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Western Asset Mortgage Capital2010 ANNUAL REPORT
FOUNDATIONS FOR THE FUTURE
KULA GOLD LImITED ACN 126 741 259
Corporate DireCtory
DireCtors
David Frecker
Lee spencer
John Watkins
Louis rozman
peter Bradford
Mark stowell
CoMpaNy seCretary
John Watkins
Chairman
Managing Director and Chief executive officer
executive Director and Chief Financial officer
Non-executive Director
Non-executive Director
Non-executive Director
registereD oFFiCe
suite 2, Level 15, 1 york street sydney NsW 2000
t: +61 2 9262 5651
F: +61 2 9262 5680
e: info@kulagold.com.au
www.kulagold.com.au
auDitor
pricewaterhouseCoopers australia
Darling park tower 2, 201 sussex street sydney NsW 2000
t: +61 2 8266 0000
share registry
Link Market services Limited
Level 12, 680 george street, sydney NsW 2000
t: 1300 554 474 or +61 2 8280 7111
stoCk exChaNge ListiNg
australian securities exchange asx CoDe: kgD
CONTENTS
chairmans letter
ceO repOrt Overview
DirectOrs’ repOrt
remUneratiOn repOrt
aUDitOr’s inDepenDence DeclaratiOn
cOrpOrate GOvernance statement
Financial statements
DirectOrs’ DeclaratiOn
inDepenDent aUDitOr’s repOrt
tO the members OF kUla GOlD
aDDitiOnal inFOrmatiOn
4
6
17
25
36
37
44
90
91
93
2010 ANNUAL REPORT
3
CHAIRmAN’S
LETTER
since the listinG OF
the cOmpany’s shares,
we have annOUnceD
FUrther encOUraGinG
explOratiOn resUlts
FrOm the OnGOinG
DrillinG prOGram On
wOODlark islanD.
4
KULA GOLD LImITED ACN 126 741 259
DaviD FreCker
it is my pleasure to invite all shareholders to read our first
annual report as a listed public company. your company
made great progress during 2010. Central to this was
kula gold’s successful initial public offering (ipo) which
resulted in the listing of its shares on the australian securities
exchange on 16 November 2010.
The IPO provided Kula Gold with $52 million of
new capital to fund its ongoing exploration activity
on Woodlark Island in Papua New Guinea and the
completion of the definitive feasibility study for the
proposed Woodlark Island Gold Project. At the end of
the financial year, on 31 December 2010, the Company
had cash of $48 million, most of which was held on
fixed deposit with major Australian trading banks.
Kula Gold’s executive and management team, headed
by Lee Spencer as Managing Director and CEO, has
recently been augmented by a number of key senior
appointments, including a Project Manager who will lead
the construction and development of the Woodlark Island
Gold Project. Since the listing of the Company’s shares,
we have announced further encouraging exploration
results from the ongoing drilling program on Woodlark
Island. Work on the definitive feasibility study, including
detailed environmental studies and land investigations, is
on track. The executive and management team is giving
it top priority and ensuring that all necessary resources,
internal and external, are engaged for this purpose.
Details of our exploration success and progress on the
feasibility study are contained in the CEO Report which
follows.
It is an exciting time to be looking at the start-up of a new
gold mine in Papua New Guinea. Gold is a commodity
that continues to be in great demand and Papua New
Guinea is a place of global significance for mineral
exploration and resource development. It has some of
the world’s largest gold, copper and gas deposits and is
experiencing strong growth through a surge of investment
in the resources sector. The foreign exchange reserves
of the country are near a record high level. Kula Gold
views Papua New Guinea as an excellent country in
which to do business.
On Woodlark Island, the Project enjoys widespread
support from the local people. It has the potential
to deliver to them long-term benefits in the form of
employment opportunities and new social infrastructure
as well as financial benefits.
The IPO Prospectus set out an indicative timetable for
Kula Gold to develop the Woodlark Island Gold Project
with production scheduled for late 2013.
I thank shareholders for their support and I hope you find
this Annual Report informative.
David Frecker
Chairman
2010 ANNUAL REPORT
5
Lee k speNCer
CEO REPORT
OvERvIEw
the year ending 31 December 2010 has been an important
stepping stone for kula gold on the path towards the development
of an operating gold mine on the Company’s core asset on
Woodlark island, Milne Bay province, papua New guinea.
At a corporate level, with the objective of supporting
the Company’s ongoing exploration programs to build
even further on the current resources and to complete
all necessary prerequisites including a DFS and EIS
as part of the process of lodging a Mining Lease
Application with the PNG Government by 2012, the
Company completed:
+ A successful Initial Public Offering (IPO) and a
listing on the Australian Securities Exchange (ASX)
on 16 November 2010;
+ Net $52 million fund raising for the IPO, which
underwrites the Company’s aggressive growth
plans for 2011;
+ Establishment of corporate headquarters in Sydney;
+ Initiating the building of a corporate and technical
team which will oversee the Company into the
development phase.
The year ahead augurs well for the prospect to increase
the global resource base by new discoveries. In the short
term, the Company’s aim is to establish sufficient resources
to justify a third pit and the potential for a higher production
profile for gold mining operations on Woodlark Island than
that indicated by the (PFS).
The transition from pure explorer to developer is gathering
pace with significant milestones achieved including:
+ A global Joint Ore Reserves Committee (JORC)
Resource of 1.75 million ozs of gold contained
within three deposits, two of which are currently
open in all directions and will be subject to intensive
drilling in 2011;
+ A major infill drilling program at Busai which
culminated in a maiden JORC reserve of 584,000
ozs of gold from an in-pit mining inventory of
772,000 ozs from two proposed open pits located
at Kulumadau and Busai, respectively;
+ Completion of a Pre-Feasibility Study (PFS) which
demonstrated the robust economics of developing a
gold mining operation from the proposed Kulumadau
and Busai open pits. Sufficient mining inventory had
been established in these areas at the time of the PFS
to support a 100,000 oz per annum operation with a
mine life of around 7 years utilising a proposed
1.5 million tonne per annum plant;
+ Confirmation of the excellent regional exploration
potential by the recognition of an additional 8 other low
sulphidation, epithermal targets on Woodlark Island.
Reconnaissance Reverse Circulation (RC) drilling was
initiated at the Woodlark King Prospect at the end of the
year with significant intersections being achieved which
highlighted the possibility of a third pit being included in
the Definitive Feasibility Study (DFS);
+ Completion of an Environmental Baseline Study and
initiation of long lead time items constituting part of
the Environmental Impact Study (EIS);
+ Initiation of the Definitive Feasibility Study (DFS)
during the year.
6
KULA GOLD LImITED ACN 126 741 259
resOUrces
Resources are the lifeblood of a project, so a
considerable amount of the total metres of 66,713
of RC and 3,108 metres of diamond drilled in the
reporting period were targeted at infill drilling to increase
confidence in the resources established in prior years
which were used in the PFS completed in early 2010.
Resource estimation for the Woodlark Gold Project
was carried out by resource specialist, Mr John
Doepel, Principal Geologist for Continental Resource
Management Pty Ltd (CRM). Resources were calculated
for Busai and Kulumadau on the basis of a total of 735
drill holes containing a total of 79,239 assays with drill
spacing typically on 25 to 50 metre section lines. A
resource was calculated for Boniavat on the back of
limited drilling by previous operators. Significant potential
remains for the discovery of further mineralisation and
resources in these areas.
The Resource estimates for the Woodlark Island
Gold Project, reported by CRM as at June 2010 and
calculated at a 0.5g/t Au cutoff, are shown in Table 1
on page 8.
LJ Putland and Associates (LJP) carried out open pit
optimisation studies at a US$900 per ounce gold
price for the Kulumadau and Busai deposits to derive
a mining inventory. The pit optimisations included all
resource categories including Inferred. A summary of the
Woodlark Open Pit Mining Inventory as of December
2010 is shown in Table 2. Of the total Mining Inventory
of 772,000 ozs, some 75% were classified in the
Measured and Indicated Resource Category, which has
given the Company a high confidence in the resources
established to date. The remaining Inferred is expected
to be elevated to a higher resource category during the
Definitive Feasibility Study stage.
In addition, LJP established a maiden reserve for the
project. A Probable Reserve of 7.7Mt @ 2.4g/t Au
for the Busai and Kulumadau Pits were produced in
a reserve statement by LJP in July 2010, as set out
in Table 3 on page 9.
Drilling Rig on Woodlark Island
sigNiFiCaNt poteNtiaL reMaiNs
For the DisCovery oF Further
MiNeraLizatioN aND resourCes
iN these areas oF BoNiavat
2010 ANNUAL REPORT
7
CEO REPORT
table 1: wOODlark resOUrce estimate 2010
WooDLark resourCe estiMate – CrM aND pFs JuNe 2010
Deposit
Category
toNNage Mt
goLD graDe au g/t
CoNtaiNeD au ozs
CUT OFF 1.0 g/t Au
Busai
Kulumadau
Measured
Indicated
Inferred
total
Measured
Indicated
Inferred
total
Total Resources
Measured
Indicated
Inferred
resource
Measured
Indicated
Inferred
total
Measured
Indicated
Inferred
total
Inferred
totaL
Busai
CUT OFF 0.5 g/t Au
Kulumadau
Boniavat
Total Resources
Measured
Indicated
Inferred
resource
totaL
2.0
2.9
2.8
7.7
2.8
1.2
2.2
6.2
4.8
4.1
5.0
14.0
3.6
7.1
10.0
20.8
4.5
2.8
5.3
12.7
1.7
8.1
9.9
17.0
35.0
2.1
2.7
3.0
2.6
2.6
2.6
2.8
2.7
2.4
2.7
2.9
2.7
1.5
1.5
1.4
1.5
1.9
1.5
1.6
1.7
1.6
1.7
1.5
1.5
1.5
130,000
250,000
270,000
660,000
240,000
100,000
200,000
540,000
370,000
350,000
470,000
1,200,000
170,000
350,000
460,000
980,000
275,000
140,000
270,000
685,000
85,000
445,000
490,000
815,000
1,750,000
Note: Figures are rounded to the nearest significant decimal place; the Busai Inferred resource at 0.5 g/t Au cut off
includes 3.9Mt at 0.9 g/t Au containing 110,000 ozs of gold from Munasi, 2km southwest of Busai.
Totals may appear incorrect due to appropriate rounding of individual values.
8
KULA GOLD LImITED ACN 126 741 259
table 2: wOODlark Open pit mininG inventOry estimate 2010
WooDLark resourCes aND opeN pit MiNe iNveNtory estiMate – pFs JuNe 2010
Category
toNNage Mt
goLD graDe au g/t
CoNtaiNeD au ozs
Deposit
Busai
Kulumadau
Measured
Indicated
Inferred
total
Measured
Indicated
Inferred
total
Total Mining Inventory
Measured
Indicated
Inferred
resource
totaL
2.1
2.2
1.3
5.7
2.7
0.6
0.6
4.0
4.9
2.8
1.9
9.6
1.9
2.7
3.4
2.6
2.5
2.3
2.3
2.4
2.2
2.6
3.0
2.5
129,000
195,000
141,000
465,000
218,000
42,000
47,000
308,000
347,000
237,000
188,000
772,000
Note: Figures are rounded to the nearest significant decimal place; the open pit strip ratio is Busai 12:1, Kulumadau 13:1.
table 3: JOrc Ore reserves
WooDLark reserves estiMate – pFs JuNe 2010
Deposit
Category
toNNage Mt
goLD graDe au g/t
CoNtaiNeD au ozs
CUT OFF 1.0 g/t Au
Kulumadau
Busai
Total
totaL
Probable
Probable
Probable
reserve
Note: Refer to Competence Persons Statements on page 95.
DevelOpment
3.3
4.4
7.7
7.7
2.4
2.3
2.4
2.4
260,000
324,000
584,000
584,000
Discovery of resources is essential to the growth of a
project, however, these resources must be demonstrated
to be economic and therefore place the project firmly
on the path to development and eventual production.
Therefore, during 2010, a PFS was completed by LJP on
the Mining Inventory that had been established by June of
the year. The PFS demonstrated the following:
+ Sufficient ore had been established at the time of the PFS
to justify a 1.5Mt pa plant producing on an annualised
basis approximately 100,000 ozs per annum;
+ Average head feed grades of 2.5g/t Au;
+ Overall metallurgical recovery of around 92% using
an initial gravity circuit followed by a standard
Carbon In Leech (CIL) processing plant;
+ Project life of 7 years; and
+ Estimated capital cost of US$135 million
and an average life-of-mine cash cost including
royalties of approximately US$550 per oz.
2010 ANNUAL REPORT
9
CEO REPORT
kuLuMaDau
pit DesigN
aND
BLoCk MoDeL
legend
1 to 3 g/t Au
3 to 5 g/t Au
> 5 g/t Au
Busai
pit DesigN
aND
BLoCk MoDeL
legend
1 to 3 g/t Au
3 to 5 g/t Au
> 5 g/t Au
10
KULA GOLD LImITED ACN 126 741 259
inDicative DevelOpment timeline
2010
IPO
EIS
MOA
DFS
FInAnCIng
eXPlORATIOn
MIne
deVelOPMenT
COnSTRUCTIOn
PROdUCTIOn
2011
2012
2013
Additional financing completed
Exploration drilling
Permitting
Detailed engineering
Construction
Production
NOTE: Compensation and relocation agreement forms part of the MOA timeline
SOURCE: Kula Gold.
The robust economics of the project in combination with
a strong market for gold dictated that a DFS should be
initiated. In Papua New Guinea, for a Mining Lease to
be granted, the Company is required to submit a DFS
together with an EIS in conjunction with a Memorandum
of Agreement (MOA) with the Local Landholders,
Local Level Government, Provincial Government and
the National Government. An indicative development
timeline for the project is shown above taking into
account the various requirements outlined.
The Company initiated the DFS and long lead time items
for EIS in the last quarter of 2010 reflecting the Board’s
confidence in the project.
explOratiOn
Previous exploration on Woodlark had concluded that
gold mineralisation was associated with base metal-
carbonate, low sulphidation, epithermal systems formed
in Miocene andesitic volcanics and their subvolcanic
intrusive equivalents. Pre-1930 historical gold production
from Woodlark Island was sourced from both hardrock
and alluvial sources with the dominant hardrock mining
having taken place at the three centres of Busai,
Kulumadau and Boniavat.
Joe Boine, senior geologist at Woodlark Island
Detailed exploration has only been undertaken at
Kulumadau and Busai with reconnaissance drilling at
Boniavat being completed in the last quarter of 2010.
The bulk of Woodlark Island is covered by a thin veneer
of young sediments consisting of coralline detritus and
marine clays. The ability to discover resources on
Woodlark is due to the experience and persistence of the
Company’s exploration team to search beneath this thin
cover. By utilising a combination of regional vectors such
as structure, aeromagnetics, geochemistry and vegetation
anomalies caused by 19th century alluvial mining
activities, the potential for discovering further resources has
become apparent. A total of eight regional targets have
been identified and these have been rated for follow up.
2010 ANNUAL REPORT
11
CEO REPORT
explOratiOn (cOntinUeD)
The first target was Boniavat where regional
reconnaissance drilling in 2010 identified two targets
for follow up drilling, namely Woodlark King and Little
Mackenzie. Further reconnaissance RC drilling was
conducted around the historical workings at Woodlark
King with significant downhole intersections being
encountered including:
+ 11 metres @ 2.1g/t Au from 73 metres
+ 4 metres @ 10.4g/t Au from 32 metres
+ 19 metres @ 10.4g/t Au from surface
+ 12 metres @ 4.9g/t Au from surface
+ 25 metres @ 3.2g/t Au from 34 metres.
The Woodlark King area was regarded as having
high potential for a third pit to be included in the DFS,
scheduled for completion at the end of the third quarter
in 2011. Step out drilling at Boniavat is planned for
quarter 1 in 2011 to enable a resource to be established
by the end of this period.
Location map of resources and regional exploration
targets against background magnetic intensity.
Woodlark King recent drill intersections
12
KULA GOLD LImITED ACN 126 741 259
health, saFety
anD the cOmmUnity
Kula Gold Limited operates in Papua New Guinea
through its 100% owned subsidiary Woodlark Mining
Limited and together employs a total of 330 employees
from various cultural backgrounds who manage
exploration, administration and environmental activities.
Safety and health has been the number one issue for
the Company operating in the challenging tropical
environment on the island.
The safety record for the period reported has been
satisfactory considering the number of drill rigs and
earthmoving machinery involved during exploration.
The Company has implemented weekly tool box
meetings, incident reports and a designated safety
officer to train local Woodlark Islanders in safety
procedures and regulations.
Through its community relations department, which is
responsible for managing community and social issues,
the Company has identified the key areas of most
concern to the local communities. These include:
health
Woodlark Island has endemic malaria with few
government medical facilities. The Company has
established a clinic under the supervision of a health
extension officer, the services of which are available
to Company employees and their families.
The service has also been extended to medical
emergencies to any islander. During the year, the
Company, in conjunction with Rotary Against Malaria
(RAM), has started issuing nets to all of the communities
in an effort to curb infant mortality from malaria.
emplOyment
In conjunction with the local communities, an Employee
Consultative Committee has been established to advise
the Company on work related issues including but not
limited to ensuring a fair and reasonable spread of
employment opportunities across the whole of the island.
traininG
The Company has instituted a training program for
equipment operators, surveyors, drillers and other
employees. The training program has proved very
successful and during the year was placed under the
supervision of an expatriate training manager.
eDUcatiOn
The Company has provided basic educational hardware
to various schools throughout the island.
1
2
3
4
1 Health programs have been initiated. 2 Training programs have been instituted.
3 The Company had provided education materials to schools. 4 Community consultation is ongoing.
2010 ANNUAL REPORT
13
CEO REPORT
envirOnment
The Company is committed to developing the project in
an environmentally responsible manner. Due to the fact
that significant impacts have already been made on the
environment by pre-World War 1 mining operations
and by extensive logging operations in the 20th century,
extensive baseline environmental studies have been
conducted by a number of recognised consultants,
expert in the relevant field of study. The baseline studies
will constitute an environmental inception report due to
be completed in the first quarter of 2011.
As a concluding remark I would like to thank the
Woodlark Island communities, the local and provincial
governments, and the PNG National Government for the
support they have given the Company and the project
during the year.
Special thanks go to our enthusiastic team of employees
both in Australia and PNG through whose persistence
and efforts the Company has achieved its 2010
objectives.
I look forward to the continued support of all
stakeholders as we progress the project along the
path towards development in 2011.
lee k spencer
CEO
5 Marine environmental studies have been undertaken 6 Land environmental monitoring is continuing.
5
6
14
KULA GOLD LImITED ACN 126 741 259
FINANCIAL
REPORT
2010 ANNUAL REPORT
15
inDex
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Corporate Governance Statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report to the members
Additional Information
17
25
36
37
45
46
47
49
50
90
91
93
16
KULA GOLD LImITED ACN 126 741 259
DirectOrs’
repOrt
Your directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of
Kula Gold Limited (referred to hereafter as Kula Gold or the Company) and the entities it controlled at the end of, or
during, the year ended 31 December 2010.
DirectOrs
The following persons were directors of Kula Gold Limited during the whole of the financial year and up to the date
of this report:
Lee Spencer
Louis Rozman
Peter Bradford
David Frecker was appointed as director on 16 September 2010 and continues in office at the date of this report.
John Watkins was appointed as director on 16 September 2010 and continues in office at the date of this report.
Mark Stowell was appointed as director on 16 September 2010 and continues in office at the date of this report.
Arnold Vogel was a director from the beginning of the financial year until his resignation on 16 September 2010.
Raymond Perkes was a director from the beginning of the financial year until his resignation on 16 September 2010.
Mark Faul and Greg Dick, alternate directors resigned on 16 September 2010.
principal activities
The principal activity of the Group is the development of the Woodlark Island Gold Project located on Woodlark Island
in Papua New Guinea.
DiviDenDs
No dividends have been paid or declared during the year (2009: $nil).
resUlt OF OperatiOns
The net loss from operations of the consolidated entity was $5,058,000 (2009: loss of $1,849,000).
2010 ANNUAL REPORT
17
DirectOrs’ repOrt
review OF OperatiOns
The year ending 31 December 2010 has been an important stepping stone on the path towards the development of
an operating gold mine on the company’s core asset on Woodlark Island, Milne Bay Province, Papua New Guinea.
The transition from pure explorer to developer is gathering pace with significant milestones achieved during the year
including:
exploration:
+ A JORC Measured, Indicated and Inferred Resource of 1.75 million ozs of gold contained within three deposits.
Two of these deposits have scope for expansion and will be subject to intensive drilling in 2011.
+ A major infill drilling program culminated in a maiden JORC reserve of 584,000 ozs of gold from
an in pit mining inventory of 772,000 ozs from two open pits located at Kulumadau and Busai respectively.
+ Completion of a Pre-Feasibility Study (PFS) which demonstrated the positive economics of developing a gold mining
operation from the proposed Kulumadau and Busai Open Pits. The study indicated that sufficient mining inventory
had been established in these areas to support a 100,000 ozs per annum operation with a mine life of around
7 years utilising a 1.5 million tonne per annum plant.
+ Confirmation of the excellent regional exploration potential by the recognition of an additional 8 other low
sulphidation, epithermal targets on Woodlark Island. Reconnaissance RC drilling was initiated at the Woodlark
King Prospect at the end of the year with significant intersections being achieved which indicate the possibility of
a third pit being included in the Definitive Feasibility Study (DFS).
+ Completion of an Environmental Baseline Study and initiation of long lead time items constituting part of the
Environmental Impact Study (EIS).
+ The Definitive Feasibility Study was commenced following the positive outcome of the PFS.
Corporate
+ A successful Initial Public Offering (IPO) and a listing on the Australian Securities Exchange (ASX) on 16 November
2010. The IPO resulted in a net $52 million to the company which underwrites the company’s aggressive growth
plans for 2011.
+ Initiated the building of a corporate and technical team which will oversee the company into the development phase.
environment
+ The Company is committed to developing the project in an environmentally responsible manner. Extensive baseline
environmental studies have been conducted which constitute an Environmental Inception Report since completed.
18
KULA GOLD LImITED ACN 126 741 259
DirectOrs’ repOrt
siGniFicant chanGes in the state OF aFFairs
In September 2010 Kula Gold Pty Ltd converted to a public company, changed its company name to Kula Gold
Limited and reorganised its share capital. On 16 November 2010, the Group listed on the Australian Securities
Exchange (ASX) raising $58 million before capital raising costs.
In the opinion of the directors there were no other significant changes in the state of affairs of the Group that occurred
during the financial year under review not otherwise disclosed in this annual report.
matters sUbseqUent tO the enD OF the Financial year
On 16 March 2011, 200,000 options were granted to Company employees under the Kula Gold Option Plan at
an exercise price of $1.80. The options are exercisable on or before 5 years from the date of grant of the options.
likely DevelOpments anD expecteD resUlts OF OperatiOns
Further information on likely developments in the operations of the Group and the expected results of operations
have not been included in this annual report because the directors believe it would be likely to result in unreasonable
prejudice to the Group.
envirOnmental reGUlatiOn
The Group is subject to significant environmental regulation in respect of its exploration activities as set out below.
The Group’s exploration activities in Papua New Guinea are subject to the environmental regulation of Papua New
Guinea. The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that
it is aware of and is in compliance with all environmental legislation. The directors of the Group are not aware of any
breach of environmental legislation for the period under review.
2010 ANNUAL REPORT
19
DirectOrs’ repOrt
inFOrmatiOn On DirectOrs
David Frecker Ba, LLM Independent Chairman and Non Executive Director. Age 62.
Experience and expertise
David Frecker was appointed as a Non executive Director of Kula Gold in September 2010 and has been elected
Chairman of the Board.
David is a commercial lawyer with over 35 years experience in practice in Australia and PNG. He is a partner of
Blake Dawson, practising in the corporate and commercial area and specialising in mining, oil & gas and resources
law, and all aspects of commercial law in PNG. Prior to joining Blake Dawson in 1980, David worked for five years
in the Mining and Major Projects Section of the State Solicitor’s Office in PNG. He subsequently spent four years as
one of Blake Dawson’s resident partners in PNG.
David is a member of AMPLA (the Resources and Energy Law Association of Australia) and the Resources, Energy and
Environmental Law Committee of the Law Council of Australia. He is admitted to practise in Australia and PNG and
holds Bachelor of Arts, Bachelor of Laws and Masters of Laws degrees from the University of Sydney.
Other current directorships
The Kokoda Track Foundation Limited.
Former directorships in last 3 years
None.
Special responsibilities
Independent Chairman.
Member of the Audit Committee.
Member of the Remuneration and Nomination Committee.
Interests in shares and options
+ 10,000 ordinary fully paid shares; and
+ 100,000 KGDOPT2 class options to acquire ordinary fully paid shares.
Lee spencer Msc app (Mineral Exploration) Managing Director and CEO. Age 57.
Experience and expertise
Lee is a Geologist with over 30 years experience in the mining industry. He has proven expertise in operating mines,
project development and exploration and has worked in South East Asia and PNG since 1976. Lee has been
associated with the Woodlark Island Gold Project for over ten years.
Lee has held numerous senior executive positions in the mining industry including CEO of BDI Mining Corp and VP of
Exploration for Indomin Resources Ltd. Lee has extensive developing country experience and has been credited with
several project discoveries and developments in the region, including the Cempaka diamond mine in Indonesia.
Lee holds an MSc App (Mineral Exploration) degree from the University of New South Wales.
20
KULA GOLD LImITED ACN 126 741 259
DirectOrs’ repOrt
inFOrmatiOn On DirectOrs (cOntinUeD)
Other current directorships
None.
Lee Spencer has been Kula Gold’s Chief Executive Officer and Managing Director since July 2007.
Former directorships in last 3 years
None.
Special responsibilities
Managing Director.
Member of the Risk Committee.
Interests in shares and options
+ 542,370 ordinary fully paid shares; and
+ 1,126,155 KGDOPT1 class options to acquire ordinary fully paid shares.
John Watkins Ba (Acct/Geo), Diploma in Geoscience (Min Ec) Executive Director and CFO. Age 56.
Experience and expertise
John Watkins has been Kula Gold’s Chief Financial Officer since January 2008.
John is an accountant and mining executive with over 30 years experience working in the resources sector. He was
previously the Commercial Manager at Barrick Gold Corporation’s Porgera Gold Mine and has worked in PNG or
on PNG projects for approximately 18 years. John has held the positions of CFO, Financial Controller and Company
Secretary for AMEX, ASX and TSX listed mining companies, including Endeavour Silver Corp and Nicron Resources Ltd.
John is a member of the Australian Society of CPAs, FCIS, FFin and a Fellow of the Australasian Institute of Mining and
Metallurgy. He has a BA (Acct/Geo) degree and a Diploma in Geoscience (Min Ec) from Macquarie University.
Other current directorships
None.
Former directorships in last 3 years
None.
Special responsibilities
Executive Director.
Interests in shares and options
+ 275,600 ordinary fully paid shares; and
+ 563,078 KGDOPT1 class options to acquire ordinary fully paid shares.
2010 ANNUAL REPORT
21
DirectOrs’ repOrt
inFOrmatiOn On DirectOrs (cOntinUeD)
Louis rozman Beng (Mining), Masters in Geoscience (Min Ec) Non Executive Director. Age 53.
Experience and expertise
Louis Rozman has been a Non Executive Director of Kula Gold since July 2007.
Louis is a Mining Engineer and executive with 30 years experience operating and constructing projects in Africa,
Australia and PNG. Louis was Chief Operations Officer of Aurion Gold Limited and was instrumental in the
development of its predecessor, Delta Gold Limited.
Louis is currently Investment Director of Pacific Road Capital Management Pty Ltd.
Louis is a Fellow and Chartered Professional (Management) of the Australasian Institute of Mining and Metallurgy and
a Member of the Australian Institute of Company Directors. He has a BEng (Mining) degree from the University of
Sydney and a Masters in Geoscience (Min Ec) from Macquarie University.
Other current directorships
Pacific Energy Ltd, Mawson West Ltd and Carbon Energy Ltd.
Former directorships in last 3 years
Timmins Gold Corp.
Special responsibilities
Non Executive Director.
Member of the Risk Committee.
Chairman of the Remuneration and Nomination Committee.
Interests in shares and options
+ 359,023 ordinary fully paid shares; and
+ 100,000 KGDOPT1 class options to acquire ordinary fully paid shares.
peter Bradford Bappsc Independent Non Executive Director. Age 52.
Experience and expertise
Peter Bradford has been a Non Executive Director of Kula Gold since September 2008.
Peter is a Metallurgist and corporate executive with 30 years of gold and base metals operational experience in
Africa and Australia.
Peter is a Fellow of the Australasian Institute of Mining and Metallurgy, a Member of the Society for Mining Engineers,
a member of the Australian Institute of Company Directors and an honorary life time member of the Ghana Chamber
of Mines. He holds a BAppSc degree in Extractive Metallurgy from the Western Australian School of Mines.
Other current directorships
Peter is currently President and CEO of Copperbelt Minerals Limited and a non-executive director of Ashburton
Minerals Limited.
Former directorships in last 3 years
Anvil Mining Limited from 1998 to 2009 and Golden Star Resources Ltd from 1999 to 2007.
22
KULA GOLD LImITED ACN 126 741 259
DirectOrs’ repOrt
inFOrmatiOn On DirectOrs (cOntinUeD)
Special responsibilities
Member of the Audit Committee.
Chairman of the Risk Committee.
Interests in shares and options
+ 432,900 ordinary fully paid shares; and
+ 100,000 KGDOPT1 class options to acquire ordinary fully paid shares.
Mark stowell BBus, Ca Independent Non Executive Director. Age 47.
Experience and expertise
Mark Stowell has been a Non Executive Director of Kula Gold since September 2010.
Mark is a Chartered Accountant with over 20 years of corporate finance and resource business management experience.
He served as manager in the corporate division of Arthur Andersen and subsequently in the establishment and
management of a number of successful ventures as principal, including resource companies operating in Australia and
internationally. He was a founder of Anvil Mining Ltd (DRC) and on its board for seven years until 2000. He was also
a founder and Non Executive Director of Incremental Petroleum Limited, an oil and gas producer with operations in
Turkey and the USA. He is the Chairman of Mawson West Ltd, an unlisted copper miner operating in Africa, and its
associated group company, Orrex Resources Ltd. Mark is also a Non Executive Director of Incremental Oil and Gas
Ltd, (ASX: IOG) a California oil and gas producer.
Mark is a member of the Institute of Chartered Accountants and has a BBus degree from Edith Cowan University
(formerly the WA College of Advanced Education).
Other current directorships
Mawson West Ltd, Orrex Resources Ltd, Incremental Oil and Gas Ltd.
Former directorships in last 3 years
Incremental Petroleum Limited.
Special responsibilities
Chairman of the Audit Committee.
Member of Remuneration and Nomination Committee.
Interests in shares and options
+ 25,000 ordinary fully paid shares; and
+ 100,000 KGDOPT2 class options to acquire ordinary fully paid shares.
2010 ANNUAL REPORT
23
DirectOrs’ repOrt
cOmpany secretary
Mr John Watkins held the position of Company Secretary during and since the end of the financial year.
Qualifications and experience are disclosed on previous pages.
meetinGs OF DirectOrs
The numbers of meetings of the Company’s Board of directors and of each Board committee held during the year
ended 31 December 2010, and the numbers of meetings attended by each director were:
bOarD meetinGs
meetinGs OF cOmmittees
auDit
risk
reNuMeratioN aND
NoMiNatioN
NuMBer
eLigiBLe to
atteND
NuMBer
atteNDeD
NuMBer
eLigiBLe to
atteND
NuMBer
atteNDeD
NuMBer
eLigiBLe to
atteND
NuMBer
atteNDeD
NuMBer
eLigiBLe to
atteND
NuMBer
atteNDeD
D Frecker
L Spencer
J Watkins
L Rozman
P Bradford
M Stowell
A Vogel*
R Perkes**
7
15
7
15
15
7
9
9
7
15
7
14
9
6
9
8
*A Vogel: Resigned 16 September 2010.
** R Perkes: Resigned 16 September 2010.
1
–
–
–
1
1
–
–
1
–
–
–
1
1
–
–
–
1
–
1
1
–
–
–
–
1
–
1
1
–
–
–
1
–
–
1
–
1
–
–
1
–
–
1
–
1
–
–
24
KULA GOLD LImITED ACN 126 741 259
DirectOrs’ repOrt
remUneratiOn repOrt
The remuneration report is set out under the following main headings:
Principles used to determine the nature and amount of remuneration
+ Details of remuneration
+ Service agreements
+ Share based compensation
+ Additional information
The information provided in this remuneration report has been audited as required by section 308(3C) of the
Corporations Act 2001.
principles used to determine the nature and amount of remuneration
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives
and the creation of value for shareholders, and conforms with market practice for delivery of reward. The Board ensures
that executive reward satisfies the following key criteria for good reward governance practices:
+ competitiveness and reasonableness;
+ acceptability to shareholders;
+ performance linkage / alignment of executive compensation;
+ transparency; and
+ capital management.
In consultation with external remuneration consultants, the Group has structured an executive remuneration framework
that is market competitive and complementry to the reward strategy of the organisation.
remuneration and Nomination Committee
The role of the Remuneration and Nomination Committee is to attend to matters relating to Kula Gold’s remuneration
policy to enable Kula Gold to attract and retain executives who will create value for Shareholders and to oversee
remuneration packages for management and employees of Kula Gold.
The Committee also attends to matters relating to succession planning and recommends candidates for election or
re-election to the Board at each annual Shareholder’s meeting. The Committee will periodically assess the appropriate
mix of skills, experience and expertise required on the Board and assess the extent to which the required skills and
experience are represented on the Board.
The Committee will comprise only non executive Directors, at least three members and a majority of independent
Directors. The Committee will be chaired by a non executive director who is not the chair of the Board.
The current members of the Remuneration and Nomination Committee are Louis Rozman (Chairman), Mark Stowell and
David Frecker.
2010 ANNUAL REPORT
25
DirectOrs’ repOrt
DirectOrs’ repOrt
remUneratiOn repOrt (cOntinUeD)
The Board has established a remuneration committee which makes recommendations to the board on remuneration
and incentive policies and practices and specific recommendations on remuneration packages and other terms of
employment for executive directors, other senior executives and non executive directors. The Corporate Governance
Statement provides further information on the role of this committee.
Non executive directors
Non-executive Directors are remunerated by way of directors’ fees within the limit approved by shareholders. The Board
determines fees paid to individual Board members. The current maximum aggregate sum which Shareholders have
fixed to be paid as fees to non-executive Directors is $300,000 per annum. This amount was fixed by Shareholders at
a general meeting held on 20 September 2010.
The Chairman is paid an annual fee of $70,000 plus superannuation. Other non-executive Directors are paid annual
base fees of $40,000 plus $10,000 for each Chairman of a Board Committee, plus superannuation.
Remuneration to non-executive Directors is not paid by commission on, or percentage of, profits or operating revenue.
Fees and payments to non executive directors reflect the demands which are made on, and the responsibilities of,
the directors. Non executive directors’ fees and payments are reviewed annually by the board. The Chair’s fees are
determined independently to the fees of non executive directors based on comparative roles in the external market. The
Chair is not present at any discussions relating to determination of his own remuneration.
Executive compensation
Remuneration to Executives is not paid by commission on, or percentage of, profits or operating revenue.
The executive compensation and reward framework has three components:
+ Fixed compensation which includes base pay and benefits, including superannuation;
+ Short term performance incentives; and
+ Long term incentives through participation in the Kula Gold Employee Option Plan.
Fixed compensation
Fixed compensation consists of base compensation which is calculated on a total cost basis, as well as employer
contributions to superannuation funds.
Short term incentives (“STI”)
The Remuneration Committee is responsible for assessing whether the KPIs are met in light of the Company’s corporate
goals and objectives and arranges annually a performance evaluation of the Company’s senior executives, including
the Chief Executive Officer and the Chief Financial Officer. The evaluation will be based on specific criteria, including
the business performance of the Company, whether strategic objectives are being achieved and the development of
management and personnel.
26
KULA GOLD LImITED ACN 126 741 259
DirectOrs’ repOrt
DirectOrs’ repOrt
remUneratiOn repOrt (cOntinUeD)
Details of remuneration
Amounts of remuneration
Details of the remuneration of the directors, the key management personnel of the Group (as defined in AASB 124
Related Party Disclosures) and the five highest paid executives of Kula Gold Limited and the Kula Gold Limited group
are set out in the following tables:
Non-executive Directors position
D Frecker
L Rozman
P Bradford
M Stowell
Non-executive Chairman (appointed as director on 16 September 2010)
Non-executive Director
Non-executive Director
Non-executive Director (appointed 16 September 2010)
Former Non-executive Directors
A Vogel
R Perkes
Non-executive Director (resigned 16 September 2010)
Non-executive Director (resigned 16 September 2010)
executive Directors and key Management personnel
L Spencer
J Watkins
Managing Director and CEO
Executive Director, CFO and Company Secretary
(appointed a Director on 16 September 2010)
In addition, the following persons must be disclosed under the Corporations Act 2001 as they are among the
5 highest remunerated group and/or company executives:
other group executives position
G Clapp
K Harland
Community Affairs/Environment Manager
Finance and Administration Manager
2010 ANNUAL REPORT
27
DirectOrs’ repOrt
remUneratiOn repOrt (cOntinUeD)
Directors, key Management personnel and other executives of the group - 2010
shOrt term
emplOyee beneFits
pOst-
emplOyment
beneFits
lOnG-
term
beneFits
share-baseD
payments
Cash
saLary
aND Fees
Cash
BoNus
superaNNuatioN
LoNg
serviCe
Leave
optioNs perCeNtage
oF totaL
paCkage
totaL
Directors
$
D Frecker
20,417
$
–
L Spencer
206,219
62,500
J Watkins
148,610
41,284
L Rozman
14,583
P Bradford
39,500
M Stowell
14,583
A Vogel*
R Perkes*
–
31,500
executives
G Clapp
229,167
K Harland
120,000
–
–
–
–
–
–
–
$
1,838
50,000
52,359
–
-–
1,312
–
–
–
–
total
824,579
103,784
105,509
*r perkes and a vogel resigned 16 september 2010
$
–
–
–
–
–
–
–
–
–
–
–
$
1,128
15,094
7,547
1,128
1,128
1,128
–
–
–
–
%
4.8
4.5
3.0
7.2
2.8
6.6
–
–
–
–
$
23,383
333,813
249,800
15,711
40,628
17,023
–
31,500
229,167
120,000
27,153
1,061,025
28
KULA GOLD LImITED ACN 126 741 259
DirectOrs’ repOrt
remUneratiOn repOrt (cOntinUeD)
Directors, key Management personnel and other executives of the group - 2009
shOrt term
emplOyee beneFits
pOst-
emplOyment
beneFits
lOnG-
term
beneFits
share-baseD
payments
Cash
saLary
aND Fees
$
–
Directors
L Rozman
L Spencer
237,500
A Vogel
R Perkes
–
42,000
P Bradford
36,000
executives
J Watkins
169,450
total
484,950
Cash
BoNus
superaNNuatioN
LoNg
serviCe
Leave
optioNs perCeNtage
oF totaL
paCkage
totaL
$
–
–
–
–
–
–
–
$
–
75,000
–
–
–
71,750
146,750
$
–
–
–
–
–
–
–
$
–
%
–
$
–
163,401
34.3
475,901
–
–
–
41,216
49.5
83,216
–
–
36,000
124,973
34.1
366,173
329,590
961,290
2010 ANNUAL REPORT
29
DirectOrs’ repOrt
remUneratiOn repOrt (cOntinUeD)
Contracts for services of key management personnel
Compensation and other terms of employment for the Managing Director and the Chief Financial Officer are formalised
in service agreements. All contracts with executives may be terminated early, subject to termination payments as
detailed below.
L Spencer, Managing Director and Chief Executive Officer
+ Term of agreement – ongoing under new terms and conditions which commenced 16 November 2010;
+ Base salary: $275,000 plus superannuation guarantee, to be reviewed annually;
+ Eligible to be paid a performance related bonus of up to 25% of the base salary at the discretion of the Board;
+ 90 days notice is required on resignation;
+ Termination by the Company, three months of base salary; and
+ Payment of benefit on termination within 12 months or after a change of control:
– 18 months of base salary grossed up to include any unpaid bonus and net of all deductions required by law.
J Watkins, Executive Director, Chief Financial Officer and Company Secretary
+ Term of agreement – ongoing under new terms and conditions which commenced 16 November 2010;
+ Base salary: $215,000 plus superannuation guarantee, to be reviewed annually;
+ Eligible to be paid a performance related bonus of up to 25% of the base salary at the discretion of the Board;
+ 90 days notice is required on resignation;
+ Termination by the Company, three months of base salary; and
+ Payment of benefit on termination within 12 months after a change of control:
– 18 months of base salary grossed up to include any unpaid bonus and net of all deductions required by law.
30
KULA GOLD LImITED ACN 126 741 259
DirectOrs’ repOrt
DirectOrs’ repOrt
remUneratiOn repOrt (cOntinUeD)
share based compensation
Options
Options over shares in Kula Gold Limited are granted under the Kula Gold Option Plan (Option Plan) to employees
(including executive directors). The Option Plan is designed to provide long term incentives for executives and senior
employees to deliver long term shareholder returns. Participation in the plan is at the Board’s discretion and no
individual has a contractual right to participate in the plan or to receive any guaranteed benefits. Options granted
under the plan carry no dividend or voting rights. Separately, at the time of the initial public offering of the Company’s
shares, each of the current Non-executive Directors were offered options. Details of options over ordinary shares in the
company provided as remuneration to each director of Kula Gold Limited and each of the key management personnel
of the Group are set out below. When exercisable, each option is convertible into one ordinary share of Kula Gold
Limited. Further information on the options is set out in note 28 to the financial statements.
The following options were granted as remuneration to directors and key management personnel of the Company
during the year ended 31 December 2010.
NaMe
graNteD
NuMBer
graNt Date
vesteD
NuMBer
ForFeiteD
iN year
expiry Date
exerCise
priCe
D Frecker
100,000
01 Dec 2010
L Spencer
1,126,155
01 Dec 2010
J Watkins
563,078
01 Dec 2010
L Rozman
100,000
01 Dec 2010
P Bradford
100,000
01 Dec 2010
M Stowell
100,000
01 Dec 2010
–
–
–
–
–
–
– 01 Dec 2015
– 01 Dec 2015
– 01 Dec 2015
– 01 Dec 2015
– 01 Dec 2015
– 01 Dec 2015
$1.80
$1.80
$1.80
$1.80
$1.80
$1.80
Fair vaLue
at graNt
Date
$41,000
$349,109
$174,555
$41,000
$41,000
$41,000
The following factors were used in determining the fair value of options on grant date:
NaMe
graNteD
NuMBer
expiry Date
Fair vaLue
per optioN
exerCise
priCe
priCe oF
shares oN
graNt Date
expeCteD
voLatiLity
iNterest
rate
D Frecker
100,000 01 Dec 2015
L Spencer
1,126,155 01 Dec 2015
J Watkins
563,078 01 Dec 2015
L Rozman
100,000 01 Dec 2015
P Bradford
100,000 01 Dec 2015
M Stowell
100,000 01 Dec 2015
$0.41
$0.31
$0.31
$0.41
$0.41
$0.41
$1.80
$1.80
$1.80
$1.80
$1.80
$1.80
$1.68
$1.68
$1.68
$1.68
$1.68
$1.68
30%
30%
30%
30%
30%
30%
5.33%
5.33%
5.33%
5.33%
5.33%
5.33%
These options carry no voting rights and no rights to dividends.
2010 ANNUAL REPORT
31
DirectOrs’ repOrt
remUneratiOn repOrt (cOntinUeD)
share based compensation (continued)
The following options were granted to a director of the Company as part of his remuneration during
the comparative reporting period:
NaMe
graNteD
NuMBer
graNt Date
vesteD
NuMBer
ForFeiteD
iN year
expiry Date
exerCise
priCe
Fair vaLue
at graNt
Date
R Perkes
95* 03 April 2009
95*
– 07 Dec 2013 US$1,000
$41,216
* Prior to capital re-organisation – Refer Note 17(c).
These options carry no voting rights and no rights to dividends.
The following factors were used in determining the fair value of options on grant date:
NaMe
graNteD
NuMBer
expiry Date
Fair vaLue per
optioN
exerCise
priCe
priCe oF shares oN
graNt Date
iNterest
rate
R Perkes
95* 07 Dec 2013
$433
US$1,000
US$1,000
0.82%
*Prior to capital re-organisation – Refer Note 17(c).
On 16 March 2011, 200,000 options were granted to Company employees under the Kula Gold Option Plan at an
exercise price of $1.80. The options are exercisable on or before 5 years from the date of grant of the options.
lOans tO DirectOrs anD execUtives
There were no loans to directors or executives during the reporting period.
shares issUeD On the exercise OF OptiOns
No options were exercised during the year ended 31 December 2010 (2009: Nil).
inDemniFicatiOn anD insUrance OF OFFicers
The Group has agreed to indemnify the directors and officers of the Group for any:
(a) liability for any act or omission in their performance as director or officer; and
(b) costs incurred in settling or defending any claim or proceeding relating to any such liability, not being
a criminal liability.
During the financial year, Kula Gold paid premiums to insure the directors and the officers of the Group. In
accordance with commercial practice the policy has a confidentiality clause which prohibits the disclosure of the
amount of the premium and the nature and amount of the liability covered. There were no claims under the policy
during the reporting period.
32
KULA GOLD LImITED ACN 126 741 259
DirectOrs’ repOrt
inDemniFicatiOn anD insUrance OF OFFicers (cOntinUeD)
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought
against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities
incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct
involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain
advantage for themselves or someone else or to cause detriment to the Group. It is not possible to apportion the premium
between amounts relating to the insurance against legal costs and those relating to other liabilities.
prOceeDinGs On behalF OF the GrOUp
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings
on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking
responsibility on behalf of the Group for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section
237 of the Corporations Act 2001.
nOn-aUDit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the
auditor’s expertise and experience with the Group are important.
Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for non-audit services provided during
the year are set out below.
The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee,
is satisfied that the provision of the non-audit services is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by
the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001
for the following reasons:
+ all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and
objectivity of the auditor; and
+ none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants.
During the year the following fees were paid or payable for non-audit services provided by the auditor of the Group, its
related practices and non-related audit firms:
2010 ANNUAL REPORT
33
DirectOrs’ repOrt
nOn-aUDit services (cOntinUeD)
Non-audit services
other assurance services
PricewaterhouseCoopers Australian firm:
cOnsOliDateD
2010
$
2009
$
Investigating accountants report and other services relating to IPO
Other services
Total remuneration for other assurance services
491,080
9,496
500,576
–
10,000
10,000
taxation services
PricewaterhouseCoopers Australian firm:
Tax compliance service
Related practices of PricewaterhouseCoopers Australian firm
Total remuneration for taxation services
40,350
22,928
63,278
–
21,600
21,600
total remuneration for non-audit services
563,854
31,600
34
KULA GOLD LImITED ACN 126 741 259
DirectOrs’ repOrt
FUnctiOnal anD presentatiOn cUrrency
The amounts included in the Directors’ Report and consolidated financial statements are presented in Australian dollars,
which is Kula Gold Limited’s functional and presentation currency, unless otherwise stated.
aUDitOr’s inDepenDence DeclaratiOn
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is
set out on page 36.
rOUnDinG OF amOUnts
The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the ‘’rounding off’’ of amounts in the Directors’ Report. Amounts in the Directors’ Report have
been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the
nearest dollar.
aUDitOr
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors.
David Frecker
Chairman
Sydney, 25 March 201
Lee spencer
Director
2010 ANNUAL REPORT
35
aUDitOr’s
inDepenDence DeclaratiOn
pricewaterhousecoopers
abn 52 780 433 757
darling Park Tower 2
201 Sussex Street
gPO BOX 2650
SYdneY nSW 1171
dX 77 Sydney
Australia
www.pwc.com/au
Telephone +61 2 8266 0000
Facsimile +61 2 8266 9999
auditor’s independence Declaration
As lead auditor for the audit of Kula Gold Limited for the year ended 31 December 2010, I declare that, to the best of
my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Kula Gold Limited and the entities it controlled during the period.
Peter Buchholz
Partner
PricewaterhouseCoopers
Sydney
25 March 2011
Liability limited by a scheme approved under professional standards Legislation
36
KULA GOLD LImITED ACN 126 741 259
cOrpOrate
GOvernance statement
The Board is committed to ensuring that Kula Gold is properly managed to protect and enhance Shareholder
interests, and that Kula Gold, its Directors, officers and employees operate in an appropriate environment of
corporate governance.
Accordingly, the Board has adopted corporate governance policies and practices (the majority of which are in
accordance with ASX’s Corporate Governance Principles and Recommendations (ASX Recommendations)) designed
to promote the responsible management and conduct of Kula Gold. Where the Company’s practices do not correlate
with the ASX Recommendations, Kula Gold is working towards compliance but does not consider that all practices
are appropriate for the size and scale of Kula Gold’s operations. The Board continues to review the framework and
practices to ensure they meet the interests of shareholders. The Company and its controlled entity together are referred
to as the Group in this statement.
A description of the Group’s main corporate governance practices is set out below.
Details of Kula Gold’s key policies and practices and charters for the Board and each of its committees may be
obtained from the Company Secretary.
principle 1 – lay sOliD FOUnDatiOns
FOr manaGement anD OversiGht
recommendation 1.1: Companies should establish the functions reserved to the Board and those delegated to
senior executives and disclose those functions
The Board is ultimately responsible for setting policies regarding the strategic direction and goals for the business and
affairs of Kula Gold.
In discharging their duties, Directors are provided direct access to and may rely upon senior management and outside
advisers and auditors. The Board collectively, the Board committees and individual Directors may seek independent
professional advice at Kula Gold’s expense for the purposes of the proper performance of their duties.
2010 ANNUAL REPORT
37
cOrpOrate
GOvernance statement
principle 1 – lay sOliD FOUnDatiOns
FOr manaGement anD OversiGht (cOntinUeD)
role of the Board
The responsibilities of the Board include:
+ overseeing the business and affairs of Kula Gold;
+ appointing the Managing Director and other senior executives and determining their terms and conditions, including
remuneration and termination;
+ driving the strategic direction of Kula Gold, ensuring appropriate resources are available to meet objectives and
monitoring management’s performance;
+ reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct and
legal compliance;
+ overseeing and reviewing the Company’s occupational health and safety systems;
+ approving and monitoring the progress of major capital expenditure, capital management and significant
acquisitions and divestitures;
+ approving and monitoring the budget and the adequacy and integrity of financial and other reporting;
+ approving the annual, half-yearly and quarterly accounts;
+ approving significant changes to the organisational structure;
+ approving the issue of any shares, options, equity instruments or other securities in Kula Gold;
+ ensuring a high standard of corporate governance practice and regulatory compliance and promoting ethical and
responsible decision-making;
+ recommending to Shareholders the appointment of the external auditor as and when their appointment or re-
appointment is required to be approved; and
+ meeting with external auditor, at their request, without management being present.
role of senior executives
The Board delegates day-to-day management of Kula Gold’s resources to management, under the leadership of the
CEO, to deliver the strategic direction and goals determined by the Board.
recommendation 1.2: Companies should disclose the process for evaluating the performance of senior executives
Kula Gold aims to have a clear process for evaluating the performance of senior executives. The Board has delegated
to the Remuneration and Nomination Committee the responsibility to arrange annually a performance evaluation of the
Company’s senior executives, including the Chief Executive Officer and the Chief Financial Officer. The evaluation will
be based on specific criteria, including the business performance of the Company, whether strategic objectives are
being achieved and the development of management and personnel.
38
KULA GOLD LImITED ACN 126 741 259
cOrpOrate
GOvernance statement
principle 2 – strUctUre the bOarD tO aDD valUe
It is a policy of Kula Gold that the Board comprises individuals with a range of knowledge, skills and experience
which are appropriate to its objectives. The composition of the Board is to be reviewed regularly to ensure the
appropriate mix of skills and expertise is present to facilitate successful strategic direction.
Currently the Board comprises six directors, being a non-executive chairman, two executive directors and three non-
executive directors. The directors have a broad mix of skills, experience and knowledge to enable them to effectively
and efficiently discharge their responsibilities and duties. Details of the members of the Board, their experience,
expertise, qualifications and independent status are set out in the Directors’ report.
recommendation 2.1: a majority of the Board should be independent Directors
The Board has adopted specific principles in relation to directors’ independence. The Board considers an independent
Director to be a non-executive Director who is not a member of Kula Gold’s management and who is free of any
business or other relationship that could materially interfere with, or could reasonably be perceived to interfere with,
the independent exercise of their judgement. The Board will consider the materiality of any given relationship on a
case-by-case basis, having regard to both quantitative and qualitative principles.
The Board currently comprises four Non-Executive Directors and two Executive Directors. The Chairman is a
Non-Executive Director. The current members of the Board are D Frecker (Chairman), L Spencer (Executive Director),
J Watkins (Executive Director), P Bradford, L Rozman and M Stowell.
D Frecker, P Bradford and M Stowell are considered by the Board to be independent. The Board considers that the
existing Board structure is appropriate for Kula Gold’s current operations and stage of development despite the fact that
it does not have a majority of independent Non-Executive Directors.
recommendation 2.2: the Chair should be an independent Director
Chairman
Mr D Frecker was appointed Chairman of the Company on 16 September 2010 and is considered an independent
Director in accordance with recommendation 2.1 of the best practice recommendations.
recommendation 2.3: the roles of Chair and Chief executive officer should not be exercised by the same individual
The role of Chair and Chief Executive Officer is not occupied by the same individual.
recommendation 2.4: the Board should establish a Nomination Committee
The Board established a Remuneration and Nomination Committee on 20 September 2010. The Remuneration and
Nomination Committee has a written charter defining the role and responsibility of the committee. The responsibilities
of the Remuneration and Nomination Committee include matters relating to succession planning and recommend
candidates for election or re-election to the Board at each annual Shareholders’ meeting. The Committee will
periodically assess the appropriate mix of skills, experience and expertise required on the Board and assess the extent
to which the required skills and experience are represented on the Board.
recommendation 2.5: Companies should disclose the process for evaluating the performance of the Board,
its Committees and individual Directors
It is intended that a review of the Board’s own performance will be conducted annually together with the reviews of the
performance of its committees and individual directors.
2010 ANNUAL REPORT
39
cOrpOrate
GOvernance statement
principle 3 – prOmOte ethical
anD respOnsible DecisiOn-makinG
recommendation 3.1: Companies should establish a code of conduct
The Board acknowledges the need for high standards of corporate governance practice and ethical conduct by all
Directors and employees of Kula Gold.
The Board has adopted a code of conduct which sets out Kula Gold’s commitment to maintaining high levels of
integrity and ethical standards in its business practices. The code of conduct sets out for all Directors, management and
employees the standards of behaviour expected of them.
The code of conduct sets out Kula Gold’s policies on various matters, including, conflicts of interest, public and media
comment, use of Kula Gold resources, security of information, intellectual property/copyright, discrimination and
harassment, corrupt conduct, occupational health and safety and insider trading.
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 Kula Gold in relation to confidential information they possess.
recommendation 3.2: Companies should establish a policy concerning trading in company securities by Directors,
senior executives and employees, and disclose the policy or a summary of that policy
Directors, officers and other employees of Kula Gold will be in possession of information relating to Kula Gold and,
possibly, other companies. From time to time, some of this information may be classified as “inside” information. The
Corporations Act provides that it is a criminal offence for a person in possession of inside information in relation to
a company to trade, or procure another person to trade in securities of that company. Kula Gold has adopted a
securities trading policy that explains the prohibition on insider trading and also, in addition, limits trading by Directors
and employees to specific “trading windows”, such as following the release of Kula Gold’s full and half year results
announcements and the annual general meeting. In certain instances Kula Gold’s policy extends beyond the strict
requirements of the Corporations Act.
Any such a trade by a Director must be notified in advance to the Chairman or the Board and clearance obtained.
Any Director or employee who (or through his or her Associates) buys, sells, or exercises rights in relation to Kula Gold
securities must notify the Company Secretary in writing of the details of the transaction within five business days after
the transaction occurring. This notification obligation operates at all times subject to certain exceptions.
40
KULA GOLD LImITED ACN 126 741 259
cOrpOrate
GOvernance statement
principle 4 – saFeGUarD inteGrity in Financial repOrtinG
recommendation 4.1: the Board should establish an audit Committee
The Board established an Audit Committee on 20 September 2010.
recommendation 4.2: the audit Committee should be structured so that it:
+ consists only of Non-executive Directors
+ consists of a majority of Independent Directors
+ is chaired by an independent chair, who is not Chair of the Board
+ has at least three members
The Audit Committee consists of three Non-executive Directors all of which are independent directors and chaired by an
independent Director who is not chair of the Board. The Chairman satisfies the test of independence.
The current members of the Audit Committee are M Stowell (Chairman), P Bradford and D Frecker.
Details of these directors’ qualifications and attendance at audit committee meetings are set out in the directors’ report.
recommendation 4.3: the audit Committee should have a formal charter
The Audit Committee has a written charter defining the role and responsibility of the committee. The role of the Audit
Committee is to assist the Board in monitoring and reviewing any matters of significance affecting financial reporting
and compliance.
The external auditor will attend the Annual General Meeting and be available to answer shareholder questions about
the conduct of the audit and the preparation and content of the audit report.
principle 5 – make timely anD balanceD DisclOsUre
recommendation 5.1: Companies should establish written policies designed to ensure compliance with asx Listing
rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and
disclose those policies or a summary of those policies
Kula Gold is committed to continuous disclosure of material information as a means of promoting transparency and
investor confidence.
The Company Secretary has been nominated as the persons responsible for communications with the Australian
Securities Exchange (ASX). This role includes the responsibility for ensuring compliance with the continuous disclosure
requirements in the ASX listing rules and overseeing and co-ordinating information disclosure to ASX.
The Company has written policies and procedures on information disclosure that focus on continuous disclosure of any
information concerning the Company that a reasonable person would expect to have a material effect on the price of
the Company’s securities.
2010 ANNUAL REPORT
41
cOrpOrate
GOvernance statement
principle 6 – respect the riGhts OF sharehOlDers
recommendation 6.1: Companies should design a communications policy for promoting effective communication
with shareholders and encouraging their participation at general meetings and disclose their policy or a summary
of that policy
The Board aims to ensure that shareholders are informed of all major developments affecting the Company.
Shareholders are updated on the Company’s operations via ASX announcements “Quarterly Activities Report”
and “Quarterly Cash Flow Report” and other disclosure information. All ASX announcements are available on the
Company’s website at www.kulagold.com.au, or alternatively, by request via email, facsimile or post. In addition,
a copy of the annual report will be distributed to all shareholders who elect to receive it.
principle 7 – recOGnise anD manaGe risk
recommendation 7.1: Companies should establish policies for the oversight and management of material business
risks and disclose a summary of those policies
Kula Gold is committed to the identification, monitoring and management of risks associated with its business activities
and has established policies in relation to the implementation of practical and effective control systems.
recommendation 7.2: the Board should require management to design and implement the risk management and
internal control system to manage the company’s material business risks and report to it on whether those risks are
being managed effectively. the Board should disclose that management has reported to it as to the effectiveness of
the company’s management of its material business risks.
The Board is responsible for ensuring that sound risk management strategy and polices are in place. The Board
established a Risk Committee on 20 September 2010. The Board has delegated to the Risk Committee responsibility
for identifying and overseeing major risk areas and that systems are in place to manage them, and report to the Board
as and when appropriate.
The role of the Risk Committee is to assist the Board with the identification and management of business and
operational risks faced by the Company. The Committee will have primary responsibility for overseeing the Company’s
risk management systems, practices and procedures and reviewing periodically the scope and adequacy of the
Company’s insurance to cover these risks.
The Risk Committee must develop and maintain a risk register which identifies the risks to the Company and its operation
and assesses the likelihood of their occurrence. The risk register will be updated periodically and represented to the
Board for its consideration at least twice a year.
The responsibility for undertaking and assessing risk management and internal control effectiveness is delegated to
management. Management is required to assess risk management and associated internal compliance and control
procedures and report back quarterly to the Risk Committee on whether those risks are being managed effectively.
The Risk Committee is comprised of at least three members and may include both Executive and Non-executive
Directors. The Committee is chaired by a non-executive Director who is not the chair of the Board.
The current members of the Risk Committee are P Bradford (Chairman), L Rozman and L Spencer.
Details of these directors’ qualifications and attendance at risk committee meetings are set out in the Directors’ Report.
42
KULA GOLD LImITED ACN 126 741 259
cOrpOrate
GOvernance statement
principle 7 – recOGnise anD manaGe risk (cOntinUeD)
recommendation 7.3: the Board should disclose whether it has received assurance from the Chief executive officer
(or equivalent) and the Chief Financial officer (or equivalent) that the declaration provided in accordance with
section 295a of the Corporations act is founded on a sound system of risk management and internal control and
that the system is operating effectively in all material respects in relation to financial reporting risks.
Mr L Spencer (CEO) and Mr J Watkins (CFO) have made the following certifications to the Board:
+ the financial records of the Company have been properly maintained in accordance with Section 286 of the
Corporations Act 2001;
+ the financial statements and notes thereto comply with the relevant accounting standards in all material respects as
required by Section 296 Corporations Act 2001;
+ the financial statements and notes thereto give a true and fair view, in all material respects, of the financial position
and performance of the company and consolidated entities as required by Section 297 of the Corporations Act
2001; and
+ any other matters are prescribed by the regulations in relation to the financial statements and the accompanying
notes are satisfied.
principle 8 – remUnerate Fairly anD respOnsibly
recommendation 8.1: the Board should establish a remuneration Committee.
The Board established a Remuneration and Nomination Committee on 20 September 2010. The Remuneration and
Nomination Committee has a written charter defining the role and responsibility of the committee.
The Remuneration and Nomination Committee consists of the following non executive directors (a majority of whom are
independent): L Rozman (Chairman), M Stowell and D Frecker. Details of these directors’ attendance at Remuneration
and Nomination Committee meetings are set out in the Directors’ Report.
The role of the Remuneration and Nomination Committee is to attend to matters relating to Kula Gold’s remuneration
policy to enable Kula Gold to attract and retain executives who will create value for Shareholders and to oversee
remuneration packages for management and employees of Kula Gold.
recommendation 8.2: Companies should clearly distinguish the structure of Non-executive Directors’ remuneration
from that of executive Directors and senior executives.
Each member of the senior executive team, including the two Executive Directors, have signed a formal employment
contract at the time of their appointment covering a range of matters including their duties, rights, responsibilities and
any entitlements on termination. The standard contract refers to a specific formal job description. Each contract sets out
the remuneration of the executive, including his or her entitlements to any options under the Employee Option Plan.
Non-executive Directors receive director’s fees in agreed amounts. At the time of initial public offering of the Company’s
shares, each of the current Non-Executive Directors were offered options on terms approved by the ASX.
Further information on directors’ and executives’ remuneration, including principles used to determine remuneration, is set
out in the Directors’ Report under the heading ‘’Remuneration report’’.
2010 ANNUAL REPORT
43
Financial statements
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report to the members of Kula Gold
45
46
47
49
50
90
91
These financial statements are the consolidated financial
statements of the consolidated entity consisting of Kula gold
limited and its subsidiary. The financial statements
are presented in the Australian currency.
Kula gold limited is a company limited by shares,
incorporated and domiciled in Australia. The registered
and principal place of business is Suite 2, level 15,
1 York Street, Sydney, nSW 2000.
A description of the nature of the consolidated entity’s
operations and its principal activities is included in the
directors’ report on pages 17 to 35, which is not part
of these financial statements.
The financial statements were authorised for issue by the
directors on 25 March 2011. The directors have the power
to amend and reissue the financial statements.
44
KULA GOLD LImITED ACN 126 741 259
cOnsOliDateD statement
OF cOmprehensive incOme
FOr the year enDeD 31 December 2010
revenue from continuing operations
Employee benefits expense
Professional and consulting expenses
Rental expense
Insurance expense
Foreign exchange losses
Other expenses
(Loss) before income tax
Income tax benefit/(expense)
Loss for the year
other comprehensive income
Notes
5
6
7
cOnsOliDateD
2010
$’000
370
(811)
(3,306)
(58)
(46)
(1,037)
(170)
(5,058)
–
(5,058)
2009
$’000
12
(918)
(314)
(45)
(12)
(559)
(42)
(1,878)
29
(1,849)
Exchange differences on translation of foreign operations
18(a)
total comprehensive loss for the year
(7,330)
(12,388)
(14,892)
(16,741)
earnings per share for loss from continuing operations attributable
to the ordinary equity holders of the parent entity:
Basic earnings per share
Diluted earnings per share
27
27
CeNts
CeNts
(6.40)
(6.40)
(3.07)
(3.07)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
2010 ANNUAL REPORT
45
cOnsOliDateD statement
OF Financial pOsitiOn
as at 31 December 2010
assets
Current assets
Cash and cash equivalents
Receivables and other assets
Inventories
total current assets
Non current assets
Property, plant and equipment
Mineral exploration and evaluation expenditure
Other non current assets
total non current assets
total assets
LiaBiLities
Current liabilities
Trade and other payables
total current liabilities
Non current liabilities
Provisions
total non current liabilities
total liabilities
Net assets
equity
Contributed equity
Reserves
Accumulated losses
total equity
cOnsOliDateD
Notes
2010
$’000
2009
$’000
8
9
10
11
12
14
15
16
48,265
1,008
1,101
50,374
2,158
68,393
18
70,569
2,614
219
294
3,127
2,400
54,881
8
57,289
120,943
60,416
3,795
3,795
1,322
1,322
147
147
116
116
3,942
1,438
117,001
58,978
17
18(a)
18(b)
134,792
(10,214)
(7,577)
117,001
62,964
(1,467)
(2,519)
58,978
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
46
KULA GOLD LImITED ACN 126 741 259
cOnsOliDateD statement
OF chanGes in eqUity
FOr the year enDeD 31 December 2010
attribUtable tO Owners OF kUla GOlD limiteD
CoNtriButeD
equity
share-
BaseD
payMeNts
reserve
ForeigN
CurreNCy
traNsLatioN
reserve
totaL
reserves
aCCuMuLateD
Losses
totaL
equity
Consolidated
Notes
$'000
$'000
$'000
$'000
$'000
$'000
Balance at 1 Jan
2009
total loss for the year
as reported in the 2009
financial statements
Exchange differences
on translation of
foreign operations
total comprehensive
loss for the year
transactions with
owners in their
capacity as owners:
Contributions of equity
net of transaction costs
share based
payments
18
17
18
Balance at
31 Dec 2009
48,094
229
12,867
13,096
(670) 60,520
–
–
–
14,870
–
14,870
–
–
–
–
329
329
–
–
(1,849)
(1,849)
(14,892)
(14,892)
– (14,892)
(14,892)
(14,892)
(1,849)
(16,741)
–
–
–
–
329
329
– 14,870
–
–
329
15,199
62,964
558
(2,025)
(1,467)
(2,519) 58,978
Balance at 1 Jan 2010
62,964
558
(2,025)
(1,467)
(2,519) 58,978
total loss for the
year as reported in
the 2010 financial
statements
Exchange differences
on translation of
foreign operations
total comprehensive
loss for the year
18
–
–
–
–
–
-–
–
–
(5,058)
(5,058)
(7,330)
(7,330)
–
(7,330)
(7,330)
(7,330)
(5,058)
(12,388)
Continued over page
2010 ANNUAL REPORT
47
cOnsOliDateD statement
OF chanGes in eqUity (cOntinUeD)
FOr the year enDeD 31 December 2010
attribUtable tO Owners OF kUla GOlD limiteD
CoNtriButeD
equity
share-
BaseD
payMeNts
reserve
ForeigN
CurreNCy
traNsLatioN
reserve
totaL
reserves
aCCuMuLateD
Losses
totaL
equity
Consolidated
Notes
$'000
$'000
$'000
$'000
$'000
$'000
transactions with
owners in their
capacity as owners:
Contributions of equity,
net of transaction costs
Share based payments
Cancellation of
options
17
18
Balance at
31 Dec 2010
71,828
–
–
–
29
(1,446)
71,828
(1,417)
–
–
–
–
–
29
(1,446)
(1,417)
– 71,828
–
–
–
29
(1,446)
70,411
134,792
(859)
(9,355)
(10,214)
(7,577)
117,001
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
48
KULA GOLD LImITED ACN 126 741 259
cOnsOliDateD statement
OF cash FlOws
FOr the year enDeD 31 December 2010
Notes
cOnsOliDateD
2010
$’000
2009
$’000
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services
tax)
Interest income
Net cash (outflow) inflow from operating activities
26
Cash flows from investing activities
Payments for property, plant and equipment
Payments for exploration activities
Net cash (outflow) inflow from investing activities
Cash flows from financing activities
Proceeds from issues of shares
Payment for repurchase of share options
Net cash inflow (outflow) from financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
8
–
(4,614)
(4,614)
151
(4,463)
(544)
(18,805)
(19,349)
71,828
(1,446)
70,382
46,570
2,614
(919)
48,265
–
(2,494)
(2,494)
12
(2,482)
(1,355)
(12,889)
(14,244)
14,870
–
14,870
(1,856)
4,636
(166)
2,614
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
2010 ANNUAL REPORT
49
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
1 Summary of significant accounting policies
2 Financial risk management
3 Critical accounting estimates and judgements
4 Segment information
5 Revenue
6 Expenses
7 Income tax (benefit)/expense
8 Current assets – Cash and cash equivalents
9 Current assets – Receivables
10 Current assets – Inventories
11 Non current assets – Property, plant and equipment
12 Non current assets – Mineral exploration and evaluation expenditure
13 Non current assets – Deferred tax assets
14 Non current assets – Other non current assets
15 Current liabilities – Trade and other payables
16 Non current liabilities – Provisions
17 Contributed equity
18 Reserves and accumulated losses
19 Directors and Key Management Personnel disclosures
20 Remuneration of auditors
21 Contingencies
22 Commitments
23 Related party transactions
24 Subsidiary
25 Events occurring after the reporting period
26 Reconciliation of loss after income tax to net cash outflow from operating activities
27 Earnings per share
28 Share based payments
29 Parent entity financial information
51
61
63
64
65
65
66
67
68
68
69
70
71
72
72
73
73
76
77
81
81
82
82
83
83
84
84
85
88
50
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
1 sUmmary OF siGniFicant accOUntinG pOlicies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial
statements are for the consolidated entity consisting of Kula Gold Limited and its subsidiaries.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards,
other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations
and the Corporations Act 2001.
Compliance with iFrs
The consolidated financial statements of the Kula Gold Limited group also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Historical cost convention
These financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’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 3.
(b) principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Kula Gold Limited
(‘’company’’ or ‘’parent entity’’) as at 31 December 2010 and the results of all subsidiaries for the year then ended. Kula
Gold Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the
financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de consolidated
from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group (refer to note 1(h)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Non controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income
statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and
consolidated statement of financial position respectively.
2010 ANNUAL REPORT
51
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
1 sUmmary OF siGniFicant accOUntinG pOlicies (cOntinUeD)
(c) segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of Directors.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s operations are measured using the currency
of the primary economic environment in which it operates (‘the functional currency’). The consolidated financial
statements are presented in Australian dollars, which is Kula Gold Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss, except when they are deferred in equity as qualifying cash flow hedges and qualifying net
investment hedges or are attributable to part of the net investment in a foreign operation.
Non monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at
the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss. For example, translation differences on non monetary assets and liabilities
such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or
loss and translation differences on non monetary assets such as equities classified as available for sale financial assets
are included in the fair value reserve in equity.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
+ assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate
at the date of that consolidated statement of financial position;
+ income and expenses for each consolidated income statement and consolidated statement of comprehensive
income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates
of the transactions); and
+ all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and
of borrowings and other financial instruments designated as hedges of such investments, are recognised in other
comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are
repaid, a proportionate share of such exchange difference is reclassified to profit or loss, as part of the gain or loss on
sale where applicable.
52
KULA GOLD LImITED ACN 126 741 259
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Financial statements
31 December 2010
1 sUmmary OF siGniFicant accOUntinG pOlicies (cOntinUeD)
(e) revenue recognition
Revenue represents interest income and is recognised using the effective interest method.
(f) income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based
on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end
of the reporting period in the countries where the company’s subsidiaries operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to
be paid to the tax authorities.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of
the reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the
deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the
end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
(g) Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee
are classified as operating leases (note 22). Payments made under operating leases (net of any incentives received
from the lessor) are charged to the consolidated income statement on a straight line basis over the period of the lease.
2010 ANNUAL REPORT
53
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
1 sUmmary OF siGniFicant accOUntinG pOlicies (cOntinUeD)
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired.
The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any
contingent consideration arrangement and the fair value of any pre existing equity interest in the subsidiary. Acquisition-related
costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-
acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling
interest’s proportionate share of the acquiree’s net identifiable assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of
the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net
identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference
is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to
their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from an independent financier under comparable
terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
(i) impairment of assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment,
or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested 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 inflows which are
largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial
assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each
reporting date.
(j) Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows, 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
six months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
54
KULA GOLD LImITED ACN 126 741 259
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Financial statements
31 December 2010
1 sUmmary OF siGniFicant accOUntinG pOlicies (cOntinUeD)
(k) inventories
Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable
value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead
expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items
of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
(l) investments and other financial assets
Classification
The Group classifies its investments in the following category: loans and receivables. The classification depends on
the purpose for which the investments were acquired. Management determines the classification of its investments at
initial recognition.
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They are included in current assets, except for those with maturities greater than 12 months after the
reporting period which are classified as non-current assets. Loans and receivables are included in trade and other
receivables (note 9) in the Consolidated Statement of Financial Position.
Recognition and derecognition
Regular purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to
purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets
not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially
recognised at fair value and transaction costs are expensed in profit or loss. Financial assets are derecognised when
the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
Subsequent measurement
Loans and receivables are carried at amortised cost using the effective interest method.
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset
or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant
or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities
are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss, measured as the
difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset
previously recognised in profit or loss is reclassified from equity and recognised in the profit or loss, as a reclassification
adjustment. Impairment losses recognised in profit or loss on equity instruments classified as available-for-sale are not
reversed through profit or loss.
2010 ANNUAL REPORT
55
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
1 sUmmary OF siGniFicant accOUntinG pOlicies (cOntinUeD)
(m) property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
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 Group and the cost of the item
can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised
when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which
they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost,
net of their residual values, over their estimated useful lives as follows:
+ Buildings
25 years
+ Motor vehicles and boats
3 years
+ Plant and equipment
+ Furniture and fittings
6 years
6 years
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 (note 1(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in
profit or loss.
(n) exploration and evaluation expenditure
Exploration and evaluation costs related to an area of interest are written off as incurred except where they may be
carried forward as an item in the consolidated statement of financial position where the rights of tenure of an area are
current and one of the following conditions is met:
+ the costs are expected to be recouped through successful development and exploitation of the area of interest, or
alternatively, by its sale; or
+ exploration and/or evaluation activities in the area of interest have not at the reporting date reached a stage which
permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and
significant operations in, or in relation to, the area of interest are continuing.
When a decision is made that the accumulated exploration and evaluation expenditure in an area of interest is
considered to be reduced or of no further value, the expenditure is written off in profit or loss in the period in which
the area is relinquished or the decision made.
(o) trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year
which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
56
KULA GOLD LImITED ACN 126 741 259
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Financial statements
31 December 2010
1 sUmmary OF siGniFicant accOUntinG pOlicies (cOntinUeD)
(p) provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events,
it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably
estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood
of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the reporting date. The discount rate used to determine the present value reflects current market
assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the
passage of time is recognised as interest expense.
(q) provision for decommissioning costs
Provision is recognised for the future decommissioning and restoration of mining operations at the end of their economic
lives. The timing of recognition requires the application of judgement to existing facts and circumstances, which will be
subject to changes. Estimates of the amounts of provision are based on current legal and constructive requirements,
technology and price levels. Because the actual outflows can differ from estimates due to changes in laws, regulations,
public expectations, technology, prices and conditions, and can take place many years in the future, the carrying
amount of the provision is regularly reviewed and adjusted to take account of such changes.
(r) employee benefits
(i) Short term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave expected to be settled within
12 months after the end of the period in which the employees render the related service are recognised in respect
of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid
when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits.
All other short-term employee benefit obligations are presented as payables.
(ii) Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present
value of expected future payments to be made in respect of services provided by employees up to the end of the
reporting period using the projected unit credit method. Consideration is given to expected future wage and salary
levels, experience of employee departures and periods of service. Expected future payments are discounted using
market yields at the end of the reporting period on national government bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows.
2010 ANNUAL REPORT
57
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
1 sUmmary OF siGniFicant accOUntinG pOlicies (cOntinUeD)
(iii) Share based payments
Share-based compensation benefits are provided to employees via the Kula Gold Limited Option Plan and an
employee share scheme. Information relating to these schemes is set out in note 28.
The fair value of options granted under the Kula Gold Limited Option Plan is recognised as an employee benefit
expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair
value of the options granted, which includes any market performance conditions but excludes the impact of any service
and non-market performance vesting conditions and the impact of any non-vesting conditions.
Non-market vesting conditions are included in assumptions about the number of options that are expected to vest.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting
conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that
are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision to original
estimates, if any, in profit or loss, with a corresponding adjustment to equity.
(s) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from
the proceeds. Incremental costs directly attributable to the issue of new shares for the acquisition of a business are not
included in the cost of the acquisition as part of the purchase consideration.
(t) goods and services tax (gst)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. 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 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
consolidated 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 flows.
(u) rounding of amounts
The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the ‘’rounding off’’ of amounts in the financial report. Amounts in the financial report have been
rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
(v) earnings per share
(i) Basic earnings per share
AASB133 Basic earnings per share is calculated by dividing:
+ the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares; and
+ by the weighted average number of ordinary shares outstanding during the financial year.
58
KULA GOLD LImITED ACN 126 741 259
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Financial statements
31 December 2010
1 sUmmary OF siGniFicant accOUntinG pOlicies (cOntinUeD)
(ii) Diluted earnings per share
AASB133 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 additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
(w) parent entity financial information
The financial information for the parent entity, Kula Gold Limited, disclosed in note 29 has been prepared on the same
basis as the consolidated financial statements, except as set out below.
(i) Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of
Kula Gold Limited. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than
being deducted from the carrying amount of these investments.
(ii) Financial guarantees
Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no
compensation, the fair values of these guarantees are accounted for as contributions and recognised as part of the
cost of the investment.
(x) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2010
reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set out below.
i) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9
and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective
from 1 January 2013).
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and
financial liabilities. The standard is not applicable until 1 January 2013 but is available for early adoption. When
adopted, the standard will affect in particular the Group’s accounting for its available-for-sale financial assets, since
AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity
investments that are not held for trading. Fair value gains and losses on available-for-sale debt investments, for example,
will therefore have to be recognised directly in profit or loss. In the current reporting period, the Group did not record
any such gains in other comprehensive income.
There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the
accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have
any such liabilities. The derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition
and Measurement and have not been changed. The Group has not yet decided when to adopt AASB 9.
2010 ANNUAL REPORT
59
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
1 sUmmary OF siGniFicant accOUntinG pOlicies (cOntinUeD)
ii) Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards
(effective from 1 January 2011).
In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting
periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment clarifies and
simplifies the definition of a related party and removes the requirement for government-related entities to disclose details
of all transactions with the government and other government-related entities. The Group will apply the amended
standard from 1 January 2011. When the amendments are applied, the Group will need to disclose any transactions
between its subsidiaries and its associates. However, there will be no impact on any of the amounts recognised in
the financial statements.
iii) AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets
(effective for annual reporting periods beginning on or after 1 July 2011).
Amendments made to AASB 7 Financial Instruments: Disclosures in November 2010 introduce additional disclosures
in respect of risk exposures arising from transferred financial assets. The amendments will affect particularly entities that
sell, factor, securitise, lend or otherwise transfer financial assets to other parties. They are not expected to have any
significant impact on the Group’s disclosures. The Group intends to apply the amendment from 1 January 2012.
60
KULA GOLD LImITED ACN 126 741 259
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Financial statements
31 December 2010
2 Financial risk manaGement
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk),
credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses
different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in
the case of interest rate and foreign exchange risks.
Risk management is carried out under policies approved by the Board of Directors.
(a) Market risk
(i) Foreign exchange risk
The Group and the parent entity operate internationally and are exposed to foreign exchange risk arising from various
currency exposures, primarily with respect to the Papua New Guinea kina and the US dollar.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated
in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow
forecasting.
It is not the Group’s present policy to hedge foreign exchange risk.
The Company’s functional currency is Australian dollars. The Group’s Papua New Guinea subsidiary has a functional
currency of Papua New Guinea Kina.
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars,
was as follows:
Cash
Payables
Net exposure
31 DeCeMBer
2010
auD
$'000
31 DeCeMBer
2009
auD
$’000
432
(112)
320
314
(80)
234
Foreign currency sensitivity analysis
The Group is exposed to movements in US dollars. The following table details the Group’s sensitivity to a 10%
increase and a 10% decrease in the Australian dollar against the relevant currencies.
Consolidated
auD increase against usD
Profit or loss post tax
auD decrease against usD
Profit or loss post tax
2010 ANNUAL REPORT
iMpaCt oN post
tax proFit
2010
$'000
(21)
23
2009
$’000
(24)
32
61
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
2 Financial risk manaGement (cOntinUeD)
(ii) Interest rate risk
The Group’s main interest rate risk arises from cash and cash equivalents.
The Group does not have any borrowings from external counterparties.
Group sensitivity
At 31 December 2010, the Group’s exposure to interest rates is not deemed to be material to its primary activities and
the interest is generally fixed.
(b) Credit risk
Credit risk arises from cash and cash equivalents as well as credit exposures in respect of outstanding receivables.
The Group has no significant concentrations of credit risk.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate
amount of committed credit facilities. The Group manages liquidity risk by maintaining sufficient bank balances to fund
its operations and the availability of funding through committed credit facilities.
The Group does not have any borrowing facilities in place at the reporting date.
Maturities of financial liabilities
The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on the remaining
period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows.
cOntractUal matUrities OF Financial liabilities
Less
thaN 6
MoNths
6-12
MoNths
BetWeeN
1 aND 2
years
BetWeeN
2 aND 5
years
over 5
years
totaL
CoNtraCtuaL
Cash FLoWs
CarryiNg
aMouNt
LiaBiLities
at 31 December 2010
$’000
$'000
$'000
$'000
$'000
Trade and other payables
3,795
total non-derivatives
3,795
–
–
–
–
–
–
–
–
$'000
3,795
3,795
$'000
3,795
3,795
Less
thaN 6
MoNths
6-12
MoNths
BetWeeN
1 aND 2
years
BetWeeN
2 aND 5
years
over 5
years
totaL
CoNtraCtuaL
Cash FLoWs
CarryiNg
aMouNt
LiaBiLities
at 31 December 2009
$’000
$'000
$'000
$'000
$'000
Trade and other payables
total non-derivatives
1,322
1,322
–
–
–
–
–
–
–
–
$'000
1,322
1,322
$'000
1,322
1,322
(d) Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
The carrying value less impairment provision of receivables and payables are assumed to approximate their fair values
due to their short term nature.
62
KULA GOLD LImITED ACN 126 741 259
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Financial statements
31 December 2010
3 critical accOUntinG estimates anD JUDGements
Estimates and judgements 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 Group makes judgements, estimates and assumptions concerning the future. The resulting accounting estimates will,
by definition, seldom equal the related actual results. The judgements, 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 period are
discussed below.
i) Area of interest
The Group currently holds three exploration licences and the sites under the three licences are in close proximity to each
other. The current assessment is that should the Group decide to commercially develop and mine the reserves in these
three exploration areas it will set up a central processing plant to process ore mined from these three sites. Accordingly,
all three exploration licensed areas are considered as one area of interest for the purpose of applying the policy on
exploration and evaluation expenditures.
ii) Mineral exploration and evaluation expenditure
Certain exploration and evaluation expenditure is capitalised where it is considered likely that the expenditure will
be recovered by future exploitation or sale, or where activities have not reached a stage which permits a reasonable
assessment of the existence of commercially recoverable reserves. This process necessarily requires management to
make certain estimates and assumptions as to future events and circumstances, in particular, whether economically
viable extraction operations can be established. Any such estimates and assumptions may change as new information
becomes available. If, after having capitalised expenditure under this policy it is concluded unlikely that the expenditure
will be recovered by future exploitation or sale, the relevant amount capitalised is written off to profit or loss.
Carried forward exploration and evaluation expenditures are disclosed in Note 12.
iii) Functional currency
The Group’s transactions and balances are denominated in three main currencies (Australian dollar, Papua New
Guinea Kina and US dollar). Operating costs are denominated in Australian dollars, Papua New Guinea Kina and US
dollars, however, primarily in Australian dollars. As the indicators are mixed, management has applied its judgement in
accordance with the Group accounting policy on foreign currency translation (note 1(d)) and has chosen the Australian
dollar as the functional currency for the parent entity and Kina as the functional currency for the subsidiary. The
presentation currency is in Australian dollars.
2010 ANNUAL REPORT
63
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Financial statements
31 December 2010
4 seGment inFOrmatiOn
During the year the Group operated predominantly in one business segment, being gold mining exploration.
Geographically, the Group operates exclusively in one geographical segment being Asia Pacific with an office
maintained in Australia. Segment accounting policies are the same as the Group’s policies described in Note 1.
Segment results are classified in accordance with their use within geographic segments:
2010
revenue
Interest income
Total segment revenue
results
austraLia
papua NeW
guiNea
$’000
$'000
362
362
8
8
totaL
$'000
370
370
Operating loss before income tax
(3,773)
(1,285)
(5,058)
Income tax expense
Net loss
Included within segment results
Depreciation and amortisation
of segment assets
Segment assets
Segment liabilities
2009
revenue
Interest income
Total segment revenue
results
Operating loss before income tax
Income tax expense
Net loss
Included within segment results
Depreciation and amortisation
of segment assets
Segment assets
Segment liabilities
–
(3,773)
(3,773)
11
45,259
505
12
12
(855)
29
(826)
(826)
13
1,066
203
–
(1,285)
(1,285)
–
75,684
3,437
–
–
(1,023)
–
(1,023)
(1,023)
–
59,350
1,235
–
(5,058)
(5,058)
11
120,943
3,942
12
12
(1,878)
29
(1,849)
(1,849)
13
60,416
1,438
The total of non-current assets located in Australia is $81,000 (2009: $41,000) and Papua New Guinea
$70,488,000 (2009: $57,248,000). Segment assets are allocated to countries where the assets are located.
64
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
5 revenUe
From continuing operations
other revenues
Interest income
6 expenses
profit before income tax includes the following specific expenses:
Depreciation
Buildings
Plant and equipment
Furniture and fittings
Motor vehicle and boats
Less: Capitalised to exploration and evaluation expenditure
Total depreciation
Amortisation
Exploration licence
Less: Capitalised to exploration and evaluation expenditure
Total amortisation
Total depreciation and amortisation
Rental expense relating to operating leases
Minimum lease payments
Employee option expense
cOnsOliDateD
2010
$’000
2009
$’000
370
370
12
12
cOnsOliDateD
2010
$’000
2009
$’000
18
183
23
191
(404)
11
13
(13)
-
11
58
29
20
206
19
212
(444)
13
9,506
(9,506)
-
13
45
329
2010 ANNUAL REPORT
65
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
7 incOme tax (beneFit)/expense
(a) income tax expense:
Current Tax
Deferred tax
Deferred income tax (revenue) expense included in income tax expense
comprises:
(Increase) in deferred tax assets (note 13)
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
Tax at the Australian tax rate of 30% (2009 - 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Share based payments
Sundry items
Income tax benefit not recognised
Total income tax expense
(c) tax losses
Australian unused tax losses for which no deferred tax asset has been
recognised
Potential tax benefit @ 30%
Benefits for tax losses will only be obtained if:
cOnsOliDateD
2010
$’000
2009
$’000
-
-
-
-
(50)
21
(29)
21
21
cOnsOliDateD
2010
$’000
2009
$’000
(5,058)
(1,517)
(1,878)
(563)
9
604
904
-
(1,939)
582
99
1
434
(29)
(179)
54
(i) the consolidated entity derives future Australian assessable income of a nature and of an amount sufficient to enable the
benefit from the deductions for the losses to be realised;
(ii) the consolidated entity continues to comply with the conditions for deductibility imposed by tax legislation; and
(iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit from the deductions for
the losses.
(d) tax on exploration expenditure in Woodlark Mining Limited (papua New guinea)
Exploration expenditure for which no deferred tax asset has been recognised
Potential tax benefit @ 30%
68,393
20,518
54,881
16,464
66
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
7 incOme tax (beneFit)/expense (cOntinUeD)
The exploration expenditure incurred in the 20 years prior to the issue of a mining lease (“ML”) or special mining
lease (“SML”) within the area of an exploration licence (“EL”) from which a ML or SML is drawn becomes part of the
allowable exploration expenditure of that ML or SML in accordance with the Papua New Guinea income tax laws.
Exploration expenditure incurred after 1 January 2003 may also be included in a second exploration expenditure pool
which subject to certain limitations forms part of the allowable deductions of a mining operation. In other words this
expenditure is potentially deductible twice once as Allowable Exploration Expenditure and secondly through the post
1 January 2003 exploration expenditure pool.
Allowable exploration expenditure forms part of the allowable deductions of a mining operation. Exploration
companies do not incur tax losses in Papua New Guinea. Rather, they accumulate their exploration expenditure
until such time as 20 years has passed since the expenditure was incurred, the EL is abandoned, or a ML or SML is
drawn from the area covered by the EL. During the period of exploration a company does not claim deductions for
depreciation, rather the cost of otherwise depreciable assets acquired forms part of the exploration expenditure. In this
way, future deductions may be claimed for the cost of such assets by way of claiming deductions for the allowable
exploration expenditure.
No deferred tax asset has been recognised in relation to this expenditure on the basis that realisation of the tax benefit
from the allowable exploration expenditure is not probable.
8 cUrrent assets – cash anD cash eqUivalents
Cash at bank and in hand
Short term deposits*
cOnsOliDateD
2010
$’000
8,158
40,107
48,265
2009
$’000
2,614
-
2,614
* Short term deposits are made for varying periods of between one day and six months, depending on the cash requirements of the
Group, and earn interest at the respective short term deposit rates.
(a) risk exposure
The Group’s exposure to interest rate risk is discussed in note 2. The maximum exposure to credit risk at the end of the
reporting period is the carrying amount of each class of cash and cash equivalents mentioned above.
2010 ANNUAL REPORT
67
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
9 cUrrent assets – receivables
GST receivable
Prepayment and other receivables
(a) impaired receivables
There were no impaired receivables for the Group.
(b) past due but not impaired
There were no receivables past due for the Group.
(c) Foreign exchange and interest rate risk
cOnsOliDateD
2010
$’000
369
639
1,008
2009
$’000
47
172
219
Information about the Group’s exposure to foreign currency risk and interest rate risk in relation to receivables is provided
in note 2.
(d) Fair value and credit risk
Due to the short term nature of these receivables, their carrying amount is assumed to approximate their fair value.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables
mentioned above.
10 cUrrent assets – inventOries
Inventory: Consumables
cOnsOliDateD
2010
$’000
1,101
1,101
2009
$’000
294
294
68
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
11 nOn cUrrent assets – prOperty, plant anD eqUipment
BuiLDiNgs
pLaNt &
equipMeNt
FurNiture &
FittiNgs
Motor
vehiCLes &
Boats
totaL
$’000
$'000
$'000
$'000
$'000
at 1 January 2009
Cost
Accumulated depreciation
Net book amount
period ended 31 December 2009
Opening net book amount
Additions
Depreciation charge
Exchange differences
Closing net book amount
at 31 December 2009
Cost
Accumulated depreciation
Net book amount
year ended 31 December 2010
Opening net book amount
Additions
Depreciation charge
Exchange differences
Closing net book amount
at 31 December 2010
Cost
Accumulated depreciation
Net book amount
601
(23)
578
578
104
(20)
(134)
528
571
(43)
528
528
82
(18)
(60)
532
593
(61)
532
783
(92)
691
691
1,164
(206)
(161)
1,488
1,786
(298)
1,488
1,488
238
(183)
(244)
1,299
1,780
(481)
1,299
37
(4)
33
33
63
(19)
(5)
72
95
(23)
72
72
68
(23)
(5)
112
158
(46)
112
910
(256)
654
654
24
(212)
(154)
312
780
(468)
312
312
192
(191)
(98)
215
874
(659)
215
2,331
(375)
1,956
1,956
1,355
(457)
(454)
2,400
3,232
(832)
2,400
2,400
580
(415)
(407)
2,158
3,405
(1,247)
2,158
Total depreciation charge for the year is $415,000 of which $404,000 has been capitalised under exploration and
evaluation expenditure (note 12) in accordance with the Group’s accounting policy.
2010 ANNUAL REPORT
69
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
12 nOn cUrrent assets – mineral explOratiOn anD
evalUatiOn expenDitUre
expLoratioN
LiCeNses
DeFerreD
expLoratioN
expeNDiture
totaL
$’000
$'000
$'000
at 1 January 2009
Cost
Accumulated amortisation
Net book amount
year ended 31 December 2009
Opening net book amount
Exchange differences
Additions
Amortisation charge
Closing net book amount
at 31 December 2009
Cost
Accumulated amortisation
Net book amount
year ended 31 December 2010
Opening net book amount
Exchange differences
Additions
Amortisation charge
Closing net book amount
at 31 December 2010
Cost
Accumulated amortisation
Net book amount
20,827
(8,389)
12,438
12,438
(2,932)
29
(9,506)
42,942
–
42,942
42,942
(10,867)
22,777
–
29
54,852
9,535
(9,506)
29
29
(9)
–
(13)
7
54,852
–
54,852
54,852
(6,922)
20,456
–
63,769
(8,389)
55,380
55,380
(13,799)
22,806
(9,506)
54,881
64,387
(9,506)
54,881
54,881
(6,931)
20,456
(13)
68,386
68,393
9,526
(9,519)
7
68,386
–
68,386
77,912
(9,519)
68,393
70
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
12 nOn cUrrent assets – mineral explOratiOn anD
evalUatiOn expenDitUre (cOntinUeD)
Woodlark Mining Ltd (formerly Valkyrie No 18 Ltd) acquired capitalised exploration expenditure and exploration
licenses from former Woodlark Mining Ltd based on their own valuation, which was supported by an independent
resource based valuation carried out by an independent geological survey company registered in Australia.
The recoverability of the carrying amount of the mineral exploration and evaluation assets is dependent on successful
development and commercial exploitation, or alternatively, sale of the respective areas of interest.
13 nOn cUrrent assets – DeFerreD tax assets
the balance comprises temporary differences attributable to:
Unrealised foreign exchange losses
Provision for annual leave
Legal expenses
Total deferred tax assets
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
cOnsOliDateD
2010
$’000
2009
$’000
–
–
–
–
–
–
–
–
–
–
–
–
2009
Movements – Consolidated
opening balance
(Charged)/credited to profit or loss
at 31 December 2009
2010
Movements – Consolidated
opening balance
(Charged)/credited to profit or loss
at 31 December 2010
2010 ANNUAL REPORT
uNreaLiseD
ForeigN
exChaNge
Losses
provisioN For
aNNuaL Leave
LegaL
expeNses
totaL
$’000
$’000
$'000
$'000
11
(11)
–
–
–
–
6
(6)
–
–
–
–
4
(4)
–
–
–
–
21
(21)
–
–
–
–
71
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
14 nOn cUrrent assets – Other nOn cUrrent assets
Deposits
cOnsOliDateD
2010
$’000
18
18
2009
$’000
8
8
15 cUrrent liabilities – traDe anD Other payables
Trade payables
Other payables and accruals
cOnsOliDateD
2010
$’000
3,514
281
3,795
2009
$’000
953
369
1,322
(a) amounts not expected to be settled within the next 12 months
Other payables include accruals for annual leave. The entire obligation is presented as current, since the Group does
not have an unconditional right to defer settlement. However, based on past experience, the Group does not expect all
employees to take the full amount of accrued leave within the next 12 months. The following amounts reflect leave that
is not expected to be taken within the next 12 months:
Annual leave obligation expected to be settled after 12 months
(b) risk exposure
Information about the Group’s exposure to foreign exchange risk is provided in note 2.
cOnsOliDateD
2010
$’000
41
41
2009
$’000
16
16
72
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
16 nOn cUrrent liabilities – prOvisiOns
Provision for rehabilitation
Total
(a) Movements in provisions
cOnsOliDateD
2010
$’000
147
147
2009
$’000
116
116
Movements in each class of provision during the financial period, other than employee benefits, are set out below:
Consolidated – 2010
Non current
Carrying amount at the start of the period
Charged/(credited) to the profit or loss
– additional provisions recognised
– exchange differences
Carrying amount at the end of the period
17 cOntribUteD eqUity
(a) share capital
Ordinary shares
Ordinary shares Class A
Ordinary shares Class B
Class Z shares US$1 each
Special shares Class Z US$1 each
Less: Transaction costs
provisioN For
rehaBiLitatioN
$’000
116
42
(11)
147
totaL
$’000
116
42
(11)
147
pareNt eNtity
pareNt eNtity
2010
shares
2009
shares
2010
$’000
2009
$’000
112,615,523
–
141,552
–
–
–
–
–
23,886
29,084
10
100
–
–
–
–
–
(6,760)
112,615,523
53,080
134,792
–
30,099
34,452
–
–
(1,587)
62,964
2010 ANNUAL REPORT
73
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
17 cOntribUteD eqUity (cOntinUeD)
(b) Movements in share capital:
Date
DetaiLs
NuMBer oF
shares
issue priCe
issue priCe
totaL
us$
$
$'000
01 January 2009
Opening balance
42,370
14 May 2009
Issue of class A shares
14 May 2009
Issue of class B shares
07 September 2009
Issue of class A shares
07 September 2009
Issue of class B shares
23 November 2009
Issue of class A shares
23 November 2009
Issue of class B shares
31 December 2009
Issue of class A shares
31 December 2009
Issue of class B shares
Less: Transaction costs
arising on share issue
1,828
2,472
1,445
1,955
654
885
626
845
–
31 December 2009
Balance
53,080
01 January 2010
Opening balance
53,080
26 February 2010
Issue of class A shares
26 February 2010
Issue of class B shares
30 June 2010
Issue of class A shares
30 June 2010
Issue of class B shares
31 August 2010
Issue of class A shares
31 August 2010
Issue of class B shares
20 September 2010
Issue of class A shares
20 September 2010
Issue of class B shares
4 November 2010
Transfer from ordinary
shares – Class A
following consolidation/
reclassification
1,252
1,690
1,063
1,437
1,170
1,580
288
390
(61,950)
4 November 2010
Share split (refer to note c)
80,393,300
18 November 2010
Issue of new shares
Less: Transaction costs
arising on Share issue
32,222,223
–
31 December 2010
Balance
112,615,523
1,000
1,000
1,000
1,000
1,300
1,300
1,700
1,700
–
1,700
1,700
2,000
2,000
2,000
2,000
2,000
2,000
–
–
–
–
1,400
1,400
1,210
1,210
1,435
1,435
1,912
1,912
48,094
2,559
3,461
1,749
2,367
939
1,271
1,198
1,617
–
(291)
62,964
62,964
2,364
3,144
2,503
3,286
2,610
3,524
667
903
–
–
1,888
1,861
2,355
2,287
2,231
2,231
2,315
2,315
–
–
1.80
58,000
–
(5,173)
134,792
74
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
17 cOntribUteD eqUity (cOntinUeD)
(c) ordinary shares
On 4 November 2010 all of the issued B Ordinary Shares were reclassified as A Ordinary Shares on the basis
of one A Ordinary Share for one B Ordinary Share; all of the issued Z Class Special Shares were reclassified as
Z Class Shares on the basis of one Z Class Share for one Z Class Special Share; all of the issued Z Class Shares in the
Company were consolidated into one Z Class Share; the one Z Class Share was reclassified as an A Ordinary Share
on the basis of one Z Class Share for one A Ordinary Share; all of the issued A Ordinary Shares were reclassified as
Ordinary Shares on the basis of one A Ordinary Share for one Ordinary Share; and the 61,841 Ordinary Shares on
issue following the above reclassifications were subdivided on a 1 to 1300 basis into 80,393,300 Ordinary Shares.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in
proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote,
and upon a poll each share is entitled to one vote.
(d) options
Information relating to the options issued, exercised and lapsed during the financial period and options outstanding
at the end of the financial period, is set out in note 28.
(e) Capital risk management
The Group’s objectives when managing capital are to safeguard it’s ability to continue as a going concern, so that it
can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Directors may decide to restrict dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
2010 ANNUAL REPORT
75
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
18 reserves anD accUmUlateD lOsses
(a) reserves
Share based payments reserve
Foreign currency translation reserve
Movements:
Share based payments reserve
Opening balance
Option expense
Cancellation of options
Balance 31 December
Movements:
Foreign currency translation reserve
Opening balance
Currency translation differences arising during the year
Balance 31 December
(b) accumulated losses
Opening balance
Net loss for the period
Balance 31 December
(c) Nature and purpose of reserves
(i) Share based payments reserve
cOnsOliDateD
2010
$’000
2009
$’000
(859)
(9,355)
(10,214)
558
29
(1,446)
(859)
(2,025)
(7,330)
(9,355)
558
(2,025)
(1,467)
229
329
–
558
12,867
(14,892)
(2,025)
cOnsOliDateD
2010
$’000
2009
$’000
(2,519)
(5,058)
(7,577)
(670)
(1,849)
(2,519)
The share based payments reserve is used to recognise the grant date fair value of options issued to employees
but not exercised.
(ii) Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive
income as described in note 1(d) and accumulated in a separate reserve within equity. The cumulative amount is
reclassified to profit or loss when the net investment is disposed of.
76
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
19 DirectOrs anD key manaGement persOnnel DisclOsUres
(a) Directors
The names of persons who were directors of Kula Gold Limited at any time during the financial period are as follows:
(i) Chairman non executive
D Frecker (appointed 16 September 2010)
(ii) executive directors
L Spencer, Managing Director and CEO
J Watkins, Executive Director and CFO (appointed 16 September 2010)
(iii) Non executive directors
L Rozman
P Bradford
M Stowell (appointed 16 September 2010)
A Vogel (resigned 16 September 2010)
R Perkes (resigned 16 September 2010)
(b) key management personnel compensation
Short term employee benefits
Post employment benefits
Long term benefits
Termination benefits
Share based payments
cOnsOliDateD
2010
$
2009
$
579,196
105,509
457,176
151,270
–
–
–
–
28,905
713,610
288,374
896,820
Detailed remuneration disclosures are provided in the remuneration report on pages 25 to 32.
(c) equity instrument disclosures relating to key management personnel
(i) Options provided as remuneration
Details of options over ordinary shares in the Company provided as remuneration to each director of Kula Gold Limited
and key management personnel during the period ended 31 December 2010 and 2009 are set out below. When
exercisable, each option is convertible into one ordinary share of Kula Gold Limited. Further information on the options
is set out in note 28.
The following options were granted as remuneration to Directors and key management personnel of the Company
during the year ended 31 December 2010.
2010 ANNUAL REPORT
77
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
19 DirectOrs anD key manaGement persOnnel DisclOsUres
(cOntinUeD)
NaMe
graNteD
NuMBer
graNt Date
vesteD
NuMBer
ForFeiteD
iN year
expiry Date
exerCise
priCe
D Frecker
L Spencer
J Watkins
L Rozman
P Bradford
M Stowell
100,000 01 Dec 2010
1,126,155 01 Dec 2010
563,078 01 Dec 2010
100,000 01 Dec 2010
100,000 01 Dec 2010
100,000 01 Dec 2010
–
–
–
–
–
–
– 01 Dec 2015
– 01 Dec 2015
– 01 Dec 2015
– 01 Dec 2015
– 01 Dec 2015
– 01 Dec 2015
$1.80
$1.80
$1.80
$1.80
$1.80
$1.80
Fair vaLue
at graNt
Date
$41,000
$349,109
$174,555
$41,000
$41,000
$41,000
The following factors were used in determining the fair value of options on grant date:
NaMe
graNteD
NuMBer
expiry Date
Fair
vaLue per
optioN
exerCise
priCe
priCe oF
shares
oN graNt
Date
expeCteD
voLatiLity
iNterest
rate
D Frecker
L Spencer
J Watkins
L Rozman
P Bradford
M Stowell
100,000 01 Dec 2015
1,126,155 01 Dec 2015
563,078 01 Dec 2015
100,000 01 Dec 2015
100,000 01 Dec 2015
100,000 01 Dec 2015
$0.41
$0.31
$0.31
$0.41
$0.41
$0.41
$1.80
$1.80
$1.80
$1.80
$1.80
$1.80
$1.68
$1.68
$1.68
$1.68
$1.68
$1.68
30%
30%
30%
30%
30%
30%
5.33%
5.33%
5.33%
5.33%
5.33%
5.33%
These options carry no voting rights and no rights to dividends.
The following options were granted to a director of the Company as part of his remuneration during the comparative
reporting period:
NaMe
graNteD
NuMBer
graNt Date
vesteD
NuMBer
ForFeiteD
iN year
expiry Date
exerCise
priCe
Fair vaLue
at graNt
Date
R Perkes
95* 03 April 2009
95*
– 07 Dec 2013
US$1,000
$41,216
*Prior to capital re-organisation – Refer Note 17(c).
The following factors were used in determining the fair value of options on grant date:
NaMe
graNteD
NuMBer
expiry
Date
Fair vaLue
per optioN
exerCise
priCe
priCe oF
share oN
graNt
Date
iNterest
rate
R Perkes
*Prior to capital re-organisation – Refer Note 17(c).
95* 07 Dec 2013
These options carry no voting rights and no rights to dividends.
$433
US$1,000
US$1,000
0.82%
The assessed fair value at grant date of options granted to directors and specified executives is allocated equally over the
period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date
are independently determined using a Black Scholes option pricing model that takes into account the exercise price, the term
78
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
19 DirectOrs anD key manaGement persOnnel DisclOsUres
(cOntinUeD)
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 dividend yield and the risk free interest
rate for the term of the option. The expected volatility reflects the assumption that the current volatility during the time of issue is
indicative of further trends, which may not necessarily be the actual outcome.
(ii) Shares provided on exercise of remuneration options
No options were exercised during the period ended 31 December 2010 (2009: Nil).
(iii) Option holdings
The numbers of options over ordinary shares in the Company held during the financial year by each director of Kula Gold
Limited and other key management personnel of the Group, including their personally related parties, are set out below.
2010 - OptiOns
NaMe
BaLaNCe
at start
oF the
year
Directors of Kula Gold Limited
D Frecker
–
L Spencer
J Watkins
L Rozman
P Bradford
M Stowell
Former Directors
R Perkes
740
370
–
–
–
95
graNteD as
CoMpeNsatioN
exerCiseD
*other
ChaNges
vesteD aND
exerCisaBLe
uNvesteD
BaLaNCe
at eND
oF the
year
100,000
1,126,155
563,078
100,000
100,000
100,000
–
–
–
–
–
–
–
–
– 100,000
(740) 1,126,155
(370)
563,078
– 100,000
– 100,000
– 100,000
–
–
–
–
–
–
100,000
1,126,155
563,078
100,000
100,000
100,000
(95)
–
–
–
These options were issued prior to the capital re-organisation – refer Note 17(c).
*Other changes represent options cancelled during the period.
All vested options are exercisable at the end of the year.
2009 - optioNs
NaMe
BaLaNCe
at start
oF the
year
Directors of Kula Gold Limited
L Spencer
R Perkes
Exectutives
J Watkins
740
–
370
graNteD as
CoMpeNsatioN
exerCiseD
other
ChaNges
vesteD aND
exerCisaBLe
uNvesteD
BaLaNCe
at eND
oF the
year
–
95
–
–
–
–
–
–
–
740
95
370
740
95
370
These options were issued prior to the capital re-organisation – refer Note 17(c).
2010 ANNUAL REPORT
–
–
–
79
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
19 DirectOrs anD key manaGement persOnnel DisclOsUres
(cOntinUeD)
(iv) Share holdings
The numbers of shares in the company held during the financial year by each director of Kula Gold Limited and key
management personnel of the Group, including their personally related parties, are set out below. There were no shares
granted during the reporting period as compensation.
2010 - OrDinary shares
NaMe
BaLaNCe at
the start oF
the year
graNteD DuriNg
reportiNg year
as CoMpeNsatioN
reCeiveD
DuriNg the
year oN
the exerCise
oF optioNs
other
ChaNges
DuriNg the
year*
BaLaNCe at
the eND oF
the year
Directors of Kula Gold Limited
D Frecker
L Spencer
L Rozman
J Watkins
P Bradford
M Stowell
Former Directors
A Vogel (resigned 16
September 2010)
R Perkes (resigned 16
September 2010)
–
463
–
87
285
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,000
541,907
359,023
275,513
432,615
25,000
10,000
542,370
359,023
275,600
432,900
25,000
–
–
–
–
*Other changes for D Frecker and M Stowell represent shares purchased on market.
* Other changes for L Spencer, L Rozman, J Watkins and P Bradford represent shares acquired at the Offer Price under the Offer.
* Other changes for L Spencer, J Watkins and P Bradford represent shares subscribed and adjustments on capital reorganisation –
refer Note 17(c).
2009 - orDiNary shares
NaMe
BaLaNCe at
the start oF
the year
Directors of Kula Gold Limited
L Rozman
L Spencer
A Vogel
R Perkes
P Bradford
M Stowell
–
370
–
–
228
–
Other key management personnel of the Group
J Watkins
68
graNteD DuriNg
reportiNg year
as CoMpeNsatioN
reCeiveD
DuriNg the
year oN
the exerCise
oF optioNs
other
ChaNges
DuriNg the
year*
BaLaNCe at
the eND oF
the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
93
–
–
57
–
19
–
463
–
–
285
–
87
*Other changes for L Spencer, J Watkins and P Bradford during the year represent shares subscribed.
(d) Loans and other transactions with key management personnel
There were no loans and other transactions with directors or executives during the reporting period (2009:nil).
80
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
20 remUneratiOn OF aUDitOrs
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its
related practices and non-related audit firms:
(a) pricewaterhouseCoopers australia
Audit and other assurance services
Statutory audit and review of financial statements
Non-statutory audit and review of financial statements
Other assurance services:
Investigating accountants report and other services relating to IPO
Other assurance services
Total remuneration for audit and other assurance services
Taxation services
Tax compliance services
Total remuneration for taxation services
cOnsOliDateD
2010
$
2009
$
80,000
69,000
491,080
9,496
649,576
60,100
–
–
10,000
70,100
40,350
40,350
21,600
21,600
Total remuneration of PricewaterhouseCoopers Australia
689,926
91,700
(b) related practices of pricewaterhouseCoopers australia
Audit and other assurance services
Statutory audit and review of financial statements
Non-statutory audit and review of financial statements
Total remuneration of related practices of PricewaterhouseCoopers Australia
Taxation services
Tax compliance services
Total remuneration for taxation services
51,820
50,944
102,764
22,928
22,928
23,713
39,372
63,085
–
–
Total remuneration of related practices of PricewaterhouseCoopers Australia
125,692
63,085
21 cOntinGencies
The Group had no contingent assets or liabilities at 31 December 2010 (2009: $nil).
2010 ANNUAL REPORT
81
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
22 cOmmitments
(a) Lease commitments
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
(b) service commitments
Commitments for minimum service payments in relation to drilling services, air
charter, barge charter and aerial survey are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
cOnsOliDateD
2010
$’000
2009
$’000
126
756
–
882
376
–
–
376
cOnsOliDateD
2010
$’000
2009
$’000
7,359
7,086
–
–
–
–
7,359
7,086
23 relateD party transactiOns
(a) parent entities
As at 31 December 2010, Kula Gold Limited is the ultimate parent entity of the Group. As at 31 December 2009, the
ultimate parent entity and ultimate controlling party was Pacific Road Capital Management G.P. Limited (incorporated in
Cayman Islands) which through its 100% ownership of Pacific Road Holdings N.V. owned 57.5% of the issued ordinary
shares of Kula Gold Pty Ltd.
(b) Directors
The names of persons who were directors of the Company at any time during the financial period are as follows:
D Frecker (appointed 16 September 2010)
L Spencer
J Watkins (appointed 16 September 2010)
L Rozman
P Bradford
M Stowell (appointed 16 September 2010)
A Vogel (resigned 16 September 2010)
R Perkes (resigned 16 September 2010)
M Faul (alternate director resigned 16 September 2010)
G Dick (alternate director resigned 16 September 2010)
82
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
23 relateD party transactiOns (cOntinUeD)
(c) subsidiaries
Interests in subsidiary are set out in note 24.
(d) key management personnel
Disclosures relating to key management personnel are set out in note 19.
(e) transactions with other related parties
The following transactions occurred with related parties:
Consulting fees paid to Capala Holdings Limited for services of R Perkes as a director of the parent entity
$31,500 (2009: $42,000).
Consulting fees paid to Goldkidz Pty Ltd for services of P Bradford as a director of the parent entity
$39,500 (2009: $36,000).
Fees paid / payable to Pacific Road Capital Management Pty Ltd for facilitation of share capital raisings
$344,439 (2009: $204,948).
Retainer and expenses paid to Pacific Road Corporate Finance Pty Ltd for advisory on IPO
$2,131,850 (2009: $Nil).
Fees paid / payable to RMB Resources for facilitation of share capital raisings
$120,424 (2009: $74,677).
Fees paid / payable to Meratus Minerals Limited for facilitation of share capital raisings
$13,409 (2009: $9,990).
Fees paid / payable to P and V Bradford for facilitation of share capital raisings
$2,600 (2009: $1,996).
Consulting fees paid to R. C. Spencer
$Nil (2009: $5,000).
24 sUbsiDiary
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in
accordance with the accounting policy described in note 1(b):
NaMe oF eNtity
CouNtry oF
iNCorporatioN
CLass oF
shares
equity hoLDiNg
Woodlark Mining Limited
Papua New Guinea
Ordinary
2010
%
100
2009
%
100
25 events OccUrrinG aFter the repOrtinG periOD
On 16 March 2011, 200,000 options were granted to Company employees under the Kula Gold Option Plan at an
exercise price of $1.80. The options are exercisable on or before 5 years from the date of grant of the options.
2010 ANNUAL REPORT
83
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
26 recOnciliatiOn OF lOss aFter incOme tax tO net cash
OUtFlOw FrOm OperatinG activities
Loss for the year
Depreciation and amortisation
Non-cash employee benefits expense-share-based payments
Net exchange differences
Change in operating assets and liabilities, net of effects from purchase
of controlled entity:
Decrease (increase) in receivables
(Increase) in inventories
Decrease (increase) in deferred tax assets
(Decrease) increase in trade and other payables
(Decrease) increase in provision for income taxes payable
Net cash inflow (outflow) from operating activities
27 earninGs per share
(a) Basic earnings per share
From continuing operations attributable to the ordinary equity holders
of the company
(b) Diluted earnings per share
From continuing operations attributable to the ordinary equity holders
of the company
(c) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
Weighted average number of ordinary shares and potential ordinary shares
used as the denominator in calculating diluted earnings per share
* 2009 weighted average number of ordinary shares were subdivided on a 1 to 1300 basis.
cOnsOliDateD
2010
$’000
(5,058)
11
29
(322)
(789)
(807)
–
2,473
–
(4,463)
2009
$’000
(1,849)
13
329
–
191
(234)
21
(903)
(50)
(2,482)
cOnsOliDateD
2010
CeNts
2009
CeNts
(6.40)
(3.07)
(6.40)
(3.07)
cOnsOliDateD
2010
2009*
79,083,830
60,218,705
79,083,830
60,218,705
84
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
27 earninGs per share (cOntinUeD)
(d) information concerning the classification of securities
(i) options
Options granted to employees under the Options Plan and to Non-Executive Directors are considered to be potential
ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they
are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the
options are set out in note 28.
28 share baseD payments
(a) i) employee option plan
The Kula Gold Option Plan (Option Plan) is designed to provide long term incentives for executives (including Executive
Directors) and senior employees to deliver long term shareholder returns. Participation in the plan is at the Board’s
discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits.
Options were granted under the plan for no consideration.
Options granted under the plan carry no dividend or voting rights.
When exercisable, each option is convertible into one ordinary share.
The exercise price of options is based on market value.
Set out below are summaries of options granted under the plan:
NaMe
graNt Date
expiry Date
issue priCe assesseD Fair
vaLue at Date
oF graNt
NuMBer oF
optioNs
graNteD
Consolidated – 2010
L Spencer
J Watkins
Total
Consolidated – 2009
L Spencer
J Watkins
R Perkes
Total
01 Dec 2010
01 Dec 2015
01 Dec 2010
01 Dec 2015
$0.31
$0.31
$349,109
$174,555
$523,664
1,126,155
563,078
1,689,233
09 Dec 2008
7 Dec 2013
09 Dec 2008
29 Jan 2014
03 Apr 2009
7 Dec 2013
US$ 1,000
US$ 1,000
US$ 1,000
$348,844
$174,422
$41,216
$564,482
740
370
95
1,205
2010 ANNUAL REPORT
85
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
28 share baseD payments (cOntinUeD)
(ii) options for Non-executive Directors
Pursuant to the decision of the Board on 29 September 2010 a total of 400,000 options were granted to Kula Gold
Non-executive Directors.
Options were granted for no consideration.
Options carry no dividend or voting rights.
When exercisable, each option is convertible into one ordinary share.
The exercise price of options is based on market value. The options will only vest and become exercisable after either
of the following events: a) the Company’s Woodlark Island Gold Project reaches commercial production as determined
by the pour of the first gold from the Project or, b) there is a change of control of the Company.
Set out below are summaries of options granted to Non-executive Directors:
NaMe
graNt Date
expiry Date
issue priCe assesseD Fair
vaLue at Date
oF graNt
NuMBer oF
optioNs
graNteD
Consolidated – 2010
D Frecker
L Rozman
P Bradford
M Stowell
Total
01 Dec 2010
01 Dec 2015
01 Dec 2010
01 Dec 2015
01 Dec 2010
01 Dec 2015
01 Dec 2010
01 Dec 2015
$0.41
$0.41
$0.41
$0.41
$41,000
$41,000
$41,000
$41,000
$164,000
100,000
100,000
100,000
100,000
400,000
graNt Date
expiry
Date
exerCise
priCe
BaLaNCe
at start
oF the
year
NuMBer
graNteD
DuriNg
the year
exerCiseD
DuriNg
the year
ForFeiteD
DuriNg
the year
NuMBer
NuMBer
NuMBer
BaLaNCe
at eND
oF the
year
NuMBer
exerCisaBLe
at eND oF
the year
NuMBer
2010
03 Apr 2009 07 Dec 2013 US$1,000
09 Dec 2008 07 Dec 2013 US$1,000
09 Dec 2008 29 Jan 2014 US$1,000
95
740
370
–
–
–
01 Dec 2010 01 Dec 2015
$1.80
– 2,089,233
Total
1,205 2,089,233
Weighted average exercise price
US$1,000
$1.80
2009
9 Dec 2008 7 Dec 2013 US$1,000
9 Dec 2008 29 Jan 2014 US$1,000
3 Apr 2009
7 Dec 2013 US$1,000
Total
740
370
–
1,110
–
–
95
95
–
–
–
–
–
–
–
–
–
(95)
(740)
(370)
–
–
–
– 2,089,233
(1,205) 2,089,233
$1.80
740
370
95
–
–
–
–
–
–
–
–
–
740
185
95
1,205
1,020
Weighted average exercise price
US$1,000 US$1,000
US$1,000
US$1,000
86
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
28 share baseD payments (cOntinUeD)
No options expired during the period, however the above options were repurchased and cancelled.
The weighted average remaining contractual life of share options outstanding at the end of the period was 5 years.
Fair value of options granted
The assessed fair value at grant date of options granted during the period ended 31 December 2010 was $0.33
(2009: $433) per option. The fair value at grant date is independently determined using a Black Scholes option
pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at
grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest
rate for the term of the option.
The following factors were used in determining the fair value of options granted during the year ended 31 December 2010:
NaMe
graNteD
NuMBer
expiry Date
Fair vaLue
per optioN
exerCise
priCe
priCe oF
shares
oN graNt
Date
expeCteD
voLatiLity
iNterest
rate
D Frecker *
100,000 01 Dec 2015
L Spencer
J Watkins
1,126,155 01 Dec 2015
563,078 01 Dec 2015
L Rozman *
100,000 01 Dec 2015
P Bradford *
100,000 01 Dec 2015
M Stowell *
100,000 01 Dec 2015
$0.41
$0.31
$0.31
$0.41
$0.41
$0.41
$1.80
$1.80
$1.80
$1.80
$1.80
$1.80
$1.68
$1.68
$1.68
$1.68
$1.68
$1.68
30%
30%
30%
30%
30%
30%
5.33%
5.33%
5.33%
5.33%
5.33%
5.33%
The model inputs for options granted during the year ended 31 December 2010 included:
(a) Options were granted for no consideration and vest based on terms agreed by Kula Gold Ltd. These options will
vest on 16 November 2012.
* Option granted to Non-Executive Directors will only vest and become exercisable after either of the following events:
a) The Company’s Woodlark island gold project reaches commercial production, which assumes to be on 31 December 2013, as
determined by the pour of the first gold from the project or, b) there is a change of control of the Company.
(b) Exercise price: $1.80.
(c) Grant date: 1 December 2010.
(d) Expiry date: 1 December 2015.
(e) Share price at grant date: $1.68.
(f) Expected dividend yield: 0%.
(g) Discount rate, government bonds 5 years at date of grant: 5.33%.
Where options are issued to employees of subsidiaries within the Group, the subsidiaries compensate Kula Gold
Limited for the amount recognised as expense in relation to these options.
2010 ANNUAL REPORT
87
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
28 share baseD payments (cOntinUeD)
The expected volatility reflects the assumption that the current volatility during the time of issue is indicative of further
trends, which may not necessarily be the actual outcome.
(b) expenses arising from share based payment transactions
Options issued under option plan
cOnsOliDateD
2010
$’000
29
29
2009
$’000
329
329
29 parent entity Financial inFOrmatiOn
(a) summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Non current assets
total assets
Current liabilities
Non current liabilities
total liabilities
Net assets
shareholders’ equity
Contributed equity
Reserves
Accumulated losses
total equity
Loss for the year
total comprehensive loss
parent entity
2010
$’000
2009
$’000
57,656
72,024
129,680
506
–
506
1,763
61,662
63,425
889
–
889
129,174
62,536
134,792
62,964
(859)
(4,759)
129,174
(3,773)
(3,773)
558
(986)
62,536
(826)
(826)
88
KULA GOLD LImITED ACN 126 741 259
nOtes tO the cOnsOliDateD
Financial statements
31 December 2010
29 parent entity Financial inFOrmatiOn (cOntinUeD)
(b) guarantees entered into by the parent entity
The parent entity has provided an unconditional bank guarantee to the lessor in respect of a lease agreement
amounting to $107,286 (2009 $nil).
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 31 December 2010 (31 December 2009 – nil).
For information about guarantees given by the parent entity, please see above.
(d) Contractual commitments for the acquisition of property, plant or equipment
As at 31 December 2010, the parent entity had no contractual commitments for the acquisition of property,
plant or equipment.
2010 ANNUAL REPORT
89
DirectOrs’ DeclaratiOn
In the directors’ opinion:
(a) the financial statements and notes set out on pages 44 to 89 are in accordance with the Corporations Act 2001,
including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements, and
(ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and its
performance for the financial year ended on that date,
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become
due and payable.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
David Frecker
Chairman
Sydney, 25 March 201
Lee spencer
Director
90
KULA GOLD LImITED ACN 126 741 259
inDepenDent aUDitOr’s repOrt
tO the members OF kUla GOlD
pricewaterhousecoopers
abn 52 780 433 757
darling Park Tower 2
201 Sussex Street
gPO BOX 2650
SYdneY nSW 1171
dX 77 Sydney
Australia
www.pwc.com/au
Telephone +61 2 8266 0000
Facsimile +61 2 8266 9999
report on the financial report
We have audited the accompanying financial report of Kula Gold Limited (the company), which comprises the balance sheet
as at 31 December 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash
flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’
declaration for the Kula Gold Limited group (the consolidated entity). The consolidated entity comprises the company and the
entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of the financial report that is free from material misstatement,
whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether
the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any material
inconsistencies with the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Liability limited by a scheme approved under Professional Standards Legislation.
2010 ANNUAL REPORT
91
inDepenDent aUDitOr’s repOrt
tO the members OF kUla GOlD (cOntinUeD)
Independence
In conducting our audit, we have complied with the independence requirements
of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) the financial report of Kula Gold Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001; and
(b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 25 to 32 of the directors’ report for the year ended
31 December 2010. The directors of the company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Kula Gold Limited for the year ended 31 December 2010, complies with
section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Peter Buchholz
Partner
Sydney
25 March 2011
92
KULA GOLD LImITED ACN 126 741 259
aDDitiOnal inFOrmatiOn
Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows:
In accordance with ASX listing rule 4.10.19 the Company confirms that it has used the cash and assets in a form readily
convertible to cash that it had at the time of admission to the ASX in a way consistent with its business objectives.
the sharehOlDer inFOrmatiOn set OUt belOw was
applicable as at 21 march 2011
ordinary share Capital - The issued capital comprised of 91,876,382 ordinary fully paid shares (quoted) and
20,739,141 ordinary fully paid shares (not quoted) held by 14 holders.
Distribution of equity securities - Analysis of numbers of equity security holders by size of holding:
holding
1 to 1,000
1,001 to 5000
5,001 to 10,000
10,001 to 100,000
100,000 and over
OrDinary shares
OptiOns
NuMBer oF
hoLDers
NuMBer oF
shares
NuMBer oF
hoLDers
NuMBer oF
optioNs
36
122
55
120
42
375
21,250
318,286
405,682
3,677,289
108,193,016
112,615,523
–
–
–
7
2
9
–
–
–
600,000
1,689,233
2,289,233
There were 8 holders of less than a marketable parcel of ordinary shares.
restricted securities - The Company had the following number and class of restricted securities on issue.
Class
Fully paid ordinary shares
Fully paid ordinary shares
NuMBer oF
orDiNary shares
Date esCroW
perioD eNDs
324,325
31-Mar-11
20,414,816
16-Nov-12
20,739,141
unquoted options - The Company had the following unquoted options on issue:
a) employee option plan - There were 1,889,223 unquoted options on issue held by five employees.
b) other unlisted options
optionholder
D C Frecker & J M Frecker ATF The GEO Superannuation Fund
Pacific Road Capital Management Holdings Pty Ltd
Merchant Holdings Pty Ltd ATF The Zulu Family Trust
P Bradford & V Bradford
NuMBer oF
optioNs
perCeNtage
100,000
100,000
100,000
100,000
25.00
25.00
25.00
25.00
400,000
100.00
2010 ANNUAL REPORT
93
aDDitiOnal inFOrmatiOn
twenty largest holders of quoted equity securities
shareholder
Pacific Road Holding NV
RMB Resources Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Pacific Road Capital A Pty Ltd
Pacific Road Capital B Pty Ltd
JP Morgan Nominees Australia Limited
USB Nominees Pty Ltd
CS Fourth Nominees Pty Limited
Citicorp Nominees Pty Limited
AMP Life Limited
Brispot Nominees Pty Ltd < House Head Nominee No 1 A/C>
Escor Investments Pty Ltd
JP Morgan Nominees Australia Limited
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