Helix Energy Solutions Group
Annual Report 2005

Plain-text annual report

Contents Chairman’s Review…………………….………………………………………………….2 Review of Operations…………………………………………………………………...4 Introduction………………………………………………………………………...4 Review of Projects……………………………………………………………......4 Corporate Governance……………………………………………………………...…..8 Directors’ Report……………………………………………………………………….15 Auditor’s Independence Declaration………………………………………………….21 Independent Audit Report……………………………………………………………….22 Directors’ Declaration…………………………………………………………………....24 Statement of Financial Position………………………………………………….……..25 Statement of Financial Performance……………………………………..……….…26 Statement of Cashflows…………………………………………………………...…….27 Notes to the Financial Statements………………………………………………..……28 Shareholding Information…………………………………………………………….…47 Tenement Schedule………………………………………………………………..……49 Corporate Directory…………………………………………………………………….52 Annual Report 2005 | 1 “the year has been a positive one, in which the Company has made substantial progress in its exploration activities..” Chairman’s Review Dear Shareholder I am pleased to present this year’s Annual Report, the twentieth in the history of Helix Resources Limited. Overall, the year has been a positive one, in which the Company has made substantial progress in its exploration activities for gold, copper, nickel and diamonds. Commencing in January, we flew the first detailed aeromagnetic survey over the north eastern section of the Mt Venn layered intrusion in Western Australia. The results of this survey produced some significant magnetic anomalies which were further evaluated in May ground- using b e n r o electromagnetic (EM) techniques. This EM survey i d e n t i f i e d m a s s i v e sulphide conductors at relatively shallow depths and a program of outcrop gossan sampling confirmed highly anomalous copper and nickel mineralisation up to 24% Cu and 1.5% Ni. In June, the Company carried out a 3,000 metre reverse circulation drilling program made up of 24 holes drilled into the north eastern ultramafic sequence. In addition more ground was applied for to the south providing Helix with almost 80% coverage of the Mt Venn layered intrusion. The results of our first drilling program at Mt Venn were encouraging; drilling confirmed the presence of extensive sulphide accumulations, with best assay results from drill hole MVRC 10 which intersected 2 metres of 1.2% Nickel from a 4 metre wide zone grading 1.3% Copper. Most holes contained broad widths of geochemically anomalous copper and nickel and the Company is now preparing a further exploration program over the entire layered intrusion aimed at identifying potential structural trap sites containing sulphide accumulations. In South Australia, a new joint venture with Minotaur Exploration Ltd over the Tunkillia gold project was signed in March of this year. The Tunkillia project currently contains an inferred resource of 10.5 Mt grading 2.2 g/t (approximately 730,000 ounces). Under the terms of the joint venture Minotaur can earn a 51% interest in the project by spending the next $5.0 million on the project. There is also a minimum requirement for Minotaur to spend $1.0 million before the end of 2006. Under a generative alliance between Minotaur and Oxiana Limited, Minotaur may introduce Oxiana to the Tunkillia project, providing there is an indicated 2 | HELIX RESOURCES LIMITED resource estimation greater than 1 million ounces of gold. Minotaur and Oxiana could then earn an additional 24.5% (total 75.5%) equity by completing a pre-feasibility study on such a project in an additional 2 year timeframe. Exploration activities at Tunkillia by Minotaur are currently from drilling in progress and results programs should be available before year end. In April, the Company carried out drilling at its Glenburgh gold project in the Gascoyne region of Western Australia. Drilling has now confirmed a JORC resource of 1.1 Mt grading 3.1g/t for 108,000 ounces of gold. The Company focussing is f u r t h e r e x p l o r a t i o n around defining a d d i t i o n a l r e s o u r c e ounces near the Apollo resource. The West Pilbara Diamond Project is being explored on behalf of Helix under an earning-in agreement with DeBeers Australia Exploration Limited (DeBeers), whereby DeBeers can earn 51% interest in the project by spending $3.0 million before June 2006. DeBeers has outlined a potential new diamond province in the West Pilbara region, with two kimberlites located on Helix Exploration Licences. Both kimberlites contain micro-diamonds and occur as dyke complexes. The Blacktop kimberlite, which straddles both a joint venture Exploration Licence and DeBeers’ own ground, has had one initial bulk sample taken from the DeBeers Exploration Licence. The bulk sample has produced approximately 5 carats of diamonds, and further work including bulk sampling is now required on the the Helix Blacktop kimberlite extensions onto tenements. The other kimberlite, Clurrie, situated on R. Vittino, R. Mosig, J. den Dryver, Tunkillia 2004 Chairman’s Review Helix tenements, remains untested. The Company is encouraged by the significant early success in finding kimberlites and diamonds in this new and exciting province and looks forward to the next exploration program. Helix reported a loss of $1,297,895 during the year. Cash reserves available are $1.6 million and the Company continues its determined exploration efforts throughout Western Australia. In August of this year, Mr Michael Wilson took up the position as Exploration Manager the Company replacing Mr Tony Martin who retired after 17 years employment. I would like to thank Tony on behalf of all at Helix for his tremendous assistance and I would also like to welcome Michael to the management to his contributions. team and forward look for Mt Venn Field Camp 2005 The staff and Board of Helix look forward to making 2006 a significant year for the Company. At the last Annual General Meeting of the Company in November 2005, Mr Riccardo Vittino joined me as an executive Director and Messrs Greg Wheeler and John den Dryver joined as non executive Directors. I would like to also thank them and the rest of the Helix staff for their valuable contributions during this important year. Robert W Mosig Executive Chairman Helix Project Locations Annual Report 2005 | 3 Review of Operations INTRODUCTION Exploration activities focussed on the Mt Venn layered intrusion - Eastern Goldfields, the Glenburgh gold project,- Gascoyne region and the Isolated Hill gold and base metals project - Eastern Goldfields in Western Australia. Activities at the Highway nickel laterite project, the Tunkillia gold project, the West Pilbara diamond project and the Loongana base metals and platinum group metals (PGM) project were carried out by joint venture partners. On platinum group metals, Helix retains an active interest in Australian PGM exploration through its Fifield and Munni Munni PGM projects. This year has seen a depressed price for palladium, generally below USD$200 an ounce. The Company maintains a continuous monitor on the potential for Australia to enter the PGM production arena, and plans to undertake a longer term economic study on the PGM market in 2006. Mt Venn Project – Western Australia Helix 80% - E38/1000 Helix 100% - ELA 38/1476 and 1775. The Mt Venn Project is situated 100km east of Laverton W.A., on the edge of the Great Victorian Desert. The project area has received very little exploration activity over the last 30 years due to its location on an Aboriginal reserve. The last recorded work on the project was carried out by Tasminex N.L. and Western Mining Corporation in the late 1960’s and early 1970’s respectively. In March of this year, an 8 square kilometre ground- borne electromagnetic (EM) survey was carried out over a specific area of the intrusion where significant magnetic and geochemical anomalism was found to occur. The EM survey assisted in defining two sulphide-rich horizons. The first was associated with the basal contact of the intrusion and the second was located up sequence, along the contact of a gabbro with a coarse-grained pyroxenite. Reverse Circulation (RC) drilling commenced in late June with a total of 24 holes drilled for 3,031 metres targeting selected geochemical, EM, magnetic and structural features along 6 kilometres of strike length. Best assay results were from hole MVRC 10, which intersected 2 metres grading 1.2% Nickel from a 4 metre wide zone grading 1.3% Copper. Most drill holes contained broad widths of geochemically anomalous copper and nickel varying from several metres up to 60 metres in drilled widths. Evidence of weak platinum group metal anomalism was detected in only one drill hole specifically targeted to intersect the titaniferous magnetite portion of the Mt Venn intrusion. By placing these assays into the context of a layered ultramafic intrusion, the Company is encouraged by these first pass drilling results. The Mt Venn Intrusion has now been confirmed to have extensive sulphide accumulation containing well developed Mt Venn appears to have some characteristics of a layered mafic/ ultramafic intrusion and was secured by Helix to examine its potential to host PGM and base metal deposits. After several years of negotiations to support the granting of an Exploration finally Licence, commenced the project in late 2004. the Company fieldwork on Initial work at the Mt Venn Project involved the flying of a detailed magnetic survey over the entire intrusion in early 2005. Follow-up activities ground included a mapping and outcrop sampling program over the western extent of the outcropping intrusion (refer portion of Figure 1). This mapping and sampling identified a series of gabbroic and pyroxenitic units with extensive surface gossan development. the 4 | HELIX RESOURCES LIMITED Figure 1: Mt Venn Project Significant Drilling Results Review of Operations copper and nickel anomalism. Future exploration will focus on the identification of likely structural trap sites, where economic levels of copper and nickel concentrations may occur in the untested portions of the Mt Venn intrusion. Glenburgh Project – Western Australia Helix 100% During the year, the Company carried out new ore resource estimations and a further drilling program. In May, Resource Evaluations Pty Ltd calculated a new JORC compliant resource for the project. The new resource included additional holes drilled by Helix in 2003-04 that intersected high grade extensions of the Apollo lode. An inferred resource of 1.1Mt at 3.1g/t for 108,000oz was estimated using a grade cut off of 1g/t, whilst the estimation also took into account minimum mining widths for ore panels. At the Apollo Prospect, 632,000 t grading 3.4g/t for 68,500 oz were estimated. This is a significant improvement from previous resource calculations, with a 60% grade increase and 20% more ounces at Apollo. Previous resource calculations had effectively smeared the orebody by using a lower 0.5g/t cutoff. The Company considers that the new resource estimation better reflects the high grade nature of the Glenburgh mineralisation. Additionally, a 2,000 metre RAB drilling program was completed over a series of geochemical anomalies at the Mustang Prospect, immediately east of the main Apollo Prospect. This area is covered by a thin veneer of alluvial soils masking the geochemical response noted elsewhere on the project. An earlier shallow vacuum drilling program in 2004 successfully identified numerous gold anomalies from the palaeo-soil surface located 1-2 metres below the cover. The RAB drilling program was designed the weathered basement below these anomalies to a depth of approximately 30 metres. test to The program highlighted a number of significant plus 1g/t gold intersections including 8m at 3.8g/t and 7m at 2.1g/t over a 1.5 kilometre strike length (refer to Figure 2). The results show potential for at least two new zones of mineralisation, both with geochemical signatures similar to that of the Apollo Prospect. Future work will concentrate on defining the new zones of anomalous geochemistry with RC drilling and confirming the possibility for along strike repetitions of the shallow dipping high grade Apollo-style lodes under shallow cover. Perry Creek Base Metals Project - Western Australia Helix 100% is a The Perry Creek copper-lead-zinc project conceptual base metals target situated in the Edmund Basin, Western Australia. The Edmund Basin is an extensive intracratonic shale-sandstone-carbonate basin of early Mesoproterzoic age which forms the lower part of the Bangemall Superbasin (refer Figure 3). The Perry Creek Project is an attractive target for sediment hosted base metals. The project area contains favourable rock types including shale and dolomites which are situated within an intracratonic rift setting. In addition, its age of 1.6Ga is comparable to the Mt Isa and MacArthur River base metal deposits. The primary target in the project area is sulphidic carbonaceous shale of the Blue Billy Formation which overlies a thick clastic wedge of conglomerate and (Prairie Downs and Gooragoora sandstone Figure 2: Glenburgh plan and long section showing significant results Annual Report 2005 | 5 Review of Operations Formations respectively). Previous explorers in the project area were Geopeko (1983-85) and P a s m i n c o ( 1 9 9 2 - 9 4 ) . B o t h companies carried out primary exploration for Mt Isa style Pb-Zn mineralization and for Jillewarra-type Cu-Pb-Au occurrences using aeromagnetic studies combined with geochemical sampling. Several anomalous localities were defined in areas of unexposed Blue Billy Formation. Helix will carry out further sampling and geophysical studies prior to drilling any defined targets in 2006. Lake Everard Project – South Australia Helix 100%, Minotaur Exploration earning 51% A Joint Venture with Minotaur Exploration Ltd (“Minotaur”) over the Lake Everard Project was signed in the first quarter of 2005. Under the terms of the Joint Venture, Minotaur can earn a 51% interest in all tenements by spending $5.0 million over four years, of which $1.0 million is a minimum commitment to be spent before the end of 2006. Under a proposed generative alliance between Minotaur and Oxiana Limited, Minotaur can introduce Oxiana to the project. Should Oxiana enter into the joint venture, then Minotaur/Oxiana can earn an additional 24.5% (total 75.5%) equity by completing a pre-feasibility study on a project which contains an Indicated Resource of at least 1 million ounces gold. Minotaur has taken over management of the project and subsequently carried out a full review of all geophysical and drilling data, identifying numerous priority targets for their 2005 field campaign. Minotaur has conducted an infill gravity survey and a close- spaced calcrete sampling program over several regional targets. In addition, a regional Aircore drilling program has commenced to test gold and copper/gold targets over the entire tenement package, and an RC/ diamond drilling program will be carried out to test geophysical anomalies and structural targets within the 20 square kilometre Tunkillia gold in calcrete anomaly. West Pilbara Diamond Project – Western Australia Helix 100%, De Beers Australia Exploration Limited earning 51% The Helix West Pilbara Diamond Project comprises 11 tenements, 100% owned by Helix, covering nearly 2,000 square kilometres and situated to the south of the Company’s Munni Munni PGM project. DeBeers Australia Exploration (DBAE) may earn a 51% interest in diamonds by spending AUD$3 million by June 2006. 6 | HELIX RESOURCES LIMITED Figure 3: Perry Creek project Stratigraphic Interpretation No field activities were carried out in 2005, however, previous reconnaissance and surface sampling by DBAE resulted in the discovery of two kimberlites, Blacktop and Clurrie, in 2004. As part of a follow up survey three micro-diamonds were recovered from a rock chip sample containing weathered kimberlite from the Blacktop area (refer to Figure 4) The discovery is immediately adjacent to the DBAE Balmoral Project tenements where a 32.85 tonne bulk sample produced 89 macro diamonds totaling 4.17 carats (-8.0 + 1.0 mm fraction) from the Blacktop kimberlite dyke and sill complex. A further 46 diamonds totalling 1.1 carats were also found in the tailings re-treatment audit of the bulk sample. located on the extension of The kimberlite and micro-diamonds found on the Helix tenements are the Blacktop kimberlite trend found on DBAE’s ground. DBAE’s drilling to date extends only to the boundary of the Helix tenements. The regional geophysics and surface loam sampling conducted by DBAE shows the complex extends for at least another 1.5 kilometres into Helix’s ground where it terminates in a major regional fault. field activities Earlier this year, DBAE advised Helix that as a result of a reassessment of De Beers’ global exploration priorities, in Australia would be substantially reduced. As a consequence DBAE and Helix are currently discussing a number of options with a view to ensure that the diamond exploration potential of the ground held by both parties is assessed thoroughly. Highway Nickel Project – Western Australia Helix 25%, Heron Resources Limited 75% Review of Operations Heron Resources have notified Helix that infill RC drilling at the Highway resource, which stands at 96Mt at 0.74% Ni and 0.05% Co, is in progress. This drilling program will bring the resource drill spacing down to 160 by 80 metres. This drilling campaign is the first step towards upgrading the status of the resource from Inferred to Indicated. resource The Highway represents a significant siliceous Nickel laterite resource located only 25 kilometres north of Heron’s Goongarie Hill project where INCO has entered into a joint venture with Heron. the Robe River where it crosses the Marra Mamba and Brockman Iron Formations. The exploration target is the occurrence of channel iron deposits (CID’s), accumulations of material anomalously high in iron that have concentrated in the channels and become lithified. Today Rio Tinto is profitably mining CID’s from Mesa J at Robe River, some 20 km to the west. API plans to conduct programs of detailed mapping and sampling to define the CID’s with follow-up drill testing of targets in the 2005/06 field season Yalleen Iron Ore Project – Western Australia Helix 100%, API Management Pty Ltd earning 70% West Pilbara Base Metal Project – Western Australia Helix 100% The Yalleen Project is a joint venture between Helix and API Management Pty Ltd (a company equally owned by Aquila Resources Ltd and AMCI Holdings Australia Pty Ltd), and covers an area of 633 square km in the West Pilbara Region of Western Australia (refer Figure 4). The terms of the joint venture are: • API will spend a total of $1.5 million over four years on exploration for iron ore to earn a 70% interest in the project, and may elect to withdraw from the project after spending a minimum of $150,000; • Once API has earned its 70% interest, Helix can elect to contribute pro-rata or dilute to a $0.50 per tonne royalty. The project area covers the south eastern extension of Figure 4: West Pilbara Project Locations The West Pilbara Base Metal Project covers the same area as the DBAE diamond joint venture with the the Munni Munni project area, addition of approximately 75 kilometres south of Karratha WA. The tenement package covers a diverse range of rock types from sequences of the Hamersley Basin in the south, through Fortescue Formation volcanics and sediments to Archaean basement in the north. Aside from the PGM potential at Munni Munni, the region is considered highly prospective for gold and base metals. Operating nickel, copper and iron ore mines the and numerous historic workings surround tenement package. As part of the DBAE diamond joint venture, a surface geochemical sample was collected by DBAE nearby to resulting samples, each diamond sample. The collected at approximate 5 square kilometre spacings, were assayed by Helix for precious and base metals. Results have highlighted numerous gold/PGM and base metal anomalies that will form the basis for a field campaign on the project area in the 2005-2006 field season. Narracoota Project – Western Australia Helix Resources Limited 90% The Naracoota project lies in the Peak Hill Goldfield 100km north of Meekatharra. During the year a regional surface geochemical sampling program was carried out over the project area. A total of 834 samples of coarse lag material were collected at 800 metre by 400 metre centres. The program outlined two significant gold anomalies. These gold anomalies are believed to be associated with regional west north- west structures on the northern edge of a large coincident gravity and magnetic feature, the Biluyin Anomaly, where historical drilling intersected a thick sequence of volcanic breccias buried under shallow colluvial sediments. Future work will be carried out in last quarter of 2005 to assess the Biluyin breccia system, with the aim of outlining a drilling program targeting gold and base metal mineralisation associated with regional structural controls and associated alteration systems. Annual Report 2005 | 7 Corporate Governance CORPORATE GOVERNANCE The Company is committed to implementing the highest standards of corporate governance. In determining what those high standards should involve the Company has turned to the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations. The Company is pleased to advise that the Company’s practices are largely consistent with those ASX guidelines. As consistency with the guidelines has been a gradual process, where the Company did not have certain policies or committees recommended by the ASX Corporate Governance Council (the Council) in place during the reporting period, we have identified such policies or committees. Where the Company’s corporate governance practices do not correlate with the practices recommended by the Council, the Company does not consider that the practices are appropriate for the Company due to the size of Company operations. To illustrate where the Company has addressed each of the Council’s recommendations, the following table cross-references each recommendation with sections of this report. The table does not provide the full text of each recommendation but rather the topic covered. Details of all of the recommendations can be found on the ASX Corporate Governance Council’s website at http:// www.asx.com.au/about/CorporateGovernance_AA2.shtm. Recommendation Recommendation 1.1 Functions of the Board and Management Recommendation 2.1 Independent Directors Recommendation 2.2 Independent Chairman Recommendation 2.3 Role of the Chairman and Chief Operating Officer Recommendation 2.4 Establishment of Nomination Committee Recommendation 2.5 Reporting on Principle 2 Recommendation 3.1 Directors’ and Key Executives’ Code of Conduct Recommendation 3.2 Company Security Trading Policy Recommendation 3.3 Reporting on Principle 3 Section 1.1 1.2 1.2 1.2 2.3 1.2, 1.4.6, 2.3.2 and the Direc- tors’ Report 1.1 1.4.9 1.1 and 1.4.9 Recommendation 4.1 Attestations by Executive Chairman and Chief Operating Officer 1.4.11 Recommendation 4.2 Establishment of Audit Committee Recommendation 4.3 Structure of Audit Committee Recommendation 4.4 Audit Committee Charter Recommendation 4.5 Reporting on Principle 4 Recommendation 5.1 Policy for Compliance with Continuous Disclosure Recommendation 5.2 Reporting on Principle 5 Recommendation 6.1 Communications Strategy Recommendation 6.2 Attendance of Auditor at General Meetings Recommendation 7.1 Policies on Risk Oversight and Management Recommendation 7.2 Attestations by Executive Chairman and Chief Operating Officer Recommendation 7.3 Reporting on Principle 7 Recommendation 8.1 Evaluation of Board, Directors and Key Executives Recommendation 9.1 Remuneration Policies Recommendation 9.2 Establishment of Remuneration Committee 2.1 2.1.2 2.1 2.1 1.4.4 1.4.4 1.4.8 1.4.8 2.1.3 1.4.11 2.1.3 1.4.10 2.2.4 2.2 Recommendation 9.3 Executive and Non-Executive Director Remuneration 2.2.4.1 and 2.2.4.2 Recommendation 9.4 Equity-Based Executive Remuneration Recommendation 9.5 Reporting on Principle 9 Recommendation 10.1 Company Code of Conduct 2.2.4.1 2.2.2 and 2.2.4 3 8 | HELIX RESOURCES LIMITED Corporate Governance 1. 1.1 Board of Directors Role of the Board The Board’s role is to govern the Company rather than to manage it. In governing the Company, the Directors must act in the best interests of the Company as a whole. It is the role of senior management to manage the Company in accordance with the direction and delegations of the Board and the responsibility of the Board to oversee the activities of management in carrying out these delegated duties. In carrying out its governance role, the main task of the Board is to drive the performance of the Company. The Board must also ensure that the Company complies with all of its contractual, statutory and any other legal obligations, including the requirements of any regulatory body. The Board has the final responsibility for the successful operations of the Company. To assist the Board carry out its functions, it has developed a Code of Conduct to guide the Directors, the Executive Chairman, the Chief Operating Officer and other key executives in the performance of their roles. 1.2 Composition of the Board To add value to the Company the Board has been formed so that it has effective composition, size and commitment to adequately discharge it responsibilities and duties. The names of the Directors and their qualifications and experience are stated in Directors’ Report along with the term of office held by each of the Directors. Directors are appointed based on the specific governance skills required by the Company and on the independence of their decision-making and judgment. The Company recognises the importance of Non-Executive Directors and the external perspective and advice that Non-Executive Directors can offer. Mr J denDryver and Mr G Wheeler are Non-Executive Directors. In addition to being Non-Executive Directors, they also meet the following criteria for independence adopted by the Company. An Independent Director is a Non-Executive Director and: 1. 2. 3. 4. 5. 6. 7. is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company; within the last three years has not been employed in an executive capacity by the Company or another group member, or been a Director after ceasing to hold any such employment; within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another group member. Or an employee materially associated with the service provided; is not a material supplier or customer of the Company or another group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; has no material contractual relationship with the Company or other group member other than as a Director of the Company; has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company; and is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company. 1.3 Responsibilities of the Board In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company. Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following. 1. 2. 3. 4. Leadership of the Organisation: overseeing the Company and establishing codes that reflect the values of the Company and guide the conduct of the Board. Strategy Formulation: working with senior management to set and review the overall strategy and goals for the Company and ensuring that there are policies in place to govern the operation of the Company. Overseeing Planning Activities: overseeing the development of the Company’s strategic plan and approving that plan as well as the annual and long term budgets. Shareholder Liaison: ensuring effective communications with shareholders through an appropriate communications policy and promoting participation at general meetings of the Company. Annual Report 2005 | 9 Corporate Governance 5. 6. 7. 8. 9. Monitoring, Compliance and Risk Management: overseeing the Company’s risk management, compliance, control and accountability systems and monitoring and directing the financial and operational performance of the Company. Company Finances: approving expenses in excess of those approved in the annual budget and approving and monitoring acquisitions, divestitures and financial and other reporting. Human Resources: appointing, and, where appropriate, removing senior management as well as reviewing and monitoring the performance of senior management in their implementation of the Company’s strategy. Ensuring the Health, Safety and Well-Being of Employees: in conjunction with the senior management team, developing, overseeing and reviewing the effectiveness of the Company’s occupational health and safety systems to ensure the well- being of all employees. Delegation of Authority: delegating appropriate powers to the Chief Operating Officer to ensure the effective day-to-day management of the Company and establishing and determining the powers and functions of the Committees of the Board. 1.4 Board Policies 1.4.1 Conflicts of Interest Directors must: • • disclose to the Board actual or potential conflicts of interest that may or might reasonably be thought to exist between the interests of the Director and the interests of any other parties in carrying out the activities of the Company; and if requested by the Board, within seven days or such further period as may be permitted, take such necessary and reasonable steps to remove any conflict of interest. If a Director cannot or is unwilling to remove a conflict of interest then the Director must, as per the Corporations Act, absent himself or herself from the room when discussion and/or voting occurs on matters about which the conflict relates. 1.4.2 Commitments Each member of the Board is committed to spending sufficient time to enable them to carry out their duties as a Director of the Company. 1.4.3 Confidentiality In accordance with legal requirements and agreed ethical standards, Directors and key executives of the Company have agreed to keep confidential, information received in the course of the exercise of their duties and will not disclose non-public information except where disclosure is authorised or legally mandated. 1.4.4 Continuous Disclosure The Board has designated the Company Secretary as the person responsible for overseeing and coordinating disclosure of information to the ASX as well as communicating with the ASX. In accordance with the ASX Listing Rules the Company immediately notifies the ASX of information: 1. 2. concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company’s securities; and that would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company’s securities. Upon confirmation of receipt from the ASX, the Company posts all information disclosed in accordance with this policy on the Company’s website in an area accessible by the public. 1.4.5 Education and Induction New Directors undergo an induction process in which they are given a full briefing on the Company. Where possible, this includes meetings with key executives, site visits of key operations, an induction package and presentations. Information conveyed to new Directors include: • • • • • details of the roles and responsibilities of a Director; formal policies on Director appointment as well as conduct and contribution expectations; details of all relevant legal requirements; access to a copy of the Board Charter; Guidelines on how the Board processes function; 10 | HELIX RESOURCES LIMITED Corporate Governance • • • • • details of past, recent and likely future developments relating to the Board; background information on and contact information for key people in the organisation; an analysis of the Company; a synopsis of the current strategic direction of the Company including a copy of the current strategic plan and annual budget; and a copy of the Constitution of the Company. In order to achieve continuing improvement in Board performance, all Directors are encouraged to undergo continual professional development. 1.4.6 Independent Professional Advice The Board collectively and each Director has the right to seek independent professional advice at the Company’s expense, up to specified limits, to assist them to carry out their responsibilities. 1.4.7 Related Party Transactions Related party transactions include any financial transaction between a Director and the Company and will be reported in writing to each Board meeting. Unless there is an exemption under the Corporations Act from the requirement to obtain shareholder approval for the related party transaction, the Board cannot approve the transaction. 1.4.8 Shareholder Communication The Company respects the rights of its shareholders and to facilitate the effective exercise of those rights the Company is committed to: • • • • Communicating effectively with shareholders through releases to the market via ASX, the Company’s website, information mailed to shareholders and the general meetings of the Company; giving shareholders ready access to balanced and understandable information about the Company and corporate proposals; making it easy for shareholders to participate in general meetings of the Company; and requesting the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report. The Company also makes available a telephone number and email address for shareholders to make enquiries of the Company. 1.4.9 Trading in Company Shares The Company has a Share Trading Policy under which Directors and certain employees and their associates may only trade in the Company’s securities during the 30 days commencing immediately after each of the following (“trading window”): • • • • the release by the Company of its half-yearly results to the ASX; the release by the Company of its annual results to the ASX; the close of the general meeting of the Company; and the release by the Company of its Quarterly Reports to the ASX. In addition, consistent with the law, designated officers are prohibited from trading in the Company’s securities while in the possession of unpublished price sensitive information concerning the Company. Unpublished price sensitive information is information regarding the Company, of which the market is not aware, that a reasonable person would expect to have a material effect on the price or value of the Company’s securities. Notice of an intention to trade must be given prior to trading in the Company’s securities as well as a confirmation that the person is not in possession of any unpublished price sensitive information. The completion of any such trade by a Director must also be notified to the Company Secretary who in turn advises the ASX. 1.4.10 Performance Review/Evaluation Each year the Board conducts an evaluation of its performance. The evaluation for this and past financial years was conducted internally. The Board’s performance was measured against both qualitative and quantitative indicators. The objective of this evaluation was to identify strengths and weaknesses and provide best practice corporate governance to the Company. In future years this process may carried out by an external consultant. Annual Report 2005 | 11 Corporate Governance 1.4.11 Attestations by Executive Chairman and Chief Operating Officer In accordance with the Board’s policy, the Executive Chairman and the Chief Operating Officer made the attestations recommended by the ASX Corporate Governance Council as to the Company’s financial condition prior to the Board signing this Annual Report. 2. Board Committees 2.1 Audit Committee Due to the size and scale of operations of the Company, the full Board undertakes the role of the Audit Committee. Below is a summary of the role and responsibilities of the Audit Committee. Further details are contained in the Audit Committee’s Charter. 2.1.1 Role The Audit Committee is responsible for reviewing the integrity of the Company’s financial reporting and overseeing the independence of the external auditors. 2.1.2 Composition The Audit Committee consists of four members, being the full Board. All members can read and understand financial statements and are otherwise financially literate. The details of the member’s qualifications may be found in their Director Profiles in the Directors’ Report. The Audit Committee holds two meetings throughout a normal year and details of attendance of the members of the Audit Committee are contained in the Directors’ Report. 2.1.3 Responsibilities The Audit Committee reviews the audited annual and half-yearly financial statements and any reports which accompany published financial statements before submission to the Board and recommends their approval. The Audit Committee also recommends to the Board the appointment of the external auditor and each year, reviews the appointment of the external auditor, their independence, the audit fee, and any questions of resignation or dismissal. The Audit Committee is also responsible for establishing policies on risk oversight and management. 2.2 Remuneration Committee Due to the size and scale of operations of the Company, the full Board undertakes the role of the Remuneration Committee. 2.2.1 Role The role of the Remuneration Committee is to assist the Board in fulfilling its responsibilities in respect of establishing appropriate remuneration levels and incentive policies for employees. 2.2.2 Composition The full Board comprises the Remuneration Committee. The Remuneration Committee holds meetings as required throughout the year. 2.2.3 Responsibilities The responsibilities of the Remuneration Committee include setting policies, terms and conditions of employment for senior executives’ remuneration, reviewing and implementing the Company’s incentive schemes and superannuation arrangements, reviewing the remuneration of both Executive and Non-Executive Directors and undertaking an annual review of the senior executives’ performance, including, setting with the Executive Chairman goals for the coming year and reviewing progress in achieving these goals. 2.2.4 Remuneration Policy The Senior Executives’ Remuneration Policy was approved by resolution of the Board in October 2004 and the Non-Executive Director Remuneration Policy was also approved by resolution of the Board in January 2005. 2.2.4.1 Senior Executive Remuneration Policy The Company is committed to remunerating its senior executives in a manner that is market-competitive and consistent with best practice as well as supporting the interests of shareholders. Consequently, under the Senior Executive Remuneration Policy the 12 | HELIX RESOURCES LIMITED Corporate Governance remuneration of senior executive may be comprised of the following: • • • • fixed salary that is determined from a review of the market and reflects core performance requirements and expectations; a performance bonus designed to reward actual achievement by the individual of performance objectives and for materially improved Company performance; participation in share/option schemes with thresholds approved by shareholders; and statutory superannuation. By remunerating senior executives through performance and long-term incentive plans in addition to their fixed remuneration the Company aims to align the interests of senior executives with those of shareholders and increase Company performance. Details of the remuneration, including both monetary and non-monetary components, for each of the Executives during the year are included in the Directors’ Report. The Board may use its discretion with respect to the payment of bonuses, stock options and other incentive payments. 2.2.4.2 Non-Executive Director Remuneration Policy Non-Executive Directors are paid their fees out of the maximum aggregate amount approved by shareholders for the remuneration of Non-Executive Directors. Non-Executive Directors do not receive performance based bonuses and do not participate in equity schemes of the Company. Non-Executive Directors are entitled to statutory superannuation. 2.2.5 Current Director Remuneration The aggregate amount of remuneration paid to Non-Executive Directors was approved by shareholders in 1996 and is currently $150,000. Details of the remuneration received by all of the Company’s Directors are contained in the Directors’ Report. 2.3 Nomination Committee 2.3.1 Role The role of a Nomination Committee is to help achieve a structured Board that adds value to the Company by ensuring an appropriate mix of skills are present in Directors on the Board at all times. As the whole Board only consists of four members, the Company does not have a nomination committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues. 2.3.2 Responsibilities The responsibilities of a Nomination Committee include devising criteria for Board membership, regularly reviewing the need for various skills and experience on the Board and identifying specific individuals for nomination as Directors for review by the Board. The Nomination Committee would also oversee management succession plans and evaluates the Board’s performance and makes recommendations for the appointment and removal of Directors. 2.3.3 Criteria for selection of Directors Directors are appointed based on the specific governance skills required by the Company. Given the size of the Company and the business that it operates, the Company aims at all times to have at least one Director with experience in the Company’s industry, appropriate to the Company’s market. In addition, Directors should have the relevant blend of personal experience in: • • • accounting and financial management; legal skills; and CEO-level business experience. 3. Company Code Of Conduct As part of its commitment to recognising the legitimate interests of stakeholders, the Company has an established a Code of Conduct to guide compliance with legal and other obligations to legitimate stakeholders. These stakeholders include employees, clients, customers, government authorities, creditors and the community as whole. This Code includes the following. Responsibilities to Shareholders and the Financial Community Generally The Company complies with the spirit as well as the letter of all laws and regulations that govern shareholders’ rights. The Company has processes in place designed to ensure the truthful and factual presentation of the Company’s financial position and prepares and maintains its accounts fairly and accurately in accordance with the generally accepted accounting and financial reporting standards. Annual Report 2005 | 13 Corporate Governance Responsibilities to Clients, Customers and Consumers Each employee has an obligation to use their best efforts to deal in a fair and responsible manner with each of the Company’s clients, customers and consumers. The Company for its part is committed to providing clients, customers and consumers with fair value. Employment Practices The Company endeavours to provide a safe workplace in which there is equal opportunity for all employees at all levels of the Company. The Company does not tolerate the offering or acceptance of bribes or the misuse of Company assets or resources. Obligations Relative to Fair Trading and Dealing The Company aims to conduct its business fairly and to compete ethically and in accordance with relevant competition laws. The Company strives to deal fairly with the Company’s customers, suppliers, competitors and other employees and encourages it employees to strive to do the same. Responsibilities to the Community As part of the community the Company: • • • is committed to conducting its business in accordance with applicable environmental laws and regulations and encourages all employees to have regard for the environment when carrying out their jobs; encourages all employees to engage in activities beneficial to their local community; and supports community charities. Responsibility to the Individual The Company is committed to keeping private information from employees, clients, customers, consumers and investors confidential and protected from uses other than those for which it was provided. Conflicts of Interest Employees and Directors must avoid conflicts as well as the appearance of conflicts between personal interests and the interests of the Company. How the Company Complies with Legislation Affecting its Operations Within Australia, the Company strives to comply with the spirit and the letter of all legislation affecting its operations. Outside Australia, the Company will abide by local laws in all countries in which it operates. Where those laws are not as stringent as the Company’s operating policies, particularly in relation to the environment, workplace practices, intellectual property and the giving of “gifts”, Company policy will prevail. How the Company Monitors and Ensures Compliance with its Code The Board, management and all employees of the Company are committed to implementing this Code of Conduct and each individual is accountable for such compliance. Disciplinary measures may be imposed for violating the Code. 14 | HELIX RESOURCES LIMITED Directors’ Report In respect of the financial year ended 30 June 2005, the Directors of Helix Resources Limited, (the parent entity), submit the financial report. In order to comply with the provisions of the Corporations Act 2001, the Director’s report as follows: DIRECTORS The following persons held office as Directors of Helix Resources Limited during the whole of the financial year and up to the date of this report: Robert W Mosig MSc, FAusIMM, FAICD Executive Chairman Appointed 1 July 1985 Mr Mosig is a Geologist with over 25 years experience in platinum group metals, gold and diamond exploration within Australasia. Mr Mosig was appointed Executive Chairman on 30 November 2004. The following persons were appointed as Directors of Helix Resources Limited during the financial year: Riccardo E Vittino Executive Director / Chief Operating Officer / Company Secretary Appointed 30 November 2004 Mr Vittino is an Accountant with 20 years experience in company secretarial and corporate management. He has held numerous directorships in resource companies including Diamond Ventures and Platinum Australia. Greg Wheeler Non-Executive Director Appointed 25 October 2004 Mr Wheeler has developed significant expertise over 13 years as a Partner of Chartered Accounting firms Grant Thornton and Deloitte Touche Tohmatsu, prior to establishing his own consulting company. His consulting skills include:- company and business valuations; advice to directors/shareholders on acquisitions or divestitures; commercial negotiations; risk assessment and mitigation. John denDryver Non-Executive Director Appointed 25 October 2004 John den Dryver is a mining engineer with some 30 years mining experience in operational and corporate management. John joined Mount Isa Mines in 1973. In 1982, John joined North Flinders Mines as the Company Mining Engineer. He became the Operations Manager for North Flinders after the mine was commissioned in 1986 and over the next 10 years managed the operations as well as developing the further discoveries in this region including the Callie Mine. In 1987 he was invited to join the Board of North Flinders to become Executive Director- Operations. In 1997 after Normandy Mining took over North Flinders, John was appointed Executive General Manager-Technical leading a team of specialist geologists, mining engineers and metallurgists in operational support, technical review and due-diligence activities. In 2003, after the takeover of Normandy by Newmont Corporation John set up his own mining consultancy business. The following persons resigned as Directors of Helix Resources Limited during the financial year: Dr G. Michael Folie BE (Civil), DIC, MSc (Econ) PhD Non-Executive Chairman Resigned 25 October 2004 Anthony R Martin BSc (Hons), MAusIMM Director Exploration – Executive Director Resigned 30 November 2004 Ian K Macpherson BCom, CA Non-Executive Director Resigned 30 November 2004 Bryce E Wauchope FCA, FAICD Non-Executive Director Resigned 30 November 2004 Annual Report 2005 | 15 Directors’ Report DIRECTORSHIPS OF OTHER LISTED COMPANIES Directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year are as follows: Name Riccardo Vittino John den Dryver Greg Wheeler COMPANY SECRETARY Riccardo Vittino Company Platinum Australia Limited Nustar Mining Corporation Limited Adelaide Resources Limited Acclaim Exploration NL Period of directorship 7 August 2000 - 20 August 2002 23 December 2003 – current 18 April 2005 – current November 2002 to June 2003 Mr Vittino is an Accountant with 20 years experience in company secretarial and corporate management. FORMER PARTNER OF THE AUDIT FIRM Greg Wheeler Past Lead Partner – Assurance & Advisory Division Deloitte Touche Tohmatsu October 1999 – April 2002 Past Lead Partner – Assurance & Corporate Services Division Grant Thornton January 1987 – October 1999 PRINCIPAL ACTIVITIES The principal activity of the Consolidated entity constituted by Helix Resources Limited and the entities it controlled during the year consisted of platinum group metals (PGM), gold and mineral exploration. There has been no significant change in the nature of these activities during the year. FINANCIAL RESULTS The net consolidated loss of the Consolidated entity for the financial period, after provision for income tax was $1,297,895 (2004: $4,769,008). DIVIDENDS No dividend has been paid since the end of the previous financial year and no dividend is recommended for the current period. REVIEW OF OPERATIONS Following the decision in October 2004 to re-focus on exploration, Helix Resources has achieved several milestones which have resulted in positive outcomes for the Company. Firstly, considerable cost savings have been achieved through the company restructure, not only in the area of staffing, but also through the reduction of corporate overheads. Secondly, the Company has been able to attract joint venture partners to share the on-going exploration and/or development risk on several of its projects. A Joint Venture with Minotaur Exploration Ltd (“Minotaur”) over the Tunkillia Gold Project in South Australia was entered into in March of this year. Under the terms of the Joint Venture, Minotaur may earn a 51% interest in the tenements for an expenditure of $5 million over 4 years, of which $1,000,000 is a first 18 month, minimum commitment. Under a proposed generative alliance with Oxiana Limited, Minotaur may introduce Oxiana to the project, under terms to be finalised, in which case Minotaur/Oxiana may earn an additional 24.5% (total 75.5% equity) by completing a pre-feasibility study on the project, and achieving an Indicated Resource of at least 1 million ounces gold or gold-equivalent, in an additional 2 years. Minotaur will be the initial project operator. Another Joint Venture was entered into with API Management Pty Ltd (“API”) (a company equally owned by Aquila Resources Limited and AMCI Holdings Australia Ltd), to assess the Iron Ore potential on Helix’s Yalleen Project in the Hamersley Region of Western Australia. Under the terms of the Joint Venture API will spend a total of $1.5 million over 4 years to earn a 70% interest. Significant advances have been made at the Company’s West Pilbara Diamond Project, which is currently the subject of a Joint Venture with DeBeers Australia Exploration Limited (“DeBeers”). The Helix West Pilbara Diamond Project comprises 11 tenements, 100% owned by Helix, covering nearly 2,000 square kilometres and situated to the south of the Company’s Munni Munni PGM project in which DeBeers may earn a 51% interest in diamonds by spending AUD$3 million by June 2006. 16 | HELIX RESOURCES LIMITED Directors’ Report In January of this year, Helix advised that initial reconnaissance and surface sampling by DeBeers had resulted in the discovery of two kimberlites and three micro-diamonds on its West Pilbara Diamond tenements. The discovery is immediately adjacent to the DBAE Balmoral Project tenements where recently a 32.85 tonne bulk sample produced 89 macro diamonds totalling 4.17 carats from the -8.0 + 1.0 mm fraction from the Blacktop kimberlite dyke and sill complex. A further 46 diamonds totalling 1.1 carats were also found in the tailings re-treatment audit of the bulk sample. The kimberlite and micro-diamonds found on the Helix ground are located on the extension of the Blacktop kimberlite trend found on DeBeers’ ground. DeBeers’ drilling to date extends only to the boundary of the Helix tenements. There has been only limited sampling carried out on the Helix side of the boundary. Earlier this year, DeBeers advised Helix that as a result of a reassessment of DeBeers’ global exploration priorities, field activities in Australia would be substantially reduced. As a consequence DeBeers and Helix are currently discussing a number of options with a view to ensure that the diamond exploration potential of the ground held by both parties is assessed thoroughly. The Company also carried out exploration activities on several of its own Projects. At the Mt Venn Copper and Nickel Project near Laverton in Western Australia, twenty- four holes were drilled for a total of 3,031 metres, with most holes drilled to 120 metres depth on 60 degrees inclinations. The targets for the drilling were the EM and magnetic anomalies situated below the gossanous outcrops which had been identified by the Company earlier in the year. Best assay results were achieved in hole MVRC 10, which intersected 2 metres grading 1.2% Nickel (including 1m at 1.8%Ni) from a 4 metre wide zone grading 1.3% Copper. However, most drill holes contained broad widths of geochemically anomalous copper and nickel varying from several metres up to 30 metres in drilled widths. Evidence of weak platinum group metal anomalism was detected in only one drill hole specifically targeted into a titaniferous magnetite portion of the Mt Venn Intrusion. By placing these assays into the context of a layered ultramafic intrusive, the Company is encouraged by these first pass drilling results. The Mt Venn Intrusion has now been confirmed to have an extensive sulphide layer containing well developed copper and nickel anomalism. Further exploration work must now focus on the identification of likely structural trap sites where economic levels of copper and nickel concentrations may occur. A RAB drilling program undertaken at the 100% owned Glenburgh Project during the year returned encouraging results including 8m at 3.8g/t and 7m at 2.1g/t gold. The latest drilling has improved the prospectivity of increasing the resource inventory, which now stands at 1.1Mt at 3.1g/t containing 108,000oz of gold. This new resource estimate is classed as inferred and complies with recommendations under the JORC Code. The Company reported a loss of $1,297,895 during the year, related essentially to the write down of carry forward exploration expenditure of $796,052. SIGNIFICANT CHANGES IN STATE OF AFFAIRS In the opinion of the Directors, other than that disclosed elsewhere in this Report, there were no significant changes in the state of affairs of the Consolidated entity that occurred during the period under review. SUBSEQUENT EVENTS There has not been any matter or circumstance, other than that referred to in the financial statements or notes thereto, that has arisen since the end of the financial year, that has significantly affected, or may significantly affect, the operations of the Consolidated Entity, the results of those operations, or the state of affairs of the Consolidated Entity in future financial years. FUTURE DEVELOPMENTS Disclosure of information regarding likely developments in the operations of the Consolidated Entity in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the Consolidated Entity. Accordingly, this information has not been disclosed in this report. REMUNERATION REPORT The Company’s Executive Officers’ remuneration policy is set to ensure that remuneration packages properly reflect the duties and responsibilities of the senior executives and are sufficient to attract, retain and motivate personnel of the requisite quality. The policy is administered by the Remuneration Committee, which is composed of all board members. The Executive Officers of the Company are employed under Service Agreements which have been in existence since May 1997. The Service Agreements are all identical in their contents and only differ in remuneration levels. They have a duration of twelve months and renew automatically unless terminated by either the Company by giving twelve months notice to the individual; or by the individual by giving six months notice to the Company. The level of remuneration is not dependent on the satisfaction of any performance condition. Non-executive Directors are remunerated by fees determined by the Board within the aggregate Directors’ fee pool limit of $150,000 approved by shareholders in April 1996. The pool limit is not at present fully utilised. In setting the fees, account is taken of the Annual Report 2005 | 17 Directors’ Report responsibilities inherent in the stewardship of the Company and the demands made of Directors in the discharge of their responsibilities. Advice is taken from independent consultancy sources to ensure remuneration accords with market practice. During the year certain non-executive directors retired and were paid a retirement benefit based on the policy in place at the time. The policy recognised the length of time served by the individual as a non-executive director of the company. The company has largely adopted the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations and decided to remunerate its non-executive directors on an ongoing basis with no accrual or entitlement to a retirement benefit. Remuneration packages contain the following key elements: Primary benefits – salary / fees and performance based bonuses; Post employment benefits – prescribed retirement benefit; and Equity – share options granted under the executive share option plan as disclosed in note 17 to the financial statements. The following table discloses the remuneration of the directors and executives of the company: 2005 Primary Perfor- mance Based Pay- ment $ Salary & Fees $ Post Employment Equity Non Monet- ary Supera- nnua- tion Pre- scribed Bene- fits $ $ $ Other Retire- ment Bene- fits $ Options % of Remu- nera- tion Other Bene- fits Total $ $ $ $ Directors R W Mosig 156,750 R E Vittino 115,180 G Wheeler 19,267 J denDryver 18,826 G M Folie 31,570 I Macpherson 10,857 B Wauchope 9,832 A R Martin 118,850 Total 481,132 - - - - - - - - - - - - - - - - - - 12,000 12,000 - - 2,718 - 1,025 10,639 38,382 - - - - - - - - - - - - - - - - - - 27,156 13.86 13,578 9.65 - - - - - - - - - - 13,578 9.49 54,312 - - - - - - - - - - 195,906 140,758 19,267 18,826 34,288 10,857 10,857 143,067 573,826 During the financial year retirement benefits of $50,000 each were paid to IK Macpherson and B Wauchope which had been accrued in prior years. Value of Options issued to directors The value attributed to the Equity Option is calculated using the Black Scholes Model. No cash has been paid to the individuals. The value of the Options will only be realised if and when the market price of Helix shares, as quoted by the Australian Stock Exchange, rises above the Exercise Price of the options. Further details of the options are contained in note 16 to the financial statements. Details of Directors’ appointment and retirement dates which occurred during the year are outlined below: There are no other executives of the company or consolidated entity. Name Position Date Appointed Date Retired Dr G M Folie A R Martin I K Macpherson B E Wauchope R E Vittino G Wheeler J denDryver Non-executive Chairman Executive Director / Director Exploration Non-executive Director Non-executive Director Executive Director / Chief Operating Officer / Company Secretary Non-executive Director Non-executive Director 30 November 2004 30 November 2004 30 November 2004 25 October 2004 30 November 2004 30 November 2004 30 November 2004 18 | HELIX RESOURCES LIMITED Director’s Report DIRECTORS’ AND EXECUTIVES’ SHARE OPTIONS In accordance with the provisions of the Employee Share Option Plan, executives and employees are entitled to subscribe for ordinary shares on the terms agreed to by the Shareholders at a meeting held on 10 November 2003 in respect of the 2009 options. At the date of this report directors and executives are entitled to purchase an aggregate of 3,450,000 ordinary shares of Helix Resources Limited according to the following terms: Directors and Executives Number of Executive Options Held Issuing Entity Exercise Price Expiry Date Number of ordinary shares under option Robert W Mosig 533,333 Helix Resources Limited Chairman 533,334 Helix Resources Limited 533,333 Helix Resources Limited 1,600,000 Anthony R Martin 316,668 Helix Resources Limited Exploration Manager 316,666 Helix Resources Limited 316,666 Helix Resources Limited $0.42 $0.46 $0.50 $0.42 $0.46 $0.50 29.03.2009 29.03.2009 29.03.2009 29.03.2009 29.03.2009 29.03.2009 Riccardo E Vittino Executive Director 950,000 300,001 300,000 299,999 900,000 Helix Resources Limited Helix Resources Limited Helix Resources Limited $0.42 $0.46 $0.50 29.03.2009 29.03.2009 29.03.2009 533,333 533,334 533,333 1,600,000 316,668 316,666 316,666 950,000 300,001 300,000 299,999 900,000 No options were granted as remuneration to directors or executives during the year. DIRECTORS’ SHAREHOLDINGS Director *Fully Paid *Listed Options Staff Options R W Mosig R E Vittino G J Wheeler J den Dryver Ordinary Shares 2,484,846 900,000 753,880 - 857,516 614,271 - - 1,600,000 900,000 - - 4,138,726 1,471,787 2,500,000 * Directors’ interests in ordinary shares and options of the parent entity are shown at the date of this Directors’ Report. OFFICERS’ INDEMNITY AND INSURANCE During the year the Company paid an insurance premium to insure the Directors and Officers of the Company and related bodies corporate. The Officers of the Company covered by the insurance policy include the Directors named in this report. The Directors’ and Officers’ Liability insurance provides cover against all costs and expenses that may be incurred in defending civil or criminal proceedings that fall within the scope of the indemnity and that may be brought against the officers in their capacity as officers of Annual Report 2005 | 19 Directors’ Report the Company or a related body corporate. The insurance policy does not contain details of the premium paid in respect of individual officers of the Company. Disclosure of the nature of the liability cover and the amount of the premium is subject to a confidentiality clause under the insurance policy. The Company has entered into an agreement with the Directors and Officers to indemnify them against any claim and related expenses, which arise as a result of work completed in their respective capacities. The Company has not otherwise, during or since the financial year indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. ENVIRONMENTAL REGULATIONS The Consolidated entity is subject to environmental regulations under laws of the Commonwealth and State. The Consolidated entity has a policy of complying with its environmental performance obligations and at the date of this report, is not aware of any breach of such regulations. MEETINGS OF DIRECTORS The number of meetings held during the year by Company Directors (including meetings of committees of Directors) and the number of those meetings attended by each Director was: Board of Directors’ Meetings Remuneration Committee Meetings Audit Committee Meetings Held* Attended Held* Attended Held Attended Dr G M Folie R W Mosig A R Martin I K Macpherson B E Wauchope R E Vittino G J Wheeler J den Dryver 4 7 5 5 5 3 3 3 4 7 5 5 5 3 3 3 1 1 - 1 1 1 1 1 1 1 - 1 1 1 1 1 - 1 - - - 1 1 1 - 1 - - - 1 1 1 * Reflects the number of meetings held during the time that the Director held office during the year. NON-AUDIT SERVICES The directors are satisfied that the provision of non-audit services, during the year, by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 as the nature of the services was limited to the review of the 1 July 2004 A-IFRS balance sheet and the review of the company’s 2004 tax returns. Details of amounts paid or payable to the auditor for non- audit services provided during the year by the auditor are outlined in note 24. AUDITOR’S INDEPENDENCE DECLARATION The auditor’s independence declaration is included on page 14 of the financial report. Dated at Perth this 5th day of September 2005. This report is made and signed in accordance with a resolution of Directors made pursuant to s.298(2) of the Corporations Act 2001. On behalf of the Directors Robert W Mosig Executive Chairman 20 | HELIX RESOURCES LIMITED Independence Decaration Annual Report 2005 | 21 Independent Audit Report 22 | HELIX RESOURCES LIMITED Independent Audit Report Annual Report 2005 | 23 Directors’ Declaration The Directors declare that: 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 Consolidated Entity; and The directors have been given the declarations required by s295A of the Corporations Act 2001. 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 Robert W Mosig Executive Chairman Signed at Perth this 5th day of September 2005. 24 | HELIX RESOURCES LIMITED Statement of Financial Position as at 30 June 2005 CONSOLIDATED COMPANY Note 2005 $ 2004 $ 2005 $ 2004 $ Current Assets Cash assets Receivables Other Total Current Assets Non-Current Assets Investments Property, plant & equipment Mineral interests Other Total Non-Current Assets Total Assets Current Liabilities Payables Provisions Total Current Liabilities Non Current Liabilities Provisions 2 3 4 3 5 6 4 7 8 8 1,635,873 1,634,457 1,635,871 1,634,455 78,088 306,410 156,058 284,222 78,088 306,410 156,058 284,222 2,020,371 2,074,737 2,020,369 2,074,735 890 171,250 163,391 223,725 1,815 171,250 164,316 223,725 11,201,564 10,425,408 11,201,564 10,425,408 149,242 136,779 149,242 136,779 11,522,946 10,949,303 11,523,871 10,950,228 13,543,317 13,024,040 13,544,240 13,024,963 214,856 67,375 159,252 59,313 214,856 67,375 159,252 59,313 282,231 218,565 282,231 218,565 10,538 212,516 10,538 212,516 Total Non Current Liabilities 10,538 212,516 10,538 212,516 Total Liabilities 292,769 431,081 292,769 431,081 Net Assets 13,250,548 12,592,959 13,251,471 12,593,882 Equity Contributed Equity Accumulated Losses 9 11 43,567,055 41,611,571 43,567,055 41,611,571 (30,316,507) (29,018,612) (30,315,584) (29,017,689) Total Equity 13,250,548 12,592,959 13,251,471 12,593,882 Notes to the financial statements are included on pages 28 to 46 Annual Report 2005 | 25 Statement of Financial Performance for the Financial Year Ended 30 June 2005 CONSOLIDATED COMPANY Note 2005 $ 2004 $ 2005 $ 2004 $ 12 12 Revenue from operating activities Proceeds from sale of investments Reversal of Directors’ Retirement Provision Write down of investments Depreciation Exploration and evaluation expenditure written off Legal Expenses and Professional Services Consultancy fees Public Relations expenses Travel and Accommodation expenses Rental expenses Employee benefits expense Directors’ Fees Written Down Value of Investments disposed 123,008 124,801 284,595 104,217 (54,501) (56,993) 1,928,351 - (111,000) (51,270) 123,008 284,595 104,217 (54,501) (56,993) 124,801 1,928,351 - (111,000) (51,270) (796,052) (4,533,390) (796,052) (4,533,390) (97,162) (3,426) (26,378) (30,871) (83,997) (300,626) (94,095) (141,015) (126,275) (74,438) (139,391) (47,217) (557,874) (112,646) (97,162) (3,426) (26,378) (30,871) (83,997) (300,626) (94,095) (141,015) (126,275) (74,438) (139,391) (47,217) (557,874) (112,646) (108,000) (749,852) (108,000) (749,852) Other expenses from ordinary activities (157,614) (177,792) (157,614) (177,792) Loss from ordinary activities before income tax Income tax expense relating to ordinary activities Net Loss Total Changes in Equity Other than those Resulting from Transactions with Owners as Owners Earnings / (Loss) per share Basic (cents per share) Diluted (cents per share) 11 18 20 20 (1,297,895) (4,769,008) (1,297,895) (4,769,008) - - - - (1,297,895) (4,769,008) (1,297,895) (4,769,008) (1,297,895) (4,769,008) (1,297,895) (4,769,008) (1.84) (1.84) (8.28) (8.28) Notes to the financial statements are included on pages 28 to 46 26 | HELIX RESOURCES LIMITED Statement of Cash Flows for the Financial Year Ended 30 June 2005 CONSOLIDATED COMPANY Note 2005 $ 2004 $ 2005 $ 2004 $ Cash Flow From Operating Activities Payments to suppliers and employees (762,687) (1,662,717) (762,324) (1,662,717) Interest received Other receipts 111,638 11,370 114,307 10,494 111,638 11,007 114,307 10,494 Net cash used in operating activities 2(b) (639,679) (1,537,916) (639,679) (1,537,916) Cash Flow From Investing Activities Payments for capitalised exploration & evaluation expenditure (1,552,208) (4,252,865) (1,552,208) (4,252,865) Payment for property, plant & equipment (5,465) (85,896) (5,465) (85,896) Proceeds from sale of property, plant & equipment Payments for shares – listed companies 363 - - (86,130) 363 - - (86,130) Proceeds from sale of shares 284,595 1,928,351 284,595 1,928,351 Payments for security deposits Proceeds from bills of exchange (21,674) (16,020) (21,674) (16,020) - 995,905 - 995,905 Net cash used in investing activities (1,294,389) (1,516,655) (1,294,389) (1,516,655) Cash Flow From Financing Activities Proceeds from issue of shares/options 2,053,997 2,311,366 2,053,997 2,311,366 Share issue costs paid (118,513) - (118,513) - Net cash provided by Financing Activities 1,935,484 2,311,366 1,935,484 2,311,366 Net increase/(decrease) in cash held 1,416 (743,205) 1,416 (743,205) Cash at beginning of financial year 1,634,457 2,377,662 1,634,455 2,377,660 Cash at End of Financial Year 2(a) 1,635,873 1,634,457 1,635,871 1,634,455 Notes to the financial statements are included on pages 28 to 46 Annual Report 2005 | 27 Notes to the Financial Statements for the Financial Year Ended 30 June 2005 1. SUMMARY OF ACCOUNTING POLICIES Financial Reporting Framework The financial report is a general-purpose financial report that has been prepared in accordance with the Corporations Act 2001, applicable Accounting Standards and Urgent Issues Group Consensus Views, and complies with other requirements of the law. The financial report has been prepared on the basis of historical cost and except where stated, does not take into account changing money values or current valuations of non-current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets. Significant Accounting Policies Accounting policies are selected and applied in a manner, which ensure that the resulting financial information satisfied the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. The following significant accounting policies have been adopted in the preparation and presentation of the financial report. a) Going Concern The Directors have prepared the financial statements on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and extinguishment of liabilities in the ordinary course of business. The Company’s operations require it to raise capital on an ongoing basis to fund its planned exploration program and to commercialise its tenement assets. If the Company does not raise further capital in the short term, it can continue as a going concern by reducing planned, but not committed exploration expenditure until funding is available and/or entering into joint venture arrangements. The Directors believe the going concern basis of accounting is appropriate as the Company has a successful track record in raising capital and believe they will be able to obtain further funding to commercialise the tenement assets in the form currently envisaged. Exploration expenditure has decreased on some projects during the financial year due to the Company entering into various joint ventures, where exploration is funded by the joint venture partner. Joint ventures are detailed in note 21. b) Principles of Consolidation The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the Consolidated entity, being the Company (the parent entity) and its controlled entities as defined in accounting standard AASB 1024 “Consolidated Accounts”. A list of controlled entities appears in note 3 to the financial statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements. The consolidated financial statements include the information and results of each controlled entity from the date on which the Company obtains control and until such time as the Company ceases to control such entity. In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the Consolidated entity are eliminated in full. c) Cash and Cash Equivalents Cash on hand and in banks and short term deposits are stated at nominal value. For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks, and money market investments readily convertible to cash within 90 days, net of outstanding bank overdrafts. d) Income Tax Tax-effect accounting principles are adopted whereby the income tax expense shown in the statement of financial performance is based on the pre-tax accounting profit adjusted for any permanent differences. Timing differences, which arise due to the different accounting periods in which items of revenue and expense are included in the determination of pre-tax accounting profit and taxable income, are brought to account as either a provision for deferred income tax, or an asset described as future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received, or the liability will become payable. The net future income tax benefit relating to tax losses and timing differences is not carried forward as an asset unless the benefit is virtually certain of being realised. 28 | HELIX RESOURCES LIMITED Notes to the Financial Statements for the Financial Year Ended 30 June 2005 e) Property, Plant and Equipment Property, plant and equipment is stated at cost and is depreciated at rates based upon their expected useful lives to the Consolidated entity. The carrying amount of property, plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. Expected net cash flows have not been discounted in determining recoverable amount. The depreciation rates used for each class of depreciable assets are: Plant and equipment Straight line Diminishing value 10% - 33% 20% - 40% Motor Vehicles Diminishing value 22.5% Mineral Interests, Exploration and Evaluation Expenditure Exploration and evaluation 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, which permits reasonable assessment of the existence of economically recoverable reserves. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. Any costs of site restoration are provided for during the relevant production stages and included in the costs of that stage. 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 and costs are written down to the extent they are not considered recoverable. Leases Lease payments for operating leases where substantially all the risks and benefits remain with the lessor are charged as expenses in the periods in which they are incurred. Investments Investments in controlled entities are held at cost. Other investments are valued at cost or recoverable amount. The carrying amount of investments is reviewed annually by Directors to ensure it is not in excess of the recoverable amount of these investments. The recoverable amount is assessed from the shares' current market value or the underlying net assets in the particular entities. Expected net cash flows have not been discounted in determining recoverable amounts. Employee Benefits Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably. Provision is made in respect of wages and salaries, annual leave and other 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. Provision made in respect of long service leave which is not expected to be settled within 12 months is measured as the present value of the estimated future cash outflows to be made by the consolidated entity in respect of services provided by the employees up to reporting date. g) h) i) j) Interest in Joint Venture Operations Interest in joint venture operations, where material, are brought to account by including in the respective classifications, the Consolidated entity's share of the individual assets employed and liabilities and expenses incurred. Details of interests in joint ventures are shown at Note 21. k) Revenue Recognition Revenue from the disposal of assets is recognised when the Consolidated entity has passed control of the goods or other assets to the buyer. Interest on bank deposits is recognised as income as it accrues. l) Accounts Payable Trade payables and other accounts payable are recognised when the Consolidated entity becomes obliged to make future payments resulting from the purchase of goods and services. m) Receivables Other receivables are recorded at amounts due less any specific provision for doubtful debts. Annual Report 2005 | 29 Notes to the Financial Statements for the Financial Year Ended 30 June 2005 n) Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of goods and services tax GST), except: 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. 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 statement of cash flows 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 as operating cash flows. o) Recoverable Amount of Non-Current Assets Non-current assets are written down to recoverable amount where the carrying value of any non-current asset exceeds recoverable amount. In determining the recoverable amount of non-current assets, the expected net cash flows have not been discounted to their present value. p) Reclassification Deposits with financial institutions of $227,686 at 30 June 2004 have been reclassified from ‘security deposits’ and disclosed as current assets as these deposits had a maturity date greater than 90 days but less than 1 year ( see note 4). 30 | HELIX RESOURCES LIMITED Notes to the Financial Statements for the Financial Year Ended 30 June 2005 NOTES TO THE STATEMENT OF CASHFLOWS 2. a) Reconciliation of Cash For the purposes of the statement of cashflows, cash includes cash on hand and in banks, and investments in money market instruments, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows CONSOLIDATED COMPANY 2005 $ 2004 $ 2005 $ 2004 $ Cash at Bank and on Deposit 1,635,873 1,634,457 1,635,871 1,634,455 b) Reconciliation of loss from ordinary activities after related income tax to net cash flows from operating activities Loss from Ordinary Activities after related income tax Non-cash flows in Operating Loss (1,297,895) (4,769,008) (1,297,895) (4,769,008) Depreciation 56,993 51,270 56,993 51,270 Exploration and evaluation expenditure written off 796,052 4,533,390 796,052 4,533,390 Write down of investments 54,501 (459,204) 54,501 (459,204) (Profit)/loss on sale of investments (176,595) (608,295) (176,595) (608,295) Loss on sale of property, plant and equipment 584 1,467 584 1,467 Changes in Net Assets and Liabilities (Increase)/Decrease in Assets (Increase)/decrease in other receivables 77,970 (130,288) 77,970 (130,288) Increase in prepayments (12,977) (3,114) (12,977) (3,114) Increase/(decrease) in Liabilities Increase/(Decrease) in trade payables 55,604 (11,129) 55,604 (11,129) Provisions employee entitlements (193,916) (143,005) (193,916) (143,005) Net Cash used in Operating Activities (639,679) 1,537,916) (639,679) (1,537,916) c) Non-cash Transactions JA Bunting & Associates was issued 100,000 shares at $0.20c per share as option payment over Loongana project. See note 9. Annual Report 2005 | 31 Notes to the Financial Statements for the Financial Year Ended 30 June 2005 3. RECEIVABLES & INVESTMENTS CONSOLIDATED COMPANY 2005 $ 2004 $ 2005 $ 2004 $ 78,088 78,088 156,058 156,058 78,088 78,088 156,058 156,058 Current Other Total Current Receivables Non-Current Shares in unlisted companies—at cost 890 55,391 Shares in controlled entities—-at cost (3a) Shares in companies listed on a stock exchange—at recoverable amount - - 890 925 55,391 925 - 108,000 - 108,000 Total Non-Current Receivables 890 163,391 1,815 164,316 Shares in companies listed on a prescribed stock exchange at market value - 108,000 - 108,000 3(a) Shares in controlled entities Name Country of Incorporation Hillview Mining NL Australia Helix Mining Investments P/L Australia Percentage Held 2005 Percentage Held 2004 100% 100% 100% 100% 4. OTHER ASSETS CONSOLIDATED COMPANY 2005 $ 2004 $ 2005 $ 2004 $ 69,513 236,897 306,410 149,242 149,242 56,536 227,686 284,222 136,779 136,779 69,513 56,536 236,897 227,686 306,410 284,222 149,242 149,242 136,779 136,779 Current Prepayments Deposits – Financial Institutions Total Other Assets— Current Non-Current Security Deposits Total Other Assets—Non Current 32 | HELIX RESOURCES LIMITED Notes to the Financial Statements for the Financial Year Ended 30 June 2005 5. PROPERTY, PLANT AND EQUIPMENT CONSOLIDATED AND COMPANY Motor Vehicles Plant & Equipment $ Gross Carrying Amount Balance at 30 June 2004 Additions Disposals Balance at 30 June 2005 Accumulated Depreciation Balance at 30 June 2004 Disposals Depreciation Balance at 30 June 2005 Net Book Value 30 June 2004 30 June 2005 432,485 5,465 (1,377) 436,573 233,812 (430) 51,356 284,738 198,673 151,835 $ 50,024 - - 50,024 24,972 - 5,637 30,609 25,052 19,415 Total $ 482,509 5,465 (1,377) 486,597 258,784 (430) 56,993 315,347 223,725 171,250 Aggregate depreciation has been allocated, whether recognised as an expense or capitalised as part of the carrying amount of other assets during the year. Plant and Equipment Motor Vehicles 6. MINERAL INTERESTS CONSOLIDATED COMPANY 2005 $ 2004 $ 2005 $ 2004 $ 51,356 5,637 56,993 44,516 6,754 51,270 51,356 5,637 56,993 44,516 6,754 51,270 CONSOLIDATED COMPANY 2005 $ 2004 $ 2005 $ 2004 $ Balance at beginning of the financial year 10,425,408 10,423,932 10,425,408 10,423,932 Expenditure incurred during the year 1,572,208 4,534,866 1,572,208 4,534,866 Expenditure written off during the year (796,052) (4,533,390) (796,052) (4,533,390) Balance at the end of the financial year 11,201,564 10,425,408 11,201,564 10,425,408 The Directors' assessment of recoverable amount was after: consideration of prevailing market conditions; previous expenditure carried out on the tenements; and the potential for mineralisation based on both the entity's and independent geological reports. The ultimate value of these assets is dependent upon recoupment by commercial development or the sale of the whole, or part, of the Consolidated entity's interests in those areas for an amount at least equal to the carrying value. There may exist, on the Consolidated entity’s exploration properties, areas subject to claim under native title or containing sacred sites or sites of significance to Aboriginal people. As a result, exploration properties or areas within the tenements may be subject to exploration and mining restrictions. Annual Report 2005 | 33 Notes to the Financial Statements for the Financial Year Ended 30 June 2005 CONSOLIDATED COMPANY 2005 $ 2004 $ 2005 $ 2004 $ 214,856 159,252 214,856 159,252 41,454 25,921 67,375 36,559 22,754 59,313 41,454 25,921 67,375 36,559 22,754 59,313 - 204,217 - 204,217 10,538 10,538 8,299 212,516 10,538 10,538 8,299 212,516 7. CURRENT PAYABLES Trade payables 8. PROVISIONS Current Provision for annual leave Provision for long service leave Non Current Provision for Non-Executive Directors’ retirement Provision for long service leave 9. CONTRIBUTED EQUITY 76,660,120 Fully Paid Ordinary Shares (2004: 62,866,808) 16,437,863 Listed Options (2004: 16,437,863) 43,409,956 41,454,472 43,409,956 41,454,472 157,099 157,099 157,099 157,099 Balance at end of financial year 43,567,055 41,611,571 43,567,055 41,611,571 34 | HELIX RESOURCES LIMITED Notes to the Financial Statements for the Financial Year Ended 30 June 2005 9. CONTRIBUTED EQUITY (cont’d) Fully Paid Ordinary Shares 2005 2004 No. $ No. $ Balance at beginning of financial year 62,866,808 41,454,472 50,525,458 38,889,600 Issue of shares to Anglogold as part consideration for purchase of Tunkillia project - - 1,250,000 250,000 Shareholder Purchase Plan and Placement 13,693,312 2,053,997 5,162,500 826,000 Share Issue Costs Issue of shares to JA Bunting & Associates as Option payment over Loongana Project Exercise of Options to Fully Paid Shares Share placement through Rights Issues Balance at end of financial year Listed Options - (118,513) 100,000 20,000 - - - - - - - - 424,681 112,830 5,504,169 1,376,042 76,660,120 43,409,956 62,866,808 41,454,472 . Balance at beginning of financial year 16,437,863 157,099 12,860,310 128,605 Issue of options to Anglogold as part consideration for purchase of Tunkillia project. Options issue through Rights Issue Exercise of Options to Fully Paid Shares - - - - - - 1,250,000 32,500 2,752,234 - (424,681) (4,006) Balance at end of financial year 16,437,863 157,099 16,437,863 157,099 Fully paid ordinary shares carry one vote per share and carry the right to dividends. Listed options carry no votes until converted to fully paid ordinary shares. 10. RESERVES Asset Revaluation Reserve Balance at beginning of financial year Transfer to accumulated losses balance of reserve relating to assets sold Balance at end of financial year CONSOLIDATED COMPANY 2005 $ 2004 $ 2005 $ 2004 $ - - - 190,606 (190,606) - - - - 490,606 (490,606) - The asset revaluation reserve arose on the revaluation of non-current assets. During the prior year the asset was sold and accordingly the portion of the asset revaluation reserve which related to that asset, was effectively realised, and transferred to accumulated losses. Annual Report 2005 | 35 Notes to the Financial Statements for the Financial Year Ended 30 June 2005 CONSOLIDATED COMPANY 2005 $ 2004 $ 2005 $ 2004 $ 11.ACCUMULATED LOSSES Balance at beginning of financial year Transfer from Asset Revaluation Reserve (29,018,612) (24,440,210) (29,017,689) (24,739,287) - 190,606 - 490,606 Net Loss attributable to members of the parent entity (1,297,895) (4,769,008) (1,297,895) (4,769,008) Balance at end of financial year (30,316,507) (29,018,612) (30,315,584) (29,017,689) 12. LOSS FROM ORDINARY ACTIVITIES Loss from ordinary activities before Income Tax includes the following items of revenue and expense: a) Operating Revenue Interest Revenue Other b) Non-Operating Revenue Proceeds from Sale of listed securities in Diamond Ventures NL Proceeds from sale of RAMA Mines shares C)- Expenses Depreciation of non-current assets: Property, plant and equipment Exploration and evaluation expenditure written off Operating lease rental expenses Minimum lease payments 111,638 11,370 123,008 107,208 177,387 284,595 56,993 796,052 83,997 114,307 10,494 124,801 111,638 11,370 123,008 114,307 10,494 124,801 1,928,351 - 1,928,351 51,270 4,533,390 47,217 107,208 177,387 284,595 56,993 796,052 83,997 1,928,351 - 1,928,351 51,270 4,533,390 47,217 13. SALE OF ASSETS Sales of assets in the ordinary course of business have given rise to the following profits / (losses): NET PROFITS / (LOSSES) Property, plant & equipment Investments 14. COMMITMENTS a) Operating Lease Commitments Not later than 1 year Later than 1 year but not later than 2 years (584) 176,595 176,011 (1,467) 1,178,499 1,177,032 (584) 176,595 176,011 (1,467) 1,178,499 1,177,032 65,000 27,083 92,083 129,420 64,710 194,130 65,000 27,083 92,083 129,420 64,710 194,130 The term of the Operating Lease in existence over the Company’s head office was for an initial period of two years. As at balance date there was a balance of seventeen months remaining. The Company has an option to renew the operating lease for a further period of two years. 36 | HELIX RESOURCES LIMITED Notes to the Financial Statements for the Financial Year Ended 30 June 2005 b) Exploration Expenditure Commitments In order to maintain current rights of tenure to exploration tenements, the company and consolidated entity are required to perform minimum exploration work to meet the requirements specified by various State governments. These obligations can be reduced by selective relinquishment of exploration tenure or application for expenditure exemptions. Due to the nature of the company and consolidated entity’s operations in exploring and evaluating areas of interest, it is very difficult to forecast the nature and amount of future expenditure. It is anticipated that expenditure commitments for the next twelve months will be tenement rentals of $105,891 (2004: $202,166) and exploration expenditure of $747,766 (2004: $1,941,520). DIRECTORS’ AND EXECUTIVES’ REMUNERATION 15. The specified Directors of Helix Resources Limited during the year were: • • • • • • • • R W Mosig (Chairman), Managing Director R E Vittino (Executive), appointed 30.11.04 – Company Secretary / Chief Operating Officer G Wheeler (Non-executive), appointed 25.10.04 J den Dryver (Non-executive), appointed 25.10.04 Dr G M Folie (Chairman), resigned 25.10.04 I K Macpherson (Non-executive), resigned 30.11.04 B E Wauchope (Non-executive), resigned 30.11.04 A R Martin (Executive), resigned 30.11.04 – Exploration Manager There were no specified executives during the year. The Company’s Executive Officers’ remuneration policy is set to ensure that remuneration packages properly reflect the duties and responsibilities of the senior executives and are sufficient to attract, retain and motivate personnel of the requisite quality. The policy is administered by the Remuneration Committee, which is composed of all board members. Remuneration packages are reviewed and determined with due regard to current market rates and are benchmarked against comparable industry salaries. The Executive Officers of the Company are employed under Service Agreements which have been in existence since May 1997. The Service Agreements are all identical in their contents and only differ in remuneration levels. They have a duration of twelve months and renew automatically unless terminated by either the Company by giving twelve months notice to the individual; or by the individual by giving six months notice to the Company. Non-executive Directors are remunerated by fees determined by the Board within the aggregate Directors’ fee pool limit of $150,000 approved by shareholders in April 1996. The pool limit is not at present fully utilised. In setting the fees, account is taken of the responsibilities inherent in the stewardship of the Company and the demands made of Directors in the discharge of their responsibilities. Advice is taken from independent consultancy sources to ensure remuneration accords with market practice 2004 Salary & Fees Primary Perfor- mance Based Payment $ - - (iii)56,250 (iii)35,625 - - 91,875 $ 40,125 11,223 230,308 131,981 30,094 27,094 470,825 127,154 127,154 (iii)33,750 33,750 Supera- nnuation Post Employment Pre- scribed Benefits Non Mone- tary $ $ $ Other Retire- ment Benefits $ Equity Options Total Other Bene- fits $ $ $ - - - - - - - - - - 1,110 12,000 10,519 - 3,000 26,629 12,000 12,000 - - - - - - - - - (i)156,933 - - - - - 156,933 - - (ii)53,228 (ii)26,614 - - 79,842 - - (ii)26,614 26,614 - - - - - - - - - 197,058 12,333 351,786 204,739 30,094 30,094 826,104 199,518 199,518 Directors E W J Tyler Dr G M Folie R W Mosig A R Martin I K Macpherson B E Wauchope Total Executives R E Vittino Total (i) Mr E W J Tyler received an Eligible Termination Payment of $156,933 upon his retirement on 16.4.04. Annual Report 2005 | 37 Notes to the Financial Statements for the Financial Year Ended 30 June 2005 (ii) Equity Options were issued to the Management Team comprising of Messrs R Mosig, A Martin and R Vittino after shareholder approval was received at the Company’s 2003 Annual General Meeting. The value attributed to the Equity Options were calculated using the Black Scholes Model based on the following input: Grant date share price Exercise price Exercise volatility Option life Dividend yield Risk-free interest rate Issued 11 November 2003 – 1st tranche $0.17 $0.42 82% 5.5 years - 5.136% Option Series Issued 11 November 2003 – 2nd tranche $0.17 $0.46 82% 5.5 years - 5.136% Issued 11 November 2003 – 3rd tranche $0.17 $0.50 82% 5.5 years - 5.136% No cash has been paid to the individuals. The value of the Options will only be realised if and when the market price of Helix shares, as quoted by the Australian Stock Exchange, rises above the Exercise Price of the options. Further details of the options are contained in note 16 to the financial statements. (iii) Messrs R Mosig, A Martin and R Vittino were granted a cash bonus during the year. The payments were made in recognition for achievements during the year and were not related to specific targets being met or formed part of employment contracts. Details of the payments are listed below: • • • Granted on 16 April 2004; The payments were cash and taxed accordingly; and The service and performance criteria used to determine the amount of the payments was reviewed by the remuneration committee of the Company and included the acquisition of remaining 50% interest in Gawler Craton JV from AngloGold for $1.5 million; the completion of a Scoping Study on Area 223 with the results showing an undiscounted pre-tax cash surplus of over $62 million before capital costs at an AUD$550 gold price; as well as Corporate achievements. 2005 Salary & Fees Directors R W Mosig R E Vittino G Wheeler J denDryver G M Folie I Macpherson B Wauchope A R Martin * Total $ 156,750 115,180 19,267 18,826 31,570 10,857 9,832 118,850 481,132 Primary Perfor- mance Based Payment $ - - - - - - - - - Non Monet- ary Post Employment Pre- scribed Benefits Supera- nnua- tion Other Retire- ment Benefits $ Equity Options Other Benefits Total $ $ $ $ $ $ - - - - - - - - - 12,000 12,000 - - 2,718 - 1,025 10,639 38,382 - - - - - - - - - - - - - - - - - - 27,156 13,578 - - - - - 13,578 54,312 - - - - - - - - - 195,906 140,758 19,267 18,826 34,288 10,857 10,857 143,067 573,826 * Mr Martin resigned as director on 30 November 2004 and was appointed as an executive for the period from 1 December 2004 to 30 June 2005. Remuneration during this period as executive was $72,936. 16. EXECUTIVE SHARE OPTION PLAN As at 30 June 2005 the Company had issued 3,450,000 share options (30 June 2004 3,450,000). Share options carry no rights to dividends and no voting rights. The difference between the total market value of options issued during the financial year, at the date of issue, and the total amount received from executives and employees is not recognised in the financial statements except for the purposes of determining directors’ and executives’ remuneration in respect of that financial year. The amounts are disclosed in remuneration in respect of the financial year in which the entitlement was earned. Further details are disclosed below: Executive Share Option Plan Balance at beginning of financial year (i) Cancelled during the financial year (ii) Granted during the financial year (iii) Exercised during the financial year (iv) Balance at end of financial year (v) 2005 No. 3,450,000 - - - 3,450,000 Weighted average exercise price $0.46 - - - $0.46 2004 No. 3,450,000 (2,200,000) 2,200,000 - 3,450,000 Weighted average exercise price $0.46 $1.00 $0.46 - $0.46 38 | HELIX RESOURCES LIMITED Notes to the Financial Statements for the Financial Year Ended 30 June 2005 Balance at beginning of financial year Options - Series No. Vested Unvested Grant Date Expiry Date Issued 26 May 1999 Issued 26 May 1999 Issued 26 May 1999 Issued 11 Nov 2003 Issued 11 Nov 2003 Issued 11 Nov 2003 416,665 416,667 416,668 733,335 733,333 733,332 3,450,000 416,665 416,667 416,668 733,335 - - - - - - 733,333 733,332 26/5/99 26/5/99 26/5/99 11/11/03 11/11/03 11/11/03 1,983,335 1,466,665 29/3/09 29/3/09 29/3/09 29/3/09 29/3/09 29/3/09 (ii) Cancelled during the financial year There were no options cancelled during the year ended 30 June 2005. Exercise Price $ $0.42 $0.46 $0.50 $0.42 $0.46 $0.50 Fair value at grant date Not valued Not valued Not valued 9.36c per option 8.84c per option 8.37c per option Options cancelled during the year ended 30 June 2004 were as follows: Options - Series No. Grant Date Expiry Date Issued 24 May 2001 Issued 24 May 2001 Issued 24 May 2001 733,335 733,333 733,332 2,200,000 24/5/01 24/5/01 24/5/01 14/5/05 14/5/05 14/5/05 Exercise Price $ $0.80 $1.00 $1.20 (iii) Granted during the financial year There were no options granted during the year ended 30 June 2005 Options granted during the year ended 30 June 2004 were as follows: Options - Series No. Grant Date Expiry Date First Tranche - Issued 11 Nov 2003 Second Tranche - Issued 11 Nov 2003 Third Tranche - Issued 11 Nov 2003 733,335 733,333 733,332 2,200,000 11/11/03 11/11/03 11/11/03 29/3/09 29/3/09 29/3/09 Exercise Price $0.42 $0.46 $0.50 Fair Value Received $ - - - (iv) Exercised during the financial year There were no options exercised during the financial years ended 30 June 2005 and 2004. (v) Balance at end of the financial year Options – Series No. Vested No. Un- vested No. Grant Date Expiry Date Issued 26 May 1999 Issued 26 May 1999 Issued 26 May 1999 First Tranche - Issued 11 Nov 2003 Second Tranche - Issued 11 Nov 2003 Third Tranche - Issued 11 Nov 2003 416,665 416,665 - 26/5/99 29/3/09 416,667 416,668 733,335 733,333 733,332 3,450,000 416,667 416,668 733,335 733,333 - 2,716,668 - - - - 733,332 733,332 26/5/99 26/5/99 11/11/03 11/11/03 11/11/03 29/3/09 29/3/09 29/3/09 29/3/09 29/3/09 Exer- cise Price $ $0.42 $0.46 $0.50 $0.42 $0.46 $0.50 Fair value at grant date Not valued Not valued Not valued 9.36c per option 8.84c per option 8.37c per option Fair value of consideration received is measured as the nominal value of cash receipts on conversion. The fair value of shares at the date of their issue is measured as the market value at close of trade on the date of their issue. Employee share options carry no rights to dividends and no voting rights. The options issued on 26 May 1999 which remain on issue at the end of the financial year ended 30 June 2004 are fully vested. Annual Report 2005 | 39 Notes to the Financial Statements for the Financial Year Ended 30 June 2005 In accordance with the Notice of Annual General Meeting 2003, options issued during the year ended 30 June 2004 vest at the following dates: • • • First tranche of options issued at $0.42 vest immediately. Second tranche of options issued at $0.46 vest 12 months from issue date. Third tranche of options issued at $0.50 vest 24 months from issue date. In accordance with the terms of the executive share option plan, options may be exercised at any time from the date the vesting period ends to the date of their expiry. The difference between the total market value of options issued during a financial year, at the date of issue, and the total amount received from executives and employees is not recognised in the financial statements except for the purposes of determining directors’ and executives’ remunerations in respect of that financial year as disclosed in note 15 to the financial statements. The amounts are disclosed in remuneration in respect of the financial years over which the entitlement was earned. Consideration received on the exercise of executive options is recognised in contributed equity. During the financial year no options were exercised, hence no amount was recognised in contributed equity arising from the exercise of executive options (2004: $nil) 17. RELATED PARTY AND DIRECTORS’ DISCLOSURES a) Other Transactions with Specified Directors The loss from ordinary activities before income tax includes the following items of expenses that resulted from transactions other than remuneration with specified directors or their personally-related entities. Transactions between related parties are on normal commercial terms and conditions unless otherwise stated. (i) During the year, Ord Partners provided professional services to the value of $16,166 (2004 $13,089) payable within 30 days from date of invoice (net of GST). Mr I K Macpherson, a Director, has significant influence in Ord Partners. Greg Wheeler Consulting Pty Ltd provided professional services to the value of $10,000 (2004 nil) payable within 30 days from date of invoice (net of GST). Mr Greg Wheeler, a Director, has significant influence in Greg Wheeler Consulting Pty Ltd. There were no balances outstanding at 30 June 2005 to either Mr I K Macpherson or Mr Greg Wheeler. b) Specified Directors’ Equity Holdings Fully paid ordinary shares issued by Helix Resources Limited Balance @ 1/7/04 Granted as remuneration No. No. Received on exercise of options No. Net other change Balance @ 30/6/05 Balance held nominally No. No. No. Specified Directors R W Mosig R E Vittino G Wheeler J den Dryver A R Martin I K Macpherson B Wauchope Total 2,484,846 442,500 - - 262,095 267,667 962,449 4,419,557 - - - - - - - - - - - - - - - - - 2,484,846 457,500 753,880 - - (267,667) (962,449) (18,736) 900,000 753,880 - 262,095 - - 4,400,821 - - - - - - - - It should be noted that Messrs Macpherson and Wauchope resigned on 30 November 2004 and therefore the balance of securities held as at 30 June 2005 is nil as they are no longer specified directors and therefore the net change of 1,230,116 is not as a result of the sale of any securities whilst a specified directors. 40 | HELIX RESOURCES LIMITED Notes to the Financial Statements for the Financial Year Ended 30 June 2005 Listed Share Options issued by Helix Resources Limited Bal @ 1/7/04 Granted as remuneration Exercised Other change Bal @ 30/6/05 Balance held nominally No. No. No. No. No. No. Specified Directors R W Mosig R E Vittino G.Wheeler J. den Dryver A R Martin I K Macpherson B Wauchope Total 857,516 614,271 - - 85,538 182,002 120,306 1,859,633 - - - - - - - - - - - - - - - - - - - - - (182,002) (120,306) (302,308) 857,516 614,271 - - 85,538 - - 1,557,325 - - - - - - - - It should be noted that Messrs Macpherson and Wauchope resigned on 30 November 2004 and therefore the balance of securities held as at 30 June 2005 is nil as they are no longer specified directors and therefore the net change of 302,308 is not as a result of the sale of any securities whilst a specified director. Executive Share Options issued by Helix Resources Limited Other change Bal @ 1/7/04 Exer- cised Granted as re- munerat ion Bal @ 30/6/05 Bal vested @ 30/6/05 No. No. No. No. No. No. Vested but not exer- cise- able No. Vested and exer- cisable Options vested during year No. No. Specified Directors R W Mosig R E Vittino G Wheeler J denDryver A R Martin Total 1,600,000 900,000 - - 950,000 3,450,000 - - - - - - - - - - - - - - - - - - 1,600,000 900,000 - - 950,000 1,233,334 716,667 - - 766,667 3,450,000 2,716,668 - - - - - - 1,233,334 716,667 - - 766,667 366,667 183,333 - - 183,333 2,716,668 733,333 Each executive share option converts into 1 ordinary share of Helix Resources Limited on exercise. No amounts are paid or payable by the recipient on receipt of the option. During the financial year, no executive share options were exercised by specified directors and executives. MR R.W. Mosig, Mr A.R. Martin and MR R.E. Vittino were issued options on 11 November 2003. The fair value of the options issued were as follows: Mr R.W. Mosig Messrs A R Martin & R E Vittino 366,667 options @ 9.36c (first tranche) 366,667 options @ 8.84c (second tranche) 366,667 options @ 8.37c (third tranche) 183,334 options @ 9.36c (first tranche) 183,334 options @ 8.84c (second tranche) 183,334 options @ 8.37c (third tranche) Further details of the options granted during the year are contained in note 15 and 16 to the financial statements. Annual Report 2005 | 41 Notes to the Financial Statements for the Financial Year Ended 30 June 2005 18. INCOME TAX CONSOLIDATED 2004 2005 COMPANY 2005 2004 Loss before income tax (1,297,895) (4,769,008) (1,297,895) (4,769,008) Income Tax Expense: Income tax expense/(benefit) calculated at 30% (389,369) (1,430,702) (389,369) (1,430,702) (Increase)/Decrease in income tax benefit due to: - non-deductible expenses - Share issue costs deductible 4,739 (7,111) 71,884 - 4,739 (7,111) 71,884 - Benefit of tax losses not brought to account as an asset 391,741 1,358,818 391,741 1,358,818 Income tax expense attributable to operating loss - - - - As of 30 June 2005, the parent entity and its controlled entities have future income tax benefits not brought to account as assets in relation to tax losses of the parent entity of $10,200,380 (2004: $9,996,914), Consolidated entity of $10,797,624 (2004: $10,627,104), available to offset against future year's taxable income. The benefit will only be obtained if: a) the Company and Consolidated entity derives future assessable income of a nature and of an amount sufficient to enable the benefits from the deductions for the losses to be realised; the Company and Consolidated entity continues to comply with the conditions for deductibility imposed by the law; and no changes in tax legislation adversely affect the companies in realising the benefit from the deductions for the losses. b) c) Legislation to allow groups, comprising a parent entity and its Australian resident wholly-owned entities, to elect to consolidate and be treated as a single entity for income tax purposes was substantively enacted on 21 October 2002. This legislation, which includes both mandatory and elective elements, is applicable to the company. At the date of this report the directors have not assessed the financial effect, if any, the legislation may have on the company and the consolidated entity and, accordingly, the directors have not made a decision whether or not to elect to be taxed as a single entity.The financial effect of the implementation of the tax consolidation system on the Company and Consolidated entity has not been recognised in the financial statements. 19. SEGMENT INFORMATION The Consolidated entity operated predominantly in one geographical segment and one business, being platinum, gold and other base metals exploration and development in Western Australia, South Australia and New South Wales. 20. EARNINGS PER SHARE Basic loss per share Diluted loss per share COMPANY 2005 Cents per share 2004 Cents per share (1.84) (1.84) (8.28) (8.28) The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Earnings / (Loss) (a) (1,297,895) (4,769,008) 2005 $ 2004 $ Weighted average number of ordinary shares (b) 70.613,737 62,866,808 (a) Earnings used in the calculation of basic earnings per share is net loss after tax of $1,297,895 (2004:$4,769,008) 2005 No 2004 No 42 | HELIX RESOURCES LIMITED Notes to the Financial Statements for the Financial Year Ended 30 June 2005 (b) The staff and listed options are considered to be potential ordinary shares and are therefore excluded from the weighted average number of shares used in the calculation of basic earnings per share. Where dilutive, potential ordinary shares are included in the calculation of diluted earnings per share (refer below). Diluted Loss per Share The earnings and weighted average number of ordinary and potential ordinary shares used in the calculation of diluted earnings per share are as follows: Earnings (a) (1,297,895) (4,769,008) 2005 $ 2004 $ Weighted average number of ordinary shares and potential ordinary shares (b) 12 months to 30 June 2005 No. 12 months to 30 June 2004 No. 70,613,737 62,866,808 (a) Earnings used in the calculation of diluted loss per share is net loss after tax of $1,297,895 (2004: $4,769,008). (b) The following potential ordinary shares 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: Staff options Listed options 2005 No. 3,450,000 16,437,863 2004 No. 3,450,000 16,437,863 INTEREST IN JOINT VENTURES 21. The parent entity has entered into the following unincorporated joint ventures: Joint Venture Project Percentage Interest Principal Exploration Activities Menzies Loongana Pilbara Diamonds Tunkillia Yalleen 38%(2004: 49%) Diluting (Heron Resources Limited 62%) Nickel 90%(2004: 90%) Diluting (J A Bunting & Associates Pty Ltd 10%) 100%(2004:100%) Diluting (DeBeers Australia Exploration Limited) 100% (2004: nil) Diluting (Mintoaur Exploration) 100% (2004: nil) Diluting (API Management Pty Ltd) Platinum Group Metals Diamonds Gold Iron Ore The joint ventures are not separate legal entities but are contractual arrangements between the participants for sharing costs and output and do not in themselves generate revenue and profit. Exploration expenditure is the only asset of the joint ventures. The consolidated entity’s interest in exploration expenditure in the above mentioned joint ventures is included in note 6 and at 30 June 2005 is $399,220 (2004 : $655,175). Annual Report 2005 | 43 Notes to the Financial Statements for the Financial Year Ended 30 June 2005 22. FINANCIAL INSTRUMENTS Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements. The Consolidated entity's exposure to interest rate risk and effective weighted average interest rate for classes of financial assets is set out below: Average Interest Rate 5.07% 5.17% Fixed Interest Rate $ - - 1,635,673 - 1,635,673 - - - - - 5.25% 5.00% - - 1,634,257 - 1,634,257 Floating Interest Rate Maturity Less than 1 year More than 1 Year $ - - - - - 236,897 236,897 149,242 149,242 - - - - - - - - - - - - 227,686 227,686 136,779 136,779 - - - - - - - - - Non Interest Bearing $ 41,699 890 200 - 42,789 214,856 77,913 292,769 34,539 163,391 200 - 198,130 159,252 271,829 431,081 Total $ 41,699 890 1,635,873 386,139 2,064,601 214,856 77,913 292,769 34,539 163,391 1,634,457 364,465 2,196,852 159,252 271,829 431,081 2005 Financial Assets Other Receivables Investments Cash assets Security deposits and deposits at financial institutions Financial Liabilities Trade Payables Employee Entitlements 2004 Financial Assets Other Receivables Investments Cash assets Security deposits and deposits at financial insitutions Financial Liabilities Trade Payables Employee Entitlements Other than those classes of assets and liabilities denoted as "listed" in note 4, none of the classes of financial assets and liabilities are readily traded on organised markets in standardised form. c) Credit Risk Credit Risk refers to the risk that counterparty will default on, its contractual obligations resulting in financial loss to the Consolidated entity. The Consolidated entity 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 Consolidated entity measures risk on a fair value basis. The maximum credit risk on financial assets of the Consolidated entity which have been recognised on the statement of financial position, other than investments in shares, is generally the carrying amount, net of any provisions for doubtful debts. d) Net Fair Value of Financial Assets and Liabilities The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities approximates their carrying value. The net fair value of financial assets and financial liabilities is based upon market prices where a market exists or by discounting the expected future cash flows by the current interest rates for assets and liabilities with similar risk profiles. Listed equity investments have been valued by reference to market prices prevailing at balance date. The market value of listed equity investments has been disclosed in Note 4 to the financial statements. For unlisted equity investments, the net fair value is an assessment by the Directors based on the underlying net assets, future maintainable earnings and any special circumstances pertaining to a particular investment. 44 | HELIX RESOURCES LIMITED Notes to the Financial Statements for the Financial Year Ended 30 June 2005 23. EMPLOYEE ENTITLEMENTS The aggregate employee entitlement liability recognized and included in the financial statements is as follows: Provision for employee entitlements: Current (Note 8) Non-Current (Note 8) Number of employees at end of finan- cial year 24. REMUNERATION OF AUDITORS a) Auditor of the Parent Entity Auditing the financial report Taxation services Other services – A-IFRS CONSOLIDATED COMPANY 2005 $ 2004 $ 2005 $ 2004 $ 67,375 10,538 77,913 59,313 212,516 271,829 67,375 10,538 77,913 59,313 212,516 271,829 No 8 2005 $ No 9 2004 $ No 8 2005 $ No 9 2004 $ 27,000 6,300 7,700 41,000 39,000 7,700 2,300 49,000 27,000 6,300 7,700 41,000 39,000 7,700 2,300 49,000 The auditor of Helix Resources Limited is Deloitte Touche Tohmatsu. 25. IMPACTS OF ADOPTING THE AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS The Australian Accounting Standards Board (AASB) has issued Australian equivalents to International Financial Reporting Standards (“A-IFRS”) for application to reporting periods beginning on or after 1 January 2005. Helix Resources Limited has commenced reviewing the transition from its current policies to A-IFRS. The adoption of A-IFRS will be first reflected in the financial statements for the half-year ending 31 December 2005 and the year ending 30 June 2006. Under AASB1 the Company and Consolidated Entity, in complying with A-IFRS for the first time is required to restate its comparative financial statements to amounts reflecting the application of A-IFRS to that comparative period. Most adjustments required on transition to A-IFRS will be made, retrospectively, against opening retained earnings as at 1 July 2004. At the date of this financial report, the Company and Consolidated Entity have substantially completed the assessment of accounting policy alternatives on transition to A-IFRS, and A-IFRS accounting policies that will be adopted from 1 July 2005. In addition, the Company and Consolidated Entity are in the process of completing its analysis of the likely impact on the results and financial position of the Company and Consolidated Entity. Key areas where accounting policies are likely to change and may impact on the financial statements of the Company and Consolidated Entity include the following: (a) Capitalisation of Exploration and Evaluation Costs AASB 6 Exploration for and Evaluation of Mineral Resources permits the area of interest method of accounting to continue for exploration and evaluation expenditure and thus AASB 6 should provide outcomes consistent with those under the existing standard AASB 1022 Accounting for the Extractive Industries in accounting for the initial recognition of exploration and evaluation assets. Annual Report 2005 | 45 Notes to the Financial Statements for the Financial Year Ended 30 June 2005 In addition, AASB 6 requires an annual assessment of impairment for exploration and evaluation assets using four indicators of impairment. These indicators are consistent with the initial recognition criteria of the existing standard and thus it is not expected that there will be a significant impact on results arising from the impairment testing requirements. (b) Income Tax In accordance with Australian Standard AASB 112 Income Taxes, deferred tax balances are determined using the balance sheet method which calculates temporary differences based on the carrying amounts of the Company’s and Consolidated Entity’s assets and liabilities in the statement of financial position and their associated tax bases. This represents a fundamental change to the way the Company and Consolidated Entity currently calculates its tax balances, where deferred tax balances are determined using the income statement method. The Company is currently evaluating the impacts of AASB 112 on the financial statements of the company and the consolidated entity. The Company and Consolidated Entity have carried forward tax losses which have not been recognised as deferred tax assets in the 30 June 2005 financial statements as they do not satisfy the ‘virtually certain’ criteria under current Australian GAAP. Although the Company’s evaluation of the impacts of AASB 112 is not complete, the Company believes that these losses will also not be recognised as deferred tax assets under A-IFRS because at this stage it is believed that they will not meet the ‘probable’ recognition criteria under A-IFRS. The Company and Consolidated Entity may also be required to recognised additional deferred tax liabilities on transition to A-IFRS, however the impacts, if any, is not yet determinable. (c) Provision for Rehabilitation and Restoration In accordance with Australian Standard AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the Company and Consolidated Entity will be required to fully provide, based on discounted future cash flows, for rehabilitation and restoration where there is a legal or constructive obligation. A corresponding asset, net of depreciation to the date of transition will be recognised and be depreciated together with development assets. The Company and Consolidated Entity will be required to recognise the unwinding of the discount in relation to the provision applied directly as an interest expense. As the Company performs restoration activity on a continuing basis, the impact of these changes are likely to be immaterial. (d) Share Based Payments Under Australian Standard AASB 2 Share-based Payment, the Company and Consolidated Entity will be required to determine the fair value of options issued to employees and recognise an expense in the Statement of Financial Performance. For options on issue on the application of AASB 2 an adjustment for their recognition will be made against opening retained earnings. The consolidated entity had 733,332 share options that were issued on 11 November 2003 and unvested as at 1 January 2005. As a consequence share based payment expense will increase by $30,690 (Consolidated Entity $30,690) for the year ended 30 June 2005 and be recognised as an employee equity – settled benefit reserve. The increase in the opening accumulated loss at 1 July 2004 in respect of years prior to fiscal 2005 will be $19,507. The Company and Consolidated Entity will not be recognising share options issued on 11 November 2003 and vested prior to 1 January 2005 as permitted by AASB1. Revenue (e) Although not impacting upon the profit of the Company and Consolidated Entity, the adoption of A-IFRS will result in a number of transactions being recorded on a “net” rather than “gross” basis. In addition the adoption of A-IFRS results in the reclassification of proceeds from the sale of non current assets from “revenue from ordinary activities” to “other income and expense” items in the statement of financial performance. As a consequence, proceeds from the sale of investments will decrease by $284,595 (Company $284,595) and the written down value of investments disposed will decrease by $108,000 (Company $108,000). The difference is a gain on sale of non current assets of $176,595 (Company $176,595) which will be recognized for the financial year ended 30 June 2005 as part of “other income”. This is a reclassification and will not impact upon the profit and loss of the Company and Consolidated Entity. Financial Instruments (f) The Company and Consolidated Entity have elected not to retrospectively apply AASB132 and 139. Accordingly there are no financial impacts on the financial statements in relation to these two standards as at 30 June 2005. Property, plant and equipment (g) On initial adoption of A-IFRS items of plant and equipment are measured at the A-IFRS cost. The directors have not elected to use fair value or revaluation as deemed cost to measure an item of property, plant and equipment. 26. ADDITIONAL COMPANY INFORMATION Helix Resources Limited is a listed public company, incorporated and operating in Australia. Registered Office 9 Richardson Street WEST PERTH WA 6005 Tel (08) 9321 2644 Principal Place of Business 9 Richardson Street WEST PERTH WA 6005 Tel (08) 9321 2644 46 | HELIX RESOURCES LIMITED Shareholding Information Analysis of Shareholders as at 5th September 2005 NUMBER OF SHARES HELD Spread of Holdings 1–1000 1,001–5,000 5,001–10,000 10,001–100,000 100,001and over Total Number of Share- holders Number of Shares 587 816 428 743 107 2,681 342,982 2,304,665 3,629,588 25,866,979 44,516,516 76,660,730 Number of shareholders holdingless than a marketable parcel 1,153 1,530,474 PERCENTAGE HELD BY 20 LARGEST SHAREHOLDERS 1 2 3 4 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Shareholder Yandal Investments Pty Ltd Cairnglen Investments Pty Ltd National Nominees Limited Invia Custodian Pty Ltd Colter Holdings Group AngloGold Australia Limited Niddrie Holdings Pty Limited ANZ Nominees Limited Zero Nominees Pty Ltd Blamco Trading Pty Ltd Nefco Nominees Pty Ltd Mr. Maxwell Alfred Kippe Equities Trustees Limited Mr. Abdelaziz Soliman Irrewarra Investments Pty Ltd Gee Vee Pty Ltd Mr. John Egan Yan’s Investments Pty Ltd Mr. John Halaska Mr. Philip Broadley Top 20 Total Shares 6,734,406 5,118,912 3,083,158 2,928,362 2,547,179 1,666,667 1,129,115 1,014,448 886,667 850,000 674,367 600,000 521,250 510,000 480,942 453,880 450,000 450,000 419,622 407,668 30,926,643 % 8.78 6.68 4.02 3.82 3.32 2.17 1.47 1.32 1.16 1.11 0.88 0.78 0.68 0.67 0.63 0.59 0.59 0.59 0.55 0.53 40.32 VOTING RIGHTS One vote for each ordinary share held in accordance with the Company's Constitution. SUBSTANTIAL SHAREHOLDERS Shareholder Cairnglen Investments Pty Ltd Yandal Investments Pty Ltd DIRECTORS' INTEREST IN SHARE CAPITAL DIRECTORS’ SHAREHOLDINGS Director R W Mosig R E Vittino G J Wheeler J den Dryver Shares 7,268,024 6,734,406 % of Issued Capital 9.48 8.78 Fully Paid Listed Options Staff Options Ordinary Shares 2,548,179 900,000 753,880 -- 4,202,059 857,516 614,271 -- -- 1,600,000 900,000 -- -- 1,471,787 2,500,000 Annual Report 2005 | 47 Shareholding Information Analysis of Optionholders as at 5th September 2005 NUMBER OF OPTIONS HELD Spread of Holdings Number of Option Holders Number of Options 1–1000 1,001–5,000 5,001–10,000 10,001–100,000 100,001and over TOTAL PERCENTAGE HELD BY 20 LARGEST OPTIONHOLDERS 234 261 101 156 36 788 110,296 679,091 762,573 4,807,768 10,078,135 16,437,883 Optionholder Options % AngloGold Australia Limited 1,287,281 1. 2. 3. 4. 5. 6. 7. 8. 9. Colter Holdings Group Mr Shaun Redmond City Corp Pty Ltd Zero Nominees Pty Ltd Mr. Abdelaziz Soliman Technica Pty Ltd Yandal Investments Pty Ltd Mr. John Halaska 10, Mr BJ Collins & Mrs SL Collins 11. Mr. Andrew Bruce Doak 12. Mr SM Baker 13. Mr CD Rose 14. 15. 16. Arco Four Investments Pty Ltd Truwest Pty Ltd ANZ Nominees Limited 17. Mr. Neil John Strong 18. 19. 20. Karalco Pty Ltd Invia Custodian Pty Ltd Jomot Pty Ltd Top 20 Total 857,182 600,000 600,000 599,800 510,000 484,703 411,470 330,417 300,000 300,000 254,259 250,000 250,000 236,168 232,927 230,000 217,500 210,000 202,963 7.83 5.21 3.65 3.65 3.65 3.10 2.95 2.50 2.01 1.82 1.82 1.55 1.52 1.52 1.44 1.42 1.40 1.32 1.28 1.23 8,161,707 50.87 The above listed options are due to expire on 30 November 2005 and are exercisable at $0.25 each. 48 | HELIX RESOURCES LIMITED Tenement Schedule as at 30th June 2005 Tenement Type and Number Name Mineral Ownership WESTERN AUSTRALIA ELA47/1144 ELA47/1145 ELA47/1146 EL09/644 ELA09/1079 MLA09/87 MLA09/88 PLA09/424 PLA09/425 PLA09/426 PLA09/427 EL38/1477 EL38/1478 ELA38/1807 ELA38/1808 EL69/1516 EL69/1517 EL69/1718 EL69/1719 EL69/1720 PL69/34 PL69/35 PL69/36 PL69/37 EL29/139* MLA29/214 EL29/139* MLA29/171 MLA29/173 MLA29/215 MLA29/216 MLA29/217 MLA29/218 MLA29/219 MLA29/220 MLA29/226 MLA29/227 Elvire Elvire Elvire Glenburgh Glenburgh Glenburgh Glenburgh Glenburgh Glenburgh Glenburgh Glenburgh Isolated Hill Isolated Hill Diamonds/Basemetals Helix Resources Limited 100% Diamonds/Basemetals DeBeers Australia Exploration earning 51% of Dia- Diamonds/Basemetals Helix Resources Limited 100% Gold Gold Gold Gold Gold Gold Gold Gold Gold, Nickel Gold, Nickel Helix Resources Limited 100% Lake Throssell Base Metals Helix Resources Limited 100% Loongana Loongana Loongana Loongana Loongana Loongana Loongana Loongana Loongana Menzies Menzies Menzies Menzies Menzies Menzies Menzies Menzies Menzies Menzies Menzies Menzies Menzies Gold, PGM, Base metals J A Bunting & Assoc Pty Ltd Gold, PGM, Base metals Joint Venture (Helix 90%) Gold, PGM, Base metals Inco (earning 51%) Gold, PGM, Base metals Gold, PGM, Base metals Gold, PGM, Base metals Gold, PGM, Base metals Gold, PGM, Base metals Gold, PGM, Base metals Menzies Nickel Joint Venture (*Heron Resources NL 62%, Helix 38% diluting) Helix Resources Limited 100% Nickel Nickel Gold Gold Gold Gold Gold Gold Gold Gold Gold Gold Gold Abbreviations and Definitions used in Schedule: EL ML PL Exploration Licence Mining Lease Prospecting Licence ELA MLA PLA Exploration Licence Application Mining Lease Application Prospecting Licence Application Annual Report 2005 | 49 Tenement Schedule as at 30th June 2005 Tenement Type and Number Name Mineral Ownership WESTERN AUSTRALIA EL38/1000 Mt Venn PGM, Nickel Helix 80% Kelray Resources NL 20% Helix Resources Limited 100% Helix Resources 100% West Pilbara Joint Venture Helix Resources Limited 100% DeBeers Australia Exploration Limited earning 51% ELA38/1476 ELA38/1775 ML47/123 ML47/124 ML47/125 ML47/126 ML47/141 ML47/142 ML47/143 ML47/144 MLA47/569 ELA47/1089 ELA47/1090 EL47/905 EL47/1015 EL47/1074 MLA47/693 MLA47/786 MLA47/787 MLA47/788 MLA47/789 MLA47/790 MLA47/791 MLA47/792 MLA47/793 MLA47/570 MLA47/571 MLA47/572 MLA47/573 MLA47/574 MLA47/639 MLA47/640 MLA47/641 MLA47/642 MLA47/643 Mt Venn Mt Venn Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni PGM PGM PGM PGM PGM PGM PGM PGM PGM Munni Munni South PGM Munni Munni South Diamonds Munni Munni South Diamonds Munni Munni South Diamonds Munni Munni South Diamonds Munni Munni South Diamonds Munni Munni South Diamonds Munni Munni South Diamonds Munni Munni South Diamonds Munni Munni South Diamonds Munni Munni South Diamonds Munni Munni South Diamonds Munni Munni South Diamonds Munni Munni South Diamonds Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Munni Diamonds Diamonds Diamonds Diamonds Diamonds Diamonds Diamonds Diamonds Diamonds Diamonds Abbreviations and Definitions used in Schedule: EL ML PL Exploration Licence Mining Lease Prospecting Licence ELA MLA PLA Exploration Licence Application Mining Lease Application Prospecting Licence Application 50 | HELIX RESOURCES LIMITED Tenement Schedule as at 30th June 2005 Tenement Type and Number Name Mineral Ownership WESTERN AUSTRALIA EL51/946 EL52/1495 EL52/1496 EL52/1623 EL52/1624 EL52/1625 EL52/1626 ELA47/1169 ELA47/1170 ELA47/1171 Narracoota Narracoota Narracoota Perry Creek Perry Creek Perry Creek Perry Creek Yalleen Yalleen Yalleen SOUTH AUSTRALIA ELA2005/20 EL2854 EL3335 NEW SOUTH WALES Lake Everard Lake Everard West Childarra J A Bunting & Assoc Pty Ltd Joint Venture (Helix 90%) Helix Resources Limited 100% Gold Gold Gold Base Metals Base Metals Base Metals Base Metals Pecious and Base Metals Helix Resources Limited 100%, Pecious and Base Metals API limited earning 51% (Iron ore) Pecious and Base Metals DBAE limited earning 51% (Diamonds) Helix Resources Limited 100% Minotaur Exploration earning 51% EL6228 Fifield Helix Resources Limited 100% Abbreviations and Definitions used in Schedule: EL ML PL Exploration Licence Mining Lease Prospecting Licence ELA MLA PLA Exploration Licence Application Mining Lease Application Prospecting Licence Application Annual Report 2005 | 51 Corporate Directory Directors Robert W Mosig Executive Chairman Riccardo E Vittino - Executive Director and Company Secretary Greg Wheeler Non Executive Director John den Dryver Non Executive Director Australian Business Number 27 009 138 738 Head and Registered Office 9 Richardson Street West Perth Western Australia 6005 PO Box 825 West Perth Western Australia 6872 Telephone: +61 8 9321 2644 Facsimilie: +61 8 9321 3909 Email: helix@helix.net.au Website: http://helix.net.au Share Registry Advanced Share Registry 110 Stirling Highway Nedlands Western Australia 6009 PO Box 1156 Nedlands Western Australia 6909 Telephone: +61 8 9389 8033 Facsimilie: +61 8 9389 7871 Auditor Deloitte Touche Tohmatsu Woodside Plaze Level 14, 240 St George’s Tce Perth Western Australia 6000 Telephone: +61 8 9365 7000 Facsimilie: +61 8 9365 7001 Stock Exchange The Company Securities are quoted on the Australian Stock Exchange Limited CODE: HLX and HLXOA 52 | HELIX RESOURCES LIMITED 

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