BOUNTY MINING LIMITED 30 JUNE 2015
for
BOUNTY MINING LIMITED AND ITS CONTROLLED ENTITIES ABN: 19 107 411 067
TABLE OF CONTENTS1 | Corporate Directory | 3 |
2 | Chairman's Report | 4 |
3 | Directors' Report | 7 |
Information about the Directors & Company Secretary | 7 | |
Principal Activities | 8 | |
Operating Review | 9 | |
Future Development | 10 | |
Financial Review | 10 | |
Events Subsequent to Reporting Date | 11 | |
Directors‟ Interests | 11 | |
D & O Insurance | 12 | |
Remuneration Report | 13 | |
Proceedings on Behalf of the Company | 15 | |
Auditor‟s Independence Declaration | 15 | |
4 | Auditor's Independence Declaration | 17 |
5 | Financial Statements | 18 |
Consolidated statement of comprehensive income | 18 | |
Consolidated statement of financial position | 19 | |
Consolidated statement of changes in equity | 20 | |
Consolidated statement of cash flows | 21 | |
Notes to financial statements | 22 | |
6 | Directors' Declaration | 60 |
7 | Independent Audit Report | 61 |
8 | ASX Additional Information | 63 |
Directors | Banker |
Gary Cochrane (Chairman) | ANZ Banking Group Ltd |
Julie Garland McLellan | 115 Pitt Street, Sydney NSW 2000 |
Robert Stewart | |
Company Secretary | Securities Exchange |
Eryl Baron | Australian Securities Exchange Ltd |
Code: BNT | |
Auditor | Share Registry |
Russell Bedford NSW | Computershare Investor Services Pty Ltd |
L29, Suncorp Place, 259 George Street Sydney NSW 2000 | Yarra Falls, 452 Johnston Street, Abbotsford VIC 3067 |
Registered Office | Solicitors |
Suite 1002, L10, 60 Pitt Street | McCullough Robertson |
Sydney NSW 2000 | L11, 66 Eagle Street |
Phone: 02 8965 0200 | Brisbane, QLD 4000 |
Fax: 02 8965 0214 | |
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CHAIRMAN'S REPORT
During the year Bounty continued to develop the Wongai Hard Coking Coal Project. Despite a very difficult commodity market Bounty successfully raised $1.27 million through the issue of equity and convertible notes to fund the progression of the Wongai project and working capital. Bounty continues to move the project from Concept Study stage to Prefeasibility Study stage and when this is complete will have earned 22.5% equity in the Wongai Project. The Farm-In Agreement allows Bounty to move to 48% equity once the Bankable Feasibility Stage is complete and then to acquire a further 3% to move to 51% ownership of the Project.
The Wongai Hard Coking Coal Project has significant advantages when compared to other coal projects currently proposed in Australia:
Confirmed high quality hard coking coal;
Very shallow, large resource base;
Very close to the coast;
The proposed covered transhipment methodology designed to avoid disruption to sea grass habitats, wetlands, tidal flats and have no adverse affect on the reef;
No seabed dredging or sea dumping are proposed as part of the Project;
Bounty‟s specialist underground mining methodology will lead to a minimal environmental footprint for the mine;
Forecast low capital and low operating costs
A strong economic return for the Project;
Signed ILUA with traditional owners and also full support from the Cape York Council and Balkanu Business Development Group;
'Life of mine Management Agreement' places Bounty in a controlling position for the Project. This is important as it allows Bounty to utilise its operational and development skills to maximise productivity, lower cost and promote a strong safety ethic.
Wongai Coal Project is an effective asset for Bounty to establish a long term presence without the risks of contract termination that have occurred in previous downturns where clients have temporarily closed mines or terminated contracts to satisfy their short term needs.
During the year Bounty has continued to achieve key milestones and to further de-risk the project by ongoing development work and regular meetings with traditional owners, State and Federal Governments, investors and project service providers.
Work completed during the year includes:
Successful completion of large diameter cored drilling program with 100% core recovery in the 200mm diameter hole;
Successful completion of detailed coke oven tests in Brisbane and Germany;
Completion of indicative detailed coal quality specification confirming high quality hard coking coal;
Completion of prefeasibility stage work for overland conveyors, transhipping options, coal preparation plant options that eliminate the need for tailings dams and support ongoing application of low environmental impact operations for land and ocean based activities;
Ongoing meetings with Federal and Queensland State Government and Great Barrier Reef Marine Park representatives to keep them fully informed on progress on various engineering and mining studies, transhipping options and low environmental impact alternatives.
Local people, including the traditional owners, have been involved in the on-site works and Government meetings and will continue to be involved throughout the life of the project.
Contract mining (traditional revenue source)The coal market remains depressed and there were no contract opportunities during the year despite some early indications of improvement in October 2014.
Following expiry of the mining contract at Aquila in July 2013 Bounty‟s equipment remains on care and maintenance pending a recovery of economic conditions and finding new revenue opportunities. Bounty has selectively sold some equipment to assist in funding the Wongai development and to support cash flow commitments.
There is not expected to be any immediate improvement in contract mining opportunities until at the end of financial year 2016. Bounty will continue to monitor whether it is advantageous to sell more equipment during this extended down turn in contracting activity.
Financial restructuringUnfortunately Bounty was unable to raise the minimum funds under an approved Prospectus which was lodged with the ASX on 18th August 2014. This was subsequently withdrawn on 10th October 2014. Since then Bounty has progressed with a number of smaller raisings to fund development of Wongai and to meeting working capital requirements. In total Bounty raised $1.27 million through equity and convertible notes during FY 15.
Bounty is in ongoing discussion with a number of potential strategic investors such as Asian steel mills about funding for future Wongai activities and to continue to move the project to Prefeasibility status and beyond over the next 18 months.
The Board of Bounty will continue to keep investors updated of all developments as they occur. Thank you for your continued support.
Gary CochraneChairman and Chief Executive Officer Dated this 29th day of September 2015
- DIRECTORS' REPORT
The Directors of Bounty Mining Limited ('Bounty' or the 'Parent Entity') and its controlled entities (the 'Bounty Group'), present their report together with the financial statements for the year ended 30 June 2015.
The names, experience, independence and qualifications of the directors of Bounty during the financial year and up to the date of this report are as set out below.
Bachelor of Engineering (Civil), Grad Dip Mining (Ballarat), MBA (Deakin)
Gary has more than 27 years experience in the mining, engineering and construction industry in Australia, China, Indonesia and Papua New Guinea. He has had senior management and technical roles at operating mines in Australia and Papua New Guinea.
Gary has spent the last 19 years as an international mining and management consultant to the coal and hard rock mining industries. Gary is a regular commentator on coal industry strategic supply and demand positions and coal investment opportunities and is a regular speaker at international coal conferences in Australia, China, and Indonesia.
Gary was a founding investor and former director of Millennium Coal which is now an operating coal mine in Queensland producing 3 million tonnes per annum. He is also on the board of several junior coal development companies with projects in Indonesia, Canada and the USA. Gary has completed an Executive MBA in Global Energy.
Gary joined the board on 27 November 2007 and became Chairman on 28 February 2008.
Julie is a professional company director with a background in the resources and energy sectors. Julie has a degree in Civil Engineering, an MBA and a Graduate Diploma in Applied Finance as well as a Diploma and an Advanced Diploma in Company Directorship. She has served on the boards of listed and unlisted companies. She is a former Chairman of Oldfields Holdings Limited and non-executive director of Kimbriki Environmental Enterprises Limited. As an executive she has been: Managing Director for Gamesa Energy Australia (a multinational energy company), General Manager Energy and Natural Resources for KPMG and Corporate Planner for BHP. Julie was a NSW Australian Institute of Company Directors councillor from 2004 until 2010 and writes, facilitates and presents governance training for the Institute and other clients.
Julie joined the board of Bounty on 4th April 2008.
Robert Stewart GAICD Non-Executive directorRob has a Bachelor of Engineering (Civil), Master of Engineering Science (Mining), FIEAust, and has spent 39 years working in the mining and construction industries. He came to Bounty following executive level experience with mine and infrastructure owners and with mining and construction contractors. Previous appointments have included: General Manager with Leighton Holdings Ltd subsidiary Thiess Pty Ltd responsible for the company‟s contract mining and construction business in NSW; Chief Executive and Managing Director of Whitehaven Coal Limited, an ASX listed coal mining company; and Executive Director of CRSM LLC, a Mongolian based company identifying, evaluating and managing investments in Mongolia‟s resource industry.
Rob is currently a director of JukesTodd, a strategic business advisor offering professional services to the resources, infrastructure and energy sectors.
Rob joined the board on 17 September 2009.
BA Politics & Econ (London), ACIS
Eryl Baron commenced her accounting career as a Chartered Accountant with BDO Binder Hamlyn in London. In 1990 Eryl moved to Sydney and worked in accounting and business in financial control positions. She has served as chief financial officer and company secretary of listed and unlisted companies. In March 2009, Eryl received a Graduate Diploma in Applied Corporate Governance from the Governance Institute of Australia. Eryl has completed the first two modules of the Advanced Certificate in Risk Management run by the Governance Institute of Australia.
Details of Board and Committee meetings held during the Financial Year are as follows:
Meetings during FY2015 | Board | Audit & Risk Committee | Remuneration & Nomination Committee | |||
Director | Held | Attended | Held | Attended | Held | Attended |
Gary Cochrane | 16 | 16 | n/a | n/a | n/a | n/a |
Julie Garland McLellan | 16 | 16 | 3 | 2 | 2 | 2 |
Rob Stewart | 16 | 16 | 3 | 3 | 2 | 2 |
In September 2013 Bounty announced that it had finalised agreements for a Farm-in, a Joint Venture and a Life-of-Mine Management Contract for the Wongai Coal Project. Bounty has focused on developing the Wongai Coal Project to the point where a Life of Mine contract begins, while looking for new contract mining opportunities.
Operating ReviewIn December 2014 a large diameter core drilling program was completed at the Wongai project with a
2.86 metre coal intersection and 100% core recovery. This provided a large sample of coal which has allowed for full washability and coke oven testing. The tests were completed by two independent laboratories in March 2015. The results confirmed a high quality hard coking coal which the board is confident would receive acceptance in all of Australia‟s key exports markets including Japan, China, India, South Korea and Brazil.
In addition to this work Bounty has progressed a number of prefeasibility activities including a review of overland haulage options from the mine to the coast and a further investigation of environmentally low impact barging and transhipping options which require no dredging, no sea dumping and have no dust.
In April 2015 the Company reached agreement with its Wongai project Joint-Venture partner Aust-pac Capital Pty Limited to vary certain terms of their Farm-in Agreement. Under the original Farm-in agreement, Bounty had the option to earn up to a 40% equity position in the project by expenditure on resource delineation, pre-feasibility and feasibility studies and finalisation of an Environmental Impact Statement ('the Phase 1, 2 and 3 Works'). Bounty also had the right to acquire a further 11% equity in the project through a capital investment to reach a 51% position. Following the variation to the agreement, Bounty now has the option to earn up to a 48% equity position by completing the Phase 1, 2 and 3 Works, and the right to acquire a further 3% equity through capital investment to reach the same 51% position.
The Wongai Project had Co-ordinated Project Status which expired on 31 July 2015 when the Environmental Impact Statement was not submitted by the due date. Bounty can reapply for Coordinated Project Status at a later date. The loss of coordinated project status removes the coordinated support from the Coordinator General‟s office. Each individual Government Department will continue to provide the support and review required under the various applicable regulations, legislations and guidelines. Bounty Mining will still continue to meet with all relevant Government Departments.
The Wongai Project consists of two Exploration Licences: EPC 2334 and EPC 2687. All values and resources ascribed to the Wongai Project relate to EPC 2334. No value or resources has been ascribed to EPC2687, and no physical work has been undertaken at the site of EPC 2687. Due to the current difficult market for fund raising, in September 2015 the Joint Venture surrendered EPC2687.
Future Developments - Wongai ProjectFollowing the completion of the large diameter cored drilling program, the Company will now focus on the completion of the Phase 2 Design and the Pre-feasibility Study, which are milestones of the Phase 2 Works. On completion of the Phase 2 Works the Company will earn a further 17.5% equity in the Project, giving a total 22.5% interest. Simultaneously the Company will progress with its Environmental Impact Study.
The Company will then embark on the Phase 3 Works i.e. the Phase 3 Drilling program, completion of the Environmental Impact Study and preparation of a Bankable Feasibility Study. On completion of the Phase 3 Works the Company will earn a further 25.5% equity in the Project, giving a total 48% interest. Bounty then has the right to acquire a further 3% equity through capital investment to reach a 51% equity position.
The Company will continue to look for contract mining or equipment hire opportunities while it progresses the Wongai Project.
In July 2015 the Company‟s Continuous Miner and its spare parts were sold to a private purchaser for
$0.25m and $0.05m respectively, which the board considers to be a fair value in the current market. This represented a significant variance to the Written Down Value as shown below.
Item | Written down value ('WDV') at 30 June 2015 before impairment | Sale value | % variance between WDV and sale value |
Continuous Miner | $1.1m | $0.25m | (78%) |
Related spare parts / inventory | $0.26m | $0.05m | (81%) |
A decision was therefore taken that the Fair Market Value of assets at 30 June 2015 would be best estimated by applying a discount of 78% to the written down value of all items of mining equipment and 81% to the written down value of all spare parts / inventory. This has resulted in an Impairment Provision of $3,147,738 against the mining equipment and $380,455 against related spares and inventories.
The loss for the financial year FY2015 was $5.0m including the impairment provision of $3.5m. $0.5m was invested in the Wongai Coal Exploration and Evaluation asset.
The group earned no revenue from contracting mining during the period.
Significant ChangesThere have been no significant changes in the operations of Bounty during the financial year.
During the year, the group did not invest in refurbishing and renewing its fleet of equipment (2014:
$0.1m).
Earnings per share were a loss of 0.71 cents (2014: loss of 0.43 cents).
Liquidity & Funding
During financial year 2015, the Bounty Group was reliant on issues of securities and loans to support the operations.
The sale of the Company‟s Continuous Miner in July 2015 and the surrender of EPC 2687 have been described in 'Operational Review' and 'Financial Review' above.
Except for the above, no other matters or circumstances have arisen since the end of the financial year which have significantly affected or could significantly affect the operations of the consolidated group, the results of the operations or the state of affairs of the consolidated group in future financial years.
There was no movement in directors‟ interests in equity during the financial year or subsequently. Directors‟ holdings in ordinary securities at 30 June 2015 are as follows:
Directors' holdings in Bounty securities | |||||
Gary Cochrane | Rob Stewart | Julie Garland McLellan | Total | ||
Shares Ordinary Shares | 1/07/2014 Movements | 247,455,658 - | 3,469,117 - | - - | 250,924,775 - |
30/06/2015 | 247,455,658 | 3,469,117 | - | 250,924,775 | |
As a % of the total securities on issue 33.6% 0.5% 0.0% 34.1% | |||||
On 15 August 2014 Bounty issued unquoted Convertible Notes at a conversion price of 2.6c per security, an interest rate of 15% and a maturity date of 14 November 2015 to raise $0.10m. The funds were used to contribute to working capital, the commencement of the Phase 2 Works of the Wongai Project and the costs of issuing a prospectus.
In August 2014 Bounty also reached agreement with its main lender VETL Pty Ltd ('VETL') (a company associated with Chairman and CEO Gary Cochrane) to defer the loan repayment date to 31 December 2016.
In March 2015 Bounty reached an arrangement with VETL whereby no interest will be charged or accrued on the loan for six months commencing 1 January 2015. This effectively capped the loan at its December 2014 level of $2.9m. This arrangement was extended by agreement until 31 October 2015 at which time the arrangement will be reviewed again.
During the financial year VETL made a further loan of $17,200 to the Company to cover short-term working capital. This loan is separate from the main loan, being interest free and having no charge attached. The loan was partially repaid in August 2015.
Bounty has agreed to indemnify and keep indemnified the Directors and Company Secretary against all liabilities incurred as directors and officers of the Bounty Group and all legal expenses incurred as directors and officers of the Bounty Group.
The indemnity only applies to the extent and in the amount that the directors and officers are not indemnified under any other indemnity, including an indemnity contained in any insurance policy taken out by the Bounty Group, under the general law or otherwise. The indemnity does not extend to any liability:
To Bounty or a related body corporate of Bounty; or
Arising out of conduct of the directors and officers involving a lack of good faith.
No indemnities have been given or insurance premiums paid, during the year, for any person who is or has been an auditor of the Company.
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