2020
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”, “Zeta Resources”, 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.
WHY ZETA RESOURCES LIMITED?
Zeta is a patient, long term investor, seeking and
finding compelling 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 assists investee companies with
its 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.
1
Annual Report for the year to 30 June 2020 CONTENTS
2 Why Zeta Resources Limited?
PERFORMANCE
3
4
5
6
7
Chairman’s Statement
Group Performance Summary
Current Year Performance
Geographical Investment Exposure
Associates of Zeta Resources
INVESTMENTS
8
Investment Manager’s Report
16 Macro Trends Affecting Resources
17 Sector Summaries
21 Our Investment Approach
22 Five Largest Holdings
25
Investment Manager and Team
GOVERNANCE
27 Directors
28 Report of the Directors
32 Corporate Governance Statement
FINANCIAL STATEMENTS
Independent Auditor’s Report
34
40 Auditor’s Independence Declaration
41 Financial Statements
45 Notes to the Financial Statements
67 SHAREHOLDER INFORMATION
69 COMPANY INFORMATION
FINANCIAL CALENDAR
Year End
30 June
Annual General Meeting
25 November 2020
Half Year
31 December
Half Year Announcement
February 2020
FORWARD–LOOKING STATEMENTS
This annual report may contain “forward-looking statements” with respect to the financial condition, results of operations and business of the
Company. Such statements involve risk and uncertainty because they relate to future events and circumstances that could cause actual results
to differ materially from those expressed or implied by forward-looking statements. The forward-looking statements are based on the directors’
current view and on information known to them at the date of this report. Nothing in this publication should be construed as a profit forecast.
Potential investors are reminded that the value of investments and the income from them may go down as well as up and investors may not receive
back the full amount invested.
2
Zeta Resources Limited
CHAIRMAN’S STATEMENT
The biggest change in Zeta’s portfolio during
the year was the acquisition of a majority stake in
Horizon Gold
Much ink has been spilled,
and will be spilled, about
Covid-19 and its impact. For
perspective, I would start by
noting that this is the eighth
annual report produced by
Zeta since the Company
was listed on ASX. The
world continues to demand
commodities, and come
what may, commodities by
their very nature, will always
be demanded. However,
PETER SULLIVAN
Chairman
we can’t look back on the year under review without
acknowledging that every commodity was, in turn,
impacted by Covid-19, albeit in different ways.
As a leveraged fund, Zeta felt the impact of swings in
the commodity markets in a heightened way. Zeta’s
loss for the year was US$22.4m, and the net asset
value per share fell by 28.8%.
The reason for the loss was not purely due to
Covid-19, but also due to a reversal of fortune at one
of Zeta’s largest investments – Panoramic Resources.
During the year under review, Panoramic encountered
significant difficulties in ramping up production at
its Savannah nickel mine in Western Australia. When
the Covid-19 crisis hit, the company decided to place
Savannah back on to care and maintenance while
Panoramic raised significant new equity to fund work
to de-risk the mine. While the company’s outlook has
stabilised, this outcome was disappointing.
Following the successful sale of Zeta’s majority stake
in Bligh Resources in July 2019, the biggest change
in Zeta’s portfolio during the year was the increased
shareholding in Horizon Gold by the acquisition from
Panoramic of its holding. Like Bligh, Horizon Gold is a
Western Australian gold junior, albeit Horizon Gold’s
resource base and tenements are much larger, in
a mining area that has produced over one million
ounces historically. Zeta is pleased to have majority
ownership of Horizon Gold, and since acquiring the
stake has renewed management and supported
the company with working capital and new equity to
fund development. Horizon Gold’s share price has
appreciated materially since the acquisition of the
majority stake by Zeta.
Beyond the above, Zeta has continued to invest
modestly in the bauxite, copper and graphite sectors.
The investment in bauxite has been in support of
Zeta’s investment in Alliance Mining Commodities,
owner of a Tier-1 bauxite asset in Guinea, West Africa.
The investments in copper and graphite are in two
commodities that in the long run will benefit from a
shift to greater use of electric power and its storage,
particularly in transportation.
Looking forward, the near-term picture is uncertain as
long as Covid-19 continues to constrain the movement
of people, and to a lesser extent goods and services.
Supply interruptions may temporarily boost certain
commodity prices if mines are shut due to Covid-19,
or prices may fall if demand in certain commodities
is reduced by increased unemployment or economic
recession. The longer-term outlook remains positive,
as the world will continue to demand commodities.
Finally, you will have seen that Zeta has recently
launched a bonus issue of options. The bonus issue
provides Zeta shareholders and the Company with
added capital management flexibility and rewards
shareholders’ support of Zeta. As a fellow shareholder
in Zeta, I welcome this bonus issue, and add my
personal thanks for your continued support of Zeta.
Peter Sullivan
Chairman
25 September 2020
3
Annual Report for the year to 30 June 2020 GROUP PERFORMANCE SUMMARY
Total return(1) (annual) (%)
Net tangible asset per ordinary share(2) (Australian cents)
Ordinary share price (Australian cents)
Discount (%)
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
2020
30 June
2019
% change
2020/19
(28.8)
26.0
18.0
(30.8)
(0.08)
Nil
51.6
(36.5)
36.6
35.5
(3.0)
(0.17)
Nil
74.0
127.5
133.3
0.0
(75.9)
(75.9)
59.5
0.1
(59.3)
(59.2)
44.4
21.1
(28.8)
(49.3)
927.0
52.94
n/a
(30.3)
(4.4)
(100.0)
28.0
28.2
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 287,643,076 shares on issue as at 30 June 2020, and 287,763,076 shares on issue
as at 30 June 2019.
(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.
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 2020
GEARING
28.8%
49.3%
30.8%
59.5%
EARNINGS PER SHARE
ORDINARY SHARES
BOUGHT BACK
AVERAGE PRICE OF
ORDINARY SHARE
BOUGHT BACK
ONGOING CHARGES
(US$0.08) 70,000
A$0.24
2.2%
TOTAL RETURN COMPARATIVE PERFORMANCE*
Since inception on 12 June 2013 to 30 June 2020
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
Dec 19 Jun 20
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 2020 GEOGRAPHICAL INVESTMENT EXPOSURE
(% OF TOTAL INVESTMENTS)
GUINEA
June 2020
June 2019
43.4%
25.1%
AUSTRALIA
June 2020
June 2019
33.8%
53.4%
CANADA
June 2020
June 2019
12.5%
10.3%
4.7%
2.2%
MALI
June 2020
June 2019
SENEGAL
June 2020
2.4%
3.4%
1.4%
OTHER
June 2020
June 2019
1.8%
5.6%
SRI LANKA
June 2020
June 2019
Source: ICM
6
Zeta Resources Limited ASSOCIATES OF ZETA RESOURCES
AS AT 30 JUNE 2020
GME Resources Limited
Seacrest L.P.
Nickel & Gold
Oil & Gas
ASX-listed junior nickel
and gold explorer
Substantial nickel
resources in Western
Australia
40.2%
Global exploration firm
Widely diversified
portfolio of exploration
interests
38.7%
Alliance Mining
Commodities Limited
Bauxite
Unlisted bauxite
development company
World class bauxite
asset in Guinea,
West Africa
35.6%
Margosa Graphite
Limited
Graphite
Unlisted graphite
explorer
Focused on high grade
vein graphite in
Sri Lanka
34.3%
7
Annual Report for the year to 30 June 2020 INVESTMENT MANAGER’S REPORT
For the second year in a row,
most commodities Zeta is
invested in either decreased in
price or were up slightly, with
the exception of gold, which
performed particularly well.
The second half of the financial
year was dominated by the
worldwide impact of Covid-19,
but it affected different
commodities in different ways.
Each of those commodities will
be discussed below.
DUGALD MORRISON
At the start of the year, Zeta’s largest commodity
exposures were fairly evenly balanced, with 25% of
gross assets in bauxite, 24% in nickel, and 23% in gold.
By the end of the year, the split was 43% bauxite,
18% gold, 14% nickel and 14% copper with investment
during the year increasing graphite to 5%. Zeta’s
current portfolio is well placed to benefit from any
8
increasing demand from the use of batteries such as
for electric vehicles.
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$0.366 to A$0.26, a fall of 28.8%. For comparison, the
S&P/ASX 200 Energy index fell 31.2% over the same
period, and the S&P/ASX 300 Metals & Mining index
which includes gold mining stocks, declined only 4.0%.
Zeta’s share price fell 49.3% to A$0.18. At the start of
the period the share price was at a 3.0% discount to net
assets; at the end of the period the share price was at a
30.8% discount to net assets.
Since year end, Zeta has added to its gold
investments by participating in entitlement issues
in support of exploration and development
programmes. The entitlement issues have been
attractively priced by the issuers.
Zeta Resources Limited
IN THE YEAR TO 30 JUNE 2020
GUINEA IS ZETA’S LARGEST
COUNTRY EXPOSURE
AT 43.4%
AUSTRALIA IS ZETA’S SECOND
LARGEST COUNTRY EXPOSURE
AT 33.8%
CANADA REMAINS ZETA’S THIRD
LARGEST COUNTRY EXPOSURE
AT 12.5%
18.0%
19.6%
2.2%
SRI LANKA IS ZETA’S FOURTH
LARGEST COUNTRY EXPOSURE
AT 4.7%
MALI IS ZETA’S FIFTH LARGEST
COUNTRY EXPOSURE
AT 2.4%
SENEGAL IS ZETA’S SIXTH LARGEST
COUNTRY EXPOSURE
AT 1.4%
2.5%
1.0%
1.4%
Note: decreases/increases refer to the movement in the portfolio percentage of the relevant country
SECTOR SPLIT OF INVESTMENTS
13
AI
29
Cu
Bauxite
Gold
Nickel
43.4%
79
Au
17.9%
28
Ni
13.9%
Copper
Graphite
Cobalt
13.5%
Oil & Gas
1.3%
6
C
4.7%
27
Co
2.4%
Other
Cash
2.0%
0.9%
9
Annual Report for the year to 30 June 2020
INVESTMENT MANAGER’S REPORT
(continued)
COMMODITY MARKETS
Nickel
As noted, during the year under review the price of
gold increased while the prices of oil and aluminium
fell, and nickel and copper both increased slightly.
The US dollar gained in strength, which benefited
Australian and Canadian miners. Zeta’s largest
geographical exposure is to Guinea, where at year
end, 43.4% of the portfolio was invested. Australia is
second, with just over a third of portfolio; and Canada
third, with about a seventh of the portfolio.
Aluminium
Aluminium prices fell for the second year in a row.
At the start of the year, aluminium was US$0.80
per pound; by the end of the year it was US$0.73
per pound, a decrease of 9.6%. Aluminium prices
weakened in the wake of the Covid-19 pandemic, and
unlike commodities such as copper which have seen
significant interruptions in supply as mines have been
closed to prevent the spread of the disease, supply
of aluminium has not reduced as much as demand
has fallen. Demand in Japan and Korea has been
significantly weaker, although since year end China has
become a net exporter of aluminium for the first time
in 11 years.
During the year, Zeta increased its holding in unlisted
bauxite developer Alliance Mining Commodities
Limited (“AMC”) through support of a capital raising.
AMC owns a world-class bauxite deposit in Guinea.
At the start of the year under review, nickel prices
performed strongly. This was due largely to low
available stocks, coupled with supply disruptions in
Indonesia. However, the second half of the year under
review was dominated by the impact of Covid-19.
Overall, for the twelve months ended June 2020, the
price of nickel increased 1.0% to US$5.80 per pound.
In the long term, nickel demand will be sustained in
part by increasing demand for electric vehicles (“EVs”).
EVs’ lithium-ion batteries, despite their name, require
a much larger amount of nickel than lithium. In the
near term, however, Covid-19 and its impact on global
economies will have the biggest impact on nickel
prices, either muting demand, or conversely being
boosted by fiscal stimuli.
Zeta’s chief investment in the nickel sector remains
Panoramic Resources Limited (“Panoramic”), while Zeta
has a smaller, but still significant investment in GME
Resources Limited (“GME Resources”). Unfortunately,
Panoramic encountered significant problems as it
attempted to ramp up production at its Savannah
mine in Western Australia. The Covid-19 pandemic
was the final straw, pushing the company to place
Savannah back onto care and maintenance while it
raised significant new capital to be used to de-risk the
mine. Zeta participated in Panoramic’s capital raising,
but the significant amount of capital raised diluted
Zeta’s stake in Panoramic, although as at 30 June 2020
Panoramic remained Zeta’s second largest investment.
ALUMINIUM PRICE
from June 2018 to June 2020
NICKEL PRICE
from June 2018 to June 2020
1.40
1.20
1.00
0.80
0.60
14
12
10
8
6
4
2
Jun 18
Dec 18
Jun 19
Dec 19
Jun 20
Jun 18
Dec 18
Jun 19
Dec 19
Jun 20
US$/lb
A$/lb
US$/lb
A$/lb
Source: LME
Source: LME
Deflation continues to be a major cause of
concern for central banks.
10
Zeta Resources Limited Gold
The price of gold rose significantly during the year
under review. At the end of June 2019 the price of gold
was US$1,409 per ounce; at the end of June 2020 the
gold price was US$1,768 per ounce, a rise of 25.5%. In
Australian dollars, the rise was more pronounced, from
A$2,012 per ounce to A$2,573, a rise of 27.9%.
The biggest increase in gold prices came during the
second half of Zeta’s financial year, as the Covid-19
crisis hit, and as central banks, particularly the US
Federal Reserve, demonstrated a commitment to
greatly increasing liquidity in the markets. Historically,
gold has performed well in US dollar terms when the
Fed has employed quantitative easing.
Market commentators have observed that whereas
in decades past a significant increase in the money
supply would ordinarily lead to an increase in
consumer prices, now we see large increases in
the money supply without any apparent increase in
consumer prices. In fact, deflation continues to be a
major cause of concern for central banks. A reasonable
conclusion would be that central banks have decided
that increasing the money supply only increases asset
prices. While this raises concerns over a widening of
the gap between rich (those with assets) and poor
(those without), central bankers have observed that
increased unemployment would be most keenly felt
by the relatively poorer members of society. Thus the
current policy looks set to continue, which bolsters the
near term outlook for gold.
During the year Zeta made another significant
investment in gold, by increasing its stake in Western
Australia based Horizon Gold Limited (“Horizon Gold”)
from Panoramic. Since acquiring a majority holding,
Zeta has supported Horizon Gold through a recent
entitlement issue to raise capital for development and
exploration.
Zeta’s other significant gold investment is in Resolute
Mining Limited (“Resolute”). Resolute started the year
with a share price of A$1.33, and finished the year
with a share price of A$1.25, down 6.0%. Resolute ran
into operational difficulties in the first half of Zeta’s
financial year. However, it has worked largely to resolve
these problems, and is producing well from its two
operating mines in Mali and Senegal. Once its hedges
– a requirement of its recently renegotiated debt
facility – expire, the company should generate strong
cash flows should gold prices remain at current levels
or higher.
GOLD PRICE
from June 2018 to June 2020
2,800
2,500
2,200
1,900
1,600
1,300
1,000
Jun 18
Dec 18
Jun 19
Dec 19
Jun 20
Spot Price US$
Spot Price A$
Source: Kitco - London PM Fix
11
Annual Report for the year to 30 June 2020 INVESTMENT MANAGER’S REPORT
(continued)
Copper
Oil & Gas
At the start of the year under review, the Brent Crude
Oil price was US$65/bbl; by the end of June 2020 the
price of Brent was US$42/bbl, a decline of 35.5%. Oil
prices were hit hardest by the Covid-19 pandemic, as
economic activity slowed, but air travel and tourism
were two of the hardest hit sectors. While prices have
recovered, they remain below the key level of US$50/
bbl, which is the estimated breakeven production price
for US unconventional (fraccing) production.
Zeta’s largest investment in this sector is in the
exploration firm Seacrest L.P., which is unlisted.
BRENT CRUDE OIL PRICE
from June 2018 to June 2020
130
110
90
70
50
30
10
Jun 18
Dec 18
Jun 19
Dec 19
Jun 20
US$/bbl
A$/bbl
Source: US Energy Information Administration
For the first half of the year under review, the price
of copper performed poorly, as investors were
concerned with industrial demand in the wake of a
slowing Chinese economy and trade wars. After a brief
uptick in early January, the copper price fell sharply
later in the month, followed by a more drastic decline
in March amidst the Covid-19 pandemic. As fears of a
deep recession have subsided and investor concerns
shifted to shrinking inventory levels and increased
demand from China, the copper price has rebounded
sharply. At the end of June 2020, the copper price was
US$2.71, identical to the price at the end of June 2019.
Since year end, the copper price has continued to rise,
climbing above US$3.00 per pound for the first time
since June 2018.
Zeta’s largest investment in the copper sector is
Canadian copper firm Copper Mountain Mining
Corporation (“Copper Mountain”), which produces
copper in British Columbia, and has a copper
development project in Queensland, Australia. During
the year under review, Zeta increased its holding in
Copper Mountain from 12.8% to 19.99%.
COPPER PRICE
from June 2018 to June 2020
5.00
4.00
3.00
2.00
Jun 18
Dec 18
Jun 19
Dec 19
Jun 20
US$/lb
A$/lb
Source: LME
The second half of the year under review was
dominated by the impact of Covid-19.
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 2020,
Zeta had a loan from UIL totalling US$68.3 million, drawn in Australian dollars and Canadian dollars.
As at 30 June 2020, Zeta had total assets of US$132.9 million (2019: US$133.7 million). Of this figure, US$57 million
(2019: US$32.8 million) was invested in the bauxite sector; US$20.6 million (2019: US$30.1 million) was invested in the
gold sector; US$36.2 million (2019: US$57.9 million) was invested in the nickel and copper sectors; and US$1.78 million
(2019: US$5.03 million) was invested in the oil & gas sector.
NTA PER SHARE VERSUS SHARE PRICE
Since inception on 12 June 2013 to 30 June 2020
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
Jun 20
NTA
Closing Share Price
Source: ICM
FINANCIAL RESULTS
The net loss after tax for the year was US$22,367,826 against a loss of US$48,687,361 in the year ended June 2019. The
net loss was comprised largely of unrealised losses from investments, taxation provided for and interest expense.
13
Annual Report for the year to 30 June 2020
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 June 2020:
RESERVES
Proved & Probable
RESOURCES
Measured & Indicated
0.51 m oz
1.12 m oz
2.22 m oz
2.81 m oz
0.40 m t
0.61 m t
0.28 m t
0.35 m t
0.02 m t
0.02 m t
14.02 m t
136.44 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.
Resolute Mining
Resolute is an Australian-headquartered gold company
with two operating mines, Syama in southern Mali,
and Mako in Senegal. Resolute has been transitioning
Syama from surface operations to a significant new
underground operation, which is making use of
innovative automated technology. During the first half
of the year under review, Syama encountered significant
operating difficulties, including a crack in the roaster,
and metallurgical problems. Resolute has worked
assiduously to correct these problems, and the latter
half of the year has seen much improved volumes.
Provided neither of its mines are shut due to Covid-19,
the company should enjoy significant cash flows,
particularly as old hedges at lower gold prices expire.
GME Resources
GME is a Perth-based nickel exploration company
focused on the development of is 100%-owned NiWest
Nickel-Cobalt Project, located in the Laverton district of
Western Australia (adjacent to Minara Resources). GME
and its subsidiary Golden Cliffs NL also own a number
of prospective gold projects in the Leonora – Laverton
region. Subsequent to year end, Zeta participated in an
equity raising by GME to fund infill drilling programmes
and exploration work at the company’s Fairfield and
Homeward Bound / Federation gold prospects located
in close proximity to the NiWest Nickel–Cobalt Project.
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%
Eulaminna
M39/0371
M39/0372
Murrin Murrin M39/0397
M39/0398
M39/0399
M39/0400
M39/1068
0% Gold and Base
Metals Rights
0% Gold and Base
Metals Rights
100%
100%
100%
100%
100%
JDF Morrison
ICM Limited
Investment Manager
25 September 2020
15
Annual Report for the year to 30 June 2020 MACRO TRENDS AFFECTING RESOURCES
E-VEHICLES
• Nearing tipping point where all factors for growth are in place
• EVs use more commodities such as nickel and copper than traditional vehicles
• Potential spike in demand for several metals, including lithium, cobalt, and manganese
•
Increased demand for flake and vein graphite
• New battery technologies may limit demand for certain battery metals
RENEWABLES
• Consumer pull and government push for renewables
• Price of solar and wind continue 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
COVID-19 DISRUPTION
• Disruptions to both production and demand causing increased volatility for many
commodities
• Near-term oil demand drastically reduced due to sudden reduction in flights, cruise ship
operations, and all forms of international travel
• Several leading indicators suggested heightened risk of recession prior to pandemic;
an extended recession would challenge demand for energy and industrial commodities
over the medium term
• US-China tensions continue to rise, in part due to Covid-19
• Significant risk to US and other countries of additional or extended shutdowns from
increasing cases or a “second wave”
GLOBAL DEBT
• Unprecedented increase in global government debt on a relative basis, exacerbated
further by the pandemic
• Record government spending to counteract economic impact from extended shutdowns
•
Increasing demand for gold as protection from risk of fiat money inflation
• Many central governments have reduced interest rates, with negative rates in some
cases; low rates contributing to increasing corporate and consumer debt
• 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
• China is significantly now the largest consumer of several major 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 disputes
impact Chinese economy
16
Zeta Resources Limited SECTOR SUMMARIES
AS AT 30 JUNE 2020
BAUXITE
13
AIAluminium
NICKEL
28
NiNickel
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, followed by China, with Guinea third
• Largest bauxite reserves are in Australia and Guinea; Vietnam 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 trending down since peaking in April 2018
Exposure
• 36% 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 Indonesia, Philippines, New Caledonia, Russia, Australia, Canada
Macro trends
• Demand for nickel for lithium-ion batteries increasing quickly, but still relatively small
component of global nickel demand
• Prices spiked in Q3 2019 following announcement of Indonesia’s intention to ban exports
of unrefined nickel ore, followed by a precipitous decline through 1H 2020 due to slowing
demand, further exacerbated by Covid-19
• Industrial demand still influenced by strength of Chinese economy
Exposure
• 40% of GME Resources (ASX:GME) – owns development project in Western Australia
• 17% of Panoramic Resources (ASX:PAN) – nickel producer in Western Australia
17
Annual Report for the year to 30 June 2020 SECTOR SUMMARIES
AS AT 30 JUNE 2020 (continued)
GOLD
79
AuGold
COPPER
29
CuCopper
18
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, United States
Macro trends
• Hedge to US dollar which has declined long term against gold
• Price of gold has been climbing since 2H 2018, now approaching and attaining record
highs amidst global economic uncertainty and unprecedented increase in government
debt worldwide
• Gold production has been in a long-term downtrend 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
• 69% of Horizon Gold (ASX:HRN) – exploration and development in Western Australia
• 1% of Resolute Mining (ASX:RSG) – operating mines in Mali and Senegal
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 with a sharp uptick in late
1990s
• Prices relatively volatile, generally tied to world economy. Prices collapsed in March 2020
but recovered quickly on supply concerns in Chile
• 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
• 20% of Copper Mountain Mining (TSX:CMMC, ASX:C6C) – producing copper in Canada,
and developing a copper asset in Australia
Zeta Resources Limited 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 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 still intact
• Annual growth in demand has followed a linear trend in line with world population
growth, but is expected to fall by a record 8 mb/d due to drastic decline in demand
amidst Covid-19 pandemic
• 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. Stockpiling of natural gas has
materially slowed demand for LNG, meaning the fraccing industry has not yet recovered
to the same extent as oil producers
Exposure
• 39% of Seacrest (unlisted) – globally diversified oil & gas exploration using seismic
where advantageous
19
Annual Report for the year to 30 June 2020 SECTOR SUMMARIES
AS AT 30 JUNE 2020 (continued)
COBALT
27
CoCobalt
GRAPHITE
6
CCarbon
20
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
• Roughly 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 has climbed alongside increased adoption of EVs and other electronics
• Cobalt prices soared in 2017 amidst fears of a supply shortage, but crashed in 2018 and
have remained low as the near-term supply-demand imbalance was resolved, and long-
term demand growth is uncertain
• Some manufacturers, including Tesla, have developed lithium-ion batteries that require
relatively less cobalt (also developing cobalt-free batteries), but industry consensus is that
the metal will continue to be required in future EV batteries, albeit likely at lower volumes
per unit
Exposure
• 40% of GME Resources (ASX:GME) – Australian nickel developer with cobalt resources of
55,000 tonnes
• 17% of Panoramic Resources (ASX:PAN) – Australian nickel producer with cobalt reserves
of 7,600 tonnes
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
graphite
• Weak prices in 2019/20 due to increased supply and slower demand growth, but long-term
forecast still strong
Exposure
• 34% of Margosa Graphite Limited (unlisted) – Sri Lankan brownfield explorer of vein
graphite, the purest naturally occurring graphite
Zeta Resources Limited OUR INVESTMENT APPROACH
ICM is a value investor and generally operates focused portfolios with narrow investment remits. ICM has several
dedicated research teams who have deep knowledge and understanding in their specific sectors, which improves
the ability to source and make solid investments. ICM has approximately US$2.2bn of assets directly under
management and is responsible indirectly for a further US$19.6bn of assets in subsidiary investments.
ICM looks to exploit market and pricing opportunities and concentrates on absolute performance. The investments
are not market index driven and ICM is unlikely to participate in either an IPO or an auction unless there is
compelling value.
Zeta seeks to leverage ICM’s investment abilities in order 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, gold, copper, nickel, graphite,
oil & gas 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
Cash
Generative
Bottom Up
Approach
Active
Investors
Investee
Relationships
Detailed
Company
Knowledge
Extensive
Industry
Experience
Sector Focused
DEEP SECTOR KNOWLEDGE
I
N
D
E
P
E
N
D
E
N
C
E
&
I
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E
G
R
I
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21
Annual Report for the year to 30 June 2020
FIVE LARGEST HOLDINGS
THE VALUE OF THE FIVE
LARGEST HOLDINGS
REPRESENTS
THE VALUE OF THE TEN
LARGEST HOLDINGS
REPRESENTS
GUINEA IS ZETA’S
LARGEST COUNTRY
EXPOSURE AT
THE TOTAL NUMBER
OF COMPANIES
INCLUDED IN THE
PORTFOLIO IS
87.4%
(2019: 82.3%) OF
TOTAL INVESTMENTS
93.6%
(2019: 90.6%) OF
TOTAL INVESTMENTS
43.4%
(2019: 25.1%) OF
TOTAL INVESTMENTS
28
(2019: 24)
22
Zeta Resources Limited
1
2
3
Alliance Mining Commodities Limited is an unlisted Australian company
that has been granted a mining concession 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.
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. Having encountered
various operational difficulties ramping up production at Savannah
following a period of the mine being on care & maintenance, Panoramic
elected to place Savannah back onto care & maintenance when the
Covid-19 crisis hit. The company has used the time while production has
ceased to raise significant new capital and work towards de-risking the
mine. Going forward, Panoramic’s value will be 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.
Country
Guinea
Sector
Bauxite developer
Fair Value
US$000
% of total
investments
% owned
57,000
43.4%
35.6%
Country
Australia
Sector
Nickel exploration
and mining
Fair Value
US$000
% of total
investments
% owned
19,237
14.7%
16.8%
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%.
The mine has a reserve life of over 30 years and produces 90-100
million pounds of copper equivalent 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 1.9 million tonnes of
copper and 590,000 ounces of gold.
Countries
Sector
Canada and
Australia
Copper exploration
and mining
Fair Value
US$000
% of total
investments
17,183
13.1%
% owned
19.9%
23
Annual Report for the year to 30 June 2020
FIVE LARGEST HOLDINGS
(continued)
4
5
Country
Australia
Sector
Gold
Fair Value
US$000
15,108
% of total
investments
11.5%
% owned
69.0%
Countries
Sri Lanka
Sector
Graphite
Fair Value
US$000
6,205
% of total
investments
4.7%
% owned
34.3%
Horizon Gold Limited is focused on exploration and development
activities at its 100%-owned Gum Creek Project in Western Australia.
Gum Creek covers approximately 620 square kilometres and has
historically produced over one million ounces of gold. Gum Creek hosts
JORC 2012 Resources of 15.9 million tonnes averaging 2.7g/t gold for
1.39 million ounces of gold. The company was spun off from nickel
company Panoramic Resources in 2016 and Zeta participated in the IPO.
In 2020 Zeta acquired Panoramic’s majority holding in Horizon Gold, and
has subsequently supported the company through providing working
capital and participating in an entitlement issue to raise new equity.
Margosa Graphite Limited is an unlisted Australian company targeting
development of JORC-compliant high grade crystalline vein graphite deposit
in Sri Lanka. Sri Lanka has a long history of graphite production since
the mid 1800s, and is home to some of the purest grade graphite in the
world. Sri Lankan high quality graphite has varied applications, including
in anodes for lithium-ion batteries used in electric vehicles. In May 2020,
Margosa announced revised Mineral Resources totalling approximately
1,724,610 tonnes, at 76.32% total graphitic content and approximately
1,316,190 tonnes of contained graphite, including Indicated Resources of
approximately 582,610 tonnes grading 75.83% TGC for 441,790 tonnes of
contained graphite.
24
Zeta Resources Limited
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 investors and see markets as a
place to exchange assets.
ICM MANAGES OVER
US$2.2bn
IN FUNDS DIRECTLY AND IS RESPONSIBLE INDIRECTLY FOR A FURTHER US$19.6BN OF ASSETS IN SUBSIDIARY
INVESTMENTS. ICM HAS OVER 65 STAFF BASED IN OFFICES IN BERMUDA, CAPE TOWN, DUBLIN, LONDON,
SINGAPORE, SYDNEY, VANCOUVER AND WELLINGTON.
DUNCAN SAVILLE
Duncan Saville, a director of ICM, is a chartered accountant with experience in
corporate finance and asset management. He is an experienced non-executive director
having 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.
ALASDAIR YOUNIE
Alasdair Younie, a director of ICM,is based in Bermuda. He has extensive experience
in financial markets and corporate finance, and is responsible for the day to day
running of the Somers Group. Mr Younie 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.
25
Annual Report for the year to 30 June 2020 INVESTMENT MANAGER AND TEAM
(continued)
Dugald Morrison has been involved with ICM and its predecessor companies since
1994 and is responsible for ICM NZ Limited, based in Wellington. He 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.
Mr Morrison is a director of Horizon Gold Limited (ASX:HRN), Brightwater Group Limited
and Snapper Services Limited.
EDUARDO GRECA
Eduardo Greca joined ICM London in 2010 as the Latam Investment Strategist before
moving to Brazil in 2012 where he is now based. Mr Greca has over twelve years of
investment research experience, and prior to joining ICM he worked for the commodities
risk management team at Kraft Foods. He covers the Latin American equity and fixed
income investments, and is responsible for the Stock Exchange sector worldwide with an
emphasis on Emerging Markets. Mr Greca 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, British Colombia. He is focused on the resources, technology, and financial
services sectors, with an emphasis on North America. Mr Kingcott has over ten 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 energy
services company based in Western Canada. Mr Kingcott is a CFA Charterholder.
26
Zeta Resources Limited
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
experience in 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 Horizon Gold
Limited (ASX: HRN), and non-executive director of Resolute Mining Limited (ASX:RSG)
and Panoramic Resources Limited (ASX:PAN). Mr Sullivan was chairman of Pan Pacific
Petroleum NL (ASX:PPP) which was delisted on 13 November 2017 and 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 27 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).
ANDRÉ LIEBENBERG
Mr Liebenberg is an experienced mining industry professional and has extensive investor
marketing, finance, business development and leadership experience. He was appointed
CEO and Executive Director of Yellow Cake plc on 1 June 2018, just prior to the company’s
IPO on the AIM market of the London Stock Exchange. Mr Liebenberg has spent over 25
years in private equity, investment banking, senior roles within BHP, and prior to joining
Yellow Cake he was Chief Financial Officer at QKR Corporation. Mr Liebenberg holds a
Bachelor of Science in Electrical Engineering from the University of Cape Town and a
Master in Business Administration from the University of Cape Town.
Directorships of other listed companies in the last 3 years
Mr Liebenberg is an executive director of Yellow Cake plc (LSE:YCA) and was a non-
executive director of Danakali Limited (ASX:DNK) until 3 August 2020
XI XI
Xi is a financial analyst with more than 20 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 are Non-Executive Directors and were appointed to the board of the Company on 7 June 2013, other than Mr Liebenberg,
who was appointed on 30 December 2019.
27
Annual Report for the year to 30 June 2020 REPORT OF THE DIRECTORS
Your directors present their report for Zeta Resources
Limited, including its subsidiaries, Kumarina Resources
Pty Limited, Zeta Energy Pte. Ltd, Zeta Investments
Limited and Horizon Gold Limited, for the year ended
30 June 2020.
OPERATING AND FINANCIAL REVIEW
Operating results
The net loss attributable to the Company for the year
to 30 June 2020 amounted to US$22,367,826.
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
André Liebenberg
Xi Xi
The directors, apart from Mr Liebenberg, have been
in office since the start of the year to the date of this
report. André Liebenberg was appointed to the board
on 30 December 2019.
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.
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$42,757,993. A decrease in the fair value of
the portfolio resulted in an unrealised loss recognised
in profit or loss at year end of US$11,216,601.
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$424,773
was invested during the twelve months to 30 June
2020 in further drilling and analysis work.
Financial position
At the end of the year, the Company had US$12,082
in cash and cash equivalents. Investments at fair
value totalled US$114,839,211, loans to subsidiaries
were valued at US$1,714,655 and the investment in
subsidiaries was valued at US$16,417,335.
28
Zeta Resources Limited The company has a loan owing to UIL of
US$68,312,746 at year end.
As at the year end, the Company had a US$3.75 million
loan facility with Bermuda Commercial Bank with
US$1,250,000 expiring on 30 September 2020.
GOING CONCERN
The financial statements have been prepared on a
going concern basis. We draw attention to the fact that
at 30 June 2020, the Company incurred a net loss of
US$22,367,826 (2019: US$48,687,361) during the year
and had accumulated losses of US$71,257,569 (2019:
US$48,889,743) and that the company’s current liabilities
exceed its current assets by US$6,517,913 (2019:
US$1,110,365). The company has undrawn capacity
under its debt facilities and the majority of the Company’s
assets consist of equity shares in listed companies
which in most circumstances are realisable within a
short timescale. Based on this, the directors believe the
Company will be able to cover the commitments arising
in the period 12 months from the date of approval of
these financial statements. 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.
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 Resources has taken up its entitlement in the
Horizon Gold Limited renounceable entitlement issue
for an amount of A$1.6 million. The loan to Horizon
Gold Limited will be repaid as part of the payment due.
On 10 September Zeta Resources offered a bonus issue
of Options to its shareholders. Eligible Shareholders
who hold Shares on the Record Date are offered one
(1) Option (Bonus Option) for every one (1) Share held
on the Record Date. The Bonus Options have no issue
price, will be exercisable at A$0.25 each and expire on
15 June 2021.
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.
REMUNERATION REPORT
The remuneration report is set out in the following
manner:
• Policies used to determine the nature and amount
of remuneration
• Details of remuneration
• Share based compensation
• Directors’ 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 which include
performance-based components.
Details of remuneration for directors
The Company paid a total of $183,333 to directors for
the year ended 30 June 2020.
The Company had no employees as at 30 June 2020.
29
Annual Report for the year to 30 June 2020 REPORT OF THE DIRECTORS
(continued)
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 in
shares and options is set out elsewhere in this report.
Directors’ interests
The relevant interests of directors either directly or
through entities controlled by the directors in the share
capital of the Company and related body corporates as
at the date of this report are:
Ordinary
shares
opening
balance
Net
change
Director
Peter R Sullivan
5,770,632
Martin Botha
479,565
André Liebenberg
Xi Xi
–
–
MEETINGS OF DIRECTORS
–
–
–
–
Ordinary
shares
closing
balance
5,770,632
479,565
–
–
The board held seven meetings during the year which
were attended by all directors. The meetings were held
on the following dates:
2019: 1 July, 30 August, 24 October
2020: 6 February, 8 April, 13 May, 17 June
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 during
the year under review.
AUDIT COMMITTEE
The board does not have a separate audit committee
with a composition as suggested in the best practice
recommendations. The full board carries out the
function of an audit committee.
The board believes that the Company is not of a
sufficient size to warrant a separate committee and
that the full board is able to meet the objectives of
the best practice recommendations and discharge its
duties in this area.
INDEMNIFYING OFFICERS OR AUDITORS
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
Both Horizon Gold Limited and 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.
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.
NON-AUDIT SERVICES
No non-audit services were performed by the auditors
of the company during the year.
30
Zeta Resources Limited ON-MARKET BUY BACK SCHEME
As part of its ongoing capital management strategy,
Zeta implemented an on-market buy-back programme
for up to 10 million ordinary shares during the period
15 September 2018 to 14 September 2020. On
8 September 2020 the Company announced that the
buy-back programme was to be extended from
15 September 2020 to 14 September 2021. 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 purchases will depend on
current market conditions and other future events.
Pursuant to 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.
Since the commencement of the on-market buy-back
scheme on 15 September 2018, Zeta Resources has
repurchased and cancelled 877,947 fully paid ordinary
shares.
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
by the average percentage income yield on the S&P/
ASX 300 Metals and Mining Index. No performance fee
was payable for the year.
Either party may terminate the agreement with six
months’ notice.
The Company paid US$592,691 in management fees
during the reporting year.
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
25 September 2020
31
Annual Report for the year to 30 June 2020 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
Four 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.
32
Zeta Resources Limited 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/
33
Annual Report for the year to 30 June 2020 INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
To the Shareholders of Zeta Resources Limited
Report on the Audit of the Annual Financial Statements
Opinion
We have audited the annual financial statements of Zeta Resources Limited set out on pages 41 to 66,
which comprise the statement of financial position as at 30 June 2020, and the statement of profit or loss
and other 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 annual financial statements present fairly, in all material respects, the financial position
of the Company as at 30 June 2020, 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 Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors
(IRBA Code) and other independence requirements applicable to performing audits of financial
statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA
Code and in accordance with other ethical requirements applicable to performing audits in South Africa.
The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board
for Accountants’ International Code of Ethics for Professional Accountants (including International
Independence Standards). 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 annual financial statements of the current period. These matters were addressed in the
context of our audit of the annual financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
REGISTERED AUDITOR – A FIRM OF CHARTERED ACCOUNTANTS(SA) • IRBA REGISTRATION NUMBER 900222
MAZARS HOUSE RIALTO ROAD GRAND MOORINGS PRECINCT CENTURY CITY 7441 • PO BOX 134 CENTURY CITY 7446 • DOCEX 9 CENTURY CITY
TEL: +27 21 818 5000 • FAX: +27 21 818 5001 • cpt@mazars.co.za • www.mazars.co.za
PARTNERS: MC OLCKERS (NATIONAL CO-CEO), MV NINAN (NATIONAL CO-CEO), JM BARNARD, AK BATT, FJ CRONJE, AS DE JAGER, D DOLLMAN, M EDELBERG, Y FERREIRA,
T GANGEN, R GROENEWALD, AK HOOSAIN, MY ISMAIL, N JANSEN, J MARAIS, B MBUNGE, FN MILLER, G MOLYNEUX, S NAIDOO, MG ODENDAAL, W OLIVIER, D RESNICK, BG SACKS,
MA SALEE, N SILBOWITZ, SM SOLOMON, HH SWANEPOEL, MJA TEUCHERT, N THELANDER, JC VAN TUBBERGH, EC VAN HEERDEN, N VOLSCHENK, J WATKINS-BAKER
A FULL LIST OF NATIONAL PARTNERS IS AVAILABLE ON REQUEST OR AT www.mazars.co.za
34
Zeta Resources Limited
Matter
Audit response
Valuation of Unlisted investments (notes 5 and
25.4 )
Financial Statements
The Company’s accounting policy in note 3.6 of the
Annual
that
investments are
the
transaction cost and subsequently measured at fair
value with any change in the fair value recognised
in profit or loss.
initially measured at
states
The lack of readily available objective evidence
such as quoted prices, increases the degree of
estimation used in determining the fair value of
unlisted investments.
The valuation methods are subject to a high degree
of judgement and are complex, especially for
investments where there are limited to no equity
transactions during the year. Areas of judgement
include estimating the expected future income from
operations that are still in the exploration phase
and other external risk factors.
Various valuation methods are used in determining
the fair value of the investments.
A relatively small percentage change
the
valuations of individual investments, in aggregate,
could result in a significant impact to the financial
statements.
in
Our approach to address the valuation assertion for
unlisted
substantive
approach. Our key audit procedures included:
involved a
investment
•
•
•
•
•
•
•
•
agreeing the valuation of the unlisted
investments to the valuation reports
prepared by independent external valuers
appointed by management to to determine
the valuation of the unlisted investments;
assessing the competence, capabilities and
objectivity of the appointed experts;
evaluating key assumptions used in the
valuation and valuation method and inputs
used to ensure the valuations are
reasonable;
recalculating key valuation workings;
reviewing that the valuation techniques used
are appropriate for the accounting standards
and industry;
assessing and validated the completeness,
accuracy and relevance of the information
provided by management to its expert;
comparing the assumptions used in the
Company’s valuation methods to previous
periods for consistency and to consider
management bias; and
assessing 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.
Having performed our audit procedures and
evaluating the outcomes we concluded that our
audit procedures appropriately address the key
audit matter.
35
Annual Report for the year to 30 June 2020
INDEPENDENT AUDITOR’S REPORT
(continued)
As part of the audit work performed, we have
evaluated the impact COVID-19 has had on the
Company’s business operations, as well as its
ability to continue as a going concern in the
foreseeable future. Our audit approach included:
•
•
•
•
•
assessing how the financial statements and
business operations of the Company might
be impacted by the disruption;
evaluating the directors’ going concern
assessment which includes the potential
impact arising from COVID19;
reviewing the adequacy and
appropriateness of the directors’ disclosure
in respect of COVID-19 implications, in
particular disclosures within principal risks &
uncertainties, post balance sheet events and
going concern;
evaluating the key assumptions in the
forecast and assessing the reasonableness
given the information existing at the date of
the audit procedures and against supporting
documentation; and
assessing the liquidity of the Company’s
current assets and facilities available, to gain
comfort over the Company’s ability to settle
liabilities as they become due and payable.
With regards to listed investments, it was noted that
investments are appropriately valued at year end
and no significant movements were noted
subsequent to the year end.
The independent external valuators report was
inspected and the exploration status of the mines
for unlisted investments was confirmed. We have
concluded that due to the mines being in the
exploration phase,
is
considered to be insignificant.
the COVID-19
impact
Based on the work performed, we are satisfied that
the Directors appropriately applied
the going
concern assumption in the financial statements and
the matter has been appropriately reflected in the
financial statements.
Going Concern and the implications of COVID-
19 on Zeta Resources’ Annual Financial
Statements
The Company's statement of profit or loss and
other comprehensive income reflects an operating
loss, consistent with the prior year. The financial
performance has resulted in negative cash flows in
the current year. The above has therefore indicated
a risk over the appropriateness of the use of the
going concern assumption in the preparation of the
financial statements of the Company. Towards the
end of the current financial year, the World Health
Organisation has declared a global pandemic from
the outbreak of COVID-19. Shortly after
the
potential impact of COVID-19 became significant
and the enforced lockdown is causing widespread
disruption to normal patterns of business activity
across the world.
the appreciation value of
As the Company is an investment company which
the
is driven by
investments held, the pandemic's negative impact
could affect the fair value of the investments at year
end and the performance of the Company in the
current year.
As listed investments are measured at fair value
the COVID-19 impact is reflected in the fair value at
year. Management has concluded that as unlisted
investments are in the exploration phase the
COIVD-19 pandemic has a minimal impact on the
fair value of the investment.
The directors’ consideration of the impact on the
financial statements are disclosed in the Directors’
Report and going concern assessment (note 24).
Whilst the situation is still evolving, based on the
information currently available, the directors have
assessed the impact of COVID-19 on the business
and have concluded
the going
concern basis of preparation is appropriate and that
no material uncertainty exists.
that adopting
36
Zeta Resources Limited
Other Matter
The financial statement of the Company for the year ended 30 June 2019 were audited by another audit
who expressed an unmodified opinion on those statements on the 4th of December 2019.
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the document titled Zeta Resources Limited for the year ended 30 June 2020, which includes
the Directors’ Report, the Corporate Governance Statement and the Integrated Annual Report, which we
obtained prior to the date of this report. The other information does not include the annual financial
statements and our auditor’s reports thereon.
Our opinion on the annual financial statements does not cover the other information and we do not
express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the annual financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
annual 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 Annual Financial Statements
The directors are responsible for the preparation and fair presentation of the annual 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 annual financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the annual 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 annual 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 2020
INDEPENDENT AUDITOR’S REPORT
(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 annual 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 annual 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 annual financial statements,
including the disclosures, and whether the annual 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.
38
Zeta Resources Limited
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 Mazars has been the auditor of Zeta Resources Limited for 1 year.
Mazars
Partner: Nico Jansen
Registered Auditor
25 September 2020
Cape Town
39
Annual Report for the year to 30 June 2020
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 2020, 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.
Mazars
Partner: Nico Jansen
Registered Auditor
25 September 2020
Cape Town
REGISTERED AUDITOR – A FIRM OF CHARTERED ACCOUNTANTS(SA) • IRBA REGISTRATION NUMBER 900222
MAZARS HOUSE RIALTO ROAD GRAND MOORINGS PRECINCT CENTURY CITY 7441 • PO BOX 134 CENTURY CITY 7446 • DOCEX 9 CENTURY CITY
TEL: +27 21 818 5000 • FAX: +27 21 818 5001 • cpt@mazars.co.za • www.mazars.co.za
PARTNERS: MC OLCKERS (NATIONAL CO-CEO), MV NINAN (NATIONAL CO-CEO), JM BARNARD, AK BATT, FJ CRONJE, AS DE JAGER, D DOLLMAN, M EDELBERG, Y FERREIRA,
T GANGEN, R GROENEWALD, AK HOOSAIN, MY ISMAIL, N JANSEN, J MARAIS, B MBUNGE, FN MILLER, G MOLYNEUX, S NAIDOO, MG ODENDAAL, W OLIVIER, D RESNICK, BG SACKS,
MA SALEE, N SILBOWITZ, SM SOLOMON, HH SWANEPOEL, MJA TEUCHERT, N THELANDER, JC VAN TUBBERGH, EC VAN HEERDEN, N VOLSCHENK, J WATKINS-BAKER
A FULL LIST OF NATIONAL PARTNERS IS AVAILABLE ON REQUEST OR AT www.mazars.co.za
40
Zeta Resources Limited
STATEMENT OF FINANCIAL POSITION
Notes at 30 June 2020
4
5
6
7
6
8
9
10
11
12
13
14
20
15
15
Non-current assets
Investment in subsidiaries
Investments
Loans to subsidiaries
Other loan
Current assets
Loans to subsidiaries
Cash and cash equivalents
Trade and other receivables
Total assets
Non-current liabilities
Loan from subsidiary
Loan from parent
Other loans
Current liabilities
Other loans
Trade and other payables
Tax payable
Total liabilities
Net assets
Equity
Share capital
Share premium
Treasury shares
Accumulated losses
Total equity
June 2020
US$
June 2019
US$
16,417,335
114,839,211
1,506,499
–
1,000,002
129,928,110
1,571,725
625,822
208,156
12,082
–
–
104,715
508,337
132,983,283
133,738,711
–
(68,312,746)
(6,312,255)
(1,250,000)
(2,656,381)
(2,831,770)
(81,363,152)
51,620,131
(2,508,840)
(45,793,293)
(9,714,019)
(1,250,000)
(473,417)
–
(59,739,569)
73,999,142
2,777
2,778
122,874,923
122,897,203
–
(71,257,569)
51,620,131
(11,096)
(48,889,743)
73,999,142
41
Annual Report for the year to 30 June 2020 STATEMENT OF PROFIT AND LOSS AND OTHER
COMPREHENSIVE INCOME
Notes at 30 June 2020
Income and investment returns
16
16
17
Revenue
Investment losses
Other income
Expenses
Directors fees
Interest expense
18 Management and consulting fees
19
Operating and administration expenses
June 2020
US$
June 2019
US$
104,734
(11,216,601)
921,852
(183,333)
(4,434,509)
(778,505)
(540,019)
271,778
(46,123,888)
1,839,929
(150,000)
(3,315,144)
(694,181)
(515,855)
Loss before tax
(16,126,381)
(48,687,361)
20
Taxation expense
Loss for the year
Total comprehensive loss for the year
Loss per share
21
Basic and diluted loss per share
(6,241,445)
(22,367,826)
(22,367,826)
–
(48,687,361)
(48,687,361)
(0.08)
(0.17)
42
Zeta Resources Limited STATEMENT OF CHANGES IN EQUITY
Notes for the year ended 30 June 2020
Share
capital
US$
Share
premium
US$
Treasury
Shares
US$
Accumulated
losses
US$
Total
US$
Balance at 31 July 2018
2,785
123,096,492
–
(202,382)
122,896,895
Purchase of treasury shares
Cancellation of treasury shares
Total comprehensive loss for the year
–
(7)
–
–
(11,096)
(199,289)
–
–
–
–
–
(11,096)
(199,296)
(48,687,361)
(48,687,361)
Balance at 30 June 2019
2,778
122,897,203
(11,096)
(48,889,743)
73,999,142
Purchase of treasury shares
15
Cancellation of treasury shares
Total comprehensive loss for the year
–
(1)
–
–
–
(11,185)
(22,280)
22,281
–
–
(11,185)
–
Balance at 30 June 2020
2,777
122,874,923
–
–
(22,367,826)
(22,367,826)
(71,257,569)
51,620,131
43
Annual Report for the year to 30 June 2020 STATEMENT OF CASH FLOWS
Notes for the year ended 30 June 2020
Cash flows from operating activities
21
Cash generated/(utilised) by operations
Interest received
Interest paid
Dividend income
Taxation paid
Net cash flows from operating activities
Cash flows from investing activities
Investments purchased
Investments sold
Increase in loan to subsidiaries from additional funding
Decrease in loan to subsidiaries from repayments
Increase in other loans from additional funding
Decrease in other loans from repayments
Net cash flows from investing activities
Cash flows from financing activities
15
Purchase of treasury shares
June 2020
US$
June 2019
US$
1,208,291
(2,136,731)
83,251
(348,403)
21,483
(3,409,675)
(2,445,053)
(42,757,993)
31,220,634
(12,580,928)
12,302,376
(4,960,000)
6,182,608
43,036
(549,726)
228,742
–
(2,414,679)
(24,564,630)
11,836,201
(2,222,629)
2,049,314
(624,947)
–
(10,593,303)
(13,526,691)
(11,185)
(210,392)
Increase in loan from parent from additional funding
46,043,589
13,845,953
Decrease in loan from parent from repayments
Increase in loan from subsidiary from additional funding
13
Decrease in loan from subsidiary from repayments
Increase in other loans from additional funding
Decrease in other loans from repayments
Net cash flows from financing activities
(27,794,521)
1,897,066
(2,788,630)
3,189,313
(8,196,272)
–
2,609,018
(5,402,381)
4,969,323
–
12,339,360
15,811,521
Net movement in cash and cash equivalents
(698,996)
(129,849)
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
8
Cash and cash equivalents at end of the year
104,715
606,363
12,082
287,172
(52,608)
104,715
44
Zeta Resources Limited NOTES TO THE FINANCIAL STATEMENTS
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 2020 comprise the Company only.
1.2 Basis of preparation
The financial statements for the year ended 30 June 2020
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 obtains funds from more than one
investor and provides investment management services. 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 25 September 2020.
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.
The board has determined by having regard to the currency
of the Company’s share capital and that Zeta invests in mining
entities whose resources are valued in United States Dollars,
that United States Dollar is the functional and reporting
currency.
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.
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 entities are designated as being
at fair value through profit and loss on initial recognition.
Loans to subsidiaries are classified as financial assets carried
at amortised cost. The loans are subject to impairment testing
as debt instruments (refer note 3.7). The impairments on
the loans are determined separately to the fair value of the
investments in the subsidiaries as disclosed in note 4.
The judgement over the tax treatment of profits generated
from the sale of Bligh Resources is disclosed in note 20.
The Covid-19 pandemic situation is uncertain and rapidly
evolving, and management shall continue to monitor the
anticipated impacts on the business as circumstances change.
Covid-19 was treated as an adjusting event. Refer to note 24.
2.
ADOPTION OF NEW AND REVISED STANDARDS
2.1 Standards and interpretations adopted during
the year
IFRIC 23 Uncertainty over Income Tax treatments
The interpretation explains how to recognise and measure
deferred and current income tax assets and liabilities where
there is uncertainty over a tax treatment. In particular, it
discusses:
-
-
-
-
-
how to determine the appropriate unit of account, and
that each uncertain tax treatment should be considered
separately or together as a group, depending on which
approach better predicts the resolution of the uncertainty;
that the Company should assume a tax authority will
examine the uncertain tax treatments and have full
knowledge of all related information, i.e. that detection
risk should be ignored;
that the Company should reflect the effect of the
uncertainty in its income tax accounting when it is not
probable that the tax authorities will accept the treatment;
that the impact of the uncertainty should be measured
using either the most likely amount or the expected value
method, depending on which method better predicts the
resolution of the uncertainty; and
that the judgements and estimates made must be
reassessed whenever circumstances have changed or
there is new information that affects the judgements.
The interpretation does not require new disclosure to be
made it does clarify that information about judgements of the
general requirements should be provided.
45
Annual Report for the year to 30 June 2020
NOTES TO THE FINANCIAL STATEMENTS
(continued)
2.
ADOPTION OF NEW AND REVISED STANDARDS
(continued)
2.1 Standards and interpretations adopted during
the year (continued)
The Company measures uncertainty by using the most likely
amount and not the expected value method. The detail of the
judgements relating to the uncertain tax position is disclosed
in note 19.
IFRS 16 Leases
IFRS 16 had no significant impact on the financial statements.
The Company does not have contracts which include leases.
2.2 New standards, amendments and interpretations
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.
The Company has elected to be tax exempt in terms of local
Bermudian legislation.
effective for annual periods beginning after
3.4 Foreign currency
1 July 2020 that have not been adopted
Foreign currency transactions and balances
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
Definition of material (Amendments to IAS 1 and IAS 8) –
effective 1 January 2020
Presentation of liabilities (Amendments to IAS 1) –
effective 1 January 2022
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.
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.
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 Profit and
Loss and Other Comprehensive Income. Foreign currency
changes are taken into account when fair valuing the equity
instruments.
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.
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.
46
Zeta Resources Limited
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.
Classification and subsequent measurement –
Policy effective from 1 July 2018
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
Investment in subsidiaries and investments in listed and
unlisted shares are measured at FVTPL as they do not meet
the criteria of cash flows that are solely payments of principal
and interest.
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
Cash and cash equivalents, loans to subsidiaries, other
loans and trade and other receivables meet the criteria for
measurement 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.
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 are measured at amortised cost and
subsequent to initial recognition, financial liabilities are
measured at amortised cost using the effective interest
method.
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 has a legally enforceable
right to set off the recognised amounts and it intends either
to settle on a net basis or to realise the asset and settle the
liability simultaneously.
3.7
Impairment of assets
The Company recognises loss allowances for Expected Credit
Losses (“ECLs”) on financial assets measured at amortised cost.
The Company measures 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.
47
Annual Report for the year to 30 June 2020 NOTES TO THE FINANCIAL STATEMENTS
(continued)
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.7
Impairment of assets (continued)
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 expects to receive).
The Company considers a financial asset to be performing when
there is a low risk of default and no amounts are past due.
Measurement of ECLs
The Company considers a financial asset to be under-
performing when contractual payments are 30 days past
due or there has been a significant increase in credit risk
since initial recognition. A significant increase in credit risk is
indicated by a significant decrease in the future prospects of
the borrower’s operations, changes in the scope of business
or changes in the organisational structure that result in a
significant change in the borrower’s ability to meet its debt
obligations.
The Company considers a financial asset in default when
contractual payments are 90 days past due. However, in
certain cases, the Company may also consider a financial
asset to be in default when internal or external information
indicates that the Company is unlikely to receive the
outstanding contractual amounts in full before taking into
account any credit enhancements held by the Company.
A financial asset is written off when there is no reasonable
expectation of recovering the contractual cash flows.
Presentation
ECLs are a probability-weighted estimate of credit losses.
Credit losses are measured as the present value of all cash
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.
3.10 Comparatives
In the current year a number of comparative amounts have been adjusted to ensure consistent disclosure with the current year
presentation. These adjustments have been minor in nature and have not resulted in any adjustment to the reported profit after
tax, net assets or net cashflow of the Company and are as follows:
Cash flow Statement
Cash flows from operating activities
Cash utilised by operations
Dividend income
Interest expense
Cash flows from investing activities
Increase in loan to subsidiary
Increase in other loans
Cash flows from financing activities
Increase in loan from parent
Decrease in loan from subsidiaries
Effect of exchange rate fluctuations on financing
activities
Effect of exchange rate fluctuations on cash held
As previously
stated
Reclassification
As adjusted
(1,907,989)
–
(3,315,144)
(150,332)
(625,822)
16,322,773
(2,504,765)
(982,396)
907,680
(228,742)
228,742
2,765,418
(22,983)
875
(2,476,820)
(288,598)
982,396
(960,288)
(2,136,731)
228,742
(549,726)
(173,315)
(624,947)
13,845,953
(2,793,363)
–
(52,608)
48
Zeta Resources Limited
4.
INVESTMENT IN SUBSIDIARIES
At fair value
June 2020
US$
June 2019
US$
Investment in Kumarina Resources Pty Limited ("Kumarina")
1,309,352
1,000,000
Investment in Zeta Energy Pte. Ltd. ("Zeta Energy")
Investment in Zeta Investments Limited (“Zeta Investments”)
Investment in Horizon Gold Limited (“Horizon Gold”)
1
1
15,107,981
16,417,335
1
1
–
1,000,002
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. Horizon Gold is measured using market price. Kumarina is valued
using resource and area multiples to value Kumarina’s two main projects, with further consideration to the remaining assets and
liabilities held by Kumarina. Kumarina is currently deemed to have a value of US$1,309,352. See note 25.4.
The remaining investments in subsidiaries are fair valued by the directors at a nominal value due to the fact that they hold no
significant assets, nor do they have any significant value. The Company had the following subsidiaries as at 30 June 2020:
30 June 2020
Kumarina incorporated in Australia
Zeta Investments incorporated in Bermuda
Zeta Energy incorporated in Singapore
Horizon Gold incorporated in Australia
30 June 2019
Kumarina incorporated in Australia
Zeta Investments incorporated in Bermuda
Zeta Energy incorporated in Singapore
5.
INVESTMENTS
Financial assets at fair value through profit or loss
Equity securities at fair value
Listed ordinary shares
Unlisted ordinary shares, subscription and other rights
Equity securities at cost
Listed ordinary shares
Unlisted ordinary shares, subscription and other rights
Number of
ordinary shares
26,245,210
1,000
1
52,826,967
Number of
ordinary shares
26,245,210
1,000
1
June 2020
US$
114,839,211
50,124,116
64,715,095
114,839,211
127,666,665
47,054,148
174,720,813
Percentage of
ordinary shares held
100%
100%
100%
69%
Percentage of
ordinary shares held
100%
100%
100%
June 2019
US$
129,928,110
89,521,947
40,406,163
129,928,110
109,256,914
44,173,811
153,430,725
During the reporting period the Company completed a total of 128 transactions (2019: 271 transactions) in securities.
See note 25.4 for disclosure of fair value determination of level 3 investments.
49
Annual Report for the year to 30 June 2020 NOTES TO THE FINANCIAL STATEMENTS
(continued)
6.
LOANS TO SUBSIDIARIES
Loan to Zeta Energy
Loan to Kumarina
LOAN TO SUBSIDIARIES – CURRENT
Loan to Horizon Gold
June 2020
US$
728,469
778,030
1,506,499
June 2019
US$
1,076,072
495,653
1,571,725
208,156
–
The loan to Zeta Energy is denominated in Australian dollars to the value of A$2,594,249 (2019: A$2,809,348), British pounds to
the value of UK£11,100 (2019: UK£11,100), New Zealand dollars to the value of NZ$6.16 million (2019: NZ$6.16 million), South
African rands to the value of R4,000 (2019: R4,000), Singapore dollars to the value of SG$28,162 (2019: SG$28,162) and United
States dollars to the value of US$(141,342) (2019: US$(147,581)). There are no fixed repayment terms except that no repayment
is due before 30 June 2021 and no interest is charged. During the year ended 30 June 2020, the loan to Zeta Energy, which was
utilised for the purchase of listed investments, was classified as under-performing due to internal indications that the Company
is unlikely to receive the full contractual amounts owed. The expected credit loss for this loan has been calculated based on the
lifetime Expected Credit Losses (“ECLs”). The directors calculated the ECLs by reviewing relevant forward-looking information that
is most relevant to the subsidiary including review of the company’ s assets and liabilities to suggest a value for the loan, there was
no change in the assessment of credit risk from the prior year. The impairment was based on the expected decrease in the value
of the underlying investment for the loan. As at the 30 June 2020 the ECLs calculated amounted to US$4,923,959.
The loan to Kumarina, used for working capital is denominated in Australian dollars and is interest free. There are no fixed
repayment terms. The loan is still performing as no contactual breaches have occurred and the value of the assets in Kumarina is
sufficient to cover all the liabilities. The impact of Covid-19 on Kumarina was not severe as the company is in the exploration phase.
The loan to Horizon Gold is denominated in Australian dollars to the value of A$300,000 and interest of 7.5% per annum. There
are no fixed repayment terms. During the year ended 30 June 2020 the loan was classified as performing as no contractual
breaches have occurred and the value of the assets in Horizon Gold is sufficient to cover all the liabilities.
A reconciliation of the impairment movement on the Zeta Energy loan can be seen below:
Opening balance of impairment
Additional impairments
Reversal of impairments
Amounts written off as bad debts
Closing impairment
7. OTHER LOAN
Loan to Bligh Resources Limited
8.
CASH AND CASH EQUIVALENTS
Cash balance comprises:
Cash at bank
June 2020
US$
4,916,284
7,675
–
–
June 2019
US$
3,898,147
1,018,137
–
–
4,923,959
4,916,284
June 2020
US$
–
June 2020
US$
June 2019
US$
625,822
June 2019
US$
12,082
104,715
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.
50
Zeta Resources Limited 9.
TRADE AND OTHER RECEIVABLES
Owing from Zeta Investments Pty Limited
Other receivables
June 2020
US$
–
–
–
June 2019
US$
476,088
32,249
508,337
The amount owing from Zeta Investments Pty Limited is denominated in Australian dollars and was a short-term balance in order
to purchase shares.
10. LOAN FROM SUBSIDIARY
Loan from Zeta Energy
June 2020
US$
–
June 2019
US$
2,508,840
As at 30 June 2019 the loan from Zeta Energy was denominated in Australian dollars to the value of A$2.63 million and New
Zealand dollars to the value of NZ$983,000 and attracted interest at rates between 4.35% and 6.85% per annum on the Australian
dollar loan and at 6.00% per annum on the New Zealand dollar loan. Zeta Energy in turn borrowed these funds from Leveraged
Equities on the same terms. In the current year the loan was transferred to the name of Zeta Resources Limited. See Note 12.
11. LOAN FROM PARENT
Loan from UIL Limited (“UIL”)
June 2020
US$
68,312,746
June 2019
US$
45,793,293
The loan is denominated in Australian dollars to the value of A$66.06 million (30 June 2019: A$40.103 million) and in Canadian
dollars to the value of CA$31.02 million (30 June 2019: CA$23.146 million), and currently attracts interest at 7.5% per annum
(30 June 2019: 7.5%) on the Australian dollar loan and 7.25% (30 June 2019: 7.25%) on the Canadian dollar loan. There are no
repayment terms and no repayment is due before 30 June 2021.
12. OTHER LOANS
Loan from ICM Limited
Loan from PPP
Loan from Leveraged Equities
Loan from Bermuda Commercial Bank Limited
June 2020
US$
436,569
1,614,293
1,761,393
2,500,000
6,312,255
June 2019
US$
3,983,509
1,980,510
–
3,750,000
9,714,019
The ICM Loan is denominated in Australian dollars to the value of A$631,100 (30 June 2019: A$5.69 million) and attracts interest at
7.5% per annum. The PPP Loan is denominated in Australian dollars to the value of A$2.34 million (30 June 2019: 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 2021.
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$1.25 million are scheduled on 30 September
2020 with the remaining balance payable on 30 September 2021.
The loan from Leveraged Equities is denominated in Australian dollars to the value of A$1.588 million and New Zealand dollars
to the value of NZ$1.035 million and currently attracts interest at rates between 4.35% and 6.85% per annum on the Australian
dollar loan and at 6.00% per annum on the New Zealand dollar loan. There are no fixed repayment terms except that no
repayment is due before 30 June 2021. In order to secure these loans Zeta Resources has pledged certain of its investments.
The shares pledged are Resolute Mining Limited (6,461,036 shares valued at US$5 million) and Panoramic Resources Limited
(6,363,635 shares valued at US$350,814).
51
Annual Report for the year to 30 June 2020
NOTES TO THE FINANCIAL STATEMENTS
(continued)
13. OTHER LOANS - CURRENT
Loan from Bermuda Commercial Bank Limited
June 2020
US$
1,250,000
The above US$1,250,000 represents the short-term portion of the loan owing to Bermuda Commercial Bank.
14. TRADE AND OTHER PAYABLES
Other liabilities
Amount owed to brokers
Accruals
June 2020
US$
26,979
2,368,352
261,050
2,656,381
June 2019
US$
1,250,000
June 2019
US$
–
178,761
294,656
473,417
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 $1 par shares
Shares split into 10,000,000 shares of US$0.00001 each
Issued in consideration for purchase of investments from UIL Limited
Issued in consideration for purchase of 100% of Kumarina Resources
Limited
Issued under initial public offering
Number of
shares
Share
capital
Share
premium
–
100
9,999,900
22,835,042
–
–
–
–
–
–
228
32,221,936
17,775,514
178
13,406,337
4,000
–
3,795
Issued under public rights issue dated 10 February 2014
42,616,164
426
19,249,296
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
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 3 April 2019
Share cancellation as a result of share buy-back 6 May 2019
Share cancellation as a result of share buy-back 6 June 2019
6,769,280
68
1,351,677
11,914,689
86,461,440
119
865
3,467,556
17,330,823
90,144,895
901
36,065,072
(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
Share cancellation as a result of share buy-back 2 July 2019
Share cancellation as a result of share buy-back 2 April 2020
(50,000)
(70,000)
–
(1)
(11,096)
(11,184)
Balance as at 30 June 2020
287,643,076
2,777
122,874,923
52
Zeta Resources Limited 16.
INVESTMENT RETURNS
Revenue
Dividend income
Interest income
Investment loss
Derived from financial instruments measured at fair value
Realised gains
Unrealised fair value losses on revaluation of investments
Unrealised fair value gains on revaluation of investments
Derived from financial instruments measured at amortised cost
Impairment of loan to Zeta Energy
17. OTHER INCOME
Foreign exchange gains
Other income
18. MANAGEMENT AND CONSULTING FEES
Management and consulting fees
June 2020
US$
21,483
83,251
104,734
20,503,342
(64,176,357)
32,464,090
(7,676)
(11,216,601)
(11,111,867)
June 2020
US$
903,005
18,847
921,852
June 2020
US$
778,505
June 2019
US$
228,742
43,036
271,778
4,885,621
(67,369,091)
17,377,719
(1,018,137)
(46,123,888)
(45,852,110)
June 2019
US$
907,680
932,249
1,839,929
June 2019
US$
694,181
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 (2019: US$ Nil).
Either party may terminate the agreement with six months’ notice.
53
Annual Report for the year to 30 June 2020
NOTES TO THE FINANCIAL STATEMENTS
(continued)
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
Brokerage
Other expenses
20.
INCOME TAX
Taxation regarding the sale of Bligh Resources Limited
June 2020
US$
June 2019
US$
144,227
38,729
59,352
40,819
146,570
110,322
540,019
June 2020
US$
6,241,445
162,940
21,829
118,601
13,781
56,830
141,874
515,855
June 2019
US$
–
Australian taxation has been accrued in full with regards to the sale of the investment in Bligh Resources Limited. At 30 June
2020 there is uncertainty over the tax treatment of gains arising from the sale of the investment by the Australian tax authority
on whether the transaction is taxable Australian property (“TAP”) or non-TAP. Although management has argued that the sale
pertains to non-TAP, and alternatively not Australian source income (and therefore not taxable either) and external taxation
advice confirms both these viewpoints, the Australian tax authority has not progressed far enough with their investigation for
management to take a different view to the mid-year position taken. Of this taxation amount accrued, US$3,358,213 has already
been paid as a withholding tax.
The Company has not raised deferred tax assets of US$15 million on potential unrealised Australian capital losses (at year-end
amounting to US$50 million) where there are insufficient capital gains of the same nature against which to utilise those losses.
The Company is domiciled in Bermuda and has elected to be tax exempt in terms of local legislation. As such no tax is payable.
21. EARNINGS PER SHARE
Basic and diluted loss per share
June 2020
US$
(0.08)
June 2019
US$
(0.17)
Loss used in calculation of basic and diluted earnings per share
(22,367,826)
(48,687,361)
Weighted average number of ordinary shares outstanding during the year used
in calculation of basic and diluted earnings per share
287,696,473
288,202,064
54
Zeta Resources Limited 22. NOTES TO THE CASH FLOW STATEMENT
22.1 Cash generated/(utilised) by operations
Loss for the year
Adjustments for:
Realised gains on investments
Fair value loss on revaluation of investments
Impairment of loan to Zeta Energy
Foreign exchange gains
Taxation expense
Dividend income
Interest income
Interest expense
Operating loss before working capital changes
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
22.2 Liabilities from financing activities
Balance as at 30 June 2018
Cash flows
- Repayment of loans
- Advances of loans received
Exchange rate fluctuations
Interest capitalised
Loan reallocation
Loan from
parent
30,151,190
–
13,845,953
(680,670)
2,476,820
–
Loan from
subsidiary
5,235,527
(5,402,381)
2,609,018
(221,922)
288,598
–
Balance as at 30 June 2019
45,793,293
2,508,840
Cash flows
- Repayment of loans
- Advances of loans received
Exchange rate fluctuations
Interest capitalised
Loan transfer
(27,794,521)
46,043,589
336,032
3,934,353
(2,788,630)
1,897,066
(133,287)
140,356
–
(1,624,345)
Balance as at 30 June 2020
68,312,746
–
23. AUDITOR REMUNERATION
Amounts received or due and receivable by the auditors for audit of
financial statements
June 2020
US$
June 2019
US$
(22,367,826)
(48,687,361)
(20,503,342)
31,712,267
7,676
(903,005)
6,241,445
(21,483)
(83,251)
4,434,509
(1,483,010)
508,337
2,182,964
1,208,291
(4,885,621)
49,991,372
1,018,137
(907,680)
–
(228,742)
(43,036)
3,315,144
(427,787)
(508,337)
(1,200,607)
(2,136,731)
Other
loan
Total
4,000,000
39,386,717
–
4,969,323
(79,804)
–
2,074,500
10,964,019
(8,196,272)
3,189,313
(30,547)
11,397
1,624,345
7,562,255
(5,402,381)
21,424,294
(982,396)
2,765,418
2,074,500
59,266,152
(38,779,423)
51,129,968
172,198
4,086,106
–
75,875,001
June 2020
US$
June 2019
US$
38,729
21,829
55
Annual Report for the year to 30 June 2020
NOTES TO THE FINANCIAL STATEMENTS
(continued)
24. GOING CONCERN
The financial statements have been prepared on a going concern basis. We draw attention to the fact that at 30 June 2020, the
Company incurred a net loss of $22,367,826 (2019: $48,687,361) during the year and had accumulated losses of $71,257,569 (2019:
$48,889,743) and that the Company’s current liabilities exceed its current assets by $6,517,913 (2019: $1,110,365). The Company has
undrawn capacity under its debt facilities and majority of the Company’s assets consist of equity shares in listed companies which
in most circumstances are realisable within a short timescale. Based on this, the directors believe the Company will be able to cover
the commitments arising in the period 12 months from the date of approval of these financial statements. 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.
On 11 March 2020 the World Health Organisation declared Covid-19 as a pandemic with many countries implementing lock down
procedures. The impact of Covid-19 was adjusted for in the 2020 figures. Covid-19 is a risk to producing mines, as the governments of
some countries may choose to close mines temporarily to reduce transmission risk. On the other hand, closure of some mines reduced
the global supply of the affected commodities, increasing prices for those mines able to stay in production. Also, quantitative easing
operations by central banks in response to Covid-19’s impact on economies has increased demand for gold. Overall, Zeta Resources’
performance has not been affected to a large extent, but the directors acknowledge the uncertainty over the 12 months ahead.
The value of investments have remained fairly constant after year end. The value of the investments is sufficient to cover the liabilities
which allows Zeta Resources to continue as a going concern.
Refer to note 28 for detail of the changes in investment value after year end.
.
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.
The table below sets out the Company classification of each class of financial assets and liabilities. All assets and liabilities
approximate their fair values:
Financial assets
mandatorily measured
at fair value through
profit or loss
US$
Financial
assets/liabilities
measured at
amortised cost
US$
16,417,335
114,839,211
–
–
–
131,256,546
–
–
–
–
–
–
–
1,506,499
208,156
12,082
1,726,737
2,656,381
68,312,746
7,562,255
2,831,770
81,363,152
Total
carrying value
US$
16,417,335
114,839,211
1,506,499
208,156
12,082
132,983,283
2,656,381
68,312,746
7,562,255
2,831,770
81,363,152
30 June 2020
Assets
Investments in subsidiaries
Investments
Loans to subsidiaries
Other loan
Cash and cash equivalents
Liabilities
Trade and other payables
Loan from parent
Other loans
Tax payable
56
Zeta Resources Limited
Financial assets
mandatorily measured
at fair value through
profit or loss
US$
Financial
assets/liabilities
measured 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
473,417
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
Loans from subsidiary
Trade and other payables
Loan from parent
Other loans
25.1 Market risks
The fair value of equity and other financial securities held in the Company’s portfolio fluctuate 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 2020 and the average rates for the year were as follows:
AUD – Australian dollar
CAD – Canadian dollar
NZD – New Zealand dollar
June 2020
Average
June 2019
Average
0.6891
0.7345
0.6444
0.6951
0.7491
0.6577
0.7011
0.7637
0.6709
0.7153
0.7554
0.6707
57
Annual Report for the year to 30 June 2020
NOTES TO THE FINANCIAL STATEMENTS
(continued)
25. FINANCIAL RISK MANAGEMENT (continued)
25.1 Market risks (continued)
The Company’s monetary assets and liabilities at 30 June 2020 (shown at fair value), by currency based on the country of primary
operations, are shown below:
Net monetary (liabilities)/assets
(4,110,734)
(71,246,271)
(31,021,016)
5,128,380
30 June 2020
Cash and cash equivalents
Loans to subsidiaries
Loan from parent
Other loan
Other loans
Trade and other payables
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
USD
8,079
AUD
5,763
(141,342)
2,594,249
CAD
–
–
NZD
49
6,163,507
(66,063,323)
(31,021,016)
–
–
300,000
(3,750,000)
(4,563,969)
(227,471)
(3,518,991)
–
–
(1,035,176)
–
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)
(234,060)
–
725,092
–
–
–
–
–
–
–
–
–
–
–
Net monetary (liabilities)/assets
(5,384,775)
(46,016,586)
(23,380,469)
5,180,643
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 2020
(Decrease)/increase in total comprehensive income
for the year ended 30 June 2019
Weakening of the United States dollar
Increase/(decrease) in total comprehensive income
for the year ended 30 June 2020
Increase/(decrease) in total comprehensive income
for the year ended 30 June 2019
AUD
CAD
NZD
Total
(4,995,076)
(2,369,075)
344,063
(7,020,088)
(4,362,044)
428,160
(349,609)
(4,283,493)
4,995,076
2,369,075
(344,063)
7,020,088
4,362,044
(428,160)
349,609
4,283,493
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.
58
Zeta Resources Limited Interest rate exposure
The exposure of the financial assets and liabilities to interest rate risks at 30 June 2020 and at 30 June 2019 is shown below:
30 June 2020
Exposure to floating rates:
Cash
Other loans
Loan from subsidiary
Exposure to fixed rates:
Loan from parent
Other loan liabilities
Loans to subsidiaries
30 June 2019
Exposure to floating rates:
Cash
Other loans
Loan from subsidiary
Exposure to fixed rates:
Loan from parent
Other loans
Other loan
Within
one year
US$
Greater than
one year
US$
12,082
(1,250,000)
–
–
(2,500,000)
–
Total
US$
12,082
(3,750,000)
–
(1,237,918)
(2,500,000)
(3,737,918)
–
–
–
–
Within
one year
US$
104,715
(1,250,000)
–
(1,145,285)
–
–
–
–
(68,312,746)
(2,197,962)
208,156
(68,312,746)
(2,197,962)
208,156
(70,302,552)
(70,302,552)
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)
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$65,232,097 at 30 June 2020 (30 June 2019: US$89,521,947) 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$6,523,210. A 10% appreciation in the market price would have the opposite effect. See note 25.4 for unlisted investment
sensitivity analyses.
59
Annual Report for the year to 30 June 2020 NOTES TO THE FINANCIAL STATEMENTS
(continued)
25. FINANCIAL RISK MANAGEMENT (continued)
25.2 Liquidity risk exposure
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Company’s reputation. The Investment Manager reviews liquidity at the time of making each investment decision.
The risk of the Company having insufficient liquidity is not considered by the board to be significant, given the amount of quoted
investments held in the Company’s portfolio and the existence of an on-going loan facility agreement.
The contractual maturities of the financial liabilities, based on the earliest date on which payment can be required, were as follows:
30 June 2020
Trade and other payables
Loans from parent
Other loans
Tax payable
30 June 2019
Loan from subsidiary
Trade and other payables
Loans from parent
Other loans
Three months
or less
US$
2,656,381
–
1,331,250
2,831,770
6,819,401
Three months
to one year
US$
More than
one year
US$
Total
US$
–
–
–
2,656,381
73,378,972
73,378,972
3,943,875
2,662,500
–
–
7,937,625
2,831,770
3,943,875
76,041,472
86,804,748
Three months
or less
US$
Three months
to one year
US$
–
2,652,780
473,417
–
1,331,250
1,804,667
–
–
6,244,100
8,896,881
More than
one year
US$
–
–
49,183,630
3,993,750
53,177,380
Total
US$
2,652,780
473,417
49,183,630
11,569,100
63,878,928
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$1,714,655 (2019: US$2,197,547) and bank balances totalling US$12,082 (2019:
US$104,715) 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-).
60
Zeta Resources Limited 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.
Valuation of financial instruments
The table below analyses financial assets measured at fair value at the end of the year by the level in the fair value hierarchy into
which the fair value measurement is categorised:
Level 1
The fair values are measured using quoted prices in active markets.
Level 2
Level 3
The fair values are measured using inputs, other than quoted prices, that are included within level 1,
that are observable for the asset.
The fair values are measured using inputs for the asset or liability that are not based on observable market data.
The directors make use of recognised valuation techniques and may take account of recent arms’ length transactions
in the same or similar investments.
The directors regularly review the principles applied by the Investment Manager to those valuations to ensure they comply with the
Company’s accounting policies and with fair value principles.
Level 3 financial instruments
Valuation methodology
The 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
Seacrest is a private equity fund that invests in the global offshore oil and gas industry. Seacrest’s sole asset is its investment
in the Azimuth Group (“Azimuth”), which in turn owns a number of operating subsidiaries in different regions across the world.
Seacrest produces quarterly reports in accordance with IFRS 9. The valuation is based on the latest management report
available at 30 June 2020 (quarter end 31 March 2020). 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 Partner and is audited annually at 31 December.
General Partner makes use of the market approach which includes resource multpiles or comparable arm’s length
transactions. 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. At year end the fair value of the investment was US$1,166,810.
Sensitivities: The valuation performed by General Partner is sensitive to the resources multiples used and the defined resource
in each asset. Possible changes to these inputs are deemed to be insignificant to the fair value of Seacrest.
Margosa Graphite Limited (“Margosa”) – Australia incorporated
The unlisted investment comprises an equity interest in Margosa, a mineral exploration and development company focused
on high grade vein graphite opportunities in Sri Lanka with granted licenses to a package of highly prospective tenements. The
most advanced project area is the Pathakada Graphite Project (“Pathakada Project”) for which Margosa completed a JORC-2012
resource estimate in April 2020 of 1.72 Mt at a grade of 76.32%, implying a total graphitic content of 1.32 Mt.
Valuation methodology: The market approach has been used for the valuation of Margosa in the form of precedent transactions
involving Margosa shares at a price of A$0.35 per share and supported by resource and area multiples from comparable
transactions. Six comparable transactions were used in the resource multiple analysis and four in the area multiple analysis.
At year end the fair value of the investment was US$6.2 million.
Sensitivities: The fair value of Margosa is considered to be less sensitive to changes in inputs and assumptions.
61
Annual Report for the year to 30 June 2020
NOTES TO THE FINANCIAL STATEMENTS
(continued)
25. FINANCIAL RISK MANAGEMENT (continued)
25.4 Fair values of financial assets and liabilities (continued)
Alliance Mining Commodities Limited (“AMC”) – Australia incorporated
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. AMC aims to develop the Koumbia Project into
an operation with steady-state production of approximately 11 million wet tonnes per annum from surface mining operations.
Valuation methodology: As a result of the nature of AMC’s assets, the nature of financial information available and the relevant
market participants, a comparable market valuation based on resources multiples from four broadly comparable bauxite
projects was used and supported by a discounted cash flow analysis. At year end the fair value of the investment was
US$57 million.
Sensitivities: The fair value of Zeta’s equity interest in AMC is sensitive to the available resource multiples for comparable
bauxite transactions observed in the market. An increase in the multiple used could significantly increase the fair value
determined. A possible alternative mutiple represents an increase of 0.1 A$/t to the multiple which can cause an increase of
US$28.5 million Zeta Resources’ equity interest in AMC.
(b)
Investments in subsidiaries
Kumarina Resources Pty Limited (“Kumarina”) - Australia incorporated
Kumarina is a mineral exploration company with two prospective copper and gold projects located in Western Australia,
the Ilgarari Copper Project and the Murrin Murrin Gold Project. Kumarina’s primary focus has been the exploration and
development of the Murrin Murrin Gold Project, which is located 50 km east of Leonora in the north-eastern Goldfields.
Valuation methodology: The market approach for the valuation of Kumarina has been used in the forms of resources multiples
from comparable transactions and area multiples from comparable transactions. The most recent mineral resource estimate
for the Murrin Murrin Gold project and the tenement area of the Illgari Copper Project were used. Eighteen copper and thirty
gold comparable transactions were used in the analysis. The area of Ilgarari Copper project is 457km² and a value of A$3,000
per km² was used. The Murrin Murrin project has a resource estimate of 52,100 oz and a value of A$30 per oz was used. At
year end the fair value of the investment was US$1.3 million.
Sensitivities: The methodology used is sensitive to the chosen resource multiples for comparable gold transactions and area
multiples for comparable copper transactions observed on the market. The magnitude of these multiples are primarily driven
by commodity prices and market conditions. The fair value of Zeta Resources’ equity interest in Kumarina is also sensitive to the
level of JORC Code 2012 gold resource for the Murrin Murrin Gold Project. An increase in the resource and area multiples will
result in an increase in the value of the investment. Possible alternative mutiples represent an increase in the tenemant size
multiple of 3,000 A$/km² and an increase in the resources multiple of 10 A$/oz which can cause increase of US$1.3 million Zeta
Resources’ equity interest in Kumarina.
Other investments
Zeta Resources has further investments at fair value totalling US$343,698 (2019: US$178,000).
30 June 2020
Financial assets
Investments
Investment in subsidiaries
Level 1
US$
Level 2
US$
Level 3
US$
50,124,116
15,107,981
–
–
64,715,095
1,309,354
There have been no movements between the level 1 and level 3 categories.
62
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 2019
Acquisitions at cost
Disposals during the year
Reclassification to amortised cost
Total gains recognised in fair value through
profit or loss
Balance at 30 June 2020
Level 3
investments
US$
40,406,163
3,213,491
–
–
Level 3
investments
in subsidiaries
US$
1,000,002
–
–
–
21,095,441
64,715,095
309,352
1,309,354
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.
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
Level 3
investments
US$
25,711,750
10,343,504
–
–
Level 3
investments
in subsidiaries
US$
2,103,504
–
(4)
–
4,350,909
(1,103,499)
Balance at 30 June 2019
40,406,163
1,000,002
Level 3
loans to
subsidiaries
US$
379,690
–
–
(379,690)
–
–
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.
63
Annual Report for the year to 30 June 2020
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
Wholly owned subsidiaries include Kumarina, Zeta Energy and Zeta Investments. Zeta Resources holds 69% of Horizon Gold’s
issued share capital. PPP is a subsidiary of Zeta Energy.
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
Horizon Gold
Loans to related parties:
Kumarina
Zeta Energy
Zeta Investments Proprietary Limited
Horizon Gold
Bligh Resources Limited
Loans from related parties:
UIL Limited
Zeta Energy
PPP
ICM Limited
Trade and other payables:
ICM Limited
Directors
Impairment of loan to subsidiary
Interest relates to loans measured at amortised cost
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
M Botha
P Sullivan
X Xi
A Liebenberg
64
June 2020
US$
June 2019
US$
1,309,352
1,000,000
1
1
1
1
15,107,981
1,566,125
778,030
728,469
–
208,156
–
68,312,746
–
1,614,293
436,569
139,708
50,000
7,676
135,680
3,934,353
76,656
65,926
592,691
50,000
50,000
50,000
33,333
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
1,018,137
288,598
2,476,820
241,948
30,187
677,467
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
Administration: activities relating to financing received which does not specifically relate to any one segment as well as
administrative activities
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.
In the current year an additional segment has been included, the comparative amounts have been updated accordingly. The
administration segment has been added due to the high value of the funding received for reinvestment.
Information about reportable segments
30 June 2020
Gold
US$
Nickel
US$
Mineral
exploration
US$
Admin
US$
Total
US$
External investment returns
10,192,858
(37,701,884)
16,321,583
75,576
(11,111,867)
Reportable segment investment
returns
Interest revenue
Interest expense
Reportable segment profit/(loss)
before tax
10,192,858
(37,701,884)
16,321,583
75,576
(11,111,867)
–
–
–
–
–
–
83,251
83,251
(4,434,509)
(4,434,509)
3,840,668
(37,078,372)
16,275,288
(5,405,410)
(22,367,826)
Reportable segment assets
20,644,737
24,285,439
87,104,399
948,708
132,983,283
Reportable segment liabilities
(2,368,352)
–
–
(78,994,800)
(81,363,152)
30 June 2019
Gold
US$
Nickel
US$
Mineral
exploration
US$
Admin
US$
Total
US$
External investment returns
10,955,989
(52,573,430)
(4,282,821)
48,152
(45,852,110)
Reportable segment investment
returns
Interest revenue
Interest expense
Reportable segment profit/(loss)
before tax
10,955,989
(52,573,430)
(4,282,821)
48,152
(45,852,110)
–
–
–
–
–
–
43,036
43,036
(3,315,144)
(3,315,144)
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)
During the year there were no transactions between segments which resulted in income or expenditure.
65
Annual Report for the year to 30 June 2020 NOTES TO THE FINANCIAL STATEMENTS
(continued)
27. SEGMENTAL REPORTING (continued)
Geographic information
In presenting information on the basis of geography, segment investment returns and segment assets are based on the
geographical location of the operating assets of the investment held by the Company.
Investment returns
Australia
Canada
Guinea
Mali
Namibia
Singapore
Sri Lanka
Other Countries
Investment returns
Assets
Australia
Canada
Guinea
Mali
Namibia
Singapore
Sri Lanka
Other Countries
Assets
June 2020
US$
(23,284,932)
(4,053,511)
22,372,102
(1,211,389)
(919,101)
(7,676)
2,027,710
(6,035,070)
June 2019
US$
(40,981,429)
(6,163,243)
5,569,813
(614,658)
(754,640)
(1,018,136)
(130,813)
(1,759,004)
(11,111,867)
(45,852,110)
June 2020
US$
44,652,648
16,527,961
57,000,000
3,184,602
792,626
728,469
6,196,163
3,900,813
June 2019
US$
74,027,756
13,408,527
32,784,651
4,385,458
2,733,873
1,076,072
2,804,262
2,518,112
132,983,283
133,738,711
28. EVENTS AFTER REPORTING DATE
28.1 Horizon Gold Limited
Zeta Resources has taken up its entitlement in the Horizon Gold renounceable entitlement issue for an amount of A$1.6 million and
the loan to Horizon Gold was repaid as part of the payment due. Zeta Resources now holds 69.35% of the issued share capital.
28.2 Bonus Option issue
On 10 September Zeta Resources offered a bonus issue of Options to its shareholders. Eligible Shareholders who hold Shares on
the Record Date are offered one (1) Option (“Bonus Option”) for every one (1) Share held on the Record Date. The Bonus Options
have no issue price, will be exercisable at A$0.25 each and expire on 15 June 2021.
28.3 Covid-19
It is uncertain what the long term impact of Covid-19 will be and as stated in note 24 the impact of lock-down procedures would
not necessarily result in a downward adjustment of investments held by Zeta Resources.
The value of the investments have recovered since 30 June 2020. The value of level 1 investments disclosed in note 25.4,
on 31 August was $82 million and the value of level 3 investments at 31 August 2020 was $66 million.
No additional impairment for the loan to subsidiary was identified up to 31 August 2020 as the value of the underlying assets in
the subsidiaries have not decreased any further since year-end.
66
Zeta Resources Limited
SHAREHOLDER INFORMATION
SUBSTANTIAL SHAREHOLDERS
As at 7 September 2020, 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
172,354,809
90,144,895
262,499,704
59.92
31.34
91.26
TOP 20 HOLDINGS OF FULLY PAID ORDINARY SHARES AS AT 7 SEPTEMBER 2020
NAME
SHARES
% OF ISSUED CAPITAL
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
GENERAL PROVINCIAL LIFE PENSION FUND LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR JAMES NOEL SULLIVAN
HARDROCK CAPITAL PTY LTD – CGLW NO 2 SUPER FUND A/C
HARDROCK CAPITAL PTY LTD
MR SEAN DENNEHY
BURNAL PTY LTD
CHERRYBURN PTY LTD – BURROWS SUPER FUND A/C
CALIMO PTY LTD
CITICORP NOMINEES PTY LIMITED
BLESSED INVESTMENTS PTY LIMITED – GREEN FAMILY S/F A/C
ACS (NSW) PTY LIMITED – ACS FAMILY SUPER FUND A/C
UURO PTY LTD
MISS ALEXANDRA MAREE SAVILLE
MR BRIAN GREEN
MR JAMES NOEL SULLIVAN & MRS GAIL SULLIVAN – SULLIVANS GARAGE
S/F A/C
SUPER SECRET PTY LIMITED – KOCZ SF A/C
NALMOR PTY LTD JOHN CHAPPELL SUPER FUND A/C
ROYAL SUNSET PTY LTD
ANNE CONEY
Total for top 20
172,354,809
90,144,895
9,410,830
1,308,595
600,000
600,000
498,566
450,000
376,160
356,017
341,145
335,000
295,000
250,000
241,778
215,000
200,000
162,855
162,000
145,000
130,000
59.92
31.34
3.27
0.45
0.21
0.21
0.17
0.16
0.13
0.12
0.12
0.12
0.10
0.09
0.08
0.07
0.07
0.06
0.06
0.05
0.05
278,577,650
96.85
67
Annual Report for the year to 30 June 2020 SHAREHOLDER INFORMATION (continued)
DISTRIBUTION SCHEDULE OF ORDINARY SHARES HELD AT 7 SEPTEMBER 2020
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
7,951
2,641,734
1,184,811
4,763,052
279,045,528
287,643,076
NO. OF ORDINARY
SHAREHOLDERS
% OF ISSUED
CAPITAL
28
983
155
181
25
1,372
0.00
0.92
0.41
1.66
97.01
100.00
The number of shareholders holding less than a marketable parcel of ordinary shares at 7 September 2020 is 541
and they hold 953,983 securities.
VOTING RIGHTS
All ordinary shares carry one vote per share without restriction.
68
Zeta Resources Limited COMPANY INFORMATION
Zeta Resources Limited
Company ARBN: 162 902 481
www.zetaresources.limited
DIRECTORS (NON-EXECUTIVE)
Peter Sullivan (Chairman)
Marthinus (Martin) Botha
André Liebenberg
Xi Xi
REGISTERED OFFICE
34 Bermudiana Road
Hamilton HM 11
Bermuda
Company Registration Number: 46795
AUSTRALIAN REGISTERED 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
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
Mazars
Mazars House
Grand Moorings Precinct
Century City 7441
Cape Town
South Africa
DEPOSITORY
JP Morgan Chase Bank NA
London Branch
25 Bank Street
Canary Wharf
London E14 5JP
United Kingdom
REGISTRAR
Automic Pty Ltd
GPO Box 5193
Sydney NSW 2001
Australia
Telephone: +61 2 9698 5414
STOCK EXCHANGE LISTING
The company’s shares are quoted on the Official List of
the Australian Securities Exchange. Ticker code: ZER
69
HEADINGAnnual Report for the year to 30 June 2020 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