Company Information
Chairman's Report
Review of Operations
Directors' Report
Income Statement
Balance Sheet
Statement of Changes in Equity
Cash Flow Statement
Notes to the Financial Statements
Directors' Declaration
Independent Audit Report
Corporate Governance
Shareholder Information
Tenement Schedule
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McPhillamys drilling December 2007
A L K A N E R E S O U R C E S
L T D
C O M P A N Y
I N F O R M A T 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
150 Stirling Highway Nedlands WA 6009
Telephone: 61 8 9389 8033
Facsimile: 61 8 9389 7871
AUDITORS
Rothsay
Chartered Accountants
Level 18, Norwich House
6 O'Connell Street Sydney NSW 2000
Telephone: 61 2 8815 5400
Facsimile: 61 2 8815 5401
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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C H A I R M A N ' S
R E P O R T
Alkane has made major advancements during the year with the aims of getting the Company back into gold production and cash flow, and to progress the
Dubbo Zirconia Project (DZP), our world class rare metal and rare earth resource.
The development of the Tomingley Gold Project (TGP), which is centred about 14 kilometres north of the Company’s Peak Hill Gold Mine, received a major
boost with the recognition that the newly discovered Caloma deposit could do more than provide the extra tonnes needed to proceed with the operation, but
had the capability to have a substantial impact on the project economics with a scoping study indicating a potential for two million tonnes grading around 3g/t
gold at shallow depths.
As a result of the scoping study a 20,000 metre RC and 5,000 metre core resource definition drilling program got underway at Caloma in late October, but
persistent heavy rain in the region and limited drill rig availability, have caused the program to drag out well into 2008. Early in this year, two RC rigs and one
core rig were on site trying to get the drilling completed by mid-April and allow definition of Measured and Indicated Resources which are necessary to
compile the data for the Definitive Feasibility Study (DFS).
Caloma is located only 500 metres from the 600,000 ounce Wyoming deposits which have previously formed the basis of the TGP resources. Although
separated from the conceptual TGP treatment plant site by the busy Newell Highway, it is very close to that site and should pose limited additional
development costs. Reporting of drill results from Caloma over the last six months has demonstrated many shallow, substantial widths and high grade gold
intercepts and has certainly supported our faith in the potential of the deposit to deliver a significant upgrade to the Project’s resource base.
Mintrex (the consulting division of Perth engineering group, Holtfreters Pty Ltd) were appointed the DFS managers in October and they commenced with a
program of reviewing all historic information relating to the TGP to define critical issues, and have completed a conceptual plant design and layout. A number
of other external consultants have also been engaged to combine with Alkane personnel to provide input into the DFS which is now scheduled for completion
late 2008 or early 2009 due to the delays with the Caloma drilling.
While much of the DFS remains to be completed, the conceptual TGP development has firmed to a one million tonne per annum open pit mining operation
and standard CIL gold recovery circuit to produce an average of 70,000 ounces of gold per year for a minimum of five years. At current spot gold prices
(A$1,000/oz) this production should be capable of generating cash flows of around $30 million a year.
The DZP has also made substantial, but at times frustratingly slow, progress during the year. Construction of the Demonstration Pilot Plant (DPP) at ANSTO
Minerals was delayed by finalisation of the process optimisation work and slow component delivery, and was finally completed early in 2008. It has
commenced operation at the time of this report.
The DPP is designed to test the complete flowsheet, providing process and engineering data, but most importantly, several tonnes of the various products for
distribution to potential end users. The data generated by the DPP will be used to update the existing feasibility model which we hope to have completed by
the middle of 2009.
A major market update for the three key DZP product streams of zirconium, niobium and yttrium-rare earths was completed by the Project’s feasibility
managers, TZ Minerals International. This study highlighted some quite dramatic changes in the dynamics of some of the Project’s products, particularly with
the niobium and specific rare earths.
Niobium is used in special steels and growing demand in China and India has seen the ferro-niobium price jump from its traditional US$15/kg to greater than
US$60/kg in March. While our understanding of the niobium market does not support this latter price long term, it would appear that the new base will be
somewhere between US$25-37/kg. This is more than double the previous price estimate we had used in earlier feasibility studies.
Perhaps more dramatic have been developments in the rare earth industry. China has dominated rare earth production for twenty years, but a fairly recent
change in the attitude towards export of rare earth raw materials, has seen certain prices more than triple. At the same time the demand for these specific rare
earths such as neodymium, dysprosium and terbium which have major uses in permanent magnets and batteries for use in hybrid vehicle electric motors has
significantly increased.
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A L K A N E R E S O U R C E S
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With these changes the base case revenue stream for the DZP was
conservatively estimated to be around US$50 million per year but the
increasing demand could enable the project to be scaled up and still have
an open pit life of 200 years.
While the TGP and DZP are the backbone of Alkane, the exciting results
generated by the two deep diamond core holes drilled at McPhillamys in
December, give another dimension to the future of the Company.
McPhillamys is part of the Orange District Exploration Joint Venture with
Newmont Australia, the large US gold producer. Newmont are the
managers of the project and are part way through their initial earn-in to get
a 51% interest by spending $5 million. Alkane are the operators and our
exploration crews carry out the ground work. Newmont can go to 75% by
carrying all expenditures through to completion of a feasibility study.
After discovery in 2006, only regional work was done at McPhillamys until
late in 2007 when a geophysical survey was followed by the two core
holes. Full details of these are documented within the Operations Report
but the intercepts of 225 metres grading 1.16g/t gold within 349 metres at
0.87g/t gold from KPD 002 and 204 metres grading 1.62g/t gold within
263 metres at 1.32g/t gold from KPD 003 confirmed that this is a very
large gold system with significant resource potential.
The 2008 program has not been finalised for McPhillamys but we believe
that the prospect warrants a major drilling program.
Due to our heavy commitments with these three projects only limited work
was carried out on other properties in the region, but we remain convinced
about their prospectivity. The Company also retains its 9 million shares
(~15%) in BC Iron Limited and feel the potential for mineable channel iron
deposits at Nullagine remains high.
At the end of the year, a rights issue to shareholders raised $12.8 million
thanks to the support of Gandel Metals Pty Ltd, a company associated with
the Alkane director, Mr Ian Gandel. These funds will enable Alkane to fully
progress its two development projects during 2008 and establish a strong
future for the Company.
I would like to thank my fellow directors, our consultants and exploration
team for their continued efforts during the year.
JOHN S F DUNLOP
Chairman
KPD 002 McPhillamys
Gold in Caloma core
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R E V I E W O F
O P E R A T I O N S
Coarse arsenopyrite and quartz veining in Caloma core
TOMINGLEY GOLD PROJECT
GOLD – NEW SOUTH WALES
Alkane Resources 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 is situated about 14 kilometres north of the Company’s Peak Hill Gold
Mine and the area forms one of a number of prospects and gold occurrences 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 and Wyoming
Three in the north which host identified mineral resources. A new deposit was discovered at Caloma late in 2006 and most of the exploration effort of 2007
has been directed towards evaluating this discovery. Caloma 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, and 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.
A scoping study of the initial Caloma drilling in August 2007 indicated that geological interpretation of the central 300 metre sector of the mineralised
porphyry at Caloma enabled a potential tonnage and grade model to be developed for that area. The drilling detail at that time was not sufficient for this body
to be assigned as an Identified Mineral Resource but a conceptual range was determined to be 1.5 to 2.0 million tonnes grading 2.5g/t gold to 3.0g/t gold
(120,000 to 190,000 ounces). This potential was assigned within a depth of about 100 metres from the surface.
Multiple mineralised structures have been identified within the Caloma target area and the main host is a westerly dipping Wyoming style feldspar porphyry
which is 80 to 100 metres in width and 1,000 metres in north-south extent. As a result of the recent drilling a more robust geological model is developing
and it is apparent that most of the mineralised structures within the porphyry have a northerly orientation, with a shallow westerly dip. These structures range
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in width from a few metres to in excess of 20 metres and appear to extend
across the full width of the porphyry host and extend into the eastern
volcaniclastic rocks. There is also apparent steeper dipping mineralisation
in north-south structures that lie at and near the footwall contact (east) of
the porphyry and/or within the underlying volcanics and sediments.
Many shallow high grade gold intercepts have been recorded (for example
PE 133 37m @ 8.63g/t Au from 14m) and have indicated that Caloma
has significant potential to add to the resource base for the TGP. Full
drilling details are available in ASX releases and Quarterly Reports on the
Company web site.
A 10,000 metre RC and 2,500 metre diamond core program was initiated
in October to define resources and provide geological, metallurgical and
geotechnical data for feasibility studies on the development of the project.
As this program advanced it became apparent that the mineralisation at
Caloma was more extensive than anticipated and the geological model for
the mineralisation had been substantially modified. The program was
expanded to 20,000 metres of RC and 5,000 metres of core drilling to fully
test the central section of the porphyry host to enable definition of
Measured and Indicated Resources.
FEASIBILITY STUDY
Late in the year a Definitive Feasibility Study (DFS) commenced under
the management of Mintrex, the consulting division of Perth engineering
group, Holtfreters Pty Ltd. Mintrex commenced with a program of
reviewing all historic information relating to the TGP to define critical
issues, and have completed a conceptual plant design and layout. A full
metallurgical test program for Caloma, and follow up to the earlier
Wyoming One and Wyoming Three data has been scheduled.
Discussions regarding infrastructure issues, including water, power and site
access, have been initiated with the appropriate agencies and authorities.
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 established
sources near Narromine, 40 kilometres to the north of the project site.
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The current conceptual development consists of three open pit mines, Wyoming One, Wyoming Three and Caloma, followed by possible underground
operations. Initial gold production would be through a conventional CIL gold recovery circuit at an open pit mining rate of around 1.0 million tonnes per
annum. This treatment rate would recover an average of 70,000 ounces of gold a year for a minimum of five years. It is anticipated that the DFS should be
completed by late 2008 and hopefully a development decision by early 2009.
At 31 December 2007, Identified Mineral Resources at Wyoming stood at:
WYOMING RESOURCES (>0.75G/T AU CUT OFF)
MEASURED
INDICATED
INFERRED
TOTAL
DEPOSIT
TONNAGE
(t)
Wyoming One
4,020,000
Wyoming Three
815,000
GRADE
(g/t)
2.25
2.20
TONNAGE
(t)
1,010,000
15,000
GRADE
(g/t)
2.77
2.32
TONNAGE
(t)
GRADE
(g/t)
TONNAGE
(t)
GRADE
(g/t)
OUNCES
1,270,000
4.09
6,300,000
830,000
2.70
2.20
2.70
547,700
58,700
606,400
TOTAL
4,835,000
2.24
1,025,000
2.76
1,270,000
4.09
7,130,000
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.
Gold in Caloma core
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A L K A N E R E S O U R C E S
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PEAK HILL GOLD MINE
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 at Tomingley 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 at Tomingley.
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.
As at December 31 2007, Identified Mineral Resources at Peak Hill
remained as:
Sulphide (Proprietary orebody only) 0.5g/t gold cut off
INDICATED RESOURCES
9.44 million tonnes
1.35g/t Au
0.11% Cu
INFERRED RESOURCES
1.83 million tonnes
0.98g/t Au
0.10% Cu
TOTAL
11.27 million tonnes
1.29g/t Au
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.
RC Drilling Caloma November 2007
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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 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, batteries and magnets, 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.
Process optimisation and development work commenced at the laboratory
facilities of ANSTO Minerals at Lucas Heights south of Sydney in July 2006.
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. ANSTO is one of Australia’s premier research facilities.
Construction of a Demonstration Pilot Plant (DPP) commenced in the second
half of 2007 and after several months delay caused by slow component delivery,
was nearing completion early in 2008. The DPP is designed to test the complete
flowsheet, providing process and engineering data, but most importantly, several
tonnes of the various products for distribution to potential end users. The plant is
scheduled to be operated for at least six months to process 100 tonnes of ore and
this could be extended to twelve months (additional 100 tonnes) depending upon
DPP kiln
DPP solvent extraction circuit
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A L K A N E R E S O U R C E S
L T D
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 2009.
A major review of the current market for DZP products was completed by
the Project’s consultants late in the year and the study focussed on the
three separate product streams of zirconium, niobium and yttrium-rare
earth elements.
Current world consumption of zirconium products is about 100,000tpa
(ZrO2 equivalent), roughly split 50% each to fused zirconia and zirconium
chemicals. The market is very diverse with applications in electronics,
ceramics, catalysts, special alloys and glasses, fuel cells, nuclear power
and as environmental stable drying agents.
The overall zirconium (+hafnium) chemical and zirconia industries are
showing annual growth rates of 8%, while specific areas of the industry,
such as advanced ceramics and catalysts, range up to 13%pa. Prices have
remained relatively stable after two years of growth and range from around
US$4/kg for basic chemical, through to US$25/kg for electronic grade
zirconia. The expansion of the nuclear power industry will also impact on
the zirconium and hafnium metal demand. Nuclear grade zirconium metal
and hafnium metal are US$250 and US$350/kg respectively.
The dominant use for niobium is in ferro-niobium for HSLA steels, and
hence demand and pricing have been driven by rapid growth in the steel
industry in the last five years, particularly in China and India. 2006/07
consumption was around 80,000 tonnes of Nb2O5 equivalent. Average
annual growth for the last four years has been near to 14% and an ongoing
growth at around 10% is anticipated. During 2007, prices jumped from a
recent level base around US$15/kg to in excess of US$60/kg. Longer term
prices are estimated to range from US$25 to $37/kg.
The yttrium and rare earth industry is also very diverse and products
have multiple uses, and hence growth rates vary for individual elements.
Overall the rare earth industry has a projected five year growth rate of
12.5% but the use of specific rare earths, such as neodymium and
dysprosium, in batteries and permanent magnets is expected to accelerate
as these show increasing demand in the developing hybrid and electric car
industry.
China currently produces around 90% of the world’s consumption of about
117,000 tonnes (as rare earth oxides) and its decision to both restrict
export of raw materials and increase the export tax on those rare earths has
resulted in a dramatic increase in pricing and demand outside of China.
On the basis of current pricing, TZMI indicated that the base value of the
yttrium concentrate should be around US$13/kg and the rare earth
concentrate, about US$8.50/kg. Early in 2008, with further changes in
China’s rare earth strategy and demand, this price was closer to US$11/kg.
Using the base case conceptual development of a 200,000tpa ore
processing and simple product range of an intermediate zirconium
chemical, a niobium-tantalum concentrate and yttrium-rare earth
concentrates, TZMI estimated that revenue for the Project would be around
US$42.5 million. The revenue would be closer to US$52 million if the
higher niobium price (US$37/kg) was achieved.
While the current flow sheet and DPP operation are focussed on the
“intermediate” product output, there is considerable scope to improve all
products, including further value adding with the production of selected
higher value separated rare earth oxides. The Dubbo ore deposit contains
greater than average yttrium, dysprosium and terbium content than other
deposits, and ANSTO is currently reviewing processing options to produce
a suite of three products to include yttrium, neodymium with the light rare
earths, and dysprosium with heavy rare earths
Also with increasing demand, particularly with niobium and the rare earths,
the potential to increase the start up production rate is significant with the
resulting increase in output and revenues. Even at accelerated production
rates, the open pit life would be measured in hundreds of years.
DPP leaching
DPP product recovery
DPP main shed
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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 at 31 December 2007 remained at:
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.
Coarse arsenopyrite and pyrite in Caloma core
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ORANGE DISTRICT EXPLORATION JOINT VENTURE
- ODEJV
GOLD, COPPER – NSW
LFB Resources NL 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). Newmont are the Manager and Alkane
the Operator of the ODEJV.
KPD 002 McPhillamys
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R E V I E W O F O P E R A T I O N S
MOLONG PROJECT
MOORILDA PROJECT
Early in the year two pre-collared diamond drill holes totalling 674.8
metres were completed to test a strong IP target (chargeability anomaly)
within Ordovician andesitic volcanics beneath a Tertiary basalt cap. The IP
anomaly was associated with magnetic features which occur within a
northwest trending structural corridor thought similar to that which hosts
the Cadia-Ridgeway deposits to the south. The location of the drill holes
was not optimal as they were drilled within a vineyard with restricted
access.
Strong and sometimes massive fracture controlled pyrite with trace
chalcopyrite mineralisation was intersected in both drill holes and is
interpreted to be the source of the IP anomaly. A later fault controlled
sericite-arsenopyrite alteration overprints the assemblage. Only minor gold
and copper values were returned from half core samples with better results
of 3 metres grading 0.5g/t gold and peak 1 metre of 1570ppm copper.
There were some associated elevated trace elements such as 1 metre of
394ppm molybdenum which support the concept that the alteration
intersected could be peripheral to a porphyry style system.
Further review of the data is planned prior to scheduling of any additional
exploration.
In 2006 the joint venture reported the discovery of significant gold
mineralisation within altered Silurian aged felsic volcanics and sediments
at McPhillamys. The mineralisation defined by limited aircore (AC), RC
drilling and one diamond core hole, extended over an open north-south
600 metre strike length. Within this area plus 1g/t gold was defined in at
least two zones within an area of 300 metres by 200 metres. Zones of plus
1% zinc were also intersected by the drilling.
Following this discovery, Newmont the JV manager, advised that their
preference for 2007 was to test several targets in the project area to add to
the regional resource inventory potential before drilling out the main zone
at McPhillamys. The targets include a number of geological and
geophysical features, sites of historic workings and areas that have shown
positive geochemical signatures.
As a result of reconnaissance RC and AC drilling follow up of these targets,
widespread anomalous gold and base metal results were recorded from
several holes testing soil geochemistry and Induced Polarisation (IP)
anomalies north and south of the McPhillamys deposit within felsic
volcanic and sedimentary sequences similar to that hosting the gold
mineralisation at McPhillamys. Encouraging intercepts were returned from
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A L K A N E R E S O U R C E S
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KP 100 (3m @ 3.9g/t Au from 32m) at McPhillamys North and in the Kings Plains area, approximately 1.5 kilometres southeast of McPhillamys, where
two holes KP 081 (16m @ 1.60g/t Au from 3m) and KP 082 (35m @ 0.52g/t Au from the surface) also intersected mineralisation.
Late in 2007 two diamond core holes, KPD 002 (453.2m) and KPD 003 (396.7m) were drilled into the central section of the McPhillamys deposit to test the
down dip, down plunge extent of the gold and base metal mineralisation. Both holes intersected extensively altered felsic volcaniclastic sediments, with
extensive sulphide mineralisation and sporadic quartz veining.
Half core results from both holes demonstrated extensive gold mineralisation over very significant intervals down to a vertical depth of 350 metres and have
confirmed that McPhillamys hosts a very large gold system.
Table 1: Summary drill core results for KPD 002 McPhillamys Prospect.
HOLE NO
EAST
NORTH
RL
(m)
AZIMUTH
INCLIN
INTCPT
KPD 002
715950
6292130
~950
270°
60°
incl
and
incl
and
incl
and
also
INTCPT
(m)
KPD 002
28.65
incl
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GRADE
(%Zn)
0.89
1.35
GRADE
(%Pb)
0.11
0.20
GRADE
(g/t Au)
INTERVAL
(m)
EOH
(m)
COMMENTS
0.87
1.16
1.87
2.52
1.55
10.59
2.34
1.53
GRADE
(g/t Au)
0.21
0.20
97.75 – 447
453.2
0.2g/t envelope
207 – 431.75
212 - 263
226 - 241
326 - 378
326 - 328
335 - 342
>0.5g/t Au
>1.0g/t Au
>1.0g/t Au
410 – 431.75
>1.0g/t Au
INTERVAL
(m)
97.75 – 126.4
103 - 114
E zinc zone
E zinc zone
Gold analysis by 30g fire assay and base metals by ICP at generally 1 metre half core intervals. True widths are about 85% of intersection
Table 2: Summary drill core results for KPD 003 McPhillamys Prospect.
HOLE NO
EAST
NORTH
RL
(m)
AZIMUTH
INCLIN
INTCPT
GRADE
(g/t Au)
INTERVAL
(m)
EOH
(m)
COMMENTS
KPD 003
715930 629225396.30 ~950
270°
70°
incl
and
and
also
and
INTCPT
(m)
22
15
KPD 003
incl
GRADE
(%Zn)
0.83
1.07
GRADE
(%Pb)
0.14
0.19
GRADE
(g/tAg)
GRADE
(g/t Au)
3.9
4.6
0.02
0.03
1.32
1.62
3.75
5.91
2.83
4.73
134 – 396.7
396.7
0.2g/t envelope
193 – 396.7
250 - 276
262 - 271
348 – 396.7
320.9 - 334
INTERVAL
(m)
46 – 68
53 - 68
>0.5g/t Au
>1.0g/t Au
>1.0g/t Au
E zinc zone
E zinc zone
Gold analysis by 30g fire assay and base metals by ICP at generally 1 metre half core intervals. True widths are about 75/% of intersection
A major drilling program is being planned for 2008 with the aim of achieving a preliminary resource potential for McPhillamys.
A
N
N
U
A
L
R
E
P O R
T
2
0
0
7
13
(m)
349.25
224.75
51
15
52
2
7
21.75
GRADE
(g/tAg)
5.0
4.5
(m)
262.7
203.7
26
9
48.7
13.1
R E V I E W O F O P E R A T I O N S
WELLINGTON
COPPER, GOLD – NSW
Alkane Resources 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 at Galwadgere. The Identified
Mineral Resource at 31 December 2007 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
During the year a 3D IP survey was completed covering the Galwadgere
copper deposit and the immediate area of 3 kilometres by 2 kilometres. A
number of moderate to strong chargeability anomalies were generated and,
importantly, the existing Galwadgere mineralisation was clearly mapped.
Apart from Galwadgere, three well defined targets were generated. Two of
these are located near the small historic McDowells workings, while the
third is just to the east of the outcropping mineralisation (1% Cu, 14% Pb,
8% Zn, 400g/t Ag and 7.5g/t Au) at Christies. No drilling has previously
tested these areas.
The IP also clearly identified down plunge extensions to the Galwadgere
deposit not tested by Alkane’s resource drilling program. Previous core
drilling returned ~44m @ 0.7% Cu including 0.25m @ 3.00% Cu,
15.5g/t Au, 230g/t Ag at a down hole depth of 262m in core hole G040
from this zone. Other less well defined targets are located to the west and
southeast of Galwadgere.
Commitments on other major projects prevented follow up to these targets
during the year.
BODANGORA AND CUDAL
GOLD, COPPER – NSW
Alkane Resources Ltd 100% (subject to 2%NSR and buy back option
to Rio Tinto Exploration Pty Limited)
Both projects are considered to have potential for monzonite porphyry
associated gold – copper and structural gold mineralisation but as with
Wellington, commitments on other major projects limited follow up this
year
LEINSTER REGION JOINT VENTURE
NICKEL, GOLD – WA
Alkane Resources Ltd 25%, Jubilee Mines NL 75%
During the year Jubilee advised that very limited work was carried out on
any the three prospects, LEINSTER DOWNS, MIRANDA and
McDONOUGH LOOKOUT within the joint venture.
BC IRON LIMITED (BCI)
Alkane retains its 9 million shares (~15%) in BCI. During the year BCI
announced a number of very encouraging drill intercepts within the
Nullagine Channel Iron prospect. A preliminary resource estimate is
scheduled for the first quarter of 2008.
this
report
is based on
Unless otherwise stated
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.
14
A L K A N E R E S O U R C E S
L T D
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.
RISK POLICY & FRAMEWORK REVIEW
Alkane undertook a review of its risk policy and framework during 2007. Deloitte (Perth) facilitated a risk assessment workshop for Alkane Directors and staff.
Alkane is committed to actively managing risks to its operations.
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.
Alkane also maintains exploration bases in Dubbo and Orange to service the eastern Central West tenements.
There were no lost time injuries in 2007.
OH&S RESULTS 2005-2007
MAN
HRS
11,440
5,560
17,000
2005
LTIS
0
0
0
0
MINOR
INJURIES
2
0
0
2
MAN
HRS
10,800
0
10,800
2006
LTIS
0
0
0
0
MINOR
INJURIES
0
0
0
0
MAN
HRS
7,200
0
0
7,200
2007
LTIS
0
0
0
0
MINOR
INJURIES
0
0
0
0
Alkane
Contractors
Visitors
Total
ENVIRONMENTAL MANAGEMENT IN 2007
There are currently in place 19 Approvals and Licences for the mining and processing operation, access to water and for pipeline routes. There were no
breaches of environmental requirements either at the mine site or on the group’s exploration tenements in 2007.
During 2007, the mine was in compliance with all consent conditions and approvals. An Annual Environmental Management Report meeting was held on site
12 December 2007 with Parkes Shire Council, Department of Environment and Climate Change and Department of Primary Industries – Mineral Resources in
attendance.
Wet plant decommissioning continued through 2007. The carbon regeneration kiln was dismantled and transported to ANSTO Minerals for use in the Dubbo
Zirconia Project Demonstration Pilot Plant.
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.
Operation of the Open Cut Experience (tourist mine) was transferred to Parkes Shire Council in 2007. This tourism asset has the potential to continue to
generate economic activity in the local area, post mine-closure.
The Peak Hill Gold Mine, essentially on care and maintenance, is still a contributor to the local economy and community. Alkane took on three new
employees during 2007 to cope with increased exploration activity on the Tomingley Gold Project and Moorilda tenements.
Three local organizations and charities were assisted by the Peak Hill Gold Mine in 2007.
There were no complaints received by the Company in 2007.
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.
A
N
N
U
A
L
R
E
P O R
T
2
0
0
7
15
A L K A N E R E S O U R C E S L T D
F I N A N C I A L S T A T E M E N T S
16
A L K A N E R E S O U R C E S
L T D
Coarse arsenopyrite in Caloma core
D I R E C T O R S ’
R E P O R T
The directors present their report on the consolidated entity consisting of
Alkane Resources Ltd (ACN 000 689 216) and the entities it controlled at
the end of, or during, the year ended 31 December 2007.
DIRECTORS
The following persons were directors of Alkane Resources Ltd during the
whole year and up to the date of this report:
J S F Dunlop (Chairman)
D I Chalmers
I R Cornelius
I J Gandel
A D Lethlean
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 program of process optimisation for the DZP continued at the ANSTO
facilities located at Lucas Heights near Sydney. The construction of the
Demonstration Pilot Plant was completed and operation commenced early
2008. The feasibility study should be completed early to mid 2009.
Work also continues on the Orange District Exploration Joint Venture with
Newmont Australia where the significant gold discovery at McPhillamys
was enhanced by two deep diamond core drill holes late in the year.
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 2 January 2008, 25,783,436 ordinary fully paid shares were issued at
an issue price of 32 cents each. These shares were issued in accordance
with the underwriting agreement to the non-renounceable rights issue
under the Prospectus dated 19 November 2007.
At the date of signing this report, the quoted shares disclosed as available
for sale financial assets with a value of $13,680,000 have value of
$9,765,000. The decline in value of these assets has not been reflected in
the financial statements.
Other than this no other matter or circumstance has arisen since 31
December 2007 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 2007.
The net amount of consolidated loss of the economic entity for the
financial year after income tax was $1,325,615 (2006 loss $3,655,095).
LIKELY DEVELOPMENTS
DIVIDENDS
No dividends have been paid by the Company during the financial year
ended 31 December 2007, 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, where feasibility studies are in progress for the
development of the Wyoming gold deposits and the strategically important
Dubbo Zirconia Project (DZP) respectively. Further drilling is in progress on
the recently discovered Caloma deposit, adjacent to Wyoming, and a
feasibility study for the development at Tomingley is scheduled to be
completed late 2008.
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.
A
N
N
U
A
L
R
E
P O R
T
2
0
0
7
17
D I R E C T O R S ’ R E P O R T
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 (57) 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 non-executive chairman of Alliance
Resources Ltd and of Drummond Gold Ltd (appointed 1 August 2007) and
non-executive director of Gippsland Ltd. Former public company
directorships in the last three years are: 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 (59) 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 38 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.
During the last three years Mr Chalmers was also a non-executive director
of AuDAX Resources Ltd (October 1993 to February 2007) and Northern
Star Resources Ltd (May 2000 to September 2007).
IAN RAYMOND (INKY) CORNELIUS (Non-executive Director)
FAICD
Mr Cornelius (67) 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,
Austral Africa Resources Limited (appointed January 2004) and
Montezuma Mining Company Ltd (appointed August 2006).
IAN JEFFREY GANDEL (Non-executive Director)
LLB, BEc, FCPA, FAICD
Mr Gandel (50) 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. He has previously been involved
in the Priceline retail chain and the CEO chain of serviced offices.
Through his private investment vehicles, Mr Gandel has been an investor in
the mining industry since 1994. Mr Gandel 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, Western Australia and
Queensland. 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 (44) 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 (62) is a member of the Institute of Chartered Accountants in
Australia with 15 years experience in the profession and a further 28 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.
NOMINATION COMMITTEE
The Nomination Committee comprises the full Board.
18
A L K A N E R E S O U R C E S
L T D
DIRECTORS' MEETINGS
The following sets out the number of meetings of the Company's directors held during the year ended 31 December 2007 and the number of meetings
attended by each director.
There were five (5) Directors’ meetings, two (2) Audit and one (1) 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
BOARD OF DIRECTORS
AUDIT
NOMINATION
REMUNERATION
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
COMMITTEE MEETINGS
J S F Dunlop
D I Chalmers
I R Cornelius
I J Gandel
A D Lethlean
5
5
5
5
5
5
5
4
5
4
2
n/a
n/a
2
2
2
n/a
n/a
2
2
-
-
-
-
-
-
-
-
-
-
1
1
1
1
1
1
1
1
1
1
SHARE OPTIONS
Options to take up ordinary shares in the capital of Alkane Resources Ltd
have been granted as follows.
Outstanding as at the date of this report:
Unlisted options –
exercisable at 40 cents on or before 24 May 2007
Outstanding as at date of this report
Outstanding at end of the financial period
Nil
Nil
Outstanding at beginning of the financial period
500,000
Unlisted Options –
exercisable at 25 cents on or before 30 September 2008
Outstanding as at date of this report
Outstanding at end of the financial period
Granted during the financial period
(cid:129)
vesting 19 April 2007
Exercised during the financial period
Unlisted Options –
exercisable at 30 cents on or before 30 September 2009
Expired during the financial period
(500,000)
Outstanding as at date of this report
Unlisted options –
exercisable at 60 cents on or before 24 May 2007
Outstanding as at date of this report
Outstanding at end of the financial period
Outstanding at beginning of the financial period
Expired during the financial period
Unlisted Options –
exercisable at 45 cents on or before 29 May 2008
Outstanding as at date of this report
Outstanding at end of the financial period
Granted during the financial period
Exercised during the financial period
Nil
Nil
4,750,000
(4,750,000)
975,000
975,000
Nil
Nil
Outstanding at end of the financial period
Granted during the financial period
(cid:129)
vesting 19 April 2008
Exercised during the financial period
None of the existing options are listed on ASX 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.
3,350,000
3,350,000
4,200,000
4,200,000
(850,000)
4,200,000
4,200,000
4,200,000
4,200,000
Nil
A
N
N
U
A
L
R
E
P O R
T
2
0
0
7
19
D I R E C T O R S ’ R E P O R T
DIRECTORS' INTERESTS AND BENEFITS
A. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT
a)
b)
c)
d)
e)
technical services and geological consulting fees of $583,442 paid
or due and payable to Multi Metal Consultants Pty Ltd, a company 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 the
Company on an as needs basis.
consulting fees of $7,263 paid or due and payable to John S Dunlop
& Associates Pty Ltd for services provided in the normal course of
business and at normal commercial rates.
amounts of $3,600 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.
consulting fees of $8,000 and underwriting fees of $451,121 paid or
due and payable to Gandel Metals Pty Ltd, a company in which Mr
Ian Gandel has a substantial financial interest and
administration, accounting and secretarial fees of $126,000 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.
These fees and disbursements exclude benefits included in the aggregate
amount of emoluments received or due and receivable by Directors as
director’s fees and shown in the financial statements, prepared in
accordance with the Corporations Regulations, or the fixed salary of a full
time employee.
REMUNERATION REPORT
The remuneration report is set out under the following main headings:
A.
Principles used to determine the nature and amount of remuneration
B. Details of remuneration
C. Service agreements
D. Share-based compensation
E.
Additional information
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.
OF REMUNERATION (AUDITED)
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:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
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.
Director’s 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.
20
A L K A N E R E S O U R C E S
L T D
B. DETAILS OF REMUNERATION (AUDITED)
Total income received, or due and receivable,
by directors of Alkane Resources Ltd from the Company,
and any related party in connection with the management
of the Company and any related parties.
CONSOLIDATED
PARENT ENTITY
2007
$
2006
$
2007
$
2006
$
1,761,752
993,384
1,646,458
881,247
The details of directors’ remunerations paid or payable or payments to related companies for services provided are as follows:
EXECUTIVE DIRECTOR OF ALKANE RESOURCES LTD
SHORT-TERM
SHORT-TERM
BENEFITS
POST-EMPLOYMENT
BENEFITS
CASH FEES AND
BENEFITS
CASH SALARY
DISBURSEMENTS
SUPERANNUATION
LONG-TERM
BENEFITS
$
$
$
-
$
-
SHARE-BASED
PAYMENT
$
TOTAL
$
107,647
751,089
DI Chalmers
60,000
583,442*
NAME
2007
*
Technical services and geological consulting fees paid to Multi Metal Consultants Pty Ltd, a company 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 the Company on an as needs basis.
No long term or termination benefits have been paid.
NON-EXECUTIVE DIRECTORS OF ALKANE RESOURCES LTD
SHORT-TERM
SHORT-TERM
NAME
2007
J S F Dunlop
I R Cornelius
I J Gandel
A D Lethlean
BENEFITS
DIRECTORS’
CASH FEES
$
50,000
40,000
40,000
39,732
169,732
BENEFITS
POST-EMPLOYMENT
CASH FEES AND
BENEFITS
DISBURSEMENTS
SUPERANNUATION
LONG-TERM
BENEFITS
$
7,263
-
459,121*
3,600
469,984
$
-
-
-
-
-
$
-
-
-
-
-
SHARE-BASED
PAYMENT
$
TOTAL
$
107,647
107,647
48,006
107,647
370,947
164,910
147,647
547,127
150,979
1,010,663
*
Includes underwriting fees of $ 451,121 payable to Gandel Metals Pty Ltd, a company in which the director has an interest.
A
N
N
U
A
L
R
E
P O R
T
2
0
0
7
21
D I R E C T O R S ’ R E P O R T
OTHER KEY MANAGEMENT PERSONNEL
NAME
2007
L Colless
SHORT-TERM
BENEFITS
POST-EMPLOYMENT
SHORT-TERM
BENEFITS
CASH FEE
$
126,000*
CASH FEES AND
BENEFITS
DISBURSEMENTS
SUPERANNUATION
LONG-TERM
BENEFITS
$
-
$
-
$
-
SHARE-BASED
PAYMENT
$
TOTAL
$
107,647
233,647
*
Corporate administration, accounting & company secretarial fees paid to Mineral Administration Services Pty Ltd, a company with which Mr. Colless is
associated.
No long term or termination benefits have been paid.
The share-based payments referred to above comprise options over ordinary shares in the Company issued upon listing of the Company on ASX Limited and
have been valued based on the Black and Scholes option pricing model.
EXECUTIVE DIRECTORS OF ALKANE RESOURCES LTD
SHORT-TERM
SHORT-TERM
BENEFITS
POST-EMPLOYMENT
BENEFITS
CASH FEES AND
BENEFITS
CASH SALARY
DISBURSEMENTS
SUPERANNUATION
LONG-TERM
BENEFITS
$
$
15,000
-
-
521,662*
75,000
92,475**
15,000
689,137
$
-
-
-
-
$
-
80,000
-
80,000
SHARE-BASED
PAYMENT
$
-
-
-
-
TOTAL
$
536,662
155,000
92,475
784,137
NAME
2006
DI Chalmers
I R Cornelius
L A Colless
Total
*
Technical services and geological consulting fees paid to Multi Metal Consultants Pty Ltd, a company 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 the Company on an as needs basis.
** Corporate administration, accounting & company secretarial fees paid to Mineral Administration Services Pty Ltd, a company with which Mr Colless is
associated
No long term or termination benefits have been paid.
22
A L K A N E R E S O U R C E S
L T D
NON-EXECUTIVE DIRECTORS OF ALKANE RESOURCES LTD
NAME
2006
J S F Dunlop
I R Cornelius
I J Gandel
A D Lethlean
H D Kennedy
OTHER KEY MANAGEMENT PERSONNEL
NAME
2006
L Colless
SHORT-TERM
SHORT-TERM
BENEFITS
BENEFITS
POST-EMPLOYMENT
DIRECTORS’
CASH FEES AND
BENEFITS
CASH FEE
DISBURSEMENTS
SUPERANNUATION
LONG-TERM
BENEFITS
SHARE-BASED
PAYMENT
$
$
25,000
20,000
16,667
37,200
26,667
125,534
7,288
1,200
-
20,100
-
28,588
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
SHORT-TERM
BENEFITS
POST-EMPLOYMENT
SHORT-TERM
BENEFITS
CASH FEE
CASH FEES AND
BENEFITS
DISBURSEMENTS
SUPERANNUATION
LONG-TERM
BENEFITS
SHARE-BASED
PAYMENT
$
-
$
55,125*
$
-
$
-
$
-
TOTAL
$
32,288
21,200
16,667
57,300
26,667
154,122
TOTAL
$
55,125
*
Corporate administration, accounting & company secretarial fee paid to Mineral Administration Services Pty Ltd, a company with which Mr. Colless is
associated.
C. SERVICE AGREEMENTS (AUDITED)
L A COLLESS
Formal written consultancy agreements exist with companies of which the
Managing Director and key management personnel have a substantial
financial interest as detailed below
Term of agreement – on going commencing July 2006
Agreement
D I CHALMERS
Term of agreement - 2 years commencing October 2006
Consulting fees of $7,000 per month payable to Mineral Administration
Services Pty Ltd, a company in which Mr Colless has a substantial
financial interest.
Agreement
Termination
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, a company 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.
Termination
Fees of up to 6 months “Notice Amount” are payable should the
consultancy agreement with MultiMetal Consultants Pty Ltd be terminated.
Fees of up to 12 months “Notice Amount” are payable should the
consultancy agreement with Mineral Administration Services Pty Ltd be
terminated by Alkane Resources Ltd and fees of up to 6 months “Notice
Amount” are payable should the consultancy agreement be terminated by
Mr Colless.
NON – EXECUTIVE DIRECTORS
On appointment to the Board, all non-executive directors enter into a
service agreement with the company in the form of a letter of appointment.
The letter summarises the Boards policies and terms, including
compensation, relevant to the office of the director.
No performance related bonuses or benefits are provided.
A
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0
0
7
23
D I R E C T O R S ’ R E P O R T
J S F DUNLOP
Agreement
J GANDEL
Agreement
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.
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.
Termination
Termination
There is no policy in place in regard to termination benefits.
There is no policy in place in regard to termination benefits.
R CORNELIUS
Agreement
A D LETHLEAN
Agreement
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.
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.
Termination
Termination
There is no policy in place in regard to termination benefits.
There is no policy in place in regard to termination benefits.
D. SHARE-BASED PAYMENTS (AUDITED)
Options granted during the year
In the financial period, 6,000,000 unlisted options were granted to Directors and key management personnel of which 1,000,000 options were issued to the
Managing Director and 5,000,000 to Non-Executive Directors and key management personnel.
The unlisted options were granted for no consideration as an incentive bonus upon appointment to the Board. The options carry no dividend or voting rights.
In relation to the 500,000 options issued to the Managing Director and 2,500,000 options issued to Non-Executive Directors and key management personnel
these are exercisable at any time. In relation to the remaining 3,000,000 options issued to the Directors and key management personnel these are exercisable
at the vesting dates listed below. When exercised, each option is convertible into one ordinary share.
The 6,000,000 free (unlisted) options comprise:
DATE OPTIONS
GRANTED
NUMBER AND CLASS
UNDER OPTION
ISSUE /EXERCISE
PRICE OF SHARES
VALUE PER OPTION
AT GRANT DATE
EXERCISE /
EXPIRY DATES
1,000,000 Options, granted to the Managing Director, divided into two classes as follows:
19 April 2007
19 April 2007
500,000
(Tranche 1)
500,000
(Tranche 2)
$0.25
$0.30
$0.119
$0.144
4,000,000 Options, granted to the Non-Executive Directors and 1,000,000 options to the Company Secretary, as follows:
19 April 2007
19 April 2007
2,500,000
(Tranche 1)
2,500,000
(Tranche 2)
$0.25
$0.30
$0.119
$0.144
Between 19 April 2007
and 30 September 2008
Between 19 April 2008
and 30 September 2009
Between 19 April 2007
and 30 September 2008
Between 19 April 2008
and 30 September 2009
24
A L K A N E R E S O U R C E S
L T D
NAME
Directors of Alkane Resources Ltd
IR Cornelius
A D Lethlean
D I Chalmers
I J Gandel
J S Dunlop
Other key management personnel
Lindsay Colless
NUMBER OF OPTIONS GRANTED
NUMBER OF OPTIONS VESTED
2007
2006
2007
2006
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
-
-
-
-
-
-
500,000
500,000
500,000
500,000
500,000
500,000
-
-
-
-
-
-
Fair value of options granted on 19 April 2007 and expiring on 30/09/2008
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the
option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date ($0.245) and expected
price volatility (104%) of the underlying share, the expected dividend yield (nil) and the risk-free interest rate (6.01%) for the term of the option.
Fair value of options granted on 19 April 2007 and expiring on 30/09/2009
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the
option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date ($0.245) and expected
price volatility (107%) of the underlying share, the expected dividend yield (nil) and the risk-free interest rate (6.24%) for the term of the option.
SHARES ISSUED ON EXERCISE OF REMUNERATION OPTIONS
Details of ordinary shares in the company provided as a result of the exercise of remuneration options to each director of Alkane Resources Ltd and other key
management personnel of the Group are set out below.
NAME
DATE OF EXERCISE OF OPTIONS
NUMBER OF ORDINARY SHARES ISSUED ON EXERCISE OF OPTIONS
Directors of Alkane Resources Ltd
IJ Gandel
23 November 2007
500,000
The amounts paid per ordinary share by the director on the exercise of options at the date of exercise were as follows:
EXERCISE DATE
AMOUNT PAID PER SHARE
2007
2006
-
23 November 2007
$0.25
No amounts are unpaid on any shares issued on exercise of options
A
N
N
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P O R
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2
0
0
7
25
D I R E C T O R S ’ R E P O R T
E
ADDITIONAL INFORMATION – (UNAUDITED)
SHARE –BASED COMPENSATION: OPTIONS
NAME
IR Cornelius
A D Lethlean
D I Chalmers
I J Gandel
J S Dunlop
L A Colless
A
B
REMUNERATION
VALUE AT
C
VALUE AT
D
VALUE AT
E
TOTAL OF
CONSISTING OF
GRANT DATE
EXERCISE DATE
LAPSE DATE
COLUMNS B-D
$
$
$
$
OPTIONS
72.91%
71.30%
14.33%
8.77%
65.28%
46.07%
131,651
131,651
131,651
72,009
131,651
131,651
-
-
-
40,024
-
-
-
-
-
-
-
-
131,651
131,651
131,651
112,033
131,651
131,651
OPTION
EXERCISE
CONDITIONS
25c - 30 Sep 2008
30c - 30 Sep 2009
25c - 30 Sep 2008
30c - 30 Sep 2009
25c - 30 Sep 2008
30c - 30 Sep 2009
500,000
30c - 30 Sep 2009
1,000,000
25c - 30 Sep 2008
30c - 30 Sep 2009
DIRECTORS' INTERESTS IN THE SHARE CAPITAL OF THE COMPANY AS AT THE DATE OF THIS REPORT.
NAME OF DIRECTOR
SHARES HELD
SHARES HELD
OPTIONS HELD
OPTIONS HELD
DIRECTLY
INDIRECTLY
DIRECTLY
INDIRECTLY
J S F Dunlop
D I Chalmers
R Cornelius
J Gandel (a)
A D Lethlean
-
-
4,536
967,148
9,450
2,183,609
-
-
70,411,964
-
-
-
-
-
-
1,000,000
1,000,000
1,000,000
(a) Note: 25,783,436 shares were issued to Abbotsleigh Pty Ltd on 02/01/08 pursuant to an underwriting agreement
KEY MANAGEMENT PERSONNEL
Other than the Executive Director and Company Secretary, there were no other key management personnel during the financial year.
INSURANCE OF OFFICERS AND AUDITORS
During the financial year, Alkane Resources Ltd incurred premiums to insure the directors, secretary and/or officers of the Company.
The liability insured is the indemnification of the Company against any legal liability to third parties arising out of any Directors or Officers duties in their
capacity as a Director or Officer other than indemnification not permitted by law.
No liability has arisen under this indemnity as at the date of this report.
The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the Company or of any related
body corporate, against a liability incurred as such by an officer or auditor.
26
A L K A N E R E S O U R C E S
L T D
CORPORATE GOVERNANCE
In recognising the need for the highest standards of corporate behaviour
and accountability, the directors of Alkane Resources Ltd support and have
adhered to the principles of corporate governance and have established a
set of policies and manuals for the purpose of managing this governance.
The Company’s detailed corporate governance policy statement is
contained in the additional Supplementary Information section of the
annual report and can be viewed on the Company's web site at
www.alkane.com.au.
CONSOLIDATED
2007
$
2006
$
The following amounts were paid to the auditors
Auditors' remuneration
-
auditing the accounts
Non-Audit Services
-
taxation services
48,000
27,000
8,000
6,000
AUDIT INDEPENDENCE AND NON-AUDIT SERVICES
Signed in accordance with a resolution of the Directors.
D I CHALMERS
Director
Dated at Perth this 28th day of March 2008
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)
ii)
no contraventions of the auditor independence requirements of the
Act in relation to the audit of the 31 December 2007 annual financial
statements; and
no contraventions of any applicable code of professional conduct in
relation to the audit.
Frank Vrachas (Lead auditor)
Rothsay Chartered Accountants”
Dated 28 March 2008
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:
(cid:129)
(cid:129)
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.
A
N
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2
0
0
7
27
I N C O M E S T A T E M E N T
FOR THE YEAR ENDED 31 DECEMBER 2007
NOTE
CONSOLIDATED
PARENT ENTITY
2007
$
2006
$
2007
$
2006
$
Revenue from continuing operations
Rent received
Gold 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
Royalty
Audit fees
Auditor - other services
Share based remuneration
Depreciation and amortisation
Cost of quoted shares sold
Peak Hill operating expenses
Cost of assets sold
Cost of unmarketable sale
Exploration costs
Provision for quoted shares written back
Provision for depreciation/amortisation
Provision for Annual leave
Quoted shares written down
Loss before income tax
Income tax attributable
Loss for the year
Loss attributable to minority interests
Loss attributable to members of Alkane Resources 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
26
21
2
18
14
23
49,563
-
3,470
-
284,992
834,620
74,578
1,247,223
(49,638)
(33,039)
(39,460)
(330,884)
(131,250)
(85,792)
(45,306)
(65,817)
-
-
(10,865)
(119,679)
(4,477)
(48,000)
(8,000)
(904,238)
(29,365)
-
(149,163)
(15,123)
(22,518)
(443,261)
2,314
(12,636)
(26,641)
-
(2,572,838)
(1,325,615)
-
(1,325,615)
55
(1,325,560)
(25,372,742)
(26,698,302)
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)
-
-
(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)
49,563
-
3,470
-
280,827
834,620
74,578
1,243,058
(49,638)
(23,655)
(39,460)
(330,884)
(89,250)
(85,792)
(45,306)
(64,860)
-
(74,618)
(10,865)
(122,661)
(4,477)
(48,000)
(8,000)
(904,238)
(29,365)
-
(149,163)
(15,123)
(22,518)
(413,719)
2,314
(12,636)
(26,641)
-
(2,568,555)
(1,325,497)
-
(1,325,497)
-
(1,325,497)
(25,254,961)
(26,580,458)
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)
-
-
(3,815)
-
(391,767)
-
-
-
(1,950)
(4,752,833)
(3,649,754)
-
(3,649,754)
-
(3,649,74)
(21,605,207)
(25,254,961)
($0.01)
($0.02)
($0.01)
($0.02)
The above income statement should be read in conjunction with the accompanying notes.
28
A L K A N E R E S O U R C E S
L T D
B A L A N C E S H E E T
AS AT 31 DECEMBER 2007
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
Reserves
Accumulated losses
Total parent entity interest
Outside equity interests in controlled entities
Total Equity
NOTE
CONSOLIDATED
PARENT ENTITY
2007
$
2006
$
2007
$
2006
$
19
3
4
5
6
7
8
9
10
11
11
12
14
14
6,706,623
419,461
7,950
440,312
7,574,346
13,680,000
-
824,628
18,245,597
32,750,225
40,324,571
1,452,231
41,984
1,494,215
130,191
130,191
1,624,406
38,700,165
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
21,071,641
6,693,676
405,187
7,950
335,729
7,442,542
13,680,000
7,873,538
693,637
10,563,438
32,810,613
40,253,155
1,380,649
41,984
1,422,633
130,191
130,191
1,552,824
38,700,331
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
21,071,689
50,803,706
14,477,083
(26,698,302)
38,582,487
117,678
38,700,165
46,326,650
-
(25,372,742)
20,953,908
117,733
21,071,641
50,803,706
14,477,083
(26,580,458)
38,700,331
-
38,700,331
46,326,650
-
(25,254,961)
21,071,689
-
21,071,689
The above balance sheet should be read in conjunction with the accompanying notes.
A
N
N
U
A
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P O R
T
2
0
0
7
29
S T A T 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 2007
NOTE
CONSOLIDATED
PARENT ENTITY
2007
$
2006
$
2007
$
2006
$
Total equity at the beginning of the financial year
21,071,641
19,664,914
21,071,689
19,659,621
Loss for the year
Total recognised income and expense for the year
(1,325,615)
(1,325,615)
(3,655,095)
(3,655,095)
(1,325,497)
(1,325,497)
(3,649,754)
(3,649,754)
Transactions with equity holders in their capacity as equity holders:
Options exercised
Shares issued (net of costs)
Share based payments
Revaluation of Investments
313,891
4,163,165
802,847
13,674,236
18,954,139
-
5,061,822
-
-
5,061,822
313,891
4,163,165
802,847
13,674,236
18,954,139
-
5,061,822
-
-
5,061,822
Total equity at the end of the financial year
38,700,165
21,071,641
38,700,331
21,071,689
Total recognised income and expense for the year is attributable to:
Members of Alkane Resources Ltd
Minority interests
(1,325,560)
(55)
(1,325,615)
(3,655,040)
(55)
(3,655,095)
(1,325,497)
-
(1,325,497)
(3,649,754)
-
(3,649,754)
The above statement of changes in equity should be read in conjunction with the accompanying notes.
30
A L K A N E R E S O U R C E S
L T D
C A S H F L O W
S T A T E M E N T
FOR THE YEAR ENDED 31 DECEMBER 2007
NOTE
CONSOLIDATED
PARENT ENTITY
2007
$
2006
$
2007
$
2006
$
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
Net cash from operating activities
20
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
Net cash provided for investing activities
Cash Flows from Financing Activities
Proceeds from issue of shares and options
Cost of share issues
Borrowings
Net cash flow from financing activities
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
19
49,563
-
(697,505)
65,390
284,992
177,135
(120,425)
3,470
(64,825)
-
-
-
-
-
797,833
(4,149)
-
(4,149,934)
(3,417,605)
4,850,983
(475,318)
1,114,388
5,490,053
1,952,023
4,754,600
6,706,623
55,010
229,987
(1,802,197)
107,708
192,748
479,479
(737,265)
800
(53,262)
-
(9,000)
-
-
-
-
(486,945)
-
(1,795,284)
(2,343,691)
5,186,595
(124,773)
-
5,061,822
1,980,866
2,773,734
4,754,600
49,563
-
(616,919)
65,390
280,827
126,486
(94,653)
3,470
(54,825)
-
-
(2,224,009)
-
-
797,833
-
-
(1,966,958)
(3,444,489)
4,850,983
(475,318)
1,114,388
5,490,053
1,950,911
4,742,765
6,693,676
55,010
229,987
(1,747,644)
107,708
188,932
463,475
(702,532)
800
(36,898)
-
(9,000)
(703,100)
-
-
-
(487,886)
-
(1,146,367)
(2,382,451)
5,186,595
(124,773)
-
5,061,822
1,976,839
2,765,926
4,742,765
The above cash flow statement should be read in conjunction with the accompanying notes.
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N O T E S T O T H E
F I N A N C I A L
S T A T E M E N T S
FOR THE YEAR ENDED 31 DECEMBER 2007
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 Resources Ltd (“the
Company”) as an individual entity and the consolidated entity
consisting of Alkane Resources 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 Resources 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 Resources Ltd ("the
Company") as at 31 December 2007 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 to obtain benefits from its activities. Alkane Resources 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 and to unused tax losses.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements.
Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantially accepted by the balance sheet
date and are expected to apply when the related deferred income tax
asset is realised or the deferred income tax liability is settled.
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.
d)
GOODS AND SERVICES TAX (GST)
Revenues, expenses and assets are recognised net of the amount of
GST except:
(cid:129)
(cid:129)
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.
32
A L K A N E R E S O U R C E S
L T D
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 measured 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)
CASH AND CASH EQUIVALENTS
For cash flow statement presentation purposes, cash and cash
equivalents include cash on hand and deposits held at call with
financial institutions, other 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.
j)
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.
k)
FAIR VALUE ESTIMATION
The fair value of financial assets and financial liabilities must be
estimated for recognition and measurement or for disclosure
purposes.
The carrying value, less impairment provision, of trade receivables
and payables are assumed to approximate their fair values due to their
short term nature.
l)
PLANT AND EQUIPMENT
Plant and equipment is stated at historical cost less depreciation.
Depreciation is calculated on a straight line basis to write off the net
cost of each asset during their expected useful life of 3 to 5 years.
m)
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.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
1.
STATEMENT OF ACCOUNTING POLICIES (Continued)
r)
JOINT VENTURES
n)
IMPAIRMENT OF ASSETS
Assets are reviewed for impairment at each reporting date or
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher
of an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets or
groups of assets (cash- generating units)
Non financial assets, other than goodwill, that suffered an impairment
are reviewed for possible reversal of the impairment at each reporting
date.
Goodwill and intangible assets that have an indefinite useful life are
not subject to amortisation and are tested annually for impairment or
more frequently if events or changes in circumstances indicate that
they might be impaired.
o)
TRADE PAYABLES
These amounts represent liabilities for goods and services provided
to the Company prior to the end of the financial year which are
unpaid. These amounts are unsecured and are usually paid within 30
days of recognition.
p)
PROVISIONS
Provisions are recognised when the Company has a present
obligation and it is probable that an outflow of resources will be
required to settle the obligation and the amount has been reliably
estimated.
q)
LEASES
Leases of property, plant and equipment where the Company has
substantially all the risks and rewards of ownership are classified as
finance leases. Finance leases are capitalised. The Company has no
finance leases.
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating (Refer
Note 24). Payments made under operating leases (net of any
incentives received from the lessor) are charged to the income
statement on a straight-line basis over the period of the lease.
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
farm out continues to be carried forward without adjustment, unless
the terms of the farm out 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.
s)
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:
(cid:129)
(cid:129)
(cid:129)
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
34
A L K A N E R E S O U R C E S
L T D
(cid:129)
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.
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.
t)
MINERAL TENEMENTS
Superannuation
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.
u)
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.
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.
Redundancy
The liability for redundancy is provided in accordance with work place
agreements.
w) 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.
x)
EARNINGS PER SHARE
Basic earnings per share is determined by dividing the operating
profit after income tax attributable to members of Alkane Resources
Ltd by the weighted average number of ordinary shares outstanding
during the year.
v)
EMPLOYEE BENEFITS
y)
SHARE BASED PAYMENTS
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.
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.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
1.
STATEMENT OF ACCOUNTING POLICIES (Continued)
z)
NEW ACCOUNTING STANDARDS AND UIG INTERPRETATIONS
Certain new accounting standards have been published that are not mandatory for 31 December 2007 reporting periods. The Group has not applied any
of the following in preparing this financial report:
AFFECTED STANDARD
AASB 8: Operating Segments
AASB 2007-3: Amendments to Australian Accounting
Standards arising from AASB 8 [AASB5, AASB6,
AASB102, AASB 107, AASB119, AASB127, AASB134,
AASB136, AASB 1023 and AASB1038]
NATURE OF CHANGE TO
ACCOUNTING POLICY
No impact on accounting policy, affects disclosures
in relation to operating segments instead of business
and geographical segments for the financial report
ending 30 June 2010.
No impact on accounting policy,
affects disclosures only
AASB 2007-7: Amendments to Australian Accounting Standards
[AASB1, AASB2, AASB4, AASB5, AASB107 and AASB128]
No impact on accounting policy,
affects disclosures only
AASB 2007-1: Amendments to Australian Accounting Standards
arising from AASB 11
No impact on the consolidated financial report or
the parent entity financial statements
APPLICATION *
1 January 2009
1 January 2009
1 July 2007
1 March 2007
AASB 2007-4: Amendments to Australian Accounting
Standards arising from ED 151 and other amendments
No impact on accounting policy or disclosures
1 July 2007
AASB Interpretation 11: Group and Treasury Share transactions
No impact on accounting policy or disclosures
1 March 2007
*
Applicable to reporting periods commencing on or after the given date.
aa) CRITICAL ACCOUNTING ESTIMATES & JUDGEMENTS
In preparing this Financial Report the Company has been required to make certain estimates and assumptions concerning future occurrences. There is an
inherent risk that the resulting accounting estimates will not equate exactly with actual events and results.
i)
Significant accounting judgements
In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving
estimations, which have the most significant effect on the amounts recognised in the financial statements:
Capitalisation of exploration and evaluation expenditure
The Group has capitalised significant exploration and evaluation expenditure on the basis either that this is expected to be recouped through future
successful development (or alternatively sale) of the Areas of Interest concerned or on the basis that it is not yet possible to assess whether it will
be recouped.
ii)
Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates
and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the
next annual reporting period are:
Impairment of capitalised exploration and evaluation expenditure
The future recoverability of capitalised exploration and evaluation expenditure is dependent on an number of factors, including whether the Company
decides to exploit the related lease itself, or, if not, whether it successfully recovers the related exploration and evaluation asset through sale.
Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, costs of drilling and
production, production rates, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices.
As at 31 December 2007, the carrying value of exploration expenditure of the group is $18,245,597.
36
A L K A N E R E S O U R C E S
L T D
2.
a)
INCOME TAX EXPENSE
Income tax expense
Current tax
Deferred tax
CONSOLIDATED
PARENT ENTITY
2007
$
2006
$
2007
$
2006
$
-
-
-
-
-
-
-
-
b)
Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
Prima facie tax payable at 30 %
Add: tax effect of amounts which are not deductible (taxable)
in calculating taxable income
Share based payments
(1,325,615)
(397,685)
(3,655,095)
(1,096,528)
(1,325,497)
(397,649)
(3,649,754)
(1,094,926)
271,271
(126,414)
-
(1,096,528)
271,271
(126,378)
-
(1,094,926)
c)
Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 30%
10,193,198
10,066,784
10,232,077
10,105,699
d)
Unrecognised temporary differences
Deferred tax liabilities – capitalised exploration
Deferred tax assets – accrued expenses
Deferred tax assets – revenue tax losses
Net deferred tax asset not recognised
Net deferred tax asset
(5,473,679)
51,653
10,193,198
10,244,851
4,771,172
(4,361,677)
-
10,066,784
10,066,784
5,705,107
(3,169,031)
51,653
10,232,077
10,283,730
7,114,699
(2,703,060)
-
10,105,699
10,105,699
7,402,639
Deferred tax assets and liabilities have been offset as they relate to income taxes levied by the same taxation authority and there is a legally recognised
right to set off.
3.
TRADE AND OTHER RECEIVABLES (CURRENT)
Debtors including GST refunds
419,461
456,397
405,187
448,827
4. AVAILABLE FOR SALE FINANCIAL ASSETS (CURRENT)
Quoted Shares - At fair value
Opening balance at 1 January
Disposals
Net gain (loss) from fair value adjustment
Closing balance at 31 December
2,400
-
5,550
7,950
4,350
-
(1,950)
2,400
2,400
-
5,550
7,950
4,350
-
(1,950)
2,400
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
CONSOLIDATED
PARENT ENTITY
2007
$
2006
$
2007
$
2006
$
-
440,312
440,312
800,000
433,996
1,233,996
-
335,729
335,729
800,000
333,562
1,133,562
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 6.96% (2006: 6.1%)
6. AVAILABLE FOR SALE FINANCIAL ASSETS (NON-CURRENT)
Quoted Shares - At fair value
Opening balance at 1 January
Additions
Net gain (loss) from fair value adjustment
Closing balance at 31 December
9,000
-
13,671,000
13,680,000
-
9,000
-
9,000
9,000
-
13,671,000
13,680,000
-
9,000
-
9,000
The shares referred in this note are subject to ASX Limited restrictions on trading until December 2008.
7. HELD-TO-MATURITY INVESTMENTS (NON-CURRENT)
Shares in controlled entities -
carried at cost (Note 18)
Opening balance at 1 January
Closing balance at 31 December
Loans to (from) subsidiaries
At fair value
Opening balance at 1 January
Addition
Closing balance at 31 December
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
Plant & equipment acquired during year
Disposals
Depreciation during year
Closing balance at 31 December
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,865,565
5,865,565
5,865,565
5,865,565
2,740,066
2,224,007
4,964,073
2,036,966
703,100
2,740,066
(2,956,100)
7,873,538
(2,881,482)
5,724,149
1,025,304
(200,676)
824,628
791,876
64,826
(15,367)
(16,707)
824,628
975,845
(183,969)
791,876
761,447
53,263
(3,815)
(19,019)
791,876
866,996
(173,359)
693,637
670,885
54,826
(15,367)
(16,707)
693,637
827,537
(156,652)
670,885
656,649
36,899
(3,815)
(18,848)
670,885
38
A L K A N E R E S O U R C E S
L T D
CONSOLIDATED
PARENT ENTITY
2007
$
2006
$
2007
$
2006
$
9.
EXPLORATION AND DEVELOPMENT EXPENDITURE (NON-CURRENT)
Peak Hill Mine development at fair value
1
1
1
1
Peak Hill Project acquisition and exploration at fair value
Opening balance at 1 January
Expenditure during the period
Net gain (loss) from fair value adjustment
Closing balance at 31 December
Accumulated contributions to other ongoing exploration projects
at fair value
Opening balance at 1 January
Expenditure during the period
Net gain (loss) from fair value adjustment
Closing balance at 31 December
OTHER (NON-CURRENT)
1,000,000
14,545
(14,545)
1,000,000
2,630,849
5,163
(1,636,012)
1,000,000
1,000,000
14,545
(14,545)
1,000,000
500,000
5,163
494,837
1,000,000
13,538,922
3,854,913
(148,239)
17,245,596
18,245,597
13,339,911
1,531,135
(1,332,124)
13,538,922
14,538,922
8,010,198
1,671,936
(118,697)
9,563,437
10,563,438
7,755,598
882,218
(627,618)
8,010,198
9,010,199
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. TRADE AND OTHER PAYABLES (CURRENT LIABILITIES)
Trade creditors
1,452,231
570,016
1,380,649
524,564
11. PROVISIONS (CURRENT LIABILITIES)
Provision for annual leave
Provision for rehabilitation
PROVISIONS (NON-CURRENT LIABILITIES)
41,984
-
41,984
27,632
-
27,623
41,984
-
41,984
27,632
-
27,632
Provision for redundancy/long service leave
130,191
117,902
130,191
117,902
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
12. CONTRIBUTED EQUITY
Share Capital
Ordinary shares – Fully paid
Movements in ordinary share capital
Opening balance at 1 January
Rights issue
Rights shortfall
Vendor issue*
Placement
Exercise of options**
Closing balance at 31 December
Less: Costs of Issues
As per Balance Sheet
PARENT ENTITY
2007
2006
NUMBER
$
NUMBER
$
215,888,726
50,803,706
200,543,468
46,326,650
200,543,468
14,495,258
-
-
-
850,000
215,888,726
-
215,888,726
46,950,472
4,638,483
-
-
-
313,891
51,902,846
(1,099,140)
50,803,706
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
*
In 2006 the Company issued 100,000 shares to a vendor for the purchase of mineral interests within a tenement.
**
In 2007 an amount of $101,391 was transferred from Share based payments Reserve to Share Capital on exercise of options.
Terms and conditions of ordinary shares:
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholder’s
meetings. In the event of winding up of the company, ordinary shareholders rank after all other shareholders and creditors are fully entitled to any
proceeds of liquidations.
40
A L K A N E R E S O U R C E S
L T D
13. OPTIONS ON ISSUE
Options – Unlisted
Exercisable at 40 cents expiring 24 May 2007
Movements in these options:
Balance at beginning of year
Exercised during year
Expired during the year
Balance as at 31 December
Exercisable at 50 cents to 24 May 2006 and at 60 cents thereafter expiring 24 May 2007
Movements in these options:
Balance at beginning of year
Expired during the year
Balance 31 December
Exercisable at 45 cents each expiring 29 May 2008
Movements in these options:
Balance at beginning of year
Issued during year
Balance 31 December
Exercisable at 25 cents each expiring 30 Sep 2008
Movements in these options:
Balance at beginning of year
Issued during year
Exercised during the year
Balance 31 December
Exercisable at 30 cents each vesting 19 Apr 2008 expiring 30 Sep 2009
Movements in these options:
Balance at beginning of year
Issued during year
Balance 31 December
PARENT ENTITY
2007
NUMBER
2006
NUMBER
-
500,000
500,000
-
(500,000)
-
500,000
-
-
500,000
-
4,750,000
4,750,000
(4,750,000)
-
-
-
4,750,000
975,000
975,000
975,000
-
975,000
3,350,000
-
4,200,000
(850,000)
3,350,000
4,200,000
-
4,200,000
4,200,000
975,000
-
975,000
-
-
-
-
-
-
-
-
-
A
N
N
U
A
L
R
E
P O R
T
2
0
0
7
41
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
CONSOLIDATED
PARENT ENTITY
2007
$
2006
$
2007
$
2006
$
14. RESERVES AND ACCUMULATED LOSSES
(A) RESERVES
Share-based payments reserve
Movement:
Balance 1 January
Employee Option expense
Equity-settled benefits
Balance 31 December
802,847
-
802,847
-
802,847
Share Investment Revaluation Reserve
13,674,236
Movement:
Balance 1 January
Revaluation
Balance 31 December
(B) ACCUMULATED LOSSES
Balance 1 January
Loss for the year after related income tax expense
Balance 31 December
(C) NATURE AND PURPOSE OF RESERVES
-
-
-
-
-
-
-
-
-
802,847
-
802,847
-
802,847
13,674,236
-
13,674,236
13,674,236
-
-
-
-
-
-
-
-
-
-
13,674,236
13,674,236
(25,372,742)
(1,325,560)
(26,698,302)
(21,717,702)
(3,655,040)
(25,372,742)
(25,254,961)
(1,325,497)
(26,580,458)
(21,605,207)
(3,649,754)
(25,254,961)
The share based payments reserve is used to recognise the fair value of options issued to employees but not exercised and equity-settled benefits
issued in settlement of share issue costs and part consideration, in lieu of cash payment, for acquisition of mineral interests.
15. KEY MANAGEMENT PERSONNEL DISCLOSURE
A)
DIRECTORS
The names of Directors who have held office during the financial year are:
Alkane Resources Ltd
John S F Dunlop, D Ian Chalmers, Ian R Cornelius, Ian J Gandel, Anthony D Lethlean
Subsidiaries
LFB Resources NL, Kiwi Australian Resources Pty Ltd, Australasian Geo-Data Pty Ltd, Australian Zirconia Ltd
Ian R Cornelius, D Ian Chalmers, Lindsay A Colless
Skyray Properties Ltd (BVI)
L Thomas
Executives during year
D Ian Chalmers (Managing Director)
42
A L K A N E R E S O U R C E S
L T D
B) TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
a)
b)
c)
d)
e)
technical services and geological consulting fees of $583,442 paid or due and payable to Multi Metal Consultants Pty Ltd, a company 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 the Company on an as needs basis,
consulting fees of $7,263 paid or due and payable to John S Dunlop & Associates Pty Ltd for services provided in the normal course of business
and at normal commercial rates.
amounts of $3,600 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.
consulting fees of $8,000 and underwriting fees of $451,121 paid or due and payable to Gandel Metals Pty Ltd, a company in which Mr Ian
Gandel has a substantial financial interest and
administration, accounting and company secretarial fees of $126,000 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.
These fees and disbursements exclude benefits included in the aggregate amount of emoluments received or due and receivable by Directors as director’s
fees and shown in the financial statements, prepared in accordance with the Corporations Regulations, or the fixed salary of a full time employee.
C) OUTSTANDING BALANCES
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current payables – Director’s fees
a)
b)
c)
A D Lethlean
I J Gandel
J S Dunlop
d) D I Chalmers
$6,666
$6,666
$4,167
$5,000
D) DIRECTORS AND DIRECTOR-RELATED ENTITIES’ SHAREHOLDINGS
The interests of Directors and their Director related entities in shares and share options at the end of the financial period are as follows:
NAME
(1) Shares
I R Cornelius
A D Lethlean
D I Chalmers
I J Gandel
J S Dunlop
Total shares
(2) Options
I R Cornelius
A D Lethlean
D I Chalmers
I J Gandel
J S Dunlop
Total Options
*
Expired during the year
BALANCE AT
THE START
OF THE
BALANCE AT
THE END
OF THE
PURCHASED/
FINANCIAL PERIOD
ISSUED
(SOLD)
FINANCIAL PERIOD
1,299,375
-
809,738
33,245,674
-
35,354,787
1,000,000
1,000,000
1,000,000
-
-
3,000,000
-
-
-
-
-
-
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
5,000,000
(195,825)
198,000
161,946
11,377,134
-
11,541,255
(1,000,000)*
(1,000,000)*
(1,000,000)*
(500,000)
-
(3,500,000)
1,103,550
198,000
971,684
44,622,808
-
46,896,042
1,000,000
1,000,000
1,000,000
500,000
1,000,000
4,500,000
A
N
N
U
A
L
R
E
P O R
T
2
0
0
7
43
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
15. KEY MANAGEMENT PERSONNEL DISCLOSURE (Continued)
E) KEY MANAGEMENT PERSONNEL COMPENSATION
The Company has taken advantage of the relief provided by Corporations Regulation 2M.6.04 and has transferred the detailed remuneration disclosures
to the Directors’ Report. The relevant information can be found in sections A-C of the remuneration report within the Directors’ Report.
F) RELATED PARTY TRANSACTIONS
Other than, the transactions disclosed above there are no other transactions between related parties that require disclosure.
16. 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.
17. RELATED PARTY TRANSACTIONS
Directors (current)
TYPE OF TRANSACTION
RELATED PARTY DIRECTORS
TERMS AND CONDITIONS
Management consulting
Director’s retainer
Geological consulting, including
geological and technical support staff
Director’s retainer
Management consulting
Director’s retainer
Director’s consulting
Director’s retainer
Consulting
Directors’ retainer
J S F Dunlop
Normal commercial
D I Chalmers
Normal commercial
I R Cornelius
Normal commercial
I J Gandel
Normal commercial
A D Lethlean
Normal commercial
CONSOLIDATED
PARENT ENTITY
2007
$
7,263
50,000
583,442
60,000
-
40,000
8,000
40,000
3,600
39,732
2006
$
7,288
25,000
521,662
15,000
156,200
20,000
-
16,667
20,100
37,200
2007
$
7,263
50,000
468,148
60,000
-
40,000
8,000
40,000
3,600
39,732
2006
$
7,288
25,000
451,524
15,000
156,200
20,000
-
16,667
20,100
37,200
Underwriting agreement
I J Gandel
3.5% of underwritten
value (2006: 5%)
451,121
71,580
451,121
71,580
44
A L K A N E R E S O U R C E S
L T D
18. CONTROLLED ENTITIES
NAME
INC
CLASS
BOOK VALUE
EQUITY
CONTRIBUTION TO GROUP
2007
$
2006
$
2007
2006
%
%
2007
$
2006
$
Australian Zirconia Ltd
Skyray Properties Ltd
Kiwi Australian Resources Pty Ltd
LFB Resources NL
Australasian Geo-Data Pty Ltd
WA
BVI
NSW
NSW
Qld
Ord
Ord
Ord
Ord
Ord
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
(21,146)
(7,127)
-
(46,251)
(157)
(23,546)
(2,255,774)
-
(604,428)
(157)
Contribution to Group Profit (Loss) after minorities
Parent –Alkane Resources Ltd
Profit (loss) for year – group
Loans to (from) subsidiaries
Provision for loss
Parent net investment in subsidiaries
9,570,310
(7,562,337)
7,873,538
7,346,302
(7,487,718)
5,724,149
(74,681)
(1,250,879)
(1,325,560)
(2,883,905)
(771,135)
(3,655,040)
CONSOLIDATED
PARENT ENTITY
2007
$
2006
$
2007
$
2006
$
19. 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
5,788,359
918,264
6,706,623
869,684
3,884,916
4,754,600
5,775,412
918,264
6,693,676
857,849
3,884,916
4,742,765
Cash at bank bear a weighted average interest rate of 5.21% (2006: 5.08%)
20. RECONCILIATION OF NET CASH OUTFLOW FROM
OPERATING ACTIVITIES TO OPERATING LOSS AFTER INCOME TAX
Depreciation
Operating Profit (Loss)
Non-cash fair value adjustments
(cid:129)
(cid:129) Movements in Provisions
Interest Income
Share based payments
Grant received
Exploration
Loss on sale of assets
Changes in net current assets and liabilities
(cid:129)
(cid:129)
Net cash provided for operating activities
Decrease (increase) in Trade and other receivables
Decrease (increase) in Trade and other payables
(1,325,615)
(3,655,095)
(1,325,497)
(3,649,754)
16,707
24,571
-
904,238
(834,620)
443,260
11,653
36,932
602,449
(120,425)
16,730
(65,747)
-
-
-
3,227,124
3,015
(229,989)
(33,303)
(737,265)
16,707
99,189
-
904,238
(834,620)
413,719
11,653
43,640
576,319
(94,652)
16,559
2,812,872
-
-
-
391,767
3,015
(247,529)
(29,462)
(702,532)
The Company has no credit standby or financing facilities in place other than disclosed on the statement of financial position.
A
N
N
U
A
L
R
E
P O R
T
2
0
0
7
45
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
21. SHARE-BASED PAYMENTS
Set out below is a summary of the options granted during the financial period:
CONSOLIDATED AND PARENT ENTITY 2007
BALANCE
GRANTED
EXERCISED
EXPIRED
BALANCE AT
EXERCISABLE
AT THE
DURING THE
DURING THE
DURING THE
END OF THE
AT END OF
VESTED AND
EXPIRY
DATE
EXERCISE
START OF
FINANCIAL
FINANCIAL
FINANCIAL
FINANCIAL
FINANCIAL
PRICE
THE YEAR
(NUMBER)
PERIOD
(NUMBER)
PERIOD
PERIOD
PERIOD
PERIOD
(NUMBER)
(NUMBER)
GRANT DATE
Director options
10 June 2002
26 May 2003
19 April 2007
19 April 2007
Company Secretary options
19 April 2007
19 April 2007
Employee/Consultants options
30 May 2003
19 April 2007
19 April 2007
Weighted average exercise price
24 May 2007
24 May 2007
30 Sep 2008
30 Sep 2009
30 Sep 2008
30 Sep 2009
29 May 2008
30 Sep 2008
30 Sep 2009
$0.60
$0.60
$0.25
$0.30
$0.25
$0.30
$0.45
$0.25
$0.30
CONSOLIDATED AND PARENT ENTITY 2006
4,000,000
750,000
-
-
-
-
2,500,000
2,500,000
-
-
(500,000)
-
(4,000,000)
(750,000)
-
-
-
-
2,000,000
2,500,000
-
-
2,000,000
-
-
-
500,000
500,000
-
-
500,000
500,000
500,000
-
-
-
-
-
-
975,000
850,000
1,200,000
-
1,200,000
1,200,000
-
(350,000)
-
975,000
-
-
$0.50
$0.28
$0.25
$0.50
$0.30
975,000
850,000
-
$0.30
VESTED AND
BALANCE
GRANTED
EXERCISED
EXPIRED
BALANCE AT
EXERCISABLE
AT THE
DURING THE
DURING THE
DURING THE
END OF THE
AT END OF
EXPIRY
DATE
EXERCISE
START OF
FINANCIAL
FINANCIAL
FINANCIAL
FINANCIAL
FINANCIAL
PRICE
THE YEAR
(NUMBER)
PERIOD
PERIOD
PERIOD
PERIOD
PERIOD
(NUMBER)
(NUMBER)
(NUMBER)
(NUMBER)
(NUMBER)
GRANT DATE
Director options
10 June 2002
10 June 2002
26 May 2003
24 May 2007
24 May 2007
24 May 2007
$0.40
$0.60
$0.60
500,000
4,000,000
750,000
Employee/Consultants options
30 May 2003
Weighted average exercise price
29 May 2008
$0.45
-
975,000
$0.50
Options granted carry no dividend or voting rights.
When exercisable, each option is convertible into one ordinary share.
-
-
-
-
-
-
-
-
-
-
-
-
500,000
4,000,000
750,000
-
-
-
975,000
975,000
$0.50
$0.45
46
A L K A N E R E S O U R C E S
L T D
(A) DIRECTOR OPTION EXPENSE
Fair value of options granted on 19 April 2007 and expiring on 30/09/2008
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term
of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date ($0.245)
and expected price volatility (104%) of the underlying share, the expected dividend yield (nil) and the risk-free interest rate (6.01%) for the term of the
option.
Fair value of options granted on 19 April 2007 and expiring on 30/09/2009
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term
of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date ($0.245)
and expected price volatility (107%) of the underlying share, the expected dividend yield (nil) and the risk-free interest rate (6.24%) for the term of the
option.
(B) EMPLOYEE OPTION EXPENSE
Employee share options have been granted to provide long-term incentive for senior employees to deliver long-term shareholder returns. Participation in
employee share options is at the Board’s discretion and no individual has a contractual right to participate in a plan or to receive any guaranteed
benefits.
Fair value of options granted on 19 April 2007 and expiring on 30/09/2008
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term
of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date ($0.245)
and expected price volatility (104%) of the underlying share, the expected dividend yield (nil) and the risk-free interest rate (6.01%) for the term of the
option.
Fair value of options granted on 19 April 2007 and expiring on 30/09/2009
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term
of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date ($0.245)
and expected price volatility (107%) of the underlying share, the expected dividend yield (nil) and the risk-free interest rate (6.24%) for the term of the
option.
(C) EXPENSES ARISING FROM SHARE-BASED PAYMENT TRANSACTIONS
Total expenses arising from share-based payments recognised during the financial period as employee benefits expense was:
Director benefits (share options)
Employee/Consultant benefits (share options)
22. SUBSEQUENT EVENTS
CONSOLIDATED
PARENT ENTITY
2007
$
645,884
258,354
904,238
2006
$
-
-
-
2007
$
645,884
258,354
904,238
2006
$
-
-
-
On 2 January 2008, 25,783,436 ordinary fully paid shares were issued at an issue price of 32 cents each. These shares were issued in accordance with
the underwriting agreement to the non-renounceable rights issue under the Prospectus dated 19 November 2007.
At the date of signing this report, the quoted shares disclosed as available for sale financial assets with a value of $13,680,000 have a value of
$9,765,000. The decline in value of these assets has not been reflected in the financial statements.
Other than this no other matter or circumstance has arisen since 31 December 2007 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 2007.
A
N
N
U
A
L
R
E
P O R
T
2
0
0
7
47
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
23. EARNINGS PER SHARE ("EPS")
CONSOLIDATED
PARENT ENTITY
2007
$
2006
$
2007
$
2006
$
(a) Basic loss per share
Loss attributable to the ordinary equity holders of the Company
(0.01)
(0.02)
(0.01)
(0.02)
(b) Earnings used in calculating earnings per share
Loss attributable to the ordinary equity holders of the Company
(1,325,615)
(3,655,095)
(1,325,497)
(3,649,754)
2007
$
2006
$
2007
$
2006
$
The weighted average number of ordinary shares on issue
used in the calculation of basic earnings per share
200,798,126
179,716,591
200,798,126
179,716,591
The diluted earnings per share is not materially different from the basic earnings per share.
2007
NUMBER
2006
NUMBER
2007
NUMBER
2006
NUMBER
24. 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 2008 amounts of approximately $1,081,000
(2007 $1,715,000) 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.
25. FINANCIAL RISK MANAGEMENT
The Company’s activities expose it to a variety of financial risks.
Credit risk
The Company does not have any significant credit risk exposure to a single counterparty or any group of counterparties having similar characteristics.
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.
48
A L K A N E R E S O U R C E S
L T D
Interest rate risk
The Group’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods is set out in the following tables
WEIGHTED AVERAGE
EFFECTIVE
INTEREST RATE
%
VARIABLE
INTEREST
$
LESS THAN
1 YEAR
$
1 TO 2
YEARS
$
NON-INTEREST
BEARING
$
TOTAL
$
FIXED MATURITY DATE
2007
Financial assets
Cash
Interest bearing deposits
Investments
Receivables
Financial liabilities
Accounts payable
2006
Financial assets
Cash
Call deposits
Term deposits
Receivables
Financial liabilities
Accounts payable
Liquidity risk
5.76
5.87
-
-
-
5.08
6.25
6.10
-
-
2,047,577
220,062
-
-
2,267,639
-
-
853,730
-
-
-
853,730
-
-
-
200,000
-
-
200,000
-
-
-
3,884,916
1,233,996
-
5,118,912
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,659,046
20,250
13,687,950
419,461
18,786,707
6,706,623
440,312
13,687,950
419,461
21,254,346
(1,452,231)
(1,452,231)
(1,452,231)
(1,452,231)
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)
Prudent liquidity management involves the maintenance of sufficient cash, marketable securities, committed credit facilities and access to capital
markets. It is the policy of the board to ensure that the Group is able to meet its financial obligations and maintain the flexibility to pursue attractive
investment opportunities through keeping committed credit lines available where possible, ensuring the Group has sufficient working capital and
preserving the 15% share issue limit available to the Company under the ASX Listing Rules.
FINANCING ARRANGEMENTS
The Company has no financing facilities available to it.
A
N
N
U
A
L
R
E
P O R
T
2
0
0
7
49
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
26. AUDITORS REMUNERATION
CONSOLIDATED
PARENT ENTITY
2007
$
2006
$
2007
$
2006
$
Amount received or due and receivable by the auditor for:
a) Audit services
Audit and review of financial reports under the Corporations Act 2001
b)
Non Audit services
Income tax return preparation
Total remuneration of auditors
48,000
8,000
56,000
27,000
6,000
33,000
48,000
8,000
56,000
27,000
6,000
33,000
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.
50
A L K A N E R E S O U R C E S
L T D
D I R E C T O R S '
D E C L A R A T I O N
In the opinion of the Directors of Alkane Resources Ltd:
a)
the financial statements and notes set out in preceding pages are in accordance with the Corporations Act 2001 including:
i)
giving a true and fair view of the financial position of the Company and the consolidated entity as at 31 December 2007 and of their performance
for the financial year ending on that date; and
b)
c)
ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements
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 audited remuneration disclosures set out in the Directors’ Report comply with Accounting Standard AASB 124 Related Party Disclosures and the
Corporations Regulations 2001.
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, 28th March 2008
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I N D E P E N D E N T
A U D I T R E P O R T
TO THE MEMBERS OF
ALKANE RESOURCES LTD
SCOPE
The financial report comprises the income statement, statement of changes in equity, balance sheet, statement of cashflows, accompanying notes, and the
Directors’ declaration of the group comprising Alkane Resources Ltd, the Company, and the entities it controlled at 31 December 2007 or from time to time
during the financial 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. The Directors are also responsible for the remuneration
disclosures contained in the directors’ 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 in the directors’ report 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 and whether the remuneration disclosures are in accordance with
AASB 124 Related Party Disclosures.
We formed our opinion on the basis of these procedures, which included:
(cid:129)
(cid:129)
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 Resources Ltd is in accordance with the Corporations Act 2001, including giving a true and fair view of the
financial position of Alkane Resources Ltd and the consolidated entity as at 31 December 2007 and of their performance for the year ended on that date and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
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 28 March 2008
Chartered Accountants
Liability limited by the Accountants Scheme, approved under the Professional Standards Act 1994 (NSW)
52
A L K A N E R E S O U R C E S
L T D
C O R P O R A T E
G O V E R N A N C E
INTRODUCTION
In accordance with the ASX Corporate Governance Council's Principles of
Good Corporate Governance and Best Practice Recommendations ("ASX
Principles and Recommendations"), Alkane Resources Ltd ("Company")
has made it a priority to adopt systems of control and accountability as the
basis for the administration of corporate governance. Some of these
policies and procedures are summarised in this statement. Commensurate
with the spirit of the ASX Principles and Recommendations, the Company
has followed each recommendation where the Board has considered the
recommendation to be an appropriate benchmark for corporate governance
practices. Where, after due consideration, the Company's corporate
governance practices depart from a recommendation, the Board has offered
full disclosure and reason for the adoption of its own practice, in
compliance with the "if not, why not" regime.
Further information about the Company's corporate governance practices is
set out on the Company's website at www.alkane.com.au.
"IF NOT, WHY NOT" REPORTING
During the financial year ended 31 December 2007 ("Reporting Period")
the Company has followed with each of the ASX Principles and
Recommendations, other than in relation to the matters specified below.
PRINCIPLE 1
Recommendation 1.1: Formalise directors' appointments in writing.
Notification of Departure
Formal letters of appointment for the non-executive directors were not put
in place until after the Reporting Period.
PRINCIPLE 2
Recommendation 2.4: The Board should establish a Nomination
Committee.
Notification of Departure
No separate nomination committee has been established.
Explanation for Departure
The role of the nomination committee is carried out by the full Board. The
Board considers that at this stage, no efficiencies or other benefits would
be gained by establishing a separate nomination committee. To assist the
Board in fulfilling its function in this regard, it has adopted a Nomination
Committee Charter.
PRINCIPLE 9
Recommendation 9.2: The Board should establish a Remuneration
Committee.
Notification of Departure
No separate remuneration committee has been established.
Explanation for Departure
The role of the remuneration committee is carried out by the full Board.
The Board considers that at this stage, no efficiencies or other benefits
would be gained by establishing a separate remuneration committee. To
assist the Board in fulfilling its function in this regard, it has adopted a
Remuneration Committee Charter.
NOMINATION COMMITTEE
The full Board carries out the role of a nomination committee in
accordance with its Nomination Committee Charter (available on the
Company's website). It is usual practice that nomination matters are a
standing item at each Board meeting. During the Reporting Period, there
were no specific nomination related discussions at the Board meetings.
Explanation for Departure
AUDIT COMMITTEE
While the directors’ appointments were formalised through the regulatory
body and approved by shareholders, their appointments were not
formalised in writing. Shortly after the Reporting Period the letters were
signed and acknowledged and the Company now follows the
recommendation.
The Audit Committee members are Anthony Lethlean (independent Chair of
the Audit Committee), John Dunlop (independent) and Ian Gandel. The
Audit Committee held two meetings during the Reporting Period. All
Committee members were in attendance at both meetings.
While none of the Audit Committee members have financial qualifications,
they all have extensive industry knowledge and are financially literate.
Details of each of the director's qualifications are set out in the Director's
Report. Further, the Chief Financial Officer is available to assist the Audit
Committee, if necessary. The Audit Committee Charter also provides that
the Committee may seek explanations and additional information from the
Company's external auditors, without management present, when required.
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C O R P O R A T E G O V E R N A N C E
REMUNERATION COMMITTEE
Details of remuneration, including the Company’s policy on remuneration,
are contained in the “Remuneration Report” which forms of part of the
Directors’ Report.
The full Board carries out the role of a remuneration committee in
accordance with its Remuneration Committee Charter (available on the
Company's website). It is usual practice that remuneration matters are a
standing item at each Board meeting. During the Reporting Period,
remuneration related discussions occurred on two occasions. For one of
those occasions Messrs Lethlean and Cornelius were absent from the
meeting while the full Board was in attendance at the second meeting that
took place.
OTHER
SKILLS, EXPERIENCE, EXPERTISE AND TERM OF OFFICE OF EACH
DIRECTOR
A profile of each director containing the applicable information is set out in
the Directors' Report.
IDENTIFICATION OF INDEPENDENT DIRECTORS
In considering the independence of directors, the Board refers to the
information set out in Box 2.1 of the ASX Principles and Recommendations
("Independence Criteria"). To the extent that it is necessary for the Board
to consider issues of materiality, the Board refers to the thresholds for
qualitative and quantitative materiality as adopted by the Board and
contained in the Board Charter, which is disclosed in full on the
Company’s website.
Applying the Independence Criteria, the independent directors of the
Company are John Dunlop and Anthony Lethlean. Notwithstanding the
Independence Criteria, the Board considers Ian Gandel and Ian Cornelius to
be independent.
The Board considers Ian Gandel to be independent of management and the
executive of the Company. Furthermore, Mr Gandel's interests as a major
shareholder are considered to be in line with the interests of all other
shareholders.
The Board considers Ian Cornelius to be independent of management and
the executive of the Company notwithstanding his long tenure as a director
of the Company and his previous role as Executive Chairman.
STATEMENT CONCERNING AVAILABILITY OF INDEPENDENT
PROFESSIONAL ADVICE
If a director considers it necessary to obtain independent professional
advice to properly discharge the responsibility of their office as a director,
then, provided the director first obtains approval for incurring such expense
from the chairperson, the Company will pay the reasonable expenses
associated with obtaining such advice.
CONFIRMATION WHETHER PERFORMANCE EVALUATION OF THE
BOARD AND ITS MEMBERS HAVE TAKEN PLACE AND HOW
CONDUCTED
During the Reporting Period no formal evaluation of the Board and its
members was carried out. However, the composition of the Board and its
suitability to carry out the Company's objectives was discussed on an on-
going informal basis throughout the Reporting Period.
EXISTENCE AND TERMS OF ANY SCHEMES FOR RETIREMENT
BENEFITS FOR NON-EXECUTIVE DIRECTORS
There are no termination or retirement benefits for non-executive directors.
54
A L K A N E R E S O U R C E S
L T D
S H A R E H O L D E R
I N F O R M A T I O N
1.
SHARE HOLDING AT 31 MARCH 2008 - ALK
(a) DISTRIBUTION OF SHAREHOLDERS
SHARE HOLDING
1,000
1 -
1,001 -
5,000
5,001 - 10,000
10,001 - 100,000
over
100,001 -
NUMBER OF HOLDERS
FULLY PAID ORDINARY SHARES
178
830
477
1,158
205
2,848
(b) UNMARKETABLE PARCELS
There are 222 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
70,406,244
2.
TOP TWENTY SHAREHOLDERS AT 31 MARCH 2008
SHAREHOLDER
NUMBER OF SHARES
% ISSUED CAPITAL
Abbotsleigh Pty Ltd
Merrill Lynch (Australia) Nominees Pty Ltd
ANZ Nominees Limited
National Nominees Limited
Sydney Equities Pty Limited
Funding Securities Pty Ltd
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Pottercorp Pty Ltd
Riomin Australia Gold Pty Ltd
Eikofin B V B A
Lampsac Pty Ltd
JP Morgan Nominees Australia Limited
Kinane Holdings Pty Ltd
RBC Dexia Investor Services Australia Nominees Pty Limited
Victoria House Finance Limited
Aquatic Resources Limited
Spacebull Pty Limited
Sydney Equities Pty Limited
RM Dimond & Associates Pty Ltd
70,411,964
18,753,690
17,456,826
9,736,200
4,798,000
3,650,000
3,482,060
2,774,364
2,240,550
2,000,000
2,000,000
1,810,549
1,700,964
1,582,820
1,560,065
1,283,817
1,277,325
1,209,000
1,202,000
1,200,000
150,130,194
29.13
7.76
7.22
4.03
1.99
1.51
1.44
1.15
0.93
0.83
0.83
0.75
0.70
0.66
0.65
0.53
0.53
0.50
0.49
0.49
62.12
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S H A R E H O L D E R I N F O R M A T I O N
3. UNLISTED OPTIONS
OPTION HOLDING AT 31 MARCH 2008 – 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 31 MARCH 2008 – ALKAS
Total options exercisable at 25 cents each expiring 30 September 2008
Number of holders
Holdings of more than 20%
Mr Ian Cornelius
Rocky Rises Pty Ltd
Leefab Pty Ltd
Mineral Administration Services Pty Ltd
OPTION HOLDING AT 31 MARCH 2008 – ALKAU
Total options vesting 19 April 2008 and exercisable at 30 cents each
expiring 30 September 2009
Number of holders
Holdings of more than 20%
Not applicable
OPTION HOLDING AT 31 MARCH 2008 – ALKAW
Total options exercisable at 25 cents each expiring 30 September 2008
Number of holders
Holdings of more than 20%
Kyim Pty Ltd
Mr Michael Donald Sutherland & Mrs Kylie Ann Sutherland
Mineral Administration Services Pty Ltd
OPTION HOLDING AT 31 MARCH 2008 – ALKAY
Total options vesting 19 April 2008 and exercisable at 30 cents each
expiring 30 September 2009
Number of holders
Holdings of more than 20%
Kyim Pty Ltd
Desailly Investments Pty Ltd
Mr Michael Donald Sutherland & Mrs Kylie Ann Sutherland
Mineral Administration Services Pty Ltd
975,000
9
250,000
2,500,000
8
500,000
500,000
500,000
500,000
3,000,000
9
850,000
5
250,000
250,000
250,000
1,200,000
7
250,000
250,000
250,000
250,000
4.
RESTRICTED SECURITIES
As at the date of this report, there were no securities subject to restriction under the Listing Rules of ASX Limited.
5.
ON MARKET BUY-BACK
As at the date of this report, there was no current on market buy-back
56
A L K A N E R E S O U R C E S
L T D
T E N E M E N T
S C H E D U L E
TENEMENT
NUMBER
GL 5884 (Act 1904)
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 6320
EL 6700
EL 5675
EL 5830
EL 5942
EL 6085
EL 4155
EL 5851
EL 7020
EL 4022
EL 5760
EL 6111
EL 6025
EL 6091
E 46/522
E 46/523
E 46/524
M 36/303
M 36/329
M 36/330
E 36/622
P 36/1601
P 36/1602
P 36/1603
P 36/1604
P 36/1605
PROJECT
NAME
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
Wellington, NSW
Wellington, NSW
Tomingley, NSW
Tomingley, NSW
Tomingley, NSW
Tomingley, NSW
Cudal, NSW
Cudal, NSW
Cudal, NSW
Bodangora, NSW
Moorilda, NSW
Moorilda, NSW
Orange-Molong, NSW
Orange-Molong, 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
ALKANE
INTEREST %
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
0
0
0
25
25
25
25
25
25
25
25
25
OTHER INTERESTS
]
]
]
]
]
] Alkane group 100%
]
]
]
]
]
]
] Alkane group 100%
]
] Alkane group 100%
]
]
] Alkane group 100%
]
]
]
] Alkane group 100%
]
] Alkane group 100%
]
] Alkane group 100%
] Newmont Australia Ltd earning 51%
]
] Alkane group retains 60% interest
] in diamond potential
]
] Jubilee Mines NL holds 75%, Alkane diluting
] Jubilee Mines NL holds 75%, Alkane diluting
]
]
]
] Jubilee Mines NL holds 75%, Alkane diluting
]
]
]
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