AUSTRAL GOLD LIMITED
AND ITS SUBSIDIARIES
ACN 075 860 472
ANNUAL REPORT
2007
For personal use only Austral Gold Limited
ACN 075 860 472
Contents
Table of Contents............................................................................................................................................................ 2
Chairman’s Letter ............................................................................................................................................................ 3
Corporate Directory........................................................................................................................................................ 4
Review of Activities ............................................................................................................................................... 5 - 11
Directors’ Report
................................................................................................................................................ 12 - 19
Auditors Independence Declaration........................................................................................................................20
Consolidated Income Statement................................................................................................................................. 21
Consolidated Balance Sheet.......................................................................................................................................22
Consolidated Statement of Changes in Equity ........................................................................................................ 23
Consolidated Cash Flow Statements ....................................................................................................................... 24
Notes to the Financial Statements ................................................................................................................... 25 - 44
Directors’ Declaration ................................................................................................................................................ 45
Independent Auditors’ Report .......................................................................................................................... 46 - 48
Additional Information Required by Australian Stock Exchange Limited ............................................................
Corporate Governance Statement...................................................................................................... . 48 - 53
Statement of issued capital........................................................................................................................ .... 54
Options on issue......................................................................................................................................... 54
Substantial Shareholders...............................................................................................................................54
Top twenty shareholders..................................................................................................................... .. 54 - 55
Schedule of Mineral Tenements................................................................................................................... 55
2
For personal use only For personal use only Corporate Directory
Directors:
Mark Bethwaite - Chairman
Eduardo Elsztain – Non Executive Director
Saul Zang – Non Executive Director
Pablo Vergara del Carril - Non Executive Director
Robert Trzebski - Non Executive Director
Natalia Zang – Alternate Non Executive Director
Company Secretary:
Denise Lindfield
Management:
Ema Volavola - Office Manager
Registered Principal Office:
Suite 605, Level 6 80 William Street
Sydney NSW 2011
Telephone:
(02) 9380 7233
Facsimile:
(02) 9380 7972
info@australgold.com.au
Email:
Website: www.australgold.com.au
Auditors:
PKF
Share Registry:
Computershare Investor Services Pty Ltd
Level 3, 60 Carrington Street
Sydney NSW 2000
Telephone: (02) 8216 5531
Facsimile:
(02) 8235 8120
Principal Bankers:
National Bank Limited
Solicitors:
Listed:
Steinepreis Paganin, Perth
Australian Stock Exchange Limited
Place of Incorporation:
Western Australia
4
For personal use only Review of Activities
The Company’s strategy is to maximize shareholder value by the development of mineral deposits in which Austral
Gold has an interest, providing such development demonstrates superior rates of return.
Guanaco Gold Project, Chile
Background
In January 2003 Austral Gold Limited (formerly Diamond Rose NL) obtained through its subsidiary Golden Rose
International Limited (GRIL), an option to acquire the Guanaco gold-copper project in Chile from subsidiaries of
Kinross Gold Corporation (Guanaco Project). At a general meeting of the Company held on 14 March 2003, the
Shareholders approved the acquisition by the Company of an interest in the Guanaco Project.
Guanaco Capital Holding (GCH) (an entity under the control of Eduardo Elsztain, a prominent South American
fund manager) agreed to provide funds to complete the purchase. The agreement to fund the acquisition was
conditional on GCH holding title in the Guanaco Project pending an equitable distribution of equity being
concluded and also on Austral Gold Limited managing the project on terms and conditions to be agreed upon.
The Guanaco Project was acquired from Compania Minera Kinam Guanaco and Kinam de Chile Limited (wholly
owned subsidiaries of Kinross Gold Corporation) by a company that is currently wholly owned by Guanaco Mining
Company Limited (GMC).
In July 2003, a binding international arbitration determined that GCH should hold 51% of the equity in the
Guanaco Project in return for an initial investment of US$1,100,000 plus an additional US$900,000 expenditure on
the Guanaco Project. In December 2003 an Implementation Agreement between Vageta (Austral Gold former
controlling shareholder), GCH, GMC and Austral Gold was executed pursuant to which a series of transactions
were to be carried as approved by the shareholders of Austral Gold in September 2004. In January 2005 the parties
completed the set of agreements and in March 2005 GCH became the major shareholder of Austral Gold. The
Board of the Company changed and its securities were reinstated by the ASX in May 2005. In December 2005,
Vageta sold its remaining interest in the Company. In November 2006, Austral Gold, GCH, GRIL and GMC
executed a Deed of Acknowledgement and Release to formally resolve the apportionment of shares in GMC and
the obligations of the parties to contribute to the expenses in GMC. The Deed of Restructure resulted in the
corporate reorganization was put forward to the shareholders at the last General Meeting. On 22 May 2007, the
shareholders approved the reconstruction of the share capital so that Austral Gold Limited now holds 51% of GMC
and 100% of GRIL and the appointment of a new Board to lead the Company in a new era.
Project Description
Guanaco is located some 200 kilometres south east of Antofagasta in Northern Chile. It is at an elevation of 2700
metres and close to the Pan-American highway which runs north/south through Chile.
5
For personal use only Guanaco is located in a structural trend which runs north/south down the centre of Chile. This porphyry copper
trend accommodates several large Chilean copper/gold mining operations including Chuquicamata, San Cristobal,
El Peñon and Escondida.
6
For personal use only Mining was undertaken at Guanaco from 1886 - with some interruptions - until 1997.
Both copper and gold have been mined at Guanaco and more than one million ounces of gold have been produced.
Austral Gold’s predecessors entered into an Option Agreement to acquire an interest in Guanaco in September
2002. Since that time, Austral Gold has pursued exploration activities at Guanaco with our joint venture partner,
Guanaco Capital Holding, which is also Austral Gold’s majority shareholder.
The photograph above shows the Dumbo open pit, the deepest of the past workings.
The smaller photograph on the lower right shows the leach pads beyond the crushing circuit which supported earlier
mining operations.
7
For personal use only A legacy from prior operations at Guanaco is significant infrastructure in the form of crushing, conveying, milling
and processing plant, together with accommodation and offices, some of which are shown in the photographs
above.
Whilst any resumption of operations at this site would require significant investment to bring existing plant up to
operating standard, and some sections of the plant would require complete replacement, any future operations at
Guanaco will have the benefit of significant former investment.
These gold figures are based on 31 December 2006 resource estimates
The Dumbo vein system, on which the Dumbo open pit shown in an earlier photograph was sited, can be seen to
the east. The Perseverancia vein system is to the south of Dumbo and the Cachinalito and Salvadora vein systems
are to its north.
These systems all strike east north east/west south west and dip steeply to the north.
8
For personal use only Exploration drilling in 2006/07 was focused on the Cachinalito Oeste, Cerro Guanaquito, and Salvadora vein
systems. The combined measured, indicated and inferred resources as at 31 December 2007 of contained ounces of
gold as a result of that drilling, is shown on each vein.
Measured, indicated and inferred resources amount to 500 000 ounces excluding any gold or silver remaining in the
leach pads from earlier operations, estimated to be just under 200 000 additional ounces.
Guanaco is Austral Gold’s principal asset and the focus of our exploration and technical effort.
Exploration at the site will continue in 2007/08 with the objective of increasing the measured, indicated and inferred
resources of gold and silver significantly above current levels.
It is anticipated that in the second half of 2008, the Company will embark on a feasibility study into the restarting of
gold mining and processing operations at Guanaco. Any feasibility study will take some months to complete, and
may lead to a development decision in 2009.
9
For personal use only Australian exploration areas
Austral Gold’s Australian exploration areas are all in Western Australia. They are of varying quality and some have
administrative issues which are being addressed by the Board.
In late 2006, the Company initiated an independent technical review of its Australian exploration portfolio by an
independent expert geologist. Based on that review, the Company’s portfolio has been rationalised to allow Austral
Gold to focus on those areas of greatest prospectivity.
Bullabulling Project (95% interest)
The Bullabulling Project is located about 60 km west-southwest of the City of Kalgoorlie-Boulder in the Eastern
Goldfields Province of Western Australia. The project comprises eight granted Prospecting Licences covering a total area
of 1,233 ha in the historical Bullabulling gold mining area.
Exploration by the Company has comprised geological structural interpretation of satellite imagery that resulted in
identification of a major shear zone about 12 to 14 kilometres wide which cuts across the P15/4514 to P15/4516
tenement group. In November – December 2006, 22 lag samples were collected along a 1,800 metres long north-
south traverse to the north of the Great Eastern Highway. The results of this program indicated a significant
anomaly. The analytical results indicate that background gold values range between 2 parts per billion (ppb) and 6
ppb. The anomaly has a peak of more than 300 ppb (0.34 parts per million).
Exploration of the Bullabulling Project is an ongoing project. Extensive additional soil lag sampling is planned for
the southern tenement group. Soil lag sampling is also planned to investigate an interpreted shear zone in P15/4518
and P15/4519 of the northern tenement group. A program of soil lag sampling is planned for the P15/4514 to
P15/4519 tenements. The objective is to identify significant gold targets and investigate deep target potential by RC
drilling.
Kookynie Project (95% interest)
The Kookynie Project is located about 45 km south east of Leonora in the Eastern Goldfields Province. It
comprises two Exploration Licence applications E40/197 and E40/198 together with four Prospecting Licence
applications P40/1112 and P40/1116 to P40/1118 covering a total area of 10.56 square kilometres [sq km].
Previous exploration activity has been concentrated on the search for regolith (weathered rock) hosted near surface
small gold deposits.
The interpretation of both aeromagnetic data and Landsat TM satellite imagery has resulted in identification of
numerous potential targets. Follow-up reconnaissance soil lag sampling was planned in order to assign priorities as a
precursor to more detailed sampling with possible follow-up by RC drilling.
In July 2007, a reconnaissance program of soil lag sampling was hampered by heavy rains including consequent
flooding of areas of the project.
10
For personal use only Due to low mineral prospectivity, the Company decided to relinquish tenements E40/197 and E40/198.
Rocklea Project (100% interest)
Rocklea Project comprises Exploration Licence Application E04/832 covering a total area of approximately 207 sq
km and is located in the West Pilbara Mineral Field of Western Australia.
Grant of the application is dependant on execution of Heritage Protection Agreements with the Innawonga Bunjima
Nyiyaparli and Eastern Guruma Peoples and a State Deed with respect to the tenement. The Company is pursuing
available options to meet the requirements of the Native Title Act in this regard.
Leonora Project (75% interest)
The Leonora Project is located about 10 km west of Leonora in the Eastern Goldfields Region of Western Australia.
The Leonora Project comprises Exploration Licences E37/728 and E37/729 covering a total area of 414 sq km.
In the opinion of the Company’s consultants the potential for discovery of significant gold or base metal deposits is
limited and this tenement was relinquished.
Raeside Project (75% interest)
The Raeside Project comprises Exploration Licence application E37/736 covering a total area of about 210 sq km
and is centred 60 km west-northwest of Leonora.
Following a re-evaluation of all available data, this tenement was relinquished.
Hann Project (100% interest)
In February 2006 the Company applied for two exploration licences (E80/2782 - 2783) covering 388 sq km, located
350 km northeast of Derby.
Exploration in these areas is high cost and in view of low prospectivity, the application has been withdrawn.
11
For personal use only Directors' report
The Directors present the following report for the financial year ended 30 June 2007 together with the financial
report of Austral Gold Limited (“the Company”) and the consolidated financial report of the economic entity, being
the Company and its subsidiaries, for the year ended 30 June 2007 and the auditors’ report thereon.
PRINCIPAL ACTIVITIES
The principal activities of the economic entity during the course of the financial year were gold and base metals
exploration, as described in preceding sections of this report.
The Company is a company limited by shares and incorporated and domiciled in Australia.
Detailed information on the Company’s operations during the year ended 30 June 2007 has been released in the
Company’s announcements and reports to the Australian Stock Exchange and is available for review on the
Company’s website at www.australgold.com.au.
REVIEW AND RESULTS OF OPERATIONS
Operating Results and Dividends
The Economic Entity’s net loss attributable to members for the year ended 30 June 2007 was $1,397,449 (2006:
profit $912,343).
No dividends of the Parent entity or any entity of the Economic Entity have been paid, declared or recommended
since the end of the preceding financial year. The Board does not recommend the payment of a dividend in respect
of the reporting period.
Financial Position
The net assets of the Economic Entity have increased by $18,255,176 from 30 June 2006 to $24,190,375. This
increase was primarily as a result of the restructure as approved by the shareholders at the General Meeting on 22
May 2007. The resultant investment in Guanaco Mining Company has been assessed as fair value according to
Accounting Standards.
The Company has the support of its substantial shareholder, Guanaco Capital Holding.
The Directors believe the Company is in a position to maintain its current operations.
Significant Changes in the State of Affairs
There were no significant changes in the state of affairs of the Economic Entity during the financial year:
FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES
Guancao (Chile)
Drilling will continue and there will be geophysical and geochemical exploration to support the drilling program. It is
anticipated that in 2008 the Company will embark on a feasibility study into the relaunch of gold mining and processing
operations at Guanaco. Any feasibility study will take some months to complete, and may lead to a development
decision in 2009.
Australian Tenements
Further reconnaissance exploration will be undertaken at Bullabulling to assess the prospectivity of the project.
The Rocklea and Kookynie Projects will be retained.
All other Australian exploration areas have been or will be relinquished.
EVENTS SUBSEQUENT TO BALANCE DATE
Several Australian tenements have been relinquished since 30 June 2007 due to low prospectivity, high exploration
costs or administrative issues. A decision was made to write these tenements off at that date.
A further 54 holes equivalent to over 12,000 metres have been drilled at Guanaco.
12
For personal use only Further funding of $100k has been received in July from the substantial shareholder, Guanaco Capital Holding.
Austral Gold and Guanaco Capital Holding proposed to increase the share capital of Guanaco Mining Company
from 72,751 to 15,373,475 shares, with Austral Gold maintaining its current 51% interest and without increasing
Guanaco Capital Holding’s shareholding in Austral Gold. This follows the capital reorganization approved by
shareholders on 22 May 2007.
PERFORMANCE IN RELATION TO ENVIRONMENTAL REGULATION
The Economic Entity’s operations are subject to significant environmental regulations under both Commonwealth
and State legislation in relation to its exploration activities.
In Australia the Economic Entity’s mining exploration operations are primarily concentrated in Western Australia.
There are significant environmental regulations under the Western Australian Mining Act 1978 and Environmental
Protection Act 1986. Licence requirements relating to waste disposal, water and air pollution exist in relation to
mining activities.
The Directors are not aware of any significant breaches during the period covered by this report.
DIRECTORS AND OFFICERS
The Directors and Officers of the Company at any time during or since the end of the financial year are:
Name and Qualifications
Experience and Special Responsibilities
Current Directors
Francis Mark Bethwaite
Chairman/ Non Executive
Director
Pablo Vergara del Carril
Non-Executive Director
Mr Bethwaite holds the degrees of Bachelor of Engineering,
Master
of Business
Administration.
of Building
and Master
Science
His mining career spans some 23 years including periods living
and working in Mount Isa and Broken Hill. Mr Bethwaite worked
for North Limited from 1978 to 1987,
including five years as
Managing Director. He worked for Renison Goldfields
Consolidated Limited from 1987 to 1998, including six years as
Managing Director. From 1998 to 2001, Mr Bethwaite worked
with Deutsche Bank, principally in the financing of mining
projects.
Mr Bethwaite was Chairman of the Australian National Maritime
Museum from 2001 - 2007. Currently he is a non-executive
Director of Deacons – Lawyers, Note Printing Australia Limited
(wholly owned by the Reserve Bank of Australia), NewSouth
Innovations Limited and of a number of not
for profit
organisations.
Appointed Director, 2 April 2007; Chairman 3 April 2007,
elected as a Director and Chairman by shareholders 22 May
2007
Mr Vergara del Carril is a lawyer and is professor of Postgraduate
Degrees for Capital Markets, Contracts, Corporate Law and
Business Law at the Argentine Catholic University.
He is a director of Banco Hipotecario (a listed company, named
the best Latin American Bank in 2004 by Latin Finance), Milkaut
S.A (an Argentine leading dairy company), Nuevas Fronteras
in Buenos Aires) and
(owner of the Intercontinental Hotel
13
For personal use only Robert Trzebski
Non-Executive Director
Eduardo Elsztain
Non Executive Director
Saul Zang
Non Executive Director
Emprendimiento Recoleta S.A.
(owner of the Buenos Aires
Design Shopping Centre). Mr Vergara del Carril is also a director
of Guanaco Mining Company Limited and Guanaco Capital
Holding Corp.
Appointed 18 May 2006
Mr Robert Trzebski holds a Degree in Geology (equivalent to
BSc), a PhD in Geophysics, a Master in International Project
Management and has over 13 years of professional experience in
mineral exploration, project management and research and
development. This
developing
collaborative research projects between mining companies and
scientific institutions in Latin America, USA, Africa, Europe, Asia
and Australia.
includes
years
eight
of
Mr Trzebski has been involved in developing international
relationships between Australian and overseas mining companies.
He is also actively involved with several bilateral chambers of
commerce and has extensive industry networks in Australia and
overseas.
Elected as a Director by shareholders on 22 May 2007
Mr Elsztain is a member of the World Economic Forum, the
Group of Fifty and Asociación Empresaria Argentina (Argentine
Business Association) and currently serves as Vice Chairman and
Chairman of the Executive Committee of Banco Hipotecario S.A.
[BASE: BHIP], Argentina’s largest mortgage bank, having assets
close to US$3 billion, in addition to a 25% share of the mortgage
market in that country.
Mr Elsztain is Chairman of IRSA Inversiones y Representaciones
S.A. [NYSE: IRS], Argentina's largest and most diversified real
estate company with a current market capitalisation above US$
700 million Alto Palermo S.A. [NASDAQ: APSA], Argentina’s
leading shopping centre company with 10 shopping malls and two
currently under construction and of Cresud S.A.C.I.F. y A.
[NASDAQ: CRESY], a leading agricultural company in Latin
America devoted to the operation and conformation of a valuable
portfolio of farmland.
He is also a Board Member of BrasilAgro – Companhia Brasileira
de Propriedades Agricolas [BOVESPA: AGRO3]; a company
which replicates Cresud’s business strategy in Brazil as well as
Director of YPF S.A.
[NYSE: YPF], the largest oil and gas
company in Argentina.
Appointed 29 June 2007
Mr Zang graduated as a lawyer from Buenos Aires University in
1968 and founded the law firm Zang, Bergel and Vines where he
is a Senior Partner. He has advised national and international
companies in different areas of the legal practice, including the
privatization process of YPF S.A. and State Owned Electricity
Company of the Province of Buenos Aires.
Mr Zang serves as Vice Chairman of IRSA Inversiones y
Representaciones S.A., Cresud S.A.C.I.F. y A. and Alto Palermo
14
For personal use only S.A.
Mr Zang is Adviser and Member of the Board of Directors of the
Buenos Aires Stock Exchange, a Member of the Executive Board
of Directors of Banco Hipotecario S.A. and a member of the
International Bar Association.
Appointed 29 June 2007
Ms Lindfield is a Chartered Accountant by profession and holds a
Bachelor of Business degree and a Graduate Diploma in
Corporate Governance.
Ms Lindfield is a member of
the Institute of Chartered
Accountants, Institute of Chartered Secretaries and the Institute
of Company Directors.
Appointed 2 April 2007
Denise Lindfield B.Bus.,
CA,ACIS,GradDipAppCorpGov,
MAICD
Company Secretary
Former Directors
The Hon Marcus Einfeld AO
Appointed 9 March 2005 – Resigned 2 April 2007
QC ( Chairman)
Terence V. Willsteed
BE (MIN) HONS BA
FAUSIMM MSME MMICA
( Non Executive Director)
Henry Kinstlinger
(Company Secretary)
Appointed 9 March 2005 – Retired 22 May 2007
Appointed 1997 – Resigned 22 May 2007
15
For personal use only DIRECTORS MEETINGS
The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings
attended by each of the Directors of the consolidated entity during the financial year are:
Directors’
meetings
Audit Committee
meetings
Remuneration
Committee
meeting
Director
Marcus Einfeld
Mark Bethwaite
Terence Willsteed
Pablo Vergara del Carril
Robert Trzebski
A
12
5
14
17
4
B
12
5
14
17
4
A
*
*
1
1
1
B
*
*
1
1
1
A
*
2
1
2
1
B
*
2
1
2
1
A
B
*
Number of meetings attended.
Reflects the number of meetings held during the time the Director held office.
Not a member of this committee
OPTIONS
During or since the end of the financial year, the Company has not granted options over unissued ordinary shares to
any Director or to any employee.
Unissued Shares under Option
At the date of this report unissued ordinary shares of the Company under option, all of which have vested are:
Expiry Date
Exercise
Price
Number of
Shares
30 November 2007
30 November 2007
14 October 2009
14 October 2009
$1.20
$2.00
$0.40
$2.00
INDEMNITY OF OFFICERS
2,300,000
4,424,511
877,334
2,773,204
The Company has not, during or since the end of the financial year, in respect of any person who is or has been an
officer or auditor of the Company or a related body corporate:
Indemnified or made any relevant agreement for indemnifying against a liability incurred as an officer,
including costs and expenses in successfully defending legal proceedings; or
Paid or agreed to pay a premium in respect of a contract insuring against a liability incurred as an officer
for the costs or expenses to defend legal proceedings.
16
For personal use only INTERESTS OF DIRECTORS
The relevant interest of each director in the share capital of the Company, as notified by the directors to the
Australian Stock Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is
as follows:
Director
F M Bethwaite
P Vergara del Carril
R Trzebski
E Elsztain
S Zang
Direct shares
Indirect shares
Options
Nil
Nil
Nil
Nil
Nil
37,987
52,196,153*
Nil
52,196,153*
52,196,153*
Nil
9,920,049
Nil
9,920,049
9,920,049
P Vergara de Carril, E Elsztain and S Zang are directors and shareholders of Guanaco Capital Holding
which holds directly or indirectly 52,196,153 shares and 9,920,049 options.
REMUNERATION REPORT
Remuneration Policy
The Economic Entity has a Remuneration Policy which aims to ensure remuneration packages of Board
Members and senior executives properly reflect the person’s duties and responsibilities and level of
performance and that remuneration is competitive in attracting, retaining and motivating people of the
highest quality.
To give effect to this policy the Economic Entity reviews available information which measures the
remuneration levels in the various labour markets in which it competes. The expectation of the Economic
Entity is that, for a particular grade of employee, the total fixed compensation will be at the median level
of the relevant market.
No shares or options were issued to executives during the year ended 30 June 2007.
There are no performance-based components of executive or non-executive remuneration.
17
For personal use only Details of Remuneration for the Year ended 30 June 2007
Key Management
Personnel
Salary and Fees
including
Superannuation
$
Options
issued
$
Non-Executive
F M Bethwaite
R Trzebski
D Lindfield
Former directors
24,999
4,300
17,114
NIL
NIL
NIL
Total
$
24,999
4,300
17,114
The following were directors of the Company during the financial year ended 30 June 2007
Directors
Non-Executive
M Einfeld
T Willsteed
Salary and Fees
including
Superannuation
$
90,000
41,706
Options
issued
$
-
-
Details of Remuneration for the Year ended 30 June 2006
Directors
Non-Executive
M Einfeld
T Willsteed
Salary and Fees
including
Superannuation
$
120,000
60,000
Options
issued
$
-
-
Total
$
90,000
41,706
Total
$
120,000
60,000
18
For personal use only For personal use only For personal use only INCOME STATEMENTS
AUSTRAL GOLD LIMITED AND ITS SUBSIDIARIES
FOR THE YEAR ENDED 30 JUNE 2007
Revenue
Operating activities
Non-operating activities
Income from Deed of Termination and Release
Depreciation expense
Exploration and evaluation expenditure
Finance costs
Impairment of loans and receivables
Administration expenses
(Losses)/gains from foreign exchange
Share of net losses of equity accounted
investments
Profit/(Loss) before income tax
Income tax benefit
e
t
o
N
3
3
4
4
5
4
4
24
6
Economic Entity
Parent Entity
2007
$
2006
$
2007
$
2006
$
156,888
(995)
-
178,952
91,785
1,820,000
156,888
178,952
(995)
91,785
-
1,820,000
155,893
2,090,737
155,893
2,090,737
(2,155)
(80,416)
(10)
(818,047)
(585,692)
(67,022)
(4,185)
(230,940)
(307,789)
-
(861,003)
225,523
(2,155)
(4,185)
(22,280)
(163,986)
(10)
(307,789)
(66,957)
(840,584)
(854,790)
(585,692)
225,523
-
-
(1,397,449)
__________
912,343
__________
(1,294,828)
__________
918,553
_________
-
-
-
-
Profit/(loss) for the year
(1,397,449)
912,343
(1,294,828)
918,553
Loss attributable to minority equity interest
-
Profit/(loss) attributable to members of the
Parent Entity
Earnings/(loss) per share (cents per share):
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
(1,397,449)
912,343
(1,294,828)
918,553
7
(0.02)
(0.02)
0.32
0.32
The above Income Statements should be read in conjunction with the accompanying notes.
21
For personal use only CONSOLIDATED BALANCE SHEET
AUSTRAL GOLD LIMITED AND ITS SUBSIDIARIES
AS AT 30 JUNE 2007
e
t
o
N
9
10
10
11
12
13
14
15
16
17
17
18
20
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Financial assets
Intangible assets
Plant and equipment
Exploration and evaluation expenditure
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Short-term borrowings
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Equity - share capital pending issue
Accumulated losses
Reserves
TOTAL EQUITY
Economic Entity
2007
$
2006
$
2007
$
Parent Entity
2006
$
136,317
28,086
164,403
223,650
24,165
247,815
136,103
92,731
228,834
223,266
43,155
266,421
-
5,232,443
-
5,232,443
22,301,517
2,116,888
12,848
7,086
24,438,339
24,602,742
47,933
250,000
297,933
297,933
-
14,675,068
913,906
467,621
9,805
26,532
-
12,848
580
-
9,805
7,539
5,736,401
14,688,496
6,163,693
5,984,216
14,917,330
6,430,114
49,017
-
49,017
47,904
250,000
297,904
46,548
-
46,548
49,017
297,904
46,548
24,304,809
5,935,199
14,619,426
6,383,566
47,812,680
37,281,992
47,812,680
37,281,992
-
1,000,000
-
1,000,000
(33,744,242)
(32,346,793)
(33,193,254)
(31,898,426)
10,236,371
24,304,809
-
-
-
5,935,199
14,619,426
6,383,566
22
For personal use only STATEMENTS OF CHANGES IN EQUITY
AUSTRAL GOLD LIMITED AND ITS SUBSIDIARIES
FOR THE YEAR ENDED 30 JUNE 2007
e
t
o
N
Issued
capital
Equity
share
capital
pending
issue
Accumulated
losses
Reserves
Total
$
$
$
$
$
Economic Entity
Balance at 1 July 2005
Loss attributable to members of Parent
Entity
Shares issued during the year
Balance at 30 June 2006
Loss attributable to members of Parent
Entity
Asset revaluation reserve
Shares issued during the year
Balance at 30 June 2007
Parent Entity
Balance at 1 July 2005
Loss attributable to members of Parent
Entity
Shares issued during the year
Balance at 30 June 2006
Loss attributable to members of Parent
Entity
Shares issued during the year
Balance at 30 June 2007
37,272,925
1,000,000
(33,259,136)
9,067
-
912,343
-
37,281,992
1,000,000
(32,346,793)
-
-
-
-
-
5,013,789
912,343
9,067
5,935,199
(1,397,449)
-
-
-
-
20
(1,397,449)
- 10,121,937
10,121,937
10,530,688
(1,000,000)
-
-
9,530,688
47,812,680
-
(33,744,242) 10,121,937
24,190,375
37,272,925
1,000,000
(32,816,979)
-
9,067
-
-
918,553
-
37,281,992
1,000,000
(31,898,426)
-
-
(1,294,828)
10,530,668
(1,000,000)
-
47,812,680
-
(33,193,254)
-
-
-
-
-
-
-
5,455,946
918,553
9,067
6,383,566
(1,294,828)
9,530,668
14,619,426
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.
23
For personal use only CASH FLOW STATEMENTS
AUSTRAL GOLD LIMITED AND ITS SUBSIDIARIES
FOR THE YEAR ENDED 30 JUNE 2007
e
t
o
N
Economic Entity
Parent Entity
2007
$
2006
$
2007
$
Cash flows from operating activities
Payments to suppliers and employees
(859,398)
(1,410,817)
(973,415)
Finance costs
-
(34,874)
-
2006
$
(1,407,071)
(34,874)
Net cash used in operating activities
25
(859,398)
(1,445,691)
(973,415)
(1,441,945)
Cash flows from investing activities
Proceeds from sale of plant and
equipment
Purchase of property, plant and
equipment
Interest received
Payments for exploration and evaluation
expenditure
Loans to subsidiaries
Net cash provided by investing
activities
Cash flows from financing activities
5,013
(6,153)
44,175
97,958
5,013
-
(6,153)
31,497
112,713
(60,970)
(72,975)
(15,321)
-
-
-
97,958
-
31,497
(46,021)
(30,528)
(17,935)
56,480
96,252
52,906
Proceeds from issue of shares
540,000
9,067
540,000
9,067
Borrowings from related Party
250,000
-
250,000
-
Net cash provided by financing
activities
790,000
9,067
790,000
9,067
Net increase (decrease) in cash held
(87,333)
(1,380,144)
(87,163)
(1,379,972)
Cash at beginning of financial year
Cash at end of financial year
9
223,650
136,317
1,603,794
223,266
1,603,238
223,650
136,103
223,266
24
For personal use only NOTES TO THE FINANCIAL STATEMENTS
AUSTRAL GOLD LIMITED AND ITS SUBSIDIARIES
FOR THE YEAR ENDED 30 JUNE 2007
Corporate information
1.
The financial report of Austral Gold Limited (the Company) for the year ended 30 June 2007 was authorised for
issue in accordance with a resolution of the Directors on 27 September 2007.
Austral Gold Limited is a company limited by shares that is incorporated and domiciled in Australia, whose shares
are publicly traded on the Australian Stock Exchange. Austral Gold Limited has prepared a consolidated financial
report incorporating the entities that it controlled during the financial year.
The nature of the operations and principal activities of the Group are described in the Directors’ Report.
2.
Summary of accounting policies
The financial report is a general purpose financial report that has been prepared in accordance with Accounting
Standards, Urgent Issues Group Consensus Interpretations, other authoritative pronouncements of the Australian
Accounting Standards Board and the Corporations Act 2001.
The financial report covers the Economic Entity of Austral Gold Limited and subsidiaries, and as an individual
parent entity. Austral Gold Limited is a listed public company, incorporated and domiciled in Australia.
The financial report of Austral Gold Limited and subsidiaries, and Austral Gold Limited as an individual parent
entity complies with all Australian equivalents to International Financial Reporting Standards (AIFRS) in their
entirety.
The following is a summary of the material accounting policies adopted by the Economic Entity in the preparation
of the financial report. The accounting policies have been consistently applied, unless otherwise stated.
(a) Basis of preparation
The financial report is a general purpose financial report that has been prepared in accordance with Accounting
Standards, Urgent Issues Group Consensus Interpretations, other authoritative pronouncements of the Australian
Accounting Standards Board and the Corporations Act 2001.
The financial report has been prepared on a historical cost basis, except for certain financial assets and liabilities
which are stated at fair value.
The financial report is presented in Australian dollars.
(b) Statement of Compliance
The accounting policies set out below have been consistently applied to all years presented.
Accounting Policies
(a) Basis of consolidation
A subsidiary is any entity Austral Gold Limited has the power to control the financial and operating policies of so as
to obtain benefits from its activities.
A list of subsidiaries is contained in Note 25 to the financial statements. The financial statements of the subsidiaries
are prepared for the same reporting periods the parent company using consistent accounting policies.
All inter-company balances and transactions between entities in the Economic Entity, including any unrealised
profits or losses, have been eliminated on consolidation.
Minority equity interests in the equity and results of the entities that are controlled are shown as a separate item in
the consolidated financial report.
Subsidiaries
The financial statements of subsidiaries are included from the date control commences until the date control ceases.
Associates
Associates are those entities over which the Economic Entity exercises significant influence, which are neither a
subsidiary nor a joint venture.
25
For personal use only Under the equity method, the investment in the associate is carried in the consolidated balance sheet at cost plus
post-acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to an associate is
included in the carrying amount of the investment and is not amortised. After application of the equity method, the
Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s
net investment in the associate. The consolidated income statement reflects the Group’s share of the results of
operations of the associate.
Where there has been a change recognised directly in the associate’s equity, the Group recognises its share of any
changes and discloses this in the consolidated statement of changes in equity.
The financial statements of associates are prepared for the same reporting period as the parent company using
consistent accounting policies.
The Economic Entity’s equity accounted share of the associates net profit or loss is recognised in the consolidated
income statement from the date significant influence commences until the date significant influence ceases.
(b) Revenue recognition
Revenue from the sale of goods is recognised when control of the goods has passed to the buyer, the amount of
revenue can be measured reliably and it is probable that it will be received by the Company.
Interestrevenue
Interest revenue is recognised as it accrues, using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective
interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to the net carrying amount of the financial asset.
Saleofnon-currentassets
The net gain on sale of non-current assets is included as revenue at the date control of the asset passes to the buyer,
usually when an unconditional contract of sale is signed.
The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of
the disposal and the net proceeds on disposal.
(c) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred
is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost
of acquisition of the asset or as part of the expense.
Receivables and payables in the balance sheets are shown inclusive of GST.
Cash flows are presented in the cash flow statements on a gross basis, except for the GST component of investing
and financing activities, which are disclosed as operating cash flows.
(d) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest.
These costs are only carried forward to the extent that they are expected to be recouped through the successful
development of the area or where activities in the area have not yet reached a stage that permits reasonable
assessment of the existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the
decision to abandon the area is made.
When production commences, the accumulated costs for the relevant area of interest are amortised over the life of
the area according to the rate of depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry
forward costs in relation to that area of interest.
Costs of site restoration are provided over the life of the facility from when exploration commences and are
included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant,
equipment and building structures, waste removal, and rehabilitation of the site in accordance with relevant clauses
of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements
and technology on an undiscounted basis.
Any changes in the estimates of the costs are accounted on a prospective basis. In determining the costs of site
restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations
26
For personal use only and future legislation. Accordingly the costs have been determined on the basis that the restoration will be
completed within one year of abandoning the site.
Intangibles
(e)
Goodwill
Goodwill and goodwill on consolidation are initially recorded at the amount by which the purchase price for a
business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at the
date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition
of associates is included in investments in associates.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate that
the carrying value may be impaired.
Impairment is determined by assessing the recoverable amount of the cash generating unit to which goodwill relates.
When the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is
recognised.
Impairment losses recognised for goodwill are not subsequently reversed.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Joint ventures
(f)
Expenditure incurred in relation to earning the Economic Entity’s beneficial interest under Joint Venture
agreements is carried forward to the extent that management consider that it is probable that future economic
benefits will eventuate and can be measured reliably.
Where these benefits cannot be measured reliably, these costs are fully provided for in the financial period.
Investments
(g)
Subsidiaries
Investments in subsidiaries are carried in the Parent Entity’s financial statements at the lower of cost and
recoverable amount.
Associates
Investments in associate entities are recognised in the financial statements by applying the equity method of
accounting.
(h) Property, plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation
Items of plant and equipment have limited useful lives and are depreciated on a straight line basis over their
estimated useful lives.
Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When changes are
made, adjustments are reflected prospectively in current and future periods only. Depreciation and amortisation are
expensed, except to the extent that they are included in the carrying amount of another asset as an allocation of
production overheads.
The depreciation rate used for plant and equipment is between 10% - 20%.
Impairment
The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable
amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.
The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset.
For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-
generating unit to which the asset belongs, unless the asset’s value in use can be estimated to be close to its fair
value.
27
For personal use only Impairment exists when the carrying value of an asset of cash-generating units exceeds its estimated recoverable
amount. The asset or cash-generating unit is then written down to its recoverable amount.
Derecognition and disposal
An item of property, plant and equipment is derecognised upon disposal or when no further future economic
benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between net disposal proceeds
and the carrying amount of the asset) is included in profit or loss in the year the asset is de-recognised.
(i)
Translation of foreign currency items
Both the functional and presentation currency of Austral Gold Limited and its Australian subsidiaries is Australian
dollars ($).
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate
of exchange ruling at balance sheet date.
Exchange differences are recognised as revenues or expenses in net profit or loss in the period in which exchange
rates change except for qualifying assets and hedge transactions.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction.
The functional currency of the Company’s associate company Guanaco Mining Company is United States dollar
(US$).
(j)
Cash and cash equivalents
For the purpose of the statement of cash flows, cash includes:
cash on hand and at call deposits with banks or financial institutions; and
Other short-term highly liquid investments with original maturities of three month or less, and bank
overdrafts.
(k)
Income Tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by balance sheet date.
Deferred income tax is provided on all temporary differences at balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except :
When the deferred income tax liability arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination and that, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss; or
When the taxable temporary difference is associated with investments in subsidiaries, associates, or
interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and
it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised,
except:
When the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; or
28
For personal use only When the deductible temporary difference is associated with investments in subsidiaries, associates, or
interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is
probable that the temporary difference will reverse in the foreseeable future and taxable profit will be
available against which the temporary difference can be utilised.
The carrying amount of any deferred income tax assets recognised is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of
the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply for the year when
the asset is realised or the liability is settled, based on the tax rates and tax laws that have been enacted or
substantively enacted at balance sheet date.
Income taxes relating to items recognised directly to equity are recognised in equity and not in profit or loss.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the
same taxation authority.
Taxconsolidation
For the purposes of income tax, Austral Gold Limited and its subsidiaries do not form a tax consolidated group.
The individual companies lodge tax returns independently of each other.
(l)
Acquisition of assets
All assets acquired including plant and equipment are initially recorded at their cost of acquisition, being the fair
value of consideration provided plus incidental costs directly attributable to the acquisition. Where there is an
acquisition of a group of assets the cost of acquisition is apportioned in proportion to the fair value of the assets
acquired.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to
their present value at the date of acquisition. The discount rate used is the incremental borrowing rate, being the rate
at which similar borrowing could be obtained from an independent financier under comparable terms and
conditions.
(m) Trade and other receivables
Trade accounts receivable, amounts due from related parties and other receivables represent the principal amounts
due at balance date plus accrued interest and less, where applicable, any unearned income and provisions for
doubtful accounts.
(n) Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services
provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes
obliged to make future payments in respect of the purchase of these goods and services.
(o)
Interest bearing liabilities
All loans and borrowings are initially recognised at cost, being the fair value of consideration received net of issue
costs associated with the borrowing.
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using
the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount
or premium on settlement.
Gains and losses are recognised in the income statement when the liabilities are derecognised and as well as through
the amortisation process.
(p) Provisions
Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which
it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
If the effect of the time value of money is material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and where
appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
29
For personal use only (q) Leases
Lease payments for operating leases, where all the risks and benefits remain with the lessor, are recognised as an
expense in the income statement on a straight line basis over the lease term.
(r) Operating cycle
An operating cycle of 12 months has been used as the basis for identifying current assets and current liabilities in the
balance sheets.
Impairment of assets
(s)
At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine
whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable
amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the
asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income
statement. In assessing value in use, the estimated future cash flows discounted to their present value using a pre-tax
discount rate.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives or more frequently
if events or changes in circumstances indicate that the carrying value may be impaired.
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 to which the asset belongs.
(t) Derecognition of Financial Assets and Financial Liabilities
Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is
derecognised when:
The rights to receive cash flows from the asset have expired
The group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them
in full without material delay to a third party under a ‘pass-through’ arrangement; or
The Group has transferred its rights to receive cash flows from the asset and either (a) has transferred
substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor
retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised
to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the
maximum amount of consideration received that the Group could be required to repay.
When continuing involvement takes the form of a written and/or purchased option( including a cash-settled option
or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the
transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash-
settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing
involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of a new liability, and the difference in the respective
carrying amounts is recognised in profit or loss.
(u) 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.
30
For personal use only (v) Earnings per share
Basic earnings per share
Basic earnings per share is determined by dividing net profit after income tax attributable to members of the parent,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in 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
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive
potential ordinary shares.
(w) Borrowing costs
Borrowing costs are recognised as an expense when incurred and capitalised for qualifying assets. There were no
costs or fees capitalised on amounts borrowed during the period.
(x) Employee leave benefits
Wages and salaries, annual leave and sick leave
Liabilities for employees’ entitlements to wages and salaries, annual leave and other employee entitlements expected
to be settled within 12 months of the reporting date are recognised in the current provisions in respect of
employees’ services up to reporting date and are measured at the amounts expected to be paid when the liabilities
are settled. Liabilities for non accumulating sick leave are recognised when the leave is taken and measured at the
rates paid or payable.
Long service leave
The liability for long service leave 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 reporting date
using the projected unit credit method. 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
reporting date on national government bonds with terms to maturity and currencies that match, as closely as
possible, the estimated cash outflows.
Superannuation
The Company contributes to an employee superannuation fund. Contributions made by the Company are legally
enforceable. Contributions are made in accordance with the requirements of the Superannuation Guarantee
Legislation.
(y) Going concern
The Company and its subsidiaries derived a loss of $1,397,449 for the year ended 30 June 2007. Goodwill relating to
Golden Rose International of $467,621 on initial acquisition and goodwill of $1,683,318 on subsequent acquisition
are included in non-current assets.
The on going viability of the Economic Entity and the recoverability of its non-current assets is dependent on the
success of the project. The Directors believe that the project will be ultimately successful and that the non-current
assets are included in the Financial Report at their recoverable amount.
The financial report has been prepared on the basis of a going concern. This basis presumes that funds will be
available to finance future operations, project expenditure exploration commitments and to repay liabilities and that
the realisation of assets and settlement of liabilities will occur in the normal course of business. The Directors
believe that the Economic Entity will be able to fund future operations through equity raising, and sale or joint
venturing of interests held in mineral tenements and projects.
At the date of this report other sources of funds are being sought to fund future working capital requirements of the
Company.
The Directors believe that they will be successful in raising sufficient funds to ensure that the Company can
continue to meet its debts as and when they become due and payable. However, if additional funds are not raised,
the going concern basis may not be appropriate with the result that the company may have to realise its assets and
extinguish its liabilities other than in the ordinary course of business and in amounts different from those stated in
the Financial Report. No allowance for such circumstances has been made in the Financial Report.
New standards and interpretations not yet adopted
The following standards, amendments to standards and interpretations have been identified as those which may
impact the entity in the period of initial application. They are available for early adoption at 30 June 2007 but have
not been applied in preparing this financial report:
31
For personal use only • AASB 7 Financial Instruments: Disclosures (August 2005) replaces the presentation requirements of financial
instruments in AASB 132. AASB 7 is applicable for annual reporting periods beginning on or after 1
January 2007, and will require additional disclosures with respect to the EDMS Group’s financial
instruments and share capital.
• AASB 2005-10 Amendments to Australian Accounting Standards (September 2005) makes consequential
amendments to AASB 132 Financial Instruments: Disclosure and Presentation, AASB 101 Presentation of
Financial Statements, AASB 114 Segment Reporting, AASB 117 Leases, AASB 133 Earnings per Share,
AASB 139 Financial Instruments: Recognition and Measurement, and AASB 1 First Time Adoption of
Australian Equivalents to International Reporting Standards arising from the release of AASB 7. AASB
2005-10 is applicable for annual reporting periods beginning on or after 1 January 2007 and is only
expected to impact disclosures contained within the consolidated financial report.
• AASB 8 Operating Segments replaces the presentation requirements of segment reporting in AASB 114
Segment Reporting. AASB 8 is applicable for annual reporting periods beginning on or after 1 January
2009 and is not expected to have an impact on the financial results of the Company of the EDMS Group
as the standard is only concerned with disclosures.
• AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 makes amendments to
AASB 5 Non-current Assets Held for Sale and Discontinued Operations, AASB 6 Exploration and
Evaluation of Mineral Resources, AASB 102 Inventories, AASB 107 Cash Flow Statements, AASB 134
Interim Reporting, AASB 119 Employee Benefits, AASB 127 Consolidated and Separate Financial
Statements, and AASB 136 Impairment. AASB 2007-3 is applicable for annual reporting periods beginning
on or after 1 January 2009 and must be adopted in conjunction with AASB 8 Operating Segments. This
standard is only expected to impact disclosures within the financial report.
• Interpretation 10 Interim Financial Reporting and Impairment prohibits the reversal of an impairment loss
recognised in the previous interim period in respect of goodwill, an investment in an equity instrument or a
financial asset carried at cost. Interpretation 10 will become mandatory for the EDMS Group’s 2008
financial statements and will apply to goodwill, investments in equity instruments, financial assets carried at
cost prospectively from the date that the EDMS Group first applied the measurement criteria of AASB
136 and AASB 139 respectively (i.e. 1 July 2004 and 1 July 2005, respectively). The adoption of
Interpretation 10 is not expected to have an impact on the financial results of the Company or the EDMS
Group.
• AASB 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other
Amendments [AASB 1, 2, 3, 4, 5, 6, 7, 102, 107, 108, 110, 112, 114, 116, 117, 118, 119, 120, 121, 127, 128,
129, 130, 131, 132, 133, 134, 136, 137, 138, 139, 141, 1023 & 1038]. AASB 2007-4 is applicable to annual
reporting periods beginning on or after 1 July 2007. The Company has not adopted this standard early. The
amendments arising from the standard reflect the AASB's decision that all options that currently exist
under IFRSs should be included in the AIFRS and additional Australian disclosures should be eliminated,
other than those now considered particularly relevant in the Australian reporting environment. A number
of editorial changes were also made. Application of this standard will not affect any of the amounts
recognised in the financial statements. No significant impact to the existing disclosures is anticipated
32
For personal use only Economic Entity
Company
2007
$
2006
$
2007
$
2006
$
112,713
147,455
112,713
147,456
44,175
31,497
44,175
31,496
156,888
178,952
156,888
178,952
(995)
-
90,785
1,000
(995)
-
90,785
1,000
155,893
270,737
155,893
270,737
3
Revenue
From operating activities
Interest revenue from:
Associated company
Other parties
Non-operating activities
- Gain/(loss) on disposal of plant & equipment
- Other
4
Profit/(Loss) from the year
(a) Expenses
Depreciation of plant and equipment
2,155
4,185
2,155
4,185
Finance costs:
- ultimate parent company
- related parties
-discount on issue of financial assets
- other
Exploration and evaluation expenditure
Rental expense on operating leases - minimum
lease payments
(b) RevenueandNetGains
-
-
-
10
10
80,416
62,208
-
-
294,158
13,631
307,789
230,940
66,419
-
-
-
10
10
22,280
62,208
-
-
294,158
13,631
307,789
163,986
66,419
Foreign currency translation (loss)/gain
(585,692)
225,523
(585,692)
225,523
(c)
Individuallysignificantitemsincludedinloss
fromordinaryactivitiesbeforeincometax
Impairment of loans
-
-
-
66,957
5
Auditors’ remuneration
Remuneration of the auditor of the Parent Entity
for:
- auditing or reviewing the financial reports
- other services/taxation
6
Income tax benefit
Prima facie income tax benefit calculated at 30%
(2006:30%)on the operating loss from ordinary
activities
97,915
20,522
118,437
87,753
10,685
98,438
97,915
20,522
118,437
87,753
10,685
98,438
(419,235)
273,703
(388,448)
275,566
33
For personal use only Non-allowable expenditure
Future income tax benefit not brought to
account
Economic Entity
Company
2007
$
2006
$
-
2007
$
2006
$
20,087
419,235
(273,703)
388,448
(295,653)
Total income tax benefit
-
992,908
-
-
-
Tax losses carried forward
6,178,832
4,781,383
5,223,865
3,929,037
The potential future income tax benefit arising from tax losses and timing differences has not been recognised as an
asset because recovery of tax losses is not virtually certain and recovery of timing differences is not assured beyond
reasonable doubt.
The potential future income tax benefit will be obtained if:
i. The relevant company derives future assessable income of a nature and an amount sufficient to enable
the benefit to be realised, or the benefit can be realised by another company in the Economic Entity in
accordance with Division 170 of the Income Tax Assessment Act 1997;
ii. The relevant company and/or Economic Entity continues to comply with the conditions for
deductibility imposed by the law; and
iii. No changes in tax legislation adversely affect the Company and/or the Economic Entity in realising the
benefit.
7
Earnings per share
Classification of securities as ordinary shares
Ordinary shares have been included in basic earnings per share.
Classificationofsecuritiesaspotentialordinaryshares
There are no dilutive potential ordinary shares. The following options were in issue at the balance date and
are not dilutive:
Economic Entity
2007
$
2006
$
(1,397,449)
-
(1,397,449)
912,343
-
912,343
2007
Number
2006
Number
64,889,724
64,889,724
40,420,583
40,460,225
Earningsreconciliation
Net profit/(loss)
Net loss attributable to outside equity interests
Basic and diluted earnings
Weightedaveragenumberofsharesusedasthe
denominator
Number for basic and diluted earnings per share
Number for diluted earnings per share
34
For personal use only Basicprofit/(loss)perordinaryshare
Basicanddilutedprofit/(loss)perordinaryshare
8
Segment information
Businesssegments
(0.02)c
(0.02)c
3.2c
3.2¢
The Economic Entity operates in one business segment being precious mineral exploration.
Geographicalsegments
The Economic Entity’s operations are conducted primarily in Australia. At 30 June 2007 the Company holds
a significant interest in Guanaco Mining Company, the owner of the Guanaco Project in Chile.
Economic Entity
Company
2007
$
2006
$
2007
$
2006
$
82,337
53,980
136,317
123,650
100,000
223,650
82,123
53,980
136,103
123,266
100,000
223,266
9
Cash and cash equivalents
Cash at bank an in hand
Short-term bank deposits
The effective interest rate on short-term bank
deposits was 5.45% (2006: 5.2%); these
deposits have an average maturity of 30 days.
Reconciliation of Cash
Cash at the end of the financial year as shown
in the cash flow statement is reconciled to
items in the balance sheets as follows:
Cash and cash equivalents
136,317
223,650
136,103
223,266
10
Trade and other receivables
Current
Advances
Other debtors
Amounts receivable from controlled entities
Provisionforimpairmentofamounts
receivablefromcontrolledentities
Noncurrent
Amountsreceivablefrom:
Ultimate parent entity
Less: Provision for diminution – ultimate
parent entity
-
-
28,086
-
-
-
24,165
-
-
-
92,731
10,650
13,515
85,947
-
(66,957)
28,086
24,165
92,731
43,155
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35
For personal use only Associated entities
Less: Provision for diminution – associated
entities
Subsidiaries
Economic Entity
Company
2007
$
2006
$
5,232,443
2007
$
-
-
5,232,443
2006
$
5,232,443
-
-
5,232,443
-
-
-
-
-
-
-
-
Loans to subsidiaries and associated entities are unsecured, interest free and with no fixed repayment terms.
11
Financial assets
Non-current
Shares in subsidiaries
Investments in subsidiaries
Investments in associates
-
-
22,301,517
22,301,517
-
-
-
-
5,886,975
448,717
8,339,376
467,623
446,283
-
14,675,068
913,906
Available-for-sale financial assets comprise investments in the ordinary issued capital of various entities. There are no
fixed returns or fixed maturity date attached to these investments.
a) Golden Rose International Ltd. (GRIL) 100% Investment:
The Investment amount arises from the acquisition of 26.99% of GRIL by Austral Gold Limited (AGD) and the
revaluation of the 73.01% already held by AGD. This was in accordance with step acquisition accounting as prescribed
by AASB 3 “Business Combinations
For the valuation of GRIL, AGD applied the equity method on the fair value of the company.
The determination of the fair value of Guanaco Mining Company based on the principle of prudence was achieved by
calculating the average of the range of AUD 40 million and AUD 55 million determined by Interfinancial Limited
Services in the Independent Expert´s Report laid before the shareholders at the Extraordinary Shareholders Meeting held
on May 22, 2007. The calculated fair value amounts to AUD 47.5 million. On May 22, 2007, the Shareholders Meeting
approved several transactions which resulted in the change of control of Guanaco Mining Company from GCH to
AGD. Guanaco Capital Holding abstained from voting and the minority shareholders approved the proposal based on a
valuation of Guanaco Mining Company of USD 49 million as agreed by GCH and AGD.
The additional value related to the 73.01% that AGD already held in GRIL and was considered a revaluation reserve
(refer to Note 20).
b) Capitalisation of the loan granted by AGD to GMC.
Capitalisation of the loan granted by AGD to GMC and direct acquisition of an additional 8.7% resulted in an additional
AUD$ 8,339,376 investment in GMC.
This amount includes the loan capitalized by AGD of AUD 4,790,748 and the amount paid for the acquisition of an
additional 8.7% in the amount of AUD 3,548,628.
12
Intangible assets
Goodwill - at cost
2,116,888
467,621
-
-
The intangible assets comprise the following:
Goodwill: original acquisition of GRIL (73.01%)
AUD 467,621
Goodwill in respect of the 26.99% acquisition of GRIL
AUD 1,649,267
Total
AUD 2,116,888
36
For personal use only 13
Plant and equipment
Plant and equipment - at cost
Accumulated depreciation
Movementsincarryingvalue
Reconciliations of the carrying amounts for each
class of plant and equipment are set out below:
Plant and equipment
Carrying amount at beginning of year
Additions
Disposals
Depreciation
Carrying amount at end of year
14
Exploration and evaluation expenditure
Costs carried forward in respect of areas of interest
in:
Exploration and/or evaluation phase
Provision for diminution
16,354
(3,506)
12,848
12,755
(2,950)
9,805
16,354
(3,506)
12,848
12,755
(2,950)
9,805
9,805
6,153
(955)
(2,155)
12,848
7,086
-
7,086
27,461
-
(13,471)
(4,185)
9,805
26,532
-
26,532
9,805
6,153
(955)
(2,155)
12,848
27,461
-
(13,471)
(4,185)
9,805
580
-
580
7,539
-
7,539
The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful
development and commercial exploration or sale of the respective areas.
15
Trade and other payables
Current
Trade creditors and accruals
16
Borrowings
Current
Amount due to related entity (unsecured)
Noncurrent
Amount due to related entities (unsecured)
17
Issued capital
66,812,125 (2006: 404,418,205) fully paid ordinary
shares
Equity–sharecapitalpendingissue
Advance by GCH in consideration of a later issue
of securities +
Economic Entity
Company
2007
$
2006
$
2007
$
2006
$
47,933
47,933
49,017
49,017
47,904
47,904
46,548
46,548
250,000
-
250,000
-
-
-
250,000
-
250,000
-
-
-
47,812,680
37,281,992
47,812,680
37,281,992
-
1,000,000
-
1,000,000
37
For personal use only 2007
No.
2006
No.
2007
No.
2006
No.
OrdinaryShares++
Balance at the beginning of the year
404,418,205
404,191,542
404,418,205
404,191,542
Shares issued during the year
28 Nov 2006
Consolidation 1 for 10 ordinary shares
7 June 2007
7 June 2006
35,813,954
(396,208,861)
22,788,827
35,813,954
(396,208,861)
22,788,827
-
226,663
-
226,663
Balance at end of year
66,812,125
404,418,205
66,812,125
404,418,205
++ Ordinary shares participate in dividends and the proceeds on winding up of the Parent Entity in proportion to the
number of shares held.
At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder
has one vote on a show of hands.
Economic Entity
2006
$
2007
$
Company
2007
$
2006
$
Accumulated losses
Accumulated losses at beginning of year
(32,346,793)
(33,259,136)
(31,898,426)
(32,816,979)
Net Profit/(loss)
(1,397,449)
912,343
(1,294,828)
918,553
Accumulated losses at end of year
(33,744,242)
(32,346,793)
(33,193,254)
(31,898,426)
18
19
Minority equity interests
Minority equity interests in subsidiaries comprise:
Interest in loss from ordinary activities after
income tax
Interest in share capital
Total minority equity interests
20
Reserves
Asset Revaluation Reserve
Balance at beginning of year
Additions
Balance at end of year
-
-
-
-
10,236,371
-
10,236,371
(217,468)
217,468
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Corresponds to the amount related to the recognized fair value of the 73.01% of GRIL.
During the year under review Austral Gold acquired an additional 26.99% share in Golden Rose International
Limited, this increased it’s holding to 100%. In accordance with AASB “Business Combinations” the fair of
the identifiable assets and liabilities of Golden Rose International was determined at the acquisition date.
73.01% of the fair adjustment relates to the interest held by Austral Gold and in accordance with AASB 3
“Business Combinations” has been recognised as a revaluation reserve.
38
For personal use only 21
Financial risk management objectives and policies
(a) Creditriskexposure
The maximum credit risk exposure of financial assets is represented by the carrying amounts of assets recognised in
the Consolidated Balance Sheet net any provisions for losses.
(b) LiquidityRisk
As the Group currently has no material borrowings, the Group’s exposure to liquidity risk is minimal.
(c) Foreigncurrencyrisk
Loans due from associate undertaking of the Group are denominated in US$ therefore the Group’s balance sheet is
exposed to movements in the US$/A$ exchange rates. The Group does not seek to hedge this exposure.
(d) Commodityrisk
The Group currently has no material exposure to commodity risk
22
Financial instruments
(a) Fair values
There is no material difference between the fair value of the Group’s financial instruments and the carrying amounts
recognised in the financial statements.
(b)Interestraterisk
The Economic Entity’s exposure to interest rate risk and the effective weighted average interest rate for classes of
financial assets and financial liabilities is set out below
2007Consolidated
Financialassets
Cash assets
Trade and other receivables
Financialliabilities
Trade and other payables
Interest bearing liabilities
e
t
o
N
9
10
15
16
Non-
Interest
Bearing
$
Fixed rate
of 1 Year
or less
Fixed
Rate Over
1 to 5
Years
Floating
Interest
Rate
Total
$
Weighted
Average
effective
Interest
Rate
-
28,086
28,086
8,439
-
-
-
-
-
250,000
8,439
250,000
-
-
-
-
-
-
136,317
136,317
5.2%
-
28,086
136,317
164,403
-
-
-
8,439
250,000
3%
258,439
39
For personal use only 2006
Consolidated
Financialassets
Cash assets
Trade and other receivables
Receivables
Financialliabilities
Trade and other payables
Interest bearing liabilities
2007
Parent
Financialassets
Cash assets
Trade and other receivables
Financialliabilities
Trade and other payables
Interest bearing liabilities
2006
Parent
Financialassets
Cash assets
Trade and other receivables
Receivables
9
10
10
-
24,165
-
-
-
5,232,443
24,165
5,232,443
15
49,017
-
49,017
-
-
-
-
-
-
-
-
-
-
223,650
223,650
5.2%
-
-
24,165
5,232,443
3.6%
223,650
5,480,258
-
-
-
49,017
-
49,017
e
t
o
N
Non-
Interest
Bearing
$
Fixed rate
of 1 Year
or less
Fixed
Rate Over
1 to 5
Years
Floating
Interest
Rate
Total
$
Weighted
Average
effective
Interest
Rate
9
10
15
16
-
92,731
92,731
8,404
250,000
258,404
9
10
10
-
43,155
-
40
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,232,443
136,103
136,103
5.2%
-
92,731
136,103
228,834
-
-
-
8,404
250,000
258,404
223,666
223,666
-
-
43,155
5,232,443
For personal use only Investments in subsidiaries
11
913,906
Financialliabilities
Trade and other payables
957,061
15
46,548
46,548
-
-
-
-
-
-
913,906
5,232,443
223,666
6,413,170
-
-
-
-
46,548
46,548
23
Dividends
No dividends were paid or proposed during the year
Commitments
24
Explorationexpenditurecommitments
In order to maintain current rights of tenure to exploration tenements, the Economic Entity is required to perform
exploration work to meet the minimum expenditure requirements specified by various State governments. These
obligations are subject to renegotiation when application for a mining lease is made and at other times. These
obligations are not provided for in the accounts and are payable:
Economic Entity
Company
2007
$
2006
$
2007
$
2006
$
Within one year
One year or later and no later than five years
55,460
80,455
233,133
745,421
55,460
80,455
233,133
745,421
Later than 5 years
-
104,467
-
104,467
135,915
1,083,021
135,915
1,083,021
Operatingleasecommitments
Future operating lease rentals not provided for in the financial statements and payable:
Within one year
One year or later and no later than five years
Economic Entity
Company
2007
$
2006
$
2007
$
2006
$
21,000
36,750
57,750
68,010
59,803
127,813
21,000
36750
57,750
68,010
59,803
127,813
The Economic Entity rents offices at 605/ 80 William Street, Sydney. The property lease in a non-cancellable lease
with a three-year term, with rent payable monthly in advance. Contingent rental provisions within the lease
agreement require that the minium lease payments be increased by reference to the CPI. An option exists at the end
of the three-year term for an additional term of two years.
41
For personal use only 25
Subsidiaries
Particularsinrelationtosubsidiaries
ParentEntity
Austral Gold Limited
Subsidiaries
Golden Rose Pty Limited
Golden Rose International Limited
Percentage Owned
2007
% owned
2006
% owned
Country of Incorporation
-
100
73
Australia
Australia
Australia
100
100
During 2007 the Company acquired 41,025,000 ordinary shares of Golden Rose International Limited. By the end of 2007,
Austral Gold Limited holds 100% of the ordinary shares of Golden Rose International Limited. The consideration of the
acquisition was satisfied by the issue of 169,366,734 ordinary shares in Austral Gold Limited to Guanaco Capital Holding
as approved by the shareholders at a General Meeting on 22 May 2007.
26
Investments accounted for using the
equity method
Details of the investment in associates is as follows:
Name(PrincipleActivities)
Ownership
Interest
2007
%
2006
%
Investment carrying
amount
Consolidated
2007
$
2006
$
Guanaco Mining Company Limited (Mining)
51.08
35.78
-
Economic Entity
2007
$
2006
$
Movementsincarryingvalueofinvestments
Carrying amount of investment in associate at the
beginning of the financial year
Acquisition
-
-
22,220,054
411,573
Share of loss
(67,022)
(411,573)
Carrying amount of investment in associate at end of
year
-
22,153,032
Economic Entity
2006
$
2007
$
Company
2007
$
2006
$
27 Cash flow information
Reconciliationofcashflowfromoperations
withprofit(loss)afterincometax
Profit (loss) after income tax
(1,397,449)
912,343
(1,294,828)
918,553
Non-cash flows in profit
Interest received
Interest paid
(44,175)
(31,497)
(112,713)
(31,497)
-
294,158
-
294,158
Exploration and evaluation expenditure written off
80,416
230,940
22,280
163,986
Exchange Rate Differences
585,692
-
585,692
42
For personal use only Depreciation
2,155
4,185
2,155
4,185
Net gain on disposal of plant and equipment
Provision for impairment
Share of associated companies net profit after
income tax
Net cash used in operating activities before change in
assets and liabilities
Changes in assets and liabilities:
955
-
67,022
(90,785)
-
-
955
-
(90,785)
66,957
24,098
-
(705,384)
1,319,344
(772,361)
1,325,578
(Increase)/Decrease in trade and other receivables
(82,595)
(373,131)
(200,214)
(373,129)
(Decrease)/Increase in trade and other payables
(71,419)
(2,391,904)
(840)
(2,394,373)
Cashflow from operations
(859,398)
(1,445,691)
(973,415)
(1,441,944)
There were no unused loan or credit facilities at year-end.
43
For personal use only 26
Related parties
Directors
The name of each person holding the position of Director during the year are Mark Bethwaite, Pablo Vergara del
Carril, Robert Trzebski, Eduardo Elsztain, Saul Zang, Terence Willsteed (retired) the Hon Marcus Einfeld,
(resigned) On 29 June 2007, the Board appointed Eduardo Elsztain and Saul Zang as Directors of the Company
Amounts paid to Directors are set out in the Directors Report.
Directors’holdingsofsharesandshareoptions
The parent company, Guanaco Capital Holding holds 78.12% interest in Austral Gold Limited.
Mr Pablo Vergara del Carril is a Director of Austral Gold Limited, Guanaco Capital Holding and of Guanaco
Mining Company. He has no direct holding in either shares or options in any of these companies with the exception
of Guanaco Capital Holding in which he holds shares.
Messrs. Elsztain and Zang are Directors of Austral Gold Limited, Guanaco Capital Holding and Guanaco Mining
Company, and hold, indirectly shares through their interests in Guanaco Capital Holding.
Mr Bethwaite a Director of Austral Gold Limited and Guanaco Mining Company holds 37,987 indirectly in Austral
Gold Limited through Fine Wine Superannuation Fund.
Whollyownedandpartlyownedsubsidiaries
Aggregate amounts receivable from Golden Rose Pty Limited as at 30 June 2007 were $64,644 (2006: $85,947).
Impairment losses of $99,957 were provided against this loan in the year ended 30 June 2007.
Aggregate amounts receivable from Golden Rose International Limited as at 30 June 2007 were $448,718 (2006:
$446,283).
Associatedentities
Aggregate amounts receivable from Guanaco Mining Company Limited as at 30 June 2007 was $0 (2006:
$5,232,443) including interest and foreign exchange adjustments. This loan was extinguished at 22 May 2007 by the
issue of shares in Guanaco Mining Company Limited as approved by shareholders on 22 May 2007.
Subsequent events
In July 2007 the Company received funding from its largest shareholder on the following terms:
1.
Funding is in the form of a loan advance of $100,000. Other than as disclosed there has not arisen in
the interval between the end of the financial year and the date of this report any item, transaction or
event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect
significantly the operations, or the state of affairs of the Economic Entity, in future financial years.
Ultimate parent entity
The Parent Entity is ultimately controlled by Guanaco Capital Holding which is incorporated in the British Virgin
Islands.
Company Details
The registered office of the Company is:
Terrace Tower
Suite 605, 80 William Street, Sydney NSW 2011
44
For personal use only For personal use only For personal use only For personal use only For personal use only ADDITIONAL INFORMATION REQUIRED
BY AUSTRALIAN STOCK EXCHANGE LIMITED
Additional information included in accordance with the Listing Rules of the Australian Stock Exchange Limited.
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
This statement outlines the main corporate governance practices in place throughout the financial year, which
comply with the ASX Corporate Governance Council recommendations, uess otherwise stated.
Board of Directors and its Committees
Your board is responsible for the overall Corporate Governance of the Economic Entity including its strategic
direction, establishing goals for management and monitoring the achievement of these goals.
To assist in the execution of its responsibilities, your board has established an Audit Committee. The Audit
Committee has a written mandate and operating procedures, which are reviewed on a regular basis. The
effectiveness of the Audit Committee is also constantly monitored. Your board has also established a framework for
the management of the Company including a system of internal control.
Composition of Board
The names of the directors of the Company in office at the date of this Statement are set out in the Directors’
Report on pages 10 to17 of the annual report.
Audit Committee
The Audit Committee has a documented Charter, approved by the Board. The role of the Committee is to advise on
the establishment and maintenance of a framework of internal control and appropriate ethical standards for the
management of the Economic Entity.
It also gives the Board of Directors additional assurance regarding the quality and reliability of financial information
prepared for use by the Board in determining policies or for inclusion in the financial report.
ThemembersoftheAuditCommitteeduringtheyearwere:
Mr Mark Bethwaite (Non-Executive Director – Chairman Audit Committee)
Mr Pablo Vergara del Carril (Non-Executive Director)
Audit Committee Meetings are also attended by the external auditors and management representatives as required.
Theresponsibilityoftheauditcommitteeincludes:
Reviewing the financial report and other financial information distributed externally;
Reviewing any new accounting policies to ensure compliance with Australian Accounting Standards and
generally accepted accounting principles;
Considering whether non-audit services provided by the external auditor are consistent with maintaining the
external auditors’ independence;
Liaising with the external auditors and ensuring that the annual and half year statutory audits are conducted
in an effective manner;
Reviewing the Company’s policies and procedures for convergence with International Financial Reporting
Standards for reporting periods beginning on 1 July 2006; and
Monitoring the procedure in place to ensure compliance with the Corporation Act 2001 and Stock
Exchange Listing Rules and all other regulatory requirements.
The Audit Committee reviews the performance of the external auditors on an annual basis and normally meets with
them during the following:
Auditplanning:
To discuss the external audit plan
49
For personal use only
To discuss any significant issues that may be foreseen
To discuss the impact of any proposed changes in accounting policies on the financial statements
To review the fees proposed for the audit work to be performed
Priortoannouncementsofresults:
To review the half yearly and preliminary final report prior to lodgement of these documents with ASX, and
any significant adjustments required as a result of the audit; and
To make the necessary recommendations to the Board for the approval of these documents.
Annualreporting:
To review the results and findings of the auditor, the adequacy of accounting and financial controls, and to
monitor the implementation of any recommendations made;
To review the draft financial report and audit report and to make the necessary recommendations to the
Board for the approval of the financial report.
Remuneration Committee
The Company established a Remuneration and Nomination Committee ("the Committee") to oversee the processes
of director and senior management remuneration, and nomination to the Board. No members of the original
Remuneration Committee remain with the Company and the Board has not re-instated this Committee as it believes
the Company can no longer justify such a Committee. All remuneration decisions are made by the Board.
TheBoardiscognisantof theobjectivesconcerningremunerationandtheyare:
to appropriately reward and thereby encourage excellent performance by management and directors, as
measured by growth of the Company;
to devise and/or approve appropriate incentives to facilitate growth, focussing not just on salary but on a
range of remuneration methods;
to take into account the requirements and expectations of all stakeholders, including shareholders, so that
remuneration is balanced by expectations concerning profitability of the Company.
TheBoardwillreview:
policies for the annual remuneration of directors and senior management;
the basis of calculation of remuneration of those persons to ensure the appearance of reasonableness;
current industry practice in the remuneration of directors and senior executives of similar size and industry
entities;
different methods of remuneration, including:
bonus schemes;
employee Share Option Scheme;
fringe benefits;
superannuation;
retirement and termination packages.
TheBoardwillalsoreview:
professional indemnity policies;
related party disclosures in the financial statements;
communication with major stakeholders to gauge their views on remuneration packages.
The Board’s objectives concerning remuneration are to devise appropriate criteria for Board membership, and
identify specific individuals for Board membership.
50
For personal use only TheBoardtakesintoaccount:
the skill sets of current Board members;
the current and future requirements of the Company for skills in particular areas which it lacks;
the value to stakeholders of a Board comprising individuals with high levels of independence and stature.
The Board fosters open and confidential communications at its meetings and with the entire Board on potential
nominees.
The Board will initiate an annual review of Board and individual director performance, including a review of Board
size, committee structures, and effectiveness of Board meetings.
Internal Control Framework
The Board acknowledges that it is responsible for the overall internal control framework, but recognises that no cost
effective internal control system will preclude all errors and irregularities. To assist in discharging this responsibility,
the Board has instigated an internal control framework that can be described as follows:
Financial reporting – an annual budget is prepared by management and approved by the directors. Monthly
actual results are reported against budget and revised forecasts for the year are prepared regularly. The
Company reports to shareholders half-yearly. Procedures are also in place to ensure that price sensitive
information is reported to the ASX in accordance with Continuous Disclosure Requirements.
Investment appraisal – the Economic Entity has clearly defined guidelines for capital expenditure. These
include annual budgets, detailed appraisal and review procedures, levels of authority and due diligence
requirements where businesses are being acquired or divested.
The Role of Shareholders
The Board of Directors aims to ensure that the shareholders are informed of all major developments affecting the
consolidated entities state of affairs. Information is communicated to shareholders as follows:
The Annual Report is distributed to all shareholders (unless a shareholder has specifically requested not to
receive the document). The Board ensures that the annual report includes relevant information about the
operations of the Economic Entity during the year, changes in the sate of affairs of the Economic Entity
and details of future developments, in addition to the other disclosures required by the Corporations Act
2001;
the quarterly report contains summarised financial
Economic Entity during the period.
information and a review of the operations of the
These reports are posted on the Company’s website at www.australgold.com.au; as are announcements made to
the ASX.
The shareholders are responsible for voting on the appointment of directors.
The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of
accountability and identification with the consolidated entities strategy and goals. Important issues are presented to
the shareholders as single resolutions.
Securities Trading Policy
The Economic Entity’s share trading policy restricts the times and circumstances in which directors, employees and
parties legally related to them, may trade in shares of the Company or its listed controlled entity. Trading is not
permitted when directors or employees possess price sensitive information which has not yet been disclosed to the
market.
Principles of Good Corporate Governance and Best Practice Recommendations
In March 2003, the ASX Corporate Governance Council (Council) released its “Principles of Good Corporate
Governance and Best Practice Recommendations” (Recommendations).
Listing Rule 14.10.3 requires a company to disclose the extent to which the entity has followed the best practice
recommendations set by the Council during the reporting period. If the entity has not followed all of the
recommendations it must identify those recommendations that have not been followed and give reasons for not
following them. If a recommendation had been followed for only part of the period, the entity must state the period
during which it had been followed.
51
For personal use only In accordance with Listing Rule 14.10.3 the Company states that it has complied with each of the Ten Essential
Corporate Governance principles and the corresponding Best Practice recommendations as published by the ASX
Corporate Governance Council (“ASX Principals and recommendations”), other than in relation to the matters
specified below.
Principal
No
Best Practice Recommendation
Compliance or Explanation for Non-compliance
A formal policy document outlining board and management
functions has not been established as yet.
The directors have determined that given the size and
direction of the Company, hands on day-to-day management
and supervision by directors is currently in its best interests.
Given the nature and size of the Company, its business
interests and the stage of development, the board is of the
view that there is an adequate and broad mix of skills
required and that given their experience each of the directors
are aware of and capable of acting in an independent manner
and in the best interests of shareholders.
The Company has not appointed a chief executive officer
because the directors have determined that the appointment
and cost of a chief executive officer is not necessary or
justified at this time. For the present the directors are
carrying out the responsibilities of chief executive officer
with the daily assistance of the company secretary and such
outside expert assistance and advice as is necessary.
The Board does not have a nomination committee because
in the directors’ view, a Company of this size and stage of
development can best operate with the functions of a
nomination committee undertaken by the full Board.
The Company has not established a code of conduct because
it did not inherit a code from the previous Board. The
Company will formulate a code appropriate for the Company
which will be posted on the Company’s website when
adopted.
1
2
2
2
3
1.1
Formalise and disclose the
functions reserved to the Board
and those delegated to
management.
2.1 A majority of the Board should
be independent directors.
2.3
The same individual should not
exercise the roles of
chairperson and chief executive
officer.
2.4
The Board should establish a
nomination committee.
3.1 Establish a code of conduct to
guide the directors, the chief
executive officer (or
equivalent), the chief financial
officer (or equivalent) and any
other key executives as to:
the practices necessary to
maintain confidence in the
Company’s integrity
the responsibility and
accountability of individuals for
reporting and investigating
reports of unethical practices.
4
4.3
Structure the audit committee
so that it consists of:
• only non-executive directors
• a majority of independent
directors
• an independent chairperson,
who is not chairperson of the
board
• at least three members
The Audit Committee comprises Mark Bethwaite (as
Chairman) and Pablo Vergara del Carril, with the Company
Secretary as secretary. The committee thus has fewer than
the minimum 3 non-executive member composition and
lacks a majority of independent directors as recommended.
The Board is keeping the Audit Committee’s Charter under
constant review in order to meet the guidelines as
appropriate to the current size, structure, and stage of
development of the Company. The members of the Audit
Committee possess the requisite financial expertise and
industry experience necessary to effectively carry out the
52
For personal use only Principal
No
5
Best Practice Recommendation
Compliance or Explanation for Non-compliance
Committee's mandate.
5.1 Establish written policies and
procedures designed to ensure
compliance with ASX Listing
Rule disclosure requirements
and to ensure accountability at
a senior management level for
that compliance.
No written policies and procedures designed to ensure
compliance with ASX Listing Rule disclosure requirements
and accountability for the compliance were inherited from
the previous Board. Formal policies will be drafted and will
be posted on the Company’s website when adopted. The
Company is in regular contact with its solicitors to ensure
ASX compliance.
6
6.1 Design and disclose a
communications strategy to
promote effective
communication with
shareholders and encourage
effective participation at
general meetings.
The new Board is committed to the objective of proper
communication with shareholders and will actively promote
shareholder involvement in the Company including regular
information on the Company's website. A formal policy will
be drafted to express these goals and will be posted on the
Company’s website when adopted.
7
7.1
The board or appropriate
board committee should
establish policies on risk
oversight and management.
Informal procedures were in place prior to the new Board
being appointed. The board is formulating its policies on
these matters which will be posted on the Company’s
website when adopted.
10
10.1 Establish and disclose a code
of conduct to guide compliance
with legal and other obligations
to legitimate stakeholders.
The Board considers that its practices are the equivalent to
the guidelines. A draft code will be prepared and will be
made available on the Company’s website when adopted.
The Board aspires to the highest standards of corporate governance and is fully supportive of and committed to the
aims, spirit and letter of the Recommendations and to their implementation as appropriate for a company of this size.
53
For personal use only Statement of issued capital at 31 August 2007
a)
Distribution of fully paid ordinary shareholders
Size of Holding
Shareholders
Number of Shares Held
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
714
360
103
100
19
1,296
305,728
981,726
845,061
2,863,482
61,816,578
66,812,125
b)
There are no restrictions on the voting rights attached to the fully paid ordinary shares. On a show of
hands, every member present in person shall have one vote and upon a poll, every member present in
person or by proxy shall have one vote for every share held.
Options on Issue at 27 September 2007
There are 10,375,049 unlisted options on issue as detailed below:
No of Options
Exercise price
Expiry date
No of Holders
877,334
2,300,000
4,424 ,511
2,773,204
.40 cents
1.20
2.00
2.00
14/10/2009
30/11/2007
30/11/2007
14/10/2009
1
3
4
2
Global Gold SA and or Guanaco Capital Holding hold 9,920,049 of these options.
Securities approved for the purposes of Item 7 of section 611 of the Corporations Act:
Shareholders approved the issue of shares upon conversion of these options pursuant to Item 7 of section 611 of
the Corporations Act. 9,920,049 of these options are yet to be exercised by Global Gold SA or Guanaco Capital
Holding.
Substantial Shareholders
At 19 September 2007 the Company’s register of substantial shareholdings shows the following:
Name
Guanaco Capital Holding Corp
HSBC Custody Nominees (Australia)*
Total
* beneficially held by Guanaco Capital Holding
Shares Held
26,406,823
25,789,330
52,196,153
Top Twenty Shareholders as at 19 September 2007
Rank
Holder
Number of Shares
% Issued Capital
1
2
3
4
5
6
Guanaco Capital Holding Corp
HSBC Custody Nominees (Australia)
Limited – A/C 2
Citicorp Nominees Pty Limited
ANZ Nominees Limited
HSBC Custody Nominees (Australia)
Limited – GSI ECSA
Niako Investments Pty Ltd
54
26,406,823
25,789,330
4,541,338
1,458,127
400,000
396,005
39.52%
38.60%
6.80%
2.18%
0.60%
0.59%
For personal use only Rank
Holder
Number of Shares
% Issued Capital
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Mr Daniel Goberman
Moshe Ambarchi
Hazlaha Investments Limited
HSBC Custody Nominees (Australia)
Limited
Birchall Projects Ltd
Greenford Investments Limited
Mountain Side Holdings Ltd
D & D Nominees Pty Ltd
Mr Peter Allan Learmont
A G Irvine Pty Ltd
Dana Duneier
Gordon Holdings (QLD) Pty Ltd
Mr Glen Smith
Warbont Nominees Pty Ltd
385,487
350,000
336,865
330,083
230,000
200,000
194,800
176,474
150,000
126,150
108,750
107,132
103,000
100,000
0.58%
0.52%
0.50%
0.49%
0.34%
0.30%
0.29%
0.26%
0.22%
0.19%
0.16%
0.16%
0.15%
0.15%
61,890,364
92.60%
Schedule of Mineral Tenements as at 28 September 2007
Tenement
P 15/4514
Project Name
Bullabulling
Interest
95%
P 15/4515
P 15/4516
P 15/4518
P 15/4519
P 15/4520
P 15/4521
P 15/4522
E 40/1116
E 40/1117
E 40/1118
E47/952*
Bullabulling
Bullabulling
Bullabulling
Bullabulling
Bullabulling
Bullabulling
Bullabulling
Kookynie
Kookynie
Kookynie
Rocklea
*Application Pending
95%
95%
95%
95%
95%
95%
95%
95%
95%
95%
100%
55
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