ANNUAL REPORT
2015
Zeta Resources Limited
Geographic Investment Exposure
Zeta Resources Limited’s (“Zeta”) investment aim is to maximise
total returns for shareholders by identifying and investing in
resource assets and companies where the underlying value is not
reflected in the market price. The company invests in a range of
resources entities, including those focused on oil & gas, gold and
base metals exploration and production.
Nature of the Company
The company is a Bermudian exempted closed end investment company, whose ordinary shares
are listed on the Australian Stock Exchange (“ASX”). The business of the company consists of
investing the pooled funds of its shareholders in accordance with its investment objective and
policy, with the aim of generating a return for shareholders with an acceptable level of risk. The
company has borrowings (“gearing”), the proceeds from which can also be invested with the aim
of enhancing returns to shareholders. This gearing increases the potential risk to shareholders
should the value of the investments fall.
The company has contracted with an external investment manager, ICM Limited (the “Investment
Manager” or “ICM”), to manage its investments and for the company secretarial function. The
company’s general administration is undertaken by ICM Corporate Services (Pty) Ltd. The company
has a board of non-executive directors who oversee and monitor the activities of the Investment
Manager and the other service providers and ensure that the investment policy is adhered to.
2
3
Group Performance Summary
Chairman’s Statement
Strategic Report and Investments
Investment Managers’ Report
4
Geographical and Sector Split of
9
Investments
10 Five Largest Holdings
11 Review of Five Largest Holdings
14 Investment Approach
15 Investment Manager and Team
Governance
16 Directors
17 Report of the Directors
21 Corporate Governance Statement
Financial Statements
22
24 Auditor’s Independence
Independent Auditor’s Report
Declaration
Image Acknowledgements:
Petroleum Geo-Services Media Gallery - image for Seacrest on page 13
25 Financial Statements
29 Notes to the Financial Statements
Other
48 Additional ASX Information
52 Company Information
as at 30 June 2015
Net tangible assets of A$0.43 per ordinary share as at 30 June 2015
Share price decline of 39.4% over 12 months to 30 June 2015
NTA average annual compound loss since inception of 20.8%1
Gross assets of US$114.5m
Financial calendar
Year End
Annual General Meeting
Half Year
Half year December 2015 announcement
30 June
16 November 2015
31 December
February 2016
FORWARD-LOOKING STATEMENTS
This annual report may contain “forward-looking statements” with respect to the financial condition, results of operations and
business of the Company and the Group. Such statements involve risk and uncertainty because they relate to future events and
circumstances that could cause actual results to differ materially from those expressed or implied by forward-looking statements.
The forward-looking statements are based on the Directors’ current views and on information known to them at the date of this
report. Nothing in this publication should be construed as a profit forecast.
Potential investors are reminded that the value of investments and the income from them may go down as well as up and investors
may not receive back the full amount invested.
1 Historic NTAs adjusted for the February 2014 entitlement issue
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Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015 Group Performance Summary
Chairman’s Statement
Total return(1) (annual) (%)
Annual compound total return(2) (since inception) (%)
Net tangible asset per ordinary share(3) (Australian cents)
Ordinary share price (Australian cents)
Discount (%)
Earnings/(loss) per ordinary share(4) (US dollars)
Dividends per ordinary share
– Interim (Australian cents)
– Final (Australian cents)
Total (Australian cents)
Equity holders' funds (US$m)
Gross assets(5) (US$m)
Cash/(overdraft) (US$m)
Other Debt (US$m)
Net debt (US$m)
Net debt gearing on gross assets (%)
Management and administration fees and other expenses (US$m)
– excluding performance fee
– including performance fee
Ongoing charges figure(6)
– excluding performance fee
– including performance fee
30 June
2015
30 June
2014
Change %
2015/2014
(55.3)
(20.8)
42.7
40.0
(6.3)
(0.57)
Nil
Nil
Nil
31.1
70.7
0.2
(39.8)
(39.6)
56.0
1.6
1.6
1.5
1.5
48.0
36.7
95.5
66.0
(30.9)
0.44
Nil
Nil
Nil
84.4
110.6
0.2
(26.4)
(26.2)
23.7
1.4
4.9
1.2
6.6
(215.2)
(156.5)
(55.3)
(39.4)
(79.5)
n/m
n/a
n/a
n/a
(63.2)
(36.1)
0.0
50.8
51.1
n/a
12.1
(67.3)
n/a
n/a
(1) Total return is calculated based on NTA per share return plus dividends reinvested from the payment date.
(2) Annual compound total return based on NTA per ordinary share return, plus dividends reinvested from the payment date, since NTA of A$0.688 at
launch on 12 June 2013.
(3) Historic NTA’s per share adjusted for February 2014 entitlement issue.
(4) Earnings per share is based on the weighted average number of shares in issue during the year.
(5) Gross assets less liabilities excluding loans.
(6) Expressed as a percentage of average net assets weighted for the February 2014 entitlement issue, ongoing charges comprise all operational,
recurring costs, including directors fees, that are payable by the company, or suffered within underlying investee funds, in the absence of any
purchases or sales of investments.
n/a = not applicable
n/m = not meaningful
The past year has been a challenging one for owners of investments in the resources sector. Almost
without exception, precious metals and industrial commodity prices have fallen significantly from their
highs early in the year.
Zeta has not been immune to these falls and with the leverage the company employs, the effect on its
net assets has been magnified.
This environment we consider is full of opportunity for the patient investor and so despite the
challenges, Zeta has continued to be active in the marketplace, increasing its investment positions in
companies whose fundamentals are strong but are available at prices well below what we believe the
companies are worth.
Zeta aims to have a number of concentrated holdings in resource companies where it can have an
involvement in the development of those companies. Of Zeta’s six largest investments, five represent
stakes in excess of 15% of each of the investee companies. In four out of five of those, Zeta is the
largest shareholder and has board representation on a number of them.
We continue to work with our investee companies to implement strategies that add value for all
shareholders and we are pleased the recent reporting season has shown each is in a robust position
to manage through this difficult period in the resource sector. Most have strong cash backing, cash
generation from production and reserve and resource optionality.
Zeta is committed to seeking maximum long-term value from each investment and we believe each is
very well placed to benefit from the eventual recovery in commodity prices.
We are grateful for the ongoing support of our majority shareholder, Utilico Investments Limited
and are delighted that they have agreed to convert a significant part of the company’s debt to equity
through the issue to them of shares and options. This will have the substantial benefit to your company
of removing both the interest burden and short term liability of the debt, as well as reducing the
volatility in our equity.
Our challenge for the year ahead is to continue to advance the strategies of our existing investments
and to make the most of the attractive opportunities we see emerging in this current downturn.
Peter Sullivan
Chairman
3 September 2015
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Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015 Investment Manager’s Report
Following a year with relatively stable commodity markets, the financial year ended June 2015 has
seen a significant bear market across all the commodities Zeta is invested in. The most notable decline
has been in the price of oil, as Saudi Arabia moved early in the year to signal its determination not to
cut production or lose market share, precipitating a steep decline in the oil price in ensuing months.
Market observers have interpreted this as a strategic move by Saudi Arabia to undermine shale oil
production in the United States. As shale oil and gas production is capital intensive, the steep reduction
in oil prices has changed previous assumptions for providers of capital.
More broadly, as we have approached the end of the year ended June 2015, the theme has been a
continued strengthening in the US dollar. This has been sustained by two factors: a flight to safety in
the wake of the Greek Euro crisis and the Chinese stock market crash; and expectations for tightening
in US interest rates. A stronger US dollar has meant weaker US dollar denominated commodity prices,
but fortunately, in addition, has weakened commodity currencies such as the Australian dollar. This
has occurred in the context of weak industrial commodity prices: iron ore, coal, copper, nickel, lead,
zinc and aluminium. They have all declined more than 20% since their peaks near the start of the year.
Interestingly, the Australian gold price actually rose 9.3% over the last 12 months.
As Zeta employs debt capital, the impact of falling resources company share prices in the wake of
falling commodity prices is leveraged. During the year under review, Zeta’s net assets per share fell
from A$0.955 to A$0.427, a fall of 55.3%. For comparison, the S&P/ASX 200 Energy index fell 23.7%
over the same period, and the S&P/ASX 300 Metals & Mining index fell 18.1%.
Total Return Comparative Performance*
(since inception on 12 June 2014 to 30 June 2015)
170.0
160.0
150.0
140.0
130.0
120.0
110.0
100.0
90.0
80.0
70.0
60.0
Jun 13 Aug 13 Oct 13 Dec 13 Feb 14 Apr 14 Jun 14 Aug 14 Oct 14 Dec 14 Feb 15 Apr 15 Jun 15
Zeta Share Price
S&P/ASX 200 Energy
S&P/ASX 300 Metals & Mining
*AUD, rebased to 100 as at 12 June 2013. Zeta NTA adjusted for February 2014 entitlement issue.
Source: Zeta and S&P Dow Jones Indices.
While the Zeta share performance over the past two years has essentially been flat this has been
relatively pleasing given the company’s leverage and the impact of falling commodity prices.
COMMODITY MARKETS
In a tough year for almost all commodity prices, the three main sectors Zeta is invested in were all hit by falling
prices.
Oil & Gas
At the start of the year under review, the WTI Crude Oil price was US$106/bbl. After the global financial crisis in
2009, oil prices stabilised and then fluctuated in a range between US$75/bbl and US$115/bbl, although that range
gradually narrowed around US$100/bbl. This year that pattern changed markedly. The context was a continual
increase in production by the United States, such that the country was widely expected to become a significant
net exporter of oil, rather than a significant net importer.
WTI Crude Oil price
(from June 2014 to July 2015)
120
100
US$/bbl
80
60
40
A$/bbl
120
100
80
60
40
Jun 14
Sep 14
US$/bbl
Dec14
A$/bbl
Mar 15
Jun 15
Source: US Energy Information
What changed was a strategic move by Saudi Arabia to not be the only ones to sustain oil prices by restricting its
own oil production. In a key OPEC meeting in November, Saudi Arabia persuaded the cartel not to cut production.
In subsequent remarks in the wake of steep decline in oil prices, Saudi Arabian oil minister Ali al-Naimi asked
reporters “Why should we cut production? Why?”. Saudi Arabia’s strategy appears clear – to undermine the United
States shale oil industry by convincing providers of capital that they cannot rely on oil prices being above US$100/
bbl, or indeed, even above US$60/bbl which is around the estimated average cost for United States shale oil
production.
The fracking revolution that has resulted in such a large recent increase in production is notable for being capital
intensive, in that it requires multiple drilling and fracking. While the United States is more efficient at this process
than anywhere else, they cannot continue to produce unprofitably. There are various estimates of Saudi Arabian
marginal costs of production, but all these estimates are below US$12/bbl.
As a result of sharply lower oil prices, United States shale oil production is now expected to fall, and domestic
oil demand is increasing. Internationally, oil output is also falling, and market observers are concerned about a
delayed impact on producers once hedges expire.
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Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Investment Manager’s Report (continued)
Nickel
While the past year has seen
a bear market
in almost all
industrial commodities, nickel
has been hit worse than most,
from
with prices declining
US$8.49/lb to US$5.30/lb, a fall
of 37.6%. In the previous year,
nickel prices had stabilised above
US$8/lb after the
Indonesian
government’s decision to ban
the export of unrefined nickel
ores. This ban remains in place,
but the price of nickel has fallen
as alternative stocks of nickel
have been sourced such as from
the Philippines.
Nickel LME price
(from June 2014 to July 2015)
10
9
8
7
US$/lb
6
5
4
Jun 14
Sep 14
Dec14
Mar 15
Jun 15
10
AS$/lb
9
8
7
6
5
4
US$/bbl
A$/bbl
Source: World Bank
Market observers believe China has been depleting its nickel stocks, and as a result are predicting a recovery in
nickel prices. However, LME-tracked warehouse stocks have increased substantially in the year under review; as
forecast shortfalls in annual production are below anticipated annual consumption, a situation which has been
well signalled for some time.
Gold
1,600
1,700
1,400
1,700
1,600
1,500
US$/oz
Gold price
(from June 2014 to July 2015)
Gold prices were mixed during
the year to June 2015, but the
end of the year witnessed a
decline below previous levels in
the wake of an increase in the
US dollar. We noted previously
that the rise in the US dollar
has been due partly to a flight
to safety during the Greek Euro
crisis and the weakness in the
Chinese stock market.
In the
past, gold has generally been a
beneficiary of a flight to safety,
but not
is
partially explained by the second
reason for the appreciation in
the US dollar – expectations for
an increase in US interest rates.
Tighter US monetary conditions
is traditionally seen as not good
for gold, in that it reverses the main impetus for the rise of gold prices over the past decade, i.e. loose monetary
policy in the form of quantitative easing etc.
in this year. This
Spot Price
A$
Spot Price
US$
Source: London Afternoon (PM)
Mar 15
Sep 14
Dec14
Jun 15
Jun 14
A$/oz
1,200
1,300
1,400
1,200
1,300
1,500
1,100
1,000
1,000
1,100
Going forward, the outlook for gold prices is unclear. Should economic conditions decline, the US may have
second thoughts about tightening its monetary policy, which may halt the appreciation in the US dollar and
consequently benefit the gold price. Alternatively, current expectations are for US interest rates and the US dollar
to increase.
CAPITAL STRUCTURE
Zeta is a closed-end investment company, listed on the ASX.
During the year Zeta has had working capital support from its parent company, Utilico Investments Limited
("Utilico"). As of 30 June 2015, Zeta had a loan from Utilico totalling US$35.4 million, drawn partly in Australian
dollars and partly in US dollars.
As at 30 June 2015, Zeta had gross assets of US$71.1 million (2014: US$114.5 million). Of this figure, $39.0 million
(2014: $54.8 million) was invested in the oil & gas sector; $21.9 million (2014: $36.5 million) was invested in the
nickel sector; $9.9 million (2014: $22.6 million) was invested in the gold sector; and the remaining $0.3 million
(2014: $0.6 million) was invested in other commodity-based resources investments.
FINANCIAL RESULTS
The consolidated net loss after tax for the year was US$53,242,013 against a profit of US$29,186,342 in 2014. The
majority of the consolidated net loss is comprised of revaluations of listed investments (marked to market) as at
30 June 2015 to account for financial assets being recognised at fair value.
SIGNIFICANT INVESTMENTS
Oil & Gas
NZOG
In the wake of sharply lower oil prices, exploration companies have curtailed their existing capital expenditure
plans, and New Zealand Oil & Gas Limited (“NZOG”) has been no exception. Following an expensive year of
drilling in 2014, NZOG acted to acquire, by an on-market takeover, a controlling stake in an oil & gas company
with existing production, ASX-listed Cue Energy Resources Limited, rather than spend the money on risky and
expensive drilling. Operationally, the Pateke discovery was successfully tied back to existing production lines, and
flow rates from that well have boosted oil volumes significantly.
Corporately, NZOG moved to make its balance sheet more efficient by returning an effective NZ$0.15 per share to
shareholders by way of a pro-rata buy-back. The company has also stated that it is working on plans for a further
buy-back. During the year Duncan Saville, an ICM director, was appointed to the board of NZOG.
Pan Pacific Petroleum
During the year Zeta conducted a successful on-market takeover bid for ASX-listed Pan Pacific Petroleum NL
(“PPP”), acquiring a 46.5% stake. The bid was launched after PPP’s shares had declined significantly following an
unsuccessful drill at Oi in offshore Taranaki, New Zealand. The attraction of PPP to Zeta was that it has significant
existing production revenues and a net cash position on its balance sheet, thus mitigating potential economic
value downside. During the year both Peter Sullivan and Dugald Morrison were appointed to the board of PPP.
Seacrest
Seacrest LP (“Seacrest”) is a Bermuda-based specialist oil & gas offshore seismic exploration company. Seacrest
has moved quickly to amass a significant number of interests in joint venture licenses for offshore oil exploration.
Nickel
Panoramic
Panoramic Resources Limited (“Panoramic”) is a Western Australian mining company operating two 100%-owned
underground nickel sulphide mines, the Savannah Project in the East Kimberley and the Lanfranchi Project near
Kambalda, Western Australia, which make up the company’s nickel division.
During the year Panoramic announced successful discoveries at both Savannah and Lanfranchi. Eventual
development of these discoveries should extend the life of both mines. At the company’s Mount Henry gold
project, a feasibility study was released in May, adding a maiden reserve of 922,900oz of gold. Panoramic recently
announced the sale of its 70% share in this project to Metals X for A$17m of shares in Metals X.
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Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015 Investment Manager’s Report (continued)
Geographical & Sector Split of Investments
In July 2015 the Lanfranchi operations experienced a magnitude 2.3 seismic event in the vicinity of the Deacon
orebody. A subsequent geotechnical assessment, combined with the limited remaining ore at Deacon and the
current low price of nickel, has meant that Panoramic has suspended production from Deacon. The company will
instead focus on the Lower Schmitz discovery at Lanfranchi.
Geographical split of investments
Gold
Resolute
ASX-listed Resolute Mining Limited (“Resolute”) is a mid-cost gold producer with two mines in production, the
Syama mine in Mali, and the Ravenswood mine in northern Queensland, Australia. Production in the year to June
2015 of c. 329,000oz of gold was down on the previous year’s production of c. 343,000oz following the closure of
the Golden Pride mine in Tanzania. The company continues to firm up prospects at its Bibiani project in Ghana,
with positive results from its underground scoping study set to support a feasibility study at the project in 2016.
Production at Syama increased by 35.9% to 224,911oz following the successful commissioning of a new oxide
circuit, which also saw cash costs fall by 20.4% to A$800/oz. At Ravenswood production fell by 25.5% to 103,773oz
due to increasing hardness of ore requiring greater processing as well as maintenance. Cash costs per ounce
increased by 13.0% to A$940/oz.
In June 2015, Resolute announced the completion of a pre-feasibility study at Syama which resulted in a material
increase in the underground ore reserve to 2.3m oz, extending the life of the mine to at least 2028. Following
the decline in the gold price, Resolute has conducted a review of operations at Syama and determined that the
planned Stage 2 mining of the ore body is best achieved by underground, rather than open pit, mining. The switch
to underground mining is expected to result in a significantly smoother cash flow profile and higher return on
capital of the project.
Resolute has provided guidance for gold production of 315,000oz at an average cash cost of A$990/oz for the
year to 30 June 2016.
Copper
Kumarina
Kumarina Resources Pty Limited (“Kumarina”) is a 100%-owned subsidiary of Zeta. The company is focused on two
prospective projects in Western Australia, being the Ilgarari copper project and the Murrin Murrin copper-gold
project. The Ilgarari project contains a secondary copper oxide resource (JORC 2004) estimated to be 1,100,000
tonnes averaging 1.9% copper located around and below historical mine workings. The Murrin Murrin project is
prospective for gold and base metals in the form VMS style copper zinc mineralisation. The company’s main focus
at the Murrin Murrin project has been the Malcolm Challenger gold mines which hosts an Indicated Resource
(JORC 2012) of 547,000 tonnes averaging 3.12 g/t for 54,800 ounces.
JDF Morrison
ICM Limited
Investment Manager
3 September 2015
2015
2014
Sector split of investments
2015
2014
Country
% of total
2015 2014
New Zealand
36.9
30.2
Australia
36.0
45.0
Other
7.8
6.2
Norway
7.0
5.8
Namibia
6.5
5.3
Mali
5.9
7.5
Source: Zeta Resources
Sector
% of total
2015 2014
Oil & Gas
58.2
50.7
Nickel
28.2
33.8
Gold
Cash
12.6
15.0
0.9
0.5
Source: Zeta Resources
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Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Five Largest Holdings
Review of the Five Largest Holdings
2015
2014
Company (Country of principal activity)
Description
Fair value
US$ 000
% of total
investments
1
2
3
4
5
(1)
(2)
(3)
(-)
(4)
Panoramic Resources Limited
Nickel exploration and mining
New Zealand Oil & Gas Limited
Oil & gas exploration and production
Seacrest LP – unlisted
Oil & gas offshore seismic exploration
(Australia)
21,318
27.4%
(New Zealand)
20,196
26.0%
(Global)
12,915
16.6%
Pan Pacific Petroleum NL
Oil & gas exploration and production
(New Zealand,
10,538
13.5%
Vietnam
Resolute Mining Limited
Gold exploration and mining
Other investments
Total Portfolio
(Australia, Mali)
6,668
8.6%
6,159
7.9%
77,794
100.0%
www.panoramicresources.com
Market Cap US$85.6 million
Panoramic Resources Limited is a Western Australian
mining company operating two 100%-owned
underground nickel sulphide mines, the Savannah
Project in the East Kimberley and the Lanfranchi
Project near Kambalda, Western Australia, which
make up the company’s nickel division. Panoramic’s
business is leveraged to both the price of nickel, and
the Australian dollar – the higher the price of nickel
and the lower the Australian dollar, the higher the
company’s profits. During the year under review,
Panoramic announced successful discoveries at both
Savannah and Lanfranchi, which are expected to
increase the mine life at each project. For the year
ended June 2015, the company produced 19,301 Ni
contained in concentrate/ore, down from last year’s
22,256t Ni, at an average cash cost of US$4.92/lb or
A$6.32/lb (last year: US$5.16/lb or A$5.53/lb). At
30 June 2015 the company had A$54 million in
net cash. Panoramic’s shares fell 44% in the year
to June 2015. After year end, a seismic event near
the Deacon orebody at Lanfranchi has resulted in
a suspension of production there; Panoramic will
instead focus its Lanfranchi operations on the Lower
Schmitz discovery.
The value of the five largest holdings represents 92.1% (2014: 94.4%) of the group’s total investments. The country
shown is the location of the principal part of the investee company’s business. The total number of companies
included in the portfolio is 21 (2014: 13).
Panoramic Resources Limited (Australia)
www.nzog.com
Market Cap US$109.5 million
New Zealand Oil & Gas Limited is an independent
New Zealand oil & gas exploration and production
company, with exposure to two relatively low cost
production assets in New Zealand: the Kupe gas and
oil field (15% partner) and Tui area oil fields (27.5%
partner). In addition, NZOG has an exploration
portfolio in New Zealand and Indonesia. NZOG is
listed on both the New Zealand and Australian stock
exchanges. NZOG’s share price declined 30.8%
during the 12 months to June 2015. However, during
the period the company returned an effective 15
cents per share to shareholders. Full year results to
30 June 2015 showed increased revenues at NZ$120
million (previous year NZ$112 million). Cash flow
from operating activities was NZ$8.6 million down
from NZ$11.5 million the prior year. At year end
NZOG had NZ$83.6 million (US$55.3 million) of net
cash, but it should be noted this includes Cue cash
as well.
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11
11
New Zealand Oil & Gas Limited (New Zealand)
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Review of the Five Largest Holdings (continued)
www.seacrest.com
Market Cap N/A - Unlisted
Seacrest LP is an unlisted Bermuda-based private
seismic specialist oil explorer. They have access to
one of the world’s largest seismic databases, and a
large team of petroleum geologists. The company
is creating value by offering a better understanding
of regional seismic patterns in oil & gas exploration
basins globally. Seacrest’s commercial approach is to
join with operating exploration firms, and acquiring
interests in joint ventures through farm-ins. Seacrest
has established a number of subsidiaries with
regional focuses. Having established a large portfolio
of interests in joint venture oil & gas exploration
permits, the company is reassessing its drilling plans
in the wake of sharply lower oil prices.
www.resolute-ltd.com.au
Market Cap US$109.1 million
Resolute Mining Limited is an unhedged gold
producer, with a long life mine at Syama in Mali,
another producing gold mine at Ravenswood in
Australia, and a development project at Bibiani in
Ghana. In the year to June 2015 Resolute’s various
operations yielded 328,684 ounces of gold. Average
cash costs of A$845 per ounce were lower than the
previous year’s A$922 per ounce. During the year the
company’s new oxide circuit at Syama commenced
production, boosting production and lowering
average cash costs. Recent exploration results and
reserves assessments have been successful, with the
expected mine life at Syama now extended to 2028.
Seacrest LP (Global)
Resolute Mining Limited (Australia, Mali)
www.panpacpetroleum.com.au
Market Cap US$15.2 million
Pan Pacific Petroleum NL is an ASX-listed oil junior
based in Sydney. The company has a 15% stake
in the low cost Tui oil fields located in offshore
Taranaki, New Zealand. PPP also has a 5% stake
in the Block 07/03 development opportunity in
Vietnam, which holds potential for both oil and gas.
In April 2015 Zeta launched an on-market takeover
bid that resulted in Zeta ending up with a 46.5%
stake in PPP. In the year ended June 2015, PPP’s
share of oil production was 0.22 million barrels, up
from 0.17 million barrels the previous year.
Pan Pacific Petroleum NL (New Zealand, Vietnam)
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Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015 Investment Approach
Investment Manager and Team
Zeta’s aim is to maximise total returns for shareholders by identifying and investing in assets and companies
where the underlying value is not reflected in the market price. The company invests in a range of resources
entities, including those focused on oil & gas, gold and base metals exploration and production.
Zeta intends to have a mid to long term investment horizon and does not expect to be trading its positions on
a frequent basis. Zeta will also work with its investee companies to seek to maximise their value and may make
follow-on investments into these companies or increase investment through market purchases as appropriate.
Zeta may acquire majority or minority positions in its target investments. Zeta seeks opportunities which will
maximise its ability to contribute as a proactive investor, with a view to actively extracting value for both its
own investors and investors in the underlying investee companies. This proactive approach may include taking
significant or full ownership positions in companies, bringing about management change and encouraging
strategies to maximise shareholder value and return.
INVESTMENT POLICY
The Directors are responsible for the determination of the company’s investment policy and have overall
responsibility for the company’s day-to-day activities. The company has, however, entered into an investment
management agreement with ICM Limited under which ICM provides investment management services including
stock selection, portfolio monitoring and research to the company.
ICM is the Investment Manager of Zeta. ICM is a Bermuda based global fund manager focused on finding
investments at valuations that do not reflect their true long term value. Our investment approach is to have a
deep understanding of the business fundamentals of each investment and its environment versus its intrinsic
value. We are long term investors and see markets as a place to exchange assets.
ICM has some US$2.4 billion under management directly and has indirect involvement in over US$12 billion
in a range of mandates. ICM has 35 staff based in offices in Bermuda, Cape Town, Dublin, Hong Kong, London,
Melbourne, Singapore and Wellington.
ICM staff responsible for Zeta’s investments include:
Dugald Morrison, aged 46, based in Wellington, New Zealand, is the General Manager for ICM NZ Limited. He has
extensive investment analysis experience, having worked in stockbroking, investment banking and investment
management firms in New Zealand, the United Kingdom, and the United States since 1987. Mr Morrison is a
director of ASX-listed Pan Pacific Petroleum NL and a number of unlisted companies. He is a member of the New
Zealand Institute of Directors.
Duncan Saville, aged 58, is a chartered accountant and a director of ICM Limited. He is currently a director
of a number of listed companies including New Zealand Oil & Gas Limited. He was formerly a non-executive
director of Utilico Investment Trust plc and is an experienced director. He is a Fellow of the Institute of Chartered
Accountants Australia and New Zealand, Australian Institute of Directors and the Financial Service Institute of
Australia and a member of the Singapore Institute of Directors.
Alasdair Younie, aged 39, is a director of ICM Limited. Based in Bermuda, he is a chartered accountant with
experience in corporate finance and corporate investment. Mr Younie qualified as a chartered accountant with
PricewaterhouseCoopers and subsequently worked for six years within the corporate finance department of
Arbuthnot Securities Limited in London. Mr Younie is a director of the Ascendant Group Limited, Bermuda
Commercial Bank Limited and Somers Limited and is a member of the Institute of Chartered Accountants in
England and Wales.
14
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Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015 Directors
Report of the Directors
Peter Ross Sullivan BE, MBA (Chairman)*, appointed 7 June 2013. Mr Sullivan is an engineer and has been
involved in the management and strategic development of resource companies and projects for more than
20 years, including project engineering, corporate finance, investment banking, corporate and operational
management and public company directorships. Mr Sullivan has considerable experience in the management and
strategic development of resource companies.
Directorships of other listed companies in the last 3 years
Mr Sullivan is currently Chairman of Pan Pacific Petroleum NL (ASX: PPP) and non-executive director of both
Resolute Mining Limited (ASX: RSG) and GME Resources Limited (ASX: GME). He was previously Chairman of
Kumarina Resources Limited from December 2011 to 24 June 2013 when Kumarina was delisted.
Marthinus (Martin) Botha*, appointed 7 June 2013. Mr Botha has over 30 years’ experience in banking, with the
last 26 years spent in leadership roles building Standard Bank Plc’s (part of The Standard Bank of South Africa
Limited group of companies) international operations. Mr Botha’s specific primary responsibilities have included
establishing and leading the development of the core global natural resources trading and financing franchises, as
well as various geographic strategies, including those in the Russian Commonwealth of Independent States, Turkey
and Middle East. Mr Botha holds a Bachelor of Engineering degree in Survey.
Directorships of other listed companies in the last 3 years
Mr Botha is currently non-executive Chairman of Sberbank CIB (UK) Limited, a securities broker regulated by UK
Financial Services Authority and Resolute Mining Limited (ASX: RSG).
Xi Xi*, appointed 7 June 2013. Ms Xi is a financial analyst with more than 15 years’ experience in the mining,
energy and natural resource industry, ranging from managing companies focused on international exploration
and development of mining projects to restructuring and overseeing a portfolio of private and public companies.
Ms Xi holds dual Bachelor of Science degrees in Chemical Engineering and Economics from the Colorado School
of Mines and a Master of Arts in International Relations and China Studies from Johns Hopkins School of Advanced
International Studies.
Directorships of other listed companies in the last 3 years
Ms Xi was previously a non-executive director of Noble Minerals Resources (ASX: NMG).
*Non-Executive Director
Your directors present their report for Zeta Resources Limited, including its subsidiaries, Kumarina Resources Pty
Limited, Zeta Energy Pte. Ltd and Zeta Investments Limited, for the year ended 30 June 2015.
DIRECTORS
The names of directors in office at any time during or since the end of the year are:
Peter Ross Sullivan
Marthinus (Martin) Botha
Xi Xi
Directors have been in office since the start of the year to the date of this report.
PRINCIPAL ACTIVITIES
The principal activities of the company are investing in listed and unlisted resource focused investments.
No significant change in the nature of these activities occurred during the year.
OPERATING AND FINANCIAL REVIEW
Operating results
The net loss attributable to the company for the year to 30 June 2015 amounted to $53,242,013.
Overview of operating activity
The company listed on the ASX on 12 June 2013 following a scheme of arrangement to merge a portfolio of
investments in resources companies held by its parent company Utilico Investments Limited with formerly ASX-
listed junior gold explorer Kumarina Resources Limited. The combined value of the investments acquired under
these two transactions was $45,628,679.
During the year the company has proceeded to build its portfolio of resource investments by investing a further
$19,636,042. A decrease in the fair value of the portfolio resulted in an unrealised loss recognised in profit or loss
at the year end of $42,748,742.
The activities of the company’s subsidiary, Kumarina, related to further exploration and evaluation of the existing
Australian mining tenements (the Murrin Murrin and Ilgarari projects) and a total of A$212,850 was invested
during the 12 months to 30 June 2015 in further drilling and analysis work.
Financial position
At the end of the year, the company had $193,267 in cash and cash equivalents. Investments at fair value totalled
$43,686,192, an investment loan to Zeta Energy valued at $23,894,270 and the investment in subsidiaries was
valued at $3,193,721.
The company has a loan owing to Utilico of $35,408,212 and loans owing to its subsidiaries of $4,395,787 at the
year end. Amounts outstanding from brokers (for settlement of trades) totalled $119,912 at 30 June 2015.
No ordinary shares were issued during the year and no options were exercised during the year.
DIVIDENDS
No dividends have been paid or declared since the start of the year. No recommendation is made as to dividends.
AFTER BALANCE DATE EVENTS
On 8 July 2015, ASX-listed Oilex Ltd announced a placement and rights issue to fund its 2015/16 work programme.
As part of the capital raising, Zeta has agreed to subscribe for 236 million new Oilex Ltd shares representing
approximately 18.1% of Oilex Ltd’s enlarged share capital (on an undiluted basis) and in addition subscribe for
A$4,243,500 of unsecured zero coupon convertible notes, convertible into 101,470,588 ordinary Oilex Ltd shares.
The total consideration payable by Zeta for the placement, net of fees received, will be A$14.0 million.
16
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Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Report of the Directors (continued)
LIKELY DEVELOPMENTS
MEETINGS OF DIRECTORS
The company intends to continue to seek to maximise total returns for shareholders by identifying and investing
in assets and companies where the underlying value is not reflected in the market price
The board held five meetings during the year which were attended by all directors. The meetings were held on
1 July, 5 September, 14 November 2014 and 9 February and 4 May 2015.
INFORMATION ON COMPANY SECRETARY
BCB Charter Corporate Services Limited was appointed Company Secretary in August 2012.
BCB Charter Corporate Services Limited delivers comprehensive corporate administration services for funds,
exempted and local companies, and other business structures. BCB Charter Corporate Services Limited’s clients
operate in a wide range of sectors.
REMUNERATION REPORT
The remuneration report is set out in the following manner:
In addition, throughout the course of the year there were a number of resolutions of directors which were made
by unanimous written resolution. This included the approval of the annual report and financial statements on
5 September 2014 and the half year report and financial statements on 16 February 2015.
There were no meetings of committees of directors that were required to be held during the year.
LOANS TO DIRECTORS AND EXECUTIVES
There were no loans entered into with directors or executives during the year under review.
UNLISTED OPTIONS
•
Policies used to determine the nature and amount of remuneration
At the date of this report the number of unlisted options on issue was as follows:
• Details of remuneration
•
Share based compensation
• Directors and executives interests
REMUNERATION POLICY
The board of directors is responsible for remuneration policies and the packages applicable to the directors
of the company. The broad remuneration policy is to ensure that packages offered properly reflect a person’s
duties and responsibilities and that remuneration is competitive and attracts, retains, and motivates people of
the highest quality.
The directors are remunerated for the services they render to the company and such services are carried out
under normal commercial terms and conditions. Engagement and payment for such services are approved by the
other directors who have no interest in the engagement of services.
At the date of this report the company had not entered into any packages with directors or senior executives
which include performance based components.
DETAILS OF REMUNERATION FOR DIRECTORS
The company paid a total of $150,000 to directors for the year ended 30 June 2015.
The company had no employees as at 30 June 2015.
SHARE BASED COMPENSATION
There is currently no provision in the policies of the company for the provision of share based compensation to
directors. The interest of directors and executives in shares and options is set out elsewhere in this report.
DIRECTORS AND EXECUTIVES’ INTERESTS
The relevant interests of directors and executives either directly or through entities controlled by the directors
and executives in the share capital of the company and related body corporates as at the date of this report are:
Director
Peter R Sullivan
Martin Botha
Xi Xi
Ordinary shares
opening balance
5,670,632
–
–
Net change
–
–
–
Ordinary shares
closing balance
5,670,632
–
–
Mr Sullivan also holds 644,113 options with a strike price of A$1.00 and an expiry date of 7 June 2016,
which he received as part of a pro rata issuance to all Kumarina shareholders on 7 June 2013.
10,122,903 Options exercisable at A$1.00 each, expiring 7 June 2016.
There were no shares issued during the year or since the end of the year upon exercise of options.
AUDIT COMMITTEE
The board reviews the performance of the external auditors on an annual basis and will meet with them during
the year to review findings and assist with board recommendations.
The board does not have a separate audit committee with a composition as suggested in the best practice
recommendations. The full board carries out the function of an audit committee.
The board believes that the company is not of a sufficient size to warrant a separate committee and that the full
board is able to meet objectives of the best practice recommendations and discharge its duties in this area.
INDEMNIFYING OFFICERS OR AUDITORS
The company has not, during or since the year ended, in respect of any person who is or has been an officer
or the auditor of the company or of a related body corporate indemnified or made any relative agreement for
indemnifying against a liability incurred as an officer or auditor, including costs and expenses in defending legal
proceedings.
ENVIRONMENTAL REGULATION
The company’s subsidiary’s (Kumarina Resources Pty Limited) operations are subject to the Western Australian
Mining Act 1978 and the Environmental Protection Act 1986.
The directors are not aware of any significant breaches and no actions were initiated for breaches under the
Environmental Protection Act during the year covered by this report.
NON-AUDIT SERVICES
No non–audit services were performed by the auditors of the company during the year.
ON-MARKET BUY BACK SCHEME
The company currently has no on-market share buy-back scheme in operation.
18
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Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Report of the Directors (continued)
Corporate Governance Statement
The company’s Directors and management are committed to conducting the group’s business in an ethical
manner and in accordance with the highest standards of corporate governance. The company has adopted and
substantially complies with the ASX Corporate Governance Principles and Recommendations (Third Edition)
(Recommendations) to the extent appropriate to the size and nature of the group’s operations. The company has
prepared a statement (“Corporate Governance Statement”) which sets out the corporate governance practices
that were in operation throughout the financial year for the company, identifies any Recommendations that have
not been followed, and provides reasons for not following such Recommendations. In accordance with ASX Listing
Rules 4.10.3 and 4.7.4, the Corporate Governance Statement will be available for review on the company’s website
(www.zetaresources.co), and will be lodged together with an Appendix 4G to the ASX at the same time that the
Annual Report is lodged with ASX.
The Appendix 4G will particularise each Recommendation that needs to be reported against by the company
and will provide shareholders with information as to where relevant governance disclosures can be found. The
company’s corporate governance policies and charters are all available on its website (www.zetaresources.co).
INVESTMENTS DISCLOSED BY THE COMPANY AT THE REPORTING DATE
Listed
Resolute Mining Limited
Panoramic Resources Limited
GME Resources Limited
Unlisted
Seacrest LP
Kumarina Resources Pty Ltd
Zeta Energy Pte. Ltd
Zeta Investments Limited
Number
of shares
28,834,000
60,123,907
19,580,826
10,500,000
26,245,610
100
100
% of issued
shares held
4.497%
18.705%
4.242%
24.45%
100%
100%
100%
During the year the company completed a total of 210 transactions in securities and paid a total of US$50,701 in
brokerage on those transactions.
INVESTMENT MANAGEMENT AGREEMENT
The company entered into an Investment Management Agreement with ICM Limited on 10 April 2013. Management
fees are payable at a rate of 0.5% per annum, of funds managed on calculation date, payable quarterly in arrears
and pro-rated for any period less than three months.
Performance fees, if applicable, are payable annually at year end at a rate of 15% of equity funds (adjusted for
any dividends paid or accrued) on calculation date less adjusted base equity funds (high-water mark) previously
used in the performance fee calculation. The adjusted base equity funds is the base equity fund used in the last
performance fee calculation adjusted by the average percentage income yield on the S&P/ASX 300 Metals and
Mining Index. No performance fee was payable for the year.
Either party may terminate the agreement with six months’ notice.
The company also paid US$432,656 in management fees during the reporting year.
AUDITORS’ INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration is included in Independent Auditor's Report .
This report is signed in accordance with a resolution of directors.
Peter R Sullivan
Chairman
Perth, Western Australia
3 September 2015
20
21
21
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Independent Auditor’s Report
22
23
23
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015 Auditor’s Independence Declaration
Statement of Financial Position
Investment in subsidiaries
Investments
Loans to subsidiaries
Current assets
Cash and cash equivalents
Trade and other receivables
Balance due from brokers
June 2015
June 2014
$
$
3,193,721
43,686,192
23,894,270
10,275,234
104,069,133
–
193,267
13,171
119,912
188,012
–
–
Total assets
71,100,533
114,532,379
s
e
t
o
N
5
6
7
8
9
10
11
Non-current liabilities
Loans from subsidiaries
Loan from parent
Current liabilities
12
Trade and other payables
Balance due to brokers
Total liabilities
NET ASSETS
Equity
13
13
Share capital
Share premium
Accumulated (losses)/profits
TOTAL EQUITY
(4,395,787)
(35,408,212)
(11,947,583)
(14,449,593)
(175,974)
–
(3,729,294)
(43,336)
(39,979,973)
31,120,560
(30,169,806)
84,362,573
832
64,881,364
(33,761,636)
31,120,560
832
64,881,364
19,480,377
84,362,573
24
25
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015 Statement of Profit or Loss and Other
Comprehensive Income
s for the year ended 30 June 2015
e
t
o
N
Revenue
14 Investment (losses)/gains
15 Other income
Expenses
Interest expense
16 Management and consulting fees
17 Operating and administration expenses
(Loss)/profit before income tax
18 Income tax
(Loss)/profit for the year
June 2015
June 2014
$
$
(42,418,422)
36,243,059
(6,090,197)
(485,418)
(3,164,318)
(1,643,037)
(432,656)
(3,900,400)
(1,136,420)
(1,027,862)
(53,242,013)
29,186,342
–
–
(53,242,013)
29,186,342
Statement of Cash Flows
s for the year ended 30 June 2015
e
t
o
N
20.1 Cash flows from operating activities
Cash utilised by operations
Interest received
Interest expense
Net cash flows from operating activities
Cash flows from investing activities
Investments purchased
Investments sold
Increase in loan to subsidiaries
Net cash flows from investing activities
Cash flows from financing activities
Other comprehensive income
–
–
20.2 Proceeds from issue of shares
TOTAL COMPREHENSIVE (LOSS)/PROFIT FOR THE YEAR
(53,242,013)
29,186,342
Increase in loan from parent
(Loss)/profit per share
19 Basic and diluted (loss)/profit per share (cents per share)
(0.57)
0.44
(Decrease)/increase in loan from subsidiaries
Net cash flows from financing activities
Net movement in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
8 Cash and cash equivalents at end of the year
June 2015
June 2014
$
$
(3,748,481)
(1,962,126)
1,343
4,656
(3,164,318)
(1,643,037)
(6,911,456)
(3,600,507)
(22,713,820)
(52,640,466)
57,499,531
18,929,077
(35,321,826)
–
(536,115)
(33,711,389)
–
19,249,722
20,958,619
9,872,593
(7,551,796)
6,479,098
13,406,823
35,601,413
5,959,252
(1,710,483)
188,012
2,383,913
(5,953,997)
(485,418)
193,267
188,012
26
27
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015 Statement of Changes in Equity
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
Notes to the Financial Statements
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
s
e
t
o
N
for the year ended 30 June 2015
Share capital
$
Share
premium
$
Accumulated
(losses)/profits
$
Total
$
Balance at 1 July 2013
13
Issue of share capital
406
45,632,068
(9,705,965)
35,926,509
426
19,249,296
–
19,249,722
Other comprehensive income for the year
–
–
29,186,342
29,186,342
Balance at 30 June 2014
832
64,881,364
19,480,377
84,362,573
Other comprehensive loss for the year
–
–
(53,242,013)
(53,242,013)
Balance at 30 June 2015
832
64,881,364
(33,761,636)
31,120,560
1.
BASIS OF PREPARATION
1.1 Corporate Information
Zeta Resources Limited (“the company”) is an investment company incorporated on 13 August 2012, listed on the Australian
Stock Exchange and domiciled in Bermuda. The financial statements of the company as at and for the year ended 30 June 2015
comprise the company only.
1.2 Basis of preparation
The financial statements for the year ended 30 June 2015 have been prepared in accordance with International Financial
Reporting Standards (IFRSs). The following accounting policies have, in all material respects, been applied consistently.
The financial statements were authorised for issue by the board of directors on 3 September 2015.
1.3 Basis of measurement
The financial statements provide information about the financial position, results of operations and changes in financial position
of the company. They have been prepared on the historic cost basis except for financial instruments at fair value through profit
or loss, which are measured at fair value.
1.4 Functional and presentation currency
The company’s functional and presentational currency is United States Dollars.
1.5 Use of estimates and judgements
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and
expense. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions are recognised in the year in which the
estimate is revised and in any future years affected.
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment
within the next financial year, as well as critical judgements in applying accounting policies that have the most significant effect
on the amounts recognised in the financial statements are included in note 22.
2.
ADOPTION OF NEW AND REVISED STANDARDS
Future amendments not early adopted in the 2015 year ended financial statements
At the date of these financial statements the following standards, amendments to standards, and interpretations, which are
relevant to the company, have been issued by the International Accounting Standard Board, but have not yet been adopted by
the company.
IFRS 9 Financial Instruments (effective for years commencing on or after 1 January 2018) - this standard addresses the initial
measurement and classification of financial assets as either measured at amortised cost or at fair value. Financial assets are
measured at amortised cost when the business model is to hold assets in order to collect contractual cash flows. All other
financial assets are measured at fair value with changes recognised in profit or loss. For an investment in an equity instrument
that is not held for trading, an entity may on initial recognition elect to present all fair value changes from the investment in other
comprehensive income.
IFRS 9 retains the classification and measurement requirements in IAS 39 for financial liabilities. The standard however requires for
financial liabilities designated under the fair value option (other than loan commitments and financial guarantee contracts), that
the amount of change in fair value attributable to changes in the credit risk of the liability be presented in other comprehensive
income (OCI). The remaining amount of the total gain or loss is included in profit or loss. However, if this requirement creates or
enlarges an accounting mismatch in profit or loss, then the whole fair value change is presented in profit or loss.
IFRS 9 will be adopted for the first time for the year ending 30 June 2019, subject to certain transitional provisions. The impact
on the financial statements has not yet been estimated.
3.
ACCOUNTING STANDARDS ADOPTED
The company has already adopted the following accounting standards:
IFRS 13 which introduces a single source of guidance on fair value measurement for both financial and non-financial assets and
liabilities by defining fair value, establishing a framework for measuring fair value and setting out disclosure requirements for fair
value measurements. The company accordingly uses last traded prices.
IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS
27 (revised 2011) Separate Financial Statements and IAS 28 (revised 2011) Associates and Joint Ventures, and the Transition
Guidance Amendments to IFRSs 10 and 12.
28
29
Notes to the Financial Statements (continued)
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
IFRS 10 Consolidated Financial Statements, introduced a new approach to determining which investees should be consolidated
and provides a single model to be applied in the control analysis for all investees. An investor controls an investee when it is
exposed or has rights to variable returns from its involvement with that investee, it has the ability to affect those returns through
its power over that investee and there is a link between power and returns. Control is reassessed as facts and circumstances
change. IFRS 10 supersedes IAS 27 (2008) and SIC-12 Consolidation – Special Purpose Entities. The company is assessed as
qualifying as an investment entity as it provides professional investment management services; its business purpose is to invest
funds solely for returns of capital appreciation and or investment income; and its investments are measured on a fair value basis.
Accordingly, the company has not presented consolidated financial statements.
The company has determined that it meets the definition of an investment entity and as a result, the company’s subsidiaries
(being the investments in Kumarina Resources Pty Limited, Zeta Energy Pte. Ltd. and Zeta Investments Limited) are accounted
for at fair value through profit or loss.
IFRS 12 Disclosure of Interests in Other Entities, which combines, in a single standard, the disclosure requirements for
subsidiaries, associates and joint arrangements, as well as unconsolidated structured entities. The required disclosures aim to
provide information to enable users to evaluate the nature of, and risks associated with, an entity’s interests in other entities and
the effects of those interests on the entity’s financial position, financial performance and cash flows.
IAS 27 (revised 2011) Separate Financial Statements, and Amendments to IAS 27: The objective of the standard is to prescribe
the accounting and disclosure requirements when an entity prepares separate financial statements. The Amendments require
an investment entity as defined in IFRS 10 to present separate financial statements as its only financial statements in the case
where it measures all of its subsidiaries at fair value through profit or loss and to disclose that fact.
4.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies detailed below have been consistently applied by the company.
4.1 Revenue
Dividends receivable are recognised as income on the ex-dividend date.
Gains or losses on the sale of investments are recorded on the trade date.
Investment income also comprises gains on changes in the fair value of financial assets at fair value through profit or loss.
Interest income is accrued on a time basis by reference to the principal outstanding and at the interest rate applicable.
4.2 Borrowing costs
Borrowing costs are recognised as an expense when incurred except those that relate to the acquisition, construction
or production of qualifying assets where the borrowing cost is added to the cost of those assets until such time as the assets
are substantially ready for their intended use or sale.
4.3
Income tax
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted by the balance date.
Deferred income tax is provided on all temporary differences at the balance date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
•
•
when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction
that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss; or
when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint
ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:
•
when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
•
when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint
ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference
will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be
utilised.
The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has
become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and
liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled,
based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.
4.4 Foreign currency
Foreign currency transactions and balances
Transactions in foreign currencies are translated into the respective functional currencies of the company at exchange rates at the
dates of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated
to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference
between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments
during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year. The foreign
currency gains or losses are recognised in profit or loss.
Foreign currency differences arising on retranslation are recognised in other comprehensive income.
4.5 Earnings per share (“EPS”)
Basic EPS is calculated as the net result attributable to members, adjusted to exclude costs of servicing equity (other than
dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus
element.
Diluted EPS is calculated as the net result attributable to members, adjusted for:
•
•
•
costs of servicing equity (other than dividends) and preference share dividends;
the after-tax effect of dividends and interest associated with potential dilutive ordinary shares that have been recognised as
expenses; and
other non-discretionary changes in revenues or expenses during the year that would result from the dilution of potential
ordinary shares, divided by the weighted average number of ordinary shares and potential dilutive ordinary shares, adjusted
for any bonus element.
4.6 Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in listed and unlisted securities, trade and other receivables, cash and
cash equivalents, trade and other payables and amounts due to/from brokers.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit
or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are
measured as described below.
Recognition and derecognition of financial instruments
Financial instruments are recognised when, and only when, the company becomes a party to the contractual provisions of the
particular instrument. The company derecognises a financial asset when the contractual rights to the cash flows arising from
the financial asset have expired or when it transfers the rights to receive the contractual cash flows on the financial asset in a
transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.
30
31
Notes to the Financial Statements (continued)
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
A financial liability is derecognised when the liability is extinguished, that being, when the obligation specified in the contract is
discharged, cancelled or has expired. The difference between the carrying amount of a financial liability assumed (or part thereof)
extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities
assumed, is recognised in profit or loss.
Financial assets at fair value through profit or loss
Investment purchases and sales are accounted for on the trade date, exclusive of transaction costs. Investments used for
efficient portfolio management are classified as being at fair value through profit or loss. As the company’s business is investing
in financial assets with a view to profiting from their total return in the form of dividends, interest or increases in fair value, its
investments are designated as being at fair value through profit or loss on initial recognition.
Gains and losses on investments are analysed within the statement of comprehensive income as capital return. Quoted
investments are shown at fair value using market bid prices. The fair value of unquoted investments is determined by the Board.
In exercising its judgement over the value of these investments, the Board uses valuation techniques which take into account,
where appropriate, latest dealing prices, valuations from reliable sources, asset values, earnings and other relevant factors.
Cash and cash equivalents
In respect of other assets, impairment losses recognised in prior years are assessed at each reporting date for any indications that
the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been
recognised.
4.8 Goodwill
Goodwill is any excess of the cost of an acquisition over the company’s interest in the cost of the identifiable assets and liabilities
acquired.
Goodwill is carried at cost less any accumulated impairment losses. Goodwill is allocated to the cash-generating unit and is tested
annually for impairment.
4.9 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options
are recognised as a deduction from equity.
Cash and cash equivalents are measured at amortised cost at the reporting date. Cash and cash equivalents comprise operating
cash balances, call deposits and short-term deposits with a maturity of three months or less.
4.10 Provisions and accruals
Non-derivative financial liabilities
The company has the following non-derivative financial liabilities; loans and borrowings, trade and other payables and amounts
due to/from brokers.
All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade
date at which the company becomes a party to the contractual provisions of the instrument. The company derecognises a financial
liability when its contractual obligations are discharged or cancelled or expire. The difference between the carrying amount of a
financial liability assumed (or part thereof), extinguished or transferred to another party and consideration paid, including any non-
cash assets transferred or liabilities assumed, is recognised in profit or loss.
Trade and other payables
Trade and other payables are initially recognised at original invoice amount and are subsequently stated at amortised cost by
applying the effective interest method. Trade and other payables are not discounted where the effects of discounting is considered
immaterial. Trade and other payables are settled within 30 to 90 days and are interest free. Any gains on derecognition are
recognised in profit or loss.'
4.7 Impairment of assets
Financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any
objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more
events have had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying
amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment
loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.
Significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively
in groups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. Any cumulative loss in
respect of an available for-sale financial asset recognised previously in equity is transferred to profit or loss.
Non-financial assets
The carrying amounts of the non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An
impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses are
recognised in profit or loss.
The recoverable amount of an asset is the greater of its value in use and its fair value less cost to sell. The fair value less
cost to sell is the amount obtainable from the sale of an asset in an arm’s length transaction less the cost of disposal.
While assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset.
Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, for
which it is probable that an outflow of economic benefits will occur, and where a reliable estimate can be made of the amount
of the obligation. The expense relating to any provision is presented in the statement of comprehensive income net of any
reimbursement. If the effect of discounting is material, provisions are discounted. The discount rate used is a pre-tax rate that
reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
5.
INVESTMENT IN SUBSIDIARIES
At fair value
June 2015
$
June 2014
$
Investment in Kumarina Resources Pty Limited (“Kumarina”)
3,193,719
10,275,233
Investment in Zeta Energy Pte. Limited (“Zeta Energy”)
Investment in Zeta Investments Limited (“Zeta Investments”)
1
1
1
1
3,193,721
10,275,234
On 1 September 2014 the company acquired 100% of the shares and voting interests in Zeta Energy Pte. Ltd. There were no
acquisition-related costs.
6.
INVESTMENTS
Financial assets at fair value through profit or loss
Equity securities at fair value
Ordinary shares – listed
Subscription and other rights – unlisted
Equity securities at cost
Ordinary shares – listed
Subscription and other rights – unlisted
June 2015
$
43,686,192
June 2014
$
104,069,133
30,261,217
13,424,975
43,686,192
37,058,471
11,573,120
48,631,591
88,101,079
15,968,054
104,069,133
67,704,425
10,588,054
78,292,479
32
33
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Notes to the Financial Statements (continued)
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
Investments held by the company at the reporting date
Listed
Panoramic Resources Limited
Resolute Mining Limited
GME Resources Limited
Other
Unlisted
Seacrest LP
Other rights
Other
Number of
shares
60,123,907
28,834,000
19,580,826
18,152,409
10,500,000
400,000
During the year the company completed a total of 210 transactions (2014: 485 transactions) in securities and paid a total of
US$50,701 (2014: US$149,284) in brokerage on those transactions.
During the year the company repaid loans received from its subsidiary Zeta Investments and from an external lender. The
company also received loans from its subsidiary Zeta Energy. To secure the loans the company has pledged certain quantities of
its shares held in listed entities.
The shares pledged include: Resolute Mining Limited (17,500,000) and Panoramic Resources Limited (5,000,000).
10. LOANS FROM SUBSIDIARIES
Loan from Kumarina
Loan from Zeta Energy
Loan from Zeta Investments
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
June 2015
$
–
4,395,787
–
4,395,787
June 2014
$
5,859,289
–
6,088,294
11,947,583
The loan from Zeta Energy is denominated in Australian dollars and New Zealand dollars and attracts interest at a rate of 7.36%
per annum (30 June 2014: Nil) on the Australian dollar loan and at 7.74% per annum (30 June 2014: Nil) on the New Zealand
dollar loan. There are no fixed repayment terms except that no repayment is due before 30 June 2016.
11. LOAN FROM PARENT
Loan from Utilico Investments Limited (“Utilico”)
June 2015
$
35,408,212
June 2014
$
14,449,593
The loan is denominated in Australian dollars to the value of A$11.55 million (30 June 2014 A$6.6 million) and in United States
dollars to the value of US$25.734 million (30 June 2014 US$8.080 million), carries interest at 10% per annum (30 June 2014: 10%) on
the Australian dollar loan and 7.5% per annum (30 June 2014: 7.5%) on the United States dollar loan, and is repayable by no later
than 30 September 2016.
7. LOANS TO SUBSIDIARIES
Loan to Zeta Energy
Loan to Kumarina
June 2015
$
23,863,438
30,832
23,894,270
June 2014
$
–
–
–
12. TRADE AND OTHER PAYABLES
Accruals
Sundry creditors
Provision for performance fee
June 2015
$
175,974
–
–
175,974
June 2014
$
258,714
32,866
3,437,714
3,729,294
The loan to Zeta Energy is denominated in Australian dollars to the value of A$7.405 million and New Zealand dollars to the value of
NZ$43.671 million. There are no fixed repayment terms and no interest is charged. During the year ended 30 June 2015, the loan
to Zeta Energy, which was utilised for the purchase of listed investments, was impaired, through profit and loss, to the fair value of
that company as determined by the directors. As at 30 June 2015 the impairment to the loan totalled US$11.428 million. The loan
to Kumarina is denominated in Australian dollars and is interest free. There are no fixed repayment terms except that no repayment
is due before 30 June 2016.
8. CASH AND CASH EQUIVALENTS
Cash balance comprises:
Cash at bank
June 2015
$
June 2014
$
193,267
188,012
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods
between 3 to 6 months depending on the immediate cash requirements of the company, and earn interest at the respective
short-term deposit rates.
9. TRADE AND OTHER RECEIVABLES
Prepayments
June 2015
$
13,171
June 2014
$
–
The accruals are for audit, management, directors and administration fees payable.
13. SHARE CAPITAL AND SHARE PREMIUM
Authorised
5,000,000,000 ordinary shares of par value $0.00001
Issued
Ordinary shares
Balance as at incorporation
Issued at incorporation as $1 par shares
Shares split into 10,000,000 shares of $0.00001 each
Issued in consideration for purchase of investments from Utilico
Issued in consideration for purchase of 100% of Kumarina
Issued under initial public offering
Issued under public rights issue dated 10 February 2014
Balance as at 30 June 2014
Balance as at 30 June 2015
For further details related to the share issue transactions please see note 20.2.
Number of
shares
Share
capital
Share
premium
100
9,999,900
22,835,042
17,775,514
4,000
42,616,164
93,230,720
93,230,720
–
–
–
228
178
–
426
832
832
–
–
–
32,221,936
13,406,337
3,795
19,249,296
64,881,364
64,881,364
34
35
Notes to the Financial Statements (continued)
Options
Balance at the beginning of the year
Balance at the end of the year
June 2015
$
10,122,903
10,122,903
June 2014
$
–
10,122,903
Under the scheme of arrangement whereby the company acquired the entire share capital of Kumarina and purchased certain
investments from Utilico one Zeta option was issued for each five ordinary shares issued.
The options are exercisable at an exercise price of A$1.00 into one ordinary share until 7 June 2016.
14. INVESTMENT INCOME
Interest income
Dividend income
Realised (losses)/gains:
Unrealised fair value (losses)/gains:
Financial assets at fair value through profit or loss
15. OTHER INCOME
Foreign exchange losses
Other income
16. MANAGEMENT AND CONSULTING FEES
Management and consulting fees
June 2015
$
1,343
1,686,534
(1,357,557)
(42,748,742)
(42,418,422)
June 2015
$
(5,953,997)
(136,200)
(6,090,197)
June 2015
$
432,656
June 2014
$
4,656
2,110,554
1,775,524
32,352,325
36,243,059
June 2014
$
(485,418)
–
(485,418)
June 2014
$
3,900,400
The company entered into an investment management agreement with ICM Limited (Bermuda registered) on 10 April 2013.
Management fees are payable at a rate of 0.5% per annum, of funds managed on calculation date, payable quarterly in arrears
and pro-rated for any period less than three months.
Performance fees are payable annually at year end on the difference between adjusted equity funds (adjusted for any dividends
paid or accrued) on calculation date less adjusted base equity funds (high-water mark) previously used in the performance fee
calculation multiplied by 15%. The adjusted base equity funds is the base equity fund used in the last performance fee calculation
adjusted by the average percentage income yield on the S&P/ASX 300 Metals and Mining Index. No performance fee was payable
in the current year (2014: US$3,437,714).
Either party may terminate the agreement with six months’ notice.
36
17. OPERATING AND ADMINISTRATION EXPENSES
Operating and administration expenses consist of:
Accounting fees
Audit fees
Australian Stock Exchange listing fees
Directors fees
Legal fees
Other expenses
18.
INCOME TAX
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
June 2015
$
June 2014
$
103,628
13,982
49,954
150,000
159,608
659,248
–
22,627
51,407
153,333
86,378
714,117
1,136,420
1,027,862
The company is domiciled in Bermuda and has elected to be tax exempt in terms of local legislation. As such no tax is payable.
19.
(LOSS)/PROFIT PER SHARE
Basic and diluted (loss)/profit per share (cents)
June 2015
$
(0.57)
June 2014
$
0.44
(Loss)/profit used in calculation of basic and diluted earnings per
share
(53,242,013)
29,186,342
Weighted average number of ordinary shares outstanding during the
year used in calculation of basic and diluted earnings per
share
93,230,720
67,077,239
The weighted average number of ordinary shares calculation is based on the year beginning 1 July 2014. For details of shares
issued during the year refer to note 20.2.
No adjustment is made for the 10,122,903 options in issue at 30 June 2015 (30 June 2014: 10,122,903) as they are not considered
to be dilutive.
20. NOTES TO THE CASH FLOW STATEMENT
20.1 Cash utilised by operations
(Loss)/profit before income tax benefit
(53,242,013)
29,186,342
June 2015
$
June 2014
$
Adjustments for:
Realised losses/(gains) on investments
Fair value loss/(profit) on revaluation of investments
Impairment of loan to subsidiary
Foreign exchange losses
Interest income
Interest expense
Operating loss before working capital change
(Increase) in trade and other receivables
Decrease)/Increase in trade and other payables
Decrease in balance due to brokers
1,357,557
31,321,186
11,427,556
5,953,997
(1,343)
3,164,318
(18,742)
(13,171)
(3,553,320)
(163,248)
(3,748,481)
(1,775,524)
(32,352,325)
–
485,418
(4,656)
1,643,037
(2,817,708)
–
3,689,605
(2,834,023)
(1,962,126)
37
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Notes to the Financial Statements (continued)
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
June 2015
$
June 2014
$
Designated at fair
value through profit
and loss
$
Loans and
receivables
$
Total carrying
value
$
20.2 Issue of share capital
Shares issued for consideration
As part of a renounceable pro-rata entitlement issue the company made
an offering of up to 50,614,556 ordinary shares at A$0.50 whereby
existing shareholders would be entitled to acquire one new ordinary share
for every one held at the record date. Under this offering the company
issued 42,616,164 shares on 10 February 2014 raising the equivalent of
$19,249,722.
21. AUDITOR REMUNERATION
–
19,249,722
June 2015
$
June 2014
$
Amounts received or due and receivable by the auditors for audit of
financial statements
13,982
22,627
22. FINANCIAL RISK MANAGEMENT
The Board of Directors, together with the Investment Manager, is responsible for the company’s risk management. The Directors’
policies and processes for managing the financial risks are set out below. These financial risks are principally related to the
market (currency movements, interest rate changes and security price movements), liquidity and credit and counterparty risk.
The accounting policies which govern the reported statement of financial position carrying values of the underlying financial
assets and liabilities, as well as the related income and expenditure, are set out in note 3 to the financial statements. The policies
are in compliance with IFRS and best practice, and include the valuation of certain financial assets and liabilities at fair value
through profit and loss.
Categories of financial instruments
The analysis of assets into their categories as defined in IAS 39 “Financial Instruments: Recognition and Measurement” (IAS 39) is
set out in the following table. For completeness, assets and liabilities of a non-financial nature, or financial assets and liabilities
that are specifically excluded from the scope of IAS 39, are reflected in the non-financial assets and liabilities category.
The table below sets out the company classification of each class of financial assets and liabilities. All assets and liabilities
approximate their fair values:
30 June 2015
Assets
Investments in subsidiaries
Investments
Loans to subsidiaries
Cash and cash equivalents
Trade and other receivables
Balance due from brokers
Designated at fair
value through profit
and loss
$
Loans and
receivables
$
Total carrying
value
$
3,193,721
43,686,192
–
–
–
–
–
–
23,894,270
193,267
13,171
119,912
3,193,721
43,686,192
23,894,270
193,267
13,171
119,912
46,879,913
24,220,620
71,100,533
Liabilities
Loans from subsidiaries
Trade and other payables
Loan from parent
30 June 2014
Assets
Investments in subsidiaries
Investments
Cash and cash equivalents
Liabilities
Loans from subsidiaries
Trade and other payables
Balance due to brokers
Loan from parent
22.1 Market risks
–
–
–
–
10,275,234
104,069,133
–
114,344,367
–
–
–
–
–
4,395,787
175,974
35,408,212
39,979,973
–
–
188,012
188,012
11,947,583
3,729,294
43,336
14,449,593
30,169,806
4,395,787
175,974
35,408,212
39,979,973
10,275,234
104,069,133
188,012
114,532,379
11,947,583
3,729,294
43,336
14,449,593
30,169,806
The fair value of equity and other financial securities held in the company’s portfolio fluctuates with changes in market prices.
Prices are themselves affected by movements in currencies and interest rates and by other financial issues, including the market
perception of future risks. The board sets policies for managing these risks within the company’s objectives and meets regularly
to review full, timely and relevant information on investment performance and financial results. The Investment Manager
assesses exposure to market risks when making each investment decision and monitors ongoing market risk within the portfolio.
The company’s other assets and liabilities may be denominated in currencies other than United States Dollars and may also
be exposed to interest rate risks. The Investment Manager and the board regularly monitor these risks. The company does
not normally hold significant cash balances. Borrowings are limited to amounts and currencies commensurate with the
portfolio’s exposure to those currencies, thereby limiting the company’s exposure to future changes to amounts and currencies
commensurate with the portfolio’s exposure to those currencies, thereby limiting the company’s exposure to future changes in
exchange rates.
Gearing may be short- or long-term, in United States Dollars and foreign currencies, and enables the company to take a long-
term view of the countries and markets in which it is invested without having to be concerned about short-term volatility. Income
earned in foreign currencies is converted to United States Dollars on receipt. The board regularly monitors the effects on net
revenue of interest earned on deposits and paid on gearing.
Currency exposure
The principal currencies to which the company was exposed were the Australian Dollar, Sterling and New Zealand Dollar. The
exchange rates applying against the United States Dollar at 30 June 2015 and the average rates for the year were as follows:
38
39
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Notes to the Financial Statements (continued)
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
Interest rate exposure
The exposure of the financial assets and liabilities to interest rate risks at 30 June 2015 is shown below:
30 June 2015
Exposure to floating rates:
Cash
Exposure to fixed rates:
Loan from subsidiaries
Loan from parent
30 June 2014
Exposure to floating rates:
Cash
Exposure to fixed rates:
Loan from subsidiaries
Loan from parent
Within
one year
$
Greater than
one year
$
Total
$
193,267
–
193,267
–
–
(4,395,787)
(4,395,787)
(35,408,212)
(35,408,212)
188,012
–
188,012
–
–
(11,947,583)
(14,449,593)
11,947,583)
(14,449,593)
Exposures vary throughout the year as a consequence of changes in the make-up of the net assets of the company arising out of
the investment and risk management processes. The company tends to limit its cash reserves and interest earned is insignificant
and therefore not sensitive to interest rate changes. Borrowings are at a fixed rate and not sensitive to interest rate risk.
Other market risk exposures
The portfolio of investments, valued at US$43,686,192 at 30 June 2015 (30 June 2014: US$104,069,133) is exposed to market
price changes. The Investment Manager assesses these exposures at the time of making each investment decision. An analysis
of the portfolio by country is set out on note 24.
Price sensitivity risk analysis
A 10% decline in the market price of the listed investment held by the company would result in an unrealised loss of $4,368,619.
A 10% appreciation in the market price would have the opposite effect
AUD – Australian Dollar
GBP – Sterling
NZD – New Zealand Dollar
30 June 2015
0.7708
1.5725
0.6774
Average
0.8366
1.5755
0.7775
The company’s monetary assets and liabilities at 30 June 2015 (shown at fair value), by currency based on the country of primary
operations, are shown below:
30 June 2015
Cash and cash equivalents
Trade and other receivables
Balance due to brokers
Loans to subsidiaries
Loans from subsidiaries
Loan from parent
Trade and other payables
USD
5,516
–
–
–
–
AUD
184,734
13,171
119,912
3,890,613
(2,721,459)
(25,734,714)
(9,673,498)
(169,003)
(497)
GBP
1,423
–
–
–
–
–
–
NZD
1,594
–
–
20,003,657
(1,674,328)
–
(6,474)
Net monetary (liabilities)/assets
(25,898,201)
(8,187,024)
1,423
18,324,449
30 June 2014
Cash and cash equivalents
Loans from subsidiaries
Loan from parent
Trade and other payables
Balance due to brokers
USD
4,605
AUD
9,681
GBP
172,623
–
(9,009,138)
(8,079,739)
(6,369,854)
(3,641,448)
–
(54,980)
(43,336)
–
–
–
–
NZD
1,103
(2,938,445)
–
(32,866)
–
Net monetary (liabilities)/assets
(11,716,582)
(15,467,627)
172,623
(2,970,208)
Based on the financial assets and liabilities held, and exchange rates applying, at the reporting date, a weakening or strengthening
of the United States Dollar against each of these currencies by 10% would have had the following approximate effect on
annualised income after tax and on net asset value (NAV) per share:
Strengthening of the United States Dollar
AUD
GBP
NZD
Total
30 June 2015
Increase in total comprehensive loss for the year
ended
30 June 2014
Increase in total comprehensive loss for the year
ended
(2,603,181)
(115,348)
(2,791,518)
(5,510,047)
(3,714,956)
(197,763)
(3,105,073)
(7,017,792)
Weakening of the United States Dollar
AUD
GBP
NZD
Total
30 June 2015
Decrease in total comprehensive loss
for the year ended
30 June 2014
Decrease in total comprehensive loss for the
period ended
2,603,181
115,348
2,791,518
5,510,047
3,714,956
197,763
3,105,073
7,017,792
These analyses are broadly representative of the company’s activities during the current year as a whole, although the level of
the company’s exposure to currencies fluctuates in accordance with the investment and risk management processes.
40
41
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Notes to the Financial Statements (continued)
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
22.2 Liquidity risk exposure
Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The company’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meets its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the company’s
reputation. The Investment Manager reviews liquidity at the time of making each investment decision. The contractual maturities
of the financial liabilities, based on the earliest date on which payment can be required, were as follows:
Three months
or less
$
More than three
months but less
than a year
$
–
175,974
–
175,974
–
3,729,294
43,336
–
3,772,630
–
–
–
–
–
–
–
–
–
More than
a year
$
4,395,787
–
35,408,212
39,803,999
11,947,583
–
–
14,449,593
26,397,176
Total
$
4,395,787
175,974
35,408,212
39,979,973
11,947,583
3,729,294
43,336
14,449,593
30,169,806
Loans from parent
30 June 2014
Loan from subsidiaries
Trade and other payables
Balance due to brokers
Loans from parent
22.3 Credit risk and counterparty exposure
The company is exposed to potential failure by counterparties to deliver securities for which the company has paid, or to pay for
securities which the company has delivered. To mitigate against credit and counterparty risk broker counterparties are selected
based on a combination of criteria, including credit rating, balance sheet strength and membership of a relevant regulatory body.
Cash and deposits are held with reputable banks. The company has an on-going contract with its Custodians for the provision
of custody services. The contracts are reviewed regularly. Details of securities held in custody on behalf of the company are
received and reconciled monthly.
Maximum exposure to credit risk
The company has loan assets totalling $23,894,270 that are exposed to credit risk.
None of the company’s financial assets is past due or impaired. The company’s principal banker is Bermuda Commercial Bank
(rated by Fitch as BBB–) and the company’s principal custodian is JP Morgan Chase Bank (rated by Fitch as AA–). The subsidiary
Kumarina holds a bank account with National Australia Bank (rated by Fitch as AA–).
22.4 Fair values of financial assets and liabilities
The assets and liabilities of the company are, in the opinion of the Directors, reflected in the statement of financial positions
at fair value. Borrowings under loan facilities do not have a value materially different from their capital repayment amount.
Borrowings in foreign currencies are converted into United States Dollars at exchanges rates ruling at each valuation date.
Unquoted investments are valued based on professional assumptions and advice that is not wholly supported by prices from
current market transactions or by observable market data.
Valuation of financial instruments
The table below analyses financial assets measured at fair value at the end of the year by the level in the fair value hierarchy into
which the fair value measurement is categorised:
Level 1: The fair values are measured using quoted prices in active markets.
Level 2: The fair values are measured using inputs, other than quoted prices, that are included within level 1, that are observable
for the asset.
Level 3: The fair values are measured using inputs for the asset or liability that are not based on observable market data.
30 June 2015
Financial assets
Investments
Investment in subsidiaries
Loan to subsidiary
Level 1
$
30,261,217
–
–
Level 2
$
–
–
–
Level 3
$
13,424,975
3,193,721
23,894,270
There have been no movements between the level 1 and level 3 categories.
The following table shows a reconciliation from opening balances to closing balances for fair value measurements in level 3
investments of the fair value hierarchy:
Balance at 30 June 2014
Acquisitions during the year
Disposals during the year
Total gains or losses recognised in:
Profit or loss
Balance at 30 June 2015
30 June 2014
Financial assets
Investments
Investment in subsidiaries
Level 3
Investments
$
15,968,054
1,000,000
Level 3
Investments
in subsidiary
$
10,275,234
Level 3
loan to
subsidiary
$
–
1
35,321,826
–
(5,293,501)
–
(3,543,079)
13,424,975
(1,788,013)
3,193,721
(11,427,556)
23,894,270
Level 1
$
88,101,079
–
Level 2
$
–
–
Level 3
$
15,968,054
10,275,234
The following table shows a reconciliation from opening balances to closing balances for fair value measurements in level 3
investments of the fair value hierarchy:
Balance at 30 June 2013
Acquisitions during the year
Total gains or losses recognised in:
Profit or loss
Balance at 30 June 2014
22.5 Capital risk management
Level 3
Investments
$
3,250,000
7,338,054
50,000
15,968,054
Level 3
Investments
in subsidiary
$
10,275,233
1
5,380,000
10,275,234
The objective of the company is stated as being to maximise shareholder returns by identifying and investing in investments
where the underlying value is not reflected in the market price. In pursuing this long term objective, the board has a responsibility
for ensuring the company’s ability to continue as a going concern. It must therefore maintain an optimal capital structure through
varying market conditions. This involves the ability to issue and buy back share capital within limits set by the shareholders in
general meeting; borrow monies in the short and long term; and pay dividends to shareholders out of current year earnings as
well as out of brought forward reserves.
42
43
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Notes to the Financial Statements (continued)
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
23. RELATED PARTIES
23.1 Material related parties
Holding company
The company’s holding company is Utilico which held 83.65% of the company’s issued share capital on 30 June 2015. Utilico is in
turn held 56.82% by General Provincial Life Pension Fund (L) Limited.
Subsidiary companies
The company’s subsidiaries are Kumarina, Zeta Energy and Zeta Investments, all 100% held subsidiaries.
Key management personnel
Key management personnel and their close family members and entities which they control, jointly or over which they exercise
significant influence are considered related parties of the company. The company’s directors, as listed in the Director’s report are
considered to be key management personnel of the company.
Investment manager
ICM Limited is the investment manager of both the company and its holding company.
23.2 Material related party transactions
Nature of transactions
Investments in related parties:
Kumarina
Zeta Investments
Zeta Energy
On 1 September 2014 the company acquired 100% of the shares and voting interests
in Zeta Energy Pte. Limited. There were no acquisition related costs. On 13 April 2015
Kumarina bought back and cancelled 44,856,490 shares. The amount paid for these
shares was A$6,481 million. This had no effect on the percentage holding in Kumarina.
Loans to related parties:
Kumarina
Zeta Energy
Loans from related parties:
Utilico
Kumarina
Zeta Energy
Interest charged by the subsidiaries
Interest charged by the parent company
Interest charged by the investment manager
Fees paid to the investment manager
Fees paid to the directors
June 2015
$
June 2014
$
3,193,719
10,275,233
1
1
30,832
23,863,438
1
–
–
–
35,408,212
14,449,593
–
4,395,787
552,203
2,412,137
109,120
431,181
150,000
5,859,289
6,088,294
634,612
911,649
–
3,900,400
153,333
24. SEGMENTAL REPORTING
The company has four reportable segments, as described below, which are considered to be the company’s strategic investment
areas. For each investment area, the company’s chief operating decision maker (“CODM”) (ICM Limited - investment manager)
reviews internal management reports on at least a monthly basis. The following summary describes each of the company’s
reportable segments:
Gold: investments in companies which mine gold
Oil & Gas: investments in companies which extract or prospect for oil or gas
Mineral Exploration: investments in companies which mine minerals other than gold
Other segments: activities which do not fit into one of the above segments
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit
before tax, as included in the internal management reports that are reviewed by the company’s CODM. Segment profit is used to
measure performance as management believes that such information is the most relevant in evaluating the performance of certain
segments relative to other entities that operate within these industries.
Information about reportable segments
30 June 2015
External revenues
Gold
$
Oil & gas
$
Mineral
exploration
$
Other
segments
$
Total
$
(9,186,191)
(14,470,287)
(18,499,858)
(262,086)
(42,418,422)
Reportable segment revenue
(9,186,191)
(14,470,287)
(18,499,858)
(262,086
(42,418,422)
Interest revenue
Interest expense
–
–
–
–
–
–
1,343
1,343
(3,164,318)
(3,164,318)
Reportable segment loss before tax
(9,186,191)
(14,599,002)
(18,499,858)
(10,956,962)
(53,242,013)
Reportable segment assets
9,861,293
38,971,352
21,936,822
331,066
71,100,533
Reportable segment liabilities
–
–
–
(39,979,973)
(39,979,973)
30 June 2014
External revenues
4,110,018
9,304,180
22,809,271
Reportable segment revenue
4,110,018
9,304,180
22,809,271
–
–
–
–
–
–
19,590
19,590
4,656
36,243,059
36,243,059
4,656
(1,643,037)
(1,643,037)
Interest revenue
Interest expense
Reportable segment profit/(loss) before
tax
4,110,018
9,304,180
22,809,271
(7,037,127)
29,186,342
Reportable segment assets
22,620,202
54,796,483
36,539,627
576,067
114,532,379
Reportable segment liabilities
–
(43,336)
–
(30,126,470)
(30,169,806)
During the year there were no transactions between segments which resulted in income or expenditure.
44
45
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Notes to the Financial Statements (continued)
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities, and other material items
Revenues
Total revenue for reportable segments
Revenue for other segments
Revenue
Profit or loss
Total profit/(loss) for reportable segments
Loss for other segments
(Loss)/profit before tax
Assets
Total assets for reportable segments
Assets for other segments
Total assets
Liabilities
Total liabilities for reportable segments
Liabilities for other segments
Total liabilities
Geographic information
June 2015
$
(42,156,336)
(262,086)
(42,418,422)
(42,285,051)
(10,956,962)
(53,242,013)
70,769,467
331,066
71,100,533
–
(39,979,973)
(39,979,973)
June 2014
$
36,223,469
19,590
36,243,059
36,223,469
(7,037,127)
29,186,342
113,956,312
576,067
114,532,379
(43,336)
(30,126,470)
(30,169,806)
Revenue
Australia
Singapore
Egypt
Mali
Namibia
New Zealand
Norway
United Kingdom
Other Countries
Assets
Australia
Singapore
Mali
Namibia
New Zealand
Norway
United Kingdom
Other Countries
Zeta Resources Limited
Annual Report
for the year to 30 June 2015
June 2015
$
June 2014
$
(22,361,895)
(11,427,556)
–
(5,104,743)
(1,278,383)
(94,932)
(1,390,572)
(455,871)
(42,384)
22,718,098
–
2,330,918
702,532
2,073,370
3,928,894
2,259,920
740,870
1,468,867
(42,156,336)
36,223,469
27,556,243
23,894,270
4,582,564
5,176,237
7,800
5,639,348
1,848,749
2,064,256
51,252,250
–
8,518,029
6,060,620
34,387,410
6,605,920
2,165,620
4,966,463
70,769,467
113,956,312
In presenting information on the basis of geography, segment revenue and segment assets are based on the geographical
location of the operating assets of the investment held by the company.
25. EVENTS AFTER THE REPORTING DATE
On 8 July 2015, ASX-listed Oilex Ltd announced a placement and rights issue to fund its 2015/16 work programme. As part of the
capital raising, Zeta has agreed to subscribe for 236 million new Oilex Ltd shares representing approximately 18.1% of Oilex Ltd’s
enlarged share capital (on an undiluted basis) and in addition subscribe for A$4,243,500 of unsecured zero coupon convertible
notes, convertible into 101,470,588 ordinary Oilex Ltd shares. The total consideration payable by Zeta for the placement, net of
fees received, will be A$14.0 million.
46
47
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Additional ASX Information
1.
SUBSTANTIAL SHAREHOLDERS
4. TOP 20 HOLDINGS OF FULLY PAID ORDINARY SHARES AS AT 15 SEPTEMBER 2015
As at 15 September 2015, the company had received notification of the following substantial shareholdings:
Utilico Investments Limited
Peter Ross Sullivan
79,224,689 (84.98%)
5,670,632 (6.08%)
2. DISTRIBUTION SCHEDULE OF ORDINARY SHARES HELD AT 15 SEPTEMBER 2015
Name
J P Morgan Nominees Australia Limited
HSBC Custody Nominees Australia Limited
James Noel Sullivan
No. of ordinary
% of issued
shareholders
capital
Hardrock Capital Pty Limited ATF CGLW Superannuation Fund
Holding ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
No. of
shares
4,090
555,555
304,588
1,376,570
91,041,699
93,230,720
15
158
34
37
16
260
0.00
0.54
0.33
1.48
97.65
100.00
The number of shareholders holding less than a marketable parcel of ordinary shares at 15 September 2015
is 21 and they hold 11,521 securities.
Source: Security Transfer Registrars
3. DISTRIBUTION SCHEDULE OF LISTED OPTIONS TO ACQUIRE ORDINARY SHARES HELD AT
15 SEPTEMBER 2015
Holding ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
No. of listed
No. of listed
% of listed
options
149,388
230,647
106,079
1,073,766
8,563,023
10,122,903
option holders
option
228
84
13
25
25
355
1.48
2.28
1.05
10.61
84.59
100.00
Calimo Pty Limited
Gillian Clare Sellers
Cherryburn Pty Limited
Custodial Services Limited
John Gillis Broinowski
Uuro Pty Limited
Australian Executor Trustees Limited No.1 Account
Peter Irving Burrows AO
ACS (NSW) Pty Limited
Pendan Pty Limited
Gail Sullivan
Minturn Pty Limited
T J + K M Russell
Brendon Hugh Doyle
Stephanie Saville
Source: Security Transfer Registrars
Stephen Leeder & K Esson
Total for top 20
Source: Security Transfer Registrars
5. VOTING RIGHTS
Shares
78,153.570
7,652,619
1,575,025
600,000
576,510
400,000
350,000
281,300
260,000
250,000
200,000
200,000
170,000
127,675
125,000
120,000
100,000
89,000
70,110
70,000
91,370,809
% of issued
capital
83.83
8.21
1.69
0.64
0.62
0.43
0.38
0.30
0.28
0.27
0.21
0.21
0.18
0.14
0.13
0.13
0.11
.10
.08
0.08
98.02
The number of option holders holding less than a marketable parcel of options to acquire ordinary shares at
15 September 2015 is 338 and they hold 734,983 listed options.
Source: Security Transfer Registrars
All ordinary shares carry one vote per share without restriction.
48
49
49
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015
Additional ASX Information (continued)
6. TOP 20 HOLDINGS OF LISTED OPTIONS AS AT 15 SEPTEMBER 2015
9. KUMARINA TENEMENT SCHEDULE
Project Area
Tenement ID
Ownership
Comments
Gold and Base Metals Rights
Gold and Base Metals Rights
Ilgarari
Eulaminna
Murrin Murrin
E52/2274
M39/0371
M39/0372
M39/0397
M39/0397
M39/0398
M39/0399
M39/0400
M39/1068
P39/5230
P39/5231
P39/5232
P39/5233
P39/5234
P39/5235
P39/5236
P39/5237
P39/5238
100%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Name
J P Morgan Nominees Australia Limited
HSBC Custody Nominees Australia Limited
Wayne C Van Blitterswyk
James Noel Sullivan
Calimo Pty Limited
Hardrock Capital Pty Limited ATF CGLW Superannuation Fund
Wayne Vincent Halloran
Wayne C Van Blitterswyk
Hardrock Capital Pty Limited
Andrew John Fisher
Kesli Chemicals Pty Limited
Cherryburn Pty Limited
Molonglo Pty Limited
HSBC Custody Nominees Australia Limited
Geomett Pty Limited
UBS Wealth Management Australia Nominees Pty Limited
Halcyon Nominees Pty Limited
Anthony John + S J Power
Pendan Pty Limited
Gail Sullivan
Total for top 20
Source: Security Transfer Registrars.
7. USE OF CAPITAL
Shares
6,937,076
879,275
325,000
315,005
106,667
100,000
96,667
96,666
82,800
72,450
62,314
57,000
54,000
53,000
50,000
50,000
50,000
27,000
25,535
25,000
% of issued
capital
68.53
8.69
3.21
3.11
1.05
0.99
0.95
0.95
0.82
0.72
0.62
0.56
0.53
0.52
0.49
0.49
0.49
0.27
0.25
0.25
9,465,455
93.49
Pursuant to the requirements of ASX listing rule 4.10.19 the company has used all cash and assets in a form
readily convertible to cash, that it held at the time of admission, in a way consistent with its business objectives.
8. APPLICATION OF CHAPTERS 6, 6A, 6B AND 6C OF THE CORPORATIONS ACT 2001
The company is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act dealing with the acquisition of
its shares. In addition neither the Bermuda Companies Act nor the company’s Bye Laws prescribe a regime for
the conduct of takeovers or contain a general prohibition on acquisitions of interests in Bermuda companies
beyond a certain threshold in the same way as the Australian Corporations Act 2001.
50
51
51
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015 GENERAL ADMINISTRATION
ICM Corporate Services (Pty) Ltd
1 Knutsford Road
Wynberg 7800
Cape Town
South Africa
AUDITOR
KPMG Inc
MSC House
1 Mediterranean Street, Foreshore
8001, Cape Town
South Africa
DEPOSITORY
JP Morgan Chase Bank NA
London Branch
25 Bank Street
Canary Wharf
London E14 5JP
United Kingdom
REGISTRAR
Security Transfer Registrars Pty Limited
770 Canning Highway
Applecross WA 6153
Australia
Telephone: +61 8 9315 2333
Stock Exchange Listing
The company’s shares are quoted on the Official List of
the Australian Securities Exchange, Ticker code: ZER
Company Information
Zeta Resources Limited
Company ARBN: 162 902 481
www.zetaresources.co
DIRECTORS (NON-EXECUTIVE)
Peter Sullivan (Chairman)
Marthinus (Martin) Botha
Xi Xi
REGISTERED OFFICE
19 Par-la-Ville Road
Hamilton HM 11
Bermuda
Company Registration Number: 46795
AUSTRALIAN REGISTERED OFFICE
Level 9
45 Clarence Street
Sydney NSW 2000
Australia
Telephone: +61 2 9248 0304
INVESTMENT MANAGER
ICM Limited
1st Floor
19 Par-la-Ville Road
Hamilton HM 11
Bermuda
Telephone: +1 441 299 2897
Email: contact@icmnz.co.nz
SECRETARY
Kim Armstrong
19 Par-la-Ville Road
Hamilton HM 11
Bermuda
ASSISTANT SECRETARY
BCB Charter Corporate Services Limited
19 Par-la-Ville Road
Hamilton HM 11
Bermuda
52
Zeta Resources LimitedAnnual Reportfor the year to 30 June 2015 Contact
PO Box 25437
Featherston Street
Wellington 6146
New Zealand
Telephone: +64 4 901 7600
www.zetaresources.co
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