ALKANE
Exploration Ltd
ACN 000 689 216
ANNUAL REPORT 2006
Company Information
Chairman's Report
Review of Operations
Directors' Report
Income Statement
Balance Sheet
Statement of Changes in Equity
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Cash Flow Statement
Notes to the Financial Statements
Directors' Declaration
Independent Audit Report
Corporate Governance
Shareholder Information
Tenement Schedule
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Zirconium Sulphate crystals formed during processing of DZP ore. SEM ANSTO x 900 magnification.
C O M PA N Y I N F O R M AT I O N
ACN 000 689 216
ABN 35 000 689 216
DIRECTORS
J S F Dunlop (Chairman)
D I Chalmers (Managing Director)
I R Cornelius
I J Gandel
A D Lethlean
SECRETARY
L A Colless
REGISTERED OFFICE
129 Edward Street Perth WA 6000
Telephone: 61 8 9227 5677
Facsimile: 61 8 9227 8178
TECHNICAL OFFICE
96 Parry Street Perth WA 6000
Telephone: 61 8 9328 9411
Facsimile: 61 8 9227 6011
SHARE REGISTRY
Advanced Share Registry Services
110 Stirling Highway Nedlands WA 6009
Telephone: 61 8 9389 8033
Facsimile: 61 8 9389 7871
AUDITORS
Rothsay
Chartered Accountants
2 Barrack Street Sydney NSW 2000
Telephone: 61 2 9299 0091
Facsimile: 61 2 9299 2595
STOCK EXCHANGE
ASX Limited
HOME EXCHANGE
Perth
ASX CODE
ALK
INTERNET
Internet Home Page: http://www.alkane.com.au
E-mail address:
mail@alkane.com.au
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CHAIRMAN'S REPORT
2006 has seen major advances on four fronts for Alkane with the receipt of the Commercial Ready Grant for the Dubbo Zirconia Project (DZP), the significant
discovery at McPhillamys, the float of BC Iron Limited and progress with the feasibility for development of the Wyoming gold deposits.
In April, the Company received approval for a grant of A$3.3 million from AusIndustry to assist with the development of the Dubbo project. This grant is given
on a dollar-for-dollar basis to advanced projects that can demonstrate a high level of innovation and the ability to increase Australia’s sustainable economic
growth. The Grant was the catalyst for the Board to approve a significant budget to progress the process flow sheet optimisation and, very importantly, to build
and operate the Demonstration Pilot Plant (DPP).
ANSTO Minerals, a business unit of the Australian Nuclear Science and Technology Organisation based at Lucas Heights in the south of Sydney, was contracted
to carry out the process optimisation and to operate the DPP. Work got underway in July, and while much remains to be done, results available to date are
showing useful understanding of the process conditions and ways to improve that flow sheet.
Acquisition of components for the DPP has commenced and, interestingly, we have found that the carbon regeneration kiln at our now closed Peak Hill Gold
Mine is an ideal size for the kiln that forms the front end of the DPP. Utilisation of this existing capital equipment will save us time and dollars and, even though
we are slightly behind schedule overall, we should have the demonstration plant operating in July 2007.
Successful operation of the DPP should enable sign off on the engineering for the flow sheet as well as generating substantial product for distribution to end
users. This should ultimately lead to conclusion of off take agreements. The target date for a development decision for the DZP remains at mid 2008.
The strategic significance of the DZP continues to be highlighted with the increasing demand for many of the commodities the project can produce such as the
developing use of zirconium and hafnium metals in nuclear power plants. Also the research and development in these special metals keeps opening new
opportunities. As an example, both Intel and IBM are reported to have separately discovered that hafnium is a major new component of the next generation
microprocessors for computer chips.
Our faith in the prospectivity of our tenements in the Orange area was rewarded with the spectacular gold-base metal discovery mid year at McPhillamys, within
the Moorilda Project. This project forms part of the joint venture with the large American gold producer, Newmont. Newmont are the managers of the JV which
has only been active for about 18 months, but Alkane remains as operator and our experience and expertise in the region has paid off with our motivation to
test a target which did not fit the normal exploration models for this area.
While exploration of McPhillamys is at a very early stage, ore grade gold and zinc intercepts have been recorded over a strike length of 400 metres and total
width of 200 metres. Drilling has tested the system to an open 150 metres vertical depth and the deposit appears to be amenable to open pit mining and
standard gold recovery techniques.
Newmont have proposed a regional approach for this year with a view to identifying more McPhillamys type targets in the immediate vicinity to build up the
overall resource potential before embarking on a more detailed drill out. From our existing knowledge we believe there are numerous targets that could provide
that resource potential.
After a long gestation period, the potential of the Nullagine area for channel iron deposits took a major step forward with the formation and float of BC Iron
Limited (BCI). In October we reached agreement with our partners in the Nullagine project, the Randolph Syndicate, to combine tenements in the East Pilbara
with Consolidated Minerals Limited to form a substantial land holding. This land package covers a very prospective terrain with the potential to host several
channel iron deposits of a type mined at Robe River and Yandicoogina by Rio Tinto and BHP Billiton.
BC Iron Limited (BCI) was formed to acquire this land package and raised A$6 million through float and listing on the ASX on 15 December 2006. BCI plans to
initiate a major drilling program to test the system (which has a potential in excess of 500 million tonnes) as soon as practical.
Alkane retains 9 million shares (17%) in BCI and we believe that any significant success by their exploration programs should see a substantial increase in the
value of this investment.
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As with previous years, a shortage of drilling equipment in New South Wales impacted on our ability to get programs completed in a timely manner. This was
particularly evident with the Tomingley Gold Project (TGP) where we were trying to advance the feasibility studies for the development of the 600,000 ounce
Wyoming gold resources.
Several conceptual development models have been considered with the most favourable being a one million tonne per annum open cut mining and carbon-in-
leach gold recovery operation for the production of 60,000 to 70,000 ounces per year followed by a 250,000 tpa underground mining operation. To maximise
the financial return on this model, ideally we will need to add another one million tonnes to the open pitable inventory within trucking distance of the Wyoming
treatment plant. The most likely source for this tonnage is the relatively recently discovered Caloma deposit which is only 500 metres east of the Wyoming
deposits.
The delayed drilling programs were finally completed at Caloma late in 2006 and early 2007, with enough encouragement to suggest that this deposit may
have the potential to meet at least part of that additional tonnage requirement. Further drilling has been scheduled and we will endeavour to get to a logical
decision on the development of this project by the middle of 2007.
At Peak Hill, most of the rehabilitation of the site has been completed with the exception of the office and gold recovery infrastructure. Finalisation of this work
will not be undertaken until after development of Wyoming, but may also await a further review of the potential to develop the large sulphide gold-copper
resource beneath the existing open pits.
Ground exploration will continue to advance the other projects at Wellington, Bodangora and Cudal in the Central West of New South Wales which we believe
are very prospective for gold and copper deposits. In particular, we plan to advance the Galwadgere copper deposit in Wellington with ground geophysics and
drilling to build a resource additional to that identified to date, and to look towards development options for this relatively small but potentially viable deposit.
I would like to thank my fellow directors, and our consultants, exploration team and gold operations management and staff for their continued efforts during the
year. In particular, I thank Inky Cornelius, who continues as a director, but from whom I took over as Chairman; David Kennedy and Lindsay Colless who retired
as a directors during the year, and I welcome Ian Gandel to the Board.
John S F Dunlop
Chairman
Sulphide Breccia MDD028 at the Charlies prospect, Molong.
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R E V I E W O F O P E RAT I O N S
TOMINGLEY GOLD PROJECT
GOLD – NEW SOUTH WALES
Alkane Exploration Ltd 100% (subject to separate royalty agreements with
Compass Resources NL, Golden Cross Operations Pty Ltd and Climax Mining Ltd)
The Tomingley Gold Project (TGP) extends over 60 kilometres from near
Parkes in the south, to north of Tomingley in the Central West of New South
Wales and covers a narrow sequence of Ordovician volcanic rocks. The
Wyoming Prospect, within the TGP, is situated about 14 kilometres north
of the Company’s Peak Hill Gold Mine and immediately north of the
historic 70,000 ounce gold producing Myalls United Mine (McPhails).
The Wyoming area forms one of a number of prospects and gold
occurrences, including Peak Hill, located along this volcanic belt. Gold
mineralisation at Wyoming has a close spatial relationship to a feldspar
porphyry which intrudes into andesitic volcaniclastic rocks near their
western contact with a more pelitic sequence. Mineralisation is associated
with extensive alteration and quartz veining of the porphyry and volcanic
rocks. Several distinct target areas have been identified to date within a
three kilometre corridor extending from McLeans in the south, through
Wyoming One to Wyoming Three in the north. A potential new deposit has
recently been discovered at Caloma which is located 500 metres east of
Wyoming Three
Much of the Wyoming area is covered by transported and unmineralised
clay sediments and this has impacted on both the exploration techniques
used to locate and define orebodies, but also on development options and
costs. This cover ranges from about 5 to 10 metres at Wyoming Three and
Caloma, to more than 60 metres over Wyoming Two. The major orebody at
Wyoming One averages 25 metres of cover.
Drilling rig at Charlies prospect, Molong.
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Since 2001 more than 125,000 metres of drilling has been completed in approximately 1,300 holes. Expenditure to date has totalled A$7.5 million, or
approximately A$12 per resource ounce defined. This level of expenditure is well inside the industry average of A$25-30 per resource ounce.
At 31 December 2006, Identified Mineral Resources stood at:
WYOMING RESOURCES (>0.75G/T AU CUT OFF)
DEPOSIT
TONNAGE
(T)
GRADE
(G/T)
TONNAGE
(T)
GRADE
(G/T)
TONNAGE
(T)
GRADE
(G/T)
TONNAGE
(T)
GRADE
(G/T)
OUNCES
MEASURED
INDICATED
INFERRED
TOTAL
Wyoming One
4,020,000
2.25
1,010,000
2.77
1,270,000
4.09
6,300,000
Wyoming Three
815,000
2.20
15,000
2.32
830,000
TOTAL
4,835,000
2.24
1,025,000
2.76
1,270,000
4.09
7,130,000
2.70
2.20
2.70
547,700
58,700
606,400
These Mineral Resources are based upon information compiled by Mr Terry Ransted MAusIMM (Principal, Multi Metal Consultants Pty Ltd) who is a competent person as defined in the 2004 Edition
of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Terry Ransted consents to the inclusion in the report of the matters based on his information in
the form and context in which it appears. The full details of methodology were given in the 2004 Annual Report.
FEASIBILITY STUDY
Feasibility studies have been ongoing since 2005 and have considered
various development scenarios, most of which involve all mining and
infrastructure to be located at the Wyoming site, about 2 kilometres south
of the Tomingley town site.
The current conceptual development consists of two open pit mines,
Wyoming One and Three, followed by an initial underground operation
focussed on Wyoming One. Gold production would be through a
conventional CIL gold recovery circuit at an open pit rate of 0.5 to 1.0
million tonnes per annum followed by an underground mine at 0.25 million
tonnes per annum. This treatment rate would recover 35,000 to 70,000
ounces of gold a year for a minimum of six years. It is anticipated that the
current feasibility study should be completed by mid 2007, leading to a
final definitive feasibility study and hopefully a development decision by
the end of the year.
Capital costs remain crucial to the financial viability of the project and the
Company has been actively reviewing available plant and equipment
throughout Australia. As the final specifications are not yet available, no
plant has been sourced to date. A 1Mtpa operation is anticipated to cost
around A$40 million.
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R E V I E W O F O P E RAT I O N S
While general industry operating costs have escalated over the last few years, the
TGP is located in an area of substantial existing infrastructure with the major
Newell Highway transecting the project, linking a number of towns with a regional
population base exceeding 150,000. No camp facilities are required and the
workforce can be sourced locally. A natural gas pipeline and railway are located
five kilometres west of Tomingley, and power is available from the New South
Wales state grid. These factors should help minimise the impact of rising costs.
Water supply remains an issue but it is thought that a pipeline could be laid from
the Macquarie River at Narromine, 40 kilometres to the north of the project site.
EXPLORATION
The TGP is considered to have substantial exploration potential and while the
immediate focus is the development of the Wyoming deposits, numerous targets
remain to be evaluated. Specifically in the Wyoming area, resource potential exists
at Caloma, Wyoming Two, McLeans and deeper underground potential below the
historic Myalls United workings.
Caloma was located early in 2006, when aircore drilling of the Patons East target
was extended to the south to test an aeromagnetic anomaly. A Wyoming style
porphyry intrusive with associated quartz veining and alteration was identified
beneath 5 metres of transported clay cover. Follow up aircore and RC drilling
tested a north-south strike length of 300 metres. Gold mineralisation was recorded
over that full 300 metre length with several lenses possible and additional drilling
is in progress to establish a resource potential. Intercepts included:
•
PE 079
3 metres grading 3.47g/t gold from 21 metres
and
12 metres grading 2.27g/t gold from 69 metres
•
•
PE 082
PE 085
11 metres grading 2.10g/t gold from 36 metres
21 metres grading 2.33g/t gold from 66 metres
including
6 metres grading 5.60g/t gold from 72 metres
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PEAK HILL GOLD MINE
The Peak Hill Gold Mine commenced operation in 1996 based upon the oxidized cap of a high sulphidation type epithermal gold system within the Ordovician
volcanic rocks. The mine ceased production in 2006 with its final gold output over the 10 year mine life totalling over 153,000 fine ounces. The operation was
an open cut mine with heap leach-dump leach gold recovery and was commissioned at a capital cost of A$5 million. The project generated A$15 million
cash flow over its life.
Final rehabilitation involving major works in reshaping, topsoiling and seeding of the heaps to create a long-term stable landform has been completed but the
office infrastructure and exploration base will remain until development of Wyoming is completed.
The significant (450,000 ounce) but moderately refractory sulphide gold-copper orebody below the oxide mine remains subject to ongoing review and will
be re-assessed following successful development of the Wyoming deposits. Several process options were previously trialled and an innovative bio-heap leach
was considered the most favourable alternative. The proximity to the town of Peak Hill houses and infrastructure however, means any mine development would
be underground.
The Peak Hill Gold Mine represented Alkane’s first substantial operating venture and it is one the Company intends to build on in the future.
As at December 31, 2006, Mineral Resources remained as:
Sulphide (Proprietary orebody only) 0.5g/t gold cut off
INDICATED RESOURCES
9.44 million tonnes
1.35g/t Au
INFERRED RESOURCES
1.83 million tonnes
0.98g/t Au
TOTAL
11.27 million tonnes
1.29g/t Au
0.11% Cu
0.10% Cu
0.11% Cu
467,570 ounces
Sulphide (Proprietary orebody only) 3.0g/t gold cut off
INFERRED RESOURCES
0.81 million tonnes
4.40g/t Au
114,000 ounces
These Mineral Resources are based upon information compiled by Mr Terry Ransted
MAusIMM (Principal, Multi Metal Consultants Pty Ltd) who is a competent person as defined
in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves. Terry Ransted consents to the inclusion in the report of the
matters based on his information in the form and context in which it appears. The full details
of methodology were given in the 2004 Annual Report.
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Peak Hill Gold Mine showing rehabilitation
of waste rock emplacement and heap leach pads.
R E V I E W O F O P E RAT I O N S
DUBBO ZIRCONIA PROJECT
ZIRCONIUM-HAFNIUM, NIOBIUM-TANTALUM, YTTRIUM-RARE EARTHS,
URANIUM – NSW
Australian Zirconia Ltd (AZL) 100%
The Dubbo Zirconia Project (DZP) is located 20 kilometres south of the
large regional centre of Dubbo, approximately 400 kilometres northwest of
Sydney in the Central West Region of New South Wales. The DZP is based
upon one of the world’s largest in-ground resources of the metals
zirconium, hafnium, niobium, tantalum, yttrium and rare earth elements.
Over several years the Company has developed a flow sheet consisting of
sulphuric acid leach followed by solvent extraction recovery and refining to
produce several products. This flow sheet has been trialled to Mini Pilot
Plant level, to recover a suite of zirconium chemicals, zirconia, a niobium-
tantalum concentrate and a yttrium-rare earth concentrate which are used
in the expanding ceramic, catalyst, electronics, engineering ceramic, and
specialty glasses and alloys industries.
The Perth based specialist zircon, titanium mineral and pigment industry
consultants, TZ Minerals International Pty Ltd, continued to provide
process and marketing advice, and project management for the DZP
feasibility studies.
In April Alkane received a Commercial Ready Grant totalling $3.29
million over a twenty seven month period. The Grant was offered on a
dollar for dollar basis to enable process optimisation, and construction and
operation of the Demonstration Pilot Plant (DPP) for the DZP. Commercial
Ready (CR) is an initiative of AusIndustry, a division of the Australian
Government’s Department of Industry, Tourism and Resources. The grants
are given to projects with a high commercial potential and are designed to
increase Australia’s sustainable economic growth by stimulating innovation
in businesses.
Process optimisation and development work commenced at the laboratory
facilities of ANSTO Minerals at Lucas Heights south of Sydney in July.
ANSTO Minerals is a business unit of the Australian Nuclear Science and
Technology Organisation and comprises a group of over 30 professional
scientists and technicians with expertise that covers chemical engineering,
metallurgy, mineralogy, chemistry, physics, applied mathematics, geology
and radiation safety.
Directors inspecting bulk sample pit for Dubbo Zirconia Project
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In the second half of 2006 ANSTO progressed with process optimisation with promising results in minimising acid consumption and improving metal
recoveries. Procurement of components for the DPP is underway and it is anticipated that construction of plant should commence shortly. The plant is
scheduled to be operated for at least six months and this could be extended to twelve months depending upon any process issues and the amount of sample
products required to be distributed to potential consumers. The feasibility database will be progressively updated to enable a development decision to be
advised by the middle of 2008.
Over the last four years markets for DZP products has continued to grow and new applications for the metals become evident. Of particular interest are the
uses of zirconium and hafnium metals in nuclear power facilities; the replacement of lead chemicals by zirconium in undercoating of all metal components of
vehicles; and the recent separate announcements by Intel and IBM on the discovery that hafnium is a key component in new generation microprocessors.
ANSTO are reviewing the process to recover separated zirconium and hafnium, and the recovery of uranium. Production of uranium remains prohibited in New
South Wales but the current flow sheet requires removal of uranium from the zirconium process stream otherwise it contaminates the end products. The
uranium recovered by this process would be stabilised and dispersed in to the residue storage facility. The Project would benefit from the flow on effect of
less residue management costs and increased revenue from the sale of a uranium product.
Identified Mineral Resources as at 31 December 2006 were:
MEASURED RESOURCES
(0-55m, 340mRL)
35.7 million tonnes
1.96% ZrO2, 0.04% HfO2, 0.46% Nb2O5, 0.03% Ta2O5,0.14% Y2O3, 0.014% U3O8 , 0.745% Total REO
INFERRED RESOURCES
(55-100m, 295mRL) 37.5 million tonnes
Similar grades
TOTAL
73.2 million tonnes
Similar grades
These Mineral Resources are based upon information compiled by Mr Terry Ransted MAusIMM (Principal, Multi Metal Consultants Pty Ltd) who is a competent person as defined in the 2004 Edition
of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Terry Ransted consents to the inclusion in the report of the matters based on his information in
the form and context in which it appears. The full details of methodology were given in the 2004 Annual Report.
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Crushing ore from bulk sample pit for the Dubbo Zirconia Project.
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R E V I E W O F O P E RAT I O N S
WELLINGTON
COPPER, GOLD – NSW
Alkane Exploration Ltd 100%
The Wellington Project is centred 15 kilometres to the southeast of the town of Wellington. The project hosts several targets, including the Federal gold and
Galwadgere copper-gold prospects. The Galwadgere deposit, which has been the focus of most of the recent exploration effort, is located adjacent to
favourable infrastructure, being three kilometres from the main Western Railway, near to power and water.
The Company carried out a drilling program in 2004-5 which has enabled an initial shallow resource to be calculated. The main zone of mineralisation
outcrops over a strike length of approximately 350 metres and is modelled over a total strike length of about 500 metres extending below Permian cover to the
north. The zone dips east at approximately 55°, plunges north at about 30° and varies in thickness from 5 to 35 metres. The mineralisation consists of
disseminated and stringer pyrite-chalcopyrite lenses within altered felsic volcanic rocks. The system is structurally overturned and appears to be capped by a
lead-zinc-silver-gold rich bedded massive sulphide with results up to 4% zinc, but to date this has rarely exceeded two to three metres in width. There is
potential for this horizon to increase in thickness to the north and down plunge.
The initial resource estimate at 0.5% copper cut off is:-
INDICATED RESOURCE
2.09 million tonnes
0.99% Cu and 0.3g/t Au
These Mineral Resources are based upon information compiled by Mr Terry Ransted MAusIMM (Principal, Multi Metal Consultants Pty Ltd) who is a competent person as defined in the 2004 Edition
of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Terry Ransted consents to the inclusion in the report of the matters based on his information in
the form and context in which it appears. The full details of methodology were given in the 2005 Annual Report
A scoping study based upon open pit mining and flotation concentration generated a positive cash flow but it was thought that a further 2 million tonnes were
required to generate a favourable return on capital. Several untested targets exist in the project area and these also have potential for copper and gold
mineralisation and an Induced Polarisation survey has been planned to test the immediate Galwadgere area for additional resources.
Galwadgere copper deposit, Wellington.
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ORANGE DISTRICT EXPLORATION JOINT VENTURE - ODEJV
GOLD, COPPER – NSW
Alkane Exploration Ltd 100%, subject to Newmont Australia Limited earning an
initial 51%
In August 2005, Alkane reached agreement with Newmont Australia Limited
(Newmont) to farmin to Alkane’s Orange Project which includes the
Molong and Moorilda tenements located near the city of Orange in the
Central West of New South Wales, adjacent to Newcrest Mining Ltd’s Cadia
Valley Operations (~30Moz total resources).
During 2006, exploration programs tested targets at Charlies, Galloway
and Borenore within the Molong tenements. Two deep diamond core
holes were drilled to follow up encouraging alteration and mineralisation
associated with monzonite type intrusives and skarn-sedimentary
replacement style mineralisation intercepted by the 2005 drilling. While no
significant grades were returned the drilling continued to confirm that the
project area still has potential to host significant gold and gold-copper
deposits.
Further modelling of the aeromagnetic data and Induced Polarisation
surveys are planned to assist with target definition.
In March 2006 a soil auger sampling program over the McPhillamys
Prospect within the Moorilda Project delineated a robust +100ppb gold
response within a 650 x 200 metres area with coincident anomalous
indicator trace elements. Reconnaissance geological mapping of this area
recorded intensely altered felsic volcanic rocks hosting iron-oxide after
sulphide, and sheeted quartz veins within the target zone.
A reconnaissance aircore drilling program of 30 holes tested part of the soil
anomaly over a 600 metre strike length. The holes intersected highly altered
volcanics with variable sulphide and quartz veining with significant gold and
base metal values. A follow up drilling program of 8 RC holes and 1 core
hole was completed with five sections tested on lines at approximately 150
metre spacing over a strike length of 600 metres. The results confirmed that
McPhillamys hosts a major mineralised system which comprises at least
two distinct gold bearing zones (Western and Eastern) which are up to 50 to
100 metres wide, are at least 400 metres in strike length, extend from the
ground surface to at least 150 metres vertical depth and are separated by a
zinc rich zone.
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RC drilling at McPhillamys, Moorilda Project.
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R E V I E W O F O P E RAT I O N S
Aircore results from the Western Gold Zone:
KP 006
including
KP 007
24 metres grading 2.03g/t gold from 4 metres
5 metres grading 5.69g/t gold from 5 metres
17 metres grading 1.50g/t gold from 32 metres (to EOH)
Diamond core hole KPD 001, drilled towards the southern end of the known mineralisation, intersected the Western Gold Zone and the Central Zinc Zone.
Results from this hole were summarised as:
KPD 001
including
also
KPD 001
including
77 metres grading 1.65g/t gold from 140 metres
13 metres grading 2.78g/t gold from 165 metres
7 metres grading 5.56g/t gold from 191 metres
31 metres grading 1.64% zinc, 12g/t silver, 0.18g/t gold from 64 metres
7 metres grading 2.49% zinc, 17g/t silver, 0.22g/t gold from 65 metres
RC holes also returned significant results from the Eastern Gold Zone:
KP 047
including
KP 048
including
and
54 metres grading 1.69g/t gold from 123 metres
20 metres grading 3.10g/t gold from 146 metres
123 metres grading 1.96g/t gold from the surface
28 metres grading 3.83g/t gold from 19 metres
12 metres grading 3.48g/t gold from 101 metres
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Air core drilling at McPhillamys Moorilda Project.
Newmont, the JV manager, have advised that their preference for 2007 was
to test several targets in the project area to add to the regional resource
inventory and build up a substantial potential resource base before drilling
out the main zone of McPhillamys. The targets include a number of
geological and geophysical features, sites of historic workings and areas
that have shown positive geochemical signatures.
The early-stage exploration targets around McPhillamys include extensions
to the McPhillamys alteration zone, where the original drilling has only
tested about 600 metres north-south strike length. The drill data suggests
that the low grade mineralised envelope remains open to the north and
south of McPhillamys and soil auger sampling has commenced to cover
this area.
While exploration of the prospect is at a very early stage, the work
completed to date at McPhillamys indicates that with the geometry of the
mineralisation and the outcrop of the gold bearing zones (no cover), the
deposit would present no apparent open pit mining impediments. It is also
apparent that with the data available, the gold and base metal rich zones
are present as distinct bodies and could be mined as separate entities.
A very preliminary metallurgical scan of a composite sample from the gold
mineralisation in core hole, KPD 001, gave a gold recovery of 87% from a
standard cyanide leach at a nominal 75 micron grind. This would suggest
that there are no refractory issues with the gold mineralisation. The
metallurgical characteristics of the base metal mineralisation are still to be
assessed.
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R E V I E W O F O P E RAT I O N S
At McPhillamys East, which is about 1 kilometre to the east of the main
LEINSTER REGION JOINT VENTURE
zone, the limited 2006 drilling demonstrated the McPhillamys style
alteration and mineralisation extended over a north-south strike length of
1.5 kilometres. Soil sampling to cover this in underway and has also
NICKEL, GOLD – WA
Alkane Exploration Ltd 25%, Jubilee Mines NL 75%
commenced at the Grahams Prospect, located 4.5 kilometres to the
During the year Jubilee advised that they had reached the expenditure
northwest, to cover a geophysical anomaly.
The historic Confidence Mine is 5 kilometres east of McPhillamys and
required to achieve a 75% interest in the three prospects – LEINSTER
DOWNS, MIRANDA and McDONOUGH LOOKOUT.
limited exploration in the 1980’s generated several intersections including
Jubilee completed aircore drilling, surface EM surveys, geochemical soil
7 metres at 2.85g/t gold. Regionally there is a 20 kilometre structural
sampling and diamond drilling. This work included a re-interpretation of
corridor with scattered historical gold workings running down the centre of
the local geology at the Miranda Project based on the aircore drilling
the project. The exploration effort in this area is minimal with the most
information, generation of a number of targets for both nickel and gold
serious being prospecting activities in the 1880’s and 1890’s.
based on drilling and surface geochemical sampling, and evaluation of the
The Moorilda Complex (15 kilometres south of McPhillamys) is a Cadia
moving loop electromagnetic (MLEM) survey.
Ridgeway-style monzonite intrusive complex where previous drilling has
A program of 249 aircore drill holes was completed at Miranda designed
intersected 19 metres at 1.23 g/t gold and 0.2% copper. Soil geochemistry
to define bedrock stratigraphy and regolith geochemistry. The aircore
and modelling of aeromagnetic data has defined a number of targets in this
traverses intersected several cumulate ultramafic horizons, felsic volcanics,
basalts, dolerites and graphitic metasedimentary schists. Traces of
weathered disseminated and stringer sulphides were viewed in samples
from a number of ultramafic hosts.
The most anomalous nickel results, including MAC149 18 metres at
0.54% nickel and 5 metres at 0.58% nickel, were returned from the
Taurus North prospect and are interpreted to be associated with a basal
contact position. Follow-up drilling is required to effectively test this new
target.
Assessment of the surface geochemical results has identified 20 nickel and
14 gold anomalies. These anomalies require further integration with
drilling, magnetics, and EM along with field inspection to place them into a
geological context and assign a priority.
area.
Reconnaissance Induced Polarisation surveys are planned for several target
areas prior to drill testing.
BODANGORA AND CUDAL
GOLD, COPPER – NSW
Alkane Exploration Ltd 100% (subject to 2%NSR and buy back option to Rio Tinto
Exploration Pty Limited)
Data review and ground reconnaissance continued on both projects. At
Cudal a soil sampling program tested several areas. The best results were
returned from the Bowan Park area where the sampling infilled and
extended soil coverage from previous surveys. This target is now defined
by a +50ppb gold anomaly over a 300 metre in strike, with a maximum of
700ppb gold. The anomaly covers the mineralised contact of a micro-
syenite intrusive where rock chip sampling from the same area returned
values to 1g/t gold & 0.17% copper.
Both projects are considered to have potential for monzonite porphyry
associated gold – copper and structural gold mineralisation. RC drilling
was originally scheduled to test the Bowan Park target late in the year but
lack of available drill rigs caused this program to be moved to 2007.
14
NULLAGINE
IRON, DIAMONDS, GOLD – WA
Alkane Exploration Ltd - 60% Randolph Syndicate 40%
The Project is made up of three prospect areas each comprising
palaeochannels with infill material which is highly prospective for CID.
Previous work in the region by Alkane concentrated on diamond exploration
between 1992 and 1998. The programs focused on existing and palaeo-
In October, Alkane and the Randolph Syndicate reached agreement with
river systems using airphoto and satellite image interpretation, stream
Consolidated Minerals Limited (CSM) to jointly float a new company, BC
sediment sampling, detailed and reconnaissance mapping, and
Iron Limited (BCI), to acquire 100% of all minerals within 14 exploration
stratigraphic drilling of the channels. Based on the detailed mapping, the
licences in the East Pilbara region of Western Australia. The BCI agreement
drilling intersections and a standard specific gravity of 2.6 tonnes per
excludes diamonds and an option granted to Vaalbara Resources Pty Ltd to
cubic metre, BCI determined that a potential for 40 million tonnes per
acquire an 80% interest in gold, silver and uranium and Witwatersrand style
vertical metre of iron rich pisolitic material may exist within the main
mineralisation in the three Alkane-Randolph tenements (EL’s 46/522-524).
Bonnie Creek palaeochannel system. This provides an exploration target of
The combined tenements cover approximately 1500km2 and include a
number of Tertiary aged palaeochannel systems which host extensive
outcrops of iron rich pisolitic accumulations with similarity to the Channel
between 200 million tonnes (5m thick) and 600 million tonnes (15m
thick) of iron rich channel deposit within this system. Other, but smaller,
potential exists within the nearby Shaw River and Nullagine River systems.
Iron Deposits (CID) currently being mined at Robe River in the west
BCI successfully listed on the ASX on 15 December and plans a major RC
Hamersley Range.
The project is centred about 200 kilometres southeast of Port Hedland and
100 kilometres north of Newman. The nearest existing significant
drilling program to be scheduled as soon as practical to complete an initial
assessment of the systems. This program should enable BC Iron to focus
on the areas with potential to achieve the goal of identifying significant
infrastructure is the Newman to Port Hedland (BHPBilliton) iron ore railway
tonnages of direct shipping quality product.
which is located 50 to 100 kilometres to the west. The Fortescue Metals
Group Cloud Break and Christmas Creek iron deposits and their proposed
rail link to Port Hedland, are located 20 to 30 kilometres to the south.
Unless otherwise stated this report is based on information compiled by Mr D I Chalmers,
FAusIMM, FAIG, (director of the Company) who has sufficient experience which is relevant to
the style of mineralisation and type of deposit under consideration and to the activity which he
is undertaking to qualify as Competent Person as defined in the 2004 Edition of the
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.
Ian Chalmers consents to the inclusion in the report of the matters based on his information
in the form and context in which it appears.
Blotched Blue-Tongued lizard at the Confidence Mine, Moorilda Project.
15
A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
6
R E V I E W O F O P E RAT I O N S
ENVIRONMENTAL AND OCCUPATIONAL HEALTH AND SAFETY REVIEW
Alkane is committed in all its activities to compliance with all laws and regulations in relation to environment and occupational health and safety. The
Company strives to improve its standards in parallel with industry best practice for both the Peak Hill Gold Mine operations and exploration.
PEAK HILL GOLD MINE
Occupational Health and Safety
The number of personnel employed at the Peak Hill Gold Mine has contracted with mine closure. Exploration personnel continue to access the Peak Hill Gold
Mine facilities to support their activities on the Tomingley Gold Project 15km to the north of Peak Hill.
There were no lost time injuries in 2006.
OH&S Results 2006
2004
MINOR
LTIS
0
0
0
0
MAN HRS
17,241
80
17,321
INJURIES
MAN HRS
2
0
0
2
11,440
5,560
17,000
2005
MINOR
LTIS
0
0
0
0
INJURIES
MAN HRS
2006
MINOR
LTIS
INJURIES
2
0
0
2
10,800
0
0
10,800
0
0
0
0
0
0
0
0
Alkane
Contractors
Visitors
Total
ENVIRONMENTAL MANAGEMENT IN 2006
There are currently in place 19 Approvals and Licences for the mining and processing operation, access to water and for pipeline routes.
During 2006, the mine was in compliance with all consent conditions and approvals.
There were no complaints received by the Company in 2006.
The Open Cut Experience (tourist mine) was open for self-guided tours during the school holiday periods (excluding summer) and hosted several guided
school excursion groups during the year.
The Peak Hill Gold Mine, fundamentally on care and maintenance, is still a contributor to the local economy and community. The mine employed on average
two personnel in 2006. Three local organizations and charities were assisted by the Peak Hill Gold Mine in 2006.
The area of the open cuts and haul roads, including the Open Cut Experience tourist attraction, has reached the status of final rehabilitation and has been
“signed off” by the regulatory authorities.
Wet plant decommissioning continued through 2006.
Alkane reviewed the Security Deposit calculations for the Peak Hill Gold Mine given that 80% of the minesite has been rehabilitated to final land form. It is
anticipated that the Department of Primary Industries will release a significant proportion of the Security Deposit in 2007.
16
A L K A N E E X P L O R A T I O N L T D
F I N A N C I A L S T A T E M E N T S
This financial report covers both Alkane Exploration Ltd as an individual entity
and the consolidated entity consisting of Alkane Exploration Ltd and its subsidiaries.
The financial report is presented in the Australian currency.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
6
17
D I R E C T O R S ’ R E P O RT
The directors present their report on the consolidated entity consisting of Alkane Exploration Ltd (ACN 000 689 216) and the entities it controlled at the end
of, or during, the year ended 31 December 2006.
DIRECTORS
The following persons were directors of Alkane Exploration Ltd during the whole year and up to the date of this report:
•
•
•
•
•
•
•
J S F Dunlop (Chairman)
(appointed 4 July 2006)
D I Chalmers
I R Cornelius
L A Colless
I J Gandel
A D Lethlean
H D Kennedy
(resigned as Chairman 4 July 2006, continuing as director)
(resigned 25 July 2006)
(appointed 25 July 2006)
(resigned 31 July 2006)
(appointed alternate director for Mr Cornelius on 31 July 2006 resigned 5 December 2006)
PRINCIPAL ACTIVITIES
The principal activities of the Company during the course of the financial year were mining and exploration for gold, and other minerals and metals. There has
been no significant change in the nature of these activities during the financial year.
RESULTS
The net amount of consolidated loss of the economic entity for the financial year after income tax was $3,655,095 (2005 loss $1,772,472).
DIVIDENDS
No dividends have been paid by the Company during the financial year ended 31 December 2006, nor have the directors recommended that any dividends be
paid.
REVIEW OF OPERATIONS
The Company continues to advance its core projects at Tomingley and Dubbo in New South Wales (NSW), where feasibility studies are in progress for the
development of the 600,000 ounce Wyoming gold deposit and the strategically important Dubbo Zirconia Project (DZP) respectively. Further drilling is
scheduled at Wyoming to attempt to define additional open pitable ore in proximity to the planned development, while optimisation of the existing resource
model is continuing.
Following receipt of a Commercial Ready Grant from AusIndustry for the DZP, a program of process optimisation commenced at the ANSTO facilities located at
Lucas Heights near Sydney. This program should lead to construction and operation of a Demonstration Pilot Plant later in 2007 and hopefully a completed
feasibility study in 2008.
Work also continues on the Orange District Exploration Joint Venture with Newmont Australia where a significant gold discovery was made during the year, and
on advancing the copper sulphide deposit at Wellington in NSW. The Nullagine channel iron deposits were floated into BC Iron Ltd.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
The state of affairs of the Company was not affected by any significant changes during the year.
EVENTS SUBSEQUENT TO BALANCE DATE
On 19 April 2007, the Company is scheduled to hold a shareholders’ meeting to approve the issue of options to employees and consultants and to directors
of the Company. No other matter or circumstance has arisen since 31 December 2006 that has or may significantly affect the operations of the Company, the
results of the Company, or the state of affairs of the Company in the financial year subsequent to the financial year ended 31 December 2006.
18
LIKELY DEVELOPMENTS
The Company intends to continue exploration on its existing tenements, to acquire further tenements for exploration of all minerals, to seek other areas of
investment in the resources industry and to develop the resources on its tenements.
ENVIRONMENTAL REGULATION
The consolidated entity is subject to significant environmental regulation in respect of its development, construction and mining activities as set out below.
MINING
During the year there were no breaches of the requirements relating to certain environmental restrictions at the Company’s mine site at Peak Hill, NSW.
Management is constantly working with the New South Wales Environment Protection Authority to ensure compliance with the regulatory requirements. The
Company employs a full time environmental manager.
EXPLORATION
The Company is subject to environmental controls and restrictions on all its mineral exploration tenements relating to any exploration activity on those
tenements. No breaches of any environmental restrictions were recorded during the year.
GENERAL
The consolidated entity aspires to the highest standards of environmental management and insists its entire staff and contractors maintain that standard.
PARTICULARS OF DIRECTORS
JOHN STUART FERGUSON DUNLOP (Non-Executive Chairman)
BE(Min), MEng Sc(Min), FAusIMM(CP), FIMM, MAIME, MCIMM
Mr Dunlop (56) is a consultant mining engineer with over 36 years surface and underground mining experience both in Australia and overseas. He is a former
director of the Australian Institute of Mining and Metallurgy (2001 - 2006) and is currently Chairman of its affiliate, the Mineral Industry Consultants
Association. John is Chairman of Alliance Resources Ltd and non-executive director of Gippsland Ltd. Former public company directorships in the last three
years: Encore Metals NL (November 1999 to November 2006).
Mr Dunlop is a member of the Audit Committee.
DAVID IAN (IAN) CHALMERS (Managing Director)
MSc, FAusIMM, FAIG, FIMMM, FSEG, MSGA, MGSA, FAICD
Mr Chalmers (58) is a geologist and graduate of the Western Australian Institute of Technology (Curtin University) and has a Master of Science degree from
the University of Leicester in the United Kingdom. He has worked in the mining and exploration industry for over 37 years, during which time he has had
experience in all facets of exploration through feasibility and development to the production phase.
Mr Chalmers is currently a principal in Multi Metal Consultants Pty Ltd and is also a non-executive director of Northern Star Resources Ltd. Former
directorships held in the last three years are: AuDAX Resources Ltd (October 1993 to February 2007).
IAN RAYMOND (INKY) CORNELIUS (Non-executive Director)
FAICD
Mr Cornelius (66) has had over 40 years experience in the minerals and petroleum industry. He spent the first nine years of his career with the Western
Australian Department of Mines before leaving to manage his own tenement consulting business. Since 1976 he has held senior executive positions in a
number of public exploration and mining companies. In this capacity he has had extensive experience and success in the selection, management and
development of deposits of many commodities.
Mr Cornelius is a non-executive director of Pancontinental Oil & Gas NL, Montezuma Mining Company Ltd and New World Alloys Ltd.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
6
19
D I R E C T O R S ’ R E P O RT
IAN JEFFREY GANDEL (Non-executive Director)
LLB, BEc, FCPA, FAICD
Mr Gandel (49) is a successful Melbourne businessman with extensive experience in retail management and retail property. He has been a director of the
Gandel Retail Trust and has had an involvement in the construction and leasing of Gandel shopping centres. Through his private investment vehicles,
Mr Gandel has been an investor in the mining industry since 1994. Gandel Metals Pty Ltd is currently a substantial holder in a number of publicly listed
Australian companies and now holds and explores tenements in its own right in Victoria and Western Australia. Ian is also a non-executive director of Alliance
Resources Ltd.
Mr Gandel is a member of the audit committee.
ANTHONY DEAN LETHLEAN (Non-executive Director)
BAppSc(geology)
Mr Lethlean (43), is a geologist with 10 years mining experience including 4 years underground on the Golden Mile in Kalgoorlie. In later years Mr Lethlean
has been working as a resources analyst with various stockbrokers and currently consults to Cartesian Capital Pty Ltd. Mr Lethlean is a non-executive director
of Alliance Resources Ltd.
Mr Lethlean is Chairman of the audit committee.
COMPANY SECRETARY
LINDSAY ARTHUR COLLESS
CA, JP (NSW), FAICD
Mr Colless (61) is a member of the Institute of Chartered Accountants in Australia with 15 years experience in the profession and a further 27 years
experience in Commerce, mainly in the mineral and petroleum exploration industry in the capacities of financial controller, company secretary and director.
He is a director and/or secretary of a number of public listed companies.
DIRECTORS' INTERESTS
Details of each director’s relevant interest in shares and rights or options of the Company as at the date of this report are:
NAME OF DIRECTOR
J S F Dunlop
D I Chalmers
I R Cornelius
I J Gandel
A D Lethlean
FULLY PAID ORDINARY SHARES
DIRECT
NUMBER HELD
INDIRECT
NUMBER HELD
-
3,780
7,875
-
-
-
805,958
1,291,500
34,245,674
-
OPTIONS
INDIRECT
NUMBER HELD
-
1,000,000
1,000,000
-
250,000
750,000
OPTION EXERCISE
CONDITIONS
-
60c - 24 May 2007
60c - 24 May 2007
40c - 24 May 2007
60c - 24 May 2007
No options were granted to directors during the financial year or since the end of the year.
NOMINATION COMMITTEE
The Nomination Committee comprises the full Board.
20
DIRECTORS' MEETINGS
The following sets out the number of meetings of the Company's directors held during the year ended 31 December 2006 and the number of meetings
attended by each director.
There were fifteen (15) Director’s Meetings, two (2) Audit, four (4) Nomination and three (3) Remuneration Committee Meetings held during the financial year.
The number of meetings attended by each director during the year (while they were a director or committee member) is as follows:
DIRECTOR
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
BOARD OF DIRECTORS
AUDIT
COMMITTEE MEETINGS
NOMINATION
REMUNERATION
J S F Dunlop
D I Chalmers
I R Cornelius
I J Gandel
A D Lethlean
H D Kennedy
L A Colless
10
15
15
8
15
7
7
10
15
15
8
14
6
7
1
N/A
N/A
1
2
1
1
N/A
N/A
1
2
1
N/A
N/A
2
4
4
1
4
3
3
2
4
4
1
3
3
3
2
3
3
1
3
2
2
2
3
3
1
2
2
2
REMUNERATION REPORT
The information provided within this remuneration report includes remuneration disclosures that are required under Accounting Standard AASB 124 ‘Related
Party Disclosures’. These disclosures have been transferred from the financial report and have been audited.
All remuneration of directors is further disclosed in Note 13 in the Notes to the Financial Statements.
A. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION
The objective of the Company's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The
framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms to market best practice
for delivery of reward.
The Board ensures that executive reward satisfies the following key criteria for good reward corporate governance practices:
•
•
•
•
•
competitiveness and reasonableness
acceptability to shareholders
performance linkage/alignment of executive compensation
transparency
capital management
The Company has structured an executive remuneration framework that is market competitive and complementary to the reward strategy for the organisation.
Non-executive directors
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors' fees
and payments are reviewed annually by the Board. The Chairman's fees are determined independently to the fees of non-executive directors based on
comparative roles in the external market. The Chairman is not present at any discussions relating to determination of his own remuneration.
Directors fees
Directors' fees are determined within an aggregate directors' fee pool limit, which is periodically recommended for approval by shareholders. This amount is
separate from any specific tasks the directors may take on for the Company. For example, Multi Metal Consultants Pty Ltd of which Messrs Chalmers is a
principal, provides some administration services for the Company, separate from his task as an executive Director.
The Company has no performance based remuneration component built into director and executive remuneration packages.
Other than the managing director, there are no other executive officers or senior managers of the Company or Group.
21
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U
A
L
R
E
P
O
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T
2
0
0
6
D I R E C T O R S ’ R E P O RT
The names of Directors who have held office during the financial year are:
Alkane Exploration Ltd
John S F Dunlop (appointed 4 July 2006), D Ian Chalmers, Ian R Cornelius, Ian J Gandel (appointed 25 July 2006), Anthony D Lethlean, H David Kennedy
(resigned 31 July 2006) and Lindsay A Colless (resigned 25 July 2006)
Subsidiaries
LFB Resources NL, Kiwi Australian Resources Pty Ltd, Australasian Geo-Data Pty Ltd, Australian Zirconia Ltd
I R Cornelius, D I Chalmers, L A Colless
Skyray Properties Ltd (BVI)
L Thomas
Executives during year
Ian R Cornelius, member of the Executive Management Committee until his resignation as Executive Chairman on 4 July 2006.
D Ian Chalmers, member of the Executive Management Committee, appointed as Managing Director on 6 October 2006.
Lindsay A Colless, member of the Executive Management Committee until his resignation as a director on 25 July 2006.
There were no other executive officers during the year.
B. DETAILS OF REMUNERATION
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
Total income received, or due and
receivable by the directors
993,384
978,787
881,247
866,394
The details of directors’ remunerations paid or payable or payments to related companies for services provided are as follows:
SHORT-TERM BENEFITS
POST-EMPLOYMENT BENEFITS
TOTAL
DIRECTORS’
PER DIEM
CASH FEES / RETAINER
CASH FEES
SUPERANNUATION
$
$
$
OTHER
$
15,000
-
-
521,662 (a)
75,000 (c)
92,475 (f)
25,000
20,000
16,667
37,200
26,667 (e)
-
7,288 (b)
1,200 (c)
-
20,100 (d)
-
55,125 (f)
-
-
-
-
-
-
-
-
-
-
80,000 (c)
-
-
-
-
-
-
-
$
536,662
155,000
92,475
32,288
21,200
16,667
57,300
26,667
55,125
2006 YEAR
NAME
Executive Directors
D I Chalmers
I R Cornelius
L A Colless
Non-executive Directors
J S F Dunlop
I R Cornelius
I J Gandel
A D Lethlean
H D Kennedy
L A Colless
22
a)
b)
c)
d)
e)
f)
technical services, geological consulting and management fees of $521,662 paid or due and payable to companies in which Mr Chalmers has a
substantial financial interest for services provided in the normal course of business and at normal commercial rates. During the year, five technical and
support staff, including Mr Chalmers, were employed to carry out work programs for Alkane on an as needs basis.
consulting fees of $7,288 (2005 $nil) paid or due and payable to John S Dunlop & Associated Pty Ltd for services provided in the normal course of
business and at normal commercial rates.
consulting fees of $76,200 ($75,000 + $1,200) paid or due and payable to Goldtrek Pty Ltd as trustee for the Lewis Trust of which Mr Cornelius is a
beneficiary for services provided in the normal course of business and at normal commercial rates. A one off fee, on termination as Executive Chairman,
of $80,000 in appreciation of Mr Cornelius’s long period of service in that role.
amounts of $20,100 paid or due and payable to Rocky Rises Pty Ltd, a company in which Mr Lethlean has a substantial financial interest, for consulting
services provided in the normal course of business and at normal commercial rates.
amounts of $26,667 paid or due and payable to a company in which Mr Kennedy has a substantial financial interest for directors’ fees.
administration, accounting and secretarial fees of $147,600 ($92,475+$55,125) paid or due and payable to a company in which Mr Colless has a
substantial financial interest for services provided in the normal course of business and at normal commercial rates.
2005 YEAR
NAME
Executive Committee
I R Cornelius
D I Chalmers
L A Colless
Non-executive Directors
A D Lethlean
H D Kennedy
C. SERVICE AGREEMENTS
SHORT-TERM BENEFITS
POST-EMPLOYMENT BENEFITS
TOTAL
DIRECTORS’
PER DIEM
CASH FEES / RETAINER
CASH FEES
SUPERANNUATION
$
-
-
-
-
40,000
$
$
150,000
540,387
169,200
79,200
-
-
-
-
-
-
OTHER
$
-
$
150,000
540,387
169,200
79,200
40,000
Formal written consultancy agreements exist with companies of which directors have a substantial financial interest as detailed below.
No performance related bonuses or benefits are provided.
J S F Dunlop
Retainer payable to John S Dunlop & Associates Pty Ltd, in which Mr Dunlop has a substantial financial interest, of $50,000 per annum plus per diem of
$1,200 per day up to 4 days per month for consulting services over and above normal director duties.
D I Chalmers
Managing director retainer of $60,000 per annum payable to Leefab Pty Ltd in which Mr Chalmers has a substantial financial interest pursuant to a formal
agreement for an initial term of two years commencing 1 October 2006.
Geological consulting and management services provided by Multi Metal Consultants Pty Ltd in which Mr Chalmers has a substantial financial interest
pursuant to a formal agreement for an initial term of two years commencing 1 October 2006.
I R Cornelius
Retainer payable to Goldtrek Pty Ltd as trustee for the Lewis Trust, of which Mr Cornelius is a beneficiary, of $40,000 per annum plus per diem of $1,200 per
day up to 4 days per month for consulting services over and above normal director duties.
I J Gandel
Retainer payable to Gandel Metals Pty Ltd in which Mr Gandel has a substantial financial interest of $40,000 per annum plus per diem of $1,200 per day up
to 4 days per month for consulting services over and above normal director duties.
23
A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
6
D I R E C T O R S ’ R E P O RT
A D Lethlean
Retainer payable to Rocky Rises Pty Ltd, in which Mr Lethlean has a substantial financial interest, of $40,000 per annum plus per diem of $1,200 per day up
to 4 days per month for consulting services over and above normal director duties.
D. SHARE-BASED PAYMENTS
No share based remuneration compensation plan exists.
DIRECTORS' INDEMNITIES
During the financial year, Alkane Exploration Ltd incurred premiums to insure the directors and secretary of the Company and its Australian based controlled
entities. The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers
in their capacity as officers of entities in the controlled entity.
CORPORATE GOVERNANCE
The Company strives to comply with the ASX Principles of Good Corporate Governance and Best Practice Recommendations and is dealt with in the
Supplementary Information section of the Annual Report.
AUDITORS' INDEPENDENCE -SECTION 307C
The following is a copy of a letter received from the Company's auditors:
"Dear Sirs,
In accordance with Section 307C of the Corporations Act 2001 (the "Act") I hereby declare that to the best of my knowledge and belief there
have been:
i)
no contraventions of the auditor independence requirements of the Act in relation to the audit of the 31 December 2006 annual financial
statements; and
ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
Frank Vrachas (Lead auditor)
Rothsay Chartered Accountants”
NON-AUDIT SERVICES
The board of directors has considered the position and, in accordance with the advice received from the audit committee is satisfied that the provision of non-
audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the
provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for
the following reasons:
• all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor
• none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for
Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including acting in a management or a decision-making
capacity for the Company or acting as advocate for the Company.
24
CONSOLIDATED
2006
$
2005
$
27,000
29,700
6,000
5,000
The following amounts were paid to the auditors
Auditors' remuneration
-
auditing the accounts
Non-Audit Services
-
taxation services
SHARE OPTIONS
Options to take up ordinary shares in the capital of Alkane Exploration Ltd have been granted as follows:
Outstanding as at the date of this report:
The following options are exercisable at 40 cents each on or before 24 May 2007
T W & J Ransted
Rocky Rises Pty Ltd
The following are exercisable at 60 cents on or before 24 May 2007
Leefab Pty Ltd
Mineral Administration Services Pty Ltd
Goldtrek Pty Ltd
Sundowner International Limited
Rocky Rises Pty Ltd
The following options are exercisable at 45 cents each on or before 29 May 2008
GR Meates & Associates Pty Ltd
S Allison
M & K Sutherland
G Morgan
M Morgan
Smiff Pty Ltd
Locksley Holdings Pty Ltd
D Meates
D Moyses
250,000
250,000
1,000,000
1,000,000
1,000,000
1,000,000
750,000
250,000
150,000
150,000
50,000
25,000
150,000
100,000
50,000
50,000
None of the existing options are listed on Australian Stock Exchange Limited. No person entitled to exercise any option has or had, by virtue of the option, a
right to participate in any share issue of any other body corporate.
Signed in accordance with a resolution of the Directors.
D I Chalmers
Director
Dated at Perth this 29th day of March 2007
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I N C O M E S TAT E M E N T
FOR THE YEAR ENDED 31 DECEMBER 2006
NOTE
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
Revenue from continuing operations
Rent received
Gold sales
Silver sales
Revenue from sale of assets
Revenue from sale of shares
Interest received or due and receivable from other corporations
Government grant
Other revenue
Expenses from continuing operations
Rent
Filing fees
Annual reports
Directors' consulting
Consulting, administration and secretarial
Public relations
Travel, entertainment & seminars
Insurances
Directors fees
Provision for subsidiaries
Costs of Open Cut Experience
Administration expenses
Audit fees
Auditor - other services
Depreciation and amortisation
Cost of quoted shares sold
Gold production, mine closure, site maintenance and rehabilitation costs
Cost of assets sold
Exploration costs
Provision for quoted shares written back
Quoted shares written down
Deconsolidation of subsidiary
Loss before income tax
Income tax attributable
Loss for the year
Loss attributable to minority interests
Loss attributable to members of Alkane Exploration Ltd
Accumulated losses at beginning of financial year
Accumulated losses at end of financial year
Earnings per share for loss attributable to the
ordinary equity holders of the Company:
2
16
20
55,010
229,987
-
800
-
192,748
451,511
176,839
1,106,895
(51,390)
(28,998)
(30,426)
(297,455)
(226,347)
(93,369)
(73,131)
(35,621)
(26,667)
-
(23,608)
(117,391)
(27,000)
(6,000)
(18,964)
-
(472,733)
(3,815)
(3,227,125)
-
(1,950)
-
(4,761,990)
(3,655,095)
-
(3,655,095)
55
(3,655,040)
(21,717,702)
(25,372,742)
25,088
551,872
-
182,082
2,659
132,117
-
86,121
979,939
(40,901)
(26,230)
(31,959)
(229,200)
(182,315)
(70,013)
(231,868)
(40,391)
(40,000)
-
(55,857)
(180,436)
(29,700)
(5,000)
14,368
-
(1,025,312)
(310,000)
(355,059)
71,887
-
15,575
(2,752,411)
(1,772,472)
-
(1,772,472)
75
(1,772,397)
(19,945,305)
(21,717,702)
55,010
229,987
-
800
-
188,932
451,511
176,839
1,103,079
(47,754)
(18,621)
(30,426)
(297,455)
(184,347)
(93,369)
(73,131)
(35,189)
(26,667)
(2,878,619)
(23,608)
(121,589)
(27,000)
(6,000)
(18,793)
-
(472,733)
(3,815)
(391,767)
-
(1,950)
-
(4,752,833)
(3,649,754)
-
(3,649,754)
-
(3,649,754)
(21,605,207)
(25,254,961)
25,088
551,872
-
182,082
2,659
128,273
-
86,121
976,095
(40,901)
(16,055)
(31,959)
(229,200)
(140,315)
(70,013)
(231,658)
(40,391)
(40,000)
(38,808)
(55,857)
(177,425)
(29,700)
(3,000)
15,564
-
(1,025,312)
(310,000)
(301,369)
71,887
-
-
(2,694,512)
(1,718,417)
-
(1,718,417)
-
(1,718,417)
(19,886,790)
(21,605,207)
($0.02)
($0.01)
($0.02)
($0.01)
The above income statement should be read in conjunction with the accompanying notes.
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B A LA N C E S H E E T
AS AT 31 DECEMBER 2006
Current Assets
Cash and cash equivalent
Receivables
Available for sale financial assets
Other financial assets
Total Current Assets
Non-Current Assets
Available for sale financial assets
Held-to-Maturity Investments
Property, Plant & Equipment
Capitalised Exploration and Evaluation Expenditure
Total Non-Current Assets
Total Assets
Current Liabilities
Payables
Provisions
Total Current Liabilities
Non-Current Liabilities
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Accumulated losses
NOTE
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
17
3
4
5
6
7
8
9
10
11
11
12
4,754,600
456,397
2,400
1,233,996
6,447,393
9,000
-
791,876
14,538,922
15,339,798
21,787,191
570,016
27,632
597,648
117,902
117,902
715,550
2,773,734
226,353
4,350
747,050
3,751,487
-
-
761,447
15,970,761
16,732,208
20,483,695
603,316
30,488
633,804
184,977
184,977
818,781
4,742,765
448,827
2,400
1,133,562
6,327,554
9,000
5,724,149
670,885
9,010,199
15,414,233
21,741,787
524,564
27,632
552,196
117,902
117,902
670,098
2,765,926
201,243
4,350
645,675
3,617,194
-
7,899,669
656,649
8,255,599
16,811,917
20,429,111
554,025
30,488
584,513
184,977
184,977
769,490
21,071,641
19,664,914
21,071,689
19,659,621
46,326,650
(25,372,742)
41,264,828
(21,717,702)
46,326,650
(25,254,961)
41,264,828
(21,605,207)
Total parent entity interest
Outside equity interests in controlled entities
Total Equity
20,953,908
117,733
21,071,641
19,547,126
117,788
19,664,914
21,071,689
-
21,071,689
19,659,621
-
19,659,621
The above balance sheet should be read in conjunction with the accompanying notes.
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S TAT E M E N T O F C H A N G E S I N E Q U I T Y
FOR THE YEAR ENDED 31 DECEMBER 2006
NOTE
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
Total equity at the beginning of the financial year
19,664,914
16,566,091
19,659,621
16,506,743
Loss for the year
Total recognised income and expense for the year
(3,655,095)
(3,655,095)
(1,772,472)
(1,772,472)
(3,649,754)
(3,649,754)
(1,718,417)
(1,718,417)
Transactions with equity holders in their capacity as equity holders:
Options exercised
Share placement (net of costs)
-
5,061,822
5,061,822
8,003
4,863,292
4,871,295
-
5,061,822
5,061,822
8,003
4,863,292
4,871,295
Total equity at the end of the financial year
21,071,641
19,664,914
21,071,689
19,659,621
Total recognised income and expense for the year is attributable to:
Members of Alkane Exploration Ltd
Minority interests
(3,655,040)
(55)
(3,655,095)
(1,772,397)
(75)
(1,772,472)
(3,649,754)
-
(3,649,754)
(1,718,417)
-
(1,718,417)
The above statement of changes in equity should be read in conjunction with the accompanying notes.
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CAS H F LO W S TAT E M E N T
FOR THE YEAR ENDED 31 DECEMBER 2006
NOTE
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
Cash Flows from Operating Activities
Rent received
Proceeds from gold & silver sales
Payments to suppliers (inclusive of goods and services tax)
Other income
Interest received
Goods and services tax receipts
55,010
229,987
(1,802,197)
107,708
192,748
479,479
25,088
596,652
(2,309,180)
321,464
132,117
120,923
55,010
229,987
(1,747,644)
107,708
188,932
463,475
25,088
596,652
(2,324,733)
321,464
128,273
114,586
Net cash from operating activities
18
(737,265)
(1,112,936)
(702,532)
(1,138,670)
Cash Flows from Investing Activities
Proceeds of sale of plant, property & equipment
Purchase of plant, property & equipment
Proceeds from sale of investment securities
Payments for investment securities
Payments for loans to subsidiaries
Proceeds from sale of investments
Loss of cash from deconsolidation
Proceeds from security deposits
Payments for security deposits
Mine site rehabilitation expenditure
Exploration expenditure
800
(53,262)
-
(9,000)
-
-
-
-
(486,945)
-
(1,795,284)
10,000
(23,203)
161,464
-
-
150,000
(571)
390,723
-
(325,000)
(1,904,491)
800
(36,898)
-
(9,000)
(703,100)
-
-
-
(487,886)
-
(1,146,367)
10,000
(3,203)
161,464
-
(129,926)
150,000
-
394,547
-
(325,000)
(1,768,723)
Net cash provided for investing activities
(2,343,691)
(1,541,078)
(2,382,451)
(1,510,841)
Cash Flows from Financing Activities
Proceeds from issue of shares and options
Cost of share issues
5,186,595
(124,773)
5,116,463
(245,168)
5,186,595
(124,773)
5,116,463
(245,168)
Net cash flow from financing activities
5,061,822
4,871,295
5,061,822
4,871,295
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
17
1,980,866
2,773,734
4,754,600
2,217,281
556,453
2,773,734
1,976,839
2,765,926
4,742,765
2,221,784
544,142
2,765,926
The accompanying notes form part of these financial statements
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N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
FOR THE YEAR ENDED 31 DECEMBER 2006
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial report are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial
statements for Alkane Exploration Ltd (“the Company”) as an individual entity and the consolidated entity consisting of Alkane Exploration Ltd and its
subsidiaries.
a)
BASIS OF PREPARATION
This general purpose financial report has been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and
Interpretations and complies with other requirements of the law.
All amounts are presented in Australian dollars, unless otherwise noted.
Compliance with IFRSs
Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (IFRSs). Compliance with AIFRSs ensures
that the consolidated financial statements and notes of Alkane Exploration Ltd comply with IFRSs.
Historical cost convention
These financial statements have been prepared under the historical cost. Cost is based on the fair values of the consideration given in exchange for
assets.
b)
CONSOLIDATION
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Alkane Exploration Ltd ("the Company") as at 31
December 2006 and the results of all controlled entities for the year then ended. Control is achieved where the Company has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. Alkane Exploration Ltd and its controlled entities are referred to in
this financial report as the Group or the consolidated entity.
The effects of all intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated in full.
Outside equity interests in the results and equity of controlled entities are shown separately in the consolidated profit and loss account and balance
sheet respectively.
Where control of an entity is obtained during a financial year, its results are included in the consolidated profit and loss account from the date on which
control commences. Where control of an entity ceases during a financial year its results are included for that part of the year during which control exists.
c)
INCOME TAX
The income tax expense or revenue for the year is the tax payable on the current year’s taxable income based on the national income tax rate, adjusted
by changes in deferred tax assets and liabilities attributable to temporary differences between tax bases of assets and liabilities and their carrying
amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities
are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative
amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary
differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary
differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or
taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be
available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax
balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and
intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
30
d)
GOODS AND SERVICES TAX (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
•
•
where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as
part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Balance Sheet.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing
activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
e)
SEGMENT REPORTING
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different
to those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment
and is subject to risks and returns that are different from those of segments operation in other economic environments.
f)
REVENUE RECOGNITION
Revenue is measures at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and
amounts collected on behalf of third parties.
Interest income is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.
g)
GOVERNMENT GRANTS
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will
comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that
they are intended to compensate.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support
to the Group with no future related costs are recognised as income of the period in which it becomes receivable.
h)
ROYALTIES AND OTHER MINING IMPOSTS
Ad valorem royalties and other mining imposts are accrued and charged against earnings when the liability from production or sale of the mineral
crystallises. Profit based royalties are accrued on a basis which matches the annual royalty expense with the profits on which the royalties are assessed
(after allowing for permanent differences).
i)
DEPRECIATION
Depreciation is provided on plant and equipment and is calculated on a straight line basis so as to write off the net cost of each asset during their
expected useful life of 3 to 5 years.
j)
CASH AND CASH EQUIVALENTS
Cash includes cash on hand and deposits held at call with financial institutions. Cash equivalents are short-term, highly liquid investments with original
maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in
value.
k)
TRADE AND OTHER RECEIVABLES
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade
receivables are due for settlement no more than 30 days from the date of recognition. Collectibility of trade receivables is reviewed on an ongoing basis.
Debts which are known to be uncollectible are written off. A provision for doubtful debts is established when there is objective evidence that the
Company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is recognised in the
income statement.
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1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
l)
INVESTMENTS AND OTHER FINANCIAL ASSETS
The Group classifies its investments in the following categories: loan and receivables, held-to-maturity investments, and available-for-sale financial
assets. The classification depends on the nature and purpose of the financial asset and is determined at the time of initial recognition. This designation
is re-evaluated at each reporting date.
m)
IMPAIRMENT OF ASSETS
At each reporting date, the Company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific
to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the profit or loss immediately, unless the relevant asset
is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the
carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the
increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset
(cash-generating unit) in prior years.
A reversal of an impairment loss is recognised in the profit or loss immediately, unless the relevant asset is carried at fair value, in which case the
impairment loss is treated as a revaluation increase.
n)
JOINT VENTURES
The consolidated entity's proportionate interests in the assets, liabilities and expenses of a joint venture have been incorporated in the financial
statements under the appropriate headings. Where part of a joint venture interest is farmed out in consideration of the farminee undertaking to incur
further expenditure on behalf of both the farminee and the economic entity in the joint venture area of interest, exploration expenditure incurred and
carried forward prior to farmout continues to be carried forward without adjustment, unless the terms of the farmout indicate that the value of the
exploration expenditure carried forward is excessive based on the diluted interest retained or it is not thought appropriate to do so. A provision is made
to reduce exploration expenditure carried forward to its recoverable or appropriate amount. Any cash received in consideration for farming out part of a
joint venture interest is treated as a reduction in the carrying value of the related mineral property.
o)
EXPLORATION EXPENDITURE
Expenditure on acquisition, exploration and evaluation relating to an area of interest is carried forward where rights to tenure of the area of interest are current and:
i)
ii)
the area has proven commercially recoverable reserves; or
exploration and evaluation activities are continuing in an area of interest but have not yet reached a stage which permits a reasonable assessment
of the existence or otherwise of economically recoverable reserves.
At the end of each financial year the Directors assess the carrying value of the exploration expenditure carried forward in respect of each area of interest
and where the carried forward carrying value is considered to be in excess of (i) above, the value of the area of interest is written down.
Capitalised exploration expenditure is considered for impairment based upon areas of interest on an annual basis, depending on the existence of
impairment indicators including:
•
•
•
•
the period for which the Company has the right to explore in the specific area has expired during the period or will expire in the near future, and is
not expected to be renewed;
substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted or planned;
exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral
resources and the Company has decided to discontinue such activities in the specific area; and
sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and
evaluation asset is unlikely to be recovered in full from successful development or by sale.
Costs carried forward in respect of an area of interest that is abandoned are written off in the year in which the decision to abandon is made.
32
p) MINERAL TENEMENTS
The Company's activities in the mining industry are subject to regulations and approvals including mining heritage, environmental regulation, the
implications of the High Court of Australia decision in what is known generally as the "Mabo" case and any State or Federal legislation regarding native
and mining titles. Approvals, although granted in most cases, are discretionary. The question of native title has yet to be determined and could effect any
mining title area whether granted by the State or not.
q)
RESTORATION, REHABILITATION AND ENVIRONMENT EXPENDITURE
Restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are accrued at the time of those activities and
treated as exploration and evaluation expenditure.
Restoration, rehabilitation and environmental expenditure necessitated by the development and production activities are accrued on an ongoing basis
over the production life of the mining activity and treated as costs of production.
Restoration, rehabilitation and environmental obligations recognised include the costs of reclamation, plant and waste site closure, current and
subsequent monitoring of the environment.
r)
TRADE PAYABLES
Trade payables and other accounts payable are recognised when the Company becomes obliged to make future payments resulting from the purchase of
goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.
s)
EMPLOYEE BENEFITS
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of
the reporting date are recognised in creditors and borrowings in respect of employees' services up to the reporting date and are measured at the amounts
expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at
the rates paid or payable.
Long service leave
The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the provision for employee benefits and
is measured in accordance with wages and salaries above. The liability for long service leave expected to be settled more than 12 months from the
reporting date is recognised in the provision for employee benefits only where there is a reasonable expectation that a liability will be incurred.
Superannuation
The amounts charged to the statement of financial performance for superannuation represents the contributions to superannuation funds in accordance
with the statutory superannuation contributions requirements or an employee salary sacrifice arrangement. No liability exists for any further contributions
by the Company in respect to any superannuation scheme.
Equity based compensation benefits
The Company does not operate an employee option scheme. The amounts disclosed for remuneration of directors and executives include the assessed
fair values of options granted during the year at the date they were granted.
Redundancy
The liability for redundancy is provided in accordance with work place agreements.
t)
CONTRIBUTED EQUITY
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
u)
EARNINGS PER SHARE
Basic earnings per share is determined by dividing the operating profit after income tax attributable to members of Alkane Exploration Ltd by the
weighted average number of ordinary shares outstanding during the year.
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1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
v)
SHARE BASED PAYMENTS
Where shares or options are issued to employees, including directors, as remuneration for services, the difference between fair value of the shares or
options issued and the consideration received, if any, from the employee is expensed. The fair value of the shares or options issued is recorded in
contributed equity.
w) NEW ACCOUNTING STANDARDS AND UIG INTERPRETATIONS
Certain new accounting standards and UIG interpretations, effective for the 2007 financial statements, have been published that are not mandatory for 31
December 2006 reporting period. The Company has elected not to adopt, where available, theses standards and UIG interpretations early. Application of
the standards and UIG interpretations is not expected to effect any of the amounts recognised in the financial statements, but will impact the type of
information disclosed in the notes to the financial statements.
2.
a)
b)
INCOME TAX EXPENSE
Income tax expense
Current tax
Deferred tax
Tax losses
Unused tax losses for which no deferred tax asset has been recognised:
Operating loss
Potential tax benefit at 30%
Add tax effect of permanent differences:
Tax losses not brought to account as deferred tax asset
Income tax attributable to operating profit (loss)
c)
Deferred tax asset.
Certain future tax benefits have not been recognised as an asset:
Attributable to tax losses, the benefits of which are
not certain of realisation at 30% (30% 2005)
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
-
-
-
-
-
-
-
-
(3,655,095)
(1,772,472)
(3,649,754)
(1,718,417)
(1,096,528)
(531,741)
(1,094,926)
(515,525)
(1,096,528)
-
531,741
-
(1,094,926)
-
515,525
-
10,066,784
8,970,256
10,105,699
9,010,773
The benefit will only be obtained if the economic entity derives future assessable income of a nature and of an amount sufficient to enable the benefit to
be realised, continues to comply with the conditions for deductibility imposed by taxation legislation and there are no changes in tax legislation
adversely affecting the economic entity in realising the benefit.
3.
TRADE AND OTHER RECEIVABLES (Current)
Debtors including GST refunds
456,397
266,353
448,827
201,243
4. AVAILABLE FOR SALE FINANCIAL ASSETS (Current)
Quoted Shares - At fair value
Opening balance at 1 January 2006
Disposals
Net gain (loss) from fair value adjustment
Closing balance at 31 December 2006
4,350
-
(1,950)
2,400
91,267
(89,577)
2,660
4,350
4,350
-
(1,950)
2,400
91,267
(89,577)
2,660
4,350
34
5. OTHER FINANCIAL ASSETS (Current)
Interest bearing deposits
Interest bearing security deposits (not available for use)
Deposits bear a weighted average interest at the rate of 6.1% (2005 4.9%).
6. AVAILABLE FOR SALE FINANCIAL ASSETS (Non-Current)
Quoted Shares - At fair value
Opening balance at 1 January 2006
Additions
Net gain (loss) from fair value adjustment
Closing balance at 31 December 2006
7. HELD-TO-MATURITY INVESTMENTS (Non-current)
Shares in controlled entities - carried at cost (Note 16)
Opening balance at 1 January 2006
Disposal (sale of Ventron Enterprises Ltd)
Closing balance at 31 December 2006
Loans to (from) subsidiaries
At fair value
Opening balance at 1 January 2006
Addition
Closing balance at 31 December 2006
Net gain (loss) from fair value adjustment
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant & equipment - at cost
Less: Accumulated depreciation
Reconciliation of carrying amount
Opening balance at 1 January 2006
Plant & equipment acquired during year
Disposals
Depreciation during year
Closing balance at 31 December 2006
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
800,000
433,996
1,233,996
67,070
679,980
747,050
800,000
333,562
1,133,562
67,070
578,605
645,675
-
9,000
-
9,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,000
-
9,000
-
-
-
-
5,865,565
-
5,865,565
6,115,565
(250,000)
5,865,565
2,036,966
703,100
2,740,066
1,942,985
93,981
2,036,966
(2,881,482)
5,724,149
(2,862)
7,899,669
975,845
(183,969)
791,876
761,447
53,263
(3,815)
(19,019)
791,876
926,452
(165,005)
761,447
995,647
23,235
(233,853)
(23,582)
761,447
827,537
(156,652)
670,885
656,649
36,899
(3,815)
(18,848)
670,885
794,508
(137,859)
656,649
675,800
3,235
-
(22,386)
656,649
35
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9.
EXPLORATION AND DEVELOPMENT
EXPENDITURE (Non-Current)
Peak Hill Mine development at fair value
Peak Hill Project acquisition and exploration at fair value
Opening balance at 1 January 2006
Addition
Net gain (loss) from fair value adjustment
Closing balance at 31 December 2006
Accumulated contributions to other ongoing
exploration projects at fair value
Opening balance at 1 January 2006
Addition
Net gain (loss) from fair value adjustment
Closing balance at 31 December 2006
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
1
1
1
1
2,630,849
5,163
(1,636,012)
1,000,000
2,630,848
17,481
(17,480)
2,630,849
500,000
5,163
494,837
1,000,000
500,000
17,480
(17,480)
500,000
13,339,911
1,531,135
(1,332,124)
13,538,922
14,538,922
11,790,481
1,508,981
40,449
13,339,911
15,970,761
7,755,598
882,218
(627,618)
8,010,198
9,010,199
6,288,245
1,427,041
40,312
7,755,598
8,255,599
The Company's activities in the mining industry are subject to regulations and approvals including mining, heritage, environmental regulation, the
implications of the High Court of Australia decisions in what is known generally as the "Mabo" and the "Wik" cases and any State or Federal legislation
regarding native and mining titles. Approvals, although granted in most cases, are discretionary. The question of native title has yet to be determined and
could affect any mining title area whether granted by the State or not.
10. PAYABLES (Current Liabilities)
Trade creditors
570,016
603,316
524,564
554,025
11. PROVISIONS (Current Liabilities)
Provision for annual leave
Provision for rehabilitation
PROVISIONS (Non-current Liabilities)
27,632
-
27,623
30,488
-
30,488
27,632
-
27,632
30,488
-
30,488
Provision for redundancy/long service leave
117,902
184,977
117,902
184,977
36
12. SHARE CAPITAL
Movements in issued capital
Opening balance at 1 January 2006
Rights issue
Rights shortfall
Vendor issue*
Placement
Exercise of options
Closing balance at 31 December 2006
Less: Costs of Issues
As per Balance Sheet
PARENT ENTITY
2006
2005
NUMBER
$
NUMBER
$
165,999,501
7,781,976
1,762,066
100,000
24,899,925
-
200,543,468
-
200,543,468
41,763,877
1,167,296
264,310
20,000
3,734,989
-
46,950,472
(623,822)
46,326,650
138,151,857
-
-
-
27,824,777
22,867
165,999,501
-
165,999,501
36,647,414
-
-
-
5,108,460
8,003
41,763,877
(499,049)
41,264,828
*In 2006, the Company issued 100,000 shares to a vendor for the purchase of mineral interest within a tenement.
Options - Listed
Exercisable at 35 cents expiring 31 March 2005
Balance at beginning of year
Exercised during year
Expired during the year
Balance as at 31 December 2006
Options - Unlisted
Exercisable at 35 cents expiring 31 May 2005
Balance at beginning of year
Expired during the year
Balance as at 31 December 2006
Exercisable at 40 cents expiring 24 May 2007
Issued during year
Balance 31 December 2006
Exercisable at 50 cents between 25 May 2004 and 24 May 2006,
or at 60 cents between 25 May 2006 and 24 May 2007
Issued during year
Balance 31 December 2006
Exercisable at 45 cents each expiring 29 May 2008
Issued during year
Balance 31 December 2006
-
-
-
-
-
-
-
-
500,000
-
4,750,000
-
975,000
-
-
-
-
-
-
-
-
-
-
-
-
-
9,790,425
(22,867)
(9,767,558)
-
3,000,000
(3,000,000)
-
-
500,000
-
4,750,000
-
975,000
-
-
-
-
-
-
-
-
-
-
-
-
-
37
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13. REMUNERATION OF DIRECTORS
A.
THE NAMES OF DIRECTORS WHO HAVE HELD OFFICE DURING THE FINANCIAL YEAR ARE:
ALKANE EXPLORATION LTD
John S F Dunlop (appointed 4 July 2006), D Ian Chalmers, Ian R Cornelius, Ian J Gandel (appointed 25 July 2006), Anthony D Lethlean, H David
Kennedy (resigned 31 July 2006) and Lindsay A Colless (resigned 25 July 2006).
SUBSIDIARIES
LFB Resources NL, Kiwi Australian Resources Pty Ltd, Australasian Geo-Data Pty Ltd, Australian Zirconia Ltd
I R Cornelius, D I Chalmers, L A Colless
Skyray Properties Ltd (BVI)
L Thomas
EXECUTIVES DURING YEAR
Ian R Cornelius, member of the Executive Management Committee until his resignation as Executive Chairman on 4 July 2006. D Ian Chalmers, member
of the Executive Management Committee, appointed as Managing Director on 6 October 2006. Lindsay A Colless, member of the Executive Management
Committee until his resignation as a director on 25 July 2006. There were no other executive officers during the year.
B.
DETAILS OF REMUNERATION
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
Total income received, or due and receivable by the directors
993,384
978,787
881,247
866,394
The details of directors’ remunerations paid or payable or payments to related companies for services provided are as follows:
2006 YEAR
SHORT-TERM BENEFITS
POST-EMPLOYMENT BENEFITS
TOTAL
NAME
Executive Director
D I Chalmers
I R Cornelius
L A Colless
Non-executive Directors
J S F Dunlop
I R Cornelius
I J Gandel
A D Lethlean
H D Kennedy
L A Colless
DIRECTORS’
CASH FEES /
RETAINER
$
PER DIEM
CASH FEES
$
15,000
-
-
521,662 (a)
75,000 (c)
92,475 (f)
25,000
20,000
16,667
37,200
26,667 (e)
-
7,288 (b)
1,200 (c)
-
20,100 (d)
-
55,125 (f)
SUPERANNUATION
$
OTHER
$
-
-
-
-
-
-
-
-
-
-
80,000 (c)
-
-
-
-
-
-
-
$
536,662
155,000
92,475
32,288
21,200
16,667
57,300
26,667
55,125
technical services, geological consulting and management fees of $521,662 paid or due and payable to companies in which Mr Chalmers has a
substantial financial interest for services provided in the normal course of business and at normal commercial rates. During the year, five technical and
support staff, including Mr Chalmers, were employed to carry out work programs for Alkane on an as needs basis.
consulting fees of $7,288 (2005 $nil) paid or due and payable to John S Dunlop & Associated Pty Ltd for services provided in the normal course of
business and at normal commercial rates.
consulting fees of $76,200 ($75,000 + $1,200) paid or due and payable to Goldtrek Pty Ltd as trustee for the Lewis Trust of which Mr Cornelius is a
beneficiary for services provided in the normal course of business and at normal commercial rates. A one off fee, on termination as Executive Chairman,
of $80,000 in appreciation of Mr Cornelius’s long period of service in that role.
a)
b)
c)
38
d)
e)
f)
amounts of $20,100 paid or due and payable to Rocky Rises Pty Ltd, a company in which Mr Lethlean has a substantial financial interest, for consulting
services provided in the normal course of business and at normal commercial rates.
amounts of $26,667 paid or due and payable to a company in which Mr Kennedy has a substantial financial interest for director’s fees.
administration, accounting and secretarial fees of $147,600 ($92,475+$55,125) paid or due and payable to a company in which Mr Colless has a
substantial financial interest for services provided in the normal course of business and at normal commercial rates.
2005 YEAR
SHORT-TERM BENEFITS
POST-EMPLOYMENT BENEFITS
TOTAL
NAME
Executive Committee
I R Cornelius
D I Chalmers
L A Colless
Non-executive Directors
A D Lethlean
H D Kennedy
C. SERVICE AGREEMENTS
DIRECTORS’
CASH FEES /
RETAINER
$
-
-
-
-
40,000
PER DIEM
CASH FEES
$
150,000
540,387
169,200
79,200
-
SUPERANNUATION
$
OTHER
$
-
-
-
-
-
-
$
150,000
540,387
169,200
79,200
40,000
Formal written consultancy agreements exist with companies of which directors have a substantial financial interest as detailed below.
No performance related bonuses or benefits are provided.
J S F Dunlop
Retainer payable to John S Dunlop & Associates Pty Ltd, in which Mr Dunlop has a substantial financial interest, of $50,000 per annum plus per diem of
$1,200 per day up to 4 days per month for consulting services over and above normal director duties.
D I Chalmers
Managing director retainer of $60,000 per annum payable to Leefab Pty Ltd in which Mr Chalmers has a substantial financial interest pursuant to a
formal agreement for an initial term of two years commencing 1 October 2006.
Geological consulting and management services provided by Multi Metal Consultants Pty Ltd in which Mr Chalmers has a substantial financial interest
pursuant to a formal agreement for an initial term of two years commencing 1 October 2006.
I R Cornelius
Retainer payable to Goldtrek Pty Ltd as trustee for the Lewis Trust, of which Mr Cornelius is a beneficiary, of $40,000 per annum plus per diem of
$1,200 per day up to 4 days per month for consulting services over and above normal director duties.
I J Gandel
Retainer payable to Gandel Metals Pty Ltd in which Mr Gandel has a substantial financial interest of $40,000 per annum plus per diem of $1,200 per day
up to 4 days per month for consulting services over and above normal director duties.
A D Lethlean
Retainer payable to Rocky Rises Pty Ltd, in which Mr Lethlean has a substantial financial interest, of $40,000 per annum plus per diem of $1,200 per
day up to 4 days per month for consulting services over and above normal director duties.
D. SHARE-BASED PAYMENTS
No share based remuneration compensation plan exists.
39
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N
N
U
A
L
R
E
P
O
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T
2
0
0
6
DIRECTORS (CURRENT)
TYPE OF TRANSACTION
Management consulting
Directors’ retainer
Geological consulting,
including geological and
technical support staff
Directors’ retainer
Management consulting
Directors’ retainer
Directors’ retainer
Consulting
Directors’ retainer
TYPE OF TRANSACTION
Financial, administration,
accounting and Company
Secretarial services and staff
Directors' fees
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
14. SEGMENTAL INFORMATION
The economic entity operates predominantly in one geographic location. The operations of the economic entity consist of mining and exploration for
gold and other minerals within Australia.
15. RELATED PARTY TRANSACTIONS
RELATED PARTY
-DIRECTORS
TERMS AND CONDITIONS
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
J S F Dunlop
Normal commercial
7,288
25,000
-
-
7,288
25,000
-
-
D I Chalmers
Normal commercial
I R Cornelius
Normal commercial
I J Gandel
A D Lethlean
Normal commercial
Underwriting agreement
I J Gandel
5% of underwritten value
DIRECTORS (RESIGNED DURING THE YEAR)
RELATED PARTY
-DIRECTORS
TERMS AND CONDITIONS
521,662
15,000
540,387
-
451,524
15,000
476,994
-
156,200
20,000
16,667
20,100
37,200
71,580
150,000
-
-
79,200
-
-
156,200
20,000
16,667
20,100
37,200
71,580
150,000
-
-
79,200
-
-
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
L A Colless
H D Kennedy
Normal commercial
Directors fees
147,600
26,667
169,200
40,000
105,600
26,667
127,200
40,000
DIRECTOR’S SHARES AND OPTIONS
Aggregate number of shares and share options of Alkane Exploration Ltd acquired from the Company during the year by Directors or their director-related
entities:-
Ordinary shares
Options over ordinary shares
2006
2005
1,762,066
-
1,762,066
-
-
-
Aggregate numbers of shares and share options of Alkane Exploration Ltd held directly, indirectly or beneficially by Directors or their director-related
entities at balance date:
Ordinary shares
Options
40
2006
2005
35,354,787 13,813,978
5,000,000
3,000,000
16. CONTROLLED ENTITIES
NAME
INC
CLASS
Ventron Enterprises Ltd*
Australian Zirconia Ltd
Skyray Properties Ltd
Kiwi Australian Resources Pty Ltd
LFB Resources NL
Australasian Geo-Data Pty Ltd
BVI
WA
BVI
NSW
NSW
Qld
Ord
Ord
Ord
Ord
Ord
Ord
Contribution to Group Profit (Loss) after minorities
Parent –Alkane Exploration Ltd
Profit (loss) for year – group
Loans to (from) subsidiaries
Provision for loss
Parent net investment in subsidiaries
BOOK VALUE
2006
$
2005
$
EQUITY
2006
2005
%
%
-
1
2,300,000
-
3,558,700
6,864
5,865,565
-
1
2,300,000
-
3,558,700
6,864
5,865,565
-
100
100
100
100
74
-
100
100
100
100
74
CONTRIBUTION TO GROUP
2006
$
-
(23,546)
(2,255,774)
-
(604,428)
(157)
2005
$
15,575
(26,952)
(7,481)
(52,767)
(20,951)
(212)
(2,883,905)
(771,135)
(3,655,040)
(92,788)
(1,679,609)
(1,772,397)
7,346,302
(7,487,718)
5,724,149
6,643,203
(4,609,099)
7,899,669
* Ventron Enterprises Ltd was disposed of on 19 September 2005
17. RECONCILIATION OF CASH
Cash as at the end of the financial year as shown
in the Cash Flow Statement is reconciled to the
related items in the balance sheet as follows:
Cash at bank
Call deposits
Cash at bank bear a weighted average interest rate of 5.08% (2005 4.15%)
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
869,684
3,884,916
4,754,600
2,773,733
-
2,773,733
857,849
3,884,916
4,742,765
2,765,926
-
2,765,926
18. RECONCILIATION OF NET CASH OUTFLOW FROM OPERATING ACTIVITIES TO OPERATING LOSS AFTER INCOME TAX
Operating Profit (Loss)
Write down in value of tenements in subsidiaries
Non-cash fair value adjustments
Exploration
(Profit)Loss on share trading
Loss on sale of assets
Changes in net current assets and liabilities
Net cash provided for operating activities
(3,655,095)
-
(49,017)
3,227,124
(2,659)
3,015
(263,292)
(737,265)
(1,772,472)
-
(114,337)
355,060
127,918
293,554
(1,112,936)
(3,649,754)
2,878,619
(49,188)
391,767
(2,659)
3,015
(276,991)
(702,532)
(1,718,417)
38,808
(99,958)
301,369
127,918
214,269
(1,138,670)
The Company has no credit standby or financing facilities in place other than disclosed on the statement of financial position.
41
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U
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2
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19. SUBSEQUENT EVENTS
On 19 April 2007, the Company is scheduled to hold a shareholders’ meeting to approve the issue of options to employees and consultants and to
directors of the Company.
No other matter or circumstance has arisen since 31 December 2006 that has or may significantly affect the operations of the Company, the results of
the Company, or the state of affairs of the Company in the financial year subsequent to the financial year ended 31 December 2006.
20. EARNINGS PER SHARE ("EPS")
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2004
$
Basic earnings per share
(0.02)
(0.01)
(0.02)
(0.01)
The weighted average number of ordinary shares on issue
used in the calculation of basic earnings per share
179,716,591
151,986,034
179,716,591
151,986,034
The diluted earnings per share is not materially different from the basic earnings per share.
2006
NUMBER
2005
NUMBER
2006
NUMBER
2005
NUMBER
21. COMMITMENTS FOR EXPENDITURE
Mineral Tenement Leases
In order to maintain current rights of tenure to mining tenements, the Company will be required to outlay in 2007 amounts of approximately $1,715,000
(2006 $1,256,000) in respect of tenement lease rentals and exploration expenditures to meet the minimum expenditure requirements of the various
Mines Departments in Australia. These obligations will be fulfilled in the normal course of operations.
22. FINANCIAL INSTRUMENTS
Financial risk management
The Company’s activities expose it to a variety of financial risks; credit risk and cash flow interest rate risk.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.
The Company has adopted the policy of dealing with creditworthy counterparties and obtaining sufficient collateral or other security where appropriate,
as a means of mitigating the risk of financial loss from defaults. The Company measures credit risk on a fair value basis.
The Company does not have any significant credit risk exposure to a single counterparty or any group of counterparties having similar characteristics.
Credit risk
The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the Company’s maximum
exposure to credit risk without taking account of the fair value of any collateral or other security obtained.
Cash flow and fair value interest rate risk
Although the Company has significant interest bearing assets, the Company’s income and operating cash flows are substantially independent of changes
in market interest rates. The Company monitors interest rates to obtain the best terms and mix of cash flow.
42
EFFECTIVE INTEREST
RATE
%
5.08
6.25
6.10
4.15
-
4.90
-
-
VARIABLE
INTEREST
$
WEIGHTED AVERAGE
LESS THAN
1 YEAR
$
1 TO 2
YEARS
$
FIXED MATURITY DATE
NON-INTEREST
BEARING
$
TOTAL
$
853,730
-
-
-
853,730
-
-
2,756,566
-
-
-
2,756,566
-
3,884,916
1,233,996
-
5,118,912
-
-
-
-
747,050
-
747,050
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,954
-
-
456,397
472,351
869,684
3,884,916
1,233,996
456,397
6,444,993
(570,016)
(570,016)
(570,016)
(570,016)
17,168
-
-
226,353
306,879
2,773,734
-
747,050
226,353
3,747,137
(603,316)
(603,316)
(603,316)
(603,316)
2006
Financial assets
Cash
Call deposits
Term deposit
Receivables
Financial liabilities
Accounts payable
2005
Financial assets
Cash
Call deposits
Term deposit
Receivables
Financial liabilities
Accounts payable
23. AUDITORS REMUNERATION
Amount received or due and receivable by the auditor for:
a) Audit services
Current year audit of financial statements
b) Other services
Income tax return preparation
Total remuneration of auditors
CONSOLIDATED
PARENT ENTITY
2006
$
2005
$
2006
$
2005
$
27,000
6,000
33,000
29,700
5,000
34,700
27,000
6,000
33,000
29,700
3,000
32,700
The auditor of the Company and its subsidiaries is Rothsay Chartered Accountants.
The Company has received notification from the Company's auditor that he satisfies the independence criterion and that there have been no
contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct in relation to the
audit. The Company is satisfied that the non-audit services provided is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
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D I R E C T O R S ' D E C LA RAT I O N
The directors declare that the attached financial statements and notes:
a)
b)
comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
give a true and fair view of the Company's and controlled entities' financial position as at 31 December 2006 and of their performance, as represented by
the results of their operations and their cash flows, for the financial year ended on that date.
In the directors' opinion:
a)
b)
the financial statements and notes are in accordance with the Corporations Act; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
D I Chalmers
Director
Perth, 29th March 2007
44
I N D E P E N D E N T AU D I T R E P O RT
TO THE MEMBERS OF ALKANE EXPLORATION LIMITED
SCOPE
The financial report comprises the balance sheet, income statement, statement of cashflows, statement of equity changes, accompanying notes and the
directors’ declaration for Alkane Exploration Limited (“the Company”), for the year ended 31 December 2006. The financial report includes the consolidated
financial statements of the consolidated entity, comprising the Company and the entities it controlled at the end of the year or from time to time during the
year.
The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act
2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and
error, and for the accounting policies and accounting estimates inherent in the financial report.
AUDIT APPROACH
We conducted an independent audit of the financial report in order to express an opinion on it to the members of the company. Our audit was conducted in
accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the financial report is free of material misstatement and
the remuneration disclosures comply with AASB 124 Related Party Disclosures. The nature of an audit is influenced by factors such as the use of professional
judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore an audit
cannot guarantee that all material misstatements have been detected.
We performed procedures to assess whether in all material respects the financial report presents fairly in accordance with the Corporations Act 2001,
Australian Accounting Standards and other mandatory professional reporting requirements in Australia a view which is consistent with our understanding of the
company's and the consolidated entity's financial position, and of their performance as represented by the results of their operations and cash flows.
We formed our opinion on the basis of these procedures, which included:
•
•
examining on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and
assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the
directors.
Whilst we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures,
our audit was not designed to provide assurance on internal controls.
AUDIT OPINION
In our opinion, the financial report of Alkane Exploration Limited is in accordance with:
a)
the Corporations Act 2001, including:
(i)
giving a true and fair view of the company's and consolidated entity’s financial position as at 31 December 2006 and their performance for the year
ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations 2001; and
b)
other mandatory professional reporting requirements.
The remuneration disclosures that are contained in the remuneration report in the Directors’ report comply with AASB 124 Related Party Disclosures.
Rothsay
Frank Vrachas
Partner
Dated: 29 March 2007
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C O R P O RAT E G O V E R N A N C E
INTRODUCTION
Alkane Exploration Ltd ("Company") has adopted systems of control and accountability as the basis for the administration of corporate governance. Some of
these policies and procedures are summarised below.
The following additional information about the Company's corporate governance practices is set out on the Company's website at www.alkane.com.au :
•
•
•
•
•
•
•
•
•
•
•
•
•
Corporate Governance Disclosures and explanations;
Statement of Board and Management Functions (Board Charter);
Nomination Committee Charter;
Policy and Procedure for Selection and Appointment of New Directors;
Summary of Code of Conduct for Company Executives;
Summary of Policy for Trading in Company Securities;
Audit Committee Charter;
Procedure for Selection, Appointment and Rotation of External Auditor;
Summary of Compliance Procedures for ASX Listing Rule Disclosure;
Shareholder Communication Strategy;
Summary of Company's Risk Management Policy and Internal Compliance and Control System;
Remuneration Committee Charter; and
Corporate Code of Conduct.
COMPLIANCE WITH PRINCIPLES OF GOOD CORPORATE GOVERNANCE AND BEST PRACTICE RECOMMENDATIONS
The Company, during the financial year ended 31 December 2006 (the Reporting Period), has continued to follow the ASX Corporate Governance Council
Principles of Good Corporate Governance and Best Practice Recommendations (ASX Principles and Recommendations).
1. MANAGEMENT AND OVERSIGHT
The Board has adopted a charter setting out the purpose and role of the Board, its responsibilities and powers and the way in which the Board functions.
Formal letters of engagement setting out key terms and conditions of appointment are in place for non executive directors. Executive directors are employed
pursuant to service agreements including a formal job description.
2. BOARD STRUCTURE
The Board comprises five directors. The Board delegates day-to-day responsibility for managing the Company to the Managing Director. Previously this
responsibility was delegated to an Executive Management Committee comprising the Chairman, the Finance Director and the Technical Director, rather than to
one individual. This structure worked historically for the Company however, given that there were a number of changes to the composition of the Board during
the year, the appointment of a Managing Director was considered appropriate to serve the best interests of the Company's shareholders. .
Four of the five directors are considered to be independent.
The independence of Messrs Dunlop, Gandel, Cornelius and Lethlean, the Company's four non-executive directors, was considered in the context of the ASX
suggested criteria for independence, which was included in the commentary to the ASX Principles and Recommendations. Messrs Dunlop and Lethlean are
considered independent in accordance with the criteria. Mr Gandel, while a substantial shareholder for the purposes of the Corporations Act, is considered to
be independent as the Company considers that his interests are aligned with interests of the shareholders. Mr Cornelius, since resigning from all executive
positions within the Group, is also considered to be independent. Mr Lethlean has been appointed as a lead independent director. The Chairman is an
independent director.
In accordance with the Constitution of the Company, all directors must retire from office no later than the third annual general meeting following their last
election and one third of the directors are to retire from office at each annual general meeting. Where eligible, a director may stand for re-election.
46
During the Reporting Period the directors were:
• Mr John Stuart Ferguson Dunlop, non-executive Chairman, was appointed to the Board on 3 July 2006
• Mr Ian Raymond (Inky) Cornelius, non-executive Director, was appointed to the Board on 10 June 1986 (resigned as Executive Chairman on 3 July
2006).
• Mr David Ian (Ian) Chalmers, Managing Director, was appointed to the Board on 10 June 1986 (appointed as Managing Director on 5 October 2006).
• Mr Anthony Dean Lethlean, non-executive director, was appointed to the Board on 30 May 2002
• Mr Ian Jeffrey Gandel, non-executive director, was appointed to the Board on 24 July 2006
• Mr Henry David Kennedy, former independent non executive director, was appointed to the Board on 28 July 2000. He resigned as a director on 28 July
2006 and was appointed as Mr Cornelius’ alternate. He resigned as alternate director on 4 December 2006.
• Mr Lindsay Arthur Colless, Finance Director, was appointed to the Board on 1 August 1986 and resigned on 24 July 2006. Mr Colless remains the
Company Secretary and Chief Financial Officer.
Profiles of the directors are set out in the Directors’ Report.
If a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his office as a director then, provided
the director first obtains approval for incurring such expense from the Chairman, the Company will pay the reasonable expenses associated with obtaining
such advise.
The full Board comprises the nomination committee which operates in accordance with the nomination committee charter. The Board met four times as the
nomination committee during the Reporting Period and the Board is mindful of nomination issues on an ongoing basis.
3. RESPONSIBLE DECISION MAKING
The Board has adopted a code of conduct for directors and executives. The Board has also adopted a policy on trading in the Company’s securities by
directors, officers and employees of the Company.
4. INTEGRITY OF FINANCIAL REPORTING
The Board has established a structure to independently verify and safeguard the integrity of the company’s financial reporting and to ensure the independence
and competence of the Company’s external auditor.
The Board requires the Managing Director and the Chief Financial Officer to state in writing that the Company’s financial reports present a true and fair view, in
all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards; that this opinion
is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and that the
Company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects.
The Board has established an audit committee which operates under a formal charter. The Board considers it a priority to restrict membership of the audit
committee to independent directors. Currently the audit committee comprises three members, Messrs Lethlean, Gandel and Dunlop. Mr Lethlean, the lead
independent director, is chairman of the audit committee. The audit committee reviews the Company’s financial reporting systems on an ongoing basis and
has formalised its findings on two occasions during the Reporting Period.
5. TIMELY AND BALANCED DISCLOSURE
The Board is committed to complying with the continuous disclosure obligations of the Corporations Act 2001 and the listing rules of Australian Stock
Exchange Limited. The Board has established a policy and procedures for compliance with these requirements.
6. SHAREHOLDER RIGHTS
The Board has established arrangements for communication and participation of shareholders.
The Company maintains an up to date website comprising corporate information, synopses of the Company’s projects, periodic reports and announcements.
Hard copies of publicly released documents are available from the Company on request.
Shareholders are given a reasonable opportunity to ask questions of the Board at general meetings. The external auditor is invited to such meetings to answer
questions from shareholders on matters relating to the audit of the Company’s financial statements.
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7. RISK MANAGEMENT
The Board has adopted an internal control framework and a risk management policy designed to ensure operational, legal and financial risks are identified,
assessed, addressed and monitored. As stated previously, the Managing Director and the Chief Financial Officer are required to provide a statement that the
Company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects (see item 4 above).
The Company has received advice that the Managing Director’s ability to recommend to the Board exploration programs to be carried out by Multi Metal
Consultants Pty Ltd may put him in a position of conflict. The Directors do not consider this to have caused any inefficiency of the Company’s risk
management in the past and have put in place procedures to eliminate any perceived conflicts in the future.
8. ENHANCEMENT OF PERFORMANCE
During the Reporting Period evaluation of the Board and its members was carried out on an ongoing basis. The composition and functioning of the Board as a
whole was discussed from time to time at regular meetings of the Board, under the leadership of the chairman. The Board considers that a more formal
procedure is not warranted at present in view of the small size, and overlap of many of the key functions, of the Board and management.
9. REMUNERATION
The Board’s remuneration policy is set out in the Remuneration Report section of the Directors’ Report.
The remuneration committee comprises the full Board. During the Reporting Period the Board met three times to consider remuneration matters. All members
of the committee attended the meetings during their incumbency except Mr Lethlean was unavailable to attend one meeting. No director participated in any
deliberation regarding his own remuneration or related issues.
There are no termination or retirement benefits for non-executive directors.
10. STAKEHOLDER INTERESTS
The Board has adopted a corporate code of conduct setting out the standard which the Board, management and employees of the Company are encouraged to
comply with when dealing with each other, shareholders and the broader community.
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S H A R E H O L D E R I N F O R M AT I O N
1.
SHARE HOLDING AT 30 MARCH 2007 - ALK
(a) DISTRIBUTION OF SHAREHOLDERS
SHARE HOLDING
1,000
1 -
5,000
1,001 -
5,001 - 10,000
10,001 - 100,000
over
100,001 -
(b) UNMARKETABLE PARCELS
There are 2,566 shareholders who hold less than a marketable parcel.
(c) VOTING RIGHTS
Voting rights are one vote per fully paid ordinary share
(d) NAMES OF THE SUBSTANTIAL HOLDERS AS DISCLOSED IN SUBSTANTIAL HOLDING NOTICES:
SHAREHOLDER
NUMBER OF SHARES
Abbotsleigh Pty Ltd
34,245,674
2.
TOP TWENTY SHAREHOLDERS AT 30 MARCH 2007
SHAREHOLDER
ANZ Nominees Limited
Abbotsleigh Pty Ltd
Mr David Michael Docherty
National Nominees Limited
Eikofin BVBA
Resource Capital Fund III LP
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Riomin Australia Gold Pty Ltd
Funding Securities Pty Ltd
Lampsac Pty Ltd
RBC Dexia Investor Services Australia Nominees Pty Limited
Aquatic Resources Limited
Thorney Investments
JP Morgan Nominees Australia Limited
Westpac Custodian Nominees Limited
Computer Visions Pty Ltd
Jamuza Pty Ltd
Tasman Asset Management Ltd
RM Dimond & Associates Pty Ltd
NUMBER OF HOLDERS
FULLY PAID
ORDINARY SHARES
2,336
848
425
1,203
214
5,026
NUMBER
OF SHARES
% ISSUED
CAPITAL
40,105,259
34,245,674
4,570,000
3,500,365
2,750,000
2,440,000
2,318,828
2,070,595
2,000,000
1,950,000
1,935,549
1,566,065
1,550,000
1,500,000
1,266,781
1,052,216
1,050,000
1,000,000
957,133
816,666
108,645,131
20.00
17.08
2.28
1.75
1.37
1.22
1.16
1.03
1.00
0.97
0.97
0.78
0.77
0.75
0.63
0.53
0.52
0.50
0.48
0.41
54.17
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3. UNLISTED OPTIONS
Option Holding at 30 March 2007 – ALKAI
Total options exercisable at 40 cents each expiring 24 May 2007
Number of holders
Holdings of more than 20%
Terrence William Ransted & Julianne Ransted (The Ransted Family Account)
Rocky Rises Pty Ltd
Option Holding at 30 March 2007 – ALKAK
Total options exercisable at 45 cents each expiring 29 May 2008
Number of holders
Holdings of more than 20%
G R Meates & Associates Pty Ltd
Option Holding at 30 March 2007 - ALKAQ
Total options exercisable at 60 cents expirying 24 May 2007
Number of holders
Holdings of more than 20%
Goldtrek Pty Ltd
Leefab Pty Ltd
Mineral Administration Services Pty Ltd
Sundowner International Ltd
4. RESTRICTED SECURITIES
As at the date of this report, there were no securities subject to restriction under the Listing Rules of Australian Stock Exchange Limited.
5. ON MARKET BUY-BACK
As at the date of this report, there was no current on market buy-back
500,000
2
250,000
250,000
975,000
9
250,000
4,750,000
5
1,000,000
1,000,000
1,000,000
1,000,000
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T E N E M E N T S C H E D U L E
TENEMENT NUMBER
REGISTERED TITLE HOLDER
ALKANE INTEREST %
PROJECT NAME
GL 5884
ML 6036
ML 6042
ML 6277
ML 6310
ML 6389
ML 6406
ML 1351
ML 1364
MLA 79 Or
ML 1479
EL 6319
EL 5548
MLA 183 Or
EL 6025
EL 6091
EL 6320
EL 6700
EL 5760
EL 6111
EL 5675
EL 5830
EL 5942
EL 6085
EL 4155
EL 5851
ELA 3051 Or
EL 4022
E 46/522
E 46/523
E 46/524
M 36/303
M 36/329
M 36/330
E 36/201
M (A) 36/477
M (A) 36/478
M (A) 36/479
M (A) 36/480
M (A) 36/550
M (A) 36/571
M (A) 36/572
E (A) 36/622
P 36/1371
P 36/1372
P (A) 36/1601
P (A) 36/1602
P (A) 36/1603
P (A) 36/1604
P (A) 36/1605
(Act 1904) Alkane Exploration Ltd (“ALK”)
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
LFB Resources NL (“LFB”)
LFB
ALK
ALK
LFB
LFB
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK
ALK, Kiwi Australian Resources Pty Ltd (“Kiwi”), Hot Holdings Pty Ltd (“Hot”)
ALK, Kiwi, Hot
ALK, Kiwi, Hot
ALK, Kiwi, Hot
ALK, Kiwi, Hot
ALK, Kiwi
ALK, Kiwi, Hot
ALK, Kiwi, Hot
ALK, Kiwi, Hot
ALK, Kiwi
ALK, Kiwi
ALK, Kiwi, Hot
ALK, Kiwi, Hot
ALK, Kiwi, Hot
ALK, Kiwi, Hot
ALK, Kiwi, Hot
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
60
60
25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
Peak Hill, NSW
Peak Hill, NSW
Peak Hill, NSW
Peak Hill, NSW
Peak Hill, NSW
Peak Hill, NSW
Peak Hill, NSW
Peak Hill, NSW
Peak Hill, NSW
Peak Hill, NSW
Peak Hill, NSW
Peak Hill, NSW
Dubbo, NSW
Dubbo, NSW
Orange-Molong, NSW
Orange-Molong, NSW
Wellington, NSW
Wellington, NSW
Moorilda, NSW
Moorilda, NSW
Tomingley, NSW
Tomingley, NSW
Tomingley, NSW
Tomingley, NSW
Cudal, NSW
Cudal, NSW
Cudal, NSW
Bodangora, NSW
Nullagine, WA
Nullagine, WA
Nullagine, WA
Miranda Well, WA
McDonough, WA
McDonough, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
Leinster Downs, WA
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