INDOCHINE MINING LIMITED INDOCHINE MINING LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEME NT) AND CONTROLLED ENTITIES
ACN 141677 385
Annual Financial Report 30 JUNE 2015
lndochine Mining Limited (Subject to Deed of Company Arrangement) and Controlled Entities ACN 141 677 385
Contents
Review of Operations 3
Director's Report 8
Auditor's Independence Declaration 18
Independent Auditor's Report 19
Consolidated Statement of Comprehensive Income 21
Consolidated Statement of Financial Position 22
Consolidated Statement of Changes in Equity 23
Consolidated Statement of Cash Flows 24
Notes to the Financial Statements 25
Directors' Declaration 60
Shareholder information 61
ind chinelndochine Mining Limited (Subject to Deed of Company Arrangement) and Controlled Entities ACN 141 677 385
Review of Operations
lndochine Mining Limited (lndochine or the Company) was placed into Voluntary Administration on 27 March 2015 by the Directors of the Company. The operations report below summaries the state of affairs in the past 12 months.
During the year, the Company saw significant changes to the Board of Directors (the Board) with Mr Hugh Thomas and Mr Stephen Promnitz stepping down as Chairman and Chief Executive Officer (CEO), respectively, of the Company and Mr Dermott McVeigh being appointed as Non-Executive Chairman, who subsequently resigned on 3 November 2015.
The head office of the Company was relocated from Sydney to Perth in order to be closer to key strategic partners and mining experts.
The Landowner Investigation Study (LIS) was completed and registered with the Papua New Guinea (PNG) Mineral Resource Authority (MRA) and workshopped with the PNG national government, provincial governments of Enga and Hela and local governments in both the provinces.
The Landowner Investigation Report (LIR), required under the Lands Act 1996, was completed in September 2014. This UR is derived from the LIS and is the framework that sets out the distribution of financial benefits to the customary clans and landowners identified in the LIS and is the precursor to the application for a Mining Lease.
Subsequent to the completion of the UR and prior to the Warden's Hearing that was scheduled for 10 December 2014, the Company's wholly owned subsidiary was served with a number of injunctions. The proceedings substantively sought the same relief, namely the weightings of rights of landowning clans or subclans in some of the areas covered under the LIS and injunctive orders to restrain the Minister for Lands from registering the UR and the Minister for Mining to renew the Exploration Licence 1093 (EL 1093).
The injunctive order restraining the renewal of the Mount Kare Gold/Silver Project EL 1093 by the MRA was discharged by the PNG National Court of Justice and the Mining Warden's Hearing was successfully completed on 6 May 2015.
The injunctive order restraining the Minister for Lands registering the UR was dealt through mediation involving all parties to the injunction with the process mediated by the PNG National Court of Justice accredited mediators. The mediation was successfully conducted at Mt Kare between 18 July and 20 July 2015 in the presence of:
Justice Kandakasi of the PNG National Court of Justice, Deputy Magistrate Mark Pupaka and the appointed mediator, Mr Craig Jones;
Plaintiffs and their lawyers;
Defendants and their lawyers; and
All Landowner clans identified in the LIR.
Following the mediation at site, the parties then re-convened at Mt Kare on 17 August 2015 to complete the vetting of all clan members identified in the UR. The Company is pleased to announce that the mediation was successfully completed with all clans signing the Agreement in the presence of the Mediators, which now enables the Company to complete the registration of the UR with the Lands Department under the Lands Act.
With all legal and community challenges having been positively dealt with, the Company is now awaiting a final outcome of its application to renew EL 1093, which incorporates the Mt Kare Gold Project. However, it should be noted that under PNG Mining Act 1992, section 112, the current exploration licence that reached expiry on 28 August 2014 continues to be in full force untilthe renewal application has been determined.
On 27 March 2015, the directors of lndochine resolved to place the Company into Voluntary Administration at
which point the powers of Directors were passed to the appointed Administrators.
Mr Martin Jones, Mr Darren Weaver and Mr Benjamin Johnson, all partners of Ferrier Hodgson were appointed on 27 March 2015 as joint and several Administrators of the Company.
On 13 May 2015, at the second creditors meeting, a Deed of Company Arrangement (OOCA) proposed by Kandahar Holdings Pty Limited (Kandahar) pursuant to Part 5.3A of the Corporations Act 2001 was approved by the creditors. The DOCA was executed on 4 June 2015 and lodged with the Australian Securities and Investment Commission. Further details on the key terms of the DOCA can be found under Note 1(b}.
On 17 June 2015, the former CEO and a creditor of the Company Mr Stephen Promnitz commenced proceedings in the Federal Court of Australia seeking relief in the form of:
a) an order setting aside the Kandahar DOCA executed on 4 June 2015 that was approved at the second creditors meeting of the Company held on 13 May 2015; and
b) an order requiring that a further meeting of the Company's creditors be held at which meeting those creditors are to be afforded an opportunity to consider and vote upon the merits of a proposal for a DOCA propounded by Second Floor Gold Ltd.
On 17 August 2015, Justice Foster of the Federal Court of Austral ia in New South Wales wholly dismissed the proceedings filed by Mr Promnitz and awarded the legal and incidental costs incurred by the Company against the plaintiff.
The key terms of the Kandahar DOCA, amongst others, include the conditions precedent requiring the Deed Administrator to call a meeting of shareholders to approve the recapitalisation proposal under the DOCA.
In order to comply with this condition precedent, the Company is required to prepare the accounts and financial reports for the year ended 30 June 2015.
During the period, the secured loan facility was renegotiated with the secured lender. As a result, the term was extended to 31 December 2014 and the loan was increased by $1.15 million. As at 31 December, the secured loan facility available to the Company was $3.25 million, of which $2.86 million, including accrued interest, was drawn down. The term of the secured loan was further extended to 28 February 2015. On 30 January 2015, the Company entered into an agreement to extend the loan term to 30 April 2015 and to increase the loan facility amount to
$3.75 million. Under this agreement, the secured lender has also agreed to potential conversion of amounts owed under the secured loan to ordinary shares in the Company. The conversion is at the discretion of the secured lender at a price of $0.0098 per share, which was set at 85% of the volume weighted average price for the 5 trading days preceding 30 January 2015. Subsequent to the Company being placed into Voluntary Administration, the loan facility of $3.75 million extended until 30 April 2015 has been frozen and the secured creditor's rights preserved under the DOCA. A new facility of $1.25 million has been extended by the secured creditor to the Voluntary Administrator to fund the costs associated with maintaining the Mt Kare Gold Project EL 1093 in good standing, including the funding of the Warden's Hearing completed on 6 May 2015 and mediation which was conducted on site from 18 July to 20 July 2015 and then re-convened on 17 August 2015.
On 22 October 2015, the new facility of $1.25 million extended by the secured creditor was varied through Deed of Variation to the original loan agreement to a total of $2.0 million to provide funding to maintain the EL 1093 and the infrastructure at Mt Kare in good standing.
In respect of Cambodian tenements, the Company was officially advised on 10 September 2014 that 12 tenements in the Ratanakiri Province (EL 749, 750-755, 757, 758, 760-762) that were under application for the third extension under ministerial discretion since 31 May 2014 were not renewed by the Minister for Mines and Energy in Cambodia.
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