Financial Statements & MD and A for six months to 30 Sept
FORM 52-109FV2
Certification of Interim Filings
Venture Issuer Basic Certificate
I, CHRIS CASTLE, Chief Executive Officer of Chatham Rock Phosphate Limited, certify the
following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim
filings”) of Chatham Rock Phosphate Limited (the “issuer”) for the interim period ended
September 30, 2019.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material
fact required to be stated or that is necessary to make a statement not misleading in light of the
circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly
present in all material respects the financial condition, financial performance and cash flows of
the issuer, as of the date of and for the periods presented in the interim filings.
Date: November 29, 2019
s/ “Chris Castle”
Chris Castle
Chief Executive Officer
NOTE TO READER
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in
Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to
the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting
(ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations
relating to the establishment and maintenance of
i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the
issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded,
processed, summarized and reported within the time periods specified in securities legislation; and
ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with the issuer’s GAAP.
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge
to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability
of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-
109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other
reports provided under securities legislation.
---
FORM 52-109FV2
Certification of Interim Filings
Venture Issuer Basic Certificate
I, ROBYN HAMILTON, Chief Financial Officer of Chatham Rock Phosphate Limited, certify the
following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim
filings”) of Chatham Rock Phosphate Limited (the “issuer”) for the interim period ended
September 30, 2019.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material
fact required to be stated or that is necessary to make a statement not misleading in light of the
circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly
present in all material respects the financial condition, financial performance and cash flows of
the issuer, as of the date of and for the periods presented in the interim filings.
Date: November 29, 2019
s/ “Robyn Hamilton”
Robyn Hamilton
Chief Financial Officer
NOTE TO READER
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in
Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to
the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting
(ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations
relating to the establishment and maintenance of
i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the
issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded,
processed, summarized and reported within the time periods specified in securities legislation; and
ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with the issuer’s GAAP.
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge
to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability
of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-
109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other
reports provided under securities legislation.
---
Consolidated Financial Statements
(Expressed in Canadian dollars)
CHATHAM ROCK PHOSPHATE LIMITED
For the six months ended September 30, 2019 and 2018
1
CONTENTS
Statement of Financial Position 2
Statement of Changes in Equity 3
Statement of Comprehensive Income 4
Statement of Cash Flows 5
Notes to the Financial Statements 6-28
2
CHATHAM ROCK PHOSPHATE LIMITED
Consolidated Balance Sheet
(Expressed in Canadian dollars)
September 30, March 31,
Notes
2019 2019
Assets
Current assets:
Cash and cash equivalents
$ 69,835 $ 243,615
Accounts receivable and other receivables
5,962 57,880
Current tax assets
- 2,113
Other current assets
5
77,228 81,464
153,025 385,072
Non-current assets:
Property, plant and equipment
95 104
NZX Bond
12,467 13,668
Mineral property interest
6
4,316,972 4,680,435
4,329,534 4,694,207
Total assets
$ 4,482,559 $ 5,079,279
Liabilities and Shareholders’ Equity
Current liabilities:
Trade and other payables
7
$ 10,209 $ 82,492
10,209 82,492
Total liabilities
10,209 82,492
Shareholders’ equity:
Share capital
8
35,241,168 35,068,781
Employee share option reserve
203,034 230,787
Accumulated deficit
(30,971,852) (30,302,781)
Total shareholders’ equity
4,472,350 4,996,787
Total liabilities and shareholders’ equity
$ 4,482,559 $ 5,079,279
Going concern (note 1)
Commitments and contingencies (note 17)
The accompanying notes form an integral part of these consolidated financial statements.
3
CHATHAM ROCK PHOSPHATE LIMITED
Consolidated Statements of Operations and Comprehensive (Loss) Income
(Expressed in Canadian dollars)
For the six months ended September 30, 2019 and 2018
Notes
Three months
ended Sept
30, 2019
Three
months
ended Sept
30, 2018
Six months
ended Sept
30, 2019
Six months
ended Sept
30, 2018
Revenue
$ 1,242 $ 1,260 $ 2,571 $ 2,623
Finance income
1,957 165 2,370 -
Finance expense
- - - (1,209)
Net finance income/(expense) 11 1,957 165 2,370 (1,209)
General and administrative expenses
12 (105,152) (289,205) (260,454) (465,260)
Depreciation
- - - -
Marine Consent Application costs
- (167) - 4,267
Profit/(loss) before income tax (continuing
operations)
(101,953) (287,947) (255,513) (459,579)
Income tax expense
-
-
-
-
Net (loss)/profit for the period from continuing
operations
(101,953) (287,947) (255,513) (459,579)
Other comprehensive income
Transfer from Foreign translation reserve
(251,166) (187,236) (441,311) (291,758)
Total comprehensive (loss)/profit for the period
$ (353,119)
$ (475,183)
$ (696,824)
$ (751,337)
Basic shareholders’ loss per share (Canadian
cents)
$ (0.39)
$ (1.42)
$ (1.00)
$ (2.39)
Diluted shareholders’ loss per share (Canadian
cents)
$ (0.39)
$ (1.42)
$ (1.00)
$ (2.39)
Weighted average number of common shares
outstanding
25,655,809 20,333,215 25,485,879 19,231,949
The accompanying notes form an integral part of these consolidated financial statements.
4
CHATHAM ROCK PHOSPHATE LIMITED
Consolidated Statement of Changes in Equity
(Expressed in Canadian dollars, except number of common shares)
For the six months ended September 30, 2019 and 2018
Foreign Employee
Number of Currency share
common Number of Share translation option Accumulated Shareholders’
shares warrants capital reserve reserve deficit equity
Balance, 1 April, 2018 17,681,093 932,074 $ 33,843,499 $ 99,955 $ - $(29,367,052) $ 4,576,402
Issue of shares, net of costs 3,109,332 - 777,333 - - - 777,333
Issue of discretionary warrants - 1,554,665 - - - - -
Share-based payments - - - - 120,689 - 120,689
Currency translation loss - - - (391,713) - - (391,713)
Net loss for the period - - - - - (459,579) (459,579)
Transfer to other comprehensive income - - - 291,758 - (291,758) -
Balance, September 30, 2018 20,790,425 2,486,739 $ 34,620,832 $ - $ 120,689 $(30,118,389) $ 4,623,132
Issue of shares, net of costs 3,513,329 - 447,949 - - - 447,949
Issue of discretionary warrants - 1,756,663
1
- - - - -
Share-based payments - - - - 110,098 - 110,098
Net loss for the period - - - - - (184,392) (184,392)
Balance, March 31, 2019 24,303,754 4,243,402 $ 35,068,781 $ - $ 230,787 $(30,302,781) $ 4,996,787
Issue of shares, net of costs 1,352,055 - 172,387 - - - 172,387
Issue of discretionary warrants - 676,026
1
- - - - -
Cancellation of options - - - - (27,753) 27,753 -
Net loss for the period - - - - - (696,824) (696,824)
Balance, September 30, 2019 25,655,809 4,919,428 $ 35,241,168 $ - $ 203,034 $(30,971,852) $ 4,472,350
1. The value of warrants issued in connection with share capital has been included in share capital.
The accompanying notes form an integral part of these consolidated financial statements.
5
CHATHAM ROCK PHOSPHATE LIMITED
Consolidated Statements of Cash flows
(Expressed in Canadian dollars)
For the six months ended September 30, 2019 and 2018
Notes
Three months
ended Sept
30, 2019
Three months
ended Sept
30, 2018
Six months
ended Sept
30, 2019
Six months
ended Sept
30, 2018
Cash flows from operating activities:
Net interest received
$ 1,985 $ - $ 1,985 $ -
Cash received from customers
1,242 1,261 2,571 2,623
Cash paid to suppliers
(192,134) (381,700) (376,990) (576,348)
Tax refund received
- - 2,055 -
Net cash (used in) operating activities 17 (188,907) (380,439) (370,379) (573,725)
Cash flows from investing activities:
Funds withdrawn/(deposited) in Trust account - 1,002 - (6,478)
Net cash (used in) investing activities
- 1,002 - (6,478)
Cash flows from financing activities:
Proceeds from issue of share capital, net of
issue costs
- 190,890 223,387 762,333
Net cash from financing activities - 190,890 223,387 762,333
Net increase/(decrease) in cash and cash
equivalents (188,907) (188,547) (146,992) 182,130
Cash and cash equivalents, beginning of
period 276,711 439,798 243,615 81,484
Effect of foreign exchange rate fluctuations on
cash held (17,970) 2,547 (26,789) (9,816)
Cash and cash equivalents, end of period
$ 69,834 $ 253,798 $ 69,834 $ 253,798
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 six months ended September 30, 2019 and 2018
6
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 Main Board (“NZX”). 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:
• 3200 – 650 West Georgia Street, Vancouver, B.C., Canada V6B 4P7
• 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 condensed 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 condensed consolidated financial statements for the three months ended September 30, 2019 were
reviewed by the Audit Committee and approved and authorized for issue by the Board of Directors on
November 29, 2019.
(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 six months ended September 30, 2019 and 2018
7
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 (MMP) 55549, as set out in Note 19.
The Group incurred a net loss of $101,953 during the three months ended September 30, 2019 and, as of
that date; the Group’s current assets exceed its current liabilities. The Group had cash reserves of $69,834
and permit work commitments with associated indicative costings as set out in Note 17.
The above mentioned conditions indicate the existence of a material uncertainty that may cast significant
doubt on the Group’s ability to continue as a going concern.
The Directors have prepared a cash flow forecast through to the period ending September 30, 2020 to
support the ongoing operations of the Group that includes the following:
• The Group continues to manage its corporate costs appropriately within existing available funds.
• The Directors will continue to raise further capital as required by one of a combination of the
following: placement of shares, pro-rata issue to shareholders, and/or further issue of shares to the
public.
• The Directors plan to evolve the company from a single project focus into a more diversified
company, principally involving other phosphate assets.
The recoverability of the carrying amounts of exploration and evaluation assets, as set out in Note 6, is
dependent on the Group gaining a Marine Consent for the MMP 55549 related project to be commercially
successful. No adjustments have been made relating to the recoverability and reclassification of recorded net
asset amounts and classification of liabilities that might be necessary should the exploration permits be
ultimately surrendered or cancelled. The Directors determined the carrying value of assets to be appropriate
subject to the above conditions being met.
(e) Functional and presentation currency:
These consolidated financial statements are presented in Canadian dollars ($) 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 six months ended September 30, 2019 and 2018
8
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
September 30, 2019 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 are 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. It is not expected that they will have a material impact on the
Group’s consolidated financial statements.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
9
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.
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
Pacific Rare Earths Limited New Zealand 100
All of the subsidiaries have a March, 31 balance date.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
10
3. Significant accounting policies (continued)
(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) 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.
(d) Share-based payments:
The Company has a share option plan, under which the fair value of all share-based awards as estimated
using the Black-Scholes Option Pricing Model at the grant date and amortized over the vesting periods. An
individual is classified as an employee when the individual is an employee for legal or tax purposes (direct
employee) or provides services similar to those performed by a direct employee, including directors of the
Company. The amount recognized as an expense is adjusted to reflect the number of awards expected to
vest. The offset is credited to share-based payments reserve.
Upon exercise of the share purchase options, consideration paid together with the amount previously
recognized in share-based payment reserve is recorded as an increase to share capital. Charges for share
purchase options that are forfeited before vesting are reversed from the share-based payments reserves. For
those share purchase options that expire or are forfeited after vesting, the amount previously recorded in
share-based payments reserve is transferred to accumulated deficit.
(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.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
11
3. Significant accounting policies (continued)
(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.
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.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
12
3. Significant accounting policies (continued)
(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) Financial assets:
Financial asset are measured at:
(I) Amortized cost;
(ii) Fair Value in Other Comprehensive Income (“FVOCI”) – debt investment;
(iii) FVOCI – equity investment; and
(iv) Fair Value Through Profit or Loss (“FVTPL”).
The classification depends on the business model in which the financial asset is managed and its contractual
cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope
of IFRS 9, Financial Instruments, are never separated. Instead, the hybrid financial instrument as a whole is
assessed for classification
A financial asset is measured at amortized cost if it meets both of the following conditions and is not
designated as at FVTPL:
- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
13
3. Significant accounting policies (continued)
(i) Financial assets (continued)
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as
at FVTPL:
- it is held within a business model whose objective is achieved by both collecting contractual cash flows and
selling financial assets; and
- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to
present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-
investment basis.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured
at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably
designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at
FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would
otherwise arise.
A financial asset (unless it is a trade receivable without a significant financing component that is initially
measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction
costs that are directly attributable to its acquisition.
The following accounting policies apply to the subsequent measurement of financial assets.
Financial assets at FVTPL These assets are subsequently measured at fair value. Net gains and
losses, including any interest or dividend income, are recognized in
profit or loss.
Financial assets at amortized cost These assets are subsequently measured at amortized cost using the
effective interest method. The amortized cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses and
impairment are recognized in profit or loss. Any gain or loss on
derecognition is recognized in profit or loss.
Equity investments at FVOCI These assets are subsequently measured at fair value. Dividends are
recognized as income in profit or loss unless the dividend clearly
represents a recovery of part of the cost of the investment. Other net
gains and losses are recognized in OCI and are never reclassified to
profit or loss.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
14
3. Significant accounting policies (continued)
(i) Financial assets (continued)
Impairment of financial assets
Financial assets measured at amortized cost, contract assets, and debt investments in FVOCI, but not
investments in equity instruments, are assessed for credit impairment under the expected credit loss (“ECL”)
model of impairment. This impairment model applies to lease receivables, loan commitments, and financial
guarantee contracts; the Company has no such items. The financial assets at amortized cost consist of
accounts receivables, cash and cash equivalents.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of
all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract
and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of
the financial asset.
Credit-impaired financial assets
At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt
securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that
have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Presentation of impairment
Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying
amount of the assets. Impairment losses related to accounts and other receivables are presented separately
in the statement of profit or loss and OCI. Impairment losses on other financial assets are presented under
‘finance costs’, and not presented separately in the statement of profit or loss and OCI due to materiality
considerations.
(j) Financial liabilities:
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or financial
liabilities at amortized cost.
Financial liabilities
Financial liabilities at amortized cost are initially measured at fair value, net of transaction costs incurred and
subsequently measured at amortized cost. Any difference between the amounts originally received, net of
transaction costs, and the redemption value is recognized in profit or loss over the period to maturity using the
effective interest method.
Financial liabilities are classified as current or non-current based on their maturity dates. The Company has
classified accounts payable and other liabilities as liabilities at amortized cost.
De-recognition of financial liabilities
The Company de-recognizes financial liabilities when, and only when, the Company’s obligations are
discharged, cancelled or they expire.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
15
3. Significant accounting policies (continued)
(k) 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.
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
September 30, March 31,
2019 2019
Prepayments $ 77,228 $ 81,464
$ 77,228 $ 81,464
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
16
6. Mineral property interest
Exploration and evaluation on Chatham Rise Project
September 30, March 31,
2019 2019
Opening balance $ 4,680,435 $ 4,552,204
Exploration costs capitalised 47,963 219,612
Foreign exchange fluctuation (411,426) (91,381)
Net book value $ 4,316,972 $ 4,680,435
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.
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 has been extended a number of times and will expire on
24 February 2020. The licence covers 2887km2 of the Chatham Rise and is located approximately 450 kilometres
east of Christchurch. On 29 August 2019 the prospecting permit was relinquished six months prior to the end of its
term. This has no impact on the mining permit and proposed mining programme.
The Group holds a Minerals Mining Permit 55549. 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 November 5, 2019 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. The permit expires December 5,
2033.
In September 2012, the Group applied for five prospecting licences offshore Namibia. It remains the intention of
the Directors to pursue these licences.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
17
7. Trade other payables
September 30, March 31,
2019 2019
Trade and other payables due to related parties $ 5,734 $ 5,444
Other trade payables 3,950 32,827
Accrued expenses 525 44,221
$ 10,209 $ 82,492
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.
(b) Issued and outstanding:
Number
of shares Amount
Balance, April, 1, 2018 17,681,093 $ 33,843,499
Issued during the year:
Shares issued net of costs 6,622,661 1,225,282
Balance, March 31, 2019 24,303,754 $ 35,068,781
Issued during the year:
Shares issued net of costs 1,352,055 172,387
Balance, September 30, 2019 25,655,809 $ 35,241,168
(c) On April 23, 2019 the Company closed a non-brokered private placement of 1,352,055 units at a price of
CAD$0.1275 per Unit for gross proceeds of CAD$172,387. 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 five 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 six months ended September 30, 2019 and 2018
18
8. Share capital (continued)
(d) Warrants:
Original Grant Date
Modified Grant Date Original Expiry Date Modified Expiry Date
September 27, 2017 February 18, 2019 September 27, 2019 September 27, 2022
January 24, 2018 February 18, 2019 January 24, 2020 January 24, 2023
September 13, 2018 February 18, 2019 September 13, 2020 September 13, 2023
August 25, 2018 February 18, 2019 August 25, 2020 August 25, 2023
March 26, 2019 March 26, 2019 March 26, 2024 March 26, 2024
April 23, 2019 April 23, 2019 April 23, 2024 April 23, 2024
Expiry Date Exercise
prices
Balance
March, 31
2019
Issued Exercised Expired/
cancelled/
forfeited
Balance
September,
30 2019
September 27,
2022
$0.45 445,706 - - - 445,706
January 24, 2023 $0.45 486,368 - - - 486,368
September 13,
2023
$0.45 1,172,885 - - - 1,172,885
August 25, 2023 $0.45 381,780 - - - 381,780
March 26, 2024 $0.45 1,756,663 - - - 1,756,663
April 23, 2024 $0.45 - 676,026 - - 676,026
4,243,402 676,026 - - 4,919,428
Weighted average
exercise price
$0.45
$0.45
-
-
$0.45
Weighted average
remaining life (years)
4.35
4.83
-
-
3.95
On April 23, 2019 as part of a Share Purchase Plan the Company issued 676,026 non-transferable share
purchase warrants. Each warrant entitles the holder to purchase one common share at a price of CAD$0.45
per share any time prior to April 23, 2024.
(e) On February 18, the Company announced that all issued 2017 warrants would be reduced in price from CAD
$1.00 per common share to CAD $0.45 per share and that it was going to extend the expiry date from two
years to five years from the date of issuance. None of the 2017 warrants have to date be exercised.
It was also announced that the January, September and August 2018 options were also to be extended to five
years from the date of issuance. None of the 2018 warrants have to date been exercised.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
19
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.
The Company grants share purchase options pursuant to the policies of the TSX-Venture Exchange with
respect to eligible persons, exercise price, maximum term, vesting, maximum options per person and
termination of eligible person status.
2018 share option grants:
The Company granted 1,690,000 share options under the share option plan of May 8, 2018. The options
which expire on May 8, 2023 are exercisable at $0.29 per share. 1,580,000 options fully vested on May 8,
2018 and 110,000 options will vest upon a performance hurdle being achieved. The performance hurdle is
gaining the Marine Consent.
The share-based payment expense of $230,787 was estimated using the Black-Scholes Option Pricing model
assuming a risk free rate of 2.16%, a volatility of 65%, an expected dividend rate of nil and an expected life of
5 years. The shares in the Company traded at CAD$0.27 on the grant date.
On September 14, 2018 190,000 options were cancelled, at a cost of $27,753, three months after the
resignation of a former Director, Dr Robin Falconer.
(b) Equity-settled transactions
There were nil (September 30, 2018: nil) share-based payments settled by the issue of ordinary shares in the
Company.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
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:
Three months
ended Sept
30, 2019
Three months
ended Sept
30, 2018
Six months
ended Sept
30, 2019
Six months
ended Sept
30, 2018
Loss used in the calculation of basic
EPS
(101,953) (287,947) (255,513) (459,579)
Weighted average number of
outstanding shares for the purpose of
basic EPS
25,655,809 20,333,215 25,485,879 19,231,949
Shares to be issued for additional
capital
- - - -
Weighted average number of
outstanding shares used in the
calculation of diluted EPS
25,655,809 20,333,215 25,485,879 19,231,949
Basic loss per share (Canadian cents) (0.39) (1.42) (1.00) (2.39)
Diluted loss per share (Canadian cents) (0.39) (1.42) (1.00) (2.39)
No dilution effect on diluted EPS as the company was operating at a net loss for the period
11. Finance income and expenses
Three months
ended Sept
30, 2019
Three months
ended Sept
30, 2018
Six months
ended Sept
30, 2019
Six months
ended Sept
30, 2018
Interest income on bank deposits 1,985 - 1,985 -
Net foreign exchange gains (28) 165 385 -
Finance income 1,957 165 2,370 -
Interest expense - - - -
Net foreign exchange losses - - - (1,209)
Finance expense - - - (1,209)
Net finance income and expenses 1,957 165 2,370 (1,209)
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
21
12. General and administrative expenses
The following items of expenditure are included in administrative expenses:
Three months
ended Sept
30, 2019
Three months
ended Sept
30, 2018
Six months
ended Sept
30, 2019
Six months
ended Sept
30, 2018
Accountancy fees $ 2,070 $ 2,447 $ 9,444 $ 11,715
Consultancy fees 17,946 38,261 52,213 83,110
Directors fees - - - -
Insurance 2,530 3,375 7,592 6,750
Legal fees 10,691 16,046 37,689 53,696
Management fees 29,797 19,337 61,704 62,949
Registry fees 2,863 11,226 6,175 15,045
Rent 4,552 4,620 9,427 9,617
Share-based payments - 120,689 - 120,689
Travel 3,395 27,406 26,718 28,449
The Board has agreed to forfeit directors fees for the year ended March 31, 2019 (beyond the amount charged).
Some directors are remunerated for their services through consultancy fees.
Refer to Note 15 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 six months ended September 30, 2019 and 2018
22
13. 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, 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 an immaterial amount for the
period ended September 30, 2019 (2018: an immaterial amount). 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 six months ended September 30, 2019 and 2018
23
13. 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 September 30, 2019, the Group is exposed to currency risk through the following assets and liabilities
denominated in Canadian dollars:
September 30, March 31
2019 2019
Cash and cash equivalents - 9,986
Other current assets - 51,114
Accounts payable (525) (17,199)
(525) 43,901
(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 cash balances through monitoring of future rolling cash flow forecasts of its operations and
equity raising, 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 six months ended September 30, 2019 and 2018
24
13. Financial instruments (continued)
The only financial liabilities are trade and other payables. At September 30, 2019, the Group had $39,787 (March
31, 2019 $82,492) in trade and other payables including accrued liabilities. Trade payables are non-interest
bearing and have a contractual maturity of less than 30 days.
(a) Financial assets and liabilities:
As at September 30, 2019, the carrying and fair values of our financial instruments by category are as follows:
Amortised
cost
Fair value
through
profit and
loss
Total
carrying
amount
Less than 1
year
1 to 3
years
$ $ $ $ $
Financial assets
Cash and cash
equivalent
69,834
- 69,834 69,834 -
Trade and other
receivables
- 197 197 197 -
NZX Bond
12,466 - 12,466 12,466 -
Total financial assets
82,300 197 82,497 82,497 -
Financial liabilities
Trade and other
payables
- 10,209 10,209 10,209 -
Total financial
liabilities
- 10,209 10,209 10,209 -
(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 six months ended September 30, 2019 and 2018
25
13. 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.
14. 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.
15. 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:
September 30, March 31,
2019 2019
Due to directors $ 5,735 $ 5,444
Due to executive officers - -
$ 5,735 $ 5,444
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
26
15. 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:
Three months
ended Sept
30, 2019
Three months
ended Sept
30, 2018
Six months
ended Sept
30, 2019
Six months
ended Sept
30, 2018
Consultancy fees $ 5,913 $ 4,137 $ 5,913 $ 9,180
Management fees 29,797 19,337 61,704 62,950
Share-based payments - 107,703 - 107,703
$ 35,710 $ 131,177 $ 67,617 $ 179,833
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.
16. Reconciliation of the profit/(loss) for the year with the net cash from operating activities
Three months
ended Sept
30, 2019
Three months
ended Sept
30, 2018
Six months
ended Sept
30, 2019
Six months
ended Sept
30, 2018
Profit/(loss) for the period
$ (101,953) $ (287,947) $ (255,513) $ (459,579)
Adjustments for:
Depreciation
- - - -
Expenses (non-cash)
- 120,689 (4,465) 120,689
Change in trade and other receivables
8,503 (4,666) 7,437 (2,861)
Change in other current assets
(44,455) (43,359) 309 1,452
Change in current tax assets
- - 2,113 -
Change in trade and other payables
(30,572) (57,255) (72,283) (87,295)
Change in exploration expenditure
(20,430) (107,901) (47,977) (146,131)
Net cash from operating activities (188,907) (380,439) (370,379) (573,725)
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
27
17. 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(d).
2019 2018
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
Minerals Mining Permit 55549
The Minerals Mining Permit was granted on December 6, 2013. On November 7, 2019 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 96 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.
CHATHAM ROCK PHOSPHATE LIMITED
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars, unless otherwise stated)
For the six months ended September 30, 2019 and 2018
28
17. Commitments and contingencies (continued)
Within 120 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.
18. Subsequent events
On November 19, 2019 the Company announced that it was proceeding with a non-brokered private placement of
up to 4,000,000 units (the “Units”) at a price of CAD $0.15 per Unit (NZ$0.177) for gross proceeds of up to CAD
$600,000, subject to regulatory approvals. Each Unit will consist of one common share in the capital of the
Company and transferrable share purchase warrant (“Warrant”), transferable subject to applicable securities
legislation. Each Warrant will entitle the holder thereof to acquire one common share at a price of CAD $0.45
(NZ$0.53) per share at any time prior to the date that is five (5) years from the date of issuance.
The proceeds of this placement will be used to fund working capital necessary to progress the re-application for
the environmental permit during the next year.
---
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 1
CHATHAM ROCK PHOSPHATE LIMITED (“CRP”)
MANAGEMENT’S DISCUSSION & ANALYSIS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2019
(All amounts stated in Canadian dollars, unless otherwise indicated)
Attention is called to a caution in respect of Forward-Looking Statements - included at page 25
CRP is now Stock Exchange listed in Canada, New Zealand and Germany.
As a result, Chatham is 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 $5.9 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 $3 million on the TSX.V and $5.4 million on
the NZX.
The cornerstone investors are based in Singapore, Germany and Switzerland and together with
the CRP management team hold, directly and indirectly, approximately 30% 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 to be held in 2020 and
2021.
It is expected to take 15 months to complete the work required to submit the re-application
with a likely submission date in Q1, 2021. This would lead to an expected grant date of Q4, 2021
and eventual production in 2024.
Chatham Rock Phosphate MD&A Report for September 30, 2019 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
Summary of Quarterly Results ................................................................................................................ 11
Significant Expenses of a Corporate Nature ............................................................................................ 12
Liquidity and Capital Resources ............................................................................................................... 12
Related Party Transactions ...................................................................................................................... 12
SUBSEQUENT EVENTS.................................................................................................................................. 13
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 September 30, 2019 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 six months ended September 30, 2019, as prepared
on November 29, 2019 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 Rock Phosphate Limited (Chatham Rock)
Incorporated under the Business Corporations Act (British Columbia)
100%
Manmar Investments 106 (Proprietary) Limited
Incorporated under the laws of Nambia
Chatham Rock Phosphate (NZ) Limited
Incorporated under the New Zealand Companies
Act 1993
100%
Pacific Rare Earths Limited
Incorporated under the New Zealand Companies
Act 1993
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 Rock Phosphate MD&A Report for September 30, 2019 Page 4
Chatham (NZ) holds a Mining Permit over an area off the coast of New Zealand with significant seabed
deposits of rock phosphate, rare earths 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.
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 푘푚
2
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 September 30, 2019 Page 5
BOARD OF DIRECTORS
• Chris Castle President, Managing Director and CEO (New Zealand based);
• Robert Goodden Independent non-executive Chairman (England based);
• Jill Hatchwell Non-executive director (New Zealand based);
• Linda Sanders Non-executive director (New Zealand based); and
• Ryan Wong Non-executive director (Malaysia based).
CAPITAL TRANSACTIONS AND SIGNIFICANT EVENTS
Capital Transactions
Chatham (NZ) has continued to raise additional equity capital totalling $2.64m in the twenty four months
to March 31, 2019. 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.
On September 5, 2018 Chatham Rock announced that it had recently formed a 100% owned subsidiary
Pacific Rare Earths Limited.
This company has been formed to project-manage a work programme aimed at quantifying the extent,
value and recoverability of Rare Earths Elements (REE) and other potentially strategic or valuable
minerals contained in the rock phosphate nodules on the Chatham Rise.
In addition, the company will be investigating the existence and recovery potential of rare earths and
other valuable minerals in seafloor muds on the Rise.
Rare Earths in phosphate
A recent study of marine phosphate nodules by the United States Geological Survey reveals that there
are significant quantities of REE contained within the phosphate nodules on the Chatham Rise. Of the 17
recognised rare earths, 15 are present in Chatham Rise rock phosphate nodules, as well as varying
concentrations of other valuable minerals including nickel, cobalt, chromium, vanadium, zirconium,
fluorine and strontium. Collectively these minerals, if they can be efficiently extracted as by-products,
represent not only an immensely strategic asset for New Zealand but could significantly improve the
already attractive forecast project economics.
The presence of these minerals within the phosphate rock is highly significant because the contained
value may be released onshore (if extraction proves feasible and economically viable) without any
change to the proposed mining system, and without any additional environmental impacts in the Project
area.
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 6
Rare Earths in seafloor muds
Shareholders will recall that we established and announced some time ago that there were significant
quantities of rare earths and other valuable minerals in the seafloor muds in our permit area. These
include cerium, lanthanum, neodymium, praseodymium, yttrium, cobalt, rubidium, cesium, germanium,
gallium, strontium, thallium and tungsten.
The primary challenge associated with the production of rare earths from the muds is the extraction
process, and the advancement of processing technology that will be required in order to demonstrate
the feasible and economically viable separation of any of these minerals. In addition, recovery of rare
earths from muds will involve the development of a new marine mining system, and therefore will be
considered for development separately from the existing CRP rock phosphate nodules project.
Further Independent Research
The information CRP already holds about REEs and other valuable minerals in its permit areas was
generated by independent organisations, with some of this work undertaken up to a decade ago. The
current knowledge confirms that REEs occur over a wide area, and estimates of the average grades and
therefore the size of the potential deposits have been made at a conceptual level. The current
conceptual information, when assessed against current price data, confirms the significance of potential
value.
As a result of the extremely favourable preliminary research, CRP has commenced a dialogue with
appropriated skilled and funded external parties, based both in New Zealand and internationally, in order
to further develop better upstanding of the extraction and recovery potential of the minerals.
CRP is excited to be engaging in the investigation of REE recovery, which is a strategic priority of the New
Zealand Government in relation to the mineral sector, as recently stated by the Honourable Dr Megan
Woods, Minister of Energy and Resources.
The Chatham Rise rock phosphate and rare earths deposit has the potential to contribute to the
understanding of REE potential in New Zealand, given that it is likely that there is more information
already available about the REE minerals in the Chatham Rise deposit than any other rare earths deposit
in New Zealand.
CHATHAM ROCK PROJECT AND EXPLORATION
CHATHAM RISE TECHNICAL REPORT
The summary below concerning Chatham’s Chatham Rise Phosphorite Project (the “Chatham Rise
Project” or the “Project”) is taken from the Chatham Rise Technical Report dated April 24, 2015 and
prepared by René Sterk, MSc MAIG MAusIMM CP (Geo). For further detailed information concerning the
Chatham Rise Project, the reader is directed to read the full Chatham Rise Technical Report.
The Chatham Rise Technical Report has been compiled by RSC Consulting Ltd (“RSC”) in compliance with
Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and
Form 43-101F1. The Report constitutes the supporting documentation for the estimate of a phosphorite
resource for the Chatham Rise Project. This resource estimate has previously been the subject of a
technical report compiled by RSC on behalf of Chatham (NZ) (RSC, 2014), which was prepared in
compliance with the 2012 edition of the Joint Ore Reserves Committee (JORC). While the resource
estimate disclosed in the present Report has not changed and has an effective date of March 3, 2014,
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 7
this Report presents the estimate in compliance with NI 43-101, and also includes updated information
on the Chatham Rise Project in light of environmental permitting developments that have taken place
since the previous report (RSC, 2014) was published. The effective date of the Report is July 6, 2015.
Property Description and Ownership
The Project covers an area of seabed phosphorite nodules that is situated about 450 km offshore of the
east coast of New Zealand at approximately 350 to 450 m water depth.
Chatham holds Mining Permit Number 55549 which was granted to Chatham (NZ) in December 2013
(“Mining Permit”). 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.
Chatham previously held a Prospecting Licence (MPL 50270) which originally expired on February 25,
2014. 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 and the licence was successfully renewed in
August 2016, for a further 6 years from February 2014 to February 2020. At that time the licence area
was reduced from 3,905 square kilometres to 2,876 square kilometres. On 29 August 2019 this
prospecting permit was relinquished six months prior to the end of its term. This has no impact on the
mining permit and the proposed mining programme.
A summary of these licence holdings and applications in shown at the table below.
New Zealand
Location of the Chatham Rise Project
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 8
Chatham Licence Holdings and Applications
Asset Holder Interest (%) Status
Licence
Expiry Area (km
2
)
MP 55549
Mining Permit
Chatham
(NZ)
100 Exploration Dec. 5, 2033 820
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.
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
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 9
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
80,000,000 20 290
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
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.
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 10
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.
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.
• 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,
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 11
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.
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
2019 2018 2017
$000s except for per share
Total revenue - - -
Net profit/(loss) (911) (1,228) (1,642)
Profit/(Loss) per share – basic and diluted (cents) (4.55) (7.93) (0.24)
Total assets 5,079 4,840 5,689
Total long-term liabilities - - -
Distribution or cash dividend declared per share - - -
Summary of Quarterly Results
Quarterly results for the past eight quarters ending September 30, 2019 are as follows:
2020 2018
$000s Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
Cash 70 277 244 54 254 440 81 63
Working capital 143 281 303 61 248 366 10 (37)
Total assets 4,483 4,865 5,079 4,891 4,816 5,002 4,840 4,608
Profit/(Loss) for
period
(102) (154) (293) (158) (288) (172) (220) (269)
Profit/(Loss) per
share (cents)
(0.39) (0.61) (1.43) (0.75) (1.42) (0.95) (1.11) (1.71)
Mineral Project
expenditures *
(16) (31) (28) (46) (107) (39) (335) (1,020)
Cash flow from
financing (net)
- 223 427 - 191 571 323 469
Weighted average
shares (millions)
25 25 21 21 20 18 15 16
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 12
*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. Periodic (at least annual) 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 six months ended September 30, 2019 the Group recorded a net loss before income taxes of
$102,000 (2018: net loss of $288,000).
Significant expense categories (apart from accumulated exploration write-offs and provisions) for the
year are discussed below:
Expenditure
2019
Note
2018
General and administration 128 1 83
Legal fees 38 54
Consulting fees 52 83
Registry, Filing and Listing 15 25
Travel and accommodation 27 28
Total 260 465
Note:
1. General and Administration costs includes management fees $62,000 (2018: $63,000),
accounting services $9,000 (2018: $12,000), insurance $8,000 (2018: $7,000) and New Zealand
office costs $17,000 (2018: $19,000).
Liquidity and Capital Resources
The Company’s cash position as at September 30, 2019 was $70,000. Trade and other payables total
$10,000.
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 value as agreed between management and the related parties.
Related party consultancy and management fees totalled $36,000 for the period (2018: $131,000) and
are set out in detail in the financial statements at Note 15.
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.
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 13
SUBSEQUENT EVENTS
On November 19, 2019 the Company announced that it was proceeding with a non-brokered private
placement of up to 4,000,000 units (the “Units”) at a price of CAD $0.15 per Unit (NZ$0.177) for gross
proceeds of up to CAD $600,000, subject to regulatory approvals. Each Unit will consist of one common
share in the capital of the Company and transferrable share purchase warrant (“Warrant”), transferable
subject to applicable securities legislation. Each Warrant will entitle the holder thereof to acquire one
common share at a price of CAD $0.45 (NZ$0.53) per share at any time prior to the date that is five (5)
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 (NZ$0.71) 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 such
news release.
The proceeds of this placement will be used to fund working capital necessary to progress the re-
application for the environmental permit during the next year.
There were no other material subsequent events up to the date of the Quarterly report.
Use of Financial Instruments
For the six months ended September 30, 2019 Chatham 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 September 30, 2019 the Group had no capital commitments (September 30, 2018: Nil).
b) The Company has no commitments under the terms of non cancellable operating leases
(September 30, 2018: 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 17.
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.
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 14
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, 2019.
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.
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 2019 the Company proposes to raise sufficient equity finance to commence the re-application
process for the Marine Consent.
It is expected to take 15 months to complete the work required to submit the re-application with a likely
submission date in Q3, 2021. This would lead to an expected grant date of Q2, 2021 and eventual
production in late 2023.
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:
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 15
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,
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.
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 16
There is no assurance that Chatham (NZ) will be successful in obtaining required funding as and
when needed on commercially acceptable terms.
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
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 17
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
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.
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 18
i. Production Risks
The future development of any mineral deposit involves significant risks that even a combination
of careful evaluation, experience and knowledge may not eliminate. This is particularly the case
in an offshore deposit such as that at Chatham Rise, which is subject to additional risks related to
its marine location. For example, production will be affected by weather patterns and sustained
periods of bad weather could adversely impact mining activity and reduce tonnages of the rock
phosphate mined. No assurance can be given that Chatham (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.
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 19
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
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
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 20
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
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:
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 21
• 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
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 analyzed extensive data on these potential effects to develop
and mitigation strategies, as well as contracted scientific organizations in New Zealand and The
Netherlands (including NIWA and Deltares) to assess the environmental impacts of its
operations. This information comprises a significant part of the Marine Consent application.
Chatham (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 Rock Phosphate MD&A Report for September 30, 2019 Page 22
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).
t. Conflicts of Interest
Certain of 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 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, 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 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 Chatham (NZ) may be exposed and its financial
position at that time. Other than as indicated, 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.
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 23
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
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.
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.
As at September 30, 2019, 25,655,809 common shares were issued and outstanding. No shares are
subject to TSX Venture escrow provisions.
Chatham Rock Phosphate MD&A Report for September 30, 2019 Page 24
On April 23, 2019 the Company closed a non-brokered private placement of 1,352,055 units at a price of
CAD$0.1275 per Unit for gross proceeds of CAD$172,387. 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 five 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.
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.
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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