Alaska Air
Annual Report 2013

Plain-text annual report

Alkane AR June13 1150_Layout 1 5/09/13 5:03 PM Page 2 ABN 35 000 689 216 Alkane AR June13 1150_Layout 1 5/09/13 5:03 PM Page 3 C O N T E N T S Company Information Chairman’s Report Review of Operations Directors’ Report Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Audit Report Corporate Governance Statement Shareholder Information Tenement Schedule 1 2 4 17 28 29 30 31 32 58 59 61 70 72 A L K A N E R E S O U R C E S L T D Alkane AR June13 1150_Layout 1 5/09/13 5:03 PM Page 1 C O M P A N Y I N F O R M A T I O N 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 D I Chalmers I J Gandel A D Lethlean SECRETARY K E Brown L A Colless REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS 65 Burswood Road Burswood WA 6100 Telephone: 61 8 9227 5677 Facsimile: 61 8 9227 8178 SHARE REGISTRY Advanced Share Registry Limited 150 Stirling Highway Nedlands WA 6009 Telephone: 61 8 9389 8033 Facsimile: 61 8 9389 7871 Website: www.advancedshare.com.au AUDITORS Rothsay Chartered Accountants Level 1, Lincoln House 4 Ventnor Avenue West Perth WA 6005 SECURITIES EXCHANGE LISTINGS Australian Securities Exchange (Perth) Ordinary fully paid shares Code: ALK OTCQX International American Depositary Receipts (ADR) Code: ANLKY Level 1 ADR Sponsor The Bank of New York Mellon Depositary Receipts Division 101 Barclay Street 22W New York NY 10286 United States of America INTERNET Internet Home Page: http://www.alkane.com.au E-mail address: mail@alkane.com.au A N N U A L R E P O R T 2 0 1 3 1 Alkane AR June13 1150_Layout 1 5/09/13 5:03 PM Page 2 C H A I R M A N ' S R E P O R T Welcome to the 2013 Alkane Resources Annual Report. This year we’re making the shift from a January – December financial year to a July – June financial year to bring the Company in line with the taxation year as we advance into a major development phase. This has necessitated an annual report for the period of January to June 2013 in order to reset the reporting schedule and as Q1 and Q2 have been surprisingly eventful, they certainly warrant a report of their own. DEVELOPMENT Alkane is a multi-commodity mining company with a series of projects at various stages of execution. We are currently developing two major projects in the Central West of NSW: the Dubbo Zirconia Project (DZP), a very large in-ground resource of rare metals and rare earths; and the Tomingley Gold Project (TGP), a medium-sized gold resource located 15 kilometres north of the Company’s successful Peak Hill Gold Mine (1996 – 2005). The last six months have heralded some exciting achievements for both projects. After a series of delays, the TGP received project approvals from the NSW Department of Planning and Infrastructure in late July 2012, with the Mining Lease granted in early 2013. Construction commenced at the TGP site following the Mining Lease grant, and is expected to take 11 months to complete. The project remains on track to move into production early 2014. The DZP remains a very exciting investment asset and enjoyed a number of successes over the period of this report. A Definitive Feasibility Study (DFS) was released in April, confirming that the DZP is both technically and financially robust over an initial 20 year life. It has EBITDA of A$5.23 billion and NPV (pre- tax) of A$1.23 billion. The Environmental Impact Statement (EIS) was also submitted in this period, delivered to the NSW Government on 28 June. The EIS document has been some 12 years in the making and covers off on the breadth of environmental issues that relate to Alkane’s presence in the Dubbo region. You can read about the details of the EIS on page 7 of this report. The DZP is currently scheduled to be commissioned in late 2015, and in full production in 2016. There is an ongoing high level of interest from industry in the output from the DZP, and Alkane continues to look for the most strategic and profitable of these potential partners. EXPLORATION A program of RC and core drilling was completed at Caloma Two within the Tomingley site, with results released periodically. The results indicate that existing gold mineralisation was more extensive than initially thought. A resource estimation, anticipated around September/October, could be incorporated into the development schedule. Projects at Bodangora, Wellington, Cudal, Calula and Peak Hill remain at various stages of exploration and evaluation. These projects will continue to add significant value to our mining portfolio, to enhance our geological and exploration knowledge in the Central West of NSW, and to create opportunities for new development projects in the coming years. ACKNOWLEDGEMENTS As always, I would like to thank my fellow directors, our consultants and exploration and operations teams and our many shareholders for their ongoing efforts in support of Alkane Resources. John S F Dunlop Chairman 2 A L K A N E R E S O U R C E S L T D Alkane AR June13 1150_Layout 1 5/09/13 5:03 PM Page 3 C H A I R M A N ' S R E P O R T ‘‘ We are currently developing two major projects in the Central West of NSW: the Dubbo Zirconia Project (DZP), a very large in-ground resource of rare metals and rare earths; and the Tomingley Gold Project (TGP), a medium-sized gold resource located 15 kilometres north of the Company’s successful Peak Hill Gold Mine (1996 – 2005).’’ A N N U A L R E P O R T 2 0 1 3 3 Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 4 R E V I E W O F O P E R A T I O N S 4 A L K A N E R E S O U R C E S L T D Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 5 R E V I E W O F O P E R A T I O N S DUBBO ZIRCONIA PROJECT (Australian Zirconia Limited (AZL) is a wholly owned subsidiary of Alkane) OVERVIEW The Dubbo Zirconia Project (DZP) is based on a large resource of zirconium, hafnium, niobium, tantalum, yttrium and rare earths, located 30 kilometres south of the large regional centre of Dubbo in the Central West of NSW. The DZP is a unique, long-life asset with a potential mine life of 70+ years. Unlike many rare earth resources, the DZP hosts an unusually high proportion of heavy rare earths, making it one of the few deposits of its kind outside China. The size and significance of the DZP is such that the resource is expected to provide up to 4-5% of annual global heavy rare earth supplies, as well as significant quantities of niobium and zirconium. The Toongi deposit hosting the mineralisation is a sub-volcanic trachyte horizontal intrusive body or lava flow approximately 900 metres by 600 metres, which was drilled out in 2000 – 2001. IDENTIFIED MINERAL RESOURCES Toongi Deposit Measured Inferred TOTAL Tonnage (Mt) 35.70 37.50 73.20 ZrO2 (%) 1.96 1.96 1.96 HfO2 (%) 0.04 0.04 0.04 Nb2O5 (%) 0.46 0.46 0.46 Ta2O5 (%) 0.03 0.03 0.03 Y2O3 (%) 0.14 0.14 0.14 REO (%) 0.75 0.75 0.75 These Mineral Resources are based upon information compiled by Mr Terry Ransted MAusIMM (Alkane Chief Geologist) 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. ORE RESERVES Toongi Deposit Proved Probable Total Tonnage (Mt) 8.07 27.86 35.93 ZrO2 (%) 1.91 1.93 1.93 HfO2 (%) 0.04 0.04 0.04 Nb2O5 (%) 0.46 0.46 0.46 Ta2O5 (%) 0.03 0.03 0.03 Y2O3 (%) 0.14 0.14 0.14 REO (%) 0.75 0.74 0.74 These Ore Reserves are based upon information compiled by Mr Terry Ransted MAusIMM (Alkane Chief Geologist) 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. The reserves were calculated at a 1.5% combined ZrO2+Nb2O5+Y2O3+REO cut-off using costs and revenues defined in the notes in ASX Announcement of 16 November 2011. 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. A N N U A L R E P O R T 2 0 1 3 5 Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 6 R E V I E W O F O P E R A T I O N S FLOWSHEET After extensive process development work from 1999 – 2003, Alkane has been working with the Australian Nuclear Science and Technology Organisation (ANSTO) since 2006 to optimise the flowsheet (see below) for production of high purity zirconium, niobium and rare earth products. In summary, the flowsheet is a selective sulphuric acid leach of the whole of ore feed (no pre-concentration), followed by solvent extraction separation of zirconium and then chemical precipitation and refining of all of the saleable products. A demonstration pilot plant (DPP) for the DZP has been operating at ANSTO Minerals’ Lucas Heights facility since 2008 and has provided proof of the project’s technical viability. To date, the DPP has recovered several tonnes of products, demonstrating the capability of the project’s flowsheet and providing material for market assessment. Operation of the DPP has also informed the feasibility studies for capital and operating cost estimates, and enabled a detailed analysis of the mass balance throughout the flowsheet. Over the past six months, operation of the DPP has continued with a focus on improving rare earth recoveries and the development of zirconia products for specific applications, and water recycling processes. 6 A L K A N E R E S O U R C E S L T D Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 7 R E V I E W O F O P E R A T I O N S ENVIRONMENTAL IMPACT STATEMENT An Environmental Impact Statement (EIS) for the DZP was submitted to the NSW Department of Planning and Infrastructure (DP&I) on 28 June 2013. The EIS contains a series of detailed and specialist socio-environmental studies that were completed under the management of principal consultants, R W Corkery & Co. These studies address a range of biophysical, social and economic issues that are critical to environmental management, maintenance and community wellbeing in the Dubbo and Toongi areas. Key areas of study include: ■ Noise and vibration ■ Air quality ■ Radiation ■ Surface water ■ Groundwater ■ Terrestrial ecology ■ Aquatic ecology ■ Aboriginal and non-Aboriginal heritage ■ Visual amenity ■ Traffic ■ Soil and land capability ■ Hazards ■ Socio-economic climate ■ Agricultural impact. Submission of the EIS represents a major step in the project development timeline for the DZP, which is considered a State Significant Development. It will be assessed for adequacy by the DP&I before going on public exhibition later this year. The determination for the EIS is expected to be finalised by mid-2014. The following table details the expected approvals process, which includes a period of public consultation and opportunities for Alkane to revise the document in response to government and community feedback. SEPTEMBER OCTOBER NOVEMBER DECEMBER JANUARY 2013 2013 2013 2014 2013 FEBRUARY 2014 MARCH 2014 JULY 2013 AUGUST 2013 INDICATIVE APPROVAL TIMELINE Review of EIS for Adequacy Response to Adequacy Submissions Public Exhibition Prepare Response to Submissions Prepare Assessment Report Determination Alkane will also use this time to finalise the project’s financing program and initiation of engineering requirements. A N N U A L R E P O R T 2 0 1 3 7 Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 8 R E V I E W O F O P E R A T I O N S DEFINITIVE FEASIBILITY STUDY The Definitive Feasibility Study (DFS) on a 400,000 tonne per annum processing operation was managed by TZ Minerals International Pty Ltd (TZMI) and completed in September 2011 (see 2011 Annual Report). That study also included an assessment of a 1 million tonne per annum operation based upon changing market conditions; the detail required to support the DFS was compiled throughout 2012. The revised results were released in April 2013, confirming the DZP as a technically and financially robust project over an initial 20 year life with EBITDA of A$5.23 billion and NPV (pre-tax) of A$1.23 billion. DUBBO ZIRCONIA PROJECT FINANCIAL SUMMARY FOR 20 YEAR LIFE IN A$ TOTAL CAPEX including EPCM and Contingency $996.4M ANTICIPATED PRODUCTION AT 1,000,000 ORE PROCESSED PER YEAR 100% 4.0% 911t Annual Revenue Annual Operating Costs Annual EBITDA IRR NPV (pre-tax) $503.5M $213.5M $290.0M 19.3% $1,235M 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 17.6% 3,997t 29.6% $149.4M 8.7% 1,967t 23.6% $118.7M 69.7% 15,827t 16.2% $81.5M 30.6% $153.9M Production 22,702t Revenue A$503.5M Zr02 Nb Metal LREO concentrate HREO concentrate 8 A L K A N E R E S O U R C E S L T D Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 9 R E V I E W O F O P E R A T I O N S Marketing RARE EARTHS AND YTTRIUM The end of Q2 in 2013 signified a positive shift in rare earth prices and demand after a very negative 12 – 18 months. It is the Company’s view that the industry will regain stability in 2014 and prices will achieve long term sustainable levels. AZL’s relationship with Memorandum of Understanding (MoU) partner Shin-Etsu Chemical focused on improving recoveries of individual rare earth elements from the two rare earth concentrates supplied by the DPP. Conversion of the MoU into a commercial toll treatment and off-take agreement would see the production of the full suite of separated rare earth oxides. As part of that agreement, Shin-Etsu would have a prior opportunity to purchase any rare earths recovered. Marketing activities in Europe have also indicated significant interest in the DZP’s rare earth output that would not be required by Shin-Etsu. ZIRCONIA AND ZIRCONIUM CHEMICALS Zirconia and zirconium chemical prices are also showing signs of recovering after being impacted by a downturn in 2012. Interest in the DZP’s zirconium output remains robust in Japan, China and Europe, with companies in key volume markets expressing interest in the DZP’s strategic significance. Zirconia products on offer from the DZP will be generally of much higher purity than the fused zirconia that is widely available on the global market, and will be a secure, long-term supply option not linked to the zircon industry thanks to the DZP’s exceptionally long mine life. Samples from the DPP are being distributed to prospective customers, and opportunities for a series of new MoUs are strong. The AZL-initiated zirconia (ZrO2) colours development facility at TZMI’s AML laboratory in Perth has commenced operation, establishing manufacturing pathways and producing a number of samples for prospective clients. An existing MoU with a European manufacturing company has been extended to 30 June 2014, with a view to developing a joint venture for the marketing of zirconium products in Europe, North America and other markets. A previous strategic decision by Alkane to move away from the zirconium oxychloride market has resulted in the planned lapse of an MoU with Mintech Chemical Industries Pty Ltd. NIOBIUM The niobium market remained stable over the last six months, with demand and price staying within a defined range established by the major Brazilian supplier, CBMM. A Joint Venture Framework Agreement recently signed with Treibacher Industrie AG (TIAG) at the end of Q2 will facilitate the production and marketing of ferro-niobium (FeNb) using niobium concentrate from the DZP. This arrangement will see AZL and TIAG form a company to process DZP niobium concentrate in Australia using TIAG’s proprietary technology, and is expected to produce over 3000 tonnes of FeNb per annum. At current prices, the agreement is expected to be worth US $90 million a year. AZL will be the sole producer of ferro-niobium in Australia once production commences in 2016. TANTALUM Tantalum is not currently considered in the DZP output, but the deposit does contain substantial concentrations. Preliminary testing for tantalum recovery was undertaken in 2012 and provided promising results; this data will need to be replicated at a much larger scale if tantalum is to be considered for commercial development. Achieving a 30% tantalum recovery would put the DZP on track to produce 100 tpa of Ta2O5 product. Y Zr Nb Ta A N N U A L R E P O R T 2 0 1 3 9 Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 10 R E V I E W O F O P E R A T I O N S INFRASTRUCTURE A program to obtain adequate and secure water supply for the DZP site commenced last year and a number of existing supply licences have been acquired. Detailed studies on site access using the existing road network and reactivation of the Dubbo to Toongi railway were completed. The EIS outlined the various rail and road options and their impacts for consideration. FINANCING In October 2012, Alkane/AZL announced that the Company had engaged Credit Suisse (Australia) Limited, Sumitomo Mitsui Banking Corporation and Petra Capital Pty Limited to provide investment banking services, including the arrangement of project financing to fund the development of the DZP. Securing the $1 billion package is expected to take up to 12 months and to coincide with final project approvals, allowing the construction program for the DZP to commence in Q1 2014. TOMINGLEY GOLD PROJECT (Tomingley Gold Operations Pty Ltd (TGO) is a wholly owned subsidiary of Alkane) OVERVIEW The Tomingley Gold Project (TGP) is a medium-sized gold resource in the Central West of NSW and is based on three deposits: Wyoming One, Wyoming Three and Caloma. The mine has a base case predicted lifespan of seven years, with a target of 10 – 12 years through additional exploration and resource definition. An estimated 380,000 ounces will be recovered at the TGP over the Project’s seven-year life, averaging approximately 55,000 ounces per annum. The gold ore will be processed through a standard carbon-in-leach (CIL) processing plant. DEVELOPMENT The Mining Lease was granted in February 2013 and construction of the mine commenced soon after, with a major focus on activities on the western side of the Newell Highway. Site earth works and concrete works are nearing completion, and all steel construction is now underway. Work on the residue storage facilities is basically complete and construction of the CIL plant and associated infrastructure is now underway. Commissioning is scheduled for early 2014. Tender documents have been prepared for the mining pre-strip and mining contracts. Mine development optimisation has also been a focus in 2013 as Alkane prepares to deal with reduced gold pricing and an anticipated reduction in operating costs. Capital and operating costs for the Project were updated in September 2012, leading to the revised capital estimate of A$116 million, including contingencies. At the end of Q2 2013, A$40.5 million had been expended on development and capital costs, including A$6.8 million for Engineering Procurement Construct Management (EPCM) expenditure. The pits were redesigned and production rescheduled based upon the in-pit Measured, Indicated and Inferred Resources. The Ore Reserves are currently being revised. The reschedule was particularly useful in smoothing gold production, but also in providing 65,000 – 70,000 ounce per annum output in the first two years to accelerate capital returns. Estimates of the cash costs (C3)* of production were revised to around A$1,000 per ounce averaged over the life of mine. * C3 cash costs: All site operating and administration costs, including state royalties, income tax, sustaining capital and head office administration, averaged over the base case seven-year operation. RESOURCE EXPANSION – TOMINGLEY GOLD PROJECT Drilling activities at Caloma continued into 2013. The major drilling program, consisting of 159 RC holes totalling 22,782 metres and 11 diamond core holes totalling 2,145 metres, was completed in March 2013. A number of substantial intercepts were reported, including: ➢ PE 873 9 metres grading 110g/t gold from 194 metres including 1 metre grading 821g/t gold from 196 metres ➢ PE 892 39 metres grading 4.52g/t gold from 150 metres including 5 metres grading 14.8g/t gold from 150 metres Geological and resource modelling has commenced, and a resource estimate is expected to be completed in Q3 or Q4 of 2013. 10 A L K A N E R E S O U R C E S L T D Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 11 R E V I E W O F O P E R A T I O N S A N N U A L R E P O R T 2 0 1 3 11 Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 12 R E V I E W O F O P E R A T I O N S IDENTIFIED MINERAL RESOURCES DEPOSIT Top Cut Sub-block Model Wyoming One Wyoming Three Caloma TOTAL MEASURED INDICATED INFERRED Tonnage (t) Grade (g/t) 2,316,553 642,468 2,690,528 5,649,549 2.2 2.0 2.3 2.2 Tonnage (t) 890,337 63,225 567,855 1,521,417 Grade (g/t) Tonnage (t) Grade (g/t) 2.2 2.0 2.1 2.1 3,117,348 102,821 2,194,490 5,414,659 1.7 1.3 1.9 1.8 Tonnage (t) 6,324,238 808,514 5,452,874 12,585,626 TOTAL Grade (g/t) 1.9 1.9 2.1 2.0 kOunces 392.4 49.9 369.4 811.7 These Mineral Resources are based upon information compiled by Mr Richard Lewis MAusIMM (Lewis Mineral Resource 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. Richard Lewis 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 are given in the ASX Report dated 25 March 2009 and 2 October 2009. ORE RESERVES DEPOSIT PROVED PROBABLE Tonnage (t) Wyoming One 1,700,000 Wyoming Three 500,000 Caloma TOTAL 1,100,000 3,300,000 Grade (g/t) 1.6 1.6 2.3 1.8 Tonnage (t) 200,000 0 100,000 300,000 Grade (g/t) 1.3 0.0 1.7 1.5 Tonnage (t) 1,900,000 500,000 1,200,000 3,600,000 TOTAL Grade (g/t) 1.6 1.6 2.2 1.8 kOunces 94.5 28.1 86.5 209.1 These Ore Reserves are based upon information compiled under the guidance of Mr Dean Basile MAusIMM (Mining One 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. The Reserves and Resources are estimated at an effective A$1,540 per ounce gold price. Dean Basile consents to the inclusion in the report of the matters based on the information in the form and context in which it appears. FINANCING The Company held 90,000 ounces of Australian dollar gold forwards to underpin the associated hedging for the Tomingley project loan facility being negotiated with Credit Suisse. In light of the recent and significant fall in the Australian dollar gold price to its lowest levels in two years, the Company took advantage of this weakness during the period by realising the value of the hedge book immediately, yielding the Company $6.8 million. The Credit Suisse facility has not progressed further at this time. Alkane has the resources available to fully fund the TGP; however, the Company remains open to the idea of securing finance from an external funder if an option with favourable terms would allow for the progression of the development program. Alternative project finance options remain under review. PEAK HILL GOLD MINE OVERVIEW The Peak Hill sulphide gold-copper orebody is located below the oxide mine area (1996 – 2005) and its potential for development is subject to ongoing review. The following resources will be reviewed to comply with the JORC 2012 standards. IDENTIFIED MINERAL RESOURCES DEPOSIT 0.5g/t gold cut off MEASURED INDICATED INFERRED Tonnage (t) Grade (g/t) Tonnage (t) Grade (g/t) Tonnage (t) Grade (g/t) Tonnage (t) TOTALS Grade (g/t) kOunces Proprietary - - 9,440,000 1.35 1,830,000 0.98 11,270,000 1.29 467.4 3.0g/t gold cut off Proprietary Tonnage (t) - Grade (g/t) - Tonnage (t) Grade (g/t) Tonnage (t) Grade (g/t) Tonnage (t) Grade (g/t) kOunces - - 810,000 4.40 810,000 4.40 114.6 These Mineral Resources are based upon information compiled by Mr Terry Ransted MAusIMM (Chief Geologist, Alkane Resources 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. 12 A L K A N E R E S O U R C E S L T D Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 13 R E V I E W O F O P E R A T I O N S OTHER EXPLORATION WELLINGTON The Wellington Project hosts the Galwadgere deposit, a small copper-gold resource with volcanogenic massive sulphide-type characteristics. The Galwadgere resource was drilled out in 2005 and an economic scoping study was run to gauge the value of further developing the project. Additional resources are required to generate acceptable returns and Alkane will continue to explore for more resources over the next few years. IDENTIFIED MINERAL RESOURCES DEPOSIT 0.5% Cu cut off Galwadgere Tonnage (t) - MEASURED Grade (% Cu) - Grade (g/t) - Tonnage (t) 2,090,000 INDICATED Grade (% Cu) 0.99 Grade (g/t) 0.3 These Mineral Resources are based upon information compiled by Mr Terry Ransted MAusIMM (Chief Geologist Alkane Resources 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. BODANGORA The Bodangora Project is located 15 kilometres north of Wellington, and about 25 kilometres north of Alkane’s Wellington (Galwadgere) project. The tenement includes part of the northern end of the Ordovician-aged Molong Volcanic Belt before being covered by younger sediments of the Great Australian Basin. Reconnaissance RC and core drilling programs in the last two years at the Glen Hollow prospect confirmed the existence of several key geological features associated with a porphyry copper-gold system. Further exploration is planned. CUDAL Cudal is located 30km west of the Cadia Valley Operations of Newcrest Mining Ltd. A limited RC drilling program has been completed at the Bowen Park prospect and the results are encouraging indicators of the potential for significant porphyry-related copper-gold mineralisation and possibly sedimentary replacement style gold-zinc mineralisation. CALULA The Calula Project is located about 25km north of Orange and straddles the structural boundary between the Ordovician-aged Molong Volcanic Belt in the west and the Silurian Hill End Trough to the east. The Ordovician hosts the major porphyry style, gold-copper deposits such as Newcrest’s Cadia-Ridgeway operations, while the Silurian volcanics host volcanogenic massive sulphide deposits (Lewis Ponds), structural gold deposits (Hill End) and the hybrid McPhillamys deposit. Alkane believes that the project is very prospective for several target styles. LEINSTER REGION JOINT VENTURE Alkane has a diluting 20% interest in this nickel-gold exploration venture, with Xstrata Nickel Australasia holding the remaining shares. The Leinster Downs project was relinquished during Q2 of 2013. The Miranda and McDonough prospects remain. A N N U A L R E P O R T 2 0 1 3 13 Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 14 R E V I E W O F O P E R A T I O N S ‘‘ Alkane is committed to compliance with all laws and regulations in relation to the environment and occupational health and safety.’’ 14 A L K A N E R E S O U R C E S L T D Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 15 R E V I E W O F O P E R A T I O N S ENVIRONMENT AND OCCUPATIONAL HEALTH AND SAFETY REVIEW Alkane is committed to compliance with all laws and regulations in relation to the environment and occupational health and safety. The Company continues to strive to improve its standards in parallel with industry-leading practice for both the Peak Hill Gold Mine decommissioning and closure, and for ongoing exploration and mine development. Alkane has contributed case studies to the NSW Minerals Council Exploration Handbook (updated in 2013). Alkane’s employees are motivated by the Company’s reputation for integrity and responsible behaviour, and this reputation also builds trust within the communities in which the Company operates. RISK POLICY AND FRAMEWORK REVIEW Alkane undertook a review of its risk management policy and framework during 2012, with external specialist consultants engaged to facilitate risk assessment workshops for Alkane directors and staff. An operational risk management co-ordinator was appointed with the responsibility of keeping the policy and framework updated subject to formal approval of policy amendments by the Board. The Company is committed to actively managing risks to its operations. Alkane brought an experienced commercial manager into the team during 2011 and appointed a full-time chief financial officer in 2012. The Operations Management Team for Tomingley Gold Operations (TGO) was assembled in the first quarter of 2013. An Operational Management Strategy has been prepared by the operations manager. A suite of management plans for TGO have been prepared by the team. Regular risk reviews continue during construction of the gold mine. OCCUPATIONAL HEALTH AND SAFETY TGO has employed a safety & training manager to implement the Mine Safety Management Plan. Construction of the TGP is bound by EPCM contractor Mintrex Pty Ltd’s Construction Safety Management Plan. A site supervisor continues to maintain the Peak Hill Gold Mine site during decommissioning. The facilities at the mine site provide support for exploration activities on the TGP 15 kilometres to the north of Peak Hill. Alkane also maintains exploration offices in Dubbo and Orange to service the Company’s tenements in Central West NSW. Exploration staff have shifted much of their attention to the TGP, Cudal and Wellington district tenements. There were no Lost Time Injuries (LTIs) in any of Alkane’s activities across exploration and mining leases during Q1 and Q2 of 2013. There were no environmental incidents on the Company’s leases during 2013. However, the Environmental Protection Authority (EPA) did investigate water (quality) supply from the Peak Hill Gold Mine to TGP. The Company’s own investigations demonstrated there were no quality issues and confirmation from the EPA is anticipated. Three complaints have been received by the Company in the first half of 2013. Two complaints related to minor property damage caused by subcontractors working on construction, and the third was a reported traffic incident where a vehicle failed to stop at a stop sign before entering Tomingley West Road from the mine site. All incidents were investigated and successfully closed out. OH&S RESULTS ON COMPANY MINERAL TENEMENTS Alkane Contractors TOTAL Man Hrs 14,427 5,805 20,232 2011 LTIs 0 0 0 Minor Injuries Man Hrs 0 0 0 16,885 9,852 26,737 2012 LTIs 0 0 0 Minor Injuries Man Hrs 2013 (Jan-Jun) LTIs Minor Injuries 0 1 1 12,620 53,544 66,164 0 0 0 0 0 0 The contractor hours in 2013 reflect construction of the Tomingley Gold Mine under the supervision of Mintrex’s Construction Safety Management Plan. An employee of one of Mintrex’s subcontractors did suffer an LTI (12 weeks off work) during construction of the water supply pipeline to Tomingley. This incident, which occurred outside of Alkane’s leases, resulted in a fractured leg. A N N U A L R E P O R T 2 0 1 3 15 Alkane AR June13 1150_Layout 1 5/09/13 5:04 PM Page 16 R E V I E W O F O P E R A T I O N S ENVIRONMENT AND COMMUNITY There are currently numerous approvals and licences in place at the TGP for mining and processing operations, access to water and pipeline routes. The Mining Lease was granted on 11 February 2013, and the Environmental Protection Licence on 20 March 2013, allowing construction to commence within the Mining Lease. There were no breaches of environmental requirements at either the mine site or on the group’s exploration tenements in 2013. Alkane has updated the Company’s website and has added content for the TGP. Links to project consent conditions, numerous management plans that provide strategies for minimising environmental impacts, and plans for rehabilitation and biodiversity enhancement on the Tomingley leases and beyond were included. A Tomingley Gold Mine Community Consultative Committee (CCC) has been formed as part of the Department of Planning and Infrastructure guidelines for mining projects. The CCC consists of an independent chair, three members of the TGO, five members of the local community, one Aboriginal representative and a Narromine Shire Council representative. During the period of this report, the CCC met twice and toured the construction site. During 2013 to date, the Company was compliant with all consent conditions and approvals. An Annual Environmental Management Report Meeting was held on site at Peak Hill on 19 July 2013 with a representative from NSW Trade and Investment and NSW EPA. The rehabilitated final landforms across the Peak Hill mine site are becoming increasingly species-rich. Several bird and mammal species, absent prior to mining (1996 – 2002), have been re-established as a result of Alkane’s revitalisation of the area. It has been agreed that Landscape Function Analysis (LFA) would be used as a tool going forwards to quantify landscape stability. Baseline LFA will be conducted in August 2013. After the closure of the Peak Hill Gold Mine, a tourist attraction that provides the public with insights into the history and practice of mining in the Peak Hill area, was opened. Called the Open Cut Experience, the site has been overseen by Parkes Shire Council since 2007. Alkane staff worked with Peak Hill Business & Tourism Association, Parkes Shire Council and Peak Hill Local Aboriginal Land Council to establish toilet facilities close to the visitor car park and the tourist mine. The Peak Hill Gold Mine, essentially on care and maintenance, is still a minor contributor to the local economy and community. In Narromine Shire, Alkane supported the Narromine Agricultural Show Society and Tomingley and Mungery Picnic Race Clubs, Narromine Men’s Shed and Narromine We Run Committee. In Parkes Shire, Alkane supported the P A & H Association, Peak Hill Pre-School Kindergarten, Peak Hill FM (community radio station), and Peak Hill Central School (Butterfly Effect). In the Dubbo local government area, Alkane supported Toongi Hall Trust with new blinds for hall windows, Dubbo Support Group – Royal Flying Doctor Service and Rotary Club of Dubbo-Western Plains Science & Engineering Challenge. 16 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 17 D I R E C T O R S ' R E P O R T The Directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Alkane Resources Ltd (ACN 000 689 216) and the entities it controlled at the end of, or during, the six month period ended 30 June 2013. DIRECTORS The following persons were Directors of Alkane Resources Ltd during the whole of the period and up to the date of this report: • • • • J S F Dunlop (Chairman) D I Chalmers I J Gandel A D Lethlean PRINCIPAL ACTIVITIES The principal activities of the Group during the course of the period were the mining of and exploration for gold, and other minerals and metals. There has been no significant change in the nature of these activities during the period. RESULTS The net amount of consolidated loss of the Group for the period after income tax was $66,418,048 (2012: profit $66,534,486). The result included impairment charges of $68,968,452, comprising a $43,891,426 impairment in relation to the Group’s gold assets and an impairment of the Group’s available- for-sale financial assets of $25,077,026. DIVIDENDS No dividends have been paid by the Group during the period ended 30 June 2013, nor have the Directors recommended that any dividends be paid. REVIEW OF OPERATIONS The Company continues to be actively involved in mineral exploration and development, focussing on its core projects at Tomingley and Dubbo in New South Wales. TOMINGLEY GOLD PROJECT (ALSO REFERRED TO AS THE TGP) The TGP is based on three defined gold resources, Wyoming One, Wyoming Three and Caloma, located 14 kilometres north of the Group’s Peak Hill Gold Mine, and approximately 50 kilometres south west of Dubbo. The gold ore will be processed through a standard carbon-in-leach processing plant. The mine has a base case predicted lifespan of seven years, with a target of 10 – 12 years through additional exploration and resource definition. An estimated 380,000 ounces will be recovered at the TGP over the project’s seven-year life, averaging approximately 55,000 ounces per annum. The Mining Lease was granted on 11 February 2013 by the NSW Department of Trade and Investment, Division of Resources and Energy. Site construction activities commenced immediately thereafter and are well advanced. Site earthworks and concrete works are nearing completion and steel construction is in progress. Commencement of the Newell Highway underpass is subject to final design approval by NSW Roads and Maritime Services. Significant rainfall was encountered during June which could impact the timetable and budget. At this stage any potential impact on the overall timetable and budget is not clear but the current schedule has plant commissioning early in 2014. Construction capital costs for the project are expected to be in line with the budget of $116.0 million, including contingencies. At the end of the June $40.5 million had been expended on development and capital costs, including $6.8 million for EPCM expenditure. The mining and processing team continues to focus on the organisation of safe and efficient operating practices for the mine. A tender process is underway for the mining pre-strip and mining equipment hire contracts. Further optimisation of the mine schedule is in progress to take into account the lower gold prices. Exploration and evaluation programs to upgrade the project’s resource and reserve inventories and to determine the potential for additional resources within the project site were completed during the period. Results from all drill holes for the drilling program at Caloma Two have been received. Geological and resource modelling has commenced and a resource estimate is anticipated to be completed by October 2013. The Caloma Two deposit is located immediately to the south of the planned Caloma open pit. A N N U A L R E P O R T 2 0 1 3 17 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 18 D I R E C T O R S ' R E P O R T DUBBO ZIRCONIA PROJECT (ALSO REFERRED TO AS THE DZP) The DZP is located in the Central West Region of New South Wales, 30 kilometres south of the city of Dubbo. The project is based upon a large in-ground resource of the metals zirconium, hafnium, niobium, tantalum, yttrium, and rare earth elements. Over several years the Group has developed a flow sheet consisting of sulphuric acid leach followed by solvent extraction recovery and refining to generate a suite of saleable products. Operation of the demonstration pilot plant (DPP) at ANSTO continued with the focus on further optimising the process and water recycling. Current programs include improving rare earth recoveries and the development of zirconia products for specific end use applications for marketing purposes. The updated Definitive Feasibility Study (DFS) was completed in April 2013 with capital and operating costs for the 1Mtpa operation. The DFS delivered a technically and financially robust project over an initial 20 years life with a pre-tax net present value of $1.23 billion. The DZP has been classified by the NSW Department of Planning and Infrastructure (DP&I) as a State Significant Project. The Environmental Impact Statement (EIS) was lodged with the NSW Department of Planning and Infrastructure on 28 June 2013, and will be assessed against the requirements issued by the Director General of DP&I prior to public exhibition as part of the approvals process. A Joint Venture Framework Agreement was executed in July 2013 with Treibacher Industrie AG replacing the existing Memorandum of Understanding (MoU). The Joint Venture will produce and market ferro-niobiun (FeNb) using all of the niobium concentrate from the DZP. Work with the Group’s MoU partner Shin-Etsu Chemical Co (Shin Etsu), is focussing on improving recoveries of individual rare earth elements from the concentrates supplied by the DPP. Conversion of this MoU into a commercial toll treatment and off-take agreement would provide the full suite of separated rare earth oxides. Marketing effort to secure off take agreements in Europe and Japan for product not required by Shin-Etsu has been further advanced. Recent marketing trips to Japan, China and Europe have confirmed significant interest in the DZP zirconium output for the key volume markets targeted by DZP zirconia. Until now the majority of world zirconium products have relied on downstream processing of zircon to produce either fused zirconia or chemical zirconia, with China supplying ~75% of all products. In all cases, there is a very good appreciation of the strategic significance of the DZP which is independent of the zircon supply chain and traditional downstream suppliers. This interest is being supported by distribution of samples from the DPP for testing by potential customers. Successful testing is expected to provide opportunities for additional MOUs and letters of intent with leading companies to purchase DZP zirconium products. The MoU with the European manufacturing and trading company that specialises in advanced ceramic materials has been extended to 30 June 2014. This MoU is the precursor to a joint venture to market zirconium products in Europe, North America and other defined markets. The MoU with Mintech Chemical Industries Pty Ltd to produce and market zirconium oxychloride (ZOC) has been allowed to lapse in keeping with AZL’s revised strategy not to target the ZOC market. Zircon demand and prices are showing signs of recovery, and flow on to the downstream zirconium industry is anticipated through the second half of 2013. The financing program led by Sumitomo Mitsui Banking Corporation and Credit Suisse is advancing with a high level review of the technical and financial components of the project to assist with definition of potential strategic partners; potential sources of ECA (Export Credit Agency) funding; and the commercial debt carrying capacity. OTHER EXPLORATION PROJECTS The Group has continued exploration and evaluation activities on its other New South Wales projects. In particular reconnaissance and follow up drilling programs have been conducted within the Bodangora and Cudal projects. Project review and target evaluations have continued at Wellington, Cudal, Calula and Peak Hill. CORPORATE As a result of materially lower gold prices and in accordance with Australian accounting standards, non-cash impairment charges of $43.9M net of taxes are to be recorded as impairments of exploration, evaluation and mine development assets relating to the Group’s gold interests, including the Tomingley Gold Project. At current gold prices the TGP will still generate strong operating cash flows from commissioning in early 2014. The Company is of the firm belief that the operation contains significant resource/mine life upside not reflected in this valuation which is based on the existing life-of-mine and which will be unlocked through additional drilling and resource identification (for example Caloma Two). An additional $25.1M charge relating to impairment to fair value of the Group’s investment in Regis Resources Limited (RRL) will also be recorded in accordance with Australian accounting standards. RRL, which closed at $2.89 on the last trading day of the reporting period, is currently trading significantly higher. During the period, the Company took advantage of a brief window of price strength to sell 3,284,689 RRL shares for net proceeds of $13.6M. While the Company is writing down the carrying value of these assets, there are other assets within the Alkane portfolio, such as the DZP, that the Company believes have a market value much greater than their current carrying value. 18 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 19 D I R E C T O R S ' R E P O R T CORPORATE (Continued) The Company has effected a change of financial year from a January-December year to July-June in order to synchronise the Group’s financial reporting and taxation periods thus leading to overall cost savings and aligning the Group with the majority of its Australian peers as the Tomingley Gold Operation and Dubbo Zirconia Project move closer to production. SIGNIFICANT CHANGES IN STATE OF AFFAIRS In February 2013, the Group was advised by the NSW Department of Trade and Investment, Division of Resources and Energy that the Mining Lease for the Tomingley Gold Project was approved. Construction activities commenced shortly thereafter and continued throughout the period. During the period, the Group sold 3,284,689 shares in Regis Resources Limited for proceeds of $13,577,739 net of transaction fees, resulting in a loss on sale of $4,162,491. The state of affairs of the Group, were not affected by any other significant changes during the period. EVENTS SUBSEQUENT TO BALANCE DATE Since balance date the Group has sold 9,215,311 shares in Regis Resources Limited for proceeds of $35,361,318 net of transaction fees. No other matter or circumstance has arisen since 30 June 2013 that has significantly affected, or may significantly affect (a) (b) (c) the Group’s operations in future financial years, or the results of those operations in future financial years, or the Group’s state of affairs in future financial years. LIKELY DEVELOPMENTS The Group intends to continue exploration activities on its existing tenements, to seek opportunities to acquire further tenements for exploration, to seek other areas of investment in the resources industry and to develop the resources on its tenements. Refer to the Review of Operations for further detail on planned developments. ENVIRONMENTAL REGULATION The Group is subject to significant environmental regulation in respect of its exploration, development, construction and mining activities as set out below. MINING AND CONSTRUCTION ACTIVITIES During the period, there were no breaches of the requirements relating to certain environmental restrictions at the Group’s mine site at Peak Hill or the construction site at the Tomingley Gold Project. Management is working with the NSW and Department of Primary Industries and the Office of Environment and Heritage to ensure compliance with all licence conditions. The Group employs a full time environmental manager to oversee the Group’s environmental activities. EXPLORATION ACTIVITIES The Group is subject to environmental controls and licence conditions on all its mineral exploration tenements relating to any exploration activity on those tenements. No breaches of any licence were recorded during the year. GENERAL The Group aspires to the highest standards of environmental management and insists its entire staff and contractors maintain that standard. A N N U A L R E P O R T 2 0 1 3 19 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 20 D I R E C T O R S ' R E P O R T INFORMATION ON DIRECTORS John Stuart Ferguson Dunlop – Non-Executive Chairman BE (Min), MEng Sc (Min), FAusIMM (CP), FIMM, MAIME, MCIMM Appointed director and Chairman 3 July 2006 Mr Dunlop is a consultant mining engineer with over 40 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 current chairman MICA (Mineral Industry Consultants Association). Mr Dunlop is non-executive chairman of Alliance Resources Limited (appointed 30 November 1994) and a non-executive director of Copper Strike Limited (appointed 9 November 2009). During the last three years he was also a non-executive director of Drummond Gold Limited (1 August 2008 – 15 July 2010) and a director of Gippsland Limited (1 July 2005 – 12 July 2013). Mr Dunlop is a member of the Audit Committee and chairman of the Remuneration and Nomination Committees. David Ian (Ian) Chalmers – Managing Director MSc, FAusIMM, FAIG, FIMMM, FSEG, MSGA, MGSA, FAICD Appointed director 10 June 1986, appointed Managing Director 5 October 2006 Mr Chalmers 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 40 years, during which time he has had experience in all facets of exploration and mining through feasibility and development to the production phase. Mr Chalmers was Technical Director until his appointment as Managing Director in 2006, overseeing the Company’s minerals exploration efforts across New South Wales, Western Australian, Indonesia and New Zealand and the development and operations of the Peak Hill Gold Mine (NSW). Since taking on the role of chief executive he has steered the Company through to the construction and development phase at the Tomingley Gold Project and to the threshold of development of the world class Dubbo Zirconia Project. Mr Chalmers is a member of the Nomination Committee. Ian Jeffrey Gandel – Non-Executive Director LLB, BEc, FCPA, FAICD Appointed director 24 July 2006 Mr Gandel 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, through his private investment vehicles, now holds and explores tenements in his own right in Victoria, Western Australia and New South Wales. Mr Gandel is also a non-executive director of Alliance Resources Ltd (appointed 15 October 2003), non-executive chairman of Gippsland Limited (appointed 24 June 2009) and non-executive chairman of Octagonal Resources Limited (appointed 10 November 2010). Mr Gandel is a member of the Audit, Remuneration and Nomination Committees. Anthony Dean Lethlean – Non-Executive Director BAppSc (Geology) Appointed director 30 May 2002 Mr Lethlean is a geologist with over 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 is currently a director of Helmsec Global Capital Limited (Mr Lethlean is a substantial shareholder in Helmsec Global Capital Limited). Mr Lethlean is a non-executive director of Alliance Resources Limited (appointed 15 October 2003). Mr Lethlean is chairman of the Audit Committee and a member of the Remuneration and Nomination Committees. 20 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 21 D I R E C T O R S ' R E P O R T JOINT COMPANY SECRETARIES Karen E V Brown BEc (hons) Ms Brown is a director and company secretary of Mineral Administration Services Pty Ltd which provides company secretarial, corporate administration and accounting services to the Company. She has considerable experience in corporate administration of listed companies over a period of some 26 years, primarily in the mineral exploration industry. She is currently company secretary of publicly listed Excelsior Gold Limited and General Mining Corporation Limited. Lindsay Arthur Colless CA, JP (NSW), FAICD Mr Colless is a member of the Institute of Chartered Accountants in Australia with over 15 years’ experience in the profession and a further 35 years’ experience in commerce, mainly in the mineral and petroleum exploration industry in the capacities of financial controller, company secretary and director. Mr Colless is also a director of Mineral Administration Services Pty Ltd. DIRECTORS' MEETINGS The following sets out the number of meetings of the Company's Directors (including meetings of Board committees) held during the period ended 30 June 2013 and the number of meetings attended by each director. MEETINGS OF THE BOARD OF DIRECTORS AUDIT NOMINATION REMUNERATION MEETINGS OF COMMITTEES HELD ATTENDED HELD ATTENDED HELD ATTENDED HELD ATTENDED 6 6 6 6 6 6 6 6 1 n/a 1 1 1 n/a 1 1 0 0 0 0 0 0 0 0 1 n/a 1 1 1 n/a 1 1 DIRECTOR J S F Dunlop D I Chalmers A D Lethlean I J Gandel SHARES UNDER OPTION There were no unissued ordinary shares of Alkane Resources Ltd under option at the date of this report. Options over 4,000,000 unissued ordinary shares expired during the period. No options over unissued ordinary shares were exercised during the period. REMUNERATION REPORT The remuneration report is set out under the following main headings: A. B. Review of remuneration arrangements Principles used to determine the nature and amount of remuneration C. Details of remuneration D. Service agreements E. Share-based compensation The information provided in the remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. The 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. A. REVIEW OF REMUNERATION ARRANGEMENTS The Group is in the process of a transformation with the Tomingley Gold Project moving into production and the Dubbo Zirconia Project progressing from feasibility into development. As a result, the Board recognises the need to review and update the remuneration arrangements of the Group to ensure continuing alignment with typical market practice, and to ensure that the remuneration framework best supports the strategic direction of the business and its future needs. Shortly after year-end, the Board engaged external advisors PwC to undertake a comprehensive review of the Group’s key management personnel remuneration practices, including executive and non-executive Directors. It is anticipated that this review will result in significant changes to the Group’s remuneration framework, with the new remuneration structure to be implemented in the 2014 financial year. A N N U A L R E P O R T 2 0 1 3 21 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 22 D I R E C T O R S ' R E P O R T A. REVIEW OF REMUNERATION ARRANGEMENTS (Continued) The key initiatives under this review, taking into account the transformation the Group is undertaking, are: • • • developing an overarching key management personnel remuneration framework to formalise reward structures and to establish a framework to guide remuneration practices going forward; design of a new short-term incentive (STI) plan to drive the collective efforts of the workforce in realising the short-term business strategy; and design of a new equity-based long-term incentive (LTI) plan for executives to encourage long-term sustainable performance. Overview of the Group’s approach to Executive remuneration in the 2014 financial year and beyond Taking into consideration the independent advice obtained from PwC, the Board is currently in the process of finalising a new executive remuneration structure to be implemented in the 2014 financial year. The objective of the Group’s executive reward structure is to ensure reward for performance is competitive and appropriate for the results delivered. The new structure will align executive reward with achievement of key strategic objectives and the creation of value for shareholders, and will reflect current market practice for delivery of reward. The Board aims to ensure that executive reward practices are aligned with the following key criteria for good reward governance practices to ensure that executive remuneration is: • • • • competitive and reasonable, enabling the Group to attract and retain key talent; aligned to the Group’s strategic and business objectives, and the creation of shareholder value; transparent; and aids in capital management needs. Fixed remuneration During the 2013 financial year, benchmarking of executives’ fixed remuneration was conducted against a custom peer group of ASX-listed resources companies to ensure remuneration levels set for financial year 2014 meet the objectives of the Group and are aligned to broader market trends within the industries it operates for comparable roles. It is the Group’s policy to position fixed remuneration at the median of the relevant peer group. The outcome of the benchmarking exercise showed that executives’ fixed remuneration levels were largely positioned around the median and as such, no increases have been made to fixed remuneration for financial year 2014. Short-term incentives To align with typical market practice and to provide a competitive total remuneration package, the Board has previously implemented a STI plan to motivate and reward executives for the achievement of the short-term business strategy. The existing plan will be updated as part of the review of the Group’s overall remuneration arrangements. Quantum offered under the STI plan will be expressed as a set percentage of base salary, with executives’ performance assessed against metrics contained within a weighted scorecard over a 12-month period. Metrics within the weighted scorecard will be cascaded from the business strategy and the selected metrics will be relevant to the participant’s level and role within the organisation. The details of the new STI structure and the specific metrics (and respective weightings) to be included in executives’ weighted scorecards are yet to be finalised, however the Group will disclose details of the final Board-approved STI plan structure, the metrics used to assess performance, and the actual performance achieved to trigger payouts to executives in the remuneration report for the 2014 financial year on a look-back basis to enable shareholders to assess the reasonableness of any payouts. The Board is cognisant of the need to conserve cash for business operations and further exploration activities. As such, STI payouts will be delivered in the form of Performance Rights. Performance Rights granted will vest subject to the satisfaction of a service period such that the rights will lapse where the participant fails to remain employed throughout the service period and as at the date of vesting. The Board believes that the deferred vesting of Performance Rights will aid in the retention of employees during this critical stage of growth. Long-term incentives The Board has also decided to review the approach to the delivery of equity to executives. The details of the new LTI program are being finalised by the Board, however it is anticipated that LTI grants will be made to executives on an annual basis to align with typical market practice, and to align executives interests with those of shareholders and the generation of long-term sustainable value. The value of grants made under the plan will be made with reference to a set percentage of base salary, with executives’ performance assessed against pre- determined performance hurdles over a three-year period. The performance hurdles will be a combination of market (i.e. share price driven) and non-market (i.e. internal) hurdles. 22 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 23 D I R E C T O R S ' R E P O R T A. REVIEW OF REMUNERATION ARRANGEMENTS (Continued) Overview of the Group’s approach to non-executive Director remuneration in the 2014 financial year and beyond Non-executive Director fees will continue to be benchmarked to determine the competitiveness of current fee arrangements. The Board will use the results of the benchmarking exercise to determine the quantum and structure of non-executive Director fees going forward. Where non-executive Director fees fall below market level, the Board may elect to bring fees in line with market through awards of equity, rather than through an increase in cash fees. While it is important to provide competitive fees to ensure that high calibre individuals with the requisite expertise and experience can be attracted to the Board, the Board remains cognisant of the need to conserve cash for business operations. B. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION (AUDITED) The objective of the Group's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms to market best practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward corporate governance practices: • • • • • Competitiveness and reasonableness Acceptability to shareholders Performance linkage and alignment of executive compensation Transparency Capital management The Group has structured an executive remuneration framework that is market competitive and complementary to the reward strategy for the organisation. The Remuneration Committee comprises of a minimum of three members and shall be chaired by an independent Director. Currently the Committee comprises Mr Dunlop, Mr Lethlean and Mr Gandel. The function of the Committee is to assist the Board in fulfilling its corporate governance responsibilities with respect to remuneration by reviewing and making appropriate recommendations to the Board on remuneration packages of Directors and senior executives, and employee incentive and equity-based plans including the appropriateness of performance hurdles and total payments proposed. 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. Non-executive Directors’ fees Directors' fees are determined within an aggregate Directors' fee pool limit (currently $700,000 per annum), which is periodically recommended for approval by shareholders. This amount is separate from any specific consulting tasks the Directors may take on for the Group. The Group has no performance based remuneration component built into director and executive remuneration packages. C. DETAILS OF REMUNERATION (AUDITED) The details of remuneration of the Directors and key management personnel are set out in the following tables. The key management personnel of Alkane Resources Ltd are the following: • • L A Colless - Joint Company Secretary K E Brown - Joint Company Secretary • M Ball - Chief Financial Officer A N N U A L R E P O R T 2 0 1 3 23 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 24 D I R E C T O R S ' R E P O R T C. DETAILS OF REMUNERATION (AUDITED) (Continued) Director and Key Management Personnel Remuneration NAME 2013 (6 Months) Executive Director D I Chalmers Non-Executive Directors J S F Dunlop I J Gandel A D Lethlean Sub-Total Directors Other Key Management Personnel L A Colless and K E Brown M Ball Total Key Management Personnel Compensation 2012 (12 Months) Executive Director D I Chalmers Non-Executive Directors J S F Dunlop I J Gandel A D Lethlean Sub-Total Directors Other Key Management Personnel L A Colless and K E Brown M Ball Total Key Management Personnel Compensation SHORT-TERM POST-EMPLOYMENT SHARE-BASED EMPLOYEE BENEFITS: BENEFITS: CASH SALARY AND FEES SUPERANNUATION $ $ PAYMENTS: SHARES $ TOTAL $ 180,000 16,200 41,500 237,700 63,073 42,500 43,750 329,323 163,544 a 141,785 634,652 5,677 - - 21,877 - 11,250 33,127 360,000 32,400 99,905 75,000 77,500 612,405 276,704 a 44,557 933,666 6,595 - - 38,995 - 4,010 43,005 - - - 41,500 - - 41,500 - - - - - 68,750 42,500 43,750 392,700 163,544 a 153,035 709,279 392,400 106,500 75,000 77,500 651,400 48,300 - 48,300 325,004 a 48,567 1,024,972 a Corporate administration, accounting & company secretarial fees paid to Mineral Administration Services Pty Ltd, a company with which Mr Colless and Mis Brown are associated. No long term or termination benefits were paid in the period. D. SERVICE AGREEMENTS (AUDITED) An engagement contract with the Managing Director and formal written consultancy agreements with companies of which key management personnel have a substantial financial interest are in existence and are detailed below. D I CHALMERS Term of agreement - 2 years commencing 1 July 2013 Agreement Engagement as Managing Director at a salary of $360,000 per annum plus statutory superannuation. Termination The Managing Director’s engagement may be terminated by agreement between the Company and the Managing Director upon such terms as they mutually agree. A payout of six months fees or the remainder of the term of the contract (whichever is greater) is payable should the Company be taken over and there is no equivalent role and/or the Managing Director elects to terminate his employment contract. 24 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 25 D I R E C T O R S ' R E P O R T D. SERVICE AGREEMENTS (AUDITED) (Continued) L A COLLESS AND K E BROWN Term of agreement – on-going commencing July 2006 Agreement Consulting fees are payable by the Company and its subsidiaries to Mineral Administration Services Pty Limited, a company in which Mr Colless and Ms Brown have substantial financial interests. Termination 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 six months “Notice Amount” are payable should the consultancy agreement be terminated by Mineral Administration Services Pty Ltd. 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 Board’s policies and terms, including compensation, relevant to the office of the director. No performance related bonuses or benefits are provided. J S F DUNLOP Agreement Salary payable, inclusive of superannuation, of $125,000 per annum plus $12,500 for committee membership ($5,000 per annum for membership of specified Board committee and $7,500 for chairmanship of committee) plus per diem of $1,500 per day up to 4 days per month averaged over a 12 month rolling period for consulting services over and above normal director duties. There were no per diem amounts paid during the period. Termination There is no policy in place in regard to termination benefits. I J GANDEL Agreement Retainer payable to Gandel Metals Pty Ltd in which Mr Gandel has a substantial financial interest of $75,000 per annum plus $10,000 per annum for membership of specified Board committees ($5,000 per annum for each committee) plus per diem of $1,500 per day up to 4 days per month for consulting services over and above normal director duties. There were no per diem amounts paid during the period. Termination There is no policy in place in regard to termination benefits. A D LETHLEAN Agreement Retainer payable to Rocky Rises Pty Ltd, in which Mr Lethlean has a substantial financial interest, of $75,000 per annum plus $12,500 for committee memberships ($5,000 per annum for membership of specified Board committee and $7,500 for chairmanship of committee) plus per diem of $1,500 per day up to 4 days per month for consulting services over and above normal director duties. There were no per diem amounts paid during the period. Termination There is no policy in place in regard to termination benefits. A N N U A L R E P O R T 2 0 1 3 25 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 26 D I R E C T O R S ' R E P O R T E. SHARE-BASED PAYMENTS (AUDITED) Performance Rights Plan On 17 May 2011, shareholders approved the Alkane Resources Performance Rights Plan. This employee incentive scheme was designed to assist in the recruitment, reward, retention and motivation of Eligible Employees. Non-executive Directors are excluded from participation in the Plan. The Board may from time to time in its absolute discretion decide that an Eligible Employee is eligible to participate in the Plan and may invite them to apply for Performance Rights. Each Performance Right will represent a right to acquire one Share, subject to the terms of the Plan. Each invitation will set out, amongst other things, the number of Performance Rights the Eligible Employee is invited to apply for, the performance criteria to which those Performance Rights will be subject, and the period of time over which the Performance Criteria must be satisfied (Performance Period), before the Performance Rights can vest. A Performance Right granted to a Participant under the Plan is granted for no consideration. If Performance Rights vest under the Plan, no amount is payable by a Participant in respect of those Performance Rights vesting, or the subsequent issue of shares in respect of them. A Participant does not have a legal or beneficial interest in any Share by virtue of acquiring or holding a Performance Right. A Participant's rights under a Performance Right are purely contractual and personal. In particular, a Participant is not entitled to participate in or receive any dividends or other shareholder benefits until the Performance Right has vested and a share has been issued to the Participant. A Performance Right granted to a Participant will vest: • • at the end of the Performance Period upon the Board giving written notice to the relevant Participant of the number of Performance Rights in respect of which the Performance Criteria were satisfied over the Performance Period; or if the Board allows early vesting as a result of an event such as a takeover bid or scheme of arrangement. A Performance Right granted will lapse on the earliest to occur of: • • • • • • the end of the Performance Period if the Performance Criteria relating to the Performance Right have not been satisfied; the Participant purporting to transfer a Performance Right or grant a security interest in or over, or otherwise purporting to dispose of or deal with, a Performance Right or interest in it (except where the Board has consented to a transfer or the Performance Right is transferred by force of law upon death to the Participant's legal personal representative or upon bankruptcy to the Participant's trustee in bankruptcy); the Participant ceasing employment (except in certain circumstances classified as a Qualifying Reason); if in the opinion of the Board, the Participant has acted fraudulently or dishonestly or in breach of his or her obligations to the Company or any of its subsidiaries, and the Board determining that the Performance Rights held by the Participant should lapse; an event such as a takeover bid or scheme of arrangement occurring (in certain circumstances subject to the Board's discretion); and the date that is seven years after the grant of the Performance Right. Although the Board has discretion to determine the number of Performance Rights granted to an Eligible Employee, broadly, the maximum number of securities which may be issued under the Plan (and any other employee share scheme operated by the Company) in a 5 year period is limited to 5% of the issued Shares of the Company (calculated at the date of the invitation under the Plan), subject to a range of exclusions, including, for example, securities issued under a disclosure document or issues that do not require disclosure under Chapter 6D of the Corporations Act because of section 708 of the Corporations Act. No Performance Rights have been issued under the Plan during the year or to the date of this report. Shares granted during the year 100,000 shares were issued to the Managing Director during the year. The issue of shares related to the achievement of key performance indicators in relation to prior years and was approved by shareholders at the previous Annual General Meeting. Options granted during the year No options were granted to the Directors or to employees during the year. INSURANCE OF OFFICERS Alkane Resources Ltd has entered into deeds of indemnity, access and insurance with each of the Directors. These deeds remain in effect as at the date of this report. Under the Deeds, the Company indemnifies each Director to the maximum extent permitted by law against legal proceedings or claims made against or incurred by the Directors in connection with being a Director of the Company, or breach by the Group of its obligations under the Deed. The liability insured is the indemnification of the Group 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. 26 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 27 D I R E C T O R S ' R E P O R T INSURANCE OF OFFICERS (Continued) No liability has arisen under this indemnity as at the date of this report. The Group has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer of the Group or of any related body corporate, against a liability incurred as such by an officer. CORPORATE GOVERNANCE Alkane Resources Ltd and the Board of Directors are committed to achieving and demonstrating the highest standards of corporate governance. The Board has established a set of policies and procedures for the purpose of managing corporate governance and continues to review the framework and practices to ensure they meet the interests of shareholders. The Group’s policies comply with the ASX Corporate Governance Principles and Recommendations. The Group’s detailed corporate governance policy statement is contained in the annual report to shareholders and can be viewed on the web site at www.alkane.com.au. AUDIT INDEPENDENCE AND NON-AUDIT SERVICES Auditor’s Independence-Section 307C The following is a copy of a letter received from the Company's auditors: "Dear Sirs, In accordance with Section 307C of the Corporations Act 2001 (the "Act") I hereby declare that to the best of my knowledge and belief there have been: i) no contraventions of the auditor independence requirements of the Act in relation to the audit of the 30 June 2013 financial statements; and ii) no contraventions of any applicable code of professional conduct in relation to the audit. Frank Vrachas (Lead Auditor) Rothsay Chartered Accountants Dated 30 August 2013” NON-AUDIT SERVICES The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group is important. Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the period are set out in note 19. 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 did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • • all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. Signed in accordance with a resolution of the Directors. D I Chalmers Director Dated at Perth this 30th day of August 2013 A N N U A L R E P O R T 2 0 1 3 27 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 28 C O N S O L I D A T E D S T A T E M E N T O F C O M P R E H E N S I V E I N C O M E FOR THE PERIOD ENDED 30 JUNE 2013 Revenue from continuing operations Other income and expenses Expenses from continuing operations Office rent and outgoings Share registry and filing fees Directors' fees and salaries expensed Professional fees and consulting services Employee remuneration and benefits Share based payments General and administration expenses Depreciation Peak Hill mine site maintenance and rehabilitation Exploration expenditure provided for or written off Impairment charges (Loss)/Profit before income tax Income tax benefit/(expense) (Loss)/Profit for the period after income tax Other comprehensive (loss)/income Changes in fair value of available for sale investments, net of tax Total comprehensive (loss)/income for the period Comprehensive (loss)/income is attributable to: Owners of Alkane Resources Ltd Non-controlling interests (Loss)/Profit is attributable to: Owners of Alkane Resources Ltd Non-controlling interests (Loss)/Earnings per share for (loss)/profit attributable to the ordinary equity holders of the Company CONSOLIDATED 6 MONTHS 12 MONTHS ENDED 30 JUNE 2013 $’000 - 4,037 (94) (26) (228) (448) (459) (41) (905) (89) (78) (371) (98,526) (101,265) (97,228) 30,810 (66,418) 3,676 (62,742) (62,742) - (62,742) (66,418) - (66,418) Cents (17.8) ENDED 31 DECEMBER 2012 $’000 - 96,716 (173) (167) (461) (1,493) (506) (248) (778) (78) (131) (1,325) - (5,360) 91,356 (24,821) 66,535 (3,676) 62,859 62,859 - 62,787 66,859 - 66,535 Cents 19.3 NOTE 5 7 6 27 The above consolidated statement of comprehensive income 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 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 29 C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N AS AT 30 JUNE 2013 Current Assets Cash and cash equivalents Receivables Available for sale financial assets Total Current Assets Non-Current Assets Property, plant and equipment Exploration and evaluation Deferred tax asset Other financial assets Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Provisions Total Current Liabilities Non-Current Liabilities Deferred tax liability Provisions Total Non-Current Liabilities Total Liabilities Net Assets Equity Contributed equity Other reserves Retained earnings Total Equity NOTE CONSOLIDATED 30 JUNE 31 DECEMBER 2013 $’000 2012 $’000 8 9 10 11 12 6 13 14 15 6 15 16 17 17 64,294 3,680 41,083 109,057 21,093 45,278 4,102 3,671 74,144 183,201 7,735 1,855 9,590 - 135 135 9,725 173,476 192,658 - (19,182) 173,476 79,715 1,431 89,425 170,571 19,678 66,556 - 4,005 90,239 260,810 525 216 741 23,476 235 23,711 24,452 236,358 192,156 (3,034) 47,236 236,358 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. A N N U A L R E P O R T 2 0 1 3 29 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 30 C O N S O L I D A T E D 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 PERIOD ENDED 30 JUNE 2013 Balance at 1 January 2012 Total profit for the period Other comprehensive loss for the period, net of tax Contributions of equity, net of transaction costs and tax Options issued, net of tax Balance at 31 December 2012 Balance at 1 January 2013 Total loss for the period Other comprehensive profit for the period, net of tax Contributions of equity, net of transaction costs and tax Share based payments Options expired, net of tax Balance at 30 June 2013 NOTE 16 17 16 16 16,17 ATTRIBUTABLE TO OWNERS OF ALKANE RESOURCES LTD CONTRIBUTED EQUITY $’000 82,002 - - 110,154 - 192,156 192,156 - - (181) 41 642 192,658 RESERVES $’000 - - (3,676) - 642 (3,034) (3,034) - 3,676 - - (642) - RETAINED EARNINGS $’000 (19,299) 66,535 - - - 47,236 47,236 (66,418) - - - - (19,182) TOTAL EQUITY $’000 62,703 66,535 (3,676) 110,154 642 236,358 236,358 (66,418) 3,676 (181) 41 - 173,476 The above consolidated 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 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 31 C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S FOR THE PERIOD ENDED 30 JUNE 2013 Cash Flows from Operating Activities Rent received (inclusive of goods and services tax) Payments to suppliers (inclusive of goods and services tax) R&D tax refund received Receipts from settlement of gold price hedges Interest received Net cash inflow/(outflow) from operating activities Cash Flows from Investing Activities Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from sale of investments Refund of security deposits Payments for security deposits Grant received Cash held by subsidiary disposed of Payments for exploration expenditure Payments for development expenditure Net cash outflow from investing activities Cash Flows from Financing Activities Proceeds from issue of shares and options Cost of share issues Net cash inflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the financial period Non-cash investing and financing activities CONSOLIDATED 6 MONTHS 12 MONTHS ENDED 30 JUNE ENDED 31 DEC 2013 $’000 65 (1,884) 1,477 6,767 1,425 7,850 (10,517) 4 13,608 334 - - - (7,951) (18,747) (23,269) - (2) (2) (15,421) 79,715 64,294 - 2012 $’000 42 (2,544) 1,423 - 3,320 2,241 (7,387) - - 22 (3,629) 550 (6) (10,901) (12,998) (34,349) 106,924 (4,906) 102,018 69,910 9,805 79,715 - NOTE 25 8 26 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. A N N U A L R E P O R T 2 0 1 3 31 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 32 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 PERIOD ENDED 30 JUNE 2013 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the consolidated financial report are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. a) BASIS OF PREPARATION This general purpose financial report has been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. The financial report is presented in Australian Dollars, which is the Group’s presentation currency. (i) Rounding of Amounts The Company is of a kind referred to in Class Order 98/100 issued by the Australian Securities and Investments Commission relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases to the nearest dollar. (ii) Compliance with IFRSs Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRSs). Compliance with AIFRSs ensures that the consolidated financial statements and notes comply with IFRSs. (iii) Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss. Cost is based on the fair values of the consideration given in exchange for assets. (iv) Comparative figures Where necessary, comparative figures have been restated to conform with changes in presentation for the current period. (v) Critical accounting estimates and judgements The preparation of financial reports requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial report, are disclosed in note 4. b) CONSOLIDATION (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Alkane Resources Ltd ("Company" or “Parent”) as at 30 June 2013 and the results of all controlled entities for the 6 month period then ended. Alkane Resources Ltd and its controlled entities are referred to in this financial report as the Group or the consolidated entity. Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Outside equity interests in the results and equity of controlled entities are shown separately in the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Financial Position respectively. 32 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 33 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 PERIOD ENDED 30 JUNE 2013 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued) b) CONSOLIDATION (Continued) (ii) Joint ventures The consolidated entity's proportionate interests in the assets, liabilities and expenses of a joint venture in which it participates are 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 Group 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. c) SEGMENT REPORTING Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the full Board of Directors. The Group has identified one reportable segment, being exploration and development activities undertaken in Australia. This segment includes activities associated with the determination and assessment of the existence of commercial economic reserves, for the Group’s mineral assets in this geographic location. There has been no change in the number of reportable segments presented in the prior period. Upon commencements of operations at the Tomingley gold project, the Group will report a second segment, being the mining of precious metals. Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of economic value from the asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location. Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables. d) FOREIGN CURRENCY TRANSLATION Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Foreign exchange gains and losses that relate to borrowings are presented in the income statement, within finance costs. All other foreign exchange gains and losses are presented in the income statement on a net basis within other income or other expenses. e) 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. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities. The Group bases its estimates on historical results, taking into consideration the type of transaction and the specifics of each arrangement. Interest income is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. f) 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 has complied with all attached conditions. Government grants relating to costs are deferred and recognised in the Statement of Comprehensive Income over the period necessary to match them with the costs that they are intended to compensate. Grants relating to the purchase of assets are netted off against the cost of the asset and recognised in profit and loss over the expected lives of the related assets. A N N U A L R E P O R T 2 0 1 3 33 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 34 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 PERIOD ENDED 30 JUNE 2013 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued) g) INCOME TAX The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the current income tax charge, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. 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 enacted by the end of the reporting period 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 is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively Alkane Resources Ltd and its wholly-owned controlled entities have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. (i) Tax incentives Companies within the Group may be entitled to claim special tax deductions for eligible activities under the Research and Development Tax Incentive regime. The Group accounts for such allowances as tax credits, which means that the allowance reduces income tax payable and current tax expense. A deferred tax asset is recognised for unclaimed tax credits that are carried forward as deferred tax assets. h) LEASES Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased asset or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. Lease income from operating leases where the Group is a lessor is recognised in income on a straight line basis over the lease term. The respective leased assets are included in the balance sheet based on their nature. i) IMPAIRMENT OF NON-CURRENT ASSETS At each balance sheet date, the Group reviews the carrying amounts of its non-current assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit (“CGU”) to which the asset belongs. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement. 34 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 35 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 PERIOD ENDED 30 JUNE 2013 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued) i) IMPAIRMENT OF NON-CURRENT ASSETS (Continued) Where an impairment loss subsequently reverses the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash generating unit in prior years. A reversal of an impairment loss is recognised immediately in the income statement. The recoverable amount of a CGU is the higher of its fair value less costs to sell (“FVLCS”) and its value in use (“VIU”). FVLCS is the best estimate of the amount obtainable from the sale of a CGU in an arm’s length transaction between knowledgeable willing parties, less the costs of disposal. This estimate is determined on the basis of available market information taking into account specific circumstances. VIU is the present value of the future cash flows expected to be derived from the CGU or group of CGU’s. Cash flow projections are based on economic and regulatory assumptions and forecast trading conditions prepared by management. j) SHARE BASED PAYMENTS Where shares or options over unissued shares are issued to contractors, employees or Directors as remuneration for services the difference between fair value of the shares or options issued and the consideration received, if any, from the recipient is expensed. The fair value of the shares or options issued is recorded in contributed equity. k) 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). l) GOODS AND SERVICES TAX (GST) Revenues, expenses and assets are recognised net of the amount of associated GST except where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are presented on a gross basis. 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. m) 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. n) 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. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable 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 Statement of Comprehensive Income. o) INVESTMENTS AND OTHER FINANCIAL ASSETS Classification The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to- maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date. A N N U A L R E P O R T 2 0 1 3 35 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 36 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 PERIOD ENDED 30 JUNE 2013 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued) o) INVESTMENTS AND OTHER FINANCIAL ASSETS (Continued) Classification (Continued) i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets. ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the statement of financial position. iii) Held-to-maturity investments Held-to-Maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. If the Group were to sell other than an insignificant amount of held-to- maturity financial assets, the whole category would be tainted and reclassified as available-for-sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the reporting date, which are classified as current assets. iv) Available-for-sale financial assets Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets, unless management intends to dispose of the investment within 12 months of the reporting date. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term. Recognition and de-recognition Regular purchases and sales of financial assets are recognised on trade date, the date on which the Group commits to purchase or sell the asset. Financial assets are no longer recognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the statement of comprehensive income as gains and losses from investment securities. Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in fair value of the financial assets at fair value through profit or loss category are presented in the profit and loss in the period in which they arise. Impairment The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or Group of financial assets is impaired. A financial asset or a Group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or Group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired. 36 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 37 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 PERIOD ENDED 30 JUNE 2013 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued) o) INVESTMENTS AND OTHER FINANCIAL ASSETS (Continued) Impairment (Continued) i) Assets classified as available for sale If there is objective evidence of impairment for available for sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss – is removed from equity and recognised in profit or loss. Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit and loss in a subsequent period. p) DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are used by the Group to protect against the Group’s Australian dollar gold price risk exposures. Derivatives are initially recognised at fair value at the date the derivative contract is entered into and subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. Derivatives that meet the purchase/sale exemption because physical goods will be delivered into the contract will be accounted for as sale contracts with revenue recognised once the goods has been delivered or the contracts are rolled over. q) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the profit or loss during the reporting period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost, net of residual values, over their estimated useful lives or, in the case of leasehold improvements, the shorter lease term as follows: • Buildings • Office furniture • Office equipment • Motor vehicles • Computer software 10 years 4 years 3.3 years 5 years 2.5 years • Rehabilitation asset Units of production The assets useful lives and residual values are reviewed, and adjusted if appropriate, at the end of each reporting period. As assets carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying values. These are included in the profit and loss. r) 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 period 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 its recoverable amount, the value of the area of interest is written down to the recoverable amount. A N N U A L R E P O R T 2 0 1 3 37 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 38 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 PERIOD ENDED 30 JUNE 2013 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued) r) EXPLORATION EXPENDITURE (Continued) Capitalised exploration expenditure is considered for impairment based upon areas of interest on an annual basis, depending on the existence of impairment indicators including: • • • • the period for which the Group 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 Group has decided to discontinue such activities in the specific area; and sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. Costs carried forward in respect of an area of interest that is abandoned are written off in the period in which the decision to abandon is made. s) TRADE PAYABLES These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period which are unpaid. These amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently at amortised cost using the effective interest method. t) PROVISIONS Provisions are recognised when the Group has a present legal or constructive obligation and it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in provision due to the passage of time is recognised as interest expense. u) EMPLOYEE BENEFITS (i) Short term obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within twelve months of the end of the period in which the employees render the related service 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. The liability for annual leaves and accumulating sick leave is recognised in the provision for employee benefits. All other short term employee benefit obligations are presented as payables. (ii) Other long term employee benefit obligations The liability for long service leave and annual leave not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on government bonds with terms and currencies that match as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. (iii) Superannuation The amounts charged to the statement of financial performance for superannuation represents the contributions to superannuation funds in accordance with the statutory superannuation contributions requirements or an employee salary sacrifice arrangement. No liability exists for any further contributions by the Group in respect to any superannuation scheme. v) 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. 38 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 39 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 PERIOD ENDED 30 JUNE 2013 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued) w) EARNINGS PER SHARE Basic earnings per share is determined by dividing the profit attributable to members of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. x) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS The Group has adopted the following new and amended Australian Accounting Standards and interpretations as of 1 January 2013: AFFECTED STANDARD NATURE OF CHANGE TO ACCOUNTING POLICY AASB 2011-13 Amendments to Australian Accounting Standards – Improvements to AASB 1049 Amends some of the requirements in AASB 1049 to improve that standard at an operational level. AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income AASB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets Requires entities to group items presented in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently, and requires tax associated with items presented before tax to be shown separately for each of the two groups of items. Amends AASB 112 Income Taxes to provide a presumption that recovery of the carrying amount of an asset measured using the fair value model in AASB 140 Investment Property will, normally, be through sale. AASB 2011-3 and AASB 2012-8 Amendments to Australian Accounting Standards – Orderly adoption of changes to the ABS GFS manual and related amendments This standard makes amendments to AASB 1049 Whole of Government and General Sector Financial Reporting to amend the definition of the ABS GFS manual, provide relief from adopting the latest version of the manual and require related disclosures. * Applicable to reporting periods commencing on or after the given date APPLICATION * 1 July 2012 1 July 2012 1 Jan 2012 1 July 2012 The following Applicable Australian Accounting Standards have been issued or amended but are not yet effective and have not been adopted by the Group for the annual reporting period ended 30 June 2013. The Group has not been able to fully assess the impact of these revised standards: • • • • • • • • • • • • • • • AASB 119 Employee Benefits AASB 127 Separate Financial Statements AASB 128 Investments in Associates and Joint Ventures AASB 9 Financial Instruments AASB 10 Consolidated Financial Statements AASB 11 Joint Arrangements AASB 12 Disclosure of Interests in Other Entities AASB 13 Fair Value Measurement AASB 2010-10 Amendments to Australian Accounting Standards –Removal of Fixed Dates for First Time Adopters AASB 2011-2 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project – Reduced Disclosure Requirements AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements AASB 2011-6 Amendments to Australian Accounting Standards – Extending relief from Consolidation, the Equity Method and Proportionate Consolidation – Reduced Disclosure Requirements AASB 2011-11 Amendments to AASB 119 arising from Reduced Disclosure Requirements AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-02 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements. Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine A N N U A L R E P O R T 2 0 1 3 39 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 40 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 PERIOD ENDED 30 JUNE 2013 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued) x) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (Continued) • • • • • • • • • AASB 2012-1 Amendments to Australian Accounting Standards – Fair value Measurement – Reduced Disclosure Requirements AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures: Offsetting Financial Assets and Financial Liabilities AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities AASB 2012-4 Amendments to Australian Accounting Standards – Government Loans AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements Cycle AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures AASB 2012-9 Amendment to AASB 1048 arising from the withdrawal of Australian Interpretation 1039 AASB 2012-10 Amendments to Australian Accounting Standards – Transition guidance and other amendments AASB 2012-11 Amendments to Australian Accounting Standards – Reduced Disclosure Requirements and Other Amendments y) PARENT ENTITY FINANCIAL INFORMATION POLICY The financial information for the parent entity, disclosed in note 29 has been prepared on the same basis as the consolidated financial statements, except as set out below. (i) Investments in subsidiaries, associates and joint ventures Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of the Company, and assessed at each reporting date for any indications of impairment. (ii) Tax consolidation legislation Alkane Resources Ltd and its wholly owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Alkane Resources Ltd, and the controlled entities in the tax consolidation Group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidation Group continues to be a standalone taxpayer in its own right. In addition to its own current and deferred tax amounts, the Company, also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidation Group. The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate the Company for any current tax payable assumed and are compensated by the Company for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to the Company under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly owned entities financial statements. The amounts receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. Assets or liabilities arising under tax funding agreements with the tax consolidation entities are recognised as current amounts receivable from or payable to other entities in the Group. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly owned tax consolidated entities. 40 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 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 FOR THE PERIOD ENDED 30 JUNE 2013 2. FINANCIAL RISK MANAGEMENT The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. The board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and manages the financial risks relating to the operations of the Group through regular reviews of the risks and mitigating strategies. FINANCIAL ASSETS 2013 Cash and cash equivalents Receivables * Available-for-sale financial assets 2012 Cash and cash equivalents Receivables * Available-for-sale financial assets * Excludes prepayments and tax receivable balances FINANCIAL LIABILITIES 2013 Trade and other payables 2012 Trade and other payables (a) CREDIT RISK: AVAILABLE FINANCIAL ASSETS FOR SALE AT AMORTISED COST $’000 $’000 - - 41,083 41,083 - - 89,425 89,425 64,294 1,474 - 65,768 79,715 893 - 80,608 TOTAL $’000 64,294 1,474 41,083 106,851 79,715 893 89,425 170,033 LIABILITIES AT AMORTISED COST $’000 TOTAL $’000 7,735 7,735 525 525 Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s cash holdings and receivables from customers. The Group limits its exposure to credit risk in relation to cash and cash equivalents and other financial assets by only utilising banks and financial institutions with acceptable credit ratings. The majority of the Group’s receivables that are classified as financial assets relates to a grant due from a government department for which credit risk is minimal. Tax receivables and prepayments do not meet the definition of financial assets. None of the Group’s receivables were past due at balance date (2012: nil). The carrying amount of the Group’s financial assets represents the maximum credit exposure. A N N U A L R E P O R T 2 0 1 3 41 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 42 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 PERIOD ENDED 30 JUNE 2013 2. FINANCIAL RISK MANAGEMENT (Continued) (a) CREDIT RISK (Continued): The Group’s maximum exposure to credit risk at the reporting date was: Cash and cash equivalents Receivables * Other financial assets Total exposure * Excludes prepayments and tax receivable balances (b) LIQUIDITY RISK: CONSOLIDATED CARRYING AMOUNT 30 JUNE 31 DECEMBER 2013 $’000 64,294 1,474 3,671 69,439 2012 $’000 79,715 893 4,005 84,613 Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions. Management monitors rolling forecasts of the Group’s cash position on the basis of expected cash flows. This is managed at a Group level. The Group’s financial liabilities generally mature within 3 months, therefore the carrying amount equals the cash flow required to settle the liability. (c) MARKET RISK: Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. (i) Currency risk The Group’s exposure to currency risk is currently limited to the movement in currencies for minor purchases denominated in foreign currencies from the date the Group commits to the expenditure to the date the liability is settled. There were no financial assets or liabilities exposed to currency risk at balance date (2012: Nil). (ii) Price risk The Group is exposed to equity securities price risk. This arises from investments held by the Group and classified on the Statement of Financial Position as available-for-sale. The majority of the Group’s equity investments are publicly traded. (iii) Interest rate risk At balance date the Group had exposure to interest rate risk, through its cash and equivalents and other financial assets held within financial institutions. The Group minimises this risk by utilising fixed rate instruments. 42 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 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 FOR THE PERIOD ENDED 30 JUNE 2013 2. FINANCIAL RISK MANAGEMENT (Continued) (c) MARKET RISK (Continued): (iv) Summarised sensitivity analysis The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk and market risk. The analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2012. CARRYING AMOUNT $’000 INTEREST RATE RISK OTHER PRICE RISK PROFIT B EQUITY C PROFIT B EQUITY C +100BP $’000 -100BP $’000 +100BP $’000 -100BP $’000 +10% $’000 -10% $’000 +10% $’000 -10% $’000 30 June 2013 Cash and cash equivalents Receivables a Available-for-sale financial assets Other financial assets Trade and other payables Total 31 December 2012 Cash and cash equivalents Receivables a Available-for-sale financial assets Other financial assets Trade and other payables Total 64,294 1,474 41,083 3,671 7,735 79,715 893 89,425 4,005 525 450 - - 26 - 476 558 - - 28 - 586 (450) - - (26) - (476) (558) - - (28) - (586) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,876 (2,876) - - - 2,876 - (2,876) - - - - 6,260 (6,260) - - - 6,260 - (6,260) a b c Excludes prepayments and tax receivable balances Impact on post-tax profit Impact on other components of Equity The Group is not subject to significant foreign exchange risk as it operates primarily with one currency and has minimal transactions in foreign currency. (d) FAIR VALUE DISCLOSURES: The carrying amount of the group’s financial assets and liabilities approximates their fair value. The fair value of financial instruments traded in active markets (such as publically traded derivatives or available for sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price is used for financial assets held by the Group is the current bid price. The carrying amounts of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. A N N U A L R E P O R T 2 0 1 3 43 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 44 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 PERIOD ENDED 30 JUNE 2013 3. SEGMENTAL INFORMATION The Group operates predominately in one geographical location. The operations of the Group consist of mining and exploration for gold and other minerals within Australia. Management have determined the operating segment based on the reports reviewed by the Managing Director. 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS In preparing this Financial Report the Group has been required to make certain estimates and judgements concerning future occurrences. The resulting accounting estimates will, by definition, seldom equal the related actual results. i) Critical judgements in applying the entities accounting policies 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. Impairment of available-for-sale financial assets The Group follows the guidance of AASB 139 Financial Instruments: Recognition and Measurement to determine when an available-for-sale financial asset is impaired. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost and the financial health of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flows. In the current reporting period, it was assessed that the declines in fair value below cost for certain available-for-sale financial assets were considered significant or prolonged, and as such an impairment loss was recorded. Refer to note 7 for details. ii) Critical 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 Group 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. The Group has recorded impairment charges against exploration and evaluation expenditure in the current period. Refer to note 7 for details. Income taxes The Group is subject to income taxes in Australia. Significant judgement is required in determining the provision for income taxes. There are certain transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group estimates its tax liabilities based on the Group’s understanding of the tax law. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. In addition, the Group has recognised deferred tax assets relating to carried forward tax losses to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same subsidiary against which the unused tax losses can be utilised. However, utilisation of the tax losses also depends on the ability of the entity to satisfy certain tests at the time the losses are recouped. 44 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 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 FOR THE PERIOD ENDED 30 JUNE 2013 5. OTHER INCOME/(EXPENSES) (Loss)/Gain from sale of investments Gain from sale of assets Interest income Gain from settlement of gold price hedges Other income 6. INCOME TAX EXPENSE a) INCOME TAX EXPENSE Current tax Deferred tax Total income tax expense b) RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE (Loss)/Profit from continuing operations before income tax expense Prima facie tax expense/(benefit) at 30% (2012: 30%) Add tax effect of: Other non-deductible items Less tax effect of: Non-assessable income Recognition of previously unrecognised prior period tax losses Recognition of previously unrecognised prior period capital losses Tax benefits of deductible equity raising costs Income tax expense attributable to entity CONSOLIDATED 6 MONTHS 12 MONTHS ENDED 30 JUNE ENDED 31 DEC 2013 $’000 (4,162) 3 1,369 6,767 60 4,037 2012 $’000 93,061 - 3,611 - 44 96,716 CONSOLIDATED 6 MONTHS 12 MONTHS ENDED 30 JUNE ENDED 31 DEC 2013 $’000 2012 $’000 (1,477) (29,333) (30,810) (97,228) (29,169) 16 (1,477) - - (180) (30,810) (1,423) 26,244 24,821 91,356 27,407 3,249 (1,423) (4,029) (8) (375) 24,821 A N N U A L R E P O R T 2 0 1 3 45 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 46 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 PERIOD ENDED 30 JUNE 2013 6. INCOME TAX EXPENSE (Continued) c) RECOGNISED DEFERRED TAX ASSETS COMPRISING THE FOLLOWING: Carry forward revenue losses Carry forward capital losses Property, plant and equipment Capital raising and future blackhole deductions Provisions and accruals Other Gross recognised deferred tax assets Set-off against deferred tax liabilities Net recognised deferred tax assets RECOGNISED DEFERRED TAX LIABILITIES COMPRISING THE FOLLOWING: Exploration expenditure Available for sale financial investments Other Gross recognised deferred tax liabilities Set-off of deferred tax assets Net recognised deferred tax liabilities d) DEFERRED TAX RECOGNISED DIRECTLY IN EQUITY Relating to equity raising costs Relating to revaluations of investments 7. IMPAIRMENT OF NON-CURRENT ASSETS (i) Gold Cash Generating Unit CONSOLIDATED 30 JUNE 31 DECEMBER 2013 $’000 2012 $’000 14,463 - 9,182 1,097 201 1,269 26,212 (22,110) 4,102 (10,834) (11,196) (80) (22,110) 22,110 - 180 1,575 1,755 17,664 8 150 1,289 142 114 19,367 (19,367) - (17,296) (25,448) (99) (42,843) 19,367 (23,476) (1,193) (1,575) (2,768) Due to the significant decline in gold price experienced during the reporting period, Management have undertaken impairment testing of the Gold cash- generating unit (“CGU”) to assess the appropriateness of its carrying value. Impairment testing was undertaken using the fair value less costs to sell (“FVLCS”) methodology. FVLCS was determined as the present value of the estimated future cash flows (expressed in real terms) expected to arise from the continued use of the assets, over the current estimated life of the mine, using assumptions that an independent market participant may take into account. These cash flows were discounted using a real after tax discount rate that reflected current market assessments of the time value of money and the risks specific to the CGU. The impairment assessment concluded that the carrying value of the Gold CGU exceeded its recoverable amount and a pre-tax impairment expense of $62,702,000 was recorded (2012: $0). The FVLCS has been performed over a 7 year period. There were no impairment charges recorded in the prior period. The key assumptions used in the FVLCS calculations include: • • • • • • commercially recoverable mineral inventories production volumes commodity prices the cash costs of production, capital expenditure, rehabilitation and mine closure costs the AUD/USD foreign exchange rate discount rates Estimates of the quantities of commercially recoverable mineral inventories represent Managements’ expectations at year end based on reserves and resource statements and exploration and evaluation work undertaken by appropriately qualified persons. 46 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 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 FOR THE PERIOD ENDED 30 JUNE 2013 7. IMPAIRMENT OF NON-CURRENT ASSETS (Continued) (i) Gold Cash Generating Unit (Continued) Production volume estimates applied were determined using current processes and technologies, and processing plant yields based on design specifications. Long term commodity price estimates were determined by reference to external market forecasts. Forecast prices vary in accordance with the year the sale is expected to occur. Estimates of cash costs of production were based on management latest estimate at balance sheet date of the costs expected to be incurred. Costs are determined after considering current forecast costs, future cost expectations and the nature and location of the operation. Capital expenditure estimates were based on management’s best estimate of sustaining capital expenditure for the existing operation and recent market prices for new infrastructure and equipment. Exchange rates used to convert foreign denominated cash flows were based on bank consensus forecast exchange rates. Where the cash flows estimated as part of the FVLCS valuation extend beyond the period provided by forecasters, the consensus forecast rate for the last year forecast is extended for the remainder of the valuation period. A real post tax discount rate of 8% was applied to the estimated CGU cash flows to arrive at the FVLCS. The valuation is most sensitive to commodity price, exchange rate and operation costs. A 5% movement in Australian dollar commodity price (i.e. taking into account the US dollar commodity price and conversion into Australian dollars) has a $16,200,000 impact on the estimated recoverable amount. A 5% movement in operating costs has a $11,100,000 impact on the estimated recoverable amount. The table below sets out the impairment charge by class of asset. (ii) Available-For-Sale Financial Assets In the current reporting period, it was assessed that the declines in fair value below cost for certain available-for-sale financial assets were considered significant or prolonged, and as such an impairment loss was recorded. The table below provides details of the impairment charge recorded. Property, plant and equipment Available-for-sale financial assets (AFSA) Exploration and evaluation costs Total impairment charges before tax Income tax benefit relating to impairment charges Total impairment charges after tax 8. CASH AND CASH EQUIVALENTS Cash at bank Deposits at call Cash at bank bears a weighted average interest rate of 3.6% (2012: 4.27%). 9. RECEIVABLES Other receivables GST receivable A N N U A L R E P O R T 2 0 1 3 GOLD CGU $’000 33,942 - 28,760 62,702 (18,811) 43,891 AFSA $’000 - 35,824 - 35,824 (10,747) 25,077 TOTAL $’000 33,942 35,824 28,760 98,526 (29,558) 68,968 CONSOLIDATED 30 JUNE 31 DECEMBER 2013 $’000 9,294 55,000 64,294 2012 $’000 6,215 73,500 79,715 CONSOLIDATED 30 JUNE 31 DECEMBER 2013 $’000 1,519 2,161 3,680 2012 $’000 565 866 1,431 47 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 48 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 PERIOD ENDED 30 JUNE 2013 10. AVAILABLE FOR SALE FINANCIAL ASSETS Listed equity securities Opening balance at beginning of period Additions during the period Disposals during the period Changes in fair value Impairment charge (note 7) Closing balance at end of period 11. PROPERTY, PLANT AND EQUIPMENT CONSOLIDATED 30 JUNE 31 DECEMBER 2013 $’000 2012 $’000 89,425 - (17,770) 5,252 (35,824) 41,083 2 94,675 - (5,252) - 89,425 2013 Cost Opening balance Additions Disposals Closing balance Accumulated depreciation and impairment Opening balance Disposals Impairment charge (note 7) Depreciation Closing balance Carrying value 2012 Cost Opening balance Additions Disposal of subsidiary Disposals Closing balance Accumulated depreciation Opening balance Disposals Depreciation Closing balance Carrying value LAND AND BUILDINGS $’000 PLANT AND EQUIPMENT $’000 ASSETS UNDER OTHER CONSTRUCTION MINING ASSETS $’000 $’000 TOTAL $’000 7,445 4,929 - 12,374 4 - 2,403 1 2,408 9,966 2,166 6,291 (1,012) - 7,445 3 - 1 4 7,441 673 379 (1) 1,051 253 - 376 89 718 333 383 306 - (16) 673 192 (16) 77 253 420 10,773 28,804 - 39,577 - - 30,107 - 30,107 9,470 1,737 9,036 - - 10,773 - - - - 10,773 1,044 1,336 - 2,380 - - 1,056 - 1,056 1,324 1,044 - - - 1,044 - - - - 1,044 19,935 35,448 (1) 55,382 257 - 33,942 90 34,289 21,093 5,330 15,633 (1,012) (16) 19,935 195 (16) 78 257 19,678 48 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 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 FOR THE PERIOD ENDED 30 JUNE 2013 12. EXPLORATION AND EVALUATION Opening balance at beginning of period Expenditure during the period Disposal of subsidiary Amounts provided for or written off Impairment charge (note 7) Closing balance end of period CONSOLIDATED 30 JUNE 31 DECEMBER 2013 $’000 66,556 7,853 - (371) (28,760) 45,278 2012 $’000 49,003 19,380 (502) (1,325) - 66,556 The recovery of the costs of exploration and evaluation expenditure carried forward is dependent upon the successful development and commercial exploitation of each area of interest, or otherwise by the sale at an amount not less than the carrying value. There may exist, on the Group’s exploration properties, areas subject to claim under native title or containing sacred sites or sites of significance to Aboriginal people. As a result, exploration properties or areas within tenements may be subject to exploration or mining restrictions. 13. OTHER FINANCIAL ASSETS Interest bearing security deposits CONSOLIDATED 30 JUNE 31 DECEMBER 2013 $’000 3,671 2012 $’000 4,005 The above deposits are held by financial institutions as security for rehabilitation obligations as required under the respective exploration and mining leases. 14. TRADE AND OTHER PAYABLES Trade and other payables 15. PROVISIONS Current Provisions Provision for rehabilitation Provision for employee benefits Non-Current Provisions Provision for employee benefits CONSOLIDATED 30 JUNE 31 DECEMBER 2013 $’000 7,735 2012 $’000 525 CONSOLIDATED 30 JUNE 31 DECEMBER 2013 $’000 1,336 519 1,855 135 2012 $’000 - 216 216 235 A N N U A L R E P O R T 2 0 1 3 49 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 50 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 PERIOD ENDED 30 JUNE 2013 16. CONTRIBUTED EQUITY Share capital Ordinary shares – Fully paid Movements in ordinary share capital Opening balance at beginning of period Share based payments Rights issue Transfer from option reserve Placement of shares Closing balance at end of period Less: Costs of issues, net of tax Balance per Statement of Financial Position PARENT ENTITY 30 JUNE 2013 31 DECEMBER 2012 NUMBER $’000 NUMBER $’000 372,539,000 192,658 372,539,000 192,156 372,539,000 100,000 - - - 372,639,000 - 372,639,000 192,156 41 - 917 - 193,114 (456) 192,658 269,028,158 6,307,500 26,903,342 - 70,300,000 372,539,000 - 372,539,000 82,002 6,668 29,594 - 77,330 195,594 (3,438) 192,156 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 shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after creditors, and are fully entitled to any proceeds of liquidations. CAPITAL RISK MANAGEMENT The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets. OPTIONS Information relating to options, including details of options issued, exercised and lapsed during the financial period and options outstanding at the end of the reporting period, is set out in note 28. 17. RETAINED PROFITS AND RESERVES Retained losses/(profits) Balance at beginning of period (Loss)/Profit for the period after income tax expense Balance at end of period Reserves Share based payment reserve Available-for-sale financial asset reserve Share based payment reserve Balance at beginning of period Options expense - gross Options expired - gross Deferred tax Balance at end of period CONSOLIDATED 30 JUNE 31 DECEMBER 2013 $’000 2012 $’000 47,236 (66,418) (19,182) (19,299) 66,535 47,236 - - - 642 - (917) 275 - 642 (3,676) (3,034) - 917 - (275) 642 50 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 51 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 PERIOD ENDED 30 JUNE 2013 17. RETAINED PROFITS AND RESERVES (Continued) Available-for-sale financial asset reserve Balance at beginning of period Change in fair value – gross Deferred tax Balance at end of period NATURE AND PURPOSE OF RESERVES CONSOLIDATED 30 JUNE 31 DECEMBER 2013 $’000 (3,676) 5,252 (1,576) - 2012 $’000 - (5,252) 1,576 (3,676) The share based payments reserve is used to recognise the fair value of options issued but not yet exercised. The available for sale financial asset reserve is used to recognise the changes in fair value of available-for-sale financial assets. 18. KEY MANAGEMENT PERSONNEL DISCLOSURE a) DIRECTORS The names of Directors who have held office during the financial period are: • Alkane Resources Ltd John S F Dunlop, D Ian Chalmers, Ian J Gandel and Anthony D Lethlean • Tomingley Holdings Pty Ltd, Tomingley Gold Operations Pty Ltd John S F Dunlop, D Ian Chalmers, Ian J Gandel and Anthony D Lethlean • Kiwi Australian Resources Pty Ltd, Australian Zirconia Limited D Ian Chalmers, Lindsay A Colless and Ian J Gandel • Skyray Properties Ltd (BVI) G Menzies b) OTHER KEY MANAGEMENT PERSONNEL The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly during the financial period: • • K E Brown – Joint Company Secretary L A Colless - Joint Company Secretary • M Ball – Chief Financial Officer A N N U A L R E P O R T 2 0 1 3 51 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 52 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 PERIOD ENDED 30 JUNE 2013 18. KEY MANAGEMENT PERSONNEL DISCLOSURE (Continued) c) TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL Type of transaction Management consulting Director’s retainer Related party Directors J S F Dunlop Director’s retainer D I Chalmers Director’s consulting Director’s retainer I J Gandel Directors’ retainer A D Lethlean Terms and conditions Normal commercial Normal commercial Normal commercial Normal commercial Type of transaction Related party Other key management personnel Terms and conditions Salary M B Ball Consulting fees * L A Colless and K E Brown Normal commercial Normal commercial CONSOLIDATED 6 MONTHS 12 MONTHS ENDED 30 JUNE ENDED 31 DEC 2013 $’000 2012 $’000 - 69 238 - 41 44 153 164 - 107 392 - 81 78 45 325 * Administration, accounting and company secretarial fees paid or due and payable to a Company in which Mr Colless and Ms Brown have substantial financial interests for services provided in the normal course of business and at normal commercial rates. d) OUTSTANDING BALANCES The following balances are outstanding at the reporting date in relation to transactions with related parties: Current payables a) A D Lethlean b) D I Chalmers c) d) e) I J Gandel J S Dunlop L A Colless & K E Brown $ 8,020 2,735 27,396 15,500 24,012 e) EQUITY INSTRUMENT DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL The interests of Directors and key management personnel and their respective related entities in shares and share options at the end of the financial period are as follows: NAME A D Lethlean D I Chalmers I J Gandel J S Dunlop L A Colless K E Brown L A Colless & K E Brown in joint interests SHARES HELD SHARES HELD DIRECTLY INDIRECTLY - - - - 26,846 64,157 - 433,396 2,268,854 91,557,875 836,000 550,000 (a) 275,000 (a) 373,335(b) (a) (b) Held by MAS Superfund and other related parties for the benefit of the respective key management personnel Held in the name of Mineral Administration Services Pty Ltd, a Company in which Mr. Colless and Ms Brown are Directors and shareholders. 52 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 53 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 PERIOD ENDED 30 JUNE 2013 18. KEY MANAGEMENT PERSONNEL DISCLOSURE (Continued) e) EQUITY INSTRUMENT DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL (Continued) NAME 2013 Shares Directors A D Lethlean D I Chalmers I J Gandel J S Dunlop Key Management Personnel L A Colless K E Brown L A Colless & K E Brown in joint interests Total shares 2012 Shares Directors A D Lethlean D I Chalmers I J Gandel J S Dunlop Key Management Personnel L A Colless K E Brown L A Colless & K E Brown in joint interests Total shares f) KEY MANAGEMENT PERSONNEL COMPENSATION Short term employee or consulting benefits Post-employment benefits Long-term benefits Termination benefits Share-based payments BALANCE AT THE START OF THE PERIOD CHANGES DURING THE PERIOD ISSUED DURING THE PERIOD ON EXERCISE OF OPTIONS BALANCE AT THE END OF THE PERIOD 433,396 2,168,854 91,557,875 836,000 576,846 339,157 373,335 96,285,463 393,996 1,971,684 70,911,964 760,000 524,405 308,324 284,849 75,155,222 - 100,000 - - - - - 100,000 39,400 197,170 20,645,911 76,000 52,441 30,833 88,486 21,130,241 - - - - - - - - - - - - - - - - 433,396 2,268,854 91,557,875 836,000 576,846 339,157 373,335 96,385,463 433,396 2,168,854 91,557,875 836,000 576,846 339,157 373,335 96,285,463 6 MONTHS 12 MONTHS ENDED 30 JUNE ENDED 31 DEC 2013 $’000 635 33 - - 41 709 2012 $,000 934 43 - - 48 1,025 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. g) RELATED PARTY TRANSACTIONS Other than the transactions disclosed above there are no other transactions between related parties that require disclosure. A N N U A L R E P O R T 2 0 1 3 53 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 54 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 PERIOD ENDED 30 JUNE 2013 19. AUDITOR’S REMUNERATION 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 Other services Total remuneration of auditors CONSOLIDATED 6 MONTHS 12 MONTHS ENDED 30 JUNE ENDED 31 DEC 2013 $’000 2012 $’000 26 - 26 53 - 53 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 non-audit services, where provided, are compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. 20. CONTINGENT ASSETS The Group has entered into an agreement with the New South Wales Department of Trade and Investment Regional Infrastructure Services to receive grant monies for the construction of certain infrastructure relating to the Tomingley Gold Project. Subject to the Group meeting all of the requirements of the agreement, the total amount of the grant to be received will be $4,000,000 (excluding GST). $1,000,000 (excluding GST) has been received in the current financial period, with a total of $1,500,000 received. 21. COMMITMENTS MINERAL TENEMENT LEASES In order to maintain current rights of tenure to mining tenements, the Group will be required to outlay in 2014 amounts of approximately $1,149,315 (2013: $581,000) 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. PROPERTY, PLANT AND EQUIPMENT The Group is currently constructing the Tomingley Gold Project. At balance date the majority of the major contracts had been awarded and procurement activities were well advanced. Commitments for acquisition and construction of property, plant and equipment not recognised as a liability in the financial statements are as follow: Within one year PHYSICAL GOLD DELIVERY COMMITMENTS CONSOLIDATED 30 JUNE 31 DECEMBER 2013 $’000 2012 $’000 42,445 17,182 The Group is exposed to movements in the gold price. The Group had previously entered into gold forward contracts to manage the gold price of a proportion of anticipated sales of gold. The gold forwards contracted constituted part of the Group financier’s overall required hedging. With the significant fall in the gold price during the period the Group was not willing to enter into the remaining gold forward contracts required under the financing terms and decided it prudent to realise the inherent value of the forward contracts resulting in a net cash inflow of $6,767,290. The gold forward sale contracts disclosed below did not meet the criteria of financial instruments for accounting purposes on the basis that they met the normal purchase/sale exemption because physical gold would be delivered into the contract. Accordingly, the contracts were accounted for as sale contracts with revenue recognised in the period in which the gold commitment was met. 54 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 55 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 PERIOD ENDED 30 JUNE 2013 21. COMMITMENTS (Continued) PHYSICAL GOLD DELIVERY COMMITMENTS (Continued) 30 June 2013 Within one year: Fixed forward contracts 31 December 2012 Within one year: Fixed forward contracts GOLD FOR PHYSICAL DELIVERY OUNCES CONTRACTED GOLD SALE PRICE PER OUNCE - $ VALUE OF COMMITTED SALES $’000 - - - 90,000 1,458 131,238 The Group has no other gold sale commitments. A contingent liability would exist for the difference between the hedge price and the spot price of gold if the forwards were not settled through physical delivery of gold. LEASE COMMITMENTS Lease payments to which the Group are committed to in the next 12 months are $184,530 (2012: $198,947). There are no operating lease commitments beyond this period. 22. RELATED PARTY TRANSACTIONS PARENT ENTITY a) The parent entity within the Group is Alkane Resources Ltd SUBSIDIARIES b) Interests in subsidiaries is set out in Note 23 KEY MANAGEMENT PERSONNEL c) Disclosures relating to Key Management Personnel are set out in Note 18 23. CONTROLLED ENTITIES NAME Australian Zirconia Limited Skyray Properties Ltd Kiwi Australian Resources Pty Ltd Tomingley Holdings Pty Ltd Tomingley Gold Operations Pty Ltd 24. SUBSEQUENT EVENTS PLACE OF INCORPORATION Western Australia British Virgin Islands Western Australia New South Wales New South Wales CLASS OF SHARES Ordinary Ordinary Ordinary Ordinary Ordinary 6 MONTHS 12 MONTHS ENDED 30 JUNE ENDED 31 DEC 2013 % 100 100 100 100 100 2012 % 100 100 100 100 100 Since balance date the Group has sold 9,215,311 shares in Regis Resources Limited for proceeds of $35,361,318 net of transaction fees. No other matter or circumstance has arisen since 30 June 2013 that has or may significantly affect the operations, the results, or the state of affairs of the Group. A N N U A L R E P O R T 2 0 1 3 55 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 56 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 PERIOD ENDED 30 JUNE 2013 25. RECONCILIATION OF NET CASH INFLOW FROM OPERATING ACTIVITIES TO OPERATING LOSS AFTER INCOME TAX Operating (Loss)/Profit Non-cash items in operating profit Depreciation and amortisation Share-based payments Loss/(Gains) recognised from sale of investments Gains recognised from sale of assets Impairment charges Changes in net assets and liabilities Decrease/(increase) in trade and other receivables Decrease/(increase) in trade and other payables Decrease/(increase) in provisions (Increase)/decrease/ in deferred tax liability Net cash inflow from operating activities CONSOLIDATED 6 MONTHS 12 MONTHS ENDED 30 JUNE ENDED 31 DEC 2013 $’000 2012 $’000 (66,418) 66,535 89 41 4,162 (3) 98,897 14 198 203 (29,333) 7,850 78 248 (93,061) - 1,325 851 (85) 106 26,244 2,241 The Company has no credit standby or financing facilities in place other than as disclosed in the statement of financial position. 26. NON-CASH INVESTING AND FINANCING ACTIVITIES There were no significant non-cash investing and financing activities during the period. 27. EARNINGS PER SHARE Basic earnings per share (a) (Loss)/ Profit attributable to the ordinary equity holders of the Company used in calculating basic earnings per share (b) The weighted average number of ordinary shares on issue used in the calculation of basic earnings per share The diluted earnings per share is not materially different from the basic earnings per share. 28. SHARE-BASED PAYMENTS SHARES 6 MONTHS 12 MONTHS ENDED 30 JUNE ENDED 31 DEC 2013 $’000 2012 $’000 (66,418) 66,535 2013 NUMBER 2012 NUMBER 372,556,127 345,597,536 During the period, 100,000 shares were issued to the Managing Director resulting in $41,500 being expensed to the profit and loss. Shares are valued at market price, being the share price on issue date. OPTIONS There were no options outstanding at the end of the financial period. 4,000,000 options expired during the period. 56 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 57 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 PERIOD ENDED 30 JUNE 2013 29. PARENT ENTITY DISCLOSURES Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity and Reserves Issued capital Accumulated (losses)/profits Reserves Total equity Financial Performance (Loss)/Profit for the period Other comprehensive income/(loss) Total comprehensive (loss)/income PARENT ENTITY 30 JUNE 31 DECEMBER 2013 $’000 2012 $’000 107,239 67,260 174,499 888 135 1,023 192,658 (19,182) - 173,476 (77,835) 3,676 (74,159) 170,586 88,067 258,653 460 10,418 10,878 192,156 58,653 (3,034) 247,775 77,952 (3,676) 74,276 There were no guarantees, commitments or contingent liabilities relating to the Parent during the period or at balance date. The movement in the allowance for impairment in respect of inter-group balances on a non-consolidated basis was as follows: Balance at beginning of period Impairment (charge)/reversal Balance at end of period PARENT ENTITY 30 JUNE 31 DECEMBER 2013 $’000 (3,415) (47,496) (50,911) 2012 $’000 (9,256) 5,841 (3,415) Whilst the loans were not payable as at 30 June 2013, a provision for impairment based on the subsidiaries financial position was made. The balance of this provision may vary due to the ability of a subsidiary to repay the loan at reporting date. A N N U A L R E P O R T 2 0 1 3 57 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 58 D I R E C T O R S ' D E C L A R A T I O N In the Directors’ opinion: 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 Group as at 30 June 2013 and of its performance for the financial period ended 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, 30 August 2013 58 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 59 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 A N N U A L R E P O R T 2 0 1 3 59 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 60 I N D E P E N D E N T A U D I T R E P O R T 60 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 61 C O R P O R A T E G O V E R N A N C E S T A T E M E N T APPROACH TO CORPORATE GOVERNANCE Alkane Resources Ltd (Company) has established a corporate governance framework, the key features of which are set out in this statement. In establishing its corporate governance framework, the Company has referred to ASX Corporate Governance Council Principles and Recommendations 2nd edition (Principles & Recommendations). The Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. Where the Company's corporate governance practices follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. In compliance with the "if not, why not" reporting regime, where, after due consideration, the Company's corporate governance practices do not follow a recommendation, the Board has explained it reasons for not following the recommendation and disclosed what, if any, alternative practices the Company has adopted instead of those in the recommendation. The following governance-related documents can be found on the Company's website at http://www.alkane.com.au/index.php/corporate/corporate-governance, under the section marked "Corporate Governance": CHARTERS • • • • Board Audit Committee Nomination Committee Remuneration Committee POLICIES AND PROCEDURES • • • • • • • • • • • Policy and Procedure for Selection and (Re) Appointment of Directors Process for Performance Evaluations Policy on Assessing the Independence of Directors Diversity Policy (summary) Code of Conduct (summary) Policy on Continuous Disclosure (summary) Compliance Procedures (summary) Procedure for the Selection, Appointment and Rotation of External Auditor Shareholder Communication Policy Risk Management Policy (summary) Policy for Trading in Company Securities The Company reports below on whether it has followed each of the recommendations during the 6-month period from 1 January 2013 to 30 June 2013 (Reporting Period). The information in this statement is current at 30 August 2013. BOARD ROLES AND RESPONSIBILITIES OF THE BOARD AND SENIOR EXECUTIVES (Recommendations: 1.1, 1.3) The Company has established the functions reserved to the Board, and those delegated to senior executives and has set out these functions in its Board Charter, which is disclosed on the Company’s website. The Board is collectively responsible for promoting the success of the Company through its key functions of overseeing the management of the Company, providing overall corporate governance of the Company, monitoring the financial performance of the Company, engaging appropriate management commensurate with the Company's structure and objectives, involvement in the development of corporate strategy and performance objectives, and reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct and legal compliance. Senior executives are responsible for supporting the Managing Director and assisting the Managing Director in implementing the running of the general operations and financial business of the Company in accordance with the delegated authority of the Board. Senior executives are responsible for reporting all matters which fall within the Company's materiality thresholds at first instance to the Managing Director or, if the matter concerns the Managing Director, directly to the Chair or the lead independent director, as appropriate. A N N U A L R E P O R T 2 0 1 3 61 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 62 C O R P O R A T E G O V E R N A N C E S T A T E M E N T SKILLS, EXPERIENCE, EXPERTISE AND PERIOD OF OFFICE OF EACH DIRECTOR (Recommendation: 2.6) A profile of each Director setting out their skills, experience, expertise and period of office is set out in the Directors' Report on page 20. The current composition of the Board includes directors with geological, engineering, finance and broking and general business skills and experience. The Board believes that these skills have been adequate for the Company’s status to date. As the Company’s projects develop and the Company matures, it is considered that augmenting the Board with additional members would enhance diversity and the depth of experience and expertise required as the Dubbo Zirconia Project is progressed. The Board is actively looking for additional Board members, potentially female, who possess a high corporate profile, legal and/or capital raising and/or financing experience. DIRECTOR INDEPENDENCE (Recommendations: 2.1, 2.2, 2.3, 2.6) The Board considers the independence of directors having regard to the relationships listed in Box 2.1 of the Principles & Recommendations and the Company's materiality thresholds. The Board has agreed on the following guidelines, as set out in the Company's Board Charter for assessing the materiality of matters: • • • • Balance sheet items are material if they have a value of more than 10% of pro-forma net asset. Profit and loss items are material if they will have an impact on the current year operating result of 10% or more. Items are also material if they impact on the reputation of the Company, involve a breach of legislation, are outside the ordinary course of business, could affect the Company’s rights to its assets, if accumulated would trigger the quantitative tests, involve a contingent liability that would have a probable effect of 10% or more on balance sheet or profit and loss items, or will have an effect on operations which is likely to result in an increase or decrease in net income or dividend distribution of more than 10%. Contracts will be considered material if they are outside the ordinary course of business, contain exceptionally onerous provisions in the opinion of the Board, impact on income or distribution in excess of the quantitative tests, there is a likelihood that either party will default, and the default may trigger any of the quantitative or qualitative tests, are essential to the activities of the Company and cannot be replaced, or cannot be replaced without an increase in cost which triggers any of the quantitative tests, contain or trigger change of control provisions, are between or for the benefit of related parties, or otherwise trigger the quantitative tests. The independent directors of the Company are John Dunlop (Chair), Anthony Lethlean and Ian Gandel (deemed independent by the Board). Messrs Dunlop and Lethlean are independent as they are non-executive directors who are not members of management and who are free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of their judgment. Mr Gandel is a substantial shareholder (as defined in the Corporations Act 2001 (Cth)) of the Company. Mr Gandel does not have any other relationships against which independence is considered (having regard to the Company’s materiality thresholds) as set out in Box 2.1 of the Principles & Recommendations. The Board considers that Mr Gandel’s interest as a substantial shareholder is consistent with that of other shareholders and his shareholding does not cause potential for real conflict between his interests and the majority of the other shareholders of the Company (and therefore affect Mr Gandel’s ability to exercise unbiased judgment). To the contrary the Board, in the absence of Mr Gandel, consider that Mr Gandel demonstrates and consistently makes decisions and takes actions that are in the best interests of the Company, and therefore consider him to be independent. The non-independent director of the Company is the Managing Director, David (Ian) Chalmers. The independent Chair of the Board is John Dunlop. The Board has also elected Mr Lethlean as lead independent director to support the Chair and the Board by: • • • • • assuming role of Chair when the Chair is unable to act; coordinating the activities of the independent directors; serving on, and as required, chairing any regular or special committees of the Board; participating in the review of the performance of the Chair and Managing Director; and participating in communication with shareholders. INDEPENDENT PROFESSIONAL ADVICE (Recommendation: 2.6) To assist directors with independent judgement, it is the Board's policy that 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 from the Chair for incurring such expense, the Company will pay the reasonable expenses associated with obtaining such advice. 62 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 63 C O R P O R A T E G O V E R N A N C E S T A T E M E N T SELECTION AND (RE)APPOINTMENT OF DIRECTORS (Recommendation: 2.6) In determining candidates for the Board, the Nomination Committee (or equivalent) follows a prescribed process whereby it evaluates the mix of skills, experience, expertise and diversity of the existing Board. In particular, the Nomination Committee (or equivalent) is to identify the particular skills and diversity that will best increase the Board's effectiveness. Consideration is also given to the balance of independent directors. Potential candidates are identified and, if relevant, the Nomination Committee (or equivalent) recommends an appropriate candidate for appointment to the Board. Any appointment made by the Board is subject to ratification by shareholders at the next general meeting. The Board recognises that Board renewal is critical to performance and the impact of Board tenure on succession planning. An election of directors is held each year. Each director other than the Managing Director, must not hold office (without re-election) past the third annual general meeting of the Company following the director's appointment or three years following that director's last election or appointment (whichever is the longer). However, a director appointed to fill a casual vacancy or as an addition to the Board must not hold office (without re-election) past the next annual general meeting of the Company. At each annual general meeting a minimum of one director or one third of the total number of directors must resign. A director who retires at an annual general meeting is eligible for re-election at that meeting. Re-appointment of directors is not automatic. The Company’s Policy and Procedure for the Selection and Re (Appointment) of Directors is disclosed on the Company’s website. BOARD COMMITTEES NOMINATION COMMITTEE (Recommendations: 2.4, 2.6) The Board has not established a separate Nomination Committee. Given the current size and composition of the Board, the Board believes that there would be no efficiencies gained by establishing a separate Nomination Committee. Accordingly, the Board performs the role of the Nomination Committee. Items that are usually required to be discussed by a Nomination Committee are marked as separate agenda items at Board meetings when required. When the Board convenes as the Nomination Committee it carries out those functions which are delegated to it in the Company’s Nomination Committee Charter. The Board deals with any conflicts of interest that may occur when convening in the capacity of the Nomination Committee by ensuring that the director with conflicting interests is not party to the relevant discussions. While the full Board did not hold any separate meetings in its capacity as the Nomination Committee during the Reporting Period, Nomination Committee matters were discussed on three occasions during Board meetings attended by all members. Details of director attendance at meetings of the full Board and at meetings of the full Board in its capacity as the Nomination Committee during the Reporting Period are set out in the table in the Directors' Report on page 21. The Board has adopted a Nomination Committee Charter which describes the role, composition, functions and responsibilities of the full Board in its capacity as the Nomination Committee. The Company’s Nomination Committee Charter is disclosed on the Company’s website. AUDIT COMMITTEE (Recommendations: 4.1, 4.2, 4.3, 4.4) The Board has established an Audit Committee. The Audit Committee is, and was at all times during the Reporting Period, structured in compliance with Recommendation 4.2. The Audit Committee comprises three independent, non-executive directors; Messrs Dunlop, Lethlean and Gandel, and is chaired by Mr Lethlean who is not Chair of the Board. Details of each of the director's qualifications are set out in the Directors' Report on page 20. Whilst none of the Audit Committee members have financial qualifications, each member is financially literate and has extensive industry knowledge. Further, the Chief Financial Officer of the Company 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. The Audit Committee held one meeting during the Reporting Period, which all Audit Committee members attended. Details of director attendance at Audit Committee meetings during the Reporting Period are set out in a table in the Directors’ Report on page 21. The Board has adopted an Audit Committee Charter which describes the role, composition, functions and responsibilities of the Audit Committee. The Company has established a Procedure for the Selection, Appointment and Rotation of its External Auditor. The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises, as recommended by the Audit Committee (or its equivalent). Candidates for the position of external auditor must demonstrate complete independence from the Company through the engagement period. The Board may otherwise select an external auditor based on criteria relevant to the Company's business and circumstances. The performance of the external auditor is reviewed on an annual basis by the Audit Committee (or its equivalent) and any recommendations are made to the Board. The Company’s Audit Committee Charter and Procedure for Selection, Appointment and Rotation of External Auditor are disclosed on the Company’s website. A N N U A L R E P O R T 2 0 1 3 63 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 64 C O R P O R A T E G O V E R N A N C E S T A T E M E N T REMUNERATION COMMITTEE (Recommendations: 8.1, 8.2, 8.3, 8.4) The Board has established a Remuneration Committee. The Remuneration Committee is and was at all times during the Reporting Period, structured in accordance with Recommendation 8.2 and Listing Rule 12.8. The Remuneration Committee comprises three independent, non-executive directors; Messrs Dunlop (Chair), Lethlean and Gandel. The Remuneration Committee held one meeting during the Reporting Period, which all Remuneration Committee members attended. Details of director attendance at Remuneration Committee meetings during the Reporting Period are set out in a table in the Directors’ Report on page 21. The Board has adopted a Remuneration Committee Charter which describes the role, composition, functions and responsibilities of the Remuneration Committee. The Company’s Remuneration Committee Charter is disclosed on the Company’s website. Details of remuneration, including the Company’s policy on remuneration, are contained in the “Remuneration Report” which forms part of the Directors’ Report and commences on page 21. The Company's policy on remuneration clearly distinguishes the structure of non-executive directors’ remuneration from that of executive directors and senior executives. Non-executive directors are remuneration at a fixed fee for time, commitment and responsibilities. Remuneration for non-executive directors is not linked to the performance of the Company. For services in addition to ordinary non-executive directors’ services, non-executive directors may charge per diem consulting fees at the rate specified by the Board from time to time for a maximum of 4 days per month over a 12-month rolling basis. Any fees in excess of this limit are to be approved by the Board. The Board may, from time to time, consider issuing equity based payments (including options) to non-executive directors, subject to obtaining the relevant shareholder approvals. Given the Company’s size and stage of development to date, the Board believes this is an effective means of attracting and retaining the highest calibre of professionals to the role whilst maintaining the Company’s cash reserves. This policy is subject to annual review. Executive pay and rewards consist of a base salary and performance incentives. Long term performance incentives may include equity based payments (including options) granted at the discretion of the Board and subject to obtaining the relevant approvals. There are no termination or retirement benefits for non-executive directors (other than for superannuation). The Company's Remuneration Committee Charter includes a statement of the Company's policy on prohibiting transactions in associated products which limit the risk of participating in unvested entitlements under any equity based remuneration schemes. PERFORMANCE EVALUATION SENIOR EXECUTIVES (Recommendations: 1.2, 1.3) The Managing Director is responsible for evaluating the performance of senior executives. The current size and structure of the Company allows the Managing Director to conduct informal evaluation regularly. Approximately annually, individual performance may be more formally assessed in conjunction with a remuneration review. Informal senior executive performance evaluation has taken place during the Reporting Period in accordance with the process disclosed. However, the more formal assessment did not take place in the Reporting Period given that it relates only to the 6-month period ended 30 June 2013 and the formal evaluation is not scheduled to take place until December 2013. BOARD, ITS COMMITTEES AND INDIVIDUAL DIRECTORS (Recommendations: 2.5, 2.6) The Chair is responsible for evaluation of the Board and, when deemed appropriate, Board committees and individual directors. Performance evaluation of the Board is carried out by means of ongoing review by the Chair with reference to the composition of the Board and its suitability to carry out the Company’s objectives. The Chair may carry out the review by various means including, but not limited to: meeting with and interviewing each Board member; consultation with the full Board, in its capacity as the Nomination Committee; circulation of internal review tools such as formal questionnaires and reports; and outsourcing to independent specialist consultants. • • • • 64 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 65 C O R P O R A T E G O V E R N A N C E S T A T E M E N T The Chair’s review may include: • • • • • • assessing the skills, performance and contribution of individual members of the Board and senior management personnel, consideration of the performance of the Board as a whole and of its various committees; the awareness of Board members of their responsibilities and duties, and of corporate governance and compliance requirements; the awareness of Board members of the Company’s goals and strategies; the understanding of Board members of the business/es the Company is operating and the trends and issues affecting the market/s in which it competes; and consideration of avenues for continuing improvement of Board functions and further development of its skill base. The Chair reports back to the Board in regard to his review at least annually. The full Board, in its capacity as the Nomination Committee, is responsible for the evaluation of the Managing Director. Given the current size and structure of the Company, in addition to the process for general performance evaluation as outlined above, further performance evaluation may be carried out on an ongoing basis through open and regular communication between the Board, in its capacity as the Nomination Committee, and the Managing Director, to identify and achieve key performance indicators, to provide feedback, and to provide guidance and support where any issues may become evident. During the Reporting Period an evaluation of the Board, its committees, and individual directors has not taken place given that it relates only to the 6-month period ended 30 June 2013 and the review is not scheduled to take place until December 2013. The Company’s Process for Performance Evaluation is disclosed on the Company’s website. ETHICAL AND RESPONSIBLE DECISION MAKING CODE OF CONDUCT (Recommendations: 3.1, 3.5) The Company has established a Code of Conduct as to the practices necessary to maintain confidence in the Company's integrity, the practices necessary to take into account its legal obligations and the reasonable expectations of its stakeholders and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. A summary of the Company’s Code of Conduct is disclosed on the Company’s website. DIVERSITY (Recommendations: 3.2, 3.3, 3.4, 3.5) The Company has established a Diversity Policy, which includes requirements for the Board to establish measurable objectives for achieving gender diversity and for the Board to assess annually both the objectives and progress towards achieving them. The Board has also adopted a Diversity Strategy, which details the Company’s measurable objectives for achieving gender diversity in accordance with the Diversity Policy. The following table outlines the objectives that have been set by the Board, together with the Board’s progress towards achieving them: MEASURABLE OBJECTIVE PROGRESS TOWARDS ACHIEVEMENT DURING REPORTING PERIOD STRUCTURAL/PROCEDURAL Periodic review of Diversity Policy. Annual review of Diversity Strategy. Review scheduled December 2014. Review scheduled December 2013. Assign responsibility for the Diversity Policy and its administration, monitoring and review. Assignment of responsibility remains outstanding. No progress during Reporting Period. INITIATIVES AND PROGRAMS Review Policy and Procedure for Selection and (Re)Appointment of Directors and Board performance evaluation process. Review scheduled December 2014. Succession planning to incorporate diversity issues. Consider the inclusion of diversity issues in KPIs. Succession planning in general remains an ongoing process on an informal basis. Introduction of proactive diversity measures remains a lower priority than equal opportunity. Incorporation of diversity issues in the development of KPIs has not yet occurred, this is a future dated target. A N N U A L R E P O R T 2 0 1 3 65 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 66 C O R P O R A T E G O V E R N A N C E S T A T E M E N T MEASURABLE OBJECTIVE PROGRESS TOWARDS ACHIEVEMENT DURING REPORTING PERIOD Develop HR policies and processes incorporating diversity issues. Review workplace and cultural practices. The development of policies and processes incorporating diversity issues is underway. Education and participation in cultural events is ongoing, nothing new to report this period. Ensure recruitment practices are compliant with diversity policy and strategy. Ongoing process. Contribute to enhanced local workforce. Provide opportunities for career development. Positions for the Tomingley Gold Mine have been advertised in local media to target the local workforce, as well as the more widely disseminated media such as Seek. The Company has also held a community employment information forum in the local area related to the development of the Tomingley Gold Mine. The Company has provided a number of employees with professional development opportunities including attendance at courses, assistance with tuition fees, time off work for study purposes and assistance with research materials. Consider provision of budget for formal career development program. No progress during Reporting Period. SPECIFIC DIVERSITY TARGETS Increase the representation of women at Board level; ideally of the next two Board appointments at least one should be female with appropriate skills and attributes. Increase the representation of women at management level: ideally of the next two management appointments at least one should be a female with appropriate skills and attributes. Increase the representation of women at professional/technical level: ideally of the next two professional/technical appointments at least one should be a female with appropriate skills and attributes. There were no Board appointments during the Reporting Period. The Board is actively looking for additional Board members, potentially female, who possess a high corporate profile, legal and/or capital raising and/or financing experience. There were no senior management roles filled during the Reporting Period. During the Reporting Period, three professional/technical roles were filled, one of which was female. In general, aim for and encourage the recruitment of at least 20% of new personnel to be female. During the Reporting Period, the Company increased the representation of females across the organisation from 15.3% to 32.3% (excluding casual staff). The Board has also adopted a policy to address harassment and discrimination in the Company, which it believes will facilitate an environment that encourages a diverse workforce. The proportion of women employees in the whole organisation, women in senior executive positions and women on the Board as at 30 June 2013 are set out in the following table: CATEGORY TOTAL NUMBER WOMEN % WOMEN Whole organisation (including Board and senior executives) Senior Executive* positions (excluding Board) Senior Managers Managers Professional** / technical and superintendents Administration and support In addition casual / short-term support staff on payroll at period end not included above Total organisation * ** includes “embedded” consultants ie 2x joint company secretaries includes “embedded” consultant ie 1x corporate communications officer A summary of the Company’s Diversity Policy is disclosed on the Company’s website. 31 3 4 6 10 4 6 37 10 1 0 2 3 4 1 11 32.26 33.33 0.00 33.33 30.00 100.00 16.66 29.73 66 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 67 C O R P O R A T E G O V E R N A N C E S T A T E M E N T CONTINUOUS DISCLOSURE (Recommendations: 5.1, 5.2) The Company has established written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and accountability at a senior executive level for that compliance. A summary of the Company’s Policy on Continuous Disclosure and Compliance Procedures are disclosed on the Company’s website. SHAREHOLDER COMMUNICATION (Recommendations: 6.1, 6.2) The Company has designed a communications policy for promoting effective communication with shareholders and encouraging shareholder participation at general meetings. The Company’s Shareholder Communication Policy is disclosed on the Company’s website. RISK MANAGEMENT (Recommendations: 7.1, 7.2, 7.3, 7.4) The Board has adopted a Risk Management Policy, which sets out the Company's risk profile. Under the policy, the Board is responsible for approving the Company's policies on risk oversight and management and satisfying itself that management has developed and implemented a sound system of risk management and internal control. Under the policy, the Board delegates day-to-day management of risk to the Managing Director, who is responsible for identifying, assessing, monitoring and managing risks. The Managing Director is also responsible for updating the Company's material business risks to reflect any material changes, with the approval of the Board. In fulfilling the duties of risk management, the Managing Director may have unrestricted access to Company employees, contractors and records and may obtain independent expert advice on any matter they believe appropriate, with the prior approval of the Board. The Board has established a separate Audit Committee to monitor and review the integrity of financial reporting and the Company’s internal financial control systems. The Audit Committee reports to the Board in this regard at least twice per year. The Board has also established a separate Risk Management Committee to assist the Managing Director to identify, monitor and manage the Company’s risks. During the Reporting Period the committee had six members; the Chair, the Managing Director, the General Manager NSW (who is designated the Risk Management Co-ordinator), the Chief Geologist, the Project Manager for Tomingley Gold Project and the Operations Manager for Tomingley Gold Project. The Chief Financial Officer was also included in Risk Management Committee business by invitation and has been appointed to the Committee effective from 22 August 2013. The committee operates under a Risk Management Committee Charter that has been adopted by the Board. In addition, the following risk management measures have been adopted by the Board to manage the Company's material business risks: • • • the Board has established authority limits for management, which, if proposed to be exceeded, require prior Board approval; the Board has adopted a compliance procedure for the purpose of ensuring compliance with the Company's continuous disclosure obligations; and the Board has adopted a corporate governance manual which contains other policies to assist the Company to establish and maintain its governance practices. The Board has formalised and documented the management of its material business risks. This system included the preparation of a risk matrix by third party consultants in consultation with the Board and management to identify the Company's material business risks and risk management strategies for these risks. In addition, the process of management of material business risks is allocated to members of senior management. Risk is a standing item at each scheduled Board meeting and the risk matrix is reviewed periodically. During the Reporting Period, a review of the Company’s operational risks, facilitated by an external consultant, was undertaken. The categories of risk reported on as part of the Company's systems and processes for managing material business risks include: market-related risk; financial reporting risk; operational risk, environmental risk, human capital risk; sustainability, occupational health and safety; economic cycle/marketing; reputational risk; political risk; strategic risk; technological risk; ethical conduct and legal and compliance risk. The Board has required management to design, implement and maintain risk management and internal control systems to manage the Company's material business risks. The Board also requires management to report to it confirming that those risks are being managed effectively. The Board has received a report from management as to the effectiveness of the Company's management of its material business risks for the Reporting Period. The Managing Director and the Chief Financial Officer have provided a declaration to the Board in accordance with section 295A of the Corporations Act and have assured the Board that such declaration is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. A summary of the Company’s Risk Management Policy is disclosed on the Company’s website. A N N U A L R E P O R T 2 0 1 3 67 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 68 C O R P O R A T E G O V E R N A N C E S T A T E M E N T ASX CORPORATE GOVERNANCE COUNCIL RECOMMENDATIONS CHECKLIST The following table sets out the Company’s position with regard to adoption of the Principles & Recommendations as at the date of this statement: RECOMMENDATION COMPLY PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT 1.1 1.2 1.3 Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions. Companies should disclose the process for evaluating the performance of senior executives. Companies should provide the information indicated in the Guide to reporting on Principle 1: PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE 2.1 2.2 2.3 2.4 2.5 2.6 A majority of the board should be independent directors. The chair should be an independent director. The roles of chair and chief executive officer should not be exercised by the same individual. The board should establish a nomination committee. Companies should disclose the process for evaluating the performance of the board, its committees and individual directors. Companies should provide the information indicated in the Guide to reporting on Principle 2: PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING 3.1 Companies should establish a code of conduct and disclose the code or a summary of the code as to: • • • the practices necessary to maintain confidence in the company’s integrity; the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders; and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess annually both the objectives and progress in achieving them. Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them. Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board. Companies should provide the information indicated in the Guide to reporting on Principle 3: 3.2 3.3 3.4 3.5 PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING 4.1 4.2 4.3 4.4 The board should establish an audit committee. The audit committee should be structured so that it: consists only of non-executive directors; consists of a majority of independent directors; is chaired by an independent chair, who is not chair of the board; and has at least three members. The audit committee should have a formal charter. Companies should provide the information indicated in the Guide to reporting on Principle 4: PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at senior executive level for that compliance and disclose those policies or a summary of those policies. Companies should provide the information indicated in the Guide to reporting on Principle 5: ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ 5.1 5.2 68 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 69 C O R P O R A T E G O V E R N A N C E S T A T E M E N T RECOMMENDATION COMPLY PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS 6.1 6.2 Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of the policy. Companies should provide the information indicated in the Guide to reporting on Principle 6: PRINCIPLE 7: RECOGNISE AND MANAGE RISK 7.1 7.2 7.3 Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks. The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.. 7.4 Companies should provide the information indicated in the Guide to reporting on Principle 7: PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY 8.1 8.2 8.3 8.4 The board should establish a remuneration committee. The remuneration committee should be structured so that it: consists of a majority of independent directors; is chaired by an independent chair; and has at least three members. Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives. Companies should provide the information indicated in the Guide to reporting on Principle 8: ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ A N N U A L R E P O R T 2 0 1 3 69 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 70 S H A R E H O L D E R I N F O R M A T I O N SHARE HOLDING AT 30 AUGUST 2013 – 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 - (b) UNMARKETABLE PARCELS There are 1,165 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 Abbotsleigh Pty Ltd TOP TWENTY SHAREHOLDERS AT 30 AUGUST 2013 SHAREHOLDER Abbotsleigh Pty Ltd JP Morgan Nominees Australia Limited JP Morgan Nominees Australia Limited National Nominees Limited HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited Merrill Lynch (Australia) Nominees Pty Ltd Pershing Australia Nominees Pty Ltd Choice Investments Dubbo Pty Ltd Funding Securities Pty Ltd Sandhurst Trustees Ltd Leefab Pty Ltd Ms Kathryn Lewis ABN Amro Clearing Sydney Nominees Pty Ltd Mr Richard Mitchell Dimond & Mrs Denise Rosslyn Dimond Berne No 132 Nominees Pty Ltd <152417 A/C> CS Fourth Nominees Pty Ltd Spacebull Pty Limited Citicorp Nominees Pty Limited Ms Jillanne Homewood NUMBER OF HOLDERS FULLY PAID ORDINARY SHARES 887 2,387 1,150 1,732 199 6,355 NUMBER OF SHARES 91,557,875 NUMBER OF SHARES 85,557,875 47,696,091 32,979,189 21,946,754 17,861,969 14,791,191 6,833,655 6,460,246 3,925,555 3,900,000 3,291,187 2,143,713 1,996,555 1,659,010 1,600,000 1,540,000 1,415,236 1,333,689 1,249,699 1,130,418 % ISSUED CAPITAL 22.96 12.80 8.85 5.89 4.79 3.97 1.83 1.73 1.05 1.05 0.88 0.55 0.54 0.45 0.43 0.41 0.38 0.36 0.34 0.30 259,312,032 69.59 70 A L K A N E R E S O U R C E S L T D Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 71 S H A R E H O L D E R I N F O R M A T I O N RESTRICTED SECURITIES As at the date of this report, there were no securities subject to restriction under the Listing Rules of ASX Limited. ON MARKET BUY-BACK As at the date of this report, there was no current on market buy-back. A N N U A L R E P O R T 2 0 1 3 71 Alkane AR June 2013 Fins 1148_Layout 1 5/09/13 5:01 PM Page 72 T E N E M E N T S C H E D U L E AT 30 AUGUST 2013 – ALK TENEMENT NUMBER PROJECT NAME/LOCALITY ALKANE INTEREST % OTHER INTERESTS 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 8106 EL 5548 ELA 4827 MLA 183 Or EL 7631 EL 6320 EL 5675 EL 5830 EL 5942 EL 6085 ML 1684 EL 7020 EL 4022 EL 7971 ELA 4808 ELA 4851 E 46/522-I E 46/523-I E 46/524 M 36/303 M 36/329 M 36/330 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 Parkes, NSW Dubbo, NSW Dubbo NSW Dubbo, NSW Geurie, NSW Wellington, NSW Tomingley, NSW Tomingley, NSW Tomingley, NSW Tomingley, NSW Tomingley, NSW Cudal, NSW Bodangora, NSW Calula, NSW Rockley, NSW Rockley, NSW Nullagine, WA Nullagine, WA Nullagine, WA Miranda Well, WA McDonough, WA McDonough, WA 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 20 20 20 Alkane group 80%, Comet Resources Ltd 20% Alkane group retains 60% interest in diamond potential Alkane group 20% diluting, Xstrata Nickel 80% 72 A L K A N E R E S O U R C E S L T D 

Continue reading text version or see original annual report in PDF format above