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T
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C O R P O R A T E D I R E C T O R Y
D I R E C T O R S
A R B A N T O C K
E X E C U T I V E C H A I R M A N
J R M C I N T Y R E
E X E C U T I V E D I R E C T O R
T R B G O Y D E R
N O N - E X E C U T I V E D I R E C T O R
B W A L E X A N D E R
N O N - E X E C U T I V E D I R E C T O R
C O M P A N Y S E C R E T A R Y
R K H A C K E R
P R I N C I P A L P L A C E O F B U S I N E S S
& R E G I S T E R E D O F F I C E
L E V E L 2 1 2 9 2 H A Y S T R E E T
W E S T P E R T H W A 6 0 0 5
T E L :
F A X :
W E B :
( 0 8 ) 9 3 2 2 3 9 6 0
( 0 8 ) 9 3 2 2 5 8 0 0
W W W . C H A L I C E G O L D . C O M
E M A I L :
I N F O @ C H A L I C E G O L D . C O M
A U D I T O R S
H L B M A N N J U D D
1 5 R H E O L A S T R E E T
W E S T P E R T H W A 6 0 0 5
S O L I C I T O R S
P U L L I N G E R R E A D H E A D L U C A S
L E V E L 2 F O R T E S C U E H O U S E
5 0 K I N G S P A R K R O A D
W E S T P E R T H W A 6 0 0 5
S H A R E R E G I S T R Y
C O M P U T E R S H A R E I N V E S T O R S E R V I C E S P T Y L I M I T E D
L E V E L 2 R E S E R V E B A N K B U I L D I N G
4 5 S T G E O R G E S T E R R A C E
P E R T H W A 6 0 0 0
T E L :
1 3 0 0 5 5 7 0 1 0
H O M E E X C H A N G E
A U S T R A L I A N S T O C K E X C H A N G E L I M I T E D
E X C H A N G E P L A Z A 2 T H E E S P L A N A D E
P E R T H W A 6 0 0 0
A S X C O D E
S H A R E C O D E :
C H N
C O N T E N T S
L E T T E R T O S H A R E H O L D E R S
R E V I E W O F O P E R A T I O N S
S C H E D U L E O F T E N E M E N T S A S A T 3 0 J U N E 2 0 0 6
D I R E C T O R S ’ R E P O R T
L E A D A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N
I N C O M E S T A T E M E N T
B A L A N C E S H E E T
S T A T E M E N T O F C H A N G E S I N E Q U I T Y
C A S H F L O W S T A T E M E N T
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
D I R E C T O R S ’ D E C L A R A T I O N
I N D E P E N D E N T A U D I T R E P O R T
C O R P O R A T E G O V E R N A N C E S T A T E M E N T
A S X A D D I T I O N A L I N F O R M A T I O N
P A G E
2
3
1 5
2 0
2 8
2 9
3 0
3 1
3 2
3 3
5 4
5 5
5 7
6 7
L E T T E R T O S H A R E H O L D E R S
Dear Shareholder
Chalice Gold had an active first year.
Incorporated in October 2005, we moved quickly to acquire a portfolio of five prospective West
Australian gold exploration projects and by March 2006 had attained ASX listing.
At the same time, we assembled a quality team of technical personnel, in a pressured market for such
resources, providing the internal capacity to rapidly assess and evaluate both exploration programs and
resource opportunities.
Drilling commenced shortly after listing with approximately 24,500 metres completed to the date of this
report. This comprised 6,900 metres of RC/diamond drilling and 17,600 metres of RAB/aircore drilling -
testing targets on three fronts.
Whilst initial results have indicated some areas of broad mineralization, we have yet to identify an ore
source from this activity.
•
•
•
•
At Higginsville, we tested the three northern priority targets at Poseidon Footwall and Mitchell
Basement. We interpreted the presence of potentially favourable geological settings and
achieved a number of narrow high grade intercepts, but these are insufficient to divert our next
focus from our southern priority targets in the Nawock and greater Lake Cowan tenement areas.
At Chalice Gold Mine, high grade intercepts were encountered in the Deeps, but are insufficient
to warrant follow up drilling given their vertical depth. We subsequently downgraded the Chalice
resource after reflecting the results of this drilling within an updated scoping study, which also
incorporated current gold price and cost parameters.
IP geophysical work is planned in the future, to further delineate new targets in the
near mine environs.
At Yandeearra, we await final results from a drilling program which has to date broadly reflected
previous first pass drilling. At 1400km2 this is a large project area which offers many more potential
targets, most of which remain untested by modern exploration methods.
In addition to the above Teck Cominco has, to date, undertaken 8,000 metres of drilling at the
Gnaweeda project (earning up to a 70% interest from Chalice Gold). Again, some broad areas of
mineralization, but no resources yet identified.
Chalice Gold is fortunate to hold prime exploration ground in an historically buoyant external price
environment, however we cannot rely on exploration success.
For this reason, we are currently seeking and will continue to actively pursue other projects and
investment opportunities for shareholder returns. With an established team, coherent capital structure
and $4 million cash at bank at 30 September 2006, we commence this process from a position of relative
strength.
I look forward to a second year of energy and endeavour to build a significant resource business, and
on behalf of the board thank our shareholders, employees and other stakeholders for their continuing
support.
Yours faithfully
Andrew Bantock
Executive Chairman
2
C H A L I C E A N N U A L R E P O R T
2 0 0 6
R E V I E W O F O P E R A T I O N S
Chalice Gold Mines’ gold exploration portfolio comprises five major project areas (figure 1):
•
•
•
•
•
150 km2 at Higginsville immediately adjacent Avoca Resources Limited’s (‘Avoca’) Trident gold
discovery, south of Kambalda, Western Australia;
170km2 at the Chalice Gold Mine located along the western margin of the Norseman-Wiluna
belt within the Widgiemooltha-Higginsville district of the Archaean Eastern Goldfields province of
Western Australia;
The large Yandeearra Gold Project (1,400 km2) in the West Pilbara region of Western Australia
adjacent Range River Gold Limited’s Indee Gold Project and DeGrey Mining Limited’s Wingina
Well and Mount Berghaus gold discoveries;
An entire greenstone belt (over 470 km2) at Gnaweeda in the Murchison Region of Western
Australia, exploration for which has been funded though a $1,500,000 joint venture with Teck
Cominco; and
The Wilga tenement, located 50 kilometres south of Laverton and 15 kilometres south, south east
of Anglogold-Ashanti’s Cleo gold mine in Western Australia.
During the financial year:
•
•
•
the Company completed an Initial Public Offering (IPO) on 24 March 2006, raising $6.8 million
(after costs of the issue) to fund the exploration of specific targets at the Higginsville, Chalice Gold
Mine, Yandeearra and Wilga gold projects;
the in-specie distribution of 35 million fully paid ordinary shares in the Company to Uranium Equities
Limited shareholders registered on 15 May 2006 was completed;
drilling was undertaken on four fronts:
-
-
-
-
drilling of discreet targets at Chalice Deeps in the Chalice Gold Mine reported significant
new mineralisation at approximately 300m depth at Deeps 2 (3m @ 6.39 g/t gold in
BCRD003), and at approximately 600m depth at Deeps 4 (2m @ 10.58 g/t gold in CHRD005).
However a scoping study undertaken by AMC Consultants following the year end indicated
that the existing resource was sub- economic. Consequently the lower cut used in reporting
the resource was increased and the mineral resource inventory was restated to 77,600
ounces at 5.28 g/t gold;
over 4,000 metres of drilling was completed at three of the 22 target areas identified at
Higginsville in the Eastern Goldfields. Whilst anomalous gold was recorded in a number of
settings (including 3m @ 4.6 g/t gold in CDRC015), no potential ore zones were identified.
Further work is planned in the area, including at Lake Cowan and Nawock to the south.
over 12,000 metres of aircore drilling was completed at Yandeearra in the West Pilbara,
testing seven large geochemical anomalies. Anomalous gold has been recorded in a
number of areas, with a significant proportion of assay results still awaited at the date of this
report; and
exploration at Gnaweeda in the Murchison has been funded through a $1.5 million joint
venture with Teck Cominco Australia Pty Ltd (‘Teck Cominco’). Teck Cominco completed
over 8,000 metres of Rotary Air Blast/Aircore (‘RAB/AC’) drilling during the year, reporting
anomalous gold results from several holes.
Details of exploration including key results and a description of each project area are included below.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
3
R E V I E W O F O P E R A T I O N S
Figure 1 : Chalice Gold Mines project locations
HIGGINSVILLE
Drilling commenced at Higginsville in mid April 2006. Eighteen drill holes for 3,206m of reverse circulation
(‘RC’) drilling were completed, testing the Poseidon Footwall and Mitchell Basement targets (Figure 2).
At the Poseidon Footwall Prospect, containing the southern extensions of the interpreted controlling
structure and host stratigraphy to Avoca’s Trident Gold Project (5km to the north along strike), a program
of 3 east–west orientated traverses of deep RC holes (14 holes for 2,480m), was undertaken to provide
geological coverage across the interpreted footwall position of the Poseidon Thrust in the central portion
of the tenement area.
Drilling intersected a sequence dominated by high magnesium and tholeiitic basalts with minor
gabbroic lithologies. Alteration and veining logged in the drilling is consistent with a strong multi-element
geochemical anomaly developed over the trace of the Poseidon Thrust (Figure 2).
At the Poseidon Footwall Prospect, a significant intercept of 3m @ 4.60 g/t, from 85m was recorded
in hole CDRC015. While follow up drilling (6 holes, 960m) around this result intersected extensions to
the zone of shearing and alteration that hosted the gold intercept, no significant intersections were
reported.
Significant results from the Mitchell Basement targets included 3m @ 6.18 g/t from 41 metres in Hole
CHRC003 at Mitchell Basement South, hosted in Tertiary palaeochannel material (Figure 2).
4
C H A L I C E A N N U A L R E P O R T
2 0 0 6
R E V I E W O F O P E R A T I O N S
Figure 2: Poseidon Footwall and Mitchell Basement targets,
showing recently completed RC drilling and newly defined alteration zone.
A program of aircore (‘AC’) drilling (12 holes for 1,035m) was completed on the Polar Bear Peninsular
on the southern shores of Lake Cowan, following the end of the financial year. The area is interpreted
to cover the southern extension of the Poseidon Thrust and north-south trending Mission Fault. Drilling
intersected carbonatised, silicified dolerite cut by quartz-fuchsite veins carrying arsenopyrite and minor
pyrite. Significant arsenic anomalism was reported in assays, although no significant end of hole gold
values were reported. Supergene gold anomalism was recorded in holes CHAC007 and CHAC008, at
the top of the saprolite horizon. Strong copper anomalism was recorded in these and several adjacent
holes.
The alteration, supergene gold and arsenic and copper anomalism suggest proximity to a bedrock gold
source, and further drilling is planned when a suitable drill rig can be secured.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
5
R E V I E W O F O P E R A T I O N S
Sub-audio magnetics (SAM) geophysical surveys were conducted over the Poseidon Footwall and
Nawock prospects. Preliminary interpretation has identified a number of discrete trends in this survey
data. When this information is combined with previous drill identified gold anomalism, a number of
follow-up targets are identified (Figure 3).
Figure 3: Nawock Prospect showing MMR image superimposed
on aeromagnetics and end of hole gold anomalism.
The Nawock prospect and greater Lake Cowan area has been identified as an area of future exploration
focus. Previous exploration in the area is limited and comprises broad spaced east-west traverses over
the interpreted southern extension of the Zuleika Shear Zone (Poseidon Thrust) and Mission Fault (a splay
off the Zuleika Shear that runs down through the Norseman gold camp).
Historical results include 5m @ 11.35 g/t gold from 30m in LCA0182 and 4m @ 33 g/t gold from 103m in
LCC006 at the Nawock Prospect.
The majority of the drilling in the southern area failed to penetrate through the Tertiary cover sequence
and have not provided a definitive test of the interpreted structures. Regional drill traverses, targeting
geophysical and geological anomalies will be required to further test this region. This could be expedited
by undertaking additional SAM surveys in order effectively define target areas.
The program of AC drilling completed on the southern shores of Lake Cowan, recorded supergene gold
anomalism, which will require follow up. A number of these drill holes also recorded alteration, further
enhancing the prospectivity of the target.
CHALICE GOLD MINE
Drilling at the Chalice Gold Mine commenced in late April 2006 with four diamond drill holes completed
for 2,413m prior to 30 June 2006, testing several targets along strike and down plunge of the historical
mineralisation. Significant results are listed in Table 1.
Results for hole BCRD003 (testing the upper part of Deeps 2) indicate good continuity of gold
mineralisation in the Middle Ultramafic (MUM) Lode positions, including several stacked lode positions
6
C H A L I C E A N N U A L R E P O R T
2 0 0 6
R E V I E W O F O P E R A T I O N S
(drawn in long section in Figure 4 and in cross section in Figure 5). The reported intercepts correlate
with historical high grade intersections (eg, BCRD002, 4.0m @ 5.73g/t Au, and WMD0131, 2m @ 12.32 g/t
Au). These results suggest potential to locate further narrow but high grade mineralisation in MUM Lode
positions between the base of the historic workings and the top of the Deeps 3 resource.
Results from CHRD005 (2m @ 10.58g/t Au, Figure 6) confirm that the Chalice mineralised system extends
at depth below the granite sill where previously it was believed to have terminated. However, drill hole
CHRD006, testing the northern edge of the Deeps 4 system, suggests the system, while open down
plunge, is closed off to the north along strike, with no significant result recorded in the Main or MUM lode
positions. An intercept of 4.8m @ 3.54 g/t Au was recorded from the Footwall lode in this hole, again
suggesting a stacking of lode systems in the Chalice Gold Mine area.
Table 1: Significant intersections, Chalice Gold Mine
Hole No.
Depth From
Depth To
Interval
Grade g/t Au
Comment
BCRD003
and
and
BCRD003
incl.
and
BCRD003
CHRD005
incl.
CHRD006
CHRD008
and
344
354
362
369.6
369.6
383
476.5
565
566
682.2
311
314
349
355.9
363
376
373
386
479.53
567
567
687
312
315
5
1.9
1
6.4
3.4
3
3
2
1
4.8
1
1
2.01
1.33
14.1
2.86
4.27
6.39
1.14
10.58
18.42
3.54
2.97
2.07
Main Lode
Main Lode
Main Lode
MUM Lode
MUM Lode
MUM Lode
Footwall Lode
Main Lode
Main Lode
Footwall Lode
MinSys 4-
Footwall
MinSys 4 -
Footwall
•
•
Based on 1 g/t Au lower cut off, minimum 1m internal waste. Results based on 50g Fire Assay/AAS analysis of orientated, 1⁄2 NQ2 core.
Reported intervals are downhole widths. True widths are estimated to be approximately 80% of the downhole interval.
Figure 4: Chalice Project. Longitudinal section of the MUM lode,
showing intersections of BCRD003 and CHRD006
C H A L I C E A N N U A L R E P O R T
2 0 0 6
7
R E V I E W O F O P E R A T I O N S
Figure 5: Chalice Project. Cross section 6478940mN
Figure 6: Chalice Project. Longitudinal section of the Main lode, showing intersection of CHRD005 and CHRD006
A single diamond drill hole (CHRD008) was completed at MinSys 4 (Figure 6), which is located
immediately south of the historic open pit where the regionally north, north-west trending greenstone
sequence swings into a northerly trend. It is also noted that the amphibolite package appears thickened
compared to material along strike, and broad zones of alteration and gold anomalism are developed
in shallow drilling. The pattern is consistent with the empirical controls on the Chalice open pit, and the
system is interpreted to represent the up-plunge expression of a new Chalice system developed at
moderate depths.
A broad zone of anomalism (>0.2 g/t Au) and alteration was recorded through the mine sequence in
the inferred position of the Main Lode horizon. A second zone of anomalism, including 18m @ 0.54 g/t
Au from 308m (in a >0.2 g/t Au envelope) was reported in a Footwall position, just above the Footwall
Ultramafic. This interval included several narrow significant intercepts, reported in Table 1.
8
C H A L I C E A N N U A L R E P O R T
2 0 0 6
R E V I E W O F O P E R A T I O N S
The results from Minsys 4, and from the MUM and Footwall positions in the Chalice Deeps drilling, suggests
that alteration and mineralisation in both the Main, MUM and possible Footwall lode positions are
developed along strike of Chalice in the main mine corridor. This corridor requires further drill testing.
Chalice re-acquired original induced polarisation (IP) survey data that Resolute Limited (‘Resolute’)
completed immediately north and south of the Chalice Gold Mine open pit in December 1997. The
survey documentation was not preserved, and Chalice Gold Mines had to reacquire the data from the
original contractors, reprocess it, and interpret the data.
Observations suggest the alteration halo around the Chalice gold mineralisation is visible in the IP data,
and is characterised by both resistive and chargeable alteration and mineralisation (Figure 7). Also,
three other mapped mineralised systems are visible as shallow and weak resistive and chargeable
mineralisation. This suggests that the IP method could be used elsewhere along strike (wherever a
similar regolith is developed) to target Chalice-style mineralisation. In addition to future IP work, several
chargeable and resistive targets have been identified in the existing data near the Chalice Gold Mine,
for further focus.
Figure 7. IP section 6479227mN, showing position of Chalice Main Lode horizon
and new targets in footwall sequence.
RAB drilling was completed on regional tenements located south of the Chalice Pit in June and July
2006. A total of 112 holes for 3,897m were completed. The program was designed to test a number of
gold targets within the Chalice tenement package. Many of the targets were highlighted following a
regional targeting exercise. No significant gold anomalism was identified.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
9
R E V I E W O F O P E R A T I O N S
SCOPING STUDY AND RESOURCES
AMC Consultants (‘AMC’) were engaged to review and update AMC’s 1998 underground Pre-Feasibility
Study (‘PFS’) on the Chalice Deeps, conducted for Resolute. The study, dated 12 July 2006, was based
on the original PFS mine design and schedule, but updated with 2006 exploration results, likely costs, the
gold price and, in particular, the updated study considered the extra costs involved with the requirement
to transport to, and toll treat at, a third party mill.
The review indicated that, notwithstanding the improved gold price environment, the requirement to toll
treat and current mining costs made mining of the existing resources uneconomic (both in the Deeps
and remanent material around the base of the historical open pit and underground workings). It was
concluded that either further surface resources or further resources in the Deeps area at a cut-off grade
of over 3 g/t would need to be discovered to make the system economic.
Based on this cut off grade requirement, the resource at Chalice Gold Mine was recalculated with a
3g/t Au lower cut, and restated as 457,000t @ 5.28g/t Au for 77,623oz (as outlined in Table 2). These
resources are located in the Deeps 1 and 3 bodies. In addition, the remanent material around the
historic pit (originally quoted as 39,200 ounces of measured and indicated material) was removed from
the resource inventory.
Category
Inferred
Calculation Methodology:
Table 2: Existing resources, Chalice Gold Mine
Tonnes
457,000
Grade g/t Gold
5.28
Ounces
77,600
All blocks >3.0g/t Au are reported. The estimation used an inversed distance cubed interpolation, on all material within a 0.3g/t Au
wireframe (Deeps 3)or 1.0g/t Au wireframe (Deeps 1) constrained by grade and geology. Upper cuts of 14g/t Au and 25g/t Au have been
applied to the Deeps 1 and Deeps 3 bodies respectively.
Footnote:
This classification under the JORC code relies on the material assumption that further mineralisation of significant grade and width
be discovered near the existing resources. Should no further mineralisation be discovered, the company may need to reassess the
classification of these resources under the requirement of the Australasian Code for Reporting of exploration results, Mineral Resources and
Ore Reserves (“JORC code”) 2004 that Resources must have reasonable prospects for eventual economic extraction.
YANDEEARRA
Work completed during the year included aircore (AC) drilling, mapping, lag and partial leach soil
geochemical sampling, stream sediment sampling and an aeromagnetic survey.
The Central Shear Zone is interpreted as a significant splay off the east–west trending Mallina Shear Zone,
host to Range River’s Indee Gold Project, located immediately to the north of the Yandeearra Project
area.
Advanced exploration techniques are being applied to help target and assess the Central Shear Zone.
Multi-element litho-geochemical analysis and Portable Infrared Mineral Analysis (PIMA) are being used
to assist in quickly vectoring into areas of alteration and mineralisation.
An AC program, testing for Indee-style gold deposits in Mallina Formation turbiditic sediments,
commenced in mid July 2006. Six geochemical anomalies along the Central Shear Zone (Holly, Connolly,
Magda, Aspen and Fir) and at Woomerina were tested (Figure 8). In total, 225 holes for 12,601m were
drilled. At time of writing, preliminary results had been received for 60% of the drilling.
Anomalous results received to date (>0.25 g/t gold in composite samples) are listed in Table 3.
10
C H A L I C E A N N U A L R E P O R T
2 0 0 6
R E V I E W O F O P E R A T I O N S
Figure 8: Yandeearra Project - surface geochemical anomalies and historical drill results
At the Holly (where previously identified anomalism has reported results including 4m @ 24g/t Au
in BYRB139, and 2m @ 7.1g/t Au in BYAC113) and Aspen Prospects (Figure 8), step out drilling was
undertaken in order to extend identified targets. Results received to date have been of similar order
to those previously identified within the Central Shear Zone and have extended the strike of the known
mineralised corridor to over 4km.
At the Connolly Prospect, within the Central Shear Zone, a coherent 1.6km x 300m gold and arsenic
soil anomaly has been outlined. The extensive anomaly is located in shallow wind blown sand, and is
interpreted to be sourced from blind gold mineralisation in the basement. Two similar anomalies have
been tested at Magda and Hogan. Final assay results are pending.
At Woomerina, drilling tested a 1 km x 500m gold and arsenic vacuum sample anomaly, again partly
buried under shallow cover. The anomaly is situated over an east-west orientated structure, parallel to
the Mallina Shear Zone to the north. Final assay results are pending.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
11
R E V I E W O F O P E R A T I O N S
Table 3. Yandeearra Project. Anomalous Assay Results.
Prospect
Hole_Id
North
East
Width
Interval
(ppm Au) Comments
Grade
HOLLY
CYAC007
7683405
633303
HOLLY
HOLLY
HOLLY
HOLLY
CYAC018
7683496
CYAC019
7683497
CYAC024
7683496
CYAC035
7683303
ASPEN
CYAC055
7682096
ASPEN STH
CYAC059
7681596
CONNOLLY
CYAC102
7678795
CONNOLLY
CYAC105
7678796
CONNOLLY
CYAC119
7678398
CONNOLLY
CYAC120
7678397
CONNOLLY
CYAC128
7678396
CONNOLLY
CYAC132
7678003
CONNOLLY
CYAC133
7678003
CONNOLLY
CYAC134
7677998
CONNOLLY
CYAC135
7677999
CONNOLLY
CYAC138
7678003
incl
633413
633393
633234
633298
incl
633689
633614
631166
631072
630945
630917
630671
630898
630870
630841
630821
630735
5m
1m
1m
2m
1m
7m
3m
4m
4m
1m
4m
4m
4m
1m
4m
8m
4m
2m
4m
68-73m
70-71m
10-11m
11-13m
26-27m
40-47m
41-44m
52-56m
16-20m
31-32m
32-36m
32-36m
12-16m
52-53m
32-36m
44-52m
0-4m
52-54m
4-8m
0.66*
1.15*
1.75*
1.82*
2.10*
0.73*
1.32*
1.59
0.27
0.69*
0.40
0.31
0.31
0.51*
0.59
0.86
0.88
2.29
0.44
EOH
4m comp
4m comp
4m comp
4m comp
4m comp
4m comp
4m comp
4m comp
2m comp
4m comp
•
•
*Analysed by Fire Assay, remainder analysed by aqua regia technique.
Based on 0.25 g/t Au lower cut off for composite samples & 0.50 g/t Au for 1m samples, minimum 1m internal waste.
Ongoing programs of partial leach soil geochemistry and stream sediment sampling are being
undertaken to screen other areas within the corridor defined by the Central Shear Zone and adjacent
areas to the east which are covered by variable amounts of cover. Preliminary assay results from an
area south of Woomerina, have identified gold and arsenic geochemical anomalism in an area of
cover. Follow up geochemical programs are underway.
The Central Shear Zone remains a priority focus area for exploration; recording mineralisation over a
significant strike distance with most of the area obscured by recent transported alluvial cover.
Final results from recently completed drilling have yet to be fully assessed but reported results to date
indicate potential of the Central Shear Zone to host economic mineralisation. Infill AC drilling is favoured
as a first future step as drill coverage in a number of areas is broad or non-existent over the strike
extent of the main mineralised structure. Deeper RC or diamond testing could be applied to test the
mineralisation in the sulphide zone.
Further use of recently applied methods such as multi-element geochemical analysis and PIMA analysis,
which are used to define geochemical and alteration vectors to higher grade mineralisation, could also
be undertaken to rapidly and efficiently locate and target areas with higher prospectivity.
A detailed aeromagnetic survey completed over the Pilbara Well Greenstone Belt has highlighted a level
of structural detail not seen in previous work. A detailed survey over the remaining northern portions of
the project would assist in better definition of existing targets as well as defining structures definition. This
would also help resolve definition over a distinct magnetic anomaly which remains to be tested and
represents a priority target.
12
C H A L I C E A N N U A L R E P O R T
2 0 0 6
R E V I E W O F O P E R A T I O N S
GNAWEEDA
Teck Cominco has reported the completion of a total of 72 RAB/AC holes for a total of 3,327m during
the financial year on tenements in the southern part of the Gnaweeda project area (Figure 9). In the
September quarter an additional 72 RAB/AC holes for 4,831m were completed on tenements in the
northern part of the project.
The programs were designed to test for gold anomalism regionally along strike of the historical
mineralisation located at the Turnberry Prospect, and to provide a better understanding of the geology
in the southern part of the Gnaweeda Greenstone Belt in an area that had very limited previous
exploration. Teck Cominco has reported that anomalous gold results were returned from several holes,
including a spot high of 4m @ 2.91 g/t Au in GNAC082. Further drilling and geochemical sampling is
planned to test the extent of mineralisation and the lithological/structural framework.
Figure 9: Gnaweeda Project – drilling summary June 2006
Surface geochemical sampling was completed over the interpreted southern extension of the Fairway
Magnetic Package (FMP) and eastern sub-domain in an area of subcrop and shallow cover. Results are
pending.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
13
R E V I E W O F O P E R A T I O N S
WILGA
Compilation of open file historical exploration data and purchase of digital geophysical data over the
tenement area and immediate surrounds was completed. A program of soil geochemical sampling
was commenced over areas of residual regolith in the central portions of the tenement. The results of
this program were not available as at the date of this report.
Figure 10: Wilga Project – location and regional geology
Further soil geochemical sampling and mapping work is scheduled in late 2006. Identified targets will be
prioritised for appropriate follow up testing.
14
C H A L I C E A N N U A L R E P O R T
2 0 0 6
S C H E D U L E O F T E N E M E N T S A S A T 3 0 J U N E 2 0 0 6
HIGGINSVILLE
Tenement #
Nature of Interest
Current Equity
E15/828
E15/829
E15/838
P15/4615
P15/4616
P15/4617
P15/4618
P15/4620
P15/4621
P15/4622
P15/4624
P15/4625
P15/4626
P15/4627
P15/4628
P15/4629
P15/4630
P15/4631
P15/4632
P15/4633
P63/1271
P63/1272
P63/1273
P63/1274
P63/1275
P63/1276
P15/4644
P15/4645
P15/4646
P15/4655
E15/740
E15/860
P15/4647
P15/4648
CHALICE
Tenement #
E15/821
E15/822
E63/873
P15/4594
P15/4595
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Right to purchase 100% subject to royalty
Owned
Owned
Owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
100%
100%
100%
Nature of interest
Current equity
Owned
Owned
Owned
Owned
Owned
100%
100%
100%
100%
100%
C H A L I C E A N N U A L R E P O R T
2 0 0 6
15
S C H E D U L E O F T E N E M E N T S A S A T 3 0 J U N E 2 0 0 6
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Option to purchase 100%, subject to royalty
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
P15/4596
P15/4597
P15/4598
P15/4599
P15/4600
P15/4601
P15/4602
P15/4603
P15/4605
P15/4606
P15/4607
P15/4608
P15/4609
P15/4610
P15/4611
P15/4612
P15/4613
P15/4614
P15/4619
P15/4634
P15/4635
P15/4636
P15/4671
P63/1248
P63/1249
P63/1250
P65/1251
P63/1252
P63/1253
P63/1257
P63/1258
P63/1259
P63/1260
P63/1261
P63/1262
P63/1263
P63/1264
P63/1265
P63/1266
P63/1267
P63/1268
P63/1269
P63/1270
M15/786
16
C H A L I C E A N N U A L R E P O R T
2 0 0 6
S C H E D U L E O F T E N E M E N T S A S A T 3 0 J U N E 2 0 0 6
YANDEEARRA
Tenement #
Nature of Interest
Current Equity
E47/590
E47/591
E47/755
E47/1041
E47/1161
E47/1162
E47/1163
E47/1164
E47/1165
E47/1166
E47/1207
M47/560
M47/561
E47/1318
P47/1060
P47/1082
M47/354
M47/373
M47/374
M47/380
M47/498
M47/638
M47/783
M47/784
M47/785
P47/1223
P47/1224
P47/1225
P47/1226
P47/1227
P47/1245
P47/1246
P47/1459
M47/1000
M47/1001
M47/1002
M47/1003
M47/1004
M47/1005
M47/1114
M47/1115
M47/1116
M47/1117
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Option to purchase 100% subject to royalty
Option to purchase 100% subject to royalty
Option to purchase 100% subject to royalty
Option to purchase 100% subject to royalty
Option to purchase 100% subject to royalty
Option to purchase 100% subject to royalty
Option to purchase 100% subject to royalty
Option to purchase 100% subject to royalty
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
C H A L I C E A N N U A L R E P O R T
2 0 0 6
17
S C H E D U L E O F T E N E M E N T S A S A T 3 0 J U N E 2 0 0 6
M47/1118
M47/1119
M47/1120
M47/1121
M47/1122
M47/1123
M47/1124
M47/1125
M47/994
M47/995
M47/996
M47/997
M47/998
M47/999
GNAWEEDA
Tenement #
E51/926
E51/927
P51/1074
P51/2514
P51/2515
E51/1027
WILGA
Tenement #
E39/1003
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Nature of Interest
Current Equity
Right to earn 100% subject to royalty
Right to earn 100% subject to royalty
Owned
Owned
Owned
Owned
0%
0%
100%
100%
100%
100%
Nature of Interest
Owned
Current Equity
100%
18
C H A L I C E A N N U A L R E P O R T
2 0 0 6
C H A L I C E G O L D M I N E S L I M I T E D
2 0 0 6 A N N U A L R E P O R T
F I N A N C I A L R E P O R T
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 6
C H A L I C E A N N U A L R E P O R T
2 0 0 6
19
D I R E C T O R S ’ R E P O R T
The directors present their report together with the financial report of Chalice Gold Mines Limited
(‘Chalice Gold Mines’ or ‘the Company’) for the period ended 30 June 2006 and the independent audit
report thereon. The Company was incorporated on 13 October 2005.
1. DIRECTORS
The directors of the Company at any time during or since the end of the period are:
A R Bantock
B.Com, ACA
Executive Chairman
(appointed 13 October 2005)
J R McIntyre
BSc (Hons), MAIG
Executive Director
(appointed 28 October 2005)
T R B Goyder
Non-executive Director
(appointed 13 October 2005)
B W Alexander
BSc, MAusIMM
Non-executive Director
(appointed 28 October 2005)
A W Kiernan
(appointed 13 October 2005)
(resigned 28 October 2005)
Andrew has extensive professional, corporate and commercial
experience in the resources, resource contracting and infrastructure
sectors. He is currently Executive Director of Uranium Equities Limited,
Managing Director of Base Resources Limited and is a Director
of Water Corporation, Western Australia’s water utility. Andrew
was previously with GRD Ltd, where he served six years as Finance
Director.
John has over 19 years experience in mineral exploration throughout
Australia, for gold, nickel, platinum group metals, copper-gold
and zinc-lead mineralisation. John graduated from the University
of Western Australia in 1985 with First Class Honours in Geology,
and has spent the last ten years in either senior management roles
with exploration companies, or consulting to both exploration and
production companies.
John is a member of the Australian Institute of Geoscientists, the
Geological Society of Australia, and the Society of Economic
Geologists.
Tim has over twenty five years experience in the resource industry. He
is currently Managing Director and Proprietor of Grimwood Davies
Pty Ltd, a contract drilling company, based in Western Australia. Tim
has been involved in the formation and management of a number
of publicly-listed companies and is currently a Director of Uranium
Equities Limited and Chairman of Base Resources Limited.
Bryan is a qualified geologist with over 15 years experience in the
exploration and mining industry. Bryan is the principal of a geological
contracting and consulting services practice, Archaean Exploration
Services Pty Ltd (‘Archaean’). Most recently Archaean has been
responsible for directing the exploration, underground mine geology
and acquisition activities for a private exploration and mining
syndicate.
Prior to this Bryan has been responsible for the management of
regional offices and the implementation of substantial exploration
and resource definition programs for several mining companies.
20
C H A L I C E A N N U A L R E P O R T
2 0 0 6
D I R E C T O R S ’ R E P O R T
2. COMPANY SECRETARY
R K Hacker
B.Com, ACA, ACIS
(appointed 28 October 2005)
Richard has 13 years professional and corporate experience in the
resources sector in both Australia and the United Kingdom. For the
last six years he has worked in senior finance roles with global energy
companies including Woodside Petroleum Limited and Centrica Plc.
Prior to this, Richard worked for seven years with leading accounting
practices. Richard is both a Chartered Accountant and Chartered
Secretary. Richard is also the Company Secretary of Uranium Equities
Limited and Base Resources Limited.
3.
DIRECTORS’ MEETINGS
During the financial period, eight directors’ meetings were held. The number of meetings attended by
each of the directors of the Company during the period are:
Number of
meetings held
during the time
the director held
office during the
year
Number of
board meetings
attended
8
8
8
8
-
8
8
8
8
-
Director
A R Bantock
J R McIntyre
T R B Goyder
B W Alexander
A W Kiernan
4.
PRINCIPAL ACTIVITIES
The principal activities of the Company during the course of the period were mineral exploration and
evaluation.
5.
REVIEW OF OPERATIONS
Following an initial public offering (‘IPO’), raising $7.5 million, the Company has undertaken a substantial
drilling and exploration program at its Higginsville, Chalice Gold Mine and Yandeearra exploration
projects.
A scoping study at the Chalice Gold Mine, incorporating post IPO drilling results, was completed in July
2006, with a re-evaluation of the existing resource estimate of 162,700 ounces at 3.22 g/t gold, and
consequent reduction of the resource estimate to 77,000 ounces at 5.28 g/t gold.
The Company incurred a loss of $1,687,726 for the period, predominantly as a result of an accounting
write-down of exploration and evaluation assets of $1,317,618 relating to the Chalice Gold Mine
project as a result of the above. Of the accounting write-down, $650,664 relates to post IPO exploration
expenditure and $666,954 relates to carry forward costs of acquisition of the project.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
21
D I R E C T O R S ’ R E P O R T
6.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The Company was admitted to the Official List of the Australian Stock Exchange (‘ASX’) on 24 March 2006
following the successful completion of an IPO by way of a prospectus, raising $7.5 million by the
allotment and issue of 37.5 million shares. Official quotation of 72.8 million securities commenced on
24 March 2006.
Other than as referred to in the Financial Report, there has not been any matter or circumstance that
has arisen since the end of the period that has significantly affected, or may significantly affect the
operations of the Company, the results of those operations, or the state of affairs of the Company in
future years.
7.
REMUNERATION REPORT
This report outlines remuneration arrangements in place for directors and executives of Chalice Gold
Mines.
7.1
Principles of compensation
The broad remuneration policy of the Company is to ensure that remuneration levels for executive
directors, secretaries and senior managers are set at competitive levels to attract and retain
appropriately qualified and experienced personnel. Remuneration packages include a combination of
fixed remuneration and long term incentives.
Fixed compensation
Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and
includes any FBT charges related to employee benefits, including motor vehicles), as well as employer
contributions to superannuation funds.
Remuneration levels are reviewed annually through a process that considers the person’s responsibilities,
expertise, duties and personal performance.
Long-term incentives
Options may be issued under the Employee Share Option Plan to directors, employees and consultants
of the Company and must be exercised within 3 months of termination. The ability to exercise the options
is usually based on the option holder remaining with the Company for at least one year. Other than the
vesting period, there is no performance hurdle required to be achieved by the Company to enable the
options to be exercised.
The Company believes that the issue of share options in the Company aligns the interests of directors,
employees and shareholders alike.
22
C H A L I C E A N N U A L R E P O R T
2 0 0 6
D I R E C T O R S ’ R E P O R T
Employment contracts
The following table sets out the contractual provisions of executive directors and senior managers.
Name and job title
Executive Directors
A R Bantock
Executive Chairman
Employment
contract duration
Unlimited
J R McIntyre
Executive Director
Unlimited
Senior Management
R K Hacker
Company Secretary
Unlimited
Non-executive directors
Notice period
Termination provision
3 months by the
Company and the
employee
1 month by the
Company and the
employee
1 month by the
Company and the
employee
Other than for misconduct,
the Company must pay
Mr Bantock $125,000 to
terminate his contract.
No termination provisions
No termination provisions
The Board recognises the importance of attracting and retaining talented non-executive directors and
aims to remunerate these directors in line with fees paid to directors of companies in the mining and
exploration industry of a similar size and complexity.
Total compensation for all non-executive directors is not to exceed $150,000 per annum.
7.2 Directors’ and executive officers’ remuneration (audited)
No key management personnel received any salaries or fees until the Company listed on the ASX on
24 March 2006.
Short-term
Non-
monetary
benefits
$
Salary &
fees
$
Key
management
personnel
Directors
A R Bantock
J R McIntyre
T R B Goyder
2006
2006
2006
31,163
44,426
12,465
3,378
6,775
3,378
3,183
B W Alexander
2006
7,479
Post-em-
ployment
Share-based
payments
Super-
annuation
benefits
$
Options (A)
$
Total
$
Value of
options as
proportion of
remuneration
%
2,805
4,487
1,122
673
43,762
21,881
43,762
10,941
81,108
77,569
60,727
22,276
54%
28%
72%
49%
Total
$
34,541
51,201
15,843
10,662
Executives
R K Hacker
(Company
Secretary)
Total
compensation
2006
35,326
3,183
38,509
3,179
5,470
47,158
12%
2006 130,859
19,897
150,756
12,266
125,816
288,838
C H A L I C E A N N U A L R E P O R T
2 0 0 6
23
D I R E C T O R S ’ R E P O R T
Notes in relation to the table of directors’ and executive officers’ remuneration
A.
The fair value of the options is calculated at the date of grant using a binomial option-pricing
model and allocated to each reporting period evenly over the period from grant date to vesting
date. The value disclosed is the portion of the fair value of the options allocated to this reporting
period. In valuing the options, market conditions have been taken into account. The following
factors and assumptions were used in determining the fair value of options on grant date:
Fair
value per
option
Exercise
price
Price of
ordinary
shares
on grant
date
Expected
volatility
Risk free
interest
rate
Dividend
yield
Grant date
Expiry date
21 March 2006 21 March 2011
$0.08
$0.25
$0.20
80%
5.3%
Nil
Details of performance related remuneration
Details of the Company’s policy in relation to the proportion of remuneration that is performance related
is discussed on page 22.
7.3
Equity instruments
7.3.1 Options and rights over equity instruments granted as compensation
Details of options over ordinary shares in the Company that were granted as compensation to each
key management personnel during the reporting period and details of options that vested during the
reporting period are as follows:
Number
of options
granted
during 2006
Grant date
Number
of options
vested
during
2006
Fair value
per option
at grant
date
$
Exercise
price
$
Expiry date
Directors
A R Bantock
J R McIntyre
2,000,000
21 March 2006
1,000,000
21 March 2006
T R B Goyder
2,000,000
21 March 2006
B W Alexander
500,000
21 March 2006
Executive
R K Hacker
250,000
21 March 2006
-
-
-
-
-
0.08
0.08
0.08
0.08
0.25
0.25
0.25
0.25
21 March 2011
21 March 2011
21 March 2011
21 March 2011
0.08
0.25
21 March 2011
No options have been granted to key management personnel since the end of the period. The options
were provided at no cost to the recipients.
7.3.2 Exercise of options granted as compensation
During the reporting period, no shares were issued on the exercise of options previously granted as
compensation.
24
C H A L I C E A N N U A L R E P O R T
2 0 0 6
D I R E C T O R S ’ R E P O R T
Analysis of options and rights over equity instruments granted as compensation
Details of the vesting profile of the options granted as remuneration to each director of the Company
and each of the named Company executives are outlined below.
Directors
A R Bantock
J R McIntyre
T R B Goyder
Number granted
Date granted
2,000,000
21 March 2006
1,000,000
21 March 2006
2,000,000
21 March 2006
B W Alexander
500,000
21 March 2006
Executive
R K Hacker
250,000
21 March 2006
% vested in
year
Forfeited in
year
Period in
which grant
vests
-
-
-
-
-
-
-
-
-
-
2007
2007
2007
2007
2007
The movement during the reporting period, by value, of options over ordinary shares in the Company
held by each Company director and each of the named Company executives is detailed below.
Granted in year
$ (A)
Value of options
exercised in year
$ (B)
Total option
value in year
$
Directors
A R Bantock
J R McIntyre
T R B Goyder
B W Alexander
Executive
R K Hacker
158,150
79,075
158,150
39,538
19,769
-
-
-
-
-
158,150
79,075
158,150
39,538
19,769
(A)
(B)
The value of options granted in the year is the fair value of the options calculated at grant date
using a binomial option-pricing model. The total value of the options granted is included in the
table above. This amount is allocated to remuneration over the vesting period.
The value of options exercised during the year is calculated as the market price of shares of the
Company on ASX as at close of trading on the date the options were exercised after deducting
the price paid to exercise the option.
8.
DIVIDENDS
No dividends were declared or paid during the period and the directors recommend that no dividend
be paid.
9.
EVENTS SUBSEQUENT TO REPORTING DATE
There are no events subsequent to reporting date which require disclosure.
10.
LIKELY DEVELOPMENTS
The Company will continue activities in the exploration and evaluation of minerals tenements with the
objective of developing a significant minerals business.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
25
D I R E C T O R S ’ R E P O R T
11. DIRECTORS’ INTERESTS
The relevant interest of each director in the shares, rights or options over such instruments issued by the
Company and other related bodies corporate, as notified by the directors to the ASX in accordance
with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:
A R Bantock
J R McIntyre
T R B Goyder
B W Alexander
Ordinary shares
Options over
ordinary shares
2,431,772
193,336
9,386,816
445,336
2,000,000
1,000,000
2,000,000
500,000
12.
SHARE OPTIONS
Options granted to directors and officers of the Company
During or since the end of the period, the Company granted options for no consideration over unissued
ordinary shares in the Company to the following directors and to the most highly remunerated officers of
the Company as part of their remuneration:
Directors
A R Bantock
J R McIntyre
T R B Goyder
B W Alexander
Officers
R K Hacker
Number of
options granted
Exercise price
Expiry date
2,000,000
1,000,000
2,000,000
500,000
$0.25
$0.25
$0.25
$0.25
21 March 2011
21 March 2011
21 March 2011
21 March 2011
250,000
$0.25
21 March 2011
All options were granted during the period. No options have been granted since the end of the period.
Unissued shares under option
At the date of this report 6,575,000 unissued ordinary shares of the Company are under option on the
following terms and conditions:
Expiry date
Exercise price
Number of shares
21 March 2011
1 May 2011
$0.25
$0.25
6,075,000
500,000
These options do not entitle the holder to participate in any share issue of the company or any other
body corporate.
Shares issued on exercise of options
During or since the end of the period, the Company has not issued any ordinary shares as a result of the
exercise of options.
26
C H A L I C E A N N U A L R E P O R T
2 0 0 6
D I R E C T O R S ’ R E P O R T
13.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has agreed to indemnify all the directors and officers who have held office of the
Company during this period, against all liabilities to another person (other than the Company or a
related body corporate) that may arise from their positions as directors and officers of the Company,
except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates
that the Company will meet the full amount of any such liabilities, including costs and expenses.
During the period the Company has paid insurance premiums of $16,305 in respect of directors and
officers liability and legal expenses insurance contracts, for current and former directors and officers. The
insurance premiums relate to:
•
•
costs and expenses incurred by the relevant officers in defending proceedings, whether civil or
criminal and whatever their outcome; and
other liabilities that may arise from their positions, with the exception of conduct involving a wilful
breach of duty or improper use of information or position to gain a personal advantage.
The amount of insurance paid is included in directors and executives remuneration on page 23.
14. NON-AUDIT SERVICES
During the year HLB Mann Judd, the Company’s auditors, performed no other services in addition to
their statutory duties other than the preparation of an Independent Accountant’s Report in relation to
the Company’s prospectus.
15.
LEAD AUDITOR’S INDEPENDENCE DECLARATION
The lead auditor’s independence declaration is set out on page 28 and forms part of the directors’
report for period ended 30 June 2006.
This report is made with a resolution of the directors:
Andrew R Bantock
Executive Chairman
Dated at Perth this 29th day of September 2006.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
27
L E A D A U D I T O R ’ S I N D E P E N D E N C E R E P O R T
!"#$%&'() *+#,-,+#,+.,ÿ/,.01'1%$&+
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)-$ÿ6$%+ÿ$.&$&ÿ78ÿ9'.$ÿ:88;<ÿ=ÿ&$/#%+$ÿ)-%)ÿ)*ÿ)-$ÿ>$")ÿ*,ÿ56ÿ?.*@#$&A$ÿ%.&ÿ>$#($,<ÿ
)-$+$ÿ-%B$ÿ>$$.C
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)*ÿ)-$ÿ%'&()H
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67ÿ8209:%ÿ;/.00/ÿ+01/ÿ-0./2ÿ<==7>ÿÿ-?ÿ#9@ÿAÿÿEFÿABCÿ*-0./25ÿG0:0429&0ÿH<6ÿ*=C5ÿIJC6ÿ=IDD>ÿK%@ÿH<6ÿ*=C5ÿIJC6ÿB
LM%3:Nÿ2:OPMQR%>S9M>%(>ÿÿ+0O13/0Nÿ2//4NTTRRR>2:O>S9M>%(
-%./&0.1NÿU%&ÿ!ÿ#%.1)0&VÿG0..Wÿ$ÿ#:0&X3&194Vÿ"3/1%ÿY2.31/9)(:9(Vÿ+%W&0ÿ$ÿY:%.XVÿ"(S39ÿE3ÿZ3%::9&%.)9VÿY9:3&ÿEÿLMM9//VÿG.0[9.ÿZÿ!9))WVÿ\9.M%&ÿZÿ\03::Vÿ-0/0.ÿ'ÿ;400S2:0W
!"#ÿ$%&&ÿ'())ÿ*+,ÿ-%./&0.12345ÿ31ÿ%ÿM0MO0.ÿ9]ÿ
U&/0.&%/39&%:ÿ%&)ÿ/20ÿ!"#ÿ$%&&ÿ'())ÿ\%/39&%:ÿ,119S3%/39&ÿ9]ÿ3&)040&)0&/ÿ%SS9(&/3&^ÿ]3.M1
F:
28
C H A L I C E A N N U A L R E P O R T
2 0 0 6
I N C O M E S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
Revenue
Impairment losses on exploration and evaluation expenditure
Corporate administrative expenses
Finance costs
Loss before tax
Income tax expense/benefit
Loss for the period
Basic earnings per share attributable to ordinary equity holders
Diluted earnings per share attributable to ordinary equity holders
Note
2006
$
3
4
7
8
9
9
154,176
(1,339,651)
(501,956)
(295)
(1,687,726)
-
(1,687,726)
(0.06)
(0.06)
The income statement is to be read in conjunction with the notes to the financial statements set out on
pages 33 to 53.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
29
B A L A N C E S H E E T
A S A T 3 0 J U N E 2 0 0 6
Current Assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Financial assets
Exploration and evaluation assets
Property, plant and equipment
Total non-current assets
Total assets
Current Liabilities
Trade and other payables
Interest-bearing loans and borrowings
Employee benefits
Total current liabilities
Non-current Liabilities
Interest-bearing loans and borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Reserves
Total equity
Note
2006
$
10
11
12
13
14
15
16
17
16
18
18
18
5,427,250
328,325
5,755,575
43,000
7,175,824
199,207
7,418,031
13,173,606
697,826
11,197
38,931
747,954
5,771
5,771
753,725
12,419,881
13,974,454
(1,687,726)
133,153
12,419,881
The balance sheet is to be read in conjunction with the notes to the financial statements set out on
pages 33 to 53.
30
C H A L I C E A N N U A L R E P O R T
2 0 0 6
S T A T E M E N T O F C H A N G E S I N E Q U I T Y
A S A T 3 0 J U N E 2 0 0 6
Note
Share capital
$
Accumulated
losses
$
Share based
payments
reserve
$
Total equity
$
Balance at date of
incorporation
Issue of fully paid ordinary
shares – tenement acquisition
Issue of fully paid ordinary
shares – initial public offering
Issue of fully paid ordinary
shares – other
Transaction costs
Employee share options vested
Loss for the period
-
7,000,000
7,500,000
60,002
(585,548)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,000,000
7,500,000
60,002
(585,548)
133,153
133,153
(1,687,726)
-
(1,687,726)
Balance at 30 June 2006
18
13,974,454
(1,687,726)
133,153
12,419,881
The statement of changes in equity is to be read in conjunction with the notes to the financial statements
set out on pages 33 to 53.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
31
C A S H F L O W S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
Cash flows from operating activities
Cash receipts from operations
Cash paid to suppliers and employees
Interest paid
Interest received
Note
2006
$
33,871
(354,557)
(179)
53,309
Total cash used in operating activities
21
(267,556)
Cash flows from investing activities
Payments for mining exploration and evaluation
Acquisition of property, plant and equipment
Net cash from investing activities
Cash flows from financing activities
Net proceeds from issue of shares
Lodgement of guarantee
Proceeds from borrowings
Repayment of borrowings
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
(1,044,271)
(191,007)
(1,235,278)
6,974,454
(43,000)
100,200
(101,570)
6,930,084
5,427,250
-
Cash and cash equivalents at 30 June 2006
10
5,427,250
The cash flow statement is to be read in conjunction with the notes to the financial statements set out on
pages 33 to 53.
32
C H A L I C E A N N U A L R E P O R T
2 0 0 6
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
1.
SIGNIFICANT ACCOUNTING POLICIES
Chalice Gold Mines is a company domiciled in Australia. The financial report of the Company is
for the period ended 30 June 2006.
The financial report was authorised for issue by the directors on the 29th day of September 2006.
(a)
Statement of compliance
The financial report is a general purpose financial report which has been prepared in
accordance with Australian Accounting Standards (‘AASB’) adopted by the Australian
Accounting Standards Board and the Corporations Act 2001. International Financial
Reporting Standards (‘IFRS’) form the basis of AASB adopted by the Australian Accounting
Standards Board, and for the purpose of this report are called Australian equivalents to IFRS
(‘AIFRS’) to distinguish from previous Australian GAAP. The financial reports of the Company
also comply with IFRS and interpretations adopted by the International Accounting
Standards Board.
(b) Basis of preparation
The financial report is presented in Australian dollars. The Company has elected to early
adopt the following accounting standards and amendments.
•
•
•
•
•
•
•
•
•
•
•
•
AASB 119 Employee Benefits (December 2004)
AASB 2004-3 Amendments to Australian Accounting Standards (December 2004)
amending AASB 1 First time Adoption of Australian Equivalents to International
Financial Reporting Standards (July 2004), AASB 1010 Presentation of Financial
Statements and AASB 124 Related Party Disclosures
AASB 2005-1 Amendments to Australian Accounting Standards (May 2005) amending
AASB 139 Financial Instruments: Recognition and Measurement
AASB 2005-3 Amendments to Australian Accounting Standards (June 2005) amending
AASB 119 Employee Benefits (either July or December 2004)
AASB 2005-4 Amendments to Australian Accounting Standards (June 2005) amending
AASB 139 Financial Instruments: Recognition and Measurement, AASB 132 Financial
Instruments: Disclosure and Presentation, AASB 1 First-time Adoption of Australian
Equivalents to International Financial Reporting Standards (July 2004), AASB 1023
General Insurance Contracts and AASB 1038 Life Insurance Contracts
AASB 2005-5 Amendments to Australian Accounting Standards (June 2005) amending
AASB 1 First time Adoption of Australian Equivalents to International Financial
Reporting Standards (July 2004), AASB 139 Financial Instruments: Recognition and
Measurement
AASB 2005-6 Amendments to Australian Accounting Standards (June 2005) amending
AASB 3 Business Combinations
AASB 2006-1 Amendments to Australian Accounting Standards (January 2006)
amending AASB 121 The Effects of Changes in Foreign Exchange Rates (July 2004)
UIG 4 Determining whether an Arrangement contains a Lease
UIG 5 Rights to Interests arising from Decommissioning, Restoration and Environmental
Rehabilitation Funds
UIG 7 Applying the Restatement Approach under AASB 129 Financial Reporting in
Hyperinflationary Economies
UIG 8 Scope of AASB 2.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
33
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
Issued standards not early adopted
The following standards and amendments were available for early adoption but have not
been applied by the Company in these financial statements:
•
•
•
AASB 7 Financial Instruments: Disclosure (August 2005) replacing the presentation
requirements of financial instruments in AASB 132. AASB 7 is applicable for annual
reporting periods beginning on or after 1 January 2007.
AASB 2005-9 Amendments to Australian Accounting Standards (September 2005)
requires that liabilities arising from the issue of financial guarantee contracts are
recognised in the balance sheet. AASB 2005-9 is applicable for annual reporting
periods beginning on or after 1 January 2006.
AASB 2005-10 Amendments to Australian Accounting Standards (September 2005)
makes consequential amendments to AASB 132 Financial Instruments: Disclosure
and Presentation, AASB 101 Presentation of Financial Statements, AASB 114 Segment
Reporting, AASB 117, Lease, AASB 133 Earnings per Share, AASB 139 Financial
Instruments: Recognition and Measurement, AASB 1 First-time Adoption of Australian
Equivalents to International Reporting Standards, AASB 4 Insurance Contracts, AASB
1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts, arising
from the release of AASB 7. AASB 2005-10 is applicable for annual reporting periods
beginning on or after 1 January 2007.
Other standards issued and available for early adoption but not applied by the Company
have not been included above as they are not expected to have a significant impact on
the financial report of the Company.
The Company plans to adopt AASB 7, AASB 2005-9 and AASB 2005-10 in the 2007 financial
year.
The financial report is prepared on the historical cost basis.
The preparation of a financial report in conformity with Australian Accounting Standards
requires management to make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making the judgements about carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates. These accounting policies have been consistently applied by the
Company.
Critical accounting judgements, estimates and assumptions
(i)
Recoverability of exploration expenditure
The carrying amount of Exploration and Evaluation expenditure is dependent on the
future successful outcome from exploration activity or alternatively the sale of the
respective areas of interest.
(ii)
Shared-based payment transactions
The Company measures the cost of equity-settled share-based payments at fair
value at the grant data using a binomial formula taking into account the terms and
conditions upon which the instruments were granted.
34
C H A L I C E A N N U A L R E P O R T
2 0 0 6
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
(c) Basis of consolidation
(i)
Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the
Company has the power, directly or indirectly, to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In assessing control,
potential voting rights that presently are exercisable or convertible are taken into
account. The financial statements of subsidiaries are included in the consolidated
financial report from the date that control commences until the date that control
ceases.
(ii)
Joint ventures
Joint ventures are those entities over whose activities the Company has joint control,
established by contractual agreement.
Jointly controlled operations and assets
The interest of the Company in unincorporated joint ventures and jointly controlled
assets are brought to account by recognising in its financial statements the assets
it controls and the liabilities that it incurs, and the expenses it incurs and its share of
income that it earns from the sale of any goods or services by the joint venture.
(iii)
Transactions eliminated on consolidation
Intra-group balances, and any unrealised gains and losses or income and expenses
arising from intra-group transactions, are eliminated in preparing the consolidated
financial statements.
(d)
Property, plant and equipment
(i)
Owned assets
Items of property, plant and equipment are stated at cost or deemed cost less
accumulated depreciation (see below) and impairment losses (see accounting
policy (i)). The cost of assets includes the cost of materials, direct labour, and where
appropriate, an appropriate proportion of overheads.
(ii)
Leased assets
Leases in terms of which the Company assumes substantially all of the risks and
rewards of ownership are classified as finance leases. The owner-occupied property
acquired by way of a finance lease is stated at an amount equal to the lower of
its fair value and the present value of the minimum lease payments at inception of
the lease, less accumulated depreciation (see below) and impairment losses (see
accounting policy (i)).
(iii)
Subsequent costs
The Company recognises in the carrying amount of an item of property, plant and
equipment the cost of replacing part of such an item when that cost is incurred if it
is probable that the future economic benefits embodied within the item will flow to
the Company and the cost of the item can be measured reliably. All other costs are
recognised in the income statement as an expense as incurred.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
35
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
(e) Depreciation
Depreciation is charged to the income statement on a diminishing value basis over the
estimated useful lives of each part of an item of property, plant and equipment. Land is
not depreciated. The estimated useful lives in the current and comparative periods are as
follows:
•
•
•
plant and equipment
7%-40%
fixtures and fittings
11%-22%
motor vehicles
22.5%
The residual value, if not insignificant, is reassessed annually.
(f)
Exploration, evaluation, development and tenement acquisition costs
Exploration, evaluation, development and tenement acquisition costs in relation to
separate areas of interest for which rights of tenure are current, are capitalised in the period
in which they are incurred and are carried at cost less accumulated impairment losses.
The cost of acquisition of an area of interest and exploration expenditure relating to that
area of interest is carried forward as an asset in the balance sheet so long as the following
conditions are satisfied:
1)
2)
the rights to tenure of the area of interest are current; and
at least one of the following conditions is also met:
(i)
(ii)
the exploration and evaluation expenditures are expected to be recouped
through successful development and exploitation of the area of interest, or
alternatively, by its sale; or
exploration and evaluation activities in the area of interest have not at the
reporting date reached a stage which permits a reasonable assessment of the
existence or otherwise of economically recoverable reserves, and active and
significant operations in, or in relation to, the area of interest are continuing.
Exploration and evaluation expenditure is assessed for impairment when facts and
circumstances suggest that their carrying amount exceeds their recoverable amount
and where this is the case an impairment loss is recognised. Should a project or an area
of interest be abandoned, the expenditure will be written off in the period in which the
decision is made. Where a decision is made to proceed with development, accumulated
expenditure will be amortised over the life of the reserves associated with the area of
interest once mining operations have commenced.
(g)
Trade and other receivables
Trade and other receivables are stated at cost less impairment losses (see accounting
policy (i)).
(h) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original
maturity of six months or less. Bank overdrafts that are repayable on demand and form an
integral part of the Company’s cash management are included as a component of cash
and cash equivalents for the purpose of the cash flow statement.
36
C H A L I C E A N N U A L R E P O R T
2 0 0 6
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
(i)
Impairment
At each reporting date, the Company assesses whether there is any indication that an
asset may be impaired. Where an indicator of impairment exists, the Company makes a
formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its
recoverable amount the asset is considered impaired and is written down to its recoverable
amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. Value in
use is the present value of the future cash flows expected to be derived from the asset or
cash generating unit. In estimating value in use, a pre-tax discount rate is used which reflects
current market assessments of the time value of money and the risks specific to the asset. For
an asset that does not generate largely independent cashflows, the recoverable amount
is determined for the cash generating unit to which the asset belongs. Impairment losses
are recognised in the income statement unless the asset has previously been revalued, in
which case the impairment loss is recognised as a reversal to the extent of that previous
revaluation with any excess recognised through the income statement. Receivables with a
short duration are not discounted.
(j)
Share capital
(i)
Ordinary share capital
Ordinary shares and partly paid shares are classified as equity.
(ii)
Transaction costs
Transaction costs of an equity transaction are accounted for as a deduction from
equity, net of any related income tax benefit.
(k)
Leases
Finance leases, which transfer substantially all the risks and benefits incidental to ownership
of the leased item, are capitalised at the inception of the lease at the fair value of the
leased property or, if lower, at the present value of minimum lease payments.
(l)
Employee benefits
(i)
Superannuation
Obligations for contributions to defined contribution pension plans are recognised as
an expense in the income statement as incurred.
(ii)
Share-based payment transactions
The Company provides benefits to employees (including directors) in the form of
share-based payment transactions, whereby employees render services in exchange
for shares or rights over shares (‘equity-settled transactions’).
The Company currently provides benefits under an Employee Share Option Plan.
The cost of these equity-settled transactions with employees and directors is
measured by reference to the fair value at the date at which they are granted.
In valuing equity-settled transactions, no account is taken of any performance
conditions, other than conditions linked to the price of the shares of the Company
(‘market conditions’). The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which the performance
conditions are fulfilled, ending on the date on which the relevant employees
become fully entitled to the award (‘vesting date’).
C H A L I C E A N N U A L R E P O R T
2 0 0 6
37
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
The cumulative expense recognised for equity-settled transactions at each reporting
date until vesting date reflects:
(i)
(ii)
the extent to which the vesting period has expired; and
the number of awards that, in the opinion of the directors, will ultimately vest.
This opinion is formed based on the best available information at balance
date. No adjustment is made for the likelihood of market performance
conditions being met as the effect of these conditions is included in the
determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards
where vesting is conditional upon a market condition.
Where the terms of an equity-settled award are modified, as a minimum an expense
is recognised as if the terms had not been modified. In addition, an expense
is recognised for any increase in the value of the transaction as a result of the
modification, as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on
the date of cancellation, and any expense not yet recognised for the award is
recognised immediately. However, if a new award is substituted for the cancelled
award, and designated as a replacement award on the date that it is granted, the
cancelled and new award are treated as if they were a modification of the original
award, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share
dilution in the computation of earnings per share.
(iii) Wages, salaries, annual leave, sick leave and non-monetary benefits
Liabilities for employee benefits for wages, salaries, annual leave and sick leave
represent present obligations resulting from employees’ services provided to
reporting date, calculated at undiscounted amounts based on remuneration wage
and salary rates that the Company expects to pay as at reporting date including
related on-costs, such as, workers compensation insurance and payroll tax.
(m) Provisions
A provision is recognised in the balance sheet when the Company has a present legal or
constructive obligation as a result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation. If the effect is material, provisions
are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, when appropriate, the risks
specific to the liability.
(n)
Trade and other payables
Trade and other payables are stated at cost.
(o)
Services rendered
Revenue from services rendered is recognised in the income statement in proportion to the
stage of completion of the transaction at the balance sheet date. The stage of completion
is assessed by reference to surveys of work performed. No revenue is recognised if there are
significant uncertainties regarding recovery of the consideration due, the costs incurred or
to be incurred cannot be measured reliably.
38
C H A L I C E A N N U A L R E P O R T
2 0 0 6
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
(p)
Expenses
(i)
Operating lease payments
Payments made under operating leases are recognised in the income statement
on a straight-line basis over the term of the lease. Lease incentives received are
recognised in the income statement as an integral part of the total lease expense
and spread over the leave term.
(ii)
Finance lease payments
Minimum lease payments are apportioned between the finance charge and the
reduction of the outstanding liability. The finance charge is allocated to each period
during the lease term so as to produce a constant periodic rate of interest on the
remaining balance of the liability.
(iii) Net financing costs
Net financing costs comprise interest payable on borrowings calculated using the
effective interest method and interest receivable on funds invested.
Interest income is recognised in the income statement as it accrues, using the
effective interest method. The interest expense component of finance lease
payments is recognised in the income statement using the effective interest method.
(q)
Income tax
Income tax in the income statement comprises current and deferred tax. Income tax is
recognised in the income statement except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates
enacted or substantially enacted at the balance sheet date, and any adjustment to tax
payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The amount of deferred tax provided
is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet
date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable
profits will be available against which the asset can be utilised. Deferred tax assets are
reduced to the extent that it is no longer probable that the related tax benefit will be
realised.
(r)
Segment reporting
A segment is a distinguishable component of the Company that is engaged either in
providing products or services (business segment), or in providing products or services within
a particular economic environment (geographical segment), which is subject to risks and
rewards that are different from those of other segments.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
39
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
(s) Non-current assets held for sale and discontinued operations
Immediately before classification as held for sale, the measurement of the assets (and
all assets and liabilities in a disposal group) is brought up to date in accordance with
applicable AIFRS. Then, on initial classification as held for sale, non-current assets and
disposal groups are recognised at the lower of carrying amount and fair value less costs to
sell.
Impairment losses on initial classification as held for sale are included in profit or loss,
even when there is a revaluation. The same applies to gains and losses on subsequent re-
measurement.
A discontinued operation is a component of the Company’s business that represents
a separate major line of business or geographical area of operations or is a subsidiary
acquired exclusively with a view to resale.
Classification as a discontinued operation occurs upon disposal or when the operation
meets the criteria to be classified as held for sale, if earlier. A disposal group that is to be
abandoned also may qualify.
(t) Goods and Services Tax
Revenue, expenses and assets are recognised net of the amount of goods and services
tax (‘GST’), except where the amount of GST incurred is not recoverable from the taxation
authority. In these circumstances, the GST is recognised as part of the cost of acquisition of
the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. 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.
2.
SEGMENT REPORTING
The Company currently only operates in one business segment and one geographical segment
being the mining and exploration industry in Australia.
3.
REVENUE
Interest received
Other income
40
C H A L I C E A N N U A L R E P O R T
2 0 0 6
2006
$
105,305
48,871
154,176
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
4.
CORPORATE ADMINISTRATIVE EXPENSES
Note
6
14
5
Accounting fees
ASX fees
Audit fees
Consulting fees
Depreciation and amortisation
Insurance
Legal fees
Marketing
Rent and outgoings
Personnel expenses
Printing and stationery
Share registry
Travel and accommodation
Recruitment
Other
5.
PERSONNEL EXPENSES
Wages and salaries
Directors’ fees
Other associated personnel expenses
Defined contribution superannuation fund contributions
Increase in liability for annual leave
Equity-settled transactions
18
6.
AUDITOR’S REMUNERATION
Audit services
Auditors of the Company
HLB Mann Judd:
Audit and review of financial reports
2006
$
14,655
32,438
10,000
20,560
12,198
19,726
6,094
9,411
30,761
295,476
4,670
7,096
4,776
7,077
27,018
501,956
105,625
19,944
3,217
25,531
8,006
133,153
295,476
10,000
C H A L I C E A N N U A L R E P O R T
2 0 0 6
41
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
7.
FINANCE COSTS
Interest expense
8.
INCOME TAX
Numerical reconciliation of income tax expense to prima facie
tax payable
Loss from continuing operations before income tax expense
Tax at the Australian rate of 30%
Tax effect of amounts which are not tax deductible (taxable)
in calculating taxable income:
Non-deductible expenses
Origination and reversal of temporary differences
Current year tax benefits not recognised
Income tax expense reported in the income statement
Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 30% tax rate
2006
$
295
(1,687,726)
(506,318)
40,282
(40,748)
(506,784)
506,784
-
1,806,389
541,917
42
C H A L I C E A N N U A L R E P O R T
2 0 0 6
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
9.
EARNINGS PER SHARE
Basic earnings per share
The calculation of basic earnings per share for the period ended 30 June 2006 was based on
the loss attributable to ordinary shareholders of $1,687,726 and a weighted average number of
ordinary shares outstanding during the period ended 30 June 2006 of 28,280,001.
Diluted earnings per share
The calculation of diluted earnings per share for the period ended 30 June 2006 was based on
the loss attributable to ordinary shareholders of $1,687,726 and a weighted average number of
ordinary shares outstanding during the period ended 30 June 2006 of 28,280,001 calculated as
follows:
Loss attributable to ordinary shareholders (diluted)
Loss attributable to ordinary shareholders
Loss attributable to ordinary shareholders (diluted)
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at 30 June
Effect of share options on issue
2006
$
1,687,726
1,687,726
28,280,001
-
Weighted average number of ordinary shares (diluted) at 30 June
28,280,001
10. CASH AND CASH EQUIVALENTS
Bank accounts
Bank bills
Cash and cash equivalents in the cash flow statement
11.
TRADE AND OTHER RECEIVABLES
Current
Other trade receivables
Prepayments
12.
FINANCIAL ASSETS
Non-current
Bond in relation to office premises
1,521,833
3,905,417
5,427,250
301,540
26,785
328,325
43,000
43,000
C H A L I C E A N N U A L R E P O R T
2 0 0 6
43
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
2006
$
-
7,034,545
1,480,930
(1,339,651)
7,175,824
211,405
(12,198)
199,207
-
193,183
(11,845)
181,338
-
18,222
(353)
17,869
568,271
129,555
697,826
13.
EXPLORATION AND EVALUATION EXPENDITURE
Cost brought forward
Acquisition of tenements
Expenditure incurred during the year
Impairment of exploration and evaluation expenditure
14.
PROPERTY, PLANT AND EQUIPMENT
At cost
Less: accumulated depreciation
Plant and equipment
Carrying amount at date of incorporation
Additions
Depreciation
Carrying amount at end of period
Plant and equipment under hire purchase
Carrying amount at date of incorporation
Additions
Amortisation
Carrying amount at end of period
15.
TRADE AND OTHER PAYABLES
Trade payments
Accrued expenses
44
C H A L I C E A N N U A L R E P O R T
2 0 0 6
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
16.
INTEREST-BEARING LOANS AND BORROWINGS
This note provides information about the contractual terms of the Company’s interest-bearing
loans and borrowings. For more information about the Company’s exposure to interest rate risk,
see note 19.
Current liabilities
Hire purchase liabilities
Non-current liabilities
Hire purchase liabilities
Hire purchase facility
2006
$
11,197
11,197
5,771
5,771
The Company’s hire purchase liabilities are secured by the assets under hire purchase of $17,869.
In the event of default, these assets revert to the financier.
Hire purchase liabilities of the Company are payable as follows:
Minimum hire
purchase
payments
$
12,111
5,858
-
17,969
2006
Interest
$
914
87
-
1,001
Principal
$
11,197
5,771
-
16,968
2006
$
38,931
38,931
Less than one year
Between one and five years
More than five years
17.
EMPLOYEE BENEFITS
Liability for annual leave
Total employee benefits
C H A L I C E A N N U A L R E P O R T
2 0 0 6
45
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
Share based payments
(a)
Employee and Consultant Share Option Plan
The Company has an Employee and Consultant Share Option Plan (‘ESOP’) in place. Under
the terms of the ESOP, the Board may offer free options to full-time or part-time employees
(including persons engaged under a consultancy agreement) and executive and non-
executive directors.
Each option entitles the holder, on exercise, to one ordinary fully paid share in the Company.
There is no issue price for the options. The exercise price for the options is such price as
determined by the Board.
An option may only be exercised after that option has vested and any other conditions
imposed by the Board on exercise satisfied. The Board may determine the vesting period, if
any.
There are no voting or dividend rights attached to the options. There are no voting rights
attached to the unissued ordinary shares. Voting rights will be attached to the unissued
ordinary shares when the options have been exercised.
Share options were granted to employees on the following terms and conditions during the
year:
Grant date
Number of
instruments
Vesting conditions
Contractual life
of options
21 March 2006
6,075,000
1 year continual services
28 June 2006
28 June 2006
250,000
250,000
1 year continual services
2 years continual services
5 years
5 years
5 years
The number and weighted average exercise prices of share options is as follows:
Weighted average
exercise price $
2006
Number of
options
2006
Outstanding at the beginning of the period
Forfeited during the period
Exercised during the period
Granted during the period
Outstanding at the end of the period
Exercisable at the end of the period
-
-
-
0.25
0.25
-
-
-
-
6,575,000
6,575,000
-
The options outstanding at 30 June 2006 have an exercise price of $0.25 and a weighted
average contractual life of 5 years.
During the period, no share options were exercised.
The fair value of the options is estimated at the date of grant using the binomial valuation
model.
46
C H A L I C E A N N U A L R E P O R T
2 0 0 6
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
The following table gives the assumptions made in determining the fair value of the options
granted in the year to 30 June 2006.
Fair value of share options and assumptions
Share price at grant date
Exercise price
Expected volatility (expressed as weighted average volatility used in
the modelling under binominal option-pricing model)
Option life (expressed as weighted average life used in the
modelling under binomial option-pricing model)
Expected dividends
Risk-free interest rate
2006
$0.20
$0.25
80%
5 years
-
5.3%
The expected volatility is based on the historic volatility, adjusted for any expected changes
to future volatility due to publicly available information.
Share options are granted under a service condition. Non-market performance conditions
are not taken into account in the grant date fair value measurement of the services
received.
Share options granted in 2006 – equity settled
Total expense recognised as employee costs
18. CAPITAL AND RESERVES
2006
$
133,153
133,153
Reconciliation of movement in capital and reserves attributable to equity holders of the parent
Share capital
(a)
Accumulated
losses
Share based
payments
reserve
Total equity
$
$
$
$
Balance at date of incorporation
-
Issue of fully paid ordinary shares
– tenement acquisition
Issue of fully paid ordinary shares
– initial public offering
Issue of fully paid ordinary shares
– other
Transaction costs
Employee share options vested
Loss for the period
7,000,000
7,500,000
60,002
(585,548)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,000,000
7,500,000
60,002
(585,548)
133,153
133,153
(1,687,726)
-
(1,687,726)
Balance at 30 June 2006
13,974,454
(1,687,726)
133,153
12,419,881
C H A L I C E A N N U A L R E P O R T
2 0 0 6
47
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
(a)
Share capital
On issue at 1 July
Exercise of share options
Issue of fully paid ordinary shares – tenement acquisition
Issue of fully paid ordinary shares – initial public offering
Issue of fully paid ordinary shares – other
On issue at 30 June
2006
No.
-
-
34,999,998
37,500,000
300,002
72,800,000
Effective 1 July 1998, the Company Law Review Act abolished the concept of par value
shares and the concept of authorised capital. Accordingly, the Company does not have
authorised capital or par value in respect of its issued shares.
Ordinary shares
Holders of ordinary shares are entitled to receive dividends as declared from time to time
and are entitled to one vote per share at shareholders’ meetings. In the event of winding up
of the Company, the ordinary shareholders rank after all other shareholders and creditors
and are fully entitled to any proceeds on liquidation.
(b)
Share options
On issue at date of incorporation
Options issued during the year
On issue at 30 June 2006
2006
No.
-
6,575,000
6,575,000
At 30 June 2006, the Company had 6,575,000 unlisted options on issue under the following
terms and conditions:
Number
6,075,000
500,000
Expiry date
21 March 2011
1 May 2011
Exercise price
$0.25
$0.25
48
C H A L I C E A N N U A L R E P O R T
2 0 0 6
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
19.
FINANCIAL INSTRUMENTS
(a)
Interest rate risk exposures
The Company’s exposure to interest rate risk and the effective weighted average interest
rate for classes of financial assets and financial liabilities is set out below:
Fixed interest maturing in:
1 year or
less
Over 1 to
5 years
Floating
interest
Non-
interest
bearing
30 June 2006
$
$
$
$
Weighted
average
int. rate
$
Total
$
Financial assets
Bank balances
Bank bills
Term deposits
Petty cash
Trade and other
receivables
Financial liabilities
Trade payables
and accrued
expenses
-
- 1,521,633
- 1,521,633
0.25%
3,905,417
43,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 3,905,417
5.58%
-
43,000
5.10%
200
200
301,540
301,540
697,826
697,826
-
-
-
-
16,968
4.45%
Financial liabilities
11,917
5,771
(b) Credit risk exposure
The maximum exposure to credit risk, excluding the value of any collateral or other security,
at balance date in relation to each class of recognised financial assets is the carrying
amount, net of any allowance for doubtful debts, as disclosed in the balance sheet and
notes to the financial statements.
(c) Net fair values of financial assets and liabilities
The carrying amounts of all financial assets and liabilities approximate the net fair values.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
49
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
20. CAPITAL AND OTHER COMMITMENTS
Exploration expenditure commitments
In order to maintain current rights of tenure to exploration tenements, the Company is required
to perform minimum exploration work to meet the minimum expenditure requirements specified
by various State governments. These obligations are subject to renegotiation when application
for a mining lease is made and at other times. The amounts stated are based on the maximum
commitments. The Company may in certain situations apply for exemptions under relevant mining
legislation. These obligations are not provided for in the financial report and are payable:
Within one year
One year or later and no later than five years
Later than five years
2006
$
863,840
1,619,700
-
2,483,540
Remuneration commitments
Commitments for the payment of salaries and other remuneration under long-term employment
contracts in existence at balance date but not recognised as liabilities, payable:
Within 1 year
Within 2-5 years
21. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operating activities
Loss for the period
Adjustments for:
Depreciation and amortisation
Impairment losses on exploration and evaluation expenditure
Interest on finance leases
Equity-settled share-based payment expenses
Operating loss before changes in working capital and provisions
(Increase) in trade and other receivables
Increase in trade creditors and accruals
Increase in provisions
Net cash used in operating activities
125,000
-
125,000
(1,687,726)
12,198
1,339,651
116
133,153
(202,608)
(246,728)
142,849
38,931
(267,556)
50
C H A L I C E A N N U A L R E P O R T
2 0 0 6
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
22. KEY MANAGEMENT PERSONNEL
The following were key management personnel of the Company at any time during the reporting
period and unless otherwise indicated were key management personnel for the entire period:
Executive directors
A R Bantock (Executive Chairman)
J R McIntyre
Non-executive directors
T R B Goyder
B W Alexander
Executive
R K Hacker (Company Secretary
The key management personnel compensation included in ‘personnel expenses’ (see note 5) is
as follows:
Short-term employee benefits
Post-employment benefits
Equity compensation benefits
2006
$
162,575
12,266
125,816
300,657
Individual directors’ and executives’ compensation disclosures
The Company has transferred the detailed remuneration disclosures to the Directors’ Report in
accordance with Corporations Amendment Regulations 2006 (No. 4). These remuneration
disclosures are provided in the Remuneration Report section of the Directors’ Report under Details
of Remuneration and are designated as audited.
Loans to key management personnel and their related parties
No loans were made to key management personnel and their related parties.
Other key management personnel transactions with the Company
A number of key management persons, or their related parties, hold positions in other entities that
result in them having control or significant influence over the financial or operating policies of
those entities.
A number of these entities transacted with the Company in the reporting period. The terms and
conditions of the transactions with management persons and their related parties were no more
favourable than those available, or which might reasonably be expected to be available, on
similar transactions to non-director related entities on an arm’s length basis.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
51
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
The aggregate amounts recognised during the year relating to key management personnel and
their related parties were as follows:
Key management
persons
Transaction
A R Bantock
Corporate Services
T R B Goyder
Corporate Services
R K Hacker
Corporate Services
J R McIntyre
Lithos-X Mineral Exploration Consultants
B W Alexander
Archaean Exploration Services Pty Ltd
Note
(i)
(ii)
(iii)
2006
$
48,871
15,000
11,705
(i)
(ii)
(iii)
The Company supplies corporate services including accounting and company secretarial
services under a Corporate Services agreement with Uranium Equities Limited. Mr Bantock
and Mr Goyder are directors of Uranium Equities Limited and Mr Hacker is the Company
Secretary. Amounts were billed based on arm’s length terms and conditions for such
services and were due and payable under normal payment terms.
The Company engaged Mr McIntyre to assist with preparation of the Company’s business
plan, IPO marketing, prospectus and due diligence activities between January 2006 and
24 March 2006.
The Company used Archaean, a company of which Mr Alexander is a director, to undertake
preparation of the Company’s business plan and pre-IPO information set. Amounts were
billed based on normal market rates for such services and were due and payable under
normal payment terms.
Amounts payable to key management personnel at reporting date arising from these transactions
were as follows:
Assets and liabilities arising from the above transactions
Current payables
Trade debtors
(15,000)
16,500
1,500
52
C H A L I C E A N N U A L R E P O R T
2 0 0 6
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
F O R T H E P E R I O D O F I N C O R P O R A T I O N U N T I L 3 0 J U N E 2 0 0 6
Options and rights over equity instruments granted as compensation
The movement during the reporting period in the number of options over ordinary shares in
Chalice Gold Mines held, directly, indirectly or beneficially, by each key management person,
including their related parties, is as follows:
Held at
date of
incorpor-
ation
Granted as
compen-
sation
Exercised
Other
changes
Held at
30 June
2006
Vested
during the
year
Vested and
exercis-
able
at 30 June
2006
Directors
A R Bantock
J R McIntyre
T R B Goyder
B W Alexander
Executive
R K Hacker
- 2,000,000
- 1,000,000
- 2,000,000
-
-
500,000
250,000
-
-
-
-
-
-
-
-
-
-
2,000,000
1,000,000
2,000,000
500,000
250,000
-
-
-
-
-
-
-
-
-
-
Movements in ordinary shares
The movement during the reporting period in the number of ordinary shares in Chalice Gold Mines
held, directly, indirectly or beneficially, by each key management person, including their related
parties, is as follows:
Held at
1 July 2005
Additions
Received on
exercise of
options
Sales
Held at
30 June 2006
Directors
A R Bantock
J R McIntyre
T R B Goyder
B W Alexander
Executive
R K Hacker
-
-
-
-
-
1,675,886
146,687
5,228,408
342,668
43,334
-
-
-
-
-
-
-
-
-
-
1,675,886
146,687
5,228,408
342,668
43,334
23.
SUBSEQUENT EVENTS
There are no subsequent events that require disclosure.
C H A L I C E A N N U A L R E P O R T
2 0 0 6
53
D I R E C T O R S ’ D E C L A R A T I O N
1
In the opinion of the directors of Chalice Gold Mines Limited (‘the Company’):
(a)
the financial statements and notes including the remuneration disclosures that are
contained in sections 7.1, 7.2 and 7.3 of the Remuneration report in the Directors’ report, set
out on pages 22 to 25, are in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the financial position of the Company as at 30 June
2006 and of its performance, as represented by the results of its operations and its
cash flows, for the period ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable.
2
The directors have been given the declarations by the Chief Executive Officer (or equivalent) and
Chief Financial Officer (or equivalent) for the period ended 30 June 2006 pursuant to Section 295A
of the Corporations Act 2001.
Dated at Perth the 29th day of September 2006.
Signed in accordance with a resolution of the directors:
ANDREW BANTOCK
Executive Chairman
54
C H A L I C E A N N U A L R E P O R T
2 0 0 6
I N D E P E N D E N T A U D I T R E P O R T
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I N D E P E N D E N T A U D I T R E P O R T
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C O R P O R A T E G O V E R N A N C E S T A T E M E N T
Corporate Governance is a matter of high importance in the Company and is undertaken with
due regard to all of the Company’s stakeholders and its role in the community. The key corporate
governance practices of the Company are summarised below.
1.
Board of Directors
1.1
Role of the Board and Management
The Board represents shareholders’ interests in continuing a successful business, which seeks to
optimise medium to long-term financial gains for shareholders. The Board believes that this focus
will ultimately result in the interests of all stakeholders being appropriately addressed when making
business decisions.
The Board is responsible for ensuring that the Company is managed in such a way to best achieve
this desired result. Given the current size and operations of the business, the Board currently
undertakes an active, not passive role.
The Board is responsible for evaluating and setting the strategic directions for the Company,
establishing goals for management and monitoring the achievement of these goals. The Executive
Chairman is responsible to the Board for the day-to-day management of the Company.
The Board has sole responsibility for the following:
•
•
•
•
•
•
•
•
Appointing and removing the Executive Chairman and approving senior executive
remuneration;
Determining the strategic direction of the Company and measuring performance of
management against approved strategies;
Review of the adequacy of resources for management to properly carry out approved
strategies and business plans;
Adopting operating and capital expenditure budgets at the commencement of each
financial year and monitoring the progress against them;
Monitoring capital and cash flow requirements;
Approving and monitoring financial and other reporting to regulatory bodies, shareholders
and other organisations;
Determining that satisfactory arrangements are in place for auditing the Company’s
financial affairs; and
Ensuring that policies and compliance systems consistent with the Company’s objectives,
external best practice and the Company’s size and scope of operations are in place and
that the Company and its officers act legally, ethically and responsibly on all matters.
The Board’s role and the Group’s corporate governance practices are being continually reviewed
and improved as required.
1.2 Composition of the Board and New Appointments
The Company’s Constitution provides that the number of directors shall not be less than three and
not more than ten. There is no requirement for any share holding qualification.
The Board considers that the Company is not currently of a size, nor are its affairs of such complexity
to justify the appointment and further expense of an independent Non-executive Chairman and
additional independent Non-executive Directors. The Board believes that the individuals on the
Board can make, and do make, quality and independent judgments in the best interests of the
Company on all relevant issues.
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The composition of the Board is reviewed periodically in view of the underlying scale, scope and
complexity of the Company’s operations. Changes are made where appropriate.
The membership of the Board and its activities are subject to periodic review. The criteria for
determining the identification and appointment of a suitable candidate for the Board shall
include quality of the individual, background of experience and achievement, compatibility with
other Board members, credibility within the Company’s scope of activities, intellectual ability to
contribute to Board’s duties and physical ability to undertake Board’s duties and responsibilities.
Directors are initially appointed by the full Board subject to election by shareholders at the next
annual general meeting. Under the Company’s Constitution the tenure of directors (other than
managing director, and only one managing director where the position is jointly held) is subject to
reappointment by shareholders not later than the third anniversary following his last appointment.
Subject to the requirements of the Corporations Act 2001, the Board does not subscribe to the
principle of retirement age and there is no maximum period of service as a director. A managing
director may be appointed for any period and on any terms the directors think fit and, subject to
the terms of any agreement entered into, the Board may revoke any appointment.
1.3 Committees of the Board
The Board considers that the Company is not currently of a size, nor are its affairs of such complexity
to justify the formation of separate or special committees at this time. The Board as a whole is able
to address the governance aspects of the full scope of the Company’s activities and to ensure
that it adheres to appropriate ethical standards.
The full Board currently holds meetings at such times as may be necessary to address any general
or specific matters as required.
If the Company’s activities increase in size, scope and nature, the appointment of separate or
special committee’s will be reviewed by the Board and implemented if appropriate.
1.4 Conflicts of Interest
In accordance with the Corporations Act and the Company’s Constitution, Directors must keep
the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of
the Company. Where the Board believes that a significant conflict exists, the Director concerned
does not receive the relevant board papers and is not present at the meeting whilst the item is
considered.
1.5
Independent Professional Advice
The Board has determined that individual Directors have the right in connection with their duties
and responsibilities as Directors, to seek independent professional advice at the Company’s
expense. The engagement of an outside adviser is subject to prior approval of the Chairman
and this will not be withheld unreasonably. If appropriate, any advice so received will be made
available to all Board members.
2.
Ethical Standards
The Board acknowledges the need for continued maintenance of a professional standard of
corporate governance practice and ethical conduct by all Directors and employees of the
Company.
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2.1 Code of Conduct for Directors
The Board has adopted a Code of Conduct for Directors to promote ethical and responsible
decision-making by the Directors. The code is based on a code of conduct for Directors prepared
by the Australian Institute of Company Directors.
The principles of the code are:
•
•
•
•
•
•
•
•
•
•
•
A director must act honestly, in good faith and in the best interests of the company as a
whole.
A director has a duty to use due care and diligence in fulfilling the functions of office and
exercising the powers attached to that office.
A director must use the powers of office for a proper purpose, in the best interests of the
company as a whole.
A director must recognise that the primary responsibility is to the Company’s shareholders
as a whole but should, where appropriate, have regard for the interest of all stakeholders of
the company.
A director must not make improper use of information acquired as a director.
A director must not take improper advantage of the position of director.
A director must not allow personal interests, or the interests of any associated person, to
conflict with the interests of the company.
A director has an obligation to be independent in judgment and actions and to take all
reasonable steps to be satisfied as to the soundness of all decisions taken as a Board.
Confidential information received by a director in the course of the exercise of directorial
duties remains the property of the Company and it is improper to disclose it, or allow it to
be disclosed, unless that disclosure has been authorised by the Company, or the person
from whom the information is provided, or is required by law.
A director should not engage in conduct likely to bring discredit upon the company.
A director has an obligation at all times, to comply with the spirit, as well as the letter of the
law and with the principles of the Code.
The principles are supported by guidelines as set out by the Australian Institute of Company
Directors for their interpretation. Directors are also obliged to comply with the Company’s Code
of Ethics and Conduct, as outlined below.
2.2 Code of Ethics and Conduct
The Company has implemented a Code of Ethics and Conduct, which provides guidelines
aimed at maintaining high ethical standards, corporate behaviour and accountability within the
Company.
All employees and directors are expected to:
•
•
•
•
•
•
respect the law and act in accordance with it;
respect confidentiality and not misuse company information, assets or facilities;
value and maintain professionalism;
avoid real or perceived conflicts of interest;
act in the best interests of shareholders;
by their actions contribute to the company’s reputation as a good corporate citizen which
seeks the respect of the community and environment in which it operates;
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•
•
•
perform their duties in ways that minimise environmental impacts and maximise workplace
safety;
exercise fairness, courtesy, respect, consideration and sensitivity in all dealings within their
workplace and with customers, suppliers and the public generally; and
act with honesty, integrity decency and responsibility at all times.
An employee that breaches the Code of Ethics and Conduct may face disciplinary action. If
an employee suspects that a breach of the Code of Ethics and Conduct has occurred or will
occur, he or she must notify that breach to management. No employee will be disadvantaged
or prejudiced if he or she reports in good faith a suspected breach. All reports will be acted upon
and kept confidential.
2.3 Dealings in Company Securities
The Company’s share trading policy imposes basic trading restrictions on all employees of the
Company with ‘inside information’, and additional trading restrictions on the directors of the
Company.
‘Inside information’ is information that:
•
•
is not generally available; and
if it were generally available, it would, or would be likely to influence investors in deciding
whether to buy or sell the Company’s securities.
If an employee possesses inside information, the person must not:
•
•
•
trade in the Company’s securities;
advise others or procure others to trade in the Company’s securities; or
pass on the inside information to others – including colleagues, family or friends – knowing
(or where the employee or Director should have reasonably known) that the other persons
will use that information to trade in, or procure someone else to trade in, the Company’s
securities.
This prohibition applies regardless of how the employee or Director learns the information.
In addition to the above, Directors must notify the Company Secretary as soon as practicable,
but not later than 5 business days, after they have bought or sold the Company’s securities or
exercised options. In accordance with the provisions of the Corporations Act and the Listing rules
of the ASX, the Company on behalf of the Directors must advise the ASX of any transactions
conducted by them in the securities of the Company. Employees must also give notice to the
Chairman prior to trading in the Company’s securities.
Breaches of this policy will be subject to disciplinary action, which may include termination of
employment.
2.4
Interests of Other Stakeholders
The Company’s objective is to maximise returns to shareholders through the continued exploration
and development of current projects and the identification and acquisition of quality mining and/
or exploration projects.
To assist in meeting its objective, the Company conducts its business within the Code of Ethics and
Conduct, as outlined in 2.2 above.
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3.
Disclosure of Information
3.1 Continuous Disclosure to ASX
The continuous disclosure policy requires all executives and Directors to inform the Executive
Chairman or in his absence the Company Secretary of any potentially material information as
soon as practicable after they become aware of that information.
Information is material if it is likely that the information would influence investors who commonly
acquire securities on ASX in deciding whether to buy, sell or hold the Company’s securities.
Information is not material and need not be disclosed if:
a)
a reasonable person would not expect the information to be disclosed or is material but
due to a specific valid commercial reason is not to be disclosed; and
b)
the information is confidential; or
c)
one of the following applies:
•
•
•
•
•
•
•
•
It would breach a law or regulation to disclose the information;
The information concerns an incomplete proposal or negotiation;
The information comprises matters of supposition or is insufficiently definite to warrant
disclosure;
The information is generated for internal management purposes;
The information is a trade secret;
It would breach a material term of an agreement, to which the company is a party,
to disclose the information;
It would harm the company’s potential application or possible patent application;
or
The information is scientific data that release of which may benefit the company’s
potential competitors.
The Executive Chairman is responsible for interpreting and monitoring the Company’s disclosure
policy and where necessary informing the Board. The Company Secretary is responsible for all
communications with ASX.
3.2 Communication with Shareholders
The Company places considerable importance on effective communications with shareholders.
The Company’s communication strategy requires communication with shareholders and other
stakeholders in an open, regular and timely manner so that the market has sufficient information to
make informed investment decisions on the operations and results of the Company. The strategy
provides for the use of systems that ensure a regular and timely release of information about the
Company is provided to shareholders.
Mechanisms employed include:
•
•
•
•
•
announcements lodged with ASX;
ASX Quarterly Cash Flow Reports;
Half Yearly Report;
presentations at the Annual General Meeting/General Meetings; and
Annual Report.
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The Board encourages full participation of shareholders at the Annual General Meeting to ensure
a high level of accountability and understanding of the Company’s strategy and goals.
The Company also posts all reports, ASX and media releases and copies of significant business
presentations on the Company’s website.
4.
Risk Management
4.1
Identification of Risk
The Board is responsible for overseeing the Company’s risk management and control framework.
Responsibility for control and risk management is delegated to the appropriate level of
management within the Company with the Executive Chairman having ultimate responsibility to
the Board for the risk management and control framework.
Arrangements put in place by the Board to monitor risk management include monthly reporting
to the Board in respect of operations and the financial position of the Company.
4.2
Integrity of Financial Reporting
From the date the Company listed on the ASX, the Company’s Managing Director and Chief
Financial Officer (or equivalent) will report in writing to the Board that:
•
•
•
the financial statements of the Company for each half and full year present a true and fair
view, in all material aspects, of the Company’s financial condition and operational results
and are in accordance with accounting standards;
the above statement is founded on a sound system of risk management and internal
compliance and control which implements the policies adopted by the Board; and
the Company’s risk management and internal compliance and control framework is
operating efficiently and effectively in all material respects.
4.3
Role of Auditor
The Company’s practice is to invite the auditor to attend the annual general meeting and be
available to answer shareholder questions about the conduct of the audit and the preparation
and content of the auditor’s report.
5.
Performance Review
The Board has adopted a self-evaluation process to measure its own performance during each
financial year. Also, an annual review is undertaken in relation to the composition and skills mix of
the directors of the Company.
Arrangements put in place by the Board to monitor the performance of the Company’s executives
include annual performance appraisal meetings with each individual to ensure that the level of
reward is aligned with respective responsibilities and individual contributions made to the success
of the Company.
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6.
Remuneration Arrangements
The broad remuneration policy is to ensure that remuneration properly reflects the relevant
person’s duties and responsibilities, and that the remuneration is competitive in attracting,
retaining and motivating people of the highest quality. The Board believes that the best way
to achieve this objective is to provide Executive Directors and executives with a remuneration
package consisting of fixed components that reflect the person’s responsibilities, duties and
personal performance.
The remuneration of Non-executive Directors is determined by the Board as a whole having
regard to the level of fees paid to non-executive directors by other companies of similar size in the
industry.
The aggregate amount payable to the Company’s Non-executive Directors must not exceed the
maximum annual amount approved by the Company’s shareholders.
ASX Corporate Governance Council: Principles of Good Corporate Governance and Best
Practice Recommendations
Council Principle 1:
Lay solid foundations for management and oversight
Council Recommendation 1.1:
Formalise and disclose the functions reserved to the board and those delegated to management.
The Company complies with this recommendation. Refer Section 1.1 of Corporate Governance
Statement.
Council Principle 2:
Structure the board to add value
Council Recommendation 2.1:
A majority of the board should be independent directors.
The Board considers that Bryan Alexander
in accordance with
is an
Recommendation 2.1. Whilst the remainder of the Board are not independent, the Board believes that
all the individuals on the Board can make, and do make, quality and independent judgments in the
best interests of the Company on all relevant issues. Directors having a conflict of interest in relation to a
particular item of business must absent themselves from the Board Meeting before commencement of
discussion on the topic.
independent director
Refer Section 1.2 of Corporate Governance Statement.
Council Recommendation 2.2:
The chairperson should be an independent director.
The Company’s Chairman, Andrew Bantock, is considered by the Board not to be independent in terms
of the ASX Corporate Governance Council’s definition of independent director. However the Board
believes that the Chairman is able and does bring quality and independent judgment to all relevant
issues falling within the scope of the role of a Chairman.
The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to
justify the expense of the appointment of an independent Non-executive Chairman.
Refer Section 1.2 of Corporate Governance Statement.
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C O R P O R A T E G O V E R N A N C E S T A T E M E N T
Council Recommendation 2.3:
The roles of the Chairperson and Chief Executive Officer should not be exercised by the same individual.
The Company complies with this recommendation.
Council Recommendation 2.4:
The board should establish a nomination committee.
The Board considers that the Company is not currently of a size to justify the formation of a nomination
committee. The Board as a whole undertakes the process of reviewing the skill base and experience
of existing directors to enable identification or attributes required in new directors. Where appropriate,
independent consultants are engaged to identify possible new candidates for the Board.
The Board acknowledges this does not comply with recommendation 2.4 of the ASX Corporate
Governance Guidelines. If the Company’s activities increase in size, scope and nature, the appointment
of a nomination committee will be reviewed by the Board and implemented if appropriate.
Refer Section 1.3 of Corporate Governance Statement.
Council Principle 3:
Promote ethical and responsible decision-making
Council Recommendation 3.1:
Establish a code of conduct to guide the directors, the Chief Executive Officer (or equivalent), the Chief
Financial Officer (or equivalent) and any other key executives as to:
3.1.1 the practices necessary to maintain confidence in the company’s integrity;
3.1.2 the responsibility and accountability of individuals for reporting and investigating reports of
unethical practice.
The Company complies with this recommendation. Refer Sections 2.1 and 2.2 of Corporate Governance
Statement.
Council Recommendation 3.2:
Disclose the policy concerning trading in company securities by directors, officers and employees.
The Company complies with this recommendation. Refer Section 2.3 of Corporate Governance
Statement.
Council Principle 4:
Safeguard integrity in financial reporting
Council Recommendation 4.1:
Require the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) to
state in writing to the board that the company’s financial reports present a true and fair view, in all
material respects, of the company’s financial condition and operational results and are in accordance
with relevant accounting standards.
The Company complies with this recommendation.
Council Recommendation 4.2:
The board should establish an audit committee.
The Board complies with this recommendation.
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C O R P O R A T E G O V E R N A N C E S T A T E M E N T
Council Recommendation 4.3:
Structure the audit committee so that it consists of:
-
-
-
-
only non-executive directors;
a majority of independent directors;
an independent chairperson, who is not chairperson of the board;
at least three members.
Refer Recommendation 4.2.
Council Recommendation 4.4:
The audit committee should have a formal operating charter. Refer Recommendation 4.2.
Council Principle 5:
Make a timely and balanced disclosure
Council Recommendation 5.1:
Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure
requirements and to ensure accountability at a senior management level for that compliance.
The Company complies with this recommendation. Refer Section 3.1 of Corporate Governance
Statement.
Council Principle 6:
Respect the rights of shareholders
Council Recommendation 6.1:
Design and disclose a communications strategy to promote effective communication with shareholders
and encourage effective participation at general meetings.
The Company complies with this recommendation. Refer Section 3.2 of Corporate Governance
Statement.
Council Recommendation 6.2:
Request the external auditor to attend the annual general meeting and be available to answer
shareholder questions about the conduct of the audit and the preparation and content of the auditor’s
report.
The Company complies with this recommendation. Refer Section 4.3 of Corporate Governance
Statement.
Council Principle 7:
Recognise and manage risk
Council Recommendation 7.1:
The Board or appropriate board committee should establish policies on risk oversight and management.
The Company complies with this recommendation. Refer Section 4.1 of Corporate Governance
Statement.
Council Recommendation 7.2:
The Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) should state in
writing that:
7.2.1 the statement given in accordance with best practice recommendation 4.1 is founded on a
sound system of risk management and internal compliance and control which implements the
policies adopted by the board;
7.2.2 the company’s risk management and internal compliance and control system is operating
efficiently and effectively in all material respects.
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C O R P O R A T E G O V E R N A N C E S T A T E M E N T
The Company complies with this recommendation. Refer Section 4.1 of Corporate Governance
Statement.
Council Principle 8:
Encourage enhanced performance
Council Recommendation 8.1:
Disclose the process for performance evaluation of the board, its committees and individual directors,
and key executives.
The Company complies with this recommendation. Refer Section 5 of Corporate Governance
Statement.
Council Principle 9:
Remunerate fairly and responsibly
Council Recommendation 9.1:
Provide disclosure in relation to the company’s remuneration policies to enable investors to understand
(i) the costs and benefits of those policies and (ii) the link between remuneration paid to directors and
key executives and corporate performance.
The Company complies with this recommendation. Refer Section 6 of Corporate Governance
Statement.
Council Recommendation 9.2
The board should establish a remuneration committee.
The Board considers that the Company is not currently of a size, nor are its affairs of such complexity
to justify the formation of a remuneration committee. The Board as a whole is responsible for the
remuneration arrangements for directors and executives of the Company.
The Board acknowledges that this does not comply with recommendation 9.2 of the ASX Corporate
Governance Guidelines. If the Company’s activities increase in size, scope and nature, the appointment
of a remuneration committee will be reviewed by the Board and implemented if appropriate. Refer
Section 1.3 of Corporate Governance Statement.
Council Recommendation 9.3:
Clearly distinguish the structure of Non-executive directors’ remuneration from that of executives.
The Company complies with this recommendation. Refer Section 6 of Corporate Governance
Statement.
Council Recommendation 9.4:
Ensure that payment of equity-based executive remuneration is made in accordance with thresholds set
in plans approved by shareholders.
The Company complies with this recommendation. The Company currently has in place an Employee
and Consultant option plan. Any issue of options made to eligible participants is made in accordance
with that plan.
Council Principle 10:
Recognise the legitimate interests of stakeholders
Council Recommendation 10.1:
Establish and disclose a code of conduct to guide compliance with legal and other obligations to
legitimate stakeholders.
The Company complies with this recommendation. Refer Section 2.4 of Corporate Governance
Statement.
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A S X A D D I T I O N A L I N F O R M A T I O N
Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed
elsewhere in this report is set out below.
Shareholdings
Substantial shareholders
The number of shares held by substantial shareholders and their associated interests as at 28 September
2006 were:
Shareholder
Number of ordinary shares held
Percentage of capital held
%
Timothy R B Goyder
Resolute Limited
9,386,816
7,624,546
12.89
10.47
Class of Shares and Voting Rights
At 28 September 2006 there were 1,405 holders of the ordinary shares of the Company.
The voting rights to the ordinary shares set out in the Company’s Constitution are:
“Subject to any rights or restrictions for the time being attached to any class or Classes of shares -
a)
b)
at meetings of members or classes of members each member entitled to vote in person or
by proxy or attorney: and
on a show of hands every person who is a member has one vote and on a poll every person
in person or by proxy or attorney has one vote for each ordinary share held.”
Holders of options do not have voting rights.
Distribution of equity security holders as at 28 September 2006:
Category
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Number of equity security holders
Ordinary shares
Unlisted share options
85
447
316
460
97
1,405
-
-
-
1
7
8
The number of shareholders holding less than a marketable parcel at 28 September 2006 was 474.
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Percentage of
capital held
%
10.47
6.91
4.56
3.40
3.29
2.67
2.31
2.13
2.12
1.69
1.65
1.51
1.37
1.37
1.33
1.33
1.30
1.23
1.23
1.23
7,624,546
5,027,226
3,321,584
2,475,958
2,391,772
1,943,344
1,682,841
1,550,338
1,545,600
1,232,012
1,200,000
1,096,672
1,000,000
1,000,000
970,000
970,000
944,240
899,016
892,004
881,338
38,648,491
53.08
A S X A D D I T I O N A L I N F O R M A T I O N
Twenty largest Ordinary Fully Paid Shareholders
as at 28 September 2006
Number of ordinary
shares held
Name
Resolute Limited
Plato Prospecting Pty Ltd
Grimwood Davies Pty Ltd
ANZ Nominees Pty Ltd
Define Consulting Pty Ltd (The Define Consulting A/C)
Westpac Custodian Nominees Limited
Citicorp Nominees Pty Ltd (CFSIL Cwlth Boff Super)
National Nominees Limited
Mr Philip Scott Button & Ms Philippa Anne Nicol
(Christopher Jordan A/C)
Tara Management Pty Ltd
Lost Ark Nominees Pty Limited (Tera Fam A/C)
Troy Resources NL
Darley Pty Limited
Mr Arnold Olschyna
Calm Holdings Pty Ltd (Tide A/C)
Raglan Pty Ltd
Fortis Clearing Nominees Pty Ltd (Settlement A/C)
Citicorp Nominees Pty Limited
Nefco Nominees Pty Ltd
Penally Management Limited
Total
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