CHATHAM ROCK PHOSPHATE LIMITED
(incorporated in Canada)
(A DEVELOPMENT STAGE COMPANY)
PLEASE NOTE:
These are the Consolidated Financial Statements of
Antipodes Gold Limited
(as it was then named)
for the
YEAR ENDED DECEMBER 31, 2016
(Stated in Canadian Dollars)
That is, the Antipodes Gold group BEFORE the reverse takeover
and name change to Chatham Rock Phosphate.
CONTENTS Page
Canadian declaration - Management''s Responsibility for Financial Reporting
2
New Zealand declaration - Directors'' declaration 3
Auditor''s reports 4-8
Statement of Financial Position 9
Statement of Changes in Equity 10
Statement of Comprehensive Income 11
Statement of Cash Flows 12
Notes to the Financial Statements 13 - 32
CANADIAN DECLARATION
MANAGEMENT''S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Chatham Rock Phosphate
Limited and all the information in this annual report are the responsibility
of management and have been approved by the Board of Directors.
The consolidated financial statements have been prepared by management in
accordance with International Financial Reporting Standards ("IFRS"). When
alternative accounting methods exist, management has chosen those it deems
most appropriate in the circumstances. Financial statements are not precise
since they include certain amounts based on estimates and judgments.
Management has determined such amounts on a reasonable basis in order to
ensure that the financial statements are presented fairly, in all material
respects. Management has prepared the financial information presented
elsewhere in the annual report and has ensured that it is consistent with
that in the financial statements.
Chatham Rock Phosphate maintains systems of internal accounting and
administrative controls in order to provide, on a reasonable basis, assurance
that the financial information is relevant, reliable and accurate and that
the Company''s assets are appropriately accounted for and adequately
safeguarded.
The Board of Directors is responsible for ensuring that management fulfills
its responsibilities for financial reporting and is ultimately responsible
for reviewing and approving the financial statements. The Board carries out
this responsibility principally through its Audit Committee. ("Committee").
The Committee is appointed by the Board, and the majority of its members are
independent non-executive directors. The Committee meets at least four times
a year with management, and as required with the external auditors, to
discuss internal controls over the financial reporting process, auditing
matters and financial reporting issues, to satisfy itself that each party is
properly discharging its responsibilities, and to review the quarterly and
the annual reports, the financial statements and the external auditors''
report. The Committee reports its findings to the Board for consideration
when approving the financial statements for issuance to the shareholders. The
Committee also considers, for review by the Board and approval by the
shareholders, the engagement or reappointment of the external auditors. KPMG,
the external auditors, were engaged to audit the consolidated financial
statements in accordance with Canadian Generally Accepted Auditing Standards
and International Standards on Auditing (New Zealand) on behalf of the
shareholders. KPMG has full and free access to the Audit Committee.
Chris Castle
Chief Executive Officer
Robyn Hamilton
Chief Financial Officer
May 24, 2017
NEW ZEALAND DECLARATION
DIRECTORS'' DECLARATION
In the opinion of the directors of Chatham Rock Phosphate Limited, the
consolidated financial statements and notes, on pages 9 to 32:
o materially comply with both International Financial Reporting
Standards ("IFRS") and generally accepted accounting practice in New Zealand
and give a true and fair view of the financial position of the company and
the group as at December 31, 2016 and the results of their operations and
cash flows for the year ended on that date, and
o Have been prepared using appropriate accounting policies, which have
been consistently applied and supported by reasonable judgements and
estimates.
The directors believe that proper accounting records have been kept which
enable, with reasonable accuracy, the determination of the financial position
of the company and the group and facilitate compliance of the financial
statements with the Financial Reporting Act 2013 and Financial Markets
Conduct Act 2013.
The directors consider that they have taken adequate steps to safeguard the
assets of the company and group, and to prevent and detect fraud and other
irregularities. Internal control procedures are also considered to be
sufficient to provide a reasonable assurance as to the integrity and
reliability of the financial statements.
The directors are pleased to present the financial statements for Chatham
Rock Phosphate Limited for the year ended December 31, 2016.
For and on behalf of the Board of Directors
___________________________ __________________________________
C Castle J Hatchwell
Director Director
Date: 24 May 2017 Date: 24 May 2017
NZ INDEPENDENT AUDITORS'' REPORT BASED ON INTERNATIONAL FINANCIAL REPORTING
STANDARDS
NZ Independent AUDITORS'' Report
NZ Independent AUDITORS'' Report page 3
Canadian Audit Report
Canadian Audit Report page 2
CHATHAM ROCK PHOSPHATE LIMITED (A Development Stage Company)
Statement of Financial Position
(in thousands of Canadian Dollars)
As at 31 December
2016
2015
ASSETS $ $
Current assets
Cash and cash equivalents (Note 6) 297 4
Trade and other receivables (Note 7) 11 11
Prepayments 1 1
Exploration and Mineral properties held for sale (Note 8) -
2,195
Total current assets 309 2,211
Total assets 309 2,211
LIABILITIES
Current liabilities
Trade and other payables (Note 9) 143 1,004
Payables to be settled in AXG shares (Note14(c)&(d)) 156 -
Joint venture obligations - 766
Accrued liabilities - 43
Total current liabilities 299 1,813
Total liabilities 299 1,813
EQUITY
Common Shares (Note 10(a)) 29,186 29,186
Contributed Surplus (Note 10(b)) 9,946 9,946
Deficit Accumulated through
Development Stage (39,122)
(38,734)
Total equity 10 398
Total liabilities and equity 309 2,211
APPROVED ON BEHALF OF THE BOARD
"signed" Christopher Castle "signed" Justin Cochrane
Christopher Castle, Director Justin Cochrane, Director
(The accompanying notes are an integral part of these financial statements.)
CHATHAM ROCK PHOSPHATE LIMITED
(A Development Stage Company)
Statement of Changes in Equity
(in thousands of Canadian Dollars except for share issuance costs)
Common Shares
Common Shares
Contributed
Surplus
Share Purchase Warrants Deficit
accumulated during the
development stage
Shareholders''
equity
total
# $ $ $ $ $
Balance - January 1, 2015 10,566,578 29,186 9,872 74
(38,982) 150
Expiration of warrants - - 74 (74)
Total comprehensive profit for the period
-
-
-
-
248
248
Balance - January 1, 2016 10,566,578 29,186 9,946 -
(38,734) 398
Total comprehensive loss for the period
-
-
-
-
(388)
(388)
Balance - December 31, 2016 10,566,578 29,186 9,946 -
(39,122) 10
(The accompanying notes are an integral part of these financial statements.)
CHATHAM ROCK PHOSPHATE LIMITED
(A Development Stage Company)
Statement of Comprehensive Income
(in thousands of Canadian Dollars, except per share amounts)
For the year ended 31 December 2016 2015
Revenue - -
Cost of sales - -
Gross (Loss)/Profit - -
Administrative and Personnel expenses (Note 11 and 12) (344) (443)
Mineral properties adjustment (Note 8) - 741
Results from operating activities (344) 298
Finance expense (Note 13) (44) (50)
(Loss)/Profit before Income Taxes (continuing operations) (388) 248
Income tax recovery/(expense) - -
Net (Loss)/Profit for the period from continuing operations (388) 248
Total Comprehensive (loss)/profit for the period (388) 248
cents cents
Basic (loss)/profit per share (Note 10 c) (3.67) 2.35
Diluted profit/( loss) per share (Note 10 c) (3.67) 2.22
(The accompanying notes are an integral part of these financial statements).
CHATHAM ROCK PHOSPHATE LIMITED
(A Development Stage Company)
Statement of Cash Flows
(in thousands of Canadian Dollars)
For the year ended 31 December 2016 2015
$ $
Cash flows from (used in) :
Operating Activities
Interest received - -
Cash receipts from customers - -
Payments to suppliers and employees (1,049) (200)
Net cash used in Operating Activities (Note 19) (1,049) (200)
Financing Activities
(Repayment)/Loans from Directors, Management & other (Note 14) (301)
200
Net cash used by Financing Activities (301) 200
Investing Activities
Proceeds from sale of mineral properties 1,643 -
Net cash from Investing Activities 1,643 -
Net increase/(decrease) in cash and cash equivalents 293 -
Cash and cash equivalents - beginning of year 4 4
Cash and cash equivalents - end of period 297 4
(The accompanying notes are an integral part of these financial statements)
1. Reporting entity
On 24 February 2017, Antipodes Gold completed the reverse takeover of the
New Zealand based company, Chatham Rock Phosphate Limited and renamed
Antipodes Gold as Chatham Rock Phosphate.
The New Zealand based subsidiary acquired in the reverse takeover has been
renamed Chatham Rock Phosphate (NZ) Limited.
Antipodes Gold Limited, renamed Chatham Rock Phosphate Limited (the
"Company"), is incorporated under the Business Corporations Act (British
Columbia) and listed on the Toronto Stock Exchange''s Venture Exchange
("TSX-V"). The Company is also registered under the New Zealand Companies Act
1993 and listed on the New Zealand Stock Exchange''s Alternative Market
("NZAX"). The Company is an FMC reporting entity under part 7 of the
Financial Markets Conduct Act 2013 (New Zealand) and Financial Reporting Act
2013 (New Zealand). The Company is a tier 1 entity in accordance with XRB
Standard A1 Accounting Standards Framework.
The Company''s registered offices are:
o Suite 1750, 1185 West Georgia Street
Vancouver, B.C., Canada V6E 4E6
o 3a Douglas Avenue, Auckland 1025, New Zealand
Accordingly, the Company has reporting obligations in both the Canadian and
New Zealand jurisdictions.
The consolidated group financial statements presented as at and for the year
ended December 31, 2016 comprise only Antipodes Gold and its then
subsidiaries (together referred to as the "Group").
That is, the Antipodes Gold group BEFORE the reverse takeover and name change
to Chatham Rock Phosphate.
The Company, through its wholly owned legal subsidiary Glass Earth
(New Zealand) Limited ("GENZL"), was engaged in the acquisition and
exploration of mineral properties in New Zealand.
2. Basis of Preparation
(a) Statement of Compliance
These financial statements comply with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standards Board.
They have also been prepared in accordance with the Financial Reporting Act
2013 and Financial Markets Conduct Act 2013 which requires compliance with
generally accepted accounting practice in New Zealand.
They comply with New Zealand equivalents to International Financial Reporting
Standards and other applicable Financial Reporting Standards, as appropriate
for profit-oriented entities.
The financial statements were approved by the Board of Directors on May 24,
2017.
(b) Basis of measurement
The financial statements have been prepared on the historical cost basis
except for the following which are measured at fair value:
o Share based payment transactions
o Valuation of warrants
(c) Segment reporting
The Company used to operate in a single segment: gold exploration
(d) Functional and presentation currency
These financial statements are presented in Canadian dollars ($), which is
the Company''s functional currency. All financial information presented in
Canadian dollars has been rounded to the nearest thousand.
(e) Use of estimates and judgements
The preparation of financial statements in conformity with IFRS requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of any contingent assets and
liabilities as at the date of the financial statements, as well as the
reported amounts of revenue and expenses during the reporting period. The
Group regularly reviews these estimates and assumptions that affect the
financial statements and actual results could differ from those estimates.
Significant areas where management estimates and judgments are applied are:
o the recoverability of exploration expenditures on mineral properties;
o the valuation of tax accounts;
o share based payments; and
o going concern
In the opinion of management, all adjustments considered necessary for fair
presentation of the results for the periods presented are reflected in the
financial statements.
3. Going Concern Assumption
These financial statements have been prepared using the assumption of going
concern.
Post the sale of its gold exploration assets, refer Note 8, the directors are
satisfied the company had sufficient funds to meet all of its liabilities and
obligations as it pursued the successful completion of the takeover offer
from/of Chatham Rock Phosphate Limited, refer Note 21.
Furthermore the going concern assumption has been applied on the basis that
the Group, following the successful completion of the takeover, will manage
its corporate costs appropriately within existing available funds and will
raise further funds to pursue its corporate goals, including diversifying the
Group from a single project focus and gaining the required marine consent
from the Environmental Protection Authority for the Chatham Rise project.
For the year ended December 31, 2016, the Group had a net loss of $388,000
(twelve months ended December 31, 2015: net profit of $248,000), working
capital surplus of $166,000 (December 31, 2015: working capital surplus of
$398,000) with an accumulated deficit at December 31, 2016 of $39,122,000
(December 31, 2015: $38,734,000).
4. Significant Accounting Policies
The accounting policies set out below have been applied consistently to all
periods presented in these financial statements, and have been applied
consistently by Group entities.
a) Basis of Consolidation
Business combinations
Business combinations are accounted for using the acquisition method as at
the acquisition date, which is the date on which control is transferred to
the
Group. Control is the power to govern the financial and operating policies
of an entity so as to obtain benefits from its activities. In assessing
control, the
Group takes into consideration potential voting rights that currently are
exercisable.
Transactions costs, other than those associated with the issue of debt or
equity securities, that the Group incurs in connection with a business
combination are expensed as incurred. Any contingent consideration payable
is measured at fair value at the acquisition date. If the contingent
consideration is classified as equity, then it is not remeasured and
settlement is accounted for within equity.
Otherwise, subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss. The Group recognises the
fair value of all identifiable assets, liabilities and contingent liabilities
of the acquired business.
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements
of subsidiaries are included in the consolidated financial statements from
the date that control commences until the date that control ceases.
Investments in jointly controlled operations
Joint operations are those arrangements over whose activities the Group has
joint control, established by contractual agreement and requiring unanimous
consent for strategic financial and operating decisions.
Transactions eliminated on consolidation
Intra-group balances are eliminated in preparing the consolidated financial
statements.
b) Mineral Properties
Direct property acquisition costs, holding costs, field exploration and field
supervisory costs relating to specific properties are capitalized as mineral
properties and deferred until the properties are brought into production, at
which time they are amortized on a unit of production basis, or until the
properties are abandoned, sold or considered to be impaired in value, at
which time an appropriate charge to profit and loss will be made.
Costs include the cash consideration paid and the fair market value of the
shares issued, if any, on the acquisition of exploration properties.
Properties acquired under option agreements whereby payments are made at the
sole discretion of the Group are recorded in the accounts at such time as the
payments are made. Costs incurred for administration and general exploration
that are not project specific, are charged to profit and loss. The recorded
amounts for acquisition costs of properties and their related capitalized
exploration expenses represent actual expenditures incurred and are not
intended to reflect present or future values.
The Group reviews the capitalized costs on its properties on a periodic, or
at least annual, basis and will recognize an impairment in value based upon
the
stage of exploration work programs proposed, current exploration results and
upon management''s assessment of the future probability of profitable
revenues from each property, or from the sale of the relevant property.
Management''s assessment of a property''s estimated current fair value may
also be based upon a review of other property transactions that have occurred
in the same geographic area as that of the property under review.
The recovery of costs of mining claims and deferred exploration is dependent
upon the existence of economically recoverable reserves, the ability of the
Group to obtain the necessary financing to complete exploration and
development and future profitable production or proceeds from disposition of
such properties.
Exploration and evaluation expenditure incurred by or on behalf of the Group
is accumulated separately for each area of interest. Each area of interest is
limited to an individual geological area which is related to a known or
probable mineral resource and is considered to constitute a favourable
environment for the presence of mineral deposits.
Exploration and evaluation expenditure for each area of interest is
capitalised and carried forward provided that one of the following conditions
is met:
? such costs are expected to be recouped through successful development
and exploitation of the area of interest or, alternatively, by its sale; or
? exploration activities in the area of interest have not yet reached a
stage which permits a reasonable assessment of the existence or otherwise of
economically recoverable reserves, and active and significant operations in
relation to the area are continuing.
Expenditure is not carried forward in respect of any area of interest unless
the company''s rights of tenure to that area of interest are current.
Mining assets
Mining assets were recorded at cost of acquisition less sales, recoupment and
losses. Cost included pre-production expenditure incurred during the
development of the mine.
c) Property and Equipment
Recognition and measurement
Items of property and equipment are measured at cost less accumulated
depreciation and any impairment.
Subsequent Costs
The cost of replacing part of an item of property and equipment is recognised
in the carrying amount of the item if it is probable that the future economic
benefits embodied within the part will flow to the Group and its cost can be
measured reliably. The costs of the day-to-day servicing of property and
equipment are recognised in profit or loss as incurred.
Depreciation
Depreciation is recognised in profit or loss on a straight line basis over
the estimated useful lives of each part of an item of property and equipment
as follows:
Computer Equipment 3 years
Mining Equipment 4 to 10 years
Motor Vehicles 5 years
Office Furniture & Equipment 10 years
d) Intangible assets
Software costs have a finite useful life. Software costs are capitalized and
amortized on a straight line basis over the estimated economic life of three
years.
e) Foreign Currency Transactions
Transactions in foreign currencies are translated to the respective
functional currencies of Group entities at exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in foreign
currencies at reporting date are retranslated to the functional currency at
the exchange rate at that date. The foreign currency gain or loss on monetary
items is the difference between amortised cost in the functional currency at
the beginning of the period, adjusted for effective interest and payments
during the period, and
the amortised cost in foreign currency translated at the exchange rate at the
end of the period. Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are retranslated to the functional
currency at the exchange rate at the date that the fair value was determined.
Foreign currency differences arising on retranslation are recognised in
profit or loss.
f) Financial instruments
The Company classified its cash and cash equivalents and amounts receivable
as loans and receivables, which are measured at amortized cost. Accounts
payable and accrued liabilities are classified as other financial
liabilities, which are measured at amortized cost. The carrying amounts
related to Trade and other receivables, Trade and other payables and Accrued
Liabilities approximate their fair value due to the relatively short periods
to maturity of these financial instruments.
g) Leased assets
Group entities lease certain land and buildings. Operating lease payments,
where the lessors effectively retain substantially all the benefits of
ownership of the leased items, are recognised in profit and loss in the
statement of comprehensive income in equal installments over the lease term.
h) Mineral Property Impairment
The Group reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable, but at least annually.
An impairment loss is recognised if the carrying amount of an asset or its
cash-generating unit ("CGU") exceeds its recoverable amount. A CGU is the
smallest identifiable asset group that generates cash flows that are largely
independent from other assets and groups. Impairment losses are recognised in
profit or loss. Impairment losses recognised in respect of CGUs are allocated
to reduce the carrying amount of the other assets in the unit (group of
units) on a pro rata basis.
The recoverable amount of an asset or CGU is the greater of its value in use
and its fair value less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset.
Exploration and Evaluation expenditure accumulated and carried forward (as
Mineral Properties) is assessed based on recoverable amount.
i) Income Taxes
Income tax expense comprises current and deferred tax. Income tax expense is
recognised in profit or loss except to the extent that it relates to items
recognised directly in other comprehensive income, in which case it is
recognised in other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amount used for taxation purposes. Deferred tax is not recognised for
the following temporary differences: the initial recognition of goodwill, the
initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit,
and differences relating to investments in subsidiaries and jointly
controlled
entities to the extent that they probably will not reverse in the foreseeable
future. Deferred tax is measured at the tax rates that are expected to be
applied to the temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised for unused tax losses, tax credits and
deductible temporary differences to the extent that it is probable that
future taxable profits will be available against which temporary difference
can be utilized. Deferred tax assets are reviewed at each reporting date and
are reduced to the extent that it is no longer probable that the related tax
benefit will be realized.
j) Joint Arrangements
Joint arrangements are a contractual agreement whereby two or more parties
undertake an economic activity that is subject to unanimous consent.
When a member of the group participates in a joint arrangement classified as
a joint operation, that member recognises its proportionate interest in the
individual assets, liabilities, revenue and expenses of the joint operationin
the financial statements under the appropriate headings.
k) Payables
Trade and other payables are recognised when the group becomes obliged to
make future payments resulting from the purchase of goods and services.
l) Common Shares
Common shares are classified as equity. Incremental costs directly
attributable to the issue of common shares and share options are recognised
as a deduction from equity.
m) Employee benefits
Employee entitlements to salaries and wages, annual leave, bonuses and other
benefits are recognised when they accrue as a result of services rendered
prior to balance date.
n) Stock based Compensation
The Company''s shareholders have approved a stock option plan. Under the
plan, stock based compensation awards will be available to officers,
directors, employees and non employees. All stock-based payments made to
employees have been accounted for using a fair value-based method of
accounting. The fair value of each stock option is accounted for in profit
and loss, over the vesting period thereof, and the related credit is included
in contributed surplus. The amount recognised as an expense is adjusted to
reflect the number of awards for which related service and non-market
verifying conditions are expected to meet such that the amount ultimately
recognised
as an expense is based on the number of awards that meet the related service
and non-market performance conditions at the vesting date. If and when the
stock options are ultimately exercised and are issued, the applicable units
of additional paid-in capital and contributed surplus will be transferred to
share capital.
The fair value is calculated based on the Black Scholes option pricing model.
This model was developed for use in estimating the fair value of traded
options that have no vesting restrictions and are fully transferable.
The fair value of stock options granted to non-employees is recognised as the
fair value of the goods or services received.
The Company''s stock-based compensation plan is described in Note 10 (c).
o) Earnings per Share
The Company presents basic and diluted earnings per share for its ordinary
shares. Basic earnings per share is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. Diluted earnings per
share is determined by adjusting the profit or loss attributable to ordinary
shareholders of the Company and the weighted average number of ordinary
shares outstanding for the effects of all dilutive potential ordinary shares,
which comprise share warrants and options.
p) Determination of fair value
Share based payment transactions
The fair values of employee stock options are measured using a Black-Scholes
model. Measurement inputs include share price on measurement date, exercise
price of the instrument, expected volatility (based on 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 behavior), 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 fair value.
q) Revenue
Revenue from the sale of goods is measured at the fair value of consideration
received or receivable, net of returns and allowances. Revenue is recognised
when the significant risks and rewards of ownership have been transferred to
the buyer and recovery of the consideration is probable.
r) Interest
Interest income is recognised as it accrues, using the effective interest
method.
s) Farm-In Expenditure
Expenditures incurred on exploration "farm-in" projects are capitalized while
the farm-in obligations are being undertaken.
Should an equity interest in the project not vest due to non-compliance of
the farm-in obligations or otherwise, accumulated expenditures are written
off to profit or loss in the statement of comprehensive income.
t) Segment Reporting
The determination of the Company''s operating segments and the information
reported for the operating segments is based on the management approach. The
Company''s President and Chief Executive Officer, has been identified as the
Company''s chief decision maker for the purpose of segment reporting. The
Company only operates in New Zealand and reports internally using the same
reports and accounting policies as used in the annual financial statements.
The Company operates in a single segment: gold exploration.
u) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with
maturities of three months or less from the acquisition date that are subject
to insignificant risk of changes in their fair value. Monies held in escrow
by Trust are also included in cash and cash equivalents.
v) New standards and interpretations not yet adopted
The following standards and interpretations, which are considered relevant to
the group but not yet effective for the period ended December 31, 2016, have
not been applied in preparing the financial statements:
IFRS 9, Financial Instruments: Classification and Measurement
IFRS 9 (2009), IFRS 9 (2010) and IFRS 9 (2013) together will replace parts of
IAS 39, Financial Instruments: Recognition and Measurement. The new standard
simplifies the measurement model and establishes two primary measurement
categories for financial assets (amortised cost and fair value) and adds
requirements related to the classification and measurement of financial
liabilities, and derecognition of financial assets and liabilities. The
effective date is annual periods beginning on or after 1 January 2018. It is
not expected to have a material impact on the group''s financial statements.
IFRS 15, Revenue from Contracts with Customers
This standard was issued in May 2014, and will replace all existing guidance
for revenue recognition, including IAS 11, Construction Contracts and IAS 18,
Revenue. The effective date is annual periods beginning on or after 1 January
2017. It is not expected to have a material impact on the group''s financial
statements.
5. Segment Information - Identification of reportable segments
The Group has identified its operating segments based on the internal reports
reviewed and used by the Company''s President and Chief Executive Officer,
(the Company''s chief operating decision maker), in assessing performance and
in determining the allocation of resources.
The Company had one segment, being Gold Exploration and was primarily focused
on the location and definition of a large hard-rock gold deposit.
6. Cash and cash equivalents
2016 2015
$ $
Bank balances 297 4
297 4
7. Trade and other receivables
2016 2015
$ $
Other receivables 11 11
11 11
8. Exploration and Mineral Properties
2016
2015
$ $
Balance - beginning of period 2,195 1,436
Expenditure on Projects:
Geological consulting, mapping and modeling
-
18
Reversal of provision of Mineral Properties
-
741
Sale of Mineral Properties (2,195) -
Balance - end of period - 2,195
On February 26, 2016, the Company''s wholly owned subsidiary, Glass Earth (New
Zealand) Limited ("GENZL"), settled the sale of all of its gold exploration
assets to its joint venture partners ("OceanaGold Waihi") for NZ$1.5m
(C$1.43m) in cash and the assumption of joint venture liabilities associated
with the permits (as more particularly set out below).
o OceanaGold Waihi assumed responsibility for all unpaid cash calls
owed by GENZL;
o GENZL transferred and OceanaGold Waihi assumed responsibility for all
GENZL''s royalty obligations associated with the permits.
Region Opening Balance
January
1, 2015
Expenditure
to December
31, 2015
Amortisation to December
31, 2015 Reversal of provision impairment & Provisions
to December
31, 2015
Disposals
to December
31, 2015 Closing Balance
December
31, 2015
Hard Rock $ $ $ $ $ $
Hauraki 1,331 18 - 741 - 2,090
Waihi West 105 - - - -
105
1,436 18 - 741 - 2,195
9. Trade and other payables
2016 2015
Current Liabilities $ $
Trade payables 83 154
Other payables 60 850
Payables to be settled with AXG shares 156 -
Current Payables 299 1,004
10. Shareholders'' Equity
a) Common Shares
Authorized: Unlimited number of common shares with no par value.
Issued and Outstanding (Group):
Common Shares Amount
# $
Outstanding January 1, 2015 10,566,578 29,186
Outstanding December 31, 2015 & 2016 10,566,578 29,186
The holders of common shares are entitled to an equal share in distributions
and to one vote per share at meetings of the Company.
b) Contributed Surplus
The following summarizes contributed surplus activity during the year for the
company and group.
2016 2015
$ $
Balance, beginning of period 9,946 9,872
Expiration of Share Purchase Warrants
74
Balance, end of period 9,946 9,946
c) Earnings per share (cents)
The calculation of basic and fully diluted earnings per share at December 31,
2016 was based on the loss attributable to ordinary shareholders of $388,000
(December 31, 2015: Profit of $248,000) and a weighted average number of
ordinary shares on issue as at the date of these financial statements of
10,566,578 (December 31, 2015: 10,566,578).
Reconciliation of shares outstanding to weighted average shares
December 31, 2016 December 31,
2015
Shares Outstanding - January 1 (Note 10a)) 10,566,578 10,566,578
Weighted Average Shares used for basic EPS 10,566,578 10,566,578
Potential shares from convertible debt - 600,000
Weighted Average Shares used for diluted EPS 10,566,578 11,166,578
11. Administrative expenses
2016 2015
Auditors Remuneration (KPMG) 17 27
Non audit fees paid to KPMG * 25 18
Consultancy fees - 20
Depreciation - 1
Directors fees - 34
General and administration -22 56
Professional fees 194 107
Registry and filing 52 47
266 310
*Fees paid for TSX.V Filing Statement audit and taxation services
12. Personnel expenses
2016 2015
Wages and salaries
(accrued but unpaid) 78 133
78 133
13. Finance income and expense
2016 2015
Foreign exchange gains/(Losses) (44) (50)
Net finance expense (44) (50)
14. Related Party Transactions
Related party transactions are in the normal course of business and are
measured at the exchange amount, which is the fair value as agreed between
management and the related parties.
a) Remuneration of $2,313 has been paid to Simon Henderson (CEO) for the
twelve months to December 31, 2016 (twelve months to December 31, 2015:
accrued $54,562. The outstanding balance for Mr. Henderson is $39,973 (twelve
months to December 31, 2015: $115,713).
b) Remuneration of $20,413 has been paid and $45,389 has been accrued
for Peter Liddle (CFO) for the twelve months to December 31, 2016 (twelve
months to December 31, 2015: accrued $45,070). The outstanding balance for
Mr. Liddle is $85,319 (twelve months to December 31, 2015: $123,562).
c) Remuneration of $10,230 has been accrued for Thomas Rabone (former
CEO) for the twelve months to December 31, 2016 (twelve months to December
31, 2015: accrued $32,922). The outstanding balance for Mr. Rabone is
$19,986 (twelve months to December 31: $57,866).
o Messrs. Henderson, Liddle and Rabone have agreed to accept payment of
remuneration owed as at 31 December 2015 in Antipodes Gold shares (subject to
TSX approval).
d) No directors'' fees were accrued or paid for the twelve months to
December 31, 2016. Directors'' fees of $33,750 were accrued for non-executive
directors (Adrian Fleming $18,750 and Justin Cochrane $15,000) for the period
1 January 2015 to 31 December 2015. No directors'' fees were accrued or paid
for in 2013 or 2014. These directors have agreed to accept payment of this
accrued remuneration in Antipodes Gold shares (subject to TSX approval).
e) All outstanding loans totaling $40,000 from directors and management
were repaid in March 2016. No further loans were received for the twelve
months to December 31, 2016.
f) Group entities
Legal subsidiaries Country of
incorporation Ownership
Interest (%)
2016 2015
Glass Earth (New Zealand) Limited New Zealand 100 100
HPD New Zealand Limited New Zealand 100 100
Glass Earth Geothermal Limited New Zealand 100 100
Glass Earth Mining Limited New Zealand 100 100
Goldmines New Zealand Limited New Zealand 100 100
15. Income Taxes
The Group had tax operating losses available to be applied against future
years'' income which could only be retained by continuing compliance with the
usual shareholder ownership continuity rules.
This shareholder ownership continuity was lost on 24 February 2017, as
explained in Note 21, Subsequent Events. Therefore, all these historical tax
losses have been extinguished.
In order to record a future income tax benefit, it must be more likely than
not that the future tax asset resulting from the tax losses available for
carry forward will be realized. Given the Group''s classification as a
development stage company and uncertainty regarding future profitability, no
future income tax benefit is recognized (except as an offset to a deferred
tax liability as set out in the note below).
16. Financial Risk Factors and Management
The group has exposure to the following risks arising from financial
instruments:
o Market risk
o Credit risk
o Liquidity risk
The Board of Directors has overall responsibility for the establishment and
oversight of the Company''s risk management framework. A summary of the
Group''s risk exposures as it relates to financial instruments is reflected
below:
a) Market Risk
Interest rate risk - The Group held $297,000 in cash and cash equivalents at
twelve months to December 31, 2016. The Group invests cash surplus to its
operation in interest bearing accounts held in a major New Zealand chartered
bank. The Group periodically assesses the quality of its investment with the
bank and is satisfied with the credit rating of the bank.
At reporting date the cash and cash equivalents were the only financial
instruments with interest rate risk exposure. The Group''s cash is held
primarily in interest bearing accounts, the rates of which are not fixed. A
100 basis point change in the interest rate would affect the Company by an
annualized amount of interest equal to approximately $2,970.
Foreign currency risk - The Group''s operational activities are all within New
Zealand and 97% of all cash transactions are in New Zealand Dollars (NZD). As
at twelve months to December 31, 2016 the Group held all of its cash and
equivalents in NZD.
b) Credit Risk and Concentrations of Credit Risk
The Group is not exposed to major credit risks attributable to customers.
The Group monitors the credit worthiness of its joint operation partners.
The Group''s cash is held in a major New Zealand chartered bank and the Group
has no investments in non-bank asset- backed commercial paper.
c) Liquidity risk
Liquidity risk represents the Group''s ability to meet its contractual
obligations. As a gold explorer with no current mining revenue the Group
ensures that its expenditure rate is commensurate with its cash position.
Given that the majority of all non-derivative financial liabilities are
classified as current, the carrying amount represents the contractual cash
flows that are due in less than twelve months.
d) Financial instrument classification
With the exception of investments in subsidiaries that are treated as
available for sale, all other financial assets are classified as loans and
receivables and all financial liabilities are classified at amortised cost
under IFRS 7.
17. Management of Capital
The Group defines the capital that it manages as its shareholder equity.
The Group''s objectives with respect to managing capital are to safeguard the
Group''s ability to continue as a going concern so that it can provide future
returns to shareholders and benefits for other stakeholders. As at December
31, 2016 total managed capital was $59,000 (twelve months to December 31,
2015: $398,000).
The Group''s capital structure reflects a company focused on mineral
exploration and financing both internal and external growth opportunities.
The exploration for and development of mineral deposits involves significant
risk which even a combination of careful evaluation, experience and knowledge
may not adequately mitigate.
In order to maintain or adjust its capital structure, the Group may issue new
shares or sell assets to fund ongoing operations.
The Group manages its capital structure by performing the following:
o Preparing budgets and cash-flow forecasts which are reviewed and
approved by the Board of Directors;
o Regular internal reporting and Board of Directors meetings to review
actual versus budgeted spending and cash-flows; and
o Detailed project analysis to assess and determine new funding
requirements.
There were no changes in the Company''s approach to capital management during
the period ended twelve months to December 31, 2016. The Company is not
subject to externally imposed capital requirements.
18. Commitments and Contingencies
a) As at December 31, 2016 the Group had no capital commitments
(December 31, 2015: Nil)
b) In December 2014 Glass Earth (New Zealand) Limited (Company''s wholly
owned subsidiary) received a notice of claim of $300k from the owner of a
property, at which the subsidiary undertook mining activity over the years
2010-12, in relation to a land access agreement. Whilst it is the intention
of the subsidiary to defend this claim, a $37,000 provision has been
recognized in these financial statements (no changes from the prior year) to
reflect the Company''s best estimate of any potential legal and other costs
associated with defending this claim.
19. Reconciliation of net loss for the year with net cash from operating
activities
2016 2015
$ $
Net (Loss)/Profit for period (388) 248
Adjustment for non-cash items:
Depreciation 1
Impairment and provision of Mineral Properties (Note 8) - (741)
Income tax expense /(recovery) - -
Exchange translation 44 50
Changes in non-cash working capital items:
Amounts receivable (2) -
Trade and other payables (703) 242
Net cash used in Operating Activities (1,049) (200)
20 Restructuring
As announced in the news release dated 22 July 2015, the Company reached
agreement on revised terms with Chatham Rock Phosphate Limited ("CRP") to
undertake the step subsequent to the sale of the Company''s gold exploration
assets, being a takeover offer to acquire all of the issued shares of CRP.
The Pre-Bid Agreement had certain terms, all of which were met before the
Company made a full takeover offer for all shares on issue in CRP under the
New Zealand Takeovers Code. This offer was made December 23, 2016.
The key terms of the offer were:
o The consideration for CRP shareholders will be satisfied in full by
an issue of AXG shares.
o Acceptance by CRP shareholders representing 90% of the CRP shares on
issue (unless waived by Antipodes Gold).
o The offer will value the companies:
o Antipodes Gold to be valued at the aggregate of NZ$300,000 and Net
Cash held, as at the day immediately preceding the Takeover Notice for the
Takeover offer being issued.
o CRP to be valued at the aggregate of NZ$0.007 per CRP share issued in
respect of all CRP shares on issue as at the date of this Agreement and any
CRP shares issued under the Option Exchange; and
o In respect of any CRP shares otherwise issued from the date of this
Agreement until the date a Takeover Notice is issued by Antipodes Gold for
the Takeover Offer, the aggregate issue price at which CRP issues such
shares.
For clarity, these respective values are to be reflected in the proportions
that the shares of Antipodes Gold will be held by CRP shareholders and
Antipodes Gold shareholders, following completion of the Takeover Offer.
Based on the foregoing valuation methodology, immediately preceding the
Takeover Notice, Antipodes Gold was valued at approximately NZ$573,000 and
CRP was valued at approximately NZ$5,351,000. With the completion of the
compulsory acquisition portion of the Takeover offer in March 2017, this will
result in existing CRP shareholders holding approximately 90.3% of the issued
share capital of Antipodes Gold and the existing shareholders of Antipodes
Gold holding approximately 9.7% of the issued share capital.
21 Subsequent Events
Chatham Rock Reverse Takeover Offer
By 17 February 2017, Antipodes Gold had received over 93% acceptances of the
offer from Chatham Rock shareholders. Accordingly, the offer was declared
unconditional and Antipodes Gold initiated procedures to compulsorily acquire
the balance of the Chatham Rock shares. This was completed on 15 March 2017.
The following actions occurred on Friday 24 February 2017:
1. Antipodes Gold consolidated its existing shares on a one (1) new
share for each ten (10) old shares;
2. Antipodes Gold issued shares to Chatham Rock shareholders in respect
of their initial 93% of acceptances;
3. Antipodes Gold changed its name to Chatham Rock Phosphate Limited
(the new subsidiary in New Zealand, Chatham Rock Phosphate Limited, changed
its name to Chatham Rock Phosphate (NZ) Limited)
4. There were changes in regard to directors and management;
a. Messrs Fleming (Chairman of directors), Henderson (director,
President and C.E.O.) and Liddle (C.F.O.) resigned;
b. Mr Christopher Castle (an existing Antipodes Gold director) was
appointed as President, Managing Director and C.E.O;
c. Mesdames Linda Sanders and Jill Hatchwell were appointed directors
(as approved by shareholders at the last Annual General Meeting). Mr Goodden
and Mr Falconer were appointed as additional directors;
d. Ms Robyn Hamilton was appointed as C.F.O.
e. Mr Justin Cochrane (an existing Antipodes Gold director), continues
in office.
Change of Financial Year End
Antipodes Gold has an existing financial year-end of 31 December.
Chatham Rock Phosphate (NZ) Limited has a financial year-end of 31 March.
The Company has given notice of its intention to change its financial year
end from December 31 to March 31 in order to coincide with the year-end of
Chatham Rock Phosphate (NZ) Limited.
The following is a summary of the transitional statements to be filed
following completion of the Chatham NZ takeover:
(i) Annual audited comparative financial statements of the Company for
the year ended December 31, 2016.
(ii) Interim comparative unaudited financial statements of Chatham NZ for
the three month period ended June 30, 2016.
(iii) Interim comparative unaudited financial statements of Chatham NZ for
the six month period ended September 30, 2016.
(iv) Interim comparative unaudited financial statements of Chatham NZ for
the nine month period ended December 31, 2016.
The following is a summary of the Company''s financial reporting periods in
its first financial year subsequent to the completion of the Acquisition:
(v) Annual audited comparative consolidated financial statements of the
Company for the year ended March 31, 2017.
(vi) Interim comparative consolidated financial statements of the Company
for the three month period June 30, 2017.
(vii) Interim comparative consolidated financial statements of the Company
for the nine month period June 30, 2017.
(viii) Interim comparative consolidated financial statements of the Company
for the nine month period December 31, 2017.
Listing on the Frankfurt Bourse
On 4 April 2017, Chatham Rock Phosphate Limited (TSXV: "NZP" and NZAX: "CRP")
announced that it had listed on the Frankfurt Stock Exchange.
Chatham''s ticker code in Frankfurt is "3GRE".
CHATHAM ROCK PHOSPHATE LIMITED
(incorporated in Canada)
(A DEVELOPMENT STAGE COMPANY)
PLEASE NOTE:
This is the Management''s Discussion & Analysis
of Antipodes Gold Limited
(as it was then named)
for the
YEAR ENDED DECEMBER 31, 2016
(Stated in Canadian Dollars)
That is, the Antipodes Gold group BEFORE the reverse takeover
and name change to Chatham Rock Phosphate.
ANTIPODES GOLD LIMITED ("AXG")
MANAGEMENT''S DISCUSSION & ANALYSIS
For the year ended December 31, 2016
(All amounts stated in Canadian dollars, unless otherwise indicated)
Attention is called to a caution in respect of Forward-Looking Statements -
included at page 21
2015 Overview
AXG had an interesting year whereby restructuring efforts started to pay off.
By mid-year, the Company had arranged to sell all its remaining gold
exploration assets and subsequent to shareholder approval in November 2015,
the sale was settled in late February 2016.
2016 Overview
The settlement of the assets sale allowed the company to focus on the reverse
takeover ("RTO") of Chatham Rock Phosphate Limited ("Chatham Rock").
AXG launched its takeover offer to CRP shareholders on December 23, 2016. By
17 February 2017, Antipodes Gold had received over 93% acceptances of the
offer from Chatham Rock shareholders. Accordingly, the offer was declared
unconditional and Antipodes Gold initiated procedures to compulsorily acquire
the balance of the Chatham Rock shares. This was completed on 15 March 2017.
2017 Subsequent Events
The following actions occurred on Friday 24 February 2017:
1. Antipodes Gold consolidated its existing shares on a one (1) new
share for each ten (10) old shares;
2. Antipodes Gold issued shares to Chatham Rock shareholders in respect
of their initial 93% of acceptances;
3. Antipodes Gold changed its name to Chatham Rock Phosphate Limited
(the new subsidiary in New Zealand, Chatham Rock Phosphate Limited, changed
its name to Chatham Rock Phosphate (NZ) Limited)
4. There were changes in regard to directors and management;
a. Messrs Fleming (Chairman of directors), Henderson (director,
President and C.E.O.) and Liddle (C.F.O.) resigned;
b. Mr Robert Goodden was appointed as an independent chairman;
c. Mr Chris Castle (an existing Antipodes Gold director) was appointed
as President, Managing Director and C.E.O;
d. Mesdames Linda Sanders and Jill Hatchwell were appointed directors
(as approved by shareholders at the last Annual General Meeting). Mr Robin
Falconer was appointed as an additional director;
e. Ms Robyn Hamilton was appointed as C.F.O.
f. Mr Justin Cochrane (an existing Antipodes Gold director), continues
in office.
Change of Financial Year End
Antipodes Gold has an existing financial year-end of 31 December.
Chatham Rock Phosphate (NZ) Limited has a financial year-end of 31 March.
The Company has given notice of its intention to change its financial year
end from December 31 to March 31 in order to coincide with the year-end of
Chatham Rock Phosphate (NZ) Limited.
The following is a summary of the transitional statements to be filed
following completion of the Chatham NZ takeover:
o Annual audited comparative financial statements of the Company for
the year ended December 31, 2016.
o Interim comparative unaudited financial statements of Chatham NZ for
the three month period ended June 30, 2016.
o Interim comparative unaudited financial statements of Chatham NZ for
the six month period ended September 30, 2016.
o Interim comparative unaudited financial statements of Chatham NZ for
the nine month period ended December 31, 2016.
The following is a summary of the Company''s financial reporting periods in
its first financial year subsequent to the completion of the Acquisition:
o Annual audited comparative consolidated financial statements of the
Company for the year ended March 31, 2017.
o Interim comparative consolidated financial statements of the Company
for the three month period June 30, 2017.
o Interim comparative consolidated financial statements of the Company
for the nine month period June 30, 2017.
o Interim comparative consolidated financial statements of the Company
for the nine month period December 31, 2017.
The following information mainly pertains to Antipodes Gold''s historical
activities, except where forward looking information now includes reference
to Chatham Rock Phosphate''s planned activities in seeking a marine consent to
allow undersea mining of phosphate.
INTRODUCTION
This discussion and analysis of the operating results and financial condition
of Antipodes Gold Limited ("Antipodes Gold") for the year ended December 31,
2016 as prepared on May 24, 2017 should be read in conjunction with the
audited financial statements and related notes for the same period and is
intended to provide the reader with a review of the factors that affected
Antipodes Gold''s performance during that year and the factors reasonably
expected to impact Chatham Rock Phosphate''s future operations and results.
The audited financial statements and related notes of Antipodes Gold have
been prepared in accordance with accounting principles that comply with
International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board. The financial statements and all
amounts in this report are expressed in Canadian dollars, except where
otherwise indicated.
Qualified Person
The Antipodes Gold exploration programs were carried out under the
supervision of Antipodes Gold''s Exploration Manager, Simon Henderson. Mr
Henderson (MSc Geology (CODES), is an AusIMM Chartered Professional under the
Discipline of Geology and is a Qualified Person as defined by National
Instrument 43-101 and is an independent contractor to the Company. He has
reviewed and approved the (historical) technical information given in this
document.
CORPORATE HISTORY AND NATURE OF THE BUSINESS
Until early 2015, the principal activity of Antipodes Gold was exploration
for gold and silver in New Zealand. Large airborne geophysics campaigns in
2005 (Hauraki & Central Volcanic Regions) and 2007 (Otago Region) had been
followed up with ground-based exploration and drilling.
As all exploration assets were sold in 2015 and the proceeds received in
early 2016, the history of Antipodes Gold''s exploration activities is now
irrelevant. Accordingly, they are not included here but may be accessed by
referring to earlier reporting.
As from February 24, 2017, the business activities are those of Chatham Rock
Phosphate Limited. The history of these activities and projected
expenditures and goals are included in the updated Filing Statement lodged on
SEDAR on 14 November 2016.
BOARD OF DIRECTORS AND MANAGEMENT (as from 24 February 2017)
o Robert Goodden (independent non-executive Chairman);
o Chris Castle (President and CEO, Managing Director);
o Jill Hatchwell (independent non-executive director)
o Linda Sanders (non-executive director)
o Robin Falconer (Principal Scientist)
All based in New Zealand except for Mr Gooden, who is based in England, and
o Justin Cochrane (independent non-executive director -
Toronto, Canada)
CAPITAL TRANSACTIONS AND SIGNIFICANT EVENTS
Capital Transactions
Antipodes Gold has not raised any equity financing in the year ended December
31, 2016.
Significant Events
Antipodes Gold sold all its gold exploration interests and has undertaken and
completed a reverse takeover of a listed New Zealand based phosphate
development company (Chatham Rock Phosphate Limited). Both these
transactions received shareholder approval in November 2015.
FINANCIAL COMMENTARY
Antipodes Gold prepares and files its financial statements and related notes
in accordance with accounting principles that comply with International
Financial Reporting Standards ("IFRS") as issued by the International
Accounting Standards Board.
Selected Annual Information
Year ended December 31
2016 2015 2014
$000s except for per share
Total revenue - - -
Net profit/(loss) (388) 248 (250)
Profit/(Loss) per share - basic and diluted (cents) (3.67) 2.35
(2.37)
Total assets 309 2,211 1,452
Total long-term liabilities - - -
Distribution or cash dividend declared per share - - -
In 2012 and 2013, Antipodes Gold was involved in placer mining but
discontinued this in August 2013. Since 2014 Antipodes Gold has been in a
holding pattern as it sought equity funding and then restructuring options.
Summary of Quarterly Results
Quarterly results for the past eight quarters ending December 31, 2016 are as
follows:
2016 2015
$000s Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Cash 297 413 531 849 4 6 13 3
Working capital 59 328 277 287 398 (1,540) (1,484)
(1,403)
Total assets 309 425 545 859 2,211 1,735 1,660 1,571
Profit/(Loss) for period
(175)
(92)
(10)
(111)
220
28
-
-
Profit/(Loss) per share (cents)
(1.67)
(0.9)
(0.1)
(1.0)
2.0
0.3
-
-
Mineral exploration - - - - 460 84 81
116
Cash flow from financing (net) - - - (301) 49 60
75 16
Weighted average shares (millions) 10.6 10.6 10.6 10.6 10.6
10.6 10.6 10.6
Antipodes Gold recorded losses each quarter/year arising from the expensing
of its general and administration expenses as well as any write-off of
exploration expenditures and other non-cash expense items. Periodic reviews
of capitalized exploration expenditures are undertaken and write-offs and
provisions are expensed to the Consolidated Statement of Comprehensive
Income.
Exploration Expenditures
Gold exploration costs used to form the bulk of Antipodes Gold''s
expenditures. Exploration activities, predominantly at WKP - part of the
Hauraki JV with Newmont (Antipodes Gold 35%) were halted due to lack of cash.
All gold exploration assets and associated liabilities were sold in 2015,
with settlement of the transaction in late February 2016.
Significant Expenses of a Corporate Nature
For the year ended December 31, 2016 Antipodes Gold group recorded a Net Loss
before income taxes of $388,000 (year months ended December 31, 2015: Profit
of $248,000). Antipodes Gold''s only function has been to complete the RTO of
CRP, using the office holder CEO and CFO. This was accomplished on 24
February 24, 2017.
Significant expense categories (apart from accumulated exploration write-offs
and provisions) are discussed as per below:
Expenditure
2016
Note
2015
General and administration 22 1 56
Professional fees 236 2 152
Net salaries 78 3 133
Directors fees - 34
Registry, Filing and Listing 52 47
Consulting fees - 20
Depreciation - 1
Total 344 443
Notes
1. General and Administration represents the reversal of provisions from
previous years together with the costs for Accounting services, Insurance and
New Zealand office costs.
2. Professional fees are audit and legal fees incurred during the
period, more recently in connection with the documentation relating to the
CRP RTO.
3. Net salaries are principally composed of the accrued costs of the
part time Chief Financial Officer and part time Chief Executive Officer who
completed the successful RTO.
Liquidity and Capital Resources
When operating as a gold exploration and mining company, Antipodes Gold''s
operations were dependent on its ability to raise financing and its ability
to realize assets and discharge liabilities.
The restructuring proposal involving the sale of Antipodes Gold''s remaining
gold exploration assets and a Reverse Take Over of Chatham Rock Phosphate
Limited were approved by shareholders in November 2015.
The settlement of the gold exploration assets sale in February 2016 meant
that NZ$1.5m (C$1.43m) was received in cash and a further C$0.766m in
liabilities assumed by the purchaser.
In April 2014, Antipodes Gold borrowed NZ$40,000 (approximately C$36,570)
from a third party. This is in addition to loans provided by directors and
management, in March/April 2014, of C$40,000. Further funding has been
provided by CRP in 2015. All loans were interest free and have been repaid
in March 2016, from the proceeds of the gold exploration assets sale.
Antipodes Gold''s cash position as at December 31, 2016 was $297,000 (December
31, 2015: $4,000) with Trade and other Payables of $299,000 of which $156,000
which has been satisfied by the issuance of Antipodes fully paid shares
(December 31, 2015: $1,768,000).
Subsequent to the RTO of CRP, the newly renamed Chatham Rock Phosphate has
the existing share and warrant capital structure as set out at the end of
this report under the heading of "Supplemental to the Financial Statements".
TSX final approval of the CRP RTO involved TSX being satisfied that the
combined Antipodes/Chatham Rock group had sufficient cash resources to meet
its G&A and other operational expenditures for the next 12 months. Of
course, further funds will be required to advance the Chatham Rise project.
Related Party Transactions
Related party transactions are in the normal course of business and are
measured at the exchange amount, which is the fair value as agreed between
management and the related parties.
a) Remuneration of $2,313 has been paid to Simon Henderson (CEO) for the
twelve months ended December 31, 2016 (twelve months ended December 31, 2015:
accrued $54,562).
b) Remuneration of $20,413 has been paid and $45,389 has been accrued
for Peter Liddle (CFO) for the twelve months ended December 31, 2016 (twelve
months ended December 31, 2015: accrued $45,070).
c) Remuneration of $10,230 has been accrued for Thomas Rabone (former
CEO) for the twelve months ended December 31, 2016 (twelve months ended
December 31, 2015: accrued $32,922).
d) No Directors fees were accrued or paid for the twelve months ended
December 31, 2016. Directors fees of $33,750 have been accrued for
non-executive directors (Adrian Fleming $18,750 and Justin Cochrane $15,000)
for the period 1 January 2015 to 31 December 2015. No directors'' fees were
accrued or paid for in 2013 or 2014. These directors have agreed to accept
payment of their accrued remuneration in Antipodes Gold shares (subject to
TSX approval).
e) All outstanding loans of $40,000 from directors and management were
repaid in March 2016. No further loans were received for the twelve months
ended December 31, 2016.
SUBSEQUENT EVENTS
Antipodes Gold launched its takeover offer to CRP shareholders on December
23, 2016. By 17 February 2017, Antipodes Gold had received over 93%
acceptances of the offer from Chatham Rock shareholders. Accordingly, the
offer was declared unconditional and Antipodes Gold initiated procedures to
compulsorily acquire the balance of the Chatham Rock shares. This was
completed on 15 March 2017.
The following actions occurred on Friday 24 February 2017:
1. Antipodes Gold consolidated its existing shares on a one (1) new
share for each ten (10) old shares;
2. Antipodes Gold issued shares to Chatham Rock shareholders in respect
of their initial 93% of acceptances;
3. Antipodes Gold changed its name to Chatham Rock Phosphate Limited
(the new subsidiary in New Zealand, Chatham Rock Phosphate Limited, changed
its name to Chatham Rock Phosphate (NZ) Limited)
4. There were changes in regard to directors and management;
a. Messrs Fleming (Chairman of directors), Henderson (director,
President and C.E.O.) and Liddle (C.F.O.) resigned;
b. Mr Robert Goodden was appointed as an independent chairman;
c. Mr Chris Castle (an existing Antipodes Gold director) was appointed
as President, Managing Director and C.E.O;
d. Mesdames Linda Sanders and Jill Hatchwell were appointed directors
(as approved by shareholders at the last Annual General Meeting). Mr Robin
Falconer was appointed as an additional director;
e. Ms Robyn Hamilton was appointed as C.F.O.
f. Mr Justin Cochrane (an existing Antipodes Gold director), continues
in office.
Listing on the Frankfurt Bourse
On 4 April 2017, Chatham Rock Phosphate Limited (TSXV: "NZP" and NZAX: "CRP")
announced that it had listed on the Frankfurt Stock Exchange (to make it
easier for its burgeoning international investor base to trade their shares).
Chatham''s ticker code in Frankfurt is "3GRE".
Use of Financial Instruments
For the year ended December 31, 2016 Antipodes Gold did not enter into any
specialized financial agreements to minimize its investment risk, currency
risk or commodity risk. The principal financial instruments affecting
Antipodes Gold''s financial condition and results of operations are currently
its cash, amounts receivable and prepayments, and accounts payable and
accrued liabilities.
Contractual Obligations and Commitments
a) At December 31, 2016 the Group had no capital commitments. (December
31, 2015 Nil).
b) Antipodes Gold has no further commitments under the terms of non
cancellable operating leases, (2015: Nil).
Off-Balance Sheet Arrangements and Contingent Liabilities
Antipodes Gold has no off-balance sheet arrangements.
o In December 2014 Glass Earth (New Zealand) Limited (Company''s wholly
owned subsidiary) received a notice of claim of $300,000 from the owner of a
property, at which the subsidiary undertook mining activity over the years
2010-12, in relation to a land access agreement. Whilst it is the intention
of the subsidiary to defend this claim, a $37,000 provision has been
recognized in these financial statements to reflect Antipodes Gold''s best
estimate of any potential legal and other costs associated with defending
this claim.
Critical Accounting Policies and Estimates
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of any contingent assets and liabilities as at the date of the
financial statements, as well as the reported amounts of revenues earned and
expenses incurred during the period. These estimates are based on historical
experience and other assumptions that are believed to be reasonable under the
circumstances.
Antipodes Gold''s significant accounting policies are those that affect its
financial statements, and are summarized in Note 4 of the audited financial
statements for the year ended December 31, 2015.
Critical accounting policies and estimates in the year included
capitalization of the costs relating to the acquisition, exploration and
development of non-producing resource properties and the recognition of
impairment of those assets, the allocation of proceeds on the purchase or
sale of assets, the valuation of stock based compensation and tax accounts,
and contingent liabilities.
Actual results could differ from these estimates.
Asset Retirement Obligations
The Company is required to record a liability for the estimated future costs
associated with legal obligations relating to the reclamation and closure of
its exploration, development or mining properties. This amount is initially
recorded with subsequent annual recognition of an accretion amount. An
equivalent amount is recorded as an increase to mineral properties and
deferred exploration costs and amortized over the useful life of the
properties.
The Company has provided for a potential obligation relating to the
reclamation of its properties.
OUTLOOK
As from February 24, 2017, following the successful takeover of Chatham Rock
Phosphate Limited, Antipodes Gold has been renamed Chatham Rock Phosphate
Limited. All future activities relate to the phosphate industry.
For additional information, please refer to Chatham Rock Phosphate''s website
at www.rockphosphate.co.nz and for regulatory filings, including news
releases, please refer to www.SEDAR.com under the new name Chatham Rock
Phosphate.
RISKS, UNCERTAINTIES AND OTHER ISSUES
Antipodes Gold had no current business activities apart for the pursuit of
the RTO of CRP, which has, from February 24, 2017, resulted in Antipodes Gold
becoming a rock phosphate developer.
The following comments relate to the new business of Chatham Rock Phosphate
Limited ("Chatham")
RISK FACTORS
Chatham''s business of exploring and developing for Mineral Resources involves
a variety of operational, financial and regulatory risks that are typical in
the natural resource industry. Chatham attempts to mitigate these risks and
minimize their effect on its financial performance, but there is no guarantee
that Chatham will be profitable in the future. Chatham''s common shares
should be considered speculative. Investors should carefully consider the
following risk factors:
a. Marine Consent
Chatham cannot commence mining operations without the Marine Consent.
Chatham filed for the Marine Consent on May 14, 2014 but was declined on
February 11, 2015. While Chatham considers that it has a good case to
receive the Marine Consent on re- application, there is no guarantee that the
Marine Consent will be granted. If Marine Consent is not granted or is
granted subject to economically unfeasible conditions, Chatham will not be
able to proceed with mining operations in respect of the Mining Permit, which
could have a material adverse effect on the financial condition, operations,
and prospects of Chatham.
The Environmental Protection Authority ("EPA") has advised that the Marine
Consent decision-making process will typically be completed within a
six-month period, however, there is provision for the EPA to extend the
prescribed timeframes within the Exclusive Economic Zone ("EEZ") ACT. The
EPA can extend the timeframes to a maximum of twice the limit specified in
the EEZ Act. Timeframes can only be extended beyond this if Chatham
requests, or agrees to, it. Any delay in the Marine Consent decision-making
process could delay the entering into of a mining contract and the
commencement of mining operations and production, which could have a material
adverse effect on the financial condition, operations, and prospects of the
Chatham.
b. Uncertainty Relating to Mineral Resources
Resource estimates are a product of the skill, experience and judgements of
the person carrying out the resource estimation and no assurances can be
given that the estimated grade and tonnes will be realized or that Chatham
will receive the prices assumed in determining its resources. Valid
estimates made at a given time may significantly change when new information
becomes available. While Chatham believes that the resource estimates
included in this Document are reasonable, resource estimates by their nature
are imprecise and depend on the quality of the sampling data and to a certain
extent, upon statistical inferences that may ultimately prove unreliable.
All of Chatham''s resources are reported as Inferred Mineral Resources.
Inferred Mineral Resources have a great deal of uncertainty associated with
them as to their existence (both quantity and ultimately recovered grade).
Generally, Inferred Mineral Resources cannot form the basis of a feasibility
study or bankable feasibility study. Owing to the nature of Chatham''s
phosphate deposit, and its accessibility, it is not guaranteed that the
deposit will ever be converted to the measured and indicated resource
categories. As such, there can be no assurance that third parties will find
Chatham''s resource categorization acceptable for future funding purposes or
capital investment decisions, which could have a material adverse effect on
the financial condition, operations, and prospects of Chatham.
c. Mining Contract and Mining Process Risk
The technical ability of Chatham to extract phosphorite from the seabed is
unproven and will require the development of a novel mining technique in
order to accommodate the depth of the sea in the Chatham Rise area.
Therefore, there are no assurances that the proposed mining method will
perform at the necessary water depths as intended or at all.
d. Requirement for Future Funding
Chatham is likely to require access to further funding in the future and
prior to commencement of production for a variety of reasons, including
working capital, expansion of the business, new developments relating to
existing operations or new acquisitions. General market conditions, volatile
phosphorite markets, the lack of any necessary permit or contract to mine, a
claim against Chatham or other factors may make it difficult to secure
funding. There is no assurance that Chatham will be successful in obtaining
required funding as and when needed on commercially acceptable terms. While
Chatham has contracted for future funding with the Drip Investors and expects
that those funding commitments from the Drip Investors will be satisfied, as
with any arrangement of this type, Chatham does have a risk of default on
those commitments being satisfied.
e. Work Program Commitments
The Mining Permit issued by the New Zealand Petroleum and Minerals ("NZPAM")
department, currently requires that mining operations commence on or before
December 6, 2017 at a mining rate of not less than 800,000 tonnes of
phosphorite per annum. Chatham has not met this deadline and will be seeking
a change to the terms of the Mining Permit to reflect that mining operations
will not commence before 2019. Chatham believes that the specified mining
rate can be achieved with the currently contemplated mining processes, many
of the steps needed to reach commencement of mining are beyond the control of
Chatham and as such there can be no guarantee that Chatham will be able to
meet this target production within the required deadline or at all. There
can be no guarantee that Chatham will receive Marine Consent and such other
permits as may be required for mining operations, nor that it will enter into
a mining contract should Marine Consent be granted or that a suitable mining
vessel will be available in the timescale required to allow Chatham to
satisfy the Mining Permit requirements.
The failure of Chatham to commence mining at a rate of not less than 800,000
tonnes of phosphorite per annum would result in a breach of the Mining Permit
and give rise to the power of the appropriate Minister, as defined in the
Crown Minerals Act 1991 of New Zealand, to revoke the Mining Permit. Whilst
Chatham believes that the appropriate Minister would likely amend the terms
of the Mining Permit in such circumstances, provided he or she was satisfied
that Chatham was making good progress to commence mining operations as soon
as practicable, there can be no assurance that such discretion would be
exercised and any such failing could have a material adverse effect on the
financial condition, operations, and prospects of Chatham.
The Mining Permit imposes other conditions upon Chatham as well, including
the requirement to complete a study within 24 months of the permit being
granted (i.e. by 6 December 2017) in support of a final investment decision.
Chatham believes that most of the work and studies have been completed to
satisfy the preparation of such a study, however, no assurance can be given
that NZPAM will accept Chatham''s study in satisfaction of this condition,
when completed and presented. Any such failing could result in the
termination or modification of the Mining Permit, which could have a material
adverse effect on the financial condition, operations, and prospects of
Chatham.
Chatham must also complete appropriate sampling, geophysical and geotechnical
surveys required to define mining blocks within 48 months of the permit being
granted (i.e. by 6 December 2017) and spend a minimum of NZD2 million per
annum (C$1.9m) in carrying out its activities. Various circumstances,
including the financial resources available to Chatham, manpower, equipment
availability, and other circumstances beyond Chatham''s control or influence
may result in the failure to satisfy the minimum work requirement and/or
other conditions. Failure to comply with any of these conditions could
result in the termination or modification of the Mining Permit, which could
have a material adverse effect on the financial condition, operations, and
prospects of Chatham.
f. Market Risk
Whilst Chatham has engaged in market research and identified a number of
potential buyers and markets in relation to the product to be mined from
Chatham Rise, Chatham has not yet entered into any marketing, sales or
offtake agreements that are in markets considered material to Chatham. In
addition, Chatham cannot be assured of the quality of product that it intends
to produce given the nature of Chatham''s resource, which could affect
anticipated demand. Further, the market may develop and change prior to the
commencement of mining operations and impact negatively on anticipated
demand, whether as a result in a change in technology, a new source of
phosphate production or otherwise. There can be no assurance, therefore,
that Chatham will be in a position to sell all of its mining output, if any,
at profitable prices, nor at all.
g. Mining Contract and Mining Process Risk
The technical ability of Chatham to extract phosphorite from the seabed is
unproven and will require the development of a novel mining technique in
order to accommodate the depth of the sea in the Chatham Rise area. Chatham
intends to use a vessel that is specially modified and equipped with a
trailing suction unit. Whilst this solution relies on a compilation of
existing, proven technology, the compilation of those techniques is novel and
the use of the process in its proposed form and at the depths of the Chatham
Rise area is untried and may require further work. Therefore, there are no
assurances that the proposed mining method will perform at the necessary
water depths as intended or at all.
Modification of a vessel for such purpose will only take place if Chatham is
granted the Marine Consent and enters into a mining contract. There can be
no assurance that Chatham will be able to enter into such a contract on
acceptable terms, nor at all, and the failure to do so could delay the
development of Chatham''s project, alter Chatham''s mining cost assumptions and
impair the ability of Chatham to carry out future fund raises. Whilst the
Directors believe that there is competition for the award of the mining
contract on competitive terms, there is no certainty that any alternative
contractors to Boskalis would be able to use the design work completed by
Boskalis, nor that any alternative contractor would be able to provide an
independently engineered processing solution on a timely basis and at a
similar anticipated cost.
Work on funding strategies for vessel modification or charter is currently
being considered by Chatham. The present idea is to establish a special
purpose vehicle to own the vessel and to fund the modifications by way of a
combination of debt and equity. A consortium of investors would be sought to
contribute equity. There is a risk that the required funding may not be
secured at all or on terms unfavourable to Chatham or the mining operator.
Subject to finalization of the financing strategy, Chatham may need to
contribute equity into the special purpose vehicle which may require that
Chatham secures further funds. It is not Chatham''s intention to make a
significant equity contribution. It is also possible, however, that the
vessel could be owned by a third party marine investor and chartered.
h. Intellectual Property Risk
In addition to the above, while the proposed mining system comprises a
compilation of existing technology, freedom-to-operate searches have not been
undertaken. Some intellectual property rights associated with the mining
system design could be proprietary to other parties. This could require
licensing arrangements to be negotiated with such parties or alternative
designs to be developed (where any such proprietary rights exist). There can
be no assurance that such licensing arrangements will be negotiated on terms
favourable or acceptable to Chatham or at all.
i. Production Risks
The future development of any mineral deposit involves significant risks that
even a combination of careful evaluation, experience and knowledge may not
eliminate. This is particularly the case in an offshore deposit such as that
at Chatham Rise, which is subject to additional risks related to its marine
location. For example, production will be affected by weather patterns and
sustained periods of bad weather could adversely impact mining activity and
reduce tonnages of the rock phosphate mined. No assurance can be given that
Chatham will meet its annual target production rates of 1.5Mt per annum once
production starts.
Chatham has no operating history upon which to base estimates of future cash
flow. Chatham''s estimates of resources and cash operating costs are, to a
large extent, based upon geological, engineering and market analyses.
Estimates of capital and operating costs are necessarily preliminary at this
stage of Chatham''s development. It is possible that actual costs and
economic returns may differ materially from Chatham''s best estimates. It is
not unusual in the mining industry for new mining operations to experience
unexpected problems during the pre-production phase, take much longer than
originally anticipated to bring into a producing phase, and to require more
capital than anticipated.
j. Changes in Law and Policy
The laws, regulations, and authorities governing Chatham and its operations
may change, and may result in additional material expenditures or time
delays. Exploration and mining permits may be susceptible to revision or
cancellation by new laws or changes in direction by the government of the
day. In addition, the Exclusive Economic Zone and Continental Shelf
(Environmental Effects) Act 2012 is new and, as with any new legislation, has
not been tested by the Courts and could be subject to uncertainty as to its
interpretation or application.
Whilst the Directors believe that the Government and population of New
Zealand generally support the development of natural resources in the manner
contemplated by Chatham, there is no assurance that future political and
economic conditions will not result in the adoption of different policies or
attitudes affecting ownership of assets, land tenure and mineral concessions,
taxation, royalties, environmental protection, labour relations and return of
capital. This may affect Chatham''s ability to undertake exploration,
development and mining activities on its projects.
k. Regulatory Compliance Risks
Chatham''s future expected mining operations and exploration activities, as
well as the transportation and handling of any products mined, are or will be
subject to extensive regulations and laws. Such regulations relate to
production, development, exploration, exports, imports, taxes and royalties,
labour standards, occupational health, waste disposal, protection and
remediation of the environment, decommissioning and reclamation, toxic
substances, transportation safety and emergency response, and other matters.
Compliance with such regulations and laws increases the costs of Chatham''s
operations.
It is possible that, in the future, the costs, delays and other effects
associated with such laws and regulations may impact Chatham''s decision as to
whether to operate existing projects, or, with respect to exploration and
development properties, whether to proceed with exploration or development,
or that such laws and regulations may result in Chatham incurring significant
costs to remediate or decommission properties that do not comply with
applicable environmental standards at such time.
Chatham expends significant financial and managerial resources to comply with
such laws and regulations and anticipates the need for even greater resources
if production is commenced. Because legal requirements are subject to change
and to interpretation, Chatham is unable to predict the ultimate cost of
compliance with these requirements or their effect on operations.
Furthermore, future changes in governments, regulations and policies, such as
those affecting Chatham''s mining operations and phosphorite transport, could
materially and adversely affect Chatham''s results of operations and financial
condition in a particular period or its long term business prospects.
Failure to comply with applicable laws, regulations and permitting
requirements may result in enforcement actions. These actions may result in
orders issued by regulatory or judicial authorities causing operations to
cease or be curtailed, and may include corrective measures requiring capital
expenditures, installation of additional equipment or remedial actions.
Chatham may be required to compensate others who suffer loss or damage by
reason of its activities and may have civil or criminal fines or penalties
imposed for violations of applicable laws or regulations.
l. Reliance on Key Equipment
The ability of Chatham to extract the phosphorite from the seabed will be
dependent on unique mining equipment, including a specialized vessel and
trailing suction unit. Should this unique equipment become unavailable once
commissioned, Chatham will likely have no alternative access to its Mineral
Resource. The equipment may become temporarily or permanently unavailable to
Chatham due to factors beyond Chatham''s control, including adverse weather
conditions, labour stoppages, technical failures, government regulations,
failure to secure any necessary intellectual property licenses or decisions
of the equipment operator. The unavailability of such equipment could have a
material adverse effect on the financial condition, operations, and prospects
of Chatham.
m. Phosphate Demand and Pricing
The profitability of Chatham''s operations, and its Ordinary Share price, will
be highly dependent upon the market price of phosphate rock. Chatham''s net
earnings and operating cash flow will be closely related and sensitive to
fluctuations in the long and short term market price of phosphorite.
Commodity prices fluctuate widely and are affected by numerous factors beyond
the control of Chatham. The world supply of and demand for fertilizers and
the stability of exchange rates can all cause significant fluctuations in
prices. These factors cannot be accurately predicted. The price of
fertilizers has fluctuated widely in recent years and future price declines
could cause commercial production to be impracticable, which could have a
material adverse effect on the financial condition, operations, and prospects
of Chatham.
n. Reliance on Key Personnel
Chatham''s success will largely depend on the efforts and abilities of certain
senior officers and key personnel. Chatham is committed to providing
attractive working conditions to assist in retaining its key senior
management personnel. However, there can be no assurance Chatham will be
able to retain these key personnel. Furthermore, the number of individuals
with relevant mining and operational experience in this industry is small.
The loss of key personnel or the inability to recruit and retain high-calibre
staff could have a material adverse effect on Chatham. The addition of new
personnel or employees and the departure of existing contractors,
particularly in key positions, can be disruptive and may have a material
adverse effect on the financial condition, operations, and prospects of
Chatham.
Personnel requirements of Chatham will also change. At present, Chatham has
a particular need for scientific and communications expertise as it pursues
the Marine Consent. If granted, those needs will reduce and there will be
increased need for engineering and sales and marketing capabilities. There
can be no assurance that additional personnel with such capabilities, fit for
Chatham''s purpose, will be secured.
o. Property Title Risk
The Mining Permit covers an offshore area in the EEZ of New Zealand. The
Mining Permit and Marine Consent (if issued) can be considered utilization
rights to that offshore area. These rights may be subject to defects or
challenges. If such defects or challenges cover a material portion of
Chatham''s offshore area, they could materially and adversely affect Chatham''s
reported Mineral Resources or its long term business prospects. As well, any
prolonged challenge to Chatham''s rights could result in substantial delays in
its development timetable, which could have a material adverse effect on the
financial condition, operations, and prospects of Chatham. Ambiguity can
arise in the interpretation of mining legislation regulations, permits and
policy, including whether or not conditions have or have not been satisfied
(either at the time of satisfaction or subsequent thereto). For example, the
precise form of study that is required to be delivered in support of a
decision to mine and in satisfaction of Mining Permit is not subject to any
further detailed guidance or definition. Interpretations, whether at the
relevant time or subsequent thereto, could result in claims or losses that
have a material adverse impact on the business, operations, assets or
prospects of Chatham.
Maori customary rights, as well as requirements to consult with Maori under
applicable New Zealand law, are relevant to Chatham''s rights. Managing
relations with local Maori communities is a matter of paramount importance to
Chatham. Notwithstanding that Maori interests do not carry with them a form
of "veto" or similar right in relation to the Mining Permit or the potential
grant of the Marine Consent, there can be no assurance that customary rights
claims, as well as related consultation issues, will not arise on or with
respect to Chatham''s rights and impact on Chatham''s exploration, development
and mining activities, which could have a material adverse effect on the
financial condition, operations, and prospects of Chatham.
p. Environmental Risk
Chatham''s projects are subject to New Zealand environmental laws. These laws
include laws generally applying to the protection of the environment, as well
as specific regulation relating to areas in which Chatham operates.
Exploration and mining projects cause a variety of environmental impacts and
Chatham is conscious of a number of potential impacts in respect of its
proposed mining operations, including:
o impact on fish stocks on the Chatham Rise;
o pollution risks from the vessel (e.g. oil spills);
o impact on benthic communities; and
o effects of plume (where silt and seabed materials are separated from
the rock phosphate and returned to the ocean floor, but do not settle on the
seabed immediately and then go into the lower levels of the water column).
Chatham has collected and analyzed extensive data on these potential effects
to develop and mitigation strategies, as well as contracted scientific
organizations in New Zealand and The Netherlands (including NIWA and
Deltares) to assess the environmental impacts of its operations. This
information comprises a significant part of the Marine Consent application.
Chatham intends to carry out its operations in compliance with all applicable
environmental laws and in compliance with any conditions imposed upon it, as
well as in a responsible manner. In the event that Chatham does not operate
in compliance with all applicable laws and conditions there is a risk that
the Mining Permit and/or Marine Consent, if granted, could be forfeited or
other adverse consequences could arise.
q. NGO Risk
Mining companies are often the target of actions by non-governmental
organizations and environmental groups in the countries in which they
operate. Such organizations and groups may take actions that are illegal,
unauthorized or dangerous, without the support of government, to disrupt
commercial operations. There can be no guarantee that any future action will
not be taken by any non-governmental organization or environmental group to
disrupt Chatham''s mining operations. They may also apply pressure to local,
regional and national government officials, or local aboriginal groups, to
take actions that are adverse to Chatham''s operations. Such actions could
have an adverse effect on Chatham''s ability to produce and sell its products,
which could have a material adverse effect on the financial condition,
operations, and prospects of Chatham.
r. Profitability and Operating History
Chatham has no history or earning revenue or profits and no assurance can be
given by Chatham that it will have future revenues or profits, since these
are dependent on the future development and success of any mining operation.
Chatham has no history of mining operations and is in a pre-revenue stage of
development. As such, Chatham is subject to many risks common to such
enterprises, including under-capitalization, cash shortages, limitations with
respect to personnel, financial and other resources and the lack of revenue.
There is no assurance that Chatham will be successful in achieving a return
on Shareholders'' investment.
s. Competition and Customer Strength
The fertilizer and mining industries are intensely competitive in all phases
of exploration, development and production. Competition in the mining
industry is primarily for properties that can be developed and produced
economically; technical and commercial expertise; and capital. Many
competitors not only explore for and mine phosphate rock, but conduct
beneficiation and marketing operations on a global basis. Such competition
may result in embedded relationships with customers that make it difficult
for Chatham to negotiate offtake or other supply arrangements. As well, many
potential phosphate customers are better capitalized than Chatham and may
engage in tactical order delays and other behaviour that could cause Chatham
to suffer cash flow difficulties and induce it to execute transactions that
do not reflect market conditions, which could have a material adverse effect
on the financial condition, operations, and prospects of Chatham.
t. Conflicts of Interest
Certain of the Chatham''s directors, officers and significant shareholders are
or may become shareholders, directors and/or officers of other natural
resource companies, and, to the extent that such other companies may
participate in ventures with Chatham, these individuals may have a conflict
of interest in negotiating and concluding terms respecting the extent of such
participation.
In the event that such a conflict of interest arises at a meeting of the
directors, a director who has such a conflict will abstain from voting for or
against the approval of such participation or of its terms. In appropriate
cases the Chatham will establish a special committee of independent directors
to review a matter in which one or more directors or officers may have a
conflict.
From time to time, the Chatham, together with other companies, may be
involved in a joint venture opportunity where several companies participate
in the acquisition, exploration and development of natural resource
properties, thereby permitting Chatham to be involved in a greater number of
larger projects with an associated reduction of financial exposure in any
given project. Chatham may also assign all or a portion of its interest in a
particular project to any of these companies due to the financial position of
the other Company or companies.
In accordance with the laws of the province of British Columbia, the
directors are required to act honestly and in good faith with a view to
furthering the best interest of Chatham. In determining whether or not the
Chatham will participate in a particular program or transaction and the terms
of such participation, the directors will primarily consider the potential
benefits to Chatham, the degree of risk to which the Chatham may be exposed
and its financial position at that time. Other than as indicated, the
Chatham has no procedures or mechanisms to deal with conflicts of interest.
u. Dependence on General Economic Conditions
The operating and financial performance of Chatham is influenced by a variety
of general economic and business conditions, including levels of consumer
spending, inflation, interest rates and exchange rates, access to debt and
capital markets, and government fiscal, monetary and regulatory policies.
Prolonged deterioration in general economic conditions, including an increase
in interest rates or a decrease in consumer and business demand, could have a
material adverse effect on Chatham''s business and financial condition.
v. Exchange Rates
Chatham is exposed to movements in exchange rates. Chatham''s historical (New
Zealand) financial statements are expressed and maintained in New Zealand
dollars. Exchange rate movements between New Zealand and other countries may
impact the profit and loss account or assets and liabilities of Chatham, to
the extent the foreign exchange rate risk is not hedged or not appropriately
hedged.
w. Insurance Risk
Although Chatham may obtain insurance to cover some of these risks and
hazards in amounts it believes to be reasonable, such insurance may not
provide adequate coverage in the event of certain circumstances. No
assurance can be given that such insurance will continue to be available or
that it will be available at economically feasible premiums or that it will
provide sufficient coverage for losses related to these or other risks and
hazards. Furthermore, there are risks that Chatham cannot insure against, or
may elect not to insure against, any such risks and hazards and Chatham may
be subject to liability or sustain loss in such circumstances, which could
have a material adverse effect on the financial condition, operations, and
prospects of Chatham.
x. Dividends
There can be no assurance as to the level of future dividends. The
declaration, payment and amount of any future dividends of Chatham are
subject to the discretion of the Shareholders or, in the case of interim
dividends to the discretion of the directors, and will depend upon, amongst
other things, Chatham''s earnings, financial position, cash requirements,
availability of profits, as well as provisions for relevant laws or generally
accepted accounting principles from time to time.
Under New Zealand law the board of directors may declare dividends from time
to time from distributable profits provided that the board of directors first
resolves and certifies that following the dividend being paid, Chatham will
satisfy the solvency test under the Companies Act 1993. This solvency test
requires that the board of directors believes on reasonable grounds that
Chatham will be able to meet its debts as they fall due and that its assets
exceed liabilities, including contingent liabilities.
y. Taxation
The tax rules, including stamp duty provisions and their interpretation,
relating to an investment in Chatham may change during the life of Chatham.
The levels of, and reliefs from, taxation may also change and vary in respect
of a given investor''s circumstances.
z. Dual Regulation
Chatham''s New Zealand subsidiary, Chatham Rock Phosphate (NZ) Limited is
primarily regulated by the Companies Act 1993. As a company listed on the
NZAX, Chatham has the Toronto Venture Exchange as its home exchange, with a
copy of each document filed in Canada, to also be filed with the NZAX.
aa. Litigation
Chatham Rock Phosphate (NZ) Limited is currently engaged in New Zealand High
Court proceedings with the EPA. If Chatham (NZ) is wholly unsuccessful in
these proceedings, Chatham (NZ) could be liable for up to NZ$800,000 plus
interest and legal costs. The Chatham Directors do not believe that such an
outcome is likely, however litigation is inherently uncertain and this level
of exposure remains a risk. Chatham has taken up the full amount as a
liability.
SUPPLEMENTAL TO THE FINANCIAL STATEMENTS
Outstanding Share and Warrant Data
The renamed Chatham Rock Phosphate''s shares trade on the TSX Venture Exchange
under the symbol "NZP" and on the New Zealand Alternative Exchange ("NZAX")
under the symbol "CRP" . The Company is authorized to issue an unlimited
number of common shares without par value.
As at May 24 2017, 13,627,813 common shares were issued and outstanding. In
addition, there were 379,214 Mandatory Warrants on issue, exercisable in
March and April 2017 at NZ$0.3935 (C$0.3739) per warrant and 1,524,618
Discretionary Warrants, exercisable until 24 February 2018 at NZ$0.3935
(C$0.3739) per warrant (assumes current conversion of NZD1.00 = CAD0.95).
The 278,359 shares issued pursuant to debt settlement agreements are subject
to usual TSX Venture escrow provisions of four months and one day (after
their issue on February 24, 2017).
The Company drew down a loan of NZ$40,000 (approximately C$33,900) from Mr
Chris Castle, under an agreement dated April 29, 2014 which was repaid in
March 2016. On February 24, 2017, the Company issued 20,000 consolidated
common shares to Mr Castle under this arrangement.
FORWARD-LOOOKING STATEMENTS
These audited consolidated financial statements and this Management''s
Discussion and Analysis, contains certain "Forward-Looking Statements" that
are prospective and reflect management''s expectations regarding Chatham Rock
Phosphate Limited''s ("CRP" or "Chatham Rock") future growth, results of
operations, performance and business prospects and opportunities.
Forward-looking information can often be identified by forward-looking words
such as "anticipate", "believe", "expect", "goal", "plan", "intend",
"estimate", "may" and "will" or similar words suggesting future outcomes, or
other expectations, beliefs, plans, objectives, assumptions, intentions or
statements about future events or performance.
All statements, other than statements of historical fact, included herein,
including without limitation, statements regarding potential mineralization
and reserves, estimates of future production, unit costs, costs of capital
projects and timing of commencement of operations, exploration results and
future plans and objectives of Chatham Rock are forward-looking statements
that involve various risks and uncertainties. There can be no assurance that
such statements will prove to be accurate, and actual results and future
events could differ materially from those anticipated in such statements.
Important factors that could cause actual results to differ materially from
Chatham Rock''s expectations are disclosed in its documents filed from time to
time with the TSX Venture Exchange and other regulatory authorities and
include, but are not limited to, failure to establish estimated resources and
reserves, the grade and recovery of ore to be mined varying from estimates,
capital and operating costs varying significantly from estimates, delays in
obtaining or failure to obtain required governmental, environmental or other
project approvals, inflation, changes in exchange rates, fluctuations in
commodity prices, delays in the development of projects and other factors.
Shareholders and prospective investors should be aware that these statements
are subject to known and unknown risks, uncertainties and other factors that
could cause actual results to differ materially from those suggested by the
forward-looking statements. Readers are cautioned not to place undue reliance
on forward-looking information. By its nature, forward-looking information
involves numerous assumptions, inherent risks and uncertainties, both general
and specific, that contribute to the possibility that the predictions,
forecasts, projections and various future events will not occur.
Chatham Rock undertakes no obligation to update publicly or otherwise revise
any forward-looking information whether as a result of new information,
future events or other such factors which affect this information, except as
required by law.
End CA:00301689 For:CRP Type:FLLYR Time:2017-05-25 10:08:02