CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

 

		2017		2016
	NOTE	$		$
Revenue	3	24,700,004		8,568,961
Cost of sales	4	(76,396,715)		(50,030,633)
Gross loss		(51,696,711)		(41,461,672)
Other income		1,317,709		12,191
Corporate and technical services	5	(8,233,903)		(5,376,517)
Financial instrument gain/(loss)		(7,607,347)		(5,992,401)
Operating loss		(66,220,252)		(52,818,399)
Finance income		125,921		340,858
Finance costs	6	(8,442,310)		(10,616,534)
Total finance costs		(8,316,389)		(10,275,676)
Loss before income tax		(74,536,641)		(63,094,075)
Income tax expense	7	-		-
Loss for the year after income tax		(74,536,641)		(63,094,075)
Other comprehensive income for the year
Items that may be reclassified subsequently to profit or loss
Foreign currency translation		(11,064,618)		(22,875,023)
Movement in the cash flow hedge reserve (net of tax)		4,287,276		(11,324,746)
Other comprehensive income for the year (net of tax)		(6,777,342)		(34,199,769)
Total comprehensive income/(loss) for the year attributable to members of the parent		(81,313,983)		(97,293,844)
LOSS PER SHARE
Basic loss per share (cents)	10	(6.87)		(7.53)
Diluted loss per share (cents)	10	(6.87)		(7.53)

 

 

The accompanying notes form part of these financial statements.

These financial statements are presented in Australian dollars being the Group's functional and presentation currency.

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2017

 

 

		2017		2016
	NOTE	$		$
CURRENT ASSETS
Cash and cash equivalents	11	8,333,662		35,010,327
Trade and other receivables	12	2,328,126		5,671,617
Inventories	13	3,098,154		1,791,640
Derivative financial instruments	14	-		-
Other current assets	15	531,497		627,959
TOTAL CURRENT ASSETS		14,291,439		43,101,543
NON CURRENT ASSETS
Property, plant and equipment	16	263,749,966		276,841,685
Mine properties and development	17	5,582,197		5,474,647
Derivative financial instruments	14	-		-
Other non-current assets	15	17,189,663		17,787,186
TOTAL NON CURRENT ASSETS		286,521,826		300,103,518
TOTAL ASSETS		300,813,265		343,205,061
CURRENT LIABILITIES
Trade and other payables	18	22,978,838		22,500,206
Provisions	19	193,960		197,387
Borrowings	20	59,874,424		25,480,837
Derivative financial instruments	14	4,202,631		8,943,553
TOTAL CURRENT LIABILITIES		87,249,853		57,121,983
NON CURRENT LIABILITIES
Provisions	19	6,778,765		6,162,775
Borrowings	20	97,060,134		84,971,049
Derivative financial instruments	14	366,877		4,622,730
TOTAL NON CURRENT LIABILITIES		104,205,776		95,756,554
TOTAL LIABILITIES		191,455,629		152,878,537
NET ASSETS		109,357,636		190,326,524
EQUITY
Issued capital	21	274,080,313		273,544,711
Reserves	22	(6,642,857)		324,992
Accumulated losses		(158,079,820)		(83,543,179)
TOTAL EQUITY		109,357,636		190,326,524

 

 

The accompanying notes form part of these financial statements.

These financial statements are presented in Australian dollars being the Group's functional and presentation currency.

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

	Ordinary shares		Accumulated losses		Option reserve		Cash flow hedge reserve		Foreign currency translation reserve		Total
	$		$		$		$		$		$
Balance at 30 June 2015	226,982,428		(20,449,104)		1,576,880		653,715		32,127,749		240,891,668
Loss for the year	-		(63,094,075)		-		-		-		(63,094,075)
Other comprehensive income
Foreign currency translation differences	-		-		-		-		(22,875,023)		(22,875,023)
Other comprehensive income for the year	-		-		-		(11,324,746)		-		(11,324,746)
Total comprehensive income for the year	-		-		-		(11,324,746)		(22,875,023)		(34,199,769)
Transactions with owners, recorded directly in equity
Issue of share capital	47,042,500		-		-		-		-		47,042,500
Transaction costs	(706,232)		-		-		-		-		(706,232)
Options & rights exercised during the year	88,153		-		(88,153)		-		-		-
Options expired during the year	-		-		-		-		-		-
Options & rights expensed during the year	-		-		254,570		-		-		254,570
Equity compensation benefit	137,862		-		-		-		-		137,862
Balance at 30 June 2016	273,544,711		(83,543,179)		1,743,297		(10,671,031)		9,252,726		190,326,524
Loss for the year	-		(74,536,641)		-		-		-		(74,536,641)
Other comprehensive income
Foreign currency translation differences	-		-		-				(11,064,618)		(11,064,618)
Other comprehensive income for the year	-		-		-		4,287,276		-		4,287,276
Total comprehensive income for the year	-		-		-		4,287,276		(11,064,618)		(6,777,342)
Transactions with owners, recorded directly in equity
Issue of share capital	-		-		-		-		-		-
Transaction costs	(41,043)		-		-		-		-		(41,043)
Options & rights exercised during the year	408,645		-		(408,645)		-		-		-
Options & rights expensed during the year	-		-		218,138		-		-		218,138
Equity compensation benefit	168,000		-		-		-		-		168,000
Balance at 30 June 2017	274,080,313		(158,079,820)		1,552,790		(6,383,755)		(1,811,892)		109,357,636

 

The accompanying notes form part of these financial statements.

These financial statements are presented in Australian dollars being the Group's functional and presentation currency.

 

CONSOLIDATED STATEMENT OF CASHFLOWS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

 

		2017		2016
	NOTE	$		$
Cash Flows from Operating Activities
Receipts from customers		23,395,420		8,361,290
Payments to suppliers and employees		(63,301,078)		(33,478,591)
Other income		1,317,709		12,191
Interest received		262,783		192,578
Net cash used in operating activities	25	(38,325,166)		(24,912,532)
Cash Flows from Investing Activities
Payments for exploration and development		-		(30,272,248)
Payments made in respect on bonds and collateral deposits		(547,659)		-
Payments for property, plant & equipment		(17,929,458)		(312,153)
Net cash used in investing activities		(18,477,117)		(30,584,401)
Cash Flows from Financing Activities
Proceeds from issue of shares		-		47,042,500
Payments for share issue costs		(41,043)		(706,232)
Proceeds from borrowings		55,882,200		26,929,500
Repayment of borrowings		(4,658,543)		(5,831,134)
Payments for borrowing costs		(7,202,257)		(8,095,566)
Financial instrument payments		(11,546,913)		(2,610,450)
Net cash generated from financing activities		32,433,444		56,728,618
Net increase/(decrease) in cash and cash equivalents		(24,368,839)		1,231,685
Effects of exchange rate changes on the balance of cash held in foreign currencies		(2,307,826)		(638,812)
Cash and cash equivalents at beginning of financial year	11	35,010,327		34,417,454
Closing cash and cash equivalents carried forward	11	8,333,662		35,010,327

 

 

The accompanying notes form part of these financial statements.

These financial statements are presented in Australian dollars being the Group's functional and presentation currency.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

 

This financial report includes the consolidated financial statements and notes of Wolf Minerals Limited and its controlled entities (Consolidated Entity or Group), and the parent entity disclosure for Wolf Minerals Limited as an individual parent entity (Parent Entity).

 

Wolf Minerals Limited is a listed public company, trading on the Australian Securities Exchange and Alternative Investment Market of the London Stock Exchange, limited by shares, incorporated and domiciled in Australia.

 

Basis of Preparation

The accounting policies set out below have been consistently applied to all years presented.

 

Statement of Compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) including Australian Interpretations and other pronouncements adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001 for "for profit" oriented entities. The consolidated financial report of the Group and the financial report of the Company comply with International Financial Reporting Standards (lFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

 

The consolidated financial statements were authorised for issue by the Board of Directors on 28 September 2017. The Board has the power to amend and reissue the financial statements.

 

Basis of Measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position if applicable:

 

·              derivative financial instruments are measured at fair value

·              financial instruments at fair value through profit or loss are measured at fair value

·              available-for-sale financial assets are measured at fair value

·              liabilities for cash-settled share-based payment arrangements are measured at fair value

·              the defined benefit asset is measured as the net total of the plan assets, plus unrecognised past service cost and unrecognised actuarial losses, less unrecognised actuarial gains and the present value of the defined benefit obligation.

 

Use of Estimates and Judgements

The preparation of the consolidated financial statements in conformity with AASBs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are set out in Note 1 (b). Estimates and assumptions are continually evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets and liabilities affected in future periods.

 

Going Concern

 

The consolidated financial report has been prepared on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business. The Consolidated Entity incurred a loss after tax of A$74,536,641 for the year ended 30 June 2017 (2016: A$63,094,075). Furthermore the Consolidated Entity has a working capital deficit of A$72,958,414 as at 30 June 2017 (2016: A$14,020,440).

 

The ability of the Company and the Consolidated Entity to maintain compliance with its debt obligations and covenants and continue to pay its debts as and when they fall due is dependent upon receiving additional funding support, successfully ramping up production to nameplate capacity and rescheduling fixed debt repayments with senior debt lenders.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

Note 1: Statement of Significant Accounting Policies (continued)

 

Going Concern (continued)

 

On 31 August 2017, the Company announced that RCF VI has agreed to release a further £5 million tranche of the Bridge Loan Facility to support short term working capital. Following the utilisation of the £5 million of the Bridge Loan Facility, further funding of £10 million is required early in the December 2017 quarter to complete the operating turnaround plan and negotiations are advanced in this regard.

 

In addition to the further funding amount of £10 million, the Directors have appropriate plans in place to meet the remaining funding shortfall over the next 12 months. This potentially includes  opportunities to improve operational cashflows through additional revenue streams, cost reduction initiatives and release of cash escrowed amounts on the balance sheet. This plan will also require the Directors to reschedule fixed debt repayments with the senior debt lenders to avoid any non compliance with senior debt conditions and financial ratios.

 

The Directors believe it is appropriate to prepare the consolidated financial report on a going concern basis. The Directors believe the Company is able to raise the additional funds as required, based on the improvement in the operating performance of the Drakelands mine and the strength of the APT price, along with the continued support from Wolf's major shareholders and its offtakers and Lenders and a proven track record of being able to raise funding as and when required.

 

In the event that the Company and Consolidated Entity do not achieve the above outcomes, there exists a material uncertainty that casts significant doubt as to whether the Company and Consolidated Entity will be able to continue as going concerns and realise their assets and extinguish their liabilities in the normal course of business.

 

The consolidated financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Company and Consolidated Entity not continue as going concerns.

 

 

Accounting Policies

 

a.             Principles of Consolidation

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by the Consolidated Entity as at 30 June 2017 and the results of all controlled entities for the year then ended. 

 

Subsidiaries are all those entities over which the Consolidated Entity has control. The Consolidated Entity controls an entity when the Consolidated Entity 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 Consolidated Entity. They are de-consolidated from the date that control ceases.

 

Inter-company transactions, balances and unrealised 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.  All controlled entities have a June financial year end.

 

A list of controlled entities is contained in Note 2 to the financial statements.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

Note 1: Statement of Significant Accounting Policies (continued)

 

b.             Significant Accounting Estimates, Judgments and Assumptions

 

The preparation of consolidated financial statements requires management to make judgments and estimates relating to the carrying amounts of certain assets and liabilities.  Actual results may differ from the estimates made.  Estimates and assumptions are reviewed on an ongoing basis.

 

The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next accounting period are:

 

(i)           Share based payment transactions

The Consolidated Entity measures the cost of equity settled transactions by reference to the fair value of the equity instruments at the date at which they are granted.  The fair value of share options and performance rights is determined by an external valuer using an appropriate valuation model.

 

(ii)          Impairment of investments in and loans to subsidiaries

The ultimate recoupment of the Parent Entity's investment in subsidiaries, and loans to subsidiaries is dependent on the successful development and commercial exploitation, or alternatively, sale, of the development assets. Impairment tests are carried out on a regular basis to identify whether the asset carrying values exceed their recoverable amounts. There is significant estimation and judgement in determining the inputs and assumptions used in determining the recoverable amounts.

 

The key areas of judgement and estimation include:

-     Recent development results and mineral resource estimates;

-     Environmental issues that may impact on the underlying tenements;

-     Fundamental economic factors that impact the operations and carrying values of assets and liabilities.

 

(iii)         Estimated impairment of mine properties and property, plant and equipment (Note 16 and 17)

The Company tests annually whether the mine properties and property, plant and equipment has suffered any impairment. The recoverable amount of the cash generating unit (CGU) has been determined based on value in use calculations which require the use of estimates and assumptions such as long-term commodity prices, discount rates, operating costs, future capital requirements and mineral resource estimates (see below). These estimates and assumptions are subject to risk and uncertainty and therefore there is a possibility that changes in circumstances will impact the recoverable amount. The Project is the Company's only CGU.

 

In assessing the carrying amounts of its mine properties and property, plant and equipment at the Project, the Directors have used an updated financial model based upon the original DFS prepared by the parent undertaking in conjunction with a number of independent experts. The study has been approved by the Directors.

 

The assessment period used in the report is the updated life of the mine of 10 years from the increased reserves, plus the remaining period for commissioning and preparation for full production. Tungsten revenues have been estimated over that period at a price range of US$220 - US$320 per mtu. Tin revenues have been estimated over that period at a price of US$20,000/tonne. These conservative estimates are based on, and are consistent with, external sources of information. The calculation assumes average annual tungsten and tin production of 367,647 mtu's and 563 tonnes respectively.  The life of mine operating cost estimate has been updated to match the mine plan for the new reserves. Royalties have been calculated at 2% of gross sales revenues and corporate income tax at 21%. A discount rate of 8% has been utilised.  Based on the calculations, the net present value as at 30 June 2017 after the recoupment of the remaining capital costs of the Project exceeds the carrying value of the mine properties and property, plant and equipment, therefore no impairment has been recorded.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

Note 1: Statement of Significant Accounting Policies (continued)

 

b.             Significant Accounting Estimates, Judgments and Assumptions (continued)

 

(iii)         Estimated impairment of mine properties and property, plant and equipment (Note 16 and 17) (continued)

The recoverable amount is sensitive to possible changes in the key assumptions which would cause the carrying amount to exceed the recoverable amount. The value in use calculations have been updated to reflect the successful application to extend the current planning permission to enable the full ore body to be mined, together with obtaining the requisite permission to operate 7 days a week.

 

The Financial Statements have been prepared on the basis that the entity can meet its commitments as and when they fall due and can therefore continue normal business activities, and the realisation of assets and liabilities in the ordinary course of business (refer Going Concern section of Note 1).

 

(iv)         Mine environmental rehabilitation and restoration provision (Note 19)

Rehabilitation costs will be incurred by the Group at the end of the operating life of the Project.  The Group assesses its rehabilitation provision at each reporting date. The ultimate rehabilitation costs are uncertain and cost estimates can vary in response to various factors, including estimates of the extent and costs of rehabilitation activities, regulatory changes, inflation rates and changes in discount rates.  These uncertainties may result in future actual expenditure differing from the amounts currently provided and there could be significant adjustments to the provisions established which would affect future financial results. The provision as at 30 June 2017 represents management's best estimate of the present value of future rehabilitation costs required.

 

(v)           Income tax expenses

Judgement is required in assessing whether deferred tax assets and liabilities are recognised on the consolidated statement of financial position.  Deferred tax assets, including those arising from temporary differences, are recognised only when it is considered more likely than not that they will be recovered, which is dependent on the generation of future assessable income of a nature and of an amount sufficient to enable the benefits to be utilised.

 

c.             Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of 12 months or less, and bank overdrafts.

 

d.             Receivables

Collectability of trade debtors is reviewed on an ongoing basis.  Debts which are known to be uncollectible are written off.  A provision for impairment is raised when some doubt as to collection exists.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

Note 1: Statement of Significant Accounting Policies (continued)

 

e.             Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses.

 

(i)           Freehold land

Freehold land is recognised at historic cost and is not depreciated as it has an indefinite useful life.

 

(ii)          Plant and equipment

Plant and equipment is measured on the cost basis.

 

The cost of fixed assets constructed within the Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.

 

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.  All other repairs and maintenance are charged to the consolidated statement of profit or loss and other comprehensive income during the financial period in which they are incurred.

 

(iii)         Depreciation

                Items of property, plant and equipment are depreciated over their estimated useful lives. The Company uses the unit-of-production basis when depreciating mine specific assets which results in a depreciation/amortisation charge proportional to the depletion of the anticipated remaining life of mine. Each item's economic life has due regard to both its physical life limitations and to present assessments of economically recoverable reserves and resources of the mine property at which it is located.

 

For the remainder of assets the reducing balance method is used, resulting in estimated useful lives between 3 to 10 years, the duration of which reflects the useful life depending on the nature of the asset. Estimates of remaining useful lives and depreciation methods are reviewed annually for all major items of plant and equipment.

 

Gains and losses on disposals are determined by comparing proceeds with the carrying amount.  These gains and losses are included in the statement of profit or loss and other comprehensive income.

 

f.              Development Assets

Capitalised mining development costs include expenditures incurred to develop new ore bodies to define further mineralisation in existing ore bodies, to expand the capacity of a mine and to maintain production. Mining development also includes costs transferred from exploration and evaluation phase once construction and development commences in the area of interest.

 

Amortisation of mining development is computed by the units of production basis over the estimated proved and probable reserves. Proved and probable mineral reserves reflect estimated quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits. These reserves are amortised from the date on which production commences. The amortisation is calculated from recoverable proven and probable reserves and a predetermined percentage of the recoverable measured, indicated and inferred resource. This percentage is reviewed annually.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

Note 1: Statement of Significant Accounting Policies (continued)

 

g.             Financial Instruments

 

(i)           Financial assets at fair value through profit or loss

This category has two sub-categories; financial assets held for trading, and those designated at fair value through profit or loss on initial recognition.  A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management.  The policy of management is to designate a financial asset if there exists the possibility it will be sold in the short term and the asset is subject to frequent changes in fair value.  Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the reporting date.

 

(ii)          Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They arise when the consolidated entity provides money, goods or services directly to a debtor with no intention of selling the receivable.  They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets.  Loans and receivables are included in receivables in the consolidated statement of financial position.

 

(iii)         Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives 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 reporting date.

 

Purchases and sales of investments are recognised on trade-date being the date on which the Consolidated Entity commits to purchase or sell the asset.  Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss.  Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Consolidated Entity has transferred substantially all the risks and rewards of ownership.

 

Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value.  Loans and receivables are carried at amortised cost using the effective interest method.  Realised and unrealised gains and losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are included in the consolidated statement of comprehensive income in the period in which they arise.  Unrealised gains and losses arising from changes in the fair value of non-monetary securities classified as available-for-sale investments are recognised in equity in the "available for sale revaluation reserve".  When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the consolidated statement of comprehensive income as gains and losses from investment securities.

 

(iv)         Fair value

                The fair values of quoted investments are based on current bid prices.  If the market for a financial asset is not active (and for unlisted securities), the Consolidated Entity establishes fair value by using valuation techniques.  These include reference to the fair values of recent arm's length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing methods refined to reflect the issuer's specific circumstances.

               

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 reporting date.  The quoted market price used for financial assets held by the Consolidated Entity is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

Note 1: Statement of Significant Accounting Policies (continued)

 

g.             Financial Instruments (continued)

 

(iv)         Fair value (continued)

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques.  The Consolidated Entity uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date.  Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held.  Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments.

 

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values.  The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Consolidated Entity for similar financial instruments.

 

(v)          Derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The accounting for subsequent changes

in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

 

Derivatives are classified as current or non-current depending on the expected period of realisation.

 

(vi)         Cash flow hedges

Cash flow hedges are used to cover the Consolidated Entity's exposure to variability in cash flows that is attributable to particular risk associated with a recognised asset or liability or a firm commitment which could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognised directly in equity, whilst the ineffective portion is recognised in profit or loss. Amounts taken to equity are transferred out of equity and included in the measurement of the hedged transaction when the forecast transaction occurs.

 

Cash flow hedges are tested for effectiveness on a regular basis both retrospectively and prospectively to ensure that each hedge is highly effective and continues to be designated as a cash flow hedge. If the forecast transaction is no longer expected to occur, amounts recognised in equity are transferred to profit or loss.

 

If the hedging instrument is sold, terminated, expires, exercised without replacement or rollover, or if the hedge becomes ineffective and is no longer a designated hedge, amounts previously recognised in equity remain in equity until the forecast transaction occurs.

 

h.            Investments

Interests in listed and unlisted securities are initially brought to account at cost. 

 

Controlled entities are accounted for in the consolidated financial statements as set out in Note 1 (a).

 

Other securities are included at fair value at reporting date.  Unrealised gains/losses on securities held for short term investment are accounted for as set out in Note 1 (g) (i) financial assets at fair value through profit or loss.  Unrealised gains/losses on securities held for long term investment are accounted for as set out in Note 1 (g) (iii) available for sale financial assets.

 

i.             Acquisition of Assets

The purchase method of accounting is used for all acquisitions of assets regardless of whether equity instruments or other assets are acquired.  Cost is determined as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition.

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

Note 1: Statement of Significant Accounting Policies (continued)

 

j.             Impairment

 

(i)           Financial Assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired.  A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

 

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the effective interest rate. 

 

An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.  Individually significant financial assets are tested for impairment on an individual basis.  The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

 

All impairment losses are recognised either in the consolidated statement of comprehensive income or revaluation reserves in the period in which the impairment arises.

 

(ii)          Non-financial Assets

The carrying amounts of the Consolidated Entity's non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment.  If any such indication exists then the asset's recoverable amount is estimated.  For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated at each reporting date.

 

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.  In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

 

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.  Impairment losses are recognised in the consolidated statement of comprehensive income.  Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units, then to reduce the carrying amount of the other assets in the unit on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed.  In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exits.  An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.  An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss has been recognised.

 

k.                            Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

 

The Group recognises a restoration and rehabilitation provision where it has a legal and constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The nature of these restoration activities includes dismantling and removing structures; rehabilitating the mine; dismantling operating facilities; and restoring, reclaiming and revegetating affected areas.

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

Note 1: Statement of Significant Accounting Policies (continued)

 

k.           Provisions (continued)

On initial recognition, the present value of the estimated costs is capitalised by increasing the carrying amount of the related mining asset to the extent that it was incurred as a result of the development or construction of the mine. Any changes to or additional rehabilitation costs are recognised as additions or charges to the corresponding asset and rehabilitation liability when they occur.

 

Over time, the discounted liability is increased for the change in present value based on the discount rate that reflects current market assessments and the risks specific to the liability. The annual unwinding of the discount is recognised in profit or loss as part of finance costs.

 

The Group does not recognise the deferred tax asset in respect of the temporary difference on the rehabilitation liability nor the corresponding deferred tax liability in respect of the temporary difference on the rehabilitation asset.

 

l.             Inventory

 

Recognition and measurement

Consumable materials for plant and equipment are recognised as inventory. Consumable stocks are carried at the lower of cost and net realisable value.

 

m.           Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use (a qualifying asset) are capitalised as part of the cost of the respective asset until the asset is substantially ready for its intended use. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

 

Where funds are borrowed specifically to finance a project, the amount capitalised represents the actual borrowing costs incurred under the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating borrowing costs over the relevant period. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

 

n.            Contributed Equity

Ordinary shares are classified as equity.

 

Incremental costs directly attributable to the issue of new shares, options or performance rights are shown in equity as a deduction, net of tax, from the proceeds.  Incremental costs directly attributable to the issue of new shares, options or performance rights, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration.

 

o.             EPS

 

(i)           Basic loss per share

Basic loss per share is determined by dividing the net loss after income tax attributable to members 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 loss per share

Diluted earnings per share adjusts the figures used in the determination of basic loss 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.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

Note 1: Statement of Significant Accounting Policies (continued)

 

p.             Foreign Currency Transactions and Balances

 

(i)           Functional and presentation currency

The functional currency of each of the Group's entities is measured using the currency of the primary economic environment in which that entity operates.  The consolidated financial statements are presented in Australian dollars which is the Parent Entity's functional and presentation currency.

 

(ii)          Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction.  Foreign currency monetary items are translated at the year-end exchange rate.  Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction.  Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

 

Exchange differences arising on the translation of monetary items are recognised in the consolidated statement of comprehensive income, except where deferred in equity as a qualifying cash flow or net investment hedge.

 

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity; otherwise the exchange difference is recognised in the consolidated statement of comprehensive income.

 

(iii)         Group companies

The financial results and position of foreign operations whose functional currency is different from the group's presentation currency are translated as follows:

 

-    Assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

-    Income and expenses are translated at average exchange rates for the period; and

-    Retained profits are translated at the exchange rate prevailing at the date of the transaction.

 

Exchange differences arising on translation of foreign operations are transferred directly to the Group's foreign currency translation reserve in the consolidated statement of financial position. These differences are recognised in the consolidated statement of comprehensive income in the period in which the operation is disposed.

 

q.             Current/Non-current Classification

Assets and liabilities are presented in the consolidated statement of financial position based on current and non-current classification.

 

An asset is current when: it is expected to be realised or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within twelve months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current.

 

A liability is current when: it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within twelve months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current.

 

Deferred tax assets and liabilities are always classified as non-current.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

Note 1: Statement of Significant Accounting Policies (continued)

 

r.             Revenue recognition

Revenue is recognised to the extent that 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:

 

Sale of goods

Revenue from the sale of goods and disposal of other assets is recognised when persuasive evidence, usually in the form of an executed sales agreement, or an arrangement exists, indicating there has been a transfer of risks and rewards to the customer, no further work or processing is required by the Group, the quantity and quality of the goods has been determined with reasonable accuracy, the price is fixed or determinable and collectability is reasonably assured. This is generally when title passes.

 

s.             Employee Benefits

 

(i)           Wages, salaries and annual leave

Liabilities for wages, salaries and annual leave expected to be settled within one year of the reporting date are recognised in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

 

(ii)          Employee benefits payable later than one year

Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

 

(iii)         Superannuation

Contributions are made by the consolidated entity to superannuation funds as stipulated by statutory requirements and are charged as expenses when incurred.

 

(iv)         Employee benefit on costs

Employee benefit on costs, including payroll tax, are recognised and included in employee benefits liabilities and costs when the employee benefits to which they relate are recognised as liabilities.

 

t.             Equity Settled Compensation

The group operates equity-settled share-based payment employee share option and performance rights schemes.  The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account.  The fair value of shares is ascertained as the market bid price.  The fair value of options is ascertained using a Monte Carlo pricing model which takes into account the exercise price, the term of the option or right, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option or right, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option or right.  The number of share option and performance rights expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

 

u.             Income Tax

The income tax expense or benefit for the period is the tax payable on that 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, unused tax losses and the adjustment recognised for prior periods, where applicable.

 

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

Note 1: Statement of Significant Accounting Policies (continued)

 

u.             Income Tax (continued)

 

-    When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or

-    When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

 

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 utilise those temporary differences and losses.

The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date.

 

Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset.

 

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entity's which intend to settle simultaneously.

 

Research and development tax offsets are accounted for on receipt and under the requirements of AASB 112.

 

v.             Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office.  In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.  Receivables and payables in the statement of financial position are shown inclusive of GST.  Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

 

w.            Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

 

x.             New, Revised or Amending Accounting Standards and Interpretations Adopted

The Consolidated Entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the 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.

 

The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

Note 1: Statement of Significant Accounting Policies (continued)

 

y.             New and amended standards and interpretations issued but not yet effective for the financial year   beginning 1 July 2016 and not early adopted

The following Australian Accounting Standards have been issued or amended and are applicable to the annual financial statements of the Consolidated Entity (or the Company) but are not yet effective. This assumes the following have not been adopted in preparation of the financial statements at the reporting date.

 

AASB No.	Title	Application date of standard	Issue date
AASB 9	Financial Instruments	1 January 2018	December 2014
AASB 2010-7	Amendments arising from Accounting Standards arising from AASB 9 (December 2010)	1 January 2018	September 2012
AASB 2014-1	Amendments to Australian Accounting Standards Part E - Financial Instruments	Part E - 1 January 2018	June 2014
AASB 2014-5	Amendments to Australian Accounting Standard  Arising From AASB 15	1 January 2018	December 2014
AASB 2014-7	Amendments to Australian Accounting Standard  Arising From AASB 9 (December 2014)	1 January 2018	December 2014
AASB 2014-10	Amendments to Australian Accounting Standard  - Sale of Contribution of Assets Between Investors and its Associates or Joint Venture	1 January 2018	December 2014
AASB 2015-8	Amendments to Australian Accounting Standards - Effective Date of AASB 15	1 January 2018	October 2015
AASB 2015-10	Amendments to Australian Accounting Standards - Effective Date of Amendments to AASB 10 and AASB 128.	1 January 2018	December 2015
AASB 2016-1	Amendments to Australian Accounting Standards - Recognition of Deferred Tax Assets for Unrealised Losses [AASB 112]	1 January 2017	February 2016
AASB 2016-2	Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 107	1 January 2017	March 2016
AASB 2016-3	Amendments to Australian Accounting Standards - Clarifications to AASB 15	1 January 2018	May 2016
AASB 2016-5	Amendments to Australian Accounting Standards - Classification and Measurement of Share-based Payment Transactions [AASB 2]	1 January 2018	July 2016
AASB 2016-6	Amendments to Australian Accounting Standards - Applying AASB 9 Financial Instruments with AASB 4 Insurance Contracts [AASB 4]	1 January 2018	October 2016
AASB 2017-1	Amendments to Australian Accounting Standards - Transfers of Investment Property, Annual Improvements 2014-2016 Cycle and Other Amendments	1 January 2018	February 2017
AASB 2017-2	Amendments to Australian Accounting Standards -Further Annual Improvements2014-2016 Cycle	1 January 2017	February 2017
AASB 2017-3	Amendments to Australian Accounting Standards - Clarifications to AASB 4	1 January 2018	July 2017
AASB 15	Revenues from Contracts with Customers	1 January 2018	October 2015
AASB 16	Leases	1 January 2019	February 2016
AASB Interpretation 22	Foreign Currency Transactions and Advance Consideration	1 January 2018	February 2017
IFRIC 23	Uncertainty over Income Tax Treatments	1 January 2019	June 2017

 

The potential impact of those standards and interpretations above that are material to the Consolidated Entity are yet to be assessed.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 2: CONTROLLED ENTITIES

 

	Country of incorporation	2017			2016
		% owned	Investment ($)		% owned	Investment ($)
Subsidiaries of Wolf Minerals Limited:
Wolf Minerals (UK) Limited	United Kingdom	100	313,711,847		100	297,798,047
Wolf Minerals Finance Pty Ltd	Australia	100	124		100	124
Wolf Minerals LLP	United Kingdom	100	-		100	-

 

During the year Wolf Minerals (UK) Limited repaid a loan to Wolf Minerals Limited through the issue of shares.

 

	2017		2016
NOTE 3: REVENUE	$		$
Revenue - tungsten	20,615,254		7,912,923
Revenue - tin	4,084,750		656,038
	24,700,004		8,568,961

 

NOTE 4: COST OF SALES
Mining	18,722,495		13,496,110
Processing	30,995,537		16,145,351
Site administration	9,457,142		8,889,220
Depreciation	17,221,541		11,499,952
	76,396,715		50,030,633

 

NOTE 5: CORPORATE AND TECHNICAL SERVICES
Administration expenses	5,617,022		2,732,611
Depreciation & amortisation expense	26,793		35,804
Directors' fees	480,586		480,586
Equity compensation benefits	311,234		359,455
Employee benefits expense
-       superannuation contributions	113,552		126,682
-       transfer to/(from) provision for annual leave	(3,427)		24,544
-       transfer to/(from) provision for long service leave	(20,326)		28,670
-       salary and wages and other employee benefits	1,708,469		1,588,165
	8,233,903		5,376,517

 

NOTE 6: FINANCE COSTS
Bank charges	9,636		6,281
Interest expense	6,897,615		9,132,039
Borrowing costs	1,364,291		1,243,063
Unwinding of discount on rehabilitation provision	170,768		235,151
	8,442,310		10,616,534

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

	2017		2016
NOTE 7: INCOME TAX EXPENSE	$		$
a.          The components of tax expense comprise:
Current tax	-		-
Deferred tax	-		-
	-		-
b.        The prima facie tax on loss from ordinary activities before income tax is reconciled to the income tax as follows:
Prima facie tax payable on loss from ordinary activities before income tax at 30% (2016: 30%)
Consolidated group	(22,224,742)		(18,928,223)
Add:
Tax effect of:
-       Share based payments	116,670		118,451
-       Other non-allowable items	4,820		8,417
-       Provisions and accruals	289,046		13,973
-       Property, plant and equipment	-		-
-       Rehabilitation expense and amortisation	167,678		-
-       Other assessable items	28,558		149
-       Revenue losses not recognised	238,634		410,288
-       Overseas revenue losses not recognised	14,262,432		12,270,969
-       Lower tax rate in foreign jurisdictions on overseas revenue losses	7,131,216		6,135,484
	22,239,054		18,957,731
Less:
Tax effect of:
-       Provisions and accruals	-		-
-       Capital raising costs	(4,368)		(29,384)
-       Other non-assessable items	(9,944)		(124)
-       Research and development tax concession rebate	-		-
	(14,312)		(29,508)
Income tax expense/(benefit)	-		-

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 7: INCOME TAX EXPENSE (continued)

 

	2017		2016
The applicable average weighted tax rates are as follows:	0%		0%
c.     The following deferred tax balances have not been accounted for:
	2017		2016
	$		$
Deferred tax assets:
At 30%
Carried forward revenue losses	2,179,027		1,366,596
Capital raising costs	9,850		1,905
Provisions and accruals	99,976		87,974
	2,288,853		1,456,475
At 20% (United Kingdom)
Property, plant and equipment	24,381		24,381
Unrealised Foreign Exchange Loss	19,039		-
Rehabilitation Asset	226,904		-
Provisions and accruals	177,935		-
Carried forward overseas revenue losses	32,138,349		17,875,918
	32,586,608		17,900,299

 

The tax benefits of the above Deferred Tax Assets will only be obtained if:

 

(a)        The company derives future assessable income of a nature and an amount sufficient to enable the benefits to be utilised; and

(b)        The company continues to comply with the deductibility conditions imposed by the Income Tax Assessment Act 1997 and its overseas equivalent; and

(c)        No change in income tax legislation adversely affects the company in utilising the benefits.

 

 

Deferred tax liabilities:
At 30%
Accrued income	108		125
	108		125
At 20% (United Kingdom):
Accrued income	6,640		-
	6,640		-
The above deferred tax liabilities have not been recognised as they have given rise to the carry forward revenue losses for which the deferred tax asset has not been recognised.

 

No deferred tax liability or deferred tax asset is recognised on the development asset as the current net effect is minimal. This will change when the Group commences production.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 8: KEY MANAGEMENT PERSONNEL COMPENSATION

 

 

		2017		2016
		$		$
The key management personnel compensation comprised:
Short term employment benefits		1,366,416		1,506,421
Share based payments		296,600		294,977
Post employment benefits		402,816		82,348
		2,065,832		1,883,746

a.          Key management personnel compensation

 

 

 

 

 

 

 

 

 

b.          Individual directors' and executives' compensation disclosure

Information regarding individual directors' and executives' compensation and some equity instruments disclosures as required by Corporation Regulation 2M.3.03 is provided in the remuneration report section of the directors' report.

 

Apart from the details disclosed in this note, no director has entered into a material contract with the Group since the end of the previous financial year and there were no material contracts involving directors' interest existing at the year end.

 

c.          Parent entity

The ultimate parent entity within the Group is Wolf Minerals Limited.

 

NOTE 9: AUDITORS' REMUNERATION	2017		2016
	$		$
Remuneration of the auditor of the parent entity for:
-       Auditing and reviewing the financial report	108,000		115,400
-       Taxation services	7,660		4,510
Remuneration of the auditors of the subsidiary for:
-       Auditing and reviewing the financial report	62,063		93,897
	177,723		213,807

 

NOTE 10: LOSS PER SHARE
a. Loss used to calculate basic and dilutive EPS	(74,536,641)		(63,094,075)
	2017		2016
	No		No
b. Weighted average number of ordinary shares on issue during the year used in     the calculation of basic EPS	1,084,425,200		837,478,563
c. Weighted average number of ordinary shares outstanding during the year used           in calculating dilutive EPS	1,084,425,200		837,478,563

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 11: CASH AND CASH EQUIVALENTS	2017		2016
	$		$
Cash at bank and on hand	8,255,188		34,894,928
Short term bank deposits	78,474		115,399
	8,333,662		35,010,327
The effective interest rate on cash at bank and on hand and short-term bank deposits was 1.45% (2016: 0.51%) these deposits have an average maturity of 180 days.
Reconciliation of cash
Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the statement of financial position as follows:
Cash and cash equivalents	8,333,662		35,010,327

 

 

NOTE 12: TRADE AND OTHER RECEIVABLES
Current
Trade Debtors	1,484,799		2,825,538
GST receivable	20,351		22,502
VAT receivable	822,976		2,823,577
	2,328,126		5,671,617

 

Provision for impairment of receivables

Current trade and term receivables are generally on 30 day terms. Non-current trade and term receivables are assessed for recoverability based on the underlying terms of the contract. A provision for impairment is recognised when there is objective evidence that an individual trade or term receivable is impaired. 

 

There are no balances within trade and other receivables that are impaired and are past due. It is expected these balances will be received when due.

 

 

NOTE 13: INVENTORIES
Consumables - at cost	3,098,154		1,791,640
	3,098,154		1,791,640

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

	2017				2016
	Fair value of asset		Fair value of liability		Fair value of asset		Fair value of liability
NOTE 14: DERIVATIVE FINANCIAL INSTRUMENTS
Current
Amortising interest rate swaps	-		-		-		-
Forward foreign exchange contracts - cash flow hedges	-		4,202,631		-		8,943,553
Total Current	-		4,202,631		-		8,943,553
Non-Current
Amortising interest rate swaps	-		366,877		-		1,237,623
Forward foreign exchange contracts - cash flow hedges	-		-		-		3,385,107
Total Non-Current	-		366,877		-		4,622,730

 

The maximum notional principal amount of the outstanding interest rate swap contracts during the year ended 30 June 2017 was £34,291,667 (~A$58,069,509) (30 June 2016: £35,000,000).

 

During the year ended 30 June 2017 the fixed interest rates were 2.05% (30 June 2016: 1.175% to 2.05%), and the main floating rate is LIBOR.

 

	2017		2016
	$		$
NOTE 15: OTHER ASSETS
Current
Prepayments	495,370		589,242
Accrued interest	-		416
Other assets	36,127		38,301
	531,497		627,959
Non-Current
Other assets1	17,189,663		17,787,186
1 Other assets comprise a bond agreement and cash collateral deposits the Company has provided as security to various parties in connection with environmental restoration obligations.  The bond and collateral deposits are not released until the underlying obligations have been fulfilled by the Company to the satisfaction of the UK authorities. The two major non-current collateral deposits are a £9.05 million restoration bond and a £0.75 million financial provision for the environmental waste permit.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

 

	2017		2016
	$		$
NOTE 16: PROPERTY, PLANT & EQUIPMENT
Plant and equipment:
At cost	162,660,199		167,564,573
Accumulated depreciation	(18,067,950)		(7,127,986)
Total plant and equipment	144,592,249		160,436,587
Motor vehicles:
At cost	614,526		651,505
Accumulated depreciation	(445,882)		(353,518)
Total motor vehicles	168,644		297,987
Land and buildings
At cost	127,758,344		119,119,934
Accumulated depreciation	(8,769,271)		(3,012,823)
Total land and buildings	118,989,073		116,107,111
Total property, plant and equipment	263,749,966		276,841,685

 

	Motor vehicles		Plant and equipment		Land and buildings		Total
	$		$		$		$
Balance at 30 June 2015	415,990		198,756		-		614,746
Additions	114,169		197,984		-		312,153
Transferred from mine properties and development	-		167,031,060		119,119,934		286,150,994
Depreciation expense	(205,615)		(7,910,697)		(3,419,444)		(11,535,756)
Effect of foreign currency exchange differences	(26,557)		919,484		406,621		1,299,548
Balance at 30 June 2016	297,987		160,436,587		116,107,111		276,841,685
Additions	-		4,595,618		15,399,576		19,995,194
Depreciation expense	(111,586)		(11,253,748)		(5,883,000)		(17,248,334)
Effect of foreign currency exchange differences	(17,757)		(9,186,208)		(6,634,614)		(15,838,579)
Balance at 30 June 2017	168,644		144,592,249		118,989,073		263,749,966

 

 

	2017		2016
NOTE 17: MINE PROPERTIES AND DEVELOPMENT	$		$
Mine properties:
At cost	6,349,227		5,927,001
Accumulated amortisation	(767,030)		(452,354)
Total mine development expenditure	5,582,197		5,474,647

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

		Mine properties	Mine development		Total
NOTE 17: MINE PROPERTIES AND DEVELOPMENT (Continued)		$	$		$
Balance at 30 June 2015		-	296,983,129		296,983,129
Expenditure capitalised during the year			31,456,414		31,456,414
Transferred to plant and equipment			(167,031,060)		(167,031,060)
Transferred to land and buildings			(119,119,934)		(119,119,934)
Transferred to mine properties		5,873,210	(5,873,210)		-
Amortisation		(452,354)	-		(452,354)
Effect of foreign currency exchange differences		53,791	(36,415,339)		(36,361,548)
Balance at 30 June 2016		5,474,647	-		5,474,647
Expenditure capitalised during the year		809,377	-		809,377
Amortisation		(388,158)	-		(388,158)
Effect of foreign currency exchange differences		(313,669)	-		(313,669)
Balance at 30 June 2017		5,582,197	-		5,582,197

 

Mine properties relates to the rehabilitation asset of the Drakelands Mine. The amortisation is recognised as part of cost of sales in the Statement of Profit or Loss and Other Comprehensive Income.

                                               

					2017		2016
					$		$
NOTE 18: TRADE AND OTHER PAYABLES
Current
Trade payables¹					13,662,144		12,382,539
Accrued borrowing costs					1,003,222		1,092,157
Sundry payables and accrued expenses2					8,313,472		9,025,510
					22,978,838		22,500,206
¹ Trade and other payable are generally settled within 30 days. ² Accrued expenses at 30 June 2017 include work performed by suppliers during June but not invoiced at period end. Included in the accrued expenses amount is an amount owed to the mining services contractor, CA Blackwell (Contracts) Limited, for £1,312,885 (≈ $2,223,239).

 

 

	Mine rehabilitation1		Employee benefits		Total
NOTE 19: PROVISIONS	$		$		$
Opening balance at 1 July 2016	6,080,399		279,763		6,360,162
Additional provisions	636,316		(23,753)		612,563
Balance at 30 June 2017	6,716,715		256,010		6,972,725

 

	2017		2016
	$		$
Analysis of total provisions
Current	193,960		197,387
Non current	6,778,765		6,162,775
	6,972,725		6,360,162

 

¹The Group makes full provision for the future cost of rehabilitating mine sites and associated production facilities on a discounted basis at the time of constructing the mine and installing those facilities.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 19: PROVISIONS (continued)

 

The rehabilitation provision represents the present value of rehabilitation costs relating to the Project site which are expected to be incurred up to and following the expiration date of the mining licence. The provision has been created based upon the updated Definitive Feasibility Study. Assumptions based upon the current economic environment and development work completed at the Project have been made, which management believes are a reasonable basis upon which to estimate the future liability, and will be reviewed regularly to take into account any material changes to the assumptions. The actual rehabilitation costs and works required will ultimately depend upon future market prices for the necessary rehabilitation works required, changes in future regulatory requirements and the timing on when the mine ceases to operate commercially.

 

The discount rate used in the calculation of the provision as at 30 June 2017 is 3% per annum. The value of the undiscounted provision is $8,906,661 (2016: $8,290,460).

	2017 $		2016 $
NOTE 20: BORROWINGS
Current
Bridge loan facility	56,315,448		-
Senior secured loan	3,558,976		25,480,837
	59,874,424		25,480,837
Non-current
Senior secured loan	97,060,134		84,971,049
Details of the bridge loan facility at 30 June
Bridge loan facility	57,278,513		-
Less: unamortised transaction costs	(963,065)		-
	56,315,448		-
Details of the senior secured loan at 30 June
Senior secured loan - Tranche A	49,544,820		54,783,939
Senior secured loan - Tranche B	58,834,474		65,055,927
Less: unamortised transaction costs	(7,760,184)		(9,387,980)
	100,619,110		110,451,886

 

		Total
Reconciliation of transaction costs		$
Bridge loan facility
Opening balance at 1 July 2016		-
Capitalised transaction costs		3,040,031
Amortisation of transaction costs		(2,076,966)
Balance at 30 June 2017		963,065
Senior secured loan
Opening balance at 1 July 2016		9,387,980
Capitalised transaction costs		-
Amortisation of transaction costs		(1,086,729)
Effect of foreign currency exchange differences		(541,067)
Balance at 30 June 2017		7,760,184

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 20: BORROWINGS (continued)

 

Senior Secured Loan and Bond Facility

On 10 May 2014 the Company signed documentation with UniCredit Bank AG, London Branch; ING Bank N.V.; and Caterpillar Financial SARL (together the Lenders) for £75 million in senior debt finance facilities, incorporating a £70 million term loan facility and a £5 million bond facility.  The term loan facility comprises two tranches, A and B, amounting to £32 million and £38 million respectively.

 

The senior debt facility is secured by mortgages and charges over the Company's Mine Properties asset and Property, Plant and Equipment.

 

On 24 October 2016 the Company announced it has executed binding agreements with its existing senior lenders (Senior Lenders) for a standstill and restructure of the senior debt currently outstanding. The standstill provides that a limited number of events of default shall apply under the Senior Debt, along with certain waivers of, and amendments to, the Senior Debt conditions for any non-compliance and grants relief from financial and other covenants. Since the Company entered into the standstill there have been no breaches of the debt covenants.

 

The terms of the Debt Restructure provide that all Senior Debt principal repayments are deferred until January 2018 and the tenor of the Senior Debt is extended until June 2023.

 

Bridge Loan Facility

In conjunction with the debt restructure, the Company agreed a £20 million 12 month secured bridge loan facility (Bridge Loan Facility) with Resource Capital Fund VI L.P. (RCF VI), a major shareholder and an associate of Wolf's other major shareholders, Resource Capital Fund V L.P. and RCF V Annex Fund. After further negotiations, the Bridge Loan Facility was subsequently increased to £30 million in March 2017, £40 million in June 2017 and £45 million in September 2017. As at 30 June, £33 million of the available loan had been utilised.

 

During its term, the Bridge Facility will be fully secured and rank pari passu with the Senior Lenders on substantially the same form and terms as existing under the Senior Debt. Interest may be paid in cash or capitalised each quarter at Wolf's discretion.

 

The Company may pre pay the Bridge Facility in certain limited circumstances, but if not prepaid at the conclusion of the 12 month term, the Bridge Facility will mandatorily switch to a three year subordinated convertible loan, if certain conditions precedent are satisfied, or a three year subordinated loan if those conditions are not satisfied.  

 

Financing Arrangements

The following financing arrangements were in place at the reporting date:

 

Name	Currency	Availability	Maturity	Interest	Limit	Drawn/ Utilised	Repaid
Senior Debt Term Loan	GBP	10 May 2013	10 years	LIBOR + 4.25%	£70 million	£70 million	£6 million
Bond Facility	GBP	10 May 2013	10 years	2.75%	£5 million	£5 million	-
Bridge Loan Facility	GBP	24 October 2016	1 year	LIBOR + 4.25%	£45 million	£33 million	-

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

	2017		2016
	$		$
NOTE 21: ISSUED CAPITAL
1,087,645,948  (2016: 1,082,887,708) fully paid ordinary shares	274,080,313		273,544,711

 

 

	2017				2016
	No		$		No		$
a.          Ordinary shares
At the beginning of reporting period	1,082,887,708		273,544,711		809,422,200		226,982,428
Shares issued during the year
-       20 November 2015	-		-		124,593		28,656
-       8 January 2016	-		-		177,967		32,924
-       4 May 2016	-		-		174,102,285		30,884,800
-       10 May 2016	-		-		251,649		40,264
-       30 June 2016	-		-		98,245,735		16,193,718
-       Options/Rights exercised during the year	-		-		563,279		88,153
-       22 December 2016	352,645		42,000		-		-
-       30 December 2016	506,638		42,000		-		-
-       3 April 2017	563,759		42,000		-		-
-       30 June 2017	641,221		42,000		-		-
-       Options/Rights exercised during the year	2,693,977		408,645		-		-
Share issue expenses	-		(41,043)		-		(706,232)
At reporting date	1,087,645,948		274,080,313		1,082,887,708		273,544,711

 

 

Ordinary shares participate in dividends and the proceeds on winding up of the Parent Entity in proportion to the number of shares held. Ordinary shares have no par value.

 

At the shareholders' meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

 

Capital Management

When managing capital, the Board's objective is to ensure the entity continues as a going concern as well as to obtain optimal returns to shareholders and benefits for other stakeholders. The Board also aims to maintain a capital structure which assists to ensure the lowest possible cost of capital available to the Group.

 

During the term of the senior secured loan facility, the Group will have the following capital restrictions imposed:

 

·      The Parent Entity may only issue shares where the net proceeds of such issuance are applied towards funding project costs; and

 

·      Pursuant to an issuance of shares for corporate activities of the Group, limited to 25% of the market capitalisation of the Parent Entity in accordance with the rules of the Australian Securities Exchange and which does not require notification to or a resolution of, the shareholders of the Parent Entity.

 

Options and performance rights

For information relating to the Wolf Minerals Limited employee option plan and performance rights plan, including details of options and performance rights issued, exercised and lapsed during the financial year and the options and performance rights outstanding at year end, refer to Note 26 Share-based Payments.

 

For information relating to share options and performance rights issued to key management personnel during the financial year, refer to Note 26 Share-based Payments.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 22: RESERVES

 

Share based payments reserve

The share based payments reserve records items recognised as expenses on valuation of share options and performance rights.

 

	2017				2016
	No		$		No		$
Balance 1 July	4,792,992		1,743,297		9,129,320		1,576,880
Issued during the year to key management personnel	3,447,368		218,138		2,035,908		254,570
Exercised during the year	(2,693,977)		(408,645)		(563,279)		(88,153)
Cancelled during the year	(3,011,834)		-		-		-
Expired during the year	-		-		(5,808,957)		-
Balance 30 June	2,534,549		1,552,790		4,792,992		1,743,297

 

Foreign currency translation reserve

The foreign currency translation reserve records the effect of exchange differences on the translation of foreign currency financial statements of subsidiaries.

 

		2017		2016
		$		$
Balance 1 July		9,252,726		32,127,749
Foreign currency differences during the year		(11,064,618)		(22,875,023)
Balance 30 June		(1,811,892)		9,252,726

 

Cash flow hedge reserve

The cash flow hedge reserve records the effect of exchange and interest differences on the translation of hedged instruments.

 

		2017		2016
		$		$
Balance 1 July		(10,671,031)		653,715
Cash flow hedge, net of tax		4,287,276		(11,324,746)
Balance 30 June		(6,383,755)		(10,671,031)

 

NOTE 23: COMMITMENTS

 

(a)     Development commitments

Under the terms of the forty year lease for the minerals and rights at the Project the Company has to pay an annual rent of ~$117,236 (£69,231) indexed annually.  The option lapses if the Company fails to maintain its obligations under the lease.

 

Under the same option agreement the Company is required to procure security for various parties in the event that it is not able to meet its contractual obligations in terms of environmental rehabilitation and restoration at the conclusion of the Project. Included within other receivables are deposits and cash collateral amounting to~ $17,173,975 (£10,141,712) (2016: ~$17,626,774 (£9,818,289)) in respect of the bonds in place at year end.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 23: COMMITMENTS (continued)

 

(b)     Lease expenditure commitments

 

	2017		2016
	$		$
Not longer than one year	140,133		133,051
Longer than one year, but not longer than five years	145,738		282,282
	285,871		415,333

 

The Group has entered into the following leases on commercial terms for office accommodation:

 

Location	Term	Expiry
22 Railway Road Subiaco	4 years	19 June 2019

 

(c)     Other contractual commitments

 

Mining Services Contract

In 2013 Wolf Minerals (UK) Limited awarded an £85 million Mining Services Contract (MSC) for the Project to CA Blackwell (Contracts) Limited.

The MSC is rates-based and made up of two parts:

·      Phase 1, Mining pre-strip and Mine development,

·      Phase 2, Mine production.

The MSC term for phase one finished on 31 March 2016. Phase 2 has a five year term from completion of phase 1 work. The MSC is able to be terminated by Wolf at any time with 60 days' notice.

 

Supply agreements

The Group has signed supply agreements for the future sale of mining outputs from the Project.  These agreements are contingent on the Company meeting certain milestones in the project and contracted quantities being met; if these conditions are not met the agreements are terminable at the discretion of the buyer. 

 

 

 

NOTE 24: SEGMENT REPORTING

 

The Consolidated Entity has identified its operating segments based on the internal reports that are reviewed and used by the chief operating decision maker to make decisions about resources to be allocated to the segments and assess their performance.

 

The financial information presented in the profit or loss and statement of financial position is the same as that presented to the chief operating decision makers.

 

The Consolidated Entity predominately operates in the tungsten and tin industry of the mining and materials sector in the United Kingdom.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

 

NOTE 25: CASH FLOW INFORMATION
	2017		2016
	$		$
a.           Reconciliation of cash flow from operations with loss after income tax
Net loss	(74,536,641)		(63,094,075)
Non cash flows in profit
Depreciation	17,248,334		11,535,756
Financial instrument expense	7,607,347		5,992,401
Equity compensation benefits	388,900		359,455
Foreign exchange differences	296,783		(7,821)
Finance cost	8,442,310		10,616,534
Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries
(Increase)/decrease in trade and term receivables	1,071,974		(3,169,049)
(Increase)/decrease in inventories	(1,408,207)		(1,791,639)
(Increase)/decrease in prepayments	64,640		(476,876)
Increase/(decrease) in trade payables and accruals	2,523,147		14,671,005
Increase/(decrease) in provisions	(23,753)		451,777
Cash flow used in operations	(38,325,166)		(24,912,532)

 

NOTE 26: SHARE BASED PAYMENTS

 

Included under Corporate and technical services expense in the statement of profit or loss and other comprehensive income is $311,234 (2016: $359,455), and relates, in full, to equity-settled share-based payment transactions.

 

All options granted to key management personnel are for ordinary shares in Wolf Minerals Limited, which confer a right of one ordinary share for every option held.

 

 

	2017		2016
	Number of options	Weighted average exercise price	Number of options/rights	Weighted average exercise price
	No	$	No	$
Options issued to key management personnel
Outstanding at the beginning of the year	-	-	850,000	0.34
Options exercised	-	-	-	-
Granted	-	-	-	-
Options expired	-	-	(850,000)	0.34
Outstanding at year end	-	-	-	-
Exercisable at year end	-	-	-	-

 

	2017		2016
	Number of options	Weighted average exercise price	Number of options/rights	Weighted average exercise price
	No	$	No	$
Options issued to shareholders
Outstanding at the beginning of the year	-	-	4,958,957	0.29
Granted	-	-	-	-
Exercised	-	-	-	-
Expired	-	-	(4,958,957)	0.29
Outstanding at year end	-	-	-	-
Exercisable at year end	-	-	-	-

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 26: SHARE BASED PAYMENTS (continued)

 

	2017		2016
Rights issued to key management personnel	Number of rights	Weighted average exercise price	Number of rights	Weighted average exercise price
Outstanding at the beginning of the year	4,792,992	-	3,320,363	-
Rights exercised	(2,693,977)	-	(563,279)	-
Granted	3,447,368	-	2,035,908	-
Rights lapsed	(3,011,834)	-	-	-
Outstanding at year end	2,534,549	-	4,792,992	-
Exercisable at year end	2,534,549	-	4,792,992	-

 

When key management personnel cease employment the options or rights are deemed to have lapsed.

 

The weighted average contract life remaining at 30 June 2017 was:

 

·      Rights                    4.75 years

 

Performance Right issued during the year

During the year ended 30 June 2017, the Company issued one tranche of performance rights, Issue 5. Issue 5 was granted on 22 December 2016 and consisted of 3,447,368 performance rights. The tranche was issued to employees in accordance with the Wolf Minerals Limited Performance Rights Plan as readopted by shareholders at the Annual General Meeting held on 29 November 2016.

 

The vesting of the performance rights is subject to the following conditions:

 

a)            50% of performance rights will vest based on the Company's relative share price performance versus the AIM Basic Resources Index in accordance with a defined scale; and

b)            50% of performance rights will vest based upon the Company's Total Shareholder Return (TSR) performance as measured over the vesting period.

 

The performance rights were valued by an independent third party using industry standard valuation techniques. The key inputs and valuations are summarised in the table below.

 

	Issue 5
Vesting conditions	a)	b)
Underlying security spot price	$0.085	$0.085
Exercise price	Nil	Nil
Valuation date	22/12/16	22/12/16
Expiration date	30/06/21	30/06/21
Performance period (years)	4.52	4.52
Volatility	80.00%	80.00%
Risk free rate	2.31%	2.31%
Dividend Yield	Nil	Nil
Number of performance rights	1,723,684	1,723,684
Valuation per performance right	$0.063	$0.054
Valuation per tranche	$108,592	$93,079

 

As at 30 June 2017, the unissued ordinary shares of Wolf Minerals Limited under options or rights are as follows:

 

Grant Date	Date of Expiry	Exercise Price	Number of Rights
28/11/14	30/06/18	$0.00	273,350
28/11/14	30/06/19	$0.00	261,130
16/11/15	30/06/20	$0.00	1,086,394
04/11/11	22/12/20	$0.00	152,778
22/12/16	30/06/21	$0.00	760,897
			2,534,549

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

 

NOTE 27: RELATED PARTY DISCLOSURES

 

i.           Interests in controlled entities are disclosed in Note 2.

ii.          No amounts in addition to those disclosed in Note 8 to the financial statements were paid or payable to Directors of the Company at the end of the year.

iii.         During the year, Wolf Minerals Limited invoiced Wolf Minerals (UK) Limited $6,471,040 for management fees (2016: $4,179,532). At 30 June 2017 $1,532,877 of management charges remained unpaid.

 

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. 

 

NOTE 28: FINANCIAL RISK MANAGEMENT

 

a.          Financial Risk Management Policies

The Consolidated Entity's financial instruments consist mainly of deposits with banks, other receivables, trade and other payables, loans to the UK based subsidiary and derivative financial instruments.

 

i.           Treasury Risk Management

The Board meets on a regular basis to analyse financial risk exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts.

 

The Board's overall risk management strategy seeks to assist the Group in meeting its financial targets, whilst minimising potential adverse effects on financial performance.

 

Risk management policies are approved and reviewed by the Board on a regular basis.  These include the use of credit risk policies and future cash flow requirements.

 

ii.          Financial Risk Exposures and Management

The main risks the Group is exposed to through its financial instruments are foreign currency risk, liquidity risk, credit risk and price risk.

 

Foreign currency risk

The Group undertakes certain transactions denominated in foreign currencies and is exposed to foreign currency risk through foreign exchange rate fluctuations, primarily with respect to pounds sterling and US Dollar. 

 

Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency.  These currencies are reasonably stable, and the risk is managed by maintaining bank accounts denominated in those currencies.

 

During previous periods the Consolidated Entity entered into forward foreign exchange contracts. These contracts are to hedge the variability in the highly probable cash flows associated with the US$ receipts from future tungsten sales. The Consolidated Entity expects that there will be a close relationship between the hedge instrument (the FX forward contract) and the hedged item (US$ drawdown and US$ receipts).

 

The maturity, settlement amounts and the average contractual exchange rates of the Consolidated Entity's outstanding forward foreign exchange contracts at the reporting date was as follows:

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 28: FINANCIAL RISK MANAGEMENT (continued)

 

Foreign currency risk (continued)

		Sell USD				Average exchange rates
		2017		2016		2017		2016
		$		$
Buy GBP
Maturity:
0 - 6 months		18,330,831		21,866,995		1.5260		1.5489
6 - 12 months		14,907,224		25,911,516		1.3754		1.5536
12+ months		-		33,238,055		-		1.4546

 

 

The Consolidated Entity recognises the profits and losses resulting from currency fluctuations as and when they arise. 

 

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.  The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities  when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 90 days; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. Further details regarding the Group's liquidity position is included within the Going Concern section of Note 1.

 

The table below summarises the maturity profile of the Consolidated Entity's financial liabilities based on contractual undiscounted payments.

 

	Less than 1 Year	Between 1 and 2 years	Between 2 and 5 years	Over 5 years	Total	Carrying Amount
	$	$	$	$	$	$
30 June 2017
Trade and other payables	22,978,838	-	-	-	22,978,838	22,978,838
Interest-bearing borrowings	62,697,392	13,208,520	50,039,970	39,711,924	165,657,806	156,934,558
	85,676,230	13,208,520	50,039,970	39,711,924	188,636,644	179,913,396

 

	Less than 1 Year	Between 1 & 2 years	Between 2 & 5 years	Over 5 years	Total	Carrying Amount
	$	$	$	$	$	$
30 June 2016
Trade and other payables	22,500,206	-	-	-	22,500,206	22,500,206
Interest-bearing borrowings	29,180,806	27,836,127	62,822,933	-	119,839,866	110,451,886
	51,681,012	27,836,127	62,822,933	-	142,340,072	132,952,092

 

Financing arrangements

The borrowing facilities in place at the reporting date are disclosed in Note 20.

 

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group's receivables from customers and investment securities.  The maximum exposure to credit risk, excluding the value of any collateral or other security, at reporting date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the consolidated financial statements.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 28: FINANCIAL RISK MANAGEMENT (continued)

 

Credit risk (continued)

The Group does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the Group.

 

Price risk

Commodity price risk is the risk that the Group's future earnings will be adversely impacted by changes in the market prices of commodities, primarily tungsten. Management is aware of this impact on its primary revenue stream but knows that there is little it can do to influence the price earned apart from a hedging scheme.

 

The Group's Treasury policy allows for hedging of highly probable cash flows associated with the US Dollar receipts from future tungsten sales up to a maximum of 50% of the Group's rolling 24 month production. This policy allows management to combine the benefits of an exposure to the tungsten price for its shareholders whilst also facilitating the ability for management to put in place limited hedging to cover the cost base.

 

The following table details the Group's sensitivity to a 10% increase and decrease in the tungsten price against the invoiced price. 10% is the sensitivity used when reporting commodity price internally to management and represents management's assessment of the possible change in price. A positive number below indicates an increase in profit for the year and other equity where the price increases.

The Group holds the following financial instruments:

 

	2017		2016
	$		$
10% increase in tungsten price	2,061,525		791,292
10% decrease in tungsten price	(2,061,525)		(791,292)

 

The Group holds the following financial instruments:

 

 

	2017		2016
	$		$
Financial assets:
Cash and cash equivalents	8,333,662		35,010,327
Trade and other receivables	2,328,126		5,671,617
Other current assets	36,127		38,717
Derivative financial instruments	-		-
Other non-current assets	17,189,663		17,787,186
Total financial assets	27,887,578		58,507,847
Trade and other receivables are expected to be received as follows:
Less than 1 month	2,328,126		5,671,617
Less than 6 months	-		-
Financial liabilities:
Trade and sundry payables	22,978,838		22,500,206
Interest bearing liabilities	156,934,558		110,451,886
Derivative financial instruments	4,569,508		13,566,283
Total financial liabilities	184,482,904		146,518,375
Trade and sundry payables are expected to be paid as follows:
Less than 1 month	22,978,838		22,500,206
Less than 6 months	-		-

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 28: FINANCIAL RISK MANAGEMENT (continued)

 

iii.         Net fair values

No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments, forward exchange contracts and interest rate swaps.

 

Fair values are materially in line with carrying values.

 

iv.        Sensitivity analysis

 

Interest Rate Risk and Foreign Currency Risk

The Group has performed sensitivity analysis relating to its exposure to interest rate risk and foreign currency risk at reporting date.  This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks.

 

Interest Rate Risk Exposure Analysis   

	Weighted Average Effective Interest Rate		Floating Interest Rate		Non Interest Bearing
	2017	2016	2017	2016	2017	2016
FINANCIAL ASSETS	%	%
Cash at bank and on hand	1.45	0.51	8,333,662	35,010,327	-	-
Receivables	-	-	-	-	2,328,126	5,671,617
Other current assets	-	-	-	-	36,127	38,717
Derivative financial instruments	-	-	-	-	-	-
Other non-current assets	-	-	-	-	17,189,663	17,787,186
Total financial assets			8,333,662	35,010,327	19,553,916	23,497,520
FINANCIAL LIABILITIES
Payables	-	-	-	-	22,978,838	22,500,206
Interest bearing liabilities	4.67	4.84	156,934,558	110,451,886	-	-
Derivative financial instruments	-	-	-	-	4,569,508	13,566,283
Total financial liabilities			156,934,558	110,451,886	27,548,346	36,066,489

 

Interest Rate Sensitivity Analysis

At 30 June 2017, the effect on profit and equity as a result of changes in the interest rate, with all other variables remaining constant would be as follows:

 

 

	2017		2016
	$		$
Change in profit
Increase in interest rate by 0.5% (50 basis points)	(209,941)		(290,238)
Decrease in interest rate by 0.5% (50 basis points)	209,941		290,238
Change in equity
Increase in interest rate by 0.5% (50 basis points)	(209,941)		(290,238)
Decrease in interest rate by 0.5% (50 basis points)	209,941		290,238

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 28: FINANCIAL RISK MANAGEMENT (continued)

 

Foreign Currency Risk Sensitivity Analysis

Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency. These currencies are reasonably stable, and the risk is managed by maintaining bank accounts denominated in those currencies.

 

During previous periods, the Consolidated Entity entered into forward foreign exchange contracts. These contracts are to hedge the variability in the highly probable cash flows associated with the US$ receipts from future tungsten sales. The Consolidated Entity expects that there will be a close relationship between the hedge instrument (the FX forward contract) and the hedged item (US$ receipts).

 

The carrying amount of the consolidated entity's foreign currency denominated financial assets and financial liabilities at the reporting date were as follows:

 

	Assets		Liabilities
	2017	2016	2017	2016
Consolidated	$	$	$	$
Pounds sterling	7,985,116	40,827,813	108,749,424	137,484,811
US dollars	231,022	304,532	-	-
	8,216,138	41,132,345	108,749,424	137,484,811

 

 

 

	2017	2016
	$	$
Change in profit
Improvement in AUD by 5%	5,026,664	4,379,120
Decline in AUD by 5%	(5,026,664)	(4,379,120)
Change in equity
Improvement in AUD by 5%	5,026,664	4,379,120
Decline in AUD by 5%	(5,026,664)	(4,379,120)

 

The above interest rate and foreign exchange rate risk sensitivity analysis has been performed on the assumption that all other variables remain unchanged.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 29: FAIR VALUE MEASUREMENT

 

Fair value hierarchy

The following tables detail the Consolidated Entity's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:

 

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

 

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

 

Level 3: Unobservable inputs for the asset or liability.

30 June 2017		Level 1		Level 2		Level 3		Total
		$		$		$		$
Assets
Forward foreign exchange contracts		-		-		-
Total assets		-		-		-
Liabilities
Amortising interest rate swaps		-		366,877		-		366,879
Forward foreign exchange contracts		-		4,202,631		-		4,202,631
Total liabilities		-		4,569,508		-		4,569,510

 

30 June 2016		Level 1		Level 2		Level 3		Total
		$		$		$		$
Assets
Forward foreign exchange contracts		-		-		-		-
Total assets		-		-		-		-
Liabilities
Amortising interest rate swaps		-		1,237,623		-		1,237,623
Forward foreign exchange contracts		-		12,328,660		-		12,328,660
Total liabilities		-		13,566,283		-		13,566,283

 

 

The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial liabilities.

 

Valuation techniques for fair value measurements categorised within level 2.

Level 2 hedging derivatives comprise forward foreign exchange contracts, forward foreign exchange options and interest rate swaps. These forward foreign exchange contracts have been fair valued using forward exchange rates that are quoted in an active market. Interest rate swaps are fair valued using forward interest rates extracted from observable yield curves. The effects of discounting are generally insignificant for Level 2 derivatives.

 

This valuation technique maximises the use of observable market data where it is available and relies as little as possible on entity specific estimates

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 30: PARENT ENTITY DISCLOSURES
Financial position		2017		2016
Assets		$		$
Current assets		57,613,431		17,590,373
Non-current assets		313,773,215		297,884,443
Total assets		371,386,646		315,474,816
Liabilities
Current liabilities		57,709,913		974,603
Non-current liabilities		62,050		82,376
Total liabilities		57,771,963		1,056,979
Net assets		313,614,683		314,417,837
Equity
Issued capital		274,080,314		273,544,711
Equity settled benefits		1,552,789		1,743,297
Accumulated losses		37,981,580		39,129,829
Total equity		313,614,683		314,417,837

 

Financial performance		2017		2016
		$		$
Profit/(loss) for the year		(1,148,249)		28,562,647
Other comprehensive income		-		-
Total comprehensive income		(1,148,249)		28,562,647

 

The Parent Entity has no contingent liabilities or guarantees outstanding at 30 June 2017 other than a $46,540 rental guarantee.

 

NOTE 31: DIVIDENDS

 

The Board of Directors have recommended that no dividend be paid. No dividends were paid during the year.

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017

 

NOTE 32: CONTINGENT ASSETS AND LIABILITIES

 

As at reporting date the Group had no contingent assets or liabilities other than a rental guarantee of $46,540.

 

NOTE 33: EVENTS AFTER THE REPORTING DATE

 

On 17 August 2017, the Company provided an update on the operating turnaround plan at Drakelands which included improvements in processing plant reliability in the crushing circuit and performance of the refinery to enhance production levels, along with providing temporary changes to weekend operating arrangements whilst technical solutions are being implemented to address LFN emissions. The Company had decided to notify GRES of its intention to recover the cost of the LFN rectification works from the Performance Bond under the construction contract if GRES did not take all necessary actions to do so at its own cost. That remains the current position.

 

On 31 August 2017, the Company announced that RCF VI had agreed to release a further £5 million tranche of the Bridge Loan Facility to support short term working capital. The funds were subsequently received on 11 September 2017.

 

No other matters or circumstances have arisen since the end of the financial period which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.

 

NOTE 34: COMPANY DETAILS

 

The registered office and principal place of business address is:

 

Suite 25, Level 3

22 Railway Road

SUBIACO  WA  6008

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

 

The following additional information is required by the Australian Securities Exchange Ltd in respect of listed public companies only.

             Shareholdings

				Distribution
		a.	Distribution of Shareholders	of holders
			Category (size of holding)
			1 - 1,000	84
			1,001 - 5,000	223
			5,001 - 10,000	182
			10,001 - 100,000	379
			100,001 - and over	82
				950

 

a.          There are no shareholdings held in less than marketable parcels.

 

b.         The names of the substantial shareholders listed in the holding company's register as at 18 September 2017 are:
Shareholder:	Number of Ordinary Shares
Resource Capital Fund V LP	610,158,609
TTI (NZ) Limited	260,972,270
Computershare Clearing	113,780,298
Traxys Projects LP	55,506,776

 

Note: Computershare Clearing is the nominee account for the depositary interests that are traded on the Alternative Investment Market of the London Stock Exchange.

 

c.          Voting Rights

                         The voting rights attached to each class of equity security are as follows:

                         Ordinary shares

-       Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands.

d.         20 Largest Shareholders - Ordinary Shares
Name	Number of Ordinary Fully Paid Shares Held		Percentage of Ordinary Fully Paid Shares Held
1.          Resource Cap Fund V L.P.	610,158,609		56.10%
2.          TTI (NZ) Limited	260,972,270		23.99%
3.          Computershare Clearing	113,780,298		10.46%
4.          Traxys Projects LP	55,506,776		5.10%
5.          BNP Paribas Nom PL	2,275,775		0.21%
6.          J P Morgan Nom Aust Ltd	1,875,940		0.17%
7.          CITICORP Nom PL	1,561,834		0.14%
8.          Aaress PL	1,302,427		0.12%
9.          Pershing Aust Nom PL	1,297,072		0.12%
10.        Russell Ralph + Hynes A M	1,287,731		0.12%
11.        Bond Street Custodians Ltd	1,243,098		0.11%
12.        McCracken Susan Jane	1,210,395		0.11%
13.        Spar Nom PL	1,155,000		0.11%
14.        Clark Russell St John	1,031,626		0.09%
15.        Aust Forestry Inv PL	947,833		0.09%
16.        Novacarta PL	909,534		0.08%
17.        HSBC Custody Nom Aust Ltd	821,682		0.08%
18.        Homewood Inv Ltd	767,040		0.07%
19.        Lewis Sharon	687,000		0.06%
20.        Fleurbow PL	537,602		0.05%
	1,059,329,542		97.38%

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

 

1.          The name of the company secretary is Pauline Carr.

 

2.          The address of the principal registered office in Australia is:

 

Suite 25, Level 3

22 Railway Road

SUBIACO  WA  6008

Telephone 61 (08) 6143 2070

 

3.          Registers of securities are held at the following address in Western Australia is:

 

Security Transfer Australia

770 Canning Hwy

            Applecross  WA  6153

 

4.          Stock Exchange Listings

 

Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange Limited and the Alternative Investment Market of the London Stock Exchange Limited.

 

5.          Unquoted Securities

 

             Ordinary Shares

            Nil.

           

            Options over Unissued Shares

A total of 2,534,549 unquoted rights are on issue. 

 

 

 

 ENDS

For further details, please contact:

Numis Securities: John Prior/James Black/Paul Gillam	+44(0)20 7260 1000
Newgate:  Adam Lloyd / Ed Treadwell	+44 (0) 20 7653 9850
Wolf Minerals Limited: Richard Lucas	+61 (0) 8 6143 2070

 

About Wolf Minerals

Wolf Minerals is a dual listed ("ASX: WLF", "AIM: WLFE") specialty metals producer. In 2015, Wolf Minerals completed the development of a large tungsten resource at its Drakelands Mine, located at Hemerdon, in southwest England.