754018bf9f6ad3ad5559b0.pdf
A.B.N. 54 126 490 855
ANNUAL REPORT 2015
COPPERMOLY LTD ANNUAL REPORT 2015
C O N T E N T S
Page
Directors' Report 2-17
Operating & Financial Review 2
Corporate Governance 17
Auditor's Independence Declaration 18
Financial Report 19
Consolidated Statement of Profit or Loss
and Other 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 24-43
Directors' Declaration 44
Independent Audit Report to the Members 45-46
Shareholder Information 47
Corporate Directory 48
Schedule of Tenements 48
Your Directors present their report on the consolidated entity consisting of Coppermoly Ltd and the entities it controlled at the end of, or during, the year ended 30 June 2015.
DIRECTORS
The following persons were Directors of Coppermoly Ltd during the whole of the financial year and up to the date of this report unless otherwise stated:
K. Grice was appointed as a Director on 15 July 2014.
J. Yao was appointed as a Director on 5 March 2015.
W. Huang was appointed as a Director on 11 March 2015.
B. Faulkner resigned as a Director on 11 March 2015.
M. Howard resigned as a Director on 11 March 2015.
M.J. Gannon resigned as Managing Director on 15 July 2014.
PRINCIPAL ACTIVITIES
The principal activities during the financial year of entities within the consolidated entity were exploration and evaluation of porphyry copper-molybdenum-gold projects in Papua New Guinea.
There were no significant changes in the principal activities during the year.
RESULTS AND DIVIDENDS
The consolidated entity loss from operating activities after income tax for the period was $798,960 (2014:
$787,337). No dividend has been paid or recommended during the year ended 30 June 2015.
OPERATING & FINANCIAL REVIEW
Coppermoly Limited is an ASX-listed exploration company targeting porphyry style large scale-low grade projects prospective for copper, gold and molybdenum. The Company's projects are located on New Britain Island in Papua New Guinea (PNG).
Operational Review
Two of the Company's exploration licences, EL1043 Mt Nakru and EL2379 Simuku, (EL2379 Simuku is a newly consolidated exploration licence combining EL1077 Simuku and EL1445 Talelumas), together known as the West New Britain Projects (WNB Projects) were previously subject to a farm-in agreement with Barrick PNG Exploration Ltd (Barrick), a subsidiary of Barrick Gold Corporation. Barrick earned a 72% interest in the three licences by spending more than $20 million on exploration. In July 2013 Coppermoly entered into an agreement with Barrick to re-acquire Barrick's interest in the WNB Projects on a staged basis to reacquire 100% ownership of these licences. Barrick still holds a nominal 28% interest in the WNB Projects, which the Company has a binding agreement to acquire, completion of which will be effected on the payment of a further $4.5M to Barrick within 6 months after the commencement of commercial production at the WNB Projects. Barrick do not have to contribute any further costs to exploration or development of the projects nor are they entitled to any profits from the projects. See note 12 in the Notes to the Consolidated Financial Statements for more details.
Coppermoly also has 100% ownership of three other tenements located on New Britain Island, including EL2014 Makmak, where early exploration is focused on the Pulding and Wara Creek prospects as well as two prominent aeromagnetic anomalies; EL1782 Powell in East New Britain a grassroots project with copper potential; and EL2272 Wowonga which covers the south east extensions of the Nakru trend.
The Company's core objective is to ensure that the full value of all of its assets are realised over time.
The consolidated entity's current mineral tenements are:
Date first
Project
acquired Location
EL 1043 Mt Nakru (47km²) Jan 2008 West New Britain EL 2379 Simuku (122km²) Jan 2008 West New Britain EL 2014 Makmak (255km²) May 2012 East New Britain EL 1782 Powell (758km²) Sep 2013 East New Britain EL 2272 Wowonga (31km²) Feb 2014 East New Britain
Figure 1: Coppermoly's Exploration Licences on New Britain
Project review
EL 1043 Mt Nakru
A surface rock chip and float sampling programme at Nakru-2 in late 2013 indicated that high-grade Cu-Au mineralisation with results up to 24% copper, occurred over an extensive area with a likely strike length in excess of 800m. This area coincides with a broad Induced Polarisation (IP) chargeability anomaly.
Following up these results Coppermoly collected a further fifteen (15) rock float (talus debris) samples in March 2015 at the Nakru-2 Northwest and Nakru-4 prospects located approximately 500 to 1000m northwest of known mineralisation at Nakru-2 and Nakru-1 respectively (Figure 2).
Three (3) samples from Nakru-2 Northwest each assayed greater than 2% copper and together with highly anomalous gold, silver, zinc and molybdenum confirm the previously indicated extensive zone of mineralisation at Nakru-2. Six (6) of the twelve (12) float samples from the Nakru-4 prospect assayed greater than 1% copper with three (3) assaying greater than 2% copper. The spatial distribution of the anomalous samples suggests new parallel zones of mineralisation at both Nakru-2 Northwest and Nakru-4. Samples were collected by Copper Quest's geologist and analysed at Intertek in Lae and Intertek Genalysis in Townsville.
Most of the samples with elevated copper contain sulphides with little or no oxidation although the presence of secondary chalcocite suggests some samples are derived from the supergene enrichment zone. The float samples are considered to have a local provenance as the local topography is relatively subdued, limiting downslope movement and the samples are relatively unoxidised suggesting recent exhumation. The dominant primary sulphide species are pyrite and chalcopyrite. The sulphide mineralisation is hosted in strongly quartz-sericite-clay altered rhyolite breccia. Similar rocks host mineralisation at Nakru-1 and Nakru-2 deposits.
The Nakru EL was renewed during the period for a period of two years following a warden's hearing held on site.
Figure 2: Nakru project location map showing surface rock float sample locations and copper assays from 2013 and 2015 sampling programme
EL 2379 Simuku (new consolidated exploration licence comprising EL1077 Simuku and EL1445 Talelumas)
Work on the Simuku prospect which comprises the Simuku porphyry, Kula alteration zone and Mt Misusu quartz stockwork has been limited to a review of the Barrick data. As the Simuku prospect extends over both the Simuku and Talelumas exploration licences, Coppermoly decided to make application to consolidate the two licences. The new exploration licence covers exactly the same land, and has the same landowners, as the antecedent tenements but reduces the administration and compliance requirements for the licence. The new consolidated exploration licence was granted as EL2379 on 11 September 2015.
EL 2014 Makmak
The Makmak EL was renewed during the period for a further two years following a warden's hearing held on site. Following a compulsory reduction in the size of the Licence this tenement now covers 75 sub blocks or
-
square kilometres.
EL 1782 Powell
The Powell tenement covers 758 square kilometres and is located in East New Britain. A data review indicates copper geochemical anomalies in the south west of the tenement warrant follow up.
EL 2272 Wowonga
Wowonga is a small, greenfields exploration licence located on the south coast of West New Britain which adjoins Coppermoly's Makmak exploration licence. Coppermoly applied for the ground when evaluating the aeromagnetic results for Makmak after noticing an unusually pronounced anomaly on this coastal promontory.
Coppermoly believes that it warrants closer examination given the exceptional results it has obtained on other tenements on the same regional trend.
Financial Review
Profit or Loss
Costs for the year ended 30 June 2015 were marginally higher by approximately $9,000, or 1% more than the previous year's total costs. Increased costs included an additional $89,900 in finance costs reflecting additional interest on loans and interest accrued on the convertible notes issued during the year; a decrease of $24,000 in the net change in fair value of financial liabilities; and an additional $6,000 in insurance costs. These additional costs were offset by reductions in other costs including corporate compliance ($18,900 decrease) due primarily to a reduced spend on public relations and travel costs; and a reduction in office rental, communication and consumables (down $17,800) due mostly to lower electricity, telephone and software costs. Other cost reductions included depreciation ($8,100 decrease); employee benefits ($4,300 decrease); and other expenses ($14,000 decrease).
Statement of Financial Position
Total assets increased over the year due largely to the increase in the capitalised values of mineral exploration and evaluation assets. The total net increase of approximately $2,384,300 was made up of an increase in cash and receivables of $402,200; and an increase in mineral exploration and evaluation assets of $2,008,400 consisting of new fully paid ordinary shares in Coppermoly (Shares) valued at $869,600 issued to Barrick for the second payment under the Barrick reacquisition agreement, approximately $363,700 spent on exploration and foreign currency exchange differences of $775,100. These increases were offset by a decrease in plant and equipment of $26,400 being largely depreciation for the year.
Total liabilities increased by approximately $1,050,300 primarily due to the issue of convertible notes in December 2014 and March 2015 recorded at $1,118,400 as at 30 June 2015 offset by a reductions in trade and other creditors of $48,000 and provisions of $20,100.
Total equity increased during the year due to net capital issued being approximately $1,150,200 (including the value of the shares issued to Barrick mentioned above) higher than the total comprehensive loss for the year.
Cash Flows
Cash used in operations during the year was down by approximately $72,600 compared to the prior year, an improvement of more than 10% and largely due to directors, including some former directors, not taking their directors' fees in cash in 2015. These amounts have been accrued in the accounts. Other material savings include lower corporate compliance and office rental, communication and consumables costs paid in 2015.
Cash used for investment activities was lower in 2015 compared to the prior year by approximately
$1,295,900. This reduction was due to a lower amount spent on exploration in 2015. Cash used for investing activities in the prior year also included $680,000 paid to Barrick as part of the reacquisition agreement for the WNB Projects.
Cash from financing activities was approximately $823,700 less than the prior year. Net funds raised from the issue of securities during the year totalled $2,260,400 less than the equivalent amount from last year but was offset by an increase in net borrowings of $1,436,800 in 2015.
As at 30 June 2015 Coppermoly had $488,351 in cash and cash equivalents compared to $90,522 at 30 June 2014.
Capital Raising and Debt Financing
There were two main funding events during the current year:
-
On 16 July 2014 Coppermoly entered into a bridging loan with one of its major shareholders, Jelsh Holdings Pty Ltd (Jelsh), to borrow $500,000. The loan was provided on an unsecured basis and was provided as interim financing used for general working capital purposes. The loan attracted interest of 6.5% per annum, subject to additional default interest applying in the event of non- repayment, and was repaid by Coppermoly on 19 December 2014. The repayment amount included interest of $13,979;
-
On 12 December 2014 Coppermoly entered into a placement and convertible note agreement with Jade Triumph International Limited. The key features of the Agreement included:
-
An upfront placement of 30,000,000 shares at an issue price of $0.01 (1 cent) per Share to raise $300,000 (Placement); and
-
The issue of 60,000,000 convertible notes at an issue price of $0.02 (Convertible Notes) to raise a total of $1,200,000 (before costs), in two separate tranches, being:
-
an initial upfront issue of 38,750,000 Convertible Notes to raise $775,000 (Initial Tranche); and
-
a subsequent issue of 21,250,000 Convertible Notes to raise $425,000, which was subject to Coppermoly first receiving Shareholder approval for that issue.
-
Each Convertible Note is:
-
convertible into one Share within 24 months of the issue of the Initial Tranche (Maturity Date), at the Option of the holder, subject to such conversion not resulting in the holder breaching the Corporations Act 2001;
-
accrues interest a rate of 7% per annum, repayable at maturity; and
-
may be repaid by Coppermoly at any time prior to the Maturity Date, subject to Coppermoly paying the holder a break fee equal to 5% of the repayment amount.
-
The noteholder also received 19,999,999 unlisted options to acquire Shares (the issue of 7,083,333 of which were subject to first obtaining Shareholder approval), which are exercisable at any time prior to the Maturity Date at an exercise price of $0.03 (3 cents) (Attaching Options), and subject to the holder only being entitled to exercise one Attaching Option for every three Convertible Notes that it elects to convert to Shares.
The funds raised from the Placement and Convertible Notes were used to fund exploration on the Company's tenements and other working capital requirements.
On 26 March 2015 Coppermoly also issued 21,963,933 unlisted options to Barrick. Each unlisted option is exercisable into one share at any time prior to 25 March 2017 at an exercise price of $0.03 (3 cents) (Barrick Options).
The Barrick Options were issued for no consideration and were in return for Barrick agreeing to waive a Condition Precedent to amending the Reacquisition Agreement between Coppermoly and Barrick.
Business strategies and prospects for future financial years
As is typical for a junior exploration company, the ability to raise funds is a critical factor. In this context, the success of the Company's exploration activities is the primary determinant, backed-up by the on-going support of its shareholders. The general state and sentiments of the equity and commodities markets and their appetite for exploration and development investments are also vital considerations. Whilst macro- economic factors are externally imposed they nevertheless define the broad context in which strategic decisions are made.
The Company's core strategy is to wholly own and to actively explore its exploration assets. With the finalisation of the Barrick reacquisition agreement a clear pathway for this strategy has now been established. The intention is for the Company's activities to remain geographically focused on New Britain Island.
The Company's core objective is to increase shareholder wealth through sustained, active, value-adding exploration. Once the value of the Company's assets has been proven, the options for realising that value will be fully and carefully assessed.
Material business risks
The Company recognises that the management of risk is a critical component for Coppermoly achieving its purpose of delivering growth in shareholder value. The Company has a framework to identify, understand, and manage risks. The material business risks that could have an adverse impact on Coppermoly's business include exposure to economic, environmental and social sustainability risks. The nature of the material risks and, where appropriate, how such risks are managed is set out below. This list is neither exhaustive nor in order of importance.
Funding risk
There is no certainty that Coppermoly will be able to raise additional capital, or that it will be able to do so on favourable terms. If Coppermoly is able to raise additional capital, it may be required to do so at a significant discount to the prevailing share price. If this occurs, this may significantly dilute existing Shareholders. If Coppermoly cannot raise additional capital through the issue of additional Shares, it may be forced to dispose of some or all of its interest in one of more of its assets. If Coppermoly is required to dispose of assets in those circumstances to a third party, such disposal could possibly be on unfavourable terms, including price. If Coppermoly is not able to raise additional funding in a timely manner through either the issue of additional Shares or the disposal of assets, it could have a significant detrimental effect on the financial position and viability of Coppermoly. To reduce these risks as much as possible the Company is striving to find the balance between cost savings and maintaining resources to allow for future operations when needed.
Exploration Licence extension risk
Coppermoly's wholly owned subsidiary, Copper Quest PNG Limited, is the legal holder of five Exploration Licences, with the following expiry dates:
Exploration Licences:
-
EL 1043 (Nakru) has been granted for a two year term ending on 7 December 2016;
-
EL 2379 (Simuku) has been granted for a two year term ending on 10 September 2017;
-
EL 1782 (Powell) has been granted for a two year term ending on 24 September 2015. Coppermoly has lodged an application to extend the term of this Exploration Licence until 24 September 2017. A Warden's Hearing is scheduled for 27 October 2015;
-
EL 2014 (Makmak) has been granted for a two year term ending on 14 May 2016; and
-
EL 2272 (Wowonga) has been granted for a two year term ending on 24 February 2016.
As at the date of this report, the current term of the Powell Exploration Licence has expired. However, Coppermoly has applied to extend the term of this Exploration Licence, and it continues in force until a determination is made regarding the application to extend its term. Accordingly, while Coppermoly has applied to renew the Powell Exploration Licence, there is no certainty that the term of the Exploration Licence will be extended.
The departmental procedure for Exploration Licence extensions requires the approval at a Warden's Hearing, followed by consideration and recommendation by the Mining Advisory Council and the final approval by the Papua New Guinean Minister of Mining. Shareholders should be aware that, pending extension, granted Exploration Licences remain in good standing until a decision is made.
There is a risk that one or more of the exploration licences will not be extended, or that the terms of the extension are not favourable to Coppermoly. This could have a significant adverse impact on the performance of Coppermoly.
Key sensitivities of Coppermoly's licences
The future success of Coppermoly is largely dependent on the success of the WNB Projects as well as Coppermoly's other copper/gold exploration licences. The WNB Projects and Coppermoly's other licences are subject to the following key sensitivities:
-
the delineation of sufficient copper/gold reserves so as to result in the viable extraction and processing of copper/gold from the WNB Projects;
-
copper and gold prices;
-
mining and processing costs of copper and gold ores;
-
the capital cost to construct any required processing plant and associated facilities or the cost of transporting any extracted materials to a third party's processing facility; and
-
national/provincial/local governments' stakes that may be included in any subsequent development agreement; and
-
consent from the customary landowners or other parties for access to exploration licences.
There is also no guarantee that Coppermoly will be able to obtain all of the necessary approvals, permits, licences and consents required to develop the West New Britain Project.
Corporate
Board Changes
The whole board was changed during 2015. The size of the board did not change.
The Board now comprises Dr Wanfu Huang, Mr Jincheng Yao and Mr Kevin Grice. Please see page 10 of the Directors' Report for further details on each director.
Mr Kevin Grice was appointed as a Director on 15 July 2014.
Dr Wanfu Huang was appointed as a Director on 11 March 2015. Mr Jincheng Yao was appointed as a Director on 5 March 2015.
Maurice Gannon resigned as a Director on 15 July 2014.
B. Faulkner resigned as a Director on 11 March 2015.
-
Howard resigned as a Director on 11 March 2015.
Competent Person Statement
The information in this report that relates to Exploration Results is based on information compiled by Mr Mike Erceg, who is a Member of the Australasian Institute of Geoscientists. Mr Erceg has sufficient experience which is relevant to the style of mineralisation under consideration and to the activities undertaken to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Erceg is a contracted consultant to Coppermoly through labour hire company Rock People Solutions Pty Ltd and consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
NOTES:
-
Co-ordinates are given in UTM Zone 56, AGD66 Datum.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the opinion of the Directors there were no significant changes in the state of affairs of the consolidated entity that occurred during the financial year not otherwise disclosed in this report or the consolidated financial report.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
There have been no subsequent events after 30 June 2015.
ENVIRONMENTAL REGULATION
The consolidated entity is subject to significant environmental regulation in respect of its mineral exploration and mining activities.
The entity has exploration tenements in Papua New Guinea. The entity is not aware of any breach of environmental regulations during or since the end of the financial year.
INFORMATION ON DIRECTORS Particulars of Directors' interest in shares and options of Coppermoly Ltd
Director and Experience Special
Responsibilities
Ordinary Shares
Listed Options
Kevin Grice
Non-Executive Director since 15 July 2014.
Age 66. Mr Grice, BComm CPA MAICD, is a successful finance executive with significant experience with listed and unlisted exploration companies and general management experience, including as acting Chief Executive and Chief Financial Officer of Renison Consolidated Mines NL (now Laneway Resources Ltd), Chief Financial Officer of ASX Listed Highlands Pacific Limited and various other roles with Ensham Resources, Century Gold Resources Pty Ltd and others.
Mr Grice has not served as a Director of any other public listed companies during the last three years.
Member of
Audit Committee.
Nil Nil
Jincheng Yao
Non-Executive Director since 5 March 2015.
Age 42. Mr Yao, MBA and Bachelor of Commerce, is a finance professional based in mainland China. He has held varies senior executive roles in the Meijin Group and is currently Vice President and Director of Meijin Energy Group Limited.
Mr Yao has not served as a Director of any other public listed companies during the last three years.
30,000,000 Nil
Wanfu Huang
Non-Executive Director since 11 March 2015.
Age 53. Dr Huang is a member of the Australian Institute of Geoscientists and holds a PhD, a MSc and a BSc. Dr Huang has more than 20 years' experience in the exploration industry. He has held numerous positions in the industry, covering base metals, gold, iron ore, coal and bauxite in Australia and overseas.
Dr Huang has not served as a Director on any other public listed companies during the last three years.
Member of
Audit Committee.
56,501,133 Nil
COMPANY SECRETARY - QUALIFICATIONS & EXPERIENCE
Paul Schultz
CPA AGIA B.Bus GDipACG. Mr Schultz has over twenty years' experience in business administration and statutory reporting. He has a professional background in commercial accounting and public practice. He is also a graduate and associate member of the Governance Institute of Australia.
Mr Schultz has been the Chief Financial Officer of Coppermoly Ltd since 8 July 2013 and was appointed as Company Secretary on 3 February 2014. He is also a member of the Audit Committee.
DIRECTORS' MEETINGS
The number of meetings of the Company's Board of Directors and of each Board committee held during the year ended 30 June 2015, and the numbers of meetings attended by each Director were:
|
Directors' Meetings
|
Audit Committee Meetings
|
|
A
|
B
|
A
|
B
|
|
Mr K Grice
(appointed 15 July 2014)
|
9
|
9
|
2
|
2
|
|
Mr J Yao
(appointed 5 March 2015)
|
2
|
2
|
*
|
*
|
|
Mr W Huang
(appointed 11 March 2015)
|
2
|
2
|
0
|
0
|
|
Mr B. Faulkner
(resigned 11 March 2015)
|
13
|
13
|
2
|
2
|
|
Mr M. Howard
(resigned 11 March 2015)
|
13
|
13
|
*
|
*
|
|
Mr M.J. Gannon (resigned 15 July 2014)
|
5
|
5
|
*
|
*
|
A= Number of meetings attended
B = Number of meetings held during the time the Director held office or was a member of the committee during the year
* = not a member of the relevant committee
REMUNERATION REPORT (Audited)
-
Principles used to determine the nature and amount of remuneration
The following people were the Directors, Executives and Key Management Personnel (KMP) of the Group during the period covered by this report:
|
Name
|
Position
|
Period Position Held
|
|
K. Grice
|
Non-Executive Director
|
15 July 2014 - Current
|
|
J. Yao
|
Non-Executive Director
|
5 March 2015 - Current
|
|
W. Huang
|
Non-Executive Director
|
11 March 2015 - Current
|
|
B. Faulkner
|
Non-Executive Director
|
6 December 2011 - 11 March 2015
|
|
M. Howard
|
Non- Executive Director
|
4 December 2013 - 11 March 2015
|
|
M.J. Gannon
|
Company Secretary Executive Director Managing Director Interim Chairman
|
30 July 2008 - 3 February 2014
12 February 2010 - 15 July 2014
24 January 2013 - 15 July 2014
11 March 2014 - 15 July 2014
|
Apart from the above there were no other executives of the Company and the Group during the current year.
The objective of the Group's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The Board ensures that Director and executive rewards satisfy the following key criteria for good reward governance practices:
The Group has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation. Remuneration consultants have not been engaged by the company.
Relationship between remuneration and Company performance
During the past year, the Group has generated losses because it is still involved in exploration and not production.