More annual reports from Alara Resources Limited:
2021 Report2014 ANNUAL REPORT
CONTENTS
About Us
Chairman’s Letter
Managing Director’s Letter
Board of Directors
Management Team
Technical & Compliance
Our People
Company Projects Overview
Khnaiguiyah Project
Oman Projects
Our Contractors
Financial Year 2014 Milestones Achieved
Financial Summary
Key Financial Numbers
FY2015 Projected Milestones
Directors’ Report
Auditors’ Independence Declaration
Consolidated Statement of Profit and
Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
01
02
03
04
06
07
09
10
14
28
38
39
40
40
41
42
64
65
66
Consolidated Statement of Changes in Equity 67
Consolidated Statement of Cash Flows
68
Notes to the Consolidated Financial Statements 69
Directors’ Declaration
Independent Auditors’ Report
JORC Competent Persons Statements
Annual Mineral Resources Statements
Forward Looking Statements
Securities Information
Corporate Directory
102
103
106
106
106
107
111
www.alararesources.com
ABN 27 122 892 719
Mission Statement
To become a mid-tier mineral producer
with a focus on mineral deposits and
projects in the Middle East region.
Alara will deliver maximum shareholder
value through profitable growth,
development of low cost operations
and through stability and sustainability
over time.
Core Values
Excellence
Alara will pursue excellence and will strive
for relevant best practice combined with a
fit-for-purpose approach through continuous
improvement and teamwork in all aspects
of our business.
To achieve our goals we will ensure our
employees and business partners have the
appropriate skills and resources to perform
their work effectively and efficiently. We will
foster an open and supportive environment
in all activities and relationships.
Respect
Alara will show consideration for and value
our employees, our Joint Venture and
other business partners, our customers,
our suppliers, our communities and
governments, and the social and physical
environment in which we operate.
Integrity
Alara and its employees are committed to
fairness and honesty and will operate with
transparency and accountability at all levels
of the business.
About Us
01
Daris/Washihi Copper-Gold Project (Oman)
Khnaiguiyah Zinc-Copper Project (Saudi Arabia)
Corporate Office (Perth, Australia)
Alara has demonstrated its capability as a mineral
resource developer.
With a completed Definitive Feasibility Study on
its flagship Khnaiguiyah Zinc-Copper Project in
Saudi Arabia and an advanced and comprehensive
Scoping Study for its Daris/Washihi Copper-
Gold Project in Oman the Company is poised
to transition to a mine builder and operator.
Annual Report 2014 ALARA RESOURCES LIMITED 02
Chairman’s Letter
The 2014 financial year has been
a mixed period of overall frustration
offset by progress on project
optimisation, consolidation and costs
management for Alara as it prepares
itself for the transition to becoming
a mine developer and operator.
Ian J Williams, AO
Non-Executive Chairman
Low key optimisation studies have been conducted
throughout the year for the Khnaiguiyah Project particularly
in areas of finance options, technical enhancement and risk
reduction. With this work and the strengthening zinc price
the Project economics have been enhanced.
Whilst the current environment creates short-term
development and cost management challenges, the
Company expects to progress the Khnaiguiyah Project
and continues to evaluate ways to extract value from our
remaining project portfolio in a financially prudent manner.
The Company is well placed to move into the next phase
of financing and mine development.
On behalf of the Board, I would like to thank our
shareholders, employees and other stakeholders for their
continued support, dedication and commitment to Alara.
We look forward to continuing to work towards attaining
our objectives and delivering value to our shareholders
over the next 12 months.
Ian J Williams, AO
Non-Executive Chairman
Dear Shareholder
In the first instance FY 2014 was one of frustration as the
company continued with its efforts to move the Khnaiguiyah
Zinc-Copper Project forward. Despite extensive
negotiations and an agreed Heads of Agreement (HoA)
with our Saudi Arabian Joint Venture partners they did not
transfer the mining licence to the joint venture company
Khnaiguiyah Mining Company as was required by the
HoA. Efforts to overcome the impasse are continuing as
we receive ongoing strong support and advice from His
Royal Highness Prince Abdullah and his principle advisor
Mr Jim Phipps on both the impasse itself, as well as
alternative ways of moving the Project forward.
Despite this project delay in Saudi Arabia and the inherent
frustration, the Company moved forward with its internal
preparations at the corporate level, with the restructuring
of the Board through the key appointments of Mr Philip
Hopkins as Managing Director, and Mr John Hopkins
and HRH Prince Abdullah bin Mosaad bin Abdulaziz Al
Saud as Non-Executive Directors. Throughout the year
a small but effective management team has also been
assembled and consolidated to meet the challenges
and opportunities ahead.
Alara’s cash position was materially enhanced during the
year by two successful applications under the Australian
Federal Government’s Research and Development Tax
Incentive Scheme for refunds amounting to a total of
AU$4.39m received in September 2013 (for 2012 financial
year) and January 2014 (for the 2013 financial year). As
a result of focused cost conservation initiatives the last
half of the year also saw reductions in monthly operating
expenditure. Additionally, the company flagged the
possibility of divesting its interest in the Oman copper
assets and has held discussions with several interested
parties. Technical review, analysis and innovation have
improved the value of these assets and the final decision
for this project has been deferred pending the outcome
of the current market review and assessment.
ALARA RESOURCES LIMITED Annual Report 2014 Managing Director’s Letter
It has been a year of
contrasting realities for
Alara and the 2015 financial
year will be an important
one for the Company
Dear Shareholder
Our Chairman has touched on the Company’s frustration
with its inability to progress our Khnaiguiyah Zinc-Copper
Project in Saudi Arabia, despite having a completed
and robust Definitive Feasibility Study (DFS) in hand.
Set alongside this was the further definition of potential
significant upsides in each of Alara’s two projects, while
the Board and Management Team were also restructured,
and the staff structure and systems adjusted to prepare
to progress both of our projects to their next stages
of development.
There have been a number of “hidden gems” or “silver
linings” from the past year that are also worth reflecting on.
During the 2014 financial year Alara achieved a number
of important operational milestones, most notably we were
able to negotiate a “solution” or agreement with our Saudi
Arabian Joint Venture (JV) partners for the Khnaiguiyah
Project that dealt with all the historic “liabilities” and also
outlined an equity solution to move forward from an
untenable 50/50 equity agreement between the parties to
a 60/40 arrangement. Although our JV partners have not in
the end honoured this agreement, it did give the Company
a very definitive and clear picture of where were are at
with the Khnaiguiyah Project and thus allowed us to plan
an alternative and appropriate approach to progress the
Project beyond this impasse.
We took this period of delay to investigate some of the
opportunities and upsides in the Project itself while
simultaneously gaining further clarity on the two material
risks: water access; and mining and exploration licencing.
We also further expanded our in-country stakeholder
relationships and support in the Kingdom of Saudi Arabia.
Concurrently, in Oman we took the previous assessment
work on the Daris/Washihi Project and expanded this into
a full Options Analysis which was then progressed to an
advanced and comprehensive Scoping Study. As a result,
this project is now ready to move to the next phase of
development once financial support is in place.
03
Philip H Hopkins
Managing Director
The 2015 financial year will be an important one for Alara.
Some short-term delays on the Khnaiguiyah Project are
anticipated, but the Project upside and potential for the
future continues to compel the Company to strive to achieve
the most appropriate solution to bring the Project to fruition.
Through good fortune and solid technical work we have
a robust zinc mine project heading into a 10 year high
zinc price cycle in a market that has high quality Project
Directors and EPC firms ready to take on their next project.
In turn the work on the Oman projects to date has been to a
very high level and has set us up very well to possibly move
the combined Daris/Washihi Project into the Pre-Feasibility
(PFS) phase and beyond. The Company is very focused
and ready to take these next steps in both projects.
The success of any Company, and thus its projects, and
the resulting benefits to its shareholders is dependent on
the people associated with it. Alara has a dedicated team
of professionals in Australia, Saudi Arabia and Oman. Our
Board, Management and Staff are of the highest standard
and bring with them the skills, experience and motivation to
take the Company through its transformation from a mineral
resource explorer to a mine builder and operator.
Externally we have been exceptionally fortunate and are
very appreciative of our strong and supportive set of key
shareholders, as well as critical in-country stakeholder
support and encouragement.
The true strength of Alara lies in the combination of its two
high quality projects, its Board and staff, in association
with these other key individuals and groups. The net result
is what we envisage will be a “breakout year” for Alara
in FY2015!
Philip H Hopkins
Managing Director
Annual Report 2014 ALARA RESOURCES LIMITED 04
Board of Directors
Ian J Williams, AO
Non-Executive Chairman
BE (Elec), FAusIMM, FIEAust
Mr Williams was awarded an Officer
of the Order of Australia (AO) in
June 2010 for distinguished service
to the Indigenous community of
Western Australia and Queensland
through the establishment of training
programmes providing sustainable
employment in the mining industry,
the promotion of social responsibility
and as a supporter of business
development initiatives.
As Managing Director of Century
Zinc Ltd, Mr Williams was responsible
for planning and bringing on stream
the Century lead/ zinc mine in north
western Queensland. Producing
some 7% of the world’s demand for
zinc concentrate, the Century mine
is one of the largest zinc mines in
the world. He was, until July 2011,
Chairman of the Port Hedland
Port Authority.
Mr Williams’s diverse experience
includes executive management of
open cut and underground mining
operations, brownfield expansions
and new major mining projects. He
was responsible for the establishment
of two iron ore mines and associated
infrastructure for Hamersley Iron.
He has also assisted the West
Australian Government in the
facilitation of a major new port and
rail infrastructure project in the State’s
Mid-West Region.
Mr Williams is Chairman of the
Remuneration and Nomination
Committee and Member of the
Audit Committee.
Philip H Hopkins
Managing Director
BSc (Mining Engineering), MBA, P.Eng,
MAusIMM, MCIM
Mr Hopkins has +30 years’
experience in the mining industry in
leadership roles across operations,
projects, commercial and executive
matters. Mr Hopkins is a mining
engineer and is also a registered
professional engineer in Canada,
South Africa, Papua New Guinea and
Australia and a Competent Person
under the JORC Code. He also holds
a First Class Mine Manager status
in several jurisdictions domestically
and abroad.
Mr Hopkins’ career has included work
with Cominco Limited, Falconbridge
Limited, Placer Dome Inc., BHP
Billiton Limited and St Barbara
Limited and has included international
postings in Canada, Papua New
Guinea, South Africa, Brazil and
Australia. He has mining experience
in base metals (copper and nickel),
gold and iron ore.
John Hopkins
Non-Executive Director
LLB, FAICD
Mr Hopkins has almost 30 years’
experience on the board or as
chairman of more than 20 public
listed companies (in Australia, UK
and Canada) and as such has
been involved in the financing and
development (and subsequent
Merger and Acquisition activities) of
many gold, base metal, energy (coal
and oil and gas), mineral sands and
other resources projects in Australia,
Africa, Asia, Europe and North
America as well as industrial and
manufacturing companies.
He is currently Chairman of
developing tungsten and tin producer
Wolf Minerals Limited (ASX: WLF)
where he has overseen significant
debt and equity raisings to take
the Hemerdon Project into full
development and South African
based coal producer Universal
Coal Plc (ASX: UNV) which also
recently secured major debt and
equity funding.
Mr Hopkins is Chairman of the
Audit Committee and Member
of the Remuneration and
Nomination Committee.
ALARA RESOURCES LIMITED Annual Report 2014
05
His Royal Highness Prince
Abdullah bin Mosaad bin
Abdulaziz Al Saud
Non-Executive Director
BEng. (Industrial) (Hons), MEng
HRH Prince Abdullah is the Chairman
of The Saudi Paper Manufacturing
Company (SPM) which he established
in 1989 and floated on the Saudi
Stock Exchange (Tadawul) in
2006. SPM has one of the largest
waste paper collection, recycling,
manufacturing and converting
(consumer tissue paper products)
operations in the Middle East with
SAR800m annual turnover and a
SAR1.3b market capitalisation.
HRH Prince Abdullah is keen to
be a part of and to assist in the
advancement of Alara’s flagship
Khnaiguiyah Project in Saudi Arabia.
HRH feels the development of this
Project of is strategic importance to
the country in terms of support of
the nation’s mining industry as well
as for local industry, expertise and
the workforce.
James D Phipps
Alternate Director for HRH Prince
Abdullah
B.A. (Philosophy), J.D. (Law)
Mr Phipps is a strategic advisor,
business executive, and lawyer with
extensive international and Middle
East experience.
Mr Phipps currently serves as Co-
Chairman of Sheffield United Football
Club, the first “United” and the first
association football club worldwide
and a founding member of the
English Premiere League.
Mr Phipps co-chairs Blades Leisure
Limited, which holds SUFC and other
operating companies, including
security and event management
companies. He chairs Shout TV,
Inc., a Lindon, Utah, based sports
entertainment business and serves
as principal advisor to His Royal
Highness Prince Abdullah bin
Mosaad bin Abdulaziz Al Saud,
providing strategic advice relative to
a worldwide portfolio of businesses,
properties and investments. He
sits on the board of the publicly
listed Saudi Paper Manufacturing
Company (Tadawul: 2300), the
leading manufacturer of tissue
paper products in the Gulf Region.
Mr Phipps has experience in
corporate turnarounds and has
served as chief executive or general
manager at a number of companies
in a turn-around capacity. He brings
experience to the board in the context
of Alara’s Middle East and G.C.C.
endeavours.
Annual Report 2014 ALARA RESOURCES LIMITED 06
Management Team
Justin Richard
Executive Director for
Alara’s Saudi & Oman operations
LLB (UWA), Grad Dip Corporate Governance
FGIA, FCIS, MAICD
Mr Richard is an accomplished
corporate lawyer and business
manager who has played a key
role in helping build and maintain
Alara’s international joint venture
relationships. He has been the
Company’s General Counsel since
2011 and in 2013 took up residence
in Riyadh as Alara’s Country Manager
for Saudi Arabia. The Company
later expanded his role to include
management of Alara’s joint venture
companies in Oman.
Prior to joining Alara, Mr Richard
worked as Senior Commercial Officer
& Contracts Specialist with Bateman
Engineering (Australia), Corporate
Counsel and head of legal for UGL
Limited’s resources division and as a
lawyer in Minter Ellison’s Construction,
Engineering and Infrastructure group.
Before entering the legal
profession, Mr Richard enjoyed
a successful career in private
enterprise as Managing Director
of Irrigate Australia.
John Watkins
Chief Financial Officer
BA, Dip GeoSc, MAppFin CPA,
FAusImm, FFin
Mr Watkins holds both Commercial
and GeoScience qualifications
and has 30 years’ of international
executive experience in the resource
industry both at corporate level and at
operating mine sites.
He has held senior roles with
companies and joint ventures
(A$100m to US$1b+ in size) in
mineral trading, mineral exploration,
petroleum production, zinc/lead/silver
mining/concentrate export, gold/silver
mining, nickel mining/concentrate
export and project development
in Australia, PNG, Canada, Mexico
and Brazil.
Mr Watkins’ extensive experience
covers all aspects of company
strategy and direction as a board
member and includes fund raising,
company promotion, project
management, mine management and
operations, metal refining and offtake
contracts, construction and capital
reporting, financial reporting, treasury,
currency/metal price hedging,
human resources, supply chain,
risk management and community/
sustainability obligations.
Formerly Commercial Director of
Mirabela Mineração Do Brasil Ltda,
Executive Director/CFO Kula Gold
Ltd and Commercial Manager with
Barrick Gold Niuigini Ltd.
Elle Macdonald
Corporate Affairs Manager
RNZAF Command Training School
– Commissioned Officer
Ms Macdonald is a highly
experienced corporate affairs
administrator with over 25 years’
experience across a diverse range
of organisations and industries
including military, media, indigenous
affairs, education, manufacturing,
legal, finance and investment, as
well as mining and resources, with
a number of these being ASX and
NZX listed entities.
Ms Macdonald is a graduate of
the Royal New Zealand Air Force
Command Training School, Officer
Training Course (Flying Officer).
Ms Macdonald’s comprehensive
experience includes executive
support at the Board and Executive
Management level, Company
Secretarial and ASX compliance,
legal, marketing and investor
relations, human resources, policies
and procedure implementation
and staff development.
ALARA RESOURCES LIMITED Annual Report 2014
Technical & Compliance
07
AV Sthapak
Corporate Exploration Manager
Victor Ho
Company Secretary
BSc & M.Tech, App Geo; Earth Sciences
BCom, LLB (Western Australia), CTA
Mr Ho has been in company
secretarial/executive roles with a
number of public listed companies
since early 2000. Previously, Mr Ho
had 9 years’ experience in the
taxation profession with the Australian
Tax Office and in a specialist tax
law firm. Mr Ho has been actively
involved in the structuring and
execution of a number of corporate
transactions, capital raisings and
capital management matters and
has extensive experience in public
company administration, corporations
law and stock exchange compliance
and shareholder relations.
Sthapak has more than 22 years’
experience as a multi commodity
exploration geologist, manager
and operator and has extensive
multinational experience in resource
exploration and mining project
feasibility studies.
Soon after joining Alara’s Oman
operations in 2011 in Muscat, Sthapak
led Alara’s in-country exploration
activity which resulted in the discovery
of one of Oman’s largest copper
deposits at Washihi (2012-13).
Sthapak has previously held various
technical and senior management
roles with Rio Tinto including Project
Director and member of the Rio
Tinto’s Global Diamonds Senior
Leadership team.
Sthapak was Awarded ‘Discoverer
of the Year’ by Rio Tinto in 2010.
Annual Report 2014 ALARA RESOURCES LIMITED 08
ALARA RESOURCES LIMITED Annual Report 2014 Our People
PERTH
SAUDI ARABIA
OMAN
09
Ian Williams
John Hopkins
Philip Hopkins
John Watkins
Elle Macdonald
Tina Newbon
Victor Ho
Non-Executive Chairman
Non-Executive Director
Chief Executive Officer; Managing Director
Chief Financial Officer
Corporate Affairs Manager
Corporate Services Coordinator
Company Secretary
HRH Prince Abdullah bin Mosaad
bin Abdulaziz Al Saud
Non-Executive Director
James Phipps
Alternate Director for HRH Prince Abdullah
Justin Richard
Fadi Zenaty
Mohammed Ansar Ahmed
Faisal Muthwed
Kamal Hassan
Executive Director Saudi & Oman Operations
Technical Officer
Administration Officer
Government Relations Officer
Administration Assistant & Driver
Atmavireshwar Sthapak
Corporate Exploration Manager
Rexin Kamilas
Administration Assistant
Badar Marhoon Al Rahbi
Government Relations Officer
Sheikh Khaleefa Al Shirjee
Community Relations Officer
Annual Report 2014 ALARA RESOURCES LIMITED 10
Company Projects Overview
SAUDI ARABIA
Khnaiguiyah Zinc-Copper
1
Project
Alara’s 50% interest held via joint
venture company, Khnaiguiyah Mining
Company (KMC)
Heads of Agreement (HoA) signed with
United Arabian Mining Company LLC
(Manajem) to increase Alara’s interest
from 50% to 60% ownership of KMC
Located adjacent to bitumen road
~200km west of Riyadh (capital city)
near major Riyadh to Jeddah highway
Comprises Mining Licence (issued
in December 2010 with exclusive
30 year term and no mineral royalties),
2 Exploration Licences (granted,
pending renewal) and 5 Exploration
Licence applications, totalling ~380km2
pending completion of transfer to KMC
JORC Reserves (Proved and Probable)
reported to JORC 2004 standard of
26.08MT at 3.3% Zn and 0.24% Cu
2Mtpa Definitive Feasibility Study (DFS)
completed in Q2 2013 with projected
US$257M capex, 2.8 year pay-back,
A$2.074B Life of Mine (LOM) revenues
and A$0.873B LOM EBITDA (at base
case Zn/Cu prices)
Saudi Industrial Development Fund
(SIDF) project financing pending
submission – potentially up to 75%
of construction costs.
1
ALARA RESOURCES LIMITED Annual Report 2014 11
ABOUT SAUDI ARABIA
Saudi Arabia is considered to be a favourable investment
destination, ranked 26th in 2013 by the World Bank out
of 189 countries in terms of “ease of doing business”
and ranked 2nd in the Middle East region after the UAE
(source: World Bank, Doing Business Project)
Country benefits from developed infrastructure including
roads and ports, low cost energy and in-country
construction expertise
SIDF supports local projects with financing (up to 75%),
low LIBOR equiv. margin and long loan tenure
Tax – 20% corporate tax (nil personal tax rate)
Royalties – nil
Foreign ownership – 100% permitted
Profits and Capital – 100% repatriation
Nil import duties for Capex
Tenure certainty – from exploration to mining
Roads – bitumen highway and road to mine gate
Power – 33KVA power line to site
Water – 15km to DFS identified Project water source –
2 further alternative water supply options identified
Fuel –
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