GameStop
Annual Report 2011

Plain-text annual report

CONTENTS Corporate Directory Chairman’s Letter Review of Operations Corporate Governance Statement Directors’ Report Auditor’s Independence Declaration IFC 1 2-18 19-24 25-31 32 Financial Report Directors’ Declaration Independent Auditor’s Report Additional Information Tenement Directory 33-58 59 60-61 62-63 64 CORPORATE DIRECTORY DIRECTORS Chairman Michael Delaney PERROTT AM B.Com Managing Director David John VARCOE B.Mining Engineering (Hons), M.AusIMM Executive Director James Noel SULLIVAN FAICD Director Peter Ross SULLIVAN BE, MBA Director Geoffrey Mayfield MOTTERAM B.MetE(Hons), M.AusIMM COMPANY SECRETARY Mark Pitts B.Bus FCA REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS Unit 105 Westpoint Centre 396 Scarborough Beach Road Osborne Park WA 6017 (08) 9444 4976 Telephone: Facsimile: (08) 9201 2370 Web Site: www.gmeresources.com.au AUDITORS HLB Mann Judd Chartered Accountants Level 4, 130 Stirling Street Perth WA 6000 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 SECURITIES EXCHANGE LISTING The Company’s shares are quoted on the Official List of Australian Securities Exchange Limited Ticker code: GME STATE OF REGISTRATION Western Australia chairman’s letter Dear Shareholder The past 12 months has been a challenging time for the global nickel business due to concern at the slow growth in Western economies. Conversely, the continued strength of China, the world’s largest nickel consumer, has again been strong. Despite the economic environment nickel prices have remained strong and at levels that support the NiWest Nickel Laterite Project. During the last year the company completed drilling at a number of its nickel projects which comprise the NiWest Project with the aim of adding to the high grade zones already identified and exploring for extensions to mineralisation. The results of this drilling demonstrated the high quality nature of the resource with excellent drill results. Following this work the respective resources were re-estimated with additional material added to JORC resources. The resources are in very good shape with significant proportions in the measured and indicated categories. Further drilling is planned, again, with the aim of improving the tonnage and grade of existing resources therefore adding directly to the value of the overall project. The Company undertook drilling at the Linden gold project during the year with very good results. This modest gold project is taking shape nicely. Further drilling and the development of a resource model are planned. This shallow high grade project should be amenable to open pit mining and processing at one of a handful of local gold plants. At the end of this period the Company is in good standing and has continued to enhance the value of its key asset, the NiWest nickel laterite project. Your directors remain strongly supportive of the NiWest project and believe that the significant resource the company has will support a world class project. The company has held preliminary discussions with a number of parties interested in investing in the project. To date nothing has eventuated however there remains interest in a number of quarters. The project is very well located in the north eastern goldfields and sits adjacent to the Murrin Murrin Operation being the second largest nickel producer in Australia. We have observed a number of potential start up nickel projects in other parts of the world come under pressure; be it threats of nationalisation or opposition from competing land users to difficulties in disposal of tailings. Western Australia by contrast presents a very supportive political and environmental landscape for major resource development. We believe that heap leaching of nickel laterites represents a significant improvement over other options and we are encouraged to see other companies progressing this technology. Not all laterite ore types are amenable to heap leaching, the fact that the NiWest project can be processed in this manner presents a significant strategic advantage to GME. I would like to thank my fellow Board members for their strong involvement in the management of the company and the development of the project. We look forward to seeing you at our Annual General Meeting. Yours faithfully MICHAEL PERROTT AM Chairman BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 1 reVieW OF OPeratiOns NiWEST NiCkEL LaTERiTE HEaP LEaCH PRojECT > Good Location, services readily available, great resource and simple process. The Company’s principal asset is the world class NiWest Nickel Laterite Heap Leach Project. Resource The NiWest Nickel Laterite Project comprises seven separate project areas in the Murrin Murrin region of the North Eastern Goldfields of Western Australia. Located on granted mining leases, total resources of 79 million tonnes averaging 1.00% nickel and 0.06% Cobalt (0.8%Ni cut off grade) have been defined through extensive systematic drilling programs. The contained nickel metal is over 1 million tonnes Location The value of the project is due to its size, location and amenability to simple heap leaching. The area is well suited to heap leach processing being located in low rainfall, semi desert environment that is sparsely vegetated and generally flat open country. This compares very favourably to many other laterite projects that are located in tropical areas with inherent issues of difficult access, tailings and waste disposal problems and also deforestation and other land use pressures. Economics The company believes that the heap leach approach will result in a step change to the capital cost and also significantly simplify the operating conditions when compared to the alternative processing options available. Process Selection Alternatives include the expensive and complex high pressure acid leach and variants including atmospheric leaching. In many parts of the world laterites are roasted to produce a nickel iron matte product however operating costs due to the very high energy requirements of this method are prohibitive. Heap leach of nickel laterite ore has been successfully demonstrated by Minara Resources and is proposed for use by European Nickel at their Caldag facility. Not all laterite ore types are amenable to heap leach processing, the fact that test work shows the NiWest ores can be heap leached adds significant advantage to the project. Technical Studies The Company completed a pre-feasibility study (PFS), produced by consultants Aker Kvaerner, which demonstrated the project was technically feasible and economically very attractive. During 2008 the scale of the project was reviewed and as has been previously reported – the optimum size was determined to be 3.5 million tonnes per annum (Mtpa) of ore stacked and leached, producing approximately 30,000 tonnes of nickel metal in concentrate per annum. Services The project area is well serviced with infrastructure such as railway linked to deep water ports, bitumen road, and gas pipeline and is in close proximity to the township of Leonora. The Company has successfully explored for water suitable for large scale processing in the area. Experience The Company has an experienced management team with 100 years plus experience in mining project development including direct experience with nickel laterite developments. The Company is now part way through a Feasibility Study (FS) however this work has been terminated while the company seeks potential partners for the project. Project Fundamentals Company internal pre-feasibility study results provide the basis for attractive economic fundamentals at current nickel prices. Capital Expenditure US$680 million Production Rate 3.5 Mtpa producing 30,000t Ni pa Grade 1% Ni Recovery >75% in 120 days Operating Costs US$5.00/lb excluding Co credits Minimum Mine Life 20 years Operating Margin $3/lb generating $225M cash flow pa ( after Cobalt credits) Table 1 – Project cash flow modelling – GME internal. Gold In addition to the nickel project the company has developed a strong gold portfolio. 2 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS reVieW OF OPeratiOns 340,000mE 380,000mE 6,840,000mN Waite Kauri 10 kilometres Murrin North Mertondale Wanbanna o a d R n L a v e rt o 420,000mE 30° Meekatharra Wiluna Mt Magnet Geraldton 30° PERTH Leinster Leonora Project Area Laverton Kalgoorlie Norseman Esperance 250 km s Albany Malcolm Rail Siding Hepi Leonora e e li n P i p s G a Minara Resources Nickel Laterite Plant Site 6,800,000mN Mt Kilkenny Macey Hill NiWest Proposed Plant Site Kookynie 6,760,000mN Figure 1. Tenement Location Map. Eucalyptus LEGEND NiWest Ltd Tenements SealedRoad GravelRoad The value of the project is its size, location and amenability to simple heap leaching BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 3 reVieW OF OPeratiOns PREviouS STudiES Engineering Studies The Company completed an independent PFS in 2008, the work was undertaken by internationally recognised engineering consultants Aker Kvaerner. This study demonstrated the viability of the heap leach concept. The Company initiated a feasibility study into a large heap leach facility with its own acid supply. The work to date has identified an optimised heap leach flowsheet. The flowsheet includes an acid regeneration step likely to have a significant impact on acid consumption. The flowsheet concept is to produce a highly marketable mixed sulphide product containing over 50% nickel and cobalt. The product is readily transportable to international markets. Capital estimates for the project were in the order of $600 to $800M, a step change from the complex and expensive HPAL alternative. Metallurgical Test Work A total of 10 x 4m leach columns of ore blends from Mount Kilkenny, Hepi and Eucalyptus drill core samples have been completed. Nickel and Cobalt recovery were very high and column slump was minimal, slump is an important measure for the success of the heap process. Results from the column test are shown in figure 2. Process Enhancement Work In 2009 GME Resources submitted two Australian and International patent applications related to the GME Nickel Heap Leach and Downstream Processes. These patents are being examined at present. • Acid regeneration – This process is designed to reduce acid consumption by regenerating some of the acid and re-using the acid on the heap leach. In the process iron is precipitated from the leach solution and regenerated acid is returned to the heap leach. • Ore preparation conditioning (pelletising) – This patent describes a method for conditioning the ore to improve the nickel recovery and stability of the heap. Based upon the laboratory column leach tests, percolation and permeability supported by both Golder Associates and SGS tests on the ore from GME tenements. Nickel Extraction v Time % i N , n o i t c a r t x E 80 70 60 50 40 30 20 10 0 0 20 40 60 80 Time, Days 100 120 140 160 Hepi # 1 Comp. MK North # 1 Comp. MK Central # 1 Comp. Mk North # 2 Figure 2. Extraction results for 4 metre column leach tests. The work to date has identified an optimised heap leach flowsheet 4 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS reVieW OF OPeratiOns GEoLoGiCaL RESouRCE BaSE > Significant global resource (joRC compliant) developed by independent consultants > New drilling undertaken and resource updated > Contains over 1 million tonnes of nickel metal > Significant high grade core to the resource > 130,000 metres drilled to date to support the BFS 0.7% Ni CoG Category Total Measured indicated inferred Combined 0.8% Ni CoG Category Total Measured indicated inferred Combined 1.0% Ni CoG Category Total Measured indicated inferred Combined 1.2% Ni CoG Category Total Measured indicated inferred Combined Tonnes (Millions) 45.86 32.28 30.32 108.46 Tonnes (Millions) 34.73 23.81 20.68 79.23 Tonnes (Millions) 16.68 9.61 6.46 32.74 Tonnes (Millions) 6.80 2.60 1.56 10.96 %Ni 0.96 0.92 0.89 0.93 %Ni 1.04 0.99 0.96 1.00 %Ni 1.20 1.14 1.13 1.17 %Ni 1.37 1.31 1.28 1.34 %Co 0.06 0.06 0.06 0.06 %Co 0.07 0.06 0.06 0.06 %Co 0.08 0.08 0.07 0.08 %Co 0.10 0.09 0.08 0.09 Ni Metal (Tonnes) Co Metal (Tonnes) 441,692 295,631 270,250 1,007,573 Ni Metal (Tonnes) 360,304 235,394 198,770 794,467 Ni Metal (Tonnes) 200,253 109,587 73,134 382,974 Ni Metal (Tonnes) 93,232 34,017 20,035 147,284 28,229 18,502 19,600 66,331 Co Metal (Tonnes) 23,367 15,045 12,266 50,677 Co Metal (Tonnes) 13,456 7,272 4,736 25,464 Co Metal (Tonnes) 6,496 2,255 1,314 10,065 Table 1. Global resource estimate of different Cut Off Grades (COG). independent consultants The Company has engaged Ravensgate Minerals Industry Consultants (Ravensgate) as its resource managers and geologists. Ravensgate have developed Krigged resource models for the 7 project areas that make up the NiWest resource base. A number of these were updated during the last year and further work has been completed on identifying sources and drivers for additional high grade tonnes. These resource models are the product of industry best practice for geological modelling which provides greater confidence for the project. The work incorporates the most recent drilling and mapping – see the project area for more information. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 5                                                                   reVieW OF OPeratiOns Figure 3. Independent , Pure Nickel Company. At a production rate of 3.5Mtpa the measured and indicated resource in Table 1 supports a long life operation with the added bonus of being able to increase feed grades in early years. The chart above demonstrates the strong global position of the project which is still independent of the major mining houses. The Company will continue to develop its 0.8% Ni cutoff resource base to support a long life operation. Further exploration on the very prospective holding of the company would significantly add to this high grade resource. oRE SaLES oPTioNS > Significant value opportunity with 4 processing plants within haulage distance The GME project is located within a reasonable haulage distance of four nickel processing plants. Although this option is not as favourable as establishing a standalone facility it does demonstrate the potential value of the resource. Nickel ore sales grading 1 to 2% nickel are marketed in many locations at price ranges of 5 to 10% of the contained nickel value This approach provides an alternative valuation of the resource at NiWest, figure 4 shows plants inside a reasonable haulage distance to the NiWest project. Figure 4. Map showing the location of the 4 nickel processing plants in WA and the respective ore feed grades. 6 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS reVieW OF OPeratiOns HEPi STaRTER PiT idENTiFiEd > Ready to mine Close spaced RC grade control drilling, mine design work and environmental permitting have been completed for the Hepi pit. The grade control drilling defined a resource of 289,000 tonnes of high grade ore at 1.53% Ni (0.8 % Ni Cut-off). The Mining proposal for the starter pit has been approved for either trail mining and processing or possible high grade ore sales. Figure 5. Showing Hepi project area layout as approved to commence operations. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 7 reVieW OF OPeratiOns PiT oPTiMiSaTioN > Expect a high conversion to reserves Pit optimisation work showed very encouraging results based on the current resource position. The Company will continue to refine this work in line with more detailed operating cost data and updated Resource categories following further drilling and modelling. Optimum pit shells are shown in the projects section of this report. Figure 6. Optimum pit shell and resource outline. Test pumping on these bores indicated that significant water should be available from this area WaTER ExPLoRaTioN > a valuable asset with a 2.0 GL Licence secured Four production bores and seven monitoring bores have been drilled on the Mining Tenements. Test pumping on these bores indicated that significant water should be available from this area, with modelling by Coffey Geoscience indicating 2.0GL per year from the Kilkenny mine area. The Company has been granted a 2.0GL per year water license based on this drilling. 8 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS ENviRoNMENTaL STudiES > Making progress with environmental approvals Environmental surveys for both flora and fauna have been undertaken at Hepi, Mt Kilkenny, Eucalyptus and Murrin North. During the period further work was undertaken at Hepi supporting an approval to mine. ENTiTLEMENT iSSuE > Strong shareholder support On 18 April 2011 the Company announced a capital raising via a 1:15 non-renounceable entitlement issue at 8 cents per share, to raise up to approximately $1.61 million. Shareholders showed strong support for the issue taking up over 65% of it and the entire shortfall was subsequently placed. The Company will use the funds to continue the development of the NiWest nickel- cobalt project, its gold projects and for general working capital purposes. NiCkEL MaRkET FuNdaMENTaLS > Nickel market remains strong Nickel metal prices have shown strength in the face of difficult economic conditions. Prices have generally been above $US20, 000 per tonne or $US9.00 per pound. The company believes that the nickel industry has a very positive outlook. On the demand side most commentators see a 5 to 6% growth in global demand driven by strong growth from developing economies. China’s most recent five-year plan calls for $US50 billion to be spent on upgrading the country’s power grid and an another $110 billion on building 13,000 kilometres of high-speed railways. e n n o t / S U $ e c i r P l a t e M 45000 40000 35000 30000 25000 20000 reVieW OF OPeratiOns Stainless steel is the main end use for nickel however there is forecast to be strong growth in high tech applications such as high temperature turbines, new generation nuclear reactors, batteries and large scale wind and solar farms. The supply side is driven by the growth in nickel sourced from laterites and the slow decline in nickel sourced from sulphides. The last major sulphide discovery was Voisey’s Bay discovered in 1994. Meanwhile other mines suffer from declining grades and the need to mine deeper ore sources. Nickel laterites account for approximately 50% of global supply with ferronickel accounting for at least 25%. This is significant as nickel produced using smelting (ferronickel) has high energy requirements and naturally high unit costs of production. The effect of significant supplies coming from the high cost producers with operating costs linked directly to energy at $US8 to 10 per pound is to put a floor on the nickel price of $10 per pound. The long term price outlook adds to the economics of the NiWest project and provides a strong basis on which to develop the project. Cobalt Price Nickel Price 1 1 - g u A 0 1 - p e S p e s d M i 0 1 - t c O t c o d m i 0 1 - v o N v o n d m i 0 1 - c e D c e d d m i 1 1 - n a J n a j i d m 1 1 - b e F b e f d m i 1 1 - r a M r a m d m i 1 1 - r p A r p a d m i 1 1 - y a M y a m d m i 1 1 - n u J n u j i d m 1 1 - l u J Figure 7. Nickel and Cobalt price information. Source LME. l u j i d m BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 9 reVieW OF OPeratiOns PRojECT LoCaTioN The Map below shows the project area adjacent to the Murrin Murrin Joint Venture (MMJV) (Minara Resources Limited). This proximity clearly demonstrates that the GME tenements host similar resources to those at the MMJV and gives the company great confidence that the ore types will be amenable to economic recovery via either heap leach or HPAL processing. This fact is supported by our own test work. The MMJV has been in operation for 12 years and is Australia’s second largest nickel producer. Figure 8. Project area map. 10 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS MiNiNG PRojECT aREaS Hepi Tenements M39/717, M39/718 and M39/819 Total area 1426 Hectares Total metres of drilling 15,050 m in 818 holes Hepi is located adjacent to the sealed Leonora to Laverton highway. Drilling at Hepi during the year provided excellent results and added to the quality of the geological resource. The metal inventory at Hepi increased by 12%. Significant drill results included; • • • • 6 metres @ 1.98% Ni from 17 m in HPC212 9 metres @ 1.77% Ni from 17 m in HPC219 6 metres @ 1.72% Ni from 15 m in HPC214 9 metres @ 1.71% Ni from 8 m in HPC215 The resource summary is reported below with 87% in the JORC measured and indicated categories. Geological Resources for Hepi Cut off 0.8 1 1.2 Tonnes (Millions) 3.3 1.27 0.6 Ni % 1.04 1.27 1.54 Co% 0.067 0.083 0.092 reVieW OF OPeratiOns Figure 9. Hepi Resource (0.8% Ni Cut-off) within the optimum pit. Figure 10. Hepi cross section 6,806,525 North. High Grade Ore Ore Zone BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 11 reVieW OF OPeratiOns Mount kilkenny Eucalyptus Tenements M39/845, M39/878, M39/879, E37/ 878, E39/1266, E39/1267, P39/4571, P39/4827 Total area 5850 Hectares Total metres of drilling 34,300 m in 870 holes The Mount Kilkenny area is located 18 km south of Hepi and 25 km from the Murrin Murrin Nickel Refinery. Additional drilling completed during the year included some very good results. • • 25 metres @ 1.46% Ni from 0 m in MKC0661 20 metres @ 1.07% Ni from 14 m in MKC0658 The resource was updated during the year with a slight increase in the overall tonnage particularly the higher grade zones. Geological Resources for Mt kilkenny Cut off 0.8 1 1.2 Tonnes (Millions) 23.2 11.4 4.8 Ni % 1.04 1.20 1.36 Co% 0.065 0.083 0.10 Tenements M39/289 , M39/313 , M39/344, M39/430, M39/568 , M39/570 , M39/616, M39/665, M39/666, M39/674, M39/744 E39/802, E39/803, E39/804, E39/1419 Total area 7356 Hectares Total metres of drilling 34,400 m in 1150 holes Eucalyptus is located 50 km South East of Hepi adjacent to the recently developed Murrin East project operated by Minara resources. Drilling and a resource update are planned for 2011. Geological Resources for Eucalyptus Cut off 0.8 1 1.2 Tonnes (Millions) 28.1 11.5 3.1 Ni % 0.98 1.14 1.32 Co% 0.062 0.072 0.081 Figure 11. Mt Kilkenny Resource (0.8%Ni cut-off) within the optimum pit. Figure 12. Part of the Eucalyptus Resource (0.8%Ni cut-off) within the optimum pit. 12 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS reVieW OF OPeratiOns Wanbanna Tenements M39/460 Murrin North Tenements M39/758 Total area 945 Hectares Total metres of drilling 11,000 m in 200 holes Total area 811 Hectares Total metres of drilling 9,300 m in 215 holes M39/758 is located adjacent to the Wanbanna resource. It is 11km north of Hepi and 4 km from the Murrin Murrin Nickel refinery. 99% of the resource is in the JORC measured and indicated categories. Geological Resources for Murrin North Cut off 0.8 1 1.2 Tonnes (Millions) 3.7 1.3 0.3 Ni % 0.97 1.14 1.34 Co% 0.06 0.07 0.08 M39/460 is located approximately 11 km north of Hepi and 5 km west of the Murrin Murrin Nickel refinery. The Wanbanna prospect area contains a significant nickel laterite resource and is considered to be highly strategic as it abuts the Company’s Murrin North project and provides a material increase in the overall resources held in the NiWest Nickel Laterite project. 93% of the resource is in the Indicated category. Geological Resources for Wanbanna Cut off 0.8 1 1.2 Tonnes (Millions) 10.7 4.8 1.3 Ni % 1.00 1.14 1.31 Co% 0.066 0.079 0.091 The deposit is hosted within the laterite developed from rocks. weathered Achaean serpentinised- peridotite Figure 13. Showing the modeled Wanbanna resource adjacent to Minara’s recently mined open pit. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 13 reVieW OF OPeratiOns Waite kauri Mertondale Tenements M37/1216 Tenements M37/591 Total area 234 Hectares Total metres of drilling 14,000m on 403 Holes Total area 885 Hectares Total metres of drilling 7,956 m 380 Holes Drilling was undertaken at Waite Kauri during the year, some of the better results are shown below. The resource model was updated with a slight increase in tonnes and grade. 98% of the resource is in the JORC measured and indicated category. Significant results included; M37/591 contains a nickel laterite bearing ultramafic with a strike length of over eight kilometres long. Additional drilling was undertaken at Mertondale with better results including; • • 5 metres @ 1.38% Ni from 9 m in MDRC107 11 metres @ 1.33% Ni from 3 m in MDRC105 • • • 11 metres @ 1.11% Ni from 19 m in WKRC0310 3 metres @ 1.39% Ni from 8 m in WKRC0318 3 metres @ 1.32% Ni from 11 m in WKRC0313 The geological resource for this area was updated based on this drilling. Geological Resources for Waite kauri Geological Resources for Mertondale Cut off 0.8 1 1.2 Tonnes (Millions) 1.9 0.5 0.24 Ni % 0.98 1.25 1.46 Co% 0.052 0.080 0.11 Cut off 0.8 1 1.2 Tonnes (Millions) 1.9 0.7 0.20 Ni % 0.98 1.15 1.36 Co% 0.077 0.09 0.12 duck Hill Tenements E31/733 Total area 1793 Hectares Total metres of drilling 6,200 m in 153 holes This tenement contains a nickel laterite bearing ultramafic over six kilometres of strike length. Geological Resources for duck Hill Cut off 0.7 1 Tonnes (Millions) 3.94 1.50 Ni % 0.96 1.27 Co% 0.077 0.09 Figure 14. Waite Kauri Resource (0.8%Ni cut-off) within the optimum pit. 14 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS reVieW OF OPeratiOns GoLd Gold assets > Priority gold project being developed > 30 Million ounces of Gold produced in the Northern Goldfields region > Hosts world class projects Sunrise dam, Granny Smith and Sons of Gwalia GME and its subsidiary Golden Cliffs NL own a number of prospective gold projects in the Leonora – Laverton region. The amount of work previously undertaken on the respective areas varies from soil sampling through to diamond drilling and resource definition. Several new tenements were applied for that either adjoined existing holdings or were considered prospective for gold or base metals. The tenements are in an area that > Significant drill results > Walk up targets > 5 large gold plants in the region has produced significant gold production over the last 100 years – see Figure 15. The portfolio of tenements prospective for gold is in excess of 150 square kilometres. A number of tenements contain resource calculations that although not JORC compliant may potentially support profitable small scale mining activity for ore sales to third parties. 300,000mE 350,000mE 6,850,000mN Tarmoola Leonora East Mertondale 400,000mE Cork Tree Well Delta 450,000mE Laverton Downs Fairfield Abednego Lancefield (1.7 m Oz) Admiral Hill Laverton Barnicoat Windara R o a d L averto n Cardinya Murrin Murrin Mt Marvin Mt Morgans (1.5m Oz) Hawk Nest 6,800,000mN Ironstone Well Harbour Lights Leonora Tower Hill Sons of Gwalia (5m Oz) Federation Homeward Bound e e l i n P i p Kiang s G a Forgotten Four Michaelangelo Historical production of 45g/t d a o Menzies R e i l r o o g l a K Orient Well y a w l i a R 6,750,000mN LEGEND GMEResources Gold Project Tenements Sealed Road Gravel Road (Histrorical Production) 20 kilometres Figure 15. Gold Projects. BACK TO CONTENTS Granny Smith (5m Oz) Wallaby Mt Morgan South Sunrise Dam (10m Oz) Linden Red October (0.5m Oz) Devon - Olympic Fortitude Linden Historical production of 45g/t Mt Celia GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 15 reVieW OF OPeratiOns up drilling has been completed to enable a resource to be reported. Past production records indicate that the Devon mine yielded ore at an average grade of 19.57g/t Au. The Olympic-Danube mining area within P39/4637 has recorded production of nearly 1500 tonnes grading 44g/t. Better Drill results from 2011 drilling campaign • • • • • • • 6 metres @ 6.60 g/t Au from 18 m in DVR206 6 metres @ 12.26 g/t Au from 19 m in DVR214 - Including 3m @ 22 g/t Au 2 metres @ 1.77 g/t Au from 8 m in DVR207 3 metres @ 2.07 g/t Au from 8 m in DVR208 1 metre @ 9.70 g/t Au from 42 m in DVR210 4 metres @ 2.45 g/t Au from 19 m in DVR212 2 metres @ 4.84 g/t Au from 34 m in DVR212 Total Gold recovery test work was conducted on two composites from the recent Devon drilling that were made up representing the expected mineable grade at 6.0 g/t Au and potential low grade material at 2.1 g/t gold. Figure 16. Abednego Project prospective gold trends. (includes Federation and Homeward Bound Projects) abednego The Abednego Project is situated on the western margin of the Murrin Murrin Tectonic Zone (MMTZ) within the Murrin Domain of the Kurnalpi Terrane. Locally the Abednego Project tenements are centred over the Federation Shear, a northeast trending splay off the northwest trending Keith Kilkenny Tectonic Zone located some 15 kilometres to the southwest of the project area. Historical records show that the Federation and Homeward Bound mines produced 1823 ounces from 1240 tonnes of ore (average grade of 45 g/t). Linden Project The Linden Project tenements are situated over the Laverton Greenstone Belt within the Central Laverton Domain of the Laverton Tectonic Zone. The Sunrise Dam (>10 million ounces) and Red October (>0.5 million ounces) deposits occur some 15 km and 5 km respectively north of Linden. Significant drilling has identified strong mineralisation over a 700m strike length. Additional RC drilling for assaying and metallurgical testing was completed during the year. A non- JORC resource was calculated for the project and follow Figure 17. Detailed plan of the Devon project, showing both new and old drilling. Drillhole coding is based on the average of the best intercept in each hole above 0.8 g/t Au. 16 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS reVieW OF OPeratiOns Figure 19. Laverton Downs Project Area. Figure 18. Cross sections through the Devon project (looking north) plotted on a local grid. Testwork on each composite was aimed at defining potential extractions at local plants, including gravity. Two grind sizes were used at P80 of 150 micron (Coarse) and P80 of 106 micron (Medium) grind. Results showed total extractions of between 91% and 94% with high gravity content and low cyanide and lime consumptions.. Laverton downs The project area consists of a sequence of Achaean Greenstones intruded by granitic rocks, and lies directly on the north-south trending Laverton Tectonic Zone which hosts significant gold deposits including the 1.7 million ounce Lancefield mining centre to the south and the plus Cork Tree Well deposit to the north. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 17 reVieW OF OPeratiOns Competent Persons Statement The information in this report that relates to Exploration Results and Mineral Resources is based on information compiled by Mr Stephen Hyland who is a member of The Australasian Institute of Mining and Metallurgy. Mr Hyland is a Principal Consultant with Ravensgate Minerals Industry Consultants who consults to the Company. Mr Hyland has sufficient experience, which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves. Mr Hyland consents to the inclusion in the report of the matters based on information provided in the form and context in which it appears. 18 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS cOrPOrate GOVernance statement iNTRoduCTioN The Board of Directors of GME Resources Limited has adopted the following Corporate Governance Principles promulgated by the ASX Corporate Governance Council 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 five directors, but up to 10 directors can serve on the board. Mr David Varcoe is the only executive, the remainder are non executive. Currently the five directors are: Michael D Perrott David J Varcoe James N Sullivan Peter R Sullivan Geoffrey M Motteram Chairman Managing Director Director Director Director 65 years 49 years 50 years 55 years 62 years Director since 1996 Director since 2008 Director since 2004 Director since 1996 Director since 1997 Mr Motteram and Mr P Sullivan are considered Independent Directors on the Board according to the definitions by the Australian Securities Exchange Corporate Governance Council (“Council”) as is the Chairman Mr Perrott. Non executive director Mr J Sullivan has been an executive in the last three years and as a result he and the Managing Director, Mr D Varcoe are not considered “Independent” in accordance with the definitions of the Council. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 19 cOrPOrate GOVernance statement As such, the Company complies with the Council’s recommendation, Item 2.1, that the majority of the Company’s directors should be Independent Directors. The Board has in addition 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 Directors confer on a “needs” basis with the Chairman with such discussion if warranted and considered necessary by the Independent Directors. • The Board considers Non-executive Directors to be independent even if they have minor dealings with the Company provided 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. 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 - AM. 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; • 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 the management of the Company. NoMiNaTioN CoMMiTTEE 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. 20 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS cOrPOrate GOVernance statement 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; • 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 • Be responsible and accountable for their actions and report any unethical behaviour. TRadiNG iN CoMPaNY SECuRiTiES The Company encourages Directors and employees to adopt a long-term attitude to their investment in the Company’s securities. All Directors and employees (including their immediate family or any entity for which they control investment decisions), must ensure that any trading in securities issued by the Company is undertaken within the framework set out in the Securities Trading Policy. The Securities Trading Policy does not prevent Directors or employees (including their immediate family or any entity for which they control investment decisions) from participating in any share plan or share offers established or made by the Company. However, Directors or employees are prevented from trading in the securities once acquired if the individual is in possession of price sensitive information not generally available to all security holders. In keeping with recent listing rule amendments, additional restrictions are placed on trading by Directors, Executives and other personnel as determined by the Chairman and Company Secretary from time to time (‘Key Management Personnel’). Key management personnel must not deal in Company Securities at any time if in possession of any inside information relating to those securities. In addition to the overriding prohibition against dealing in the Company’s securities when a person is in possession of inside information, Key Management Personnel and their associated parties are at all times prohibited from dealing in the Company’s securities during prescribed ‘closed’ periods. The Company has nominated closed periods to be during the week prior to the release of the Company’s Quarterly Reports (including the Appendix 5B) unless exceptional circumstances apply. The Securities Trading Policy also includes a clause prohibiting Directors and Executives from entering into transactions in associated products which operate to limit the economic risk of security holdings in the Company over unvested entitlements. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 21 cOrPOrate GOVernance statement TRadiNG iN CoMPaNY SECuRiTiES (CoNTiNuEd) In accordance with Listing Rules, a director must notify the ASX within 5 business days after any change in the Director’s relevant interest in securities of the Company or a related body corporate of the Company. A director must notify the Company Secretary in writing of the requisite information within 2 business days in order for the Company Secretary to make the necessary notifications to ASIC and ASX as required by the Corporations Act and the ASX Listing Rules. 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. TiMELY aNd BaLaNCEd diSCLoSuRE To auSTRaLiaN SECuRiTiES 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 Securities 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 responsible for communications with Australian Securities Exchange. This role includes responsibility for compliance with the continuous disclosure requirements of the Australian Securities Exchange Listing Rules and overseeing and coordinating information disclosures to Australian Securities Exchange, analysts, brokers, shareholders the media and the public. All disclosures to Australian Securities Exchange are posted on the Company’s website soon after clearance has been received from Australian Securities 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. 22 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS cOrPOrate GOVernance statement 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 Securities Exchange; • Distribution of the annual report to shareholders together with a notice of meeting; • Posting of half-yearly results and all Australian Securities 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 considered appropriate. On the Company’s website, information about the Company’s projects is 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. 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 monitors 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 Securities 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. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 23 cOrPOrate GOVernance statement REMuNERaTioN (CoNTiNuEd) 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 Directors and Senior Executives are all reviewed and discussed by the Board. The Company does not operate an employee share option plan and there are no options outstanding issued to directors. 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. divERSiTY PoLiCY The Board has implemented a Diversity Policy in line with the ASX’s Corporate Governance guidelines. The Group believes that the promotion of diversity on its Boards, in senior management and within the organisation generally is good practice. The Diversity Policy seeks to attract and retain people by promoting an environment where employees are treated with fairness and respect and have equal access to opportunities as they arise. Diversity within the workforce includes such factors as religion, race, ethnicity, language, gender, disability and age. Gender diversity The Corporate Governance recommendation 3.2 is effective from 1 July 2011 and requires the Board to set ‘measureable objectives’ for achieving gender diversity and to report against them on an annual basis. The Board is currently reviewing its practices and will put measures in place to assess the success of the policy during the coming financial year. 24 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS DirectOrs’ rePOrt Your directors present their report of GME Resources Limited and its controlled entities for the financial year ended 30 June 2011. directors The names of directors in office at any time during or since the end of the year are: Michael Delaney Perrott David John Varcoe James Noel Sullivan Peter Ross Sullivan Geoffrey Mayfield Motteram (Non executive - Chairman) (Managing Director) (Non executive - 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 Group for the financial year to 30 June 2011 amounted to $587,602 (2010:$635,852). overview of operating activity The Company is examining alternatives to enable it to develop the NiWest nickel laterite Heap Leach project in the NE Goldfields. The Company has explored and developed a significant resource base containing over 1 million tonnes of nickel metal. During the year the company undertook more exploration to further enhance the mineral resource. The Company believes that the optimal size of the NiWest Heap leach Project is 3.5 million tonnes per annum (Mtpa) of ore processed, producing between 30,000 and 35,000 tonnes of nickel metal per annum. The Company envisages constructing a world class Nickel and Cobalt processing plant in the Northern Goldfields. The Company is encouraged by the strong Nickel price over the last year to levels that make the proposed NiWest Heap Leach project an attractive proposition. The Company has raised funds during the year and is continuing to add value to the project by reviewing the resources and refining process options. The Company is actively seeking a strategic partner to assist with the development of the project. Financial Position At the end of the financial year the consolidated entity had $1,759,613 (2010: $1,957,866) in cash and at call deposits. Carried forward exploration and evaluation expenditure was $31,797,475 (2010: $30,261,011). During the year issued capital increased from 302,352,750 to 322,635,902 shares at the end of 2011. The movement related to a non-renounceable rights issue as announced in April 2011. dividends No dividends have been paid or declared since the start of the financial year. No recommendation is made as to dividends. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 25 DirectOrs’ rePOrt Significant Changes in State of affairs There were no significant changes in the state of affairs of the consolidated entity during the financial year. after Balance date Events No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the Group’s operations, the results of those operations or the Group’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 activities 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 Group, 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 Group. information on directors and Company Secretary Michael delaney Perrott AM BCom FAIM (Chairman) 65 Years director since 1996 Mr Perrott has been involved in the construction and contracting industry since 1969. He is currently Chairman and director of various listed and unlisted public and private companies. Mr Perrott is also a member of the Board of Notre Dame University and SANE Australia and a council member for the State Ministerial Council for Suicide prevention. Mr Perrott has been Chairman of the Company since his appointment as a director in 1996. Other current directorships of listed companies Director of Schaffer Corporation Limited since February 2005 and VDM Group Ltd since July 2009. Former directorships of listed companies in last 3 years Director of Port Bouvard Limited from 1998 until April 2009, and Director of Portman Limited from June 1997 until December 2008. david john varcoe B. Mining Engineering (Honours) MAusIMM (Managing director) 49 Years director since 2008 Mr Varcoe is a mining engineer with over 20 years experience that includes extensive senior managerial and technical positions with Australia and international resource companies. His experience includes positions at Sons of Gwalia, Centaur, WMC, and Goldfields St Ives and for the period prior to joining GME as Principal Consultant for Rio Tinto based in the United Kingdom and Perth WA. Mr Varcoe has not been a Director of any other public listed entities during the past three years. 26 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS DirectOrs’ rePOrt james Noel Sullivan FaiCd (Non Executive director) 50 Years director since 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) 55 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. Geoffrey Mayfield Motteram BMetE (Hons), MAusIMM (Non Executive director) 62 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. Former directorships of listed companies in last 3 years Mr Motteram was a director of Mount Magnet South Limited from 31 May 2006 to 14 September 2010. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 27 DirectOrs’ rePOrt information on directors and Company Secretary (Continued) Mr Mark Edward Pitts B.Bus FCA (Company Secretary) 49 Years Mr Pitts was appointed to the position of Company Secretary in February 2009. Mr Pitts is a Chartered Accountant with over twenty five years experience in statutory reporting and business administration. He has been directly involved with, and consulted to a number of public companies holding senior financial management positions. He is a partner in the corporate advisory firm Endeavour Corporate. Endeavour offers professional services focused on Company Secretarial support, corporate advice, supervision of ASIC and ASX reporting and compliance requirements, and commercial and financial support. REMuNERaTioN REPoRT (audiTEd) 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, Executive 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. At the date of this report the Company had not entered into any packages with Directors or senior executives which include performance based components. 28 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS DirectOrs’ rePOrt 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 as appropriate when reviewing remuneration packages. 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: 2011 Executive directors David J Varcoe Non-Executive directors James N Sullivan Michael D Perrott Geoffrey M Motteram Peter R Sullivan Executives Mr Mark Pitts 2010 Executive directors David J Varcoe James N Sullivan Non-Executive directors Michael D Perrott Geoffrey M Motteram Peter R Sullivan Executives Mr Mark Pitts Short Term Benefits Salary & Fees $ Post Employment Benefits Superannuation $ Long Term Benefits options $ 254,675 25,000 24,000 30,000 24,000 24,000 60,000 416,675 - - - - - 25,000 - - - - - - - Short Term Benefits Salary & Fees $ Post Employment Benefits Superannuation $ Long Term Benefits options $ 218,091 24,000 32,500 24,000 24,000 32,244 354,835 - - - - - - - - - - - - - - Total $ 279,675 24,000 30,000 24,000 24,000 60,000 441,675 Total $ 218,091 24,000 32,500 24,000 24,000 32,244 354,835 The Company and its subsidiaries had three employees as at 30 June 2011. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 29 DirectOrs’ rePOrt Service agreements There are no service agreements with any of the Company’s Directors. Share Based Compensation There is currently no provision in the policies of the consolidated entity for the provision of share based compensation to directors. The interest of Directors in shares and options is set out elsewhere in this report. 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 Michael D Perrott David J Varcoe James N Sullivan Peter R Sullivan Geoffrey M Motteram ordinary Shares opening Balance 13,343,613 254,375 14,329,570 13,987,158 5,267,552 Net Change 889,574 19,958 955,302 932,475 351,169 ordinary Shares Closing Balance 14,233,187 271,333 15,284,872 14,919,633 5,618,721 Meetings of directors During the year, 6 meetings of directors were held. Attendances were: Name Michael D Perrott David J Varcoe James N Sullivan Peter R Sullivan Geoffrey M Motteram Number Eligible to attend 6 6 6 6 6 Number attended 6 6 6 6 5 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. unlisted options At the date of this report the number of unlisted Options on issue were as follows: • 5,000,000 Options exercisable at $0.13 each, expiring 28 Feb 2012; • 5,000,000 Options exercisable at $0.18 each, expiring 28 Feb 2012 There were no shares issued during the year or since the end of the year upon exercise of options. audit Committee The Board reviews the performance of the external auditors on an annual basis and meets with them during the year to review findings and assist with Board recommendations. The Board does not have a separate Audit Committee with a composition as suggested in the best practice recommendations. The full Board carries out the function of an audit committee. The Board believes that the Company is not of a sufficient size to warrant a separate committee and that the full board is able to meet objectives of the best practice recommendations and discharge its duties in this area. 30 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS DirectOrs’ rePOrt 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. 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 Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note 12 to the financial statements. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services do not compromise the auditor’s independence as all non-audit services have been reviewed to ensure that they do not impact the impartiality and objectivity of the auditor and none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board. auditor’s independence declaration A copy of the auditor’s 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. david j varcoe Managing Director Perth, Western Australia 29 September 2011 BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 31 auDitOr’s inDePenDence DeclaratiOn 32 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS statement OF cOmPrehensiVe incOme FOr the Year enDeD 30 June 2011 Note Consolidated 2011 $ 2010 $ Other income Depreciation expense Exploration written down Management and consulting fees Administration expenses Loss before income tax benefit Income tax benefit Net loss for the year Other comprehensive income Income tax relating to components of other comprehensive income Other comprehensive income for the year, net of tax 2 7 3 165,758 123,891 216,478 230,712 166,124 59,111 171,116 300,637 199,642 169,283 587,602 635,852 - - 587,602 635,852 - - - - - - Total comprehensive result for the year 587,602 635,852 Basic loss per share (cents per share) Diluted loss per share (cents per share) 14 (0.19) (0.19) (0.23) (0.23) The accompanying notes form part of this financial statement. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 33 statement OF Financial POsitiOn as at 30 June 2011 CuRRENT aSSETS Cash and cash equivalents Trade and other receivables Other financial assets ToTaL CuRRENT aSSETS NoN CuRRENT aSSETS Note Consolidated 2011 $ 2010 $ 11(b) 4 5 1,759,613 6,242 8,250 1,957,866 48,760 8,250 1,774,105 2,014,876 Plant and equipment Deferred exploration and evaluation expenditure 6 7 27,236 31,797,475 263,283 30,261,011 ToTaL NoN CuRRENT aSSETS 31,824,711 30,524,294 ToTaL aSSETS CuRRENT LiaBiLiTiES 33,598,816 32,539,170 Trade and other payables 8 120,950 ToTaL CuRRENT LiaBiLiTiES 120,950 79,450 79,450 ToTaL LiaBiLiTiES 120,950 79,450 NET aSSETS EquiTY Issued capital Financial assets reserve Option reserve Accumulated losses ToTaL EquiTY The accompanying notes form part of this financial statement. 33,477,866 32,459,720 9 9 9 49,093,323 (1,125) 973,537 (16,587,869) 47,487,575 (1,125) 973,537 (16,000,267) 33,477,866 32,459,720 34 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS statement OF chanGes in eQuitY FOr the Year enDeD 30 June 2011 CoNSoLidaTEd Note ordinary Shares Financial assets Reserve option Reserve accumulated Losses Total Balance at 30 june 2009 44,526,381 (1,125) 740,796 (15,364,415) 29,901,637 Loss for the year Total comprehensive income for the year Transaction with owners in their capacity as owners Issue of unlisted options Shares issued (net of costs) Balance at 30 june 2010 Loss for the year Total comprehensive income for the year Transaction with owners in their capacity as owners Shares issued (net of costs) Balance at 30 june 2011 9 9 - - - - - - (635,852) (635,852) (635,852) (635,852) - 2,961,194 47,487,575 - - (1,125) 232,741 - 973,537 - - (16,000,267) 232,741 2,961,194 32,459,720 - - - - - - (587,602) (587,602) (587,602) (587,602) 1,605,748 49,093,323 - (1,125) - 973,537 - (16,587,869) 1,605,748 33,477,866 The accompanying notes form part of this financial statement. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 35 statement OF cashFlOWs FOr the Year enDeD 30 June 2011 Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Interest received Net cash outflow from operating activities Cash flows from investing activities Acquisition of plant and equipment Net cash outflow from investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from sale of assets Payment of costs associated with issue of shares Net cash inflow from financing activities Note Consolidated 2011 $ 2010 $ 107,862 (1,967,352) 57,896 (1,801,594) 100,508 (1,468,406) 23,383 (1,344,515) 11(a) (7,907) (7,907) - - 1,612,548 5,500 (6,800) 1,611,248 2,978,193 - (31,999) 2,946,194 Net increase/(decrease)in cash and cash equivalents (198,253) 1,601,679 Cash and cash equivalents held at the start of the year 1,957,866 356,187 Cash and cash equivalents held at the end of the year 11(b) 1,759,613 1,957,866 The accompanying notes form part of this financial statement. 36 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 1. STaTEMENT oF aCCouNTiNG PoLiCiES GME Resources Limited (‘the Company’) is a listed public company, incorporated and domiciled in Australia. The consolidated financial statements of the Company for the financial year ended 30 June 2011 comprise the Company and its subsidiaries (together referred to as ‘the Group’). (a) Basis of Preparation The financial statements are a general-purpose financial report, which have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and Interpretations and complies with other requirements of the law. The financial statements have also been prepared on a historical cost basis. The financial statements are presented in Australian dollars. The Company is a listed public company, incorporated in Australia and operating in Australia. The entity’s principal activities are mineral exploration and investment. (b) Adoption of New and Revised Standards In the year ended 30 June 2011, the Group has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period. It has been determined by the Group that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to Group accounting policies. The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2011. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to Group accounting policies. (c) Significant Accounting Judgements and Key Estimates The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates. The recoverability of the carrying amount of exploration and evaluation costs carried forward has been reviewed by the directors. In conducting the review, the recoverable amount of the consolidated entity’s deferred exploration and evaluation expenditure of $29,074,766 relating to the NiWest nickel laterite project has been assessed by reference to the higher of “fair value less costs to sell” and “value in use”. In determining value in use, future cash flows are based on: • Estimates of ore reserves and mineral resources for which there is a high degree of confidence of economic extraction. • Estimated production and sales levels. • Estimate future commodity prices. • Future costs of production. • Future capital expenditure. • Future exchange rates. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 37 nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 1. STaTEMENT oF aCCouNTiNG PoLiCiES (CoNTiNuEd) (c) Significant Accounting Judgements and Key Estimates (Continued) The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The cashflow model used to support the assessment is calculated over a period of 20 years, being the estimated life of the mine. The discount rate is 8% and for the purpose of this exercise, future nickel and cobalt prices of USD 20,000 and USD 40,000 per tonne respectively have been assumed with a long term AUD/USD exchange rate of $0.95. Variations to expected future cash flows, and timing thereof, could result in significant changes to the impairment test results, which in turn could impact future financial results. The accounting policies and methods of computation adopted in the preparation of the financial statements are consistent with those adopted and disclosed in the company’s financial statements for the financial year ended 30 June 2010. (d) Going Concern The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. As disclosed in the financial statements, the consolidated entity recorded an operating loss of $587,602 and a cash outflow from operating activities of $1,801,594 for the year ended 30 June 2011 and at balance date, had net current assets of $1,653,155. The Board considers that the consolidated entity is a going concern taking into account the existing cash resources of the Company and the ability of the Company to raise funds from sources including: • The placement of securities under the ASX Listing Rule 7.1 or otherwise; • An excluded offer pursuant to the Corporations Act 2001; or • The sale of assets. In addition the Directors are confident that the major shareholders who have supported the entity in the past will continue to support it with future funding when required. Accordingly, the Directors believe that subject to prevailing equity market conditions, the consolidated entity will obtain sufficient funding to enable it to continue as a going concern and that it is appropriate to adopt that basis of accounting in the preparation of the financial statements. (e) Statement of Compliance The financial statements were authorised for issue on 29th September 2011. The financial statements comply with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial statements, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS). 38 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 1. STaTEMENT oF aCCouNTiNG PoLiCiES (CoNTiNuEd) (f) Basis 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 In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Control exists where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefit from its activities. Business combinations have been accounted for using the purchase method of accounting. Unrealised gains or transactions between the Group and its associates are eliminated to the extent of the Group’s interests in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in the statement of comprehensive income and within equity in the consolidated statement of financial position. Losses are attributable to the non-controlling interests even if that results in a deficit balance. The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised within equity attributable to owners of GME Resources Limited. When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interests as an associate, joint controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 39 nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 1. STaTEMENT oF aCCouNTiNG PoLiCiES (CoNTiNuEd) (g) Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. 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. (h) Borrowing Costs Borrowing costs are recognised as an expense when incurred except those that relate to the acquisition, construction or production of qualifying assets where the borrowing cost is added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. (i) Cash and Cash Equivalents Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. (j) Trade and Other Receivables 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. (k) 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 date. Deferred income tax is provided on all temporary differences at the balance date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: • when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. 40 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 1. STaTEMENT oF aCCouNTiNG PoLiCiES (CoNTiNuEd) (k) Income Tax (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 date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Tax consolidation legislation GME Resources Limited and its 100% owned Australian resident subsidiaries have implemented the tax consolidation legislation. Current and deferred tax amounts are accounted for in each individual entity as if each entity continued to act as a taxpayer on its own. GME Resources Limited recognises both its own current and deferred tax amounts and those current tax liabilities, current tax assets and deferred tax assets arising from unused tax credits and unused tax losses which it has assumed from its controlled entities within the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts payable or receivable from or payable to other entities in the Group. Any difference between the amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) controlled entities in the tax consolidated group. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 41 nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 1. STaTEMENT oF aCCouNTiNG PoLiCiES (CoNTiNuEd) (l) 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 statement of financial position 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 statement of financial position. (m) 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. 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 statement of comprehensive income. (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. 42 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 1. STaTEMENT oF aCCouNTiNG PoLiCiES (CoNTiNuEd) (n) Investments and Other Financial Assets Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transactions costs. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end. 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. (i) Financial assets at fair value through profit or loss Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in profit or loss. (ii) Held-to-maturity investments 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 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. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 43 nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 1. STaTEMENT oF aCCouNTiNG PoLiCiES (CoNTiNuEd) (o) 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 statement of comprehensive income. 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 (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 otherwise 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(p)). 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 to mining property and development assets within property, plant and equipment. (p) Impairment of Assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset 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). 44 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 1. STaTEMENT oF aCCouNTiNG PoLiCiES (CoNTiNuEd) (p) Impairment of Assets (Continued) 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. (q) Trade and Other Payables 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. (r) 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. (s) Earnings per Share Basic EPS is calculated as net result 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 result 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. (t) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of GME Resources Limited. (u) Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 45 nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 2. REvENuE aNd ExPENSES (a) Revenue Operating Activities Interest received Proceeds from: Facilitation fee for prospecting rights Other Total revenue (b) Expenses: Consolidated 2011 $ 2010 $ 57,896 23,383 100,000 7,862 100,000 508 165,758 123,891 Depreciation – plant and equipment 216,478 230,712 3. iNCoME Tax (a) Income Tax Recognised in Profit and Loss - - The prima facie income tax expense on pre-tax accounting result from operations reconciles to the income tax provided in the financial statements as follows: Accounting loss before tax from continuing operations (587,602) (635,852) Income tax benefit calculated at 30% Unused tax losses and tax offset not recognised as deferred tax assets R&D Tax concession Unrecognised deferred tax assets/liabilities Under provision for income tax benefit in prior years Income tax benefit reported in the consolidated statement of comprehensive income. (176,281) 522,532 - (401,823) 55,572 - (190,756) 464,186 19,556 (273,547) (19,439) - 46 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 3. iNCoME Tax (CoNTiNuEd) (b) Unrecognised Deferred Tax Balances Unrecognised deferred tax assets comprise: Losses available for offset against future taxable income Capital allowance differences Capital raising costs Provision for non-recovery of investments Accrued expenses and liabilities Unrecognised deferred tax liabilities comprise: Exploration expenditure Capital allowance differences Consolidated 2011 $ 2010 $ 10,659,641 4,869 15,764 1,169,023 14,809 11,864,106 9,539,242 - 9,539,242 10,137,109 - 7,605 1,169,023 9,900 11,323,637 9,078,303 61,110 9,139,413 Income tax benefit not recognised directly in equity: Capital raising costs 118,122 98,191 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. 4. TRadE aNd oTHER RECEivaBLES (CuRRENT) Sundry debtors GST Refundable The average credit period on sale of goods and rendering of services is 30 days. 5. oTHER FiNaNCiaL aSSETS (CuRRENT) Available-for-sale Listed investments 6,327 (85) 6,242 6,327 42,433 48,760 8,250 8,250 BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 47 nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 6. PLaNT aNd EquiPMENT (NoN CuRRENT) Plant and equipment - at cost Less accumulated depreciation Total plant and equipment Reconciliation of the carrying amount of plant and equipment: Carrying amount at the beginning of the year Additions Disposals Insurance write-off Depreciation Carrying amount at the end of the year Consolidated 2011 $ 2010 $ 762,129 (734,893) 27,236 263,283 7,907 (5,226) (22,250) (216,478) 27,236 781,697 (518,414) 263,283 493,995 - - - (230,712) 263,283 7. dEFERREd ExPLoRaTioN aNd EvaLuaTioN ExPENdiTuRE (NoN CuRRENT) Deferred exploration and evaluation expenditure - at cost Movements: Balance at beginning of the year Direct expenditure Less expenditure written off 30,261,011 1,702,588 31,963,599 (166,124) 31,797,475 29,138,670 1,181,452 30,320,122 (59,111) 30,261,011 The ultimate recoupment of the above deferred exploration and evaluation expenditure is dependent on the successful development and commercial exploitation or, alternatively, sale of the respective areas at amounts sufficient to recover the investment. 8. PaYaBLES (CuRRENT) Trade payables and accruals Consolidated 2011 $ 120,950 120,950 2010 $ 79,450 79,450 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 16. There are no secured liabilities as at 30 June 2011. 48 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 9. CoNTRiBuTEd EquiTY aNd RESERvES Issued and paid up capital $ $ 322,635,902 (2010: 302,352,750) ordinary shares, fully paid 49,093,323 47,487,575 Ordinary shares Balance at the beginning of the year Entitlement Issue (a) Shares issued in lieu of placement fee (b) Issue of shares pursuant to acquisition of tenements (c) Entitlement issue (d) Entitlement issue (e) Costs associated with entitlement issue Issue of shares in lieu of placement fee (f) Balance at the end of the year 47,487,575 1,612,548 10,104 - - - (16,904) - 49,093,323 No of Shares 44,526,381 - - 15,000 1,055,725 1,922,469 (49,533) 17,534 47,487,575 No of Shares Balance at the beginning of the year 302,352,750 253,373,931 Entitlement Issue (a) Shares issued in lieu of placement fee (b) Issue of shares pursuant to acquisition of tenements (c) Entitlement issue (d) Entitlement issue (e) Issue of shares in lieu of placement fee (f) Balance at the end of the year 20,156,850 126,302 - - - - 322,635,902 - - 150,000 21,114,494 27,463,842 250,483 302,352,750 (a) In June 2011, 20,156,850 shares were issued under a non-renounceable rights issue at 8c per share. (b) In June 2011, 126,302 shares were issued in lieu of a placement fee relating to the shortfall of shares (c) During the prior year, the company issued 150,000 shares as consideration for mining rights and legal interests in tenements adjacent to and part of its existing portfolio. (d) In July 2009, 21,114,494 shares were issued under a non-renounceable rights issue at 5c per share. (e) In May 2010, 27,463,842 shares were issued under a non-renounceable rights issue at 7c per share. (f) In May 2010, 250,483 shares were issued in lieu of a placement fee relating to the shortfall of shares placed under entitlement issue (e) above. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 49 nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 9. CoNTRiBuTEd EquiTY aNd RESERvES (CoNTiNuEd) Options Over Unissued Capital Exercise price Balance at the beginning of the year Expired Issued Balance at the end of the year $0.70 2,000,000 (2,000,000) - - $0.13 5,000,000 - - 5,000,000 $0.18 5,000,000 - - 5,000,000 The 5,000,000 13c and 5,000,000 18c options outstanding at year end will expire on 28 February 2012. Reserves Nature and Purpose The financial assets reserve is used to record movements in the fair value of available for sale assets. The option reserve is used to record the fair value of options issued. 10. 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) 2011 % 100 100 100 100 2010 % 100 100 100 100 Company’s Cost of investment 2011 $ - - 616,893 4,561,313 5,178,206 2010 $ - - 616,893 4,561,313 5,178,206 50 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 11. STaTEMENT oF CaSH FLoWS (a) Reconciliation of Cash Flows from Operating Activities Loss from ordinary activities after tax Depreciation / amortisation Exploration costs written off Exploration costs capitalised (excluding creditors) Decrease/(increase) in receivables Increase/(decrease) in sundry creditors Other non cash transactions (including issue of options) Net cash flows from operating activities (b) Reconciliation of Cash and Cash Equivalents Cash balance comprises: Cash at bank Deposits at call Consolidated 2011 $ 2010 $ (587,602) 216,478 166,124 (1,619,819) (275) 23,500 - (1,801,594) (635,852) 230,712 59,111 (1,225,368) 964 (6,824) 232,742 (1,344,515) 205,598 1,554,015 1,759,613 335,044 1,622,822 1,957,866 Cash at bank earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods between 3 to 6 months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. 12. audiToR’S 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 Group other services in relation to the company and any other entity in the Group - Consolidated 2011 $ 2010 $ 22,750 14,196 36,946 34,925 3,429 38,354 BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 51 nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 13. SEGMENT REPoRTiNG The Group has adopted AASB 8 Operating Segments which requires operating segments to be identified on the basis of internal reports about components of the Group that are reviewed by the chief operating decision maker, being the Board of GME Resources Limited, in order to allocate resources to the segment and assess its performance.  The Board of GME Resources Limited reviews internal reports prepared as consolidated financial statements and strategic decisions of the Group are determined upon analysis of these internal reports.  During the period, the Group operated predominantly in one business and geographical segment being the resources sector in Australia.  Accordingly, under the ‘management approach’ outlined only one operating segment has been identified and no further disclosure is required in the notes to the consolidated financial statements. Consolidated 2011 $ 2010 $ 14. EaRNiNGS PER SHaRE Basic and diluted loss per share (cents) (0.19) (0.23) Loss used in calculation of basic and diluted earnings per share 587,602 635,852 Weighted average number of ordinary shares outstanding during the year used in calculation of basic and diluted earnings per share 304,125,651 275,601,101 No adjustment was made for the 10,000,000 options on issue at 30 June 2011 (2010: 12,000,000) as they are not considered to be dilutive. 15. diRECToRS’ aNd ExECuTivES diSCLoSuRES (a) Details of Key Management Personnel (i) Directors Michael Delaney Perrott David John Varcoe James Noel Sullivan Peter Ross Sullivan Geoffrey Mayfield Motteram – Non executive Chairman – Managing Director – Non executive Director – Non executive Director – Non executive Director (ii) Executives Mark Pitts – Company Secretary (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. 52 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 15. diRECToRS’ aNd ExECuTivES diSCLoSuRES (CoNTiNuEd) (b) Compensation of Key Management Personnel (Continued) 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. 2011 (ii) Compensation of Key Management Personnel for the year ended 30 June 2011 Post Employment Benefits Superannuation $ Short Term Benefits Salary & Fees $ Long Term Benefits options $ Executive directors David J Varcoe Non-Executive directors James N Sullivan Michael D Perrott Geoffrey M Motteram Peter R Sullivan Executives Mr Mark Pitts 254,675 25,000 24,000 30,000 24,000 24,000 60,000 416,675 - - - - - 25,000 (ii) Compensation of Key Management Personnel for the year ended 30 June 2010 - - - - - - - 2010 Executive directors David J Varcoe James N Sullivan Non-Executive directors Michael D Perrott Geoffrey M Motteram Peter R Sullivan Executives Mr Mark Pitts Short Term Benefits Salary & Fees $ Post Employment Benefits Superannuation $ Long Term Benefits options $ 218,091 24,000 32,500 24,000 24,000 32,244 354,835 - - - - - - - - - - - - - - Total $ 279,675 24,000 30,000 24,000 24,000 60,000 441,675 Total $ 218,091 24,000 32,500 24,000 24,000 32,244 354,835 BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 53 nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 15. diRECToRS’ aNd ExECuTivES diSCLoSuRES (CoNTiNuEd) (c) Shareholdings of Key Management Personnel (Consolidated) Michael Delaney Perrott David John Varcoe James Noel Sullivan Peter Ross Sullivan Geoffrey Mayfield Motteram ordinary Shares 1/7/2010 13,343,613 254,375 14,329,570 13,987,158 5,267,552 Net Change 889,574 19,958 955,302 932,475 351,169 ordinary Shares 30/6/2011 14,233,187 271,333 15,284,872 14,919,633 5,618,721 (d) Other Transactions and Balances with Key Management Personnel There were no other transactions with key management personnel during this financial year. 16. FiNaNCiaL iNSTRuMENT diSCLoSuRES Financial Risk Management Objectives The Group is exposed to market risk (including interest rate), credit risk and liquidity risk. The Group does not issue derivative financial instruments, nor does it believe that it has exposure to such trading or speculative holdings through its investments in associates. Risk management is carried out by the Board as a whole, which provides the principles for overall risk management, as well as policies covering specific areas such as foreign exchange risk, interest rate risk, and liquidity risk. The group uses different methods to measure different types of risk to which it is exposed. Where appropriate these methods will include sensitivity analysis in the case of interest rate, and other price risks and aging analysis for credit risk. (a) Categories of Financial Instruments Fixed interest Rate Maturing Weighted average Effective interest Rate 2011 Financial Assets Floating interest Rate $ Within 1 year $ over 1 year $ Non-interest Bearing $ Total $ Cash assets Other financial assets Trade and other receivables Payables 3.96% - 205,598 - 1,554,015 - - - - - 205,598 1,554,015 - - - - - - - - - - - 8,250 - 1,759,613 8,250 - 8,250 1,767,863 120,950 120,950 120,950 120,950 54 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 16. FiNaNCiaL iNSTRuMENT diSCLoSuRES (CoNTiNuEd) Fixed interest Rate Maturing Weighted average Effective interest Rate 2010 Financial assets Floating interest Rate $ Within 1 year $ over 1 year $ Non-interest Bearing $ Total $ Cash assets Other financial assets Trade and other receivables Payables 3.22% - 335,044 - 1,622,822 - - - - - 335,044 1,622,822 - - - - - - - - - - - 8,250 1,957,866 8,250 42,433 42,433 50,683 2,008,549 79,450 79,450 79,450 79,450 Interest Rate Risk Sensitivity Analysis (b) The Company and the Group are exposed 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, in respect of the cash balances and deposits. The sensitivity analyses below have been determined based on the exposure to interest rates for instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the change in interest rates. At reporting date, if interest rates had been 50 basis points higher and all other variables were held constant, the Group’s net loss before tax and equity would reduce by $8,798 and increase by $8,798 respectively (2010:$9,789). A reduction in the interest rate would have an equal but opposite effect. (c) Liquidity Risk The Company manages liquidity risk by continually monitoring cash reserves and cash flow forecasts to ensure that financial commitments can be met as and when they fall due. (d) Credit Risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is not significantly exposed to credit risk from its operating activities, however the Board does monitor receivables as and when they arise. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial asset mentioned above. The Group does not hold collateral as security. No material exposure is considered to exist by virtue of the possible non performance of the counterparties to financial instruments and cash deposits. BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 55 nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 16. FiNaNCiaL iNSTRuMENT diSCLoSuRES (CoNTiNuEd) (e) Capital Management Risk The Company controls the capital of the Group in order to maximise the return to shareholders and ensure that the Group can fund its operations and continue as a going concern. The Company effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in these risks and the market. These responses include the management of expenditure and debt levels, distributions to shareholders and share issues. There have been no changes in the strategy adopted by management to control the capital of the group since the prior year. (f) 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 statement of financial position and in the notes to and forming part of the financial statements. 17. CoMMiTMENTS aNd CoNTiNGENT LiaBiLiTiES There were no capital commitments or contingent liabilities, not provided for in the financial statements of the Group as at 30 June 2011, other than: (a) Mineral Tenement Leases In order to maintain current rights of tenure to mining tenements, the Group in its own right or in conjunction with its joint venture partners may be required to outlay amounts of approximately $2,424,223 (2010: $5,506,000) 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 Group 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 Group’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 Group’s operations. Native title claims have been made over ground in which the Group currently has an interest. It is possible that further claims could be made in the future. The Company has established access agreements with the major claimant groups in the area. All of the mineral resources are located on granted mining leases. Once granted there is no opportunity for veto of project development under the Native Title act however owners must adhere to the provisions of the Aboriginal Heritage Act 1972 which regulates how to deal with specific heritage sites that may exist on the tenement. 56 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 17. CoMMiTMENTS aNd CoNTiNGENT LiaBiLiTiES (CoNTiNuEd) (c) Non Cancellable Operating Lease Commitments Within one year One year or later and no later than five years Consolidated 2011 $ 32,850 13,687 46,537 2010 $ 27,676 - 27,676 18. 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 17 – Commitments and Contingent Liabilities. 19. RELaTEd PaRTiES 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 Current Payables Loans 2011 $ 2010 $ 13,706,097 11,135,928 1,441,784 1,530,993 BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 57 nOtes tO the Financial statements FOr the Year enDeD 30 June 2011 20. PaRENT ENTiTY diSCLoSuRE As at, and throughout, the financial year ended 30 June 2011 the parent company of the group was GME Resources Limited. Results of the parent entity Loss for the period Other comprehensive income Total comprehensive result for the period Financial position of the parent entity at year end Current assets Total assets Current liabilities Total liabilities Total equity of the parent entity comprising of : Share capital Option reserve Financial assets reserve Accumulated losses Total Equity 21. SuBSEquENT EvENTS 2011 $ 687,601 - 687,601 2010 $ 735,854 - 735,854 1,770.556 33,165,804 1,660,734 1,660,734 2,011,325 32,195,365 1,608,444 1,608,444 49,093,323 (1,125) 973,538 (18,560,667) 31,505,069 47,487,575 (1,125) 973,538 (17,873,066) 30,586,922 No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the Group’s operations, the results of those operations or the Group’s state of affairs in future financial years. 58 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS DirectOrs’ DeclaratiOn 1. In the opinion of the directors of GME Resources Limited (the “Company”): a. The financial statements, notes, and the additional disclosures are in accordance with the Corporations Act 2001 including: i) giving a true and fair view of the group’s financial position as at 30 June 2011 and of its performance for the year then ended; and ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001; and b. there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. c. the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board. 2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2011. This declaration is signed in accordance with a resolution of the Board of Directors. david j varcoe Managing Director Perth, Western Australia 29th September 2011 BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 59 inDePenDent auDitOr’s rePOrt 60 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS inDePenDent auDitOr’s rePOrt BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 61 aDDitiOnal inFOrmatiOn FOr listeD PuBlic cOmPanies The following additional information, applicable at 21 September 2011, is required by the Australian Securities Exchange Ltd in respect of listed public companies only. Shareholding a. distribution of Shareholders Category (size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over Number of Holders 90 339 175 578 228 1,410 b. c. d. The number of shareholders holding less than a marketable parcel is 456. The names of the substantial shareholders listed in the holding company’s register as at 21 September 2011 are: Shareholder ALCF PTY LTD (FORMERLY RETIREWISE) MANDALUP INVESTMENTS PTY LTD Number % of issued capital 85,729,092 25,715,246 26.6 8.0 Voting Rights The voting rights attached to each class of equity security are as follows: Ordinary shares — Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. 62 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS aDDitiOnal inFOrmatiOn FOr listeD PuBlic cOmPanies e. 20 Largest Shareholders — Ordinary Shares Name Number of ordinary Fully Paid Shares Held % Held of issued ordinary Capital 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 RETIREWISE CAPITAL PTY LTD RETIREWISE CAPITAL AUSTRALIA PTY LTD NEWPORT BLACK TRUST COMPANY LTD MANDALUP INVESTMENTS PTY LTD RETFORD RESOURCES NL DUNCRAIG INVESTMENTS SERVICES PTY LTD EQUITY TRUSTEES LIMITED TWO TOPS PTY LTD MR PETER ROSS SULLIVAN HARDROCK CAPITAL PTY LTD MANDALUP INVESTMENTS PTY LTD J P MORGAN NOMINEES AUSTRALIA LIMITED PROTAX NOMINEES PTY LTD MR JAMES NOEL SULLIVAN MD NICHOLAEFF PTY LTD MR DOUGLAS STUART BUTCHER NAVIGATOR AUSTRALIA LTD GEOMETT PTY LTD TUNZA HOLDINGS PTY LTD SULLIVANS GARAGE PTY LTD 29,262,418 24,870,544 24,658,424 20,241,180 16,086,642 14,233,187 11,408,024 8,096,525 7,034,105 6,064,867 5,474,066 5,249,140 4,413,333 4,288,174 4,077,170 4,000,400 3,565,471 3,466,666 3,088,390 2,855,964 9.07 7.71 7.64 6.27 4.99 4.41 3.54 2.51 2.18 1.88 1.70 1.63 1.37 1.33 1.26 1.24 1.11 1.07 0.96 0.89 Stock Exchange Listing Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange Limited. The ASX code is GME. 202,434,690 62.74 BACK TO CONTENTS GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT 63 tenement DirectOrY Project Tenements Company interest Comments abednego West P 39/4934, P 39/4716 – 4723, P 39/4729 – 4738, P 39/4751, P 39/4572, P 39/4496, P 39/4999, P 39/5000, P 39/5090, M 39/0825, M 39/0427 P 39/5093, P 39/5094 duck Hill Eucalyptus E 31/733 M 39/744 M 39/289, M 39/430 and M 39/344 M 39/665 - 666 and M 39/674 M 39/313 M 39/568, M 39/570, M 39/616 M 39/802 -804 Golden Cliffs 100% Placer Royalty 2% Gold NiWest 100% GME 50% NiWest 100% NiWest 100% NiWest 100% Murchison Metals 50% Anglo 100% Gold Rights plus nickel royalty Minara Royalties Minara Royalties Old City 100% gold rights E 39/1419, E 39/1470, E 39/1527, E 39/1552 NiWest 100% Hawk Nest M 38/218 and P 38/3397 Hepi M 39/717 – 718, 819 Laverton downs E 38/1876, E38/2394 E 38/2066 Leonora East Linden P 37/7185 P 37/6931-6932 P 37/7279-7282 P 37/7425-7432 E 37/871 E 39/1375 P 39/4637-4638 MLA 39/1077-1078 P 39/2974 - 2976 converted to MLA 39/500 Mertondale M 37/591 Mt Margaret P39/4971-4972 Mt kilkenny E 37/878 E 39/1266-1267 P 39/4571, P39/4827 M 39/878 – 879 M 39/845 Mt Morgan South P 39/4639 P 39/4743-4750 GME 100% Niwest 100% NiWest 100% Golden Cliffs 100% GME 100% Golden Cliffs Golden Cliffs GME Golden Cliffs 100% Golden Cliffs 100% GME 100% GME 100% GME 10% NiWest 100% Golden Cliffs NiWest 100% NiWest 100% NiWest 100% NiWest 100% NiWest 100% GME Golden Cliffs 90% Haoma Mining NL Retford Resources Royalty Murrin Murrin (Minara Resources) M 39/426, 456, 552, 553 and 569 Golden Cliffs 100% rights to non nickel laterite Nickel laterite royalty 20 cents per tonne Murrin Murrin North M 39/758 Waite kauri M 37/1216 Wanbanna M 39/460 Misc Licences L 39/174, L 37/175, L 31/46, L 40/25, L 39/194, L 39/215 Niwest 100% Niwest 100% NiWest 80% NiWest 100% 20% Wanbanna Pty Ltd Haul Roads, Ground Water Resources LEGENd E: Exploration Licence P: Prospecting Licence PLA: Prospecting Licence Application M: Mining Lease ELA: Exploration Licence Application L: Miscellaneous Lease MLA: Mining Lease Application 64 GME RESOuRCES LiMiTEd 2011 ANNuAL REpORT BACK TO CONTENTS 

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