Cazaly Resources Limited
ABN: 23 101 049 334
and
Controlled Entities
Annual Report
For the Year Ended
30 June 2010
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
CONTENTS
Corporate Directory
Directors’ Report
Auditors’ Independence Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Shareholder Information
3
4
16
17
18
19
20
21
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Annual Report 2010
Cazaly Resources Limited and Controlled Entities
CORPORATE DIRECTORY
MANAGING DIRECTOR
Nathan McMahon
MANAGING DIRECTOR
Clive Jones
NON-EXECUTIVE DIRECTOR
Kent Hunter
COMPANY SECRETARY
Lisa Wynne
PRINCIPAL & REGISTERED OFFICE
Level 2, 38 Richardson Street
WEST PERTH WA 6005
Telephone: (08) 9322 6283
Facsimile: (08) 9322 6398
AUDITORS
Bentleys
Level 1,
12 Kings Park Road
WEST PERTH WA 6005
SHARE REGISTRAR
Advanced Share Registry Services
150 Stirling Highway
NEDLANDS WA 6009
Telephone: (08) 9389 8033
Facsimile: (08) 9389 7871
STOCK EXCHANGE LISTING
Australian Securities Exchange
(Home Exchange: Perth, Western Australia)
Code: CAZ
BANKERS
National Australia Bank
50 St Georges Terrace
PERTH WA 6000
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Annual Report 2010
Cazaly Resources Limited and Controlled Entities
DIRECTORS' REPORT
Your directors present their report, together with the financial statements of the company and its
controlled entities (“Economic Entity”) for the financial year ended 30 June 2010.
1.
DIRECTORS
The names of directors in office at any time during or since the end of the year are:
Nathan McMahon
Clive Jones
Kent Hunter
Directors have been in office since the start of the financial year to the date of this report unless
otherwise stated.
COMPANY SECRETARY
The following person held the position of company secretary at the end of the financial year:
Lisa Wynne
Ms Wynne has a Bachelor of Commerce and is a Chartered Accountant with significant
experience working with listed entities in senior financial roles responsible for management and
financial reporting, taxation, and ensuring continuous disclosure and compliance. Lisa
presently works with a number of emerging ASX listed resource companies and specialises in
financial and company secretarial transaction and corporate work.
2.
PRINCIPAL ACTIVITIES
The principal activity of the Economic Entity during the financial period was mineral
exploration.
There were no significant changes in the nature of the Economic Entity’s principal activities
during the financial period.
3.
OPERATING RESULTS
The loss of the Economic Entity after providing for income tax amounted to $1,370,163 (2009:
$5,290,296).
4.
DIVIDENDS PAID OR RECOMMENDED
The directors do not recommend the payment of a dividend and no amount has been paid or
declared by way of a dividend to the date of this report.
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Annual Report 2010
Cazaly Resources Limited and Controlled Entities
5.
REVIEW OF OPERATIONS
Parker Range Iron Ore Project
Cazaly continued work on the Parker Range Pre-Feasibility Study (PFS) and results released shortly
after the end of December. Development work has been ongoing. The Parker Range Project lies
approximately 15 kilometres south-east of Marvel Loch and approximately 63 kilometres by road
south of the Perth–Kalgoorlie railway.
The PFS indicates very robust economics for the project which greatly benefits from its close location
to existing and accessible infrastructure including road, rail, port, power and township. This access
allows for the relatively rapid development and ramp up to planned full production of 4 Mtpa within
1.5 years. A Definitive Feasibility Study (DFS) into the project commenced following these results,
the initial phase of which incorporated a bridging programme of further metallurgical testwork.
The PFS study showed that the Company is on track to become the second major iron ore producer in
the Yilgarn region of Western Australia, behind Koolyanobbing Operations who have successfully
operated in the region for many years.
The study also highlighted Kwinana as the preferred export port over Esperance due to its closer
proximity and lower capital costs requirements.
The targeted fines only product has ultra-low phosphorous content and chemical properties which are
highly marketable (Table 1).
Table 1: Parker Range Target Product Specification
Ore
Type
Min
Max
Fe
%
56.0
57.5
CaFe* SiO2 AI2O3
%
%
%
P
%
Mn
TiO2 LOI
%
%
%
61.4
3.50
2.10
0.016
1.30
0.02
8.80
63.3
6.50
2.90
0.029
2.20
0.10
9.20
* CaFe: calcined Fe% grade
Resources and Mining
The PFS was based upon the existing October 2009 global resource for the Mount Caudan iron ore
deposit of 40.4mt @ 53.8% Fe as modelled by Runge Limited using a nominal 50% Fe wireframe.
From this an Indicated and Inferred resource estimate utilising a 52% Fe low cut resulted in a resource
of 28.7mt @ 55.4% Fe as follows;
Table 2: Mount Caudan Deposit Mineral Resource Estimate (52%Fe Cut-off Grade)
Type
Canga
Oxide
Total
Tonnes
t
1,342,000
27,363,000
28,705,000
Fe
%
53.5
55.5
55.4
CaFe
%
57.1
61.1
60.9
Al2O3
%
6.8
2.6
2.8
P
%
0.01
0.02
0.02
SiO2
%
8.6
6.5
6.6
LOI
%
6.3
9.2
9.0
Mn
%
0.9
1.3
1.3
S
%
0.06
0.08
0.08
Total
The Company did not declare an ore reserve as part of the PFS with this work to be completed in the
DFS. The existing resource model was utilised to estimate mineable resources which comprise 90%
Indicated and 10% Inferred material. Given the continuity of mineralisation and the close proximity of
inferred to indicated material the Company firmly expects that further planned drilling will readily
convert a reasonable proportion of the inferred resource material to indicated status which can then be
considered for conversion to an ore reserve as part of the DFS.
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Annual Report 2010
Cazaly Resources Limited and Controlled Entities
5.
REVIEW OF OPERATIONS
Metallurgy
Ore characterisation studies to date have largely been aimed at characterising the chemical and physical
properties of lump/fines and fines only ‘at shipment’ products and the beneficiation potential of the ore.
In summary, the ore has ultra-low phosphorus, carries acceptable levels of other potential impurities and
responds favourably to beneficiation.
Preliminary beneficiation test work undertaken to evaluate ore response to potential upgrading has
resulted in early success with wet-screening/de-sliming and gravity separation techniques. The work has
indicated that there is good potential to upgrade the ore, including lower grade (50-54% Fe) ore.
Subsequently, a systematic programme of metallurgical test work was commenced to further assess this
beneficiation potential. Based on physical attributes the ore can be classified as moderately strong in
comparison to Pilbara hematite ores and will be amenable to conventional crushing and screening
process technology.
Processing and Infrastructure
The study was based upon a process plant producing a single fines product at a nominal rate of 4 Mtpa.
The plant would incorporate a primary sizing/crushing circuit, with two stage secondary and tertiary
crushing, scalping screening, sampling and stockpiling of product fines by radial stacker. The ore will
then be transported by road from site to the rail head before being transported by rail to port. The plant
will have the flexibility to expand to incorporate beneficiation during Year 3 of operation.
There are two existing export port options at Esperance and Kwinana with both having potential for the
export of iron ore mined at Parker Range. The preferred option is the port of Kwinana, due to both
lower rail haulage distance and capital cost. Additionally, there are proposed a further two future port
options located at James Point (Kwinana) and Southern Mid-West Port (North of Perth), however best
case development for these is 2013.
Operations
The Company and its contractors anticipate employing up to 159 persons during the 4 Mtpa operations
phase with up to 124 persons on-site at any one time. Furthermore, during construction a workforce of
up to 250 people will be require to complete the project over a 12 month implementation program.
It is the intention of Cazaly to provide opportunities wherever possible to the local community in the
area. Cazaly will continue to work closely with the Yilgarn Shire Council and community to provide
these opportunities.
Pilbara Iron Ore Projects
Hamersley Project
A total of 9 drill holes were completed for 1,332m at the Winmar Deposit , located approximately
70km north of the township of Tom Price. The Winmar Deposit is a Channel Iron Deposit (CID) target
buried by modern alluvial drainage. Drilling tested extensions to mineralisation discovered in late
2008 as well as infilling previous drilling to determine mineralisation continuity.
Numerous significant results were returned with a best result of 60m @ 55.6% Fe. Mineralisation has
been intersected over a strike of 1km and is open in all directions. A small number of holes have also
intersected bedrock mineralisation (BID) beneath the CID providing additional scope for resources.
The conclusion of recent drill programmes has enabled the Company to estimate the maiden Inferred
Resource for the Winmar Deposit as follows;
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Annual Report 2010
Cazaly Resources Limited and Controlled Entities
5.
REVIEW OF OPERATIONS
Winmar Deposit - Inferred Resource Estimate
TOTAL
Ore
Type
Cut Off
Tonnes
Fe %
t
Detrital Iron
Channel Iron
Bedded Iron
40
52
52
36,090,000
92,260,000
14,880,000
Fe
%
45.81
54.92
54.97
%
47.05
58.44
59.32
P
%
SiO2
LOI
%
%
0.03
25.12
2.65
0.04
10.56
6.02
%
5.68
4.20
4.16
0.05
9.42
7.32
CaFe
Al2O3
Channel &
Bedded Iron
52
107,140,000
54.93
58.57
4.19
0.04
10.40
6.20
Total
40 / 52
143,230,000
52.63
55.58
4.57
0.04
14.11
5.31
NB: Calcined Fe (CaFe) calculated by the formula CaFe% = (Fe%)/(100-LOI1000))*100
Mineralisation occurs as three types; an Upper Detrital Zone, a Mid Level CID and a basement
Bedded Iron zone. Of these the CID mineralisation is the most pervasive and important. The zone
contains the bulk of the resource and has favourable chemical properties. A programme of
metallurgical test work is underway to examine a range of potential beneficiation techniques including
screening, scrubbing, heavy liquid separation and magnetic separation to further improve the chemical
properties of the ore.
Importantly, much of the target at Winmar has yet to be explored. The resource has been estimated
from over 1.5km of strike from a total target strike length of approximately 2.8km. The size of this
initial resource is substantially more than what was expected and accordingly the exploration target for
the deposit has now been revised upwards to 250 to 300mt @ 52-55% Fe (55-59% CaFe) based upon
the results to date and the geometric extent of the target. Note that the Company’s exploration target
includes potential quantity and grade and is conceptual in nature. There has been insufficient
exploration to define these extended mineral resources and it is uncertain if further exploration will
result in the determination of such further mineral resources.
Earaheedy Iron Ore Project
The Company has combined its tenement holdings in the Earaheedy Basin located in the central region
of Western Australia to form a 50/50 joint venture with Vector Resources Limited (ASX:VEC) to
principally explore for iron ore and manganese mineralisation. The project covers a very large area in
excess of 2,300 km2 including a substantial strike extent of the iron ore prospective Frere
Formation.Numerous targets have been identified and the company is currently negotiating access to
the tenements with the traditional owners.
The Earaheedy Basin was first explored for iron ore during the 1970’s, principally by BHP and
AMAX Exploration, who defined extensive areas of haematite enrichment with surface grades of up to
66% Fe. Subsequent work was very limited and only minimal drilling was conducted before work was
discontinued. Recent work however, by the Geological Survey of Western Australia and by other
companies, has reinvigorated exploration and highlighted the potential of the region to host major iron
ore deposits. The discovery of high grade manganese mineralisation by Zinc Co Australia within the
Earaheedy has also recently highlighted the potential of the region.
Whilst the project is at an early stage of development, the extent of known iron formations within the
host Frere Formation, the results from regional surface sampling and the results from other work in the
region highlights the great potential of the project to host several large scale deposits of haematite,
haematite-goethite and magnetite.
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Annual Report 2010
Cazaly Resources Limited and Controlled Entities
6.
FINANCIAL POSITION
The net assets of the Economic Entity have increased by $6,6 million from 30 June 2009 to $20.5
million in 2010, due to increased capital which has predominately been expended on the Parker Range
Project.
The Economic Entity has $3.4 million in cash assets as at 30 June 2010.
7.
FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES
The Economic Entity will continue its mineral exploration activity at and around its exploration
projects with the object of identifying commercial resources.
The Economic Entity will also continue to identifying new mineral exploration opportunities within
Australia and the rest of the world for further potential acquisitions which may offer value enhancing
opportunities for shareholders.
8.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
The following significant changes in the state of affairs of the Economic Entity occurred during the
financial period:
In July 2009, the Company issued 2,983,236 ordinary shares at a price of 16.5 cents pursuant to the
Non-Renounceable Entitlement Issue Prospectus dated 11 May 2009.
On 7 September 2009, the Company issued 2,377,040 ordinary shares at a deemed price of 27.5 cents
pursuant to an agreement to acquire Gondwana Resources Limited’s interest in the Parker Range
Project.
On 8 September 2009, the Company issued 680,450 ordinary shares at a deemed price of 27.5 cents
pursuant to an agreement to acquire William Robert Richmond’s interest in the Parker Range Project.
On 25 November 2009, the Company issued 823,801 ordinary shares at a deemed price of 24.28 cents
pursuant to an agreement to terminate the royalty arrangement between the Group and Carbine
Resources Ltd.
On 30 December 2009, the Company announced a placement to raise up to $2,240,000 by way of
placement of 4 million ordinary shares and 4 million 28 cent Options expiring 1 February 2010. The
ordinary shares and Options were issued on 31 December 2009. On 29 January 2010, the Options
were exercised and the Company issued 4 million ordinary shares.
On 7 April 2010, the Company issued 3 million ordinary shares by way of a Placement to a range of
leading institutions and sophisticated investors.
During May 2010 and June 2010, the Company issued 5,454,545 ordinary shares by way of a
Placement to a range of leading institutions and sophisticated investors.
During the financial period, the Company issued a total of 147,028 ordinary shares on exercise of
147,028 20 cent Listed Options expiring 28 February 2011.
On 17 June 2010, the Company announced that is had signed an agreement with Phoenix Gold Pty Ltd
to sell it’s West Kalgoorlie Gold assets, including the 100% owned subsidiary Hayes Mining Pty Ltd.
The sale is conditional on Phoenix receiving approval form the ASX for admission of its securities to
the official list and obtaining ministerial consents for tenement transfers to Phoeneix.
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Annual Report 2010
Cazaly Resources Limited and Controlled Entities
9.
AFTER BALANCE DATE EVENTS
On 15 July, the Company issued 1,084 Shares following the exercise of 1,084 20 cent Options
expiring 28 February 2011.
On 12 August, the Company issued 1,712 Shares following the exercise of 1,712 20 cent Options
expiring 28 February 2011.
On 25 August, the Company issued 1,000,000 Shares to Nathan McMahon following the exercise of
1,000,000 30 cent Options expiring 1 July 2011.
On 7 September, the Company issued 678,803 Shares to Nathan McMahon and related parties of
Nathan McMahon, following the exercise of 678,803 20 cent Options expiring 28 February 2011.
On 9 September, the Company issued 1,667 Shares following the exercise of 1,667 20 cent Options
expiring 28 February 2011.
On 29 September 2010, the Company announced it had entered into a Bridging Facility with a range
of Institutions, Sophisticated Investors and Directors to provide bridge loan amounts of a minimum of
$2 million and maximum of $4 million. Lenders will be issued with 100,000 Cazaly Options for every
$100,000 drawndown. The bridging facility has been arranged as a short-term finance for the purpose
of allowing the completion of the Parker Range Bankable Feasibility Study and general working
capital requirements. The Company has drawn down $1 million to date. The terms of the bridging
facility, are at arms length and on commercial terms.
Apart from the above, no other matters or circumstances have arisen since the end of the financial
period which significantly affected or may significantly affect the operations of the Economic Entity,
the results of those operations, or the state of affairs of the Economic Entity in future financial years.
10. ENVIRONMENTAL ISSUES
The Economic Entity is aware of its environmental obligations with regards to its exploration activities
and ensures that it complies with all regulations when carrying out any exploration work.
The directors have considered the recently enacted National Greenhouse and Energy Reporting Act
2007 (the NGER Act) which introduces a single national reporting framework for the reporting and
dissemination of information about the greenhouse gas emissions, greenhouse gas projects, and energy
use and production of corporations. At the current stage of development, the directors have determined
that the NGER Act will have no effect on the Group for the current, or subsequent financial year. The
directors will reassess this position as and when the need arises.
11.
INFORMATION ON DIRECTORS
Nathan McMahon
Managing Director (Corporate and Administration)
Qualifications
B.Com
Experience
Interest in Shares
Mr McMahon has provided tenement management advice to the mining
industry for approximately 15 years to in excess of 20 public listed mining
companies. Mr McMahon has specialised in native title negotiations, joint
venture negotiations and project acquisition due diligence. Mr McMahon is a
Director of several listed companies. These include on the ASX; joint
Managing Director of Cazaly Resources Ltd., a Director of Catalyst Metals
Ltd, Hodges Resources Ltd and Bannerman Resources Ltd. He is also a
Director of the AIM listed company Universal Coal PLC.
Fully Paid Ordinary Shares
11,405,357
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Annual Report 2010
Cazaly Resources Limited and Controlled Entities
11.
INFORMATION ON DIRECTORS (Cont’d)
Clive Jones
Managing Director (Technical)
Qualifications
B.App.Sc(Geol), M.AusIMM.
Experience
Mr Jones has been involved in mineral exploration for over 25 years and has
worked on the exploration for a range of commodities including gold, base
metals, mineral sands, uranium and iron ore. Mr Jones is a Director of several
ASX listed companies. He is Chairman of Cortona Resources Ltd., joint
Managing Director of Cazaly Resources Ltd and Chairman of Corazon Mining
Ltd and a Director of Bannerman Resources Ltd.
Interest
Options
in Shares
and
Fully Paid Ordinary Shares
$0.20 Options expiring on 28 February 2011
$0.30 Options expiring on 1 July 2011
7,566,802
856,669
1,000,000
Kent Hunter
Non-Executive Director
Qualifications
B.Bus, CA.
Experience
Mr Hunter is a Chartered Accountant with over 16 years’ corporate and
company secretarial experience. He has been involved in the listing of over 20
exploration companies on ASX in the past 9 years. He has experience in capital
raisings, ASX compliance and regulatory requirements and is currently a
director of Cazaly Resources Limited, Cauldron Energy Limited and Gryphon
Minerals Limited and is company secretary of two other ASX Listed entities.
Interest
Options
in Shares
and
Fully Paid Ordinary Shares
$0.20 Options expiring on 28 February 2011
$0.30 Options expiring on 1 July 2011
1,830,757
221,346
250,000
Directorships of other listed companies
Directorships of other listed companies held by directors in the three years immediately before the
end of the financial year are as follows:
Name
Nathan McMahon
Company
Period of directorship
Hodges Resources Limited
Since May 2008
Whinnen Resources Limited
Since December 2009
Catalyst Metals Limited
From July 2008 to September 2009
From May 2005 to December 2009
Universal Coal PLC
Bannerman Resources Limited From June 2007 to December 2008
Since February 2005
Corazon Mining Limited
Cortona Resources Limited
Since January 2006
Bannerman Resources Limited Since January 2007
Elixir Petroleum Limited
Cauldron Energy Limited
Venture Minerals Limited
Gryphon Minerals Limited
Red Emperor Resources NL
From March 2004 to November 2008
Since November 2002
From May 2006 to July 2009
From January 2004 to February 2009
From 2 April 2007
Clive Jones
Kent Hunter
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Annual Report 2010
Cazaly Resources Limited and Controlled Entities
12. REMUNERATION REPORT
This report details the nature and amount of remuneration for each director of Cazaly Resources
Limited.
Remuneration Policy
The remuneration policy of Cazaly Resources Limited has been designed to align director objectives
with shareholder and business objectives by providing a fixed remuneration component which is
assessed on an annual basis in line with market rates. The board of Cazaly Resources Limited believes
the remuneration policy to be appropriate and effective in its ability to attract and retain the best
directors to run and manage the company, as well as create goal congruence between directors and
shareholders.
The board’s policy for determining the nature and amount of remuneration for board members is set
out below.
The remuneration policy, setting the terms and conditions for the executive directors and other senior
staff members, was developed by the managing directors and approved by the board after seeking
professional advice from independent external consultants.
In determining competitive remuneration rates, the Board seeks independent advice on local and
international trends among comparative companies and industry generally. It examines terms and
conditions for employee incentive schemes, benefit plans and share plans. Independent advice is
obtained to confirm that executive remuneration is in line with market practice and is reasonable in the
context of Australian executive reward practices.
All executives receive a base salary (which is based on factors such as length of service and
experience), superannuation and fringe benefits.
The Economic Entity is an exploration entity, and therefore speculative in terms of performance.
Consistent with attracting and retaining talented executives, directors and senior executives are paid
market rates associated with individuals in similar positions, within the same industry. The Board
however acquired and were issued shares as part of the terms of the Initial Public Offer. Board
members have retained these securities which assist in aligning their objectives with overall
shareholder value.
Options have been issued to Board members to provide a mechanism to participate in the future
development of the Company and an incentive for their future involvement with and commitment to
the Company.
Options and performance incentives will be issued in the event that the entity moves from an
exploration entity to a producing entity, and key performance indicators such as profits and growth
can be used as measurements for assessing Board performance.
12. REMUNERATION REPORT (Cont’d)
The executive directors and executives receive a superannuation guarantee contribution required by
the government, which is currently 9% and do not receive any other retirement benefits.
All remuneration paid to directors 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. Options are valued using the Black-Scholes methodology.
The board policy is to remunerate non-executive directors at market rates for comparable companies
for time, commitment and responsibilities. The managing directors in consultation with independent
advisors determines payments to the non-executive directors and reviews their remuneration annually,
based on market practice, duties and accountability. 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. Fees for non-executive directors are not linked to the performance of the Company.
However, to align directors’ interests with shareholder interests, the directors are encouraged to hold
shares in the company.
11
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
12. REMUNERATION REPORT (Cont’d)
Company Performance, Shareholder Wealth and Directors’ and Executives’ Remuneration
The remuneration policy has been tailored to increase goal congruence between shareholders and
directors and executives. This has been achieved by the issue of shares to the majority of the directors
and executives to encourage the alignment of personal and shareholder interest.
Details of Remuneration for Year Ended 30 June 2010
The remuneration for each key management person and company executive of the company during the
year was as follows:
Short-term Benefits
Post-
employment
Benefits
Other
Long-term
Benefits
Share based
Payment
Total
Performance
Related
Cash, salary
Cash
Non-
Other
Super-
Other
Equity Options
&
profit
cash
annuation
commissions
share
benefit
$
$
Nathan McMahon – Managing Director (ii)
2010
2009
180,000
180,000
-
-
Clive Jones – Managing Director (iii)
2010
2009
180,000
180,000
-
-
Kent Hunter – Non Executive Director
2010
2009
27,250
26,312
-
-
Lisa Wynne – Company Secretary (iv)
2010
2009
-
-
Total Remuneration
2010
2009
387,250
386,312
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
5,976
54,772
36,911
54,772
42,887
$
-
-
-
-
-
-
-
937
-
937
$
-
-
-
-
-
-
-
-
-
-
(i)
$
$
%
108,267
288,267
-
180,000
108,267
288,267
-
180,000
27,067
-
19,128
-
54,317
33,225
73,900
36,911
262,729
704,751
-
430,136
38%
0%
38%
0%
50%
0%
26%
0%
37%
0%
$
-
-
-
-
-
-
-
-
-
-
i) The fair value of the Options is calculated at the date of grant using a Black-Scholes model.
ii) An aggregate amount of $180,000 (2009:$ 180,000) was paid, or was due and payable to Kingsreef Pty Ltd, a company
controlled by Mr Nathan McMahon, for the provision of corporate and tenement management services to the Company.
iii) An aggregate amount of $180,000 (2009:$ 180,000) was paid, or was due and payable to Widerange Corporation Pty Ltd, a
company controlled by Mr Clive Jones, for the provision of geological services to the Company.
iv) An aggregate amount of $54,772 (2009: $36,911) was paid, or was due and payable to Sila Consulting Pty Ltd, a company
of which Ms Wynne is a Director, for the provision of company secretarial services to the Company.
Options issued as part of remuneration for the year ended 30 June 2010
The following Options were issued to directors and executives as part of their remuneration for the
year ended 30 June 2010. No cash consideration was paid by the recipients.
Number
Granted (i)
Number Vested
Grant Date
Expiry Date
Exercise Price
Fair Value at
N B McMahon
C B Jones
K M Hunter
1,000,000
1,000,000
250,000
2,250,000
1,000,000
1,000,000
250,000
2,250,000
13.11.2009
13.11.2009
13.11.2009
01.07.2011
01.07.2011
01.07.2011
12
$
$0.30
$0.30
$0.30
Grant Date
$
0.108
0.108
0.108
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
12. REMUNERATION REPORT (Cont’d)
(i)
Options were awarded to Board members as part of the Remuneration Policy to provide a mechanism for them to
participate in the future development of the Economic Entity and as an incentive for their future involvement with and
commitment to the Economic Entity.
Employment Contracts of Directors and Senior Executives
The employment conditions of the Managing Directors, Nathan McMahon and Clive Jones, are
formalised in a contract of employment. Other than the Managing Directors, all executives are
employees of Cazaly Resources Limited.
The employment contracts stipulate a range of one to three-month resignation periods. The Economic
Entity may terminate an employment contract without cause by providing one to three months written
notice or making payment in lieu of notice, based on the individual’s annual salary component.
Termination payments are not payable on resignation or under the circumstances of unsatisfactory
performance.
13. MEETINGS OF DIRECTORS
The number of directors' meetings and resolutions held during the financial year each director held
office during the financial year and the number of meetings attended by each director are:
Directors Meetings
Director
N McMahon
C Jones
K Hunter
Number Eligible to Attend
5
5
5
Meetings Attended
5
5
5
The Economic Entity does not have a formally constituted audit committee as the board considers that
the company’s size and type of operation do not warrant such a committee.
14.
INDEMNIFYING OFFICERS OR DIRECTORS
In accordance with the constitution, except as may be prohibited by the Corporations Act 2001 every
Officer, or agent of the Company shall be indemnified out of the property of the Company against any
liability incurred by him in his capacity as Officer or agent of the Company or any related corporation
in respect of any act or omission whatsoever and howsoever occurring or in defending any
proceedings, whether civil or criminal.
The Company has insurance policies in place for Directors and Officers insurance. The premium paid
on this policy was $15,290.
13
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
15. OPTIONS
Unissued Shares Under Option
At the date of this report unissued ordinary shares of the Company under option are:
Expiry Date
Exercise Price
Number Under
Grant Date
5 October 2011
19 June 2012
14 September 2012
26 October 2012
22 May 2013
28 February 2011
1 July 2011
6 October 2011
6 July 2013
6 July 2016
11 January 2015
4 February 2015
11 February 2012
$0.8036
$0.8600
$0.39
$0.45
$0.30
$0.20
$0.30
$0.25
$0.30
$0.40
$0.33
$0.49
$0.40
Option
50,000
250,000
75,000
225,000
100,000
12,161,028
2,250,000
500,000
750,000
750,000
925,000
100,000
500,000
5 October 2006
19 June 2007
14 September 2012
26 October 2007
22 May 2008
28 February 2009
13 November 2009
13 November 2009
13 November 2009
13 November 2009
12 January 2010
5 February 2010
11 February 2010
Option holders do no have any rights to participate in any issue of shares or other interests in the
Company or any other entity.
There have been no unissued shares or interest under option of any controlled entity within the
Economic Entity during or since the reporting date.
For details of options issued to directors and executives as remuneration, refer to the Remuneration
Report.
During the year ended 30 June 2010, the following ordinary shares of Cazaly Resources Ltd were
issued on the exercise of options granted. A further 1,683,266 shares have been issued since year end.
No amounts are unpaid on any of the shares.
Grant Date
Exercise Price Number of Shares
Listed Options
Listed Options
17 June to 16 July 2009
12 March 2009
$0.20
$0.20
Issued
147,028
4,000,000
No person entitled to exercise the option had or has any right by virtue of the option to participate in
any share issue of any other body corporate.
15. PROCEEDINGS ON BEHALF OF COMPANY
No person has applied for leave of Court to bring proceedings on behalf of the company or intervene
in any proceedings to which the company is a party for the purpose of taking responsibility on behalf
of the company for all or any part of those proceedings.
The Economic Entity was not a party to any such proceedings during the year.
14
To The Board of Directors
Auditor’s Independence Declaration under Section 307C of the Corporations
Act 2001
This declaration is made in connection with our audit of the financial report of Cazaly Resources Limited
and Controlled Entities for the year ended 30 June 2010 and in accordance with the provisions of the
Corporations Act 2001.
We declare that, to the best of our knowledge and belief, there have been:
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit;
no contraventions of the Code of Professional Conduct of the Institute of Chartered Accountants in
Australia in relation to the audit.
Yours faithfully
BENTLEYS
Chartered Accountants
RANKO MATIC CA
Director
th
DATED at PERTH this 29 day of September 2010
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
CONSOLIDATED STATEMENT OF COMPREHNSIVE INCOME
FOR THE YEAR ENDED
30 JUNE 2010
Revenue
Other Income
Employee benefits expense
Depreciation expense
Finance costs
Administrative expense
Legal Fees
Advertising and promotional expenses
Consultancy expenses
Compliance and Regulatory expenses
Occupancy expenses
Written-off exploration expenditure
Provision for diminution in value of shares
Loss on disposal of shares
Other expenses
Loss before income tax
Income tax benefit
Loss for the period
Note
2010
$
2009
$
2
2
3
6
597,053
639,351
2,205,971
40,429
(673,980)
(36,559)
(7,656)
(550,007)
(31,253)
(100,805)
(250,213)
(151,595)
(271,193)
(370,000)
-
(1,777,006)
(25,800)
(235,667)
(25,508)
(3,361)
(405,221)
(746,429)
(56,737)
(272,767)
(126,269)
(175,228)
(1,347,773)
(3,055,420)
(1,178,943)
(8,917)
(1,443,043)
(6,958,460)
72,880
1,668,164
(1,370,163)
(5,290,296)
Other comprehensive income
-
-
Net Loss and Total comprehensive income
for the period attributable to members
(1,370,163)
(5,290,296)
Basic loss per share (cents per share)
19
(1.53)
(8.47)
The accompanying notes form part of these financial statements
17
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT
30 JUNE 2010
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Prepayments
Non current assets held for sale
Note
2010
$
2009
$
7
8
9
3,390,602
335,352
30,015
3,755,969
5,066,305
3,816,351
140,237
6,893
3,963,481
-
TOTAL CURRENT ASSETS
8,822,274
3,963,481
NON CURRENT ASSETS
Trade and other receivables
Financial assets
Property, plant and equipment
Exploration and evaluation assets
Deferred tax assets
8
10
11
12
6
142,839
323,722
122,890
12,083,805
5,085,658
57,505
788,767
55,736
9,725,338
2,903,684
TOTAL NON CURRENT ASSETS
17,758,914
13,531,030
TOTAL ASSETS
26,581,188
17,494,511
CURRENT LIABILITIES
Trade and other payables
Short-term provision
13
14
876,454
70,869
616,860
46,164
TOTAL CURRENT LIABILITIES
947,323
663,024
NON CURRENT LIABILITIES
Deferred tax liabilities
6
5,085,658
2,903,684
TOTAL NON CURRENT LIABILITIES
5,085,658
2,903,684
TOTAL LIABILITIES
6,032,981
3,566,708
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
20,548,207
13,927,803
15
16
17
20,348,703
613,744
(414,240)
12,783,160
7,421,043
(6,276,400)
20,548,207
13,927,803
The accompanying notes form part of these financial statements.
18
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED
30 JUNE 2010
Balance at 1 July 2008
Net loss and total comprehensive
income for the period attributable
to members
Shares issued during the year
Transaction costs
Option reserve
Deferred tax liability component
Balance at 30 June 2009
Net loss and total comprehensive
income for the period attributable
to members
Shares issued during the year
Transaction costs
Option reserve
Transfers to retained earnings
Deferred tax liability component
Balance at 30 June 2010
Issued Capital Accumulated
$
Losses
$
Option
Reserve
$
Total
$
9,017,161
-
(986,104)
(5,290,296)
7,421,043
-
15,452,100
(5,290,296)
3,794,859
(32,501)
-
3,641
12,783,160
-
-
-
-
(6,276,400)
-
-
-
-
7,421,043
3,794,859
(32,501)
-
3,641
13,927,803
-
(1,370,163)
-
(1,370,163)
8,004,139
(365,716)
-
-
(72,880)
20,348,703
-
-
-
7,232,323
-
(414,240)
-
-
425,024
(7,232,323)
-
613,744
8,004,139
(365,716)
425,024
-
(72,880)
20,548,207
The accompanying notes form part of these financial statements
19
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED
30 JUNE 2010
Note
2010
$
2009
$
Cash Flows from Operating Activities
Payments to suppliers and employees
Interest received
Other revenue
Payments for exploration and evaluation
(1,667,251)
103,317
413,670
(6,449,860)
(2,102,803)
64,844
420,745
(2,884,984)
Net cash used in operating activities
20
(7,600,124)
(4,502,198)
Cash Flows From Investing Activities
Proceeds from sale of exploration assets
Proceeds from sale of equity investments
Purchase of plant and equipment
Purchase of equity investments
Purchase of exploration assets
Recoupment of exploration expenditure
from Joint Venture operations
Proceeds for Joint Venture Management
709,320
609,596
(101,955)
(84,214)
(297,980)
13,558
1,327,702
580,555
(7,139)
(37,000)
170,770
-
178,710
Net cash provided by investing activities
848,325
2,213,598
Cash Flows from Financing Activities
Proceeds from issue of securities
Payment for costs of issue of securities
6,691,766
(365,716)
4,064,735
(32,502)
Net cash provided by financing activities
6,326,050
4,032,233
Net increase in cash held
(425,749)
1,743,633
Cash and cash equivalents at beginning of
the financial year
3,816,351
2,072,718
Cash and cash equivalents at end of the
financial year
7
3,390,602
3,816,351
The accompanying notes form part of these financial statements
20
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The financial report covers the Economic Entity of Cazaly Resources Limited (“the Company”)
and controlled entities (“the Economic Entity”). Cazaly Resources Limited is a listed public
company, incorporated and domiciled in Australia.
Basis of Preparation
The financial report is a general purpose financial report that has been prepared in accordance with
Australian Accounting Standards, Australian Accounting Interpretations, other authoritative
pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the AASB has concluded would
result in a financial report containing relevant and reliable information about transactions, events
and conditions to which they apply. Compliance with Australian Accounting Standards ensures that
the financial statements and notes also comply with International Financial Reporting Standards.
Material accounting policies adopted in the preparation of this financial report are presented below.
They have been consistently applied unless otherwise stated.
The financial report has been prepared on an accruals basis and is based on historical costs,
modified, where applicable, by the measurement at fair value of selected non-current assets,
financial assets and financial liabilities.
(a) Principles of Consolidation
The consolidated financial statements incorporate the assets, liabilities and results of entities
controlled by the Company at the end of the reporting period. A controlled entity is any entity over
which the Company has the power to govern the financial and operating policies so as to obtain
benefits from the entity’s activities. Control will generally exist when the parent owns, directly or
indirectly through subsidiaries, more than half of the voting power of an entity. In assessing the
power to govern, the existence and effect of holdings of actual and potential voting rights are also
considered.
Where controlled entities have entered or left the Economic Entity during the year, the financial
performance of those entities are included only for the period of the year that they were controlled.
A list of controlled entities is contained in Note 22 to the financial statements.
In preparing the consolidated financial statements, all inter-group balances and transactions
between entities in the Economic Entity have been eliminated on consolidation. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with those
adopted by the Company.
Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to
a parent, are shown separately within the Equity section of the consolidated Statement of Financial
Position and Statement of Comprehensive Income. The non-controlling interest in the net assets
comprise their interests at the date of the original business combination and their share of changes
in equity since that date.
Business Combinations
Business combinations occur where an acquirer obtains control over one or more businesses and
results in the consolidation of its assets and liabilities.
21
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
a) Principles of Consolidation (cont’d)
A business combination is accounted for by applying the acquisition method, unless it is a
combination involving entities or businesses under common control. The acquisition method
requires that for each business combination on of the combining entities must be indentified as the
acquirer i.e. parent entity). The business combination will be accounted for as at the acquisition
date, which is the date that control over the acquiree is obtained by the parent entity. At this date,
the parent shall recognise, in the consolidated accounts, and subject to certain limited exceptions,
the fair value of the identifiable assets acquired and liabilities assumed. In addition, contingent
liabilities of the acquiree will be recognised where a present obligation has been incurred and its
fair value can be reliably measured.
The acquisition may result in the recognition of goodwill or a gain from a bargain purchase. The
method adopted for the measurement of goodwill will impact on the measurement of an non-
controlling interest to be recognised in the acquiree where less than 100% ownership inters is held
in the acquiree.
The acquisition date fair value of the consideration transferred for a business combination plus the
acquisition date fair value of any previously held equity interest shall form the cost of the
investment in the separate financial statements. Consideration may comprise the sum of the assets
transferred by the acquirer, liabilities incurred by the acquirer to the former owners of the acquiree
and the equity interests issued by the acquirer.
Fair value uplifts in the value of pre-existing equity holdings are taken to the statement of
comprehensive income. Where changes in the value of such equity holdings had previously been
recognised in other comprehensive income, such amounts are recycled to profit or loss.
Included in the measurement of consideration transferred is any asset or liability resulting gfroma
contingent consideration arrangement. Any obligation incurred relating to contingent consideration
is classified as either a financial liability or equity instrument, depending upon the nature of the
arrangement. Rights to refunds of consideration previously paid are recognised as a receivable.
Subsequent to initial recognition, contingent consideration classified as equity is not remeasured
and its subsequent settlement is accounted for within equity. Contingent consideration classified as
a asset or a liability is remeasured each reporting period to faire value through the statement of
comprehensive income unless the change in value can be identified as existing at acquisition date.
A transaction costs incurred in relation to the business combination are expensed to the statement
of comprehensive income.
(b) Plant and Equipment
Plant and equipment are stated at cost less accumulated depreciation and impairment. 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. The recoverable amount is assessed on the
basis of the expected net cash flows that will be received from the asset’s employment and
subsequent disposal. The expected net cash flows have been discounted to their present values in
determining recoverable amounts.
22
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(b) Plant and Equipment (cont’d)
Depreciation
Depreciation is provided on plant and equipment. Depreciation is calculated on a straight line
basis so as to write off the net cost or other revalued amount of each asset over its expected useful
life to its estimated residual value. The estimated useful lives, residual values and depreciation
method are reviewed at the end of each annual reporting period.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Plant and equipment
Office furniture and equipment
Motor vehicle
Leasehold improvements
Depreciation Rate
40.0%
18.0%
22.5%
Term of Lease
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each
balance sheet 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 the carrying amount.
These gains and losses are included in the Statement of Comprehensive Income. When revalued
assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to
retained earnings.
(c) Exploration, Evaluation and Development Expenditure
Costs incurred during exploration and evaluation relating to an area of interest are accumulated.
Costs are carried forward to the extent they are expected to be recouped through successful
development, or by sale, or where exploration and evaluation activities have not at balance date
reached a stage to allow a reasonable assessment regarding the existence of economically
recoverable reserves. In these instances the entity must have rights of tenure to the area of interest
and must be continuing to undertake exploration operations in the area.
Costs carried forward in respect of an area of interest that is abandoned are written off in the year
in which the decision to abandon is made.
When production commences, the accumulated costs for the relevant area of interest are
amortised over the life of the area according to the rate of depletion of the economically
recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of
continuing to carry forward costs in relation to that area of interest.
Costs of site restoration are provided over the life of the facility from when exploration
commences and are included in the costs of that stage. Site restoration costs include the
dismantling and removal of mining plant, equipment and building structures, waste removal, and
rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been
estimated of future costs, current legal requirements and technology on an undiscounted basis.
23
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(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, are transferred to entities in the Economic Entity are
classified as finance leases. Finance leases are capitalised by recording an asset and a liability
equal to the present value of the minimum lease payments, including any guaranteed residual
values. Leased assets are depreciated on a straight-line basis over the shorter of their estimated
useful lives or the lease term.
Lease payments for operating leases, where substantially all the risks and benefits remain with the
lessor, are charged as expenses in the periods in which they are incurred.
(e) Financial Instruments
Initial Recognition and Measurement
Financial instruments, incorporating financial assets and financial liabilities, are recognised
when the entity becomes a party to the contractual provisions of the instrument. Trade date
accounting is adopted for financial assets that are delivered within timeframes established by
marketplace convention.
Financial instruments are initially measured at fair value plus transactions costs where the
instrument is not classified as at fair value through profit or loss. Transaction costs related to
instruments classified as at fair value through profit or loss are expensed to profit or loss
immediately.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or
the asset is transferred to another party whereby the entity is no longer has any significant
continuing involvement in the risks and benefits associated with the asset. Financial liabilities are
derecognised where the related obligations are either discharged, cancelled or expire. The
difference between the carrying value of the financial liability extinguished or transferred to
another party and the fair value of consideration paid, including the transfer of non-cash assets or
liabilities assumed, is recognised in profit or loss.
Classification and Subsequent Measurement
(i) Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in the category ‘financial assets at fair
value through profit or loss’. Financial assets are classified as held for trading if they are acquired
for the purpose of selling in the near term. Derivatives are also classified as held for trading
unless they are designated as effective hedging instruments. Gains or losses on investments held
for trading are recognised in profit or loss.
(ii) Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity are
classified as held-to-maturity when the Group has the positive intention and ability to hold to
maturity. Investments that are intended to be held-to-maturity, such as bonds, are subsequently
measured at amortised cost.
24
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(e) Financial Instruments (cont’d)
(iii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Such assets are carried at amortised cost using the
effective interest method. Gains and losses are recognised in profit or loss when the loans and
receivables are derecognised or impaired, as well as through the amortisation process.
Loans and receivables are included in current assets, except for those which are not expected to
mature within 12 months after the end of the reporting period. (All other loans and receivables
are classified as non-current assets).
(iv) Available-for-sale investments
Available-for-sale investments are those non-derivative financial assets that are designated as
available-for-sale or are not classified as any of the three preceding categories. After initial
recognition available-for sale investments are measured at fair value with gains or losses being
recognised as a separate component of equity until the investment is derecognised or until the
investment is determined to be impaired, at which time the cumulative gain or loss previously
reported in equity is recognised in profit or loss.
The fair value of investments that are actively traded in organised financial markets is determined
by reference to quoted market bid prices at the close of business on the balance sheet date. For
investments with no active market, fair value is determined using valuation techniques. Such
techniques include using recent arm’s length market transactions; reference to the current market
value of another instrument that is substantially the same; discounted cash flow analysis and
option pricing models.
(f) Cash and Cash Equivalents
Cash and cash equivalents includes 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.
(g) Trade and Other Receivables
Trade receivables, which generally have 30-90 day terms, are recognised and carried at original
invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful debts
is made when there is objective evidence that the entity will not be able to collect the debts. Bad
debts are written off when identified.
(h) Revenue and Other Income
Revenue from the sale of goods is recognised upon the delivery of goods to customers. Interest
revenue is recognised on a proportional basis taking into account the interest rates applicable to
the financial assets. Revenue from the rendering of a service is recognised upon the delivery of
the service to the customers.
All revenue is stated net of the amount of goods and services tax (GST).
25
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(i) Impairment of Assets
At each reporting date, the economic entity reviews the carrying amounts of its tangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where the asset does not generate cash flows that are
independent from the other assets, the Economic Entity estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generated unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised in the Statement of Comprehensive
Income immediately, unless the relevant asset is carried at fair value, in which case the
impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently
reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised
estimate of its recoverable amount, but only to the extent that the increased carrying amount does
not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years.
A reversal of an impairment loss is recognised in the Statement of Comprehensive Income
immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is
treated as a revaluation increase
(j) 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 (“ATO”). 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.
The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or
liability in the Statement of Financial Position.
Cash flows are included in the cash flow statement on a gross basis. The GST components of
cash flows arising from investing and financing activities which are recoverable from, or payable
to, the ATO are classified as operating cash flows.
26
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(k) Taxation
The income tax expense (revenue) for the year comprises current income tax expense (income)
and deferred tax expense (income).
Current income tax expense charged to the profit or loss is the tax payable on taxable income
calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date.
Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to
(recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability
balances during the year as well unused tax losses.
Current and deferred income tax expense (income) is charged or credited directly to equity
instead of the profit or loss when the tax relates to items that are credited or charged directly to
equity.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred tax assets also result where amounts have been fully expensed but future tax deductions
are available. 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 assets and liabilities are calculated at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled, based on tax rates enacted or
substantively enacted at reporting date. Their measurement also reflects the manner in which
management expects to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to
the extent that it is probable that future taxable profit will be available against which the benefits
of the deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates,
and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the
reversal of the temporary difference can be controlled and it is not probable that the reversal will
occur in the foreseeable future.
Tax Consolidation
Cazaly Resources Limited and its wholly-owned Australian subsidiaries have formed an income
tax consolidated group under tax consolidation legislation. Each entity in the group recognises its
own current and deferred tax assets and liabilities. Such taxes are measured using the ‘stand-alone
taxpayer’ approach to allocation. Current tax liabilities (assets) and deferred tax assets arising
from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head
entity. The group notified the Australian Tax Office that it had formed an income tax
consolidated group to apply from 1 July 2004.
27
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(l) Foreign Currency
All foreign currency transactions during the financial year are brought to account using the
exchange rate in effect at the date of the transaction. Foreign currency monetary items at
reporting date are translated at the exchange rate existing at that date.
(m) Trade and Other Payables
Trade payables and other payables are carried at amortised costs and represent liabilities for
goods and services provided to the company prior to the end of the financial year that are unpaid
and arise when the company becomes obliged to make future payments in respect of the purchase
of these goods and services.
(n) Provisions
Provisions are recognised when the Economic Entity has a present obligation, the future sacrifice
of economic benefits is probable, and the amount of the provision can be reliably measured.
The amount recognised as a provision is the best estimate of the consideration required to settle
the present obligation at reporting date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cash flows estimated to
settle the present obligation, its carrying amount is the present value of those cash flows.
(o) Share Based Payments
Equity-settled share based payments granted, are measured at fair value at the date of grant. Fair
value is measured by use of a binomial model. The expected life used in the model has been
adjusted, based on management’s best estimate, for the effects of non-transferability, exercise
restrictions, and behavioural considerations.
The fair value determined at the grant date of the equity-settled share-based payments is expensed
on a straight-line basis over the vesting period, based on the Economic Entity’s estimate of shares
that will eventually vest.
For cash-settled share-based payments, a liability equal to the portion of the goods or services
received is recognised at the current fair value determined at each reporting date.
(p) Issued Capital
Issued and paid up capital is recognised at the fair value of the consideration received by the
Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in
equity as a reduction of the share proceeds received.
28
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(q) Earnings Per Share
Basic earnings per share is calculated as net earnings attributable to members, adjusted to exclude
costs of servicing equity (other than dividends) and preference share dividends, divided by the
weighted average number of ordinary shares, adjusted for an bonus element.
Diluted EPS is calculated as net earnings attributable to members, adjusted for:
costs of servicing equity (other than dividends) and preference share dividends; the after tax
effect of dividends and interest associated with dilutive potential ordinary shares that would have
been recognised as expenses; and other non-discretionary changes in revenues or expenses during
the period that would result from the dilution of potential ordinary shares; divided by the
weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for
any bonus element.
(r) Employee Benefits
Provision is made for the Economic Entity’s liability for employee benefits arising from services
rendered by employees to balance date. Employee benefits that are expected to be settled within
one year have been measured at the amounts expected to be paid when the liability is settled, plus
related on-costs. Employee benefits payable later than one year have been measured at the present
value of the estimated future cash outflows to be made for those benefits.
(s) Joint Venture Entities
A joint venture entity is an entity in which Cazaly holds a long-term interest and which is jointly
controlled by Cazaly and one or more other venturers. Decisions regarding the financial and
operating policies essential to the activities, economic performance and financial position of that
venture require the consent of each of the venturers that together jointly control the entity.
Cazaly has certain contractual arrangements with other participants to engage in joint activities
where all significant matters of operating and financial policy are determined by the participants
such that the operation itself has no significant independence to pursue its own commercial
strategy. These contractual arrangements do not create a joint venture entity due to the fact that
the policies are those of the participants, not a separate entity carrying on a trade or a business of
its own.
The financial statements of Cazaly include its share of the assets, liabilities and cash flows in such
joint venture operations, measured in accordance with the terms of each arrangement, which is
usually pro-rata to Cazaly’s interest in the joint venture operations.
(t) Royalty Assets
Royalty assets are valued in the accounts at cost of acquisition and are amortised over the period
in which their benefits are expected to be realised. The balances are reviewed annually and any
balance representing future benefits for which the realisation is considered to be no longer
probable are written off.
29
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(u) Critical Accounting Estimates and Judgments
The preparation of financial statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.
The directors evaluate estimates and judgments incorporated into the financial report based on
historical knowledge and best available current information. Estimates assume a reasonable
expectation of future events and are based on current trends and economic data, obtained both
externally and within the group.
Key Judgements –Exploration and evaluation expenditure
Exploration and evaluation costs are carried forward where right of tenure of the area of interest
is current. These costs are carried forward in respect of an area that has not at balance sheet date
reached a stage that permits reasonable assessment of the existence of economically recoverable
reserves, refer to the accounting policy stated in note 1(c).
Key Judgements Share based payment transactions
The Company 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 Black-Scholes option pricing model, using the
assumptions detailed in note 26.
Key Judgment – Environmental Issues
Balances disclosed in the financial statements and notes thereto are not adjusted for any pending
or enacted environmental legislation, and the directors understanding thereof. At the current stage
of the company’s development and its current environmental impact the directors believe such
treatment is reasonable and appropriate.
Key Estimate – Taxation
Balances disclosed in the financial statements and the notes thereto, related to taxation, are based
on the best estimates of directors. These estimates take into account both the financial
performance and position of the company as they pertain to current income taxation legislation,
and the directors understanding thereof. No adjustment has been made for pending or future
taxation legislation. The current income tax position represents that directors’ best estimate,
pending an assessment by the Australian Taxation Office.
(v) Adoption of new and revised Accounting Standards
During the financial period, the Group has reviewed all of the new and revised Standards and
Interpretations issued by the AASB that are relevant to its operations and effective for annual
reporting periods beginning on or after 1 July 2009. During the current period, certain accounting
policies have changes as a result of new or revised accounting standards which became operative
for the annual reporting period commencing on 1 July 2009. The affected policies and standards
are:
AASB 101: Presentation of Financial Statements
AASB 8: Operating Segments
AASB 3: Business Combinations
AASB 127: Consolidated and Separate Financial Statements
30
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(v) Adoption of new and revised Accounting Standards (cont’d)
Presentation of Financial Statements
The previous version of AASB 101 used the titles ‘balance sheet’ and ‘cash flow statement’. The
revised standard uses ‘statement of financial position’ and ‘statement of cash flows’ for those
statements, although entities can use other statement titles. The previous version of AASB 101
required the presentation of an income statement that included items of income and expense
recognised in profit or loss. It required items of income and expense not recognised in profit or
loss to be presented in the statement of changes in equity, together with owner changes in equity.
It also labelled the statement of changes in equity comprising profit or loss, other items of income
and expense and the effects of changes in accounting policies and correction of errors as
‘statement of recognised income and expense’.
This Standard now requires:
• All changes in equity arising from transactions with owners in their capacity as owners
(i.e. owner changes in equity) to be presented separately from non-owner changes in equity.
An entity is not permitted to present components of comprehensive income (i.e. nonowner
changes in equity) in the statement of changes in equity. The purpose is to
information to users by requiring aggregation of items with shared
separation of items with different characteristics;
•
Income and expenses to be presented in one statement (a statement of comprehensive
income) or in two statements (a separate income statement and a statement of
comprehensive income), separately from owner changes in equity;
provide better
and
characteristics
• Components of other comprehensive income to be displayed in the statement of
comprehensive income; and
• Total comprehensive income to be presented in the financial statements.
The revised standard requires an entity to disclose income tax relating to each component of other
comprehensive income. The previous version of AASB 101 did not include such a requirement.
The revised standard also requires an entity to disclose reclassification adjustments relating to
income. Reclassification adjustments are amounts
components of other comprehensive
reclassified to profit or loss in the current period that were recognised in other comprehensive
income in previous periods.
The previous version of AASB 101 permitted disclosure of the amount of dividends recognised as
distributions to equity holders (now referred to as ‘owners’) and the related amount per share in
the income statement, in the statement of changes in equity or in the notes. The revised standard
requires dividends recognised as distributions to owners and related amounts per share to be
presented in the statement of changes in equity or in the notes. The presentation of such
disclosures in the statement of comprehensive income is not permitted.
Segment Reporting
The Group has applied AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB
114 and as a result some of the required operating segment disclosure have changed. AASB 8
requires a ‘management approach’ under which segment information is presented on the same
basis as that used for internal reporting purposes. Operating segments are now reported in a
manner that is consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision-maker has been identified as the Board of Cazaly Resources
Ltd.
31
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(v) Adoption of new and revised Accounting Standards(Cont’d)
The adoption of the ‘management approach’ to segment reporting has resulted in the
identification of reportable segments largely consistent with the prior year.
Principles of Consolidation
AASB 127 (revised) required the effects of all transactions with non-controlling interests to be
recorded in equity if there is no change in control and these transactions will no longer result in
goodwill or gains and losses. This is different to the Group’s previous accounting policy where
transactions with minority interests were treated as transactions with parties external to the group.
The standard also specifies the accounting when control is lost. Any remaining interest in the
entity must be remeasured to fair value and a gain or loss is recognizes in profit or loss. This is
consistent with the entity’s previous accounting policy if significant influence is not retained.
The Group will in future allocate losses to the non-controlling interest in its subsidiaries even if
the accumulated losses should exceed the non-controlling interest in the subsidiary’s equity.
Under the previous policy, excess losses were allocated to the parent entity.
Lastly, dividends received from investments in subsidiaries, jointly controlled entities or
associates after 1 July 2009 are recognised as revenue even if they are paid out of pre-acquisition
profits. However, the investment may need to be tested for impairment as a result of the dividend
payment. Under the entity’s previous policy, any dividends would have been deducted from the
cost of the investment.
The changes were implemented prospectively from 1 July 2009. There has been no impact on the
current period as none of the non-controlling interests have a deficit balance. There have also
been no transactions whereby an interest in an entity is retained after the loss of control of that
entity, no transactions with non-controlling interests and no dividends paid out of pre-acquisition
profits.
Business Combinations
All payments to purchase a business are now recorded at fair value at the acquisition date, with
contingent payments included at their respective fair values. Under the Group’s previous policy,
contingent payments were only recognised when the payments were probable and could be
measured reliably and were accounted for as an adjustment to the cost of the acquisition.
Acquisition-related costs are expensed as incurred. Previously, they were recognised as part of
the cost of acquisition and therefore included in goodwill.
Non-controlling interests in an acquiree are now recognised either at fair value or at the non-
controlling interest’s proportionate share of the acquiree’s net assets. This decision is made on an
acquisition-by-acquisition basis. Under the previous policy, the non-controlling interest was
always recognised at its share of the acquiree’s net assets.
If the Group recognises acquired deferred tax assets after the initial recognition accounting there
will no longer be any adjustment to goodwill. As a consequence, the recognition of the deferred
tax asset will increase the Group’s net profit after tax.
The financial report was authorised for issue on 29 September 2010 by the board of directors.
32
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
2. REVENUE & OTHER INCOME
Revenue
- interest received
- option fees
- management fees
- recoupment of office costs on-charged
- other revenue
Other Income
- profit on sale of tenement
- profit on sale of fixed asset
- net gain on financial assets held for trading
3. LOSS FOR THE YEAR
(i) Expenses
Borrowing costs
- other persons
Depreciation of non-current assets
- plant and equipment
- motor vehicle
Rental expense on operating leases
- minimum lease payments
Fair value loss on other financial assets at fair value
through profit or loss
2010
$
2009
$
109,063
50,000
-
413,670
24,320
597,053
419,930
1,758
1,784,283
2,205,971
56,413
100,000
62,193
420,745
-
639,351
40,429
-
-
40,429
7,656
3,361
34,478
2,081
36,559
23,580
1,928
25,508
26,798
24,160
-
3,055,420
Exploration expense written off
370,000
1,347,773
Employee benefits:
- Superannuation benefits
- Employee equity settled benefits
12,415
425,024
12,226
-
33
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
4.
KEY MANAGEMENT PERSONNEL COMPENSATION
The totals of remuneration paid to key management personnel of the Company during the year are
as follows:
Short-term employee benefits
Post-employment benefits
Equity based payments
2010
$
442,022
-
262,729
704,751
2009
$
429,199
937
-
430,136
The Company has taken advantage of the relief provided by Corporations Regulation 2M.6.04
and has transferred the detailed remuneration disclosures to the directors’ report. The relevant
information can be found in the Directors report under the heading Remuneration Report.
b) Shareholdings
Number of Shares held by Key Management Personnel:
2010
Balance
1 July 2009
Received as
Remuneration
Options
Exercised
Net Change
Other
Balance
30 June 2010
N McMahon
C Jones
K Hunter
6,430,398
6,853,338
1,770,757
15,054,493
-
-
-
-
-
-
-
-
3,096,156
713,464
60,000
3,869,620
9,526,554
7,566,802
1,830,757
18,924,113
2009
Balance
1 July 2008
Received as
Remuneration
Options
Exercised
Net Change
Other
Balance
30 June 2009
N McMahon
C Jones
K Hunter
5,222,796
5,140,001
1,328,066
11,690,863
-
-
-
-
1,207,602
1,713,337
442,691
3,363,630
6,430,398
6,853,338
1,770,757
15,054,493
34
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
4.
KEY MANAGEMENT PERSONNEL COMPENSATION (Cont’d)
c) Option Holdings
Number of $0.20 Options expiring 28 February 2011, held by Directors and Executives:
Nathan
McMahon
Clive Jones
Kent Hunter
Balance
1 July
2009
678,803
856,669
221,346
1,756,818
Issued
Exercised
Lapsed
-
-
-
-
-
-
-
-
-
-
-
-
Balance
30 June
2010
678,803
Vested
during the
year
-
Vested
and
exercisable
678,803
Vested and
unexercis-
able
-
856,669
221,346
1,756,818
-
-
-
856,669
221,346
1,756,818
-
-
-
Number of $0.30 Options expiring 1 July 2011, held by Directors and Executives:
Nathan
McMahon
Clive Jones
Kent Hunter
Balance
1 July
2009
-
-
-
-
Issued
Exercised
Lapsed
1,000,000
1,000,000
250,000
2,250,000
-
-
-
-
-
-
-
-
Balance
30 June
2010
1.000,000
Vested
during the
year
1.000,000
Vested
and
exercisable
1.000,000
Vested and
unexercis-
able
-
1,000,000
1,000,000
1,000,000
250,000
250,000
250,000
2,250,000
2,250,000
2,250,000
-
-
-
Number of $1.9436 (formerly $2.00) Options expiring 30 November 2009, held by Directors and
Executives:
Nathan
McMahon
Clive Jones
Kent Hunter
Balance
1 July
2009
1,000,000
1,000,000
200,000
2,200,000
Issued
Exercised
Lapsed
-
-
-
-
-
-
-
-
1,000,000
1,000,000
200,000
2,200,000
Balance
30 June
2010
-
Vested
during the
year
-
Vested
and
exercisable
-
Vested and
unexercis-
able
-
-
-
-
-
-
-
-
-
-
-
-
-
Number of $0.75 Options expiring 30 November 2009, held by Directors and Executives:
Balance
1 July
2009
1,000,000
1,000,000
500,000
2,500,000
Issued
Exercised
Lapsed
Balance
30 June
2010
Vested
during the
year
-
-
-
-
-
-
-
-
1,000,000
1,000,000
500,000
2,500,000
-
-
-
-
-
-
-
-
Vested
and
exercisabl
e
-
-
-
-
Vested and
unexercis-
able
-
-
-
-
Nathan
McMahon
Clive Jones
Kent Hunter
35
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
4.
KEY MANAGEMENT PERSONNEL COMPENSATION (Cont’d)
d) Compensation Options
2010
Number
Granted
Number
Vested
Grant
Date
Expiry
Date
Exercise
Price
N B McMahon
C B Jones
K M Hunter
1,000,000
1,000,000
250,000
2,250,000
1,000,000
1,000,000
250,000
2,250,000
13.11.2009 01.07.2011
13.11.2009 01.07.2011
13.11.2009 01.07.2011
$
$0.30
$0.30
$0.30
2009
Number
Granted
Number
Vested
Grant
Date
Expiry
Date
Exercise
Price
N B McMahon
C B Jones
K M Hunter
1,000,000
1,000,000
500,000
2,500,000
1,000,000
1,000,000
500,000
2,500,000
30.11.2007 30.11.2009
30.11.2007 30.11.2009
30.11.2007 30.11.2009
$
$0.75
$0.75
$0.75
Fair Value
at Grant
Date
$
0.108
0.108
0.108
Fair Value
at Grant
Date
$
0.210
0.210
0.210
(i) Key Management Personnel Option Valuation Calculation
Grant date share price
Exercise price
Expected volatility
Option life
Dividend yield
Risk-free interest rate
2010
30 cent Options expiring
1 July 2011
$0.245
$0.30
100%
1.63 years
-
4.25%
2009
75 cent Options expiring
30 November 2009
$0.375
$0.75
135%
3 years
-
6.54%
e) Shares issued on exercise of compensation options
Date of exercise of options
Number of ordinary shares issued
on exercise of options during the
year
N McMahon
C Jones
K Hunter
2010
-
-
-
2009
4 October 2008
18 July 2008
-
2010
-
-
-
2009
1,000,000
1,000,000
-
The Economic Entity policy for determining the nature and amount of emoluments of board members
and senior executives of the company is as follows:
The remuneration structure for executive officers, including executive directors, is based on a number
of factors, including length of service, particular experience of the individual concerned, and overall
performance of the Economic Entity. The contracts for service between the Economic Entity and
specified directors and executives are on a continuing basis the terms of which are not expected to
change in the immediate future. Upon retirement specified directors and executives are paid employee
benefit entitlements accrued to date of retirement. The company may terminate the contracts without
cause by providing one to three months written notice or making payment in lieu of notice based on
the individual’s annual salary component at industry award redundancy rates.
36
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
5.
AUDITORS’ REMUNERATION
Remuneration of the auditor for:
- Auditing or reviewing the financial report
6.
INCOME TAX EXPENSE
The components of the tax expense/(income) comprise:
Current tax
Deferred tax
(a) The prima facie tax on loss from ordinary activities
before income tax is reconciled to the income tax as
follows:
2010
$
2009
$
45,115
45,115
36,750
36,750
-
(72,880)
(72,880)
-
(1,668,164)
(1,668,164)
(1,443,044)
(6,958,460)
Prima facie tax benefit on loss from ordinary activities
before income tax at 30% (2009: 30%)
(432,913)
(2,087,538)
Add:
Tax effect of:
Other non-allowable items
1,567
7,574
Less:
Tax effect of:
Tax benefit of deductible equity raising costs
Effect of tax losses derecognised
Over provision of prior year
Other
Income tax benefit attributable to entity
The applicable weighted average effective tax rates are
as follows:
(35,132)
534,312
(145,760)
5,046
(72,880)
(15,588)
420,251
7,137
-
(1,668,164)
(3.2%)
(24.0%)
37
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
6.
INCOME TAX EXPENSE (Cont’d)
(b) Deferred tax assets at 30% (2009: 30%) comprise
the following
Carry forward revenue losses
Carry forward capital losses
Unrealised Fair Value Adjustment
Capital raising and future black hole deductions
Provisions and accruals
Other
Deferred tax liabilities at 30% (2009: 30%)
comprise the following
Exploration expenditure
Investments
Other
(c) Deferred tax recognised directly in equity:
Relating to equity raising costs
Other
7.
CASH AND CASH EQUIVALENTS
Cash at bank
Petty cash
Deposits at call (i)
2010
$
2009
$
3,559,123
910,854
215,730
267,293
48,658
84,000
5,085,658
1,384,109
377,549
751,015
264,460
42,551
84,000
2,903,684
5,085,470
-
188
5,085,658
2,903,496
-
188
2,903,684
(72,881)
(3,641)
(72,881)
(3,641)
182,109
495
3,207,998
3,390,602
58,483
495
3,757,373
3,816,351
(i) The effective interest rate on short-term bank deposits was 5.06% (2009:7.56%); these deposits have an
average maturity of 26 days.
8.
TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Other debtors
Non-Current
Bonds (i)
(i) Bonds are term deposits, held by way of bank guarantee.
51,323
284,029
335,352
46,434
93,803
140,237
142,839
142,839
57,505
57,505
38
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
9. NON CURRENT ASSETS HELD FOR SALE
Current
Hayes Mining Pty Ltd assets held for sale(i):
Receivables
Exploration and evaluation assets (ii)
2010
$
151,500
4,914,805
5,066,305
2009
$
-
-
-
(i) On 18 June 2010, the Company announced that it had signed an agreement with Phoenix
Gold Pty Ltd to sell its West Kalgoorlie Gold assets, including the 100% owned subsidiary
Hayes Mining Pty Ltd. The sale is conditional on Phoenix receiving approval form the ASX
for admission of its securities to the official list and obtaining ministerial consents for
tenement transfers to Phoeneix.
(ii) The exploration and evaluation assets relate to costs to acquire tenements and capitalised
exploration costs and are included in the segment assets of the Economic Entity’s exploration
operating segment as disclosed in Note 23.
10. FINANCIAL ASSETS
Current
Financial assets, at fair value through profit or
loss:
Held-for-trading Australian listed shares
11. PROPERTY, PLANT AND EQUIPMENT
Plant and Equipment
At cost
Accumulated depreciation
Office Furniture and Equipment
At cost
Accumulated depreciation
Motor Vehicle
At cost
Accumulated depreciation
Leasehold Improvement
At cost
Accumulated amortisation
39
323,722
788,767
323,722
788,767
173,225
(141,327)
31,898
149,671
(112,363)
37,308
45,511
(22,193)
23,318
68,288
(614)
67,674
5,344
(5,344)
-
28,444
(16,679)
11,765
27,272
(20,609)
6,663
5,344
(5,344)
-
122,890
55,736
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
11. PROPERTY, PLANT AND EQUIPMENT (Cont’d)
Movement in the carrying amounts for each class of plant and equipment between the beginning
and end of the current financial year.
Plant and
Equipment
Balance at the beginning of the year
Additions
Disposals
Depreciation/expense
Carrying amount at the end of the year
37,308
23,554
-
(28,964)
31,898
2010
$
Office
Furnitur
e
11,765
17,067
-
(5,514)
23,318
Motor
Vehicles
Total
6,664
68,287
(5,196)
(2,081)
67,674
55,737
108,908
(5,196)
(36,559)
122,890
2009
$
Plant and
Equipment
Balance at the beginning of the year
Additions
Disposals
Depreciation/expense
Carrying amount at the end of the year
51,564
6,460
-
(20,716)
37,308
Office
Furnitur
e
13,949
680
-
(2,864)
11,765
Motor
Vehicles
Total
8,592
-
-
(1,928)
6,664
74,105
7,140
-
(25,508)
55,737
2009
$
2010
$
12. EXPLORATION, EVALUATION AND
DEVELOPMENT COSTS
Non-Current
Costs carried forward in respect of areas of
interest in:
Exploration and evaluation phases at cost
Royalty assets
Movement – exploration and evaluation
Brought forward
Exploration expenditure capitalised during the
year
Disposals
Recoupment of exploration expenditure from
joint venture partners
Assets classified as non current assets held for
sale
Exploration expenditure written off
40
12,036,805
47,000
9,678,338
47,000
12,083,805
9,725,338
9,678,338
8,441,493
7,846,718
(236,888)
2,755,388
-
(13,558)
(170,770)
(4,867,805)
(370,000)
-
(1,347,773)
12,036,805
9,678,338
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
12. EXPLORATION, EVALUATION AND DEVELOPMENT COSTS (Cont’d)
The value of the Economic Entity interest in exploration expenditure is dependent upon:
the continuance of the Economic Entity rights to tenure of the areas of interest;
•
the results of future exploration; and
•
the recoupment of costs through successful development and exploitation of the areas of
•
interest, or alternatively, by their sale.
The Economic Entity exploration properties may be subjected to claim(s) under native title, or
contain sacred sites, or sites of significance to Aboriginal people. As a result, exploration
properties or areas within the tenements may be subject to exploration restrictions, mining
restrictions and/or claims for compensation. At this time, it is not possible to quantify whether
such claims exist, or the quantum of such claims.
13. TRADE AND OTHER PAYABLES
Current
Trade creditors
Other creditors and accrued expenses
(i) Creditors are non-interest bearing and settled at 30 day terms.
14. PROVISION
Current
Provision for Annual Leave
15.
ISSUED CAPITAL
2010
$
2009
$
780,059
96,395
876,454
225,093
391,767
616,860
70,869
46,164
107,442,705 fully paid ordinary shares (2009:
83,976,604) with no par value
12,844,294 Listed Options, exercisable at 20
cents expiring 28 February 2011
(a) Movements in Ordinary Shares
20,348,703
12,783,160
-
Number of
shares
Issue
price
-
$
Opening balance at 1 July 2009
Notes
83,976,604
12,783,160
Placement
Issue
Issue
Issue
Placement
Placement
Placement
Exercise of Listed Options
Transaction costs relating to share
issues
Deferred tax liability component
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
2,983,237
2,377,040
680,450
823,801
8,000,000
3,000,000
5,454,545
147,028
-
$0.165
$0.275
$0.275
$0.243
$0.28
$0.40
$0.55
$0.20
-
492,234
655,000
187,500
200,000
2,240,000
1,200,000
3,000,000
29,405
(365,716)
-
-
(72,880)
Closing balance at 30 June 2010
107,442,705
20,348,703
41
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
15.
ISSUED CAPITAL (Cont’d)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
In July 2009, the Company issued 2,983,236 ordinary shares at a price of 16.5 cents pursuant to the
Non-Renounceable Entitlement Issue Prospectus dated 11 May 2009.
On 7 September 2009, the Company issued 2,377,040 ordinary shares at a deemed price of 27.5
cents pursuant to an agreement to acquire Gondwana Resources Limited’s interest in the Parker
Range Project.
On 8 September 2009, the Company issued 680,450 ordinary shares at a deemed price of 27.5 cents
pursuant to an agreement to acquire William Robert Richmond’s interest in the Parker Range Project.
On 25 November 2009, the Company issued 823,801 ordinary shares at a deemed price of 24.28
cents pursuant to an agreement to terminate the royalty arrangement between the Group and Carbine
Resources Ltd.
On 30 December 2009, the Company announced a placement to raise up to $2,240,000 by way of
placement of 4 million ordinary shares and 4 million 28 cent Options expiring 1 February 2010. The
ordinary shares and Options were issued on 31 December 2009. On 29 January 2010, the Options
were exercised and the Company issued 4 million ordinary shares.
On 7 April 2010, the Company issued 3 million ordinary shares by way of a Placement to a range of
leading institutions and sophisticated investors.
During May 2010 and June 2010, the Company issued 5,454,545 ordinary shares by way of a
Placement to a range of leading institutions and sophisticated investors.
(viii) During the financial period, the Company issued a total of 147,028 ordinary shares on exercise of
(ix)
147,028 20 cent Listed Options expiring 28 February 2011.
Deferred tax recognised directly in equity relating to equity raising costs.
Ordinary shares participate in dividends and the proceeds on winding up of the Company in
proportion to the number of shares held and in proportion to the amount paid up on the shares held.
At shareholders meetings each ordinary share is entitled to one vote in proportion to the paid up
amount of the share when a poll is called, otherwise each shareholder has one vote on a show of
hands.
(b) Movements in Listed Options
Opening balance at 1 July 2009
Placement
Exercise of Listed Options
Closing balance at 30 June 2010
Notes
(i)
(ii)
Number of
Options
11,499,702
1,491,620
(147,028)
-
12,844,294
Issue
price
$
-
-
-
-
-
-
-
(i)
(ii)
In May 2009, the Company released a prospectus for a pro rata non-renounceable entitlement issue of
ordinary shares on a 1 for 3 basis with a free attaching new option for every 2 new shares applied for.
The options are exercisable at 20 cents on or before 28 February 2011 and are Listed on the ASX.
During the financial period, the Company issued a total of 1,491,620 being the shortfall of the rights
issue.
During the financial period, a total of 147,028 Options were exercised.
42
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
15.
ISSUED CAPITAL (Cont’d)
(a) Capital risk management
The Economic Entity’s objectives when managing capital are to safeguard their ability to continue as a
going concern, so that they may continue to provide returns for shareholders and benefits for other
stakeholders. Due to the nature of the Economic Entity’s activities, being mineral exploration, the
Group does not have ready access to credit facilities, with the primary source of funding being equity
raisings. Therefore, the focus of the Economic Entity’s capital risk management is the current working
capital position against the requirements of the Economic Entity’s to meet exploration programmes
and corporate overheads. The Economic Entity’s strategy is to ensure appropriate liquidity is
maintained to meet anticipated operating requirements, with a view to initiating appropriate capital
raisings as required.
The working capital position of the Economic Entity at 30 June 2010 and 30 June 2009 are as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Working capital position
16. OPTION RESERVE
2010
$
3,390,602
335,352
(876,454)
2,849,500
2009
$
3,816,351
140,237
(616,860)
3,339,728
2010
$
613,744
2009
$
7,421,043
This reserve is used to record the value of equity benefits provided to the employees and directors as
part of their remuneration.
17. ACCUMULATED LOSSES
Accumulated losses at the beginning of the financial
period
Net loss attributable to members
Transfers from Option Reserve
Accumulated losses at the end of the financial period
2010
$
2009
$
(6,276,400)
(1,370,163)
7,232,323
(986,104)
(5,290,296)
-
(414,240)
(6,276,400)
43
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
18. FINANCIAL RISK MANAGEMENT
The Economic Entity’s principal financial instruments comprise receivables, payables, held-for-
trading investments, cash and short-term deposits.
The Board of Directors has overall responsibility for the oversight and management of the
Economic Entity’s exposure to a variety of financial risks (including fair value interest rate risk,
credit risk, liquidity risk and cash flow interest rate risk).
The Economic Entity’s overall risk management program focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the financial performance of
the Economic Entity..
Interest rate risks
The Economic Entity’s exposure to market interest rates relates to cash deposits held at variable
rates. The Board constantly analyses its interest rate exposure. Within this analysis
consideration is given to potential renewals of existing positions.
Credit risk
The maximum exposure to credit risk at balance date is the carrying amount (net of provision
of doubtful debts) of those assets as disclosed in the Statement of Financial Position and notes to
the financial statements. The Economic Entity has adopted a policy of only dealing with
creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of
mitigating the risk of financial loss from defaults. The Economic Entity’s exposure and the
credit ratings of its counterparties are continuously monitored and the aggregate value of
transactions concluded are spread amongst approved counterparties.
Credit risk related to balances with banks and other financial institutions is managed by the
board. The board’s policy requires that surplus funds are only invested with counterparties with
a Standard & Poor’s rating of at lease AA-. All of the Economic Entity’s surplus funds are
invested with AA Rated financial institutions.
Liquidity risk
The responsibility for liquidity risk management rests with the Board of Directors. The
Economic Entity manages liquidity risk by maintaining sufficient cash or credit facilities to meet
the operating requirements of the business and investing excess funds in highly liquid short term
investments.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest
rates and equity prices will affect the Economic Entity’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.
44
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
18. FINANCIAL INSTRUMENTS (Cont’d)
Maturity profile of financial instruments
The following table details the Group’s exposure to interest rate risk as at 30 June 2010:
2010
Floating
Interest
Rate
$
Fixed
Interest
maturing
in 1 year
or less
$
Fixed
Interest
maturing
over 1 to 5
years
$
Financial assets
Cash and cash
equivalents
Trade and other
receivables
Financial assets –
held for trading
Weighted average
Interest rate
Financial Liabilities
Trade and other
payables
Weighted average
interest rate
182,109
3,207,998
-
294,339
-
182,109
-
3,502,337
-
-
-
-
5.03%
-
-
-
-
-
-
-
-
-
-
-
Non-
interest
bearing
2010
Total
$
$
495
3,390,602
335,352
629,691
323,722
659,569
323,722
4,344,015
876,454
876,454
876,454
876,454
The following table details the Group’s exposure to interest rate risk as at 30 June 2009:
2009
Floating
Interest
Rate
$
Fixed
Interest
maturing
in 1 year
or less
$
Fixed
Interest
maturing
over 1 to 5
years
$
Non-
interest
bearing
2009
Total
$
$
Financial assets
Cash and cash
equivalents
Trade and other
receivables
Financial assets –
held for trading
Weighted average
Interest rate
Financial Liabilities
Trade and other
payables
Weighted average
interest rate
58,483
3,757,373
-
495
3,816,351
-
-
57,505
140,237
197,742
-
58,483
-
-
3,757,373
1.21%
-
57,505
-
788,767
929,499
788,767
4,802,860
-
-
-
-
-
-
45
-
-
-
616,860
616,860
-
616,860
616,860
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
18. FINANCIAL INSTRUMENTS (Cont’d)
Net Fair Values
The carrying value and net fair values of financial assets and liabilities at balance date are:
2010
Carrying
Amount
$
Net fair
Value
$
2009
Carrying
Amount
$
Net fair
Value
$
On-balance sheet financial instruments
Financial assets
Cash and deposits
Receivables
Investment held for
trading
Financial liabilities
Payables
3,390,602
629,691
3,390,602
629,691
3,816,351
197,742
3,816,351
197,742
323,722
323,722
788,767
788,767
4,344,015
4,344,015
4,802,860
4,802,860
876,454
876,454
616,860
616,860
876,454
876,454
616,860
616,860
The financial instruments recognised at fair value in the statement of financial position have been
analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in
making the measurements. All financial instruments measured at fair value are level one, meaning
fair value is determined from quoted prices in active markets for identical assets.
19. EARNINGS PER SHARE
2010
$
2009
$
(a)
Loss used in the calculation of basic EPS
(1,443,043)
(5,290,295)
(b) Weighted average number of ordinary shares outstanding
during the period used in the calculation of basic loss per
share:
Number of
Shares
Number of
Shares
94,462,769
62,431,184
46
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
Economic Entity
2010
$
2009
$
20. CASH FLOW INFORMATION
(i) Reconciliation of cash flows from operating
activities with profit/(loss) after income tax
Loss after income tax
(1,370,163)
(5,290,295)
Non operating cash flows in loss for the year:
Depreciation
Profit)/Loss on sale of shares
(Profit)/Loss on sale of exploration assets
Employee equity settled transactions
Fair value adjustment to investments
Profit on sale of tenements
Exploration write-off
Management fees received
Changes in assets and liabilities:
Decrease/(increase) in trade receivables
and prepayments
Increase/(decrease) in trade payables,
accruals and employee entitlements
Increase/(decrease) in provisions
Decrease/(increase) in exploration
Decrease/(increase) in deferred tax assets
(Decrease)/increase in deferred tax
liabilities
36,559
1,777,006
(1,758)
425,024
1,784,283
(494,250)
370,000
-
25,508
1,178,943
-
-
3,055,420
(890,429)
1,347,773
(62,193)
(483,137)
1,100,073
529,471
24,705
(6,556,418)
(2,181,974)
2,181,974
(535,198)
(8,244)
(2,755,391)
(1,871,672)
203,507
Cash outflow from operations
(7,600,124)
(4,502,198)
(ii) Non-cash financing and investing activities
425,024
-
Share based payments (note 26)
47
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
21.
COMMITMENTS
On 10 November 2003 the Economic Entity entered into a lease agreement with Giorgio Longo
and Clotilda Aurora Longo for the premises known as entire First Floor, 22 Oxford Close,
Leederville, Western Australia. The initial term, is for two (2) years expiring on 30 September
2006 in consideration for a rental fee of $30,000 per annum. The Economic Entity has negotiated
an extension of the lease agreement with Giorgio Longo until 30 September 2010 for a rental fee of
$60,000 per annum.
On 25 February 2010, the Economic Entity entered into a lease agreement with CB Richard Ellis
(C) Pty Ltd for the premises at Level 2, 38 Richardson Street, West Perth, Western Australia. The
initial term, is for three (3) years expiring on 1 April 2013 in consideration for a rental fee of
$216,804 per annum.
In order to maintain rights of tenure to mining tenements, the Economic Entity would have the
following discretionary exploration expenditure requirements up until expiry of leases. These
obligations, which are subject to renegotiation upon expiry of the leases, are not provided for in the
financial statements and are payable:
Not longer than one year
Longer than one year, but not longer than five years
Longer than five years
2010
$
1,179,604
3,124,023
-
4,303,627
2009
$
5,335,168
597,676
-
5,932,844
At the moment the Economic Entity has commitments in excess of cash, however the Board
believes it will be able to raise the additional funds to satisfy the commitments for the future.
If the Economic Entity decides to relinquish certain leases and/or does not meet these obligations,
assets recognised in the Statement of Financial Position may require review to determine the
appropriateness of carrying values. The sale, transfer or farm-out of exploration rights to third
parties will reduce or extinguish these obligations.
22.
CONTROLLED ENTITIES
Parent Entity
Country of Incorporation Percentage Owned
2010
2009
Cazaly Resources Limited
Australia
Controlled Entities
Hayes Mining Pty Ltd
Cazaly Iron Pty Ltd
Sammy Resources Pty Ltd
Cazroy Pty Ltd
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
0%
On 28 July 2009 the parent entity acquired 100% of Cazroy Pty Ltd, for purchase consideration
of $1.00.
48
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
23. OPERATING SEGMENTS
The Group operates predominantly in one geographical segment, being Western Australia, and in
one business segment, mineral mining and exploration and substantially all of the entity’s resources
are deployed for this purpose.
Segment Information
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed
and used by the Board of Directors in assessing performance and determining the allocation of
resources.
The Group is managed primarily on the basis of its exploration and corporate activities.
Operating segments are therefore determined on the same basis.
Reportable segments disclosed are based on aggregating operating segments where the segments
are considered to have similar economic characteristics
Types of reportable segments
Exploration
Segment assets, including acquisition cost of exploration licenses, all expenses related to the
tenements and profit on sale of tenements are reported on in this segment.
Corporate
Corporate, including treasury, corporate and regulatory expenses arising from operating an ASX
listed entity. Segment assets, including cash and cash equivalents, and investments in financial
assets are reported in this segment.
Basis of accounting for purposes of reporting by operating segments
Accounting policies adopted
Unless stated otherwise, all amounts reported to the Board of Directors as the chief decision
maker with respect to operating segments are determined in accordance with accounting policies
that are consistent to those adopted in the annual financial statements of the Company.
Segment assets
Where an asset is used across multiple segments, the asset is allocated to the segment that
receives the majority of economic value from the asset. In the majority of instances, segment
assets are clearly identifiable on the basis of their nature and physical location.
Unless indicated otherwise in the segment assets note, deferred tax assets and intangible assets
have not been allocated to operating segments.
Segment liabilities
Liabilities are allocated to segments where there is direct nexus between the incurrence of the
liability and the operations of the segment. Borrowings and tax liabilities are generally
considered to relate to the Group as a whole and are not allocated. Segment liabilities include
trade and other payables.
49
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
23. OPERATING SEGMENTS (Cont’d)
Unallocated items
The following items of revenue, expense, assets and liabilities are not allocated to operating
segments as they are not considered part of the core operations of any segment:
• non-recurring items of revenue or expense;
•
• deferred tax assets and liabilities;
income tax expense;
Comparative information
This is the first reporting period in which AASB 8: Operating Segments has been adopted.
Comparative information has been stated to conform to the requirements of the Standard.
(i) Segment performance
30 June 2010:
Total segment revenue
Reconciliation of segment revenue to total
revenue:
Inter-segment elimination
Unallocated revenue
Total Economic Entity revenue
Exploration Corporate
$
$
Total
$
494,250
102,803
597,053
-
-
597,053
Segment net profit/(loss) before tax
124,250
(1,982,722)
(1,858,472)
Reconciliation of segment result to company net
(loss) before tax:
Amounts not included in segment result but
reviewed by the Board:
Un-allocated items:
Other
Net loss before tax from continuing operations
30 June 2009:
Total segment revenue
Reconciliation of segment revenue to total
revenue:
Inter-segment elimination
Unallocated revenue
Total Economic Entity revenue
-
415,429
(1,443,043)
202,622
56,413
259,035
-
380,316
639,351
Segment net profit/(loss) before tax
(1,145,151)
(6,234,055)
(7,379,206)
Reconciliation of segment result to company net
(loss) before tax:
Amounts not included in segment result but
reviewed by the Board:
Unallocated items:
Other
Net loss before tax from continuing operations
50
-
-
(420,746)
(6,958,460)
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
23. OPERATING SEGMENTS (Cont’d)
Exploration Corporate
Total
$
$
$
(ii) Segment assets
30 June 2010:
Segment assets
Segment asset increases for the period:
Capital expenditure
Acquisitions
Interest received
Capital raising
Reconciliation of segment assets to total assets:
Inter-segment eliminations
Unallocated assets:
Deferred tax assets
Other assets
Total assets from continuing operations
30 June 2009:
Segment assets
Segment asset increases for the period:
Capital expenditure
Acquisitions
Interest received
Capital raising
Reconciliation of segment assets to total assets:
Inter-segment eliminations
Unallocated assets:
Deferred tax assets
Other assets
Total assets from continuing operations
(iii) Segment liabilities
30 June 2010:
Segment liabilities
Reconciliation of segment liabilities to liabilities:
Inter-segment eliminations
Unallocated liabilities:
Deferred tax liabilities
Other liabilities
Total liabilities from continuing operations
51
17,150,110
4,345,420
21,495,530
7,880,160
-
7,880,160
-
-
84,214
109,063
84,214
109,063
8,004,139
8,004,139
7,880,160
8,197,416
16,077,576
-
5,085,658
-
26,581,188
9,782,843
4,605,748
14,388,591
2,584,618
-
2,584,618
-
-
-
37,000
56,413
37,000
56,413
3,794,859
3,794,859
2,584,618
3,888,272
6,472,890
-
-
-
2,903,684
202,236
17,494,511
-
-
5,085,658
947,323
6,032,981
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
23.
OPERATING SEGMENTS (Cont’d)
Exploration
Corporate
Total
30 June 2009:
Segment liabilities
Reconciliation of segment liabilities to liabilities:
$
-
$
-
Inter-segment eliminations
Unallocated liabilities:
Deferred tax liabilities
Other liabilities
Total liabilities from continuing operations
24.
EVENTS SUBSEQUENT TO REPORTING DATE
$
-
-
2,903,684
663,024
3,566,708
On 15 July, the Company issued 1,084 Shares following the exercise of 1,084 20 cent Options
expiring 28 February 2011.
On 12 August, the Company issued 1,712 Shares following the exercise of 1,712 20 cent Options
expiring 28 February 2011.
On 25 August, the Company issued 1,000,000 Shares to Nathan McMahon following the exercise
of 1,000,000 30 cent Options expiring 1 July 2011.
On 7 September, the Company issued 678,803 Shares to Nathan McMahon and related parties of
Nathan McMahon, following the exercise of 678,803 20 cent Options expiring 28 February 2011.
Apart from the above, no other matters or circumstances have arisen since the end of the financial
period 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.
On 9 September, the Company issued 1,667 Shares following the exercise of 1,667 20 cent
Options expiring 28 February 2011.
On 24 September, the Company announced it had entered into a Bridging Facility with a range of
Institutions, Sophisticated Investors and Directors to provide bridge loan amounts of a minimum
of A$2 million and maximum of A$4 million. Lenders will be issued with 100,000 Cazaly
Options for every $100,000 drawndown. The bridging facility has been arranged as a short-term
finance for the purpose of allowing the completion of the Parker Range Bankable Feasibility
Study and general working capital requirements. The Company has drawn down A$1 million to
date. The terms of the bridging facility, are at arms length and on commercial terms.
52
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
25.
RELATED PARTY INFORMATION
Transactions between related parties are on commercial terms and conditions, no more
favourable than those available to other parties unless otherwise stated.
Transactions with related entities:
(i)
Director related Entities
Remuneration (excluding the reimbursement of costs) received or receivable by the directors of
the Economic Entity and aggregate amounts paid to superannuation plans in connection with the
retirement of directors are disclosed in Note 4 to the accounts.
Mr McMahon was at any time during the financial year a director and shareholder of Catalyst
Metals Limited (“Catalyst”), Hodges Resources Limited (“Hodges”) and Whinnen Resources
Limited (“Whinnen”). Catalyst, Hodges and Whinnen have an agreement based on normal
commercial terms and conditions to reimburse Cazaly for office rental and administration and
overheads.
Mr Jones is a director and shareholder of Cortona Resources Limited (“Cortona”) and Corazon
Mining Limited (“Corazon”) Cortona and Corazon have agreements based on normal commercial
terms and conditions to reimburse Cazaly for office rental and administration and overheads.
Aggregate amounts of each of the above types of other transaction with related parties of Cazaly
Resources Limited:
Sales
Rent, administrative and office overheads:
Catalyst Metals Limited
Hodges Resources Limited
Corazon Mining Limited
Cortona Resources Limited
Whinnen Resources Limited
2010
$
2009
$
14,342
62,489
7,054
37,660
34,108
30,966
42,584
66,557
23,445
-
53
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
26.
SHARE BASED PAYMENTS
Options are issued to vendors as part of purchase consideration and also to directors and employees
as part of their remuneration as disclosed in Note 4. The options issued may be subject to
performance criteria, and are issued to directors and employees of Cazaly Resources Limited to
increase goal congruence between executives, directors and shareholders.
The following table illustrates the number and weighted average exercise prices of and movements
in share options issued under Share Based Payment Scheme during the year:
2010
2009
Weighted
Average
Exercise Price
$
Weighted
Average
Exercise Price
$
Number of
Options
Number of
Options
5,675,000
1.20
8,575,000
3,525,000
2,250,000
-
(4,975,000)
6,475,000
0.34
0.30
-
1.26
0.35
-
-
-
(2,900,000)
5,675,000
0.94
-
-
-
0.29
1.20
6,475,000
5,675,000
At beginning of reporting
period
Granted during the period
- Employee & consultants
options
- Director remuneration
Exercised during the period
Expired during the period
Balance the end of reporting
period
Exercisable at end of
reporting period
(i)
(ii)
(iii)
The compensation options outstanding at 30 June 2010 had a weighted average exercise price
between $0.25 and $0.86 and a weighted average remaining life between 1 year and 6 years.
The respective weighted average fair values of options granted during 2010 were $0.3254.
Included under employee benefits expense in the Statement of Comprehensive Income is $425,024
(2009: Nil), and relates to equity-settled payment transactions.
27.
CONTINGENT LIABILITIES AND CONTINGENT ASSETS
There are currently no other contingent liabilities or contingent assets outstanding at the end of
the year.
54
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
28.
PARENT ENTITY DISCLOSURES
(a) Financial Position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Reserves:
Equity settled employee benefits
Retained profits
Total Equity
(b) Financial Performance
Loss for the year
Other comprehensive income
2010
$
2009
$
3,755,968
4,197,181
3,963,481
13,531,030
7,953,149
17,494,511
947,324
968,382
663,024
2,903,684
1,915,706
3,566,708
20,421,583
12,783,160
613,744
(14,997,884)
7,421,043
(6,276,400)
6,037,443
13,927,803
(10,133,899)
-
(5,290,296)
-
Total comprehensive income
(10,133,899)
(5,290,296)
(c) Guarantees Entered into by the Parent
Entity in Relation to the Debts of its
Subsidiaries
(d) Contingent Liabilities of the Parent Entity
(e) Commitments for the Acquisition of
Property, Plant and Equipment by the
Parent Entity
-
-
-
-
-
-
(i) the Loss includes a forgiveness of a loan to wholly owned subsidiary, Hayes Mining Pty Ltd for $5,151,171.
55
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
29.
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 2009–11: Amendments to Australian Accounting
Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131,
132, 136, 139, 1023 & 1038 and Interpretations 10 & 12] (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 assets. The Group has not yet determined the potential impact on the financial
statements.
The changes made to accounting requirements include:
-
simplifying the classifications of financial assets into those carried at amortised cost and
those carried at fair value;
simplifying the requirements for embedded derivatives;
removing the tainting rules associated with held-to-maturity assets;
removing the requirements to separate and fair value embedded derivatives for financial
assets carried at amortised cost;
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
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.
-
-
-
-
-
• AASB 124: Related Party Disclosures (applicable for annual reporting periods commencing on or
after 1 January 2011).
This standard removes the requirement for government related entities to disclose details of all
transactions with the government and other government related entities and clarifies the definition
of a related party to remove inconsistencies and simplify the structure of the standard. No
changes are expected to materially affect the Group.
• AASB 2009–4: Amendments to Australian Accounting Standards arising from the Annual
Improvements Project [AASB 2 and AASB 138 and AASB Interpretations 9 & 16] (applicable
for annual reporting periods commencing from 1 July 2009) and AASB 2009-5: Further
Amendments to Australian Accounting Standards arising from the Annual Improvements Project
[AASB 5, 8, 101, 107, 117, 118, 136 & 139] (applicable for annual reporting periods
commencing from 1 January 2010).
These standards detail numerous non-urgent but necessary changes to accounting standards
arising from the IASB’s annual improvements project. No changes are expected to materially
affect the Group.
• AASB 2009–8: Amendments to Australian Accounting Standards — Group Cash-settled Share-
based Payment Transactions [AASB 2] (applicable for annual reporting periods commencing on
or after 1 January 2010).
56
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
29.
NEW ACCOUNTING STANDARDS FOR APPLICATION IN FUTURE PERIODS (Cont’d)
the accounting for group cash-settled share-based payment
These amendments clarify
transactions in the separate or individual financial statements of the entity receiving the goods or
services when the entity has no obligation to settle the share-based payment transaction. The
amendments
in Interpretation 8 and
Interpretation 11 and as a consequence, these two Interpretations are superseded by the
amendments. These amendments are not expected to impact the Group.
the requirements previously
incorporate
included
• AASB 2009–9: Amendments to Australian Accounting Standards — Additional Exemptions for
First-time Adopters [AASB 1] (applicable for annual reporting periods commencing on or after
1 January 2010).
These amendments specify requirements for entities using the full cost method in place of the
retrospective application of Australian Accounting Standards for oil and gas assets, and exempt
entities with existing leasing contracts from reassessing the classification of those contracts in
accordance with Interpretation 4 when the application of their previous accounting policies would
have given the same outcome. These amendments are not expected to impact the Group.
• AASB 2009–10: Amendments to Australian Accounting Standards — Classification of Rights
Issues [AASB 132] (applicable for annual reporting periods commencing on or after 1 February
2010).
These amendments clarify that rights, options or warrants to acquire a fixed number of an entity's
own equity instruments for a fixed amount in any currency are equity instruments if the entity
offers the rights, options or warrants pro-rata to all existing owners of the same class of its own
non-derivative equity instruments. These amendments are not expected to impact the Group.
• AASB 2009–12: Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112,
119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052] (applicable for
annual reporting periods commencing on or after 1 January 2011).
This standard makes a number of editorial amendments to a range of Australian Accounting
Standards and Interpretations, including amendments to reflect changes made to the text of
International Financial Reporting Standards by the IASB. The standard also amends AASB 8 to
require entities to exercise judgment in assessing whether a government and entities known to be
under the control of that government are considered a single customer for the purposes of certain
operating segment disclosures. These amendments are not expected to impact the Group.
• AASB 2009–13: Amendments to Australian Accounting Standards arising from Interpretation 19
[AASB 1] (applicable for annual reporting periods commencing on or after 1 July 2010).
This standard makes amendments to AASB 1 arising from the issue of Interpretation 19. The
amendments allow a first-time adopter to apply the transitional provisions in Interpretation 19.
This standard is not expected to impact the Group.
• AASB 2009–14: Amendments to Australian Interpretation — Prepayments of a Minimum
Funding Requirement [AASB Interpretation 14] (applicable for annual reporting periods
commencing on or after 1 January 2011).
This standard amends Interpretation 14 to address unintended consequences that can arise from
the previous accounting requirements when an entity prepays future contributions into a defined
benefit pension plan.
57
Annual Report 2010
Cazaly Resources Limited and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2010
29.
NEW ACCOUNTING STANDARDS FOR APPLICATION IN FUTURE PERIODS (Cont’d)
• AASB Interpretation 19: Extinguishing Financial Liabilities with Equity Instruments (applicable
for annual reporting periods commencing on or after 1 July 2010).
This Interpretation deals with how a debtor would account for the extinguishment of a liability
through the issue of equity instruments. The Interpretation states that the issue of equity should be
treated as the consideration paid to extinguish the liability, and the equity instruments issued
should be recognised at their fair value unless fair value cannot be measured reliably in which
case they shall be measured at the fair value of the liability extinguished. The Interpretation deals
with situations where either partial or full settlement of the liability has occurred. This
Interpretation is not expected to impact the Group.
The Group does not anticipate the early adoption of any of the above Australian Accounting Standards.
58
Independent Auditor's Report
To the Members of Cazaly Resources Limited
We have audited the accompanying financial report of Cazaly Resources Limited (“the Company”) and
Controlled Entities (“the Consolidated Entity”), which comprises the statement of financial position as at
30 June 2010, and the statement of comprehensive income, statement of changes in equity and
cash flow statement for the year ended on that date, a statement of accounting policies, other selected
explanatory notes 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 Cazaly Resources Limited are responsible for the preparation and fair presentation of
the financial report in accordance with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and
maintaining internal control relevant to the preparation and fair presentation of the financial report that is
free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In
Note 1, the directors also state, in accordance with Accounting Standards AASB 101: Presentation of
Financial Statements, that compliance with the Australian equivalents to International Financial Reporting
Standards (IFRS) ensures that the financial report, comprising the financial statements and notes,
complies with IFRS.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit
to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In
making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independent Auditor’s Report
To the Members of Cazaly Resources Limited (Continued)
Independence
In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements
and the Corporations Act 2001.
Auditor's Opinion
In our opinion:
a. The financial report of Cazaly Resources Limited and Controlled Entities is in accordance with the Corporations Act 2001,
including:
i.
ii.
giving a true and fair view of the Company and the Consolidated Entity’s financial position as at 30 June 2010 and of its
performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;
b. The financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included within the report of the directors for the year ended 30 June 20 10. The
directors of Cazaly Resources Limited are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Cazaly Resources Limited for the year ended 30 June 2010, complies with section
300A of the Corporations Act 2001.
BENTLEYS
Chartered Accountants
RANKO MATIC CA
Director
th
DATED at PERTH this 29 day of September 2010
Annual Financial Report 2010
Cazaly Resources Limited and Controlled Entities
ADDITIONAL SHAREHOLDER INFORMATION
Shareholding
The distribution of members and their holdings of equity securities in the company as at 22 September
2010 was as follows:
Class of Equity Securities
Number Held as at 22 September 2010
Fully Paid Ordinary
Shares
Listed Options
($0.20 expiring 28
February 2011)
1-1,000
1,001 - 5,000
5,001 – 10,000
10,001 - 100,000
100,001 and over
TOTALS
331
1,034
612
1,004
144
3,125
Substantial Shareholders
Substantial shareholders in the Company are set out below
Shareholder
Clive Jones
Nathan McMahon
Unquoted Securities
231
187
42
105
23
588
Number
7,566,802
11,405,357
Class of Equity Security
Number
Number of
Security Holders
5 October 2011 Options
19 June 2012 Options
14 September 2012 Options
26 October 2012 Options
22 May 2013 Options
28 February 2011 Options
1 July 2011 Options
6 October 2011 Options
6 July 2013 Options
6 July 2016 Options
11 January 2015 Options
4 February 2015 Options
11 February 2012 Options
$0.8036
$0.8600
$0.39
$0.45
$0.30
$0.20
$0.30
$0.25
$0.30
$0.40
$0.33
$0.49
$0.40
50,000
250,000
75,000
225,000
100,000
12,161,028
2,250,000
500,000
750,000
750,000
925,000
100,000
500,000
1
2
1
2
1
588
3
1
1
1
5
1
1
62
Annual Financial Report 2010
Cazaly Resources Limited and Controlled Entities
ADDITIONAL SHAREHOLDER INFORMATION (Cont’d)
Voting Rights
The voting rights attached to each class of equity security are as follows:
Ordinary Shares
- Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a
meeting or by proxy has one vote on a show of hands.
Quoted and Unquoted Options
- These options have no voting rights.
Twenty Largest Shareholders
The names of the twenty largest ordinary fully paid shareholders as at 22 September 2010 are as follows:
Name
Number of Ordinary
Fully Paid Shares Held
% Held of Issued
Ordinary Capital
New Page Investments Limited
Mr Clive Bruce Jones
Kingsreef Pty Ltd
Nathan Bruce McMahon
gRANDLODGE Pty Ltd
HSBC Custody Nominees (Australia)
Limited
Mrs Suzanne Dobinson
Citicorp Nominees Pty Limited
Clive Jones
bt Portfolio Services Limited
Mr Kent Michael Hunter
Fusion Resources Ltd
Appolinax Inc
Mrs Karen Cameron Murie
UBS Wealth Management Australia
Nominees Pty Ltd
Newton2 Pty Limited
Kouta Bay Pty Ltd
Widerange Corporation Pty Ltd
ANZ Nominees Limited
Red Emperor Resources NL
TOTAL
8,000,000
5,453,336
5,395,288
4,425,004
3,005,417
1,796,429
1,497,709
1,464,233
1,333,334
1,300,000
1,165,646
1,000,000
1,000,000
945,471
765,000
655,000
631,777
600,000
594,282
7.331
4.997
4.944
4.055
2.754
1.646
1.372
1.342
1.222
1.191
1.068
0.916
0.916
0.866
0.701
0.600
0.579
0.550
0.545
586,667
41,614,593
0.538
38.134
63
Annual Financial Report 2010
Cazaly Resources Limited and Controlled Entities
ADDITIONAL SHAREHOLDER INFORMATION (Cont.)
Twenty Largest Shareholders
The names of the twenty largest listed option shareholders as at 22 September 2010 are as follows:
Name
BT Portfolio Services Limited
Queensway Investments Pty Ltd
Mr Clive Bruce Jones
Slade Technologies Pty Ltd
Dr Alastair Rowland Brown
UBS Wealth Management Australia
Nominees Pty Ltd
Newton2 Pty Limited
Jeff Towler Building Pty Ltd
Mr Phil Miolin
Jeff Towler Building Pty Ltd
Mr Justin Anthony Virgin
Mr David Ernest Oldfield
Mr Terry James Gardiner
Clive Jones
Mervyn Ian Bassett & Shirley Ethel Bassett
A22 Pty Ltd
HSBC Custody Nominees (Australia)
Limited
Mr Kent Michael Hunter
Mrs Amanda Hargreaves
Mr Terence Gray & Mrs Elizabeth Gray
TOTAL
Number of Ordinary
Fully Paid Shares Held
% Held of Issued
Ordinary Capital
1,136,516
775,000
681,668
583,000
316,515
300,000
287,084
250,000
223,863
200,000
200,000
200,000
198,500
166,667
150,000
150,000
147,309
145,706
145,000
144,039
6,400,867
9.346
6.373
5.605
4.794
2.603
2.467
2.361
2.056
1.841
1.645
1.645
1.645
1.632
1.371
1.233
1.233
1.211
1.198
1.192
1.184
52.634
64
Annual Financial Report 2010
Cazaly Resources Limited and Controlled Entities
CORPORATE GOVERNANCE
The Company is committed to implementing the highest standards of corporate governance. In determining what those
high standards should involve the Company has turned to the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations, 2nd Edition. The Company is pleased to advise that the Company’s
practices are largely consistent with those ASX guidelines. As consistency with the guidelines has been a gradual
process, where the Company did not have certain policies or committees recommended by the ASX Corporate
Governance Council (the Council) in place during the reporting period, we have identified such policies or committees.
The Board of Directors of Resources Limited is responsible for corporate governance of the Company. The Board
guides and monitors the business and affairs of Cazaly Resources Limited on behalf of the shareholders by whom they
are elected and to whom they are accountable.
Where the Company’s corporate governance practices do not correlate with the practices recommended by the Council,
the Company is working towards compliance however it does not consider that all the practices are appropriate for the
Company due to the size and scale of Company operations.
For further information on corporate governance policies adopted by Cazaly Resources Limited, refer to our website:
www.cazalyresources.com.au.
Board Objectives
The Board will develop strategies for the Company, review strategic objectives, and monitor the performance against
those objectives. The overall goals of the corporate governance process are to:
•
•
•
drive shareholders value;
assure a prudential and ethical base to the Company’s conduct and activities; and
ensure compliance with the Company’s legal and regulatory obligations.
Principle 1: Lay solid foundations for management and oversight
The board has adopted a Charter that sets out the roles and responsibilities of the board. This may be viewed at the
Corporate Governance page of the Company’s website. The Charter includes, amongst other things that the Board will:
•
•
•
•
•
•
•
developing initiatives for profit and assets growth;
reviewing the corporate, commercial and financial performance of the Company on a regular basis;
acting on behalf of, and being accountable to, the Shareholders;
identifying business risks and implementing actions to manage those risks; and
developing and effecting management and corporate systems to assure quality
reviewing the Company’s systems of risk management and internal compliance and control, codes of
conduct and legal compliance
ensuring that policies and procedures are in place consistent with the Company’s objectives, and ensuring the
Company and its officers act legally, ethically and responsibly in all matters
The Company is committed to the circulation of relevant materials to Directors in a timely manner to facilitate
Directors’ participation in Board discussions on a fully informed basis.
Senior Executives evaluation
The Board consists of three (3) members, two of which hold executive roles as Joint Managing Directors. The board
therefore undertakes ongoing self-assessment and review of performance of the Board, and individual directors
annually. The Chairman of the Board is responsible for determining the process for evaluating Board performance.
To facilitate optimal performance, the Executives participate in professional development programs.
65
Annual Financial Report 2010
Cazaly Resources Limited and Controlled Entities
CORPORATE GOVERNANCE
Principle 2: Structure the board to add value
Composition
The board currently consists of three directors, two executives and one non-executive. Details of their experience,
qualifications and committee memberships are set in the directors report. All directors were in office at the date of this
report:
Clive Jones – Managing Director
Executive Director since August 2003
Term in office – 73 months
Nathan McMahon – Managing Director
Executive Director since June 2003
Term in office - 75 months
Kent Hunter
Independent Non-executive director since August 2003
Term in office – 73 months
Appointment
Election of Board members is substantially the province of the Shareholders in general meeting. However, the
Company commits to the following principles:
•
•
the Board to comprise of Directors with a blend of skills, experience and attributes appropriate for the Company
and its business;
the principal criterion for the appointment of new Directors being their ability to add value to the Company and
its business.
Board Independence
The Board has accepted the ASX Corporate Governance Councils definition of an Independent Director contained in
their report titled “Corporate Governance Principles and Recommendations, 2nd Edition.”.
Mr Hunter is a Non-Executive Director and is considered to be Independent. In reaching that determination, the Board
has taken into account:
• The specific disclosures made in accordance with the Corporations Act, but each such director in respect of
any material contract or relationship
• That no such director is, or is associated directly with, a substantial shareholder of the company
• Where applicable, the related party dealings referable to each such Director, noting that those dealings are not
material under accounting standards. Full details of related party dealings are set out in the notes to the
financial statements
• That no such non-executive Director has within the last three years been employed in an executive capacity by
the company
• That no such non-executive Director is , or is associate with a supplier or customer of the company which is
material under accounting standards
• That such non-executive Director’s are free from any interest and any business or other relationship which
could, or could reasonable be perceived to, materially interfere with the director’s ability to act in the best
interests of the Company.
Under the accounting standards, a matter is considered to be material if it is equal to or greater than 10% of the
appropriate base amount.
66
Annual Financial Report 2010
Cazaly Resources Limited and Controlled Entities
CORPORATE GOVERNANCE
Mr McMahon is an Executive Director of the Company and does not meet the Company’s criteria for independence.
Mr McMahon’s experience and knowledge of the Company make his contribution to the Board such that it is
appropriate for him to remain on the Board.
Mr Jones is an Executive Director of the Company and does not meet the Company’s criteria for independence.
Mr Jones experience and knowledge of the Company make his contribution to the Board such that it is appropriate for
him to remain on the Board.
Given the size of the company and the industry in which is operates, the current Board structure is considered to best
serve the Company in meeting its objectives, given its small capitalisation, limited resources and existing operations.
The composition of the Board is reviewed on an annual basis to ensure that the Board has the appropriate mix of
expertise and experience.
Independent professional advice
There are procedures in place, as agreed by the board, to enable directors to seek independent professional advice on
issues arising in the course of their duties at the company’s expense.
Remuneration and Nomination Committee
As the entire board consist of three (3) members, the Company does not have a Remuneration and Nomination
Committee. The Directors believe given the size and scope of the operations of the Company, it is sufficient for the full
board to assume those responsibilities that are ordinarily assigned to a remuneration and nomination committee.
Where appropriate, independent consultants are engaged to identify possible new candidates for the Board.
Nomination Arrangements
Where a vacancy is considered to exist, the Board will select an appropriate candidate through consultation with
external parties and consideration of the needs of shareholders and the Company. Such appointments will be referred to
shareholders for re-election at the next annual general meeting. All Directors, except the Managing Director, are
subject to re-election by shareholders at least every three years.
When a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the
services of a new director with particular skills, the Board will determine the selection criteria for the position based on
the skills deemed necessary for the Board to best carry out its responsibilities. The Board will then appoint the most
suitable candidate (assuming one is available) who must stand for election at the next annual general meeting.
Performance
During the reporting year the Company did not conduct a formal evaluation of Directors and Executives. The Board
undertakes an annual review of its own performance with external advice as appropriate. To facilitate optimal
performance, the Board participates in professional development programs.
Principle 3: Promote ethical and responsible decision making
Code of Conduct
The Directors, officers and employees of the Company are required to conduct themselves in accordance with the
Company’s Code of Conduct which can be viewed on the Governance Page of the Company’s website.
Share Trading Policy
The Company also has policies concerning trading in the Company’s securities by directors, officers and employees.
This policy can be viewed on the Governance Page of the Company’s website.
Diversity Policy
The Company does not have a Diversity policy in place at this stage. The Board will seek to develop a Diversity Policy
in the future, which can then be sued as a guide to be used by the Company to identify new directors, senior executives
and employees.
Gender proportions:
46% of the Company’s employees are women and one of these women holds a senior executive position.
67
Annual Financial Report 2010
Cazaly Resources Limited and Controlled Entities
CORPORATE GOVERNANCE
Principle 4: Safeguard integrity of financial reporting
Audit Committee
Given the size and scope of the operations of the Company, the full board has assumed those responsibilities that are
ordinarily assigned to a audit committee.
It is the Board’s responsibility to ensure that an effective internal control framework exists within the Company. This
includes both internal controls to deal with both the effectiveness and efficiency of significant business processes, the
safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial and non
information.
Appointment of auditor
The shareholders in a general meeting are responsible for the appointment of the external auditors of the Company, and
the Board from time to time will review the scope, performance and fees of those external auditors.
Principle 5: Make timely and balanced disclosure
The Board has designated the Managing Directors as the persons responsible for overseeing and coordinating disclosure
of information to the ASX as well as communicating with the ASX. The Company has a Continuous Disclosure Policy
available for viewing on the Governance page of the Company’s website.
Principle 6: Respect the rights of shareholders
The Board of Cazaly is committed to open and effective communication, ensuring all shareholders is informed of all
significant development concerning the Company. The Company has in place an effective Shareholder
Communications Policy. This policy can be viewed on the Governance page of the Company’s website.
Principle 7: Recognise and manage risk
Identification and Management of Risk
The Board’s Charter clearly establishes that it is responsible for ensuring there is a good sound system for overseeing
and managing risk. Due to the size and scale of operations, risk management issues are considered by the Board as a
whole.
The Board’s collective experience will enable accurate identification of the principal risks which may affect the
Company’s business. Management of these risks will be discussed by the Board at periodic (at least annual) strategic
planning meetings. In addition, key operational risks and their management, will be recurring items for deliberation at
Board meetings.
A copy of the Company’s risk management policy can be viewed on the Governance page of the Company’s website.
The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that
the group’s objectives and activities are aligned with those risks and opportunities.
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:
• Board receives regular updates on key risks associated with the development of the Company’s Parker
Range Project and has commissioned a Pre-Feasibility on the Parker Range Project, which will also
report on material risk for the project;
•
Implementation of Board-approved annual operating budgets and plans, then monitoring the actual
progress against those; and
The Board will seek to develop a more extensive Risk Management Policy over the coming year, which can then
be used as a guide to be used throughout the company in identifying and communicating business risks.
68
Annual Financial Report 2010
Cazaly Resources Limited and Controlled Entities
CORPORATE GOVERNANCE
The Board has received assurance from the Financial Controller and Managing Director that the declarations made in
accordance with section 295A of the Corporation Act 2001 are:
1. founded on a sound system of risk management and internal compliance and control which implements the
policies adopted by the board
2. the Company’s risk management and internal compliance and control system is operating efficiently and
effectively in all material respects.
Principle 8: Remunerate fairly and responsibly
Remuneration Arrangements
As the entire board consist of three (3) members, the Company does not have a Remuneration and Nomination
Committee. The Directors believe given the size and scope of the operations of the Company, it is sufficient for the full
board to assume those responsibilities that are ordinarily assigned to a remuneration and nomination committee.
Where appropriate, independent consultants are engaged to appropriate levels of remuneration
.
It is the company’s objective to provide maximum stakeholder benefit from the retention of a high quality board by
remunerating directors fairly and appropriately with reference to relevant employment market conditions. To assist in
achieving the objective the Board links the nature and amount of executive directors’ emoluments to the company’s
financial and operational performance. The expected outcomes of this remuneration structure are:
•
•
Retention and motivation of Directors
Performance rewards to allow Directors to share the rewards of the success of Cazaly Resources Limited
The remuneration of an executive director will be decided by the Remuneration and Nomination Committee. In
determining competitive remuneration rates the Committee reviews local and international trends among comparative
companies and the industry generally. It also examines terms and conditions for the employee share option plan.
•
Where applicable, the Company is committed to remunerating its senior executives in a manner that is market-
competitive and consistent with best practice as well as supporting the interests of shareholders. Consequently, under
the Senior Executive Remuneration Policy the remuneration of senior executive may be comprised of the following:
fixed salary that is determined from a review of the market and reflects core performance requirements and
expectations;
a performance bonus designed to reward actual achievement by the individual of performance objectives and
for materially improved Company performance;
participation in any share/option scheme with thresholds approved by shareholders;
statutory superannuation.
•
•
•
By remunerating senior executives through performance and long-term incentive plans in addition to their fixed
remuneration the Company aims to align the interests of senior executives with those of shareholders and increase
Company performance. During the year there were no Non-Director Executives.
The value of shares and options were they to be granted to senior executives would be calculated using the Black and
Scholes method.
The objective behind using this remuneration structure is to drive improved Company performance and thereby increase
shareholder value as well as aligning the interests of executives and shareholders.
The Board may use its discretion with respect to the payment of bonuses, stock options and other incentive payments.
The maximum remuneration of non-executive Directors is the subject of shareholder resolution in accordance with the
Company’s Constitution, and the Corporations Act 2001 as applicable. The appointment of non-executive Director
remuneration within that maximum will be made by the Board having regard to the inputs and value of the Company of
the respective contributions by each non-executive Director. Usually Non-Executive Directors do not receive
performance based bonuses and but may participate in equity schemes of the Company.
69
Annual Financial Report 2010
Cazaly Resources Limited and Controlled Entities
CORPORATE GOVERNANCE
The Board may award additional remuneration to non-executive Directors called upon to perform extra services or make
special exertions on behalf of the Company.
There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive directors.
All remuneration paid to directors and executives is valued at the cost to the company and expensed. Options are
valued using the Black-Scholes methodology.
Full details regarding the remuneration of Directors, is included in the Directors’ Report.
Explanation of departure from the ASX Corporate Governance Principles and Recommendations 2nd Edition
During the financial year Cazaly strived to comply with the 8 Essential Corporate Governance Principles and
Recommendations where appropriate for the size and nature of the Company and Industry in which it operates. A
summary of departure form the ASX Corporate Governance Principles and Recommendations is outlined below:
Best Practice
Recommendation
Notification of
Departure
Explanation of Departure
2.1-2.3 - Structure of
the Board
The majority of
the board are not
independent
directors, the
Chair is does not
meet the criteria
for Independence
and the role of the
Chair and CEO are
exercised by the
same individual
2.4 The board should
establish a
nomination
committee
The Company has
not established a
formal nomination
committee
3.2 Companies
should establish a
policy concerning
diversity and disclose
the policy or a
summary of the
policy.
4.1-4.3 Safeguard
integrity in financial
reporting
The Company
does not have a
Diversity Policy
The Company has
not established a
formal audit
committee
The Board continues to strive to meet the ASX Corporate Governance
Principles and Recommendations or other such principles and
guidance as the Board may consider appropriate form time to time,
however the Board also recognises that complying the ASX Corporate
Governance Principles and Recommendations 2.1, 2.2 and 2.3 is
impractical given the size of the company and the industry in which it
operates. The Board instead aims to assess the independence of the
Company’s non-executive Director on an ongoing basis requiring full
disclosure where conflicts of interest arise. The Board (subject to
members’ voting rights in general meeting) is responsible for selection
of new board members and succession planning, and has regard to a
candidate’s experience and competence in areas such as exploration,
financial and administration. The wide commercial and technical
experience of Messrs McMahon and Jones assists Cazaly in meeting
its corporate objectives and plans.
The Board continues to strive to meet the ASX Corporate Governance
Principles and Recommendations or other such principles and
guidance as the Board may consider appropriate form time to time,
however the Board also recognises that complying the ASX Corporate
Governance Principles and Recommendation 2.4.is impractical given
the size of the company and the industry in which it operates. The
board consists of three (3) members and therefore the Directors
believe, it is sufficient for the full board to assume those
responsibilities that are ordinarily assigned to a remuneration and
nomination committee
Recommendation 3.2 was revised recently and the Company has not
finalised its Diversity Policy at the time of this report. The Board will
seek to develop a Diversity Policy over the coming year, which can
then be sued as a guide to be sued throughout the Company in
identifying new directors, senior executives and employees.
The Board continues to strive to meet the ASX Corporate Governance
Principles and Recommendations or other such principles and
guidance as the Board may consider appropriate form time to time,
however the Board also recognises that complying the ASX Corporate
Governance Principles and Recommendations 4.1-4.3 is impractical
given the size of the company and the industry in which it operates.
The board consists of three (3) members and therefore the Directors
believe, it is sufficient for the full board to assume those
responsibilities that are ordinarily assigned to an audit committee.
70
Annual Financial Report 2010
Cazaly Resources Limited and Controlled Entities
CORPORATE GOVERNANCE
7.2 Risk Management
System.
The board has not
requested that
management
design and
implement a risk
management and
internal control
system and report
to the board on
whether those
risks are being
managed
effectively.
The Board continues to strive to meet the ASX Corporate Governance
Principles and Recommendations or other such principles and
guidance as the Board may consider appropriate form time to time,
however the Board also recognises that complying the ASX Corporate
Governance Council Recommendation 7.2.is impractical given the size
of the company and the industry in which it operates. The board
consists of three (3) members, two of which are joint executive
managing directors and therefore the Directors believe, it is sufficient
for the full board to assume the responsibilities of ensuring that risks
and opportunities are identified on a timely basis and that the
Company’s objectives and activities are aligned with those risks and
opportunities.
8.1 The board should
establish a
remuneration
committee and
8.2 The remuneration
committee structure
The Company has
not established a
formal
remuneration
committee
Non-executive
directors received
options
8.3 Clearly
distinguish the
structure of non-
executive directors’
remuneration from
that of executives
The Board continues to strive to meet the ASX Corporate Governance
Principles and Recommendations or other such principles and
guidance as the Board may consider appropriate form time to time,
however the Board also recognises that complying the ASX Corporate
Governance Council Recommendation 8.1is impractical given the size
of the company and the industry in which it operates. The board
consists of three (3) members and therefore the Directors believe, it is
sufficient for the full board to assume those responsibilities that are
ordinarily assigned to a remuneration and nomination committee
The Board continues to strive to meet the ASX Corporate Governance
Principles and Recommendations or other such principles and
guidance as the Board may consider appropriate from time to time,
however during previous reporting periods, the Company has issued
options to Non-Executive Directors. Non-Executive Directors
typically do not participate in equity or option schemes, however the
Board has determined that, consistent with the size of the Company
and the activities focused nature of business and shareholding
structure, the Company will seek shareholder approval for the issue of
share options to Non-Executive Directors from time to time. The
Board believes the options issued to Non-Executive Directors provide
them with a mechanism to participate in the future development of the
Company and act as an incentive for their future involvement with and
commitment to the Company. The Directors believe that the success
of the Company in the future will depend in large part upon the skills
of the people engaged to manage the Company's operations.
Accordingly, it is important that the Company is able to attract and
retain people of the highest calibre. The Directors consider that the
most appropriate means of achieving this is to provide Directors with
an opportunity to participate in the Company's future growth and an
incentive to contribute to that growth and thus to enhance overall
shareholder wealth creation.
71
Annual Financial Report 2010
Cazaly Resources Limited and Controlled Entities
SCHEDULE OF MINERAL TENEMENTS AS AT 22 SEPTEMBER 2010
#NO
1 ELA
19 PL's
1 EL
9 PL's
3 EL's, 2 ELA's, 1 ML, 3 PL's
PL 3
1 ELA
1 EL
2 EL, 1 ELA, 1 PL
1 ELA
3 PL's
2 PL's
2 ELA's, 4 EL's
6 ELA's
1 ELA
PROJECT
AU-7 MILE HILL
AU-BALAGUNDI
AU-BULONG
AU-CARDINIA BORE
AU-CAROSUE
AU-CHADWIN
AU-COOLGARDIE
AU-HIGGINSVILLE
AU-JILLEWARRA
AU-MADOONIA
DOWNS
AU-MENZIES
AU-MT CLIFFORD
AU-MT WELD
#NO
1 ELA
3 EL's
3 PL's
1 EL
1 ELA
1 EL
2 EL's
1 ELA
5 PL 's
1 ML
PROJECT
FE-YALLEEN
FORRESTANIA
GOLDEN RIDGE
IOCG-LAKE MACKAY
IOCG-POLLOCK HILL
IOCG-WEBB
JUTSON ROCKS
KENNEDY HILL
KINTORE
KUN-CASTLE HILL
1 ML, 20 PL's KUN-NORTHLANDER
1 EL
4 PL's
LIME-LOONGANA
MACPHERSONS
AU-RANDALS
2 EL's, 3 PL's
MAGELLEN
1 ELA, 1EL
AU-TEUTONIC BORE
AU-RUBY WELL
3 PL's
1 EL
MENZIES
MT REMARKABLE
BIG BEN
1 EL, 6 PL's
MT VETTERS
1 EL
1 EL
2 EL's
1 ELA
BIG BEN-ALICE HILL
COSMO NEWBERRY
FE-BONNEY DOWNS
14 ELA, 8 EL's, 1 LA
FE-EARAHEADY
1 ELA
FE-ETHEL CREEK
2 ELA's, 3 EL's, 2 PL's
FE-HAMERSLEY
1 ELA
2 EL's
1 EL
1 ELA
1 EL
1 EL
MULGA DOWNS
NEBO
NT-ACACIA BORE
NT-DAVENPORT
NT-MT ISABEL
NT-QUARTZ HILL
1 ELA
1 ELA
1 ELA
2 ELA's
3 ELA's, 1 EL
1 ELA
1 ELA
1 ELA
1 EL
1 EL
3 ELA's, 1 LA, 4 EL's, 3 ML's,
8PL's
1 EL
FE-HIGH RANGE
1 ELA
NT-WAUCHOPE
FE-HILLSIDE
1 MLA, 8 PL's
QUARTZ CIRCLE
FE-JIMPERDING HILL
FE-KARRATHA
FE-MARILLANA
FE-MOORINE ROCKS
FE-MT GOULD
FE-MT NICHOLSON
FE-MT WILKINS
FE-MT. STUART
FE-PARKER RANGE
1 ELA
3 PL's
1 EL
1 EL
1 ELA
1 ELA
1 ELA
1 EL
1 EL
SCADDAN
TEN MILE HILL
UR-HINKLER WELL
UR-JAILOR BORE
UR-KINTYRE
UR-LEOPOLD DOWNS
UR-PAROO
UR-PELLS RANGE
UR-QUARTZ HILL NT
FE-PILBARA
1 ELA, 1 EL UR-RAWLINSON RANGE
4 ELA's, 29 PLA's
FE-RHODES RIDGE
3 ELA's
1 EL
1 ELA
1 EL
1 MLA
FE-ROCKLEA
FE-STRAWBERRY
ROCKS
FE-SYLVANIA
FE-WALLAREENYA
FE-WINMAR
1 ELA
1 EL
2 ML's
PL 3
ML 1
ELA 2
U-YEELIRRIE
U-YEELIRRIE
VETTERSBURG
VETTERSBURG
WEK-GRANTS PATCH
YEEDA
Notes: EL = Granted Elexploration Licence MLA = Mining Lease Application M = Granted Mining Lease
ELA= Exploration Licence Application P = Granted Prospecting Licence PLA =
72
Annual Financial Report 2010
Cazaly Resources Limited and Controlled Entities
The information that relates to exploration targets, exploration results and drilling data of Cazaly operated projects is based on
information compiled by Mr Clive Jones and Mr Gregory Miles who are Members of The Australasian Institute of Mining and
Metallurgy and The Australian Institute of Geoscientists respectively and are employees of the Company. The information that relates
to the Mt Caudan Mineral Resource Estimate has been authorized by Mr Paul Payne who is a member of the Australasian Institute of
Mining and Metallurgy and an employee of Runge Limited. The information that relates to the West Kalgoorlie Project Mineral
Resources has been authorized by Mr Jones and Mr Miles. Both Mr Jones, Mr Miles and Mr Payne have sufficient experience which is
relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify
as a Competent Persons as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’. Mr Jones, Mr Miles and Mr Payne consent to the inclusion in their names in the matters based on their
information in the form and context in which it appears.
73