CHATHAM ROCK PHOSPHATE LIMITED (“CRP”) MD & A to 3132018
Consolidated Financial Statements
(Expressed in Canadian dollars)
CHATHAM ROCK PHOSPHATE LIMITED
For the year ended March 31, 2018 and 2017
1
CONTENTS
Canadian declaration – Management’s Responsibility for
Financial Reporting
2
New Zealand declaration – Directors’ declaration 3
Auditors’ Report 4
Statement of Financial Position 5
Statement of Changes in Equity 6
Statement of Comprehensive Income 7
Statement of Cash Flows 8
Notes to the Financial Statements 9-30
2
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”). 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
June 12, 2018
3
NEW ZEALAND DECLARATION
DIRECTORS’ DECLARATION
In the opinion of the directors of Chatham Rock Phosphate Limited, the consolidated financial statements and
notes, on pages 5 to 30:
• 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 March 31, 2018 and the results of their operations and cash flows for the year ended on that
date, and
• 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 March 31, 2018.
For and on behalf of the Board of Directors
___________________________ __________________________________
C Castle J Hatchwell
Director Director
Date: 12 June 2018 Date: 12 June 2018
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Chatham Rock Phosphate Limited
We have audited the accompanying consolidated financial statements of Chatham Rock Phosphate Limited, which
comprise the consolidated statements of financial position as at March 31, 2018 and March 31, 2017, the
consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for
the years then ended, and related notes, comprising a summary of significant accounting policies and other
explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgment, including the assessment of
the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making
those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial
position of Chatham Rock Phosphate Limited as at March 31, 2018 and March 31, 2017, and its consolidated
financial performance and its consolidated cash flows for the years then ended in accordance with International
Financial Reporting Standards.
Emphasis of Matter
Without modifying our opinion we draw attention to Note 2(d) in the consolidated financial statements financial
statements. The Group has incurred negative cash flow from operations of $2,418,336 (2017: $1,300,839),
a loss of $1,228,005 (2017: $1,636,550) and as at 31 March 2018 has a current year working capital surplus of
$10,130 (2017: $126,081).
The ability to continue to operate long-term is dependent on raising further funding to pursue the Group’s corporate
goals. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the
Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
12 June 2018
New Zealand
4
5
CHATHAM ROCK PHOSPHATE LIMITED
Consolidated Balance Sheet
(Expressed in Canadian dollars)
March 31, March 31,
Notes
2018 2017
Assets
Current assets:
Cash and cash equivalents
$ 81,484 $ 762,672
Accounts receivable and other receivables
12,631 103,541
Current tax assets
9,973 7,573
Other current assets
5
169,271 556,450
273,359 1,430,236
Non-current assets:
Property, plant and equipment
106 285
NZX Bond
13,962 13,992
Mineral property interest
6
4,552,204 4,244,497
4,566,272 4,258,774
Total assets
$ 4,839,631 $ 5,689,010
Liabilities and Shareholders’ Equity
Current liabilities:
Trade and other payables
7
$ 263,229 $ 1,304,155
263,229 1,304,155
Total liabilities
263,229 1,304,155
Shareholders’ equity:
Share capital
8
33,843,499 32,426,568
Currency translation reserve
99,955 97,334
Deficit
(29,367,052) (28,139,047)
Total shareholders’ equity
4,576,402 4,384,855
Total liabilities and shareholders’ equity
$ 4,839,631 $ 5,689,010
Going concern (note 1)
Commitments and contingencies (note 19)
The accompanying notes form an integral part of these consolidated financial statements.
6
CHATHAM ROCK PHOSPHATE LIMITED
Consolidated Statements of Operations and Comprehensive (Loss) Income
(Expressed in Canadian dollars)
For the year ended March 31, 2018 and 2017
Notes 2018 2017
Revenue
$ 4,585
$ -
Finance income
7,650 8,216
Finance expense
(50,469) (2,809)
Net finance income/(expense)
11 (42,819) 5,407
Expenses
General and administrative expenses 12 (1,102,537) (1,488,192)
Depreciation
(176) (531)
Exploration costs
(10,230) (2,513)
Marine Consent Application costs
(76,828) (150,721)
Profit/(loss) before income tax (continuing
operations)
(1,228,005) (1,636,550)
Income tax expense
-
-
Net (loss)/profit for the period from continuing
operations
(1,228,005) (1,636,550)
Total comprehensive (loss)/profit for the period
$(1,228,005)
$ (1,636,550)
Basic shareholders’ loss per share (Canadian
cents)
¢ (7.93)
¢ (0.24)
Diluted shareholders’ loss per share (Canadian
cents)
¢ (7.93)
¢ (0.24)
Weighted average number of common shares
outstanding
15,486,362
753,037,211
The accompanying notes form an integral part of these consolidated financial statements.
7
CHATHAM ROCK PHOSPHATE LIMITED
Consolidated Statement of Changes in Equity
(Expressed in Canadian dollars, except number of common shares)
For the year ended March 31, 2018 and 2017
Number of Foreign
common Number of Share Translation Accumulated Shareholders’
shares warrants capital reserve deficit equity
Balance, 1 April, 2016 498,206,514 - $ 29,888,605 $ - $ (26,502,497) $ 3,377,275
Issue of shares, net of costs 343,673,040 - 1,929,548 - - 1,929,548
Cancellation of shares (12,034,492) - (44,553) - - (44,553)
Shares surrendered in RTO (817,572,286) - - - - -
Shares issued for acquisition costs 1,355,037 - 589,228 - - 589,228
Mandatory warrants issued in RTO - 379,214 63,740 - - 63,740
Discretionary warrants issued in RTO - 1,524,618 - - - -
Currency translation gain - - - 106,167 - 106,167
Net income for the period - - - - (1,636,550) (1,636,550)
Balance, March 31, 2017 13,627,813 1,903,832 $ 32,426,568 $ 97,334 $ (28,139,047) $ 4,384,855
Issue of shares, net of costs 3,673,333 - 1,416,931 - - 1,416,931
Issue of discretionary warrants - 932,074 - - - -
Exercised mandatory warrants 379,214 (379,214) - - - -
Expired discretionary warrants - (1,524,618) - - - -
Currency translation loss - - - 2,621 - 2,621
Net loss for the period - - - - (1,228,005) (1,228,005)
Balance, March 31, 2018 17,680,360 932,074 $ 33,843,499 $ 99,955 $ (29,367,052) $ 4,576,402
The accompanying notes form an integral part of these consolidated financial statements.
8
CHATHAM ROCK PHOSPHATE LIMITED
Consolidated Statements of Cash flows
(Expressed in Canadian dollars)
For the year ended March 31, 2018 and 2017
Notes 2018 2017
Cash flows from operating activities:
Net interest received
$ 5,250 $ 1,024
Cash received from customers
4,585 -
Cash paid to suppliers
(1,179,365) (1,074,746)
Exploration expenditure
(1,198,371) (233,044)
Interest paid
(50,435) -
Tax refund received
- 5,927
Net cash (used in) operating activities
18
(2,418,336)
(1300,839)
Cash flows from investing activities:
Funds withdrawn from Trust account
462,118
-
Funds deposited in Trust account
(4,678)
(273,039)
Net cash (used in) investing activities
457,440
(273,039)
Cash flows from financing activities:
Proceeds from issue of share capital, net of
issue costs
1,296,954
1,925,191
Cash received from reverse acquisition
-
242,005
Net cash from financing activities
1,296,954
2,167,196
Net increase/(decrease) in cash and cash
equivalents
(663,942)
593,318
Cash and cash equivalents, beginning of
period
762,672
166,461
Effect of foreign exchange rate fluctuations on
cash held
(17,246)
2,893
Cash and cash equivalents, end of period
$ 81,484
$ 762,672
The accompanying notes form an integral part of these consolidated financial statements.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
9
1. Nature of business and going concern
Chatham Rock Phosphate Limited (the “Group” or “CRP”) is a development-stage Group incorporated under the
Business Corporations Act (British Columbia) and listed on the Toronto Stock Exchange’s Venture Exchange (“TSX-
V”). The Group is also registered on the overseas company register under the New Zealand Companies Act 1993
and listed on the New Zealand Stock Exchange’s Alternative Market (“NZAX”). The Group is an FMC reporting entity
under part 7 of the Financial Markets Conduct Act 2013 (New Zealand)
The Group comprises the parent Group and its wholly owned subsidiaries. The financial statements are presented
for the consolidated group.
Chatham Rock Phosphate Limited’s focus is the development and exploitation of the Chatham Rise rock phosphate
deposit offshore New Zealand and potential overseas phosphate projects.
The Group’s registered offices are:
• Suite 1750, 1185 West Georgia Street, Vancouver, B.C., Canada V6E 4E6
• Level 1, 93 The Terrace, Wellington 6011, New Zealand
Accordingly, the Group has reporting obligations in both the Canadian and New Zealand jurisdictions.
2. Basis of preparation
(a) Statement of compliance:
These consolidated financial statements have been prepared in accordance with the principles of the
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”). .
(b) Approval of the financial statements:
The consolidated financial statements for the year ended March 31, 2018 were reviewed by the Audit Committee
and approved and authorized for issue by the Board of Directors on June 12, 2018.
(c) Basis of measurement:
These consolidated financial statements have been prepared on the historical cost basis, utilising the accrual
method of accounting unless otherwise described in the following notes.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
10
2. Basis of preparation (continued)
(d) Going concern
These consolidated financial statements have been prepared on a going concern basis, which assumes that
the Group will be able to realise its assets and extinguish its liabilities in the normal course of business and at
amounts stated in the financial report. This includes the Group’s minerals mining commitments, being the
minimum work requirements under the Minerals Mining Permit 55549, as set out in Note 19.
The Group incurred a net loss of $1,228,005 during the year ended 31 March 2018 and, as of that date, the
Group’s current assets exceed its current liabilities. The Group had cash reserves of $81,484 and permit work
commitments with associated indicative costings as set out in Note 19.
The above mentioned conditions indicate the existence of a material uncertainty that may cast significant doubt
on the Group’s ability to continue as a going concern.
The Directors have prepared a cash flow forecast through to the period ending March 31, 2019 to support the
ongoing operations of the Group that includes the following:
• The Group continues to manage its corporate costs appropriately within existing available funds.
• The Directors will continue to raise further capital as required by one of a combination of the following:
placement of shares, pro-rata issue to shareholders, and/or further issue of shares to the public.
• The Directors plan to evolve the company from a single project focus into a more diversified company,
principally involving other phosphate assets.
No adjustments have been made relating to the recoverability and reclassification of recorded net asset
amounts and classification of liabilities that might be necessary should the exploration permits be ultimately
surrendered or cancelled. The Directors determined the carrying value of assets to be appropriate subject to
the above conditions being met.
(e) Functional and presentation currency:
These consolidated financial statements are presented in Canadian dollars ($) as the Group’s primary listing is
on the Toronto Stock Exchange’s Venture Exchange. The functional currency of the parent company is
Canadian Dollars and the functional currency of Chatham Rock Phosphate (NZ) Limited, the subsidiary
company, is New Zealand dollars (NZD), the currency of the primary economic environment in which it operates.
(f) Significant accounting judgements, estimates and assumptions:
The preparation of the consolidated financial statements requires management to make judgements, estimates
and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and
accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions
and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or
liabilities affected in future periods.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
11
2. Basis of preparation (continued)
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year, are described below. The Group based its assumptions and estimates on
parameters available when the financial statements were prepared. Existing circumstances and assumptions
about future developments, however, may change due to market changes or circumstances arising beyond the
control of the Company. Such changes are reflected in the assumptions when they occur.
In the process of applying the Group’s accounting policies, management has made the following judgements,
which have the most significant effect on amounts recognised in the consolidated financial statements:
Share-based payment transactions
The Group measures the cost of equity-settled transactions by reference to the fair value of the equity
instruments at the date at which they are granted.
Exploration and evaluation costs
Significant judgement is required in determining whether it is likely that future economic benefits will be derived
from the capitalised exploration and evaluation expenditure. In the judgement of the Directors, at March 31,
2018 exploration activities in each area of interest where amounts remain capitalised have not yet reached a
stage which permits a reasonable assessment of the existence or otherwise of economically recoverable
reserves. Active and significant operations in relation to each of those areas of interest are planned and nothing
has come to the attention of the Directors to indicate future economic benefits will not be achieved.
In the event where ongoing committed activities cannot be funded by existing financial resources, the Group
will either need to raise additional capital, or meet its obligations either by farm-out or partial sale of the Group’s
exploration interests, or subject to negotiation and approval, vary the minimum work requirements. The
Directors are continually monitoring those areas of interest and are exploring alternatives for funding the
development of those areas of interest when economically recoverable reserves are confirmed. If new
information becomes available that suggests the recovery of expenditure is unlikely, the amounts capitalised
will need to be reassessed at that time.
(g) New standards and interpretations not yet adopted
At the date of authorisation of these consolidated financial statements, certain new standards and
interpretations to existing standards have been published but not yet effective, and have not been adopted early
by the Group.
Management anticipates that all pronouncements will be adopted in the first accounting period beginning on or
after the effective date of the new standard. Information on new standards, amendments and interpretations
that are expected to be relevant to the Group’s consolidated financial statements is provided below. Certain
other new standards and interpretations issued but not yet effective, that are not expected to have a material
impact on the Group’s consolidated financial statements, have not been disclosed.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
12
2. Basis of preparation (continued)
IFRS 9 - Financial Instruments (effective from 1 January 2018)
IFRS 9 will replace the multiple classification and measurement models in IAS 39, Financial Instruments:
Recognition and Measurement, with a single model that has only two classification categories: amortized cost
and fair value. The new standard also requires a single impairment method to be used, provides additional
guidance on the classification and measurement of financial liabilities, and provides a new general hedge
accounting standard.
The Company has chosen not to early adopt IFRS 9 Financial Instruments (effective for the year ending March
31, 2019), which was issued during the year. The standard is not expected to have a material impact on the
Group’s financial statements.
Certain comparative information has been represented to conform with current year’s presentation.
3. Significant accounting policies
The accounting policies set out below have been applied consistently for all periods presented in these consolidated
financial statements.
(a) Basis of consolidation:
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 re-measured 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.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
13
3. Significant accounting policies (continued)
Transactions eliminated on consolidation
Intra-group balances are eliminated in preparing the consolidated financial statements.
These consolidated financial statements include the accounts of the Group and its subsidiaries. All inter-Group
transactions and balances are eliminated on consolidation.
Significant subsidiaries of the Group are as follows:
Country of Effective
Name incorporation interest
Chatham Rock Phosphate (NZ) Limited New Zealand 100
Manmar Investments One Hundred and Six (Proprietary)
Limited
Namibia 100
Glass Earth (New Zealand) Limited New Zealand 100
HPD New Zealand Limited New Zealand 100
Glass Earth Geothermal Limited New Zealand 100
Glass Earth Mining Limited New Zealand 100
Goldmines New Zealand Limited New Zealand 100
(b) Currency translation:
Transactions in currencies other than the functional currency are recorded at the rate of exchange prevailing
on the date of the transaction. Monetary assets and liabilities are translated at the exchange rate in place on
the reporting date. Non-monetary items that are measured at historical cost in a foreign currency are translated
at the exchange rate on the date of the transaction. 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 the fair value was determined. Foreign currency translation differences are recognised in profit or loss.
For consolidation purposes, Chatham Rock Phosphate (NZ) Limited is translated into the Group’s presentation
currency of Canadian dollars. Assets and liabilities are translated using the exchange rate prevailing at the end
of the reporting period. Income and expense items are translated at the average exchange rate for the relevant
period. Translation differences are recognised in other comprehensive income (loss) and are accumulated
within equity in the currency translation reserve.
(c) Financial instruments:
Receivables
Receivables are stated at their cost less impairment losses.
Trade and other payables
Trade and other payables are stated at cost.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
14
3. Significant accounting policies (continued)
(d) Share capital:
Common shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares
and share options are recognised as a deduction from equity.
(e) Impairment:
The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether
there is any objective evidence of impairment.
An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.
Impairment losses directly reduce the carrying amount of assets and are recognised in the Statement of
Comprehensive Income.
(f) Mineral property interest:
Exploration and evaluation costs, including the costs of applying and acquiring licences, are capitalised as
intangible assets on an area of interest basis. Costs incurred before the Group has obtained the legal rights to
explore an area are recognised in the Statement of Comprehensive Income.
Exploration and evaluation assets are classified as finite lived tangible assets and are measured at cost less
any accumulated amortisation and impairment losses. Amortisation will commence once the Group has
commenced mining operations and will be recognised on a unit of production basis.
Exploration and evaluation assets are recognised and carried forward if the rights of the area of interest are
current and either:
(i) The expenditures are expected to be recouped through successful development and exploitation of
the area of interest; or
(ii) Activities in the area of interest have not at the reporting date, reached a stage which permits a
reasonable assessment of the existence or other wise of economically recoverable reserves and
active and significant operations in, or in relation to, the area of interest are continuing.
Ultimate recoupment of costs is dependent on successful development and commercial exploration or
alternatively sale of respective areas. Costs are written off as soon as an area has been abandoned or
considered to be non-commercial.
Exploration and evaluation assets are assessed for impairment if:
(i) Sufficient data exists to determine technical feasibility and commercial viability, and
(ii) Facts and circumstances suggest that the carrying amount exceeds the recoverable amount (see
impairment accounting policy (e)). For the purposes of impairment testing, exploration and evaluation
assets are allocated to cash-generating units to which the exploration activity relates. The cash
generating unit shall not be larger than the area of interest.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
15
3. Significant accounting policies (continued)
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest
are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for
impairment and then reclassified from intangible assets to mining property and development assets within
property, plant and equipment.
(g) Finance income and expenses:
Finance income comprises interest income on bank deposits and foreign currency gains that are recognised in
the Statement of Comprehensive Income. Interest income is recognised as it accrues, using the effective
interest method.
Finance expenses comprise interest expense and foreign currency losses, are recognised in the Statement of
Comprehensive Income. All borrowing costs are recognised in the Statement of Comprehensive Income using
the effective interest method.
(h) Income tax:
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Statement
of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which
case it is recognised in equity.
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 amounts used for taxation purposes. 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 to the extent that it is probable that future taxable profits will be available
against which temporary differences can be utilised. 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 realised.
(i) Earnings per share:
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted
average number of ordinary shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which
comprise share warrants and options.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
16
4. Segment reporting
The Group conducts its business as a single reportable operating segment, being the development of a defined rock
phosphate deposit.
The chief operating decision maker, who is responsible for allocating resources and assessing performance of the
operating segment, has been identified as the Board. The Board manages development activity through review and
approval of contracts and other operational information.
The Group operates in the minerals exploration industry within New Zealand and has commenced due diligence
activities on phosphate assets overseas.
5. Other current assets
2018 2017
Prepayments $ 164,593 $ 86,370
Duncan Cotterill Trust Account - 470,080
Salley Bowes Harwardt Trust Account 4,678 -
$ 169,271 $ 556,450
Following a High Court ruling, funds in the Duncan Cotterill Trust account were used to settle disputed EPA
expenses during the current financial year.
6. Mineral property interest
Exploration and evaluation on Chatham Rise Project
2018 2017
Opening balance $ 4,244,497 $ 3,763,865
Exploration costs capitalised 316,808 331,917
Foreign exchange fluctuation (9,101) 148,715
Net book value $ 4,552,204 $ 4,244,497
The recoverability of the carrying amounts of exploration and evaluation assets is dependent on the Group gaining
a Marine Consent for the project to be commercially successful. Commitments and tenure of the permit is included
in Note 19.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
17
6. Mineral property interest (continued)
The Group was granted a Minerals Prospecting Licence (“MPL”) 50270 under the Continental Shelf Act 1964 on
February 25, 2010 for a period of four years. The licence covers 2887km2 of the Chatham Rise and is located
approximately 450 kilometres east of Christchurch.
On February 11, 2015 the Group was refused Marine Consent from the Environmental Protection Authority (EPA),
New Zealand’s environmental regulator on grounds which the Group disputes. Subsequently, the Directors impaired
the carrying value of the capitalised costs to represent their best estimate of the recoverability as the Group
reconsiders the re-submission of the Marine Consent with the EPA.
On April 27, 2017 and December 8, 2017 the Group was granted a change of conditions in the permit to further
defer the minimum work programme commitments. All work commitments have been met to date.
In September 2012, the Group applied for 5 prospecting licences offshore Namibia. It remains the intention of the
Directors to pursue these licences.
7. Trade other payables
2018 2017
Trade and other payables due to related parties $ 50,286 $ 212,247
Other trade payables 161,584 179,383
Environmental Protection Agency - 741,865
Accrued expenses 51,359 170,660
$ 263,229 $ 1,304,155
The EPA outstanding $851,865 was settled during the year including interest costs of NZD$55,000 and legal fee
reimbursements of NZD$110,000.
8. Share capital
(a) Authorised:
The Group's share capital consists of an unlimited number of common shares without par value.
The holders of ordinary shares are entitled to receive dividends and are entitled to one vote per share at
meetings of the Group, to the extent to which they have been paid up. All shares rank equally with regard to the
Group’s residual assets.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
18
8. Share capital (continued)
(b) Issued and outstanding:
Number
of shares Amount
Balance, April 1, 2016 498,206,514 $ 29,888,605
Issued during the year:
Shares issued net of costs 343,673,040 1,929,548
Cancellation of shares (12,034,492) (44,553)
Shares surrendered in RTO (817,572,286) -
Mandatory warrants issued in RTO - 63,740
Shares issued for acquisition cost 1,355,037 589,228
Balance, March 31, 2017 13,627,813 32,426,568
Issued during the year:
Warrants exercised 379,214 -
Shares issued net of costs 3,673,333 1,416,931
Balance, March 31, 2018 17,680,360 $ 33,843,499
(c) On April 19, 2017 the Company closed a non-brokered private placement of 89,764 common shares for gross
proceeds of CAD$33,213, at a price of CAD$0.37 per common share, under terms that were agreed in October
2017.
(d) On June 28, 2017 the Company closed a non-brokered private placement of 884,587 units at a price of
CAD$0.50 per Unit for gross proceeds of CAD$442,293.50. Each unit consists of one common share and one-
half of one non-transferable share purchase warrant. Each whole warrant entitles the holder to purchase one
common share at a price of CAD$1.00 per share any time prior to the date that is two years from the date of
issuance. A finder’s fee of 6,827 Units was payable to an arm’s length party in connection with this placement.
(e) On October 12, 2017 pursuant to debt settlement agreements with certain of its directors, officers and
consultants, a total of C$167,370 of unpaid wages and consulting fees to such directors, officers and consultants
was settled by the issuance of 347,321 common shares at deemed prices of between C$0.43 to C$0.576 per
share.
(f) On December 1, 2017 the Company issued 1,372,097 common shares pursuant to the rights Issue. The issue
price of the Shares is NZ$0.40 for gross proceeds of NZ$548,838 (C$483,636)
(g) On January 24, 2018 the Company closed a non-brokered private placement of 972,737 units at a price of
CAD$0.30 per Unit for gross proceeds of CAD$291,821. Each Unit consists of one common share and one-half
of one non-transferable share purchase warrant. Each whole warrant entitles the holder thereof to acquire one
common share at a price of CAD$0.45 per share at any time prior to the date that is two years from the date of
issuance.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
19
(h) Mandatory Warrants - In February 2017 the Company issued 379,214 Mandatory Warrants as a result of the
reverse takeover by Chatham Rock Phosphate (NZ) Limited (formerly Chatham Rock Phosphate Limited). Each
mandatory warrant requires the holders to acquire one common share of the Company at a price of NZD$0.394
per share on or before April 17, 2018. All of these Mandatory Warrants were exercised in June 2017.
On June 28, 2017 as part of a non-brokered private placement the Company issued 442,293 non-transferable
share purchase warrants. Each warrant entitles the holder to purchase one common share at a price of
CAD$1.00 per share any time prior to the date that is two years from the date of issuance. A finder’s fee of
3,413 warrants were issued as part of a finder’s fee payable to an arm’s length party in connection with this
placement.
On January 24, 2018 as part of a non-brokered private placement the Company issued 486,368 non-
transferable share purchase warrants. Each warrant entitles the holder thereof to acquire one common share
at a price of CAD$0.45 per share at any time prior to the date that is two years from the date of issuance.
(i) Discretionary Warrants - In February 2017 the Company issued 1,524,618 Discretionary Warrants as a result
of the reverse takeover by Chatham Rock Phosphate (NZ) Limited (formerly Chatham Rock Phosphate Limited).
Each discretionary warrant requires the holder to acquire one common share of the Company at a price of
NZD$0.394 per share on or before March 17, 2018. These discretionary warrants were not exercised before
March 17, 2017 and have now expired.
In February 2017 the Company acquired Antipodes Gold Limited via a reverse acquisition. Each shareholder
was offered 1 AXG share for 65.59 shares held in the Company.
9. Share based payments
(a) Recognised share-based payment expenses
The purpose of the share-based payments is to reward key consultants and cornerstone investors in a manner
that aligns remuneration with the creation of shareholder wealth.
As the Company’s activities have been predominantly developing an already defined mineral deposit,
shareholder wealth is dependent, for the foreseeable future, on development success rather than an
improvement in the Company’s earnings.
(b) Equity-settled transactions
Share-based payments of C$167,370 (March, 31 2017: C$84,897, prior to the reverse takeover) settled by the
issue of 347,231 (March, 31 2017: 11,318,795) ordinary shares in the Company
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
20
10. Earnings per share
The earnings and weighted average number of outstanding shares used in the calculation of basic and diluted
earnings per share are as follows:
2018 2017
Loss used in the calculation of basic
EPS
(1,228,005) (1,636,550)
Weighted average number of
outstanding shares for the purpose of
basic EPS
15,486,362 693,708,728
Effect of dilution, weighted number of
mandatory warrants
- 36,363
Weighted average number of
outstanding shares used in the
calculation of diluted EPS
15,486,362 693,745,091
Basic loss per share (Canadian cents) (7.93) (0.24)
Diluted loss per share (Canadian cents) (7.93) (0.24)
No dilution effect on diluted EPS as the company was operating at a net loss for the period
11. Finance income and expenses
2018 2017
Interest income on bank deposits 7,650 8,216
Finance income 7,650 8,216
Interest expense 50,435 -
Net foreign exchange losses 34 2,809
Finance expense 50,469 2,809
Net finance income and expenses (42,819) 5,407
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
21
12. General and administrative expenses
The following items of expenditure are included in administrative expenses:
2018 2017
Auditor’s remuneration to KPMG
comprises:
Audit of annual financial statements 32,375 26,996
Professional fees charged in respect
of RTO
- 21,881
Total auditors’ remuneration 32,375 48,877
Accountancy fees 43,254 21,411
Consultancy fees 222,158 223,615
Directors fees - -
Insurance 16,545 6,502
Legal fees 163,593 303,290
Listing fees 16,110 39,223
Management fees 190,919 107,904
Registry fees 22,801 55,241
Rent 20,175 18,618
Reverse acquisition costs - 335,517
Travel 173,842 53,071
The Board has agreed to forfeit directors fees for the year ended March 31, 2018 (beyond the amount charged)
as they are remunerated for their services through consultancy fees.
Refer to Note 17 for discussion on consultancy fees, which are charged by related parties.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
22
13. Income tax expense in the Statement of Comprehensive Income
Reconciliation of effective tax rate
2018 2017
Profit/(loss) for the year $ (1,228,005) $ (1,636,550)
Income tax using the Company’s domestic tax rate
27% (2017: 26%)
(331,562) (426,503)
Tax effect of:
Non-deductible expenditure 77,908 185,512
Current year losses for which no deferred tax is
recognised
327,854 379,201
Change in unrecognized temporary differences (61,921) (106,479)
Foreign tax rate differentials (12,279) (32,731)
Income tax expense - -
Comprising:
Current tax expense
- -
Deferred tax expense
Origination and reversal of temporary differences (59,709) (98,873)
Change in unrecognized temporary differences 59,709 98,873
Total income tax expense in income statement
- -
The current tax assets consists of:
Resident withholding tax paid 2,126 7,573
Current tax assets
$ 2,126 $ 7,573
14. Deferred tax assets and liabilities
Unrecognised deferred tax assets
Deferred tax assets have not been recognized in respect of the following:
2018 2017
Deductible temporary differences $ - $ -
Tax losses (9,572,075) (9,244,220)
$ (9,572,075) $ (9,244,220)
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
2018 2017
Property, plant and equipment $ - $ 43
Intangible assets 1,084,877 1,014,914
Trade and other payables 6,616 6,051
Tax losses (1,091,493) (1,021,008)
$ - $ -
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
23
15. Financial instruments
Exposure to credit, market, foreign currency, equity prices and liquidity risks arise in the normal course of the Group’s
business.
Financial instruments are comprised of accounts receivable and other receivables, cash and cash equivalents, other
financial assets, trade creditors and other payables, borrowings, and other financial liabilities.
Recognition and de-recognition of financial assets and liabilities
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument. Financial assets and financial liabilities are recognised initially at fair value
plus transaction costs
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or
if the Group transfers the financial asset to another party without retaining control or substantial all risks and rewards
of the asset.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Subsequent measurement of financial assets
All financial assets held by the Group in the years reported have been designated into one classification, "loans and
receivables", being non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. After initial recognition these are measured at amortised cost using the effective interest method, less
provision for impairment. Discounting is omitted where the effect of discounting is immaterial.
All financial assets are subject to review for impairment at least once each reporting date. Accounts receivable are
reviewed for impairment when accounts are past due or when other objective evidence is received that a specific
counterparty will default.
Subsequent measurement of financial liabilities
Trade payables and other borrowings are subsequently measured at amortised cost using the effective interest
method.
Sensitivity analysis
In managing currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings.
Over the longer-term, however, permanent changes in foreign exchange will have an impact on profit.
It is estimated that a general increase of one percentage point in the value of the New Zealand dollar against other
foreign currencies would have decreased the Group’s profit before income tax by approximately $nil for the period
ended March 31, 2018 (2017: $nil). As a purchaser of foreign currency, the Group’s risk is that the NZD depreciates.
Credit risk:
The Group incurs credit risk from financial instruments when a counter party fails to meet its contractual obligations.
Credit risk arises on cash and other receivables. The Group does not have a significant concentration of credit risk
with any single party.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
24
15. Financial instruments (continued)
Market risk:
Market risk is that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s
income or the value of it’s holding of financial instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters, while optimising the return.
(i) Foreign currency risk:
The Group is exposed to foreign currency risk on purchases that are denominated in a currency other than
the Group’s functional currency, New Zealand dollars (NZD). It is the Group’s policy not to hedge foreign
currency risks.
At March 31, 2018, the Group is exposed to currency risk through the following assets and liabilities
denominated in Canadian dollars:
2018 2017
Cash and cash equivalents 51,574 -
Other current assets 4,678 -
Accounts payable (17,519) (14,065)
38,733 (14,065)
(ii) Interest rate risk:
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates.
The Group’s cash and cash equivalents attract interest at floating rates and have maturities of 90 days or
less. The interest is typical of New Zealand banking rates, which are at present historically low; however,
the Group’s conservative investment strategy mitigates the risk of deterioration to capital invested. A
change of 100 basis points in the interest rate would not be material to the consolidated financial
statements.
Liquidity risk:
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The
Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group’s reputation.
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an
appropriate liquidity risk framework for the management of the Group’s short, medium and longer term
funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate
banking facilities through monitoring of future rolling cash flow forecasts of its operations, which reflect
management’s expectations of the settlement of financial assets and liabilities.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
25
15. Financial instruments (continued)
The only financial liabilities are trade and other payables. At March 31, 2018, the Group had $263,299 (2017:
$1,304,155) in trade and other payables. Trade payables are non-interest bearing and have a contractual maturity
of less than 30 days.
(a) Financial assets and liabilities:
As at March 31, 2018, the carrying and fair values of our financial instruments by category are as follows:
Loans and
receivables
Financial
liabilities
Carrying
value Fair value
Less than 1
year 1 to 3 years
$ $ $ $ $ $
Financial assets
Cash and cash
equivalent 81,484 - 81,484 81,484 81,484 -
Trade and other
receivables 12,631
- 12,631 12,631 12,631 -
Other current assets 4,678
- 4,678 4,678 4,678 -
NZX Bond 13,962
- 13,962 13,962 13,962 -
Total financial assets 112,755
- 112,755 112,755 112,755 -
Financial liabilities
Trade and other
payables - 263,299 263,299 263,299 263,299 -
Total financial
liabilities - 263,299 263,299 263,299 263,299 -
(b) Fair value:
All financial instruments measured at fair value are categorized into one of three hierarchy levels, described
below, for disclosure purposes. Each level is based on the transparency of the inputs used to measure the fair
values of assets and liabilities:
• Level 1 - Values based on unadjusted quoted prices in active markets that are accessible at the
measurement date for identical assets and liabilities.
• Level 2 - Values based on quoted prices in markets that are not active or model inputs that are observable
either directly or indirectly for substantially the full contractual term of the asset or liability.
• Level 3 - Values based on prices or valuation techniques that require inputs that are both unobservable
and significant to the overall fair value measurement.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
26
15. Financial instruments (continued)
The carrying values of cash and cash equivalents, accounts receivable and accounts payable and accrued
liabilities approximate their respective fair values due to the short-term nature of these instruments. The
carrying value of the bank term loan approximates its fair value due to the existence of floating market-based
interest rates.
The Group has no financial assets or liabilities included in Level 1, 2 or 3 of the fair value hierarchy.
16. Capital management
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.
The Group’s capital structure reflects a Group 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:
• Preparing budgets and cash-flow forecasts which are reviewed and approved by the Board of Directors;
• Regular internal reporting and Board of Directors meetings to review actual versus budgeted spending and
cash-flows; and
• Detailed project analysis to assess and determine new funding requirements.
There were no changes in the Group’s approach to capital management during the period. The Group is not subject
to externally imposed capital requirements.
17. Related party transactions
(a) Balances receivable and payable:
The amounts due to related parties and included in accounts payable, are non-interest bearing, unsecured and
due on demand, and comprise the following:
2018 2017
Due to directors $ 40,140 $ 181,965
Due to executive officers 10,146 30,282
$ 50,286 $ 212,247
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
27
17. Related party transactions (continued)
(b) Key management personnel:
Key management personnel includes the consulting and management fees paid and/or accrued to the Group’s
senior officers and directors as follows:
2018 2017
Consultancy fees $ 155,457 $ 373,363
Management fees 190,919 -
$ 346,376 $ 373,363
Depending on the nature of services and costs, certain amounts have been capitalized to intangible assets as
they are directly attributable to the Chatham Rise project.
Transactions and balances with key management personnel and their related parties
During the year, the Company paid management fees of $3,851 (2017: $52,050) to Chris Castle. The
outstanding balance at balance date was $nil (2017: $52,050).
During the year, the Company paid consultancy fees of $38,695 (2017: $53,952) to Robert Goodden Consulting
Ltd, a company in which Mr R Goodden is also a Director. The outstanding balance at balance date was $29,879
(2017: $26,025).
During the year, the Company paid consultancy fees for stakeholder management of $35,901 (2017: $nil) to
Ms L Sanders. The outstanding balance at balance date was $7,609 (2017: $nil). During the year, the Company
paid consultancy fees for stakeholder management of $nil (2017: $74,286) to LJ Sanders Consulting Ltd, a
company in which Ms L Sanders is also a Director. The outstanding balance at balance date was $nil (2017:
$49,881) of which $nil (2017 $24,556) is included in trade payables.
During the year, the Company paid consultancy fees of $1,926 (2017: $81,879) to Robin Falconer Associates
Ltd, a company in which Mr R Falconer is also a Director. The outstanding balance at balance date was $1,954
(2017: $54,009) of which $nil (2017: $27,984) is included in trade payables.
During the year, the Company paid consultancy fees of $61,439 (2017: $49,058) to CRP-OCS Consulting Ltd,
a company in which Mr R Wood is also a Director. The outstanding balance at balance date was $10,146 (2017:
$30,282) of which $10,146 (2017:$27,671) is included in trade payables.
During the year, the Company paid consultancy fees of $17,496 (2017: $6,284) to Nevay Holdings Ltd, a
company in which Mr C Castle & Ms J Hatchwell are also Directors. The outstanding balance at balance date
was $698 (2017: $nil).
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
28
17. Related party transactions (continued)
Some of the Directors of Chatham Rock Phosphate Ltd are commonly Directors in Aorere Resources Limited,
which in its own name and through its subsidiary; Mineral Investments Ltd has a combined 3.5% (2017: 4.58%)
shareholding in Chatham Rock Phosphate Ltd.
Ms L Sanders, Mr C Castle and Ms J Hatchwell are Directors of Chatham Rock Phosphate Ltd and are also
commonly Directors in Widespread Limited.
During the year, the Company paid management fees of $187,068 (2017: $55,854) to Aorere Resources
Limited. The outstanding balance at balance date was $nil (2017: $nil).
18. Reconciliation of the profit/(loss) for the year with the net cash from operating activities
2018 2017
Profit/(loss) for the period
$(1,228,005)
$
(1,636,550)
Adjustments for:
Depreciation
176
532
Reverse acquisition cost (non-cash)
-
335,517
Expenses (non-cash)
-
30,810
Change in trade and other receivables
21,387
20,224
Change in other current assets
(77,465)
(7,663)
Change in current tax assets
-
(1,281)
Change in trade and other payables
(822,319)
257,063
Change in exploration expenditure
(312,110)
(289,490)
Net cash from operating activities
(2,418,336)
$ (1,300,839)
19. Commitments and contingencies
Licence work commitments
The Group has the following indicative expenditure commitments at balance date (being minimum work
requirements under its minerals mining permit and minerals prospecting licence). The Company is dependent on
certain factors to be able to meet these minimum work requirements. They are set out in Note 2(e).
2018 2017
NZD NZD
Within one year $ - $ -
After one year but not more than five years $ 6,000,000 $ 6,000,000
$ 6,000,000 $ 6,000,000
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
29
19. Commitments and contingencies (continued)
Minerals Mining Permit 55549
The Minerals Mining Permit was granted on December 6, 2013. On December 7, 2017 the Company was granted
a change of conditions in the permit to defer the minimum work programme commitments. To date all minimum work
commitments have been completed. The minimum work programme includes:
Within 60 months of the commencement date of the permit, the permit holder shall:
• Complete an updated resource optimisation study for the permit area; and
• Prepare a technical report detailing all work completed during this stage of the work programme to be
submitted to the chief executive in accordance with the regulations.
Within 72 months of the commencement date of the permit, the permit holder shall:
• Complete and submit a sufficiently detailed engineering study and feasibility study, which (without
limitation) is at the level of detail to reach a decision-to-mine milestone; and
• Submit a detailed timeline for the construction/refit of a selected vessel including (without limitation) the
detail timing of the commissioning and mobilisation to the Chatham Rise; and
• Complete and submit a marine operations risk review report that includes (without limitation) a HAZID Risk
Assessment Matrix, risk review of on-board processing and risk review of planned and unplanned
maintenance in various weather scenarios; and
• Either commit by notice in writing to the Chief Executive to carry out the work programme obligations set
out for the following 24 months and to commence production within 60 months of the commencement date
of the permit or surrender the permit.
Within 96 months of the commencement date of the permit, the permit holder must spend on average $2 million per
annum completing appropriate sampling, geophysical and geotechnical surveys and data analysis (without
limitation) in respect of the mining blocks identified for the first five years of production. For the remainder of the
term the Company must spend $2 million per annum on carrying out further specified work programme
commitments.
Glass Earth Gold
In March 2014 Glass Earth (New Zealand) Limited (Group’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 (no changes from the prior year) to reflect the Group’s
best estimate of any potential legal and other costs associated with defending this claim.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the year ended March 31, 2018 and 2017
30
20. Subsequent events
Subsequent to year end the Company has received $312,000 towards a non-brokered private placement of up to
4,800,000 units at a price of CAD$0.25 per Unit. Each unit consists of one common share and one-half of one non-
transferable share purchase warrant. Each whole warrant entitles the holder to purchase one common share at a
price of CAD$0.45 per share any time prior to the date that is two years from the date of issuance.
There were no other material subsequent events up to the date of the Audit report.
---
Chatham Rock Phosphate MD&A Report for March 2018 Page 1
CHATHAM ROCK PHOSPHATE LIMITED (“CRP”)
MANAGEMENT’S DISCUSSION & ANALYSIS
FOR THE YEAR ENDED MARCH 31, 2018
(All amounts stated in Canadian dollars, unless otherwise indicated)
Attention is called to a caution in respect of Forward‐Looking Statements ‐ included at page 24
CRP is now Stock Exchange listed in Canada, New Zealand and Germany.
Chatham is now positioned on the world stage, to more effectively raise funds from
international investors. These funds are required to reapply for the Marine Consent required to
give effect to our granted mining permit. Our overall objective
is the mining of phosphate
nodules on the Chatham Rise (offshore New Zealand).
The TSX.V listing in Canada was achieved by means of a merger with dual listed Antipodes Gold
Limited (“Antipodes Gold”), which, having sold its Coromandel based gold assets to Newmont
New Zealand, was a cashed‐up shell.
Antipodes Gold consolidated its shares 1 for 10 and then
made a one Antipodes share for 65.59 Chatham shares offer. That process was complex, highly
regulated and took over a year to complete.
In parallel with that CRP undertook multiple investor roadshows in Europe and Canada and
continued to steadily
raise working capital from investors there, as well as in New Zealand and
Asia. CRP has now raised more than $5.5 million since the Marine Consent was declined in
February 2015. During this period, the market capitalisation has recovered from $2.4 million to
over a peak of $10 million and is
presently around $5.2 million.
The cornerstone investors are based in Singapore, Germany and Switzerland and together with
the CRP management team hold, directly and indirectly, approximately 32% of the company.
The rest of the shares are held by more than 1,800 shareholders in nine countries.
CRP is expecting to
raise the funds required to complete the Marine Consent reapplication and
to cover the costs of the Environmental Protection Authority hearing during the next twelve
months.
It is expected to take 15 months to complete the work required to submit the re‐application
with a likely submission date in Q3,
2019. This would lead to an expected grant date of Q2, 2020
and eventual production in 2022.
Chatham Rock Phosphate MD&A Report for March 2018 Page 2
Contents
INTRODUCTION ............................................................................................................................................. 3
CORPORATE HISTORY AND NATURE OF THE BUSINESS ................................................................................ 3
BOARD OF DIRECTORS ................................................................................................................................... 5
CAPITAL TRANSACTIONS AND SIGNIFICANT EVENTS .................................................................................... 5
Capital Transactions .................................................................................................................................. 5
Significant Events ....................................................................................................................................... 5
CHATHAM ROCK PROJECT and EXPLORATION .............................................................................................. 6
FINANCIAL COMMENTARY .......................................................................................................................... 11
Summary of Quarterly Results ................................................................................................................
11
Significant Expenses of a Corporate Nature ............................................................................................ 11
Liquidity and Capital Resources ............................................................................................................... 12
Related Party Transactions ...................................................................................................................... 12
SUBSEQUENT EVENTS .................................................................................................................................. 12
Use of Financial Instruments ................................................................................................................... 13
Contractual Obligations and Commitments ............................................................................................ 13
Off‐Balance Sheet Arrangements and Contingent Liabilities .................................................................. 13
Critical Accounting Policies and Estimates
.............................................................................................. 13
Mineral Properties ................................................................................................................................... 14
OUTLOOK ..................................................................................................................................................... 14
RISKS, UNCERTAINTIES AND OTHER ISSUES ................................................................................................ 14
Risk Factors .............................................................................................................................................. 14
SUPPLEMENTAL TO THE FINANCIAL STATEMENTS ..................................................................................... 23
Outstanding Share and Option Data ....................................................................................................... 23
FORWARD‐LOOKING STATEMENTS ............................................................................................................ 24
Chatham Rock Phosphate MD&A Report for March 2018 Page 3
INTRODUCTION
This discussion and analysis of the operating results and financial condition of Chatham Rock Phosphate
Limited (“Chatham Rock”, or the “Company”) for the year ended March 31, 2018, as prepared on June
12, 2018 should be read in conjunction with the audited consolidated financial statements and related
notes for the same
period and is intended to provide the reader with a review of the factors that
affected the Company’s performance during that year and the factors reasonably expected to impact
future operations and results.
The audited consolidated financial statements and related notes of Chatham Rock 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.
CORPORATE HISTORY AND NATURE OF THE BUSINESS
Chatham Rock 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”).
A name change from
Antipodes Gold Limited to Chatham Rock, in February 2017, was undertaken at the
same time as a reverse takeover arrangement for the Company to acquire its main subsidiary, Chatham
Rock Phosphate (NZ) Limited (“Chatham (NZ)”) (which was incorporated in New Zealand under the
Companies Act 1993 on April 27,
2004).
Chatham (NZ)'s registered office and principal place of business is located at Level 1, 93 The Terrace,
Wellington 6011, New Zealand.
Significant Intercorporate Relationships
Chatham (NZ) is a junior mineral development company, focused on the development of a marine
phosphorite deposit off the coast of New Zealand. It has
not commenced mining operations or
generated operating revenues to date.
Chatham (NZ) holds a Mining Permit over an area off the coast of New Zealand with significant seabed
deposits of rock phosphate and other potentially valuable minerals.
In 2007, Chatham (NZ) and an associate applied for a prospecting license over
an area covering a portion
of a phosphorite deposit on the Chatham Rise, being historically an intensively investigated area of the
Chatham Rise for potentially economic concentrations of rock phosphate.
100%
Manmar Investments 106
(Proprietary) Limited
Incorporated under the laws
of Namibia
Chatham Rock Phosphate Limited (Chatham Rock)
Incorporated under the Business Corporations Act (British Columbia)
Chatham Rock Phosphate (NZ) Limited
Incorporated under the New Zealand
Companies Act 1993
Chatham Rock Phosphate MD&A Report for March 2018 Page 4
In 2010, Chatham (NZ) (as to 90%) and its associate (as to 10%) were jointly granted a prospecting
licence, pursuant to the Crown Minerals Act 1991 of New Zealand, covering 4,726 ݉݇
ଶ
of the Chatham
Rise. Following the prospecting licence being granted, Chatham (NZ) carried out significant background
work as part of the licence requirements to further characterize the phosphorite resource and assess the
potential environmental impacts of a possible mining operation in a marine environment.
Since acquiring the original prospecting licence
in 2010, Chatham (NZ) has commissioned six cruises in
two programs. The key objects of the cruises were to corroborate the previous work conducted on the
Chatham Rise and to collect further geological, geotechnical, geophysical and environmental data. For
phosphorite grade corroboration purposes, the M.V. Tranquil Image cruise collected 55 samples
using a
Van Veen grab. The R.V. Dorado Discovery conducted four cruises out to the project area and collected
181 box core and grab samples as well as environmental data.
The data collected by Chatham (NZ) allowed better delineation of the deposit. The more recent work by
Chatham (NZ) on
investigating this resource confirmed the general tenor of the phosphorite grades and
location of phosphorite in the area, advanced work aimed at investigating the feasibility of mining the
resource, and has provided valuable information to assess the environmental effects of the proposed
mining operations.
In early 2011, Chatham (NZ) commissioned
independent studies for the design of a system to recover
phosphorite from the Chatham Rise seabed from three of the largest dredging companies in the world.
Boskalis Offshore Subsea Contracting B.V (“Boskalis”) was one of the participants and was selected by
Chatham (NZ) as its preferred technical partner for the Chatham
Rise Project.
Chatham (NZ) divested some oil and gas related investments to its associate in exchange for it
transferring its 10% interest in the prospecting license to Chatham (NZ), resulting in the project
becoming wholly owned by Chatham (NZ).
In September 2012, Chatham (NZ) applied for a Mining Permit in
respect of a part of the area covered by
the Continental Shelf Licence. As part of that application process and in anticipation of applying for the
Marine Consent, Chatham (NZ) consulted with a range of stakeholders. This has included the local
(Maori) Iwi, the Chatham Islands community, the Government, fishing
groups and a range of
environmental groups. The purpose of this consultation was to establish a relationship with these
parties and to identify and resolve issues associated with the mining proposal. As a result, the Directors
believe that the project is now well understood by a wide range of stakeholders and
in turn Chatham
(NZ) has a better understanding of the views and possible concerns of all parties whose interests are
potentially affected by the project.
The Mining Permit was granted on December 6, 2013.
In May 2014, Chatham (NZ) submitted to the (New Zealand) Environmental Protection Authority (“EPA”)
a
formal application for Marine Consents. The application was declined on February 11, 2015.
Chatham (NZ) aims to pursue a re‐submission of its Marine Consent application and has been raising
equity capital in preparation for this task.
Chatham Rock Phosphate MD&A Report for March 2018 Page 5
BOARD OF DIRECTORS
Chris Castle President, Managing Director and CEO (New Zealand based);
Robert Goodden Independent non‐executive Chairman (England based);
Robin Falconer Independent non‐executive director (New Zealand based);
Jill Hatchwell Non‐executive director (New Zealand based);
Linda Sanders Non‐executive director (New Zealand based);
Ernst
Schönbächler Non‐executive director (Switzerland based); and
Ryan Wong Non‐executive director (Malaysia based).
Mr Justin Cochrane Independent non‐executive director (Toronto, Canada) resigned December 22,
2017.
CAPITAL TRANSACTIONS AND SIGNIFICANT EVENTS
Capital Transactions
Chatham (NZ) has continued to raise additional equity capital totalling $1.6m in the eighteen months to
March 31, 2018. These funds are being applied to the preparatory work in reapplying for the marine
consent for the Chatham Rise project.
Significant Events
Apart from strong progress in preparing for the marine consent reapplication, the Company completed
its reverse takeover merger with Antipodes Gold Limited on 24 February 2017.
This resulted in Chatham Rock gaining a listing on the Toronto Venture Exchange (TSX.V Code “NZP”).
Chatham Rock is now also quoted on
the Frankfurt Exchange.
The Company and Board of Directors has been strengthened by funding from new shareholders, who are
now represented by a new director each (Mr Schönbächler and Mr Wong) who add further skill sets to
the Board.
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Chatham Rock Phosphate MD&A Report for March 2018 Page 7
The permits are Mining Permit 55549 granted to Chatham (NZ) in December 2013 (“Mining Permit”)
along with the Continental Shelf licence MPL 50270 granted in February 2010 (“Prospecting Licence”).
The Mining Permit is not due to expire until 2033 and, subject to the granting of a Marine Consent from
the Environmental Protection Authority (“EPA”), will allow Chatham (NZ) to conduct mining operations.
The Prospecting Licence (MPL 50270) expired on February 25, 2014 and an application for an extension
of a term for a further four years was submitted to New Zealand Petroleum and Minerals (“NZPAM”) in
December 2013.
The licence was successfully renewed in August 2016, for a further 6 years from February 2014. The
licence area has been reduced from 3,905 square kilometres to 2,876 square kilometres.
A summary of these licence holdings and applications in shown at the table below.
Chatham Licence Holdings and Applications
Asset Holder Interest (%) Status
Licence
Expiry Area (km
2
)
MP 55549
Mining Permit
Chatham
(NZ)
100ExplorationDec. 5, 2033 820
MPL 50270
Prospecting
Licence
Chatham
(NZ)
100ExplorationFeb. 24,
2020
2,876
Geology and Mineralization
The phosphorite deposit occurs as a thin surficial seafloor layer of phosphorite‐bearing glauconitic sand
with thicknesses typically ranging from 0 to 1 m, at depths of 350 to 450 m below sea level. The sand
layer consists of mainly silt and sand‐sized sediments, with phosphatised chalk
nodules up to 15 cm in
diameter.
Exploration
Phosphorite nodules were first discovered on the Chatham Rise in the 1950s by a New Zealand
Government survey. During the 1960s to 1980s several private and government sponsored cruises
explored the Chatham Rise and surrounding seafloor area. The most extensive surveys were
conducted
by an agreement between the New Zealand Department of Scientific and Industrial Research and the
West German Government on cruises by the German research vessels R.V. Valdivia in 1978 and R.V.
Sonne in 1981.
The 1978 R.V. Valdivia cruise was the first intensive sampling and research campaign to be
conducted
over the Chatham Rise; a total of 655 samples from 689 attempts were collected over a 300 km
2
area in
the west of the Project area. The majority of the samples were collected using a large Van Veen‐style
grab of 0.12 m
3
volume, weighing approximately 400 kg.
The 1981 R.V. Sonne cruise was the most comprehensive exploration effort to assess the Chatham Rise
phosphorite deposit. In addition to oceanographic, meteorological and geophysical data, the cruise
collected 19 hours of video recordings of the sea floor as well as 519 sediment samples taken
by a
pneumatic grab‐sampler. The seafloor sediment samples collected during this cruise are the most
representative sample data collected on the Chatham Rise and are considered to be of a high enough
quality to include in a resource estimation.
Chatham Rock Phosphate MD&A Report for March 2018 Page 8
Since acquiring the licence in 2010, Chatham (NZ) has conducted six cruises in two programs in the
Project area. The key task of the cruises was to validate the previous work conducted on the Chatham
Rise and collect further geological, geotechnical, geophysical and environmental data. For phosphorite
grade estimation purposes the
M.V. Tranquil Image cruise collected 55 samples using a Van Veen grab.
The R.V. Dorado Discovery conducted four cruises to the Project area and collected 206 box core and
grab samples.
Sample quality and QA/QC measures varied considerably between the cruises and within each cruise. A
critical part of the
assessment of the data collected in the Project area was to determine what quality
thresholds to use to allow or disallow data to enter into the estimation process. As part of the data
verification process, the relative and absolute quality of the data was assessed in as much detail as
practically
possible. In general, the best samples were those that were collected using the pneumatic
grab, sampled the full sand horizon, had a small survey error and had no other apparent data
ambiguities. Samples collected from the R.V. Sonne are considered to represent the better quality
samples collected in the licence
area, followed by some of the R.V. Valdivia samples and then the box
core samples from the Dorado Discovery. Samples not included in the resource estimate are samples
that failed due to technical failure, samples collected but which have no data recorded, samples with no
location coordinates, non‐validated data and
samples documented as washed or otherwise biased.
Mineral Resources
Definition of the domains used for modelling was based on seismic facies delineated during the R.V.
Sonne cruise. A 2D block model was constructed based on 1 km by 1 km blocks that covers the main
sampled area based on the
average data spacing in the main sample areas. A maximum search radius of
3,000 m was used based on variogram modelling.
Estimation was performed in each domain using ordinary kriging using the accumulation method on the
parameters Ph kg/ m
2
(phosphorite grade), Depth and Sample Quality Ranking (“SQR”). The grade (Ph
kg/ m
2
) was then calculated by dividing Ph kg/ m
2
by the estimated Depth for each block.
A total of 80 million m
2
at an average grade of 290 kg/ m
2
is classified as a global Inferred Mineral
Resource at a cut‐off grade of 100 kg/ m
2
(table below). There are no resources classified in indicated or
measured categories. As the Chatham Rise phosphorite resource is classified entirely as an Inferred
Mineral Resource it does not constitute a mineral reserve and so does not have demonstrated economic
viability. The specification of the phosphorite (i.e. the phosphate content)
has been studied by various
operators including Chatham (NZ), and, even though a representative average grade cannot be
determined for the Mineral Resource, the tenor of the specification (in the order of 18‐19% P2O5 of
screened material) is suitable to allow classification into the Inferred Mineral Resource category.
The average
thickness of the resource is 0.20 m.
Statement of Mineral Resources (phosphorite) for Mining Permit 55549, Chatham Rise. Estimates are
rounded to reflect the level of confidence in these resources at the present time.
Classification Volume (m
3
) Thickness (cm) Ph kg/m
3
Inferred
Mineral
Resource
80,000,00020290
Notes:
1. The Mineral Resource is reported in accordance with CIM NI 43‐101, 2011 edition
2. The Mineral Resource is contained within MP 55549
Chatham Rock Phosphate MD&A Report for March 2018 Page 9
3. All resources have been rounded to the nearest 0.1 million tonnes
4. Ph kg/m
3
is the weight of phosphorite per cubic metre
5. Even though a representative average grade for the specification (phosphate
grade) cannot be determined for the Mineral Resource, the tenor of the
specification (in the order of 18‐19% P
2
O
5
of screened material) is suitable to allow
classification into the Inferred Mineral Resource category
6. The Mineral Resource is reported at 100 kg/m
3
phosphorite cut‐off grade
7. The Mineral Resource is classified entirely as an Inferred Mineral Resource. It does
not constitute a mineral reserve and so does not have demonstrated economic
viability.
RSC’s analysis to date indicates that a potentially economically extractable Mineral Resource exists in the
Project area. Several high‐profile sampling cruises, most independent from each other, have all
identified grades of economic interest within the same area. These cruises have been well documented
and specific knowledge on sampling systems has
been retained and included in this Report.
Recommendations
In addition to the Inferred Mineral Resource described above, in RSC's opinion, there is significant
exploration potential to extend the Mineral Resource within the Mining Permit. Based on existing
sampling data (that was not included in the resource because of lower density
of sampling or lower SQR
numbers), the exploration target would be in the order of 30,000,000 to 50,000,000 m
3
at grades
between 200 and 300 kg/m
3
. The potential quantity and grade of this global exploration target is
conceptual in nature. There has been insufficient exploration to define a Mineral Resource and it is
uncertain if further exploration will result in the target being delineated as a Mineral Resource.
Exploration potential also exists outside MP 55549 and
within Chatham (NZ)'s MPL 50270 permit;
however, there is insufficient suitable information to quantify a target range.
RSC recommends that further seafloor sampling is undertaken to both increase the confidence in the
established Mineral Resource as well as to extend the boundaries of the resource, predominantly
towards the west where
currently low‐quality Valdivia data indicate an exploration target of at least 5 Mt
phosphorite. Increasing the confidence in the current Mineral Resource by additional sampling will give
Chatham (NZ) the grade and geological confidence in the phosphorite deposit to allow them to further
develop mining plans and economic studies.
Outlook
Chatham (NZ) continues to progress the Chatham Rise Project towards mining whilst also examining
other high quality phosphate projects featuring strong grades, meaningful size, mining‐friendly locales
near significant markets.
Chatham (NZ) remains confident that its phosphate deposit places it in a strong position globally to
deliver an essential
ingredient to the agriculture industry, where the demand for food remains a growth
market in turbulent economic times. Despite challenging market conditions, Chatham (NZ) considers
that the ongoing volatility in the major phosphate producing regions (Middle East and North Africa)
supports its conviction in the importance of executing well‐planned,
efficient exploration and
development program designed to advance this high‐quality phosphate project; and to pursue other high
–quality projects within our area of expertise.
The Chatham Rise phosphate has valuable attributes:
It is a reactive phosphate, of grades between 21‐22% P205 that may be directly applied to
existing pastures, without the necessity of beneficiation or upgrading.
Chatham Rock Phosphate MD&A Report for March 2018 Page 10
It is low in deleterious metals (cadmium), and has other significant environmental benefits over
conventional imported phosphate products.
It is a key ingredient of New Zealand’s major agriculture industry.
The project shows strong economic advantages over imported products where production and
delivery to market costs of
the Chatham Rise product are equivalent to transport costs to NZ of
similar products.
There is significant upside exploration potential, with grab tests of adjacent ground showing
individual samples of economic grade, and much of the highly prospective Chatham Rise is
untested.
Chatham (NZ) is in the process of
reapplying for a marine consent to mine phosphate nodules on the
Chatham Rise seabed. Mitigation of the effects of mining on the corals by excluding known coral areas,
adaptive management, articulation of the clear economic benefits, and a better understanding of
modelling and risk management should ameliorate EPA concerns. Chatham
(NZ) remains confident that
marine resource consents will be granted.
Current Work Program
Working closely with the various government organizations, significant work is aimed at
preparing re‐application documents for the Marine Consent.
Additional field trials are being scoped to establish the suitability of the Chatham phosphate for
direct application in a range of New Zealand geographic agricultural conditions.
Optimization of the current resources is being undertaken to establish better mine plans that
amongst a range of outcomes addresses the exclusion of known coral thickets.
Chatham Rock Phosphate MD&A Report for March 2018 Page 11
FINANCIAL COMMENTARY
The Company 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 March 31
2018 2017 2016
$000s except for per share
Total revenue ‐ ‐
Net profit/(loss) (1,228) (1,637) (725)
Profit/(Loss) per share – basic and diluted (cents) (7.93) (0.24) (0.20)
Total assets 4,840 5,689 4,266
Total long‐term liabilities ‐ ‐ ‐
Distribution or cash dividend declared per share ‐ ‐ ‐
Summary of Quarterly Results
Quarterly results for the past eight quarters ending March 31, 2018 are as follows:
2018 2017
$000s Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Cash 81 63 321 779 763 599 493 334
Working capital 10 (37) (283) 207 126 728 1,019 519
Total assets 4,840 4,608 5,261 5,892 5,689 5,755 5,955 5,384
Profit/(Loss) for
period
(220) (269) (421) (318) (960) (246) (201) (228)
Profit/(Loss) per
share (cents)
(1.11) (1.71) (2.81) (2.30) (0.14) (0.03) (0.02) (0.04)
Mineral Project
expenditures *
(335) (1,020) 81 76 106 77
111 113
Cash flow from
financing (net)
323 469 (4) 509 553 397
763 422
Weighted
average shares
(millions)
15 16 15 14 694 829 824 605
*In recent years, mineral project expenditures have been focussed on the marine consent application and
reapplication.
The Company records 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.
Significant Expenses of a Corporate Nature
For the year ended March 31, 2018 the Group recorded a Net Loss before income taxes of $1,228,000
(2017: Net Loss of $1,637,000).
Chatham Rock Phosphate MD&A Report for March 2018 Page 12
Significant expense categories (apart from accumulated exploration write‐offs and provisions) for the
year are discussed below:
Expenditure 2018
Note
2017
General and administration 2711 154
Audit fees 322 49
Legal fees 1643 303
Reverse acquisition costs ‐ 336
Consulting fees 222224
Registry, Filing and Listing 3994
Travel and accommodation 17453
Total 9021,213
Note
1. General and Administration costs includes management fees $191,000, accounting services
$43,000, insurance $17,000 and New Zealand office costs $20,000.
2. Audit fees covers the audit for 31 March 2018.
3. Legal costs includes $55,000 payable on settlement of the EPA decision.
Liquidity and Capital Resources
The Company’s cash position as at March 31, 2018 was $81,484. Trade and other payables total
$263,229.
Judgement was entered against the Group after the Judicial Review held in March, relating to costs
charged by the Environmental Protection Authority (EPA) in respect of the marine consent hearing
process. The EPA sought
payment of approximately $714,029 of invoiced but unpaid costs which had
been challenged by the Directors. The Group immediately paid the EPA the sum under dispute. Interest
and legal costs of NZ$110,000 were subsequently settled during January 2018.
The Company’s existing share, option and warrant capital structure is set out
at the end of this report
under the heading of “Supplemental to the Financial Statements”.
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.
Related party consultancy and management fees totalled $346,376 for the year (2017: $373,363) and are
set out in detail in the
financial statements at Note 17.
Depending on the nature of the services and costs, certain amounts have been capitalised to intangible
assets as they are directly attributable to the Chatham Rise Project.
SUBSEQUENT EVENTS
There are no subsequent events to report apart from those mentioned above, being:
Chatham Rock Phosphate MD&A Report for March 2018 Page 13
Subsequent to year end the Company has received $593,000 towards a non‐brokered private placement
of up to 4,800,000 units at a price of CAD$0.25 per Unit. Each unit consists of one common share and
one‐half of one non‐transferable share purchase warrant. Each whole warrant entitles the holder to
purchase one common share at a price of CAD$0.45 per share any time prior to the date that is two years
from the date of issuance. In the event that the common shares of the Company trade on the TSX
Venture Exchange at a closing price of greater than CAD$0.60
per common share for a period of 20
consecutive trading days at any time after four months and one day after the closing date of the private
placement, the Company may accelerate the expiry date of the Warrants by giving notice to the holders
thereof by way of a news release
and in such case the Warrants will expire on the 30th day after the date
of dissemination of the news release.
Use of Financial Instruments
For the year ended March 31, 2018 Chatham Rock did not enter into any specialized financial
agreements to minimize its investment risk, currency risk or commodity risk. The principal financial
instruments affecting the Company’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 March 31, 2018 the Group had no capital commitments (March 31, 2017: Nil).
b) The Company has no further commitments under the terms of non‐cancellable operating leases
(March 31, 2017: Nil).
c) The Company has future multi‐year work program obligations in order to maintain tenure of its
mineral permits. These obligations include: ‐ permit rentals, mapping, sampling, data compilation
and modelling. These are set out in detail in the financial statements at Note 19.
Off‐Balance Sheet Arrangements and Contingent Liabilities
The Company has no off‐balance sheet arrangements.
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.
The Company’s significant accounting policies are those that affect its financial statements, and are
summarized in Note 3 of the audited financial statements for the year ended March 31, 2018.
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.
Chatham Rock Phosphate MD&A Report for March 2018 Page 14
Mineral Properties
The decision to capitalize exploration expenditures, and the timing of the recognition that capitalized
exploration is unlikely to have future economic benefits, can materially affect the reported earnings of
the Company. In line with accepted industry practice for exploration companies, the Company has
adopted the policy of deferring property specific acquisition,
exploration and development costs.
Deferred costs relating to properties that are relinquished, or where continued exploration is deemed
inappropriate, are written off in the year such assessment is made. If the Company adopted a policy of
expensing all exploration costs, the Company’s asset base, shareholders’ equity, and loss from
operations
would be materially different. These deferred costs will be amortized on the unit‐of‐
production basis over the estimated useful lives of the properties following the commencement of
production. The cost of mineral properties includes any cash consideration paid, and the fair market
value of shares issued on the acquisition of
property interests, if any. The recorded amounts represent
actual expenditures incurred and are not intended to reflect present or future values.
The Company reviews capitalized costs on its property interests on a periodic, or at least annual, basis
and will recognize an impairment in value based upon current exploration results
and upon
management’s assessment of the future probability of profitable revenues from the property or from the
sale of the property. Management’s assessment of the property’s estimated current fair market 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.
OUTLOOK
During 2018 and 2019 the Company proposes to raise sufficient equity finance to complete the re‐
application process for the Marine Consent which has just commenced
It is then expected to take 15 months to complete the work required to submit the re‐application with a
likely submission date in Q3,
2019. This would lead to an expected grant date of Q2, 2020 and eventual
production in 2022.
For additional information, please refer to the Company’s website at www.rockphosphate.co.nz and for
regulatory filings, including news releases, please refer to www.SEDAR.com.
RISKS, UNCERTAINTIES AND OTHER ISSUES
Risk Factors
Chatham (NZ)’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 (NZ)
attempts to mitigate these risks and minimize their effect on its financial performance, but there is no
guarantee that Chatham (NZ) will
be profitable in the future. The Company’s common shares should be
considered speculative. Investors should carefully consider the following risk factors:
a. Marine Consent
Chatham (NZ) cannot commence mining operations without the Marine Consent. Chatham (NZ)
filed for the Marine Consent on May 14, 2014 but was declined on February
11, 2015. While
Chatham (NZ) considers that it has a good case to receive the Marine Consent on re‐ application,
Chatham Rock Phosphate MD&A Report for March 2018 Page 15
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 (NZ) 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 (NZ).
Recent revisions to the Exclusive Economic Zone (“EEZ”) ACT mean that the Marine Consent
decision‐making process will typically be completed within a nine‐month period, however, there
is provision for timeframes to be extended in certain circumstances. 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 Chatham (NZ).
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 (NZ) 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 (NZ) 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 (NZ)'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
(NZ)'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 (NZ)'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 (NZ).
c. Mining Contract and Mining Process Risk
The technical ability of Chatham (NZ) 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 (NZ) 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 (NZ) or other factors may make it difficult to secure funding.
There is no assurance that Chatham (NZ) will be successful in obtaining required funding as and
when needed on commercially acceptable terms. While Chatham (NZ) 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 (NZ) does have a risk of
default on those commitments being satisfied.
Chatham Rock Phosphate MD&A Report for March 2018 Page 16
e. Work Program Commitments
The Mining Permit issued by the New Zealand Petroleum and Minerals (“NZPAM”) department,
originally required 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 (NZ) has sought and
already
been granted changes to the terms of the Mining Permit to reflect that mining
operations cannot commence before 2019. Further changes to the conditions of the mining
permit have subsequently been applied for to reflect ongoing delays in the environmental
permitting process that Chatham (NZ) must undertake. Chatham (NZ) believes
that the specified
mining rate can be achieved with the currently contemplated mining processes, but many of the
steps needed to reach commencement of mining are beyond the control of Chatham (NZ) and as
such there can be no guarantee that Chatham (NZ) will be able to meet this target production
within the required deadline or at all. There can be no guarantee that Chatham (NZ) 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 (NZ) to satisfy the Mining Permit
requirements.
The failure of Chatham (NZ) to commence mining at a rate of not less than 800,000 tonnes of
phosphorite per annum could 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 (NZ) 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
(NZ) 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 (NZ).
The Mining Permit imposed other conditions
upon Chatham (NZ) 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. This deadline has been altered and is
expected to be waived again. However, no assurance can be given that
NZPAM will accept
Chatham (NZ)'s revised timing 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
(NZ).
Chatham (NZ) was
also expected to 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. This deadline has also been altered once
and is expected to be altered
again. However, failure to comply with this condition 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 (NZ).
f. Market Risk
Whilst Chatham (NZ) 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 (NZ) has
not yet entered into any marketing, sales or offtake agreements that are in markets considered
material to Chatham (NZ). In addition, Chatham (NZ) cannot
be assured of the quality of product
Chatham Rock Phosphate MD&A Report for March 2018 Page 17
that it intends to produce given the nature of Chatham (NZ)'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 (NZ) 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 (NZ) 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 (NZ) intends to use a vessel that is specially modified
and equipped with a trailing suction unit. Whilst this solution relies on
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 (NZ) is granted the
Marine Consent and enters into a mining contract. There can be no assurance that Chatham (NZ)
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 (NZ)'s project, alter Chatham (NZ)'s mining cost
assumptions and impair the ability of Chatham (NZ) 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 (NZ). The present idea (in conjunction with project leader Boskalis) 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 by Boskalis to contribute equity.
There is a risk that the required funding may not be secured at all or on terms unfavourable to
Chatham (NZ), the special purpose vehicle, or the mining operator. Subject to finalization of the
financing strategy, Chatham
Rock may need to contribute equity into the special purpose vehicle
which may require that Chatham Rock secures further funds. It is not Chatham Rock'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. There is a remote
possibility that 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 (NZ) or at all.
i. Production Risks
Chatham Rock Phosphate MD&A Report for March 2018 Page 18
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 (NZ) will meet its annual target
production rates of 1.5Mt per annum once production starts.
Recently a
New Zealand company called Rocket Lab has signalled that it will be launching
satellites from the Mahia Peninsula, about 500 km west of the project area. There is a risk that
jettisoned rocket components could either sink the dredging vessel and/or impede the
phosphate recovery operations.
Chatham (NZ) has no
operating history upon which to base estimates of future cash flow.
Chatham (NZ)'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 (NZ)'s development. It is
possible that actual
costs and economic returns may differ materially from Chatham (NZ)'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 (NZ) 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 (NZ),
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 (NZ)'s ability to undertake exploration, development and mining
activities on its projects.
k. Regulatory Compliance Risks
Chatham (NZ)'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 (NZ)'s operations.
It is possible that, in the future, the costs, delays and other effects associated with such laws and
regulations may impact Chatham (NZ)'s decision as to whether to operate existing projects, or,
with respect to exploration and development
properties, whether to proceed with exploration or
Chatham Rock Phosphate MD&A Report for March 2018 Page 19
development, or that such laws and regulations may result in Chatham (NZ) incurring significant
costs to remediate or decommission properties that do not comply with applicable
environmental standards at such time.
Chatham (NZ) 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 (NZ) 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 (NZ)'s
mining operations and phosphorite transport, could materially and adversely
affect Chatham (NZ)'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 (NZ) 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 (NZ) 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 (NZ) will likely have no
alternative access to its Mineral Resource. The equipment may become temporarily or
permanently unavailable to Chatham (NZ) due to factors beyond Chatham (NZ)'s control,
including adverse weather conditions, labour stoppages, rocket strike, 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 (NZ).
m. Phosphate Demand and Pricing
The profitability of Chatham Rock's group operations, and its ordinary Share price, will be highly
dependent
upon the market price of phosphate rock. Chatham (NZ)’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 (NZ). 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 (NZ).
n. Reliance on Key Personnel
Chatham (NZ)'s success will largely depend on the efforts and abilities of certain senior officers
and key personnel. Chatham (NZ) is committed to providing attractive working conditions to
assist in retaining its
key senior management personnel. However, there can be no assurance
Chatham (NZ) 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
Chatham Rock Phosphate MD&A Report for March 2018 Page 20
personnel or the inability to recruit and retain high‐calibre staff could have a material adverse
effect on Chatham (NZ). 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 (NZ).
Personnel requirements of Chatham (NZ) will also change. At present, Chatham (NZ) 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 (NZ)'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 (NZ)'s offshore area, they could materially and adversely affect Chatham (NZ)'s
reported Mineral Resources or its long term business prospects. As well, any prolonged
challenge
to Chatham (NZ)'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 (NZ). 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 (NZ).
Maori customary rights, as well as requirements to consult with Maori under applicable New
Zealand law, are relevant to Chatham (NZ)'s
rights. Managing relations with local Maori
communities is a matter of paramount importance to Chatham (NZ). 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
(NZ)'s rights and impact on Chatham (NZ)'s exploration, development and mining activities,
which could have a material adverse effect on the financial condition, operations, and prospects
of Chatham (NZ).
p. Environmental
Risk
Chatham (NZ)'s New Zealand 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 can
cause a variety of environmental impacts and Chatham
(NZ) is conscious of a number of potential
impacts in respect of its proposed mining operations, including:
impact on fish stocks on the Chatham Rise;
pollution risks from the vessel (e.g. oil spills);
impact on benthic communities; and
effects of plume (where silt and seabed materials
are separated from the rock phosphate
Chatham Rock Phosphate MD&A Report for March 2018 Page 21
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 (NZ) has collected and analysed 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 (NZ) 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 (NZ) 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 (NZ)'s mining operations. They may also apply pressure to local, regional and
national government officials, or local iwi groups, to take actions that are adverse to Chatham
(NZ)'s operations. Such actions could have
an adverse effect on Chatham (NZ)'s ability to
produce and sell its products, which could have a material adverse effect on the financial
condition, operations, and prospects of Chatham (NZ).
r. Profitability and Operating History
Chatham (NZ) has no history or earning revenue or profits and no assurance can be
given by
Chatham (NZ) that it will have future revenues or profits, since these are dependent on the
future development and success of any mining operation. Chatham (NZ) has no history of mining
operations and is in a pre‐revenue stage of development. As such, Chatham (NZ) 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 (NZ) 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 (NZ) to negotiate offtake or other supply
arrangements. As well, many potential phosphate customers are better capitalized than
Chatham (NZ) and may engage in tactical order delays and other behaviour that
could cause
Chatham (NZ) 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 (NZ).
Chatham Rock Phosphate MD&A Report for March 2018 Page 22
t. Conflicts of Interest
Certain of the Chatham (NZ)’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 (NZ), 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 (NZ) 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 (NZ), 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 (NZ) to be involved in
a greater number of larger projects with an associated reduction of financial exposure in any
given project. Chatham (NZ) 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
(NZ). In
determining whether or not the Chatham (NZ) will participate in a particular program or
transaction and the terms of such participation, the directors will primarily consider the potential
benefits to Chatham (NZ), the degree of risk to which the Chatham (NZ) may be exposed and its
financial position
at that time. Other than as indicated, the Chatham (NZ) has no procedures or
mechanisms to deal with conflicts of interest.
u. Dependence on General Economic Conditions
The operating and financial performance of Chatham (NZ) 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 (NZ)'s business and
financial condition.
v. Exchange Rates
Chatham (NZ) is exposed to movements in exchange rates. Chatham (NZ)'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 (NZ), to the extent the foreign exchange rate risk is
not hedged or not appropriately hedged.
w. Insurance Risk
Although Chatham (NZ) 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
Chatham Rock Phosphate MD&A Report for March 2018 Page 23
sufficient coverage for losses related to these or other risks and hazards. Furthermore, there are
risks that Chatham (NZ) cannot insure against, or may elect not to insure against, any such risks
and hazards and Chatham (NZ) 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 (NZ).
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 (NZ) 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 (NZ)'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 (NZ) 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 (NZ) 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 (NZ) may change during the life
of Chatham Rise project. The levels of, and reliefs
from, taxation may also change and vary in respect of a given investor's circumstances.
z. Dual Regulation
Chatham Rock’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 Rock 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
During 2017 Chatham Rock Phosphate (NZ) Limited was engaged in New Zealand High Court
proceedings with the EPA. Judgement was
entered against Chatham in December who
immediately paid the EPA the sum under dispute. Interest and legal costs of NZ$110,000 were
subsequently settled during January 2018.
SUPPLEMENTAL TO THE FINANCIAL STATEMENTS
Outstanding Share and Option Data
Chatham Rock’s shares trade on the TSX Venture Exchange (ticker code NZP), the New Zealand
Alternative Exchange (ticker code CRP) and the Frankfurt Stock Exchange (ticker code 3GRE). The
Company is authorized to issue an unlimited number of common shares without par value.
Chatham Rock Phosphate MD&A Report for March 2018 Page 24
As at March 31 2017, 17,681,093 common shares were issued and outstanding. There are no shares
subject to TSX Venture escrow provisions.
On June 28, 2017 the Company closed a non‐brokered private placement of 884,587 units at a price of
CAD$0.50 per Unit for gross proceeds of CAD$442,293.50. Each
Unit consists of one common share in
the capital of the Company and one‐half of one non‐transferable share purchase warrant. Each whole
warrant entitles the holder to purchase one common share at a price of CAD$1.00 per share any time
prior to the date that is two years from
the date of issuance. A finder’s fee of 6,827 Units was payable to
an arm’s length party in connection with this placement.
On October 12, 2017 pursuant to debt settlement agreements with certain of its directors, officers and
consultants, a total of C$193,473 of unpaid wages and consulting fees to
such directors, officers and
consultants was settled by the issuance of 347,321 common shares at deemed prices of between C$0.43
to C$0.576 per share.
On December 1, 2017 the Company issued 1,372,097 common shares pursuant to the rights Issue. The
issue price of the Shares is NZ$0.40.
On January 24, 2018 the Company closed a non‐brokered private placement of 972,737 units at a price of
CAD$0.30 per Unit for gross proceeds of CAD$291,821. Each Unit consists of one common share and
one‐half of one non‐transferable share purchase warrant. Each whole warrant entitles the holder thereof
to acquire one common share at a price of CAD$0.45 per share at any time prior to the date that is two
years from the date of issuance.
In May 2018, the Company granted, pursuant to its stock option plan, incentive stock options to its
directors, officers and consultants to
purchase up to an aggregate of 1,690,000 common shares in the
capital stock of the Company, exercisable for a period of five years, at a price of CAD$0.29 per share.
Mandatory Warrants
On June 28, 2017 as part of a non-brokered private placement the Company issued 442,293 non-transferable share
purchase warrants. Each warrant entitles the holder to purchase one common share at a price of CAD$1.00 per share
any time prior to the date that is two years from the date of issuance. A finder’s fee of 3,413 warrants were issued as
part of a finder’s fee payable to an arm’s length party in connection with this placement.
On January 24, 2018 as part of a non-brokered private placement the Company issued 486,368 non-transferable
share purchase warrants. Each warrant entitles the holder thereof to acquire one common share at a price of
CAD$0.45 per share at any time prior to the date that is two years from the date of issuance.
FORWARD‐LOOKING 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 (“Chatham Rock” or “Company”) 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.
Chatham Rock Phosphate MD&A Report for March 2018 Page 25
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 the Company 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 Company’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.
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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