2021
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.
Panoramic Resources Limited
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 2021 CONTENTS
1 Why Zeta Resources Limited?
PERFORMANCE
3
4
5
6
Chairman’s Statement
Group Performance Summary
Current Year Performance
Geographical Investment Exposure
INVESTMENTS
7
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
33 Corporate Governance Statement
FINANCIAL STATEMENTS
35
Independent Auditor’s Report
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
November 2021
Half Year
31 December
Half Year Announcement
February
Front cover image – Alliance Mining
Commodities Limited
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 standout investment of the year under review
was Copper Mountain Mining Corporation.
I am very pleased to report
that Zeta has enjoyed its best
year ever. A combination of
factors combined to produce a
gratifying result, with a net profit
for the year of US$114.7m. Net
assets per share (after adjusting
historical figures for the
September 2020 bonus option
issue) more than doubled.
PETER SULLIVAN
Chairman
In short, the primary reason behind
Zeta’s success this year was a
strong performance by industrial
commodities. While gold basically trod water, copper
was up 52.8%, aluminium rose 57.1%, nickel rose 44.2%,
and Brent oil was up 77.2%. By investing in mining
companies rather than directly in the commodities, Zeta
enjoyed the benefit of operating leverage as the share
prices of its investments grew faster than the underlying
commodity prices.
The standout investment of the year under review was
Copper Mountain Mining Corporation, whose share
price rose 485.5%. During the year, Copper Mountain
enjoyed the benefit of the strong rise in the price of
copper, but also achieved record production as a
result of earlier significant investment into improving
operating capability. Copper Mountain started the
year with significant debt, and as a result its improved
performance was leveraged in both an operational and
financial sense. Pleasingly, the company also announced
a new life of mine plan for its core mine in British
Columbia, and when combined with the prospect of
developing its Little Eva mine in Australia, the future
looks bright for the company. Zeta remains the largest
shareholder in Copper Mountain.
As a portfolio, our other investments also performed
well, albeit not to the same level as Copper Mountain.
Zeta’s investment in Alliance Mining Commodities,
which owns a world-class bauxite resource in Guinea,
continues to work towards developing this asset.
Western Australian nickel firm Panoramic Resources
enjoyed a much better year than the previous, with its
share price rising 75.0% during the year as the company
works towards a full restart of its Savannah nickel mine.
While the price of gold is the one commodity in Zeta’s
portfolio which has declined, albeit very slightly, we
continue to be pleased with Zeta’s investment in Horizon
Gold, which has been releasing a steady stream of
positive drilling results.
There has recently been much attention paid to the so
called “battery metals”. Long-term shareholders in Zeta
will know that the Company has for some time targeted
such commodities. However, it is worth highlighting
that the strong demand for electric vehicles (“EVs”)
globally impacts all three of Zeta’s largest investments.
The switch from internal combustion engines to electric
propulsion requires a significant increase in copper
usage. Nickel is the largest component by weight in the
most common forms of lithium-ion batteries and nickel
demand for this use is still in its early days. The focus on
energy efficiency will lead to increased use of aluminium
in car frames and other machinery instead of steel.
Aside from EVs, the world continues to grapple with
the covid-19 pandemic and its emerging variants. The
combination of fiscal stimulus and supply shortages due
to covid-related mine shutdowns have both contributed
to the strong uplift in industrial commodity prices.
Looking forward, it is unclear how long the pandemic
will last, and whether the world will ever return to a
pre-pandemic “normal”. For now, Zeta continues to see
increasing value in its investments driven primarily by
increasing demand.
We continue to see our shares trading at a significant
discount to the underlying net tangible asset backing.
Apart from the value add we obtain for shareholders
through our share buy-back programme, we are
exploring other strategies that may help close this
discount.
Finally, I would note the pleasing uptake of the Zeta
options which expired on 15 June 2021. With over 96%
of the options exercised, netting A$69.7 million, this was
a significant strengthening of the balance sheet and
positions us well for further investment opportunities.
Thank you for your ongoing support.
Peter Sullivan
Chairman
23 September 2021
3
Annual Report for the year to 30 June 2021 GROUP PERFORMANCE SUMMARY
30 June
2021
30 June
2020
% change
2021/20
Total return(1) (annual) (%)
102.7
(30.0)
Net tangible asset per ordinary share(2) (Australian cents)
Ordinary share price (Australian cents)
Discount (%)
Profit/(loss) per ordinary share(3) (US dollars)
Dividends per ordinary share
Equity holders' funds (US$m)
Gross assets(4) (US$m)
Cash (US$m)
Other debt (US$m)
Net debt (US$m)
Net debt gearing on gross assets (%)
51.9
43.0
17.1
0.33
Nil
220.2
260.0
1.4
(39.8)
(39.4)
15.2
25.6*
18.0
29.7
(0.07)*
Nil
99.5*
175.4*
0.0
(75.9)
(75.9)
43.3
442.4
102.7
138.9
(42.3)
571.4
n/a
121.3
48.2
n/a
(47.6)
(49.4)
n/a
(1)
(2)
Total return is calculated based on NTA per share return plus dividends reinvested from the payment date.
The NTA is calculated based on 566,004,068 shares on issue as at 30 June 2021, and 287,643,076 shares on issue as at
30 June 2020.
(3)
Earnings per share is based on the weighted average number of shares in issue during the year adjusted for the
bonus element of options exercised in 2021.
(4) Gross assets less liabilities excluding loans.
* Comparative information has been adjusted for the options exercised in 2021.
n/a = not applicable
Panoramic Resources Limited
4
Zeta Resources Limited
CURRENT YEAR PERFORMANCE
NAV TOTAL RETURN
PER ORDINARY SHARE
SHARE PRICE RETURN
PER SHARE
NAV DISCOUNT
AS AT 30 JUNE 2021
GEARING
102.7%
138.9% 17.1%
14.8%
EARNINGS PER SHARE
ORDINARY SHARES
BOUGHT BACK
AVERAGE PRICE OF
ORDINARY SHARE
BOUGHT BACK
ONGOING CHARGES
(EXCLUDING
PERFORMANCE FEE)
US$0.33
1,287,056 A$0.36
1.5%
TOTAL RETURN COMPARATIVE PERFORMANCE*
since inception on 12 June 2013 to 30 June 2021
200.00
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
Jun 18
Jun 19
Jun 20
Jun 21
Zeta Share Price
S&P/ASX 200 Energy
S&P/ASX 300 Metals & Mining
*AUD, rebased to 100 as at 12 June 2013. Zeta share price adjusted for February
2014 entitlement issue and diluted for the September 2020 bonus option issue
Source: ICM and S&P Dow Jones Indices
5
Annual Report for the year to 30 June 2021 GEOGRAPHICAL INVESTMENT EXPOSURE
(% OF TOTAL INVESTMENTS)
CANADA
June 2021
June 2020
37.2%
12.5%
AUSTRALIA
June 2021
June 2020
33.0%
33.8%
GUINEA
June 2021
June 2020
22.9%
43.4%
SRI LANKA
June 2021
June 2020
Source: ICM
5.3%
4.7%
OTHER
June 2021
June 2020
1.6%
5.6%
6
Zeta Resources Limited INVESTMENT MANAGER’S REPORT
Copper Mountain Mining Corporation
The year under review was
a strong year for industrial
commodity prices. Looking
back, the uplift began during
the end of the previous
financial year, but quickened
in pace in late 2020 with the
announcement of multiple
covid-19 vaccines that
demonstrated good efficacy
against the coronavirus.
Commodity prices appear to
have stabilised in the second
half of the financial year, settling into trading ranges,
albeit on average some 50% higher than the year
before.
DUGALD MORRISON
Gold did not enjoy the same uplift in price
experienced by industrial commodities. Gold did not
rise despite a stimulatory monetary and fiscal policy
in the United States, and in fact the loose monetary
policy by the US Federal Reserve led to a weakening
in the US dollar against most currencies that
stretched from March 2020 until around May 2021.
Gold prices in currencies other than US dollars were
thus, in general, down for the year.
Turning to Zeta’s commodity exposures, the most
significant change was a strong uplift in the share price
of Copper Mountain Mining (discussed below).
At the start of the year, Zeta had 43.4% of gross assets
in bauxite, 17.9% in gold, 13.9% in nickel and 13.5%
in copper. By the end of the year, the top commodity
exposures were 38.5% in copper, 22.9% bauxite,
14.4% gold, and 12.3% nickel.
As a leveraged investment company with small
company exposure, the increase in commodity prices
was exacerbated in Zeta’s NAV performance. During
the year under review, Zeta’s net assets per share
doubled from A$0.26 to A$0.52. For comparison, the
S&P/ASX 200 Energy index rose 6.9% over the same
period, and the S&P/ASX 300 Metals & Mining index,
which includes gold mining stocks, rose 29.7%. Zeta’s
share price rose from A$0.18 to A$0.43. At the start
of the period the share price was at a 29.7% discount
to net assets; at the end of the period the share price
was at a 17.1% discount to net assets.
Zeta ended the financial year with a much lower
level of gearing, as a result of growth in the value of
its investment assets, coupled with new equity from
the exercise of options. In September 2020, Zeta
issued new options on a 1:1 basis. The options had an
exercise price of A$0.25 and an expiry date of 15 June
2021. A total of 278,770,100 options were exercised,
representing an investment of c. US$54 million in new
equity. At the start of the financial year, Zeta had a net
debt (total loans less cash) to equity ratio of 147%; by
the end of the year the ratio was 17%.
7
Annual Report for the year to 30 June 2021
INVESTMENT MANAGER’S REPORT
(continued)
IN THE YEAR TO 30 JUNE 2021
CANADA IS ZETA’S
LARGEST COUNTRY EXPOSURE
AT 37.2%
AUSTRALIA IS ZETA’S SECOND
LARGEST COUNTRY EXPOSURE
AT 33.0%
GUINEA IS ZETA’S THIRD
LARGEST COUNTRY EXPOSURE
AT 22.9%
24.7%
0.8%
20.5%
Note: decreases/increases refer to the movement in the portfolio percentage of the relevant country
SECTOR SPLIT OF INVESTMENTS
29
Cu
28
Ni
Copper
Bauxite
Gold
38.5%
(13.5%)
13
AI
22.9%
(43.4%)
79
Au
14.4%
(17.9%)
Nickel
Graphite
Cobalt
12.3%
(13.9%)
Oil & Gas
0.6%
(1.3%)
6
C
5.3%
(4.7%)
27
Co
2.0%
(2.4%)
Other
Cash
2.9%
(2.0%)
1.1%
(0.9%)
Figures in brackets as at 30 June 2020
8
Zeta Resources Limited COMMODITY MARKETS
As noted, during the year under review the price
of industrial commodities such as copper and oil
increased while the price of gold fell slightly. The US
dollar weakened, reducing the benefit somewhat
of the strong commodity prices for Australian and
Canadian miners. Zeta’s largest geographical exposure
is to Canada, where at year end, 37.2% of the portfolio
was invested. Australia is second, with a third of the
portfolio; and Guinea third, with just less than
a quarter of the portfolio.
Copper
The rebound in copper prices which began in March
2020 continued apace throughout most of 2021. The
increase in the price of copper began as markets
reacted to increasing demand, particularly from China,
partly in response to government stimulus and partly
as economic activity began to recover following the
initial shock of the onset of the covid-19 pandemic.
As multiple vaccines with clinical efficacy against the
coronavirus were granted emergency use authorization
by the FDA and other governmental health agencies
globally, the rise in the price of copper, along with other
industrial commodities, quickened.
Demand for copper continues to be underpinned
by increasing production of electric vehicles, which
require greater use of copper wiring than traditional
internal combustion engine vehicles. The additional
infrastructure required to charge electric vehicles
also requires the use of additional copper. Supply
shortages related to mine shutdowns due to covid-19
are expected to abate, but the risk of interruptions
remains. At the end of June 2021, the copper price
was US$4.19 per pound, 52.8% above the price at the
end of June 2020. Since year end, the copper price has
stayed within a relatively tight trading range around
$4.20 per pound.
Zeta’s largest investment in the copper sector is
Canadian copper firm Copper Mountain Mining
Corporation (“Copper Mountain”), which produces
copper in British Columbia and has a copper
development project in Queensland, Australia. The
increase in the share price of Copper Mountain was
the largest contributor to the increase in the value of
Zeta’s gross assets during the year, as the company
achieved record production just as copper prices
reached their recent peak. Copper Mountain raised
new equity near the end of 2020, and Zeta supported
the capital raising.
COPPER PRICE
from June 2019 to June 2021
7.00
6.00
5.00
4.00
3.00
2.00
1.00
Jun 19
Dec 19
Jun 20
Dec 20
Jun 21
US$/lb
A$/lb
Source: LME
Demand for copper continues to be underpinned
by increasing production of electric vehicles.
9
Annual Report for the year to 30 June 2021 INVESTMENT MANAGER’S REPORT
(continued)
Horizon Gold Limited
Aluminium
Aluminium prices had a similar trajectory to copper
prices during the year, continuing a rise that started
around March 2020, and for similar reasons. At the
start of the year, aluminium was US$0.73 per pound;
by the end of the year it was US$1.14 per pound, an
increase of 57.1%. While the primary driver behind the
rise in aluminium prices was a recovery in demand,
aluminium has also recently benefited from increased
demand in the production of electric vehicles. This is
because lithium-ion batteries significantly increase the
weight of vehicles, and some car manufacturers have
been compensating by replacing steel with aluminium
in car frames.
Recently, significant problems with the global shipping
industry has resulted in record premiums for
aluminium in the United States and, to a lesser extent,
Europe, as most of the available aluminium is in Asia.
10
Zeta increased its holding during the year in unlisted
bauxite developer Alliance Mining Commodities
Limited (“AMC”) through support of two capital raisings.
AMC owns a world-class bauxite deposit in Guinea.
The recent coup in Guinea is not expected to affect the
long-term outlook for AMC.
ALUMINIUM PRICE
from June 2019 to June 2021
1.60
1.40
1.20
1.00
0.80
0.60
0.40
Jun 19
Dec 19
Jun 20
Dec 20
Jun 21
US$/lb
A$/lb
Source: LME
Zeta Resources Limited Zeta’s largest investment in the gold sector is in
Western Australian gold exploration company Horizon
Gold Limited (“Horizon Gold”). During the year Zeta
supported the company through an entitlement issue
to raise capital for development and exploration.
Horizon Gold continues to work through an extensive
drilling campaign across multiple prospects.
GOLD PRICE
from June 2019 to June 2021
3,100
2,800
2,500
2,200
1,900
1,600
1,300
1,000
Jun 19
Dec 19
Jun 20
Dec 20
Jun 21
Spot Price US$
Spot Price A$
Source: Kitco - London PM Fix
Gold
Unlike the other commodities under review, gold
was not a beneficiary of the recovery in commodity
and equity markets following the initial shock of the
onset of the covid-19 pandemic. Instead, gold ranged
between c. US$1,650 and US$2,050 per ounce, but
spent most of the year in a range between US$1,750
and US$1,950. At the end of June 2020 the price of
gold was US$1,768 per ounce; at the end of June 2021
the gold price was US$1,763 per ounce, a decline
of 0.3%. In Australian dollars, the decline was more
pronounced, from A$2,573 per ounce to A$2,346,
a fall of 8.8%.
Central bank monetary policies were generally
stimulatory globally in response to the covid-19
pandemic. Normally this would be expected to result in
an uplift in gold prices; however, the muted response
from gold prices has led market observers to conclude
that part of the demand for gold by speculators has
instead switched to demand for cryptocurrencies.
We note the re-emergence of inflation in consumer
prices after a long absence even in an environment of
sustained loose monetary policy. This recent inflation
has resulted for a number of reasons, including
product shortages due to logistics difficulties, and
resurgent consumer demand arising from near full
employment and certain labour shortages resulting in
wage inflation. On the one hand, inflation may lead to
speculative demand for gold, but on the other hand a
tightening in monetary policy to reduce inflation would
likely result in falling gold prices.
We note the re-emergence of inflation in
consumer prices after a long absence.
11
Annual Report for the year to 30 June 2021 INVESTMENT MANAGER’S REPORT
(continued)
Nickel
Oil & Gas
As with copper and aluminium, the price of nickel
enjoyed a strong start to the year as industrial demand
recovered and supply shortages arose following the
onset of covid-19. However, the second half of the year
saw nickel settle into a trading range between US$7.20
per pound and US$8.70 per pound. Overall, for the
twelve months ended June 2021, the price of nickel
increased 44.2% to US$8.37 per pound. Demand for
nickel continues to be sustained in part by increasing
demand for electric vehicles. Lithium-ion batteries,
despite their name, typically require a much larger
amount of nickel than lithium.
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”). Following the
significant problems encountered by Panoramic in
the previous year, Panoramic has utilised new capital
(supported by Zeta) to de-risk its Savannah mine in
Western Australia. The company has also secured new
financing facilities and an offtake agreement, and is
working toward a full restart of production at Savannah.
At the start of the year under review, the Brent Crude
Oil price was US$42 per barrel; by the end of June
2021 the price of Brent was US$74 per barrel, an
increase of 77.2%. While this increase was stronger
than the other industrial commodities under review, it
also followed a much stronger downturn in oil prices
when the covid-19 pandemic first hit in early 2020.
While global warming has led much of the world to
take action to attempt to reduce the use of carbon, the
reality is that demand for fossil fuels is likely to persist
for some time. As the global economy recovers and
international travel returns to its earlier norms, the
demand for oil is likely to continue. In the short term,
the increased usage of electric vehicles is likely to lead
to an increase in demand for other fossil fuels such as
natural gas and coal in order to meet the increasing
demand for electricity globally.
Zeta does not currently have any significant
investments in the oil & gas sector.
NICKEL PRICE
from June 2019 to June 2021
BRENT CRUDE OIL PRICE
from June 2019 to June 2021
120
100
80
60
40
20
0
Jun 19
Dec 19
Jun 20
Dec 20
Jun 21
US$/lb
A$/lb
Source: LME
Jun 19
Dec 19
Jun 20
Dec 20
Jun 21
US$/bbl
A$/bbl
Source: US Energy Information Administration
14
12
10
8
6
4
2
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 2021,
Zeta had a loan from UIL totalling US$32.6 million, drawn in Australian dollars and Canadian dollars.
As at 30 June 2021, Zeta had total assets of US$268.2 million (2020: US$132.9 million). Of this figure, US$61.4 million
(2020: US$57 million) was invested in the bauxite sector; US$38.7 million (2020: US$20.6 million) was invested in the
gold sector; US$136.4 million (2020: US$36.2 million) was invested in the nickel and copper sectors; and US$1.62 million
(2020: US$1.78 million) was invested in the oil & gas sector.
NTA PER SHARE VERSUS SHARE PRICE
since inception on 12 June 2013 to 30 June 2021
s
r
a
l
l
o
D
n
a
i
l
a
r
t
s
u
A
0.800
0.700
0.600
0.500
0.400
0.300
0.200
0.100
0.000
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
Jun 18
Jun 19
Jun 20
Jun 21
Note: Historic figures adjusted for the February 2014 entitlement issue
and diluted for the September 2020 bonus option issue
Source: ICM
NTA
Closing Share Price
FINANCIAL RESULTS
The net profit after tax for the year was US$114,670,080 against a loss of US$22,367,826 in the year ended June 2020.
The net profit was comprised largely of unrealised gains from investments.
13
Annual Report for the year to 30 June 2021
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 2021:
RESERVES
Proved & Probable
RESOURCES
Measured & Indicated
14.24 m t
138.58 m t
0.02 m t
0.02 m t
0.35 m t
0.47 m t
0.33 m oz
1.17 m oz
—
0.15 m t
0.27 m t
0.33 m t
1.81 m oz
2.46 m oz
Alumina
Cobalt
Copper
Gold
Graphite
Nickel
Silver
13
AI
27
Co
29
Cu
79
Au
6
C
28
Ni
47
Ag
14
Zeta Resources Limited ASSOCIATES
As at 30 June 2021, the following three entities were determined to be associates of Zeta:
GME Resources Limited
ASX-listed junior nickel and gold explorer with substantial nickel
resources in Western Australia
Alliance Mining
Commodities Limited
Unlisted bauxite development company with a world class asset in
Guinea, West Africa
Margosa Graphite Limited
Unlisted graphite explorer focused on high-grade vein graphite in
Sri Lanka
% owned
43.2
36.2
33.4
SIGNIFICANT INVESTMENTS
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.
GME Resources
GME Resources Limited is a Western Australian
exploration and development company whose principal
asset is its 100%-owned NiWest nickel-cobalt project
situated adjacent to Glencore’s Murrin Murrin operation.
The NiWest project is regarded as one of the largest and
highest quality undeveloped nickel/cobalt resources in
Australia. In August 2018 the company completed a Pre-
Feasibility Study into the technical and economic viability
of a heap leach and direct solvent extraction operation.
NiWest has an ore reserve estimate of 64.9 million
tonnes at 0.91% Ni and 0.06% Co for 592,000 contained
nickel and 38,000 contained cobalt.
Star Royalties
Star Royalties Ltd. is a Canadian company focused on
investment in precious metal royalties and streaming.
The company has also pioneered its first forest carbon
credit royalty and is pursuing a pipeline of additional
green investments.
Resolute
Resolute Mining Limited (“Resolute) is an Australian-
headquartered gold company with two operating
mines, Syama in southern Mali, and Mako in Senegal.
Following significant operating difficulties the previous
year, Resolute has again suffered multiple setbacks,
including shutdowns related to covid-19, industrial action,
political problems related to the coup in Mali, and the
cancellation by the government in Ghana of the planned
sale of the company’s Bibiani mine to a Chinese firm.
However, Resolute has moved to replace most of its
senior management team, and the company recently
sold Bibiani to a new buyer, albeit at a reduced price
from that agreed with the Chinese firm.
Kumarina
Kumarina Resources Pty Limited (“Kumarina”) is a
100%-owned subsidiary of Zeta. The company is focused
on the Murrin Murrin copper-gold project in Western
Australia. The Murrin Murrin project has a gold resource
(JORC 2012) of 36,000 ounces and is prospective for base
metals in the form VMS style copper zinc mineralisation.
Ownership Comments
0% Gold and Base
Metals Rights
0% Gold and Base
Metals Rights
100%
100%
100%
100%
100%
Project area
Tenement
ID
Eulaminna
M39/0371
M39/0372
Murrin Murrin M39/0397
M39/0398
M39/0399
M39/0400
M39/1068
JDF Morrison
ICM Limited
Investment Manager
23 September 2021
15
Annual Report for the year to 30 June 2021 MACRO TRENDS AFFECTING RESOURCES
ELECTRIC 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 commodities
CLIMATE CHANGE AND DECARBONISATION
• Heightened consumer pull and government push to reduce carbon emissions across
every sector of the economy globally
• Use of renewables, including solar, wind, and biofuels increasing quickly but still a relatively
small component of total energy mix
• Growing focus on ESG reporting and fulsome accounting of carbon footprint required for
many businesses
• Likely to be a drag on long term demand for certain commodities such as thermal coal
and oil and a tailwind for several others, including nickel, copper, lithium, graphite, and
potentially uranium
COVID-19 DISRUPTION
• Disruptions to both production and demand causing increased volatility and uncertainty
for many commodities
• Demand and prices for most commodities improved in recent months as vaccination
programmes continue and several countries relax restrictions, but significant uncertainty
remains
•
Increasing cases and hospitalisations in several countries fuelled by emerging variants,
leading to additional shutdowns and economic uncertainty
GLOBAL DEBT AND STIMULUS
• 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
and restrictions
•
Inflation may result in increased interest rates making debt loads unsustainable
• 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
16
Zeta Resources Limited SECTOR SUMMARIES AS AT 30 JUNE 2021
COPPER
29
CuCopper
BAUXITE
13
AIAluminium
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
• Increasing demand for wiring for electric vehicles, but price still generally tied to the global
economy and industrial demand
• Dramatic price increase since April 2020, fuelled by a tight concentrate market, supply
interruptions in Chile, and anticipated ramp up of electric vehicle sales over the next
decade
• Fluctuating demand from China and risk of supply disruptions in South America also
influence prices, particularly in the short term
Exposure
• 18% of Copper Mountain Mining (TSX:CMMC, ASX:C6C) – producing copper in Canada,
and developing a copper asset in Australia
• 100% of Kumarina (unlisted) – junior copper-gold exploration firm in Western Australia
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 on upward trend since bottoming in May 2020
• Aluminium being used by some manufacturers to replace steel in car frames to compensate
for the additional weight of lithium-ion batteries vs internal combustion engines
Exposure
• 36% of Alliance Mining Commodities (unlisted) – owner and developer of a world-class
bauxite resource in Guinea
17
Annual Report for the year to 30 June 2021 SECTOR SUMMARIES AS AT 30 JUNE 2021
(continued)
GOLD
79
AuGold
NICKEL
28
NiNickel
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 volatile and trending down since peaking above $2,000 per oz
in August 2020, but nonetheless remains near 10-year highs, as forecasts of monetary
tightening compete with inflation concerns and unprecedented fiscal stimulus by the US
Federal Reserve and other governments
• 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
• 69% of Horizon Gold (ASX:HRN) – exploration and development in Western Australia
• 100% of Kumarina (unlisted) – junior copper-gold exploration firm in Western Australia
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, Russia, New Caledonia, Australia, Canada
Macro trends
• Demand for nickel for lithium-ion batteries increasing quickly, but still relatively small
component of global nickel demand
• Nickel prices fully recovered since bottoming in March 2020, reaching a 7-year high in
early 2021 amidst strong demand forecasts related to the economic recovery and electric
vehicle sales
• Industrial demand still heavily influenced by strength of Chinese economy
Exposure
• 17% of Panoramic Resources (ASX:PAN) – nickel producer in Western Australia
• 43% of GME Resources (ASX:GME) – owns development project in Western Australia
18
Zeta Resources Limited
GRAPHITE
6
CCarbon
COBALT
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
• Prices have increased steadily since late 2017 amidst climbing demand for batteries and
recent supply disruptions in China related to tighter environmental restrictions
Exposure
• 33% of Margosa Graphite Limited (unlisted) – Sri Lankan brownfield explorer of vein
graphite, the purest naturally occurring graphite
27
CoCobalt
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
• After two years of weak pricing, cobalt prices rebounded in Q1 2021 on the back of
increased demand for batteries and other industrial processes
• 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 for the next 10+ years, albeit
likely at lower volumes per unit
Exposure
• 17% of Panoramic Resources (ASX:PAN) – Australian nickel producer with cobalt
reserves of 7,600 tonnes
• 43% of GME Resources (ASX:GME) – Australian nickel developer with cobalt resources of
55,000 tonnes
19
Annual Report for the year to 30 June 2021 SECTOR SUMMARIES AS AT 30 JUNE 2021
(continued)
OIL & GAS
Overview
• Oil is a fossil petroleum liquid whose primary use is fuel; around 80% of oil is refined
into gasoline, diesel, and jet fuel, with the remaining 20% supplying various products
including lubricants, asphalt, and petrochemicals
• Natural gas is a petroleum gas whose primary uses are heating, electricity generation,
and feedstock for petrochemicals
• Globally diverse sources of production and demand
• Largest producers of oil are US, Saudi Arabia, and Russia; largest producers of gas are
the US and Russia, with Iran a distant third
Macro trends
• Annual growth in oil demand has followed a linear trend in line with world population
growth, but fell by a record 8 million barrels per day due to sudden decline in demand at
the start of the covid-19 pandemic; demand is forecast to rebound to 2019 levels by 2022
• Oil prices have been volatile, but by mid-2021 had recovered to prices not seen since
2018 as the supply recovery has been relatively muted and the global market remains in
deficit
• Lower prices since 2014 have led to reduced global expenditures on oil & gas exploration,
but technological improvements led to increased supply (prior to covid-19), especially in
the US
• After a 4% drop in 2020, global natural gas and LNG demand is expected to recover in
2021 and continue to climb over the next 10-15 years, at minimum
Exposure
• No significant investments in this sector
20
Zeta Resources Limited OUR INVESTMENT APPROACH
ICM is a long-term 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
compelling investments. ICM has approximately
US$2.9 billion of assets directly under management and
is responsible indirectly for a further US$23.2 billion 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 the
investment portfolio comprises a series of bottom-up
decisions. ICM typically does not participate in either
an IPO or an auction unless there is compelling value.
ICM also looks for disruption and the opportunities it
can unlock in both existing and new business models.
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 copper,
bauxite, gold, nickel, graphite, cobalt, oil & gas and
base metals exploration and production.
When reviewing investment opportunities, as part of
the investment process ICM will look to understand
the material Environmental, Social & Governance
(“ESG”) factors. ICM incorporates ESG factors in the
investment process in three key ways:
• Understanding: indepth analysis of key issues that
face potential and current holdings, as well as a deep
understanding of the industry in which they operate.
• Integration: incorporate the output of the
‘Understanding’ component detailed above into the
full company analysis to ensure a clear and complete
picture of the investment opportunity is obtained.
• Engagement: engage with investee companies on
the key issues on a regular basis, both virtually and
on location, where possible, to discuss and identify
any gaps in their ESG policy to further develop and
improve their ESG disclosure and implementation.
S
T
A
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&
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P
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T
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V
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F
R
A
M
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W
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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
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21
Annual Report for the year to 30 June 2021
FIVE LARGEST HOLDINGS
Copper Mountain Mining Corporation
THE VALUE OF THE FIVE
LARGEST HOLDINGS
REPRESENTS
THE VALUE OF THE TEN
LARGEST HOLDINGS
REPRESENTS
CANADA IS ZETA’S
LARGEST COUNTRY
EXPOSURE AT
THE TOTAL NUMBER
OF COMPANIES
INCLUDED IN THE
PORTFOLIO IS
91.8%
(2020: 87.4%) OF
TOTAL INVESTMENTS
98.1%
(2020: 93.6%) OF
TOTAL INVESTMENTS
37.2%
(2020: 12.4%) OF
TOTAL INVESTMENTS
30
(2020: 28)
22
Zeta Resources Limited
1
2
3
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.
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 north-west 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-compliant mineral resource in excess of 1.5 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.
Countries
Sector
Canada and
Australia
Copper exploration
and mining
Fair Value
US$000
% of total
investments
112,255
41.9%
% owned
18.3%
Country
Guinea
Sector
Bauxite developer
Fair Value
US$000
% of total
investments
% owned
61,403
22.9%
36.2%
Country
Australia
Sector
Nickel exploration
and mining
Fair Value
US$000
% of total
investments
% owned
36,750
13.6%
16.5%
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 pandemic started. Since then, the company has
raised significant new capital, completed some key capital works to
de-risk the mine, and has recently secured project financing and an
offtake agreement. 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.
23
Annual Report for the year to 30 June 2021
FIVE LARGEST HOLDINGS
(continued)
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. Horizon Gold has been working through an extensive drilling
campaign across multiple prospects.
Country
Australia
Sector
Gold
Fair Value
US$000
21,665
% of total
investments
8.1%
% owned
69.5%
MARGOSA GRAPHITE LIMITED (“Margosa”) 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 the year under review Margosa completed
a Feasibility Study focused on development of the Ridee Ganga Project
which is located approximately 40 km south-southeast of Colombo, the
capital city and main port of Sri Lanka.
Country
Sri Lanka
Sector
Graphite
exploration and
mining
Fair Value
US$000
14,161
% of total
investments
5.3%
% owned
33.6%
4
5
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$2.9 billion
IN FUNDS DIRECTLY AND IS RESPONSIBLE INDIRECTLY FOR A FURTHER US$23.2 BILLION OF ASSETS IN
SUBSIDIARY INVESTMENTS. ICM HAS OVER 70 STAFF BASED IN OFFICES IN BERMUDA, CAPE TOWN, DUBLIN,
LONDON, SEOUL, SINGAPORE, SYDNEY, VANCOUVER AND WELLINGTON.
DUNCAN SAVILLE
Duncan Saville is a director and chairman of ICM Limited who founded the ICM Group
and its predecessor companies and has been employed by the Group since 1988.
Duncan 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. His
Fellowships include the Institute of Chartered Accountants Australia and New Zealand,
the Australian Institute of Company Directors and the Financial Services Institute of
Australasia, and he is a Member of the Singapore Institute of Directors.
ALASDAIR YOUNIE
Alasdair Younie joined the ICM Group in 2010, is a director of ICM Limited and is based
in Bermuda. Alasdair has extensive experience in financial markets and corporate
finance, and he is responsible for the day-to-day running of the Somers Group. Alasdair
qualified as a chartered accountant with PricewaterhouseCoopers and subsequently
worked for six years in the corporate finance division of Arbuthnot Securities Limited
in London. Alasdair is a director of Allectus Capital Limited, Somers Limited and West
Hamilton Holdings Limited. Alasdair graduated from Bristol University with a BSc in
Economics and Economic History in 1998 and is a Member of the Institute of Chartered
Accountants in England and Wales.
25
Annual Report for the year to 30 June 2021 INVESTMENT MANAGER AND TEAM
(continued)
DUGALD MORRISON
Dugald Morrison has been involved with ICM and its predecessor companies since
1994 and is responsible for ICM NZ Limited, based in Wellington. 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. Dugald is focused on the Resources sector worldwide. Dugald is a director of a
number of companies, including Horizon Gold Limited (ASX:HRN). Dugald graduated from
Victoria University of Wellington in 1991 with BCA (Hons) and is a Member of the New
Zealand Institute of Directors.
TRISTAN KINGCOTT
Tristan Kingcott joined ICM in 2018 and is responsible for ICM CA Research Limited,
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
and a Member of the CFA Society in Vancouver.
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.
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 Panoramic Resources Limited (ASX:PAN) and
Copper Mountain Mining Corporation (TSX:CMMC). Mr Sullivan was a director of Bligh
Resources Limited (ASX:BGH) until 13 August 2019 following the sale of the company to
Saracen Mineral Holdings Limited. Mr Sullivan retired as a director of Resolute Mining
Limited (ASX:RSG) effective 27 May 2021 after over 20 years’ involvement with the company.
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 non-executive 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 over 25 years’ experience
in the resources industry across 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).
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 2021 REPORT OF THE DIRECTORS
Kumarina Resources Pty Limited
Directors present their report for Zeta Resources
Limited, including its subsidiaries Kumarina Resources
Pty Limited, Zeta Energy Pte. Ltd, Zeta Investments
Limited, Zeta Minerals Ltd and Horizon Gold Limited,
for the year ended 30 June 2021.
OPERATING AND FINANCIAL REVIEW
Operating results
The net profit attributable to the Company for the year
to 30 June 2021 amounted to US$114,670,080.
DIRECTORS
Zeta Resources Limited has a board of four
non-executive, independent 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
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$18,759,245. An increase in the fair
value of the portfolio resulted in an unrealised
profit recognised in profit or loss at year end of
US$122,843,094.
The activities of the Company’s subsidiary Kumarina
related to further exploration and evaluation of the
existing Australian mining tenements (the Murrin Murrin
project) and a total of A$540,592 was invested during
the twelve months to 30 June 2021 in further drilling
and analysis work. On 28 January 2021, Kumarina
entered into a sale agreement for the sale of the
tenement pertaining to the Ilgarari Copper Project.
28
Zeta Resources Limited Financial position
COVID-19 IMPACT
At the end of the year, the Company had US$1,378,703
in cash and cash equivalents. Investments at fair
value totalled US$243,477,995, loans to subsidiaries
were valued at US$1,224,888 and the investment in
subsidiaries was valued at US$22,114,602.
The Company has a loan owing to UIL of
US$32,576,107 at year end.
As at the year end, the Company had a US$2.5 million
loan facility with Bermuda Commercial Bank expiring
on 30 September 2021.
On 10 September 2020 the Company offered a
bonus issue of options to its shareholders. Eligible
shareholders who held shares on the record date
were offered one option (bonus option) for every one
share held on the record date. The bonus options
had no issue price, were exercisable at A$0.25 each
and expired on 15 June 2021. 287,567,921 options
were issued, and 278,770,100 options were exercised,
raising an amount of US$54,000,923.
GOING CONCERN
The financial statements have been prepared on
a going concern basis. We draw attention to the
fact that at 30 June 2021, the Company’s current
liabilities exceed its current assets by US$12,727,647
(2020: US$6,517,913). 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.
The impact of the covid-19 pandemic continued
to be felt during the financial year under review. In
the first half of the financial year, share prices and
commodity prices – particularly industrial commodities
such as copper – rose strongly following multiple
announcements of vaccines with high efficacy rates
against the coronavirus. Lockdowns in various
countries at varying times impacted select mines,
reducing the supply of commodities, which also
resulted in higher commodity prices. Those mines that
were able to operate at normal production levels –
such as Copper Mountain – benefited from the higher
commodity prices.
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
The Company performed a review of events after the
reporting date and determined that there were no
such events requiring recognition or disclosure in the
financial statements.
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
29
Annual Report for the year to 30 June 2021 REPORT OF THE DIRECTORS
(continued)
Remuneration policy
MEETINGS OF DIRECTORS
The board of directors is responsible for remuneration
policies and the packages applicable to the directors
of the Company. The board 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.
There were nine Board of Directors and one Audit & Risk
Committee meetings held during the year ended 30 June
2021. The attendance by the directors was as follows:
Board
Audit & Risk
Committee*
Number of meetings held
during the year
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.
Peter Sullivan
Martin Botha
André Liebenberg
Xi Xi
9
9
9
9
9
1
1
1
1
1
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 $200,000 to directors for
the year ended 30 June 2021.
The Company had no employees as at 30 June 2021.
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
Ordinary
shares
closing
balance
Net
change
Director
Peter R Sullivan
5,770,632
5,735,632
11,506,264
Martin Botha
479,565
295,435
775,000
André Liebenberg
Xi Xi
–
–
–
–
–
–
*The Audit & Risk Committee was established on 25 November 2020
Board of Directors and Audit Risk Committee meetings
require that any two directors or members be present to
form a quorum.
Due to the size of the board and the nature of the
Company’s operations, it does not have a separate
Remuneration Committee or a Nomination Committee.
Matters normally considered by these committees are
addressed by the full board. This includes addressing
succession issues and ensuring the board has the
appropriate balance of skills, experience, independence,
and knowledge of the entity to enable it to discharge its
duties and responsibilities effectively.
LOANS TO DIRECTORS
There were no loans entered into with directors during
the year under review.
AUDIT & RISK COMMITTEE
The Audit & Risk Committee (“committee”) comprises
all the independent directors of the Company and is
chaired by André Liebenberg.
The Company has established a separately chaired Audit
& Risk Committee. Its duties include considering and
recommending to the board for approval the contents
of the half yearly and annual financial statements. The
committee also provides an opinion as to whether
the annual report and accounts, taken as a whole, are
fair, balanced and understandable and provide the
information necessary for shareholders to assess the
Company’s performance, business model and strategy.
30
Zeta Resources Limited The committee also reviews the external auditors’
report on the annual financial statements and is
responsible for reviewing and forming an opinion
on the effectiveness of the external audit process
and audit quality. Other duties include reviewing the
appropriateness of the Company’s accounting policies
and ensuring the adequacy of the internal control
systems and standards.
The committee meets at least twice a year. The
planned meetings are held prior to the board
meetings to approve the half yearly and annual
results. Representatives of the Investment Managers
attend all meetings.
During the year ended 30 June 2021, the committee
consisted of all the independent directors of the
Company.
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
Panoramic Resources Limited
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.
NON-AUDIT SERVICES
No non-audit services were performed by the auditors
of the Company during the year.
31
Annual Report for the year to 30 June 2021 REPORT OF THE DIRECTORS
(continued)
ON-MARKET BUY-BACK SCHEME
AUDITOR’S INDEPENDENCE DECLARATION
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.
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
23 September 2021
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 is only implemented where the share price of
the Company is 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 1,287,056 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 the calculation date,
payable quarterly in arrears and pro-rated for any
period less than three months.
Performance fees are payable annually at year end
on the difference between adjusted equity funds
(adjusted for any dividends paid or accrued) on
calculation date less adjusted base equity funds (high-
water mark) previously used in the performance fee
calculation multiplied by 15%. Zeta Resources agreed
to pay a performance fee of $4,223,318 for the year
ended 30 June 2021.
Either party may terminate the agreement with six
months’ notice.
The Company paid US$5,491,044 in management fees
during the reporting year.
32
Zeta Resources Limited CORPORATE GOVERNANCE STATEMENT
THE COMPANY‘S CORPORATE GOVERNANCE FRAMEWORK
Corporate Governance is the process by which the board of directors of a company protects shareholders’
interests and by which it seeks to enhance shareholder value. Shareholders hold the directors responsible for
the stewardship of a company’s affairs, delegating authority and responsibility to the directors to manage the
company on their behalf and holding them accountable for its performance. Responsibility for good governance
lies with the board. The board considers the practice of good governance to be an integral part of the way it
manages the Company and is committed to maintaining high standards of financial reporting, transparency and
business integrity.
The governance framework of the Company reflects the fact that, as an investment company, it has no full-time
employees and outsources its activities to third party service providers.
THE BOARD
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
COMMITTEE
MANAGEMENT
OVERSIGHT
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
All independent NEDs
CHAIRMAN:
André Liebenberg
The board as a
whole performs
this function
The board as a
whole performs
this function
The board as a
whole performs
this function
KEY OBJECTIVE:
KEY OBJECTIVE:
KEY OBJECTIVES:
KEY OBJECTIVE:
• to oversee the
• to review the
• to regularly review
• to set the
financial reporting
and control
environment.
performance of
the Investment
Manager.
the board’s structure
and composition;
and
remuneration policy
for the directors of
the Company.
• to consider any new
appointments.
33
Annual Report for the year to 30 June 2021 CORPORATE GOVERNANCE STATEMENT
(continued)
As an ASX-listed company, the board’s principal
governance reporting objective is in relation to
the ASX Corporate Governance Principles and
Recommendations (“Recommendations”) developed by
the ASX Corporate Governance Council.
In accordance with ASX Listing Rules 4.10.3 and
4.7.4, the Corporate Governance Statement, and
accompanying Appendix 4G, will be available for review
on the Company’s website and will be lodged with ASX
concurrently with the Annual Report.
The Appendix 4G details each Recommendation that
needs to be reported against by the Company and will
provide shareholders with information as to where
relevant governance disclosures can be found.
The Company’s corporate governance policies and
charters are all available on the Company’s website.
The Company’s directors and management are
committed to conducting the group’s business in an
ethical manner and in accordance with the highest
standards of corporate governance. The Company
has adopted and substantially complies with the
Recommendations to the extent appropriate to the
size and nature of the group’s operations.
The Company has prepared a Corporate Governance
Statement based on the fourth 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:
https://www.zetaresources.limited/investor-relations/corporate-governance/
34
Zeta Resources Limited INDEPENDENT AUDITOR’S REPORT
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
Email: cpt@mazars.co.za
www.mazars.co.za
Independent Auditor’s Report
30 June 2021
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 2021, 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 Zeta Resources Limited as at 30 June 2021, 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.
Registered Auditor – A firm of Chartered Accountants (SA) • IRBA Registration Number 900222
Partners: MC Olckers (National Co-CEO), MV Ninan (National Co-CEO), JM Barnard, AK Batt, AS De Jager, DS Dollman,
M Edelberg, Y Ferreira, T Gangen, R Groenewald, AK Hoosain, MY Ismail, N Jansen, J Marais, B Mbunge, FN Miller,
G Molyneux, A Moruck, S Naidoo, MG Odendaal, W Olivier, D Resnick, BG Sacks, MA Salee, N Silbowitz, SM Solomon,
HH Swanepoel, AL Swartz, 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
35
35
Annual Report for the year to 30 June 2021
INDEPENDENT AUDITOR’S REPORT
(continued)
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.
The key audit matters relate to the Annual Financial Statements.
Matter
Audit response
Valuation of Unlisted investments (notes 5 and
22.4 )
The company’s accounting policy in note 3.6 of
the Annual Financial Statements states that
the
investments are
transaction cost and subsequently measured at
fair value with any change in the fair value
recognised in profit or loss.
initially measured at
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
determining the fair value of the investments.
in
A relatively small percentage change in the
valuations of
in
aggregate, could result in a significant impact to
the financial statements.
investments,
individual
Based on the above the valuation of unlisted
investments has been identified as a Key audit
matter.
Our approach to address the valuation assertion
for unlisted investment involved a substantive
approach. Our key audit procedures included:
•
•
•
•
•
•
•
•
to
to ensure
the valuation
agreeing the valuation of the unlisted
investments
reports
prepared by independent external valuers
appointed by management 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
the valuations are
reasonable;
recalculating key valuation workings;
reviewing that the valuation techniques
used are appropriate for the accounting
standards and industry;
assessing and validating the completeness,
accuracy and relevance of the information
provided by management to their 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.
36
36
Zeta Resources Limited
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
2021, 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
37
Annual Report for the year to 30 June 2021
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, actions taken to eliminate threats or safeguards applied.
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
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
2 years.
Mazars
Partner: Nico Jansen
Registered Auditor
23 September 2021
Cape Town
39
39
Annual Report for the year to 30 June 2021 AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
Mazars House, Rialto Road
Grand Moorings Precinct
Century City, 7441
PO Box 134, Century City 7446
Mazars House, Rialto Road
Docex 9 Century City
Grand Moorings Precinct
Century City, 7441
Tel: +27 21 818 5000
PO Box 134, Century City 7446
Fax: +27 21 818 5001
Docex 9 Century City
Email: cpt@mazars.co.za
www.mazars.co.za
Tel: +27 21 818 5000
Fax: +27 21 818 5001
Email: cpt@mazars.co.za
www.mazars.co.za
In relation to our audit of the financial statements of Zeta Resources Limited for the financial
Auditor’s Independence Declaration
year ended 30 June 2021, I declare to the best of my knowledge and belief, there have been
no contraventions of the auditor independence requirements of the International Standards on
In relation to our audit of the financial statements of Zeta Resources Limited for the financial
Auditing or any other applicable code of professional conduct.
year ended 30 June 2021, I declare 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
Mazars
23 September 2021
Partner: Nico Jansen
Cape Town
Registered Auditor
23 September 2021
Cape Town
Registered Auditor – A firm of Chartered Accountants (SA) • IRBA Registration Number 900222
Partners: MC Olckers (National Co-CEO), MV Ninan (National Co-CEO), JM Barnard, AK Batt, AS De Jager, DS Dollman,
M Edelberg, Y Ferreira, T Gangen, R Groenewald, AK Hoosain, MY Ismail, N Jansen, J Marais, B Mbunge, FN Miller,
G Molyneux, A Moruck, S Naidoo, MG Odendaal, W Olivier, D Resnick, BG Sacks, MA Salee, N Silbowitz, SM Solomon,
Registered Auditor – A firm of Chartered Accountants (SA) • IRBA Registration Number 900222
HH Swanepoel, AL Swartz, MJA Teuchert, N Thelander, JC Van Tubbergh, EC Van Heerden, N Volschenk, J Watkins-Baker
Partners: MC Olckers (National Co-CEO), MV Ninan (National Co-CEO), JM Barnard, AK Batt, AS De Jager, DS Dollman,
A full list of national partners is available on request or at www.mazars.co.za
M Edelberg, Y Ferreira, T Gangen, R Groenewald, AK Hoosain, MY Ismail, N Jansen, J Marais, B Mbunge, FN Miller,
G Molyneux, A Moruck, S Naidoo, MG Odendaal, W Olivier, D Resnick, BG Sacks, MA Salee, N Silbowitz, SM Solomon,
HH Swanepoel, AL Swartz, 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
40
40
Zeta Resources Limited STATEMENT OF FINANCIAL POSITION
Notes at 30 June 2021
Non-current assets
4 Investment in subsidiaries
5 Investments
6 Loans to subsidiaries
Current assets
6 Loans to subsidiaries
7 Cash and cash equivalents
Total assets
Non-current liabilities
9 Loan from parent
10 Other loans
Current liabilities
8 Loan from subsidiary
11 Other loans
12 Trade and other payables
18 Tax payable
Total liabilities
Net assets
Equity
13 Share capital
13 Share premium
Accumulated income/(losses)
Total equity
June 2021
US$
June 2020
US$
22,114,602
243,477,995
1,224,888
16,417,335
114,839,211
1,506,499
–
1,378,703
208,156
12,082
268,196,188
132,983,283
(32,576,107)
(1,332,610)
(68,312,746)
(6,312,255)
(3,377,965)
(2,500,000)
(5,148,039)
(3,080,346)
(48,015,067)
220,181,121
5,560
176,763,050
43,412,511
220,181,121
–
(1,250,000)
(2,656,381)
(2,831,770)
(81,363,152)
51,620,131
2,777
122,874,923
(71,257,569)
51,620,131
41
Annual Report for the year to 30 June 2021 STATEMENT OF PROFIT AND LOSS AND OTHER
COMPREHENSIVE INCOME
Notes for the year ended 30 June 2021
Income and investment returns
14 Revenue
14 Investment gains/(losses)
6 Impairment of loan to subsidiary
15 Other (losses)/income
Expenses
Directors fees
Interest expense
16 Management and consulting fees
17 Operating and administration expenses
Profit/(loss) before tax
18 Taxation expense
Profit/(loss) for the year
Total comprehensive income/(loss) for the year
Profit/(loss) per share
19 Basic profit/(loss) per share
19 Diluted profit/(loss) per share
June 2021
US$
June 2020
US$
53,985
136,938,205
(1,394,034)
(8,271,609)
(200,000)
(6,393,063)
(5,491,044)
(572,360)
104,734
(11,208,925)
(7,676)
921,852
(183,333)
(4,434,509)
(778,505)
(540,019)
114,670,080
(16,126,381)
–
114,670,080
114,670,080
(6,241,445)
(22,367,826)
(22,367,826)
0.33
0.33
(0.07)
(0.07)
42
Zeta Resources Limited STATEMENT OF CHANGES IN EQUITY
Notes for the year ended 30 June 2021
Share
capital
US$
Share
premium
US$
Treasury
Shares
US$
Accumulated
losses
US$
Total
US$
Balance at 31 July 2019
2,778
122,897,203
(11,096)
(48,889,743)
73,999,142
Purchase of treasury shares
Cancellation of treasury shares
Total comprehensive loss for the year
–
(1)
–
–
(22,280)
–
Balance at 30 June 2020
2,777
122,874,923
(11,185)
22,281
–
–
–
–
(11,185)
–
(22,367,826)
(22,367,826)
(71,257,569)
51,620,131
Purchase of treasury shares
13 Cancellation of treasury shares
–
(5)
–
(110,013)
(110,008)
110,013
13 Options exercised
2,788
53,998,135
Total comprehensive income for the year
–
–
Balance at 30 June 2021
5,560
176,763,050
–
–
–
–
–
–
(110,013)
–
54,000,923
114,670,080
114,670,080
43,412,511
220,181,121
43
Annual Report for the year to 30 June 2021 STATEMENT OF CASH FLOWS
Notes for the year ended 30 June 2021
Cash flows from operating activities
20.1 Cash (utilised)/generated by operations
14 Interest received
Interest paid
14 Dividend received
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
13 Purchase of treasury shares
13 Options exercised
20.2 Increase in loan from parent from additional funding
20.2 Decrease in loan from parent from repayments
20.2 Increase in loan from subsidiary from additional funding
20.2 Decrease in loan from subsidiary from repayments
20.2 Increase in other loans from additional funding
20.2 Decrease in other loans from repayments
June 2021
US$
June 2020
US$
(3,762,954)
1,208,291
37,853
(428,466)
16,132
–
(4,137,435)
(18,759,245)
21,347,424
(568,843)
360,529
–
–
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
2,379,865
(10,593,303)
(110,013)
14,826,385
18,446,626
(34,223,214)
3,420,043
–
14,301,379
(13,461,727)
(11,185)
–
46,043,589
(27,794,521)
1,897,066
(2,788,630)
3,189,313
(8,196,272)
Net cash flows from financing activities
3,199,479
12,339,360
Net movement in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
7 Cash and cash equivalents at end of the year
1,441,909
12,082
(75,288)
1,378,703
(698,996)
104,715
606,363
12,082
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 2021 comprise the Company only.
1.2 Basis of preparation
The financial statements for the year ended 30 June 2021
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 23 September 2021.
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 dollars 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
ongoing basis. Revisions are recognised in the period in which
the estimate is revised and in any future periods affected.
assets and liabilities within the next financial year relate to
the valuation of unquoted investments, details of which are
set out in note 22 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 18.
The impact of the covid-19 pandemic continued to be felt
during the financial year under review. In the first half of
the financial year, share prices and commodity prices –
particularly industrial commodities such as copper – rose
strongly following multiple announcements of vaccines with
high efficacy rates against the coronavirus. Lockdowns in
various countries at varying times impacted select mines,
reducing the supply of commodities, which also resulted
in higher commodity prices. Those mines that were able
to operate at normal production levels – such as Copper
Mountain – benefited from the higher commodity prices.
2.
ADOPTION OF NEW AND REVISED STANDARDS
2.1 Standards and interpretations adopted during
the year
No new or amended standards and interpretations that
became effective in the current period had a significant
impact on the financial statements.
2.2 New standards, amendments and interpretations
effective for annual periods beginning after
1 July 2021 that have not been adopted
At the date of authorisation of these financial statements, the
following standards affecting the Company were in issue, but
not yet effective:
Presentation of liabilities (Amendments to IAS 1) – effective
1 January 2023
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.
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
No new or amended standards and interpretations that
became effective after 1 July 2021 are expected to have a
significant impact on the financial statements.
45
Annual Report for the year to 30 June 2021 NOTES TO THE FINANCIAL STATEMENTS
(continued)
3.
SIGNIFICANT ACCOUNTING POLICIES
3.5 Earnings per share (“EPS”)
The accounting policies detailed below have been consistently
applied by the Company.
3.1
Investment income
Dividend income is recognised when the Company’s right
to receive payment is established and is presented gross of
withholding taxes.
Gains or losses on the sale of investments are recorded on
the trade date.
Investment income also comprises of unrealised gains on
changes in the fair value of financial assets at fair value
through profit or loss.
Interest income is recognised using the effective interest rate
method.
3.2 Borrowing costs
Borrowing costs are recognised as an expense when incurred.
3.3
Income tax
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax
rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the Statement
of Financial Position date.
The Company invests in various jurisdictions and is subject
to typical source taxation such as withholding tax on passive
income (dividends, interest and royalties where applicable)
and capital gains on immovable property.
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 18.
The Company has elected to be tax exempt in terms of local
Bermudian legislation.
3.4 Foreign currency
Foreign currency transactions and balances
Transactions in foreign currencies are translated into the
respective functional currency of the Company at exchange
rates at the dates of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the reporting
date are translated to the functional currency at the prevalent
exchange rate at that date. The foreign currency gain or loss on
monetary items is the difference between the amortised cost in
the functional currency at the beginning of the period, adjusted
for effective interest and principal payments during the period,
and the amortised cost in foreign currency translated at the
prevalent exchange rate at the end of the period. The foreign
currency gains or losses are recognised as part of other
income/(losses) in the Statement of Profit and Loss and Other
Comprehensive Income. Foreign currency changes are taken
into account when fair valuing the equity instruments.
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 aftertax effect of dividends and interest associated
with potential dilutive ordinary shares that have been
recognised as expenses; and
• other non-discretionary changes in revenues or expenses
during the period that would result from the dilution of
potential ordinary shares divided by the weighted average
number of ordinary shares and potential dilutive ordinary
shares, adjusted for any bonus element.
3.6 Financial instruments
Recognition and initial measurement
Trade receivables and debt securities issued are initially
recognised when they are originated. All other financial assets
and financial liabilities are initially recognised when the entity
becomes a party to the contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without
a significant financing component) or financial liability is
initially measured at fair value plus, for an item not at fair
value through profit and loss (“FVTPL”), transaction costs that
are directly attributable to its acquisition or issue. A trade
receivable without a significant financing component is initially
measured at the transaction price.
Classification and subsequent measurement
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.
Financial assets at FVTPL
All investments are mandatorily measured at FVTPL.
Investments are subsequently measured at fair value. Net
gains and losses include foreign exchange gains and losses.
Interest or dividend income are recognised in profit or loss
separately.
Financial assets at amortised cost
Cash and cash equivalents, loans to subsidiaries and other
loans meet the criteria for measurement at amortised cost.
46
Zeta Resources Limited
These assets are subsequently measured at amortised cost
using the effective interest method. The amortised cost is
reduced by impairment losses. Foreign exchange gains and
losses, impairments and any gains or losses on derecognition
are 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.
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.
The Company considers a financial asset to be performing when
there is a low risk of default and no amounts are past due.
The Company considers a financial asset to be underperforming
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.
The Company derecognises a financial liability when its
contractual obligations are discharged, cancelled or expire.
Presentation
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.
ECLs are a probability-weighted estimate of credit losses.
Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to
the entity in accordance with the contract and the cash flows
that the Company expects to receive).
Measurement of ECLs
Loss allowances for financial assets measured at amortised cost
are deducted from the gross carrying amount of the assets.
3.8 Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares and share
options are recognised as a deduction from equity.
3.9 Provisions and accruals
Provisions are recognised when the Company has a present
legal or constructive obligation as a result of past events, for
which it is probable that an outflow of economic benefits
will occur, and where a reliable estimate can be made of the
amount of the obligation. The expense relating to any provision
is presented in the statement of comprehensive income net
of any reimbursement. If the effect of discounting is material,
provisions are discounted. The discount rate used is a pre-tax
rate that reflects current market assessments of the time value
of money and, where appropriate, the risks specific to the
liability.
47
Annual Report for the year to 30 June 2021
NOTES TO THE FINANCIAL STATEMENTS
(continued)
4.
INVESTMENT IN SUBSIDIARIES
At fair value
June 2021
US$
June 2020
US$
Investment in Kumarina Resources Pty Limited ("Kumarina")
449,775
1,309,352
Investment in Zeta Energy Pte. Ltd. ("Zeta Energy")
Investment in Zeta Investments Limited ("Zeta Investments")
Investment in Zeta Minerals Ltd ("Zeta Minerals")
Investment in Horizon Gold Limited ("Horizon Gold")
1
1
1
1
1
–
21,664,824
22,114,602
15,107,981
16,417,335
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. The Company
participated in the two rights issues offered by Horizon Gold in the year. Kumarina is valued using a resource multiple to value
Kumarina’s main project, with further consideration to the remaining assets and liabilities held by Kumarina. Kumarina is currently
deemed to have a value of US$449,775. See note 22.4.
The remaining investments in subsidiaries are fair valued by the directors at a nominal value due to the fact that they hold no significant
assets, nor do they have any significant value. Zeta Minerals is an entity incorporated for the purpose of holding investments and is
currently still dormant.
The Company had the following subsidiaries as at 30 June 2021:
30 June 2021
Kumarina incorporated in Australia
Zeta Investments incorporated in Bermuda
Zeta Energy incorporated in Singapore
Zeta Minerals incorporated in United Kingdom
Horizon Gold incorporated in Australia
30 June 2020
Kumarina incorporated in Australia
Zeta Investments incorporated in Bermuda
Zeta Energy incorporated in Singapore
Horizon Gold incorporated in Australia
The Company had the following Indirect subsidiary as at 30 June 2021:
30 June 2021
Pan Pacific Petroleum Pty Limited incorporated in Australia
30 June 2020
Pan Pacific Petroleum Pty Limited incorporated in Australia
Number of
ordinary shares
26,245,210
1,000
1
100
74,104,807
Number of
ordinary shares
26,245,210
1,000
1
52,826,967
Percentage of
ordinary shares held
100%
100%
100%
100%
69%
Percentage of
ordinary shares held
100%
100%
100%
69%
Number of
ordinary shares
581,942,846
Percentage of
ordinary shares held
100%
Number of
ordinary shares
581,942,846
Percentage of
ordinary shares held
100%
Pan Pacific Petroleum Pty Limited is an Australian oil and gas exploration and production company.
48
Zeta Resources Limited
5.
INVESTMENTS
Financial assets at fair value through profit or loss
Equity securities at fair value
Listed ordinary shares, subscription and other rights
Unlisted ordinary shares, subscription and other rights
Cost of equity securities at fair value
Listed ordinary shares, subscription and other rights
Unlisted ordinary shares, subscription and other rights
June 2021
US$
243,477,995
166,678,842
76,799,153
243,477,995
131,669,242
52,359,524
184,028,766
Investments held by the Company at the reporting date
Listed
Copper Mountain Mining Corporation
Panoramic Resources Limited
GME Resources Limited
Star Royalties Limited
Other investments*
*Other investments comprise of less than 5% of the Company’s gross assets
Unlisted
Other investments
Other rights
June 2020
US$
114,839,211
50,124,116
64,715,095
114,839,211
127,666,665
47,054,148
174,720,813
Number of
shares
38,449,647
338,397,362
240,563,538
8,447,800
148,127,558
74,570,764
28,520,525
During the reporting period the Company completed a total of 94 transactions (2020: 128 transactions) in securities.
See note 22.4 for disclosure of fair value determination of level 3 investments.
The investment return is recognised primarily due to the increase in value of the Company’s investment in Copper Mountain
Mining Corporation.
6.
LOANS TO SUBSIDIARIES
Loan to Zeta Energy
Loan to Kumarina
LOAN TO SUBSIDIARIES – CURRENT
Loan to Horizon Gold
June 2021
US$
–
1,224,888
1,224,888
June 2020
US$
728,469
778,030
1,506,499
–
208,156
The loan to Zeta Energy is denominated in Australian dollars to the value of A$2,594,249 (2020: A$2,594,249) and United States
dollars to the value of US$4,373,278 (2020: US$4,342,910), with the total loan being US$6,317,993 (2020: US$5,652,428). During
the year ended 30 June 2021, the loan to Zeta Energy, which was utilised for the purchase of listed investments, was classified
as credit impaired 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. The loan was moved from underperforming in the prior year
to credit impaired in the current period. The impairment was based on the expected decrease in the value of the underlying
investment for the loan. As at the 30 June 2021 the ECLs calculated amounted to US$6,317,993.
49
Annual Report for the year to 30 June 2021
NOTES TO THE FINANCIAL STATEMENTS
(continued)
6.
LOANS TO SUBSIDIARIES (continued)
The loan to Kumarina, used for working capital is denominated in Australian dollars and is interest free. There are no fixed repayment
terms. The loan is still performing as no contactual breaches have occurred and the value of the assets in Kumarina is sufficient to cover
all the liabilities. The impact of covid-19 on Kumarina was not severe as the company is in the exploration phase.
A reconciliation of the impairment movement on the Zeta Energy loan can be seen below:
Underperforming loan impairment
Opening balance of impairment
Impairment
Transfer to credit impaired
Closing impairment
Credit impaired loan impairment
Opening balance of impairment
Transfer from underperforming
Impairment
Closing impairment
7.
CASH AND CASH EQUIVALENTS
Cash balance comprises:
Cash at bank
June 2021
US$
4,923,959
–
(4,923,959)
–
June 2021
US$
–
4,923,959
1,394,034
6,317,993
June 2020
US$
4,916,283
7,676
–
4,923,959
June 2020
US$
–
–
–
–
June 2021
US$
June 2020
US$
1,378,703
12,082
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods
up three months.
8.
LOAN FROM SUBSIDIARY
Loan from Horizon Gold
June 2021
US$
3,377,965
June 2020
US$
–
The Horizon Gold loan is denominated in Australian dollars to the value of A$4,500,000, attracts interest at 5% per annum and is
repayable before 30 June 2022.
9.
LOAN FROM PARENT
Loan from UIL Limited (“UIL”)
June 2021
US$
32,576,107
June 2020
US$
68,312,746
The loan is denominated in Australian dollars to the value of A$23.47 million (30 June 2020: A$66.06 million) and in Canadian
dollars to the value of CA$18.59 million (30 June 2020: CA$31.02 million), and currently attracts interest at 7.5% per annum
(30 June 2020: 7.5%) on the Australian dollar loan and 7.25% (30 June 2020: 7.25%) on the Canadian dollar loan. The loan is
repayable on not less than 12 months’ notice and no repayment is due before 30 June 2022.
50
Zeta Resources Limited 10. OTHER LOANS
Loan from ICM Limited
Loan from Pan Pacific Petroleum Pty Ltd (“PPP”)
Loan from Leveraged Equities
Loan from Bermuda Commercial Bank Limited
June 2021
US$
–
237,758
1,094,852
–
1,332,610
June 2020
US$
436,569
1,614,293
1,761,393
2,500,000
6,312,255
The PPP loan is denominated in Australian dollars to the value of A$317,169 (30 June 2020: A$2.34 million) and is interest free.
There are no fixed repayment terms except that no repayment is due before 30 June 2022.
The loan from Leveraged Equities is denominated in Australian dollars to the value of A$451,288 (30 June 2020: A$1.6 million) and
New Zealand dollars to the value of NZ$1.1 million (30 June 2020: NZ$1 million) and currently attracts interest at rates between
4.35% and 6.85% (30 June 2020: between 4.35% and 6.85%) per annum on the Australian dollar loan and at 6.00% (30 June 2020:
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 2022. 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$2.4 million) and Panoramic Resources Limited (6,363,635 shares valued
at US$667,825).
11. OTHER LOANS – CURRENT
Loan from Bermuda Commercial Bank Limited
June 2021
US$
2,500,000
June 2020
US$
1,250,000
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 (30 June 2020: Bermuda Commercial Bank’s commercial base rate
+1.25%). The remaining balance is payable on 30 September 2021.
12. TRADE AND OTHER PAYABLES
Other liabilities
Amount owed to brokers
Accruals
June 2021
US$
28,111
570,047
4,549,881
5,148,039
June 2020
US$
26,979
2,368,352
261,050
2,656,381
The accruals are for audit, management, directors and administration fees payable, as well as a performance fee payable to ICM
Limited. See note 16.
51
Annual Report for the year to 30 June 2021
NOTES TO THE FINANCIAL STATEMENTS
(continued)
13. SHARE CAPITAL AND SHARE PREMIUM
Authorised
5,000,000,000 ordinary shares of par value US$0.00001
Issued
Ordinary shares
Balance as at 30 June 2019
Share cancellation as a result of share buy-back 2 July 2019
Share cancellation as a result of share buy-back 2 April 2020
Number of
shares
–
Share
capital
US$
–
Share
premium
US$
–
287,763,076
2,778
122,897,203
(50,000)
(70,000)
–
(1)
(11,096)
(11,184)
Balance as at 30 June 2020
287,643,076
2,777
122,874,923
Share cancellation as a result of share buy-back 25 May 2021
Share cancellation as a result of share buy-back 26 May 2021
Share cancellation as a result of share buy-back 10 June 2021
Share cancellation as a result of share buy-back 17 June 2021
Share cancellation as a result of share buy-back 18 June 2021
Share cancellation as a result of share buy-back 25 June 2021
Share cancellation as a result of share buy-back 28 June 2021
Issued in consideration of exercise of options over the period
10 September 2020 to 15 June 2021
Balance as at 30 June 2021
Options
(12,000)
(62,666)
(184,130)
(53,826)
(47,586)
(10,900)
(38,000)
–
(1)
(2)
(1)
(1)
–
–
(3,062)
(17,204)
(49,619)
(14,121)
(12,549)
(2,887)
(10,566)
278,770,100
566,004,068
2788
53,998,135
5,560
176,763,050
On 10 September 2020 the Company offered a bonus issue of options to its shareholders. Eligible shareholders who held shares
on the record date were offered one option (bonus option) for every one share held on the record date. The bonus options had
no issue price, were exercisable at A$0.25 each and expired on 15 June 2021.
Balance as at 30 June 2020
Options issued on 29 September 2020
Options exercised
Options expired on 15 June 2021
Balance as at 30 June 2021
14.
INVESTMENT RETURNS
Revenue
Dividend income
Interest income
Investment gains/(loss)
Derived from financial instruments measured at fair value
Realised gains
Unrealised fair value losses on revaluation of investments
Unrealised fair value gains on revaluation of investments
52
–
287,567,921
(278,770,100)
(8,797,821)
–
June 2020
US$
21,483
83,251
104,734
20,503,342
(64,176,357)
32,464,090
(11,208,925)
(11,104,191)
June 2021
US$
16,132
37,853
53,985
14,095,111
(5,082,392)
127,925,486
136,938,205
136,992,190
Zeta Resources Limited
15. OTHER INCOME
Foreign exchange (losses)/gains
Other income
16. MANAGEMENT AND CONSULTING FEES
Management and consulting fees
June 2021
US$
(8,280,401)
8,792
(8,271,609)
June 2021
US$
5,491,044
June 2020
US$
903,005
18,847
921,852
June 2020
US$
778,505
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 (used in the performance fee calculation when it was last
payable) multiplied by 15%. Performance fee for the year ended 30 June 2021 was $4,223,318 (2020: $nil).
Either party may terminate the agreement with six months’ notice.
17. OPERATING AND ADMINISTRATION EXPENSES
Operating and administration expenses consist of:
Accounting fees
Audit fees
Australian Securities Exchange listing fees and regulatory costs
Insurance costs
Brokerage
Other expenses
18.
INCOME TAX
Taxation regarding the sale of Bligh Resources Limited
June 2021
US$
June 2020
US$
265,293
19,293
116,679
–
95,651
75,444
572,360
144,227
38,729
59,352
40,819
146,570
110,322
540,019
June 2021
US$
–
June 2020
US$
6,241,445
Australian taxation has been accrued in full with regards to the sale of the investment in Bligh Resources Limited in July 2019. At
30 June 2021 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. 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. 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$11 million on potential unrealised Australian capital losses (at year-end
amounting to US$38 million) where there are insufficient capital gains of the same nature against which to utilise those losses.
There is no expiration date on losses.
The Company is domiciled in Bermuda and has elected to be tax exempt in terms of local legislation. As such no tax is payable.
53
Annual Report for the year to 30 June 2021 NOTES TO THE FINANCIAL STATEMENTS
(continued)
19. EARNINGS PER SHARE
Basic profit/(loss) per share
Diluted profit/(loss) per share
June 2021
US$
0.33
0.33
June 2020
US$
(0.07)
(0.07)
Profit/(loss) used in calculation of basic and diluted earnings per share
114,670,080
(22,367,826)
Weighted average number of ordinary shares outstanding during the year used
in calculation of basic earnings per share
Adjustment for unexercised options during the period
348,193,810
334,742,573
149,080
–
Weighted average number of ordinary shares outstanding during the year used
in calculation of diluted earnings per share
348,342,890
334,742,573
The weighted average number of ordinary shares outstanding during the year has been adjusted for the for the bonus element of
options exercised in 2021. This adjustment is made retrospectively to comparative information.
20. NOTES TO THE CASH FLOW STATEMENT
20.1 Cash (utilised)/generated by operations
Profit/(loss) for the year
Adjustments for:
Realised gains on investments
Fair value (gain)/loss on revaluation of investments
Impairment of loan to Zeta Energy
Foreign exchange losses/(gains)
Taxation expense
Dividend income
Interest income
Interest expense
Operating loss before working capital changes
Decrease in trade and other receivables
Increase in trade and other payables
June 2021
US$
June 2020
US$
114,670,080
(22,367,826)
(14,095,111)
(122,843,094)
1,394,034
8,280,401
–
(16,132)
(37,853)
6,393,063
(6,254,612)
–
2,491,658
(3,762,954)
(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
54
Zeta Resources Limited 20.2 Liabilities from financing activities
Balance as at 30 June 2019
Cash flows
- Repayment of loans
- Advances of loans received
Exchange rate fluctuations
Interest capitalised
Loan transfer
Loan from
parent
US$
45,793,293
(27,794,521)
46,043,589
336,032
3,934,353
Loan from
subsidiary
US$
2,508,840
(2,788,630)
1,897,066
(133,287)
140,356
–
(1,624,345)
Balance as at 30 June 2020
68,312,746
Cash flows
- Repayment of loans
- Advances of loans received
Options exercised
Exchange rate fluctuations
Interest capitalised
(34,223,214)
18,446,626
(33,410,740)
7,765,976
5,684,713
Other loan
US$
10,964,019
(8,196,272)
3,189,313
(30,547)
11,397
1,624,345
7,562,255
Total
US$
59,266,152
(38,779,423)
51,129,968
172,198
4,086,106
–
75,875,001
(13,461,727)
(47,684,941)
–
–
3,420,043
14,301,379
36,168,048
–
(5,763,798)
(39,174,538)
(46,730)
4,652
919,269
275,232
8,638,515
5,964,597
Balance as at 30 June 2021
32,576,107
3,377,965
3,832,610
39,786,682
21. GOING CONCERN
The financial statements have been prepared on a going concern basis. We draw attention to the fact that at 30 June 2021, the
Company’s current liabilities exceed its current assets by US$12,727,647 (2020: US$6,517,913). 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.
55
Annual Report for the year to 30 June 2021 NOTES TO THE FINANCIAL STATEMENTS
(continued)
22. FINANCIAL RISK MANAGEMENT
The board of directors, together with the Investment Manager, is responsible for the Company’s risk management. The directors’
policies and processes for managing the financial risks are set out below. These financial risks are principally related to the market
(currency movements, interest rate changes and security price movements), liquidity and credit and counterparty risk.
The accounting policies which govern the reported statement of financial position carrying values of the underlying financial assets and
liabilities, as well as the related income and expenditure, are set out in note 3 to the financial statements. The policies are in compliance
with IFRS and best practice and include the valuation of certain financial assets and liabilities at fair value through profit and loss.
Categories of financial instruments
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:
30 June 2021
Assets
Investments in subsidiaries
Investments
Loans to subsidiaries
Cash and cash equivalents
Liabilities
Loans from subsidiary
Trade and other payables
Loan from parent
Other loans
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
Financial assets
mandatorily measured
at fair value through
profit or loss
US$
Financial
assets/liabilities
measured at
amortised cost
US$
22,114,602
243,477,995
–
–
265,592,597
–
–
–
–
–
Financial assets
mandatorily measured
at fair value through
profit or loss
US$
16,417,335
114,839,211
–
–
–
131,256,546
–
–
–
–
–
–
1,224,888
1,378,703
2,603,591
3,377,965
598,158
32,576,107
3,832,610
40,384,840
Financial
assets/liabilities
measured at
amortised cost
US$
–
–
1,506,499
208,156
12,082
1,726,737
2,656,381
68,312,746
7,562,255
78,531,382
Tax payable was removed from comparative information as it is not a financial instrument.
56
Total
carrying value
US$
22,114,602
243,477,995
1,224,888
1,378,703
268,196,188
3,377,965
598,158
32,576,107
3,832,610
40,384,840
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
78,531,382
Zeta Resources Limited
22.1 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 ongoing market risk within the portfolio.
The Company’s other assets and liabilities may be denominated in currencies other than United States dollars and may also be
exposed to interest rate risks. The Investment Manager and the board 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 2021 and the average rates for the year were as follows:
AUD – Australian dollar
CAD – Canadian dollar
NZD – New Zealand dollar
June 2021
Average 2021
June 2020
Average 2020
0.7496
0.8059
0.6981
0.7474
0.7807
0.6956
0.6891
0.7345
0.6444
0.6951
0.7491
0.6577
The Company’s monetary assets and liabilities at 30 June 2021, by currency based on the currency of denomination for loans and
cash and cash equivalents, and on the currency of the primary trading market for equities, are shown below:
30 June 2021
Investments in subsidiaries
Investments
Cash and cash equivalents
Loans to subsidiaries
Loan from parent
Other loans
Net monetary liabilities
30 June 2020
Investments in subsidiaries
Investments
Cash and cash equivalents
Loans to subsidiaries
Loan from parent
Other loan
Other loans
AUD
29,500,875
97,944,214
1,812,002
4,228,249
CAD
–
134,005,760
–
–
(23,472,807)
(18,587,776)
(5,274,662)
–
104,737,871
115,417,984
AUD
23,823,191
55,051,131
5,763
2,594,249
CAD
–
24,707,446
–
–
(66,063,323)
(31,021,016)
300,000
(4,563,969)
–
–
Net monetary (liabilities)/assets
11,147,042
(6,313,570)
NZD
–
–
49
–
–
(1,083,811)
(1,083,762)
NZD
–
–
49
6,163,507
–
–
(1,035,176)
5,128,380
57
Annual Report for the year to 30 June 2021 NOTES TO THE FINANCIAL STATEMENTS
(continued)
22. FINANCIAL RISK MANAGEMENT (continued)
22.1 Market risks (continued)
Based on the financial assets and liabilities held, and exchange rates applying, at the reporting date, a weakening or strengthening
of the United States dollar against each of these currencies by 10% would have had the following approximate effect on income
after tax and on net asset value (NAV):
AUD
CAD
NZD
Total
Strengthening of the United States dollar
Increase/(decrease) in total comprehensive income for
the year ended 30 June 2021
Increase/(decrease) in total comprehensive income for
the year ended 30 June 2020
Weakening of the United States dollar
(Decrease)/increase in total comprehensive income for
the year ended 30 June 2021
(Decrease)/increase in total comprehensive income for
the year ended 30 June 2020
7,851,151
9,301,535
(75,657)
17,077,029
768,143
(463,732)
330,473
634,884
(7,851,151)
(9,301,535)
75,657
(17,077,029)
(768,143)
463,732
(330,473)
(634,884)
These analyses are broadly representative of the Company’s activities during the current year as a whole, although the level of the
Company’s exposure to currencies fluctuates in accordance with the investment and risk management processes.
Interest rate exposure
The exposure of the financial assets and liabilities to interest rate risks at 30 June 2021 and at 30 June 2020 is shown below:
30 June 2021
Exposure to floating rates:
Cash
Other loans
Exposure to fixed rates:
Loan from parent
Loan from subsidiary
Other loan liabilities
30 June 2020
Exposure to floating rates:
Cash
Other loans
Exposure to fixed rates:
Loan from parent
Other loan liabilities
Loans to subsidiaries
58
Within
one year
US$
Greater than
one year
US$
1,378,703
(2,500,000)
(1,121,297)
–
–
–
Total
US$
1,378,703
(2,500,000)
(1,121,297)
–
(32,576,107)
(32,576,107)
(3,377,965)
–
(3,377,965)
Within
one year
US$
12,082
(1,250,000)
(1,237,918)
–
–
–
–
–
(1,094,852)
(33,670,959)
Greater than
one year
US$
–
(2,500,000)
(2,500,000)
(68,312,746)
(2,197,962)
208,156
(3,377,965)
(1,094,852)
(37,048,924)
Total
US$
12,082
(3,750,000)
(3,737,918)
(68,312,746)
(2,197,962)
208,156
(70,302,552)
(70,302,552)
Zeta Resources Limited 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$188,343,666 at 30 June 2021 (30 June 2020: US$65,232,097) is exposed to market
price changes. The Investment Manager assesses these exposures at the time of making each investment decision. An analysis of
the portfolio by country is set out on note 24.
Price sensitivity risk analysis
A 10% decline in the market price of the listed investments held by the Company would result in an unrealised loss of
US$18,834,366. A 10% appreciation in the market price would have the opposite effect. See note 22.4 for unlisted investment
sensitivity analyses.
22.2 Liquidity risk exposure
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Company’s reputation. The Investment Manager reviews liquidity at the time of making each investment decision.
The risk of the Company having insufficient liquidity is not considered by the board to be significant, given the amount of quoted
investments held in the Company’s portfolio and the existence of an ongoing loan facility agreement.
The contractual maturities of the financial liabilities, based on the earliest date on which payment can be required, were as follows:
30 June 2021
Trade and other payables
Loans from parent
Loan from subsidiary
Other loans
30 June 2020
Trade and other payables
Loans from parent
Other loans
Three months
or less
US$
598,158
–
–
2,540,625
3,138,783
Three months
or less
US$
2,656,381
–
1,331,250
3,987,631
Three months
to one year
US$
More than
one year
US$
Total
US$
–
–
3,533,013
1,386,189
4,919,202
Three months
to one year
US$
–
–
3,943,875
3,943,875
–
598,158
34,779,063
34,779,063
–
–
3,533,013
3,926,814
34,779,063
42,837,047
More than
one year
US$
Total
US$
–
2,656,381
73,378,972
73,378,972
2,662,500
7,937,625
76,041,472
81,316,597
22.3 Credit risk and counterparty exposure
The Company is exposed to potential failure by counterparties to deliver securities for which the Company has paid, or to pay for
securities which the Company has delivered. To mitigate against credit and counterparty risk broker counterparties are selected
based on a combination of criteria, including credit rating, balance sheet strength and membership of a relevant regulatory body.
Cash and deposits are held with reputable banks. The Company has an ongoing 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$1,224,888 (2020: US$1,714,655) and bank balances totalling US$1,378,703 (2020:
US$12,082) 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-).
59
Annual Report for the year to 30 June 2021
NOTES TO THE FINANCIAL STATEMENTS
(continued)
22. FINANCIAL RISK MANAGEMENT (continued)
22.4 Fair values of financial assets and liabilities
The assets and liabilities of the Company are, in the opinion of
the directors, reflected in the statement of financial 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 The fair values are measured using inputs, other than
quoted prices, that are included within level 1, that
are observable for the asset.
Level 3 The fair values are measured using inputs for the
asset or liability that are not based on observable
market data. 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, (b) investments in subsidiaries and (c)
investments in other rights.
(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
2021 (quarter end 31 March 2021). 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. The General Partner makes
use of the market approach which includes resource
multiples 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$0 due to the decline
in Seacrest’s net asset position.
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 million tonnes (“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$0.5
per share. At year end the fair value of the investment was
US$14.2 million.
Sensitivities: The fair value of Margosa is considered
sensitive to price of precedent transactions. If the price
of the precedent transactions changed by 30% it can
cause a change of US$3 million Zeta Resources’ equity
interest in Margosa.
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 of
aluminium per annum from surface mining operations.
60
Zeta Resources Limited 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 resource multiples from five broadly
comparable bauxite projects was used. The resource
of available aluminium of 711 Mt was used at a value of
A$0.35 per tonne. The methodology is supported by a
discounted cash flow analysis. At year end the fair value
of the investment was US$61.4 million.
Sensitivities: The fair value of Zeta’s equity interest in
AMC is sensitive to the available resource multiples for
comparable bauxite transactions observed in the market.
An increase in the multiple used could significantly
increase the fair value determined. A possible alternative
mutiple represents an increase of 0.05 A$/t to the
multiple which can cause an increase of US$8.7 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 a highly
prospective gold project located at Murrin Murrin in
Western Australia. 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. On 28 January 2021,
Kumarina entered into a sale agreement for the sale of
the tenement pertaining to the Ilgarari Copper Project.
Valuation methodology: The market approach for the
valuation of Kumarina has been used in the form of
resource multiples from comparable transactions.
The most recent mineral resource estimate for the
Murrin Murrin Gold project and nineteen comparable
transactions were used in the analysis. The Murrin Murrin
project has a resource estimate of 52,100 oz and a value
of A$43 per oz was used. At year end the fair value of the
investment was US$449,775.
Sensitivities: The methodology used is sensitive to
the chosen resource multiples for comparable gold
transactions observed on the market. The magnitude of
these multiples are primarily driven by commodity prices
and market conditions. The fair value of Zeta Resources’
equity interest in Kumarina is also sensitive to the level
of JORC Code 2012 gold resource for the Murrin Murrin
Gold Project. An increase in the resource multiples will
result in an increase in the value of the investment.
Possible alternative mutiples represent an increase in
the resources multiple of 5 A$/oz which can cause an
increase of US$195,323 Zeta Resources’ equity interest in
Kumarina.
(c)
Investments in other rights
Panoramic Resources Limited Options
Zeta Resources hold 28,520,525 options with an exercise
price of A$0.16. The options expire on 30 June 2023.
There are no vesting conditions linked to these options.
Valuation methodology: The Black-Scholes option pricing
model was used to value the options. The share price
of Panoramic Resources Limited at 30 June 2021 was
A$0.15. An estimated volatility level of 75% for Panoramic
Resources Limited and a risk-free rate over the life of the
options of 0.06% was used. At year end the fair value of
the investment was US$1.2 million.
Sensitivities: The fair value of the options is sensitive to
the volatility level, a change in the volatility used of 15%
could cause a change of US$415,747 in the total value
held by Zeta Resources.
30 June 2021
Financial assets
Investments
Investment in subsidiaries
Level 1
US$
Level 2
US$
Level 3
US$
166,678,842
21,664,824
–
–
76,799,153
449,778
There have been no movements between the level 1 and level 3 categories.
61
Annual Report for the year to 30 June 2021 NOTES TO THE FINANCIAL STATEMENTS
(continued)
22. FINANCIAL RISK MANAGEMENT (continued)
22.4 Fair values of financial assets and liabilities (continued)
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 2020
Acquisitions at cost
Total gains/(losses) recognised in fair value through profit or loss
Balance at 30 June 2021
30 June 2020
Financial assets
Investments
Investment in subsidiaries
Level 1
US$
50,124,116
15,107,981
Level 3
investments
US$
64,715,095
2,182,428
9,901,630
76,799,153
Level 2
US$
–
–
Level 3
investments
in subsidiaries
US$
1,309,354
–
(859,576)
449,778
Level 3
US$
64,715,095
1,309,354
There have been no movements between the level 1 and level 3 categories.
The following table shows a reconciliation from opening balances to closing balances for fair value measurements in level 3
investments of the fair value hierarchy:
Balance at 1 July 2019
Acquisitions at cost
Total gains recognised in fair value through profit or loss
Balance at 30 June 2020
22.5 Capital risk management
Level 3
investments
US$
40,406,163
3,213,491
21,095,441
64,715,095
Level 3
investments
in subsidiaries
US$
1,000,002
–
309,352
1,309,354
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- or long-term; and pay dividends to shareholders out of current year
earnings as well as out of brought forward reserves.
62
Zeta Resources Limited
23. RELATED PARTIES
23.1 Material related parties
Holding company
The Company’s holding company is UIL which held 60.88% of the Company’s issued share capital on 30 June 2021. UIL is 65.2%
owned by General Provincial Life Pension Fund Limited. Somers Isles Private Trust Company Limited holds 100% of General
Provincial Life Pension Fund Limited.
Entities controlled by these entities are considered related parties of the Company. Permanent Investments Limited and ICM
Limited are controlled by Somers Isles Private Trust Company 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.
23.2 Material related parties transactions
Nature of balances
Investments in related parties:
Kumarina
Zeta Investments
Zeta Energy
Horizon Gold
Loans to related parties:
Kumarina
Zeta Energy
- Loan outstanding
- Impairment
Horizon Gold
Loans from related parties:
UIL Limited
Horizon Gold
PPP
ICM Limited
Trade and other payables:
ICM Limited
Directors
June 2021
US$
June 2020
US$
449,775
1,309,352
1
1
1
1
21,664,824
15,107,981
1,224,888
–
6,317,993
(6,317,993)
–
32,576,107
3,377,965
237,758
–
778,030
728,469
5,652,428
(4,923,959)
208,156
68,312,746
–
1,614,293
436,569
3,276,643
50,000
139,708
50,000
63
Annual Report for the year to 30 June 2021 NOTES TO THE FINANCIAL STATEMENTS
(continued)
23. RELATED PARTIES (continued)
23.1 Material related parties (continued)
Nature of transactions
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 Limited
Interest charged by Permanent Investment Limited
Interest charged to investee entity
Management fees paid to ICM Limited
Performance fee accrued to ICM Limited
Fees paid to the directors
Xi Xi
M Botha
P Sullivan
A Liebenberg
June 2021
US$
1,394,034
4,652
5,684,713
54,435
109,233
3,803
1,103,229
4,223,318
50,000
50,000
50,000
50,000
June 2020
US$
7,676
135,680
3,934,353
76,656
–
65,926
592,691
–
50,000
50,000
50,000
33,333
All fees paid to directors are deemed short term remuneration payments.
24. SEGMENTAL REPORTING
The Company has four reportable segments, as described below, which are considered to be the Company’s strategic investment areas.
For each investment area, the Company’s chief operating decision maker (“CODM”) (ICM Limited - investment manager) reviews internal
management reports on at least a monthly basis. The following summary describes each of the Company’s reportable segments:
Gold: investments in companies which 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.
Information about reportable segments
30 June 2021
Gold
US$
Nickel
US$
Mineral
exploration
US$
Admin
US$
Total
US$
External investment returns
(3,912,718)
20,236,987
119,247,328
26,559
135,598,156
Reportable segment investment returns
(3,912,718)
20,236,987
119,247,328
26,559
135,598,156
Interest revenue
Interest expense
Reportable segment profit/(loss)
before tax
–
–
–
–
–
–
37,853
37,853
(6,393,063)
(6,393,063)
(3,914,036)
20,232,953
119,825,637
(21,474,474)
114,670,080
Reportable segment assets
39,887,307
33,110,117
193,820,061
1,378,703
268,196,188
Reportable segment liabilities
–
–
(570,047)
(47,445,020)
(48,015,067)
Management fee expenses and foreign exchange losses arising from loans are attributed to the admin segment.
64
Zeta Resources Limited
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
10,192,858
(37,701,884)
16,321,583
75,576
(11,111,867)
Interest revenue
Interest expense
Reportable segment profit/(loss)
before tax
–
–
–
–
–
–
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)
During the year there were no transactions between segments which resulted in income or expenditure.
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
June 2021
US$
19,254,259
106,026,848
5,406,128
(1,930,230)
3,542,107
(1,394,034)
4,417,763
275,315
135,598,156
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)
(11,111,867)
The investment return recognised in the Canadian segment is due primarily to the increase in value of the Company’s investment
in Copper Mountain Mining Corporation.
Assets
Australia
Canada
Guinea
Mali
Namibia
Singapore
Sri Lanka
Other countries
Assets
June 2021
US$
88,420,285
99,769,569
61,402,739
1,870,911
16,478
–
14,160,667
2,555,540
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
268,196,188
132,983,283
65
Annual Report for the year to 30 June 2021 NOTES TO THE FINANCIAL STATEMENTS
(continued)
25. EVENTS AFTER REPORTING DATE
The Company performed a review of events after the reporting date. A military coup d’état occurred in Guinea on 5 September
2021. The long-term impact on the valuation of the Company’s investment in AMC is currently unknown, but the situation is being
closely monitored. The Company has determined that there are no other events requiring recognition or disclosure in the financial
statements.
66
Zeta Resources Limited SHAREHOLDER INFORMATION
SUBSTANTIAL SHAREHOLDERS
As at 7 September 2021, 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
344,573,832
187,572,396
532,146,228
60.88
33.14
94.02
TOP 20 HOLDINGS OF FULLY PAID ORDINARY SHARES AS AT 7 SEPTEMBER 2021
NAME
SHARES
% OF ISSUED CAPITAL
J P Morgan Nominees Australia Pty Limited
General Provincial Life Pension Fund Limited
HSBC Custody Nominees (Australia) Limited
Mr Peter Ross Sullivan
Mr James Noel Sullivan
Hardrock Capital Pty Ltd – CGLW No 2 Super Fund A/C
Hardrock Capital Pty Ltd
VCM Investments Pty Ltd
Cherryburn Pty Ltd – Burrows Super Fund A/C
Ingot Capital Investments Pty Ltd
ACS (NSW) Pty Limited – ACS Family Super Fund A/C
Citicorp Nominees Pty Limited
M & S Bowden Superannuation Pty Ltd – M & S Bowden Super Fund A/C
Mrs Alexandra Maree Giles
Burnal Pty Ltd
Mr Sean Dennehy
Abbawood Nominees Pty Ltd – Abbott Family S/F No 1 A/C
Mr James Noel Sullivan & Mrs Gail Sullivan – Sullivans Garage S/F A/C
Blessed Investments Pty Limited – Green Family S/F A/C
Nalmor Pty Ltd John Chappell Super Fund A/C
Calimo Pty Ltd
Rossdale Superannuation Pty Ltd – Rossdale SF A/C
344,591,332
180,289,790
14,071,209
4,528,132
1,765,959
1,200,000
1,200,000
783,000
752,320
681,780
590,000
535,040
500,000
483,556
450,000
410,000
400,000
400,000
335,000
324,000
256,017
225,406
60.89
31.86
2.49
0.80
0.31
0.21
0.21
0.14
0.13
0.12
0.10
0.09
0.09
0.09
0.08
0.07
0.07
0.07
0.06
0.06
0.05
0.04
Total for top 20
554,772,541
98.02
67
Annual Report for the year to 30 June 2021 SHAREHOLDER INFORMATION
DISTRIBUTION SCHEDULE OF ORDINARY SHARES HELD AT 7 SEPTEMBER 2021
HOLDING RANGES
Above 0 up to and including 1,000
Above 1,000 up to and including 5,000
Above 5,000 up to and including 10,000
Above 10,000 up to and including 100,000
Above 100,000
Total
NO. OF
SHARES
10,236
2,485,333
1,302,004
5,393,038
556,768,457
565,959,068
NO. OF ORDINARY
SHAREHOLDERS
% OF ISSUED
CAPITAL
38
921
173
187
36
1,355
0.00
0.44
0.23
0.95
98.38
100.00
The number of shareholders holding less than a marketable parcel of ordinary shares at 7 September 2021 is 39 and
they hold 11,389 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 (Chairman of the
Audit & Risk Committee)
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 2021 SIGNIFICANT STAKES IN A SELECT RANGE OF KEY COMMODITY COMPANIES
www.zetaresources.limited