HigHligHts
Corporate
•
Sold the Chalice and Higginsville Gold Projects to Avoca Resources Limited (Avoca Resources), for shares in Avoca
Resources to the value of $5.8 million and 2,000,000 unlisted options over ordinary shares in Avoca Resources.
•
3.5 million Avoca Resources shares were sold after year end, realising $6.9 million for the Company. A further $0.8 million
of Avoca Resources shares are to be received on settlement of the second tranche of the sale.
Higginsville and CHaliCe
•
Followed up over 6,500 metres of RC/diamond drilling and 2,600 metres of RAB/air core drilling at Higginsville and Chalice
conducted from March to June 2006, with over 2,400 metres of RAB/air core drilling and detailed SAM and IP geophysical
surveys.
Yandeearra
• Completed over 12,600 metres of air core drilling at Yandeearra to test seven large geochemical targets. Anomalous gold
results were recorded from four prospects.
• Received encouraging gold and uranium results from rock chip sampling of radiometric anomalies at the Nevada Prospect
within the Yandeearra Project.
gnaweeda
• Actively tested targets through an exploration joint venture with Teck Cominco.
• RC drilling returned narrow high grade gold intercepts within broader zones of anomalous gold mineralisation at the
Turnberry Prospect.
wilga
• Conducted an auger drilling program which defined an extensive, low order gold anomaly in an area of cover.
Creek system in the western part of the Yandeearra Project
View looking east during heli-supported fieldwork compaign in the
southern part of the Yandeearra Project
1
let ter to sHareHo lders
Dear Shareholder
Chalice Gold Mines completed the financial year significantly recapitalised but firmly focused on the same business – seeking
discoveries across our portfolio of Western Australian gold projects and new project opportunities.
As discussed in our June 2007 notice of meeting, the sale of our Higginsville and Chalice projects to Avoca Resources
Limited (“Avoca”) presented a number of benefits compared to other strategic alternatives. Principal among these were the
management of equity dilution and providing continuing upside exposure for shareholders, both to regional gold discovery and
development of Avoca’s Trident Gold Mine.
Some of this potential was realised through the sale, in September 2007, of 3.5 million Avoca shares received for Tranche 1
of the sale, at $1.98 per share. This represents a 38% premium to the original Avoca transaction value (of $1.43 per share),
realising a further $1.9 million for your company.
The alternative to selling the Tranche 1 shares was to remain with over 60% of our value in another listed company. We felt
that to be beyond the reasonable management of your Company and also value the enhanced capacity that approximately $9.0
million of cash on hand now confers in our search for new discoveries and project opportunities.
We continue to hold 2.0 million unlisted 3-year $1.79 Avoca options and the right to receive a further $0.84 million of Avoca
shares upon settlement of Tranche 2 of the sale.
Exploration continued at our remaining three gold projects during the year.
• At the large Yandeearra Gold Project in the West Pilbara, 12,600 metres of aircore drilling was completed to test seven large
geochemical targets. Additionally, a review of available radiometrics was followed by a sampling program which drew focus
to the Nevada Prospect, in the central south of the project on Fortescue sediment sequences. Best results from rock chip
samples included 14.64 g/t gold and 920 ppm uranium.
We will continue to follow up this newly identified area.
• At the Gnaweeda Gold Project in the Murchison, Teck Cominco (“Teck”) progressed an active program with over 7,000
metres of aircore drilling.
Teck has advised that this will be followed up with further RC drilling at the Turnberry and St Annes Prospects in the last
quarter of 2008, as part of their arrangement to earn a 51% project interest by spending $750,000 (increasing to 70% upon
$1.5 million spent).
• At the Wilga Gold Project, an auger sampling program provided encouraging results, identifying an extensive, low order gold anomaly.
We will continue to progress these projects, dealing with partners and other external parties where this can provide returns
and continuing upside exposure for shareholders.
The past year was important for your Company. I look forward to the future, and thank the Board and shareholders for their
continuing support.
Yours faithfully
Andrew Bantock
Executive Chairman
2
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
rev iew and r es ults o f oper ati o ns
1. Higginsville and Chalice gold projects
exploration aCtivitY
During the year, Chalice Gold Mines Limited (Chalice Gold Mines or the Company) completed an active exploration program
to test priority targets at its Chalice and Higginsville Projects.
2,400 metres of RAB/air core drilling conducted in July 2006 took total drilling at the projects since March 2006 to over 11,500
metres (6,500 metres RC/diamond and 5,000 metres RAB/aircore). This was followed by two sub-audio magnetics surveys,
and an induced polarisation (IP) survey. Whilst the results of the exploration program were interpreted by Chalice Gold Mines
to have identified a number of prospective geological settings, the program was not successful in defining an economic gold
resource.
sale of Higginsville and CHaliCe gold projeCts to avoC a resourCes
On 30 April 2007, Chalice Gold Mines reached agreement for the sale of its Chalice and Higginsville gold projects to Avoca
Resources, for shares in Avoca Resources to the value of $5,841,000 and 2,000,000 unlisted options over ordinary shares in
Avoca Resources.
The sale comprised two tranches as follows:
Tranche 1
Tranche 1, which settled on 25 July 2007, involved the sale of Chalice Gold’s Higginsville tenements, the Chalice Gold Mine and
areas north thereof.
Consideration for completion of Tranche 1 was $5 million of Avoca Resources shares, at $1.43 per share, for a total of 3.5
million Avoca Resources shares, based on the 5 day ASX Volume Weighted Average Price (VWAP) prior to the date of
agreement, plus 2 million 3-year, unlisted Avoca options, each with an exercise price of $1.79. The unlisted options were valued
at $0.41 per option at the grant date, for accounting purposes utilising standard theoretical option valuation methodology.
The total consideration value for Tranche 1 has therefore been booked within the accounts at $5.82 million, comprising $5
million of share consideration value and $0.8 million for the unlisted options.
Tranche 2
Tranche 2, which comprises a package of tenements south of the Chalice Gold Mine, will complete upon grant of an Exploration
Licence (EL) and then amalgamation of the same with certain Prospecting Licences (PL) already held by Chalice Gold Mines, as
well as the achievement of other conditions precedent typical of such sale agreements (such as receipt of relevant Department
of Industry and Resources approvals).
Grant of the EL and amalgamation with the PL’s is expected by June 2008, allowing for relevant public notice requirements.
2. Yandeearra project (100% Chalice gold Mines limited)
nevada gold and uraniuM prospeCt
Following a “desktop” review of available radiometric data, a heli-supported fieldwork campaign was conducted to provide a
first pass assessment of radiometric anomalies in the southern part of the Yandeearra project area. The field program included
ground reconnaissance, scintillometer surveys and rock chip sampling of 13 separate target areas.
3
rev iew and r es ults o f oper ati o ns
Continued
Encouraging gold and uranium results were returned from the Nevada Prospect. Significant gold and uranium results include:
•
•
Sample 114528 returned 14.64 g/t gold and 920 ppm uranium; and
Sample 114527 returned 1.06 g/t gold and 50 ppm uranium.
The Nevada Prospect comprises a discrete radiometric anomaly within the basal units of the Fortescue Group. Details of the
three rock chip samples taken from the Nevada Prospect are tabulated below.
Sample
Number
Easting
(GDA 94)
Northing
(GDA94)
Target
Area
Au
Average
(ppb)
Au 1
(ppb)
Au 3
(ppm)
U (ppm)
Comments
114526
627994
7651508
YAN20
15
15
-
23.90 Haematite rich layer, locally
siliceous with haematite
fragments (fault?)
114527
628047
7651563
YAN20
1069
1138
1.00
50.71 Quartz pebble
114528
628020
7651540
YAN20
14640
16360
12.92
920.70
conglomerate bed, iron-rich
Shallow dipping ferruginous
horizon bounded by schist
and conglomerate, estimated
thickness of 0.30m
Analyses on 2 - 3kg surface rockchip samples by Genalysis Laboratory Services, Perth. Gold and uranium assays were carried
out by Method B/MS to a detection limit of 1 ppb (Au) and 0.01 ppm (U) respectively.
TABLE 1 : Details of rock chips samples from the Nevada Prospect
The encouraging gold and uranium results from sample 114528 are associated with a thin (0.30m thick) ferruginous layer within
a quartz pebble conglomerate.
Historical soil sampling (-80 mesh) has defined a coherent >30ppb gold anomaly approximately 700m to the north of the
rockchip sampling, close to the basal contact of the conglomerate sequence. The soil anomaly measures approximately 700m in
strike, peaks at 544ppb gold and is open to the south and west (Figure 1).
Field reconnaissance and scintillometer surveying at the Nevada Prospect
Panoramic view at Yandeearra Project during heli-supported fieldwork campaign
4
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
FIGURE 1 : Nevada Prospect - Rock chip and soil sample results over aerial photography
5
rev iew and r es ults o f oper ati o ns
Continued
A program of detailed mapping and further sampling has commenced for the Nevada Prospect to further assess the extent and
significance of the gold and uranium mineralisation defined to date.
Assay results from all rock chip samples received to date are detailed within Table 2.
Sample
Number
Easting
(GDA 94)
Northing
(GDA94)
Target
Area
Au Average
(ppb)
Au 1
(ppb)
Au 2
(ppb)
Au 3
(ppm)
U
(ppm)
114501
114502
114503
114504
114505
114506
114507
114508
114509
114510
114511
114512
114513
114514
114515
114516
114517
114518
114519
114520
114521
114522
114523
114524
114525
114526
114527
114528
114529
114530
114531
114532
114533
114534
608966
608893
608772
608911
632306
632143
631904
631872
631233
630078
630158
630158
630213
630409
639353
639266
639112
609550
609539
628125
627927
627660
627132
627757
626670
627994
628047
628020
635029
635269
636895
636909
634280
614530
7652030
7652230
7652249
7651945
7657375
7657476
7657769
7657818
7659220
7659902
7659754
7659754
7659554
7600617
7658213
7658153
7658047
7665695
7665717
7653058
7653198
7653319
7653473
7653608
7653630
7651508
7651563
7651540
7649350
7649524
7652122
7650560
7652260
7646288
YAN04
YAN04
YAN04
YAN04
YAN08
YAN08
YAN08
YAN08
YAN08
YAN07
YAN07
YAN07
YAN07
YAN23
YAN25
YAN25
YAN25
YAN01
YAN01
YAN11
YAN11
YAN11
YAN11
YAN24
YAN24
YAN20
YAN20
YAN20
YAN10
YAN10
YAN12
YAN12
YAN13
YAN22
32
4
<1
39
3
3
<1
<1
3
9
<1
<1
<1
<1
<1
<1
<1
<1
<1
<1
<1
<1
2
<1
1
<1
15
4
<1
47
3
3
<1
<1
3
9
<1
<1
<1
<1
<1
<1
<1
<1
<1
<1
<1
<1
2
<1
1
<1
15
1069
14640
1138
16360
1.00
12.92
69
61
74
65
12
4
<1
5
79
70
12
4
<1
5
4.82
7.44
2.55
2.87
2.93
2.12
3.01
0.24
4.33
0.57
3.49
0.58
3.22
0.20
0.51
0.34
0.16
0.77
0.85
9.18
34.25
1.95
6.00
0.42
0.31
23.90
50.71
920.70
24.98
22.71
14.76
34.85
4.29
5.66
Analyses on 2 - 3kg surface rockchip samples by Genalysis Laboratory Services, Perth. Gold and uranium assays were
carried out by Method B/MS to a detection limit of 1 ppb (Au) and 0.01 ppm (U) respectively.
TABLE 2 : Rock chip sample results – Yandeearra Project
6
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
indee-stYle gold targets
During the year a 12,600m aircore program, testing for Indee-style gold deposits in Mallina Formation turbiditic sediments, was
completed. Six geochemical anomalies (Holly, Fir, Aspen, Connolly, Magda and Hogan) along the Central Shear Zone and a
seventh target at Woomerina were tested (Figure 2).
FIGURE 2
Yandeearra Project - surface geochemical anomalies and selected historical drill results
7
rev iew and r es ults o f oper ati o ns
Continued
Central Shear Zone
The Central Shear Zone is interpreted as a significant splay off the east – west trending Mallina Shear Zone, host to Range River
Gold Limited’s 529,000oz Indee Gold Project, located immediately to the north of the Yandeearra Project area.
At the Holly (where previously identified anomalism has reported results including 4m @ 23.9g/t Au in BYRB139, and 2m @
7.1g/t Au in BYAC113) and Aspen Prospects, step out drilling was undertaken in order to extend identified targets. Results
received to date from the Central Shear Zone have extended the strike of the known mineralised corridor to over 4km.
At the Connolly Prospect a coherent 1.6km x 300m gold and arsenic soil anomaly was tested by four drilling traverses. The
extensive anomaly is located in shallow wind blown sand, and is interpreted to be sourced from blind gold mineralisation in the
basement. Results from the Connolly Prospect have defined a north-northeast trending zone of gold mineralisation over 150m
x 1km as defined by +300ppb Au contour. This zone of anomalism is hosted within a weakly quartz veined and limonite-altered
siltstone.
Woomerina
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. Preliminary
interpretation indicates better anomalism associated with an east-west trending outcropping quartz-tourmaline vein which
traverses part of the area.
Drilling returned low level gold anomalism in several drillholes, associated with variably quartz veined zones in a sequence of
sandstone and siltstone. The best result of 5m @ 0.80g/t Au from 4m (including 1m @ 2.25g/t Au from 8m) was hosted in a
quartz veined siltstone in CYAC197. Anomalous assay results are tabulated in Table 3.
Prospect
Hole Id
North
East
Width
Interval
Grade
(ppm Au)
Comments
WOOMERINA
CYAC197
7672027
641605
incl
WOOMERINA
CYAC198
7672050
641601
WOOMERINA
CYAC201
7672135
641600
WOOMERINA
CYAC202
7672159
641600
5m
1m
1m
1m
2m
4-9m
8-9m
7-8m
37-38m
8-10m
0.80
2.25
0.78
0.57
0.92
Quartz veined siltstone
Lower saprolite
Sandy siltstone
Medium grained siltstone
Analysed by aqua regia technique.
Based on 0.50 g/t Au lower cut off and minimum 1m internal waste.
TABLE 3 : Anomalous assay results, Woomerina Prospect
West Yule
A partial leach sampling program has outlined a new area of gold and arsenic anomalism southeast of the Woomerina Prospect
extending to the western limits of the Yule River. The anomaly, named West Yule, is a broad, coherent, 5km long northeast
trending area of gold and arsenic anomalism in an area of transported sand cover.
The defined target areas within the Yandeearra Project have been prioritised for appropriate follow up exploration.
8
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
Areas of granite outcrop within a creek bed at the YAN04 Target –
Yandeearra Project
View looking north from the southern part of the Yandeearra Project
3. gnaweeda (100% Chalice gold Mines limited – teck Cominco earning 70% interest)
Exploration undertaken by Teck Cominco Australia Ltd (“Teck Cominco”) at the Gnaweeda Project as project manager, included
several programs of aircore and RC drilling:
turnberrY prospeCt
RC drilling at the Turnberry Prospect targeted the strike and dip extensions of known gold mineralisation beneath the
predominantly shallow (approximately 100m) historical drilling.
Four RC holes were drilled and largely intersected coarse-grained mafic or dolerite rocks with pervasive carbonate alteration,
localised quartz-carbonate veining and disseminated pyrite. The drilling returned narrow high grade gold intercepts within
broader zones of anomalous gold mineralisation. The best results included 1m @ 37.60g/t gold from 50m in GNRC003 and 1m
@ 11.06g/t Au from 216m in GNRC002.
Gold mineralisation appears to be associated with zones of strong silica-pyrite alteration, with abundant fine-grained arsenopyrite.
Significant results from drilling are tabulated in Table 4 and RC hole locations are shown in Figure 4.
9
rev iew and r es ults o f oper ati o ns
Continued
Hole No.
GNRC001
GNRC002
GNRC003
From (m)
To (m)
Interval (m)
213
234
235
236
82
147
149
157
207
208
216
217
218
39
50
51
52
61
62
63
64
248
251
252
253
276
293
214
235
236
237
83
148
150
158
208
209
217
218
219
40
51
52
53
62
63
64
65
249
252
253
254
277
294
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
Au g/t
1.07
10.58
1.12
1.48
1.86
1.06
1.21
1.93
5.72
0.87
11.06
2.30
1.20
1.34
37.60
1.50
0.98
1.44
1.22
0.82
1.10
1.13
1.07
6.76
5.75
3.12
1.01
Original samples resplit at one metre intervals with gold analysed by 50g fire assay
TABLE 4 : Significant gold results from RC drilling –Turnberry Prospect
The results indicate relatively thin, high-grade gold zones with broader haloes of anomalous gold at below 0.5g/t level. The gold
mineralisation remains open at depth and along strike.
10
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
FIGURE 3 : Gnaweeda Project – maximum gold in drilling
at the Turnberry Prospect
FIGURE 4 : Gnaweeda Project – Aeromagnetics showing recent drilling (white)
and geochemistry (orange) and anomalous results
regional targets
Several programs of aircore drilling were undertaken to test previously defined targets at three separate prospect areas.
Fairway Magnetic Package
A program of 4,831m of aircore drilling (70 holes) was completed to follow up previously defined targets within the north-
south trending Fairway Magnetic Package, a 2-4km wide belt of mafic intrusive and felsic intrusive/volcanic rocks. The aircore
holes were generally drilled to infill previous holes at line spacings of 200-250m and hole spacings of 100-150m.
Previous broader spaced drilling defined localised gold associated with broader arsenic anomalism in this package. Results
from the aircore drilling program supported the general arsenic trend, and returned a best result of 4m @ 2.91g/t gold within a
downhole interval of 45m of anomalous arsenic values (300-1200ppm arsenic) in hole GNAC082 (Figure 4) Further work is
needed to test the extent of mineralisation and the lithological/structural framework.
Old Chiddle Well
A program of 2,300m of aircore drilling (45 holes) targeted a prominent north-south linear magnetic feature on the western
side of the Project area.
Results from drilling were not significant, returning a maximum value of 65 ppb gold on the northern-most line.
A portion of the aircore program was reserved for infill drilling around an anomalous historical gold intercept of 1m @ 12.12g/t
gold at the Old Chiddle Well Prospect. Drilling returned a maximum value of 215ppb gold, with broadly associated arsenic
anomalism. The 12g/t gold intercept appears localized and was not repeated in any of the surrounding holes.
11
rev iew and r es ults o f oper ati o ns
Continued
Nickel Target
Three holes were also completed within the eastern sub-
domain testing an arcuate ultramafic body, visible as a strong
magnetic feature in the TMI image. A coarse grained mafic
to ultramafic rock defined by relict olivine cumulate textures
and relatively shallow weathering (10-30m) was intersected.
Results received were very encouraging with elevated Ni and
Co in all three holes. A best result of 13m @ 0.33% nickel
and 368ppm cobalt was returned from 15m to end of hole
in GNAC052. Additional geochemistry will be undertaken to
further evaluate the potential of this body.
Under an exploration joint venture, Teck Cominco can earn a
70% interest in the Gnaweeda Project by spending $1.5 million
over three years, with a minimum expenditure of $140,000.
4.0 wilga (100% Chalice gold
Mines limited)
FIGURE 5 : Wilga Project – gold in soil and auger geochemistry
Exploration undertaken on the Wilga Project area comprised soil sampling and an auger drilling program.
The soil sampling program outlined two separate >25ppb gold in soil anomalies coincident with a semi-continuous banded
iron formation (BIF) horizon in the central portion of the project. Limited historical shallow drilling in this area has previously
returned narrow intervals of gold mineralisation associated with variably quartz veined BIF.
The auger drilling program defined an extensive, low order (>10ppb gold, peak 31ppb gold) gold anomaly in an area of cover to
the west of the main mineralised banded iron formation. The anomaly trends north to north-north east and is semi-continuous
over a strike distance of approximately 1,800m at the >10ppb gold contour (Figure 5).
A field check is required to assess the significance of the defined auger anomaly. The results of the auger program will be fully
appraised, together with the local regolith, prior to the preparation of a suitable forward exploration program.
The information in this report that relates to Exploration Results is based on information compiled by Mr Bryan Alexander, a full-time employee of Archaean
Exploration Services Pty Ltd, who is a Member of the Australian Institute of Mining and Metallurgy. Archaean Exploration Services Pty Ltd consults to Chalice Gold
Mines Ltd. Mr Alexander has sufficient experience in the field of activity being reported to qualify as a Competent Person as defined in the 2004 edition of the
Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves, and consents to the release of information in the form and context
in which it appears here.
12
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
sC Hedu le of teneMents
as at 30 june 2007
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
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
M47/1118
M47/1119
M47/1120
M47/1121
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Application
Application
Owned
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
0%
100%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
13
sC Hedu le of teneMents
Continued
Tenement #
Nature of Interest
Current Equity
M47/1122
M47/1123
M47/1124
M47/1125
M47/994
M47/995
M47/996
M47/997
M47/998
M47/999
E47/1748
E47/1749
gnaweeda
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
Application
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Tenement #
Nature of Interest
Current Equity
E51/926
E51/927
P51/1074
P51/2514
P51/2515
E51/1027
wilga
Tenement #
E39/1003
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%
NOTE : Chalice Tranche 2 tenements, the subject of a sale agreement with Avoca Resources Limited and which had not
completed at 30 June 2007, are not included in the above schedule.
14
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
CHaliCe gold Mines liMited
finanCia l report
for tHe Year ended 30 june 2007
15
direCto rs’ rep ort
The Directors present their report together with the financial report of Chalice Gold Mines Limited (‘Chalice Gold Mines’ or
‘the Company’) for the financial year ended 30 June 2007 and the independent audit report thereon. In order to comply with
the provisions of the Corporations Act, the Directors report as follows:
1. directors
The Directors of the Company at any time during or since the end of the financial year are:
A R Bantock
B.Com, ACA
Executive Chairman
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 Liontown
Resources Limited and is a Director of Water Corporation, Western Australia’s water utility.
T R B Goyder
Non-executive Director
Tim has over thirty years experience in the resource industry. 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 Liontown Resources Limited.
B W Alexander
BSc, MAusIMM
Non-executive Director
Bryan is a qualified geologist with over 16 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.
A W Kiernan
LLB
Non-executive Director
(appointed 15 February 2007)
Tony is a Solicitor with considerable experience in the administration and operation of listed public companies. He practices
extensively in the areas of media, resources and information technology law. In addition to his legal practice Tony provides
commercial and corporate advice to various entities. Tony is Chairman of Anglicare (WA), BC Iron Limited and Solbec
Pharmaceuticals Ltd. He is also a Director of Uranium Equities Limited, Liontown Resources Limited, Hailian International
Limited and North Queensland Metals Limited.
J R McIntyre
(resigned 15 February 2007)
16
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
2. Company secretary
R K Hacker
B.Com, ACA, ACIS
Richard has 14 years professional and corporate experience in the energy and resources sector in Australia and the United
Kingdom. Richard has previously worked in senior finance roles with global energy companies including Woodside Petroleum
Limited and Centrica Plc. Prior to this, Richard worked with leading accounting practices. Richard is both a Chartered
Accountant and Chartered Secretary and is also Company Secretary of Liontown Resources Limited.
3. directors’ meetings
During the year, seven Directors’ meetings were held. The number of meetings attended by each of the Directors of the
Company during the year are:
Director
A R Bantock
T R B Goyder
B W Alexander
A W Kiernan
J R McIntyre
4. principal activities
Number of board meetings
attended
Number of meetings held
during the time the director
held office during the year
7
7
7
3
2
7
7
7
5
2
The principal activities of the Company during the course of the period were mineral exploration and evaluation.
5. review of operations
During the financial year Chalice Gold Mines:
•
reached agreement for the sale of its Chalice and Higginsville Gold Projects to Avoca Resources Limited (Avoca Resources),
for shares in Avoca Resources to the value of $5,841,000 and 2,000,000 unlisted options over ordinary shares in Avoca
Resources;
•
followed up over 6,500 metres of RC/diamond drilling and 2,600 metres of RAB/air core drilling at Chalice and Higginsville
conducted from March to June 2006, with over 2,400 metres of RAB/air core drilling and detailed SAM and IP geophysical
surveys at Chalice and Higginsville;
•
•
•
•
completed over 12,600 metres of air core drilling at the Yandeearra Project to test seven large geochemical targets;
received encouraging gold and uranium results from rock chip sampling of radiometric anomalies at the Nevada Prospect
within the Yandeearra Project;
through an exploration joint venture with Teck Cominco, actively tested targets at Gnaweeda;
completed an auger drilling program at Wilga which defined an extensive, low order gold anomaly; and
17
direCto rs’ rep ort
Continued
•
incurred a loss of $1,187,476 for the period, which included a net gain on sale of the Chalice and Higginsville projects to
Avoca Resources of $1,581,271 and an accounting write-down of exploration and evaluation assets of $1,556,950. This
relates to a write-down in the value of the Yandeearra project following results of the drilling program undertaken during
the year.
6. significant changes in the state of affairs
On 30 April 2007, Chalice Gold Mines reached agreement for the sale of its Chalice and Higginsville Gold Projects to Avoca
Resources Limited (Avoca Resources), for shares in Avoca Resources to the value of $5,841,000 and 2,000,000 unlisted options
over ordinary shares in Avoca Resources.
The total consideration value is $6,667,693, comprising $5,841,000 of share consideration value and $826,693 for the unlisted
options, valued using a binomial option-pricing model.
For full details of the transaction, refer to Note 3 of the financial statements.
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.
This is particularly important in view of the strong demand for experienced technical and financial personnel currently being
experienced in the Australian and international resources industry, driven by increased world demand for commodities, and the
significant impact that each individual can make within a small executive team for an exploration and development company
such as at Chalice Gold Mines. In short, the labour market is tight and key people make a difference to exploration and growth
outcomes.
Remuneration offered by Chalice Gold Mines is therefore geared to attracting talented employees through a combination of
fixed remuneration and long term incentives, calibrated and individually tailored to be competitive in the external market to
offer incentive to join and remain with the Company.
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.
18
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
Performance related compensation
The Company currently has no formal performance related remuneration policy which governs the payment of annual
cash bonuses upon meeting pre-determined performance targets. However, the Board may consider performance related
remuneration in the form of cash or share options when they consider these to be warranted.
Employment contracts
The following table sets out the contractual provisions of executive Directors and key management personnel.
Name and Job Title
Employment Contract
Duration
Notice Period
Termination Provision
Executive Directors
A R Bantock
Executive Chairman
Non-executive directors
Unlimited
3 months by the Company
and the employee
Other than for misconduct, the
Company must pay Mr Bantock
$125,000 to terminate his
contract.
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.
19
direCto rs’ rep ort
Continued
7.2 direCtors’ and exeCutive offiCers’ reMuneration (audited)
Short-term payments
Salary &
fees
$
Non-
monetary
benefits
$
Total
$
Post-
employ-
ment
payments
Super-
annuation
benefits
$
Share-based
payments
Options (A)
$
Total
$
Value of
options as
proportion
of remun-
eration
(%)
2007
2006
2007
2006
2007
2006
2007
2006
114,679
31,163
45,872
12,465
27,523
7,479
10,239
-
3,540
3,378
3,540
3,378
3,540
3,183
1,319
-
118,219
10,321
114,388
242,928
34,541
49,412
15,843
31,063
10,662
11,558
-
2,805
4,128
1,122
2,477
673
922
-
43,762
81,108
114,388
167,928
43,762
28,597
10,941
-
-
60,727
62,137
22,276
12,480
-
2007
85,265
12,614
97,879
8,574
57,194
163,647
2006
44,426
6,775
51,201
4,487
21,881
77,569
2007
2006
146,789
35,326
3,540
3,183
150,329
13,211
14,299
177,839
38,509
3,179
5,470
47,158
2007
430,367
28,093
458,460
39,633
328,866
826,959
2006
130,859
19,897
150,756
12,266
125,816
288,838
47%
54%
68%
72%
46%
49%
-
-
35%
28%
8%
12%
Key Management
Personnel
Directors
A R Bantock
T R B Goyder
B W Alexander
A W Kiernan
(appointed
15 February 2007)
Former Directors
J R McIntyre
(resigned
15 February 2007)
Executives
R K Hacker
Total
Compensation
Notes in relation to the table of directors’ and executive officers’ remuneration
A. The fair value of the options are 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:
20
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
Grant
Date
Expiry
Date
Fair value
per option
Exercise
price
Price of
ordinary
shares on
grant date
Expected
volatility
Risk free
interest rate
Dividend
yield
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 are discussed at 7.1
above.
7.3 equitY instruMents
7.3.1 Options and rights over ordinary shares granted as compensation
Details of options over ordinary shares in the Company that were granted as compensation to 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 2007
Grant date
Number of
options vested
during 2007
Fair value per
option at grant
date
$
Exercise price
$
Expiry date
Directors
A R Bantock
T R B Goyder
B W Alexander
Former
Directors
J R McIntyre
Executives
R K Hacker
-
-
-
-
-
-
-
-
-
-
2,000,000
2,000,000
500,000
1,000,000
250,000
-
-
-
-
-
0.25
0.25
0.25
21 March 2011
21 March 2011
21 March 2011
0.25
21 March 2011
0.25
21 March 2011
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
2,000,000
21 March 2006
T R B Goyder
2,000,000
21 March 2006
B W Alexander
500,000
21 March 2006
Former
Directors
J R McIntyre
1,000,000
21 March 2006
Executives
R K Hacker
250,000
21 March 2006
-
-
-
-
-
0.08
0.08
0.08
0.08
0.08
0.25
0.25
0.25
21 March 2011
21 March 2011
21 March 2011
0.25
21 March 2011
0.25
21 March 2011
21
direCto rs’ rep ort
Continued
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.
Exercise of options granted as compensation
7.3.2
During the reporting year and the prior year, no shares were issued on the exercise of options previously granted as
compensation.
Analysis of options and rights over ordinary shares 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.
Number granted
Date granted
% vested in year
Forfeited in year
Period in which
grant vests
Directors
A R Bantock
2,000,000
21 March 2006
T R B Goyder
2,000,000
21 March 2006
B W Alexander
500,000
21 March 2006
A W Kiernan
-
-
100%
100%
100%
-
Former Directors
J R McIntyre
Executives
R K Hacker
1,000,000
21 March 2006
100%
250,000
21 March 2006
100%
-
-
-
-
-
-
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.
Directors
A R Bantock
T R B Goyder
B W Alexander
A W Kiernan
Former Directors
J R McIntyre
Executives
R K Hacker
Value of options
Granted
in year
$ (A)
Exercised
in year
$ (B)
Forfeited
in year
$ (C)
Total option value
in year
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(A) 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.
22
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
(B) 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.
(C) The value of options that lapsed during the year represents the benefit foregone and is calculated at the date the option
lapsed using a binomial option-pricing model with no adjustments for whether the performance criteria have or have not
been achieved.
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
On 25 July 2007, the Company received 3,496,503 Avoca Resources Limited (Avoca Resources) shares and 2,000,000 unlisted
options over ordinary shares in Avoca Resources as consideration for the first tranche (Tranche 1) under an agreement to sell
the Company’s Chalice and Higginsville gold projects to Avoca Resources.
Completion of Tranche 1 has been determined to be an adjusting event under AASB110 ‘Events After the Balance Sheet
Date’ and therefore the financial statements have been adjusted to record a net gain on sale of the Tranche 1 tenements of
$1,581,271.
For further details of the transaction, refer to Note 3.
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.
11. directors’ interests
The 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
T R B Goyder
B W Alexander
A W Kiernan
12. share options
Ordinary shares
2,431,772
11,835,208
445,336
270,074
Options over
ordinary shares
2,000,000
2,000,000
500,000
-
Options granted to directors and officers of the company
During or since the end of the year, the Company did not grant any options for no consideration over unissued ordinary
shares in the Company to any of the Directors or to the most highly remunerated officers of the Company as part of their
remuneration.
23
direCto rs’ rep ort
Continued
Unissued shares under options
At the date of this report 5,825,000 unissued ordinary shares of the Company are under option on the following terms and
conditions:
Expiry date
21 March 2011
Exercise price
Number of shares
$0.25
5,825,000
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.
13. indemnification and insurance of directors and officers
The Company has agreed to indemnify all the Directors who have held office of the Company during the year, against all
liabilities to another person (other than the Company or a related body corporate) that may arise from their position 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 year the Company paid insurance premiums of $17,698 in respect of Directors and officers indemnity 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 position, 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 20.
14. non-audit services
During the year HLB Mann Judd, the Company’s auditors, performed no other services in addition to their statutory duties.
15. auditor’s independence declaration
The auditor’s independence declaration is set out on page 25 and forms part of the Directors’ report for the year ended
30 June 2007.
This report is made in accordance with a resolution of the Directors:
Andrew R Bantock
Executive Chairman
Dated at Perth this 20th day September 2007
24
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
auditor’s independenCe repo rt
Auditor’s Independence Declaration
As lead auditor for the audit of the financial report of Chalice Gold Mines Limited for the
year ended 30 June 2007, I declare that to the best of my knowledge and belief, there have
Auditor’s Independence Declaration
been:
a)
no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and
As lead auditor for the audit of the financial report of Chalice Gold Mines Limited for the
year ended 30 June 2007, I declare that to the best of my knowledge and belief, there have
no contraventions of any applicable code of professional conduct in relation to the
b)
been:
audit.
a)
This declaration is in respect of Chalice Gold Mines Limited.
no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the
audit.
This declaration is in respect of Chalice Gold Mines Limited.
Perth, Western Australia
20 September 2007
L
Di Giallonardo
Partner, HLB Mann Judd
Perth, Western Australia
20 September 2007
L
Di Giallonardo
Partner, HLB Mann Judd
HLB Mann Judd (WA Partnership)
15 Rheola Street West Perth 6005. PO Box 263 West Perth 6872 Western Australia. DX 238 (Perth) Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Partners: Terry M Blenkinsop, Litsa Christodulou, Wayne M Clark, Lucio Di Giallonardo, Colin D Emmott, Trevor G Hoddy, Norman G Neill, Peter J Speechley
HLB Mann Judd (WA Partnership) is a member of
International and the HLB Mann Judd National Association of independent accounting firms
HLB Mann Judd (WA Partnership)
15 Rheola Street West Perth 6005. PO Box 263 West Perth 6872 Western Australia. DX 238 (Perth) Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Partners: Terry M Blenkinsop, Litsa Christodulou, Wayne M Clark, Lucio Di Giallonardo, Colin D Emmott, Trevor G Hoddy, Norman G Neill, Peter J Speechley
HLB Mann Judd (WA Partnership) is a member of
International and the HLB Mann Judd National Association of independent accounting firms
25
inCoMe stateMent
for tHe Year ended 30 june 2007
Net gain on sale of exploration and evaluation assets
Other income
Total income
Impairment losses on exploration and evaluation expenditure
Exploration costs not capitalised
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
2007
$
2006
$
3
4
5
8
9
10
10
1,581,271
452,305
2,033,576
-
154,176
154,176
(1,556,950)
(1,317,617)
(68,211)
(22,034)
(1,593,107)
(501,956)
(2,784)
(295)
(1,187,476)
(1,687,726)
-
-
(1,187,476)
(1,687,726)
(0.02)
(0.06)
(0.02)
(0.06)
The income statement is to be read in conjunction with the notes to the financial statements set out on pages 30 to 53.
26
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
b alanCe s Heet
as at 30 june 2007
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets
Assets held for sale
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
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Reserves
Total Equity
Note
2007
$
2006
$
11
12
13
14
13
15
16
17
18
19
18
20
21
21
21
2,323,949
5,919,204
20,701
153,189
5,427,250
328,325
-
-
8,417,043
5,755,575
70,193
3,134,600
208,491
43,000
7,175,824
199,207
3,413,284
7,418,031
11,830,327
13,173,606
152,179
-
22,688
174,867
-
54,326
54,326
697,826
11,197
38,931
747,954
5,771
-
5,771
229,193
753,725
11,601,134
12,419,881
13,974,454
(2,875,202)
501,882
13,974,454
(1,687,726)
133,153
11,601,134
12,419,881
The balance sheet is to be read in conjunction with the notes to the financial statements set out on pages 30 to 53.
27
stat eMent o f CHanges in eq ui tY
as at 30 june 2007
Note
Share capital
$
Accumulated
losses
$
Share based
payments reserve
$
Total equity
$
Balance at 1 July 2006
13,974,454
(1,687,726)
133,153
12,419,881
Employee share options vested
Loss for the period
-
-
-
368,729
368,729
(1,187,476)
-
(1,187,476)
Balance at 30 June 2007
21
13,974,454
(2,875,202)
501,882
11,601,134
Note
Share capital
$
Accumulated
losses
$
Share based
payments reserve
$
Balance at date of incorporation
2
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
60,000
(585,548)
-
-
-
-
-
-
-
-
-
-
-
-
-
133,153
Total equity
$
2
7,000,000
7,500,000
60,000
(585,548)
133,153
(1,687,726)
-
(1,687,726)
Balance at 30 June 2006
21
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
30 to 53.
28
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
C asH flow stateMent
for tHe Year ended 30 june 2007
Note
2007
$
2006
$
Cash flows from operating activities
Cash receipts from operations
Cash paid to suppliers and employees
Interest paid
Interest received
Net cash from operating activities
24
Cash flows from investing activities
228,106
(1,046,185)
(2,315)
248,982
(571,412)
33,871
(354,557)
(179)
53,309
(267,556)
Payments for mining exploration and evaluation
(2,408,849)
(1,044,271)
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Net cash from investing activities
Cash flows from financing activities
Net proceeds from issue of shares
Lodgement of bank guarantee and security deposits
Proceeds from borrowings
Repayment of borrowings
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at 30 June
11
(102,737)
43,812
(191,007)
-
(2,467,774)
(1,235,278)
-
(45,701)
-
(18,414)
(64,115)
(3,103,301)
5,427,250
2,323,949
6,974,454
(43,000)
100,200
(101,570)
6,930,084
5,427,250
-
5,427,250
The cash flow statement is to be read in conjunction with the notes to the financial statements set out on pages 30 to 53.
29
note s to tHe finanCial stat eMent s
for tHe Year ended 30 june 2007
1. significant accounting policies
Chalice Gold Mines is an ASX listed public company domiciled in Australia. The financial report of the Company is for the year
ended 30 June 2007. The previous financial period of the Company was from the date of registration, 13 October 2005 to 30
June 2006.
The financial report was authorised for issue by the Directors on the 19th day of September 2007.
(a) stateMent of CoMplianCe
The financial report complies with Australian Accounting Standards, which include Australian equivalents to International
Financial Reporting Standards (‘AIFRS’). Compliance with AIFRS ensures that the financial report, comprising the financial
statements and notes thereto, complies with International Financial Reporting Standards (‘IFRS’).
(b) b asis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of
the Corporations Act 2001, Accounting Standards and Interpretations and complies with other requirements of the law. The
financial report has also been prepared on a historical cost basis, except for derivative financial instruments and available-for-sale
investments, which have been measured at fair value. The financial report is presented in Australian dollars.
In the year ended 30 June 2007, the Company has reviewed all of the new and revised Standards and Interpretations issued
by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2006. It
has been determined by the Company that there is no impact, material or otherwise, of the new and revised Standards and
Interpretations on its business and, therefore, no change is necessary to its accounting policies.
(C) signifiC ant aCCounting judgeMents, estiMates and assuMptions
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.
The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of
certain assets and liabilities within the next annual reporting period are:
(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 date using a binomial
formula taking into account the terms and conditions upon which the instruments were granted.
(d) 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
30
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
subject to risks and rewards that are different from those of other segments.
(e)
revenue reCognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue
can be reliably measured.
(i) Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the
costs incurred or to be incurred in respect of the transaction can be reliably measured. Risks and rewards of ownership
are considered passed to the buyer at the time of delivery of the goods to the buyer.
(ii) 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 and the costs
incurred or to be incurred cannot be measured reliably.
(iii) Interest received
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.
(f) 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 lease 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) Financing costs
Financing costs comprise interest payable on borrowings calculated using the effective interest method and interest
receivable on funds invested.
(g) 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
18.75%
The residual value, if not insignificant, is reassessed annually.
31
note s to tHe finanCial stat eMent s
for tHe Year ended 30 june 2007
(H) 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 substantively 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.
(i) 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 Australian Taxation Office (‘ATO’) is included as a current asset or liability in the balance sheet.
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.
(j)
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.
(k) CasH and C asH 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.
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(l) trade and otHer reCeivables
Trade and other receivables are stated at cost less impairment losses (see accounting policy (j)).
(M) 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.
(n) plant and equipMent
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes
the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred.
The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial
year end.
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are
expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.
(o) finanCial assets
Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial
assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as
appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at
fair value, through profit or loss, directly attributable transactions costs. The Company determines the classification of its financial
assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year end.
(i) Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss’.
Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives
are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on
investments held for trading are recognised in profit or loss.
(ii) Held-to-maturity investments
If the Company has the positive intent and ability to hold debt securities to maturity, then they are classified as held-
to-maturity. Held-to-maturity investments are measured at amortised cost using the effective interest method, less any
impairment losses.
(iii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
33
note s to tHe finanCial stat eMent s
for tHe Year ended 30 june 2007
active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised
in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
(iv) Available-for-sale investments
Available-for-sale investments are those non-derivative financial assets that are designated as available-for-sale or are not
classified as any of the three preceding categories. After initial recognition available-for sale investments are measured at
fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or
until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is
recognised in profit or loss.
The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted
market bid prices at the close of business on the balance sheet date. For investments with no active market, fair value is
determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference
to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option-
pricing models.
(p) exploration, evaluation, developMent and teneMent a Cquisition 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)
the rights to tenure of the area of interest are current; and
2) at least one of the following conditions is also met:
(i)
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
(ii) 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.
(q) trade and otHer pa Yables
Trade and other payables are stated at cost.
(r) interest-bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable
transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective
interest method.
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Gains and losses are recognised in profit and loss when the liabilities are derecognised.
(i) 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.
(s) 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’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects:
(i)
the extent to which the vesting period has expired; and
(ii) the number of 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
35
note s to tHe finanCial stat eMent s
for tHe Year ended 30 june 2007
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.
(t) 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.
(u) sHare C apital
(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.
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. net gain on sale of exploration and evaluation assets
Net gain on sale of exploration and evaluation assets
Note
26
2007
$
1,581,271
2006
$
-
On 30 April 2007, Chalice Gold Mines reached agreement for the sale of its Chalice and Higginsville gold projects to Avoca
Resources, for shares in Avoca Resources to a value of $5,841,000 and 2,000,000 unlisted options over ordinary shares in Avoca
Resources.
The sale is to be completed in two tranches as follows:
Tranche 1
Tranche 1, which settled on 25 July 2007, comprised of the sale of Chalice Gold Mines’ Higginsville tenements, the Chalice Gold
Mine and areas north thereof.
Consideration for completion of Tranche 1 was $5,000,000 of Avoca Resources shares, at $1.43 per share, for a total of
3,496,503 Avoca Resources shares, based on the 5 day ASX Volume Weighted Average Price (VWAP) prior to the date of
agreement, plus 2 million 3-year Avoca options, each with an exercise price of $1.79. The unlisted options have been valued at
$0.41 per option at the date of grant.
The total consideration value for Tranche 1 is therefore valued in the financial statements at $5,826,693, comprising $5,000,000
of share consideration value and $826,693 for the unlisted options, valued using a binomial option-pricing model.
Completion of Tranche 1 has been determined to be an adjusting event under AASB110 ‘Events After the Balance Sheet
36
C H A L I C E G O L D M I N E S L T D
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Date’ and therefore the financial statements have been adjusted to record the net gain on sale of the Tranche 1 tenements of
$1,581,271.
Tranche 2
Tranche 2, which comprises a package of tenements south of the Chalice Gold Mine, will complete upon grant of an Exploration
Licence (EL) and then amalgamation of the same with certain Prospecting Licences (PL) already held by Chalice Gold Mines, as
well as the achievement of other conditions precedent typical of such sale agreements (such as receipt of relevant Department
of Industry and Resources approvals).
Grant of the EL and amalgamation with the PL’s is expected within the next 12 months, allowing for relevant public notice
requirements.
Consideration for completion of Tranche 2 is $841,000 of Avoca Resources shares, with pricing of these shares to be based on
the 5 day VWAP at the time of the amalgamation of the PL’s within the EL.
At 30 June 2007 and subsequent to balance sheet date, the Company had not completed Tranche 2 of the sale agreement to
sell the remaining Chalice Gold Mines tenements. Pending completion of Tranche 2, the remaining Chalice tenements will be
transferred to Avoca Resources for consideration of $841,000.
No net gain or loss on sale of exploration and evaluation assets for Tranche 2 has been recorded during the year and the
Tranche 2 tenements are classified as assets held for sale (refer to Note 14).
4. other income
Interest received
Gain on sale of plant and equipment
Corporate and administration service fees
Other
2007
$
2006
$
199,906
614
251,435
350
452,305
105,305
-
48,871
-
154,176
37
note s to tHe finanCial stat eMent s
for tHe Year ended 30 june 2007
5. Corporate administrative expenses
2007
$
2006
$
7
16
14,600
20,891
1,605
28,864
23,315
12,800
56,458
36,167
30,295
3,293
35,868
2,250
6
1,096,732
15,622
89,576
21,068
12,112
-
91,591
1,593,107
493,162
95,000
63,568
85,379
(9,106)
368,729
1,096,732
14,655
-
-
32,438
10,000
20,560
12,198
19,726
6,094
-
-
9,411
295,476
4,670
30,761
7,096
4,776
7,077
27,018
501,956
105,625
19,944
3,217
25,531
8,006
133,153
295,476
Accounting fees
Annual report costs
ASIC fees
ASX fees
Audit fees
Consulting fees
Depreciation and amortisation
Insurance
Legal fees
Loss on sale of plant and equipment
Make good provision – office premises
Marketing
Personnel expenses
Printing and stationery
Rent and outgoings
Share registry
Travel and accommodation
Recruitment
Other
6. personnel expenses
Wages and salaries
Directors’ fees
Other associated personnel expenses
Defined contribution superannuation fund contributions
(Decrease)/increase in liability for annual leave
Equity-settled transactions
21
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C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
2007
$
2006
$
7. auditor’s remuneration
Audit services
HLB Mann Judd:
Audit and review of financial reports
23,315
10,000
8. finance costs
Interest expense
9. income tax
Current tax expense
Deferred tax expense relating to the origination and reversal of
temporary differences
Tax losses not brought to account as deferred tax assets
Total income tax expense reported in the income statement
Numerical reconciliation of income tax expense to
prima facie tax payable
2,784
295
(227,038)
(466,036)
(560,148)
787,186
-
(2,151,112)
2,617,148
-
Loss from continuing operations before income tax expense
(1,187,476)
(1,687,726)
Tax at the Australian corporate rate of 30%
(356,243)
(506,318)
Tax effect of amounts which are not tax deductible (taxable) in
calculating taxable income:
Non-deductible expenses
Blackhole expenditure tax deductible
Origination and reversal of temporary differences
Current year tax benefits not recognised
Income tax expense reported in the income statement
Deferred income tax
Deferred tax liabilities
Delayed revenue recognition for tax purposes
Exploration and evaluation expenditure
129,205
(35,133)
(560,148)
(822,319)
822,319
-
40,282
(35,133)
(2,151,112)
(2,652,281)
2,652,281
-
15,381
1,166,411
(15,599)
(2,152,747)
39
note s to tHe finanCial stat eMent s
for tHe Year ended 30 june 2007
Deferred tax assets
Revenue losses available for offset against future taxable income
560,148
2,151,112
2007
$
2006
$
Current receivables
Employee benefits
Accrued expenses
Net deferred tax assets recognised
Tax Losses
(1,748,008)
(4,873)
10,941
-
-
11,679
5,555
-
Unused tax losses for which no deferred tax asset has been
recognised
Potential tax benefit at 30% tax rate
9,663,253
2,898,976
8,840,934
2,652,280
10. earnings per share
Basic earnings per share
The calculation of basic earnings per share for the year ended 30 June 2007 was based on the loss attributable to ordinary
shareholders of $1,187,476 [2006: $1,687,726] and a weighted average number of ordinary shares outstanding during the year
ended 30 June 2007 of 72,800,000 [2006: 28,280,001].
Diluted earnings per share
The calculation of diluted earnings per share for the year ended 30 June 2007 was based on the loss attributable to ordinary
shareholders of $1,187,476 [2006: $1,687,726] and a weighted average number of ordinary shares outstanding during the year
ended 30 June 2007 of 72,800,000 [2006: 28,280,001] calculated as follows:
Loss attributable to ordinary shareholders (diluted)
Loss attributable to ordinary shareholders
Loss attributable to ordinary shareholders (diluted)
1,187,476
1,187,476
1,687,726
1,687,726
Weighted average number of ordinary shares (diluted)
No.
No.
Weighted average number of ordinary shares at 30 June
72,800,000
28,280,001
Effect of share options on issue
-
-
Weighted average number of ordinary shares (diluted) at 30 June
72,800,000
28,280,001
11. Cash and cash equivalents
Bank balances
Bank bills
Petty cash
354,533
1,969,216
200
1,521,633
3,905,417
200
Cash and cash equivalents in the cash flow statement
2,323,949
5,427,250
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C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
12. trade and other receivables
Current
Other trade receivables
Prepayments
Other current receivable – sale of exploration and evaluation
assets
3
13. financial assets
Current
2007
$
2006
$
63,210
29,301
5,826,693
5,919,204
301,540
26,785
-
328,325
Bank guarantee and security deposits
20,701
-
Non-current
Bond in relation to office premises
Bank guarantee and security deposits
14. assets held for sale
Exploration and evaluation expenditure
45,193
25,000
70,193
43,000
-
43,000
153,189
-
During the year, Chalice Gold Mines reached agreement to sell its Chalice and Higginsville gold projects to Avoca Resources. The
sale is to be completed in 2 tranches with Tranche 1 completed in July 2007.
At 30 June 2007, the Company had not completed Tranche 2 of the sale agreement to sell the remaining Chalice Gold Mines
tenements, although a legally enforceable contract has been executed. Pending achievement of certain conditions precedent to
the Tranche 2 sale (including the grant of an Exploration Licence and then amalgamation of the same with certain Prospecting
Licences already held by Chalice Gold Mines, as well as the achievement of other conditions precedent typical of such sale
agreements), the remaining Chalice tenements will be transferred to Avoca Resources for consideration of $841,000.
Exploration and evaluation assets, the subject of Tranche 2 under the sale agreement, have therefore been classified as assets
held for sale.
41
note s to tHe finanCial stat eMent s
for tHe Year ended 30 june 2007
15. exploration and evaluation expenditure
Costs carried forward in respect of areas of interest in the
exploration and evaluation phase (at cost)
Acquisition of tenements – stamp duty and other
Expenditure incurred during the year
2007
$
2006
$
7,175,824
374,009
1,608,539
-
7,034,545
1,480,930
Impairment of exploration and evaluation expenditure
(1,556,950)
(1,317,617)
Exploration costs not capitalised
Disposals of tenements
Transfer to assets held for sale
14
(68,211)
(4,245,422)
(153,189)
3,134,600
(22,034)
-
-
7,175,824
The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases are dependent
on the successful development and commercial exploitation or sale of the respective areas.
16. property, plant and equipment
At cost
Less: accumulated depreciation
Plant and equipment
Carrying amount at beginning of financial year
Additions
Depreciation
Transfers from plant and equipment under hire purchase
Disposals/write offs
Carrying amount at end of period
Plant and equipment under hire purchase
Carrying amount at beginning of financial year
Additions
Amortisation
Transfers to plant and equipment
Disposals/write offs
Carrying amount at end of period
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263,460
(54,969)
208,491
181,338
112,228
(54,290)
532
(31,317)
208,491
17,869
-
(2,169)
(532)
(15,168)
-
211,405
(12,198)
199,207
-
193,183
(11,845)
-
-
181,338
-
18,222
(353)
-
-
17,869
17. trade and other payables
Trade payables
Accrued expenses
2007
$
2006
$
99,602
52,577
152,179
568,271
129,555
697,826
18. 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 22.
Current liabilities
Hire purchase liabilities
Non-current liabilities
Hire purchase liabilities
Hire purchase facility
-
-
11,197
5,771
The Company’s hire purchase liabilities are secured by the assets under hire purchase of $Nil (2006: $17,869). In the event of
default, these assets revert to the financier.
Less than one year
Between one and five years
More than five years
Less than one year
Between one and five years
More than five years
Minimum hire
purchase payments
$
-
-
-
-
Minimum hire
purchase payments
$
12,111
5,858
-
17,969
2007
Interest
$
2006
Interest
$
-
-
-
-
914
87
-
1,001
Principal
$
-
-
-
-
Principal
$
11,197
5,771
-
16,968
43
note s to tHe finanCial stat eMent s
for tHe Year ended 30 june 2007
19. employee benefits
Liability for annual leave
Total employee benefits
sHare based paYMents
(a) Employee Share Option Plan
2007
$
22,688
22,688
2006
$
38,931
38,931
The Company has an Employee 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), 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 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 issued ordinary shares when the options have been exercised.
No share options were granted to employees during the year.
The number and weighted average exercise prices of share options is as follows:
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
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
44
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
Weighted average
exercise price
$
2007
0.25
0.25
-
-
0.25
0.25
Number
of options
2007
6,575,000
750,000
-
-
5,825,000
5,825,000
2006
2006
-
-
-
0.25
0.25
-
-
-
-
6,575,000
6,575,000
-
The options outstanding at 30 June 2007 have an exercise price of $0.25 [2006: $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 option-pricing model.
The following table gives the assumptions made in determining the fair value of the options granted in the year to 30 June 2007.
Fair value of share options and assumptions
2007
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
$0.25
$0.25
80%
5 years
-
5.3%
The expected volatility is based on the volatility of similar mining and exploration companies, due to there being no historical
share price date at the data the options were granted.
Share options are granted under service conditions. 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 personnel expenses
20. other non-current liabilities
Lease incentive
Make good provision
2007
$
368,729
368,729
18,457
35,869
54,326
2006
$
133,153
133,153
-
-
-
45
note s to tHe finanCial stat eMent s
for tHe Year ended 30 june 2007
21. Capital and reserves
Reconciliation of movement in capital and reserves attributable to equity holders of the parent
2007
Share capital (a)
$
Accumulated losses
$
Share based
payments reserve
$
Total equity
$
Balance at 1 July 2006
13,974,454
(1,687,726)
Employee share options vested
Loss for the period
-
-
Balance at 30 June 2007
13,974,454
-
(1,187,476)
(2,875,202)
133,153
368,729
-
501,882
12,419,881
368,729
(1,187,476)
11,601,134
2006
Share capital (a)
$
Accumulated losses
$
Share based
payments reserve
$
Total equity
$
Balance at date of incorporation
2
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
60,000
(585,548)
-
-
Balance at 30 June 2006
13,974,454
(a) Share capital
-
-
-
-
-
-
(1,687,726)
(1,687,726)
On issue at 1 July
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
Ordinary shares
-
-
-
-
-
133,153
-
133,153
2007
No.
72,800,000
-
-
-
2
7,000,000
7,500,000
60,000
(585,548)
133,153
(1,687,726)
12,419,881
2006
No.
-
34,999,998
37,500,000
300,002
72,800,000
72,800,000
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
46
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
shareholders and creditors and are fully entitled to any proceeds on liquidation.
(b) Share options
On issue at 1 July
Options forfeited
Options issued during the year
On issue at 30 June
2007
No.
6,575,000
(750,000)
-
5,825,000
2006
No.
-
-
6,575,000
6,575,000
At 30 June 2007 the Company had 5,825,000 unlisted options on issue under the following terms and conditions:
Number
5,825,000
Expiry Date
21 March 2011
Exercise Price
$0.25
22. 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:
30 June 2007
Note
1 year
or less
$
Over 1 to 5
years
$
Floating
interest
$
Non-interest
bearing
$
Total
$
Weighted
average int.
rate
Financial assets
Bank balances
Bank bills
Bank guarantees and
security deposits
Petty cash
Trade and other
receivables
Financial liabilities
Trade payables and
accrued expenses
Employee benefits
11
11
13
11
12
17
19
-
1,969,216
90,894
-
-
-
-
-
-
-
-
-
-
-
354,533
-
-
-
-
-
-
-
-
-
200
354,533
1,969,216
90,894
200
5,889,903
5,889,903
152,179
152,179
22,688
22,688
1.43%
6.17%
6.40%
-
-
-
-
47
note s to tHe finanCial stat eMent s
for tHe Year ended 30 june 2007
1 year
or less
$
Over 1 to 5
years
$
Floating
interest
$
Non-interest
bearing
$
Total
$
Weighted
average int.
rate
-
3,905,417
43,000
-
-
-
-
-
-
-
-
-
-
-
11,197
5,771
1,521,633
-
-
-
-
-
-
-
-
-
-
200
1,521,633
3,905,417
43,000
200
301,540
301,540
697,826
697,826
38,931
-
38,931
16,968
0.25%
5.58%
5.10%
-
-
-
-
4.45%
30 June 2006
Note
Financial assets
Bank balances
Bank bills
Term deposits
Petty cash
Trade and other
receivables
Financial liabilities
Trade payables and
accrued expenses
Employee benefits
Hire purchase liabilities
11
11
13
11
12
17
19
18
(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.
23. 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 1 year
Within 2 – 5 years
Later than 5 years
2007
$
692,860
1,299,113
-
2006
$
863,840
1,619,700
-
1,991,973
2,483,540
48
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
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
Operating lease commitments
Non-cancellable operating lease rentals are payable as follows:
within 1 year
within 2-5 years
24. reconciliation of cash flows from operating activities
Loss for the period
Adjustments for:
Depreciation and amortisation
Profit on sale of exploration and evaluation assets
Loss on sale of other assets
Profit on sale of other assets
Provision for make good lease fit out (office premises)
2007
$
125,000
-
125,000
80,873
144,736
225,609
2006
$
125,000
-
125,000
-
-
-
(1,187,476)
(1,687,726)
56,458
(1,581,271)
3,294
(614)
35,868
12,198
-
-
-
-
Impairment losses on exploration and evaluation expenditure
1,556,950
1,317,617
Exploration costs not capitalised
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
(Decrease) in current financial assets
Net cash used in operating activities
68,211
470
368,729
(679,381)
154,215
(46,268)
2,215
(2,193)
22,034
116
133,153
(202,608)
(246,728)
142,849
38,931
-
(571,412)
(267,556)
49
note s to tHe finanCial stat eMent s
for tHe Year ended 30 june 2007
25. 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
(resigned 15 February 2007)
Non-executive Directors
T R B Goyder
B W Alexander
A W Kiernan
Executives
R K Hacker
(Company Secretary)
(appointed 15 February 2007)
The key management personnel compensation included in ‘personnel expenses’ (see note 6) are as follows:
Short-term employee benefits
Post-employment benefits
Equity settled transactions
2007
$
2006
$
458,460
39,633
328,866
826,959
150,756
12,266
125,816
288,838
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.
50
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
The aggregate amounts recognised during the year relating to key management personnel and their related parties were as
follows:
Key management persons
Transaction
Note
B W Alexander
Geological consulting services
A W Kiernan
J R McIntyre
Other related parties
Legal services
Geological consulting services
Liontown Resources Limited
Corporate services
Uranium Equities Limited
Corporate services
(i)
(ii)
(iii)
(iv)
(v)
2007
$
2006
$
44,520
15,277
-
(96,500)
(154,935)
11,705
-
15,000
-
(48,871)
(i) The Company engaged Archaean Exploration Pty Ltd, a company of which Mr Alexander is a Director, to undertake
preparation of the Company’s business plan and pre-IPO information set in the 2006 financial year. Archaean Exploration
also provided geological consulting services to the Company during the 2007 financial year. Amounts were billed based on
normal market rates for such services and were due and payable under normal payment terms.
(ii) The Company used the legal services of Mr Kiernan and Christensen Vaughan (a company of which Mr Kiernan is a
consultant) during the course of the financial year. Amounts were billed based on normal market rates for such services
and were due and payable under normal payment terms.
(iii) 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. Amounts were billed based on normal market rates
for such services and were due and payable under normal payment terms.
(iv) The Company supplies corporate services including accounting and company secretarial services under a Corporate
Services Agreement with Liontown Resources Limited. Messrs Bantock, Goyder, Kiernan and McIntyre were all Directors
of Liontown Resources Limited during the year and Mr Hacker is the Company Secretary. Amounts were billed on a
proportionate share of the cost to the Company of providing the services and are due and payable under normal payment
terms.
(v) The Company supplied corporate services including accounting and company secretarial services under a Corporate
Services Agreement with Uranium Equities Limited (until May 2007). Messrs Bantock, Goyder and Kiernan are all Directors
of Uranium Equities Limited and Mr Hacker was the Company Secretary until 17 May 2007. Amounts were billed at cost
and are 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
2007
$
(13,657)
31,900
18,243
2006
$
(15,000)
16,500
1,500
51
note s to tHe finanCial stat eMent s
for tHe Year ended 30 june 2007
Options and rights over equity instruments granted as compensation
The movement during the reporting period in the number of options over ordinary shares in the Company held, directly,
indirectly or beneficially, by each key management person, including their related parties, is as follows:
Held at
1 July 2006
Granted
as comp-
ensation
Exercised
Other
changes
Held at
30 June 2007
Vested
during the
year
Vested and
exercisable at
30 June 2007
2007
Directors
A R Bantock
J R McIntyre
2,000,000
1,000,000
T R B Goyder
2,000,000
B W Alexander
500,000
A W Kiernan
Executives
-
R K Hacker
250,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,000,000
2,000,000
1,000,000
1,000,000
2,000,000
2,000,000
500,000
500,000
-
-
250,000
250,000
-
-
-
-
-
-
Held at
date of
incorp-
oration
Granted
as comp-
ensation
Exercised
Other
changes
Held at
30 June 2006
Vested
during the
year
Vested and
exercisable at
30 June 2006
-
-
-
-
-
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
-
-
-
-
-
-
-
-
-
-
2006
Directors
A R Bantock
J R McIntyre
T R B Goyder
B W Alexander
Executives
R K Hacker
52
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
Movements in ordinary shares
The movement during the reporting period in the number of ordinary shares in the Company held, directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
Held at
1 July 2006
Additions
Received on
exercise of options
Sales
Held at
30 June 2007
2007
Directors
A R Bantock
T R B Goyder
B W Alexander
A W Kiernan*
Former
Directors
J R McIntyre
Executives
R K Hacker
1,765,886
5,228,408
342,668
200,037
765,886
6,575,600
112,668
70,037
146,687
106,687
43,334
94,201
-
-
-
-
-
-
* A W Kiernan was appointed on 15 February 2007.
No shares were granted to key management personnel during the reporting period as compensation.
2006
Directors
A R Bantock
J R McIntyre
T R B Goyder
B W Alexander
Executives
R K Hacker
Held at
1 July 2005
Additions
Received on
exercise of options
Sales
-
-
-
-
-
1,765,886
146,687
5,228,408
342,668
43,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,531,772
11,804,008
455,336
270,074
253,374
137,535
Held at
30 June 2006
1,765,886
146,687
5,228,408
342,668
43,334
26. subsequent events
On 25 July 2007, the Company received 3,496,503 Avoca Resources shares and 2,000,000 unlisted options over ordinary shares
in Avoca Resources as consideration for the first tranche (Tranche 1) under an agreement to sell the Company’s Chalice and
Higginsville gold projects to Avoca Resources.
Completion of Tranche 1 has been determined to be an adjusting event under AASB110 ‘Events After the Balance Sheet
Date’ and therefore the financial statements have been adjusted to record the net gain on sale of the Tranche 1 tenements of
$1,581,271.
For further details of the transaction, refer to Note 3.
53
direCto rs’ deCla ration
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 18 to 23, are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of the Company as at 30 June 2007 and of its performance,
as represented by the results of its operations and its cash flows, for the year ended on that date; and
(ii) 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 year ended 30 June 2007 pursuant to Section 295A of the Corporations Act 2001.
Dated at Perth the 20th day of September 2007.
Signed in accordance with a resolution of the Directors:
ANDREW BANTOCK
Executive Chairman
54
C H A L I C E G O L D M I N E S L T D
A N N U A L R E P O R T 2 0 0 7
independent audit repo rt
INDEPENDENT AUDITOR’S REPORT
To the members of
CHALICE GOLD MINES LIMITED
We have audited the accompanying financial report of Chalice Gold Mines Limited, which comprises
the balance sheet as at 30 June 2007, the income statement, statement of changes in equity, cash flow
statement and notes to the financial statements for the year then ended and the directors’ declaration.
As permitted by the Corporations Regulations 2001, the company has disclosed information about the
remuneration of directors and executives (“remuneration disclosures”), required by Accounting
Standard AASB 124: Related Party Disclosures, under the heading “remuneration report” in the
directors’ report and not in the financial report. We have audited these remuneration disclosures.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial
report in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. T his responsibility includes establishing and
maintaining internal controls relevant to the preparation and fair presentation of the financial report that
is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances.
In Note 1(a), the directors state that compliance with the Australian equivalents to International
Financial Reporting Standards ensures that the financial report, comprising the financial statements and
notes, complies with International Financial Reporting Standards.
The directors of the company are also responsible for the remuneration disclosures contained in the
directors’ report.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit
to obtain reasonable assurance whether the financial report is free from material misstatement. O ur
responsibility is to also express an opinion on the remuneration disclosures contained in the directors’
report based on our audit.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report and the remuneration disclosures contained in the directors’ report. The procedures
selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report and the remuneration disclosures contained in the directors’ report,
whether due to fraud or error. In making those risk assessments, the auditor considers internal controls
relevant to the entity’s preparation and fair presentation of the financial report and the remuneration
disclosures contained in the directors’ report in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report and the remuneration disclosures contained in the directors’ report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or
management.
HLB Mann Judd (WA Partnership)
15 Rheola Street West Perth 6005. PO Box 263 West Perth 6872 Western Australia. DX 238 (Perth) Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Partners: Terry M Blenkinsop, Litsa Christodulou, Wayne M Clark, Lucio Di Giallonardo, Colin D Emmott, Trevor G Hoddy, Norman G Neill, Peter J Speechley
HLB Mann Judd (WA Partnership) is a member of
International and the HLB Mann Judd National Association of independent accounting firms
55
independent audit repo rt
Continued
INDEPENDENT AUDITOR’S REPORT
To the members of
CHALICE GOLD MINES LIMITED
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
We have audited the accompanying financial report of Chalice Gold Mines Limited, which comprises
the balance sheet as at 30 June 2007, the income statement, statement of changes in equity, cash flow
Independence
statement and notes to the financial statements for the year then ended and the directors’ declaration.
In conducting our audit, we have complied with the independence requirements of the Corporations
As permitted by the Corporations Regulations 2001, the company has disclosed information about the
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,
remuneration of directors and executives (“remuneration disclosures”), required by Accounting
provided to the directors of Chalice Gold Mines Limited and included in the Directors’ Report, would
Standard AASB 124: Related Party Disclosures, under the heading “remuneration report” in the
be on the same terms if provided to the directors as at the date of this auditor’s report.
directors’ report and not in the financial report. We have audited these remuneration disclosures.
Auditor’s Opinion
Directors’ Responsibility for the Financial Report
In our opinion:
The directors of the company are responsible for the preparation and fair presentation of the financial
report in accordance with Australian Accounting Standards (including the Australian Accounting
(a)
the financial report of Chalice Gold Mines Limited is in accordance with the Corporations Act
Interpretations) and the Corporations Act 2001. T his responsibility includes establishing and
2001, including:
maintaining internal controls relevant to the preparation and fair presentation of the financial report that
is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
(i) giving a true and fair view of the company’s financial position as at 30 June 2007 and of its
accounting policies; and making accounting estimates that are reasonable in the circumstances.
performance for the year then ended; and
In Note 1(a), the directors state that compliance with the Australian equivalents to International
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Financial Reporting Standards ensures that the financial report, comprising the financial statements and
notes, complies with International Financial Reporting Standards.
Interpretations) and the Corporations Regulations 2001; and
The directors of the company are also responsible for the remuneration disclosures contained in the
(b) the financial report also complies with International Financial Reporting Standards as disclosed in
directors’ report.
Note 1(a).
Auditor’s Responsibility
Auditor’s Opinion on the AASB 124 Disclosures Contained in the Directors’ Report
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
In our opinion the remuneration disclosures that are contained in the directors’ report comply with
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
Accounting Standard AASB 124.
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit
to obtain reasonable assurance whether the financial report is free from material misstatement. O ur
responsibility is to also express an opinion on the remuneration disclosures contained in the directors’
report based on our audit.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report and the remuneration disclosures contained in the directors’ report. The procedures
selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report and the remuneration disclosures contained in the directors’ report,
whether due to fraud or error. In making those risk assessments, the auditor considers internal controls
relevant to the entity’s preparation and fair presentation of the financial report and the remuneration
disclosures contained in the directors’ report in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
ailartsuA nretseW ,htreP
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
7002 rebmetpeS 02
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report and the remuneration disclosures contained in the directors’ report.
HLB MANN JUDD
stnatnuoccA deretrahC
ODRANOLLAIG ID L
rentraP
Our audit did not involve an analysis of the prudence of business decisions made by directors or
management.
HLB Mann Judd (WA Partnership)
15 Rheola Street West Perth 6005. PO Box 263 West Perth 6872 Western Australia. DX 238 (Perth) Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Partners: Terry M Blenkinsop, Litsa Christodulou, Wayne M Clark, Lucio Di Giallonardo, Colin D Emmott, Trevor G Hoddy, Norman G Neill, Peter J Speechley
HLB Mann Judd (WA Partnership) is a member of
International and the HLB Mann Judd National Association of independent accounting firms
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Co rpo rate governanCe stateMent
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 s hareholders’ 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.
•
Ensuring that risk management and internal controls, 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 Company’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. 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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Co rpo rate governanCe stateMent
Continued
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 the Board’s duties and responsibilities.
Directors are initially appointed by the full Board subject to election by shareholders at the next general meeting. Under
the Company’s Constitution the tenure of Directors (other than Managing Director (or equivalent), and only one Managing
Director (or equivalent) 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 committees 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; and
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
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Co rpo rate governanCe stateMent
Continued
community and environment in which it operates;
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 and employees who possess inside information.
‘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.
Breaches of this policy will be subject to disciplinary action, which may include termination of employment.
2.4 interests of o tHer 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
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.
• 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 CoMMuniC ation 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 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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Co rpo rate governanCe stateMent
Continued
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 identifiC ation 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:
•
an annual risk assessment and review of mitigating controls to manage key risks;
• monthly reporting to the Board in respect of operations and the financial position of the Company;
•
budgetary expenditure controls;
• monthly reporting to the Board on status of tenure to tenements; and
•
regular reporting on adherence to health and safety guidelines and policies.
4.2 integritY of finanCial reporting
From the date the Company listed on the ASX, the Company’s Executive Chairman 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. Ongoing 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 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. This is a
particularly important policy in view of the strong demand for experienced technical and financial personnel currently being
experienced in the Australian and international resources industry, driven by increased world demand for commodities, and the
significant impact that each individual can make within a small executive team for an exploration and development company
such as at Chalice Gold Mines. In short, the labour market is tight and key people make a difference to exploration and growth
outcomes.
Remuneration packages offered by Chalice Gold Mines are therefore geared to attracting talented employees through a
combination of fixed remuneration and long term incentives, calibrated and individually tailored to be competitive in the
external market to offer good incentive to join and remain with the Company.
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.
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.
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 Mr Kiernan is an independent Director in accordance with 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.
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Co rpo rate governanCe stateMent
Continued
Refer Section 1.2 of Corporate Governance Statement.
Council Recommendation 2.2:
The chairperson should be an independent Director.
Council Recommendation 2.3:
The roles of the Chairperson and Chief Executive Officer should not be exercised by the same individual.
The Company’s Chairman, Mr Bantock, acts in an executive capacity and is considered by the Board not to be independent in
terms of the ASX Corporate Governance Council’s definition of an independent Director. However the Board believes that the
Chairman is able to 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.
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, an independent consultant is 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:
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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 considers that the Company is not currently of a size to justify the formation of an audit committee. The Board as a
whole undertakes the selection and proper application of accounting policies, the identification and management of risk and the
review of the operation of the internal control systems.
The Board acknowledges this does not comply with recommendation 4.2 of the ASX Corporate Governance Guidelines. If the
Company’s activities increase in size, scope and nature, the appointment of a audit committee will be reviewed by the Board and
implemented if appropriate. Refer to section 1.3 of the Corporate Governance Statement.
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
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Co rpo rate governanCe stateMent
Continued
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.
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.
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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 Share 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.
67
asx additional inforMatio n
Additional information required by the Australian Securities 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 18 September 2007 were:
Shareholder
Timothy R B Goyder
Resolute Limited
Number of ordinary shares held
Percentage of capital held
%
11,835,208
7,624,546
16.26
10.47
Class of sHares and voting rigHts
At 18 September 2007 there were 1,005 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) at meetings of members or classes of members each member entitled to vote in person or by proxy or attorney: and
b) 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 18 septeMber 2007:
Number of equity security holders
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,000 – 100,000
100,001 and over
Total
Ordinary
Shares
72
291
212
334
96
1,005
Unlisted Share Options
-
-
-
1
5
6
The number of shareholders holding less than a marketable parcel at 18 September 2007 was 202.
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