2010
ACN 130 955 725 ASX Code: HCH
CONTENTS
CORPORATE DIRECTORY
Chairman’s Letter
Project Background
Review of Operations
Tenement Schedule and Details
Corporate Governance Statement
Directors’ Report
Auditor’s Independence Declaration
Independent Audit Report to the Members
Directors’ Declaration
Statements of Comprehensive Income
Statements of Financial Position
Statements of Changes in Equity
Statements of Cash Flows
Notes to and Forming Part of the
Financial Statements
Information Required by the ASX
1
2
6
17
30
34
40
42
43
44
45
46
47
48
66
AGM TO BE HELD AT
D J Carmichael
Level 3 London House
216 St Georges Terrace
PERTH WA
2PM MONDAY 15 NOVEMBER 2010
DIRECTORS
SOLICITORS
Murray E Black (Chairman)
Christian E Easterday (Managing Director)
Bernard R Mountford (Resigned 19 July 2010)
Dr Allan Trench (Appointed 19 July 2010)
McKenzie Moncrieff Lawyers
Level 5, 37 St George’s Terrace
PERTH WA 6000
SHARE REGISTRY
Security Transfer Registrars Pty Ltd
770 Canning Highway
APPLECROSS WA 6153
Telephone: +61 8 9315 0933
Facsimile: +61 8 9315 2233
AUDITORS
RSM Bird Cameron Partners
8 St George’s Terrace
PERTH WA 6000
PRINCIPAL BANKER
Westpac Banking Corporation
Hannan Street
KALGOORLIE WA 6430
COMPANY SECRETARY
John E Sendziuk
PRINCIPAL PLACE OF BUSINESS:
PERTH
Suite 25, 784 Canning Hwy,
APPLECROSS WA 6153
Telephone: +61 8 9315 9009
Telephone: +61 8 9315 9005
Facsimile: +61 8 9315 5004
PO Box 1725,
APPLECROSS WA 6953
REGISTERED OFFICE:
KALGOORLIE
Corner Federal Road and Wilson Street
KALGOORLIE WA 6430
Telephone: +61 8 9021 3033
Facsimile: +61 8 9021 6995
Email:
Web:
ally@hotchili.net.au
www.hotchili.net.au
CHAIRMAN’S LETTER
Dear Shareholder
On behalf of the board of Hot Chili Limited
(Hot Chili or Company), I am pleased to
present the company’s first annual report
since successfully listing on the Australian
Securities Exchange (ASX) in early May.
The past year has been a busy and exciting
period for the company. During this time we have
secured a world-class exploration portfolio of large
and advanced uranium-copper-gold projects in
Chile and raised sufficient funds to undertake
substantial exploration programmes over each.
Our company is now well positioned and has
commenced significant work programmes that
aim to rapidly establish potentially large high-
value resources in one of the world’s premier
mining countries. Central to these plans are the
company’s two advanced projects Productora and
Los Mantos. The Productora project is rated by the
Chilean Commission for Nuclear Energy (CCHEN)
as Chile’s largest and most advanced uranium
project. Both projects contain operating copper
mines and both allow Hot Chili the opportunity to
move quickly towards resource definition.
In cooperation with local partners, CMP and
CODELCO, Hot Chili is establishing itself as one
of the first major uranium-copper-gold focused
explorers in Chile. Against a background of strong
commodity prices for each of the company’s
target commodities, and with Chile set to become
a uranium producing country later this year, Hot
Chili’s timing could not be better.
Having now established a local exploration team
and commenced maiden drilling activities at
Productora, the company is poised to materialise
the results of over two years of effort. I would like
to thank my fellow directors and the efforts of our
exploration team who have laid the foundations
for our success ahead. I would also like to thank
shareholders for their continuing support.
Murray Edward Black
HOT CHILI LIMITED ANNUAL REPORT 2010
1
PROJECT BACKGROUND
2
Following 2½ years of project generation
and negotiation hot chili has secured
majority interests in three of chile’s largest
and most advanced multi-commodity
uranium projects: productora, los mantos
and chile norte.
Hot Chili’s projects have the potential to host
major endowments of uranium, copper and gold
as well as molybdenum and rare earth minerals.
All projects lie in Chile’s coastal cordillera, one of
the world’s best iron-oxide-copper-gold (IOCG)
provinces hosting several significant deposits,
including Candelaria, Mantos Blancos, Manto
Verde and El Soldado.
All of Hot Chili’s projects are low altitude (<1,000m
elevation) and are close to major infrastructure.
Uranium is regulated under the Chilean mining
code and there are no regulatory encumbrances to
exploring or exploiting uranium in Chile, other than
the government’s right to purchase a proportion of
production at commercial market rate. The proportion
that the government will be able to preferentially
purchase has not been decided. However, this is
expected to be in the order of 20-25%.
Hard-rock, IOCG related uranium processing
technology is well established and proven at large-
scale in Olympic Dam, the world’s largest uranium
resource. IOCG uranium deposits are recognised
as a major source of future uranium resources
and CODELCO has announced it will commence
first commercial production of uranium through
its CODELCO North operations in September
2010. This is important as it will represent the first
commercial production of uranium from Chile.
Hot Chili has assembled a world-class exploration
team to advance these projects and ensure the
Company maintains a strong technical and
economic focus.
The Company has secured two key projects,
Productora and Los Mantos, which are at an
advanced exploration stage and have the potential
to quickly progress towards resource development.
The Company considers it has developed critical
local relationships in Chile and is well positioned
to take advantage of its established position and
pursue any potential future growth opportunities.
Through its negotiations, Hot Chili has partnered
with two of Chile’s largest local mining companies
CODELCO and CMP. CODELCO is the world’s
largest copper producer and CMP is Chile’s largest
iron ore producer. Importantly, CMP’s parent
company, CAP, became a 5% shareholder in Hot
Chili upon listing of the company on the ASX in
early May 2010.
During the year, Hot Chili commenced a
series of intensive exploration programmes
over its project portfolio, initially focussing on
the more advanced projects of Productora
and Los Mantos. The Company’s preliminary
aims involve delineating a significant uranium-
copper-gold resource base from its projects and
advancing these to a production decision.
LEFT:
Hot Chili’s Managing
Director Christian
Easterday and Senior
Geologist Tatiana Salazar
investigating drilling
chips, Productora
September 2010
FAR LEFT:
David Wilson and Team
on Productora ROM pad
HOT CHILI LIMITED ANNUAL REPORT 2010
3
PROJECT BACKGROUND (CONTINUED)
In order of level of advancement, the three
projects and their key features are:
PRODUCTORA
• Productora is Hot Chili’s flagship project and
has been identified by CCHEN as the largest
uranium project in Chile.
• Approximately 75% of the Target Mineralisation
of the Productora project land position is
currently secure through a combination of
Hot Chili’s own landholding interests, and
various five-year earn-in and purchase option
agreements. The Company plans to actively
pursue any potential future opportunities to
increase this project position.
• The project is at an advanced stage, with
an operating underground mine, significant
historical drilling and extensive supporting
geological work already undertaken.
• The Company estimates potential for a Target
Mineralisation of 50 – 165 million pounds of
U3O8, 0.6 – 1.5 million tonnes of copper and
0.5 – 1.2 million ounces of gold at the project.
•
for
Indicated grade
this Target
ranges
Mineralisation comprise 0.4 – 1.0 kg/t for
U3O8, 1.0 – 2.0% for copper and 0.3 – 0.5g/t
for gold.
• The identified footprint of the copper-uranium-
gold mineralised system at Productora is
6.1km in strike length and 2km in width.
LOS MANTOS
• Hot Chili has executed a five-year purchase
option agreement over the Los Mantos project.
• The project is at a moderately advanced
stage with an operating small-scale mine,
and extensive historical underground and
surface development. No drilling has been
undertaken over the project.
• The Company estimates potential for a Target
Mineralisation of 0.4 – 0.7 million tonnes of
copper, 3 – 26 million pounds of U3O8, and
0.1 – 0.4 million ounces of gold at the project.
•
this Target
ranges
Indicated grade
Mineralisation comprise 0.1 – 0.6 kg/t U3O8,
1.5 – 2.0% copper and 0.1 – 0.4g/t gold.
for
• Extensive zones of mineralisation are exposed
over 2km in strike length and 1km in width.
• The Company has recognised a zoned IOCG
system with uranium potential increasing
at depth.
4
CHILE NORTE
• Hot Chili has executed a five-year agreement
with CODELCO to earn an interest in a large
contiguous
the
Company’s own landholding in the project area.
land holding
that adjoins
• The project is at an early stage of advancement.
Historical exploration in the area included
investigations, minor
uranium exploration
drilling activity,
trenching and surface
geochemical assaying.
• Over 17km strike
length of uranium
anomalism has been identified in the area
from historical work. Further extensions of
this uranium anomalism are inferred by the
Company under cover along strike and in
analogous areas of project. Significant copper-
gold potential also exists within the project.
TARGET SIZE TARGET MINERALISATION
STATEMENT
the
identified
footprint
... is 6.1km
in strike
length and
2km in
width.
Exploration Target Size and Target Mineralisation
described in this annual report--- is conceptual in
nature and should not be construed as a JORC
compliant Mineral Resource. Target mineralisation
is based on projections of established grade
ranges over appropriate widths and strike lengths
having
for geological considerations
including mineralisation style, specific gravity and
expected mineralisation continuity as determined
by qualified geological assessment. There is
insufficient
to establish whether
further exploration will result in the determination
of a Mineral Resource.
information
regard
DISEQUILIBRIUM EXPLANATORY
STATEMENT
eU3O8 refers to the equivalent U3O8 grade. This
is estimated
from gross gamma down-hole
measurements corrected for water and drilling
mud in each hole. These results are provisional
upon the application of calibration correction
factors which are determined from geochemical
analysis. Geochemical analysis may show higher
or lower amounts of actual U3O8, the difference
being referred to as disequilibrium.
COMPETENT PERSON’S STATEMENT
Information in this report that relates to exploration results
or mineral resources is based on information compiled
by Mr Christian Easterday, a Director, who is a Member
of The Australian Institute of Geoscientists. Mr Easterday
has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration
and to the activity which he is undertaking to qualify as a
‘Competent Person’ as defined in the 2004 Edition of the
Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves’ (the JORC Code).
Mr Easterday consents to the inclusion in this report of
the statements based on his information in the form and
context in which they appear.
CHILE NORTE
PROJECT
PRODUCTORA
PROJECT
LOS MANTOS
PROJECT
LEFT:
Location of Hot
Chili’s projects
in Chile
FAR LEFT:
View across the
Productora project
HOT CHILI LIMITED ANNUAL REPORT 2010
5
undertaken in
two stages with
the first drill
hole of stage 1
commencing
on the 16th Aug
2010 at the
company’s
flagship
Productora
project
REVIEW OF OPERATIONS
1.0
SUMMARY OF OPERATIONS
In the months following Hot Chili’s successful listing
on the Australian Securities Exchange (ASX) on
the 3rd of May 2010, the company commenced a
series of intensive exploration work programmes to
prepare for the commencement of maiden drilling
programmes over the Productora and Los Mantos
projects. These programmes included detailed
mapping, rock-chip sampling, soil sampling,
data compilation and drilling programme design.
Importantly, the results of these work programmes
provided increased confidence in the potential of
the projects and higher-resolution on delineating
areas for immediate confirmatory drill targeting.
Following regulatory approval in late July 2010,
the company commenced drill platform clearing
at both Productora and Los Mantos to facilitate
a 26,000m RC drilling programme over the
two projects. The drilling programme is being
undertaken in two stages with the first drill hole
of stage 1 commencing on the 16th August 2010
at the company’s flagship Productora project.
Drilling operations and field technical support are
now fully established at Productora.
The Company has also made significant progress
with its generative exploration activities in Chile
including the recent completion of a major
helicopter based aeromagnetic and radiometric
programme over each of its three projects. This
investment in high-resolution data-set acquisition
will provide further assistance in the direct targeting
of future drill sites at each of Hot Chili’s projects.
2.0
PRODUCTORA PROJECT
The Productora project is located in Chile’s low-
altitude coastal range belt, 15km south of the
regional mining centre of Vallenar. Productora
is the most advanced of Hot Chili’s three Chilean
projects, containing an operating underground
rated by Chilean
copper-gold mine and
Commission for Nuclear Energy (CCHEN) as the
country’s largest identified uranium project. CMP,
Chile’s largest iron ore producer, is a major partner
in the project.
2.1
SOIL SAMPLING PROGRAMME
During the year, the company commenced a large
surface soil geochemistry programme at Productora.
A total of 1,520 multi-element soil samples were
collected at the project during the year.
Compilation of these initial surface radiometric
and geochemical soil sample results have
revealed significant zones of anomalous copper
and molybdenum showing close correlation with
the primary corridor of mineralisation as defined
by mapping and two primary IP chargeability
anomalies. Over the centre of the project, zones
of anomalous copper, molybdenum and uranium
in historical soil sample results undertaken by
CCHEN were repeated by Hot Chili’s programme.
2.2
ROCK-CHIP SAMPLING
PROGRAMME
A total of 332 rock-chip samples have been
collected at Productora during detailed litho-
structural mapping of the project during the
year. This sampling focussed on mineralised
material from surface exposures along the main
mineralised trend and returned several significant
results as outlined in the table below.
Results of this work indicate that wide zones of
copper mineralisation like that located at the
operating Productora underground copper-
gold mine and the abandoned St Innes mine
are structurally located. Zones of higher grade
uranium mineralisation are more discrete within
the NE-trending fault zones which define the
primary corridor of mineralisation. Importantly,
recent results provide Hot Chili with further
confidence of expected grade
for
mineralisation at Productora.
ranges
2.3
LITHO-STRUCTURAL MAPPING
Hot Chili’s consultant structural mapping team
commenced a detailed litho-structural mapping
campaign over the Productora project during the
year. Initial mapping concentrated on the main
mineralised corridor at Productora and has provided
a firm understanding of the nature and metallogenic
distribution of IOCG related mineralisation at the
project. Investigations of historical drill sites,
trenching and mine development areas has
provided further confirmation of the extent and
results of historical exploration activities already
undertaken over the project.
Further mapping is planned to extend coverage
along the entire 12km strike extent of the main
mineralised corridor at Productora as well as
reconnaissance mapping and investigations of
areas of interest associated with IP chargeability
anomalies in the western extent of the project.
6
RIGHT:
Hot Chili’s Director,
Roland Mountford
measuring
radioactivity at
Productora
FAR RIGHT:
Drilling at Productora,
September 2010
LEFT:
View over the
Productora mine
infrastructure and
openstopes
Selected Significant Surface Rock-Chip Sample Results from Productora
Sample ID
Easting
(m)
Northing
(m)
Copper
(%)
Uranium
(ppm)
Gold
(ppm)
Molybdenum
(ppm)
Cobalt
(ppm)
PD0017
PD0018
PD0021
PD0023
PD0024
PD0096
PD0100
PD0131
PD0136
PD0146
PD0147
PD0150
PD0228
PD0247
PD0254
323632
323632
323580
323631
323631
324495
323486
323783
324255
325161
325246
323626
323310
323164
322143
6822971
6822971
6822179
6822233
6822233
6825411
6824160
6822659
6822700
6828902
6828910
6822984
6820627
6820182
6821347
8.39
1.22
0.86
1.98
0.13
4.57
2.61
2.08
0.02
1.16
2.52
0.81
5.36
6.11
0.08
90
150
640
240
740
bd
520
274
4
298
802
651
22
17
499
0.3
0.4
1.2
0.2
0.0
3.8
0.1
1.3
15.9
0.2
0.9
0.2
1.7
4.7
0.0
265
455
789
432
66
46
451
135
14
4
3
894
6
99
44
10
205
5
5
3
407
691
15
2
56
104
117
128
10
83
Note: bd represents below detection limit
2.4
PRODUCTORA STAGE 1 DRILLING - CONFIRMATION OF URANIUM- COPPER
MINERALISATION
Drilling has commenced at the company’s Productora project with a first stage programme comprising approximately 9,000m being directed
towards several key areas of the project. The first stage of drilling is scheduled to be completed in late 2010.
Previous exploration for copper at Productora by Teck and General Minerals during the 1990’s recorded several significant drilling intercepts
including 112m grading 0.65% copper and 0.1g/t gold from 102m, and 44m grading 0.72% copper and 0.1g/t gold from 52m. Earlier
uranium focused exploration by CCHEN recorded uranium grades ranging between 0.3 - 1.0kg/t eU3O8, over widths of 2 to 15m over a
strike extent of approximately 2.4km along the same mineralised corridor. Hot Chili’s drilling at the project will be the first assessment of
all of the key commodities contained at Productora, principally uranium, copper and gold.
The second stage of drilling at Productora comprises approximately 7,000m and is designed to provide expanded drilling coverage to facilitate
preliminary resource estimations should stage 1 results prove successful. This second stage of drilling at Productora will commence early in
2011, subject to the results of the first stage drilling programme.
HOT CHILI LIMITED ANNUAL REPORT 2010
7
REVIEW OF OPERATIONS (CONTINUED)
PRODUCTORA SURFACE RADIOMETRIC SURVEY
(All Soil and Rock-Chip Data)
PRODUCTORA PROJECT SURFACE ROCK CHIP - URANIUM
Results and IP Chargeability Anomalies
CARMEN
PROSPECT
PRODUCTORA
MINE
SANTA INNES
MINE
HIGHWAY/
RAIL
Mineralised Corridor
Northern IP anomaly
Mineralised Corridor
Southern IP anomaly
LAND
POSITION
Gap in soil coverage
related to mine
infrastructure
FROM THE LEFT:
Cogging of chip trays
from Productora drilling
September 2010
RIGHT:
View looking north
across the Productora
mine area
FAR RIGHT:
Hot Chili’s Senior
Geologist Tatiana Salazar
investigating drill chips
8
PRODUCTORA PROJECT SURFACE ROCK CHIP - COPPER
Results and IP Chargeability Anomalies
PRODUCTORA PROJECT SURFACE ROCK CHIP - GOLD
Results and IP Chargeability Anomalies
HOT CHILI LIMITED ANNUAL REPORT 2010
9
sound
technical
platform...
to base the
company’s
forthcoming
drilling
REVIEW OF OPERATIONS (CONTINUED)
3.0
LOS MANTOS PROJECT
The Los Mantos project is located in Chile’s low-
altitude coastal range belt, 60km south of the
coastal city of La Serena and 15km west of the
large Andacollo copper-gold mine. The project
has seen significant small-scale historical surface
and underground mining activity but as yet has
not been drill tested. Under the terms of Hot
Chili’s five year purchase-option agreement,
the owners of Los Mantos have been granted a
concession to continue their small-scale surface
and underground copper mining activity limited to
a rate of 30,000 tonnes per annum.
3.1
SOIL SAMPLING PROGRAMME
During the year, 998 surface soil samples were
collected over the extent of the Los Mantos project
for multi-element analysis as well as radiometric
measurement. The soil sampling programme was
undertaken using 100m spaced sample lines with
site sampling every 25m over the main mineralised
corridor and every 50m outside of this corridor.
A total of 140 samples recorded results of
greater than 0.1% copper. In combination with
rock-chip sampling, the distribution of extensive
low grade copper results in non-mineralised
areas throughout the main zone has provided
encouragement for bulk tonnage copper potential
at Los Mantos.
Radiometric readings at each of the soil sample
sites show an increasing response from north to
south that correlates well with decreasing elevation.
3.2
ROCK-CHIP SAMPLING
AND LITHO-STRUCTURAL
MAPPING PROGRAMME
To date, a total of 206 rock-chip samples have
been collected at Los Mantos as part of detailed
litho-structural mapping campaigns by Hot Chili.
This sampling mainly focussed on mineralised
material from outcrop and exposures in surface
mining development areas along
the main
mineralised trends. This sampling was done in
combination with detailed litho-structural mapping
of the main deposit window at Los Mantos.
Results indicate that mantos style mineralisation
throughout the northern zone of the project
(dipping moderately towards the NE) comprises
mostly copper and gold. The southern zone of the
project exposes shear-vein hosted mineralisation
(dipping moderately toward the SW) which is
interpreted to lie at a lower structural level to that
of the northern zone of the project. In this area,
copper and gold mineralisation is also associated
with enrichments of uranium and molybdenum.
The average grade of rock chip sampling, mainly
over mineralised material in these zones, is
summarised in the table below.
Average Surface Rock-Chip Sample Results from Northern and Southern Zones at Los Mantos
Average Grade
Zone
Samples
Copper
(%)
Uranium
(ppm)
Gold
(ppm)
Molybde-
num
(ppm)
Cobalt
(ppm)
Mineralisation
Style
Northern
Southern
154
52
1.96
2.73
4
61
0.16
0.19
56
268
112
156
mantos
vein/shear
The results of detailed mapping, radiometric and geochemical soil and rock-chip sampling have
confirmed significant strike length, widths and grades of copper-gold mineralisation at the Los Mantos
project. This work has also indicated a zoned enrichment of both uranium and molybdenum in
copper-gold mineralisation at depth in the deposit. These results together with ongoing copper
mining from the project have provided a sound technical platform from which to base the company’s
forthcoming drilling programmes.
10
LOS MANTOS SURFACE RADIOMETRIC SURVEY
(All Soil and Rock-Chip Data)
LOS MANTOS PROJECT SURFACE LITHO-STRUCTURAL MAP
Mapping competed by Hot Chili to date
Sediments
Mantos
Mineralisation
Volcanics
NORTHERN
ZONE
SOUTHERN
ZONE
Land
Position
Shear-vein
Mineralisation
HIGHWAY/
RAIL
Granite
RIGHT:
Surface
development at
Los Mantos
HOT CHILI LIMITED ANNUAL REPORT 2010
11
REVIEW OF OPERATIONS (CONTINUED)
LOS MANTOS PROJECT SURFACE ROCK CHIP RESULTS
COPPER
LOS MANTOS PROJECT SURFACE ROCK CHIP RESULTS
GOLD
CARMEN
PROSPECT
12
LOS MANTOS PROJECT SURFACE ROCK CHIP RESULTS
URANIUM
LOS MANTOS PROJECT SURFACE ROCK CHIP RESULTS
MOLYBDENUM
FROM THE LEFT:
Copper mineralised
mantos zone at
Los Mantos
FAR LEFT:
Drilling chip trays
LEFT:
Managing Director
Christian Easterday and
Director Ronald Mountford
investigating surface
development
HOT CHILI LIMITED ANNUAL REPORT 2010
13
REVIEW OF OPERATIONS (CONTINUED)
Selected Significant Surface Rock-Chip Sample Results from Los Mantos
Sample
ID
Easting
Northing
Copper
(%)
Uranium
(ppm)
Gold
(ppm)
Molybdenum
(ppm)
Cobalt
(ppm)
Zone
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Southern
Northern
Northern
Northern
Northern
Northern
243
457
299
77
325
42
293
603
110
169
157
287
160
378
76
136
146
142
607
593
140
74
519
104
82
1,560
Northern
35
184
362
87
Northern
Northern
Northern
Northern
LM0046
LM0050
LM0051
LM0055
LM0077
LM0078
LM0085
LM0086
LM0088
LM0097
LM0103
LM0106
LM0109
LM0110
LM0113
LM0115
LM0131
LM0264
LM0270
LM0271
LM0124
LM0125
LM0201
LM0255
LM0257
LM0021
LM0027
LM0031
LM0033
LM0072
288903
6638596
288986
6638714
289089
6638707
1.26
3.35
9.44
288934
6638762
17.29
288839
6638536
288824
6638544
288891
6638553
288937
6638644
288930
6638674
288988
6638667
288979
6638745
288953
6638747
288888
6638762
288850
6638772
289033
6638735
289018
6638706
289090
6637900
288441
6638463
288630
6638746
288620
6638729
288630
6638823
288529
6638960
288959
6640151
288595
6639333
288528
6639384
288419
6639636
288474
6639357
288562
6639074
288436
6638816
288979
6638488
3.14
3.22
6.19
5.98
1.71
4.19
4.73
7.65
4.09
3.46
0.78
9.6
3.83
5.94
3.16
2.06
3.81
2.28
7.21
8.42
10.05
6.36
10.25
12.05
3.75
3.22
Note: bd represents below detection limit
40
70
710
60
106
49
11
95
57
48
81
266
44
32
108
450
126
101
45
38
29
7
7
9
10
bd
bd
10
10
17
0.3
0.3
0.4
1.0
0.8
0.2
0.3
0.2
0.1
0.3
0.4
0.4
0.2
0.4
0.1
0.3
0.2
0.6
0.4
0.7
1.1
0.9
0.1
0.8
1.3
0.4
1.5
2.1
1.2
0.5
412
653
2,230
222
244
40
141
162
158
44
239
237
274
280
24
6,630
13
11
8
11
92
49
344
471
621
751
5
3,390
26
203
14
major
flight-based
radiometric and
magnetics survey
primarily over
CODELCO’s land
position in the
project
3.3
LOS MANTOS STAGE 1 DRILLING
– HIGH-GRADE COPPER THE
INITIAL FOCUS OF DRILLING
Drill pad clearing and access preparation has
commenced and is already well advanced at
Los Mantos. Following the completion of stage 1
drilling at Productora, the drill rig will be mobilised
to the Los Mantos project where the company will
be completing an initial 3,000m of drilling.
The project has seen significant small-scale
historical surface and underground mining activity
for copper over a continuous 2km of strike extent.
Current mining operations at the project are limited
to 30,000 tonnes per annum under the terms of
Hot Chili’s purchase option agreement with ore
trucked to the nearby ENAMI treatment facility.
Surface mapping as well as soil and rock-
chip sampling by Hot Chili’s exploration team
has confirmed over 2.5km cumulative strike
length of mantos and vein-hosted copper-
gold mineralisation at surface. Similar to the
Productora project, Los Mantos displays a zoned
increasing uranium-
metal distribution with
molybdenum content at depth. Stage 1 drilling
will target multiple positions along the strike
extent of mineralisation at the project exploring for
uranium, copper, gold and molybdenum.
A further 7,000m is designed for the stage 2
drilling at Los Mantos. This drilling is designed to
allow for the calculation of a preliminary resource
should stage 1 results prove successful.
4.0
CHILE NORTE PROJECT
The Chile Norte project is located in Chile’s low-
altitude coastal range belt, approximately 50km
south of the coastal city of Iquique. Hot Chili has
assembled a substantial landholding in the area
and in addition the company has executed a
formal agreement with CODELCO to gain access
to a large contiguous tenement holding at Chile
Norte. Hot Chili is exploring to locate a large
iron-oxide-copper gold style target within the
Chile Norte project that may be associated with
significant at-surface, uranium evaporite style
mineralisation. Already ten uranium anomalies
have been identified in the area over two sections;
5km and 17.5km in extent, and CCHEN have
rated the project area as Chile’s second largest
identified uranium project after Productora.
4.1
PRELIMINARY EXPLORATION
PROGRAMME
Work undertaken over the Chile Norte project
during the year was limited to reconnaissance
mapping, regional structural interpretation and
the design of a major flight-based radiometric and
magnetics survey primarily over CODELCO’s land
position in the project.
In July 2009, Hot Chili engaged Jigsaw Geoscience
to conduct a field reconnaissance review of the
Chile Norte project. Field multi-element sampling
from this visit yielded the following results:
• Old uranium trenches yielded significantly
anomalous uranium (U) assays ranging from
40ppm U to 5710ppm U. Other anomalous
elements associated with uranium included
vanadium (V - 14ppm to 1310ppm) and
strontium (Sr – 71ppm to 3690 ppm).
• Salt crusts over fault zones on the western
splay of the Salar Grande fault system
returned anomalous uranium values varying
between 40ppm U to 320ppm U.
• Sulphur levels were generally elevated in most
samples (average assay of 3.16% S – almost
twice crustal abundance).
• Copper assays
from various prospecting
pits and inactive copper mines returned
anomalous copper assays (range: 0.37% Cu
to 5.48% Cu).
Exploration work undertaken by Hot Chili has
confirmed the presence of a strike extensive
zone of near-surface uranium mineralisation that
is interpreted to extend and be concealed under
shallow colluvial cover through Hot Chili’s land
positions. This work mainly comprised ground
truthing, confirmation sampling of trench material
and ground scintillometer readings.
zones associated with
Structural damage
restrictional jogs and fault intersections have
been identified as primary trap sites for the
concentration of uranium bearing fluids.
Several areas of significant copper-gold-cobalt
mineralisation are also identified within Hot Chili
and CODELCO’s land position that will warrant
follow-up exploration.
Hot Chili will await the results of the recently
completed airborne survey to plan the next phase
of on-ground exploration at the project.
HOT CHILI LIMITED ANNUAL REPORT 2010
15
REVIEW OF OPERATIONS (CONTINUED)
5.0
GEOPHYSICAL SURVEY
During July 2010, Hot Chili completed a
major helicopter based aeromagnetic and
radiometric survey at all three of its uranium-
copper-gold projects in Chile. The airborne
local Chilean
survey was conducted by
geophysical contractor GeoDatos SAIC. The
survey comprised a total of 644 line km’s over
the Productora project, 308 line km’s over the
Los Mantos project and 1,219 line km’s over
the Chile Norte project. A flight line spacing of
100m with a flight height of 50m was chosen in
order to maximise resolution of the survey and
enable the direct targeting of drill-sites.
The survey represents a significant investment
in the company’s projects and will provide a
high-resolution dataset to assist our exploration
team in interpreting the existing iron-oxide-
(IOCGU) systems, as
copper-gold-uranium
well as identifying new targets within our land
holdings.
Completion of data processing and delivery of
results from the airborne survey is expected in
late November 2010.
16
TENEMENT SCHEDULE AND DETAILS
1.0
PRODUCTORA TENEMENT
DETAILS
Outside of the Company’s own landholding,
hot chili has executed an agreement with four
parties (GBD, CMP, Del Campo and Coyigualles).
Importantly, these parties control over 75% of
the strike extent of defined mineralisation within
this land position including the central mining
lease of Productora which contains an operating
underground copper mine.
Hot Chili recently successfully acquired a
further four concessions along the southern
extension to the Productora project. The new
concessions extend the strike length of the
Productora Project by 2.5km, or 20 per cent,
providing further up-side to Hot Chili’s plans
to delineate and develop significant uranium-
copper-gold resources at the project.
Hot Chili has established close working relationships
with both government and private stakeholders, of
particular note is the major local partnership with
CMP (Chile’s largest iron ore producer).
An underground copper mine is in operation
within the central mining lease of the Productora
project. Under the terms of Hot Chili’s (SMEAL’s)
agreement with the owners of this mining
lease (Coyigualles agreement as summarised
in section 9.2(d) of the Prospectus) the lease
mining agreement will be allowed to continue
throughout SMEAL’s five year exploration
purchase option period with extraction limited to
1.3 million tonnes of ore, and mining terminated
with a 120 day notice period upon exercise of
the option at any time within the five year
exploration period. The lease mining company
will have 6 months from exercise of the option
agreement in which to remove all equipment.
The details of the tenement holding for the
Productora project are presented in the table
on the next page.
HOT CHILI LIMITED ANNUAL REPORT 2010
17
TENEMENT SCHEDULE AND DETAILS (CONTINUED)
Productora project tenement details
%
Holder*
Interest Licence Type
Mining
Patents**
2010-2011
USD (7)-(8)
Area
(ha)
Expenditure
Commitment-
Payments
Expiration
date of the
concession
(dd.mm.yyyy)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Mining
Exploitation
Mining
Exploitation
Mining
Exploitation
300
300
300
300
300
300
300
300
100
200
200
200
200
200
300
200
200
200
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
134.57
269.13
269.13
269.13
269.13
269.13
403.69
269.13
269.13
1345.62
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
200
1345.62
None
200
1345.62
None
SMEAL
100
SMEAL
100
SMEAL
100
Exploration
277
1345.62
None
SMEAL
100
Exploration
202
1345.62
None
Alga VI
SMEAL
100
ALGA VII
SMEAL
100
Mining
Exploitation
Mining
Exploitation
66
93
1345.62
None
1345.62
None
COYIGUALLES
(SLMP)
100
Mining
Exploitation
75
504.61
DEL CAMPO
(SLMB)
100
100
Mining
Exploitation
Mining
Exploitation
30
10
201.85
67.29
Payments of
US$100,000 pa
for 5 years and
US7,250,000
exercise payment
Payments of
US$50,000 pa
for 5 years and
US780,000
exercise payment
N/A
N/A
N/A
Licence
ID
FRAN 1
FRAN 2
FRAN 3
FRAN 4
FRAN 5
FRAN 6
FRAN 7
FRAN 8
FRAN 9
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
FRAN 10
SMEAL
FRAN 11
SMEAL
FRAN 12
SMEAL
FRAN 13
SMEAL
FRAN 14
SMEAL
FRAN 15
SMEAL
FRAN 16
SMEAL
FRAN 17
SMEAL
SMEAL
FRAN
12, 1/40
FRAN
13, 1/40
FRAN
14, 1/40
FRAN
18,
FRAN
21,
PRO-
DUC-
TORA
1/16
BUENA
SUERTE
1/6
PILAR
1/2
DEL CAMPO
(SLMPi)
18
12.03.2011
11.03.2011
16.03.2011
12.03.2011
11.03.2011
16.03.2011
12.03.2011
11.03.2011
16.03.2011
12.03.2011
11.03.2011
16.03.2011
12.03.2011
11.03.2011
14.04.2011
14.04.2011
29.04.2011
Being
processed
Being
processed
Being
processed
Being
processed
Being
processed
Being
processed
Being
processed
Comments
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Precedence Application
Precedence Application
Constituted, Romate
auction
Constituted Romate
auction
5 Year- 100% Purchase-
option Agreement executed
5 Year- 100% Purchase-
option Agreement executed
5 Year- 100% Purchase-
option Agreement executed
Licence
ID
CUENCA
A 1/51
CUENCA
B 1/28
CUENCA
C 1/51
CUENCA
D
CUENCA
E
CHOAPA
1/10
ELQUI
1/14
LIMARI
1/15
LOA
1/6
MAIPO
1/10
TOLTEN
1/14
CACHI-
YUYITO 1
CACHI-
YUYITO 2
CACHI-
YUYITO 3
ZAPA 1
1/10
ZAPA 3
1/23
ZAPA 5A
1/16
ZAPA 7
1/24
%
Holder*
Interest Licence Type
Mining
Patents**
2010-2011
USD (7)-(8)
Area
(ha)
Expenditure
Commitment-
Payments
Expiration
date of the
concession
(dd.mm.yyyy)
CMP
CMP
CMP
CMP
CMP
CMP
CMP
CMP
CMP
CMP
CMP
65
65
65
65
65
65
65
65
65
65
65
Mining
Exploitation
Mining
Exploitation
Mining
Exploitation
Mining
Exploitation
Mining
Exploitation
Mining Ex-
ploitation
Mining
Exploitation
Mining
Exploitation
Mining
Exploitation
Mining
Exploitation
Mining
Exploitation
255
1715.66
139
935.20
255
1715.66
3
1
50
61
66
30
50
70
20.19
6.73
336.41
410.42
444.06
201.85
336.41
470.97
CMP
65
Exploration
300
403.69
CMP
65
Exploration
300
403.69
,
0
0
0
,
0
0
5
$
S
U
2
r
Y
,
0
0
0
,
0
5
7
$
S
U
-
1
r
Y
(
s
r
a
e
y
5
r
e
v
o
0
0
0
0
0
0
4
$
S
U
,
,
f
o
t
n
e
m
t
i
m
m
o
C
e
r
u
t
i
d
n
e
p
x
E
0
0
0
,
0
0
1
$
S
U
f
o
i
t
n
e
m
y
a
P
e
s
c
r
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x
E
.
)
0
0
0
,
0
5
2
1
$
S
U
,
-
5
r
Y
,
,
0
0
0
0
0
0
1
$
S
U
,
-
4
r
Y
,
,
0
0
0
0
0
5
$
S
U
CMP
65
Exploration
300
403.69
l
a
t
o
T
-
3
r
Y
Comments
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
22.05.2010
5 Year- 65% JV Earn-in
option Agreement executed
23.05.2010
5 Year- 65% JV Earn-in
option Agreement executed
22.05.2010
5 Year- 65% JV Earn-in
option Agreement executed
GBD
GBD
GBD
GBD
65
65
65
65
Mining
Exploitation
Mining
Exploitation
Mining
Exploitation
Mining
Exploitation
100
672.81
92
80
618.99
538.25
120
807.37
Total Expenditure
Commitment of
US$500,000
over 5 years
(US$100,000
pa). Exercise
Payment-
US$100,000
N/A
N/A
N/A
N/A
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
5 Year- 65% JV Earn-in
option Agreement executed
20,904.35
Total Expenditure Commitment (5 Yrs)- US$5,100,000
Total Exercise Payment Commitment US$8,230,000
* Note: (1) GBD= Glenn Burns Dacre. (2) CMP= Compañía Minera del Pacífico. (3) SLMP= Sociedad Legal Minera La Productora 1 de la
Sierra Coyigualles. (4) SLMB= Sociedad Legal Minera Buena Suerte 1 de la Sierra Tamarico. (5) SLMPi= Sociedad Legal Minera Pilar 1 de la
Sierra Tamarindo. (6) SMEAL= Sociedad Minera El Águila Limitada. (7) In accordance with the observed dollar exchange rate published on
September 28th, 2009 (CH$544.66), by the Central Bank of Chile. (8) This amount is only referential. It is calculated by taking into account
a monetary unit known as UTM, which is established and readjusted on a monthly basis. Hence, it will depend on the UTM existing in March
2010.
** Note: (9) Mining Patents represent yearly rent and rate fees for mining rights in Chile. (10) Values may suffer variations according to the value of the
Monthly Tax Unit
HOT CHILI LIMITED ANNUAL REPORT 2010
19
TENEMENT SCHEDULE AND DETAILS (CONTINUED)
PRODUCTORA PROJECT TENEMENT LOCATION PLAN
20
2.0
LOS MANTOS TENEMENT DETAILS
The Los Mantos project comprises 9 licences in total, including 5 Mining Exploitations and 4 Exploration Licences. The Exploration Licences
have been constituted as a layer of protection and do not add to the landholding of the project, defined only by the 5 Mining Exploitation
Licences. The Mining Exploitation Licences cover approximately 264 ha.
Hot Chili, through its Chilean subsidiary company Sociedad Minera El Aguila (SMEAL, has entered into a five year option agreement for the
100% purchase of the Los Mantos project. The private purchase-option agreement with local Chilean landholder and mine operator Mr Aldo
Cordero Godoy was executed on the 11th of June 2009, with the payment of US$220,000. The right to purchase 100% of Los Mantos is
exercisable at any time within the five year option period following satisfaction of all remaining yearly option payments and an exercise payment
of US$2,000,000.
Mr Aldo Cordero Godoy will receive a 0.5% Gross Production Royalty on all marketable minerals produced from the project and a 30,000 tpa
mining concession during the five year option period.
Los Mantos project tenement details
Mining
Patents
2010-2011
US$ (2)-(3)
Expenditure
Commitment-
Payments
Expiration
date of the
concession
(dd.mm.yyyy)
Rosita 1 a 6
ACG
100
Licence
ID
Antonio 1
al 29
Espada 1 al
12
Alinderami-
ento y Otras
Ensueño 1
al 11
ILLAPEL 1-
(Andacollo)
ILLAPEL 2-
(Andacollo)
ILLAPEL 2-
(Ovalle)
ILLAPEL 3-
(Ovalle)
%
Holder*
Interest Licence Type
ACG
100
ACG
100
ACG
100
ACG
100
Mining
Exploitation
Mining
Exploitation
Mining
Exploitation
Mining
Exploitation
Mining
Exploitation
Area
(ha)
139
36
30
9
50
935.20
242.21
201.85
60.56
336.41
ACG
100
Exploration
200
269.13
ACG
100
Exploration
200
269.13
ACG
100
Exploration
200
269.13
ACG
100
Exploration
200
269.13
.
4
r
Y
n
i
,
0
0
0
0
0
1
$
S
U
d
n
a
3
2
1
r
Y
r
o
f
,
,
a
p
0
0
0
0
5
$
S
U
,
f
o
s
t
n
e
m
y
a
P
.
,
0
0
0
0
0
0
2
$
S
U
,
f
o
t
n
e
m
y
a
P
e
s
i
c
r
e
x
E
14.10.2011
15.10.2011
30.10.2011
30.10.2011
Comments
5 Year- 100% Purchase-option
Agreement executed
5 Year- 100% Purchase-option
Agreement executed
5 Year- 100% Purchase-option
Agreement executed
5 Year- 100% Purchase-option
Agreement executed
5 Year- 100% Purchase-option
Agreement executed
Floor of Protection licences only.
5 Year- 100% Purchase-option
Agreement executed
Floor of Protection licences only.
5 Year- 100% Purchase-option
Agreement executed
Floor of Protection licences only.
5 Year- 100% Purchase-option
Agreement executed
Floor of Protection licences only.
5 Year- 100% Purchase-option
Agreement executed
2,852.75
Total Payments Commitment (5 Yrs)- US$250,000
Total Exercise Payment Commitment US$2,000,000
*Note: (1) ACG= Aldo Cordero Godoy. (2) In accordance with the observed dollar exchange rate published on September 28th, 2009
(CH$544.66), by the Central Bank of Chile. (3) This amount is only referential. It is calculated by taking into account a monetary unit known as
UTM, which is established and readjusted on a monthly basis. Hence, it will depend on the UTM existing in March 2010.
HOT CHILI LIMITED ANNUAL REPORT 2010
21
TENEMENT SCHEDULE AND DETAILS (CONTINUED)
LOS MANTOS PROJECT TENEMENT PLAN
22
3.0
CHILE NORTE TENEMENT DETAILS
The Company’s tenements comprise 131 mining and exploration licences over areas considered to be highly prospective for the definition
of a large IOCGU deposit. Of these licenses, 94 have been approved and 37 are in the process of being approved (constituted). Hot Chili’s
exploration licences cover the northern and southern extensions of the identified uranium mineralisation in the area.
The Company executed an “Exploration and Promise to Incorporate” agreement with CODELCO on the 22nd of October, 2009.
Hot Chili intends to actively pursue future discussions in relation to gaining further land positions in the area.
Chile Norte project tenement details
Licence
ID
Holder*
%
Interest
Licence
Type
Area
(ha)
Mining
Patents
2010-2011
US$ (2)-(3)
Expenditure
Commitment-
Payments
Augita 4B
CODELCO
Quito 11
CODELCO
Quito 12
CODELCO
Quito 13
CODELCO
Quito 14
CODELCO
Quito 15
CODELCO
Quito 16
CODELCO
Quito 18
CODELCO
Quito 19
CODELCO
Quito 20
CODELCO
Quito 21
CODELCO
Quito 22
CODELCO
Quito 23
CODELCO
Quito 24
CODELCO
Quito 25
CODELCO
Quito 26
CODELCO
Quito 27
CODELCO
Quito 28
CODELCO
Quito 29
CODELCO
Quito 30
CODELCO
65
65
65
65
65
65
65
65
65
65
65
65
65
65
65
65
65
65
65
65
Exploration
400
538.25
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
-
4
r
Y
,
0
0
0
0
0
3
$
S
U
,
-
3
r
Y
,
,
0
0
0
0
0
3
$
S
U
2
r
Y
,
,
0
0
0
0
5
1
$
S
U
-
1
r
Y
(
s
r
a
e
y
5
r
e
v
o
0
0
0
0
0
0
2
$
S
U
,
,
f
o
t
n
e
m
t
i
m
m
o
C
e
r
u
t
i
d
n
e
p
x
E
Exploration
200
269.13
l
a
t
o
T
,
0
0
0
0
0
0
2
$
S
U
,
f
o
t
n
e
m
y
a
P
e
s
i
c
r
e
x
E
.
)
0
0
0
,
0
5
7
$
S
U
-
5
r
Y
,
0
0
0
,
0
0
5
$
S
U
Expiration
date of the
concession
(dd.mm.yyyy)
5/07/2010
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
Being
processed
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
Comments
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
HOT CHILI LIMITED ANNUAL REPORT 2010
23
TENEMENT SCHEDULE AND DETAILS (CONTINUED)
Chile Norte project tenement details (continued)
Licence
ID
Holder*
%
Interest
Licence
Type
Area
(ha)
Mining
Patents
2010-2011
US$ (2)-(3)
Expenditure
Commitment-
Payments
Quito 31
CODELCO
Quito 32
CODELCO
Quito 33
CODELCO
Quito 34
CODELCO
Quito 35
CODELCO
Quitos 35
CODELCO
Quito 36
CODELCO
Quito 37
CODELCO
65
65
65
65
65
65
65
65
Exploration
200
269.13
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
300
403.69
Exploration
200
269.13
Exploration
300
403.69
Quito 38
CODELCO 65
Exploration
300
403.69
Apir 1
CODELCO 65
Exploration
800
1,076.49
Apir 2
CODELCO 65
Exploration
1200
1,614.74
Apir 3
CODELCO 65
Exploration
600
807.37
Apir 4
CODELCO 65
Exploration
1200
1,614.74
Apir 5
CODELCO 65
Exploration
1000
1,345.62
Apir 6
CODELCO 65
Exploration
1200
1,614.74
Apir 7
CODELCO 65
Exploration
800
1,076.49
Apir 8
CODELCO 65
Exploration
600
807.37
Apir 9
CODELCO 65
Exploration
600
807.37
Apir 10
CODELCO 65
Exploration
100
134.57
Apir 11
CODELCO 65
Exploration
1000
1,345.62
Apir 12
CODELCO 65
Exploration
400
538.25
Apir 13
CODELCO 65
Exploration
1200
1,614.74
Apir 14
CODELCO 65
Exploration
1200
1,614.74
-
5
r
Y
,
0
0
0
,
0
0
5
$
S
U
-
4
r
Y
,
0
0
0
,
0
0
3
$
S
U
-
3
r
Y
,
,
0
0
0
0
0
3
$
S
U
2
r
Y
,
,
0
0
0
0
5
1
$
S
U
-
1
r
Y
(
s
r
a
e
y
5
r
e
v
o
0
0
0
0
0
0
2
$
S
U
,
,
f
o
t
n
e
m
t
i
m
m
o
C
e
r
u
t
i
d
n
e
p
x
E
Apir 15
CODELCO 65
Exploration
200
269.13
l
a
t
o
T
24
,
0
0
0
0
0
0
2
$
S
U
,
f
o
t
n
e
m
y
a
P
e
s
i
c
r
e
x
E
.
)
0
0
0
,
0
5
7
$
S
U
Expiration
date of the
concession
(dd.mm.yyyy)
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
Being processed
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
9/01/2011
Comments
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
5 Year- 65% JV Option
Agreement executed
Licence
ID
Holder*
%
Interest
Licence
Type
Area
(ha)
Mining
Patents
2010-2011
US$ (2)-(3)
Expenditure
Commitment-
Payments
Expiration
date of the
concession
(dd.mm.yyyy)
Comments
Apir 16
CODELCO 65
Exploration
600
807.37
Apir 17
CODELCO 65
Exploration
200
269.13
Apir 18
CODELCO 65
Exploration
200
269.13
Apir 19
CODELCO 65
Exploration
200
269.13
Apir 20
CODELCO 65
Exploration
20
269.13
,
0
0
0
,
0
5
1
$
S
U
-
1
r
Y
(
s
r
a
e
y
5
r
e
v
o
0
0
0
,
0
0
0
,
2
$
S
U
-
4
r
Y
,
0
0
0
,
0
0
3
$
S
U
-
3
r
Y
,
0
0
0
,
0
0
3
$
S
U
2
r
Y
i
e
s
c
r
e
x
E
.
)
0
0
0
,
0
5
7
$
S
U
-
5
r
Y
,
0
0
0
,
0
0
5
$
S
U
t
i
f
o
t
n
e
m
m
m
o
C
e
r
u
t
i
d
n
e
p
x
E
l
a
t
o
T
0
0
0
,
0
0
0
,
2
$
S
U
f
o
t
n
e
m
y
a
P
9/01/2011
5 Year- 65% JV Option
Agreement executed
9/01/2011
5 Year- 65% JV Option
Agreement executed
9/01/2011
5 Year- 65% JV Option
Agreement executed
9/01/2011
5 Year- 65% JV Option
Agreement executed
Being processed
5 Year- 65% JV Option
Agreement executed
ROLLY 1
ROLLY 2
ROLLY 3
ROLLY 4
ROLLY 5
ROLLY 6
ROLLY 7
ROLLY 8
ROLLY 9
ROLLY 10
ROLLY 11
ROLLY 12
ROLLY 13
ROLLY 14
ROLLY 15
ROLLY 16
ROLLY 17
ROLLY 18
ROLLY 19
ROLLY 20
ROLLY 21
ROLLY 22
ROLLY 23
ROLLY 24
ROLLY 25
ROLLY 26
ROLLY 27
ROLLY 28
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
300
300
300
300
300
300
300
300
200
200
300
300
300
300
200
300
200
200
200
200
300
300
300
300
300
300
300
300
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
269.13
269.13
403.69
403.69
403.69
403.69
269.13
403.69
269.13
269.13
269.13
269.13
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
HOT CHILI LIMITED ANNUAL REPORT 2010
25
TENEMENT SCHEDULE AND DETAILS (CONTINUED)
Chile Norte project tenement details (continued)
Holder*
%
Interest
Licence
Type
Area
(ha)
Mining
Patents
2010-2011
US$ (2)-(3)
Expenditure
Commitment-
Payments
Expiration
date of the
concession
(dd.mm.yyyy)
Comments
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
300
300
300
200
200
200
200
300
300
300
300
300
300
200
300
200
300
200
300
300
300
300
300
300
300
300
300
200
300
300
300
300
300
300
300
300
300
300
200
403.69
403.69
403.69
269.13
269.13
269.13
269.13
403.69
403.69
403.69
403.69
403.69
403.69
269.13
403.69
269.13
403.69
269.13
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
269.13
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
269.13
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
27.05.2011
Constituted
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
09.06.2011
Constituted
13.06.2011
Constituted
05.06.2011
Constituted
09.06.2011
Constituted
05.06.2011
Constituted
09.06.2011
Constituted
13.06.2011
Constituted
10.06.2011
Constituted
10.06.2011
Constituted
05.06.2011
Constituted
05.06.2011
Constituted
Licence
ID
ROLLY 29
ROLLY 30
ROLLY 31
ROLLY 32
ROLLY 33
ROLLY 34
ROLLY 35
ROLLY 36
ROLLY 37
ROLLY 38
ROLLY 39
ROLLY 40
ROLLY 41
ROLLY 42
ROLLY 43
ROLLY 44
ROLLY 45
ROLLY 46
ROLLY 47
CHRIS 1
CHRIS 2
CHRIS 3
CHRIS 4
CHRIS 5
CHRIS 6
CHRIS 7
CHRIS 8
CHRIS 9
MURRAY 1
MURRAY 2
MURRAY 3
MURRAY 4
MURRAY 5
MURRAY 6
MURRAY 7
MURRAY 8
MURRAY 9
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
MURRAY 10
RMU
MURRAY 11
RMU
26
Licence
ID
Holder*
%
Interest
Licence
Type
Area
(ha)
Mining
Patents
2010-2011
US$ (2)-(3)
Expenditure
Commitment-
Payments
Expiration
date of the
concession
(dd.mm.yyyy)
Comments
MURRAY 12
RMU
MURRAY 13
RMU
MURRAY 14
RMU
MURRAY 15
RMU
MURRAY 16
RMU
MURRAY 17
RMU
MURRAY 18
RMU
MURRAY 19
RMU
MURRAY 20
RMU
MURRAY 21
RMU
MURRAY 22
RMU
MURRAY 23
RMU
MURRAY 24
RMU
MURRAY 25
RMU
MURRAY 26
RMU
MURRAY 27
RMU
MURRAY 28
RMU
MURRAY 29
RMU
MURRAY 30
RMU
MURRAY 31
RMU
MURRAY 32
RMU
MURRAY 33
RMU
MURRAY 34
RMU
CHRIS 6
CHRIS 7
CHRIS 8
CHRIS 9
CHRIS 14
CHRIS 15
CHRIS 17
CHRIS 18
CHRIS 19
CHRIS 22
PAM 1
PAM 2
PAM 3
PAM 5
PAM 6
PAM 8
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
200
100
200
200
300
300
300
100
300
300
300
200
300
300
300
300
300
300
100
200
300
300
200
300
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
403.69
269.13
134.57
269.13
269.13
403.69
403.69
403.69
134.57
403.69
403.69
403.69
269.13
403.69
403.69
403.69
403.69
403.69
403.69
134.57
269.13
403.69
403.69
269.13
403.69
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
09.06.2011
Constituted
10.06.2011
Constituted
05.06.2011
Constituted
09.06.2011
Constituted
13.06.2011
Constituted
05.06.2011
Constituted
10.06.2011
Constituted
09.06.2011
Constituted
13.06.2011
Constituted
05.06.2011
Constituted
09.06.2011
Constituted
09.06.2011
Constituted
10.06.2011
Constituted
09.06.2011
Constituted
13.06.2011
Constituted
05.06.2011
Constituted
09.06.2011
Constituted
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
23.06.2011
Constituted
23.06.2011
Constituted
23.06.2011
Constituted
23.06.2011
Constituted
23.06.2011
Constituted
23.06.2011
Constituted
23.06.2011
Constituted
23.06.2011
Constituted
23.06.2011
Constituted
04.09.2011
Constituted
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
HOT CHILI LIMITED ANNUAL REPORT 2010
27
TENEMENT SCHEDULE AND DETAILS (CONTINUED)
Chile Norte project tenement details (continued)
Licence
ID
Holder*
%
Interest
Licence
Type
Area
(ha)
Mining
Patents
2010-2011
US$ (2)-(3)
Expenditure
Commitment-
Payments
Expiration
date of the
concession
(dd.mm.yyyy)
Comments
PAM 9
PAM 10
PAM 11
PAM 12
PAM 13
PAM 14
PAM 15
PAM 16
PAM 17
BRAVO 1
BRAVO 2
BRAVO 3
BRAVO 4
BRAVO 5
BRAVO 8
BRAVO 9
BRAVO 10
BRAVO 11
BRAVO 12
PAM 1
PAM 2
PAM 3
PAM 4
PAM 5
PAM 6
PAM 7
PAM 8
PAM 9
PAM 10
PAM 11
PAM 12
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
RMU
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
100
100
100
300
300
300
300
300
100
300
300
300
200
200
200
100
200
300
200
100
200
300
200
300
200
300
300
100
100
100
300
134.57
134.57
134.57
403.69
403.69
403.69
403.69
403.69
134.57
403.69
403.69
403.69
269.13
269.13
269.13
134.57
269.13
403.69
269.13
134.57
269.13
403.69
269.13
403.69
269.13
403.69
403.69
134.57
134.57
134.57
403.69
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
31.08.2011
Constituted
31.08.2011
Constituted
31.08.2011
Constituted
31.08.2011
Constituted
31.08.2011
Constituted
31.08.2011
Constituted
31.08.2011
Constituted
31.08.2011
Constituted
31.08.2011
Constituted
31.08.2011
Constituted
30.09.2011
Constituted
30.09.2011
Constituted
77,643.05
Total Expenditure Commitment (5 Yrs)- US$2,000,000
Total Exercise Payment Commitment US$2,000,000
Note: (1) CODELCO= Corporación Nacional del Cobre, acting through its subsidiary Compañía Minera Los Andes. (2) SMEAL = Sociedad
Minera El Águila Limitada. (3) RMU = Rodrigo Muñoz Urbina. (4) In accordance with the observed dollar exchange rate published on
September 28th, 2009 (CH$544.66), by the Central Bank of Chile. (5) This amount is only referential. It is calculated by taking into account
a monetary unit known as UTM, which is established and readjusted on a monthly basis. Hence, it will depend on the UTM existing in March
2010.
28
CHILE NORTE PROJECT REGIONAL STRUCTURAL SETTING AND TENEMENT MAP
HOT CHILI LIMITED ANNUAL REPORT 2010
29
CORPORATE GOVERNANCE STATEMENT
1.0
CORPORATE GOVERNANCE PROCEDURES AND POLICIES
1.1
THE BOARD
The Board is responsible for the overall corporate governance of the Company, and it recognises the need for the highest standards of
ethical behaviour and accountability. The Board is committed to administering its corporate governance structures to promote integrity and
responsible decision making.
1.2
BOARD CHARTER
The Board has adopted a board charter. Under the board charter, the Board is responsible for the overall operation and stewardship of the
Company and its subsidiaries and, in particular, is responsible for:
a) setting the strategic direction of the Company, establishing goals to ensure that these strategic objectives are met and monitoring the
performance of management against these goals and objectives;
b) ensuring there are adequate resources available to meet the Company’s objectives;
c) appointing the managing director and company secretary and chief financial officer of the Company;
d) evaluating the performance and determining the remuneration of senior executives, and ensuring that appropriate policies and procedures
are in place for recruitment, training, remuneration and succession planning;
e) approving and monitoring financial reporting and capital management;
f) approving and monitoring the progress of business objectives;
g) ensuring that any necessary statutory licences are held and compliance measures are maintained to ensure compliance with the law
and licences;
h) ensuring that adequate risk management procedures exist and are being used;
i) ensuring that the Company has appropriate corporate governance structures in place, including standards of ethical behaviour and a
culture of corporate and social responsibility;
j) ensuring that the Board is and remains appropriately skilled to meet the changing needs of the Company; and
k) ensuring procedures are in place for ensuring the Company’s compliance with the law.
1.3
CONFLICTS OF INTEREST
In accordance with the Corporations Act and the Constitution, Directors must keep the Board advised, on an ongoing basis, of any interest
that could potentially conflict with those of the Company. Where the Board believes a significant conflict exists, the Director concerned will not
receive the relevant papers and will not be present at the Board meeting whilst the matter is being considered.
1.4
INDEPENDENT PROFESSIONAL ADVICE
In fulfilling their duties, each Director dealing with corporate governance matters may obtain independent professional advice at the Company’s
expense, subject to prior approval of the Chairman, whose approval will not be unreasonably withheld.
1.5
CORPORATE GOVERNANCE POLICIES
The Board has adopted the corporate governance policies described below. Copies of the policies are available on the Company’s website at:
www.hotchili.net.au.
As the Company’s activities develop in size, nature and scope, the implementation of additional corporate governance policies will be given
further consideration.
30
1.6
CODE OF CONDUCT
The Board believes that the success of the Company has been and will continue to be enhanced by a strong ethical culture within the organisation.
The Company has established a corporate code of conduct (Code) which aims to develop a consistent understanding of, and approach to,
the desired standards of conduct and behaviour with which the Directors, officers, managers, employees and consultants of the Company are
expected to comply.
The Code sets out the Company’s policies on various matters, including the following:
a) conflicts;
b) fair dealing;
c) Company assets and property;
d) computer, email and internet use;
e) health, safety and environment;
f) employment practices; and
g) gifts and entertainment.
In addition to their obligations under the Corporations Act in relation to inside information, all Directors, employees and consultants have a duty
of confidentiality to the Company in relation to confidential information they possess.
The Code also outlines the procedure for reporting any breaches of the Code and the possible disciplinary action the Company may take in
respect of any breaches.
1.7
CONTINUOUS DISCLOSURE POLICY
Once listed, the Company will be a “disclosing entity” pursuant to section 111AR of the Corporations Act and, as such, will need to comply
with the continuous disclosure requirements of Chapter 3 of the ASX Listing Rules and section 674 of the Corporations Act. Subject to the
exceptions contained in the ASX Listing Rules, the Company will be required to disclose to ASX any information concerning the Company which
is not generally available and which a reasonable person would expect to have a material effect on the price or value of the Shares.
The Company is committed to observing its disclosure obligations under the Corporations Act and its obligations under the ASX Listing Rules.
All relevant information provided to ASX will be posted on the Company’s website.
The Company has adopted a continuous disclosure policy, the purpose of which is to:
a) ensure that the Company, as a minimum, complies with its continuous disclosure obligations under the Corporations Act and the ASX
Listing Rules and, as much as possible, seeks to achieve and exceed best practice;
b) provide Shareholders and the market with timely, direct and equal access to information issued by the Company; and
c) promote investor confidence in the integrity of the Company and its securities.
1.8
SECURITIES DEALING POLICY
The Company has in place a securities dealing policy which sets out the requirements for all Directors, executives, employees, contractors,
consultants and advisers of the Company dealing in the Company’s securities.
Directors and senior executives of the Company may not deal in the Company’s securities without first notifying the Managing Director and the
Company Secretary of the intention to trade. The Managing Director may not deal in the Company’s securities without prior approval of the
Chairman, and notifying the Company Secretary of the intention to trade. The Company Secretary must be subsequently notified of any trade
that has occurred.
HOT CHILI LIMITED ANNUAL REPORT 2010
31
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
1.9
SHAREHOLDER COMMUNICATION POLICY
The Company has adopted a shareholder communication policy which outlines the processes through which the Company will endeavour to
ensure timely and accurate information is provided equally to all Shareholders and the broader market.
The Company supports Shareholder participation in general meetings. Mechanisms for enabling Shareholder participation will be reviewed
regularly to encourage the highest level of Shareholder participation.
1.10
RISK MANAGEMENT POLICY
The Company has established a risk management policy, the purpose of which is to:
a) provide a framework for identifying, assessing, monitoring and managing risk;
b) communicate the roles and accountabilities of participants in the risk management system; and
c) highlight the status of risks to which the Company is exposed, including any material changes to the Company’s risk profile.
The Board is responsible for:
a) risk management and oversight of internal controls;
b) establishing procedures which provide assurance that business risks are identified, consistently assessed and adequately addressed; and
c) for the overseeing of such procedures.
d) the Board will review assessments of the effectiveness of risk management and internal compliance and control on an annual basis.
1.11
CORPORATE GOVERNANCE – EXCEPTIONS TO ASX RECOMMENDATIONS
The Company sets out below its “if not why not” report in relation to those matters of corporate governance where the Company’s practice departs
from the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (2nd edition) (Recommendations) to the
extent that they are currently applicable to the Company.
1.12
RECOMMENDATIONS 1.2 AND 2.5 (PROCESS FOR EVALUATION)
The Company does not have in place a formal process for evaluation of the Board, its committees, individual Directors and key executives.
The small size of the Board and the nature of the Company’s activities make the establishment of a formal performance evaluation strategy
unnecessary. Performance evaluation is a discretionary matter for consideration by the entire Board and in the normal course of events the
Board will review performance of the management, Directors and the Board as a whole.
1.13
RECOMMENDATION 2.1 (INDEPENDENT DIRECTORS)
At present, the Board does not comprise a majority of “independent directors”. There is one Director who satisfies the criteria for independence
as outlined in Recommendation 2.1. Dr Allan Trench holds no shares in the company and is not involved in the day-to-day management of
the company. However, given the size and scope of the Company’s operations, the Board considers that it has the relevant experience in the
exploration and mining industry and is appropriately structured to discharge its duties in a manner that is in the best interests of the Company
and its Shareholders from both a long-term strategic and operational perspective.
The Board intends to appoint further independent non-executive directors as suitably qualified candidates are identified, and the size and
scale of the Company’s operations determine.
1.14
RECOMMENDATION 2.2 (INDEPENDENT CHAIRMAN)
The Chairman of the Company, Mr Murray Black, is not an independent director in accordance with the criteria for independence as outlined
in Recommendation 2.1. However, given the size and scope of the Company’s operations, the Board considers that Mr Black has the relevant
experience in the exploration and mining industry and his appointment as Chairman is in the best interests of the Company and its Shareholders.
32
1.15
RECOMMENDATION 2.4 (NOMINATION COMMITTEE)
There is no nomination committee. The full Board, which comprises two (2) Non-Executive Directors and one (1) Executive Director, considers
the matters and issues that would fall to the nomination committee. The Board considers that, given the current size and scope of the
Company’s operations, no efficiencies or other benefits would be gained by establishing a separate nomination committee. The Board intends
to reconsider the requirement for, and benefits of, a separate nomination committee as the Company’s operations grow and evolve.
1.16
RECOMMENDATIONS 4.1, 4.2, 4.3 AND 4.4 (AUDIT COMMITTEE)
There is no audit committee. The role of the audit committee is undertaken by the full Board, which comprises two (2) Non-Executive Directors
and one (1) Executive Director. The Board considers that, given the current size and scope of the Company’s operations and that only one
(1) Director holds an executive position in the Company, no efficiencies or other benefits would be gained by establishing a separate audit
committee at present.
As the Company’s operations grow and evolve, the Board will reconsider the appropriateness of forming a separate audit committee.
1.17
RECOMMENDATION 8.1 (REMUNERATION COMMITTEE)
The Company has not established a separate remuneration committee and does not have a formal remuneration policy in place. The role of the
remuneration committee is undertaken by the full Board. The Board considers that, given its current size and that only one (1) Director holds
an executive position in the Company, no efficiencies or other benefits would be gained by establishing a separate remuneration committee.
As the Company’s operations grow and evolve, the Board will reconsider the appropriateness of forming a separate remuneration committee.
HOT CHILI LIMITED ANNUAL REPORT 2010
33
DIRECTORS’ REPORT
1.0
DIRECTORS’ REPORT
Your Directors have pleasure in presenting their report together with the financial statements of the consolidated entity (hereafter referred to as
the consolidated entity) for the year ended 30 June 2010 and the auditor’s report thereon.
1.1
DIRECTORS
The names of the Directors of Hot Chili Ltd during the financial year and to the date of this report are:
Murray E Black
Christian E Easterday
Bernard R Mountford
Dr Allan Trench
(Chairman)
(Executive Director)
(Non Executive Director - Resigned 19 July 2010)
(Non Executive Director - Appointed 19 July 2010)
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.
1.2
DIRECTORS INFORMATION
Murray Edward Black, Non-Executive Chairman
Mr Black has over 35 years’ experience in the mineral exploration and mining industry and has served as an executive director and chairman
for several listed Australian exploration and mining companies. He part-owns and manages a substantial private Australian drilling business,
has interests in several commercial developments and has significant experience in capital financing. In the past three years Mr Black has
been a director of Northwest Resources Ltd. ceasing on 5th August 2008.
Christian Ervin Easterday, Managing Director
Mr Easterday is a geologist with over 12 years’ experience in the mineral exploration and mining industry. He holds an Honours Degree in
Geology from the University of Western Australia, a Masters degree in Mineral Economics from Curtin University of Technology and a Masters
Degree in Business Administration from Curtin’s Graduate School of Business. Mr Easterday has held several senior positions and exploration
management roles with top-tier gold companies including Placer Dome, Hill 50 Gold and Harmony Gold, specialising in structural geology,
resource development and mineral economic valuation. For the past five years, Mr Easterday has been involved in various aspects of project
negotiation drawing together his commercial, financial and project valuation skills. This work has involved negotiations and valuations covering
gold, copper, uranium, iron ore, nickel, and tantalum resource projects in Australia and overseas. Mr Easterday is a Member of The Australian
Institute of Geoscientists.
Bernard R Mountford, Non-Executive Director (Resigned 19 July 2010)
Mr Bernard R Mountford is a geologist with over 35 years’ experience in the mineral exploration industry and has served as an executive
director for several listed Australian exploration and mining companies. His background spans a wide spectrum of commodities, with expertise
in gold, uranium and base metals. Mr Mountford has been the principal consultant for Hawkeye Resources Pty Ltd, a private geological
consultancy, since 1983. For the past three years he has led project generation and evaluation activities for Hot Chili, drawing on over 15 years’
exploration experience in the country. Mr Mountford is a Member of The Australian Institute of Mining and Metallurgy.
Dr Allan Trench, Non-Executive Director (Appointed 19 July 2010)
Dr Allan Trench is a geologist/geophysicist and business management consultant with over 20 years experience across a broad range of
commodities. His minerals sector experience spans strategy formulation, exploration, project development and mining operations. Allan
holds degrees in geology, a doctorate in geophysics, a Masters degree in Mineral Economics and a Masters degree in Business Administration.
He currently is an independent director of Venture Resources Ltd commencing on the 12th November 2008, Navigator Resources Ltd
commencing on the 14th November 2005 and Pioneer Resources Ltd on the 8th September 2003 commencing in 2003.
Allan has previously worked with McKinsey & Company as a management consultant, with Woodside Petroleum in strategy development and
with WMC both as a geophysicist and exploration manager. He is an Associate Consultant with international metals and mining advisory firm
CRU Group and has contributed to the development of that company’s uranium practice, having previously managed the CRU Group global
copper research team.
Allan maintains academic links as an Adjunct Professor to the Western Australian School of Mines, Curtin University of Technology.
Dr Allan Trench’s appointment adds considerable experience and expertise to Hot Chili’s board.
34
1.3
CORPORATE INFORMATION
Hot Chili Ltd is a Company limited by shares and is domiciled in Australia.
1.4
PRINCIPAL ACTIVITIES
During the year the consolidated entity was involved in mineral exploration.
1.5
RESULTS OF OPERATIONS
The results of the consolidated entity for the year ended 30th June 2010 was a loss of $3,182,794 ( 2009: loss $930,947).
1.6
DIVIDENDS
No dividends were paid or declared since the end of the previous year. The Directors do not recommend the payment of a dividend.
1.7
REVIEW OF OPERATIONS
See separate Operations Report pages 6 to 29..
1.8
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes to the state of affairs, subsequent to the end of the reporting period, other than what has been reported in
other parts of this report.
1.9
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
At the date of this report there are no other matters or circumstances which have arisen since 30 June 2010 that has significantly affected or
may significantly affect:
i)
the operations of the consolidated entity;
ii) the results of its operations; or
iii) the state of affairs of the consolidated entity subsequent to 30 June 2010.
1.10
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Further information on the likely developments in the operations of the consolidated entity and the expected results of operations
have been included in the review of operations.
1.11
SECURITY HOLDING INTERESTS OF DIRECTORS
Ordinary Shares
Options Over Ordinary Shares
Directors
Murray E Black
Bernard R Mountford (Resigned 19 July 2010)
Direct
Interest
Indirect
Interest
Direct
Interest
-
-
10,000,000
1,333,333
-
-
Christian E Easterday
200,000
10,000,000
100,000
Dr Allan Trench (Appointed 19 July 2010)
-
-
-
Indirect
Interest
6,750,000
1,000,000
6,750,000
-
HOT CHILI LIMITED ANNUAL REPORT 2010
35
DIRECTORS’ REPORT (CONTINUED)
1.12
SHARES UNDER OPTION
There were, 40,740,000 ordinary shares under option at 30th June 2010.
1.13
SHARES ISSUED ON THE EXERCISE OF OPTIONS
There were no Ordinary shares of Hot Chili Limited issued during the year ended 30 June 2010 on the exercise of options.
1.14
DIRECTORS BENEFITS
Since 30 June 2010 no Director of the consolidated entity has received or become entitled to receive a benefit (other than a benefit included
in the aggregate amount of emoluments received or due and receivable by Directors shown in the financial statements) by reason of a contract
made by the consolidated entity with the Director or with a firm of which he is a member, or with a company in which he has a substantial
financial interest.
1.15
J SENDZIUK (COMPANY SECRETARY)
John Sendziuk is a Chartered Accountant. He has been in practice for 23 years providing corporate secretarial, taxation and business advice to
a diverse group of business clients and public companies. Mr Sendziuk has been the Company Secretary of Hot Chili Ltd since 14 May 2010.
1.16
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During the financial year, the consolidated entity maintained an insurance policy which indemnifies the Directors and Officers of Hot Chili
Limited in respect of any liability incurred in connection with the performance of their duties as Directors or Officers of the consolidated entity.
The consolidated entity’s insurers have prohibited disclosure of the amount of the premium payable and the level of indemnification under the
insurance contract.
1.17
DIRECTORS’ MEETINGS
The number of directors’ meetings attended and number of written resolutions signed by each of the Directors of the Company during the
year were:
Director
Murray E Black
Bernard R Mountford (Resigned 19 July 2010)
Christian E Easterday
Dr Allan Trench (Appointed 19 July 2010)
1.18
ENVIRONMENTAL ISSUES
No. of Meetings
while in office
No. of Meetings
attended
6
6
6
-
6
4
6
-
The consolidated entity’s exploration and mining operations are subject to environment regulation under the law of Chile. The consolidated
entity holds exploration/mining tenements in Chile thus is subject to the Mining Acts of that country each with specific conditions relating to
environmental management. In some jurisdictions Cash Bonds must be lodged with the relevant Department until conditions are fulfilled.
There are no bonds currently in place in respect of the consolidated entity’s tenement holdings.
The Directors advise that during the year ended 30 June 2010, no claim has been made by any competent authority that any environmental
issues, condition of license or notice of intent has been breached, and no claim has been made for increase of bond.
The Directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which requires entities to report
annual greenhouse gas emissions and energy use. For the measurement period 1 July 2009 to 30th June 2010 the directors have assessed
that there are no current reporting requirements but may be required to do so in the future.
36
2.0
REMUNERATION REPORT
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
2.1
PRINCIPLES USED TO DETERMINE AMOUNT AND NATURE OF REMUNERATION
The objective of the consolidated entity’s executive reward framework is to ensure reward for performance is competitive and appropriate for
the results delivered. The Board ensures that executive reward satisfies the following key criteria for good reward governance practises:
• competitiveness and reasonableness
• acceptability to shareholders
•
transparency
The current base remuneration for Directors was last reviewed with effect from 23 March 2010. All director fees are periodically recommended
for approval by shareholders.
The consolidated entity’s policy regarding executives remuneration is that the executives are paid a commercial salary and benefits based on
the market rate and experience.
2.2
DETAILS OF REMUNERATION OF KEY MANAGEMENT PERSONNEL OF THE CONSOLIDATED ENTITY AND
REMUNERATION OF DIRECTORS
Details of the nature and amount of each element of remuneration of each Director of the consolidated entity for the financial year are as follows:-
Post
Employment
Share-based
Payments
Superannuation
$
Options
$
2010
Name
Short Term
Consulting Fees
Related Parties
$
Salary
$
Murray E Black
Bernard R Mountford
(Resigned 19 July 2010)
-
68,551
Christian E Easterday
215,110
Dr Allan Trench
(Appointed 19 July 2010)
-
283,661
-
-
-
-
-
Directors’
Fee
$
14,896
6,667
1,787
800
50,417
6,050
-
-
71,980
8,637
-
-
-
-
-
2009
Name
Short Term
Post
Employment
Share-based
Payments
Consulting Fees
Related Parties
$
Salary
$
Directors’
Fee
$
Superannuation
$
Options
$
Murray E Black
Bernard R Mountford
(Resigned 19 July 2010)
-
53,832
Christian E Easterday
79,183
Dr Allan Trench
(Appointed 19 July 2010)
-
133,015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
16,683
76,018
271,577
-
364,278
Total
$
-
53,832
79,183
-
133,015
HOT CHILI LIMITED ANNUAL REPORT 2010
37
DIRECTORS’ REPORT (CONTINUED)
2.3
REMUNERATION OF KEY MANAGEMENT PERSONNEL
2010
Name
Rodrigo Dias
(Manager Chile appointed 17 May 2010)
John Sendziuk
(Company Secretary appointed 14 May 2010)
2009
Name
Rodrigo Dias
(Manager Chile appointed 17 May 2010)
John Sendziuk
(Company Secretary appointed 14 May 2010)
Short Term
Consulting Fees
$
-
-
-
Salary
$
26,028
5,000
31,028
Post
Employment
Share-Based
Payments
Superannuation
$
Options
$
-
600
600
-
-
-
Total
$
26,028
5,600
31,628
Short Term
Post
Employment
Share-Based
Payments
Consulting Fees
$
Salary
$
Superannuation
$
Options
$
Total
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
There were no termination benefits paid during the year to any director or key management personnel.
There were no key management personnel employed by the company during the year for which disclosure of remuneration is required, apart
from the remuneration details disclosed above.
At the date of this report, the company had no employees that fulfilled the role of key management personnel, other than those disclosed above.
2.5
SERVICE CONTRACTS
The Company has entered into an executive service agreement with Mr Christian Easterday, as Managing Director of the Company.
Remuneration
Under the agreement, Mr Easterday will receive an annual salary of $220,000, plus superannuation at the rate of 12% and other entitlements.
Mr Easterday’s remuneration is subject to annual review.
Term and termination
Mr Easterday is employed for an initial term of 3 years, commencing on 5 April 2010 (End Date). At least 6 months’ before the End Date,
either party may give notice that the agreement will terminate on the End Date.
During the initial 3 year term, the Company may terminate the agreement by providing Mr Easterday with notice of termination or payment in
lieu of notice up to an amount equivalent to 6 months’ remuneration.
After the initial term, the agreement will continue until either Mr Easterday terminates by giving the Company 6 months’ notice, or the Company
terminates by giving Mr Easterday 6 months’ notice or payment in lieu of notice up to an amount equivalent to 6 months’ remuneration.
The Company may terminate the agreement summarily for any serious incidents of wrongdoing by Mr Easterday.
Termination entitlements
Upon termination of the agreement, Mr Easterday will be entitled to termination benefits in accordance with Part 2D.2 of the Corporations Act.
The termination benefits (including any amount of payment in lieu of notice) must not exceed the amount equal to one times the executive’s
average annual base salary in the last 3 years’ of service with the Company, unless the benefit has first been approved by Shareholders in a
general meeting.
38
Post termination restraints
Mr Easterday is subject to post termination non-competition restraints up to a maximum of 12 months from the date of termination.
2.6
OTHER INFORMATION
Director and executive remuneration contains no bonus cash or option components.
No directors have received loans from the consolidated entity.
The share price of the Company has fluctuated with the markets since the listing on 3rd May 2010 at 20 cents. The shares have reached a
high of 30 cents and a low of 17 cents.
2.7
SHARES UNDER OPTION
At the date of this report, there were 40,740,000 unissued ordinary shares under options.
2.8
OPTIONS LAPSED DURING THE YEAR
No options lapsed during the year.
2.9
PROCEEDINGS ON BEHALF OF COMPANY
No person has applied for leave of Court to bring proceedings on behalf of the consolidated entity or intervene in any proceedings to which the
consolidated entity is a party for the purpose of taking responsibility on behalf of the consolidated entity for all or any part of those proceedings.
The consolidated entity was not a party to any such proceedings during the year.
2.10
NON-AUDIT SERVICES
The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not
compromise the external auditor’s independence for the following reasons:
• all non-audit services are reviewed and approved by the directors prior to commencement to ensure they do not adversely affect the
integrity and objectivity of the auditor; and
•
the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES
110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.
Non audit services that have been provided by the entity’s auditor, RSM Bird Cameron Partners, have been disclosed in Note 14.
2.11
USE OF FUNDS
During the financial period ending 30th June 2010, the consolidated entity has used the cash that it had at time of admission to the Australian
Securities Exchange in a way consistent with its business objectives as stated in the prospectus.
2.12
AUDITORS INDEPENDENCE DECLARATION
The lead auditor’s independence declaration for the year ended 30 June 20 I 0 has been received and can be found on page 40 of annual report.
Dated this 24th day of September 2010 in accordance with a resolution of the Directors and signed for on behalf of the Board by:
Christian E Easterday, Managing Director
for and on behalf of the Company
24th September 2010
HOT CHILI LIMITED ANNUAL REPORT 2010
39
AUDITOR’S INDEPENDENCE DECLARATION
T
O B
E S
U
P
PLIE
D A
S P
D
F
40
INDEPENDENT AUDIT REPORT TO THE MEMBERS
HOT CHILI LIMITED ANNUAL REPORT 2010
41
INDEPENDENT AUDIT REPORT TO THE MEMBERS (CONTINUED)
42
DIRECTORS’ DECLARATION
In the opinion of the Directors of Hot Chili Ltd “the consolidated Entity”:
1. The financial statements and notes, as set out on pages 28 to 51, are in accordance with the Corporations Act 2001, including:
a) complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
b) giving a true and fair view of the financial position as at 30 June 2010 and of its performance for the year ended on that date of the
Company and the entities it controlled.
2. The Chief Executive Officer and Chief Finance Officer have each declared that:
a) the financial records of the consolidated entity for the financial year have been properly maintained in accordance with section 295A
of the Corporations Act 2001;
b) the financial statements and notes for the financial year comply with the Accounting Standards; and
c) the financial statements and notes for the financial year give a true and fair view.
3. In the Directors’ opinion, there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they
become due and payable.
4. The remuneration disclosures included in the audited Remuneration Report of the Directors’ Report for the year ended 30 June 2010,
comply with Section 300A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Board of Directors and signed for and on behalf of the board by:
Dated this 24th day of September 2010
Christian E Easterday, Managing Director
for and on behalf of the Company
24th September 2010
HOT CHILI LIMITED ANNUAL REPORT 2010
43
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2010
Interest income
Other income
Depreciation
Consulting fees
Exploration expenses
Corporate fees
Legal and professional
Employee benefits expense
Administration expenses
Accounting fees
Travel costs
Other expenses
Note
2
3
Consolidated Entity
2010
$
32,434
66,074
98,508
(4,587)
(537,190)
(250,821)
(84,590)
(563,579)
(113,159)
(52,858)
(23,416)
(212,478)
(84,259)
2009
$
137
-
137
-
-
(197,142)
-
(597,273)
-
-
(19,508)
(80,887)
(35,874)
Loss from continuing operations before income tax
(1,828,429)
(930,547)
Income tax expense
5
-
-
Loss after income tax
Other comprehensive income
(1,828,429)
(930,547)
-
-
Total comprehensive income attributable to Members of Hot Chili Limited
(1,828,429)
(930,547)
Basic earnings per share (cents)
Diluted earnings per share (cents)
13
13
(2.14)
(2.14)
(1.16)
(1.16)
The above Statements of Comprehensive Income should be read in conjunction with the accompanying notes.
44
STATEMENTS OF FINANCIAL POSITION
AS AT 30 JUNE 2010
Current Assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total Current Assets
Non-Current Assets
Property, plant and equipment
Exploration and evaluation expenditure
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Total Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Option reserve
Foreign currency translation reserve
Accumulated losses
Total Equity
Consolidated Entity
Note
2010
$
2009
$
6
7
8
9
6,607,586
55,430
173,017
461,502
8,473
-
6,836,033
469,975
167,874
1,829,495
-
388,628
1,997,369
8,833,402
388,628
858,603
10
99,093
105,528
99,093
105,528
99,093
8,734,309
105,528
753,075
11
11,419,755
1,682,400
12(b)
12(c)
12(a)
72,308
1,222
-
1,222
(2,758,976)
(930,547)
8,734,309
753,075
The above Statements of Financial Position should be read in conjunction with the accompanying notes
HOT CHILI LIMITED ANNUAL REPORT 2010
45
STATEMENTS OF CHANGES IN EQUITY
AS AT 30 JUNE 2010
Consolidated Entity
Balance at 1 July 2009
Loss for the year
Total Comprehensive Income for the year
Share options issued
Shares issued
Share issue costs
Contributed
Equity
$
1,682,400
-
-
10,642,105
(904,750)
Option
Reserve
$
-
-
-
72,308
-
-
Foreign
Currency
Reserve
$
Accumulated
Losses
$
Total
Equity
$
1,222
(930,547)
753,075
-
-
-
(1,828,429)
(1,828,429)
(1,828,429)
(1,828,429)
72,308
10,642,105
(904,750)
Balance at 30 June 2010
11,419,755
72,308
1,222
(2,758,976)
8,734,309
Balance at 1 July 2008
Loss for the year
Total Comprehensive Income for the year
Translation movements
Shares issued
Balance at 30 June 2009
-
-
-
-
1,682,400
1,682,400
-
-
-
-
-
-
-
-
-
-
-
(930,547)
(930,547)
(930,547)
(930,547)
1,222
-
-
-
1,222
1,682,400
1,222
(930,547)
753,075
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.
46
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2010
Cash Flows From Operating Activities
Payments to suppliers and employees
Interest received
Consolidated Entity
Note
2010
$
2009
$
(2,148,759)
(833,629)
32,434
137
Net cash (used in) operating activities
16(b)
(2,116,325)
(833,492)
Cash Flows From Investing Activities
Payments for property plant and equipment
Payments for mineral exploration areas
Net Cash (used in) investing activities
Cash Flows From Financing Activities
Proceeds from share issue
Share issue costs
(172,461)
(198,763)
-
(388,628)
(371,224)
(388,628)
9,400,000
1,682,400
(832,440)
-
Net cash provided by financing activities
8,567,560
1,682,400
Net increase (decrease) in cash held
6,080,011
460,280
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rates on cash holdings in foreign currencies
Cash and cash equivalents at the end of the financial year
461,502
66,073
-
1,222
1,222
16(a)
6,607,586
461,502
The above Statements of Cash Flows should be read on conjunction with the accompanying notes.
HOT CHILI LIMITED ANNUAL REPORT 2010
47
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
1.0
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the material accounting policies adopted by the consolidated entity in the preparation of the financial statement.
a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian equivalents to International Financial Reporting
Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations
and the Corporations Act 2001.
The financial report was authorised for issue on 24 September 2010 by the Board of Directors.
The functional and presentation currency of Hot Chili Limited is Australian Dollars.
Compliance with IFRSs
Australian Accounting Standards include AIFRS. Compliance with AIFRS ensures that the financial statements of Hot Chili Limited comply
with International Financial Reporting Standards (IFRSs).
New Accounting Standards and Interpretations
The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period
of initial application. They are available for early adoption at 30 June 2010, but have not been applied in preparing these financial statements.
i) AASB 2009-5 Further amendments to Australian Accounting Standards arising from the Annual Improvements Process affect various
AASBs resulting in minor changes for presentation, disclosure, recognition and measurement purposes. The amendments, which
become mandatory for the consolidated entity’s 31 December 2010 financial statements, are not expected to have a significant impact on
the financial statements.
ii) AASB 2009-8 Amendments to Australian Accounting Standards - Group Cash-settled Share-based Payment Transactions resolves diversity
in practice regarding the attribution of cash-settled share-based payments between different entities within a group. As a result of the
amendments AI 8 Scope of AASB 2 and AI 11 AASB 2 - Group and Treasury Share Transactions will be withdrawn from the application
date. The amendments, which become mandatory for the consolidated entity’s 31 December 2010 financial statements, are not expected
to have a significant impact on the financial statements.
Application should not affect any of the amounts recognised in the financial report, but may require additional levels of disclosures. The
company will adopt the new standard, together with its consequential changes, for the financial report dated 31 December 2010.
Initial application of AASB 8 Operating Segments and application of revised AASB 101 Presentation of Financial Statements have occurred
in the current period. AASB 8 has expanded the level of disclosures, based on the ‘management approach’ while AASB 101 has amended
aspects of the format of the primary statements. No initial application of any other issued and effective Australian Accounting Standard has
had any significant effect on the current period or any prior period. Furthermore, no other new Australian Accounting Standard, which has
been issued but is not yet effective, is expected to have any significant effect on a future reporting period.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale
financial assets.
Critical accounting estimates
The preparation of financial statements in conformity of AIFRS requires the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher degree of judgement
or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 24.
48
b) Principles of consolidation
The consolidated financial statements comprise the financial statements of Hot Chili Ltd and its controlled entities, Sociedad Minera El
Corazon Limitada, Sociedad Minera El Aguila Limitada and Sociedad Minera El Huerto Limitada Control exists where the consolidated entity
has the capacity to dominate the decision-making in relation to the financial and operating policies of another entity so that the other entity
operates with the consolidated entity to achieve the objectives of the consolidated entity. All inter-company balances and transactions between
entities in the consolidated entity, including any unrealised profits and losses have been eliminated on consolidation.
Non controlling interests in the results and equity of the consolidated entities are shown separately in the consolidated Statement of
Comprehensive Income and consolidated Statement of Financial Position respectively.
Where control of an entity is obtained during a financial year, its results are included in the consolidated Statement of Comprehensive Income
from the date on which control commences. Where control ceases, de-consolidation occurs from that date.
Investments in associates are accounted for in the consolidated financial statements using the equity method. Under this method, the
consolidated entity’s share of the post-acquisition profits or losses of associates is recognised in the consolidated Statement of Comprehensive
Income, and its share of post-acquisition movements in reserves is recognised in consolidated reserves. The cumulative post-acquisition
movements are adjusted against the cost of the investment. Associates are those entities over which the consolidated entity exercises
significant influence, but not control. Investments in subsidiaries are recognised at cost less impairment losses.
c) Income tax
The consolidated entity adopts the liability method of tax-effect accounting whereby the income tax expense is based on the profit adjusted
for any non-assessable or disallowed items.
Deferred tax is accounted for using the statement of financial position liability method in respect of temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the
initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax
is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is
adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible
temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will
occur in income taxation legislation and the anticipation that the consolidated entity will derive sufficient future assessable income to enable
the benefit to be realised and comply with the conditions of deductibility imposed by the law.
Hot Chili Limited and its wholly-owned Chilean subsidiaries have not formed an income tax consolidated group under the Tax
Consolidation Regime.
d) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade
allowances and amounts collected on behalf of third parties. Revenue is recognised for major business activities as follows:
i)
Interest Income
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.
ii) Other Services
Other debtors are recognised at the amount receivable and are due for settlement within 30 days from the end of the month in which services
were provided.
HOT CHILI LIMITED ANNUAL REPORT 2010
49
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010 (CONTINUED)
1.0
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
e) 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 economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against operating results in the year in which the decision to abandon
the area is made.
When production commences the accumulated costs for the relevant area of interest are amortised over the life of the project area according
to the rate of depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that
area of interest.
f) Property, plant and equipment
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the consolidated entity and the cost of the item can be measured reliably. All
other repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which they are incurred.
Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.
Plant and equipment
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these
assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets’ employment
and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.
Depreciation
The depreciable amount of all plant and equipment is depreciated on a diminishing value over their useful lives to the consolidated entity
commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Plant and Equipment
Depreciation Rate
10-30%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in
the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to
retained earnings.
g) Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which
are unpaid, together with assets ordered before the end of the financial year. The amounts are unsecured and are usually paid within 30 days
of recognition.
50
h) Equity-based payments
Equity-based compensation benefits can be provided to directors and executives.
The fair value of options granted to directors and executives is recognised as an employee benefit expense with a corresponding increase
in contributed equity. The fair value is measured at grant date and recognised over the period during which the directors and/or executives
becomes unconditionally entitled to the options.
The fair value at grant date is independently determined using an option pricing model that takes into account the exercise price, the term of
the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and
expected price volatility of the underlying share, the expected divided yield and the risk-free interest rate for the term of the option.
i) Earnings per share
i) Basic earnings per share
Basic earnings per share is determined by dividing the profit attributable to equity holders of the company, excluding any costs of servicing
equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year.
ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income
tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares
assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
j) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker has been identified as the board of directors.
Change in accounting policy
The consolidated entity has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114.
The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for
internal reporting purposes. This has resulted in the consolidated entity reporting on one segment.
Determination and presentation of operating segments
The consolidated entity has applied AASB 8 Operating Segments with effect from 1 July 2009. AASB 8 requires the entity to identify operating
segments and disclose segment information on the basis of internal reports that are provided to, and reviewed by, the chief operating decision
maker of the consolidated entity to allocate resources and assess performance. In the case of the consolidated entity the chief operating
decision maker is the Board of Directors. Operating segments now represent the basis on which the company reports its segment information
to the Board on a monthly basis. The change in policy has not resulted in a change to the disclosure presented.
k) Impairment of assets
Assets that have an indefinite useful like are not subject to amortisation and are tested annually for impairment. Assets that are subject
to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).
l) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments
with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value, and bank overdrafts.
HOT CHILI LIMITED ANNUAL REPORT 2010
51
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010 (CONTINUED)
1.0
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
m) Provisions
Provisions are recognised when the consolidated entity has a present legal or constructive obligation as a result of past events, it is more likely
than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.
n) GST
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the
taxation. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated as inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or
payable to, the taxation authority is included with other receivables or payables in the Statement of Financial Position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable
from, or payable to the taxation authority, are presented as operating cash flow.
2.0
INTEREST INCOME
Interest income
3.0
OTHER INCOME
Gain on foreign exchange transactions
4.0
SEGMENT INFORMATION
Consolidated Entity
2010
$
32,434
32,434
66,074
66,074
2009
$
137
137
-
-
• The consolidated entity has identified its operating segments based on the internal reports that are reviewed and used by the board of
directors (chief operating decision makers) in assessing performance and determining the allocation of resources.
• The consolidated entity operates as a single segment which is mineral exploration.
• The consolidated entity is domiciled in Australia. All revenue from external parties is generated from Australia only. Segment revenues are
allocated based on the country in which the party is located
• Operating revenues of approximately Nil (2009 - Nil) are derived from a single external party.
• All the assets relate to exploration. Segment assets are allocated to segments based on the purpose for which they are used.
52
5.0
INCOME TAX EXPENSE
a) Income tax expense:
Current tax
Deferred tax
b) Reconciliation of income tax expense to prima facie tax payable
Loss before income tax
Prima facie income tax at 30% ( 2009: 30%)
Tax-effect of amounts not assessable in calculating taxable income:
Tax-effect of amounts not deductible in calculating taxable income
Tax loss not recognised
Income tax expense/(benefit)
c) Tax losses:
Consolidated Entity
2010
$
2009
$
-
-
-
-
-
-
(1,828,429)
(548,529)
-
(930,547)
(279,164)
-
254,733
160,212
(293,796)
(118,951)
-
-
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30%
1,375,824
412,747
396,504
118,951
d) The directors estimate that the potential deferred tax asset at 30 June 2010 in respect of tax losses not brought to account is $444,784
(2009 : $118,951).
The Chilean subsidiaries of Hot Chili Ltd also have tax losses that are a potential deferred tax asset of $124,510 (2009 : $71,653). The
companies will be taxed independently in Chile.
e) The benefit for tax losses will only be obtained if:
i) The consolidated entity and the subsidiaries derive income, sufficient to absorb tax losses.
ii) There is no change to legislation to adversely affect the consolidated entity and its subsidiaries in realising the benefit from the
deduction of the losses.
HOT CHILI LIMITED ANNUAL REPORT 2010
53
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010 (CONTINUED)
6.0
CASH AND CASH EQUIVALENTS
Cash at bank
The above figures are reconciled to cash at the end of the financial year.
7.0
TRADE AND OTHER RECEIVABLES
Trade and other receivables
There are no impaired receivables or any provision for impairment against the receivables.
8.0
PROPERTY, PLANT & EQUIPMENT
Plant and equipment at cost
Less provision for depreciation
Reconciliations:
Plant & Equipment
Carrying amount at the beginning of the year
Additions
Depreciation
Carrying Amount At The End Of The Year
9.0
EXPLORATION AND EVALUATION EXPENDITURE
Mining tenements at cost
Tenements
Carrying amount at the beginning of the year
Purchase of mineral interests
Exploration costs written off
Carrying Amount At The End Of The Year
Consolidated Entity
Note
2010
$
6,607,586
6,607,586
2009
$
461,502
461,502
55,430
55,430
8,473
8,473
172,461
(4,587)
167,874
-
172,461
(4,587)
167,874
-
-
-
-
-
-
-
1,829,495
1,829,495
388,628
388,628
388,628
1,440,867
-
-
388,628
-
1,829,495
388,628
The future realisation of these non-current assets is dependent on further exploration and funding necessary to commercialise the resources
or realisation through sale.
54
10.0
TRADE & OTHER PAYABLES
Trade payables
Other payables
11.0
CONTRIBUTED EQUITY
a) Share capital
At the beginning of the financial year
Shares issued during the year
Less cost of issue
At The End Of The Financial Year
At the beginning of the financial year
Shares issued during the year
Shares cancelled during the year
At The End Of The Financial Year
b) Terms and Condition of Contributed Equity
Ordinary Shares
Consolidated Entity
2010
$
32,472
66,621
99,093
2009
$
96,736
8,792
105,528
1,682,400
-
10,642,105
1,682,400
(904,750)
-
11,419,755
1,682,400
No. Shares
No. Shares
80,000,000
-
60,210,527
80,000,000
(16,000,000)
-
124,210,527
80,000,000
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds
from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.
c) Movement in Unlisted Options
Balance at beginning of year
Issued during the year
Options lapsed during the year
Balance At End Of Year
Listed options details at 30 June 2010
2010
Options
2009
Options
40,200,000
-
540,000
40,200,000
-
-
40,740,000
40,200,000
There are 40,740,000 options over ordinary shares in the company at 30 June 2010.11.0
CONTRIBUTED EQUITY (CONTINUED)
d) Capital Risk Management
The consolidated entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can
continue to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost
of capital.
HOT CHILI LIMITED ANNUAL REPORT 2010
55
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010 (CONTINUED)
In order to maintain or adjust the capital structure, the consolidated entity may issue new shares, pay dividends or return capital to shareholders.
Capital is calculated as ‘equity’ as shown in the Statement of Financial Position, and is monitored on the basis of funding exploration activities.
12.0
RESERVES AND RETAINED LOSSES
a) Accumulated losses
Accumulated losses at the beginning of the year
Net loss for the year
Accumulated losses at the end of the year
b) Reserves
Options reserve
The options reserve is used to recognise the fair value of options issued.
As at 30 June 2010, no options to which the reserve relates have been exercised.
Balance at the beginning of the year
Balance at the end of the year
Foreign transaction reserve
Balance at the beginning of the year
Additions during the year
Balance at the end of the year
Total Reserves and Accumulated Losses
13.0
EARNINGS/(LOSS) PER SHARE
Consolidated Entity
2010
$
2009
$
(930,547)
-
(1,828,429)
(930,547)
(2,758,976)
(930,547)
-
72,308
72,308
1,222
-
-
-
-
-
1,222
1,222
1,222
(2,685,446)
(929,325)
Loss after tax attributable to members of Hot Chili Limited
(1,828,429)
(930,547)
Basic loss per share (cents)
Diluted loss per share (cents)
Unexercised options are not dilutive.
(2.14)
(2.14)
(1.16)
(1.16)
The weighted average number of ordinary shares on issue used in the calculation of basic earnings/
(loss) per share
85,543,187
80,000,000
Weighted average number of ordinary shares and potential ordinary shares used as the denominator
in calculating diluted earnings per share
85,543,187
80,000,000
56
14.0
REMUNERATION OF AUDITORS
Remuneration of the auditor for:
- Auditing and reviewing of financial reports
- Preparation an investigating accountants report for inclusion in the IPO prospectus
Consolidated Entity
2010
$
2009
$
18,000
10,000
28,000
-
9,500
9,500
15.0
KEY MANAGEMENT PERSONNEL DISCLOSURES
a) Directors
The following persons were Directors of Hot Chili Ltd during the financial year and up to the date of this report:
Murray E Black
Bernard R Mountford
Christian E Easterday
Dr Allan Trench
b) Company Secretary
John Sendziuk
c) Country Manager
Rodrigo Diaz Borquez
(Chairman)
(Non Executive Director) (Resigned 19 July 2010)
(Executive Director)
(Non Executive Director) (Appointed 19 July 2010)
(Appointed 14 May 2010)
(Appointed 17 May 2010)
Details of Remuneration of Key Management Personnel for the Year Ended 30 June 2010
Short-term benefits
Post-employment benefits
Share based payment
386,669
9,237
-
133,015
-
-
395,906
133,015
HOT CHILI LIMITED ANNUAL REPORT 2010
57
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010 (CONTINUED)
15.0
KEY MANAGEMENT PERSONNEL DISCLOSURES
d) Key Management Personnel Interests in the Shares and Options of the Company
Shares
The number of shares in the company held during the financial year, and up 30 June 2010, by each Key Management Personnel of Hot Chili
Limited, including their personally related parties, are set out below. There were no shares granted as compensation during the year.
2010
Murray E Black
Christian E Easterday
Bernard R Mountford(Resigned 19 July 2010)
Dr Allan Trench (Appointed 19 July 2010)
John Sendziuk (Appointed 14 May 2010)
2009
Murray E Black
Christian E Easterday
Bernard R Mountford (Resigned 19 July 2010)
Dr Allan Trench (Appointed 19 July 2010)
John Sendziuk (Appointed 14 May 2010)
Balance at
the start of
the year
13,500,000
13,700,000
2,000,000
-
700,000
29,900,000
Received during
the year on
the exercise
of options
Other
changes
during
the year
Balance at
the end of
the year
-
-
-
-
-
-
(3,500,000)
10,000,000
(3,500,000)
10,200,000
(666,667)
1,333,333
-
-
400,000
1,100,000
(7,266,667)
22,633,333
Balance at
the start of
the year
Received during
the year on
the exercise
of options
Other
changes
during
the year
Balance at
the end of
the year
-
-
-
-
-
-
-
-
-
-
-
-
13,500,000
13,500,000
13,700,000
13,700,000
2,000,000
2,000,000
-
-
700,000
700,000
29,900,000
29,900,000
58
Options
The number of options over ordinary shares in the company held during the financial year, and up to 30 June 2010, by each Key Management
Personnel of Hot Chili Ltd including their personally related parties are set out below:
2010
Murray E Black
Christian E Easterday
Bernard R Mountford
(Resigned 19 July 2010)
Dr Allan Trench
(Appointed 19 July 2010)
John Sendziuk
(Appointed 14 May 2010)
2009
Murray E Black
Christian E Easterday
Bernard R Mountford
(Resigned 19 July 2010)
Dr Allan Trench
(Appointed 19 July 2010)
John Sendziuk
(Appointed 14 May 2010)
Balance at
the start of
the year
6,750,000
6,850,000
1,000,000
-
350,000
14,950,000
Balance at
the start of
the year
-
-
-
-
-
-
Acquired
during
the year
Exercised
during
the year
Forfeited
during
the year
Balance at
the end of
the year
Vested and
exercisable at
the end of
the year
-
-
-
-
-
Acquired
during
the year
6,750,000
6.850,000
1,000,000
-
350,000
14,950,000
-
-
-
-
-
-
-
-
-
-
-
Exercised
during
the year
-
-
-
-
-
-
-
-
-
-
-
6,750,000
6,750,000
6,850,000
6,850,000
1,000,000
1,000,000
-
-
350,000
350,000
14,950,000
14,950,000
Forfeited
during
the year
Balance at
the end of
the year
Vested and
exercisable at
the end of
the year
6,750,000
6.750,000
6,850,000
6,850,000
1,000,000
1,000,000
-
-
350,000
350,000
14,950,000
14,950,000
16.0
NOTES TO STATEMENTS OF CASH FLOWS
a) Reconciliation of Cash
For the purposes of the statements of cash flows, 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 statements of cash flows is reconciled to the related
follows:
items
Statement
Financial
Position
the
as
in
of
Cash and short term deposits
Consolidated Entity
2010
$
6,607,586
6,607,586
2009
$
461,502
461,502
HOT CHILI LIMITED ANNUAL REPORT 2010
59
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010 (CONTINUED)
16.0
NOTES TO STATEMENTS OF CASH FLOWS (CONTINUED)
b) Reconciliation of Net Cash used In Operating Activities to Operating Loss After Income Tax
Loss for the year
Depreciation
Effect of exchange rates on holdings in foreign currencies
Consolidated Entity
2010
$
2009
$
(1,828,429)
(930,547)
4,587
(66,074)
-
-
Net cash flows from operating activities before change in assets and liabilities
(1,889,916)
(930,547)
Change in assets and liabilities during the financial year:
Other current assets
Payables
Net cash outflow from operating activities
c) Non cash investing and financing activities
(219,974)
(8,473)
(6,435)
105,525
(2,116,325)
(833,495)
The consolidated entity issued 740,000 options to brokers as part of their fee for capital raising. The options were valued at $72,308 using
the Black and Scholes option pricing model.
The consolidated entity issued 6,210,527 shares valued at $1,242,105 as part payment on an option contract to acquire mining tenements
in Chile.
17.0
FINANCE FACILITIES
No credit standby facility arrangement or loan facilities existed at 30 June 2010.
18.0
COMMITMENTS FOR EXPENDITURE
a) Exploration Commitments
In order to maintain current rights of tenure to exploration and mining tenements, the consolidated entity has the following discretionary
exploration expenditure requirements up until expiry of leases. These obligations are not provided for in the financial statements and
are payable:
Within one year
Later than one year but not later than five years
b) Operating Leases
1,401,313
19,291,403
20,692,716
-
-
-
The consolidated entity leases office premises under an operating lease expiring in three years. The lease has various terms and renewal rights
and commenced on 1 May 2010.
Commitments for minimum lease payments in relation to operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
34,943
42,900
-
77,893
-
-
-
-
60
19.0
EVENTS OCCURRING AFTER REPORTING DATE
Dr Allan Trench was appointed as a director on 19 July 2010.
Other than the appointment of a new director, at the date of the director’s declaration there is no matter or circumstance that has arisen since
30 June 2010 that has significantly affected or may significantly affect the operations, the results of those operations, or the state of affairs of
the consolidated entity, subsequent to 30 June 2010, other than those mentioned in the Director’s Report.
20.0
RELATED PARTIES
Directors
Mr B R Mountford is associated with Hawkeye Resources Pty Ltd a company which received payments of $68,551 (2009: $53,832) for
consulting services. These amounts have been recognised as part of the Director’s remuneration.
Mr C E Easterday is associated with Mining Technical Solutions which received payments of $215,110 (2009: $79,183) for consulting
services. These amounts have been recognised as part of the Director’s remuneration.
21.0
CONTINGENT LIABILITIES
There are no contingent liabilities at reporting date (2009: Nil).
22.0
INVESTMENT IN CONTROLLED ENTITIES
Name of Entity
Sociedad Minera El Corazon Limitada
Sociedad Minera El Aguila Limitada
Sociedad Minera El Huerto Limitada
23.0
FINANCIAL RISK MANAGEMENT
Equity Holding
Country of
Incorporation
Chile
Chile
Chile
Class of
Shares
Ordinary
Ordinary
Ordinary
2010
%
100
100
100
2009
%
100
100
100
The consolidated entity’s principal financial instruments comprise receivables, payables cash and short-term deposits. The consolidated entity
manages its exposure to key financial risks in accordance with the consolidated entity’s financial risk management policy. The objective of the
policy is to support the delivery of the consolidated entity’s financial targets while protecting future financial security.
The main risks arising from the consolidated entity’s financial instruments are interest rate risk, credit risk and liquidity risk. The consolidated
entity uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure
to interest rates and assessments of market forecasts for interest rates. Ageing analysis of and monitoring of receivables are undertaken to
manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below.
Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees policies for managing
each of the risks identified below, including for interest rate risk, credit allowances and cash flow forecast projections.
HOT CHILI LIMITED ANNUAL REPORT 2010
61
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010 (CONTINUED)
23.0
FINANCIAL RISK MANAGEMENT (CONTINUED)
Risk Exposures and Responses
a) Interest rate risk exposure
The consolidated entity’s exposure to market interest rates relates primarily to the consolidated entity’s cash balances and short-term deposits.
The consolidated entity constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing
positions, alternative financing positions and the mix of fixed and variable interest rates.
The consolidated entity’s cash balance is available at call and is held at a floating interest rate, all creditors and debtors are non interest bearing
and are payable and receivable on commercial terms.
The consolidated entity has considered the sensitivity relating to its exposure to interest rate risk at reporting date. This analysis considers the
effect on current year results and equity which could result in a change in this risk. Management have considered the potential impact on the
profit and equity and considered that it would not be a material amount.
b) Credit risk exposure
Credit risk arises from the financial assets of the consolidated entity, which comprise deposits with banks and trade and other receivables.
The consolidated entity’s exposure to credit risk arises from potential default of the counter party, with the maximum exposure equal to the
carrying amount of these instruments. The carrying amount of financial assets included in the Statement of Financial Position represents the
consolidated entity’s maximum exposure to credit risk in relation to those assets.
The consolidated entity does not hold any credit derivatives to offset its credit exposure.
The consolidated entity trades only with recognised, credit worthy third parties and as such collateral is not requested nor is it the Company’s
policy to securities it trade and other receivables.
Receivable balances are monitored on an ongoing basis with the result that the consolidated entity does not have a significant exposure to
bad debts.
There are no significant concentrations of credit risk within the consolidated entity.
c) Liquidity risk
Liquidity risk arises from the financial liabilities of the consolidated entity and the consolidated entity’s subsequent ability to meet their obligations
to repay their financial liabilities as and when they fall due.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and, the availability of funding through the
ability to raise further equity or through related party entities. Due to the dynamic nature of the underlying businesses, the Board aims at
maintaining flexibility in funding through management of its cash resources. The consolidated entity has no financial liabilities at the year-end
other than normal trade and other payables incurred in the general course of business.
62
d) Fair values
The fair values of the consolidated entity’s financial assets and liabilities are summarised in the table below;
2010
Cash and cash
Trade and other receivables
Trade and other payables
2009
Cash and cash
Trade and other receivables
Trade and other payables
e) Foreign exchange risk
Consolidated Entity
Carrying
amount
$
Fair
value
$
6,607,586
6,607,586
55,430
99,093
Carrying
amount
$
55,430
99,093
Fair
value
$
6,607,586
6,607,586
55,430
105,528
55,430
105,528
The consolidated entity has considered the sensitivity relating to its exposure to foreign currency risk at reporting date. This sensitivity analysis
considers the effect on current year results and equity which could result in a change in the USD / AUD rate. The consolidated entity is exposed
to foreign exchange risk through its USD cash holdings at reporting date.
The table below summarises the impact of + / - 10% strengthening / weakening of the AUD against the USD on the consolidated entities post
tax profit for the year and equity. The analysis is based on a 10% strengthening /weakening of the AUD against the USD at reporting date with
all other factors remaining equal.
AUD/USD + 10%
AUD/USD - 10%
Consolidated Entity
Post tax profit
$
Equity
$
(514,657)
(514,657)
514,657
514,657
24.0
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future
events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
The consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
Share based payment transactions
The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the
date at which they are granted. The fair value is determined by an external valuation using a Binomial or Black-Scholes option pricing model,
using the assumptions detailed in Note 26(a).
Recoverability of exploration expenditure
The group tests annually whether the exploration and evaluation expenditure incurred in identifiable areas of interest is expected to be
recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable
assessment of the existence of reserves and further work is expected to be performed. All expenditure that does not meet these criteria is
expensed to the Statement of Comprehensive Income.
HOT CHILI LIMITED ANNUAL REPORT 2010
63
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010 (CONTINUED)
25.0
PARENT ENTITY DISCLOSURES
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Financial performance
Loss for the year
Other comprehensive income
Total comprehensive income
Contingent liabilities of the parent entity
2010
$
2009
$
6,618,396
2,173,641
449,519
408,959
8,792,037
858,478
69,393
69,393
105,403
105,403
11,419,755
1,682,400
72,308
-
(2,769,419)
(929,325)
8,722,644
753,075
(1,840,094)
(929,325)
-
-
(1,840,094)
(929,325)
The parent entity did not have any contingent liabilities as at 30 June 2010 or 30 June 2009.
Contractual commitments for the acquisition of property, plant or equipment
As at 30 June 2010 (30 June 2009 – $Nil), the parent entity did not have any contractual commitments for the acquisition of property, plant
or equipment.
64
26.0
SHARE BASED PAYMENTS
a) Options issued
The Company issued options to a consultant as part payment of share issue costs.
Set out below is a summary of options issued as at 30 June 2010:
Issue date
Expiry
date
Balance at
start of year
Number issued
during year
Number expired
during year
Balance at
end of year
01/05/2009
29/10/2014
10/01/2010
29/10/2014
29/04/2010
29/10/2014
-
-
-
200,000
140,000
400,000
-
-
-
200,000
140,000
400,000
Number
exercisable at
end of year
200,000
140,000
400,000
Fair value of options issued:
The fair value at issue date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the share price
at issue date and expected price volatility of the underlying share, and the risk free interest rate for the term of the loan.
The model inputs for options granted during the year ended 30 June 2010 included:
a) options are granted for no consideration.
b) exercise price - $0.20.
c)
issue date - 1 May 2009, 10 January 2010, 29 April 2010
d) expiry date – 29 October 2014.
e) expected price volatility of the Company’s shares: 110%.
f)
risk-free interest rate: 5.36%.
g) spot price at date of valuation: $0.05, $0.10 and $0.20.
b) Expenses arising from share-based payment transactions
Total transactions arising from share-based payment transactions recognised during the year were as follows:
Expenses related to options issued to consultants
Shares issued for option payment on Chilean mining rights
2010
$
72,308
1,242,105
1,314,413
2009
$
-
-
The option payment on Chilean mining rights were issued at the date of listing and consisted of 6,210,525 shares at the listing price of $0.20.
HOT CHILI LIMITED ANNUAL REPORT 2010
65
INFORMATION REQUIRED BY THE ASX
SHAREHOLDER INFORMATION AS AT 23 AUGUST 2010
a) Spread of Holdings
1
1,001
5,001
10,001
-
-
-
-
1,000
5,000
10,000
100,000
100,001
&
Over
b) Spread of Holdings
1
1,001
5,001
10,001
-
-
-
-
1,000
5,000
10,000
100,000
100,001
&
Over
c) Substantial Shareholders
Kalgoorlie Auto Service Pty Ltd
Port Finance Ltd NV
Ajava Holdings Pty Ltd
d) Directors’ Shareholdings:
Shareholders
Units
4
41
80
367
124
616
1,727
138,258
754,835
17,312,766
106,002,941
124,210,527
Option Holders
Units
-
-
-
12
28
40
-
-
-
1,050,000
39,690,000
40,740,000
40,000,000
6,210,527
5,000,000
Murray E Black
Bernard R Mountford (Resigned 19 July 2010)
Christian E Easterday
Dr Allan Trench (Appointed 19 July 2010)
Shares Held
Directly
Shares Held by Companies
in which Directors have a
beneficial interest
-
-
200,000
-
10,000,000
1,333,333
10,200,000
-
66
e) The names of the twenty largest shareholders as at 23 August 2010, who between them held 61.25% of the issued capital are listed below:
1
2
3
Kalgoorlie Auto Service Pty Ltd
Port Finance Ltd NV
Ajava Holdings Pty Ltd
4 Norman Lester Mountford
5
Fitel Nominees Ltd
6 Miro & Helen Cecich
7
8
Campari Holdings Pty Ltd
SHL Pty Ltd
9 Hahn Properties Pty Ltd
10 Harbour Seager Rex
11
Romulus Pty Ltd
12 Harbour Seager Rex
13 Miro Cecich
14
15
16
17
18
19
20
DBS Vickers SEC Singapore
Timothy James Carter
Gary Dene Gale
Ian William Dorrington
Oregonwood Pty Ltd
Jacqueline Tracey Hunter
Alf’s Crew Pty Ltd
Number of
Ordinary Shares
%
40,000,000
32.20
6,210,527
5,000,000
4,000,000
2,739,500
2,250,000
2,000,000
1,750,000
1,500,000
1,300,000
1,100,000
1,050,000
1,000,000
1,000,000
950,000
925,000
900,000
900,000
800,000
750,000
5.00
4.03
3.22
2.21
1.81
1.61
1.41
1.21
1.05
0.89
0.85
0.81
0.81
0.76
0.74
0.72
0.72
0.64
0.60
76,125,027
61.29
HOT CHILI LIMITED ANNUAL REPORT 2010
67
NOTES
68
HOT CHILI LIMITED ANNUAL REPORT 2010
69
www.hotchili.net.au