CHALICE GOLD MINES LIMITED
Level 2, 1292 Hay Street
WEST PERTH, WESTERN AUSTRALIA 6005
Tel:
Fax:
(+61) (8) 9322 3960
(+61) (8) 9322 5800
Web:
Email:
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ANNUAL REPORT 2012
CORPORATE DIRECTORY
DIRECTORS
Tim Goyder
Executive Chairman
Douglas Jones
Managing Director
Anthony Kiernan Non-executive Director
Stephen Quin
Non-executive Director
COMPANY SECRETARIES
Richard Hacker
Leanne Forgione
PRINCIPAL PLACE OF BUSINESS & REGISTERED OFFICE
Level 2, 1292 Hay Street
WEST PERTH, WESTERN AUSTRALIA 6005
Tel:
Fax:
(+61) (8) 9322 3960
(+61) (8) 9322 5800
Web:
Email:
AUDITORS
HLB Mann Judd
Level 4, 130 Stirling Street
PERTH, WESTERN AUSTRALIA 6000
SHARE REGISTRY
Australia
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Level 2, Reserve Bank Building
45 St Georges Terrace
PERTH, WESTERN AUSTRALIA 6000
Tel: 1300 557 010
Canada
Computershare Investor Services
100 University Avenue, 9th Floor
TORONTO, ONTARIO M5J 2Y1
HOME EXCHANGE
Australian Securities Exchange Limited
Exchange Plaza
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PERTH, WESTERN AUSTRALIA 6000
TORONTO STOCK EXCHANGE
The Exchange Tower
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TORONTO, ONTARIO M5X 1J2
ASX
Share Code: CHN
TSX
Share Code: CXN
CONTENTS
CHAIRMAN’S LETTER
REVIEW OF OPERATIONS
SCHEDULE OF TENEMENTS
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
STATEMENT OF COMPREHENSIVE INCOME
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
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66
72
ChairmaN’S LETTEr
DEar SharEhOLDEr
I am pleased to report to you on what has been a pivotal year for Chalice with the successful sale of
the Zara gold Project in Eritrea to China SFECO group and the Eritrean National Mining Corporation
(“ENAMCO”) for combined proceeds of US$114 million before tax.
As a result of this transaction and after paying all applicable taxes Chalice now has approximately
AUD$81 million in the bank and is on the hunt for high-quality resource assets that will underpin the
next chapter of our development as an international mining company.
The Zara Project was acquired for approximately $7 million through the merger with Sub-Sahara
Resources in 2009. Chalice immediately embarked on the process of consolidating ownership of
the asset, agreeing Eritrean government equity, and advancing the Zara Project towards production,
including the completion of a scoping and feasibility study.
Following final mine permitting in November 2011, it was with mixed feelings that the Board agreed
to sell the Company’s remaining 60 per cent interest in the Zara Project to China SFECO group. This
decision was reached after taking a multitude of factors into consideration, with the Board concluding
that it was in the best interests of shareholders.
After a lengthy completion period due to the need to obtain both Chinese and Eritrean government
approvals, the sale was finally completed on 4 September 2012.
The sale of the Zara Project has put the Company in an enviable position to acquire new projects,
particularly where our peers are finding it difficult to obtain finance for the development of projects in
the current market.
An in-house business development team has been established and a focused effort has commenced
to assess potential assets for acquisition. While precious metals and copper assets are the most likely
targets, the Board remains open to considering other commodities where there is potential to generate
significant shareholder returns.
The Board has also resolved, subject to shareholder approval to undertake a capital reduction and
return of 10 cents per share to shareholders (approximately $25 million). Following a review of
the Company’s current capital requirements, the Board has decided that a return to shareholders is
justified, enabling some of the proceeds of the Zara transaction to be distributed to shareholders while
retaining cash of approximately $55 million to pursue new growth opportunities.
2
The Company has requested a Class Ruling on behalf of shareholders from the Australian
Taxation Office (“ATO”) to confirm the tax implications for shareholders on the basis that this is a
return of capital. Details of the tax implications to shareholders will be released on receipt of the
Class Ruling from the ATO.
Subject to receipt of the ATO Class Ruling and shareholder approval, it is hoped the capital
reduction and return would be completed in early December 2012. Full details will be outlined to
shareholders in due course.
The Company has two remaining exploration projects in Eritrea, Mogoraib North and Hurum.
During the year, Chalice entered into a 60:40 joint venture arrangement with ENAMCO on
these assets. Funding will be on a two-thirds Chalice and one-third ENAMCO basis, taking into
account the Eritrean government’s 10 per cent free-carried interest.
Mogoraib North is the subject of an active drilling campaign that will be carried out between
October and December 2012. While the primary targets are Volcanic Hosted Massive Sulphide
systems similar to the world-class Bisha deposit, which lies just 10 km to the south of Mogoraib
North, there also appears to be promising gold potential similar to the Zara Project. A $1 million
exploration program is planned between now and the end of the year which should provide an
initial test of the potential of these targets.
In conclusion, I would like to thank the Board, management team and staff for their substantial
efforts over recent months in what has been both a challenging and rewarding period for the
Company. I would also like to thank our shareholders for your patience and continued support.
With a substantial cash reserve, Chalice is in an enviable position in the junior resource sector
and I am confident that a high-quality asset can be acquired with the potential to generate
significant shareholder returns into the future.
yours faithfully
TIM gOyDER
Executive Chairman
CHALICE GOLD MINES ANNUAL REPORT 2012
3
REVIEW OF OPERATIONS
Following completion of the capital return and capital
reduction, it is expected that Chalice will have cash on hand
of approximately $55 million. These funds will be used to
pursue quality acquisition opportunities in the resource sector.
The Company has an in-house Business Development team
which is currently actively assessing opportunities, with a
particular focus on advanced gold and copper-gold projects
both in Australia and overseas.
exPloration in eritrea
Mogoraib North – Hurum Joint Venture (Chalice 60%
and ENAMCO 40%)
Following the formation of a joint venture between ENAMCO
and Chalice covering the Mogoraib North and Hurum
Exploration Licences (the ‘MHJV’) in early May 2012,
ENAMCO reimbursed Chalice approximately US$750,000
(representing one-third of historical project-to-date expenditures
incurred at Mogoraib North and Hurum). Exploration
expenditure within the MHJV will be funded as to two-thirds
Chalice and one-third ENAMCO.
ENAMCO’s 40% interest includes its statutory 10% free
carried interest.
Sale of the Zara Project
Activities during the year focused on completing the sale
of the Zara Project in Eritrea, East Africa to China SFECO
Group (‘SFECO’) (a subsidiary of Shanghai Construction
Group Co. Ltd), and to the Eritrean National Mining
Corporation (‘ENAMCO’).
In April 2012 Chalice signed an Agreement to sell its 60 per
cent interest in the Zara Project for US$80 million (including
a deferred payment of US$2 million on the first gold pour
at the Koka Gold Mine) to SFECO. The sale of the 60 per
cent interest was in addition to the agreement to sell 30 per
cent interest to ENAMCO in June 2011 for approximately
US$34 million. ENAMCO also holds a statutory 10 per
cent free carried interest in the project. Both transactions
were completed on 4 September 2012 for a combined
consideration of US$114 million. Following the payment
of applicable taxes in Eritrea, Chalice had approximately
AUD$81 million cash at bank.
Chalice will now commence the evaluation of resource
projects for acquisition in addition to advancing its remaining
exploration projects in Eritrea being the Mogoraib North and
the Hurum Exploration Licences as outlined below.
caPital ManageMent
following coMPletion of
the Sale of the Zara Project
Following completion of the sale of the Zara Project, the Board
undertook a review of its capital management options and
determined that the funds on hand exceeded its current capital
requirements, providing justification to return some of this
capital to shareholders.
Following this Board review and subject to shareholder
approval, the Board proposes to undertake an equal capital
reduction and return of up to $25 million (10 cents cash per
share) to shareholders as at the appropriate record date.
The Company has requested a Class Ruling on behalf of
shareholders from the Australian Taxation Office (“ATO”) to
confirm the tax implications for shareholders on the basis that
this is a return of capital. Details of the tax implications to
shareholders will be released on receipt of the Class Ruling
from the ATO.
Subject to receipt of the ATO Class Ruling and shareholder
approval, it is hoped the capital reduction and return would
be completed in early December 2012.
4
figure 1 Ground position in Eritrea following completion of the sale of the
Zara Project
Mogoraib north exPloration
Diamond drilling targeting potential Volcanic Hosted Massive Sulphide (VHMS) deposits commenced during the year on the Company’s
555 sq km Mogoraib North property, which lies just north of the world-class Bisha VMS mine (owned by Nevsun Resources Limited
and ENAMCO) (Figure 2). Some 2,356 metres in 11 holes were completed before drilling was suspended due to the onset of the wet
season in north-east Africa.
bisha
figure 2 Geology of the Mogoraib North project showing interpreted VHMS trends
The Mogoraib North Project in relation to the Bisha Mine
CHALICE GOLD MINES ANNUAL REPORT 2012
5
REVIEW OF OPERATIONS (cONTINuEd)
The drilling is designed to test bedrock Electro-Magnetic
(“EM”) conductors that potentially reflect VHMS bodies similar
to the nearby Bisha deposit. The conductors were identified
by a Versatile Time-domain Electro-Magnetic (VTEM) survey
completed in mid-2011 and subsequently further refined by
geological mapping, ground-based geophysics (gravity) and
geochemical sampling. Although no massive sulphides have
been intersected in the holes completed to date, one hole
(MOGD 007) intersected high silver (up to 2.8 g/t) and
barium values in highly sulphidic carbonaceous shales that
potentially reflects a distal VHMS setting. Drilling is expected
to recommence in October 2012 with follow-up of the MOGD
007 intersection a high priority.
In addition, artisanal gold workings were identified in the
north-central part of the tenement associated with anomalous
stream sediment gold values. Soil and rock chip sampling over
the area (termed Area C) identified coincident gold-bismuth-
tellurium-molybdenum anomalism centred on the artisanal
workings and a swarm of porphyritic felsic dykes (Figure 4).
This geochemical signature is identical to that found over the
Koka deposit and is characteristic of Intrusive Related Gold
Systems (IRGS) such as those found in the Tintina Belt of Alaska
and the Yukon (e.g. Fort Knox, Pogo). Follow-up soil sampling
to define the extent of anomalism is planned, with drilling to
commence in November 2012.
Drilling in progress at Mogoraib North
Artisanal workings at Mogoraib North – Area C
figure 3 Mogoraib North geology showing locations of VTEM targets and
drill holes completed in 2012
6
figure 4 Area C Anomaly showing coincident gold, bismuth, tellurium and molybdenum soil anomalies
– the characteristic geochemical signature of Intrusive Related Gold Systems (IRGS)
huruM exPloration
The Company completed a first-pass reconnaissance
exploration program on the 275 sq km Hurum property,
which lies along strike from the Zara project and covers
similar geological elements. Stream sediment and soil
sampling defined several gold and pathfinder element
anomalies associated with artisanal gold workings and
alteration zones that require further work.
gnaweeda Project
On 13 June 2012, the Company announced it had agreed
to sell its remaining 13.5% interest in the Gnaweeda Gold
Project to Archean Star Resources Inc. The consideration for
the sale was 5 million common shares in Archean Star.
On 4 October 2012, the Company terminated the agreement
to sell its interest due to non-performance by Archean Star.
The Company’s 13.5% interest in the Project remains with
all commensurate rights.
Artisanal workings at Mogoraib North – Area C
CHALICE GOLD MINES ANNUAL REPORT 2012
7
SChEDuLE OF TENEmENTS
ProjectS - eritrea
Mogoraib North
Hurum
LICENCE TyPE
Exploration Licence
Exploration Licence
NATURE OF INTEREST
Owned
Owned
CURRENT EqUITy
60%
60%
ProjectS - auStralia
TENEMENT #
E51/0926
E51/0927
NATURE OF INTEREST
CURRENT EqUITy
Owned
Owned
13.5%
13.5%
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 is a qualified Person under National Instrument 43-101 – ‘Standards of Disclosure for Mineral Projects’. The qualified
Person has verified the data disclosed in this release, including sampling, analytical and test data underlying the information contained in this release. Dr Jones
consents to the release of information in the form and context in which it appears here.
FOrWarD LOOkiNg STaTEmENTS
This document may contain forward-looking information within the meaning of Canadian securities legislation and forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995 (collectively, “forward-looking statements”). These forward-looking statements are made as of the date
of this document and Chalice gold Mines Limited (the Company) does not intend, and does not assume any obligation to update these forward-looking statements
except as required by law or regulation.
Forward-looking statements relate to future events or future performance and reflect Company management’s expectations or beliefs regarding future events and
include, but are not limited to, statements with respect to the estimation of mineral reserves and mineral resources, the realization of mineral reserve estimates, the
likelihood of exploration success, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations,
environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage.
In certain cases, forward-looking statements can be identified by the use of words such as plans, expects or does not expect, is expected, budget, scheduled, estimates,
forecasts, intends, anticipates or does not anticipate, or believes, or variations of such words and phrases or statements that certain actions, events or results may, could,
would, might or will be taken, occur or be achieved or the negative of these terms or comparable terminology. By their very nature forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from
any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to actual results
of current exploration activities; changes in project parameters as plans continue to be refined; future prices of mineral resources; possible variations in ore reserves, grade
or recovery rates; accidents, labour disputes and other risks of the mining industry; the ultimate outcome for shareholders of any Class Ruling received from the Australian
Tax Office (“ATO”) in relation to any proposed capital return, whether shareholders would vote in favour of such a return of capital if put before them at a meeting of the
shareholders, as well as those factors detailed from time to time in the Company’s interim and annual financial statements, all of which are filed and available for review
. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those
on SEDAR at
described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no
assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking statements.
8
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 2012 and the independent auditor’s report thereon.
In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:
1. Directors
t r B GoyDer
Executive Chairman
Tim has over 30 years experience in the resource industry. He 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, Strike Energy Limited and
Chairman of Liontown Resources Limited, all listed on ASX.
D A Jones PhD, AusIMM, CPGeo
Managing Director
Doug is a geologist with over 30 years experience in 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, TSX and AIM-listed
Minera IRL Limited and TSX listed Serabi Mining Plc. Doug is a member of the audit committee.
A W KiernAn LLB
Non-executive Director
Tony, previously a lawyer, is a corporate advisor with extensive experience in the administration and operation of listed public
companies. He is Chairman of BC Iron Limited, Uranium Equities Limited, Venturex Resources Limited and is a director of Liontown
Resources Limited, all listed on ASX. Tony is Chairman of the Audit Committee and Remuneration Committee.
s P Quin PGeo,FGAC, FSEG, MIOM3
Independent Non-executive Director
Stephen is a mining geologist with over 30 years’ experience in the mining and exploration industry. Stephen is based in
Vancouver, Canada, and has been the President & CEO of Midas Gold Corp. and its predecessor since January 2011.
Stephen was, until December 2010, President and COO of Capstone Mining Corp. and President & CEO of its predecessor,
Sherwood Mining Corp. from 2005 until the combination with Capstone in 2008. He is also a director of TSX-listed Mercator
Minerals Ltd., TSX Venture-listed Troon Ventures and NASDAQ-listed Blue Wolf Mongolia Holdings Corp. Stephen has extensive
experience in the resources sector, and in the financing, development and operation of production companies. Stephen is a
member of the Audit and Remuneration Committees.
M r Griffiths BSc Dip Ed, AusIMM, GAIC
Non-executive Director (resigned 21 November 2011)
Mike is a geologist with considerable experience in the minerals exploration sector in both Eritrea and Africa. Mike resigned
as a director on 21 November 2011. Mike is currently a director of TSX listed Currie Rose Limited and Chairman of ASX listed
Mozambi Coal Limited.
J Jeffery BSc (Engineering), BSc (honours), MBA (Marketing)
Executive Director/Chief Operating Officer (appointed 7 July 2011, resigned 21 November 2011)
Juan resigned as a director on 21 November 2011.
CHALICE GOLD MINES ANNUAL REPORT 2012
9
Directors’ rePort (continueD)
2. chief finAnciAl officer AnD coMPAny secretAries
r K hAcKer
B.Com, ACA, ACIS
Chief Financial Officer/Company Secretary
Richard is a Chartered Accountant and Chartered Secretary with 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 was in private practice with
major accounting practices. Richard is also joint Company Secretary of Liontown Resources Limited.
l forGione
B.Com, CA
Company Secretary
Leanne is a Chartered Accountant who has over 10 years of accounting and governance experience within the mining and
energy industries. Leanne is also joint Company Secretary of Liontown Resources Limited.
3. Directors’ MeetinGs
The number of meetings of directors (including meetings of committees of directors) held during the year and the number of
meetings attended by each director were as follows:
Directors’ MeetinGs
AuDit
reMunerAtion
noMinAtion
Number of meetings held:
Number of meetings attended:
T R B Goyder
D A Jones
A W Kiernan
M R Griffiths
S P Quin
J Jeffery
5
5
5
4
1
5
1
2
-
1
2
-
2
-
1
1
-
1
-
1
-
-
-
-
-
-
-
-
The Company has an audit committee, a remuneration committee and a nomination committee of the board of directors.
Members acting on the committees during the year were:
AuDit
reMunerAtion
A W Kiernan (Chairman)
A W Kiernan (Chairman)
noMinAtion
Full Board
S P Quin
T R B Goyder
(resigned from Committee on 1 March 2012)
S P Quin
4. PrinciPAl Activities
The principal activities of the Group during the year were advancing the Koka gold deposit in Eritrea to development and
conducting mineral exploration and evaluation. The sale of the Company’s interest in the Zara Project, which was completed in
September 2012, saw a significant change in the nature of the Company’s activities. Exploration of the Company’s other projects
continued in Eritrea.
10
Directors’ rePort (continueD)
5. revieW of oPerAtions
5.1
the ZArA ProJect, eritreA
Sale of the Zara Project to China SFECO Group
In April 2012 Chalice signed a Sale and Purchase Agreement (‘SPA’) to sell its 60 per cent interest in the Zara Project for
US$80 million (including a deferred payment of US$2 million on the first gold pour at the Koka Gold Mine) to China SFECO
Group (‘SFECO’), a subsidiary of Shanghai Construction Group Co. Ltd. The sale of the 60 per cent interest was in addition
to a previous agreement to sell a 30 per cent interest to the Eritrean National Mining Company (‘ENAMCO’) in June 2011 for
approximately US$34 million. ENAMCO at that stage had a free carried 10 per cent interest in the Zara Project.
Both transactions were completed on 4 September 2012 for a combined consideration of US$114 million. Following the
payment of applicable taxes in Eritrea, Chalice had approximately $83 million cash in the bank. The Company will now
commence the evaluation of resource projects for acquisition in addition to advancing its remaining exploration projects in Eritrea.
5.2 exPlorAtion - eritreA
Mogoraib North Exploration
Diamond drilling targeting potential Volcanic Hosted Massive Sulphide (VHMS) deposits commenced during the year on the
Company’s Mogoraib North property, which lies just north of the world-class Bisha VMS mine (owned by Nevsun Resources
Limited and ENAMCO). Some 2,356 metres in 11 holes were completed before drilling was suspended due to the onset of the
wet season in north-east Africa.
The drilling is designed to test bedrock Electro-Magnetic (‘EM’) conductors that potentially reflect VHMS bodies similar to the
nearby Bisha deposit. The conductors were identified by a Versatile Time-domain Electro-Magnetic (‘VTEM’) survey completed in
mid-2011 and subsequently further refined by ground-based geophysics and geochemical sampling.
Drilling is expected to recommence in October 2012. In addition, artisanal gold workings were identified in the north-central part of
the tenement and in-fill soil samples and rock chip samples were collected from the area to follow-up anomalous gold-in-soil samples
obtained in a previous reconnaissance program. Assays from this sampling and the diamond drilling program are pending.
Following the formation of a joint venture between ENAMCO and Chalice covering the Mogoraib North and Hurum Projects in
early May 2012, ENAMCO has paid Chalice approximately US$750,000 (representing one-third of historical project-to-date
expenditures incurred at Mogoraib North and Hurum). Exploration expenditure will be funded in accordance with each party’s
paid participating interest, being two-thirds Chalice and one-third ENAMCO.
6. finAnciAl revieW
6.1 results for the yeAr
The loss of the Group for the year ended 30 June 2012 was $4,135,214.
Significant items for the year include:
• corporate and administration costs totalling $2,092,923; and
• corporate personnel costs of $1,525,680 which includes $215,280 of non-cash equity settled payments for share options
and performance rights issued to directors and employees.
6.2
finAnciAl Position
As at 30 June 2012, the Group had net assets of $47,036,529, including $3,074,530 in cash and cash equivalents, and an
excess of current assets over current liabilities of $43,816,076. Following completion of the sale of the Zara Project subsequent
to year end, at the date of this report, Chalice has approximately $81 million cash on hand.
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 since balance date.
CHALICE GOLD MINES ANNUAL REPORT 2012
11
Directors’ rePort (continueD)
8. reMunerAtion rePort – AuDiteD
This report outlines remuneration arrangements in place for directors and executives of Chalice Gold Mines Limited.
The Remuneration Report is presented under the following sections:
8.1 Message from the Board
8.2 Introduction
8.3 Principles of compensation
8.4 Key management personnel remuneration
8.5 Equity instruments
8.6 Service agreements
8.1 MessAGe froM the BoArD
As indicated in last year’s Remuneration Report and particularly in the context of Chalice evolving from an exploration company
to a development company, the Board undertook a review of its approach to remuneration. The focus of the review was to ensure
alignment between the business strategy, remuneration and shareholder interests, as well as being cognisant of the approaches
adopted by other ASX listed companies in the mining sector.
For the 2012 financial year, the Company made the following key changes to its remuneration structure:
• implementation of a Long Term Incentive Plan (‘LTIP’) (which was approved by shareholders at the Company’s AGM held in
November 2011); and
• a revision to the structure of director fees to include a base fee and committee fee component (reflective of the varying
workloads of each director).
These changes to the Company’s approach were an important step forward in aligning the remuneration policy with the strategic
direction of its business. However, in light of the sale of the Company’s main asset, the Zara Project, as outlined in Section 5 of this
report, further changes to the application of the policy may be required as the future direction of the Company becomes more evident.
8.2
introDuction
The information provided in this Remuneration Report has been audited as required by section 308 (3C) of the Corporations Act
2001. Information regarding the remuneration of Key Management Personnel (‘KMP’) is required by Corporations Regulations
2M.3.03. KMP are those individuals who have the authority and responsibility for planning, directing and controlling the
activities of the Company and the Group. The following were the KMP for the Group at any time during the year:
Tim Goyder
Executive Chairman
Douglas Jones
Managing Director
Juan Jeffery
Chief Operating Officer and Executive Director (resigned as a director and employee 21 November 2011)
Mike Griffiths
Non-executive Director (resigned 21 November 2011)
Anthony Kiernan Non-executive Director
Stephen Quin
Non-executive Director
Richard Hacker Chief Financial Officer and Joint Company Secretary
Michael Kelly
General Manager – Zara Mining Share Company
12
Directors’ rePort (continueD)
8.3 PrinciPles of coMPensAtion
8.3.1 Remuneration governance
Remuneration committee
The Board is responsible for ensuring Chalice’s remuneration strategy is aligned with Company performance and shareholder
interests and equitable for participants. To assist with this, the Board has established a Remuneration Committee consisting of the
following directors:
Anthony Kiernan Chair of the Remuneration Committee & Non-executive Director
Stephen Quin
Independent Non-Executive Director
Tim Goyder was initially a member of the Remuneration Committee, however, due to his role of Executive Chairman of the
Company, it was determined that he should resign as a member of the Committee so that the Committee consists only of non-
executive directors and/or independent non-executive directors.
An additional member will be appointed to the Remuneration Committee when the size of the full Board is increased.
Use of remuneration consultants
To ensure the Remuneration Committee is fully informed when making remuneration decisions, the Remuneration Committee may
seek external advice, as required, on remuneration policies and practices.
During the year advice was sought from Ernst & Young in relation to the design and implementation of the proposed LTI Plan.
Furthermore, the Company obtained benchmark data for the resources sector from Godfrey Remuneration Group Pty Ltd
(‘Godfrey’) to assist in the setting of executive remuneration. The Company did not receive any specific advice on salaries or
remuneration policy from Godfrey.
Remuneration report approval at 2011 Annual General Meeting
The Remuneration Report for the financial year ended 30 June 2011 received negative shareholder support at the 2011 Annual
General Meeting (‘AGM’) with a vote of 47% of those voting not in favour of approving the 2011 Remuneration Report. The
basis of the negative vote was not as to the quantum of remuneration, but to the form of remuneration to non-executive directors
and the perceived lack of independent directors on the Board (see generally the comments below).
(Please note that the Financial Report dated 27 September 2012 refers to 36% of those voting not in favour of approving the
2011 Remuneration Report. The preceding paragraph reflects the correct percentage of 47%.)
Since the 2011 AGM, the Board has further consulted with key shareholders to determine the reasons for voting against the
2011 Remuneration Report.
The table below sets out the summary of feedback received from key shareholders in relation to the Company’s Remuneration
Policy or application thereof and the Company’s response to those concerns.
shAreholDer feeDBAcK
The vesting of a significant
proportion of long term
incentives grants should, not in
their opinion, occur less than
three years from date of grant.
Discussion
As at the date of this Report, a significant proportion of previously issued Long Term Incentives
(‘LTI’) to KMP, including performance rights and share options, some of which vested in less than
3 years, have lapsed due to the sale of the Zara Project, ie. the performance conditions could no
longer be met. The Board will consider increasing vesting periods for future issues of LTI to KMP.
However, there may be certain circumstances whereby shorter vesting periods are warranted such
as for retention purposes.
The issue of share options with
only a premium exercise price
to the current share price is not,
in their opinion, a sufficient
performance hurdle.
Vested share options issued to KMP, the majority of which have been approved by shareholders
in previous years, will remain in full force and effect. However, as noted in the 2011
Remuneration Report, the Company has implemented an Employee Long Term Incentive Plan
to issue performance rights which will provide for additional performance hurdles where
warranted. In future it is the Board’s intention to utilise performance rights rather than share
options as the means of providing long term incentives to KMPs.
Non-executive directors should
not, in their opinion, receive
share options or performance
rights.
The Board is of the opinion that share options are an important component of attracting and
retaining quality non-executive directors, particularly in the small cap resources sector. However,
the concerns of shareholders have been noted and the issue of share options in future will be
taken into consideration as compared to the likely increase in fixed directors’ fees should share
options not be issued.
Members of the Remuneration
Committee should consist of
non-executive directors only.
The Remuneration Committee now consists of non-executive directors only.
CHALICE GOLD MINES ANNUAL REPORT 2012
13
Directors’ rePort (continueD)
8.3.2 Remuneration principles and components of remuneration
The Company has adopted the following principles in its remuneration framework:
1. The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and
retain directors and executives of the highest and appropriate calibre and, while incurring a cost which is acceptable to
shareholders and appropriate for the Company’s size; and
2. Key management personnels’ interests need to be aligned with the creation of shareholder value and Company performance by:
• providing fair, consistent and competitive compensation and rewards to attract and retain appropriate employees;
• ensuring that total remuneration is competitive with its peers by market standards;
• incorporating in the remuneration framework both short and long term incentives linked to the strategic goals and
performance of the individuals and the Company and shareholder returns;
• demonstrating a clear relationship between individual performance and remuneration; and
• motivating employees to pursue and achieve the long term growth and success of the Company.
The following table is an overview of the components of remuneration:
eleMent
non-executive Directors
executives
Fixed remuneration
Base salary
Base fee
Committee fees
Superannuation
Consultancy fees
Other benefits
Variable remuneration
Short term incentives (STI)
Share options
Performance rights
# Only applies to Australian non-executives.
## Some directors are paid consultancy fees on an arm’s length basis (refer below).
×
#
##
×
###
×
×
×
×
### Non-executive directors are eligible to participate in the share option plan at the discretion of the Board and subject to shareholder approval where required
(refer below for further details).
14
Directors’ rePort (continueD)
8.3.3 Non-executive director remuneration
The Company’s Constitution and the ASX Listing Rules specify that the aggregate fees to be paid to non-executive directors for
their role as a director are to be approved by shareholders at a general meeting. At the 2011 AGM, Shareholders approved an
aggregate amount of $450,000 per year (including superannuation).
The fee structure for non-executive directors is reviewed annually and the Remuneration Committee and the Board will consider
advice from external consultants, which includes comparative analyses of the fees paid to non-executive directors of comparable
companies in the resources sector with similar market capitalisations when undertaking the annual review process. Generally, the
Company will position itself within the 50th and 75th percentile band of the comparative market data.
For the 2012 financial year (effective 1 July 2011), non-executive directors received a fee of $45,000 (inclusive of
superannuation), the members of the Audit Committee and Remuneration Committee also received an additional $5,000 for their
roles on each of those Committees. The additional payments recognise the additional time commitment by non-executive directors
who serve on committees.
The non-executive directors are not entitled to receive retirement benefits. Non-executive directors, at the discretion of the Board,
may participate in the Employee Share Option Plan, subject to the usual approvals required by shareholders. However, the Board
has noted the concerns of shareholders regarding the issue of share options to non-executive directors and will balance the cost
benefit of issuing share options to attract and retain quality directors against paying higher fixed directors’ fees.
Non-executive directors are not eligible to participate in the Company’s LTIP.
Apart from their duties as directors, some non-executive directors may undertake work for the Company on a consultancy basis
pursuant to the terms of consultancy services agreements. Under the terms of these consultancy agreements, non-executive
directors would receive a daily rate or monthly retainer for the work performed at a rate comparable to market rates that they
would otherwise receive for their consultancy services.
The remuneration of non-executive directors for the years ended 30 June 2012 and 30 June 2011 is detailed further in this
Remuneration Report. The amounts listed under ‘Salary & Fees’ includes both director fees and consultancy fees received by non-
executive directors.
8.3.4 Executive remuneration
The executive remuneration consists of fixed remuneration and may also comprise variable remuneration in the form of share
options and performance rights. During the 2012 financial year, an LTIP was implemented with the intention to more closely align
executive remuneration with the interests of shareholders. The LTIP was approved by the Company’s shareholders at the 2011
AGM and the structure of the plan is detailed below.
Fixed remuneration
The level of fixed remuneration is set to provide a base level of remuneration which is both appropriate for the position and
competitive in the market. The Company aims to pay within the 50th and 75th percentile band of benchmark data, but the
Board has the discretion to pay above this to attract and retain key employees in achieving the Company’s strategic goals.
Fixed remuneration is reviewed at appropriate times (and no less than on an annual basis) by the Remuneration Committee and
approved by the Board having regard to the Company and individual performance, relevant comparable remuneration for
similarly capitalised companies in the mining industry and independently compiled market data. Executives receive their fixed
remuneration in the form of cash.
The fixed remuneration for executives is detailed further in this Report.
Variable remuneration - STIP
As detailed in the 2011 Remuneration Report, the Remuneration Committee recommended to the Board that a formal Short Term
Incentive Plan (‘STIP’) be implemented. It was proposed that the objectives of the plan would be closely linked to the development
of the Koka Gold Mine, which, subsequent to year end, was sold as part of the Zara Project.
Due to the sale of the Zara Project, a formal STIP has not been implemented; however, the Board retains discretion to reward
outstanding individual performance subject to the Company’s cash position and financial outlook.
No cash bonuses were paid during the financial year ended 30 June 2012.
CHALICE GOLD MINES ANNUAL REPORT 2012
15
Directors’ rePort (continueD)
Variable remuneration – share option plan
Equity grants to executives have previously been delivered in the form of employee share options granted under the Company’s
Employee Share Option Plan which was approved by shareholders in 2010. Options were issued at an exercise price
determined by the Board at the time of issue.
Generally, no performance hurdles were set on options issued to executives. The Company believed that as options were issued
at a price in excess of the Company’s current share price at the date of issue of those options, there was an inherent performance
hurdle as the share price of the Company’s shares had to increase before any reward could accrue to the executive.
The vesting period for share options is at the discretion of the Board and the expiry date of share options is usually between 3
and 5 years.
Upon cessation of employment, participants have 3 months from the date of cessation to exercise the share options. This
requirement may be waived at the Board’s discretion.
It is the Board’s preference to issue Performance Rights under the new LTIP rather than share options.
Variable remuneration – new employee long term incentive plan (LTIP)
Within the context of the review of the Company’s remuneration approach the Company introduced an Employee LTIP, with the
objectives of:
• aligning employee incentives with personal and Company performance;
• balance the short term with the long term Company focus; and
• assist in attracting and retaining high calibre employees by providing an attractive long term retention tool that builds an
‘ownership of the Company’ mindset.
Under the LTIP, the Board has the discretion to make annual awards of performance rights to executives and employees. The level
of the award of performance rights is dependent on an employee’s position within the Company. Subject to the performance
criteria set out in the terms of the LTIP, performance rights held by an employee may convert into ordinary fully paid shares in the
Company. In the event performance criteria are not achieved, the employee’s performance rights lapse with no shares being
issued. Details of performance rights granted during the year are shown below:
executive
nuMBer of riGhts
PerforMAnce conDition
AchieveMent DAte
stAtus
Mr J Jeffery(1)
250,000
250,000
250,000
Mr M Kelly(2)
166,667
Practical completion of the plant at the
Company’s Koka Gold Mine
30 June 2013
First gold pour from the Koka Gold Mine
30 September 2013
Commercial gold production from
the Koka Gold Mine for a period of
6 months
30 June 2014
Practical completion of the plant at the
Company’s Koka Gold Mine
30 June 2013
166,667
166,666
125,000
125,000
First gold pour from the Koka Gold Mine
30 September 2013
Commercial gold production from
the Koka Gold Mine for a period of
6 months
30 June 2014
Retention – Service period only
1 October 2012
Retention – Service period only
1 October 2013
Mr R Hacker
Lapsed
Lapsed
Lapsed
Lapsed
Lapsed
Lapsed
(1) Mr Jeffery’s performance rights lapsed on 17 February 2012 as Mr Jeffery ceased employment with the Company.
(2) Mr Kelly’s performance rights lapsed on 7 September 2012 as the Company completed the sale of the Zara Project and thus the performance conditions set for
Mr Kelly were no longer able to be achieved.
16
Directors’ rePort (continueD)
A summary of the LTIP is set out below:
Key DesiGn feAture
Eligibility
Award quantum
DesiGn
All full-time employees and permanent part-time employees (including executive directors and the
managing director) of the Company are eligible participants. Shareholder approval is required
before any director or related party of the Company can participate in the LTIP.
The award quantum will be determined in consideration of total remuneration of the individual,
market relativities and business affordability. The LTIP does not set out a maximum number of shares
that may be issuable to any one person, other than the 5% limit of the total number of issued shares.
Performance conditions
The performance conditions that must be satisfied in order for the performance rights to vest are
determined by the Board. The performance conditions may include one or more of the following:
Vesting
Term and lapse
• Employment of a minimum period of time;
• achievement of specific objectives by the participant and/or the Company. This may include the
achievement of share price targets and other major long term milestone targets; or
• such other performance objectives as the Board may determine.
Vesting will occur at the end of a defined period, usually three years, and upon the achievement of
the performance conditions.
The term of the performance rights is determined by the Board in its absolute discretion, but will
ordinarily have a three year term up to a maximum of five years. Performance Rights are subject
to lapsing if performance conditions are not met by the relevant measurement date or expiry
date (if no other measurement date is specified) or if employment is terminated for cause or in
circumstances as described below.
Price Payable by Participant No consideration.
Cessation of Employment
If an employee leaves the Company prior to the expiration of the relevant vesting period for a
particular award of performance rights, generally such performance rights would lapse except in
certain limited situations such as disability, redundancy or death.
8.3.5 Link between performance and executive remuneration
The focus of executive remuneration over the financial year was fixed remuneration and the share options (ie. growing the value
of the Company as reflected through share price). The current review of the Company’s remuneration approach seeks to ensure
that executive remuneration is appropriately aligned with the business strategy and shareholder interests.
The share price performance over the last 5 years is as follows:
Share price
30 June
2008
$0.14
30 June
2009
$0.25
30 June
2010
$0.39
30 June
2011
$0.33
30 June
2012
$0.20
On 4 September 2012, the Company completed the sale of the Zara Project to SFECO and ENAMCO for gross proceeds of
US$114 million. At the date of this report Chalice has a cash backed value of $0.33 per share.
CHALICE GOLD MINES ANNUAL REPORT 2012
17
Directors’ rePort (continueD)
8.4 Key MAnAGeMent Personnel reMunerAtion (AuDiteD)
short-terM PAyMents
Post-
eMPloyMent
PAyMents
shAre-
BAseD
PAyMents
Key
Management
Personnel
Salary
& fees
Non-
monetary
benefits
Total
Superannuation
benefits
Other
Termination
benefits
Long Term
Incentives (4)
Total
Proportion of
remuneration
performance
related
$
$
$
$
$
$
$
$
Directors
T R B Goyder(1) 2012
263,761
2,445
266,206
23,739
2011
229,358
2,601
231,959
20,642
D A Jones
2012
284,404
6,235
290,639
25,596
2011
284,404
2,601
287,005
25,596
A W Kiernan
2012
203,196
2,445
205,641
2011
165,527
2,601
168,128
M R Griffiths
2012
49,331
955
50,286
3,888
2,973
5,701
2011
275,229
2,601
277,830
24,771
S P Quin
2012
42,083
2011
35,000
2,445
2,601
44,528
37,601
-
-
J Jeffery (2)
2012
218,056
1,490
219,546
25,536
2011
-
-
-
-
Executive
R K Hacker
2012
229,358
3,599
232,957
20,642
2011
239,358
3,189
242,547
21,542
M P Kelly (3)
2012
341,235
2011
-
-
-
341,235
-
-
-
-
-
-
-
-
-
50,459
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
81,250
-
-
-
-
-
-
-
-
289,945
252,601
316,235
-%
-%
-%
269,740
582,341
46%
-
-
209,529
171,101
11,800
118,246
95,072
397,673
56,085
100,613
163,039
200,640
-
-
326,332
-
-%
-%
10%
24%
56%
81%
-%
-%
36,753
290,352
13%
-
-
-
264,089
341,235
-
-%
-%
-%
Total
Compensation
2012 1,631,424
19,614 1,651,038
105,102
50,459
81,250
104,638 1,992,487
2011 1,228,876
16,194 1,245,070
95,524
-
-
527,851 1,868,445
(1) At the Company’s 2011 Annual General Meeting, Shareholders approved the issue of 2,500,000 options to Mr Goyder. The options were issued with an
exercise price of $0.50 and had, as a condition of vesting, successful completion of obtaining debt and/or equity funding for the development of the Zara
Project. No expense was recognised in 2012 as the directors considered it was unlikely that the options would vest. Subsequent to year end, the sale of the Zara
Project was completed. Therefore, the vesting conditions of the options are not able to be achieved and the options issued were cancelled on 7 September 2012.
(2) Mr Jeffery was granted performance rights on 15 December 2011, which subsequently lapsed on Mr Jeffery’s resignation.
(3) Mr Kelly was appointed to General Manager – Zara Mining Share Company on 1 September 2011. On 16 December 2011, Mr Kelly was granted 500,000
performance rights with specific performance hurdles relating to the Zara Project. No expense was recognised in 2012 as the directors considered it unlikely that
the performance rights would vest. Subsequent to year end, the sale of the Zara Project was completed and therefore the performance hurdles are unable to be
achieved. The performance rights were cancelled on 7 September 2012.
(4) The fair value of the options and performance rights is calculated at the date of grant using a Black-Scholes 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 and performance rights market conditions have been taken into account.
Details of performance-related remuneration
The proportion of remuneration that is performance related, including the STI and LTI components is tailored to individual
executives. As discussed in section 8.3.4 the Company has not formally implemented an STIP due to the sale of the Zara Project.
As the Company’s future direction becomes evident, the proportion of performance related remuneration will be re-assessed.
18
Directors’ rePort (continueD)
8.5 eQuity instruMents (AuDiteD)
8.5.1 Employee share options
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 2012
GrAnt
DAte
fAir vAlue Per
oPtion At
GrAnt DAte
$
exercise
Price
exPiry
DAte
$
nuMBer
of oPtions
vesteD
DurinG 2012
Directors
T R B Goyder
2,500,000
22 November 2011
0.07
0.50
30 November 2014
-
The options granted to Mr Goyder were to vest on the achievement of obtaining sufficient finance (either debt or equity) for the
development of the Koka Gold Mine.
Subsequent to the reporting date, Mr Goyder’s options lapsed as the vesting conditions set were no longer achievable due to the
sale of the Zara Project.
During the reporting period, no shares were issued on the exercise of options previously granted as compensation.
Details of the vesting profile of the options granted as remuneration to each key management person of the Group are outlined below.
nuMBer
GrAnteD
DAte
GrAnteD
% vesteD
in yeAr
% forfeiteD
in yeAr
DAte on Which
GrAnt vests
Director
T R B Goyder
2,500,000
22 November 2011
-
S Quin
187,500
25 November 2010
100%
187,500
25 November 2010
-
M Griffiths
375,000
16 November 2009
100%
-
-
-
-
Upon obtaining debt or equity
finance for the Koka Gold Mine
30 April 2012
30 April 2013
1 September 2011
The movement during the reporting period, by value of options over ordinary shares in the Group held by each key management
person is detailed below:
vAlue of oPtions
GrAnteD in yeAr(1)
$
vAlue of oPtions
exerciseD in yeAr(1)
$
vAlue of oPtions lAPseD
in yeAr(1)
$
T R B Goyder
163,513
-
-
(1) For details on the valuation of the options, including the models and assumptions, please refer to note 15.
CHALICE GOLD MINES ANNUAL REPORT 2012
19
Directors’ rePort (continueD)
b) Employee long term incentive plan - performance rights
Details of performance rights granted as compensation to KMP during the reporting period and details of performance rights that
vested during the reporting period are as follows:
nuMBer
of riGhts
GrAnteD
DurinG 2012
GrAnt
DAte
fAir vAlue Per
riGht At
GrAnt DAte
$
exPiry
DAte
nuMBer
of riGhts
vesteD
DurinG 2012
Executives
J Jeffery(1)
M Kelly(2)
R Hacker
750,000
15 December 2011
500,000
16 December 2011
250,000
16 December 2011
0.29
0.30
0.30
30 June 2015
30 June 2015
1 October 2014
-
-
-
(1) Mr Jeffery’s performance rights lapsed on 17 February 2012.
(2) Mr Kelly’s performance rights lapsed on 7 September 2012.
During the reporting period, no shares were issued on the exercise of performance rights previously granted as compensation.
Details of the vesting profile of performance rights granted as remuneration to each KMP of the Group are outlined below.
nuMBer
GrAnteD
DAte
GrAnteD
% vesteD
in yeAr
% forfeiteD
in yeAr
DAte on Which
GrAnt vests
Executive
J Jeffery(1)
M Kelly(2)
R Hacker
750,000
15 December 2011
500,000
16 December 2011
125,000
16 December 2011
125,000
16 December 2011
-
-
-
-
100%
-
-
-
-
-
1 October 2012
1 October 2013
(1) Mr Jeffery’s performance rights lapsed on 17 February 2012.
(2) Mr Kelly’s performance rights lapsed on 7 September 2012.
The movement during the reporting period, by value of performance rights over ordinary shares in the Group held by each KMP
is detailed below:
vAlue of PerforMAnce
riGhts GrAnteD in yeAr(1)
$
vAlue of PerforMAnce
riGhts exerciseD in yeAr(1)
$
vAlue of PerforMAnce
riGhts lAPseD in yeAr(1)
$
J Jeffery
M Kelly
R Hacker
217,500
150,000
75,000
-
-
-
217,500
-
-
(1) For details on the valuation of the options, including the models and assumptions, please refer to note 15.
20
Directors’ rePort (continueD)
8.6 service AGreeMents
Remuneration arrangements for KMP are formalised in employment agreements. Details of these contracts are provided below.
Tim Goyder
(Executive Chairman)
terMinAtion
DiMinution of resPonsiBility
other Provisions
Mr. Goyder’s
employment agreement
may be terminated by
the Company or Mr.
Goyder upon giving
three months notice.
If Mr Goyder ‘s role in the Company undergoes a
material variation or diminution of responsibilities,
including a material change in authority or in
his reporting relationship to the Board, he may
terminate his employment and would then receive a
payment equal to 12 months salary.
Standard Chalice
terms and conditions of
employment.
Douglas Jones
(Managing Director and
Chief Executive Officer)
Dr Jones’ employment
agreement may be
terminated by the
Company or Dr Jones
upon giving three
months notice.
If Dr Jones’ role in the Company undergoes a
material variation or diminution of responsibilities,
including a material change in authority or in
his reporting relationship to the Board, he may
terminate his employment and would then receive a
payment equal to 12 months salary.
Standard Chalice
terms and conditions of
employment.
Other Key Management
Personnel
Nil
All other Key
Management
Personnel employment
agreements may be
terminated by the
Company or the
employee upon giving
three months notice.
Non-Executive Directors Nil
Nil
Standard Chalice
terms and conditions of
employment.
9. DiviDenDs
No dividends were declared or paid during the year 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. Following the sale of the Company’s major asset, the Zara Project, the Company will focus on the
evaluation of resource projects for acquisition and also the exploration of the Company’s remaining projects in Eritrea.
11. events suBseQuent to rePortinG DAte
11.1 coMPletion of the sAle of the ZArA ProJect
On 15 June 2011, Chalice executed a Deed of Acquisition with ENAMCO for the sale to ENAMCO of a 30 per cent
participating interest in Chalice’s Zara Project for US$32 million. This 30 per cent was in addition to ENAMCO’s then existing
10 per cent free carried interest.
On 27 April 2012, the Company agreed to sell its remaining 60 per cent interest in the Zara Project to SFECO for US$80
million, including a deferred consideration of US$2 million payable upon commencement of first commercial production of the
Koka Gold Mine.
On 4 September 2012, the transactions with SFECO and ENAMCO were settled, resulting in a net profit after tax of
approximately $43.4 million. On completion of both transactions and after the payment of all applicable taxes in Eritrea,
Chalice had approximately $83 million cash at bank.
As at 30 June 2012, the Zara Project was recognised as an asset held for sale and a discontinued operation. Refer to note 10.
11.2 DrAGon MininG liMiteD PAyMent
As outlined in note 21, a contingent liability existed as at 30 June 2012 for a payment to Dragon Mining Limited of $1.5 million.
On 11 September 2012, Chalice settled this obligation.
CHALICE GOLD MINES ANNUAL REPORT 2012
21
Directors’ rePort (continueD)
11.3 cAPitAl reDuction AnD return
Following the recent completion of the sale of the Company’s interest in the Zara Project in Eritrea, Chalice currently has
approximately $81 million cash on hand. The Board has undertaken a review of its capital management options and determined
that these funds exceed its current capital requirements, providing justification to return some of this capital to shareholders.
On 24 September 2012, Chalice announced a proposed capital reduction and return, subject to shareholder approval, of up to
$25 million (10 cents per share) to those persons or entities that are shareholders as at the appropriate record date. At the date
of this report the record date has not been determined and the capital reduction and return is subject to shareholder approval
and timely receipt of a requested tax ruling from the Australian Taxation Office.
12. Directors’ interests
The relevant interest of each director in the shares, rights or options over such instruments issued by Chalice and other related
bodies corporate, as notified by the directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the
date of this report is as follows:
T R B Goyder
D A Jones
S P Quin
A W Kiernan
orDinAry shAres
oPtions over
orDinAry shAres
33,724,342
296,278
26,321
1,137,041
-
2,500,000
750,000
500,000
13. shAre oPtions AnD PerforMAnce riGhts
Unissued shares under option
At the date of this report 5,100,000 unissued ordinary shares of the Company are under option on the following terms and conditions:
exPiry DAte
exercise Price
($)
nuMBer of shAres
1 December 2012
31 July 2013
31 March 2014
31 March 2014
30 April 2014
30 April 2014
30 April 2014
14 September 2014
30 November 2014
0.25
0.20
0.35
0.45
0.55
0.65
0.75
0.45
0.45
500,000
500,000
1,250,000
1,250,000
187,500
187,500
375,000
750,000
100,000
These options do not entitle the holder to participate in any share issue of Chalice or any other body corporate.
Performance rights
At the date of this report 400,000 performance rights have been issued on the following terms and conditions:
exPiry DAte
30 June 2015
30 June 2015
exercise Price
($)
Nil
Nil
nuMBer of shAres
250,000
150,000
Shares issued on exercise of options or performance rights
During or since the end of the year, no options or performance rights were exercised.
22
Directors’ rePort (continueD)
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 $14,672 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 KMP remuneration on page 18.
15. non-AuDit services
During the year HLB Mann Judd, the Company’s auditors, performed no other services in addition to their statutory duties.
16. AuDitor’s inDePenDence DeclArAtion
The auditor’s independence declaration is set out on page 24 and forms part of the Directors’ Report for the year ended 30 June 2012.
This Report is made in accordance with a resolution of the Directors:
Tim R B Goyder
Executive Chairman
Dated at Perth the 10th day of October 2012
coMPetent Persons AnD QuAlifieD Person 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 is a Qualified Person under National Instrument 43-101 – ‘Standards of Disclosure for Mineral Projects’. The Qualified
Person has verified the data disclosed in this release, including sampling, analytical and test data underlying the information contained in this release. Dr Jones
consents to the release of information in the form and context in which it appears here.
forWArD looKinG stAteMents
This document may contain forward-looking information within the meaning of Canadian securities legislation and forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995 (collectively, forward-looking statements). These forward-looking statements are made as of the date
of this document and Chalice Gold Mines Limited (the Company) does not intend, and does not assume any obligation, to update these forward-looking statements.
Forward-looking statements relate to future events or future performance and reflect Company management’s expectations or beliefs regarding future events and
include, but are not limited to, statements with respect to the estimation of mineral reserves and mineral resources, the realization of mineral reserve estimates, the
likelihood of exploration success, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations,
environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking statements
can be identified by the use of words such as plans, expects or does not expect, is expected, will, may would, budget, scheduled, estimates, forecasts, intends,
anticipates or does not anticipate, or believes, or variations of such words and phrases or statements that certain actions, events or results may, could, would, might
or will be taken, occur or be achieved or the negative of these terms or comparable terminology. By their very nature forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from
any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to actual
results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of mineral resources; possible variations in ore
reserves, grade or recovery rates; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in
the completion of development or construction activities; as well as those factors detailed from time to time in the Company’s interim and annual financial statements
and management’s discussion and analysis of those statements, all of which are filed and available for review on SEDAR at
. Although the Company has
attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there
may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place
undue reliance on forward-looking statements.
CHALICE GOLD MINES ANNUAL REPORT 2012
23
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
year ended 30 June 2012, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
a) 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
10 October 2012
W M CLARK
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.
22
24
stAteMent oF coMprehensive incoMe
For the yeAr enDeD 30 June 2012
Continuing operations
Other income
Reversal of share of loss of associate
Loss on sale of exploration and evaluation assets
Exploration expenditure not capitalised
Change in fair value of options held through profit and loss
Impairment of exploration and evaluation assets
Corporate administrative expenses
Depreciation and amortisation expense
Loss before tax from continuing operations
note
consoliDAteD
2012
$
2011
$
3(a)
11
9
3(b)
369,678
-
(147,091)
(96,820)
-
(126,431)
615,748
1,508
-
(15,720)
(2,978)
(41,130)
(3,618,603)
(3,911,155)
(99,454)
(474,327)
(3,718,721)
(3,828,054)
Income tax expense
5
-
-
Loss for the year from continuing operations
(3,718,721)
(3,828,054)
Discontinued operations
Loss from discontinued operations (net of tax)
10
(416,493)
-
Loss for the year
(4,135,214)
(3,828,054)
Loss for the year attributable to:
Owners of the parent
Non-controlling interests
Other comprehensive income/(loss)
Net change in fair value of available for sale investments
Exchanges differences on translation of foreign operations
Other comprehensive income/(loss) for the year
(4,093,565)
(3,828,054)
(41,649)
-
(4,135,214)
(3,828,054)
18(b)
18(b)
(34,000)
12,000
2,562,582
(5,776,792)
2,528,582
(5,764,792)
Total comprehensive loss for the year
(1,606,632)
(9,592,846)
Total comprehensive loss for the year attributable to:
Owners of the parent
Non-controlling interests
(1,564,983)
(9,592,846)
(41,649)
-
(1,606,632)
(9,592,846)
Basic and diluted loss (cents per share)
Basic and diluted loss (cents per share) from continuing operations
6
6
(1.6)
(1.5)
(1.8)
(1.8)
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
CHALICE GOLD MINES ANNUAL REPORT 2012
25
stAteMent oF FinAnciAl position
For the yeAr enDeD 30 June 2012
Current assets
Cash and cash equivalents
Trade and other receivables
Assets held for sale – Zara Project
Total current assets
Non-current assets
Financial assets
Exploration and evaluation assets
Property, plant and equipment
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Unearned income
Employee benefits
note
consoliDAteD
2012
$
2011
$
22
7
3,074,530
10,193,836
486,635
478,080
10(a)
48,483,409
-
52,044,574
10,671,916
8
9
12
13
14
15
862,640
919,136
2,482,857
36,492,204
275,419
1,508,705
3,620,916
38,920,045
55,665,490
49,591,961
859,855
941,382
2,979,441
-
93,883
177,607
Liabilities held for sale – Zara Project
Total current liabilities
10(a)
4,670,319
-
8,603,498
1,118,989
Non-current liabilities
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Reserves
Total equity attributable to the owners of the parent
Non-controlling interests
Total equity
16
25,463
25,463
45,091
45,091
8,628,961
1,164,080
47,036,529
48,427,881
17
18(a)
18(b)
64,200,112
64,200,112
(16,202,389)
(12,108,824)
(4,636,037)
(3,663,407)
43,361,686
48,427,881
3,674,843
-
47,036,529
48,427,881
The above statement of financial position should be read in conjunction with the accompanying notes.
26
stAteMent oF chAnges in equity
For the yeAr enDeD 30 June 2012
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CHALICE GOLD MINES ANNUAL REPORT 2012
1
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stAteMent oF cAsh FloWs
For the yeAr enDeD 30 June 2012
Cash flows from operating activities
Cash receipts from operations
Cash paid to suppliers and employees
Interest received
Net cash used in operating activities
Cash flows from investing activities
Payments for mining exploration and evaluation
Acquisition of property, plant and equipment
Tax payment for acquisition of exploration assets
Repayment of loan by non-controlling interests
Interim payment received
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Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Payments for share issue costs
Net cash from financing activities
note
consoliDAteD
2012
$
2011
$
155,134
244,230
(3,171,481)
(3,016,741)
265,079
376,724
22
(2,751,268)
(2,395,787)
(8,590,119)
(13,079,323)
(2,457,989)
(863,056)
-
(3,048,675)
14
3,126,262
2,979,441
695,203
-
-
-
-
(1,034,819)
(4,247,202)
(18,025,873)
-
-
-
24,066,103
(1,120,938)
22,945,165
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 30 June
(6,998,470)
2,523,505
10,193,836
7,688,905
(18,235)
(18,574)
22
3,177,131
10,193,836
The above statement of cash flows should be read in conjunction with the accompanying notes.
28
notes to the FinAnciAl stAteMents
For the yeAr enDeD 30 June 2012
1. siGnificAnt AccountinG Policies
Chalice Gold Mines Limited is a dual listed Australian Securities Exchange (‘ASX’) and Toronto Stock Exchange (‘TSX’) 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 2012.
(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 of the consolidated financial
statements and notes thereto, complies with International Financial Reporting Standards (IFRS).
The financial report was authorised for issue by the directors on 10 October 2012.
(b) Adoption of new and revised standards
In the year ended 30 June 2012, the Group has reviewed all of the new and revised Standards and Interpretations issued by the
AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2011. It has been
determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business
and, the Group has adopted the following new and amended Australian Accounting Standards and AASB Interpretations as of 1
July 2011:
• AASB 124 Related Party Disclosures (amendment) effective 1 July 2011
• AASB 132 Financial Instruments
• Improvements to AASB’s
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 2012. The following standards and interpretations have been recently issued or amended and have not been
adopted by the Group for the annual reporting period ending 30 June 2012, outlined below:
• AASB 10 Consolidated Financial Statements
• AASB 11 Joint arrangements
• AASB 12 Disclosure of Interests in Other Entities
• AASB 13 Fair Value Measurement
• AASB 119 Employee Benefits
• AASB 9 Financial Instruments
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 necessary to the Group’s accounting policies.
CHALICE GOLD MINES ANNUAL REPORT 2012
29
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
(c) Basis of consolidation
The consolidated financial statements comprise the 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 whether the Company controls another entity.
Investments in subsidiaries held by Chalice Gold Mines Limited are accounted for at cost in the financial statements of the parent
entity less any impairment charges.
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 acquired. 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.
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 the carrying amount of exploration and evaluation expenditure carried forward and it is dependent
on the future successful outcome from exploration activity or alternatively the sale of the respective areas of interest. Where
exploration results are unsuccessful, or no further work is to be undertaken, the directors will then assess whether an
impairment write-down is required, which will be recognised in the statement of comprehensive income.
(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 Black-Scholes
Option model taking into account the terms and conditions upon which the instruments were granted. The details and
assumptions used in determining the value of these transactions are detailed in note 15.
(iii) Impairment of available for sale assets
The Group follows the guidance of AASB 139 Financial Instruments: Recognition and Measurement to determining when
an available-for-sale financial asset is impaired. This determination requires significant judgement. In making this judgement,
the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its
costs and the financial health of and short-term business outlook for the investee, including factors such as industry and sector
performance, changes in technology and operational and financing cash flows.
30
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
(e) Foreign currency translation
The functional currency of the 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 reporting date.
All exchange differences in the consolidated financial report are taken to profit or loss as incurred. 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 into the presentation currency of Chalice
Gold Mines Limited at the rate of exchange ruling at the balance date and their income statements are translated at the weighted
average exchange rate for 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) Operating segments
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur
expenses (including revenues and expenses relating to transactions with other components of the same entity, whose operating
results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to
the segment and assess its performance and for which discrete financial information is available. This includes start up operations
which are yet to earn revenues. Management will also consider other factors in determining operating segments such as the
existence of a line manager and the level of segment information presented to the board of directors.
Operating segments have been identified based on the information provided to the chief operating decision makers – being
the board.
Operating segments that meet the quantitative criteria as described in AASB 8 are reported separately. However, an operating
segment that does not meet the quantitative criteria is still reported separately where information about the segment would be
useful to users of the financial statements.
(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. Revenue is measured at the fair value of the consideration received or receivable, net of returns, trade
allowances, rebates and amounts collected on behalf of third parties.
(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 and
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.
CHALICE GOLD MINES ANNUAL REPORT 2012
31
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
(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 statement of comprehensive income 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
7%-40%
• fixtures and fittings
11%-22%
• motor vehicles
18.75%- 25%
The residual value, if not insignificant, is reassessed annually.
(i) Income tax and other taxes
The income tax expense for the period is the tax payable on the current period’s taxable income based on the applicable income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to
unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted at the end of the
reporting period in the country where the company’s subsidiaries operate and generate taxable income. Provisions are
established where appropriate on the basis of amounts expected to be paid to the tax authorities.
Current tax liabilities for the current period and prior periods are measured at the amount expected to be recovered from or paid
to taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted
by the balance date.
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.
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.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
• when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction
that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit
or loss; or
• when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures,
and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will
not reverse in the foreseeable future.
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.
32
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
(j) Other taxes
Revenue, expenses and assets are recognised net of the amount of goods and services tax (’GST’) or other taxes, except where
the amount of GST or other taxes incurred are not recoverable from the taxation authority. In these circumstances, the GST or
other taxes incurred, are 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.
Other taxes payable in foreign jurisdictions are included as a current payable 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.
Taxes paid in foreign jurisdictions are classified as investing cash flows in the statement of cash flows.
(k) 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.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased
to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net
of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or
loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a
reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual
value, on a systematic basis over its remaining useful life.
(l) 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.
(m) Trade and other receivables
Trade and other receivables are stated at cost less impairment losses (see accounting policy (k)).
(n) 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. Non-current assets and disposal
groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than
through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group
is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to
qualify for recognition as a completed sale within one year from the date of classification.
In the statement of comprehensive income, income and expenses from the discontinued operations are reported separately from
income and expenses from continuing operations, down to the level of profit after taxes, even when the Group retains a non-
controlling interest in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in the statement of
comprehensive income.
Property, plant and equipment and tangible assets once classified as held for sale are not depreciated or amortised.
CHALICE GOLD MINES ANNUAL REPORT 2012
33
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
(o) 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.
The carrying values of plant and equipment are reviewed for impairment at each balance date in line with the Group’s
impairment policy (see accounting policy (k)).
(p) 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 at 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.
34
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
(q) Derecognition of financial assets and financial liabilities
(i) Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) are
derecognised when:
• the rights to receive cash flows from the asset have expired; and/or
• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group
has transferred substantially all the risk and rewards of the asset, or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it
evaluates if and to what extent it has retained the risk and rewards of ownership.
When it has neither transferred nor retained substantially all of the risk and rewards of the asset, nor transferred control of the
asset, the asset is recognised to the extent of the Group’s continuing involved in the asset. In that case, the Group also recognises
an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and
obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
(ii) Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability
and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss
(r) Impairment of financial assets
The Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of a financial assets is deemed to be impaired if, and only if, there is objective
evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred
’loss event’) and that loss event has an impact on estimated future cash flows of the financial asset or the group of financial
assets that can be reliably estimated. Evidence of impairment may include indications that debtors or a group of debtors is
experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will
enter bankruptcy or other financial reorganisation and when observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
(i) Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assess whether objective evidence of impairment exists
individually for financial assets that are individually significant, or collectively for financial assets that are not individually
significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial
asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and
collectively assess them for impairment. Assets that are individually assessed for impairment and for which an impairment loss
is or continues to be, recognised are not included in a collective assessment of impairment.
If there are objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the
difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future
expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at
the financial asset’s original effective interest rate.
(ii) Financial assets carried at cost
If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried
at fair value (because its fair value cannot be reliably measured), or on a derivative asset that is linked to and must be settled
by delivery of such an unquoted equity instrument, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the current market rate of return for a
similar financial asset. Such impairment loss shall not be reversed in subsequent periods.
CHALICE GOLD MINES ANNUAL REPORT 2012
35
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
(iii) Available-for-sale investments
If there is objective evidence that an available-for-sale investment is impaired, an amount comprising the difference between
its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously
recognised in profit or loss, is transferred from equity to the statement of comprehensive income. Reversals of impairment
losses for equity instruments classified as available-for-sale are not recognised in profit. Reversals of impairment losses for
debt instruments are reversed through profit or loss if the increase in an instrument's fair value can be objectively related to an
event occurring after the impairment loss was recognised in profit or loss.
(s) 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)
the rights to tenure of the area of interest are current; and
2) at least one of the following conditions is also met:
(i)
the exploration and evaluation expenditures are expected to be recouped through successful development and
exploitation of the area of interest, or alternatively, by its sale; or
(ii) exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits
a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant
operations in, or in relation to, the area of interest are continuing.
Exploration and evaluation expenditure is initially measured at cost and include acquisition of rights to explore, studies,
exploratory drilling, trenching and sampling and associated activities. General and administrative costs are only included in the
measurement of exploration and evaluation expenditures where they are related directly to operational activities in a particular
area of interest.
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.
(t) Trade and other payables
Trade and other payables are stated at amortised cost. Trade and other payables are presented as current liabilities unless
payment is not due within 12 months.
(u) 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.
36
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
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 superannuation, workers’
compensation insurance and payroll tax.
(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 transaction
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. The fair value is determined using a Black-Scholes model and further details are provided at
note 15.
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:
(a)
the extent to which the vesting period has expired; and
(b)
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, 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.
(v) 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.
CHALICE GOLD MINES ANNUAL REPORT 2012
37
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
(w) 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 it has significant influence if it has 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.
(x) Joint venture interests
The Group has an interest in a joint venture, which is a jointly controlled entity, whereby the venturers have a contractual
arrangement that establishes join control over the economic activities of the entity. The agreement requires unanimous agreement
for financial and operating decisions among the venturers. The Group recognises its interest in the joint venture using the
proportionate consolidation method. The Group combines its proportionate share of each of the assets, liabilities, income and
expenses of the joint venture with similar items, line by line, in its consolidated financial statements.
Adjustments are made in the Group’s consolidated financial statements to eliminate the Group’s share of intragroup balances,
transactions and unrealised gains and losses on such transactions between the Group and its joint venture. Losses on transactions
are recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets or an
impairment loss. The joint venture is proportionately consolidated until the date on which the Group ceases to have joint control
over the joint venture.
Upon loss of joint control, the Group measures and recognises its remaining investment at its fair value. Any difference between
the carrying amount of the former jointly controlled entity upon loss of joint control and the fair value of the remaining investment
and proceeds from disposal are recognised in profit or loss. When the remaining investment constitutes significant influence, it is
accounted for as investment in an associate.
38
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
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 and evaluation costs. Results of both segments are reported to the Board of Directors at each Board meeting.
Exploration expenditure is reflected as a segment as exploration expenditure occurs in one geographical area – Eritrea.
exPlorAtion AnD
evAluAtion
corPorAte
totAl
Other Income
Loss on sale of exploration and
evaluation assets
2012
$
-
(147,091)
Exploration costs not capitalised
(96,820)
(15,720)
Impairment of exploration and
evaluation assets
(126,431)
(41,130)
2011
$
2012
$
2011
$
2012
$
2011
$
-
-
171,911
232,230
171,911
232,230
-
-
-
-
-
-
(147,091)
-
(96,820)
(15,720)
(126,431)
(41,130)
Corporate and administrative expenses
-
-
(3,618,603)
(3,911,155)
(3,618,603)
(3,911,155)
Segment loss before tax
(370,342)
(56,850)
(3,446,692)
(3,678,925)
(3,817,034)
(3,735,775)
Unallocated income/(expenses)
Net financing income
Depreciation
Reversal of associates net loss
Loss from discontinued operations
Change in fair value of options
Loss before income tax
197,767
383,518
(99,454)
(474,327)
-
1,508
(416,493)
-
-
(2,978)
(4,135,214)
(3,828,054)
exPlorAtion AnD
evAluAtion
corPorAte
totAl
30 June
2012
30 June
2011
$
30 June
2012
30 June
2011
$
30 June
2012
$
30 June
2011
$
Segment assets:
Exploration and evaluation assets
2,482,857 36,492,204
-
-
2,482,857 36,492,204
Other
371,349
1,124,354
390,705
862,431
762,054
1,986,785
2,854,206 37,616,558
390,705
862,431
3,244,911 38,478,989
Unallocated assets
Assets held for sale
Total assets
3,937,170 11,112,972
48,483,409
-
55,665,490 49,591,961
Segment liabilities
(3,544,485)
(745,807)
(414,157)
(418,273)
(3,958,642)
(1,164,080)
Liabilities held for sale
Total liabilities
(4,670,319)
-
(8,628,961)
(1,164,080)
CHALICE GOLD MINES ANNUAL REPORT 2012
39
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
consoliDAteD
2012
$
2011
$
171,911
197,767
369,678
105,752
539,691
100,227
111,940
388,253
199,127
434,455
232,230
383,518
615,748
381,751
-
103,253
136,358
356,438
192,670
519,486
1,525,680
1,826,970
213,478
394,229
3,618,603
3,911,155
1,018,393
107,796
81,721
135,755
(39,272)
6,007
899,082
71,000
128,826
132,643
35,413
32,155
215,280
527,851
1,525,680
1,826,970
51,500
51,500
43,815
43,815
3. revenue AnD exPenses
(a) Other income
Corporate and administration service fees
Net finance income
(b) Corporate administrative expenses
Consultants
Costs associated with assets held for sale
Insurance
Legal fees
Travel
Head office costs
Regulatory and compliance
Personnel expenses (note 3(c))
Other
(c) 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
4. AuDitors’ reMunerAtion
Audit services
HLB Mann Judd:
Audit and review of financial reports
40
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
incoMe tAx
5.
The prima facie income tax expense on pre-tax accounting result on operations and discontinued operations reconciles to the
income tax benefit in the financial statements as follows:
Accounting loss from continuing operations
Accounting loss from discontinuing operations
Accounting loss before income tax
consoliDAteD
2012
$
2011
$
(3,718,721)
(3,828,054)
(416,493)
-
(4,135,214)
(3,828,054)
Income tax calculated at the Australian corporate rate of 30%
(1,240,564)
(1,148,416)
Non-deductible expenses
Deferred tax assets and liabilities not recognised
Income tax expense reported in the statement of comprehensive income
306,437
934,127
-
745,138
403,278
-
The tax rate used in the above reconciliation is the corporate rate of 30% payable by Australian corporate entities on taxable
profits under Australian tax law. There has been no change in this tax rate since the previous reporting period.
Unrecognised deferred tax balances
The following deferred tax assets and liabilities have not been brought to account:
Deferred tax assets comprise:
Revenue losses available for offset against future taxable income
Share issue expenses
Accrued expenses and liabilities
Deferred tax liabilities comprise:
Exploration costs capitalised
Accrued income
Net deferred tax assets recognised
consoliDAteD
2012
$
2011
$
4,157,557
3,084,217
457,721
73,115
642,948
78,320
4,688,393
3,805,485
(112,500)
(559)
(113,059)
(188,939)
(14,003)
(202,906)
Income tax benefit not recognised directly in equity during the year:
Share issue costs
47,218
302,725
Deferred tax liabilities have not been recognised 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 MINES ANNUAL REPORT 2012
41
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
6. eArninGs Per shAre
Basic and diluted earnings per share
The calculation of basic earnings per share for the year ended 30 June 2012 was based on the loss attributable to ordinary
equity holders of the parent of $4,093,565 [2011: loss of $3,828,054] and a weighted average number of ordinary shares
outstanding during the year ended 30 June 2012 of 250,030,886 [2011: 209,469,399].
consoliDAteD
2012
$
2011
$
Loss attributable to ordinary shareholders
Loss attributable to ordinary equity holders of the parent from continuing operations
3,718,721
3,828,054
Loss attributable to ordinary equity holders of the parent from a discontinued operation
374,844
-
Net loss attributable to ordinary equity holders of the parent for basic earnings
4,093,565
3,828,054
Net loss attributable to ordinary equity holders of the parent adjusted for the
effect of dilution
4,093,565
3,828,054
Diluted earnings per share have not been disclosed as the impact from options and performance rights is anti-dilutive.
7. trADe AnD other receivABles
Other trade receivables
Asset sale proceeds receivable
Prepayments
8. finAnciAl Assets
Non-current
Available for sale investments
Bond in relation to office premises
Bank guarantee and security deposits
357,417
181,355
54,523
74,695
486,635
-
296,725
478,080
710,442
744,442
60,063
92,135
88,070
86,624
862,640
919,136
42
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
9. exPlorAtion AnD evAluAtion exPenDiture
Costs carried forward in respect of:
Exploration and evaluation phase – at cost
Balance at beginning of year
Transferred to property, plant and equipment (note 12)
Expenditure incurred
Acquisition of exploration and evaluation assets from Dragon Mining Limited:
– Eritrean profits tax paid on behalf of Dragon Mining Limited
– Stamp duty
Impairment of exploration and evaluation assets
Exploration and evaluation assets not capitalised
Sale of exploration and evaluation assets
Effects of movements in exchange rate
Transferred to assets held for sale – Zara Project (note 10 (a))
Total exploration expenditure
consoliDAteD
2012
$
2011
$
36,492,204
27,056,158
(27,412,053)
-
7,970,928
10,943,633
-
-
(126,431)
(96,820)
(900,172)
3,048,675
1,034,819
(41,130)
-
-
569,964
(5,549,951)
(14,014,763)
-
2,482,857
36,492,204
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.
CHALICE GOLD MINES ANNUAL REPORT 2012
43
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
10. DiscontinueD oPerAtions
(a) Zara Project
On 27 April 2012, the Company reached agreement to sell its 60 per cent interest in the Zara Project in Eritrea to China
SFECO Group (‘SFECO’) for US$80 million, including a deferred consideration of US$2 million payable upon commencement
of first commercial production at the Koka Gold Mine. The sale to SFECO is in addition to an agreement to sell a 30 per cent
interest (plus a 10 per cent free carried interest) in the Zara Project to the Eritrean National Mining Corporation (‘ENAMCO’) in
June 2011.
As at 30 June 2012, there were a number of conditions precedent to completing the sale of the Zara Project to SFECO including
the settlement of the sale to ENAMCO. As such, the Zara Project was classified as a disposal group held for sale and as a
discontinued operation. The disposal to both SFECO and ENAMCO was completed on 4 September 2012 (refer to note 26).
Revenue
Expenses - depreciation
Loss for the year from discontinued operation
2011
$
2012
$
-
(416,493)
(416,493)
The major classes of assets and liabilities of the Zara Project classified as held for sale as at 30 June 2012:
2012
$
2011
$
Assets
Cash at bank (note 22)
Trade and other receivables
Property, plant and equipment (note 12)
Exploration and evaluation expenditure (note 9)
Liabilities
Trade and other payables
Loans and borrowings
Net assets
Included in other comprehensive income:
Exchange differences on translation of foreign operations
Reserve of disposal group classified as held for sale
Net Cash flows from (used in) discontinued operation
Net cash used in operating activities
Net cash used in investing activities
Net cash from financing activities
Net cash flows for the year
44
102,601
783,963
33,582,082
14,014,763
48,483,409
707,271
3,963,048
4,670,319
43,813,090
2,152,704
2,152,704
-
(5,175,709)
-
(5,175,709)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
11. investMents in AssociAtes
Reconciliation of movements in investments in associates:
Balance at 1 July
Differences in fair value on loss of significant influence
Transfer of balance on loss of significant influence
Balance at 30 June
consoliDAteD
2012
$
2011
$
-
-
-
-
684,934
1,508
(686,442)
-
CHALICE GOLD MINES ANNUAL REPORT 2012
45
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
12. ProPerty, PlAnt AnD eQuiPMent
consoliDAteD
PlAnt AnD
eQuiPMent
$
office
furniture
AnD
eQuiPMent
$
coMPuter
eQuiPMent
AnD
softWAre
$
Motor
vehicles
DeveloPMent
Assets
totAl
$
$
$
567,047
160,568
180,587
600,503
-
1,508,705
-
360,581
24,461
-
-
8,103
(708)
-
-
-
27,412,053
27,412,053
54,977
36,121
3,222,250
3,682,032
(2,575)
28,213
1,734,131
1,783,522
-
(12,864)
-
-
(12,864)
(515,947)
(655,288)
(22,161)
(38,043)
(498,156)
(32,368,434)
(33,582,082)
52,643
114,273
108,503
Year ended 30 June 2012
At 1 July 2011 net of accumulated
depreciation and impairment
Reclassification from exploration and
evaluation expenditure (note 9)
Additions
Exchange differences
Disposals
Reclassification to assets held for sale
(note 10)
At 30 June 2012 net of accumulated
depreciation and impairment
Depreciation charge for the year
(244,158)
(31,529)
(86,443)
(153,817)
At 30 June 2012
Cost
Accumulated depreciation and
impairment
105,834
386,808
437,202
(53,191)
(272,535)
(328,699)
Net carrying amount
52,643
114,273
108,503
-
-
-
-
-
-
-
-
275,419
929,844
(654,425)
275,419
consoliDAteD
PlAnt AnD
eQuiPMent
$
office
furniture
AnD
eQuiPMent
$
coMPuter
eQuiPMent
AnD
softWAre
$
Motor
vehicles
DeveloPMent
Assets
totAl
$
$
$
Year ended 30 June 2011
At 1 July 2010 net of accumulated
depreciation and impairment
Additions
Exchange differences
344,876
206,993
193,291
512,334
422,170
(37,172)
1,675
(7,775)
91,782
347,429
(6,527)
(86,044)
Depreciation charge for the year
(162,827)
(40,325)
(97,959)
(173,216)
At 30 June 2011 net of accumulated
depreciation and impairment
567,047
160,568
180,587
600,503
At 30 June 2011
Cost
Accumulated depreciation and
impairment
1,027,765
466,464
466,927
894,596
(460,718)
(305,896)
(286,340)
(294,093)
Net carrying amount
567,047
160,568
180,587
600,503
-
-
-
-
-
-
-
-
1,257,494
863,056
(137,518)
(474,327)
1,508,705
2,855,752
(1,347,047)
1,508,705
46
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
13. trADe AnD other PAyABles
Trade payables
Services and withholding tax payable
Accrued expenses
14. uneArneD incoMe
Asset sale interim payment
consoliDAteD
2012
$
237,353
234,183
388,319
859,855
2011
$
147,973
80,153
713,256
941,382
2,979,441
2,979,441
-
-
On 27 January 2012, Chalice received US$3 million from the Eritrean National Mining Corporation (‘ENAMCO’) as an interim
payment for ENAMCO’s acquisition of a 30 per cent interest in the Zara Project in Eritrea. Subsequent to year end, the sale to
ENAMCO was completed with the balance of US$31 million being received (refer to note 26).
15. eMPloyee Benefits
Annual leave accrued
Provision for long service leave
Share based payments
56,028
37,855
93,883
95,300
82,307
177,607
(a) Employee share option plan
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 Company. There is no issue price for the
options. The exercise price for the options is determined by the Board.
An option may only be exercised after that option has vested and any other conditions imposed by the Board on exercise
satisfied. The Board may determine the vesting period, if any.
The number and weighted average exercise prices of share options is as follows:
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Granted during the year
Exercisable at the end of the year
Outstanding at the end of the year
WeiGhteD
AverAGe
exercise Price
$
nuMBer
of oPtions
2012
0.42
0.40
-
0.48
0.41
0.45
2012
5,000,000
(500,000)
-
3,850,000
4,812,500
8,350,000
CHALICE GOLD MINES ANNUAL REPORT 2012
47
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Granted during the year
Exercisable at the end of the year
Outstanding at the end of the year
WeiGhteD
AverAGe
exercise Price
$
nuMBer
of oPtions
2011
0.30
-
0.25
0.68
0.60
0.42
2011
10,075,000
-
(5,825,000)
750,000
3,250,000
5,000,000
The options outstanding at 30 June 2012 have a weighted average exercise price of $0.45 [2011: $0.42] and a weighted
average contractual life of 4 years [2011: 5 years].
The fair value of the options is estimated at the date of grant using a Black-Scholes option-pricing model. The following table
gives the assumptions made in determining the fair value of the options granted during the year.
Weighted average share price at grant date
Weighted exercise price
Expected volatility (expressed as weighted average volatility)
Option life (expressed as weighted average life)
Expected dividends
Risk-free interest rate
2012
$0.29
$0.48
62%
3 years
-
3.02%
2011
$0.62
$0.68
71%
4 years
-
5.12%
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.
(b) Employee long term incentive plan
At the Company’s 2011 Annual General Meeting, an Employee Long Term Incentive Plan (‘LTIP’) was approved by shareholders.
Under the LTIP, the Board may issue performance rights to employees and directors. A performance right is a right to be issued an
ordinary share upon the satisfaction of certain performance conditions that are attached to the performance right, the conditions
of which are determined by the Board.
Performance rights are granted for no consideration and the term of the performance rights are determined by the Board in its
absolute discretion, but will ordinarily have a three year term up to a maximum of five years. Performance rights are subject to
lapsing if performance conditions are not met by the relevant measurement date or expiry date (if no other measurement date is
specified) or if employment is terminated. There is no ability to re-test performance under the LTIP after the performance period.
The fair value of performance rights has been calculated at the grant date and allocated to each reporting period evenly over the
period from grant date to vesting date. The value disclosed is the portion of fair value of the rights allocated to this reporting period.
The assessed fair value of the performance rights outstanding at 30 June 2012 was $0.30 per performance right (2011: Nil).
A summary of performance rights in the Group and the Company is as follows:
GrAnt DAte
oPeninG
BAlAnce
GrAnteD
vesteD
lAPseD
closinG
BAlAnce
shAre Price At
DAte of issue
-
-
-
-
-
750,000
500,000
250,000
150,000
1,650,000
-
-
-
-
-
(750,000)
-
-
-
(750,000)
-
500,000
250,000
150,000
900,000
$0.29
$0.30
$0.30
$0.30
15 December 2011
16 December 2011
16 December 2011
16 December 2011
48
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
The fair value of performance rights are determined by the share price at grant date and recognised as an expense based on the
extent to which vesting conditions have been met.
Share based payment transactions
The expense recognised for during the year is shown in the following table:
Share options granted in 2011 - equity settled
Share options granted in 2012 – equity settled
Performance rights granted in 2012
Total expenses recognised as personnel expenses
16. other liABilities
Non-current
Lease make good provision
consoliDAteD
2012
$
67,885
88,491
58,904
2011
$
527,851
-
-
215,280
527,851
25,463
25,463
45,091
45,091
17. issueD cAPitAl
There were 250,030,886 shares on issue at 30 June 2012 (2011: 250,030,886).
(a) Movements in ordinary shares on issue
2012
2011
no.
$
no.
$
Balance at beginning of financial year
250,030,886
64,200,112
181,033,617
41,254,947
Shares issued under non-renounceable rights issue
Share placement
Shares issued on exercise of unlisted options
Cost of share issues
-
-
-
-
-
-
-
-
30,172,269
12,672,353
32,000,000
9,600,000
6,825,000
1,793,750
-
(1,120,938)
Balance at end of financial year
250,030,886
64,200,112
250,030,886
64,200,112
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 exercised during the year
Options issued during the year
On issue at 30 June
2012
no.
2011
no.
7,000,000
13,075,000
(2,500,000)
-
-
(6,825,000)
3,850,000
750,000
8,350,000
7,000,000
CHALICE GOLD MINES ANNUAL REPORT 2012
49
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
At 30 June 2012 the Company had 8,350,000 unlisted options on issue under the following terms and conditions:
nuMBer
exPiry DAte
exercise Price
$
500,000
1 December 2012
500,000
31 July 2013
1,250,000
31 March 2014
1,250,000
31 March 2014
750,000
1 September 2012
187,500
30 April 2014
187,500
30 April 2014
375,000
30 April 2014
750,000
14 September 2014
2,500,000
30 November 2014*
100,000
30 November 2014
0.25
0.20
0.35
0.45
0.50
0.55
0.65
0.75
0.45
0.50
0.45
*These options were issued with vesting conditions relating to obtaining debt or equity finance for the Koka Gold Mine. The
options lapsed in September 2012 when the vesting conditions were no longer achievable due to the sale of the Zara Project
(Note 10(a)).
(c) Performance rights
On issue at 1 July
Issue of performance rights under the Employee Long Term Incentive Plan
Performance rights lapsed
On issue at 30 June
2012
no.
-
1,650,000
(750,000)
900,000
2011
no.
-
-
-
-
At 30 June 2012 the Company had 900,000 performance rights options on issue under the following terms and conditions:
nuMBer
terMs
exPiry DAte
exercise Price
$
166,667* Practical completion of the plant at the Company’s Koka Gold Mine
166,667* First gold pour from the Koka Gold Mine
30 June 2015
30 June 2015
166,666* Commercial gold production from the Koka Gold Mine for a period of 6 months
30 June 2015
250,000
Retention – Service period only
150,000
Retention – Service period only
1 October 2014
1 October 2014
-
-
-
-
-
*These performance rights were issued with specific performance hurdles relating to the Zara Project. Subsequent to year end,
the sale of the Zara Project was completed and therefore the performance rights are unable to be achieved. The performance
rights were cancelled on 7 September 2012.
50
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
18. AccuMulAteD losses AnD reserves
(a) Movements in accumulated losses attributable to owners of the parent:
Balance at beginning of financial year
Loss for the year attributable to owners of the parent
Balance at end of financial year
(b) Nature and purpose of reserves
Other capital reserves
(i) Share-based payment transactions
consoliDAteD
2012
$
2011
$
(12,108,824)
(8,280,770)
(4,093,565)
(3,828,054)
(16,202,389)
(12,108,824)
The share-based payment transaction reserve is used to recognise the value of equity-settled share-based payment
transactions provided to employees, including key management personnel, as part of their remuneration. Refer to note 15 for
further details of these plans.
All other reserves as stated in the consolidated statement of changes in equity
(ii) Foreign currency translation reserve
The foreign currency reserve is used to record exchange differences arising from the translation of the financial statements of foreign
subsidiaries. It is also used to record the effect of exchange variances resulting from net investments in foreign operations.
(iii) Investment revaluation reserve
The investment revaluation reserve comprises the cumulative net change in the fair value of available-for-sale financial assets
until the investments are derecognised or impaired.
19. 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 note 17 and 18.
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 have on
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 exposures 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.
CHALICE GOLD MINES ANNUAL REPORT 2012
51
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
At 30 June 2012, Chalice had the following exposures to USD foreign currency:
Financial Assets
Cash and cash equivalents
Financial Liabilities
Trade and other payables
consoliDAteD
2012
$
2011
$
1,914,895
169,403
566,436
598,983
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 gain/(loss)
Impact on equity
(ii) Equity prices
AUD/USD +10%
AUD/USD -10%
AUD/USD +10%
AUD/USD -10%
consoliDAteD
2012
$
174,081
(191,490)
174,081
(191,490)
2011
$
39,052
(42,958)
39,052
(42,958)
The Group currently has no significant exposure to equity price risk.
(iii) Interest rate risk
At reporting date the Group’s exposure to market risk for changes in interest rates 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 constantly analyses its exposures 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:
Cash and cash equivalents
consoliDAteD
2012
$
2011
$
3,074,530
10,193,836
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 2012, if interest rates had moved by 100 basis points, with all other variables held constant, the post-
tax result for the Group would have been affected as follows:
consoliDAteD
iMPAct on Profit
2012
$
5,105
(4,641)
5,105
(4,641)
2011
$
54,382
(49,438)
54,382
(49,438)
Impact on gain/(loss)
Impact on equity
100 bp increase
100 bp decrease
100 bp increase
100 bp decrease
52
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
(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 maximum exposure to credit risk, excluding the value of any collateral or other security, at balance 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.
It is not the Company’s policy to securitise its trade and other receivables, however, receivable balances are monitored on an
ongoing basis.
(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 $859,855 (2011: $919,136) 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.
20. PArent entity
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Reserves
Total equity
Financial performance
Loss for the year
Total comprehensive income
2012
$
2011
$
43,612,739
37,466,387
9,119,742
18,643,038
52,732,481
56,109,425
388,388
25,462
413,850
373,180
45,091
418,271
52,318,631
55,691,154
64,200,112
64,200,112
(14,106,062)
(10,552,259)
2,224,581
2,043,301
52,318,631
55,691,154
(3,553,803)
(1,889,834)
(3,553,803)
(1,889,834)
CHALICE GOLD MINES ANNUAL REPORT 2012
53
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
Commitments and contingencies
(i) Contingencies
Other than as disclosed in note 21, the parent entity has no contingent assets or liabilities.
(ii) Operating lease commitments
Within 1 year
Within 2-5 years
Later than 5 years
2012
$
2011
$
300,761
370,766
1,555,573
1,058,200
-
207,170
1,856,334
1,636,136
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
Office lease commitments
Within 1 year
Within 2-5 years
Later than 5 years
Contingent liability
consoliDAteD
2012
$
562,642
382,631
-
2011
$
-
3,509,114
-
945,273
3,509,114
300,761
370,766
1,555,573
1,058,200
-
207,170
1,856,334
1,636,136
On 22 June 2010, the Company acquired Dragon Mining Limited’s (‘Dragon’) 20 per cent interest in the Zara Project for $8
million and 2 million Chalice shares. In addition, Chalice had an obligation to pay Dragon a further $4 million on delineation of
a 1 million ounce reserve at the Zara Project.
During the 2012 financial year, the Company and Dragon agreed to set aside the trailing payment of $4 million in consideration
for an up-front one-off payment of $1.5 million. The payment was subject to the completion of Chalice’s sale of the Zara Project
to SFECO.
At 30 June 2012, there was no present obligation to pay Dragon $1.5 million as the payment was conditional upon the
completion of the sale of the Zara Project to SFECO. As a result, the payment to Dragon has not been recognised as a liability in
the financial statements.
On 11 September 2012, Chalice paid Dragon $1.5 million.
54
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
22. cAsh AnD cAsh eQuivAlents
Bank balances
Term deposits
Petty cash
consoliDAteD
2012
$
2011
$
2,208,187
2,177,448
858,451
8,000,000
7,892
16,388
3,074,530
10,193,836
For the purpose of the statement of cash flows, cash and cash equivalents comprise of the following at 30 June:
Bank balances
Term deposits
Petty cash
Cash at banks and short term deposits attributable to a discontinued operation (note 10)
Cash and cash equivalents in the statement of cash flows
Reconciliation of cash flows from operating activities
Loss before tax from continuing operations
Loss before tax from discontinuing operations
Loss before tax
Adjustments for:
Depreciation and amortisation
Loss from discontinued operations
Reversal of share of associate’s loss
Foreign exchange losses
Changes in fair value of available-for-sale investments
Exploration assets expensed
Loss on sale of exploration and evaluation assets
Impairment of exploration and evaluation assets
Equity-settled share-based payment expenses
consoliDAteD
2012
$
2011
$
2,208,187
2,177,448
858,451
8,000,000
7,892
102,601
16,388
-
3,177,131
10,193,836
(3,718,721)
(3,828,054)
(416,493)
-
(4,135,214)
(3,828,054)
99,454
416,493
-
18,235
-
96,820
147,091
126,431
215,280
474,327
-
(1,508)
18,574
2,978
15,720
-
41,130
527,851
Operating loss before changes in working capital and provisions
(3,015,410)
(2,748,982)
(Increase) in trade and other receivables
(Increase)/decrease in financial assets
Increase in trade creditors and other liabilities
(decrease)/increase in provisions
(decrease)/increase in non-current financial assets
Net cash used in operating activities
240,540
22,497
104,458
(83,724)
(19,629)
(175,352)
(9,415)
464,613
67,570
5,779
(2,751,268)
(2,395,787)
CHALICE GOLD MINES ANNUAL REPORT 2012
55
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
23. relAteD PArties
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 (‘KMP’) for the entire period:
Executive Directors
T R B Goyder (Executive Chairman)
D A Jones (Managing Director)
J Jeffery (Chief Operating Officer) (resigned as a director on 21 November 2011)
Non-executive Directors
A W Kiernan
S P Quin
M R Griffiths (resigned 21 November 2012)
Executives
R K Hacker (Chief Financial Officer)
M Kelly (General Manager – Zara Mining Share Company)
The KMP compensation included in ‘personnel expenses’ (see note 3 (c)) is as follows:
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payment
Other
consoliDAteD
2012
$
2011
$
1,651,038
1,245,070
105,102
81,250
104,638
50,459
95,524
-
527,851
-
1,992,487
1,868,445
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 Key Management Personnel remuneration and are designated as audited.
Loans to key management personnel and their related parties
No loans were made to KMP or their related parties.
56
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
Other key management personnel transactions with the Group
A number of KMP, 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 or 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 or their related parties were
as follows:
Key MAnAGeMent Personnel
trAnsAction
note
A W Kiernan
Other related parties
Legal and consulting services
Liontown Resources Limited
Corporate services
Uranium Equities Limited
Corporate services
(i)
(ii)
(iii)
2012
$
2011
$
160,000
140,500
(132,000)
(144,000)
(2,628)
(401)
(i)
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.
(ii) The Group supplied corporate services including accounting and company secretarial services under a Corporate Services
Agreement to Liontown Resources Limited. Messrs Goyder, Jones and Kiernan are directors of Liontown Resources Limited.
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 minor corporate services during the year to Uranium Equities Limited. Messrs Goyder and Kiernan are both
directors of Uranium Equities Limited. Amounts were billed at cost to the Group and are due and payable under normal payment
terms.
Amounts payable to KMP at reporting date arising from these transactions were as follows:
Assets and liabilities arising from the above transactions
Current payables
Trade debtors
2012
$
(9,000)
12,000
3,000
2011
$
(8,000)
-
(8,000)
CHALICE GOLD MINES ANNUAL REPORT 2012
57
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
Options and performance rights over equity instruments granted as compensation
The movement during the reporting period in the number of options and performance rights over ordinary shares in the Group
held, directly, indirectly or beneficially, by each KMP, including their related parties, is as follows:
helD At
1 July 2011
GrAnteD As
coMPensAtion
exerciseD/
forfeiteD
helD At
30 June 2012
vesteD DurinG
the yeAr
vesteD AnD
exercisABle At
30 June 2012
T R B Goyder
A W Kiernan
D A Jones
M R Griffiths
S P Quin
J Jeffery
Executive
R K Hacker
M P Kelly
-
2,500,000
500,000
2,500,000
750,000
750,000
-
-
-
-
-
-
-
-
-
2,500,000
500,000
2,500,000
750,000
750,000
-
750,000
(750,000)
-
500,000
-
250,000
500,000
-
-
750,000
500,000
-
-
-
375,000
187,500
-
-
-
-
500,000
2,500,000
750,000
562,500
-
500,000
-
helD At
1 July 2010
GrAnteD As
coMPensAtion
exerciseD/
forfeiteD
helD At
30 June 2011
vesteD DurinG
the yeAr
vesteD AnD
exercisABle At
30 June 2011
T R B Goyder
2,000,000
500,000
2,500,000
750,000
-
750,000
500,000
-
-
-
-
-
(2,000,000)
-
-
-
-
-
-
500,000
-
-
-
500,000
2,500,000
1,250,000
2,500,000
750,000
750,000
375,000
375,000
375,000
375,000
500,000
-
500,000
A W Kiernan
D A Jones
M R Griffiths
S P Quin
Executive
R K Hacker
58
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
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 KMP, including their related parties, is as follows:
helD At
1 July 2011
ADDitions
receiveD on
exercise of
oPtions
helD At
30 June 2012
sAles
helD At 30
June 2012
T R B Goyder
27,257,249
6,467,093
A W Kiernan
1,062,041
100,000
D A Jones
M R Griffiths(1)
S P Quin
J Jeffery(2)
Executive
R K Hacker
M P Kelly(3)
296,278
600,960
26,321
-
-
-
-
47,000
98,334
133,000
-
-
-
-
-
-
-
-
-
-
33,724,342
1,162,041
296,278
600,960
26,321
47,000
231,334
-
helD At
1 July 2010
ADDitions
receiveD on
exercise of
oPtions
helD At
30 June 2011
sAles
T R B Goyder
19,951,206
5,306,043
2,000,000
27,257,249
A W Kiernan
D A Jones
M R Griffiths
S P Quin
Executive
R K Hacker
820,074
235,000
600,960
241,967
61,278
-
-
26,321
40,000
58,334
-
-
-
-
-
1,062,041
296,278
600,960
26,321
98,334
(1) Mr Griffiths resigned as a director on 21 November 2011.
(2) Mr Jeffery was appointed as director/chief operating officer on 7 July 2011 and resigned as a director on 21 November 2011.
Mr Jeffery ceased employment on 15 February 2012.
(3) Mr Kelly was appointed as General Manager – Zara Mining Share Company on 1 September 2011.
No shares were granted to KMP during the reporting period as compensation.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,724,342
1,162,041
296,278
600,960
26,321
47,000
231,334
-
helD At 30
June 2011
27,257,249
1,062,041
296,278
600,960
26,321
98,334
CHALICE GOLD MINES ANNUAL REPORT 2012
59
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
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:
country of
incorPorAtion
% eQuity interest
investMent
$
2012
2011
2012
2011
nAMe
Parent entity
Chalice Gold Mines Limited
Subsidiaries
Chalice Operations Pty Ltd (i)
Australia
Australia
Yolanda International Limited
British Virgin Islands
Chalice Gold Mines (Eritrea) Pty Ltd (ii)
Australia
(i) Subsidiaries of Chalice Operations Pty Ltd
Western Rift Pty Ltd
Keren Mining Pty Ltd
Universal Gold Pty Ltd
Sub-Sahara Resources (Eritrea) Pty Ltd
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
6,802,388
6,802,388
1,210,000
1,210,000
-
-
-
-
-
-
1,358,223
1,358,223
-
-
-
(ii) Subsidiaries of Chalice Gold Mines (Eritrea) Pty Ltd
Zara Mining Share Company
Eritrea
90
-
37,772,732
60
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
25. Joint venture interests
(a) At the end of the financial year the Group held the following interests in exploration licences:
Mogoraib North and Hurum Exploration Licences
consoliDAteD interest
country
2012
Eritrea
%
60%
2011
%
100%
(b) Included in the assets and liabilities of the consolidated Group are the following items which represent the consolidated
Group’s interest in the assets and liabilities of the joint venture:
Current assets
Trade and other receivables
Non-current assets
Exploration and evaluation assets
Property, plant and equipment
Total assets
Current liabilities
Trade and other payables
Total liabilities
2012
$
2011
$
201,479
201,479
2,106,444
21,779
2,128,223
2,329,702
332,818
332,818
332,818
-
-
-
-
-
-
-
-
-
Refer to note 21 for details of commitments of the joint venture. The joint venture has no contingent liabilities as at 30 June 2012.
CHALICE GOLD MINES ANNUAL REPORT 2012
61
notes to the finAnciAl stAteMents (continueD)
For the yeAr enDeD 30 June 2012
26. suBseQuent events
Completion of the sale of the Zara Project
On 15 June 2011, Chalice executed a Deed of Acquisition with the Eritrean National Mining Corporation (‘ENAMCO’) for the
sale to ENAMCO of a 30 per cent participating interest in Chalice’s Zara Project for US$32 million. This is in addition to the 10
per cent free carried interest of ENAMCO. ENAMCO also agreed to pay Chalice approximately US$2 million representing a
reimbursement of exploration costs incurred by Chalice.
On 27 April 2012, the Company agreed to sell its remaining 60 per cent interest in the Zara Project to China SFECO
Group (‘SFECO’) for US$80 million, including a deferred consideration of US$2 million payable upon commencement of first
commercial production of the Koka Gold Mine.
On 4 September 2012, the transactions with SFECO and ENAMCO were settled, resulting in a net profit after tax of
approximately $43.4 million. On completion of both transactions and after the payment of all applicable taxes in Eritrea,
Chalice had approximately $83 million cash at bank.
As at 30 June 2012, the Zara Project was recognised as an asset held for sale and a discontinued operation. Refer to note 10.
Dragon Mining Limited payment
As outlined in note 21, a contingent liability was recognised for a payment to Dragon Mining Limited of $1.5 million. On 11
September 2012, Chalice settled the obligation.
Capital Reduction and Return
Following the recent completion of the sale of the Company’s interest in the Zara Project in Eritrea, Chalice currently has
approximately $81 million cash on hand. The Board has undertaken a review of its capital management options and determined
that these funds exceed its current capital requirements, providing justification to return some of this capital to shareholders.
On 24 September 2012, Chalice announced a proposed capital reduction and return, subject to shareholder approval, of up to
$25 million (10 cents per share) to those persons or entities that are shareholders as at the appropriate record date. At the date
of this report the record date has not been determined and the capital reduction and return is subject to shareholder approval
and timely receipt of a requested tax ruling from the Australian Taxation Office.
62
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. giving a true and fair view of the Group’s financial position as at 30 June 2012 and of its performance for the year
ended on that date; and
ii. complying with Australian Accounting Standards (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 2012.
This declaration is signed in accordance with a resolution of the Board of Directors.
Dated at Perth the 10th day of October 2012
Signed in accordance with a resolution of the Directors:
TIM GOYDER
Executive Chairman
CHALICE GOLD MINES ANNUAL REPORT 2012
63
inDepenDent AuDitor’s report
INDEPENDENT AUDITOR’S REPORT
To the members of Chalice Gold Mines Limited
Report on the Financial Report
We have audited the accompanying financial report of Chalice Gold Mines Limited (“the company”),
which comprises the consolidated statement of financial position as at 30 June 2012, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity
and the consolidated statement of cash flows for the year then ended, notes comprising a summary
of significant accounting policies and other explanatory information, and the directors’ declaration for
the consolidated entity. The consolidated entity comprises the company and the entities it controlled
at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act
2001 and for such internal control as the directors determine is necessary to enable the preparation
of the financial report that is free from material misstatement, whether due to fraud or error.
In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101:
Presentation of Financial Statements,
that the consolidated financial report complies with
International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or
management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
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.
64
63
inDePenDent AuDitor’s rePort (continueD)
Matters relating to the electronic presentation of the audited financial report and remuneration
report
This auditor’s report relates to the financial report and remuneration report of Chalice Gold Mines
Limited for the financial year ended 30 June 2012 published in the annual report and included on the
company’s website. The company’s directors are responsible for the integrity of the company’s
website. We have not been engaged to report on the integrity of this website. The auditor’s report
refers only to the financial report and remuneration report. It does not provide an opinion on any
other information which may have been hyperlinked to/from the financial report and remuneration
report. If users of the financial report and remuneration report are concerned with the inherent risks
arising from publication on a website, they are advised to refer to the hard copy of the audited
financial report and remuneration report to confirm the information contained in this website version
of the financial report and remuneration report.
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
2012 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations
2001; and
(b) the financial report also complies with International Financial Reporting Standards as
disclosed in Note 1(a).
Report on the Remuneration Report
We have audited the remuneration report included in the directors’ report for the year ended 30 June
2012. The directors of the company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance
with Australian Auditing Standards.
Auditor’s opinion
In our opinion the remuneration report of Chalice Gold Mines Limited for the year ended 30 June
2012 complies with section 300A of the Corporations Act 2001.
Other matter
This independent auditor’s report replaces our previous report issued on 27 September 2012 in
respect of the financial report of the company issued on 27 September 2012. The company has re-
issued its financial report for the year ended 30 June 2012 due to the circumstances disclosed on
page 13 of the remuneration report relating to the voting at the 2011 Annual General Meeting.
HLB MANN JUDD
Chartered Accountants
Perth, Western Australia
10 October 2012
W M CLARK
Partner
64
CHALICE GOLD MINES ANNUAL REPORT 2012
65
corporAte governAnce report
APProAch to corPorAte GovernAnce
Chalice Gold Mines Limited (Company) has adopted systems of control and accountability as the basis for the administration of
corporate governance. Some of these policies and procedures are summarised in this statement. Commensurate with the spirit
of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations 2nd edition (Principles &
Recommendations), the Company has followed each recommendation where the Board has considered the recommendation to be
an appropriate benchmark for its corporate governance practices. Where the Company's corporate governance practices follow a
recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. In compliance with
the "if not, why not" reporting regime, where, after due consideration, the Company's corporate governance practices depart from a
recommendation, the Board has offered full disclosure and an explanation for the adoption of its own practice.
The following governance-related documents can be found on the Company's website at
section marked "Corporate”, "Corporate Governance".
, under the
chArters
Board
Audit Committee
Nomination Committee
Remuneration Committee
Policies and procedures
Policy and Procedure for Selection and (Re)Appointment of Directors
Process for Performance Evaluation
Policy on Assessing the Independence of Directors
Diversity Policy
Code of Conduct (summary)
Policy on Continuous Disclosure (summary)
Compliance Procedures (summary)
Procedure for the Selection, Appointment and Rotation of External Auditor
Shareholder Communication Policy
Risk Management Policy (summary)
The Company reports below on how it has followed (or otherwise departed from) each of the recommendations during the
2011/2012 financial year (Reporting Period). The information in this statement is current at 30 June 2012.
BoArD
Roles and responsibilities of the Board and Senior Executives
(Recommendations: 1.1, 1.3)
The Company has established the functions reserved to the Board, and those delegated to senior executives and has set out these
functions in its Board Charter.
The Board is collectively responsible for promoting the success of the Company through its key functions of overseeing the
management of the Company, providing overall corporate governance of the Company, monitoring the financial performance
of the Company, engaging appropriate management commensurate with the Company's structure and objectives, involvement
in the development of corporate strategy and performance objectives, and reviewing, ratifying and monitoring systems of risk
management and internal control, codes of conduct and legal compliance.
Senior executives are responsible for supporting the Managing Director and assisting the Managing Director in implementing
the running of the general operations and financial business of the Company in accordance with the delegated authority of the
Board. Senior executives are responsible for reporting all matters which fall within the Company's materiality thresholds at first
instance to the Managing Director or, if the matter concerns the Managing Director, directly to the Chair or the lead independent
director, as appropriate.
The Company’s Board Charter is disclosed on the Company’s website.
66
corPorAte GovernAnce rePort (continueD)
Skills, experience, expertise and period of office of each Director
(Recommendation: 2.6)
A profile of each Director setting out their skills, experience, expertise and period of office is set out in the Directors' Report.
The Board considers that its current composition is appropriate for the Company’s current size and operations, and the following
mix of skills and expertise which the directors possess is relevant to the Company’s business: public company management
experience; resource industry experience; geological qualifications; and legal qualifications. The Board has, as noted below, not
a majority of directors who are independent.
As the Company’s major asset, the Zara Project has sold, the Board’s mix of skills and diversity will be reassessed in determining
the future direction of the Company.
Director independence
(Recommendations: 2.1, 2.2, 2.3, 2.6)
The Board does not have a majority of directors who are independent. Notwithstanding this, the Board considers that the
current composition of the Board is adequate for the Company’s current size and operations, and includes an appropriate mix
of skills and expertise relevant to the Company’s business. The Board will continue to monitor its composition as the Company’s
operations evolve and will appoint further independent directors when considered appropriate.
The Board considers the independence of directors having regard to the relationships listed in Box 2.1 of the Principles &
Recommendations and the Company's materiality thresholds.
The Board has agreed on the following guidelines, as set out in the Company's Board Charter for assessing the materiality of
matters:
• Statement of Financial Position items are material if they have a value of more than 1% of pro-forma net asset.
• Statement of Comprehensive Income items are material if they will have an impact on the current year operating result of 5% or
more.
• Items are also material if they impact on the reputation of the Company, involve a breach of legislation, are outside the
ordinary course of business, could affect the Company’s rights to its assets, if accumulated would trigger the quantitative tests,
involve a contingent liability that would have a probable effect of 1% or more on balance sheet or profit and loss items, or will
have an effect on operations which is likely to result in an increase or decrease in net income or dividend distribution of more
than 5%.
• Contracts will be considered material if they are outside the ordinary course of business, contain exceptionally onerous
provisions in the opinion of the Board, impact on income or distribution in excess of the quantitative tests, there is a likelihood
that either party will default, and the default may trigger any of the quantitative or qualitative tests, are essential to the activities
of the Company and cannot be replaced, or cannot be replaced without an increase in cost which triggers any of the
quantitative tests, contain or trigger change of control provisions, are between or for the benefit of related parties, or otherwise
trigger the quantitative tests.
The sole independent director of the Company is Stephen Quin. Mr Quin is independent as he is a non-executive director who is
not a member of management and who is 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 his judgment.
The non-independent directors of the Company (as defined in the ASX Guidelines) are Tim Goyder, Doug Jones and Anthony
Kiernan. Mr Kiernan is however a non-executive director.
The non-independent Chair of the Board is Tim Goyder. The Chair is an executive director and does not satisfy the test of
independence as set out in Box 2.1 of the Principles and Recommendations. The Board believes that Tim Goyder is the most
appropriate person for the position as Chair because of his seniority and industry expertise. However, the Board has appointed
Stephen Quin to act as lead independent director when any conflicts of interest arise.
The Managing Director is Doug Jones who is not Chair of the Board.
Independent professional advice
(Recommendation: 2.6)
To assist directors with independent judgement, it is the Board's policy that if a director considers it necessary to obtain
independent professional advice to properly discharge the responsibility of their office as a director then, provided the director
first obtains approval from the Chair for incurring such expense, the Company will pay the reasonable expenses associated with
obtaining such advice.
CHALICE GOLD MINES ANNUAL REPORT 2012
67
corPorAte GovernAnce rePort (continueD)
Selection and (re)appointment of directors
(Recommendation: 2.6)
In determining candidates for the Board, the Nomination Committee (or equivalent) will follow a prescribed process whereby
it would evaluate the mix of skills, experience and expertise of the existing Board. In particular, the Nomination Committee (or
equivalent) would identify the particular skills that will best increase the Board's effectiveness. Consideration would also be given
to the balance of independent directors. Potential candidates are identified and, if relevant, the Nomination Committee (or
equivalent) would recommend an appropriate candidate for appointment to the Board. Any appointment made by the Board is
subject to ratification by shareholders at the next general meeting under the Company’s Constitution.
The Board recognises that Board renewal is critical to performance and the impact of Board tenure on succession planning. Each
director other than the Managing Director, must not hold office (without re-election) past the third annual general meeting of the
Company following the director's appointment or three years following that director's last election or appointment (whichever is
the longer). However, a director appointed to fill a casual vacancy or as an addition to the Board must not hold office (without
re-election) past the next annual general meeting of the Company. At each annual general meeting a minimum of one director or
one third of the total number of directors must resign. A director who retires at an annual general meeting is eligible for re-election
at that meeting. Re-appointment of directors is not automatic.
The Company’s Policy and Procedure for the Selection and (Re) Appointment of Directors is disclosed on the Company’s website.
BoArD coMMittees
Nomination committee
(Recommendations: 2.4, 2.6)
The Board has not established a separate Nomination Committee. Given the current size and composition of the Board, 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. Items that are usually required to be discussed by a Nomination
Committee would be marked as separate agenda items at Board meetings when required. Should the Board convene as the
Nomination Committee it would carry out those functions which are delegated to it in the Company’s Nomination Committee
Charter. The Board would deal with any conflicts of interest that may occur when convening in the capacity of the Nomination
Committee by ensuring that the director with conflicting interests is not party to the relevant discussions.
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.
The Board has adopted a Nomination Committee Charter which describes the role, composition, functions and responsibilities of
the Nomination Committee.
The Company’s Nomination Committee Charter is disclosed on the Company’s website.
Audit committee
(Recommendations: 4.1, 4.2, 4.3, 4.4)
The Board has established an Audit Committee.
The Audit Committee is not structured in compliance with Recommendation 4.2. The formation of an Audit Committee in
accordance with Recommendation 4.2 is not possible as the Board only has one independent director. The Audit Committee is
comprised of Anthony Kiernan (Chair) and Stephen Quin. The Board considers this structure is the best mix of skills and expertise
to carry out the function of an Audit Committee available to the Company and appropriate for its current needs. The Board has
adopted an Audit Committee Charter which describes the role, composition, functions and responsibilities of the Audit Committee
and which the Audit Committee applies to assist it to fulfil its function. The Audit Committee Charter makes provision for the Audit
Committee to meet with the external auditor as required.
The Audit Committee held two meetings during the Reporting Period. Details of the directors who are members of the Audit
Committee, and their attendance at Audit Committee meetings are set out in the following table:
nAMe
no. of MeetinGs AttenDeD
Anthony Kiernan (Chair) (executive, non-independent)
Stephen Quin (non-executive, independent)
2
2
68
corPorAte GovernAnce rePort (continueD)
Details of each of the director’s qualifications are set out in the Directors’ Report. Neither member of the Audit Committee has
formal accounting or financial qualifications however, each member is financially literate, has an understanding of the industry in
which the Company operates and has considerable ‘on board’ experience.
The Company 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 Company through the engagement period. The Board may otherwise select an
external auditor based on criteria relevant to the Company's business and circumstances. The performance of the external auditor
is reviewed on an annual basis by the Audit Committee (or its equivalent) and any recommendations are made to the Board.
The Company’s Audit Committee Charter and Procedure for Selection, Appointment and Rotation of External Auditor are
disclosed on the Company’s website.
Remuneration committee
(Recommendations: 8.1, 8.2, 8.3, 8.4)
The Board has established a Remuneration Committee.
The Remuneration Committee is not structured in accordance with Recommendation 8.2. The formation of a Remuneration
Committee in accordance with Recommendation 8.2 is not possible as the Board has only one independent director.
The Remuneration Committee held one meeting during the Reporting Period. Details of the directors who are members of the
Remuneration Committee and their attendance at Remuneration Committee meeting are set out in the following table:
nAMe
no. of MeetinGs AttenDeD
Anthony Kiernan (Chair) (executive, non-independent)
Stephen Quin (non-executive, independent)
1
1
To assist the Remuneration Committee to fulfil its function as the Remuneration Committee, the Board has adopted a Remuneration
Committee Charter which describes the role, composition, functions and responsibilities of the Remuneration Committee.
Details of remuneration, including the Company’s policy on remuneration, are contained in the ‘Remuneration Report’ which forms
of part of the Directors’ Report. 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; however, non-executive directors, at the
discretion of the Board may participate in the Company’s Employee Share Option Plan (subject to shareholder approval). Pay
and rewards for executive directors and senior executives consists of a base salary and may comprise performance incentives.
Long term performance incentives may include options and performance rights 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.
There are no termination or retirement benefits for non-executive directors (other than for superannuation).
The Company's Remuneration Committee Charter includes a statement of the Company's policy on prohibiting transactions in
associated products which limit the risk of participating in unvested entitlements under any equity based remuneration schemes.
The Company’s Remuneration Committee Charter is disclosed on the Company’s website.
PerforMAnce evAluAtion
Senior executives
(Recommendations: 1.2, 1.3)
The Managing Director and Executive Chairman are responsible for evaluating the performance of senior executives. This is
conducted by informal interviews, and via ongoing contact between the Managing Director, the Executive Chairman and the
senior executives. As the Company grows, it will review the need for a formal evaluation process.
During the Reporting Period a performance evaluation of senior executives took place in accordance with the process disclosed.
CHALICE GOLD MINES ANNUAL REPORT 2012
69
corPorAte GovernAnce rePort (continueD)
Board, its committees and individual directors
(Recommendations: 2.5, 2.6)
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.
Any issues arising are addressed by the Chair with the Board.
During the Reporting Period, an evaluation of the Board, applicable committees, the Managing Director and individual directors
took place in accordance with the process disclosed.
The Company’s Process for Performance Evaluation is disclosed on the Company’s website.
ethicAl AnD resPonsiBle Decision MAKinG
Code of conduct
(Recommendations: 3.1, 3.5)
The Company has established a Code of Conduct as to the practices necessary to maintain confidence in the Company's
integrity, the practices necessary to take into account its legal obligations and the reasonable expectations of its stakeholders and
the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
A summary of the Company’s Code of Conduct is disclosed on the Company’s website.
Diversity
(Recommendations: 3.2, 3.3, 3.4, 3.5)
The Company has established a Diversity Policy, which includes requirements for the Board to establish measurable objectives for
achieving gender diversity and for the Board to assess annually both the objectives and progress in achieving them.
However, due to changes to the Company’s structure during the Reporting Period, the Board has not set measurable objectives
for achieving gender diversity. The Board intends to revisit the establishment of measurable objectives during the forthcoming
financial year.
The proportion of women employees in the whole organisation, women in senior executive positions and women on the Board
are set out in the following table:
PROPORTION OF WOMEN
Whole organisation
13 out of 37 (35%)
Senior executive positions
1 out of 3 (33.3%)
Board
0 out of 4 (0%)
The Company’s Diversity Policy is available on the Company’s website.
Continuous disclosure
(Recommendations: 5.1, 5.2)
The Company has established written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure
requirements and accountability at a senior executive level for that compliance.
A summary of the Company’s Policy on Continuous Disclosure and Compliance Procedures are disclosed on the Company’s website.
70
corPorAte GovernAnce rePort (continueD)
Shareholder communication
(Recommendations: 6.1, 6.2)
The Company has designed a communications policy for promoting effective communication with shareholders and encouraging
shareholder participation at general meetings.
The Company’s Shareholder Communication Policy is disclosed on the Company’s website.
Risk management
Recommendations: 7.1, 7.2, 7.3, 7.4)
The Board has adopted a Risk Management Policy, which sets out the Company's risk profile. Under the policy, the Board is
responsible for approving the Company's policies on risk oversight and management and satisfying itself that management has
developed and implemented a sound system of risk management and internal control.
Under the policy, the Board delegates day-to-day management of risk to the Managing Director, who is responsible for
identifying, assessing, monitoring and managing risks. The Managing Director is also responsible for updating the Company's
material business risks to reflect any material changes, with the approval of the Board.
In fulfilling the duties of risk management, the Managing Director may have unrestricted access to Company employees,
contractors and records and may obtain independent expert advice on any matter they believe appropriate, with the prior
approval of the Board.
The Audit Committee is empowered to monitor and review the integrity of financial reporting and the Company's internal financial
control systems and risk management systems.
In addition, the following risk management measures have been adopted by the Board to manage the Company's material
business risks:
• the Board has established authority limits for management, which, if proposed to be exceeded, requires prior Board approval;
• the Board has developed and implemented 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 Company's continuous
disclosure obligations; and
• the Board has adopted a corporate governance manual which contains other policies to assist the Company to establish and
maintain its governance practices.
The Board has also implemented a system to review, formalise and document the management of its material business risks. This
system includes a risk register used by management to identify the Company’s material business risks. In addition, the process
of managing material business risks is allocated to members of senior management. The risk register is reviewed regularly and
updated, as required.
The categories of risk to be reported on or referred to as part of the Company’s systems and processes for managing material
business risk include market-related, financial reporting, operational, environmental, human capital, sustainability, occupational
health and safety, political, strategic, economic cycle/marketing, and legal and compliance.
The Board has required management to design, implement and maintain risk management and internal control systems to
manage the Company's material business risks. The Board also requires management to report to it confirming that those risks
are being managed effectively. The Board has received a report from management as to the effectiveness of the Company's
management of its material business risks for the Reporting Period.
The Managing Director and the Chief Financial Officer have provided a declaration to the Board in accordance with section
295A of the Corporations Act (in relation to the Company’s financial statements) and have assured the Board that such
declaration is founded on a sound system of risk management and internal control and that the system is operating effectively in
all material respects in relation to financial reporting risks.
A summary of the Company’s Risk Management Policy is disclosed on the Company’s website.
CHALICE GOLD MINES ANNUAL REPORT 2012
71
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 26 September
2012 were:
shAreholDer
Franklin Resources Inc
Timothy Rupert Barr Goyder
Lujeta Pty Ltd
nuMBer of
orDinAry shAres
helD
PercentAGe of
cAPitAl helD
%
31,107,008
33,724,342
20,182,750
12.44
13.49
8.07
clAss of shAres AnD votinG riGhts
At 26 September 2012 there were 2,649 holders of the ordinary shares of the Company, 7 holders of unlisted share options
and 2 holders of performance rights. The share options and performance rights have been granted under the Company’s
Employee Share Option Plan and Employee Long Term Incentive Plan.
The voting rights to the ordinary shares set out in the Company’s Constitution are:
“Subject to any rights or restrictions for the time being attached to any class or Classes of shares -
a) at meetings of members or classes of members each member entitled to vote in person or by proxy or attorney: and
b)
on a show of hands every person who is a member has one vote and on a poll every person in person or by proxy or
attorney has one vote for each ordinary share held.”
Holders of options or performance rights do not have voting rights.
Distribution of equity security holders as at 26 September 2012:
cAteGory
nuMBer of eQuity security holDers
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,000 – 100,000
100,001 and over
Total
orDinAry
shAres
unlisteD shAre
oPtions
PerforMAnce
riGhts
421
773
456
819
180
2,649
-
-
-
1
6
7
-
-
-
-
2
2
The number of shareholders holding less than a marketable parcel at 26 September 2012 was 668.
72
Asx ADDitionAl inforMAtion (continueD)
Twenty largest Ordinary Fully Paid Shareholders as at 26 September 2012
nAMe
nuMBer of
orDinAry shAres
helD
PercentAGe of
cAPitAl helD
%
National Nominees Limited
Timothy R B Goyder
Lujeta Pty Ltd
JP Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Claw Pty Ltd
Calm Holdings Pty Ltd
Clement Pty Ltd
Sundowner International Limited
Colbern Fiduciary Nominees Pty Ltd
Twynam Agricultural Group Pty Ltd
Canadian Register Control
Balfes (QLD) Pty Ltd
Buttonwood Nominees Pty Ltd
Dragon Mining Limited
Greenslade Holdings Pty Ltd
Mr Philip Scott Button + Ms Philippa Anne Nicol
Teragoal Pty Ltd
UBS Nominees Pty Ltd
Total
41,861,881
33,724,342
20,182,750
18,962,641
14,569,608
4,984,956
4,000,000
3,850,000
3,800,000
3,664,782
3,000,000
2,333,484
2,296,247
2,000,000
2,000,000
2,000,000
1,516,667
1,427,261
1,400,000
1,351,245
16.74
13.49
8.07
7.58
5.83
1.99
1.60
1.54
1.52
1.47
1.20
0.93
0.92
0.80
0.80
0.80
0.61
0.57
0.56
0.54
168,925,864
67.56
CHALICE GOLD MINES ANNUAL REPORT 2012
73
this PAGe hAs Been left BlAnK intentionAlly
74
CORPORATE DIRECTORY
DIRECTORS
Tim Goyder
Executive Chairman
Douglas Jones
Managing Director
Anthony Kiernan Non-executive Director
Stephen Quin
Non-executive Director
COMPANY SECRETARIES
Richard Hacker
Leanne Forgione
PRINCIPAL PLACE OF BUSINESS & REGISTERED OFFICE
Level 2, 1292 Hay Street
WEST PERTH, WESTERN AUSTRALIA 6005
Tel:
Fax:
(+61) (8) 9322 3960
(+61) (8) 9322 5800
Web:
Email:
AUDITORS
HLB Mann Judd
Level 4, 130 Stirling Street
PERTH, WESTERN AUSTRALIA 6000
SHARE REGISTRY
Australia
Computershare Investor Services Pty Limited
Level 2, Reserve Bank Building
45 St Georges Terrace
PERTH, WESTERN AUSTRALIA 6000
Tel: 1300 557 010
Canada
Computershare Investor Services
100 University Avenue, 9th Floor
TORONTO, ONTARIO M5J 2Y1
HOME EXCHANGE
Australian Securities Exchange Limited
Exchange Plaza
2 The Esplanade
PERTH, WESTERN AUSTRALIA 6000
TORONTO STOCK EXCHANGE
The Exchange Tower
PO Box 421
130 King Street West
TORONTO, ONTARIO M5X 1J2
Share Code: CHN
ASX
TSX
Share Code: CXN
CHALICE GOLD MINES LIMITED
Level 2, 1292 Hay Street
WEST PERTH, WESTERN AUSTRALIA 6005
Tel:
Fax:
(+61) (8) 9322 3960
(+61) (8) 9322 5800
Web:
Email:
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ANNUAL REPORT 2012