limited and controlled entities - new century resources€¦ · the principal activities of the...

LIMITED AND CONTROLLED ENTITIES

ABN 53 142 165 080

HALF-YEAR FINANCIAL REPORT

FOR THE SIX MONTHS ENDED

31 December 2019

New Century

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TABLE OF CONTENTS Corporate directory ........................................................................................................................ 3

Directors’ report ............................................................................................................................. 4

Auditor’s independence declaration ............................................................................................... 6

Condensed consolidated interim statement of profit or loss and other comprehensive income ..... 7

Condensed consolidated interim statement of financial position .................................................... 8

Condensed consolidated interim statement of changes in equity .................................................. 9

Condensed consolidated interim statement of cashflows ............................................................ 10

Condensed notes to the consolidated interim financial statements .............................................. 11

Directors’ declaration ................................................................................................................... 28

Independent auditor’s review report ............................................................................................. 29

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CORPORATE DIRECTORY

Directors Registered and business address

Robert McDonald (Chairman) Level 4, 360 Collins Street

Patrick Walta (Managing Director) Melbourne, Victoria 3000

Nick Cernotta (Non-Executive Director) Australia

Evan Cranston (Non-Executive Director) Telephone: +61 3 9070 3300

Bryn Hardcastle (Non-Executive Director) Email: [email protected]

Peter Watson (Non-Executive Director) Website: www.newcenturyresources.com

Company secretary Auditors

Oonagh Malone Deloitte Touche Tohmatsu

550 Bourke Street

Stock exchange Melbourne, Victoria, 3000

Australian Stock Exchange (ASX) Code: NCZ

Home office: Perth Share registry

Automic Registry Services

Country of incorporation and domicile 126 Phillip Street

Australia Sydney, New South Wales, 2000

Telephone: +61 2 9698 5414

Solicitors

HWL Ebsworth Lawyers

Level 20

240 St Georges Terrace

Perth, Western Australia, 6000

New Century

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DIRECTORS' REPORT

The Directors present their report, together with the Condensed Consolidated Interim Financial Statements (‘the Financial Statements’), on the consolidated entity (referred to hereafter as the 'Group') consisting of New Century Resources Limited (referred to hereafter as ‘New Century Resources’ or the 'Company') and the entities it controlled for the half-year ended 31 December 2019.

Directors

The Directors who held office during or since the end of the half-year and until the date of this report are set out below. Directors were in office for the entire period unless otherwise stated.

Robert McDonald (Chairman) appointed 17 July 2019

Patrick Walta (Managing Director)

Nick Cernotta

Evan Cranston

Bryn Hardcastle

Peter Watson

Tolga Kumova resigned 17 July 2019

Principal activities

The principal activities of the Group for the half-year were the review and development of mineral exploration projects.

Dividends

No dividend has been declared or paid by the Group during the half-year and the Directors do not at present recommend a dividend (30 June 2019: Nil).

Operating results

The consolidated loss of the Group amounted to $7,354,039 (6 months to 31 December 2018: Loss $10,068,891) after providing for income tax.

Review of operations and significant changes in the state of affairs

During the financial period, the Group continued with the development of the Century Mine. Further information is set out in the Company’s ASX announcement which is located at the Company’s website.

In the prior financial period, a strategic decision was made by the Group to suspend work on the definitive feasibility

study for the Kodiak Coking Coal Project, which is located in Alabama, USA. During the period the Group continued to

maintain the Kodiak Coking Coal Project in care and maintenance mode, including environmental studies and

monitoring. The Group is considering its options with regards to future financing of the Kodiak Coking Coal Project.

Refer to Matters subsequent to the end of the half-year section below for other significant events since the end of the half-year.

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Matters subsequent to the end of the half-year In January 2020, the Group announced the completion of the expansion of existing working capital facilities with Varde Partners from a total US$42,900,000 to US$70,900,000. Refer to Note 16 to the Financial Statements for further details.

In January 2020, the Group sold its non-controlling minority interest of 49 percent in the Lawn Hill and Riversleigh

Pastoral Holding Company. Refer to Note 20 to the Financial Statements for further details.

In February 2020, the group announced the initiation of slurry commissioning of the upgraded rougher circuit at the Century Project, allowing the full capacity of the entire processing plant to be incorporated into operations for the first time. The Century Project will progressively transition from 9Mtpa to 12Mtpa (33 percent throughput increase) over the remainder of financial year 2020. This achievement represents the third and final milestone of refurbishment activities required for the scheduled ramp up to 12Mtpa throughput. The upgraded rougher circuit is anticipated to provide a further increase to overall zinc metal production, with the additional volumetric capacity allowing for both higher throughput rates and improved recoveries (via longer slurry residence time through the rougher/scavenger circuit). The rougher expansion also allows for continued lowering of overall unit costs of production via increasing metal production against a 70 percent fixed cost base on site.

There have been no other events that have occurred subsequent to the reporting date which have significantly affected or may significantly affect the Group’s operations or results in future years.

Future developments, prospects and business strategies

Disclosure of further information regarding likely developments in the operations of the Group in future financial periods and the expected results of those operations are set out in the Company’s ASX announcements which are located at the Company’s website.

Auditor’s independence declaration

The auditor’s independence declaration is set out on the following page and forms part of the Directors’ Report for the half-year ended 31 December 2019.

Made and signed in accordance with a resolution of the Directors.

Robert McDonald Chairman

13 March 2020

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network.

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Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 Tel: +61 3 9671 7000 www.deloitte.com.au

The Board of Directors New Century Resources Limited

Level 4 360 Collins Street Melbourne, VIC, 3000

13 March 2020

Dear Board Members

New Century Resources Limited

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the

following declaration of independence to the directors of New Century Resources Limited.

As lead audit partner for the review of the financial statements of New Century Resources Limited

for the half-year ended 31 December 2019, I declare that to the best of my knowledge and belief,

there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the

review; and

(ii) any applicable code of professional conduct in relation to the review.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

Suzana Vlahovic Partner

Chartered Accountants

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CONDENSED CONSOLIDATED INTERIM STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

6 months to 31 Dec 2019


For the half-year ended 31 December 2019 Note $ $

Other income 766,501 772,382

Depreciation and amortisation expense 3 (98,250) (178,501)

Exploration and evaluation expenditure (732,267) (964,050)

Employee benefits – share based payments (282,853) -

Employee benefits – other (1,606,346) (1,064,883)

Professional expenses (1,316,863) (2,139,788)

Foreign exchange gains/(losses) 4 (2,091,729) 200,263

Finance income 5 181,189 190,517

Finance expense 5 (1,402,861) (5,261,316)

Other expenses (770,560) (1,623,515)

Loss before income tax expense (7,354,039) (10,068,891)

Income tax expense 6 - -

Loss for the half-year (7,354,039) (10,068,891)

Other comprehensive income

Items that may be reclassified subsequently to profit or loss

Exchange loss on translation of foreign controlled entities, net of tax (21,017) (19,901)

Other comprehensive loss for the half-year (21,017) (19,901)

Total comprehensive loss for the half-year (7,375,056) (10,088,792)

Loss for the half-year attributable to:

Members of the parent entity (7,354,039) (10,068,891)

Total comprehensive loss for the half-year attributable to:

Members of the parent entity (7,375,056) (10,088,792)

Loss per share Cents Cents

Basic loss per share 1.24 2.00

Diluted loss per share 1.24 2.00

The accompanying notes form part of these financial statements.

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CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION 31 Dec 2019 30 Jun 2019

As at 31 December 2019 Note $ $

Current assets

Cash and cash equivalents 7 11,911,055 34,282,769

Trade and other receivables 8 6,444,411 8,668,896

Inventories 9 5,991,003 7,903,782

Prepayments 10 1,760,125 7,945,067

Financial assets 11 - 5,750,000

Total current assets 26,106,594 64,550,514

Non-current assets

Property, plant and equipment 12 307,943,985 233,133,258

Right-of-use assets 13 49,957,434 -

Other financial assets 14 13,171,615 13,166,698

Total non-current assets 371,073,034 246,299,956

TOTAL ASSETS 397,179,628 310,850,470

Current liabilities

Trade and other payables 15 71,124,844 77,879,468

Borrowings 16 25,461,399 14,076,069

Financial liability at fair value through profit and loss 17 1,920,000 1,233,331

Lease liabilities 13 10,946,693 -

Employee benefit provisions 18 1,435,544 1,269,054

Deferred proceeds from sale of investment 20 10,000 -

Total current liabilities 110,898,480 94,457,922

Non-current liabilities

Environmental rehabilitation provisions 19 204,739,512 200,828,797

Borrowings 16 33,974,072 40,024,281

Financial liability at fair value through profit and loss 17 4,066,853 5,903,918

Lease liabilities 13 39,607,210 -

Total non-current liabilities 282,387,647 246,756,996

TOTAL LIABILITIES 393,286,127 341,214,918

NET ASSETS 3,893,501 (30,364,448)

Equity

Issued capital 21 353,403,115 312,052,963

Foreign currency translation reserve 4,075,661 4,096,678

Accumulated losses (353,585,275) (346,514,089)

TOTAL EQUITY 3,893,501 (30,364,448)


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CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

Ordinary shares

$

Accumulated losses

$

Foreign currency

translation reserve

$

Total

$

For the half-year ended 31 December 2019

Opening balance 312,052,963 (346,514,089) 4,096,678 (30,364,448)

Comprehensive income

Loss for the half-year - (7,354,039) - (7,354,039)

Other comprehensive income for the half-year

Exchange differences on translation of controlled entities - - (21,017) (21,017)

Total comprehensive loss for the half-year - (7,354,039) (21,017) (7,375,056)

Transactions with owners, in their capacity as owners

Issue of shares 43,615,000 - - 43,615,000

Share based payment - 282,853 - 282,853

Costs arising from issue of shares (2,264,848) - - (2,264,848)

Closing balance 353,403,115 (353,585,275) 4,075,661 3,893,501

Ordinary shares

$

Accumulated losses

$

Foreign currency

translation reserve

$

Total

$

For the half-year ended 31 December 2018

Opening balance 311,618,023 (325,466,218) 4,145,917 (9,702,278)

Comprehensive income

Loss for the half-year - (10,068,891) - (10,068,891)

Other comprehensive income for the half-year

Exchange differences on translation of controlled entities - - (19,901) (19,901)

Total comprehensive loss for the half-year - (10,068,891) (19,901) (10,088,792)

Closing balance 311,618,023 (335,535,109) 4,126,016 (19,791,070)


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CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

Note



For the half-year ended 31 December 2019 $ $

CASH FLOWS FROM OPERATING ACTIVITIES

Payments to suppliers and employees (749,944) (2,915,541)

Interest received 5 181,189 190,517

Financing expenses paid - (632,762)

Payments for exploration and evaluation (732,267) (964,050)

Net cash outflow from operating activities (1,301,022) (4,321,836)

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for property, plant and equipment (142,093,180) (85,994,535)

Receipts during development phase classified as investing activity 81,801,609 49,183,176

Proceeds from Assets Held for Sale 20 10,000 -

Net cash outflow from investing activities (60,281,571) (36,811,359)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings - 11,438,424

Proceeds from MMG funding support 11 5,750,000 5,750,000

Proceeds from share issues 21 43,518,000 -

Payments for share issue costs 21 (2,264,848) -

Payments for lease liabilities 13 (6,604,478) -

Payments for financial liability at fair value through profit or loss 17 (1,187,795) -

Net cash inflow from financing activities 39,210,879 17,188,424

Net decrease in cash and cash equivalents (22,371,714) (23,944,771)

Cash and cash equivalents at the beginning of the financial period 34,282,769 46,249,135

Cash and cash equivalents at the end of the half-year 11,911,055 22,304,364


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CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Note 1: Basis of preparation

Reporting entity

New Century Resources Limited (‘the Company’) is a company domiciled in Australia. The Condensed Consolidated Interim Financial Statements (the ‘Financial Statements’) of the Company for the half-year ended 31 December 2019 comprise the Company and its controlled entities (together referred to as the ‘Group’). The Group is primarily involved in the review and development of mineral exploration projects.

The Annual Report of the Group for the year ended 30 June 2019 is available at the Company’s website at www.newcenturyresources.com.

Statement of compliance

The Financial Statements are prepared on a going concern basis in accordance with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

The Financial Statements do not include all of the information required for a full annual financial report and should be read in conjunction with the Annual Report of the Group for the year ended 30 June 2019 and any public announcements made by the Company during the interim financial reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The Financial Statements were approved by the Board of Directors on 13 March 2020.

Significant accounting policies

The accounting policies applied by the Group in the Financial Statements are consistent with those applied by the Group in its Annual Report for the year ended 30 June 2019, except for the adoption of new standards and interpretations effective as of 1 July 2019.

The Group initially applied AASB 16 Leases from 1 July 2019. Refer to Note 13 to the Financial Statements for details on the initial application of AASB 16.

Other mandatory Accounting Standards and Interpretations issued and available for early adoption but not applied by the Group or not available for early adoption which will become mandatory in subsequent years have not been included here as they are not expected to have a material impact on the Group financial statements.

Critical accounting estimates and judgements

Estimates and judgements used in developing and applying the Group’s accounting policies are continually evaluated and are based on experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and underlying assumptions are reviewed on an ongoing basis.

The critical estimates and judgements are consistent with those applied by the Group in its Annual Report for the year ended 30 June 2019.

Going concern

The Financial Statements has been prepared on the going concern basis which assumes the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business for a period of at least 12 months from the date of signing the Financial Statements.

The primary activity of the Group during the half-year has been the continuation of the development of the Century Project. Given the Century Project is currently in development phase, no revenue is being recognised in the condensed consolidated interim statement of profit and loss and other comprehensive income. The Group incurred a net loss of $7,354,039 during the half-year.

As at 31 December 2019, the Group had a net current assets deficiency of $84,791,886 (30 June 2019: net current assets deficiency of $29,907,408). The net current assets deficiency is calculated as currents assets less current liabilities.

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The Group expects to generate net profit and positive operating cashflows for the 12 months following the approval of the Financial Statements. Expectations of continued positive operating cashflows are based on the expected completion of commissioning of the Century Project at the end of the June 2020 quarter.

In addition, the Directors of the Company note the following considerations relevant to the Group’s ability to continue as a going concern:

• As at 31 December 2019, total cash and cash equivalents of $11,911,055 are held by the Group.

• Cash flow forecasts from the internal financial model show that the Group will have sufficient cash flows to meet all commitments and working capital requirements for the 12 month period from the date of signing the Financial Statements.

• Completion of the expansion of the existing working capital facilities with Varde Partners in January 2020 from a total US$42,900,000 to US$70,900,000. The additional US$28,000,000 facility has a term of 2.5 years, carries an interest rate of eight percent per annum and first ranking security over all Century Project assets. It also includes a limited term silver royalty and options allocation – for more details refer to Note 16 to the Financial Statements. The additional facility was fully drawn down in January 2020.

• Announcement in February 2020 of the initiation of slurry commissioning of the upgraded rougher circuit, allowing the full capacity of the entire processing plant to be incorporated into operations for the first time. The Century Project will progressively transition from 9Mtpa to 12Mtpa (33 percent throughput increase) over the remainder of financial year 2020. This achievement represents the third and final milestone of refurbishment activities required for the scheduled ramp up to 12Mtpa throughput.

The upgraded rougher circuit is anticipated to provide a further increase to overall zinc metal production, with the additional volumetric capacity allowing for both higher throughput rates and improved recoveries (via longer slurry residence time through the rougher/scavenger circuit). The rougher expansion also allows for continued lowering of overall unit costs of production via increasing metal production against a 70 percent fixed cost base on site. The achievement of the full capacity of the entire processing plant will generate additional cash flows that further supports the Group’s ability to continue as a going concern.

• The achievement of cash flow forecasts for the sale of zinc assumes no material negative shift in the zinc price. If in the period leading up to full commissioning, expected to be declared at the end of the June 2020 quarter, the Group will, if necessary and in response to any further substantial decline in the zinc price, employ all operational and financial tools available to it to minimize the impact of such a decline in price on the Group’s ability to sustain positive cash outcomes.

The effectiveness of each of these techniques will be accessed as they may be required and in the context of

the overall economic climate. These tools may include, amongst others;

i.) The judicious management of the balance between spot and frame contracts, their tenor, their renewal terms and the mechanisms negotiated to provide for early payment or other timing benefits.

ii.) Possible hedging of known production either outright or through the hedging of the Quotation Period exposure.

iii.) Executing a number of operational improvements identified to date, and in particular during the commissioning of the upgraded rougher circuit, designed to enhance the level of metal production.

iv.) Pursuing a revived drive to reduce costs in partnership with our major suppliers.

v.) Accessing the debt or equity markets in which the Group has a record of successful transactions.

As a result, the Directors are of the view that the Group will be able to meet its debts as and when they fall due and accordingly the Directors have prepared the Financial Statements on the going concern basis.

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Note 2. Operating segments

Description of segments

The Group has determined the operating segments based on the reports reviewed by the Board of Directors in order to make strategic decisions. The Board of Directors considers how resources are allocated and performance is assessed and has identified two reportable segments being Australia (which constitutes the Century Mine) and United States of America (which constitutes the Kodiak Project).

Basis of accounting for purposes of reporting by operating segments

Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors, being the chief operating decision maker with respect to operating segments, are determined in accordance with accounting policies that are consistent with those adopted in the annual financial statements of the Group.

Intersegment transactions

Segment assets and liabilities are presented net of any intersegment borrowings.

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Segment information

Australia

6 months to

31 Dec 2019

$

USA

6 months to

31 Dec 2019

$

Total

6 months to

31 Dec 2019

$

Australia

6 months to

31 Dec 2018

$

USA

6 months to

31 Dec 2018

$

Total

6 months to

31 Dec 2018

$

Other income 766,501 - 766,501 772,382 - 772,382

Exploration and evaluation expenditure (99,633) (632,634) (732,267) (439,879) (524,171) (964,050)

Employee benefits – share based

payments (282,853) - (282,853) - - -

Employee benefits – other (1,606,346) - (1,606,346) (1,064,883) - (1,064,883)

Professional expenses (1,316,863) - (1,316,863) (1,762,369) (377,419) (2,139,788)

Foreign exchange gains/(losses) (2,091,729) - (2,091,729) 200,263 - 200,263

Other expenses (766,161) (4,399) (770,560) (1,619,081) (4,434) (1,623,515)

Earnings/(loss) before interest,

income tax, depreciation and

amortisation ('EBITDA') (5,397,084) (637,033) (6,034,117) (3,913,567) (906,024) (4,819,591)

Depreciation and amortisation

expenses (98,250) - (98,250) (178,501) - (178,501)

Earnings/(loss) before interest and

income tax ('EBIT') (5,495,334) (637,033) (6,132,367) (4,092,068) (906,024) (4,998,092)

Net financing (expense)/income (1,225,581) 3,909 (1,221,672) (5,073,637) 2,838 (5,070,799)

Earnings/(loss) before income tax

('EBT') (6,720,915) (633,124) (7,354,039) (9,165,705) (903,186) (10,068,891)

Income tax expense - - - - - -

Net loss for the period attributable

to equity holders of New Century

Resources Limited (6,720,915) (633,124) (7,354,039) (9,165,705) (903,186) (10,068,891)

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Segment assets and liabilities

Australia

31 Dec 2019

$

USA

31 Dec 2019

$

Total

31 Dec 2019

$

Australia

30 Jun 2019

$

USA

30 Jun 2019

$

Total

30 Jun 2019

$

Current assets 26,059,721 46,873 26,106,594 64,534,982 15,532 64,550,514

Non-current assets 370,239,747 833,287 371,073,034 245,471,586 828,370 246,299,956

Total assets 396,299,468 880,160 397,179,628 310,006,568 843,902 310,850,470

Current liabilities 110,753,293 145,187 110,898,480 93,734,860 723,062 94,457,922

Non-current liabilities 281,574,660 812,987 282,387,647 245,944,995 812,001 246,756,996

Total liabilities 392,327,953 958,174 393,286,127 339,679,855 1,535,063 341,214,918

Note 3. Depreciation and amortisation expense



$ $

Depreciation and amortisation of property, plant and equipment – refer note 12 (21,590) (178,501)

Amortisation of right-of-use assets – refer note 13 (76,660) -

(98,250) (178,501)

Note 4. Foreign exchange gains/(losses)



$ $

Foreign exchange gains/(losses) (2,091,729) 200,263

Foreign exchange losses in the current period are mainly due to revaluation of US dollar denominated receivables which arises from proceeds from sales during the development phase.

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Note 5. Financing income/(expense)



$ $

Financing income

Interest income 181,189 190,517

Financing expense

Unwind of discount relating to environmental rehabilitation provision – note 19 (1,386,731) (4,628,554)

Unwind of discount relating to lease liabilities – refer note 13 (16,130) -

Interest on deferred revenue - (417,856)

Fees on bank guarantee termination - (185,887)

Other - (29,019)

(1,402,861) (5,261,316)

Note 6. Income tax expense



$ $

Numerical reconciliation of income tax expense to prima facie tax payable

Loss from operations before income tax expense (7,354,039) (10,068,891)

Tax at the Australian tax rate of 30% (2018: 30%)

(2,206,212) (3,020,667)

Tax effect amounts which are not deductible/(taxable) in calculating taxable income:

Tax effect of different tax rate of overseas subsidiaries 15,727 22,580

Share based payments 113,956 -

Asset acquisition cost not deductible - 282,000

Income tax benefits not recognised 2,076,342 2,711,925

Other 187 4,162

Income tax expense - -

The Group has approximately $108.0 million (tax effected) of temporary differences and tax losses that have not been recognised as deferred tax assets. These temporary differences and tax losses have not been brought to account as they do not meet the recognition criteria as per the Group’s accounting policy.

No franking credits are available.

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Note 7. Cash and cash equivalents

31 Dec 2019 30 Jun 2019

$ $

Cash at bank 11,911,055 34,282,754

Cash on hand - 15

11,911,055 34,282,769

Refer to the Statement of Cash Flows for a reconciliation of the movement in cash and cash equivalents.

Amount of cash and cash equivalents held as USD at 31 December 2019 was US$7,578,173 (30 June 2019: US$4,844,886).

Note 8. Trade and other receivables

31 Dec 2019 30 Jun 2019

$ $

GST receivables 1,895,222 1,344,308

Other receivables 4,549,189 7,324,588

6,444,411 8,668,896

Other receivables comprise mainly outstanding invoice amounts of shipment during the development phase. The credit loss is not significant on the other receivables.

Note 9. Inventories

31 Dec 2019 30 Jun 2019

$ $

Consumables and spare parts – at cost 5,991,003 7,903,782

Consumables inventory are carried at lower of cost and net realisable value.

Note 10. Prepayments

31 Dec 2019 30 Jun 2019

$ $

Prepayments 1,760,125 7,945,067

The reduction in prepayments is mainly due to timing of payments and amortisation, and reclassification of loan establishment fees to borrowings during the period – refer to Note 16 to the Financial Statements.

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Note 11. Financial assets

31 Dec 2019 30 Jun 2019

$ $

MMG funding support payment receivable - 5,750,000

MMG agreed to pay a series of funding support payments for a total of $34,500,000 to support rehabilitation of the

Century Project. The final payment of $5,750,000 was received on 1 July 2019.

Note 12. Property, plant and equipment


12 months to 30 Jun 2019


$ $ $

Balance at beginning of the period 233,133,258 60,412,157 60,412,157

Additions 142,093,180 213,930,563 94,545,482

Capitalisation of right-of-use assets amortisation – note 13 5,579,267

Capitalisation of unwind of interest on lease liabilities – note 13 1,528,890 - -

Capitalisation of adjustment for effective borrowing rate – note 16 7,937,010 - -

Additions to rehabilitation asset – note 19 2,522,999 74,266,969 -

Depreciation expense for the period (21,590) (261,604) (178,501)

Proceeds from sale during development phase (84,829,029) (115,214,827) (12,732,503)

Balance at end of the period 307,943,985 233,133,258 142,046,635

The depreciation expense relates mainly to assets at Group corporate office. Any proceeds during development phase has been offset against the property, plant and equipment in accordance with the Group’s accounting policy. Proceeds against which shipment had not been made by 31 December 2019 has been treated as deferred proceeds – refer Note 15 to the Financial Statements. Total borrowing costs capitalised during the period amounted to $16,859,323 which includes $1,528,890 relating to unwind of interest on lease liabilities, $7,937,010 relating to adjustment for effective borrowing rate and $7,393,423 of interest and other borrowing costs. The amount capitalised during the year ended 30 June 2019 was $4,525,914.

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Note 13. Leases As a lessee, the Group leases assets, including Corporate office building and mining equipment at its Century Mine.

Transition The Group initially applied AASB 16 Leases from 1 July 2019 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information is not restated. Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC 4 Determining whether an Arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the definition of a lease in AASB 16. On transition to AASB 16, the Group assessed all the contracts that existed on the transition date. Impact on transition On transition to AASB 16, the Group recognised the following balances on 1 July 2019.

1 July 2019

$

Right-of-use assets 55,613,361

Lease liabilities 55,613,361

On transition, the right-of-use assets equalled the lease liabilities, hence there was no impact on the retained earnings. Balances at 31 December 2019 Right-of-use assets The movement in the right-of-use assets is reconciled below:



$ $

Balance at beginning of the period - -

Recognition on first time adoption of AASB 16 55,613,361 -

Amortisation - capitalised as Property, plant and equipment – note 12 (5,579,267)

Amortisation – expensed during the period (76,660) -

Balance at end of the period 49,957,434 -

The amortisation expensed during the period relates to leasing of the Group corporate office building. Amortisation of the leased assets at the Century Mine has been capitalised as Property, plant and equipment.

New Century

20

Lease liabilities The movement in the lease liabilities is reconciled below:



$ $

Balance at beginning of the period - -

Recognition on first time adoption of AASB 16 55,613,361 -

Interest unwind 1,545,020 -

Lease payments (6,604,478) -


Disclosed as

Current 10,946,693 -

Non-current 39,607,210 -


Of the total interest unwind of $1,545,020, an amount of $1,528,890 relating to leased assets at Century Mine was capitalised (refer to Note 12 to the Financial Statements), and the remaining amount of $16,130 relating to leasing of Group corporate office building that was expensed during the period. Lease liabilities are payable as follows:

31 Dec 2019 30 Jun 2019

$ $

Less than one year (gross amount) 13,549,444 -

Between one and five years (gross amount) 44,272,929 -

Total (gross amount) 57,822,373 -

Less: future interest (7,268,470) -

Carrying value 50,553,903 -

Policy applicable from 1 July 2019 At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in AASB 16. The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date. The right-of-use assets are subsequently amortised using either straight line or units of production method as relevant to the type of asset. In addition, the right-of-use assets are periodically adjusted by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using an incremental borrowing rate of six percent. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability and by reducing the carrying amount to reflect the lease payments made. The lease liability is remeasured when there is a modification in the lease contract, which can include a change in future lease payments or lease terms. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use assets. The Group presents the right-of-use assets and lease liabilities separately in the statement of financial position.

New Century

21

Policy applicable before 1 July 2019 For contracts entered into before 1 July 2019, the Group determined whether the arrangement was or contained a lease based on the assessment of whether:

• fulfilment of the arrangement was dependent on the use of a specific assets or assets; and

• the arrangement conveyed a right to use the asset. Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership were transferred to the Group were classified as finance leases. The Group did not have any finance leases in the comparative period. Lease payments for operating leases, where substantially all the risks and benefits remained with the lessor, were recognised as expenses on a straight line basis over the lease term. Leases that were classified as operating leases at 30 June 2019 met the definition of a lease from 1 July 2019 in AASB 16.

Note 14. Other financial assets

31 Dec 2019 30 Jun 2019

$ $

Deposit held as security guarantees 13,171,615 13,166,698

Term deposits held as security guarantees are for the benefit of other parties in guarantee of liabilities. They are interest bearing with the interest rate dependent on the term of the deposits. They are valued at the face value of the term deposits.

Note 15. Trade and other payables

31 Dec 2019 30 Jun 2019

$ $

Current unsecured liabilities

Trade payables 26,763,903 29,773,346

Other payables and accrued expenses 15,684,272 16,402,033

Deferred proceeds 28,676,669 31,704,089

71,124,844 77,879,468

At reporting date, it was not yet certain when commissioning will take place and therefore proceeds against which shipment had not been made by 31 December 2019 has been treated as deferred proceeds – refer to Note 12 to the Financial Statements.

New Century

22

Note 16. Borrowings

31 Dec 2019 30 Jun 2019

$ $

Secured - current

Borrowings 25,461,399 14,076,069

Secured – non-current

Borrowings 33,974,072 40,024,281

Total borrowings 59,435,471 54,100,350

The movement in borrowings was as follows.



$ $

Opening balance 54,100,350 -

Borrowings obtained US$42,900,000 - 61,237,599

Amount disclosed as financial liability at fair value through profit or loss - (7,137,249)

Adjustment for effective borrowing rate 7,937,010 -

Exchange differences 65,720 -

Establishment fee netted of against borrowings (2,667,609) -

Balance at end of period 59,435,471 54,100,350

During the previous period, the Group secured a financing facility with Varde Partners. This comprised a secured Senior facility of US$42,900,000 (A$61,237,599 at 30 June 2019 exchange rate) which has been drawn down. The Senior facility attracts interest at eight percent per annum and is repayable by scheduled payments over a period of 12 to 30 months after the utilisation date. The Senior facility also includes payments based on silver production which is capped at US$5,000,000. This has been recognised as a financial liability at fair value through profit or loss as disclosed Note 17 to the Financial Statements. The establishment fee in the comparative period was recognised as prepayments in Note 10 to the Financial Statements. Subsequent to 31 December 2019, on 17 January 2020, the Group announced the completion of the expansion of existing working capital facilities with Varde Partners from a total US$42,900,000 to US$70,900,000. The additional US$28,000,000 facility has a term of 2.5 years, carries an interest rate of eight percent per annum and first ranking security over all Century Project assets. It also includes a limited term silver royalty and options allocation. The details of the facilities are provided below.

Facility Existing

A$60 million facility

Additional

A$40 million facility

Facility type Senior secured (all assets) Senior secured (all assets)

Facility amount A$60,000,000 (US$42,900,000) A$40,000,000 (US$28,000,000)

Term 2.5 years from February 2019 2.5 years from January 2020

Interest rate 8% per annum 8% per annum

Silver royalty 20% of payable silver production limited

to 4 years (capped at US$5 million) 10% of payable silver production limited

to 4 years

Options None 25 million options at $0.25 per share,

3.5 year term

Materials conditions precedent None None

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23

Note 17. Financial liability at fair value through profit or loss

31 Dec 2019 30 Jun 2019

$ $

Current 1,920,000 1,233,331

Non-current 4,066,853 5,903,918


The movement in financial liability at fair value through profit or loss was as follows.



$ $

Opening balance 7,137,249 -

Additions 7,137,249

Repayments (1,187,795) -

Exchange differences 37,399 -


The financial liability at fair value through profit or loss represents the fair value of payments to be made under the Varde Senior loan facility which is dependent on forecast silver production. The payment is capped at US$5,000,000. During the period, payments of US$811,000 (A$1,187,795) were made resulting in the remaining maximum exposure of US$4,189,000 which equates to A$5,986,853 at the 31 December 2019 exchange rate.

Note 18. Employee benefits provision




$ $ $

Opening balance 1,269,054 678,548 678,548

Movement for the half-year 166,490 590,506 420,937

Balance at end of period 1,435,544 1,269,054 1,099,485

Employee benefits provision represents the annual leave and long service leave entitlements of the employees.

New Century

24

Note 19. Environmental rehabilitation provisions




$ $ $

Opening balance 200,828,797 117,297,685 117,297,685

Impact of change in discount rate 2,522,999 74,266,969 -

Interest unwind 1,386,731 9,221,790 4,628,554

Exchange differences 985 42,353 36,313

Balance at end of period 204,739,512 200,828,797 121,962,552

The Group has provisions for mine site restoration associated with the Century Project in Queensland and the Kodiak

Project in Alabama. The majority of the provision relates to the Century Project in Queensland. The Group assumes the

rehabilitation will be carried out at the end of life of the Group’s mining operations in estimating the environmental

rehabilitation provisions.

The impact of change in discount rate of $2,522,999 (30 June 2019: $74,266,969) relates to a change in estimate of the

discount rate, with the corresponding amount recognised in Property plant and equipment in accordance with the

Group’s accounting policy – refer to Note 12 to the Financial Statements.

Note 20. Assets held for sale


Pastoral Holding Company to Waanyi SPC Pty Ltd which had the 51 percent controlling interest in Riversleigh Pastoral

Holding Company.

Waanyi SPC Pty was established in 1998 in accordance with the Gulf Communities Agreement, the Native Title

Agreement for the Century Mine. The role of Waanyi SPC Pty is to be the corporate representative of the Waanyi

People, particularly in relation to the ownership and management of pastoral companies.

Of the agreed sale price of $9,750,000, a deposit of $10,000 had been received in December 2019, with the remaining

proceeds of $9,740,000 received in January 2020.

The 49 percent interest in the Lawn Hill and Riversleigh Pastoral Holding Company met the assets held for sale criteria

at 31 December 2019.

The carrying value of this investment as at 31 December 2019 was nil. Therefore, there was no impact on the statement

of financial position at 31 December 2019 from the reclassification of the investment to assets held for sale. There was

also no operational income, expense, or cashflow associated with this investment for the six months ended 31

December 2019.

The deposit of $10,000 received in December 2019 has been classified as deferred proceeds from sale of investment at

31 December 2019. The gain on sale of $9,750,000 has been recognised in the income statement, subsequent to the

half-year end, in January 2020.

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25

Note 21. Issued capital

There were no movements in issued capital in the prior half-year. The movement in issued capital during the period was as follows:

6 months 31 Dec 2019

Number of shares $

Opening balance – 1 July 2019 505,732,048 312,052,963

Shares issued on 8 August 2019 at 33 cents under placement 73,859,807 24,373,736

Shares issued on 18 September 2019 at 33 cents under placement 54,928,072 18,126,264

Shares issued on 18 September 2019 at 33 cents under placement 1,515,153 500,000

Shares issued on 20 September 2019 at 33 cents under share purchase plan 1,333,353 440,000

Shares issued on 18 November 2019 at 36 cents under Employee Share Plan 270,676 97,000

Shares issued on 18 November 2019 at 36 cents under Employee Share Plan 215,466 78,000

Total shares issued 132,122,527 43,615,000

Costs arising from issue of shares - (2,264,848)

Closing balance – 31 December 2019 637,854,575 353,403,115

The shares issued on 18 November 2019 at 36 cents under Employee Share Plan amounting to $97,000 did not result in receipt of cash. This was recognised as a debit to employee expense and credit to issued capital. Therefore, total cash proceeds from issue of shares was $43,518,000. Holders of ordinary shares have the right to receive dividends as declared and in the event of winding up the parent entity, to participate in the proceeds from the sale of all surplus assets in proportion to the number of shares held and the amount paid up.

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

New Century

26

Note 22. Key management personnel

Remuneration arrangements of key management personnel are disclosed in the 30 June 2019 annual financial report. There were no changes in the key management personnel or their remuneration arrangements since the release of the 30 June 2019 annual financial report to 31 December 2019.

Subsequent to the half-year end, on 20 January 2020, the Group announced changes to the terms of the employment for New Century Managing Director Patrick Walta. The revised terms were developed with the assistance of an independent remuneration consultant engaged by the Company’s Nomination and Remuneration Committee to help with the design of an appropriate peer comparable package. The updated employment terms are as follows:

• Role and term: Managing Director on an ongoing basis.

• Total Fixed Remuneration (TFR): $473,000 per annum inclusive of superannuation.

• Notice period: 6 months’ notice of termination by the Company or Managing Director.

• Short Term Incentive: Up to a maximum of 30 percent of TFR payable in cash subject to achieving targets set by the Board in accordance with the Company’s Short Term Incentive Plan.

• Long Term Performance Rights: 145 percent of TFR, calculated as up to 1,907,258 Performance Rights, subject to achieving maximum performance of the conditions (and also subject to shareholder approval at a later date).

• Change of Control Terms: An additional payment of 6 months' TFR in the event of a change of control. If employment is terminated within 6 months of a change of control, the Managing Director will not be entitled to any notice of termination or payment in lieu of notice.

Note 23. Financial instruments

The carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair value.

Note 24. Dividends

No dividend has been declared or paid by the Group during the half-year and the Directors do not at present recommend a dividend. No dividends were declared or paid in the comparative periods.

Note 25. Commitments and contingent liabilities

The commitments and contingent liabilities of the Group are set out in the Annual Report of the Group. There has been no significant change in commitments and contingent liabilities during the half-year.

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27

Note 26. Matters subsequent to the end of the half-year

In January 2020, the Group announced the completion of the expansion of existing working capital facilities with Varde Partners from a total US$42,900,000 to US$70,900,000. Refer to Note 16 to the Financial Statements for further details.


Pastoral Holding Company. Refer to Note 20 to the Financial Statements for further details.

In February 2020, the group announced the initiation of slurry commissioning of the upgraded rougher circuit at the Century Project, allowing the full capacity of the entire processing plant to be incorporated into operations for the first time. The Century Project will progressively transition from 9Mtpa to 12Mtpa (33 percent throughput increase) over the remainder of financial year 2020. This achievement represents the third and final milestone of refurbishment activities required for the scheduled ramp up to 12Mtpa throughput. The upgraded rougher circuit is anticipated to provide a further increase to overall zinc metal production, with the additional volumetric capacity allowing for both higher throughput rates and improved recoveries (via longer slurry residence time through the rougher/scavenger circuit). The rougher expansion also allows for continued lowering of overall unit costs of production via increasing metal production against a 70 percent fixed cost base on site.

There have been no other events that have occurred subsequent to the reporting date which have significantly affected or may significantly affect the Group’s operations or results in future years.

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28

DIRECTORS' DECLARATION

The Directors of the Company declare that:

1. the financial statements and notes, as set out on pages 7 to 27 are in accordance with the Corporations Act

2001 and:

a. comply with Accounting Standards, which, as stated in accounting policy Note 1 to the financial

statements, constitutes explicit and unreserved compliance with International Financial Reporting

Standards (IFRS); and

b. give a true and fair view of the financial position as at 31 December 2019 and of the performance for the

half-year ended on that date of the Group;

2. in the Directors’ opinion there are reasonable grounds to believe that the Group will be able to pay its debts

as and when they become due and payable.

This declaration has been made after receiving the declarations required to be made to the Directors in accordance

with Section 295A of the Corporations Act 2001 for the half-year ended 31 December 2019.

This declaration is made in accordance with a resolution of the Board of Directors.

Robert McDonald Chairman

13 March 2020

Deloitte Touche Tohmatsu

ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 Tel: +61 3 9671 7000 www.deloitte.com.au

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network.

29

Independent Auditor’s Review Report to the Members of New Century Resources Limited

We have reviewed the accompanying half-year financial report of New Century Resources

Limited, which comprises the condensed statement of financial position as at 31 December 2019, the condensed statement of profit or loss and other comprehensive income, the condensed statement of cash flows and the condensed statement of changes in equity for the half-year ended on that date, selected explanatory notes and, the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the end of the half-year or from time to time during the half-year as set out on pages 7 to 28.

Directors’ Responsibility for the Half-Year Financial Report The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that gives a true and fair view and is free

from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order

to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of the consolidated entities’ financial position as at 31 December 2019 and its performance for the half-year ended on that date and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of New Century Resources Limited, ASRE 2410 requires that

we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons

responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly,

we do not express an audit opinion. Auditor’s Independence Declaration In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of New Century Resources Limited

would be in the same terms if given to the directors as at the time of this auditor’s review report.

30

Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes

us believe that the half-year financial report of New Century Resources Limited is not in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the consolidated entity’s financial position as at 31 December

2019 and of its performance for the half-year ended on that date; and

(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

DELOITTE TOUCHE TOHMATSU

Suzana Vlahovic Partner Chartered Accountants Melbourne, 13 March 2020

limited and controlled entities - new century resources€¦ · the principal activities of the...

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