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Page 1 of 61 ABN 95 112 425 788 Annual Financial Report 30 June 2016 For personal use only
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ABN 95 112 425 788
Annual Financial Report
30 June 2016
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CONTENTS
CORPORATE DIRECTORY ................................................................................................................................................... 3
DIRECTORS’ REPORT ........................................................................................................................................................... 4
LEAD AUDITOR’S INDEPENDENCE DECLARATION ................................................................................................ 24
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ............ 25
CONSOLIDATED STATEMENT OF FINANCIAL POSITION .................................................................................... 26
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ..................................................................................... 27
CONSOLIDATED STATEMENT OF CASH FLOWS .................................................................................................... 28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .............................................................................. 29
DIRECTORS’ DECLARATION............................................................................................................................................ 60
INDEPENDENT AUDITOR’S REVIEW REPORT ........................................................................................................... 61
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CORPORATE DIRECTORY Pilbara Minerals Limited
ABN 95 112 425 788
Incorporated in Australia
BOARD OF DIRECTORS
Anthony Kiernan Non-Executive Chairman
Ken Brinsden Managing Director
Robert Adamson Non-Executive Director
Steve Scudamore Non-Executive Director
Neil Biddle Non-Executive Director
John Young Executive Director
Alan Boys Alternate Director
COMPANY SECRETARY
Alex Eastwood
PRINCIPAL REGISTERED OFFICE IN AUSTRALIA
130 Stirling Highway
North Fremantle WA 6159
Tel: + 61 8 9336 6267
Fax: + 61 8 9433 5121
Website: www.pilbaraminerals.com.au
ASX CODE
PLS
SHARE REGISTER
Advanced Share Registry Services
110 Stirling Highway
Nedlands WA 6009
Tel: +61 8 9389 8033
AUDITORS
KPMG
235 St Georges Terrace
Perth WA 6000
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DIRECTORS’ REPORT For the year ended 30 June 2016
The Directors present their report together with the consolidated financial statements of the Group comprising
of Pilbara Minerals Limited (“the Company”) and its subsidiaries for the financial year ended 30 June 2016 and
the auditor’s report thereon.
DIRECTORS
The Directors of the Company at any time during or since the end of the financial year are:
Name, qualifications and
independence status Experience, special responsibilities and other directorships
Mr Anthony Kiernan
LLB
Chairman and
Independent Non-
Executive Director
Appointed 1 July 2016
Mr Anthony (Tony) Kiernan is a highly experienced public company director and former
solicitor who has extensive experience in the management and operation of listed
public companies. Mr Kiernan is a member of the Audit and Risk Committee and
Chairman of the Remuneration Committee.
Mr Kiernan is Chairman of the Fiona Wood Foundation which focuses on research into
burn injuries.
Other current directorships: Mr Kiernan is a director of the following entities, which
are listed on the Australian Securities Exchange:
• Chalice Gold Mines Limited (since 2007) – Chairman
• BC Iron Limited (since 2006) – Chairman
• Danakali Limited (since 2013)
• Venturex Resources Limited (since 2010) – Chairman.
Former directorships in the last three years: Mr Kiernan was a director of Liontown
Resources Ltd and Uranium Equities Ltd in the last 3 years, both being listed on ASX. Mr
Kiernan resigned from both companies in November 2013.
Mr Ken Brinsden
BEng (Mining) MAusIMM
MAICD
Chief Executive Officer
and Managing Director
Appointed 4 May 2016
Mr Brinsden is a mining engineer with over 20 years’ experience in surface and
underground mining operations. Since graduation from the Western Australian School
of Mines, Mr Brinsden has worked for major mining companies including WMC
Resources Limited, Normandy Mining Ltd, Central Norseman Gold Corporation, Iluka
Resources Limited, Gold Fields Limited and more recently Atlas Iron Limited.
Mr Brinsden joined Atlas Iron Limited in May 2006 as Operations Manager and held the
roles of Chief Operating Officer and Chief Development Officer before being appointed
as its Managing Director in 2012.
Mr Brinsden was appointed as Chief Executive Officer of the Company in January 2016
with his appointment to the Board as Managing Director effective from 4 May 2016.
Other current directorships: None.
Former directorships in the last three years: Atlas Iron Limited (22 February 2012 to
27 April 2016).
Mr Robert Adamson
BSc, MSc (Hons),
MAusIMM, CP (Geo),
MAIMVA (CMV), MMICA
Independent Non-
Executive Director
Appointed 1 July 2010
Mr Robert (Bob) Adamson’s professional career spans some 49 years. The first 25 years
of which, he was employed with several international mining houses, in managerial and
board positions with listed exploration and mining companies in Australia and overseas.
Mr Adamson has been an independent mineral industry consultant since 1993. He has
an extensive background in mineral exploration and mining for gold, base metals,
diamonds and semi-precious stones, principally in Australia, southern Africa, New
Zealand, South Korea, Canada and the Philippines. Mr Adamson is a member of the
Audit and Risk Committee and Remuneration Committee.
Other current directorships: Mr Adamson is not currently a director of any other
public listed company.
Former directorships in the last three years: None.
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Name, qualifications and
independence status Experience, special responsibilities and other directorships
Mr Steve Scudamore
FCA, MA (Oxon), FAICD, SF
Fin
Independent Non-
Executive Director
Appointed 18 July 2016
Mr Steve Scudamore is a chartered accountant with a Master of Arts from Oxford
University, a Fellow of the Institute of Chartered Accountants, England, Wales and
Australia (FCA), a Fellow of the Institute of Company Directors (FAICD) and a Senior
Fellow of the Financial Services Institute of Australia (SF Fin).
Mr Scudamore’s career includes 28 years as a partner at international accounting and
financial services firm KPMG, where he served as a member of KPMG’s Global Energy
and Natural Resources Group, a Member of the KPMG Australian Corporate Finance
Executive and Board, and Chairman of Partners in Western Australia. Mr Scudamore is
Chairman of the Audit and Risk Committee and is a member of the Remuneration
Committee.
Mr Scudamore also currently serves as chairman of MDA Insurance Pty Ltd, and holds
board positions on industry, government and community boards, including as a Trustee
of the Western Australian Museum, Chairman of Amana Living Incorporated (formerly
Anglican Homes) and a member of Council at Curtin University. Mr Scudamore is also a
senior advisor to Lazard Australia.
Other current directorships: Mr Scudamore currently serves as a non-executive
director on the board of Altona Mining Limited (since 2013)
Former directorships in the last three years: Aquila Resources Limited (10 December
2012 to 7 June 2016).
Mr Neil Biddle
BAppSc (Geology),
MAusIMM
Executive Director
30 May 2013 to 19 August
2016
Non-Executive Director
Effective 20 August 2016
Mr Neil Biddle is a geologist and Corporate Member of the Australasian Institute of
Mining and Metallurgy. He has over 30 years professional and management experience
in the exploration and mining industry and since 1987 has served on the Board of
several ASX listed companies. Mr Biddle was Managing Director of TNG Ltd from 1998
to 2007, Border Gold NL from 1994 to 1998, and Consolidated Victorian Mines from
1991 to 1994.
Other current directorships: Mr Biddle is not currently a director of any other public
listed company.
Former directorships in the last three years: Arunta Resources Ltd (4 April 2013 to
8 April 2015).
Mr John Young
BAppSc (Geology), Grad
Dip – Technology
Management, MAusIMM
Executive Director
Appointed 4 September
2015
Mr John Young is a highly experienced geologist having been engaged on exploration
and production projects encompassing gold, uranium and specialty metals. From 2002
to 2006, Mr Young was Exploration Manager for Haddington Resources Limited and was
responsible for resource exploration and resource definition for their Bald Hill Tantalum
mine. Mr Young’s corporate experience has included appointments as CEO of Marenica
Energy Limited and CEO and director of Thor Mining PLC. Mr Young has been
responsible for exploration and evaluation for both the Pilgangoora and Tabba Tabba
projects since their acquisition by the Company.
Other current directorships: Mosman Oil & Gas Limited.
Former directorships in the last three years: None.
Effective 1 July 2016, Mr Anthony Leibowitz retired as Non-Executive Chairman of the Company. Mr Leibowitz
has more than 30 years of corporate finance, investment banking and broad commercial experience. He has a
strong track record in capital raisings, mergers and acquisitions, business restructuring and corporate
governance and was previously a global partner at PricewaterhouseCoopers based in Perth and Sydney for 12
years.
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COMPANY SECRETARY
Mr Alex Eastwood, LLB (Hons), B.Ec, GAICD
Mr Eastwood was appointed to the position of Company Secretary on 1 September 2016. Mr Eastwood has
more than 20 years’ experience as a commercial lawyer, company secretary and corporate finance executive.
Mr Eastwood has previously held partnerships with two international law firms, and has extensive experience
as an executive director in the corporate finance area. Mr Eastwood has also held a number of senior corporate
positions with ASX-listed companies including as General Counsel and Company Secretary with Gryphon
Minerals and General Counsel with Imdex Limited.
Mr Alan Boys, B. Com, CA
Mr Boys held the position of Company Secretary from 23 October 2014 until his date of resignation on 31
August 2016. Mr Boys is a Chartered Accountant whom initially spent some 17 years in professional accounting
services firms, retiring from public practice as a partner of PricewaterhouseCoopers at the end of 1998. For the
past 18 years, Mr Boys has been involved in providing financial advisory, investment banking services, and
accounting and secretarial services to ASX listed and unlisted public companies. Mr Boys will act as an alternate
Director for Mr Neil Biddle from 20 August 2016 until 30 September 2016.
Other current directorships: nil.
Former directorships in the past three years: nil.
DIRECTORS’ MEETINGS
The number of directors’ meetings and number of meetings attended by each director of the Company during
the financial year are:
Director Board Meetings
Attended Held
Mr Tony Leibowitz* 10 10
Mr Robert Adamson 9 10
Mr Ken Brinsden 2 2
Mr Neil Biddle 10 10
Mr John Young 8 8
* Mr Leibowitz retired as a director effective 1 July 2016. Mr Anthony Kiernan was appointed as a director and Chairman on
1 July 2016.
Mr Steve Scudamore was appointed as a director on 18 July 2016.
During the year the full board acted in the capacity of both the Audit and Risk Committee and Remuneration
Committee. Subsequent to year end, the Company established a separate Audit and Risk Committee and
reconstituted the Remuneration Committee. Both committees consist solely of non-executive directors.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year was the exploration, development and mining of mineral
resources. There were no significant changes in the nature of the activities of the Group during the year.
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Objectives
The Group’s objectives are to:
• Develop and mine the world class lithium-tantalum deposit at the 100% owned Pilgangoora Project
(“Project”) located in the Pilbara region of Western Australia;
• Continue to conduct exploration activities at the Project to improve the existing resource and reserve;
• Conduct exploration activities to hopefully discover new economic mineral deposits; and
• Consider participation in downstream chemical processing opportunities to leverage the quality of the
Project.
In order to meet these objectives, the following targets have been set for the 2017 financial year and beyond:
• Complete the Project’s definitive feasibility study in the first quarter of the 2017 financial year;
• Finance the construction and commissioning of the Project;
• Target Project construction to commence in the second quarter of the 2017 financial year and
commissioning in the second quarter of the 2018 financial year;
• Finalise offtake agreements with the Company’s prospective customer base that will underpin the
Project’s production profile of chemical spodumene concentrate; and
• Develop partnerships with key lithium chemicals industry groups to participate in downstream chemical
processing opportunities by the third quarter of the 2017 financial year.
OPERATING AND FINANCIAL REVIEW
Review of Operations
During the year, the Company continued the exploration and development of its Pilgangoora Lithium-Tantalite
Project located in the Pilbara region of Western Australia.
The Pilgangoora Lithium-Tantalite Project was subject to an extensive and successful exploration program
during the period. In March 2016, the Company produced a Prefeasibility Study (“PFS”) which confirmed the
technical and financial viability of a standalone 2 million tonnes per annum (“Mtpa”) mining and on-site
processing operation. The Company is progressing to a Definitive Feasibility Study (“DFS”) which is expected
to be completed during the first quarter of the 2017 financial year.
Operations at the Tabba Tabba Tantalum Project were temporarily suspended in January 2016 due to the
processing plant requiring modification and rectification works. In April 2016 operations at the Tabba Tabba
Tantalum Project were suspended due to the cost of certain rectification works and the prevailing tantalum
market conditions.
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Review of Principal Business
Pilgangoora Lithium-Tantalum Project
The Pilgangoora Lithium-Tantalite Project is
located 120 kilometres southeast of Port
Hedland in Western Australia. It is 100% owned
by the Company. Since acquiring Pilgangoora in
mid-2014, the Company has made significant
progress in identifying and increasing the size of
the resource as well as assessing and
developing a greater understanding of the
metallurgy of the deposit. The Pilgangoora
Project now represents the second largest
spodumene (lithium-mineral) deposit globally.
During the period, the Company completed the
PFS on the Pilgangoora Lithium-Tantalum
Project. The PFS confirmed the technical and
financial viability of a 2 Mtpa standalone mining
and processing operation over an initial 15-year
mine life based on an initial maiden Ore Reserve
of 29.5 Mt @ 1.31% Li2O, 134 ppm Ta2O5 and
1.18% Fe2O3.
Key financial outcomes included:
• Project net present value (“NPV”) of A$407 million (10% discount rate, post-tax) and internal rate of return
(“IRR”) of 44% (PFS Reserve basis);
• Project capital estimate of A$184 million (+/-25%); and
• Outstanding life-of-mine operating cash costs of US$205/tonne of spodumene concentrate FOB (net of
by-product credits).
The Company is currently undertaking a DFS which is expected to be completed in the September 2016 quarter.
In February 2016, the Company confirmed the significant scale of the Pilgangoora Mineral Resource, with the
release of an Indicated and Inferred Resource of 80.2 Mt grading 1.26% Li2O (containing 1,008,000 tonnes of
lithium oxide), including 42.3 Mt grading 195 ppm Ta2O5 (containing 18.2 million pounds (“Mlb”) of tantalum
oxide).
Subsequently, following a successful drilling program the Company released an updated Mineral Resource in
July 2016 with an upgraded Indicated and Inferred Resource of 128.6 Mt grading 1.22% Li2O containing 1.57 Mt
of lithium oxide and 39 Mlb of Ta2O5, as follows:
Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Li2O (t) Ta2O5 (Mlb)
Measured 18.0 1.36 150 245,000 5.9
Indicated 65.6 1.24 131 812,000 19.0
Inferred 45.0 1.15 144 515,000 14.2
Total 128.6 1.22 138 1,572,000 39.2
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MiningPlus Pty Ltd completed an independent review of the February 2016 Mineral Resource, for the purpose
of optimisation studies to estimate project Ore Reserves, and found no material flaws in the resource model.
The following Ore Reserve was released in March 2016:
Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Fe2O3 (%) Li2O (t) Ta2O5 (t) Ta2O5 (Mlb)
Proven 0.0 0.00 0 0.00 0 0 0
Probable 29.5 1.31 134 1.15 273,000 1,856 4.09
Total 29.5 1.31 134 1.15 273,000 1,856 4.09
In August 2016, the Company announced a further increase to the Pilgangoora Lithium-Tantalum Project ore
reserves following the drilling program undertaken as part of the Definitive Feasibility Study, as follows:
Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Fe2O3 (%) Li2O (t) Ta2O5 (Mlb)
Proven 17.5 1.31 143 0.94 230,000 5.5
Probable 52.3 1.25 128 1.07 653,000 14.8
Total 69.8 1.26 132 1.04 883,000 20.3
Further information regarding the Project can be found in the Annual Report under the heading titled
Pilgangoora Lithium-Tantalum Project.
Tabba Tabba Tantalum Project
In 2014, the Company entered into the incorporated joint venture Tabba Tabba Tantalum Pty Ltd (“TTT”) with
Valdrew Nominees Pty Ltd (“Valdrew”) to jointly evaluate, develop and mine the Tabba Tabba Tantalum Project
located some 75 kilometres by road from Port Hedland, Western Australia.
The tenements are owned by Global Advanced Metals Wodgina Pty Ltd (“GAM”) and the mining and
processing is to be undertaken by TTT pursuant to an agreement with GAM, who has an offtake agreement for
the project’s tantalite concentrate.
On 25 September 2015, the Company entered into a sale and purchase agreement with Valdrew to acquire the
remaining 50% interest in the Tabba Tabba Tantalum Project. The acquisition increased the Company’s interest
in the Tabba Tabba Tantalum Project to 100%.
The purchase consideration for Valdrew’s 50% shareholding in TTT was $2,000,000 cash on settlement.
Additionally, all loans and advances as well as any amounts due to Valdrew in respect of past goods and
services were released in full and was not enforceable against TTT.
Subject to delivery of tantalite concentrate to GAM in accordance with the Minerals and Processing Agreement,
a further $1,300,000 was payable by TTT to Valdrew. In addition, Valdrew was entitled to receive up to
20,000,000 unlisted options over ordinary shares in the Company in the event certain milestones were achieved.
Each unlisted option was to have a term of two years and an exercise price calculated as the five-trading day
volume weighted average price (“VWAP”) prior to the issue date of the options.
Operations at the Tabba Tabba Tantalum Project were suspended in January 2016 following issues with the
commissioning process. The Company completed an independent engineering and project review of the site
in April 2016. The engineering review determined that further expenditure was required to modify the existing
processing plant before the commissioning process could be finalised. This combined with existing weak
tantalum market conditions meant that the operation was suspended indefinitely. As a result, none of the
milestones were achieved and accordingly no unlisted options in the Company will be issued to Valdrew.
West Pilbara Joint Venture
In April 2013, the Company entered into a farm-in and joint venture agreement with Fox Resources Limited
(“Fox”) over six tenements comprising its West Pilbara project. To date, Fox has farmed in to the extent of 55%
of the joint venture, however Fox is currently suspended from the ASX and no exploration activities were
undertaken during the period.
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Review of Financial Conditions
The consolidated loss for the year ended 30 June 2016 was $55.61 million (restated 2015 loss: $6.62 million).
Excluding the following non-cash items, the consolidated entity achieved an unaudited operating loss of
$15.90 million (restated 2015 loss: $2.80 million):
• non-cash impairment charges related to the closure of the Tabba Tabba Project ($12.14 million);
• non-cash share-based payment expenses following the issue of options to directors, employees,
consultants, service providers and convertible noteholders to preserve cash ($26.56 million);
• non-cash depreciation charges related to corporate assets ($0.05 million);
• non-cash net financing costs ($1.77 million); and
• non-cash gain on equity investment ($0.81 million).
The operating loss of $15.90 million includes exploration and evaluation costs of $10.56 million incurred mainly
on the Pilgangoora Project, following a change in accounting policy to expense exploration and evaluation
costs as incurred.
Share Placements and Issues
During the financial year, the Company raised the following amounts of capital before costs:
Date Number of shares Price per share ($) Amount raised ($’000)
23 July 2015 22,727,274(i) $0.11 2,500
24 November 2015 52,173,913 $0.23 12,000
14 April 2016 142,000,000 $0.38 53,960
26 May 2016 39,609,256 $0.38 15,051
30 May 2016 81,684,208 $0.38 31,040
(i) Three attaching unlisted options were issued for every four shares issued with a strike price of $0.15 per option and a term of two
years from date of issue (17,045,455 options)
Convertible Notes
On 2 September 2015, the Company issued 4,000,000 unlisted secured convertible notes with a face value of
$4 million. The convertible notes had a maturity date of 2 March 2017, a coupon rate of 15% per annum and
could be converted at a price equal to 80% of the Company’s five-day weighted average share price preceding
conversion. Unlisted non-transferable options totalling 50,000,000 with an exercise price of $0.05 and an expiry
date of 2 March 2017 were also issued in conjunction with the convertible notes. By 21 April 2016, all unlisted
secured convertible notes issued on 2 September 2015 were converted to equity following the issue of
12.3 million ordinary shares at an average conversion price of $0.33 per share.
During the year, unlisted secured convertible notes from an issue made on 24 March 2014 were converted to
equity following the issue of 1.7 million ordinary shares at an average conversion price of $0.11 per share. Of
the 1.7 million ordinary shares issued, 0.3 million were issued for consideration for accrued interest owing on
the convertible notes being converted to ordinary shares. The remaining unlisted secured convertible notes
expired on 25 September 2015 which resulted in the repayment of notes with a face value of $13,550 and
accrued interest.
During the year, unlisted secured convertible notes from an issue made on 30 May 2014 were converted to
equity following the issue of 7.6 million ordinary shares at an average conversion price of $0.11 per share. Of
the 7.6 million ordinary shares issued, 1.6 million were issued as consideration for accrued interest owing on
the convertible notes being converted to ordinary shares. The remaining unlisted secured convertible notes
expired on 30 November 2015 which resulted in the repayment of notes with a face value of $161,450 and
accrued interest.
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By 19 April 2016, convertible notes that were issued by the Company on 22 June 2015 with a face value of
$1,700,000 were converted to equity at a price equal to 80% of the Company’s five-day weighted average share
price preceding conversion. As a result, 6.9 million ordinary shares were issued at an average conversion price
of $0.25 per share.
Options Issued
During the financial year, the Company issued the following options:
Option Grant date Exercise price Expiry date Vested Options unexercised
at 30 June 2016
29,500,000 28/08/2015 $0.10 22/03/2017 29,500,000 8,000,000
56,400,000 28/08/2015 $0.05 02/03/2017 56,400,000 4,937,500
17,045,455 30/11/2015 $0.15 01/12/2017 17,045,455 3,268,181
5,000,000 30/11/2015 $0.10 22/03/2017 5,000,000 5,000,000
23,000,000 18/04/2016 $0.40 16/05/2018 23,000,000 23,000,000
1,000,000 18/04/2016 $0.40 16/05/2018 1,000,000 1,000,000
2,000,000 18/04/2016 $0.65 16/05/2018 2,000,000 2,000,000
15,000,000 18/04/2016 $0.40 16/05/2019 -(i) 15,000,000
800,000 06/05/2016 $0.40 16/05/2018 -(ii) 800,000
13,500,000 06/05/2016 $0.40 16/05/2018 13,500,000 13,500,000
16,500,000 06/05/2016 $0.40 16/05/2019 -(i) 16,500,000
5,000,000 11/05/2016 $0.65 16/05/2018 5,000,000 5,000,000
6,000,000 22/06/2016 $0.63 22/06/2019 -(i) 6,000,000
(i) The vesting conditions attaching to these options are:
• 33.33% will vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board;
• 33.33% will vest upon the funding required to develop the Pilgangoora Project being raised or procured based on parameters
acceptable to the Board and a “decision to mine” being made by the Board in respect of the Pilgangoora Project;
• 33.33% will vest upon the Pilgangoora Project mine development and plant construction being largely complete (both for civil
works and mine establishment) and the process plant having achieved a nominal 85% of its design throughput capacity during
production runs, at a saleable product specification; and
• A continuing employment service condition at the time each milestone is achieved.
(ii) The vesting condition attaching to these options is six months of continuous employment service.
During the period, a total of $8.10 million was raised following the exercise of 122,793,103 unlisted options
over ordinary shares.
Significant Changes in the State of Affairs
In the opinion of the Directors there were no significant changes in the state of affairs of the Group that
occurred during the financial year under review, except as already noted in this Directors’ Report.
DIVIDENDS
The Directors recommend that no dividend be declared or paid.
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EVENTS SUBSEQUENT TO REPORTING DATE
On 4 July 2016, the Company announced it had signed a binding offtake agreement with leading Chinese
lithium chemicals company, General Lithium Corporation (“GLC”) for the supply of 140,000 tonnes per annum
(“tpa”) of 6% chemical-grade spodumene concentrate from Q1 2018 for an initial six-year period, with the
option to extend for a further four years. The offtake pricing mechanism will be based on the price of lithium
carbonate, so that the Company shares in the pricing outcomes derived from carbonate deliveries to higher
volume contracts with cathode makers in China.
As part of the Offtake Agreement with GLC, a binding Memorandum of Understanding (“MOU”) was signed to
enable the Company and GLC to participate in the evaluation and development of a future offshore spodumene
conversion plant, to process spodumene concentrates from the Pilgangoora Project. In the event a positive
decision is made to proceed with the development, GLC will provide technology, technical expertise and
intellectual property, and will build and operate the lithium chemicals production facility through an
incorporated joint venture with the Company. Pilbara is expected to have a 50% share of the equity in the
proposed Joint Venture.
A binding Equity Subscription Agreement was also executed with GLC as part of the above, whereby GLS has
agreed to invest A$17.75 million in the Company via a 3% placement at 50c per share; with settlement to occur
after the conditions precedent to the Offtake Agreement terms have been satisfied. A further 2% placement is
proposed (for a total stake of 5% in Pilbara Minerals), once a formal investment decision has been made to
proceed with the development of the lithium chemicals facility.
The Offtake Agreement is subject to various conditions precedent, including the waiver or non-exercise of the
right of first refusal to the spodumene concentrates held by Mineral Resources Limited under the terms of the
Pilgangoora Asset Sale Agreement.
On 11 July 2016, the Company announced a further substantial increase in the Pilgangoora Lithium-Tantalum
Project’s Mineral Resource. The resource upgrade resulted in:
• A 60% increase in the total Measured, Indicated and Inferred Resource to 128.6 Mt grading 1.22% Li2O
(spodumene) and 138 ppm Ta2O5 and 0.63% Fe2O3, containing 1.57 Mt of lithium oxide and 39 Mlb of
Ta2O5;
• A 134% increase in the total Measured and Indicated Resource, available for conversion to Ore Reserves,
to 83.6 Mt grading 1.27% Li2O (spodumene), 135 ppm Ta2O5 and 0.58% Fe2O3, containing 1.06 Mt of
lithium oxide and 24.9 Mlb of Ta2O5;
• After applying a cut-off of 1% Li2O to the total Mineral Resource of 128.6 Mt, the Inferred and Indicated
Lithium Resource components amount to 91 Mt @ 1.43% Li2O, containing 1.3 Mt of lithium oxide.
In August 2016, the Company announced a substantial increase in the Ore Reserves for the Pilgangoora
Lithium-Tantalum Project to 69.8 million tonnes grading 1.26% Li2O which will aid in the completion of a
Definitive Feasibility Study (DFS). The updated Ore Reserves are more than double the maiden ore reserve
announced in the March 2016 Pre-Feasibility Study (29.5 Mt @ 1.3% Li2O and 134ppm Ta2O5). The overall
Pilgangoora Ore Reserve now comprises 883,000 tonnes of contained lithium oxide and 20.3 million pounds
of contained tantalite.
LIKELY DEVELOPMENTS
The Group will continue to develop the Pilgangoora Lithium-Tantalum Project with a view to commissioning and
operating the same. This will require completion of a positive DFS, and the raising of sufficient capital to fund the
development, construction and commissioning of the Project.
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ENVIRONMENTAL REGULATION
The Group’s operations are subject to significant environmental regulation under both Commonwealth and State
legislation in relation to its mining, development and exploration activities. The Group is committed to achieving
a high standard of environmental performance. Compliance with the requirements of environmental regulations
and with specific requirements of site environmental licences was substantially achieved across all operations with
no known instance of non-compliance noted. Based on the results of enquiries made, the Directors are not aware
of any significant breaches during the period covered by this report.
INTERESTS
The relevant interest of each director in the shares, rights or options over such instruments issued by the
companies within the Group and other related bodies corporate, as notified by the Directors to the ASX in
accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:
Director Pilbara Minerals Limited
Ordinary shares Options over ordinary shares
Mr Robert Adamson 3,937,851 4,000,000
Mr Neil Biddle 36,221,930 8,000,000
Mr Ken Brinsden 869,565 15,000,000(i)
Mr Anthony Kiernan 75,000 -
Mr Steve Scudamore - -
Mr John Young 16,158,316 10,000,000
Mr Alan Boys 1,877,504 6,900,000
(i) Vesting conditions attached to these options are set out in footnote (b) to the “Share Options” table below.
SHARE OPTIONS
At the date of this report unissued shares of the Group under option are:
Expiry date Exercise price Number of options
21 December 2016 $0.05 1,250,000
2 March 2017 $0.05 4,625,000
22 March 2017 $0.10 11,000,000
25 March 2017 $0.03 4,166,665
1 December 2017 $0.15 3,268,181
16 May 2018 $0.40 37,500,000
16 May 2018a $0.40 800,000
16 May 2018 $0.65 7,000,000
16 May 2019b $0.40 31,500,000
a The vesting condition requires an employee to provide six months of continuous service from the date of grant.
b Vesting conditions applying to these unlisted options include:
• Delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board (33.33% vest);
• The funding required to develop the Pilgangoora Project has been raised or procured based on parameters acceptable to the
Board of Pilbara Minerals and a “decision to mine” has been made by the Board in respect of the Pilgangoora Project (further
33.33% vest);
• The Pilgangoora Project mine development and plant construction is largely complete (both for civil works and mine
establishment) and the process plan has achieved a nominal 85% of its design throughput capacity during production runs, at a
saleable product specification (final 33.33% vest).
Unless stated, there are no other vesting conditions on options on issue.
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INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has agreed to indemnify the following current and past directors of the Company, Mr R.
Adamson, Mr N. Biddle, Mr K. Brinsden, Mr T. Leibowitz, Mr A. Kiernan, Mr S. Scudamore and Mr J. Young
against all liabilities to another person (other than the Company or a related body corporate) that may arise
from their position as Directors of the Company and its controlled entities, except where the liability arises out
of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount
of any such liabilities, including costs and expenses.
The Company has also agreed to indemnify the current Directors of its controlled entities for all liabilities to
another person (other than the Company or a related body corporate) that may arise from their position, except
where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the
Company will meet the full amount of any such liabilities, including costs and expenses.
Under the terms of the insurance policy entered into in April 2016, the Company has agreed to indemnify
certain senior executives for all liabilities to another person (other than the Company or a related body
corporate) that may arise from their position in the Company and its controlled entities, except where the
liability arises out of conduct involving a lack of good faith. The policy stipulates that the Company will meet
the full amount of any such liabilities, including legal fees.
Insurance premiums
Since the end of the previous financial year the Company has paid insurance premiums of $93,885 in respect
of directors’ and officers’ liability and legal expenses’ insurance contracts, for current directors and officers,
including senior executives of the Company and directors, senior executives and secretaries of its controlled
entities. The insurance premiums relate to:
• costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal
and whatever their outcome; and
• other liabilities that may arise from their position, with the exception of conduct involving a wilful breach
of duty or improper use of information or position to gain a personal advantage.
NON-AUDIT SERVICES
Somes Cooke audited the Group up until their resignation on 10 June 2016. Somes Cook did not provide any
non-audit services during this period. The Directors resolved to appoint KPMG as the interim auditor of the
Group, with their appointment to be confirmed at the next Annual General Meeting. KPMG did not provide
any non-audit services from 10 June 2016 up to year end.
LEAD AUDITOR’S INDEPENDENCE DECLARATION
The Lead Auditor’s Independence Declaration is set out on page 24 and forms part of the Directors’ Report for
the financial year ended 30 June 2016.
ROUNDING OF AMOUNTS
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 and in accordance with the Instrument, amounts in the consolidated financial statements and the
Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated. For
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REMUNERATION REPORT – AUDITED
This Remuneration Report for the year ended 30 June 2016 outlines the director and executive remuneration
arrangements of the Group in accordance with the requirements of the Corporations Act 2001 (Cth) (“Act”) and
its regulations. The Remuneration Report details the remuneration arrangements for Key Management
Personnel (“KMP”) who are defined as those persons having authority and responsibility for planning, directing
and controlling the major activities of the Group, directly or indirectly, including any director (whether executive
or otherwise).
Principles of Compensation – audited
The nature and amount of remuneration for an executive and non-executive director depends on the nature
of the role and market rates for the position, which are determined with the assistance of external advisors
(where necessary), surveys and reports, taking into account the experience and qualifications of each individual.
The Board ensures that the remuneration paid to KMP is competitive and reasonable. Fees and payments to
the Non-Executive Directors reflect the demands made, and the responsibilities placed on the Non-Executive
Directors. Non-Executive director fees and payments are reviewed annually by the Board.
The following were KMP of the Group during the financial year and unless otherwise indicated were KMP for
the entire financial year:
Non-Executive Directors Executive Directors Executives
Mr Tony Leibowitz1
Mr Robert Adamson
Mr Ken Brinsden2
Mr Neil Biddle
Mr John Young3
Mr Alan Boys4
Mr Brian Lynn5
1 Mr Leibowitz resigned as Chairman of the Board on 1 July 2016. 2 Mr Brinsden was appointed Chief Executive Officer on 18 January 2016. Mr Brinsden was appointed to the board as Managing Director
on 4 May 2016. 3 Mr Young was appointed to the Board on 4 September 2015. 4 Mr Boys resigned as Chief Financial Officer on 21 June 2016 but acted in the capacity of Company Secretary for the entire financial year. 5 Mr Lynn was appointed Chief Financial Officer on 22 June 2016.
The objective of the Company’s remuneration framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The remuneration framework aligns executive reward with the
achievement of strategic and operational objectives and the creation of value for shareholders. The Board
ensures that the executive reward framework satisfies the following key criteria in line with appropriate
corporate governance practices:
• attract, retain, motivate and reward executives;
• reward executives for Company and individual performance against pre-determined targets/benchmarks;
• link rewards with the strategic goals and performance of the Company;
• provide competitive remuneration arrangements by market standards;
• align executive interests with those of the Company’s shareholders; and
• comply with applicable legal requirements and appropriate standards of governance.
The Company has structured an executive remuneration framework that is market competitive and
complementary to the reward strategy for the organisation. Executive remuneration packages may comprise a
mix of the following:
• Fixed remuneration comprising base salary and employer superannuation contributions. Salaries are
reviewed on an annual basis to ensure competitive remuneration is paid to executives with reference to
their role, responsibility, experience and performance. Salaries are reviewed on an annual basis and are
based on external surveys and reports that provide market rates.
• Short-term incentives (“STIs”) comprising cash bonuses and equity base schemes. The STIs are
structured to provide remuneration for the achievement of individual and Company performance targets
linked to the Company’s strategic objectives.
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• Long-term incentives (“LTIs”) comprising participation in equity based schemes. The LTIs provide
remuneration for the achievement of corporate objective linked to the long-term growth of the Company.
The STIs and LTIs are all at risk.
The Company has gone through a significant recent transition and is currently finalising a definitive feasibility
study to advance the Pilgangoora Project from an exploration project towards development, construction
and ultimately production. During the past 12 months the Company chose to preserve cash for its successful
exploration activities by granting fully vested unlisted options over ordinary shares as part of its
remuneration framework. To recognise the recent changes in the Company’s circumstances the Directors
recently resolved to re-constitute the Remuneration Committee with non-executive directors and tasked the
committee with, amongst other things, formulating a new remuneration policy and framework which is
appropriate for the Company’s current activities and aligned with best practise in the market place. It is
expected that a new remuneration policy and framework will be adopted which will result in significant
changes to the Company’s approach towards executive and non-executive remuneration which will take
effect during the course of the 2017 financial year.
One of the main objectives of the new remuneration framework will be to attract and retain key executives at
a vital stage in the Company’s development and to ensure that all executive remuneration is directly and
transparently linked with strategy and performance. This will include aligning STIs and LTIs with achievement
of the Company’s short-term and long-term strategic objectives and longer term shareholder return. Other
key objectives of the new remuneration framework may include:
• to ensure all equity based instruments issued to executives are performance based in accordance with
recommended corporate governance practices;
• to ensure effective benchmarking of total annual remuneration for executives. In this regard, the
Company may seek external advice on market practices for a clearly defined peer group of similar
companies to ensure remuneration is fair and competitive including fixed remuneration as well as STIs
and LTIs;
• to reward individual and group objectives thus promoting a balance of individual performance and
teamwork across the executive management team;
• preserve cash where necessary for exploration and project development;
• subject to shareholder approval, increasing the pool of directors’ fees available to non-executive directors
to encourage new appointments to the Board to improve its diversity; and
• to promote independence and impartial decision making across the non-executive directors.
During the year, 75,000,000 unlisted options over ordinary shares in the Company were granted to directors
and executives, including 69,000,000 unlisted options over ordinary shares being issued to Directors following
receipt of shareholder approval.
Of the 75,000,000 unlisted options noted above, 15,000,000 were issued to Mr Ken Brinsden (Managing
Director) and 6,000,000 were granted to Mr Brian Lynn (Chief Financial Officer) with the following vesting
conditions linked to important milestones associated with the Pilgangoora Project:
• Delivery of a final definitive feasibility study to a standard acceptable to the Board (33.3%);
• Adequate funding required to develop the Pilgangoora Project being raised or procured based on
parameters acceptable to the Board and a “decision to mine” determined by the Board (33.3%); and
• Completion of the mine development and plant construction at the Pilgangoora Project and the process
plant achieving a nominal 85% of its design capacity at a saleable product specification (33.3%).
The remaining 54,000,000 unlisted options were not subject to any vesting conditions. The Company
considered that the issue of these 54,000,000 unlisted options to Directors’ conserved cash in the short term
and acted as an incentive to grow the share price of the Company in the long term. This effectively linked
Directors’ performance to the share value and therefore to the interests of all shareholders. For this reason,
there were no performance conditions prior to the grant or exercise of the options. The grant of the options
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to Messrs Biddle and Leibowitz also reflected the significant contribution made by them in raising capital for
the Company over the past 12 months.
a) Assessing Performance and Clawback of Remuneration
The Board is responsible for assessing performance against key performance indicators (“KPIs”) and
determining the STI and LTI components to be paid based upon reports from management, market
conditions and Company performance.
In the event of serious misconduct or a material misstatement in the Company’s financial statements,
the Board may cancel or defer performance-based remuneration and may also clawback performance-
based remuneration paid in previous financial years.
b) Consequences of Performance on Shareholder Wealth
Executive remuneration is aimed at aligning the strategic and business objectives with the creation of
shareholder wealth. The table below shows measures of the Group’s financial performance over the last
five years as required by the Corporations Act 2001. However, these are not necessarily consistent with
the measures used in determining the variable amounts of remuneration to be awarded to KMP. As a
consequence, there may not always be a direct correlation between the statutory key performance
measures and the variable remuneration awarded.
2016 2015 2014 2013 2012
Profit/(loss) for the year attributable to owners
of Pilbara Minerals Limited ($’000) (55,607) (6,620)* (3,187) (1,156) (2,081)
Basic earnings/(loss) per share (cents) (6.8) (1.1)* (1.1) (1.6) (3.8)
Dividend payments ($’000) - - - - -
Share price $0.62 $0.11 $0.02 $0.01 $0.01
Increase/(decrease) in share price % 463.6 452.6 58.3 (14.3) (54.8)
* Restated for the change in exploration and evaluation accounting policy
c) Service Contracts
The remuneration and other terms of employment for the Managing Director and other KMP are
formalised in employment contracts, as set out below.
Mr Brinsden, Managing Director and Chief Executive Officer (“CEO”), has an employment agreement
dated 2 December 2015 with the Company and was appointed as Managing Director on 4 May 2016.
Mr Brinsden commenced employment on 18 January 2016 and continues unless terminated. Termination
of the employment agreement by the CEO requires 12 weeks’ written notice within the first 12 months
of service. After 12 months of service, the CEO is required to give 16 weeks’ written notice of termination.
The Company must give the CEO 12 weeks written notice of termination within the first 12 months of
employment for termination without cause and 12 months’ written notice of termination on completion
of 12 months of service. Upon termination, the CEO is entitled to receive from the Company all payments
owed to him under the employment agreement up to and including the date of termination and any
payments due to him pursuant to any relevant legislation by way of accrued annual leave and long
service leave. The agreement specifies duties and obligations to be fulfilled as CEO and provides for an
annual review of base remuneration taking into account performance. Mr Brinsden’s remuneration
includes a salary of $350,000 per annum inclusive of superannuation. The CEO did not receive an increase
to base salary during the reporting period and no monetary bonus has been awarded.
Mr Biddle, Executive Director, receives remuneration from the Company in the form of director’s fees
and consulting fees for corporate advisory and consulting services, both of which are paid to his related
party Hatched Creek Pty Ltd (“Hatched Creek”). No formal contract exists between the Company and
Hatched Creek for the corporate advisory consulting services provided by Mr Biddle on commercial
terms. The arrangement can be terminated without notice.
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Mr Young, Executive Director, is remunerated by the Company for director’s fees and consulting fees, both
of which were paid through his related party Metallon Resources Pty Ltd (“Metallon”). A service agreement
dated 29 August 2014 between Metallon and the Company specifies the services that are required to be
performed and provides for an annual review of base remuneration. The notice of termination is three
months by either party.
Mr Boys, Company Secretary, is an employee of the Dubois Group Pty Ltd (“Dubois Group”), with which
the Company has an agreement in place to provide the services of Mr Boys and other staff to undertake
accounting and company secretarial duties for the Group. The contract with the Dubois Group provides
the terms of services and has a notice of termination period of three months by either party.
Mr Lynn, Chief Financial Officer (“CFO”), has an employment agreement dated 22 June 2016 with the
Company. The agreement specifies duties and obligations to be fulfilled and provides for an annual
review of base remuneration taking into account performance. Mr Lynn is remunerated a salary of
$240,000 per annum inclusive of superannuation. Termination of the employment agreement by the
CFO requires 12 weeks written notice within the first 12 months of service. After 12 months of service,
the CFO is required to give 16 weeks written notice of termination and the Company is required to give
12 months’ written notice of termination. The Company must give the CFO 12 weeks written’ notice of
termination within the first 12 months of employment for termination without cause. Upon termination,
the CFO is entitled to receive from the Company all payments owed to him under the employment
agreement up to and including the date of termination and any payments due to him pursuant to any
relevant legislation by way of accrued annual leave and long service leave.
d) Non Executive
The maximum annual aggregate directors’ fee pool limit is $400,000 and was approved by shareholders
at the annual general meeting on 30 November 2015.
From 1 September 2015 From 1 July 2015 to 31 August 2015
Base fees (annual)
Non-Executive Chairman 96,000 36,000
Other Non-Executive directors 60,000 36,000
Fees are reviewed annually by the Board taking into account comparable roles and market data. The
current base fees were reviewed with effect from 1 September 2015.
e) Executive Remuneration Framework and Performance Pay Outcomes
The Group’s executive KMP total remuneration structure provides for:
• Fixed remuneration;
• Short-term, performance linked equity remuneration (STI); and
• Long-term, performance linked equity remuneration (LTI).
During the period, the CEO received 8.3% of his remuneration as fixed, 91.7% of his remuneration as LTI.
During the period, the CFO received 12.3% of his remuneration as fixed, 87.7% of his remuneration as
LTI. During the period, all other KMP received 9.2% of their remuneration as fixed and 90.8% of their
remuneration as STI.
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Directors’ and Executive Officers’ Remuneration – audited
Details of the remuneration of the Directors and the KMP of the Group are set out in the following tables.
Short term Post-employment
benefits
Share-based payments
Total Equity options
Salary
and fees
Consulting
fees
Superannuation
benefits Vested
Performance
related
Non-Executive Directors
Tony Leibowitz1 2016 86,000 215,200 - 3,008,088 - 3,309,288
2015 36,000 138,000 - - - 174,000
Robert Adamson 2016 56,000 - - 752,022 - 808,022
2015 36,000 - - - - 36,000
Executive Directors
Ken Brinsden 2016 150,507 - 10,264 - 1,786,291 1,947,062
2015 - - - - - -
Neil Biddle 2016 56,000 281,500 - 3,008,088 - 3,345,588
2015 36,000 240,420 - - - 276,420
John Young2 2016 56,000 180,000 - 2,366,920 - 2,602,920
2015 - 168,400 - - - 168,400
Other KMP
Alan Boys3 2016 - 216,000 - 2,254,893 - 2,470,893
2015 - 77,750 - - - 77,750
Brian Lynn4 2016 7,969 - 757 - 62,382 71,108
2015 - - - - - -
Total Directors’
and KMP
remuneration
2016 412,476 892,700 11,021 11,390,011 1,848,673 14,554,881
2015 108,000 624,570 - - - 732,570
1 Mr Leibowitz retired as Chairman of the Board and Non-Executive Director on 1 July 2016
2 Mr Young was not a Director of the Company in 2015 but was a KMP. In September 2015, Mr Young became an Executive Director of
the Company
3 Mr Boys resigned as CFO on 21 June 2016 but acted in the capacity of Company Secretary for the entire financial year
4 Mr Lynn was appointed CFO on 22 June 2016
Mr Leibowitz did not have a formal contract for director services as at the completion of the 30 June 2016
financial year. The Company remunerated Kalonda Pty Ltd for the director services that were provided by Mr
Leibowitz. Mr Leibowitz was paid director’s fees under the terms agreed to by a directors’ resolution.
Additionally, Mr Leibowitz provided corporate advisory services to the Company on terms agreed by the board.
The Company remunerated Floreat Investments Pty Ltd for Mr Leibowitz’s corporate advisory services,
provision of office accommodation and secretarial services.
Directors’ and Executive Officers’ Remuneration – unaudited
The statutory remuneration disclosures detailed above for the year ended 30 June 2016 were significantly
impacted by non-cash values ascribed in accordance with Australian Accounting Standards to unlisted share
options issued during the year to directors and KMP.
To comply with Australian Accounting Standards, the unlisted share options were valued at the date of grant
using the Black Scholes valuation methodology (refer below). These valuations were significantly impacted by
the fact that the Company’s share price at the time the options were granted was higher than the option
exercise price. Each option’s exercise price was largely based on the Company’s share price at the time that the
Director’s approved each option. As the majority of options issued required shareholder approval, there was a
significant passage of time between the date the Directors approved the terms of the options (including their
exercise price) and the date the options were actually granted once shareholder approval was received. During
this passage of time the Company’s share price experienced significant growth resulting in the share price at
the time of grant being significantly higher than the exercise price allocated to the options by the Directors.
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This resulted in a much higher non-cash value being attributed to each option when compared to a valuation
that utilised the Company’s share price at the time the share options were approved by the Directors and the
exercise price established.
Set out below are non-statutory details of the Directors and KMP remuneration for the year ended 30 June
2016, whereby the non-cash values ascribed to share options issued during the year (to comply with Australian
Accounting Standards) have been replaced with the market value of the share options at the time the Directors
approved their issue, to arrive at an Adjusted Remuneration Total.
Total
T.
Leibowitz
R.
Adamson
K.
Brinsden
N.
Biddle
J.
Young
A.
Boys
B.
Lynn
Total Statutory
Remuneration 14,554,881 3,309,288 808,022 1,947,062 3,345,588 2,602,920 2,470,893 71,108
Less: Non-cash
accounting value of
share options (13,238,684) (3,008,088) (752,022) (1,786,291) (3,008,088) (2,366,920) (2,254,893) (62,382)
Add: Market value
of share options on
approval by
Directors 885,000 160,000 40,000 0 160,000 450,000 75,000 0
Adjusted
Remuneration
Total 2,201,197 461,200 96,000 160,771 497,500 686,000 291,000 8,726
The market value of share options above was calculated as the difference between the Company’s share price
on the date the Director’s approved the issue of the share options and the exercise price of the options. Where
the Company’s share price was below the exercise price, a nil market value was assigned to an option.
This table demonstrates that the Directors and KMP will benefit when the Company’s share price exceeds the
exercise price of the options issued, which aligns the interests of the Directors and KMP with those of the
Company’s shareholders. The realised value of options exercised by Directors and KMP during the year is set
out in the table titled “Analysis of Movements in Equity Instruments – Audited” contained within the
Remuneration Report.
Equity Instruments – audited
All options refer to unlisted options over ordinary shares in Pilbara Minerals Limited, which are exercisable on
a one-for-one basis. During the year the Company established an Employee Share Option Plan which was
approved by shareholders on 18 April 2016.
All options issued as compensation to directors and KMP’s are non-cash in nature. They are valued using the
Black Scholes option valuation methodology which calculates an implied value for each option based on the
Company’s share price volatility, the risk free rate of return, the life of the option, the Company’s share price at
the grant date and the option exercise price.
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Options over Equity Instruments granted as Compensation Instruments – audited
Details on unlisted options over ordinary shares in the Company that were granted as compensation to each
KMP during the reporting period and details on unlisted options that vested during the reporting period are
as follows:
No. of options
granted during
2016
Grant date
Fair value
per option at
grant date
Exercise
price per
option
Expiry date
No. of options
vested during
2016
Tony Leibowitz 8,000,000* 28/08/2015 $0.061 $0.100 22/03/2017 8,000,000
8,000,000* 18/04/2016 $0.315 $0.400 16/05/2018 8,000,000
Robert Adamson 2,000,000* 28/08/2015 $0.061 $0.100 22/03/2017 2,000,000
2,000,000* 18/04/2016 $0.315 $0.400 16/05/2018 2,000,000
Ken Brinsden 15,000,000** 18/04/2016 $0.381 $0.400 16/05/2019 -
Neil Biddle 8,000,000* 28/08/2015 $0.061 $0.100 22/03/2017 8,000,000
8,000,000* 18/04/2016 $0.315 $0.400 16/05/2018 8,000,000
John Young 5,000,000* 30/11/2015 $0.159 $0.100 22/03/2017 5,000,000
5,000,000* 18/04/2016 $0.315 $0.400 16/05/2018 5,000,000
Alan Boys 3,000,000* 28/08/2015 $0.061 $0.100 22/03/2017 3,000,000
5,000,000* 06/05/2016 $0.414 $0.400 16/05/2018 5,000,000
Brian Lynn 6,000,000** 22/06/2016 $0.315 $0.626 22/06/2019 -
* Unlisted options issued without vesting conditions expire on the earliest of their expiry date or at the Board’s discretion.
** Unlisted options were issued with the following vesting conditions:
• 33.33% vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board;
• 33.33% vest upon the funding required to develop the Pilgangoora Project being raised or procured based on parameters
acceptable to the Board and a “decision to mine” being made by the Board in respect of the Pilgangoora Project;
• 33.33% vest upon the Pilgangoora Project mine development and plant construction being largely complete (both for civil works
and mine establishment) and the process plant having achieved a nominal 85% of its design throughput capacity during
production runs, at a saleable product specification; and
• A continuing employment service condition at the time each milestone is achieved.
Exercise of Options granted as Compensation Instruments – audited
During the reporting period, the following ordinary shares were issued on the exercise of unlisted options
previously granted as compensation.
No. of shares Amount paid per share
Tony Leibowitz 4,000,000 $0.10
Neil Biddle 8,000,000 $0.10
Alan Boys 900,000 $0.10
There are no amounts unpaid on any ordinary shares issued as a result of the exercise of unlisted options
during the 2016 financial year.
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Details of Equity Incentives affecting Current and Future Remuneration –
audited
Details of vesting profiles of the unlisted options held by each KMP of the Group as at 30 June 2016 are detailed
below.
Instrument Grant date % vested in
year
% forfeited
in year (A)
Financial year in
which grant vests
Tony Leibowitz Options 7,100,000 18/04/2016 100% 0% 2016
Robert Adamson Options 2,000,000 28/08/2015 100% 0% 2016
Options 2,000,000 18/04/2016 100% 0% 2016
Ken Brinsden Options 15,000,000 18/04/2016 0% 0% 2017 and 2018
Neil Biddle Options 8,000,000 18/04/2016 100% 0% 2016
John Young Options 5,000,000 30/11/2015 100% 0% 2016
Options 5,000,000 18/04/2016 100% 0% 2016
Alan Boys Options 2,100,000 28/08/2015 100% 0% 2016
Options 5,000,000 06/05/2016 100% 0% 2016
Brian Lynn Options 6,000,000 22/06/2016 0% 0% 2017 and 2018
(A) The percentage forfeited in the year represents the reduction from the maximum number of instruments available to vest due to performance criteria not being achieved.
Analysis of Movements in Equity Instruments – audited
The value of unlisted options over ordinary shares in the Company granted and exercised by each KMP during
the reporting period is detailed below.
Granted in year (A) Value of options exercised in year (B)
Tony Leibowitz $3,008,088 $1,140,000
Robert Adamson $752,022 -
Ken Brinsden $5,721,750 -
Neil Biddle $3,008,088 $2,280,000
John Young $2,366,920 -
Alan Boys $2,254,893 $358,500
Brian Lynn $1,890,600 -
(A) The value of options granted during the year is the fair value of the unlisted options calculated at grant date. The total value of the unlisted options granted is included in the table above. This amount is allocated to remuneration over the applicable vesting period.
(B) The value of unlisted options exercised during the year is calculated as the market price of shares of the Company as at close of trading on the date the unlisted options were exercised less the price paid to exercise the unlisted option.
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24
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of Pilbara Minerals Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2016 there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG R Gambitta Partner
Perth
7 September 2016
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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME For the year ended 30 June 2016
Notes
2016
$’000
2015
Restated
$’000
Other income
Other income 4 28
Expenses
General and administration (4,728) (951)
Exploration costs expensed 2.1.3 (10,556) (1,482)
Depreciation and amortisation expense (51) (21)
Impairment expense 2.1.1 (12,136) (1,605)
Gain on equity investment 3.4 812 -
Share based payment expense 2.1.2 (26,562) (1,955)
Other expenses - (397)
Operating profit/(loss) (53,217) (6,383)
Finance income 149 45
Finance costs (2,350) (334)
Net financing costs 2.2 (2,201) (289)
Loss before income tax expense (55,418) (6,672)
Income tax expense 2.5 (189) 52
Net loss for the period (55,607) (6,620)
Total comprehensive income/(loss) for the period (55,607) (6,620)
Basic and diluted loss per share for the period (cents per share) 2.6 (6.76) (1.12)
The notes on pages 29 to 59 are an integral part of these consolidated financial statements. The Statement of Profit or Loss for the year
ended 30 June 2015 reflects the retrospective application of a change to the accounting policy for exploration and evaluation costs.
Refer to Note 2.1.4 for further information.
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2016
Notes
2016
$’000
2015
Restated
$’000
2014
Restated
$’000
Assets
Current assets
Cash and cash equivalents 4.1 100,040 3,216 1,095
Trade and other receivables 4.2 1,545 919 337
Inventories 46 - -
Loans receivable - 1,627 -
Total current assets 101,631 5,762 1,432
Non-current assets
Property, plant and equipment 3.2 833 77 4
Deferred exploration and evaluation expenditure 3.1 263 263 2,635
Investments accounted for using the equity method 3.4 - 1,200 -
Other financial assets 6 6 206
Total non-current assets 1,102 1,546 2,845
Total assets 102,733 7,308 4,277
Liabilities
Current liabilities
Trade and other payables 4.3 2,952 743 220
Share application money received in advance - 1 725
Provisions 4.3 1,004 41 -
Borrowings 5.2 137 2,622 1,386
Total current liabilities 4,093 3,407 2,331
Non-current liabilities
Borrowings 5.2 209 - -
Total non-current liabilities 209 - -
Total liabilities 4,302 3,407 2,331
Net assets 98,431 3,901 1,946
Equity
Issued capital 5.1 146,476 22,526 16,099
Reserves 5.1 21,731 1,257 163
Retained earnings (69,776) (19,882) (14,316)
Total equity 98,431 3,901 1,946
The notes on pages 29 to 59 are an integral part of these consolidated financial statements. The Statement of Financial Position at 30
June 2015 and 1 July 2014 reflects the retrospective application of a change to the accounting policy for exploration and evaluation
costs. Refer to Note 2.1.4 for further information.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2016
Notes
Issued
Capital
Restated
$’000
Share-
based
payment
reserve
Restated
$’000
Foreign
currency
reserve
$’000
Accumulated
losses
Restated
$’000
Total
equity
$’000
Balance at 1 July 2014 16,099 231 (68) (14,316) 1,946
Loss for the period - - - (6,620) (6,620)
Total comprehensive
income/(loss) for the period
- - - (6,620) (6,620)
Issue of ordinary shares 6,681 - - - 6,681
Share issue costs (254) - - - (254)
Issue of options - 2,148 - - 2,148
Transfer on conversion of
options
- (1,054) - 1,054 -
Balance at 30 June 2015 22,526 1,325 (68) (19,882) 3,901
Balance at 1 July 2015 22,526 1,325 (68) (19,882) 3,901
Loss for the period - - - (55,607) (55,607)
Total comprehensive
income/(loss) for the period
(55,607) (55,607)
Issue of ordinary shares 5.1 114,551 - - - 114,551
Share issue costs 5.1 (7,021) - - - (7,021)
Conversion of convertible
notes
8,319 - - - 8,319
Option conversions 8,101 - - - 8,101
Issue of options 5.1 - 26,187 - - 26,187
Transfer on conversion of
options
5.1 - (5,713) - 5,713 -
Balance at 30 June 2016 146,476 21,799 (68) (69,776) 98,431
The notes on pages 29 to 59 are an integral part of these consolidated financial statements. Equity and reserves at 30 June 2015 and 1
July 2014 reflect the retrospective application of a change to the accounting policy for exploration and evaluation costs. Refer to Note
2.1.4 for further information.
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CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2016
Notes
2016
$’000
2015
Restated
$’000
Cash flows from operating activities
Cash paid to suppliers and employees (4,818) (1,552)
Payments for exploration and evaluation expenditure (9,702) (465)
Interest received 149 45
Income tax paid (189) -
Other receipts - 23
Net cash outflow from operating activities 4.1 (14,560) (1,949)
Cash flows from investing activities
Payments for property, plant and equipment (4,626) (94)
Cash acquired 251 -
Payments for security deposit - (5)
Additional interests acquired in associates and joint ventures (2,000) (1,000)
Loan to related party (1,224) (1,627)
Net cash outflow from investing activities (7,599) (2,726)
Cash flows from financing activities
Proceeds from the issue of shares 122,721 5,156
Capital raising costs (7,021) (60)
Proceeds from borrowings 4,000 1,700
Repayment of borrowing costs (143) -
Interest paid (574) -
Net cash inflow from financing activities 118,983 6,796
Net increase in cash held 96,824 2,121
Cash and cash equivalents at the beginning of the period 3,216 1,095
Cash and cash equivalents at the end of the period 4.1 100,040 3,216
The notes on pages 29 to 59 are an integral part of these consolidated financial statements. The Statement of Cash Flows for the year
ended 30 June 2015 reflects the retrospective application of a change to the accounting policy for exploration and evaluation costs.
Refer to Note 2.1.4 for further information.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2016
NOTE 1 – BASIS OF PREPARATION
In preparing the 2016 financial statements, Pilbara Minerals Limited (“the Company”) has made a number of
changes in structure, layout and wording in order to make the financial statements less complex and more
relevant for shareholders and other users. The Company has grouped notes into sections under six key
categories:
1. Basis of preparation
2. Results for the year
3. Assets and liabilities supporting exploration and evaluation activities
4. Working capital disclosures
5. Equity and funding
6. Other disclosures
Significant accounting policies specific to one note are included within that note and where possible, wording
has been simplified to provide clearer commentary on the financial report of the Group. Accounting policies
that are determined to be non-significant are not included in the financial statements.
1.1 Reporting Entity
Pilbara Minerals Limited is a listed public company incorporated and domiciled in Australia.
The Company’s registered office is at 130 Stirling Highway, North Fremantle WA 6159. These
consolidated financial statements comprise the Company and its subsidiaries (together referred to as
the “Group”).
The Group is a for-profit entity and is primarily involved in the exploration for and development of
minerals.
1.2 Basis of Accounting
The consolidated financial statements are general purpose financial statements which have been
prepared in accordance with Australian Accounting Standards (“AAS”) adopted by the Australian
Accounting Standards Board (“AASB”) and the Corporations Act 2001. The consolidated financial
statements comply with International Financial Reporting Standards (“IFRS”) adopted by the
International Accounting Standards Board (“IASB”). They were authorised for issue by the Board of
Directors on 7 September 2016.
1.3 Basis of Consolidation
1.3.1 Business Combinations
The Group accounts for business combinations using the acquisition method when control is transferred
to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are
the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain
on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as
incurred, except if related to the issue of debt or equity securities.
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Page 30 of 61
The consideration transferred does not include amounts related to the settlement of pre-existing
relationships. Such amounts are generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay
contingent consideration that meets the definition of a financial instrument is classified as equity, then
it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent
consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value
of the contingent consideration are recognised in profit or loss.
1.3.2 Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. The financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control commences until the date on which
control ceases.
1.3.3 Interests in Equity-Accounted Investees
The Group’s interests in equity-accounted investees comprise interests in associates and joint ventures.
Associates are those entities in which the Group has significant influence, but not control or joint control,
over the financial and operating policies. A joint venture is an arrangement in which the Group has joint
control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its
assets and obligations for its liabilities.
Interests in associates and joint ventures are accounted for using the equity method. They are initially
recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated
financial statements include the Group’s share of the profit or loss and OCI of equity-accounted
investees, until the date on which significant influence or joint control ceases.
1.3.4 Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-
group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted
investees are eliminated against the investment to the extent of the Group’s interest in the investee.
Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there
is no evidence of impairment.
1.4 Functional and Presentational Currency
These consolidated financial statements are presented in Australian dollars, which is the Company’s
functional currency. All amounts have been rounded to the nearest thousand, unless otherwise stated in
accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191.
1.5 Use of Judgments and Estimates
In preparing these consolidated financial statements, management has made judgments, estimates and
assumptions that affect the application of the Group’s accounting policies and the reported amounts of
assets, liabilities, income and expense. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are
recognised prospectively.
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Page 31 of 61
Judgements and estimates which are material to the financial report are found in the following sections:
• Share-based payments (Refer to note 2.1.2)
• Property, plant and equipment (carrying value and impairment charges). (Refer to note 2.1.1).
1.6 Measurement of Fair Values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for
both financial and non-financial assets and liabilities.
A financial asset measured at amortised cost is assessed at each reporting date to determine whether
there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates
that a loss event has occurred after the initial recognition of the asset, and that the loss event had a
negative effect on the estimated future cash flows of that asset that can be estimated reliably. Refer to
note 2.1.1 for policies on non-financial assets.
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NOTE 2 – RESULTS FOR THE YEAR
2.1 Expenses
Expenses incurred by the Group are the main drivers of the results for the year.
2.1.1 Impairment expense
ACCOUNTING POLICY
Non-financial assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
The impairment expense recognised within the Statement of Profit or Loss relates to the Tabba Tabba
Tantalum Project and can be broken down as follows:
2016
$’000
2015
Restated
$’000
Impairment – property, plant and equipment 4,449 -
Impairment – mine development 7,660 -
12,109 -
Impairment – exploration and evaluation expenditure - 1,605
Reversal of liability (1,300) -
Impairment – goodwill 1,327 -
12,136 1,605
In 2014, the Company entered into a joint venture with Valdrew Nominees Pty Ltd to jointly evaluate,
develop and mine the Tabba Tabba Tantalum Project. The Tabba Tabba Tantalum Project was held via
an incorporated joint venture Tabba Tabba Tantalum Pty Ltd (formerly Nagrom Mining Pty Ltd) (“TTT”),
which was initially owned 50% by Valdrew Nominees Pty Ltd and 50% by Pilbara Minerals Limited. The
project is subject to a mining and offtake agreement with the tenement owner Global Advanced Metals
(Wodgina) Pty Ltd, a subsidiary of major international specialty metals group Global Advanced Metals
(“GAM”).
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On 25 September 2015, the Company entered into a sale and purchase agreement with Valdrew to
acquire the remaining 50% interest in the Tabba Tabba Tantalum Project for a cash consideration of
$2 million plus contingent consideration of $1.3 million in the event TTT deliver tantalum concentrate to
GAM pursuant to the offtake agreement. Additionally, Valdrew released TTT from any loans, advances
or claims in respect of past purchases due from TTT. The Company also agreed to issue to Valdrew up
to 20,000,000 unlisted incentive options, each with a term of two years, with the exercise price being the
five-trading day VWAP prior to the issue date. The issue of the options was dependent upon the
successful commissioning of the processing plant and production of Ta2O5 concentrate, which did not
occur.
In January 2016, the operations at the Tabba Tabba Tantalum Project were suspended following plant
commissioning problems. A subsequent engineering review determined that significant expenditure
would be required to modify the existing plant before the commissioning process could be finalised.
The impact of this when combined with existing tantalum market conditions meant that the Tabba Tabba
Tantalum Project was suspended indefinitely.
The Company commissioned an independent assessment by third party engineers to value the TTT
property, plant and equipment assets (owned and under hire purchase) as well as received offers for the
sale of the TTT assets. Based on this information, the Company has valued these assets at $0.5 million.
Accordingly, a $4.4 million impairment charge on TTT plant and equipment was recognised.
As part of the mining and offtake agreement with GAM; GAM retained the ownership and rights to the
tenements of the Tabba Tabba Tantalum Project. As a result of the decision to suspend operations
indefinitely, the Company expects to return all mineral rights back to GAM for no consideration and
accordingly all capitalised project development costs ($7.66 million) have been impaired to nil.
As part of the acquisition of TTT assets, Pilbara Minerals Limited recognised a goodwill intangible asset
of $1.3 million. Following an assessment of the carrying value of the goodwill it was determined that the
balance should be impaired to nil.
As noted above, a $1.3 million liability was raised to recognise a future payment to Valdrew upon the
delivery of concentrate to GAM when the Company purchased the remaining 50% interest in the Tabba
Tabba Tantalum Project in September 2015. To date this provision has not been satisfied and will not be
satisfied in the future. Accordingly, the $1.3 million liability was reversed to the Statement of Profit or Loss.
2.1.2 Share-based payment expense
ACCOUNTING POLICY
Share-based payment arrangements
The grant-date fair value of equity-settled share-based payment arrangements granted to holders of equity based instruments (including employees) are generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
In determining the fair value of share based payments granted, a key estimate and judgement is the volatility input assumed within the option pricing model. The Company uses historical volatility of the Company to determine an appropriate level of volatility expected, commensurate with the expected option life.
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The share-based payment expense included within the Statement of Profit or Loss can be broken down
as follows:
2016
$’000
2015
$’000
Share options expense 26,562 1,955
The following table shows total options granted (or deemed to be granted) during the year ended 30
June 2016 and the value attributed to each option granted, by holder:
Holder
No. of
options
Exercise
price Expiry
Value
($/option)
Value
($’000)
Value
expensed
Directors 18,000,000 $0.10 22/03/2017 $0.0614 1,105 1,105
5,000,000 $0.10 22/03/2017 $0.1588 794 794
23,000,000 $0.40 16/05/2018 $0.3146 7,236 7,236
15,000,000 $0.40 16/05/2019 $0.3815 5,722 1,786
KMP 3,000,000 $0.10 22/03/2017 $0.0614 185 185
5,000,000 $0.40 16/05/2018 $0.4142 2,071 2,071
6,000,000 $0.63 22/06/2019 $0.3151 1,891 62
Subtotal –
Directors/KMP 75,000,000 19,004 13,239
Employee/Contractors 4,500,000 $0.10 22/03/2017 $0.0614 277 277
9,300,000 $0.40 16/05/2018 $0.4142 3,852 3,793
16,500,000 $0.40 16/05/2019 $0.4851 8,004 2,099
Service provider 4,000,000 $0.10 22/03/2017 $0.0614 246 246
1,000,000 $0.40 16/05/2018 $0.3142 314 314
2,000,000 $0.65 16/05/2018 $0.2370 474 474
5,000,000 $0.65 16/05/2018 $0.4495 2,247 2,247
Convertible noteholders 56,400,000 $0.05 02/03/2017 $0.0620 3,498 3,498
Options attached to
share placement 17,045,455 $0.15 01/12/2017 - - -
Subtotal 190,745,455 37,916 26,187
Related share-based
payment expenses - - 375
Total 190,745,455 37,916 26,562
All options issued to Directors were approved by shareholders at General Meetings held in August 2015,
November 2015 and April 2016.
The classes of the options on issue as at 30 June 2016 are as follows:
Options issued Expiry date Exercise price No. of options not yet exercised
23,150,000 21 December 2016 $0.05 1,250,000
56,400,000 2 March 2017 $0.05 4,937,500
34,500,000 22 March 2017 $0.10 13,000,000
50,000,000 25 March 2017 $0.03 4,166,665
17,045,455 1 December 2017 $0.15 3,268,181
37,500,000 16 May 2018 $0.40 37,500,000
800,000 a 16 May 2018 $0.40 800,000
7,000,000 16 May 2018 $0.65 7,000,000
31,500,000 b 16 May 2019 $0.40 31,500,000
6,000,000 22 June 2019 $0.63 6,000,000 a The vesting conditions attached to this set of options are based on an employee providing six months of continuous service to
the Company.
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b The vesting conditions attached to these unlisted options were:
• 33.33% vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board;
• 33.33% vest upon the funding required to develop the Pilgangoora Project being raised or procured based on parameters
acceptable to the Board and a “decision to mine” being made by the Board in respect of the Pilgangoora Project;
• 33.33% vest upon the Pilgangoora Project mine development and plant construction being largely complete (both for
civil works and mine establishment) and the process plant having achieved a nominal 85% of its design throughput
capacity during production runs, at a saleable product specification; and
• a continuing employment service condition at the time each milestone is achieved.
Unless stated, there are no other vesting conditions on options on issue.
The number and weighted average exercise prices of unlisted share options are as follows:
2016 2015
Weighted average
exercise price No. of options
Weighted average
exercise price No. of options
Outstanding at 1 July $0.036 41,469,994 $0.030 49,999,991
Exercised during the period $0.066 (122,793,103) $0.037 (31,679,997)
Granted during the period $0.236 190,745,455 $0.050 23,150,000
Outstanding at 30 June $0.351 109,422,346 $0.036 41,469,994
Exercisable at 30 June 71,122,346 41,469,994
2.1.3 Exploration and evaluation expenditure
The consolidated financial statements have been prepared incorporating retrospective application of a voluntary change in accounting policy relating to exploration and evaluation expenditure. The new accounting policy was adopted on 30 June 2016 and has been applied retrospectively. The Directors believe that the change in accounting policy will provide more relevant and reliable information to users of the consolidated financial statements. Both the previous and the new accounting policy are compliant with AASB 6: Exploration for and Evaluation of Mineral Resources.
The impact of the change in accounting policy on the Consolidated Statement of Profit or Loss, Consolidated Statement of Financial Position and Consolidated Statement of Cash Flow is included in Section 2.1.4.
ACCOUNTING POLICY
The Company previously accounted for exploration and evaluation expenditure relating to an area of interest by carrying forward that expenditure where no impairment trigger exists.
The Company now accounts for exploration and evaluation activities by applying the following policy.
Exploration for and evaluation of mineral resources is the search for mineral resources after the entity has obtained legal rights to explore in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral resource. Accordingly, exploration and evaluation expenditures are those expenditures incurred in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.
Accounting for exploration and evaluation expenditures is assessed separately for each “area of interest”. Each “area of interest” is an individual geological area which is considered to constitute a favourable environment for the presence of a mineral deposit or has been proved to contain such a deposit.
Exploration and evaluation costs are written off in the year they are incurred, apart from acquisition costs which are carried forward where right of tenure of the area of interest is current, and they are expected to be recouped through sale or successful development and exploitation of the area of interest, or where exploration and evaluation activities in the area of interest have not reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.
Where an area of interest is abandoned, or the Directors decide that it is not commercially viable, any accumulated acquisition costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated costs are written off to the extent that they will not be recoverable in the future.
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2016
$’000
2015
Restated
$’000
Costs expensed in relation to areas of interest in the exploration and
evaluation phase (10,556) (1,482)
2.1.4 Voluntary change of accounting policy
a) Exploration expense
The impact on the consolidated financial statements from incorporating retrospective application
of a voluntary change in the exploration and evaluation expenditure accounting policy is as follows:
30 June 2015 (‘000) 30 June 2014 ($’000)
Previous
policy
Increase/
(decrease) Restated
Previous
policy
Increase/
(decrease) Restated
Consolidated statement
of financial position
(extract)
Exploration and evaluation
expenditure
1,806 (1,543) 263 3,070 (435) 2,635
Net assets 5,444 (1,543) 3,901 2,381 (435) 1,946
Accumulated losses (18,339)* (1,543) (19,882) (13,881) (435) (14,316)
Total equity 5,444 (1,543) 3,901 2,381 (435) 1,946
Consolidated statement
of profit or loss and
comprehensive income
(extract)
Impairment expense (1,980) 375 (1,605)
Exploration costs expensed - (1,482) (1,482)
Loss for the year (5,513) (1,107) (6,620)
Loss per share
Basic and diluted (cents per
share)
(0.94) (0.18) (1.12)
30 June 2015 ($’000)
Previous
policy
Increase/
(decrease) Restated
Consolidated statement of cash flows (extract)
Payments for exploration and evaluation expenditure - (465) (465)
Net cash used in operating activities (1,483) (465) (1,948)
Payments for exploration and evaluation expenditure (465) 465 -
Net cash used in investing activities (3,191) 465 (2,726)
* Includes impact of change in accounting policy for share based payments. Refer to note 2.1.4(b).
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b) Share-based payment reserve
Prior to the current year, the Company transferred the fair value of options exercised in contributed
equity. The Company has changed accounting policy to now transfer the fair value of options
exercised in the year against accumulated losses. The impact in this change in accounting policy is to
decrease contributed equity by $1,054,160 and decrease accumulated losses by the same amount in
the 2015 financial year.
2.2 Net financing costs
ACCOUNTING POLICY
The Group’s finance income and finance costs include:
• interest income; • interest expense; and • dividend income;
Interest income or expense is recognised using the effective interest method. Dividend income is recognised in profit or loss on the date on which the Group’s right to receive payment is established.
Net financing costs can be analysed as follows:
2016
$’000
2015
$’000
Interest income on bank deposits 149 45
Finance income 149 45
Interest expense – convertible notes (Refer to Note 5.2.2) (2,318) (334)
Interest expense – hire purchase assets (27) -
Net foreign exchange loss (5) -
Finance costs (2,350) (334)
Net finance costs recognised in profit or loss (2,201) (289)
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2.3 Operating segments
For management purposes the Group has one operating segment, being mineral exploration and
evaluation in Australia. Segment results that are reported to the Group’s chief operating decision
maker include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis. Unallocated items comprise mainly of corporate assets and head office expenses.
2.3.1 Information about reporting segments
Mineral exploration and evaluation
2016
$’000
2015
$’000
For the year ended 30 June
Reportable segment other income - -
Reportable segment costs expensed (22,692) (1,482)
Reportable segment (loss) before income tax (22,692) (1,482)
Reportable segment assets 763 263
Reportable segment liabilities 3,470 42
Reconciliation of reportable segment loss and assets
Loss
Total loss for reportable segments (22,692) (1,482)
Unallocated amounts: corporate expenses (30,714) (4,849)
Net finance costs (2,201) (289)
Loss before income tax (55,607) (6,620)
Asset
Total assets for reportable segments 763 263
Assets for corporate segment 101,970 7,045
102,733 7,308
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2.4 Personnel expenses
ACCOUNTING POLICY
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
Other long-term employee benefits
The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements are recognised in profit or loss in the period in which they arise.
Termination benefits
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the reporting date, then they are discounted.
The table below sets out personnel costs expensed during the year:
2016
$’000
2015
$’000
Wages and salaries 841 171
Superannuation expense 110 6
Increase/(decrease) in liability for annual leave 42 -
993 177
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2.5 Income tax expenses
ACCOUNTING POLICY
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year, and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends. Current tax assets and liabilities are offset only if certain criteria are met.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
• temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
• taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.
Deferred tax assets and liabilities are offset only if certain criteria are met.
2.5.1 Income tax expense
2016
$’000
2015
$’000
Current income tax expense (189) (52)
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2.5.2 Reconciliation of effect tax rates
2016
$’000
2015
Restated
$’000
Loss before tax from continuing operations (55,418) (6,672)
Tax using the Company’s domestic tax rate of 30% (2015: 30%) (16,625) (2,002)
Research and development tax offset - (52)
Subsidiary tax liability (189) -
Tax effect of:
Non-deductible expenses
Share based payment expense 7,969 -
Gain on equity investment (244) -
Financing costs 523 -
Other 30 692
Tax losses not recognised 4,316 1,310
Temporary differences not brought to account 4,031 -
Income tax expense reported in the consolidated statement of profit or loss (189) (52)
Potential deferred tax assets have not been recognised at 30 June 2016 for deductible temporary
differences and tax losses because it is not probable that future taxable profit will be available against
which the Company can use the benefits. The deferred tax losses not recognised at 30 June 2016 have
a tax effected value of $6.4 million (2015: $2.1 million).
2.6 Earnings (loss) per share
Basic earnings (loss) per share
2016
$’000
2015
Restated
$’000
Net loss attributable to ordinary shareholders (55,607) (6,620)
Issued ordinary shares at 1 July 658,579 330,297
Effect of shares issued 164,403 258,953
Weighted average number of ordinary shares at 30 June 822,982 589,250
Basic and diluted loss per share (cents)* (6.76) (1.12)
* Due to the fact that the Company made a loss, potential ordinary shares from the exercise of options have been excluded due
to their anti-dilutive effect
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NOTE 3 – ASSETS AND LIABILITIES SUPPORTING EXPLORATION AND
EVALUATION
This section focuses on the exploration and evaluation assets which form the core of the Group’s business,
including those assets and liabilities that support the ongoing exploration and evaluation as well as
commitments existing at the year end.
3.1 Exploration and evaluation expenditure
ACCOUNTING POLICY
Refer to Note 2.1.3 for the Company’s exploration and evaluation expenditure policy.
3.1.1 Exploration and evaluation assets
2016
$’000
2015
Restated
$’000
Costs carried forward in relation to areas of interest in the exploration and
evaluation phase 263 263
Reconciliations: Exploration and evaluation phase
Carrying amount at the beginning of the year 263 2,635
Acquisitions - 233
Transfer to equity accounted investments - (1,000)
Impairment - (1,605)
Carrying amount at the end of the year 263 263
3.1.2 Exploration licence expenditure commitments
The Company has minimum exploration commitments as follows:
2016
$’000
2015
$’000
Within one year 125 233
Later than one year but less than five years 260 931
Greater than five years 557 -
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3.2 Property, plant and equipment
ACCOUNTING POLICY
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as a separate item of property, plant and equipment.
Depreciation
Depreciation is calculated to write off the cost of items of property plant and equipment less their estimated residual value using either the straight line or units of production methods over either the estimated useful life or the estimated resource. Depreciation is recognised in profit or loss. Land is not depreciated.
The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:
• Office equipment 2 to 10 years • Plant and equipment 5 years • Motor vehicles 5 years
Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted appropriately.
Property,
plant and
equipment
$’000
Hire
purchase
equipment
$’000
Mine
properties
$’000
Mine
rehabilitatio
n
$’000
Total
$’000
Cost
Balance at 1 July 2014 13 - - - 13
Additions 94 - - - 94
Disposals - - - - -
Balance at 30 June 2015 107 - - - 107
Balance at 1 July 2015 107 - - - 107
Acquisitions through business
combinations
4,153 696 2,491 - 7,340
Additions 208 - 4,418 908 5,534
Transfers - - - 42 42
Balance at 30 June 2016 4,468 696 6,909 950 13,023
Accumulated depreciation and
impairment losses
Balance at 1 July 2014 (9) - - - (9)
Depreciation (21) - - - (21)
Impairment loss - - - - -
Disposals - - - - -
Balance at 30 June 2015 (30) - - - (30)
Balance at 1 July 2015 (30) - - - (30)
Depreciation (51) - - - (51)
Impairment loss (3,928) (521) (6,909) (751) (12,109)
Balance at 30 June 2016 (4,009) (521) (6,909) (751) (12,190)
Carrying amounts
At 1 July 2014 4 - - - 4
At 30 June 2015 77 - - - 77
At 30 June 2016 459 175 - 199 833
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3.3 Intangible assets and goodwill
ACCOUNTING POLICY
Recognition and measurement
Goodwill
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.
3.3.1 Goodwill
2016
$’000
2015
$’000
Balance at 1 July - -
Additions 1,327 -
Impairment (1,327) -
Balance at 30 June - -
Goodwill arose on the acquisition of 50% of the Tabba Tabba Tantalum Project in September 2015. The
goodwill was subsequently written down to nil following the suspension of operations at the Tabba
Tabba Tantalum Project in January 2016. See Note 3.4 for further details.
3.4 Business combinations
2016
$’000
2015
$’000
Investment in equity accounted associate - 1,200
In 2014, the Company entered into the incorporated joint venture Tabba Tabba Tantalum Pty Ltd (“TTT”)
with Valdrew Nominees Pty Ltd (“Valdrew”) to jointly evaluate, develop and mine the Tabba Tabba
Tantalum Project located some 75 km by road from Port Hedland, Western Australia.
The tenements are owned by Global Advanced Metals Wodgina Pty Ltd (“GAM”) and the mining and
processing is undertaken by TTT pursuant to an agreement with GAM, who has an offtake agreement
for the project’s tantalite concentrate. On 25 September 2015, the Group acquired the remaining 50%
of the issued shares in Tabba Tabba Tantalum Pty Ltd (formerly Nagrom Mining Pty Ltd) for a
consideration of $2,000,000.
The acquisition of 50% of the Tabba Tabba Project for $2 million valued the 50% investment already
held by the Company at $2 million. The Company carried the original 50% investment at a cost of
$1.2 million at the date of acquisition. The Company recognised a loss of $12,000 against the investment
which was the Company’s share of the joint venture’s loss between 1 July 2015 and the date of
acquisition. Therefore, a gain on the revaluation on the investment of $0.81 million was recognised as
follows:
$’000
Carrying value of investment before the acquisition 1,200
Share of loss (12)
Carrying value of investment 1,188
Fair value of investment on acquisition 2,000
Gain on revaluation of investment 812
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Details of the purchase consideration, the net assets acquired and goodwill are as follows:
Fair value at
acquisition date
$’000
Cash and cash equivalents 251
Trade and other receivables 1,016
Inventories 46
Property, plant and equipment 7,340
Trade and other payables (5,526)
Borrowings (454)
2,673
Goodwill arising on acquisition 1,327
Total value of acquisition 4,000
In January 2016, the operations at the TTT Project were suspended following plant commissioning
problems. A subsequent engineering review determined that significant expenditure would be required
to modify the existing plant before the commissioning process could be finalised. The impact of this,
when combined with existing tantalum market conditions meant that the TTT Project was suspended
indefinitely. As a consequence, goodwill arising on acquisition was impaired to nil.
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NOTE 4 – WORKING CAPITAL
4.1 Cash and cash equivalents
ACCOUNTING POLICY
Cash and cash equivalents comprise cash balances and call deposits with a maturity of less than or equal to six months from the date of acquisition. The carrying value of cash and cash equivalents is considered to approximate fair value.
4.1.1 Cash and cash equivalents
2016
$’000
2015
$’000
Bank balances 6,019 3,216
Call deposits 94,021 -
Cash and cash equivalents in the statement of financial position 100,040 3,216
4.1.2 Reconciliation of cash flows from operating activities
2016
$’000
2015
$’000
Cash flows from operating activities
Loss for the period (55,607) (6,620)
Adjustments for:
- Depreciation 51 21
- Finance costs 2,350 334
- Impairment expense 12,136 1,605
- Share based payment expense 26,562 1,955
- Gain on equity investment (812) -
Operating loss before changes in working capital and provisions (15,320) (2,705)
Change in trade and other receivables (620) (224)
Change in trade payables and employee benefits 1,380 981
Net cash used in operating activities (14,560) (1,948)
4.2 Trade and other receivables
ACCOUNTING POLICY
Trade and other receivables are recognised initially at fair value which is usually the value of the invoice sent to the counter-party and subsequently at the amounts considered recoverable. Where there is evidence that the receivable is not recoverable, it is impaired with a corresponding charge to the profit or loss statement.
2016
$’000
2015
$’000
Current
Trade debtors - 757
Goods and services tax receivable 671 52
Security deposits 759 5
Other receivables 115 105
1,545 919
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4.3 Trade and other payables and provisions
ACCOUNTING POLICY
Trade payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually payable within 30 days’ net of recognition. Trade payables are recognised initially at the value of the invoice received from a supplier.
Provisions
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money, and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.
Site restoration
In accordance with the applicable legal requirements, a provision for site restoration in respect of returning the land to its original state is recognised when the land is disturbed.
2016
$’000
2015
$’000
Current – Trade and other payables
Trade payables 2,093 458
Accruals 802 284
Other payables 57 1
2,952 743
Current – Provisions
Mine rehabilitation provision 962 41
Annual leave provision 42 -
1,004 41
NOTE 5 – EQUITY AND FUNDING
5.1 Capital and Reserves
ACCOUNTING POLICY
Ordinary shares are classified as equity. Costs directly attributable to the issue of new ordinary shares are recognised as a deduction from equity, net of any tax effects.
5.1.1 Ordinary shares
2016
‘000
2015
‘000
Fully paid ordinary shares 1,148,051 658,579
Total share capital on issue at 30 June 1,148,051 658,579
Movements in ordinary shares on issue:
On issue at 1 July 658,579 330,297
Shares issued during the period
Issued for cash 338,195 280,753
Issued for services provided - 1,614
Exercise of share options 122,793 31,680
Conversion of convertible notes including accrued interest 28,484 14,235
On issue at 30 June 1,148,051 658,579
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2016
$’000
2015
Restated
$’000
Ordinary shares 146,476 22,526
Total share capital on issue at 30 June 146,476 22,526
Movements in ordinary shares on issue:
On issue at 1 July 22,526 16,099
Shares issued during the period
Issued for cash 114,551 4,721
Issued for services provided - 117
Exercise of share options 8,101 1,159
Conversion of convertible notes and accrued interest 8,319 684
Transfer from share based payment reserve - -
Share issue costs (7,021) (254)
At reporting date 146,476 22,526
Terms and conditions of ordinary shares
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to one vote per share at shareholders’ meetings. In the event of winding up of the Company,
ordinary shareholders rank after all other shareholders and creditors with respect to any proceeds of
liquidations.
5.1.2 Reserves
2016
$’000
2015
Restated
$’000
Share-based payment reserve 21,799 1,325
Foreign currency reserve (68) (68)
21,731 1,257
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Share-based payment reserve
2016
$’000
2015
$’000
Share-based payment reserve 21,799 1,325
Movements in share-based payment reserve:
Balance at 1 July 1,325 230
Share based payment expense following issue of options 26,187 1,955
Financing transaction costs - 194
Options exercised and transferred to accumulated losses (5,713) (1,054)
Balance at reporting date 21,799 1,325
The share-based payment reserve is used to record the fair value of the options issued. Options issued
to directors, consultants and employees during the year and their associated value impact on the share
based payment reserve are as follows:
Option Grant date Share price on
date of grant
Exercise
price Expiry date
Valuation (cents
per option)
29,500,000 28/08/2015 $0.11 $0.10 22/03/2017 6.14
56,400,000 28/08/2015 $0.11 $0.05 02/03/2017 6.20
5,000,000 30/11/2015 $0.24 $0.10 22/03/2017 15.88
23,000,000 18/04/2016 $0.58 $0.40 16/05/2018 31.46
1,000,000 18/04/2016 $0.58 $0.40 16/05/2018 31.42
2,000,000 18/04/2016 $0.58 $0.65 16/05/2018 23.70
15,000,000* 18/04/2016 $0.58 $0.40 16/05/2019 38.15
800,000** 06/05/2016 $0.70 $0.40 16/05/2018 41.42
13,500,000 06/05/2016 $0.70 $0.40 16/05/2018 41.42
16,500,000* 06/05/2016 $0.70 $0.40 16/05/2019 48.51
5,000,000 11/05/2016 $0.87 $0.65 16/05/2018 44.95
6,000,000* 22/06/2016*** $0.57 $0.63 22/06/2019 31.51
*The vesting conditions attaching to these options are:
• 33.33% will vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board;
• 33.33% will vest upon the funding required to develop the Pilgangoora Project being raised or procured based on
parameters acceptable to the Board and a “decision to mine” being made by the Board in respect of the Pilgangoora
Project;
• 33.33% will vest upon the Pilgangoora Project mine development and plant construction being largely complete (both for
civil works and mine establishment) and the process plant having achieved a nominal 85% of its design throughput
capacity during production runs, at a saleable product specification; and
• A continuing employment service condition at the time each milestone is achieved.
** The vesting condition attaching to these options is six months of continuous employment service.
*** The options granted on 22 June 2016 were not issued to the recipient in the reporting period due to the exercise price being
the June 2016 quarter VWAP. The options will be issued subsequent to year end.
All option valuations during the period were performed by an independent third party valuer. The Black
Scholes option valuation methodology was used to value the options. Inputs to the option valuation
model included the Company’s share price volatility, risk free rates, option life, and the option exercise
price. Option volatility was calculated using the share price movement of the Company over the past 12
months up until the date the options were granted.
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The key inputs used in the measurement of the fair values at grant date of the equity-settled share based
payment plans were as follows: 2016
Expected volatility (weighted average) 102.4%
Expected life (weighted average) 2.0 years
Risk free interest rate (based on government bonds) (weighted average) 1.8%
5.2 Loans and borrowings
This note provides information about the contractual terms of the Group’s interest bearing loans and
borrowings. For more information about the Group’s exposure to interest rate risk, see Section 6.2.
2016
$’000
2015
$’000
Current
Hire purchase liability 137 -
Convertible note – debt liability - 2,622
Total borrowings - current 137 2,622
Non-current
Hire purchase liability 209 -
Total borrowings – non-current 209 -
5.2.1 Terms and repayment schedule
The terms and conditions of outstanding loans are as follows:
Currency
Nominal
interest
rate
Year of
maturity
2016 2015
Face
value
$’000
Carrying
amount
$’000
Face
value
$’000
Carrying
amount
$’000
2014 Convertible notes AUD 20% 2015 - - 1,500 832
2015 Convertible notes AUD 15% 2016 - - 1,700 1,790
2016 Convertible note AUD 15% 2017 - - - -
Hire purchase AUD 6.5% 2019 346 346 - -
Total interest bearing liabilities 346 346 3,200 2,622
5.2.2 Convertible note liability
ACCOUNTING POLICY
The liability component of a convertible note is recognised initially at its fair value. Subsequent to initial recognition, the liability component of the convertible note is measured at amortised cost using the effective interest method.
On 11 June 2015, the Company entered into an agreement with a group of sophisticated investors to
issue convertible notes with free attaching options over fully paid ordinary shares of the Company for
cash consideration of $4,000,000, subject to shareholder approval. Approval from shareholders was
received at an Extraordinary General Meeting held on 28 August 2015.
The 4,000,000 convertible notes were issued with a face value of $1.00 per note, a maturity date of 2
March 2017 and accrued interest at a rate of 15% per annum. The notes were convertible at a 20%
discount to the five-day VWAP of the Company’s share price on conversion date and were secured
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against the rights over the Pilgangoora tenements. The convertible notes were classified as a financial
liability in its entirety.
50,000,000 free attaching options were issued to convertible noteholders with the related convertible
notes. A further 6,400,000 unlisted options were issued as consideration for capital raising fees
associated with the issue of the convertible notes. The options were issued with no vesting conditions,
were exercisable at $0.05 per option and had a term of 18 months. The issue of these options is
considered to be a share based payment expense and their cost of $3.5 million has been treated as such.
Movements in convertible notes during the year are shown as follows:
2016
$’000
2015
$’000
Carrying amount of liability at the beginning of the period 2,622 1,386
Interest expense 1,745 -
Termination of notes (175) -
Issue of notes 4,000 1,700
Conversion to equity (8,192) (464)
Carrying amount of liability at the end of the period - 2,622
The fair value of the convertible notes on issue during the year was equivalent to their face value. As the
notes can be converted after six months at a 20% discount to the five-day share price VWAP at the time
of conversion, the fair value of the notes has been accreted to reflect this additional value over the six-
month period. The interest expense of $2,318,000 included in the profit or loss includes $1,745,000
accretion in value and $573,000 interest paid in cash (levied at the coupon rate of 15%).
5.3 Capital management
Capital consists of ordinary share capital, retained earnings, reserves and net debt. The Group’s objectives
when managing capital are to safeguard the Group’s ability to continue as a going concern so as to
maintain a strong capital base sufficient to maintain future exploration and development activities.
There were no changes to the Group’s approach to capital management during the year.
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NOTE 6 – OTHER DISCLOSURES
6.1 Financial risk management
ACCOUNTING POLICY
The Group classifies non-derivative financial assets into the following categories:
• financial assets at fair value through profit or loss, • held-to-maturity financial assets, • loans and receivables, and • available-for-sale financial assets.
The Group classifies non-derivative financial liabilities into the following categories:
• financial liabilities at fair value through profit or loss, and • other financial liabilities.
Non-derivative financial assets and financial liabilities – Recognition and de-recognition
The Group initially recognises loans and receivables and debt securities issued on the date when they are originated. All other financial assets and financial liabilities are initially recognised on the trade date when the entity becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised financial assets that is created or retained by the Group is recognised as a separate asset or liability.
The Group de-recognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
Financial assets and financial liabilities are offset, and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Non-derivative financial assets – Measurement
Financial assets at fair value through profit or loss A financial asset is classified as at fair value through profit or loss if it is classified as held for-trading or is designated as such on initial recognition. Directly attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, including any interest or dividend income, are recognised in profit or loss.
Held-to-maturity financial assets These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method.
Loans and receivables These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method.
Available-for-sale financial assets These assets are initially measured at fair value, plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on debt instruments, are recognised in other comprehensive income and accumulated in the fair value reserve. When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.
Non-derivative financial liabilities – Measurement
A financial liability is classified as at fair value through profit or loss if it is classified as held-for-trading or is designated as such on initial recognition. Directly attributable transaction costs are recognised in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value and changes therein, including any interest expense, are recognised in profit or loss. Other non-derivative financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.
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Set our below are details of the Group’s financial assets and liabilities at the end of the reporting
period. 2016
$’000
2015
$’000
Financial assets
Cash and cash equivalents 100,040 3,216
Trade and other receivables 1,545 919
Loans receivable - 1,627
Other financial assets 6 6
Total financial assets 101,591 5,768
Financial liabilities
Trade and other payables 2,952 743
Borrowings 346 2,622
Total financial liabilities 3,298 3,365
6.1.1 Overview
The Group has exposure to the following risks from their use of financial instruments:
• Credit risk
• Liquidity risk
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the
Group’s risk management framework. The Group’s risk management policies are established to identify
and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks
and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes
in market conditions and the Group’s activities.
The Group’s management of financial risk is aimed at ensuring net cash flows are sufficient to meet all
of its financial commitments and maintain the capacity to fund the exploration, evaluation and
development of the Pilgangoora Project and ancillary exploration activities.
The principal financial instruments as at the reporting date include cash, receivables, payables and loan
and finance agreements.
Set out below is information about exposures to the above risks, the objectives, policies and processes
for measuring and managing risk, and the management of capital.
6.1.2 Credit risk
Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the Group’s cash at bank and term deposits.
The carrying amount of financial assets represents the maximum credit exposure.
The Group limits its exposure to credit risk by only transacting with high credit quality financial
institutions. During the year the Group maintained all cash and cash equivalents balances with banks
and financial institutions holding a AA- rating based on S&P Global ratings.
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6.1.3 Liquidity Risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated
with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s
approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet
its liabilities when they are due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group’s reputation. The Group also manages liquidity risk
by producing cash flow forecasts to ensure that there is a clear and up-to-date view of the short to
medium term funding requirements and the possible sources of those funds. The Group aims to maintain
the level of its cash and cash equivalents and other highly marketable debt investments at an amount in
excess of expected cash outflows on financial liabilities.
The following are the remaining contractual maturities of financial liabilities at the reporting date. The
amounts are gross and undiscounted, and include contractual interest payments and exclude the impact
of netting agreements:
Carrying
amount
$’000
Total
$’000
Six months
or less
$’000
Six to 12
months
$’000
One to two
years
$’000
Two to five
years
$’000
30 June 2016
Non-derivative
financial liabilities
Hire purchase 346 373 77 77 155 64
Trade payables 2,093 2,093 2,093 - - -
2,439 2,466 2,170 77 155 64
30 June 2015
Non-derivative
financial liabilities
Convertible notes 2,622 2,675 975 - 1,700 -
Trade payables 458 458 458 - - -
3,080 3,133 1,433 - 1,700 -
6.1.4 Fair values
The fair values of financial assets and liabilities, together with the carrying amounts shown in the
consolidated statement of financial position, are as follows:
Level
Carrying amount Fair value
2016
$’000
2015
$’000
2016
$’000
2015
$’000
Financial assets and liabilities measured at fair
value
Convertible note Level 2 - 2,622 - 2,675
Fair value hierarchy:
• Level 1 – the instrument has quoted prices (unadjusted) in active markets for identical assets or
liabilities;
• Level 2 – the fair values are measured using in puts (other than quoted prices) that are observable
for the asset or liability either directly or indirectly; or
• Level 3 – the fair values are measured using inputs for the asset or liability that are not based on
observable market data.
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Cash and cash equivalents, other receivables, trade creditors, other creditors and accruals have been
excluded from the above analysis as their fair values are equal to their carrying values.
6.2 Related parties
6.2.1 Parent and ultimate controlling party
The ultimate controlling party of the Group is Pilbara Minerals Limited.
6.2.2 Key management personnel
The following people were considered as key management personnel during the financial year:
Position Appointed Resigned
Tony Leibowitz Non-executive Chairman 11 June 2013
Robert Adamson Non-executive Director 1 July 2010
Ken Brinsden Managing Director 18 January 2016
Neil Biddle Executive Director 30 May 2013
John Young Executive Director 4 September 2015
Alan Boys Company Secretary and Chief Financial Officer 26 October 2014 21 June 2016 as CFO
Brian Lynn Chief Financial Officer 22 June 2016
Key management personnel compensation comprised the following:
2016
$
2015
$
Short term employee benefits 1,305,176 732,570
Post-employment benefits 11,021 -
Share-based payments (non-cash) 13,238,684 -
14,554,881 732,570
Compensation of the Group’s key management personnel includes salaries, and contributions to a post-
employment defined contribution plan. Information regarding individual directors and executive’s
compensation and some equity instruments are disclosed as required by s300A of the Corporations Act
and Corporations Regulations 2M.3.03 are provided in the Remuneration Report section of the Directors’
Report.
6.2.3 Transactions with key management personnel related parties
During the year the Group transacted with related parties of key management personnel.
Tony Leibowitz is a director and shareholder of the following related party entities which transacted with
the Company during the year:
Entity Services provided 2016 2015
Kalonda Pty Ltd Director services $86,000 $75,881
Floreat Investments Pty Ltd Corporate advisory services $215,200 $47,155
Leibowitz and Sons Pty Ltd Corporate advisory services - $39,586
During the year, the Company paid Kalonda Pty Ltd $13,200 for the provision of office accommodation
for Mr Leibowitz.
On 2 September 2015, Kalonda Pty Ltd subscribed to convertible notes with a face value of $200,000.
On 19 April 2016, Kalonda Pty Ltd pursuant to the terms of the convertible note deed converted the
principal into 425,435 ordinary shares in the Company.
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Neil Biddle is a director and shareholder of the following related party entity which transacted with the
Company during the year:
Entity Services provided 2016 2015
Hatched Creek Pty Ltd Director and corporate advisory services $337,500 $276,420
Robert Adamson is a director and shareholder of the following related party entity which transacted with
the Company during the year:
Entity Services provided 2016 2015
Robert G Adamson Consultants Director services $56,000 $36,000
John Young is a director and shareholder of the following related party entity which transacted with the
Company during the year:
Entity Services provided 2016 2015
Metallon Resources Pty Ltd Director and geological advisory services $236,000 $168,400
Alan Boys is a director and shareholder of the following related party entity which transacted with the
Company during the year:
Entity Services provided 2016 2015
Dubois Group Pty Ltd Accounting and secretarial services $216,000 $77,750
On 2 September 2015, Starchaser Nominees Pty Ltd, a related entity to Mr Alan Boys, subscribed to
convertible notes with a face value of $50,000. On 24 March 2016, Starchaser Nominees Pty Ltd pursuant
to the terms of the convertible note deed converted the principal into 167,504 ordinary shares in the
Company.
All transactions with key management personnel related party entities were on commercial terms.
Up until the Group’s purchase of the remaining 50% interest in the incorporated joint venture Tabba
Tabba Tantalum Pty Ltd in September 2015, it was a related party of the Group. Valdrew Nominees Pty
Ltd, the 50% joint holder of Tabba Tabba Tantalum Pty Ltd, was also a related party of the Group in
accordance with AASB 124 for the year ended 30 June 2016.
Up until the date of acquisition, the Group invoiced Tabba Tantalum Pty Ltd an amount of $1,223,345
(2015: $427,974) for services and as at 28 September 2015 had trade receivables due from Tabba Tabba
Tantalum Pty Ltd of $754,322 (2015: $754,322) and an outstanding loan advance due to it of $2,850,389
(2015: $1,627,045).
Up until the date of acquisition, the Group purchased goods and services from Valdrew Nominees Pty
Ltd totalling $212,684 (2015: $215,280) and had trade payables as at 28 September 2015 of $42,349
(2015: $84,500). During the year, the Group purchased its 50% interest in Tabba Tabba Tantalum Pty Ltd
from Valdrew Nominees Pty Ltd for the sum of $2,000,000 (2015: $1,200,000).
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6.3 Group entities
6.3.1 Parent entity
Pilbara Minerals Limited.
6.3.2 Significant subsidiaries
Country of incorporation 2016 2015
Tabba Tabba Tantalum Pty Ltd Australia 100% 50%
Sturt Resources Ltd Australia 100% 100%
Sturt Resources PNG Ltd Papua New Guinea 100% 100%
Star 15 Limited Papua New Guinea 100% 100%
New Global Limited Papua New Guinea 100% 100%
Pilbara Lithium Pty Ltd Australia 100% -
6.4 Joint arrangements
On 25 September 2015, the Company increased its interest in Tabba Tabba Tantalum Pty Ltd (formerly
Nagrom Mining Pty Ltd) from 50% to 100%. Refer to Note 3.4 for additional details.
6.5 Parent entity disclosures
As at, and throughout the financial year ending 30 June 2016 the parent company of the Group was
Pilbara Minerals Limited.
2016
$’000
2015
$’000
Results of the parent entity
Loss for the period (55,697) (6,620)
Other comprehensive income/(loss) - -
Total comprehensive loss for the period (55,697) (6,620)
Financial position of the parent entity at year end
Current assets 100,796 5,762
Total assets 101,393 7,308
Current liabilities 3,058 3,407
Total liabilities 3,058 3,407
Total equity of the parent comprising of:
Share capital 146,476 22,526
Share-based payment reserve 21,799 1,325
Accumulated losses (69,940) (19,950)
Total equity 98,335 3,901
6.6 Subsequent events
On 4 July 2016, the Company announced it had signed a binding offtake agreement with leading Chinese
lithium chemicals company, General Lithium Corporation (“GLC”) for the supply of 140,000 tonnes per
annum of 6% chemical-grade spodumene concentrate from Q1 2018 for an initial six-year period, with
the option to extend for a further four years. The offtake pricing mechanism is to be based on the price
of Lithium Carbonate, so that the Company shares in the pricing outcomes derived from carbonate
deliveries to higher volume contracts with cathode makers in China.
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In addition, a binding Memorandum of Understanding was also executed with GLC to participate in the
evaluation and development of a future offshore spodumene conversion plant, to process spodumene
concentrates from the Pilgangoora Project whereby GLC will provide technology, technical expertise and
intellectual property, and will build and operate the lithium chemicals production facility through an
incorporated joint venture with the Company. Pilbara is expected to have a 50% share of the equity in
the proposed Joint Venture.
A binding Equity Subscription Agreement was also executed with GLC whereby they have agreed to
invest A$17.75 million in the Company via a 3% placement at 50c per share; with settlement to occur
after the conditions precedent to the Offtake Agreement terms have been satisfied. A further 2%
placement is proposed (for a total stake of 5% in Pilbara Minerals), once a formal investment decision
has been made to proceed with the development of the lithium chemicals facility.
The offtake agreement is subject to various conditions precedent, including the waiver or non-exercise
of the right of first refusal to the spodumene concentrates held by Global Advanced Metals Wodgina
Pty Ltd under the terms of the Pilgangoora Asset Sale Agreement.
6.7 Auditors’ remuneration
Somes Cooke audited the Group up until their resignation on 10 June 2016. The Directors resolved to
appoint KPMG, as the interim auditor of the Group with their appointment to be confirmed at the next
Annual General Meeting.
2016
$
2015
$
Audit services – KPMG 30,000 -
Audit services – Somes Cooke 10,000 29,000
Services other than statutory audit – KPMG - -
Services other than statutory audit – Somes Cooke - -
Total auditor’s remuneration – KPMG 30,000 -
Total auditor’s remuneration – Somes Cooke 10,000 29,000
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6.8 Standards issued but not yet effective
A number of new standards and amendments to standards are effective for annual periods beginning
after 1 July 2015 and earlier application is permitted; however, the Group has not early applied the
following new or amended standards in preparing these consolidated financial statements.
New or amended
standards Summary of the requirements
Possible impact on consolidated
financial statements
IFRS 9 Financial
Instruments
IFRS 9, published in July 2014, replaces the existing
guidance in IAS 39 Financial Instruments: Recognition
and Measurement. IFRS 9 includes revised guidance
on the classification and measurement of financial
instruments, a new expected credit loss model for
calculating impairment on financial assets, and new
general hedge accounting requirements. It also carries
forward the guidance on recognition and de-
recognition of financial instruments from IAS 39.
IFRS 9 is effective for annual reporting periods
beginning on or after 1 January 2018, with early
adoption permitted.
The Group is assessing the
potential impact on its
consolidated financial
statements resulting from the
application of IFRS 9.
IFRS 15 Revenue
from Contracts
with Customers
IFRS 15 establishes a comprehensive framework for
determining whether, how much, and when revenue is
recognised. It replaces existing revenue recognition
guidance, including IAS 18 Revenue, IAS 11
Construction contracts, and IFRIC 13 Customer Loyalty
Programmes.
IFRS 15 is effective for annual reporting periods
beginning on or after 1 January 2018, with early
adoption permitted.
The Group is assessing the
potential impact on its
consolidated financial
statements resulting from the
application of IFRS 15.
AASB 16 Leases The key feature of AASB 16 (for lease accounting) are
as follows:
- Lessees are required to recognise assets and
liabilities for all leases with a term of more than
12 months, unless the underlying asset is of low
value.
- A lessee measures right-of-use assets similarly to
other non-financial assets and lease liabilities
similar to other financial liabilities.
- Assets and liabilities arising from a lease are
initially measured on a present value basis. The
measurement includes non-cancellable lease
payments (including inflation-linked payments),
and also includes payments to be made in
optional periods if the lessee is reasonably
certain to exercise an option to extend the lease,
or not to exercise an option to terminate the
lease.
- AASB 16 contains disclosure requirements for
lessees.
AASB 16 is effective for annual reporting periods
beginning on 1 January 2019, with early adoption
permitted
The Group is assessing the
potential impact on its
consolidated financial
statements resulting from the
application of AASB 16.
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KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
Independent auditor’s report to the members of Pilbara Minerals Limited
Report on the financial report We have audited the accompanying financial report of Pilbara Minerals Limited (the company), which comprises the consolidated statement of financial position as at 30 June 2016, and consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1.1 to 6.8 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error. In note 1.2, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements of the Group comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group’s financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
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Auditor’s opinion In our opinion:
(a) the financial report of the Group is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1.2.
Other Matter
The consolidated financial statements of the Company as at and for the year ended 30 June 2015 were audited by another auditor who expressed an unmodified opinion on those statements on 30 September 2015.
Report on the remuneration report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2016. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Pilbara Minerals Limited for the year ended 30 June 2016, complies with Section 300A of the Corporations Act 2001.
KPMG
R Gambitta Partner
7 September 2016
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