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Rio Tinto PLCAUSTRAL GOLD LIMITED
AND ITS SUBSIDIARIES
ABN 30 075 860 472
ANNUAL REPORT
2008
Austral Gold Limited
ABN 30 075 860 472
Contents
Table of Contents................................................................................................................................1
Chairman’s Letter................................................................................................................................2
Corporate Directory.............................................................................................................................3
Review of Activities .......................................................................................................................4 - 8
Directors’ Report ........................................................................................................................9 - 17
Auditors Independence Declaration..................................................................................................18
Consolidated Income Statements .....................................................................................................19
Consolidated Balance Sheets............................................................................................................20
Consolidated Statements of Changes in Equity................................................................................21
Consolidated Cash Flow Statements ..............................................................................................22
Notes to the Financial Statements ...........................................................................................23 - 47
Directors’ Declaration ......................................................................................................................47
Independent Auditors’ Report ..................................................................................................48 - 49
Additional Information Required by Australian Stock Exchange Limited
Corporate Governance Statement...................................................................... .............50 - 55
Statement of Issued Capital....................................................................................................55
Options on Issue......................................................................................................................56
Substantial Shareholders........................................................................................................56
Top Twenty Shareholders....................................................................................................... 57
Schedule of Mineral Tenements..............................................................................................57
1
Austral Gold Limited
ABN 30 075 860 472
Chairman’s Letter
Dear Shareholder
2007/08 has been a year of progress on a number of fronts for Austral Gold.
In Australia, rationalisation of our portfolio of exploration properties has been completed with
the sale of Austral Gold’s Rocklea iron ore prospect in the West Pilbara for $5.25 million to
Murchison Metals Limited in April 2008. Rocklea has an identified iron ore resource but it is
too small for stand alone development.
Since 30 June 2008, Austral Gold acquired a 100% interest in Guanaco Capital Holding
Argentina, and with it, the option to earn up to 50% of the Aminsa projects in the Province of
San Juan in Argentina. Guanaco Capital Holding Argentina has also made applications for
nine tenements in the Province of Santa Cruz in the south of Argentina.
Our current technical and expenditure focus remains on the Guanaco Project in Chile.
Following approval of a restructuring resolution at the General Meeting of shareholders in
May 2008, Austral Gold now owns 100% of the Guanaco Project through its subsidiary
Guanaco Mining Company.
A number of exploration activities were completed at Guanaco during 2007/08. These
included a major geophysical survey, geochemistry and a structural geology review all of
which were designed to guide the 2008 drilling program, Stage 1 of which commenced in
June 2008. The key outcomes of this drilling were the confirmation of strike extensions to
known gold bearing structures and the identification of a new structure, the Natalia trend,
parallel to and south of the Cachinalito Norte trend.
Analysis of these results and preparation for Stage 2 drilling due to start in October 2008 are
in hand. I will be in a position to update shareholders on Stage 2 progress at the Annual
General Meeting in late November.
Austral Gold continues to be well served by its staff both on site at Guanaco, led by
Exploration Manager, Carlos Peralta and in our small Sydney office, led by Company
Secretary and CFO, Catherine Lloyd. On behalf of shareholders I thank them for their loyalty
and their efforts.
Mark Bethwaite
Chairman
2
Corporate Directory
Directors:
Mark Bethwaite - Chairman
Eduardo Elsztain – Non Executive Director
Saul Zang – Non Executive Director
Pablo Vergara del Carril - Non Executive Director
Natalia Zang – Non Executive Director
Robert Trzebski - Non Executive Director
Company Secretary:
Catherine Lloyd
Management:
Ema Volavola - Office Manager
Registered Principal Office:
Suite 605, 80 William Street
Sydney NSW 2011
Telephone:
(02) 9380 7233
Facsimile:
(02) 9380 7972
Email:
Website:
info@australgold.com.au
www.australgold.com.au
Auditors:
PKF
Share Registry:
Level 10, 1 Margaret Street
Sydney NSW 2000
Computershare
GPO Box 2975
Melbourne VIC 3001
Tel (within Australia) 1300 850 505
Tel (outside Australia) +61 3 9415 5000
Principal Bankers:
National Australia Bank Limited
Solicitors:
Steinepreis Paganin, Perth WA
Listed:
Code:
Australian Stock Exchange
AGD
Place of Incorporation:
Western Australia
3
Review of Activities
The strategy of Austral Gold Limited (the Company) is to maximize shareholder value through the
development of mineral deposits in which the Company has an interest, providing such development
demonstrates superior rates of return.
The Company continues to explore and invest in its Guanaco Project in northern Chile to expand its
mineral resources, increase the property’s potential annual production and improve its financial
viability. By early 2009, the Company expects to complete, in parallel with an ongoing exploration
program, a Pre-Feasibility Study. This may be followed by a Bankable Feasibility Study to determine
the financial viability of the Guanaco Project and propose an optimal plan for the extraction of gold
and silver.
The Company also expects to acquire further properties in the Guanaco region and in Argentina and
will pursue joint ventures with other successful mining exploration companies.
Guanaco Project, Chile (100% interest)
Background
In January 2003 Austral Gold Limited obtained, through its subsidiary Golden Rose International
Limited (GRIL), an option to acquire the Guanaco Project in Chile from subsidiaries of Kinross Gold
Corporation. 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 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) called Guanaco Compañía Minera Limitada,
incorporated in Chile.
In March 2005 and after several agreements between GCH and Austral Gold’s founders, GCH
became the major shareholder of Austral Gold. The Board of the Company was changed and its
securities were reinstated by the ASX in May 2005. In December 2005, the founders of Austral Gold
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 which was put forward to the shareholders at a
General Meeting. On 22 May 2007, the shareholders approved a reconstruction of the share capital
so that Austral Gold held 51% of GMC and 100% of GRIL and the appointment of a new Board to
lead the Company into a new era.
On 28 May 2008, Austral Gold shareholders approved the latest restructuring of share capital so that
Austral Gold Limited now holds directly or indirectly, through its 100% interest in GRIL, 100% of GMC.
Institutional
& Retail
Investors
39%
61%
Australian
Listed Entity ASX:AGD
Guanaco Mining Company
British Virgin Islands
Holding Company
Guanaco Compania Minera
Chilean
Operating Company
4
Project Description
Guanaco is located 220 kilometres south east of Antofagasta in Northern Chile. It is at an elevation of
2,700 metres and close to the Pan-American Highway which runs north/south through Chile.
Guanaco is located in the Paleone/Eocene belt, a structural trend which runs north/south down the
centre of Chile. This trend accommodates several large copper/gold mining operations including
Zaldivar, El Peñon and Escondida.
Mining was undertaken at Guanaco from 1886 - with some interruptions - until 2001. Gold, copper
and silver have been mined at Guanaco with more than 1.5 million ounces of gold produced.
Austral Gold’s predecessors entered into an Option Agreement to acquire an interest in Guanaco in
September 2002 that was finalized in March 2003. Since 2004, Austral Gold has pursued exploration
activities at Guanaco with our joint venture partner, Guanaco Capital Holding, who was also Austral
Gold’s majority shareholder.
5
The photograph above shows the east view of the Dumbo open pit showing the deepest of the past
workings. The photograph below shows the leach pads, north of the Dumbo pit.
Whilst any resumption of operations at Guanaco 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 as well as
sufficient water rights granted and no environmental liability from previous exploitation activities.
6
Austral Gold Limited
Guanaco Project – Exploration Program
Heap Leach
Pads
145,748 oz Au
S a l v a d o r a
t o 3 3 0 , 0 0 0 o z A u
C a c h i n a l
i
D u m b o 1 3 9 , 0 0 0 o z A u
P e r s e v e n c i a 2 7 , 0 0 0 o z A u
In the diagram above, 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.
The combined measured, indicated and inferred resources of contained ounces of gold as a result of
drilling to date is shown on each vein in this diagram. As of today, measured, indicated and inferred
resources of gold amount to approximately 500,000 ounces, excluding gold remaining in the leach
pads.
GOLD
Au
Cachinalito Oeste
Cachinalito Central
Tonnes Grade (g/t)
Ounces
Tonnes Grade (g/t)
Ounces
Dumbo West
Tonnes Grade (g/t)
Ounces
Tonnes Grade (g/t)
Ounces
Tonnes
Perseverancia
TOTAL
Grade
(g/t)
Ounces
Measured
Indicated
Inferred
TOTAL
318,320
432,040
189,100
939,460
3.25
2.99
2.50
2.98
33,281
41,573
15,175
90,029
540,340
645,340
464,460
1,650,140
5.42
4.18
3.94
4.52
94,209
86,622
58,894
239,725
158,440
523,820
1,405,440
2,087,700
2.88
2.65
1.77
2.08
14,660
44,662
80,068
139,390
65,780
101,540
58,700
226,020
4.04
3.76
3.27
3.71
8,540
12,284
6,173
26,997
1,082,880
1,702,740
2,117,700
4,903,320
4.33
3.38
2.35
3.15
150,690
185,141
160,310
496,141
Heap Leach Pads
Total
Estimated
Au
Ag
Tonnes
Tonnes
(ppm)
(ppm)
Cu
%
% of Tonnes Estimated Possible Estimated Possible
Estimated
Au Oz
Au Oz
Ag Oz
Ag Oz
Phase I
Phase II
TOTAL
4,836,672
6,274,708
11,111,380
3,897,578
4,436,567
8,334,145
0.512
0.572
0.544
2.767
2.562
2.658
0.0260
0.0360
0.0313
80.58
70.71
75.01
64,159
81,589
145,748
79,617
115,393
194,317
346,733
365,441
712,173
430,275
516,849
949,495
Dr Robert Trzebski is a director of Austral Gold Limited. He has a Degree in Geology, a PhD in
Geophysics, a Master International Project Management and has over 13 years of professional
experience in mineral exploration, project management and research and development. Dr Robert
Trzebski qualifies as a Competent Person as defined in the 2004 Edition of the “Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves.’ Dr Robert Trzebski
consented to the inclusion of the resource figures identified above.
Exploration drilling at Guanaco continues in 2008 with the objective of increasing the measured,
indicated and inferred resources of gold and silver above current levels.
Stage 1 drilling took place in June, July and August 2008. The program was successful in identifying a
significant silica/quartz vein structure 120 meters to the south and parallel to the Cachinalito Norte
structure. This vein structure was named Natalia and contains the same mineral assemblages found
in the gold-bearing veins in the district. Also, at Cachinalito Oeste, the gold/silver bearing structure
was extended 650 meters to the west, where 12 holes encountered a silica/quartz vein structure with
low grade gold/sliver anomalies.
After interpretation and analysis of Stage 1 drilling, Stage 2 comprising approximately 15,000 metres
of reverse circulation drilling will commence in October 2008.
It is anticipated that in late 2008, the Company will embark on a Pre Feasibility Study into the
restarting of mining and processing operations at Guanaco. Any subsequent Bankable Feasibility
Study will take some months to complete, and may lead to a development decision late in 2009.
In May 2008, the Company lodged the DIA (Declaración de Impacto Ambiental or Environmetal
Impact Declaration) to the CONAMA (Comisión Nacional de Medio Ambiente) for the restarting of
Guanaco Mine late in 2010.
7
Australian exploration areas
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 the Company to focus
on those areas of greatest prospectivity. In 2007/08, the Company’s former interests in Raeside and
Kookynie have been relinquished or are in the process of relinquishment.
In April 2008, Austral Gold sold its 100% interest in the Rocklea iron ore tenement to Murchison
Metals Limited for $5.25 million.
This consideration has now been received and some $2.5 million has been applied to repaying loans
which had been advanced to Austral Gold by Guanaco Capital Holding, our major shareholder. These
loans had been used principally to finance ongoing exploration at the Guanaco project in Chile.
The remainder of the sale proceeds from Rocklea are being applied to future expenditure
commitments at Guanaco and Bullabulling in WA.
The sale of Rocklea completes the rationalisation of the Company’s Australian exploration areas,
allowing Austral Gold to focus on the Bullabulling project.
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 metre 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 the northern tenement group. The objective is to identify nickel and gold
targets and investigate deep target potential by reverse circulation drilling.
The Company has now executed an agreement with a Western Australian based exploration
contractor and research and field work commenced in September 2008.
8
Directors' Report
Your Directors present the following report for the financial year ended 30 June 2008 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, (referred to hereafter as the Group) for the
year ended 30 June 2008 and the auditors’ report thereon.
PRINCIPAL ACTIVITIES
The principal activities of the Company during the course of the financial year were exploration and
evaluation of mineral properties, 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 2008 has been
released in the Company’s announcements and reports to the Australian Stock Exchange. It is
available for review on the Company’s website at www.australgold.com.au.
REVIEW AND RESULTS OF OPERATIONS
Operating Results and Dividends
The Group’s net profit attributable to members for the year ended 30 June 2008 was $11,766,323
(2007: loss $1,397,449).
No dividends of the Company or its subsidiaries have been paid, declared or recommended since the
end of the 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 Group have increased by $39,890,957 from 30 June 2007 to $64,195,766. This
increase was primarily as a result of the restructure as approved by the shareholders at the General
Meeting on 28 May 2008. The resultant investment in Guanaco Mining Company has been assessed
at fair value in accordance with the Accounting Standards.
The Company has the support of its substantial shareholder, Inversiones Financieras del Sur SA
(IFISA).
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 Group during the financial year:
FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES
GUANACO (Chile)
Drilling continues and it is intended to embark on a Pre Feasibility Study in late 2008 into the relaunch of
mining and processing operations at Guanaco. Any subsequent Bankable Feasibility Study will take
some months to complete, and may lead to a development decision late in 2009.
AUSTRALIAN TENEMENTS
Further reconnaissance exploration will be undertaken at Bullabulling to assess the prospectivity of the
project.
All other Australian exploration areas have been sold or relinquished.
EVENTS SUBSEQUENT TO BALANCE DATE
1) Acquisition of Guanaco Capital Holding Argentina SA (GCHA) was effected on 4 August 2008.
GCHA, a company incorporated under Argentinean Law, is the owner of nine tenement
applications totalling almost 85,000 hectares in the Macizo el Deseado area in the Province of
Santa Cruz in Argentina.
GCHA is also party to an Earn In Agreement with Argentina Minera SA (Aminsa) and its founders
to jointly explore tenements covering approximately 227,000 hectares in the Province of San
9
Juan, in Argentina. The property is located within the Porphyry Piuquenes- Los Azules corridor
near Xstrata’s advanced exploration copper project called El Pachón in Argentina and Los
Pelambres owned by Antofagasta Minerals in Chile.
Under the agreement, GCHA will earn in up to 50% of Aminsa in 5 years by contributing up to US
$15 million over this period.
Copper and gold exploration activities at the Aminsa projects will commence in September 2008
mainly in Los Bagres, Rincones de Araya, Rio Salinas and Calderon/Calderoncito in the Province
of San Juan. Recently concluded geophysics using induced polarity and advanced spaceborne
thermal emission and reflection radiometer techniques and geochemical programs have
confirmed anomalies within these areas.
The founders of Aminsa, Patricio Jones (CEO and Chairman of Suramina Resources, a company
listed in the Toronto Stock Exchange with assets in Chile and Argentina), Ricardo Martinez and
Roberto Martinez have experience in exploration activities in the region having participated,
among others, in the discoveries of two of the largest mines in Argentina; Xstrata’s copper Bajo
de la Alumbrera and Barrick’s gold mine Veladero. Patricio Jones has been involved with the
Lundin Group since the 1980s.
2)
In September 2008, Guanaco Compañía Minera, 100% owned by Austral Gold, initiated the
process to acquire an additional 49 concessions totalling some 11,128 hectares located in close
proximity to the Guanaco Project in Chile.
If granted, Guanaco Compañía Minera will hold almost 25,000 hectares in 270 concessions.
3)
In September 2008, the Company entered into an agreement with a Western Australia contractor
to undertake exploration at Bullabulling.
PERFORMANCE IN RELATION TO ENVIRONMENTAL REGULATION
The Group’s Australian and Chilean exploration activities are subject to environmental regulations
under Commonwealth and State legislation in relation to the former and Chilean law in relation to the
latter.
In relation to the Group’s mineral exploration operations in Western Australia, licence requirements
relating to waste disposal, water and air pollution exist under the Western Australian Mining Act 1978
and Environmental Protection Act 1986. The Directors are not aware of any significant breaches
during the period covered by this report.
In relation to the Group’s mineral exploration operations in Chile, licence requirements relating to
“Bases Generales de Medio Ambiente” exist under the Chilean Law No. 19,300. The Directors are not
aware of any significant breaches during the period covered by this report. Moreover, all the
exploration activities performed so far have been approved by the Environmental Authority, Comisión
Nacional de Medio Ambiente (CONAMA).
10
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
Francis Mark Bethwaite
Chairman/ Non Executive
Director
Mr Bethwaite has qualifications of Bachelor of Engineering, Master of
Building Science and Master of Business Administration. His mining
career spans some 23 years including periods living and working in Mount
Isa and Broken Hill. Mark 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, Mark worked with Deutsche Bank,
principally in the financing of mining projects.
Mr Bethwaite was Chairman of the Australian National Maritime Museum
from 2001 - 2007. He is a non-executive Director of New South
Innovations Pty Limited, Digital Core Laboratories Pty 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
Pablo Vergara del Carril
Non Executive Director
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
Robert Trzebski
Non Executive Director
He is a director of Banco Hipotecario S.A. [BASE: BHIP], Milkaut S.A (an
Argentine leading dairy company), Nuevas Fronteras (owner of the
Intercontinental Hotel in Buenos Aires) and 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
Dr 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 includes eight years of
developing collaborative research projects between mining companies
and scientific institutions in Latin America, USA, Africa, Europe, Asia and
Australia.
Dr 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
11
Eduardo Elzstain
Non Executive Director
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.
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 of approx. US$500 million Alto
Palermo S.A. [NASDAQ: APSA], Argentina’s leading shopping centre
company with 10 shopping malls 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 with a current market capitalization of
above US$300 million.
Appointed 29 June 2007
Saul Zang
Non Executive Director
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
Representaciones S.A., Cresud S.A.C.I.F. y A. and Alto Palermo S.A.
IRSA
Inversiones y
Natalia Zang
Non Executive Director
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
International Bar
Association.
the
Appointed 29 June 2007
Ms. Zang holds a Bachelor of Business Administration and a Masters in
Finance (Capital Markets) from the Universidad del CEMA (Argentina).
She has over 10 years professional experience in corporate finance and
asset management having worked for Alto Palermo S.A. and Jazzya
Investments including two years as Managing Director.
She is a member of the board and Chief Financial Officer of Guanaco
Capital Holding and Guanaco Mining Company.
Appointed 19 March 2008 (formerly an Alternate Director)
12
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 Group during the financial year are:
Directors’
meetings
Audit Committee
meetings
Director
Mark Bethwaite
Pablo Vergara del Carril
Robert Trzebski
Eduardo Elsztain
Saul Zang
Natalia Zang
A
13
11
13
6
7
13
B
13
13
13
13
13
13
A
Number of meetings attended.
A
1
1
*
*
*
*
B
1
1
*
*
*
*
B
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
14 October 2009
14 October 2009
Exercise
Price
$0.40
$2.00
Number
877,334
2,773,204
INDEMNITY OF OFFICERS
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.
13
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
Direct Shares
Direct Options
Indirect Shares
Indirect Options
F M Bethwaite
P Vergara del
Carril
R Trzebski
E Elsztain
S Zang
N Zang
-
-
-
5,650,132
1,435,668
-
-
-
-
64,509
16,391
-
37,987
*
-
*
*
20,000 *
-
*
-
*
*
*
* P Vergara de Carril, E Elsztain, S Zang and N Zang are directors and shareholders of Guanaco
Capital Holding Corp which holds 25,789,330 shares and 50,000 options.
* E Elsztain and S Zang are directors of IFISA which holds 102,259,174 shares and 1,167,521
options
REMUNERATION REPORT
The remuneration report is set out under the following headings:
A) Remuneration Policy
B) Details of Remuneration
C) Service Agreements
D) Share Based Payments
A) Remuneration Policy
The Company has a Remuneration Policy which aims to ensure remuneration packages of directors
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 Company reviews available information which measures the
remuneration levels in the various labour markets in which it competes. The expectation of the
Company 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 2008.
There are no performance-based components of executive or non-executive remuneration.
14
B) Details of Remuneration
Details of Remuneration for the Year ended 30 June 2008
PRIMARY
POST-EMPLOYMENT
SHARE-BASED
2008
Cash &
Salary
Fees
Cash
bonus
Non
monetary
benefits
Super-
annuation
Retirement
benefits
Shares Options Total $
Non-executive
directors
F M Bethwaite
R Trzebski
Total non-
executive directors
Other Key
Management
Personnel
C Lloyd
C Peralta
D Lindfield
61,102
36,697
97,799
59,806
57,415
33,880
TOTAL
248,900
-
-
-
-
-
-
-
-
-
-
-
-
-
-
38,898
3,303
42,201
5,382
-
-
47,583
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
40,000
140,000
65,188
57,415
33,880
296,483
Details of Remuneration for the Year ended 30 June 2007
PRIMARY
POST-EMPLOYMENT
SHARE-BASED
Cash &
Salary
Fees
Cash
bonus
Non
monetary
benefits
Super-
annuation
Retirement
benefits
Shares Options
Total $
2007
Non-executive
directors
F M Bethwaite
R Trzebski
Total Non-
Executive
Directors
Other Key
Management
Personnel
-
3,945
3,945
D Lindfield
17,114
TOTAL
21,059
-
-
-
-
-
-
-
-
-
-
24,999
355
25,354
-
25,354
-
-
-
-
-
-
-
-
-
-
24,999
4,300
29,299
17,114
46,413
-
-
-
-
-
15
C) Service Agreements
Mr Carlos Peralta, Exploration and Geology Manager
Mr Peralta shall be entitled to receive ordinary fully paid-in shares of Austral Gold under the following
terms and conditions:
An aggregate of 600,000 (six hundred thousand) shares, in 3 (three) tranches on the following dates
and in the following amounts:
Tranche I:
01/04/2009
200,000 (two hundred thousand) shares
Tranche II: 01/04/2010
200,000 (two hundred thousand) shares
Tranche III: 01/04/2011
200,000 (two hundred thousand) shares
In addition, Mr. Peralta shall receive one share for each ounce discovered under the Discovery Bonus
scheme, to be quantified based on measured resources resulting from exploration activities planned
and led by Mr. Peralta and audited by an independent third party hired by the Company.
D) Share Based Payments
There were no share based payments during the year under review.
Auditors
PKF continues in office as auditors in accordance with the requirements of the Corporations Act 2001.
Non-audit services
The company may decide to employ the auditors on assignments additional to their statutory audit
duties where the auditors’ expertise and experience with the Company are important.
Details of amounts paid or payable to the auditors, PKF, for audit and non-audit services provided
during the year are set out below:
The Board of Directors has considered the position and is satisfied that the provision of the non-audit
services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the
auditors, as set out below, did not compromise the auditors independence requirements of the
Corporation Act 2001 for the following reasons:
• All non-audit services have been reviewed by the audit committee to ensure they do not impact
the impartiality and objectivity of the auditors.
• None of the services undermine the general principles relating to auditors independence as set
out in APES 110 Code of Ethics for Professional Accountants.
During the year the following fees were paid or payable for services provided by the auditors:
2008
$
2007
$
Audit services
Audit and review of financial reports
64,490
97,915
Non-audit services
Tax advice in respect of potential group re-structuring
and financing options
20,110
20,522
Total
84,600
118,437
16
PROCEEDINGS ON BEHALF OF THE COMPANY
Other than stated below, no person has applied for leave of Court to bring proceedings on behalf of
the Company or intervene in any proceedings to which the Company is a party for the purpose of
taking responsibility on behalf of the Company for all or part of those proceedings.
AUDITORS INDEPENDENCE DECLARATION
The lead auditors’ independence declaration for the year ended 30 June 2008 has been received and
is included in this report.
Signed in accordance with a resolution of Directors at Sydney, 23 September 2008.
____________________________
_________________________
Francis Mark Bethwaite
Director
Robert Trzebski
Director
17
AUDITOR'S INDEPENDENCE DECLARATION
Auditor's Independence Declaration
As lead auditor for the audit of Austral Gold Limited for the year ended 30 June 2008, I declare that to the
best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Austral Gold Limited and its subsidiaries.
PKF
Bruce Gordon
Partner
23 September 2008
Sydney
Tel: 61 2 9251 4100 | Fax: 61 2 9240 9821 | www.pkf.com.au
PKF | ABN 83 236 985 726
Level 10, 1 Margaret Street | Sydney | New South Wales 2000 | Australia
DX 10173 | Sydney Stock Exchange | New South Wales
PKF East Coast Practice is a member of PKF Australia Limited a national association of independent chartered accounting and consulting firms each trading as PKF. The East
Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice is also a member of PKF International, an association of legally independent chartered
accounting and consulting firms.
Liability limited by a scheme approved under Professional Standards Legislation
18
INCOME STATEMENTS
AUSTRAL GOLD LIMITED AND ITS SUBSIDIARIES
FOR THE YEAR ENDED 30 JUNE 2008
Revenue
Operating activities
Non-operating activities
Depreciation expense
Exploration and evaluation expenditure
Finance costs
Administration expenses
Impairment losses
Gains/(losses) from foreign exchange
Share of net losses of equity accounted
investments
e
t
o
N
3
3
4
4
4
4
4
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
32,662
156,888
32,662
156,888
14,693,641
(995)
4,986,867
(995)
14,726,303
155,893
5,019,529
155,893
(7,884)
-
(113,785)
(749,056)
(2,155,764)
(2,155)
(80,416)
(3,046)
(2,155)
-
(22,280)
(10)
(58,549)
(10)
(818,047)
(692,215)
(840,584)
-
-
-
107,360
(585,692)
93,013
(585,692)
25
(40,851)
(67,022)
-
-
Profit/(Loss) before income tax
11,766,323
(1,397,449)
4,358,732
(1,294,828)
Income tax benefit
6
-
-
-
-
Profit/(loss) for the year
11,766,323
(1,397,449)
4,358,732
(1,294,828)
Profit /(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
-
-
-
-
11,766,323
(1,397,449)
4,358,732
(1,294,828)
7
16.64
16.64
(0.30)
(0.30)
6.16
6.16
(0.28)
(0.28)
The above Income Statements should be read in conjunction with the accompanying notes.
19
BALANCE SHEETS
AUSTRAL GOLD LIMITED AND ITS SUBSIDIARIES
AS AT 30 JUNE 2008
e
t
o
N
9
10
10
11
12
13
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
2,311,093
25,745
2,336,838
136,317
1,982,957
136,103
28,086
2,940
28,085
164,403
1,985,897
164,188
984,001
-
2,214,903
513,361
-
-
175,219
22,997,678
43,749,380
14,472,057
2,116,888
12,848
-
-
9,802
12,848
14
62,305,057
7,086
-
580
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
63,464,277
25,134,500
45,974,085
14,998,846
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Financial liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
65,801,115
25,298,903
47,959,982
15,163,034
15
16
776,553
313,743
1,090,296
47,933
946,161
994,094
561,824
-
561,824
47,904
495,704
543,608
Financial liabilities
16
515,053
TOTAL NON-CURRENT LIABILITIES
515,053
-
-
-
-
-
-
TOTAL LIABILITIES
1,605,349
994,094
561,824
543,608
NET ASSETS
EQUITY
Issued capital
Retained earnings/(Accumulated
losses)
Reserves
Minority Interest
TOTAL EQUITY
64,195,766
24,304,809
47,398,158
14,619,426
17
44,334,254
15,914,254
44,334,254
15,914,254
18
20
19
9,920,507
9,940,917
88
(1,845,816)
3,063,904
(1,294,828)
10,236,371
-
-
-
-
-
64,195,766
24,304,809
47,398,158
14,619,426
The above Balance Sheets should be read in conjunction with the accompanying notes
20
STATEMENTS OF CHANGES IN EQUITY
AUSTRAL GOLD LIMITED AND ITS SUBSIDIARIES
FOR THE YEAR ENDED 30 JUNE 2008
e
t
o
N
Issued
capital
Share
capital
pending
issue
Retained
earnings/
(Accumulated
losses)
$
$
$
37,281,992
1,000,000
(32,346,793)
(31,898,426)
-
-
-
-
-
31,898,426
(1,397,449)
Reserves
Minority
interest
Total
$
-
-
-
$
-
-
-
-
$
5,935,199
-
(1,397,449)
- 10,236,371
- 10,236,371
10,530,688
(1,000,000)
-
-
-
9,530,688
15,914,254
-
-
-
-
28,420,000
44,334,254
-
-
-
-
-
-
-
(1,845,816) 10,236,371
- 24,304,809
11,766,323
-
- 11,766,323
-
-
-
-
(276,379)
(19,075)
-
-
-
-
88
(276,379)
(19,075)
88
- 28,420,000
9,920,507
9,940,917
88 64,195,766
37,281,992
1,000,000
(31,898,426)
(31,898,426)
-
-
-
31,898,426
(1,294,828)
10,530,688
(1,000,000)
-
15,914,254
-
28,420,000
44,334,254
-
-
-
-
(1,294,828)
4,358,732
-
3,063,904
-
-
-
-
-
-
-
-
-
-
-
-
6,383,566
-
(1,294,828)
9,530,688
- 14,619,426
-
4,358,732
- 28,420,000
- 47,398,158
20
20
20
19
Consolidated
Balance at 30 June 2006
Reduction in share capital
Loss attributable to members of
the Consolidated Group
Asset revaluation
Shares issued during the year
Balance at 30 June 2007
Net profit attributable to
members of the Consolidated
Group
Asset revaluation
Foreign currency translation
Minority interest acquired
through subsidiary
Shares issued during the year
Balance at 30 June 2008
Parent Entity
Balance at 30 June 2006
Reduction in share capital
Loss attributable to members of
the Parent Entity
Shares issued during the year
Balance at 30 June 2007
Net profit attributable to
members of the Parent Entity
Shares issued during the year
Balance at 30 June 2008
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes
21
CASH FLOW STATEMENTS
AUSTRAL GOLD LIMITED AND ITS SUBSIDIARIES
FOR THE YEAR ENDED 30 JUNE 2008
e
t
o
N
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
Cash flows from operating activities
Payments to suppliers and employees
Finance costs
(78,936)
(113,785)
(859,398)
(1,854,112)
(973,415)
(10)
(58,549)
(10)
Net cash used in operating activities
26
(192,721)
(859,408)
(1,912,661)
(973,425)
Cash flows from investing activities
Proceeds from sale of plant and
equipment
Purchase of property, plant and
equipment
Proceeds from sale of exploration and
evaluation expenditure
Payment for exploration and evaluation
expenditure
Interest received
Investment in associate
Cash acquired from subsidiary
Net cash provided/(used) through
investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from related party
Repayments to related party
Net cash (used)/provided through
financing activities
-
5,013
(9,860)
(6,153)
-
-
5,013
(6,153)
4,986,867
-
4,986,867
-
(308,529)
(60,970)
-
(15,321)
32,662
44,185
32,662
112,723
(1,766,269)
290,502
-
-
(1,103,027)
-
-
-
3,225,373
(17,925)
3,916,502
96,262
-
2,001,910
(2,840,711)
540,000
250,000
-
1,260,016
-
(1,417,003)
540,000
250,000
-
(838,801)
790,000
(156,987)
790,000
Net increase/(decrease) in cash held
2,193,851
(87,333)
1,846,854
Cash at beginning of financial year
Movement in foreign currency reserve
136,317
(19,075)
223,650
136,103
-
-
(87,163)
223,266
-
Cash at end of financial year
9
2,311,093
136,317
1,982,957
136,103
The above Statements of Cash Flows should be read in conjunction with the accompanying notes
22
NOTES TO THE FINANCIAL STATEMENTS
AUSTRAL GOLD LIMITED AND ITS SUBSIDIARIES
FOR THE YEAR ENDED 30 JUNE 2008
1. Corporate information
The financial report of Austral Gold Limited (the Company) for the year ended 30 June 2008 was
authorised for issue in accordance with a resolution of the Directors on 23 September 2008.
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.
Summary of accounting policies
2.
The financial report is a general purpose financial report that has been prepared in accordance with
Interpretations, other authoritative
Accounting Standards, Urgent
pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
Issues Group Consensus
The financial report covers the Economic Entity of Austral Gold Limited and its’ subsidiaries(“Group),
and as an individual parent entity.
The financial report of Austral Gold Limited and its’ subsidiaries, and Austral Gold Limited as an
individual parent entity complies with all Australian equivalents to International Financial Reporting
Standards (AIFRS) in their entirety. Compliance with AIFRS ensures compliance with International
Financial Reporting Standards (IFRS).
The following is a summary of the material accounting policies adopted by the Group in the
preparation of the financial report. The accounting policies have been consistently applied, unless
otherwise stated.
(a) Basis of preparation
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.
(c) Early adoption of standards
The Group has elected to apply the following standards to the annual reporting period beginning 1
July 2007:
AASB 3 Business Combinations
AASB 127 Consolidated and Separate Financial Statements
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 24 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 Group, 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.
The Group has early adopted AASB 3 Business Combinations in the preparation of the financial
report. In accordance with transitional provisions of this Standard the Group has applied the early
23
adoption prospectively. The Group has been unable to determine the effect of this adoption on future
periods.
The early adoption of the Standard has resulted in the recognition of a gain of $4,856,904 in the profit
and loss as a result of the re-statement of a previously held interest to fair value at the date control
was obtained.
The early adoption of AASB 3 has resulted in the Group having to also early adopt AASB 127
Consolidated and Separate Financial Statements. There has been no impact to the profit and loss as
a result of this early adoption.
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 Group exercises significant influence, which are neither a
subsidiary nor a joint venture.
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 Group’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 Group.
Interest revenue
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.
Sale of non-current assets
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/ Value added tax
Revenues, expenses and assets are recognised net of the amount of GST/VAT, except where the
amount of GST/VAT incurred is not recoverable from the Tax Office. In these circumstances the
GST/VAT 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/VAT.
Cash flows are presented in the cash flow statements on a gross basis, except for the GST/VAT
component of investing and financing activities, which are disclosed as operating cash flows.
(d)
Intangibles
Goodwill
Goodwill on consolidation is initially recorded at the amount by which the purchase price for a
business or for an ownership interest in a subsidiary 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.
24
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.
Acquisition discount on consolidation is recorded at the amount by which the purchase price for a
business or for an ownership interest in a subsidiary is less than the fair value attributed to its net
assets at the date of acquisition. Acquisition discount is recognised in the profit and loss in the period
in which it occurs.
(e) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of
interest and are carried forward in the balance sheet where:
(i) rights to tenure of the area of interest are current; and
(ii) one of the following conditions is met:
•
•
such costs are expected to be recouped through successful development and exploitation
of the area of interest or alternatively, by its sales; or
exploration and/or evaluation activities in the area of interest have not, at balance sheet
date, yet reached a stage which permits a reasonable assessment of the existence or
otherwise of economically recoverable reserves and active and significant operations in, or
relation to, the areas are continuing.
Expenditure relating to pre-exploration activities is written off to the income statement during the
period in which the expenditure is incurred.
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.
Accumulated expenditure on areas that have been abandoned, or are considered to be of no value,
are written off in the year in which such a decision 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.
Joint ventures
(f)
Expenditure incurred in relation to earning the Group’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.
(g)
Investments
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.
25
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%.
De-recognition 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 de-recognition 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.
Translation of foreign currency items
(i)
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 subsidiary Guanaco Mining Company is United States
dollar (US$).
The results and financial position of all Group entities that have a functional currency different from
the parent’s functional currency are translated into Australian Dollars as follows:
• Assets and liabilities for each balance sheet presented are translated at the closing rate at the
•
date of that balance sheet.
Income and expenses for each income statement are translated at the average rate of
exchange; and
• All resulting exchange differences are recognised as a separate component of equity
(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.
Income Tax
(k)
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:
26
• 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
• 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.
Tax consolidation
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.
Trade and other receivables
(l)
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.
(m) 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.
Interest bearing liabilities
(n)
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.
(o) 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.
(p) 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.
27
(q) 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
(r)
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.
(s) De-recognition 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 de-recognition 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
(t) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax, from the proceeds.
(u) Earnings per share
Basic earnings per share
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.
28
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.
(v) 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.
(w) 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.
(x) Going concern
The Company and its subsidiaries derived a profit of $11,766,323 for the year ended 30 June 2008.
The on going viability of the Group and the recoverability of its non-current assets is dependent on the
success of The Guanaco Project. The Directors believe that The Guanaco 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 Group 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.
29
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 2008 but have not been applied in preparing this financial report:
Accounting Standards
AASB No. Title
Issue Date
Operative Date
(Annual reporting
periods beginning
on or after)
8
Operating Segments
Feb 2007
1 Jan 2009
101
Presentation of Financial Statements (Amended)
Sept 2007
1 Jan 2009
123
Borrowing Costs (Amended)
June 2007
1 Jan 2009
2008-1 Amendments to Australian Accounting Standard - Share-
based Payments: Vesting Conditions and Cancellations
Mar 2008
1 Jan 2009
2008-2 Amendments to Australian Accounting Standards – Puttable
Financial Instruments and Obligations arising on Liquidation
Mar 2008
1 Jul 2009
2008-5 Amendments to Australian Accounting Standards arising from
Jul 2008
1 Jan 2009
the Annual Improvements Project
2008-6 Further Amendments to Australian Accounting Standards
arising from the Annual Improvements Project
Jul 2008
1 Jul 2009
2008-7 Amendments to Australian Accounting Standards – Cost of
Jul 2008
1 Jan 2009
an Investment in a Subsidiary, Jointly Controlled Entity or
Associate
Australian Interpretations
Int No. Title
Issue Date
Operative Date
(Annual reporting
periods beginning
on or after)
4
Determining whether an Arrangement contains a Lease [revised] Feb 2007
1 Jan 2008
12
Service Concession Arrangements
Feb 2007
1 Jan 2008
13
Customer Loyalty Programmes
Aug 2007
1 Jul 2008
129
Service Concession Arrangements: Disclosures [revised]
Feb 2007
1 Jan 2008
IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
Jul
2008
Jul
2008
1 Jan 2009
1 Oct 2008
Analysis of changes – Accounting Standards
The following standards are considered applicable to the Group and will be adopted during the first
annual reporting period after the effective date of each pronouncement.
30
AASB 8
(a)
(b)
(c)
(d)
(e)
specifies how an entity should report information about its operating segments in annual
financial reports and, as a consequential amendment to AASB 134 Interim Financial
Reporting, requires an entity to report selected information about its operating segments
in interim financial reports. It also sets out requirements for related disclosures about
products and services, geographical areas and major customers;
requires an entity to report financial and descriptive information about its reportable
segments. Reportable segments are operating segments or aggregations of operating
segments that meet specified criteria. Operating segments are components of an entity
about which separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be reported on the same
basis as is used internally for evaluating operating segment performance and deciding
how to allocate resources to operating segments;
requires an entity to report a measure of operating segment profit or loss and of segment
assets. It also requires an entity to report a measure of segment liabilities and particular
income and expense items if such measures are regularly provided to the chief operating
decision maker. It requires reconciliations of total reportable segment revenues, total
profit or loss, total assets, liabilities and other amounts disclosed for reportable segments
to corresponding amounts in the entity’s financial statements;
requires an entity to report information about the revenues derived from its products or
services (or groups of similar products and services), about the countries in which it earns
revenues and holds assets, and about major customers, regardless of whether that
information is used by management in making operating decisions. However, the
Standard does not require an entity to report information that is not prepared for internal
use if the necessary information is not available and the cost to develop it would be
excessive; and
requires an entity to give descriptive information about the way the operating segments
were determined, the products and services provided by the segments, differences
between the measurements used in reporting segment information and those used in the
entity’s financial statements, and changes in the measurement of segment amounts from
period to period.
AASB 8 will result in a change in the segment disclosures presented in the financial report such that
the segments presented will not be based on primary and secondary segments but reflect those
segments and amounts regularly reviewed by the entity’s chief operating decision maker. While the
amounts presented in the financial statements will not change the amounts presented in the segment
reporting note may differ to those currently presented as a result of AASB 8 requiring the amounts
presented to be based on those seen by the entity’s chief operating decision maker.
AASB 101 (Amended)
AASB 101 amended changes how an entity presents changes in equity and especially how it reports
changes in equity that arise from transactions with owners in their capacity as owners. The amended
standard also changes presentation and terminology of the primary financial statements. The new
rules do not change the recognition, measurement or disclosure of specific transactions and other
events.
The introduction of AASB 101 (amended) will not have a material impact on the amounts presented
within the financial statement but it likely to result in a substantial change in the presentation and
terminology of the primary financial statements.
AASB 123
In relation to borrowing costs directly attributable to the acquisition, construction or production of a
qualifying asset, AASB 123 as issued in July 2004 permitted entities to either:
(a)
(b)
immediately recognise them as an expense; or
capitalise them as part of the carrying amount of a qualifying asset.
Under this Standard, only the capitalisation treatment is permitted.
Adoption of the revised AASB 123 will result in the capitalisation of all interest expenses on qualifying
assets. The entity has been unable to assess (as at authorisation of this financial report) the financial
impact of this change on the entity’s financial report in the period of initial application
31
AASB 2008-1
AASB 2008-1 clarifies that vesting conditions comprise service conditions and performance conditions
only and that other features of a share-based payment transaction are not vesting conditions. It also
specifies that all cancellations, whether by the entity or by other parties, should receive the same
accounting treatment.
Adoption of the revised AASB 2008-1 will not result in a change in accounting policy for the entity as
AASB 2008-1 only clarifies an existing treatment the entity had already complied with.
AASB 2008-5
AASB 2008-5 results from the International Accounting Standards Board’s annual improvements
project. The annual improvements project provides a vehicle for making non-urgent but necessary
amendments to IFRSs.
The amendments to some Standards result in accounting changes for presentation, recognition or
measurement purposes, while some amendments that relate to terminology and editorial changes are
expected to have no or minimal effect on accounting. There is unlikely to be a material change in the
financial statements on adoption of these amendments.
AASB 2008-6
AASB 2008-6 amends AASB 1 and AASB 5 to include requirements relating to a sale plan involving
the loss of control of a subsidiary. The amendments require all the assets and liabilities of such a
subsidiary to be classified as held for sale and clarify the disclosures required when the subsidiary is
part of a disposal group that meets the definition of a discontinued operation. There is unlikely to be a
material change in the financial statements on adoption of these amendments.
AASB 2008-7
(a) amends AASB 1 to allow first-time adopters, in their separate financial statements, to use a
deemed cost option for determining the cost of an investment in a subsidiary, jointly controlled
entity or associate. The deemed cost of such an investment can be either its:
(i)
fair value (determined in accordance with AASB 139 Financial Instruments:
Recognition and Measurement) at the entity’s date of transition to Australian-
equivalents-to-IFRSs; or
previous GAAP carrying amount at that date.
(ii)
A first-time adopter may choose either deemed cost option to measure its investment in each
subsidiary, jointly controlled entity or associate that it elects to measure using a deemed cost;
(b) removes from AASB 118 the requirement to deduct dividends declared out of pre-acquisition
profits from the cost of an investment in a subsidiary, jointly controlled entity or associate.
Therefore, all dividends from a subsidiary, jointly controlled entity or associate are recognised
by the investor as income;
(c) amends AASB 127 to require, in particular circumstances, a new parent entity established in
a group reorganisation to measure the cost of its investment at the carrying amount of the
share of the equity items shown in the separate financial statements of the original parent at
the date of the reorganisation. The relevant circumstances include that the reorganisation
involves:
(i)
the new parent obtaining control of the original parent through an exchange of equity
instruments;
no change to the group’s assets and liabilities; and
no change to the owners’ absolute and relative interests in the net assets; and
(ii)
(iii)
(d) amends AASB 136 to include recognising a dividend from a subsidiary, jointly controlled entity
or associate, together with other evidence, as an indication that the investment in the
subsidiary, jointly controlled entity or associate may be impaired.
There is unlikely to be a material change in the financial statements on adoption of these
amendments.
AASB 2008-8
AASB 2008-8 amends the application guidance of AASB 139 Financial Instruments: Recognition and
Measurement to clarify how the existing principles underlying hedge accounting apply to the
designation of:
(a) a one-sided risk in a hedged item; and
(b) inflation as a hedged risk or portion in particular circumstances.
The amendments apply retrospectively to annual reporting periods beginning on or after 1 July 2009,
with earlier application permitted. There is unlikely to be a material change in the financial statements
on adoption of these amendments.
32
3
Revenue
From operating activities
Interest revenue from:
Associated company
Other parties
Non-operating activities
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
-
112,713
-
112,713
32,662
44,175
32,662
44,175
32,662
156,888
32,662
156,888
- Gain/(loss) on disposal of plant &
-
(995)
-
(995)
equipment
- Gain on sale of tenement
- Gain on revaluation
- Discount on acquisition
4
(a)
Profit/(loss) from the year
Expenses
4,986,867
4,856,904
4,849,870
-
-
-
4,986,867
-
-
-
-
-
14,693,641
(995)
4,986,867
(995)
Depreciation of plant and equipment
7,884
2,155
3,046
2,155
Exploration and evaluation expenditure
-
80,416
-
22,280
Finance costs:
- related parties
- other
113,785
-
113,785
-
10
10
58,549
-
58,549
-
10
10
Rental expense on operating leases -
minimum lease payments
32,404
62,208
32,404
62,208
(b)
Revenue and Net Gains
Foreign currency translation gain/(loss)
107,360
(585,692)
93,013
(585,692)
(c)
Individually significant items included in
loss from ordinary activities before
income tax
Impairment of goodwill
2,155,764
-
-
-
5
Auditors’ remuneration
Remuneration of the auditor of the Parent
Entity for:
- auditing or reviewing the financial reports
- other services/taxation
64,490
20,110
84,600
97,915
20,522
118,437
64,490
20,110
84,600
97,915
20,522
118,437
Remuneration of other Group auditor
3,530
-
-
-
33
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
6
Income tax benefit
Prima facie income tax benefit calculated at
30% (2006:30%) on the operating
profit/(loss) from ordinary activities
3,529,897
(419,235)
1,307,620
(388,448)
Utilise tax losses carried forward
(1,911,916)
-
(1,307,620)
Permanent differences
(1,617,981)
419,235
Total income tax benefit
-
-
-
-
-
388,448
-
Tax losses carried forward
13,732,071
17,261,968
15,230,033
16,537,653
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 Group in
accordance with Division 170 of the Income Tax Assessment Act 1997;
ii. The relevant company and/or Group 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 Group in realising the benefit.
7
Earnings per share
Classification of securities as ordinary shares
Ordinary shares have been included in basic earnings per share.
Classification of securities as potential ordinary shares
There are no dilutive potential ordinary shares. The following options were in issue at the balance date
and are not dilutive:
No. of Options
Exercise Price
Expiry Date
No. of Holders
877,334
2,773,204
0.40
2.00
14/10/09
14/10/09
1
27
Earnings reconciliation
Net profit/(loss)
Net loss attributable to outside equity interests
Consolidated
2008
$
2007
$
11,766,323
(1,397,449)
-
Basic and diluted earnings
11,766,323
(1,397,449)
34
2008
Number
2007
Number
Weighted average number of shares used as the
denominator
Number for basic and diluted earnings per share
70,705,276
458,970,573
Number for diluted earnings per share
70,705,276
458,970,573
Basic profit/(loss) per ordinary share
16.64c
(0.30)c
Basic and diluted profit/(loss) per ordinary share
16.64c
(0.30)c
8 Segment information
Business segments
The Group operates in one business segment being precious mineral exploration.
Geographical segments
The Group’s operations are conducted in Chile and Australia. At 30 June 2008 the Company holds a 100%
interest in Guanaco Mining Company, the owner of the Guanaco Project in Chile.
2008
$
2008
$
2008
$
2007
$
2007
$
2007
$
Australia
Chile
Consolidated
Australia
Chile
Consolidated
Interest revenue
32,662
Gain/(loss) on sale of
asset
Other
Segment revenue
4,986,867
-
5,019,529
-
-
(18)
(18)
32,662
156,888
4,986,867
(995)
(18)
-
5,019,511
155,893
-
-
-
-
Gain on revaluation
Acquisition discount
Total revenue
4,856,904
4,849,888
14,726,303
156,888
(995)
-
155,893
-
-
155,893
Segment profit/(loss)
4,348,564
(133,269)
4,215,295
(1,330,427)
(67,022)
(1,397,449)
Gain on revaluation
Acquisition discount
Impairment of goodwill
Total profit/(loss)
4,856,904
4,849,888
(2,155,764)
11,766,323
-
-
-
(1,397,449)
35
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
9
Cash and cash equivalents
Cash at call and in hand
2,305,098
82,337
1,982,957
Short-term bank deposits
5,995
53,980
-
82,123
53,980
2,311,093
136,317
1,982,957
136,103
The effective interest rate on short-term
bank deposits was 7.10% (2007:
5.45%); these deposits have an average
maturity of 90 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
2,311,093
136,317
1,982,957
136,103
10
Trade and other receivables
Current
Advances
Other debtors
Non current
Amounts receivable from:
Subsidiaries
Less: Provision for diminution –
subsidiaries
Other
11 Other financial assets
Non-current
Investments in subsidiaries
Investments in associates
2,940
22,805
25,745
-
2,940
28,086
28,086
-
2,940
-
28,085
28,085
-
-
984,001
984,001
-
-
-
-
2,281,860
580,318
(66,957)
(66,957)
-
-
2,214,903
513,361
-
-
-
-
43,749,380
5,886,977
22,997,678
-
8,585,080
22,997,678
43,749,380
14,472,057
There are no fixed returns or fixed maturity date attached to these investments.
36
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
12
Intangible assets
Goodwill - at cost
-
2,116,888
Movements in carrying value
Reconciliations of the carrying amounts for
goodwill are set out below:
Carrying amount at beginning of year
2,116,888
467,621
Additions
38,876
1,649,267
Write down on impairment
(2,155,764)
-
Carrying amount at end of year
-
2,116,888
-
-
-
-
-
-
-
-
-
-
13 Plant and equipment
Plant and equipment - at cost
Accumulated depreciation
413,770
(238,551)
175,219
16,354
(3,506)
12,848
16,354
(6,552)
9,802
16,354
(3,506)
12,848
Movements in carrying value
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:
12,848
170,255
-
(7,884)
175,219
9,805
6,153
(955)
(2,155)
12,848
12,848
-
-
(3,046)
9,802
9,805
6,153
(955)
(2,155)
12,848
Mining concessions
62,300,000
-
Exploration and/or evaluation expenses
5,057
7,086
Provision for diminution
-
-
62,305,057
7,086
-
-
-
-
-
580
-
580
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
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
Trade creditors and accruals
776,553
47,933
561,824
47,904
37
16
Financial liabilities
Current
Financial liabilities
Non current
Financial liabilities
17
Issued capital
Fully paid ordinary shares
Ordinary Shares +
Balance at the beginning of the year
Shares issued during the year
28 Nov 2006
Consolidation 1 for 10 ordinary shares
7 June 2007
16 June 2008
Balance at end of year
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
313,743
946,161
515,053
-
-
-
250,000
-
44,334,254
15,914,254
44,334,254
15,914,254
2008
No.
2007
No.
66,812,125
404,418,205
-
35,813,954
-
(396,208,861)
-
22,788,827
101,500,000
-
168,312,125
66,812,125
+ 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.
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
18 Retained earnings/
(Accumulated losses)
Accumulated losses at beginning of year
(1,845,816)
(32,346,793)
(1,294,828)
(31,898,426)
Reduction in accumulated losses 24/11/06
-
31,898,426
-
31,898,426
Net profit/(loss) for the year
11,766,323
(1,397,449)
4,358,732
(1,294,828)
Retained earnings/(Accumulated losses) at
end of year
9,920,507
(1,845,816)
3,063,904
(1,294,828)
19 Minority equity interests
Minority equity interests in subsidiaries
comprise:
Acquired as part of subsidiary
88
-
-
-
38
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
20 Reserves
Asset Revaluation Reserve
Balance at beginning of year
10,236,371
-
Revalue mine carrying value
(276,379)
10,236,371
Balance at end of year
9,959,992
10,236,371
Foreign Currency Translation Reserve
Balance at beginning of year
Translation difference between acquisition
date and year end
Balance at end of year
-
(19,075)
(19,075)
-
-
-
Total Reserves
9,940,917
10,236,371
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21 Financial risk management objectives and policies
The Group’s principal financial instruments comprise receivables, cash and short-term deposits. These activities
expose the Group to a variety of financial risks: market risk (including currency risk, interest rate risk and price
risk), credit risk and liquidity risk.
Although the Group does not have documented policies and procedures, the Directors manage the different
types of risks to which it is exposed by considering risk and monitoring levels of exposure to interest rate and
foreign exchange risk and by being aware of market forecasts for interest rates, foreign exchange and commodity
prices. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk,
liquidity risk is monitored through general business budgets and forecasts.
The Group and the parent entity hold the following financial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables
Loans to subsidiaries
Total financial assets
Financial liabilities
Trade and other payables
Financial liabilities
Total financial liabilities
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
2,311,093
136,317
1,982,957
12,913
28,086
2,940
-
-
2,214,903
2,324,006
164,403
4,200,800
136,013
28,085
513,361
677,459
(279,802)
(8,439)
(65,073)
(8,404)
(828,796)
(946,161)
-
(495,704)
(1,108,598)
(954,600)
(65,073)
(504,108)
Net exposure
1,215,408
(790,197)
4,135,727
173,351
39
Risk Exposures and Responses
(a) Interest Rate Risk
The Group’s exposure to market interest rates relates primarily to the Group’s short term deposits
held.
Sensitivity analysis
The effect of volatility of interest rates within expected reasonable possible movements would not be
material.
(b) Currency Risk
At 30 June 2008 the Group had the following exposure to foreign currency that is not designated in
cash flow hedges:
Financial assets
Cash and cash
equivalents
Trade and other
receivables
Financial liabilities
Trade and other
payables
Financial liabilities
Net exposure
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
$US
$US
$US
$US
313,761
962,705
(204,961)
(792,492)
279,013
-
-
-
-
-
-
-
-
-
-
-
-
Sensitivity analysis
The effect of volatility of interest rates within expected reasonable possible movements would not be
material.
(c) Credit Risk
The maximum exposure to credit risk, excluding the value of any collateral or other security, at
balance date to recognised financial assets is the carrying amount of those assets, net of any
allowance for doubtful debts, as disclosed in the balance sheet and notes to the financial report.
The Group trades only with recognised, creditworthy third parties, and as such collateral is not
requested nor is it the Group's policy to securitise its trade and other receivables. It is the Group's
policy to consider the credit worthiness of all customers who wish to trade on credit terms.
In addition, receivable balances are monitored on an ongoing basis with the result that the Group's
exposure to bad debts is not significant. There are no significant concentrations of credit risk.
(d) Price Risk
The Group’s exposure to commodity and equity securities price risk is minimal.
(e) Liquidity Risk
The Group manages liquidity risk by monitoring cash flow and maturity profiles of financial assets and
liabilities.
Maturities of financial liabilities
The tables below analyse the Group’s and the parent entity's financial liabilities, net and gross settled
derivative financial instruments into relevant maturity groupings based on the remaining period at the
reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows.
40
Year Ended 30 June 2008
< 6 months
6 – 12 months
1 – 5 years
(cid:190) 5 years
Total
Consolidated financial assets
Cash and cash equivalents
Trade and other receivables
Available for sale financial assets
Financial liabilities
Trade and other payables
Financial liabilities
Net maturity
Parent financial assets
Cash and cash equivalents
Trade and other receivables
Loans to subsidiaries
Financial liabilities
2,311,093
12,913
-
(279,802)
(313,743)
1,730,461
1,982,957
2,940
2,214,903
Trade and other payables
(65,073)
Net maturity
4,135,727
Allowance for impairment loss
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(515,053)
(515,053)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,311,093
12,913
-
(279,802)
(828,796)
1,215,408
1,982,957
2,940
2,214,903
(65,073)
4,135,727
Trade receivables are non-interest bearing and are generally on 30-60 day terms. A provision for impairment loss
is recognised when there is objective evidence that an individual trade receivable is impaired. An impairment loss
of $nil(2007: $nil) has been recognised by the Group and $nil (2007: $nil) by the Company in the current year.
Movements in the provision for impairment loss were as follows:
Opening balance
Additional provision
Amounts written off
Amounts recovered
Closing balance
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
-
-
-
-
-
-
-
-
-
-
66,957
66,957
-
-
-
-
-
-
66,957
66,957
At 30 June, the ageing analysis of trade and other receivables is as follows:
Current
31 – 60 days
61 – 90days
91 days and over
Closing balance
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
12,913
28,086
2,940
25,085
-
-
-
-
-
-
-
-
-
-
-
-
12,913
28,086
2,940
25,085
As at 30 June 2008 the Group had debts that were past due but not doubtful in the amount of $nil (2007: $nil).
41
Defaults and breaches
During the current and prior years, there were no defaults or breaches on any of the loans.
Capital management
The Group’s policy is to maintain a strong and flexible capital base to maintain investor, creditor and market
confidence and to sustain future development of the business. The Group monitors the return on capital which
the Group defines as total shareholders’ equity attributable to the members of Austral Gold Limited.
The Group monitors balance sheet strength and flexibility using cash flow forecast analysis and a detailed
budgeted process.
There were no changes in the Group’s approach to capital management during the year.
22 Dividends
No dividends were paid or proposed during the year
23 Commitments
Exploration expenditure commitments
To maintain current rights of tenure to exploration tenements, the Group 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:
Within one year
One year or later and no later than five years
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
49,320
-
55,460
80,455
49,320
55,460
-
80,455
49,320
135,915
49,320
135,915
Operating lease commitments
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
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
22,014
16,940
21,000
36,750
22,014
21,000
16,940
36,750
38,954
57,750
38,954
57,750
The Group rents offices at Suite 605/ 80 William Street, Sydney. The property lease is a non-cancellable lease with
a three-year term expiring 31 March 2010, 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.
42
24 Subsidiaries
2008
% owned
2007
% owned
Country of incorporation
Particulars in relation to subsidiaries
Parent Entity
Austral Gold Limited
Subsidiaries
Guanaco Mining Company
Golden Rose Pty Limited
Golden Rose International Limited
Australia
100
100
100
-
British Virgin Islands
100
100
Australia
Australia
During 2008 the Company acquired 35,651 ordinary shares of Guanaco Mining Company, following which
Austral Gold Limited held 100% of the ordinary shares of Guanaco Mining Company. The consideration of the
acquisition was the issue of 101,500,000 ordinary shares in Austral Gold Limited to Guanaco Capital Holding
Corp as approved by the shareholders at a General Meeting on 28 May 2008.
Movements in carrying value of subsidiaries
Carrying amount of investment in subsidiary at the beginning of the
financial year
Acquisition relating to existing subsidiaries
Transfer from investment in associate
Acquisition relating to new subsidiary
Contributions paid
Parent Entity
2008
$
5,886,977
38,875
9,206,789
2007
$
2
-
-
28,420,000
5,886,975
196,739
-
Carrying amount of investment in associate at end of year
43,749,380
5,886,977
Fair value of assets and liabilities at acquisition of GMC
Current assets
Cash and bank
Trade and other receivables
Total current assets
Non current assets
Other assets
Exploration and evaluation expenditure
Total non current assets
Total assets
Current liabilities
Trade and other payables
Non current liabilities
Other payables
Total liabilities
Net assets acquired
Total Consideration
Acquisition Discount
Assets/
Liabilities
$
290,502
39,604
330,106
1,215,029
62,300,000
63,515,029
63,845,135
479,514
515,644
995,158
62,849,977
58,000,000
4,849,977
43
25
Investments accounted for using the equity
method
Details of the investment in associates is as
follows:
Ownership
Interest
Investment carrying
amount
Consolidated
Name (Principle Activities)
2008
%
2007
%
2008
$
2007
$
Guanaco Mining Company (exploration)
100
51
-
22,997,678
Movements in carrying value of associates
Carrying amount of investment in associate at
the beginning of the financial year
Acquisition
Contributions paid
Share of loss
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
22,997,678
-
8,585,080
-
-
22,368,539
-
8,339,376
1,765,885
696,161
621,709
245,704
(40,851)
(67,022)
-
-
-
Transfer to investment in subsidiary
(24,722,712)
-
(9,206,789)
Carrying amount of investment in associate at
end of year
-
22,997,678
-
8,585,080
44
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
26 Cash flow information
Reconciliation of cash flow from operations
with profit/(loss) after income tax
Profit/(loss) after income tax
11,766,323
(1,397,449)
4,358,732 (1,294,828)
Non-cash flows in profit
Gain on revaluation of investment in
associate
Acquisition discount
Impairment of goodwill
(4,856,904)
(4,849,888)
2,116,888
-
-
-
-
-
-
-
-
-
Interest received
(32,662)
(44,185)
(32,662)
(112,723)
Exploration and evaluation expenditure
written off
Exchange rate differences
33,229
80,416
-
22,280
(107,360)
585,692
(93,013)
585,692
Depreciation
7,884
2,155
3,046
2,155
Net gain on disposal of plant and equipment
-
955
-
955
Net gain on disposal of asset
(4,986,867)
Provision for impairment
-
-
Share of loss in associate
40,851
67,022
(4,986,867)
-
-
-
-
-
Net cash used in operating activities before
change in assets and liabilities
Changes in assets and liabilities:
(Increase)/decrease in trade and other
receivables
(Decrease)/increase in trade and other
payables
Net receivable acquired through subsidiary
(868,506)
(705,394)
(750,764)
(796,469)
(981,660)
(82,595)
(1,676,397)
(176,116)
728,618
(71,419)
514,500
(840)
928,827
-
-
-
Cash flow from operations
(192,721)
(859,408)
(1,912,661)
(973,425)
There were no unused loan or credit facilities at year-end.
45
27 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 and Natalia Zang. Amounts paid to Directors are set out in
the Directors Report
Directors’ holdings of shares and share options
The parent company, IFISA holds 61% 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, Guanaco Mining
Company and IFISA and hold indirectly shares through their interests in Guanaco Capital Holding and indirectly
through IFISA.
Mr Bethwaite, a Director of Austral Gold Limited and Guanaco Mining Company, holds 37,987 shares indirectly in
Austral Gold Limited through Fine Wine Superannuation Fund.
Mr Trzebski is a director of Austral Gold Limited and Guanaco Mining Company.
Wholly owned and partly owned subsidiaries
Aggregate amounts receivable from Golden Rose Pty Limited as at 30 June 2008 were $159,719 (2007:
$131,601). Impairment losses of $nil were provided against this loan in the year ended 30 June 2008.
Aggregate amounts receivable from Golden Rose International Limited as at 30 June 2008 were $2,122,142
(2007: $448,717).
Aggregate amount payable to Guanaco Capital Holding Corp as at 30 June 2008 was nil (2007: $946,161).
Interest paid to Guanaco Capital Holding during the year ended 30 June 2008 was $113,724. (2007: nil).
Funds advanced to the Group from Guanaco Capital Holding during the year ended 30 June 2008 was
$2,001,910 (2007: $250,000).
Funds repaid to Guanaco Capital Holding during the year ended 30 June 2008 were $2,840,711 (2007: nil).
28
Subsequent events
a) Acquisition of Guanaco Capital Holding Argentina SA (GCHA). The transaction was effected on 4 August 2008.
GCHA, a company duly incorporated under the Argentinean Law is the owner of 9 tenement applications totalling
almost 85,000 hectares in the Argentinian Province of Santa Cruz and an Earn In Agreement signed with
Argentina Minera S.A. (Aminsa) and its founders to jointly explore tenements covering approximately 227,000
hectares in the Argentinian Province of San Juan.
b) Signing of Funding Agreement with Guanaco Capital Holding Corporation (GCH):
Austral Gold Limited has signed a Funding Agreement with GCH upon which GCH has committed to lend Austral
Gold Limited up to US$4 million at 12-month term deposit interest rate published by Westpac.
Ultimate parent entity
The Parent Entity is controlled by IFISA which is incorporated in Uruguay. The ultimate beneficial owner of IFISA
is IFIS which is incorporated in Bermuda.
46
AUSTRAL GOLD LIMITED
DIRECTORS’ DECLARATION
In the opinion of the directors of Austral Gold Limited:
a)
b)
c)
the accompanying financial statements and notes are in accordance with the Corporations Act
2001, comply with the accounting standards and give a true and fair view of the Company's and the
Group’s financial position as at 30 June 2008 and of their performance for the year ended on that
date.
at the date of this declaration there are reasonable grounds to believe that the Company will be
able to pay its debts as and when they become due and payable.
the directors have been given the declarations by the chief executive officer and chief financial
officer required by Section 295A.
Signed in accordance with a resolution of the directors.
_____________________
Francis Mark Bethwaite
Chairman
_____________________
Robert Trzebski
Director
Sydney, 23 September 2008
Sydney, 23 September 2008
47
INDEPENDENT AUDITOR’S REPORT
To the members of Austral Gold Limited
Report on the Financial Report
We have audited the accompanying financial report of Austral Gold Limited, which comprises the Balance
Sheets as at 30 June 2008, and the Income Statements, Statements of Changes in Equity and Cash
Flow Statements for the year ended on that date, a summary of significant accounting policies and other
explanatory notes and the Directors’ Declaration for both Austral Gold Limited and of Austral Gold Group
(the consolidated entity). The consolidated entity comprises the entity and it’s subsidiaries at the year’s
end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The Directors of Austral Gold Limited are responsible for the preparation and fair presentation of the
financial report in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining
internal controls relevant to the preparation and fair presentation of the financial report that is free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances. In Note 2, the
Directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that compliance with Australian Accounting Standards ensures that the financial report,
comprising the financial statements and notes, complies with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report whether due to fraud or error. In
making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Tel: 61 2 9251 4100 | Fax: 61 2 9240 9821 | www.pkf.com.au
PKF | ABN 83 236 985 726
Level 10, 1 Margaret Street | Sydney | New South Wales 2000 | Australia
DX 10173 | Sydney Stock Exchange | New South Wales
PKF East Coast Practice is a member of PKF Australia Limited a national association of independent chartered accounting and consulting firms each trading as PKF. The East
Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice is also a member of PKF International, an association of legally independent chartered
accounting and consulting firms.
48
Liability limited by a scheme approved under Professional Standards Legislation
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act
2001.
Auditor’s Opinion
In our opinion:
(a)
the financial report of Austral Gold Limited is in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the entity’s and consolidated entity’s financial position as at
30 June 2008 and of their performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 2.
Material uncertainty regarding continuation as a going concern
Without qualifying our opinion, we draw attention to note2(x) in the financial statements which indicates
that the on going viability of the consolidated entity and the recoverability of its non current assets is
dependent on the success of The Guanaco Project. The existence of this material uncertainty may cast
significant doubt about the consolidated entity’s ability to continue as a going concern. The financial
report does not include any adjustments relating to the recoverability and classification of recorded asset
amounts or to the amounts and classification of liabilities that might be necessary if the entity does not
continue as a going concern.
Should the consolidated entity be unable to continue as a going concern, it may be required to realise its
assets and extinguish its liabilities other than in the ordinary course of business, and at amounts that
differ from those stated in the financial statements
Report on the Remuneration Report
We have audited the Remuneration Report included on pages 14 to 16 of the Directors’ Report for the
year ended 30 June 2008. The Directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001.
Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Austral Gold Limited for the year ended 30 June 2008,
complies with section 300A of the Corporations Act 2001.
PKF
Bruce Gordon
Partner
23 September 2008
Sydney
49
2
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 2008
This statement outlines the main corporate governance practices in place throughout the financial year, which
comply with the ASX Corporate Governance Council recommendations, unless otherwise stated.
Board of Directors and its Committees
Your board is responsible for the overall Corporate Governance of the Group 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.
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 Group.
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.
The members of the Audit Committee during the year were:
• Mr Mark Bethwaite (Non Executive Director – Chairman Audit Committee)
• Mr Pablo Vergara del Carril (Non Executive Director)
• Ms Natalia Zang (Non Executive Director)
Audit Committee Meetings are also attended by the external auditors and management representatives as
required.
The responsibility of the audit committee includes:
• 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 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:
Audit planning:
•
•
•
•
To discuss the external audit plan
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
50
Prior to announcements of results:
•
•
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.
Annual reporting:
•
•
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
All remuneration decisions are made by the Board.
The Board is cognisant of the objectives concerning remuneration and they are:
•
•
•
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.
The Board will review:
•
•
•
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.
The Board will also review:
•
•
•
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.
The Board takes into account:
•
•
•
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.
51
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 as
required. The Company reports to shareholders quarterly. 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 Group 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 available to all shareholders (through the Company web site). The Board ensures
that the annual report includes relevant information about the operations of the Group during the year,
changes in the state of affairs of the Group and details of future developments, in addition to the other
disclosures required by the Corporations Act 2001;
the quarterly report contains summarised financial information and a review of the operations of the
Group during the period.
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 Groups strategy and goals. Important issues are presented to the
shareholders as single resolutions.
Securities Trading Policy
The Group’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 August 2007, the ASX Corporate Governance Council (Council) re-released its “Corporate Governance
Principles and Recommendations” (Recommendations).
Listing Rule 14.10.3 requires a company to disclose the extent to which the entity has followed the
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.
In accordance with Listing Rule 14.10.3 the Company states that it has complied with each of the Eight Essential
Corporate Governance Principles and the corresponding Recommendations as published by the ASX Corporate
Governance Council.
52
Principal
No
Recommendation
Compliance or
Explanation for Non-compliance
2.2 The chairperson should be an
The Chairman is an independent, non-executive director.
1
1.1 Establish and disclose the
functions reserved to the
Board and those delegated to
senior management.
1
2
2
2
2
1.2 Disclose the process for
evaluating the performance of
senior executives
2.1 A majority of the Board should
be independent directors.
independent director.
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.
2
2.5 Disclose the process for
evaluating the performance of
the Board, its Committees and
individual directors.
3
3.1 Establish a code of conduct
and disclose a summary
addressing
• the practices necessary to
maintain confidence in the
company’s integrity
• the practices necessary to
take into account their legal
obligations and the
reasonable expectations of
their stakeholders
• the responsibility and
accountability of individuals
for reporting and
investigating reports of
unethical behaviour.
A formal policy document outlining board and management
functions has not been established.
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.
Delegation of specific responsibilities to senior
management is agreed and documented in Board
Meetings.
The Board reviews senior management performance and
assesses remuneration in line with this review annually.
Four of the six directors are not considered independent
due to their relationship with IFISA, the Company’s majority
shareholder and other significant shareholders. This
situation is unlikely to change.
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 Board intends to review its overall performance and
performance of individual directors within the next 12
months.
The Company is in the process of formalising a code of
conduct policy which will be posted on the Company’s
website when adopted.
53
Principal
No
Recommendation
Compliance or
Explanation for Non-compliance
3
4
4
4
5
3.2 Establish and disclose a policy
concerning trading in company
securities by directors, senior
executives and employees.
The Board is in the process of reviewing a share trading
policy which will be published on the Company’s web site
when adopted.
Directors and senior management are aware of their
disclosure requirements when trading directly or indirectly
in the Company shares.
4.1 Establish an Audit Committee Complies.
4.2 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), Pablo Vergara del Carril and Natalia Zang. The
committee lacks a majority of independent directors as
recommended.
The members of the Audit Committee possess the requisite
financial expertise and industry experience necessary to
effectively carry out the Committee's mandate.
4.3 The Audit Committee should
have a formal charter.
The Audit Committee has a documented charter approved
by the Board.
5.1 Establish and disclose written
policies designed to ensure
compliance with ASX Listing
Rule disclosure requirements
and to ensure accountability at
a senior management level for
that compliance.
Formal written policies designed to ensure compliance with
ASX Listing Rule disclosure requirements and
accountability for that compliance are not currently in place.
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 policy to
promote effective
communication with
shareholders and encourage
effective participation at
general meetings.
7
7.1 Establish and disclose policies
for the oversight and
management of material
business risks.
7
7.2 Design and implement a risk
management and internal
control system to manage the
company’s material business
risks and report on whether
those risks are being
managed effectively.
The new Board is committed to the objective of proper
communication with shareholders and actively promotes
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.
The board is formulating its policies on these matters which
will be posted on the Company’s website when adopted.
The Company’s system of risk management and internal
control is basic, yet appropriate for the size and nature of
transaction incurred.
The Board seek external advice when considering new or
significant transactions to ensure risks are identified and
addressed in a timely manner.
54
Principal
No
Recommendation
Compliance or
Explanation for Non-compliance
The sign-off received by the Board from the CFO relates to
financial reporting. It is limited by knowledge and belief and
provides a reasonable, but not absolute level of assurance
with regards to the system of risk management and internal
control.
7
7.3 The Board should disclose
whether it has received
assurance from senior
management that the
declaration provided in
accordance with section 295A
of the Corporations Act is
founded on a sound system of
risk management and internal
control and that the system is
operating effectively in all
material respects in relation to
financial reporting risks.
8
8
8.1 Establish a Remuneration
Commitee
The Company cannot justify the operation of a
Remuneration Committee. All remuneration decisions are
made by the Board.
8.2 Distinguish the structure of
non-executive directors
remuneration from that of
executive directors and senior
management.
The Board is cognisant of the objectives concerning
remuneration of directors and senior management and is
committed to the design of appropriate structures to fulfil
these objectives.
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.
Capital
As at 29 August 2008 the total issued capital of Austral Gold Limited was 168,312,125 ordinary shares.
168,312,125 shares were quoted on the Australian Securities Exchange under the code AGD.
The only shares of the Company on issue are ordinary shares. None of these shares are restricted securities
within the meaning of the Listing Rules of the Australian Securities Exchange.
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.
There exist a total of 3,650,538 unlisted options at 29 August 2008 as detailed in paragraph b) below
a) Distribution of fully paid ordinary shareholders at 29 August 2008
Size of Holding
Shareholders
Number of Shares Held
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 50,000
50,001 - 100,000
100,001 and over
693
331
100
72
20
34
Total
1,250
294,601
894,658
805,855
1,612,516
1,411,248
163,293,247
168,312,125
55
b) Unlisted options on issue at 29 August 2008
There are 3,650,538 unlisted options on issue as detailed below:
No of Options
Exercise price
Expiry date
No of Holders
877,334
2,773,204
$0.40
$2.00
14/10/2009
14/10/2009
1
27
IFISA holds 1,167,521 of these options.
GCH holds 50,000 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. 1,217,521 of these options are yet to be exercised by IFISA or GCH.
c) Distribution of option holders at 29 August 2008
Size of Holding
Shareholders
Number of Shares Held
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 50,000
50,001 - 100,000
100,001 and over
Total
6
8
-
7
1
6
28
3,439
20,587
-
200,556
64,509
3,361,447
3,650,538
d) Substantial Shareholders
At 29 August 2008 the Company’s register of substantial shareholdings shows the following:
Name
Inversiones Financieras del Sur SA (IFISA)
Guanaco Capital Holding (GCH)
Shares Held
102,259,174
25,789,330
56
e) Top twenty shareholders as at 29 August 2008
Rank Holder
No. of shares
% of issued
capital
1
Inversiones Financieras del Sur SA (IFISA)
102,259,174
60.76%
2 HSBC Custody Nominees (Australia) Limited
25,789,330
15.32%
3 Dolphin Fund PLC
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