REG - European Metals Hldg - Annual Financial Report
29/09/2023 15:15
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RNS Number : 2225O European Metals Holdings Limited 29 September 2023
For immediate release
29 September 2023
European Metals Holdings Limited
("European Metals" or the "Company")
ANNUAL RESULTS
European Metals Holdings Limited (ASX & AIM: EMH, OTCQX: EMHXY, ERPNF and
EMHLF) ("European Metals" or the "Company") are pleased to announce the
Company's annual results for the year ended 30 June 2023.
The annual report has been released on the Australian Securities Exchange
("ASX") as required under the listing rules of the ASX.
Whilst the financial information included in this announcement has been
prepared in accordance with the accounting policies and basis of preparation
set out below, this announcement does not constitute the Company's statutory
financial statements.
A copy of the annual report will be posted to shareholders and is also
available on the Company's website www.europeanmet.com.
CONTACT
For further information on this update or the Company generally, please visit
our website at www.europeanmet.com (http://www.europeanmet.com/) or see
full contact details at the end of this release.
ENQUIRIES:
European Metals Holdings Limited
Keith Coughlan, Executive Chairman Tel: +61 (0) 419 996 333
Email: keith@europeanmet.com
Kiran Morzaria, Non-Executive Director Tel: +44 (0) 20 7440 0647
Shannon Robinson, Company Secretary Tel: +61 (0) 418 675 845
Email: shannon@europeanmet.com
WH Ireland Ltd (Nomad & Broker)
James Joyce / Darshan Patel / Isaac Hooper Tel: +44 (0) 20 7220 1666
(Corporate Finance)
Harry Ansell (Broking)
Panmure Gordon (UK) Limited (Joint Broker)
John Prior Tel: +44 (0) 20 7886 2500
Hugh Rich
James Sinclair Ford
Harriette Johnson
Blytheweigh (Financial PR) Tel: +44 (0) 20 7138 3222
Tim Blythe
Megan Ray
Chapter 1 Advisors (Financial PR - Aus)
David Tasker Tel: +61 (0) 433 112 936
The information contained within this announcement is deemed by the Company to
constitute inside information under the Market Abuse Regulation (EU) No.
596/2014 ("MAR") as it forms part of UK domestic law by virtue of the European
Union (Withdrawal) Act 2018 and is disclosed in accordance with the Company's
obligations under Article 17 of MAR. The person who authorised for the
release of this announcement on behalf of the Company was Keith Coughlan,
Executive Chairman.
CORPORATE DIRECTORY
Directors
Mr Keith Coughlan Executive Chairman
Mr Richard Pavlik Executive Director
Mr Kiran Morzaria Non-Executive Director
Ambassador Lincoln Bloomfield, Jr Non-Executive Director
Company Secretary
Ms Shannon Robinson
Registered Office in Australia Registered Office in Czech Republic
Level 3 GEOMET s.r.o.
35 Outram Street Ruska 287
West Perth WA 6005 417 01 Dubi Bystrice
Telephone 08 6245 2050 The Czech Republic
Facsimile 08 6245 2055 Telephone: +420 732 671 666
Email www.europeanmet.com
Registered Address and Place of Incorporation - BVI AIM Nominated Advisor & Joint Broker
Woodbourne Hall WH Ireland Ltd
PO Box 3162 24 Martin Lane
Road Town London EC4R 0DR
Tortola VG1 110 United Kingdom
British Virgin Islands
Joint Broker
Share Register - Australia Panmure Gordon (UK) Limited
Computershare Investor Services Limited One New Change
Level 17 London EC4M 9AF
221 St Georges Terrace United Kingdom
Perth WA 6000
Telephone 1300 850 505 (within Australia) UK Depository
Telephone +61 3 9415 4000 (outside Australia) Computershare Investor Services plc
Facsimile 1800 783 447 (within Australia) The Pavilions
Facsimile +61 3 9473 2555 (outside Australia) Bridgewater Road
Bristol BS99 6ZZ
United Kingdom
Auditor Reporting Accountants (UK)
Stantons International Audit and Consulting Pty Ltd Chapman Davis LLP
Level 2, 40 Kings Park Road 2 Chapel Court
West Perth WA 6005 London SE1 1HH
Telephone +61 8 9481 3188 United Kingdom
Facsimile +61 8 9321 1204
Securities Exchange Listing - Australia Securities Exchange Listing - United Kingdom
ASX Limited London Stock Exchange plc
Level 40, Central Park 10 Paternoster Square
152-158 St Georges Terrace London EC4M 7LS
Perth WA 6000 United Kingdom
ASX Code: EMH AIM Code: EMH
Securities Exchange Listing - OTCQX Best Market
OTC Markets Group
300 Vesey Street, 12th Floor
New York City
NY 10282 United States
OTCQX Codes: EMHXY, ERPNF and EMHLF
CONTENTS
Chairman's Letter 3
Review of Operations 5
Directors' Report 14
Remuneration Report 19
Auditor's Independence Declaration 24
Consolidated Statement of Profit or Loss and Other Comprehensive Income 25
Consolidated Statement of Financial Position 26
Consolidated Statement of Changes in Equity 27
Consolidated Statement of Cash Flows 28
Notes to the Consolidated Financial Statements 29
Directors' Declaration 59
Independent Audit Report to the members of European Metals Holdings Limited 60
Additional Information 64
Tenement Schedule 65
CHAIRMAN'S LETTER
Dear Shareholders
Welcome to the 2023 Annual Report for European Metals Holdings Limited
("European Metals" or "the Company").
On behalf of the Board of Directors, I am pleased to report to you on what has
been a very significant year for the Company in the development of the Cinovec
Lithium Project.
The team has had another busy and productive year and big steps have been
taken towards the realisation of our stated strategy to become a lithium
producer. The Cinovec Project stands on the cusp of filling a significant role
in addressing the supply and demand imbalance for lithium in the European
Union.
Awareness of this imbalance has been growing within the region and formal
steps have been taken by the European Union and the European Commission to
assist projects like Cinovec to be brought into production as quickly as
possible. The EU Critical Raw Materials Act is an example of the recent level
of support, and the key tenets of the Act have received strong support within
the Czech Republic, our country of operation. The Czech Government has
recently become actively supportive of the Project, highlighted by the visit
of Czech Prime Minister Petr Fiala to Cinovec in May, and his personal public
endorsement of the project. The Company expects that benefits will flow from
this recent support, at both national and regional levels.
The Project was awarded pre-approval for an ~ EUR 49 million grant under the
EU's Just Transition Fund scheme in January 2023 - indicative of the overall
support for the Project and the industry. Importantly, Cinovec was formally
classified as a "Strategic Project" as part of this grant scheme, potentially
leading to further assistance. The final application and approval process are
due to be completed in early 2024.
Other key milestones achieved during the year include the appointment of DRA
Global to complete the Definitive Feasibility Study ("DFS"), the continuation
of outstanding results from the final test work, and the securing of the land
necessary to build the proposed lithium processing plant at Dukla,
approximately 6.2km from the proposed portal site.
DRA Global, a globally recognised leader in the delivery of lithium projects,
is making excellent progress on the DFS which remains on track for publication
before the end of 2023. As part of the required test work for the study, the
Company has continued to deliver excellent results, particularly in the area
of lithium recoveries. This test work will shortly complete and battery grade
lithium samples will be available for distribution to selected potential off
take partners. Securing the land necessary for the construction of the
proposed beneficiation and processing plants has been a significant
development for the Project and was concluded in early June 2023.
Post the completion of the reporting period, European Metals received an
investment from a significant strategic investor, the European Bank for
Reconstruction and Development ("EBRD"). The EBRD is an International
Financial Institution owned by the European Union, European Investment Bank
and 71 countries, including the Czech Republic. The investment by EBRD is a
strong endorsement of the Cinovec Project's value and its commitment to the
highest environmental and social standards. The EBRD investment aims to fund
the project's predevelopment work and opens a pathway to potentially securing
project financing. The successful completion of the technical due diligence
process is a testament to the quality of the Cinovec team and the work which
has been done to date, and a strong vote of confidence in the project. The
EBRD investment is confirmation that the Cinovec Project is a vital part of
establishing a strong, sustainable European electric vehicle battery supply
chain to support Europe's accelerating transition to e-mobility.
These significant developments place your company in a sound position to
finalise our studies, secure project finance and long-term, high quality off
take agreements, and take the project towards a final investment decision.
Financially the Company is in a sound financial position, with approximately
AUD$8.9 million at bank at the date of this report. In addition, the project
company, Geomet, is also well-funded and we do not envisage the need to seek
additional funding until Final Investment Decision, at which point a full
Project Financing is expected to be completed.
Cinovec advances towards being a significant producer of lithium for the
European market at a time when this sector is displaying unprecedented growth.
The demand for electric vehicles, batteries and therefore lithium is growing
faster in Europe than anywhere else in the world. The size, location,
economics and ESG credentials of the Cinovec Project place it in an enviable
position to become a significant contributor to the solution of critical
metals security in Europe.
Finally, I would like to take this opportunity to thank all staff, advisors,
contractors, our Project partners, CEZ and our shareholders, who have
supported us over the past year. I look forward to updating you throughout the
new financial year as we continue to advance the Cinovec Project.
Keith Coughlan
EXECUTIVE CHAIRMAN
REVIEW OF OPERATIONS
PROJECT REVIEW
Geomet s.r.o. controls the mineral exploration licenses awarded by the Czech
Republic over the Cinovec Lithium Project.
Geomet s.r.o. is owned 49% by European Metals and 51% by CEZ a.s. through its
wholly owned subsidiary, SDAS. CEZ is a significant energy group listed on
various European Exchanges with the ticker CEZ.
Cinovec hosts a globally significant hard-rock lithium deposit with a total
Measured, Indicated and Inferred Mineral Resource of 708.2Mt at 0.43% Li2O and
0.05% Sn containing a combined 7.39 million tonnes Lithium Carbonate
Equivalent, as reported to ASX on 13 October 2021 (Resource Upgrade at Cinovec
Lithium Project).
This followed previous reports: 28 November 2017 (Further Increase in
Indicated Resource at Cinovec South). An initial Probable Ore Reserve of
34.5Mt at 0.65% Li2O and 0.09% Sn reported on 4 July 2017 (Cinovec Maiden Ore
Reserve - Further Information) has been declared to cover the first 20 years'
mining at an output of 22,500tpa of battery-grade lithium carbonate reported
on 11 July 2018 (Cinovec Production Modelled to Increase to 22,500tpa of
Lithium Carbonate).
This makes Cinovec the largest hard-rock lithium deposit in Europe, the fourth
largest non-brine deposit in the world, and a globally significant tin
resource. The deposit has previously had over 400,000 tonnes of ore mined as a
trial sub-level open-stope underground mining operation focussed on the
recovery of tin only. In January 2022 EMH completed an updated Preliminary
Feasibility Study, conducted by specialist independent consultants, which
indicated a return post tax NPV(8) of USD1.94B and a post-tax IRR of 36.3%.
The study confirmed that the Cinovec Project is a potential low operating cost
producer of battery grade lithium hydroxide or battery grade lithium carbonate
as markets demand. It confirmed the deposit is amenable to bulk underground
mining. Metallurgical test-work has produced both battery grade lithium
hydroxide and battery grade lithium carbonate in addition to high-grade tin
concentrate. A Definitive Feasibility Study ("DFS") for the Cinovec Project is
currently underway and at an advanced stage.
Cinovec is centrally located for European end-users and is well serviced by
infrastructure, with a sealed road adjacent to the deposit, rail lines located
5 km north and 8 km south of the deposit and an active 22 kV transmission line
running to the historic mine. As the deposit lies in an active mining region,
it has strong community support. The economic viability of Cinovec has been
enhanced by the recent strong increase in demand for lithium globally, and
within Europe specifically.
ENGAGEMENT OF GERMAN STRATEGIC ENERGY INVESTMENT ADVISER
On 28 October 2022, the Company announced the appointment of Luthardt
Investment GmbH, a Berlin-based consultancy specializing in energy production
and government relations support to large infrastructure projects
internationally.
SIMPLIFIED EXTRACTION PROCESS
On 31 October 2022, the Company announced a simplification of the flowsheet to
deliver very high purity lithium hydroxide, lithium carbonate, lithium
sulphate or lithium phosphate. The Company reported that this simplified new
flowsheet had demonstrated overall lithium recoveries of 88-93%. After
roasting and leaching, the pregnant leach solution ("PLS") is passed through
two cleaning steps to remove transition metal and calcium impurities,
resulting in a "polished" PLS of lithium sulphate together with sulphates of
other similar metals, principally sodium and potassium. The last step in the
earlier flowsheet was to purify the crude lithium carbonate with a
bicarbonation and crystallisation step. The simplified flowsheet precipitates
lithium phosphate directly from the polished PLS and then goes on to clean the
lithium phosphate to enable precipitation of a much cleaner crude lithium
carbonate. The final purification step of bicarbonation and re-precipitation
is the same as in the earlier flowsheet, but the end-product is of even higher
quality due to the input crude lithium carbonate being much cleaner. The
simplification of the central section of the LCP flowsheet reduces the number
of basic chemical engineering unit processes (after the initial roast/water
leach) from 15 to 7. The revised process also results in the elimination of
all energy-intensive cooling processes.
The completed testwork for the re-engineered LCP flowsheet produced the
following crude and battery-grade lithium carbonate products, compared with
the published global standard specification, YS/T 582-2013 with the Li2CO3
results highlighted in yellow.
Li(2)CO(3) Na K Mg Ca Mn Fe Ni Cu Zn Al Si Pb SO(4)(2)- Cl
% ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm
YS/T ≥99.5 250 10 80 50 3 10 10 3 3 10 30 3 800 30
582-2013
Crude LC 99.4 368 3 5 357 0 8 3.4 0.2 1.2 5.1 26 0 4860 NA
Battery-Grade LC 99.99 3 0.8 0.9 2 0.7 6.3 3.4 0.2 1.3 2.8 2.1 0.07 95 <10
As can be seen from the table, the crude lithium carbonate first precipitated
(i.e., with no purification or re-precipitation steps) meets the battery-grade
specification for 10 of the 14 impurity thresholds. The battery-grade lithium
carbonate recrystallised after a single bicarbonation step shows an
exceptionally clean battery-grade material. The ability to produce an
exceptionally clean battery-grade product in a single bicarbonation step is
expected to reduce Capex, energy and reagent costs and consequently the Opex
of production.
The Company made a further announcement in relation to the testwork on 25 May
2023 which confirmed separation efficiency and capability of flotation of
lithium-bearing zinnwaldite. The updated flotation testwork recently
undertaken at Nagrom Laboratories (Perth) has repeatedly reached >95%
lithium recovery from flotation concentrates at target Li-grades and mass
yield. Ongoing testwork to confirm the robust nature of the process and
optimise the Definitive Feasibility Study ("DFS") design has surpassed
previous performance indicators. Results from testing and optimisation of
flotation for the concentration of zinnwaldite in fine ore has exceeded
expectations and further demonstrated the potential for high overall lithium
recoveries when combined with magnetic separation for the coarse particle size
ranges.
European Union's Just Transition Fund approveD Cinovec as a Strategic Project
On 30 January 2023, the Company announced the Cinovec Project has been
classified as a Strategic Project for the Usti Region of the Czech Republic.
The list of Strategic Projects has been approved by the European Commission,
the Czech Central Government and the Czech Regional Government in Usti.
Being classified as such means that the Cinovec Project has priority for grant
funding from the Just Transition Fund ("JTF") co-funding, ahead of many other
projects that have been submitted. The total amount allocated by the Just
Transition fund for the Czech Republic is CZK 41B (€1.64B) of which the Usti
region has been allocated CZK 15.8B (approx. €632M).
The first call for grant applications under the JTF opened on 14 November 2022
and closes on 31 December 2023. Given that the total amount which may be
applied for by the eleven designated Strategic Projects in the Usti region in
the first call is CZK 8.3B (approx. €350M) and that the funds allocated in
this first call from the Just Transition Fund to these Strategic Projects
totals CZK7.3B (approx. €300M), although there can be no certainty, the
Company believes that the Cinovec Project is well-positioned to receive a
significant portion of the funds applied for from the JTF for the Project. The
maximum funding to be made available upon application to each Strategic
Project in the Usti Region is CZK 1.2bn (approx. €49M).
The Cinovec Project has been allocated the maximum possible JTF grant of CZK
1.2B (approx.. €49M), subject to passing through the application process,
funds remaining available, and obtaining the necessary permits for the
early-stage Cinovec work programmes to which this grant funding is planned to
be applied, in particular the early full development of the twin decline
entry/egress system for the mine. Accordingly, Geomet s.r.o. (the Cinovec
project company) will apply for JTF Grant funding for the maximum amount of
CZK 1.2B (approx. €49M).
APPOINTMENT OF DRA GLOBAL AS DEFINITIVE FEASIBILITY STUDY MANAGER
On 2 February 2023, the Company announced that DRA Global Limited ("DRA") has
been appointed to complete the DFS for the Cinovec Project in the Czech
Republic. With over 30 years' experience in the development and execution of
projects, DRA is a recognised leader in the delivery of lithium projects
globally. DRA has the necessary capacity, expertise and track record to
deliver the Cinovec DFS in a timely and efficient manner and will be working
to build on all of the optimisation work that the Cinovec team completed over
the course of 2022, with a view to completion of the DFS in Q4 2023. DRA's
appointment for this vital piece of project development work is testament to
both the Company's and its joint-venture partner CEZ s.a.'s commitment to, and
the tremendous prospectivity and value of, the Cinovec Project. The Cinovec
Project's in-house team will work closely with DRA to develop and finalise the
DFS.
DRA Global Limited (ASX: DRA | JSE: DRA) is a multi-disciplinary consulting,
engineering, project delivery and operations management group predominantly
focused on the mining and minerals resources sector. DRA has an extensive
global track record, spanning more than three decades and more than
7,500 studies and projects as well as operations, maintenance and
optimisation solutions across a wide range of commodities. DRA has expertise
in mining, minerals and metals processing, and related non-process
infrastructure including sustainability, water and energy solutions for the
mining industry. DRA delivers advisory, engineering and project delivery
services throughout the capital project lifecycle from concept through to
operational readiness and commissioning as well as ongoing operations,
maintenance and shutdown services.
Land Secured for Cinovec Lithium Plant
On 9 June 2023, the Company announced that Geomet s.r.o. (its 49% owned
subsidiary) has agreed to purchase land at the industrial site "Dukla" in the
Újezdeček Municipality, 6.2 km south of the planned Cinovec Mine portal
area, on which it intends to construct a lithium plant, for a total purchase
consideration of US$ 43.96m.
The Dukla site, which is subject to an existing industrial usage permit, is
owned by four private companies, with all peripheral and adjacent land
relevant to the site held by the Czech Republic state and/or local public
bodies. The Cinovec Project holding company, Geomet s.r.o. (Geomet) which is a
forty-nine percent (49%) owned subsidiary of European Metals, has agreed to
acquire one of the privately held land packages and entered into exclusive and
unconditional option agreements for the purchase of the other three. The Dukla
site has been confirmed as an appropriate site upon which to build a lithium
plant for the beneficiation of Cinovec ore and production of battery-grade
lithium in accordance with the ongoing DFS which is on track to be completed
in 4Q23. This confirmation has been obtained as a result of engineering
layout and design work undertaken in the DFS to-date, geohydrological and
geotechnical surveys over the site, completed in early 2023.
An application to the Usti Regional Department of Land Use Planning for the
rezoning of the land around the Dukla site (which is already zoned for
industrial use), ore transport corridor options and the Cinovec Mine portal
area was made in April 2022. The result of this re-zoning application is
expected to be finalised in 4Q23. Geomet intends to exercise its 3 options
and settle these land acquisitions after the re-zoning application has been
successful, anticipated to occur in 2024.
Czech PM visits Cinovec, signs key MoC with PM of Saxony
On 9 June 2023, the Company announced that Czech Republic Prime Minister Petr
Fiala had visited the Cinovec Project and stated that he sought to expedite
the development of significant projects such as Cinovec.
Prime Minister Fiala commented on the Cinovec Project via social media, which
translates to: "Lithium is a critical and key raw material. Cínovec is the
largest European deposit of this raw material. Thanks to this, the Czech
Republic has a unique opportunity to contribute to both its own and European
raw material security. We are on the threshold of a lithium revolution as the
use of lithium will grow significantly. As a country with a large share of the
automotive industry, it is important for us to support it and capture current
trends. We are offered a unique chance to build the entire chain from mining
to the production of electric cars. That is why we need lithium and we are
trying to build a battery factory, the so-called gigafactory."
Prime Minister Fiala also commented on the Memorandum of Cooperation with the
Saxony Government via social media, which translates to: "I believe that this
memorandum will help our cooperation on the development of the lithium deposit
in Cínovec and, in the future, the creation of the entire production chain
for the production of batteries for cars."
ESG - ENVIRONMENTAL, SOCIAL AND GOVERNANCE
ESG and impact investing have become key criteria for both investors and fund
managers, leading a new path to how companies are being assessed. The
acceleration has been driven by heightened social, governmental and consumer
attention on the broader impact of corporations, as well as by the investors
and executives who acknowledge a strong ESG proposition is a key indicator of
a Company's long-term success. ESG reporting offers a tool and roadmap for
investors and society to hold companies to account, to make sure issues such
as climate change, social justice, equality, diversity and environmental
protection are reflected and appropriately addressed by the Company.
European Metals has focused very strongly on the Company's ESG criteria and,
during 2021, adopted a set of ESG metrics and disclosures following the
recommendations released by the World Economic Forum ("WEF") in Geneva,
Switzerland which are acknowledged as the gold standard for ESG reporting. The
key points of this initiative are -
• Establishment of an ESG Committee at Board level, chaired by Ambassador
Lincoln Bloomfield who has considerable private sector experience centred on
sustainability, resilience and renewable energy. The ESG Committee has met
to consider relevant matters including establishing ESG baseline reporting.
• Engagement of Socialsuite ESG technology platform - a global leader in ESG
impact management systems and sustainability reporting.
• Continuation of ESG reporting, monitoring and improvement for European
Metals utilising Socialsuite.
• EMH's ESG transparency commitment will include an independent lithium
production Life Cycle Assessment ("LCA") which includes a full carbon
footprint assessment.
LITHIUM LIFE CYCLE ASSESSMENT SPECIALIST ENGAGED
In line with the stated ESG adoption, the Project engaged UK-based and
globally recognised sustainability and life cycle assessment consultancy,
Minviro, to provide an updated ISO compliant life cycle assessment ("LCA") of
the Cinovec project.
This updated assessment will cover both battery-grade lithium carbonate and
battery grade lithium hydroxide, and will be benchmarked against global
lithium peers. Minviro is actively engaged to identify decarbonisation
optimisation in the definitive feasibility study for Cinovec.
CORPORATE
The Company successfully completed a capital raising of approximately
€6 million by EBRD as a strategic investment in the Company and the
development of the Cinovec Project (refer to the Company's ASX release dated
21 July 2023). As part of the due diligence process, EBRD engaged an
independent, international mining consultancy to undertake a technical review
of the Cinovec Project. EBRD also performed a review of the Cinovec Project in
respect to compliance with EBRD's Environmental and Social Policy. The
Company's relationship with EBRD is expected to be highly strategic as the
European Union charts a path towards greater lithium supply security and
sustainability. Support for the Company's lithium project aligns with these
EU goals.
The EBRD is an international financial institution established in 1991 to
foster the economic transition process and to promote private and
entrepreneurial initiative in its countries of operation including Central and
Eastern Europe, former Soviet Union and Eastern Mediterranean through
provision of loans, equity investments, conducting policy dialogue and
providing technical cooperation. It has since played a transformative role
and gained unique expertise in fostering change in the region and beyond,
investing €170 billion in more than 6,400 projects including nearly EUR 3bn
in some 70 mining projects across 15 countries of operation.
The Company announced on 10 November 2022, the appointment of Mr Marc Rowley,
a lithium specialist, to lead its Definitive Feasibility Study team to
progress the Cinovec Project in the Czech Republic.
The Company announced the appointment of Ms Shannon Robinson as the Company
Secretary on 20 April 2023.
RISKS AND UNCERTAINTIES
The Group's activities have inherent risk, and the Board is unable to provide
certainty of the expected results of activities, or that any or all of the
likely activities will be achieved. The material business risks faced by the
Group that could influence the Group's future prospects, and how the Group
manages these risks, are provided below.
Operational risk
The Company may be affected by various operational factors. In the event that
any of these potential risks eventuate, the Company's operational and
financial performance may be adversely affected. No assurances can be given
that the Company will achieve commercial viability through successful
exploration outcomes on its tenement holdings. Until the Company is able to
realise value from its projects, it is likely to incur ongoing operating
losses.
The operations of the Company may be affected by various factors, including
failure to achieve predicted grades during mining, operational and technical
difficulties encountered during mining, lack of infrastructure in the
Company's areas of operation, unanticipated metallurgical problems which may
affect value of defined resources, increases in the costs of consumables,
spare parts, plant and equipment.
Mineral Resource estimates are made in accordance with the 2012 edition of the
JORC Code. Mineral resources are estimates only. An estimate is an expression
of judgement based on knowledge, experience and industry practice. Estimates
may alter significantly when new information or techniques become available.
Resource estimates can be imprecise and depend on interpretations, which may
prove to be inaccurate.
The Company's interest in mining tenements are at various stages of
exploration and potential production, and potential investors should
understand that mineral exploration and production is a speculative and
high-risk undertaking that may be impeded by circumstances and factors beyond
the control of the Company. The Company has interests in mining tenements in
the Czech Republic which operate under different regulatory conditions which
may impact on time taken to evaluate projects and may affect the viability of
resources.
There can no assurance that the tenements, or any other exploration properties
that may be acquired in the future, will result in the exploitation of an
economic mineral resource. Even though an apparently viable deposit has been
identified, there is no guarantee that it can be economically exploited.
The Company will need to apply for a mining lease to undertake development and
mining on the relevant tenement. There is no guarantee that the Company will
be granted a mining lease and if it is granted, it will be subject to
conditions which may impact on the financial viability of the project.
Renewals
Mining and exploration tenements are subject to periodic renewal. The renewal
of the term of granted tenements is subject to compliance with the applicable
mining legislation and regulations and the discretion of the relevant mining
authority. Renewal conditions may include increased expenditure and work
commitments or compulsory relinquishment of areas of the tenements. The
imposition of new conditions or the inability to meet those conditions may
adversely affect the operations, financial position and/or performance of the
company. The company considers the likelihood of tenure forfeiture to be low
given the laws and regulations governing exploration in the Czech Republic and
the ongoing expenditure budgeted for by the company. However, the consequence
of forfeiture or involuntary surrender of a granted tenement for reasons
beyond the control of the company could be significant.
Title
Notwithstanding that the exploration licenses the subject of the Cinovec
Project has been granted, if the application for the licenses did not strictly
comply with the application requirements (such as were required reports were
not lodged or were lodged late), there is a risk that the tenements could be
deemed invalid.
Global conditions
General economic conditions, movements in interest and inflation rates and
currency exchange rates may have an adverse effect on the Company's potential
development activities, as well as on its ability to fund those activities.
General economic conditions, laws relating to taxation, new legislation, trade
barriers, interest and inflation rates, currency exchange controls, national
and international political circumstances (including outbreaks in
international hostilities, wars, terrorist acts, sabotage, subversive
activities, security operations, labour unrest, civil disorder, and states of
emergency), natural disasters (including fires, earthquakes and floods), and
quarantine restrictions, epidemics and pandemics, may have an adverse effect
on the Company's operations and financial performance, including the Company's
exploration and development activities, as well as on its ability to fund
those activities.
Regulatory compliance
The company's operating activities are subject to extensive laws and
regulations relating to numerous matters including resource licence consent,
environmental compliance and rehabilitation, taxation, employee relations,
health and worker safety, waste disposal, protection of the environment,
protection of endangered and protected species and other matters. The company
requires permits from regulatory authorities to authorise the company's
operations. These permits relate to exploration, development, production and
rehabilitation activities. While the company believes that it will operate in
substantial compliance with all material current laws and regulations,
agreements or changes in their enforcement or regulatory interpretation could
result in changes in legal requirements or in the terms of existing permits
and agreements applicable to the company or its properties, which could have a
material adverse impact on the company's current operations or planned
activities. Obtaining necessary permits can be a time-consuming process and
there is a risk that company will not obtain these permits on acceptable
terms, in a timely manner or at all. The costs and delays associated with
obtaining necessary permits and complying with these permits and applicable
laws and regulations could materially delay or restrict the company from
proceeding with the development of a project or the operation or development
of a mine. Any failure to comply with applicable laws and regulations or
permits, even if inadvertent, could result in material fines, penalties or
other liabilities. In extreme cases, failure could result in suspension of the
company's activities or forfeiture of one or more of the tenements, the
subject of the Projects.
Climate
There are a number of climate-related factors that may affect the operations
and proposed activities of the company. The climate change risks particularly
attributable to the company include: (a) the emergence of new or expanded
regulations associated with the transitioning to a lower-carbon economy and
market changes related to climate change mitigation. The company may be
impacted by changes to local or international compliance regulations related
to climate change mitigation efforts, or by specific taxation or penalties for
carbon emissions or environmental damage. These examples sit amongst an array
of possible restraints on industry that may further impact the company and its
business viability. While the company will endeavour to manage these risks and
limit any consequential impacts, there can be no guarantee that the company
will not be impacted by these occurrences; and (b) climate change may cause
certain physical and environmental risks that cannot be predicted by the
company, including events such as increased severity of weather patterns and
incidence of extreme weather events and longer-term physical risks such as
shifting climate patterns. All these risks associated with climate change may
significantly change the industry in which the company operates.
General risks
Future funding requirements and the ability to access debt and equity markets.
The funds raised by the Company are considered sufficient to meet the
evaluation and development objectives of the Company. Additional funding may
be required in the event development costs exceed the company's estimates and
to effectively implement its business and operations plans in the future, to
take advantage of opportunities for acquisitions, joint ventures or other
business opportunities, and to meet any unanticipated liabilities or expenses
which the company may incur, additional financing will be required. In
addition, should the company consider that its development results justify
commencement of production on any of its projects, additional funding will be
required to implement the company's development plans, the quantum of which,
remain unknown at the date of the Annual report. The company may seek to raise
further funds through equity or debt financing, joint ventures, production
sharing arrangements or other means. Failure to obtain sufficient financing
for the company's activities and future projects may result in delay and
indefinite postponement of development or production on the company's
properties or even loss of a property interest. There can be no assurance that
additional finance will be available when needed or, if available, the terms
of the financing might not be favourable to the company and might involve
substantial dilution to shareholders.
Reliance on key personnel
The responsibility of overseeing the day-to-day operations and the strategic
management of the company depends substantially on its senior management and
its key personnel. There can be no assurance given that there will be no
detrimental impact on the company if one or more of these employees cease
their employment. The company may not be able to replace its senior management
or key personnel with persons of equivalent expertise and experience within a
reasonable period of time or at all and the company may incur additional
expenses to recruit, train and retain personnel. Loss of such personnel may
also have an adverse effect on the performance of the company.
Competition
The industry in which the company will be involved is subject to domestic and
global competition. Although the company will undertake all reasonable due
diligence in its business decisions and operations, the company will have no
influence or control over the activities or actions of its competitors, which
activities or actions may, positively or negatively, affect the operating and
financial performance of the company's projects and business.
Market conditions
Share market conditions may affect the value of the company's shares
regardless of the company's operating performance. Share market conditions are
affected by many factors such as:
(a) general economic outlook;
(b) introduction of tax reform or other new legislation;
(c) interest rates and inflation rates;
(d) global health epidemics or pandemics;
(e) currency fluctuations;
(f) changes in investor sentiment toward particular market
sectors;
(g) the demand for, and supply of, capital; (
(h) political tensions; and
(i) terrorism or other hostilities.
The market price of shares can fall as well as rise and may be subject to
varied and unpredictable influences on the market for equities in general and
resource exploration stocks in particular. Neither the company nor the
Directors warrant the future performance of the company or any return on an
investment in the company. Potential investors should be aware that there are
risks associated with any securities investment. Securities listed on the
stock market, and in particular securities of exploration companies experience
extreme price and volume fluctuations that have often been unrelated to the
operating performance of such companies. These factors may materially affect
the market price of the shares regardless of the company's performance. In
addition, after the end of the relevant escrow periods affecting shares in the
company, a significant sale of then tradeable shares (or the market perception
that such a sale might occur) could have an adverse effect on the company's
share price.
Commodity price volatility and exchange rate
If the company achieves success leading to mineral production, the revenue it
will derive through the sale of product exposes the potential income of the
company to commodity price and exchange rate risks. Commodity prices fluctuate
and are affected by many factors beyond the control of the company. Such
factors include supply and demand fluctuations for precious and base metals,
technological advancements, forward selling activities and other
macro-economic factors. Furthermore, international prices of various
commodities are denominated in United States dollars, whereas the income and
expenditure of the company will be taken into account in Australian currency,
exposing the company to the fluctuations and volatility of the rate of
exchange between the United States dollar and the Australian dollar as
determined in international markets.
Government policy changes
Adverse changes in government policies or legislation may affect ownership of
mineral interests, taxation, royalties, land access, labour relations, and
mining and exploration activities of the company. It is possible that the
current system of exploration and mine permitting in the Czech Republic may
change, resulting in impairment of rights and possibly expropriation of the
company's properties without adequate compensation.
Dilution
In the future, the company may elect to issue shares or engage in capital
raisings to fund construction of the Project and growth, for investments or
acquisitions that the company may decide to undertake, to repay debt or for
any other reason the Board may determine at the relevant time. While the
company will be subject to the constraints of the ASX Listing Rules regarding
the percentage of its capital that it is able to issue within a 12-month
period (other than where exceptions apply), shareholder interests may be
diluted as a result of such issues of shares or other securities.
Taxation
The acquisition and disposal of shares will have tax consequences, which will
differ depending on the individual financial affairs of each investor. All
potential investors in the company are urged to obtain independent financial
advice about the consequences of acquiring shares from a taxation viewpoint
and generally. To the maximum extent permitted by law, the company, its
officers and each of their respective advisers accept no liability and
responsibility with respect to the taxation consequences of subscribing for
shares under the prospectus.
Litigation
The company is exposed to possible litigation risks including native title
claims, tenure disputes, environmental claims, occupational health and safety
claims and employee claims. Further, the company may be involved in disputes
with other parties in the future which may result in litigation. Any such
claim or dispute if proven, may impact adversely on the company's operations,
reputation, financial performance and financial position. The company is not
currently engaged in any litigation.
Environmental regulation
The operations and proposed activities of the company are subject to Czech
laws and regulations concerning the environment. As with most exploration
projects and mining operations, the company's activities are expected to
have an impact on the environment, particularly if advanced exploration or
mine development proceeds. It is the company's intention to conduct its
activities to the highest standard of environmental obligation, including
compliance with all environmental laws.
Mining operations have inherent risks and liabilities associated with safety
and damage to the environment and the disposal of waste products occurring as
a result of mineral exploration and production. The occurrence of any such
safety or environmental incident could delay production or increase production
costs. Events, such as unpredictable rainfall or bushfires may impact on
the company's ongoing compliance with environmental legislation,
regulations, and licences. Significant liabilities could be imposed on the
company for damages, clean-up costs or penalties in the event of certain
discharges into the environment, environmental damage caused by previous
operations or non-compliance with environmental laws or regulations.
The disposal of mining and process waste and mine water discharge are under
constant legislative scrutiny and regulation. There is a risk that
environmental laws and regulations become more onerous making the company's
operations more expensive.
Approvals are required for land clearing and for ground disturbing activities.
Delays in obtaining such approvals can result in the delay to anticipated
exploration programs or mining activities.
DIRECTORS' REPORT
Your Directors present their report, together with the consolidated financial
statements of the Group, being European Metals Holdings Limited ("EMH" or the
"Company") and its controlled entities ("Group"), for the year ended 30 June
2023.
Directors
The following persons were Directors of the Company and were in office for the
entire year, and up to the date of this report, unless otherwise stated:
Mr Keith Coughlan Executive Chairman Appointed 30 June 2020
Previously Managing Director Appointed 6 September 2013
Mr Richard Pavlik Executive Director Appointed 27 June 2017
Mr Kiran Morzaria Non-Executive Director Appointed 10 December 2015
Ambassador Lincoln Bloomfield Jr Non-Executive Director Appointed 3 January 2021
Company Secretary
David Koch
Resigned 20 April 2023
Shannon Robinson
Appointed 20 April 2023
Principal Activities
The Group is primarily involved in the development of the Cinovec lithium
project in the Czech Republic.
Review of Operations
The 2023 Financial Year has been one of significant growth and development for
the Group. For further information refer to the Project Review section of this
report.
Results of Operations
The consolidated loss after tax for year ended 30 June 2023 was $5,928,441
(2022: $6,802,895).
Financial Position
The net assets of the Group have increased by $507,883 to $36,307,393 at 30
June 2023 (2022: $35,799,510).
Significant Changes in the State of Affairs
There have not been any significant changes in the state of affairs of the
Group during the financial year other than as disclosed in the Review of
Operations section of this report.
Dividends Paid or Recommended
No dividends were declared or paid during the year and the Directors do not
recommend the payment of a dividend for the period.
Information on Directors
Keith Coughlan Executive Chairman - Appointed 30 June 2020
Previously Managing Director (CEO) - Appointed 6 September 2013 to 30 June
2020
Qualifications BA
Experience Mr Coughlan has had almost 30 years' experience in stockbroking and funds
management. He has been largely involved in the funding and promoting of
resource companies listed on ASX, AIM and TSX. He has advised various
companies on the identification and acquisition of resource projects and was
previously employed by one of Australia's then largest funds management
organizations.
Interest in CDIs/shares and Options Mr Coughlan held, at the end of the financial year, 850,000 CDIs/shares direct
interest and 4,900,000 CDIs/shares indirect interest held by Inswinger
Holdings Pty Ltd, an entity of which Mr Coughlan is a director and a
shareholder.
Performance Rights Mr Coughlan held, at the end of the financial year, 2,400,000 Performance
Rights indirect interest held by KADAJE INVESTMENTS PTY LTD , an entity of which Mr Coughlan is a director and a shareholder.
Special Responsibilities Member of Nomination Committee
Member of Environment, Social and Governance Committee
Directorships held in other listed entities Non-Executive Chairman of Doriemus plc
Mr Coughlan was previously a Non-Executive Director of Calidus Resources
Limited
Richard Pavlik Executive Director - Appointed 27 June 2017
Qualifications Masters Degree in Mining Engineer
Experience Mr Pavlik is the Chief Advisor to the CEO of Geomet s.r.o. and is a highly
experienced Czech mining executive. Mr Pavlik holds a Masters Degree in Mining
Engineer from the Technical University of Ostrava in the Czech Republic. He is
the former Chief Project Manager and Advisor to the Chief Executive Officer at
OKD. OKD has been a major coal producer in the Czech Republic. He has almost
30 years of relevant industry experience in the Czech Republic. Mr Pavlik also
has experience as a Project Analyst at Normandy Capital in Sydney as part of a
postgraduate program from Swinburne University. Mr Pavlik has held previous
senior positions within OKD and New World Resources as Chief Engineer, and as
Head of Surveying and Geology. He has also served as the Head of the
Supervisory Board of NWR Karbonia, a Polish subsidiary of New World Resources
(UK) Limited. He has an intimate knowledge of mining in the Czech Republic.
Interest in CDIs/shares and Options Mr Pavlik held, at the end of the financial year, 300,000 CDIs/shares direct
interest
Performance Rights Mr Pavlik held, at the end of the financial year, 1,200,000 Performance Rights
direct interest
Special Responsibilities Member of Environment, Social and Governance Committee
Member of Nomination Committee
Directorships held in other listed entities Nil
Information on Directors (continued)
Kiran Morzaria Non-Executive Director - Appointed 10 December 2015
Qualifications Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines
and an MBA (Finance) from CASS Business School
Experience Mr Morzaria has extensive experience in the mineral resource industry working
in both operational and management roles. He spent the first four years of
his career in exploration, mining and civil engineering before obtaining his
MBA. Mr Morzaria has served as a director of a number of public companies in
both an executive and non-executive capacity.
Interest in CDIs/shares and Options Mr Morzaria held, at the end of the financial year, 200,000 CDIs/shares direct
interest. Mr Morzaria is a director and chief executive of Cadence Minerals
Plc which owns 11,968,504 CDIs/shares. Mr Morzaria has no control on the
acquisition or sale of the shares held by Cadence Minerals plc.
Special Responsibilities Chair of Remuneration Committee
Chair of Nomination Committee
Member of Audit and Risk Committee
Member of Environment, Social and Governance Committee
Directorships held in other listed entities Chief Executive Officer and Director of Cadence Minerals plc and Director of
UK Oil & Gas plc. Mr Morzaria was previously a Director of Bacanora
Minerals plc.
Lincoln Bloomfield Jr. Non-Executive Director - Appointed 3 January 2021
Qualifications Harvard College (cum laude, Government, 1974), Fletcher School of Law and
Diplomacy (M.A.L.D., 1980)
Experience Ambassador Bloomfield is based in Washington, DC, and brings governance and
regulatory experience, years of international diplomacy and security expertise
to the EMH Board, along with a North American presence, while his private
sector experience is centred on sustainability, resilience and renewable
energy.
Interest in CDIs/shares and Options Ambassador Bloomfield held, at the end of the financial year, 250,500 direct
interest in CDIs/shares.
Special Responsibilities Chair of Environment, Social and Governance Committee
Chair of Audit and Risk Committee
Member of Remuneration Committee
Member of Nomination Committee
Directorships held in other listed entities Nil
Company Secretary
Ms Shannon Robinson (appointed 20 April 2023)
Ms Robinson is a chartered secretary and corporate advisor with 20 years'
experience in providing strategic advice on mergers and acquisitions, capital
raisings, and listings of companies on stock exchanges such as the ASX and
AIM, due diligence, compliance, and managing legal issues associated with
clients' activities. Shannon is a former corporate lawyer, a graduate member
of the Australian Institute of Company Directors (AICD) and a fellow of the
Governance Institute of Australia (GIA). Shannon is currently company
secretary of Doriemus plc (ASX:DOR), and joint company secretary of Echo IQ
Limited (ASX:EIQ) and Viridis Mining and Minerals Limited (ASX:VMM).
Mr David Koch (resigned 20 April 2023).
Director Meetings
The number of Directors' meetings and meetings of Committees of Directors held
during the year and the number of meetings attended by each of the Directors
of the Company during the year is:
Directors' Meetings Audit and Risk Committee
Name Number attended Number eligible to attend Number eligible to and attended
Keith Coughlan 6 6 -
Richard Pavlik 6 6 -
Kiran Morzaria 6 6 2
Lincoln Bloomfield, Jr 6 6 2
Indemnifying officers or auditor
During or since the end of the financial year the Company has given an
indemnity or entered into an agreement to indemnify, or paid or agreed to pay
insurance premiums as follows:
i. The Company has entered into agreements to indemnify all Directors
and provide access to documents, against any liability arising from a claim
brought by a third party against the Company. The agreement provides for the
Company to pay all damages and costs which may be awarded against the
Directors.
ii. The Company has paid premiums of $71,000 (2022: $93,090) to insure
each of the Directors against liabilities for costs and expenses incurred by
them in defending any legal proceedings arising out of their conduct while
acting in the capacity of Director of the Company, other than conduct
involving a willful breach of duty in relation to the Company. Under the terms
and conditions of the insurance contract, the nature of the liabilities
insured against and the premium paid cannot be disclosed.
iii. No indemnity or insurance of auditors has been paid.
CDIs/shares under option/warrant
During the year, no unquoted options and warrants were issued to consultants.
Unissued CDIs/shares of European Metals Holdings Limited under option and
warrant at the date of this report is as follows:
Expiry date Exercise Price Number under option/warrants
23 October 2023 42 cents 2,024,000
23 October 2023 45 cents 200,000
31 December 2025 80 cents 2,000,000
CDIs/shares under option/warrant (continued)
The following ordinary shares of European Metals Holdings Limited were issued
during the year ended 30 June 2023 and up to the date of this report on the
exercise of options granted:
Type Date options granted Expiry Date Number under option Cancelled/expired Number exercised Exercise Price
Consultant 30 April 2020 31 December 2022 10,000,000 (3,656,993) 6,343,007 $0
No person entitled to exercise the option or warrant has or has any right by
virtue of the option or warrant to participate in any share issue of any other
body corporate.
Performance Rights
Performance rights on issue at the date of this report is as follows:
Issued to Grant date/Issue date Expiry date Number on issue
Consultant 24 November 2021/30 November 2021 30 November 2024 100,000
Keith Coughlan 17 December 2020/2 March 2022 2 March 2025 2,400,000
Richard Pavlik 17 December 2020/2 March 2022 2 March 2025 1,200,000
Employee in terms of ESIP 27 February 2022 /2 March 2022 2 March 2025 1,200,000
12 December 2022/20 December 2022 2 March 2025 450,000
13 December 2022/20 December 2022 2 March 2025 300,000
14 December 2022/20 December 2022 2 March 2025 170,000
Consultant 22 February 2022/ 2 March 2022 2 March 2025 900,000
29 August 2022/ 1 September 2022 2 March 2025 750,000
Environmental, Social and Governance
The Company has adopted a set of Environmental, Social and Governance ("ESG")
metrics and disclosures following the recommendations released by the World
Economic Forum ("WEF") in Geneva, Switzerland which are acknowledged as the
gold standard for ESG reporting.
The establishment of an ESG Committee at Board level is chaired by Ambassador
Lincoln Bloomfield who has considerable private sector experience centred on
sustainability, resilience and renewable energy. Ambassador Bloomfield has
stated, "European Metals is making every effort to ensure that any finished
product containing our lithium will satisfy the public's need for assurance
that high ESG standards have been upheld at every stage of our production
process. We are committed to the well-being of our workforce, minimizing
environmental impact throughout our process, and engaging with the local
community".
The Company engaged Socialsuite ESG technology platform - a global leader in
ESG impact management systems and sustainability reporting.
The Company has utilised Socialsuite's ESG technology platform to establish
its initial ESG baseline dashboard. The Company will focus on delivering and
reporting on its ESG metrics and indicators. Socialsuite's ESG reporting
technology provides an easy way for investors and other stakeholders to assess
the progress of the Company on its journey.
The Company's ESG transparency commitment is a precursor to an independent
lithium production Life Cycle Assessment2 ("LCA") which includes a full Carbon
Footprint assessment.
Proceedings on Behalf of the Company
No person has applied for leave of Court to bring proceedings on behalf of the
Company or intervene in any proceedings to which the Company is a party for
the purpose of taking responsibility on behalf of the Company for all or any
part of those proceedings.
The Company was not a party to any such proceedings during the year.
Non-audit Services
Stantons has not provided any non-audit services during the year.
Significant events after the reporting date
Subsequent to 30 June 2023, the following significant events were undertaken
by the Group:
- On 18 July 2023 a mortgage in favour of the joint venture partners
(Severoceske Doly and the Company) was granted over the Deskform Property in
the Czech Republic. Additional information is disclosed in the Operations
Report (refer to "Land Secured for Cinovec Lithium Plant" section) and ASX
Announcement dated 9 June 2023.
- As announced on 21 July 2023, the EBRD has invested EUR6,000,000 to
support the Group's development of the Cinovec Project in the Czech Republic.
The investment was implemented by way of a private placement of 12,315,213
shares of the Group to EBRD at a price of $0.803 per share.
- On 7 September 2023, 400,000 shares were issued on the exercise of
unlisted options which were granted on 23 October 2020 for an exercise price
of $0.45.
Auditor's Independence Declaration
The auditor's independence declaration for the year ended 30 June 2023 has
been received and can be found on page 24 of the financial report.
Corporate Governance Statement
The Company's 2023 Corporate Governance Statement has been released as a
separate document and is located on the Company's website at
https://www.europeanmet.com/corporate-governance/.
REMUNERATION REPORT (AUDITED)
This report details the nature and amount of remuneration for each Director of
the Company, and key management personnel ("KMP"). The Directors are pleased
to present the remuneration report which sets out the remuneration information
for European Metals Holdings Limited's Non-Executive Directors, Executive
Directors and other key management personnel.
A. Principles used to determine the nature and amount of remuneration
The remuneration policy of the Group has been designed to align Director and
management objectives with shareholder and business objectives by providing a
fixed remuneration component, and offering specific long-term incentives based
on key performance areas affecting the Group financial results. The Board of
the Company believes the remuneration policy to be appropriate and effective
in its ability to attract and retain the best management and Directors to run
and manage the Group, as well as create goal congruence between Directors,
Executives and shareholders.
The Board's policy for determining the nature and amount of remuneration for
Board members and Senior Executives of the Group is as follows:
The remuneration policy, setting the terms and conditions for the Executive
Directors and other Senior Executives, was developed by the Board. All
Executives receive a base salary (which is based on factors such as length of
service and experience), superannuation, options and performance incentives.
The Board
reviews Executive packages annually by reference to the Group's performance,
executive performance, and comparable information from industry sectors and
other listed companies in similar industries.
Executives are also entitled to participate in the employee share and option
arrangements.
All remuneration paid to Directors and Executives is valued at the cost to the
Group and expensed.
The Board policy is to remunerate Non-executive Directors at commercial market
rates for comparable companies for time, commitment, and responsibilities. The
Board determines payments to the non-executive.
Directors and reviews their remuneration annually based on market practice,
duties, and accountability. Independent external advice is sought when
required. The maximum aggregate amount of fees that can be paid to
Non-executive Directors is subject to approval by shareholders at the Annual
General Meeting. Fees for Non-Executive Directors are not linked to the
performance of the Group. However, to align Directors' interests with
shareholder interests, the Directors are encouraged to hold CDIs/shares in the
Company.
The remuneration policy has been tailored to increase the direct positive
relationship between shareholders' investment objectives and Directors' and
Executives' performance. Currently, this is facilitated through the
issue of options to the majority of Directors and Executives to encourage the
alignment of personal and shareholder interests. The Company believes this
policy will be effective in increasing shareholder wealth. For details of
Directors' and Executives' interests in CDIs/shares, options and performance
shares at year end, refer to the remuneration report.
B. Details of Remuneration
Details of the nature and amount of each element of the emoluments of each of
the KMP of the Company (the Directors) for the year ended 30 June 2023 are set
out in the following tables:
The maximum amount of remuneration for Non-Executive Directors is $300,000 as
approved by shareholders.
During the financial period, the Company did not engage any remuneration
consultants.
2023
Group Key Management Personnel Short-term benefits Post- Long-term benefits Equity-settled share-based payments Total % of remuneration as share-based payments
employment
benefits
Salary, fees and leave Profit share and bonuses Non-monetary Other Super- Long Service Leave Rights/
annuation
Options ((iii))
Directors $ $ $ $ $ $ $ $ %
Keith Coughlan((i)) 425,901 48,922 - - 27,500 32,762 201,359 736,444 27
Kiran Morzaria 57,048 - - - - - - 57,048 0
Richard Pavlik ((ii)) 141,295 33,647 - - - - 100,681 275,623 37
Lincoln Bloomfield Jr 70,852 - - - - - - 70,852 0
695,096 82,569 - - 27,500 32,762 302,040 1,139,967 26
Notes:
(i) During the financial year, a total of $137,280 of Mr Coughlan's
remuneration was reimbursed by Geomet s.r.o.
(ii) In the current financial period, Mr Pavlik was reimbursed for a salary
that should have been paid to him by European Metals Holdings Limited in 2021,
in addition to the salary paid by Geomet. The total salary for the period
January 2021 to July 2022 was $54,883 and a bonus of $33,647.
(iii) As noted in section F "Performance Rights granted for the year ended 30
June 2023" of the Remuneration Report, performance rights were granted to
Keith Coughlan and Richard Pavlik on 17 December 2020. The Group's estimate of
when
these performance rights will vest has been extended for previous years, as
disclosed in section F. As a result, no additional share-based expense is
recognised for the year ended 30 June 2023.
2022
Group Key Management Personnel Short-term benefits Post- Long-term benefits Equity-settled share-based payments Total % of remuneration as share-based payments
employment
benefits
Salary, fees and leave Profit share and bonuses Non-monetary Other Super- Long Service Leave Rights/
annuation
Options
Directors $ $ $ $ $ $ $ $
Keith Coughlan((i)) 318,000 51,226 - 27,160 31,800 6,263 1,264,087 1,698,536 74
Kiran Morzaria 43,570 - - - - - - 43,570 -
Richard Pavlik 79,351 35,431 - - - - 632,043 746,825 85
Lincoln Bloomfield Jr ((ii)) 50,741 - - - - - - 50,741 -
491,662 86,657 - 27,160 31,800 6,263 1,896,130 2,539,672 75
Notes:
(i) During the financial year, a total of $137,280 of Mr Coughlan's
remuneration was reimbursed by Geomet s.r.o.
(ii) Includes $3,507 accrual of June 2022 fee.
C. Service Agreements
It was formally agreed at a meeting of the directors that the following
remuneration be established; there are no formal notice periods, leave
accruals or termination benefits payable on termination.
Mr Keith Coughlan, Executive Chairman, received a salary of $474,823 plus
statutory superannuation contribution from 1 July 2022 to 30 June 2023.
D. Share-based compensation
During the financial year, nil CDIs/shares were issued to KMP under the
Employee Securities Incentive Plan (ESIP) (2022: nil).
Loan CDIs/shares on issue to KMP under the ESIP are as follows:
30 June 2023 Loan CDIs/shares Grant Details Exercised Balance at
Lapsed/Cancelled End of Year
Grant Date No. Value No. Value No. Value No. Value
$ $ $ Vested $
Group KMP
Keith Coughlan 30 Nov 2017 850,000 592,245 - - - - 850,000 592,245
Richard Pavlik 30 Nov 2017 300,000 209,028 - - - - 300,000 209,028
Kiran Morzaria 30 Nov 2017 200,000 139,352 - - - - 200,000 139,352
1,350,000 940,625 - - - - 1,350,000 940,625
30 June 2022 Loan CDIs/shares Grant Details Exercised Balance at
Lapsed/Cancelled End of Year
Grant Date No. Value No. Value No. Value No. Value
$ $ $ Vested $
Group KMP
Keith Coughlan 30 Nov 2017 850,000 592,245 - - - - 850,000 592,245
Richard Pavlik 30 Nov 2017 300,000 209,028 - - - - 300,000 209,028
Kiran Morzaria 30 Nov 2017 200,000 139,352 - - - - 200,000 139,352
1,350,000 940,625 - - - - 1,350,000 940,625
The terms of the loan CDIs/shares are disclosed in Note 17(d).
E. Options issued for the year ended 30 June 2023
No options were issued as part of the remuneration for the year ended 30 June
2023 (2022: nil).
F. Performance Rights granted for the year ended 30 June 2023
No performance rights were granted as part of the remuneration for the year
ended 30 June 2023 (2022: nil).
Granted in prior year Performance Rights Details Exercised Lapsed Balance at
End of Year Vested Unvested
Grant Date No. Value(1) No. Value No. Value No. Value(1) No. No.
$ $ $ $
Group KMP
Keith Coughlan 17 Dec 2020 2,400,000 2,088,000 - - - - 2,400,000 2,088,000 - 2,400,000
Richard Pavlik 17 Dec 2020 1,200,000 1,044,000 - - - - 1,200,000 1,044,000 - 1,200,000
3,600,000 3,132,000 - - - - 3,600,000 3,132,000 - 3,600,000
Notes:
1. The value of performance rights granted to key management personnel is
calculated as at the grant date based on the share price at grant date. As at
30 June 2023, management's assessment is that the performance rights will vest
as follows:
- 1,200,000 Class A performance rights on 31 December 2023
- 1,200,000 Class B performance rights on 30 September 2024
- 1,200,000 Class A performance rights on 1 March 2025
G. Equity instruments issued on exercise of remuneration options
There were no equity instruments issued during the year to Directors or other
KMP as a result of options exercised that had previously been granted as
compensation.
H. Loans to Directors and Key Management Personnel
There were no loans issued to Key Management Personnel during the financial
year.
I. Company performance, shareholder wealth and Directors' and Executives'
remuneration
The remuneration policy has been tailored to increase the direct positive
relationship between shareholders' investment objectives and Directors' and
Executives' performance. This will be facilitated through the issue of options
to the majority of Directors and Executives to encourage the alignment of
personal and shareholder interests. The Company believes this policy will be
effective in increasing shareholder wealth. At commencement of mine
production, performance-based bonuses based on key performance indicators are
expected to be introduced.
J. Other information
2023 Balance at Start of year Granted as remuneration during the year Issued on exercise of options Other Changes during the year Balance at end of year
Name
Keith Coughlan 850,000 - - - 850,000
Indirect(1) 8,500,000 - - (3,600,000) 4,900,000
Richard Pavlik 300,000 - - - 300,000
Kiran Morzaria 200,000 - - - 200,000
Indirect(2) 17,663,864 - - (5,695,360) 11,968,504
Lincoln Bloomfield, Jr 182,500 - - 68,000 250,500
Total 27,696,364 - - (9,227,360) 18,469,004
1. Mr Coughlan held, at the end of the financial year, 850,000 CDIs/shares
direct interest and 8,500,000 CDIs/shares indirect interest held by Inswinger
Holdings Pty Ltd, an entity of which Mr Coughlan is a director and a
shareholder.
2. Mr Morzaria is a director and chief executive of Cadence Minerals plc,
an entity which owns 11,968,504 CDIs/shares in European Metals Holdings
Limited. Mr Morzaria does not have direct control over the disposal of the
shares either by means of his directorship of Cadence Minerals plc or his
shareholding in Cadence Minerals plc.
K. Other transactions with Key Management Personnel
Purchases from related parties are made on terms equivalent to those that
prevail in arm's length transactions.
From July 2022, the Company received accounting and bookkeeping services of
$28,655 plus GST from Everest Corporate, a company controlled by the spouse of
Executive Chairman, Keith Coughlan. Amount payable to Everest Corporate as at
30 June 2023 was $nil (2022: $8,012).
From October 2022, the Company received company secretarial, accounting and
bookkeeping services of $89,105 plus GST from Nexia, a company at which the
spouse of Executive Chairman, Keith Coughlan, acts as key management
personnel. Amount payable to Nexia as at 30 June 2023 was $17,028 (2022:
$nil).
The Company received rental income of $13,349 plus GST from Everest Corporate
for subletting the office in West Perth, until October 2022.
There were no other transactions with Key Management Personnel during the
financial year.
End of Remuneration Report
Signed in accordance with a resolution of the Board of Directors.
Keith Coughlan
EXECUTIVE CHAIRMAN
Dated at 29 September 2023
AUDITOR'S INDEPENDENCE DECLARATION
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2023
Note 30 June 2023 30 June 2022
$ $
Other income 6 1,116,293 1,155,359
Research and Development rebate - 56,187
Finance Income 479,783 44,783
Share based payments 17,18 (1,933,518) (2,884,447)
Equity accounting on investment in Geomet s.r.o. 13 (1,845,158) (1,367,744)
Professional fees (1,544,741) (1,278,103)
Employees' benefits (719,705) (822,968)
Advertising and promotion (576,744) (475,966)
Travel and accommodation (175,848) (84,475)
Directors' fees (219,984) (173,662)
Share registry and listing expense (152,501) (244,206)
Insurance expense (76,357) (88,699)
Audit fees 7 (63,443) (50,575)
Depreciation and amortisation expense (48,873) (40,412)
Facility, advance fee and finance costs (3,092) (4,031)
Foreign exchange gain/(loss) 145,858 (16,544)
Other expenses (310,411) (544,101)
Derecognition of foreign currency reserve - 16,709
Loss before income tax (5,928,441) (6,802,895)
Income tax expense 3 - -
Loss from operations (5,928,441) (6,802,895)
(Loss) for the year attributable to the members of the Company
(5,928,441) (6,802,895)
Other comprehensive income/(loss)
Items that will not be reclassified to profit or loss - -
Items that may be reclassified subsequently to profit or loss (25,452) (5,598)
- Exchange differences on translating foreign operations
- - Equity accounting on investment in Geomet s.r.o. 4,528,258 853,136
Other comprehensive (loss)/income for the year, net of tax 4,502,806 847,538
Total comprehensive (loss) for the year attributable to members of the Company (1,425,635) (5,955,357)
Loss per share for loss from continuing operations
Basic and diluted loss per CDI/share (cents) 8 (3.14) (3.78)
The above statement should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2023
2023 2022
Note $ $
CURRENT ASSETS
Cash and cash equivalents 9 8,892,951 19,055,509
Trade and other receivables 10 8,619,578 782,518
Other assets 11 34,697 53,094
TOTAL CURRENT ASSETS 17,547,226 19,891,121
NON-CURRENT ASSETS
Other assets 11 48,154 47,392
Right-of-use asset 12 39,968 87,930
Investments accounted for using equity method 13 19,629,519 16,946,419
Property, plant and equipment 2,899 -
TOTAL NON-CURRENT ASSETS 19,720,540 17,081,741
TOTAL ASSETS 37,267,766 36,972,862
CURRENT LIABILITIES
Trade and other payables 14 818,977 939,822
Provisions - employee entitlements 15 16,570 147,048
Lease liability 12 40,775 45,707
TOTAL CURRENT LIABILITIES 876,322 1,132,577
NON-CURRENT LIABILITIES
Provisions - employee entitlements 15 84,051 -
Lease liability 12 - 40,775
TOTAL NON-CURRENT LIABILITIES 84,051 40,775
TOTAL LIABILITIES 960,373 1,173,352
NET ASSETS 36,307,393 35,799,510
EQUITY
Issued capital 16 47,881,352 47,881,352
Reserves 17 18,720,115 12,283,791
Accumulated losses (30,294,074) (24,365,633)
TOTAL EQUITY 36,307,393 35,799,510
The above statement should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2023
Issued Capital Share Based Payment Reserve Foreign Currency Translation Reserve Accumulated
Losses Total
$ $ $ $ $
Balance at 1 July 2021 34,087,930 9,220,602 (467,879) (17,562,738) 25,277,915
Loss attributable to members of the Company - - - (6,802,895) (6,802,895)
Transfer on derecognition of subsidiaries (16,709) - (16,709)
Other comprehensive income/(loss) - - 864,247 - 864,247
Total comprehensive income/loss for the year - - 847,538 (6,802,895) (5,955,357)
Transactions with owners, recognized directly in equity
14,399,000 - - - 14,399,000
CDIs/shares issued during the year
Capital raising costs (885,538) - - - (885,538)
Exercise of options and warrants 279,960 - - - 279,960
Share based payments - 2,683,530 - - 2,683,530
Balance at 30 June 2022 47,881,352 11,904,132 379,659 (24,365,633) 35,799, 510
Balance at 1 July 2022 47,881,352 11,904,132 379,659 (24,365,633) 35,799, 510
Loss attributable to members of the Company - - - (5, 928,441) (5,928,441)
- - 4,502,806 - 4,502,806
Other comprehensive (loss)
Total comprehensive (loss) for the year - - 4,502,806 (5, 928,441) (1,425,635)
Transactions with owners, recognised directly in equity
Share based payments - 1,933,518 - - 1,933,518
Balance at 30 June 2023 47,881,352 13,837,650 4,882,465 (30,294,074) 36,307,393
The above statement should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2023
Note 30 June 2023 30 June 2022
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Other income 1,716,398 827,208
Payments to suppliers and employees (3,596,566) (2,602,747)
Research and Development Rebate - 56,187
Interest received 438,823 29,466
Payments for Cinovec associated costs (398,354) (887,098)
Net cash (used in) operating activities 19 (1,839,699) (2,576,984)
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment (4,191) -
Payments to associate (8,420,065) -
Net cash (used in) investing activities (8,424,256) -
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of CDIs /shares - 14,399,000
Capital raising costs paid - (885,538)
Proceeds from exercise of options and warrants - 279,960
Payment for lease liability (48,799) (36,577)
Net cash (used in)/provided by financing activities (48,799) 13,756,845
Net (decrease)/increase in cash and cash equivalents (10,312,754) 11,179,861
Cash and cash equivalents at the beginning of the financial year 19,055,509 7,880,673
Exchange differences in foreign currency held 150,196 (5,025)
Cash and cash equivalents at the end of financial year 9 8,892,951 19,055,509
The above statement should be read in conjunction with the accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
These consolidated financial statements and notes represent those of European
Metals Holdings Limited ("EMHL" or "the Company") and its Controlled Entities
(the "Consolidated Group" or "Group").
The consolidated financial statements are general purpose financial
statements, which have been prepared in accordance with Australian Accounting
Standards, Australian Accounting Interpretations, other authoritative
pronouncements of the Australian Accounting Standards Boards (AASB) and the
Corporations Act 2001. The Group is a for-profit entity for financial
reporting purposes under Australian Accounting Standards.
The accounting policies detailed below have been adopted in the preparation of
the financial report. Except for cash flow information, the consolidated
financial statements have been prepared on an accrual basis and are based on
historical cost, modified, where applicable, by the measurement at fair values
of selected non-current assets, financial assets and financial liabilities.
The Company is a listed public company, incorporated in the British Virgin
Islands and registered in Australia.
(i) Accounting policies
The Group has considered the implications of new and amended Accounting
Standards which have become applicable for the current financial reporting
year.
New and Revised Accounting Standards Adopted by the Group
The Group has adopted all the new or amended Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ("AASB")
that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet
mandatory have not been early adopted.
New and revised Accounting Standards for Application in Future Periods
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 Group.
There are no other standards that are not yet effective and that would be
expected to have a material impact on the entity in the current or future
reporting period and on foreseeable future transactions.
(ii) Statement of Compliance
The financial report was authorised for issue on 29 September 2023.
Australian Accounting Standards set out accounting policies that the AASB has
concluded would result in the financial statements containing relevant and
reliable information about transactions, events and conditions. Compliance
with Australian Accounting Standards ensures that the financial statements and
notes also comply with International Financial Reporting Standards as issued
by the IASB.
(iii) Financial Position
The Directors have prepared the consolidated financial statements on going
concern basis, which contemplates continuity of normal business activities and
the realisation of assets and extinguishment of liabilities in the ordinary
course of business.
At 30 June 2023, the Group comprising the Company and its subsidiaries has
incurred a loss for the year amounting to $5,928,441 (2022: loss of
$6,802,895). The Group has a net working capital surplus of $16,670,909 (2022:
surplus of $18,758,544) and cash and cash equivalents of $8,892,951 (2022:
$19,055,509).
The Directors have prepared a cash flow forecast, which indicates that the
Company 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.
Based on the cash flow forecasts, the Directors are satisfied that the going
concern basis of preparation is appropriate.
(iv) Critical accounting estimates and judgements
The application of accounting policies requires the use of judgements,
estimates and assumptions about carrying values of assets and liabilities that
are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions are recognised in the period in which the estimate is revised if it
affects only that period or in the period of the revision and future periods
if the revision affects both current and future periods.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees and
consultants by reference to the estimated fair value of the equity instruments
at the date at which they are granted. These are expensed over the estimated
vesting periods. Judgement has been exercised on the probability and timing of
achieving milestones related to performance rights granted to Directors.
Estimation of the Group's borrowing rate
The lease payments used to determine the lease liability and right-of-use of
asset at 1 July 2020 under AASB 16 Leases are discounted using the Group's
incremental borrowing rate of 5%.
Recognition of deferred tax assets
Deferred tax assets relating to temporary differences and unused tax losses
have not been recognised as the Directors are of the opinion that it is not
probable that future taxable profit will be available against which the
benefits of the deferred tax assets can be utilised.
Investment in associate
Control exists where the parent entity is exposed or has the rights to
variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee. Power over the
investee exists when it has existing rights to direct the relevant activities
of the investee which are those which significantly affect the investee's
returns. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities
require the unanimous consent of the parties sharing control. Significant
influence exists if the Group holds 20% or more of the voting power of an
investee, and has the power to participate in the financial and operating
policy decisions of the entity.
Estimates and judgements are required by the Group to consider the existence
of control, joint control or significant influence over an investee. The Group
has considered its investment in Geomet concluding the Group has significant
influence but not control or joint control.
(b) Income Tax
Current income tax expense charged to the profit or loss is the tax payable on
taxable income calculated using applicable income tax rates enacted, or
substantially enacted, as at reporting date. Current tax liabilities
(assets) are therefore measured at the amounts expected to be paid to
(recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and
deferred tax liability balances during the year as well unused tax losses.
Current and deferred income tax expense (income) is charged or credited
directly to equity instead of the profit or loss when the tax relates to items
that are credited or charged directly to equity.
Deferred tax assets and liabilities are ascertained based on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. Deferred tax assets
also result where amounts have been fully expensed but future tax deductions
are available. No deferred income tax will be recognised from the initial
recognition of an asset or liability, excluding a business combination, where
there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are
expected to apply to the period when the asset is realised or the liability is
settled, based on tax rates enacted or substantively enacted at reporting
date. Their measurement also reflects the manner in which management expects
to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses
are recognised only to the extent that it is probable that future taxable
profit will be available against which the benefits of the deferred tax asset
can be utilised. Where temporary differences exist in relation to investments
in subsidiaries, branches, associates, and joint ventures, deferred tax assets
and liabilities are not recognised where the timing of the reversal of the
temporary difference can be controlled and it is not probable that the
reversal will occur in the foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable
right of set-off exists and it is intended that net settlement or simultaneous
realisation and settlement of the respective asset and liability will occur.
Deferred tax assets and liabilities are offset where a legally enforceable
right of set-off exists, the deferred tax assets and liabilities relate to
income taxes levied by the same taxation authority on either the same taxable
entity or different taxable entities where it is intended that net settlement
or simultaneous realisation and settlement of the respective asset and
liability will occur in future periods in which significant amounts of
deferred tax assets or liabilities are expected to be recovered or settled.
(c) Impairment of Assets
At the end of each reporting period the Group assesses whether there is an
indication that an asset may be impaired. If any such indication exists, or
when annual impairment testing for an asset is required, the Group makes an
estimate of the asset's recoverable amount. An asset's recoverable amount is
the higher of its fair value less costs to sell and its value in use and is
determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of
assets and the asset's value in use cannot be estimated to be close to its
fair value. In such cases the asset is tested for impairment as part of the
cash-generating unit to which it belongs. When the carrying amount of an asset
or cash-generating unit exceeds its recoverable amount, the asset or
cash-generating unit is considered impaired and is written down to its
recoverable amount.
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.
Impairment losses relating to continuing operations are recognised in those
expense categories consistent with the function of the impaired asset unless
the asset is carried at revalued amount in which case the impairment loss is
treated as a revaluation decrease.
An assessment is also made at each reporting period as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there
has been a change in the estimates used to determine the asset's recoverable
amount since the last impairment loss was recognised. If that is the case the
carrying amount of the asset is increased to its recoverable amount. That
increased amount cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for
the asset in prior years.
Such reversal is recognised in profit or loss unless the asset is carried at
revalued amount, in which case the reversal is treated as a revaluation
increase. After such a reversal the depreciation charge is adjusted in future
periods to allocate the asset's revised carrying amount, less any residual
value, on a systematic basis over its remaining useful life.
(d) 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
three months or less, and bank overdrafts. Bank overdrafts are shown within
short-term borrowings in current liabilities in the Statement of Financial
Position.
(e) Revenue
Interest
Interest income is recognised using the effective interest method.
Services Revenue
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.
(f) 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 Statement of Cash Flows on a gross basis,
except for the GST component of investing and financing activities, which are
disclosed as operating cash flows.
(g) Trade and other receivables
Trade receivables are measured on initial recognition at fair value and are
subsequently measured at amortised cost using the effective interest rate
method, less any allowance for impairment. Trade receivables are generally due
for settlement within 30 days. Impairment of trade receivables is continually
reviewed and those that are considered to be uncollectible are written off by
reducing the carrying amount directly. An allowance account is used when
there is objective evidence that the Group will not be able to collect all
amounts due according to the original contractual terms. Factors considered by
the Group in making this determination include known significant financial
difficulties of the debtor, review of financial information and significant
delinquency in making contractual payments to the Group.
The impairment allowance is set equal to the difference between the carrying
amount of the receivable and the present value of estimated future cash flows,
discounted at the original effective interest rate. Where receivables are
short-term discounting is not applied in determining the allowance.
The amount of the impairment loss is recognised in the profit and loss within
other expenses. When a trade receivable for which an impairment allowance had
been recognised becomes uncollectible in a subsequent period, it is written
off against the allowance account. Subsequent recoveries of amounts previously
written off are credited against other expenses in the profit and loss.
(h) Government grants
An unconditional government grant is recognised in profit or loss as other
income when the grant becomes receivable. Grants that compensate the Group for
expenses incurred are recognised in profit or loss as other income on a
systematic basis in the same period in which the expenses are recognised.
Research and development tax incentives are recognised in the consolidated
statement of profit or loss when received or when the amount to be received
can be reliably estimated.
(i) Employee Benefits
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Other long-term employee benefits
Provision is made for the liability due to employee benefits arising from
services rendered by employees to the reporting date. Employee benefits
expected to be settled within one year together with benefits arising out of
wages and salaries, sick leave and annual leave which will be settled after
one year, have been measured at their nominal amount. Other 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. Contributions
made to defined employee superannuation funds are charged as expenses when
incurred.
(j) Exploration and Evaluation Assets
Exploration and evaluation costs, including costs of acquiring licenses, are
capitalised as exploration and evaluation assets on an area of interest basis.
Costs of acquiring licences which are pending the approval of the relevant
regulatory authorities as at the date of reporting are capitalised as
exploration and evaluation cost if in the opinion of the Directors it is
virtually certain the Group will be granted the licences.
Exploration and evaluation assets are only recognised if the rights of tenure
to the area of interest are current and either:
• The expenditures are expected to be recouped through successful
development and exploitation of the area of interest; or
• Activities in the area of interest have not at the reporting date,
reached a stage which permits a reasonable assessment of the existence or
otherwise of economically recoverable reserves and active and significant
operations in, or in relation to, the area of interest are continuing.
Exploration and evaluation assets are assessed for impairment when:
• Sufficient data exists to determine technical feasibility and commercial
viability; and
• Facts and circumstances suggest that the carrying amount exceeds the
recoverable amount (see impairment accounting policy in Note 1(c). For the
purposes of impairment testing, exploration and
evaluation assets are allocated to cash-generating units to which exploration
activity relates. The cash generating unit shall not be larger than the area
of interest.
Once the technical feasibility and commercial viability of the extraction of
mineral resources in an area of interest are demonstrable, exploration and
evaluation assets attributable to that area of interest are first tested for
impairment and then reclassified from intangible assets to mining property and
development assets within property, plant and equipment.
(k) Financial Instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the financial instrument.
Financial instruments (except for trade receivables) are measured initially at
fair value adjusted by transaction costs, except for those carried at 'fair
value through profit or loss', in which case transaction costs are expensed to
profit or loss. Where available, quoted prices in an active market are used
to determine the fair value. In other circumstances, valuation techniques are
adopted. Subsequent measurement of financial assets and financial liabilities
are described below.
Trade receivables are initially measured at the transaction price if the
receivables do not contain significant financing component in accordance with
AASB 15 Revenue from Contracts with Customers.
Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and all
substantial risks and rewards are transferred. A financial liability is
derecognised when it is extinguished, discharged, cancelled or expired.
Classification and measurement
Financial assets
Except for those trade receivables that do not contain a significant financing
component and are measured at the transaction price in accordance with AASB 15
Revenue from Contracts with Customers, all financial assets are initially
measured at fair value adjusted for transaction costs (where applicable).
For the purpose of subsequent measurement, financial assets other than those
designated and effective as hedging instruments are classified into the
following categories upon initial recognition:
• amortised cost;
• fair value through other comprehensive income (FVOCI);
and
• fair value through profit or loss (FVPL).
Classifications are determined by both:
• the contractual cash flow characteristics of the
financial assets; and
• the Group's business model for managing the financial
asset.
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet with the
following conditions (and are not designated as FVPL);
• they are held within a business model whose objective is to hold
the financial assets and collect its contractual cash flows; and
• the contractual terms of the financial assets give rise to cash
flows that are solely payments of principal and interest on the principal
amount outstanding.
For debt instruments at fair value through OCI, interest income, foreign
exchange revaluation and impairment losses or reversals are recognised in the
statement of profit or loss and computed in the same manner as for financial
assets measured at amortised cost. The remaining fair value changes are
recognised in OCI.
After initial recognition, these are measured at amortised cost using the
effective interest method. Discounting is omitted where the effect of
discounting is immaterial. The Group's cash and cash equivalents, trade and
most other receivables fall into this category of financial instruments.
Financial assets at fair value through other comprehensive income
The Group measures debt instruments at fair value through OCI if both of the
following conditions are met:
• the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding; and
• the financial asset is held within a business model with the
objective of both holding to collect contractual cash flows and selling the
financial asset.
Upon initial recognition, the Group can elect to classify irrevocably its
equity investments as equity instruments designated at fair value through OCI
when they meet the definition of equity under AASB 132 Financial Instruments:
Presentation and are not held for trading.
Financial assets at fair value through profit or loss (FVPL)
Financial assets at fair value through profit or loss include financial assets
held for trading, financial assets designated upon initial recognition at fair
value through profit or loss or financial assets mandatorily required to be
measured at fair value. Financial assets are classified as held for trading
if they are acquired for the purpose of selling or repurchasing in the near
term.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial
liabilities at fair value through profit or loss, loans and borrowings,
payables or as derivatives designated as hedging instruments in an effective
hedge, as appropriate.
Financial liabilities are initially measured at fair value, and, where
applicable, adjusted for transaction costs unless the Group designated a
financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the
effective interest method except for derivatives and financial liabilities
designated at FVPL, which are carried subsequently at fair value with gains or
losses recognised in profit or loss.
All interest-related charges and, if applicable, gains and losses arising on
changes in fair value are recognised in profit or loss.
(l) Trade and other payables
Trade payables and other payables are carried at amortised cost and represent
liabilities for goods and services provided to the Group prior to the end of
the financial period that are unpaid and arise when the Group becomes obliged
to make future payments in respect of the purchase of these goods and
services. Trade and other payables are presented as current liabilities
unless payment is not due within 12 months.
(m) Earnings Per CDI/share
Basic earnings per CDI/share is determined by dividing the profit or loss
attributable to ordinary shareholders of the Company, by the weighted average
number of CDIs/shares outstanding during the period, adjusted for bonus
elements in CDIs/shares issued during the period.
Diluted earnings per CDI/share
Diluted earnings per CDI/share adjusts the figure used in the determination of
basic earnings per CDI/share to take into account the after income tax effect
of interest and other financial costs associated with dilutive potential
CDIs/shares and the weighted average number of CDIs/shares assumed to have
been issued for no consideration in relation to dilutive potential
CDIs/shares, which comprise convertible notes and CDI/share options granted.
(n) Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or
production of assets that necessarily take a substantial period of time to
prepare for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their intended use
or sale.
All other borrowing costs are recognised as expenses in the period in which
they are incurred.
(o) Provisions
A provision is recognised if, as a result of a past event, the Group has a
present legal or constructive obligation that can be estimated reliably, and
it is probable that an outflow of economic benefits will be required to settle
the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the
time value of money and, when appropriate, the risks specific to the
liability.
(p) Segment reporting
An operating segment is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group's
other components. Operating segments' results are reviewed by the Group's
Executive Chairman to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete financial
information is available.
(q) Principles of Consolidation
The consolidated financial statements incorporate all of the assets,
liabilities and results of the parent European Metals Holdings Limited and all
of the subsidiaries. Subsidiaries are entities the parent controls. The parent
controls an entity when it 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 over the entity. A list of the subsidiaries is
provided in Note 22.
The assets, liabilities and results of all subsidiaries are fully consolidated
into the financial statements of the Group from the date on which control is
obtained by the Group. The consolidation of a subsidiary is discontinued from
the date that control ceases. Intercompany transactions, balances and
unrealised gains or losses on transactions between Group entities are fully
eliminated on consolidation. Accounting policies of subsidiaries have been
changed and adjustments made where necessary to ensure uniformity of the
accounting policies adopted by the Group.
Equity interests in a subsidiary not attributable, directly or indirectly, to
the Group are presented as "non-controlling interests". The Group initially
recognises non-controlling interests that are present ownership interests in
subsidiaries and are entitled to a proportionate share of the subsidiary's net
assets on liquidation at either fair value or at the non-controlling
interests' proportionate share of the subsidiary's net assets. Subsequent to
initial recognition, non-controlling interests are attributed their share of
profit or loss and each component of other comprehensive income.
Non-controlling interests are shown separately within the equity section of
the statement of financial position and statement of comprehensive income.
(r) CDI based payments
The grant date fair value of CDI-based payment awards granted to employees is
recognised as an employee expense, with a corresponding increase in equity,
over the period that the employees unconditionally become entitled to the
awards. The amount recognised as an expense is adjusted to reflect the number
of awards for which the related service and non-market vesting conditions are
expected to be met, such that the amount ultimately recognised as an expense
is based on the number of awards that do not meet the related service and
non-market performance conditions at the vesting date. For CDI-based payment
awards with non-vesting conditions, the grant date fair value of the CDI-based
payment is measured to reflect such conditions and there is no true-up for
differences between expected and actual outcomes.
Loan CDIs/shares are treated similar to options and value is an estimate
calculated using an appropriate mathematical formula based on Black-Scholes
option pricing model. The choice of models and the resultant Loan CDI value
require assumptions to be made in relation to the likelihood and timing of the
vesting of the Loan CDIs/shares and the value and volatility of the price of
the underlying shares.
(m)
Earnings Per CDI/share
Basic earnings per CDI/share is determined by dividing the profit or loss
attributable to ordinary shareholders of the Company, by the weighted average
number of CDIs/shares outstanding during the period, adjusted for bonus
elements in CDIs/shares issued during the period.
Diluted earnings per CDI/share
Diluted earnings per CDI/share adjusts the figure used in the determination of
basic earnings per CDI/share to take into account the after income tax effect
of interest and other financial costs associated with dilutive potential
CDIs/shares and the weighted average number of CDIs/shares assumed to have
been issued for no consideration in relation to dilutive potential
CDIs/shares, which comprise convertible notes and CDI/share options granted.
(n)
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or
production of assets that necessarily take a substantial period of time to
prepare for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their intended use
or sale.
All other borrowing costs are recognised as expenses in the period in which
they are incurred.
(o)
Provisions
A provision is recognised if, as a result of a past event, the Group has a
present legal or constructive obligation that can be estimated reliably, and
it is probable that an outflow of economic benefits will be required to settle
the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the
time value of money and, when appropriate, the risks specific to the
liability.
(p)
Segment reporting
An operating segment is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group's
other components. Operating segments' results are reviewed by the Group's
Executive Chairman to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete financial
information is available.
(q)
Principles of Consolidation
The consolidated financial statements incorporate all of the assets,
liabilities and results of the parent European Metals Holdings Limited and all
of the subsidiaries. Subsidiaries are entities the parent controls. The parent
controls an entity when it 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 over the entity. A list of the subsidiaries is
provided in Note 22.
The assets, liabilities and results of all subsidiaries are fully consolidated
into the financial statements of the Group from the date on which control is
obtained by the Group. The consolidation of a subsidiary is discontinued from
the date that control ceases. Intercompany transactions, balances and
unrealised gains or losses on transactions between Group entities are fully
eliminated on consolidation. Accounting policies of subsidiaries have been
changed and adjustments made where necessary to ensure uniformity of the
accounting policies adopted by the Group.
Equity interests in a subsidiary not attributable, directly or indirectly, to
the Group are presented as "non-controlling interests". The Group initially
recognises non-controlling interests that are present ownership interests in
subsidiaries and are entitled to a proportionate share of the subsidiary's net
assets on liquidation at either fair value or at the non-controlling
interests' proportionate share of the subsidiary's net assets. Subsequent to
initial recognition, non-controlling interests are attributed their share of
profit or loss and each component of other comprehensive income.
Non-controlling interests are shown separately within the equity section of
the statement of financial position and statement of comprehensive income.
(r)
CDI based payments
The grant date fair value of CDI-based payment awards granted to employees is
recognised as an employee expense, with a corresponding increase in equity,
over the period that the employees unconditionally become entitled to the
awards. The amount recognised as an expense is adjusted to reflect the number
of awards for which the related service and non-market vesting conditions are
expected to be met, such that the amount ultimately recognised as an expense
is based on the number of awards that do not meet the related service and
non-market performance conditions at the vesting date. For CDI-based payment
awards with non-vesting conditions, the grant date fair value of the CDI-based
payment is measured to reflect such conditions and there is no true-up for
differences between expected and actual outcomes.
Loan CDIs/shares are treated similar to options and value is an estimate
calculated using an appropriate mathematical formula based on Black-Scholes
option pricing model. The choice of models and the resultant Loan CDI value
require assumptions to be made in relation to the likelihood and timing of the
vesting of the Loan CDIs/shares and the value and volatility of the price of
the underlying shares.
(s) Foreign Currency Transactions and Balances
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.
Transaction 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 Profit or Loss, 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 other comprehensive
income; otherwise the exchange difference is recognised in Profit or Loss.
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 the end of the reporting period;
• Income and expenses are translated at average exchange rates
for the period; and
• Retained earnings are translated at the exchange rates
prevailing at the date of the transaction.
• Exchange differences arising on translation of foreign
operations recognised in the other comprehensive income and included in the
foreign currency translation reserve in the Statement of Financial Position.
These differences are reclassified into Profit or Loss in the period in which
the operation is disposed.
(t) Issued capital
CDIs/shares are classified as equity. Incremental costs directly attributable
to the issue of new CDIs/shares or options are shown in equity as a deduction,
net of tax, from the proceeds. Incremental costs directly attributable to the
issue of new CDIs/shares or options for the acquisition of a new business are
not included in the cost of acquisition as part of the purchase
consideration.
(u) Investments in associates
Associates are entities over which the consolidated entity has significant
influence but not control or joint control. Investments in associates are
accounted for using the equity method. Under the equity method, the share of
the profits or losses of the associate is recognised in profit or loss and the
share of the movements in equity is recognised in other comprehensive income.
Investments in associates are carried in the statement of financial position
at cost plus post-acquisition changes in the consolidated entity's share of
net assets of the associate. Goodwill relating to the associate is included in
the carrying amount of the investment and is neither amortised nor
individually tested for impairment. Dividends received or receivable from
associates reduce the carrying amount of the investment.
When the consolidated entity's share of losses in an associate equal or
exceeds its interest in the associate, including any unsecured long-term
receivables, the consolidated entity does not recognise further losses, unless
it has incurred obligations or made payments on behalf of the associate.
The consolidated entity discontinues the use of the equity method upon the
loss of significant influence over the associate and recognises any retained
investment at its fair value. Any difference between the associate's carrying
amount, fair value of the retained investment and proceeds from disposal is
recognised in profit or loss.
(v) Leases
At inception of a contract, the Group assesses if the contract contains a
lease or is a lease. If there is a lease present, a right-of-use asset and a
corresponding lease liability are recognised by the Group where the Group is a
lessee. However, all contracts that are classified as short-term leases (i.e.
a lease with a remaining lease term of 12 months or less) and leases of
low-value assets are recognised as an operating expense on a straight-line
basis over the term of the lease.
Initially the lease liability is measured at the present value of the lease
payments still to be paid at the commencement date. The lease payments are
discounted at the interest rate implicit in the lease. If this rate cannot be
readily determined, the Group uses the incremental borrowing rate.
Lease payments included in the measurement of the lease liability are as
follows:
• fixed lease payments less any lease incentives;
• variable lease payments that depend on an index or rate, initially
measured using the index or rate at the commencement date;
• the amount expected to be payable by the lessee under residual value
guarantees;
• the exercise price of purchase options, if the lessee is reasonably
certain to exercise the options;
• lease payments under extension options, if the lessee is reasonably
certain to exercise the options; and
• payments of penalties for terminating the lease, if the lease term
reflects the exercise of an option to terminate the lease.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, any lease payments made at or before the commencement date
and any initial direct costs. The subsequent measurement of the right-of-use
assets is at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the lease term or useful life of the
underlying asset, whichever is the shortest. Where a lease transfers ownership
of the underlying asset or the cost of the right-of-use asset reflects that
the Group anticipates to exercise a purchase option, the specific asset is
depreciated over the useful life of the underlying asset.
(w) Fair value measurement hierarchy
The Group is required to classify all assets and liabilities, measured 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; and Level 3: Unobservable inputs for the asset or liability.
Considerable judgement is required to determine what is significant to fair
value and therefore which category the asset or liability is placed in can be
subjective.
The fair value of assets and liabilities classified as level 3 is determined
by the use of valuation models. These include discounted cash flow analysis or
the use of observable inputs that require significant adjustments based on
unobservable inputs.
NOTE 2: DETERMINATION OF FAIR VALUES
A number of the Group's accounting policies and disclosures require the
determination of fair value, for both financial and non-financial assets and
liabilities. Fair values have been determined for measurement and / or
disclosure purposes based on the following methods. When applicable, further
information about the assumptions made in determining fair values is disclosed
in the notes specific to that asset or liability.
When an asset or liability, financial or non-financial, is measured at fair
value for recognition or disclosure purposes, the fair value is based on the
price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date;
and assumes that the transaction will take place either: in the principal
market; or in the absence of a principal market, in the most advantageous
market.
Fair value is measured using the assumptions that market participants would
use when pricing the asset or liability, assuming they act in their economic
best interests. For non-financial assets, the fair value measurement is based
on its highest and best use. Valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair
value, are used, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three
levels, using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. Classifications are reviewed at each
reporting date and transfers between levels are determined based on a
reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may
be used when internal expertise is either not available or when the valuation
is deemed to be significant. External valuers are selected based on market
knowledge and reputation. Where there is a significant change in fair value of
an asset or liability from one period to another, an analysis is undertaken,
which includes a verification of the major inputs applied in the latest
valuation and a comparison, where applicable, with external sources of data.
CDI-based payment transactions
The fair value of the employee CDI options is measured using the Black-Scholes
formula. Measurement inputs include CDI price on measurement date, exercise
price of the instrument, expected volatility (based on weighted average
historic volatility adjusted for changes expected due to publicly available
information), weighted average expected life of the instruments (based on
historical experience and general option holder behaviour), expected
dividends, and the risk-free interest rate (based on government bonds).
Service and non-market performance conditions attached to the transactions are
not taken into account in determining the fair value.
The fair value of consultant CDI options and warrants is measured at the fee
of the services received, except for when the fair value of the services
cannot be estimated reliably, the fair value is measured using the
Black-Scholes formula.
The fair value of performance rights granted to Directors is measured using
the share price at grant date. Service and non-market performance conditions
attached to the transactions are not taken into account in determining the
fair value.
30 June 2023 30 June 2022
Note 3: INCOME TAX
(a) Income tax expense $ $
Current tax - -
Deferred tax - -
- -
Deferred income tax expense included in income tax expense comprises:
(Increase) in deferred tax assets - -
Increase in deferred tax liabilities* - -
- -
* Any capital gain on disposal of shares in Geomet held by EMH UK is
tax-exempt under the current UK legislation (Schedule 7AC of the Taxation of
Chargeable Gains Act 1992). For this reason, no deferred tax liability has
been recognised as at 30 June 2023.
(b) Reconciliation of income tax expense to prima facie tax payable
Net (loss) before tax (5,928,441) (6,802,895)
Prima facie tax on operating loss at 25% (2022: 25%) (1,482,110) (1,700,724)
Add / (Less): Non-deductible items
Non-deductible expenses 1,333, 306 1,322,354
Adjustments recognised in the current year in relation to the current tax of 1,236 -
previous years
Current year tax loss not recognised 188,998 378,370
Temporary differences not recognised (41,430) -
Income tax attributable to operating profit/loss - -
The applicable weighted average effective tax rates are as follows: Nil% Nil%
Balance of franking account at year end Nil Nil
Deferred tax assets/(liabilities)
Tax losses 1,499,005 1,311,243
Other receivables and other assets (27,670) (19,976)
Unrealised foreign exchange gain - 1,177
Trade and other payables and Accruals 8,750 31,343
Business related costs - 47
Right-of-use assets (9,992) (21,982)
Lease liabilities 10,194 21,621
Provisions 27,517 36,762
Unrecognised deferred tax asset 1,507,804 1,360,235
Set-off deferred tax liabilities (37,663) -
Net deferred tax assets 1,470,141 1,360,235
Tax losses
Unused tax losses for which no deferred tax asset has been recognised 6,000,962 5,244,970
30 June 2023
30 June 2022
(a) Income tax expense
$
$
Current tax
-
-
Deferred tax
-
-
-
-
Deferred income tax expense included in income tax expense comprises:
(Increase) in deferred tax assets
-
-
Increase in deferred tax liabilities*
-
-
-
-
* Any capital gain on disposal of shares in Geomet held by EMH UK is
tax-exempt under the current UK legislation (Schedule 7AC of the Taxation of
Chargeable Gains Act 1992). For this reason, no deferred tax liability has
been recognised as at 30 June 2023.
(b) Reconciliation of income tax expense to prima facie tax payable
Net (loss) before tax
(5,928,441)
(6,802,895)
Prima facie tax on operating loss at 25% (2022: 25%)
(1,482,110)
(1,700,724)
Add / (Less): Non-deductible items
Non-deductible expenses
1,333, 306
1,322,354
Adjustments recognised in the current year in relation to the current tax of
previous years
1,236
-
Current year tax loss not recognised
188,998
378,370
Temporary differences not recognised
(41,430)
-
Income tax attributable to operating profit/loss
-
-
The applicable weighted average effective tax rates are as follows:
Nil%
Nil%
Balance of franking account at year end
Nil
Nil
Deferred tax assets/(liabilities)
Tax losses
1,499,005
1,311,243
Other receivables and other assets
(27,670)
(19,976)
Unrealised foreign exchange gain
-
1,177
Trade and other payables and Accruals
8,750
31,343
Business related costs
-
47
Right-of-use assets
(9,992)
(21,982)
Lease liabilities
10,194
21,621
Provisions
27,517
36,762
Unrecognised deferred tax asset
1,507,804
1,360,235
Set-off deferred tax liabilities
(37,663)
-
Net deferred tax assets
1,470,141
1,360,235
Tax losses
Unused tax losses for which no deferred tax asset has been recognised
6,000,962
5,244,970
The Company is registered in the British Virgin Islands (BVI) and the Company
is a tax resident of Australia. The unused tax losses are representative of
losses incurred in Australia.
There are currently no withholding taxes or exchange control regulations in
the BVI applicable to the Company. The Company is subject to UK taxation
regulations in respect of European Metals (UK) Limited.
NOTE 4: RELATED PARTY TRANSACTIONS
Transactions between related parties are at arms' length and on normal
commercial terms and conditions no more favourable than those available to
other parties unless otherwise stated.
During the year, the Company received $1,102,944 (2022: $1,102,944) from its
associate, Geomet s.r.o. for providing services of managing the Cinovec
project development. The Company's Directors also received remuneration from
Geomet s.r.o in arm's length transaction during the financial year.
From July 2022, the Company received accounting and bookkeeping services of
$28,655 plus GST from Everest Corporate, a company controlled by the spouse of
Executive Chairman, Keith Coughlan. Amount payable to Everest Corporate as at
30 June 2023 was $nil (2022: $8,012).
From October 2022, the Company received company secretarial, accounting and
bookkeeping services of $89,105 plus GST from Nexia, a company at which the
spouse of Executive Chairman, Keith Coughlan, acts as key management
personnel. Amount payable to Nexia as at 30 June 2023 was $17,028 (2022:
$nil).
The Company received rental income of $13,349 plus GST from Everest Corporate
for subletting the office in West Perth, until October 2022.
There were no other transactions with related parties during the financial
year.
NOTE 5: KEY MANAGEMENT PERSONNEL COMPENSATION
Refer to the Remuneration Report contained in the Directors' Report for
details of the remuneration paid or payable to each member of the Group's key
management personnel (KMP) for the year ended 30 June 2023 and 30 June 2022.
The totals of remuneration paid to KMP during the year are as follows:
2023 2022
$ $
Short-term benefits 777,665 605,479
Post-employment benefits 27,500 31,800
Long service leave 32,762 6,263
Equity settled 302,040 1,896,130
1,139,967 2,539,672
Loans to Key Management Personnel
There were no loans to Key Management Personnel during the financial year
(2022: nil). The total value of loan CDIs/shares at 30 June 2023 amounted to
$1,442,666 (30 June 2022: $1,442,666). The fair value of the remaining
1,350,000 loan CDIs/shares is $1,442,666 at 30 June 2023.
NOTE 6: Other Income 2023 2022
$ $
Service revenue - Cinovec project development 1,102,944 1,102,944
Other Income 13,349 52,415
1,116,293 1,155,359
NOTE 7: AUDITOR'S REMUNERATION 2023 2022
$ $
Auditor's services
Audit and review of financial report 63,443 48,665
- Under provision in prior year - 1,910
63,443 50,575
NOTE 8: BASIC AND DILUTED LOSS PER CDI/share
2023 2022
$ $
Loss attributable to members of European Metals Holdings Limited ($) (5,928,441) (6,802,895)
Weighted average number of CDIs/shares outstanding 188,790,669 179,817,540
Basic and diluted loss per CDI/share (cents) (3.14) (3.78)
NOTE 9: CASH AND CASH EQUIVALENTS 2023 2022
$ $
Cash at bank 6,758,425 14,035,258
Term deposit 2,134,526 5,020,251
Total cash and cash equivalents in the consolidated Statement of Cash Flows 8,892,951 19,055,509
NOTE 10: TRADE AND OTHER RECEIVABLES 2023 2022
$ $
Trade and other receivable 94,802 694,907
Advances to associate 8,418,872 -
GST and VAT receivable 38,903 60,808
Interest receivable 67,001 26,803
8,619,578 782,518
The Group notes that no debtors are past due as at 30 June 2023 (2022: nil).
NOTE 11: OTHER ASSETS 2023 2022
$ $
Current
Prepayments - 53,094
Other receivables 34,697 -
34,697 53,094
NOTE 11: OTHER ASSETS (continued)
2023 2022
$ $
Non-Current
Bank guarantee on office lease 48,154 47,392
48,154 47,392
2022
NOTE 12: OFFICE LEASE 2023 $
$
(a) Right-of-use asset
Right-of-use asset at cost 136,122 136,122
Less accumulated depreciation (96,154) (48,192)
39,968 87,930
Reconciliation of Right-of-use asset:
2023 2022
$ $
Opening balance 87,930 136,122
Additions/lease modification - (8,007)
Depreciation (47,962) (40,185)
Closing balance 39,968 87,930
(b) Lease liability
Opening balance 86,482 97,893
Additions/lease modification - 20,025
Interest expense 3,092 5,141
Payments (48,799) (36,577)
Closing balance 40,775 86,482
2023 2022
(b) Lease liability $ $
Current 40,775 45,707
Non-current - 40,775
Closing balance 40,775 86,482
The Group's West Perth office is leased under a lease agreement assigned to
the Group commencing on 1 May 2021 for a period of three years with a
three-year renewal option and rental of $50,000 plus GST per year payable plus
outgoings. The lease liability is measured at the present value of the
remaining lease payments, discounted using the Group's incremental borrowing
rate as at 1 May 2021. The Group's incremental borrowing rate is the rate at
which a similar borrowing could be obtained from an independent creditor under
comparable terms and conditions. The weighted-average rate applied was 5%.
NOTE 13: INVESTMENT IN ASSOCIATE 2023 2022
$ $
Opening balance 16,946,419 17,461,027
Share of loss - associate (1,845,158) (1,367,744)
Share of other comprehensive income/(loss) - associates 4,528,258 853,136
19,629,519 16,946,419
Effective 28 April 2020, Geomet was equity accounted (i.e. 49% of share of the
profit or loss of the investee after the date of acquisition) for as
Investment in Associate by EMH. The Company was appointed to provide services
of managing the Cinovec project development.
Summarised statement of financial position 2023 2022
$ $
Current assets 24,328,436 26,418,644
Non-current assets 64,599,159 28,724,124
Total assets 88,927,595 55,142,768
Current liabilities 5,785,887 3,500,606
Non-current liabilities 17,193,373 -
Total liabilities 22,979,260 3,500,606
Net assets 65,948,335 51,642,162
Summarised statement of profit or loss and other comprehensive income
Revenue 18,399 5,250
Expenses (3,781,572) (2,796,568)
Loss for the year (3,763,173) (2,791,318)
NOTE 14: TRADE AND OTHER PAYABLES 2023 2022
$ $
Trade payables 747,492 584,039
Accrued expenses and other liabilities 71,485 355,783
818,977 939,822
Payables are normally due for payment within 30 days.
NOTE 15: PROVISIONS 2023 2022
$ $
Current Liability
Provision for annual leave 16,570 96,259
Provision for long service leave - 50,789
Non-current Liability
Provision for long service leave 84,051 -
100,621 147,048
NOTE 16: ISSUED CAPITAL 2023 2022
$ $
(a) Issued and paid up capital
192,385,492 CDIs/shares (30 June 2022: 186,042,485 CDIs/shares) 47,881,352 47,881,352
Total issued capital 47,881,352 47,881,352
(b) Movements in CDIs/shares
Date Number $
Balance at the beginning of the year 1 July 2021 175,119,485 34,087,930
Exercise of unlisted options @ 42c 16 July 2021 238,000 99,960
Share placement @ A$1.40 per CDI/share 28 January 2022 10,285,000 14,399,000
Exercise of unlisted options @ 45c 4 March 2022 400,000 180,000
Capital raising cost - (885,538)
Balance at the end of the year 30 June 2022 186,042,485 47,881,352
Date Number $
Balance at the beginning of the year 1 July 2022 186,042,485 47,881,352
Issue to consultant @ 0c 9 January 2023 6,343,007 -
Balance at the end of the year 30 June 2023 192,385,492 47,881,352
(c) Capital risk management
The Group's objectives when managing capital is to safeguard its ability to
continue as a going concern, so that it may continue to provide returns for
shareholders and benefits for other stakeholders.
The capital structure of the Group consists of equity comprising issued
capital, reserves and accumulated losses.
The Group does not have ready access to credit facilities, with the primary
source of funding being equity raisings. Therefore, the focus of the Group's
capital risk management is to maintain sufficient current working capital
position to meet the requirements of the Group to meet exploration programs
and corporate overheads. The Group's strategy is to ensure appropriate
liquidity is maintained to meet anticipated operating requirements, with a
view to initiating appropriate capital raisings as required.
The working capital position of the Group at 30 June is as follows:
2023 2022
$ $
Cash and cash equivalents 8,892,951 19,055,509
GST and other receivables 8,619,578 782,518
Other assets 34,697 53,094
Trade and other payables (818,977) (939,822)
Provisions (16,570) (147,048)
Lease liability (40,775) (45,707)
Working capital surplus/(deficit) 16,670,904 18,758,544
The Group is not subject to any externally imposed capital requirements.
NOTE 17: RESERVES 2023 2022
$ $
Option and Warrant Reserve 17(a) 4,788,589 4,370,589
Performance Shares Reserve 17 (b) 3,471,444 3,471,444
Performance Rights Reserve 17 (c) 4,134,950 2,619,432
Loan CDIs/shares Reserve 17 (d) 1,442,667 1,442,667
Foreign Currency Translation Reserve 17 (e) 4,882,465 379,659
Total Reserves 18,720,115 12,283,791
(a) Option and Warrant Reserve 2023 2022
$ $
Balance at the beginning of the financial year 4,370,589 4,306,491
Share based payment expense (Note 18) 418,000 64,098
Balance at the end of the financial 4,788,589 4,370,589
year
The following options and warrants existed as at 30 June 2022 and 30 June
2023:
Expiry Balance at 30 June 2022 Issued during the year Exercised during the year Expired/ cancelled Balance at 30 June 2023
date
Options @ 25cents 31 Dec 22 10,000,000 - - (10,000,000) -
Options @ 42cents 23 Oct 23 2,024,000 - - - 2,024,000
Options @ 45cents 23 Oct 23 600,000 - - - 600,000
Options @ 80 cents 31 Dec 2022(1) - 2,000,000 - (2,000,000) -
Options @ 80 cents 31 Dec 2025(2) - 2,000,000 - - 2,000,000
Warrants @ $1.10 31 Jan 23 1,200,000 - - (1,200,000) -
Total 13,824,000 4,000,000 - (13,200,000) 4,624,000
(1)2,000,000 options were cancelled during the period lapsing unvested due to
the vesting criteria not being met.
(2)2,000,000 options exercisable at $0.80 on or before 31 December 2023 were
granted to consultants on 15 June 2023, subject to vesting conditions. The
share-based payment expense of $418,000 was recognised in the consolidated
statement of profit or loss and other comprehensive income for the year.
(b) Performance Shares Reserve
The Performance Shares reserve records the fair value of the Performance
Shares issued. No performance shares were on issue at 30 June 2023.
Date Number $
Balance at the beginning of the year 1 July 2022 - 3,471,444
Balance at the end of the year 30 June 2023 - 3,471,444
( )
(c) Performance Rights Reserve
30 June 2023 30 June 2022
Grant Date Number $ Number $
Balance at the beginning of the period 5,800,000 2,619,432 3,600,000 -
Granted to directors 17 Dec 2020 - 302,040 - 1,896,130
Granted to a consultant 24 Nov 2021 - (1,829) 100,000 107,440
Granted to an employee 2 Mar 2022 - 424,235 1,200,000 344,803
Granted to a consultant 2 Mar 2022 - 318,305 900,000 271,059
Granted to a consultant 29 Aug 2022 750,000 247,614 - -
Granted to an employee 12 Dec 2022 450,000 107,705 - -
Granted to an employee 13 Dec 2022 300,000 71,587 - -
Granted to an employee 14 Dec 2022 170,000 45,861 - -
Balance at the end of the period 7,470,000 4,134,950 5,800,000 2,619,432
(d) Loan CDIs/shares Reserve
Employee securities incentive plan
In prior years, remuneration in the form of Employee Securities Incentive Plan
were issued to the Directors and employees to attract, motivate and retain
such persons and to provide them with an incentive to deliver growth and value
to shareholders.
The Loan CDIs/shares reserve records the fair value of the Loan CDIs/shares
issued.
The Loan CDIs/shares represent an option arrangement. Loan CDIs/shares vested
immediately. The key terms of the Employee Share Plan and of each limited
recourse loan provided under the Plan are as follows:
i. The total loan equal to issue price multiplied by the number of
Plan CDIs/shares/shares applied for ("Advance"), which shall be deemed to have
been draw down at Settlement upon issued of the Loan Shares.
ii. The Loan shall be interest free. However, if the advance is not
repaid on or before the Repayment date, the Advance will accrue interest at
the rate disclosed in the Plan from the Business Day after the Repayment Date
until the date the Advance is repaid in full.
iii. All or part of the loan may be repaid prior to the Advance
repayment Date.
Repayment date
iv. Notwithstanding paragraph iii. above, ("the borrower") may repay
all or part of the Advance at any time before the repayment date i.e. The
repayment date for 1,650,000 Director CDIs/shares - 15 years after the date of
loan advance and the repayment date for 1,500,000 Employee CDIs/shares - 7
years after the date of loan advice.
v. The Loan is repayable on the earlier of:
(a) The repayment date;
(b) The plan CDIs/shares being sold;
(c) The borrower becoming insolvent;
(d) The borrower ceasing to be employed by the Company; and
(e) The plan CDIs/shares being acquired by a third party by way of an
amalgamation, arrangement, or formal takeover bid for not less than all the
outstanding CDIs/shares.
Loan Forgiveness
vi. The Board may, in its sole discretion, waive the right to
repayment of all or any part of the outstanding balance of an Advance where:
(a) The borrower dies or becomes permanently disabled; or
(b) The Board otherwise determines that such waiver is appropriate
vii. Where the Board waives repayment of the Advance in accordance with
clause 6(a), the Advance is deemed to have been repaid in full for the
purposes of the Plan in this agreement.
Sale of loan CDIs/shares
viii. In accordance with the terms of the Plan and the Invitation, the
Loan CDIs/shares cannot be sold, transferred, assigned, charged or otherwise
encumbered with the Plan CDIs/shares except in accordance with the Plan.
30 June 2023 30 June 2022
Number Amount Expensed Number Amount Expensed
Balance at beginning of the year 1,350,000 1,442,667 1,350,000 1,442,667
Loan CDIs/shares repaid during the year - - - -
Balance at end of the year 1,350,000 1,442,667 1,350,000 1,442,667
Loan CDIs/shares Reserve
CDIs/shares entitle the holder to participate in dividends and the proceeds on
winding up of the Company in proportion to the number of shares held. On a
show of hands every holder of a CDI/share present at a meeting in person or by
proxy, is entitled to one vote, and in a poll each share is entitled to one
vote.
The Loan CDIs/shares were issued to the executive members under the Employee
Securities Incentive Plan on 6 June 2018.
Holders of CDIs/shares have the same entitlement benefits of holding the
underlying shares. Each Share in the Company confers upon the Shareholder:
1. the right to one vote at a meeting of the Shareholders of
the Company or on any Resolution of Shareholders;
2. the right to an equal share in any dividend paid by the
Company; and
3. the right to an equal share in the distribution of the
surplus assets of the Company on its liquidation.
(e) Foreign Currency Translation Reserve
The foreign currency translation reserve records exchange differences arising
on translation of foreign controlled subsidiaries, the Group's share of
foreign exchange movement in Geomet s.r.o. and the deconsolidation of EQHSA in
prior year.
2023 2022
$ $
Balance at the beginning of the financial year 379,659 (467,879)
Transfer of foreign currency to profit or loss on deregistration of EQHSA - (16,709)
Movement during the year 4,502,806 864,247
Balance at the end of the financial year 4,882,465 379,659
NOTE 18: SHARE BASED PAYMENT EXPENSE
During the year, the Group incurred a share-based payments expense for a total
of $1,933,518 resulting from the transactions detailed below.
(i) Share based payment arrangements granted in previous years/periods and
existing during the year ended 30 June 2023:
· On 17 December 2020, the shareholders approved the grant of
2,400,000 Performance Rights to Mr Keith Coughlan and 1,200,000 Performance
Rights to Mr Richard Pavlik. The 3,600,000 Performance Rights were issued on 2
March 2022. The Performance Rights were valued at $3,132,000 at grant date
and are being expensed over the vesting period noted below. For the year ended
30 June 2023, management assessed the probability of achieving the finance
hurdles to be over 50%, as a result of which, a share-based expense of
$302,040 was recognised in the consolidated statement of profit or loss and
other comprehensive income for the year.
Number granted Grant date Estimated Vesting Date Share price on grant date Value per right Total fair value % vested
Class A 1,200,000 17 Dec 20 31 Dec 2023 $0.87 $0.87 $1,044,000 0%
Class B 1,200,000 17 Dec 20 30 Sep 2024 $0.87 $0.87 $1,044,000 0%
Class C 1,200,000 17 Dec 20 1 March 2025 $0.87 $0.87 $1,044,000 0%
· On 24 November 2021, 100,000 Performance Rights were issued to a
consultant. The Performance Rights were valued at $76,750 at grant date and
are being expensed over the vesting period noted below. A reversal of
share-based payment expense of $1,829 was recognised in the consolidated
statement of profit or loss and other comprehensive in income for the year, to
account for the new estimated longer vesting period. The group notes that
Class C is estimated to vest on 31 March 2025. As the consultant performance
rights expire on 30 November 2024, management assessed the probability of
aching the hurdle to be less than 50%, as a result of which, no expense was
recognised with respect to Class C noted below.
Number granted Grant date Estimated Vesting Date Share price on grant date Value per right Total fair value % vested
Class A 10,000 24 Nov 21 31 Dec 2023 $1.535 $1.535 $15,350 0%
Class B 20,000 24 Nov 21 30 Sep 2024 $1.535 $1.535 $30,700 0%
Class C 20,000 24 Nov 21 1 March 2025 $1.535 $1.535 $30,700 0%
· On 22 February 2022, 900,000 Performance Rights were issued to a
consultant. The Performance Rights were valued at $1,044,000 at grant date and
are being expensed over the vesting period noted below. The share-based
payment expense of $318,305 was recognised in the statement of profit or loss
and other comprehensive in income for the year.
Number granted Grant date Estimated Vesting Date Share price on grant date Value per right Total fair value % vested
Class A 300,000 22 Feb 22 31 Dec 2023 $1.16 $1.16 $348,000 0%
Class B 300,000 22 Feb 22 30 Sep 2024 $1.16 $1.16 $348,000 0%
Class C 300,000 22 Feb 22 1 March 2025 $1.16 $1.16 $348,000 0%
· On 27 February 2022, 1,200,000 Performance Rights were issued to
an employee. The Performance Rights were valued at $1,368,000 at grant date
and are being expensed over the vesting period noted below. The share-based
payment expense of $424,235 was recognised in the consolidated statement of
profit or loss and other comprehensive in income for the year.
Number granted Grant date Estimated Vesting Date Share price on grant date Value per right Total fair value % vested
Class A 400,000 27 Feb 22 31 Dec 2023 $1.14 $1.14 $456,000 0%
Class B 400,000 27 Feb 22 30 Sep 2024 $1.14 $1.14 $456,000 0%
Class C 400,000 27 Feb 22 1 March 2025 $1.14 $1.14 $456,000 0%
· On 29 August 2022, 750,000 Performance Rights were issued to an
employee. The Performance Rights were valued at $547,500 at grant date and are
being expensed over the vesting period noted below. The share-based payment
expense of $247,614 was recognised in the consolidated statement of profit or
loss and other comprehensive in income for the year.
Number granted Grant date Estimated Vesting Date Share price on grant date Value per right Total fair value % vested
Tranche 1 250,000 29 Aug 22 31 Dec 2023 $0.73 $0.73 $182,500 0%
Tranche 2 250,000 29 Aug 22 30 Sep 2024 $0.73 $0.73 $182,500 0%
Tranche 3 250,000 29 Aug 22 1 March 2025 $0.73 $0.73 $182,500 0%
· On 12 December 2022, 450,000 Performance Rights were issued to an
employee. The Performance Rights were valued at $301,500 at grant date and are
being expensed over the vesting period noted below. The share-based payment
expense of $107,705 was recognized in the consolidated statement of profit or
loss and other comprehensive in income for the year.
Number granted Grant date Estimated Vesting Date Share price on grant date Value per right Total fair value % vested
Tranche 1 150,000 12 Dec 22 31 Dec 2023 $0.67 $0.67 $100,500 0%
Tranche 2 150,000 12 Dec 22 30 Sep 2024 $0.67 $0.67 $100,500 0%
Tranche 3 150,000 12 Dec 22 1 March 2025 $0.67 $0.67 $100,500 0%
· On 13 December 2022, 300,000 Performance Rights were issued to an
employee. The Performance Rights were valued at $201,000 at grant date and are
being expensed over the vesting period noted below. The share-based payment
expense of $71,587 was recognised in the consolidated statement of profit or
loss and other comprehensive in income for the year.
Number granted Grant date Estimated Vesting Date Share price on grant date Value per right Total fair value % vested
Tranche 1 100,000 13 Dec 22 31 Dec 2023 $0.67 $0.67 $67,000 0%
Tranche 2 100,000 13 Dec 22 30 Sep 2024 $0.67 $0.67 $67,000 0%
Tranche 3 100,000 13 Dec 22 1 March 2025 $0.67 $0.67 $67,000 0%
· On 14 December 2022, 170,000 Performance Rights were issued to an
employee. The Performance Rights were valued at $117,300 at grant date and are
being expensed over the vesting period noted below. The share-based payment
expense of $45,861 was recognised in the consolidated statement of profit or
loss and other comprehensive in income for the year.
Number granted Grant date Estimated Vesting Date Share price on grant date Value per right Total fair value % vested
Tranche 1 70,000 14 Dec 22 31 Dec 2023 $0.69 $0.69 $48,300 0%
Tranche 2 100,000 14 Dec 22 30 Sep 2024 $0.69 $0.69 $69,000 0%
Loan CDIs/shares granted in prior years and existed during the financial year
ended 30 June 2023:
Number Repaid during the year Number
30 June 2022 30 June 2023
Director Loan CDIs/shares 1,350,000 - 1,350,000
1,350,000 - 1,350,000
No loan CDIs/shares were granted/repaid during the financial year.
The total fair value of the Loan CDIs/shares was fully expensed in the
consolidated statement of profit or loss and other comprehensive income in the
2019 financial year.
A summary of the outstanding Director Loan CDIs/shares at 30 June 2023 and the
inputs used in the valuation of the loan CDIs/shares issued to Directors are
as follows:
Loan CDIs/shares Keith Coughlan Richard Pavlik Kiran Morzaria
Issue price $0.725 $0.725 $0.725
Share price at date of issue $0.70 $0.70 $0.70
Grant date 30 November 2017 30 November 2017 30 November 2017
Expected volatility 143.41% 143.41% 143.41%
Expiry date 30 November 2032 30 November 2032 30 November 2032
Expected dividends Nil Nil Nil
Risk free interest rate 2.47% 2.47% 2.47%
Value per loan CDI $0.69676 $0.69676 $0.69676
Number of loan CDIs/shares 850,000 300,000 200,000
Total value $592,245 $209,028 $139,352
NOTE 19: CASH FLOW INFORMATION 2023 2022
$ $
Reconciliation of cash flow from operating activities with (loss) after tax:
(Loss) after income tax (5,928,441) (6,802,895)
Adjustments for:
Share based payments 1,933,518 2,884,447
Finance costs 25,962 5,141
Foreign exchange loss 362,201 16,544
Depreciation and amortisation expenses 48,873 40,412
Equity accounted of investment in Geomet s.r.o. 1,845,158 1,367,744
Derecognition of foreign currency reserve - (16,709)
Lease modification - 28,572
Interest in assets and liabilities net of deemed disposal of subsidiary
Decrease/(Increase) in trade and other receivables and other assets 40,302 (647,462)
(Decrease)/Increase in trade and other payables (120,845) 500,024
(Decrease)/increase in provisions (46,427) 47,198
Cash flow used in operating activities (1,839,699) (2,576,984)
(b) Credit standby facilities
The Company had no credit standby facilities as at 30 June 2023 and 2022.
(c) Investing and Financing Activities - Non-Cash
There were no non-cash investing or financing activities during the year,
apart from the shares issued to a consultant, as per Note 16.
NOTE 20: OPERATING SEGMENTS
The accounting policies used by the Group in reporting segments are in
accordance with the measurement principles of Australian Accounting Standards.
The Group has identified its operating segments based on the internal reports
that are provided to the Board of Directors. According to AASB 8 Operating
Segments, two or more operating segments may be aggregated into a single
operating segment if the segments have similar economic characteristics, and
the segments are similar in each of the following respects:
• The nature of the products and services;
• The nature of the production processes;
• The type or class of customer for their products and services;
• The methods used to distribute their products or provide their
services; and
• If applicable, the nature of the regulatory environment, for
example; banking, insurance and public utilities.
Effective 28 April 2020, the Group has a 49% interest in Geomet s.r.o. which
is accounted for in accordance with AASB 128 Investment in Associates and
Joint Venture. Therefore, the Group has only one operating segment based on
geographical location. The Australian segment incorporates the services
provided to Geomet s.r.o. in relation to the Cinovec project development along
with head office and treasury function. Consequently, the financial
information for the sole operating segment is identical to the information
presented in these financial reports.
NOTE 21: FINANCIAL RISK MANAGEMENT
The Group's financial instruments consist mainly of deposits with banks,
equity instruments and accounts receivable and payable. The main purpose of
non-derivative financial instruments is to raise finance for Group's
operations. The Group does not speculate in the trading of derivative
instruments.
The Group holds the following financial instruments:
2023 2022
$ $
Financial assets
Cash and cash equivalents 8,892,951 19,055,509
Other receivables 8,619,578 782,518
Other assets 82,851 47,392
Total financial assets 17,595,380 19,885,419
Trade and other payables 818,977 939,822
Lease liability 40,775 86,482
Total financial liabilities 859,752 1,026,304
The fair value of the Group's financial assets and liabilities approximate
their carrying value.
Specific Financial Risk Exposures and Management
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk, interest rate risk and price risk) credit risk and
liquidity risk.
(i) Market risk
The Board meets on a regular basis to analyse currency and interest rate
exposure and to evaluate treasury management strategies in the context of the
most recent economic conditions and forecasts.
Interest rate risk
Exposure to interest rate risk arises on financial assets and financial
liabilities recognised at the end of the reporting period whereby a future
change in interest rates will affect future cash flows or the fair value of
fixed rate financial instruments. The Group is also exposed to earnings
volatility on floating rate instruments. Interest rate risk is not material to
the Group as no interest-bearing debt arrangements have been entered into.
Price risk
Price risk relates to the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices.
Foreign exchange risk
Exposure to foreign exchange risk may result in the fair value or future cash
flows of a financial instrument fluctuating due to movement in foreign
exchange rates of currencies in which the Group holds financial instruments
which are other than the AUD functional currency of the Group.
With instruments being held by overseas operations, fluctuations in foreign
currencies may impact on the Group's financial results. The Group's exposure
to foreign exchange risk is monitored by the Board. The majority of the
Group's funds are held in Australian dollars, British Stirling and EUR.
At 30 June 2023, the Group has financial assets and liabilities denominated in
the foreign currencies detailed below:
2023
2022
Amount in EUR Amount in GBP Amount in GBP
Amount in USD Amount in AUD Amount in EUR Amount in USD Amount in AUD
Cash and cash equivalents in EMHL 2,018,189 48,287 - - 3,054 25,287 - -
Trade and other payables in EMHL 6,300 12,909 3,901 - 9,450 105,593 600 -
Total per foreign currency 2,024,489 61,196 3,901 - 12,504 130,880 600 -
5% effect in foreign exchange rates 101,224 3,060 195 - 625 6,544 30 -
Other than intercompany balances there were no financial assets and
liabilities denominated in foreign currencies for EMH UK.
(ii) Credit risk
Credit exposure represents the extent of credit related losses that the Group
may be subject to on amounts to be received from financial assets. Credit risk
arises principally from trade and other receivables. The objective of the
Group is to minimise the risk of loss from credit risk. The Group trades only
with creditworthy third parties. In addition, receivable balances are
monitored on an ongoing basis with the result that the Group's exposure to bad
debts is insignificant. The Group's maximum credit risk exposure is limited to
the carrying value of its financial assets as indicated on the Consolidated
Statement of Financial Position and notes to the consolidated financial
statements.
The credit quality of the financial assets was high during the year. The
table below details the credit quality of the financial assets at the end of
the year:
2023 2022
Financial assets Credit Quality $ $
Cash and cash equivalents held at Westpac Bank High 2,045,240 131,265
Cash and cash equivalents held at ANZ bank High 6,847,711 18,924,244
Bank guarantee held at ANZ bank High 48,154 47,392
Other receivables High 8,619,578 782,518
17,560,683 19,885,419
(iii) Liquidity risk
Liquidity risk is the risk that the entity will not be able to meet its
financial obligations as they fall due. The objective of the Group is to
maintain sufficient liquidity to meet commitments under normal and stressed
conditions.
Prudent liquidity risk management implies maintaining sufficient cash and
marketable securities, and the availability of funding through an adequate
amount of committed credit facilities. The Group aims at maintaining
flexibility in funding by maintaining adequate reserves of liquidity.
The following are the contractual maturities of financial assets and financial
liabilities, including estimated interest receipts and payments and excluding
the impact of netting arrangements.
Carrying Amount Contractual Cash flows <3 months 3-6 months 6-24 months
$ $ $ $
As at 30 June 2023 $
Financial assets
Cash and cash equivalents 8,892,951 8,892,951 8,892,951 - -
Other receivables 8,619,578 8,619,578 8,619,578 - -
Other assets 82,851 82,851 34,697 - 48,154
Cash inflows 17,595,380 17,595,380 17,547,226 - 48,154
Financial liabilities
Trade and other payables 818,977 818,977 818,977 - -
Lease liabilities 40,775 40,775 12,047 12,201 16,527
Cash outflows 859,752 859,752 831,024 12,201 16,527
Contractual Cash flows <3 months 3-6 months 6-24 months
Carrying Amount $ $ $
As at 30 June 2022 $ $
Financial assets - -
Cash and cash equivalents 19,055,509 19,055,509 19,055,509 - -
Other receivables 782,518 782,518 782,518 - -
Other assets 47,392 47,392 - - 47,392
Cash inflows 19,885,419 19,885,419 19,838,027 - 47,392
Contractual Cash flows <3 months 3-6 months 6-24 months
Carrying Amount $ $ $
As at 30 June 2022 $ $
Financial liabilities
Trade and other payables 939,822 939,822 939,822 - -
Lease liabilities 86,482 86,482 11,155 11,297 64,030
Cash outflows 1,026,304 1,026,304 950,977 11,297 64,030
(iv) Interest rate risk
From time to time the Group has significant interest-bearing assets, but they
are as a result of the timing of equity raising and capital expenditure rather
than a reliance on interest income. The interest rate risk arises on the rise
and fall of interest rates. The Group's exposure to interest rate risk, which
is the risk that a financial instrument's value will fluctuate as a result of
changes in market interest rates and the effective weighted average interest
rate for each class of financial assets and financial liabilities comprises:
Weighted Average Interest Rate Floating Interest Rate Fixed Non-interest bearing Total
As at 30 June 2023 Interest
Financial assets % $ $ $ $
Cash and cash equivalents 1.05% - 2,134,526 6,758,425 8,892,951
Other receivables - - 8,619,578 8,619,578
Bank guarantee - 48,154 34,697 82,851
- 2,182,680 15,412,700 17,595,380
Financial liabilities
Trade and other payables - - 818,977 818,977
Lease liabilities - - 40,775 40,775
- - 859,752 859,752
Weighted Average Interest Rate Floating Interest Rate Fixed Non-interest bearing Total
As at 30 June 2022 Interest
Financial assets % $ $ $ $
Cash and cash equivalents 1.62% - 18,029,343 1,026,166 19,055,509
Other receivables - - 721,710 721,710
Bank guarantee - 47,392 - 47,392
- 18,076,735 1,747,876 19,824,611
Financial liabilities
Trade and other payables - - 918,029 918,029
Lease liabilities - - 86,482 86,482
- - 1,004,511 1,004,511
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in the interest rates at the reporting date would
have increased or decreased the Group's equity and profit or loss by $21,345
(2022: $180,767).
(v) Net fair value of financial assets and liabilities
The net fair value of cash and cash equivalents and non-interest-bearing
monetary assets and financial liabilities approximates their carrying values.
NOTE 22: CONTROLLED ENTITIES
Subsidiaries of European Metals Holdings Limited
Controlled entity Country of Incorporation Class of Shares Percentage Owned
2023 2022
Equamineral Group Limited (EGL) British Virgin Islands Ordinary 0% 0%
Equamineral SA (ESA Congo) Republic of Congo Ordinary 0% 0%
European Metals UK Limited (EMH UK) United Kingdom Ordinary 100% 100%
EMH (Australia) Pty Ltd Australia Ordinary 100% 100%
NOTE 23: PARENT ENTITY DISCLOSURE
The following information has been extracted from the books and records of the
parent, European Metals Holdings Limited, and has been prepared in accordance
with Australian Accounting Standards.
Statement of Financial Position 2023 2022
$ $
ASSETS
Current assets 9,366,264 19,889,522
Non-current assets 8,511,087 135,422
TOTAL ASSETS 17,877,351 20,024,944
LIABILITIES
Current liabilities 1,186,524 1,132,577
Non-current liabilities - 40,775
TOTAL LIABILITIES 1,186,524 1,173,352
NET ASSETS 16,690,827 18,851,592
EQUITY
Issued capital 47,881,352 47,881,352
Reserves 13,837,650 11,904,132
Accumulated losses (45,028,175) (40,933,892)
TOTAL EQUITY/(DEFICIT) 16,690,827 18,851,592
Profit or Loss and Other Comprehensive Income
Loss for the year (4,094,183) (5,441,368)
Total comprehensive loss (4,094,183) (5,441,368)
Guarantees
There are no guarantees entered into by European Metals Holdings Limited for
the debts of its subsidiaries as at 30 June 2023.
Contingent liabilities
There are no contingent liabilities of the parent as at 30 June 2023 and 30
June 2022.
Commitments
There were no commitments for the parent as at 30 June 2023 and 30 June 2022.
NOTE 24: CAPITAL COMMITMENTS
There are no capital commitments for the Group as at 30 June 2023 and 30 June
2022.
NOTE 25: CONTINGENT LIABILITIES
There are no contingent liabilities for the Group as at 30 June 2023 and 30
June 2022.
NOTE 26: SIGNIFICANT EVENTS AFTER THE REPORTING DATE
Subsequent to 30 June 2023, the following significant events were undertaken
by the Group:
- On 18 July 2023 a mortgage in favour of the joint venture partners
(Severoceske Doly and the Company) was granted over the Deskform Property in
the Czech Republic. Additional information is disclosed in the Operations
Report (refer to "Land Secured for Cinovec Lithium Plant" section) and ASX
Announcement dated 9 June 2023.
- As announced on 21 July 2023, the EBRD has invested EUR 6,000,000 to
support the Group's development of the Cinovec Project in the Czech Republic.
The investment was implemented by way of a private placement of 12,315,213
shares of the Group to EBRD at a price of $0.803 per share.
- On 7 September 2023, 400,000 shares were issued on the exercise of
unlisted options which were granted on 23 October 2020 for an exercise price
of $0.45.
DIRECTORS' DECLARATION
The Directors of the Company declare that:
1. the consolidated financial statements, notes and the additional disclosures
are in accordance with the Corporations Act 2001 including:
(a) complying with Accounting Standards;
(b) are in accordance with International Financial Reporting Standards issued by
the International Accounting Standards Board, as stated in Note 1 to the
financial statements; and
(c) give a true and fair view of the financial position as at 30 June 2023 and of
the performance for the year ended on that date of the Group.
2. the Chief Executive Officer and Chief Finance Officer have each declared that:
(a) the financial records of the Group for the financial year have been properly
maintained in accordance with s286 of the Corporations Act 2001;
(b) the consolidated financial statements and notes for the financial year comply
with the Accounting Standards; and
(c) the consolidated financial statements and notes for the financial year give a
true and fair view.
3. in the Directors' opinion there are reasonable grounds to believe that the
Company will be able to pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of
Directors and is signed for and on behalf of the Directors by:
Keith Coughlan
EXECUTIVE CHAIRMAN
Dated at Perth on 29 September 2023
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF EUROPEAN METALS HOLDINGS LIMITED
additional information
The following additional information is required by the Australian Securities
Exchange in respect of listed public companies only.
1 Shareholding as at 13 September 2023
(a) Distribution of Shareholders
Number
Category (size of holding) of Shareholders
1 - 1,000 684
1,001 - 5,000 890
5,001 - 10,000 408
10,001 - 100,000 525
100,001 - and over 159
2,666
(b) The number of shareholdings held in less than marketable parcels is 475.
(c) Voting Rights
The voting rights attached to each class of equity security are as follows:
205,100,705 CDIs/shares
- Each CDI/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 - CDIs/ shares as at 13 September 2023
Rank Shareholder Number of CDIs Percentage of capital held
/shares held
1. BNP Paribas Nominees Pty Ltd ACF Clearstream 19,115,755 9.32
2. Armco Barriers Pty Ltd 13,660,000 6.66
3. Euroclear Nominees Limited EOC01 12,371,555 6.03
4. J P Morgan Nominees Australia Pty Limited 10,189,919 4.97
5. European Energy & Infrastructure Group Limited 6,343,007 3.09
6. Vidacos Nominees Limited CLRLUX 6,164,615 3.01
7. BNP Paribas Noms Pty Ltd DRP 5,844,204 2.85
8. Hargreaves Lansdown (Nominees) Limited 15942 5,774,580 2.82
9. Inswinger Holdings Pty Ltd 4,900,000 2.39
10. Citicorp Nominees Pty Limited 4,718,623 2.30
11. Interactive Investor Services Nominees Limited SMKTISAS 4,396,569 2.14
12. Barclays Direct Investing Nominees Limited Client1 4,185,941 2.04
13. Hargreaves Lansdown (Nominees) Limited VRA 3,737,709 1.82
14. Lawshare Nominees Limited SIPP 3,317,052 1.62
15. HSDL Nominees Limited Maxi 2,540,192 1.24
16. Interactive Investor Services Nominees Limited SMKTNOMS 2,350,141 1.15
17. Wilgus Investments Pty Ltd 2,210,000 1.08
18. Mr Richard Keller 2,180,000 1.06
19. Lawshare Nominees Limited ISA 2,147,419 1.05
20. BNP Paribas Nominees Pty Ltd 2,057,350 1.00
Total Top 20 Shareholders 118,204,631 57.63
2 The name of the Company Secretary is Ms Shannon Robinson.
3 The address of the principal registered office in Australia is Level 3, 35
Outram Street, West Perth WA 6005. Telephone +61 8 6245 2050.
4 Registers of securities are held at the following addresses
Computershare Investor Services Limited
Level 17
221 St Georges Terrace
Perth, Western Australia, 6000
5 Securities Exchange Listing
Quotation has been granted for all the CDIs/shares of the Company on all
Member Exchanges of the Australian Securities Exchange Limited.
6 Unquoted Securities
A total of 4,224,000 options over unissued CDIs/shares are on issue.
A total of 7,470,000 performance shares are on issue.
7 Use of Funds
The Company has used its funds in accordance with its business objectives.
TENEMENT SCHEDULE
Permit Code Deposit Interest at beginning of Quarter Acquired / Disposed Interest at end of Quarter
Cinovec 100% N/A 100%
Exploration Area N/A
Cinovec II 100% N/A 100%
Cinovec III 100% N/A 100%
Cinovec IV 100% N/A 100%
Preliminary Mining Permit Cinovec II Cinovec South 100% N/A 100%
Cinovec III Cinovec East 100% N/A 100%
Cinovec IV Cinovec NorthWest 100% N/A 100%
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