Announcement PDF Indian Pacific Resources Limited (ACN 139 847 555) Annual Report Year 31 December 2019 CONTENTS Directors' report 2 Auditor's independence statement 4 Consolidated statement of profit or loss and other comprehensive income 5 Consolidated statement of financial position 6 Consolidated statement of changes in equity 7 Consolidated statement of cash flows 8 Notes to the financial statements 9 Directors' declaration 37 Independent auditor's report 38 Page 1 DIRECTORS' REPORT DIRECTORS' REPORT The directors present their report, together with the financial statements of Indian Pacific Resources Limited (ACN 139 847 555) (hereafter referred to as the "Company"), for the financial year ended 31 December 2019. Principal Activities The principal activities of the Company during the financial year were exploration for iron ore in Madagascar. There was no significant change in the nature of these activities during the year, Operating Results, Review of Operations for the Year and Significant Changes in State of Affairs The net loss after tax attributable to shareholders of Indian Pacific Resources Limited of $945,983 the year ended 31 December 2019 (the net loss after tax for the previous financial year was A$350,788). The increase in the net loss largely results from the recognition of remuneration for directors and management for the period 1 July 2016 to 30 June 2019. In 2016, the board of directors agreed that they would not seek any emoluments from the Company until such time as it raised a minimum of $2.5 million. The board of directors proposed for the remuneration to be settled by way of the issue of shares. The increase in the loss is partly offset by settlement for fees outstanding from the withdrawal from the LSE listing for significantly less than expected. No significant changes in the Company's state of affairs occurred during the financial year. Dividends No dividends were declared and paid during the year. Events After Balance Date On 30 January 2020, the World Health Organisation declared the coronavirus outbreak (COVID-19) a "Public Health Emergency of International Concern" and on March 10, 2020, declared COVID-19 a pandemic. The operations of the Company could be negatively impacted by the regional and global outbreak of COVID-19 and may impact the Company's results and its ability to source funding for the next reporting year. As at the date of this report, the full effect of the outbreak remains uncertain. The effects are likely to be significant but cannot be reliably estimated or quantified. The Group will monitor the ongoing developments and be proactive in mitigating the impact on its operations. On 25 March 2020, shareholders approved the issue of 31,830,000 fully paid ordinary shares to directors and management, including directors who have resigned and directors removed from office The shares were issued at 2 cents or a 15% premium to the previous share issue with shares to the three directors subject to a "lock-up" based on continuation of services for 2 years. The Company and Cline Mining Corporation agreed a valuation for the Company to acquire its 25% equity interest in the Iron Ore Corporation of Madagascar sari and conversion of its rights to fully paid ordinary shares under the Deeds of Variation. Cline agreed to a payment of US$192,500 to be converted into Australian dollars on the completion date and the fully paid ordinary shares to be issued at 2.5 cents per fully paid ordinary shares. The Company retained Bentleys, Dentons Australia, Harbury Capital Limited and Wardell Armstrong International pic as consultants to and lead the Company through the listing process on the Australian Securities Exchange. Page 2 DIRECTORS' REPORT Environmental Issues The Company's projects are subject to the laws and regulations regarding environmental matters in Madagascar Many of the activities and operations of the Company cannot be carried out without prior approval from and compliance with all relevant authorities. The company conducts its activities in an environmentally responsible manner and in accordance with all applicable laws. However, the company could be subject to liability due to risks inherent to its activities, such as accidental spills, leakages or other unforeseen circumstances. Information on Directors The following persons were the directors in office during the period 1 January 2019 to 31 December 2019 and since year-end unless otherwise stated: PG Bibby (Non-executive Director), appointed 3 July 2015 MA Burridge (Non-executive Director), resigned 5 May 2019 SL Fabian (Non-executive Director), appointed 23 January 2017 JM Madden (Executive Director and Company Secretary), appointed 6 October 2009 DL Wu (Non-executive Director and Chairman), removed on 23 August 2019 Options No options over issued shares or interests in the Company were granted during or since the end of the financial year and there were no options outstanding at the date of this report. Proceedings on Behalf of Company The Company has no outstanding or pending litigation whether brought by the Company or brought against the Company by a third party. Non-Audit Services There were no non-audit services provided by the Company's external auditor. Auditor's Independence Declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 4. This report of the directors is signed in accordance with a resolution of the Board of Directors. Jed PG Bibby Chairman Dated this 5 August 2020 Page s > Bentleys THINKiNG AHEAD Bentleys Audit & Corporate (WA) Pty Ltd House 2*6 3t orges fefrace Pe^f- WA 60CC are WA 6650 AS\ 3^ '21 22Z 8C2 To The Board of Directors -ci 8 9226 J50C Auditor's Independence Declaration under Section 307C of the Corporations Act 2001 As lead audit Partner for the audit of the financial statements of Indian Pacific Resources Limited for the financial year ended 31 December 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit Yours faithfully BENTLEYS DOUG BELL CA Chartered Accountants Partner Dated at Perth this 5^ day of August 2020 AWVraaV GLOBAL. Accwta } A iGfS CONSOLIDATED STATEMENT OF PROFIT OR LOSS & OTHER COMPREHENSIVE INCOME Note 6 31 December 2019 2018 $ $ 202 6,514 Administration costs 53,408 74,486 Employee costs 752,948 76,053 Total revenue and other Income Expenditure Deferment of settlement terms for acquisition of Ore Corporation of Madagascar sarl costs 53,131 Finance costs 20,000 Contractors and consultants 94,225 47,711 Exchange fluctuation 56,459 85,704 Listing costs 7 Travel (156,826) 87,660 Other 6,381 3.651 Total expenditure 914,255 340,736 Loss before tax for year (914,053) (334,222) (914,053) (334,222) Income tax (expense)/benefit Net loss 8 Net loss for the year attributable to: Non-controlling interests Owners of Indian Pacific Resources Limited 31,930 16,566 (945,983) (350,788) (914,053) (334,222) Items that have been or may be subsequently reclassified to profit or loss Translation reserve Non-controlling interests 13,071 (7,161) Owners of Indian Pacific Resources Limited (50.550) 60,004 Total comprehensive income for the year (37,479) 52,843 Total comprehensive income for the year attributable to: Non-controlling interests Owners of Indian Pacific Resources Limited 45,001 9.405 (981.438) (283,623) (936,437) (274,218) The accompanying notes form part of these financial statements Page 5 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Note 31 December 2019 2018 $ $ Assets Current assets Cash and cash equivalents 10 2,091,819 83,538 Receivables 11 14,419 5.739 Other 12 2,807 2,842 2.109,045 92,119 2,970,267 Total current assets Non-current assets Exploration and evaluation 13 3,133,129 Property plant and equipment 14 12,831 Total non-current assets 3,145.960 2,970,267 Total assets 5.255.005 3,062.386 231.686 Liabilities Current liabilities Payables 15 775,361 Provisions 16 23,857 Borrowings and other liabilities 17 Deferred consideration 18 21,293 240,000 161,802 407.340 Total current liabilities 961,020 900,319 Total liabilities 961,020 900,319 4,293,985 2,162,067 15.971,191 Net assets Equity Contributed equity 19 18,832,748 Other contributed equity 20 221,893 Reserves 21 (161,038) (110.488) Accumulated losses 22 (14,734,436) (13,788,453) 4,159,167 2,072,250 Equity attributable to shareholders of IPR Attributable to non-controlling interests Total equity 23 134,818 89,817 4,293,985 2,162.067 The accompanying notes form part of these financial statements Page 6 As at 31 December 2019 Net loss for the period Other comprehensive income Total comprehensive income Income and expense for the period recognised directly in equity Transactions with owners in their capacity as owners of the Company Share issues Equity raising costs Other contributed equity Conversion of convertible notes Share-based payments As at 31 December 2018 Net loss for the period Other comprehensive income Total comprehensive income Newly consolidated entities Income and expense for the period recognised directly in equity Transactions with owners in their capacity as owners of the Company Share issues Equity raising costs Share-based payments As at 31 December 2017 221,893 221,893 (945,983) (14.734.436) (50,550) (50.550) (161,038) (945,983) (13.788.453) (110,488) Page 7 The accompanying notes form part of these financial statements 18,832,748 360,000 110,960 2,861.557 2,510,456 (119,859) 15.971,191 (350.788) 67,165 67,165 4,159,167 (945,983) (50.550) (996.533) 2,510,456 (119,859) 221,893 360,000 110,960 3,083,450 2,072,250 (350.788) 67,165 (283,623) 134.818 31,930 13,071 45.001 2,162,067 89,817 4,293,985 (914,053) (37,479) (951,532) 2,510,456 (119,859) 221,893 360,000 110,960 3,083,450 (334.222) 60.004 (274,218) 16.566 (7.161) 9,405 41.556 2.394.729 41,556 80,412 $ Total Equity 41.556 2,314.317 Note 23 Equity Attributable to Equity Shareholders Attributable to of IPR Non-controlling Interests $ $ 41,556 (350.788) (13.437,665) $ $ (177,653) Note 22 Accumulated Losses Note 21 Translation Reserve 41.556 221,893 Note 20 Other Contributed Equity 41,556 15,929.635 $ Note 19 Share Capital CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS Note 31 December 31 December 2019 2018 $ $ Cash flows from/(usecl) In operating activities Payments to employees and suppliers Interest received Net cash flows from/(used) in operating activities 29 (259,103) (250,346) 202 497 (258,901) (249,849) Cash flows from/(used) In investing activities Proceeds from sale of tenements 6,017 Settlement of acquisition of IGCM (253,478) Exploration and evaluation expenditure (200,562) (81,622) Property plant and equipment (12,831) Net cash flows from/(used) in investing activities (466,871) (75,605) 2,732,349 8,700 Cash flows from financing activities Proceeds from share issues Equity raising costs (49,777) Proceeds from borrowings 100,000 2,782,572 8,700 2,056,800 (316,754) the financial period 83,538 400,292 Exchange fluctuation (48,519) Net cash flows Cash and cash equivalents as at the start of Cash and cash equivalents as at the end of the financial period 10 2,091,819 83,538 The accompanying notes form part of these financial statements Page 8 NOTES TO THE FINANCIAL STATEMENTS Note 1 Corporate information The Financial Statements of Indian Pacific Resources Limited (hereafter referred to as the "parent entity") and its controlled entities comprising Malagasy Holdings (Tratramarina Pty Ltd (formerly Malagasy Exploration and Mining Pty Ltd) and its controlled entity Universal Exploration Madagascar sari) and Malagasy Holdings (Bekisopa) Pty Ltd (formerly IPR Services Pty Ltd) and its controlled entity Iron Ore Corporation of Madagascar sari) for the financial year ended 31 December 2019. The Financial Statements were authorised for issue in accordance with a resolution of the Board of Directors on 5 August 2020. The parent entity is as at the date of this annual report an unlisted public entity limited by shares incorporated in Australia. The principal activities of the parent entity are exploration for ferrous metals. Note 2(a) Basis of preparation and accounting policies Preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards Board (hereafter referred to as "AASB") standards and other authoritative pronouncements of the AASB and the Corporations Act 2001. The financial report has been prepared on an historical cost basis. The financial report is presented in Australian dollars. The Statement of Comprehensive Income for both 2019 and 2018 covers the period 1 January to 31 December in each year. Statement of compliance The financial report complies with Australian Accounting Standards as issued by the AASB and International Financial Reporting Standards as issued by the International Accounting Standards Board. Going concern The Group recorded a net loss of $945,983 (2018: $350,788) and incurred cash outflows from operating and investing activities of $725,772 for the year ended 31 December 2019 (2018: $325,454). Its investing activities including, the once-off extinguishment of the deferred consideration payable to Cline Mining Corporation of $253,478. As at 31 December 2019, the Group had working capital of $1,946,428 (excluding accrued remuneration for directors and management of $636,601 and amount due to Cline Mining Corporation to be extinguished by way of the issue of fully paid ordinary shares). The Group had a working capital deficiency in the previous year of $808,200. The Group has ongoing operating and expenditure cash flow plans in relation to its Exploration interests together with its ongoing corporate and operating expenditure requirements. Expenditure on exploration is inclusive of, but not limited to, those amounts identified in Notes 25 and 26. To fulfil the expenditure requirements contemplated by those plans, the Group will require additional funding. These conditions give rise to a material uncertainty that may cast significant doubt upon the Groups ability to continue as a going concern. The ongoing operation of the Group is dependent upon: (i) The Group raising sufficient additional funding from shareholders or other parties; Page 9 NOTES TO THE FINANCIAL STATEMENTS (ii) The group converting existing loans to equity and if necessary, deferring deferred payment arrangements; and (iii) The Group reducing expenditure in line with available funding. The directors have prepared a cash flow forecast, which indicates that the Group will have sufficient cash flows to meet all commitments and working capital requirements for the 12-month period from the date of signing this financial report. Included in this forecast is a successful listing of the Company on the Australian Securities Exchange, Based on the cash flow forecast and other factors referred to above, the directors are satisfied that the going concern basis of preparation is appropriate. In particular, given the Group's history of raising capital to date, the directors are confident of the Group's ability to raise additional funds as and when they are required. Should the Group be unable to continue as a going concern it may be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different to those stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or to the amount and classification of liabilities thai might result should the Group be unable to continue as a going concern and meet its debts as and when they fall due. Critical accounting estimates The preparation of the financial report requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the group's accounting policies. The areas involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to the financial report are disclosed in Note 3. Note 2(b) Capital management policy The goal of management is to ensure that the Group continues as a going concern whilst simultaneously managing the dilution. The Group seeks to add value through its exploration and evaluation activities so that new issues of shares can be undertaken at a premium to previous issues. The Group is involved in high risk exploration and therefore, it looks to raise equity rather than debt or quasi-equity instruments. Note 2(c) Principles of consolidation The consolidated financial statements comprise the financial statements of Indian Pacific Resources Limited and its controlled entities as at and for the period ended 31 December each year (the Group). Controlled entities are those entities over which the Group has the power to govern the financial and operating policies to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity. The financial statements of the controlled entities are prepared for the same reporting period as the parent entity, using consistent accounting policies, in preparing and consolidated financial statements, all inter-parent entity balances, transactions, unrealised gains and losses resulting from the intra-group transactions have been eliminated in full. Controlled entities are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. Page 10 NOTES TO THE FINANCIAL STATEMENTS Investments in controlled entitles by Indian Pacific Resources Limited are accounted for at cost in the separate financial statements of the parent entity less any impairment charges. The acquisition of controlled entities is accounted for using the acquisition method of accounting. The acquisition method of accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the entity acquired. The identifiable assets acquired, and the liabilities assumed are measured at their acquisition date fair values. The difference between the identifiable assets acquired less the liabilities assumed and the fair value of the consideration is goodwill or discount on acquisition. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For purposes of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquired entity are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measures based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and are presented within equity in the consolidated statement of financial position, separately from the equity of the owners of the parent entity. Total comprehensive income within a controlled entity is attributed to the non-controlling interest even if that results in a deficit balance. A change in the ownership interest of a controlled entity that does not result in a loss of control, is accounted for as an equity transaction. A change in the ownership interest of a controlled entity, without a loss of control, is accounted for as an equity transaction, if the Group loses control over a controlled entity, it: (i) Derecognises the assets (including goodwill) and liabilities of the controlled entity; (ii) Derecognises the carrying amount of any non-controlling interest; (iii) Derecognises the cumulative translation differences recorded in equity; (iv) Recognises the fair value of the consideration received; (v) Recognises the fair value of any investment retained; (vi) Recognises any surplus or deficit in the Statement of Comprehensive Income statement; and (vii) Reclassifies the parent entity's share of components previously recognised in other comprehensive income to Statement of Comprehensive Income or retained earnings, as appropriate. Page 11 NOTES TO THE FINANCIAL STATEMENTS Note 2(d) Foreign currency translation The financial report of the Group is presented in Australian dollars, which is the functional and presentation currency of the parent entity. Each entity in the Group determines is own functional currency. On consolidation, the assets and liabilities of foreign operations are translated into Australian dollars at the rate of exchange prevailing at the reporting date and the income statements for foreign operations are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. Note 2(e) Revenue recognition Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract: determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount" method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Note 2(f) Income tax The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current tax charge is calculated on the basis of the tax laws acted or substantively enacted at the end of the reporting period. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial report of the Group. Deferred income tax; however, is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit and loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the financial period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Page 12 NOTES TO THE FINANCIAL STATEMENTS 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. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same tax authority Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is a recognised in Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. Note 2(g) Leases The Group has applied AASB 16 Leases to its lease obligations. Under this new standard, the group is required to recognise all right of use assets and lease liabilities, except for short-term (12 months or fewer) and low value leases, on the balance sheet. The lease liability is initially measured at the present value of future lease payments for the lease term. Where a lease contains an extension option, the lease payments for the extension period will be included in the liability if the Group is reasonably certain that it will exercise the option. The liability includes variable lease payments that depend on an index or rate but excludes other variable lease payments. The right of use asset at initial recognition reflects the lease liability, initial direct costs and any lease payments made before the commencement date of the lease less any lease incentives and, where applicable, provision for dismantling and restoration. The Group has recognised depreciation of right of use assets and interest on lease liabilities in the statement of comprehensive income over the lease term. Separate the total amount of cash paid into a principal portion (presented within financing activities) and interest portion (which the Group presents in operating activities) in the cash flow statement. The Group has measured the rights to use as if AASB 16 has applied since the commencement date of the lease arrangements and used the incremental borrowing rate at the date of transition. Under this approach the Group has capitalised the rights to use and recorded the present value of obligations to pay as a liability by applying a single incremental borrowing rate with an adjustment to the opening balance of accumulated losses. The Group has assessed the financial implications of application of AASB 16 Leases and concluded that there is no impact. Note 2(h) Impairment of assets Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash flows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each financial period. Note 2(1) Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise cash at banks and at hand and short-term deposits with an original maturity of three months or less. Page 13 NOTES TO THE FINANCIAL STATEMENTS For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Note 2(j) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. The amount of impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The amount of the impairment is recognised in Statement of Comprehensive Income within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent financial period, it is written off against the allowance account. Subsequent recoveries of amounts previously wr