ABN 59 142 014 873 ANNUAL REPORT 30 JUNE 2017 CORPORATE DIRECTORY DIRECTORS Paul Boyatzis (Chairman) Bruce Maluish (Managing Director) Peter Pawlowitsch (Non-executive Director) SECRETARY John Geary REGISTERED AND PRINCIPAL OFFICE Level 1 6 Thelma Street West Perth WA 6005 Telephone: (08) 9226 3780 Facsimile: (08) 9226 3764 Website: www.ventnorresources.com.au SHARE REGISTRY Computershare Investor Services Pty Ltd Level 11 172 St George's Terrace Perth WA 6000 Telephone: (08) 9323 2000 Facsimile: (08) 9323 2033 AUDITORS RSM Australia Partners 8 St Georges Terrace Perth WA 6000 AUSTRALIAN SECURITIES EXCHANGE Ventnor Resources Limited shares (VRX) are listed on the Australian Securities Exchange. Ventnor Resources Limited 1 COMPANY REVIEW EXPLORATION ACTIVITIES During the year Ventnor Resources Ltd (Ventnor or the Company) focused on the continued exploration of the Company’s Biranup Project in Western Australia and completed further work at the Company’s Warrawanda nickel project. The Company completed the divestment of its Thaduna/Green Dragon Copper Project Joint Venture. Biranup The Biranup Project area is 370 kilometres north-east of Kalgoorlie in Western Australia and proximal to the Tropicana gold mine owned by AngloGold Ashanti and Independence Group. Tropicana commenced production in 2013 and contains a resource in excess of 6Moz situated 22 kilometres to the south-west of EL 39/1828. EL39/1828 was previously explored in the 1990s by WMC and more recently by the AngloGold Ashanti and Independence Group joint venture, which generated a large dataset of geological information over a 7½ year period. Immediately following the grant of the tenement Ventnor commenced field checking and data analysis work, and within six months had completed a maiden RC drilling program on the Black Dragon outcrop which produced high-grade assay results including 9 metres at 7.08g/t Au in BDRC1001 and 6 metres at 3.02g/t Au. The Ventnor strategy for the advancement of the Biranup Project area has been to acquire high quality IP survey data, detailed 50m line-spaced aeromagnetic data, as well as satellite-acquired Emissivity and Quartz Mapping. These datasets were reviewed in-house and by Company consultants to generate multiple exploration targets for testing. Ventnor Resources Limited 3 COMPANY REVIEW Also, a previously flown large airborne SPECTREM survey was reviewed in order to assess survey data quality and to identify both regolith features and any anomalous EM responses that could indicate bedrock conductors associated with conductive semi-massive to massive sulphide mineralisation for follow-up work. As a result of this work, Ventnor determined to proceed with on-ground MLEM surveys at Silver Dragon and Fire Dragon. In adding to the geological knowledge of the tenement Ventnor was able to reinterpret the regional basement geology, isolating a promising gold anomaly, and identifying an anomalous NiCu zone. The Company conducted Moving Loop Electromagnetic geophysical surveys at the Silver Dragon and Fire Dragon prospects at Biranup. Following the identification of a compelling bedrock anomaly the geophysical survey was expanded to include further survey lines to better define a target for future drilling. The survey identified conductors at Fire Dragon and Silver Dragon and the Company drilled three deep RC holes at both Fire Dragon (2 holes) and Silver Dragon (1 hole). The Company continued evaluation of the database collated on the Biranup Project with the aim of identifying further drill targets. Extra ground was applied for in the Biranup project area with Ventnor applying for four adjacent Exploration Licences. The additional licences are for 77 graticular blocks making the total project area now 370 km 2. In support of the geophysical interpretation, there is geochemical anomalism associated with the Fire Dragon SPECTREM anomaly. Aircore bottom-of-hole assays for silver and cobalt are anomalous. The peak value, which is on the southern edge of the EM anomaly, is a bottom-of-hole sample that returned 28.68g/t silver and 0.32% cobalt. The MLEM surveying was carried out along 200m spaced E-W traverses to follow up on a strong anomalous conductor response identified from the SPECTREM survey. The ground EM survey resolved a strong anomalous EM response indicative of a bedrock conductor. The EM anomaly is also associated with a weak magnetic anomaly. The EM and magnetic anomaly responses have been modelled by geophysical consultants and high priority drill target areas were identified. Ventnor Resources Limited 4 COMPANY REVIEW 3D view of modelled EM conductor plates with magnetic inversion result as smooth red bodies and MLEM profile responses with modelled source conductors as yellow and red “plates” Selected chips from FRC001, similar to those below, were sent to A & A Crawford Geological consultants in Tasmania, to determine the nature of the host rock and the origin of the sulphides. Ventnor Resources Limited 5 COMPANY REVIEW Silver Dragon magnetic anomaly features with geochemical anomaly outlines The magnetic body shows ovoid features and is associated with the following anomalism from the multielement auger geochemical sampling: • • • • • • Mg – Enriched Fe – Depleted Zn – Enriched Cu – Enriched Co – Enriched Ni – Enriched What should also be noted in addition to the image above is that of a LAG soil sample taken by Western Mining Corporation (WMC) in 1997, which returned a value of 315ppm Ni and 160ppm Cu above very low background. WMC commenced exploration in the area with a large tenement holding they called their Pleiades Lakes Project, with the stated aim to target the area for Voiseys Bay style mafic hosted nickel sulphide deposits. The project focused on 14 magnetic anomalies generated from a large aeromag survey over a 3 year period. Of the 14 magnetic targets, one target (PL6) stood out as having the most significant nickel and copper anomalism. The soil sample followed an anomalous rock chip taken from the outcrop at Silver Dragon. This Ventnor Resources Limited 6 COMPANY REVIEW position is proximal to the identified contactor and made for a compelling target to be investigated as proposed. In late January 2017 Ventnor completed a follow up diamond drilling program at the Fire Dragon prospect in the Biranup Project area. A multi-purpose RC and diamond drill rig was used to drill an RC pre-collar with a diamond tail to drill deeper down the conductor and to generate drill core. This was to allow for a much better understanding of the host rocks in the Fire Dragon area and to intersect the strongest conductive area, testing for nickel and copper sulphides. Also, the drill hole was cased with PVC to undertake a DHEM survey, and attempts were made to re-instate the PVC in two previous holes. Unfortunately, the PVC casing that was installed become blocked, which precluded the survey from successfully testing the lower sulphide rich zones. Whilst the geophysical survey crew was onsite additional lines of MLEM were surveyed. This data allowed for better modelling of the conductor and to generate a new drill target. The eastern line has confirmed an additional conductor that will require further surveys to determine the orientation. As previously reported, the RC drilling intersected a pervasively sulphidic, predominantly pyrrhotite, mafic rock, with discrete zones of semi-massive to massive sulphides. Assay results have been received that confirm these zones are associated with peak copper, nickel and cobalt values and are anomalous, when compared to the background values in the rest of the holes, by an order of magnitude. Warrawanda During March 2017 Ventnor conducted a Down Hole EM (DHEM) survey on an extended diamond drill hole at its Warrawanda nickel Project 40kms south of Newman in Western Australia. The diamond hole was extended to conduct the DHEM following evaluation of the diamond core and other supporting geophysical surveys, which indicated a subtle bedrock conductor. Further work included another program of soil geochemistry and ground EM above the conductor interpreted from the DHEM. The re-evaluation of previous data and this further work at the Warrawanda nickel prospect has generated a new zone that could well be a compelling exploration target for sulphide nickel. Detailed Information Warrawanda is a 17km long ultramafic unit, which the Company believes may host a significant sulphide nickel deposit. Exploration work that has been undertaken to identify sulphide nickel is as follows; • • • • • • • • SkyTEM airborne electromagnetic survey; Drilling of 18 RC holes for 2,859m; Field mapping, soil geochemistry and gossan sampling; Hymap spectral mapping; Review of the GSWA 2013 Capricorn AEM TEMPEST survey; Fixed loop electromagnetic (FLEM) surveys; Diamond drill tail of Ventnor 2011 RC hole, WWRC002, to 400m; and Down hole electromagnetic (DHEM) survey of the extended hole, WWRCD002. WWRCD002 Warrawanda TMI Ventnor Resources Limited 7 COMPANY REVIEW A review of the Company’s SkyTEM data in conjunction with the GSWA 2013 Capricorn AEM TEMPEST survey indicated a potential southerly dipping conductor in the region of WWRC002 drilled in 2011. The multielement assays from 230m to the end of hole at 250m, indicate the ultramafic was showing nickel depletion, associated with an increase in sulphur and change in the magnesium levels. WWRC002 may have potentially been drilled close to nickel sulphide mineralisation and warranted further investigation. In September 2016, WWRC002 was extended to 400m by drilling an HQ diamond tail. The core to ~270m was an altered and strongly magnetic ultramafic, with zones of sparsely disseminated pyrrhotite. Subsequently, DHEM survey data was acquired and EM conductor plate modelling completed. The DHEM data from WWRCD002 detected anomalous EM responses related to off hole bedrock conductors modelled as conductor plates, located to the west of the drill hole. However, the DHEM data is complex and difficult to model, resulting in generally low confidence modelled conductor plates. To improve the confidence in the locations of the modelled conductor plates, their positions and geometries were compared to the digital elevation model (DEM), airborne magnetic results, and airborne EM SkyTEM results. The SkyTEM survey did identify a very faint and subtle EM anomaly corresponding to the modelled DHEM conductor plate locations. The modelled DHEM conductor plate locations correspond to a south dipping late time anomalous response observed in the SkyTEM data. LEI inversion modelling of the SkyTEM data also produced a south dipping zone of slightly elevated conductivity corresponding to the modelled DHEM conductor plate locations. Thaduna/Green Dragon Copper Project The Thaduna Project is located 40km east of DeGrussa and represents the largest copper resource in the Doolgunna-Bryah Basin Region outside of Sandfire’s Degrussa-Doolgunna Project (7.9Mt@1.8% Cu for 142,000 tonnes of contained copper). Until 22 August Sandfire owned a 35% interest in the Thaduna/Green Dragon project, and had entered into a farm-in agreement with Ventnor Resources Ltd to earn a further 45% (total of 80%). Ventnor announced on 22 August 2016 that Ventnor Resources Ltd (Ventnor), Delgare Pty Ltd (Delgare), a wholly owned subsidiary of Ventnor, and Sandfire Resources NL (Sandfire) had executed agreements for Sandfire to purchase the remaining 65% of the Thaduna/Green Dragon Copper Project with Ventnor to maintain a royalty interest. The Ventnor board ensured the sale agreement was structured to produce the same or very similar outcomes to those of the JV once mining of the resource commences. CORPORATE The fully underwritten one for two non-renounceable rights issue at 1.5 cents per share, announced on 19 September 2016, was completed on 12 October 2016 with application shares issued by 14 October 2016 and shortfall shares issued on 27 October 2016. A total of 68,798,484 fully paid ordinary shares was issued to raise $1,031,977 (before costs). On 21 October 2016 Ventnor announced it had received firm commitments for a placement of an additional 17,000,000 shares to sophisticated and professional investors at the same issue price as the one for two non-renounceable rights issue announced on 19 September 2016 to raise an additional $255,000. This share placement was completed and shares issued on 28 October 2016. Competent Person’s Statement The information in this report that relates to Exploration Results is based on, and fairly represents, information compiled by Mr David Reid who is a Member of the Australian Institute of Geoscientists (MAIG). Mr Reid is a contractor to Ventnor Resources Limited. Mr Reid has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the “2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Reid consents to the inclusion in this report of the matters based on information provided by him and in the form and context in which it appears. Ventnor Resources Limited 8 DIRECTORS REPORT Your directors present their report on the Company and its controlled entities for the year ended 30 June 2017. DIRECTORS The names of the directors of the Company in office during the financial year and up to the date of this report are as follows: Paul Boyatzis Bruce Maluish Peter Pawlowitsch Directors were in office from the beginning of the financial year until the date of this report unless otherwise stated. The particulars of the qualifications, experience and special responsibilities of each director are as follows: Paul Boyatzis, B Bus, ASA, MSDIA, CPA – Non-Executive Chairman Mr Boyatzis has over 30 years experience in the investment and equity markets and an extensive working knowledge of public companies. He has assisted many emerging companies raise investment capital both locally and through overseas institutional investors. Mr Boyatzis is a current member of the Australian Institute of Company Directors, the Securities and Derivative Industry Association and a member of the Certified Practising Accountants of Australia. Director since 24 September 2010. During the past three years Mr Boyatzis has held the following other listed company directorships: • Nexus Minerals Ltd – 6 October 2006 to present • Aruma Resources Ltd – 5 January 2010 to present • Transaction Solutions International Ltd – 23 February 2010 to 30 June 2017 Bruce Maluish, BSc (Surv), Dip Met Min – Managing Director Mr Maluish has more than 30 years’ experience in the mining industry with numerous roles as Managing Director and General Manager with companies such as the Monarch Group of Companies, Matilda Minerals, Abelle, Hill 50 and Forsyth Mining, while mining a variety of commodities from gold, nickel and mineral sands from both open pits and underground. His management and administrative experience includes the set up and marketing of IPOs, from commencement of exploration to full production, to the identification, development and expansion of projects including mergers and acquisitions. His international experience includes identification of projects and negotiations with clients in Asian markets. His qualifications include credentials in Surveying, Mining, Project Planning and Finance Director since 24 September 2010. During the past three years Mr Maluish has held the following other listed company directorships: • Nexus Minerals Ltd – 1 July 2015 to present Ventnor Resources Limited 9 DIRECTORS REPORT Peter Pawlowitsch, B.Com, MBA, CPA – Non-Executive Director Mr Pawlowitsch holds a Bachelor of Commerce from the University of Western Australia, is a member of the Certified Practising Accountants of Australia and holds a Masters of Business Administration from Curtin University. These qualifications have underpinned more than 10 years experience in the accounting profession and more recently in business management and the evaluation of businesses and mining projects. Director since 12 February 2010. During the past three years Mr Pawlowitsch has held the following other listed company directorships: • Dubber Corporation Limited – 26 September 2011 to present • Department 13 International Limited – 30 January 2012 to 18 December 2015 • Knosys Limited – 16 March 2015 to present • Novatti Group Limited – 19 June 2015 to present • Rewardle Holdings Limited – 30 May 2017 to present Interests in the shares and options of the Company and related bodies corporate As at the date of this report, the interests of the directors (direct and indirect) in the shares and options of Ventnor Resources Limited were: Paul Boyatzis - 2,250,000 ordinary fully paid shares - 500,000 options expiring 2 December 2017, exercisable at 5.5 cents each - 1,000,000 options expiring 28 November 2019, exercisable at 2.8 cents each Bruce Maluish - 10,053,810 ordinary fully paid shares - 1,000,000 options expiring 2 December 2017, exercisable at 5.5 cents each - 2,000,000 options expiring 28 November 2019, exercisable at 2.8 cents each Peter Pawlowitsch - 4,007,500 ordinary fully paid shares - 500,000 options expiring 2 December 2017, exercisable at 5.5 cents each - 1,000,000 options expiring 28 November 2019, exercisable at 2.8 cents each COMPANY SECRETARY John Geary, B.Bus, Grad Dip Acctg, Grad Dip Adv Taxation Mr Geary has forty years experience in the mineral exploration industry in Australia and overseas. His experience includes prospecting and the evaluation, acquisition, maintenance and compliance requirements associated with mining tenements. He has been actively engaged in the planning and implementation of many exploration programmes and his experience as a contract driller has enabled him to recognise and identify potential resource value. He has been involved in the promotion, prospectus preparation and listing of a number of exploration companies (IPO’s) on the Australian Securities Exchange. He has held the position of Executive Director and Company Secretary for a number of ASX listed exploration companies in recent years. Ventnor Resources Limited 10 DIRECTORS REPORT CORPORATE INFORMATION Corporate Structure Ventnor Resources Limited is a limited liability company that is incorporated and domiciled in Australia. Ventnor Resources Limited has prepared a consolidated financial report incorporating the entities that it controlled during the financial year as follows: Ventnor Resources Ltd Delgare Pty Ltd Ventnor Gold Pty Ltd Ventnor Kumarina Pty Ltd Ventnor Mining Pty Ltd Ventnor Pilbara Pty Ltd - parent entity 100% owned controlled entity 100% owned controlled entity 100% owned controlled entity 100% owned controlled entity 100% owned controlled entity Nature of Operations and Principal Activities The principal continuing activities during the year of entities within the consolidated entity was mineral exploration. OPERATING AND FINANCIAL REVIEW Review of Operations A review of operations for the financial year and the results of those operations is contained within the company review. Operating Results Consolidated loss after income tax for the financial year was $1,010,828 (2016: $10,013,717). Financial Position At 30 June 2017, the Group had net asset of $3,441,751 (2016: $3,154,513) with cash reserves of $1,227,791. Financing and Investing Activities The Company issued the following securities during the year: • 68,798,484 ordinary fully paid shares by a one for two non-renounceable rights issue at an issue price of 1.5 cents each, raising $1,031,977; and • 17,000,000 ordinary fully paid shares by placement at an issue price of 1.5 cents per share, raising $255,000. Dividends No dividends were paid during the year and no recommendation is made as to dividends. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the state of affairs of the Company during the financial year are detailed in the company review. In the opinion of the directors, there were no other significant changes in the state of affairs of the Company that occurred during the financial year under review not otherwise disclosed in this report or in the financial report. Ventnor Resources Limited 11 DIRECTORS REPORT EVENTS SUBSEQUENT TO BALANCE DATE No matters or circumstances have arisen, since the end of the financial year, which significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state of affairs of the Company in subsequent financial years, other than outlined in the company review which is contained in this Annual Report: LIKELY DEVELOPMENTS AND EXPECTED RESULTS The Company will continue to pursue its principal activity of exploration and evaluation, particularly in respect to the Projects as more particularly outlined in the company review. The Company will also continue to pursue other potential investment opportunities to enhance shareholder value. MEETINGS OF DIRECTORS The numbers of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director were as follows: P Boyatzis B Maluish P Pawlowitsch Ventnor Resources Limited Board of Directors Number Number eligible to attended attend 4 4 4 4 4 4 12 DIRECTORS REPORT REMUNERATION REPORT (AUDITED) This report details the nature and amount of remuneration for each director and executive of Ventnor Resources Limited. The information provided in the remuneration report includes remuneration disclosures that are audited as required by section 308(3C) of the Corporations Act 2001. For the purposes of this report Key Management Personnel of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the group, directly or indirectly, including any director (whether executive or otherwise) of the parent company. For the purposes of this report the term “executive” includes those key management personnel who are not directors of the parent company. Remuneration Committee The full Board carries out the role and responsibilities of the Remuneration Committee and is responsible for determining and reviewing the compensation arrangements for the Directors themselves, the Managing Director and any Executives. Executive remuneration is reviewed annually having regard to individual and business performance, relevant comparative remuneration and internal and independent external advice. The remuneration report is set out under the following main headings: ● Remuneration policy ● Remuneration structure ● Employment contracts of directors and senior executives ● Details of remuneration for year ● Compensation options to key management personnel ● Shares issued to key management personnel on exercise of compensation options ● Additional disclosures relating to key management personnel A. Remuneration policy The board policy is to remunerate directors at market rates for time, commitment and responsibilities. The board determines payments to the directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of directors’ fees that can be paid is subject to approval by shareholders in general meeting, from time to time. Fees for non-executive directors are not linked to the performance of the consolidated entity. However, to align directors’ interests with shareholders interests, the directors are encouraged to hold shares in the Company. The Company’s aim is to remunerate at a level that will attract and retain high-calibre directors and employees. Company officers and directors are remunerated to a level consistent with the size of the Company. The executive directors and full time executives receive a superannuation guarantee contribution required by the government, which is currently 9.50%, and do not receive any other retirement benefits. Some individuals, however, may choose to sacrifice part of their salary to increase payments towards superannuation. All remuneration paid to directors and executives is valued at the cost to the Company and expensed. The Board believes that it has implemented suitable practices and procedures that are appropriate for an organisation of this size and maturity. The Company did not pay any performance-based component of remuneration during the year. Ventnor Resources Limited 13 DIRECTORS REPORT B. Remuneration structure In accordance with best practice corporate governance, the structure of non-executive director and executive compensation is separate and distinct. Non-executive Director Compensation Objective The Board seeks to set aggregate compensation at a level that provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. Structure The Constitution and the ASX Listing Rules specify that the aggregate compensation of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination approved by shareholders was an aggregate compensation of $250,000 per year. The amount of aggregate compensation sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process. Non-Executive Directors’ remuneration may include an incentive portion consisting of options, as considered appropriate by the Board, which may be subject to Shareholder approval in accordance with ASX listing rules. Separate from their duties as Directors, the Non-Executive Directors undertake work for the Company directly related to the evaluation and implementation of various business opportunities, including mineral exploration/evaluation and new business ventures, for which they receive a daily rate. These payments are made pursuant to individual agreement with the non-executive Directors and are not taken into account when determining their aggregate remuneration levels. Executive Compensation Objective The entity aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the entity so as to: • reward executives for Company and individual performance against targets set by appropriate benchmarks; • align the interests of executives with those of shareholders; • link rewards with the strategic goals and performance of the Company; and • ensure total compensation is competitive by market standards. Structure In determining the level and make-up of executive remuneration, the Board negotiates a remuneration to reflect the market salary for a position and individual of comparable responsibility and experience. Due to the limited size of the Company and of its operations and financial affairs, the use of a separate remuneration committee is not considered appropriate. Remuneration is regularly compared with the external market by participation in industry salary surveys and during recruitment activities generally. If required, the Board may engage an external consultant to provide independent advice in the form of a written report detailing market levels of remuneration for comparable executive roles. Remuneration consists of a fixed remuneration and a long term incentive portion as considered appropriate. Compensation may consist of the following key elements: • Fixed Compensation; • Variable Compensation; • Short Term Incentive (STI); and • Long Term Incentive (LTI). Ventnor Resources Limited 14 DIRECTORS REPORT Fixed Remuneration The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually by the Board having regard to the Company and individual performance, relevant comparable remuneration in the mining exploration sector and external advice. The fixed remuneration is a base salary or monthly consulting fee. Variable Pay — Long Term Incentives The objective of long term incentives is to reward directors/executives in a manner which aligns this element of remuneration with the creation of shareholder wealth. The incentive portion is payable based upon attainment of objectives related to the director’s/executive’s job responsibilities. The objectives vary, but all are targeted to relate directly to the Company’s business and financial performance and thus to shareholder value. Long term incentives (LTI’s) granted to directors/ executives are delivered in the form of options. LTI grants to Executives are delivered in the form of employee share options. These options are issued at an exercise price determined by the Board at the time of issue. The employee share options generally vest over a selected period. The objective of the granting of options is to reward Executives in a manner which aligns the element of remuneration with the creation of shareholder wealth. As such LTI’s are made to Executives who are able to influence the generation of shareholder wealth and thus have an impact on the Company’s performance. The level of LTI granted is, in turn, dependent on the Company’s recent share price performance, the seniority of the Executive, and the responsibilities the Executive assumes in the Company. Typically, the grant of LTIs occurs at the commencement of employment or in the event that the individual receives a promotion and, as such,