2019
ANNUAL REPORT
SIGNIFICANT STAKES IN A SELECT RANGE OF KEY COMMODITY COMPANIES
Zeta Resources Limited is a resource-focused investment
holding company whose 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.
NATURE OF THE COMPANY
Zeta Resources Limited (“Zeta” or the “Company”) is a closed-end investment company, whose ordinary shares are
listed on the Australian Securities Exchange (“ASX”). The business of Zeta 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 contracted with an external investment manager, ICM Limited (the “Investment Manager” or “ICM”),
to manage its investments and undertake the Company secretarial function.
CONTENTS
2 Why Zeta Resources Limited?
ZETA RESOURCES LIMITED
3
4
5
6
7
Geographical Investment Exposure
Group Performance Summary
Current Year Performance
Associates of Zeta Resources
Chairman’s Statement
INVESTMENTS
Investment Manager’s Report
8
16 A case study in investing in resources: Bligh Resources
17 Macro Trends Affecting Resources
18 Sector Summaries
22
23 Five Largest Holdings
26
Investment Manager and Team
ICM Investment Philosophy
GOVERNANCE
28 Directors
29 Report of the Directors
33 Corporate Governance Statement
FINANCIAL STATEMENTS
Independent Auditor’s Report
35
39 Auditor’s Independence Declaration
40 Financial Statements
44 Notes to the Financial Statements
66 SHAREHOLDER INFORMATION
68 COMPANY INFORMATION
FINANCIAL CALENDAR
Year End
30 June
Annual General Meeting
30 December 2019
Half Year Announcement
February 2019
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.
1
Annual Report for the year to 30 June 2019
WHY ZETA RESOURCES LIMITED?
Zeta is a patient, long term investor, seeking
and finding value in the resources sector.
Zeta’s investment aim is to maximise total returns for
shareholders by identifying and investing in resource
assets and companies in diverse commodity sectors
where the underlying value is not reflected in the
market price.
Zeta has a select range of concentrated investments,
where the Company has a meaningful influence on
its investment. Rather than take a passive approach,
Zeta is an active manager of its investments, working
alongside investee management teams to ensure
rational decision making, particularly in respect of
capital allocation.
In addition, Zeta often participates at a corporate
governance level, and assist investee companies with
its extensive network of contacts and experience.
Zeta utilises ICM as its Investment Manager. ICM
has a global network of offices, including a specialist
team devoted to research and analysis of resource
companies.
2
Zeta Resources Limited GEOGRAPHICAL INVESTMENT EXPOSURE
(% OF TOTAL INVESTMENTS)
AUSTRALIA
June 2019
June 2018
53.4%
66.6%
GUINEA
June 2019
June 2018
25.1%
10.8%
CANADA
June 2019
June 2018
10.3%
9.1%
3.4%
8.2%
NAMIBIA
June 2019
June 2018
2.4%
0.9%
OTHER
June 2019
June 2018
5.4%
4.4%
MALI
June 2019
June 2018
Source: ICM
3
Annual Report for the year to 30 June 2019 GROUP PERFORMANCE SUMMARY
Total return(1) (annual) (%)
Net tangible asset per ordinary share(2) (Australian cents)
Ordinary share price (Australian cents)
Premium/(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
2019
30 June
2018
% change
2019/18
(36.5)
36.6
35.5
(3.0)
(0.17)
Nil
74.0
133.3
0.1
(59.3)
(59.2)
44.4
56.1
57.6
40.5
(29.7)
0.15
Nil
122.9
162.3
0.3
(39.4)
(39.1)
24.1
(165.0)
(36.5)
(12.3)
(90.0)
(213.3)
n/a
(39.8)
(17.9)
(65.2)
50.5
51.4
n/a
(1)
Total return is calculated based on NTA per share return plus dividends reinvested from the payment date.
(2)
The NTA is calculated based on 287,763,076 shares in issue.
(3)
Earnings per share is based on the weighted average number of shares in issue during the year.
(4) Gross assets less liabilities excluding loans.
* Restated, refer to note 28.
n/a = not applicable
4
Zeta Resources Limited CURRENT YEAR PERFORMANCE
NAV TOTAL RETURN
PER ORDINARY SHARE
SHARE PRICE RETURN
PER SHARE
NAV DISCOUNT
AS AT 30 JUNE 2019
GEARING
-36.5%
-12.3%
-3.0%
44.4%
EARNINGS PER SHARE
ORDINARY SHARES
BOUGHT BACK
AVERAGE PRICE OF
ORDINARY SHARE
BOUGHT BACK
ONGOING CHARGES
(US$0.17)
807,948
A$0.37
1.3%
TOTAL RETURN COMPARATIVE PERFORMANCE*
Since inception on 12 June 2013 to 30 June 2019
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
Jun 18
Dec 18
Jun 19
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
5
Annual Report for the year to 30 June 2019 ASSOCIATES OF ZETA RESOURCES
AS AT 31 OCTOBER 2019
Panoramic Resources
Limited
Nickel
West Australian nickel
company
Over 300,000 tonnes
of nickel resources
Alliance Mining
Commodities Limited
GME Resources Limited
Bauxite
Nickel & Gold
Unlisted bauxite
development company
World class bauxite
asset in Guinea,
West Africa
ASX-listed junior nickel
and gold explorer
Substantial nickel
resources in Western
Australia
35.2%
34.7%
40.2%
Seacrest L.P.
Horizon Gold Limited
Oil & Gas
Gold
Global exploration firm
Widely diversified
portfolio of exploration
interests
38.7%
ASX-listed junior gold
explorer
Gold resources and
zinc-copper-silver
discovery in Western
Australia
20.1%
Margosa Graphite
Limited
Graphite
Unlisted graphite
explorer
Focused on high grade
vein graphite in
Sri Lanka
33.3%
6
Zeta Resources Limited CHAIRMAN’S STATEMENT
The sale of Zeta’s investment in Bligh
was a highlight
Unlike last year, commodity
prices were down overall,
and as a leveraged fund, Zeta
made a significant loss. Zeta’s
loss for the year was US$48.7
million, and the net asset value
per share fell by 36.5%.
Thirdly, once Zeta controlled a majority stake in Bligh,
it developed a cost effective plan of selective drilling
and cost control, thereby significantly increasing the
company’s resources. Finally, when Saracen again
expressed interest in Bundarra, Zeta worked to ensure
there was competitive tension in the sales process,
with a pleasing end result for Zeta shareholders.
PETER SULLIVAN
Chairman
However, we are pleased
with the positioning of Zeta’s
portfolio, and beneath the
headline loss has been one
very pleasing success, as well
as a significant rebalancing of
the portfolio.
The success came near the end of the year, and in
fact the full realisation of Zeta’s investment in Bligh
Resources Limited was finalised at the end of July
2019. The price offered by Saracen Mineral Holdings
Limited in its takeover bid announced in June 2019
represented a 97% premium to Bligh’s share price
immediately prior to the takeover, and a 260%
premium on Zeta’s A$9.0m investment cost. Zeta
received new Saracen shares in exchange for its
holding in Bligh, and as of writing, the share price of
Saracen had risen significantly in the wake of strong
Australian dollar gold prices.
The sale of the investment in Bligh capped a series of
deliberate steps taken by Zeta. Firstly, to act quickly
to buy the initial stake when Saracen first publicly
expressed interest in Bligh’s chief asset, Bundarra.
Secondly, Zeta outmanoeuvred Saracen’s bid for
the Bundarra asset by launching a takeover bid for
Bligh itself rather than the company’s main asset.
The other significant development during the year was
more subtle, namely a rebalancing of the Company’s
portfolio. At the start of the year, Zeta had over 50%
of its portfolio invested in nickel, and over 20% in
gold. At the end of the year, Zeta’s biggest exposure
was to bauxite, with around 25% of the portfolio,
with nickel at 24% and gold at 23%. Copper has been
increased from 11% to 14%. While Zeta is confident in
the long term outlook for nickel, it was important that
the Company is not overexposed to the risk of any
one commodity, and while the investment in bauxite
is more related to Zeta’s belief in the value of the
particular investment rather than bullishness about
the underlying commodity, we remain equally excited
about the investment potential of our investments.
Looking ahead, it remains to be seen whether short
term fears that have driven recent gains in precious
metals and declines in industrial commodity prices,
will prove to be misplaced or not. Either way, Zeta will
continue to seek to find and realise value in resources
and resource companies.
Peter Sullivan
Chairman
3 December 2019
7
Annual Report for the year to 30 June 2019 INVESTMENT MANAGER’S REPORT
In the Company’s 2018
annual report, we reported
that most commodities had
performed strongly, with the
exception of gold. This year,
I report the opposite, with
gold being up, but the other
commodities Zeta is invested
in were all down. Since Zeta’s
June 2019 year end, an
unusual divergence among
industrial commodities has
occurred, with nickel being a
DUGALD MORRISON
standout performer, while the other commodities have
continued to decrease in price.
As noted in the chairman’s statement, Zeta’s portfolio
is now more balanced than it was a year ago. Back
then, over 40% of Zeta’s portfolio was invested in
nickel. In this annual report, you will see that the
Company’s largest investment in any one commodity
8
is in bauxite, with roughly 25% of gross assets, while
nickel was 24%, and gold was 23%.
As a leveraged investment company with small company
exposure, the overall decline in commodity prices was
exacerbated in Zeta’s NAV performance. During the
year under review, Zeta’s net assets per share fell from
A$0.579 to A$0.366, a fall of 36.5%. For comparison,
the S&P/ASX 200 Energy index fell 9.1% over the same
period, and the S&P/ASX 300 Metals & Mining index
which includes gold mining stocks, rose 19.1%. Zeta’s
share price fell 12.3% to A$0.355. At the start of the
period the share price was at a 29.7% discount to net
assets; at the end of the period the share price was at a
3% discount to net assets.
After year end, Zeta has used weakness in commodity
proceeds to add to existing investments, as well as
making new investments in resources companies.
These acquisitions have utilised the proceeds from the
sale of Zeta’s holding in Bligh Resources.
Zeta Resources Limited IN THE YEAR TO 30 JUNE 2019
AUSTRALIA REMAINS ZETA’S
LARGEST COUNTRY EXPOSURE
AT 53.4%
GUINEA REMAINS ZETA’S SECOND
LARGEST COUNTRY EXPOSURE
AT 25.1%
CANADA REMAINS ZETA’S THIRD
LARGEST COUNTRY EXPOSURE
AT 10.3%
13.2%
14.3%
1.2%
MALI REMAINS ZETA’S FOURTH
LARGEST COUNTRY EXPOSURE
AT 3.4%
NAMIBIA IS ZETA’S FIFTH LARGEST
COUNTRY EXPOSURE AT 2.4%
SRI LANKA REMAINS ZETA’S
SIXTH LARGEST COUNTRY
EXPOSURE AT 2.1%
4.8%
1.5%
0.8%
Note: decreases/increases refer to the movement in the portfolio percentage of the relevant country
SECTOR SPLIT OF INVESTMENTS
13
AI
29
Cu
6
C
Bauxite
Nickel
Gold
25.1%
28
Ni
23.9%
79
Au
23.2%
Copper
Oil & Gas
Cobalt
14.2%
4.5%
27
Co
4.1%
Graphite
Other
Cash
2.2%
1.7%
1.1%
9
Annual Report for the year to 30 June 2019 INVESTMENT MANAGER’S REPORT
(continued)
COMMODITY MARKETS
As noted, during the year under review the price of
gold increased while the prices of oil, aluminium,
nickel and copper decreased. The US dollar gained
in strength, which benefited Australian miners. Zeta’s
largest geographical exposure is to Australia, where at
year end, over half the portfolio was invested.
Nickel
Having enjoyed a sustained uplift in price throughout
the year ended June 2018, nickel prices fared badly
in the last half of calendar 2018 and did not quite
recover those losses in the first six months of
calendar 2019. For the twelve months ended June
2019, the price of nickel fell 13.9% to US$5.74 per
pound. However, subsequent to year end, nickel has
performed strongly. In the short term, this uplift in
price has occurred chiefly due to low available stocks,
coupled with supply disruptions in Indonesia. Beyond
the short term, the long-term outlook for nickel stocks
is positive, provided that there is a continued increase
in demand for electric vehicles (“EVs”). EVs’ lithium-ion
batteries, despite their name, require a much larger
amount of nickel than lithium.
Zeta’s chief investment in the nickel sector remains
Panoramic Resources Limited (“Panoramic”), and Zeta
has a smaller, but still significant investment in GME
Resources Limited (“GME Resources”). Panoramic
has been active in the year under review, selling its
Lanfranchi mine, and its interests in platinum group
metals in Canada, to focus on restarting production
at its Savannah mine in Western Australia. Panoramic
encountered a number of challenges in restarting
Savannah, but the company announced it had shipped
its first concentrate in February 2019. The push to
ramp up to full production has also been challenging,
but Panoramic announced recently that it expects this
to be reached in the June 2020 quarter.
At the start of the year under review GME released its
preliminary feasibility study for the NiWest nickel-cobalt
project. The company released its maiden reserves, and
the study shows a significant nickel-cobalt asset, which
when developed, would have an initial mine life of
27 years.
NICKEL PRICE
from June 2017 to July 2019
10
8
6
4
2
Jun 17
Dec 17
Jun 18
Dec 18
Jun 19
US$/lb
A$/lb
Source: LME
Lithium-ion batteries require a much larger
amount of nickel than lithium
10
Zeta Resources Limited Gold
Copper
Having risen in each of the two years prior to this year,
copper fell in the 12 months ended June 2019. At the
start of the year, copper was US$3.02 per pound,
and by the end of the year it was US$2.71 per pound,
a decrease of 10.2%. Since year end, copper prices
have declined in line with decreases in the prices of
other industrial commodities, as investors have been
concerned about industrial demand weakening in the
wake of a slowing Chinese economy and trade wars.
During the year under review, Zeta has increased its
holding in copper from 11% of its portfolio to 14%.
The largest holding is Canadian copper firm Copper
Mountain Mining Corporation, which produces copper
in British Columbia, and has a copper development
project in Queensland, Australia. Subsequent to year
end, Zeta has increased its investment in Copper
Mountain, and made other investments in copper
companies. These purchases have been funded with
the proceeds of the sale of Bligh.
COPPER PRICE
from June 2017 to July 2019
5.00
4.00
3.00
2.00
Jun 17
Dec 17
Jun 18
Dec 18
Jun 19
US$/lb
A$/lb
Source: LME
The price of gold rose significantly during the year
under review. At the end of June 2018 the price of gold
was US$1,250 per ounce; at the end of June 2019 the
gold price was US$1,409 per ounce, a rise of 12.7%. In
Australian dollars, the rise was more pronounced, from
A$1,702 per ounce to A$2,012, a rise of 18.2%.
In an era of relatively high asset prices and low interest
rates, the recent rise in gold prices has been ascribed
to investor concerns over a possible downturn in the
global economy, and the likelihood that central banks
will again increase the supply of money. The rise of
populist political parties, and heightened trade tensions,
has only served to strengthen the demand for gold.
Gold’s recent rise should also be judged in light of a
strong US dollar, thus making the rise in the price of
gold even stronger in terms of non-US currencies. Zeta’s
biggest gain of the year was realised when Saracen
Mineral Holdings Limited (“Saracen”) made a successful
takeover bid for Bligh Resources Limited (“Bligh”)
which was 87%-owned by Zeta. The price offered by
Saracen in its takeover bid announced on 14 June 2019
represented a 97% premium to Bligh’s share price
immediately prior to the takeover, and a 260% premium
on Zeta’s A$9.0m investment cost. Zeta’s investment in
Resolute Mining Limited (“Resolute”) started the year
with a share price of A$1.275, and finished the year with
a share price of A$1.33, up 4.3%.
GOLD PRICE
from June 2017 to July 2019
2,200
2,000
1,800
1,600
1,400
1,200
1,000
Jun 17
Dec 17
Jun 18
Dec 18
Jun 19
Spot Price US$
Spot Price A$
Source: Kitco - London PM Fix
11
Annual Report for the year to 30 June 2019 INVESTMENT MANAGER’S REPORT
(continued)
Aluminium
Oil & Gas
After two years of increases, Aluminium prices fell
during the year under review. At the start of the year,
aluminium was US$0.99 per pound; by the end of the
year it was US$0.80 per pound, a decrease of 18.4%.
Aluminium prices have been weak for some time, with
industry commentators ascribing the downturn to
investors being cautious about demand for metals amid
a lack of progress in the prolonged U.S.-China trade
war and weak manufacturing data from the world’s top
economies.
During the year, Zeta significantly increased its
holding in unlisted bauxite developer Alliance Mining
Commodities Limited (“AMC”). AMC owns a world-class
bauxite deposit in Guinea.
At the start of the year under review, the Brent Crude
Oil price was US$78/bbl; by the end of June 2019 the
price of Brent was US$65/bbl, a decline of 16.7%. As
with other industrial commodities, the decline in oil
prices has been ascribed to weak economic conditions,
coupled with strong production in the United States,
where the breakeven production price by fraccers is
estimated at US$50/bbl.
Having last year sold the investment in New Zealand
Oil & Gas Limited, Zeta’s largest remaining investment
in this sector is in the seismic exploration firm Seacrest
L.P., which is unlisted.
BRENT CRUDE OIL PRICE
from June 2017 to July 2019
ALUMINIUM PRICE
from June 2017 to July 2019
1.30
1.10
0.90
0.70
Jun 17
Dec 17
Jun 18
US$/lb
Dec 18
A$/lb
130
110
90
70
50
30
1.50
1.00
0.50
Jun 19
Source: LME
Jun 17
Dec 17
Jun 18
Dec 18
Jun 19
US$/bbl
A$/bbl
Source: US Energy Information Administration
a downturn ... has been ascribed to the U.S.-
China trade war and weak manufacturing data
from the world’s top economies
12
Zeta Resources Limited CAPITAL STRUCTURE
Zeta is a closed-end investment company, listed on the ASX, and incorporated in Bermuda.
During the year Zeta has had working capital support from its parent company, UIL Limited (“UIL”). As of 30 June 2019,
Zeta had a loan from UIL totalling US$45.8 million, drawn in Australian dollars and Canadian dollars.
As at 30 June 2019, Zeta had gross assets of US$133.3 million (2018: US$162.3 million). Of this figure, $5.03 million
(2018: US$6.3 million) was invested in the oil & gas sector; $57.9 million (2018: US$103.9 million) was invested in the
nickel and copper sectors; $30.1 million (2018: US$30.7 million) was invested in the gold sector; and US$32.8 million
(2018: US$17.8 million) was invested in the bauxite sector.
NTA PER SHARE VERSUS SHARE PRICE
Since inception on 12 June 2013 to 30 June 2019
s
r
a
l
l
o
D
n
a
i
l
a
r
t
s
u
A
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
Jun 18
Jun 19
NTA
Closing Share Price
Source: ICM
FINANCIAL RESULTS
The net loss after tax for the year was US$48,687,361 against a profit of US$30,255,839 in the year ended June 2018.
The majority of the net loss was comprised of unrealised losses from investments.
13
Annual Report for the year to 30 June 2019
INVESTMENT MANAGER’S REPORT
(continued)
LOOK-THROUGH RESERVES & RESOURCES
Zeta’s investment portfolio includes exposure to the following commodities, weighted by the percentage ownership of
investee declared Reserves and Resources as follows as at the end of August 2019:
RESERVES
Proved & Probable
RESOURCES
Measured & Indicated
0.34 m oz
0.60 m oz
1.52 m oz
1.95 m oz
0.24 m t
0.31 m t
0.28 m t
0.35 m t
0.02 m t
0.02 m t
13.66 m t
132.92 m t
Gold
Silver
Copper
Nickel
Cobalt
Alumina
79
Au
47
Ag
29
Cu
28
Ni
27
Co
13
AI
14
Zeta Resources Limited SIGNIFICANT INVESTMENTS
Kumarina
The five largest investments held by Zeta are considered in
greater detail in their own section later in this annual report.
The remaining significant investments are as follows.
Bligh
Bligh Resources Limited is a small Australian gold
explorer that 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. In addition, the company has prospecting
licenses for gold in Western Australia and manganese
in the Northern Territory.
During the year, Saracen Mineral Holdings Limited
launched a takeover offer for Bligh, and after the period
under review, Zeta sold 100% of its holding in Bligh.
Seacrest
Seacrest L.P. is a specialist oil & gas offshore seismic
exploration company. Seacrest amassed a significant
number of geographically diversified interests in
joint venture licenses for offshore oil exploration, but
suffered a loss in value in the wake of the significant
fall in the price of oil and a number of disappointing
drilling results. The company has enjoyed some recent
success through the joint ventures, and is hopeful
that further success will result once more drilling is
conducted.
Margosa Graphite
Margosa Graphite Limited is an unlisted junior
explorer focused on Sri Lankan crystalline vein
graphite, the purest naturally occurring graphite.
Sri Lanka has historically been one of the world’s
largest suppliers of high quality graphite. Margosa is
utilising modern exploration technology in brownfield
areas, with the aim of identifying a substantial
resource ahead of development and eventual
production.
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.
PROJECT
AREA
TENEMENT
ID
OWNERSHIP COMMENTS
Ilgarari
E52/2274
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%
Eulaminna
M39/0371
M39/0372
Murrin Murrin 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
JDF Morrison
ICM Limited
Investment Manager
3 December 2019
15
Annual Report for the year to 30 June 2019 A CASE STUDY IN INVESTING IN RESOURCES: BLIGH RESOURCES
Bligh Resources Limited is a Perth-based gold
exploration and production junior, whose chief asset
is the Bundarra gold project, located 65km north of
Leonora in the Eastern Goldfields region of Western
Australia.
IDENTIFYING THE OPPORTUNITY
Zeta first identified Bligh as a potential investment
back in 2016. Zeta was already invested in GME
Resources, near to Bundarra, and Zeta noted that
Bligh’s deposit near Leonora had good potential with
lots of surrounding infrastructure.
After buying a 6.6% stake in Bligh, Zeta was surprised
by an announcement from Bligh stating that the
company had agreed to sell its Bundarra gold project
to Saracen for share consideration of A$8.5 million.
While this was at a premium to the current share
price of Bligh, Zeta’s research indicated that the price
offered by Saracen was significantly undervaluing
Bligh’s potential value.
SURPRISED BY SARACEN
Zeta acted decisively, buying three parcels of Bligh
shares within two days, increasing Zeta’s ownership of
Bligh to 19.9%.
While Bligh and Saracen worked towards seeking
shareholder approval for their agreed transaction, Zeta
prepared a takeover offer, not just for the Bundarra
gold project, but for all of Bligh.
After Zeta launched its takeover offer, Saracen
responded by modestly increasing its own offer for
the Bundarra gold project, but Zeta countered with an
increased offer. Importantly, Zeta made its offer for
Bligh in cash, whereas Saracen offered its own shares.
The board of Bligh recommended Zeta’s offer over
Saracen’s in part because Zeta’s offer was considered
to be more certain. By July 2017, Zeta owned 88.7% of
Bligh’s shares.
SUPPORTING MANAGEMENT
Having assumed control of Bligh, Zeta then supported
Bligh’s cost-effective approach to drilling with the
aim of increasing the company’s stated Mineral
Resources. Zeta provided capital when needed, along
with expertise in the form of board governance and
management input.
In December 2018, Bligh announced that total mineral
resources had increased 18% in tonnage and 14% in
ounces to 9.7 Mt @ 2.1 g/t Au for 660,000 ounces of
gold. Five months later, Bligh announced completion
of an internal Conceptual Underground Mining Study
on the potential economic exploitation of the Wonder
North Deeps lode at Bundarra.
SARACEN RETURNS
From the perspective of Saracen, while they had lost
the initial bid for Bundarra, they kept in touch, and as
Bligh had been successful in steadily increasing the
stated Mineral Resources of the company, clearly this
provided additional value to Saracen. With significant
processing infrastructure nearby, the raw ore latent in
Bligh was attractive to Saracen, who were aware that
it was also attractive to other mining companies in the
region. Saracen decided to make another attempt at
buying Bundarra. Given the increased proven value
in Bligh, Saracen agreed to buy the entire company
at a significantly improved price. As the majority
shareholder, Zeta was well placed to influence the
outcome. Calculating that a better outcome for Bligh
shareholders (including Zeta) could be achieved by
receiving Saracen shares over cash, Zeta suggested
Saracen make their bid in shares, which Saracen did.
Saracen’s June 2019 takeover offer to acquire Bligh
represented (at a Saracen share price of A$3.47) a 97%
premium to Bligh’s closing share price the day before
the offer, and valued Bligh at A$38.2 million. The price
offered by Saracen for Zeta’s shares represented a
260% premium on Zeta’s A$9.0 million investment
cost. Zeta’s suggestion to Saracen that it make its offer
in shares proved to be well founded, as by the time
Zeta and other Bligh shareholders received their new
Saracen shares on 31 July, the price of Saracen shares
had risen to A$4.19 (partly due to rising gold prices).
Using that price, the overall return to Zeta over two and
a half years of investment in Bligh was roughly 330%.
16
Zeta Resources Limited MACRO TRENDS AFFECTING RESOURCES
E-VEHICLES
• Nearing tipping point where all factors for growth in place
• EVs use more commodities such as nickel and copper than traditional vehicles
• Anticipated spike in demand for lithium and cobalt
•
Increased demand for flake and vein graphite
RENEWABLES
• Consumer pull and government push for renewables
• Price of solar continues to reduce
• Renewables increasing, but still a relatively small component of total energy mix
• Low price of natural gas reducing carbon footprint and industrial demand for renewables
TRADE CONFLICTS
• Shift in policy by US administration from promoting stability through free trade to
promoting self interest
• Trade war between US and China continues to escalate
• Significant market uncertainty associated with both US trade disputes and potential
withdrawal of the UK from the European Union
• Tariffs can provide short term benefits to some commodity producers, while hurting others
• Overall impact of decreased trade is negative for demand and hence commodity prices
GLOBAL DEBT
• Unprecedented increase in global government debt on a relative basis
• Many central governments reducing interest rates, with negative rates in some cases;
low rates contributing to increasing consumer debt
• Uncertainty regarding near term actions of the US Federal Reserve
• Several leading indicators suggest heightened risk of recession
• Risk to global economy, and thus demand for industrial commodities
CHINA URBANISATION
• Central government spending on new cities helps manage GDP growth
• Smooths cycles and sustains demand for industrial commodities
• Government committed to renewables and EVs
• Pollution reduction targets reducing obsolescent refineries and reducing production of
certain commodities, e.g. aluminium
• Long term growth in question as Chinese population ages and effects of trade war
impact Chinese economy
17
Annual Report for the year to 30 June 2019 SECTOR SUMMARIES
AS AT 30 JUNE 2019
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
• Aluminium prices in decline since peaking in April 2018
Exposure
• 35% of Alliance Mining Commodities (unlisted) – owner and developer of a world-class
bauxite resource in Guinea
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
• Demand for nickel for lithium-ion batteries increasing quickly, but still relatively small
component of global nickel demand
• Prices faced pressure in first half of 2019 due to rising nickel supplies and slowing demand
from stainless steel mills
• Industrial demand still influenced by strength of Chinese economy
Exposure
• 41% of GME Resources (ASX:GME) – owns development project in Western Australia
• 33% of Panoramic Resources (ASX:PAN) – restarted one of its two nickel mines in Western
Australia
BAUXITE
13
AIAluminium
NICKEL
28
NiNickel
18
Zeta Resources Limited GOLD
79
AuGold
COPPER
29
CuCopper
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
• Hedge to US dollar which has declined long term against gold
• Price of gold up considerably in 2019 amidst global economic uncertainty
• Gold production has been in a long-term uptrend since record-keeping commenced
• Demand for jewellery dominated by China and India; US a distant third
Exposure
• 100% of Kumarina (unlisted) – exploration and development in Western Australia
• 87% of Bligh Resources (ASX:BGH) – development project in Western Australia
• 20% of Horizon Gold (ASX:HRN) – exploration and development in Western Australia
• 1% of Resolute Mining (ASX:RSG) – operating mines in Mali and Queensland, 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 Peru and China distant
second and third
Macro trends
• Annual production has been increasing for over fifty years, but sharp uptick in late 1990s
• Prices relatively volatile, generally tied to world economy, and in a downtrend since mid-
2018
• Increasing demand from wiring for electric vehicles, but price still dominated by industrial
demand or lack thereof
Exposure
• 100% of Kumarina (unlisted) – junior copper-gold exploration firm in Western Australia
• 13% of Copper Mountain Mining (TSX:CMMC, ASX:C6C) – producing copper in Canada,
and developing a copper asset in Australia
19
Annual Report for the year to 30 June 2019 SECTOR SUMMARIES
AS AT 30 JUNE 2019 (continued)
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 the US, Saudi Arabia, and Russia; 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 since 2014 have led to reduced global expenditures on oil & gas exploration,
but technological improvements led to increased supply, especially in the US
• Fraccing has moved the US into the number one position in both oil and gas production;
fraccing has had less success outside of North America
Exposure
• 39% of Seacrest (unlisted) – globally diversified seismic oil & gas exploration
Overview
• Industrial metal used primarily in rechargeable batteries such as lithium-ion
• Other uses include superalloys, integrated circuits and other industrial processes
• Vast majority is produced as a by-product of copper or nickel mining
• Nearly 60% of cobalt ore is produced in the Democratic Republic of the Congo, and more
than 60% of smelting capacity is in China
Macro trends
• Cobalt demand is at an all-time high and is expected to continue climbing alongside
increased adoption of EVs and other electronics
• Cobalt prices soared in 2017 amidst fears of a supply shortage, but crashed in 2018/2019
as the near-term supply-demand imbalance was resolved
• Some manufacturers have developed lithium-ion batteries that require relatively less
cobalt, but industry consensus is that the metal will continue to be required in future EV
batteries, albeit at potentially lower volumes per unit
Exposure
• 41% of GME Resources (ASX:GME) – Australian nickel developer with cobalt resources of
55,000 tonnes
• 33% of Panoramic Resources (ASX:PAN) – Australian nickel producer with cobalt reserves
of 7,600 tonnes
COBALT
27
CoCobalt
20
Zeta Resources Limited GRAPHITE
6
CCarbon
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 have 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
• Several new projects are being developed worldwide amidst strong demand expectations
and higher prices through 2018
Exposure
• 32% of Margosa Graphite Limited (unlisted) – Sri Lankan brownfield explorer of vein
graphite, the purest naturally occurring graphite
21
Annual Report for the year to 30 June 2019 ICM INVESTMENT PHILOSOPHY
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 bauxite, nickel, gold, copper, oil & gas, cobalt, graphite
and base metals exploration and production.
S
T
A
B
L
E
&
S
U
P
P
O
R
T
I
V
E
F
R
A
M
E
W
O
R
K
We seek out and make
compelling investments
SUPERIOR, CONSISTENT PERFORMANCE
Long Term
Deep Value
Optionality
Bottom Up
Approach
Active
Investors
Investee
Relationships
Identify
Synergies
Extensive
Domain
Knowledge and
Expertise
Sector Focused
CREATE SYNERGIES
I
N
D
E
P
E
N
D
E
N
C
E
&
I
N
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E
G
R
I
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22
Zeta Resources Limited
FIVE LARGEST HOLDINGS
THE VALUE OF THE FIVE
LARGEST HOLDINGS
REPRESENTS
THE VALUE OF THE TEN
LARGEST HOLDINGS
REPRESENTS
AUSTRALIA IS ZETA’S
LARGEST COUNTRY
EXPOSURE AT
THE TOTAL NUMBER
OF COMPANIES
INCLUDED IN THE
PORTFOLIO IS
82.3%
(2018: 85.6%) OF THE
COMPANY’S TOTAL
INVESTMENTS
90.6%
(2018: 96.9%) OF THE
COMPANY’S TOTAL
INVESTMENTS
53.5%
(2018: 66.6%) OF THE
COMPANY’S TOTAL
INVESTMENTS
24
(2018: 18)
23
Annual Report for the year to 30 June 2019 FIVE LARGEST HOLDINGS
(continued)
Panoramic Resources Limited is a Western Australian mining company
that owns 100% of the Savannah underground nickel sulphide mine,
located in the East Kimberley in Western Australia. During the year
under review, Panoramic worked hard to bring Savannah back into
production this year. Despite this not being a greenfield mine, the
company has encountered various problems in firstly, achieving “first”
production, and secondly, ramping up production to full capacity.
However, the first shipment was achieved in February 2019, and
Panoramic estimates full production will be achieved in the June 2020
quarter. 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.
Alliance Mining Commodities Limited is an Australian private company
that has been granted a Mining Concession by Presidential Decree for
the development of the Koumbia Bauxite Project in the northwest of the
Republic of Guinea. The Government of Guinea holds a 10% free-carried
interest in AMC’s Guinea subsidiary which holds the concession. The
Koumbia Bauxite Project is a world class bauxite development, with a
JORC (2012) resource in excess of 2 billion tonnes. The Koumbia ore, high
in alumina and low in reactive silica and boehmite, makes it particularly
attractive for use in a low temperature, low cost, refining process.
Bligh Resources Limited is a Perth-based gold exploration company,
which owns 100% of the Bundarra Gold Project (“Bundarra”). Bundarra
lies within the Norseman-Wiluna greenstone belt of the Archaean
Yilgarn Craton, approximately 65km north of Leonora in the Eastern
Goldfields region of Western Australia. Bundarra covers an area of 24.5
km2 and consists of five Mining Leases and five Prospecting Licences.
The project hosts Mineral Resources estimated to contain 9.7 million
tonnes averaging 2.1 g/t Au for a total of 660,000 ounces of gold across
five deposits.
During the year under review, Saracen Mineral Holdings Limited
launched a takeover offer to buy Bligh, and in July 2019 Zeta sold
100% of its holding in Bligh in exchange for new Saracen shares.
1
2
3
24
SHARE PRICE
54.5%
Country
Australia
Sector
Nickel exploration
and mining
Fair Value
US$000
% of total
investments
% owned
35,836
27.4%
33.0%
UNLISTED
Country
Guinea
Sector
Bauxite developer
Fair Value
US$000
% of total
investments
% owned
32,785
25.1%
34.7%
resources
SHARE PRICE
84.0%
Country
Australia
Sector
Gold exploration
Fair Value
US$000
% of total
investments
% owned
16,366
12.5%
87.4%
Zeta Resources Limited 4
5
SHARE PRICE
32.0%
Countries
Sector
Canada and
Australia
Copper exploration
and mining
Fair Value
US$000
% of total
investments
% owned
15,239
11.7%
12.8%
SHARE PRICE
4.3%
Countries
Australia and Mali
Sector
Gold exploration
and mining
Fair Value
US$000
% of total
investments
% owned
7,226
5.5%
1.0%
Copper Mountain Mining Corporation is a Canadian copper mining
company headquartered in Vancouver, British Columbia. Its chief
asset is 75% of the Copper Mountain mine located about 20 km
south of Princeton, British Columbia and 300 km east of the port of
Vancouver. Mitsubishi Materials Corporation owns the remaining 25%
of the Copper Mountain mine. The mine produces about 100 million
pounds of copper equivalent production per year, including significant
gold and silver credits, all of which are shipped to Japan for smelting
in one of Mitsubishi’s copper smelters. Copper Mountain also owns
the Eva Copper Project, which is located 75 kilometres from the town
of Cloncurry and 95 kilometres north-east of Mt Isa in north-west
Queensland, Australia. The project comprises one of Australia’s largest
undeveloped copper resources, containing 1.65 million tonnes of
copper and 409,000 ounces of gold.
Resolute Mining Limited is an Australian domiciled gold mining company,
with three operating mines: the Syama mine in southern Mali; the
Ravenswood mine in northeast Australia, and the recently acquired Mako
gold mine in eastern Senegal. In addition, the company owns the Bibiani
gold mining project in Ghana. Production in the year to 30 June 2019 of
c. 305,000oz gold was in line with the guidance. Gold produced at Syama
increased by 25.4% to 243,617oz. Syama Underground is a new automated
underground development still in the ramp-up stage, although commercial
production rates were achieved in the June 2019 quarter. With increased
volumes, cash costs at Syama fell by 24.2% to A$906/oz. At Ravenswood,
gold produced fell by 31.3% to 61,819oz, and the Mt Wright Underground
at Ravenswood is expected to be closed in late 2019. However, recent
drilling at Ravenswood substantially boosted reserves, and Resolute is
working on improving its plan for the Ravenswood Expansion Project which
is targeting a new 15-year mine life with annual production of c. 200,000oz.
As at 30 June 2019, Resolute had cash and bullion on hand of A$34.3m,
down from A$79.6m in the prior year. Total borrowings were A$193.0m, up
significantly from A$33.8m in the prior year due to capital expenditures on
the Syama Underground development.
25
Annual Report for the year to 30 June 2019 INVESTMENT MANAGER AND TEAM
The directors are responsible for Zeta’s investment
policy and have overall responsibility for the Company’s
day-to-day activities. Zeta has, however, entered into an
Investment Management Agreement with ICM Limited
under which ICM provides investment management
services to Zeta, including investment analysis, portfolio
monitoring, research and corporate finance.
ICM is an international Fund Manager and Corporate
Finance Adviser headquartered in Bermuda, with
10 offices globally. ICM has expertise in listed equity,
private equity, and fixed income bonds, and
specialises in the following investment sectors: utility &
infrastructure, financial services, mining and resources,
technology, and fixed income.
ICM focuses on identifying investments at valuations
that do not reflect their true long-term value and then
assisting management to add value where appropriate.
Their investment approach is to have a deep
understanding of the business fundamentals of each
investment and its environment versus its intrinsic
value. ICM are long term, patient investors
and see markets as a place to exchange assets.
ICM MANAGES OVER
US$20.1bn
IN FUNDS, DIRECTLY AND INDIRECTLY, IN A RANGE OF MANDATES. ICM HAS OVER 60 STAFF BASED IN OFFICES
LOCATED WORLDWIDE.
DUNCAN SAVILLE
Duncan Saville founded the ICM Group and its predecessor companies, and has
been employed by the Group since 1988. Duncan Saville is a chartered accountant
with experience in corporate finance and asset management. He has previously
been a director in multiple companies in the utility, investment, mining, and
technology sectors. Duncan is currently a non-executive director of Resimac Group
Limited and West Hamilton Holdings Limited. His Fellowships include the Institute
of Chartered Accountants Australia and New Zealand, the Australian Institute of
Company Directors and the Financial Services Institute of Australasia, and he is a
Member of the Singapore Institute of Directors.
ALASDAIR YOUNIE
Alasdair Younie is a director of ICM Limited and is based in Bermuda. Alasdair has
extensive experience in financial markets and corporate finance, and is responsible
for the day to day running of the Somers Group. Alasdair qualified as a chartered
accountant with PricewaterhouseCoopers and subsequently worked for six years in
the corporate finance division of Arbuthnot Securities Limited in London. Alasdair is
a director of Ascendant Group Limited, Bermuda Commercial Bank Limited, Somers
Limited, Bermuda First Investment Company Limited, One Communications Limited
and West Hamilton Holdings Limited. Alasdair graduated from Bristol University with
a BSc in Economics and Economic History in 1998 and is a Member of the Institute
of Chartered Accountants in England and Wales.
26
Zeta Resources Limited DUGALD MORRISON
Dugald Morrison has been involved with ICM and its predecessor companies since
1994 and is responsible for ICM NZ Limited, based in Wellington. Dugald is an
experienced investment analyst, having worked in stockbroking, investment banking
and investment management firms in New Zealand, the United Kingdom, and the
United States since 1987. Dugald is focused on the Resources sector worldwide.
Dugald is a director of RESIMAC Financial Services Limited, Brightwater Group Limited
and Snapper Services Limited. Dugald graduated from Victoria University of Wellington
in 1991 with BCA (Hons) and is a Member of the New Zealand Institute of Directors.
EDUARDO GRECA
Eduardo Greca joined ICM in 2010 as a Latam Investment Strategist, based in
Colombia since 2018 (previously in Brazil from 2012). Eduardo has over ten years
of investment research experience, and prior to joining ICM, he worked for the
commodities risk management team at Kraft Foods. Eduardo supports the ICM
team on Latin American equity and fixed income investments, and he is responsible
for the Stock Exchange sector worldwide with an emphasis on Emerging Markets.
Eduardo obtained a Bachelor’s degree in Economics at the Federal University of
Parana in 2009, is a CFA Charterholder, and a Member of the CFA Society in Brazil.
TRISTAN KINGCOTT
Tristan Kingcott joined ICM in 2018 and is responsible for the Canadian office,
based in Vancouver, Canada. Tristan is focused on the resources, technology, and
financial services sectors, with an emphasis on North America. Tristan has over eight
years’ experience in financial and commercial analysis, and prior to joining ICM, has
performed various roles, including Manager of Corporate Development at Ferus
Inc., an oil & gas services company based in Western Canada. He holds a Bachelor
of Commerce degree in Finance from the University of Alberta, Canada, and is a CFA
Charterholder.
27
Annual Report for the year to 30 June 2019 DIRECTORS
PETER SULLIVAN (CHAIRMAN)
Mr Sullivan is an engineer and has been involved in the management and strategic
development of resource companies and projects for more than 25 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 GME Resources Limited (ASX:GME) and non-executive
director of Resolute Mining Limited (ASX:RSG) and Panoramic Resources Limited
(ASX:PAN). Mr Sullivan was Chair of Pan Pacific Petroleum NL (ASX:PPP) which was
delisted on 13 November 2017.
Mr Sullivan was a director of Bligh Resources Limited (ASX:BGH) until 13 August 2019
following the sale of the company to Saracen Mineral Holdings Limited.
MARTHINUS (MARTIN) BOTHA
Mr Botha has over 30 years’ experience in banking, with the last 26 years spent in
leadership roles building Standard Bank Group’s international operations. Mr Botha’s
primary responsibilities at Standard Bank Plc included establishing and leading the
development of the core global natural resources trading and financing franchises, as
well as various geographic strategies. 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 chairman of Resolute Mining Limited (ASX:RSG).
XI XI
Ms Xi is a financial analyst with more than 15 years’ experience in the mining, energy
and natural resource industry, ranging from managing companies focused on
international exploration and development of mining projects to restructuring and
overseeing a portfolio of private and public companies. Ms Xi holds dual Bachelor of
Science degrees in Chemical Engineering and Economics from the Colorado School
of Mines and a Master of Arts in International Relations and China Studies from
Johns Hopkins School of Advanced International Studies.
Directorships of other listed companies in the last 3 years
Ms Xi Xi is currently non-executive director of Mineral Resources Limited (ASX:MIN),
and previously Galaxy Resources Limited (ASX:GXY).
All Directors were appointed to the Board of the Company on 7 June 2013 and are Non-Executive Directors.
28
Zeta Resources Limited REPORT OF THE DIRECTORS
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 2019.
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
The directors have been in office since the start of the
year to the date of this report.
PRINCIPAL ACTIVITIES
The principal activities of the company are investing in
listed and unlisted resource focused investments.
No significant change in the nature of these activities
occurred during the year.
OPERATING AND FINANCIAL REVIEW
Operating results
The net loss attributable to the company for the year to
30 June 2019 amounted to US$48,687,361.
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$12,728,429. A decrease in the fair value of the
portfolio resulted in an unrealised loss recognised in
profit or loss at year end of US$49,991,372.
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$222,414 was
invested during the twelve months to 30 June 2019 in
further drilling and analysis work.
Financial position
At the end of the year, the company had US$104,715
in cash and cash equivalents. Investments at fair
value totalled US$129,928,110, loans to subsidiaries
were valued at US$1,571,725 and the investment in
subsidiaries was valued at US$1,000,002.
The company has a loan owing to UIL of $45,793,293 at
year end.
29
Annual Report for the year to 30 June 2019 REPORT OF THE DIRECTORS
(continued)
GOING CONCERN
REMUNERATION REPORT
The financial statements have been prepared on a going
concern basis. The majority of the company’s assets
consist of equity shares in listed companies and in most
circumstances are realisable within a short timescale.
The use of the going concern basis of accounting is
appropriate because there are no material uncertainties
related to events or conditions that may cast significant
doubt about the ability of the company to continue as
a going concern. After making enquiries, the directors
have a reasonable expectation that the company
has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, the
directors continue to adopt the going concern basis in
preparing the accounts.
As at the year end, the company had a US$5 million
loan facility with Bermuda Commercial Bank with
US$1,250,000 expiring on 30 September 2019. The
company will repay the outstanding debt when due
from the realisation of portfolio investments. Creditors
and short-term payables as at year end have all
been settled through cash flow generated from the
realisation of portfolio investments.
DIVIDENDS
No dividends have been paid or declared since the
start of the year. No recommendation is made as to
dividends.
AFTER BALANCE SHEET DATE EVENTS
Zeta has sold 100% of its holding in Bligh Resources
Limited on 31 July 2019.
During August 2019 Zeta made capital loan repayments
to UIL totalling A$25 million.
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.
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’ interests
Remuneration policy
The board of directors is responsible for remuneration
policies and the packages applicable to the directors
of the company. The broad remuneration policy is to
ensure that packages offered properly reflect a person’s
duties and responsibilities and that remuneration is
competitive and attracts, retains, and motivates people
of the highest quality.
The directors are remunerated for the services they
render to the company and such services are carried
out under normal commercial terms and conditions.
Engagement and payment for such services are
approved by the other directors who have no interest in
the engagement of services.
At the date of this report the company had not entered
into any packages with directors or senior executives
which include performance-based components.
Details of remuneration for directors
The company paid a total of $150,000 to directors for
the year ended 30 June 2019.
The company had no employees as at 30 June 2019.
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.
30
Zeta Resources Limited Directors’ interests
INDEMNIFYING OFFICERS OR AUDITORS
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:
Ordinary
shares
opening
balance
Director
Peter R Sullivan
5,770,632
Martin Botha
479,565
Xi Xi
–
Ordinary
shares
closing
balance
5,770,632
479,565
–
Net
change
–
–
–
MEETINGS OF DIRECTORS
The board held three meetings during the year which
were attended by all directors. The meetings were held
on 5 September, 5 November 2018 and 7 February 2019.
In addition, throughout the course of the year there
were a number of resolutions of directors which were
made by unanimous written resolution.
There were no meetings of committees of directors
that were required to be held during the year.
LOANS TO DIRECTORS
There were no loans entered into with directors or
executives during the year under review.
The company has not, during or since the year ended,
in respect of any person who is or has been an officer
or the auditor of the company or of a related body
corporate indemnified or made any relative agreement
for indemnifying against a liability incurred as an officer
or auditor, including costs and expenses in defending
legal proceedings.
ENVIRONMENTAL REGULATION
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 and the
Western Australian Mining Act during the year
covered by this report.
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.
AUDIT COMMITTEE
NON-AUDIT SERVICES
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.
No non–audit services were performed by the auditors
of the company during the year.
ON-MARKET BUY BACK SCHEME
As part of its ongoing capital management strategy,
Zeta has implemented an on-market buy-back for
up to 10 million ordinary shares during the period
15 September 2018 to 14 September 2019. The buy-
back will only be effective should the share price of the
company be at a discount to NTA exceeding 10%. The
timing and quantity of shares will depend on current
market conditions and other future events. Pursuant to
31
Annual Report for the year to 30 June 2019 REPORT OF THE DIRECTORS
(continued)
section 257B(4) of the Corporations Act 2001 (Cth), the
share buy-back does not require shareholder approval
as it falls under the 10/12 limit.
by the average percentage income yield on the S&P/
ASX 300 Metals and Mining Index. No performance fee
was payable for the year.
Since the commencement of the on-market buy-back
scheme on 15 September 2018, Zeta Resources has
repurchased 807,948 and cancelled 757,948 fully paid
ordinary shares.
Either party may terminate the agreement with six
months’ notice.
The company paid US$677,467 in management fees
during the reporting year.
INVESTMENT MANAGEMENT AGREEMENT
The company entered into an Investment Management
Agreement with ICM Limited on 3 June 2018.
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
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
3 December 2019
32
Zeta Resources Limited CORPORATE GOVERNANCE STATEMENT
THE COMPANY‘S CORPORATE GOVERNANCE FRAMEWORK
Corporate Governance is the process by which the board of directors of a company protects shareholders’
interests and by which it seeks to enhance shareholder value. Shareholders hold the directors responsible for
the stewardship of a company’s affairs, delegating authority and responsibility to the directors to manage the
company on their behalf and holding them accountable for its performance. Responsibility for good governance
lies with the Board. The Board considers the practice of good governance to be an integral part of the way it
manages the Company and is committed to maintaining high standards of financial reporting, transparency and
business integrity.
The governance framework of the Company reflects the fact that as an investment company it has no full-time
employees and outsources its activities to third party service providers.
THE BOARD
Three non-executive directors
CHAIRMAN:
Peter Sullivan
KEY OBJECTIVES:
• to provide leadership within
a framework of prudent
and effective controls which
enable risk to be assessed and
managed; and
• to constructively challenge
and scrutinise performance
of all outsourced activities.
• to set strategy, values and
standards;
AUDIT & RISK
MANAGEMENT
OVERSIGHT
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
The Board as a
whole performs
this function
The Board as a
whole performs
this function
The Board as a
whole performs
this function
The Board as a
whole performs
this function
KEY OBJECTIVE:
KEY OBJECTIVE:
KEY OBJECTIVES:
KEY OBJECTIVE:
• to oversee the
• to review the
• to regularly review
• to set the
financial reporting
and control
environment.
performance of
the Investment
Manager.
the Board’s structure
and composition;
and
remuneration policy
for the Directors of
the Company.
• to consider any new
appointments.
33
Annual Report for the year to 30 June 2019 CORPORATE GOVERNANCE STATEMENT
(continued)
As an ASX-listed company, the board’s principal
governance reporting objective is in relation to
the ASX Corporate Governance Principles and
Recommendations (“Recommendations”) developed by
the ASX Corporate Governance Council.
In accordance with ASX Listing Rules 4.10.3 and
4.7.4, the Corporate Governance Statement, and
accompanying Appendix 4G, will be available for review
on the Company’s website and will be lodged with ASX
concurrently with the Annual Report.
The Appendix 4G details 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 the Company’s website.
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
Recommendations to the extent appropriate to the
size and nature of the group’s operations.
The Company has prepared a Corporate
Governance Statement based on the Third Edition
of the Recommendations. It 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.
Details about the Company’s corporate governance policies and charges are
available in the corporate governance section of our website at:
www.zetaresources/investor-relations/corporate-governance/
34
Zeta Resources Limited INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
To the shareholders of Zeta Resources Limited
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Zeta Resources Limited (the “company”) set out on
pages 40 - 65, which comprise the statement of financial position as at 30 June 2019, and the
statement of comprehensive income, the statement of changes in equity and the statement of
cash flows for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies.
In our opinion, the financial statements present fairly, in all material respects, the financial
position of the company as at 30 June 2019, and its financial performance and cash flows for the
year then ended in accordance with International Financial Reporting Standards.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the company in
accordance with the sections 290 and 291 of the Independent Regulatory Board for Auditors’ Code
of Professional Conduct for Registered Auditors (Revised January 2018), parts 1 and 3 of the
Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors
(Revised November 2018) (together the IRBA Codes) and other independence requirements
applicable to performing audits of financial statements in South Africa. We have fulfilled our other
ethical responsibilities, as applicable, in accordance with the IRBA Codes and in accordance with
other ethical requirements applicable to performing audits in South Africa. The IRBA Codes are
consistent with the corresponding sections of the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants and the International Ethics Standards
Board for Accountants’ International Code of Ethics for Professional Accountants (including
International Independence Standards) respectively. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial statements of the current period. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
35
Annual Report for the year to 30 June 2019
INDEPENDENT AUDITOR’S REPORT
To the shareholders of Zeta Resources Limited
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Zeta Resources Limited (the “company”) set out on
pages 40 - 65, which comprise the statement of financial position as at 30 June 2019, and the
statement of comprehensive income, the statement of changes in equity and the statement of
cash flows for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies.
In our opinion, the financial statements present fairly, in all material respects, the financial
position of the company as at 30 June 2019, and its financial performance and cash flows for the
year then ended in accordance with International Financial Reporting Standards.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the company in
accordance with the sections 290 and 291 of the Independent Regulatory Board for Auditors’ Code
of Professional Conduct for Registered Auditors (Revised January 2018), parts 1 and 3 of the
Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors
(Revised November 2018) (together the IRBA Codes) and other independence requirements
applicable to performing audits of financial statements in South Africa. We have fulfilled our other
ethical responsibilities, as applicable, in accordance with the IRBA Codes and in accordance with
other ethical requirements applicable to performing audits in South Africa. The IRBA Codes are
consistent with the corresponding sections of the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants and the International Ethics Standards
Board for Accountants’ International Code of Ethics for Professional Accountants (including
International Independence Standards) respectively. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial statements of the current period. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
INDEPENDENT AUDITOR’S REPORT
(continued)
INDEPENDENT AUDITOR’S REPORT
To the shareholders of Zeta Resources Limited (Continued)
Valuation of unlisted investments
Refer to Note 3.6, 5 and 25.4 of the financial statements
The key audit matter
The Company’s core business of investment
holding is driven by the appreciation of value
in the investments held. The Company’s
determination of the valuation of unlisted
investments is considered a key audit matter
due to:
The lack of readily available objective
evidence such as quoted prices, which
increases estimation uncertainty and audit
effort for these unlisted investments.
The valuation methods applied by the
Company to determine the fair value of the
unlisted investments are subject to a high
degree of judgement and are complex,
especially for investments where there
were no additional share trades or new
equity issued during the year. Areas of
judgement include the future income
expected from operations that are still in
the exploration phase and other external
risk factors.
The unlisted investments operate in a
specialist niche market and are valued
using hybrid valuation methods.
A relatively small percentage change in the
valuations of individual investments, in
aggregate, could result in a significant
impact to the financial statements.
We considered the existing market conditions,
estimates regarding future performance of the
underlying investments within each
investment, and recently traded prices in
addressing this key audit matter.
How the matter was addressed in our audit
Our audit procedures included:
We critically assessed the valuation
methodology applied to value the investments
against accounting standards and industry
practise.
We used our own valuation and mineral
resource experts to assess the outcomes of
management’s independent expert in addition
to management’s own view and to evaluate
the reasonability of the scope of the work done
by management’s expert as well as the
sufficiency and appropriateness of the
assumptions used by management’s expert.
We also used our own valuation and mineral
resource experts to challenge and assess the
key inputs and assumptions used in the
valuation models, such as resource and area
multiples from comparable transactions as well
mineral reserve and resource estimates, and
to critically assess the valuation methodology
applied to value the investments against
accounting standards and industry practise.
We separately assessed and validated the
completeness, accuracy and relevance of the
information provided by management to its
expert.
We compared the assumptions used in the
Company’s valuation methods to previous
periods for consistency and to consider
management bias.
We assessed the Company’s disclosures
(including the assumptions used as inputs to
the valuations) using our understanding
obtained from our testing and against the
requirements of the accounting standards.
Based on the procedures described above, it
necessitated the restatement of the 30 June
2018 balances as set out in Note 28 of the
financial statements. Our revised procedures
and our audit evidence obtained supported
management’s assumptions and disclosures in
respect of the valuation of unlisted
investments.
36
Zeta Resources Limited INDEPENDENT AUDITOR’S REPORT
To the shareholders of Zeta Resources Limited (Continued)
Other Matter
The financial statements of the company for the year ended 30 June 2018 were audited by another
auditor who expressed an unmodified opinion on those statements on the 5th of September 2018.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the document titled “Zeta Resources Audited Financial Report for the year
ended 30 June 2019” which includes the Report of the Directors, which we obtained prior to the
date of this report, as well as the Corporate Governance Report and the Annual Report, which is
expected to be made available to us after that date. The other information does not include the
financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not and
will not express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Statements
The directors are responsible for the preparation and fair presentation of the financial statements
in accordance with International Financial Reporting Standards and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
37
Annual Report for the year to 30 June 2019
INDEPENDENT AUDITOR’S REPORT
(continued)
INDEPENDENT AUDITOR’S REPORT
To the shareholders of Zeta Resources Limited (Continued)
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the company’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December
2015, we report that Deloitte & Touche has been the auditor of Zeta Resources Limited for 1 year.
Deloitte & Touche
Registered Auditors
Per: P Farrand
Partner
4 December 2019
38
Zeta Resources Limited AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
In relation to our audit of the financial statements of Zeta Resources Limited for the financial year
ended 30 June 2019, 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 other
applicable code of professional conduct.
Deloitte & Touche
Registered Auditors
Per: P Farrand
Partner
4 December 2019
39
Annual Report for the year to 30 June 2019
STATEMENT OF FINANCIAL POSITION
at 30 June 2019
Notes
Non-current assets
4 Investment in subsidiaries
5 Investments
6 Loans to subsidiaries
7 Other loan
Current assets
8 Cash and cash equivalents
9 Trade and other receivables
Total assets
Non-current liabilities
10 Loan from subsidiary
11 Loan from parent
12 Other loans
Current Liabilities
13 Other loans
14 Trade and other payables
Total liabilities
Net assets
Equity
15 Share capital
15 Share premium
Treasury stock
Accumulated losses
Total equity
* Restated, refer to note 28
40
June 2019
US$
June 2018
US$
1,000,002
129,928,110
1,571,725
625,822
2,103,504
161,187,270
379,690
–
104,715
508,337
287,172
–
133,738,711
163,957,636
(2,508,840)
(45,793,293)
(9,714,019)
(1,250,000)
(473,417)
(59,739,569)
73,999,142
(5,235,527)
(30,151,190)
–
(4,000,000)
(1,674,024)
(41,060,741)
122,896,895
2,778
2,785
122,897,203
123,096,492
(11,096)
(48,889,743)
73,999,142
–
(202,382)
122,896,895
Zeta Resources Limited STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2019
Notes
Revenue
16 Investment (losses)/income
17 Other income/(losses)
Expenses
Directors fees
Interest expense
18 Management and consulting fees
19 Operating and administration expenses
(Loss)/profit before income tax
20 Income tax
(Loss)/profit for the year
Total comprehensive (loss)/income for the year
(Loss)/profit per share
June 2019
US$
June 2018
US$
(45,852,110)
1,839,929
34,621,956
(682,799)
(150,000)
(3,315,144)
(694,181)
(515,855)
(150,000)
(2,179,015)
(925,443)
(428,860)
(48,687,361)
30,255,839
–
(48,687,361)
(48,687,361)
–
30,255,839
30,255,839
21 Basic and diluted (loss)/profit per share
(0.17)
0.15
* Restated, refer to note 28
41
Annual Report for the year to 30 June 2019 STATEMENT OF CASH FLOWS
for the year ended 30 June 2019
Notes
Cash flows from operating activities
22 Cash (utilised)/generated by operations
Interest received
Interest expense
Net cash flows from operating activities
Cash flows from investing activities
Investments purchased
Investments sold
(Increase)/decrease in loan to subsidiaries
Increase in other loans
June 2019
US$
June 2018
US$
(1,907,989)
43,036
(3,315,144)
(5,180,097)
235,803
102
(2,179,015)
(1,943,110)
(24,564,630)
(41,223,177)
11,836,201
(150,332)
(625,822)
331,047
31,052,236
–
Net cash flows from investing activities
(13,504,583)
(9,839,894)
Cash flows from financing activities
Proceeds from issue of shares
15 Purchase of treasury shares
Increase in loan from parent
Increase in other loans
13 (Decrease)/increase in other loans – current
Decrease in loan from subsidiaries
Effect of exchange rate fluctuations on financing activities
–
(210,392)
16,322,773
7,719,323
(2,750,000)
(2,504,765)
(982,396)
66,368
–
6,857,240
–
4,000,000
(179,245)
1,100,671
Net cash flows from financing activities
17,594,543
11,845,034
Net movement in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
8 Cash and cash equivalents at the end of the year
(1,090,137)
287,172
907,680
104,715
62,030
15,828
209,314
287,172
42
Zeta Resources Limited STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2019
Notes
Share
capital
US$
Share
premium
US$
Options
US$
Treasury
Shares
US$
Accumulated
(losses)/profits
US$
Total
US$
Balance at 1 July 2017
900
66,233,041
17,265,320
15 Issue of shares
15 Options exercised
1,020
39,532,628
–
865
17,330,823
(17,265,320)
Total comprehensive Income for the year
–
–
Balance at 30 June 2018
2,785
123,096,492
Purchase of treasury shares
15 Cancellation of treasury shares
Total comprehensive loss for the year
–
(7)
–
–
(199,289)
–
Balance at 30 June 2019
2,778
122,897,203
–
–
–
–
–
–
–
–
–
–
–
(30,458,221)
53,041,040
–
–
39,533,648
66,368
30,255,839
30,255,839
(202,382)
122,896,895
(11,096)
–
–
–
–
(11,096)
(199,296)
(48,687,361)
(48,687,361)
(11,096)
(48,889,743)
73,999,142
* Restated, refer to note 28
43
Annual Report for the year to 30 June 2019 NOTES TO THE FINANCIAL STATEMENTS
The key assumptions concerning the future and other key
sources of estimation uncertainty that have a significant risk
of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year relate to
the valuation of unquoted investments, details of which are
set out in note 25 and the classification of the subsidiaries
as investment entities. Details of the subsidiaries are set out
in note 4. Subsidiaries that carry on business as investment
companies are designated as being at fair value through
profit and loss on initial recognition.
2.
ADOPTION OF NEW AND REVISED STANDARDS
2.1 Standards and interpretations adopted during
the year
IFRS 9 Financial instruments
IFRS 9 Financial Instruments sets out requirements for
recognising and measuring financial assets, financial liabilities
and some contracts to buy or sell non-financial items. This
standard replaces IAS 39 Financial Instruments: Recognition
and Measurement.
IFRS 9 contains a new classification and measurement
approach for financial assets that reflects the business
model in which assets are managed and their cash flow
characteristics. IFRS 9 contains three principal classification
categories for financial assets: measured at amortised cost,
fair value through other comprehensive income and fair value
through profit and loss (“FVPL”). The standard eliminates the
IAS 39 categories of held to maturity, loans and receivables
and available for sale.
The classification and measurement requirements of IFRS
9 have been adopted retrospectively as of the date of
initial application on July 1, 2018. However, the company
has chosen to take advantage of the option not to restate
comparatives. Therefore, the June 30, 2018 figures are
presented and measured under IAS 39.
1.
BASIS OF PREPARATION
1.1 Corporate information
Zeta Resources Limited (“Zeta Resources” or “the Company”)
is an investment company incorporated on 13 August 2012,
listed on the Australian Securities Exchange and domiciled in
Bermuda. The financial statements of the company as at and
for the year ended 30 June 2019 comprise the company only.
1.2 Basis of preparation
The financial statements for the year ended 30 June 2019
have been prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the
International Accounting Standard Board (IASB). The
company carries on the business of an investment holding
company, in accordance with IFRS 10. 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 and
they will be recognised at fair value through profit and loss.
The financial statements were authorised for issue by the
board of directors on 3 December 2019.
1.3 Basis of measurement
The financial statements provide information about the
financial position, results of operations and changes in
financial position of the company. They have been prepared
on the historic cost basis except for those financial
instruments at fair value through profit or loss, which are
measured at fair value. The financial statements are prepared
on a going concern basis.
1.4 Functional and presentation currency
The company’s functional and presentation 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
expenses. 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.
44
Zeta Resources Limited
IFRS 9 Financial instruments
The following table shows the original measurement categories in accordance with IAS 39 and the new measurement categories
under IFRS 9 for financial assets and financial liabilities as at 1 July 2018.
Financial assets
IAS 39
classification
IAS 39
measurement
IFRS 9
classification
Investments in subsidiaries
Designated at FVPL
2,103,504
Investments
Designated at FVPL
161,187,270
FVPL
FVPL
Loans to subsidiaries
Designated at FVPL
379,690
Amortised cost
Cash and cash equivalents
Amortised cost
287,172
Amortised cost
IFRS 9
measurement
2,103,504
161,187,270
379,690
287,172
Financial liabilities
IAS 39
classification
IAS 39
measurement
IFRS 9
classification
IFRS 9
measurement
Loans from subsidiaries
Amortised cost
5,235,527
Amortised cost
5,235,527
Trade and other payables
Amortised cost
1,674,024
Amortised cost
Loan from parent
Amortised cost
30,151,190
Amortised cost
Loan from third party
Amortised cost
4,000,000
Amortised cost
1,674,024
30,151,190
4,000,000
The company neither revoked nor made any new
designations on the date of initial application. IFRS 9 has not
resulted in changes in the carrying amount of the company’s
financial instruments due to changes in measurement
categories. All financial assets that were classified as FVPL
under IAS 39 are still classified as FVPL under IFRS 9 except
for loans to subsidiaries which are classified and measured
at amortised cost under IFRS 9. All financial assets that were
classified and measured at amortised cost continue to be.
Zeta Resources Limited does not believe that the new
classification requirements have had a material impact on its
accounting for loans and investments in equity securities that
are managed on a fair value basis. At 30 June 2018 and at
30 June 2019, Zeta Resources Limited had no equity
investments classified as available-for-sale or at fair value
through other comprehensive income. Therefore, all gains
and losses are recognised in profit and loss.
IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a
forward-looking ‘expected credit loss’ (“ECL”) model. This
requires considerable judgement about how changes in
economic factors affect ECLs, which are determined on a
probability-weighted basis. In Zeta Resources Limited the
new impairment model is only applicable to financial assets
measured at amortised cost. As Zeta Resources Limited’s
impairment considerations have been in line with IFRS 9,
Zeta Resources Limited noted no additional impairments
necessary under IFRS 9.
IFRS 15 Revenue
IFRS 15 had no significant impact on the financial statements.
Recognition of interest and dividends are now based on
IFRS 9 guidance. The company does not have contracts with
customers for revenue.
2.2 New standards, amendments and interpretations
effective for annual periods beginning after 1 July
2019 that have not been adopted
At the date of authorisation of these financial statements, the
following standards affecting the company were in issue, but
not yet effective:
Amendment to the conceptual framework –
effective 1 January 2020; and
Definition of material (Amendments to IAS 1 and IAS 8) –
effective 1 January 2020
The company has chosen not to early adopt the new and
revised standards affecting presentation and disclosure which
have been published and are mandatory for the company’s
accounting records beginning on the date mentioned above.
Based on initial assessment, these standards are not
expected to have a material impact on the company.
45
Annual Report for the year to 30 June 2019
NOTES TO THE FINANCIAL STATEMENTS
(continued)
3.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies detailed below have been consistently
applied by the company.
3.1
Investment income
Dividend income is recognised when the company’s right
to receive payment is established and is presented gross of
withholding taxes.
Gains or losses on the sale of investments are recorded on
the trade date.
Investment income also comprises of unrealised gains on
changes in the fair value of financial assets at fair value
through profit or loss.
Interest income is recognised using the effective interest rate
method.
3.2 Borrowing costs
Borrowing costs are recognised as an expense when incurred.
3.3
Income tax
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted
or substantively enacted by the balance sheet date.
Diluted EPS is calculated as the net resulting earnings
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
Recognition and initial measurement
Trade receivables and debt securities issued are initially
recognised when they are originated. All other financial assets
and financial liabilities are initially recognised when the entity
becomes a party to the contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without
a significant financing component) or financial liability is
initially measured at fair value plus, for an item not at fair
value through profit and loss (FVTPL), transaction costs that
are directly attributable to its acquisition or issue. A trade
receivable without a significant financing component is initially
measured at the transaction price.
The company has elected to be tax exempt in terms of local
Bermudian legislation.
Classification and subsequent measurement –
Policy effective from 1 July 2018
3.4 Foreign currency
Foreign currency transactions and balances
Transactions in foreign currencies are translated into the
respective functional currency 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 translated to the functional currency at the prevalent
exchange rate at that date. The foreign currency gain or loss on
monetary items is the difference between the amortised cost in
the functional currency at the beginning of the period, adjusted
for effective interest and principal payments during the period,
and the amortised cost in foreign currency translated at the
prevalent exchange rate at the end of the period. The foreign
currency gains or losses are recognised as part of other
income/(losses) in the Statement of Comprehensive income.
Foreign currency differences arising on retranslation are
recognised in other comprehensive income.
3.5 Earnings per share (“EPS”)
Basic EPS is calculated as the net resulting earnings
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.
Financial assets
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as at FVTPL:
•
•
it is held within a business model whose objective is to
hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on
the principal amount outstanding
All financial assets not classified as measured at amortised
cost as described above are measured at FVTPL. On initial
recognition, the company may irrevocably designate a financial
asset that otherwise meets the requirements to be measured at
amortised cost as at FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would otherwise arise.
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net
gains and losses, including any interest or dividend income,
are recognised in profit or loss.
Financial assets at amortised cost
These assets are subsequently measured at amortised cost
using the effective interest method. The amortised cost
is reduced by impairment losses. Interest income, foreign
exchange gains and losses and impairment are recognised in
profit or loss. Any gain or loss on derecognition is recognised
in profit or loss.
46
Zeta Resources Limited 3.6 Financial instruments (continued)
3.7
Impairment of assets
Financial assets are not reclassified subsequent to their initial
recognition unless the entity changes its business model for
managing financial assets, in which case all affected financial
assets are reclassified on the first day of the first reporting
period following the change in the business model.
Financial liabilities
The company has adopted the following classifications for
financial liabilities:
Financial liabilities at amortised cost and subsequent to initial
recognition, financial liabilities are measured at amortised
cost using the effective interest method.
Classification and subsequent measurement –
Policy effective before 1 July 2018
The company classifies its financial assets and liabilities at
initial recognition into the following categories in accordance
with IAS 39.
Financial assets and financial liabilities at FVPL
The company classifies its investments in debt and equity
securities as financial assets or financial liabilities at FVPL.
These financial assets and financial liabilities are designated
at FVPL at inception.
Financial assets and financial liabilities designated at FVPL
at inception are those managed, and their performance
evaluated on a fair value basis in accordance with the
company’s investment strategy.
Financial assets and financial liabilities at amortised cost
Financial assets at amortised cost are classified as other
financial assets. This includes cash and cash equivalents,
due from brokers, interest receivable, dividend receivable
and other assets. Financial liabilities at amortised cost are
classified as other financial liabilities. This includes due to
broker, interest payable, dividends payable and accrued
expenses and other liabilities.
Derecognition
The company derecognises a financial asset when the
contractual rights to the cash flows from the financial
asset expire, or when they transfer the financial asset in a
transaction in which substantially all the risks and rewards of
ownership of the financial asset are transferred or in which
the company neither transfers nor retains substantially all the
risks and rewards of ownership and does not retain control of
the financial asset.
The company derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire.
Offsetting
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and
only when, the company currently have a legally enforceable
right to set off the recognised amounts and they intend either
to settle on a net basis or to realise the asset and settle the
liability simultaneously.
The company recognise loss allowances for ECLs on financial
assets measured at amortised cost.
The company measure loss allowances at an amount equal to
lifetime ECLs, except for the following, which are measured at
12-month ECLs:
• debt securities that are determined to have low credit risk
at the reporting date; and
• other debt securities and bank balances for which credit
risk (i.e. the risk of default occurring over the expected life
of the financial instrument) has not increased significantly
since initial recognition.
Loss allowances for trade receivables are always measured at
an amount equal to lifetime ECLs.
Lifetime ECLs are the ECLs that result from all possible default
events over the expected life of a financial instrument.
12-month ECLs are the portion of ECLs that result from
default events that are possible within the 12 months after
the reporting date (or a shorter period if the expected life of
the instrument is less than 12 months).
The maximum period considered when estimating ECLs is
the maximum contractual period over which the company is
exposed to credit risk.
Presentation
ECLs are a probability-weighted estimate of credit losses.
Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to
the entity in accordance with the contract and the cash flows
that the company expect to receive).
Measurement of ECLs
Loss allowances for financial assets measured at amortised cost
are deducted from the gross carrying amount of the assets.
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.
47
Annual Report for the year to 30 June 2019 NOTES TO THE FINANCIAL STATEMENTS
(continued)
4.
INVESTMENT IN SUBSIDIARIES
At fair value
June 2019
US$
June 2018
US$
Investment in Kumarina Resources Pty Limited ("Kumarina")
1,000,000
2,103,498
Investment in Zeta Energy Pte. Ltd. ("Zeta Energy")
Investment in Axelrock Limited ("Axelrock")
Investment in Pan Pacific Petroleum Pty Limited ("PPP")
Investment in Pan Pacific Petroleum Vietnam Pty Limited ("PPP Vietnam")
Investment in Pan Pacific Petroleum JPDA Pty Limited ("PPP JPDA")
Investment in Zeta Investments Limited ("Zeta Investments")
1
–
–
–
–
1
1
1
1
1
1
1
1,000,002
2,103,504
* Restated, refer to note 28
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. Kumarina is valued using the multiples of exploration
expenditure method and the area multiples method to value Kumarina’s two main projects, with further consideration to the
remaining assets and liabilities held by Kumarina. The company is currently deemed to have a value of US$1,000,000.
The remaining investments in subsidiaries are fair valued by the directors at a nominal value due to the fact that they hold no
significant assets, nor do they have any significant value. The company had the following subsidiaries as at 30 June 2019:
30 June 2019
Kumarina incorporated in Australia
Zeta Investments incorporated in Bermuda
Zeta Energy incorporated in Singapore
30 June 2018
PPP incorporated in Australia
Kumarina incorporated in Australia
Zeta Investments incorporated in Bermuda
Axelrock incorporated in Bermuda
PPP Vietnam incorporated in Australia
PPP JPDA incorporated in Australia
Zeta Energy incorporated in Singapore
5.
INVESTMENTS
Financial assets at fair value through profit or loss
Equity securities at fair value
Ordinary shares – listed
Ordinary shares, subscription and other rights – unlisted
48
Number of
ordinary shares
26,245,210
1,000
1
Number of
ordinary shares
581,942,846
26,245,210
1,000
100
2
2
1
June 2019
US$
129,928,110
89,521,947
40,406,163
129,928,110
Percentage of
ordinary shares held
100%
100%
100%
Percentage of
ordinary shares held
100%
100%
100%
100%
100%
100%
100%
June 2018
US$
161,187,270
135,475,520
25,711,750
161,187,270
Zeta Resources Limited Equity securities at cost
Ordinary shares – listed
Ordinary shares, subscription and other rights – unlisted
June 2019
US$
109,256,914
44,173,811
153,430,725
June 2018
US$
101,986,368
33,830,307
135,816,675
During the reporting period the company completed a total of 271 transactions (2018: 315 transactions) in securities and paid a
total of US$56,830 (2018: US$52,269) in brokerage on those transactions.
6.
LOANS TO SUBSIDIARIES
Loan to Zeta Energy
Loan to Kumarina
June 2019
US$
1,076,072
495,653
1,571,725
June 2018
US$
27,010
352,680
379,690
The loan to Zeta Energy is denominated in Australian dollars to the value of A$2,809,348 (2018: A$(190,652)), British pounds to
the value of UK£11,100 (2018: UK£11,100), New Zealand dollars to the value of NZ$6.16 million (2018: NZ$6.2 million), South
African rands to the value of R4,000 (2018: R4,000), Singapore dollars to the value of SG$28,162 (2018: SG$5,100) and United
States dollars to the value of US$(147,581) (2018: US$(149,788)). There are no fixed repayment terms except that no repayment
is due before 30 June 2020 and no interest is charged. During the year ended 30 June 2019, the loan to Zeta Energy, which
was utilised for the purchase of listed investments, was impaired, through profit and loss, to the fair value of Zeta Energy as
determined by the directors. The loan to Kumarina, used for working capital is denominated in Australian dollars and is interest
free. There are no fixed repayment terms except that no repayment is due before 30 June 2020.
7. OTHER LOAN
Loan to Bligh Resources Limited
June 2019
US$
625,822
June 2018
US$
–
The loan to Bligh Resources Limited is denominated in Australian dollars and interest of 8% is capitalised monthly. There are no
fixed repayment terms except that no repayment is due before 30 June 2020.
8.
CASH AND CASH EQUIVALENTS
Cash balance comprises:
Cash at bank
June 2019
US$
June 2018
US$
104,715
287,172
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.
49
Annual Report for the year to 30 June 2019 NOTES TO THE FINANCIAL STATEMENTS
(continued)
9.
TRADE AND OTHER RECEIVABLES
Owing from Zeta Investments Pty Limited
Other receivables
June 2019
US$
476,088
32,249
508,337
June 2018
US$
–
–
–
The amount owing from Zeta Investments Pty Limited is denominated in Australian dollars and is a short-term balance in order to
purchase shares.
10. LOAN FROM SUBSIDIARY
Loan from Zeta Energy
June 2019
US$
2,508,840
June 2018
US$
5,235,527
The loan from Zeta Energy is denominated in Australian dollars to the value of A$2.63 million (30 June 2018: A$6.235 million) and
New Zealand dollars to the value of NZ$983,000 (30 June 2018: NZ$924,000) and currently attracts interest at rates between
4.35% and 6.85% per annum (30 June 2018: 4.35% and 6.85%) on the Australian dollar loan and at 6.00% per annum (30 June
2018: 6.00%) on the New Zealand dollar loan. There are no fixed repayment terms except that no repayment is due before
30 June 2020. Zeta Energy has in turn borrowed these funds on the same interest and repayment terms. In order to secure the
loans Zeta Resources has pledged certain of its investments. The shares pledged are Resolute Mining Limited (7,650,000) and
Panoramic Resources Limited (5,384,615).
11. LOAN FROM PARENT
Loan from UIL Limited (“UIL”)
June 2019
US$
45,793,293
June 2018
US$
30,151,190
The loan is denominated in Australian dollars to the value of A$40.103 million (30 June 2018: A$18.615 million) and in Canadian
dollars to the value of CA$23.146 million (30 June 2018: CA$21.542 million), and currently attracts interest at 7.5% per annum
(30 June 2018: 7.5%) on the Australian dollar loan and 7.25% (30 June 2018: 7.25%) on the Canadian dollar loan. There are no
repayment terms and no repayment is due before 30 June 2020.
12. OTHER LOANS
Loan from ICM Limited
Loan from PPP
Loan from Bermuda Commercial Bank Limited
June 2019
US$
3,983,509
1,980,510
3,750,000
9,714,019
June 2018
US$
–
–
–
–
The ICM Loan is denominated in Australian dollars to the value of A$5.67 million and attracts interest at 7.5% per annum. The
PPP Loan is denominated in Australian dollars to the value of A$2.85 million and is interest free. For both of the ICM Limited and
PPP loans there are no fixed repayment terms except that no repayment is due before 30 June 2020. The Bermuda Commercial
Bank loan is denominated in United States dollars and currently attracts interest at Bermuda Commercial Bank’s commercial base
rate + 1.25% per annum. Repayments of US$1.25million are scheduled on 30 September 2019 and 30 September 2020, with the
remaining balance payable on 30 September 2021.
50
Zeta Resources Limited 13. OTHER LOANS - CURRENT
Loan from Bermuda Commercial Bank Limited
June 2019
US$
1,250,000
The above US$1,250,000 represents the short-term portion of the loan owing to Bermuda Commercial Bank.
14. TRADE AND OTHER PAYABLES
Other liabilities
Rehabilitation provision
Amount owed to brokers
Accruals
June 2019
US$
–
–
178,761
294,656
473,417
June 2018
US$
4,000,000
June 2018
US$
459,890
900,000
–
314,134
1,674,024
The accruals are for audit, management, directors and administration fees payable.
15. 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
Issued at incorporation as US$1 par shares
Shares split into 10,000,000 shares of US$0.00001 each
Issued in consideration for purchase of investments from UIL
Issued in consideration for purchase of 100% of Kumarina Resources
Limited
Issued under initial public offering
Issued under public rights issue dated 10 February 2014
Following shareholder approval, issued under ASX listing rule 10.11
dated 7 December 2015
Issued under a scheme of arrangement pursuant to acquiring all the
ordinary share capital of Pan Pacific Petroleum NL
Issued pursuant to an exercise of options on 10 November 2017
Issued in consideration for purchase of investments from Somers Isles
Private Trust Company Limited
Number of
shares
Share
capital
Share
premium
100
9,999,900
22,835,042
17,775,514
4,000
42,616,164
6,769,280
11,914,689
86,461,440
90,144,895
–
–
–
228
178
–
426
68
119
865
901
–
–
–
32,221,936
13,406,337
3,795
19,249,296
1,351,677
3,467,556
17,330,823
36,065,072
Balance as at 30 June 2018
288,521,024
2,785
123,096,492
Share cancellation as a result of share buy-back 7 November 2018
Share cancellation as a result of share buy-back 5 December 2018
Share cancellation as a result of share buy-back 5 March 2019
Share cancellation as a result of share buy-back 4 April 2019
Share cancellation as a result of share buy-back 7 May 2019
Share cancellation as a result of share buy-back 7 June 2019
(322,446)
(12,320)
(202,202)
(112,727)
(58,253)
(50,000)
(3)
–
(2)
(1)
(1)
–
(93,785)
(3,201)
(50,817)
(26,374)
(13,732)
(11,380)
Balance as at 30 June 2019
287,763,076
2,778
122,897,203
51
Annual Report for the year to 30 June 2019 NOTES TO THE FINANCIAL STATEMENTS
(continued)
16.
INVESTMENT (LOSS)/INCOME
Interest income
Dividend income
Realised gains
Fair value (loss)/profit on revaluation of investments
(Impairment)/recovery of prior impairments of loan to Zeta Energy
June 2019
US$
43,036
228,742
4,885,621
(49,991,372)
(1,018,137)
(45,852,110)
June 2018
US$
102
318,616
96,590
21,331,678
12,874,970
34,621,956
* Restated, refer to note 28
During the period ended 30 June 2019, the loan granted to Zeta Energy was impaired to the fair value of Zeta Energy as
determined by the directors.
17. OTHER INCOME/(LOSSES)
Foreign exchange gains
Other income/(losses)
18. MANAGEMENT AND CONSULTING FEES
Management and consulting fees
June 2019
US$
907,680
932,249
1,839,929
June 2019
US$
694,181
June 2018
US$
209,314
(892,113)
(682,799)
June 2018
US$
925,443
The company entered into an investment management agreement with ICM Limited on 3 June 2018. Management fees are
payable at a rate of 0.5% per annum, of the net tangible assets managed on calculation date (last day of quarter), payable
quarterly in arrears.
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 paid in
the current period (2018: US$ Nil).
Either party may terminate the agreement with six months’ notice.
19. OPERATING AND ADMINISTRATION EXPENSES
Operating and administration expenses consist of:
Accounting fees
Audit fees
Australian Securities Exchange listing fees and regulatory costs
Insurance costs
Other expenses
52
June 2019
US$
June 2018
US$
162,940
21,829
118,601
13,781
198,704
515,855
139,262
22,040
86,656
13,444
167,458
428,860
Zeta Resources Limited 20.
INCOME TAX
The company has elected to be tax exempt in terms of local Bermudian legislation.
21. EARNINGS PER SHARE
Basic and diluted (loss)/profit per share
June 2019
US$
(0.17)
June 2018
US$
0.15
(Loss)/profit used in calculation of basic and diluted earnings per share
(48,687,361)
30,255,839
Weighted average number of ordinary shares outstanding during the year used
in calculation of basic and diluted earnings per share
288,202,064
201,443,782
* Restated, refer to note 28
22. NOTES TO THE CASH FLOW STATEMENT
Cash (utilised)/generated by operations
(Loss)/profit for the year
Adjustments for:
Realised gains on investments
Fair value loss/(profit) on revaluation of investments
Impairment/(recovery) of prior impairments of loan to Zeta Energy
Rehabilitation provision
Foreign exchange losses
Interest income
Interest expense
Operating loss before working capital changes
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
* Restated, refer to note 28
23. AUDITOR REMUNERATION
Amounts received or due and receivable by the auditors for audit of
financial statements
June 2019
US$
June 2018
US$
(48,687,361)
30,255,839
(4,885,621)
49,991,372
1,018,137
–
(907,680)
(43,036)
3,315,144
(199,045)
(508,337)
(1,200,607)
(1,907,989)
(96,590)
(21,331,678)
(12,874,970)
900,000
(209,314)
(102)
2,179,015
(1,177,800)
–
1,413,603
235,803
June 2019
US$
21,829
June 2018
US$
22,040
24. GOING CONCERN
The financial statements have been prepared on a going concern basis. The majority of the Company’s assets consist of equity
shares in listed companies and in most circumstances are realisable within a short timescale. The use of the going concern basis of
accounting is appropriate because there are no material uncertainties related to events or conditions that may cast significant doubt
about the ability of the Company to continue as a going concern. After making enquiries, the directors have a reasonable expectation
that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors
continue to adopt the going concern basis in preparing the accounts.
53
Annual Report for the year to 30 June 2019 NOTES TO THE FINANCIAL STATEMENTS
(continued)
25. 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
IFRS 9 contains three principal classification and measurement categories for financial assets: at amortised cost, fair value through
other comprehensive income, and fair value through profit and loss. The analysis of assets into their categories as defined in
IFRS 9 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 IFRS 9, are reflected in the non-financial assets and liabilities category.
The classification and measurement requirements of IFRS 9 have been adopted retrospectively as of the date of initial application
on July 1, 2018. However, the Company has chosen to take advantage of the option not to restate comparatives. Therefore, the
June 30, 2018 figures are presented and measured under IAS 39.
The classification and measurement categories under IAS 39 were financial assets and liabilities at FVTPL and financial assets and
liabilities at amortised cost.
The table below sets out the Company classification of each class of financial assets and liabilities. All assets and liabilities
approximate their fair values:
Designated at fair
value through
profit and loss
US$
Loans and
receivables at
amortised cost
US$
1,000,002
129,928,110
–
–
–
–
–
–
1,571,725
625,822
508,337
104,715
Total
carrying value
US$
1,000,002
129,928,110
1,571,725
625,822
508,337
104,715
130,928,112
2,810,599
133,738,711
–
–
–
–
–
2,508,840
473,417
45,793,293
10,964,019
59,739,569
2,508,840
473417
45,793,293
10,964,019
59,739,569
30 June 2019
Assets
Investments in subsidiaries
Investments
Loans to subsidiaries
Other loan
Trade and other receivables
Cash and cash equivalents
Liabilities
Loan from subsidiary
Trade and other payables
Loan from parent
Other loans
54
Zeta Resources Limited Designated at fair
value through
profit and loss
US$
Loans and
receivables at
amortised cost
US$
2,103,504
161,187,270
379,690
–
163,670,464
–
–
–
–
–
–
–
–
287,172
287,172
5,235,527
1,674,024
30,151,190
4,000,000
41,060,741
Total
carrying value
US$
2,103,504
161,187,270
379,690
287,172
163,957,636
5,235,527
1,674,024
30,151,190
4,000,000
41,060,741
30 June 2018
Assets
Investments in subsidiaries
Investments
Loans to subsidiaries
Cash and cash equivalents
Liabilities
Loan from subsidiary
Trade and other payables
Loan from parent
Other loans
* Restated, refer to note 28
25.1 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, interest rates and by other financial issues, including the market perception
of future risks. The board of directors 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 of directors 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 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 of directors 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, Canadian Dollar and New Zealand dollar.
The exchange rates applying against the United States dollar at 30 June 2019 and the average rates for the year were as follows:
AUD – Australian dollar
CAD – Canadian dollar
NZD – New Zealand dollar
30 June 2019
0.7011
0.7637
0.6709
Average
0.7153
0.7554
0.6707
55
Annual Report for the year to 30 June 2019 NOTES TO THE FINANCIAL STATEMENTS
(continued)
25. FINANCIAL RISK MANAGEMENT (continued)
The company’s monetary assets and liabilities at 30 June 2019 (shown at fair value), by currency based on the country of primary
operations, are shown below:
30 June 2019
Cash and cash equivalents
Loans to subsidiaries
Loan from subsidiary
Loan from parent
Other loan
Other loans
Trade and other payables
Trade and other receivables
CAD
–
–
–
NZD
64
6,163,507
(982,928)
USD
5,334
AUD
141,692
(147,581)
3,516,348
–
–
–
(2,637,946)
892,673
(40,103,855)
(23,146,409)
–
–
(5,000,000)
(8,494,432)
(242,528)
–
(56,158)
725,092
(234,060)
–
–
–
–
–
–
Net monetary (liabilities)/assets
(5,384,775)
(46,016,586)
(23,380,469)
5,180,643
30 June 2018
Cash and cash equivalents
Loans to subsidiaries
Loan from subsidiary
Loan from parent
Other loans
Trade and other payables
USD
192
–
–
–
AUD
107,291
467,000
(6,235,050)
CAD
272,941
–
–
(18,615,260)
(21,541,670)
(4,000,000)
–
(1,194,766)
(630,497)
–
–
NZD
21
–
923,984
–
–
–
Net monetary (liabilities)/assets
(5,194,574)
(24,906,516)
(21,268,729)
924,005
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 income
after tax and on net asset value (NAV):
Strengthening of the United States dollar
(Decrease)/Increase in total comprehensive income
for the year ended 30 June 2019
(Decrease)/Increase in total comprehensive income
for the year ended 30 June 2018
Weakening of the United States dollar
Increase/(Decrease) in total comprehensive income
for the year ended 30 June 2019
Increase/(Decrease) in total comprehensive income
for the year ended 30 June 2018
AUD
CAD
NZD
Total
(4,362,044)
428,160
(349,609)
(4,283,493)
(10,663,959)
77,871
62,549
(10,523,539)
4,362,044
(428,160)
349,609
4,283,493
10,663,959
(77,871)
(62,549)
10,523,539
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.
56
Zeta Resources Limited Interest rate exposure
The exposure of the financial assets and liabilities to interest rate risks at 30 June 2019 and at 30 June 2018 is shown below:
30 June 2019
Exposure to floating rates:
Cash
Other loans
Loan from subsidiary
Exposure to fixed rates:
Loan from parent
Other loans
Other loan
30 June 2018
Exposure to floating rates:
Cash
Loan from third party
Exposure to fixed rates:
Loan from subsidiary
Loan from parent
Within
one year
US$
104,715
(1,250,000)
–
(1,145,285)
–
–
–
–
Within
one year
US$
287,172
(4,000,000)
(3,712,828)
Greater than
one year
US$
–
(3,750,000)
(2,508,840)
(6,258,840)
(45,793,293)
(3,983,509)
625,822
Total
US$
104,715
(5,000,000)
(2,508,840)
(7,404,125)
(45,793,293)
(3,983,509)
625,822
(49,150,980)
(49,150,980)
Greater than
one year
US$
–
–
–
–
–
–
(5,235,527)
(30,151,190)
(35,386,717)
Total
US$
287,172
(4,000,000)
(3,712,828)
(5,235,527)
(30,151,190)
(35,386,717)
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. The majority of borrowings are at a fixed rate and not sensitive to interest rate risk.
Other market risk exposures
The portfolio of listed investments valued at US$89,521,947 at 30 June 2019 (30 June 2018: US$135,475,520) 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 27.
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$8,577.661. A 10% appreciation in the market price would have the opposite effect. See note 25.4 for unlisted investment
sensitivity analyses.
57
Annual Report for the year to 30 June 2019 NOTES TO THE FINANCIAL STATEMENTS
(continued)
25. FINANCIAL RISK MANAGEMENT (continued)
25.2 Liquidity risk exposure
Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The Company’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meets its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The
Investment Manager reviews liquidity at the time of making each investment decision. The contractual maturities of the financial
liabilities, based on the earliest date on which payment can be required, were as follows:
30 June 2019
Loan from subsidiary
Trade and other payables
Loans from parent
Other loans
30 June 2018
Loan from subsidiary
Trade and other payables
Loans from parent
Other loans
Twelve months
or less
US$
–
473,417
–
1,250,000
1,723,417
Twelve months
or less
US$
–
1,674,024
More than
a year
US$
2,508,840
–
45,793,293
9,714,019
58,016,152
More than
a year
US$
5,235,527
–
–
30,151,190
4,000,000
5,674,024
–
35,386,717
Total
US$
2,508,840
473,417
45,793,293
10,964,019
59,739,569
Total
US$
5,235,527
1,674,024
30,151,190
4,000,000
41,060,741
25.3 Credit risk and counterparty exposure
The Company is exposed to potential failure by counterparties to deliver securities for which the Company has paid, or to pay for
securities which the Company has delivered. To mitigate against credit and counterparty risk broker counterparties are selected based
on a combination of criteria, including credit rating, balance sheet strength and membership of a relevant regulatory body.
Cash and deposits are held with reputable banks. The Company has an on-going contract with its Custodians for the provision of
custody services. The contracts are reviewed regularly. Details of securities held in custody on behalf of the Company are received and
reconciled monthly.
Maximum exposure to credit risk
The Company has loan assets totalling US$2,197,547 (2018: US$379,690) and bank balances totalling US$104,715 (2018:
US$287,172) that are 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-).
25.4 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.
58
Zeta Resources Limited 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 2 financial instruments
Bligh Resources Limited
On 14 June 2019 Saracen Mineral Holdings (ASX:SAR) announced it had made an off-market takeover offer to acquire all the shares
in Bligh Resources Limited. The takeover offer was subject to a number of conditions including regulatory approvals. The valuation
as at 30 June 2019 has been set using the 30 June 2019 SAR price (A$3.68) at A$0.1358 per share but subject to an expected
withholding of capital gains tax on sale proceeds. The offer became unconditional on 31 July 2019.
At year end the fair value of the investment was US$21,143,024.
Level 3 financial instruments
Valuation methodology
The board of directors have satisfied themselves as to the methodology used, the discount rates and key assumptions applied in
the valuation of level 3 assets. 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 in subsidiaries.
(a) Unlisted companies
Seacrest L.P. (“Seacrest”) Bermuda incorporated
Valuation inputs: Seacrest produces quarterly reports in accordance with IFRS 9. The valuation is based on the latest
management report available at 30 June 2019 (quarter end 30 June 2019), which shows a valuation of US$0.27. Where
required, the last quarter’s results are adjusted for drawdowns, distributions, and significant events impacting the portfolio
companies since the quarter end.
Valuation methodology: The Seacrest valuation is prepared by the General Partners with reference to each individual licence.
The internal valuation is tested against external valuations by Stockdale and available market data. If the internal valuation falls
within the lower half of the independent valuation range, then it is accepted as fair market value, otherwise it is reviewed for
calibration. Zeta Resources has used a fair value valuation of Seacrest of US$0.27 per share based on the valuation described
above. At year end the fair value of the investment was US$4,639,250.
Sensitivities: Given Seacrest 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.
Margosa Graphite Limited (“Margosa”) – Australia incorporated
Valuation inputs: The unlisted investment comprises an equity interest in Margosa, a mineral exploration and development
company focused on high grade graphite vein opportunities in Sri Lanka with rights to a package of highly prospective tenements.
Margosa is an early stage exploration company with drilling commenced on positive geophysical targets at the end of the period.
Valuation methodology: Based on Margosa being an early stage exploration company, the directors have chosen to use the
latest information provided by Margosa regarding current equity capital raisings as the most appropriate valuation method for
Zeta Resources’ holding of A$0.20 per share. At year end the fair value of the investment was US$2,804,262.
59
Annual Report for the year to 30 June 2019
NOTES TO THE FINANCIAL STATEMENTS
(continued)
25. FINANCIAL RISK MANAGEMENT (continued)
25.4 Fair values of financial assets and liabilities (continued)
Sensitivities: Given Margosa is an exploration company its risks are significant in both directions dependant on the grade of the
graphite veins to be brought into operation. Should substantial premium vein graphite be discovered and successfully brought
into operation, the valuation uplifts are significant.
Alliance Mining Commodities Limited (“AMC”) – Australia incorporated
Valuation inputs: The unlisted investment comprises an equity interest in a privately-owned company that has been granted a
mining concession for the development of the Koumbia Bauxite Project in the Republic of Guinea. The simple, low cost, long life
development will initially produce 5.5Mwtpa as a standalone project. Due to the size of the current mineral resource base there
is strong potential to expand the operation significantly during the early years to a capacity well in excess of the initial targeted
production.
Valuation methodology: AMC is a private company in the process of raising funds for the development of its bauxite mining
project. As such, the directors have chosen to use the latest information provided by AMC regarding current equity capital
raisings, as the most appropriate valuation method for Zeta Resources holding. At year end the fair value of the investment was
US$32,784,651.
Sensitivities: The company has a world class bauxite project with initial production capacity of 10Mtpa. Production is expected
to ramp up in 2019 with scope for further expansion over the following five years.
(b)
Investments 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 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 2019.
Valuation methodology: Zeta Resources has used a fair value valuation of investments held by Zeta Energy by which to impair
the loan value as at 30 June 2019. At year end the fair value of the loan was US$1,076,072.
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.
Kumarina Resources Pty Limited– Australia incorporated
This comprises the privately-owned 100% equity interest in a mineral exploration company with two highly prospective
copper/gold projects located in Western Australia. The company is in the process of doing further research and exploration
around the development of its Ilgarari Copper Project and its Murrin Murrin Gold Project. Kumarina is valued using the
multiples of exploration expenditure method and the area multiples method to value Kumarina’s two main projects, with
further consideration to the remaining assets and liabilities held by Kumarina. At year end the fair value of the investment was
US$1,000,000.
Other investments
Zeta Resources has further investments at fair value totalling US$178,000 (2018: US$78,505).
30 June 2019
Financial assets
Investments
Investment in subsidiaries
Level 1
US$
Level 2
US$
Level 3
US$
68,378,923
21,143,024
–
–
40,406,163
1,000,002
There have been no movements between the level 1 and level 3 categories.
Investment in Bligh Resources Limited was transferred from level 1 to level 2 as a result of the fair value being based on the
takeover offer by Saracens.
60
Zeta Resources Limited 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 2018
Acquisitions at cost
Disposals during the year
Reclassification to amortised cost
Total gains/(losses) recognised in
fair value through profit or loss
Balance at 30 June 2019
Level 3
investments
US$
25,711,750
10,343,504
–
–
Level 3
investments
in subsidiaries
US$
2,103,504
–
(4)
–
4,350,909
40,406,163
(1,103,499)
1,000,002
Level 3
loans to
subsidiaries
US$
379,690
–
–
(379,690)
–
–
Loans to subsidiaries were reclassified to amortised cost as at 1 July 2018
30 June 2018
Financial assets
Investments
Investment in subsidiaries
Loans to subsidiaries
Level 1
US$
Level 2
US$
Level 3
US$
135,475,520
–
–
–
–
–
25,711,750
2,103,504
379,690
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:
Level 3
investments
US$
408,583
33,045,767
–
(7,742,600)
25,711,750
Level 3
investments
in subsidiaries
US$
3,181,102
4
–
(1,077,602)
2,103,504
Level 3
loans to
subsidiaries
US$
30,027,206
1,013,278
(44,417,518)
13,756,724
379,690
Balance at 1 July 2017
Acquisitions at cost
Disposals during the year
Total gains recognised in:
Fair value through profit or loss
Balance at 30 June 2018
* Restated, refer to note 28
25.5 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 of directors 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.
61
Annual Report for the year to 30 June 2019 NOTES TO THE FINANCIAL STATEMENTS
(continued)
26. RELATED PARTIES
26.1 Material related parties
Holding company
The Company’s holding company is UIL which held 59.9% of the company’s issued share capital on 30 June 2019. UIL is 62.4%
owned by General Provincial Life Pension Fund Limited.
Subsidiary companies
The Company’s subsidiaries are Kumarina, Zeta Energy and Zeta Investments, all are 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 the Company and of UIL.
26.2 Material related parties transactions
Nature of transactions
Investments in related parties:
Kumarina
Zeta Investments
Zeta Energy
PPP
Axelrock
PPP Vietnam
PPP JPDA
Loans to related parties:
Kumarina
Zeta Energy
Zeta Investments Proprietary Limited
Bligh Resources Limited
Loans from related parties:
UIL Limited
Zeta Energy
PPP
ICM Limited
Trade and other payables:
ICM Limited
Directors
Interest charged by the subsidiaries
Interest charged by the parent company
Interest charged by ICM
Interest charged to investee entity
Fees paid to the Investment Manager
Fees paid to the directors
X Xi
M Botha
P Sullivan
* Restated, refer to note 28
62
June 2019
US$
June 2018
US$
1,000,000
2,103,498
1
1
–
–
–
–
495,653
1,076,072
476,088
625,822
45,793,293
2,508,840
1,980,510
3,983,509
162,949
37,500
288,598
2,476,820
241,948
30,187
677,467
150,000
50,000
50,000
50,000
1
1
1
1
1
1
352,680
27,010
–
–
30,151,190
5,235,527
–
–
162,057
37,500
295,428
1,808,717
–
–
652,993
150,000
50,000
50,000
50,000
Zeta Resources Limited 27. 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 explore or mine for gold
Nickel: investments in companies which explore or mine for nickel
Mineral exploration: investments in companies which explore or mine for 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
30 June 2019
External revenues
Gold
US$
Nickel
US$
Mineral
exploration
US$
10,955,989
(52,573,430)
(4,282,821)
Reportable segment revenue
10,955,989
(52,573,430)
(4,282,821)
Interest revenue
Interest expense
–
–
–
–
–
–
Other
segments
US$
48,152
48,152
43,036
Total
US$
(45,852,110)
(45,852,110)
43,036
(3,315,144)
(3,315,144)
Other income and expenses
(19,226)
32,249
927,603
(503,769)
436,857
Reportable segment profit/(loss)
before tax
10,936,763
(52,541,181)
(3,355,218)
(3,727,725)
(48,687,361)
Reportable segment assets
30,072,681
42,539,536
59,391,966
1,734,528
133,738,711
Reportable segment liabilities
–
–
–
(59,739,569)
(59,739,569)
30 June 2018
External revenues
Reportable segment revenue
Interest revenue
Interest expense
Gold
US$
767,222
767,222
–
–
Nickel
US$
Mineral
exploration
US$
36,020,009
(2,160,977)
36,020,009
(2,160,977)
–
–
–
–
Other
segments
US$
(4,298)
(4,298)
102
Total
US$
34,621,956
34,621,956
102
(2,179,015)
(2,179,015)
Other income and expenses
(616)
3,692
(928,273)
(1,262,007)
(2,187,204)
Reportable segment profit/(loss)
before tax
766,606
36,023,701
(3,089,250)
(3,445,218)
30,255,839
Reportable segment assets
30,716,732
85,181,389
47,772,343
287,172
163,957,636
Reportable segment liabilities
–
–
–
(41,060,741)
(41,060,741)
During the year there were no transactions between segments which resulted in income or expenditure.
* Restated, refer to note 28
63
Annual Report for the year to 30 June 2019 NOTES TO THE FINANCIAL STATEMENTS
(continued)
27. SEGMENTAL REPORTING (continued)
Reconciliations of reportable segment revenues, profit or loss, assets
and liabilities, and other material items
Revenues
Total revenue for reportable segments
Revenue for other segments
Revenue
Profit or loss
Total (loss)/profit for reportable segments
Loss for other segments
Profit before tax
Assets
Total assets for reportable segments
Assets for other segments
Total assets
Liabilities
Total liabilities for reportable segments
Liabilities for other segments
Total liabilities
Geographic information
June 2019
US$
June 2018
US$
(45,900,262)
34,626,254
48,152
(4,298)
(45,852,110)
34,621,956
(44,959,636)
(3,727,725)
(48,687,361)
132,004,183
1,734,528
133,738,711
–
(59,739,569)
(59,739,569)
33,701,057
(3,445,218)
30,255,839
163,670,464
287,172
163,957,636
–
(41,060,741)
(41,060,741)
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.
June 2019
US$
(40,981,429)
(6,163,243)
5,569,813
(614,658)
(754,640)
(1,018,136)
(1,889,817)
(45,852,110)
June 2018
US$
33,763,689
(1,197,462)
257,915
636,752
(1,511,710)
12,611,090
(9,938,318)
34,621,956
Revenue
Australia
Canada
Guinea
Mali
Namibia
Singapore
Other countries
Revenue
* Restated, refer to note 28
64
Zeta Resources Limited Assets
Australia
Canada
Guinea
Mali
Namibia
Singapore
Other Countries
Assets
June 2019
US$
74,027,756
13,408,527
32,784,651
4,385,458
2,733,873
1,076,072
5,322,374
June 2018
US$
109,623,707
15,011,839
17,843,064
13,466,126
2,038,469
27,010
5,947,421
133,738,711
163,957,636
28. PRIOR PERIOD ERROR
In the prior year financial statements, the company’s investment in Kumarina was measured at a fair value that was calculated
by Zeta as the original cost. In the current year a formal valuation was performed for the 30 June 2018 and 2019 figures which
lead to the fair value being restated from US$3,063,498 to US$2,103,498. Zeta will not look into 30 June 2017 fair values as it is
impracticable due to the retrospective application being not determinable.
The restatement did not affect the earnings per share or cash flow statement for the year ended 30 June 2018. The adjustment
of the investment in Kumarina resulted in changes in amounts in notes 4, 16, 21, 22, 25, 26 and 27 as investments in subsidiaries
and investment income were reduced by US$960,000 at 30 June 2018.
Statement of financial position
as at 30 June 2018
Total assets
Investment in subsidiaries
Total equity
Accumulated losses
Statement of comprehensive income
for the year ended 30 June 2018
Investment income
Profit
Total comprehensive income
29. EVENTS AFTER THE REPORTING DATE
29.1 Bligh Resources Limited
Impact of restatement
As previously reported
US$
164,917,636
3,063,498
123,856,895
757,618
Adjustment
US$
(960,000)
(960,000)
(960,000)
(960,000)
Impact of restatement
As previously reported
US$
35,581,956
31,215,839
31,215,839
Adjustment
US$
(960,000)
(960,000)
(960,000)
As restated
US$
163,957,636
2,103,493
122,896,895
(202,382)
As restated
US$
34,621,956
30,255,839
30,255,839
Zeta Resources Limited has sold 100% of its holding (253,742,974 shares) in Bligh Resources Limited on 31 July 2019. Proceeds
received consisted of 9,363,115 Saracen Mineral Holdings Limited shares.
29.2 UIL Limited loan repayments
During August 2019 Zeta Resources Limited made capital loan repayments amounting to A$25million. These payments were
made as a result of the sale of investments following the year end.
65
Annual Report for the year to 30 June 2019 SHAREHOLDER INFORMATION
SUBSTANTIAL SHAREHOLDERS
As at 17 November 2019, the company had received notification of the following substantial shareholdings:
NAME
UIL Limited
General Provincial Life Pension Fund Limited
UIL Limited (and associates)
SHARES
% OF ISSUED CAPITAL
172,286,916
91,981,917
264,268,833
59.88%
91.85%
TOP 20 HOLDINGS OF FULLY PAID ORDINARY SHARES AS AT 17 NOVEMBER 2019
SHARES
% OF ISSUED CAPITAL
172,352,437
90,144,895
9,105,772
1,308,595
625,000
600,000
450,000
410,499
376,160
335,000
298,696
295,000
269,946
262,565
250,000
241,778
215,000
200,000
162,000
145,000
59.90
31.33
3.16
0.45
0.22
0.21
0.16
0.14
0.13
0.12
0.10
0.10
0.09
0.09
0.09
0.08
0.07
0.07
0.06
0.05
278,048,343
96.64
NAME
J P MORGAN NOM AUST PL
GENERAL PROVINCIAL LIFE P
HSBC CUSTODY NOM AUST LTD
SULLIVAN JAMES NOEL
HARDROCK CAP PL – CGLW NO 2 S/F A/C
HARDROCK CAP PL
BURNAL PL
CALIMO PL
CHERRYBURN PL
BLESSED INV PL
DENNEHY SEAN
ACS NSW PL
SAVILLE STEPHANIE C
CITICORP NOM PL
UURO PL
SAVILLE ALEXANDRA MAREE
GREEN BRIAN
SULLIVAN JAMES NOEL + G
NALMOR PL JOHN CHAPPELL S
ROYAL SUNSET PL
Total for top 20
66
Zeta Resources Limited DISTRIBUTION SCHEDULE OF ORDINARY SHARES HELD AT 17 NOVEMBER 2019
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
5,310
2,658,511
1,217,677
5,185,357
278,646,221
287,713,076
NO. OF ORDINARY
SHAREHOLDERS
% OF ISSUED
CAPITAL
23
991
158
194
25
1,391
0.00
0.92
0.42
1.80
96.85
100.00
The number of shareholders holding less than a marketable parcel of ordinary shares at 17 November 2019 is 67
and they hold 67,612 securities.
VOTING RIGHTS
All ordinary shares carry one vote per share without restriction.
67
Annual Report for the year to 30 June 2019 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 OFFICE
Level 11, 1 York Street
Sydney NSW 2000
Australia
Telephone: + 61 414 224 494
CANADIAN OFFICE
ICM CA Research Limited
1800-510 West Georgia Street
Vancouver BC V6B 0M3
Canada
Telephone: +1 778 222 7378
Email: contactca@icm.limited
NEW ZEALAND OFFICE
ICM NZ Limited
PO Box 25437
Wellington 6140
New Zealand
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 2897
Email: contact@icm.limited
68
SECRETARY
ICM Limited
34 Bermudiana Road
PO Box HM 1748
Hamilton HM GX
Bermuda
GENERAL ADMINISTRATION
ICM Corporate Services (Pty) Ltd
1 Knutsford Road
Wynberg 7800
Cape Town
South Africa
AUDITOR
Deloitte & Touche
1st Floor, The Square
Cape Quarter
27 Somerset Road
Green Point
Cape Town, Western Cape 8001
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
HEADINGZeta Resources Limited SIGNIFICANT STAKES IN A SELECT RANGE OF KEY COMMODITY COMPANIES
BERMUDA OFFICE
34 Bermudiana Road
Hamilton HM 11
Bermuda
Telephone: +1 441 299 2897
www.zetaresources.limited