AI assistant
SUPERIOR RESOURCES LIMITED Annual Report 2017
65848_rns_2017-09-18_aec9b589-bceb-4c8b-8ef7-aa6edfbb1ed5.pdf
Annual Report
Open in viewerOpens in your device viewer
Superior Resources Limited
ABN 72 112 844 407
ANNUAL FINANCIAL REPORT For the year ended 30 June 2017
Contents
| Corporate Review | |
|---|---|
| Directors' Report | |
| Auditor's Independence Declaration | 16 |
| Corporate Governance | 18 |
| Consolidated Income Statement | 19 |
| Consolidated Statement of Comprehensive Income | 20 |
| Consolidated Statement of Financial Position | 21 |
| Consolidated Statement of Changes in Equity | 22 |
| Consolidated Statement of Cash Flows | 23 |
| Notes to the Consolidated Financial Statements | 24 |
| Directors' Declaration | 47 |
| Independent Auditor's Report | 48 |
CORPORATE REVIEW
Company Background
Superior Resources Limited (Superior or the Company) is a Brisbane based ASX-listed company (ASX code: SPQ) exploring for lead-zinc-silver, copper and gold deposits in Australia.
Superior currently holds a number of exploration permits, one exploration permit application and a granted mining lease in northern Queensland for base metals exploration.
In northwest Queensland exploration for Mount Isa style deposits over the last six years has resulted in Superior holding a first-class portfolio of properties for these deposits. Superior has an expanding portfolio of volcanogenic massive sulphide and porphyry properties in the Greenvale area of north eastern Queensland with inferred resources defined for one property.
Superior is also a party to a farm-in agreement for gold over three granted mining leases at Tick Hill in northwest Queensland. Tick Hill provides the Company with exposure to an area with potential for high grade gold mineralisation adjacent to a previously mined high grade gold mine.
Corporate Philosophy
Superior's aim is to increase shareholder value through the discovery and acquisition of significant mineral deposits and it has a strategy consistent with this aim.
Superior targets areas with potential for larger high-grade deposits of copper, lead-zinc-silver and gold. These include the large Mount Isa style deposits in northwest Queensland, the more moderate volcanogenic massive sulphide (VMS) deposits in northeast Queensland and the Proterozoic Tick Hill gold deposits in northwest Queensland.
Superior has adopted a conceptual approach in its search for Mount Isa style deposits which identifies permissive environments for these deposits and then explores these areas. Models, derived from the existing large mineral deposits, are an integral part of this approach. Once a permissive environment is identified, Superior utilises advanced exploration methods (particularly geophysics) with modern computer modelling of results to produce targets for further testing.
While a conceptual approach is also appropriate to a search for Proterozoic gold and VMS copper-gold deposits, Superior has adopted the more traditional approach in this search of exploring around existing indications of mineralisation.
Drilling is an essential part of Superior's exploration programs with drill testing of conceptual targets being part of the search for Mount Isa style deposits and drilling around and beneath existing mineralisation part of the search for gold and copper-gold deposits.
Superior continues to utilise experienced explorers in its exploration as they offer the best chance for discovery of resources.
Your Directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Superior Resources Limited ('the Company') and the entities it controlled at the end of, or during, the year ended 30 June 2017.
DIRECTORS' REPORT
DIRECTORS
The following persons were Directors of the Company during the year and up to the date of this report:
| P H Hwang | (Managing Director) |
|---|---|
| C A Fernicola (Chairman and Company Secretary) | |
| K J Harvey | (Non-executive Director) |
PRINCIPAL ACTIVITIES
During the year the principal activity of the Group was exploration for base metals and gold in northern Queensland, Australia. There were no significant changes in the nature of the company's activities during the year and no significant activity changes are anticipated.
DIVIDENDS
There were no dividends paid to members during the financial year.
REVIEW OF OPERATIONS
The loss after tax for the year was $416,235 (2016 loss: $2,458,561).
The Company's activities during the full year period were focused on the following activities and events:
- Nicholson Project (Zinc, Lead)
- Teck Australia Pty Ltd (Teck) progressed the first year and part of the second year $\sigma$ exploration program under an Earn-In and Joint Venture Agreement.
- Greenvale Project (VMS and porphyry copper, gold and zinc) $\bullet$
- data compilation and modelling of geophysical data in preparation for planning of next stage exploration programs at the Greenvale Project;
- new tenement application, EPM26165 ("Cockie South"), was granted on 30 $\sigma$ January 2017 as an addition to the Greenvale Project;
- o conduct preparations for a 1,422m drilling program at the Greenvale Project.
- Tick Hill Gold Project (Gold exploration and tailings facility gold reprocessing)
- progress metallurgical and scoping assessment of the Tick Hill tailings storage $\Omega$ facility.
- Corporate Commercial
- participated as a shortlisted bidder in a formal sale process for the acquisition of $\circ$ advanced gold projects in Western Australia;
- identify and engage with third parties in relation to new project opportunities as $\Omega$ well as potential joint venture arrangements in relation to the North West Queensland Projects.
- Corporate Capital Raising
- o conducted two placement capital raising campaigns and a Share Purchase Plan.
NORTH WEST QUEENSLAND - NICHOLSON PROJECT
The Nicholson Project (EPM15670 and EPM18203), located near the Walford Creek lead-zinc-silvercopper deposit, is considered to have the potential to contain sediment-hosted lead-zinc-silver massive sulphide deposits, similar to the Mount Isa and McArthur River deposits.
DIRECTORS' REPORT
NORTH WEST QUEENSLAND - NICHOLSON PROJECT (continued)
Teck Australia Pty Ltd, a wholly-owned subsidiary of Canada's largest diversified resource company. Teck Resources Limited, commenced exploration work on Superior's Nicholson Project (Project) during the March quarter of 2016. Teck is conducting the work under an Earn-in and Joint Venture Agreement (Agreement) with Superior that was entered into during October 2015.
Under the terms of the Agreement. Teck has an exclusive right to earn a 70% interest in the Project by spending $2,500,000 in accordance with the following structure:
- (Initial Period) incurring $250,000 minimum expenditure: to be spent on exploration by 30 September 2016: and
- (Earn-In Period) incurring $2,250,000 in optional expenditure on or before the 31 December 2018.
On 1 September 2016, the Company agreed with Teck to extend the "Initial Period" of Teck's earn-in right under the Agreement to 31 December 2016. All other terms remain unchanged as set out in ASX announcement dated 3 November 2015.
On 8 November 2016, Teck confirmed that it had completed the $250,000 minimum expenditure requirement for the Initial Period and that it will commit to the Earn-in Period, which requires expenditure of a further $2,250,000 to be completed on or before 31 December 2018 (refer ASX Announcement 14 November 2016).
At the end of the full year to 30 June 2017, Teck had spent an approximate total of $475,000 on the Project.
Work completed during the vear
In summary, the exploration work that was completed by Teck on the Project during the period consisted of:
- completion of an Aboriginal cultural heritage survey: $\bullet$
- completion of an initial Audio-frequency Magnetotelluric (AMT) geophysical survey; $\bullet$
- completion of analysis and interpretation of results from the initial AMT survey; and $\bullet$
- preparations and planning for a follow-up and infill AMT geophysical survey.
Initial AMT survey
The initial AMT survey comprised 24 survey stations over three survey lines, totalling 19 kilometres. The survey targeted potential sub-basins identified through the integration of magnetics, seismic and gravity data and focussed on the south-western portions of the two tenements proximal to a key geological structure called the Nicholson River Fault.
The results of the initial AMT survey will determine if a conductive body is developed within prospective stratigraphy defined by seismic interpretations.
The AMT survey was undertaken to confirm the presence of key interpreted growth faults which provide conduits for mineralised fluids and to better determine the nature of interpreted sub-basin locations within EPM 15670 and EPM 18203, including the presence and extent of conductive pyritic carbonaceous shale host units.
AMT electro-magnetic survey and imaging techniques provide the potential to map geological structures to depths of 500 meters or more. AMT surveys provide the ability to determine the characteristics of base metal (and other) deposits and anomalies as well as investigate deep geological structures in greater clarity at depth than other geophysical methods.
Initial AMT survey results
The results of the initial AMT survey indicate that permissive rock packages are believed to be detected to a depth of 1,000 metres and located in the hanging wall of the major Nicholson River fault.
DIRECTORS' REPORT
NORTH WEST QUEENSLAND - NICHOLSON PROJECT (continued)
Survey line #1 identified a discrete conductive anomaly at a depth of between 200 and 500 metres, which is interpreted by Teck to be hosted by the same geological rock package as that which hosts the Century Zinc Mine.
Follow-up infill AMT survey
Preparations and planning for a follow-up and infill AMT geophysical survey were being conducted by Teck during the first calendar half of 2017. The follow-up and infill survey is designed to:
- follow up the single point anomalism from the 2016 AMT survey (AMT survey line #1);
- survey over Superior's existing Walford South drill hole in order to assist in constraining the $\bullet$ AMT results: and
- survey the intersection between the Nicholson Fault and the prospective Mt Les stratigraphy.
The Company is very encouraged by the results of the survey so far and looks forward to further characterising the AMT conductivity anomaly already identified during the first year of operations with Teck.
Aboriginal cultural heritage
An Aboriginal cultural heritage survey was completed with the Waanyi native title holders to enable the completion of the follow up and infill AMT survey.
GREENVALE PROJECT
The Greenvale Project covers a region of volcanic and intrusive rocks of Ordovician age that are similar in type and age to the porphyry copper belt in New South Wales. The New South Wales belt of rocks host the large Cadia and North Parkes porphyry copper mines.
Superior's Greenvale Project is highly prospective for VMS and porphyry copper, gold, zinc and silver deposits and contains at least eight known prospects. The project is located within an area of notable economic significance being proximal to the Kidston, Balcooma, Surveyor and Dry River deposits.
On 30 January 2017 the Department of Natural Resources and Mines granted the Company's new Exploration Permit for Minerals (EPM) application, EPM26165 "Cockie South".
EPM26165 covers the highly prospective Steam Engine Gold Deposit and the Galah Dam Gold-Zinc-Copper Prospect.
The Company commenced preparations to conduct exploration drilling programs on the Steam Engine Gold Deposit, the Bottletree Prospect and the Galah Dam prospect immediately after landholder access arrangements and native title procedural requirements were finalised.
Greenvale Drilling Program
Work during the quarter comprised preparatory work to facilitate the commencement of an initial 1,000m drilling program (as originally planned) on four prospects within the Greenvale Project. The four prospects targeted in the initial program are:
- Steam Engine Gold Deposit (gold);
- Bottletree Prospect (copper); $\overline{a}$
- Galah Dam Prospect (gold-silver-zinc-copper); and
- One Mile Dam Prospect (copper-gold).
This work included:
- Negotiation of Landowner Access and Compensation Agreements;
- Finalisation of drilling contract and geological services terms:
- Commencement of drill site and access track preparations; and
- Completion of Aboriginal cultural heritage survey and regulatory compliance procedures.
DIRECTORS' REPORT
GREENVALE PROJECT - (continued)
The drilling programs are aimed to:
- (Steam Engine) enable completion of an initial gold resource estimate on the main Steam Engine lode:
- (Steam Engine) extend the known mineralisation and to locate significant widths of higher grade gold within the lesser explored Eastern Ridge lode of the project;
- (Bottletree) identify broad intersections of copper mineralisation and characterise the $\bullet$ mineralisation style: and
- (Galah Dam) target prospective chargeable sources. The Galah Dam prospect is a large plunging alteration zone with similarities to the nearby Balcooma copper, zinc, lead and silver mine. Previous exploration at Galah Dam had identified gold, zinc and copper mineralisation within the alteration zone.
- (One Mile Dam Prospect) identify the source of an intense and extensive bedrock EM, IP and VTEM geophysical anomaly that is likely to be associated with extensive massive sulphide mineralisation at the nearby One Mile Prospect.
The Drilling program commenced on 10 July 2017 and was completed on 29 July 2017. A total of 1,422 metres were drilled at the four prospects. The program was extended by 422 metres over the initially planned 1,000 metres, partly due to the presence of extensive zones of visible copper mineralisation and strong alteration at the Bottletree Prospect together with strongly altered sulphide and massive sulphide intervals in the single hole at the Galah Dam Prospect.
Field Reconnaissance
An initial field reconnaissance program was conducted during May 2017 over the four Greenvale Project prospects, which confirmed widespread and significant areas of surface copper mineralisation at the Bottletree Prospect and several gossanous outcrops in the vicinity of the Galah Dam Prospect.
A total of 12 rock chip reconnaissance samples were taken from various outcrops that were potentially mineralised to establish the presence of metals and any associated elements.
At Galah Dam, a rock chip sample from a gossan outcrop returned anomalously high assays for gold and silver (7.35g/t Au, 25.6g/t Ag) (refer to ASX Announcement dated 30 June 2017).
At the Bottletree prospect, areas of surface copper minerals including malachite and chyrsocolla, with distinct vegetation anomalies (including Eriachne Mucronata [copper grass] and Polycarpaea [copper weed]), were found to be coincident with high order gradient-array chargeability anomalies. Two rock chip samples from these areas returned assays of up to 2.61% Cu and 0.3q/t Au (refer to ASX Announcement dated 30 June 2017).
A rock chip sample was taken from an old mine dump on the Eastern Ridge Lode at the Steam Engine Prospect, in the vicinity of Superior's proposed drill holes. This sample was taken to confirm that the gold present was hosted by muscovite-quartz-carbonate-pyrite schist. It returned 4.64g/t Au and 1.6g/t Ag (refer to ASX Announcement dated 30 June 2017).
TICK HILL TAILINGS PROJECT
Further metallurgical studies were undertaken during the first half of the year to assess the efficiency of gravity separation (via a Knelson concentrator) on a single 50kg sample of Tick Hill tailings taken from one of the two tailings paddocks (the eastern paddock) located at the historic Tick Hill mine site. Although a gravity concentrate with free gold was produced, the overall gold recovery to concentrate was too low for gravity separation to be considered as an alternate or complementary processing method for the Tick Hill tailings.
Following the gravity test work, further test work has been planned to enable detailed design of a process flowsheet and the determination of a financial model. Discussions with third parties were also commenced to investigate arrangements to minimise the potential capital and operating costs.
The Company continued a process of data review and planning for the preparation of a deep drilling program.
DIRECTORS' REPORT
TICK HILL TAILINGS PROJECT - (continued)
Extension to JVA Earn-in Period
The Company received confirmation from Diatreme Resources Limited of a 12-month extension to the Earn-in Period under the Tick Hill Exploration Farm-in and Joint Venture Agreement (refer below for details of the agreement). Subject to any further extension of term, the Earn-in Period will expire on 31 December 2017.
The parties have agreed to conduct a full review of progress on the project on or around 30 September 2017 for the purpose of considering each parties' positions and future extensions of term.
Tick Hill Background: JVA with Diatreme Resources Limited
Under the terms of an Exploration Farm-in and Joint Venture Agreement (JVA) with Diatreme Resources Limited (DRX), the tailings, alluvial-colluvial gold and all other surface sources of gold are being assessed
jointly with DRX. The joint arrangement requires each party to contribute 50% of all costs associated with the operations.
All drilling operations associated with the surface gold assessment program have been conducted with a DRX-owned drill rig. These costs have been shared equally between the parties.
Under the JVA, Superior has the right to earn a 50% interest in the project by spending a minimum of $750,000 on exploration, which will include substantial drilling over a two year earn-in period (which can be extended by agreement). All expenditure incurred by Superior on the Surface Gold Project will constitute earn-in expenditure and will be counted towards SPQ's $750,000 minimum earn-in obligation.
During the earn-in period Superior will have the sole and exclusive right to access and conduct exploration on the project as well as to determine the nature of the exploration programs.
Upon a transfer of a 50% interest in the THGP to Superior, Superior will be required to pay DRX $100,000 and an amount equal to 50% of the government security bond on the mining leases.
Mt Isa Mines Limited retains a royalty on gold produced from the mining leases, which is set at a variable rate depending on the annual grade of gold produced from mining. The royalty applies initially to gold produced above 5g/t Au and then, after payment of royalties totalling $5M, to gold produced above 10g/t Au. A separate royalty rate applies to gold produced from tailings resulting from previous minina.
CORPORATE - COMMERCIAL
New Project Opportunities
Superior continued to actively seek advanced project acquisition and joint venture opportunities.
On 7 July 2016, Superior announced that it was participating as a shortlisted bidder in a formal sale process for the acquisition of an advanced stage gold project. The project was the Lake Carey Gold Project held by Fortitude Gold Pty Ltd (In Liquidation) and located in the Eastern Goldfields of Western Australia. The Company was not successful in acquiring the project.
The Company also evaluated and considered several other gold and other project opportunities that range from strategically significant exploration portfolios through to near development projects.
Superior continues to seek new project opportunities.
NORTH WEST QUEENSLAND - VICTOR PROJECT
The Company has engaged with several parties in relation to farm-in and joint venture arrangements in respect of its Tier 1 North West Queensland zinc project, the Victor Project.
DIRECTORS' REPORT
CAPITAL RAISING
Placement to Sophisticated Investors - July 2016
The Company completed a placement to sophisticated investors on 15 July 2016 to raise $299,000 through an issue of fully paid ordinary shares to sophisticated investors at $0.008 per new share, with a free attaching option (exercise price $0.03 expiring 30 June 2019) for every new share subscribed. Some of the Directors participated in the placement for a total of $64,000. Shareholder approval was obtained at the Company's 2016 AGM for the Directors' subscriptions and the attaching options to the placement shares.
A total of 29,375,000 shares were issued under the placement, with the balance of the placement being issued following shareholder approval at the 2016 AGM.
The placement was made using the Company's existing 15% capacity and shareholder approval was not required in respect of the 29,375,000 shares.
Funds raised under the placement were used for working capital.
Placement to Sophisticated Investors - May 2017
The Company completed a placement to sophisticated investors on 1 May 2017 to raise $473,000 through an issue of 86,884,432 fully paid ordinary shares to sophisticated investors at an issue price of $0.0055 per new share. The placement was made using the Company's existing capacity under Listing
Rules 7.1 and 7.1A and shareholder approval was not required for the issue.
Funds raised under the placement were used to:
- fund the drilling of four prospects within the Greenvale Project; and
- provide working capital. $\bullet$
Share Purchase Plan - December 2016
The Company completed a Share Purchase Plan (SPP) that was offered to existing shareholders on 13 December 2016 to raise $447,000, resulting in the issue of 83,600,000 shares.
The SPP closed oversubscribed and exceeded the targeted maximum of $418,000 (refer to ASX announcement dated 14 December 2016).
The funds raised from the SPP will be used to:
- fund the drilling of priority gold, zinc and copper targets at the Company's Greenvale Project (refer ASX announcement dated 2 November 2016):
- progress the Company's objective of acquiring a new gold project; and
- provide working capital.
CASH CONSERVATION
The Company's Board continues to maintain the current cash conservation measures with respect to the Company's operations and administration.
DIRECTORS' REPORT
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Significant changes in the state of affairs of the Group during the financial year were as follows:
During the year the company completed capital raisings totalling $1,155,447 comprising 83,600,000 ordinary shares issued to existing shareholders under a Share Purchase Plan and 130,059,432 ordinary shares issued to sophisticated investors and Directors.
On 16 December 2016 the Company issued 37,375,000 options, being a free attaching option to each new share issued to sophisticated investors and Directors on 14 July and 16 December 2016.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
There are no matters or circumstances that have arisen since 30 June 2017 that have significantly affected, or may significantly affect:
- the Group's operations in future financial years, or $(a)$
- $(b)$ the results of those operations in future financial vears, or
- $(c)$ the Group's state of affairs in future financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS FROM OPERATIONS
Results from exploration are difficult to predict in advance so expected results are uncertain.
ENVIRONMENTAL REGULATION
The Group's operations are subject to significant environmental regulation under the laws of the commonwealth and state.
INFORMATION ON DIRECTORS
Peter Henry Hwang B.Sc(Hons), LLB. Managing director. Age 48
Experience and expertise
Originally an exploration geologist, Mr Hwang worked as a solicitor for 15 years in national law firms specialising in resources and native title law. He has extensive experience in advising on the development of mining and major infrastructure projects as well as resource mergers and acquisitions. Mr Hwang is a member of the Australian Government Attorney-General's Department Native Title Practitioner's Panel and previously a member of the Government of Western Australia Native Title Taskforce on Mineral Tenement and Land Title Applications.
Other current directorships None.
Former directorships in last 3 years None.
Special responsibilities Managing Director.
Interests in shares and options
18,077,974 ordinary shares in Superior Resources Limited. 4,250,000 options over unissued ordinary shares in Superior Resources Limited.
DIRECTORS' REPORT
INFORMATION ON DIRECTORS (continued)
Carlos Fernicola B.Com, FCA, F Fin FCIS FCSA Chairman. Age 56
Graduate Diploma Advanced Accounting, Graduate Diploma Applied Finance and Investments, Graduate Diploma Corporate Governance and Graduate Certificate Financial Planning.
Experience and expertise
Mr Fernicola is the Principal of Carlos Fernicola & Co., Chartered Accountants. Mr Fernicola is a Fellow of the Institute of Chartered Accountants in Australia, Fellow of the Governance Institute of Australia and Fellow of the Financial Services Institute of Australia. He has over 30 years of experience in accounting, taxation, audit and the financial services industry.
Other current directorships
None.
Former directorships in last 3 years None.
Special responsibilities
Chairman and Company Secretary. Member of the Audit Committee.
Interests in shares and options
23.500.000 ordinary shares in Superior Resources Limited. 3,750,000 options over unissued ordinary shares in Superior Resources Limited.
Kenneth James Harvey M.Sc, MAusIMM, MAIG, MSEG, MGSA. Non-executive Director. Age 72 Experience and expertise
Mr Harvey has 47 years experience in mineral exploration, project evaluation, resource estimation and exploration management.
Other current directorships
None.
Former directorships in last 3 years None.
Special responsibilities Member of the Audit Committee.
Interests in shares and options
22,454,432 ordinary shares in Superior Resources Limited.
DIRECTORS' REPORT
INFORMATION ON DIRECTORS (continued)
Company Secretary
The Company Secretary is Mr Carlos Alberto Fernicola B.Com, FCA, FFin FCIS FGIA. Graduate Diploma Advanced Accounting, Graduate Diploma Applied Finance and Investments, Graduate Diploma Corporate Governance and Graduate Certificate Financial Planning. Mr Fernicola was appointed to the position of Company Secretary on 11 November 2010.
MEETINGS OF DIRECTORS
The numbers of meetings of the company's board of Directors held during the year ended 30 June 2017, and the numbers of meetings attended by each director were:
Board Director Meetings Meetings Eligible to attend attended PH Hwang $\overline{4}$ $\overline{4}$ CA Fernicola $\overline{4}$ $\overline{4}$ KJ Harvey $\overline{4}$ $\overline{4}$ Audit Committee Director Meetings Meetings eligible to attend attended CA Fernicola $\overline{2}$ $\overline{2}$ KJ Harvev $\overline{2}$ $\overline{2}$
DIRECTORS' REPORT
REMUNERATION REPORT (AUDITED)
The directors are pleased to present your Group's 2017 remuneration report which sets out remuneration information for Superior Resources Limited's non-executive directors, executive directors, and other key management personnel.
The report contains the following sections:
- (a) Directors and key management personnel disclosed in this report
- (b) Remuneration governance
- (c) Use of remuneration consultants
- (d) Executive remuneration policy and framework
- (e) Relationship between remuneration and Superior Resources Limited's performance
- (f) Non-executive director remuneration policy
- (g) Voting and comments made at the company's 2016 Annual General Meeting
- (h) Details of remuneration
- (i) Service agreements
- (j) Details of share-based compensation and bonuses
- (k) Equity instruments held by key management personnel
- (I) Loans to key management personnel
- (m) Other transactions with key management personnel
Directors and key management personnel disclosed in this report $(a)$
| Non-executive and executive directors (see pages 8 to 9 for details about each director) | ||
|---|---|---|
| PH Hwang | ||
| CA Fernicola | ||
| KJ Harvey | ||
| Other key management personnel | ||
| Name | Position | |
| CA Fernicola | Company Secretary |
Remuneration governance $(b)$
The board is responsible for:
- the over-arching executive remuneration framework
- operation of the incentive plans which apply to the executive team, including key performance indicators and performance hurdles
- remuneration levels of executive directors and other key management personnel, and
- non-executive directors fees
The objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-term interests of the Group.
Use of remuneration consultants $(c)$
The Group has not engaged the services of any remuneration consultants during the current or prior financial years.
DIRECTORS' REPORT
REMUNERATION REPORT (AUDITED) (continued)
$(d)$ Executive remuneration policy and framework
The combination of base pay and superannuation make up the executive directors total remuneration. Base pay for the executive directors is reviewed annually to ensure the executives' pay is competitive with the market. The board ensures that executive reward satisfies the following key criteria for good reward governance practices:
- competitiveness and reasonableness
- acceptability to shareholders $\bullet$
- transparency $\bullet$
- capital management $\bullet$
Long-term incentives
Long-term incentives are provided to executive directors by obtaining approval at a general meeting of shareholders. Any issue of options to executive directors is designed to focus executives on delivering long-term shareholder returns.
$(e)$ Relationship between remuneration and Superior Resources Limited's performance
There is no direct link between remuneration, company performance and shareholder wealth. The Group's activities focus on the objective of delivery of long term shareholder returns.
$(f)$ Non-executive director remuneration policy
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors' fees and payments are reviewed annually by the Board.
Non-executive directors' fees are determined within an aggregate directors' fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $250,000 in aggregate plus statutory superannuation.
$(g)$ Voting and comments made at the company's 2016 Annual General Meeting
Superior Resources Limited received more than 95% of "yes" votes on its remuneration report for the 2016 financial year. The company did not receive any feedback at the AGM or throughout the year on its remuneration practices.
$(h)$ Details of remuneration
The following tables show details of the remuneration received by the directors and the key management personnel of the Group for the current and previous financial year.
DIRECTORS' REPORT
REMUNERATION REPORT (AUDITED) (continued)
| 2017 | Short-termbenefits | Post-employmentbenefits | Share-basedpayments | |
|---|---|---|---|---|
| Name | Cash salaryand feesS | SuperannuationS | OptionsS | TotalS. |
| Non-executive directorsCA FernicolaKJ Harvey | 24,00021,918 | 2,082 | 24,00024,000 | |
| OtherkeymanagementpersonnelCA Fernicola(CompanySecretary) | 24,000 | 24,000 | ||
| Sub-total non-executivedirectors and other keymanagement personnel | 69,918 | 2,082 | 72,000 | |
| Executive directorsPH Hwang - ManagingDirector | 211,000 | 20,045 | 231,045 | |
| Totals | 280.918 | 22,127 | 303,045 |
| 2016 | Short-termbenefits | Post-employmentbenefits | Share-basedpayments | |
|---|---|---|---|---|
| Name | Cash salaryand feesS | SuperannuationS | OptionsS | TotalS. |
| Non-executive directorsCA FernicolaKJ HarveyDJ Horton (Retired 16 | 21,00021,9189,000 | 2,082 | 21,00024,0009,000 | |
| November 2015)Other keymanagementpersonnelCA Fernicola(CompanySecretary) | 24,000 | 24,000 | ||
| Sub-total non-executivedirectors and other keymanagement personnel | 78,918 | 2.082 | 81,000 | |
| Executive directorsPH Hwang - ManagingDirector | 211,000 | 20,045 | 231,045 | |
| Totals | 289,918 | 22,127 | 312,045 |
DIRECTORS' REPORT
REMUNERATION REPORT (AUDITED) (continued)
$(i)$ Service agreements
Remuneration and other terms of employment of the Managing Director are formalised in an agreement. The major provisions of the agreement relating to remuneration are set out below.
PH Hwang, Managing Director
- Term of employment agreement indefinite commencing 22 April 2013.
- Base salary, inclusive of superannuation, for the year ended 30 June 2017 of $231,045, to be reviewed at least annually by the Board.
- Payment of a termination benefit on early termination by the company, other than for gross misconduct, equal to six months remuneration.
- Agreement may be terminated by employee giving six months' notice in writing.
$(i)$ Details of share based compensation and bonuses
There have been no options granted affecting remuneration in the current or a future reporting period.
$(k)$ Equity instruments held by key management personnel
The tables below show the number of shares and options in the company that were held during the financial year by key management personnel of the Group, including their close family members and entities related to them.
Ordinary Shares
| Name | Balance at thestart of thevear | Received onexercisingoptions | Net purchased' (sold) | Other changes | Balance at theend of the year |
|---|---|---|---|---|---|
| Directors of Superior Resources Limited | |||||
| PH Hwang | 6.677.974 | 11,400,000 | $\rightarrow$ | 18,077,974 | |
| CA Fernicola | 10,340,000 | 13,160,000 | $\overline{\phantom{a}}$ | 23,500.000 | |
| KJ Harvey | 19,454,432 | 3,000,000 | 22,454,432 |
Options Over Unissued Ordinary Shares
| Name | Balance at thestart of thevear | OptionsExercised | Net purchased(sold) | Other changes | Balance at theend of the year |
|---|---|---|---|---|---|
| Directors of Superior Resources Limited | |||||
| PH Hwang | $\overline{\phantom{a}}$ | 4,250,000 | $\rightarrow$ | 4,250,000 | |
| CA Fernicola | ۰ | 3,750,000 | $\overline{\phantom{a}}$ | 3,750,000 | |
| KJ Harvey | $\blacksquare$ | $\sim$ |
$(1)$ Loans to key management personnel
There were no loans to key management personnel during the financial period.
$(m)$ Other transactions with key management personnel
There were no other transactions with key management personnel.
End of Remuneration Report
DIRECTORS' REPORT
SHARES UNDER OPTION
There are 37,375,000 unissued ordinary shares of SPQ under option at the date of this report.
During the year ended 30 June 2017, and since year end, there were no shares issued on the exercise of options granted.
INSURANCE OF OFFICERS
During the financial year the Group paid a premium of $11,370 to insure the directors and secretaries of the company.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in or on behalf of the Company with leave of the court under section 237 of the Corporations Act 2001.
NON-AUDIT SERVICES
The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the company are important.
Details of amounts paid or payable to the auditor for audit and non-audit services provided during the year are outlined in note 24 to the financial statements.
The board of directors has considered the position and, in accordance with the advice received from the audit committee is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
- all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor, and
- none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.
During both the current and previous financial year there were no fees paid or payable for non-audit services provided by the auditor.
DIRECTORS' REPORT
AUDITOR'S INDEPENDENCE DECLARATION
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 17.
AUDITOR
$\ddot{\phantom{a}}$
PKF Hacketts Audit continues in office in accordance with section 327 of the Corporations Act 2001.
This-report is made in accordance with a resolution of Directors. CA Fernicola
Chairman
Brisbane, 19th day of September 2017
AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF SUPERIOR RESOURCES LIMITED
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2017, there have been:
- no contraventions of the auditor independence requirements of the Corporations Act 2001 $(a)$ in relation to the audit; and
- $(b)$ no contraventions of any applicable code of professional conduct in relation to the audit.
PKF HACKETTS AUDIT
Liam Murphy Partner
Brisbane, 19th September 2017
PKF Hacketts Audit ABN 33 873 151 348
Level 6, 10 Eagle Street, Brisbane QLD 4000 GPO Box 1568, Brisbane QLD 4001 p +61 7 3839 9733 $f + 61738321407$
17
8 East Street, PO Box 862 Rockhampton QLD 4700 p +61 7 4927 2744 +61 7 4927 4317
Liability limited by a scheme approved under Professional Standards Legislation. PKF International Limited administers a network of legally independent firms which carry on separate business under the PKF Name. PKF International Limited is not responsible for the acts or omissions of individual member firms of the network. For office locations visit www.pkf.com.au
CORPORATE GOVERNANCE
Corporate Governance practices that form the basis of a comprehensive system of control and accountability for the administration of the Company have been adopted. The Board is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate with the Company's needs.
The Company has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council.
A description of the Company's current corporate governance practices is set out in the Company's corporate governance statement. This statement is available on the Company's website and can be viewed at www.superiorresources.com.au.
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2017
| Note | 2017S | 2016$ | |
|---|---|---|---|
| Other income | 8 | 2,690 | 2,437 |
| Accounting and audit feesAdministration expensesDepreciation and amortisation | (35, 290)(355, 221)(3,904) | (30,088)(344, 134)(3,700) | |
| Impairment of available-for-sale financial assetsOffice rent and outgoings | 12 | (22, 032) | (42,000)(16, 421) |
| Tenement expenditure written off | 14 | (21, 728) | (2,024,655) |
| Loss before income taxIncome tax (expense) / benefit | 9 | (435, 485)19,250 | (2,458,561) |
| Loss for the year from continuing operationsattributable to owners of Superior ResourcesLimited | (416, 235) | (2,458,561) | |
| Earnings (loss) per share | Cents | Cents | |
| Basic earnings (loss) per share | 29 | (0.12) | (1.01) |
| Diluted earnings (loss) per share | 29 | (0.12) | (1.01) |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2017
| Note | 2017S | 2016$ | |
|---|---|---|---|
| Loss for the year from continuing operationsattributable to owners of Superior ResourcesLimited | (416,235) | (2,458,561) | |
| Other comprehensive income / (loss) for the year, netof tax | 50,750 | ||
| Total comprehensive income / (loss) for the yearattributable to owners of Superior ResourcesLimited | (365,485) | (2.458.561 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017
| Note | 2017$ | 2016$ | |
|---|---|---|---|
| ASSETS | |||
| Current Assets | |||
| Cash and cash equivalents | 10 | 445,007 | 98,472 |
| Trade and other receivables | 11 | 60,059 | 66,975 |
| Available-for-sale financial assets | 12 | 98,000 | 28,000 |
| Total Current Assets | 603,066 | 193,447 | |
| Non-Current Assets | |||
| Property, plant and equipment | 13 | 13,024 | 13,710 |
| Exploration expenditure | 14 | 3,116,578 | 2,835,635 |
| Other | 16 | 27,500 | 25,000 |
| Total Non-Current Assets | 3,157,102 | 2,874,345 | |
| Total Assets | 3,760,168 | 3,067,792 | |
| LIABILITIES | |||
| Current Liabilities | |||
| Payables | 17 | 262,646 | 360,232 |
| Total Current Liabilities | 262,646 | 360,232 | |
| Non-Current Liabilities | |||
| Payables | 17 | 235,288 | 235,288 |
| Total Non-Current Liabilities | 235,288 | 235,288 | |
| Total Liabilities | 497,934 | 595,520 | |
| Net Assets | 3,262,234 | 2,472,272 | |
| Equity | |||
| Contributed equity | 19 | ||
| Reserves | 20 | 9,031,67750,750 | 7,876,230 |
| Retained profits (accumulated losses) | 21 | (5,820,193) | (5,403,958) |
| Total Equity | 3,262,234 | 2,472,272 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2017
| Contributedequity5 | Reserves$ | Retainedprofits(accumulatedlosses)$ | Total$ | |
|---|---|---|---|---|
| Balance at 1 July 2015 | 7,766,926 | (2,945,397) | 4,821,529 | |
| Loss for the yearOther comprehensiveincome / (loss) | (2,458,561) | (2,458,561) | ||
| Total comprehensiveincome for the year | (2,458,561) | (2,458,561) | ||
| Transactions withowners in theircapacity as owners:Contributions of equity,net of transaction costs | 109,304 | 109,304 | ||
| Balance at 30 June2016 | 7,876,230 | (5,403,958) | 2,472,272 | |
| Loss for the yearOther comprehensive | (416, 235) | (416, 235) | ||
| income / (loss) | 50,750 | 50,750 | ||
| Total comprehensiveincome for the year | 50,750 | (416, 235) | (365, 485) | |
| Transactions withowners in theircapacity as owners:Contributions of equity,net of transaction costs | 1,155,447 | 1,155,447 | ||
| Balance at 30 June2017 | 9,031,677 | 50,750 | (5,820,193) | 3,262,234 |
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2017
| Note | 2017S | 2016S |
|---|---|---|
| 21,900(372, 262)2,690 | 20,576(154, 092)2,437 | |
| 28 | (347, 672) | (131, 079) |
| (339, 022)(3,218)(2,500) | (293, 268)(7, 446)2,500 | |
| (344, 740) | (298, 214) | |
| 1,079,864(60, 917)20,000 | 170,000(1,706) | |
| 1,038,947 | 168,294 | |
| 346,53598,472 | (260, 999)359,471 | |
| 10 | 445,007 | 98,472 |
Non-cash financing activities Refer to note 19(a).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
1. General Information
Superior Resources Limited (the Company) is a company limited by shares, incorporated and domiciled in Australia. The Company's shares are listed on the Australian Securities Exchange.
The registered office of the Company is:
Unit 8, 61 Holdsworth Street Coorparoo QLD 4151 Ph 07 3847 2887
The principal place of business of the Company is:
Unit 8, 61 Holdsworth Street Coorparoo QLD 4151 Ph 07 3847 2887
The financial statements are for the Group consisting of Superior Resources Limited and its subsidiaries (the consolidated entity or the Group).
2. Significant Accounting Policies
$(a)$ Statement of compliance
These financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law.
The financial statements comprise the consolidated financial statements of the Group. For the purposes of preparing the consolidated financial statements, the Company is a for-profit entity.
Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the company and the Group comply with International Financial Reporting Standards ('IFRS').
The financial statements were authorised for issue by the directors on 19th September 2017.
$(b)$ Basis of preparation
The financial statements have been prepared on an accrual basis and under the historical cost convention, as modified where applicable by the revaluation of available-for-sale financial assets. financial assets and liabilities (including derivative instruments) at fair value through profit or loss, certain classes of property, plant and equipment and investment property.
$(c)$ Principles of consolidation
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
2. Significant Accounting Policies (continued)
The acquisition method of accounting is used to account for business combinations by the Group (refer to note $2(0)$ ).
Intercompany transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and statement of comprehensive income, statement of changes in equity and balance sheet respectively.
$(d)$ Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable when it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
Interest revenue is recognised using the effective interest rate method.
All revenue is stated net of the amount of goods and services tax (GST).
$(e)$ Income Tax
The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the assets and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
2. Significant Accounting Policies (continued)
$(f)$ Cash and cash equivalents
For the consolidated statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand and deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
$(g)$ Investments and other financial assets
Available for sale
Available-for-sale financial assets, comprising principally marketable equity securities, are nonderivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance date.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are included in the income statement as gains and losses from investment securities.
Subsequent measurement
Available-for-sale financial assets are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income.
Fair value
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the balance date. The quoted market price used for financial assets is the current bid price.
In order to provide an indication about the reliability of the inputs used in determining fair value, the accounting standards prescribe that the Group must classify its financial instruments into three levels of fair value hierarchy.
The Group's only financial instrument measured at fair value is its shares in Deep Yellow Limited which are classified as Level 1 under the fair value hierarchy, Level 1 represents the fair value, based on a quoted market price, determined by an active market.
Impairment
The Group assesses at each balance date whether there is objective evidence that a financial asset or Group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets and the Group determines that the financial asset is impaired, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is recognised in the income statement. Impairment losses recognised in the income statement on equity instruments classified as availablefor-sale are not reversed through the income statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
2. Significant Accounting Policies (continued)
$(h)$ Plant and equipment
Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives, as follows:
Equipment / Software 3-5 years
The asset's residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement. When revalued assets are sold, it is company policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.
$(i)$ Trade and other payables
These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
$(i)$ Exploration expenditure
Expenditure is accumulated separately for each area of interest until such time as the area is abandoned or sold. The realisation of the value of the expenditure carried forward depends on any commercial results that may be obtained through successful development and exploitation of the area of interest or alternatively by its sale. If an area of interest is abandoned or is considered to be of no further commercial interest the accumulated exploration costs relating to the area are written off against income in the year of abandonment. Some exploration expenditure may also be written off where areas of interest are partly relinquished and in cases where uncertainty exists as to the value, provisions for possible diminution in value are established.
$(k)$ Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
$(1)$ Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the financial year but not distributed at balance date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
2. Significant Accounting Policies (continued)
$(m)$ Earnings per share
$(i)$ Basic earnings per share
Basic earnings per share is calculated by dividing the profit/(loss) attributable to equity holders of the Group, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
$(ii)$ Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
$(n)$ Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.
$(o)$ Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets.
The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
2. Significant Accounting Policies (continued)
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
Employee benefits $(p)$
$(i)$ Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.
$(ii)$ Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on government bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur.
$(q)$ Parent entity financial information
The financial information for the parent entity, Superior Resources Limited, disclosed in note 31 has been prepared on the same basis as the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
3. Application of new and revised accounting standards
The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting Standards and Interpretations are disclosed below. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity.
Standards and Interpretations in issue not yet adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual report year ended 30 June 2017.
AASB 15 Revenue from Contracts with Customers
The new standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contractbased five-step analysis of transactions to determine whether, how much and when revenue is recognised.
The Group has not yet fully assessed the impact of AASB 15 as this standard does not apply mandatorily before 1 January 2018.
AASB 16 Leases
AASB 16 eliminates the operating and finance lease classifications for lessees currently accounted for under AASB 117 Leases. It instead requires an entity to bring most leases onto its balance sheet in a similar way to how existing finance leases are treated under AASB 117. An entity will be required to recognise a lease liability and a right of use asset in its balance sheet for most leases. There are some optional exemptions for leases with a period of 12 months or less and for low value leases. Lessor accounting remains largely unchanged from AASB 117.
The Group has not yet fully assessed the impact of AASB 16 as this standard does not apply mandatorily before 1 January 2019.
There are no other standards that are not yet effective and that are expected to have a material impact on the consolidated entity in the current or future reporting periods and on foreseeable future transactions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
4. Financial risk management
The Group's overall risk management plan seeks to minimize potential adverse effects due to the unpredictability of financial markets.
The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Group is exposed are credit risk, liquidity risk, market risk and cash flow interest rate risk.
The Group holds the following financial asset and liabilities:
| 2017$ | 2016$ | |
|---|---|---|
| Financial assets | ||
| Cash and cash equivalents | 445,007 | 98,472 |
| Trade and other receivables | 60,059 | 66.975 |
| Available-for-sale financial assets | 98,000 | 28,000 |
| 603,066 | 193,447 | |
| Financial liabilities | ||
| Trade and other payables | 497 934 | 595,520 |
| 497.934 | 595,520 |
Risk management is carried out by the Group's finance function under policies and objectives which have been approved by the Board of Directors. The Managing Director has been delegated the authority for designing and implementing processes which follow the objectives and policies.
The Board receives monthly reports which provide details of the effectiveness of the processes and policies in place.
Credit risk
Credit risk is the risk of loss from a counter-party failing to meet its financial obligations to the Company.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognized financial assets is the carrying amount of those assets, net of any provision for doubtful debts, as disclosed in the balance sheet and notes to the financial statements.
Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions. For bank and financial institutions, only independently rated parties with a minimum rating of 'A' are accepted.
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available).
| 2017 | 2016 | |
|---|---|---|
| Cash at bank and short-term bank deposits | 445.007 | 98.472 |
| 445.007 | 98,472 |
Other than cash and cash equivalents, the most significant other financial assets are trade and other receivables. The Group does not have any material credit risk exposure to any single debtor or Group of debtors under financial instruments entered into by the Group. There were no past due debts at balance date requiring consideration of impairment provisions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
4. Financial risk management (continued)
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities to meet obligations when due. At the end of the reporting period the Group held deposits at call of $34,839 (2015: $95,099) that are expected to readily generate cash inflows for managing liquidity risk.
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows. No finance facilities were available to the Group at the end of the reporting period.
Maturities of financial liabilities
The table below analyses the Group's financial liabilities into relevant maturity groupings.
| Contractual maturitiesof financial liabilities | Lessthan 6months | $6 - 12$months | Between1 and $2$vears | Between$2$ and $5$years | Over 5vears | Totalcontractualcash flows | Carryingamount |
|---|---|---|---|---|---|---|---|
| At 30 June 2017 | $ | S | S | $ | $ | $ | |
| Trade and other payables | 239,663 | 22,983 | 235,288 | 497,934 | 497,934 | ||
| 239,663 | 22,983 | 235,288 | 497,934 | 497,934 | |||
| At 30 June 2016 | |||||||
| Trade and other payables | 329,556 | 30,676 | 235,288 | 595,520 | 595,520 | ||
| 329,556 | 30,676 | 235,288 | 595,520 | 595,520 |
Market risk
The Group is exposed to equity securities price risk. This arises from investments held by the Group in Deep Yellow Limited and classified on the statement of financial position as available-for-sale financial assets. The Group is not exposed to commodity price risk.
The table below summaries the impact of increases/decreases in the Deep Yellow Limited share price on the Group's total comprehensive income / (loss) for the year and on equity. The analysis is based on the assumption that the share price had increased/decreased by 25% (2016 - 25%) from balance date fair value with all other variables held constant.
| Impact on post-tax loss | Impact on reserves | |||||||
|---|---|---|---|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |||||
| Investment | $+25%$ | $-25%$ | $+25%$ | $-25%$ | $+25%$ | $-25%$ | $+25%$ | $-25%$ |
| YellowDeepLimited | in6.737 | (6,737) | 7.000 | (7,000) | - 17.763 | (17.763) | $\overline{\phantom{a}}$ | $\blacksquare$ |
Cash flow and fair value interest rate risk
As the Group has no significant interest-bearing assets or borrowings, the Group's income and operating cash flows are not materially exposed to changes in market interest rates.
At 30 June 2017, if interest rates had changed by -/+ 100 basis points from the year-end rates with all other variables held constant, post-tax loss for the year would have been $2.717 lower/higher (2016 change of 100 bps $2,290 higher/lower), as a result of higher/lower interest income from cash and cash equivalents.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
4. Financial risk management (continued)
Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The net fair value of financial assets and financial liabilities approximates their carrying values as disclosed in the consolidated statement of financial position and notes to the financial statements.
5. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
Critical judgements in applying the entity's accounting policies
The Group has capitalised exploration expenditure of $3,116,578 (2016: $2,835,635). This amount includes costs directly associated with exploration. These costs are capitalised as an intangible asset until assessment and/or drilling of the permit is complete and the results have been evaluated. These costs include employee remuneration, materials, rig costs, delay rentals and payments to contractors. The expenditure is carried forward until such a time as the area moves into the development phase, is abandoned or sold. Given exploration activities have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of recoverable resources and the difficulty in forecasting cash flows to assess the fair value of exploration expenditure there is uncertainty as to the carrying value of exploration expenditure. The ultimate recovery of the carrying value of exploration expenditure is dependent upon the successful development and commercial exploitation or, alternatively, sale of the interest in the tenements.
6. Going concern
Notwithstanding that the Group incurred an operating loss after tax of $416,235 (2016: loss of $2,458,561) these financial statements have been prepared on a going concern basis which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
The ability of the consolidated entity to continue as a going concern is dependent upon one or more of the following:
- achieving sufficient future cash flows from operations to enable its obligations to be met;
- the success of cost saving initiatives, which include entering into Joint Venture arrangements and reducing tenement areas, so as to reduce the carrying and expenditure costs for tenements, and
- obtaining additional funding from capital raising activities.
The Directors acknowledge that to continue the exploration and development of the Group's exploration projects, the budgeted cash flows from operating and investing activities for the future will necessitate further capital raisings. In addition, the directors have agreed to retain 50% of their salary payments until the Group has sufficient cash reserves to meet its operational commitments for at least the next 12 months.
At the date of this report and having considered the above factors, the directors are confident of achieving the above and that the Group will be able to continue as a going concern.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
6. Going concern (continued)
In the event that the Group is unable to satisfy future funding requirements there exists a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern with the result that the Group may be required to realise its assets at amounts different from those currently recognised, settle liabilities other than in the ordinary course of business and make provisions for costs which may arise as a result of cessation or curtailment of normal business operations.
7. Segment information
The Group operates solely within one segment, being the mineral exploration industry in Australia.
| 2017$ | 2016S | ||
|---|---|---|---|
| 8. Other income | |||
| Interest | 2,690 | 2,437 | |
| 9. Income tax | |||
| 2017$ | 2016$ | ||
| (a) | Numerical reconciliation of income tax expense / (benefit)to prima facie tax payable | ||
| Profit (loss) from continuing operations before income tax expense | (435, 485) | (2,458,561) | |
| Tax at the Australian tax rate of 27.5% (2016: 30%)Recognition of deferred tax assets not previously recognisedAdjustments for current tax of prior years | (119, 758)(19, 250)(662) | (737, 568) | |
| Adjustment to deferred tax assets and liabilities for tax losses andtemporary differences not recognised | 120,420 | 737,568 | |
| Income tax expense / (benefit) | (19, 250) | ||
| (b) | Tax adjustment relating to items of other comprehensiveincome | ||
| Available-for-sale financial assets - fair value adjustment | 19,250 | ||
| (c) | Tax losses | ||
| Unused tax losses for which no deferred tax asset has beenrecognised | |||
| Potential tax benefit at 27.5% (2016: 30%) (note 15) | 6,731,3231,851,114 | 6,295,0171,888,505 | |
| (d) | Franking credits | ||
| Franking credits available for use in subsequent financial yearsbased on a tax rate of 27.5% (2016: 30%) | |||
| 251,146 | 251,146 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
| 2017S | 2016$ | |
|---|---|---|
| 10. Current assets - Cash and cash equivalents | ||
| Cash at bank and on hand | 445,007 | 98,472 |
| 2017Ş | 2016$ | |
| 11. Current assets - Trade and other receivables | ||
| Other receivablesPrepayments | 10,81849,24160,059 | 13,20053,77566,975 |
| 2017 | 2016 | |
| 12. Current assets - Available-for-sale financial assets | $ | $ |
| Listed equity securities | 98,000 | 28,000 |
| At beginning of yearImpairment of available-for-sale financial asset | 28,000 | 70,000(42,000) |
| Revaluation increment recognised in reservesAt end of year | 70,00098,000 | 28,000 |
| 2017$ | 2016$ | |
| 13. Non-current assets - Property, plant and equipment | ||
| Equipment / software - at costAccumulated depreciation | 82,457(69, 433)13,024 | 79,239(65, 529)13,710 |
| Equipment /SoftwareS | ||
| Year ended 30 June 2017Opening net book amount | 13,710 | |
| AdditionsDepreciation chargeClosing net book amount | 3,218(3,904)13,024 | |
| Year ended 30 June 2016 | ||
| Opening net book amountAdditionsDepreciation charge | 9,9647,446(3,700) | |
| Closing net book amount | 13,710 |
$\ddot{\phantom{a}}$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
14. Non-current assets - Exploration expenditure
| 2017$ | 2016Ŝ | |
|---|---|---|
| Exploration phase property costs | ||
| Deferred geological, geophysical, drilling and other expenditure -at cost | ||
| 3,116,578 | 2,835,635 | |
| The capitalised exploration expenditure carried forward above hasbeen determined as follows: | ||
| Opening balance | 2,835,635 | 4,461,254 |
| Expenditure incurred during the year | 302,671 | 399,036 |
| Exploration abandoned | (21, 728) | (2,024,655) |
| 3,116,578 | 2,835,635 | |
| 15. Non-current assets – Deferred tax assets | ||
| 2017 | 2016 | |
| $ | $ | |
| Deferred tax assets | ||
| The balance comprises temporary differences attributable to: | ||
| Amounts recognised in profit or loss | ||
| Accruals | 17,395 | 28,421 |
| Employee entitlements | 6,320 | 9,203 |
| Business capital costs | 25,570 | 21,089 |
| Tax losses | 2,626,026 | 2,644,762 |
| Amounts recognised in equity | ||
| Business capital costs | 24,993 | 21,151 |
| Tax losses | 41,059 | 30,380 |
| Total deferred tax assets | 2,741,363 | 2,755,006 |
| Set-off of deferred tax assets/liabilities pursuant to set-off | ||
| provisions (note 18) | (890, 249) | (866, 501) |
| Net adjustment to deferred tax assets for tax losses not | ||
| recognised | (1,851,114) | (1,888,505) |
| Net deferred tax assets |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
15. Non-current assets - Deferred tax assets (continued)
| AccrualsS | EmployeeentitlementsS | Businesscapitalcosts$ | Taxlossesincurred$ | Total$ | |
|---|---|---|---|---|---|
| At 30 June 2015(Charged)/credited to | 13,232 | 5,854 | 51,763 | 2,447,232 | 2,518,081 |
| profit or loss(Charged)/credited to | 15,189 | 3,349 | 271 | 217,604 | 236.413 |
| contributed equity | (9,794) | 10,306 | 512 | ||
| At 30 June 2016 | 28.421 | 9,203 | 42,240 | 2,675,142 | 2,755,006 |
| (Charged)/credited toprofit or loss | (11, 026) | (2,883) | 4 4 8 1 | (18, 736) | (28, 164) |
| (Charged)/credited to | |||||
| contributed equity | 3,842 | 10,679 | 14,521 | ||
| At 30 June 2017 | 17,395 | 6,320 | 50,563 | 2,667,085 | 2,741,363 |
| 16. Non-current assets – Other | 2017$ | 2016s | |||
| Security deposits | 27,500 | 25,000 | |||
| 2017 | 2016 | ||||
| 17. Payables | $ | $ | |||
| Current liabilities | |||||
| Trade payables | 86,478 | 165,416 | |||
| Other payables | 35,528 | 113,632 | |||
| Other payables - related party (i) | 117,657 | 50,508 | |||
| Employee entitlements | 22,983 | 30,676 | |||
| 262,646 | 360,232 | ||||
| Non-current liabilities | |||||
| Other payables - related party (ii) | 235,288 | 235,288 | |||
| 235,288 | 235,288 | ||||
| Total Payables | 497,934 | 595,520 |
(i) These amounts represent the unpaid directors' remuneration that may be called within the next 12 months. The liability is unsecured and no decision has been made by the directors on the timing or nature of the consideration to be provided in settlement.
(ii) These amounts represent the unpaid directors' remuneration for periods to 30 June 2016. The directors have agreed that they will not call upon the payment of this balance outstanding for a period of not less than 12 from the date of this report.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
| 18. Non-current liabilities - Deferred tax liabilities | 2017S | 2016S |
|---|---|---|
| Deferred tax liabilities | ||
| The balance comprises temporary differences attributable to:Amounts recognised in profit or lossExploration expenditureInvestmentPrepayments | 857,059(2, 175)13,542 | 850,690(2, 372)15,376 |
| Property, plant and equipmentAmounts recognised in other comprehensive incomeAvailable-for-sale financial assets | 2.573 | 2,807 |
| Total deferred tax liabilitiesSet-off of deferred tax assets/liabilities pursuant to set-offprovisions (note 15) | 19,250890,249(890,249) | 866,501(866, 501) |
| Net deferred tax liabilities |
| 1,338,37610,22816,2452,8071,367,656Charged/(credited) toprofit or loss(487, 686)(12,600)(869)(501, 155)۰Charged /(credited)to othercomprehensiveincomeAt 30 June 2016850,690(2,372)15,3762,807866,501Charged/(credited) to1976,369(1,834)(234)4,498Charged /(credited)19,25019,250to othercomprehensiveincomeAt 30 June 2017857,05917,07513,5422.573890,249 | ExplorationexpenditureS | Available-for-salefinancialassets$ | Prepayments | Property,plant andequipmentЪ | TotalS | |
|---|---|---|---|---|---|---|
| At 30 June 2015 | ||||||
| profit or loss | ||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
| 19. Contributed equity | 2017 | 2016 |
|---|---|---|
| 463,421,804 (2016: 249,762,372) ordinary shares fully paid | 9.031.677 | 7,876,230 |
$(a)$ Movements in ordinary share capital:
| Number of | Issue Price | |||
|---|---|---|---|---|
| Date | Details | shares | S | S |
| At 30 June 2015 | Balance | 238,661,372 | 7,766,926 | |
| 29 Jan-16 | Shares issued | 11,101,000 | 0.0100 | 111,010 |
| Share issue expenses | (1,706) | |||
| At 30 June 2016 | Balance | 249,762,372 | 7,876,230 | |
| 14 Jul-16 | Shares issued | 29,375,000 | 0.0080 | 235,000 |
| 16 Dec-16 | Shares issued | 8,000,000 | 0.0080 | 64,000 |
| 20 Dec-16 | Shares issued | 83,600,000 | 0.0050 | 418,000 |
| 20 Dec-16 | Shares issued | 5,800,000 | 0.0050 | 29,000 |
| 11 May-17 | Shares issued | 86,884,432 | 0.0055 | 477,864 |
| Share issue expenses | (68, 417) | |||
| At 30 June 2017 | Balance | 463,421,804 | 9,031,677 |
A total of $1,155,447 was raised of which $1,011,447 was received as cash (net of share Issue costs of $68,417), $70,000 was received as cash prior to 1 July 2016, $64,000 was received by way of offset against amounts owing to related parties and $10,000 was received by way of offset against an amount owing to a trade creditor.
(b) Ordinary shares:
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
(c) Share options
On 16 December 2016 the Company issued 37,375,000 options, being a free attaching option to each new share issued to sophisticated investors and Directors on 14 July and 16 December 2016. The options were subject to shareholder approval which was obtained at the Company AGM on 17 November 2016.
The options have an exercise price of 3.0 cents and expire on 30 June 2019. The options carry no dividend or voting rights. Each option is convertible into one ordinary share.
(d) Capital risk management
The Group's objectives when managing capital are to safeguard its ability to continue as a going concern, so that they can continue to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The capital structure of the Group includes cash and cash equivalents, equity attributable to equity holders, comprising of contributed equity, reserves and accumulated losses. In order to maintain or adjust the capital structure, the Group may issue new shares, sell assets to reduce debt or adjust the level of activities undertaken by the company.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
19. Contributed equity (continued)
The Group monitors capital on the basis of cash flow requirements for operational, and exploration and evaluation expenditure. The Group's exposure to borrowings as at 30 June 2017 totals $nil (2016: $nil). The Group will continue to use capital market issues and joint venture participant funding contributions to satisfy anticipated funding requirements.
The Group's strategy to capital risk management is unchanged from prior years.
| 20. Reserves | 2017S | 2016$ |
|---|---|---|
| Available-for-sale investments revaluation reserve | 50,750 | |
| At beginning of yearRevaluation increment (note 12)Income tax [email protected]%$At end of year | 70,000(19,250)50,750 | |
| 21. Retained profits (accumulated losses) | 2017S | 2016S |
| Retained profits / (accumulated losses) | (5,820,193) | (5,403,958) |
| At beginning of yearNet profit / (loss) for the yearAt end of year | (5,403,958)(416, 235)(5,820,193) | (2,945,397)(2,458,561)(5,403,958) |
22. Joint venture entities
Tick Hill Gold Project (THGP)
On 17 June 2013, the consolidated entity entered into an Exploration Farm-In and Joint Venture Agreement (JVA) over the THGP with Diatreme Resources Limited (DRX). The commencement of the JVA was subject to certain conditions to be satisfied.
Formal arrangements between DRX and MIM Holdings Limited (MIM) for the transfer of Tick Hill mining leases were finalised by the signing of a Sale Implementation Deed between those parties on 7 November 2014. The transfer of the mining leases to DRX from MIM was completed on 20 March 2015.
On 30 January 2015, the consolidated entity and DRX confirmed that the remaining conditions of the JVA had been waived and as a result, the consolidated entity was entitled to commence earning into the THGP from 1 January 2015.
Under the JVA the consolidated entity has the right to earn a 50% interest in the THGP by spending a minimum of $750,000 on exploration, which will include substantial drilling over a two year earn-in period (which can be extended by agreement). All expenditure incurred by the consolidated entity on the Surface Gold Project (involving the tailings, alluvial-colluvial gold and all other surface sources of gold) will constitute earn-in expenditure and will be counted towards the $750,000 minimum earn-in obligation. During the earn-in period the consolidated entity will have sole and exclusive right to access
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
22. Joint venture entities (continued)
and conduct exploration on the THGP as well as to determine the nature of the exploration programs. Upon a transfer of a 50% interest in the THGP, the consolidated entity will be required to pay DRX $100,000 and an amount equal to 50% of the government security bond on the mining leases.
MIM retains a royalty on gold produced from the mining leases, which is set at a variable rate depending on the annual grade of gold produced from mining. The royalty applies initially to gold produced above 5g/t Au and then, after payment of royalties totalling $5m, to gold produced above 10g/t Au. A separate royalty rate applies to gold produced from tailings resulting from previous mining.
Under the terms of the JVA, the Earn-in Period ended on 31 December 2016. The parties to the JVA have agreed to a 12-month extension to the Earn-in Period until 31 December 2017.
The consolidated entity had not earned any interest in the joint venture as at 30 June 2017.
Nicholson Project
On 3 November 2015 the consolidated entity entered into a Farm-in and Joint Venture Agreement with Teck Australia Pty Ltd (Teck Australia) to explore Superior's Nicholson Project (zinc-lead-copper) in north-west Queensland, subject to certain conditions to be satisfied.
Under the original terms of the Agreement, Teck Australia has an exclusive right to earn a 70% interest in the project tenements by spending $2,500,000 in accordance with the following structure:
- Initial Period incurring $250.000 minimum expenditure to be spent on exploration or paid in cash to Superior Resources by 30 September 2016 (subsequently extended to 31 December 2016). and
- Earn-In Period incurring $2,250,000 in operational expenditure before 31 December 2018.
During November 2016 Teck Australia confirmed that it had completed the $250,000 expenditure for the Initial Period per the Joint Venture Agreement and that it will commit to the Earn-In Period which requires expenditure of a further $2,250,000 on or before 31 December 2018.
On satisfaction of the earn-in rights by Teck Australia, the parties will be in a 70:30 (Teck Australia: Superior Resources) joint venture.
Teck Australia had not earned any interest in the joint venture as at 30 June 2017.
23. Key Management Personnel disclosures
$(a)$ Key management personnel compensation
| 2017 | 2016S | |
|---|---|---|
| Short-term employee benefits | 280,918 | 289,918 |
| Post-employment benefits | 22,127 | 22,127 |
| 303,045 | 312,045 |
Detailed remuneration disclosures are provided in the remuneration report on pages 11 to 14. At 30 June 2017 $396,945 remains payable (2016: $281,796).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
23. Key Management Personnel disclosures (continued)
$(b)$ Equity instrument disclosures relating to key management personnel
$(i)$ Options provided as remuneration and shares issued on exercise of such options
There have been no options granted affecting remuneration in the current or a future reporting period.
$(ii)$ Option holdings
The numbers of options over ordinary shares in the company held during the financial year by each Director of Superior Resources Limited and other key management personnel of the Group, including their personally related parties, is set out below. There were no options on issue during the previous financial year.
| 2017Name | Balance at thestart of thevear | OptionsExercised | Net purchased(sold) | Other changes | Balance at theend of the year |
|---|---|---|---|---|---|
| Directors of Superior Resources Limited | |||||
| PH Hwang | 4,250,000 | $\blacksquare$ | 4,250,000 | ||
| CA Fernicola | - | $\blacksquare$ | 3,750,000 | $\mathbf{m}$ | 3,750,000 |
| KJ Harvey | $\overline{\phantom{0}}$ | - |
$(iii)$ Share holdings
The number of ordinary shares in the company held during the financial year by each Director of Superior Resources Limited and other key management personnel of the Group, including their personally related parties, is set out below.
| 2017Name | Balance at thestart of thevear | Received onexercisingoptions | Net purchased' (sold) | Other changes | Balance at theend of the year |
|---|---|---|---|---|---|
| Directors of Superior Resources Limited | |||||
| PH Hwang | 6.677.974 | $\sim$ | 11,400,000 | $\sim$ | 18,077,974 |
| CA Fernicola | 10,340,000 | 13,160,000 | $\overline{\phantom{a}}$ | 23,500,000 | |
| KJ Harvey | 19,454,432 | $\blacksquare$ | 3,000,000 | ٠ | 22,454,432 |
| 2016Name | Balance at thestart of thevear | Received onexercisingoptions | Net purchased' (sold) | Other changes | Balance at theend of the year |
|---|---|---|---|---|---|
| Directors of Superior Resources Limited | |||||
| P H Hwang | 4,677,974 | 2,000,000 | مد | 6.677.974 | |
| C A Fernicola | 9,340,000 | $\blacksquare$ | 1,000,000 | 10,340,000 | |
| K J Harvey | 18,454,432 | $\blacksquare$ | 1.000,000 | ٠ | 19,454,432 |
| D J Horton* | 3,662,500 | $\blacksquare$ | 3.662,500 | ||
| (* Retired 16 | |||||
| November 2015) |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
24. Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor, its related practices and nonrelated audit firms:
| PKF Hacketts Audit | |
|---|---|
| Audit or review of financial report29,000 | 29,800 |
| 29,000______________________________________ | 29,800. |
25. Contingencies
There are no contingent liabilities affecting the Group as at the date of this report.
26. Commitments
Exploration commitments
So as to maintain current rights to tenure of various exploration and mining tenements, the company will be required to outlay amounts in respect of tenement rent to the relevant governing authorities and to meet certain annual exploration expenditure commitments. These outlays (exploration expenditure and rent), which arise in relation to granted tenements, inclusive of tenement applications granted subsequent to 30 June 2017, are as follows:
| 2017S | 2016S | |
|---|---|---|
| Exploration expenditure commitmentsCommitments for payments under exploration permits for mineralsin existence at the reporting date but not recognised as liabilitiespayable is as follows: | ||
| Payable within one yearPayable between one and five years | 741,7672,127,895 | 834,6332,978,880 |
| 2.869.662 | 3.813.513 |
Outlays may be varied from time to time, subject to approval of the relevant government departments, and may be relieved if a tenement is relinguished or certain contractual arrangements are entered into with third parties (e.g. a farm-in or joint venture arrangement). Cash security bonds totalling $27,500 (2016: $25,000) are currently held by the relevant governing authorities to ensure compliance with 6granted tenement conditions.
27. Events occurring after the balance date
No matter or circumstance has arisen since the end of the financial year that has significantly affected or may significantly affect the operations of the company, the results of the operations or the state of affairs of the company in financial years subsequent to 30 June 2017.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
28. Reconciliation of profit / (loss) after income tax to net cash flows from operating activities
| 2017S | 2016S | |
|---|---|---|
| Profit / (loss) for the year | (416, 235) | (2,458,561) |
| Depreciation and amortisationExploration abandonedImpairment of available-for-sale financial assetsIncome tax | 3,90421,728(19, 250) | 3,7002,024,65542,000 |
| Changes in operating assets and liabilities:(Increase) / decrease in other receivables(Increase) / decrease in prepaymentsIncrease/(decrease) in trade payablesIncrease/(decrease) in other payables - currentIncrease/(decrease) in other payables - non-currentIncrease / (decrease) in employee entitlements | 3,291(2, 567)(12, 411)81,561(7,693) | (6, 821)2,86539,415(24, 782)235,28811,162 |
| Net cash outflow from operating activities | (347, 672) | (131, 079) |
| 29. Earnings (loss) per share | ||
| (a) Basic earnings (loss) per share | 2017Cents | 2016Cents |
| Profit (loss) attributable to the ordinary equity holders of thecompany | (0.12) | (1.01) |
| (b) Diluted earnings (loss) per share | ||
| Profit (loss) attributable to the ordinary equity holders of thecompany | (0.12) | (1.01) |
| (c) Reconciliations of earnings (loss) used in calculatingearnings per share | 2017$ | 2016$ |
| Basic earnings (loss) per shareProfit (loss) attributable to ordinary equity holders of the companyused in calculating basic earnings per share | (416,235) | (2,458,561) |
| Diluted earnings(loss) per shareProfit (loss) attributable to ordinary equity holders of the companyused in calculating diluted earnings per share | (416, 235) | (2,458,561) |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
29. Earnings (loss) per share (continued)
| (d) Weighted average number of shares used as thedenominator | 2017Number | 2016Number |
|---|---|---|
| Weighted average number of ordinary shares used as thedenominator in calculating basic earnings (loss) per shareAdjustments for calculation of diluted earnings (loss) per share:Options | 341,820,745٠ | 243,332,285 |
| Weighted average number of ordinary shares and potentialordinary shares used as the denominator in calculating dilutedearnings (loss) per share | 341,820,745 | 243,332,285 |
The 37,375,000 options granted on 16 December 2016 are not included in the calculation of diluted earnings per share because they are antidilutive for the year ended 30 June 2017. These options could potentially dilute basic earnings per share in the future.
30. Related party disclosures
(a) Parent entity
The parent entity within the Group is Superior Resources Limited.
(b) Subsidiaries
The consolidated financial statements include the financial statements of Superior Resources Limited and the subsidiary listed in the following table:
| % equity interest | Investment | ||||
|---|---|---|---|---|---|
| Country of | 2017 | 2016 | 2017 | 2016 | |
| incorporation | |||||
| Superior Gold Pty Ltd | Australia | 100 | 100 | 1.000 | 1.000 |
| Ordinary shares |
(c) Key management personnel
Disclosures relating to key management personnel are set out in note 23.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017
31. Parent entity information
(a) Summary financial informationThe individual financial statements for the parent entity show the following aggregate amounts:
| 2017$ | 2016$ | |
|---|---|---|
| Statement of financial positionAssetsCurrent assets | 587,994 | 193,078 |
| Non-current assetsTotal assets | 3,176,3083,764,302 | 2,878,4223,071,500 |
| LiabilitiesCurrent liabilitiesNon-current liabilitiesTotal liabilities | 262,646235,288497,934 | 359,986235,288595,274 |
| Shareholders' equityIssued capital | 9,031,677 | |
| ReservesRetained profits/(accumulated losses) | 50,750(5,816,059) | 7,876,230(5,400,004) |
| 3,266,368 | 2,476,226 | |
| Statement of profit or loss and other Comprehensive Income | ||
| Loss for the yearOther comprehensive income/(loss) net of tax | (416, 055)50,750 | (2,458,224) |
| Total comprehensive income/(loss) for the year | (365,305) | (2.458, 224) |
Contingent liabilities of the parent entity $(b)$
The parent entity did not have any contingent liabilities as at 30 June 2017 or 30 June 2016.
DIRECTORS' DECLARATION
In the directors' opinion:
- $\overline{1}$ the financial statements and notes set out on pages 19 to 46, are in accordance with the Corporations Act 2001, including:
- complying with Accounting Standards, the Corporations Regulations 2001 and other $(a)$ mandatory professional reporting requirements, and
- giving a true and fair view of the consolidated entity's financial position as at 30 June 2017 $(b)$ and of its performance for the financial year ended on that date, and
- having regard to note 6 to the financial statements, there are reasonable grounds to believe that $2.$ the company will be able to pay its debts as and when they become due and payable.
Note 2(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.
The directors have been given the declarations by the chief executive officer/chief financial officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
CA Fernicola Chairman
Brisbane, 19th September 2017
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SUPERIOR RESOURCES LIMITED
Report on the Financial Report
Opinion
We have audited the accompanying financial report of Superior Resources Limited ("the company"), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated income statement, consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the company and the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year.
In our opinion the financial report of Superior Resources Limited is in accordance with the Corporations Act 2001, including:
- $i)$ Giving a true and fair view of the consolidated entity's financial position as at 30 June 2017 and of its performance for the year ended on that date; and
- ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. Our responsibilities under those standards are further described in the Auditor's Responsibility section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of matter
Without modifying our opinion, we draw attention to the consolidated entity's incurred losses of $416,235 and operating cash outflows of $347,672 for the year ended 30 June 2017. These conditions as described in Note 6 to the financial statements, indicate the existence of a material uncertainty that may cast significant doubt about the consolidated entity's ability to continue as a going concern and therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business.
The financial report of the consolidated entity does not include any adjustments in relation to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a going concern.
Independence
We are independent of the consolidated entity in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
$\Lambda$ O
| $+0$ | ||
|---|---|---|
| PKF Hacketts Audit | Level 6, 10 Eagle Street, Brisbane QLD 4000 | 8 East Street, PO Box 862 |
| ABN 33 873 151 348 | GPO Box 1568, Brisbane QLD 4001 | Rockhampton QLD 4700 |
| p +61 7 3839 9733 | p +61 7 4927 2744 | |
| f +61 7 3832 1407 | $f$ +61 7 4927 4317 |
Liability limited by a scheme approved under Professional Standards Legislation. PKF International Limited administers a network of legally independent firms which carry on separate business under the PKF Name. PKF International Limited is not responsible for the acts or omissions of individual member firms of the network. For office locations visit www.pkf.com.au
Key Audit Matter
A key audit matter is a matter that, in our professional judgement, was of most significance in our audit of the financial report of the current period. This matter was addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. For each matter below, our description of how our audit addressed the matter is provided in that context.
Carrying value of capitalised exploration expenditure
Why significant
As at 30 June 2017 the carrying value of and evaluation exploration assets WAS $3,116,578 (2016: $2,835,635), as disclosed in Note 14. This represents 83% of total assets of the consolidated entity.
The consolidated entity's accounting policy in respect of exploration and evaluation expenditure is outlined in Note 2 (i).
Significant judgement is required:
- determining whether facts and $\bullet$ in indicate circumstances that the exploration and evaluation assets should be tested for impairment in accordance with Australian Accounting Standard AASB 6 Exploration for and Evaluation of Mineral Resources ("AASB 6"); and
- determining treatment in the of exploration and evaluation expenditure in accordance with AASB 6, and the consolidated entity's accounting policy. In particular:
- whether the particular areas of $\circ$ interest meet the recognition conditions for an asset; and
- which elements of exploration $\Omega$ and evaluation expenditures qualify for capitalisation for each area of interest.
How our audit addressed the key audit matter
Our work included, but was not limited to, the following procedures:
- Conducting a detailed review of management's assessment of impairment trigger events prepared in accordance with AASB 6 including:
- assessing whether the rights to tenure of $\Omega$ the areas of interest remained current at reporting date as well as confirming that rights to tenure are expected to be renewed for tenements that will expire in the near future:
- holding discussions with the directors and $\Omega$ management as to the status of ongoing exploration programmes for the areas of interest, as well as assessing if there was evidence that a decision had been made to discontinue activities in any specific areas of interest; and
- obtaining and assessing evidence of the $\Omega$ consolidated entity's future intention for the areas of interest, including reviewing future budgeted expenditure and related work programmes;
- considering whether exploration activities for the areas of interest had reached a stage where a reasonable assessment of economically recoverable reserves existed;
- testing, on a sample basis, exploration and evaluation expenditure incurred during the year for compliance with AASB 6 and the consolidated entity's accounting policy; and
- assessing the appropriateness of the related disclosures in Note 2(j) and 14.
Other Information
Other information is financial and non-financial information in the annual report of the consolidated entity which is provided in addition to the Financial Report and the Auditor's Report. The directors are responsible for Other Information in the annual report.
The Other Information we obtained prior to the date of this Auditor's Report was the Director's Report and Shareholder Information. The remaining Other Information is expected to be made available to us after the date of the Auditor's Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, the auditor does not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information in the Financial Report and based on the work we have performed on the Other Information that we obtained prior the date of this Auditor's Report we have nothing to report.
Directors' Responsibilities for the Financial Report
The Directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the Directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards.
In preparing the financial report, the Directors are responsible for assessing the consolidated entity's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using a going concern basis of accounting unless the Directors either intend to liquidate the consolidated entity or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our responsibility is to express an opinion on the financial report based on our audit. Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.
Auditor's Responsibilities for the Audit of the Financial Report (continued)
The procedures selected depend on the auditor's judgement, including assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.
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.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report.
We 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 consolidated entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial report 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 consolidated entity to cease to continue as a going concern.
We evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.
We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the consolidated entity to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
The Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2017.
In our opinion, the Remuneration Report of Superior Resources Limited for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
PKF HACKETIS
PKF HACKETTS AUDIT
Liam Murphy Partner
Brisbane, 19th September 2017