Azure Minerals Limited
ABN 46 106 346 918
Annual Report and Financial Statements
for the year ended 30 June 2012
Azure Minerals Limited – 2012 Annual Report
Corporate Information
ABN 46 106 346 918
Directors
Mr. Peter Ingram (Chairman)
Mr. Anthony Rovira (Managing Director)
Dr Wolf Martinick (Non-Executive Director)
Company Secretary
Mr. Brett Dickson
Registered Office
Level 1, 30 Richardson Street
WEST PERTH WA 6005
(08) 9481 2555
Solicitors
Middletons
Level 32
44 St Georges Terrace
Perth WA 6000
Bankers
Commonwealth Bank of Australia Limited
Share Register
Computershare
Level 2, 45 St Georges Terrace
PERTH WA 6000
Telephone: (08) 9445 7000
Facsimile: (08) 9445 7677
Auditors
BDO Audit (WA) Pty Ltd
38 Station Street
SUBIACO WA 6008
Internet Address
www.azureminerals.com.au
ASX Code
Shares
AZS
1
Azure Minerals Limited – 2012 Annual Report
Contents
Chairman’s Letter
Review of Operations
Directors' Report
Corporate Governance Statement
Financial Statements
- Statement of Comprehensive Income
- Statement of Financial Position
- Statements of Changes in Equity (Consolidated)
- Statement of Cash Flows
- Notes to the Financial Statements
- Directors' Declaration
- Independent Audit Report
- Auditor’s Independence Declaration
ASX Additional Information
3
4
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19
25
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27
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29
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53
55
56
Competent Person Statement:
Information in this report that relates to Exploration Results and Mineral Resources is based on information compiled by Mr Tony Rovira,
who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Rovira is a full-time employee of Azure Minerals Limited. Mr
Rovira has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity
which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves”. Mr Rovira consents to the inclusion in the documents of the matters based on
his information in the form and context in which it appears.
2
Azure Minerals Limited – 2012 Annual Report
Chairman’s Letter
Dear Fellow Shareholders,
It is my pleasure to present to you my inaugural Chairman’s Letter together with the Company’s Annual Report for
2012.
On behalf of the Board of Azure Minerals I am pleased to report that, whilst not without its difficulties, the past 12
months has been a busy and very successful period, with the Company continuing to focus its efforts in Mexico and
on further developing its highly prospective portfolio of precious and base metals projects. During the year,
Company personnel, under the capable direction of the Managing Director Mr Tony Rovira, have worked very hard
to advance three key projects:
the Promontorio Copper-Gold-Silver Project;
(cid:120)
(cid:120) Zinc and Copper Projects in the El Tecolote District; and
(cid:120)
the Pozo de Nacho Molybdenum Project.
As our exploration programs at these properties continue, we are steadily progressing towards achieving Azure’s
key objective of becoming a profitable minerals producer in Mexico.
All of the Company’s projects are located in the world-renowned Sierra Madre Occidental Mineral Province in
northern Mexico. This area, whilst extremely mineral-rich, continues to be relatively under-explored, a fact we
believe offers exceptional growth opportunities for Azure.
Mexico’s continuing reputation as an attractive mining investment destination, attested to by several internationally
renowned surveys of rankings and indices, is due mainly to its demonstrated mineral potential and favourable policy
environment. The country has a 500-year history of mining and in recent years has experienced a resurgence of
activity due to increased world demand for minerals. Mexico has a strong economy with a favourable tax and
regulatory regime, making it an ideal place for Azure to explore for minerals.
Very encouraging results of the Promontorio Project Pre-Feasibility Study (PFS) were recently released to ASX.
Promontorio is a high-grade copper-silver-gold project with considerable up-side potential. The PFS is the
culmination of over six months of intensive work by the Company and its consultants, Como Engineers. The results
clearly demonstrate the robust technical and economic viability of Promontorio as it stands, and even more so
should on-going exploration achieve our target of increasing the resource base to between 1 and 2 million tonnes of
ore at similar grades to the existing deposit. We look forward to updating shareholders as we continue drilling at
Promontorio and commence a Definitive Feasibility Study of the Project.
Drilling at the El Tecolote and La Tortuga Projects, operated in joint venture with JOGMEC, are on-going and
continue to generate positive results. A deep geophysical target at La Tortuga is of particular interest. Unfortunately
our first drill test of the anomaly failed to intersect the target zone.
I look forward to the next 12 months during which we expect to continue advancing towards our objective of
becoming a significant mining company in Mexico.
I would like to thank our shareholders, partners, employees and my fellow directors for their ongoing efforts on your
behalf and for their support.
Yours faithfully,
Peter Ingram
Chairman
3
Azure Minerals Limited – 2012 Annual Report
Review of Operations
Azure Minerals Limited (‘Azure’ or ‘the Company’) has had a successful 12 months on the ground in Mexico, progressing its
Promontorio copper-gold-silver project through to the positive completion of a Pre-Feasibility Study and advancing its
copper exploration joint ventures with the Japanese Government corporation JOGMEC.
PROMONTORIO (Copper-Gold-Silver)
Consisting of massive high-grade copper sulphide mineralisation, containing significant values of gold and silver, the
Promontorio Project is located in the richly mineralised Sierra Madre Occidental mining province in Chihuahua State,
Mexico (Figure 1). It is situated within the same NNW-SSE trending belt that hosts a number of currently operating gold
mines, including the multi-million ounce mines at Ocampo, Pinos Altos, Concheño, Mulatos and Dolores, all located within
50km of the Project.
Promontorio has a current JORC-compliant Mineral Resource (‘Resource’) of 502,000 tonnes @ 4.7% Copper, 2.1 g/t gold
and 99 g/t Silver1.
CATEGORY
TONNES GRADE (%
Cu)
GRADE
(g/t Au)
GRADE
(g/t Ag)
290,000
Indicated
212,000
Inferred
TOTAL
502,000
Table 1: Promontorio Mineral Resource
4.2
5.3
4.7
2.1
2.1
2.1
94
106
99
CONTAINED
COPPER
(Tonnes)
12,100
11,300
23,400
CONTAINED
GOLD
(Ounces)
20,000
14,000
34,000
CONTAINED
SILVER
(Ounces)
873,000
724,000
1,597,000
FIGURE 1: Azure Minerals’ Projects in Mexico
1 Details of the resources classification and estimation methodologies are contained in Azure’s announcement to the ASX, released on 7th
January 2009.
4
Azure Minerals Limited – 2012 Annual Report
Mineralisation outcrops over a strike length of 1,000m, while to date, sufficient drilling has been completed to enable the
Resource to be estimated over a strike length of only 200m. However, the most recent drilling undertaken by Azure extended
the north-south strike length of the mineralised system to 400m, confirming the potential for additional resources to be added
through further drilling. The deposit remains open in all directions. Based on the exploration undertaken to-date, the
Company believes there is a potential to increase the Resource at Promontorio to between 1 and 2 million tonnes, at grades of
4-5% Copper, 1.5-2.5g/t Gold and 80-120g/t Silver (Exploration Target2).
FIGURE 2: Long Section Showing Resource and Extension Drilling
Pre-Feasibility Study
In August 2012, Azure announced the results from the Pre-Feasibility Study (‘PFS’) of Promontorio. This demonstrated the
robust technical and economic viability of the Project with the current mining inventory of 656,000 tonnes supporting a
150,000tpa mining and processing operation over an initial mine life of 4 ½ years (Current Case). The PFS also estimated the
likely economics of the Project if further exploration achieved a doubling of the Mining Inventory at the same grade as the
current Inventory (Upside Case).
Results of the two Cases are summarised below.
Current Case3
(cid:120) Gross revenue = US$195 million
(cid:120) Free cash = US$54 million
(cid:120) Cash costs (C1: net of credits) = US$1.16 / pound Copper
(cid:120) NPV (10%) = US$32 Million
(cid:120)
(cid:120) Total production of:
IRR = 42%
o 19,400 tonnes of Copper
o 14,900 ounces of Gold
o 1,220,000 ounces of Silver
Upside Case4
Azure has in its sights, an initial Exploration Target5 to double the Mineral Resource at Promontorio. If achieved, the Project
could potentially deliver:
(cid:120) Gross revenue = US$395 Million
(cid:120) Free cash = US$155 Million
(cid:120) NPV (10%) = US$86 Million
2 The potential quantity and grade of the Exploration Target is conceptual in nature, and there has been insufficient exploration to define a
Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.
3 The Current Case, uses the current Resource and metal prices as at 8 August 2012 (US$3.42/lb Copper, US$1,612/oz Gold and US$28/oz
Silver)
4 The Upside Case uses Current Prices (as at 8 August 2012) and assumes that further exploration at Promontorio will double the current
mining inventory to 1.3Mt at the same metal grades and recoveries as used in the PFS. The potential tonnes and grade used in the Upside
Case is conceptual in nature. It includes material that has not yet been discovered or defined and is considered to be an Exploration Target.
5 See Footnote 2
5
Azure Minerals Limited – 2012 Annual Report
Key Points
The PFS, carried out by Como Engineers Pty Ltd (‘Como’, a subsidiary of VDM Group Ltd), has delivered the following key
outcomes:
(cid:120) Mining will be from underground, utilising selective extraction techniques
(cid:120) Mineral processing will be by conventional crushing, grinding, flotation and filtration techniques to produce
two high grade sulphide concentrates
(cid:120) Copper concentrate will grade 39.5% Copper, 9.4g/t Gold and 773g/t Silver
(cid:120) Pyrite-gold concentrate will grade 7-8g/t Gold – a value-add opportunity not included in the PFS financials
(cid:120) Planning for a Definitive Feasibility Study (DFS) has commenced
As is normal practice, Como prepared several alternative scenarios to assess the impact of variances in metal prices, mining
inventories, recovery, grade and costs. Importantly, the scenarios demonstrated that the project retained a positive cash flow
within all the range of options studied. In addition, the table below illustrates the significant positive impact that additional
resources and higher metal prices have on Promontorio’s value, justifying further exploration expenditure on the Project.
ITEM
UNITS
Mine Life
Initial Capital Cost
Gross Revenue
Free Cash (pre-tax)
NPV (pre-tax)
IRR (pre-tax)
C1 Cash Cost
Years
US$(M)
US$(M)
US$(M)
US$(M)
%
US$/lb Cu
CONSERVATIVE
CASE6
4.5
$34.6
$179.7
$36.9
$19
29%
$1.12
CURRENT PRICE
CASE7
4.5
$34.6
$195
$54
$32
42%
$1.16
UPSIDE
CASE 8
8.8
$34.6
$395
$155
$86
55%
$1.00
Prior to the completion of the PFS, Azure accessed the upper levels of the Mina Grande mine workings, which form part of
the historical Promontorio mine. Detailed mapping and surveying identified three principal mineralised veins along the 250m
length of old workings.
This work also identified a new vein of high grade massive copper sulphide mineralisation which was unknown to modern
explorers and to date has not been tested by any drilling. Channel sampling across the full 2.2m wide vein returned values of:
12.95% Copper
18.5g/t Gold
364g/t Silver
Following the positive results of the PFS, the Company anticipates that drilling at Promontorio will re-commence in the
December quarter of 2012.
Cascada Prospect
Azure has undertaken follow-up exploration on the Cascada Prospect, which is located alongside the Promontorio Deposit.
Cascada is an epithermal gold-silver system with bulk tonnage potential, similar to the other operating gold mines in the
district. Drilling has intersected wide zones of gold mineralisation. Some key drill intercepts are listed in Table 3.
DRILL HOLE
P2
P3
P6
P9
P10
P11
P12
APR-DD-54
FROM (m)
71.6
0.0
30.5
24.4
76.2
3.1
57.9
48.0
Table 3: Drill intercepts at Cascada
TO (m)
106.0
24.4
54.9
39.6
86.9
35.1
80.8
185.0
WIDTH (m)
24.4
24.4
24.4
15.2
10.7
32.2
22.9
137.0
GRADE (g/t Au)
1.28
1.86
5.15
1.31
2.72
1.62
1.12
0.42
Further drilling is warranted at Cascada which is anticipated to commence in the December quarter of 2012, in conjunction
with the Promontorio drilling.
6 Conservative Case uses metals prices of: US$3.00/lb Copper, US$1,500/oz Gold & US$30/oz Silver
7 Current Price: see Footnote 3 referenced on Page 5
8 Upside Case: see Footnote 4 referenced on Page 5
6
Azure Minerals Limited – 2012 Annual Report
EL TECOLOTE DISTRICT (Copper & Zinc)
Azure has 100% ownership of a 600km² strategic tenement holding in the El Tecolote District, located in Sonora State,
Mexico. The area comprises three adjoining properties: El Tecolote, La Tortuga and San Eduardo which are prospective for
porphyry-hosted copper and skarn copper-zinc deposits.
Azure has entered into separate Joint Venture (‘JV’) agreements with the Japan Oil, Gas and Metals National Corporation
(‘JOGMEC’) over the La Tortuga and El Tecolote projects. The JV’s are managed and staffed by Azure out of the
Company’s office in Hermosillo, Sonora, with funding and technical assistance provided by JOGMEC.
The El Tecolote JV was established in 2011 with JOGMEC having the right to earn an initial 51% interest in the project by
spending US$5 million over the first three years. Upon reaching that milestone, it can elect to earn an additional 19% interest
by spending a further US$8 million during the following three years, taking its total project equity to 70%. Total expenditure
at 30 June 2012 was US$2.1 million.
The La Tortuga JV was established in 2008 with JOGMEC having the right to earn a 51% interest in the project by spending
US$3 million by March 2013. Total expenditure at 30 June 2012 was US$2.2 million.
JOGMEC is a wholly-owned Japanese Government corporation established to assist in the stable supply of oil, gas and
mineral resources to the Japanese economy. Its mission is to gain entry into high-potential mineral exploration projects
through providing funding and technical assistance. JOGMEC’s involvement in two of our projects demonstrates its belief in
the strength of the Company’s Mexican assets and management team, and we look forward to further cementing this belief
through ongoing exploration success.
El Tecolote JV
Situated between the Company’s San Eduardo and La Tortuga Projects in the state of Sonora, El Tecolote is a 178km²
property containing abundant evidence of base metal mineralisation with potential for both porphyry copper and skarn
copper-zinc-silver deposits.
The property contains the historical El Tecolote Mine, which previously produced 1.4 million tonnes @ 1.9% copper, 7.0%
zinc and 47 g/t silver. The mine closed in 1984 due to low commodity prices, with unmined copper and zinc mineralisation
remaining around the old mine workings. Azure’s exploration in this area identified possible strike and depth extensions and
repetitions.
In addition, several porphyry copper targets have been identified with strong IP and geochemical anomalies present along
with surface occurrences of alteration, quartz veining and copper oxide mineralisation.
The 2011/12 exploration program comprised 16 diamond drill holes for a total of 4,300m. The drilling tested extensions and
repetitions of skarn mineralisation in the El Tecolote Mine, as well as several porphyry copper prospects, and the Reyna del
Cobre skarn prospect.
Around the El Tecolote Mine, drilling intersected skarn-hosted mineralisation consisting of disseminated to semi-massive
sphalerite (zinc sulphide) and minor disseminated chalcopyrite (copper sulphide). The mineralisation is contained within a
zone of carbonate sediments (a tactite unit known as T-1) located approximately 40m to the northeast of, and parallel to the
historical underground mine workings of the El Tecolote Mine.
Better drill intercepts include:
(cid:120)
13.6 metres @ 6.9% Zinc from 125.1m in TEC-DD-003, including:
(cid:120)
(cid:120)
10.10% Zinc over 1.9m from 131.15m; and
10.95% Zinc over 4.1mfrom 134.65m
4.0 metres @ 1.4% Zinc from 94.0m in TEC-DD-013
8.0 metres @ 1.5% Zinc from 108.0m in TEC-DD-013
30.5 metres @ 2.4% Zinc from 60.5m in TEC-DD-014
(within 50.9 metres @ 1.7% Zinc from 59.1m)
4.7 metres @ 3.0% Zinc from 117.7m in TEC-DD-014
(cid:120)
(cid:120)
(cid:120)
(cid:120)
The Company commenced its Stage 2 drilling program during September 2012, following up the zinc mineralisation
intersected around the El Tecolote Mine and additional porphyry copper targets.
7
Azure Minerals Limited – 2012 Annual Report
La Tortuga JV
Exploration conducted by the JV on the 214km² La Tortuga property, identified outcropping and buried occurrences of
porphyry copper and skarn copper-zinc style mineralisation, indicating the strong potential to discover deposits of this type.
During the year, Azure completed a deep-seeking, three dimensional Titan 24 Induced Polarisation (IP) – Resistivity –
Magneto-Telluric (MT) survey over a strong aeromagnetic anomaly in the northwest corner of the property. With no outcrop
present in this area, geophysical surveying is the only viable first-pass exploration tool, and the Titan 24 system, operated by
Quantec Geoscience from Canada, is designed to map mineralised bodies in three dimensions to depths in excess of one
kilometre.
The survey successfully identified the presence of a large, strongly (MT) resistive body immediately adjacent to the
aeromagnetic anomaly. Together, these anomalies have the characteristics and dimensions typical of a porphyry copper
deposit with an adjoining alteration zone. The combined results of Azure’s aeromagnetic and magneto-telluric modelling
indicate the anomalies are hosted within basement rocks commencing at around 600m below surface and extending to depths
in excess of 1,500m.
A 1,000m deep diamond drill hole was designed to test the deep geophysical target and drilling commenced in August 2012.
Unfortunately the hole had to be abandoned at 665m due to caving of the hole and did not fully test the target. However the
hole did achieve some success. After passing through the overlying post-mineral cover rocks, the drill hole entered basement
rocks at 635m and drilled through 30m of strongly hematite-altered, veined and brecciated, intrusive rock. These rocks are
considered to be significant indicators of potential mineralisation at depth and further drilling is warranted to fully test the
target.
Pozo De Nacho
Pozo de Nacho contains a substantial body of molybdenum mineralisation hosted within an intrusive porphyry system and
surrounding sediments. Azure has drilled mineralisation over an area of 800m by 250m, from surface to depths in excess of
300m. The mineralised system remains open in most directions. An IP and resistivity survey of the property was completed in
late 2010 with several strong anomalies identified. The Company is of the opinion that further drilling at Pozo de Nacho will
outline a mineral resource.
8
Azure Minerals Limited – 2012 Annual Report
Directors' Report
Your directors present their report on the consolidated entity (referred to hereafter as “the Group”) consisting of Azure Minerals Limited
and the entities it controlled at the end of or during the year ended 30 June 2012.
DIRECTORS
The following persons were directors of Azure Minerals Limited during the whole of the financial year and up to the date of this report.
Peter Ingram (appointed 12 October 2011)
Anthony Rovira
Wolf Martinick
John Saleeba (resigned 30 November 2011)
PRINCIPAL ACTIVITIES
During the year the principal continuing activity of the Group was exploration for precious and base minerals in Mexico.
DIVIDENDS
No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made.
REVIEW OF OPERATIONS
Group Overview
Azure Minerals Limited was incorporated on 19 September 2003. Its principal focus on exploration for gold, copper, silver and zinc in
Mexico. The company has a number of 100% owned projects, two of which have been joint ventured. The Group’s principal project is
the Promontorio project where a modest size but high grade copper-gold—silver deposit has been identified. The Group will continue to
seek opportunities either 100% owned or in joint venture in Mexico.
Operating Results for the Year
The operating loss after income tax of the Group for the year ended 30 June 2012 was $3,712,330 (2011: $4,461,805). Included in this
loss figure is $4,094,247 (2011: $3,982,806) of exploration expenditure written off. Refer to notes 1(c) and 6 to the financial statements.
Shareholder Returns
Basic loss per share (cents)
Diluted loss per share (cents)
2012
(0.9)
(0.9)
2011
(1.2)
(1.2)
Investments for Future Performance
The future performance of the group is dependent upon exploration success and the continued progress of development of those projects
where precious and base metals are already present. To this end the group has budgeted to continue exploration at its Mexico projects.
Review of Financial Condition
At the date of this report the consolidated entity has a sound capital structure and is in a strong position to progress its mineral properties.
Risk Management
The board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that activities are aligned with the
risks and opportunities identified by the board.
The group believes that it is crucial for all board members to be a part of this process, and as such the board has not established a separate
risk management committee. The Board has adopted a Risk Management Policy.
The board has a number of mechanisms in place to ensure that management's objectives and activities are aligned with the risks identified by
the board. These include the following:
(cid:19) Board approval of a strategic plan, which covers strategy statements designed to meet stakeholders’ needs and manage business risk.
(cid:19) Implementation of board approved operating plans and budgets and board monitoring of progress against these budgets.
The company undertakes risk review meetings as required with the involvement of senior management. Identified risks are weighed with
action taken to mitigate key risks.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Group during the financial year.
9
Azure Minerals Limited – 2012 Annual Report
Directors' Report
SIGNIFICANT EVENTS AFTER THE REPORTING DATE
Since the end of the reporting date the Group has conducted a share purchase plan. This will result in the Group issuing 118,000,100 shares
at an issue price of 1.8 cents per share to raise $2,124,000. In addition on 21 September 2012 the Group received commitments to
participate in a share placement of 39,000,000 fully paid ordinary shares at $0.018 each to raise $702,000. Options exercisable at 2 cents
each and expiring 2 years from their issue date will also be allocated on the basis of one free option for every two shares subscribed under
the placement.
No other matter or circumstance has arisen since the end of the financial year which significantly affected or may significantly affect the
operations of the group, the results of those operations, or the state of affairs of the group in future financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The group expects to maintain the present status and level of operations.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The company is subject to significant environmental regulation in respect to its exploration activities.
The company aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in
compliance with all environmental legislation. The directors of the company are not aware of any breach of environmental legislation for
the year under review. The directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which
requires entities to report annual greenhouse gas emissions and energy use. The directors have assessed that the Company has no current
reporting requirements, but may be required to report in the future.
INFORMATION ON DIRECTORS
Names, qualifications, experience and special responsibilities
Mr. Peter Anthony Ingram BSc, FAusIMM, MGSA, FAICD (appointed 12 October 2011 and on 1 December 2012 appointed Chairman)
Mr Ingram is a geologist with over forty years experience in the mining and mineral exploration industries within Australia, including over
thirty years experience in public company management. He was the founding Chairman and Managing Director of Universal Resources
Limited (now Altona Mining Limited).
Mr Ingram was a founding councillor and past President of the Association of Mining and Exploration Companies (AMEC) and has been
made an Honorary Life Member in recognition of his services to AMEC. He was also a founding director of the Australian Gold Mining
Industry Council. He has served on the board of management of the WA School of Mines at Curtin University and was instrumental in the
establishment of the Chair of Mineral Economics and Mine Management within that institution.
Mr Ingram’s previous directorships include: Managing Director of Metana Minerals NL and Eastmet Limited; Executive Chairman of
Australia Oriental Minerals NL and Glengarry Resources Limited; and Non-executive Director of Dragon Mining Limited, Metana
Petroleum Limited and Carnarvon Petroleum Limited.
Other Current Directorships
Altona Minerals Limited
Former Directorships in the last 3 years
None.
Special Responsibilities
Chairman of the Board and Chairman of the Remuneration and member of the Audit & Risk Management Committee
Interests in Shares and Options
3,000,000 options over ordinary shares in Azure Minerals Limited
Mr. Anthony Paul Rovira, BSc Flinders University, BSc (Hons) Flinders University, MAusIMM (Managing Director)
Tony Rovira has 25 years technical and management experience in the mining industry, as an exploration and mining geologist, and as a
company executive at Board level. Since graduating from Flinders University in South Australia in 1983, Tony has worked for companies
both large and small, including BHP, Barrack Mines, Pegasus Gold and Jubilee Mines.
From 1997-2003 Tony was the General Manager of Exploration with Jubilee Mines, during which time he led the team that discovered and
developed the world class Cosmos and Cosmos Deeps nickel sulphide deposits in Western Australia. In the year 2000, the Association of
Mining and Exploration Companies awarded Tony the “Prospector of the Year Award” for these discoveries.
Tony joined Azure Minerals as the inaugural CEO in December 2003 and was appointed Executive Chairman in June 2007. He is
responsible for the decision to focus Azure Minerals' activities on the world class mineral provinces in Mexico, where the company has
been operating since 2005.
Other Current Directorships
None.
10
Azure Minerals Limited – 2012 Annual Report
Directors' Report
INFORMATION ON DIRECTORS (cont’d)
Names, qualifications, experience and special responsibilities (cont’d)
Former Directorships in the last 3 years
None.
Special Responsibilities
Managing Director
Interests in Shares and Options
3,300,000 ordinary shares in Azure Minerals Limited, of which 1,880,000 are held indirectly.
7,500,000 options over ordinary shares in Azure Minerals Limited
Dr Wolf Martinick, PhD, BSc (agric) (Appointed 1 September 2007)
Dr Martinick is an environmental scientist with over 40 years experience in mineral exploration and mining projects around the world,
attending to environmental, water, land access and indigenous people issues. He has conducted due diligence on mining projects around
the world on behalf of international financial institutions and resource companies for a variety of transactions including listings on
international stock exchanges, mergers and debt financing. He is a Fellow of the Australian Institute of Mining and Metallurgy.
He is a founding director and chairman of Weatherly International plc, an AIM listed company with copper mines in Namibia. He was
also a founding director of Basin Minerals Limited, an ASX listed mineral exploration company that discovered a world-class mineral
project in Victoria, Australia, that was acquired by Iluka Resources Limited in 2003.
Other Current Directorships
Sun Resources NL – Non-Executive Director since February 1996 and Chairman since 1 March 2011
Ezenet Limited – Chairman since January 2003
Weatherly International Plc – Director since July 2005
Former Directorships in the last 3 years
Windimurra Vanadium Limited – resigned 2 October 2009
Carbine Resources Limited – resigned 4 November 2008
Uran Limited – resigned 12 November 2010
Special Responsibilities
Chairman of the Audit and Risk Management Committee and member of the Remuneration Committee
Interests in Shares and Options
1,540,000 ordinary shares in Azure Minerals Limited
2,500,000 options over ordinary shares in Azure Minerals Limited
Mr. John Walter Saleeba, BCom, LLB, CPA, FAICD (Non-Executive Director, retired 30 November 2011)
Mr Saleeba was formerly a partner in the law firm Clayton Utz. He is a Fellow of the Australian Institute of Company Directors and is
currently Chairman of Resource Equipment Limited and VDM Group Limited. Mr Saleeba has held directorships with a number of other
public companies, covering a wide range of business activities.
Interests in Shares and Options at time of retirement
2,669,600 ordinary shares in Azure Minerals Limited, all of which are held indirectly.
2,500,000 options over ordinary shares in Azure Minerals Limited
Company Secretary
Brett Dickson, BBus, CPA (Appointed 21 November 2006)
Mr Dickson is a Certified Practising Accountant with a Bachelors degree in Economics and Finance from Curtin University and has over
20 years experience in the financial management of companies, principally companies in early stage development of its resource or
product, and offers broad financial management skills. He has been Chief Financial Officer for a number of successful resource
companies listed on the ASX. In addition he has had close involvement with the financing and development of a number of greenfield
resources projects.
11
Azure Minerals Limited – 2012 Annual Report
Directors' Report
DIRECTORS' MEETINGS
The number of directors' meetings held (including meetings of committees of directors) and number of meetings attended
by each of the directors of the company during the financial year are:
Directors'
Meetings
A
5
8
5
8
B
5
8
4
8
Meetings of Committees
Audit
A
1
-
-
1
B
1
-
-
1
Remuneration
B
A
-
-
-
-
-
-
-
-
Peter Anthony John Ingram
Anthony Paul Rovira
John Walter Saleeba
Wolf Gerhard Martinick
Notes
A - Number of meetings attended.
B - Number of meetings held during the time the director held office or was a member of the committee during the year.
* - Not a member of the relevant committee.
Retirement, Election And Continuation In The Office Of Directors
John Saleeba retired at the 2011 Annual General Meeting hold on 30 November 2011.
12
Azure Minerals Limited – 2012 Annual Report
Directors' Report
REMUNERATION REPORT (AUDITED)
The remuneration report is set out under the following main headings:
A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Service agreements
D Share-based compensation
E Additional Information
The information provided in this remuneration report has been audited as required by section 308 (3C) of the Corporation Act 2001.
A Principles used to determine the nature and amount of remuneration
The remuneration policy of Azure Minerals Limited has been designed to align director and executive objectives with shareholder and
business objectives by providing a fixed remuneration component and where appropriate offering specific long-term incentives based on
key performance areas affecting the Groups results. At present the Company has not implemented any specific long-term incentives and
as such the remuneration policy is not impacted by the Groups performance, including earnings in shareholder wealth (dividends,
changes in share price or return on capital to shareholders). The board of Azure Minerals Limited believes the remuneration policy to be
appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the Group.
The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the
board. All executives receive a base salary (which is based on factors such as length of service and experience) and superannuation. The
board reviews executive packages annually by reference to the Groups performance, executive performance and comparable information
from industry sectors and other listed companies in similar industries.
The board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract the highest
calibre of executives and reward them for performance that results in long-term growth in shareholder wealth.
Executives are also entitled to participate in the employee share and option arrangements.
The executive directors and executives receive a superannuation guarantee contribution required by the government, which is currently
9% of cash salary, and do not receive any other retirement benefits. Some individuals, however, may choose to sacrifice part of their
salary to increase payments towards superannuation.
All remuneration paid to directors and executives is valued at the cost to the company and expensed. Shares given to directors and
executives are valued as the difference between the market price of those shares and the amount paid by the director or executive; to date
no shares have been awarded to directors or executives. Options are valued using either the Black-Scholes or Binomial methodologies.
The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and
responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually based on market
practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that
can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting (currently $200,000). In line
with standard industry practice fees for non-executive directors are not linked to the performance of the economic entity. However, to
align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the company and are able to participate
in employee option plans.
A Remuneration Committee has been established and is a committee of the board. It is primarily responsible for making
recommendations to the board on:
(cid:120) Non-executive directors fees
(cid:120) Remuneration levels of executive directors and other key management personnel
(cid:120) Key performance indicators and performance hurdles of the executive team
Their objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-term interests of
the Group. The Corporate Governance Statement provides further information on the role of this committee.
Remuneration consultants were not engaged during the year.
In the 2005/2006 financial year Azure Minerals Limited established a Directors Retirement Benefit Policy whereby each non-executive
director is entitled to a retirement benefit in accordance with the maximum amount ascertained pursuant to section 200G(2)(b) of the
Corporations Act 2001. In the 2006/2007 financial year the Directors Retirement Benefit Policy was terminated and the retirement
benefit entitlement has been frozen as of 30 June 2006. With the retirement of Mr Saleeba during the year the plan has been terminated.
B Details of remuneration
Amount of remuneration
Details of the remuneration of the directors and key management personnel (as defined in AASB 124 Related Party Disclosures) of
Azure Minerals Limited are set out below in the following tables.
The key management personnel of Azure Minerals Limited includes the directors as disclosed earlier in this report and the following who
have authority and responsibility for planning, directing and controlling the exploration activities of the entity and the Company
Secretary, Mr B Dickson is an executive whose remuneration must be disclosed under the Corporations Act 2001.
13
Azure Minerals Limited – 2012 Annual Report
Directors' Report
Key management personnel of the Group
Short-Term
Cash, salary
& fees
Cash
Bonus
Non monetary
benefits
Post Employment
Super-
annuation
Retirement
benefits
Name
Share-based
Payments
Options
Total
Percentage
Consisting of
Options
%
Directors
Peter Anthony Ingram – Chairman1
2012
2011
46,997
-
Anthony Paul Rovira – Managing Director
2012
2011
300,000
300,000
Wolf Gerhard Martinick –Non Executive
2012
2011
45,000
45,000
-
-
-
-
-
-
-
-
-
-
-
-
John Walter Saleeba – Non executive
2012
2011
Executives
Brett Dickson – Company Secretary
18,750 - -
45,000 - -
Total
2012
2011
2012
2011
153,120
153,120
563,867
543,120
- -
- -
-
-
+
-
1. Appointed 12 October 2011
Compensation options
During the 2012 and 2011 the following options were issued.
4,230
-
27,000
27,000
4,050
4,050
-
-
-
-
-
-
1,687 77,011
4,050 -
48,480
-
99,707
-
-
109,260
327,000
436,260
-
27,315
-
27,315
-
-
-
-
-
81,945
36,967
35,100
77,011
-
48,480
245,835
49,050
76,365
-
97,448
76,365
153,120
235,065
726,325
824,055
48.6
-
-
25.0
-
35.8
-
-
35.8
-
34.9
6.7
29.8
Granted
Terms and conditions for each grant
Vested
2012/2011
Number
Date
Fair
Value
Per
option
Fair
value
$
Exercise
Price
$
Expiry
date
First
exercise
date
Last
exercise
date
Number
Directors
P A Ingram 2012
3,000,000
9 Dec 11
.016
48,480
0.049
30 Nov14
9 Dec 11
30 Nov 14
3,000,000
2011
A P Rovira 2012
-
-
-
-
-
-
-
-
-
-
2011
2,000,000
14 Dec10
.0546
109,260
0.130
W Martinick 2012
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14Dec10
30 Nov 13
2,000,000
-
-
-
2011
500,000
14Dec10
.0546
27,315
0.130
30Nov13
14Dec10
30 Nov 13
500,000
J W Saleeba 2012
-
-
-
-
-
-
-
-
-
2011
500,000
14Dec10
.0546
27,315
0.130
30Nov13
14Dec10
30Nov13
500,000
Executives
B Dickson 2012
-
-
2011
1,500,000
14Dec10
Total 2012
3,000,000
2011
4,500,000
-
.0546
.016
0.546
-
-
-
-
-
-
81,945
0.130
30Nov13
14Dec10
30 Nov 13
1,500,000
48,480
245,835
3,000,000
4,500,000
Value of Options granted as part of remuneration was calculated in accordance with AASB 2: Share Based Payments.
14
Azure Minerals Limited – 2012 Annual Report
Directors' Report
Compensation options (cont’d)
Fair Value per
options granted
during the year
Value of options
granted during
the year
Value of options
exercised during
the year
Value of options
lapsed during the
year
Remuneration
consisting of options
for the year
$
$
Directors
P A Ingram 2012
0.016
48,480
2011
A P Rovira 2012
2011
J W Saleeba 2012
2011
W G Martinick 2012
2011
Executives
B Dickson 2012
2011
-
-
0.055
-
0.055
-
0.055
-
0.055
-
-
109,260
-
27,315
-
27,315
-
81,945
$
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
(16,400)
-
-
%
48.6
-
-
25.0
-
35.8
-
35.8
-
34.9
There were no alterations to the terms and conditions of options granted as remuneration since their grant date. There were neither
forfeitures nor shares issued on exercise of Compensation Options during 2012 or 2011.
The Company’s remuneration policy prohibits directors and executives from entering into transactions or arrangements which limit the
economic risk of participating in unvested entitlements.
Retirement benefits provided for the non-executive directors in the financial statements do not form part of the above remuneration until
such time as the amount is paid to the retiring director.
Apart from the issue of options the company currently has no performance based remuneration component built into director and
executive remuneration (2011: Nil)
C Service Agreements
Remuneration and other terms of employment for the following key management personnel are formalised in service agreements, the
terms of which are set out below:
Anthony Rovira, Managing Director:
(cid:19) Term of agreement - 1 years commencing 1 July 2012.
(cid:19) Base salary, exclusive of superannuation, of $300,000 to be reviewed annually by the remuneration committee.
(cid:19) Payment of termination benefit on early termination by the employer, other than for gross misconduct, includes an amount equal to the
amounts due for the balance of the term of the contract from the date of termination.
Brett Dickson, Company Secretary/Chief Financial Officer:
(cid:19) Term of agreement – 1 years commencing 1 July 2012
(cid:19) Fixed fee, $12,760 per month.
(cid:19) Payment of termination benefit on early termination by the employer, other than for gross misconduct, includes an amount equal to the
amounts due for the balance of the term of the contract from the date of termination.
Retirement Benefits
Other retirement benefits may be provided directly by the company if approved by shareholders.
D Share based compensation
Options over shares in Azure Minerals Limited may be issued to directors and executives. The options are not issued based on
performance criteria, but are issued to directors and executives of Azure Minerals Limited; where appropriate, to increase goal congruence
between executives, directors and shareholders. There are no standard vesting conditions to options awarded with vesting conditions, if
any, at the discretion of Directors at the time of grant. Options are granted for nil consideration.
During the year 3,000,000 options exercisable at $0.49 on or before 30 November 2014 were issued to Directors and Executives.
(2011:4,500,000 exercisable at $0.13 on or before 30 November 2013)
No options were exercised during the financial year and no options have been exercised since the end of the financial year. During the
year 900,000 (2011: 900,000) options exercisable at various prices with various expiry dates lapsed. The value of the options at lapse date
was nil as the exercise price of the option was significantly in excess of the market price of the underlying share. The value is determined
at the time of lapsing, but assuming the condition was satisfied.
The Company’s remuneration policy prohibits executives from entering into transactions or arrangements which limit the “at risk” aspect
of participating in unvested entitlements.
15
Azure Minerals Limited – 2012 Annual Report
Directors' Report
E Additional Information
Performance based remuneration
Details of remuneration: options
Other than the award of options and given the current cash resources of the Group, the company currently has no performance based
remuneration component built into director and executive remuneration packages.
Performance Income as a proportion of total compensation
No performance based bonuses have been paid to key management personnel during the financial year. It is the intent of the board to
review the inclusion of performance bonuses as part of remuneration packages during the 2012/13 financial year.
Company’s Performance
Company’s share price performance
The Company’s share price performance shown in the below graph is a reflection of the Company’s performance during the year.
The variable components of the executives’ remuneration including short-term and long-term incentives are indirectly linked to the
Company’s share price performance.
The graph below shows the Company’s share price performance during the financial year ended 30 June 2012.
Company's Share Price Performance
$0.14
$0.12
$0.10
$0.08
$0.06
$0.04
$0.02
$0.00
$
e
c
i
r
P
e
r
a
h
S
Loss per share
1
1
-
l
u
J
-
1
0
1
1
-
l
u
J
-
1
3
1
1
-
g
u
A
-
0
3
1
1
-
p
e
S
-
9
2
1
1
-
t
c
O
-
9
2
1
1
-
v
o
N
-
8
2
1
1
-
c
e
D
-
8
2
2
1
-
n
a
J
-
7
2
2
1
-
b
e
F
-
6
2
2
1
-
r
a
M
-
7
2
2
1
-
r
p
A
-
6
2
-
y
a
M
-
6
2
2
1
2
1
-
n
u
J
-
5
2
Below is information on the Company’s loss per share for the previous four financial years and for the current year ended 30 June 2012.
Basic loss per share (cents)
2012
(0.9)
2011
(1.2)
2010
(0.9)
2009
(1.9)
2008
(3.3)
Voting and comments made at the company’s 2011 Annual General Meeting
Azure Minerals received more than 90% of “yes” votes on its remuneration report for the 2011 financial year. The company did not receive
any specific feedback at the AGM or throughout the year on its remuneration practices
End of Audited Remuneration Report
16
Azure Minerals Limited – 2012 Annual Report
Directors' Report
LOANS TO DIRECTORS AND EXECUTIVES
No loans have been provided to directors or executives.
SHARES UNDER OPTION
At the date of this report there are 20,500,000 unissued ordinary shares in respect of which options are outstanding.
Balance at the beginning of the year
Share option movements during the year Issued Lapsed
Exercisable at 4.9 cents, on or before 30 November 2014 3,000,000
Exercisable at 25 cents, on or before 30 November 2012 (500,000)
Exercisable at 25 cents, on or before 31 January 2012 (400,000)
Total options issued and lapsed in the year to 30 June 2012
Total number of options outstanding as at 30 June 2012 and at the date of this report
The balance is comprised of the following
Date granted
6 Dec 2006
9 Dec 2009
14 Dec 2010
9 Dec 2011*
Expiry date
31 Jan 2013
30 Nov 2012
30 Nov 2013
30 Nov 2014
Exercise price (cents)
35.0
8.8
13.0
4.9
Total number of options outstanding at the date of this report
Total Number of
options
18,400,000
3,000,000
(500,000)
(400,000)
2,100,000
20,500,000
Number of options
500,000
12,500,000
4,500,000
3,000,000
20,500,000
* These options were granted as remuneration to Directors. Details of options granted to officers are disclosed at note 25.
No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of
any other body corporate.
No options were exercised during the financial year and since the end of the financial year no options have been exercised.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During the financial year, Azure Minerals Limited paid a premium of $19,980 (2011: $19,092) to ensure the directors and secretary of
the company and its Australian based controlled entities.
The liabilities insured and legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the
officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in
connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the
officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to
cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs
and those relating to other liabilities.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
company, or to 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.
No Proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the
Corporations Act 2001
17
Azure Minerals Limited - Financial Statements
Corporate Governance Statement
Approach to Corporate Governance
Azure Minerals Limited (Company) has adopted systems of control and accountability as the basis for the administration of corporate
governance. Some of these policies and procedures are summarised in this statement. Commensurate with the spirit of the ASX Corporate
Governance Council's Corporate Governance Principles and Recommendations 2nd edition (Principles & Recommendations), the
Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its
corporate governance practices. Where the Company's corporate governance practices follow a recommendation, the Board has made
appropriate statements reporting on the adoption of the recommendation. In compliance with the "if not, why not" reporting regime, where,
after due consideration, the Company's corporate governance practices depart from a recommendation, the Board has offered full disclosure
and an explanation for the adoption of its own practice.
The following governance-related documents can be found on the Company's website at www.azureminerals.com.au, under the section
marked “Corporate”, "Corporate Governance":
Charters
Board
Audit Committee
Nomination Committee
Remuneration Committee
Policies and Procedures
Policy and Procedure for Selection and (Re) Appointment of Directors
Process for Performance Evaluations
Policy on Assessing the Independence of Directors
Diversity Policy (summary)
Code of Conduct (summary)
Policy on Continuous Disclosure (summary)
Compliance Procedures (summary)
Procedure for the Selection, Appointment and Rotation of External Auditor
Shareholder Communication Policy
Risk Management Policy (summary)
Set out below is a report by the Company on how it has followed (or otherwise departed from) each of the recommendations during the
year ending 30 June 2012 (Reporting Period). The information in this statement is current at 24 September 2012.
Board
Roles and responsibilities of the Board and Senior Executives
(Recommendations: 1.1, 1.3)
The Company has established the functions reserved to the Board, and those delegated to senior executives and has set out these functions
in its Board Charter.
The Board is collectively responsible for promoting the success of the Company through its key functions of overseeing the management of
the Company, providing overall corporate governance of the Company, monitoring the financial performance of the Company, engaging
appropriate management commensurate with the Company's structure and objectives, involvement in the development of corporate strategy
and performance objectives, and reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct
and legal compliance.
Senior executives are responsible for supporting the Managing Director and assisting the Managing Director in implementing the running
of the general operations and financial business of the Company in accordance with the delegated authority of the Board. Senior executives
are responsible for reporting all matters which fall within the Company's materiality thresholds at first instance to the Managing Director
or, if the matter concerns the Managing Director, directly to the Chair or the lead independent director, as appropriate.
The Company’s Board Charter is disclosed on the Company’s website.
Skills, experience, expertise and period of office of each Director
(Recommendation: 2.6)
A profile of each Director setting out their skills, experience, expertise and period of office is set out in the Directors' Report.
The mix of skills and diversity for which the Board is looking to achieve in membership of the Board is represented by the Board’s current
composition. While the Company is at exploration stage, it does not wish to increase the size of the Board, and considers that the Board
weighted towards technical experience is appropriate at this stage of the Company’s development.
19
Azure Minerals Limited - Financial Statements
Corporate Governance Statement
Director independence
(Recommendations: 2.1, 2.2, 2.3, 2.6)
The Board has a majority of directors who are independent.
The Board considers the independence of directors having regard to the relationships listed in Box 2.1 of the Principles and
Recommendations and the Company’s materiality thresholds. The Board has agreed on the following guidelines, as set out in the
Company's Board Charter for assessing the materiality of matters:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Statement of Financial Position items are material if they have a value of more than 5% of pro-forma net asset.
Profit and loss items are material if they will have an impact on the current year operating result of 5% or more.
Items are also material if they impact on the reputation of the Company, involve a breach of legislation, are outside the ordinary
course of business, could affect the Company’s rights to its assets, if accumulated would trigger the quantitative tests, involve a
contingent liability that would have a probable effect of 5% or more on statement of financial position or profit and loss items, or will
have an effect on operations which is likely to result in an increase or decrease in net income or dividend distribution of more than
5%.
Contracts will be considered material if they are outside the ordinary course of business, contain exceptionally onerous provisions in
the opinion of the Board, impact on income or distribution in excess of the quantitative tests, there is a likelihood that either party will
default, and the default may trigger any of the quantitative or qualitative tests, are essential to the activities of the Company and
cannot be replaced, or cannot be replaced without an increase in cost which triggers any of the quantitative tests, contain or trigger
change of control provisions, are between or for the benefit of related parties, or otherwise trigger the quantitative tests.
The independent directors of the Company are Wolf Martinick, John Saleeba (resigned on 30 November 2011) and Peter Ingram
(appointed 12 October 2011). These directors are independent as they are non-executive directors who are not members of management
and who are free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially
interfere with, the independent exercise of their judgment.
The non-independent director of the Company is Anthony Rovira. Anthony Rovira is not independent as he is the Company’s Managing
Director. Mr Rovira was also Chair of the Board until 1 December 2011. While the Board recognises the importance of the need for the
division of responsibilities between the Chair and Managing Director, the Board considered that Anthony Rovira was the most appropriate
person for the position of Executive Chair given his industry experience, and the size and current activities of the Company. The Board also
believed that Antony Rovira’s appointment as Chair was in line with shareholder expectation. However, on 1 December 2011, Mr Rovira
relinquished his role as Chair to focus solely on his position as Managing Director and Mr Ingram was appointed independent Chair of the
Board. The Board recognised the need to divide the role of Managing Director and Chair, in compliance with Recommendation 2.3 of the
Principles and Recommendations.
Independent professional advice
(Recommendation: 2.6)
To assist directors with independent judgement, it is the Board's policy that if a director considers it necessary to obtain independent
professional advice to properly discharge the responsibility of their office as a director then, provided the director first obtains approval
from the Chair for incurring such expense, the Company will pay the reasonable expenses associated with obtaining such advice.
Selection and (Re)Appointment of Directors
(Recommendation: 2.6)
In determining candidates for the Board, the Nomination Committee (or equivalent) follows a prescribed process whereby it evaluates the
mix of skills, experience, expertise and diversity of the existing Board. In particular, the Nomination Committee (or equivalent) is to
identify the particular skills and diversity that will best increase the Board's effectiveness. Consideration is also given to the balance of
independent directors. Potential candidates are identified and, if relevant, the Nomination Committee (or equivalent) recommends an
appropriate candidate for appointment to the Board. Any appointment made by the Board is subject to ratification by shareholders at the
next general meeting.
The Board recognises that Board renewal is critical to performance and the impact of Board tenure on succession planning. Each director
other than the Managing Director, must not hold office (without re-election) past the third annual general meeting of the Company
following the director's appointment or three years following that director's last election or appointment (whichever is the longer).
However, a director appointed to fill a casual vacancy or as an addition to the Board must not hold office (without re-election) past the next
annual general meeting of the Company. At each annual general meeting a minimum of one director or one third of the total number of
directors must resign. A director who retires at an annual general meeting is eligible for re-election at that meeting. Re-appointment of
directors is not automatic.
The Company’s Policy and Procedure for the Selection and Re (Appointment) of Directors is disclosed on the Company’s website.
20
Azure Minerals Limited - Financial Statements
Corporate Governance Statement
Board committees
Nomination Committee
(Recommendations: 2.4, 2.6)
The Board believed that the former composition of the Board did not make the establishment of a separate Nomination Committee
practicable, and the Board believed that there would be no efficiencies or other benefits gained by establishing a separate Nomination
Committee. Accordingly, the Board performed the role of the Nomination Committee. Items that were usually required to be discussed by a
Nomination Committee were marked as separate agenda items at Board meetings when required. When the Board convened as the
Nomination Committee it carried out those functions which are delegated to it in the Company’s Nomination Committee Charter. The
Board dealt with any conflicts of interest that occurred when convening in the capacity of the Nomination Committee by ensuring that the
director with conflicting interests was not a party to the relevant discussions.
On 10 April 2012, the Board established a combined Nomination and Remuneration Committee comprised of the Board’s two independent
non-executive directors; Mr Peter Ingram (Chair) and Mr Wolf Martinick.
The full Board, in its capacity as the Nomination Committee, held one meeting during the Reporting Period, which all Board members
attended.
The Board has adopted a Nomination Committee Charter which describes the role, composition, functions and responsibilities of the
Nomination Committee. The Company’s Nomination Committee Charter is disclosed on the Company’s website.
Audit and Risk Management Committee
(Recommendations: 4.1, 4.2, 4.3, 4.4)
The Board established an Audit Committee comprised of Dr Wolf Martinick (Chair) and Mr John Saleeba (resigned 30 November 2011),
both independent non-executive directors. On 10 April 2012, the Board formed an Audit and Risk Management Committee comprised of
Dr Wolf Martinick (Chair) and Mr Peter Ingram, both independent non-executive directors. Given the size and structure of the Board, the
Company is unable to structure the Audit Committee in accordance with Recommendation 4.2. However, the Audit and Risk Committee
has been structured so that it is in accordance with Recommendation 4.2, except that it only has two members.
The Audit Committee held one meeting and the Audit and Risk Committee held one meeting during the Reporting Period. Details of the
directors’ attendance at the meetings are set out in the following table:
Name
No. of meetings eligible to
attend
No. of meetings attended
Wolf Martinick (Chair)
John Saleeba (resigned 30 November 2011)
Peter Ingram (appointed 12 October 2011).
2
1
1
2
1
1
The Board has adopted an Audit Committee Charter which describes the role, composition, functions and responsibilities of the Audit
Committee. The Company has developed a Risk Management Policy.
Details of each of the director's qualifications are set out in the Directors' Report. Each of the members of the Audit and Risk Committee
consider themselves to be financially literate and have an understanding of the industry in which the Company’s operates. The Company’s
Chief Financial Officer, Mr Brett Dickson, is a Certified Practising Accountant with a Bachelors degree in Economics and is invited to
attend Audit Committee meetings by invitation.
The Company has established a Procedure for the Selection, Appointment and Rotation of its External Auditor. The Board is responsible
for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises, as recommended
by the Audit Committee (or its equivalent). Candidates for the position of external auditor must demonstrate complete independence from
the Company through the engagement period. The Board may otherwise select an external auditor based on criteria relevant to the
Company's business and circumstances. The performance of the external auditor is reviewed on an annual basis by the Audit Committee (or
its equivalent) and any recommendations are made to the Board.
The Company’s Audit Committee Charter and Procedure for Selection, Appointment and Rotation of External Auditor are disclosed on the
Company’s website.
21
Azure Minerals Limited - Financial Statements
Corporate Governance Statement
Remuneration Committee
(Recommendations: 8.1, 8.2, 8.3, 8.4)
The Board established a Remuneration Committee comprised of Wolf Martinick (Chair) and John Saleeba (resigned 30 November 2011).
As noted above, on 10 April 2012, the Board formed a combined Nomination and Remuneration Committee comprise of Wolf Martinick
(Chair) and Peter Ingram, both independent non-executive directors. The Nomination and Remuneration Committee is not structured in
accordance with Recommendation 8.2 as it only has two members. However, the Board considers that the composition is appropriate as it
comprises the Board’s two non-executive directors.
Neither the Remuneration Committee or the Nomination and Remuneration Committee met during the Reporting Period.
The Board has adopted a Remuneration Committee Charter which describes the role, composition, functions and responsibilities of the
Remuneration Committee.
Details of remuneration, including the Company’s policy on remuneration, are contained in the Remuneration Report which forms of part
of the Directors’ Report. The Company’s policy is to remunerate non-executive directors at a fixed fee for time, commitment and
responsibilities. Remuneration for non-executive directors is not linked to individual performance. From time to time the Company may
grant options to non-executive directors. The grant of options is designed to recognise and reward efforts as well as to provide
nonexecutive directors with additional incentive to continue those efforts for the benefit of the Company. The maximum aggregate amount
of fees (including superannuation payments) that can be paid to non-executive directors is subject to approval by shareholders at general
meeting.
Executive pay and reward consists of a base salary and performance incentives. Long term performance incentives may include options
granted at the discretion of the Remuneration Committee and subject to obtaining the relevant approvals. The grant of options is designed
to recognise and reward efforts as well as to provide additional incentive and may be subject to the successful completion of performance
hurdles.
In the 2005/2006 financial year the Company established a Directors Retirement Benefit Policy whereby each non-executive director is
entitled to a retirement benefit in accordance with the maximum amount ascertained pursuant to section 200G(2)(b) of the Corporations Act
2001 (Cth). In the 2006/2007 financial year, the Directors Retirement Benefit Policy was terminated and the retirement benefit entitlement
does not apply to any non-executive director appointed from 30 June 2006. However, it did apply to Mr. John Saleeba. Mr Saleeba retired
from the Board on 30 November 2011 and was paid a retirement benefit of $77,011. Further details can be found in the Remuneration
Report.
The Company’s Remuneration Committee Charter includes a statement of the Company’s policy on prohibiting transactions in associated
products which limit the risk of participating in unvested entitlements under any equity based remuneration schemes.
The Company’s Remuneration Committee Charter is disclosed on the Company’s website.
Performance evaluation
Senior executives
(Recommendations: 1.2, 1.3)
The Managing Director is responsible for evaluating the performance of senior executives. The evaluations are performed by conducting
interviews with the senior executives as required. During the interview key performance indicators are set and agreed on, which will form
the basis for the following years’ review.
The Nomination Committee (or equivalent), at least annually, evaluates the performance of the Managing Director by formal interview. In
reviewing the performance of the Managing Director, performance against pre-determined budgets and performance criteria set the
previous year (if any) is assessed.
During the Reporting Period an evaluation of the Managing Director and other senior executives took place in accordance with the process
disclosed above.
Board, its committees and individual directors
(Recommendations: 2.5, 2.6)
The Chair is responsible for evaluation of the Board and, when deemed appropriate, Board committees and individual directors.
The Chair evaluates the Board and, when deemed appropriate, Board committees and individual directors by utilising questionnaires which
are completed by each director. The Chair, in consultation with the Company Secretary, then reviews the questionnaires and holds round
table discussions with the Board to discuss the questionnaires. The Chair holds discussions with individual directors, if required.
During the Reporting Period an evaluation of the Board and individual directors took place in accordance with the process disclosed above.
22
Azure Minerals Limited - Financial Statements
Corporate Governance Statement
The Company’s Process for Performance Evaluation is disclosed on the Company’s website.
Ethical and responsible decision making
Code of Conduct
(Recommendations: 3.1, 3.5)
The Company has established a Code of Conduct as to the practices necessary to maintain confidence in the Company's integrity, the
practices necessary to take into account its legal obligations and the reasonable expectations of its stakeholders and the responsibility and
accountability of individuals for reporting and investigating reports of unethical practices.
A summary of the Company’s Code of Conduct is disclosed on the Company’s website.
Diversity
(Recommendations: 3.2, 3.3, 3.4, 3.5)
The Company has established a Diversity Policy, which includes requirements for the Board to establish measurable objectives for
achieving gender diversity and for the Board to assess annually both the objectives and progress towards achieving them.
The Board has not set measurable objectives for achieving gender diversity. Given the Company’s stage of development as an exploration
company, the number of employees in Australia and the nature of the labour market in Mexico, the Board considers that it is not practical
to set measurable objectives for achieving gender diversity.
The proportion of women employees in the whole organisation, women in senior executive positions and women on the Board are set out
in the following table:
Whole organisation
Senior executive positions
Board
Proportion of women
2 out of 7 (28%)
0 out of 1 (0%)
0 out of 3 (0%)
The Company’s Diversity Policy is disclosed on the Company’s website.
Continuous Disclosure
(Recommendations: 5.1, 5.2)
The Company has established written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure
requirements and accountability at a senior executive level for that compliance.
A summary of the Company’s Policy on Continuous Disclosure and Compliance Procedures are disclosed on the Company’s website.
Shareholder Communication
(Recommendations: 6.1, 6.2)
The Company has designed a communications policy for promoting effective communication with shareholders and encouraging
shareholder participation at general meetings.
The Company’s Shareholder Communication Policy is disclosed on the Company’s website.
Risk Management
Recommendations: 7.1, 7.2, 7.3, 7.4)
The Board has adopted a Risk Management Policy and Risk Management Procedures. Under the Risk Management Policy, the Board
oversees the processes by which risks are managed. This includes defining the Company’s risk appetite, monitoring of risk performance
and those risks that may have a material impact to the business. Management is responsible for the implementation of the risk management
and internal control system to manage the Company’s risks and to report to the Board whether those risks are being effectively managed.
In addition, the following risk management measures have been adopted by the Board to manage the Company’s material business risks:
(cid:127)
(cid:127)
(cid:127)
the Board has established authority limits for management, which, if proposed to be exceeded, requires prior Board approval;
the Board has adopted a compliance procedure for the purpose of ensuring compliance with the Company’s continuous disclosure
obligations; and
the Board has adopted a corporate governance manual which contains other policies to assist the Company to establish and
maintain its governance practices.
23
Azure Minerals Limited - Financial Statements
Corporate Governance Statement
The Company’s system to manage its material business risks includes the preparation of a risk register by management to identify the
Company’s material business risks, analyse those risks, evaluate those risks (including assigning a risk owner to each risk) and treat those
risks. Risks and their management are to be monitored and reviewed at least half yearly by senior management. The risk register is to be
updated and a report submitted to the Managing Director. The Managing Director is to provide a risk report at least half yearly to the Board
and an annual review of the risk profile is to be undertaken to ensure relevancy. Specific areas of risk that were identified in the report
included operational activities, asset management (including title to exploration and mining leases) and staff.
The Board has required management to design, implement and maintain risk management and internal control systems to manage the
Company’s material business risks. The Board also requires management to report to it confirming that those risks are being managed
effectively. The Board has received a report from management as to the effectiveness of the Company’s management of its material
business risks for the Reporting Period.
The Managing Director and the Chief Financial Officer have provided a declaration to the Board in accordance with section 295A of the
Corporations Act and have assured the Board that such declaration is founded on a sound system of risk management and internal control
and that the system is operating effectively in all material respects in relation to financial reporting risks.
A summary of the Company’s Risk Management Policy is disclosed on the Company’s website.
24
Azure Minerals Limited - Financial Statements
Consolidated Statements of Comprehensive Income
YEAR ENDED 30 JUNE 2012
Notes
Consolidated
Revenue from continuing activities
Expenditure
Depreciation
Salaries and employee benefits expense
Directors fees
Exploration expenses
Exploration expenses reimbursed
Travel expenses
Promotion expenses
Administration expenses
Consulting expenses
Insurance expenses
Share based payment expense
(Profit) from equipment sales
Provision for doubtful debts
Other expenses
5
6
6
6
28
2012
$
2011
$
109,777
209,669
(39,442)
(570,562)
(110,747)
(4,094,247)
2,104,045
(216,121)
(58,943)
(107,191)
(29,599)
(44,722)
(48,480)
8,771
(426,978)
(187,891)
(32,440)
(558,148)
(90,000)
(3,982,806)
1,145,538
(209,491)
(48,626)
(120,207)
(261,340)
(48,079)
(245,835)
-
-
(220,040)
Loss from continuing operations before income tax
(3,712,330)
(4,461,805)
Income tax benefit/(expense)
7
-
-
Loss from continuing operations after income tax
(3,712,330)
(4,461,805)
Loss is attributable to:
The owners of Azure Minerals Limited
Other comprehensive income/(loss)
Change to available-for –sale financial assets, net of tax
Exchange differences on translation of foreign
operations
Other comprehensive income/(loss) for the year net
of tax
3,712,330
4,461,805
(36,313)
8,336
(58,268)
(126,411)
(94,581)
(118,075)
Total comprehensive loss for the Year
(3,806,911)
(4,579,880)
Total comprehensive income is attributable to:
The owners of Azure Minerals Limited
(3,806,911)
(4,579,880)
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
23
(0.9)
(0.9)
(1.2)
(1.2)
The above Consolidated Statements of Comprehensive Income are to be read in conjunction with the Notes to the Financial Statements.
25
Azure Minerals Limited - Financial Statements
Consolidated Statements of Financial Position
AT 30 JUNE 2012
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Total Current Assets
Non-Current Assets
Available for sale investments
Plant and equipment
Capitalised exploration expenditure
Other financial assets
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Provisions
Total Current Liabilities
Non-Current Liabilities
Provisions
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Notes
Consolidated
2012
$
2011
$
19
8
9
10
11
12
14
15
15
643,525
332,594
976,119
4,689,383
879,826
5,569,209
12,967
126,988
1,580,221
45,378
1,765,554
49,280
118,598
1,331,811
45,378
1,545,067
2,741,673
7,114,276
213,259
68,388
281,647
766,861
133,959
900,820
42,687
42,687
37,686
37,686
324,334
938,506
2,417,339
6,175,770
16
17(a)
39,592,568
1,120,067
(38,295,296)
2,417,339
39,592,568
1,166,168
(34,582,966)
6,175,770
The above Consolidated Statements of Financial Position are to be read in conjunction with the Notes to the Financial Statements
26
Azure Minerals Limited - Financial Statements
Consolidated Statements of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2012
30 JUNE 2012
Issued
Share Capital
Share
Option
Reserve
Available for
Sale Assets
Reserve
$
$
$
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
Total
$
$
39,592,568
1,510,777
8,336
(352,945)
(34,582,966)
6,175,770
-
-
-
-
-
-
-
-
-
-
-
-
(3,712,330)
(3,712,330)
-
(36,313)
(58,268)
-
-
-
(58,268)
(36,313)
(36,313)
(58,268)
(3,712,330)
(3,806,911)
48,480
48,480
-
-
-
-
-
-
48,480
48,480
39,592,568
1,559,257
(27,977)
(411,213)
(38,295,296)
2,417,339
Balance at 1 July 2011
Loss for period
Other comprehensive income/(loss)
Exchange differences on
operations
Change in fair value of available-for-sale financial assets
translation of
foreign
Total other comprehensive loss
Total comprehensive loss for the period
Transactions with owners in their capacity as owners:
Share based payments
Total transactions with owners
Balance as at 30 June 2012
30 JUNE 2011
Issued
Share Capital
Share
Option
Reserve
Available for
Sale Assets
Reserve
$
$
$
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
Total
$
$
Balance at 1 July 2010
35,250,678
1,264,942
-
(226,534)
(30,121,161)
6,167,925
Loss for period
Other comprehensive income/(loss)
Exchange differences on
operations
Change in fair value of available-for-sale financial assets
translation of
foreign
Total other comprehensive income/(loss)
Total comprehensive income/(loss) for the period
-
-
-
-
-
Transactions with owners in their capacity as owners:
Issue of share capital, net of transaction costs
4,341,890
-
-
-
-
-
-
Share based payments
Total transaction with owners
Balance at 30 June 2011
-
245,835
4,341,890
245,835
-
-
(4,461,805)
(4,461,805)
-
8,336
(126,411)
-
8,336
(126,411)
-
-
-
(126,411)
8,336
(118,075)
8,336
(126,411)
(4,461,805)
(4,579,880)
-
-
-
-
-
-
-
-
-
4,341,890
245,835
4,587,725
39,592,568
1,510,777
8,336
(352,945)
(34,582,966)
6,175,770
The above Consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes.
27
Azure Minerals Limited - Financial Statements
Consolidated Statements of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2012
Notes
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees
Interest received
Expenditure on mining interests
NET CASH (OUTFLOW) INFLOW FROM
OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment
Option payments for projects
Security deposits
NET CASH (OUTFLOW) INFLOW FROM
INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of ordinary shares
Share issue costs
NET CASH (OUTFLOW) INFLOW FROM
FINANCING ACTIVITIES
2012
$
2011
$
(1,748,636)
170,932
(2,126,744)
(1,247,350)
166,075
(3,317,751)
19(b)
(3,704,448)
(4,399,026)
(57,643)
(364,943)
-
(56,882)
(357,264)
(23,070)
(422,586)
(437,216)
-
-
-
4,570,410
(304,853)
4,265,557
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents at the beginning of the
financial year
Effect of exchange rate changes on cash and cash
equivalents
CASH AND CASH EQUIVALENTS AT END OF YEAR
19(a)
(4,127,034)
(570,685)
4,689,383
5,242,755
81,176
643,525
17,313
4,689,383
The above Consolidated Statements of Cash Flows are to be read in conjunction with the Notes to the Financial Statements.
28
Azure Minerals Limited – Financial Statements
Notes to the Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently
applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for Azure Minerals
Limited as an individual entity and the consolidated entity consisting of Azure Minerals Limited and its subsidiaries.
BASIS OF PREPARATION
This general purpose financial report has been prepared in accordance with the Australian Accounting Standards, other authoritive
pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act 2001.
Compliance with AIFRSs
The consolidated financial statements of Azure Minerals Limited and the separate financial statements of Azure Minerals Limited also
comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Historical cost convention
These financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3.
Going Concern
This report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation
of assets and settlement of liabilities in the normal course of business.
The Consolidated Entity has incurred a net loss after tax for the year ended 30 June 2012 of $3,712,330 (2011: $4,461,805) and experienced
net cash outflows from operating activities of $3,704,448 (2011: $4,399,026). At 30 June 2012, the Consolidated Entity had net current
assets of $694,472 (30 June 2011: net current assets of $4,668,389).
The Directors believe there are sufficient funds to meet the Consolidated Entity’s working capital requirements and as at the date of this
report the directors believe they can meet all liabilities as and when they fall due. However the Directors recognise that additional funding
either through the issue of further shares, convertible notes or a combination of both may be required for the Consolidated Entity to continue
to actively explore its mineral properties in the long term.
The Directors have reviewed the business outlook and the assets and liabilities of the Consolidated Entity and are of the opinion that the use
of the going concern basis of accounting is appropriate. Since the end of the end of the reporting date the Group has conducted a share
purchase plan (“Plan”), refer Note 22 for further information.
However, if the Consolidated Entity is unable to achieve the above, there is significant uncertainty whether the Consolidated Entity will be
able to continue as a going concern and therefore whether it will be able to pay its debts as and when they fall due and realise its assets and
extinguish its liabilities in the normal course of business at the amounts stated in the financial report.
The financial report does not include any adjustments relating to the recoverability or classification of recorded asset amounts, nor the
amounts or classification of liabilities that might be necessary should the Consolidated Entity not be able to continue as a going concern.
(a) Principles of consolidation
The consolidated financial statements are those of the consolidated entity, comprising Azure Minerals Limited (the parent entity) and all
entities which Azure Minerals Limited controlled from time to time during the year and at the reporting date (“the Group”). A controlled
entity is any entity Azure Minerals Limited has the power to control the financial and operating policies of so as to obtain benefits from its
activities.
Information from the financial statements of subsidiaries is included from the date the parent company obtains control until such time as
control ceases. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the
reporting period during which the parent company has control.
Subsidiary acquisitions are accounted for using the acquisition method of accounting.
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies which may exist.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full.
Unrealised losses are eliminated unless costs cannot be recovered.
Investments in subsidiaries are accounted for at cost in the individual financial statements of Azure Minerals Limited.
Azure Minerals Limited - Financial Statements
Notes continued
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(b) Property, plant and equipment
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses.
Plant and equipment
Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by directors to
ensure it is not in excess of the recoverable amount from these assets.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs
and maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation
Depreciation of plant and equipment is calculated on a reducing balance basis so as to write off the net costs of each asset over the expected
useful life. The rates vary between 20% and 40% per annum.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its
estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.
When revalued assets are sold, it is group policy to transfer the amounts included in other reserves in respect of those assets to retained
earnings.
(c) Exploration and evaluation costs
Exploration and evaluation costs are written off in the year they are incurred apart from acquisition costs which are carried forward where
right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation
of the area of interest or, where exploration and evaluation activities in the area of interest have not reached a stage that permits reasonable
assessment of the existence of economically recoverable reserves.
Where an area of interest is abandoned or the directors decide that it is not commercial, any accumulated acquisition costs in respect of that
area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period
and accumulated costs written off to the extent that they will not be recoverable in the future.
Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences.
(d) Leases
Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that
are transferred to entities in the economic entity are classified as finance leases.
Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or
the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the
reduction of the lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over their estimated useful lives.
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged on a straight line basis
over the period of the lease.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.
(e) Income tax
The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is
calculated using the tax rates that have been enacted or are substantially enacted by the statement of financial position date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial
recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax
is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is
adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible
temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will
occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable
the benefit to be realised and comply with the conditions of deductibility imposed by the law.
30
Azure Minerals Limited - Financial Statements
Notes continued
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(f) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from
the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of
the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities,
which are disclosed as operating cash flows.
(g) Foreign currency translation
Functional and presentation currency
The functional currency of each of the group's entities is measured using the currency of the primary economic environment in which that
entity operates. The consolidated financial statements are presented in Australian dollars which is Azure Minerals Limited’s functional and
presentation currency. The functional currency of Australian subsidiary (Azure Mexico Pty Ltd) is the Australian dollar. The functional
currency of the Mexican overseas subsidiary (Minera Piedra Azul CV de SA) is the Mexican Peso.
Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction.
Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be
carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the
date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the profit or loss, except where deferred in equity as a
qualifying cash flow or net investment hedge.
Group companies
The financial results and position of foreign operations whose functional currency is different from the group's presentation currency are
translated as follows:
(cid:120)
(cid:120)
assets and liabilities are translated at year-end exchange rates prevailing at that reporting date; and
income and expenses are translated at average exchange rates for the period.
Exchange differences arising on translation of foreign operations are transferred directly to the group's foreign currency translation reserve
in the statement of financial position. These differences are recognised in the profit or loss in the period in which the operation is disposed.
(h) Trade and other payables
Liabilities for trade creditors are recognised initially at fair value and subsequently at amortised cost.
Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an expense on an
accrual basis.
(i) Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits
include wages and salaries, annual leave, and long service leave.
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve
months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the
liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in
respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market
yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability,
are used.
Share-based payments
The Group provides benefits to employees (including directors) of the Group in the form of share-based payment transactions, whereby
employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted.
The fair value is determined by an internal valuation using a Binomial option pricing model.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the
vesting period has expired and (ii) the number of options that, in the opinion of the directors of the Group, will ultimately vest. This opinion
is formed based on the best available information at reporting date. No adjustment is made for the likelihood of market performance
conditions being met as the effect of these conditions is included in the determination of fair value at grant date.
31
Azure Minerals Limited - Financial Statements
Notes continued
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(i) Employee benefits (Cont’d)
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for
the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award
on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award.
(j) Revenue recognition
Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial assets.
(k) Contributed Equity
Ordinary shares are classified as equity.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.
(l) Earnings per share (EPS)
Basic earnings per share
Basic EPS is calculated as the profit attributable to equity holders of the company, excluding any costs of servicing equity other than
ordinary shares, divided by the weighted average number of ordinary shares outstanding during the financial year, adjusted for any bonus
elements in ordinary shares issued during the year.
Diluted earnings per share
Diluted EPS adjusts the figures used in the determination of basic EPS to take into account the after income tax effect of interest and other
financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued
for no consideration in relation to dilutive potential ordinary shares.
(m) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original
maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the
statement of financial position.
(n) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current
financial year.
(o) Interests in joint ventures
The Groups share of the assets, liabilities, revenue and expenses of joint venture operations are included in the appropriate items of the
consolidated income statement and statement of financial position.
(p) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting to the chief operating decision maker. The chief operating
decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the
Executive Chairman.
(q) Investments and Financial assets
Classification
The Group classifies its financial assets in the following categories: loans and receivables. The classification depends on the purpose for
which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
Financial assets at fair value through profit and loss
Financial assets at fair value through profit and loss are financial assets held for trading. A financial asset is classified in this category if
acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designed as
hedges. Assets in this category are classified as current assets if they are expected to be settled with 12 months; otherwise they are classified
as non-current.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and
are recognised at fair value on initial recognition. They are included in current assets, except for those with maturities greater than 12
months after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other receivables
in the statement of financial position sheet (note 8).
Recognition and derecognition
Regular purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell the
asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or
loss. Financial assets are derecognised when the right to receive cash flows from the financial assets have expired or have been transferred
and the Group has transferred substantially all the risks and rewards of ownership.
32
Azure Minerals Limited - Financial Statements
Notes continued
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(q) Investments and Financial assets (Cont’d)
Subsequent measurement
Loans and receivables are carried at amortised cost using effective interest method.
Impairment
The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired.
Impairment losses are recognised in the profit or loss. Debts which are known to be uncollectible are written off by reducing the carrying
amount directly.
(r) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
The fair value of financial instruments traded in active markets (such as publicly traded derivative, and trading and available-for-sale
securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the
current bid price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using
valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each
reporting date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques,
such as estimated discounted cash flow, are used to determined fair value for the remaining financial instruments. The fair value of interest
rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined
using forward exchange market rates at the reporting date.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their
short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows
at the current market interest rate that is available to the Group for similar financial instruments.
(s) Provisions
Provisions for legal claims, service warranties and make good obligations are recognised when the Group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has
been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering
the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in
the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the
reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the
risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
(t) New Accounting Standards for Application in future Periods
The AASB has issued new and amended accounting standards and interpretations that have mandatory application dates for future reporting
periods. The Group has decided against early adoption of these standards. A discussion of those future requirements and their impact on the
Group follows:
AASB 9: Financial Instruments and AASB 2010-7: Amendments to Australian Accounting Standards arising from AASB 9 [AASB 1, 3, 4,
5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 27]
(applicable for annual reporting periods commencing on or after 1 January 2013).
These standards are applicable retrospectively and amend the classification and measurement of financial instruments, as well as recognition
and de-recognition requirements if financial instruments. The Group has not yet determined the potential impact on the financial statements.
The key changes made to accounting requirements include:
(cid:127) simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value;
(cid:127) simplifying the requirements for embedded derivatives;
(cid:127) removing the tainting rules associated with-held-to-maturity assets;
(cid:127) removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost;
(cid:127) allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held
for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised
in profit or loss and there is no impairment or recycling on disposal of the instrument; and
(cid:127) reclassifying financial assets where there is a change in an entity's business model as they are initially classified based on:
a.
b.
the objective of the entity's business model for managing the financial assets; and
the characteristics of the contractual cash flows.
33
Azure Minerals Limited - Financial Statements
Notes continued
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(t) New Accounting Standards for Application in future Periods (Cont’d)
(cid:127) Requiring an entity that chooses to measure a financial liability at fair value to present the portion of the change in its fair value due to
changes in the entity’s own credit risk in Other Comprehensive Income, except when that would create an accounting mismatch. If such
a mismatch would be created or enlarged; the entity is required to present all changes in fair value (including the effects of changes in
the credit risk of the liability) in profit or loss.
(cid:127) AASB 10: Consolidated Financial Statements, AASB 11: Joint Arrangements, AASB 12: Disclosure of Interests in Other Entities,
AASB 127: Separate Financial Statements (August 2011), AASB 128: Investments in Associates and Joint Ventures (August 2011) and
AASB 2011-7: Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards
[AASB 1, 2, 3, 5, 7, 9, 2009-11, 101, 107, 112, 118, 121, 124, 132, 133, 136, 138, 139, 1023 & 1038 and interpretations 5, 9, 16 & 17]
(applicable for annual reporting periods commencing on or after 1 January 2013).
AASB 10 replaces parts of AASB 127: Consolidated and Separate Financial Statements (March 2008, as amended) and Interpretation
112: Consolidation – Special Purpose Entities. AASB 10 provides a revised definition of control and additional application guidance so
that a single control model will apply to all investees. The Group has not yet been able to reasonably estimate the impact of the Standard
on its financial statements.
AASB 11 replaces AASB 131: Interests in Joint Ventures (July 2004, as amended). AASB 11 requires joint arrangements to be
classified as either “joint operations” (where parties that have joint control of the arrangements have rights to the assets and obligations
for the liabilities) or “joint ventures” (where the parties that have joint control of the arrangement have rights to the net assets of the
arrangement). Joint ventures are required to adopt the equity method of accounting (proportionate consolidation is no longer allowed).
AASB 12 contains the disclosure requirements applicable to entities that hold an interest in a subsidiary, joint venture, joint operation or
associate. AASB 12 also introduces the concept of “structured entity”, replacing the “special purpose entity” concept currently used in
interpretation 112, and requires specific disclosures in respect of any investments in unconsolidated structured entities. This standard
will affect disclosures only and is not expected to significantly impact the Group.
To facilitate the application of AASB’s 10, 11 and 12, revised versions of AASB 127 and AASB 128 have also been issued. These
standards are not expected to significantly impact the Group.
(cid:127) AASB 13: Fair Value Measurement and AASB 2011-8: Amendments to Australian Accounting Standards arising from AASB 13
[AASB 1, 2, 3, 4, 5, 7, 9, 2009-11, 101, 102, 108, 110, 116, 117, 118, 119, 120, 121, 128, 131, 132, 133, 134, 136, 138, 139, 140, 141,
1004, 1023 & 1038 and interpretations 2, 4, 12, 13, 14, 17, 19, 131 & 132] (applicable for annual reporting periods commencing on or
after 1 January 2013).
AASB 13 defines fair values, sets out in a single Standard a framework for measuring fair value, and requires disclosures about fair
value measurement.
AASB 13 requires:
- Inputs to all fair value measurements to be categorised in accordance with a fair value hierarchy;
- Enhanced disclosure regarding all assets and liabilities (including, but not limited to, financial assets and financial liabilities) to be
measured at fair value
These standards are not expected to significantly impact the Group.
(cid:127) AASB 119: Employee Benefits (September 2011) and AASB 2011-10: Amendments to Australian Accounting Standards arising from
AASB 119 (September 2011) [AASB 1, AASB 101, AASB 124, AASB 134, AASB 1049 & AASB 2011-8 and Interpretation 14]
(applicable for annual reporting periods commencing on or after 1 January 2013)
These standards introduce a number of changes to accounting and presentation of defined benefit plans. The Group does not have any
defined benefit plans and so is not impacted by the amendment.
AASB 119 (September 2011) also includes changes to the accounting for termination benefits that require an entity to recognise an
obligation for such benefits at the earlier of:
(i) For an offer that may be withdrawn – when the employee accepts;
(ii) For an offer that cannot be withdrawn – when the offer is communicated to the affected employees: and
(iii) Where the termination is associated with a restructuring of activities under AASB 137: Provisions, Contingent Liabilities and
Contingent Assets, and if earlier than the first two conditions – when the related restricting costs are recognised.
The Group has been able to reasonably estimate the impact of these changes to AASB 119.
34
Azure Minerals Limited - Financial Statements
Notes continued
2 .
FINANCIAL RISK MANAGEMENT
Overview
The Company and Group have exposure to the following risks from their use of financial instruments:
(cid:19) credit risk
(cid:19)
(cid:19) market risk
liquidity risk
This note presents information about the Company’s and Group’s exposure to each of the above risks, their objectives, policies and
processes for measuring and managing risk, and the management of capital.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Management
monitors and manages the financial risks relating to the operations of the group through regular reviews of the risks.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers and cash and cash equivalents. For the Company it arises
from receivables due from subsidiaries.
Cash and Cash Equivalents
The Group manages its credit risk on cash and cash equivalents by only dealing with banks licensed to operate in Australia.
Trade and other receivables
As the Group operates in the mining exploration sector, it generally does not have trade receivables and therefore is not exposed to credit risk
in relation to trade receivables.
Presently, the Group undertakes exploration and evaluation activities exclusively in Mexico. At the reporting date there were no significant
concentrations of credit risk.
Exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk
at the reporting date was:
Trade and other receivables
Cash and cash equivalents
Security deposits
Impairment losses
Note
8
19
12
Consolidated
Carrying amount
2012
2011
317,435
643,525
45,378
863,332
4,689,383
45,378
None of the Company’s other receivables are past due (2011: nil). However, Minera Piedra Azul C.A. de C.V.(“MPA”) a 100% owned,
Mexican incorporated subsidiary of the Company is in dispute with Mexican tax authorities over claims made in its 2008 income tax return.
As a result of the dispute, Mexican tax authorities have imposed a fine of $426,978 on MPA, which it has paid under protest. MPA is in the
process of appealing the decision and until all appeal avenues are exhausted the Group will carry the amount paid as a receivable. Given that
the appeal may be ultimately disallowed a provision against the full amount has been made
Other than as described above, the Group operates in the mining exploration sector and generally does not have trade receivables and is
therefore not materially exposed to credit risk in relation to trade receivables. Other receivables are principally value added taxes withheld by
third parties and due to the Group from sovereign governments, as such the Group does not consider it is exposed to any significant credit
risk.
The allowance accounts in respect of other receivables is used to record impairment losses unless the Group is satisfied that no recovery of
the amount owing is possible; at that point the amount is considered irrecoverable and is written off against the financial asset directly. At 30
June 2012 the Group does not have any collective impairments on its other receivables other than as described above (2011: nil).
The Group places its cash deposits with institutions with a credit rating of AA or better and only with major banks.
Guarantees
Group policy is to provide financial guarantees only to wholly-owned subsidiaries. There are no guarantees outstanding (2011: Nil)
35
Azure Minerals Limited - Financial Statements
Notes continued
2 .
FINANCIAL RISK MANAGEMENT (Cont’d)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows.
The Company anticipates a need to raise additional capital in the next 12 months to meet forecasted operational activities. The decision on
how the Company will raise future capital will depend on market conditions existing at that time.
Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 180 days, including
the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such
as natural disasters
The following are the contractual maturities of financial liabilities at amortised cost:
Consolidated
30 June 2012
Trade and other payables
30 June 2011
Trade and other payables
Market Risk
Carrying
amount
Contractual
cash flows
6 mths or
less
6-12 mths
1-2 years
2-5 years
More than
5 years
213,259
766,861
-
-
213,259
766,861
-
-
-
-
-
-
-
-
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s
income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return.
Currency risk
The Group is exposed to currency risk on purchases that are denominated in a currency other than the respective functional currencies of
Group entities, primarily the United Sates Dollar (USD) and Mexican Peso (MxP). The currencies in which the transactions primarily are
denominated are USD and MxP.
The Group has not entered into any derivative financial instruments to hedge such transactions and anticipated future receipts or payments
that are denominated in a foreign currency.
Group’s investments in its subsidiaries are not hedged as those currency positions are considered to be long term in nature.
Exposure to currency risk
The Group’s exposure to foreign currency risk at reporting date was as follows, based on notional amounts:
Trade receivables
Trade payables
Gross statement of financial position
Forward exchange contracts
Net exposure
30 June 2012
USD
442,203
46,583
488,786
-
488,786
30 June 2011
USD
581,906
207,831
789,737
-
789,737
The Company’s exposure to foreign currency risk at 30 June 2012 was nil (2011:Nil).
The following significant exchange rates applied during the year:
AUD
USD
Average rate
2012
0.09695
2011
0.9892
Reporting date spot rate
2012
0.9842
2011
1.0596
36
Azure Minerals Limited - Financial Statements
Notes continued
2 .
FINANCIAL RISK MANAGEMENT (Cont’d)
Sensitivity analysis
Over the reporting period there have been significant movements in the Australian dollar when compared to other currencies, it is
therefore considered reasonable to review sensitivities base on a 10% movement in the Australian dollar. A 10 percent strengthening of
the Australian dollar against the following currencies at 30 June would have increased equity and decrease loss by the amounts shown
below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same
basis for 2011.
30 June 2012
USD
30 June 2011
USD
Consolidated
Equity
Profit or loss
48,879
48,879
78,974
78,974
A 10 percent weakening of the Australian dollar against the above currencies at 30 June would have had the equal but opposite effect on
the above currencies to the amounts shown above, on the basis that all other variables remain constant.
Interest rate risk
Interest rate risk is the risk that the Groups financial position will be adversely affected by movements in interest rates that will increase
the costs of floating rate debt or opportunity losses that may arise on fixed rate borrowings in a falling interest rate environment. The
Group does not have any borrowings therefore is not exposed to interest rate risk in this area. Interest rate risk on cash and short term
deposits is not considered to be a material risk due to the short term nature of these financial instruments.
At the reporting date the interest rate profile of the Company’s and the Group’s interest-bearing financial instruments was:
Variable rate instruments
Short term cash deposits
Consolidated
Carrying amount
2012
2011
675,571
4,474,954
Cash flow sensitivity analysis for variable rate instruments
The Group has reviewed the likely movements in interest rates and considers that a movement of +/- 100 basis points is reasonable.
Group Sensitivity
At 30 June 2012 if interest rates had changes +/- 100 basis points from year end rates with all other variables held constant, equity and post
tax profit would have been $6,889 higher /lower (2011 – change of 100 basis points: $44,749 higher/lower).
Fair values
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are as follows:
Consolidated
30 June 2012
30 June 2011
Trade and other receivables
Cash and cash equivalents
Other financial assets
Trade and other payables
Carrying amount
Fair value
Carrying amount
Fair value
332,594
643,525
45,378
(213,259)
332,594
643,525
45,378
(213,259)
879,826
4,689,383
45,378
(766,861)
879,826
4,689,383
45,378
(766,861)
The methods and assumptions used to estimate the fair value of instruments are:
Cash and cash equivalent: The carrying amount approximates fair value because of their short-term to maturity.
Receivables and payables: The carrying amount approximates fair value.
Available-for-sale financial assets: Quoted prices in active markets been used to determine the fair value of listed available-for-sale
investments (Level 1). The fair value of these financial assets has been based on the closing quoted bid prices at reporting date, excluding
transaction costs.
37
Azure Minerals Limited - Financial Statements
Notes continued
2 .
FINANCIAL RISK MANAGEMENT (Cont’d)
Capital Management
The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide
returns for shareholders and benefits of other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets.
There were no changes in the Group’s approach to capital management during the year.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
3.
CRITICAL ACCOUNTING ESTIMATES AND SIGNIFICANT JUDGEMENTS
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and
liabilities within the next annual reporting period are:
Share based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the
date at which they are granted. The fair value is determined by an internal valuation using a Binomial option pricing model.
Exploration and evaluation costs
Exploration and evaluation costs are written off in the year they are incurred apart from acquisition costs which are carried forward where
right of tenure of the area of interest is current. The future recoverability of exploration and evaluation expenditure is dependent on a
number of factors, including whether the Group decides to exploit the related lease itself, or, if not, whether it successfully recovers the
related exploration and evaluation assets through sale.
Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which could
impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity
prices.
To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets
will be reduced in the period in which this determination is made.
Deferred tax assets
Deferred tax assets are recognised for deductible temporary differences when management considers that it is probable that future taxable
profits will be available to utilise those temporary differences.
SEGMENT INFORMATION
4.
The Company currently does not have production and is only involved in exploration. As a consequence, activities in the operating
segments are identified by management based on the manner in which resources are allocated, the nature of the resources provided and the
identity of service line manager and country of expenditure. Discrete financial information about each of these areas is reported to the
executive management team on a monthly basis.
Based on this criteria, management has determined that the company has one operating segment being mineral exploration in Mexico. As
the company is focused on mineral exploration, the Board monitors the company based on actual versus budgeted exploration expenditure
incurred by area of interest. These areas of interest meet aggregating criteria and are aggregated into one reporting sector. This internal
reporting framework is the most relevant to assist the Board with making decisions regarding the company and its ongoing exploration
activities, while also taking into consideration the results of exploration work that has been performed to date
Revenue from external sources
Reportable segment loss
Reportable segment assets
Reportable segment liabilities
30 June 2012
$
-
30 June 2011
$
-
(2,422,442)
(2,837,268)
1,834,693
(93,166)
1,410,312
(415,662)
38
Azure Minerals Limited - Financial Statements
Notes continued
4.
SEGMENT INFORMATION (cont’d)
Reconciliation of reportable segment loss
Reportable segment loss
Other profit
Unallocated:
- Salaries and wages
- Travel and accommodation
- Office costs
- Other corporate expenses
- Share based payments
- Profit on asset sales
- Depreciation
Loss before tax
Reconciliation of reportable segment assets
Reportable segment assets
Unallocated:
- Cash
- Trade and other receivables
- Investments
- Security deposits
- Office plant and equipment
Total assets
Reconciliation of reportable segment liabilities
Reportable segment liabilities
Unallocated:
- Trade and other payables
- Provisions
Total liabilities
REVENUE FROM CONTINUING OPERATIONS
5.
Other revenues
Interest
Bank interest
Total revenues from continuing operations
30 June 2012
$
30 June 2011
$
(2,422,442)
109,777
(2,837,268)
209,669
(682,377)
(216,121)
(107,191)
(314,825)
(48,480)
8,771
(39,442)
(648,148)
(209,491)
(120,207)
(578,085)
(245,835)
-
(32,440)
(3,712,330)
(4,461,805)
1,834,693
1,410,312
643,525
172,319
12,967
45,378
32,791
4,689,383
879,826
49,280
45,378
40,097
2,741,673
7,114,276
(93,166)
(415,662)
(120,094)
(111,074)
(324,334)
(351,200)
(171,644)
(938,506)
109,777
109,777
209,669
209,669
6.
EXPENSES
Loss before income tax includes the following specific expenses
Depreciation of plant and equipment
Exploration expenditure
Exploration expenditure reimbursement
Operating lease expenses
Superannuation
Provision for doubtful debt
39
32,440
39,442
3,982,806
4,094,247
(1,145,538)
(2,104,045)
129,658
60,401
36,967
35,100
-
426,978
Azure Minerals Limited - Financial Statements
Notes continued
7.
INCOME TAX
(a) Income tax expense
Current tax
Deferred tax
Adjustment for current tax of prior periods
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
Tax at the Australian tax rate of 30% (2010: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Share-based payments
Provision for doubtful debt
Sundry items
Movement in unrecognised temporary differences
Tax effect of current year foreign tax losses for which no deferred tax asset has been recognised
Difference in overseas tax rates
Tax effect of current year tax losses for which no deferred tax asset has been recognised
Income tax expense
(c) Unrecognised temporary differences
Deferred Tax Assets (at 30%)
On Income Tax Account
Capital raising costs
Prepayments
Depreciation of plant and equipment
Provisions
Carry forward tax losses
Carry forward tax losses – foreign
Other – tenement
Deferred Tax Liabilities (at 30%)
2012
$
-
-
-
-
(3,712,330)
(1,113,699)
14,544
128,093
56,341
(914,721)
(131,331)
1,063,337
(21,267)
3,982
-
-
3,935
16,099
37,823
5,011,558
3,787,244
719,934
9,576,593
-
2011
$
-
-
-
-
(4,461,805)
(1,338,542)
73,751
-
57,477
(1,207,314)
(110,770)
1,046,138
(20,923)
292,869
-
68,556
(3,737)
(16,675)
57,493
4,875,606
2,745,174
785,267
8,511,684
-
Deferred income tax assets have not been recognised as it is not probable that future profit will be available against which deductible
temporary differences can be utilised.
In addition to the above Australian estimated future income tax benefits the consolidated entity has incurred significant expenditure in
Mexico, some of which should give rise to taxable deductions. At this stage the company is unable to reliably estimate the quantity of such
future tax benefits.
There are no franking credits available.
8.
TRADE AND OTHER RECEIVABLES
Current
Prepayments
Sundry Receivables (a)
Provision for doubtful debt (b)
15,159
744,413
(426,978)
332,594
16,494
863,332
-
879,826
(a) Except as described in (b) below, these amounts generally arise from activities outside the usual operating activities. Interest is not
usually charged and collateral is not obtained. For the Group the receivable principally arises from consumption taxes paid to third
party suppliers for which a refund from tax authorities is expected.
There are no impaired sundry receivables and no past due but not impaired receivables.
40
Azure Minerals Limited - Financial Statements
Notes continued
8.
TRADE AND OTHER RECEIVABLES (cont’d)
(b) Minera Piedra Azul C.A. de C.V.(“MPA”) a 100% owned, Mexican incorporated subsidiary of the Company is in dispute with
Mexican tax authorities over claims made in its 2008 income tax return. As a result of the dispute, Mexican tax authorities have
imposed a fine of $426,978 on MPA, which it has paid under protest. MPA is in the process of appealing the decision and until all
appeal avenues have been exhausted the Group will carry the amount paid as a receivable. Given that the appeal may be
ultimately disallowed a provision against the full amount has been made.
(c) Refer to note 2 for information on the risk management policy of the Group and the credit quality of the Groups receivables.
9.
AVAILABLE FOR SALE INVESTMENTS
Listed shares at fair value (a)
Stoneshield Capital Corp.
2012
$
2011
$
12,967
49,280
(a) Available-for-sale investments consist of investments in ordinary shares, and therefore have no fixed maturity date or coupon rate.
Stoneshield Capital Corp. is listed on the Toronto Venture Exchange. Fair value has been determined directly by reference to
published quotations on active markets. Also refer to Note 2 – Financial Risk Management.
At Cost
Impairment
Fair value adjustment to reserve
Fair value at 30 June
10. PLANT AND EQUIPMENT
Consolidated
At 1 July 2010
Cost
Accumulated Depreciation
Net Book Amount
Year ended 30 June 2011
Opening net book value
Additions
Disposals
Depreciation on disposals
Depreciation Charge
Foreign exchange translation adjustment
Closing net book amount
At 30 June 2011
Cost
Accumulated Depreciation
Net Book Amount
Year ended 30 June 2012
Opening net book value
Additions
Disposals
Depreciation on disposals
Depreciation Charge
Foreign exchange translation adjustment
Closing net book amount
At 30 June 2012
Cost
Accumulated Depreciation
Net Book Amount
40,944
-
(27,977)
12,967
40,944
-
8,336
49,280
Furniture, fittings
and equipment
$
Motor
Vehicles
$
Exploration
Equipment
$
Total
317,210
(259,605)
57,605
68,050
(47,300)
20,750
38,908
(16,369)
22,539
424,168
(323,274)
100,894
57,605
55,274
-
-
(22,796)
(3,160)
86,923
20,750
-
-
-
(6,759)
(2,275)
11,718
22,539
2,849
-
-
(2,889)
(2,544)
19,957
100,894
58,123
-
-
(32,440)
(7,979)
118,598
366,908
(279,985)
86,923
59,798
(48,080)
11,718
38,465
(18,508)
19,957
465,171
(346,573)
118,598
86,923
13,168
-
-
(24,557)
(3,920)
71,614
11,718
37,507
(21,650)
19,677
(11,967)
(819)
34,466
19,957
6,968
-
-
(2,918)
(3,099)
20,908
118,598
57,643
(21,650)
19,677
(39,442)
(7,838)
126,988
373,935
(302,321)
71,614
70,744
(36,278)
34,466
41,581
(20,673)
20,908
486,260
(359,272)
126,988
41
Azure Minerals Limited - Financial Statements
Notes continued
2012
$
2011
$
11. CAPITALISED EXPLORATION EXPENDITURE (NON-CURRENT)
At Cost
Reconciliations
Movement in the carrying amounts of capitalised exploration expenditure between the
beginning and end of the current financial year
1,580,221
1,331,811
Opening net book amount
Additions
Disposals
Closing net book amount
1,331,811
248,410
-
1,580,221
1,109,034
222,777
-
1,331,811
Recovery of the capitalised amount is dependent upon successful development and commercial exploitation, or alternatively, sale.
12. OTHER FINANCIAL ASSETS (NON-CURRENT)
Security Deposit
45,378
45,378
These financial assets are carried at cost.
13. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 1(a):
Name
Country of incorporation
Class of shares
Equity Holding*
2012
%
100
100
100
100
2011
%
100
100
100
-
Azure Mexico Pty Ltd
Minera Piedra Azul, S.A. de C.V
Minera Capitana S.A. de C.V
Az-Perth S.A. de C.V.
Australia
Mexico
Mexico
Mexico
Ordinary
Ordinary
Ordinary
Ordinary
*Percentage of voting power is in proportion to ownership
14. TRADE AND OTHER PAYABLES (CURRENT)
Trade payables
213,259
766,861
Information about the Groups financial risk management policies is disclosed in note 2.
15. PROVISIONS
CURRENT
Employee benefits
Non-executive directors retirement benefits
NON-CURRENT
Employee benefits
68,388
-
68,388
56,948
77,011
133,959
42,687
37,686
The provisions for employee benefits include accrued annual leave and long service leave. For long service leave it covers all unconditional
entitlements where employees have completed the required period of service. Based on past experience employee entitlements that
represent annual leave are presented as current and employee entitlements that are in relation to long serve leave are present as non-current.
42
Azure Minerals Limited - Financial Statements
Notes continued
16. CONTRIBUTED EQUITY
(a) Share capital
Ordinary shares fully paid
Total consolidated contributed equity
(b) Movements in ordinary share capital
1 July opening balance
Issue at $0.09 per share
Share issue expenses
30 June closing balance
Consolidated
2012
Number of shares
394,000,000
394,000,000
2011
$
39,592,568
39,592,568
Number of shares
394,000,000
394,000,000
$
39,592,568
39,592,568
2012
2011
Number of
shares
394,000,000
-
-
394,000,000
$
39,592,568
-
-
39,592,568
Number of
shares
343,217,666
50,782,334
-
394,000,000
$
35,250,678
4,570,410
(228,520)
39,592,568
Funds raised from the share issue during the 2011 year were used to progress the company’s exploration activities and for general working
capital.
(c) Movements in unlisted options on issue
1 July Opening Balance
Issued during the year
-Exercisable at 13.0 cents, on or before 30 Nov 2013
- Exercisable at 4.9 cents, on or before 30 Nov 2014
Forfeited during the year
- Exercisable at 25 cents, on or before 30 Nov 2008
- Exercisable at 17.5 cents, on or before 31 Jan 2011
- Exercisable at 25 cents on or before 31 Jun 2012
- Exercisable at 25 cents, on or before 30 Nov 2012
30 June closing balance
Further information on options issued is set out in note 28.
(d) Ordinary shares
Number of options
2012
2011
18,400,000
14,800,000
-
4,500,000
3,000,000
-
-
-
(400,000)
(500,000)
(400,000)
(500,000)
-
-
20,500,000
18,400,000
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the
number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a
poll each share is entitled to one vote.
For further information on Capital Management refer to Note 2.
43
Azure Minerals Limited - Financial Statements
Notes continued
17. RESERVES AND ACCUMULATED LOSSES
Accumulated losses
Balance at beginning of year
Loss for the year
Balance at end of year
Share-based payments reserve
Balance at beginning of year
Movement during the year
Balance at end of year
Available-for-sale assets reserve
Balance at beginning of year
Revaluation
Balance at end of year
Foreign currency translation reserve
Balance at beginning of year
Movement during the year
Balance at end of year
2012
$
2011
$
34,582,966
3,712,330
30,121,161
4,461,805
38,295,296
34,582,966
1,510,777
48,480
1,559,257
1,264,942
245,835
1,510,777
8,336
(36,313)
(27,977)
-
8,336
8,336
(352,945)
(58,268)
(411,213)
(226,534)
(126,411)
(352,945)
(a) Nature and purpose of reserves
Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options issued but not exercised.
Available-for-sale assets reserve
This reserve records fair value changes on available-for-sale investments. Amounts are recognised in profit and loss when the associated
assets are sold or impaired.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the statements of foreign
subsidiaries.
18. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES
No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made.
19. STATEMENT OF CASH FLOWS
(a) Cash and cash equivalents (refer note 2)
Cash and cash equivalents comprises:
(cid:16) cash at bank and in hand
(cid:16) short-term deposits
Closing cash and cash equivalents balance
26,038
617,487
643,525
214,429
4,474,954
4,689,383
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.
Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of
the Group, and earn interest at the respective short-term deposit rates.
44
Azure Minerals Limited - Financial Statements
Notes continued
(b) Reconciliation of the net loss after income tax to
the net cash flows from operating activities
Net loss
Depreciation of non-current assets
Share based payment expense
Loss (Profit) on equipment sales
Foreign exchange differences
Provision for doubtful debt
Investments – non cash
Changes in operating assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in prepayments
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Net cash outflow from operating activities
2012
$
2011
$
(3,712,330)
39,442
48,480
(8,771)
1,934
426,978
-
(94,829)
1,006
(340,787)
(65,571)
(3,704,448)
(4,461,805)
32,440
245,835
-
(3,644)
-
(40,944)
(723,435)
145
523,671
28,711
(4,399,026)
(c) Non-cash financing and investing activities
There have been no non-cash financing and investing activities during the 2012 year (2011: Nil).
20. COMMITMENTS
(a) Exploration commitments
The company has certain commitments to meet minimum expenditure requirements on the mineral exploration assets it has an interest
in. Outstanding exploration commitments which are expected to be met in the normal course of business are as follows:
Not later than one year
120,902
118,747
(b) Option payments
The company has entered into option agreements to acquire a 100% interest in the Promontorio project located in the northern Mexican
state of Chihuahua within the richly mineralised Sierra Madre Occidental mining province. In order to retain the right to acquire the
Promontorio project option payments must be made as follows:
Not later than one year
Later than one year and not later than five years
3,000,966
-
314,944
2,716,392
(c) Lease expenditure commitments
Operating leases (non-cancellable):
Minimum lease payments
not later than one year
later than one year and not later than five years
Aggregate lease expenditure contracted for at
reporting date
3,031,336
3,000,966
64,364
-
146,421
61,930
64,364
208,351
The property lease is a non-cancellable lease with a three-year term ending 31 December 2012, rent is payable monthly in advance. The
lease allows for subletting of all leased areas and excess off space has been sub-let the related third parties as disclosed in Note 26(d).
21. CONTINGENCIES
There are no material contingent liabilities or contingent assets of the company at reporting date.
45
Azure Minerals Limited - Financial Statements
Notes continued
22. EVENTS OCCURING AFTER BALANCE SHEET DATE
Since the end of the reporting date the Group has conducted a share purchase plan (“Plan”). This will result in the Group issuing
118,000,100 shares at an issue price of 1.8 cents per share to raise $2,124,000. In addition on 21 September 2012 the Group received
commitments to participate in a share placement of 39,000,000 fully paid ordinary shares at $0.018 each to raise $702,000. Options
exercisable at 2 cents each and expiring 2 years from their issue date will also be allocated on the basis of one free option for every two
shares subscribed under the placement.
No other matter or circumstance has arisen since the end of the financial year which significantly affected or may significantly affect the
operations of the group, the results of those operations, or the state of affairs of the group in future financial years
23. LOSS PER SHARE
(a) Reconciliation of earnings to profit or loss
Net loss
Loss used in calculating basic loss per share
2012
$
2011
$
(3,712,330)
(3,712,330)
(4,461,805)
(4,461,805)
CONSOLIDATED
Number of
shares
2012
Number of
shares
2011
(b) Weighted average number of ordinary shares outstanding
during the year used in calculating basic loss per share
Weighted average number of ordinary shares used in
calculating basic loss per share
394,000,000 359,680,071
(c) Effect of dilutive securities
Options on issue at reporting date could potentially dilute basic earnings per share in the future. The effect in the current year is to
decrease the loss per share hence they are considered antidilutive. Accordingly diluted loss per share has not been disclosed.
24. AUDITORS’ REMUNERATION
Amounts received or due and receivable by BDO
Audit (WA) Pty Ltd or associated entities for:
Tax compliance services
Other
An audit or review of the financial report of the entity
Remuneration of other auditors of subsidiaries
Audit or review of financial report of subsidiaries
25. KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Compensation of key management personnel by compensation
Short-term
Post employment
Share-based payment
Consolidated
2012
$
2011
$
12,289
550
44,641
57,480
8,989
325
35,435
44,749
8,531
10,201
Consolidated
2012
$
563,867
113,978
48,480
726,325
2011
$
543,120
35,100
245,835
824,055
For further information refer to the Remuneration Report included as part of the Director’s Report.
(b) Shares issued on exercise of compensation options
There were no shares issued on exercise of compensation options during the year.
46
Azure Minerals Limited – Financial Statements
Notes continued
25. KEY MANAGEMENT PERSONNEL DISCLOSURES (cont’d)
(c) Option holdings of key management personnel
2012
Balance at
beginning of
year
1 July 2011
Granted as
Remuneration
Options
Exercised
Options
Lapsed
Balance at end
of year
30 June 2012
Vested at 30 June 2011
Vested &
Exercisable
Unvested
Directors
Wolf Gerhard Martinick
Peter Anthony Ingram
Anthony Paul Rovira
John Walter Saleeba
Executives
Brett Dickson
Total
2011
Directors
Wolf Gerhard Martinick
Anthony Paul Rovira
John Walter Saleeba
Executives
Brett Dickson
Total
2,900,000
-
8,000,000
2,500,000
-
3,000,000
-
-
5,000,000
-
18,400,000
3,000,000
-
-
-
-
-
-
(400,000)
-
(500,000)
-
2,500,000
3,000,000
7,500,000
2,500,000
2,500,000
3,000,000
7,500,000
2,500,000
-
5,000,000
5,000,000
(900,000)
20,500,000
20,500,000
-
-
-
-
-
-
Balance at
beginning of
year
1 July 2010
Granted as
Remuneration
Options
Exercised
Options
Lapsed
Balance at end
of year
30 June 2011
Vested at 30 June 2011
Unvested
Vested &
Exercisable
2,800,000
6,500,000
2,000,000
500,000
2,000,000
500,000
3,500,000
1,500,000
14,800,000
4,500,000
-
-
-
-
-
(400,000)
(500,000)
-
2,900,000
8,000,000
2,500,000
2,900,000
8,000,000
2,500,000
-
5,000,000
5,000,000
(900,000)
18,400,000
18,400,000
-
-
-
-
-
(d) Shareholdings of key management personnel
Balance
1 July
Ord
Granted
Ord
On Exercise
of Options
Ord
Net Change
Other
Balance
30 June
Balance
Indirectly Held
Ord
Ord
Ord
2012
Directors
Wolf G Martinick
Anthony P Rovira
Peter A Ingram
John W Saleeba
Executives
Brett Dickson
Total
1,540,000
3,200,000
-
2,669,600
112,000
7,521,600
-
-
-
-
-
-
-
100,000
-
-
-
100,000
1,540,000
3,300,000
-
2,669,600
112,000
7,621,600
-
1,880,000
-
2,669,600
40,000
4,589,600
-
-
-
-
-
-
47
Azure Minerals Limited – Financial Statements
Notes continued
25. KEY MANAGEMENT PERSONNEL DISCLOSURES (cont’d)
(d) Shareholdings of key management personnel (cont’d)
Balance
1 July
Ord
Granted
Ord
On Exercise
of Options
Ord
Net Change
Other
Balance
30 June
Balance
Indirectly Held
Ord
Ord
Ord
2011
Directors
Wolf G Martinick
Anthony Paul Rovira
John Walter Saleeba
Executives
Brett Dickson
Total
1,540,000
3,200,000
2,669,600
112,000
7,521,600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,540,000
3,200,000
2,669,600
112,000
7,521,600
-
1,880,000
2,669,600
40,000
4,589,600
26. RELATED PARTY DISCLOSURES
(a) Parent entity
The ultimate parent entity within the Group is Azure Minerals Limited.
(b) Subsidiaries
Loans to subsidiaries
Beginning of the year
Loans advanced
Loans Repaid
Allowance for impairment
End of year
Parent Entity
2012
$
9,939,795
4,278,684
-
(3,823,578)
10,394,901
2011
$
6,167,053
3,772,742
-
-
9,939,795
It is the intention of each subsidiary to repay outstanding loans through the successful exploitation or sale of its mineral assets. During
the year Minera Capital S.A. de C.V. disposed of all its assets and accordingly the Parent Entity made an allowance of $3,823,578
against loans advanced to its Mexican subsidiary Minera Capital , S.A. de C.V.
No other provision for doubtful debts have been raised in relation other outstanding balances, and no other expense has been recognised
in respect of bad or doubtful debts due from related parties.
(c) Key management personnel
Disclosures relating to key management personnel are set out in note 25.
(d) Other Related Transactions
The Company has entered into a sub-lease agreement on normal commercial terms with Oro Verde Limited, a company of which Wolf
Martinick is a director and Brett Dickson is Company Secretary. During the year Ezenet Limited paid sub-lease fees totalling $4,800
(2011: $4,800).
The Company has also entered into a sub-lease agreement on normal commercial terms with Rox Resources Limited, a company of
which Brett Dickson is Company Secretary. During the year Rox Resources Limited paid sub-lease fees totalling $98,406 (2011:
$68,520).
27.
INTERESTS IN JOINT VENTURES
The company has interests in the following joint ventures:
Joint Venture
(a)
JOGMEC
Activities
Copper
Interest
100%
Carrying Value $
NIL
Under the joint venture agreement JOGMEC may earn a 51% interest in the La Tortuga and Los Nidos projects by spending US$3
million by 31 March 2012. At 30 June 2012 JOGMEC had spend approximately US$2,171,944 (2011: US$1,858,753).
48
Azure Minerals Limited – Financial Statements
Notes continued
27.
INTERESTS IN JOINT VENTURES (cont’d)
(b)
JOGMEC
Copper
100%
NIL
The Group has entered into a joint venture with JOGMEC covering the El Tecolote project. Pursuant to the agreement JOGMEC
may earn a 51% interest in the project by spending US$5 million. JOGMEC may earn a further 19% interest by spending a further
US$8 million. At 30 June 2012 JOGMEC had spent approximately US$2,138,118 (2011: US$341,387).
28. SHARE-BASED PAYMENTS
The group has issued options pursuant to an Employee Share plan and also Director Options Issued pursuant to approval obtained by shareholders
at a General Meeting. Details of each issue is set out below:
(a) Employee and consultants option plan
The establishment of the Azure Minerals Limited – Employees and Contractors Option Incentive Plan (“Plan”) was approved by shareholders at
the 2004 Annual General Meeting. The plan is designed to provide long-term incentives for employees and certain contractors to deliver long
term shareholder returns. Participation in the plan is at the Boards discretion and no individual has a contractual right to participate in the plan or
to receive guaranteed benefits. In addition, under the Plan, the Board determines the terms of the options including exercise price, expiry date and
vesting conditions, if any.
Options granted under the plan carry no dividend or voting rights. When exercised, each option is convertible into an ordinary share of the
company with full dividend and voting rights.
Set out below are summaries of options granted under the plan.
2012
Grant Date
Expiry Date
Exercise
Price
(cents)
6 Dec ‘06
6 Dec ‘06
31 Jan ‘12
31 Jan ‘13
25.0
35.0
Value per
option at
grant date
(cents)
3.64
3.45
Weighted average exercise price
2011
6 Dec ‘06
6 Dec ‘06
6 Dec ‘06
31 Jan ‘11
31 Jan ‘12
31 Jan ‘13
17.5
25.0
35.0
3.74
3.64
3.45
Weighted average exercise price
Balance of
the start of
the year
Number
500,000
500,000
1,000,000
$0.30
500,000
500,000
500,000
1,500,000
$0.258
Granted
during
the year
Number
Exercised
during the
year
Number
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Lapsed
during the
year
Number
(500,000)
-
(500,000)
$0.25
(500,000)
(500,000)
$0.175
Balance at
end of the
year
Number
-
500,000
500,000
$0.35
-
500,000
500,000
1,000,000
$0.30
Vested and
exercisable at
end of the year
Number
-
500,000
500,000
$0.35
-
500,000
500,000
1,000,000
$0.30
No options were exercised during the periods covered by the above tables. During the year 500,000 lapsed (2011: 500,000).
The weighted average remaining contractual life of share options outstanding at the end of the period was 0.59 years (2011: 1.09 years).
Fair value of options granted.
Options are granted for no consideration. No options were granted pursuant to the Plan during the 2012 or 2011 financial years.
49
Azure Minerals Limited – Financial Statements
Notes continued
28. SHARE-BASED PAYMENTS (cont’d)
(b) Directors and executive options
Set out below are summaries of Directors options granted.
2012
Grant Date
Expiry Date
Exercise
Price
(cents)
9 Dec ‘11
24 Dec ‘07
9 Dec ‘09
14 Dec ‘10
30 Nov‘14
31 Jan ‘12
30 Nov‘12
30 Nov‘13
4.9
25.0
8.8
13.0
Weighted average exercise price
Value per
option at
grant
date
(cents)
1.6
11.7
2.9
5.5
Balance at
the start of
the year
Number
Granted
during
the year
Number
Exercised
during the
year
Number
Lapsed
during the
year
Number
Balance at
end of the year
Number
400,000
12,500,000
4,500,000
17,400,000
$0.103
- 3,000,000 -
-
-
-
-
-
-
-
3,000,000
-
$0.049
-
(400,000)
-
-
(400,000)
$0.25
3,000,000
-
12,500,000
4,500,000
20,000,000
$0.092
Vested and
exercisable at
end of the
year
Number
3,000,000
-
12,500,000
4,500,000
20,000,000
$0.092
2011
24 Dec ‘07
24 Dec ‘07
9 Dec ‘09
14 Dec ‘10
31 Jan‘11
31 Jan ‘12
30 Nov‘12
30 Nov‘13
25.0
25.0
8.8
13.0
10.2 400,000 - -
-
11.7
-
2.9
-
5.5
-
400,000
12,500,000
-
13,300,000
-
-
4,500,000
4,500,000
(400,000)
-
-
-
(400,000)
- -
400,000
12,500,000
4,500,000
17,400,000
400,000
12,500,000
4,500,000
17,400,000
The weighted average remaining contractual life of share options outstanding at the end of the period was 0.9 years (2011: 1.6 years).
Fair value of director options granted.
Options are granted for no consideration. During the 2012 financial year the weighted average fair value of the options granted was 1.6 cents
(2011: 5.5 cents). The price was calculated by using the Binominal Option valuation methodology applying the following inputs:
Weighted average exercise price
Weighted average life of the option
Weighted average underlying share price
Expected share price volatility
Risk free interest rate
2012
4.9 cents
3.0 years
2.8 cents
110%
3.68%
2011
13.0 cents
3 years
8.6 cents
115%
5.25%
Historical volatility has been the basis for determining expected share price volatility as it assumed that this is indicative of future trends, which
may not eventuate.
The life of the options is based on historical exercise patterns, which may not eventuate in the future.
Total expenses arising from share-based payment transactions recognised during the year were as follows:
Options issued to directors and executives
Consolidated
2012
$
2011
$
48,480
245,835
50
Azure Minerals Limited – Financial Statements
Notes continued
29. PARENT ENTITY FINANCIAL INFORMATION
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Statement of Financial Position
Current assets
Total assets
Current liabilities
Total liabilities
Shareholder’s equity
Issued capital
Reserves
Share-based payments
Accumulated loses
2012
$
11,152,664
11,244,484
188,482
231,169
2011
$
14,959,150
15,094,796
487,159
522,845
39,592,568
39,592,568
1,531,280
(30,110,532)
11,013,315
1,519,113
(26,539,730)
14,571,951
(b) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2012 or 30 June 2011.
(c) Contracted commitments for the acquisition of property, plants or equipment
The parent entity did not have any commitments for the acquisition of property, plants or equipment.
51
Tel: +8 6382 4600
Fax: +8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF AZURE MINERALS LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Azure Minerals Limited, which comprises the
consolidated statement of financial position as at 30 June 2012, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, notes comprising a summary of significant
accounting policies and other explanatory information, and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or from
time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act
2001 and for such internal control as the directors determine is necessary to enable the preparation
of the financial report that gives a true and fair view and is free from material misstatement,
whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial statements comply 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. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about 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
company’s preparation of the financial report that gives a true and fair view 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 company’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.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,
which has been given to the directors of Azure Minerals Limited, would be in the same terms if
given to the directors as at the time of this auditor’s report.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards
Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
53
Opinion
In our opinion:
(a) the financial report of Azure Minerals Limited is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June
2012 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
(b) the financial report also complies with International Financial Reporting Standards as disclosed
in Note 1.
Material Uncertainty Regarding Continuation as a Going Concern
Without qualifying our opinion, we draw attention to note 1 in the financial report which indicates
that the company incurred a net loss of $3,712,330 for the year ended 30 June 2012, and, as at that
date, the company experienced net cash outflows from operating activities of $3,704,448. These
conditions along with other matters as set forth in note 1 of the financial report indicate the
existence of a material uncertainty which may cast significant doubt on the entity’s ability to
continue as a going concern and therefore whether it will realise its assets and extinguish its
liabilities in the normal course of business and at the amounts stated in the financial report.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30
June 2012. 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.
Opinion
In our opinion, the Remuneration Report of Azure Minerals Limited for the year ended 30 June 2012
complies with section 300A of the Corporations Act 2001.
BDO Audit (WA) Pty Ltd
Peter Toll
Director
Perth, Western Australia
Dated this 24th day of September 2012
54
Tel: +8 6382 4600
Fax: +8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
24 September 2012
Chairman of Audit Committee
Azure Minerals Limited
Level 1 30 Richardson Street
WEST PERTH WA 6005
Dear Sir,
DECLARATION OF INDEPENDENCE BY PETER TOLL TO THE DIRECTORS OF AZURE MINERALS
LIMITED
As lead auditor of Azure Minerals Limited for the year ended 30 June 2012, I declare that, to the
best of my knowledge and belief, there have been no contraventions of:
(cid:127)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
(cid:127)
any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Azure Minerals Limited and the entities it controlled during the
period.
Peter Toll
Director
BDO Audit (WA) Pty Ltd
Perth, Western Australia
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards
Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
55
Azure Minerals Limited – Financial Statements
ASX Additional Information
The number of shareholders, by size of holding, in each class of share as at 18 September 2012 are:
1
1,001
5,001
10,001
100,001
-
-
-
-
1,000
5,000
10,000
100,000
and over
The number of shareholders holding less than a marketable parcel of shares are:
(b) Twenty largest shareholders
The names of the twenty largest holders of quoted shares are:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Yandal Investments Pty Ltd
HSBC Custody Nominees
Citicorp Nominees Pty Limited
ASIPAC Group Pty Ltd
International Commodity Finance Limited
Alchemy Securities Pty Ltd
JP Morgan Nominees Australia Limited
Mr Thomas Fritz Ensmann
Dr Lyndsay George McDonald Gordon
Mr Peter Murray Nicholas
Investec Bank (Australia) Ltd
Mr Kevin Chan + Miss Renata Hiu Fong Jian
Novacarta Pty Ltd
Poluru Pty Ltd
Cathies Lane Pty Ltd
Fleurbow Pty Ltd
Mr Anthony Paul Rovira
Mooroolbark International Pty Ltd
Mr Phillip Wood
Forsyth Barr Custodians Ltd
Ordinary shares
Number of holders Number of shares
139
197
637
1,713
617
3,303
1,611
12,839
735,562
5,658,173
75,363,967
312,229,459
94,000,000
17,842,031
Listed ordinary shares
Number of shares
29,152,200
21,356,928
6,221,530
5,555,555
5,555,555
5,026,785
4,958,103
4,160,816
3,501,833
3,400,000
3,100,000
3,036,694
2,912,500
2,900,000
2,500,000
2,489,140
2,420,000
2,413,000
2,400,000
2,220,558
115,281,197
Percentage of
ordinary shares
7.40
5.42
1.58
1.41
1.41
1.28
1.26
1.06
0.89
0.86
0.79
0.77
0.74
0.74
0.63
0.63
0.61
0.61
0.61
0.56
29.26
(c) Substantial shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001
are:
Yandal Investments Pty Ltd
(d) Voting rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
Number of Shares
29,152,200
56
Azure Minerals Limited – Financial Statements
ASX Additional Information
(e) Schedule of interests in mining tenements
Common Name
Pozo de Nacho
Estacion Llano
Los Chinos
La Tortuga
Los Nidos
El Tecolote
San Juan
San Eduardo
Promontorio
Pozo de Nacho
Pozo de Nacho 2 - Fracc. 1
Pozo de Nacho 2 - Fracc. 2
Pozo de Nacho 3
Estacion Llano
Los Chinos
La Tortuga
La Tortuga II
Los Nidos
Los Nidos II
El Tecolote
El Tecolote II
El Tecolte III
El Tecolte III-A
San Juan
San Juan II
San Eduardo
San Eduardo 2 Frac 1
San Eduardo 2 Frac 2
San Eduardo 2 Frac 3
Hidalgo
Promontorio
El Magistral
Promontorio Regional
1.
2.
JOGMEG earning a 51% interest
Azure has an option to purchase 100%
Tenement
222873
225057
225058
228563
227017
231815
230422
233462
231051
234294
230771
236795
234586
239384
228839
222952
232387
236796
236797
236798
235270
235269
218881
234447
Percentage held / earning
100%
100%
100%
100%
100%
100%
100%1
100%1
100%1
100%1
100%1
100%1
100%1
100%1
100%
100%
100%
100%
100%
100%
100%2
100%2
100%2
100%
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
57