Graco
Annual Report 2009

Plain-text annual report

2009 Annual Report Greenland Capital: Nuuk Greenland (Kalaallisut: Kalaallit Nunaat, meaning “Land of the Greenlanders”; Danish: Grønland) is a self-governing Danish province located between the Arctic and Atlantic Oceans, east of the Canadian Arctic Archipelago. Greenland is, by area, the world’s largest island which is not a Population (July 2008 est): 57,564. continent in its own right. Though ethnically an Arctic island nation and responsibility for self-government of judicial affairs, geographically a part of the continent of North policing, and natural resources. Greenlanders were America, politically and historically Greenland recognised as a separate people under international is associated with Europe, specifically Iceland, law. Denmark maintains control of finances, Norway, and Denmark. In 1978, Denmark granted foreign affairs, and defense. It is a step towards home rule to Greenland. full independence from Danish rule. Greenlandic A referendum on greater autonomy was approved on 25 November 2008. Internationally, on 21 June 2009, Greenland assumed self-determination with became the official language of Greenland at the historic ceremony. SECTION 1 | 1 CORPORATE DIRECTORY DIRECTORS Mr Michael Hutchinson Mr Simon Cato Mr Roderick McIllree Mr Jeremy Whybrow Mr Malcolm Mason Mr Tony Ho Dr. Hans Kristian (Hank) Schønwandt COMPANY SECRETARY Mr Bruce Acutt BUSINESS OFFICE First Floor 33 Colin Street West Perth, Western Australia, 6005 Telephone: +61 8 9226 1100 Facsimile: +61 8 9226 2299 GREENLAND OFFICE PO Box 156 Narsaq, Greenland, 392 Telephone: +299 661 494 Facsimile: +299 662 494 WEBSITE www.ggg.gl AUSTRALIAN SOLICITORS Fairweather & Lemonis Level 9 172 St Georges Terrace Perth, Western Australia, 6000 GREENLAND SOLICITORS Nuna Law Qullilerfix 2, 6 Post Box 59 3900 Nuuk, Greenland AUDITORS Deloitte Woodside Plaza 240 St Georges Terrace Perth, Western Australia, 6000 SHARE REGISTRY Advanced Share Registry Services 110 Stirling Highway Nedlands, Western Australia, 6009 SECTION 1 | 2 CONTENTS Section 1 Company Focus Letter from the Chairman Review of Operations Rare Earths Market Overview Section 2 Corporate Governance Statement Directors Report Audit Independence Declaration Directors Declaration Income Statement Balance Sheets Statement of Change in Equity Statement of Cash Flows Notes to the Financial Statements ASX additional information 1 | 4 1 | 6 1 | 8 1 | 18 2 | 1 2 | 4 2 | 23 2 | 26 2 | 27 2 | 28 2 | 29 2 | 31 2 | 32 2 | 67 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 3 Company Focus 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy (“Greenland Minerals” or the “Company”) is a mineral exploration and development Company active in southern Greenland. Scoping and feasibility Resources The first, and most critical aspect, in achieving recognition as a major, world class mining project is the completion of a resource inventory to international standards. We understand that at present Kvanefjeld is the largest compliant (JORC) resource of rare earths in the world. In addition Kvanefjeld contains substantial JORC compliant resources of Uranium, Zinc and Sodium Fluoride. Following on from metallurgical studies in 2008 and 2009 the Company is focused on mining and engineering studies, for inclusion into a pre-feasibility study, initial results of which will be out late in 2009. This study will be a critical milestone for the Company, with its main focus on developing a process route that can extract the elements of interest in an economically viable and environmentally responsible manner. The mining study is being conducted by Coffey Mining Pty Ltd and covers the mine design and ore scheduling, geotechnical issues, hydrogeology and tailings management. The engineering study component is being completed by GRD Minproc and includes, process design, engineering design and capital and operating costs of a processing plant. Environmental studies Environmental studies have been ongoing for the past three years with Orbicon, a leading Danish based environmental sciences group undertaking field work and base-line monitoring around the Kvanefjeld project area. This work is conducted under the supervision of Coffey Natural Systems who are preparing a strategy for the Environmental and Social Impact Assessment. Community relations The Company and its representatives have facilitated and participated in many community based information and consultation meetings this year. The meetings have also been attended by representatives of the Government, the local Municapality and the Bureau of Mines and Petroleum (BMP). The topics being discussed at these meetings have widened considerably during that time and the debate no longer focuses solely on the issue of uranium mining but now includes all the social and environmental impacts that a large mining project will have on Greenland. The Company also supports local sporting and educational activities. Rare Earths Public awareness of the strategic importance of rare earths in the modern world increased dramatically this year with fears of potential supply constraints and a growing recognition of the “very green” role they have in reducing the impact of global warming and climate change. Given its importance Kvanefjeld, as the largest JORC compliant rare earth project has naturally gained prominence. This is especially so as its magmatic source means we have both light and heavy rare earths in our resource inventory. Corporate We are continuing to refine our plans for listing in a major overseas jurisdiction which were delayed due to the global financial crisis. Given the relatively quick rebound in the demand for commodities and the exceptional demand for rare earths the Company is reviewing the opportunity this new situation presents and we are pleased to have advised shareholders on 18 September 2009 of the appointment of Evolution Securities Limited, a major UK stockbroking firm, to handle potential capital raisings and other matters that may arise in the future. SECTION 1 | 4 Status of Political and Community Relationships In early June, 2009 an election took place in Greenland that resulted in a new government coming to power. The IA party (Inuit Ataqatigiit) has formed a coalition government with the Demokraatit party. This election preceded the handover date of June 21, where Greenland officially took the next step to independence from Denmark with the transition from Home Rule to Self Rule. This was an event attended by numerous heads of state and international dignitaries and put Greenland in the global media spotlight. The transition to self-rule has implications for participants in Greenland’s exploration and mining industry as Greenland can now assume 100% control of their mineral rights, whereas previously the mineral rights were shared with Denmark. A new mining act is in the process of being drafted and it is anticipated that this will be implemented in early 2010. A genuine recognition is present throughout all political levels in Greenland that the development of a strong minerals industry is of fundamental importance to the economy, and will create many new employment opportunities. In southern Greenland, the global economic crisis has led to rising unemployment and difficulties in traditional industries, including fishing and tourism, and new industry is required to build the foundation of a prosperous independent future. In early September, 2009, Company representatives participated in a meeting in Narsaq, south Greenland, attended by the new Minister of Commerce and Raw Materials Ove Karl Berthelsen, along with the Mayor and council members of the southern Greenland municipalities. This incorporates the three main towns of southern Greenland - Qaqortoq , Nanortalik and Narsaq. Company representatives presented an update on the status of the Kvanefjeld project to the above parties, before general discussions and any issues were raised, and where the project is within the feasibility frame work. A site visit to the Kvanefjeld plateau was conducted to ensure that the Minister and Mayor had a good understanding of the geography of the project area. Following the meeting with the council and Minister, a public meeting/debate was held in Narsaq that was well-attended by community members. The meeting was headed by a panel that included the Minister of Commerce and Raw Materials, the Mayor, Company representatives, and spokespersons for groups opposed to mining. The aim of the meeting was to update the community on emerging opportunities in southern Greenland, and specifically update the community on the status of the Kvanefjeld project, as well as discussing issues pertaining to the mining of uranium-bearing ores. Following presentations by panel members the community had the opportunity to ask specific questions and provide their opinion and perspective. The public meeting provided an excellent opportunity to clearly update key stakeholders on the status and significance of Kvanefjeld, and it indicated the strong support from the community for the project to advance to a Definitive Feasibility Study. The meeting was widely reported in the Greenland media. Overall, the meetings presented a great opportunity for the Company to commence dialogue with the new Greenland government and southern Greenland municipal council, and the outcomes were considered positive by all parties. 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 5 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Letter from the Chairman Dear Shareholder On behalf of the Board of Greenland Minerals and Energy Limited I am pleased to present this Annual Report for the period from the 1 July 2008 to 30 June 2009. The Company has met significant milestones that has transformed it from an explorer to a company concentrating on development. When I joined the Company in November 2008 it was a time of great instability in world financial markets, however, the prospects of our Company looked appealing in the medium to long term. Progress since that time has confirmed my view. As you will see in this report we have met significant milestones that have transformed the Company’s focus from exploration to development. Our resource upgrade, announced 18 June 2009, has shown that the Kvanefjeld project is a world class resource of rare earths and uranium, and indeed our focus, and the worlds focus, is increasingly on the strategic value of the rare earths. We have now made the strategic decision to devote the majority of our funds to examine the technical issues in bringing this great resource into production. The work conducted this year has therefore focussed on drilling for metallurgical test samples and geotechnical drilling, (that is, testing for rock stability), all important information which will complete our current mine design work. Progress on our pre-feasibility study has continued for the whole period and this annual report and our quarterly reports for this year detail our progress. During 2008 and 2009 senior executives of the Company, principally Rod McIllree, John Mair and Shaun Bunn have been able to present our case to the government and people of Greenland. We believe, as many people in Greenland also now believe, that the Kvanefjeld project may well be a magnificent opportunity for Greenland to move to greater economic self sufficiency. We are also keenly aware of the importance of showing all stakeholders in Greenland that the resource can be developed responsibly and for the benefit of all. I would like to thank all the staff of Greenland Minerals and Energy Limited and our invaluable contractor in Greenland, Greenland Mining Services A/S. On behalf of the Directors, I thank you for your continuing support as a shareholder of the Company as we develop the world class resource that is Kvanefjeld. Mr Michael Hutchinson Chairman SECTION 1 | 6 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 7 Review of Operations by the Managing Director 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G The Company has achieved much in the past two years, building the foundations for a world class mining operation at our flagship Kvanefjeld multi-element project in southern Greenland. Introduction The Company is primarily focused on its license area over the northern Ilimaussaq Intrusive Complex; a unique geological entity with extraordinary resource potential. A large JORC-compliant multi-element resource (rare earth elements, zinc, uranium and sodium fluoride) has been rapidly defined at Kvanefjeld, which clearly highlights the world-class resource potential of the Ilimaussaq Complex. A pre-feasibility study is currently underway, with a focus on defining a process route to extract the elements of interest from these unique multi-element ores in an economically viable and environmentally responsible way. The Company’s vision is one of the big picture; to be a significant producer of commodities of fundamental strategic importance and value to tomorrows world. Rare earth elements (REE) are now recognised as being critical to the global manufacturing base of many emerging consumer items. China, however, has successfully monopolised global REE supply, raising serious concerns to non-Chinese consumers over the long-term stability of REE supply and pricing. Electricity from nuclear power continues to gain acceptance internationally as the clean base-load energy supply of the future; owing to rapidly increasing power demands coupled with concerns over carbon-based energy sources, greenhouse gas emissions and global warming. As the nuclear renaissance continues to gain momentum, the strategic importance of uranium resources will continue to emerge. The northern Ilimaussaq Complex offers the potential for multi-element resources of unparalleled scale; resources that could restore balance to the global supply of rare earth elements, and help provide energy security to Europe for many decades. Exploration activities Exploration activities in the 2008 exploration season were extensively commented on in the 2008 Annual Report and resulted in the resource upgrade discussed below. In June 2009, the Company commenced a field program in Greenland that was primarily focused Kvanefjeld - Strategic location on generating information that will be utilised in the various studies relating to the broader feasibility process. This includes sterilisation drilling, geotechnical drilling, as well as drilling for metallurgical samples. The metallurgical drill holes were designed to sample various ore-types across the resource. This material will be used in ongoing metallurgical testwork. In addition, data collection for environmental studies continues, and builds on data collected during the previous two field seasons. Collectively, this data forms the basis of an Environmental Baseline Study. SECTION 1 | 8 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 9 Review of Operations by the Managing Director 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Whilst actively operating in Greenland, the Company conducts meetings to update community representatives on the current status of our activities in southern Greenland. These community meetings provide an excellent forum for the community to raise any queries and concerns, which can then be discussed by all stakeholders. Updated Resource Statement Late in the June quarter, the Company released an updated resource statement for the Kvanefjeld multi-element project. Kvanefjeld is the first defined resource within the Company’s exploration license area over the northern Ilimaussaq Complex in southern Greenland. The resource update was based on geochemical assay data that was generated from the substantial diamond drill program conducted during the 2008 field season in Greenland. The 2008 drill program had aimed to improve the resource category, as well as to expand the overall resource base. In consideration of these aims, the 2008 drill program and resulting resource upgrade can be regarded as extremely successful. Following the extensive exercise of data validation for the large multi-element dataset, a new resource estimate was generated by consultants Hellman and Schofield Pty Ltd. The updated resource statement confirms the size and quality of the multi-element resource at Kvanefjeld, with 79% of all rare earth oxide (REO), uranium and zinc resources now in the ‘indicated’ category. The new resource statement contains 4.79 Mt REO, 0.9 Mt zinc and 283 Mlbs U3O8. Significantly, Kvanefjeld represents just a small portion of the Company’s exploration license that covers the highly- prospective northern part of the Ilimaussaq Intrusive Complex. Kvanefjeld Multi-Element Resource Statement, June, 2009 At U3O8% cutoff grades1 Tonnes (million) U3O8%2 U 3O8 lb/t TREO%3 Zn% Resource 0.015 0.020 0.025 365 92 457 276 63 339 207 43 250 0.028 0.027 0.028 0.032 0.031 0.032 0.035 0.036 0.035 0.62 0.59 0.62 0.70 0.69 0.70 0.77 0.78 0.77 1.06 1.12 1.07 1.13 1.21 1.14 1.20 1.31 1.22 category Indicated Inferred TOTAL Indicated Inferred TOTAL Indicated Inferred TOTAL 0.22 0.22 0.22 0.23 0.24 0.23 0.23 0.25 0.24 1. There is greater coverage of assays for uranium than other elements owing to historic spectral assays. U3O8 has therefore been used to define the cutoff grades to maximise the confidence in the resource calculations. 2. Additional decimal places do not imply an added level of precision. 3. Total Rare Earth Oxide (TREO) refers to the rare earth elements in the Lanthanide series plus yttrium. Note: Figures quoted may not sum due to rounding. SECTION 1 | 10 Rare Earths at Kvanefjeld The value of a rare earth element resource is not just dependant on the overall grade and tonnage of the resource, but is greatly influenced by the proportion of individual rare earth elements. Light rare earth elements nearly always occur in much greater abundance than heavy rare earth elements. Owing to the relative scarcity of heavy rare earths, and the ever increasing applications for these metals, their demand and value is soaring. Two dominant types of rare earth deposits include those associated with carbonatites (Mountain Pass, Mt Weld, Hoidas Lake), and those associated with peralkaline igneous complexes (Thor Lake, Strange Lake, Kvanefjeld). It is generally the deposits that are associated with peralkaline complexes that are relatively enriched in the lucrative heavy rare earth elements. The Ilimaussaq Complex, host to Kvanefjeld, is the world’s type example for agpaitic nepheline syenites; an extreme form of peralkaline igneous rocks. Accordingly, the rare earth element resource at Kvanefjeld is not just extremely large, but also contains a favourable mix of rare earth elements, with a relative enrichment of the heavy rare earths. Kvanefjeld is also strongly enriched in yttrium; an element that is not a lanthanide but it is included with rare earths owing to its similar chemical properties to heavy rare earths. The heavy rare earth elements and yttrium combined account for 14% of the rare earth resource at Kvanefjeld. Kvanefjeld multi-element ore: Rare earth constituents plus yttrium by percent La Ce Pr Nd 27.5 42.0 4.2 12.9 Sm 1.6 Eu 0.1 Gd 1.1 Tb 0.2 Dy 1.1 Ho 0.2 Er 0.6 Tm 0.1 Yb 0.5 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Pie charts illustrating the relative abundance of individual rare earth elements within the resources at Kvanefjeld, and two other well documented rare earth element deposits; Mountain Pass in California, USA, and Mt Weld, in Western Australia. Kvanefjeld is hosted by peralkaline igneous rocks of the Ilimaussaq Complex, and is relatively enriched in heavy rare earths in comparison to deposits hosted by carbonatites, such as Mt Weld and Mountain Pass (soure: IMCOA, Company websites). SECTION 1 | 11 Review of Operations by the Managing Director 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Update on Geological Framework and Resource Potential In the geological world alkaline magmatism is known to be associated with some of the world’s most prolific mineral deposits. Alkaline intrusions host a variety of mineral deposit types that include phosphate deposits, specialty metal deposits inclusive of REEs, niobium, tantalum, and titanium, and some alkaline complexes are also associated with prolific copper and gold deposits. The Ilimaussaq Intrusive Complex is the world’s type-example of a particularly unusual group of alkaline rocks that are referred to as agpaitic nepheline syenites. Similar alkaline igneous complexes include the Khibina Complex in Sweden that hosts the world’s largest apatite deposits (phosphate ores), and the Lovozero Complex in Russia (Kola Peninsula) that hosts vast loparite deposits that are rich in niobium and titanium. The Ilimaussaq Complex is unique, in that it contains almost purely agpaitic rocks. For these reasons, it has been the subject of extensive studies from scientists worldwide. Henning Sørensen, one of the world’s most highly regarded geoscientists, devoted a significant portion of his career to understanding the Ilimaussaq Complex and its economic significance. In a paper published in 1992 Sørensen theorised that agpaitic rocks could contain vast resources of rare elements that could be exploited in a multi-element capacity. As the work programs of Greenland Minerals and Energy progress, the results are starting to indicate that Sørensen’s theory is correct. A JORC-compliant 457Mt resource has been defined at Kvanefjeld in a lujavrite host. This lujavrite underlies naujaite throughout the majority of the northern part of the complex, where regional resources are likely located. The lujavrite is host to REE, uranium, zinc and sodium fluoride mineralisation. The regional extent of the lujavrites can be seen in the diagram on the facing page. Ongoing geological studies by the Company have built on the existing knowledge base to improve the understanding of ore-genesis within the Ilimaussaq Intrusive Complex. The northern half of the complex preserves the uppermost levels, which are the most prospective areas for bulk- tonnage, multi-element resources. The southern half of the complex is more deeply eroded, exposing basal units referred to as kakortokites that contain the zirconium-rich mineral eudialyte. Black lujavrite, the dominant Shipping samples from Narsaq. host to REEs, uranium, zinc and sodium fluoride mineralisation at Kvanefjeld, is now known to be widespread through the northern part of the complex. Whilst black lujavrites are mineralised throughout, the grades of REEs, uranium and zinc are highest in the uppermost portions of the black lujavrite where they have been concentrated by magmatic processes. The Company is working to identify broad domal upwellings of black lujavrite where new bulk-tonnage ore zones are likely to occur. As the geological understanding improves, the Company is increasingly confident of the immense resource potential of the Ilimaussaq Complex. In this sense, Kvanefjeld can be considered as the first multi-element resource defined within the broader Ilimaussaq mineral field. SECTION 1 | 12 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Aerial photograph over the Company’s exploration license covering the northern Ilimaussaq Complex. Black lujavrite is the main host unit to multi-element mineralisation, and outcrops most extensively on Kvanefjeld Plateau. Whilst black lujavrite is limited in outcrop, it occurs through most of the complex at shallow to moderate depths. There is genuine scope to define new significant multi-element ore zones within the license area. SECTION 1 | 13 Review of Operations by the Managing Director Update on the Pre-Feasibility Study Following two highly successful exploration campaigns, conducted in 2007 and 2008, and the subsequent rapid growth of the resource base, the Company commenced a pre-feasibility study on the Kvanefjeld multi-element project in late 2008. The study, scheduled for completion in late 2009, is a critical milestone for the Company and given the unique nature of the geology and the multi- element ores its main focus is on developing a process route that can extract the elements of interest in an economically viable and environmentally responsible manner. The recently upgraded resource statement has confirmed the world class potential of Kvanefjeld, and emphasises the importance of the pre-feasibility process to the evolution of the project. The mining study component is being conducted by Coffey Mining Pty Ltd and covers mine design and ore scheduling, geotechnical issues, hydrogeology and tailings management. The engineering study component is being completed by GRD Minproc and includes the process design, engineering design and capital and operating costs of a processing plant. Environmental studies are also underway with Coffey Natural Systems preparing a strategy for the Environmental and Social Impact Assessment and Orbicon, a Danish based environmental science group, undertaking field work and base-line monitoring. Previous work by the Danish Atomic Energy Agency (RISO) identified a viable way to extract uranium. However, given the emerging economic and strategic significance of specialty metals, such as rare earths, the Company is taking a multi-element approach with other process routes being evaluated to maximise specialty metal recoveries and the economic viability of the project. The initial metallurgical development program has been completed. As part of this testwork program the Company engaged Perth based SGS Lakefield Oretest to carry out a fourth stage of testwork (T4), following on from the initial T1 and T2 research programs conducted in 2008 at Amdel, in South Australia and the T3 research program completed early in 2009 by SGS Lakefield Oretest. ANSTO (Australian Nuclear Services and Technology Organisation) were also engaged to work on process development, specifically for REE metallurgical behavior and recovery. The results of ANSTO’s current work program will feed into the broader process development and plant design that is being conducted by GRD Minproc. During the 1970’s and early 1980’s the Danish government, through RISO and the Geological Survey of Greenland, commissioned a series of high quality studies to assess the viability of Kvanefjeld as a potential uranium resource. Their work included exploration and resource definition, detailed environmental studies, socio-economic impact studies and infrastructure studies that included investigations into hydro-electric power. Mine plans were established, which included the plant 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 14 location and potential sites for tailings disposal. A series of metallurgical programs were run to identify a viable route to extract uranium. This culminated in the development of a pilot plant to test high pressure carbonate leaching on bulk samples extracted from Kvanefjeld. Despite the extensive studies and significant technical advances made, work on the project ceased in the early 1980’s due to a change in the political sentiment toward nuclear energy that emerged globally. Given the extensive and successful research program and pilot plant operation conducted by RISO on the Kvanefjeld project Greenland Minerals strategy is to build on this knowledge and to use this as the basis of its prefeasibility study. With this in mind the Company engaged Jorgen Jensen, the former project manager of the Kvanefjeld project for RISO. Mr Jensen has contributed significantly to the Company’s metallurgical studies, and has helped ensure that the results of all the previous test work are incorporated into the current metallurgical program. Metallurgical Testwork The key results achieved from the extensive metallurgical testing to date show that: • the rare earths can be beneficiated by froth flotation, and uranium to a lesser extent. The recovery of U and REE to a flotation concentrate equated to over 70% and 90% respectively; • a processing route using Flotation/Sulphation Roast/Water Leaching was unlikely to prove 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G economic due to the lower selectivity for uranium during flotation and high reagent consumptions; • Carbonate Pressure Leaching (CPL), based on the process parameters developed by RISO during the 1983 Pre- feasibility Study, was highly selective for uranium; • REEs can be recovered from CPL residues in a float concentrate. Further work is required to improve selectivity and hence concentrate grades; and • REEs can be recovered from CPL residues, with or without a flotation stage, using a dilute acid leach. More work is required to improve recovery and reduce acid consumption; and • at least one of the more valuable minerals, containing uranium and heavy REE, is amenable to heavy liquid separation techniques opening up the possibility of beneficiating the ore prior to CPL. Overall, the advances on REE metallurgy made to date are considered as extremely encouraging. SECTION 1 | 15 Review of Operations by the Managing Director Flowsheet Development Based on the testwork results to date, and the substantial piloting work carried out by RISO for their 1983 Study, the Company has developed a basic flowsheet which allows the uranium to be extracted ahead of the REE refining stage using CPL technology. The CPL residues are then treated by froth flotation, to concentrate the REEs prior to acid leach and subsequent refining into a REE carbonate product. The flowsheet is detailed in the figure below. 2009 Field Activities in Greenland The Company has just recently completed a field program in Greenland that included sterilisation drilling, geotechnical drilling, and drilling for metallurgical samples. The metallurgical drill holes were designed to sample various ore-types across the resource. This material will be used in ongoing metallurgical testwork. In addition, data collection for environmental studies was completed. This builds on data collected during the previous two field seasons. Collectively, this forms the basis of an Environmental Baseline Study. 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 16 Review of Operations by the Managing Director 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 17 Whilst actively operating in Greenland, the Company conducts community meetings to update community representatives on the current status of the Company’s exploration activities in southern Greenland. These community meetings provide an excellent forum for the community to raise any queries and concerns, which can then be discussed by all stakeholders. Mineralogical Studies and Ore-Type Classification As part of the pre-feasibility study, the Company is undertaking a detailed mineralogical and geochemical study of the Kvanefjeld ore body. This will enable ore types to be classified on the basis of mineralogy and geochemistry. The various ore types will then be metallurgically tested at a bench scale level, to ensure that the optimal process route is confirmed and that variations in ore type are fully accounted for. During previous studies, variations in the ore body were not sufficiently understood nor accurately mapped as there was no multi-element geochemical coverage. This was essentially due to a lack of geochemical data as the drill core was only analysed spectrally during that phase of the study carried out by RISO. Greenland Minerals now has a more complete geochemical coverage of the deposit allowing ore types to be clearly identified and mapped in three dimensions. The vast multi-element dataset has been investigated geostatistically, and modeled in three dimensions with Leapfrog™ software. This has led to the development of a three-dimensional geochemical and mineralogical model of the resource as it is currently defined. Rare Earths Market Overview 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greek alchemists defined earths as materials that could not be changed by the sources of heat available to them. This perception lasted for many centuries, so long in fact that until late in the 18th century the oxides of metals such as calcium, aluminium and magnesium were known as earths. In 1794, while investigating a rare Swedish mineral, a Finnish chemist named Johan Gaddin, discovered a new ‘earth’ to which he gave the name ‘Ytterbia’, after Ytterby, the village where the mineral was found – subsequently shortened to Yttria. Later, in 1803, from the same rare mineral a new earth named Ceria was discovered and since Yttria and Ceria had been discovered in a rare mineral and closely resembled one another, they were referred to as ‘rare earths’. Today, the term rare earths refers to a series of 17 chemically similar metals, consisting of the 15 elements known as the lanthanides, plus yttrium and scandium. It is the rare earth metals and oxides that are of particular interest to scientists and industrialists, due to their unique magnetic and spectroscopic properties. The major applications for rare earths are given in Table 1. SECTION 1 | 18 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G IMCOA Industrial Minerals Company of Australia Pty Ltd ABN 42 084 433 992 Rare Earths Market Overview September 2009 DISCLAIMER The statements in this Overview for Greenland Minerals & Energy Ltd (“GGG”) 2009 Annual Report represent the considered views of the Industrial Minerals Company of Australia Pty Ltd (IMCOA). It includes certain statements that may be deemed “forward-looking statements”. All statements in this overview, other than statements of historical facts, that address future market developments, government actions and events, are forward-looking statements. While IMCOA believes the outcomes expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include rare earths applications, the development of economic rare earths substitutes and general economic, market or business conditions. While, IMCOA has made every reasonable effort to ensure the veracity of the information presented it cannot expressly guarantee the accuracy and reliability of the estimates, forecasts and conclusions contained herein. Accordingly, if data from the overview is to be quoted then the above Disclaimer should be included. Dudley J. Kingsnorth Executive Director Industrial Minerals Company of Australia Pty Ltd 19 SECTION 1 | 19 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Rare Earths Market Overview Applications of Rare Earth Yttrium Cerium Neodymium Samarium Gadolinium Dysprosium Erbium Ytterbium Lanthanum Praseodymium Promethium Europium Terbium Holmium Thulium Lutetium Y 39 La 57 Ce 58 Pr 59 Nd 60 Pm 61 Sm 62 Eu 63 Gd 64 Tb 65 Dy 66 Ho 67 Er 68 Tm 69 Yb 70 Lu 71 Phosphors Glass Magnets Electronics Energy Ceramics Catalysts Metallurgy Others X-ray Screen Phosphor Phosphors Optical Glass Colourising Decolourising Optical Fibres Permanent magnets YIG Magnetic Levitation Condensers Hydrogen Storage Fuel Cells Batteries Nuclear Reactor Shieds Nuclear Reactor Control Rods Engine Parts Oxygen Sensors Machine Tools Sintering Additives Refractories Petroleum Cracking Exhaust Gas Control Pyropher Metals Heat Resistant Alloys Steel Additives Magnetostrictive Alloys Crystal Glass Abrasives Artificial Jewels X-ray Screen Phosphor Lasers YAG, GGG Salts Metals Oxides significant quantities used moderate quantities used minor quantities used & research applications only SECTION 1 | 20 Yttrium Cerium Neodymium Samarium Gadolinium Dysprosium Erbium Ytterbium Lanthanum Praseodymium Promethium Europium Terbium Holmium Thulium Lutetium Y 39 La 57 Ce 58 Pr 59 Nd 60 Pm 61 Sm 62 Eu 63 Gd 64 Tb 65 Dy 66 Ho 67 Er 68 Tm 69 Yb 70 Lu 71 Phosphors Glass Magnets Electronics Energy Ceramics Catalysts Metallurgy Others Salts Metals Oxides significant quantities used moderate quantities used minor quantities used & research applications only X-ray Screen Phosphor Phosphors Optical Glass Colourising Decolourising Optical Fibres Permanent magnets YIG Magnetic Levitation Condensers Hydrogen Storage Fuel Cells Batteries Nuclear Reactor Shieds Nuclear Reactor Control Rods Engine Parts Oxygen Sensors Machine Tools Sintering Additives Refractories Petroleum Cracking Exhaust Gas Control Pyropher Metals Heat Resistant Alloys Steel Additives Magnetostrictive Alloys Crystal Glass Abrasives Artificial Jewels X-ray Screen Phosphor Lasers YAG, GGG 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 21 Rare Earths Market Overview 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 1. Introduction Throughout the industry rare earths are normally expressed in terms of rare earth oxides (REO) and often classified into three groups: Light, Medium and Heavy. At other times the light and medium rare earths are referred to as the ‘cerics’ and the heavy rare earths as the ‘yttrics’. The rare earths with their atomic weights and symbols are detailed in Table 2. Rare earths are a critical minor constituent of many advanced materials that are essential inputs to the manufacture of items such as hybrid vehicles, mobile telephones, computers, televisions and energy efficient lights. Although rare earths have a relatively high unit value, the impact of their cost has little, if any, impact on the selling price of the final item. Furthermore, as they are generally present in minute concentrations they are not recycled. It is for these reasons that rare earths are considered strategic materials. In Japan rare earths are often referred to as the ‘seeds of high technology’. Rare earth products are generally priced in terms of US$ per kg REO, regardless of the chemical form in which they are sold. Table 2: Rare Earths and their Atomic Weights Element Type Atomic No. Symbol Atomic Weight Lanthanum Cerium ‘Light’ Praseodymium or Neodymium ‘Ceric’ Promethium* Samarium Europium ‘Medium’ Gadolinium Terbium Dysprosium Holmium ‘Heavy’ Erbium Thulium Ytterbium Lutetium Yttrium Scandium Or ‘Yttric’ Note: ppm = parts per million 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 39 21 La Ce Pr Nd Pm Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y Sc 138.92 140.13 140.92 144.27 145.00 150.43 152.00 156.90 159.20 162.46 163.50 167.20 169.40 173.04 174.99 88.92 45.10 *Promethium does not occur naturally as a stable isotope, although it can be artificially manufactured SECTION 1 | 22 2. The Dimensions of the Global Rare Earths Market Today • Forecast volume in 2008: 124,000t REO • Value: Approximately US$1¼billion in 2008. • Over the past decade market growth has been in the range of 8-11%pa, with the exception of the correction in 2001/02 (due to the ‘technology crash); while the current global financial crisis is anticipated to have reduced consumption in 2008 to 124,000t REO from mid-2008 estimates of 135-145,000t REO. • China supplies ~92% of global demand and consumes ~60% of the demand. • To assist in generating manufacturing jobs for the millions of Chinese moving from the country to the urban areas China has adopted policies that encourage rare earth producers to go downstream and add value. To achieve this goal the following measures are now in place, which effectively mean that China’s rare earth resources are primarily for China’s domestic 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G manufacturing industries : o Export quotas. o Export taxes. o Production quotas. o Foreign investment in rare earth resources/mines is prohibited. Table 3: Global Rare Earths Demand in 2008 (t REO ±10%) Application China Japan1 USA Others Total Market Catalysts Glass Polishing 7,000 8,000 8,000 Metal Alloys 16,000 Magnets 21,000 Phosphors Ceramics Other Total 5,500 2,500 6,000 & SE Asia Share 2,000 12,500 1,500 23,000 19% 2,000 4,500 4,500 3,500 2,500 2,500 2,000 1,000 1,000 1,250 750 500 1,250 250 1,500 1,500 1,000 1,000 500 750 250 12,500 15,000 22,500 26,500 9,000 7,000 8,500 10% 12% 18% 21% 7% 6% 7% 74,000 23,500 18,500 8,000 124,000 100% Source: IMCOA, Roskill and CREIC Note: 1. Large proportions of both the rare earth alloys for batteries and magnets are exported from China to Japan for the manufacture of the NiMH batteries and the NdFeB magnets; which, if they were included in the statistics as Japanese consumption would increase that country’s consumption of rare earths to approximately 35,000t REO, or 40-45,000t in all forms as shown in Tables 19 & 20. It is this dependence upon China as an effective sole source for many of these strategic materials that is the driving force behind Japanese industry’s support for non-Chinese rare earths projects. SECTION 1 | 23 Rare Earths Market Overview The estimated gross value of the global rare earths market is given in Table 4 below: Table 4: Estimated ‘Gross Value’ of Rare Earths Market in 2008 US$M (±15%) Application Average Value Gross Value Market Share US$M by Value Catalysts Glass Polishing Metal Alloys Magnets Phosphors Ceramics Other Total US$3/kg REO US$2/kg REO US$4/kg REO US$8/kg REO US$18/kg REO US$45/kg REO US$7½/kg REO US$5/kg REO 11/kg REO avg Source: metal pages©, Roskill, IMCOA 60 25 60 175 475 400 50 40 5% 2% 4% 14% 37% 31% 4% 3% US$1200-1400M 100% The average value of rare earths in mid-2008 would have been US$11-13/kg REO, while at the end of the year it was closer to US$10/kg REO; a clear reflection of the current global financial crisis. It is anticipated that prices will pick-up again in the latter half of 2009, with restoration to the levels in mid 2008 in late 2010 when the impact of ongoing reductions in Chinese export quotas will start to have an impact on availability. 3. Global Rare Earth Resources Hard rock deposits of bastnasite and placer deposits of monazite and xenotime host most of the world’s economic concentrations of rare earths. The majority of rare earth mining operations are based on the exploitation of these minerals. Due to the relative concentration of the rare earth oxides in these minerals, it is the light rare earths that predominate and account for the largest proportion of rare earth oxides produced. World production of light rare earths is dominated by the processing of bastnasite at Baotou in Inner Mongolia, where it is a by-product of iron ore mining. Monazite and xenotime are usually extracted as by-products of mineral sands and tin operations, often from placer deposits. The relative rare earth contents of key world commercial resources are shown in Tables 5A to 5C below: 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 24 Table 5A: Rare Earths Content of Major Source Minerals (% total REO) Rare Earth Oxidee La2O3 CeO2 Pr6O11 Nd2O3 Sm2O3 Eu2O3 Gd2O3 Tb4O7 Dy2O3 Y2O3 Total Bastnasite Xenotime Ion Adsorption Clays Bayun Obo, Mongolia, China 23.0 50.0 6.2 18.5 0.8 0.2 0.7 0.1 0.1 trace 99.6 Mountain Pass, Lahat Guangdong, Xunwu, Jiangxi, China Perak, China California, Malaysia USA 33.2 49.1 4.3 12.0 0.8 0.1 0.2 trace trace 0.1 99.8 1.2 3.1 0.5 1.6 1.1 trace 3.5 0.9 8.3 61.0 81.2 1.2 3.0 0.6 3.5 2.2 0.2 5.0 1.2 9.1 59.3 85.3 42.0 2.3 8.8 30.8 3.8 0.5 2.9 trace trace 8.0 99.1 Lognan, Jiangxi, China 1.8 0.4 0.7 3.0 2.8 0.1 6.9 1.3 6.7 65.0 88.7 Source for Tables 5A, 5B and 5C is Roskill, USGS and company literature Table 5B: Rare Earths Content of Major Source Minerals (%total REO) Rare Earth Oxidee La2O3 CeO2 Pr6O11 Nd2O3 Sm2O3 Eu2O3 Gd2O3 Tb4O 7 Dy2O3 Y2O3 Total Monazite Loparite Bastnasite & Parisite Mt Weld, Australia India Guandong, Lovozersky, Dong Pao China Russia Vietnam 25.1 48.5 5.3 16.7 2.2 0.6 0.9 0.1 0.2 0.3 23.0 46.0 5.5 20.0 4.0 - - - - - 23.0 42.7 4.1 17.0 3.0 0.1 2.0 0.7 0.8 2.4 99.9 98.5 95.8 28.0 57.5 3.8 8.8 1.0 0.1 0.2 0.1 0.1 trace 99.6 32.4 50.4 4.0 10,7 0.9 - - - - 0.7 99.1 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 25 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Rare Earths Market Overview Table 5C: Rare Earths Content of Potential Source Minerals (%total REO) Rare Earth Oxidee La2O3 CeO2 Pr6O11 Nd2O3 Sm2O3 Eu2O3 Gd2O3 Tb4O7 Dy2O3 Y2O3 Total Trachyte Dubbo, Australia Apatite Steenstrupine Fergusonite Nolans, Hoidas Lake, Kvanefjeld, Thor Lake, Australia Canada Greenland Canada 19.5 36.7 4.0 14.1 2.5 0.1 2.1 0.3 2.0 15.8 97.1 18.5 47.8 6.1 21.4 2.4 0.5 1.2 0.1 0.3 1.5 19.8 45.6 5.8 21.9 2.9 0.6 1.3 0.1 0.4 1.3 27.4 41.2 4.2 12.9 1.6 0.1 1.1 0.2 1.1 7.7 99.8 99.7 97.5 0.3 4.4 1.7 15.6 10.4 1.6 14.3 1.8 9.9 29.0 89.0 The less abundant, but more valuable, yttrium and heavy rare earths are mainly sourced from ionic absorption clays in southern China. Current world reserves of rare earths, as assessed by the US Geological Survey, are estimated to be about 88 million tonnes REO contained (see Table 6 below) which, based on their continued availability and typical metallurgical recoveries, should theoretically be sufficient for the next 200 years. The largest proportion of these reserves lie in China (27 million tonnes) and are equivalent to around 30% of the world’s reserves, while the USA accounts for another 13 million, Australia 5 million and India 2.3 million tonnes. World Mine Production, Reserves and Reserve Base, as defined by the US Geological Survey are shown below. Table 6: Estimated Mine Production, Reserves and Reserve Base 2007-08 Country Mine Productione Reserves 2007 2008 Reserve Base United States Australia Brazil China - - 650 - - 650 13,000,000 14,000,000 5,200,000 5,800,000 48,000 84,000 120,000 120,000 27,000,000 89,000,000 Former Soviet Union India Malaysia Other Countries n/a 2,700 380 n/a n/a 2,700 380 n/a 19,000,000 21,000,000 1,100,000 1,300,000 30,000 35,000 22,000,000 23,000,000 World Total (rounded) 123,000 124,000 88,000,000 150,000,000 SECTION 1 | 26 Source: USGS, January 2009 It should be noted that the reserve figures in the table encompass a wide range of mineral qualities and do not necessarily comply with the internationally recognised codes for the definition of resources and reserves. Furthermore, the prospectivity of a resource is determined by several factors including grade, cost of processing, impurities and the relative concentration of the rare earth elements in greatest demand, which are not identified in the above table. The most common minerals that are processed to recover the rare earths are listed in Table 7. Almost all the light rare earths produced today are extracted from bastnasite and monazite, while most of the heavy rare earths are extracted from xenotime and ionic (adsorption) clays. The processes used to separate the rare earths from these minerals have changed little in the past 20 years. The route chosen is based upon the economics of the processes available with particular reference to the local costs of sulphuric acid, hydrochloric acid and caustic soda, the primary reagents used to extract rare earths. Table 7: Composition of Major Rare Earth Minerals Mineral Formula Major Occurrences REO max (%) Bastnasite LnFCO3 China, USA Monazite (Ln,Y,Th)PO4 China, Australia, Brazil, India, Malaysia, Africa Loparite (Na,Ca,Ln,Y)(Nb,Ta,Ti)2O6 Former Soviet Union Xenotime YPO4 China, Australia, Malaysia, Africa Apatite (Ca,Ln)5[(P2Si)O4]3 Former Soviet Union, Australia, Ionic Clays Weathered Xenotime and Apatite Canada China 75 65 32 62 12 n/a A project in which the rare earths are a by-product to the major commodity could have a significant advantage over a project solely dependent upon rare earths. 4. Global Rare Earths Demand 4.1 Demand in 2000 The first recorded commercial production of rare earths was in Treibach, Austria, in 1903 which took the form of mischmetal for lighter flints. Fifty years later global production was of the order 1,000tpa REO valued at approximately US$25 million. Over the past eight years rare earths production/ consumption has increased by 50%, from 80,000tpa REO to 120,000tpa REO (see Table 8 below). 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 27 Rare Earths Market Overview Table 8: Global Rare Earths Demand in 2000 (t REO ±10%) Application China Japan & SE Asia Catalysts Glass Polishing Metal Alloys Magnets Phosphors Ceramics Other Total 2,000 2,000 2,000 5,500 3,500 1,000 750 3,250 1,750 6,500 4,000 2,750 3,500 2,500 1,250 500 USA 9,500 2,500 2,000 1,750 1,500 500 500 150 Others Total 4,250 3,000 3,500 2,500 2,000 2,000 500 100 17,500 14,000 11,500 12,500 10,500 6,000 3,000 4,000 20,000 22,750 18,400 17,850 79,000 Source: Roskill, IMCOA and CREIC 4.2 Forecast Global Rare Earths Demand in 2014 In the view of IMCOA the impact of the current global financial crisis is to have set back longer term consumption of rare earths by 2 years; in essence this means that the current forecast demand in 2014 is similar to the forecast demand in 2012 made 2-3 years ago. In forecasting demand in 2014 IMCOA makes the following comments: • The following assumptions in estimating/forecasting global demand for rare earths have been made: 2008: Estimated demand in 2006 was 110,000t REO, growing to 120,000t REO in 2007 with expectations in the middle of last year that demand could surge to 132,000t REO (IMCOA) to 144,000t REO (CREIC) in 2008. The current estimate, given the shutdown of many manufacturing operations in China during the Beijing Olympics and the rapid slowdown in the global economy is 124,000t REO. 2009: As global growth remains subdued and consumers reduce their stocks to reduce working capital rare earths demand this year is forecast to be 95,000t REO. Recent conversations with producers and consumers indicate that there are early signs that demand is picking up in 3Q2009. 2010: With a modest pick-up in the growth of global GDP, while stocks will continue to be reduced to lessen working capital, global demand is forecast to return to 124,000t REO. 2011 to 2014: With a forecast return to global GDP growth rates of 3½-4½%pa the growth in demand for rare earths is forecast to be 8-11%pa; which equates to global demand of 180,000t REO in 2014. • IMCOA is of the view that demand will increase at a faster rate in China than the rest of the world so that China’s share of global consumption will grow from 59% in 2007 to 65% in 2014. 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 28 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G • Growth in demand by the various sectors under which the industry is generally classified is forecast to be at the following rates in the period 2011 to 2014: o Metal alloys @ 15-20% pa o Magnets @ 10-15% pa o Phosphors @ 7-10% o Ceramics and other applications @ 7-9% o Catalysts and Polishing @ 6-8% o Glass at a negligible rate. • The Copenhagen Climate Change Conference (December 2009) could have a significant impact on the forecast. Table 9: Forecast Global Rare Earths Demand in 2014 (t REO ±15%) Application China Japan1 & SE Asia USA Others Total Market 2,250 2,250 5,000 7,500 5,000 3,000 3,000 2,500 15,000 1,000 1,250 1,750 1,000 1,000 2,000 500 1,250 750 1,250 1,750 1,000 1,000 1,000 500 29,000 12,500 20,000 45,500 41,500 12,000 9,000 10,500 Share 16% 7% 11% 25% 23% 7% 5% 6% 117,500 30,500 23,500 8,500 180,000 100% Catalysts Glass Polishing 10,500 8,500 12,500 Metal Alloys 34,500 Magnets 34,500 7,000 3,000 7,000 Phosphors Ceramics Other Total Source: IMCOA Note: 1. Large proportions of both the rare earth alloys for batteries and magnets are exported from China to Japan for the manufacture of the NiMH batteries and the NdFeB magnets; which, if they were included in the statistics as Japanese consumption would increase that country’s consumption of rare earths substantially. If these volumes were included in Japanese consumption In 2014 then the country’s consumption could well be 40-45,000t REO, or 50-60,000t in all forms. As noted above it is this dependence upon China as a virtual sole source for many strategic materials that is the driving force behind Japanese industry’s support for non-Chinese rare earths projects. 5. Global Rare Earths Supply The major ongoing issue for the rare earths industry is ‘balance’; due to the incongruity between the ratio of the individual rare earths produced and consumed, there is always a situation in which there is a shortfall of some rare earths while others are in surplus . On the basis of the known analyses of the major resources it is considered that total production would probably have to be approximately 205,000t REO in 2014 to meet projected demand of 180,000 t REO, (with any shortfall to be drawn from stocks), as illustrated in the Table 10 below, where potential critical shortages are shown in red. SECTION 1 | 29 Rare Earths Market Overview Table 10: Forecast Global Demand and Supply for Individual Rare Earths in 2014 (±15%) Rare Earth Oxide Lanthanum Cerium Praseodymium Neodymium Samarium Europium Gadolinium Terbium Dysprosium Erbium Yttrium Ho-Tm-Yb-Lu Demand1 Supply/Production1,2 REO Tonnes 51,050 65,750 7,900 34,900 1,390 840 2,300 590 2,040 940 12,100 200 % 28.4% 36.5% 4.4% 19.4% 0.8% 0.5% 1.3% 0.3% 1.1% 0.5% 6.7% 0.1% REO Tonnes 55,100 82,400 10,000 33,300 4,000 900 3,150 400 1,800 1,000 11,650 1,300 % 26.9% 40.2% 4.9% 16.3% 2.0% 0.4% 1.5% 0.2% 0.9% 0.5% 5.7% 0.5% Total 180,000 100.0% 205,000 100.0% Source: IMCOA estimates From the above table it is evident that, terbium, dysprosium and yttrium (highlighted in red) will be in short supply, even with total production exceeding total demand in an absolute sense by 15-20%. As praseodymium can be substituted for neodymium in magnets in most cases it appears that a shortage of these important rare earths for permanent magnets could be partially alleviated by the increased production. Forecast supply and demand from 2004 through to 2014 are shown/forecast below in Table 11. Demand has been ‘adjusted’ to allow for the issue of balance. IMCOA is of the view that global supply could fall short of the desired level of 205,000t REO by some 1,500t REO. Table 11: Adjusted Demand and Supply Suppy & Demand 2004 2005 2006 2007 2008 2009f 2010f 2011f 2012f 2013f 2014f Global Demand 90,000 98,000 110,000 120,000 124,000 85,000 124,000 135,500 148,500 163,000 180,000 Adjusted Global Demand 90,000 100,000 113,000 125,000 131,000 90,000 135,000 146,000 162,000 182,000 205,000 China Demand China Supply ROW Supply 33,000 85,500 52,000 60,000 70,000 77,000 65,000 82,000 91,000 102,000 116,000 133,000 99,000 110,000 100,000 115,000 90,000 120,000 130,000 145.000 154,500 165,000 5,000 6,500 7,500 8,500 9,000 6,500 7,500 15,000 20,000 32,000 38,500 Global Supply 90,500 105,500 117,500 108,500 124,000 96,500 127,500 145,000 165,000 186,500 203,500 Surplus/Deficit 500 5,500 4,500 16,500 7,000 6,500 7,500 1,000 3,000 4,500 1,500 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 30 It should be noted that the Chinese authorities have indicated that production will be ‘managed’ to conserve resources. As mentioned above it is possible that the Copenhagen Climate Change Conference (December 2009) could have a significant impact on rare earths demand highlighting the potential for a shortfall in supply. However, it is also evident from recent presentations by Chinese officials that the Chinese rare earths industry will not readily surrender effective control of the industry; although it may have to concede its domination of the heavy rare earths sector if it is unable to successfully address the environmental issues associated with the mining and processing of the ionic clays in Southern China. Furthermore, if China continues to reduce its rare earths export quotas (see Section 6 below) then this would put an artificial constraint on supply. O O E E R (cid:30) a p t d n a m e D 250,000 250,000 200,000 200,000 150,000 100,000 50,000 0 China Supply ROW Supply Adjusted Global Demand China Demand Table 11: Adjusted Demand and Supply Suppy & Demand 2004 2005 2006 2007 2008 2009f 2010f 2011f 2012f 2013f 2014f Global Demand 90,000 98,000 110,000 120,000 124,000 85,000 124,000 135,500 148,500 163,000 180,000 Adjusted Global Demand 90,000 100,000 113,000 125,000 131,000 90,000 135,000 146,000 162,000 182,000 205,000 China Demand China Supply ROW Supply 33,000 85,500 52,000 60,000 70,000 77,000 65,000 82,000 91,000 102,000 116,000 133,000 99,000 110,000 100,000 115,000 90,000 120,000 130,000 145.000 154,500 165,000 5,000 6,500 7,500 8,500 9,000 6,500 7,500 15,000 20,000 32,000 38,500 Global Supply 90,500 105,500 117,500 108,500 124,000 96,500 127,500 145,000 165,000 186,500 203,500 Surplus/Deficit 500 5,500 4,500 16,500 7,000 6,500 7,500 1,000 3,000 4,500 1,500 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 31     Rare Earths Market Overview 6. China The current dominance of China as the ‘major player’ in the rare earths industry is not in question as it supplies 95% of global demand and consumes 60% of the demand. Hence as the major supplier and consumer the country is able to have a significant influence on the future of the industry, with clear indications that China is using this dominance to assist its own manufacturing industries. 6.1 Chinese Consumption of Rare Earths The breakdown and growth in China’s rare earths consumption is illustrated by the following data released by the Chinese Rare Earth Information Centre (CREIC) in November 2008. It should be noted that the Chinese approach to the breakdown of rare earths applications is different from that adopted by IMCOA and the data in Tables 13 & 14 is in absolute tonnes, not REO. CREIC estimate that between 2005 and 2007 China’s growth in demand was 18%pa, compared with global growth of 11% and Rest of the World (ROW) growth of 2%pa. (data for 2008 is not available, but the data given below provides a picture of the increasing consumption in China, which did not slow down until the latter half of 2008). Table 12: Break down of Chinese Rare Earths Consumption in 2007 (REO, tonnes) Application Field Consumption Percentage Five Advanced Materials Permanent magnets Polishing powder Hydrogen storage materials Fluorescent materials Auto catalysts Subtotal Metallurgy Petrochemical industry Glass & ceramics Others Subtotal Total Others Source: CREIC Nov. 2008 Volume 22,250 7,369 6,200 4,490 2,710 43,019 10,994 7,548 3,303 7,686 29,531 72,550 30.7% 10.2% 8.5% 6.2% 3.7% 59.3% 15.2% 10.4% 4.5% 10.6% 40.7% 100.0% 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 32 Table 13: Output of ‘Added Value’ Rare Earths Products in China, 2005-2007 (absolute tonnes) Advanced materials 2005 2006 2007 Average Permanent magnets Hydrogen storage materials Fluorescent materials Polishing powder Auto emission purifier (,000 unit) Source: CREIC Nov. 2008 35,200 13,000 5,650 4,457 8,400 41,350 15,000 5,870 6,092 50,800 18,600 8,480 7,523 10,000 10,850 growth rate +20.1% +19.6% +22.5% +29.9% +13.8% Table 14: Output of Rare Earths Phosphors in China, 2005-2007 (absolute tonnes) Year 2005 2006 2007 Average Trichromatic phosphor for lamps Phosphor for CRT colour TV Long afterglow phosphors Other phosphors Total Source: CREIC Nov. 2008 2,500 1,650 1,500 - 5,650 3,200 1,300 1,195 175 5,870 growth rate +60% -22.2% -22.5% negligible 6,400 1,000 900 180 8,480 +22.5% 6.2 Chinese Taxes, Quotas and Constraints on Rare Earths Trade Over the past 3-4 years China has made some fundamental changes to the taxes and quotas on rare earth exports. The changes have caused Japanese, European and North American customers to place greater emphasis on identifying and supporting alternative non-Chinese suppliers. The specific developments in China, the aim of which is to promote ‘value adding’ industries, which appear to be having the desired effect from recent export statistics, are outlined below: Export Taxes on Rare Earth Exports from China In late 2006 the Chinese Government introduced a tax on rare earth exports of 10%, which was increased to 15% on selected rare earths in 2007. In December 2007 the authorities increased the export taxes on all rare earth exports, with effect from 1st January 2008, to the following levels: • Europium, terbium, dysprosium, yttrium as oxides, carbonates or chlorides – 25% • All other rare earth oxides, carbonates and chlorides – 15% • Neodymium metal – 15% • All other rare earth metals– 25% • Ferro rare earth alloys – 20% 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 33 Rare Earths Market Overview 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Refund of VAT on Rare Earth Exports from China In 2007 China withdrew the refund of VAT (16%) on exports of unimproved rare earths, while the refund on value added exports such as magnets and phosphors remains in place. The effect of this decision, when considered with the export tax regime above, is that non-Chinese rare earth processors such as cerium polishing powder producers and rare earth magnet producers pay 31% more for their rare earth raw materials (plus transport and storage costs). Chinese Rare Earth Export Quotas The Chinese Ministry of Commerce has recently announced the rare earth export quotas for Chinese rare earth enterprises for the second half of 2009; which amount to an effective 12% reduction in quotas between 2008 and 2009. The size of the reduction in the annual rare earth export quotas is the largest in the history of the quotas since they were introduced in 2004. The history of China rare earth quotas is shown in Table 15. Table 15: History of Chinese Rare Earth Export Quotas 2004-2009 Year 1st Allocation 2nd Allocation Total Domestic Enterprises Foreign Enterprises Domestic Enterprises Foreign Enterprises Domestic Enterprises Foreign Enterprises Grand Total Per Cent Change 2004 2005 2006 2007 2008 2009 Notes: n/a n/a n/a 19,600t 22,780t n/a n/a n/a 8,211t 8,211t1 n/a n/a n/a 23,974t 11,376t n/a n/a n/a 8,289t 5,082t1 48,040t 48,040t 45,752t 43,574t 17,569t 17,569t 16,069t 16,069t 65,609t 65,609t 61,821t 59,643t - 0% -6% -4% 57,000t 46,000t 50,000t 50,000t Actual: 34,156t Actual: 13,293t Actual: 47,449t -5.5%2 50,000t3 Adjusted:40,987t2 Adjusted:15,834t2 Adjusted:56,939t2 15,043t 6,685t 18,257t 10,160t 33,300t 16,845t 50,145t -12% 35,000t3 1. In 2008 quotas were allocated for 10 months (second tranche was effectively for 4 months) so there was alignment with a calendar year. 2. Adjusted for 12 month allocation for comparative purposes. 3. Estimated demand by Japan in 2008 and 2009 is >35,000tREO and >25,000tREO respectively 4. The Cumalative Average Reduction Rate (CARR) of export quotas from 2005 to 2009 is -6½% pa. SECTION 1 | 34 The potential impact of the reduction in the export quotas may be put in context when it is recognised that Japan’s estimated rare earths consumption in 2008 alone was greater that 40,000t rare earth materials (i.e. not REO), which could well be more than the total export quota fin the near future. Foreign companies such as Rhodia, Neo Material Technologies and Santoku receive separate quotas as shown in Table 15. Toll trading of rare earths Toll trading of rare earths in China has been banned since November 2006, which effectively means the toll treating of rare earths is also banned; one reason for Lynas moving the location of its secondary processing facilities from China to Malaysia in 2007. Resultant distortion of prices For the non-Chinese rare earth consumers the impact of the above actions has not only been limited access to rare earths, thereby imposing restrictions on their ability to expand their businesses, but it has also had a significant impact on prices. 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Year 1st Allocation 2nd Allocation Total Domestic Enterprises Foreign Enterprises Domestic Enterprises Foreign Enterprises Domestic Enterprises Foreign Enterprises Grand Total Per Cent Change 48,040t 48,040t 45,752t 43,574t 17,569t 17,569t 16,069t 16,069t 65,609t 65,609t 61,821t 59,643t - 0% -6% -4% Estimated Rest of World Demand 57,000t 46,000t 50,000t 50,000t 2009 15,043t 6,685t 18,257t 10,160t 33,300t 16,845t 50,145t -12% 35,000t3 Actual: 34,156t Adjusted:40,987t2 Actual: 13,293t Adjusted:15,834t2 Actual: 47,449t Adjusted:56,939t2 -5.5%2 50,000t3 2004 2005 2006 2007 2008 n/a n/a n/a 19,600t 22,780t n/a n/a n/a 8,211t 8,211t1 n/a n/a n/a 23,974t 11,376t n/a n/a n/a 8,289t 5,082t1 SECTION 1 | 35 Rare Earths Market Overview 7. Japan Whereas China consumes ~60% of the global demand for rare earths, Japan is the second largest consumer with estimated demand equivalent to ~20% of global demand. If the significant volume of rare earths sold to the US fcc catalyst producers is excluded then the Japanese share of rare earths consumption is 50-60% of ROW demand. Furthermore, Japan purchases significant volumes of rare earth magnet and battery alloys which are not classified as rare earths exports. Hence Japan is seen as the major destination for rare earths produced by the potential non-Chinese projects. The demand for rare earths in Japan is driven by the high growth in demand for ‘hi-tech’ products such as HEVs,rare earth magnets and PDPs as shown in Table 16 below. There is every indication that the high growth in demand for these items will continue, when the global financial crisis has past; even though consumption has fallen that significantly during the crisis.. Table 16: Japanese Production of Items Containing Rare Earths, 2004-2007 End-product Unit 2004 2005 2006 2007 2008 Small motors (under 70 W) M units HEVs (world sales) 000 units 339 168 340 299 354 383 363 432 353 463 Sintered rare earth magnets tonnes 7,900 8,500 10,000 11,250 10,750 Sintered Nd-Fe-B Alloys tonnes n/a 14,000 16,500 18,750 18,000 Nickel-metal hydride batteries M units 306 303 327 305 326 Autocatalysts Digital cameras tonnes 14,690 15,959 15,644 15,688 15,614 000 units 29,200 28,880 37,150 46,760 36,270 Ceramic capacitors M units 406,200 463,900 576,800 677,800 619,200 Fluorescent lamps 000 units 768,560 859,380 987,580 927,400 860,850 LCD Backlights PDP televisions LCD Televisions 000 units 403,750 498,170 620,110 607,080 581,610 000 units 1,720 2,900 5,020 5,160 6,590 000 units 2,670 4,350 5,970 7,310 n/a Source: Roskill’s Letters from Japan , Iwatani and IMCOA The demand for the items above is the driving force for the increasing demand for the rare earths as shown in Table 18. The aggregate annual average increase in imports over the years 2002 to 2007 was 15% pa.; with a fall of approximately 10% in 2008. 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 36 Table 17: Japanese Imports of Rare Earths Products, 2003-2008 (gross tonnes) Rare Earth Product Yttrium oxide Cerium Oxide Cerium compounds Lanthanum oxide Rare earth metals Rare earth compounds 2003 1,235 4,241 6,609 2,241 6,119 2004 2005 2006 2007 1,377 1,226 1,603 1,805 4,178 6,147 11,489 11,013 6,381 7,216 9,069 8,015 1,915 1,801 2,141 3,310 6,379 8,387 9,450 9,320 2008 1,673 8,883 7,924 3,617 6,306 (incl. intermediate compounds) 4,802 6,230 5,738 7,664 6,621 5,927 Ferro-cerium Total 458 298 592 548 840 997 25,705 26,758 31,106 41,964 40,564 35,327 Source: Roskill’s Letters from Japan, Iwatani and IMCOA Table 18: Growth in Japanese Rare Earth Imports 2003-2008 Year Volume Value % Change in price Tonnes % Growth US$M US$/kg 2003 25,705 2004 26,406 2005 30,495 2006 41,407 2007 40,084 2008 35,327 +14% +3% +15% +36% -3% -13% 139.5 189.9 218.6 368.8 537.0 453.9 Source: Roskill’s Letters from Japan, Iwatani and IMCOA 5.43 7.19 7.17 8.91 13.40 12.87 -9% +32% Nil +24% +50% -4% A review of the above tables indicates an apparent discrepancy with the global estimates shown in Table 3, which is due to the fact that the above table is in absolute tonnes and not REO. IMCOA is of the view that the above tables could over-estimate the consumption of rare earths in Japan for the following reasons: • Japan exports finished rare earth products, which can lead to ‘double counting’. • Stockpiling by the major Japanese consumers. • The rare earth metals and the ferro-cerium are generally alloys, which ‘convert’ to lower REO values. The relatively limited fall in the volume and prices during the onset of the global financial crisis in 2008 is a reflection of the ubiquitous demand for rare earths. 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 37 Rare Earths Market Overview 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 8. Rare Earth Prices As a result of increasing demand through 2005 to 2008, the export quotas and taxes put in place by China, the increasing enforcement of environmental standards in China and stockpiling by Japanese companies there was a steady increase in prices over the period, but more importantly a distortion in prices. The distortion is caused by the price attached to export quotas, which may be sold within China at US$1-2/kg REO. The natural tendency of rare earth processors is to maximise their profit; hence, while the sale of terbium at US$650/kg may realise a profit of US$100-200/kg, the export of cerium at US$3/kg, compared with internal prices of US$1¼/kg has limited appeal. As a result the export sales price of cerium is currently US$4-6/kg. Tables 19 & 20 show the steady increase in rare earth prices over the 2005 to 2008 period; a trend that is expected to continue when global growth returns to the levels experienced before the global financial crisis. Table 19: Comparison of Rare Earth Prices for 2005-09 Rare Earth Product Rare Earth Price US$/kg FOB China1 2005 2006 2007 2008 YTD Aug 2009 Lanthanum Oxide Cerium Oxide Praseodymium Oxide Neodymium Oxide Samarium Oxide Europium Oxide Gadolinium Oxide Terbium Oxide Dysprosium Oxide Yttrium Oxide 1.60 1.40 8.30 7.40 4.50 280 n/a 325 50 n/a Source: metal pages© Note: Figures have been rounded 1.80 1.50 13.60 14.80 4.50 240 n/a 460 70 4 3.10 2.50 28.00 29.00 4.50 300 10.50 555 85 7 7.75 4.35 27.00 27.00 4.50 475 9.75 650 110 15 6.20 4.30 14.25 14.25 4.50 455 6.80 355 100 15 Table 20: Japanese Prices of Rare Earth Metals, 2005-2009 (US$/kg cif Japan) Rare Earth Metal 2005 2006 2007 2008 2009 Jan-Mar Lanthanum Cerium Neodymium Praseodymium Samarium Terbium Dysprosium 4.10 6.20 11.40 13.30 12.20 426 61 4.80 6.50 22.30 21.50 12.80 624 99 6.50 7.40 40.10 39.00 14.10 743 119 12.90 10.00 37.20 35.30 21.80 878 153 12.70 9.50 18.00 17.50 21.00 600 141 SECTION 1 | 38 Section 2 | Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 1 | 39 Greenland Minerals and Energy Limited 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G CONTENTS Contents Corporate governance statement Directors’ report Auditors’ independence declaration Independent auditor’s report Director’s declaration Income statement Balance sheet Statements of changes in equity Cash flow statement Notes to the financial statements 1 General information 2 Significant accounting policies 3 Critical accounting estimates and judgments 4 Segmented information 5 Revenue 6 Loss for year before tax 7 Income tax expense 8 Cash and equivalents 9 Trade and receivables 10 Other assets 11 Financial assets 12 Property plant and equipment 13 Capitalised exploration and evaluation expenditure 14 Trade and other payables 15 Provisions 16 Issued capital 17 Reserves 18 Dividends 19 Accumulated losses 20 Earnings per share 21 Prior period adjustments 22 Commitments for expenditure 23 Contingent liabilities 24 Jointly controlled operations 25 Subsidiaries 26 Acquisition of assets 27 Notes to cash flow statement 28 Share based payments 29 Financial instruments 30 Key management personnel compensation 31 Related party transactions 32 Key management personnel equity holdings 33 Remuneration of auditor 34 Subsequent events Additional stock exchange information Page 1 5 23 24 26 27 28 29 31 32 32 41 42 42 43 43 45 45 46 46 47 47 48 49 49 49 50 50 50 51 52 53 53 53 53 54 55 59 63 63 64 65 66 67 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Corporate Governance Greenland Minerals and Energy Limited Corporate Governance CORPORATE GOVERNANCE Principles of Best Practice Recommendations commentary The Board of Directors is responsible for the overall strategy, governance and performance of Greenland Minerals & Energy Limited. (hereafter GGG or the Company). The Company is an exploration Company whose strategy is to add substantial shareholder value through the acquisition, exploration, development and commercialisation of projects in Greenland with a focus on the Kvanefjeld project. The Board has adopted a corporate governance framework which it considers to be suitable given the size, history and strategy of the Company. Principles of Best Practice Recommendations In accordance with ASX Listing Rule 4.10, GGG is required to disclose the extent to which it has followed the Principles of Best Practice Recommendations during the financial year. Where GGG has not followed a recommendation, this has been identified and an explanation for the departure has been given. Principle 1: Lay solid foundations for management and oversight The Board has established a framework within the Group that: · enables it to provide strategic guidance and effective supervision of management; · clarifies the respective roles and responsibilities of Board members and senior executives; · ensures a balance of authority so that no single individual has unfettered powers; and · identifies significant business risks and ensures that those risks are well managed. The day-to-day management of the Group has been delegated to the Managing Director, Mr Roderick McIllree. The executives (whether or not a director) have clearly identified areas of responsibility and report directly to an executive director or the Managing Director who monitors their role. The Board has also adopted a Board Charter which details the functions and responsibilities of the Board and those delegated to management. In addition, each executive director and senior executive has signed an employment agreement A copy of the Board Charter has been placed on the Company’s website. Principle 2: Structure the Board to add value The Board has been structured so that it has effective composition, size and commitment to adequately discharge its responsibilities and duties. The names and qualifications of the Directors are stated in the annual report along with the date of appointment. Each Director is entitled to receive independent professional advice at the Company’s expense. Mr Anthony Ho, Mr Michael Hutchinson, Mr Malcolm Mason and Mr Hank Schønwandt are independent Directors who fulfill the independence criteria outlined in the guidelines. The majority of the board are non-executive directors. The Board believes that it is able to exercise independence and judgment and does possess the necessary skills, expertise and experience required to effectively discharge their duties. The focus has been on the ability of the Board to add value by effectively exercising independence and discharging their duties, rather than on meeting the independence test in the guidelines. The role of the Chairman was fulfilled by Mr Hank Schønwandt (to 25 November 2008), Mr Michael Hutchinson (from 25 November 2008) and the Managing Director, Mr Rod McIllree filled the role of Managing Director and Chief Executive Officer. The board has convened an Audit and Risk Committee as well as a Remuneration Committee. 1 SECTION 2 | 1 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Corporate Governance Greenland Minerals and Energy Limited Corporate Governance CORPORATE GOVERNANCE The Board maintains the role of Nomination to itself as it considers the Company not appropriate in size to justify this as a separate committee. The executive director board members have full time, executive responsibility for the operations of the Company. The responsibilities are split into 3 sections: · The Managing Directors role in allocating priorities and tasks to the executives of the Company, leading the Company generally, raising capital as required and public relations at all levels. · The exploration and development effort. · Other corporate support. The executive directors are responsible for exploration and development and other corporate support, report on their activities to the Managing Director, who monitors their role and then reports to the board as required. The board as a whole monitors the Managing Director’s performance. Principle 3: Promote ethical and responsible decision-making Ethical and responsible decision-making is promoted by the Board in a top-down approach. The Board has adopted a Code of Conduct to guide the Directors, the Chairman, the Managing Director and other key executives as to practices necessary to maintain confidence in the Company’s integrity and to the responsibility and accountability of individuals for reporting and investigating reports of unethical behaviour. The Board recognises legal ethical and other obligations to all legitimate stakeholders and the requirement to act in accordance with these obligations. The Company has formalised its policies accordingly. The Board has also adopted a Securities Trading Policy, to guide investment decisions. The Company has not adopted compliance standards and procedures to facilitate the implementation and assessment of the Code of Conduct and Securities Trading Policy. Given the Company’s size, history and strategy it was not considered appropriate to adopt these policies during the reporting period. The Company will largely comply with these recommendations during future reporting periods. The Company has formalised its policy accordingly. A copy of the Copy of Conduct and Securities Trading Policy has been placed on the Company’s website. Principle 4: Safeguard integrity in financial reporting The integrity of the Company’s financial reporting is a critical aspect of GGG’s corporate governance and structures have been implemented during the reporting period to verify and safeguard the integrity of the Company’s financial reporting. It is the policy of the Board that the Company’s financial statements be reviewed or audited, at a minimum, each half year. The financial statements are reviewed by the Board which operates under formal terms of reference. The Board Charter is placed on the website. The Board has requested that the Managing director as the Chief Executive Officer and the Chief Financial Officer state in writing that the financial statements present a true and fair view, in all material respects, of the Company’s financial condition and operational results and that, · The financial records have been properly maintained in accordance with s286 of the Corporations Act 2001 · The financial statements are in accordance with the Corporations Act 2001, comply with relevant Accounting Standards and Corporation Regulations 2001. · The financial statements are founded on sound system of risk management, as outlined in principle 7. SECTION 2 | 2 2 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited Corporate Governance CORPORATE GOVERNANCE Principle 5: Make timely and balanced disclosure The Board promotes timely and balanced disclosure of all material matters concerning the Company. The Company has formalised its policy to promote a culture whereby all senior management understands the processes in relation to the timely disclosure of information. A copy of the Reporting Policy has been placed on the Company’s website. Principle 6: Respect the rights of shareholders The Board respects the rights of all shareholders and, to facilitate the effective exercise of those rights, the Company is committed to effective communication with shareholders. This occurs by electronic ASX releases to the market, through GGG e-list email communications (registration is available via the Company’s website) and by the provision to shareholders of balanced and understandable information in relation to corporate proposals. Shareholders generally participate in shareholder meetings through the appointment of a proxy. The Company’s external Auditor is invited to attend these meetings. Principle 7: Recognise and manage risk The Company recognises the importance of managing risk and has established systems to assess monitor and manage risk based on the Company’s size, history and strategy. The exploration and development of natural resources is a speculative activity that involves a high degree of financial risk. The Company has formalised its policy to identify, monitor and manage risk. The Company as part of its risk management, formally established an Audit and Risk Committee The Company’s executives and senior management, through the Managing Director are responsible for the identification of material risks to the business and the design and implementation of internal control systems to manage the identified risks. The Board has received from management, reports on the effectiveness of the company’s management of its material business risks. The Board has obtained a written confirmation from the Managing Director and the Chief Financial Officer that the statement in relation to principle 4, that the financial reports are founded on a sound system of risk management and internal compliance and control and the Company’s risk management and internal compliance control systems are operating efficiently and effectively in all material respects. The principle areas of risk for the company are in the areas of: · Occupational health and safety and work related safety risks · Environment risks · Security of tenure over tenements · Financial risk in the areas of maintaining sufficient funding for the continuation of operations and risks related to fraud, misappropriation and errors. The Company has implemented and maintains adequate policies to monitor these areas and to reduce risk exposure. Principle 8: Remunerate fairly and responsibly The Board is committed to ensuring that the level and composition of remuneration is sufficient and reasonable and that its relationship to corporate and individual performance is defined. Executive Remuneration Policy The Company remunerates its senior executives in a manner that is market competitive, consistent with best practice and aligned to the interests of shareholders. Remuneration comprises a fixed salary, determined from a market review, to reflect core performance requirements and expectations of the relevant position and statutory superannuation where applicable. SECTION 2 | 3 3 Director’s Report Greenland Minerals and Energy Limited Corporate Governance CORPORATE GOVERNANCE Non-Executive Remuneration Policy Non-Executive Directors are paid a fixed fee out of the maximum aggregate amount which has been approved by shareholders. Non-executive Directors are entitled to statutory superannuation where applicable. There are no schemes for retirement benefits, other than statutory superannuation, for any non-executive Director. A copy of the Code of Conduct has been placed on the Company’s website. 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 2 | 4 4 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited Directors’ Report DIRECTORS’ REPORT The directors of Greenland Minerals and Energy Limited submit herewith the annual financial report for the financial year ended 30 June 2009. In order to comply with the provisions of the Corporations Act 2001, the directors report the following: Directors The names of directors in office at any time during or since the end of the year are: Michael Hutchinson – appointed 25 November 2008 Roderick Claude McIllree Simon Kenneth Cato Anthony Ho Malcolm Geoffrey Mason Simon Alexander Stafford Michael – resigned 13 November 2008 Hans Kristian Vinding Schønwandt Jeremy Sean Whybrow Company Secretary The following person held the position of Company secretary at the end of the financial year: Mr Bruce Richard Acutt, B.Comm – Mr Acutt trained and worked as an accountant with major accounting firms in the audit and resources sector. He has been associated with the mining and exploration sector for over twenty years. Principal Activities The principal activity of the consolidated group during the financial year was mineral exploration and project evaluation. There were no significant changes in the nature of the consolidated group’s principal activities during the financial year. Operating Results The net loss attributable to members of the consolidated group after providing for income tax amounted to $4,008,712 (2008: loss $202,767,366) Subsequent Events The following subsequent events occurred after 30 June 2009; (cid:1) Successful completion of a placement of 4 million shares at $0.25, raising $1,000,000, less costs, as per the prospectus issued 31 July 2009. (cid:1) The Company announced on 31 August 2009, it had finalised terms on the acquisition of a 4% royalty applicable on net profits from the future production of metals on license 2005/28 in South Greenland. The Company currently holds a legal and beneficial interest of 61%, in the joint venture with the right to move to 100%, when the Company deems it most appropriate. Acquisition of the 4% royalty will be subject to shareholders’ approval at an Extraordinary Meeting, to be called in due course. The Consideration will be payable in escrowed shares in the Company. This transaction is a transaction that requires shareholder approval in accordance with listing rule 10.1 of the Australian Securities Exchange Limited and section 611 of the Corporation Act 2001. Share placements of 25 million shares at $0.20 completed on 15 May 2009 and of 4 million shares at $0.25 completed 31 July 2009, were initially made to fund the acquisition. However, due to the consideration been settled in shares in the Company, these funds will instead be used to fund the pre-feasibility study on Kvanefjeld. 5 SECTION 2 | 5 Director’s Report Greenland Minerals and Energy Limited Directors’ Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G DIRECTORS’ REPORT Subsequent Events (cont) (cid:1) The Company has been served with writs by Westrip Holdings Limited (Westrip) and Rimbal Pty Ltd, issued in the Supreme Court of Western Australia. The matter relates to the dispute being taken by shareholders of Westrip as a derivative claim on behalf of Westrip against the directors of Westrip. The writs served on the Company, alleged breaches of confidentiality, misleading conduct and breach of contract and were for unspecified damages and other relief. The Company, through its solicitors, strongly denies the allegations and any wrongdoing and will vigorously defend the action. Future Developments Disclosure of information regarding likely developments in the operations of the consolidated group in future financial periods and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated group. Accordingly, this information has not been disclosed in this report. Environmental Regulations The consolidated group operates within the resources sector and conducts its business activities with respect for the environment while continuing to meet the expectations of shareholders, customers, employees and suppliers. The consolidated group’s exploration activities are currently regulated by significant environmental regulation under laws of Greenland and the Commonwealth and states and territories of Australia. The consolidated group aims to ensure that the highest standard of environmental care is achieved, and that it complies with all relevant environmental legislation. The directors are not aware of any particular or significant environmental issues, which have been raised in relation to the consolidated group’s operations during the year covered by this report. Dividends In respect of the financial year ended 30 June 2009, no dividends have been paid or declared since the start of the financial year and the directors do not recommend the payment of a dividend in respect of the financial year. Shares During the year ended 30 June 2009, ordinary shares of Greenland Minerals and Energy Limited were issued as detailed in Note 16 to the financial report. The total number of ordinary shares on issue at 30 June 2009 was 218,508,543 (2008: 193,008,540). The total number of shares issued during the current financial year was 25,500,003. There is no other class of shares issued by the Company and the Company has no un-issued shares. Details of shares issued during the year or since the end of the financial year as a result of exercised options are: Issuing entity Greenland Minerals and Energy limited Number of shares issued Class of share Amount paid for shares Amount unpaid no shares 15 Ordinary shares $0.20 - SECTION 2 | 6 6 Director’s Report Greenland Minerals and Energy Limited Directors’ Report DIRECTORS’ REPORT Options During the year ended 30 June 2009 the options of Greenland Minerals and Energy Limited were issued as detailed in Note 17 to the financial report. Details of unissued shares or interests under options at the date of this report are: Issuing entity Greenland Minerals and Energy Limited Greenland Minerals and Energy Limited Greenland Minerals and Energy Limited Greenland Minerals and Energy Limited Greenland Minerals and Energy Limited Number of shares under option Class of shares Exercise price of option Expiry date of option 168,632,047 Ordinary shares $0.20 30 June 2011 750,000 Ordinary shares $0.10 30 June 2013 5,750,000 Ordinary shares $0.50 30 June 2011 5,750,000 Ordinary shares $1.00 30 June 2011 1,888,840 Ordinary shares $1.50 30 June 2011 A total of 9,250,000 were granted during the current financial year. The holders of these options do not have the right, by virtue of being holders, to participate in any share issue or interest issue of the company or of any other body corporate. 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 2 | 7 7 Director’s Report Greenland Minerals and Energy Limited Directors’ Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G DIRECTORS’ REPORT Review of Operations The Company is a mineral exploration and development company actively exploring in southern Greenland. The Company is primarily focused on exploring its license area over the northern Ilimaussaq Intrusive Complex; a unique geological entity with extraordinary resource potential. A large JORC- compliant multi-element resource (rare earth elements (REE), zinc, uranium and sodium fluoride) has been rapidly defined at Kvanefjeld plateau, which clearly highlights the world-class resource potential of the Ilimaussaq Complex. A pre-feasibility study is currently underway, with a focus on defining a process route to extract the elements of interest from these unique multi-element ores in an economically viable and environmentally responsible way. The Company’s vision is one of the big picture, to be a significant producer of commodities of fundamental strategic importance and value to tomorrows world. Rare earth elements are now recognised as being critical to global manufacturing of many emerging consumer items. However, China has successfully monopolised global REE supply, raising serious concerns to non-Chinese consumers over the long-term stability of REE supply and pricing. Electricity from nuclear power continues to gain acceptance internationally as a clean base-load energy supply of the future. This has been emphasised due to rapidly increasing power demands, concerns over carbon-based energy sources, greenhouse gas emissions and global warming. As the nuclear renaissance continues to gain momentum, the strategic importance of uranium resources will continue to emerge. The northern Ilimaussaq Complex offers the potential for multi-element resources of unparalleled scale; resources that could restore balance to the global supply of rare earth elements, and provide energy security to Europe for many decades. Exploration activities In June 2009, the Company commenced a field program in Greenland that was primarily focused on generating information that will be utilised in the various studies relating to the broader feasibility process. This includes sterilisation drilling, geotechnical drilling, as well as drilling for metallurgical samples. The metallurgical drill holes are designed to sample various ore-types throughout the resource. This material will be used in ongoing metallurgical testwork. In addition, data collection for environmental studies continues, and builds on data collected during the previous two field seasons. Collectively, this data forms the basis of an Environmental Baseline Study. Whilst actively operating in Greenland, the Company conducts community meetings to update community representatives on the current status of the Company’s exploration activities in southern Greenland. These community meetings provide an excellent forum for the community to raise any queries and concerns, which can then be discussed by all stakeholders. Updated Resource Statement Late in the June 2009 quarter, the Company released an updated resource statement for the Kvanefjeld multi-element project. Kvanefjeld is the first defined resource within the Company’s exploration license area over the northern Ilimaussaq Complex in southern Greenland. The resource update was based on geochemical assay data that was generated from the substantial diamond drill program conducted during the 2008 field season in Greenland. The 2008 drill program had aimed to improve the resource category, as well as to expand the overall resource base. In consideration of these aims, the 2008 drill program and resulting resource upgrade can be regarded as extremely successful. Following the extensive exercise of data validation for the large multi-element dataset, a new resource estimate was generated by consultants Hellman and Schofield Pty Ltd. The updated resource statement confirms the size and quality of the multi- element resource at Kvanefjeld, with 79% of all rare earth oxide (REO), uranium and zinc resources now in the ‘indicated’ category. The new resource statement contains 4.79 Mt REO, 0.9 Mt zinc and 283 Mlbs U3O8. Significantly, Kvanefjeld represents just a small region within the Company’s exploration license that covers the highly-prospective northern portion of the Ilimaussaq Intrusive Complex (Table. 1). SECTION 2 | 8 8 Director’s Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited Directors’ Report DIRECTORS’ REPORT Table 1 - Kvanefjeld Multi-Element Resource Statement, June, 2009 At U3O8% Cut-off grades1 Tonnes (million) U3O8%2 U3O8 lb/t TREO%3 Zn% 0.015 0.020 0.025 365 92 457 276 63 339 207 43 250 0.028 0.027 0.028 0.032 0.031 0.032 0.035 0.036 0.035 0.62 0.59 0.62 0.70 0.69 0.70 0.77 0.78 0.77 1.06 1.12 1.07 1.13 1.21 1.14 1.20 1.31 1.22 0.22 0.22 0.22 0.23 0.24 0.23 0.23 0.25 0.24 Resource category Indicated Inferred TOTAL Indicated Inferred TOTAL Indicated Inferred TOTAL 1. There is greater coverage of assays for uranium than other elements owing to historic spectral assays. U3O8 has therefore been used to define the cut-off grades to maximise the confidence in the resource calculations. 2. Additional decimal places do not imply an added level of precision. 3. Total Rare Earth Oxide (TREO) refers to the rare earth elements in the Lanthanide series plus yttrium. Note: Figures quoted may not sum due to rounding. Update on Geological Framework and Resource Potential In the geological world alkaline magmatism is known to be associated with some of the world’s most prolific mineral deposits. Alkaline intrusions host a variety of mineral deposit types that include phosphate deposits, specialty metal deposits inclusive of REEs, niobium, tantalum, and titanium, and some alkaline complexes are also associated with prolific copper and gold deposits. The Ilimaussaq Intrusive Complex is the world’s type-example of a particularly unusual group of alkaline rocks that are referred to as agpaitic1 nepheline2 syenites3. Similar alkaline igneous complexes include the Khibina Complex in Sweden that hosts the world’s largest apatite deposits (phosphate ores), and the Lovozero Complex in Russia (Kola Peninsula) that hosts vast loparite deposits that are rich in niobium and titanium. The Ilimaussaq Complex is unique, in that it comprises almost purely agpaitic rocks. For these reasons, it has been the subject of extensive studies by scientists worldwide. Henning Sørensen, one of the world’s most highly regarded geoscientists, devoted a significant portion of his career to understanding the Ilimaussaq Complex and its economic significance. In a paper published in 1992 Sørensen theorised that agpaitic rocks could contain vast resources of rare elements that could be exploited in a multi-element capacity. As the work programs of the Company progress, the results are encouraging and indicate that Sørensen’s theory may be correct. 1 The term agpaitic is applied to nepheline syenites that contain unusual minerals such as eudialyte and rinkite, rather than the common zirconium- and titanium- bearing minerals such as zircon, titanite and ilmenite. Agpaitic rocks are enriched in rare elements such as REEs, niobium, titanium, yttrium, tantalum, uranium, beryllium and fluorine. 2 Nepheline, also called nephelite is a feldspathoid: a silica-undersaturated aluminosilicate, Na3KAl4Si4O16, that occurs in intrusive and volcanic rocks with low silica. 3 Syenite is a coarse-grained intrusive igneous rock which is relatively depleted in silica, and enriched in the alkali elements sodium and potassium. Igneous rocks are those that formed by the crystallisation of magmas. 9 SECTION 2 | 9 Director’s Report Greenland Minerals and Energy Limited Directors’ Report DIRECTORS’ REPORT Figure 1. Schematic geological map of the northern Ilimaussaq Intrusive Complex (after Anderson, 1964). Black lujavrite is host to REE, uranium, zinc and sodium fluoride mineralisation. A JORC-compliant 457Mt resource has been defined at Kvanefjeld (highlighted by stippled red line). Targets K2 to K8 were defined on the basis of radiometric surveys, and geological mapping. Black lujavrite underlies naujaite through much of the northern part of the complex. 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Ongoing geological studies by the Company have built on the existing knowledge base to improve the understanding of ore-genesis within the Ilimaussaq Intrusive Complex. The northern half of the complex preserves the uppermost levels, which are the most prospective areas for bulk-tonnage, multi-element resources. The southern half of the complex is more deeply eroded, exposing basal units referred to as kakortokites that contain the zirconium-rich mineral eudialyte. Black lujavrite, the dominant host to REEs, uranium, zinc and sodium fluoride mineralisation at Kvanefjeld, is now known to be widespread through the northern part of the complex. Whilst black lujavrites are mineralised throughout, the grades of REEs, uranium and zinc are highest in the uppermost portions of the black lujavrite where they have been concentrated by magmatic processes. The Company is working to identify broad domal upwellings of black lujavrite where new bulk-tonnage ore zones are likely to occur. As the geological understanding improves, the Company is increasingly confident of the immense resource potential of Ilimaussaq Complex. In this sense, Kvanefjeld can be considered as the first multi-element resource defined within the broader Ilimaussaq ore field. Update on the Pre-Feasibility Study Following the two highly successful exploration campaigns and rapid resource growth, the Company launched a pre-feasibility study on the Kvanefjeld multi-element project in late 2008. The study is scheduled for completion in late 2009. The recently upgraded resource statement confirms the world class potential of Kvanefjeld, and emphasises the importance of the pre-feasibility process to the evolution of the project. Given the unique nature of the geology and the multi-element ores, it is a critical milestone for the Company to develop a process route that can extract the elements of interest in an economically viable manner. The mining study component is being conducted by Coffey Mining Pty Ltd and covers the mine design and ore scheduling, geotechnical issues, hydrogeology and tailings management. SECTION 2 | 10 10 Director’s Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited Directors’ Report DIRECTORS’ REPORT The engineering study component is being conducted by GRD Minproc and includes the process design, engineering design and capital and operating costs of a milling and processing plant including a rare earth refinery and uranium recovery plant. Environmental studies are also underway with Coffey Natural Systems preparing a strategy for the Environmental and Social Impact Assessment. Orbicon, a Danish based environmental sciences group, is undertaking field the work and base-line monitoring. Previous work by the Danish Atomic Energy Agency (RISO) identified a viable way to extract uranium. However, given the emerging economic and strategic significance of specialty metals, such as rare earths, the Company is taking a multi-element approach with other process routes being evaluated to maximise specialty metal recoveries and the economic viability of the project. During the year, metallurgical testwork continued, and the work programs were implemented in Greenland to generate data pertinent to the feasibility process. ANSTO (Australian Nuclear Services and Technology Organisation) have commenced work on process development specifically for REE metallurgical behaviour and recovery. The results of ANSTO’s current work program will feed into the broader process development and plant design that is being conducted by GRD Minproc. Changes in State of Affairs The following significant changes in the state of affairs of the Company occurred during the financial year. (i) Completion of the sale of the Company’s Three Sisters project in Queensland. The sale was completed on the 19 December 2008 for the consideration of $130,000 in cash proceeds and 1,200,000 shares in Riviera Minerals Limited (the purchaser). Other than the above, there was no significant change in the state of affairs of the consolidated group. Financial Position The net assets of the consolidated group were $48,109,043 at year end. The consolidated group was in a strong financial position at the end of the financial year with sufficient financial resources to undertake its objectives. The consolidated group’s objective is to locate new mineral discoveries that significantly upgrade the value of its projects and consider other opportunities in Greenland’s resources sector. The board adopted AASB-2 Share Based Payments on the accounting of the acquisition of Chahood Capital Limited and the joint venture interest in the Kvanefjeld project, for the financial year ended 30 June 2008. The transactions were previously recorded pursuant to AASB-3 Business Combinations. The required adjustments are summarised in Note 21 of the financial statements for the year ended 30 June 2009. The adjustments have no impact on cash flow. Information on Directors Michael Hutchinson Appointed Special responsibilities - - - Non-Executive Chairman 25 November 2008 Member of the Remuneration Committee (Chairman) Member of the Audit Committee Qualifications - BSc 11 SECTION 2 | 11 Director’s Report Michael Hutchinson (cont) Experience Greenland Minerals and Energy Limited Directors’ Report DIRECTORS’ REPORT - Mr Hutchinson has more than 30 years experience in non-ferrous metal trading. He is a long standing Director of LME Holdings Limited and The London Metal Exchange Limited, the world’s largest market in options and futures contracts on base and other metals. He is currently non-Executive Chairman of RBS Sempra Metals Limited ('RBS Sempra'), having previously served as its Chairman and Chief Executive Officer. RBS Sempra the successor company of Metallgesellschaft Limited, which became MG plc and floated on the London Stock Exchange in September 1999. Mr Hutchinson is also Chairman of Wogen plc a trader of off exchange metals that sources metals worldwide for industrial end users. is Interest in shares & options Directorships held in other listed entities - 4,000,000 unlisted options - Non-executive Chairman of; RBS Sempra Metals Limited – since January 2005 Wogen plc – since July 2008 Non-executive Director of; LME Holdings Limited – since April 2005 Mecom Group plc – since May 2009 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Roderick Claude McIllree Appointed Special responsibilities Qualifications Managing Director 23 March 2007 Member of the Remuneration Committee - - - - B.Sc. (Mineral Exploration and Mining Geology), G.Cert. (Mineral Economics) MAusIMM. Experience Interest in shares & options - Mr McIllree graduated from Curtin University of Technology in 1996 with a Bachelor of Science degree (Mineral Exploration and Mining Geology) and commenced a career in the mining industry where he worked for major mining companies both domestically and internationally, gaining experience in mineral exploration and in all facets of mining. Mr McIllree moved to the finance sector in 2000 and worked as an analyst and advisor for broking houses active in capital markets. Mr McIllree has experience initiated several successful mining companies with assets both domestically and overseas. He was instrumental in sourcing the Kvanefjeld Project for the Company. - 3,361,095 Ordinary Shares of Greenland Minerals and Energy Limited, international capital raisings having in 2,522,000 listed options and 6,600,000 unlisted unvested options. Directorships held in other listed entities - Executive director of; Convergent Minerals Limited – since July 2006 Simon Kenneth Cato Appointed Qualifications Experience Executive Director 21 February 2006 - - - B.A. - Mr Cato has had over 25 years capital markets experience in broking, regulatory roles and as director of listed companies. He initially was employed by the ASX in Sydney and in Perth. During the last 19 years he has been an executive director and/or responsible executive of 3 stockbroking firms and in those roles he has been involved in many aspects of broking including management issues such as credit control and reporting to regulatory bodies in the securities industry. As a broker he has also been involved in the underwriting of a number of initial public offers and has been through the process of an initial public offer listing in a dual role of broker and director. Currently he holds a number of executive and non executive roles with listed companies in Australia. Interest in shares & options - 920,100 Ordinary Shares in Greenland Minerals and Energy Limited, 800,100 options and 6,600,000 unvested unlisted options. SECTION 2 | 12 12 Director’s Report Greenland Minerals and Energy Limited Directors’ Report DIRECTORS’ REPORT 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Simon Cato (cont) Directorships held in other listed entities - Current Chairman of; Convergent Minerals Limited - since July 2006. Advanced Share Registry Limited - since August 2007. Director of: Bentley International Limited – since February 2004 Queste Communications Limited – since February 2008 Former directorships in other- listed entities in the last 3 years Sofcom Limited – January 2004 to March 2008 Scarborough Equities Limited – November 2004 to March 2009 Anthony Ho Appointed Special responsibilities Qualifications Experience - - - Non-Executive Director 9 August 2007 Member of the Audit Committee (Chairman) Member of the Remuneration Committee - B.Comm, CA, FAICD, FCIS - Mr Ho is an experienced Company director having held executive directorship and chief financial officer roles with a number of publicly listed companies. Mr Ho was executive director of Arthur Yates & Co Limited, retiring from that position in April 2002. His corporate and governance experience include being chief financial officer/finance director of M.S. McLeod Holdings Limited, Galore Group Limited, the Edward H O'Brien group of companies and Volante Group Limited. Prior to joining commerce, Mr Ho was a partner of Cox Johnston & Co, Chartered Accountants, which has since merged with Ernst & Young. Mr Ho holds a Bachelor of Commerce degree from the University of New South Wales and is a member of the Institute of Chartered Accountants in Australia and a fellow of both the Chartered Institute of Company Secretaries Australia and the Australian Institute of Company Directors. Interest in shares & options Directorships held in other listed entities - 250,000 Ordinary Shares of Greenland Minerals and Energy Limited. - Non-executive Chairman; Esperance Minerals NL – since July 2008; member of Audit Committee Director of; Dolomatrix International Limited – since April 2007; Chairman of Audit Committee. Apollo Minerals Limited – since July 2009; Chairman of Audit Committee. Former directorships in other- listed entities in the last 3 years - Brazin limited – September 1997 to January 2007 Malcolm Geoffrey Mason Appointed Special responsibilities Qualifications Non-Executive Director 9 August 2007 Member of the Audit Committee - - - - B.Sc. (Hons), MAus IMM SECTION 2 | 13 13 Director’s Report Malcolm Mason (cont) Experience 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited Directors’ Report DIRECTORS’ REPORT from acquiring projects and prospects - Mr Mason has had more than 40 years experience in the Australian and international exploration and mining industries. His experience covers gold, base metals and non-metallic minerals. Since 1995 he has specialised in uranium. As a principal he has investigated many known deposits in Australia and overseas. His depth of through experience extends application or negotiation to mounting intensive and extensive exploration into evaluation programmes and completing feasibility studies. In 1996, Mr Mason formed Acclaim Uranium NL, which successfully listed on the ASX. As Managing Director he implemented his “uranium only” strategy and acquired an extensive portfolio of Australian uranium projects. Among the projects were Millipede/Abercromby, Nowthanna and Lake Maitland calcrete deposits. In 1998, Mr Mason helped identify the Langer Heinrich deposit for Acclaim Uranium NL which then drilled and completed a feasibility study. In early 2005 he joined Redport Limited as Strategic Adviser, assisted the Company to acquire the Lake Maitland uranium deposit, and was involved in its exploration and evaluation. Interest in shares & options - 610,000 Ordinary Shares of Greenland Minerals and Energy Limited, 180,000 options and 3,500,000 unvested options. Directorships held in other listed entities - Nil Hans Kristian Vinding Schønwandt Appointed Qualifications Experience Non-Executive Director 9 August 2007 - - - PhD (Economic Geology) - Dr Schønwandt has been involved in mineral exploration and geological mapping in Greenland since 1963. He has contributed to the mining society’s attention to Greenland’s mineral potential through numerous international publications and presentations at mining conferences. Interest in shares & options - 1,500,000 Ordinary Shares of Greenland Minerals and Energy Limited and 1,000,000 listed options Directorships held in other listed entities Directorships held in other listed entities - Nil - Director of; London Mining plc – since January 2006 Simon Alexander Stafford Michael Appointed Qualifications Experience - - Non-Executive Director 9 August 2007 – resigned 13 November 2008 - LLB (Hons) - Mr Stafford-Michael practised as a barrister in the United Kingdom from 1982 to 2005. He developed a commercial practice, with particular emphasis on financial services, banking, tax, corporate and commercial and insurance and reinsurance. Mr Stafford-Michael had a substantial advisory practice in the United Kingdom concerning regulation and compliance issues arising under the Banking, Financial Services and Insurance (Companies) Acts and the rules and regulations of the securities markets; compliance with the Money Laundering Regulations; the conduct of fraud and money laundering investigations; and the duties and liabilities of Company directors and their professional advisers under the Companies and Insolvency Acts. His corporate clients included a substantial number of major oil and mining corporations, particularly in connection with insurance claims predicated on environmental risks. SECTION 2 | 14 14 Director’s Report Greenland Minerals and Energy Limited Directors’ Report Simon Stafford Michael (cont) Interest in shares & options Directorships held in other entities - 1,000,000 Ordinary Shares of Greenland Minerals and Energy Limited. - Nil DIRECTORS’ REPORT Jeremy Sean Whybrow Appointed Qualifications Exploration Director 21 February 2006 - - - B.Sc. (Mineral Exploration and Mining Geology), G.Cert(Minerals Economics), M.Aus.I.M.M Experience - Mr Whybrow has had over 12 years experience in the mining industry both domestically and internationally. Mr Whybrow has worked for companies such as Sons of Gwalia Ltd, PacMin Ltd, Teck Australia Ltd, Mount Edon Gold Mines Ltd and Croesus Mining NL. the operational environment and includes significant exposure to exploration and mining operations, project evaluation and feasibility studies. Previously, Mr Whybrow has worked internationally in China, Africa and the Philippines as well as numerous localities in Australia. His experience has been mainly in Interest in shares & options - 900,100 Ordinary Shares of Greenland Minerals and Energy Limited, 710,100 listed options and 6,600,000 unvested unlisted options. 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Directorships held in other listed entities - Director of: Convergent Minerals Limited. – since July 2006 Remuneration Report – Audited This report details the nature and amount of remuneration for each director of Greenland Minerals and Energy Limited and senior management receiving the highest remuneration. Director and senior management details The following persons acted as directors during or since the end of the financial year: Roderick Claude McIllree, Managing Director Simon Kenneth Cato, Executive Director Jeremy Sean Whybrow, Exploration Director Michael Hutchinson, Non-Executive Chairman – appointed 25 November 2008 Anthony Ho, Non-Executive Director Malcolm Geoffrey Mason, Non-Executive Director Simon Alexander Stafford Michael, Non-Executive Director – resigned 13 November 2008 Hans Kristian Vinding Schønwandt, Non-Executive Director (non-executive chairman to 25 November 2008) The term ‘senior management’ is used in this remuneration report to refer to the following persons. Except as noted, the named persons held their current position for the whole of the financial year and since the end of the financial year: Bruce Richard Acutt, Company Secretary John Mair, General Manager – appointed 1 July 2008 Shaun Bunn, Project Manager – appointed 30 July 2008 SECTION 2 | 15 15 Director’s Report Greenland Minerals and Energy Limited Directors’ Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Remuneration report – audit (cont) DIRECTORS’ REPORT Remuneration Policy The remuneration policy of Greenland Minerals and Energy Limited has been designed to align director and senior management objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the consolidated group’s financial results. The board of Greenland Minerals and Energy Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best senior management and directors to run and manage the consolidated group, as well as create alignment of interests between directors, senior management and shareholders. The board’s policy for determining the nature and amount of remuneration for board members and senior executives of the consolidated group is as follows: All senior management receive a base salary (which is based on factors such as length of service and experience) and superannuation. The executive directors and senior management receive a superannuation guarantee contribution required by the government, which is currently 9% and do not receive any other retirement benefits. All remuneration paid to directors and senior management is valued at the cost to the Company and expensed. Shares issued to directors and senior management at market price of those shares. Options are valued using the Black-Scholes methodology. The board policy is to remunerate non-executive directors with a base fee and, for special exertion, at market rates for time, commitment and responsibilities. The board as a whole, fulfilling the role of the remuneration committee determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. The current shareholder approved cap on these fees is $400,000. Fees for non- executive directors are not linked to the performance of the Company. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company. Details of Remuneration The remuneration for the directors and senior management of the entity receiving the highest remuneration during the year was as follows: 2009 Executive Directors Simon Kenneth Cato Jeremy Sean Whybrow Roderick Claude McIllree Non-executive Directors Simon Alexander Stafford- Michael (i) Anthony Ho Hans Kristian Vinding Schønwandt (ii) Malcolm Geoffrey Mason Michael Hutchinson Senior Management Bruce Acutt John Mair Shaun Bunn Total SECTION 2 | 16 Short-term employee benefits Share based payments Post- employment Superannuation Salary $ Fees $ Shares $ Options $ $ Total $ 75,000 160,000 162,000 40,000 50,000 50,000 - - - - - 70,000 (1,228,334) - 65,000 - - - - - 119,006 150,375 - - 210,000 299,026 1,175,407 40,000 40,000 37,453 - 22,000 961,667 - - - - 784,885 629,800 - - 414,453 - (266,667) 190,893 1,605,578 10,350 18,900 20,700 125,350 228,900 232,700 - (1,158,334) 70,850 5,850 - 1,120,673 975,260 - 667,253 - - 18,900 - 22,000 228,900 489,919 74,700 3,003,471 16 Director’s Report Remuneration report – audit (cont) DIRECTORS’ REPORT Greenland Minerals and Energy Limited Directors’ Report Short-term employee benefits Share based payments Post- employment Superannuation Salary $ Fees $ Shares $ Options $ $ Total $ 64,052 197,600 199,990 40,000 - - 8,420,171 8,420,171 8,420,171 7,650 8,531,873 9,450 8,627,221 10,350 8,630,511 - - 33,980 3,600,834 - 40,678 - - - 3,634,814 44,339 3,661 171,500 157,527 40,000 3,600,834 40,000 - 3,122,465 - 3,812,334 - 3,319,992 - 790,669 26,000 - 220,658 7,201,668 28,382,978 - - 26,000 31,111 36,627,084 2008 Executive Directors Simon Kenneth Cato Jeremy Sean Whybrow Roderick Claude McIllree Non-executive Directors Simon Alexander Stafford- Michael Anthony Ho Hans Kristian Vinding Schønwandt Malcolm Geoffrey Mason Senior Management Bruce Acutt Total 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G (i) (ii) Simon Stafford-Michael resigned as a Director effective 13 November 2008. The reversal of share based payments of $1,228,334 represents the amount recognised as remuneration in the prior year for shares which had not vested as at the date of resignation and were therefore forfeited. During the current financial year Mr Hans Kristian Schønwandt was issued 500,000 shares and granted 1,500,000 options (vesting immediately) as approved at a shareholders’ meeting held on 25 November 2008. The purpose of the issue of the shares and options was for consideration for the cancellation of all share milestones under a director service agreement entered into in the prior year that could have potentially lead to the issue of up to 2,000,000 shares to Mr Schønwandt subject to vesting conditions. At the date of alteration, Mr Hans Kristian Schønwandt was entitled to 500,000 shares for each 12 months service (up to 1,500,000 shares) and 1,000,000 shares if the market captalisation of the Company reached $150 million and 1,000,000 shares if the market capitalisation of the Company reached $200 million. The total maximum number of shares that could have been issued under the arrangement was 3,000,000. The cancellation has been accounted for as an acceleration of the vesting conditions with an amount of $962 thousand recognised in the current financial year. This amount represents the total remaining fair value (including current year vesting expense) as determined at the original grant date. The market price of ordinary shares of the Company on the date of alteration was $0.27 and the market price of listed options was $0.15. The fair value of the original share based payment arrangement immediately before alteration was $837,500. The total fair value of the replacement share based payment arrangement was $295,000. In accordance with AASB 2 – Share Based Payments, no additional amount has been brought to account for the replacement shares and options as it has been determined that the fair value of these shares and options is less than the net fair value of the cancelled equity instrument as determined at the date of cancellation. No director or senior management person appointed during the period received a payment as part of his or her consideration for agreeing to hold the position. Key terms of employment contracts Michael Hutchinson, Non Executive Chairman (cid:1) Director fee excluding superannuation for the year ended 30 June 2009 of £50,000 (cid:1) Entitled to be reimbursed for all out of pocket expenses necessarily incurred in the performance of his duties including relating to travel, entertainment, accommodation, meals and telephone. (cid:1) No fixed term. SECTION 2 | 17 17 Director’s Report Greenland Minerals and Energy Limited Directors’ Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Remuneration report – audit (cont) Roderick McIllree, Managing Director DIRECTORS’ REPORT (cid:1) Term and type of contract – service agreement subject to annual review. (cid:1) Base salary of $162,000 per annum paid monthly in arrears. (cid:1) Entitled to receive a separate director’s fee of $50,000 per annum. (cid:1) Superannuation at 9% is payable on the base salary and directors fee. (cid:1) Entitled to be reimbursed for all out of pocket expenses necessarily incurred in the performance of their duties including relating to travel, entertainment, accommodation, meals and telephone. (cid:1) Either the Company or the director may terminate their engagement without cause by giving the other party three months written notice. (cid:1) Remuneration will be reviewed every 12 months or as otherwise agreed between the parties. Jeremy Whybrow, Exploration Director (cid:1) Term and type of contract – service agreement subject to annual review. (cid:1) Base salary of $150,000 per annum paid monthly in arrears. (cid:1) Entitled to receive a separate director’s fee of $50,000 per annum. (cid:1) Superannuation at 9% is payable on the base salary and directors fee. (cid:1) Entitled to be reimbursed for all out of pocket expenses necessarily incurred in the performance of his duties including relating to travel, entertainment, accommodation, meals and telephone. (cid:1) Either the Company or the director may terminate their engagement without cause by giving the other party three months written notice. (cid:1) Remuneration will be reviewed every 12 months or as otherwise agreed between the parties. Simon Cato, Executive Director (cid:1) Term and type of contract – service agreement limited to a maximum of 80 hours per month subject to annual review. (cid:1) Base salary of $80,000 per annum paid monthly in arrears. (cid:1) Entitled to receive a separate director’s fee of $40,000 per annum. (cid:1) Superannuation at 9% is payable on the base salary and directors fee (cid:1) Entitled to be reimbursed for all out of pocket expenses necessarily incurred in the performance of his duties including relating to travel, entertainment, accommodation, meals and telephone. (cid:1) Either the Company or the director may terminate their engagement without cause by giving the other party three months written notice. (cid:1) Remuneration will be reviewed every 12 months or as otherwise agreed between the parties. Anthony Ho, Non-Executive Director (cid:1) No fixed term. (cid:1) $40,000 per annum. (cid:1) Entitled to be reimbursed for all out of pocket expenses necessarily incurred in the performance of his duties including relating to travel, entertainment, accommodation, meals and telephone. Malcolm Mason, Non-executive Director (cid:1) No fixed term. (cid:1) $40,000 per annum. (cid:1) Entitled to be reimbursed for all out of pocket expenses necessarily incurred in the performance of his duties including relating to travel, entertainment, accommodation, meals and telephone. Hank Schønwandt, Non-executive Director (cid:1) No fixed term. (cid:1) $40,000 per annum. (cid:1) Entitled to be reimbursed for all out of pocket expenses necessarily incurred in the performance of his duties including relating to travel, entertainment, accommodation, meals and telephone. (cid:1) The company issued 500,000 shares and 1,000,000 options with an exercise price of $0.20 and an expiry date of 30 June 2011 in satisfaction of outstanding obligations regarding contract. SECTION 2 | 18 18 Director’s Report Greenland Minerals and Energy Limited Directors’ Report Remuneration report – audit (cont) DIRECTORS’ REPORT Simon Stafford-Michael, Non Executive Director – Resigned 13 November 2008 (cid:1) Term of contract – service agreement for 3 years. (cid:1) Director fee excluding superannuation for the year ended 30 June 2008 of $30,000. (cid:1) Entitled to a living allowance and a daily rate for performing and part of their services outside the country’s residence of £600 per day. John Mair, General Manager (cid:1) Term and type of contract – service agreement subject to annual review. (cid:1) Base salary of $200,000 per annum paid monthly in arrears. Superannuation at 9% is payable on the base salary. (cid:1) Entitled to be reimbursed for all out of pocket expenses necessarily incurred in the performance of his duties including relating to travel, entertainment, accommodation, meals and telephone. (cid:1) Either the Company or the director may terminate his engagement without cause by giving the other party three months written notice. (cid:1) Remuneration will be reviewed every 12 months or as otherwise agreed between the parties. Shaun Bunn, Project Manager (cid:1) Term of contract – consultancy service agreement with Shaun Bunn & Associates Pty Limited, 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G engagement is for a minimum term of 36 months. (cid:1) The Company may only terminate the agreement, during the minimum term period term upon limited events akin to poor performance, misconduct or incapacity without cause giving Shaun Bunn & Associates Pty Limited 12 months notice (cid:1) Shaun Bunn & Associates Pty Limited will be paid fee of $30,000 per month (cid:1) Shaun Bunn & Associates Pty Limited will be reimbursed for all out of pocket expenses necessarily incurred in the performance of the services including reasonable expenses relating to travel, entertainment, accommodation, meals and telephone. (cid:1) The Company has issued 750,000 incentive options with an exercise price of 10 cents and an expiry date of 30 June 2013. A second tranche of 750,000 options with an exercise price of 25 cents will be issued on commencement of a feasibility study in relation to the Kvanefjeld project. Share based payments granted as compensation for the current financial year The Company issued 500,000 shares valued at $135 thousand, to Mr Hans Kristian Schønwandt which was approved at a shareholders’ meeting held on 25 November 2008. The fair value of the shares issued is based on the trading price of the company’s shares on the ASX, of $0.27 on the grant date of 25 November 2008. The issue of these shares represents consideration for the cancellation of a previous equity instrument which was subject to vesting conditions. There were no options exercised by directors or senior management during the financial year ended 30 June 2009. No options issued to directors or senior management lapsed during the year. During the financial year, the following share-based payment arrangements were in existence Options series 3 4 9 10 13 14 Grant date Expiry date 30/06/2011 30/06/2011 30/06/2011 30/06/2013 30/06/2011 30/06/2011 31/07/07 31/07/07 25/11/08 25/11/08 25/06/09 25/06/09 Grant date fair value 25,260,513 3,827,350 240,000 (1) 190,893 371,200 258,600 Vesting date (i) (ii) 25/11/08 25/11/08 25/06/09 25/06/09 (1) This amount includes $160 thousand representing the fair value of options granted to Mr Hans Kristian Schønwandt as a replacement equity instrument upon cancellation of equity instruments previously granted under a director service agreement. The fair value of the replacement equity instrument has not been brought to account or included in Mr Schønwandt’s remuneration for the year as it has been determined that the fair value is less than the net fair value of the original cancelled equity instrument as determined at the date of cancellation. SECTION 2 | 19 19 Director’s Report Greenland Minerals and Energy Limited Directors’ Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Remuneration report – audit (cont) DIRECTORS’ REPORT (i) The following vesting conditions are attached to the options issued. Tranche Number of options 1 2,200,000 2 3 2,200,000 2,200,000 Vesting hurdle The volume weighted average share price on the ASX of the company’s fully paid shares is 50 cents or more for 20 consecutive trading days The volume weighted average share price on the ASX of the company’s fully paid shares is $1.00 or more for 20 consecutive trading days The volume weighted average share price on the ASX of the company’s fully paid shares is $1.50 or more for 20 consecutive trading days (ii) The following vesting conditions were attached to the options issued. Tranche Number of options 1 2,000,000 2 1,000,000 Vesting hurdle Mr Mason continues to serve as a director of the company for 12 consecutive months and makes himself available to provide technical geological, services including field services to the company’s Kvanefjeld project. Mr Mason continues to serve as a director of the company for 18 consecutive months and makes himself available to provide technical geological, services including field services to the company’s Kvanefjeld project. The following grants of share-based payment compensation to directors and senior management relate to the current financial year: During the financial year Option series 9 9 10 13&14 No. granted 1,000,000 500,000 750,000 4,000,000 No. vested 1,000,000 500,000 750,000 4,000,000 % of grant vested 100 100 100 100 % of compensation for the year consisting of options % of grant forfeited -%(1) 80.5% 38.9% 94.4% Name H. Schønwandt M. Mason S. Bunn M. Hutchinson (1) The value of the options granted to H. Schønwandt have not been brought to account as they represent a replacement equity instrument for a share based payment previously granted in prior year. It has been determined that the fair value of the replacement equity instrument is less than the net fair value of the cancelled equity instrument as determined at the date of cancellation. The following table summarises the value of options granted, exercised or lapsed during the current year to directors and senior management: Name M Mason H Schønwandt S Bunn M Hutchinson Value of options at grant date (i) $ Value of options exercised at the exercise date $ Value of options lapsed at the date of lapse (ii) $ 80,000 160,000 190,893 629,800 - - - - (i) The value of options granted during the period is recognised in compensation over the vesting period of the grant, in accordance with Australian accounting standards. (ii) The value of options lapsing during the period due to the failure to satisfy a vesting condition is determined assuming the vesting condition had been satisfied. SECTION 2 | 20 - - - - 20 Director’s Report Greenland Minerals and Energy Limited Directors’ Report Remuneration report – audit (cont) DIRECTORS’ REPORT Company performance, shareholder wealth and director and senior management remuneration The remuneration policy has been tailored to align the interests of shareholders, directors and senior management. To achieve this aim, the entity may issue options to individual or all of senior management. Any issue of options will be based on the performance of the Company and or individual and will be based on the achievement of clearly defined bench marks and milestones. These bench marks and milestones include: (cid:1) Share price and or the market capitalisation of the Company exceeding pre-determined levels. (cid:1) Completion specific projects or pre-determined stages of projects. (cid:1) Periods of service with the Company. (cid:1) Improvements in shareholder value. The Company notes that all directors are shareholders at present and the Company has no present intention to issue further incentive shares or options to directors. There is no Board policy in relation to limiting the recipient exposure to risk in relation to options issued to any individual. The following table shows the gross revenue and profits for the period from incorporation date 26 February 2006 to 30 June 2009 for the listed entity, as well as the share price at the end of each financial year. 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Remuneration Report Revenue Net loss before and after tax Share price at beginning of year Share price at end of year Dividend Basic loss per share Diluted loss per share 2009 $1,279,120 2008 $1,334,337 $(4,008,712) $(202,767,366) $1.75 $0.66 - $1.25 $1.25 $0.66 $0.36 - $0.02 $0.02 2007 2006 $228,241 $(199,700) $0.26 $1.75 - $0.62 $0.62 $21,272 $(324) - $0.26 - $0.00 $0.00 Meetings of Directors During the financial year, 7 meetings of directors were held. Attendances by each director during the year were as follows: Director M Hutchinson R McIllree S K Cato A Ho M G Mason S A S Michael H K V Schønwandt J S Whybrow Directors Meetings Number of meetings eligible to attend 2 7 7 7 7 2 7 7 Number attended 1 7 7 7 7 2 7 6 Audit Committee The audit committee was formed at the Directors’ Board Meeting on the 22 April 2009. The audit committee members are Anthony Ho (Chairman), Michael Hutchinson and Malcolm Mason. The audit committee is to meet at least twice a year and must have a quorum of two members. There was 1 audit committee meeting held between the date of formation and the end of the financial year, as follows: Member A Ho M G Mason M Hutchinson Audit Committee Meetings Number of meetings eligible to attend 1 1 1 Number Attended 1 1 - SECTION 2 | 21 21 Director’s Report Greenland Minerals and Energy Limited Directors’ Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G DIRECTORS’ REPORT Indemnifying Officers During or since the end of the financial year the Company has given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premium to insure the directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of the director of the Company, other than conduct involving a willful breach of duty in relation to the Company. Proceedings on Behalf of Company No person has applied for leave of Court 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 There were no non-audit services provided to the Company, by the auditor, during the financial year ended 30 June 2009. Auditor’s Independence Declaration The auditor’s independence declaration for the year ended 30 June 2009 has been received and is included on page 23 the financial report. Rounding off of amounts The company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998. In accordance with that Class Order amounts in the directors’ report and the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. Signed in accordance with a resolution of directors, made pursuant to section 298(2) of the Corporations Act 2001. On behalf of the Directors. SECTION 2 | 22 22 Director’s Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 2 | 23 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 2 | 24 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 2 | 25 Director’s Report Directors’ declaration Greenland Minerals and Energy Limited Directors’ Declaration The directors declare that: (a) in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Company and the consolidated entity; and the directors have been given the declarations required by s.295A of the Corporations Act 2001. (b) (c) Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001. On behalf of the Directors Simon Cato Director 30 September 2009 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G SECTION 2 | 26 26 Income Statement for the year ended 30 June 2009 Income Statement for the financial year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report Revenue Expenditure Directors’ fees and salary expense Share based payments – directors Share based payments – other Occupancy expenses Other expenses Consolidated 2009 $' 000 2008 $' 000 Company 2009 $' 000 2008 $' 000 1,279 1,334 1,279 1,334 Note 5 (602) (981) - (271) (3,440) (374) (31,303) (170,304) (67) (2,061) (602) (981) - (271) (3,424) (374) (31,303) (170,304) (67) (2,040) Loss before tax Income tax expense 6 7 (4,015) - (202,775) - (3,999) - (202,754) - Loss for the year (4,015) (202,775) (3,999) (202,754) Attributable to: Equity holders of the parent Minority interest (4,009) (6) (4,015) (202,767) (8) (202,775) (3,999) - (3,999) (202,754) - (202,754) 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Loss per share 20 Basic loss per share – cents per share Diluted loss per share – cents per share 2.00 2.00 125.00 125.00 Notes to the financial statements are included on pages 32 to 66 27 SECTION 2 | 27 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Balance Sheet as at 30 June 2008 Balance sheet as at 30 June 2009 Current Assets Cash and cash equivalents Trade and other receivables Other assets Total Current Assets Non-Current Assets Trade and other receivables Financial assets Property, plant and equipment Capitalised exploration and evaluation expenditure Total Non-Current Assets Total Assets Current Liabilities Trade and Other Payables Provisions Total Current Liabilities Total Liabilities Net Assets Equity Issued Capital Reserves Accumulated Losses Equity attributable to equity holders of the parent Minority Interest Total Equity Greenland Minerals and Energy Limited 2009 Financial Report Note 8 9 10 Consolidated 2009 $' 000 2008 $' 000 14,039 1,281 1,066 16,386 21,637 1,561 28 23,226 Company 2009 $' 000 2008 $' 000 13,585 1,281 1,066 15,932 21,631 1,469 28 23,128 9 11 12 13 14 15 16 17 19 - 98 506 - - 405 5,207 4,410 506 4,838 4,311 405 33,694 34,298 22,355 22,760 24,611 34,734 13,273 22,827 50,684 45,986 50,666 45,955 2,538 37 2,575 259 - 259 2,531 37 2,568 249 - 249 2,575 48,109 259 45,727 2,568 48,098 249 45,706 98,519 93,666 98,519 93,666 156,538 154,994 156,532 154,994 (206,976) (202,967) (206,953) (202,954) 48,081 28 48,109 45,693 34 45,727 48,098 - 48,098 45,706 - 45,706 Notes to the financial statements are included on pages 32 to 66 SECTION 2 | 28 28 Statement of Changes in Equity for the financial year ended 30 June 2008 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Statement of changes in equity for the financial year ended 30 June 2009 Consolidated Fully Paid Ordinary Option reserve Share Foreign currency translation Accumulated reserve losses $' 000 Attributable to equity holders of the parent Minority interest $' 000 $' 000 Total $' 000 $' 000 $' 000 $' 000 Balance at 1 July 2007 Net loss for the period (recognised income and expenses) (i) Contributions of equity net of transaction costs Issue of shares upon exercise of options Issue of shares for acquisition of assets Recognition of share based payments (ii) Minority interest arising from acquisition Balance at 1 July 2008 Net loss for the period (recognised income and expenses) Contributions of equity net of transaction costs Exchange differences arising on translation of foreign operations Recognition of share based payments Balance at 30 June 2009 5,238 141 - (200) 5,179 - 5,179 - - - (202,767 ) (202,767 ) (8) (202,775) 35,044 - - - 35,044 - 35,044 514 - - - 514 - 514 6,150 - - - 6,150 - 6,150 46,720 154,853 - - 201,573 - 201,573 93,666 154,994 - (202,967) 45,693 34 45,727 - 42 42 - 4,718 - - - - 135 1,538 98,519 156,532 - (4,009) (4,009) (6) (4,015) - 6 - 6 - - - 4,718 4,718 6 1,673 - - 6 1,673 (206,976) 48,081 28 48,109 (i) Net loss for the year ended 30 June 2008 has been restated as a result of a prior period adjustment. The net loss for the year was increased by $164,421 thousand. Refer to Note 21 for details of prior period adjustment. (ii) Recognition of share based payments for the year ended 30 June 2008 has been restated as a result of a prior period adjustment. The movement in the Option Reserve for the year was increased by $120,300 thousand and the movement in Issued Capital decreased by $21,230 thousand. Refer to Note 21 for details of prior period adjustment. Notes to the financial statements are included on pages 32 to 66 29 SECTION 2 | 29 Greenland Minerals and Energy Limited 2009 Financial Report Statement of Changes in Equity for the financial year ended 30 June 2008 (continued) 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Statement of changes in equity For the financial year ended 30 June 2009 Company Fully Paid Ordinary Shares $' 000 Option reserve $' 000 Accumulated losses $' 000 Total $' 000 5,238 141 (200) 5,179 - - ( 202,754 ) (202,754) 35,044 - - 35,044 514 - - 514 6,150 - - 6,150 46,720 154,853 - 201,573 Balance at 1 July 2007 Net loss for the period (recognised income and expenses) (i) Contributions of equity net of transaction costs Issue of shares upon exercise of options Issue of shares for acquisition of assets Recognition of share based payments (ii) Balance at 1 July 2008 93,666 154,994 (202,954) 45,706 Net loss for the period (recognised income and expenses) Contributions of equity net of transaction costs Recognition of share based payments Balance at 30 June 2009 - 4,718 - - ( 3,999) (3,999) - 4,718 135 98,519 1,538 156,532 - (206,953) 1,673 48,098 (i) Net loss for the year ended 30 June 2008 has been restated as a result of a prior period adjustment. The net loss for the year was increased by $164,421 thousand. Refer to Note 21 for details of prior period adjustment. (ii) Recognition of share based payments for the year ended 30 June 2008 has been restated as a result of a prior period adjustment. The movement in the Option Reserve for the year was increased by $120,300 thousand and the movement in Issued Capital decreased by $21,230 thousand. Refer to Note 21 for details of prior period adjustment. Notes to the financial statements are included on pages 32 to 66 SECTION 2 | 30 30 Greenland Minerals and Energy Limited 2009 Financial Report Cash Flow Statement for the financial year ended 30 June 2008 Cash flow statement For financial year ended 30 June 2009 Cash flows from operating activities Receipts from customers Payments to suppliers and employees GST paid and refundable Net cash used in operating activities Cash flows from investing activities Interest received Interest paid Proceeds from loan establishment fees Proceeds from repayment of advances made to other parties Payments for property, plant and equipment Payments for exploration and evaluation Payments for acquisition of subsidiary Payments for set up of subsidiaries Proceeds from sale of tenements Application funds for equity securities held in trust Net cash used in investing activities Cash flows from financing activities Proceeds from issue of equity securities Payments for issue costs Loans to related parties Loans from related parties Proceeds from application funds for equity securities Net cash from financing activities Net (decrease)/increase in cash and equivalents Cash and equivalents at the beginning of the financial year Cash and equivalents at the beginning of the financial year Note 27 Consolidated 2009 $' 000 2008 $' 000 Company 2009 $' 000 2008 $' 000 83 (3,032) (60) (3,009) 15 (2,331) - (2,316) 83 (3,112) (60) (3,089) 15 (2,331) - (2,316) 1,337 (5) 100 1,023 - - 1,337 (5) 100 1,023 - - 51 - 51 - 26 (191) (10,726) - - 130 (367) (11,553) (3,000) (24) - (191) (10,726) 130 (367) (11,553) (1,000) (24) - 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G (725) (10,029) - (13,921) (725) (10,029) - (11,921) 5,000 (282) (3) - 38,922 (3,364) (101) 6 5,000 (282) (371) - 38,922 (3,364) (2,101) - 725 5,440 - 35,463 725 5,072 - 33,457 (7,598) 19,226 (8,046) 19,220 21,637 2,411 21,631 2,411 8 14,039 21,637 13,585 21,631 Notes to the financial statements are included on pages 32 to 61 31 SECTION 2 | 31 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Notes to the accounts 1. General information Greenland Minerals and Energy Limited is a public company listed on the Australian Securities Exchange, incorporated in Australia and operating in Greenland with a head office in Perth. Greenland Minerals and Energy Limited registered office and its principal place of business are as follows: Registered office 33 Colin Street West Perth, WA Principal place of business 33 Colin Street West Perth, WA The entity’s principal activities are mineral exploration and evaluation. 2. Significant accounting policies Statement of compliance The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law. The financial report includes the separate financial statements of the company and the consolidated financial statements of the Group. Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with A-IFRS ensures that the financial statements and notes of the company and the Group comply with International Financial Reporting Standards (‘IFRS’). The financial statements were authorised for issue by the directors on 30 September 2009. Basis of preparation The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. The company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. Critical accounting judgments and key sources of estimation uncertainty In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Refer to note 3 for a discussion of critical judgements in applying the entity’s accounting policies, and key sources of estimation uncertainty. Adoption of new and revised Accounting Standards In the current year, the Group has adopted no new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. SECTION 2 | 32 32 Notes to the Financial Statements For the year ended 30 June 2009 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited 2009 Financial Report 2. Significant accounting policies (cont’d) The following significant accounting policies have been adopted in the preparation and presentation of the financial report: (a) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) (referred to as ‘the Group’ in these financial statements). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. In the separate financial statements of the Company, intra-group transactions (‘common control transactions’) are generally accounted for by reference to the existing (consolidated) book value of the items. Where the transaction value of common control transactions differ from their consolidated book value, the difference is recognised as a contribution by or distribution to equity participants by the transacting entities. Minority interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses. (b) Joint venture arrangements Jointly controlled operations Where the Group is a venturer and so has joint control in a jointly controlled operation, the Group recognises the assets that it controls and the liabilities that is incurs, along with the expenses that it incurs as a party to the joint venture. (c) Foreign currency The individual financial statements of each group entity are presented in its functional currency being the currency of the primary economic environment in which the entity operates. For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Australian dollars, which is the functional currency of Greenland Minerals and Energy Limited and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non- monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non- monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. 33 SECTION 2 | 33 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Notes to the Financial Statements For the year ended 30 June 2009 2. Significant accounting policies (cont’d) Greenland Minerals and Energy Limited 2009 Financial Report Exchange differences are recognised in profit or loss in the period in which they arise except for: · exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned or likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the net investment. On consolidation, the assets and liabilities of the Group’s foreign operations are translated into Australian dollars at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s foreign currency translation reserve. Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed. (d) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or for receivables and payables which are recognised inclusive of GST. ii. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows. (e) Revenue Revenue is measured at the fair value of the consideration received or receivable. Interest revenue Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. Rental income Revenue from operating sub-leases is recognised in accordance with the Group’s accounting policy. (f) Share-based payments Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of a Black Scholes. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. Further details on how the fair value of equity-settled share-based transactions has been determined can be found in note 28. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with corresponding adjustment to the equity-settled employee benefits reserve. SECTION 2 | 34 34 Notes to the Financial Statements For the year ended 30 June 2009 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited 2009 Financial Report (g) 2. Significant accounting policies (cont’d) Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods and services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. Income tax Current tax Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Deferred tax Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from the initial recognition of goodwill. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and interests in joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the company/Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the period Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess. (h) Cash and cash equivalents Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in value and have a maturity of three months or less at the date of acquisition. 35 SECTION 2 | 35 Notes to the Financial Statements For the year ended 30 June 2009 (i) 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited 2009 Financial Report 2. Significant accounting policies (cont’d) Financial assets Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value. Subsequent to initial recognition, investments in subsidiaries are measured at cost in the company financial statements. Other financial assets are classified into the following specified categories: ‘available-for- sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through profit or loss’. Available-for-sale financial assets Certain shares held by the Group are classified as being available-for-sale and are stated at fair value. Fair value is determined in the manner described in note 11. Gains and losses arising from changes in fair value are recognised directly in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in profit or loss for the period. Dividends on available-for-sale equity instruments are recognised in profit and loss when the Group’s right to receive the dividends is established. Loans and receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest income is recognised by applying the effective interest rate. Impairment of financial assets Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of financial assets including uncollectible trade receivables is reduced by the impairment loss through the use of an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. SECTION 2 | 36 36 Notes to the Financial Statements For the year ended 30 June 2009 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited 2009 Financial Report 2. Significant accounting policies (cont’d) In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised directly in equity. Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. (j) Property, plant and equipment Plant and equipment and leasehold improvements are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. Depreciation on plant and equipment is calculated on a diminishing value basis so as to write off the net cost or other devalued amount of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the diminishing value method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. The following useful lives are used in the calculation of depreciation: Leasehold improvements Plant and equipment 10 – 15 years 4 – 10 years (k) Leased assets Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. All other leases are classified as operating leases. Group as lessor Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. However, contingent rentals arising under operating leases are recognised as income in a manner consistent with the basis on which they are determined. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. (l) Employee benefits A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably. Liabilities recognised in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. 37 SECTION 2 | 37 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 2. Significant accounting policies (cont’d) Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. (m) Financial instruments issued by the company (n) Debt and equity instruments Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Financial liabilities Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities. Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Impairment of long-lived assets excluding goodwill At each reporting date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired. Recoverable amount 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 which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at re-valued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash- generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash- generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase. SECTION 2 | 38 38 Notes to the Financial Statements For the year ended 30 June 2009 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited 2009 Financial Report 2: Significant accounting policies (cont’d) (o) Capitalisation of exploration and evaluation expenditure Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off to the income statement in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest will be amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Costs of site restoration at the current stage are expensed as they are incurred. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining or petroleum permits. (p) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. (q) Standards and Interpretations issued not yet effective At the date of authorisation of the financial report, the Standards and Interpretations listed below were in issue but not yet effective. Initial application of the following Standards will not affect any of the amounts recognised in the financial report, but will change the disclosures presently made in relation to the Group and the Company’s financial report: Standard Effective for annual reporting periods beginning on or after Expected to be initially applied in the financial year ending · AASB 101 ‘Presentation of Financial Statements’ 1 January 2009 30 June 2010 (revised September 2007), AASB 2007-8 ‘Amendments to Australian Accounting Standards arising from AASB 101’, AASB 2007-10 ‘Further Amendments to Australian Accounting Standards arising from AASB 101’ 39 SECTION 2 | 39 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 2: Significant accounting policies (cont’d) Standard · AASB 8 ‘Operating Segments’, AASB 2007-3 ‘Amendments to Australian Accounting Standards arising from AASB 8’ · AASB 2009-2 ‘Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments’ Effective for annual reporting periods beginning on or after Expected to be initially applied in the financial year ending 1 January 2009 30 June 2010 1 January 2009 (and that ends on or after 30 April 2009) 30 June 2010 Initial application of the following Standards/Interpretations is not expected to have any material impact on the financial report of the Group and the Company however the impact of the application is yet to be fully evaluated: Standard/Interpretation · AASB 123 ‘Borrowing Costs’ (revised), AASB 2007- 6 ‘Amendments to Australian Accounting Standards arising from AASB 123’ Effective for annual reporting periods beginning on or after Expected to be initially applied in the financial year ending 1 January 2009 30 June 2010 · AASB 3 ‘Business Combinations’ (revised), AASB 127 ‘Consolidated and Separate Financial Statements’ (revised) and AASB 2008-3 ‘Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127’ Business combinations occurring after the beginning of annual reporting periods beginning 1 July 2009 30 June 2010 · AASB 2008-1 ‘Amendments to Australian Accounting Standard - Share-based Payments: Vesting Conditions and Cancellations’ · AASB 2008-2 ‘Amendments to Australian Accounting Standards - Puttable Financial Instruments and Obligations arising on Liquidation’ · AASB 2008-5 ‘Amendments to Australian Accounting Standards arising from the Annual Improvements Project’ · AASB 2008-6 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project’ 1 January 2009 30 June 2010 1 January 2009 30 June 2010 1 January 2009 30 June 2010 1 July 2009 30 June 2010 · AASB 2008-7 ‘Amendments to Australian 1 January 2009 30 June 2010 Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate SECTION 2 | 40 40 Notes to the Financial Statements For the year ended 30 June 2009 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 2: Significant accounting policies (cont’d) Standard/Interpretation · AASB 2008-8 ‘Amendments to Australian Accounting Standards – Eligible Hedged Items’ · AASB 2009-4 ‘Amendments to Australian Accounting Standards arising from the Annual Improvements Process’ · AASB 2009-5 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process’ Greenland Minerals and Energy Limited 2009 Financial Report Effective for annual reporting periods beginning on or after Expected to be initially applied in the financial year ending 1 July 2009 30 June 2010 1 July 2009 30 June 2010 1 January 2010 30 June 2011 · AASB 2009-6 “Amendments to Australian 1 January 2009 (i) 30 June 2010 Accounting Standards” · AASB 2009-7 “Amendments to Australian Accounting Standards” · AASB 1 ‘First-time Adoption of Australian Accounting Standards’ 1 July 2009 (ii) 30 June 2010 1 July 2009 30 June 2010 · AASB 2009-8 “Group Cash Settled Share Based 1July 2009 1 January 2010 Payment Transactions” · AASB Interpretation 15 ‘Agreements for the 1 January 2009 30 June 2010 Construction of Real Estate’ · AASB Interpretation 16 ‘Hedges of a Net Investment 1 October 2008 30 June 2010 in a Foreign Operation’ · AASB Interpretation 17 ‘Distributions of Non-cash 1 July 2009 30 June 2010 Assets to Owners’, AASB 2008-13 ‘Amendments to Australian Accounting Standards arising from AASB Interpretation 17 – Distributions of Non-cash Assets to Owners’ AASB Interpretation 18 ‘Transfers of Assets from Customers’ 1 July 2009 (iii) 30 June 2010 (i) (ii) (iii) Applicable to financial years beginning on or after 1 January 2010,except for the amendments made to the guidance to AASB118 ‘Revenue’ that have no explicit application date and are taken to be immediately effective. Applicable to financial years beginning on or after 1 January 2009 that end on or after 30 June 2009. AASB Interpretation 18 applies to transfers of assets from customers received on or after 1 July 2009. 3: CRITICAL ACCOUNTING ESTIMATES & JUDGEMENTS In preparing this Financial Report the Company has been required to make certain estimates and assumptions concerning future occurrences. There is an inherent risk that the resulting accounting estimates will not equate exactly with actual events and results. 41 SECTION 2 | 41 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 3: CRITICAL ACCOUNTING ESTIMATES & JUDGEMENTS (cont) a) b) Significant accounting judgments In the process of applying the Company's accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements: Capitalisation of exploration and evaluation expenditure The Company has capitalised significant exploration and evaluation expenditure on the basis either that this is expected to be recouped through future successful development or alternatively sale of the Areas of Interest. If ultimately the area of interest is abandoned or is not successfully commercialised, the carry value of the capitalised exploration and evaluation expenditure would need to be written down to its recoverable amount. Deferred tax assets The Company expects to have carried forward tax losses which have not been recognised as deferred tax assets as it is not considered sufficiently probable at this point in time, that these losses will be recouped by means of future profits taxable in the relevant jurisdictions. Significant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: Impairment of capitalised exploration and evaluation expenditure The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Company decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, costs of drilling and production, production rates, future legal and political changes, (including obtaining the right to mine given the Greenlandic governments stance on uranium mining and development in Greenland and changes to environmental restoration obligations) and changes to commodity prices. As at 30 June 2009, the carrying value of capitalised exploration expenditure is $33,693,900, refer to note 13. Legal claims A contingent liability has been disclosed, refer to note 23, relating to an estimate of the liability that will be incurred by the Company in defending writs, issued to the Company by Westrip Holdings Limited and Rimbal Pty Ltd. The liability is based on an estimation by directors after obtaining legal opinions. 4: Segment Information The company operates in one geographical segment, being Greenland and in one business, being mineral exploration and evaluation. 5: Revenue Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 Interest - Bank deposits 1,113 1,325 1,113 1,325 Operating lease revenue - Sub lease 63 9 63 9 Other revenue 103 - 103 - 1,279 1,334 1,279 1,334 SECTION 2 | 42 42 Notes to the Financial Statements For the year ended 30 June 2009 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited 2009 Financial Report Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 6: Loss for the year before tax (a) Gains and losses Loss for the year have been arrived at after crediting the following items: Loss on disposal of tenement (207) Loss on disposal of leasehold assets Changes in fair value of available for sale investments (3) (142) Gain on foreign currency exchange 88 - - - - (207) (3) (142) 88 - - - - (b) Other expenses Loss for the year included the following expenses: Consulting expenses Depreciation expense Directors fees and salary expense Employee benefits - salaries Post employment benefits – defined contribution plan Share based payments - directors Share based payments - other Finance costs Insurance Legal costs Marketing & PR consulting Operating lease rental expenses Occupancy expenses Stock exchange fees Travel expenses Other expenses 7: Income tax expense (a) Tax expense Current tax Deferred tax (492) (249) (492) (249) (94) (602) (40) (31) (981) - (5) (121) (481) (563) (63) (208) (86) (628) (394) (82) (374) (139) (27) (31,303) (170,304) - (61) (62) (171) (9) (58) (86) (826) (350) (94) (602) (40) (31) (981) - (5) (121) (481) (563) (63) (208) (86) (628) (389) (82) (374) (139) (27) (31,303) (170,304) - (61) (62) (171) (9) (58) (86) (826) (337) Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 - - - - - - - - - - - - - - - - 43 SECTION 2 | 43 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 7: Income tax expense (cont) (b) The prima facie income tax expense on pre-tax accounting loss from operations reconciles to the income tax expenses in the financial statements as follows: Prima facie tax benefit on loss at 30% Add: Tax effect of: other non-allowable items share based payments provisions and accruals accrued income Unused tax losses not recognised as deferred tax assets Less: Tax effect of: exploration, evaluation and development expenditure provisions and accruals capital expenditure write off accrued income (1,204) (60,832) (1,199) (60,826) 479 - 144 67 3,105 3,795 123 60,482 - - 2,456 63,061 479 144 67 3,100 3,790 123 60,482 - - 2,450 63,055 (2,354) - (237) - (2,591) (1,917) (5) (219) (88) (2,229) (2,354) - (237) - (2,591) (1,917) (5) (219) (88) (2,229) Income tax expense The applicable weighted tax rates are as follows: - 0% - 0% - 0% - 0% (c) The following deferred tax balances have not be recognised: Deferred tax assets: at 30% Carry forward revenue losses Capital raising costs Less: offset against deferred tax liability 6,478 696 7,174 3,373 843 4,216 6,473 696 7,169 3,373 843 4,216 (5,113) 2,061 (2,826) 1,390 (5,113) 2,056 (2,826) 1.390 The tax benefits of the above deferred tax assets will only be obtained if; a) The company derives future assessable income of a nature and amount sufficient to enable the benefits to be utilised, b) The company continues to comply with the conditions of deductibility imposed by law, and c) No change in income tax legislation adversely affects the company’s ability to utilise the benefits SECTION 2 | 44 44 Notes to the Financial Statements For the year ended 30 June 2009 7: Income tax expense (cont) Deferred tax liabilities: at 30% Exploration, evaluation and development expenditure Accrued income Less: offset of deferred tax asset Greenland Minerals and Energy Limited 2009 Financial Report Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 5,090 23 5,113 (5,113) - 2,736 90 2,826 (2,826) - 5,090 23 5,113 (5,113) - 2,736 90 2,826 (2,826) - The above deferred tax liabilities have not been recognised, as they have given rise to the carry forward losses for which the deferred tax asset has not been recognised. 8: Cash and equivalents 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Cash on hand Cash at bank and on deposit 9: Trade and other receivables (a) Current Trade debtors (i) Other debtors (i) Accrued interest Loan to related parties GST refundable Funds held in trust (ii) (b) Non-current Loan to Chahood Capital Limited (iii) Loan to Greenland Minerals & Energy (Trading) A/S (iv) Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 12 14,027 14,039 1 21,636 21,637 12 13,573 13,585 1 21,630 21,631 Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 34 - 77 3 127 1,040 1,281 - 142 301 51 67 1,000 1,561 34 - 77 3 127 1,040 1,281 - 50 301 51 67 1,000 1,469 - - - - - - 4,838 4,838 369 5,207 - 4,838 (i) Trade debtors and sundry debtors are non-interest bearing, unsecured and generally on 30 day terms. 45 SECTION 2 | 45 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9: Trade and other receivables (cont) (ii) (iii) (iv) Funds held in trust consist of a deposit of $1,000,000 which is being held in trust by Gravner Limited. The money is being held as a deposit whilst Gravner Limited negotiates on behalf of the company for the purchase of the 4% royalty issued by Westrip Holdings Ltd. The deposit will form part of the consideration if the purchase is successful. In the event that the purchase transaction does not go ahead the money will be refunded to the company. A further $40 thousand is being held by the Group’s London based lawyers as a retainer in relation to funding the minority shareholders of Westrip Holdings Limited the major shareholders. The loan to Chahood Capital Limited (Chahood), are funds that were on lent by Chahood to Greenland Minerals and Energy (Trading) A/S to acquire a 61% interest in the Kvanefjeld project. This loan is unlikely to be called for repayment in the foreseeable future and forms part of Greenland Minerals and Energy Limited net investment in the subsidiaries. No interest is charged on this loan balance. The loan to Greenland Minerals and Energy (Trading) A/S, is a funding arrangement provided by the parent company. The funds are used by the subsidiary to pay for exploration expenses incurred by the parent company. No interest is charged on this loan balance. their dispute with in 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 10: Other assets Deposit bonds Prepayments Funds held in trust for un-allotted shares 11: Financial assets Investment in subsidiary (at cost) Available for sale investments carried at fair cost: Shares in listed companies Changes in fair value (i) Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 96 245 725 1,066 28 - - 28 96 245 725 1,066 28 - - 28 Consolidated Parent 2009 $' 000 - 2008 $' 000 240 (142) 98 2009 $' 000 2008 $' 000 4,312 4,311 240 (142) 4,410 - - 4,311 - - - - (i) Movement in market value is based on the closing price on the Australian Securities Exchange, of the shares held on 30 June 2009. SECTION 2 | 46 46 Notes to the Financial Statements For the year ended 30 June 2009 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited 2009 Financial Report 12: Property, plant and equipment Historical cost - Plant and Equipment Accumulated depreciation Historical cost - Leasehold improvements Accumulated depreciation Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 607 (182) 85 (4) 506 500 (95) - - 405 607 (182) 85 (4) 506 500 (95) - - 405 (a) Movements in the carrying amounts Movement in the carrying values for each class of property, plant and equipment between the beginning and the end of the period. Plant and Equipment Carrying value at beginning of period Acquisitions Disposals Depreciation expense Carrying value at end of period Leasehold improvements Carrying value at beginning of period Acquisitions Depreciation expense Carrying value at end of period Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 405 113 (3) (90) 425 - 85 (4) 81 119 368 - (82) 405 - - - - 405 113 (3) (90) 425 - 85 (4) 81 119 368 - (82) 405 - - - - Total property, plant and equipment carrying value at end of period 506 405 506 405 13: Capitalised exploration and evaluation expenditure Balance at beginning of period Acquisition costs Exploration and/or evaluation phase in current period: Capitalised expenses (i) Less: Disposal of tenement (ii) Balance at end of period Consolidated Parent 2009 $' 000 22,355 - 2008 $' 000 2,729 9,150 2009 $' 000 13,272 - 2008 $' 000 2,729 - 11,915 34,270 (576) 33,694 10,476 22,355 - 22,355 11,915 25,187 (576) 24,611 10,544 13,272 - 13,273 47 SECTION 2 | 47 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 13: Capitalised exploration and evaluation expenditure (cont) (i) (ii) (iii) On the 31 July 2007, Greenland Minerals and Energy Limited acquired a 61% interest in the Kvanefjeld Project. As part of the acquisition, the company entered into an un-incorporated joint venture with Westrip Holdings Limited (Westrip), a UK based company to carry out the exploration and evaluation of Kvanefjeld. The company holds a 61% interest in the joint venture with Westrip holding the balance. Under the initial acquisition agreement, Greenland Minerals and Energy Limited, for the first 2 years from the date of acquisition is required to fully fund the exploration and evaluation expenditure, while maintaining the 61%-39% holding interest. In September 2008 the Group sold the Three Sisters Project, disposal of tenement amount, represents the carry cost of the tenement at the time of the sale. The recoverability of the Group’s carrying value of the capitalised exploration and evaluation expenditure relating to the Kvanefjeld Project is subject to the successful development and exploitation of the exploration property, which includes among other issues, obtaining the right to mine. Alternatively recoverability could result from the sale of the tenement at an amount at least equal to the carrying amount. The company is currently developing the Kvanefjeld Project, recognised as the largest undeveloped multi-element occurrence of rare earth oxides (REO), zinc and uranium in the world. The company is aware of and respects the Greenlandic government’s present stance on uranium mining and development in Greenland. This is currently a zero tolerance approach to the exploration and exploitation of uranium however the Government has commenced a community consultation process. The Company will continue to develop this project in a manner that is in accord with both Greenlandic Government and local community expectations, and in due course looks forward to being part of the community discussion on the social and economic benefits associated with development of the Kvanefjeld project. 14: Trade and other payables Accrued expenses (i) Trade creditors (ii) Sundry creditors (ii) Amounts payable to related parties Funds held in trust (iii) Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 512 1,292 9 - 725 2,538 50 199 4 6 - 259 512 1,292 2 - 725 2,531 50 199 - - - 249 (i) (ii) (iii) Accrued expenses related to services and goods provided to the Group prior to 30 June 2009, but the Group was not charged or invoiced for these goods and services by the supplier until after 30 June 2009. The amounts are generally payable and paid within 30 Days and are non-interest bearing. Trade and sundry creditors are non-interest bearing with the exception of amounts owed on corporate credit cards and after 30 days interest is charged at rates ranging between 14% and 16%. All trade and sundry creditors are generally payable on terms of 30 days Funds held in trust, relate to funds received as part of a capital raising but the raising was not completed and shares issued until August 2009. SECTION 2 | 48 48 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 14: Trade and other payables (cont) (iv) The financial risk related to trade and other payables is managed by ensuring sufficient at call cash balances are maintained by the Company to enable the settlement in full of all amounts as and when they become due for payment. 15: Provisions Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 Provision for annual leave 37 - 37 - 16: Issued capital Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the company does not have a limited amount of authorised capital and issued shares do not have a par value. Fully paid ordinary shares carry one vote per share and carry the right to dividends 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Balance brought forward Issue of ordinary shares through capital raisings Issue of ordinary shares for acquisition of assets Issue of ordinary shares for equity based payments (refer to note 28) Issue of ordinary shares as a result of exercised options Balance at end of financial year 17: Reserves a) Option reserve Balance brought forward Issue of options to corporate advisors Issue of options to directors (i) Issue of options to senior management (i) Issue of options to consultants (i) Options exercised Balance at end of financial year (i) Refer to note 28 2009 2008 No ' 000 193,009 $' 000 93,666 No ' 000 $' 000 37,202 5,238 25,000 4,718 56,235 35,044 - 500 - 135 65,000 6,150 32,000 46,720 - 218,509 - 98,519 2,572 193,009 514 93,666 Consolidated Parent 2009 $' 000 154,994 - 1,013 191 334 - 156,532 2008 $' 000 141 126,482 28,382 - - (11) 154,994 2009 $' 000 154,994 - 1,013 191 334 - 156,532 2008 $' 000 141 126,482 28,382 - - (11) 154,994 49 SECTION 2 | 49 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 17: Reserves (cont) The option reserve arises from the accumulated proceeds received from the issuing of options and accumulate the value of options issued in consideration for share based payments. Amounts are transferred out of the reserve and into issued capital when the options are exercised. Further information about share-based payments to directors and senior management is made in note 32 to the financial statements. Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 b) Foreign Currency translation reserve Current year adjustment from currency translation of foreign controlled entities (i) (i) 6 6 The foreign currency translation reserve records the foreign currency differences arising from the translation of the foreign subsidiary’s accounts from Danish Kroner, the functioning currency of the Greenland Minerals and Energy (Trading) A/S, to Australian dollars. - - - - - - 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G c) Total reserves Option reserve Foreign currency translation reserve Consolidated Parent 2009 $' 000 156,532 6 156,538 2008 $' 000 156,994 - 156,994 2009 $' 000 156,532 - 156,532 2008 $' 000 156,994 - 156,994 18: Dividends No dividends have been proposed or paid during the year. 19: Accumulated losses Balance at beginning of financial year Loss attributable to members of parent entity Related income tax Balance at end of financial year 20: Earnings per share Consolidated Parent 2009 $' 000 (202,967) 2008 $' 000 (200) 2009 $' 000 (202,954) 2008 $' 000 (200) ( 4,009) (202,767) (3,999) (202,754) (206,976) (202,967) (206,953) (202,954) Basic loss per share From continuing operations Diluted loss per share From continuing operations SECTION 2 | 50 Consolidated 2009 Cents Per share 2008 Cents Per share 2.00 125.00 2.00 125.00 50 Notes to the Financial Statements For the year ended 30 June 2009 20: Earnings per share (cont) Greenland Minerals and Energy Limited 2009 Financial Report 197,406 162,302 Weighted average number of shares used in the calculation of basic and diluted loss per share (i) There were 174,199,287 potential ordinary shares on issue at 30 June 2009 that are not dilutive and are therefore excluded from the weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share. 21: Prior period adjustments a) b) c) In the prior period the acquisition of Chahood Capital Limited and interest in the Kvanefjeld Joint Venture were accounted for under AASB 3 – Business Combinations. The application of this standard resulted in the shares issued as consideration being valued at the market value on date of issue with the excess of the consideration over the fair value of assets acquired capitalised, as part of capitalised exploration and evaluation expenditure in the consolidation financial report. Subsequently it was identified that the transactions did not meet the definition of a business combination under AASB 3. The transactions should have been measured under AASB 2 – Share Based Payments and the value of the shares issued by the Company were based on the independent valuation of the joint venture assets at the time of the acquisition. As a result, both the Capitalised exploration and evaluation expenditure and Issued capital balances decreased by $65,350 thousand, refer to the table below. In the prior period the valuation of the directors’ options and shares did not appropriately reflect the relevant grant date and vesting conditions. As a result, the option reserve decreased by $7,277 thousand, issued capital increased by $320 thousand and equity based payments decreased by $6,957 thousand, refer to the table below. In the prior period the valuations of the options and shares issued to the Corporate Advisor did not appropriately reflect the relevant grant date and vesting conditions and were not recognised as equity based payments. As a result, the option reserve increased by $127,587 thousand, issued capital increased by $43,800 thousand and equity based payments increased by $171,378 thousand, refer to table below. An adjustment has been applied to the comparative disclosures in the financial statements for the period ended 30 June 2009. The aggregate effect of this adjustment is as follows: Previously stated 30 Jun 2008 $’000 Adjustment $’000 Restated 30 June 2008 $’000 Capitalised exploration and evaluation expenditure Option Reserve Issued Capital Accumulated Losses 87,705 34,693 114,896 38,546 (65,350) 22,355 120,300 (21,230) 164,421 154,994 93,666 202,967 The impact on the basic and diluted loss per share for the period ended 30 June 2008 as a result of the adjustment to the Loss for the period is as follows: 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 51 SECTION 2 | 51 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 21: Prior period adjustments (cont) Basic loss per share (cents) Diluted loss per share (cents) 22: Commitments for expenditure Previously stated 30 Jun 2008 (0.24) (0.24) Restated 30 Jun 2008 (125.00) (125.00) Exploration Commitments: The Company has one exploration license for which it has exploration commitments. EL 2005/28 is located in Greenland. The Bureau of Minerals and Petroleum of Greenland have advised Greenland Minerals and Energy Limited that expenditure made in the 2008 year is sufficient to keep the license in good standing until December 2011. Consolidated Parent 2009 2008 2009 2008 Tenement commitments Not longer than 1 year Longer than 1 year but not longer than 5 years Longer than 5 years Operating leases Not longer than 1 year Longer than 1 year but not longer than 5 years Longer than 5 years Other contractual obligations (ii) Not longer than 1 year Longer than 1 year but not longer than 5 years Longer than 5 years 500 500 121 550 671 250 250 500 500 500 121 671 792 250 250 500 500 500 121 550 671 250 250 500 500 500 121 671 792 250 250 500 (i) (ii) The only commitments for operating leases are lease rentals on the Company’s Perth head office premises. The current lease expires on the 30 November 2013, with a 5 year renewal option. Lease payments are reviewed every two years with the first review due 1 December 2010 and are based on movement in the consumer price index. Relates to ongoing contractual obligations with Gravner Limited for corporate advisory services. SECTION 2 | 52 52 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 23: Contingent liabilities and contingent assets Payroll tax (i) Legal related costs (ii) Consolidated 2009 $' 000 2008 $' 000 1,500 500 2,000 1,100 - 1,100 Parent 2009 $' 000 2008 $' 000 1,500 500 2,000 1,100 - 1,100 (i) (ii) As a result of the requirements of the Western Australian Payroll Tax Assessment Act 2002, the Company may have a contingent liability in respect of the granting of the equity instruments of approximately $1,500,000. This liability will only become payable upon the options vesting. Costs associated with defending writs served on the Company by Westrip Holdings Limited and Rimbal Pty Ltd. The contingent liability is based on an estimation by directors after obtaining legal opinion. 24: Jointly controlled operations The Group is a venturer in the following jointly controlled operations: Name of venture Kvanefjeld Project (i) Principal activity Mineral exploration and evaluation Total interest 2009 % 61 2008 % 61 The joint venture is an un-incorporated joint venture between the Group and Westrip Holdings Limited as described in Note 13. (i) (ii) There are no assets employed separately in the joint venture or capital commitments separate from the commitments brought to account by the Company. There are no contingent liabilities in relation to the joint venture. 25: Subsidiaries Name of subsidiary Chahood Capital Limited Greenland Minerals and Energy (Trading) A/S These companies are not members of a tax-consolidated group. Country of incorporation Isle of Man Greenland Ownership interest 2008 2009 % % 100 100 61 61 26: Acquisition of assets (a) On 31 July 2007, Greenland Minerals and Energy Limited acquired 100% of Chahood Capital Limited. As the entity was non-trading and the only asset held was cash, this purchase transaction was accounted for as an acquisition of and asset, not a business combination. Purchase consideration Consideration Cash Shares Issued – in Greenland Minerals and Energy Limited (i) Total consideration Number of shares Fair Value per security $ - - 35,000,000 0.0946 Fair value $ 1,000,000 3,311,538 4,311,538 53 SECTION 2 | 53 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 26: Acquisition of assets (cont) (b) On 31 July 2007, Greenland Minerals and Energy acquired a 61% interest in Greenland Minerals and Energy (Trading) A/S, through its subsidiary, Chahood Capital Limited. Greenland Minerals and Energy (Trading) A/s holds the mineral exploration rights to the Kvanefjeld Project. As the entity was non-trading and the only asset held was cash of $100,000, this purchase transaction was accounted for as an acquisition of and asset, not a business combination. Consideration Cash Shares Issued – in Greenland Minerals and Energy Limited Total consideration Number Fair Value of shares per security $ - - 30,000,000 0.0946 Fair value $ 2,000,000 2,838,462 4,838,462 (i) Determined with reference to the fair value of the interest in Kvanefjeld Project, acquired through Greenland Minerals and Energy (Trading) A/S, which Chahood Capital Limited acquired a 61% interest in on 31 July 2007. 27: Notes to the cash flow statement Reconciliation of loss for the period to net cash flows from operating activities Loss for the year (Gain) loss on sale or disposal of non- current assets Impairment of fair value through profit and loss of financial assets Depreciation Equity-settled share-based payments Interest income received and receivable Interest expense paid (Increase)/decrease in assets Trade and other receivables Other assets Increase (decrease) in liabilities trade and other payables in other liabilities in provisions Net cash used in operating activities Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 (4,015) (202,775) (3,999) (202,754) 210 142 94 981 (1,337) 5 280 594 - 37 (3,009) - 210 - - 82 201,607 (1,023) - (280) (25) 102 (4) - (2,316) 142 94 981 (1,337) 5 188 590 - 37 (3,089) - 82 201,607 (1,023) - (296) (25) 93 - - (2,316) SECTION 2 | 54 54 Notes to the Financial Statements For the year ended 30 June 2009 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited 2009 Financial Report 27: Notes to the cash flow statement (cont) Non-cash financing and investing activity (i) (ii) The Company, as part consideration for the sale of its Three Sisters Tenement, received 1,200,000 shares valued at $240 thousand in Riviera Minerals Limited, the purchaser. During the year the company capitalised share based payments made to directors, senior management and corporate advisors totaling $692 thousand for services provided which are directly related to the Kvanefjeld Project. The Company has not entered into any other non-cash financing or investing activities. 28: Share based payments a) The issue of shares for share based payments The issue of 500,000 shares valued at $135 thousand, to Mr Hans Kristian Schønwandt was approved at a shareholders’ meeting held on 25 November 2008. The fair value of the shares issued was $0.27, based on the trading price of the company’s shares on the ASX, on the original grant date. The purpose of the issue of the shares and options (refer to Note 28 (b) for details of options granted) was for consideration for the cancellation of all share milestones under a director service agreement that could have potentially lead to the issue of up to 2,000,000 shares to Mr Schønwandt subject to vesting conditions. The cancellation has been accounted for as an acceleration of the vesting conditions with an amount of $962 thousand recognised in the current financial year. This amount represents the total remaining fair value (including current year vesting expense) as determined at the original grant date. In accordance with AASB 2 – Share Based Payments, no additional amount has been brought to account for the replacement shares and options as it has been determined that the fair value of these shares and options is less than the net fair value of the cancelled equity instrument as determined at the date of cancellation During the year, shares previously granted to S Stafford-Michael were forfeited upon his resignation as a director of the company. As a result, an amount of $1,228,334 recognised in the share based payments reserve to 30 June 2008 was reversed to the income statement in the current year. These shares were subject to vesting conditions that were not met at the date of resignation. (b) The issue of options for share based payments The company granted 9,250,000 share options as shareholder approved share based payments to directors, senior management and corporate advisors. The following share-based payment arrangements, to directors, senior management and corporate advisors were in existence during the current and comparative reporting periods: Grant Expiry Exercise No Date Date Price Value @ grant Date $ Series 2008 3 4 5 6 19,800,000 31/07/2007 30/06/2011 3,000,000 31/07/2007 30/06/2011 75,000,000 31/07/2007 25,000,000 31/07/2007 122,800,000 30/06/2011 30/06/2011 $0.20 $0.20 25,260,513 3,827,350 $0.20 $0.20 95,683,756 31,894,585 156,666,204 55 SECTION 2 | 55 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 28: Share based payments (cont) Grant Expiry Exercise Series No Date Date Price Value @ grant Date $ 2009 9 10 11 12 13 14 1,500,000 25/11/2008 30/06/2011 $0.20 240,000 (1) 750,000 25/11/2008 30/06/2013 1,500,000 11/03/2009 30/06/2011 1,500,000 11/03/2009 30/06/2011 2,000,000 25/06/2009 30/06/2011 2,000,000 25/06/2009 30/06/2011 $0.10 $0.50 $1.00 $0.50 $1.00 9,250,000 190,893 177,876 156,703 371,200 258,600 1,395,272 (1) This amount includes $160 thousand representing the fair value of options granted to Mr Hans Kristian Schønwandt as a replacement equity instrument upon cancellation of equity instruments previously granted under a director service agreement. As noted at Note 28 (a), the fair value of the replacement equity instruments have not been brought to account as it has been determined that the fair value is less than the original cancelled equity instrument determined as at the date of acquisition. Options were priced using the Black Scholes model. The expected life of the option is based on the time between grant date of the option and the option expiry date. The expected volatility has been calculated using the closing price on the ASX of the company’s fully paid shares over varying time periods. Input into model Grant date share price Exercise Price Expected volatility Option life (years) Dividend yield Risk free rate of return Series 3 Series 4 Series 9 Series 10 Series 11 Series 12 Series 13 Series 14 $1.42 $0.20 $1.42 $0.20 $0.27 $0.20 $0.27 $0.10 $0.16 $0.50 $0.16 $1.00 $0.37 $0.50 $0.37 $1.00 70% 70% 148% 148% 179% 179% 109% 109% 3.92 - 3.92 - 2.59 - 4.59 - 2.30 - 2.30 - 2.01 - 2.01 - 6.12% 6.12% 5.65% 5.65% 2.78% 2.78% 4.17% 4.17% No options issued to directors and senior management were exercised during the financial year ended 30 June 2009. SECTION 2 | 56 56 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 28: Share based payments (cont) Series 3 These director incentive options were granted equally to Messrs Cato, McIllree and Whybrow subject to the following vesting hurdles: Tranche Number of options 1 2,200,000 Vesting hurdle The volume weighted average share price on the ASX of the company’s fully paid shares is 50 cents or more for 20 consecutive trading days The volume weighted average share price on the ASX of the company’s fully paid shares is $1.00 or more for 20 consecutive trading days The volume weighted average share price on the ASX of the company’s fully paid shares is $1.50 or more for 20 consecutive trading days 2 3 2,200,000 2,200,000 Series 4 These director incentive options were granted to Mr Malcolm Mason subject to the following vesting hurdles: Tranche Number of options 1 2,000,000 Vesting hurdle Mr Mason continues to serve as a director of the company for 12 consecutive months and makes himself available to provide technical geological, services including field services to the company’s Kvanefjeld project. Mr Mason continues to serve as a director of the company for 18 consecutive months and makes himself available to provide technical geological, services including field services to the company’s Kvanefjeld project. 2 1,000,000 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Series 5 & 6 These series consist of 75,000,000 options and 25,000,000, both with an exercise price of $0.20, granted Gravner Limited under a corporate advisor agreement that formed part of the Kvanefjeld acquisition. These options are vested unrestricted options. Series 9 These are director incentive options series consisting of 1,000,000 options issued to Mr H Schønwandt and 500,000 options issued to Mr M Mason of 2,000,000. These were $0.20 exercise prices options and there were no further vesting conditions attached to these options. Series 10 Senior management incentive options issued to Mr S Bunn, consisting of 750,000 options with a $0.10 exercise price. There were no further vesting conditions attached to these options. Series 11 & 12 These options were issued to consultants for services provided to the Company in securing contracts for the drilling program at the Kvanefjeld project. The series consists of 1,500,000 options with an exercise price of $0.50 and 1,500,000 options with an exercise price of $1.00. There were no further vesting conditions attached to theses options. Series 13 & 14 Director options issued to Mr M Hutchinson, consisting of 2,000,000 options with a $0.50 exercise price and 2,000,000 options with a $1.00 exercise price. There were no further vesting conditions attached to theses options. 57 SECTION 2 | 57 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 28: Share based payments (cont) Terms under which the options are issued are as follows: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Each Option entitles the holder to one Share Until the Options are vested, the Options will be unlisted and will not be transferable except with the approval of the Board. Once the Options are vested, the Company will apply to have the Options listed and the Options will be freely transferable. The Company will provide to each Options holder a notice that is to be completed when exercising the Options (Notice of Exercise). Subject to these terms, the Options may be exercised wholly or in part by completing the Notice of Exercise and delivering it together with payment to the secretary of the Company to be received any time prior to the Expiry Date. The Company will process all relevant documents received at the end of every calendar month. Upon the exercise of an Option and receipt of all relevant documents and payment, the holder in accordance with paragraph (i) will be allotted and issued a Share ranking pari passu with the then issued Shares. There will be no participating rights or entitlements inherent in the Options and the holders will not be entitled to participate in new issues of capital which may be offered to Shareholders during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 7 business days after the issue is announced. This will give Option holders the opportunity (where available) to exercise their Options prior to the date for determining entitlements to participate in any such issue. If there is a bonus issue (Bonus Issue) to Shareholders, the number of Shares over which an Option is exercisable will be increased by the number of Shares which the holder would have received if the Option had been exercised before the record date for the Bonus Issue (Bonus Shares). The Bonus Shares must be paid up by the Company out of profits or reserves (as the case may be) in the same manner as was applied in the Bonus Issue, and upon issue will rank equally in all respects with the other Shares on issue as at the date of issue of the Bonus Shares. In the event of any reconstruction (including consolidation, sub-division, reduction or return) of the issued capital of the Company prior to the Expiry Date, all rights of an Option holder are to be changed in a manner consistent with the Listing Rules. In the event that the Company makes a pro rata issue of securities, the exercise price of the Options will be adjusted in accordance with the formula set out in Listing Rule 6.22.2. The following reconciles the outstanding share options granted at the beginning and end of the financial year. Balance at beginning of the financial year Granted during financial year Forfeited during the financial year Exercised during the financial year Expired during the financial year Exercisable at the end of the financial year 2009 2008 Weighted average exercise price 0.2 0.62 - - - Number of options 122,800,000 9,250,000 - - - Number of options 122,800,000 - - - - 132,050,000 0.22 122,800,000 Weighted average exercise price 0.2 0.2 - - - 0.2 SECTION 2 | 58 58 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 29: Financial instruments (a) Capital risk management The Group manages its capital in order to maintain sufficient funds are available provide the shareholders with adequate returns and ensure that the Group can fund its exploration and evaluation activities as a going concern. The Group’s overall strategy remains unchanged from 30 June 2008. The capital structure of the Group consists of fully paid shares and options as disclosed in notes 16 and 17 respectively. None of the Group’s entities are subject to externally imposed capital requirements. (b) Categories of financial instruments Financial assets Cash and equivalents Loans and receivables - current Available for sale financial asset Financial liabilities Amortised cost Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 14,039 1,281 98 21,637 1,561 - 13,585 6,488 4,410 21,631 6,307 4,311 2,538 259 2,531 249 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G (c) Financial risk management objectives The Group’s principal financial instruments comprise cash and short term deposits. The main purpose of the financial instruments is to earn the maximum amount of interest at a low risk to the Group. For the period under review, it has been the Group’s policy not to trade in financial instruments The main risks arising from the Group’s financial instruments are interest rate risk, credit risk and liquidity risk. The board reviews and agrees policies for managing each of these risks and they are summarised below: (i) (ii) Interest Rate Risk The Company is exposed to movements in market interest rates on short term deposits. The policy is to monitor the interest rate yield curve out to 120 days to ensure a balance is maintained between the liquidity of cash assets and the interest rate return. The Company does not have short or long term debt, and therefore this risk is minimal. There has been no change in managing interest rate risk or the method of measuring risk from the prior year. Credit Risk Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted the policy of only dealing with credit worthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group does not have any significant credit risk exposure to any single counterparty or any Company of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit – ratings assigned by external international rating agencies. The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the Company’s maximum exposure to credit risk 59 SECTION 2 | 59 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 29: Financial instruments (cont) There has been no change in managing credit risk or the method of measuring risk from the prior year. (iii) Liquidity Risk Liquidity risk refers to maintaining sufficient cash and equivalents to meet on going commitments, as and when they occur. The primary source of liquid funds for the Group, are funds the Group holds on deposit with varying maturity dates. The Group monitors its cash flow forecast and actual cash flow to ensure that present and future commitments are provided for. As well as matching the maturity date of funds invested with the timing of future commitments. There has been no change in managing credit risk or the method of measuring risk from the prior year. The following table details the company’s and the Group’s expected maturity for its non-derivative financial assets. The tables below have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where the company/Group anticipates that the cash flow will occur in a different period. Consolidated Weighted Average Effective interest rate < 6 Months 6 – 12 Months % $' 000 $' 000 2009 Cash and equivalents 3.2 6,114 7,925 1 - 5 Years $' 000 > 5 Years $' 000 - - Trade and receivables - current Other financial assets - - 281 1,000 - - 98 6,395 8,925 98 2008 Cash and equivalents Trade and receivables - current 6.4 - 637 21,000 - 561 - 1,000 1,198 21,000 1,000 SECTION 2 | 60 - - - - 60 Total $' 000 - 14,039 1,281 98 15,418 21,637 1,561 23,198 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 29: Financial instruments (cont) Company Weighted Average Effective interest rate < 6 Months 6 -12 Months % $' 000 $' 000 1 -5 Years $' 000 > 5 Years $' 000 Total $' 000 2009 Cash and equivalents 3.2 5,660 7,925 Trade and receivables - current Trade and receivables - Non- current - - Other financial assets 281 1,000 369 - - - - - - - - 13,585 1,281 4,838 5,207 98 4,312 4,410 6,310 8,925 98 9,150 24,483 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 2008 Cash and equivalents Trade and receivables - current Trade and receivables - Non- current Other financial assets 6.4 - 631 21,000 - 469 - - - - - 1,000 - - - 21,631 1,469 - - 4,838 4,838 4,311 4,311 1,100 21,000 1,000 9,149 32,249 The following tables detail the company’s and the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. Consolidated Weighted Average Effective interest rate % < 6 Months $' 000 6 – 12 Months $' 000 1 – 5 Years $' 000 > 5 Years $' 000 Total $' 000 - - 2,538 2,538 259 259 - - - - - - - - - - - - 2,538 2,538 - 259 259 2009 Trade and other payables 2008 Trade and other payables 61 SECTION 2 | 61 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 29: Financial instruments (cont) Company 2009 Financial liabilities Trade and other payables 2008 Trade and other payables Weighted Average Effective interest rate % < 6 Months $' 000 6 -12 Months $' 000 1 – 5 Years $' 000 > 5 Years $' 000 Total $' 000 - - 2,531 2,531 249 249 - - - - - - - - - 2,531 2,531 249 249 - - - - (d) Market risk (i) Interest Rate Risk The Group’s exposure to interest rate risk, which is the risk that a financial instruments value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on those financial assets and financial liabilities in as follows The Group has performed sensitivity analysis relating to its exposure to interest rate risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity post tax which could result from a change in these risks. In the analysis a 1% or 100 basis points movement has been applied on the assumption that interest rates are unlikely to move more than that, taking into account the current interest rate levels and general state of the economy. There has been no change in managing credit risk or the method of measuring risk from the prior year. Interest Rate Sensitivity Analysis At 30 June 2009, the effect on profit and equity as a result of changes in the interest rate, with all other variables remaining constant would be as follows: Change in profit Increase in interest rate by 1% (100 basis points) Decrease in interest rate by 1% (100 basis points) Consolidated 2009 $' 000 2008 $' 000 Parent 2009 $' 000 2008 $' 000 148 (148) 226 (226) 148 226 (148) (226) (i) A 1% or 100 basis points variable has been applied to the interest rate sensitivity analysis, after giving consideration to the current interest rate levels and general state economy. SECTION 2 | 62 62 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 29: Financial instruments (cont) Fair value of financial instruments The carrying value of all financial instruments is the approximate fair value of the instruments. This is based on that all financial instruments have either a short term date of maturity or are loans to subsidiaries. 30: Key management personnel compensation The aggregate compensation made to key management personnel of the company and the Group is set out below: Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payment Consolidated 2009 $ 1,589,860 74,700 - - 2008 $ 1,011,327 31,111 - - 1,338,911 35,584,646 3,003,471 36,627,084 Company 2009 $ 1,589,860 74,700 - - 2008 $ 1,011,327 31,111 - - 1,338,911 35,584,646 3,003,471 36,627,084 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 31: Transactions with other related parties Missoni Investments Pty Ltd a Company of which Mr Malcolm Mason is a director was paid directors and consultancy fees of $283,185 during the year (2008: $197,527). Of this amount, $190,375 related to payments to Mr Mason for services provided by Mr Mason to the company and this amount has been disclosed in the details of remuneration paid to Mr Mason. The balance of the amount paid to Missoni Investments Pty Ltd, relates to services provided by other staff of the company and for the payment of rent, charged by Missoni Investments Pty Ltd on storage facilities, provided by the company. Mineralhunt Services APL a company of which Mr Hans Kristian Schønwandt is a director, was paid consultancy and director fees of $159,006 during the year (2008: $211,500). This amount has been disclosed in the details of remuneration paid to Mr Schønwandt. Shaun Bunn and Associates Pty Ltd is a company of which Mr Shaun Bunn is a director, was paid consultancy fees of $299,026 during the year (2008: nil). This amount has been disclosed in the details of remuneration paid to Mr Bunn. 63 SECTION 2 | 63 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G 32: Key management personnel equity holdings Fully paid ordinary shares of Greenland Minerals and Energy Limited Balance at 1 July No. Granted as compensation No. Received on exercise of options No. Net other change No. Balance at 30 June No. Balance held nominally No. 2009 M Hutchinson R McIllree S Cato A Ho M Mason H Schønwandt S Stafford- Michael J Whybrow J Mair S Bunn 2008 R McIllree S Cato A Ho M Mason H Schønwandt S Stafford- Michael J Whybrow - 3,102,295 921,100 50,000 610,000 - - - - - 1,000,000 500,000 1,000,000 750,100 - - 2,850,095 800,100 - 360,000 - - - - - - - 1,000,000 - 700,100 1,000,000 - - - - - - - - - - - - - - - - - - 158,800 - 150,000 - - 3,261,095 921,100 200,000 610,000 - 1,500,000 - 150,000 - - 252,200 121,000 50,000 250,000 1,000,000 900,100 - - 3,102,295 921,100 50,000 610,000 - 1,000,000 - 50,000 1,000,000 750,100 - - - - - - - - - - - - - - - - SECTION 2 | 64 64 Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 32: Key management personnel equity holdings (cont) Share options of Greenland Minerals and Energy Limited Balance at 1 July No. Granted as compen- sation No. - 4,000,000 8,922,000 7,400,100 - - - - 3,180,000 500,000 - - 7,310,000 - - 1,000,000 - - 750,000 1,935,000 6,600,000 800,100 6,600,000 - - 180,000 3,000,000 - - - - 700,000 6,600,000 2009 M Hutchinson R McIllree S Cato A Ho M Mason H Schønwandt S Stafford-Michael J Whybrow J Mair S Bunn 2008 R McIllree S Cato A Ho M Mason H Schønwandt S Stafford-Michael J Whybrow Exercised No. Net other change (i) No. Bal at 30 June No. Bal vested at 30 June No. Vested and exerci- sable No. Options vested during year No. - - - - - - - - - - - - - - - - 4,000,000 - - 4,000,000 8,922,000 2,322,000 2,322,000 7,400,100 800,100 800,100 - - - - - 3,680,000 680,000 680,000 2,500,000 1,000,000 1,000,000 1,000,000 1,000,000 - - - - - - - - - - 7,310,000 710,100 710,100 2,500,000 2,500,000 2,500,000 2,500,000 - - - - 750,000 750,000 750,000 750,000 387,000 8,922,000 2,322,000 2,322,000 - - - - - 7,400,100 800,100 800,100 - - - 3,180,000 180,000 180,000 - - - - - - 10,000 7,310,000 710,000 710,000 - - - - - - - 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G (i) Net other change relates to options purchased either on market through the ASX, or through third party off market transactions. All share options issued to key management personnel were made in accordance with the provisions of the employee share option plan. During the financial year, no options (2008 nil) were exercised by key management personnel 33. Remuneration of auditors Auditor of the parent entity Audit or review of the financial report Preparation of the tax return Other non-audit services Consolidated Company 2009 $ 62,876 - - 62,876 2008 $ 31,050 4,200 - 35,250 2009 $ 53,500 - - 53,500 2008 $ 31,050 4,200 - 35,250 The auditor of Greenland Minerals and Energy Limited is Deloitte Touche Tohmatsu, for the period ended 30 June 2008 the auditor was Mack and Co. 65 SECTION 2 | 65 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Notes to the Financial Statements For the year ended 30 June 2009 Greenland Minerals and Energy Limited 2009 Financial Report 34. Subsequent Events The following subsequent events occurred after 30 June 2009; (cid:1) Successful completion of a placement of 4 million shares at $0.25, raising $1,000,000, less costs, as per the prospectus issued 31 July 2009. (cid:1) The Company announced on 31 August 2009, it had finalised terms on the acquisition of a 4% royalty applicable on net profits from the future production of metals on license 2005/28 in South Greenland. The Company currently holds a legal and beneficial interest of 61%, in the joint venture with the right to move to 100%, when the Company deems it most appropriate. Acquisition of the 4% royalty will be subject to shareholders’ approval at an Extraordinary Meeting, to be called in due course. The Consideration will be payable in escrowed shares in the Company. This transaction is a transaction that requires shareholder approval in accordance with listing rule 10.1 of the Australian Securities Exchange Limited and section 611 of the Corporation Act 2001. Share placements of 25 million shares at $0.20 completed on 15 May 2009 and of 4 million shares at $0.25 completed 31 July 2009, were initially made to fund the acquisition. However, as the consideration was shares in the company, these funds will instead be used to fund the continuation of the work on the pre- feasibility study on Kvanefjeld. (cid:1) The Company has been served with writs by Westrip Holdings Limited (Westrip) and Rimbal Pty Ltd, issued in the Supreme Court of Western Australia. The matter relates to the dispute being taken by shareholders of Westrip as a derivative claim on the behalf of Westrip against the directors of Westrip. The writs served on the Company, alleged breaches of confidentiality, misleading conduct and breach of contract and were for unspecified damages and other relief. The Company, through its solicitors, strongly denies the allegations and any wrongdoing and will vigorously defend the action. SECTION 2 | 66 66 Notes to the Financial Statements For the year ended 30 June 2009 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Greenland Minerals and Energy Limited 2009 Financial Report Company secretary Bruce Acutt Registered office 1st Floor, 33 Colin Street, West Perth, Western Australia, 6005 Principal administration office 1st Floor, 33 Colin Street, West Perth, Western Australia, 6005 Share registry Advanced Share Registry Services 110 Stirling Highway Nedlands, Western Australia, 6009 Additional stock exchange information as at 3rd September 2009 Number of holders of equity securities Ordinary share capital 222,508,555 fully paid ordinary shares are held by 1,576 individual shareholders. Options 144,332,047 options are held by 617 individual optionholders. Options do not carry a right to vote. Substantial Shareholders Shareholder 1. GCM Nominees Limited 2. Westrip Holdings Limited 3. ANZ Nominees Limited 4. Gravner Limited 5. HSBC Custody Nominees 6. Citicorp Nominees Pty Limited Number 35,000,000 30,000,000 17,108,428 15,000,000 12,895,976 11,160,371 Percentage 15.730% 13.483% 7.689% 6.741% 5.796% 5.016% 67 SECTION 2 | 67 Distribution of holders of quoted sharesGreenland Minerals and Energy Limited 2009 Financial Report 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Distribution of holders of quoted shares Share Spread Holders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over 69 352 376 632 147 1,576 Units 43,367 1,044,867 3,307,186 23,949,121 194,164,014 222,508,555 Percentage 0.019% 0.471% 1.486% 10.763% 87.261% 100% Twenty largest holders of quoted shares Ordinary shareholders 1. GCM Nominees Limited 2. Westrip Holdings Limited 3. ANZ Nominees Limited 4. Gravner Limited 5. HSBC Custody Nominees 6. Citicorp Nominees Pty Limited 7. Rochford Limited 8. NGAI Hung Limited 9. South Asian Commodity Holdings Limited 10. Mr Roderick Claude McIllree 11. Merrill Lynch (Australia) Nominees Pty Limited 12. Falfaro Investments Limited 13. National Nominees Limited 14. UBS Nominees Pty Limited 15. NEFCO Nominees Pty Limited 16. Hans Kristian Schonwandt 17. Deck Chair Holdings Pty Limited 18. Mr Simon Stafford-Michael 19. RBC Dexia Investor Services Australia Nominees Pty Limited 20. Mr Richard Homsany & Mrs Rosa Dianna Marsia Homsany Fully paid ordinary shares Number 35,000,000 30,000,000 17,108,428 15,000,000 12,895,976 11,160,371 7,000,000 5,450,000 5,073,712 3,331,095 3,237,255 3,000,000 2,676,233 2,500,000 2,438,000 1,500,000 1,050,000 1,000,000 Percentage 15.730% 13.483% 7.689% 6.741% 5.796% 5.016% 3.146% 2.449% 2.280% 1.497% 1.455% 1.348% 1.203% 1.124% 1.096% 0.674% 0.472% 0.449% 1,000,000 850,000 0.449% 0.382% 161,271,070 72.479% SECTION 2 | 68 68 9 0 0 2 t r o p e R l a u n n A d t L y g r e n E d n a s l i a r e n M d n a l n e e r G Distribution of holders of quoted options Greenland Minerals and Energy Limited 2009 Financial Report Distribution of holders of quoted options Option Spread Holders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over 12 87 144 287 87 617 Units 6,245 347,979 1,305,372 12,430,043 130,242,408 144,332,047 Percentage 0.004% 0.241% 0.904% 8.612% 90.238% 100% Twenty largest holders of quoted options Option Holders 1. Gravner Limited 2. South Asian Commodity Holdings Limited 3. Rochford Limited 4. NGAI Hung Limited 5. Excellent Corporation Limited 6. Mr Cameron French 7. Citicorp Nominees Pty Limited 8. Mr Roderick Claude McIllree 9. Mr John Lefroy Mair 10. Mr David Christopher Kemp 11. Mr Michael Bushell 12. Merrill Lynch (Australia) Nominees Limited 13. Mrs Jenny Lee Bushell 14. CIMB-GK Securities PTE Limited 15. NEFCO Nominees Pty Limited 16. AJ Payne Holdings Pty Limited 17. Tadea Pty Limited 18. Mr Richard Homsany & Mrs Rosa Dianna Marsia Homsany 19. Mr Stephen Frederick Schmedje & Mrs Cornelia Petra Schmedje 20. Bond Street Custodians Limited $0.20 Listed Options Number 43,700,000 12,000,000 11,500,000 10,000,000 9,500,000 3,435,437 3,271,500 2,522,000 2,500,000 2,205,039 2,000,000 2,000,000 1,380,000 1,375,542 1,299,400 900,000 871,200 850,000 Percentage 30.277% 8.314% 7.968% 6.928% 6.582% 2.380% 2.267% 1.747% 1.732% 1.528% 1.386% 1.386% 0.956% 0.953% 0.900% 0.624% 0.604% 0.589% 800,000 765,000 0.554% 0.530% 112,875,118 78.205% 69 SECTION 2 | 69 Greenland Minerals and Energy Limited ACN 85 118 463 004 BUSINESS OFFICE First Floor 33 Colin Street West Perth, Western Australia, 6005 Telephone: +61 8 9226 1100 Facsimile: +61 8 9226 2299 GREENLAND OFFICE PO Box Narsaq Telephone: +299 661 494 Facsimile: +299 662 494 WEBSITE www.ggg.gl 

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