Announcement PDF PARKWAY MINERALS NL A.C.N. 147 346 334 Annual Report For the year ended 30 June 2020 Parkway Minerals NL A.C.N. 147 346 334 Contents to Financial Report Page No. Corporate Directory 3 Chairman’s Letter 4 Directors’ Report 5 Auditor’s Independence Declaration 23 Consolidated Statement of Comprehensive Income 24 Consolidated Statement of Financial Position 25 Consolidated Statement of Changes in Equity 26 Consolidated Statement of Cash Flows 28 Notes to the Consolidated Financial Statements 29 Directors’ Declaration 59 Independent Auditor’s Report 60 Shareholder Information 65 Tenement Register 67 2 Parkway Minerals NL A.C.N. 147 346 334 Corporate directory Directors: Adrian Griffin Patrick McManus (resigned 30 April 2020) Natalia Streltsova (resigned 17 September 2019) Patrick Power (appointed 17 September 2019) Bahay Ozcakmak (appointed 17 September 2019) Richard Beresford (appointed 12 March 2020) Company Secretary: Amanda Wilton-Heald Auditor: Ernst & Young Ernst & Young Building 11 Mounts Bay Road Perth WA 6000 AUSTRALIA Telephone (+61 8) 9429 2222 Facsimile (+61 8) 9429 2436 Share Registry: Advanced Share Registry 160 Stirling Highway Nedlands WA 6009 AUSTRALIA Telephone (+61 8) 9389 8033 Facsimile (+61 8) 9262 3723 Registered and Principal Office Level 1 675 Murray Street West Perth WA 6005 Telephone (+61 8) 9479 5386 Website www.parkwayminerals.com.au Email info@parkwayminerals.com.au Stock Exchange Listing Parkway Minerals NL shares are listed on the Australian Securities Exchange (ASX code: PWN) and OTC Pink (OTC Pink code: PWNNY). Solicitors HWL EBSWORTH Lawyers Level 20, 240 St Georges Terrace Perth WA 6000 AUSTRALIA Telephone (+61 8) 6559 6500 Bankers National Australia Bank Ground Floor 100 St Georges Terrace Perth WA 6000 AUSTRALIA Telephone: (+61 8) 9441 9313 3 Parkway Minerals NL A.C.N. 147 346 334 CHAIRMAN’S LETTER Dear Shareholder So far, 2020 is shaping-up to be a volatile and challenging period for the global economy. Whilst the ongoing COVID-19 pandemic continues to present many challenges and disruptions, these impacts are occurring during a period of continued technological innovation and accelerating adoption of both new and existing technologies. Underlying some of these broad trends, particularly those associated with decarbonisation of power generation and electrification of transport, is the increasing awareness of environmental, social and corporate governance (ESG) related themes. As societal expectations evolve and the investment community increasingly adopts more sustainable investing approaches, ESG principles are creating challenges for legacy industries, whilst at the same time, creating opportunities in new industries, and for more innovative business models. Against this backdrop of accelerating change, the last year for Parkway Minerals has also been a period of significant transformation and rejuvenation. Since listing in 2011, Parkway Minerals was primarily focused on the Dandaragan Trough Project (DTP), where a significant greensand deposit, abundant in phosphate and potassium resources, was successfully delineated over several years. Despite developing the proprietary KMax® process to extract potassium from the greensands at the DTP, in more recent times, the board identified that the investment community was unlikely to be supportive of the next stages of evaluation at this project. Recognising the limited growth opportunities at the DTP, in October 2019, Parkway Minerals completed a transformational transaction through the acquisition of Consolidated Potash Corporation (CPC). By acquiring CPC, Parkway Minerals acquired a minority interest in the Karinga Lakes Potash Project (KLPP) in the Northern Territory, in Australia. The CPC transaction, also resulted in Parkway Minerals acquiring the innovative aMES™ technology, which has been developed to process a range of challenging brine streams from the mining industry, in order to recover valuable minerals, reagents as well as produce fresh water. During the year, significant progress has been made in relation to commercialising the aMES™ technology, by building an in-house process engineering team and collaborating with leading strategic partners and prospective clients to deliver, BPaaS – Brine Processing as a Solution™. Through the acquisition of CPC, the management of Parkway Minerals has also been transformed, with the appointment of Patrick Power, a Vancouver based mining executive, with significant experience in equity capital markets as well as in the development of a significant Canadian potash company. As part of the CPC acquisition, Bahay Ozcakmak was appointed executive director of Parkway Minerals, and following the 2019 AGM, Bahay assumed the role of managing director. Bahay has extensive experience commercialising innovative technologies targeting the production and processing of various brine streams for a range of industrial applications including the production of energy, water and minerals. More recently, Richard Beresford joined the board in the capacity of a non-executive director. Richard has broad technology commercialisation experience, and significantly strengthens the board’s corporate governance and ESG related capabilities, which align strongly with the future direction of Parkway Minerals. Parkway Minerals continues to hold a strategic investment in Davenport Resources (ASX: DAV), which has successfully delineated a globally significant potash resource in Germany and has recently completed scoping studies which have delivered excellent technical and economic results and provide Davenport Resources with an attractive opportunity to create and unlock substantial value. As we position Parkway Minerals for future success, I would like to thank all our stakeholders, including our shareholders, collaborators and staff for your continued support and look forward to providing further updates on our ongoing progress in commercialising our world-class technology portfolio to provide long-term sustainable solutions for processing complex brines, in the energy, mining and wastewater industries. Yours Sincerely, Adrian Griffin Chairman 4 Parkway Minerals NL A.C.N. 147 346 334 Directors’ Report The Directors present their report on Parkway Minerals NL and its controlled entities (“Parkway”, “the Company” or “PWN”) for the year ended 30 June 2020. Directors The names and details of the Company’s directors in office during the financial year and until the date of this report are set out below, directors were in office for the entire year unless otherwise stated. Adrian Griffin (Non-executive Chairman) Patrick McManus (Managing Director): resigned 30 November 2019 and continued as Non-executive Director; (Non-executive Director): resigned 30 April 2020 Natalia Streltsova (Non-executive Director): resigned 17 September 2019 Patrick Power (Non-executive Director): appointed 17 September 2019 Bahay Ozcakmak (Executive Director): appointed 17 September 2019, resigned 28 November 2019 (Managing Director): appointed 28 November 2019 Richard Beresford (appointed 12 March 2020) Names, qualifications, experience and special responsibilities Adrian Griffin Non-Executive Chairman (appointed 12 November 2010) Qualifications Bsc(Honours),GSA,MAusIMM Adrian Griffin, an Australian-trained mining professional, has had exposure to metal mining and processing worldwide during a career spanning more than three decades. A pioneer of the lateritic nickel processing industry, he has helped develop extraction technologies for a range of minerals over the years. Today, Adrian specialises in mine management and production. He is a former Chief Executive Officer of Dwyka Diamonds Limited, an AIM- and ASX-listed diamond producer, was a founding director and executive of Washington Resources Limited and also a founding director of Empire Resources Limited, Ferrum Crescent Limited and Reedy Lagoon Corporation Limited. Moreover, Mr Griffin was a founding director of ASX-listed Northern Minerals, of which company he is currently a non-executive director. He is also managing director of ASXlisted Lithium Australia NL. Other listed company directorships during the last 3 years: Northern Minerals Ltd (Director June 2006 – present), Reedy Lagoon Corporation Ltd (Director June 2014 – present) and Lithium Australia NL (Director February 2011 – present). Adrian Griffin is also a member of the Audit & Risk Committee, Remuneration Committee (Chairman) and the Nomination Committee. Patrick McManus Managing Director (resigned 30 November 2019) Non-Executive Director (resigned 30 April 2020) Qualifications Bsc(Honours), MBA Patrick McManus has a degree in mineral processing from Leeds University and an MBA from Curtin University. A mining professional for more than 30 years, his work has taken him to many sites within Australia and overseas, including Eneabba and the Murray Basin in Australia, and Madagascar, Indonesia and the United States. During that time, Patrick has worked in operational, technical and corporate roles for RioTinto, RGC Limited and Bemax Resources Limited. He was a founding director and, from January 2007 to March 2010, managing director of ASX-listed Corvette Resources Limited. 5 Parkway Minerals NL A.C.N. 147 346 334 Directors’ Report (continued) Other listed company directorships during the last 3 years: Davenport Resources NL (Director January 2017 – present). Natalia Streltsova Non-Executive Director (resigned 17 September 2019) Qualifications MSc, PhD (Chem Eng), GAICD, MSME, MCIM Dr Natalia Streltsova is a senior executive with over 27 years’ experience in the minerals industry of which 15 years, prior to forming her own consulting business in 2014, was spent in various leadership and technical roles with major mining houses including Vale SA (formerly CVRD), BHP Billiton and WMC Resources Limited. In all of these roles, there was considerable interaction with operations to provide support as well as to identify and implement innovative projects leading to increased production and cost reduction. Dr Streltsova has a strong background in mineral processing and metallurgy with broad international experience in project, technical and business development capacities. Dr Streltsova has previously been a director on a number of Vale subsidiary boards as well as on several collaborative industry boards. She is also a Non-Executive Director on ASX listed Neometals Limited. Other listed company directorships during the last 3 years: Neometals Limited (Director April 2016 – present) Patrick Power Non-executive Director (appointed 17 September 2019) Mr Patrick Power is the founder of Western Potash, and was instrumental in securing substantial investment for the company and advancing the Milestone (under construction) project in Saskatchewan, Canada. Mr Power brings over 25 years' experience in mining finance, management and venture capital. Mr Power is currently a director of Western Potash and President and CEO of Arctic Star Exploration, a diamond exploration company. He has served as a director of other mineral exploration companies including Amarillo Gold Corp., First Narrows Resources Corp., and Goldtex Resources Ltd. Other listed Company directorships during the last 3 years: Western Potash Corp. (Director April 2007 – April 2017), Arctic Star Exploration Corp. (Director June 2003 – Present). Bahay Ozcakmak Executive Director (appointed 17 September 2019, resigned 28 November 2019) Managing Director (appointed 28 November 2019) Qualifications BSc, MABus, DipFin(Inv.), MAICD Mr Bahay Ozcakmak is the founder of Activated Water Technologies Pty Ltd (“AWT”) and was the CEO of AWT’s parent company, Consolidated Potash Corporation Ltd (“CPC”), up until its acquisition by Parkway. In addition to two decades of successful technology commercialisation experience, Mr Ozcakmak has extensive corporate development expertise, including M&A in the energy and mining sectors, where he has led the successful acquisition of several flagship projects and major corporate transactions, particularly with listed companies. Mr Ozcakmak has broad corporate experience ranging from business and corporate strategy development through to CEO and director level roles in the energy and mining sectors. Recent experience with resources companies have focused on gold, copper, nickel, cobalt, lithium, potash and uranium projects. Mr Ozcakmak is currently a director of several private and public companies including TSX-Venture listed Fidelity Minerals Corp. Other listed company directorships during the last 3 years: TSX Venture exchange listed: Lions Bay Capital Inc. (Director May 2018- October 2019), Fidelity Minerals Corp. (Director June 2018 – Present). 6 Parkway Minerals NL A.C.N. 147 346 334 Directors’ Report (continued) Richard Beresford Non-executive Director (appointed 12 March 2020) Qualifications BSc (Mechanical Engineering), MSc (Technology and Development), and is a member of FAIE and FAICD Mr. Beresford has over 30 years’ experience in the international energy natural gas and renewable energy industries. Mr. Beresford served as a director of Eden Energy Limited. Mr. Beresford held the position of Executive Chairman of Green Rock Energy Limited (ASX: BKT), a Perth based energy explorer and developer from 2012 to 2015. Prior to his appointment as Executive Chairman he was the Managing Director and a non-executive director from 2008 to 2012. Mr. Beresford was Head of Gas Strategy and Development of CLP Power Hong Kong Limited from 2005 to 2007. Mr. Beresford spent five years with Woodside Petroleum Limited and 12 years with British Gas Plc. Other listed company directorships during the last 3 years: Eden Energy Limited (Director May 2007 – May 2018), Liquefied Natural Gas Limited (Feb 2004 – 30 April 2020). Company secretary Amanda Wilton-Heald (appointed 7 March 2018) Amanda is a Chartered Accountant with over 20 years of accounting, auditing (of both listed and non-listed companies) and company secretarial experience within Australia and the UK. Amanda has been involved in the listing of junior explorer companies on the ASX and has experience in corporate advisory and company secretarial services. Interests in the shares and options of the company and related bodies corporate As at the date of this report, the interests of the directors (including related parties) in the shares and options of the company were: Number of ordinary shares Number of options over ordinary shares 20,046,552 214,595,618 685,399 - 8,833,333 24,833,333 5,000,000 5,000,000 Adrian Griffin Bahay Ozcakmak Patrick Power Richard Beresford Partly paid contributing shares 4,950,217 52,424,060 - Dividends No dividend has been paid or declared since the start of the financial year and the directors do not recommend the payment of a dividend in respect of the financial year. OPERATING AND FINANCIAL REVIEW Principal activities The principal activity of the entity during the financial year was the exploration for minerals and commercialisation of proprietary brine processing technologies, with applications in the energy and mining sectors. Operating results for the year The loss after income tax expense for the year ended 30 June 2020 was $2,421,674 (2019: $2,009,060). 7 Parkway Minerals NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Financial Performance 2020 $ Total income Loss before tax Loss after income tax expense Loss per share (cents) 102,023 (2,421,674) (2,421,674) (0.15) 2019 $ 335,231 (2,009,060) (2,009,060) (0.28) % Increase/ (Decrease) -69.57% 20.54% 20.54% -46.43% The financial position of the Group is presented in the attached Consolidated Statement of Financial Position. As at 30 June 2020, the group had a net asset balance of $6,147,779 an increase of $3,480,918 from 30 June 2019. The cash balance increased from $120,981 to $2,001,380 as at 30 June 2020. For further details, refer to the consolidated statement of financial position. Introduction During fiscal 2019-20 Parkway Minerals NL (“Parkway Minerals” or “the Company”) has undergone significant transformation and rejuvenation. In October 2019, the Company completed a transformational transaction through the acquisition of Consolidated Potash Corporation (CPC). By acquiring CPC, Parkway Minerals acquired a minority interest in the Karinga Lakes Potash Project (KLPP) in the Northern Territory in Australia. The CPC transaction, also resulted in Parkway Minerals acquiring the innovative aMES™ technology. Following the acquisition of CPC, significant progress continued to be made in relation to commercialising the aMES™ technology, by building an in-house process engineering team and collaborating with leading strategic partners and prospective clients to deliver, BPaaS – Brine Processing as a Solution™. Recognising the advantages of building a brine processing technology portfolio, in May 2020, the Company acquired the iBC™ technology. Given Parkway Minerals has the opportunity to share in project development related benefits through the strategic application of the aMES™ technology, potentially through licensing, without necessarily needing to contribute to project development related costs, participation in the earlier resource exploration phase is a substantial risk the board has deemed to be unnecessary, for the creation of substantial value. In this regard, whilst the Company has retained its interest in the KLPP, interests in all other exploration related projects, including Lake Seabrook Project (LSP) and the Dandaragan Trough Project (DTP) were relinquished during the period, with the New Mexico Lithium Project (NMLP) relinquished in late August 2020. SUMMARY OF PROJECT PORTOLIO Karinga Lakes Potash Project (KLPP) The KLPP is a Joint Venture (JV) with Verdant Minerals Ltd in the Northern Territory (Figure 1). Prior to its acquisition by Parkway Minerals, CPC earned an initial 15% interest in the KLPP by completing a scoping study in February 2019. Parkway Minerals also has the right to acquire up to 40% through staged investment of a further $2 million, a large proportion of these funds have already been expended. Parkway Minerals also holds a conditional option to acquire an additional 10.1% in the project, under certain circumstances. Resource Appraisal • The KLPP has undergone comprehensive resource appraisal and represents a highly prospective sulphate of potash (SOP) brine project. • Verdant Minerals have been exploring the KLPP area since May 2010 and on 20 February 2014 reported a historical in-situ potash resource for the project. The 2014 resource is based on the total porosity and is in the process of being updated. 8 Parkway Minerals NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) • Most of the process development studies performed to date, have been based on brine and salt feedstocks from Lake Miningere, where the reported brine composition was deemed to be particularly well suited for the production of sulphate of potash (SOP). Resource Appraisal Activities The potash brine investigations including those utilised for the purposes of resource appraisal and reporting were based on data acquired over several years, including: • 93 brine samples from hand dug pits • 4 small backhoe trenches which were pump tested • 8 vibracore drill holes, 73 sonic drill holes & 200 aircore drill holes • 42 installed 50mm piezometers around drill holes & 48 piezometers around trenches • 47 installed 100mm wells • 10 pumping tests from 100mm wells • 4 long term pump tests from 3 trenches and a well • 142 porosity samples. Figure 1: Karinga Lakes Potash Project (KLPP), NT, Australia. In May 2020, Parkway Minerals commenced a Preliminary Feasibility Study (PFS) for the project based on the strategic application of the aMES™ technology. As the Company’s aMES™ commercialisation partner (see Summary of Technology Portfolio, section below), the study manager for the PFS is Worley, with the study incorporating a re-evaluation of the historical in-situ sulphate of potash (SOP) resource, with the objective of reporting an updated recoverable potash resource as part of the study. Verdant Minerals Ltd is currently undertaking a tenement rationalisation process focused on holding essentially a very similar project area, but consolidating the Exploration Licences from 7 to 3 contiguous licences, therefore simplify dealings with relevant stakeholders. 9 Parkway Minerals NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) New Mexico Lithium Project (NMLP) The NMLP covers the central portion of the Lordsburg Playa in southwest New Mexico, in the United States. During the period, Parkway Minerals earned a 70% interest in the project by funding tenement renewals and early stage exploration and had the right to move to 100% ownership. The NMLP represents an attractive exploration opportunity for the discovery of mineral rich brines. Due to the anticipated temperature and composition of the interpreted in-situ brines, the project was considered to be potentially suitable for development with the aMES™ technology, upon discovery of a suitable brine hosted mineral resource. Despite the prospectivity of the project, in late August 2020, the Company made the strategic decision to relinquish its interest in the NMLP (see note Significant events after the balance date, for further details). Dandaragan Trough Project (DTP) The DTP, located 175km north of Perth in Western Australia, consisted of sedimentary deposits of greensands which contained glauconite, a potash rich mica, and phosphate nodules. The project objective was to produce potash and phosphate fertilisers and a range of by-products. Despite delineating a significant mineral resource over several years, the Company determined that advancing the project to a more advanced stage of evaluation, would require significant additional funding, which was unlikely to be secured in the nearterm, given the significant capital intensity of the project. In order to advance the project, the company has undergone several initiatives in recent years to attract a potential joint venture partner, which ultimately proved unsuccessful. In light of these challenges, during the period, the Company progressively relinquished all of its interests in the DTP. Lake Seabrook Project (LSP) The LSP covered a salt lake close to the Koolyanobbing iron ore mining area, straddling the Perth to Kalgoorlie rail-line, in Western Australia. Following encouraging initial brine sampling results, following the acquisition of CPC, and the subsequent focus on advancing the KLPP, all interests in the LSP were relinquished during the period. SUMMARY OF TECHNOLOGY PORTFOLIO During the reporting period, following the acquisition of CPC, the Company established the Parkway Minerals – Engineering & Technical Office at Victoria University, in Melbourne, Australia. The Company has also established a process engineering team, to assist in the commercialisation of the brine processing technology portfolio, which includes the iBC™ brine pre-treatment and aMES™ brine processing technologies. The Company has performed a range of evaluations regarding the potential application of the Company’s brine processing technologies, for a number of companies operating predominantly in the energy and mining sectors. In order to accelerate the commercialisation of the aMES™ technology, in May 2020, Parkway Minerals entered into a Global Strategic Cooperation Agreement with major global engineering services company, Worley. aMES™ Technology The activated Mineral Extraction System, or aMES™ is an innovative process technology that enables the treatment of concentrated brine solutions to recover a range of valuable compounds, reagents and fresh water. The technology utilises a proprietary multi- staged process incorporating novel membrane technology and is based on proprietary IP, incorporating patents, expertise and know-how acquired over more than a decade of intense process development. Advantages of the aMES™ technology include: • improvements in mineral recovery and product quality, • opportunity for substantial project capex & opex savings, • efficient use of energy and produces pure water as a by-product, and • improved project footprint and environmental sustainability. 10 Parkway Minerals NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Ongoing collaboration with a number of brine project developers and operators has confirmed there are many applications where the aMES™ technology has the potential to deliver substantial value by enhancing existing flowsheets, in order to improve overall project performance. iBC™ Technology The integrated Brine Causticization, or iBC™ is a patented process technology that simultaneously removes common impurities from waste brine streams and converts sodium carbonates and bicarbonates commonly found in coal seam gas (CSG) brines, into more soluble sodium hydroxide. As a result of the causticization step, the iBC™ technology produces a purified brine suitable for downstream processing, including with the aMES™ technology, for the production of various salt products and industrial-grade sodium hydroxide. K-MAX® Technology The K-Max® process uses hot sulphuric acid to leach glauconite at atmospheric pressure, extracting potassium and other elements to make a range of products, including sulphate of potash (SOP), high magnesium SOP, (KMS), phosphoric acid, aluminium sulphate (alum) and iron oxide. The process is also applicable to other mica-like minerals, such as phlogopite. Strategic Investments Davenport Resources (ASX:DAV) Parkway Minerals holds a strategic investment (34.3 million shares) in Davenport Resources (ASX: DAV), which has successfully delineated a globally significant in-situ potash resource (in excess of 550 million tonnes of contained potash) across 4 projects, at its South Harz project in Germany. Recently completed scoping studies have delivered excellent technical and economic results and provide Parkway Minerals with encouragement that this investment will generate significant returns as well as provide Parkway Minerals with the opportunity to investigate a range of value-accretive initiatives. Significant changes in the state of affairs Other than the above, there have been no significant changes in the state of affairs for the year. Significant events after the balance date During the financial year, the Group established an Engineering & Technical Office co-located at Victoria University’s Werribee Campus, the site where the majority of the laboratories and piloting facilities associated with the Group’s various technology program are located. On 2 August 2020, Melbourne (where the Werribee Campus is located) moved to Stage 4 Restrictions associated with the COVID-19 outbreak. During the Stage 4 Restrictions, access to the Werribee Campus has been reduced significantly and has been limited to essential activities. Key personnel supporting the Group’s activities have been granted certain exemptions, allowing key activities to proceed with the adoption of relevant safety protocols, albeit on reduced schedules to minimise risks. The impact of the COVID-19 pandemic is ongoing and it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation continues to develop and is dependent on measures imposed by the Governments such as maintaining social distancing requirements, quarantine, travel restrictions and economic stimulus that may be provided. On 25 August 2020, despite the prospectivity of the NMLP, given i) recently identified project access related challenges, ii) COVID-19 related operational difficulties in the United States, iii) the continued collapse in lithium prices throughout 2020, and iv) the relatively high holding costs, the Company decided to relinquish its interest in the NMLP. 11 Parkway Minerals NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Likely Developments and expected results The Company remains focused on: • Completion of the KLPP pre-feasibility study, as this will showcase the advantages of the aMES™ technology and provide valuable technoeconomic data to support ongoing business development initiatives. • Successful installation, commissioning and operation of the new state-of-the-art aMES™ pilot plant at Victoria University, will provide valuable engineering data, and will also support ongoing business development. • Successful commercialisation of the world-class technology portfolio to provide long-term sustainable solutions for processing complex brines, in the energy, mining and wastewater industries. Environmental regulation and performance The Company’s activities are subject to Australian legislation relating to the protection of the environment. The Company is subject to significant environmental legal regulations in respect to its exploration and evaluation activities. There have been no known breaches of these regulations and principles. Indemnification and Insurance of directors and officers The Company has entered into deeds of access and indemnity with the officers of the Company, indemnifying them against liability incurred, including costs and expenses in successfully defending legal proceedings. The indemnity applies to a liability for costs and expenses incurred by the director or officer acting in their capacity as a director or officer. Except in the case of a liability for legal costs and expenses, it does not extend to a liability that is: (a) owed to the Company or a related body corporate of the Company; (b) for a pecuniary penalty order under section 1317G or a compensation order under section 1317H or section 131