2017
ANNUAL REPORT
Panoramic Resources
Limited
Resolute Mining Limited
New Zealand Oil & Gas
Limited
Nickel
Gold
Oil & Gas
West Australian nickel
company
Over 300,000 tonnes of
nickel resources
ASX-listed mid-cost gold
producer
Producing mines in
Mali and Queensland,
Australia
New Zealand oil & gas
E&P junior
Substantial cash
following asset sales
Pan Pacific
Petroleum NL
Oil & Gas
Seacrest LP
Bligh Resources Limited
Oil & Gas
Gold
ASX-listed E&P junior
Global exploration firm
Substantial cash
following asset sale
Widely diversified
portfolio of exploration
interests
ASX-listed junior gold
explorer
Substantial identified
gold resource in Western
Australia
Horizon Gold Limited
GME Resources Limited
Alliance Mining
Commodities Limited
Gold
Nickel & Gold
Bauxite
ASX-listed junior gold
explorer
Subsidiary of Panoramic
Resources Limited
ASX-listed junior nickel
and gold explorer
Substantial nickel
resources in Western
Australia
Australian-based bauxite
developer
World class bauxite asset
in Guinea,
West Africa
CONTENTS
OVERVIEW AND PERFORMANCE
4
5
Group Performance Summary
Chairman’s Statement
STRATEGIC REPORT AND INVESTMENTS
Investment Manager’s Report
6
15 Macro Trends Affecting Resources
16 Sector Summaries
21
22
23 Geographical and Sector Split of Investments
24 Five Largest Holdings
25 Review of the Five Largest Holdings
ICM Investment Philosophy
Investment Manager and Team
GOVERNANCE
28 Directors
29 Report of the Directors
35 Corporate Governance Statement
FINANCIAL STATEMENTS
Independent Auditor’s Report
36
39 Auditor’s Independence Declaration
40 Financial Statements
44 Notes to the Financial Statements
OTHER
64 Additional ASX Information
66 Company Information
1
ZETA RESOURCES
LIMITED
INVESTMENT OBJECTIVE
Zeta Resources Limited’s 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
Zeta Resources Limited (“Zeta”) is a 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 undertake 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.
GEOGRAPHICAL INVESTMENT EXPOSURE
FINANCIAL CALENDAR
Year End
30 June
Annual General Meeting
24 November 2017
Half Year
31 December
Half Year December 2017 Announcement
February 2018
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.
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 view 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.
2
3
GROUP PERFORMANCE SUMMARY
CHAIRMAN’S STATEMENT
Total return(1) (annual) (%)
Net tangible asset per ordinary share(2) (Australian cents)
Ordinary share price (Australian cents)
Discount (%)
Profit/(loss) per ordinary share(3) (US dollars)
Dividends per ordinary share
Equity holders' funds (US$m)
Gross assets(4) (US$m)
Cash (US$m)
Other debt (US$m)
Net debt (US$m)
Net debt gearing on gross assets (%)
30 JUNE
2017
30 JUNE
2016
CHANGE %
2017/16
19.8
36.9
37.0
0.3
0.06
Nil
53.0
80.6
0.0
(27.6)
(27.6)
34.2
(27.9)
(171.1)
30.8
18.0
(41.6)
(0.05)
Nil
42.8
82.4
0.2
(39.9)
(39.7)
48.2
19.8
105.6
(100.7)
222.0
n/a
23.8
(2.2)
n/a
(30.8)
(30.5)
n/a
(1)
(2)
(3)
Total return is calculated based on NTA per share return plus dividends reinvested from the payment date.
The NTA is calculated including the 86,461,440 December 2019 options as they are considered to be in-substance issued shares.
Earnings per share is based on the weighted average number of shares in issue during the year. An adjustment has been made for the 86,461,440 options issued as
they are considered to be in-substance issued shares.
(4)
Gross assets less liabilities excluding loans.
n/a = not applicable
Zeta has worked
hard during the
year to add value
to its existing
investments as
well as initiate
new positions
I’m pleased to report that commodity prices have performed much better to date in 2017.
Zeta has benefited from this upturn with a strong reported profit of US$10.3m, validating its
long term approach to resource investment. While we cannot control short term fluctuations
in prices, we believe that long term demand for commodities will remain intact.
With a largely stable platform of investments in oil & gas, gold, nickel, and a growing presence
in copper, Zeta has worked hard during the year to add value to its existing investments as well
as initiate new positions.
In April, Zeta launched a takeover offer for Bligh Resources Limited (“Bligh”). The strategic
rationale was to gain control of a quality gold asset, in close geographical proximity to existing
processing infrastructure. While a competitive process, the takeover was successful, delivering
Zeta a 86% stake in Bligh.
In June, Pan Pacific Petroleum NL (“PPP”) and Zeta announced that they had entered into a
scheme of arrangement, under which Zeta will acquire all of the issued share capital of PPP
that it does not already own. With PPP having sold its oil & gas assets and becoming essentially
a cash box, the rationale for the scheme is to consolidate PPP into Zeta, thus reducing costs,
and enabling the cash in PPP to be put to more productive use within Zeta. Under the scheme,
PPP shareholders will be able to elect to receive either cash or Zeta shares in exchange for
their shares in PPP, and it’s my hope that many will choose to join us as shareholders in Zeta.
After the balance date, in August, Zeta made a partial takeover offer pursuant to the New
Zealand Takeovers Code, to acquire 50.01% of the shares in New Zealand Oil & Gas Limited
(“NZOG”). If successful, the offer will result in Zeta holding a controlling stake in NZOG. Like PPP,
NZOG has sold the majority of its oil & gas assets. Zeta’s aim is to significantly reduce costs at
NZOG, and seek to better use of the cash sitting idle in NZOG, including returning a substantial
portion of it to shareholders.
In addition to the above, Zeta supported the spin-out by Panoramic Resources Limited
(“Panoramic”) of its gold subsidiary in the form of an IPO of Horizon Gold Limited. Zeta invested
in the IPO, and retains both Panoramic as a top-five holding, and Horizon Gold as a smaller
investment.
The increased focus on lithium-ion batteries has driven a speculative rush in battery related
metals. I would note that while Zeta does not have any exposure to lithium, it does have
significant investments in nickel and cobalt, both important components of the most popular
types of lithium-ion batteries, and recently it made a modest investment in a graphite company.
We will continue to monitor developments in this sector closely.
Our major shareholder UIL Limited has been a significant factor in our growth to date. During
the year we took advantage of cash inflows to reduce our level of debt to UIL, although we will
be relying on further support as we complete a number of the new initiatives mentioned above.
With the above developments, Zeta’s portfolio, while still relatively concentrated, has broadened.
We intend for Zeta to remain a concentrated rather than a diversified investor in the belief
that it is better to have a thorough understanding of and influential involvement with investee
companies, rather than a commitment to simple risk dissipation through diversity of holdings.
Peter Sullivan
Chairman
12 September 2017
4
5
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017
INVESTMENT MANAGER’S REPORT
The twelve months under review have shown a general similarity to the previous year. Aside from gold, the first six
COMMODITY MARKETS
months to the end of December 2016 was characterised by a general decline in commodity prices. The subsequent
six months has seen a general recovery, most latterly helped by weakness in the US dollar. Overall, the twelve months
has ended up with prices somewhat lower than the start of the period. Zeta’s fortunes have largely mirrored that of
the commodity markets, albeit with greater relative changes given the company’s leveraged balance sheet.
The first half of the financial year under review was notable for continuing the decline in the price of Australian dollars
against US dollars that occurred in the previous year, thus boosting the profitability of Australian miners whose
export prices were denominated in US dollars. In the second half of the year under review, the Australian dollar
strengthened against the US dollar, thus reversing some of these earlier gains.
Whereas commodity prices generally ended the twelve months to 30 June 2017 close to where they started, Zeta’s
investments were overall higher than at the start. During the year under review, Zeta’s net assets per share rose
from A$0.308 to A$0.369, a rise of 19.8%. For comparison, the S&P/ASX 200 Energy index rose 6.0% over the same
period, and the S&P/ASX 300 Metals & Mining index, which includes gold mining stocks, rose 24.1%. Zeta’s share price
doubled, rising 105.6% to A$0.37. At the start of the period the share price was at a 41.6% discount to net assets, at
the end of the period the share price was at a modest 0.3% premium to net assets.
TOTAL RETURN COMPARATIVE PERFORMANCE*
since inception on 12 June 2013 to 30 June 2017
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
Jun 13
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
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: ICM and S&P Dow Jones Indices
As noted, the year under review saw modest declines in the prices of oil, nickel and gold. The price of copper,
however, finished the year higher than where it started.
Oil & Gas
BRENT CRUDE OIL PRICE
from June 2015 to July 2017
l
b
b
/
$
S
U
90
80
70
60
50
40
30
20
90
80
70
60
50
40
30
20
l
b
b
/
$
A
Jun 15
Nov 15
Apr 16
Sep 16
Feb 17
Jul 17
US$/bbl
A$/bbl
Source: US Energy Information Administration
At the start of the year under review, the Brent Crude Oil price was US$50/bbl, somewhat off its lows during the prior
twelve months following a significant decline the previous year. This year oil prices were more stable, but finished the
year under review slightly lower than at the start, with Brent Crude Oil at US$48/bbl.
The failure of oil prices to recover meaningfully has resulted in a continued curtailment of many companies exploration
projects, and in some cases asset sales. The latter has been particularly true of Zeta’s investments in the sector.
During the year under review, both PPP and NZOG sold their respective stakes in the offshore New Zealand joint
venture permit Tui. NZOG also sold its largest asset, a stake in the offshore New Zealand gas field Kupe.
As noted last year, the sustained downturn in oil prices has impacted the business model of Zeta’s investment in
Seacrest LP (“Seacrest”), whose business model was based on acquiring stakes in a wide range of exploration permits
globally. As a result, the board of Zeta has adjusted the valuation of the company’s holding in Seacrest, which is
unlisted.
6
7
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 INVESTMENT MANAGER’S REPORT
(continued)
Nickel
Gold
NICKEL PRICE
from June 2015 to July 2017
b
l
/
$
S
U
8
7
6
5
4
3
8
7
6
5
4
3
b
l
/
$
A
Jun 15
Sep 15
Dec 15
Mar 16
Jun 16
Sep 16
Dec 16
Mar 17
Jun 17
US$/lb
A$/lb
Source: LME
GOLD PRICE
from June 2015 to July 2017
2,000
1,800
1,600
z
o
/
$
S
U
1,400
1,200
1,000
800
Jun 15
Sep 15
Dec 15
Mar 16
Jun 16
Sep 16
Dec 16
Mar 17
2,000
1,800
1,600
1,400
z
o
/
$
A
1,200
1,000
800
Jun 17
Zeta’s chief investment in the nickel sector is Panoramic Resources Limited and to a lesser extent GME Resources
Limited. As noted in last year’s report, Panoramic has placed its two operating mines in Western Australia, Savannah
and Lanfranchi, on care and maintenance. This has resulted in substantially lower operating costs, but naturally there
Gold prices had a mixed year, starting off badly, before recovering somewhat in the second half of the year under
will be no revenues until the mines become operational again. The first six months of the year brought hope of a
review. At the end of June 2016, gold was US$1,322 per ounce; at the end of June 2017 the gold price was US$1,241
sustained recovery in nickel prices, but this hope was dashed in the second six month period.
per ounce.
Since year end, supply disruptions have resulted in a sudden upturn in nickel prices. It remains to be seen whether
In contrast to the previous year, when gold prices in Australian dollar terms reached record highs, the share price
this latest rise will be sustained, however, there is increasing focus on the industry from new investors, who have
noted the skyrocketing demand for lithium, and to a lesser extent cobalt, from emerging electric vehicle and battery
movements of Australian gold mining companies have this year been more muted. Whereas the previous year, Zeta’s
investment in Resolute Mining Limited (“Resolute”) quadrupled, ending June 2016 at A$1.27 per share, at the end of
technologies. Until recently the usage of nickel in many forms of lithium-ion batteries had been overlooked, but this
June 2017 the share price had fallen 6.3% to A$1.19.
has now changed.
Spot Price US$
Spot Price A$
Source: Kitco - London PM Fix
8
9
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 INVESTMENT MANAGER’S REPORT
(continued)
Copper
CAPITAL STRUCTURE
COPPER LME PRICE
from June 2015 to July 2017
b
l
/
$
S
U
4.00
3.50
3.00
2.50
2.00
1.50
4.00
3.50
3.00
2.50
2.00
1.50
b
l
/
$
A
Jun 15
Sep 15
Dec 15
Mar 16
Jun 16
Sep 16
Dec 16
Mar 17
Jun 17
US$/lb
A$/lb
Source: Kitco - LME
The six-year bear market for copper came to an end in the year under review. Having finished June 2016 at US$2.19
per pound, the price of copper jumped in October, and ended June 2017 at US$2.68 per pound. Since then the price
of copper has risen further, partly due to weakness in the US dollar, to increased industrial demand, and to increased
scrutiny of the likely impact on demand that the emergence of electric vehicles will have on copper respectively. A
report issued by UBS in May 2017 noted that a typical electric vehicle is likely to use 91kg of copper in its battery and
wiring, vs. 50kg in a comparable traditional internal combustion engine car. During the year under review, Zeta has
slowly increased its portfolio investment in copper.
Zeta is a closed-end investment company, listed on the ASX, and was incorporated in Bermuda.
During the year Zeta has had working capital support from its parent company, UIL Limited (“UIL”). As of 30 June 2017,
Zeta had a loan from UIL totalling US$22.3 million, drawn in Australian dollars.
As at 30 June 2017, Zeta had gross assets of US$80.9 million (2016: US$83.0 million). Of this figure, $30.4 million
(2016: $39.6 million) was invested in the oil & gas sector; $24.1 million (2016: $10.4 million) was invested in the nickel
and copper sectors; and $26.4 million (2016: $32.7 million) was invested in the gold sector.
NTA PER SHARE VERSUS SHARE PRICE
since inception on 12 June 2013 to June 2017
)
$
A
(
e
r
a
h
s
r
e
p
A
T
N
1.20
1.00
0.80
0.60
0.40
0.20
0.00
1.20
1.00
0.80
0.60
0.40
0.20
0.00
)
$
A
(
e
c
i
r
p
e
r
a
h
S
Jun 13
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Listed
Unlisted
Kumarina
Closing Share Price
Source: ICM
10
11
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017
INVESTMENT MANAGER’S REPORT
(continued)
FINANCIAL RESULTS
The net profit after tax for the year was US$10,277,906 against a loss of US$6,974,491 in the year ended June 2016. The
majority of the consolidated net profit was comprised of realised gains from sales or distributions from listed investments.
SIGNIFICANT INVESTMENTS
Oil & Gas
New Zealand Oil & Gas
The year under review was one of significant change for NZOG. The company sold its two operational assets: its joint
venture stakes in the gas field Kupe and the oil field Tui. The Kupe stake was sold first, after the company received
an unsolicited offer at a price in excess of NZOG’s then current market capitalisation and the company’s internal
valuation. The Tui stake was sold later, with the main benefit to NZOG not being the sales price, but rather the
removal of the risk to the company around the near term cost of field abandonment, given that Tui is nearing the end
Gold
Resolute
ASX-listed 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, with a third development asset at Bibiani in Ghana.
Production in the year to 30 June 2017 of c. 330,000/oz of gold was up on the previous year’s production of
c. 315,000/oz. Gold ounces produced at Syama increased by 13.5% to 237,830oz in part due to the operation of a
refurbished roaster at the end of the previous year that had previously been a bottleneck in the mine’s production.
Cash costs for the year rose by 8.0% to A$896/oz. At Ravenswood gold ounces produced fell by 12.8% to 92,004oz;
production is expected to gradually decrease as the Mt Wright underground mine reaches the end of its life, and
until the Ravenswood expansion project is completed. Cash costs per ounce at Ravenswood increased by 21.2% to
A$1,252/oz, in part due to the lower volumes.
At 30 June 2017 Resolute had cash and bullion on hand of A$283 million and total borrowings of A$35 million.
of its production life. As noted above, Zeta launched a partial takeover for NZOG in August 2017. Should the offer be
During the year, Resolute continued development work on the underground mine at Syama. Sublevel cave ore
successful, it will result in Zeta’s ownership of NZOG rising from 17% to 50%.
production is expected to commence in December 2018. The Ravenswood expansion project is at the regulatory
Pan Pacific Petroleum
PPP also had significant change during the year under review. Like NZOG, PPP sold its stake in the Tui oil field joint
venture to the same purchaser that bought the NZOG stake. Later in the year, PPP sold its assets in Vietnam to one
of its joint venture partners. Aside from an outstanding dispute, and thus potential liability, the company does not
have any current exposure to oil & gas. In June 2017, PPP and Zeta announced that they had executed a scheme
implementation agreement, with the aim of merging the two companies via a court approved scheme of arrangement.
Zeta has offered PPP shareholders a choice of cash or Zeta shares in exchange for their PPP shares.
Seacrest
Seacrest is a specialist oil & gas offshore seismic exploration company. Seacrest moved quickly to amass a significant
number of geographically diversified interests in joint venture licenses for offshore oil exploration, but has suffered a
loss in value in the wake of the significant and sustained fall in the price of oil and a number of disappointing drilling
approvals stage.
Resolute has provided guidance for gold production of 300,000oz at an All-In-Sustaining-Cost of A$1,280/oz (US$960/
oz) for the year to 30 June 2017.
Bligh
Bligh Resources is a small Australian gold explorer, which owns the Bundarra Gold Project, which lies within the
Norseman-Wiluna greenstone belt of the Archean Yilgarn Craton, approximately 60km north of Leonora in the Eastern
Goldfields region of Western Australia. The company also has prospecting licenses for gold in Western Australia and
manganese in the Northern Territory.
During the year, Zeta launched a takeover offer for Bligh, which was ultimately successful, with Zeta owning an 86%
stake in Bligh.
results. Seacrest’s operational interests are now at varying stages, but some are moving forward with drilling.
Subsequent to year end, Bligh announced an entitlement offer to raise A$1.2m. Bligh intends to use the proceeds
Nickel
Panoramic
Panoramic is a Western Australian mining company that owns two 100%-owned underground nickel sulphide mines,
the Savannah Project in the East Kimberley and the Lanfranchi Project near Kambalda, Western Australia. Both mines
remained on care and maintenance throughout the year under review. Panoramic has worked to refine its feasibility
study for the resumption of operations at Savannah, including modest field drilling. Earlier in the year, Panoramic
successfully spun off its gold assets in the IPO of Horizon Gold. Zeta participated in the capital raising for Horizon
Gold, and remains a shareholder of both companies.
from the offer to fund exploration and development at the Bundarra Gold Project, reduce debt, and for working
capital purposes.
12
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Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 INVESTMENT MANAGER’S REPORT
(continued)
MACRO TRENDS AFFECTING RESOURCES
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. During the year under review,
Kumarina entered a joint venture with a subsidiary of GME Resources to explore and potentially develop the Murrin
Murrin project. However, GME gave notice that it was withdrawing from the joint venture in June 2017. Kumarina’s
main focus is now the Ilgarari copper.
JDF Morrison
ICM Limited
Investment Manager
12 September 2017
E-VEHICLES
RENEWABLES
CHINA URBANISATION
GLOBAL DEBT
• Nearing tipping point where all factors for growth in place
• EVs use more commodities such as nickel and copper than traditional vehicles
• Spike in demand for lithium and cobalt
•
Increased demand for flake and vein graphite
• Consumer pull and government push for renewables
• Price of solar continues to reduce
• Tesla showing the way with trifecta of solar roof panels, home battery and EV,
but yet to reach tipping point
• Low price of natural gas reducing carbon footprint and industrial demand for
renewables
• Central government spending on new cities helps manage GDP growth
• Smooths cycles and sustains demand for industrial commodities
• Long term growth in question as Chinese population ages
• Government committed to renewables and EVs
• Unprecedented increase in global government debt on a relative basis
• The US expected to lead the way for unwinding of Federal Reserve balance
sheet
• Recent past has shown a readiness to retreat easily on market corrections
• Risk to global economy, and thus demand for industrial commodities
14
15
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 SECTOR SUMMARIES
GOLD
79
AuGold
196.967
Overview
• Precious metal, prized for its rarity and relative lack of chemical reactivity
• Gold occurs naturally in only a single isotope
• Historic demand has been 50% jewellery; 40% investment; 10% industrial
• Diversified sources of production
• Largest producers China, Australia, Russia
Macro trends
• Gold seen as natural hedge to quantitative easing by central banks
• Hedge to US dollar which has declined long term against gold
• Gold production has been in a long-term uptrend since recordkeeping
commenced
• Demand for jewellery dominated by China and India; US a distant third
Exposure
• 3% of Resolute Mining (ASX:RSG) - operating mines in Mali and Queensland,
Australia
• 86% of Bligh Resources (ASX:BGH) - development project in Western Australia
• 8% of Horizon Gold (ASX:HRN) – exploration and development in Western
Australia
• 100% of Kumarina (unlisted) – exploration and development in Western Australia
OIL & GAS
Overview
• Oil is a fossil petroleum liquid whose primary use is fuel; around 80% of oil is
refined into gasoline, diesel, and jet fuel, with the remaining 20% supplying
various products including lubricants, asphalt, and petrochemicals
• Natural gas is a petroleum gas whose primary uses are heating, electricity
generation, and feedstock for petrochemicals
• Globally diverse sources of production and demand
• Largest producers of oil are Saudi Arabia, Russia and the US; largest producers
of gas are the US and Russia, with Iran a distant third
Macro trends
•
“Peak oil” has been discussed for decades, but long-term trend of annual
growth in production is still intact
• Annual growth in demand has followed a linear trend in line with world
population growth
• Lower prices has meant global expenditures on oil & gas exploration have
been falling since 2014; growth is expected to resume in 2018
• Fraccing has moved the US into the number one position in gas production;
fraccing has had less success in other countries
Exposure
• 17% of New Zealand Oil & Gas (NZX:NZO) – owns 50% of Cue, with production
interests in oil in New Zealand and gas in Indonesia; has agreed to purchase
4% of Kupe gas field in offshore New Zealand
• 25% of Seacrest (unlisted) – globally diversified seismic oil & gas exploration
• 51% of Pan Pacific Petroleum (ASX:PPP) – now a cash box having sold its
operating assets
16
17
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 SECTOR SUMMARIES
(continued)
NICKEL
28
NiNickel
58.693
COPPER
29
CuCopper
63.546
Overview
•
Industrial metal used primarily in stainless steel
• Other uses include electroplating, alloy steel, and in cathodes for electric batteries
• Diversified sources of production
• Largest producers Philippines, Russia, Canada, Australia, New Caledonia, Indonesia
Macro trends
• Until recently, nickel prices depressed by global stockpiling
• Supply disruptions have led to short term jumps in prices
•
Increasing production of lithium-ion batteries expected to sustain long-term
demand growth
Exposure
• 28% of Panoramic Resources (ASX:PAN) - two nickel mines on care and
maintenance in Western Australia
• 5% of GME Resources (ASX:GME) – owns development project in Western Australia
Overview
•
Industrial metal used primarily in electrical wiring
• Other uses are roofing and plumbing; industrial machinery; and in alloys
• Occurs naturally in a form that requires relatively little refining
• Diversified production, but Chile by far the largest producer with China a distant
second
Macro trends
• Annual production has been increasing since WW2, but sharp uptick in late 1990s
• Prices relatively volatile, generally tied to world economy, but also in a downtrend
from mid-2011 through mid-2016
• Recent uptrend in prices sustained by focus on electric vehicles, which use more
copper wiring than traditional internal combustion engine vehicles
Exposure
• Zeta has 3% of its current gross assets invested in small Australian listed copper
firms, and 100% of Kumarina (unlisted)
BAUXITE
13
AI
Aluminium
26.982
Overview
• Aluminium is the most widely used metal after iron; its primary usage is in alloys
where its light weight is preferred
• Bauxite is the primary ore from which aluminium is extracted; the ore must first
be chemically processed to produce alumina (aluminium oxide); alumina is then
smelted using an electrolysis process to produce pure aluminium metal
• Diversified sources of production, albeit less than other commodities invested
in by Zeta
• Largest bauxite producer Australia, almost twice that of the second producer
China, with Brazil third
• Largest bauxite reserves are in Guinea and Australia; Brazil is a distant third
Macro trends
• Alumina production has been in increasing trend since early 1980s
• Australia a big producer of bauxite and alumina, but relatively little smelting done
there
• Similar to copper, aluminium prices in decline from mid-2011 through mid-2016,
but now in uptrend
Exposure
• Zeta has 0.5% of its gross assets invested in a Guinea bauxite development
company
18
19
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 SECTOR SUMMARIES
(continued)
ICM INVESTMENT PHILOSOPHY
GRAPHITE
6
CCarbon
12.011
Overview
• Graphite is the most stable form of carbon under standard conditions, and is a
form of coal
• Found in three natural forms: amorphous; flake (or crystalline); and vein (or lump)
• Flake and vein graphite has application in anodes in lithium-ion batteries
• Graphite can be produced synthetically, although current production methods
yield a purer graphite from natural ores
• With modern chemical purification processes and thermal treatment, natural
graphite achieves a purity of 99.9 percent compared to 99.0 percent for the
synthetic equivalent
• Largest producer of graphite is China; biggest graphite reserves are in Turkey
Macro trends
• Main uses of graphite are brake linings, foundry operations, lubricants, refractory
applications, and steelmaking
• Growth of production of lithium-ion batteries is causing a rapid increase in demand
for natural graphite
• At the end of 2016, natural graphite accounts for 60-65% of lithium-ion anode
market share; synthetic is around 30%; and alternatives such as lithium titanate,
silicon and tin is around 5%
Exposure
• Zeta is investing in a Sri Lankan graphite brownfield explorer of vein graphite, the
purest naturally occurring graphite
20
21
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 INVESTMENT MANAGER AND TEAM
GEOGRAPHICAL & SECTOR SPLIT OF INVESTMENTS
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,
patient investors and see markets as a place to exchange assets.
ICM has some US$21.1 billion under management directly and indirectly in a range of mandates. ICM has over 40
staff based in offices in Bermuda, Cape Town, Dublin, Hong Kong, London, Singapore, Sydney and Wellington.
ICM staff responsible for Zeta’s investments include:
Dugald Morrison, 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 a number
of unlisted companies. He is a member of the New Zealand Institute of Directors.
Duncan Saville, a director of ICM, is a chartered accountant with experience in corporate finance and asset
management. He is currently a director of a number of listed companies including New Zealand Oil & Gas Limited
and is an experienced company 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 is a member of the
Singapore Institute of Directors.
Alasdair Younie, a director of ICM. 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.
Eduardo Greca, joined ICM in 2010 as an Equity Analyst and he is based in Brazil. He has over eight years of
experience as an economist, and prior to joining the investment team he worked in the commodities team at Kraft
Foods in Brazil. Eduardo supports Zeta on Latam investments. Eduardo obtained an economics degree at the Federal
University of Parana in 2009 and is a CFA Charterholder.
GEOGRAPHICAL SPLIT OF INVESTMENTS*
COUNTRY
2017
2016
% OF TOTAL
Australia
New Zealand
Mali
Other
Norway
Namibia
46.4
24.7
16.2
5.0
4.0
3.7
28.1
32.3
24.5
6.3
4.6
4.2
*Including investments held by Zeta Energy Pte. Ltd
Source: ICM
SECTOR SPLIT OF INVESTMENTS*
SECTOR
2017
2016
% OF TOTAL
Oil & Gas
Gold
Nickel
Copper
Cash
Bauxite
36.9
32.3
26.2
3.2
0.9
0.5
47.4
39.3
11.9
0.5
0.9
0.0
*Including investments held by Zeta Energy Pte. Ltd
Source: ICM
22
23
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 FIVE LARGEST HOLDINGS
REVIEW OF THE FIVE LARGEST HOLDINGS
2017
2016
COMPANY (Country of principal activity)
Description
FAIR VALUE
US$000
% OF TOTAL
INVESTMENTS
1
2
3
4
5
(4)
(1)
(2)
(3)
(5)
Panoramic Resources Limited (Australia)
Nickel exploration and mining
19,993
24.8%
Resolute Mining Limited (Australia, Mali)
Gold exploration and mining
18,989
23.6%
New Zealand Oil & Gas Limited (New Zealand)
Oil & gas exploration and production
12,308
15.3%
Pan Pacific Petroleum NL (Australia)
Oil & gas exploration and production
Seacrest LP – unlisted (Global)
Oil & gas offshore seismic exploration
9,099
11.3%
7,679
9.5%
Other investments
12,526
15.5%
Total Portfolio
80,594
100.0%
The value of the five largest holdings represents 84.5% (2016: 92.6%) of the group’s total investments. The country shown is the
location of the principal part of the company’s business. The total number of companies included in the portfolio is 18 (2016: 18).
RESOLUTE MINING LIMITED
(AUSTRALIA, MALI)
www.rml.com.au
Market Cap: US$700.1 million
Resolute Mining Limited
is a gold producer
listed on the ASX, with long life mines at Syama
in Mali and at Ravenswood in Australia, and a
development project at Bibiani in Ghana. In the
year to June 2017 Resolute’s various operations
yielded 329,834 ounces of gold. Average cash costs
of A$995 per ounce were higher than the previous
year’s A$898 per ounce. During the year Resolute
began development work on underground mining
at Syama, and is in the regulatory approvals stage
of pursuing the return to large scale open pit
mining at Ravenswood.
NEW ZEALAND OIL & GAS LIMITED
(NEW ZEALAND)
www.nzog.com
Market Cap: US$84.3 million
(Investment held by Zeta Energy Pte. Ltd)
New Zealand Oil & Gas Limited is an independent
New Zealand oil & gas exploration and production
company. During the year, the company sold
its two production assets, both in offshore New
Zealand: the Kupe gas and oil field, and Tui area
oil fields. NZOG has retained an exploration
portfolio in both New Zealand and Indonesia, and
owns 50% of Australian-based oil & gas junior Cue
Energy, which has interests in producing assets in
New Zealand and Indonesia. NZOG is listed on the
New Zealand stock exchange. At year end NZOG
had NZ$126.1 million (previous year NZ$96.8
million) of cash, having returned NZ$100.0 million
of cash to shareholders following the sale of Kupe.
After year end, Zeta announced a partial takeover
bid that if successful would result in Zeta owning
at least 50.01% of NZOG.
24
25
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 REVIEW OF THE FIVE LARGEST HOLDINGS
(continued)
PAN PACIFIC PETROLEUM NL
(AUSTRALIA)
www.panpacpetroleum.com.au
Market Cap: US$17.2 million
(Investment held by Zeta Energy Pte. Ltd)
Pan Pacific Petroleum NL is an ASX-listed oil junior
based in Sydney. During the year the company
sold its stake in the Tui oil joint venture in New
Zealand, as well as its stake in the 07/03 oil and
gas development joint venture in Vietnam. In
August 2017, PPP and Zeta announced that
they had entered into a scheme implementation
agreement, under which Zeta or its nominee will
acquire all of the issued share capital of PPP that
it does not already own by way of a recommended
court approved scheme of arrangement.
PANORAMIC RESOURCES LIMITED
(AUSTRALIA)
www.panoramicresources.com
Market Cap: US$111.9 million
Panoramic Resources Limited
is a Western
Australian mining company
that owns
two
100%-owned underground nickel sulphide mines,
the Savannah Project in the East Kimberley and
the Lanfranchi Project near Kambalda, Western
Australia. Panoramic’s value 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 worth.
Both of Panoramic’s nickel mines were in care
and maintenance throughout the year, given the
persistently low nickel prices. At 30 June 2017
Panoramic had A$21 million (previous year A$19
million) in net cash.
SEACREST LP
(GLOBAL)
www.seacrest.com
Market Cap: N/A - Unlisted
Seacrest LP is an unlisted private seismic specialist
oil explorer. The company has access to one of
the world’s largest seismic databases, and a large
team of petroleum geologists. The company seeks
to create 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 geographically diversified
portfolio of interests in joint venture oil & gas
exploration permits, the company has reassessed
its approach to drilling, and is proceeding with
significantly more caution.
26
27
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 DIRECTORS
REPORT OF THE DIRECTORS
Peter Ross Sullivan (Chairman and Non-Executive Director), 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. He has specialised in providing strategic corporate, financial and
investment advice to companies principally in the resource sector. He has served as a Director for numerous listed
and unlisted companies and been closely involved with their development. Mr Sullivan holds a Bachelor of Engineering
and a Master of Business Administration.
Directorships of other listed companies in the last 3 years
Mr Sullivan is Chairman of Pan Pacific Petroleum NL (ASX:PPP), GME Resources Limited (ASX:GME) and Bligh Resources
Limited (ASX:BGH) and non-executive director of Resolute Mining Limited (ASX:RSG) and Panoramic Resources
Limited (ASX:PAN).
Marthinus (Martin) Botha (Non-Executive Director), 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 primary responsibilities at
Standard Bank 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 the Middle East. Mr Botha is currently non-executive chairman of Sberbank CIB (UK)
Ltd, a securities broker regulated by the UK Financial Services Authority. Mr Botha holds a Bachelor of Engineering
degree in Survey.
Directorships of other listed companies in the last 3 years
Mr Botha is non-executive director of Resolute Mining Limited (ASX:RSG).
Xi Xi (Non-Executive Director), 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
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 2017.
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 profit attributable to the company for the year to 30 June 2017 amounted to US$10,277,906.
Overview of operating activity
The company listed on the ASX on 12 June 2013.
During the year the company has continued to build its portfolio of resource investments by investing a further
US$10,515,751. An increase in the fair value of the portfolio resulted in an unrealised profit recognised in profit or
loss at year end of US$5,504,003.
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$117,518 was invested during
the twelve months to 30 June 2017 in further drilling and analysis work.
Ms Xi Xi is currently non-executive director of Mineral Resources Limited (ASX:MIN), and previously Galaxy Resources
Limited (ASX:GXY).
Financial position
At the end of the year, the company had US$15,828 in cash and cash equivalents. Investments at fair value totalled
US$47,685,376, loans to subsidiaries were valued at US$30,027,206 and the investment in subsidiaries was valued
at US$3,181,102.
The company has a loan owing to UIL of $22,257,029 at year end.
DIVIDENDS
No dividends have been paid or declared since the start of the year. No recommendation is made as to dividends.
28
29
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 REPORT OF THE DIRECTORS
(continued)
AFTER BALANCE DATE EVENTS
Remuneration policy
Zeta Resources Limited has entered into a Scheme Implementation Agreement under which Zeta (or its nominee) will
The board of directors is responsible for remuneration policies and the packages applicable to the directors of the
acquire all of the issued share capital of PPP that it does not already own by way of a recommended court approved
company. The broad remuneration policy is to ensure that packages offered properly reflect a person’s duties and
scheme of arrangement. Under the scheme, PPP shareholders can elect to receive either A$0.038 cash per PPP
responsibilities and that remuneration is competitive and attracts, retains, and motivates people of the highest quality.
share, or one Zeta share for every ten PPP shares. Zeta already has a relevant interest in approximately 50.91% of
PPP shares via its wholly owned subsidiary Zeta Energy Pte. Ltd (“Zeta Energy”).
Zeta has entered into a subscription agreement to subscribe for 15 million shares in Margosa, to be issued in 5
tranches over a 12-month period, for a cost of A$3 million. The first tranche of the subscription was completed on
21 July 2017 where Zeta received 5,000,000 shares for A$1 million. Tranche 2 to 5 become due 3 months, 6 months,
9 months and 12 months following the initial subscription. After the last tranche has been issued, Zeta will own
approximately 33% of Margosa.
Following the announcement of a takeover bid to acquire all Bligh shares not already owned by Zeta, on 13 July 2017
Zeta acquired a further 109,736,891 shares in Bligh at a cost of A$0.038 a share. Zeta now currently owns 85.75%
of Bligh.
On 10 August 2017 Zeta gave notice of its intention to make a partial takeover offer under the New Zealand Takeovers
Code to acquire an additional 41.955% of each class of the shares in NZOG not currently held or controlled by Zeta
Energy at an offer price of NZ$0.72 per share. If successful, the offer would result in Zeta Energy holding or controlling
no less than 50.01% of the voting rights in NZOG.
There have been no other facts nor circumstances of a material nature that have occurred between the reporting
date and the date of this report that have a material impact on the financial position of the company at 30 June 2017.
LIKELY DEVELOPMENTS
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.
INFORMATION ON COMPANY SECRETARY
On 12 September 2017 ICM Limited was appointed Company Secretary.
REMUNERATION REPORT
The remuneration report is set out in the following manner:
• Policies used to determine the nature and amount of remuneration
• Details of remuneration
• Share based compensation
• Directors and executives interests
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 2017.
The company had no employees as at 30 June 2017.
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
NET CHANGE
ORDINARY SHARES
CLOSING BALANCE
5,670,632
–
–
–
279,565
–
5,670,632
279,565
–
30
31
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 REPORT OF THE DIRECTORS
(continued)
MEETINGS OF DIRECTORS
NON-AUDIT SERVICES
The board held six meetings during the year which were attended by all directors. The meetings were held on 4 July,
No non–audit services were performed by the auditors of the company during the year.
2 September, 29 November 2016 and 8 February, 23 May and 12 June 2017.
In addition, throughout the course of the year there were a number of resolutions of directors which were made by
unanimous written resolution.
ON-MARKET BUY-BACK SCHEME
The company currently has no on-market share buy-back scheme in operation.
There were no meetings of committees of directors that were required to be held during the year.
INVESTMENTS DISCLOSED BY THE COMPANY AT THE REPORTING DATE
LOANS TO DIRECTORS AND EXECUTIVES
There were no loans entered into with directors or executives during the year under review.
UNLISTED OPTIONS
At the date of this report the number of unlisted options on issue was as follows:
86,461,440 Options exercisable at A$0.001 each, expiring 7 December 2019.
There were no options exercised during the year, or since the end of the year, that resulted in additional shares being
issued.
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 the objectives of the best practice recommendations and discharge its duties in this area.
INDEMNIFYING OFFICERS OR AUDITORS
Listed
Bligh Resources Limited
GME Resources Limited
New Zealand Oil & Gas Limited*
Oilex Limited*
Pan Pacific Petroleun NL*
Panoramic Resources Limited
Resolute Mining Limited
*Owned by Zeta Energy Pte. Ltd
Unlisted
Kumarina Resources Pty Limited
Zeta Energy Pte. Ltd
Zeta Investments Limited
NUMBER OF
SHARES
% OF ISSUED
SHARES HELD
100,412,123
23,588,258
27,103,776
121,323,567
296,269,023
118,369,868
20,784,000
26,245,610
100
100
42.374%
5.088%
17.001%
7.203%
50.910%
27.620%
2.820%
100%
100%
100%
The company has not, during or since the year ended, in respect of any person who is or has been an officer or the
During the year the company completed a total of 256 transactions in securities and paid a total of US$54,634 in
auditor of the company or of a related body corporate indemnified or made any relative agreement for indemnifying
brokerage on those transactions.
against a liability incurred as an officer or auditor, including costs and expenses in defending legal proceedings.
ENVIRONMENTAL REGULATION
Kumarina Resources Pty Limited’s 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.
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 agreement has an expiry date of 3 June 2018.
The company paid US$481,772 in management fees during the reporting year.
32
33
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 REPORT OF THE DIRECTORS
(continued)
CORPORATE GOVERNANCE STATEMENT
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration is included in the Independent Auditor’s Report.
This report is signed in accordance with a resolution of directors.
Peter R Sullivan
Chairman
Perth, Western Australia
12 September 2017
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.limited), 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.limited).
34
35
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017
INDEPENDENT AUDITOR’S REPORT
36
37
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 INDEPENDENT AUDITOR’S REPORT
(continued)
AUDITOR’S INDEPENDENCE DECLARATION
KPMG Inc.
KPMG Crescent
85 Empire Road, Parktown, 2193,
Private Bag 9, Parkview, 2122, South Africa
Telephone
Fax
Docex
Internet
+27 (0)11 647 7111
+27 (0)11 647 8000
472 Johannesburg
kpmg.co.za
Independent Auditor’s Declaration to the directors of Zeta Resources Limited
In relation to our audit of the financial report of Zeta Resources Limited for the financial year ended 30 June 2017, to
the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of
the International Standards on Auditing or any applicable code of professional conduct.
KPMG Inc.
Per P Farrand
Chartered Accountant (SA)
Registered Auditor
Director
12 September 2017
38
39
KPMG Inc. is a company incorporated under the South African
Companies Act and a member firm of the KPMG network of
independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity.
KPMG Inc. is a Registered Auditor, in public practice, in terms of
the Auditing Profession Act, 26 of 2005.
Registration number 1999/021543/21
Chief Executive:
N Dlomu
Directors:
Full list on website
The company’s principal place of business is at KPMG Crescent,
85 Empire Road, Parktown, where a list of the directors’ names is
available for inspection.
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 STATEMENT OF FINANCIAL POSITION
STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
s at 30 June 2017
e
t
o
N
4
5
6
7
8
Non-current assets
Investment in subsidiaries
Investments
Loans to subsidiaries
Current assets
Cash and cash equivalents
Trade and other receivables
Total assets
Non-current liabilities
9
10
Loan from subsidiary
Loan from parent
Current Liabilities
11 Trade and other payables
Balance due to brokers
Total liabilities
NET ASSETS
Equity
12
12
Share capital
Share premium
12 Options
Accumulated losses
TOTAL EQUITY
June 2017
US$
June 2016
US$
3,181,102
47,685,376
30,027,206
3,086,091
49,813,042
29,803,322
15,828
–
238,893
12,109
s for the year ended 30 June 2017
e
t
o
N
Revenue
13
Investment income/(losses)
14 Other (losses)/income
Expenses
Directors fees
Interest expense
15 Management and consulting fees
80,909,512
82,953,457
16 Operating and administration expenses
Profit/(loss) before income tax
June 2017
US$
14,246,441
(213,826)
(150,000)
(2,627,116)
(662,662)
(314,931)
10,277,906
June 2016
US$
(4,036,767)
1,437,732
(150,000)
(3,371,114)
(560,884)
(293,458)
(6,974,491)
(5,351,022)
(22,257,029)
(3,754,667)
(36,165,296)
17
Income tax
Profit/(loss) for the year
–
–
10,277,906
(6,974,491)
Other comprehensive income
–
–
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
10,277,906
(6,974,491)
Profit/(loss) per share
18 Basic and diluted profit/(loss) per share (cents per share)
0.06
(0.05)
(260,421)
–
(27,868,472)
53,041,040
900
66,233,041
17,265,320
(30,458,221)
53,041,040
(192,220)
(78,140)
(40,190,323)
42,763,134
900
66,233,041
17,265,320
(40,736,127)
42,763,134
40
41
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 STATEMENT OF CASH FLOWS
STATEMENT OF CHANGES IN EQUITY
s for the year ended 30 June 2017
e
t
o
N
Share
capital
US$
Share
premium
US$
Options
US$
Accumulated
losses
US$
Total
US$
Balance at 1 July 2015
832
64,881,364
12 Issue of shares
12 Issue of options
Other comprehensive income for the year
68
1,351,677
–
–
–
–
–
–
17,265,320
(33,761,636)
31,120,560
–
–
1,351,745
17,265,320
–
(6,974,491)
(6,974,491)
Balance at 30 June 2016
900
66,233,041
17,265,320 (40,736,127)
42,763,134
Other comprehensive income for the year
–
–
–
10,277,906
10,277,906
Balance at 30 June 2017
900
66,233,041
17,265,320 (30,458,221)
53,041,040
s for the year ended 30 June 2017
e
t
o
N
Cash flows from operating activities
19.1 Cash utilised by operations
Interest received
Interest expense
Net cash flows from operating activities
Cash flows from investing activities
Investments purchased
Investments sold
Decrease/(increase) in loan to subsidiaries
Net cash flows from investing activities
Cash flows from financing activities
19.2 Proceeds from issue of shares
19.3 Proceeds from issue of options
Decrease in loan from parent through issue of shares and options
Decrease in loan from parent from repayment
Increase in loan from parent from additional funding
Increase/(decrease) in loan from subsidiaries
June 2017
June 2016
US$
US$
(703,080)
14
(2,627,116)
(3,330,182)
(90,994)
25,262
(3,371,114)
(3,436,846)
(11,453,601)
(4,334,188)
26,190,010
937,850
15,674,259
760,235
(12,416,348)
(15,990,301)
–
–
–
(18,859,148)
4,950,881
1,596,355
1,351,745
17,265,320
(18,617,065)
–
19,374,149
(641,120)
Net cash flows from financing activities
(12,311,912)
18,733,029
Net movement in cash and cash equivalents
32,165
(694,118)
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
7 Cash and cash equivalents at end of the year
238,893
(255,230)
15,828
193,267
739,744
238,893
42
43
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 NOTES TO THE FINANCIAL STATEMENTS
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 2017
comprise the company only.
1.2 Basis of preparation
The financial statements for the period ended 30 June 2017 have been prepared in accordance with International Financial Reporting
Standards (IFRSs). The following accounting policies have, in all material respects, been applied consistently. The company carries
on the business of an investment holding company. The purpose of the company is to earn returns through capital appreciation or
investment income. The company is accordingly applying the consolidation exemption for investments in subsidiaries.
The financial statements were authorised for issue by the board of directors on 12 September 2017.
1.3 Basis of measurement
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies detailed below have been consistently applied by the company.
3.1 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.
3.2 Borrowing costs
Borrowing costs are recognised as an expense when incurred.
3.3
Income tax
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.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted by the balance sheet date.
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 period in which
the estimate is revised and in any future periods 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 21.
2. ADOPTION OF NEW AND REVISED STANDARDS
Future amendments not early adopted in the 2017 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 Standards 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.
IFRS 16 Leases - as Zeta Resources is an investment entity, its main operations are to invest in securities. All other business
operations are outsourced and therefore no leases are held by Zeta Resources. This indicates that IFRS 16 will have no impact
on Zeta Resources. IFRS 15 Revenue – Zeta Resources’ revenue consists only of dividend income and realised and unrealised
gains and losses. These income streams are not impacted by IFRS 15.
3.4 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 period, adjusted for effective
interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the
end of the period. The foreign currency gains or losses are recognised in profit or loss.
Foreign currency differences arising on retranslation are recognised in other comprehensive income.
3.5 Earnings per share ("EPS")
Basic EPS is calculated as 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 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 period 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.
3.6 Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in listed and unlisted securities, investment loans, 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.
44
45
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 NOTES TO THE FINANCIAL STATEMENTS
(continued)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.6 Financial instruments (continued)
Non-derivative financial instruments (continued)
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
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.
Non-derivative financial liabilities
The company has the following non-derivative financial liabilities: loans and borrowings, trade and other receivables, 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.
3.7
Impairment of assets
Financial assets
A financial asset 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 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.
Financial assets related to subsidiaries are measured at fair value under IAS 39, in line with the requirements for investment
entities under IFRS 10.
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.
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
3.7
Impairment of assets (continued)
Non-financial assets (continued)
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.
In respect of other assets, impairment losses recognised in prior periods 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.
3.8 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.
3.9 Provisions and accruals
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.
4.
INVESTMENT IN SUBSIDIARIES
June 2017
US$
June 2016
US$
At fair value
Investment in Kumarina Resources Pty Limited ("Kumarina")
3,181,100
3,086,089
Investment in Zeta Energy Pte. Ltd. ("Zeta Energy")
Investment in Zeta Investments Limited ("Zeta Investments")
1
1
1
1
3,181,102
3,086,091
Investments in subsidiaries are held as part of the investment portfolio and consequently, in accordance with IFRS 10 are not
consolidated but rather shown at fair value through profit and loss. The directors’ fair valuation of Kumarina is still considered
to be its 2013 cost value as there have been no significant changes in the entity and its prospects. The company had the
following subsidiaries as at 30 June 2017:
30 June 2017
Kumarina incorporated in Australia
Zeta Investments incorporated in Bermuda
Zeta Energy incorporated in Singapore
30 June 2016
Kumarina incorporated in Australia
Zeta Investments incorporated in Bermuda
Zeta Energy incorporated in Singapore
Number of
ordinary shares
Percentage of
ordinary shares held
26,245,210
1,000
1
100%
100%
100%
Number of
ordinary shares
Percentage of
ordinary shares held
26,245,210
1,000
1
100%
100%
100%
46
47
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 NOTES TO THE FINANCIAL STATEMENTS
(continued)
5.
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
Investments held by the company at the reporting date
Listed
Panoramic Resources Limited
Bligh Resources Limited
Resolute Mining Limited
GME Resources Limited
Other investments
Unlisted
Other investments
Other rights
June 2017
US$
47,685,376
47,276,793
408,583
47,685,376
45,142,335
706,040
45,848,375
June 2016
US$
49,813,042
40,776,406
9,036,636
49,813,042
40,650,179
11,573,120
52,223,299
Number of
shares
118,369,868
100,412,123
20,784,000
23,588,258
35,184,537
302,654
938,331
6. LOANS TO SUBSIDIARIES
Loan to Zeta Energy
Loan to Kumarina
June 2017
US$
29,735,459
291,747
30,027,206
June 2016
US$
29,672,978
130,344
29,803,322
The loan to Zeta Energy is denominated in Australian dollars to the value of A$20.669 million (2016: A$20.427 million), British
pounds to the value of UK£1.0 million (2016: UK£1.0 million), New Zealand dollars to the value of NZ$26.340 million (2016:
NZ$43.584 million) and United States dollars to the value of $11.2 million (2016: Nil). There are no fixed repayment terms and
no interest is charged. During the period ended 30 June 2017, 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 the company as determined by the directors. In
determining the fair value of Zeta Energy the directors have valued the listed investments held by the company at market value
of the exchange they are listed on, other than the listed investment in Pan Pacific Petroleum NL (“PPP”) and unlisted investment
in Seacrest which were valued by the directors at fair value. The directors deem an alternate valuation for PPP to be more
appropriate due to the thinly traded nature of the shares in the market, that Zeta Energy has control of PPP by holding more
than 50% of its issued share capital and that PPP’s net asset value per share supports the directors’ valuation. The net asset
value of PPP is substantially made up of cash and cash equivalents and listed investments. The directors have used a fair value
valuation of Seacrest of US$0.72 per share based on the value of its subsidiary Azimuth, as fully described in note 21.4. As at
30 June 2017 the impairment to the loan totalled US$16.773 million. The loan to Kumarina is denominated in Australian dollars
and is interest free. There are no fixed repayment terms except that no repayment is due before 30 June 2018.
7. CASH AND CASH EQUIVALENTS
Cash balance comprises:
Cash at bank
June 2017
US$
June 2016
US$
15,828
238,893
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying
periods between three to six months depending on the immediate cash requirements of the company, and earn interest at
the respective short-term deposit rates.
Listed investments held by subsidiaries of the company include 27,103,776 shares in New Zealand Oil & Gas Limited,
121,323,567 shares in Oilex Limited, and 296,269,023 shares in Pan Pacific Petroleum NL.
8. TRADE AND OTHER RECEIVABLES
During the reporting period the company completed a total of 256 transactions (2016: 86 transactions) in securities and paid
a total of US$54,634 (2016: US$5,955) in brokerage on those transactions.
Prepayments
During the reporting period the company also received loans from its subsidiary Zeta Energy. To secure the loans Zeta
Resources has pledged certain quantities of its shares held in listed entities.
9. LOAN FROM SUBSIDIARY
The shares pledged include: Resolute Mining Limited (11,000,000) and Panoramic Resources Limited (6,666,666).
Loan from Zeta Energy
June 2017
US$
–
June 2017
US$
5,351,022
June 2016
US$
12,109
June 2016
US$
3,754,667
The loan from Zeta Energy is denominated in Australian dollars to the value of A$6.01 million (30 June 2016: A$3.84 million)
and New Zealand dollars to the value of NZ$1.01 million (30 June 2016: NZ$1.26 million) and currently attracts interest at rates
between 4.35% and 6.85% per annum (30 June 2016: 7.11%) on the Australian dollar loan and at 6.00% per annum (30 June
2016: 6.49%) on the New Zealand dollar loan. There are no fixed repayment terms except that no repayment is due before
30 June 2018. Zeta Energy has in turn borrowed these funds from Leveraged Equities New Zealand and Bell Potter Capital
Limited Australia on the same interest and repayment terms. In order to secure the loans Zeta has pledged certain of its
investments. The shares pledged include: Resolute Mining Limited (11,000,000) and Panoramic Resources Limited (6,666,666).
48
49
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 NOTES TO THE FINANCIAL STATEMENTS
(continued)
10. LOAN FROM PARENT
Loan from UIL Limited (“UIL”)
June 2017
US$
22,257,029
June 2016
US$
36,165,296
The loan is denominated in Australian dollars to the value of A$28.99 million (30 June 2016: A$45.4 million), carries interest at
7.5% per annum (30 June 2016: 10%) and no repayment is due before 30 June 2018. During the year the company converted
A$15.86 million of loans into NZ$17 million of which NZ$15.05 million was repaid in May 2017. Following the repayment the
balance of the NZ$ loan was converted back into A$. During the year the company received A$2.6 million of funding for the
purchase of investments, capitalised interest of A$5.93 million and made further repayments of A$10.70 million.
11. TRADE AND OTHER PAYABLES
Accruals
June 2017
US$
260,421
June 2016
US$
192,220
The accruals are for audit, management, directors and administration fees payable.
12. SHARE CAPITAL AND SHARE PREMIUM
Authorised
5,000,000,000 ordinary shares of par value US$0.00001
Issued
Ordinary shares
Balance as at incorporation
Number of
shares
Share
capital
Share
premium
Issued at incorporation as US$1 par shares
Shares split into 10,000,000 shares of US$0.00001 each
Issued in consideration for purchase of investments from UIL
Issued in consideration for purchase of 100% of Kumarina
Resources Limited
Issued under initial public offering
Issued under public rights issue dated 10 February 2014
Following shareholder approval, issued under ASX listing rule 10.11
dated 7 December 2015
Balance as at 30 June 2016
Balance as at 30 June 2017
100
9,999,900
22,835,042
17,775,514
4,000
42,616,164
6,769,280
100,000,000
100,000,000
–
–
–
228
178
–
426
68
900
900
–
–
–
32,221,936
13,406,337
3,795
19,249,296
1,351,677
66,233,041
66,233,041
13. INVESTMENT INCOME/(LOSSES)
Interest income
Dividend income
Realised gains
Unrealised fair value gains/(losses):
Financial assets at fair value through profit or loss
Impairment of loan to subsidiary at fair value through profit or loss
14. OTHER (LOSSES)/INCOME
Foreign exchange (losses)/gains
Other income
15. MANAGEMENT AND CONSULTING FEES
Management and consulting fees
June 2017
US$
14
380,939
8,361,485
4,342,269
1,161,734
14,246,441
June 2017
US$
(255,230)
41,404
(213,826)
June 2017
US$
662,662
June 2016
US$
25,262
–
17,756
2,427,511
(6,507,296)
(4,036,767)
June 2016
US$
739,744
697,988
1,437,732
June 2016
US$
560,884
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 period (2016: US$ Nil).
Either party may terminate the agreement with six months’ notice. The agreement has an expiry date of 3 June 2018.
16. OPERATING AND ADMINISTRATION EXPENSES
For further details related to the share issue transactions please see note 19.2.
Operating and administration expenses consist of:
Options
June 2017
US$
June 2016
US$
Accounting fees
Audit fees
Options
Balance at the beginning of the year (Note (a))
86,461,440
17,265,320
–
Following shareholder approval, issued under ASX listing rule 10.11
dated 7 December 2015
–
–
17,265,320
Balance at the end of the year
86,461,440
17,265,320
17,265,320
Note (a) The options were exercisable at an exercise price of A$1.00 into one ordinary share until 7 December 2019.
Australian Stock Exchange listing fees and regulation costs
Insurance costs
Other expenses
June 2017
US$
June 2016
US$
115,645
20,838
55,620
14,153
108,675
314,931
82,833
14,463
47,694
14,042
134,426
293,458
50
51
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 NOTES TO THE FINANCIAL STATEMENTS
(continued)
17. INCOME TAX
19. NOTES TO THE CASH FLOW STATEMENT (continued)
The company is domiciled in Bermuda and has elected to be tax exempt in terms of local legislation. As such no tax is payable.
18. EARNINGS/(LOSS) PER SHARE
Earnings/(loss) per share
June 2017
US$
0.06
June 2016
US$
(0.05)
Profit/(loss) used in calculation of basic and diluted earnings per share
10,277,906
(6,974,491)
19.2 Issue of shares
Shares issued for consideration
During the year ended 30
June 2016, following shareholder approval,
in accordance with ASX listing rule 10.11, the company issued 6,769,280
ordinary shares on 7 December 2015, at a cost of A$0.2817 per share,
to UIL Limited, raising the equivalent of US$1.352 million.
Weighted average number of ordinary shares outstanding during the year
used in calculation of basic and diluted earnings per share
186,461,440
145,959,570
19.3 Issue of options
The weighted average number of ordinary shares calculation is based on the year beginning 1 July 2016. For details of shares
issued during the year refer to note 19.2.
An adjustment has been made for the 86,461,440 options as they are considered to be in substance issued shares.
Options issued for consideration
During the year ended 30 June 2016, following shareholder approval, the
company issued 86,461,440 options at a cost of A$0.2817 per option,
to UIL Limited, raising the equivalent of US$17.27 million. These options
are exercisable at a price of A$0.001
into one ordinary share until
7 December 2019.
19. NOTES TO THE CASH FLOW STATEMENT
19.1 Cash utilised by operations
June 2017
US$
June 2016
US$
20. AUDITOR REMUNERATION
June 2017
US$
June 2016
US$
–
1,351,745
June 2017
US$
June 2016
US$
–
17,265,320
June 2017
US$
June 2016
US$
Income/(loss) before income tax benefit
10,277,906
(6,974,491)
Adjustments for:
Realised gains on investments
Fair value (profit)/loss on revaluation of investments
Foreign exchange losses/(gains)
Interest income
Interest expense
Operating loss before working capital change
Decrease in trade and other receivables
Increase in trade and other payables
Decrease in balance due from brokers
(Decrease)/increase in balance due to brokers
(8,361,485)
(5,504,003)
255,230
(14)
2,627,116
(705,250)
12,109
68,201
–
(78,140)
(703,080)
(17,756)
4,079,785
(739,744)
(25,262)
3,371,114
(306,354)
1,062
16,246
119,912
78,140
(90,994)
Amounts received or due and receivable by the auditors for audit of financial
statements
20,838
14,463
21. 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.
52
53
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 NOTES TO THE FINANCIAL STATEMENTS
(continued)
21. FINANCIAL RISK MANAGEMENT (continued)
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 2017
Assets
Investments in subsidiaries
Investments
Loans to subsidiaries
Cash and cash equivalents
Liabilities
Loans from subsidiaries
Trade and other payables
Loan from parent
30 June 2016
Assets
Investments in subsidiaries
Investments
Loans to subsidiaries
Cash and cash equivalents
Trade and other receivables
Liabilities
Loans from subsidiaries
Trade and other payables
Loan from parent
Balance due to brokers
Designated at fair
value through
profit and loss
US$
Loans and receivables
at fair value through
profit and loss
US$
Total
carrying value
US$
3,181,102
47,685,376
–
–
50,866,478
–
–
–
–
3,086,091
49,813,042
–
–
–
–
–
30,027,206
15,828
30,043,034
5,351,022
260,421
22,257,029
27,868,472
–
–
29,803,322
238,893
12,109
3,181,102
47,685,376
30,027,206
15,828
80,909,512
5,351,022
260,421
22,257,029
27,868,472
3,086,091
49,813,042
29,803,322
238,893
12,109
52,899,133
30,054,324
82,953,457
–
–
–
–
–
3,754,667
192,220
36,165,296
78,140
40,190,323
3,754,667
192,220
36,165,296
78,140
40,190,323
21. FINANCIAL RISK MANAGEMENT (continued)
21.1 Market risks
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 objective 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 on-going 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 2017 and the average rates for the year were as follows:
AUD – Australian Dollar
GBP – Sterling
NZD – New Zealand Dollar
June 2017
0.7678
1.3008
0.7325
Average
0.754
1.2686
0.7125
The company’s monetary assets and liabilities at 30 June 2017 (shown at fair value), by currency based on the country of
primary operations, are shown below:
30 June 2017
Cash and cash equivalents
Loans to subsidiaries
Loans from subsidiaries
Loan from parent
Trade and other payables
USD
1,656
AUD
14,089
7,679,016
10,040,059
–
–
(4,613,964)
(22,257,029)
(164,815)
(81,739)
Net monetary (liabilities)/assets
7,515,857
(16,898,584)
30 June 2016
Cash and cash equivalents
Trade and other receivables
Loans to subsidiaries
Loans from subsidiaries
Loan from parent
Trade and other payables
Balance due to brokers
USD
1,423
–
–
–
–
(170,258)
–
AUD
220,022
–
9,613,170
836,352
19,353,800
(2,857,128)
(36,165,296)
(21,962)
(78,140)
–
–
–
–
(897,539)
–
–
–
GBP
–
–
–
–
–
–
GBP
899
–
NZD
83
12,308,131
(737,058)
–
(75)
11,571,081
NZD
16,549
12,109
54
55
Net monetary (liabilities)/assets
(168,835)
(29,289,334)
837,251
18,484,919
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 NOTES TO THE FINANCIAL STATEMENTS
(continued)
21. FINANCIAL RISK MANAGEMENT (continued)
21.1 Market risks (continued)
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
Decrease in total comprehensive profit for the year
ended 30 June 2017
Increase in total comprehensive loss for the year
ended 30 June 2016
Weakening of the United States Dollar
Increase in total comprehensive profit for the year
ended 30 June 2017
Decrease in total comprehensive loss for the year
ended 30 June 2016
AUD
GBP
NZD
Total
(3,826,679)
(161,552)
(1,849,220)
(5,837,451)
(1,970,597)
(185,814)
(3,017,865)
(5,174,276)
3,826,679
161,552
1,849,220
5,837,451
1,970,597
185,814
3,017,865
5,174,276
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.
Interest rate exposure
The exposure of the financial assets and liabilities to interest rate risks at 30 June 2017 is shown below:
Within
one year
US$
Greater than
one year
US$
Total
US$
21. FINANCIAL RISK MANAGEMENT (continued)
21.2 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:
30 June 2017
Loan from subsidiaries
Trade and other payables
Loans from parent
30 June 2016
Loan from subsidiaries
Trade and other payables
Balance due to brokers
Loans from parent
Three months
or less
US$
More than
three months
but less than
a year
US$
–
260,421
–
260,421
–
192,220
78,140
–
270,360
–
–
–
–
–
–
–
–
–
More than
a year
US$
Total
US$
5,351,022
5,351,022
–
260,421
22,257,029
22,257,029
27,608,051
27,868,472
3,754,667
3,754,667
–
–
192,220
78,140
36,165,296
36,165,296
39,919,963
40,190,323
30 June 2017
Exposure to floating rates:
Cash
Exposure to fixed rates:
Loan from subsidiaries
Loan from parent
30 June 2016
Exposure to floating rates:
Cash
Exposure to fixed rates:
Loan from subsidiaries
Loan from parent
15,828
–
15,828
21.3 Credit risk and counterparty exposure
–
–
(5,351,022)
(22,257,029)
(5,351,022)
(22,257,029)
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.
238,893
–
238,893
Maximum exposure to credit risk
–
–
(3,754,667)
(36,165,296)
(3,754,667)
(36,165,296)
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$47,685,376 at 30 June 2017 (30 June 2016: US$49,813,042) 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 23.
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
US$4,768,538. A 10% appreciation in the market price would have the opposite effect.
The company has loan assets totalling US$29,803,322 (2016: US$23,894,270) that is exposed to credit risk.
None of the company’s financial assets are past due, but the loan asset to Zeta Energy has been impaired as per note 6. 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-).
21.4 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 position 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.
56
57
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 NOTES TO THE FINANCIAL STATEMENTS
(continued)
21. FINANCIAL RISK MANAGEMENT (continued)
21.4 Fair values of financial assets and liabilities (continued)
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
Level 3
The fair values are measured using inputs, other than quoted prices, that are included within level 1, that are
observable for the asset.
The fair values are measured using inputs for the asset or liability that are not based on observable market
data. The directors make use of recognised valuation techniques and may take account of recent arms’ length
transactions in the same or similar investments.
The Directors regularly review the principles applied by the Investment Manager to those valuations to ensure they comply with
the company’s accounting policies and with fair value principles.
Level 3 financial instruments
Valuation methodology
The directors have satisfied themselves as to the methodology used, the discount rates and key assumptions applied, and the
valuation. The level 3 assets have each been assessed based on its industry, location and business cycle. Where sensible, the
directors have taken into account observable data and events to underpin the valuations.
The level 3 investments are split between (a) unlisted companies and (b) investments and loans in subsidiaries.
(a) Unlisted companies
Seacrest LP (“Seacrest”) - Bermuda incorporated
Valuation inputs: The unlisted investment comprises an equity interest in Seacrest. The company’s sole asset is its holding
in Azimuth, a joint venture between Seacrest and PGS (the listed Norwegian seismic data service company). Azimuth owns
a number of operating subsidiaries.
The valuation of Azimuth is based on fair value GAAP accounting. Using the General Partner’s valuation of the Seacrest
portfolio a discount is applied to each Azimuth subsidiary. The extent of the discount depends on whether the assets are
in a mature or frontier basin. In addition, following the fall in the oil price a further discount was applied thereby calculating
a fair value for Azimuth. On this basis Azimuth was valued as at 30 June 2017 at US$63.62m. The director’s deem this
valuation method to be appropriate.
Valuation methodology: Zeta has used a fair value valuation of Seacrest of US$0.72 per share based on the value of Azimuth,
described above.
Sensitivities: Given Azimuth is an exploration company its risks are significant in both directions. Should commercially
recoverable oil not be discovered then the value will fall to nil. Should substantial commercially recoverable oil be discovered
the valuation uplifts are significant.
(b)
Investments and loans in subsidiaries
Zeta Energy - Singapore incorporated
Valuation inputs: The key asset is the investment loan to Zeta Energy which was utilised for the purchase of listed investments,
and which was impaired, through profit and loss, to the fair value of the company as determined by the directors based on
the valuation of the investments held by Zeta Energy as at 30 June 2017.
Valuation methodology: Zeta has used a fair value valuation of losses incurred by Zeta Energy on its investments by which
to impair the loan value in the accounts as at 30 June 2017.
Sensitivities: Given Zeta Energy’s assets comprise listed investments its risks are significant in both directions. Increases in
share prices will increase the value of the loan and decreases in share prices will further decrease the value of the loan.
Other investments and loans to subsidiaries
Zeta has further investments and loans to subsidiaries valued at book and realisable value, with a total value of US$3.2m
(2016: US$3.1m).
21. FINANCIAL RISK MANAGEMENT (continued)
21.4 Fair values of financial assets and liabilities (continued)
30 June 2016
Financial assets
Investments
Investment in subsidiaries
Loan to subsidiary
Level 1
US$
Level 2
US$
Level 3
US$
47,276,793
–
–
–
–
–
408,583
3,181,102
30,027,206
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 1 July 2016
Acquisitions at cost
Disposals during the year
Total gains recognised in:
Fair value through profit or loss
Balance at 30 June 2017
30 June 2016
Financial assets
Investments
Investment in subsidiaries
Loan to subsidiary
Balance at 30 June 2016
Level 3
investments
US$
9,036,636
332,920
(11,200,000)
2,239,027
408,583
Level 1
US$
40,776,406
–
–
40,776,406
Level 3
investments
in subsidiary
US$
3,086,091
–
–
95,011
3,181,102
Level 2
US$
–
–
–
–
Level 3
loan to
subsidiary
US$
29,803,322
11,200,000
(12,137,850)
1,161,734
30,027,206
Level 3
US$
9,036,636
3,086,091
29,803,322
9,036,636
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 1 July 2015
Acquisitions at cost
Disposals during the year
Total losses recognised in:
Fair value through profit or loss
Balance at 30 June 2016
Level 3
investments
US$
13,424,975
–
–
Level 3
investments
in subsidiary
US$
3,193,721
–
–
(4,388,339)
9,036,636
(107,630)
3,086,091
Level 3
loan to
subsidiary
US$
23,894,270
12,416,347
–
(6,507,295)
29,803,322
58
59
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
(continued)
21. FINANCIAL RISK MANAGEMENT (continued)
21.5 Capital risk management
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.
22. RELATED PARTIES
22.1 Material related parties
Holding company
The company’s holding company is UIL which held 85.5% of the company’s issued share capital on 30 June 2017. UIL is in turn
held 62.09% by General Provincial Life Pension Fund 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 an Investment Manager of both the company, its subsidiaries and UIL.
22.2 Material related parties transactions
Nature of transactions
Investments in related parties:
Kumarina
Zeta Investments
Zeta Energy
Loans to related parties:
Kumarina
Zeta Energy
Loans from related parties:
Utilico
Zeta Energy
Trade and other payables:
ICM Limited
Directors
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 2017
US$
June 2016
US$
3,181,100
1
1
291,747
29,735,459
22,257,029
5,351,022
162,057
37,500
380,552
2,246,555
–
481,772
150,000
3,086,089
1
1
130,344
29,672,978
36,165,296
3,754,667
103,829
37,500
318,776
3,051,091
1,225
344,464
150,000
During the year ended 30 June 2017 the company held a loan from its subsidiary Zeta Energy. To secure the loan Zeta
Resources has pledged certain quantities of its shares held in listed entities.
The shares pledged include: Resolute Mining Limited (11,000,000) and Panoramic Resources Limited (6,666,666).
23. 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 explore or mine for nickel, copper and other minerals
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
Reportable segment revenue
3,354,866
3,560,753
7,337,443
30 June 2017
External revenues
Interest revenue
Interest expense
Reportable segment profit/(loss)
before tax
Gold
US$
Oil & gas
US$
Mineral
exploration
US$
Other
segments
US$
3,354,866
3,560,753
7,337,443
Total
US$
14,246,441
14,246,441
14
(6,621)
(6,621)
14
(2,627,116)
(2,627,116)
–
–
–
–
–
–
3,396,270
3,560,753
7,337,443
(4,016,560)
10,277,906
Reportable segment assets
26,371,713
30,392,342
24,129,627
15,830
80,909,512
Reportable segment liabilities
–
–
–
(27,868,472)
(27,868,472)
30 June 2016
External revenues
Gold
US$
Oil & gas
US$
Mineral
exploration
US$
Other
segments
US$
Total
US$
22,471,287
(11,016,091)
(15,375,751)
(116,212)
(4,036,767)
Reportable segment revenue
22,471,287
(11,016,091)
(15,375,751)
(116,212)
(4,036,767)
Interest revenue
Interest expense
–
–
–
–
–
–
25,262
25,262
(3,371,114)
(3,371,114)
Reportable segment loss before tax
22,471,287
(10,543,292)
(15,150,562)
(3,751,924)
(6,974,491)
Reportable segment assets
32,747,455
39,573,255
10,375,105
257,642
82,953,457
Reportable segment liabilities
–
–
(78,140)
(40,112,183)
(40,190,323)
During the year there were no transactions between segments which resulted in income or expenditure.
60
61
Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017 NOTES TO THE FINANCIAL STATEMENTS
(continued)
23. SEGMENTAL REPORTING (continued)
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities, and other material items
23. SEGMENTAL REPORTING (continued)
Revenues
Total revenue for reportable segments
Revenue for other segments
Revenue
Profit or loss
Total profit or loss for reportable segments
Profit or loss for other segments
Profit/(loss) 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 2017
US$
June 2016
US$
14,253,062
(6,621)
14,246,441
14,294,466
(4,016,560)
10,277,906
80,893,682
15,830
80,909,512
(3,920,555)
(116,212)
(4,036,767)
(3,222,567)
(3,751,924)
(6,974,491)
82,695,815
257,642
82,953,457
–
(27,868,472)
(27,868,472)
(78,140)
(40,112,183)
(40,190,323)
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.
Revenue
Australia
Singapore
Mali
Namibia
New Zealand
Norway
United Kingdom
Other Countries
Revenue
June 2017
US$
8,274,800
1,161,734
2,341,802
846,520
–
911,400
303,800
413,006
June 2016
US$
(8,497,796)
(6,507,295)
15,579,453
(1,664,577)
(1,665)
(1,801,948)
(595,749)
(430,978)
14,253,062
(3,920,555)
Assets
Australia
Singapore
Mali
Namibia
Norway
United Kingdom
Other Countries
Assets
June 2017
US$
37,282,206
29,735,459
13,102,297
–
–
–
773,720
80,893,682
June 2016
US$
22,755,967
29,803,322
20,424,525
3,520,472
3,835,958
1,257,543
1,098,028
82,695,815
24. EVENTS AFTER THE REPORTING DATE
24.1 Pan Pacific Petroleum NL (“PPP”)
Zeta Resources Limited (“Zeta”) has entered into a Scheme Implementation Agreement under which Zeta (or its nominee) will
acquire all of the issued share capital of PPP that it does not already own by way of a recommended court approved scheme
of arrangement. Under the scheme, PPP shareholders can elect to receive either A$0.038 cash per PPP share, or one Zeta
share for every ten PPP shares. Zeta already has a relevant interest in approximately 50.91% of PPP shares via its wholly owned
subsidiary Zeta Energy Pte. Ltd.
24.2 Margosa Graphite Limited (“Margosa”)
Zeta has entered into a subscription agreement to subscribe for 15 million shares in Margosa, to be issued in 5 tranches
over a 12-month period, for a cost of A$3 million. The first tranche of the subscription was completed on 21 July 2017 where
Zeta received 5,000,000 shares for A$1 million. Tranches 2 to 5 become due 3 months, 6 months, 9 months and 12 months
following the initial subscription.
24.3 Bligh Resources Limited (“Bligh”)
Following the announcement of a takeover bid to acquire all Bligh shares not already owned by Zeta, on 13 July 2017 Zeta
acquired a further 109,736,891 shares in Bligh at a cost of A$0.038 a share. Zeta now currently owns 85.75% of Bligh.
24.4 New Zealand Oil & Gas Limited (“NZOG”)
On 10 August 2017 Zeta gave notice of its intention to make a partial takeover offer under the New Zealand Takeovers Code
to acquire an additional 42.0% of each class of the shares in NZOG not currently held or controlled by Zeta Energy at an offer
price of NZ$0.72 per share. If successful, the offer would result in Zeta Energy holding or controlling no less than 50.01% of
the voting rights in NZOG.
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Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017
ADDITIONAL ASX INFORMATION
1.
SUBSTANTIAL SHAREHOLDERS
4.
VOTING RIGHTS
As at 15 September 2017, the company had received notification of the following substantial shareholdings:
All ordinary shares carry one vote per share without restriction.
UIL Limited
86,388,449 (86.39%)
Peter Ross Sullivan
5,670,632 (5.67%)
2. DISTRIBUTION SCHEDULE OF ORDINARY SHARES HELD AT 15 SEPTEMBER 2017
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
3,299
392,694
229,248
918,760
98,455,999
100,000,000
NO. OF ORDINARY
SHAREHOLDERS
% OF ISSUED
CAPITAL
15
130
26
26
16
213
0.00
0.39
0.23
0.92
98.46
100.00
The number of shareholders holding less than a marketable parcel of ordinary shares at 15 September 2017
is 18 and they hold 6,959 securities.
3.
TOP 20 HOLDINGS OF FULLY PAID ORDINARY SHARES AS AT 15 SEPTEMBER 2017
NAME
J P Morgan Nominees Australia Limited
HSBC Custody Nominees Australia Limited
James Noel Sullivan
Hardrock Capital Pty Limited
Calimo Pty Limited
Cherryburn Pty Limited
Gillian Clare Sellers
ACS (NSW) Pty Limited
John Gillis Broinowski
Uuro Pty Limited
Custodial Services Limited
AO Peter Irving Burrows
Australian Executor Trustees Limited
Pendan Pty Limited
Minturn Pty Limited
Alexandra Maree Saville
T J + K M Russell
Stephanie Saville
Bouchi Pty Limited
John Dugald F Morrison
Total for top 20
SHARES
85,576,217
7,932,184
1,308,595
600,000
576,510
350,000
350,000
295,000
260,000
250,000
200,000
200,000
200,000
127,675
120,000
109,818
80,000
70,110
64,000
60,000
% OF ISSUED
CAPITAL
85.58
7.93
1.31
0.60
0.58
0.35
0.35
0.30
0.26
0.25
0.20
0.20
0.20
0.13
0.12
0.11
0.08
0.07
0.06
0.06
98,730,109
98.74
5. USE OF CAPITAL
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.
6.
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.
7.
KUMARINA TENEMENT SCHEDULE
PROJECT AREA
TENEMENT ID
OWNERSHIP
COMMENTS
Ilgarari
Eulaminna
Murrin Murrin
E52/2274
M39/0371
M39/0372
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% Gold and Base Metals Rights
0% Gold and Base Metals Rights
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
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Zeta Resources LimitedAnnual Report for the year to 30 June 2017Zeta Resources LimitedAnnual Report for the year to 30 June 2017
COMPANY INFORMATION
Zeta Resources Limited
Company ARBN: 162 902 481
www.zetaresources.limited
DIRECTORS (NON-EXECUTIVE)
Peter Sullivan (Chairman)
Marthinus (Martin) Botha
Xi Xi
REGISTERED OFFICE
34 Bermudiana 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
NEW ZEALAND OFFICE
ICM NZ Limited
PO Box 25437
Featherston Street
Wellington 6146
Telephone: +64 4 901 7600
Email: contact@icmnz.co.nz
INVESTMENT MANAGER
ICM Limited
34 Bermudiana Road
Hamilton HM 11
Bermuda
Telephone: +1 441 299 2894
SECRETARY
ICM Limited
34 Bermudiana Road
PO Box HM 1748
Hamilton HM GX
Bermuda
66
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 Australia Pty Ltd
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
Zeta Resources LimitedAnnual Report for the year to 30 June 2017 www.zetaresources.limited
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