==> picture [336 x 94] intentionally omitted <==

2020 Annual Report

2 Chairman’s Statement
5 Management Discussion and Analysis
28 Corporate Governance Report
51 Directors’ and Senior Management’s Profile
55 Report of the Directors
65 Independent Auditor’s Report Audited Financial Statements
70 Consolidated Statement of Profit or Loss and Other Comprehensive Income
72 Consolidated Statement of Financial Position
74 Consolidated Statement of Changes in Equity
75 Consolidated Statement of Cash Flows
77 Notes to the Consolidated Financial Statements
159 Five-Year Financial Summary
160 Glossary of Terms
163 Corporate Information

NEWTON RESOURCES LTD ANNUAL REPORT 2020

==> picture [200 x 117] intentionally omitted <==

Chairman’s Statement

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Chairman’s Statement

Dear Shareholders,

I am pleased to report that, despite the difficult operating and economic environments under the outbreak of coronavirus disease 2019 (“COVID-19”) pandemic in 2020, the Group achieved a growth in the resources business with increase in revenue by about 70% to approximately US$467.5 million and improvement in gross profit by about 52% to approximately US$6.7 million. Also, the Group recorded a net profit from the continuing operations for the Reporting Period of approximately US$0.8 million while the Group recorded a net loss for the Corresponding Prior Period. The overall turnaround in the Group’s financial results for 2020 was mainly attributed to the support of our customers and suppliers and the efforts of our management and our business development team which contributed to the continual growth in business volume and expansion of quality product offerings.

The Group’s overall volume of iron ore supply had increased by about 47% to approximately 4.4 Mt for 2020. I would like to thank our supplier, Koolan, which has continued to perform its supply obligations under the Restated Long Term Hematite Supply Agreement despite the outputs were impacted by the planned stripping activities at the Hematite Mine and the pandemic. While the Hematite Ore shipments from Koolan may remain at a low level in the next few months, I am looking forward to the successful completion of the overburden stripping phase by our supplier within 2021 with voluminous supply of high-grade Hematite Ore to the Group in the long run. The Group has also procured different types of iron ore from several overseas mines in South Africa, Brazil and Australia.

2020 was a challenging year for everyone in the world. The outbreak of COVID-19 pandemic hit the world with uncertainty and greatly disrupted the world’s industrial and economic activities. China is the first major economy to resume its growth since the outbreak with strong demand of steel and iron ore leading to rising iron ore prices in the second half of 2020. Supply constraints and strong Chinese recovery had been the key drivers leading to the increase in seaborne iron ore prices especially in the last quarter of 2020. Seaborne iron ore prices are expected to remain high and be supportive to the Group’s operating performance which shall help mitigate the financial impact of reduced supply from Koolan in the near term. However, the more volatile and continual fast moving seaborne iron ore prices has recently created challenges to our resources business, in particular, on trade negotiation, product pricing and execution of hedging strategy and hedging instruments. Our business development team shall keep abreast of the market development and take the necessary steps to secure the swift sales of iron ore of the Group.

In 2021, the pandemic is still clearly a big challenge. But, the introduction of the COVID-19 vaccine is a really positive force that can help to unleash pent-up demand in the economy. The Group will endeavour to further identify and expand the product offerings and try to take steps to convert these standalone supplies into more sustainable long term supplies if that could bring more contributions to the financial results of the Group in the long run. The Group will also cautiously explore and capture mergers and acquisitions and other collaboration or investment opportunities as appropriate.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Chairman’s Statement

Lastly, I would like to express my heartfelt gratitude to my fellow Board members, our management team and all the staff members for their dedication and commitment made for the Group. On behalf of the Board, I would like to express my sincere thanks to the Shareholders, customers, suppliers, banks and business partners for their continuous support.

Chong Tin Lung, Benny

Chairman

Hong Kong, 25 March 2021

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

==> picture [181 x 162] intentionally omitted <==

----- Start of picture text -----

ANNUAL REPORT 2020 5
----- End of picture text -----

Management Discussion and Analysis

Financial Highlights

Financial Highlights
	2020	2019
	US$’000	US$’000
		(Restated)5
Continuing operations
Revenue	467,495	275,167
Gross profit	6,676	4,389
Profit/(loss) for the year	844	(3,112)
EBITDA1	5,164	2,859
Basic earnings/(loss) per share (US$ cents)	0.02	(0.08)
The Group
Total assets	135,681	159,699
Total equity	32,049	30,134
Net debt2	418	16,410
	2020	2019
The Group
Liquidity ratio3	1.1	1.2
Net gearing ratio4	1%	54%

1 EBITDA is defined as profit/(loss) before interest, tax expense, depreciation, amortisation and impairment loss for the year

2 Net debt is defined as total interest-bearing liabilities less cash and bank balances

3 Liquidity ratio is computed as total current assets divided by total current liabilities

4 Net gearing ratio is computed as the net debt divided by total equity

5 As explained in Note 2.1 to the consolidated financial statements, due to the change in presentation currency during the year ended 31 December 2020, the comparative figures as shown in the above financial highlights have been restated and presented in US$ as if US$ had been the Group’s presentation currency in the prior periods.

6 NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Our Resources Business

The Group continues to employ a distributorship business model that involves the sourcing and supply of iron ore and other commodities (the “Resources Business”). The Group has established business development team (the “Business Development Team”) comprising a team of market specialists with extensive experience and expertise in the iron and steel industry and sound reputation among international suppliers and customers.

As a distributor, the Group is not merely engaged in the sourcing and supply of iron ore and other commodities, but also provides a range of value-added services. Most notably, the Group matches the product offerings of the suppliers with the demand of the customers in terms of pricing, quality and timing, such that the commodities from the overseas mine owners can be effectively brought to the customers in need at the appropriate time. Other major functions of the Group as a distributor include providing support in the area of supplier management and logistics. The Group takes care of the coordination with different suppliers and arranges for commodities from multiple sources to be supplied to customers as a package where necessary. The Group also organises shipment and delivery of the commodities to the customers.

From the suppliers’ perspective, it is preferable to supply the commodities to the Group as their distributor given that the Group is a reputable business partner that offers access to international trade finance facilities. The Group provides its suppliers with the required finance or credits, which are typically borne by the distributors at an early stage in the supply chain. Effectively, the Group has financed the purchases of iron ore inventories with its internal resources and borrowings, which are made possible due to the Group’s corporate and shareholder profiles. On top of that, the suppliers may be less familiar with the situations and latest developments in foreign markets and subject to significant market risks. It is therefore to the suppliers’ advantage to avail themselves of the local market insights, connections and expertise of the Group as the distributor in the sales and distribution of their commodity products in foreign markets.

Therefore, the services provided by the Group in its intermediary role as a distributor are generally perceived to be indispensable and add values on both upstream and the downstream sides of the Resources Business and the commodity industry.

It is also believed that the Group’s core competence lies in having a highly competent and experienced Business Development Team, the members of which had been involved in the procurement of iron ore from overseas mines under offtake or standalone arrangements and in the provision of related shipping services for more than a decade. They had also developed business relationships and engaged in business collaboration with iron ore and non-ferrous metal suppliers, and hence they possess a substantial amount of industry-specific experience in trade negotiation and business operation and have a well-established good reputation in the industry, and are widely recognised by suppliers and customers as trustworthy business partners. Taking advantage of the Business Development Team’s sound industry knowledge and recognition in the market, the Group has been able to offer better and more complete services to its customers and grow the Group’s business during the Reporting Period and in the years ahead.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Our Resources Business (Continued)

With the success in securing the Restated Long Term Hematite Supply Agreement in 2019 and other supply contracts with mine owners from time to time, the Group managed to secure stable and sustainable supply of quality iron ore from reputable overseas mines during the Reporting Period. According to the offtake arrangement under the Restated Long Term Hematite Supply Agreement, Koolan shall supply and sell Hematite Ore to be sourced from the Hematite Mine in such annual quantity as equals 80% of Koolan’s total available production to the Group during each contract year to the date of permanent cessation of Koolan’s mining operations at the Hematite Mine. Apart from the Hematite Ore supply from Koolan, the Group also sourced iron ore supplies from other overseas mines, including the magnetite ore from South Africa, the medium-grade iron ore fines from Brazil and the low-grade hematite fines and lumps and the high-grade iron pellet from Australia. The Restated Long Term Hematite Supply Agreement and the aforesaid diversified iron ore supplies illustrated the Business Development Team’s continual effort and success in growing the Group’s business and the growth in business volume achieved during the Reporting Period. The Group believes that its business reputation in the iron and steel industry and good relationships with suppliers are gradually building up.

Apart from the supply side, the Group has also been working on the strengthening of the customer business network so that, with the stable long-term supply of quality products, the Group can develop and improve customer relations with good business continuity and repeated orders so as to support the Group’s business with sustainable growth in the long run. The Group’s customers included the sourcing arms of steel mills and the trading arms of state-owned enterprises, as well as end-users of the commodities.

In addition, in line with market practices, it is customary for customers to fix the iron ore selling price based on a future price with a view to aligning the customers’ procurement costs with the selling prices of their end products. On the supply side, the commodities are purchased at competitive prices, which, under the Restated Long Term Hematite Supply Agreement, for instance, are to be determined based on the agreed market pricing formulae taking into account the relevant benchmark prices and indices of specified periods commonly adopted and perceived to be of authoritative, and reference value published from time to time by recognised institutions in the iron ore industry. In view of the prevailing market conditions and customer preferences, the Group continues to adopt a pricing strategy for iron ore products that accepts sales to customers and purchases from suppliers with terms that are subject to future pricing quotation periods (the “QPs”). As the benchmark prices, the market indices and the QPs with each customer may differ from that under the relevant supply contract(s), resulting in possible gaps in the procurement costs and the selling prices of the Group’s iron ore products, the Group continues to adopt the hedging tools to hedge against commodity price fluctuation risks.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Our Resources Business (Continued)

During the Reporting Period, the Group continued to adopt the hedging tools such as iron ore futures or swaps contracts that were executed through Singapore Exchange Securities Trading Limited to manage the operational risks that may arise from the Group’s Resources Business. Through these hedging instruments, the Group has been able to hedge against most (if not all) of the financial impacts on the iron ore supply and sales contracts as a result of the fluctuations in iron ore market prices, which may arise from movements in the benchmark prices and market indices under different QPs. The Group’s hedging executives have managed the Group’s exposure over iron ore price fluctuation by execution of approved hedge strategy and hedging instruments.

Business and Operational Review

Our Markets and Customers

2020 was a challenging year for everyone in the world and the Group’s operations. The outbreak of COVID-19 pandemic hit the world with uncertainty and greatly disrupted the world’s industrial and economic activities. Global output is estimated by the International Monetary Fund to have fallen by 3.5% in 2020, and all countries have been affected. On the contrary, according to the General Administration of Customs of the PRC, China recorded a 2.3% GDP growth in 2020 and reported a record-high annual import of 1,170 million tonnes of iron ore in 2020, up 9% as compared to last year.

Due to the outbreak of the COVID-19 pandemic, China, being the world’s top producer and consumer of steel, of which iron ore is the key component, had to temporarily closed the factories and construction sites across the country, and caused demand from the steel sector in the PRC to decline significantly in the first quarter of 2020. Also, many businesses in China had been unable to resume production on time after Lunar New Year in early 2020 and were forced to have their production orders cancelled, and investment levels were then bound to shrink accordingly during the first quarter of 2020.

Brazilian supply was also impacted during the first quarter of 2020 due to heavy rains. The COVID-19 pandemic also temporarily curbed some operations there. In Australia, a major miner was also impacted by operational issues. Iron ore exporters other than Australia and Brazil increased their exports to China due to constrained demand elsewhere and high seaborne prices.

After the end of the national lockdown in the PRC by the end of February 2020, China’s steel demand has recovered sharply – boosted by pent-up demand, seasonal restocking and strong infrastructure spending. The China-led re-activation of its vast mining or metal processing capability continued to spur related industries worldwide back to work. The Chinese demand for iron ore has improved progressively since it reopened its economy in May 2020. Indeed, the PRC Government has launched a series of rescue measures, such as expansionary fiscal policies, tax cuts and fee reductions for enterprises affected by the outbreak of the COVID-19 pandemic, especially small and medium-sized enterprises, and these measures helped business enterprises maintain necessary investment levels.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Business and Operational Review (Continued)

Our Markets and Customers (Continued)

In the second half of 2020, more sizeable stimuli aiming to help Chinese enterprises to shake off the negative impacts of the COVID-19 pandemic had ramped up both demand and prices for iron ore. Most of the stimulus packages had been injected into fixed asset investment, which in turn boosted China’s infrastructure, property and manufacturing sectors, especially in the second half of 2020. China’s property market investment and infrastructure construction investment posted year-on-year increases of 7% and 0.9% respectively in 2020 according to data released by the National Bureau of Statistics of China.

Chinese steel prices were higher than expected, and the iron ore prices turned out to be stronger than the market players’ expectation in the second half of 2020. According to sources, this could be attributed to the easier access to credit which has allowed the mills and traders to maintain a higher inventory level than normal. The infrastructure sector stimulus resulted in increasing steel demand, while property construction was also performing strongly. All of these were contributing to buoyant sentiment in China, while much of the rest of the world was slowly recovering from the negative impacts of the COVID-19 pandemic.

Another important factor affecting the seaborne iron ore prices is the supply and pricing of hard coking coal to the Chinese steel mills in the second half of 2020. The trade conflicts between China and Australia have intensified in 2020 as relations between the two countries deteriorated. China’s restrictions on imports of Australian coking coal resulted in the falling of the seaborne price of premium hard coking coal at the start of October 2020. On the contrary, China’s domestic coking coal prices increased significantly in the last quarter of 2020 due to the import ban, as strong Chinese steel consumption boosted demand for domestic coking coal and coke, both of which were in tight supply.

There were concerns that the restrictions on Australian coal would put steel margins under pressure as the price of domestic coking coal and coke would increase further as the Chinese steel mills were obliged to source more domestically. This would be compounded by efforts to reduce production in China’s coal production hubs, as a result of coal de-capacity measures and targets imposed by the PRC authorities in recent years. China’s ban on Australian coking coal imports has increased both CFR and domestic coal prices, eroding steel margins in the steelmaking process, although steel margins have been more robust in 2020 due to the recovery of the economy in China.

Given the rising coking costs, iron ore fines with high silica levels continued to be subject to greater impurity discount on account of higher coking utilisation rate or less optimal coal blending combination, and were pushing up the production costs of the steel mills in the fourth quarter of 2020. According to sources, with premiums for mainstream medium-grade fines weakening on the back of overall iron ore price strength, the iron ore sellers were under pressure to widen their discounts for cargoes due to reducing liquidity. High coking costs also weighed on discounts for low-grade fines due to their relatively higher contaminant levels and lower Fe content by the end of 2020.

10 NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Business and Operational Review (Continued)

Our Markets and Customers (Continued)

China has yet to impose any import restriction or levy on Australian iron ores. Given China’s reliance on imported iron ore, along with increased demand due to the industrial-led stimulus, it could be expected that the iron ore trade between China and Australia would be less significantly affected in near future. The Group will keep abreast of the latest policy measures and development in the trade conflicts between China and Australia so as to accommodate the changes or adjust the Group’s business strategies as appropriate.

Our Product Prices

Iron ore prices rose by more than 70% in 2020. Due to international iron ore supply disruptions in 2019, the seaborne iron ore prices for medium-grade fines (62% Fe CFR North China) (the “Platts IODEX Price”) and highgrade fines (65% Fe CFR North China) (the “65 IO Price”) were strong and trading at about US$90 per tonne and about US$100 per tonne, respectively, at the beginning of 2020. On the back of rising Chinese demand for iron ore after the national lockdown, the Platts IODEX Prices and the 65 IO Prices had soared to about US$100 per tonne and about US$120 per tonne, respectively, in June 2020.

Iron ore prices started increasing further in August 2020, but the big rally did not occur until December 2020, reflecting buoyant and sustained Chinese demand, continued supply-side constraints and improved steel margin brought by strong steel prices. China’s rapid post-COVID-19 economic recovery resulted in robust demand for iron ore for the second half of 2020; coupled with production disruptions (regulatory restrictions related to tailing dam management) in Brazil causing worldwide supply concerns, all had led to a climb in iron ore prices to hit the multiyear highs in the final quarter of 2020 and after. The Platts IODEX Prices and the 65 IO Prices have reached about US$160 per tonne and about US$170 per tonne, respectively, by the end of 2020.

Medium-grade and high-grade iron ore were preferred by most steel mills in the PRC in the fourth quarter of 2020, supported by favourable margins and rising coke prices and also due to their adequate liquidity in a volatile price environment. The appetite for higher grade depended on mill margins.

After the end of the Reporting Period, the Platts IODEX Prices and 65 IO Prices have continued their strong run, reaching above US$170 per tonne and above US$200 per tonne, respectively, in early 2021. China’s steel production has also started the year strongly, according to the China Iron & Steel Association. Moreover, the successful COVID-19 vaccine trials spurred investor sentiment and led to a more optimistic outlook for the global economy, further fueling the market prices and demand for iron ore in the future.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Business and Operational Review (Continued)

Our Product Prices (Continued)

According to sources, China’s steel demand in 2021 could be expected to stay flat as a result of the combined effects of the following two forces. The manufacturing and steel using sectors will gradually recover and rebound with more steel demands than those from the construction and infrastructure sectors, which will continue to support the steel demand in 2021. On the other hand, if the economy shows a real recovery, the PRC government is likely to reverse its stimulus policy to cool down the construction sector. When Chinese steel margins come under pressure, it could spur some pushback on the rising iron ore prices in 2021. In addition, the PRC government could also be expected to further tighten credit conditions in 2021 and constrain financing for property developers, which could result in some downward pressure on iron ore prices.

The more volatile and continual fast moving seaborne iron ore prices after 31 December 2020 has created challenges to the Resources Business, in particular, on trade negotiation, product pricing and execution of hedging strategy and hedging instruments. The Business Development Team shall keep abreast of the market development and take the necessary steps to secure the swift sales of iron ore of the Group going forward.

Our Supplies

In 2020, the Group continued to procure the Hematite Ore extracted from the Hematite Mine under the long term offtake arrangements of the Restated Long Term Hematite Supply Agreement on Free on Board basis from Australia. Riding on the experience and expertise of the Business Development Team, the Group also sourced iron ore supplies from other overseas mines, including magnetite ore from South Africa, medium-grade iron ore fines from Brazil and low-grade hematite fines and lumps and high-grade iron pellet from Australia, on Cost and Freight (“CFR”) terms. During the Reporting Period, the Group purchased and sold approximately 4.4 Mt of iron ore (2019: approximately 3.0 Mt), comprising approximately 1.5 Mt Hematite Ore from Koolan and approximately 2.9 Mt of iron ore from other suppliers.

The Group’s sourcing and sales of iron ore are mainly priced with reference to the relevant benchmark prices, such as Platts IODEX Prices and 65 IO Prices, and price adjustments for quality and impurities are applied subject to business negotiation, terms of sales, and cargo specifications.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Business and Operational Review (Continued)

Our Supplies (Continued)

In line with the industry practices, provisional pricing arrangements are adopted by the Group for the Resources Business for most of the iron ore products, where the sales and purchases will be subject to benchmark prices of future QPs. Certain of these sales and purchases will be subject to different future QPs to accommodate the specific needs and requirements of customers and suppliers on each cargo. Under the provisional pricing arrangements, the Group recognised sales and purchases based on provisional prices for the relevant QPs prevailing at the month of shipment. Any future price movements that occurred up till the end of the QPs are embedded within the Group’s trade receivables and trade payables. These subsequent changes in the value of the provisionally priced receivables and payables are also recognised as part of the Group’s revenue and cost of sales. Therefore, the Group’s revenue figures remain subject to provisional pricing adjustments until they are finalised. The provisional prices are usually finalised within three months after the month of shipment. As the benchmark prices, the iron ore market indices and the QPs with each customer may differ from that under the relevant supply contract(s), resulting in possible gaps in the procurement costs and the selling prices of the Group’s iron ore products, the Group continues to adopt the hedging tools to hedge against commodity price fluctuation risks.

During the Reporting Period, the Group recognised net losses of approximately US$3.9 million (2019: approximately US$0.1 million (restated)) and net gains of approximately US$10.6 million (2019: approximately US$1.3 million (restated)) from hedging transactions in the Group’s revenue and cost of sales, respectively.

The Group has successfully managed its purchase and sales contracts to be settled under the same QPs in order to minimise the business risk arising from iron ore supplies with highly variable iron grade sourced in the fourth quarter of 2020. Therefore, the Group did not have any outstanding iron ore futures or swap contracts as at 31 December 2020 (2019: net purchases of 505,000 tonnes of iron ore).

The Group also engaged in the delivery of iron ore products, where the revenue are recognised over the period of time from cargo loading to the finish of port discharging. The service providers (usually the vessel owners) were responsible for the delivery of the cargoes from the loading ports and mainly to main ports in China. Attributed to the COVID-19 pandemic, various protocols and measures were implemented by various governments to reduce the risk of virus transmission. Our suppliers continue to maintain a range of general site and travel protocols to reduce the risk of virus transmission and remains ready to respond promptly to any safety restrictions or new measures should they be required. In particular, our nominated vessels had to satisfy the required quarantine inspection and other governmental requirements prior to berthing at the loading ports and discharge ports. We are pleased to advise that there was no major outbreak of the COVID-19 pandemic reported for the nominated vessels during the Reporting Period. The Group is also ready to respond promptly in the event of any implementation of required governmental or other health or precautionary measures or restrictions as appropriate.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Business and Operational Review (Continued)

Our Supplies (Continued)

During the Reporting Period, the overall average unit selling price of the Group’s iron ore was approximately US$106 per tonne (2019: approximately US$91 per tonne), which has taken into account the provisional price of the sales, the aforesaid changes in values of the trade receivables and related hedging arrangements, and the Group’s revenue derived from provision of shipment services. The increase is largely in line with the strong iron ore prices with adjustment made for trade discounts on the iron grade and product impurities during the Reporting Period.

In 2020, the Hematite Ore supplied by the Hematite Mine continued to be one of the major iron ore products offered by the Group. The Group is pleased to report that, notwithstanding the global uncertainty under the pandemic, Koolan, as the supplier, has continued to perform its supply obligations under the Restated Long Term Hematite Supply Agreement. However, the business performance for the Reporting Period was negatively impacted by the COVID-19 pandemic to a certain extent, including the decrease in Hematite Ore supply attributed to the planned stripping phase of the Hematite Mine, the difficult mining conditions of Koolan under the cyclone-related adverse weather conditions from time to time and necessary operational changes implemented by Koolan as part of the response to the COVID-19 pandemic.

The average grade of Hematite Ore shipments in the first half of 2020 was above 65% Fe. According to the information available to the Group, in the second half of 2020, the supplier has commenced the stripping programme at the Hematite Mine which is required in order to access a significantly greater volume of high grade Hematite Ore from the second half of 2021 onwards. As a result, the Hematite Ore supply has decreased reflecting the waste movement cycle of the Hematite Mine and the average grade of Hematite Ore shipments has also shifted to lower grade of about 63% or below during the second half of 2020. These changes are largely in line with the mine plan of the supplier where the ore production at this stage is highly variable. Moreover, the supplier continues the stripping process at the Hematite Mine and is targeting to substantially complete the overburden stripping phase in the first half of 2021. However, the total ore supply in the coming future will be lower than that for the second half of 2020 as the wet season impacts in the region are typically most pronounced and the supply will also be subject to successful implementation of certain safety and support measures at the mine site. The average grade of Hematite Ore shipments could also be at their lowest to an average of 58% to 61% Fe in the first half of 2021 as the supplier expects that the waste movement cycle at the Hematite Mine shall reach its peak. The supplier has taken steps to enhance the waste movements at the Hematite Mine by the commissioning of additional production excavator and haul trucks and other logistics infrastructure. It is expected by the supplier that the iron ore outputs will increase significantly thereafter. The strong iron ore prices shall continue to provide support to the Group’s performance in the coming financial year and pricing outlook remains solid under strong policy support by the PRC Government.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Business and Operational Review (Continued)

Our Supplies (Continued)

The Group is looking forward to the successful completion of the overburden stripping phase within the main pit at the Hematite Mine by the supplier within 2021 with voluminous supply of high grade Hematite Ore to the Group in the long run.

Coupled with the effort of the Business Development Team to further enhance the business development of the Resources Business with more diversified product offerings, the Group has achieved a growth in the iron ore supply from other mines during the Reporting Period. Other supplies include supplies of iron ore from several overseas mines in South Africa, Brazil and Australia. The COVID-19 pandemic has had a negative impact on global activities in 2020, the quantity of iron ore procured from other suppliers is slightly less than the quantity that the Group has originally envisaged. The Business Development Team has also been working on the strengthening of the customer business network and has expanded the sales to customers in Southeast Asia region in 2020.

To summarise, the Group recognised an overall increase in revenue and gross profit for the Reporting Period attributed to the success in expansion and growth of the Resources Business despite the global uncertainty under the COVID-19 pandemic. There was a fall in gross profit margin attributed to the relatively high volume of standalone and periodic supplies of iron ore procured from the overseas mine owners (other than the Hematite Mine) which were sold to the customers at thin margin under fierce market competition and rapid trade negotiation and conclusion during the Reporting Period.

Looking forward, Hematite Ore shipments from Koolan will remain at a low level during the next few months as the supplier is expected to progress the peak overburden stripping phase at the Hematite Mine. However, seaborne iron ore prices are expected to remain high and be supportive to the Group’s operating performance which shall help mitigate the financial impact of reduced supply to the Group’s operation in the near term. Notwithstanding the challenges and uncertainty brought by the continual COVID-19 pandemic or its resurgent virus that may threaten the business and performance of the global economies, the trade conflicts and other issues, the Group will endeavour to further identify and expand the product offerings and try to take steps to convert the standalone supplies into more sustainable long term supplies if that could bring more contributions to the financial results of the Group in the long run.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Company Overview and Financial Review

In FY 2020, facing the challenges of the COVID-19 epidemic, the protracted tension between China and the United States and the trade conflicts between China and Australia, the Group’s Resources Business was negatively impacted to a certain extent. However, with the continuous support of the Group’s customers and suppliers and the persistent efforts of our management and the Business Development Team, the Group’s revenue derived from continuing operations increased by about 70% to approximately US$467.5 million, as compared to approximately US$275.2 million (restated) for FY 2019, which was mainly attributed to the sales of iron ore. The profit for the year from continuing operations during the Reporting Period was approximately US$0.8 million (2019: loss of approximately US$3.1 million (restated)). The basic earnings per share from continuing operations for the Reporting Period was approximately US0.02 cents (2019: basic loss per share of approximately US0.08 cents (restated)).

During the Reporting Period, on 30 June 2020, the Group completed the Disposal of the discontinued operations of an iron and gabbro-diabase mine located in Mainland China (thereafter collectively referred to as the “Mining Business” or the “Discontinued Operations”). The Disposal Group was sold at a cash consideration of approximately US$13.9 million, and resulted in a net gain on disposal of approximately US$0.2 million. Upon completion, the Group ceased and discontinued the Mining Business.

Having considered that, after completion of the Disposal, the Company’s principal operating subsidiaries carry out business activities and transactions mainly in US$, being the currency that mainly influences the underlying transactions, events and business conditions, the functional currency of the Company has been changed from RMB to US$. Furthermore, the Company and the Group have determined to change the presentation currency of these financial statements to US$ with effect from 1 July 2020, which shall align with the new functional currency of the Company. The comparative information has been restated and presented in US$ as if US$ had been the Group’s presentation currency for the prior periods. Details of the changes in functional and presentation currency and the methodology used to re-present the comparative figures are disclosed in Note 2.1 to the consolidated financial statements.

In order to foster further development of the Resources Business with more stable customer demands and more diversified product offerings, the Group has formed a subsidiary with our key business partner, who is an experienced market and industry leader, in FY 2020. The newly set-up subsidiary shall better align the business interests of the Group with our key stakeholders toward the continual expansion of the Resources Business and allow the sharing of resources and results together. It is expected that, after getting through the difficult business situation and uncertainties brought by the COVID-19 pandemic, this new business set-up will encourage our key business partner and our employees to achieve better results by bringing new sources of commodity supplies and new income stream to the Group and thereby contribute to the growth of the Group’s business. The Group shall benefit from new businesses and diversified product offerings, additional financial resources and additional revenue and profit in the long run.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Company Overview and Financial Review (Continued)

Revenue and Gross Profit

The Group recognised revenue derived from sales of iron ore products and other commodities on a gross basis, service income from the shipment of cargoes, fair values adjustment on trade receivables arising from the fluctuations in commodity price indices and gain or loss on iron ore futures or swap contracts to manage the operational risks that may arise from the sales of iron ore.

During the Reporting Period, the Group recognised revenue from continuing operations of approximately US$467.5 million (2019: approximately US$275.2 million (restated)), representing an increase of about 70%. The Group has maintained a steady and growing customer portfolio comprising the sourcing arms of steel mills and the trading arms of state-owned enterprises, as well as end-users of the commodities.

The Group sold approximately 4.4 Mt of iron ore during the Reporting Period (2019: approximately 3.0 Mt), comprising approximately 1.5 Mt Hematite Ore from Koolan and approximately 2.9 Mt iron ores from other suppliers. Notwithstanding the overall increase in the quantity of iron ore sold during the Reporting Period, the Group’s operations have been negatively affected to a certain extent by the COVID-19 pandemic, which created challenges to the Group. On the supply side, the lockdown and various operational changes, protocols, and measures launched to contain the COVID-19 pandemic and unexpected adverse weather conditions in Western Australia had disrupted our supplier’s mining activities leading to only a slight increase in supply of Hematite Ore in terms of quantity during the Reporting Period. In addition to the supply of Hematite Ore, the Group made more purchases with other suppliers on standalone or periodic contracts during the Reporting Period with a view to diversify the product offerings, thus increasing the Group’s business volume. On the demand side, since the second quarter of 2020, the lockdown measures have mostly been lifted across China, prompting a quick recovery in Chinese economic activity. Chinese market demand for iron ore rebounded strongly post-lockdown to meet pent-up demand. The iron ore prices have also performed well with the Platts IODEX Prices and the 65 IO Prices remaining strong at the average of about US$109 and US$122 per tonne, respectively, during the Reporting Period.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Company Overview and Financial Review (Continued)

Revenue and Gross Profit (Continued)

The following table summarised the business volume and revenue of the Resources Business from continuing operations by product and country of origin:

(in US$ million) 2020 Transaction volume Revenue Gross profit Mt	2019 Transaction volume Revenue Gross profit Mt (Restated) (Restated)
Revenue from sales of iron ore products Koolan 1.5 Other Suppliers 2.9	1.3 1.7 3.0 274.1 4.2 – 1.1 0.2
4.4 467.5 6.7 Sales of coal – – –
Total 4.4 467.5 6.7	3.0 275.2 4.4

In response to the COVID-19 pandemic, significant changes had been implemented by Koolan to the mine operating protocols, which together with the scheduled overburden stripping programme and the challenging weather and mining conditions, causing the slower mine production and lesser output during the Reporting Period, as compared to the quantity that the Group has originally envisaged. Koolan is carrying out the waste stripping activities in the second half of 2020, which resulted in lower production and generally lower average ore grade than 2019. The average ore grade in the first half of FY 2020 was about 65% Fe, which then gradually reduced to about 61% Fe for those shipments delivered in the fourth quarter of 2020. The impurities (particular silica) have shot up dramatically in the second half of 2020. As a result, the average unit selling price of the Hematite Ore decreased attributed to larger sales discounts offered to the Group’s customers to reflect a combination of lower average ore grade, high contaminants (particular silica) and increased price adjustments for product quality in the market.

Other suppliers include suppliers of iron ore from several overseas mines in South Africa, Brazil and Australia. The COVID-19 pandemic has had a negative impact on global activities in 2020, the quantity of iron ore procured from other suppliers is less than the quantity that the Group has originally envisaged. The Group’s Business Development Team has been working on strengthening the customer business network and has expanded the business to customers in South East Asia region in 2020.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Company Overview and Financial Review (Continued)

Gross Profit Margin

The Group aims at speeding up the inventory turnover and maintaining minimal inventory level. During the Reporting Period, the Group has continued to be successful in concluding sales contracts with customers in rapid trade negotiations and thus minimizing the inventory level. The Group has been successfully matching the products with customers and locking in the profit or loss with the effective execution of hedging instruments and shipping arrangements. In addition, in line with the strong iron ore market price prevailing for most of 2020, the Group has been able to achieve an increase in gross profit by approximately US$2.3 million for the Reporting Period, as compared to that of 2019.

On the other hand, the Group has also made sales that were usually negotiated under standalone or periodic contracts with thin margins under the fierce market competition with a view to further diversify the product offerings in the long run. The increase in these sales during the Reporting Period has caused the Group’s gross profit margin for FY 2020 to be slightly lower than last year.

Results for the Reporting Period

The Group’s net profit for the year (including that from the Discontinued Operations) was approximately US$0.8 million (2019: loss of approximately US$10.1 million (restated)). The net profit from continuing operations of the Group for the Reporting Period and the profit for the year attributable to the owners of the Company from continuing operations both amounted to approximately US$0.8 million (2019: loss of approximately US$3.1 million (restated)).

The overall improved financial results of the Group for the year were mainly attributable to (i) the improvement in the operating results of and the growth in the Resources Business as reflected in the increase in the Group’s revenue and gross profit mainly derived from the sales of iron ore by approximately US$192.3 million and approximately US$2.3 million respectively; and (ii) the absence of non-recurring impairment losses on other current financial assets of the Group of approximately US$1.6 million (restated) and the net operating loss and impairment losses attributed to the Discontinued Operations of approximately US$3.8 million (restated) and approximately US$3.2 million (restated), respectively, that were recognised in the Corresponding Prior Period.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Company Overview and Financial Review (Continued)

Changes in the Financial Position

The Group had total assets of approximately US$135.7 million as at 31 December 2020 (2019: approximately US$159.7 million (restated)), which mainly represented the trade and bills receivables arising from the Resources Business of approximately US$96.0 million, other long-term assets relating to the Restated Long Term Hematite Supply Agreement of approximately US$16.2 million and cash and bank balance of approximately US$20.1 million. The overall decrease in the Group’s total assets was attributed to the completion of the Disposal where those assets attributed to the Disposal Group classified as held for sale as at 31 December 2019 of approximately US$29.4 million (restated) were realised and the decrease in cash and bank balances by approximately US$38.1 million. Such decrease was partly offset by the increase in the Group’s trade and bills receivables by approximately US$54.0 million arising from the Resources Business during the Reporting Period.

The Group had total liabilities of approximately US$103.6 million as at 31 December 2020 (2019: approximately US$129.6 million (restated)), which mainly representing the trade and bills payables arising from the Resources Business of approximately US$81.8 million and interest-bearing bank and other borrowings of approximately US$20.5 million. The overall decrease in the Group’s total liabilities was attributed to the completion of the Disposal where those liabilities attributed to the Disposal Group associated with the assets classified as held for sale as at 31 December 2019 of approximately US$15.5 million were realised and the decrease in the Group’s bank and other borrowings by approximately US$54.2 million as a result of the repayment made during the Reporting Period. Such decrease was partly offset by the increase in the Group’s trade and bills payables by approximately US$45.1 million arising from the Resources Business during the Reporting Period.

The Group’s total equity also increased to approximately US$32.0 million as at 31 December 2020 (2019: approximately US$30.1 million (restated)). The increase mainly represented the net profit of the Group for the Reporting Period of approximately US$0.8 million and capital injection to a subsidiary of the Group by the noncontrolling interests of US$1.0 million during the Reporting Period.

Dividend

The Board does not recommend the payment of a final dividend in respect of FY 2020.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Segment Information

The Group principally engaged in the Resources Business as the continuing operations throughout the Reporting Period and for the Corresponding Prior Period.

An analysis of the Group’s revenue from external customers by geographical segment is as follows:

	2020	2019
	US$’million	US$’million
		(Restated)
Mainland China	455.9	271.6
Others	11.6	3.6
Total revenue from external customers	467.5	275.2

Revenue from external customers by geographical location is determined based on the ports of discharge.

The Group’s non-current assets mainly represented the long-term assets relating to the Restated Long Term Hematite Supply Agreement which is operated and based in Hong Kong.

Further details of the Group’s segment information and segment results are set out in Note 4 to the consolidated financial statements, and further discussions on business performance and market overview of the Resources Business of the Group are set out in the sections headed “Our Resources Business” and “Business and Operational Review” above.

Liquidity, Financial Resources and Financing Activities

As at 31 December 2020, the cash and cash equivalents of the Group amount to approximately US$15.2 million (2019: approximately US$13.0 million (restated)), representing approximately 11% (2019: approximately 8%) of total assets of the Group. The cash and cash equivalents were denominated as to about 87% in USD, about 10% in HKD and about 3% in RMB (2019: about 91% in USD, about 4% in HKD and about 5% in RMB).

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Liquidity, Financial Resources and Financing Activities (Continued)

The Group’s net debt position was approximately US$0.4 million as at 31 December 2020 (2019: approximately US$16.4 million (restated)). The Group’s net debt position had improved because the Group received the remaining consideration from the Disposal of approximately US$13.2 million during the Reporting Period. Also, the Group has successfully secured more favourable terms of banking facilities and better trade terms agreed with customers which reduced the deposit requirements for the issuance of letters of credit. As a result, the restricted bank deposits to secure the issuance of letters of credit reduced by approximately US$8.3 million during the Reporting Period.

The Group had unutilised committed banking facilities of approximately US$273.3 million for the Resources Business as at 31 December 2020. The Group will continue to negotiate for new trade finance facilities with banks to support continual development of the Group’s business.

The Group’s liquidity ratio has remained stable at about 1.1 as at 31 December 2020 (2019: about 1.2).

Capital Structure and Gearing Ratio

As at 31 December 2020, the Group’s interest-bearing bank and other borrowings was approximately US$20.5 million (2019: approximately US$74.7 million (restated)). During the Reporting Period, the Group repaid approximately US$67.1 million to financial and non-financial institutions. The Group’s net gearing ratio has significantly improved and was about 1% as at 31 December 2020 (2019: about 54%).

Going forward, the Group’s management and the Business Development Team will continue to focusing on managing the banking facilities and other financing options so as to minimise the cash requirements for the Group’s business.

Funding and Treasury Policy

The Group has a funding and treasury policy to monitor its funding requirements and perform ongoing liquidity review. This approach takes into consideration the maturity of the Group’s financial instruments, financial assets, projected cash flows from operations and the general working capital requirements. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the effective use of bank and other borrowings and trade finance and treasury facilities. Further details of the Group’s interest-bearing bank and other borrowings are set out below and in Note 22 to the consolidated financial statements.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Loans, Indebtedness, Maturity Profile and Exposure to Fluctuations in Interest Rates

As at 31 December 2020, the Group’s interest-bearing bank and other borrowings was approximately US$20.5 million (2019: approximately US$74.7 million (restated)) and over 99% will mature within one year or on demand (2019: about 86%). The Group’s interest-bearing bank and other borrowings were denominated as to about 66% in USD and about 34% in HKD (2019: about 10% in USD and about 90% in HKD). Apart from the bank borrowings secured by bills receivables, the entire interest-bearing bank and other borrowings bear a fixed interest rate as at 31 December 2020. The decrease in interest-bearing bank and other borrowings was mainly attributable to the repayment of approximately US$67.1 million made during the Reporting Period.

Pledge of Assets

The Group’s utilised banking facilities as at 31 December 2020 were secured by an aggregate amount of restricted bank deposits of approximately US$4.9 million and the bills receivables of approximately US$13.5 million. As at 31 December 2019, the Group’s restricted bank deposits and bills receivables of approximately US$45.3 million (restated) and US$2.2 million (restated), respectively, were used to secure the interest-bearing bank and other borrowings and banking facilities.

As at 31 December 2020 and 2019, no property, plant and equipment or right-of-use assets were pledged for the Group’s bank borrowing or banking facilities.

Exposure to Fluctuations in Exchange Rates

As further discussed in Notes 1 and 2.1 to the consolidated financial statements, the Group completed the Disposal on 30 June 2020. Since then, the Company’s principal operating subsidiaries carry out business activities and transactions mainly in USD, being the currency that mainly influences the underlying transactions, events and business conditions. Therefore, the functional currency of the Company has been changed from RMB to USD upon completion of the Disposal. The change was considered an important step to reducing the foreign currency exposure or risk of the Group and the impact of any material fluctuations in the exchange rates of USD against other foreign currencies to the Group’s financial results which is beyond the control of the Group.

All of the Group’s sales and purchases from continuing operations for the Reporting Period and about 97% and about 93% of the Group’s total assets and total liabilities respectively as at 31 December 2020 were denominated in USD. Currently, the Group does not have any foreign currency hedging policy.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Exposure to Fluctuations in Commodity Prices

During the Reporting Period, the Group continues to manage the exposure over fluctuations in iron ore prices by entering into iron ore futures or swap contracts. The Group’s hedging executives have managed such exposure by execution of approved hedging strategy and hedging instruments. Through these hedging instruments, the Group shall be able to hedge largely against fluctuations in iron ore prices arising from the Resources Business. The pricing mechanism in the Group’s iron ore sales and purchase contracts reflects a reference index price. The reference index price that were mostly adopted by the Group during the years ended 31 December 2020 and 2019 were the Platts IODEX Prices and the 65 IO Prices.

Significant Investments, Acquisitions and Disposals

Except for the Disposal of the Mining Business as discussed in Notes 1 and 26 to the consolidated financial statements and above, there were not any significant investments held, acquisitions and disposal by the Group during the Reporting Period.

The Group did not have any specific future plans for material investments or capital assets as at 31 December 2020. However, the Group will continue to explore and evaluate projects and investment opportunities with potentials to create value for its shareholders in the long run.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Employees and Remuneration Policies

As at 31 December 2020, the Group had a total of 28 (2019: 24) employees in Hong Kong and Mainland China from its continuing operations. The slight increase in number of headcounts was attributed to the expansion of the Business Development Team during the Reporting Period to cope with the expansion of the Resources Business.

The Group formulates its human resources allocation and recruitment plans based on its development strategies. The remuneration packages of the employees are structured by reference to job nature (including geographical locations) and prevailing market conditions. The remuneration policy of the Group is subject to periodic review, and year-end bonuses and share options are available to reward employees in line with their individual performances and industry practice. In addition, the Group encourages its employees to receive training that is suitable for their job nature and caters to their needs of obtaining certain professional qualifications, such as providing or encouraging employees to attend seminars and training for different professional knowledge. Appropriate training programmes and/or seminar subsidies are also offered to ensure continuous staff training and development.

The emoluments of the Directors, comprising Director’s fee, salary package, discretionary bonus and share options, are reviewed and determined by the Board based on the recommendations from the Remuneration Committee with reference to the Company’s performance, the Director’s duties and responsibilities with the Company, and the prevailing market conditions. The Director’s remuneration will be subject to annual review by the Remuneration Committee and the Board with the authorisation granted by shareholders at the AGM.

The human resources department of the Group is responsible for the collection and administration of the human resources data and making recommendations to the Remuneration Committee for consideration. The Remuneration Committee consults with the chairman of the Board about these recommendations on remuneration policy and structure and remuneration packages. The Remuneration Committee is also responsible for establishing transparent procedures for developing such remuneration policy and structure to ensure that no Director or any of his/her associates will participate in deciding his/her own remuneration.

The Group has followed the measures and directives issued by the government and health authorities at the cities with operations and deployed appropriate operation protocols and preventive measures to protect the Group’s employees and provide them with healthy and hygienic working environments within the office premises during the Reporting Period.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Employees and Remuneration Policies (Continued)

To help fight against the COVID-19 pandemic, the Group has followed the guidelines and requirements of relevant local government departments published from time to time. The Group has also implemented preventive measures for our employees such as work-from-home practice, flexible working hours and encourages our employees to hold virtual meetings with our stakeholders as much as feasible. The Group and our staff force will continue to closely observe the health instructions and preventive measures issued by the government authorities to help contain the COVID-19 pandemic.

During the Reporting Period, certain operating subsidiaries of the Group (“Applicants”) made applications for the subsidy (“Subsidy”) from the COVID-19 Anti-epidemic Fund under the Employment Support Scheme as promulgated by the Government of the Hong Kong Special Administrative Region of the People’s Republic of China (“HKSAR Government”), which shall be applied towards the payroll costs of the eligible staff members of the Applicants for certain months in 2020. During FY 2020, the Subsidy of approximately US$0.2 million that was approved and granted by the HKSAR Government to the Applicants was applied towards the Group’s payroll costs and was recognised as the Group’s other income during the Reporting Period.

Event after the Reporting Period

From 31 December 2020 to the date of this annual report, there was no important event affecting the Group.

Outlook and Future Plans

The outbreak of COVID-19 pandemic has caused unprecedented challenges in almost every part of the world and is expected to have significant continual impact on the world’s economic development this year. The positive effects of the onset of vaccinations in some countries, additional policy support rolled out at the end of 2020 in the developed economies such as the United States and Japan and an expected increase in contact-intensive activities as the health crisis wanes are now illustrating an increasingly clear route to bring the immediate crisis to an end. However, there remains tremendous uncertainties and prospects of recovery vary greatly across countries. The positive effects could be partially offset by a somewhat worse outlook for the very near term as measures to contain the spread of the virus may continue to dampen business and economic activities.

In the China market, as part of the low-carbon initiatives under the national 14th five-year economic plan for 202125, in late December 2020, China’s Ministry of Industry and Information Technology urged the country’s steel industry to reduce its crude steel output in 2021. It will inevitably impact China’s steel production and iron ore consumption. However, some analysists expect China steel production to continue its growth in 2021 because it is unlikely that any measures to lower steel production will be introduced in 2021, particularly given the strong GDP growth backdrop.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Management Discussion and Analysis

Outlook and Future Plans (Continued)

Global steel output has recovered though Brazilian supply remains impacted by the COVID-19 pandemic and regulatory restrictions related to tailings dam management. On the supply side, the market is now focusing on the timing, ability and willingness of the world’s top three producers returning its capacity. Furthermore, the high iron ore prices over the last few years have rekindled interest in new projects, expansions and restarts. The market expects the potential for more seaborne capacity to come online over 2021 and 2022.

As discussed earlier, Hematite Ore shipments from Koolan will decrease during the first half of 2021 as the supplier progresses the peak overburden stripping phase at the Hematite Mine. Based on the information available to the Group, the average grade of iron ore is expected to be temporarily lower to an average of 58% to 61% Fe in the near term. The Group is looking forward to the successful completion of the aforesaid overburden stripping phase by the supplier within 2021 with voluminous supply of high grade Hematite Ore to the Group in the long run.

In addition to the above, the more volatile and continual fast moving seaborne iron ore prices after 31 December 2020 have created challenges to the Group’s Resources Business, in particular, on trade negotiation, product pricing and execution of hedging strategy and hedging instruments. The Business Development Team shall keep abreast of the market development and take the necessary steps to secure the swift sales of iron ore of the Group in 2021.

Notwithstanding the current global uncertainty, the Group continues to focus its efforts on optimising the Resources Business, improving its profitability and return to the shareholders.

Looking forward, the Group will continue to identify and explore new supplies of iron ore and other commodities and evaluate and secure possible long-term business and offtake relationships with suitable suppliers so as to further diversify the Group’s product offerings, and is looking forward to the upkeep or even further expansion of the scale of the Group’s business. The Group will also cautiously explore and capture mergers and acquisitions and other collaboration or investment opportunities as appropriate.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

The Board is pleased to present this Corporate Governance Report in the Group’s annual report for FY 2020.

Corporate Governance Practices

The Board strongly believes that corporate governance is an integral part of the Company’s mission in our pursuit of growth and value creation. The Board strives to attain and uphold a high standard of corporate governance and to maintain sound and well-established corporate governance practices for the interest of the Shareholders. During FY 2020, we adopted corporate governance principles that emphasise a quality Board, effective risk management and internal control systems, stringent disclosure practices, transparency and complete accountability towards all the stakeholders of the Company.

As part of the Company’s unwavering commitment to high standards of corporate governance, it has adopted all applicable Code Provisions and, where appropriate, Recommended Best Practices of the CG Code as set out in the Appendix 14 to the Listing Rules throughout the Reporting Period. So far as known to the Directors, there has been no material deviation from the CG Code during the Reporting Period.

The Company continues to enhance its corporate governance practices appropriate to the conduct and growth of its business, and to review and improve such practices from time to time to ensure that business activities and decision making processes are regulated in a proper and prudent manner in accordance with international best practices.

The Board

Responsibilities

The Board is responsible for the leadership and control of the Group, and oversees the Group’s businesses, strategic decisions and performance. The Board has delegated to the senior management the authority and responsibility for the day-to-day management and operation of the Group. In addition, the Board has established Board committees and has delegated to these Board committees various responsibilities as set out in their respective terms of reference.

The Company has arranged for appropriate insurance cover for Directors’ and officers’ liabilities in respect of legal actions against its Directors and senior management arising out of corporate activities.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

The Board (Continued)

Board Composition

The Board currently comprises five Directors, consisting of two executive Directors and three independent non-executive Directors. Mr. Li Changfa retired as an executive Director and the chief operating officer of the Company upon expiration of his employment term with effect from 1 March 2020. All Directors possess the skills, experience and expertise either in the same industry or relevant to the management of the business of the Group. Biographies of the Directors are set out from pages 51 to 54 of this annual report under the section headed “Directors’ and Senior Management’s Profile”.

The list of Directors (by category) as set out under “Corporate Information” on page 163 of this annual report is also disclosed in all corporate communications issued by the Company pursuant to the Listing Rules from time to time. The independent non-executive Directors are expressly identified as such in all corporate communications of the Company pursuant to the Listing Rules.

Save as disclosed herein, none of the members of the Board has any relationship (including financial, business, family or other material/relevant relationship(s)) between each other.

As at the date of this annual report, the Company met the requirements of the Listing Rules relating to the appointment of at least three independent non-executive Directors representing at least one-third of the Board with at least one independent non-executive Director possessing appropriate professional qualifications or accounting or related financial management expertise.

Pursuant to the requirements of the Listing Rules, the Company has received written confirmation from each of the independent non-executive Directors confirming his independence from the Company, and considers all of the independent non-executive Directors to be independent in accordance with the independence guidelines as set out in the Listing Rules.

All Directors have given sufficient time and attention to the affairs of the Group. Each executive Director is suitably qualified for his position, and has sufficient experience to hold the position so as to carry out his duties effectively and efficiently.

The independent non-executive Directors bring a wide range of business and financial expertise, experience and independent judgement to the Board. Through active participation and sharing of valuable impartial view on matters discussed at Board meetings, taking lead in managing issues involving potential conflict of interests and serving on Board committees, all independent non-executive Directors have made various contributions to the effective direction of the Company.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

The Board (Continued)

Chairman and Chief Executive Officer

The Company fully supports the division of responsibility between the chairman of the Board and the chief executive officer to ensure a balance of power and authority. Their respective responsibilities are clearly defined and set out in writing. During FY 2020, the role of chairman was held by Mr. Chong Tin Lung, Benny and the Company does not have a chief executive officer.

The chairman provides leadership and is responsible for the effective functioning of the Board in accordance with good corporate governance practice. With the support of the company secretary and the senior executives, the chairman is responsible for ensuring that the Directors receive adequate, accurate, clear, complete and reliable information in a timely manner and appropriate briefing on issues arising at Board meetings, and that all key and appropriate issues are discussed by the Board in a timely manner.

The role of chief executive officer focuses on achieving the Company’s objectives and implementing policies and strategies approved and delegated by the Board. He/she is in charge of the Company’s day-to-day management and operations and is also responsible for developing strategic plans and formulating the organisational structure, control systems and internal procedures and processes for the Board’s approval. As at the date of this report, the function of the chief executive officer is performed by the executive Director other than the chairman. The Board continually reviews the effectiveness of the Group’s corporate governance structure to assess whether any changes, including the appointment of a chief executive officer, are necessary.

Appointment, Re-election and Removal of Directors

Each of the Directors (including executive Directors and independent non-executive Directors) is engaged on a service contract for a term of three years from their respective effective dates of appointment. The appointment may be terminated by not less than three months’ prior written notice.

In accordance with the Articles, all the Directors are subject to retirement by rotation at least once every three years and any new Director appointed to fill a casual vacancy or as an addition to the Board shall submit himself/ herself for re-election by Shareholders at the first general meeting after appointment. Any further appointment of an independent non-executive Director, who has served the Board for more than nine years, shall be subject to a separate resolution to be approved by the Shareholders.

The procedures and process of appointment, re-election and removal of the Directors are laid down in the Articles. The Nomination Committee is responsible for reviewing the Board’s composition, structure and size, developing and formulating the relevant procedures for nomination and appointment of Directors, monitoring the appointment and succession planning of Directors and assessing the independence of independent non-executive Directors.

None of the Directors has a service contract which is not determinable by the Company within one year without payment of compensation other than statutory compensation.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

The Board (Continued)

Nomination Committee

The Nomination Committee was established on 8 June 2011 and comprised four members, including Mr. Lee Kwan Hung, Eddie (Chairman of the Committee), Mr. Tsui King Fai and Mr. Shin Yick, Fabian, all being independent non-executive Directors, and Mr. Chong Tin Lung, Benny, being an executive Director.

The specific written terms of reference of the Nomination Committee are available on the websites of the Company and the Hong Kong Exchanges and Clearing Limited.

Pursuant to the terms of reference, the principal duties of the Nomination Committee include the following:

To review the structure, size, composition and diversity of the Board and to make recommendations on any proposed changes to the Board to complement the Group’s corporate strategy;
To identify candidates suitably qualified for appointment as the Directors;
To make recommendations to the Board on appointment or re-appointment of the Directors and succession planning for the Directors;
To review the board diversity policy, as appropriate, the measurable objectives adopted for implementing the policy and the progress on achieving the objectives; and
To assess the independence of independent non-executive Directors.

The Nomination Committee has adopted written nomination policy which includes the nomination criteria, procedure and process for providing a formal, considered and transparent procedure to the Board for evaluating and selecting candidates for directorships. Where vacancy(ies) on the Board exists, the Nomination Committee will carry out the selection process by making reference to the expertise, skills, experience, professional knowledge, personal character, personal integrity and time commitments of the proposed candidate(s), the Company’s needs and other relevant statutory requirements and regulations. The human resources department of the Company will assist and an external recruitment agency may be engaged to carry out the recruitment and selection process where necessary.

The nomination policy for directors can be accessed from the website of the Company.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

The Board (Continued)

Nomination Committee (Continued)

The Board adopted a board diversity policy setting out the approach to achieve diversity in the Board composition. As set out in the policy, a truly diverse Board will include and make good use of differences in the background, knowledge, skills, expertise, regional and industry experience, age, gender and other qualities of the members of the Board. These characteristic and objectives have been taken into account in determining the optimum composition of the Board. Board diversity has been considered and practised by the Company from a number of aspects, including but not limited to gender, age, cultural and educational background, ethnicity, skills, experience, knowledge, expertise and independence. The current Board is considered well-balanced in terms of the aforesaid characteristics (save for the absence of female Board member) and of a diverse mix appropriate for the business of the Group. The Nomination Committee is responsible for the review of the measurable objectives, such as the length of services and professional knowledge of the Directors, adopted for implementing the board diversity policy in terms of nomination of a potential candidate and re-appointment of existing Director and the progress on achieving the objectives. The Nomination Committee will also review the board diversity policy, as appropriate, to ensure its effectiveness and recommend any proposed revisions to the Board for approval.

A summary of the work performed by the Nomination Committee during FY 2020 is set out as follows:

Reviewed and discussed on the existing structure, size, composition and diversity of the Board to ensure that it has a balance of expertise, skills and experience appropriate for the requirements for the business of the Group and that it is in compliance with the requirements under the Listing Rules;
Reviewed the nomination policy for Directors and the board diversity policy;
Assessed the independence of the independent non-executive Directors; and
Recommended the re-appointment of retiring Directors at the 2020 AGM.

In accordance with articles 106(1) and 106(2) of the Articles, Messrs. Tsui King Fai and Lee Kwan Hung, Eddie will retire from their office by rotation at the 2021 AGM. All the above retiring Directors, being eligible, shall offer themselves for re-election as Directors at the 2021 AGM.

Both Mr. Tsui King Fai and Mr. Lee Kwan Hung, Eddie were appointed as independent non-executive Directors on 15 December 2010 and have served in such roles for more than nine years. Their re-election as independent non-executive Directors will therefore be subject to separate resolutions to be approved by the Shareholders at the 2021 AGM pursuant to code provision A4.3 of the CG Code.

The Nomination Committee recommended the re-appointment of these retiring Directors at the 2021 AGM. The Company’s circular, sent together with this annual report, contains detailed information of these retiring Directors as well as the considerations of the Nomination Committee in relation to their recommendation of the re-appointment of these retiring Directors pursuant to the Listing Rules requirements.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

The Board (Continued)

Nomination Committee (Continued)

The Nomination Committee held one meeting during FY 2020 and the attendance records of the Nomination Committee members are as follows:

Name of Nomination Committee Member	Attendance/Number of Meeting(s) held
Mr. Lee Kwan Hung, Eddie (Chairman)	1/1
Mr. Chong Tin Lung, Benny	1/1
Mr. Tsui King Fai	1/1
Mr. Shin Yick, Fabian	1/1

Corporate Governance Functions

The Board is responsible for performing the corporate governance duties including:

To develop and review the Company’s policies and practices on corporate governance;
To review and monitor the training and continuous professional development of the Directors and senior management;
To review and monitor the Company’s policies and practices on compliance with legal and regulatory requirements;
To develop, review and monitor the code of conduct and compliance manual (if any) applicable to employees and the Directors; and
To review the Company’s compliance with the CG Code and disclosure in the Corporate Governance Report.

Induction and Continuing Development

All Directors have been given a Director’s manual with relevant guideline materials regarding, among others, the duties and responsibilities of being a Director, the relevant laws and regulations applicable to the Directors, duty of disclosure of interests and business of the Group.

Each newly appointed Director receives a formal, comprehensive and tailored induction on the first occasion of his/her appointment to ensure that he/she has an appropriate understanding of the business and operations of the Group and that he/she is fully aware of his/her responsibilities and obligations under the Listing Rules and relevant statutory requirements. Such induction is normally supplemented with visits to the Group’s premises and/ or meetings with the senior management of the Company.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

The Board (Continued)

Induction and Continuing Development (Continued)

All Directors have been updated on the latest developments regarding the Listing Rules and other applicable regulatory requirements to ensure compliance and enhance their awareness of good corporate governance practices. In addition, they are also continually updated with the business and market changes to facilitate the discharge of their responsibilities.

The Directors confirmed that they have complied with Code Provision A.6.5 of the CG Code about the requirement for the Directors’ training. During FY 2020, all the Directors participated in continuous professional development by attending seminars/conferences/workshops/in-house briefings/reading materials as summarised below to develop and refresh their knowledge and skills on the topics of corporate governance, regulatory development, business or management and other relevant topics, and provided records of training to the Company.

Name of Director	Type of Continuous Professional Development
	Attending Seminars/ Conferences/Workshops/ In-house Briefings Reading Materials and Updates
Executive Directors Mr. Chong Tin Lung, Benny (Chairman) Mr. Luk Yue Kan Mr. Li Changfa (Note 1) Independent Non-executive Directors Mr. Tsui King Fai Mr. Lee Kwan Hung, Eddie Mr. Shin Yick, Fabian	– ✓ ✓ ✓ – – ✓ ✓ ✓ ✓ ✓ ✓

Note:

(1) Retired with effect from 1 March 2020.

Besides, continuous briefings and professional development for the Directors will be arranged by the Company where necessary.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

The Board (Continued)

Board Meetings

Board Practices and Conduct of Meetings

Regular Board meetings are held at least four times a year and additional Board meetings are held when the Board considers appropriate. Schedules for regular Board meetings are normally agreed with the Directors in advance in order to facilitate them to attend. Draft agenda of each Board meeting is sent to the Directors in order to give them an opportunity to include any other matters in the agenda for discussion in the meeting. Notice of regular Board meetings is served to all the Directors at least 14 days before the meetings. For other Board meetings and committee meetings, reasonable notice is generally given.

In respect of regular Board meetings or committee meetings and so far as practicable in all other cases, meeting papers are sent to the Directors or respective committee members in a timely manner and at least 3 days before the intended date of the respective meetings to keep the Directors apprised of the latest developments and financial position of the Group and to enable them to make informed decisions. The Board and each Director also have separate and independent access to the senior management where necessary.

The chief financial officer and other relevant senior management normally attend regular Board meetings and where necessary, other Board meetings and committee meetings, to advise on business developments, financial and accounting matters, statutory and regulatory compliance, corporate governance and other major aspects of the Group.

The company secretary is responsible to take and keep minutes of all Board meetings and committee meetings. Draft minutes are circulated to the Directors for comment within a reasonable time after each meeting and the final version is open for Directors’ inspection.

The Articles contain provisions requiring the Directors to abstain from voting and not to be counted in the quorum at meetings for approving transactions in which such Directors or any of their associates have a material interest. According to current Board practices, any material transaction, which involves a conflict of interest for a Substantial Shareholder or a Director, will be considered and dealt with by the Board at a duly convened Board meeting.

Directors’ Attendance Records and Time Commitment

During FY 2020, five Board meetings and one general meeting were held for reviewing and approving the financial and operating performance and other matters accordingly.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

The Board (Continued)

Board Meetings (Continued)

Directors’ Attendance Records and Time Commitment (Continued)

The attendance records of individual Directors at the following meetings during FY 2020 are as follows:

Name of Director	Attendance/Number of Meeting(s) held during the respective term of services
	Board Meeting(s) AGM
Executive Directors Mr. Chong Tin Lung, Benny (Chairman) Mr. Luk Yue Kan Mr. Li Changfa (Note 1) Independent Non-executive Directors Mr. Tsui King Fai Mr. Lee Kwan Hung, Eddie Mr. Shin Yick, Fabian	5/5 1/1 5/5 1/1 0/0 0/0 5/5 1/1 5/5 1/1 5/5 1/1
Total number of meetings held during FY 2020	5 1

Note:

(1) Retired with effect from 1 March 2020.

Apart from the above Board meetings, a meeting between the chairman and the independent non-executive Directors without the presence of other Directors was also held during FY 2020.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

The Board (Continued)

Model Code for Securities Transactions

The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as its own code of conduct for dealing in securities of the Company by the Directors.

Specific enquiry has been made of all the Directors and all of them have confirmed that they have complied with the required standards as set out in the Model Code throughout FY 2020.

The Company has also established written guidelines (the “Code for Securities Transactions by Relevant Employees”) on no less exacting terms than the Model Code for securities transactions by employees of the Group who are likely to be in possession of unpublished inside information in relation to the securities of the Company. Each of the relevant employees has been given a copy of the Code for Securities Transactions by Relevant Employees.

The Company was not aware of any incident of non-compliance with the Model Code or the Code for Securities Transactions by Relevant Employees throughout FY 2020.

Formal notifications were sent by the Company to its Directors and relevant employees reminding them that they should not deal in the securities of the Company during the “black-out period” in accordance with requirements under the Model Code.

Delegation of Management Functions

The overall management and control of the Company’s business are vested in its Board. The Board is responsible for establishing policies, strategies and plans, providing leadership in the attainment of the objective of creating value to Shareholders, and, on behalf of Shareholders, overseeing the Company’s financial performance. All Directors carry out their duties in good faith and in compliance with the standards of applicable laws and regulations, take decisions objectively and act in the interests of the Company and its Shareholders at all times.

The Board reserves for its decision all major matters of the Company, including approval and monitoring of all policy matters, overall strategies and budgets, internal control and risk management systems, material transactions (in particular those that may involve conflict of interests), financial information, appointment of the Directors and other significant financial and operational matters.

All the Directors have full and timely access to all relevant information as well as the advice and services of the company secretary and senior management, with a view to ensuring that Board procedures and all applicable laws and regulations are followed. Each Director is normally able to seek independent professional advice in appropriate circumstances at the Company’s expenses, upon making reasonable request to the Board.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Delegation of Management Functions (Continued)

The day-to-day management, administration and operation of the Company are delegated to the senior management, which include the implementation of decisions of the Board, the co-ordination and direction of day-to-day operation and management of the Company in accordance with the management strategies and plans approved by the Board, formulating and monitoring the production and operating plans and budgets, and supervising and monitoring the control systems. The Board has the full support of the senior management for the discharge of its responsibilities.

The delegated functions and responsibilities are periodically reviewed. Approval has to be obtained from the Board prior to any significant transactions entered into by the foregoing senior management.

The Board has established four committees, namely, the Nomination Committee, the Investment Committee, the Remuneration Committee and the Audit Committee, for overseeing particular aspects of the Company’s affairs. All Board committees of the Company were established with defined written terms of reference which (except for the terms of reference of the Investment Committee) can be accessed from the websites of Hong Kong Exchanges and Clearing Limited and the Company and are also available to the Shareholders upon request.

The majority of the members of each Board committee (except for the Investment Committee) are independent non-executive Directors and the list of the chairman and members of each Board committee is set out under “Corporate Information” on page 163 of this annual report.

All Board committees are provided with sufficient resources to discharge their duties and, upon reasonable request, are able to seek independent professional advice in appropriate circumstances at the Company’s expenses.

Investment Committee

The Investment Committee was established on 7 October 2016 and comprised two members, including Mr. Chong Tin Lung, Benny (Chairman of the Committee) and Mr. Luk Yue Kan, both being executive Directors.

The specific written terms of reference of the Investment Committee were approved and adopted by the Board.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Investment Committee (Continued)

Pursuant to the terms of reference, the duties of the Investment Committee include the following:

To consider, review, evaluate and approve investment proposals, including but not limited to trading of listed and unlisted debt or equity securities, structured products, and treasury products, for consideration at or below 5% of the total assets of the Group (as published in its latest interim or annual financial statements where applicable) or the market capitalisation of the Company, whichever is the lower (collectively the “Allowable Threshold”). All Directors shall report any investment proposal they have formulated or any reasonable investment opportunity that has come to their attention to the Committee as soon as possible. For investment proposals with consideration exceeding the Allowable Threshold, the Committee shall review and make recommendations to the Board;
To review and make recommendations to the Board for appropriate securities dealing, investment and treasury strategies; and
To consider such other topics and matters as may be delegated by the Board from time to time.

A summary of the work performed by the Investment Committee during FY 2020 is set out as follows:

Reviewed and recommended to the Board on the proposed formation of a subsidiary with the business partner in order to foster further development of the Resources Business.

The Investment Committee held two meetings during FY 2020 and the attendance records of the Investment Committee members are as follows:

Name of Investment Committee Member	Attendance/Number of Meeting(s) held
Mr. Chong Tin Lung, Benny (Chairman)	2/2
Mr. Luk Yue Kan	2/2

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Remuneration of Directors and Senior Management

The Company has established a formal and transparent procedure for formulating policies on remuneration of the Directors and the senior management. Details of the remuneration of each of the Directors and the senior management for FY 2020 are set out in Note 7 to the consolidated financial statements.

Remuneration Committee

The Remuneration Committee was established on 8 June 2011 and comprised four members, including Mr. Lee Kwan Hung, Eddie (Chairman of the Committee), Mr. Tsui King Fai and Mr. Shin Yick, Fabian, all being independent non-executive Directors, and Mr. Chong Tin Lung, Benny, being an executive Director.

The specific written terms of reference of the Remuneration Committee are available on the websites of the Company and the Hong Kong Exchanges and Clearing Limited. Pursuant to the terms of reference, the primary duties of the Remuneration Committee include making recommendations to the Board on the Company’s policies and structure of the remuneration of the Directors and senior management, and the remuneration packages of the Directors and the senior management, including benefits in kind, pension rights and compensation payments. The Remuneration Committee is also responsible for establishing transparent procedures for developing such remuneration policy and structure to ensure that no Director or any of his/her associates will participate in deciding his/her own remuneration, which remuneration will be determined by reference to the performance of the individual and the Company as well as market practice and conditions.

The human resources department of the Company is responsible for collection and administration of the human resources data and making recommendations to the Remuneration Committee for consideration. The Remuneration Committee consults with the chairman of the Board about these recommendations on remuneration policy and structure and remuneration packages.

The Remuneration Committee held one meeting during FY 2020 and the attendance records of the Remuneration Committee members are as follows:

Name of Remuneration Committee Member	Attendance/Number of Meeting(s) held
Mr. Lee Kwan Hung, Eddie (Chairman)	1/1
Mr. Chong Tin Lung, Benny	1/1
Mr. Tsui King Fai	1/1
Mr. Shin Yick, Fabian	1/1

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Remuneration of Directors and Senior Management (Continued)

Remuneration Committee (Continued)

A summary of the work performed by the Remuneration Committee during FY 2020 is set out as follows:

Reviewed the remuneration policy and structure of the Company;
Reviewed and recommended to the Board on the remuneration packages (including discretionary bonus) of Directors and senior management of the Company for FY 2020; and
Reviewed and recommended to the Board on the renewal of services contracts with two independent nonexecutive directors.

Accountability and Audit

Directors’ Responsibilities for Financial Reporting in respect of Financial Statements

The Directors acknowledge their responsibilities for preparing the financial statements of the Group and other financial disclosures required under the Listing Rules. The management has provided the Board with such explanation and information to enable it to carry out an informed assessment of the financial position of the Company and the Group which are put to the Board for approval.

The Board is responsible for presenting a balanced, clear and understandable assessment of the annual report and overseeing the preparation of the financial statements of the Company and the Group with a view to ensuring that such financial statements give a true and fair view of the state of affairs of the Group and that relevant statutory and regulatory requirements and applicable accounting standards are complied with.

During FY 2020, the management has provided the Board with monthly updates so as to give the Directors a balanced and understandable assessment of the Company’s performance, position and prospects.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Accountability and Audit (Continued)

Risk Management and Internal Control

The Board acknowledges its responsibility for the risk management and internal control systems of the Group and reviewing their effectiveness; in particular, it is responsible for evaluating and determining the nature and extent of the risks in maintaining appropriate and effective risk management and internal control systems for the Group to safeguard investments of the Shareholders and assets of the Company. Such systems of the Group are designed to facilitate effective and efficient operations, to ensure reliability of financial reporting and compliance with applicable laws and regulations, to identify and manage potential risks, and to safeguard assets of the Group. The systems have been established to provide reasonable, though not absolute, assurance against material misstatement or loss and to manage rather than eliminate risks of failure to achieve business objectives.

During FY 2020, the Board, through the Audit Committee, conducted a review of the effectiveness of the risk management and internal control systems of the Group covering all material controls in areas such as finance, operations and compliance. The Board concluded that in general, the Group’s risk management and internal control systems and processes for financial reporting and Listing Rules compliance are effective and adequate.

The Risk Management Department, the Company’s internal audit function, conducts evaluation of the Group’s internal control on an on-going basis. The Risk Management Department performs risk-based audits to review the effectiveness of the Group’s material internal control and risk management so as to provide assurance that key business and operational risks are identified, evaluated and managed. The work carried out by the Risk Management Department will ensure the internal control are in place and functioning as intended. The Risk Management Department reports to the Audit Committee with its findings and makes recommendations to improve the internal control of the Group.

The Company has in place an integrated framework of risk management and internal control which is consistent with the principles outlined in the “Internal Control and Risk Management – A Basic Framework” issued by the Hong Kong Institute of Certified Public Accountants. The key control measures are summarised below:

Monitoring

Ongoing assessment of control systems’ performance.
Internal audits performed periodically by Risk Management Department.
Review the effectiveness of the internal control procedures in place to ensure business operation of the Group are conducted in compliance with the Listing Rules, and report the findings to the Board.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Accountability and Audit (Continued)

Risk Management and Internal Control (Continued)

Information and Communication

Information in sufficient details is provided to the right person timely.
Channels of communication developed within the Group and with external parties to ensure information are documented and communicated in a timely manner.
Channels of communication for people to report any suspected improprieties.
To ensure compliance with the continuous disclosure obligation of inside information, the Group has adopted a policy for handling and dissemination of inside information. The policy provides guidance to officers on whether the information shall be considered as inside information, and if so, officers shall report to the Board for disclosure. The Group has communicated to the officers regarding the policy in place and has reminded the officers of their reporting obligation from time to time.

Control Activities

Policies and procedures set to ensure management directives are carried out.
Control points implanted to safeguard the Group from those identified risks.

Risk Assessment

Identification, evaluation and assessment of the key risk factors affecting the achievement of the Company’s objectives are performed regularly.
Undertake proper actions to manage the risks so identified.

Control Environment

Channels to communicate the Company’s commitment to integrity and high ethical standards to the staff are established.
Proper delegation and clear line of reporting, responsibility and accountability within the Group.

To strengthen the Group’s corporate governance, the Company engaged a professional firm during FY 2020 to provide support on the risk management and execution of the internal audit plan. The Risk Management Department liaises with such professional firm on the preparation of internal audit reports and submits the same annually to the Audit Committee to report the internal audit findings and status update to enable the assessment on internal control of the Group and the effectiveness of risk management. Management is responsible for ensuring appropriate actions are taken to rectify any control weaknesses highlighted in the internal audit reports within a reasonable period. During FY 2020, the Group has not identified any significant control failings or weaknesses, and the extent to which they have resulted in unforeseen outcomes or contingencies that have had, could have had, or may in the future have, a material impact on the Group’s financial performance or condition.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Accountability and Audit (Continued)

Risk Management and Internal Control (Continued)

Control Environment (Continued)

Risk management is an essential part of corporate governance. Effective risk management facilitates the Group’s business development and operation by setting the appropriate risk appetite, maintaining an optimal risk level and most importantly, proactively managing risks. The Group’s risk management is the responsibility of every management and embedded in daily operation of every business unit and staff.

Together with the executive Directors, Risk Management Department performs an assessment of risks that could be involved in the Group’s operations annually, and submits a risk assessment report to the Audit Committee. The Board, through the Audit Committee, reviews the risk assessment annually. For discussions of significant risks faced by the Group during the Reporting Period, please refer to the discussion set out in the Management Discussion and Analysis section in this annual report. During the Reporting Period, the Group has been able to proactively respond to the changes in its business and external environments.

Audit Committee

The Audit Committee was established on 8 June 2011 and comprised three members, including Mr. Tsui King Fai (Chairman of the Committee), who possesses the appropriate professional qualification or accounting or related financial management expertise in accordance with the requirements under the Listing Rules, Mr. Lee Kwan Hung, Eddie and Mr. Shin Yick, Fabian, all being independent non-executive Directors.

None of the members of the Audit Committee is a former partner of the Company’s existing external auditor.

The specific written terms of reference of the Audit Committee are available on the websites of the Company and the Hong Kong Exchanges and Clearing Limited.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Accountability and Audit (Continued)

Audit Committee (Continued)

Pursuant to the terms of reference, the main duties of the Audit Committee include the following:

To review the financial statements and reports and consider any significant or unusual items raised by the staff responsible for accounting and financial reporting function, internal auditor or external auditor before submission to the Board;
To ensure co-ordination between internal and external auditors of the Group, and to ensure that the internal audit function of the Group is adequately resourced and has appropriate standing with the Group, and to review and monitor its effectiveness;
To review the relationship with the external auditor by reference to the work performed by it, its fees and terms of engagement, and make recommendations to the Board on the appointment, re-appointment and removal of external auditor;
To review the adequacy and effectiveness of the Group’s financial reporting system, risk management and internal control systems and associated procedures; and
To oversee the risk management and internal control systems of the Group and to report to the Board on any material issues, and make recommendations to the Board.

A summary of work performed by the Audit Committee during FY 2020 is set out as follows:

Reviewed with the senior management and finance-in-charge and/or the external auditor the accounting principles and practices adopted by the Group, the accuracy and fairness of the annual financial statements for FY 2019 and the interim financial report for the six-months ended 30 June 2020 respectively;
Met with the external auditor and reviewed its work and findings relating to the annual audit for FY 2019 and the effectiveness of the audit process;
Reviewed with management and finance-in-charge the effectiveness of the risk management and internal control systems of the Group, including effectiveness of the Risk Management Department, the Company’s internal audit function;
Approved the internal audit report for FY 2019;
Met with the internal auditor and reviewed and approved the risk assessment report and internal audit plan of the Group prepared by the internal auditor;

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Accountability and Audit (Continued)

Audit Committee (Continued)

Reviewed the external auditor’s independence, approved the engagement of external auditor and recommended the Board on the re-appointment of external auditor;
Reviewed the financial reporting and compliance procedures and the report from the management on the Company’s risk management and internal control systems and processes;
Reviewed the Group’s continuing connected transactions conducted during the year ended 31 December 2019; and
Noted the impact on the Group’s financial reporting in respect of new and amendments to accounting standards.

The Audit Committee held two meetings during FY 2020 and the attendance records of the Audit Committee members are as follows:

Name of Audit Committee Member	Attendance/Number of Meeting(s) held
Mr. Tsui King Fai (Chairman)	2/2
Mr. Lee Kwan Hung, Eddie	2/2
Mr. Shin Yick, Fabian	2/2

After each meeting, the chairman of the Audit Committee provided the Board with a briefing on the significant issues. An Audit Committee meeting was also held in March 2021 to consider, among others, the Group’s annual results and annual report for FY 2020.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Accountability and Audit (Continued)

External Auditor’s Independence and Remuneration

The Audit Committee is mandated to review and monitor the independence of the auditor to ensure objectivity and the effectiveness of the audit process of the financial statements in accordance with applicable standards. Members of the Audit Committee were of the view that the Company’s external auditor, Messrs. Ernst & Young, is independent and has recommended the Board to re-appoint it as the Company’s auditor at the 2021 AGM. During FY 2020, the external auditor has rendered audit and non-audit services to the Company. The statement about its reporting responsibilities for the Company’s financial statements is set out in the section headed “Independent Auditor’s Report” on pages 65 to 69 of this annual report.

A summary of audit services and non-audit services provided by the external auditor for FY 2020 and its corresponding remuneration is set out below:

	Fees Paid/
Category of Services	Payable
	US$’000
Audit/review services
– Interim review services	95
– Annual audit services	205
Non-audit services
– Tax advisory services	11
Total	311

Company Secretary

The company secretary of the Company (the “Company Secretary”), Mr. Luk Yue Kan who is also an executive Director, the chief financial officer and a member of the Investment Committee of the Company, is a full time employee of the Company and has knowledge of the Company’s day-to-day affairs. The Company Secretary reports to the chairman of the Board and is responsible for advising the Board on governance matters. During FY 2020, the Company Secretary undertook no less than 15 hours of relevant professional training. His biography is set out on page 51 of this annual report under the section headed “Directors’ and Senior Management’s Profile”.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Constitutional Documents

The Company did not make any change to its constitutional documents during FY 2020. The memorandum and articles of association of the Company are available on the websites of the Company and the Hong Kong Exchanges and Clearing Limited.

Communication with Shareholders and Investor Relations

The Company is committed to upholding the highest standards of corporate governance and maintaining effective communication with the Shareholders and investors. To this end, the Company makes use of traditional and online platforms such as results announcements and presentations, annual and interim reports, and the Shareholders’ meetings to reach out to individual Shareholders and stakeholders within the investment community to ensure transparent, timely and accurate dissemination of information.

General meetings of the Company provide a forum for communication between the Board and the Shareholders. The chairman of the Board as well as chairmen of the Nomination Committee, Remuneration Committee, Audit Committee and Investment Committee or, in their absence, other members of the respective committees are available to answer questions at general meetings.

The 2021 AGM is scheduled to be held on 10 June 2021. The notice of AGM will be sent to the Shareholders at least 20 clear business days before the AGM.

The Company has investor relations team, led by an executive Director, to meet existing Shareholders and potential investors, research analysts and investment managers from time to time.

To promote effective communication, the Company maintains a website at www.newton-resources.com, where upto-date information and updates on the Company’s business operations and developments, financial information, corporate governance practices and other information are available for public access. Investors may write directly to the Company at its principal place of business in Hong Kong or via email to [email protected] for any enquiries.

Shareholders’ Rights

In accordance with article 68 of the Articles, any two or more Shareholders holding at the date of deposit of the requisition not less than one-tenth of the paid up capital of the Company carrying the right of voting at general meetings of the Company shall at all times have the right, by written requisition to the Board or the Company Secretary, to require an extraordinary general meeting to be called by the Board and to put forward proposals specified in such requisition by the procedures below:

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Shareholders’ Rights (Continued)

The Shareholder shall deposit a requisition in writing to require an extraordinary general meeting and to put forward proposals at the Company’s principal place of business in Hong Kong at 49th Floor, One Exchange Square, 8 Connaught Place, Central, Hong Kong (marked for the attention of the Company Secretarial Department) or the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

The requisition must include the business to be transacted at the required extraordinary general meeting and must be signed by the Shareholder concerned. If the requisition is confirmed as proper and valid, an extraordinary general meeting shall be convened within 21 days after the deposit of such requisition subject to the requirements of the relevant Articles and the Listing Rules. In case an extraordinary general meeting could not be convened upon the request, the Company will inform the Shareholder accordingly.

If within twenty-one days of such deposit the Board fails to proceed to convene such meeting, the requisitionist(s) himself (themselves) may do so in the same manner, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the Board shall be reimbursed to the requisitionist(s) by the Company.

For enquiries to the Board, the Shareholder shall contact the Investor Relations Department at the Company’s principal place of business in Hong Kong at 49th Floor, One Exchange Square, 8 Connaught Place, Central, Hong Kong or by e-mail to [email protected]. The Company will endeavour to respond to their queries in a timely manner.

As one of the measures to safeguard the Shareholders’ interests and rights, a separate resolution is proposed for each substantially separate issue at the Shareholders’ meetings, including the election of individual Directors, for the Shareholders’ consideration and voting.

All resolutions put forward at the Shareholders’ meetings will be voted by poll pursuant to the Listing Rules and the Articles, and the poll voting results will be published on the websites of the Company and the Hong Kong Exchanges and Clearing Limited after the relevant general meeting in accordance with the requirements of the Listing Rules.

Shareholders may at any time change their choice of language (English or Chinese or both) or means of receipt (printed form or through electronic means on the Company’s website) of corporate communications by writing or email to the Company’s branch share registrar in Hong Kong.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Governance Report

Dividend Policy

The Company has adopted a dividend policy, pursuant to which the Shareholders will be entitled to receive any dividend the Company declares. The payment and amount of any dividend will be at the discretion of the Board and will depend on the Group’s general business condition and strategies, cash flows, financial results, capital requirements and taxation conditions, interests of respective Shareholders, statutory restrictions, and other factors that the Board deems relevant.

The payment of any dividend will also be subject to the laws of the Cayman Islands as amended from time to time and the Company’s constitutional documents, which indicate that payment of dividends out of the Company’s share premium account is possible on the condition that the Company is able to pay its debts when they fall due in the ordinary course of business at the time the proposed dividend is to be paid.

In general, the Company does not expect to declare dividends in a year where it does not have any distributable earnings.

The Company currently intends to retain certain, if not all, of its available funds and future earnings to operate and expand its business and/or acquisitions.

Cash dividends on the Shares, if any, will be paid in HKD.

The Board will review the dividend policy on an annual basis.

Going Concern

There are no material uncertainties relating to events or conditions that cast significant doubt upon the Company’s ability to continue as a going concern.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Directors’ and Senior Management’s Profile

Board of Directors

Mr. Chong Tin Lung, Benny

Chairman/Executive Director

Mr. Chong, aged 48, was appointed as an Executive Director, the Chairman of the Board and the Investment Committee and a member of each of the Nomination Committee and the Remuneration Committee with effect from 9 April 2018. He is also a director of subsidiaries of the Company.

Mr. Chong is currently an Executive Director, the Executive Chairman and the Chief Executive Officer of Auto Italia Holdings Limited (stock code: 720).

Mr. Chong is the Founder of VMS Group and has served as its chairman since its establishment in 2006. He is also a Director of VMS Investment Group Limited, which is a Substantial Shareholder of the Company. Mr. Chong has accumulated over 20 years of experience in the financial and investment industry. VMS Group is principally engaged in proprietary investments, private equity, asset management, securities brokerage and corporate finance advisory services.

Mr. Chong is a Chartered Financial Analyst. He obtained a Bachelor of Commerce from the University of Toronto in 1994 and a Master of Science in Investment Management from the Hong Kong University of Science and Technology in 2000.

Mr. Chong is the son of Ms. Mak Siu Hang, Viola, who is a Substantial Shareholder of the Company.

Mr. Luk Yue Kan

Executive Director/Chief Financial Officer/Company Secretary

Mr. Luk, aged 45, was appointed as an executive Director and the chief financial officer of the Company on 1 April 2015 and is a member of the Investment Committee. He joined the Company in March 2011 as the financial controller. In November 2011, he assumed the additional role of company secretary of the Company. He oversees the business, treasury management, financial reporting, company secretarial, human resources, risk management, mergers and acquisitions and investor relations matters of the Company. He is also a senior management of the Company and a director and company secretary of subsidiaries of the Company.

Mr. Luk holds an Executive MBA degree from Richard Ivey School of Business at The University of Western Ontario in Canada and a Bachelor’s degree in Accountancy from the Hong Kong Polytechnic University. He is a fellow member of the Hong Kong Institute of Certified Public Accountants, and an associate and a Chartered Tax Advisor of the Taxation Institute of Hong Kong. Mr. Luk has over 23 years’ experience in auditing, accounting and financial management.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Directors’ and Senior Management’s Profile

Board of Directors (Continued)

Mr. Tsui King Fai

Independent Non-executive Director

Mr. Tsui, aged 71, was appointed as an independent non-executive Director on 15 December 2010 and is the chairman of the Audit Committee and a member of each of the Remuneration Committee and the Nomination Committee.

Mr. Tsui currently holds positions in the following companies listed on the Main Board of the Stock Exchange:

Name of Company	Title
Lippo Limited (stock code: 226)	Independent non-executive director
Lippo China Resources Limited (stock code: 156)	Independent non-executive director
Hongkong Chinese Limited (stock code: 655)	Independent non-executive director
China Aoyuan Group Limited (stock code: 3883)	Independent non-executive director
Vinda International Holdings Limited (stock code: 3331)	Independent non-executive director

Moreover, Mr. Tsui was a director and senior consultant of WAG Worldsec Corporate Finance Limited up to his resignation on 30 June 2016.

Mr. Tsui graduated from the University of Houston with a Master of Science in Accountancy degree and a Bachelor of Business Administration degree with first class honors awarded in 1974 and 1973 respectively.

Mr. Tsui is a fellow member of the Hong Kong Institute of Certified Public Accountants and a member of each of the Chartered Accountants Australia and New Zealand, and the American Institute of Certified Public Accountants. He has extensive experience in accounting, finance and investment management, particularly in investments in China. Mr. Tsui had worked for two of the “Big Four” audit firms in Hong Kong and the United States of America.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Directors’ and Senior Management’s Profile

Board of Directors (Continued)

Mr. Lee Kwan Hung, Eddie

Independent Non-executive Director

Mr. Lee, aged 55, was appointed as an independent non-executive Director on 15 December 2010 and is the chairman of each of the Remuneration Committee and the Nomination Committee and a member of the Audit Committee. Currently, he is a consultant of Howse Williams.

Mr. Lee currently also holds positions in the following companies listed on the Main Board of the Stock Exchange:

Name of company	Title
Embry Holdings Limited (stock code: 1388)	Independent non-executive director
NetDragon Websoft Holdings Limited (stock code: 777)	Independent non-executive director
Tenfu (Cayman) Holdings Company Limited (stock code: 6868)	Independent non-executive director
China BlueChemical Ltd. (stock code: 3983)	Independent non-executive director
Red Star Macalline Group Corporation Ltd. (stock code:1528)	Independent non-executive director
FSE Services Group Limited (stock Code: 331)	Independent non-executive director
Ten Pao Group Holdings Limited (stock Code: 1979)	Independent non-executive director
Glory Sun Financial Group Limited (stock code:1282)	Independent non-executive director

Moreover, Mr. Lee was an independent non-executive director of Asia Cassava Resources Holdings Limited (stock code: 841) and Landsea Green Properties Co., Ltd. (stock code: 106), up to his resignation on 13 May 2018 and 19 June 2020 respectively.

Mr. Lee holds a Bachelor of Laws (Honours) degree and Postgraduate Certificate in Laws from the University of Hong Kong. He was admitted as a solicitor in Hong Kong and the United Kingdom and is a practising lawyer. Between 1993 and 1994, Mr. Lee was a senior manager in the Listing Division of the Stock Exchange. Mr. Lee was a partner of Woo Kwan Lee & Lo between 2001 and 2011.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Directors’ and Senior Management’s Profile

Board of Directors (Continued)

Mr. Shin Yick, Fabian

Independent Non-executive Director

Mr. Shin, aged 52, was appointed as an independent non-executive Director on 14 August 2015 and is a member of each of the Audit Committee, the Remuneration Committee and the Nomination Committee.

Mr. Shin currently holds positions in the following listed companies:

Name of Company	Place of listing	Title
Pak Tak International Limited (stock code: 2668)	Main Board	Non-executive director
China Automobile New Retail (Holdings) Limited	Main Board	Independent non-executive
(stock code: 526)		director
Zhengye International Holdings Company Limited	Main Board	Independent non-executive
(stock code: 3363)		director
Olympic Circuit Technology Co., Ltd	Shanghai Stock Exchange	Independent director
(stock code: 603920)

Mr. Shin was the company secretary of Victory City International Holdings Limited (stock code: 539) for the period from January 2021 to April 2021. He was a senior consultant of a China-based securities company from June 2018 to January 2019, the chief executive officer of a private corporate finance company from August 2015 to May 2018 and the deputy chief executive officer of CMB International Capital Limited from February 2010 to July 2015. Mr. Shin has over 30 years of experience in investment banking and financial management. Prior to joining CMB International Capital Limited, he worked in several investment banks in Hong Kong.

Mr. Shin was an independent non-executive director of Huabang Financial Holdings Limited (stock code: 3638), China Shun Ke Long Holdings Limited (stock code: 974) and China Tianrui Automotive Interiors Co., Ltd (stock code: 6162), up to his resignation on 2 October 2018, 31 October 2018 and 15 September 2020 respectively. He resigned as a director of Bio-Key Incorporation Inc. (NADSDAQ: BKYI), a company listed on Nasdaq stock market of the United States on 2 September 2020.

Mr. Shin graduated from the University of Birmingham in England with a Bachelor’s degree in commerce. After graduation, he worked in the audit department of Deloitte Touche Tohmatsu. He had also worked in a listed company in Hong Kong as group financial controller. He is a fellow member of the Hong Kong Institute of Certified Public Accountants, The Association of Chartered Certified Accountants, The Chartered Governance Institute and The Hong Kong Institute of Chartered Secretaries.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Report of the Directors

The Directors have pleasure in presenting this annual report and the audited consolidated financial statements of the Group for FY 2020.

Principal Activities and Business Review

The principal activity of the Company is investment holding. The principal activities and other particulars of its principal subsidiaries are set out in Note 1 to the consolidated financial statements. Further discussion and analysis of the activities as required by Schedule 5 to the Companies Ordinance, including a fair review of the Group’s business, a description of the principal risks and uncertainties facing the Group, an indication of likely future development in the Group’s business, and a review of the financial performance of the Group can be found in the Management Discussion and Analysis set out on pages 5 to 27 of this annual report. Discussions on the Group’s environmental policies and performance, compliance with the relevant laws and regulations that have a significant impact on the Group, and key relationships with its employees, customers and suppliers and others that have a significant impact on the Group and on which the Group’s success depends are set forth in the sections headed “Environmental Policies and Performance”, “Compliance with Relevant Laws and Regulations” and “Relationships with Stakeholders” in this report of the Directors. The abovementioned discussions form parts of the business review as contained in this report of the Directors.

Results and Appropriations

The results of the Group for FY 2020 and the Group’s financial position as at 31 December 2020 are set out in the consolidated financial statements on pages 70 to 158 of this annual report.

The Directors do not recommend the payment of a final dividend for FY 2020 (2019: Nil).

Share Capital

Save as disclosed in Note 23 to the consolidated financial statements, there were no movements in the Company’s share capital during the year.

Pre-Emptive Rights

There is no provision for pre-emptive rights under the Articles or the laws of the Cayman Islands which would oblige the Company to offer new shares on a pro rata basis to the existing Shareholders.

Equity-linked Agreements

Save for the share option schemes of the Company set out in the section headed “Share Option Schemes” on page 60 of this annual report and Note 25 to the consolidated financial statements, no equity-linked agreements were entered into during FY 2020 or subsisted at the end of FY 2020.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Report of the Directors

Distributable Reserves

As at 31 December 2020, the Company did not have any reserves available for distribution, calculated in accordance with the Companies Act (2021 Revision) of the Cayman Islands. The share premium account of the Company is available for distribution or payment of dividends to the Shareholders subject to the provisions of the Articles and provided that immediately following the distribution or the payment of dividends, the Company is able to pay its debts immediately as they fall due in the ordinary course of business.

Permitted Indemnity Provision

Under the Articles, the Company had a permitted indemnity provision (as defined in section 469 of the Companies Ordinance) in force for the benefit of the Directors throughout the Reporting Period and as at the date of approval of this report of the Directors, pursuant to which the Company shall indemnify any Director against any liability or loss suffered or expenses reasonably incurred by the Director in connection with any action, suit or proceeding in which he is involved by reason of being a Director, and in which judgement is given in his favour or in which he is acquitted. The Company has maintained insurance cover for Directors’ and officers’ liabilities in respect of legal actions against the Directors arising out of corporate activities.

Important Past Year End Events

Since 31 December 2020, being the end of the financial year under review, and up to the date of this annual report, no important event materially affecting the Group has occurred.

Purchase, Sale or Redemption of the Company’s Listed Securities

During FY 2020, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any listed securities of the Company.

Environmental Policies and Performance

The Group actively fulfils its social responsibility of enhancing environmental protection. In the Resources Business, the Group engages suppliers and service providers that place high priority on and show recognition of environmentally-friendly practices. In addition, the Group advocates 3Rs – Reduce, Reuse and Recycle throughout the operation to boost resource utilisation efficiency and reduce carbon emission. The Group strives to raise our employees’ environmental awareness and competence on environmental conservation through green office guidelines. The Group’s environmental performance aspect for FY 2020 will be further disclosed in the Company’s environmental, social and governance report to be published in due course.

Loans and Borrowings

Particulars of the loans and borrowings of the Group as at 31 December 2020 are set out in Note 22 to the consolidated financial statements.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Report of the Directors

Compliance with Relevant Laws and Regulations

The Company is a limited liability company incorporated in the Cayman Islands with its shares listed on the Main Board of the Stock Exchange. The Group’s businesses are mainly conducted through its subsidiaries incorporated in Hong Kong, British Virgin Islands and the PRC with the customers, suppliers and business partners mainly located in Hong Kong, Australia, South Africa and the PRC. During FY 2020, the Group is not aware of any material non-compliance with the relevant applicable laws and regulations by any member of the Group.

Relationship with Stakeholders

The Group recognises that employees, customers, suppliers and business partners are keys to its sustainable development. The Group is committed to establishing a close and caring relationship with its employees, providing quality products and services to its customers and enhancing cooperation with its suppliers and business partners.

The Company provides a fair and safe workplace, promotes diversity to our staff, provides competitive remuneration and benefits and career development opportunities based on their merits and performance. The Group also puts ongoing efforts to provide adequate trainings and development resources to the employees so that they can keep abreast of the latest development of the market and the industry and, at the same time, improve their performance and self-fulfillment in their positions.

The Group understands that it is important to maintain good relationships with customers and provide the products in a way that satisfies needs and requirements of the customers. The Group enhances the relationship by continual interactions with customers to gain insights into the changing market demand for the products so that the Group can respond proactively.

The Group is also dedicated to developing good relationship with suppliers as long-term business partners to enhance the stability of the Group’s businesses. The Group reinforces the business partnership with suppliers by ongoing communication in a proactive manner.

During the Reporting Period, the Group had reliance on several major suppliers and customers of the Resources Business. Going forward, the management will continue to grow the Resources Business and the Group will endeavour to further identify and expand the product offerings and try to take steps to convert the standalone supplies into more sustainable long term supplies if that could bring more contributions to the financial results of the Group in the long run.

Further disclosures about credit terms and creditworthiness of customers and ageing analysis of the Group’s receivables and payables are set out in Notes 17 and 21 to the consolidated financial statements respectively.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Report of the Directors

Major Customers and Suppliers

The aggregate sales to the Group’s five largest customers accounted for approximately 88% of the Group’s total revenue for FY 2020 and the Group’s sales to the largest customer accounted for approximately 39% of the Group’s total revenue for that year.

The aggregate purchases from the Group’s five largest suppliers accounted for approximately 94% of the Group’s total purchases and the Group’s purchases from the largest supplier accounted for approximately 36% of the Group’s total purchases for that year.

Except for MGI and Koolan, none of the Directors, their close associates (as defined under the Listing Rules), or any Shareholder (which, to the best knowledge of the Directors, owns more than 5% of the Company’s issued share capital) has any interest in the Group’s five largest suppliers or five largest customers for FY 2020.

Management Contracts

No contract, other than employment contracts, concerning the management and administration of the whole or any substantial part of the business of the Group was entered into or existed during the year.

Directors

The Directors during the financial year and up to the date of this annual report are:

Executive Directors

Mr. Chong Tin Lung, Benny (Chairman) Mr. Luk Yue Kan Mr. Li Changfa (retired with effect from 1 March 2020)

Independent Non-executive Directors

Mr. Tsui King Fai Mr. Lee Kwan Hung, Eddie Mr. Shin Yick, Fabian

The Company has received from each of the independent non-executive Directors an annual confirmation of independence pursuant to rule 3.13 of the Listing Rules and considers all of its independent non-executive Directors to be independent in accordance with the guidelines as set out under the Listing Rules.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Report of the Directors

Financial Summary

A summary of the published results and assets and liabilities of the Group for the last five financial years is set out on page 159.

Changes in Director’s Information

The changes in the Director’s information since the disclosure made in the Interim Report 2020 are set out below:

Name of Director	Details of Changes
Mr. Tsui King Fai	The annual emolument has been revised from HK$264,000 to
	HK$280,000 with effect from 1 January 2021.
Mr. Lee Kwan Hung, Eddie	The annual emolument has been revised from HK$264,000 to
	HK$280,000 with effect from 1 January 2021.
Mr. Shin Yick, Fabian	Resigned as an independent non–executive director of China Tianrui
	Automotive Interiors Co., Ltd (stock code: 6162) and a director of Bio-Key
	Incorporation Inc. (NADSDAQ: BKYI) with effect from 15 September 2020
	and 2 September 2020 respectively

Acted as a company secretary of Victory City International Holdings Limited (stock code: 539) for the period from 11 January 2021 to 11 April 2021

The annual emolument has been revised from HK$264,000 to HK$280,000 with effect from 1 January 2021.

Save for the information disclosed above, there is no other information required to be disclosed in this report pursuant to rule 13.51B (1) of the Listing Rules.

Biographical Information of Directors and Senior Management

Brief biographical information of the Directors and senior management of the Company are set out in the section headed “Directors’ and Senior Management’s Profile” on pages 51 to 54 of this annual report.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Report of the Directors

Directors’ Service Contracts

None of the Directors proposed for re-election at the 2021 AGM has entered into any service agreement with the Group which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

Directors’ Interests in Transactions, Arrangements or Contracts

Save as disclosed in the paragraph headed “Connected Transactions” in this report of the Directors on page 63 of this annual report and “Related Party Transactions” in Note 28 to the consolidated financial statements, no Director or an entity connected with a Director or any of its controlling shareholder and any of its subsidiaries, had a material interest, whether directly or indirectly in any transaction, arrangement or contract of significance to the Group’s business, to which the Company or any of its subsidiaries was a party during FY 2020 or at the end of FY 2020.

Directors’ Interests in Competing Business

During FY 2020 and up to the date of this annual report, none of the Directors or their close associates (as defined under the Listing Rules) have any interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

Directors’ and Chief Executive’s Interests in Shares, Underlying Shares and Debentures

As at 31 December 2020, none of the Directors and chief executive of the Company has any interests or short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (the “Associated Corporations”), as recorded in the register required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

Share Option Schemes

Upon the termination of the old share option scheme, which was previously adopted on 9 April 2010, on 12 June 2020, the Company adopted a new share option scheme (the “2020 Share Option Scheme”) on the same date. No share option had been granted under the 2020 Share Option Scheme during FY 2020. Details of the Company’s share option schemes are set out in Note 25 to the consolidated financial statements.

Rights to Purchase Shares or Debentures of Directors and Chief Executive

Other than the aforesaid share option scheme of the Company, at no time during the year ended 31 December 2020 had the Company or any of its subsidiaries entered into any arrangement which enables the Directors or chief executive of the Company to have the right to subscribe for securities of the Company or any of its Associated Corporations or to acquire benefits by means of acquisition of Shares in or debentures of the Company or any of its Associated Corporations.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Report of the Directors

Substantial Shareholders’ and Other Parties’ Interests in Shares and Underlying Shares

Long Position in Shares

As at 31 December 2020, so far as known to any Director or chief executive of the Company, the following parties (other than Directors or chief executive of the Company) had interests in the Shares or underlying Shares as recorded in the register required to be kept under Section 336 of the SFO:

			Approximate
			percentage of
		Total number	total issued
Name of Shareholder	Nature of interest	of Shares held	Shares
Mak Siu Hang, Viola(1)	Interest of controlled corporation	1,149,744,000	28.74%
VMS Investment Group Limited (“VMSIG”)(1)	Beneficial interest, interest of	1,149,744,000	28.74%
	controlled corporation
Fast Fortune Holdings Limited (“Fast Fortune”)(1)	Beneficial interest	360,000,000	9.00%
Shougang Group Co., Ltd.(2)	Interest of controlled corporation	1,098,570,000	27.46%
Shougang Holding (Hong Kong) Limited	Interest of controlled corporation	1,098,570,000	27.46%
(“Shougang Hong Kong”)(2)
Lord Fortune Enterprises Limited (“Lord Fortune”)(2)	Beneficial interest	370,000,000	9.25%
Plus All Holdings Limited (“Plus All”)(2)	Beneficial interest	728,570,000	18.21%
Cheng Yu Tung Family (Holdings) Limited(3)	Interest of controlled corporation	620,000,000	15.50%
Cheng Yu Tung Family (Holdings II) Limited(4)	Interest of controlled corporation	620,000,000	15.50%
Chow Tai Fook Capital Limited (“CTF Capital”)(5)	Interest of controlled corporation	620,000,000	15.50%
Chow Tai Fook (Holding) Limited (“CTF Holding”)(6)	Interest of controlled corporation	620,000,000	15.50%
Chow Tai Fook Enterprises Limited (“CTF Enterprises”)(7)	Interest of controlled corporation	620,000,000	15.50%
New World Development Company Limited (“NWD”)(8)	Interest of controlled corporation	620,000,000	15.50%
NWS Holdings Limited (“NWS”)(9)	Interest of controlled corporation	620,000,000	15.50%
NWS Resources Limited (“NWS Resources”)(9)	Interest of controlled corporation	620,000,000	15.50%
NWS Mining Limited (“NWS Mining”)(9)	Interest of controlled corporation	620,000,000	15.50%
Modern Global Holdings Limited (“Modern Global”)(9)	Interest of controlled corporation	620,000,000	15.50%
Perfect Move Limited (“Perfect Move”)(9)	Interest of controlled corporation	620,000,000	15.50%
Faithful Boom Investments Limited (“Faithful Boom”)(9)	Beneficial interest	620,000,000	15.50%

Fast Fortune Holdings Limited (“Fast Fortune”)[(1)] Shougang Group Co., Ltd.[(2)] Shougang Holding (Hong Kong) Limited (“Shougang Hong Kong”)[(2)] Lord Fortune Enterprises Limited (“Lord Fortune”)[(2)] Plus All Holdings Limited (“Plus All”)[(2)] Cheng Yu Tung Family (Holdings) Limited[(3)] Cheng Yu Tung Family (Holdings II) Limited[(4)] Chow Tai Fook Capital Limited (“CTF Capital”)[(5)] Chow Tai Fook (Holding) Limited (“CTF Holding”)[(6)] Chow Tai Fook Enterprises Limited (“CTF Enterprises”)[(7)] New World Development Company Limited (“NWD”)[(8)] NWS Holdings Limited (“NWS”)[(9)] NWS Resources Limited (“NWS Resources”)[(9)] NWS Mining Limited (“NWS Mining”)[(9)] Modern Global Holdings Limited (“Modern Global”)[(9)] Perfect Move Limited (“Perfect Move”)[(9)] Faithful Boom Investments Limited (“Faithful Boom”)[(9)]

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Report of the Directors

Substantial Shareholders’ and Other Parties’ Interests in Shares and Underlying Shares (Continued)

Long Position in Shares (Continued)

Notes:

(1) Fast Fortune and VMSIG held 360,000,000 Shares and 789,744,000 Shares as beneficial owners, respectively. Ms. Mak Siu Hang, Viola held a 100% direct interest in VMSIG. Fast Fortune was a wholly-owned subsidiary of VMSIG. Therefore, Ms. Mak Siu Hang, Viola was deemed to be interested in all the Shares held by each of VMSIG and Fast Fortune, and VMSIG was deemed to be interested in all the Shares held by Fast Fortune.
(2) Shougang Group Co., Ltd. held a 100% direct interest in Shougang Hong Kong. Lord Fortune and Plus All were whollyowned subsidiaries of Shougang Hong Kong. Therefore, Shougang Group Co., Ltd. and Shougang Hong Kong were both deemed to be interested in all the Shares held by Lord Fortune and Plus All.
(3) Cheng Yu Tung Family (Holdings) Limited held approximately 48.98% direct interest in CTF Capital and was accordingly deemed to have an interest in the Shares deemed to be interested by CTF Capital.
(4) Cheng Yu Tung Family (Holdings II) Limited held approximately 46.65% direct interest in CTF Capital and was accordingly deemed to have an interest in the Shares deemed to be interested by CTF Capital.
(5) CTF Capital held approximately 81.03% direct interest in CTF Holding and was accordingly deemed to have an interest in the Shares deemed to be interested by CTF Holding.
(6) CTF Holding held 100% direct interest in CTF Enterprises and was accordingly deemed to have an interest in the Shares interested by or deemed to be interested by CTF Enterprises.
(7) CTF Enterprises held more than one-third of the issued shares of NWD and was accordingly deemed to have an interest in the Shares interested by or deemed to be interested by NWD.
(8) NWD held more than 60% direct interest in NWS and was accordingly deemed to have an interest in the Shares interested by or deemed to be interested by NWS.
(9) NWS held a 100% direct interest in NWS Resources, which held a 100% direct interest in NWS Mining. NWS Mining held a 100% interest in Modern Global, which held a 100% direct interest in Perfect Move. Faithful Boom was a wholly-owned subsidiary of Perfect Move. Therefore, NWS, NWS Resources, NWS Mining, Modern Global and Perfect Move were all deemed to be interested in all the Shares held by Faithful Boom.

Save as disclosed above, the Directors are not aware of any persons who, as at 31 December 2020, had any interests or short positions in the Shares or underlying Shares as recorded in the register required to be kept under Section 336 of the SFO.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Report of the Directors

Sufficiency of Public Float

According to information that is available to the Company and within the knowledge of the Directors, the percentage of the Shares which are in the hands of the public (as defined in the Listing Rules) exceeds 25% of the Company’s total number of issued Shares during FY 2020 and up to the date of this report.

Corporate Governance

Principal corporate governance practices adopted by the Company are set out in the Corporate Governance Report on pages 28 to 50 of this annual report.

Connected Transactions

During FY 2020, the Group had not conducted any connected transactions or continuing connected transactions that were not exempt from the annual reporting requirement under Chapter 14A of the Listing Rules.

A summary of significant related party transactions is disclosed in Note 28 to the consolidated financial statements. These transactions conducted in FY 2020 constitute continuing connected transactions of the Company as defined in Chapter 14A of the Listing Rules that are exempt from any announcement, annual review, reporting, or independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Annual General Meeting

The 2021 AGM of the Company is scheduled to be held on Thursday, 10 June 2021. A notice convening the 2021 AGM will be issued and disseminated to the Shareholders in due course.

Closure of Register of Members

The register of members of the Company will be closed from Monday, 7 June 2021 to Thursday, 10 June 2021 (both days inclusive), during which no transfer of the Shares will be registered. In order to be eligible to attend and vote at the 2021 AGM, all transfer of the Shares accompanied by the relevant properly completed transfer forms and the relevant share certificates must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not later than 4:30 p.m. on Friday, 4 June 2021.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Report of the Directors

Auditor

The financial statements for FY 2020 have been audited by Messrs. Ernst & Young, who will retire at the 2021 AGM and, being eligible, offer itself for re-appointment. A resolution for the reappointment of Messrs. Ernst & Young as auditor of the Company is to be proposed at the 2021 AGM.

On behalf of the Board

Chong Tin Lung, Benny

Chairman

Hong Kong, 25 March 2021

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Independent Auditor’s Report

==> picture [62 x 51] intentionally omitted <==

Ernst & Young �� 22/F, CITIC Tower ��1� 1 Tim Mei Avenue ��22� Central, Hong Kong

Tel ��: +852 2846 9888 Fax ��: +852 2868 4432 ey.com

To the shareholders of Newton Resources Ltd

(Incorporated in the Cayman Islands with limited liability)

Opinion

We have audited the consolidated financial statements of Newton Resources Ltd (the “Company”) and its subsidiaries (the “Group”) set out on pages 70 to 158, which comprise the consolidated statement of financial position as at 31 December 2020, and the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board (“IASB”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

Basis for opinion

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Independent Auditor’s Report

Key audit matters (Continued)

Key audit matter

How our audit addressed the key audit matter

Revenue recognition

Revenue from the Group’s sourcing and supply of iron ore and other commodities (the “Resources Business”) amounted to US$467.5 million in the Group’s consolidated financial statements for the year and was recorded on the gross basis.

The Group recognises revenue from contracts with customers on a gross basis when control of goods is transferred to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods. We identified revenue recognition in respect of the Resources Business as our audit focus area because the terms of sales arrangements, including the timing of transfer of the products, delivery specifications including incoterms and nature of the promises to the customers, involve complexity and judgement in determining sales revenues on a gross or net basis and revenue recognition in the appropriate accounting period.

The Group disclosed the accounting policies and details of revenue recognition in Note 2.4 Summary of significant accounting policies, Note 3 Significant accounting judgements and estimates and Note 4 Revenue and segment information to the consolidated financial statements.

We performed walkthroughs to obtain an understanding on the business model and the management’s design of controls over the revenue cycle of the Resources Business.

We reviewed the revenue recognition policy applied by the Group to check its compliance with the IFRS requirements. Also, we reviewed how the terms of the sales arrangements were considered within the revenue recognition process, including the discretion in determining the pricing, the responsibility for the risk of price fluctuation, the quality of goods, inventory risk and the customers’ complaints and requests, the timing of transfer of the products and delivery specifications, etc.

In addition to substantive analytical reviews performed to obtain an understanding of how the revenue has trended over the year, we performed a detailed testing on transactions around the year-end to check whether revenues were recognised in the correct accounting period. We also tested journal entries focusing on unusual or irregular transactions regarding revenue recognition.

We also assessed the adequacy of the related disclosures in the notes to the consolidated financial statements.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Independent Auditor’s Report

Other information included in the Annual Report

The directors of the Company are responsible for the other information. The other information comprises the information included in the Annual Report, other than the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the consolidated financial statements

The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRSs issued by the IASB and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors of the Company are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors of the Company either intend to liquidate the Group or to cease operations or have no realistic alternative but to do so.

The directors of the Company are assisted by the Audit Committee in discharging their responsibilities for overseeing the Group’s financial reporting process.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Independent Auditor’s Report

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Our report is made solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Independent Auditor’s Report

Auditor’s responsibilities for the audit of the consolidated financial statements

(Continued)

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Mr. Tong Ka Yan, Augustine.

Ernst & Young

Certified Public Accountants Hong Kong

25 March 2021

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Consolidated Statement of Profit or Loss and Other Comprehensive Income

Year ended 31 December 2020

2020 Notes US$’000	2019 US$’000 (Restated) 275,167 (270,778) 4,389 – (716) (2,730) (1,595) (2,417) (13) (3,082) (30) (3,112) (6,964) (10,076) 11 (586) (575) (10,651)
Continuing operations Revenue 4 467,495 Cost of sales (460,819)
Gross profit 6,676 Other income and gains 161 Selling and distribution costs (2,050) Administrative expenses (2,032) Impairment losses on other current financial assets 18 – Finance expense, net 6 (1,733) Share of profits/(losses) of an associate 35
Profit/(loss) before tax from continuing operations 5 1,057 Income tax expenses 8 (213)
Profit/(loss) for the year from continuing operations 844 Discontinued operations Loss for the year from discontinued operations 9 –
Profit/(loss) for the year 844
Other comprehensive income Other comprehensive income that may be reclassified to profit or loss in subsequent periods: Exchange differences on translation of foreign operations (153) Other comprehensive income that will not be reclassified to profit or loss in subsequent periods: Exchange differences on translation of the Company and its non-foreign operations (475)
Other comprehensive income for the year, net of tax (628)
Total comprehensive income for the year 216

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Consolidated Statement of Profit or Loss and Other Comprehensive Income

Year ended 31 December 2020

		2020	2019
	Notes	US$’000	US$’000
			(Restated)
Profit/(loss) for the year attributable to
the owners of the Company:
– from continuing operations		818	(3,112)
– from discontinued operations		13	(6,894)
		831	(10,006)
Profit/(loss) for the year attributable to
non-controlling interests:
– from continuing operations		26	–
– from discontinued operations		(13)	(70)
		13	(70)
Profit/(loss) for the year		844	(10,076)
Total comprehensive income attributable to:
Owners of the Company		193	(10,592)
Non-controlling interests		23	(59)
		216	(10,651)
EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO
ORDINARY EQUITY HOLDERS OF THE COMPANY	11
Basic and diluted
– For profit/(loss) for the year (US$ cents)		0.02	(0.25)
– For profit/(loss) from continuing operations (US$ cents)		0.02	(0.08)

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Consolidated Statement of Financial Position

31 December 2020

31 December 2020 Notes US$’000	31 December 1 January 2019 2019 US$’000 US$’000 (Restated) (Restated)
Non-current assets Property, plant and equipment 12 186 Intangible assets 13 – Right-of-use assets 14(a) 200 Other long-term assets 15 16,181 Investment in an associate 16 244	147 29,655 – 105 308 142 17,995 – 194 211
Total non-current assets 16,811	18,644 30,113
Current assets Inventories – Trade and bills receivables 17 95,994 Other current financial assets 18 2,258 Prepayments and other receivables 523 Restricted bank deposits 19 4,905 Cash and cash equivalents 20 15,190	– 414 41,979 – 11,403 8,590 139 3,704 45,345 31,917 12,811 14,272
118,870 Assets of a disposal group classified as held for sale 9 –	111,677 58,897 29,378 –
Total current assets 118,870	141,055 58,897
Current liabilities Trade and bills payables 21 81,784 Other current financial liabilities 291 Contract liabilities – Other payables and accruals 850 Interest-bearing bank and other borrowings 22 20,412 Income tax payables 194	36,660 164 1,286 11,854 – 1,460 798 1,186 64,442 32,330 600 1,158
103,531 Liabilities directly associated with the assets classified as held for sale 9 –	103,786 48,152 15,510 –
Total current liabilities 103,531	119,296 48,152
Net current assets 15,339	21,759 10,745
Total assets less current liabilities 32,150	40,403 40,858

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Consolidated Statement of Financial Position

31 December 2020

		31 December 31 December	1 January
		2020 2019	2019
	Notes	US$’000 US$’000	US$’000
		(Restated)	(Restated)

Non-current liabilities
Interest-bearing bank and other borrowings	22	101 10,269	–
Other non-current financial liabilities		– –	73
Total non-current liabilities		101 10,269	73
Net assets		32,049 30,134	40,785
Equity
Equity attributable to owners of the Company
Share capital	23	46,890 51,338	51,338
Reserves	24	(15,824) (20,508)	(9,916)
		31,066 30,830	41,422
Non-controlling interests		983 (696)	(637)
Total equity		32,049 30,134	40,785

Chong Tin Lung, Benny Director

Luk Yue Kan Director

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Consolidated Statement of Changes in Equity

Year ended 31 December 2020

	Attributable to owners of the Company Share capital Share premium account Capital reserves Exchange fluctuation reserve Accum- ulated losses Total Non- controlling interests Total equity US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Note 23
At 1 January 2020 Profit for the year Other comprehensive income for the year: Exchange differences arising on translation into presentation currency
	51,338 111,330 12,015 (7,731) (136,122) 30,830 (696) 30,134

	– – – – 831 831 13 844

	– – – (638) – (638) 10 (628)

Total comprehensive income for the year Effect of change in functional currency (Note 2.1) Capital injection to a subsidiary Disposal of the Disposal Group (Note 2.1)
	– – – (638) 831 193 23 216
	(4,448) (9,646) (592) 13,219 1,467 – – –
	– – 43 – – 43 957 1,000
	– – – (4,910) 4,910 – 699 699

At 31 December 2020
	46,890 101,684 11,466 (60) (128,914) 31,066* 983 32,049*

(Restated) At 1 January 2019 Loss for the year Other comprehensive income for the year: Exchange differences arising on translation into presentation currency	51,338 111,330 12,015 (7,145) (126,116) 41,422 (637) 40,785 – – – – (10,006) (10,006) (70) (10,076) – – – (586) – (586) 11 (575) – – – (586) (10,006) (10,592) (59) (10,651) 51,338 111,330 12,015 (7,731) (136,122) 30,830 (696) 30,134
Total comprehensive income for the year
At 31 December 2019

These reserve accounts comprise the deficiency in reserves of US$15,824,000 (2019: US$20,508,000 (restated)) in the consolidated statement of financial position.

74 NEWTON RESOURCES LTD ANNUAL REPORT 2020

Consolidated Statement of Cash Flows

Year ended 31 December 2020

		2020	2019
	Notes	US$’000	US$’000
			(Restated)
Cash flows from operating activities Profit/(loss) before tax: From continuing operations		1,057	(3,082)
From discontinued operations	9	–	(6,964)
Adjustments for:
Gain on disposal of the Disposal Group	26	(243)	–
Loss on disposal of items of property, plant and equipment		22	–
Depreciation of items of property, plant and equipment	12	27	573
Depreciation of right-of-use assets	14	108	23
Amortisation of other long-term assets	15	1,814	1,114
Impairment losses on property, plant and equipment		–	2,065
Impairment losses on intangible assets		–	8
Impairment losses on right-of-use assets		–	10
Impairment losses on other current financial assets		–	1,704
Impairment losses on prepayments and other receivables		–	967
Reversal of write-down of inventories to net realisable value		(75)	(103)
Write-back of other payables		(1,071)	–
Finance expense, net		1,808	2,570
Share of profits/(losses) of an associate		(35)	13
Cash flows before working capital changes		3,412	(1,102)
Decrease in inventories		144	442
Increase in trade and bills receivables Decrease/(increase) in other current financial assets		(54,019) 9,836	(41,979) (5,306)
(Increase)/decrease in prepayments and other receivables Decrease/(increase) in restricted bank deposits		(337) 8,338	910 (13,243)
Increase in trade and bills payables		45,113	36,660
Increase in other current financial liabilities		215	2,842
Decrease on contract liabilities Decrease in other payables and accruals		(26) (60)	(1,434) (196)
Cash generated from/(used in) operations Interest received Bank charges paid Hong Kong profits tax paid		12,616 172 (248) (50)	(22,406) 1,095 (162) (1)
Mainland China income tax paid		–	(8)
Net cash flows from/(used in) operating activities		12,490	(21,482)

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Consolidated Statement of Cash Flows

Year ended 31 December 2020

2020 Notes US$’000	2019 US$’000 (Restated) 128 (138) – (19,109) – (19,119) 44,936 (2,782) – (2,699) (16) 39,439 (1,162) 14,272 (154) 12,956 2,211 10,600 12,811 145 12,956
Cash flows from investing activities Consideration received from disposal of the Disposal Group 26 13,190 Purchase of items of property, plant and equipment (61) Proceeds from disposal of items of property, plant and equipment 24 Purchase of other long-term assets – Capital injection of a subsidiary from non-controlling interests 500
Net cash flows from/(used in) investing activities 13,653
Cash flows from financing activities Proceeds from bank and other borrowings 13,482 Repayment of bank and other borrowings (67,080) Decrease in restricted bank deposits 32,102 Interest and other finance expenses paid (2,350) Principal portion of lease payments (99)
Net cash flows (used in)/from financing activities (23,945)
Net increase/(decrease) in cash and cash equivalents 2,198 Cash and cash equivalents at beginning of year 12,956 Effect of foreign exchange rate changes, net 36
Cash and cash equivalents at end of year 15,190
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 2,158 Non-pledged time deposits with original maturity of less than three months when acquired 13,032
Cash and cash equivalents as stated in the consolidated statement of financial position 15,190 Cash attributable to discontinued operations 9(f) –
Cash and cash equivalents as stated in the consolidated statement of cash flows 15,190

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

1. Corporate and Group Information

Newton Resources Ltd (the “Company”, and together with its subsidiaries, collectively the “Group”) is a limited liability company incorporated in the Cayman Islands. The registered office of the Company is located at P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

During the year, the principal activity of the Company was investment holding and the principal activities of its subsidiaries included trading of iron ore and other commodities (the “Resources Business”).

On 31 December 2019, the Company entered into a sale and purchase agreement (the “Sale and Purchase Agreement”) for the disposal of its entire interests in Venca Investments Limited (“Venca”), a then direct whollyowned subsidiary of the Company, for a total consideration of United States Dollars (“US$”) 13,916,000 (the “Disposal”). Venca is an investment holding company and its principal operating subsidiary includes Lincheng Xingye Mineral Resources Co., Ltd, which owns and operates the Yanjiazhuang Mine, an iron and gabbrodiabase mine located in Yanjiazhuang Mining Area, Shiwopu, Haozhuang Town, Lincheng County, Hebei Province, the People’s Republic of China (the “PRC”) (thereinafter collectively referred to as the “Disposal Group”). The Disposal had been completed on 30 June 2020 and the Group ceased and discontinued the iron concentrate business and gabbro-diabase and stone business (the “Discontinued Operations”). An analysis of the results and cash flows of the Discontinued Operations is presented in Note 9 to the consolidated financial statements. In addition, details of the change in the functional currency of the Company as a result of the completion of the Disposal and the changes in the presentation currency of the Group’s and the Company’s financial statements are set out in Notes 2.1 and 32 to the consolidated financial statements.

Information about subsidiaries

Particulars of the Company’s principal subsidiaries as at 31 December 2020 are as follows:

	Place of
	incorporation/	Issued ordinary/	Percentage of
	registration and	registered	equity interests attributable		Principal
Name	operations	share capital	to the Company (%)		activities
			Direct	Indirect
Ace Profit Investment Limited	Hong Kong	Hong Kong Dollars	–	100	Commodity trading
(“Ace Profit”)		(“HK$”) 1
Shou Ji Holdings Limited*	British Virgin Islands	US$4,000,000	–	75	Investment holding
	(“BVI”)
Shou Ji International	Hong Kong	HK$1	–	100	Commodity trading
Trade Limited
Shou Ji International	BVI	US$1	–	100	Provision of
Transport Limited					management
					services

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

1. Corporate and Group Information (Continued)

Information about subsidiaries (Continued)

	Place of
	incorporation/	Issued ordinary/	Percentage of
	registration and	registered	equity interests attributable		Principal
Name	operations	share capital	to the Company (%)		activities
			Direct	Indirect
Shou Ji Services Limited	Hong Kong	HK$2	–	75	Provision of
					management
					services
Shou Ji Trading Limited	Hong Kong	HK$1	–	75	Commodity trading
Xingan League Newton Trading	Mainland China	Renminbi (“RMB”)	–	100	Commodity trading
Company Limited**		40,000,000

During the year ended 31 December 2020, the Group and the non-controlling equity holder contributed US$2,999,999 and US$1,000,000 respectively to Shou Ji Holdings Limited as paid up capital.

** It is registered as a wholly-foreign-owned enterprise under PRC law.

The above table lists the subsidiaries of the Company, which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

2.1 Basis of Preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) (which include all International Financial Reporting Standards, International Accounting Standards (“IASs”) and Interpretations) issued by the International Accounting Standards Board and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for certain trade and bills receivables, certain trade and bills payables and iron ore futures/swap contracts accounted for as financial assets or liabilities at fair value through profit or loss which have been measured at fair value. Disposal group held for sale at 31 December 2019 was stated at the lower of their carrying amounts and fair values less costs to sell as further explained in Note 2.4 to the consolidated financial statements. These financial statements are presented in US$ and all values are rounded to the nearest thousand except when otherwise indicated.

Change in functional currency

As mentioned in Note 1 to the consolidated financial statements, the Group completed the Disposal on 30 June 2020. Since then, the Company’s principal operating subsidiaries carry out business activities and transactions mainly in US$, being the currency that mainly influences the underlying transactions, events and business conditions. Therefore, the functional currency of the Company has been changed from RMB to US$ upon the completion of the Disposal. The Company has accounted for the effect of the above change in the functional currency prospectively in accordance with IAS 21 “The Effect of Changes in Foreign Exchange Rates” when all items in the financial statements of the Company at 1 July 2020 had been translated into US$ using the relevant exchange rates prevailing at the effective date of the change.

78 NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.1 Basis of Preparation (Continued)

Change in presentation currency

Further to the aforesaid change in the functional currency, the Company and the Group has determined to change the presentation currency of the financial statements to US$ with effect from 1 July 2020, which shall align with the new functional currency of the Company. Such change in the presentation currency has been accounted for retrospectively in accordance with IAS 8 “Accounting Policies, Change in Accounting Estimates and Errors”. As a result, the comparative figures of the Company’s and the Group’s financial statements as at 1 January 2019 and 31 December 2019 and for the year ended 31 December 2019 have been restated and re-presented using US$ as if these prior period’s financial statements had been originally prepared and presented in US$. The following methodology has been used to re-present the comparative figures as at 1 January 2019 and 31 December 2019 and for the year ended 31 December 2019, which were originally presented in RMB, in US$:

Assets and liabilities of the Group’s entities, where their functional currencies were currencies other than US$ in the prior periods, had been translated into US$ at the closing rates of exchange prevailing at the end of relevant prior reporting periods and profit and loss items of those entities were translated into US$ at the relevant average rates of exchange, unless exchange rates fluctuated significantly during the year, in which case, the exchange rates prevailing on the dates of transactions were used;
Translation differences and cumulative translation differences have been presented as if the Company and the Group had used US$ as the presentation currency for the comparative periods. All exchange differences resulting from the retranslation of foreign currency financial statements had been recognised as other comprehensive income for the relevant prior years; and
Share capital, share premium account and capital reserves of the Company and the Group were translated at historical exchange rates prevailing at the relevant dates of the particular transactions. As the Company has also changed its functional currency with effect from 1 July 2020, a translation effect occurred for each component of equity during the year ended 31 December 2020, which is shown as a separate line item in the Group’s consolidated statement of changes in equity and the Company’s reserve movements as set out in Note 32 to the consolidated financial statements.

Upon completion of the Disposal, the Group has released an aggregate amount of US$4,910,000 from the accumulated exchange fluctuation reserve to accumulated losses, being the accumulated exchange differences on translation of the Disposal Group, which is considered as non-foreign operations of the Group.

In addition to the comparative information in respect of the previous period as provided in these consolidated financial statements, the Group and the Company presented an additional statement of financial position as at 1 January 2019 without related notes in accordance with IAS 1 “Presentation of Financial Statements”.

Further details of the Group’s policies to account for foreign currency transaction and translation of foreign currency financial statements were set out in Note 2.4 to the consolidated financial statements.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.1 Basis of Preparation (Continued)

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31 December 2020. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee).

When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group’s voting rights and potential voting rights.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control described above. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or deficit in profit or loss. The Group’s share of components previously recognised in other comprehensive income is reclassified to profit or loss or accumulated losses, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.2 Changes in Accounting Policies and Disclosures

The Group has adopted the Conceptual Framework for Financial Reporting 2018 and the following revised IFRSs for the first time for the current year’s financial statements.

Amendments to IFRS 3 Definition of a Business Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform Amendment to IFRS 16 Covid-19-Related Rent Concessions (early adopted) Amendments to IAS 1 and IAS 8 Definition of Material

The amendments to IFRS 3, amendments to IFRS 9, IAS 39 and IFRS 7 and amendment to IFRS 16 are not relevant to the preparation of the Group’s financial statements. The nature and the impact of the Conceptual Framework for Financial Reporting 2018 and amendments to IAS 1 and IAS 8 are described below:

(a) Conceptual Framework for Financial Reporting 2018 (the “Conceptual Framework”) sets out a comprehensive set of concepts for financial reporting and standard setting, and provides guidance for preparers of financial statements in developing consistent accounting policies and assistance to all parties to understand and interpret the standards. The Conceptual Framework includes new chapters on measurement and reporting financial performance, new guidance on the derecognition of assets and liabilities, and updated definitions and recognition criteria for assets and liabilities. It also clarifies the roles of stewardship, prudence and measurement uncertainty in financial reporting. The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The Conceptual Framework did not have any significant impact on the financial position and performance of the Group.
(b) Amendments to IAS 1 and IAS 8 provide a new definition of material. The new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments clarify that materiality will depend on the nature or magnitude of information, or both. The amendments did not have any significant impact on the financial position and performance of the Group.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.3 Issued but not yet Effective International Financial Reporting Standards

The Group has not applied the following new and amendments to IFRSs which were issued before 31 December 2020 and are pertinent to its operations but not yet effective:

Amendments to IFRS 9, IAS 39, Interest Rate Benchmark Reform – Phase 2[1] IFRS 7, IFRS 4 and IFRS 16 Amendments to IFRS 3 Reference to the Conceptual Framework[2] Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use[2] Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling a Contract[2] Annual Improvements to Amendments to IFRS 1, IFRS 9, Illustrative Examples accompanying IFRSs 2018-2020 IFRS 16, and IAS 41[2] IFRS 17 Insurance Contracts[3] Amendments to IFRS 17 Insurance Contracts[3] Amendments to IAS 1 Classification of Liabilities as Current or Non-current[3] Amendments to IFRS 10 and Sale or Contribution of Assets between an Investor and its Associate or IAS 28 Joint Venture[4]

1 Effective for annual periods beginning on or after 1 January 2021 2 Effective for annual periods beginning on or after 1 January 2022 3 Effective for annual periods beginning on or after 1 January 2023
4 No mandatory effective date yet determined but available for adoption

The Group is in the process of making an assessment of the impact of these new standards and amendments to standards upon initial application. The Group is not yet in a position to ascertain their impacts on the Group’s results of operations and financial position.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

2.4 Summary of Significant Accounting Policies

Investment in an associate

An associate is an entity in which the Group has a long-term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

The Group’s investment in an associate is stated in the consolidated statement of financial position at the Group’s share of net assets under the equity method of accounting, less any impairment losses. The Group’s share of the post-acquisition results and other comprehensive income of an associate is included in the consolidated statement of profit or loss and other comprehensive income. In addition, when there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes, when applicable, in the consolidated statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and its associate are eliminated to the extent of the Group’s investments in the associate, except where unrealised losses provide evidence of an impairment of the assets transferred.

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Fair value measurement (Continued)

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 – based on quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly
Level 3 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Impairment of non-financial assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, financial assets and assets of a disposal group classified as held for sale), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cashgenerating unit (the “CGU”)’s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the CGU to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to profit or loss in the period in which it arises in those expense categories consistent with the function of impaired assets.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

2.4 Summary of Significant Accounting Policies (Continued)

Impairment of non-financial assets (Continued)

An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to profit or loss in the period in which it arises.

Related parties

A party is considered to be related to the Group if:

(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group;

(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Related parties (Continued)

(b) (Continued)
(vi) the entity is controlled or jointly controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity or of a parent of the entity; and
(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group.

Property, plant and equipment and depreciation

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. When an item of property, plant and equipment is classified as held for sale or when it is part of a disposal group classified as held for sale, it is not depreciated and is accounted for in accordance with IFRS 5, as further explained in the accounting policy for “Non-current assets and disposal groups held for sale”. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to profit or loss in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Depreciation of items of property, plant and equipment, other than mining infrastructure, is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The estimated useful lives of property, plant and equipment are as follows:

Buildings	20 years
Motor vehicles, fixtures and others	3 – 15 years
Machinery	10 – 15 years

Depreciation of mining infrastructure is calculated using the units of production (“UOP”) method to depreciate the cost of the assets proportionately to the extraction of the proved and probable mineral reserves. The mining infrastructure of the Disposal Group was estimated to have a useful life up to year 2044.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Property, plant and equipment and depreciation (Continued)

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end.

An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in profit or loss in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Construction in progress represents items of property, plant and equipment under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. When a mine construction project moves into the production stage, the capitalisation of certain mine construction costs ceases and costs are either regarded as part of the costs of inventories or expensed, except for costs which qualify for capitalisation relating to mining asset additions or improvements, or mineable reserve development. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

Non-current assets and disposal groups held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sales transaction rather than through continuing use. For this to be the case, the asset or disposal group must be available for immediate sale in its present condition subject only to terms that are usual and customary for the sale of such assets or disposal groups and its sale must be highly probable. All assets and liabilities of a subsidiary classified as a disposal group are reclassified as held for sale regardless of whether the Group retains a non-controlling interest in its former subsidiary after the sale.

Non-current assets and disposal groups (other than financial assets) classified as held for sale are measured at the lower of their carrying amounts and fair values less costs to sell. Property, plant and equipment and intangible assets classified as held for sale are not depreciated or amortised.

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are subsequently amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Intangible assets (Continued)

Mining rights

Mining rights are stated at cost less accumulated amortisation and any impairment losses. The mining rights, with a life longer than or equal to the license life, are amortised over the estimated useful lives of the mines.

Exploration rights and assets

Exploration rights are stated at cost less accumulated amortisation and any impairment losses and exploration assets are stated at cost less impairment losses.

Exploration rights are amortised over the term of rights. Equipment used in exploration is depreciated over its useful life, or, if dedicated to a particular exploration project, over the life of the project on the straight-line basis, whichever is shorter.

Long-term assets relating to a commodity supply contract with forward purchases of future outputs at discount (the “Contract”)

The Group entered into the Contract, pursuant to which there is an expectation in the quantity of commodities to be received under the Contract at the date of inception based on the estimated reserves and resources of the underlying mine and the contractual entitlements to future outputs. In view of the future outputs that will be physically delivered by the supplier and the purchases at discount by the Group that will not be net settled in cash under the Contract, the Group made an upfront payment to acquire the contractual rights and obligations under the Contract which would be considered as a deposit in exchange for the entitlements to the pre-sold commodities with purchase discounts offered by the supplier for the estimated quantities of commodities to be received at future dates under the Contract.

The upfront payment of the Group is recorded as a non-current asset, which is stated at cost less accumulated amortisation and any impairment losses. Amortisation is recognised on the unit-of-production basis by matching the physical delivery of commodities over the estimated output of commodities entitled by the Group.

Leases

The Group assesses at contract inception whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Group as a lessee

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-ofuse assets representing the right to use the underlying assets.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Leases (Continued)

Group as a lessee (Continued)

(a) Right-of-use assets

Right-of-use assets are recognised at the commencement date of the lease (that is the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease terms and the estimated useful lives of the assets as follows:

Office premises

3 years

If ownership of the leased asset transfers to the Group by the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

(b) Lease liabilities

Lease liabilities are recognised at the commencement date of the lease at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including insubstance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for termination of a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in lease payments (e.g., a change to future lease payments resulting from a change in an index or rate) or a change in assessment of an option to purchase the underlying asset.

The Group’s lease liabilities are included in interest-bearing bank and other borrowings.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Leases (Continued)

Group as a lessee (Continued)

(c) Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases of offices premises (that is those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the recognition exemption for leases of lowvalue assets to leases of office equipment and laptop computers that are considered to be of low value. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

Group as a lessor

When the Group acts as a lessor, it classifies at lease inception (or when there is a lease modification) each of its leases as either an operating lease or a finance lease.

Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. When a contract contains lease and non-lease components, the Group allocates the consideration in the contract to each component on a relative stand-alone selling price basis. Rental income is accounted for on a straight-line basis over the lease terms and is included in other revenue in the consolidated statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as other revenue in the period in which they are earned.

Leases that transfer substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee are accounted for as finance leases.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Investments and other financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income, and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient of not adjusting the effect of a significant financing component, the Group initially measures a financial asset at its fair value, plus in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15 in accordance with the policies set out for “Revenue recognition” below.

In order for a financial asset to be classified and measured at amortised cost or fair value through other comprehensive income, it needs to give rise to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model. The Group has a significant proportion of trade and bills receivables with embedded derivatives for provisional pricing. These receivables are generally held to collect contract cash flows but do not meet the SPPI criteria and as a result must be held at fair value through profit or loss. Subsequent fair value gains or losses are taken to profit or loss.

The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows, while financial assets classified and measured at fair value through other comprehensive income are held within a business model with the objective of both holding to collect contractual cash flows and selling. Financial assets which are not held within the aforementioned business models are classified and measured at fair value through profit or loss.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

2.4 Summary of Significant Accounting Policies (Continued)

Investments and other financial assets (Continued)

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at amortised cost (debt instruments)

Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are carried in the consolidated statement of financial position at fair value with net changes in fair value recognised in the consolidated statement of profit or loss.

This category includes derivative instruments which the Group had not irrevocably elected to classify at fair value through other comprehensive income.

A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.

A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:

the rights to receive cash flows from the asset have expired; or
the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if, and to what extent, it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Impairment of financial assets

The Group recognises an allowance for expected credit loss (“ECL”) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

General approach

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information that is available without undue cost or effort, including historical and forward-looking information.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Impairment of financial assets (Continued)

General approach (Continued)

The Group considers a financial asset in default when contractual payments are 180 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

Financial assets at amortised cost is subject to impairment under the general approach and they are classified within the following stages for measurement of ECLs except for trade receivables which apply the simplified approach as detailed below.

Stage 1 Financial instruments for which credit risk has not increased significantly since initial recognition and for which the loss allowance is measured at an amount equal to 12-month ECLs
Stage 2 Financial instruments for which credit risk has increased significantly since initial recognition but that are not credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs
Stage 3 Financial assets that are credit-impaired at the reporting date (but that are not purchased or originated credit-impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs

Simplified approach

For trade receivables that do not contain a significant financing component or when the Group applies the practical expedient of not adjusting the effect of a significant financing component, the Group applies the simplified approach in calculating ECLs. Under the simplified approach, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forwardlooking factors specific to the debtors and the economic environment.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

2.4 Summary of Significant Accounting Policies (Continued)

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and bills payables, other payables, interest-bearing bank and other borrowings and other financial liabilities.

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities designated upon initial recognition as at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied. Gains or losses on liabilities designated at fair value through profit or loss are recognised in profit or loss, except for the gains or losses arising from the Group’s own credit risk which are presented in other comprehensive income with no subsequent reclassification to profit or loss. The net fair value gain or loss recognised in profit or loss does not include any interest charged on these financial liabilities.

Financial liabilities at amortised cost

After initial recognition, the Group’s interest-bearing bank borrowing is subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case it is stated at cost. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in profit or loss.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Derivative financial instruments

Initial recognition and subsequent measurement

The Group uses derivative financial instruments, such as futures/swaps, to hedge its commodity price risk. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

The fair value of commodity purchase contracts that meet the definition of a derivative as defined by IFRS 9 is recognised in profit or loss as cost of sales. Commodity contracts that are entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with the Group’s expected purchase, sale or usage requirements are held at cost.

Any gains or losses arising from changes in fair value of derivatives are taken directly to profit or loss.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Derivative financial instruments (Continued)

Current versus non-current classification

Derivative instruments that are not designated as effective hedging instruments are classified as current or non-current or separated into current and non-current portions based on an assessment of the facts and circumstances (i.e., the underlying contracted cash flows).

Where the Group expects to hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond 12 months after the end of the reporting period, the derivative is classified as non-current (or separated into current and non-current portions) consistently with the classification of the underlying item.
Embedded derivatives that are not closely related to the host contract are classified consistently with the cash flows of the host contract.
Derivative instruments that are designated as, and are effective hedging instruments, are classified consistently with the classification of the underlying hedged item. The derivative instruments are separated into current portions and non-current portions only if a reliable allocation can be made.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average basis and, in the case of finished goods, comprises direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Cash and cash equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired.

For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including time deposits, and assets similar in nature to cash, which are not restricted as to use.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

2.4 Summary of Significant Accounting Policies (Continued)

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in profit or loss.

Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Group operates.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

when the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

2.4 Summary of Significant Accounting Policies (Continued)

Income tax (Continued)

Deferred tax assets are recognised for all deductible temporary differences and the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:

when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Revenue recognition

Revenue from contracts with customers

Revenue from contracts with customers is recognised when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

(a) Sale of iron ores, coals and stone products

Revenue from the sale of iron ores, coals and stone products is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of these products.

Certain of the Group’s products are provisionally priced at the date when revenue is recognised; however, substantially all iron ore sales are reflected at final prices in the results for the year. The final selling price for all provisionally priced products is based on the price for the quotational period stipulated in the contract. Final prices for iron ores are normally determined between 30 and 60 days after delivery to the customer. The change in value of the provisionally priced receivable is based on the relevant forward market prices and is recognised in revenue from other sources.

(b) Shipping services

For Cost and Freight (“CFR”) arrangements, the Group is responsible for providing shipping services (as principal) after the date that the Group transfers control of the iron ore to its customers. The Group, therefore, has a separate performance obligation for shipping services which are provided solely to facilitate the sale of the commodities. The transaction price is allocated to the iron ore and shipping services using the relative stand-alone selling price method. The output method is used for measuring progress of the shipping services because there is a direct relationship between the Group’s effort and the transfer of service to the customer. The Group recognises revenue on the basis of the time elapsed relative to the total expected time to complete the service.

Revenue from providing shipping services is recognised over time as the customer simultaneously receives and consumes the benefits provided by the Group.

100

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Revenue recognition (Continued)

Revenue from other sources

(a) Quotation period price adjustments

A proportion of the Group’s sales are provisionally priced, where the final price is referenced to a future market-based (Platts) index price. Adjustment to the sales price occurs based on movements in the index price up to the end of the quotational period (QP). These are referred to as provisional pricing arrangements and are such that the selling price for the iron ore is determined on a specified future date after shipment to the customer. Adjustments to the sales price therefore occur up until the end of the QP. The period between provisional pricing and the end of the QP is generally between one and three months. For those provisional pricing arrangements, any future changes that occur over the QP are embedded within trade receivables. Given the exposure to the commodity price, these provisionally priced trade receivables are measured at fair value through profit or loss (Note 17). Subsequent changes in the fair value of provisionally priced trade receivables are recognised in revenue but are presented separately from revenue from contracts with customers.

(b) Gain or loss on iron ore futures/swap contracts

The Group’s designated hedging executives are responsible for managing the Group’s exposure over iron ore price fluctuation by entering into iron ore futures and swaps contracts. Net gain or loss from those hedging tools to manage the operational risks that may arise from the selling of iron ore is recognised as revenue from other sources.

Other income

Interest income is recognised on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.

Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the costs, for which it is intended to compensate, are expensed.

Contract liabilities

A contract liability is recognised when a payment is received or a payment is due (whichever is earlier) from a customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue when the Group performs under the contract (i.e., transfers control of the related goods or services to the customer).

101

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

2.4 Summary of Significant Accounting Policies (Continued)

Employee benefits

The Group’s employer contributions vest fully with the employees when contributed into the Mandatory Provident Fund retirement benefit scheme (the “MPF Scheme”) in accordance with the rules of the MPF Scheme. Where employees leave the scheme prior to the full vesting of the employer’s contributions, the amount of forfeited contributions cannot be used to reduce the contributions payable by the Group.

The employees of the Group’s subsidiaries which operates in Mainland China are required to participate in a central pension scheme operated by the local municipal government. These subsidiaries are required to contribute 20% of its payroll costs to the central pension scheme. The contributions are charged to profit or loss as they become payable in accordance with the rules of the central pension scheme.

Borrowing costs

Borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Foreign currencies

Upon the change of presentation currency as disclosed in Note 2.1 to the consolidated financial statements above, the consolidated financial statements are presented in US$. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end of the reporting period. Differences arising on settlement or translation of monetary items are recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item.

In determining the exchange rate on initial recognition of the related asset, expense or income on the derecognition of a non-monetary asset or non-monetary liability relating to an advance consideration, the date of initial transaction is the date on which the Group initially recognises the non-monetary asset or nonmonetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Group determines the transaction date for each payment or receipt of the advance consideration.

102

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

2.4 Summary of Significant Accounting Policies (Continued)

Foreign currencies (Continued)

The functional currencies of certain subsidiaries and an associate are currencies other than US$. As at the end of the reporting period, the assets and liabilities of these entities are translated into US$ at the exchange rates prevailing at the end of the reporting period and their profit or loss are translated into US$ at the relevant average exchange rates for the year, unless exchange rates fluctuated significantly during the year, in which case, the exchange rates prevailing on the dates of transactions are used.

The resulting exchange differences are recognised in other comprehensive income and accumulated in the exchange fluctuation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss when the gain or loss on disposal is recognised.

For the purpose of the consolidated statement of cash flows, cash flows of foreign operating subsidiaries are translated into US$ at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of these subsidiaries which arise throughout the year are translated into US$ at the weighted average exchange rates for the year.

Discontinued operation

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which represents a separate major line of business or geographic area of operations, or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale.

When an operation is classified as discontinued, a single amount is presented in the statement of profit or loss, which comprises the post-tax profit or loss of the discontinued operation and the post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on the disposal, of the assets or disposal group constituting the discontinued operation.

3. Significant Accounting Judgements and Estimates

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets and liabilities affected in the future.

103

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

3. Significant Accounting Judgements and Estimates (Continued)

3.1 Judgements

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the consolidated financial statements:

（a） Determining revenue from contracts with customers on the gross basis

Determining whether revenue of the Group should be reported on a gross or net basis is a continuing assessment of various factors. Since the Group has sole discretion in determining the product pricing, takes full responsibility of the goods sold or services provided to the customers, and also is responsible for the risk associated with the goods before change of control over the goods, and the customers’ complaints and requests, the Group considers that it controls the specified goods or services before their delivery to its customers and is a principal in the transactions. Accordingly, the Group recognises revenue on the gross basis. Otherwise, the Group records the net amount earned as commission income from products sold or services provided.

(b) Identifying performance obligation and determining the timing of satisfaction of shipping services

For the Group’s sales to customers on CFR basis, the Group is responsible for providing shipping services which is a separate performance obligation, other than the transfer of goods. While the Group does not directly operate the vessels, the Group has determined that it is a principal in these arrangements because it controls the specified services before they are provided to the customers. The terms of the Group’s contracts with the service providers give the Group the ability to direct the service providers to provide the specified shipping services on the Group’s behalf.

The Group has also considered that revenue for shipping services is recognised over time because the customers simultaneously receive and consume the benefits from the services provided by the Group. The fact that another entity would not need to re-perform the shipping services that the Group has provided to date demonstrates that the customers simultaneously receive and consume the benefits of the Group’s performance as it performs. The Group determined that the output method is the best method for measuring progress of the shipping services because there is a direct relationship between the Group’s effort and the progress of transfer of services to the customers. The Group recognises revenue on the basis of the time elapsed relative to the total expected time to complete the services.

104

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

3. Significant Accounting Judgements and Estimates (Continued)

3.1 Judgements (Continued)

(c) Determining the lease term of contract with renewal option

The Group has a lease contract that include extension and termination option. The Group applies judgement in evaluating whether or not to exercise the option to renew or terminate the lease, and it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation to the leased asset). The renewal period for lease of the Group’s office premise is not included as part of the lease term as it is not reasonably certain to be exercised.

3.2 Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.

(a) Impairment of other long-term assets

The Group assesses whether there are any indicators of impairment for other long-term assets at the end of each reporting period. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the value in use and its fair value less costs of disposal of the CGUs. The carrying values of the other long-term assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

Impairment assessments (the value in use calculations) require the use of estimates and assumptions such as mine reserves of the Hematite Mine (as defined in Note 15 to the consolidated financial statements), long-term commodity prices (considering current and historical prices, price trends and related factors), discount rates, and the Group’s operating performance (which includes sales volumes of the Group derived from the Hematite Mine). These estimates and assumptions are subject to risk and uncertainty. Therefore, there is a possibility that changes in circumstances will impact these projections, which may impact the recoverable amount of the CGUs. In such circumstances, some or all of the carrying amounts of the CGUs may be impaired with the impact recognised in profit or loss.

105

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

3. Significant Accounting Judgements and Estimates (Continued)

3.2 Estimation uncertainty (Continued)

(b) Provision for expected credit losses on current financial assets at amortised cost

For current financial assets at amortised cost, the ECL is recognised in two stages, the 12-month ECL and lifetime ECL. The 12-month ECL is the portion of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months after the reporting date. However, when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECLs.

(c) Leases – estimating the incremental borrowing rate

The Group cannot readily determine the interest rate implicit in a lease, and therefore, it uses an incremental borrowing rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group “would have to pay”, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when it needs to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating).

106 NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

4. Revenue and Segment Information

The Resources Business is the only reportable business segment of the Group during the years ended 31 December 2020 and 2019.

An analysis of revenue from continuing operations is as follows:

	2020	2019
	US$’000	US$’000
		(Restated)
Revenue from contracts with customers Revenue from other sources: Quotation period price adjustments (Note) – relating to prior year shipments – relating to current year shipments	425,613 724 45,097	275,931 – (684)
Net losses on iron ore futures or swap contracts	(3,939)	(80)
	467,495	275,167

Note: The Group has continued to adopt the provisional pricing arrangements for certain iron ore products and accepting that its sales to customers may be subject to future pricing quotation periods (the “QPs”) that differ from the periods that the inventories are delivered and to fix the iron ore selling prices based on the agreed market pricing formulae taking into account the relevant benchmark prices and indices subject to future QPs. As a result, certain of the Group’s iron ore products are provisionally priced at the date when revenue is recognised. In this regards, the Group’s revenue from the sales of iron ore is measured at the estimated forward commodity prices for the relevant QPs prevailing at the date or for the period when the inventory is sold, being the amount to which the Group is expected to be entitled at the end of future QP. Any future price movements that occurred up till the end of the QP are embedded within the Group’s trade receivables. Subsequent changes in value of the provisionally priced receivables are based on the estimated forward commodity prices for the relevant QPs and is recognised as “revenue from other sources” and included in “quotation period price adjustments” above. Certain of the Group’s revenue recognised during the Reporting Period were still subject to provisional pricing adjustments until they are finalised usually within three months after the inventories were delivered.

107

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

4. Revenue and Segment Information (Continued)

(a) Revenue from contracts with customers

(i) Disaggregated revenue information

enue from contracts with customers Disaggregated revenue information
2020 US$’000	2019 US$’000 (Restated)
Types of goods/service Sale of iron ores 411,318 Sale of coals – Shipping services 14,295	258,319 1,098 16,514
Total revenue from contracts with customers 425,613	275,931
Geographical markets (Note) Mainland China (the “PRC”) 413,846 Others 11,767	271,783 4,148
Total revenue from contracts with customers 425,613	275,931
Timing of revenue recognition Goods transferred at a point in time 411,318 Services transferred over time 14,295	259,417 16,514
Total revenue from contracts with customers 425,613	275,931

Note: Revenue from external customers by geographical location is based on the ports of discharge.

The following table shows the amount of revenue recognised in the current reporting period that was included in the contract liabilities at the beginning of the reporting period:

	2020	2019
	US$’000	US$’000
		(Restated)
Sale of coals	–	1,098

108

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

4. Revenue and Segment Information (Continued)

(a) Revenue from contracts with customers (Continued)

(ii) Performance obligations

Information about the Group’s performance obligations is summarised below:

Sale of iron ores

Each iron ore shipment is governed by a sales contract with the customer, including spot sales agreements and long-term offtake agreements. For the Group’s iron ore sales that are sold under Cost and Freight (“CFR”) Incoterms, whereby the Group is also responsible for providing shipping services, the shipping service represents a separate performance obligation in these situations.

Revenue from iron ore sales is recognised when control of the iron ore passes to the customer, which generally occurs at a point in time when the iron ore is physically transferred onto a vessel. This is the point where title passes to the customer together with significant risks and rewards of ownership.

Shipping services

Under these shipping arrangements, revenue is recognised over time using an output basis to measure progress towards complete satisfaction of the service as this best represents the Group’s performance. This is on the basis that the customer simultaneously receives and consumes the benefits provided by the Group as the services are being provided.

Sale of coals

The performance obligation is satisfied upon delivery of coals, and deposits are normally required before delivery.

Information about major customers

The analysis of the Group’s revenue from continuing operations by major customers (including quotation period price adjustments but excluding gains or losses on iron ore futures or swap contracts), which contributed 10% or more to the Group’s revenue, is as follows:

	2020	2019
	US$’000	US$’000
		(Restated)
Customer A	180,106	81,524
Customer B	101,834	64,642
Customer C	59,635	44,446
Customer D Customer E	51,493 N/A1	N/A 31,231	1

1 The corresponding revenue did not contribute over 10% of the total revenue of the Group from continuing operations.

109

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

4. Revenue and Segment Information (Continued)

(b) Geographical Segment Information

(i) Revenue from external customers

graphical Segment Information Revenue from external customers
	2020	2019
	US$’000	US$’000
		(Restated)
Mainland China	455,867	271,527
Others	11,628	3,640
Total revenue from external customers	467,495	275,167

Revenue from external customers by geographical location is determined based on the ports of discharge.

(ii) The Group’s non-current assets mainly represented the long-term assets relating to the Contract which is operated and based in Hong Kong.

110

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

5. Profit/(Loss) Before Tax from Continuing Operations

The Group’s profit/(loss) before tax from continuing operations is arrived at after charging/(crediting):

		2020	2019
	Notes	US$’000	US$’000
			(Restated)
Cost of inventories sold		455,281	254,439
Shipping costs		14,295	16,514
Net gains on iron ore futures/swap contracts included in
cost of sales		(10,571)	(1,289)
Depreciation of items of property, plant and equipment		27	32
Depreciation of right-of-use assets	14(c)	108	18
Amortisation of other long-term assets included in
cost of sales Lease payments not included in the measurement of	15	1,814	1,114
lease liabilities Auditors’ remuneration (including out-of-pocket expenses)	14(c)	170 300	170 388
Government subsidy – Employment Support Scheme (Note)		(160)	–
Employee benefit expenses (excluding directors’
remuneration (Note 7)):
– Wages, salaries and allowances		1,954	875
– Pension scheme contributions		78	45

Note: Being the aggregate amount of approved subsidies from the COVID-19 Anti-epidemic Fund under the Employment Support Scheme as promulgated by the Government of the Hong Kong Special Administrative Region of the People’s Republic of China, for the Group.

111

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

6. Finance Expense, Net

An analysis of the Group’s net finance expense from continuing operations is as follows:

		2020	2019
	Note	US$’000	US$’000
			(Restated)
Bank interest income		172	1,095
Interest on bank and other borrowings		(1,543)	(2,930)
Guarantee fee		(588)	(247)
Interest on lease liabilities	14(c)	(27)	(5)
Net foreign exchange gain/(losses)		501	(168)
Bank charges		(248)	(162)
Finance expense, net		(1,733)	(2,417)

7. Emoluments of Directors and Senior Management

Details of the remuneration of directors, disclosed pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), section 383(1)(a), (b), (c) and (f) of the Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation, are as follows:

	2020	2019
	US$’000	US$’000
		(Restated)
Fees	102	130
Other emoluments:
Salaries, allowances and benefits in kind	569	744
Discretionary bonuses	65	44
Pension scheme contributions	4	4
	638	792
Total	740	922

112

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

7. Emoluments of Directors and Senior Management (Continued)

(a) Executive directors and non-executive directors

The remuneration paid to executive and non-executive directors during the years ended 31 December 2020 and 2019 were as follows:

		Salaries,
		allowances		Pension
		and benefits	Discretionary	scheme
	Fees	in kind	bonuses	contributions	Total
	US$’000	US$’000	US$’000	US$’000	US$’000
2020
Executive directors:
Mr. Chong Tin Lung, Benny	–	248	21	2	271
Mr. Luk Yue Kan	–	263	44	2	309
Mr. Li Changfa(1)	–	58	–	–	58
Total	–	569	65	4	638
2019 (Restated)
Executive directors:
Mr. Chong Tin Lung, Benny	–	245	–	2	247
Mr. Luk Yue Kan	–	261	44	2	307
Mr. Li Changfa	–	238	–	–	238
	–	744	44	4	792
Non-executive director:
Mr. Wu Wai Leung, Danny(2)	28	–	–	–	28
	28	–	–	–	28
Total	28	744	44	4	820

(1) Retired on 1 March 2020

(2) Resigned on 1 November 2019

113

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

7. Emoluments of Directors and Senior Management (Continued)

(b) Independent non-executive directors

The fees paid to independent non-executive directors during the years ended 31 December 2020 and 2019 were as follows:

	2020	2019
	US$’000	US$’000
		(Restated)
Mr. Tsui King Fai	34	34
Mr. Lee Kwan Hung, Eddie	34	34
Mr. Shin Yick, Fabian	34	34
	102	102

(c) Five highest paid individuals

The five highest paid individuals during the year included two (2019: three) directors, details of whose remuneration are set out in Note 7(a) above. Details of the remuneration for the year of the remaining three (2019: two) highest paid employees who are neither a director nor chief executive of the Company are as follows:

	2020	2019
	US$’000	US$’000
		(Restated)
Salaries, allowances and benefits in kind	452	188
Discretionary bonuses	516	114
Pension scheme contributions	7	3
	975	305

114

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

7. Emoluments of Directors and Senior Management (Continued)

(c) Five highest paid individuals (Continued)

The number of non-director and non-chief executive, highest paid individuals whose remuneration fell within the following bands is as follows:

		Number of	individuals
		2020	2019
HK$1,000,001	to HK$1,500,000	1	2
HK$2,500,001	to HK$3,000,000	1	–
HK$3,500,001	to HK$4,000,000	1	–
		3	2

During the year ended 31 December 2020, no emoluments were paid by the Group to any of the persons who are or were directors of the Company or the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office, as a director of any member of the Group or of any other office in connection with the management of affairs of any member of the Group.

(d) Emoluments of senior management

The emoluments of senior management whose profiles are included in the section headed “Directors’ and Senior Management’s Profile” on page 51 to page 54 of this annual report are already disclosed as the emoluments of directors in Note 7(a) above.

115

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

8. Income Tax Expenses

Hong Kong profits tax has been provided at the rate of 16.5% (2019: 16.5%) on the estimated assessable profits arising in Hong Kong during the year, except for one subsidiary of the Group which is a qualifying entity under the two-tiered profits tax rates regime. The first HK$2,000,000 (2019: HK$2,000,000) of assessable profits of this subsidiary are taxed at the rate of 8.25% (2019: 8.25%) and the remaining assessable profits are taxed at the rate of 16.5% (2019: 16.5%).

The provision for the PRC corporate income tax (“CIT”) is based on the CIT rate applicable to the entities located in or deemed to be operating in Mainland China as determined in accordance with the relevant income tax rules and regulations of the PRC for the years ended 31 December 2020 and 2019.

	2020	2019
	US$’000	US$’000
		(Restated)
Current – Hong Kong
Charge for the year	206	–
Under/(over) provision in prior years	7	(5)
Current – Mainland China	–	35
Total tax charge for the year from continuing operations	213	30

There was no tax charge from discontinued operations for the years ended 31 December 2020 and 2019.

116

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

8. Income Tax Expenses (Continued)

A reconciliation of the tax expense applicable to profit/(loss) before tax at the statutory income tax rate in Hong Kong where the main operating entities of the Group are domiciled to the tax expense at the effective tax rate is as follows:

2020 US$’000	2019 US$’000 (Restated) (3,082) (6,964) (10,046) (1,658) (719) (45) 345 (5) 2,112 30 30 –
Profit/(loss) before tax from continuing operations 1,057 Loss before tax from discontinued operations –
1,057
Tax at the statutory income tax rate (16.5%) 174 Effect of different tax rates (43) Income not subject to tax (189) Expenses not deductible for tax 201 Under/(over) provision in prior years 7 Tax effect of unrecognised tax losses and deductible temporary differences 63
Tax charge at the Group’s effective rate (2020: 20.2%; 2019: (0.3%)) 213
Tax charge from continuing operations at the effective rate (2020: 20.2%; 2019: (1.0%)) 213
Tax charge from discontinued operations at the effective rate –

At the end of the reporting period, the Group has unrecognised tax losses from continuing operations arising from entities operating in Hong Kong of US$465,000 (2019: US$356,000 (restated)) that are available indefinitely for offsetting against future taxable profits of the entities in which the losses arose. The Group also has estimated unrecognised tax losses from continuing operations arising from an entity operating in Mainland China of US$1,686,000 (2019: US$1,577,000 (restated)) that will expire in one to five years for offsetting against future taxable profits. Deferred tax assets have not been recognised in respect of these estimated tax losses and deductible temporary differences as it is considered not probable that sufficient taxable profits will be available against which the unused tax losses can be utilised by the Group.

117

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

9. Discontinued Operations

As disclosed in Note 1 to the consolidated financial statements, on 31 December 2019, the Company entered into the Sale and Purchase Agreement for the Disposal. As at 31 December 2019, the Disposal Group was classified as a disposal group held for sale and as Discontinued Operations. The Disposal Group and the iron concentrate business and gabbro-diabase and stone business are no longer included in Note 4 to the consolidated financial statements for operating segment information. The Disposal had been completed on 30 June 2020 for a total consideration of US$13,916,000.

(a) The results of the Discontinued Operations for the respective period/year are presented below:

	Note	From 1 January 2020 to 30 June 2020 (date of completion of the Disposal) US$’000	2019 US$’000
			(Restated)
Revenue		161	377
Cost of sales		(161)	(366)
Other income and gains		221	220
Selling and distribution costs		(3)	(3)
Administrative expenses		(264)	(1,443)
Impairment losses on property, plant and equipment		–	(2,065)
Impairment losses on intangible assets		–	(8)
Impairment losses on right-of-use assets		–	(10)
Impairment losses on prepayments and other receivables		–	(967)
Impairment losses on other current financial assets		–	(109)
Other expenses		(122)	(2,437)
Gain on disposal of the Disposal Group Finance expense, net	26	243 (75)	– (153)
Loss before tax from the Discontinued Operations		–	(6,964)
Income tax expense		–	–
Loss for the period/year from the Discontinued Operations		–	(6,964)

118

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

9. Discontinued Operations (Continued)

(b) Loss for the period/year from the Discontinued Operations are arrived at after charging/(crediting):

	From 1 January 2020 to 30 June 2020 (date of completion of the Disposal) US$’000	2019 US$’000
		(Restated)
Cost of inventories sold	161	366
Depreciation of items of property, plant and equipment	–	541
Depreciation of right-of-use assets	–	5
Lease payments not included in the measurement of lease liabilities	10	15
Reversal of write-down of inventories to net realisable value	(75)	(103)
Write-back of other payables Loss on disposal of items of property, plant and equipment Estimated possible payments on the outstanding gabbro-diabase resources fee payable Employee benefit expenses (excluding directors’ remuneration) – Wages, salaries and allowances – Pension scheme contributions Gross rental income from leasing of equipment	(1,071) 22 1,104 209 24 (171)	– – 2,274 550 88 (220)

119

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

9. Discontinued Operations (Continued)

(c) The net cash flows incurred by the Discontinued Operations are as follows:

	From 1 January 2020 to 30 June 2020 (date of completion of the Disposal) US$’000	2019 US$’000
		(Restated)
Operating activities	431	(519)
Investing activities	24	(22)
Net cash inflows/(outflows)	455	(541)

120

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

9. Discontinued Operations (Continued)

(d) Earnings/(loss) per share from the Discontinued Operations:

		2020	2019
			(Restated)
Basic and diluted (US$	cents)	–	(0.17)

The calculation of basic earnings/(loss) per share from the Discontinued Operations is based on:

2020	2019 (Restated)
Profit/(loss) Profit/(loss) attributable to ordinary equity holders of the Company from the Discontinued Operations, used in the basic earnings/(loss) per share calculation (US$’000) 13	(6,894)
Shares Weighted average number of ordinary shares in issue during the year used in the basic earnings/(loss) per share calculation (thousands of shares) (Note 11) 4,000,000	4,000,000

Diluted earnings/(loss) per share from the Discontinued Operations was the same as the basic earnings/ (loss) per share from the Discontinued Operations as the Company had no potentially dilutive ordinary shares in issue during the years ended 31 December 2020 and 2019.

(e) Commitments – Property, plant and equipment:

		2020	2019
		US$’000	US$’000
			(Restated)
Contracted,	but not provided for	–	5,532

121

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

9. Discontinued Operations (Continued)

(f) The major classes of assets and liabilities of the Disposal Group classified as held for sale as at 31 December 2019 are as follows:

		2019
	Notes	US$’000
		(Restated)
Assets
Property, plant and equipment	12	26,535
Intangible assets	13	96
Right-of-use assets	14(a)	125
Inventories		75
Other current financial assets		712
Prepayments and other receivables		1,690
Cash and cash equivalents		145
Assets of the Disposal Group classified as held for sale		29,378
Liabilities
Trade and bills payables		(164)
Other current financial liabilities		(14,370)
Contract liabilities		(26)
Other payables and accruals		(320)
Income tax payable		(557)
Other non-current financial liabilities		(73)
Liabilities directly associated with the assets classified as held for sale		(15,510)
Net assets directly associated with the Disposal Group		13,868

122

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

9. Discontinued Operations (Continued)

(f) The major classes of assets and liabilities of the Disposal Group classified as held for sale as at 31 December 2019 are as follows: (Continued)

The non-current assets of the Disposal Group were classified as a disposal group held for sale and are measured at the lower of their carrying amounts and fair values less costs to sell. Fair values less costs to sell were estimated based on the consideration negotiated during the Disposal. The fair values less costs to sell, carrying amounts and impairment provision of the non-current assets of the Disposal Group as at 31 December 2019 are as follows:

			Fair values
		Carrying	less costs	Impairment
		amounts	to sell	provision
	Notes	US$’000	US$’000	US$’000
		(Restated)	(Restated)	(Restated)
Non-current assets of the Disposal Group:
– Property, plant and equipment	12	28,600	26,535	2,065
– Intangible assets	13	104	96	8
– Right-of-use assets	14(a)	135	125	10
Total		28,839	26,756	2,083

10. Dividend

The directors do not recommend the payment of a dividend in respect of the year ended 31 December 2020 (2019: Nil).

123

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

11. Earnings/(loss) per Share Attributable to Ordinary Equity Holders of the Company

The calculation of the basic earnings/(loss) per share amounts is based on the profits/(loss) for the years attributable to ordinary equity holders of the Company, and the weighted average number of ordinary shares of 4,000,000,000 in issue during the years ended 31 December 2020 and 2019.

The calculation of basic earnings/(loss) per share is based on:

	2020	2019
		(Restated)
Profit/(loss)
Profit/(loss) attributable to ordinary equity holders of the Company,
used in the basic earnings/(loss) per share calculation
From continuing operations (US$’000)	818	(3,112)
From discontinued operations (US$’000)	13	(6,894)
	831	(10,006)
Shares Weighted average number of ordinary shares in issue during the year used in the basic earnings/(loss) per share calculation (thousands of shares)	4,000,000	4,000,000

Diluted earnings/(loss) per share was the same as the basic earnings/(loss) per share as the Company had no potentially dilutive ordinary shares in issue during the years ended 31 December 2020 and 2019.

124

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

12. Property, Plant and Equipment

Buildings US$’000	Motor vehicles, fixtures and others US$’000	Machinery US$’000	Mining infrastructure US$’000	Construction in progress US$’000	Total US$’000
Cost: At 1 January 2020 – Additions – Write-off – Exchange realignment –

	207	–	–	–	207
	61	–	–	–	61
	(30)	–	–	–	(30)
	5	–	–	–	5

At 31 December 2020 –
	243	–	–	–	243

Accumulated depreciation and impairment: At 1 January 2020 – Provided for the year – Write-off –

	(60)	–	–	–	(60)
	(27)	–	–	–	(27)
	30	–	–	–	30

At 31 December 2020 –
	(57)	–	–	–	(57)

Net carrying amount: At 31 December 2020 –

	186	–	–	–	186

(Restated) Cost: At 1 January 2019 9,068 Additions – Reclassification to assets held for sale (Note 9(f)) (8,922) Exchange realignment (146)	841 104 (723) (15)	15,212 34 (14,999) (247)	24,070 – (23,680) (390)	58,718 – (57,767) (951)	107,909 138 (106,091) (1,749) 207 (78,254) (573) (2,065) 79,556 1,276 (60) 147
At 31 December 2019 –	207	–	–	–
Accumulated depreciation and impairment: At 1 January 2019 (6,970) Provided for the year (136) Impairment recognised during the year (Note 9(f)) (140) Reclassification to assets held for sale (Note 9(f)) 7,130 Exchange realignment 116	(642) (73) (5) 649 11	(12,453) (364) (172) 12,783 206	(16,669) – (526) 16,925 270	(41,520) – (1,222) 42,069 673
At 31 December 2019 –	(60)	–	–	–
Net carrying amount: At 31 December 2019 –	147	–	–	–

125

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

13. Intangible Assets

Intangible Assets
	Note	US$’000
		(Restated)
Cost:
At 1 January 2019		7,298
Reclassification to assets held for sale	9(f)	(7,180)
Exchange realignment		(118)
At 31 December 2019		–
Accumulated amortisation and impairment:
At 1 January 2019		(7,193)
Impairment recognised during the year	9(f)	(8)
Reclassification to assets held for sale	9(f)	7,084
Exchange realignment		117
At 31 December 2019		–
Net carrying amount:
At 31 December 2019		–

126

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

14. Leases

The Group as a lessee

(a) Right-of-use assets

The carrying amounts of the Group’s right-of-use assets and the movements during the year are as follows:

		Prepaid
		land lease	Office
		payments	premises*	Total
	Note	US$’000	US$’000	US$’000
At 1 January 2020		–	308	308
Depreciation charge		–	(108)	(108)
Exchange realignment		–	–	–
At 31 December 2020		–	200	200
(Restated)
At 1 January 2019		142	–	142
Additions		–	327	327
Depreciation charge		(5)	(18)	(23)
Impairment recognised during the year	9(f)	(10)	–	(10)
Reclassification to assets held for sale	9(f)	(125)	–	(125)
Exchange realignment		(2)	(1)	(3)
At 31 December 2019		–	308	308

The Group has a lease contract for office premise used in its continuing operations. The lease of office premise generally has a lease term of 3 years, and the Group is restricted from assigning and subleasing the leased assets outside the Group.

127

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

14. Leases (Continued)

The Group as a lessee (Continued)

(b) Lease liabilities

The carrying amount of lease liabilities (included under interest-bearing bank and other borrowings (Note 22)) and the movements during the year are as follows:

		2020	2019
	Note	US$’000	US$’000
			(Restated)
Carrying amount at 1 January		311	420
New leases		–	327
Accretion of interest recognised during the year	6	27	5
Payments		(126)	(21)
Reclassification to liabilities held for sale		–	(413)
Exchange realignment		–	(7)
Carrying amount at 31 December		212	311
Analysed into:
Current portion		111	100
Non-current portion		101	211

The maturity analysis of lease liabilities is disclosed in Note 22 to the consolidated financial statements.

(c) The amounts recognised in profit or loss from continuing operations in relation to leases are as follows:

leases are as follows:
		2020	2019
	Notes	US$’000	US$’000
			(Restated)
Interest on lease liabilities	6	27	5
Depreciation charge of right-of-use assets	5	108	18
Expense relating to short-term leases and other leases
with remaining lease terms ended on or before
31 December	5	170	170
Total amount recognised in profit or loss		305	193

128

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

14. Leases (Continued)

The Group as a lessee (Continued)

(d) Extension option

The Group has a lease contract that includes an extension option. This option is negotiated by management to provide flexibility in managing the leased-asset portfolio and it is aligned with the Group’s business needs. Set out below are the undiscounted potential future rental payments relating to periods following the exercise date of the extension option that is not included in the lease terms:

Payable within five years 2020 2019 US$’000 US$’000 (Restated) Extension option expected not to be exercised 254 254	Payable within five years 2020 2019 US$’000 US$’000 (Restated) Extension option expected not to be exercised 254 254
	2019 US$’000 (Restated) 254
Extension option expected not to be exercised 254

(e) The total cash outflow for leases is disclosed in Note 27(c) to the consolidated financial statements.

15. Other Long-Term Assets

Other Long-Term Assets
	2020	2019
	US$’000	US$’000
		(Restated)
At 1 January	17,995	–
Additions	–	19,109
Amortisation provided	(1,814)	(1,114)
At 31 December	16,181	17,995

In 2019, the Company entered into the assignment and novation agreement for a total consideration of US$19,109,000, pursuant to which the contractual rights and obligations to purchase hematite ore from the hematite mine (the “Hematite Mine”) under the then prevailing long term hematite supply agreement will be assigned and novated to the Group, i.e. the Contract as defined in Note 2.4 to the consolidated financial statements. The Contract entitled the Group to purchase the hematite ore from the Hematite Mine in such annual quantity as equals 80% of total available production of the Hematite Mine during each contract year from the effective date of the Contract to the date of permanent cessation of the mining operations at the Hematite Mine.

129

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

15. Other Long-Term Assets (Continued)

Based on the business circumstances, the Group has accounted for the Contract as a contract for ownuse. In view of the future outputs that will be physically delivered by the supplier and purchased by the Group at discount that the obligations under the Contract will not be net settled in cash, the Contract is treated as a non-current asset which is stated at cost less accumulated amortisation and any impairment loss and is amortised to match with the physical delivery of commodities (i.e. the utilisation by the Group) under the Contract.

16. Investment in an Associate

Investment in an Associate
	2020	2019
	US$’000	US$’000
		(Restated)
Share of net assets	244	194

Particulars of the associate are as follows:

			Percentage
			of ownership
		Place of	interest
	Registered	registration and	attributable to
Name	share capital	business	the Group	Principal activities
			(%)
Inner Mongolia	RMB10,000,000	Mainland China	15	Environmental
Nogoonshil Eco-				restoration and
Management Co., Ltd.				ecological greening
				services

The Group’s shareholding in the associate is held through a wholly-owned subsidiary of the Company. The Group nominates one director out of seven in the board of directors of the associate.

130

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

17. Trade and Bills Receivables

Trade and Bills Receivables
	2020	2019
	US$’000	US$’000
		(Restated)
Trade receivables	53,923	1,923
Bills receivables	42,071	40,056
Total	95,994	41,979

The Group’s trading terms with its customers generally require deposits or letters of credit, except for creditworthy customers to whom credits are granted. Generally, on presentation of shipping documents and the provisional invoices, the customers shall settle 95% or more of the invoiced value of the cargoes within prescribed payment due dates and the remaining sales proceeds shall be settled within 30 days from the dates of the final invoices. Sales is invoiced and settled in US$.

The Group seeks to maintain strict control over its outstanding receivables and overdue balances are reviewed regularly by management. The Group has not held any collateral or other credit enhancements over its trade receivable balances.

At 31 December 2020, the Group has transferred certain of bills of exchange amounted to US$13,482,000 (2019: US$2,200,000 (restated)) to a bank with recourse in exchange for cash. The Group continues to be exposed to default risk but does not retain any rights on the use of the bills receivables, including the sales, transfer or pledge of the bills receivables to any third parties. The proceeds from transferring the bills receivables were accounted for as collateralised bank advances and included in interest-bearing bank and other borrowings of US$13,482,000 as at 31 December 2020 (2019: US$2,200,000 (restated)) (Note 22).

As at 31 December 2020 and 2019, the trade and bills receivables were non-interest-bearing.

Set out below is the measurement of trade and bills receivables of the Group as at 31 December 2020 and 2019.

	2020	2019
	US$’000	US$’000
		(Restated)
Trade and bills receivables
– at amortised cost	142	6,157
– at fair value through profit or loss (Note)	95,852	35,822
Total	95,994	41,979

131

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

17. Trade and Bills Receivables (Continued)

Note: The Group’s trade and bills receivables include provisionally priced receivables relating to sales of iron ore where the iron ore selling prices are determined based on the agreed market pricing formulae taking into account the relevant benchmark prices and indices subject to future QPs that differ from the periods that the inventories are delivered. Under IFRS 9, these provisionally priced receivables are measured at the estimated forward commodity prices for the relevant QPs and amounted to US$95,852,000 at 31 December 2020 (2019: US$35,822,000 (restated)) and were stated at the fair value.

An ageing analysis of the trade receivables as at the end of the reporting periods, based on the invoice date, net of loss allowance, is as follows:

			2020	2019
			US$’000	US$’000
				(Restated)
Within	3	months	53,923	1,923

The Group applies the IFRS 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for all trade receivables measured at amortised cost. The Group’s trade receivables that were past due as at 31 December 2020 and 2019 have been settled up to the date of this report, therefore, the credit risk related to the receivables at amortised cost were considered to be immaterial.

18. Other Current Financial Assets

Set out below is an overview of other current financial assets of the Group as at 31 December 2020 and 2019.

		2020	2019
	Notes	US$’000	US$’000
			(Restated)
Other current financial assets at fair value
through profit or loss
– Iron ore futures or swap contracts	(a)	–	2,360
Other current financial assets at amortised cost
– Deposits and other receivables	(b)	3,944	10,620
		3,944	12,980
Impairment allowance	(b)	(1,686)	(1,577)
Total		2,258	11,403

132

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

18. Other Current Financial Assets (Continued)

The movements in impairment allowance of other current financial assets at amortised cost for the year is as follows:

		2020	2019
	Note	US$’000	US$’000
			(Restated)
At 1 January		1,577	–
Impairment recognised during the year	(b)	–	1,595
Exchange realignment		109	(18)
At 31 December		1,686	1,577

Notes:

(a) As at 31 December 2020, the Group did not have any open position of iron ore futures or swap contracts (2019: 505,000 tonnes expired by the end of February 2020 with a positive contract value of US$2,360,000).
(b) As at 31 December 2020, the deposits and other receivables mainly represented a trade deposit to a supplier with a net carrying amount of US$1,303,000 (2019: US$3,154,000 (restated)).

In a prior year, the Group entered into a coal purchase agreement (the “Coal Purchase Agreement”) for the supply of coal. Pursuant to the Coal Purchase Agreement, the Group had paid the contractual deposit (the “Coal Deposit”) which was refundable in full to the Group upon the expiry of the Coal Purchase Agreement. The Coal Purchase Agreement expired in 2018. Amid fragile global economic outlook under the COVID-19 pandemic, this poses a greater risk and difficulty for the outstanding amount of the Coal Deposit to be repaid in full. In view of the greater uncertainty and taken into account the actions in progress to prompt for the settlement, an impairment allowance of US$1,595,000 (restated) was provided during the year ended 31 December 2019.

133

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

19. Restricted Bank Deposits

Restricted Bank Deposits
		2020	2019
	Notes	US$’000	US$’000
			(Restated)
Restricted bank deposits to secure the issuance of
letters of credit Restricted bank deposits to secure an interest-bearing	(a)	4,905	13,243
bank borrowing	(b)	–	32,102
		4,905	45,345

Notes:

(a) As at 31 December 2020, the balance represented bank deposits restricted by banks to secure the issuance of letters of credit. The restricted bank deposits amounted to US$4,905,000 will be utilised or released upon the settlement of the letters of credit, which will be within twelve months from the end of the reporting period and are therefore classified as current assets (2019: US$13,243,000 (restated)). The restricted bank deposits were denominated in US$.
(b) As at 31 December 2019, the Group had aggregated restricted bank deposits of HK$250,000,000 (equivalent to US$32,102,000 (restated)) to secure an interest-bearing bank borrowing (Note 22).

134

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

20. Cash and Cash Equivalents

Cash and Cash Equivalents
	2020	2019
	US$’000	US$’000
		(Restated)
Cash and bank balances	2,158	2,211
Time deposits	13,032	10,600
Cash and cash equivalents	15,190	12,811

The Group’s cash and cash equivalents are denominated in the following currencies as at 31 December 2020 and 2019:

2020 US$’000	2019 US$’000 (Restated)
Cash and cash equivalents denominated in: US$ 13,162 HKD 1,523 RMB 505 Singapore Dollar –	11,746 582 482 1
15,190	12,811

The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made for varying periods ranging from one day to three months depending on the immediate cash requirements of the Group, and earn interest at the respective short term time deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default.

The carrying amounts of the cash and bank balances in the consolidated statement of financial position approximate to their fair values.

135

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

21. Trade and Bills Payables

Certain of the Group’s purchases are settled by letters of credit up to a tenor of 120 days. As at 31 December 2020, the Group’s bills payables amounted to US$27,705,000 (2019: US$26,434,000 (restated)). An ageing analysis of the trade and bills payables as at the end of the reporting periods, based on the invoice date, is as follows:

			2020	2019
			US$’000	US$’000
				(Restated)
Within	3	months	81,784	36,660

The Group’s trade and bills payables were non-interest-bearing as at 31 December 2020 and 2019.

Set out below is the measurement of trade and bills payables of the Group as at 31 December 2020 and 2019.

	2020	2019
	US$’000	US$’000
		(Restated)
Trade and bills payables
– at amortised cost	332	6,752
– at fair value through profit or loss (Note)	81,452	29,908
Total	81,784	36,660

Note: The Group’s trade and bills payables include provisionally priced payables relating to purchase of iron ore where the iron ore purchasing prices are determined based on the agreed market pricing formulae taking into account the relevant benchmark prices and indices subject to future QPs that differ from the periods that the inventories are delivered. Under IFRS 9, these provisionally priced payables are measured at the estimated forward commodity prices for the relevant QPs and amounted to US$81,452,000 at 31 December 2020 (2019: US$29,908,000 (restated)) and were stated at the fair value.

136

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

22. Interest-Bearing Bank and Other Borrowings

Interest-Bearing Bank and Other Borrowings	r Borrowings	r Borrowings
2020 Effective interest rate Notes (%) US$’000	2020		2019

	Effective		Effective interest rate (%) US$’000 (Restated)

		US$’000


Current Bank borrowings secured by bills receivables 17 1.1 Other borrowing – unsecured 6.0 Other borrowing – secured – Bank borrowing secured and repayable on demand – Lease liabilities 14(b) 8.6			2.7 2,200 10.0 5,000 10.0 25,040 3.7 32,102 8.6 100

		13,482
		6,819
		–
		–
		111

			64,442
		20,412

Non-current Lease liabilities 14(b) 8.6 Other borrowing – secured –			8.6 211 6.0 10,058

		101
		–

			10,269
		101

Total			74,711
		20,513

137

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

22. Interest-Bearing Bank and Other Borrowings (Continued)

Interest-Bearing Bank and Other Borrowings(Continued)
	2020	2019
	US$’000	US$’000
		(Restated)
Analysed into:
Bank borrowings repayable within one year or on demand	13,482	34,302
Other borrowings repayable:
Within one year	6,930	30,140
In the second year	101	10,168
In the third to fifth years, inclusive	–	101
	7,031	40,409
	20,513	74,711

Note: As at 31 December 2020, all the borrowings were denominated in HK$ except for the bank borrowings secured by bills receivables which were denominated in US$. As at 31 December 2019, except for the unsecured other borrowing and the bank borrowings secured by bills receivables of US$5,000,000 (restated) and US$2,200,000 (restated) respectively, which were denominated in US$, all the borrowings were denominated in HK$.

23. Share Capital

Shares
2020 HK$’000	2019 HK$’000
Authorised: 10,000,000,000 ordinary shares of HK$0.1 each 1,000,000	1,000,000
US$’000	US$’000 (Restated)
Issued and fully paid: 4,000,000,000 ordinary shares of HK$0.1 each, totally HK$400,000,000 46,890	51,338

As explained in Note 2.1 to the consolidated financial statements, the Company changed the functional currency and presentation currency from RMB to US$ with effect from 1 July 2020. As a result, the translation effect has led to a decrease in share capital of the Company by US$4,448,000 during the year ended 31 December 2020.

138

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

24. Reserves

The amounts of the Group’s reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes in equity on page 74 of the consolidated financial statements.

25. Share Option Schemes

The Company adopted a new share option scheme (the “2020 Share Option Scheme”) at the annual general meeting held on 12 June 2020 to enable it to grant share options (“2020 Scheme Options”) as incentives or rewards to eligible participants for their contribution to the Group. Eligible participants of the 2020 Share Option Scheme include the directors (including independent non-executive directors) of the Group or any entities in which the Group holds an equity interest (“Invested Entity”), employees of the Group or any Invested Entity, suppliers of goods or services to the Group or any Invested Entity, customers of the Group or any Invested Entity, any person or entity providing design, research, development or other technological support to the Group or any Invested Entity, the shareholders of the Group or any Invested Entity, any non-controlling shareholder in the Company’s subsidiaries, any advisor (professional or otherwise) or consultant to any area of business or business development of the Group or any Invested Entity, any person seconded or nominated by the Group to represent the Group’s interest in any of the Invested Entity and any other group of classes of participants who have contributed or may contribute by way of joint venture, business alliance or other business arrangement to the development and growth of the Group. Unless otherwise cancelled or amended, the 2020 Share Option Scheme will remain in force for a period of 10 years commencing from 12 June 2020 and ending on 11 June 2030.

The maximum number of unexercised 2020 Scheme Options currently permitted to be granted under the 2020 Share Option Scheme and any other share option scheme of the Company is an amount equivalent, upon their exercise, to 30% of the shares of the Company in issue at any time. In addition to the 30% limit set out above, the total number of shares which may be issued upon exercise of all 2020 Scheme Options to be granted under the 2020 Share Option Scheme and any other share option scheme of the Company must not in aggregate exceed 10% of the Company’s shares in issue as at the date of approval of the 2020 Share Option Scheme, which is equivalent to a maximum of 400,000,000 shares based on the number of Company’s shares in issue as at 12 June 2020 of 4,000,000,000 shares, unless otherwise approved by the shareholders of the Company in a general meeting. Options lapsed in accordance with the terms of the 2020 Share Option Scheme will not be counted for the purpose of calculating the 10% limit.

139

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

25. Share Option Schemes (Continued)

The maximum number of shares issuable under 2020 Scheme Options to each eligible participant in the 2020 Share Option Scheme within any 12-month period is limited to 1% of the shares of the Company in issue at any time. Any further grant of 2020 Scheme Options in excess of this limit is subject to shareholders’ approval in a general meeting.

2020 Scheme Options granted to a director, chief executive or substantial shareholder of the Company, or to any of their associates, are subject to approval in advance by the independent non-executive directors. In addition, any 2020 Scheme Options granted to a substantial shareholder or an independent non-executive director of the Company, or to any of their associates, in excess of 0.1% of the shares of the Company in issue at any time or with an aggregate value (based on the price of the Company’s shares at the date of grant) in excess of HK$5 million, within any 12-month period, are subject to shareholders’ approval in advance in a general meeting.

The offer of a grant of 2020 Scheme Options may be accepted within 21 days from the date of offer, upon payment of a nominal consideration of HK$1 in total by the grantee. The exercise period of 2020 Scheme Options granted is determinable by the directors, save that such period must not exceed 10 years from the date of grant of 2020 Scheme Options.

The exercise price of 2020 Scheme Options is determined by the directors, but may not be less than the highest of (i) the Stock Exchange closing price of the Company’s shares on the date of offer of 2020 Scheme Options; (ii) the average Stock Exchange closing price of the Company’s shares for the five trading days immediately preceding the date of offer; and (iii) the nominal value of the Company’s shares.

The 2020 Scheme Options do not confer rights on the holders to dividends or to vote at shareholders’ meetings.

No option has been granted under the 2020 Share Option Scheme during the year ended 31 December 2020. As at the beginning and the end of the reporting period and the date of approval of these financial statements, no option was outstanding under the 2020 Share Option Scheme. Accordingly, the total number of the Company’s shares available for issue upon exercise of the options that may be granted under the 2020 Share Option Scheme and any other share option scheme of the Company is 400,000,000 shares, representing 10% of the Company’s shares in issue as at the date of this annual report.

The Company previously adopted a share option scheme on 9 April 2010, and no share option has been granted thereunder since adoption. The old share option scheme was terminated with effect from 12 June 2020, pursuant to the resolution passed at the aforesaid annual general meeting of the Company held on the same date.

140 NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

26. Disposal of Subsidiaries

As set out in Note 1 to the consolidated financial statements, the Group completed the Disposal of the Disposal Group at a cash consideration of US$13,916,000 on 30 June 2020 and ceased and discontinued the Discontinued Operations. The following are the assets and liabilities in respect of the Disposal Group on the date of completion of the Disposal.

	Note	US$’000
Net assets disposed of: Property, plant and equipment Intangible assets Right-of-use assets Inventories Trade receivables Other current financial assets Prepayments and other receivables Cash and cash equivalents Trade payables		26,101 95 123 6 4 654 1,643 598 (153)
Other current financial liabilities Other payables and accruals Income tax payable		(15,268) (208) (551)
Other non-current financial liabilities Non-controlling interests		(70) 699
Gain on disposal of the Disposal Group	9(a)	13,673 243
Satisfied by:
Cash		13,916

141

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

26. Disposal of Subsidiaries (Continued)

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of the Disposal Group is as follows:

==> picture [470 x 103] intentionally omitted <==

----- Start of picture text -----

|||
|---|---|
|2020|
|US$’000|
|Cash consideration|13,916|
|Cash received in 2019|(128)|
|Cash and bank balances disposed of|(598)|
|Net inflow of cash and cash equivalents in respect of the disposal of the Disposal Group|13,190|

----- End of picture text -----

27. Note to the Consolidated Statement of Cash Flows

(a) Major non-cash transactions

During the year ended 31 December 2020, the non-controlling equity holder of a subsidiary of the Group had subscribed for new shares in that subsidiary, which were satisfied partially in cash and partially by way of the issue of a financial instrument of US$500,000 to that subsidiary. The said financial instrument has been recognised as an addition to the Group’s other current financial assets during the year, which was non-cash in nature.

During the year ended 31 December 2019, the Group had non-cash additions to right-of-use assets and lease liabilities of US$327,000 (restated) and US$327,000 (restated), respectively, in respect of lease arrangements for office premises.

(b) Changes in liabilities arising from financing activities

==> picture [447 x 238] intentionally omitted <==

----- Start of picture text -----

|||
|---|---|
|Interest-|
|bearing bank|
|and other|
|borrowings|
|US$’000|
|At 1 January 2020|74,711|
|Changes from financing cash flows|(53,697)|
|Foreign exchange movement|(501)|
|At 31 December 2020|20,513|
|(Restated)|
|At 1 January 2019|32,330|
|Changes from financing cash flows|42,138|
|New leases|327|
|Reclassification to liabilities held for sale|(413)|
|Foreign exchange movement|329|
|At 31 December 2019|74,711|

----- End of picture text -----

142

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

27. Note to the Consolidated Statement of Cash Flows (Continued)

(c) Total cash outflow for leases

The total cash outflow for leases included in the consolidated statement of cash flows is as follows:

	2020	2019
	US$’000	US$’000
		(Restated)
Within operating activities	(180)	(185)
Within investing activities	–	–
Within financing activities	(126)	(21)
	(306)	(206)

28. Related Party Transactions

(a) In addition to the transactions detailed elsewhere in these financial statements, the Group had the following transactions with related parties during the year:

2020
Notes
US$’000

2019
US$’000
(Restated)

Continuing operations
Guarantee fee paid and payable to a substantial
shareholder of the Company
(i)
588
Purchases of iron ores from an indirect wholly-owned
subsidiary of a 30%-controlled company of a substantial
shareholder of the Company
(ii)
–
Acquisition of the contractual rights and obligations under
the Contract from a 30%-controlled company of a
substantial shareholder of the Company
(iii)
–

247
4,085
19,109

143

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

28. Related Party Transactions (Continued)

(a) (Continued)

Notes:

(i) A substantial shareholder of the Company (the “Guarantor”) has guaranteed and indemnified the obligations of Ace Profit under the Contract mentioned in Note 15 to the consolidated financial statements with a maximum liability of US$75,000,000. The Group shall pay a capped sum of HK$5,000,000 to the Guarantor in respect of each calendar year from the date of the guarantee becoming unconditional until none of the obligations and undertakings of the Guarantor remains in full force and effect. The Group incurred the guarantee fee of US$588,000 for the year ended 31 December 2020 (2019: US$247,000 (restated)).

As a form of financial assistance (as defined in the Listing Rules) received by the Group from a connected person of the Company, the provision of the above guarantee and indemnity (together with the above maximum annual fee) by the Guarantor was conducted on normal commercial terms and not secured by the assets of the Group. Accordingly, such financial assistance is fully exempt from the disclosure and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

(ii) During the year ended 31 December 2019, the purchases from an indirect wholly-owned subsidiary of a 30%-controlled company of a substantial shareholder of the Company were made according to the published prices and conditions offered by that company to its customers. These transactions constitute continuing connected transactions in the year ended 31 December 2019 which had already been disclosed in the Report of Directors in the 2019 Annual Report of the Company pursuant to Chapter 14A of the Listing Rules.
(iii) In 2019, the Assignment and Novation Agreement was entered into between the Company and Shougang Concord International Enterprises Company Limited (“Shougang Concord International”), a 30%-controlled company of a substantial shareholder and hence, a connected person of the Company. Pursuant to the Assignment and Novation Agreement, Shougang Concord International and its subsidiary SCIT Trading Limited shall assign and novate their respective rights and obligations under the Contract to the Company and Ace Profit respectively (Note 15). The Assignment and Novation Agreement and the transactions contemplated thereunder had been approved by the independent shareholders in the extraordinary general meeting of the company held on 24 July 2019. This transaction constitutes a connected transaction which had already been disclosed in the Report of Directors in the 2019 Annual Report of the Company pursuant to Chapter 14A of the Listing Rules.

(b) Outstanding balances with related parties

As of 31 December 2020, the Group had an outstanding balance due to a substantial shareholder of the Company of US$55,000 (2019: US$247,000 (restated)). These balances were unsecured, interestfree and repayable on demand. Except as disclosed elsewhere in the consolidated financial statements, there were no material balances with related parties as at 31 December 2020 and 2019.

(c) Compensation of key management personnel

Other than the emoluments paid to the directors and the chief executive of the Company (being the key management personnel of the Company) as disclosed in Note 7 to the consolidated financial statements, there was no significant compensation arrangement during the year.

144

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

29. Financial Instruments by Category

The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows:

	2020	2019
	US$’000	US$’000
		(Restated)
Financial assets
Financial assets at fair value through profit or loss
Trade and bills receivables	95,852	35,822
Other current financial assets	–	2,360
	95,852	38,182
Financial assets at amortised cost
Trade and bills receivables	142	6,157
Other current financial assets	2,258	9,043
Restricted bank deposits	4,905	45,345
Cash and cash equivalents	15,190	12,811
	22,495	73,356
Total	118,347	111,538
Financial liabilities
Financial liabilities at fair value through profit or loss
Trade and bills payables	81,452	29,908
Financial liabilities at amortised cost
Trade and bills payables	332	6,752
Other current financial liabilities	291	1,286
Interest-bearing bank and other borrowings	20,513	74,711
	21,136	82,749
Total	102,588	112,657

145

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

30. Fair Value and Fair Value Hierarchy of Financial Instruments

Fair Value

The carrying amounts and fair values of the Group’s financial instruments, other than those with carrying amounts that reasonably approximate to fair values, are as follows:

Carrying amounts	Fair values	Fair values
2020 2019	2020		2019
US$’000 US$’000	US$’000	US$’000
(Restated)		(Restated)
Financial assets Trade and bills receivables at fair value through profit or loss 95,852 35,822	95,852		35,822
Other current financial assets at fair value through profit or loss – 2,360	–		2,360
95,852 38,182	95,852		38,182
Financial liabilities Trade and bills payables at fair value through profit or loss 81,452 29,908	81,452		29,908
Non-current portion of interest-bearing bank and other borrowings (other than lease liabilities) – 10,058	–		9,618
81,452 39,966	81,452		39,526

Management has assessed that the fair values of trade and bills receivables at amortised cost, other current financial assets at amortised cost, restricted bank deposits, cash and cash equivalents, trade and bills payables at amortised cost, other current financial liabilities at amortised cost and the current portion of interest-bearing bank and other borrowings (other than lease liabilities) approximate to their carrying amounts largely due to the short-term maturities of these instruments.

146

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

30. Fair Value and Fair Value Hierarchy of Financial Instruments (Continued)

Fair Value (Continued)

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

The fair values of trade and bills receivables and trade and bills payables classified as financial assets at fair value through profit and loss and financial liabilities at fair value through profit and loss respectively are determined by incorporating market observable inputs sourced from applicable Platts Iron Ore Index Price (“Platts Index”), which is a source of benchmark price assessments in the physical commodity markets, published daily or regularly for iron ore products and quoted on a US$ per dry metric tonne basis.
The Group enters into derivative financial instruments with various counterparties. Derivative financial instruments, including principally commodities futures or swap contracts, are measured with reference to the commodity’s quoted market prices.
The fair values of the non-current portion of interest-bearing bank and other borrowings (other than lease liabilities) had been calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and remaining maturities. The changes in fair value as a result of the Group’s own non-performance risk for interest-bearing bank and other borrowings (other than lease liabilities) as at 31 December 2019 were assessed to be insignificant.

147

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

30. Fair Value and Fair Value Hierarchy of Financial Instruments (Continued)

Fair value hierarchy

The following tables illustrate the fair value measurement hierarchy of the Group’s financial instruments:

(a) Assets and liabilities measure at fair value

	Fair value measurement using Quoted prices in active markets Significant observable inputs Significant unobservable inputs (Level 1) (Level 2) (Level 3) Total US$’000 US$’000 US$’000 US$’000
2020 Financial assets: Trade and bills receivables



	– 95,852 – 95,852

Financial liabilities: Trade and bills payables

	– 81,452 – 81,452

2019 (Restated) Financial assets: Trade and bills receivables Other current financial assets at fair value through profit or loss	– 35,822 – 35,822 2,360 – – 2,360 2,360 35,822 – 38,182 – 29,908 – 29,908

Financial liabilities: Trade and bills payables

148

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

30. Fair Value and Fair Value Hierarchy of Financial Instruments (Continued)

Fair value hierarchy (Continued)

(b) Assets and liabilities for which fair values are disclosed

The Group did not have any non-current financial assets or liabilities disclosed at fair values as at 31 December 2020.

2019 (Restated)

	Fair value measurement using Quoted prices in active markets Significant observable inputs Significant unobservable inputs (Level 1) (Level 2) (Level 3) Total US$’000 US$’000 US$’000 US$’000
Financial assets	– – – –
Financial liabilities: Non-current portion of interest- bearing bank and other borrowings (other than lease liabilities)	– 9,618 – 9,618

149

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

31. Financial Risk Management Objectives and Policies

The financial assets of the Group mainly include trade and bills receivables and other current financial assets, restricted bank deposits and cash and cash equivalents, which arise directly from its operations. Financial liabilities of the Group mainly include trade and bills payables, other current financial liabilities and interestbearing bank and other borrowings.

The Group also enters into derivative transactions, including principally commodities futures or swap contracts. The purpose is to manage the commodity price risk arising from the Group’s operations.

The main risks arising from the Group’s financial instruments are foreign currency risk, credit risk, liquidity risk and commodity price risk.

The Group’s financial risk management policies seek to ensure that adequate resources are available to manage the above risks and to maximise value for its shareholders. The board of directors reviews and agrees policies for managing each of these risks and they are summarised below.

Foreign currency risk

As mentioned in Notes 1 and 2.1 to the consolidated financial statements, the Group completed the Disposal on 30 June 2020. Since then, the Company’s principal operating subsidiaries carry out business activities and transactions mainly in US$, being the currency that mainly influences the underlying transactions, events and business conditions. Therefore, the functional currency of the Company has been changed from RMB to US$ upon completion of the Disposal. The change was considered an important step to reducing the foreign currency exposure or risk of the Group and the impact of any fluctuations in the exchange rates of US$ against other foreign currencies to the Group’s financial results which is beyond the control of the Group.

The Hong Kong dollar is pegged to the United States dollar, the Group’s exposure to foreign currency risk in respect of the bank balances and interest-bearing borrowings denominated in HKD is considered to be minimal.

150

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

31. Financial Risk Management Objectives and Policies (Continued)

Credit risk

Maximum exposure and year-end staging

The tables below show the credit quality and the maximum exposure to credit risk based on the Group’s credit policy, which is mainly based on past due information unless other information is available without undue cost or effort, and year-end staging classification as at 31 December 2020 and 2019. The amounts presented are gross carrying amounts for financial assets.

2020

12-month ECLs Stage 1 US$’000	Lifetime ECLs Simplified Stage 3 approach Total US$’000 US$’000 US$’000
Trade and bills receivables – Other current financial assets at amortised cost – Normal 955 – Doubtful – Restricted bank deposits – Not yet past due 4,905 Cash and cash equivalents – Not yet past due 15,190
	– 142 142

	– – 955
	2,989 – 2,989
	– – 4,905
	– – 15,190

21,050
	2,989 142 24,181

151

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

31. Financial Risk Management Objectives and Policies (Continued)

Credit risk (Continued)

Maximum exposure and year-end staging (Continued)

2019 (Restated)

12-month ECLs Stage 1 US$’000	Lifetime ECLs Stage 3 Simplified approach Total US$’000 US$’000 US$’000
Trade and bills receivables – Other current financial assets at amortised cost – Normal 5,889 – Doubtful – Restricted bank deposits – Not yet past due 45,345 Cash and cash equivalents – Not yet past due 12,811	– 6,157 6,157 – – 5,889 4,731 – 4,731 – – 45,345 – – 12,811
64,045	4,731 6,157 74,933

The credit quality of the other current financial assets at amortised cost is considered to be “normal” when they are not past due and there is no information indicating that the financial assets had a significant increase in credit risk since initial recognition. Otherwise, the credit quality of the financial assets is considered to be “doubtful”.

The Group is expanding its customer bases to minimise concentrations of credit risk in relation to trade receivables by undertaking transactions with a number of customers.

Further quantitative data in respect of the Group’s exposure to credit risk arising from trade receivables are disclosed in Note 17 to the consolidated financial statements.

152

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

31. Financial Risk Management Objectives and Policies (Continued)

Liquidity risk

The Group has a funding and treasury policy to monitor its funding requirements and perform ongoing liquidity reviews. This approach takes into consideration the maturity of its financial instruments, financial assets, projected cash flows from operations and the general working capital requirements of the Group. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the effective use of bank and other borrowings and trade finance and treasury facilities.

The maturity profile of the Group’s financial liabilities as at the end of the reporting period, based on the contractual undiscounted payments, is as follows:

	On	Less than	1 to 5
	demand	1 year	years	Total
	US$’000	US$’000	US$’000	US$’000
2020
Trade and bills payables	81,784	–	–	81,784
Other current financial liabilities	–	291	–	291
Lease liabilities	–	127	106	233
Interest-bearing bank and other borrowings
(excluding lease liabilities)	–	20,542	–	20,542
	81,784	20,960	106	102,850
2019 (Restated)
Trade and bills payables	36,660	–	–	36,660
Other current financial liabilities	–	1,286	–	1,286
Lease liabilities	–	126	232	358
Interest-bearing bank and other borrowings
(excluding lease liabilities)	32,193	34,414	10,412	77,019
	68,853	35,826	10,644	115,323

153

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

31. Financial Risk Management Objectives and Policies (Continued)

Commodity price risk

During the reporting period, the Group continues to manage the exposure over fluctuations in iron ore prices by entering into iron ore futures or swap contracts. The Group’s hedging executives have managed such exposure by execution of approved hedging strategy and hedging instruments. Through these hedging instruments, the Group shall be able to hedge largely against fluctuations in iron ore prices arising from the Resources Business. The pricing mechanism in the Group’s iron ore sales and purchase contracts reflects a reference index price. The reference index price that were mostly adopted by the Group during the years ended 31 December 2020 and 2019 were the Platts Index and 65% Fe CFR North China.

During the reporting period, the Group recognised net losses of approximately US$3,939,000 (2019: US$80,000 (restated)) and net gains of US$10,571,000 (2019: US$1,289,000 (restated)) from hedging transactions in the Group’s revenue and cost of sales, respectively.

The Group has managed its purchase and sales contracts to be settled under the same QPs in order to minimise the business risk arising from iron ore supplies with highly variable iron grade sourced in the fourth quarter of 2020. Therefore, the Group did not have any outstanding iron ore futures or swap contracts as at 31 December 2020 (2019: net purchases of 505,000 tonnes of iron ore).

According to the Group’s provisionally priced iron ore sales and purchase contracts, the final price is referred to the applicable Platts Index or relevant market indices for specified future dates or periods. Therefore, the Group has exposure at the end of the reporting period to the future movements in the iron ore price under provisionally priced sales and purchase of iron ore products and such accounting impact (excluding the financial impact of the hedging instruments) are set out below:

154

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

31. Financial Risk Management Objectives and Policies (Continued)

Commodity price risk (Continued)

Co	mmodity price risk(Continued)
	2020 2019 US$’000 US$’000 (Restated)
On	Revenue
– – On	10% increase in iron ore prices 10,093 3,165 10% decrease in iron ore prices (10,093) (3,165) Cost of Sales
– –	10% increase in iron ore prices (10,111) (8,467) 10% decrease in iron ore prices 10,111 8,467

The sensitivity analysis has illustrated the impact of a 10% increase or decrease in reference index prices on the monetary values of revenue and cost of sales that were subject to provisional pricing at each reporting date, while holding all other variables, including foreign exchange rates, constant. The above sensitivity analysis should therefore be considered as for illustration purpose only.

Capital management

The primary objectives of the Group’s capital management are to safeguard the Group’s ability to continue as a going concern and to maintain healthy capital ratios to support its business and maximise shareholders’ value.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders or raise new capital from its investors. No changes were made in the objectives, policies or processes for managing financial risk during the years ended 31 December 2020 and 2019.

155

NEWTON RESOURCES LTD ANNUAL REPORT 2020

31 December 2020

Notes to the Consolidated Financial Statements

32. Statement of Financial Position of the Company

Information about the statement of financial position of the Company at the end of the reporting period is as follows:

31 December 31 December	1 January
2020 2019	2019
US$’000 US$’000	US$’000
(Restated)	(Restated)
Non-current assets Property, plant and equipment 62 8	6
Current assets Due from subsidiaries 28,413 57,633	57,448
Other current financial assets 78 108	120
Restricted bank deposits – 32,102	31,916
Cash and cash equivalents 1,438 4,033	6,915
Total current assets 29,929 93,876	96,399
Current liabilities Due to subsidiaries – –	22,074
Other current financial liabilities 206 1,157 Other payables and accruals 252 500 Interest-bearing bank and other borrowings – 62,142	403 631 31,916
Income tax payable – 431	438
Total current liabilities 458 64,230	55,462
Net current assets 29,471 29,646	40,937
Total assets less current liabilities 29,533 29,654	40,943
Net assets 29,533 29,654	40,943
Equity Share capital 46,890 51,338	51,338
Reserves (Note) (17,357) (21,684)	(10,395)
Total equity 29,533 29,654	40,943

Director

Chong Tin Lung, Benny Director

Luk Yue Kan

156

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

32. Statement of Financial Position of the Company (Continued)

Note:

A summary of the Company’s reserves is as follows:

	Share		Exchange
	premium	Capital	fluctuation	Accumulated
	account	reserve	reserve	losses	Total
	US$’000	US$’000	US$’000	US$’000	US$’000
At 1 January 2020	111,330	11,623	(10,325)	(134,312)	(21,684)
Profit for the year	–	–	–	311	311
Other comprehensive income for the year:
Exchange differences arising on
translation into presentation currency	–	–	(432)	–	(432)
Total comprehensive income for the year Effect of change in functional currency (Note 2.1)	– (9,646)	– (723)	(432) 10,757	311 4,060	(121) 4,448
At 31 December 2020	101,684	10,900	–	(129,941)	(17,357)
(Restated)
At 1 January 2019	111,330	11,623	(9,681)	(123,667)	(10,395)
Loss for the year	–	–	–	(10,645)	(10,645)
Other comprehensive income for the year:
Exchange differences arising on
translation into presentation currency	–	–	(644)	–	(644)
Total comprehensive income for the year	–	–	(644)	(10,645)	(11,289)
At 31 December 2019	111,330	11,623	(10,325)	(134,312)	(21,684)

In accordance with the articles of association of the Company and the Companies Act (2021 Revision) of the Cayman Islands, the Company’s share premium account is distributable in certain circumstances.

The capital reserve of the Company represented (i) capital injections that were treated as contributions from the equity holders of the Company as part of the group reorganisation for listing; and (ii) the unpaid amount that was waived by the then immediate holding company upon listing.

157

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

31 December 2020

33. Comparative Amounts

As explained in Note 2.1 to the consolidated financial statements, due to the change in presentation currency during the year ended 31 December 2020, the comparative consolidated financial statements have been restated and presented in US$ as if US$ had been the Group’s presentation currency in the prior periods.

34. Approval of the Financial Statements

The consolidated financial statements were approved and authorised for issue by the board of directors on 25 March 2021.

158

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Five-Year Financial Summary

As explained in Note 2.1 to the consolidated financial statements, due to the change in presentation currency during the year ended 31 December 2020, the comparative figures as shown in the five-year financial summary have been restated and presented in US$ as if US$ had been the Group’s presentation currency in the prior periods.

A summary of the results and of the assets, liabilities and non-controlling interests of the Group for the last five financial years, as extracted from the published audited financial statements and restated as appropriate, is set out below:

Results

Results
		For the year ended 31		December
	2020	2019	2018	2017	2016
	US$’000	US$’000	US$’000	US$’000	US$’000
		(Restated)	(Restated)	(Restated)	(Restated)
Revenue	467,495	275,167	46,837	95,625	11,971
Profit/(loss) before tax from continuing operations	1,057	(3,082)	(2,212)	(3,404)	(1,082)
Income tax expenses	(213)	(30)	(8)	(36)	–
Profit/(loss) for the year from
continuing operations	844	(3,112)	(2,220)	(3,440)	(1,082)
Loss for the year from
discontinued operations	–	(6,964)	(14,010)	(3,596)	(77,613)
Profit/(loss) for the year	844	(10,076)	(16,230)	(7,036)	(78,695)

Note: Revenue for the respective years ended 31 December 2016, 2017, 2018, 2019 and 2020 represent that of continuing operations. Further details of the performance of the discontinued operations are presented in Note 9 to the consolidated financial statements.

Assets, Liabilities and Non-controlling Interests

2020 US$’000	As at 31 December 2019 2018 2017 2016 US$’000 US$’000 US$’000 US$’000 (Restated) (Restated) (Restated) (Restated) 18,644 30,108 41,071 39,284 141,055 58,902 77,483 69,652 (119,296) (48,152) (59,395) (46,374) (10,269) (73) (77) (72) 30,134 40,785 59,082 62,490 30,830 41,422 59,732 62,978 (696) (637) (650) (488) 30,134 40,785 59,082 62,490
Non-current assets 16,811 Current assets 118,870 Current liabilities (103,531) Non-current liabilities (101)
Net assets 32,049
Equity attributable to owners of the Company 31,066 Non-controlling interests 983
Total equity 32,049

159

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Glossary of Terms

In this annual report, unless the context otherwise requires, the following expressions have the meanings as mentioned below:

“Ace Profit” Ace Profit Investment Limited（向利投資有限公司）, a limited liability company incorporated in Hong Kong and an indirect wholly-owned subsidiary of the Company with its principal activities being the supply and trading of iron ore “AGM” an annual general meeting of the Company “Articles” the articles of association of the Company, as amended from time to time “Audit Committee” the audit committee of the Company “Board” the board of Directors “CG Code” the Corporate Governance Code contained in Appendix 14 to the Listing Rules “Company” Newton Resources Ltd, a company incorporated in the Cayman Islands with limited liability, and the shares of which are listed on the Main Board of the Stock Exchange “Companies Ordinance” Companies Ordinance (Chapter 622 of the Laws of Hong Kong) “Director(s)” the director(s) of the Company “Disposal” the disposal of the Group’s entire interests in the Disposal Group “Disposal Company” Venca Investments Limited（永佳投資有限公司）, a limited liability company incorporated in the British Virgin Islands and a direct whollyowned subsidiary of the Company prior to the completion of the Disposal “Disposal Group” the Disposal Company and its subsidiaries, including, amongst others, Xingye Mining “FY 2019” or “Corresponding the financial year ended 31 December 2019 Prior Period” “FY 2020” or “Reporting Period” the financial year ended 31 December 2020

160 NEWTON RESOURCES LTD ANNUAL REPORT 2020

Glossary of Terms

“Group” the Company and its subsidiaries collectively “Hematite Mine” the hematite mine situated at Koolan Island, Western Australia “Hematite Ore” the iron ore of high-grade for direct shipping ore sales “HK$” or “HKD” Hong Kong dollar, the lawful currency of Hong Kong “Investment Committee” the investment committee of the Company “Interim Report 2020” the interim report of the Company for the six-month period ended 30 June

“Interim Report 2020” the interim report of the Company for the six-month period ended 30 June 2020 “Koolan” Koolan Iron Ore Pty Limited, a company incorporated in Australia, the registered holder of the Hematite Mine and an indirect wholly-owned subsidiary of MGI “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “MGI” Mount Gibson Iron Limited, a company incorporated in Australia, the

“MGI” Mount Gibson Iron Limited, a company incorporated in Australia, the shares of which are listed on the Australian Securities Exchange “Model Code” the Model Code for Securities Transactions by Directors of Listed Issuers contained in Appendix 10 to the Listing Rules “Mt” megatonne(s)/million tonnes “Nomination Committee” the nomination committee of the Company “Remuneration Committee” the remuneration committee of the Company

161

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Glossary of Terms

“Restated Long Term Hematite Supply Agreement”

the amended and restated Koolan Island long term hematite ore sale agreement entered into by MGI, Koolan, the Company and Ace Profit under a deed of novation, amendment and restatement dated 31 May 2019 among all original parties to the Koolan Island long term ore sale agreement and the Group. Pursuant to the Restated Long Term Hematite Supply Agreement, Koolan shall supply and sell and Ace Profit shall purchase Hematite Ore to be derived from the Hematite Mine in such annual quantity as equals 80% of Koolan’s total available production during each contract year at the agreed market pricing formulae for the period from the effective time of the aforesaid deed of novation, amendment and restatement to the date of permanent cessation of Koolan’s mining operations at the Hematite Mine

“RMB” Renminbi, the lawful currency of the PRC “SFO” Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong “Share(s)” existing ordinary share(s) of HK$0.10 each in the share capital of the Company “Shareholder(s)” holder(s) of issued Share(s) “Stock Exchange” The Stock Exchange of Hong Kong Limited “Substantial Shareholder(s)” has the meaning ascribed to it under the Listing Rules “tonne(s)” equal to 1,000 kilograms “US$” or “USD” the United States dollar, the lawful currency of the United States of America “Xingye Mining” Lincheng Xingye Mineral Resources Co., Ltd（臨城興業礦產資源有限公司）, an indirect non-wholly owned subsidiary of the Company prior to the completion of the Disposal

162 NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Information

Board of Directors

Executive Directors

Mr. Chong Tin Lung, Benny (Chairman) Mr. Luk Yue Kan

Independent Non-executive Directors

Mr. Tsui King Fai Mr. Lee Kwan Hung, Eddie Mr. Shin Yick, Fabian

Board Committees

Audit Committee

Mr. Tsui King Fai (Chairman) Mr. Lee Kwan Hung, Eddie Mr. Shin Yick, Fabian

Remuneration Committee

Mr. Lee Kwan Hung, Eddie (Chairman) Mr. Chong Tin Lung, Benny Mr. Tsui King Fai Mr. Shin Yick, Fabian

Nomination Committee

Mr. Lee Kwan Hung, Eddie (Chairman) Mr. Chong Tin Lung, Benny Mr. Tsui King Fai Mr. Shin Yick, Fabian

Registered Office

P.O. Box 309 Ugland House Grand Cayman, KY1-1104 Cayman Islands

Principal Place of Business in Hong Kong

49th Floor, One Exchange Square 8 Connaught Place Central, Hong Kong

Principal Share Registrar and Transfer Office

Suntera (Cayman) Limited Suite 3204, Unit 2A, Block 3, Building D P.O. Box 1586, Gardenia Court, Camana Bay Grand Cayman, KY1-1100 Cayman Islands

Hong Kong Branch Share Registrar and Transfer Office

Tricor Investor Services Limited Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

Investment Committee

Mr. Chong Tin Lung, Benny (Chairman) Mr. Luk Yue Kan

Company Secretary

Mr. Luk Yue Kan

163

NEWTON RESOURCES LTD ANNUAL REPORT 2020

Corporate Information

Auditor

Ernst & Young Certified Public Accountants Public Interest Entity Auditor registered in accordance with the Financial Reporting Council Ordinance 22/F, CITIC Tower 1 Tim Mei Avenue Central, Hong Kong

Solicitors

Chiu & Partners 40th Floor, Jardine House 1 Connaught Place Hong Kong

Investor Information

For more information about the Group, please contact the Investor Relations Department at:

Newton Resources Ltd 49th Floor, One Exchange Square 8 Connaught Place Central, Hong Kong Tel : (852) 2521 8168 Fax : (852) 2521 8117 Email : [email protected]

Website

www.newton-resources.com

Principal Bankers

Agricultural Bank of China Limited, Hong Kong Branch Bank of Communications Co., Ltd. Hong Kong Branch Standard Chartered Bank (Hong Kong) Limited

Stock Code

Hong Kong Stock Exchange 1231

Share Information

Board lot size: 2000

164

NEWTON RESOURCES LTD ANNUAL REPORT 2020

==> picture [177 x 38] intentionally omitted <==

49th Floor, One Exchange Square, 8 Connaught Place, Central, Hong Kong Tel: (852) 2521 8168 Fax: (852) 2521 8117

www.newton-resources.com

==> picture [183 x 41] intentionally omitted <==

AI assistant

Newton Resources Ltd — Annual Report 2020

49785_rns_2021-04-21_ab6d0e3d-ac07-49f2-8005-f12efdb268fa.pdf

Contents

Chairman’s Statement

Chairman’s Statement

Dear Shareholders,

Chairman’s Statement

Chong Tin Lung, Benny

Management Discussion and Analysis

Management Discussion and Analysis

Financial Highlights

Management Discussion and Analysis

Our Resources Business

Management Discussion and Analysis

Our Resources Business (Continued)

Management Discussion and Analysis

Our Resources Business (Continued)

Business and Operational Review

Our Markets and Customers

Management Discussion and Analysis

Business and Operational Review (Continued)

Our Markets and Customers (Continued)

Management Discussion and Analysis

Business and Operational Review (Continued)

Our Markets and Customers (Continued)

Our Product Prices

Management Discussion and Analysis

Business and Operational Review (Continued)

Our Product Prices (Continued)

Our Supplies

Management Discussion and Analysis

Business and Operational Review (Continued)

Our Supplies (Continued)

Management Discussion and Analysis

Business and Operational Review (Continued)

Our Supplies (Continued)

Management Discussion and Analysis

Business and Operational Review (Continued)

Our Supplies (Continued)

Management Discussion and Analysis

Company Overview and Financial Review

Management Discussion and Analysis

Company Overview and Financial Review (Continued)

Revenue and Gross Profit

Management Discussion and Analysis

Company Overview and Financial Review (Continued)

Revenue and Gross Profit (Continued)

Management Discussion and Analysis

Company Overview and Financial Review (Continued)

Gross Profit Margin

Results for the Reporting Period

Management Discussion and Analysis

Company Overview and Financial Review (Continued)

Changes in the Financial Position

Dividend

Management Discussion and Analysis

Segment Information

Liquidity, Financial Resources and Financing Activities

Management Discussion and Analysis

Liquidity, Financial Resources and Financing Activities (Continued)

Capital Structure and Gearing Ratio

Funding and Treasury Policy

Management Discussion and Analysis

Loans, Indebtedness, Maturity Profile and Exposure to Fluctuations in Interest Rates

Pledge of Assets

Exposure to Fluctuations in Exchange Rates

Management Discussion and Analysis

Exposure to Fluctuations in Commodity Prices

Significant Investments, Acquisitions and Disposals

Management Discussion and Analysis

Employees and Remuneration Policies

Management Discussion and Analysis

Employees and Remuneration Policies (Continued)

Event after the Reporting Period

Outlook and Future Plans

Management Discussion and Analysis

Outlook and Future Plans (Continued)

Corporate Governance Report

Corporate Governance Practices

Newton Resources Ltd Annual Report 2020