Empire Resources Limited
Annual Report 2010

Plain-text annual report

EMPIRE RESOURCES LIMITED AND CONTROL L ED ENT IT Y ABN 32 092 471 513 FOR THE YEAR ENDED 30 JUNE 20 1 0 Empire Resources Limited is a Perth based copper and gold focused explorer with deposits in Western Australia. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 1 ANNUAL REPORT TA BLE OF CONTENTS PAGE 1. Corporate Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IFC 2. Highlights of 2009-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3. Corporate Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4. Chairman’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5. Review of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6. Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 7. Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 8. Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 9. Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 10. Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 11. Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 12. Directors’ Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 13. Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 14. Auditor’s Independence Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 15. Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 16. Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 1. COR POR ATE DIRECTOR Y DIRECTORS Tom Revy BAppSc – Chairman David Sargeant BSc – Managing Director Adrian Jessup BSc(Hons) – Executive Director MANAGEMENT David Ross BSc(Hons) MSc – Exploration Manager COMPANY SECRETARY Simon Storm BCom, BCompt(Hons), CA, FCIS REGISTERED and PRINCIPAL OFFICE 53 Canning Highway Victoria Park 6100 Western Australia Phone +61 (0)8 9361 3100 Facsimile +61 (0)8 9361 3184 Email info@resourcesempire.com.au Website www.resourcesempire.com.au ABN 32 092 471 513 SHARE REGISTRY Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross 6153 Western Australia AUDITOR HLB Mann Judd Level 4 130 Stirling Street Perth 6000 Western Australia STOCK EXCHANGE LISTING The Company is listed on the Australian Stock Exchange Limited. Home Exchange Perth ASX Code: Shares ERL Page IFC Page 2 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2009 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 2. HIGHL IGHTS OF 2009-201 0: > Two new zones of copper mineralisation discovered at the Trajan prospect, Yuinmery: 7m @ 1.09% Cu and 5m @ 3.1% Cu > Further copper intersections made at the Troy Creek project: 8m @ 1.47% Cu and 4m @ 3.04% Cu > Yarlarweelor uranium project sold to FYI Resources Ltd with Empire retaining a 32% interest in FYI. Drilling at the Kangaroo Ridge prospect intersects wide zones of uranium mineralisation: 35m @ 503ppm U3O8 including 5m @ 1,069ppm U3O8 > Tenement holding increased at Penny’s Find in a joint venture with Rubicon Resources Ltd SUBS EQUE NT TO 30 J UNE 2010: > Enters into $2 million sale agreement for the Penny’s Find gold resource and associated tenements > Enters into option agreement with La Mancha Resources to acquire 75.82% interest in a 149km2 granted tenement holding surrounding the Company’s Yuinmery copper-gold resource project > Trebles land holding at Yuinmery copper-gold project gaining numerous new geophysical targets ready for drilling 3. CORPOR ATE OBJECTIVES The Company’s long term objective is to become a successful mining house by participation in the discovery and development of one or more world-class mineral deposits. The short term objective is to enhance value and obtain a cash flow from the Company’s existing tenements in Australia which have potential for gold, copper and PGM deposits. This value may be realised by delineating reserves and commencing mining operations, entering into significant farm- out or royalty arrangements or acquiring new opportunities to provide an early cash flow. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 1 4. CHAIR MAN’S R EPO RT Dear Shareholders As your Chairman since January 2010, I have been, and continue to be, extremely encouraged by the opportunities that lie in front of us for 2011 and beyond. Globally, with few significant discoveries in recent times in key commodities, I believe the market is only just beginning to realise the impact of the pending shortage in core commodities. The effect of fewer discoveries will be further felt as a result of the 2008 economic crisis and the postponement or cancellation of hundreds of billions of dollars of new mining projects and expansions. Pending other market influences, this should bode well for companies, such as Empire Resources, focused on exploration in base metals, in highly-prospective low-sovereign risk areas. Our objectives of near term cash flow and ultimately discovering and participating in the development of significant mining operations remain on track, despite the lingering effects of the 2008 global financial crisis on small cap resource companies worldwide. Investment in exploration remains the focus of the Company’s strategy for growth. A major proportion of this investment over the last year continued to be on programs designed to define additional resources within established project targets. Elsewhere, exploration programs and strategies designed to create a pipeline of new discoveries continue to be developed however, each opportunity is rigorously assessed on an ongoing basis. Since listing in February 2007, the Company has made three significant copper and gold discoveries in Western Australia and announced JORC compliant resources for two of these discoveries. During the year, the sale of the Yarlarweelor Uranium Project to FYI Resources Limited, was finalised as announced to the ASX on the 1 April 2010. As part of the sale agreement, Empire Resources Ltd emerged with a direct 32% stake in FYI Resources Ltd. This strategic divestment allows Empire to remain focused on its base metal assets while maintaining an exposure for shareholders to a highly prospective uranium area. Given early exploration results by FYI, we remain encouraged at what may lie ahead for this project over the next 12 to 18 months. On other activities, Empire over the last 12 months has further proved the highly prospective nature of its base metal rich but underexplored Yuinmery Copper Gold Project located in the Youanmi greenstone belt in Western Australia. Drilling has confirmed VMS style mineralisation similar to a number of projects in the area. Drilling at Just Desserts continued to return high grade copper and gold intercepts and confirmed depth continuity. New targets were also identified in the project area with encouraging results from the Trajan and Augustus zones. Our focus on the near term will be to increase the current resource at Yuinmery by identifying new targets and undertaking strategic drilling campaigns on known areas. Finally, I would like to conclude by recognising the tireless efforts of our management team and employees and contractors who I believe have contributed significantly to the Company over the last 12 months. Similarly it would be remiss of me not to acknowledge the efforts and contributions of Empire’s outgoing Chairman, Mr Adrian Griffin one of the founding Board members of the Company. His knowledge and experience greatly assisted the Company on where it is today. We look forward to a challenging and rewarding year at Empire Resources and would like to thank shareholders for their ongoing support. Thomas Revy Chairman REGISTERED and PRINCIPAL OFFICE 53 Canning Highway, Victoria Park WA 6100 (cnr Taylor Street) Phone +618 9361 3100 Fax +618 9361 3184 Page 2 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 5. REVIEW OF OP ERATIONS Empire Resources Ltd is a gold and copper focused exploration company. Since listing in February 2007, the Company has made three significant copper and/or gold discoveries in Western Australia and announced JORC compliant resources for two of these discoveries. At the Penny’s Find project near Kalgoorlie, the Company located a near surface high grade gold deposit which has a JORC compliant resource estimated at 314,000 tonnes @ 5.2g/t Au. It is likely further drilling at depth will upgrade this resource. Following exploration success during 2007 and 2008, the Company announced a copper–gold resource for the Just Desserts prospect at the Yuinmery project, 80km southwest of Sandstone, WA. This initial resource has been estimated at 1,070,000 tonnes @ 1.82% Cu and 0.78g/t Au at a 1% Cu cutoff. Continued drilling will likely upgrade this resource and locate additional resources at other nearby prospects. In the latter part of 2008 a discovery of high grade copper sulphide mineralisation was made at the large Troy Creek project, 180km northeast of Wiluna in Western Australia. The drill intersections consisted of 2m @ 4.65% Cu and 3m @ 1.97% Cu - forming part of a 36m intersection grading 0.76% Cu. Empire Resources Ltd has a 32% interest in FYI Resources Ltd, who now owns the large Yarlarweelor uranium project, 125km north of Meekatharra, WA which shows potential to host large tonnages of primary uranium mineralisation. Previous limited drilling within a 5km long zone of anomalous uranium radioactivity returned up to 8m @ 708ppm U3O8. The Wynne base metal project is located 260km northeast of Carnarvon in Western Australia. Surface sampling has identified highly anomalous base metal gossans outcropping over a 4km strike length which represent immediate drill targets. Figure 1. Project location map REGISTERED and PRINCIPAL OFFICE 53 Canning Highway, Victoria Park WA 6100 (cnr Taylor Street) Phone +618 9361 3100 Fax +618 9361 3184 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 3 YUINMERY (WA): Copper - Gold Project 100% interest The Yuinmery copper-gold project is situated 475km northeast of Perth, WA. It lies within the Archaean Youanmi greenstone belt and covers a synclinal sequence of chloritised felsic tuffaceous rocks with interbedded sulphide bearing chert horizons. Copper- gold mineralisation, previously identified from a number of prospects at Yuinmery, is of volcanogenic massive sulphide (VMS) style similar in nature to orebodies currently being mined at Golden Grove and Jaguar in Western Australia. It occurs as massive sulphides associated with chert exhalite horizons, as matrix sulphides in lapilli tuff, and associated with mafic and ultramafic intrusions. At one of the Yuinmery prospects, Just Desserts, drilling during 2007-2008 intersected high grade copper-gold zones with assays such as 23m @ 2.68% Cu, 1.28g/t Au; 14m @ 2.63% Cu, 1.91g/t Au; 13m @ 2.55% Cu, 1.67g/t Au; 6m @ 3.79% Cu, 12.85g/t Au and 10m @ 4.23% Cu, and 6.01g/t Au. Based on the above drilling an indicated + inferred JORC resource of 1,070,000 tonnes @ 1.82% Cu, 0.78g/t Au was estimated for the Just Desserts prospect and reported on in the March 2009 Quarterly. This resource lies between 50 and 250 metres below surface and is open at depth. Elsewhere in the world deposits of this style of mineralisation commonly occur in clusters and have been mined to great depths. During the past year the Company has undertaken RAB, RC and diamond drilling programs plus downhole electromagnetic (EM) surveys at Yuinmery, testing a number of different prospects. Sixteen holes, 3170m of RC drilling and five holes, 1771m of diamond drilling were completed at the Just Desserts, Trajan, Augustus, B zone and C zone prospects (see Figure 3). Diamond drilling has confirmed the Just Desserts mineralisation continues at depth with an intersection of 12.5m @ 0.7% Cu, including 1.9m @ 1.6% Cu, from a vertical depth of 350m. This intersection is thought to have intersected the bottom edge of the south-easterly plunging copper-gold mineralisation (see Figure 4). Further drilling is planned down plunge from the currently defined resource. RC drilling at Trajan immediately along strike to the south of Just Desserts, intersected two zones of copper mineralisation, 7m @ 1.09% Cu, 0.63g/t Au from 110m downhole and 5m @ 3.1% Cu, 0.38g/t Au, including 2m @ 6.1% Cu, from 136m. The mineralised zones currently remain open down plunge and further drilling is being planned (see Figure 4). The Augustus prospect is located two kilometres to the east of Just Desserts. One diamond hole, targeting a strong EM anomaly, intersected a sequence of chloritic felsic tuffs and rhyolitic breccias containing zones of banded and disseminated sulphides, mainly pyrrhotite and pyrite along with minor chalcopyrite. Within a wide mineralised interval from 354m downhole assaying 20.57m @ 0.32% Cu, were narrow, higher grade sections assaying up to 3.4% Cu. Further drilling is being planned. RC and diamond drilling at the B and C zone prospects intersected narrow zones of low grade copper mineralisation associated with chloritised tuffs and volcanogenic sediments. A 33 hole, 963m reconnaissance RAB drilling program was completed in the Fitz Bore area, 4 km south of the Just Desserts prospect. This program, designed to test soil gold anomalies, was successful in locating three new areas of gold mineralisation associated with quartz veining in gabbro. Intersections of 8m @ 0.51g/t Au from surface, 4m @ 0.62g/t Au from 24m and 7m @ 0.58g/t Au from 40m to EOH warrant further work in this area. Subsequent to the end of the reporting year, the Company entered into an option agreement with La Mancha Resources Ltd to purchase a 75.82% interest in tenements surrounding the Just Desserts resource (see Figures 5). This agreement trebles the Company’s tenement position to 227km2. A recently completed airborne EM survey by La Mancha identified up to 22 previously untested conductive zones considered by Empire to be prospective for massive sulphide mineralisation. A number of these anomalies are considered to be priority drill targets (see Figures 6). Page 4 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Figure 2. Yuinmery project prospects. Figure 3. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 5 Figure 4. Figure 5. Page 6 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Figure 6. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 7 PENNY’S FIND (WA): Gold Project 100% interest The Penny’s Find project, situated in the Eastern Goldfields of Western Australia, lies 50km northeast of Kalgoorlie and 30km from the Kanowna Belle Gold Mine. Within mining lease M27/156, gold mineralisation is associated with quartz veining developed at or near a sheared contact between basalt and sediments. The Company has previously outlined a gold resource at Penny’s Find of 314,000 tonnes @ 5.18g/t Au down to a vertical depth of 150m below surface. The mineral resource estimate is summarised in the following table: PENNY’S FIND MINERAL RESOURCE Category Measured Indicated Inferred TOTAL Tonnes 79,000 132,000 103,000 314,000 Grade* (g/t Au) Ounces 4.40 3.98 7.33 5.18 11,120 16,880 24,313 52,313 * Grades are based on a minimum cut-off of 0.5 g/t Au and high assays cut to 25 g/t Au. In October 2009 the Company entered into a joint venture agreement with Rubicon Resources Ltd to acquire an interest in the Mt McLeay tenements located immediately north of the Penny’s Find deposit (see Figure 7). During the past year the Company undertook drilling programs of RAB (44 holes, 1418m) and RC (10 holes, 1069m) testing geological targets and old gold workings both on the Mt McLeay tenements and Empires. The targets tested returned only narrow, low grade gold mineralisation. The Company continued discussions throughout the year with various parties for the sale or joint development of the resource. On the 15 September 2010 the Company announced to the Australian Stock Exchange it had entered into a staged sale agreement for Penny’s Find with unlisted company Brimstone Resources Ltd. At the election of Brimstone, the sale consideration comprises either: • Staged cash payments totaling $2.0 million by December 2012 for a 100% interest of the Penny’s Find project. A 2% gross royalty will also be payable on gold produced in excess of the current JORC resource of 52,500 ozs gold. • Staged cash payments totaling $0.5 million together with exploration and development expenditure of up to $3 million by December 2013 for an 80% interest in the Penny’s Find project. Any additional development costs associated with ERL’s residual 20% interest will be carried by Brimstone and repayable from the proceeds of future gold production. Page 8 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Figure 7. Figure 8. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 9 YARLARWEELOR (WA): Uranium Project 32% indirect interest The Yarlarweelor uranium project is located 125km north of Meekatharra in Western Australia. The Company announced to the Australian Securities Exchange in April 2010 the sale of 100% of the Yarlarweelor project to FYI Resources Ltd. As part of the sale agreement, Empire Resources emerged with a direct 32% stake in FYI Resources and two seats on it’s Board of Directors. Previous exploration during the early 1980’s discovered primary uranium mineralisation in the form of uraninite at five locations within the project area. Four of these occurrences are from within the Archaean Despair Granite where limited drilling showed the uraninite mineralisation to be hosted in multiple parallel shear zones and the surrounding granites. Since the completion of the Yarlarweelor sale, FYI Resources has drilled four diamond holes, totalling 652 metres at the Kangaroo Ridge and Doris prospects. These holes intersected wide zones of uranium mineralisation associated with biotite rich shear zones in granite, confirming the presence of significant uranium mineralisation at Yarlarweelor. Results from the drilling at Kangaroo Ridge included: • 35m @ 503ppm U3O8 including 5m @ 1,069ppm U3O8 in KRD10-02 • 7.8m @ 588ppm U3O8 including 1m @ 1,873ppm U3O8 in KRD10-01 and • 14m @ 221ppm U3O8 including 1m @ 844ppm U3O8 in KRD10-03 The true widths of mineralisation in KRD10-02 and 03 are estimated to be 9 metres and 3 metres respectively. The true width of mineralisation in KRD10-01 is estimated to be 4 metres. The uranium mineralisation at Kangaroo Ridge currently extends for 200 metres along strike and to 200 metres depth as defined by recent and historical drilling. This mineralisation remains open both along strike and at depth. The single diamond core hole drilled at the Doris prospect intersected seven zones of biotite schist ranging in true widths from 1.3m to 4.0m. To date, assays from only two of these biotite schist zones and the adjacent granite have been reported: 2.94m @ 184ppm U3O8 from 97.66m and 5.37m @ 185ppm U3O8 from 117.02m. Preliminary metallurgical testwork on a composite core sample from hole KRD10-01 at Kangaroo Ridge, gave an 89% extraction of uranium to liquor in 12 hours and 91% extraction in 24 hours under mild sulphuric acid leaching conditions. This testwork confirmed the potential for a significant proportion of the Yarlarweelor uranium mineralisation to be amenable to recovery by simple acid leaching. Results from a previous airborne radiometric survey and geological mapping indicate shear zones with a combined strike length in excess of 25km exist within FYI’s tenements and may be prospective for uranium mineralisation. A program of field checking and sampling of radiometric anomalies is ongoing to rank areas for future drilling. Page 10 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Figure 9. Diamond drilling at Yarlarweelor EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 11 Figure 10. Figure 11. Page 12 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 TROY CREEK (WA): Copper - Gold - PGM Project 100% interest The Troy Creek copper-gold-platinum group metal (PGM) project is situated 900km northeast of Perth on the northern margin of the Palaeoproterozoic Earaheedy Basin where the Company holds tenements covering an area of 270km2. Several prominent geochemical and magnetic targets have been identified in sedimentary rocks within the Company’s tenements. These include a large zone of multi-element anomalous geochemistry in sedimentary rocks which extend along strike for a distance of more than 20km. This zone, defined by rock chip sampling, soil geochemistry and limited drilling, is anomalous in copper, gold, PGM, arsenic, silver and antimony. The Main Gossan prospect which lies within this zone was tested with one reverse circulation drill hole in 2008. This hole intersected high grade copper sulphide mineralisation which included 2m @ 4.65% Cu from 91 metres, and 3m @ 1.97% Cu from 117 metres. These high grade intersections form part of a 36 metre sulphide mineralised zone assaying 0.76% Cu and extending from 91m to the end of hole. The true width of mineralisation is estimated to be 60% of the intersected width. The copper mineralisation consists of fine grained stratiform copper and iron sulphides in graphitic shales and shows some similarities to “Kupferscheifer Style” mineralisation which forms world class copper deposits in Germany and southwest Poland. These similarities include stratiform mineralisation over large areas, the presence of adjacent haematitic oxidized rocks and comparable geochemistry i.e. anomalous copper, silver, arsenic, and zinc, with adjacent but discrete platinum group metals mineralisation eg. 7m @ 0.59g/t Pt + Pd. During the past year sixteen RC holes totalling 1,784 metres were drilled on seven separate targets spread over a distance of sixteen kilometres. Considerable difficulty was experienced with this drilling program as four holes were abandoned prior to target depth and another six holes failed to test targets because of geological complexity in areas with little or no outcrop. Six holes were drilled at the Main Gossan prospect with one hole, drilled fifty metres east of the 2008 discovery hole, intersecting: 8m @ 1.47% Cu from 76 metres, 4m @ 3.04% Cu from 104 metres and 1m @ 1.12% Cu from 124 metres. The remaining five holes intersected only minor anomalous copper values. The Company is actively looking for a joint venture partner to fund further exploration on this large project. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 13 Figure 12. WYNNE (WA): Copper - Lead - Zinc Project 100% interest Exploration licence E08/1979, granted in June 2010, covers an area of 90km2 in the northern Gascoyne region of Western Australia, 260km northeast of Carnarvon. Previous exploration in the area identified extensive gossans containing geochemically anomalous copper, lead and zinc values but no drilling was ever undertaken. These gossans are associated with meta-sedimentary rocks of the Proterozoic Morrissey Metamorphic Suite. Surface rock chip sampling by the Company has confirmed the anomalous base metal signature of the Wynne gossans which occur in three horizons outcropping over at least a 4km strike length. Assays were highly anomalous with values up to 0.25% Cu, 0.39% Pb, 0.14% Zn, 124ppm Bi, 114ppm Mo and 128ppm W. A ground based electromagnetic survey is being planned to locate any large sulphide conductors present beneath the gossans. Any suitable conductors found will be tested by drilling. TORRENS (SA): Copper - Gold - Uranium Project 100% interest The Torrens Project targeted Iron Oxide-Copper- Gold mineralisation on the eastern margin of the Gawler Craton in South Australia. No field work was undertaken on the project during the past year and the Company has relinquished it’s interest in the project. David Sargeant Managing Director 24 September 2010 Competent Person’s Statement The information in this Annual Report that relates to Exploration Results and Resources have been compiled by Mr. David Ross B.Sc. M.Sc., who is an employee of the Company. He is a member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. He has sufficient experience which is relevant to the style of mineralisation and type of deposits under consideration and to the activity to which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. David Ross consents to the inclusion in this Annual Report of the matters based on his information in the form and context in which it appears. Page 14 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Note s on the Re source s he ld b y Emp i re Resour ces Lim it ed Penny’s Find Resource An updated resource estimate for the Penny’s Find gold mineralisation was completed and announced to the market on 8 August 2007 and 12 October 2007. There has been no change to the resource since that time. The mineral resource by category is 314,000 tonnes averaging 5.2 g/t gold down to a vertical depth of 150m below surface. The mineral resource above 0.5 g/t gold is summarised in the following table. Penny’s Find Classified mineral resources – August 2007 Category Grade* (g/t Au) Tonnes Measured Indicated Inferred TOTAL 79,000 132,000 103,000 314,000 4.40 3.98 7.33 5.18 Ounces 11,177 16,893 24,276 52,316 * grades are based on a minimum cut-off of 0.5g/tAu and high assays cut to 25g/tAu Resource modelling consultants Datageo calculated a JORC compliant in situ resource estimate, utilising all drill hole information available on mining lease M27/156 up to the end of June 2007. The resource grade was estimated using ordinary kriging based on the drill hole data composited downhole to 1m intervals within constraining shapes representing the mineralisation. Assumed specific gravity values used were: oxide 2.0t/m3; transitional 2.2t/m3; fresh 2.5t/m3. Yuinmery Resource A resource estimate for the Just Desserts prospect at Yuinmery was completed and announced to the market on 9 April 2009. There has been no change in the resource since that time. The mineral resource by category to a depth of 250m below surface is reported below. The resource comprises no oxide mineralisation, only transitional and fresh. Just Desserts Classified Mineral Resources – March 2009 Category Tonnes Grade* Grade* Grade* Cu% Au g/t Ag g/t 1%Cu cutoff Indicated 104,000 1.65 Inferred TOTAL 966,000 1.84 1,070,000 1.82 1.5%Cu cutoff Indicated 46,000 2.11 Inferred 536,000 2.34 TOTAL 582,000 2.33 0.86 0.77 0.78 1.14 0.92 0.93 1.32 2.12 2.06 1.58 2.68 2.61 *High assays have been cut to 9%Cu, 20g/tAu and 10g/tAg. Resource modelling consultants Datageo calculated a JORC compliant in situ resource estimate, utilising all drill hole information available on Prospecting Licence P57/1215 up to the end of June 2008. The resource grade was estimated using ordinary kriging based on the drill hole data composited down hole to 1m intervals within constraining shapes representing the mineralisation. Assumed specific gravity values used were: transitional 2.7t/m3; fresh 3.2t/m3. Competent Persons Statement The information is this report concerning the Mineral Resources for the Penny’s Find Deposit and the Just Desserts Deposit at Yuinmery have been estimated by Mr Peter Ball B.Sc who is a director of DataGeo Geological Consultants and is a member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Ball has sufficient experience which is relevant to the styles of mineralisation and types of deposit under consideration and qualifies as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Ball consents to the inclusion in the public release of the matters based on his information in the form and context in which it appears. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 15 Page 16 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 E MPIRE RESOURCES LIMITED AND CONTROLL ED ENT IT Y ABN 32 092 471 513 FOR THE YEAR ENDED 30 JUNE 2 0 10 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 17 FINANCIAL STATEMENTS DIRECTORS ’ REPOR T Your directors submit their report on Empire Resources Limited and its controlled entity for the financial year ended 30 June 2010. DIRECTORS The company’s directors in office during the financial period and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated. Tom Revy Chairman (Non Executive) BappSc. Grad Dip Bus. (Appointed 8 January 2010) Mr Revy is a mining professional with in excess of 27 years experience in the mining industry to date including operations, process design and commissioning, technical and general management, business development, project and company evaluation and corporate management. Countries where extensive work has been undertaken include Australia, PNG, Southern and Central Africa, Central and South America and China. He also holds the role of Director of the Australian Latin American Business Council (ALABC). David Sargeant Managing Director BSc. MAusIMM Mr Sargeant – who holds a Bachelor of Science degree in economic geology from the University of Sydney – has more than 35 years experience as a geologist, consultant and company director. As such, he has been involved in numerous mineral exploration, ore deposit evaluation and mining development projects and is a member of AusIMM and the Geological Society of Australia. During his career, Mr Sargeant has held a range of senior positions, including that of senior geologist with Newmont Pty Ltd and senior supervisory geologist with Esso Australia Ltd at the time of the Harbour Lights Gold Mine discovery and development. Further, Mr Sargeant was the first chief geologist at Telfer Gold Mine during exploration, development and production at that project. In addition, he was exploration manager for the Adelaide Petroleum NL group of companies, manager of resources development for Sabminco NL and a technical director of Western Reefs Limited during the period in which that company became a successful producer at the Dalgaranga Gold Project. Mr Sargeant has been a director of the following listed companies during the past three years. Company FYI Resources Ltd Position Appointed Ceased Non Executive Director 30/11/2009 – Page 18 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Adrian Jessup Executive Director BSc. MAusIMM Mr Jessup also holds a Bachelor of Science degree (with honours) in economic geology from the University of Sydney and has more than 35 years continuous experience as a geologist, company director and consultant involved in mineral exploration, ore deposit evaluation and mining. He is a member of AusIMM, the Geological Society of Australia and the Australian Institute of Geoscientists. For the last fifteen years, Mr Jessup has operated a geological consulting company. During that time, he was a founding director of Sylvania Resources Limited and remained on the board for two years. Prior to that, Mr Jessup was managing director of Giralia Resources NL for eight years, from the company’s inception in 1987. Previously, he had worked for AMAX Exploration Inc., as a senior geologist and as regional manager in charge of that company’s mineral exploration in Western Australia. Mr Jessup has been a director of the following listed companies during the past three years. Company FYI Resources Ltd Position Executive Director Appointed 30/11/2009 Ceased – Adrian Griffin Chairman (Non Executive) BSc. MAusIMM (Resigned 8 January 2010) Mr Griffin graduated from the University of Melbourne in 1975 and is a member of the Australasian Institute of Mining and Metallurgy (‘AusIMM’) and the Geological Society of Australia. He began his professional career with exploration for base metals in Tasmania. He went on to develop mine planning, grade control and exploration methods in iron ore with BHP. In the 1980s, Mr Griffin was operations manager for a number of public companies involved in the mining and production of gold and base metals throughout Australia and southeast Asia. In 1988, he managed the commissioning of underground production at the Bellevue gold mine in Western Australia. Mr Griffin began consulting to the mining industry in 1990 and has held board positions with a number of public companies since then. His management experience is broad, encompassing as it does exploration, financing, development, commissioning and the production of a wide range of mineral commodities. Mr Griffin was a director of the following listed companies during the past three years up to the date of his resignation. Company Position Washington Resources Limited Managing Director Northern Uranium Limited Non Executive Director Reedy Lagoon Corporation Limited Non Executive Director Dwyka Resources Limited Hodges Resources Limited Chief Executive Officer Managing Director 17/08/2005 Appointed 1/9/2004 2/06/2006 9/05/2007 1/12/2005 Ceased 1/12/2008 – 27/11/2009 30/10/2007 1/12/2008 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 19 MANAGEMENT Simon Storm Company Secretary BCom. BCompt(Hons). CA, FCIS Mr Storm is a Chartered Accountant with over 26 years of Australian and international experience in the accounting profession and commerce. He commenced his career with Deloitte Haskins & Sells in Africa then London before joining Price Waterhouse in Perth. He has held various senior finance and/or company secretarial roles with listed and unlisted entities in the banking, resources, construction, telecommunications and property development industries. In the last 8 years he has provided consulting services covering accounting, financial and company secretarial matters to various companies in these sectors. David Ross Exploration Manager BSc(Hons). MSc. MAusIMM Mr Ross holds a Bachelor of Science degree (with honours) in geology from Aberdeen University, Scotland and a Master of Science degree in economic geology from McMaster University in Canada. He is a member of the AusIMM, the Geological Society of Australia and the Australian Institute of Geoscientists. With over 20 years experience as an exploration geologist in Western Australia his career has seen him involved with numerous mineral exploration, ore deposit evaluation and mine development projects for both gold and base metals. He has held senior geologist positions with Brunswick NL and Giralia Resources and was geological superintendent for Australian Resources at the Gidgee Gold Mine. Most recently he held the position of chief geologist with De Grey Mining Ltd where he was instrumental in the discovery of the Orchard Well VMS deposits. Principal Activities During the period the principal activities of the Company consisted of mineral exploration and evaluation of properties in Australia. There has been no significant change in these activities during the financial period. Dividends No dividends have been paid during the period and no dividends have been recommended by the directors. Result for the Financial Period Loss from ordinary activities after income tax expense was $522,353 (2009: $1,167,359) Review of Operations During the year, the Company continued exploration activities at its Yuinmery copper – gold project with the first high grade intersections made at the Trajan prospect and encouraging copper intersections being found at the Augustus prospect. In addition the Company sold its Yarlarweelor uranium project in WA to FYI Resources Limited and holds a 32% shareholding in that company. In order to continue funding its operations the Company raised $1,540,000 before costs through a series of share placements. Significant changes in the state of affairs of the Company during the financial year were as follows: • Sale of Yarlarweelor uranium project to FYI Resources Ltd. In the opinion of the Directors there were no other significant changes in the state of affairs of the Company. Page 20 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Remuneration Report (Audited) This report details the amount and nature of remuneration of each director of the Company and the executives receiving the highest remuneration. Remuneration Policy The principles used to determine the nature and amount of remuneration are applied through a remuneration policy which ensures the remuneration package properly reflects the person’s duties and responsibilities and that the remuneration is competitive in attracting, retaining and motivating people of the highest quality. The remuneration policy, setting the terms and conditions for the executive directors has been developed by the board after seeking professional advice and taking into account market conditions and comparable salary levels for companies of a similar size and operating in similar sectors. The remuneration policy is to provide a fixed remuneration component. The board believes that this remuneration policy is appropriate given the stage of development of the Company and the activities which it undertakes and is appropriate in aligning Directors’ objectives with shareholder and businesses objectives. The remuneration framework has regard to shareholders’ interests in the following ways: • Focuses on sustained growth as well as focusing the directors on key non-financial drivers of value, and • Attracts and retains high calibre directors. The remuneration framework has regard to directors’ interests in the following ways: • Rewards capability and experience, • Reflects competitive reward for contributions to shareholder growth, • Provides a clear structure for earning rewards, and • Provides recognition for contribution. Non Executive Directors The board policy is to remunerate non executive directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the non executive director and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to directors is subject to approval by shareholders at a General Meeting. Fees for non executive directors are not linked to the performance of the economic entity. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and may receive options. The Directors have resolved that non executive director’s fees will be $30,000 per annum for the Chairman, inclusive of statutory superannuation contributions. Shareholders have approved aggregate remuneration for all non executive directors at an amount of $100,000 per annum. Where applicable, superannuation contributions of 9% are paid on these fees as required by law. Share-based compensation To ensure that the Company has appropriate mechanisms to continue to attract and retain the services of Directors and Employees of a high calibre, the Company has established the Empire Resources Limited Share Plan (“SP”) and the Empire Resources Option Plan. The Directors consider the plans are an appropriate method to: a) reward Directors and Employees for their past performance; b) provide long-term incentives to participate in the Company’s future growth; c) motivate Directors and Employees and generate loyalty in Employees; and d) assist to retain the services of valuable Employees. The value attributed to the share based compensation for the year is as follows: EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 21 Year granted Vested % Forfeited % Financial years in which shares may vest Total value of grant vested $ Minimum total value of grant yet to vest $ Maximum total value of grant yet to vest $ 2007 2010 2007 2010 2007 2010 2007 2010 72% - 72% - 72% - 72% - - - - - - - - - 2008-11 2010-13 2008-11 2010-13 2008-11 2010-13 50,286 - 75,430 - 50,286 - 19,341 7,500 29,011 7,500 19,341 7,500 2008-11 2010-13 35,200 - 13,539 7,500 19,341 7,500 29,011 7,500 19,341 7,500 13,539 7,500 A Remuneration consisting of shares B Value at issue date $ Shares C Value at exercise date $ D Value at lapse date $ E Total of columns B-D $ 11% 0% 4% 3% 6% 69,627 - 104,441 69,627 48,739 - - - - - - - - - - 69,627 - 104,441 69,627 48,739 Directors Mr A Griffin 1 Mr T Revy 2 Mr D Sargeant Mr A Jessup Specified Executives Mr S Storm 1 Resigned 8 January 2010 2 Appointed 8 January 2010 Directors Mr A Griffin 1 Mr T Revy 2 Mr D Sargeant Mr A Jessup Specified Executives Mr S Storm 1 Resigned 8 January 2010 2 Appointed 8 January 2010 A = The percentage of the value of remuneration consisting of shares, based on the value of shares expensed during the current year. B = The value at issue date calculated in accordance with AASB 2 Share-based Payment of shares issued during the year as part of remuneration. C = The value at exercise date of shares that were issued as part of remuneration and were exercised during the year, being the intrinsic value of the shares at that date. D = The value at lapse date of shares that were issued as part of remuneration and that lapsed during the year. Lapsed shares refer to shares that vested but expired due to the term of the loan expiring. Page 22 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Share Options At the date of this report unissued ordinary shares of the Company under option are: Date of expiry Number under option Exercise price ($) Grant date 1-Feb-07 2-Jun-10 31-Dec-10 2-Jun-13 25-Jun-10 25-Jun-13 0.25 0.15 0.14 3,000,000 8,227,729 2,700,000 13,927,729 Directors’ Interest The relevant interest of each director in the shares and options over shares issued by the Company at the date of this report is as follows: Number of Ordinary shares Number of Options Director Mr T Revy Direct Indirect Direct Indirect 350,000 - 500,000 - Mr D Sargeant - 6,100,000 Mr A Jessup 722,222 1,345,333 - - 500,000 500,000 Company Performance Comments on performance are set out in the review of operations. Significant Changes in the State of Affairs There were no other significant changes in the state of affairs of the Company other than those noted in the review of operations. Likely Developments and Expected Results Disclosure of likely developments in the operations of the Company and the expected results of those operations in future financial years, and any further information, has not been included in this report because, in the reasonable opinion of the Directors to do so would be likely to prejudice the business activities of the Company. Environmental Regulation The Company’s operations were subject to environmental regulations under both Commonwealth and State legislation in relation to its exploration activities. The directors are not aware of any breaches during the period covered by this report. Executives Executive Directors receive either a salary plus superannuation guarantee contributions as required by law, currently set at 9%, or provide their services via a consultancy arrangement. Directors do not receive any retirement benefits. Individuals may, however, choose to sacrifice part of their salary to increase payments towards superannuation. Options are not issued as part of remuneration for long term incentives. All remuneration paid to directors and executives is valued at cost to the Company and expensed. Compensation of Key Management Personnel for the year ended 30 June 2010. The following table discloses the remuneration of the Key Management Personnel (Directors and executive officers) of the Company. The information in this table is audited. Employment contracts Mr D Sargeant By agreement dated 24 October 2009, the Company and Kirkdale Holdings Pty Ltd (ACN 009 096 388) (‘Kirkdale’) agreed the terms and conditions under which Kirkdale would provide the services of Mr Sargeant as Managing Director of the Company. The agreement has: a) a term of three years; b) requires the payment to Kirkdale of a fee of $15,000 (GST excl) per month (increasing by 10% each year) and reimbursement of expenses; c) provisions requiring the payment of a termination benefit of 50% of the amount due on termination of the agreement. Mr A Jessup By agreement dated 24 October 2009, the Company and Murilla Exploration Pty Ltd (ACN 068 277 190) (‘Murilla’) agreed the terms and conditions under which Murilla would provide the services of Mr Jessup as an executive officer of the Company. The agreement has: a) a term of three years; b) requires the payment to Murilla of a fee of $7,000 (GST excl) per month (increasing by 10% each year) and reimbursement of expenses; c) provisions requiring the payment of a termination benefit of 50% of the amount due on termination of the agreement. Directors may be paid additional fees for special duties or services outside the scope of the ordinary duties of a Director. Directors will also be reimbursed for all reasonable expenses incurred in the course of their duties. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 23 Meetings of Directors Events subsequent to reporting date The following table sets out the number of meetings of the Company’s directors held during the period ended 30 June 2010 and the number of meetings attended by each director. Directors’ meetings Director Mr Adrian Griffin Mr Thomas Revy Mr David Sargeant Mr Adrian Jessup A 3 3 6 5 A = meetings attended B = meetings held whilst a director B 3 3 6 6 As at the date of this report the Company has not formed any committees as the directors consider that at present the size of the Company does not warrant such. Audit, corporate governance, director nomination and remuneration matters are all handled by the full board. Proceedings on Behalf of the Company No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of the proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under Section 237 of the Corporations Act 2001. Indemnification and Insurance of Directors and Officers Indemnification The Company has agreed to indemnify current directors and officers and past directors and officers against all liabilities to another person (other than the Company or a related body corporate), including legal expenses that may arise from their position as directors and officers of the Company and its controlled entity, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. Insurance The directors have not included details of the amount of the premium paid in respect of the directors’ and officers’ liability insurance contracts, as such disclosure is prohibited under the terms of the contract. On 15 September 2010, Empire Resources Ltd entered into a staged sale agreement for its Penny’s Find gold project with unlisted company Brimstone Resources Ltd. At the election of Brimstone Resources Ltd, the sale consideration comprises either: • Staged cash payments totalling $2 million for a 100% interest of the Penny’s Find project, or • Stage cash payment totalling $0.5 million together with exploration and development expenditure of up to $3 million for an 80% interest in the Penny’s Find project. On 1 September 2010 the Company announced it had entered into an option agreement to purchase an interest in three granted exploration licences and two granted prospecting licences held by La Mancha Resources Australia surrounding the Company’s advanced Yuinmery copper – gold resource project in Western Australia.. The five tenements are the subject of a joint venture between La Mancha Resources Australia and Giralia Resources Limited in which La Mancha currently holds an interest of approximately 75.82%. Under the terms of the option agreement, Empire must spend a minimum of A$150,000 per annum for up to three years while retaining an option to purchase La Mancha’s interest for a cash consideration of A$750,000. A 2% net smelter royalty capped at A$5,000,000 will be payable by Empire on any minerals produced from the La Mancha tenements. Other than this, no matter or circumstance has arisen, since the end of the financial year, which significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in subsequent financial years. Non-audit Services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Consolidated entity are important. Details of the amounts paid or payable to the auditor (HLB Mann Judd and RSM Bird Cameron) for audit and non-audit services provided during the year are set out below. Page 24 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 The Board of directors has considered the position and is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed by the board to ensure they do not impact the impartiality and objectivity of the auditor; • none of the services undermine the general principles relating to auditor independence as set out in Professional Statement FI, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. During the period, the following fees were paid or payable for services provided by the auditors of the parent entity HLB Mann Judd and RSM Bird Cameron:, its related practices and non-related audit firms: Consolidated Year ended 30 June 2010 $ Year ended 30 June 2009 $ Assurance Services HLM Mann Judd (Current Auditor) 1. Audit services Audit and review of financial reports and other audit work under the Corporations Act 2001 Total remuneration for audit services 2. Other assurance services Tax-related Total remuneration for other assurance services Total remuneration for assurance services Assurance Services RSM Bird Cameron (Former Auditor) 1. Audit services Audit and review of financial reports and other audit work under the Corporations Act 2001 Total remuneration for audit services 2. Other assurance services Tax-related Total remuneration for other assurance services Total remuneration for assurance services 18,500 – 18,500 – – – 18,500 – – 2,250 2,250 – – – 25,200 25,200 5,700 5,700 2,250 30,900 Auditors Independence Declaration Section 307C of the Corporations Act 2001 requires the company’s auditors, HLB Mann Judd, to provide the directors with a written Independence Declaration in relation to their audit of the financial report for the year ended 30 June 2010. This written Auditor’s Independence Declaration is attached to the Auditor’s Independent Audit Report to the members and forms part of this Director’s Report. Signed in accordance with a resolution of Directors. D Sargeant Managing Director Perth, Western Australia 24 September 2010 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 25 STAT EMEN T OF COMPR EHE NS IV E INCOM E FOR TH E YEA R E NDED 3 0 JU NE 2010 EMPIRE RESOURCES LI MI TED Revenue from Continuing operations Depreciation expense Exploration expense Employee benefits expense Management fee expense Directors Fees Accounting expense Consultancy expense Share-based payment ASX expense Corporate Relations expense Insurance expense Other expenses Share of loss of equity accounted investees Loss before income tax Income tax expense Net loss for the year Other comprehensive income Income tax relating to components of other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive loss for the year Loss per share for loss from contiuing operations attributable to the ordinary equity holders of the Company Note 2 3 3 8 4 Consolidated Group 2009 $ 2010 $ 1,534,161 139,732 (23,577) (1,147,416) (20,032) (254,772) (30,000) (48,265) (6,658) (24,601) (647,618) (20,149) (260,103) (30,000) (42,855) (200) (113,909) (113,724) (15,415) (27,134) (15,482) (110,695) (243,159) (24,938) (23,315) (16,107) (103,481) – (522,353) (1,167,359) – – (522,353) (1,167,359) – – – – – – (522,353) (1,167,359) Basic and diluted loss per share (cents per share) 5 (0.61) (1.62) The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. Page 26 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 STATE MENT OF FINANCIA L PO SIT ION A S AT 30 J U NE 2 0 1 0 EMPIRE RESOURCES LI MI TED ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Total Current Assets NON-CURRENT ASSETS Investments accounted for using the equity method Plant & equipment Total Non-Current Assets TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY Note Consolidated Group 2009 $ 2010 $ 6 7 8 9 595,674 70,861 666,535 809,433 15,648 825,081 1,256,645 34,427 1,291,072 – 58,004 58,004 1,957,607 883,085 10 130,106 130,106 101,287 101,287 130,106 101,287 1,827,501 781,798 11 12 11,723,878 10,269,731 739,174 625,265 (10,635,551) (10,113,198) 1,827,501 781,798 The above Statement of Financial Position should be read in conjunction with the accompanying notes. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 27 STAT EME NT OF CH AN GE S IN EQUITY FOR THE YEAR ENDED 30 JUNE 20 1 0 EMPIRE RESOURCES LIMITED Balance at 1 July 2008 Shares issued during the year Options issued during the year Equity issue expenses Total comprehensive loss for the year Balance at 30 June 2009 Balance at 1 July 2009 Shares issued during the year Options issued during the year Equity issue expenses Total comprehensive loss for the year Balance at 30 June 2010 Consolidated group Share capital Accumulated ordinary Losses $ $ Option Reserve $ 9,420,471 (8,945,839) 511,541 850,000 – (740) – – – – (1,167,359) – 113,724 – – Total $ 986,173 850,000 113,724 (740) (1,167,359) 10,269,731 (10,113,198) 625,265 781,798 10,269,731 (10,113,198) 625,265 781,798 1,539,691 – (85,544) – – – 1,539,691 113,909 113,909 (85,544) – (522,353) – (522,353) 11,723,878 (10,635,551) 739,174 1,827,501 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes Page 28 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 STATEM ENT OF CASH FLOWS FOR TH E YEA R ENDED 3 0 JU NE 2010 EMPIRE RESOURCES LIMITED Cashflows from Operating Activities Receipts from customers Payments to suppliers and employees Interest received Consolidated Group 2009 2010 Note $ $ 11,000 (537,650) 24,357 74,526 (491,295) 65,206 Net cash used in operating activities 6(i) (502,293) (351,563) Cash Flows from Investing Activities Payment for renewal or purchase of prospects Exploration and evaluation expenditure – (1,167,660) (90,000) (959,537) Net cash used in investing activities (1,167,660) (1,049,537) Cash Flows from Financing Activities Proceeds from issue of equity securities Equity securities issue costs 1,539,691 850,000 (83,497) (740) Net cash provided by financing activities 1,456,194 849,260 Net decrease in cash held Cash at the beginning of the financial year (213,759) (551,840) 809,433 1,361,273 Cash at the end of the financial year 6 595,674 809,433 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 29 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL ST ATEME NTS 30 J UNE 2 01 0 1. Statement of Significant Accounting Policies The financial report covers the consolidated entity of Empire Resources Limited (“Empire”) and its controlled entity and Empire as an individual parent entity. Empire is a listed public company limited by shares, incorporated and domiciled in Australia. (a) Basis of Preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. It is prepared on the basis of historical costs. The financial report is presented in Australian dollars. The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the consolidated financial report, comprising the financial statements and notes thereto, complies with the International Financial Reporting Standards (IFRS). The financial report was authorised for issue by the Board on 24 September 2010. The following is a summary of the material accounting policies adopted by the consolidated entity in the preparation of the financial report. The accounting policies have been consistently applied by the controlled entity and are consistent with those in the June 2009 financial report. The group has applied the revised AASB 101 Presentation of Financial Statements which became effective on 1 January 2009. The revised standard requires the separate presentation of a statement of comprehensive income and a statement of changes in equity. All non-owner changes in equity must now be presented in the statement of comprehensive income. As a consequence, the group had to change the presentation of its financial statements. Comparative information has been re-presented so that it is also in conformity with the revised standard. (b) Going Concern As disclosed in the Statement of Comprehensive Income, the consolidated entity recorded operating losses of $522,353 (2009:$1,167,359) and as disclosed in the Statement of Cash Flows, the consolidated entity recorded cash outflows from operating activities of $502,293 (2009: $351,563) and investing activities of $1,167,660 (2009:$1,049,537) and a cash inflow from financing activities of $1,456,194 (2008:$849,260). Cash flows from financing activities arose from capital raisings that are disclosed in Note 11(a). After consideration of these financial conditions, the Directors have assessed the following matters in relation to the adoption of the going concern basis of accounting by the consolidated entity: • The consolidated entity has successfully completed a capital raising during the year as disclosed in Note 11(a) and have the ability to continue doing so on a timely basis, pursuant to the Corporations Act 2001, as is budgeted to occur in the twelve month period from the date of this financial report; • Subsequent to year end and disclosed in Note 20, Empire has entered into a sale agreement for the Penny’s Find Project; • The consolidated entity has net current assets of $536,429 (2009: $723,794) at balance date and expenditure commitments for the next 12 months of $752,054 (2009:$685,458), as disclosed in Note 14, and retain the ability to scale down their operations to conserve cash, in the event that the capital raisings are delayed or partial; and • The company and consolidated entity have the ability, if required, to undertake mergers, acquisitions or restructuring activity or to wholly or in part, dispose of interests in mineral exploration and development assets. Due to the above matters, the Directors believe that it is reasonably foreseeable that the company and consolidated entity will continue as going concerns and that it is appropriate that this basis of accounting be adopted in the preparation of the financial statements. (c) Basis of Consolidation A controlled entity is any entity that Empire Resources Limited has the power to control the financial and operating policies of the entity so as to obtain benefits from its activities. A list of the controlled entity is contained in Note 8 to the financial statements. The controlled entity has a June financial year end. All inter-company balances and transactions between entities in the consolidated group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity. Where a controlled entity enters or leaves the consolidated group during the year, their operating results are included/excluded from the date control was obtained or until the date control ceased. Page 30 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 Business Combinations Business combinations occur where control over another business is obtained and results in the consolidation of its assets and liabilities. All business combinations, including those involving entities under common control, are accounted for by applying the purchase method. The purchase method requires an acquirer of the business to be identified and for the cost of the acquisition and fair values of identifiable assets, liabilities and contingent liabilities to be determined as at acquisition date, being the date that control is obtained. Cost is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control together with costs directly attributable to the business combination. Any deferred consideration payable is discounted to present value using the entity’s incremental borrowing rate. Changes in accounting policy The group has changed its accounting policy for transactions with non-controlling interests and the accounting for loss of control, joint control or significant influence from 1 July 2009 when a revised AASB 127 Consolidated and Separate Financial Statements became operative. Previously transactions with non-controlling interests were treated as transactions with parties external to the group. Disposals therefore resulted in gains and losses in profit and loss and purchases resulted in the recognition of goodwill. On disposal or partial disposal, a proportionate interest in reserves attributable to the subsidiary was reclassified to profit or loss or directly to retained earnings. Previously when the group ceased to have control, joint control or significant influence over an entity, the carrying amount of the investment at the date control, joint control or significant influence ceased became its cost for the purposes of subsequently accounting for the retained interests in associates, jointly controlled entity or financial assets. The group has applied the new policy prospectively to transactions occurring on or after 1 July 2009. As a consequence, no adjustments were necessary to any of the amounts previously recognised in the financial statements. (d) Investment in associated entities The Group’s investment in its associate is accounted for using the equity method of accounting in the consolidated financial statements, after initially being recognised at cost. The associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture. Under the equity method, the investment in the associate is carried in the consolidated statement of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associate. 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 additional impairment loss with respect to the Group’s net investment in the associate. Goodwill included in the carrying amount of the investment in 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 consolidated statement of comprehensive income reflects the Group’s share of the results of operations of the associate, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in 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 receivable and loans, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The balance dates of the associate and the Group are identical and the associate’s accounting policies conform to those used by the Group for like transactions and events in similar circumstances. (e) Plant & Equipment Plant and equipment is measured on the cost basis less depreciation and impairment losses. The carrying amount of plant & equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets. Recoverable amount is assessed on the basis of the expected net cash flows which will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Depreciation is calculated on the straight line basis and is brought to account over the estimated useful lives of all plant and equipment from the time the asset is held ready for use. The depreciation rates used are: Office furniture Office computer equipment Motor vehicles 15-33% 33% 20% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 31 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation reserve relating to the assets are then transferred to accumulated losses. (f) Income Tax The income tax expense or benefit 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 difference and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance date. Deferred income tax is provided on all temporary differences at the balance date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. 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. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: • when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. (g) Cash & Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the Statement of Financial Position. Page 32 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 (h) Acquisition of Assets The purchase method of accounting is used for all acquisitions of assets regardless of whether shares or other assets are acquired. Cost is determined as the fair value of the assets given up at the date of the acquisition plus costs incidental to the acquisition. Transaction costs arising on the issue of equity instruments are recognised directly in equity. (i) Impairment of assets At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of comprehensive income. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. (j) Financial Instruments Recognition Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method. Available-for-sale financial assets Available for sale financial assets include any financial assets not included in the above categories. Available- for-sale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity. Financial liabilities Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Impairment At each reporting date, the Company assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the statement of comprehensive income. (k) Exploration and Development Expenditure Exploration, evaluation and acquisition costs are written off in the year they are incurred. Development costs are capitalised. Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production. (l) Employee Entitlements Salaries, wages and annual leave Liabilities for wages and salaries, including non- monetary benefits, annual leave and accumulating sick leave expected to be settled within twelve months of the reporting date are recognised in other creditors in respect to employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non- accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. Equity settled transactions The Group provides benefits to employees (including senior executives) of the Group in the form of share- based payments, whereby employees render services in exchange for shares or rights over shares (equity- settled transactions). There are currently two plans in place to provide these benefits: • • the Employee Share Option Plan (ESOP), which provides benefits to directors and senior executives; and the Employee Share Loan Plan (ESLP), which provides benefits to all employees, excluding senior executives and directors. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a Black-Scholes model, further details of which are given in Note 18. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Empire Resources Limited (market conditions) if applicable. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). Page 33 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 The cumulative expense recognised for equity-settled transactions at each balance date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. 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. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. If 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 modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If 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 (see Note 5). (m) Trade Receivables All trade receivables are recognised at the amounts receivable as they are due for settlement no more than 30 days from the date of recognition. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. An allowance for doubtful debts is raised where some doubt as to collection exists. (n) Trade creditors These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial period and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (o) Recoverable Amount of Non-current Assets The recoverable amount of an asset is the net amount expected to be recovered through the cash inflows and outflows arising from its continued use and subsequent disposal. Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. Where net cash inflows are derived from a group of assets working together, recoverable amount is determined on the basis of the relevant group of assets. The decrement in the carrying amount is recognised as an expense in net profit or loss in the reporting period in which the recoverable amount write-down occurs. The expected net cash flows used in determining recoverable amount are not discounted to their present value. (p) Leases A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased non-current assets, and operating leases under which the lessor effectively retains substantially all such risks and benefits Operating lease payments are charged as expenses in the periods in which they are incurred, as this represents the pattern of benefits derived from the leased assets. (q) Revenue Recognition Amounts disclosed as revenue are net of duties and taxes paid. Revenue is recognised as follows: (i) Interest Interest earned is recognised as and when it is receivable, including interest which is accrued and is readily convertible to cash within two working days. Accrued interest is recorded as part of other debtors. (ii) Sundry income Sundry income is recognised as and when it is receivable. Income receivable, but not received at balance date, is recorded as part of other debtors. (r) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST. Page 34 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 (s) Critical accounting estimates and judgements • Segment reporting – new AASB 8 Operating The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group. Key Estimates — Impairment The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a Black and Scholes model, using the assumptions detailed in Note 18. The Group measures the cost of cash-settled share- based payments at fair value at the grant date using the Black and Scholes formula taking into account the terms and conditions upon which the instruments were granted, as discussed in Note 18. This fair value is expensed over the period until vesting with recognition of a corresponding liability. The liability is re-measured to fair value at each balance date up to and including the settlement date with changes in fair value recognised in profit or loss. (t) Adoption of new and revised standards Changes in accounting policies on initial application of Accounting Standards In the year ended 30 June 2010, the Group has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period. During the year, certain accounting policies have changed as a result of new or revised accounting standards which became operative for the annual reporting period commencing on 1 July 2009. The affected policies and standards are: • Principles of consolidation – revised AASB 127 Consolidated and Separate Financial Statements and changes made by AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity and Associate Segments • Financial Instruments – revised AASB 7 Financial Instruments: Disclosures The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2010. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to Group accounting policies. (u) Segment Reporting The Group has applied AASB 8 Operating Segments from 1 July 2009. AASB 8 requires a “management approach” under which segment information is presented on the same basis as that used for internal reporting purposes. Operating segments are now reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Empire Resources Ltd. The Group operates only in one business and geographical segment being predominantly in the area of mineral exploration in Western Australia. The Group considers its business operations in mineral exploration to be its primary reporting function. (v) Earnings per share Basic earnings per share is calculated as net profit or loss attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net profit or loss attributable to members of the parent, adjusted for: • costs of servicing equity (other than dividends) and preference share dividends; • the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and • other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 35 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 2. Revenue Revenue Interest received Sale of tenement Other income 3. Loss from ordinary activities Loss before income tax The loss from ordinary activities before income tax has been determined after: (a) Expenses Depreciation Consolidated Group 2009 2010 $ $ 24,357 65,206 1,499,804 – 10,000 74,526 1,534,161 139,732 Consolidated Group 2009 2010 S S 23,577 24,601 Exploration costs written off 1,147,416 647,618 4. Income tax (a) Income tax recognised in loss No income tax is payable by the parent or consolidated group as they both recorded losses for income tax purposes for the year. (b) Numerical reconciliation between income tax expense and the loss before income tax. Loss before tax Income tax benefit at 30% (2009:30%) Tax effect of: – deductible capital raising expenditure – non deductible expenditure – deductible temporary differences – share based payment Deferred tax asset not recognised Income tax benefit attributable to loss from ordinary activities before tax Consolidated Group 2009 2010 $ $ (522,353) (1,167,359) (156,706) (350,208) (34,111) 73,076 3,095 34,173 80,473 (29,451) – – 34,117 345,542 – – Page 36 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 4. Income Tax (continued) Consolidated Group 2009 2010 $ $ (c) Unrecognised deferred tax balances Tax losses attributable to members of the group - revenue 8,409,486 8,126,678 Potential tax benefit at 30% Deferred tax asset asset not booked Amounts recognised in Statement of comprehensive income - employee provisions - other Amounts recognised in equity - share issue costs 2,522,846 2,438,003 4,061 7,725 346 (1,425) 166,711 (9,503) Net unrecognised deferred tax asset at 30% 2,701,343 2,427,421 A deferred tax asset attributable to income tax losses has not been recognised at balance date as the probability criteria disclosed in Note 1(f) is not satisfied and such benefit will only be available if the conditions of deductibility also disclosed in Note 1(f) are satisfied. 5. Loss per share Consolidated Group 2009 2010 Cents Cents Basic and diluted loss per share (cents per share) (0.61) (1.62) Loss used in the calculation of basic EPS (522,353) (1,167,359) Weighted average number of shares outstanding during the year used in calculations of basic loss per share 85,856,572 71,877,096 Diluted loss per share has not been disclosed as it is not materially different from basic loss per share 6. Cash and cash equivalents Cash at bank Consolidated Group 2009 2010 $ $ 595,674 809,433 595,674 809,433 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 37 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 6. (i) Cash and cash equivalents (continued) Reconciliation of cash flow from operations with loss after income tax Loss after income tax Sale of tenement Depreciation Share based payments expense Exploration expenditure written off Share of loss of equity accounted investees Changes in assets and liabilities, net of the effects of purchase of subsidiaries: (Increase)/decrease in trade and other receivables (Decrease)/Increase in trade and other payables (Decrease)/Increase in employee benefits Consolidated Group 2009 2010 $ $ (522,353) (1,167,359) (1,499,804) 23,577 113,909 1,167,660 243,159 (473,852) (53,904) 24,422 1,041 – 24,601 113,724 959,537 – (69,497) 52,251 (336,758) 2,441 Net cash outflow from operating activities (502,293) (351,563) 7. Trade and other Receivables Current Trade receivables Other receivables Consolidated Group 2009 2010 $ $ 36,090 34,771 – 15,648 70,861 15,648 Provision for Impairment of Receivables Current trade receivables are non-interest bearing and generally on 30 day terms. A provision for impairment is recognised when there is objective evidence that an individual trade receivable is impaired. Page 38 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 8. Investments (a) Investments accounted for using the Equity Method Reconciliation of movements in investments accounted for using the equity method: Balance at 1 July Acquisitions Share of loss since acquistion Balance at 30 June Consolidated Group 2009 2010 $ $ – 1,499,804 (243,159) 1,256,645 – – – – Name of entity Associated entities FYI Resources Ltd Principal activity Country of incorporation % % $ Mineral exploration Australia 32% – 1,353,559 $ – Ownership interest 2009 2010 Published fair value 2009 2010 Summarised financial information of associates: Financial position Total assets Total liabilities Net assets Group’s share of associates’ net assets Financial performance Total revenue Total loss for the year Group’s share of associate’s profit/(loss) Capital commitments and contingent liabilities of associate: Share of capital commitments incurred jointly with other investors Share of contingent liabilities incurred jointly with other investors Consolidated Group 2009 $ 2010 $ 4,678,120 450,124 4,227,996 1,353,559 29,645 (1,223,518) (243,159) 406,534 – – – – – – – – – – (b) Investments in subsidiaries Controlled Entities Parent Entity: Empire Resources Limited Subsidiaries of Empire Resources Limited: Torrens Resources Pty Ltd Country of incorporation Australia Australia Percentage Owned 2010 % 2009 % – – 100 100 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 39 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 9. Plant & equipment Plant and Equipment Cost Accumulated depreciation Motor Vehicles Cost Accumulated depreciation Consolidated Group 2009 $ 2010 $ 27,198 (25,069) 2,129 90,217 (57,919) 32,298 27,198 (19,635) 7,563 90,217 (39,776) 50,441 Total Plant and Equipment 34,427 58,004 Movements in the carrying amounts of each class of property, plant & equipment at the beginning and end of the current financial period is as set out below: Plant and Equipment Balance at the beginning of year Additions Depreciation expense Carrying amount at the end of the year Motor Vehicles Balance at the beginning of year Additions Depreciation expense Carrying amount at the end of the year 10. Trade and other payables Trade payables and accruals Employee benefits Consolidated Group 2009 $ 2010 $ 7,563 – (5,434) 2,129 14,022 – (6,459) 7,563 50,441 68,583 – (18,143) 32,298 – (18,142) 50,441 Consolidated Group 2009 $ 2010 $ 106,869 23,237 130,106 79,091 22,196 101,287 Page 40 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 11. Issued capital (a) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares. On a show of hands every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. 97,195,921 (2009: 71,918,192) fully paid ordinary shares 11,723,878 10,269,731 Consolidated Group 2009 2010 $ $ (i) Ordinary shares - number At 1 July 2009 Shares issued - 5,000,000 on 3 July 2008 at $0.17 Apex Minerals NL Shares issued - 10,750,000 on 14 August 2009 at $0.05 Sophisticated investors Shares issued - 1,850,000 on 24 November 2009 at $0.05 Sophisticated investors Shares placement - 4,450,000 on 23 December 2009 at $0.075 Shares placement - 8,227,729 on 12 May 2010 at $0.07 Consolidated Group 2009 No. 2010 No. 71,918,192 66,918,192 – 5,000,000 10,750,000 1,850,000 4,450,000 8,227,729 – – – – Balance at 30 June 2010 97,195,921 71,918,192 (ii) Ordinary shares – value At 1 July 2009 Shares issued - 5,000,000 on 3 July 2008 at $0.17 Apex Minerals NL Shares issued - 10,750,000 on 14 August 2009 at $0.05 Sophisticated investors Shares issued - 1,850,000 on 24 November 2009 at $0.05 Sophisticated investors Shares placement - 4,450,000 on 23 December 2009 at $0.075 Shares placement - 8,227,729 on 12 May 2010 at $0.07 Less share issue costs Balance at 30 June 2010 (b) Options Consolidated Group 2009 $ 2010 $ 10,269,731 9,420,471 – 850,000 537,500 92,500 333,750 575,941 (85,544) – – – – (740) 11,723,878 10,269,731 As at 30 June 2010 (30 June 2009: 3,000,000) the Company had the following options on issue over ordinary shares: Grant date Date of expiry Exercise price ($) Number under option 1-Feb-07 2-Jun-10 25-Jun-10 31-Dec-10 2-Jun-13 25-Jun-13 0.25 0.15 0.14 3,000,000 8,227,729 2,700,000 13,927,729 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 41 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 12. Reserves Reserves Reserves comprise the following: Options reserve Balance as at start of financial year Share-based payment Consolidated Group 2009 $ 2010 $ 739,174 625,265 625,265 113,909 511,541 113,724 Balance as at end of the financial year 739,174 625,265 Details of certain components of the option reserve arising as a consequence of equity based payments are included in Note 18. 13. Financial risk management The Consolidated entity’s financial situation is not complex. It’s activities may expose it to a variety of financial risks in the future: market risk (including currency risk and fair value interest rate risk), credit risk, liquidity risk and cash flow interest rate risk. At that stage the Consolidated entity’s overall risk management program will focus on the unpredictability of the financial markets and seek to minimise potential adverse effects on the financial performance of the Consolidated entity. Risk management is carried out under an approved framework covering a risk management policy and internal compliance and control by management. The Board identifies, evaluates and approves measures to address financial risks. The Consolidated entity hold the following financial instruments: Financial assets Cash and cash equivalents Trade and other receivables Financial liabilities Trade and other payables Consolidated Group 2009 $ 2010 $ 595,674 70,861 809,433 15,648 666,535 825,081 130,106 101,287 Page 42 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 13. Financial risk management (continued) (a) Market risk Cash flow and fair value interest rate risk The Consolidated entity’s main interest rate risk arises from cash deposits to be applied to exploration and development of areas of interest. Deposits at variable rates expose the Consolidated entity to cash flow interest rate risk. Deposits at fixed rates expose the Consolidated entity to fair value interest rate risk. During 2010 and 2009, the Consolidated entity’s deposits at variable rates were denominated in Australian Dollars. As at the reporting date, the Consolidated entity had the following variable rate deposits and there were no interest rate swap contracts outstanding: Deposit Other cash available Net exposure to cash flow interest rate risk 2010 Weighted average interest rate % 2009 Weighted average interest rate % Balance $ 537,828 57,846 Balance $ 763,168 46,265 3.0% 595,674 4.9% 809,433 The Consolidated entity analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into the renewal of existing positions. Sensitivity – Consolidated and Parent entity During 2010, if interest rates had been 1% higher or lower than the prevailing rates realised, with all other variables held constant, there would be an immaterial change in post-tax profit for the year. Equity would not have been impacted. (b) Credit risk The Consolidated entity has no significant concentrations of credit risk. Cash transactions are limited to high credit quality financial institutions. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures on outstanding receivables and committed transactions. In relation to other credit risk areas management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised at the beginning of this note. (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close-out market positions. The Consolidated entity manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The Consolidated entity will aim at maintaining flexibility in funding by accessing appropriate committed credit lines available from different counterparties where appropriate and possible. Surplus funds when available are generally only invested in high credit quality financial institutions in highly liquid markets. Financing arrangements The Consolidated and parent entity has no borrowing facilities. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 43 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 13. Financial risk management (continued) Fixed interest rate maturing Weighted average effective Floating interest rate Within year 1 to 5 years Over 5 years Non–interest bearing interest rate $ $ $ $ $ Total $ 30 June 2010 Financial Assets: Cash and cash equivalents 3.0% 575,674 20,000 Trade and other receivables Total Financial Assets – – 575,674 20,000 Financial Liabilities: Trade and other payables Short-term borrowings Total financial liabilities – – – – – – – – – – – – – – – – – – – 595,674 70,861 70,861 70,861 666,535 130,106 130,106 – – 130,106 130,106 Fixed interest rate maturing Weighted average effective Floating interest rate Within year 1 to 5 years Over 5 years Non–interest bearing interest rate $ $ $ $ $ Total $ 30 June 2009 Financial Assets: Cash and cash equivalents 4.9% 789,433 20,000 Trade and other receivables Total Financial Assets – – 789,433 20,000 Financial Liabilities: Trade and other payables Short-term borrowings Total financial liabilities – – – – – – – – – – – – – – – – – – – 15,648 15,648 808,433 15,648 825,081 101,287 101,287 – – 101,287 101,287 Maturities of financial assets and liabilities The note above analyses the Consolidated and parent entity’s financial liabilities. These liabilities comprise trade and other payables, are non interest bearing and will mature within 12 months. The amounts disclosed are the contractual undiscounted cash flows. There are no derivatives. Maturity analysis of financial assets and liability based on management’s expectation Year ended 30 June 2010 <6 months 6-12 months 1-5 years >5 years Total Consolidated Financial assets Cash & cash equivalents Trade & other receivables Financial liabilities Trade & other payables Net maturity 595,674 70,861 666,535 130,106 536,429 – – – – – – – – – – – – – – – 595,674 70,861 666,535 130,106 536,429 Page 44 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 13. Financial risk management (continued) (d) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments that are not traded in an active market (for example, investments in unlisted subsidiaries) is determined using valuation techniques or cost (impaired if appropriate). The Consolidated entity uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. 14. Capital and Leasing Commitments (i) Operating Lease Commitments Non-cancellable operating leases contracted for but not capitalised in the financial statements Payable - minimum lease payments – not later than 12 months – between 12 months and 5 years – greater than 5 years The company entered into an operating lease on 1 August 2007 for office space it occupies in Victoria Park. The term of the lease is 3 years and expired on 1 August 2010. The lease was renewed for a further 3 years to 31 July 2013 (ii) Expenditure commitments contracted for: Exploration Tenements In order to maintain current rights of tenure to exploration tenements, the Company is required to outlay rentals and to meet the minimum expenditure requirements. These obligations are not provided for in the financial statements and are payable: – not later than 12 months – between 12 months and 5 years – greater than 5 years Consolidated Group 2009 $ 2010 $ 48,493 102,136 – 34,272 36,137 – 150,629 70,409 Consolidated Group 2009 $ 2010 $ 752,054 685,458 3,008,216 2,741,832 – – 3,760,270 3,427,290 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 45 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 15. Directors and other key management personnel (i) Details of Key Management Personnel Chairman – non executive Mr T Revy (from 8 January 2010) Managing Director Mr D Sargeant (from 13 April 2000) Executive director Mr A Jessup (from 15 August 2003) Company Secretary Mr S Storm (from 30 April 2007) (ii) Compensation of Key Management Personnel Short-term employee benefits Post-employment benefits Share-based payments Consolidated Group 2009 2010 $ $ 336,800 325,200 – 97,614 434,414 – 97,478 422,678 The company has taken advantage of the relief provided by AASB 2008-4 Amendments to Australian Accounting Standard – Key Management Personnel Disclosures by Disclosing Entities, and has transferred the detailed remuneration disclosures to the directors’ report. The relevant information can be found in the Remuneration Report on pages 21 to 23. (iii) Equity instrument disclosures relating to directors and other key management personnel Shareholdings The number of ordinary shares in the Company held during the year by each director and other key management personnel, including their personally related entities or associates, are set out below. Page 46 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 15. Directors and other key management personnel (continued) 2010 Shareholdings of Key Management Personnel Balance at Balance at the start Issued under On exercise Net change the end of the period share plan of options other of the period 500,000 – 6,100,000 2,067,555 8,667,555 350,000 350,000 – – – – – – – – – – – – – – – 350,000 – – 500,000 350,000 6,100,000 2,067,555 350,000 9,017,555 – – 350,000 350,000 Directors Mr A Griffin 1 Mr T Revy 2 Mr D Sargeant Mr A Jessup Specified Executives Mr S Storm 1 Resigned 8 January 2010 2 Appointed 8 January 2010 2009 Shareholdings of Key Management Personnel Balance at Balance at the start Issued under On exercise Net change the end of the period share plan of options other of the period Directors Mr A Griffin Mr D Sargeant Mr A Jessup Specified Executives Mr S Storm 500,000 5,850,000 1,967,555 8,317,555 350,000 350,000 – – – – – – – – – – – – – 250,000 100,000 500,000 6,100,000 2,067,555 350,000 8,667,555 – – 350,000 350,000 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 47 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 15. Directors and other key management personnel (continued) All equity transactions with key management personnel, which relate to the Company’s listed ordinary shares, have been entered into on an arms length basis. Option holdings Details of shares issued as remuneration can be found in the remuneration report. The number of options over ordinary shares in the Company held during the reporting period by each director and key management personnel, including their personally related entities, are set out below. 2010 Option holdings of Key Management Personnel Balance at the start Balance at Vested and Net change the end of exercisable at of the period Issued Expired other the period 30 June 2010 Directors Mr A Griffin 1 Mr T Revy 2 Mr D Sargeant Mr A Jessup Specified Executives Mr S Storm 1 Resigned 8 January 2010 2 Appointed 8 January 2010 – – – – – – – – 500,000 500,000 500,000 1,500,000 500,000 500,000 – – – – – – – – – – – – – – – 500,000 500,000 500,000 1,500,000 500,000 500,000 – – – – – – – 2009 Option holdings of Key Management Personnel Balance at the start Balance at Vested and Net change the end of exercisable at of the period Issued Expired other the period 30 June 2009 Directors Mr A Griffin Mr D Sargeant Mr A Jessup Specified Executives Mr S Storm 300,000 2,849,999 1,183,777 4,333,776 200,000 200,000 – – – – – – (300,000) (2,849,999) (1,183,777) (4,333,776) (200,000) (200,000) – – – – – – – – – – – – – – – – – – Page 48 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 16. Related Parties Directors and specified executives Disclosures relating to the remuneration and shareholdings of directors and specified executives are set out in the Directors’ Report and Note 15 respectively. Other transactions with directors, their associates and director related entities are as follows: Amounts paid to companies associated with certain Directors for management services Kirkdale Holdings Pty Ltd - Mr D Sargeant Murilla Exploration Pty Ltd - Mr A Jessup Total Amounts payable to Directors for Directors Fees Mr T Revy Mr A Griffin Consolidated Group 2009 $ 2010 $ 164,000 108,000 272,000 132,000 132,000 264,000 15,000 15,000 30,000 – 30,000 30,000 The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year: Reimbursement Amounts owed by Amounts owed to Related party Consolidated Associate: FYI Resources Ltd Associate Revenue from of Expenditure Related parties Related parties as at 30 June Related Parties Related Parties as at 30 June $ $ $ $ 2010 2009 1,509,804 172,538 36,090 – – – – – The Group has a 32% interest in FYI Resources Limited (2009: 0%). 17. Remuneration of auditors The auditor of Empire Resources Ltd is HLB Mann Judd. Previously the auditor was RSM Bird Cameron. Amounts received or due and receivable by HLB Mann Judd for: Audit or review of the financial reports of the Company Other services Amounts received or due and receivable by non HLB Mann Judd audit firms: Audit or review of the financial reports of the Company Other services Consolidated Group 2009 $ 2010 $ 18,500 – – 2,250 – – 25,200 5,700 20,750 30,900 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 49 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 18. Share Based Payments (a) Employee share plan The Company has established an employee share plan, which is also available to Directors, known as the 2008 Empire Resources Limited Employee Share Plan and was approved by shareholders on 28 November 2007. The issue price for Shares offered under the Plan is at the discretion of the Board, provided that the issue price is not less than 1% below the weighted average sale price of Shares sold through ASX during the one week period up to and including the offer date. A Director or Employee who is invited to subscribe for Shares under the Plan may also be invited to apply for a loan up to the amount payable in respect of the Shares accepted, on the following terms: a) Loans must be made solely to the Participant or their nominee and in the name of either the Participant or their nominee as the case may be. b) The principal amount outstanding under a Loan will be interest free. c) Any loan made available to a Participant shall be applied by the Company directly toward payment of the issue price of the Shares to be acquired under the Plan. d) the term of the loan shall be three (3) years from the date of issue of the Shares e) The Company retains a lien over each share acquired pursuant to the loan until such time as the loan is repaid. Set out below is a summary of shares issued to Directors and employees under the Empire Resources Employee Share Plan: Consolidated entity – 30 June 2010 Issue date 12 May 2008 Expiry date Balance at start of period Number Issued during year Number Loan repaid during year Number Expired during year Number Balance at end of year Number Exercisable at end of year Number 12 May 2011 2,450,000 – – – 2,450,000 – Weighted average exercise price $0.188 $0.188 (b) Option plan The Company has established an option share plan, which is also available to directors, employees and some consultants, known as the 2010 Empire Resources Option Plan and was approved by shareholders on 25 June 2010. Page 50 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 18. Share Based Payments (continued) The following table illustrates the number and weighted average exercise prices of and movements in share options issued during the year: Outstanding at the beginning of the year Granted during the year Forfeited during the year Exercised during the year Expired during the year 2010 Number – 2,700,000 – – – 2010 Weighted average exercise price – $0.14 – – – Outstanding at the end of the year 2,700,000 $0.14 Exercisable at the end of the year – 2009 Number 2009 Weighted average exercise price – – – – – – – – – – – – – A corporate goal must be met before the options may be exercised: The corporate goal that has been set is the Company’s market capitalisation reaching $10.77 million (which was the market capitalisation of the Company at 1 December 2009 plus 50%) and remaining at that level for 50 ASX Business Days. The fair value of the equity-settled share options is estimated as at the date of grant using the Black and Scholes model taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used for the years ended 30 June 2010: Grant date Expiry date Exercise price Vesting date of Expected Option Dividend Period options Volatility yield life Fair value at grant Risk-free interest rate Grant date share price Key Management Personnel options 25-Jun-10 25-Jun-13 $0.14 25-Jun-13 $0.02 Employee options 25-Jun-10 25-Jun-13 $0.14 25-Jun-13 $0.02 Consultant options 25-Jun-10 25-Jun-13 $0.14 25-Jun-13 $0.02 107% 107% 107% 3 years 3 years 3 years 0% 0% 0% 4.57% 4.57% 4.57% $0.04 $0.04 $0.04 (c) Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows: Shares issued under employee share plan Options issued Consolidated Group 2009 $ 2010 $ 113,724 113,724 185 – 113,909 113,724 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 51 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 19. Segment Information The Group has applied AASB 8 Operating Segments from 1 July 2009. AASB 8 requires a “management approach” under which segment information is presented on the same basis as that used for internal reporting purposes. Operating segments are now reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Empire Resources Ltd. Consistent with prior year, the Group operates only in one business and geographical segment being predominantly in the area of mining and exploration in Australia. The Group considers its business operations in mineral exploration to be its primary reporting function. 20. Events after the Balance Date On 15 September 2010, Empire Resources Ltd entered into a staged sale agreement for its Penny’s Find gold project with unlisted company Brimstone Resources Ltd. At the election of Brimstone Resources Ltd, the sale consideration comprises either: - Staged cash payments totalling $2 million for a 100% interest of the Penny’s Find project, or - Stage cash payment totalling $0.5 million together with exploration and development expenditure of up to $3 million for an 80% interest in the Penny’s Find project. On 1 September 2010 the Company announced it had entered into an option agreement to purchase an interest in three granted exploration licences and two granted prospecting licences held by La Mancha Resources Australia surrounding the Company’s advanced Yuinmery copper – gold resource project in Western Australia.. The five tenements are the subject of a joint venture between La Mancha Resources Australia and Giralia Resources Limited in which La Mancha currently holds an interest of approximately 75.82%. Under the terms of the option agreement, Empire must spend a minimum of A$150,000 per annum for up to three years while retaining an option to purchase La Mancha’s interest for a cash consideration of A$750,000. A 2% net smelter royalty capped at A$5,000,000 will be payable by Empire on any minerals produced from the La Mancha tenements. Other than this, since 30 June 2010 there has not been any matter or circumstance not otherwise dealt with in the financial report that has significantly affected or may significantly affect the Company. Page 52 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 EMPIRE RESOURCES LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010 21. Parent Entity Financial Information The individual financial statements for the parent entity show the following aggregate amounts: ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Total Current Assets NON-CURRENT ASSETS Financial assets Plant & equipment Total Non-Current Assets TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY Loss before income tax expense Income tax expense Loss after tax and total comprehensive income Parent entity 2010 $ 2009 $ 595,674 70,861 666,535 809,433 15,648 825,081 1,256,645 34,427 1,291,072 – 58,004 58,004 1,957,607 883,085 130,106 130,106 101,287 101,287 130,106 101,287 1,827,501 781,798 11,723,878 10,269,731 739,174 625,265 (10,635,551) (10,113,198) 1,827,501 781,798 (522,353) (1,168,149) – – (522,353) (1,168,149) EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 53 DIRECTORS’ DECLARA TION 1. In the directors’ opinion: (a) the financial statements and notes set out on pages 26 to 53 are in accordance with the Corporations Act 2001 including: (i) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (ii) giving a true and fair view of the Company’s and Consolidated entity’s financial position as at 30 June 2010 and of their performance for the financial year ended on that date; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and (c) the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board. 2. The directors have been given the declarations by the Chief Executive Officer and the Chief Financial Officer required by section 295A of the Corporations Act 2001 for the financial year ended 30 June 2010. This declaration is made in accordance with a resolution of the directors. David Sargeant Managing Director Perth, Western Australia 24 September 2010 Page 54 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 INDEPENDENT AUDITOR’S REPORT INDEPENDENT AUDITOR’S REPORT To the members of EMPIRE RESOURCES LIMITED To the members of EMPIRE RESOURCES LIMITED IND EP EN DENT AUDITO R’S R EPOR T TO THE M EMBE RS OF EMPIRE R ESO UR CES L IMI TED 26 to 54. Report on the Financial Report We have audited the accompanying financial report of Empire Resources Limited (“the company”), Report on the Financial Report which comprises the statement of financial position as at 30 June 2010, the statement of We have audited the accompanying financial report of Empire Resources Limited (“the company”), comprehensive income, statement of changes in equity and statement of cash flows for the year which comprises the statement of financial position as at 30 June 2010, the statement of ended on that date, a summary of significant accounting policies, other explanatory notes and the comprehensive income, statement of changes in equity and statement of cash flows for the year directors’ declaration for the consolidated entity as set out on pages 11 to 47. The consolidated entity ended on that date, a summary of significant accounting policies, other explanatory notes and the comprises the company and the entities it controlled at the year’s end or from time to time during the directors’ declaration for the consolidated entity as set out on pages 11 to 47. The consolidated entity financial year. 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 and fair presentation of the financial Directors’ Responsibility for the Financial Report report in accordance with Australian Accounting Standards (including the Australian Accounting The directors of the company are responsible for the preparation and fair presentation of the financial Interpretations) and the Corporations Act 2001. This responsibility includes establishing and report in accordance with Australian Accounting Standards (including the Australian Accounting maintaining internal controls relevant to the preparation and fair presentation of the financial report Interpretations) and the Corporations Act 2001. This responsibility includes establishing and that is free from material misstatement, whether due to fraud or error; selecting and applying maintaining internal controls relevant to the preparation and fair presentation of the financial report appropriate accounting policies; and making accounting estimates that are reasonable in the that is free from material misstatement, whether due to fraud or error; selecting and applying circumstances. appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that the consolidated financial statements of the Empire In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101: Resources Limited group and the separate financial statements Empire Resources Limited comply Presentation of Financial Statements, that the consolidated financial statements of the Empire with International Financial Reporting Standards. Resources Limited group and the separate financial statements Empire Resources Limited comply 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 Auditor’s Responsibility our audit in accordance with Australian Auditing Standards. These Auditing Standards require that Our responsibility is to express an opinion on the financial report based on our audit. We conducted we comply with relevant ethical requirements relating to audit engagements and plan and perform the our audit in accordance with Australian Auditing Standards. These Auditing Standards require that audit to obtain reasonable assurance whether the financial report is free from material misstatement. 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 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures assessment of the risks of material misstatement of the financial report, whether due to fraud or error. in the financial report. The procedures selected depend on the auditor’s judgement, including the In making those risk assessments, the auditor considers internal control relevant to the company’s assessment of the risks of material misstatement of the financial report, whether due to fraud or error. preparation and fair presentation of the financial report in order to design audit procedures that are In making those risk assessments, the auditor considers internal control relevant to the company’s appropriate in the circumstances, but not for the purpose of expressing an opinion on the preparation and fair presentation of the financial report in order to design audit procedures that are effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness appropriate in the circumstances, but not for the purpose of expressing an opinion on the of accounting policies used and the reasonableness of accounting estimates made by the directors, as effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness well as evaluating the overall presentation of the financial report. 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. 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 opinions. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Liability limited by a scheme approved under Professional Standards Legislation 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. 48 48 HLB Mann Judd (WA Partnership) is a member of EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 International, a worldwide organisation of accounting firms and business advisers. Page 55 48 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. INDEPENDENT AUDITOR’S REPORT To the members of EMPIRE RESOURCES LIMITED Report on the Financial Report We have audited the accompanying financial report of Empire Resources Limited (“the company”), which comprises the statement of financial position as at 30 June 2010, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for the consolidated entity as set out on pages 11 to 47. 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 and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that the consolidated financial statements of the Empire Resources Limited group and the separate financial statements Empire Resources Limited comply 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. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s 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 company’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 company’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 opinions. 21 to 23 Page 56 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 49 Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s Opinion In our opinion: (a) the financial report of Empire Resources Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of it’s performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) the financial statements also comply with International Financial Reporting Standards as disclosed in Note 1(a). Report on the Remuneration Report We have audited the Remuneration Report included in pages 3 to 7 of the directors’ report for the year ended 30 June 2010.The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s Opinion In our opinion the Remuneration Report of Empire Resources Limited for the year ended 30 June 2010 complies with section 300A of the Corporations Act 2001. HLB MANN JUDD Chartered Accountants Perth, Western Australia 24 September 2010 N G NEILL Partner AUDITOR’S INDEPENDENCE DEC LA RA TI ON EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 57 50 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. AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Empire Resources Limited for the year ended 30 June 2010, 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 Empire Resources Limited Perth, Western Australia 24 September 2010 N G NEILL Partner, HLB Mann Judd 50 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. AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Empire Resources Limited for the year ended 30 June 2010, 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 Empire Resources Limited Perth, Western Australia 24 September 2010 N G NEILL Partner, HLB Mann Judd CORPORATE GOV ER NANCE PR INCI PL ES Introduction Empire Resources Limited (“Company”) has made it a priority to adopt systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised in this statement. To the extent that they are applicable, and given its circumstances, the Company adopts the Eight Essential Corporate Governance Principles and Best Practice Recommendations (‘Recommendations’) published by the Corporate Governance Council of the ASX. Where the Company’s corporate governance practices follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. Where, after due consideration, the Company’s corporate governance practices depart from a recommendation, the Board has offered full disclosure and reason for the adoption of its own practice, in compliance with the “if not, why not” regime. As the Company’s activities develop in size, nature and scope, the size of the Board and the implementation of additional corporate governance structures will be afforded further consideration. DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES Summary Statement Recommendation ASX Principles and Recommendations If not, why not Recommendation ASX Principles and Recommendations If not, why not 1.1 1.2 1.3 2.1 2.2 2.3 2.4 2.5 2.6 3.1 3.2 3.3 4.1 4.2 X X X X √ √ X X √ X √ X X Refer (a) below Refer (a) below Refer (a) below Refer (b) below Refer (b) below Refer (b) below Refer (c) below Refer (d) below Refer (e) below Refer (f) below Refer (g) below Refer (f) below Refer (c) below 4.3 4.4³ 5.1 5.2 6.1 6.2 7.1 7.2 7.3 7.4 8.1 8.2 8.3 n/a n/a n/a n/a X n/a X n/a X n/a √ n/a X n/a n/a n/a n/a Refer (h) below n/a Refer (i) below n/a Refer (j) below n/a Refer (k) below n/a Refer (l) below n/a n/a Page 58 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 (a) Principle 1 Recommendation 1.1, 1.2 and 1.3 (b) Principle 2 Recommendations 2.1, 2.2, 2.3 Notification of Departure Empire has not formally disclosed the functions reserved to the Board and those delegated to senior executives. The appointment of non executive directors to the Board is not formalised in writing by way of a letter or other agreement. Explanation for Departure: The Board recognises the importance of distinguishing between the respective roles and responsibilities of the Board and management. The Board has established an informal framework for the management of the Company and the roles and responsibilities of the Board and management. Due to the small size of the Board and of the Company, the Board do not think that it is necessary to formally document the roles of Board and management as it believes that these roles are being carried out in practice and are clearly understood by all members of the Board and management. The Board is responsible for the strategic direction of the Company, establishing goals for management and monitoring the achievement of these goals, monitoring the overall corporate governance of the Company and ensuring that Shareholder value is increased. The Company has two executives, being the Managing Director and an executive Director. The Managing Director is responsible for ensuring that the Company achieves the goals established by the Board. The appointments of non executive directors are formalised in accordance with the regulatory requirements and the Company’s constitution. Notification of departure The Company does not have a majority of independent directors, with only one of the 3 Board members being independent. Explanation for departure 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 current Board structure presently consists of the independent non executive chairman, Mr Thomas Revy, the managing director (Mr David Sargeant) and one executive director (Mr Adrian Jessup), both of whom are not independent. The Company considers that each of the directors possess skills and experience suitable for building the Company. It is the Board’s intention to appoint another independent director as and when the size and complexity of its operations changes and a suitable candidate is identified. (c) Principle 2 Recommendation 2.4 and Principle 4 Recommendations 4.1, 4.2, 4.3, 4.4 Notification of Departure Separate nomination and audit committees have not been formed. Explanation for Departure The Board considers that the Company is not currently of a size, or its affairs of such complexity, that the formation of separate or special committees is justified at this time. The Board as a whole is able to address the governance aspects of the full scope of the Company’s activities and ensure that it adheres to appropriate ethical standards. In particular, the Board as a whole considers those matters that would usually be the responsibility of an audit committee and a nomination committee. The Board considers that, at this stage, no efficiencies or other benefits would be gained by establishing a separate audit committee or a separate nomination committee. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 59 (d) Principle 2 Recommendation 2.5 Notification of Departure Empire does not have in place a formal process for evaluation of the Board, its committees, individual directors and key executives. Explanation for Departure Evaluation of the Board is carried out on a continuing and informal basis. The Company will put a formal process in place as and when the level of operations of the Company justifies this. (e) Principle 2 Recommendation 2.6 Companies should provide the information indicated in the Guide to Reporting on Principle 2. Disclosure: Skills, Experience, Expertise and term of office of each Director A profile of each director containing their skills, experience, expertise and term of office is set out in the Directors’ Report. Identification of Independent Directors The independent director of the Company during the Reporting Period is disclosed in (b) above. Independence is measured having regard to the relationships listed in Box 2.1 of the Principles & Recommendations. Statement concerning availability of Independent Professional Advice To assist directors with independent judgement, it is the Board’s policy that if a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of their office as a director then, provided the director first obtains approval for incurring such expense from the Chair, the Company will pay the reasonable expenses associated with obtaining such advice. Nomination Matters The full Board sits in its capacity as a Nomination Committee. Performance Evaluation During the Reporting Period the performance evaluations for the Board and individual directors did occur in accordance with the disclosed process in Recommendation 2.5. Selection and Reappointment of Directors The Board considers the balance of independent directors on the Board as well as the skills and qualifications of potential candidates that will best enhance the Board’s effectiveness. Each director other than the managing director must retire from office no later than the longer of the third annual general meeting of the company or 3 years following that director’s last election or appointment. At each annual general meeting a minimum of one director or a 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. Reappointment of directors is not automatic. (f) Principle 3 Recommendation 3.1, 3.3 Notification of Departure Empire has not established a formal code of conduct. Explanation for Departure: The Board considers that its business practices, as determined by the Board and key executives, are the equivalent of a code of conduct. (g) Principle 3 Recommendation 3.2 Companies should establish a policy concerning trading in company securities by directors, senior executives and employees, and disclose the policy or a summary of that policy. Disclosure: The board has adopted a policy which prohibits dealing the Company’s securities by directors, officers and employees when those persons possess inside information. The policy prohibits short term or speculative trading of the Company’s securities. The policy provides that permission be obtained from the Chairman prior to trading. (h) Principle 5 Recommendation 5.1, 5.2 Notification of Departure Empire has not established written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and accountability for compliance. Explanation for Departure The Directors have a long history of involvement with public listed companies and are familiar with the disclosure requirements of the ASX listing rules. The Company has in place informal procedures that it believes are sufficient for ensuring compliance with ASX Listing Rule disclosure requirements and accountability for compliance. The Board has nominated the Managing Director and the Company Secretary as being responsible for all matters relating to disclosure. Page 60 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Principle 6 Recommendation 6.1, 6.2 Notification of Departure Empire has not established a formal Shareholder communication strategy. Explanation for Departure While the Company has not established a formal Shareholder communication strategy, it actively communicates with its Shareholders in order to identify their expectations and actively promotes Shareholder involvement in the Company. It achieves this by posting on its website copies of all information lodged with the ASX. Shareholders with internet access are encouraged to provide their email addresses in order to receive electronic copies of information distributed by the Company. Alternatively, hard copies of information distributed by the Company are available on request. (i) Principle 7 Recommendation 7.1, 7.2 Notification of Departure Empire has an informal risk oversight and management policy and internal compliance and control system. Explanation for Departure The Board does not currently have formal procedures in place but is aware of the various risks that affect the Company and its particular business. Section 8 of the prospectus dated 7 November 2006 provides a summary of the relevant risk factors that may affect the Company. As the Company develops, the Board will develop appropriate procedures to deal with risk oversight and management and internal compliance, taking into account the size of the Company and the stage of development of its projects. (j) Principle 7 Recommendation 7.3 The Board should disclose whether it has received assurance from the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. Disclosure: The Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) have provided a declaration to the Board in accordance with section 295A of the Corporations Act and have assured the Board that such declaration is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial risk. (k) Principle 8 Recommendations 8.1 Notification of departure Empire does not have a formal remuneration policy and has not established a separate remuneration committee. Directors and management may receive options or shares. Explanation for Departure The current remuneration of the Directors is disclosed in the Directors’ Report. Non executive Directors receive a fixed fee for their services and may also receive options or shares. The issue of options or shares to non executive Directors may be an appropriate method of providing sufficient incentive and reward while maintaining cash reserves. Due to the Company’s early stage of development and small size, it does not consider that a separate remuneration committee would add any efficiency to the process of determining the levels of remuneration for the Directors and key executives. The Board believes it is more appropriate to set aside time at specified Board meetings each year to specifically address matters that would ordinarily fall to a remuneration committee. In addition, all matters of remuneration will continue to be in accordance with regulatory requirements, especially in respect of related party transactions; that is, none of the Directors will participate in any deliberations regarding their own remuneration or related issues. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 61 Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 24 September 2010. ADDIT IONAL INFOR MATIO N (a) Distribution of shares The numbers of shareholders, by size of holding are: Category (size of holding) Number of holders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over 12 81 145 391 169 789 The number of shareholdings held in less than marketable parcels is 126. (b) Twenty largest shareholders The names of the twenty largest holders of quoted shares are: SHAREHOLDERS APEX MINERALS NL KIRKDALE HOLDINGS PTY LTD TRISTESSE PTY LTD MEEKAL PTY LTD SUHARITDUMRONG SUKHON HAZARDOUS INV PTY LTD RUBYSTAR NOM PTY LTD D W SARGEANT PTY LTD RBJ NOM PTY LTD ARMCO BARRIERS PTY LTD AGENS PTY LTD BLAMNCO TRADING PTY LTD COLTRANGE PTY LTD LACHLAN RESOURCE INV LTD HSBC CUSTODY NOM AUST LTD BIRKNER ARTUR KSLCORP PTY LTD GIFFARD SVCS PTY LTD JORDAN GRAHAM FRANCIS RICHMOND RES PTY LTD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Number of shares held Holding (%) 5,000,000 3,300,000 3,195,899 3,098,333 2,268,500 2,172,437 2,133,333 2,000,000 2,000,000 1,860,000 1,600,000 1,500,000 1,497,677 1,428,571 1,323,791 1,188,500 1,184,000 1,000,000 1,000,000 958,333 5.14% 3.40% 3.29% 3.19% 2.33% 2.24% 2.19% 2.06% 2.06% 1.91% 1.65% 1.54% 1.54% 1.47% 1.36% 1.22% 1.22% 1.03% 1.03% 0.99% Stock Exchange Listing – Listing has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Stock Exchange Limited except for the following which are not quoted by virtue of restriction agreements. 39,709,374 40.86% Page 62 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Quoted shares on ASX Unquoted Shares issued under ERL Share Plan Total issued share capital 97,745,921 2,450,000 97,195,921 (c) Substantial shareholders The names of substantial shareholders are: Shareholder Apex Minerals NL David Sargeant (d) Voting rights Number of shares 5,000,000 6,100,000 All shares carry one vote per unit without restriction. EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 63 INTERESTS IN MINING AND EXPLORATION TENEMENTS as 24 September 2010 PROJECT TROY CREEK PENNY’S FIND MT MCLEAY YUINMERY YUINMERY OPTION WYNNE Page 64 TENEMENT E69/1486 E69/1728 E69/1729 E69/2357 E69/2358 E69/2485 P69/40 P69/41 P69/42 P69/43 P69/44 P69/45 E27/410 E27/420 M27/156 P27/1713 P27/1714 P27/1715 P27/1716 P27/1717 P27/1718 P27/1719 P27/1720 P27/1721 P27/1722 P27/1723 P27/1724 P27/1725 P27/1726 P27/1727 P27/1728 P27/1729 P27/1730 P27/1731 P27/1814 P27/1922 P27/1993 P27/1962 P27/2007 P27/2008 P27/1711 P27/1748 P27/1749 P27/1954 P27/1979 P27/1990 P27/2006 M57/265 P57/1214 P57/1215 P57/1216 P57/1217 E57/735 E57/766 E57/783 E57/840 E57/514 E57/524 E57/681 P57/1130 P57/1131 E08/1979 INTEREST REMARKS 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Application not yet granted Application not yet granted Earning up to 51% Ditto Ditto Ditto Ditto Ditto Ditto Application no yet granted Application not yet granted Option for 75.9% interest Ditto Ditto Ditto Ditto EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 R a m m & C o | D e s g n i EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 Page 65 Page 66 EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010 E M P I R E R E S O U R C E S L I M I T E D – A N N U A L R E P O R T 2 0 1 0 

Continue reading text version or see original annual report in PDF format above