Annual Report 2010
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Level 2, 1292 Hay Street West Perth WA 6005 PO BOX 2890 Perth 6001
T: +61 (08) 9322 3960 F: +61 (08) 9322 5800 E: info@chalicegold.com
www.chalicegold.com
DiRECTORS
T R B Goyder Executive Chairman
D A Jones
Managing Director
A W Kiernan Non-executive Director
S P Quin
Non-executive Director
M R Griffiths
Executive Director
COMPANy SECRETARy
R K Hacker
PRiNCiPAL PLACE OF BuSiNESS
& REGiSTERED OFFiCE
Level 2
1292 Hay Street
WEST PERTH WA 6005
Tel: +618 9322 3960
Fax: +618 9322 5800
Web: www.chalicegold.com
Email: info@chalicegold.com
AuDiTORS
HLB Mann Judd
Level 4, 130 Stirling Street
PERTH WA 6005
SHARE REGiSTRy
Computershare investor Services Pty Limited
Level 2
Reserve Bank Building
45 St Georges Terrace
PERTH WA 6000
Tel: 1300 557 010
HOME EXCHANGE
Australian Securities Exchange Limited
Exchange Plaza
2 The Esplanade
PERTH WA 6000
ASX CODE
Share Code: CHN
Level 2, 1292 Hay Street West Perth WA 6005
T: +61 (08) 9322 3960 F: +61 (08) 9322 5800
E: info@chalicegold.com
www.chalicegold.com
Contents
Investment highlights
Chairman’s letter
12 month strategic outlook
Activities review
Achievements in 2010 financial year
eritrea - Zara Project
Reserves and Resources
Infill Drilling at Koka
near Mine exploration
Regional exploration in eritrea
Australian exploration Projects
sustainable Development
schedule of tenements
Directors’ report
Auditor’s independence declaration
02
03
05
06
06
06
10
10
14
19
20
22
24
25
36
statement of comprehensive income
37
statement of financial position
statement of changes in equity
statement of cash flows
notes to the financial statements
Directors’ declaration
Independent auditor’s report
Corporate governance report
AsX additional information
38
39
40
41
70
71
73
82
Chalice Gold Annual Report 2010
1
InvestMent hIGhlIGhts
2
Chalice Gold Annual Report 2010
• Koka Gold Deposit: – High grade, open pit gold deposit – Feasibility Study completed – Strong economics – Low technical risk• Aggressive exploration programs underway to expand resource base• Highly anomalous gold values detected over 15km long trend• Strategic ground position in emerging gold and base metal province• Experienced Board and Management with extensive expertise in African gold sector ChAIRMAn’s letteR
Dear shareholder
I am pleased to present Chalice Gold’s 2010 Annual
Report after what has been, in many respects, a
landmark year for our Company.
At a time of considerable investor interest and
activity in the global gold sector, I am confident that
Chalice has established the foundations required to
build a first-rate international gold mining company
focused on east Africa and underpinned by the
high-quality Zara Project in eritrea.
We believe that the nubian shield, in which the
Zara Project is located, is highly prospective and
offers similar potential to some of the better-known
parts of West Africa, such as Ghana and Burkina
Faso, but is still very much in its infancy in terms
of exploration. Most of our 615 square kilometre
tenement package at Zara remains virtually
untouched by modern exploration.
notwithstanding
this exciting potential, our
first priority at the Zara Project was to progress
development of the high-grade Koka gold deposit
to provide us with a pathway to initial production
and cashflow.
We expect that this high-grade, open-cut deposit –
which contains a resource of 840,000oz of gold at
a grade of 5.3g/t gold, including an ore Reserve of
4.6 million tonnes at a grade of 5.1g/t for 760,000oz
of gold – offers an outstanding opportunity to
develop a high-margin gold operation, with an
expected head grade not seen in the Western
Australian gold sector for some years.
In october 2009, the Company completed a detailed
scoping study for the development of the Koka gold
deposit and, given the positive results, we moved
immediately to undertake a full Feasibility study.
Both of these technical studies were undertaken by
leading industry consultants lycopodium Minerals
Pty ltd, AMC Consultants Pty ltd and Knight Piésold.
the Feasibility study, which was completed in early
July 2010, confirmed that the deposit can support a
robust gold operation producing 104,000oz per year
with low cash operating costs of Us$338 per oz and
an initial mine life of seven years.
the Feasibility study forecast initial capital costs for
the Project – including mine equipment, mining
pre-strip, processing plant infrastructure and other
owner’s costs – totalling Us$122 million, with an
additional $9 million in sustaining capital over the
life of mine.
the other key metrics and financials of the Project
are extremely robust. Using a gold price of Us$1,200
per oz, the mine is estimated to generate earnings
before interest, tax, depreciation and amortisation
(“eBItDA”) over its life of Us$589 million, with an
annual average eBItDA of Us$84 million and a
capital payback period of slightly over two years.
Using a 5% discount rate, the net Present value of
the Project is in the order of Us$200 million.
With this strong foundation now in place, I am
pleased to report that Chalice has, in cooperation
the eritrean Government, commenced
with
the permitting process for the Koka Project to
facilitate the grant of a Mining licence to enable
development to commence during 2011.
In parallel with the permitting process, the
Company has appointed Gryphon Partners, an
international resources corporate advisory group,
to assist in obtaining finance for the development
of this project. We are targeting first production
from the Koka Project in 2013.
I am confident that the financial robustness of the
Project will draw interest from a wide range of
institutions to fund its development.
In June 2010, the Company achieved an important
objective by consolidating 100% ownership of the
Zara Project (subject to government participation
rights) by exercising its option to acquire all of the
shares in Dragon Mining (eritrea) ltd which held the
remaining 20% free-carried interest in the project.
the consideration for this acquisition was $8 million,
together with the issue of 2 million ordinary shares
in Chalice. A further payment of $4 million is due
upon the delineation of a combined 1 million ounce
mineral reserve within the central Zara leases.
Following completion of the Feasibility study, the
Company is now also directing its attention towards
unlocking the substantial exploration potential
Chalice Gold Annual Report 2010
33
within its large tenement position in eritrea. As
I mentioned in opening, we believe the nubian
shield offers numerous outstanding opportunities
to build our gold resource base in east Africa,
initially within an economic trucking distance of the
proposed mine at Koka.
Particular attention will initially focus on drilling
near-mine targets, including the Konate prospect
– an area which contains substantial artisanal
workings and located just 5 km south of the Koka
deposit – and a deep penetration 3D IP survey
within the Koka-Konate Corridor.
the IP survey is due to commence during october
2010 and will hopefully provide the Company with
new targets similar to the Koka gold deposit. Initial
results from drilling at Konate have been most
encouraging and we are looking forward to reporting
further results from this campaign in the near future.
In addition, the Company will be undertaking a
substantial regional aeromagnetic survey covering
our current granted tenements of 615 square
kilometres. this geophysical information will be a
major step forward to providing new targets hidden
by complex geology and rugged topography.
Regionally, the Company has also completed a
broad stream sediment sampling program (BleG)
throughout its granted land package. Initial results
from this program have been impressive and follow-
up sampling is now being undertaken to target
potential host rocks that may be the source of these
outstanding BleG results.
the next financial year will create
further
opportunities for significant growth as we look to
unlock the enormous potential of near-mine and
regional targets. this is explained in more detail in
the body of this Annual Report.
Financially, the Company is now in a solid position
with approximately $16 million in cash at bank to
expedite permitting and financing of the Koka gold
deposit and carry out focused and well-managed
exploration activities.
As previously advised, the Company has also decided
to dual list its shares on the toronto stock exchange
(tsX) during october 2010, which will again broaden
our shareholder and investor base.
In preparation of our tsX listing, we welcomed
the appointment to our Board in May this year of
stephen Quin, a highly experienced Mining Geologist.
stephen’s input has been extremely valuable and
we look forward to drawing on his considerable
experience in mine development as we develop the
Koka Project and add value to our resource base in
east Africa.
In conclusion, we are very positive about Chalice’s
future and, while there will be challenges ahead,
I strongly believe we will be able to provide
shareholders with an opportunity for strong capital
growth in the medium term.
on behalf of the Board, I would like to thank our loyal
shareholders, employees and consultants for their
continued support in building Chalice.
Kind regards
Tim R B Goyder
executive Chairman
4
Chalice Gold Annual Report 2010
12 Month stRAteGIC oUtlooK
Grow the near mine resource base
•
Following the promising results of an initial 2,500 metres drilling program at Konate in September 2010,
further diamond drilling is being undertaken.
•
•
The Konate prospect and the 6 km x 1 km structural corridor hosting the Koka resources and reserves will
be covered by a deep-penetration 3D Induced Polarisation (IP) survey planned to commence in october
2010. this state-of-the-art geophysical system is designed to map potentially ore-hosting structures and
alteration within the Koka-Konate corridor to 500 metres or more. this will allow better targeting of
drilling, particularly for buried mineralisation in this highly prospective area.
Previous shallow penetration IP indicates a strongly resistive zone developing to the south of Koka. This
geophysical anomaly has a similar response to the main Koka deposit and, as at Koka, may reflect intense
silicification accompanying gold mineralisation. this zone remains untested and drilling will commence
once the 3D IP survey is completed.
Generate a pipeline of regional targets
•
Highly encouraging results from BLEG stream geochemical sampling over the Zara North and Central
licences have highlighted highly anomalous gold values over a strike length of at least 15 km from the
Konate prospect in the south to recently identified artisanal workings 10 km north of Koka. Infill sampling
to better define the source of the anomalies is currently ongoing which will potentially generate further
gold targets to test with drilling.
•
The Company plans to fly a heli-borne magnetic and radiometric survey over the Zara Project licences.
the survey, which will commence in october 2010, will involve flying 12,700 line-kms at a 100 metre line
spacing. Adjoining areas currently under application
may also be flown, subject to grant of the mineral
rights. Following grant, the Company also plans
to fly 3,891 line-kms of vteM, radiometrics and
magnetics over the Mogoraib application north of
Bisha Mine where the main target is gold and base
metal vhMs mineralisation.
Permit the Koka Gold Deposit
•
The Company has commenced the permitting
process for the development of a mining
operation on the Koka gold deposit. the
Company and the government of eritrea are
committed to progress this as expeditiously as
possible so that development can commence in
2011.
Fund the development of the Koka
Gold Deposit
•
The Company has commenced discussions over
financing the development of the Koka gold
deposit. Whilst the type of financing has not
been determined, a mixture of debt and equity
is likely. the Company is confident that, due to
the robust economics of the project, funding is
achievable on commercially attractive terms.
Chalice Gold Annual Report 2010
5
ACtIvItIes RevIeW
AChIeveMents
Merger with sub-sahara Completed
Acquisition of 11% interest in Zara from Africa Wide Resources
Positive scoping study completed – Feasibility study commences
5,000m infill drilling program completed
near mine and regional exploration commences
Announcement of revised Resource and maiden Reserve at Koka
Acquired remaining 20% interest in Zara from Dragon Mining
Feasibility study completed – Project robust and viable
Koka permitting process commences
national Instrument 43-101 technical Report on the Koka Gold Deposit completed
Completion of social and environmental Impact reports
Grow the near mine resource base
Generate a pipeline of regional targets
Permit the Koka Gold Deposit
Fund the development of the Koka Gold Deposit
Aug 2009
Aug 2009
oct 2009
Feb 2010
Mar 2010
Jun 2010
Jun 2010
Jul 2010
Aug 2010
oct 2010
oct 2010
In progress
In progress
In progress
In progress
eRItReA – ZARA PRoJeCt
Chalice’s Zara Project encompasses in excess of 600 sq km of prospective land in the nubian shield, a gold belt
that hosts several major gold deposits, including the world class sukhari gold mine in neighbouring egypt,
along with Chalice’s feasibility stage Koka gold deposit and Konate prospect.
Koka Gold Deposit Feasibility Study
the key financial outcomes of the Feasibility study, which was undertaken by lycopodium Minerals limited
with inputs from AMC Consultants Pty ltd and Knight Piésold Pty ltd, are shown below. All figures are in US
dollars except where noted.
Key Financial Outcomes
100% Project Financial Outcomes*
(Unleveraged)
life-of-mine eBItDA
Average annual eBItDA
nPv5% after-tax cash flows
IRR after-tax
Payback period (years)
$900
$381M
$54M
$99M
22%
2.8
Gold Price
$1,200
$589M
$84M
$196M
35%
2.1
$1,500
$797M
$114M
$293M
45%
1.8
* the eritrean government has a statutory 10% non-contributing interest with their share of pre-production
and capital expenditure being repaid from production cash flows. the Government has the right to acquire
and pay for a further 20% full contributing interest.
6
Chalice Gold Annual Report 2010
Feasibility Study Assumptions and Parameters
Base Case Assumptions
Gold price base case
Foreign exchange rate
Foreign exchange rate
Fuel price
Fiscal Parameters
Corporate tax rate
Royalty *
Base Case Mine Parameters
ore milled (Mt)
Waste mined (Mt)
strip ratio
Average gold grade
total contained gold
estimated gold recovery
total recovered gold
life of Mine
Average annual gold production
Base Case Cost Parameters
Pre-production capital
sustaining capital and mine closure
Average total cash costs ($/oz)
* the gross royalty is negotiable to a maximum of 5%.
Us$/oz
AUD/Us$
eritrean nakfa/Us$
$/litre
%
%
Mt
Mt
t:t
g/t
oz
%
oz
Years
oz
$M
$M
$/oz
900
0.85
15.00
1.00
38
5.0
4.6
48.3
10.4
5.10
760,000
96.3
730,780
7
104,000
122
9
338
Eritrean Government Project Participation Rights
the Government of eritrea has a 10% non-contributing interest in any mining operation but may acquire, on
the basis of an independently determined valuation, an additional 20% contributing interest.
Operating Cost Estimates
operating cash costs over the life of the project are projected to average $338/oz, with the operating cost
components summarised below:
Average mining costs
Processing cost
General and administration
Refining charges
Operating cash costs (LOM)
$/t milled
$/t mined
$/recoverable oz
20.46
24.78
7.36
0.63
53.23
1.92
2.33
0.69
0.06
5.00
129.80
157.20
46.70
4.00
337.70
Chalice Gold Annual Report 2010
37
Capital Costs Estimates
the Feasibility study is based on capital pricing as of the second quarter of 2010. the level of accuracy of the
capital costs estimates is within ±15%.
the pre-production capital costs are estimated at $122 million, including contingency and escalation, but
excluding 2010 sunk costs that will be funded from existing cash resources. sustaining capital expenditures
over the operation’s mine life is estimated at $9 million, including closure costs of $1.3 million, with the
balance met by the salvage value of the plant and equipment.
the cost breakdown for pre-production capital expenditures, assuming an owner-operator scenario, is
shown below:
Estimate +15%
Description
Mining equipment
Mine pre-strip
Process plant
Reagents and plant services
Infrastructure
Construction indirect
Management costs
owners’ costs
Total
$M
$M
$M
$M
Cost Estimate
Contingency
Escalation
Total Cost
18.8
11.3
18.3
4.9
22.9
10.5
7.1
12.1
105.9
0.9
0.0
2.2
0.6
3.2
1.4
0.7
0.4
9.4
0.3
0.4
1.6
0.4
2.0
0.3
0.7
1.0
6.7
20.0
11.7
22.1
5.9
28.1
12.2
8.5
13.5
122.0
8
Chalice Gold Annual Report 2010
Figure 1: 3D perspective view of Koka open pit
and resource model showing drill hole traces.
Figure 2: Koka open-pit, plant and waste dump layout.
Figure 3: Layout of proposed Koka ore processing facility and mine support infrastructure.
Chalice Gold Annual Report 2010
9
ReseRves AnD ResoURCes
AMC Consultants Pty ltd has completed Mineral Resource and ore Reserve estimates for Chalice for the Koka
Gold Deposit in eritrea as at 1 June 2010, as detailed below:
Koka Mineral Resource
the Mineral Resource estimate, classified and reported in accordance with the JoRC Code, is listed in table 1.
Mineral Resources are reported inclusive of ore Reserves.
Category
Indicated Resource
Tonnes
(Mt)
5.0
Grade
(g/t Au)
5.3
Contained Gold
(Oz)
840,000
Table 1: Koka Gold Deposit Mineral Resource Estimate as at 1 June 2010 Reported at 1.2 g/t Au Cut-Off
Koka Ore Reserve
the Koka ore Reserve estimate, classified and reported in accordance with the JoRC Code, is listed in table 2.
this is the first ore Reserve estimate reported for Koka.
Category
Probable Reserve
Tonnes
(Mt)
4.6
Grade
(g/t Au)
5.1
Contained Gold
(Oz)
760,000
Table 2: Koka Gold Deposit Ore Reserve Estimate as at 1 June 2010
the statement has been compiled by independent consultants, AMC Consultants Pty ltd (“AMC”), and
incorporates data from 139 diamond drill holes totalling ~23,000m.
InFIll DRIllInG At KoKA
An infill diamond drilling program, comprising ~5,000 metres in 30 holes, was completed during the year.
the drilling was designed to further increase the Company’s confidence in the high-grade mineralisation of
the Koka Main Zone and provide a basis for a revised Resource estimate and maiden Reserve estimate for the
Koka Feasibility study noted above. some of the better intersections are summarised in table 3 below, while
complete results can be found in the Company’s news releases.
Hole
Depth (m)
North
(Local)
East
(Local)
Azimuth
(°)
Dip (°)
From
(m)
To (m)
170.1
9740
4960
102
-52
ZARD128
including
including
ZARD 129
113
9740
4980
102
-50
ZARD 130
98
9740
5000
102
-52
ZARD 131
102.4
9700
5000
102
-50
44
44
52
79
104
116
143
10
32
6
29
17
23
42
68
75
46
55
82
108
117
144
19
40
12
46
20
29
53
69
Interval
(m)
31
Gold
(g/t)
6.48
2
3
3
4
1
1
9
8
6
17
4
6
11
1
38.22
18.68
7.78
3.25
31.48
100.54
6.13
9.47
26.92
4.66
5.15
3.17
4.68
11.02
10
Chalice Gold Annual Report 2010
Hole
Depth (m)
North
(Local)
East
(Local)
Azimuth
(°)
Dip (°)
From
(m)
To (m)
Interval
(m)
ZARD 132
including
including
including
including
ZARD 133
ZARD 134
ZARD135
including
including
including
ZARD136
101.9
9620
5000
102
-51
90
9
9
14
18
24
41
50
terminated due to deviation
99.5
9660
5000
102
-51
5.70
130.40
9620
4980
102
-51
129.00
9660
4980
102
-51
Gold
(g/t)
27.78
29.30
49.14
71.28
188.25
45.15
5.57
13.02
9.93
21.70
20.25
8.29
12.37
33.82
17.22
79.14
5.27
5.08
21.90
46.53
8.65
9.97
29.13
5.49
3.60
18.75
25.95
32.76
127.77
92
27
11
15
19
27
43
53
12
24
39
56
44
44
70
68
82
100
115
113
32
49
70
87
101
111
122
134
131
2
18
2
1
1
3
2
3
6.3
1
1
11
6
2
5
1
6
2
5
2
3
10
1
5
5
2
1
4
1
23
38
45
38
42
65
67
75
98
110
111
29
39
69
81
96
109
121
130
130
ZARD137
179.4
9620
4940
102
-51
including
ZARD138
ZARD139
90
9820
5000
147.70
9820
4980
102
102
-50
-50
ZARD140
ZARD
220
130
9660
9780
4920
4980
102
102
-50
-50
nsI – drilled into hanging wall
of ore shoot
15
51
72
126
134
17
59
74
132
135
2
8
2
6
1
3.62
1.35
10.58
1.28
12.09
nsI – drilled beneath ore shoot
31
45
40
51
9
6
4.68
7.51
Chalice Gold Annual Report 2010
311
Hole
Depth (m)
North
(Local)
East
(Local)
Azimuth
(°)
Dip (°)
From
(m)
To (m)
Interval
(m)
ZARD142
90
9780
5000
102
-50
ZARD143
194
9780
4960
102
-50
including
ZARD144
ZARD145
200
173.4
9620
9819
4920
4956
102
102
-50
-50
170.5
9620
4965
102
-52
230.4
9780
4940
102
-51
167
9659
4962
102
-52
ZARD146
including
ZARD147B
including
including
including
including
including
including
including
ZARD148
including
12
Chalice Gold Annual Report 2010
58
74
98
127
10.2
17
37
27
46
47
63
76
97
160
200
28
46
111
123
69
69
116
52
53
73
95
106
108
113
117
123
132
141
157
157
183
43
57
62
88
59
75
101
129
12.5
20
39
30
53
50
68
78
101
161
202
30
51
112
126
74
72
118
75
54
74
100
127
109
114
118
124
134
146
160
158
186
58
58
64
92
1
1
3
2
2.3
3
2
3
7
3
5
2
4
1
2
2
5
1
3
5
3
2
23
1
1
5
21
1
1
1
1
2
5
3
1
3
15
1
2
6
Gold
(g/t)
15.06
12.47
5.23
4.95
5.97
3.97
6.33
1.46
18.71
39.04
2.85
43.99
6.51
15.93
9.85
51.35
2.23
101.00
4.97
40.28
66.59
8.65
5.58
36.93
27.45
3.27
9.30
73.75
28.54
53.23
14.58
7.32
3.51
41.66
121.20
8.73
2.14
19.65
4.91
4.98
Hole
Depth (m)
North
(Local)
East
(Local)
Azimuth
(°)
Dip (°)
From
(m)
To (m)
Interval
(m)
ZARD149
216.6
9821
4938
102
-50
including
including
including
including
including
ZARD150
171.8
9700
4961
102
-50
275.5
265.9
129.5
9700
9740
9698
4920
4910
4981
102
102
102
-50
-50
-50
ZARD 151B
ZARD152
ZARD153B
including
including
ZARD154
188.4
9698
4942
102
-50
ZARD155B
204.1
9660
4939
102
-52
ZARD156
229
9821
4901
102
-50
ZARD157
including
201.7
9739
4940
102
-52
116
45
82
82
88
94
107
111
117
132
157
166
173
68
92
117
52
98
84
89
95
125
112
118
133
158
169
174
75
96
1
7
16
2
1
1
18
1
1
1
1
3
1
7
4
Gold
(g/t)
19.72
3.05
11.07
21.52
37.82
81.54
5.30
39.13
16.73
9.81
37.81
4.26
37.69
4.02
5.35
nsI – drilled beneath ore shoot
137
138
35
45
51
69
83
85
116
96
123
107
124
146
102
144
159
77
80
119
40
54
52
77
87
86
117
102
124
109
125
147
104
148
163
81
81
125
1
5
9
1
8
4
1
1
6
1
2
1
1
2
4
4
4
1
6
6.09
3.79
6.28
28.97
2.31
11.30
42.25
13.68
4.84
9.52
20.63
35.67
18.66
9.43
2.05
2.04
24.89
84.63
2.95
Table 3: Koka Deposit Infill Drilling - Significant Intercepts
note: the metres quoted are down hole metres and gold grades are uncut with up to 2 metres of internal dilution (<0.25g/t gold).
All samples were prepared at the Africa horn laboratory in Asmara, eritrea and then analysed by Genalysis laboratories in Perth,
Western Australia.
note 2: nsI = no significant Intersections
Chalice Gold Annual Report 2010
13
neAR MIne eXPloRAtIon
Chalice recognises that it could further enhance the economics of the already robust mine proposed for
the Koka deposit by expanding the near-mine resource base. While efforts initially focused on delivering a
completed feasibility study for Koka following the merger with sub-sahara Resources nl (“sub-sahara”), in the
latter half of the year attention turned to evaluating the significant exploration potential at the Zara Project
with some exciting results.
Figure 4: Geology and prospects within the Koka-Konate Corridor
Konate
Drilling has been undertaken at the Konate prospect, which is located approximately 5 km south of the Koka
Deposit, and has a geological setting similar to that of Koka. Drilling commenced in early July 2010 and, by
mid- september, 2,500m of drilling has been completed in 15 holes.
Initial results from this drilling were encouraging, with best intersections to date of 3m @ 12.79g/t gold from
120m (drill hole ZARD 177) and 4m @ 11.65g/t gold from 109m (drill hole ZARD 185) within broader zones of
lower grade gold mineralisation.
hole ZARD 185 intersected fresh quartz stockwork mineralisation in a microgranite host over a down-hole
width of 30m (close to true width) from 109m depth. Better grade mineralisation is associated with higher
concentrations of sulphides, predominantly pyrite, including the high grade intersection 4m @ 11.65g/t. this
is a style of mineralisation similar to that hosting the high grade mineral resources and mineral reserves in
the Koka deposit.
ZARD 177 was drilled 65 metres north of ZARD 185 on an oblique 40 metre section and intersected quartz
stockwork mineralisation over a 22m width. Better gold values were again associated with pyrite concentrations
and included the high-grade intersection of 3m @ 12.79g/t.
A complete list of significant intersections from these two holes is shown in table 4.
14
Chalice Gold Annual Report 2010
Hole
Depth
(m)
North
(Local)
East
(Local)
Azimuth
(°)
Dip (°)
From
(m)
To (m)
Interval
(m)
ZARD177
209
390616 1820420
240
-60
ZARD185
205
390605 1820346
240
-60
including
including
including
Table 4: Konate Prospect – Significant Intercepts
120
133
138
141
109
119
119
133
135
123
136
139
142
113
139
122
139
139
3
3
1
1
4
20
3
6
4
Gold
(g/t)
12.79
2.3
2.19
2.25
11.65
1.39
3.28
2.08
2.73
the Konate prospect and the 6 km x 1 km structural corridor connecting it to Koka will be covered by a
deep-penetration 3D Induced Polarisation (IP) survey planned to commence in october 2010. the survey
is expected to map out the three-dimensional structural and alteration architecture of this complex and
highly prospective zone and allow better targeting of drilling, particularly for buried mineralisation. historical
shallow IP indicates that gold mineralisation at both Koka and Konate is associated with strongly resistive
zones, reflecting silicification associated with the gold mineralisation. the resistive zones are locally also
associated with chargeable zones, reflecting sulphides accompanying mineralisation. Definition of zones with
this association of resistive and chargeable zones will provide better focusing on drill targets that otherwise
may have only subtle surface expressions, as in the southern part of the Koka Deposit.
Drilling at Konate
Chalice Gold Annual Report 2010
315
Koka South
A six-hole, 890 metre diamond drilling program was completed during the year at the Koka south prospect,
located immediately along strike to the south of the Koka Deposit.
the drilling, which covered a strike length of 200 metres, was designed to follow up previous intercepts
of up to 1 metre grading 92 g/t Au associated with Koka-style quartz stockwork mineralisation in altered
microgranite. Further intercepts of similar style were achieved from the program, highlighting the potential
for additional gold resources in narrow high-grade zones that may be accessible from future underground
development off the Koka pit.
Better intercepts from this drilling are summarised in table 5 below:
Hole
Depth
(m)
North
(Local)
East
(Local)
Azimuth
(°)
Dip (°)
From
(m)
To (m)
Interval
(m)
Gold
(g/t)
ZARD 169
202.3
390204.1
1823777
012
-60
59
62
3
23.72
89
94
103
115
122
126
83
95
56
59
Including 1m @ 70.07 g/t
90
95
105
118
1
1
2
3
1.27
1.22
4.86
8.58
Including 1m @ 20.47 g/t
124
127
2
1
30.74
2.86
no significant intercepts
84
97
1
2
8.77
24.04
Including 1m @ 47.11 g/t
57
60
1
1
2.85
91.93
no significant intercepts
120
121
1
8.19
-50
-50
-50
-50
-62
ZARD 170
ZARD 171
133
390160.8 1823754 102
130.6
390154.4 1823914
102
ZARD 172
98.3
390187.9 1823805 102
ZARD 173
ZARD 174
180
390152.6 1823714
102
155.3
390283.8 1823940 282
Table 5: Koka South Prospect – Significant Intercepts
16
Chalice Gold Annual Report 2010
Although drill holes ZARD 170 and ZARD 173 failed to intersect mineralisation, these holes were poorly sited
due to access issues and may have passed beneath the high-grade zone intersected in ZARD 172 and the
historical hole ZARD 110. Previous shallow penetration IP indicates a strongly resistive zone developing to the
south, which is similar to the response over the main Koka deposit. this target remains untested and further
drilling will be conducted once the planned 3D IP survey is completed and a rock-breaker capable of building
access tracks is available.
Figure 5: IP Resistivity anomalies associated
with the Koka and Koka South mineralised
zones showing drillhole distribution.
Chalice Gold Annual Report 2010
17
Regional Geochemical Sampling
the Company undertook a regional drainage BleG (Bulk leach extractable Gold) sampling program covering
the Zara north, Central and south licences. this program returned highly encouraging results from the
Zara north and Central licences, highlighting strong gold anomalies extending over a strike length of at least
15km from the Konate prospect in the south to previously unknown artisanal workings 10km north of Koka
(Figure 6). In total, 59 samples were collected, with numerous samples containing greater than 10 parts per
billion (ppb) gold (a level considered significantly anomalous) and the best sample returning 362ppb gold.
other samples returned values of between five and 10ppb gold, a level still considered anomalous.
the high tenor of these samples and their value as an indicator of extensive gold mineralisation is highlighted
by the fact that sampling downstream from the Koka gold deposit itself returned a highest value of 75ppb
gold. the survey high value of 362ppb is the highest value obtained to date from all Zara Project BleG samples
collected since project inception and is an order of magnitude higher than most of those obtained in the lead
up to the Koka discovery.
Infill sampling to better define the source of the anomalies is currently in progress.
18
Chalice Gold Annual Report 2010
Figure 6: Geology of the northern half of
the Zara tenements showing anomalous
BLEG results
ReGIonAl eXPloRAtIon In eRItReA
In addition to the 615 square km Zara Project, Chalice has made
applications for five prospecting licences and two exploration
licences for an area of 19,570 square km in eritrea (Figure 7).
the application areas were selected on the basis of regional
alteration and structural interpretations covering 38,000 km2
of northern eritrea using a combination of landsat, Aster
and Quickbird satellite imagery. the structural interpretation
defined the large scale structural architecture of northern
eritrea and identified areas with structural settings regarded
as favourable for gold deposition. Areas identified as having
coincident structural and alteration targets were selected for
applications. Additional areas were selected on the basis of
‘Bisha-style’ signatures suggestive of volcanic-hosted massive
sulphide (vhMs) mineralisation. the Bisha mine is currently
being put into production and will be a significant producer of
gold, copper and zinc commencing late 2010.
At the date of this report these applications were still pending.
Figure 7: Eritrea - showing areas in which Chalice Gold Mines has interests.
Chalice Gold Annual Report 2010
319
AUstRAlIAn eXPloRAtIon PRoJeCts
Wilga Gold Project
In December 2009, Chalice agreed to sell its interest in the Wilga joint venture to AngloGold Ashanti Australia
limited for A$20,000.
Gnaweeda Gold Project
teck Resources limited (“teck”) advised that it had earned a 70% interest in the Gnaweeda Gold Project by
incurring expenditure of A$1.5 million. Due to the new strategic focus on eritrea, Chalice elected to dilute its
30% by not contributing to the proposed exploration program to be undertaken in 2010.
In the fiscal year 2009, Kent exploration Inc. (“Kent”) entered into an agreement with teck pursuant to which
Kent had the right to earn 100% of teck’s 70% interest in the Gnaweeda Gold Project.
Kent subsequently completed an eight-hole, 1,576 metre diamond drill program at Gnaweeda. At the Bunarra
prospect drilling intersected mineralisation to depths of over 200 metres, with the most significant intersections
coming from drill hole Bn003, with an 18m intersection grading 11.09 g/t gold, including 4m@ 37.76 g/t gold
(inclusive of a 1m intersection @ 99.1 g/t gold), 1m @ 24.2 g/t gold and 3m @ 7.09 g/t gold.
significant gold intersections from three wide-spaced drill holes at the turnberry prospect included drill hole
tB003 with 16m @ 2.46 g/t gold, including 3m @ 6.40 g/t gold, 3m @ 4.8 g/t gold and 1m @ 7.16 g/t gold.
CoRPoRAte
Merger with Sub-Sahara Resources NL
In August 2009, Chalice merged with sub-sahara, holder of a 69% interest in the Zara Project through
a scheme of arrangement which provided that shareholders of sub-sahara received one Chalice share for
every 10.73 sub-sahara shares held by them. sub-sahara shareholders collectively gained an interest of
approximately 39% in the merged group. sub-sahara became a wholly-owned subsidiary of Chalice and
was de-listed from the AsX.
At the time of the merger with sub-sahara, Chalice acquired a further 11.12% interest in the Zara Project
for A$1.2 million from Africa Wide Resources ltd. the acquisition of this further interest, coupled with the
69% interest acquired through the merger with sub-sahara, resulted in Chalice having an 80% interest in
the Zara Project.
Chalice has since acquired all of the shares in Dragon Mining (eritrea) limited and Dragon Mining limited’s
20% interest in the Zara Project taking Chalice’s interest to 100% (subject to eritrean Government project
participation rights). the consideration paid was A$8 million and 2 million ordinary shares in Chalice. there
is a further payment of A$4 million to be made upon delineation of a 1 million ounce gold mineral reserve
directly within the central Zara licences.
Investment in London Africa
During the year, Chalice acquired a 20% interest in london Africa limited (“london Africa”) which holds an
exploration licence south of Chalice’s Zara Project in eritrea. london Africa is an unlisted United Kingdom
public company.
Capital Raisings
During the year, Chalice placed approximately 57.9 million shares to raise gross proceeds of $20.7 million. In
addition to this, in september 2010, a fully underwritten non-renounceable pro rata entitlements issue was
completed to raise a further $12.6 million before costs of the issue.
20
Chalice Gold Annual Report 2010
Competent Persons Statement
the information in this report that relates to exploration Results is based on information compiled by Dr Doug Jones, a full-time employee
and Director of Chalice Gold Mines limited, who is a Member of the Australasian Institute of Mining and Metallurgy and is a Chartered
Professional Geologist. Dr Jones 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.
the Mineral Resource estimate was prepared by Mr. John tyrrell who is a Member of the Australasian Institute of Mining and Metallurgy.
Mr. tyrrell is a full time employee of AMC and has sufficient experience in gold resource estimation to act as Competent Person as defined
in the 2004 edition of the ‘Australasian Code for Reporting of exploration Results, Mineral Resources and ore Reserves (the JoRC Code)’.
Mr. tyrrell consents to the inclusion of this information in the form and context in which it appears.
these mineral resource estimates were reported in a news release dated 4 June 2010 but are summarised here for convenience. Readers
should review that news release for additional information, including the mineral resource estimates at different cut-off grades, the
parameters used in the estimate and the required nI 43-101 disclosure.
the information in this statement of ore Reserves is based on information compiled by Mr David lee who is a Member of the Australasian
Institute of Mining and Metallurgy and a full time employee of AMC. Mr lee has sufficient relevant experience to be a Competent Person
as defined in the JoRC Code. Mr lee consents to the inclusion of this information in the form and context in which it appears.
these mineral reserve estimates were reported in a news release dated 4 June 2010 but are summarised herein for convenience. Readers
should review that news release for additional information, including the mineral resource estimates at different cut-off grades, the
parameters used in the estimate and the required nI 43-101 disclosure.
Chalice Gold Annual Report 2010
21
sUstAInABle DeveloPMent
Occupational Health & Safety
Chalice is committed to developing and sustaining high standards of health and safety for all its employees
both in eritrea and Australia. As part of this commitment, the Company has initiated a number of changes
to accommodate the ever changing dynamics that have occurred over the past 12 months as the Company
progresses from an explorer towards a gold producer.
these changes have resulting in a transformation of the Company’s efforts to establish a series of modified
policies and procedures that are designed to promote a safe harmonious work place, with a strong emphasis
on employer to employee interaction.
In addition, one of the essential components of the current measures is to develop a clear understanding of
culture and language differences so that appropriate action can be taken so as to avoid any misinterpretation
that is often associated with the implementation of standards sometimes alien to the local population.
As part of this process, Chalice aims to comply with all applicable laws, regulations and standards in all
jurisdictions of operation and develop a culture of safety from the top down. this will be strongly emphasised
with all employees, consultants and contractors. to that end, the Company recognises that some local
contractors will not have the same standard of health and safety nor the means to implement our standards.
Accordingly, the Company will assist where possible and work with the contractor to ensure compliance.
During the year, security measures have been upgraded substantially. this upgrade was implemented with
the co-operation of the eritrean authorities and a very comprehensive safety and Crisis Management platform
has been implemented following a thorough audit of all our existing procedures and policies. this includes
activation of in-vehicle satellite tracking so that management can track all vehicle movements and provide
assistance in the event of breakdown or accident.
the Company views this initiative as an ongoing process and will continually monitor and upgrade to provide
maximum commitment to our staff, employees and contractors.
Community
Chalice understands the importance of being an active community participant and will continue to foster
the well established long term relationship that has been developed over the past 5 years, since exploration
commenced on the Zara Project.
over the past few months, the company has formally engaged the local and regional communities as
stakeholders in the development of the Koka Gold Deposit and Chalice expects to reach agreement with the
communities on a detailed plan of involvement which will benefit all stakeholders. ongoing discussions are
being held with local communities and the Government regarding appropriate programs to assist and build
capacity within both the local and broader eritrean community.
All Chalice employees will be made aware of the relationship with the community and management will
provide systems to identify, assess, monitor and control existing and potential impacts on the local community.
Community leaders will also be encouraged to seek reasonable access to management.
22
Chalice Gold Annual Report 2010
Environment
the Company is committed to developing the most practical balance between economic development and
protection of the environment. Up until now, environmental impacts have been minimal during the exploration
phase and in areas still being explored, impacts will remain low. As the Company progresses towards mining,
the number of people on site and the footprint of intense activity will increase and measures will be taken to
minimise and mitigate possible negative impacts on both the environment and local community.
Whilst operating in eritrea, Chalice will endeavour to:
•
•
•
•
•
•
comply with and, where possible exceed Eritrean legislation and regulations.
identify and manage environmental risk through assessment and audit with the view to prevent any
effects before they arise.
progressively develop, implement, and maintain environmental management systems consistent with
international standards.
educate and promote environmental awareness to all employees and contractors to increase their
involvement and understanding of environmental responsibility and the management thereof.
develop the personnel and resources to meet the Company’s objectives, and
increase interactivity between employees, managers and the various authorities to ensure delivery of
common environmental objectives.
this will be an important part of the proposed community development plan in eritrea to deliver a lasting
legacy of environmental responsibility.
Chalice Gold Annual Report 2010
323
sCheDUle oF teneMents
Projects - Australia
Tenement #
e47/1748
e51/0926
e51/0927
Projects - Eritrea
Zara (1,2,3,4)
Zara south
Zara north
Mogoraib
lower Anseba
hurum
seccai Reba
Adobha Abyi
nakfa east
Irafayle West
Nature of Interest
Current Equity
owned
owned
owned
100%
30%
30%
License Type
Nature of Interest
Current Equity
exploration license
Prospecting license
Prospecting license
owned
owned
owned
Prospecting license
Application
Prospecting license
Application
Prospecting license
Prospecting license
Prospecting license
Prospecting license
Prospecting license
Application
Application
Application
Application
Application
100%
100%
100%
0%
0%
0%
0%
0%
0%
0%
24
Chalice Gold Annual Report 2010
M R Griffiths
executive Director
(appointed 26 August 2009)
Mike is a Geologist with considerable experience in
the minerals exploration sector in both eritrea and
Africa generally. Mike previously held the position
of Managing Director of sub-sahara Resources nl.
S P Quin
non-executive Director
(appointed 3 May 2010)
stephen is a Mining Geologist with over 30 years
experience in the mining and exploration industry.
stephen is based in vancouver, Canada and is the
President of tsX listed copper producer Capstone
Mining Corp. stephen has extensive experience in
the resources sector, and in the development and
operation of production companies.
2. CoMPAnY seCRetARY
R K Hacker B.Com, ACA, ACIs
Richard has significant 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 a Chartered Accountant and Chartered
secretary and
is also Company secretary of
liontown Resources limited.
DIReCtoRs’ RePoRt
the Directors present their report together with the
financial report of the Chalice Gold Mines limited
(‘Chalice’) and its subsidiaries (together ‘the Group’)
for the financial year ended 30 June 2010 and the
independent auditor’s report thereon. In order to
comply with the provisions of the Corporations Act,
the Directors report as follows:
1. DIReCtoRs
the Directors of Chalice at any time during or since
the end of the financial year are:
T R B Goyder
executive Chairman
tim has over 30 years experience in the resource
industry. tim has been involved in the formation
and management of a number of publicly-listed
and private companies and is currently a Director
of Uranium equities limited and Chairman of
liontown Resources limited.
D A Jones PhD, AusIMM, CPGeo
Managing Director
Doug is a Geologist with over 30 years experience
in international mineral exploration, having worked
extensively in Australia, Africa, south America and
europe. his career has covered exploration for gold
in a wide range of geological settings, volcanic
and sediment-hosted zinc-copper-lead, and IoCG
style copper-gold. he is also a director of liontown
Resources limited and tsX and AIM listed Minera
IRl limited.
A W Kiernan llB
non-executive Director
tony is a lawyer and general corporate advisor
with extensive experience in the administration
and operation of listed public companies. tony
is Chairman of BC Iron limited, Uranium equities
limited, venturex Resources limited and is a
director of liontown Resources limited. tony was
formerly a director of north Queensland Metals
limited and solbec Pharmaceuticals limited (now
named FYI limited) in the previous 3 years.
Chalice Gold Annual Report 2010
25
3. DiReCtoRs’ meetinGs
During the year six Directors’ meetings were held.
the number of meetings attended by each of the
Directors of Chalice during the year are:
Number of
meetings
held during
the time the
director held
office during
the year
Number
of board
meetings
attended
6
6
6
6
2
6
6
6
6
2
Director
T R B Goyder
D A Jones
A W Kiernan
M R Griffiths
S P Quin
4. PRinCiPAl ACtivities
the principal activities of the Group during the
course of the period were mineral exploration and
evaluation.
26
Chalice Gold Annual Report 2010
5. Review of oPeRAtions
5.1 KoKa GolD Deposit Feasibility stuDy
Chalice achieved a major milestone towards its goal
of becoming a significant African gold producer
with the completion of a positive feasibility study
on the Koka Gold Deposit (“Koka”), part of its
100% owned Zara Project in eritrea, east Africa
(the eritrean government has a statutory 10%
non-contributing interest with their share of pre-
production and capital expenditure being repaid
from production cash flows).
the results of the study have confirmed Koka as
a potentially robust gold project with forecast
average annual gold production of 104,000 ounces
over an initial mine life of 7 years and life of mine
cash operating costs of Us$338 per ounce of gold.
Capital costs are expected to be Us$122 million.
key
recommendations
Chalice is currently working on delivering the
remaining
the
feasibility study to allow the mine permitting
process and negotiation of a mining agreement
with the Government of eritrea to commence.
Chalice is optimistic that mine development may
get the green light in 2011.
from
5.2 exploratioN eritrea
Chalice recognises the potential to further improve
the economics of Koka by expanding the near-mine
resource base. since completion of the merger with
sub-sahara Resources nl (“sub-sahara”) efforts
have initially focused on delivering a completed
feasibility study for Koka. However, in the latter
half of the year attention turned to evaluating the
significant exploration potential at the Zara Project.
initial results from drilling at Koka south and
regional BleG geochemical sampling at the Zara
Project have generated encouraging results which
warrant immediate follow-up. one cluster of BleG
gold anomalies define a highly anomalous trend
some 10 km long to the north of the Koka deposit
and this high priority target is currently being
followed up.
Drilling has also commenced approximately 5 kms
south of the Koka Deposit at the Konate prospect
which has a geological setting similar to that of
Koka.
A first-pass seven hole, 2000 m diamond drilling
program commenced early July 2010 and is expected
to be completed by the middle of August 2010 with
initial results forthcoming during september 2010.
in addition to the 615 square km Zara Project, the
Group has made applications for five prospecting
licences and two exploration licences for an area
of 19,570 square km in eritrea. At the date of this
report these tenements have not been granted.
for A$1.2 million from Africa wide Resources ltd.
the acquisition of this further interest, coupled
with the 69% interest acquired through the merger
with sub-sahara, resulted in Chalice having an 80%
interest in the Zara Project.
5.3 exploratioN australia
Chalice has sold its interest in the wilga joint
venture to AngloGold Ashanti Australia limited for
A$20,000. in addition, Chalice has elected to dilute
its 30% interest in the Gnaweeda Project by not
contributing to the proposed exploration program
to be undertaken in 2010.
5.4 MerGers aND acquisitioNs
in August 2009, Chalice merged with sub-sahara,
holder of a 69% interest in the Zara Project
through a scheme of arrangement which provided
that shareholders of sub-sahara received one
Chalice share for every 10.73 sub-sahara shares
held by them. sub-sahara shareholders collectively
gained an interest of approximately 39% in the
merged group. sub-sahara became a wholly-
owned subsidiary of Chalice and was de-listed from
the AsX.
At the time of the merger with sub-sahara, Chalice
acquired a further 11.12% interest in the Zara Project
Chalice has since exercised an option to acquire all
the shares in Dragon mining (eritrea) limited and
Dragon mining limited’s 20% interest in the Zara
Project taking Chalice’s interest to 100% (subject to
eritrean Government project participation rights).
the consideration paid to acquire the interest
was A$8 million and 2 million ordinary shares in
Chalice. there is a further payment of A$4 million
upon delineation of a 1 million ounce gold mineral
reserve directly within the Zara Project.
5.5 corporate
During the year, Chalice placed approximately 57.9
million shares to sophisticated and institutional
investors to raise gross proceeds of $20.7 million.
5.6 iNvestMeNts
During the year, Chalice acquired a 20% interest
in london Africa limited (“london Africa”) which
holds an exploration license south of Chalice’s
Zara Project in eritrea. london Africa is an unlisted
United Kingdom public company.
Chalice Gold Annual Report 2010
327
6. finAnCiAl
the net loss after tax of the Group for the year ended 30 June 2010 was $5,575,878. the increase in the loss in
comparison to prior years reflects the increased level of activity being undertaken since the completion of the
merger with sub-sahara in August 2009 combined with a number of one-off costs.
significant items included in the loss for the year include:
•
•
•
An impairment write down of the Group’s Australian based exploration assets of approximately $1,172,000
following the change in strategic focus to the Group’s newly acquired Zara Project in eritrea.
Costs incurred in relation to the merger with Sub-Sahara of $655,400.
Personnel costs of $2,094,734 which includes $883,432 of non cash equity settled payments for share
options issued to two directors. the valuation of the options was measured at the date of grant (which
was shortly after shareholder approval at the Company’s 2009 Annual General meeting). if the options
had been valued at the date that the Board resolved to issue the options, the amount expensed to the
profit and loss would have been a significantly lower amount of $441,536.
During the year the Company issued 57,913,080 shares as follows:
Date
10 September 2009
26 March 2010
31 May 2010
Number
issued
16,300,000
20,000,000
21,613,080
issue
price
($)
0.27
0.36
0.42
total
consideration
before costs
of issue
($)
4,401,000
7,200,000
9,077,494
Cash outflows used in investing activities was $18,767,107 which included $8,203,270 for exploration and
evaluation costs incurred on the Zara Project in eritrea, $8,000,000 paid to Dragon mining limited for the
acquisition of its 20% interest in the Zara Project and $1,210,000 paid to Africa wide Resources limited for an
11% interest in the Zara Project.
6.1 FiNaNcial positioN
As at 30 June 2010, the Group had net assets of $34,547,711, including $7,688,905 in cash and cash equivalents,
and an excess of current assets over current liabilities of $5,374,182.
6.2 DiviDeNDs
no dividend has been paid or declared since the commencement of the period and no dividends have been
recommended by the Directors.
7. siGnifiCAnt CHAnGes in tHe stAte of AffAiRs
other than as referred to in section 5, there are no significant changes in the state of affairs of the Group.
8. RemUneRAtion RePoRt – AUDiteD
this report outlines remuneration arrangements in place for directors and executives of Chalice Gold mines.
8.1 priNciples oF coMpeNsatioN
the broad remuneration policy of the Group is to ensure that remuneration levels for executive directors,
secretaries, officers and other key management personnel are set at competitive levels to attract and retain
appropriately qualified and experienced personnel.
28
Chalice Gold Annual Report 2010
this is particularly important in view of the significant impact that each individual can make within a relatively
small executive team for an exploration and development company such as Chalice. the recently appointed
Remuneration Committee is to take an active role in setting executive remuneration levels; however, the
board has not yet established formal objectives and criteria in relation to executive remuneration.
Remuneration offered by Chalice is 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 Group.
Given the stage of development of the Group and the fact that it has not yet attained commercial production,
compensation of directors and executives to date has emphasised base salary and meaningful share option
awards. in the event that the Group achieves commercial production in the future, this policy may be re-
evaluated to instead emphasise increased base salaries and cash bonuses with a reduced reliance on share
option awards.
Fixed compensation
fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any
tax charges related to employee benefits), 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.
cash incentives
Chalice currently has no formal performance-related remuneration policy which governs the payment of
annual cash bonuses upon meeting pre-determined performance targets. Due to the size and nature of the
Group, the need to conserve cash is a priority and therefore long term incentives issued under the option Plan
is the preferred method of incentivising directors and executives.
long-term incentives
options may be issued at the board’s discretion under the option Plan to directors, employees and consultants
of the Group and must be exercised within three months of termination, although directors have discretion
to waive this obligation to exercise within three months of termination. the ability to exercise the options
is usually based on the option holder remaining with the Group for at least one year; however, the vesting
period may be tailored depending on specific circumstances at the discretion of the board. other than the
vesting period which is usually based on a period of service, there is no performance hurdle required to be
achieved by the Group to enable the options, which are outstanding, to be exercised. the board of directors,
in exercising its discretion, will take into account previous grants when determining the number of options
to be issued.
the exercise price for the options is such price as determined by the board provided that the exercise price
shall be not less that the weighted average sale price of shares sold on AsX during the five business days prior
to the date of issue or such other period as determined by the board (in its discretion). All options issued have
a defined expiry date and if not exercised prior to that date, the options will lapse.
Chalice believes that the issue of options aligns the interests of directors, employees and shareholders alike.
Non-executive directors
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.
As approved by shareholders, total compensation for the non-executive directors is not to exceed A$150,000
per annum (in the aggregate).
Chalice Gold Annual Report 2010
29
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30
Chalice Gold Annual Report 2010
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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:
Grant
Date
expiry Date
Fair
value per
option
$
exercise
price
$
16 November 2009
31 March 2014
16 November 2009
31 March 2014
16 November 2009
1 September 2012
0.41
0.39
0.33
0.35
0.45
0.50
price of
ordinary
shares
on grant
date
$
0.55
0.55
0.55
expected
volatility
risk free
interest
rate
Dividend
yield
89%
89%
89%
4.74%
4.74%
4.74%
0
0
0
Details of performance-related remuneration
Details of the Group’s policy in relation to the proportion of remuneration that is performance-related are
discussed at 8.1 above.
8.3 equity iNstruMeNts
8.3.1 options and rights over ordinary shares granted as compensation
Details of options over ordinary shares in the Group 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
2010
Grant date
Number
of options
vested
during
2010
Fair value
per option
at grant
date
$
exercise
price
$
expiry date
Directors
D A Jones1
1,250,000
16 November 2009
1,250,000
518,576
1,250,000
16 November 2009
M R Griffiths
375,000
16 November 2009
375,000
16 November 2009
-
-
-
492,225
122,499
122,499
0.35
0.45
0.50
0.50
31 March 2014
31 March 2014
1 September 2012
1 September 2012
executive
R K Hacker
-
-
375,000
30,085
0.20
31 July 2013
1.
2.
the value of D A Jones’ options has been calculated from the date of shareholder approval (16 november 2009). the value of D A
Jones’ options at date of announcement (as opposed to the actual date of approval) is $441,536 based on a fair value of $0.18, share
price of $0.25 at date of announcement and a risk free rate of 4. 47%.
subject to shareholder approval at Chalice’s next general meeting, mr stephen Quin (who was appointed to the board on
3 may 2010) will be issued 750,000 options expiring 30 April 2014 as follows:
tranche 1: 187,500 options with an exercise price of A$0.55, vesting on issue;
tranche 2: 187,500 options with an exercise price of A$0.65, vesting on 30 April2011;
tranche 3: 187,500 options with an exercise price of A$0.75, vesting on 30 April 2012; and
tranche 4: 187,500 options with an exercise price of A$0.75, vesting on 30 April 2013.
Chalice Gold Annual Report 2010
331
exercise of options granted as compensation
8.3.2
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 Group and each
of the named Company executives are outlined below.
Director
D A Jones
M R Griffiths
Number
granted
Date granted
% vested
in year
Forfeited
in year
Date on which
grant vests
1,250,000
16 November 2009
100%
1,250,000
16 November 2009
375,000
375,000
16 November 2009
16 November 2009
-
-
-
-
-
-
-
31 March 2011
1 September 2010
1 September 2011
-
the movement during the reporting period, by value, of options over ordinary shares in the Group held by
each Company director and each of the named Company executives is detailed below.
D A Jones
M R Griffiths
value of options
granted in year
(a)
$
value of options
exercised in year
(b)
$
value of options
lapsed in year
(c)
$
1,010,801
244,998
-
-
-
-
(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 peiod.
(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.
9. DiviDenDs
no dividends were declared or paid during the period and the directors recommend that no dividend be paid.
10. liKely DeveloPments
the Group will continue activities in the exploration and evaluation of minerals tenements with the objective
of developing a significant minerals business.
Depending on the results of the current first-pass drilling at the Konate prospect, it is anticipated that drilling
will continue at this site in coming months. follow-up drilling is also planned to investigate narrow but very
high grade intersections encountered in recent drilling at the Koka south. in addition a deep penetration 3D
induced Polarisation survey over the highly prospective Koka-Konate corridor will commence in october 2010.
the Company plans to fly a detailed aeromagnetic and radiometric survey over the entire Zara tenement
block to investigate its structural architecture and alteration signatures. this survey is planned to commence
in october 2010.
32
Chalice Gold Annual Report 2010
follow-up sampling over the gold anomalies identified in the regional BleG survey at Zara has already
commenced and it is anticipated this work will define new targets for drilling in the coming months. the BleG
sampling program, which has proven to be so effective at Zara, will also be extended to the areas currently
under application assuming they are progressively granted over the next 12 months.
11. sUBseQUent events
on 9 August 2010 Chalice announced to the AsX that it intends to undertake a fully underwritten non-
renounceable rights issue on the basis of one share for every six shares held at an issue price of 42 cents per
share to raise approximately $12.6 million before issue costs.
12. DiReCtoRs’ inteRests
the interest of each Director in the shares, rights or options over such instruments issued by Chalice 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:
T R B Goyder
D A Jones
M R Griffiths
S Quin
A W Kiernan
ordinary shares
19,951,206
235,000
600,960
-
820,074
options over
ordinary shares
2,000,000
2,500,000
750,000
-
500,000
13. sHARe oPtions
options granted to directors and officers of the Group
During or since the end of the financial year, Chalice granted options for no consideration over unissued
ordinary shares in the company to the following directors and officers of the Group as part of their remuneration.
Directors
D A Jones
M Griffiths
S P Quin (1)
Number of
options granted
2,500,000
750,000
750,000
(1)
subject to shareholder approval at Chalice’s next General meeting, s Quin will be issued 750,000 unlisted share options expiring on
30 April 2014 as follows:
– 187,500 options with an exercise price of $0.55, vesting on issue
– 187,500 options with an exercise price of $0.65 vesting on 30 April 2011
– 187,500 options with an exercise price of $0.75 vesting on 30 April 2012
– 187,500 options with an exercise price of $0.75 vesting on 30 April 2013
Chalice Gold Annual Report 2010
33
unissued shares under option
At the date of this report 13,075,000 unissued ordinary shares of the Company are under option on the
following terms and conditions:
expiry date
21 March 2011
1 December 2012
11 December 2012
31 July 2013
31 March 2014
31 March 2014
1 September 2012
16 November 2011
31 March 2012
exercise price
($)
Number of shares
0.25
0.25
0.20
0.20
0.35
0.45
0.50
0.35
0.36
5,575,000
500,000
250,000
500,000
1,250,000
1,250,000
750,000
2,000,000
1,000,000
these options do not entitle the holder to participate in any share issue of Chalice or any other body corporate.
shares issued on exercise of options
During or since the end of the period, Chalice has not issued any ordinary shares as a result of the exercise
of options.
14. inDemnifiCAtion AnD insURAnCe of DiReCtoRs
AnD offiCeRs
Chalice has agreed to indemnify all the directors and officers who have held office during the year, against all
liabilities to another person (other than Chalice or a related body corporate) that may arise from their position
as directors and officers of Chalice, except where the liability arises out of conduct involving a lack of good
faith. the agreement stipulates that Chalice will meet the full amount of any such liabilities, including costs
and expenses.
During the year the Group paid insurance premiums of $15,319 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 30.
15. non-AUDit seRviCes
During the year HlB mann Judd, the Company’s auditors, performed no other services in addition to their
statutory duties.
34
Chalice Gold Annual Report 2010
16. AUDitoR’s inDePenDenCe DeClARAtion
the auditor’s independence declaration is set out on page 36 and forms part of the Directors’ report for the
year ended 30 June 2010.
this report is made in accordance with a resolution of the Directors:
tim r b Goyder
executive Chairman
Dated at Perth this 16 August 2010
coMpeteNt persoN’s stateMeNt
the information in this report that relates to exploration Results is based on information compiled by Dr Doug
Jones, a fulltime employee and Director of Chalice Gold mines limited, who is a member of the Australasian
institute of mining and metallurgy and is a Chartered Professional Geologist. Dr Jones 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.
Chalice Gold Annual Report 2010
335
AUDitoR’s inDePenDenCe DeClARAtion
Auditor’s Independence Declaration
As lead auditor for the audit of the financial report of Chalice Gold Mines Limited for the
Auditor’s Independence Declaration
year ended 30 June 2010, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
As lead auditor for the audit of the financial report of Chalice Gold Mines Limited for the
a)
the auditor independence requirements of the Corporations Act 2001 in relation to
year ended 30 June 2010, I declare that to the best of my knowledge and belief, there have
the audit; and
been no contraventions of:
b)
any applicable code of professional conduct in relation to the audit.
a)
This declaration is in respect of Chalice Gold Mines Limited.
the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
b)
any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Chalice Gold Mines Limited.
Perth, Western Australia
16 August 2010
Perth, Western Australia
16 August 2010
L DI GIALLONARDO
Partner, HLB Mann Judd
L DI GIALLONARDO
Partner, HLB Mann Judd
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
HLB Mann Judd (WA Partnership) is a member of
International, a worldwide organisation of accounting firms and business advisers.
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
36
Chalice Gold Annual Report 2010
HLB Mann Judd (WA Partnership) is a member of
International, a worldwide organisation of accounting firms and business advisers.
15
15
stAtement of ComPReHensive inCome
For the year ended 30 June 2010
consolidated
continuing operations
Net gain/ (loss) on sale of exploration and evaluation assets
3(a)
(146,677)
Note
2010
$
Fair value of options held through profit and loss
Other income
Share of loss of associate
Project transaction costs expensed
Impairment of exploration and evaluation assets
Corporate administrative expenses
loss before tax
Income tax expense/benefit
(11,732)
658,509
(1,508)
(655,400)
(1,172,071)
(4,246,999)
(5,575,878)
-
3(b)
11
10
3(c)
5
2009
$
674,486
12,463
880,336
-
(527,434)
(129,862)
(1,474,525)
(564,536)
-
loss for the period attributable to owners of the parent
(5,575,878)
(564,536)
other comprehensive income
Net change in fair value of available for sale investments
Exchanges differences on translation of foreign operations
total comprehensive income after tax attributable to
owners of the parent
(34,000)
70,084
36,000
-
(5,539,794)
(528,536)
Basic and diluted earnings per share
6
(0.40
(0.10)
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
Chalice Gold Annual Report 2010
37
stAtement of finAnCiAl Position
For the year ended 30 June 2010
consolidated
current assets
Cash and cash equivalents
Trade and other receivables
total current assets
Non-current assets
Financial assets
Exploration and evaluation assets
Investments in associates
Property, plant and equipment
total non-current assets
total assets
current liabilities
Trade and other payables
Employee benefits
Other
total current liabilities
Non-current liabilities
Other
total non-current liabilities
total liabilities
Net assets
equity
Share capital
Accumulated losses
Reserves
total equity
Note
2010
$
7
8
9
10
11
12
13
14
15
15
16
17(a)
17(b)
7,688,905
329,587
8,018,492
214,255
27,056,158
684,934
1,257,494
29,212,841
37,231,333
2,534,272
110,038
-
2,644,310
39,312
39,312
2,683,622
34,547,711
41,254,947
(8,280,770)
1,573,534
34,547,711
2009
$
9,623,637
162,000
9,785,637
174,827
1,950,775
-
232,566
2,358,168
12,143,805
151,640
18,196
3,182
173,018
47,207
47,207
220,225
11,923,580
13,974,454
(2,704,892)
654,018
11,923,580
the above statement of financial position should be read in conjunction with the accompanying notes.
38
Chalice Gold Annual Report 2010
stAtement of CHAnGes in eQUity
For the year ended 30 June 2010
consolidated
issued
capital
$
accumulated
losses
$
share based
payments
reserve
$
investment
revaluation
reserve
$
balance at 1 July 2009
13,974,454
(2,704,892)
618,018
36,000
Revaluation of available
for sale investments
Exchange differences
on translation of foreign
operations
Loss for the year
total comprehensive
income for the year
-
-
-
-
-
-
(5,575,878)
(5,575,878)
Share issue – merger by
scheme of arrangement
6, 802,388
Share placement
(net after costs)
Share issue
– consideration
19,578,105
900,000
Share based payments
-
-
-
-
-
-
-
-
-
-
-
-
883,432
Foreign
currency
translation
reserve
$
-
-
total
$
11,923,580
(34,000)
70,084
70,084
-
(5,575,878)
(34,000)
-
-
(34,000)
70,084
(5,539,794)
-
-
-
-
-
-
-
-
6,802,388
19,578,105
900,000
883,432
balance at 30 June 2010
41,254,947
(8,280,770)
1,501,450
2,000
70,084
34,547,711
consolidated
issued
capital
$
accumulated
losses
$
share based
payments
reserve
$
investment
revaluation
reserve
$
Foreign
currency
translation
reserve
$
balance at 1 July 2008
13,974,454
(2,140,356)
570,910
-
Revaluation of available
for sale investments
Loss for the year
total comprehensive
income for the year
Share based payments
-
-
-
-
-
(564,536)
(564,536)
36,000
-
36,000
-
-
-
47,108
-
-
-
-
-
-
total
$
12,405,008
36,000
(564,536)
(528,536)
47,108
balance at 30 June 2009
13,974,454
(2,704,892)
618,018
36,000
-
11,923,580
the above statement of changes in equity should be read in conjunction with the accompanying notes.
Chalice Gold Annual Report 2010
339
stAtement of CAsH flows
For the year ended 30 June 2010
consolidated
Note
2010
$
2009
$
cash flows from operating activities
Cash receipts from operations
Cash paid to suppliers and employees
Interest received
181,323
(3,130,431)
320,575
Net cash used in operating activities
22
(2,628,533)
288,734
(1,388,115)
522,328
(577,053)
cash flows from investing activities
Payments for mining exploration and evaluation
(16,203,270)
(320,890)
Proceeds from sale of tenements
Acquisition of property, plant and equipment
Proceeds from sale of investments
Proceeds from joint venture termination
Payments for investment in associates
270,000
(852,974)
154,416
164,509
(686,442)
-
(94,329)
897,003
-
-
Proceeds from option fee received for sale of exploration and
evaluation assets
-
250,000
Payments for acquisition of subsidiary
Cash acquired on merger by scheme of arrangement
19(b)
19(a)
Payments for costs of business combinations
Net cash from/(used) in investing activities
cash flows from financing activities
Lodgement of bank guarantee and security deposits
Proceeds from issue of shares
Payments for share issue costs
Funds held on trust
Net cash from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of exchange rate fluctuations on cash held
cash and cash equivalents at 30 June
7
(1,210,000)
252,054
(655,400)
(18,767,107)
(50,000)
20,678,494
(1,100,389)
3,169
19,531,274
(1,864,366)
9,623,637
(70,366)
7,688,905
-
-
(503,860)
227,924
-
-
-
-
-
(349,129)
9,972,766
-
9,623,637
the above statement of cash flows should be read in conjunction with the accompanying notes.
40
Chalice Gold Annual Report 2010
notes to tHe finAnCiAl stAtements
For the year ended 30 June 2010
1. siGnifiCAnt ACCoUntinG PoliCies
Chalice Gold mines limited is an AsX listed public company domiciled in Australia at level 2, 1292 Hay street,
Perth, western Australia. the consolidated financial report comprises the financial statements of Chalice Gold
mines limited (‘Company’) and its subsidiaries (‘the Group’) for the year ended 30 June 2010.
(a) basis of preparation and statement of compliance
the financial report has also been prepared on a historical cost basis, except for available-for-sale
investments, which have been measured at fair value. Cost is based on the fair values of the consideration
given in exchange for assets. Chalice is domiciled in Australia and all amounts are presented in Australian
dollars, unless otherwise noted.
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).
the financial report was authorised for issue by the Directors on 16 August 2010.
(b) adoption of new and revised standards
in the year ended 30 June 2010, the Group has reviewed all of the new and revised standards and
interpretations issued by the AAsB that are relevant to its operations and effective for the current annual
reporting period beginning on or after 1 July 2009.
During the current period, certain accounting policies have changed as a result of new or revised
accounting standards, which became operative for the annual reporting period commencing on 1 July
2009. the affected policies and standards are:
• Principles of consolidation – revised AASB 127 Consolidated and separate financial statements
and changes made by AAsB 2008-7 Amendments to Australian Accounting standards – Cost of an
investment in a subsidiary, Jointly Controlled entity or Associate
• Business combinations – revised AASB 3 Business Combinations
• Segment reporting – new AASB 8 operating segments
the Group has also reviewed all new standards and interpretations that have been issued but are not yet
effective for the year ended 30 June 2010. As a result of this review, the Directors have determined 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 the Group’s accounting policies.
principles of consolidation
AAsB 127 (revised) requires the effects of all transactions with non-controlling interests to be recorded
in equity if there is no change in control and these transactions will no longer result in goodwill or gains
and losses. this is different to the Group’s previous accounting policy where transactions with minority
interests were treated as transactions with parties external to the group.
the standard also specifies the accounting when control is lost. Any remaining interest in the entity must
be remeasured to fair value and a gain or loss is recognised in profit or loss. this is consistent with the
entity’s previous accounting policy if significant influence is not retained.
the Group will in future allocate losses to non-controlling interests in subsidiaries even if the accumulated
losses should exceed the non-controlling interest in the subsidiary’s equity. Under the previous policy,
excess losses were allocated to the parent entity.
lastly, dividends received from investments in subsidiaries, jointly controlled entities or associates after
1 July 2009 are recognised as revenue even if they are paid out of pre-acquisition profits. However, the
investment may need to be tested for impairment as a result of the dividend payment. Under the entity’s
previous policy, these dividends would have been deducted from the cost of the investment.
Chalice Gold Annual Report 2010
41
the changes were implemented prospectively from 1 July 2009. there has been no impact on the
current period as none of the non-controlling interests have a deficit balance. there have also been
no transactions whereby an interest in an entity is retained after the loss of control of that entity, no
transactions with non‐controlling interests and no dividends paid out of pre-acquisition profits.
business combinations
All payments to purchase a business are now recorded at fair value at the acquisition date, with
any contingent payments included at their respective fair values. Under the Group’s previous policy,
contingent payments were only recognised when the payments were probable and could be measured
reliably and were accounted for as an adjustment to the cost of the acquisition.
Acquisition-related costs are expensed as incurred. Previously, they were recognised as part of the cost
of acquisition and therefore included in goodwill. non-controlling interests in an acquiree are now
recognised either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s
net assets. this decision is made on an acquisition-by-acquisition basis. Under the previous policy, the
non-controlling interest was always recognised at its share of the acquiree’s net assets.
if the Group recognises acquired deferred tax assets after the initial recognition accounting there will no
longer be any adjustment to goodwill. As a consequence, the recognition of the deferred tax asset will
increase the Group’s net profit after tax.
segment reporting
the Group has applied AAsB 8 ‘operating segments’ from 1 July 2009. AAsB 8 requires a ‘management
approach’ under which segment information is presented on the same basis as that used for internal
reporting purposes. operating segments are now reported in a manner that is consistent with the internal
reporting provided to the chief decision maker. the chief decision-maker has been identified as the Board
of Chalice Gold mines limited.
(c) basis of consolidation
the consolidated financial statements comprise the separate financial statements of Chalice Gold mines
limited (“Company” or “Parent”) and its subsidiaries as at 30 June each year (the “Group”). interests in
associates are equity accounted and are not part of the consolidated Group.
subsidiaries are all those entities over which the Company has the power to govern the financial and
operating policies so as to obtain benefits from their activities. the existence and effect of potential
voting rights that are currently exercisable or convertible are considered when assessing whether a group
controls another entity.
the financial statements of the subsidiaries are prepared for the same reporting period as the parent
company, using consistent accounting policies.
in preparing the consolidated financial statements, all intercompany balances and transactions, income
and expenses and profit and losses resulting from intra-group transactions have been eliminated in full.
subsidiaries are fully consolidated from the date on which control is transferred to the Company and
cease to be consolidated from the date on which control is transferred out of the Group. Control exists
where the Company has the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities. the existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing when the Company controls another entity.
the acquisition of subsidiaries is accounted for using the acquisition method of accounting. the
acquisition method of accounting involves recognising at acquisition date, separately from goodwill,
the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquire.
the identifiable assets acquired and the liabilities assumed are measured at their acquisition date
fair values.
the difference between the above items and the fair value of consideration (including the fair value of
any pre-existing investment in the acquiree) is goodwill or a discount on acquisition.
42
Chalice Gold Annual Report 2010
A change in ownership interest of a subsidiary that does not result in a loss of control is accounted for as
an equity transaction.
(d) significant 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 amount of assets, 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 Group.
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 recoverability 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)
share-based payment transactions
the Group 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.
(e) Foreign currency translation
the functional currency of the parent company is Australian dollars, and the functional currency of
subsidiaries based in eritrea is United states dollars (Us$). the presentation currency of the Group is
Australian dollars.
transactions in foreign currencies are initially recorded in the functional currency by applying the
exchange rates ruling at the date of the transaction. monetary assets and liabilities denominated in
foreign currencies are retranslated at the rate of the exchange ruling at the balance sheet date.
All exchange differences in the consolidated financial report are taken to profit or loss. non-monetary
items that are measured in terms of historical cost in a foreign currency are translated at exchange rates
as at the date of the initial transaction.
As at the balance date the assets and liabilities of these subsidiaries are translated in the presentation
currency of Chalice Gold mines limited at the rate of exchange ruling at the balance sheet date and their
income statements are translated at the weighted average exchange rate of the year.
the exchange differences arising on the translation are taken directly to a separate component of
recognised foreign currency translation reserve in equity.
on disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that
particular foreign operation is recognised in profit or loss.
(f) segment reporting
the Group has applied AAsB 8 ‘operating segments’ from 1 July 2009. AAsB 8 requires a ‘management
approach’ under which segment information is presented on the same basis as that used for internal
reporting purposes.
operating segments are now reported in a manner consistent with the internal reporting provided to the
chief decision maker. the chief decision-maker has been identified as the Board of Chalice Gold mines
limited.
in August 2009, Chalice completed a merger by scheme of Arrangement with sub-sahara Resources nl,
69% owners of the Zara Project in eritrea, east Africa. Prior to this, the Group operated in one business
and geographical segment being the mining and exploration industry in Australia.
Chalice Gold Annual Report 2010
343
Upon completion of the merger, the Group has significantly reduced all Australian exploration activities and
focused its efforts on exploration in eritrea. therefore, the Group now operates in only one material business
and geographical segment being the mining and exploration industry in eritrea.
(g) revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group
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 statement of comprehensive income in
proportion to the stage of completion of the transaction at balance date. the stage of completion is
assessed by reference to surveys of work performed. no revenue is recognised if there are significant
uncertainties regarding recovery of the consideration due, the costs incurred or to be incurred
cannot be measured reliably.
(iii) Interest received
interest income is recognised in the statement of comprehensive income as it accrues, using the
effective interest method. the interest expense component of finance lease payments is recognised
in the statement of comprehensive income using the effective interest method.
(h) expenses
(i) Operating lease payments
Payments made under operating leases are recognised in the statement of comprehensive income
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) Depreciation
Depreciation is calculated 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 depreciation rates used
in the current and comparative periods are as follows:
• plant and equipment
• fixtures and fittings
7%–40%
11%–22%
• Motor Vehicles
18.75%–25%
the residual value, if not insignificant, is reassessed annually.
(j)
income tax
income tax in the statement of comprehensive income comprises current and deferred tax. income tax
is recognised in the statement of comprehensive income 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 reporting date, and any adjustment to tax payable in respect of previous years.
Deferred income tax is provided on all temporary differences at reporting date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting 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 reporting date.
44
Chalice Gold Annual Report 2010
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.
(k) 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
statement of financial position.
Cash flows are included in the statement of cash flows 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.
(l)
impairment
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired.
where an indicator of impairment exists, the Group 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 statement of comprehensive income 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 statement of comprehensive income.
Receivables with a short duration are not discounted.
(m) cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of six
months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s
cash management are included as a component of cash and cash equivalents for the purpose of the
statement of cash flows.
(n) trade and other receivables
trade and other receivables are stated at cost less impairment losses (see accounting policy (l)).
(o) 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 Group’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.
Chalice Gold Annual Report 2010
45
(p) 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.
(q) 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 Group 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 Group 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 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 reporting 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.
46
Chalice Gold Annual Report 2010
(r) exploration, evaluation, development and tenement acquisition costs
exploration, evaluation, development and tenement acquisition costs in relation to separate areas of
interest for which rights of tenure are current, are capitalised in the period in which they are incurred and
are carried at cost less accumulated impairment losses. the cost of acquisition of an area of interest and
exploration expenditure relating to that area of interest is carried forward as an asset in the statement of
financial position so long as the following conditions are satisfied:
1)
2)
the rights to tenure of the area of interest are current; and
at least one of the following conditions is also met:
(i)
(ii)
the exploration and evaluation expenditures are expected to be recouped through successful
development and exploitation of the area of interest, or alternatively, by its sale; or
exploration and evaluation activities in the area of interest have not at the reporting date
reached a stage which permits a reasonable assessment of the existence or otherwise of
economically recoverable reserves, and active and significant operations in, or in relation to,
the area of interest are continuing.
exploration and evaluation expenditure is assessed for impairment when facts and circumstances suggest
that their carrying amount exceeds their recoverable amount and where this is the case an impairment
loss is recognised. should a project or an area of interest be abandoned, the expenditure will be written
off in the period in which the decision is made. where a decision is made to proceed with development,
accumulated expenditure will be amortised over the life of the reserves associated with the area of
interest once mining operations have commenced.
(s) trade and other payables
trade and other payables are stated at cost.
(t) 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.
Gains and losses are recognised in profit and loss when the liabilities are derecognised.
(u) 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.
(v) provisions and employee benefits
A provision is recognised when the Group 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.
employee benefits
(i) Wages, salaries, and annual leave
liabilities for employee benefits for wages, salaries, annual leave and sick leave represent
present obligations resulting from employees’ services provided to reporting date, calculated at
undiscounted amounts based on remuneration wage and salary rates that the Group expects to
pay as at reporting date including related on-costs, such as, workers’ compensation insurance and
payroll tax.
Chalice Gold Annual Report 2010
347
(ii) Long service leave and other long term employee benefits
the Group’s net obligation in respect of long-term employee benefits other than defined benefit
plans is the amount of future benefit that employees have earned in return for their service in the
current and prior periods plus related on-costs. this benefit is discounted to determine its present
value, and the fair value of any related assets is deducted. the discount rate is the yield at the
reporting date on government bonds that have maturity dates approximating the terms of the
Group’s obligations. the calculation is performed using the projected unit cost method.
(iii) Superannuation
obligations for contributions to defined contribution pension plans are recognised as an expense in
the statement of comprehensive income as incurred.
(iv) Share-based payment transactions
the Group 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 reporting date. no adjustment is made for
the likelihood of market performance conditions being met as the effect of these conditions is
included in the determination of fair value at grant date.
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.
(w) share capital
(i) Ordinary share capital
ordinary shares and partly paid shares are classified as equity.
(ii) Transaction costs
transaction costs of an equity transaction are accounted for as a deduction from equity, net of any
related income tax benefit.
48
Chalice Gold Annual Report 2010
(x) investments in associates
the Group’s investment in associates is accounted for using the equity method of accounting in the
consolidated financial statements and at cost in the parent. the associates are entities over which the
Group has significant influence and that are neither subsidiaries nor joint ventures.
the Group generally deems they have significant influence if they have over 20% of the voting rights.
Under the equity method, investments in associates are carried in the consolidated statement of financial
position at cost plus post acquisition changes in the Group’s share of net assets of the associates. Goodwill
relating to an associate is included in the carrying amount of the investment and is not amortised.
After application of the equity method, the Group determines whether it is necessary to recognise any
impairment loss with respect to the Group’s net investment in associates. Goodwill included in the
carrying amount of the investment in the associate is not tested separately; rather the entire carrying
amount of the investment is tested for impairment as a single asset. if an impairment is recognised, the
amount is not allocated to the goodwill of the associate.
the Group’s share of its associates’ post acquisition profits or losses is recognised in the statement of
comprehensive income, and its share of post-acquisition movements are adjusted against the carrying
amount of the investment. Dividends receivable from the associates are recognised in the parent entity’s
statement of comprehensive income as a component of other income.
when the Group’s share of losses in an associate equals or exceeds its interest in the associate, including
any unsecured long term receivables and loans, the Group does not recognise further losses unless it has
incurred obligations or made payments on behalf of the associate.
Chalice Gold Annual Report 2010
49
2. seGment RePoRtinG
the Group has identified its operating segments based on internal reports that are reviewed and used by
the Board of Directors in assessing performance and in determining the allocation of resources.
the operating segments are identified by management based on the allocation of costs; whether they
are corporate related costs or exploration costs. Results of both segments are reported to the Board of
Directors on at least a monthly basis. exploration expenditure is reflected as a segment as exploration
expenditure occurs in one geographical area – eritrea.
year ended 30 June 2010
Other income
total segment revenue
exploration
and
evaluation
$
corporate
$
unallocated
$
125,000
125,000
533,509
533,509
segment net operating loss after tax
(1,221,189)
(4,354,689)
segment net operating loss after tax includes:
Interest revenue
Depreciation
Share of loss of associate
-
(174,117)
-
Impairment of exploration and evaluation expenditure
(1,172,071)
347,770
(90,676)
(1,508)
-
Other non-cash expenses
-
(894,160)
total
$
658,509
658,509
(5,575,878)
347,770
(264,793)
(1,508)
(1,172,071)
(894,160)
-
-
-
-
-
-
-
-
segment assets
Investment in associates
Capital expenditure
Other assets
27,913,362
1,629,066
7,688,905
37,231,333
27,056,158
684,934
-
-
-
684,934
27,056,158
857,204
944,132
7,688,905
9,490,241
segment liabilities
(2,169,248)
(514,374)
cashflow information
Net cash flow from operating activities
-
(2,628,533)
Net cash flow from investing activities
(17,576,198)
(1,190,909)
-
-
-
(2,683,622)
2,628,533
(18,767,107)
Net cash flow from financing activities
(50,000)
19,581,274
19,531,274
50
Chalice Gold Annual Report 2010
year ended 30 June 2009
exploration
and
evaluation
$
corporate
$
unallocated
$
total
$
Profit on sale of exploration and evaluation assets
674,486
Other income
total segment revenue
-
674,486
-
892,799
892,799
Segment net operating profit/(loss) after tax
544,624
(1,109,160)
segment net operating profit/(loss)
after tax includes:
Interest revenue
Depreciation
-
8,395
Impairment of exploration and evaluation expenditure
129,862
545,099
63,148
-
Other non-cash expenses
-
35,922
-
-
-
-
-
-
-
-
674,486
892,799
1,567,285
(564,536)
545,099
71,543
129,862
35,922
segment assets
Capital expenditure
Other assets
segment liabilities
Cashflow information
1,980,423
539,745
9,623,637
12,143,805
1,950,775
-
-
1,950,775
29,648
539,745
9,623,637
10,193,030
63,550
156,675
Net cash flow from operating activities
-
(577,053)
Net cash flow from investing activities
(71,970)
299,894
Net cash flow from financing activities
-
-
-
-
-
-
220,225
(577,053)
227,924
-
Chalice Gold Annual Report 2010
351
3. RevenUe AnD eXPenses
(a)
Net gain/(loss) on sale of exploration and evaluation assets
Net gain/(loss) on sale of exploration and evaluation assets
(b)
other income
Corporate and administration service fees
Profit on sale of shares
Net finance income
Other Income
(c)
corporate administrative expenses
Depreciation and amortisation
Insurance
Legal fees
Travel
Office costs
Regulatory and compliance
Personnel expenses (note 3(d))
Other
(d)
personnel expenses
Wages and salaries
Directors’ fees
Other associated personnel expenses
Contributions to defined contribution plans
(Decrease)/increase in liability for annual leave
(Decrease)/increase in liability for long service leave
Equity-settled share- based payment transactions
consolidated
2010
$
2009
$
(146,677)
(146,677)
674,486
674,486
181,323
279,234
4,416
347,770
125,000
56,003
545,099
-
658,509
880,336
264,793
59,173
193,864
292,789
413,668
507,270
2,094,734
420,708
71,543
26,846
80,706
25,094
242,707
117,908
745,200
164,521
4,246,999
1,474,525
877,932
41,833
175,226
109,341
2,877
4,093
490,086
45,948
35,211
132,665
(5,818)
-
883,432
47,108
2,094,734
745,200
52
Chalice Gold Annual Report 2010
4. AUDitoRs’ RemUneRAtion
Audit services
HLB Mann Judd:
Audit and review of financial reports
5. 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 Statement of comprehensive income
consolidated
2010
$
31,215
31,215
2009
$
24,370
24,370
consolidated
2010
$
2009
$
(512,395)
(64,548)
(62,726)
580,121
-
57,381
7,167
-
Numerical reconciliation of income tax expense to prima facie tax payable
Profit/(Loss) from continuing operations before income tax expense
(5,575,925)
(564,536)
Tax at the Australian corporate rate of 30%
(1,672,777)
(169,361)
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
Unrecognised deferred tax assets
1,029,931
(161,206)
62,726
(741,326)
741,326
-
30,619
(35,133)
57,381
(116,494)
116,494
-
Deferred tax assets have not been recognised in respect of the following items:
Deductible temporary differences
Tax losses
69,477
4,334,504
60,338
1,221,699
The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets
have not been recognised in respect of these items because it is not probable that future taxable profit will be available
against which the Group can utilise the benefits thereof.
unrecognised deferred tax liabilities
Deferred tax liabilities have not been recognised in respect of the following items:
Taxable temporary differences
69,477
60,338
Deferred tax liabilities have not been recongised in respect of these taxable temporary differences as the entity is able
to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
Chalice Gold Annual Report 2010
53
6. eARninGs PeR sHARe
basic and diluted earnings per share
the calculation of basic earnings per share for the year ended 30 June 2010 was based on the loss attributable
to ordinary shareholders of $5,575,878 [2009: loss of $564,536] and a weighted average number of ordinary
shares outstanding during the year ended 30 June 2010 of 133,806,990 [2009: 72,800,000].
loss attributable to ordinary shareholders
Loss attributable to ordinary shareholders
Loss attributable to ordinary shareholders (diluted)
Weighted average number of ordinary shares
Weighted average number of ordinary shares at 30 June
Effect of share options on issue
consolidated
2010
$
(5,575,878)
(5,575,878)
2009
$
(564,536)
(564,536)
No.
No.
133,806,990
72,800,000
3,534,181
-
Weighted average number of ordinary shares (diluted) at 30 June
137,341,171
72,800,000
7. CAsH AnD CAsH eQUivAlents
Bank balances
Term deposits
Petty cash
consolidated
2010
$
2,619,390
5,060,542
8,973
2009
$
1,543,318
8,079,930
389
Cash and cash equivalents in the statement of cash flows
7,688,905
9,623,637
8. tRADe AnD otHeR ReCeivABles
Other trade receivables
Prepayments
9. finAnCiAl Assets
Non-current
Available for sale investments
Bond in relation to office premises
Bank guarantee and security deposits
54
Chalice Gold Annual Report 2010
consolidated
2010
$
239,844
89,743
329,587
2009
$
101,763
60,237
162,000
consolidated
2010
$
48,977
84,325
80,953
214,255
2009
$
94,709
51,624
28,494
174,827
10. eXPloRAtion AnD evAlUAtion eXPenDitURe
Costs carried forward in respect of:
Exploration and evaluation phase – at cost
Balance at beginning of year
Expenditure incurred
Acquisitions through business combinations
Acquisition of exploration and evaluation assets from Dragon Mining Limited
Reimbursement of exploration costs on merger
Sale of tenements
Refund of tenement costs
Impairment of exploration and evaluation assets
Effects of movements in exchange rate
total exploration expenditure
consolidated
2010
$
2009
$
1,950,775
9,461,445
7,790,911
8,900,000
455,304
(166,021)
(286,651)
(1,172,071)
122,466
27,056,158
2,033,937
342,946
-
-
-
(296,246)
-
(129,862)
-
1,950,775
the recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases
is dependent on the successful development and commercial exploitation or sale of the respective areas.
11. investments in AssoCiAtes
During the financial year, the Group acquired a 20% interest in unlisted United Kingdom based london Africa
limited (“london Africa”). london Africa is registered in england and wales and the principle activity of the
company is exploring and developing precious and base metal deposits in eritrea. the initial interest acquired
by the Group was 11.8% which was increased to a 20% interest on 21 may 2010.
consolidated
Reconciliation of movements in investments in associate:
balance at 1 July
Payments made to acquire interest
Share of loss for the year
Balance at 30 June
Summary of financial information of associate:
Financial position
Total Assets
Total Liabilities
Net Assets
Share of associate’s net assets
Financial performance
Total revenue
Total loss for the year
Share of associate’s loss
2010
$
-
686,442
(1,508)
684,934
705,428
(93,507)
611,921
122,384
10
(7,541)
(1,508)
2009
$
-
-
-
-
-
-
-
-
-
-
-
Chalice Gold Annual Report 2010
355
12. PRoPeRty, PlAnt AnD eQUiPment
consolidated
office
Furniture
and
equipment
computer
equipment
and
software
plant and
equipment
Motor
vehicles
total
29,648
121,686
81,232
-
232,566
215,983
211,905
(9,433)
40,940
95,412
(1,784)
176,244
-
(92)
445,720
118,844
(4,018)
(48,212)
878,887
426,161
(15,327)
(264,793)
344,876
206,993
193,291
512,334
1,257,494
Depreciation charge for the year
(103,227)
(49,261)
(64,093)
year ended 30 June 2010
At 1 July 2009 net of accumulated
depreciation and impairment
Additions
Acquired through business combinations
Exchange differences
At 30 June 2010 net of accumulated
depreciation and impairment
at 1 July 2009
Cost at fair value
Accumulated depreciation and
impairment
Net carrying amount
29,648
121,686
81,232
46,243
174,930
207,436
(16,595)
(53,244)
(126,204)
-
-
-
428,609
(196,043)
232,566
at 30 June 2010
Cost at fair value
Accumulated depreciation and
impairment
717,874
486,164
383,680
677,006
2,264,724
(372,998)
(279,171)
(190,389)
(164,672)
(1,007,230)
Net carrying amount
344,876
206,993
193,291
512,334
1,257,494
year ended 30 June 2009
At 1 July 2008 net of accumulated
depreciation and impairment
Additions
Depreciation charge for the year
At 30 June 2009 net of accumulated
depreciation and impairment
at 1 Jul 2008
Cost at fair value
Accumulated depreciation and
impairment
20,083
15,323
(5,758)
79,225
108,473
61,003
(18,542)
20,002
(47,243)
29,648
121,686
81,232
30,920
113,927
187,434
(10,837)
(34,702)
(78,961)
Net carrying amount
20,083
79,225
(108,473)
at 30 June 2009
Cost at fair value
Accumulated depreciation and
impairment
46,243
174,930
207,436
(16,595)
(53,244)
(126,204)
Net carrying amount
29,648
121,686
81,232
-
-
-
-
-
-
-
-
-
-
207,781
96,328
(71,543)
232,566
332,281
(124,500)
207,781
428,609
(196,043)
232,566
56
Chalice Gold Annual Report 2010
13. tRADe AnD otHeR PAyABles
Trade payables
Eritrean services tax payable
Accrued expenses
14. emPloyee Benefits
Annual leave accrued
Provision for long service leave
share based payments
(a) employee share option plan
consolidated
2010
$
821,110
877,185
835,977
2,534,272
2009
$
129,534
-
22,106
151,640
consolidated
2010
$
59,887
50,151
110,038
2009
$
18,196
-
18,196
the Group has an employee share option Plan (‘esoP’) in place. Under the terms of the esoP, the Board
may offer options for no consideration to full-time or part-time employees (including persons engaged
under a consultancy agreement), executive and non-executive Directors. in the case of the Directors, the
issue of options under the esoP requires shareholder approval.
each option entitles the holder, on exercise, to one ordinary fully paid share in the Group. 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.
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
Weighted
average
exercise price
2010
$
0.25
-
-
0.42
0.30
0.26
Number of
options
2010
6,825,000
-
-
3,250,000
10,075,000
8,450,000
Chalice Gold Annual Report 2010
57
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
Weighted
average
exercise price
2009
$
0.25
0.23
-
0.20
0.25
0.25
Number of
options
2009
6,725,000
400,000
-
500,000
6,825,000
6,325,000
the options outstanding at 30 June 2010 have an exercise price of $0.30 [2009: $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 2010.
Fair value of share options and assumptions
Share price at grant date
Exercise price
Expected volatility (expressed as weighted average volatility used in the
modelling under binominal option-pricing model)
Option life (expressed as weighted average life used in the modelling under
binomial option-pricing model)
Expected dividends
Risk-free interest rate
2010
$0.55
$0.42
89%
2009
$0.12
$0.20
85%
5 years
5 years
-
4.74%
-
7.5%
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 2009 - equity settled
share options granted in 2010 – equity settled
total expense recognised as personnel expenses
2010
$
4,244
879,188
883,432
2009
$
47,108
-
47,108
58
Chalice Gold Annual Report 2010
15. otHeR liABilities
current
Lease incentive
Non-current
Make good provision
consolidated
2010
$
-
-
39,312
39,312
2009
$
3,182
3,182
47,207
47,207
16. issUeD CAPitAl
there were 181,033,617 (2009: 72,800,000) shares on issue at 30 June 2010.
(a) Movements in ordinary shares on issue
2010
2009
No.
$
No.
$
Balance at beginning of financial year
72,800,000
13,974,454
72,800,000
13,974,454
Shares issued on completion of merger
Share placement
Issued as consideration for acquisition of
controlled entity
Share placement costs
Balance at end of financial year
48,320,537
6,802,388
57,913,080
20,678,494
2,000,000
900,000
-
(1,100,389)
-
-
-
-
-
-
-
-
181,033,617
41,254,947
72,800,000
13,974,454
issuance of ordinary shares
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled
to one vote per share at shareholders’ meetings. in the event of winding up of the Company, the ordinary
shareholders rank after all other shareholders and creditors and are fully entitled to any proceeds on
liquidation.
(b)
share options
On issue at 1 July
Options forfeited
Options issued during the year
On issue at 30 June
2010
No.
6,825,000
-
6,250,000
13,075,000
2009
No.
6,725,000
(400,000)
500,000
6,825,000
Chalice Gold Annual Report 2010
359
At 30 June 2010 the Company had 13,075,000 unlisted options on issue under the following terms
and conditions:
Number
5,575,000
500,000
250,000
500,000
1,250,000
1,250,000
750,000
1,000,000
2,000,000
expiry Date
21 March 2011
1 December 2012
11 December 2012
31 July 2013
31 March 2014
31 March 2014
1 September 2012
31 March 2012
16 November 2011
exercise price
$
0.25
0.25
0.20
0.20
0.35
0.45
0.50
0.36
0.35
17. ACCUmUlAteD losses AnD ReseRves
(a) Movements in accumulated losses were as follows:
Balance at beginning of financial year
Net loss for the year
Balance at end of financial year
2010
$
2009
$
(2,704,892)
(2,140,356)
(5,575,878)
(564,536)
(8,280,770)
(2,704,892)
(b)
reserves
consolidated
At 1 July 2009
Currency translation differences
Share-based payments
Revaluation movements
At 30 June 2010
At 1 July 2008
Currency translation differences
Share-based payments
Revaluation movements
At 30 June 2009
investment
revaluation
reserve
$
share based
payments
reserve
$
Foreign
currency
translation
reserve
$
36,000
618,018
-
-
-
(34,000)
-
70,084
883,432
-
-
-
total
$
654,018
70,084
883,432
(34,000)
2,000
1,501,450
70,084
1,573,534
-
-
-
36,000
36,000
570,910
-
47,108
-
618,018
-
-
-
-
-
570,910
-
47,108
36,000
654,018
60
Chalice Gold Annual Report 2010
18. finAnCiAl instRUments
(a) capital risk management
the Group manages its capital to ensure that it will be able to continue as a going concern while
maximising the return to shareholders.
the capital structure of the Group consists of equity attributable to equity holders, comprising issued
capital, reserves and accumulated losses as disclosed in notes 16 and 17.
the Board reviews the capital structure on a regular basis and considers the cost of capital and the risks
associated with each class of capital. the Group will balance its overall capital structure through new
share issues as well as the issue of debt, if the need arises.
(b) Market risk exposures
market risk is the risk that changes in market prices such as foreign exchange rates, equity prices and
interest rates will affect the Group’s income or value of its holdings of financial instruments.
(i) Foreign exchange rate risk
the Group undertakes certain transactions denominated in foreign currencies, hence exposes to
exchange rate fluctuations arise. the Group does not hedge this exposure.
the Group manages its foreign exchange risk by constantly reviewing its exposure and ensuring that
there are appropriate cash balances in order to meet its commitments.
At 30 June 2010, Chalice had the following exposures to UsD foreign currency:
Financial assets
Cash and cash equivalents
Financial liabilities
Trade and other payables
usD impact
consolidated
the parent
2010
$
2009
$
371,278
760,347
-
-
2010
$
76,016
-
2009
$
-
-
the following tables summarises the impact of increases/decreases in the relevant foreign exchange rates
on the Group’s post-tax result for the year and on the components of equity. the sensitivity analysis uses a
variance of 10% movement in the UsD against AUD.
Impact on Loss
Impact on Equity
AUD/USD +10%
AUD/USD -10%
AUD/USD +10%
AUD/USD -10%
consolidated
the parent
2010
$
35,372
(38,909)
35,372
(38,909)
2009
$
2010
$
-
-
-
-
-
-
-
-
2009
$
(6,910)
7,602
(6,910)
7,602
equity prices
the Group currently has no significant exposure to equity price risk.
interest rate risk
At reporting date the Group’s exposure to market risk for changes in interest rate relates primarily to the
Group’s short term cash deposits. the Group is not exposed to cash flow volatility from interest rate changes
on borrowings, as it does not have any short or long term borrowings.
Chalice Gold Annual Report 2010
61
Chalice constantly analyses its exposure to interest rates, with consideration given to potential renewal of
existing positions and the period to which deposits may be fixed.
At reporting date the following financial assets were exposed to fluctuations in interest rates:
consolidated
the parent
2010
$
2009
$
2010
$
2009
$
Cash and cash equivalents
7,688,904
9,623,637
7,386,176
9,623,637
the following sensitivity analysis is based on the interest rate risk exposures in existence at reporting date. the
sensitivity is based on a change of 100 basis points in interest rates at reporting date.
in the year ended 30 June 2010, if interest rates had moved by 100 basis points, with all other variables held
constant, the post tax result to financial assets of the Group would have been affected as follows:
impact on profit
consolidated
the parent
2010
$
29,366
(26,656)
29,366
(26,656)
2009
$
26,320
(23,928)
26,320
(23,928)
2010
$
29,366
(26,656)
29,366
(26,656)
2009
$
26,320
(23,928)
26,320
(23,928)
Impact on Loss
Impact on Equity
100 bp increase
100 bp decrease
100 bp increase
100 bp decrease
(c) credit risk exposure
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations. the Group’s exposure to credit risk is not significant and currently
arises principally from sundry receivables (see note 8) which represent an insignificant proportion of the
Group’s activities.
the maximum exposure to credit risk, excluding the value of any collateral or other security, at balance
sheet date to recognised financial assets is the carrying amount, net of any allowance for doubtful debts,
as disclosed in the notes to the financial statements.
(d) liquidity risk exposure
liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
the Board of Directors actively monitors the Group’s ability to pay its debts as and when they fall due by
regularly reviewing the current and forecast cash position based on the expected future activities.
the Group has non-derivative financial liabilities which include trade and other payables of $2,534,272
(2009: $151,640) all of which are due within 60 days.
(e) Net fair values of financial assets and liabilities
the carrying amounts of all financial assets and liabilities approximate the net fair values.
19. ACQUisition of sUBsiDiARies
(a) acquisition of sub-sahara resources Nl
on 14 August 2009, the Company acquired all the shares in sub-sahara Resources nl (now named
Chalice operations Pty ltd), owner of 68.88% of the Zara Project in eritrea, following completion of a
merger between the two companies by scheme of Arrangement. the acquisition was satisfied by the
issue of 48,327,537 ordinary shares as consideration for all the fully paid ordinary shares and partly paid
shares of sub-sahara Resources nl.
62
Chalice Gold Annual Report 2010
the net assets acquired in the business combination at the date of acquisition are as follows:
acquiree’s
carrying amount
before business
combination
$
Fair value
adjustments
$
Fair value
$
252,054
463,165
57,810
426,162
7,396,018
(673,470)
(304,243)
7,617,496
(815,109)
Net assets acquired:
Cash and cash equivalents
Trade and other receivables
Financial assets
Property, plant and equipment
Exploration and evaluation expenditure
Trade and other payables
Other liabilities
Net assets
Goodwill on consolidation
Total consideration satisfied by the issue of 48,320,537
ordinary shares
the cash inflow on acquisition is as follows:
Net cash acquired on acquisition of Sub Sahara Resources
NL Group
Cash paid
Net cash inflow
252,054
463,165
57,810
426,162
6,580,909
(673,470)
(304,243)
6,802,387
-
6,802,387
252,054
-
252,054
(b) acquisition of yolanda international limited
on 26 August 2009, the Company acquired all the shares in yolanda international limited, owner of
11.12% of the Zara Project in eritrea, from Africa wide Resources limited. the acquisition was satisfied by
payment of $1,210,000 for all the fully paid ordinary shares in yolanda international limited.
the net assets acquired in the business combination at the date of acquisition are as follows:
acquiree’s
carrying amount
before business
combination
$
Fair value
adjustments
$
Fair value
$
1,210,000
1,210,000
-
Net assets acquired:
Exploration and evaluation expenditure
Net assets
Goodwill on consolidation
total consideration
the net cash outflow on acquisition is as follows:
Net cash acquired on acquisition of Yolanda International
Limited
Cash paid
Net cash outflow
1,210,000
1,210,000
-
1,210,000
-
(1,210,000)
(1,210,000)
Chalice Gold Annual Report 2010
363
(c) acquisition of Dragon Mining (eritrea) limited
on 22 June 2010, the Group acquired Dragon mining (eritrea) limited, registered holder of the Zara
Project exploration licence in eritrea, from Dragon mining limited and also Dragon mining limited’s
interest in the Zara project. the acquisition of Dragon mining (eritrea), as opposed to the interest in the
Zara project, was for nil consideration.
20. PARent entity
Financial position
assets
Current assets
Non-current assets
total assets
liabilities
Current liabilities
Non-current liabilities
total liabilities
equity
Issued capital
Retained profits
Investment revaluation
Share-based payments
total equity
Financial performance
Loss for the year
Total comprehensive income
commitments and contingencies
(i) contingencies
The parent entity has no contingent assets or liabilities.
(ii) operating lease commitments
Within 1 year
Within 2-5 years
Later than 5 years
2010
$
2009
$
16,447,615
18,686,641
9,785,637
2,358,168
35,134,256
12,143,805
998,972
39,312
1,038,284
173,018
47,207
220,225
41,254,947
13,974,454
(8,662,425)
(2,704,892)
2,000
1,501,450
36,000
618,018
34,095,972
11,923,580
(5,957,533)
(5,991,533)
(564,536)
(528,536)
232,234
178,964
-
148,346
560,353
-
411,198
708,699
64
Chalice Gold Annual Report 2010
21. Commitments AnD ContinGenCies
exploration expenditure commitments
in order to maintain current rights of tenure to exploration tenements, the Group is required to perform
minimum exploration work to meet the minimum expenditure requirements specified by various 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 Group may in certain situations apply for
exemptions under relevant mining legislation or enter into joint venture arrangements which significantly reduce
working capital commitments. these obligations are not provided for in the financial report and are payable:
Within 1 year
Within 2-5 years
Later than 5 years
operating lease commitments
Within 1 year
Within 2-5 years
Later than 5 years
consolidated
2010
$
713,287
-
-
2009
$
596,060
82,500
-
713,287
678,560
268,015
205,799
-
148,346
560,353
-
473,814
708,699
contingent liabilities
(a) acquisition of Dragon Mining (eritrea) limited
As part of the acquisition of all shares in Dragon mining (eritrea) limited (Dme) and Dragon mining
limited’s 20% interest in the Zara Project there is a requirement that a further payment of A$4 million is
to be paid to Dragon mining upon delineation of a 1 million ounce gold mineral reserve within specific
tenements in the Zara Project.
(b) potential tax liability
in late July 2010, it became apparent from discussions with the eritrean Government that the Government
may seek to impose a profits tax liability arising on the acquisition by the Group of Dme and of Dme’s
parent’s interest in the Zara Project. Dme was holding the licences for the Zara Project upon trust for the
joint venture partners. it still remains as licensee.
Advice received by the Group prior to this transaction taking place was that this was not a taxable event
as it did not result in a transfer of the license for the Project and further that the transaction was between
Australian registered entities.
As part of the transaction with Dme, the Group provided an indemnity to the Dragon Group against any
tax that may arise.
Discussions are ongoing with the eritrean Government however at the date of this report the timing or
conclusions on these discussions are uncertain.
if a tax liability does exist, the relevant eritrean legislation allows unrecovered expenditure to be offset
against the assessable amount. At this stage the quantum of unrecovered expenditure that could be
offset is unknown.
the Group is assessing the possible financial impact and has estimated that if there is a liability it would
range between nil and a maximum amount of $3.4m depending upon allowable offsetting expenditure.
no provision for any liability has been recognised in the financial statements at balance date.
Chalice Gold Annual Report 2010
65
22. ReConCiliAtion of CAsH flows fRom oPeRAtinG ACtivities
Net loss for the period
Adjustments for:
Depreciation and amortisation
Loss on sale of exploration and evaluation assets
Contract termination fee
Foreign exchange losses
Share of associate’s loss
Net gain on sale of securities
Changes in fair value of available-for-sale investments
Costs of business combinations
Impairment of exploration and evaluation assets
Equity-settled share-based payment expenses
consolidated
2010
$
2009
$
(5,575,878)
(564,536)
264,793
(146,677)
(125,000)
70,366
1,508
(4,416)
11,732
655,400
1,172,071
883,432
71,543
(674,486)
-
-
-
(56,003)
(12,463)
527,434
129,862
47,108
operating loss before changes in working capital and provisions
(2,792,669)
(531,541)
(Increase) in trade and other receivables
Decrease in financial assets
Increase in trade creditors and other liabilities
(Decrease) in provisions
(Decrease) in non-current financial assets
Net cash used in operating activities
(65,999)
1,750
245,745
(13,260)
(4,100)
(61,311)
-
25,200
(6,050)
(3,351)
(2,628,533)
(577,053)
23. Key mAnAGement PeRsonnel
the following were key management personnel of the Group at any time during the reporting period and
unless otherwise indicated were key management personnel for the entire period:
executive Directors
t R B Goyder (executive Chairman)
D A Jones (managing Director)
m R Griffiths (executive Director)
Non-executive Directors
A w Kiernan
s Quin
executive
R K Hacker (Chief financial officer)
(appointed 26 August 2010)
(appointed 3 may 2010)
66
Chalice Gold Annual Report 2010
the key management personnel compensation included in ‘personnel expenses’ (see note 3) are as follows:
Short-term employee benefits
Post-employment benefits
Equity settled transactions
consolidated
2010
$
799,785
70,061
881,744
1,751,590
2009
$
473,023
28,975
36,275
538,273
individual director’s and executive’s compensation disclosures
the Group 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 Group
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 Group 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.
the aggregate expense/(income) recognised during the year relating to key management personnel and their
related parties were as follows:
Key management persons
transaction
A W Kiernan
Legal and consulting services
other related parties
Liontown Resources Limited
Corporate services
Uranium Equities Limited
Corporate services
Plato Prospecting Pty Ltd
Property, plant & equipment
Liontown Resources Limited
Corporate services
Note
(i)
(ii)
(iii)
(iv)
2010
$
81,000
(144,000)
(8,750)
-
49,078
2009
$
79,204
(217,725)
(49,369)
29,145
74,405
(i)
(ii)
the Group used the consulting and legal services of mr Kiernan 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.
the Group supplies corporate services including accounting and company secretarial services under
a Corporate services Agreement to liontown Resources limited. messrs Goyder and Kiernan were all
Directors of liontown Resources limited during the year and mr Hacker was the Company secretary.
Amounts were billed on a proportionate share of the cost to the Group of providing the services and are
due and payable under normal payment terms.
(iii) the Group supplied company secretarial services during the year to Uranium equities limited. messrs
Goyder and Kiernan were all Directors of Uranium equities limited. Amounts were billed at cost to the
Group and are due and payable under normal payment terms.
Chalice Gold Annual Report 2010
367
(iv) During the year, the Group utilised the services of Dr Jones in the role of managing Director. Dr Jones
was the managing Director of liontown Resources limited. Amounts were billed by liontown Resources
limited based on a proportionate share of its cost of employing Dr Jones 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
consolidated
2010
$
(6,000)
13,200
7,200
2009
$
(26,333)
14,917
(11,416)
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 Group
held, directly, indirectly or beneficially, by each key management person, including their related parties, is as
follows:
2010
Held at
1 July 2009
Granted as
compensation
exercised/
Forfeited
Held at
30 June 2010
vested during
the year
vested and
exercisable at
30 June 2010
T R B Goyder
2,000,000
A W Kiernan
D A Jones
M R Griffiths
executive
R K Hacker
500,000
-
-
-
-
2,500,00
750,000
500,000
-
-
-
-
-
-
2,000,000
500,000
2,500,000
750,000
-
2,000,000
-
1,250,000
-
500,000
1,250,000
-
500,000
375,000
500,000
Movements in ordinary shares
the movement during the reporting period in the number of ordinary shares in the Group held, directly,
indirectly or beneficially, by each key management person, including their related parties, is as follows:
2010
Held at
1 July 2009
additions
T R B Goyder
17,240,458
2,710,748
A W Kiernan
D A Jones
M R Griffiths
Executive
R K Hacker
820,074
35,000
-
-
200,000
600,960
51,982
40,000
received on
exercise of
options
-
-
-
-
-
Held at
30 June 2010
19,951,206
820,074
235,000
600,960
sales
Held at
30 June 2010
19,951,206
820,074
235,000
600,960
-
-
-
-
40,000
(51,982)
40,000
no shares were granted to key management personnel during the reporting period as compensation.
68
Chalice Gold Annual Report 2010
24. RelAteD PARty DisClosURe
the consolidated financial statements include the financial statements of Chalice Gold mines limited and its
subsidiaries listed in the following table:
Name
parent entity
country of
incorporation
%
equity interest
investment
$
2010
2009
2010
2009
Chalice Gold Mines Limited
Australia
subsidiaries
Chalice Operations Pty Ltd (i)
Australia
Yolanda International Limited
British Virgin
Islands
Dragon Mining (Eritrea) Limited
Australia
(i) subsidiaries of chalice operations
pty ltd
Western Rift Pty Ltd
Keren Mining Pty Ltd
Universal Gold Pty Ltd
Australia
Australia
Australia
Sub-Sahara Resources (Eritrea) Pty Ltd
Australia
100
100
100
100
100
100
100
-
-
-
-
-
-
-
6,802,388
1,210,000
-
-
-
1,358,223
-
-
-
-
-
-
-
-
25. sUBseQUent events
on 9 August 2010 Chalice announced to AsX that it intends to undertake a fully underwritten non-renounceable
rights issue on the basis of one share for every six shares held at an issue price of 42 cents per share to raise
approximately $12.6 million before issue costs.
Chalice Gold Annual Report 2010
69
DiReCtoRs’ DeClARAtion
1.
in the opinion of the directors of Chalice Gold mines limited (the ‘Company’):
a.
the financial statements, notes and the additional disclosures in the directors’ report designated as
audited, of the Group are in accordance with the Corporations Act 2001 including:
i.
ii.
giving a true and fair view of the Group’s financial position as at 30 June 2010 and of its
performance for the year ended on that date; and
complying with Australian Accounting standards (including the Australian Accounting
interpretations) and the Corporations Regulations 2001;
b.
c.
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
the financial statements and notes thereto are in accordance with international financial Reporting
standards issued by the international Accounting standards Board.
2.
this declaration has been made after receiving the declarations required to be made to the directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2010.
this declaration is signed in accordance with a resolution of the Board of Directors.
Dated at Perth the 16th day of August 2010
signed in accordance with a resolution of the Directors:
tim R B GoyDeR
executive Chairman
70
Chalice Gold Annual Report 2010
inDePenDent AUDitoR’s RePoRt
INDEPENDENT AUDITOR’S REPORT
To the members of
INDEPENDENT AUDITOR’S REPORT
CHALICE GOLD MINES LIMITED:
To the members of
Report on the Financial Report
CHALICE GOLD MINES LIMITED:
We have audited the accompanying financial report of Chalice Gold Mines Limited (“the company”),
which comprises the statement of financial position as at 30 June 2010, and the statement of
Report on the Financial Report
comprehensive income, statement of changes in equity and statement of cash flows for the year ended
We have audited the accompanying financial report of Chalice Gold Mines Limited (“the company”),
on that date, a summary of significant accounting policies, other explanatory notes and the directors’
which comprises the statement of financial position as at 30 June 2010, and the statement of
declaration of the consolidated entity comprising the company and the entities it controlled at the year’s
comprehensive income, statement of changes in equity and statement of cash flows for the year ended
end or from time to time during the financial year.
on that date, a summary of significant accounting policies, other explanatory notes and the directors’
declaration of the consolidated entity comprising the company and the entities it controlled at the year’s
Directors’ Responsibility for the Financial Report
end or from time to time during the financial year.
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
Directors’ Responsibility for the Financial Report
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining
The directors of the company are responsible for the preparation and fair presentation of the financial
internal controls relevant to the preparation and fair presentation of the financial report that is free from
report in accordance with Australian Accounting Standards (including the Australian Accounting
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining
policies; and making accounting estimates that are reasonable in the circumstances.
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
In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101: Presentation of
policies; and making accounting estimates that are reasonable in the circumstances.
Financial Statements, that the consolidated financial statements comply with International Financial
Reporting Standards.
In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101: Presentation of
Financial Statements, that the consolidated financial statements comply with International Financial
Auditor’s Responsibility
Reporting Standards.
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
Auditor’s Responsibility
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
obtain reasonable assurance whether the financial report is free from material misstatement.
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
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
obtain reasonable assurance whether the financial report is free from material misstatement.
the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
making those risk assessments, the auditor considers internal control relevant to the company’s
the financial report. The procedures selected depend on the auditor’s judgement, including the
preparation and fair presentation of the financial report in order to design audit procedures that are
assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
making those risk assessments, the auditor considers internal control relevant to the company’s
An audit also includes evaluating the appropriateness of accounting
of the company’s internal control.
preparation and fair presentation of the financial report in order to design audit procedures that are
policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
the overall presentation of the financial report.
An audit also includes evaluating the appropriateness of accounting
of the company’s internal control.
policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating
Our audit did not involve an analysis of the prudence of business decisions made by directors or
the overall presentation of the financial report.
management.
Our audit did not involve an analysis of the prudence of business decisions made by directors or
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
management.
our audit opinions.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
HLB Mann Judd (WA Partnership) is a member of
Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
International, a worldwide organisation of accounting firms and business advisers.
HLB Mann Judd (WA Partnership) is a member of
International, a worldwide organisation of accounting firms and business advisers.
51
51
Chalice Gold Annual Report 2010
371
inDePenDent AUDitoR’s RePoRt (ContinUeD)
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act
2001.
Auditor’s Opinion
In our opinion:
(a)
the financial report of Chalice Gold Mines Limited is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and
of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001; and
(b)
the consolidated financial statements also comply with International Financial Reporting Standards
as disclosed in Note 1(a).
Report on the Remuneration Report
We have audited the Remuneration Report included in of the directors’ report for the year
ended 30 June 2010. The directors of the company are responsible for the preparation and presentation
of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Chalice Gold Mines Limited for the year ended 30 June 2010
complies with section 300A of the Corporations Act 2001.
HLB MANN JUDD
Chartered Accountants
Perth, Western Australia
16 August 2010
L DI GIALLONARDO
Partner
52
72
Chalice Gold Annual Report 2010
CoRPoRAte GoveRnAnCe RePoRt
statement
Chalice Gold mines limited (“Chalice” or “the Group”) has made it a priority to adopt systems of control
and accountability as the basis for the administration of corporate governance. some of these policies and
procedures are summarised in this statement. Commensurate with the spirit of the AsX Corporate Governance
Council’s Corporate Governance Principles and Recommendations (“Principles & Recommendations”), the
Group has followed each recommendation where the Board has considered the recommendation to be an
appropriate benchmark for its corporate governance practices. where the Group’s corporate governance
practices follow a recommendation, the Board has made appropriate statements reporting on the adoption
of the recommendation. where, after due consideration, the Group’s corporate governance practices depart
from a recommendation, the Board has offered full disclosure and reason for the adoption of its own practice,
in compliance with the “if not, why not” regime.
Disclosure of corporate Governance practices
summary statement
ASX P & R1
If not, why not2
ASX P & R1
If not, why not2
Recommendation 1.1
Recommendation 1.2
Recommendation 4.3
Recommendation 4.4³
Recommendation 1.3³
n/a
n/a
Recommendation 5.1
Recommendation 2.1
Recommendation 2.2
Recommendation 2.3
Recommendation 2.4
Recommendation 2.5
Recommendation 5.2³
Recommendation 6.1
Recommendation 6.2³
Recommendation 7.1
Recommendation 7.2
n/a
n/a
n/a
n/a
n/a
n/a
Recommendation 2.6³
n/a
n/a
Recommendation 7.3
Recommendation 3.1
Recommendation 3.2
Recommendation 7.4³
n/a
n/a
Recommendation 8.1
Recommendation 3.3³
n/a
n/a
Recommendation 8.2
Recommendation 4.1
Recommendation 4.2
Recommendation 8.3³
n/a
n/a
1
2
3
indicates where the Group has followed the Principles & Recommendations.
indicates where the Group has provided “if not, why not” disclosure.
indicates an information based recommendation. information based recommendations are not adopted or reported against using
“if not, why not” disclosure – information required is either provided or it is not.
Website Disclosures
further information about the Group’s current charters, policies and procedures as adopted by the Group
in August 2010 may be found at the Group’s website at www.chalicegold.com, under the section marked
Corporate Governance. A list of these charters, policies and procedures together with the Recommendations
to which they relate, are set out below.
charters
Board
Audit Committee
Nomination Committee
Remuneration Committee
recommendation(s)
1.3
4.4
2.6
8.3
Chalice Gold Annual Report 2010
73
policies and procedures
Policy and Procedure for Selection and (Re)Appointment of Directors
Process for Performance Evaluation
Policy on Assessing the Independence of Directors
Policy for Trading in Company Securities (summary)
Code of Conduct (summary)
Policy on Continuous Disclosure (summary)
Procedure for Selection, Appointment and Rotation of External Auditor
Shareholder Communication Policy
Risk Management Policy (summary)
2.6
1.2, 2.5
2.6
3.2, 3.3
3.1, 3.3
5.1, 5.2
4.4
6.1, 6.2
7.1, 7.4
Disclosure – principles & recommendations
the Group reports below on how it has followed (or otherwise departed from) each of the Principles &
Recommendations during the 2009/2010 financial year (“Reporting Period”). this statement has been prepared
based on the Group’s corporate governance practices during the Reporting Period. in August 2010, the Group
enhanced its corporate governance policies and procedures by adopting a Corporate Governance manual
containing a full suite of corporate governance policies and procedures. these new policies and procedures
will form the basis for the Group’s future reporting against the Principles and Recommendations.
priNciple 1 – lay soliD FouNDatioNs For MaNaGeMeNt aND oversiGHt
recommendation 1.1:
Companies should establish the functions reserved to the Board and those delegated to senior executives and
disclose those functions.
Disclosure:
the Group has established the functions reserved to the Board. these functions are set out in the Group’s
Board Charter adopted in August 2010, and previously in its Corporate Governance statement on the Group’s
website. the Board is collectively responsible for setting the strategic direction of the Group. the Board is
also responsible for among other things overseeing the management of the Group, monitoring the financial
performance of the Group, engaging appropriate management commensurate with the Group’s structure
and objectives, involvement in the development of corporate strategy and performance objectives and
ensuring that policies, risk management and compliance systems are consistent with the Group’s objectives
and external best practice taking into consideration the Group’s size and scope of operations.
the Group has established the functions delegated to senior executives (and now sets out these functions
in its Board Charter). senior executives are responsible for supporting the managing Director and assisting
the managing Director in implementing the running of the general operations and financial business of the
Group, in accordance with the delegated authority of the Board.
in the Board Charter adopted by the Group in August 2010, senior executives are responsible for reporting
all matters which fall within the Group’s materiality thresholds at first instance to the managing Director or,
if the matter concerns the managing Director, then directly to the Chair or the lead independent director, as
appropriate.
recommendation 1.2:
Companies should disclose the process for evaluating the performance of senior executives.
explanation for departure:
During the Reporting Period the Group did not publicly disclose its process for performance evaluation of its
senior executives.
However, the Group now discloses on its website its process for performance evaluation which notes that
the managing Director and executive Chairman review the performance of the senior executives. this is
conducted by informal interviews.
74
Chalice Gold Annual Report 2010
recommendation 1.3:
Companies should provide the information indicated in the Guide to reporting on Principle 1.
Disclosure:
During the Reporting Period a formal evaluation of senior executives did not occur. However, due to the size
of the Group, the executive Chairman takes an active role in assessing the performance of executives on an
informal basis.
priNciple 2 – structure tHe boarD to aDD value
recommendation 2.1:
A majority of the Board should be independent directors.
Notification of Departure:
only two of the five directors, Anthony Kiernan and stephen Quin are considered independent.
explanation for Departure:
the independent directors of the Board are Anthony Kiernan and stephen Quin and the non-independent
directors of the Board are timothy Goyder, Doug Jones and michael Griffiths.
the Board considers that the current composition of the Board is adequate for the Group’s current size and
operations, and includes an appropriate mix of skills and expertise, relevant to the Group’s business.
the Board continues to monitor its composition as the Group’s operations evolve and will appoint further
independent directors if considered appropriate.
recommendation 2.2:
the Chair should be an independent director.
Notification of Departure:
the Chair of the board, timothy Goyder, is not an independent director.
explanation for Departure:
the Chair is an executive director and does not satisfy the test of independence as set out in Box 2.1 of the AsX
Principles and Recommendations (“independence test”).
the Board believes that timothy Goyder is the most appropriate person for the position as Chair because
of his seniority and industry experience. However, the Board has appointed Anthony Kiernan to act as lead
independent director when conflict may arise.
recommendation 2.3:
the roles of the Chair and Chief executive officer should not be exercised by the same individual.
Disclosure:
the managing Director is Dr Doug Jones who is not Chair of the Board.
recommendation 2.4:
the Board should establish a nomination Committee.
Notification of Departure:
the Group has not established a separate nomination Committee.
explanation for Departure:
Given the current size and composition of the Group, the Board believes that there would be no efficiencies
gained by establishing a separate nomination Committee. Accordingly, the Board performs the role of the
nomination Committee. the Board deals with any conflicts of interest that may occur when convening in the
capacity of the nomination Committee by ensuring the director with conflicting interests is not party to the
relevant discussions. in August 2010, the Board adopted a nomination Committee Charter. when the Board
convenes as the nomination Committee it will carry out those functions which are delegated in the Group’s
nomination Committee Charter.
Chalice Gold Annual Report 2010
375
recommendation 2.5:
Companies should disclose the process for evaluating the performance of the Board, its committees and
individual directors.
explanation for departure:
for a majority of the Reporting Period the Group did not publicly disclose its process for performance evaluation
of the Board, its committees and individual directors, except to a limited extend whereby it disclosed that the
Board had adopted a self-evaluation process to measure its own performance.
However, the Group now makes available its process for performance evaluation on its website which notes
that the Chair evaluates the performance of the Board, individual directors, the managing director and
any applicable committees of the Board. these evaluations are undertaken by each director completing a
questionnaire which is then evaluated by the Chair.
recommendation 2.6:
Companies should provide the information indicated in the Guide to reporting on Principle 2.
Disclosure:
skills, experience, expertise and term of office of each Director
A profile of each director containing their skills, experience, expertise and term of office is set out in the
Directors’ Report.
identification of independent Directors
the independent directors of the Group are Anthony Kiernan and stephen Quin. these directors are
independent as they are non-executive directors who are not members of management and who are free of
any business or other relationship that could materially interfere with, or could reasonably be perceived to
materially interfere with, the independent exercise of their judgment.
independence is measured having regard to the relationships listed in Box 2.1 of the Principles &
Recommendations and the Group’s materiality thresholds. the materiality thresholds are set out below.
company’s Materiality thresholds
since adopting the new Corporate Governance manual in August 2010, the Board has agreed on the following
guidelines for assessing the materiality of matters, as set out in the Group’s new Board Charter:
•
•
•
•
Balance sheet items are material if they have a value of more than 10% of pro-forma net asset.
Profit and loss items are material if they will have an impact on the current year operating result of 10%
or more.
Items are also material if they impact on the reputation of the Group, involve a breach of legislation, are
outside the ordinary course of business, they could affect the Group’s rights to its assets, if accumulated
they would trigger the quantitative tests, involve a contingent liability that would have a probable effect
of 10% or more on balance sheet or profit and loss items, or they will have an effect on operations which
is likely to result in an increase or decrease in net income or dividend distribution of more than 10%.
Contracts will be considered material if they are outside the ordinary course of business, contain
exceptionally onerous provisions in the opinion of the Board, impact on income or distribution in excess
of the quantitative tests, there is a likelihood that either party will default, and the default may trigger any
of the quantitative or qualitative tests, are essential to the activities of the Group and cannot be replaced,
or cannot be replaced without an increase in cost of such a quantum, triggering any of the quantitative
tests, contain or trigger change of control provisions, they are between or for the benefit of related
parties, or otherwise trigger the quantitative tests.
statement concerning availability of independent professional advice
to assist directors with independent judgement, it is the Board’s policy that if a director considers it necessary
to obtain independent professional advice to properly discharge the responsibility of their office as a director
then, provided the director first obtains approval for incurring such expense from the Chair, the Group will pay
the reasonable expenses associated with obtaining such advice.
76
Chalice Gold Annual Report 2010
Nomination Matters
the full Board carries out the role of the nomination Committee. the full Board did not officially convene as
a nomination Committee during the Reporting Period, however nomination-related discussions occurred
from time to time during the year as required. to assist the Board to fulfil its function as the nomination
Committee, in August 2010 it adopted a nomination Committee Charter.
the explanation for departure set out under Recommendation 2.4 above explains how the functions of the
nomination Committee are performed.
performance evaluation
During the Reporting Period an evaluation of the Board, its committees and individual directors did not occur.
selection and (re) appointment of Directors
the composition of the Board is reviewed periodically in view of the underlying scale, scope and complexity
of the Group’s operations. Changes are made where appropriate.
the membership of the Board and its activities are subject to periodic review. the Board has adopted a self-
evaluation process to measure its own performance during each financial year. Also, the composition and
skills mix of the directors of the Group are reviewed on a regular basis.
the criteria for determining the identification and appointment of a suitable candidate for the Board includes
quality of the individual, background of experience and achievement, compatibility with other Board members,
credibility within the Group’s scope of activities, intellectual ability to contribute to Board’s duties and physical
ability to undertake Board’s duties and responsibilities. independent consultants may be engaged to identify
possible new candidates for the Board.
Directors are initially appointed by the full Board subject to election by shareholders at the next annual general
meeting. Under the Group’s Constitution the tenure of directors (other than the managing Director, and only
one managing Director where the position is jointly held) is subject to reappointment by shareholders not later
than the third anniversary following his last appointment. subject to the requirements of the Corporations
Act 2001, the Board does not subscribe to the principle of retirement age and there is no maximum period of
service as a director. A managing Director may be appointed for any period and on any terms the directors
think fit and, subject to the terms of any agreement entered into, the Board may revoke any appointment.
priNciple 3 – proMote etHical aND respoNsible DecisioN-MaKiNG
recommendation 3.1:
Companies should establish a Code of Conduct and disclose the code or a summary of the code as to the
practices necessary to maintain confidence in the Group’s integrity, the practices necessary to take into
account their legal obligations and the reasonable expectations of their stakeholders and the responsibility
and accountability of individuals for reporting and investigating reports of unethical practices.
Disclosure:
During the Reporting Period, the Group had a Code of Conduct for its Board, executives and employees as
to the practices necessary to maintain confidence in the Group’s integrity, practices necessary to take into
account their legal obligations and the expectations of their stakeholders and responsibility.
recommendation 3.2:
Companies should establish a policy concerning trading in company securities by directors, senior executives
and employees, and disclose the policy or a summary of that policy.
Disclosure:
the Group has established a policy concerning trading in the Group’s securities by directors and employees.
recommendation 3.3:
Companies should provide the information indicated in the Guide to reporting on Principle 3.
Disclosure:
A copy of the Group’s Code of Conduct and share trading Policy was disclosed on the Group’s website
throughout the trading Period.
the Group’s replacement Code of Conduct and share trading Policy was included on its website from
August 2010.
Chalice Gold Annual Report 2010
77
priNciple 4 – saFeGuarD iNteGrity iN FiNaNcial reportiNG
recommendation 4.1:
the Board should establish an Audit Committee.
Notification of Departure:
During the Reporting Period, no separate Audit Committee was formed.
explanation for Departure:
Given the size and composition of the Group, the Board believed that there would be no efficiencies gained by
establishing a separate Audit Committee. However, an Audit Committee was formed in June 2010.
recommendation 4.2:
the Audit Committee should be structured so that it:
•
•
•
•
consists only of non-executive directors
consists of a majority of independent directors
is chaired by an independent Chair, who is not Chair of the Board
has at least three members.
Notification of Departure:
During the Reporting Period, no separate Audit Committee was formed.
explanation for Departure:
During the Reporting Period the Board carried out the role of Audit Committee and therefore it was not
structured in accordance with the compositional recommendation. in June 2010, an Audit Committee was
established, comprising Anthony Kiernan and stephen Quin; both are independent and have the experience
to carry out the obligations and duties of an Audit Committee. mr Anthony Kiernan will chair the Audit
Committee.
recommendation 4.3:
the Audit Committee should have a formal charter.
Notification of Departure:
During the Reporting Period the Group did not have an Audit Committee Charter.
explanation for Departure:
As part of the Group reviewing its governance structures, the Board has now adopted and disclosed its
formal Audit Committee Charter and therefore now follows the recommendation set out in Principle 4 of the
AsX Principles and Recommendations. A copy of the Audit Committee Charter is publically available on the
Group’s website.
recommendation 4.4:
Companies should provide the information indicated in the Guide to reporting on Principle 4.
Disclosure:
the Audit Committee did not hold any meetings during the Reporting Period.
Details of each of the director’s qualifications are set out in the Directors’ Report. no members of the Audit
Committee have formal accounting or financial qualifications, however, all are considered to be financially
literate.
with effect from August 2010, the Group has established procedures for the selection, appointment and
rotation of its external auditor. the Board is responsible for the initial appointment of the external auditor
and the appointment of a new external auditor when any vacancy arises, as recommended by the Audit
Committee (or its equivalent). Candidates for the position of external auditor must demonstrate complete
independence from the Group through the engagement period. the Board may otherwise select an external
auditor based on criteria relevant to the Group’s business and circumstances. the performance of the external
auditor is reviewed on an annual basis by the Audit Committee (or its equivalent) and any recommendations
are made to the Board.
78
Chalice Gold Annual Report 2010
priNciple 5 – MaKe tiMely aND balaNceD Disclosure
recommendation 5.1:
Companies should establish written policies designed to ensure compliance with AsX listing Rule disclosure
requirements and to ensure accountability at a senior executive level for that compliance and disclose those
policies or a summary of those policies.
Disclosure:
the Group has established written policies designed to ensure compliance with AsX listing Rule disclosure
and accountability at a senior executive level for that compliance.
recommendation 5.2:
Companies should provide the information indicated in the Guide to reporting on Principle 5.
Disclosure:
A copy of the Group’s Policy on Continuous Disclosure was disclosed on the Group’s website throughout the
trading Period.
the Group’s replacement Policy on Continuous Disclosure was included on its website from August 2010.
priNciple 6 – respect tHe riGHts oF sHareHolDers
recommendation 6.1:
Companies should design a communications policy for promoting effective communication with shareholders
and encouraging their participation at general meetings and disclose their policy or a summary of that policy.
Disclosure:
the Group has designed a communications policy for promoting effective communication with shareholders
and encouraging shareholder participation at general meetings.
recommendation 6.2:
Companies should provide the information indicated in the Guide to reporting on Principle 6.
Disclosure:
A copy of the Group’s Risk management Policy was disclosed on the Group’s website throughout the trading
Period.
the Group’s replacement Risk management Policy was included on its website from August 2010.
priNciple 7 – recoGNise aND MaNaGe risK
recommendation 7.1:
Companies should establish policies for the oversight and management of material business risks and disclose
a summary of those policies.
Disclosure:
the Board has adopted a Risk management Policy. the Board adopted a policy under which it is responsible
for overseeing the Group’s risk management and control framework. Responsibility for control and risk
management is delegated to the appropriate level of management within the Group with the managing
Director having ultimate responsibility to the Board for the risk management and control framework.
Arrangements put in place by the Board to monitor risk management include monthly reporting to the Board
in respect of health, safety and environment, operations and the financial position of the Group.
when required, a formal process of identifying key business risks and assessing how these risks are being
managed is undertaken.
Chalice Gold Annual Report 2010
379
As the Group continues to evolve from an explorer to a gold producer, the Board will enhance the processes
and procedures to manage and report on material business risks.
in addition, the following risk management measures have been adopted by the Board to manage the
Group’s material business risks:
•
the Board has established authority limits for management which, if exceeded, will require prior Board
approval;
the Board is developing and implementing a range of emergency response and other health and safety
policies and procedures relevant to its operations in eritrea;
the Board has adopted a compliance procedure for the purpose of ensuring compliance with the
Group’s continuous disclosure obligations; and
the Board has adopted a corporate governance manual which contains other policies to assist the Group
to establish and maintain its governance practices.
•
•
•
in August 2010, the Board resolved to review, formalise and document the management of its material
business risks and expects to implement this system before the end of 2010. this system is expected to include
the preparation of a risk register by management to identify the Group’s material business risks and risk
management strategies for these risks. in addition, the process of management of material business risks will
be allocated to members of senior management. the risk register will be reviewed quarterly and updated, as
required.
recommendation 7.2:
the Board should require management to design and implement the risk management and internal control
system to manage the Group’s material business risks and report to it on whether those risks are being
managed effectively. the Board should disclose that management has reported to it as to the effectiveness of
the Group’s management of its material business risks.
Disclosure:
the Board has required management to design, implement and maintain risk management and internal
control systems to manage the Group’s material business risks. whilst this did not occur during the reporting
period, the Board will require management to report to it confirming that those risks are being managed
effectively. further, the Board will receive a report from management as to the effectiveness of the Group’s
management of its material business risks.
recommendation 7.3:
the Board should disclose whether it has received assurance from the Chief executive officer (or equivalent)
and the Chief financial officer (or equivalent) that the declaration provided in accordance with section 295A
of the Corporations Act is founded on a sound system of risk management and internal control and that the
system is operating effectively in all material respects in relation to financial reporting risks.
Disclosure:
the managing Director (or equivalent) and the Chief financial officer (or equivalent) have provided a
declaration to the Board in accordance with section 295A of the Corporations Act and have assured the Board
that such declaration is founded on a sound system of risk management and internal control and that the
system is operating effectively in all material respects in relation to financial risk.
recommendation 7.4:
Companies should provide the information indicated in the Guide to reporting on Principle 7.
Disclosure:
the Board has not received the report from management under Recommendation 7.2. this will occur during
the next reporting period.
the Board has received the assurance from the managing Director (or equivalent) and the Chief financial
officer (or equivalent) under Recommendation 7.3.
80
Chalice Gold Annual Report 2010
priNciple 8 – reMuNerate Fairly aND respoNsibly
recommendation 8.1:
the Board should establish a Remuneration Committee.
Notification of Departure:
the Group has established a separate Remuneration Committee from June 2010.
recommendation 8.2:
Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of
executive directors and senior executives.
Disclosure:
non-executive directors are remunerated at a fixed fee for time, commitment and responsibilities.
Remuneration for non-executive directors is not linked to individual performance.
Pay and rewards for executive directors and senior executives consists of a base salary and performance
incentives. long term performance incentives may include options granted at the discretion of the Board and
subject to obtaining the relevant approvals. executives are offered a competitive level of base pay at market
rates and are reviewed annually to ensure market competitiveness.
recommendation 8.3:
Companies should provide the information indicated in the Guide to reporting on Principle 8.
Disclosure:
Details of remuneration, including the Group’s policy on remuneration, are contained in the “Remuneration
Report” which forms of part of the Directors’ Report.
the Remuneration Committee did not hold any meetings during the Reporting Period.
in August 2010, the Board adopted a Remuneration Committee Charter.
the explanation for departure set out under Recommendation 8.1 above explains how the functions of the
Remuneration Committee are performed.
there are no termination or retirement benefits for non-executive directors (other than for superannuation).
the Group’s Remuneration Committee Charter includes a statement of the Group’s policy on prohibiting
transactions in associated products which limit the risk of participating in unvested entitlements under any
equity based remuneration schemes.
Chalice Gold Annual Report 2010
81
AsX ADDitionAl infoRmAtion
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 advised to the Company and their associated interests
as at 13 August 2010 were:
shareholder
Franklin Resources Inc & its affiliates
Timothy R B Goyder
Lujeta Pty Ltd
Number of
ordinary shares held
percentage of
capital held
%
26,663,150
19,951,206
11,500,000
14.89%
11.02%
6.08%
class of shares and voting rights
At 13 August 2010 there were 2,480 holders of the ordinary shares of the Company.
the voting rights to the ordinary shares set out in the Company’s Constitution are:
“subject to any rights or restrictions for the time being attached to any class or Classes of shares -
a)
b)
at meetings of members or classes of members each member entitled to vote in person or by proxy or
attorney: and
on a show of hands every person who is a member has one vote and on a poll every person in person or
by proxy or attorney has one vote for each ordinary share held.”
Holders of options do not have voting rights.
Distribution of equity security holders as at 13 august 2010:
category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,000 – 100,000
100,001 and over
Total
Number of equity security holders
ordinary shares
unlisted share options
415
847
473
616
129
2,480
-
-
-
1
5
6
the number of shareholders holding less than a marketable parcel at 13 August was 433.
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Chalice Gold Annual Report 2010
twenty largest ordinary Fully paid shareholders as at 13 august 2010
Name
National Nominees Limited
Mr Timothy Rupert Barr Goyder
Lujeta Pty Ltd
Citicorp Nominees Pty Ltd
Anvil Mining Limited
HSBC Custody Nominees (Australia) Ltd
ANZ Nominees Limited
Balfes (Qld) Pty Ltd
Sundowner International Limited
Calm Holdings Pty Ltd
HSBC Custody Nominees (Australia) Limited-GSCO ECA
Merrill Lynch (Australia) Nominees Pty Ltd
Colbern Fiduciary Nominees Pty Ltd
Dragon Mining Limited
Mr Ross Francis Stanley
HSBC Custody Nominees (Australia) Limited-GSI EDA
JP Morgan Nominees Australia Limited
Lost Ark Nominees Pty Ltd
Greenslade Holdings Pty Ltd
Mrs Helen Joy Alexander
total
Number of ordinary
shares held
percentage of
capital held
%
31,499,506
19,951,206
11,500,000
10,071,734
8,387,698
7,070,645
5,525,184
4,000,000
3,552,955
3,400,000
2,886,718
2,516,076
2,500,000
2,000,000
2,000,000
1,990,156
1,563,668
1,400,000
1,300,000
1,280,000
17.40
11.02
6.35
5.56
4.63
3.91
3.05
2.21
1.96
1.88
1.60
1.40
1.38
1.10
1.10
1.10
0.86
0.77
0.72
0.71
124,395,546
68.71%
Chalice Gold Annual Report 2010
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Level 2, 1292 Hay Street West Perth WA 6005 PO BOX 2890 Perth 6001
T: +61 (08) 9322 3960 F: +61 (08) 9322 5800 E: info@chalicegold.com
www.chalicegold.com