Level 2, 907 Canning Highway
Mt Pleasant
Western Australia 6153
Postal: Post Office Box 920
CANNING BRIGDE
APPLECROSS WA 6953
Phone: (618) 93159057
Fax: (618) 93159037
Email: enq@gmeresources.com.au
BY E-MAIL
GME RESOURCES LTD
ABN 62 009 260 315
28 September 2006
The Companies Announcement Office
Australian Stock Exchange Limited
Level 10 Exchange Centre
20 Bond Street
SYDNEY NSW 2000
Dear Sirs
2006 ANNUAL REPORT
Please find attached the following documents for immediate release to ASX and lodgement with
ASIC:
• The 2006 Annual Report incorporating the Audited Financial Statements for GME
Resources Limited and Controlled Entities for the Year ended 30 June 2006; and
Yours faithfully
MARK PITTS
Company Secretary
Z:\Client Files\Co Sec Files\GME\ASX\2006 Annual Report 280906.Doc:28/9/06
G M E R E S O U R C E S L T D
ABN 62 009 260 315
ANNUAL REPORT
2006
CONTENTS
PAGE
CORPORATE DIRECTORY ..............................................................
1
CHAIRMAN’S LETTER ....................................................................
2
REVIEW OF OPERATIONS .............................................................
3
CORPORATE GOVERNANCE ........................................................ 14
DIRECTORS’ REPORT .................................................................... 21
AUDITORS INDEPENDENCE DECLARATION ................................ 29
FINANCIAL REPORT ...................................................................... 30
DIRECTORS’ DECLARATION ........................................................ 54
INDEPENDENT AUDIT REPORT .................................................... 55
SHAREHOLDER INFORMATION ................................................... 57
TENEMENT DIRECTORY ............................................................... 59
GME RESOURCES LTD
CORPORATE DIRECTORY
DIRECTORS
Chairman
Michael Delaney PERROTT B.Com
Managing Director
James Noel SULLIVAN FAICD
Director
Peter Ross SULLIVAN BE, MBA
Director
Geoffrey Mayfield MOTTERAM B.MetE(Hons), M.AusIMM
COMPANY SECRETARY
Mark Edward PITTS B.Bus, C.A.
REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS
Level 2,
907 Canning Highway
Mt Pleasant WA 6153
PO Box 920
Applecross WA 6953
Telephone:
Facsimile:
E-Mail:
Web Site:
(08) 9315 9057
(08) 9315 9037
enq@gmeresources.com.au
www.gmeresources.com.au
AUDITORS
HLB Mann Judd
Chartered Accountants
15 Rheola Street
West Perth WA 6005
SHARE REGISTRY
Computershare Registry Services Pty Ltd
Level 2, Reserve Bank Building
45 St George’s Terrace
Perth WA 6000
GPO Box D182
Perth WA 6001
Telephone:
Facsimile:
(08) 9323 2000
(08) 9323 2033
STOCK EXCHANGE LISTING
The Company’s shares are quoted on the
Official List of Australian Stock Exchange Limited
Ticker code: GME
STATE OF REGISTRATION
Western Australia
- 1 -
ANNUAL REPORT 2006
GME RESOURCES LTD
CHAIRMAN’S LETTER
Dear Shareholder
It has been a successful year with good progress being made on a number of fronts. The position
the Company is now in will provide further opportunities for shareholders.
The Company continued to confirm and extend the lateritic nickel resource base at the NiWest
Nickel Project during the past year. Of greater strategic importance has been the delineation of
significant quantities of saprock ore types, which are considered amenable to processing by Heap
Leach Technology. This was highlighted in the recent prospectus in which funds were raised to
further a Heap Leach development.
Whereas high clay smectite nickel ore requires treatment in high pressure acid leach facilities, recent
metallurgical test work indicates that saprock ore types at several of the Company’s project areas
can be treated in a relatively lesser cost Heap Leach process.
Consulting Engineers Aker Kvaerner have been briefed to commence a scoping study for a plant of
varying sizes which together with the outcome of the more significant column tests currently being
undertaken, should provide the Board with various choices of how to proceed further.
Heap Leaching of copper and other metals has been used successfully for decades whereas
treatment of nickel laterites by this technique is relatively novel. Much work has been done in recent
years with heap leaching technology in the nickel and cobalt sector and the Company may be well
placed to see the benefit of this increased knowledge. If the test work is favorable and we are able
to take advantage of the continued high nickel price, it creates additional opportunities and value for
the Company.
In addition to the metallurgical test work and development studies for the saprock resources, further
research and development into the suitability of heap leaching of the various laterite ore types has
been initiated. Should this prove successful, the quantity of available leachable nickel laterites may
be greater than originally anticipated. This together with advances in treatment technology, could
lead to a significant increase in magnitude of the project.
The Board is grateful to its shareholders who have continued to support the Company with another
strongly supported rights issue of which 93% of the entitlements were taken up.
Our thanks are expressed to Mr Jamie Sullivan, Managing Director, and his staff together with our
fellow Directors.
I look forward to welcoming you to our Annual General Meeting.
Yours faithfully
MICHAEL PERROTT
Chairman
- 2 -
ANNUAL REPORT 2006
GME RESOURCES LTD
REVIEW OF OPERATIONS
World Class Nickel Project
The NiWest Nickel Project is a world class nickel resource with a contained metal content
in excess of 1,200,000 tonnes Nickel and 75,000 tonnes Cobalt, located between surface
and 50 metres.
The Directors of your company have initiated metallurgical test programs and
development studies aimed at unlocking the value of this multi billion dollar project
using Acid Heap Leach Technology
REVIEW OF OPERATIONS
NiWest Nickel Project– 100% Ownership
The past twelve months has proven to be a very productive year for your Company. The
Company’s primary focus of work is the Niwest Nickel Project located in the North Eastern
Goldfields of Western Australia.
The NiWest Nickel Project comprises nine project areas with a land holding of over 500 square
kilometres hosting extensive nickel laterite resources. These resources are strategically located
within a sixty kilometres radius of the Murrin Murrin Nickel Refinery and other important
infrastructure such as, standard gauge railway linked to port facilities, a natural gas pipeline,
arterial bitumen road and the townships of Leonora and Laverton. Mining Leases have been
secured over 95% of the known resources and Land Access Agreements have been executed
with the Native Title Claimants.
Heap Leach Development
The most significance outcome from exploration work completed this year was the discovery of
high grade nickel mineralisation in saprock at the Hepi project. A review of the NiWest Nickel
Project resources indicated extensive distribution of saprock ore types at Waite Kauri, Mt
Kilkenny, and Eucalyptus. This type of mineralisation is friable, low in clay content and is
considered amenable for processing by Heap Leach Technology.
Heap Leaching has been used for decades as a processing route to extract metals
such as copper, gold and silver. It is a relatively simple, proven process, which
uses atmospheric conditions and basic technology to leach the metals into
solution.
Heap Leaching is neither labour nor capital intensive requires very few moving
parts and provides for low operating costs. The key to successful heap leaching is
achieving competent stable heaps that maintain percolation of solution to allow
the leaching process to take place.
Until recently, the NiWest resources represented a logical long term feed to the Murrin Murrin
Nickel Refinery and would equate to in excess of 12 years ore supply at the current tonnage and
grade being treated by that plant.
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ANNUAL REPORT 2006
GME RESOURCES LTD
However, a number of factors have determined that the Board proceed with an alternate
development strategy to that of simple ore sale to the Murrin Murrin Joint Venture namely:
• Murrin Murrin Joint Venture has indicated that they will be able to maintain a 1.3 % Ni feed
grade for some time yet.
• Metallurgical bottle roll tests performed on agglomerated RC drill cuttings indicate rapid
nickel leach extraction rates up to 85% at acceptable acid consumption. An average leach
rate of 66% was achieved over the tests conducted.
• A commitment to develop a Nickel Laterite Heap Leach project in Turkey by European Nickel
and a commitment by the Murrin Murrin Joint Venture to establish commercial Heap Leach
Operation.
• The recent recognition that a significant proportion of the NiWest resources are contained
within weathered ultramafic (“Saprock”) which is expected to form stable heaps with good
Heap Leach percolation rates.
• An established measured / indicated resource base of 4.6 million tonnes of high grade
saprock mineralisation averaging 1.31% nickel and 0.10% Cobalt at Hepi, Waite Kauri and
Mt Kilkenny project areas provide the basis for a Stage One five year mining and processing
operation at between 0.75 and 0.9 million tonnes per annum.
• Higher clay limonite / smectite ores that are not suitable to heap leach processing would be
co-mined and available for sale.
• Alternatively, a research and development test program involving the blending of the high
grade clay ore types with lower grade saprock ore types to establish competent stable
agglomerates has the potential to unlock the value of the Niwest resources through a large
scale long life heap leach operation.
Based on the above the Company has commissioned a Sonic drill rig capable of providing core
samples from the lateritic profile. Sample generated has been used to establish column leach tests
on representative samples from the following measured and indicated resources.
Project
Hepi
Hepi
Waite Kauri
Mt Kilkenny Central
Total
Tonnes
1,108,000
584,000
1,300,000
1,655,000
4,647,000
Category
Measured
Indicated
Measured
Indicated
% Ni
1.44
1.30
1.33
1.23
1.31
% Co
0.10
0.11
0.14
0.08
0.1
Contained Ni Tonnes
15,955
7,592
17,290
20,356
61,193
The test work is designed to establish the following
• That saprock mineralisation forms stable agglomerates
• Heap Leach solution percolation rates
• Nickel extraction rates
• Acid consumption rates
• Metal recovery from pregnant solution
- 4 -
ANNUAL REPORT 2006
GME RESOURCES LTD
Metallurgical Results
In March 2006 The Company engaged SGS Lakefield Oretest Pty Ltd to undertake metallurgical
bottle roll tests using three separate resource areas where low clay saprolite and saprock ore types
had been identified within the NNP.
At Hepi and Mt Kilkenny Central, ore intersections from multiple RC drill holes were collected, to
provide representative test samples across each saprolite resource. Samples were then classified
into three separate ore types and composite sample prepared for test work. The test from Waite
Kauri was one composite sample prepared of the entire ore zone from drill hole WKR301. Each
composite sample was analyised and then agglomerated with sulphuric acid prior to commencement
of test work. The samples were rolled in bottles with sulphuric acid for 62 days to simulate heap
leaching conditions.
A summary of the bottle roll leach results are listed below.
Acid Bottle Roll Test Summary 62 Days
Composite
Sample
HEPI Comp 1
HEPI Comp 2
HEPI Comp 3
MK Comp 1
MK Comp 2
MK Comp 3
WK Comp 1
Ore Type
Saprolite Trans
Saprolite
Saprock
Clay Trans
Saprolite
Saprock
Saprolite/Saprock
Average
Thickness
2.10m
4.20m
2.70m
4.00m
7.20m
7.90m
21.00m
Head
Grade
Ni %
1.44
1.98
1.48
1.33
1.45
1.17
2.04
Extraction
Co%
Ni %
0.04
0.14
0.08
0.14
0.09
0.04
0.09
62.7
60.9
72.2
54.2
63.2
85.3
62.7
Acid
Add'n
Co% Kg/T
50.5 377
36.7 429
38.8 600
39.7 447
33.9 429
55.3 558
75.3 409
The Nickel metal extraction from the bottle roll tests were higher than those expected and these
results provide the company with confidence to move forward with further metallurgical test work on
representative saprock ore types from the Hepi, Waite Kauri and Mt Kilkenny resources.
Development of Heap Leach Project
As discussed the company is proceeding with column leach testwork, a metal recovery test program
and definition of infrastructure availability, such as water supply. Consulting engineers Aker
Kvaerner have been appointed to undertake a scoping study to be completed during the first quarter
of 2007.
A Feasibility Study will then proceed, however, the scale and timing of the Feasibility Study will
depend on the scale of project envisaged. A smaller scale project, with low capital cost due to
purchasing acid will require less detailed engineering with a commitment expected during 2007.
Commissioning of the project would take place during 2008.
The larger scale project would involve a sulphur burning acid plant, demonstration heap and
demonstration metal recovery circuits with Full Feasibility completed by end 2007. Completion time
for the acid plant would dictate full commissioning by end 2009. A smaller scale “lead in” project
would commission on purchased acid from mid 2008.
Nickel Resources
Over the year the Company completed six drilling campaigns which involved 491 reverse
circulation drill holes for a total of 15,770 metres. The programs, which were a combination of,
- 5 -
ANNUAL REPORT 2006
GME RESOURCES LTD
resource expansion and infill resource definition, were highly successful. Significant increases in
Total Resource were achieved along with a major upgrade of Indicated and Measured resource
categories.
The exploration work undertaken over the past year has resulted in high grade resources
increasing by 8.2 million tonnes, or 20%, to 48.77 million tonnes grading 1.25% Nickel
and 0.10% Cobalt
Infill drilling has upgraded Total Indicated and Measured resources to 36.7 million tonnes
at 1.28% Nickel and 0.09% Cobalt. This represents an increase of 85% over the past 12
months.
There remains a considerable amount of drilling work to be undertaken to fully evaluate the
resource extent of each individual project area. To put this into perspective, the total strike of the
laterised ultramafic structures within the NiWest Nickel Project is, in excess of 70 kilometres. In
particular Eucalyptus and Mt Kilkenny are extensive holdings that host the majority of these
structures.
Potential exists to build on the resource base through selective targeting of higher grade drill
intersections. Planned future drilling programs will continue to be directed at evaluating the full
resource potential of NiWest Nickel Project, however the primary focus of the work will shift to
resource definition over the nickel saprock mineralisation. Expansion of these resources is
expected to underpin the development of NiWest Heap Leach project.
A re-logging program is in progress to identify areas that require follow up work and to quantify
the saprock resources. Targets will be generated from this work and followed up with drill
programs.
NIWEST NICKEL PROJECT
TOTAL RESOURCES AT VARIOUS CUT OFF GRADES
Ni Cut Off Grade % Million Tonnes % Ni
0.81
1.0
1.25
1.42
227.55
128.1
48.76
26.08
0.5
0.7
1.0
1.2
Tonnes Contained Metal
% Co
0.05
0.06
0.1
0.11
Nickel
1,843,000
1,281,000
609,500
370,300
Cobalt
113,800
76,800
48,700
28,700
- 6 -
ANNUAL REPORT 2006
GME RESOURCES LTD
Project
Mt Kilkenny
Mt Kilkenny
Eucalyptus
Eucalyptus
Waite Kauri
Murrin North
Murrin North
Hepi
Hepi
Hepi
Mertondale
Macey Hill
Duck Hill
Total
Total
Total
Entitlement Issue
RESOURCE STATEMENT – JUNE 2006
ALL PROJECT AREAS - 1% NICKEL CUT OFF GRADE
Category
Indicated
Inferred
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Inferred
Inferred
Inferred
Indicated/Measured
Inferred
Combined
Million
Tonnes
13.73
1.38
17.10
7.10
1.30
2.15
0.97
1.10
0.58
0.35
1.20
0.30
1.50
35.96
12.80
48.76
% Ni
% Co
1.29
1.14
1.24
1.16
1.33
1.34
1.14
1.44
1.30
1.09
1.24
1.40
1.27
1.28
1.18
1.25
0.10
0.07
0.08
0.09
0.14
0.09
0.11
0.10
0.11
0.11
0.08
0.15
0.30
0.09
0.12
0.10
In June the Company announced a one for fifteen Renounceable Entitlement issue to raise up to
$2.0 million dollars. The issue was not underwritten but was well supported with 93% of entitlements
taken up. The issue raised $1.88 million dollars and funds will directed at further metallurgical test
work, scoping studies and future drilling programs.
Information relating to exploration work completed on individual project areas is detailed over the
following pages.
Eucalyptus Project
P39/3459 -3460, E39/480, E39/703, M39/289, M39/344, M39/430, M39/313, M39/568, M39/570,
M39/615, M39/665 – 666, M39/802
The Eucalyptus Project contains significant defined lateritic nickel cobalt resources which represent
almost 50% of the NiWest resources. About one third of this years drilling budget was directed at
resource expansion and upgrading the resources at Eucalyptus. The programs resulted in a 30%
increase in an overall resource tonnes (at 1% Ni cut off grade) an 85 % increase in indicated
resources.
- 7 -
ANNUAL REPORT 2006
GME RESOURCES LTD
Eucalyptus Resource - 1% Ni cut off grade
Indicated
Inferred
Total
Million Tonnes
17.10
7.10
24.20
%Ni
1.24
1.16
1.22
%Co
0.08
0.09
0.08
The majority of the work completed was focused on the Camelback area. The Camelback resource
is relatively close to surface and has continuity of high grade mineralisation over six kilometres of
strike. The detailed airborne magnetics survey that was flown in August 2005 was used as the
control for the resource expansion drilling and has contributed to the recent exploration successes. A
series of infill resource definition drilling programs were completed that resulted in a major upgrade
in Indicated Resources.
Drilling results from the May 2006 program around hole EBRC89 area returned a number of high
grade intersections greater than 1.2% nickel over 10 metres in thickness. Five of the seven holes
intersected nickel mineralisation between surface and 5 metres in depth over a strike length of 800
metres.
Systematic infill RC drilling programs will continue to be undertaken to extend high grade
nickel/cobalt laterite mineralisation focusing on the +1.3% Nickel zones. A new resource is expected
to be delineated at Eucalyptus Central as a result of the high grade mineralisation discovered in
May 2006 (see project plan). Drilling is also planned over the untested ultramafic structure to the
North of Camelback into the to Eucalyptus North area.
Saprock Mineralisation
The Camelback resource is the most significant at the Eucalyptus project and contains over ten
million tonnes averaging 1.25% Nickel and 0.08% cobalt. It will be re-logged to quantify the
significant saprock mineralisation thought to be contained in the resource.
Mt Kilkenny
E39/688 M39/878 – 879, E39/1107-1108, P39/4404-4407, P39/4412-4417
The Mt Kilkenny Project area also represents one of the NiWest Nickel Project larger resources.
Drilling programs completed throughout the year resulted in a significant increase in total tonnes and
a 45% increase in Indicated resource. Details of the resource at Mt Kilkenny are listed in the
following table.
Mt Kilkenny Resource - 1% Ni cut off grade
Million Tonnes
Indicated
Inferred
Total
13.73
1.38
15.11
%Ni
1.29
1.14
1.28
%Co
0.10
0.07
0.10
Exploration work over the year consisted of detail airborne magnetics survey, numerous geological
site inspections, four RC percussion drilling programs, petrological studies, resource calculations,
and nickel sulphide review.
Fugro Airborne Surveys Pty Ltd was contracted in July 2005 to undertake a detail airborne
magnetics survey of the Mt. Kilkenny Project area. The objective of this ultra detail low level
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ANNUAL REPORT 2006
GME RESOURCES LTD
magnetic survey was essentially to provide a reliable geological base to aid resource definition
drilling. The detailed airborne magnetics work has contributed to the recent exploration successes.
The August 2005 drill program at Mt Kilkenny was initially planned to test several isolated high grade
nickel intersections in the Central area. The aeromagnetic data illustrates that the ultramafic units
over the Central area are dislocated from the main northern and southern units and that previous
wide spaced drilling could have missed the ultramafic structures.
The results from the program were successful in delineating a substantial new high grade saprock
resource. A significant number of holes recorded nickel intersections greater than ten metres in
thickness within 12 metres of surface. The following table contains significant results from drilling at
Mt Kilkenny Central
Mt Kilkenny Central Drill Results August 2005
1% Ni cut off grade
Hole
MKC0131
MKC0135
MKC0151
MKC0154
MKC0158
MKC0159
MKC0160
MKC0161
MKC0161
MKC0163
MKC0163
MKC0164
MKC0164
MKC0166
MKC0167
MKC0169
MKC0170
MKC0173
MKC0173
MKC0177
MKC0178
MKC0179
MKC0181
MKC0181
MKC0182
MKC0184
MKC0184
MKC0191
From
8
12
5
3
12
11
12
11
32
35
43
4
24
13
19
8
3
18
34
10
5
9
8
19
21
9
25
20
To
13
33
27
8
17
27
20
25
42
42
54
19
34
35
31
12
10
31
42
16
29
31
15
39
41
23
32
31
Interval Ni%
1.32
1.28
1.37
1.21
1.00
1.15
1.37
1.35
1.21
1.70
1.36
1.00
1.10
1.11
2.08
1.45
1.25
1.48
1.10
1.08
1.28
1.22
2.15
1.39
1.23
1.30
1.05
1.10
5
21
22
5
5
16
8
14
10
7
11
15
10
22
12
4
7
13
8
6
24
22
7
20
20
14
7
11
Co%
0.16
0.07
0.06
0.15
0.07
0.05
0.05
0.14
0.05
0.17
0.06
0.03
0.03
0.09
0.15
0.20
0.07
0.20
0.04
0.08
0.05
0.10
0.16
0.05
0.05
0.09
0.04
0.04
In May 2006 a drilling program over the extent of the southern Mt Kilkenny ultramafic was completed
to test for high grade mineralisation structures between the existing low grade wide spaced drill
holes. Generally the results were in line with previous drilling with the exception of hole, MKC203
which intersected 18 metres averaging 1.35% nickel and 0.05% cobalt on the western edge of the
ultramafic by eleven metres of sand cover.
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ANNUAL REPORT 2006
GME RESOURCES LTD
A measured resource base will be required for project development and an infill drilling program is
planned to upgrade the strike of the Mt Kilkenny Central resource. Stage one of this program is
scheduled to commence in October 2006. The program will also include increased hole density over
a further 1000 metres strike to the north of the Central resource. Mineralisation over this area is
considered to be suitable for heap leaching.
Hepi
M39/717 – 718, M39/819
The Hepi project is located 10 kilometres to the west of the Murrin Murrin Nickel Refinery and is
serviced by bitumen road and a gas pipeline. The Malcolm rail siding which is utilised by the MMJV,
to transport product in and out of the area is located 30 kilometres to the west.
The majority of work in the second half of the year was focused on the Saprock resource identified at
the Hepi project. The discovery program in December 2005 delivered a number of outstanding nickel
intersections over a horizon 200 metres wide. Initial high grade results such as 9 metres @ 3.03%
Ni, 6 metres @ 2.63% Ni and 8 metres @ 2.12% Ni were followed up with further drill programs in
February and May. In June the Company released a Measured Resource Statement for Hepi
Project.
Hepi Resource - 1% Ni cut off grade
Category
Measured
Indicated
Inferred
Combined
Million Tonnes
1.20
0.58
0.35
2.13
% Ni
1.44
1.30
1.09
1.34
% Co%
0.10
0.11
0.11
0.1
Drilling at Hepi has shown that the distribution of saprock mineralisation is consistent in both grade
and geology. Average depth to ore is 16 metres and average thickness of mineralisation at a 1%
nickel cut off grade is 6.5 metres. Metallurgical results from bottle roll leach tests indicate nickel
metal recoveries up to 65% are achievable under atmospheric leach conditions. Further Heap
Leach test work is in progress and results are due in by February 2006.
Additional drilling is planned at Hepi over several ultramafic units that have not been drill tested.
Scoping studies underway will examine the benefits of the projects location to established
infrastructure, resource and suitability for future treatment plant.
Murrin North
M39/758 and MLA39/757
The Murrin North project contains a significant high grade nickel laterite resource strategically
located approximately four kilometres to the North West of the Murrin Murrin JV nickel refinery.
Exploration at Murrin North was focused on completing the infill drilling program to upgrade the
resource to indicated category. Two deeper angle holes were drilled to test down dip extensions to
+4% nickel intersections recorded in two adjacent drill holes.
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ANNUAL REPORT 2006
GME RESOURCES LTD
Although the angle holes both intersected nickel laterite mineralisation below the high grade zones
they confirmed that the +4% nickel mineralisation represents an enriched zone within the laterite
profile.
Resource calculations for Murrin North were completed in September 2005. The upgraded resource
statement showed an increase in resource tonnes and grade of 15%.
Further work is planned to upgrade the inferred resources. In addition a review of the project for
potential heap leach saprock ore types is also planned.
Murrin North Resource – 1% Ni cut off grade
Million Tonnes
Indicated
Inferred
Total
2.15
0.97
3.12
%Ni
1.34
1.14
1.28
%Co
0.09
0.10
0.10
Waite Kauri
M37/1215
The Waite Kauri project area is located approximately 20 kilometres to the North West of the Murrin
Murrin Nickel Refinery. The area contains a measured resource of 1.3 million tonnes grading 1.33 %
nickel and 0.14% cobalt.
Work on the project was limited due to outstanding Heritage issues. This matter was resolved in
December following the amalgamation of three tenements and the grant of a new Mining Lease.
The Waite Kauri project has been identified as a saprock ore type and is included in the Company’s
Heap Leach test work program. Results from bottle roll test work indicated nickel recoveries up to
63% for nickel and 75% for cobalt.
The eastern limb of the resource has recorded exceptionally high nickel grades. Further heap leach
test work is in progress on samples taken from this area.
Mertondale
P37/4201 – 4205, MLA37/591
A small reverse circulation RC percussion drilling program was undertaken on three of the five
Mertondale tenements, P37/4203, P37/4204 and P37/4205. Exploration objectives were to test the
high grade (greater than 1.3 % Ni) areas and determine if the previous drilling was too shallow,
especially in the south. Drilling would be undertaken to better evaluate the earlier drilling along the
central ironstone ridge.
In total thirty six reverse circulation RC percussion holes for 1014 metres were completed on the
southern three tenements.
Drilling indicated that most of the better nickel/cobalt mineralisation is restricted to a narrow
ironstone capped band unit within the olivine cumulate ultramafic.
Further drilling is planned over two zones of nickel/cobalt mineralisation located in sections based
upon holes MDRC062-66 and the section MDRC085-84-86. The following table shows the
significant drill intercepts from the drilling program.
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ANNUAL REPORT 2006
GME RESOURCES LTD
Mertondale Drill Results February 2006
1% Ni cut off grade
Hole
MDRC60
MDRC61
MDRC61
MDRC62
MDRC63
MDRC63
MDRC64
MDRC65
MDRC67
MDRC77
MDRC79
MDRC81
MDRC82
MDRC83
MDRC84
MDRC86
MDRC87
MDRC89
MDRC93
MDRC94
MDRC95
From
6
6
16
18
11
20
16
10
6
19
13
30
10
11
24
16
29
11
9
14
15
To
17
10
18
24
12
30
18
28
14
24
18
32
28
13
29
30
32
14
12
17
20
interval
11
4
2
6
1
10
2
18
8
5
5
2
18
2
5
14
5
3
3
3
5
Ni %
1.283
1.028
1.140
1.097
1.030
1.120
1.145
1.925
1.359
1.052
1.246
1.295
1.090
1.260
1.344
1.496
1.133
1.013
1.065
1.410
1.490
Co %
0.061
0.050
0.101
0.030
0.039
0.054
0.089
0.107
0.099
0.059
0.085
0.065
0.045
0.222
0.232
0.153
0.073
0.166
0.171
0.374
0.138
Golden Cliffs Nickel Laterite Royalty - MMJV
M39/426, 456, 552 AND 569
Minara Resources Limited on behalf of the Murrin Joint Venture has rights to nickel-cobalt laterite
mineralisation on the above tenements. GME, through its subsidiary Golden Cliffs NL retains the
rights to precious metals or other base metals discovered on these tenements, including nickel
sulphides. To maintain these rights Minara pays the company a facility fee of $100,000 per year
and, in addition to this, a royalty of $0.20 cents per tonne payable on ore processed. The royalty
payment is triggered as increments of 500,000 tonnes of ore processed.
The resources located on the Golden Cliffs royalty tenements do not form part of the NiWest Nickel
Project and are not included in the NiWest Statement of Resource.
In February 2006, the Company received a royalty payment $100,000. Total royalty payments
received as a result of mining and processing ore from the tenements now exceeds $595,000.
The Statement of Resources provided below was supplied by Murrin Murrin JV in 1997. It is based
on a 0.8% Nickel Ni cut off grade. However, the Murrin Murrin JV do not provide resource
statements of available tonnes at the higher cut off grade that is required to support the current
processing grade of approximately 1.3% nickel.
Statement of Resources located on Murrin Murrin JV
- 12 -
ANNUAL REPORT 2006
GME RESOURCES LTD
Deposit
MM4
MM4
MM4E
MM13
Total
Million
Tonnes
5.6
4.8
3.8
7.2
21.4
Royalty Tenements
%Ni
1.03
0.97
1.07
1.11
1.05
%Co
0.07
0.07
0.09
0.07
0.07
Cut-off
%Ni
0.8
0.8
0.8
0.8
0.8
Resource
Status
Measured
Indicated
Inferred
Inferred
The MMJV have announced development of commercial Heap Leach operations to treat reject scats
from the treatment plant and is currently testing the viability of heap leaching lower grade ores. The
Company is currently seeking information from the Murrin Murrin JV as to:
• Tonnes and grade of remaining resources in situ
• Quantities of Golden Cliffs lower grade ore on stockpiles available for heap leach
processing
• Status of the next tonnage based royalty payment
Gold Assets
GME and it’s subsidiary Golden Cliffs NL own a number of prospective gold projects in the Leonora
– Laverton region. The amount of work undertaken on the respective areas varies from soil sampling
through to diamond drilling and resource definition. Minimal work has been undertaken on these
tenements over the past two years.
The gold assets do not represent their true value in the company by comparison to the nickel assets.
The Company’s strategy in relation to gold is to realise a fair market value of these assets through
outright sale, joint venture or divestment through a new IPO.
The Company is monitoring and reviewing these and other strategic gold assets with the view to
build on the base portfolio where possible. Application for a number of tenements considered either
strategic to the current holding or prospective for new discoveries have been lodged over the past
year. With the gold price appearing to have stabilised around $800 per ounce, opportunity now
exists to maximise the value of these assets for the shareholders.
- 13 -
ANNUAL REPORT 2006
GME RESOURCES LTD
CORPORATE GOVERNANCE STATEMENT
Introduction
The Board of Directors of GME Resources Limited has adopted the following Corporate
Governance Principles and is responsible for the adherence to these Principles. These
Principles and Practices are reviewed regularly and upgraded or changed to reflect changes in
law and what is regarded as best practice. A description of the Company's main Corporate
Governance Principles and Practices is set out below.
Role of the Board
The Board has adopted the following Statement of Matters for which the Board will be
responsible:
(1) Reviewing and determining the Company's strategic direction and operational policies;
(2) Review and approve business plans, budgets and forecasts and set goals for
management;
(3) Appoint and remunerate Chief Executive Officer and Senior Staff;
(4) Review performance of Chief Executive Officer and Senior Staff;
(5) Review financial performance against Key Performance Indicators on a monthly basis;
(6) Approve acquisition and disposal of tenements;
(7) Approve exploration and mining programs;
(8) Approve capital, development and other large expenditures;
(9) Review risk management and compliance;
(10) Oversee the Company's control and accountability systems;
(11) Reporting to shareholders; and
(12) Ensure compliance with environmental, taxation, Corporations Act and other laws and
regulations.
Managing Director
GME's most senior employee is the Managing Director who is appointed and subject to annual
reviews by the Board. The Managing Director recommends policies, strategic direction and
business plans for the Board's approval and is responsible for managing the Company's day-to-
day business.
Board Independence
The Board consists of four directors, but up to 10 directors can serve on the board. Mr James
Sullivan is the only executive the remainder are non executive. Currently the four directors are:
Michael D Perrott
James N Sullivan
Peter R Sullivan
Geoffrey M Motteram
Chairman
Managing Director
Director
Director
60 years
Director since 1996
45 years Director since 2004
Director since 1996
50 years
Director since 1997
57 years
- 14 -
ANNUAL REPORT 2006
GME RESOURCES LTD
Mr Motteram is the only director considered Independent on the Board according to the
definitions by the Australian Stock Exchange Corporate Governance Council ("Council").
The Managing Director, Mr J Sullivan is a full time executive, and is also a substantial
shareholder of the Company. Both, the Chairman, Mr Perrott, and Mr P Sullivan are also not
considered "Independent" by the definitions of the Council as they are both directly or indirectly
substantial shareholders in the Company.
As such, the Company does not comply with the Council's recommendation, Item 2.1, that the
majority of the Company's directors should be Independent Directors. The Board has however
adopted a series of safeguards to ensure that independent judgement is applied when
considering the business of the Board:
• Directors are entitled to seek independent professional advice at the Company's
expense. Prior written approval of the Chairman is required but this is not unreasonably
withheld.
• Directors having a conflict of interest with an item for discussion by the Board must
absent themselves from a board meeting where such item is being discussed before
commencement of discussion on such topic.
• The Independent Director confers on a "needs" basis with the Chairman with such
discussion if warranted and considered necessary by the Independent Director.
• The Board considers Non-executive Directors to be independent even if they have minor
dealings with
they are not a substantial shareholder.
Transactions with a value in excess of 5% of the Company's annual operating costs are
considered material. A director will not be considered independent if he has transactions
in excess of this materiality threshold.
the Company provided
Tenure of the Board
The Directors are expected to review their membership of the Board from time to time taking
into account the length of service on the Board, age, qualification and experience. In light of the
needs of the Company and direction of the Company together with such other criteria
considered desirable for composition of a balanced board and the overall interests of the
Company.
A director is expected to resign if the remaining directors recommend that a director should not
continue in office, but is not obliged to do so.
Chairman
The current Chairman is Mr Michael D Perrott, Mr Perrott brings a wealth of business
experience, connections and drive to the Board.
The Chairman's role is separated from the role of the Managing Director.
The Chairman's role includes:
• Providing effective leadership on formulating the Board's strategy;
• Representing the views of the Board to the public;
- 15 -
ANNUAL REPORT 2006
GME RESOURCES LTD
• Ensuring that that the Board meets at regular intervals throughout the year and that
minutes of meeting accurately record decisions taken and where appropriate the views
of individual directors;
• Guiding the agenda, information flow and conduct of all board meetings;
• Reviewing the performance of the board of directors; and
• Monitoring the performance of management of the Company.
Committees
Due to the small size of the Company and the number of board members, the Board does not
have a formal nomination committee structure. Any new directors will be selected according to
the needs of the Company at that particular time, the composition and the balance of
experience on the Board as well as the strategic direction of the Company.
Should the need arise to consider a new board member, some or all of the Directors would form
the committee to consider the selection process and appointment of a new director.
At each annual general meeting the following directors retire:
• One third of directors (excluding the Managing Director);
• Directors appointed by the Board to fill casual vacancies or otherwise;
• Directors who have held office for more than three years since the last general meeting
at which they were elected.
Details on Current Directors
Details on current directors including their skills and experience are included in the Directors’
Report.
Ethical and Responsible Decision-making
In making decisions, the Directors of the Company, its officers and employees, take into
account the needs of all stakeholders:
• Shareholders;
• Employees;
• Community;
• Creditors;
• Contractors; and
• Government (Federal, State and Local).
The Directors, officers and employees of the Company are expected to:
• Comply with the laws and regulations both by the letter and in spirit;
- 16 -
ANNUAL REPORT 2006
GME RESOURCES LTD
• Act honestly and with integrity;
• Avoid conflicts of interest by not placing themselves in situations which result in divided
loyalties;
• Use the Company's assets responsibly and in the interests of the Company, not take
advantage of property, information or position for personal gain or to compete with the
Company;
• To keep non-public information confidential except where disclosure is authorised or
legally mandated; and
• Responsible and accountable for their actions and report any unethical behaviour.
Trading in Company Securities
The Directors, officers and employees of the Company must not acquire or dispose of securities
in the Company whilst in possession of price sensitive information not yet released to the
market. Subject to this condition and the trading prohibition applying to periods prior to major
announcements, including announcement of drilling results, announcement of half-yearly and
full year results and the holding of a general meeting, trading can occur at any time.
Directors must advise the Company which in turn advises the Australian Stock Exchange of any
transactions conducted by them in the Company's securities within five business days after the
transaction occurs.
Integrity of Financial Reporting
GME's Managing Director and Company Secretary report in writing to the Board:
• That the Company's financial reports are complete and present a true and fair view, in all
material respects, of the financial condition and operational results of the Company and
Group; and
• That the above statement is founded on a sound system of internal control and risk
management which implements the policies adopted by the Board and that the
Company's risk management and internal controls are operating efficiently in all material
respects.
Audit Committee
The Company does not have a formal audit committee as, in the opinion of the directors, the
scope and size of the Company’s operations do not warrant it. As such the Company is not in
strict compliance of the Council’s Recommendation 4.2 that the Board should establish an audit
committee. It should be noted however that when the Council’s Recommendation was made it
was emphasised that it was more relevant for large companies.
The Board regularly reviews the scope of audits, the level of audit fees and the performance of
auditors.
The Board also is continually assessing to ensure the independence of the external auditor is
maintained. The company will and does, if necessary, use other consultants to avoid any
potential independence issues.
- 17 -
ANNUAL REPORT 2006
GME RESOURCES LTD
Timely and Balanced Disclosure to Australian Stock Exchange
The Company has procedures in place to identify matters that are likely to have a material effect
on the price of the Company's securities and to ensure those matters are notified to the
Australian Stock Exchange in accordance with its listing rule disclosure requirements.
Information to the market and media is handled by the Chairman, the Managing Director or the
Company Secretary. In particular, the Company Secretary has been nominated as the person
includes
responsible
responsibility for compliance with the continuous disclosure requirements of the Australian
Stock Exchange Listing Rules and overseeing and coordinating information disclosures to
Australian Stock Exchange, analysts, brokers, shareholders the media and the public.
for communications with Australian Stock Exchange.
This role
All disclosures to Australian Stock Exchange are posted on the Company's website soon after
clearance has been received from Australian Stock Exchange.
The Chairman, the Managing Director and Company Secretary are monitoring information in the
marketplace to ensure that a false market does not emerge in the Company's securities.
Communication with Shareholders
It is the Company's communication policy to communicate with shareholders and other
stakeholders in an open, regular and timely manner so that the market has sufficient information
to make informed investment decisions on the operations and results of the Company.
The information is communicated to the shareholders through:
• Continuous disclosure announcements made to the Australian Stock Exchange;
• Distribution of the annual report to shareholders together with a notice of meeting;
• Posting of half-yearly results and all Australian Stock Exchange announcements on the
Company's website;
• Posting of all major drilling results;
• Posting of all media announcements on the Company's website; and
• Calling of annual general meetings and other meetings of shareholders to obtain
approval for board action as appropriate.
On the Company's website, information about the Company's projects are shown.
At annual general meetings and other general meetings of shareholders, shareholders are
encouraged to ask questions of the Board of Directors relating to the operation of the Company.
- 18 -
ANNUAL REPORT 2006
GME RESOURCES LTD
Risk Management
Due to its size of operation and size of the board, there is no formal board committee to identify,
assess and monitor and manage risk. Responsibility for day to day control and risk
management lies with the Managing Director and Company Secretary (financial risk) with
reporting responsibility to the Board. The Board participate and monitor risks including but not
limited to compliance with development and environmental approvals, tendering, contracting
and development, pricing of products, quality, safety, strategic issues, financial risk, joint
venture, accounting and insurance. Any changes in the risk profile for the Company are
communicated to its stakeholders via an announcement to Australian Stock Exchange.
Performance
The Board has adopted a self-evaluation process to measure its own performance. The
Chairman evaluates the performance of each director and the Board evaluates the performance
of the Chairman. Performance of senior executives is evaluated by the Managing Director in
cooperation with the Chairman. All performance evaluations are measured against budget,
goals and objectives set.
All directors of the board have access to the Company Secretary who is appointed by the
Board. The Company Secretary reports to the Chairman, in particular to matters relating to
corporate governance.
All board members have access to professional independent advice at the Company's expense
provided they first have obtained the Chairman's approval which will not be unreasonably
withheld.
Remuneration
Managing Director and Non-executive Directors
The directors are remunerated for the services, they render the Company and such services are
normally carried out under normal commercial terms and conditions. Remuneration is also
determined having regard to how directors are remunerated for other similar companies, the
time spent on the Company’s matters and the performance of the Company. Engagement and
payment for such services are approved by the other directors with no interest in the
engagement of services.
The Board has no retirement or termination benefits. Payments to all directors are set out in the
Director's Report.
Senior Executives
The remuneration of senior executives is discussed and determined by the Board upon
receiving advice from the Managing Director. The remuneration packages are set at levels
intended to attract and retain the executives capable of managing the Company's operations.
The remuneration of senior executives, where applicable is set out in the Directors’ Report.
General
Due to the staff size and the close involvement of the Board in the operations of the Company,
the Company does not operate a formal remuneration committee. All remuneration paid to the
Chairman, Non-executive Directors, Executive Director and Senior Executives are all reviewed
and discussed by the Board.
- 19 -
ANNUAL REPORT 2006
GME RESOURCES LTD
The Company does not operate an employee share option plan and there are no options
outstanding issued to directors, employees or former employees.
Interests of Stakeholders
It is the Company's objective to create wealth for its shareholders and provide a safe and
challenging environment for employees and for the Company to be a valuable member of the
community as a whole.
The Company's ethical and responsible behaviour is set out under the heading "Ethical and
Responsible Decision-making".
The Company's core values are summarised as follows:
• Provide value to its shareholders through growth in its market capitalisation;
• Act with integrity and fairness;
• Create a safe and challenging workplace;
• Be participative and recognise the needs of the community;
• Protect the environment;
• Be commercially competitive; and
• Strive for high quality performance and development.
- 20 -
ANNUAL REPORT 2006
GME RESOURCES LTD
DIRECTORS’ REPORT
Your directors present their report of GME Resources Limited and its controlled entities for the
financial year ended 30 June 2006.
Directors
The names of directors in office at any time during or since the end of the year are:
Michael Delaney Perrott
James Noel Sullivan
Peter Ross Sullivan
Geoffrey Mayfield Motteram
(Non executive - Chairman)
(Managing Director)
(Non executive - Director)
(Non executive - Director)
Directors have been in office since the start of the financial year to the date of this report unless
otherwise stated.
Principal Activities
The principal activities of the consolidated entity are mineral exploration and investment.
No significant change in the nature of these activities occurred during the year.
Operating and Financial Review
Operating Results
The net loss after income tax attributable to members of the consolidated entity for the financial
year to 30 June 2006 amounted to $379,353 (2005: $30,538).
Overview of operating activity
During the reporting period, the Company’s exploration focus was directed towards upgrading
it’s 100% owned NiWest Nickel Project located in the North Eastern Goldfields of Western
Australia.
Work completed has resulted is a significant increase in total resources and upgrading of
resource category. The resource base for the NiWest Nickel project now stands at 48.76 million
tonnes averaging 1.25% Nickel and 0.10% Cobalt. Measured and Indicated resources are 35.96
million tonnes grading 1.28% Nickel and 0.09% Cobalt.
Initial test work on saprock resources at several of the project areas indicates that these ore
types may be amenable to treatment by Heap Leach Technology. Stage two test work has be
initiated to establish if the saprock ore can form stable heaps and maintain percolation rates
required in Heap Leach processing.
In addition to this work the Company has briefed a consulting engineer on commencing a
scoping study to fully evaluate the development of a project using Heap Leach Technology.
Results from test work and the scoping studies are expected to be completed by March 2007.
For a more detailed summary of activities for the year refer to the Review of Operations set out
elsewhere in this Annual Report
- 21 -
ANNUAL REPORT 2006
GME RESOURCES LTD
Financial Position
At the end of the financial year the consolidated entity had $365,547 (2005 $351,709) in cash
and at call deposits.
Cash increased subsequent to the end of the financial year with the successful conclusion of a
Renounceable Entitlement Issue (refer Note 23 in the Financial Report). Carried forward
exploration expenditure was $9,097,138 (2005 $7,663,965).
During the year issued capital increased from 191,499,384 in 2005 to 202,807,215 ordinary
shares at the end of 2006, the movement of 11,307,831 ordinary shares resulted from a 1:15
entitlement issue on the 12th August 2005.
Dividends
No dividends have been paid or declared since the start of the financial year. No
recommendation is made as to dividends.
Significant Changes in State of Affairs
On 12 August 2005, Directors closed a 1 for 15 renounceable entitlement issue at 15 cents. The
entitlement issue was not underwritten and closed with almost 90% acceptances. The
Company’s share registry received acceptances for 11,307,831 ordinary shares at an issue
price of 15 cents per share raising a total of $1,696,175.65.
The Company elected not to place the shortfall of 1,458,795 shares or 11.4%.
Other than the Renounceable Entitlement Issue as referred to, there were no significant
changes in the state of affairs of the consolidated entity during the financial year.
After Balance Date Events
On 28 June 2006, Directors announced a 1 for 15 Renounceable Entitlement Issue at 15 cents.
The entitlement issue was not underwritten, and on 11 August 2006 the offer closed with almost
93% acceptances. The Company’s share registry received acceptances for 12,558,783 ordinary
shares at an issue price of 15 cents per share raising a total of $1,883,817.
The Company elected not to place the shortfall of 961,698 shares or 7.2%.
Other than the Renounceable Entitlement Issue as referred to, no matters or circumstances
have arisen since the end of the financial year which significantly affected or may significantly
affect the consolidated entity’s operations, the results of those operations or the consolidated
entity’s state of affairs in future financial years.
Likely Developments
The consolidated entity’s areas of interest are in the exploration stage, and although the results
of work carried out to date are encouraging it is not possible to predict the likely developments.
The consolidated entity will continue its mineral exploration and investment with the object of
finding further mineralised resources and exploiting those already discovered.
The Board is following a strategic plan for the growth of the consolidated entity, however, further
information about likely developments future prospects and business strategies as they pertain
to the operations and expected results of those operations have not been included in this report,
as the Directors’ reasonably believe that disclosure of this information would be likely to result in
unreasonable prejudice to the consolidated entity.
- 22 -
ANNUAL REPORT 2006
GME RESOURCES LTD
Information on Directors and Company Secretary
Michael Delaney Perrott BCom FAIM
(Chairman) 60 Years
Director since 1996
Mr Perrott has been involved in industries associated with construction, contracting, mining and
land development since 1969. He is currently Chairman and director of various listed and
unlisted public and private companies. He is a member of the Board of Notre Dame University
and a council member of National Advisory Council for Suicide Prevention and Community Life.
Mr Perrott has been Chairman of the Company since his appointment as a director in 1996.
Other current directorships of listed companies
Director of Port Bouvard Limited since 1998 and Chairman since December 2000, director of
Portman Limited since June 1997 and Schaffer Corporation Limited since February 2005.
Former directorships of listed companies in last 3 years
Chairman of Bone Medical Limited from May 2001 to August 2005 and Asset Backed Holdings
Limited from October 2000 to October 2003.
James Noel Sullivan
(Managing Director) 45 Years
Director since 2004
Mr Sullivan was appointed Managing Director of the Company in October 2004. Mr Sullivan has
over 20 years experience in commerce providing services to the mining and allied industries.
Mr Sullivan was instrumental in establishing and managing the Golden Cliffs Prospecting
Syndicate which acquired and pegged a number of prospective tenements in the Eastern
Goldfields. The Golden Cliffs Prospecting Syndicate was subsequently acquired by the
company in 1996. Mr Sullivan has extensive knowledge in mining and prospecting in the North
Eastern Goldfields and in particular on matters involving tenement administration, native title
negotiation and supply and logistics of services. Mr Sullivan’s practical knowledge in these
areas will be of great benefit to the Company as it seeks to develop its assets for the benefit of
its shareholders.
Mr Sullivan has not been a Director of any other public listed entities during the past three
years.
Peter Ross Sullivan BE, MBA
(Non Executive Director) 50 years
Director since 1996
Mr Sullivan is an engineer and has been involved in the management and strategic
development of resource companies and projects for more than 20 years.
Mr Sullivan has been a director of the Company since his appointment in 1996.
Other current directorships of listed companies
Mr Sullivan has been a director of Resolute Mining Limited since June 2001.
Former directorships of listed companies in last 3 years
Mr Sullivan was a Director of Valhalla Uranium Limited for the period September 2005 to September
2006.
- 23 -
ANNUAL REPORT 2006
GME RESOURCES LTD
Geoffrey Mayfield Motteram BMetE (Hons), MAusIMM
(Non Executive Director) 57 years
Director since 1997
Mr Motteram is a metallurgical engineer with over 30 years’ experience in the development of
projects in the Australian resources industry.
He has extensive experience in gold and base metals having been involved with WMC’s
Kwinana Nickel Refinery and Kalgoorlie Nickel Smelter. He subsequently joined BHP, and later
Metals Exploration, where he was involved in the evaluation of gold and base metal projects.
Since 1989 he has acted as a Mining Project and Metallurgical Consultant. He was involved in
the formation of Minara Resources Limited (formerly Anaconda Nickel Limited) in 1994 and
controlled the technical development of the Murrin Murrin Joint Venture until the end of 1997.
He is a former director of Minara Resources Limited.
Mr Motteram has been a non executive director of the Company since 1997, and provides
technical support to the Company. During the past three years Mr Motteram has not been a
Director of any other public listed entities.
Mr Mark Pitts B.Bus CA
(Company Secretary) 44 Years
Mr Pitts was appointed to the position of Company Secretary in June 2005. Mr Pitts is a
Chartered Accountant who has been providing financial accounting, assurance and governance
advice for 20 years. He is currently a Partner in advisory firm Endeavour Corporate which
specialises in the provision of company secretarial services to ASX listed entities.
Remuneration report
The remuneration report is set out in the following manner:
• Policies used to determine the nature and amount of remuneration.
• Details of remuneration
• Service agreements
• Share based compensation
Remuneration policy
The Board of Directors is responsible for remuneration policies and the packages applicable to
the Directors of the Company. The broad remuneration policy is to ensure that packages
offered properly reflect a person’s duties and responsibilities and that remuneration is
competitive and attracts, retains, and motivates people of the highest quality.
The Managing Director and Non-executive Directors are remunerated for the services they
render to the Company and such services are carried out under normal commercial terms and
conditions. Engagement and payment for such services are approved by the other directors
who have no interest in the engagement of services.
There are no retirement or termination benefits payable to the Board or senior executives.
At the date of this report the Company had not entered into any packages with Directors or
senior executives which include performance based components, the Company does not
operate an employee share option plan and there are no options outstanding issued to
directors, employees or former employees.
- 24 -
ANNUAL REPORT 2006
GME RESOURCES LTD
(Refer to the Corporate Governance Statement for more detail on the Board’s policy in this
area.)
Details of remuneration for Directors’
Remuneration levels are competitively set to attract and retain appropriately qualified and
experienced Directors and senior executives. The Board of Directors obtains independent
advice when appropriate when reviewing remuneration packages.
During the year there were no senior executives which were employed by the Company for
whom disclosure is required.
Details of nature and amount of each element of the emoluments of directors and executives of
the Company (and each of the officers of the Company and the consolidated entity receiving the
highest remuneration) are:
Managing Director
Fees
2006
$
James N Sullivan (appointed Oct 2004)
123,341
Non – Executive Directors
Michael D Perrott
Geoffrey M Motteram
Peter R Sullivan
Fees
2006
$
30,000
24,000
24,000
Fees
2005
$
92,999
Fees
2005
$
30,000
18,000
24,000
The Company and its subsidiaries had no employees as at 30 June 2006.
Service agreements
There are no service agreements with any of the Company’s Directors.
Share based compensation
There is currently no provision in policies of the consolidated entity for the provision of share
based compensation to directors or senior executives. The interest of Directors in shares and
options is set out elsewhere in this report.
- 25 -
ANNUAL REPORT 2006
GME RESOURCES LTD
Directors and Executives Interests
The relevant interests of directors either directly or through entities controlled by the directors in
the share capital of the company as at the date of this report are:
Director
Ordinary
Shares
Balance
1/7/05
Net
Change
(i)
Ordinary
Shares
Balance
30/6/06
Share issue
subsequent
to Balance
Date
(ii)
Ordinary
Shares
Balance at
the date of
this Report
Michael D Perrott
9,196,967
613,132
9,810,099
654,006
10,464,105
James N Sullivan
9,356,132
837,877
10,194,009
679,596
10,873,605
Peter R Sullivan
11,540,147
769,345
12,309,492
987,796
13,297,288
Geoffrey M Motteram
3,885,050
259,004
4,144,054
276,270
4,420,324
(i) Net change - movement for the year was in respect of 15:1 entitlement taken up in August
2005. A related party to James N Sullivan also purchased an additional 214,666 shares on
market during the year.
(ii) Renounceable entitlement issue refer note 23.
Meetings of Directors
During the year, 7 meetings of directors were held. Attendances were:
Name
Michael D Perrott
James N Sullivan
Peter R Sullivan
Geoffrey M Motteram
Number
Eligible to
Attend
Number
Attended
7
7
7
7
7
7
7
7
Loans to Directors and Executives
There were no loans entered into with Directors or executives during the financial year under
review.
Related party transactions with directors and executives are set out in Note 17 to the Financial
Report.
- 26 -
ANNUAL REPORT 2006
GME RESOURCES LTD
Unlisted Options
At the date of this report the number of unlisted Options on issue were as follows:
•
•
•
2,000,000 Options exercisable at $0.20 each;
2,000,000 Options exercisable at $0.30 each; and
1,000,000 Options exercisable at $0.40 each.
All of the above unlisted Options will expire on 30 June 2007.
Audit Committee
The Company does not have an audit committee as, in the opinion of the directors, the scope
and size of the Company’s operations do not warrant it.
Indemnifying Officers or Auditors
The company has not, during or since the financial year, in respect of any person who is or has
been an officer or the auditor of the Company or of a related body corporate:
•
•
indemnified or made any relative agreement for indemnifying against a liability incurred
as an officer or auditor, including costs and expenses in defending legal proceedings; or
paid or agreed to pay a premium in respect of a contract insuring against a liability
incurred as an officer or auditor for the costs or expenses to defend legal proceedings.
Environmental Regulation
The consolidated entity’s exploration and mining tenements are located in Western Australia.
There are significant regulations under the Western Australian Mining Act 1978 and the
Environmental Protection Acts that apply. Licence requirements relating to ground disturbance,
rehabilitation and waste disposal exist for all tenements held.
The directors are not aware of any significant breaches during the period covered by this report.
Proceedings on Behalf of Company
No person has applied for leave of Court, pursuant to section 237 of the Corporations Act 2001,
to bring proceedings on behalf of the Company or 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
any part of those proceedings.
The Company was not a party to any such proceedings during the year.
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 or consolidated
entity are important.
During the year HLB Mann Judd, has performed certain other services in addition to their
statutory audit duties, details of all amounts paid or payable to the auditor are set out in Note 14.
- 27 -
ANNUAL REPORT 2006
GME RESOURCES LTD
The board has considered the non-audit services provided during the year by the auditor and is
satisfied that the provision of those non-audit services during the year by the auditor is
compatible with and did not compromise, the auditor independence requirements of the
Corporations Act 2001.
Auditors’ independence declaration
A copy of the auditors’ independence declaration as required under section 307C of the
Corporations Act 2001 is set out on the following page.
This report is signed in accordance with a Resolution of Directors.
James N Sullivan
Managing Director
Perth, Western Australia
27 September 2006
- 28 -
ANNUAL REPORT 2006
Auditors’ Independence Declaration
As lead auditor for the audit of the financial report of GME Resources Ltd for the
year ended 30 June 2006, I declare that to the best of my knowledge and belief, there
have been:
a)
b)
no contraventions of the auditor
Corporations Act 2001 in relation to the audit; and
independence requirements of the
no contraventions of any applicable code of professional conduct in relation
to the audit.
This declaration is in respect of GME Resources Ltd.
Perth, Western Australia
27 September 2006
N G NEILL
Partner, HLB Mann Judd
HLB Mann Judd (WA Partnership)
15 Rheola Street West Perth 6005. PO Box 263 West Perth 6872 Western Australia. DX 238 (Perth) Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Partners: Ian H Barsden, Terry M Blenkinsop, Litsa Christodulou, Wayne M Clark, Lucio Di Giallonardo, Colin D Emmott, Trevor G Hoddy, Norman G Neill, Peter J Speechley
HLB Mann Judd (WA Partnership) is a member of
International and the HLB Mann Judd National Association of independent accounting firms
GME RESOURCES LTD
CONSOLIDATED INCOME STATMENT
FOR THE YEAR ENDED 30 JUNE 2006
Note
Consolidated
Parent Entity
2006
$
2005
$
2006
$
2005
$
Revenue
2
154,402
379,512
54,402
179,512
Interest expense
Depreciation expense
Write down in value of carried forward
exploration expenditure
Write down in value of investments
-
19,104
-
19,104
8,112
2,109
8,112
2,109
65,335
-
-
750
64,987
-
-
750
Management and consulting fees
249,841
223,000
249,841
223,000
Administration expenses
210,467
165,087
210,467
165,067
Loss before income tax expense
379,353
30,538
479,005
230,518
Income tax expense
3
-
-
-
-
Loss from ordinary activities after
related income tax
Net loss attributable to members of the
parent entity
379,353
30,538
479,005
230,518
379,353
30,538
479,005
230,518
Earnings Per Share
Basic earnings per share
(cents per share)
Diluted earnings per share
(cents per share)
16
16
(0.19)
(0.02)
(0.19)
(0.02)
The accompanying notes form part of these financial statements.
- 30 -
ANNUAL REPORT 2006
GME RESOURCES LTD
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2006
Note
Consolidated
Parent Entity
2006
$
2005
$
2006
$
2005
$
CURRENT ASSETS
Cash and cash equivalents
Receivables
Other financial assets
13(b)
4
5
365,547
95,035
8,250
351,709
166,289
9,375
365,547
41,448
8,250
351,709
43,282
9,375
TOTAL CURRENT ASSETS
468,832
527,373
415,245
404,366
NON CURRENT ASSETS
Receivables
Other financial assets
Plant and equipment
Exploration costs carried forward
6
7
8
9
-
-
24,377
9,097,138
-
-
32,489
7,663,965
5,391,513
2,615,950
24,377
1,037,228
3,916,610
2,615,950
32,489
1,080,246
TOTAL NON CURRENT ASSETS
9,121,515
7,696,454
9,069,068
7,645,295
TOTAL ASSETS
9,590,347
8,223,827
9,484,313
8,049,661
CURRENT LIABILITIES
Payables
10
241,361
166,267
1,421,652
1,178,774
TOTAL CURRENT LIABILITIES
241,361
166,267
1,421,652
1,178,774
TOTAL LIABILITIES
241,361
166,267
1,421,652
1,178,774
NET ASSETS
EQUITY
9,348,986
8,057,560
8,062,661
6,870,887
Issued Capital
Financial Assets Reserve
Accumulated losses
11
11
23,221,622
(1,125)
(13,871,511)
21,549,718
-
(13,492,158)
23,221,622
(1,125)
(15,157,836)
21,549,718
-
(14,678,831)
TOTAL EQUITY
9,348,986
8,057,560
8,062,661
6,870,887
The accompanying notes form part of these financial statements.
- 31 -
ANNUAL REPORT 2006
GME RESOURCES LTD
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2006
CONSOLIDATED
Note
ORDINARY
SHARES
FINANCIAL
ASSETS
RESERVE
ACCUMULATED
LOSSES
TOTAL
Balance at 1 July 2004
20,630,217
Loss attributable to members of the
parent entity in 2005
-
Shares issued
11
919,501
Balance at 30 June 2005
21,549,718
-
-
-
-
(13,461,620)
7,168,597
(30,538)
(30,538)
-
919,501
(13,492,158)
8,057,560
Revaluation of financial assets
Loss attributable to members of the
parent entity in 2006
-
-
Shares issued (net of costs)
11
1,671,904
(1,125)
-
(1,125)
-
-
(379,353)
(379,353)
-
1,671,904
Balance at 30 June 2006
23,221,622
(1,125)
(13,871,511)
9,348,986
PARENT
Balance at 1 July 2004
Loss attributable to members of the
parent entity in 2005
20,630,217
-
Shares issued
11
919,501
Balance at 30 June 2005
21,549,718
Loss attributable to members of the
parent entity in 2006
Revaluation of financial assets
-
-
-
-
-
-
-
(1,125)
Shares issued (net of costs)
11
1,671,904
-
(14,448,313)
6,181,904
(230,518)
(230,518)
-
919,501
(14,678,831)
6,870,887
(479,005)
(479,005)
-
-
(1,125)
1,671,904
Balance at 30 June 2006
23,221,622
(1,125)
(15,157,836)
8,062,661
The accompanying notes form part of these financial statements.
- 32 -
ANNUAL REPORT 2006
GME RESOURCES LTD
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2006
Cash Flows From Operating Activities
Note
Consolidated
Parent Entity
2006
$
2005
$
2006
$
2005
$
Cash receipts from customers
Cash paid to suppliers and employees
Interest received
Interest paid
Net cash from operating activities
13(a)
220,000
(1,932,387)
54,321
-
(1,658,066)
110,000
(2,019,918)
57,971
(5,264)
(1,857,211)
-
(487,318)
54,321
-
(432,997)
-
(631,273)
57,971
(5,264)
(578,566)
Cash Flows From Investing Activities
Acquisition of Plant and equipment
Proceeds from sale of prospects
Amounts paid on behalf of controlled
entities
Net cash from investing activities
Cash Flows From Financing
Activities
Proceeds from issue of shares
Payment of costs associated with issue
of shares
-
-
-
-
(33,999)
132,000
-
-
(33,999)
132,000
-
98,001
(1,225,069)
(1,225,069)
(1,263,541)
(1,165,540)
1,696,174
287,500
1,696,174
287,500
(24,270)
-
(24,270)
-
Net cash from Financing activities
1,671,904
287,500
1,671,904
287,500
Net Increase/(Decrease) in Cash and
cash equivalents
13,838
(1,471,710)
13,838
(1,456,606)
Cash and cash equivalents at 1 July
351,709
1,823,419
351,709
1,808,315
Cash and cash equivalents at 30
June
13(b)
365,547
351,709
365,547
351,709
The accompanying notes form part of these financial statements.
- 33 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
1. STATEMENT OF ACCOUNTING POLICIES
GME Resources Limited (‘the Company’) is a company domiciled in Australia. The consolidated
financial report of the Company for the financial year ended 30 June 2006 comprise the Company
and its subsidiaries (together referred to as ‘the Group’).
(a) Basis of Preparation
The financial report is a general-purpose financial report, which has been prepared in
accordance with the requirements of the Corporations Act 2001 and Australian Accounting
Standards. The financial report has also been prepared on a historical cost basis, unless
otherwise stated, except for available for sale investments which have been measured at fair
value.
The financial report is presented in Australian dollars.
(b) Statement of compliance
The financial report was authorised for issue on 26th September 2006..
The financial report complies with Australian Accounting Standards, which include Australian
equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS
ensures that the financial report, comprising the financial statements and notes thereto,
complies with International Financial Reporting Standards (IFRS).
This is the first financial report prepared based on AIFRS and comparatives for the year ended
30 June 2005 have been restated accordingly except for the adoption of AASB 132 Financial
Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition
and Measurement. The Company has adopted the exemption under AASB 1 First-time
Adoption of Australian Equivalents to International Financial Reporting Standards from having
to apply AASB 132 and AASB 139 to the comparative period. Reconciliations of AIFRS equity
and profit for 30 June 2005 to the balances reported in the 30 June 2005 financial report and
at transition to AIFRS are detailed in Note 22.
The following amendments to Australian Accounting Standards that have recently been issued
or amended are not applicable to the Company and therefore have no impact.
Amendment/New
Standard
2005-2
2005-4
2005-9
2005-12
UIG 6
UIG 7
Affected Standards
139:
Instruments: Recognition
AASB 1023: General Insurance Contracts
and
Financial
AASB
Measurement, AASB 132: Financial Instruments: Disclosure and
Presentation, AASB 1: First-time adoption of AIFRS, AASB
1023: General Insurance Contracts and AASB 1028: Life
Insurance Contracts
AASB 4: Insurance Contracts, AASB 1023: General Insurance
Contracts, AASB 139: Financial Instruments: Recognition and
Measurement and AASB 132: Financial Instruments: Disclosure
and Presentation
AASB 1038: Life Insurance Contracts and AASB 1023: General
Insurance Contracts
UIG 6 Liabilities Arising from Participating in a Specific Market –
Waste Electrical and Electronic Equipment
UIG 7 Applying the Restatement Approach under AASB 129
Financial Reporting in Hyperinflationary Economies
- 34 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
1. STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
Australian Accounting Standards and Urgent Issues Group Interpretations that have recently
been issued or amended but are not yet effective have not been adopted for the annual
reporting period ending 30 June 2006:
AASB 1: First time adoption of
AIFRS, AASB 139: Financial
Instruments: Recognition and
Measurement
AASB 3: Business Combinations No change
Amendment /
New
Standard
2004-3
Affected Standards
AASB 1 First time adoption of
AIFRS AASB 101 Presentation of
Financial Statements AASB 124
Related Party Disclosures
2005-1
AASB 139: Financial Instruments:
Recognition and Measurement
2005-5
2005-6
2005-10
2006-1
AASB 132: Financial Instruments:
Disclosure
and Presentation,
AASB 101: Presentation of
Financial Statements, AASB 114:
Segment Reporting, AASB 117:
Leases, AASB 133: Earnings per
Share, AASB 139: Financial
Instruments: Recognition and
Measurement, AASB 1: First time
adoption AIFRS, AASB
4:
Insurance Contracts, AASB 1023:
General Insurance Contracts and
AASB 1038: Life
Insurance
Contracts
AASB 121 The Effects of Change
in Foreign Currency Rates
AASB 7
AASB 7 Financial Instruments:
Disclosures
Application
Date
Standard*
1 January 06
of
Application
Date
for
Company
1 July 06
1 January 06
1 July 06
1 January 06
1 July 06
1 January 06
1 July 06
1 January 07
1 July 07
1 January 06
1 July 06
1 January 07
1 July 07
no
Nature of Change
to
Accounting
Policy
to
No change
accounting policy
required.
Therefore
impact
to
No change
accounting policy
required.
Therefore
impact
No change
to
accounting policy
required.
Therefore
impact
no
no
no
to
accounting policy
required.
Therefore
impact
No change
to
accounting policy
required.
Therefore
impact
no
no
No change
to
accounting policy
required.
Therefore
impact
No change
to
accounting policy
required.
Therefore
impact
no
- 35 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
1. STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
AASB 119
AASB 119 Employee Benefits
UIG 4
UIG 4 Determining whether an
Arrangement contains a Lease
UIG 5
to
Interests
in
UIG 5 Rights
Decommissioning,
Restoration
and Environmental Rehabilitation
Funds
UIG 8
UIG 8 Scope of AASB 2
UIG 9
UIG
Embedded Derivatives
Reassessment
9
of
1 January 06
1 July 06
1 January 06
1 July 06
January
1 July 2006
1
2006
1 May 2006
1 July 2006
1 June 2006
1 July 2006
no
no
No change
to
accounting policy
required.
Therefore
impact
No change
to
accounting policy
required.
Therefore
impact
No change
to
accounting policy
required.
Therefore
impact
No change
to
accounting policy
required.
Therefore
impact
to
No change
accounting policy
required.
Therefore
impact
no
no
no
*Application date is for the annual reporting periods beginning on or after the date shown in
the above table.
(c) Principles of Consolidation
The consolidated financial statements comprise the financial statements of GME Resources
Limited and its subsidiaries as at 30 June each year (the Group).
The financial statements of the subsidiaries are prepared for the same reporting period as the
parent company, using consistent accounting policies
the consolidated
In preparing
intercompany balances and
transactions, income and expenses and profit and losses resulting from intra-group
transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group and cease to be consolidated from the date on which
control is transferred out of the Group.
financial statements, all
The acquisition of subsidiaries has been accounted for using the purchase method of
accounting. The purchase method of accounting involves allocating the cost of the business
combination to the fair value of the assets acquired and the liabilities and contingent liabilities
assumed at the date of acquisition. Accordingly, the consolidated financial statements include
the results of subsidiaries for the period from their acquisition.
Minority interests represent the portion of profit or loss and net assets in subsidiaries not held
by the Group and are presented separately in the income statement and within equity in the
consolidated balance sheet
- 36 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
1. STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
(d) Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to
the Group and the revenue can be reliably measured. The following specific recognition
criteria must also be met before revenue is recognised:
Interest income
Interest revenue is recognised on a time proportionate basis that takes into account the
effective yield on the financial asset
(e) Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and
short term deposits with an original maturity of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and
cash equivalents as defined above, net of outstanding bank overdrafts.
(f) Receivables
Outlined below are the relevant accounting policies for trade and other receivables applicable
for the years ending 30 June 2006 and 30 June 2005.
Accounting policies applicable for the year ending 30 June 2006
Trade receivables, which generally have 30-90 day terms, are recognised and carried at
original invoice amount less an allowance for any uncollectible amounts. An allowance for
doubtful debts is made when there is objective evidence that the Group will not be able to
collect the debts. Bad debts are written off when identified.
Accounting policies applicable for the year ending 30 June 2005
Trade receivables were recognised and carried at original invoice amount less a provision for
any uncollectible debts. An estimate for doubtful debts was made when collection of the full
amount was no longer probable. Bad debts were written off as incurred.
(h)
Income Tax
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 sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet 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.
- 37 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
1. STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
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 sheet 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 sheet 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 sheet 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.
(i) Other taxes
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 balance sheet are shown
inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as
part of receivables or payables in the balance sheet.
(j)
Plant and Equipment
Plant and equipment is stated at cost less accumulated depreciation and any accumulated
impairment losses. Such cost includes the cost of replacing parts that are eligible for
capitalisation when the cost of replacing the parts is incurred. Similarly, when each major
inspection is performed, its cost is recognised in the carrying amount of the plant and
equipment as a replacement only if it is eligible for capitalisation.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets
as follows:
Plant and equipment – over 4 to 5 years.
- 38 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
1. STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted
if appropriate, at each financial year end.
(i) Impairment
The carrying values of plant and equipment are reviewed for impairment at each
reporting date, with recoverable amount being estimated when events or changes in
circumstances indicate that the carrying value may be impaired.
The recoverable amount of plant and equipment is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset
For an asset that does not generate largely independent cash inflows, recoverable
amount is determined for the cash-generating unit to which the asset belongs, unless the
asset's value in use can be estimated to be close to its fair value.
An impairment exists when the carrying value of an asset or cash-generating units
exceeds its estimated recoverable amount. The asset or cash-generating unit is then
written down to its recoverable amount
For plant and equipment, impairment losses are recognised in the income statement in
the cost of sales line item.
(ii) Derecognition and disposal
An item of property, plant and equipment is derecognised upon disposal or when no
further future economic benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is included in
profit or loss in the year the asset is derecognised.
(k)
Investments and other financial assets
receivables, held-to-maturity
The Group has elected to apply the option available under AASB 1 of adopting AASB 132 and
AASB 139 from 1 July 2005. Outlined below are the relevant accounting policies for
investments and other financial assets applicable for the years ending 30 June 2006 and 30
June 2005.
Accounting policies applicable for the year ending 30 June 2006
Financial assets in the scope of AASB 139 Financial Instruments: Recognition and
Measurement are classified as either financial assets at fair value through profit or loss, loans
investments, as
and
appropriate. When financial assets are recognised initially, they are measured at fair value,
plus, in the case of investments not at fair value through profit or loss, directly attributable
transactions costs. The Group determines the classification of its financial assets after initial
recognition and, when allowed and appropriate, re-evaluates this designation at each financial
year-end.
All regular way purchases and sales of financial assets are recognised on the trade date i.e.
the date that the Group commits to purchase the asset. Regular way purchases or sales are
purchases or sales of financial assets under contracts that require delivery of the assets within
the period established generally by regulation or convention in the marketplace.
investments, or available-for-sale
(i) Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in the category ‘financial
assets at fair value through profit or loss’. Financial assets are classified as held for
trading if they are acquired for the purpose of selling in the near term. Derivatives are
also classified as held for trading unless they are designated as effective hedging
instruments. Gains or losses on investments held for trading are recognised in profit or
loss.
- 39 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
1. STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
(ii) Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity
are classified as held-to-maturity when the Group has the positive intention and ability to
hold to maturity. Investments intended to be held for an undefined period are not included
in this classification. Investments that are intended to be held-to-maturity, such as bonds,
are subsequently measured at amortised cost. This cost is computed as the amount
initially recognised minus principal repayments, plus or minus the cumulative amortisation
using the effective interest method of any difference between the initially recognised
amount and the maturity amount. This calculation includes all fees and points paid or
received between parties to the contract that are an integral part of the effective interest
rate, transaction costs and all other premiums and discounts. For investments carried at
amortised cost, gains and losses are recognised in profit or loss when the investments
are derecognised or impaired, as well as through the amortisation process.
(iii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. Such assets are carried at amortised
cost using the effective interest method. Gains and losses are recognised in profit or loss
when the loans and receivables are derecognised or impaired, as well as through the
amortisation process.
(iv) Available-for-sale investments
Available-for-sale investments are those non-derivative financial assets that are
designated as available-for-sale or are not classified as any of the three preceding
categories. After initial recognition available-for sale investments are measured at fair
value with gains or losses being recognised as a separate component of equity until the
investment is derecognised or until the investment is determined to be impaired, at which
time the cumulative gain or loss previously reported in equity is recognised in profit or
loss.
The fair value of investments that are actively traded in organised financial markets is
determined by reference to quoted market bid prices at the close of business on the
balance sheet date. For investments with no active market, fair value is determined using
valuation techniques. Such techniques include using recent arm’s length market
transactions; reference to the current market value of another instrument that is
substantially the same; discounted cash flow analysis and option pricing models.
Accounting policies applicable for the year ending 30 June 2005
Listed shares were carried at net market value. Changes in net market value were recognised
as a revenue or expense in determining the net profit for the period.
All other non-current investments were carried at the lower of cost and recoverable amount.
(l)
Exploration and Evaluation Expenditure
Exploration and evaluation costs, including the costs of acquiring licences, are capitalised as
exploration and evaluation assets on an area of interest basis. Costs incurred before the
Group has obtained the legal rights to explore an area are recognised in the income statement
Exploration and evaluation assets are only recognised if the rights of the area of interest are
current and either:
(i)
the expenditures are expected to be recouped through successful development
and exploitation of the area of interest; or
- 40 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
1. STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
(ii)
activities in the area of interest have not at the reporting date, reached a stage
which permits a reasonable assessment of the existence or other wise of
economically recoverable reserves and active and significant operations in, or in
relation to, the area of interest are continuing
Exploration and evaluation assets are assessed for impairment if
•
•
sufficient data exists to determine technical feasibility and commercial viability,
and
facts and circumstances suggest that the carrying amount exceeds the
recoverable amount (see impairment accounting policy 1(m)).
For the purposes of impairment testing, exploration and evaluation assets are allocated to
cash-generating units to which the exploration activity relates. The cash generating unit shall
not be larger than the area of interest.
Once the technical feasibility and commercial viability of the extraction of mineral resources in
an area of interest are demonstrable, exploration and evaluation assets attributable to that
area of interest are first tested for impairment and then reclassified from intangible assets to
mining property and development assets within property, plant and equipment.
(m)
Impairment of assets
The Group assesses at each reporting date whether there is an indication that an asset may
impaired. If any such indication exists, or when annual impairment testing for an asset
be
is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s
recoverable amount is the higher of its fair value less costs to sell and its value in use and is
determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets and the asset's value in
use cannot be estimated to be close to its fair value. In such cases the asset is tested for
impairment as part of the cash-generating unit to which it belongs. When the carrying
amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or
cash-generating unit is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. Impairment losses relating to continuing
operations are recognised in those expense categories consistent with the function of the
impaired asset unless the asset is carried at revalued amount (in which case the impairment
loss is treated as a revaluation decrease).
An assessment is also made at each reporting date as to whether there is any indication that
previously recognised impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously recognised impairment
loss is reversed only if there has been a change in the estimates used to determine the
asset’s recoverable amount since the last impairment loss was recognised. If that is the case
the carrying amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior years. Such
reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which
case the reversal is treated as a revaluation increase. After such a reversal the depreciation
charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any
residual value, on a systematic basis over its remaining useful life.
- 41 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
1. STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
(n) Trade and other payables
The Group has elected to apply the option available under AASB 1 of adopting AASB 132 and
AASB 139 from 1 July 2005. Outlined below are the relevant accounting policies for trade and
other payables applicable for the years ending 30 June 2006 and 30 June 2005.
Accounting policies applicable for the year ending 30 June 2006
Trade payables and other payables are carried at amortised costs and represent liabilities for
goods and services provided to the Group prior to the end of the financial year that are unpaid
and arise when the Group becomes obliged to make future payments in respect of the
purchase of these goods and services.
Accounting policies applicable for the year ending 30 June 2005
Trade payables and other payables are carried at costs which is the fair value of the
consideration to be paid in the future for goods and services received, whether or not billed to
the consolidated entity.
(o)
Issued capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of
new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
(p) Earnings per share
Basic EPS is calculated as net profit attributable to members, adjusted to exclude 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 EPS is calculated as net profit attributable to members, adjusted for:
•
•
•
costs of servicing equity (other than dividends) and preference share dividends;
the after tax effect of dividends and interest associated with potential dilutive
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 potential dilutive ordinary
shares, adjusted for any bonus element.
- 42 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
Consolidated
Parent Entity
2006
$
2005
$
2006
$
2005
$
2. REVENUE AND EXPENSES
(a) Revenue
Operating Activities
Interest received
54,321
57,971
54,321
57,971
Proceeds from:
Facilitation fee for prospecting
rights
Royalty fees
100,000
-
100,000
100,000
Other revenue
81
1,541
-
-
81
-
-
1,541
154,402
259,512
54,402
59,512
Non Operating Activities
Proceeds from disposal of
tenements
-
120,000
-
120,000
Total revenue
154,402
379,512
54,402
179,512
(b) Expenses:
Depreciation – plant and
equipment
Interest – other persons
Write down in value of
carried forward exploration
expenditure
Write down in value of
investments
8,112
-
2,109
19,104
8,112
-
2,109
19,104
65,335
-
64,987
-
750
-
-
750
- 43 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
Consolidated
Parent Entity
2006
$
2005
$
2006
$
2005
$
3.
INCOME TAX
(a)
Income tax recognised in profit
and loss
The prima facie tax benefit on operating
result is reconciled to the income tax
provided in the financial statements as
follows:
Accounting
continuing operations
loss before
from
tax
Income tax (expense) benefit calculated
at 30%
Non-deductible expenses
Adjustments to head entity in respect of
tax consolidation
Other
Adjustments in respect of deferred
income tax of previous years
Unrecognised deferred tax assets /
(liabilities)
Income Tax expense/(benefit) reported
in the income statement
(b) Unrecognised deferred tax
balances
Unrecognised deferred tax assets
comprise:
Losses available for offset against future
taxable income
Prepayments
Capital raising costs
Accrued expenses and liabilities
Unrecognised deferred tax liabilities
comprise:
Exploration expenditure
Depreciation for tax purposes
Income tax expense not recognised
directly in equity:
Capital raising costs
379,353
30,537
479,005
230,518
113,806
9,161
143,702
-
-
(1,837)
-
7,281
(1,637)
-
412,962
7,281
69,156
(1,837)
413,267
(1,637)
(15,289)
(20,976)
1,959,227
1,480,278
(105,798)
15,289
(2,523,172)
(1,959,227)
-
-
-
-
2,797,214
2,233,427
2,797,214
2,233,427
-
35,137
3,000
2,835,351
3,969
43,771
3,000
2,284,167
-
35,137
2,400
2,834,751
3,969
43,771
2,400
2,283,567
2,729,141
412
2,729,553
2,299,190
266
2,299,456
311,168
412
311,580
324,074
266
324,340
33,953
42,193
33,953
42,193
Potential deferred tax assets attributable to tax losses and capital losses carried forward have not been
brought to account because directors do not believe it is appropriate to regard realisation of the future tax
benefit as probable.
Tax Consolidation
Effective 1 July 2003, for the purposes of income taxation, the Company and its 100% wholly-owned
subsidiaries formed a tax consolidated group, the head entity of the tax consolidated group is GME
Resources Limited.
- 44 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
Consolidated
Parent Entity
2006
$
2005
$
2006
$
2005
$
4. RECEIVABLES (CURRENT)
Sundry debtors
95,035
166,289
41,448
43,282
5. OTHER FINANCIAL ASSETS (CURRENT)
Available-for-sale
Listed investments
8,250
9,375
8,250
9,375
Listed shares are carried at current market value. A reduction in market value amounting to $1,125 has
been recognised for this financial year directly in equity. In the prior years reductions were recognised in
the income statement.
6. RECEIVABLES (NON CURRENT)
Loans to controlled entities (wholly
owned)
Provision for impairment loss
-
-
-
-
-
-
6,714,208
(1,322,695)
5,391,513
5,239,305
(1,322,695)
3,916,610
An existing provision for non recoverability has been reclassified as an impairment loss recognised against
loans to controlled entities. The provision is considered prudent as these entities have continued to incur
losses during the year. The provision allows for the possibility of these loans not being recoverable.
7. OTHER FINANCIAL ASSETS (NON CURRENT)
Unlisted Investments:
Controlled entities (refer note 12)
Provision for impairment loss
-
-
-
-
-
-
5,178,206
(2,562,256)
2,615,950
5,178,206
(2,562,256)
2,615,950
All investments comprise ordinary shares and no shares held in related corporations are listed on a
prescribed stock exchange.
The recoverability of the carrying value of shares in controlled and associated entities is dependent on the
successful development and commercial exploration or, alternatively, sale of the respective areas in which
those controlled entities have an interest.
- 45 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
Consolidated
Parent Entity
2006
$
2005
$
2006
$
2005
$
8. PLANT AND EQUIPMENT (NON CURRENT)
Plant and equipment - at cost
Less provision for depreciation
Total Plant and Equipment
34,641
(10,264)
24,377
34,641
(2,152)
32,489
34,641
(10,264)
24,377
34,641
(2,152)
32,489
Reconciliation of the carrying amount
of plant and equipment:
Carrying amount at the beginning of
the year
Additions
Disposals
Depreciation
Carrying amount at the end of the
year
32,489
-
-
(8,112)
599
33,999
-
(2,109)
32,489
-
-
(8,112)
599
33,999
-
(2,109)
24,377
32,489
24,377
32,489
9. EXPLORATION EXPENDITURE CARRIED FORWARD (NON CURRENT)
Deferred exploration expenditure
- at cost
Movements:
Balance at beginning of the year
Direct expenditure
Less exploration expenditure written
off
7,663,965
1,498,508
6,028,300
1,635,665
1,080,246
21,969
1,022,118
58,128
9,162,473
7,663,965
1,102,215
1,080,246
(65,335)
9,097,138
-
7,663,965
(64,987)
1,037,228
-
1,080,246
The ultimate recoupment of the above deferred exploration expenditure is dependent on the successful
development and commercial exploitation or, alternatively, sale of the respective areas.
10. PAYABLES (CURRENT)
Trade payables and accruals
Unearned income
Amount payable to wholly owned entity
181,361
60,000
-
241,361
106,267
60,000
-
179,361
-
1,242,291
104,267
-
1,074,507
166,267
1,421,652
1,178,774
Trade payables and accruals are non interest bearing and normally settled on 30 day terms.
Details of exposure to Interest rate risk and fair value in respect of liabilities are set out in note 18. There
are no secured liabilities as at 30 June 2006.
- 46 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
Consolidated
Parent Entity
Note
2006
$
2005
$
2006
$
2005
$
11. CONTRIBUTED EQUITY AND
RESERVES
Issued and paid up capital
202,807,215 (2005: 191,499,384)
ordinary shares, fully paid
Ordinary shares
23,221,622
21,549,718
23,221,622
21,549,718
Balance at the beginning of the year
21,549,718
20,630,217
21,549,718
20,630,217
Entitlement issue (a)
Costs associated with entitlement
issue
Issue of shares pursuant to a Native
Title Agreement
Conversion of convertible note and
take up of 1998 and 2004
entitlements
Conversion of convertible note and
take up of 1998 and 2004
entitlements
1,696,174
(24,270)
-
-
1,696,174
(24,270)
-
-
-
332,000
293,750
293,751
-
-
-
-
-
332,000
293,750
293,751
Balance at the end of the year
23,221,622
21,549,718
23,221,622
21,549,718
No of
Shares
No of
Shares
No of
Shares
No of
Shares
Balance at the beginning of the year
191,499,384
180,555,834
191,499,384
180,555,834
(a)
Entitlement issue
Issue of shares pursuant to a Native
Title Agreement
Conversion of convertible note and
take up of 1998 and 2004
entitlements
Conversion of convertible note and
take up of 1998 and 2004
entitlements
Balance at the end of the year
11,307,831
-
11,307,831
-
-
-
2,193,548
4,375,001
-
-
2,193,548
4,375,001
-
202,807,215
4,375,001
191,499,384
-
202,807,215
4,375,001
191,499,384
(a) On 12 August 2005 the Company received acceptances for 11,307,831 ordinary shares at an issue price
of 15 cents per share pursuant to a renounceable entitlement issue of 1:15 shares.
Options over Unissued Capital
At 30 June 2006, 5,000,000 unlisted options were on issue.
2,000,000 Options exercisable at $0.20 each;
2,000,000 Options exercisable at $0.30 each; and
1,000,000 Options exercisable at $0.40 each.
All of the above Options will expire on 30 June 2007.
Reserves
Nature and purpose
The Financial Assets reserve is used to record movements in the fair value of available for sale assets.
- 47 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
12. CONTROLLED ENTITIES
Name of Controlled Entity/
(Country Of Incorporation)
Percentage
Owned
GME Sulphur Inc (USA)
GME Investments Pty Ltd (Australia)
Golden Cliffs NL (Australia)
NiWest Limited (Australia)
2006
%
100
100
100
100
2005
%
100
100
100
100
Company’s
Cost of
Investment
2006
$
2005
$
-
-
616,893
4,561,313
5,178,206
-
-
616,893
4,561,313
5,178,206
Consolidated
Parent Entity
2006
$
2005
$
2006
$
2005
$
13. STATEMENT OF CASH FLOWS
(a) Reconciliation of cash flows
from operating activities
Loss from ordinary activities after tax
(379,353)
Depreciation / amortisation
Write off of exploration expenditure
8,112
65,335
(30,538)
2,109
-
(479,005)
(230,518)
8,112
64,987
2,109
-
Decrease/(Increase) in receivables
100,000
Exploration costs capitalised (excluding
creditors)
Write down in value of investments
Non cash interest paid
Net gain from sale of non current assets
(excluding creditors and debtors)
Decrease/(Increase) in other current
assets
Increase/(Decrease) in sundry creditors
Other non cash transactions
Net Cash Flows from Operating
Activities
(1,445,433)
(1,613,948)
(20,364)
(224,661)
-
-
-
(27,540)
20,813
-
750
13,839
(132,000)
(100,000)
(677)
20,492
(17,238)
-
-
-
-
(27,540)
20,813
750
13,839
(132,000)
-
(677)
20,492
-
(27,900)
(1,658,066)
(1,857,211)
(432,997)
(578,566)
- 48 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
13.
STATEMENT OF CASH FLOWS (CONTINUED)
(b) Reconciliation of Cash and cash
equivalents
Cash balance comprises:
Cash at bank
Deposits at call
(c) Non Cash Financing and
Investing Activities
(i) Conversion of convertible note debt
to equity
(ii) Issue of shares to native title
claimants
14. AUDITORS’ REMUNERATION
Amounts received or due and receivable
by the auditors of GME Resources Ltd
for:
- an audit or review of the financial
statements of the company and any
other entity in the consolidated entity
- other services in relation to the
company and any other entity in the
consolidated entity
15. SEGMENT REPORTING
Consolidated
Parent Entity
2006
$
2005
$
2006
$
2005
$
354,547
11,000
365,547
340,709
11,000
351,709
354,547
11,000
365,547
340,709
11,000
351,709
-
-
300,000
332,000
-
-
300,000
332,000
12,500
11,800
12,500
11,800
17,730
30,230
-
11,800
17,730
30,230
-
11,800
There are no individual segments to be reported as the Company’s operations are predominantly in the
mining industry in Australia.
Consolidated
2006
$
2005
$
16. EARNINGS PER SHARE
Basic and diluted loss per share (cents)
(0.19)
(0.02)
Loss used in calculation of basic and diluted earnings
per share
Weighted average number of ordinary shares
outstanding during the year used in calculation of basic
and diluted earnings per share
379,353
30,538
201,475,060
183,505,479
No adjustment was made for the 5,000,000 options on issue at 30 June 2006 (2005 5,000,000) as they are
not considered to be dilutive.
- 49 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
17. DIRECTORS’ AND EXECUTIVES DISCLOSURES
a) Details of Key Management Personnel
(i) Directors
Michael Delaney Perrott
James Noel Sullivan
Peter Ross Sullivan
Geoffrey Mayfield Motteram
– Non executive Chairman
– Managing Director
– Non executive Director
– Non executive Director
(b) Compensation of Key Management Personnel
(i) Compensation Policy
The Board of Directors is responsible for remuneration policies and the packages applicable to the Directors
of the Company. The board remuneration policy is to ensure that packages offered properly reflect a
person’s duties and responsibilities and that remuneration is competitive and attracts, retains, and motivates
people of the highest quality
The Managing Director and Non-executive Directors are remunerated for the services they render to the
Company and such services are carried out under normal commercial terms and conditions. Engagement
and payment for such services are approved by the other directors who have no interest in the engagement
of services.
There are no retirement or termination benefits payable to the Board or senior executives.
At the date of this report the Company had not entered into any packages with Directors or senior executives
which include performance based components, the Company does not operate an employee share option
plan and there are no options outstanding issued to directors, employees or former employees.
(ii) Compensation of Key Management Personnel for the year-ended 30 June 2006
Michael Delaney Perrott
James Noel Sullivan
Peter Ross Sullivan
Geoffrey Mayfield Motteram
Fees
30,000
123,341
24,000
24,000
(iii) Compensation of Key Management Personnel for the year-ended 30 June 2005
Michael Delaney Perrott
James Noel Sullivan
Peter Ross Sullivan
Geoffrey Mayfield Motteram
Fees
30,000
92,999
24,000
18,000
Total
30,000
123,341
24,000
24,000
Total
30,000
92,999
24,000
18,000
(c) Shareholdings of Key Management Personnel (Consolidated)
Michael Delaney Perrott
James Noel Sullivan
Peter Ross Sullivan
Geoffrey Mayfield Motteram
Ordinary
Shares
1/7/2005
9,196,967
9,356,132
11,540,147
3,885,050
Net Change
613,132
837,877
769,345
259,004
Ordinary Shares
30/6/06
9,810,099
10,194,009
12,309,492
4,144,054
(d) Other transactions and balances with Key
Management Personnel
There were no other transactions with key management personnel during this financial year.
Up until June 2005, the Company received management services including, administrative support services,
office facilities, accounting and company secretarial services from Troika Management Limited, Troika
Property Pty Ltd and Port Bouvard Limited entities which are associated with Mr Perrott, to the value of
$60,186. An amount outstanding to Director related entities in the prior year of $19,584 was paid during this
financial year.
- 50 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
18. FINANCIAL INSTRUMENT DISCLOSURES
(a) Interest Rate Risk
The consolidated entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate
as a result of changes in market interest rates, and the effective weighted average interest rates on those financial
assets and financial liabilities, is as follows:
2006
Weighted
Average
Effective
Interest Rate
Floating
Interest
Rate
Fixed Interest Rate
Maturing
Within 1
year
Over 1 year
Non-interest
Bearing
Total
Financial Assets
$
$
$
$
$
Cash assets
Other financial assets
Receivables
5.25%
354,547
-
-
354,547
11,000
-
-
11,000
Financial Liabilities
Payables
-
-
-
-
Fixed Interest Rate
Maturing
-
-
-
-
-
-
-
8,250
93,035
101,285
365,547
8,250
93,035
466,832
245,361
245,361
245,361
245,361
2005
Weighted
Average
Effective
Interest Rate
Floating
Interest
Rate
Within 1
year
Over 1 year
Non-interest
Bearing
Total
Financial Assets
$
$
$
$
$
Cash assets
Other financial assets
Receivables
4.79%
340,709
-
-
340,709
11,000
-
-
11,000
Financial Liabilities
Payables
(b) Credit Risk
-
-
-
-
-
-
-
-
-
-
-
9,375
166,289
175,664
351,709
9,375
166,289
527,373
166,267
166,267
166,267
166,267
The maximum exposure to credit risk, excluding the value of any collateral or other security, to recognised
financial assets is the carrying amount as disclosed in the balance sheet and notes to the financial statements.
The consolidated entity does not have any material credit risk exposure to any single debtor or group of debtors
under financial instruments entered into by the consolidated entity.
- 51 -
ANNUAL REPORT 2006
GME RESOURCES LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
18.
FINANCIAL INSTRUMENT DISCLOSURES (CONTINUED)
(c) Net Fair Values
The net fair value of the financial assets and financial liabilities approximates their carrying value. Other than
listed investments that are measured at the quoted bid price at balance date adjusted for transaction costs
expected to be incurred, no financial assets and financial liabilities are readily traded on organised markets in
standardised form.
The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in
the balance sheet and in the notes to and forming part of the financial statements.
19. COMMITMENTS AND CONTINGENT LIABILITIES
There were no capital commitments or contingent liabilities, not provided for in the financial statements of the
consolidated entity as at 30 June 2006, other than:
(a) Mineral Tenement Leases
In order to maintain current rights of tenure to mining tenements, the consolidated entity in its own right or in
conjunction with its joint venture partners may be required to outlay amounts of approximately $1,202,000 (2005:
$1,200,000) per annum on an ongoing basis in respect of tenement lease rentals and to meet the minimum
expenditure requirements of the Western Australian and Queensland Mines Department. These obligations are
expected to be fulfilled in the normal course of operations by the consolidated entity or its joint venture partners
and are subject to variations dependent on various matters, including the results of exploration on the mineral
tenements.
(b) Claims of Native Title
Legislative developments and judicial decisions (in particular the uncertainty created in the area of Aboriginal
land rights by the High Court decision in the “Mabo” case and native title legislation) may have an adverse
impact on the consolidated entity’s exploration and future production activities and its ability to fund those
activities. It is impossible at this stage to quantify the impact (if any) which these developments may have on the
consolidated entity’s operations.
Native title claims have been made over ground in which the consolidated entity currently has an interest. It is
possible that further claims could be made in the future. However, the Company has not undertaken the
considerable legal, historical, anthropological and ethnographic research which would be necessary to
determine whether any current or future claims, if made, will succeed and, if so, what the implications would be
for the consolidated entity.
(c) Non Cancellable Operating Lease
Commitments
Within one year
One year or later and no later than
five years
Consolidated
Parent Entity
2006
$
2005
$
2006
$
2005
$
27,966
26,840
27,966
26,840
20,974
48,940
46,970
73,810
20,974
48,940
46,970
73,810
20. INTERESTS IN BUSINESS UNDERTAKINGS - JOINT VENTURES
The Company has entered into a number of agreements with other companies to gain interests in project areas.
These interests will be earned by expending certain amounts of money on exploration expenditure within a specific
time. The Company can however, withdraw from these projects at any time without penalty. The amounts required to
be expended in the next year have been included in note 19 – Commitments and Contingent Liabilities.
- 52 -
ANNUAL REPORT 2006
GME RESOURCES LTD
21. RELATED PARTIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
Total amounts receivable and payable from entities in the wholly-owned group at balance date:
Non-Current Receivables
Loans net of provisions for non recovery
5,391,513
3,916,610
Current Payables
Loans
1,242,291
1,074,507
2006
$
2005
$
22. TRANSITION TO AIFRS
For all periods up to and including the year ended 30 June 2005, the Group prepared its financial statements
in accordance with Australian generally accepted accounting practice (‘AGAAP’). These financial statements
for the year ended 30 June 2006 are the first the Group is required to prepare in accordance with Australian
equivalents to International Financial Reporting Standards (‘AIFRS’).
Accordingly, the Group has prepared financial statements that comply with AIFRS applicable for periods
beginning on or after 1 January 2005 and the significant accounting policies meeting those requirements are
described in Note 1. In preparing these financial statements, the Group has started from an opening balance
sheet as at 1 July 2004, the Group’s date of transition to AIFRS, and made those changes in accounting
policies and other restatements required by AASB 1 First-time adoption of AIFRS .
This note explains the principal adjustments made by the Group in restating its AGAAP balance sheet as at 1
July 2004 and its previously published AGAAP financial statements for the year ended 30 June 2005.
Exemptions applied
AASB 1 allows first-time adopters certain exemptions from the general requirement to apply AIFRS
retrospectively. The Group has taken the following exemptions:
• Comparative information for financial instruments is prepared in accordance with AGAAP and the
company and group have adopted AASB 132: Financial Instruments: Disclosure and Presentation and
AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005.
• AASB 3 Business Combinations has not been applied to acquisitions of subsidiaries or of interests in
associates and joint ventures that occurred before 1 July 2004.
Explanation of material adjustments
There are no material differences between the income statement, the balance sheet and the cash flow
statement presented under AIFRS and the income statement, the balance sheet and the cash flow statement
presented under previous AGAAP.
23. EVENTS SUBSEQUENT TO BALANCE DATE
On 6 July 2006, Directors announced a 1 for 15 Renounceable Entitlement Issue at 15 cents. The entitlement
issue was not underwritten, and on 11 August 2006 the offer closed with almost 93% acceptances. The
Company’s share registry received acceptances for 12,558,783 ordinary shares at an issue price of 15 cents
per share raising a total of $1,883,817.
The Company elected not to place the shortfall of 961,698 shares or 7.2%.
- 53 -
ANNUAL REPORT 2006
GME RESOURCES LTD
DIRECTORS’ DECLARATION
1.
In the opinion of the directors:
a).
the financial statements and notes of the company and of the consolidated entity are in
accordance with the Corporations Act 2001 including:
i.
giving a true and fair view of the company’s and consolidated entity’s financial
position as at 30 June 2006 and of their performance for the year then ended;
and
ii.
complying with Accounting Standards and Corporations Regulations 2001;
b)
there are reasonable grounds to believe that the company will be able to pay its debts as
and when they become due and payable.
2.
This declaration has been made after receiving the declarations required to be made to the
directors by the Chief Executive Officer and the Chief Financial Officer, in accordance with
Section 295A of the Corporations Act 2001, for the financial year ended 30 June 2006.
This declaration is signed in accordance with a resolution of the Board of Directors.
James N Sullivan
Managing Director
Perth, Western Australia
27th September 2006
- 54 -
ANNUAL REPORT 2006
INDEPENDENT AUDIT REPORT
To the members of
GME RESOURCES LTD
Scope
The Financial Report and Directors’ Responsibility
The financial report comprises the balance sheet as at 30 June 2006, and the income statement,
statement of changes in equity, cash flow statement, accompanying notes to the financial
statements and the directors’ declaration for the year then ended for both GME Resources
Ltd (‘the company’) and the consolidated entity. The consolidated entity comprises both the
company and the entities it controlled during that year.
The directors of the company are responsible for the preparation and true and fair
presentation of the financial report in accordance with the Corporations Act 2001. This
includes responsibility for the maintenance of adequate accounting records and internal
controls designed to prevent and detect fraud and error, for the accounting policies and for
the accounting estimates within the financial report.
Audit Approach
We conducted an independent audit in order to express an opinion to the members of the
company. Our audit was conducted in accordance with Australian Auditing Standards, in
order to provide reasonable assurance that the financial report is free of material
misstatement. The nature of an audit is influenced by several factors including the use of
professional judgement, selective testing, the inherent limitations of internal control and the
availability of audit evidence which may be persuasive rather than conclusive. Accordingly,
an audit cannot guarantee that all material misstatements have been detected.
We performed procedures to assess whether, in all material respects, the financial report
presents fairly, in accordance with the Corporations Act 2001, including compliance with
Accounting Standards and other mandatory financial reporting requirements in Australia, a
view which is consistent with our understanding of the company’s and the consolidated
entity’s financial position, and of their performance as represented by the results of their
operations, changes in equity and cash flows.
We formed our audit opinion on the basis of these procedures, which included:
• examining, on a test basis, information to provide evidence supporting the amounts and
disclosures in the financial report, and
• assessing the appropriateness of the accounting policies and disclosures used and the
reasonableness of significant accounting estimates made by the directors.
When determining the nature and extent of our procedures we considered the effectiveness
of management’s internal controls over financial reporting. Our audit was not designed to
provide assurance in relation to internal controls.
HLB Mann Judd (WA Partnership)
15 Rheola Street West Perth 6005. PO Box 263 West Perth 6872 Western Australia. DX 238 (Perth) Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Partners: Ian H Barsden, Terry M Blenkinsop, Litsa Christodulou, Wayne M Clark, Lucio Di Giallonardo, Colin D Emmott, Peter M Forbes, Trevor G Hoddy, Norman G Neill, Peter J Speechley
HLB Mann Judd (WA Partnership) is a member of
International and the HLB Mann Judd National Association of independent accounting firms
Independent Audit Report
Independence
In conducting our audit, we followed applicable independence requirements of Australian
professional ethical pronouncements and the Corporations Act 2001.
The Directors’ Report attached to the financial statements includes a copy of the
Independence Declaration given to the Directors by the lead auditor for the audit. That
Declaration would be on the same terms if it had been given to the Directors at the time this
audit report was made.
Audit Opinion
In our opinion, the financial report of GME Resources Ltd is in accordance with:
(a)
the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the company’s and consolidated entity’s financial
position as at 30 June 2006 and of their performance for the year then ended;
and
complying with Accounting Standards in Australia and the Corporations
Regulations 2001; and
(b) other mandatory financial reporting requirements in Australia.
HLB MANN JUDD
Chartered Accountants
Perth, Western Australia
27 September 2006
N G NEILL
Partner
GME RESOURCES LTD
SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 21 September 2006.
A.
Distribution of Securities
(a) Analysis of numbers of shareholders by size and holding:
Category
(size of holding)
Ordinary
Shares
-
1
-
1,001
-
5,001
10,001
-
100,000 and over
1,000
5,000
10,000
100,000
310
186
87
348
177
1,108
(b) There were 388 holders of less than a marketable parcel of ordinary shares.
(c) The percentage of the total holding of the twenty largest shareholders is:
Ordinary Shares
66.00%
B.
Voting Rights
The voting rights attaching to each class of shares are set out below:
(a)
Ordinary Shares:
On a show of hands, every member present in person or by proxy shall have one vote and
upon a poll each share shall have one vote.
C.
Substantial Shareholders
Substantial shareholders who have notified the Company as at 21 September 2006, are:
Name
Retirewise Capital Pty Ltd and associated entities
Mandalup Investments Pty Ltd
Guiness Peat Group plc, Mid-East Minerals Limited and
Retford Resources NL
Peter Ross Sullivan
James Noel Sullivan
%
27.32
7.01
5.70
6.17
5.01
- 57 -
ANNUAL REPORT 2006
GME RESOURCES LTD
SHAREHOLDER INFORMATION
The names of the 20 largest security holders of each class of equity security as at 21 September 2006
are listed below:
ORDINARY SHARES
Name
Number
Issued Shares Held
%
Retirewise Capital Pty Ltd
ANZ Nominees Limited
Mandalup Investments Pty Ltd
Retford Resources NL
Duncraig Investment Services Pty Ltd
Hardrock Capital Pty Ltd
UBS Nominees Pty Ltd
Peter Ross Sullivan
Geomett Pty Ltd
James Noel Sullivan
Gravelstone Pty Ltd (Malavoca Super Fund)
Donald Anthony Sullivan
Tunza Holdings Pty Ltd
Mervyn Ross and Mary Sullivan
Sullivans Garage Pty Ltd
Ingot Capital Management Pty Ltd
The Old Brewery Company Pty Ltd
Topsfield Pty Ltd
Douglas Stuart Butcher
38,715,566
17,793,858
15,082,771
12,272,073
10,464,105
7,146,223
5,900,000
5,114,667
4,420,324
4,265,125
3,081,066
3,032,833
2,503,200
2,430,792
2,330,000
2,218,666
2,064,512
1,706,666
1,600,000
17.98
8.26
7.01
5.70
4.86
3.32
2.74
2.37
2.05
1.98
1.43
1.41
1.16
1.13
1.08
1.03
0.96
0.79
0.74
142,142,447
66.00
- 58 -
ANNUAL REPORT 2006
GME RESOURCES LTD
TENEMENT DIRECTORY
Project
Tenements
Company Interest
Comments
Abednego West
MLA39/427
Golden Cliffs 100% Placer Royalty
Chain Bore
Clermont
Duck Hill
Eucalyptus
MLA39/824
MLA 39/825
MLA39/823
MLA37/581
EPMA11575, EPMA11806, EPMA12164
GME 100%
GME 40%
Joint Venture with
Australian Gold Fields
NL (in Liquidation)
MLA31/214
Niwest 50%
Murchison Metals 50%
P39/3459 - 3460 converted to MLA39/744
NiWest 100%
Anglo 100% Gold
Rights plus nickel
royalty
EL39/703
ML39/666
ML39/430 and ML39/344
ML39/665 - 666 and ML 39/674
M39/313 ML 39/568, 39/570, 39/616 and 39/802
M39/289
E39/480 converted to MLA39/803 - 804
NiWest 100%
nickel rights
Oldcity Pty Ltd Nickel
Royalty
Hawks Nest
M38/218, P38/2515 converted to MLA 38/683
GME 100%
Ilgarari
E52/1452
Laverton Downs
E38/506 converted to MLA38/587 - 588 and 38/782 - 784
100% rights to non
copper minerals
Copper Royalty
NiWest 100%
nickel rights
Millennium Minerals
100% Gold Rights
Leonora East
P37/4106 converted to MLA37/566
GME 100%
P37/5330 - 5333, P37/5477 converted to MLA37/1059
P37/5650 - 5656
MLA37/876
ELA37/871
Linden
P39/3417 - 3418 converted to MLA39/797 - 798
P39/2974 - 2976 converted to MLA 39/500
Macey Hill
Mertondale
Mt Kilkenny
ELA 39/1181
ELA39/1251
ML39/845
P37/4201 - 37/4205 converted to MLA37/591
E39/688 ML39/878 – 879, ELA 39/1107- 09
P39/4404, P39/4412 -4417
E39/990 J/V JINDALEE RESOURCES
Golden Cliffs 100%
Golden Cliffs 100%
GME100%
GME 10%
Golden Cliffs 100%
Golden Cliffs 100%
NiWest 100%
NiWest 100%
NiWest 100%
Niwest 100%
90% Haoma Mining NL
Farmin to Earn 80%
Mt Morgan South
MLA39/702 - 703, MLA 39/481, MLA39/777
GME 100%
Murrin Murrin
MLA39/554 and MLA39/457
Golden Cliffs 100%
Mt Fouracre
ELA37/845
Golden Cliffs 100%
- 59 -
ANNUAL REPORT 2005
GME RESOURCES LTD
Project
Murrin Murrin
(Minara
Resources)
Murrin Murrin
HEPI
Murrin Murrin
North
Pyke Hill
Waite Kauri
LEGEND:
Tenements
Company Interest
Comments
MLA39/426, 456, 552, 553 and 569
ML 39/717 - 718
ML39/819
ML39/758
MLA39/757 and MLA39/759
EL39/633
M37/1216
Nickel laterite royalty 20
cents per tonne
Golden Cliffs 100%
rights to non nickel
laterite
Niwest 100%
Niwest 100%
GME 100%
Niwest 100%
E:
Exploration Licence
P:
Prospecting Licence
EPM:
Exploration Permit for Minerals
M: Mining Lease
ELA: Exploration Licence
Application
EPM
A:
Exploration Permit for Minerals
Application
PLA: Prospecting Licence
Application
MLA: Mining Lease
Application
.
- 60 -
ANNUAL REPORT 2005