Linde
Annual Report 2007

Plain-text annual report

(ABN 53 090 772 222) (formerly VPH Limited) Annual Financial Report For the year ended 30 June 2007 Contents Corporate Information Review of Operations Directors’ Report Corporate Governance Statement Auditor’s Independence Declaration Consolidated Income Statement Consolidated Balance Sheet Consolidated Cash Flow Statement Consolidated Statement of Changes in Equity Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report ASX Additional Information Page 3 4 5 12 19 20 21 22 23 24 46 47 49 CORPORATE INFORMATION ABN 53 090 772 222 Directors Reginald N Gillard (Non-Executive Chairman) Gregory L Smith (Executive Director) Patrick J Flint (Non-Executive Director) Gavin Argyle (Non-Executive Director) Company Secretary Paul Jurman Registered office Ground Floor 30 Ledgar Road Balcatta WA 6021 Telephone Fax +61 8 9240 2836 +61 8 9240 2406 Principal place of business Ground Floor 30 Ledgar Road Balcatta WA 6021 Share Register Computershare Investor Services Pty Ltd Level 2, 45 St George’s Terrace Perth WA 6000 Solicitors Steinepreis Paganin Level 4, 16 Milligan Street Perth WA 6000 Auditors RSM Bird Cameron Partners 8 St George’s Terrace Perth WA 6000 3 REVIEW OF OPERATIONS The 2007 financial year has been one of significant development for the Company. In September 2006 the Company’s shareholders resolved to change the focus of activities to the resources sector, and to change the Company’s name to Lindian Resources Limited. The reason for the change was that the Company’s technology related business was not viable and it was considered the resources sector will provide the Company and its Shareholders with significant potential upside. The Company’s objective is to identify and acquire projects with potential for significant mineral resources across a range of commodities, including diamonds, gold, platinum and iron ore. The Company is focussing its efforts to identify such projects in Africa, and in particular countries that are rich in mineral resources but untested by modern exploration techniques. The political risks associated with operating in these countries are often significantly higher than operating in Australia, but the potential rewards are also significantly higher. In conjunction with the change of activities in September 2006 the Company: • • • entered into a joint venture agreement to earn an 80% interest in the Tshikapa Diamond Project (agreement settled in October 2006); completed a public offering raising A$1.595 million; and appointed a new board and management team consisting of Mr Reg Gillard, Mr Greg Smith and Mr Patrick Flint (each of whom were appointed to the Board of Directors). Mr Rob Franco and Mr Geoff Gander resigned from the Board of Directors. Since October 2006 the Company has focused its efforts on exploring the Tshikapa Diamond Project and on actively seeking further prospective exploration and mining projects in Africa. The Company is presently in advanced negotiations in respect of two projects; a coastal Iron project in West Africa and a Gold/Diamond project in the north east of the Democratic Republic of Congo. Negotiations in respect of both projects are expected to be finalized by the end of 2007. Any agreements entered into will be subject to a detailed due diligence review. The Company disposed of its technology related assets in February 2007. Tshikapa Diamond Project (Company earning 80%) The Tshikapa Diamond Project is located in the Tshikapa diamond field, in the West Kasai region of the Democratic Republic of Congo. The field is about 600 km east-southeast of Kinshasa, the capital of DRC. The Tshikapa Diamond Project consists of four licence areas covering about 800 sq km in the Tshikapa Diamond Field, one of the largest alluvial provinces in the world, located along the northern margin of the Congo–Angola diamond province. The project area has substantial alluvial diamond production from several sources including river gravels and terraces, and well defined basal conglomerates in Cretaceous sediments. Although no hard rock sources have been located to date, the presence of kimberlitic indicator minerals in heavy mineral concentrates collected by previous workers suggested that kimberlitic intrusives may be present in the area. During the year the Company undertook a review of historic data for the area and completed stream sediment sampling over the project area. Satellite imagery was used to delineate sampling sites. The minus 80 fraction of the stream sediment samples was dispatched to Genalysis Laboratory in Perth, Western Australia for geochemical analysis for a broad range of elements including gold, base metals, cobalt, nickel and platinoids. The heavy mineral concentrate was sent to Diatech (also in Perth, Western Australia) for visual determination of kimberlitic indicator minerals. The results for both the geochemical analysis and the visual examination did not show any anomalous results indicative of a possible mineralization within the underling rocks. The concentrate examined by Diatech demonstrated the presence of minerals which potentially originated from a kimberlitic source. Five samples of the 68 taken demonstrated elevated ilmenite and spinel counts with some of these grains classified as B Type spinel or A Type ilmenites. Selected grains from these samples were dispatched for microprobe analysis to determine whether their composition matched that of a potentially economic kimberlitic source rock. It was determined that these samples did not originate from such a kimberlite source. The Company is presently reviewing the potential for further exploration activity in respect of this project. 4 DIRECTORS’ REPORT Your directors submit the annual financial report of Lindian Resources (“the Company”) and its controlled entity (“the consolidated entity”) for the financial year ended 30 June 2007. Directors The names of directors who held office during or since the end of the year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Names, qualifications, experience and special responsibilities Reginald N Gillard – (Non-Executive Chairman) (60 years) Appointed 30 October 2006 Reg Gillard has been involved in the resources sector for over 20 years, and is currently focused on corporate management, corporate governance and the evaluation and acquisition of businesses. He has considerable experience in acquiring mineral projects (particularly in Africa) and in raising funds for the exploration and development of such projects. Prior to this Mr Gillard practised as an accountant, during which time he formed and developed a number of service related businesses. He is a non-executive chairman of Aspen Group Ltd, Caspian Oil & Gas Limited, Perseus Mining Limited, Lafayette Mining Limited, Pioneer Nickel Limited (from 17 March 2005), Eneabba Gas Limited (from 2 August 2005), Tiger Resources Limited (from 9 December 2005) and Elemental Minerals Limited (from 6 June 2006). He also served as non-executive chairman of Moto Goldmines Limited (ceased 17 August 2005). Gregory L Smith – BSc, AUSIMM (Executive Director) (53 years) Appointed 30 October 2006 Mr Smith has a BSc in Geology from Dalhousie University in Canada. He is a Fellow of the Geological Association of Canada and a Member of the Australasian Institute of Mining and Metallurgy. Mr Smith has 30 years experience gained as an exploration and mining geologist in Canada, Africa, Australia and South East Asia in both staff and consulting roles. Most recently Mr Smith was exploration manager for Moto Goldmines Ltd on the Moto Gold Project in the DRC. He is currently also a director of Elemental Minerals Limited (from 30 January 2007). Patrick J Flint – CA, BCom (Non-Executive Director) (42 years) Appointed 30 October 2006 Patrick Flint is a chartered accountant with significant experience in the management of publicly listed mineral exploration companies. He has been involved in numerous capital raisings and project acquisitions. He is also an executive director of Erongo Energy Limited (from 23 November 2006) and a non-executive director of Tiger Resources Limited (from 9 January 2007) and Zedex Minerals Limited (from 1 May 2007), and company secretary of Elemental Minerals Limited and Red Metal Limited (all of which are listed on the Australian Stock Exchange). Gavin Argyle – B.Com, MBA (Non–Executive Director) (44 years) Mr Gavin Argyle has over 10 years experience in investment banking and stock broking in Australia, including initiating, managing and completing share placements and initial public offerings for more than 30 companies. Mr Argyle has served on the board of numerous Australian and US listed and private companies in executive and non-executive positions. He is currently an Executive Director of Capital Investment Partners Pty Limited. His qualifications include a Bachelor of Commerce from the University of Western Australia and an MBA from the Wharton Business School at the University of Pennsylvania. He is currently also a director of Biron Apparel Limited (from 21 December 2006). Mr Geoff Gander acted as Executive Director until his resignation from the Board on 30 October 2006. Mr Robert Franco acted as Non-executive Director until his resignation from the Board on 30 October 2006. Company Secretary Paul Jurman – CPA, B Com Appointed 30 October 2006 Mr Jurman is a CPA with over 10 years experience and has been involved with a diverse range of Australian public listed companies in company secretarial and financial roles. He is also company secretary of Erongo Energy Limited, Carnavale Resources Limited, Elemental Minerals Limited and Pan Palladium Limited. 5 DIRECTORS’ REPORT (continued) Principal Activities The principal activity of the consolidated entity during the year was changed to the exploration and evaluation of mineral interests. The consolidated entity ceased its activities related to the development and marketing of enhanced electronic messaging and communication services to individuals and businesses throughout Australia. Review of operations A review of operations of the consolidated entity during the year ended 30 June 2007 is provided in the “Review of Operations” immediately preceding this Directors’ Report. Operating results for the year The consolidated loss for the year after income tax was $1,860,699 (2006: $169,138) Significant changes in the state of affairs On 25 October 2006 the consolidated entity raised $1,594,800 by the issue of 5,316,000 ordinary shares at 30 cents each pursuant to a Prospectus dated 13 September 2006. On 31 October 2006, the Company issued 1,250,000 shares and 1,000,000 options pursuant to an agreement with CRC as consideration for the identification of the Tshikapa Diamond Project in the Democratic Republic of Congo. During the year, the Company entered into a heads of agreement with Masters sprl (Masters) pursuant to which the Company has the right to earn an 80% interest in the Tshikapa Diamond Project (Exploration Joint Venture Heads of Agreement). On 31 October 2006, the Company satisfied various conditions pursuant to the Formal Farm-in Joint Venture Agreement, and issued the first tranche of consideration of 400,000 shares. In February 2007, the Company completed a non-renounceable entitlements issue of 1 option for every 2 shares held by shareholders to raise approximately $163,850. Significant events after balance date No matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly affect the operations, results or state of affairs of the Company in subsequent financial years. Likely developments and expected results The Consolidated Entity remains committed to adding to shareholder wealth through the development of its mineral interests. The Company continues to review potential project opportunities, being primarily resources projects located in Africa. Dividends No dividends have been paid or declared since the start of the financial year and the directors do not recommend the payment of a dividend in respect of the financial year. Directors’ Meetings The number of meetings held during the year and the number of meetings attended by each director were as follows: Number of meetings attended during period in office Number of meetings held during period in office Number of meetings attended: R N Gillard G L Smith P J Flint G J Argyle R M Franco G A Gander 3 3 3 4 1 1 3 3 3 4 1 1 The Company does not have audit, remuneration or nomination committees. Due to the small size of the board all matters that would be addressed by committees are dealt with by the full board of directors. 6 DIRECTORS’ REPORT (continued) Directors Interests The interests of each Director in the shares and options of the Company at the date of this report are as follows: Fully paid ordinary shares 810,541 733,952 517,541 - Options over ordinary shares 1,676,103 1,366,976 1,493,603 585,000 R N Gillard G L Smith P J Flint G J Argyle Share Options As at the date of this report, there are 21,932,004 options to subscribe for unissued ordinary shares in the Company, comprising: Listed options Unlisted options Unlisted options Unlisted options Number of options 17,383,504 550,000 1,000,000 3,000,000 Exercise price $0.30 $0.20 $0.20 $0.30 Expiry date 31 Dec 2009 31 Dec 2010 1 July 2011 15 Sept 2009 These options do not entitle the holder to participate in any share issue of the Company or any other body corporate. There are no options to subscribe for shares in any controlled entity. Options issued during the year were as follows: • • • • 1,000,000 listed options were issued to Capital Investments Pty Ltd, a director-related company for corporate advisory services. 16,383,504 listed options were issued at a price of $0.01 each on the basis of one option for every two shares held at the record date per the prospectus. 1,000,000 unlisted options were issued to Corporate & Resource Consultants Pty Ltd, a director-related entity, as consideration for the identification of the Tshikapa Diamond Project in the Democratic Republic of Congo. 3,000,000 unlisted options were issued to Mr Gillard, Mr Flint and Mr Smith as an incentive for them to provide ongoing commitment and effort to the Company. All options were granted during the financial year. No options have been granted since the end of the financial year. Details of ordinary shares issued during the financial year as a result of the exercise of an option are: Number of shares Amount paid per share 1,463 $0.30 For details on the valuation of the options issued during the year, including models and assumptions used, please refer to Note 21. There were no alterations to the terms and conditions of options granted as remuneration since their grant date. Indemnification and insurance of Directors and Officers The Company has agreed to indemnify the directors and previous directors of the Company, against all liabilities to another person that may arise from their position as directors of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. During the financial year the Company agreed to pay an annual insurance premium of $20,015 in respect of directors’ and officers’ liability and legal expenses’ insurance contracts, for directors, officers and employees of the Company. The insurance premium relates to: • • costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever the outcome. other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty. 7 Remuneration report This report outlines the remuneration arrangements in place for directors and executives of the Company. Remuneration philosophy The performance of the company depends upon the quality of the directors and executives. The philosophy of the company in determining remuneration levels is to: - set competitive remuneration packages to attract and retain high calibre employees; - - establish appropriate performance hurdles for variable executive remuneration. link executive rewards to shareholder value creation; and Options Issued as part of remuneration for the year ended 30 June 2007 Options are issued to directors and executives as part of their remuneration. Remuneration structure In accordance with best practice Corporate Governance, the structure of non-executive director and executive remuneration is separate and distinct. Non-executive director remuneration The Board seeks to set aggregate remuneration at a level that provides the company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. The ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. Aggregate remuneration is currently set at $150,000 per year. Each director receives a fee for being a director of the company. The remuneration of non-executive directors for the year ended 30 June 2007 is: Base Emolument Superannuation R N Gillard P J Flint G J Argyle R M Franco 26,667 32,000 29,411 34,750 2,400 2,880 - 900 8 DIRECTORS’ REPORT (continued) Executive Officers Mr Smith is an Executive Director of the Company and is entitled to Director Fees of $100,000 per annum plus superannuation. Mr Gander was an Executive Director of the Company and received Directors Fees of $30,000 per annum plus $150 per hour in consulting fees for fulfilling the Executive duties of the Company. Mr Gander received a termination payment of $25,000 at the time of his resignation for services provided. Options issued to Executive and Non-executive directors Directors 30 June 2007 R N Gillard (i) G L Smith (i) P J Flint (i) G J Argyle G A Gander R M Franco Directors 30 June 2006 G J Argyle G A Gander R M Franco Executives A Meloncelli Granted No. Granted as remuneration $ Remuneration represented by options % Options Exercised $ Options Lapsed $ 1,000,000 1,000,000 1,000,000 148,000 148,000 148,000 - - - - - - 3,000,000 444,000 81.7% 65.9% 79.0% - - - - - - - - - - - - - - - - - - Granted No. Granted as remuneration $ Remuneration represented by options % Options Exercised $ Options Lapsed $ 330,000 300,000 - 50,000 680,000 660 600 - 100 1,360 2.15% 1.30% - 0.47% - - 60,000 - 10,000 70,000 - - - - - The fair value of the options was calculated using a Black and Scholes model. The following factors and assumptions were taken into account in determining the fair value of options on the grant date. Grant Date Expiry Date (i) 27 October 2006 15 September 2009 Fair value per option 14.8 cents Exercise price 30 cents Price of shares on valuation date 30 cents Expected Volatility 70% Risk free interest rate 5.50% Dividend yield - For details on the valuation of the options, including models and assumptions used, please refer to Note 21. There were no alterations to the terms and conditions of options granted as remuneration since their grant date. 9 DIRECTORS’ REPORT (continued) 30 June 2007 Directors R N Gillard (appointed 30 October 2006) G L Smith (appointed 30 October 2006) P J Flint (appointed 30 October 2006) G J Argyle G A Gander (resigned 30 October 2006) R M Franco (resigned 30 October 2006) Short-term Post Employment Share Based Payment Remuneration represented by options Total Salary & Fees Other Super Options $ $ $ $ $ % 26,667 66,667 32,000 29,411 34,750 34,750 4,154 4,154 4,154 5,287 1,133 1,133 2,400 148,000 181,221 6,000 148,000 224,821 2,880 148,000 187,034 - - 900 - - - 34,698 35,883 36,783 81.7% 65.9% 79.0% - - 30 June 2006 Directors G J Argyle G A Gander R M Franco Executives S Mison (appointed 13 March 2006) A Meloncelli (resigned 13 March 2006) 224,245 20,015 12,180 444,000 700,440 Share Based Payment Options Short-term Salary & Fees Remuneration represented by options Total $ $ $ % 30,000 45,500 30,000 14,320 21,048 660 600 - - 100 30,660 46,100 30,000 14,320 21,148 2.15% 1.46% - - 0.47% 140,868 1,360 142,228 10 DIRECTORS’ REPORT (continued) Environmental issues The Consolidated Entity is aware of its environmental obligations with regards to its exploration activities and ensures that it complies with all regulations when carrying out any exploration work. Auditor Independence and Non-Audit Services Section 307C of the Corporations Act 2001 requires our auditors, RSM Bird Cameron Partners, to provide the directors of the Company with an Independence Declaration in relation to the audit of the annual report. This Independence Declaration is set out on page 19 and forms part of this directors’ report for the year ended 30 June 2007. Non-Audit Services The following non-audit services were provided by our auditors, RSM Bird Cameron Partners. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. RSM Bird Cameron Partners received or are due to receive the following amounts for the provision of non-audit services: Independent Accountant Report for prospectus $14,640 Signed in accordance with a resolution of the directors. R N Gillard Chairman 26 September 2007. 11 CORPORATE GOVERNANCE STATEMENT The ASX Listing Rules require listed entities to disclose the extent to which they have followed the best practice recommendations set by the ASX Corporate Governance Council during the reporting period. This corporate governance statement summarises the corporate governance practices that have been formally reviewed and adopted by the Board with a view to ensuring continued investor confidence in the operations of the Company. A table has been included at the end of this statement detailing the Company’s compliance with the best practice recommendations. The Company’s website at www.lindianresources.com.au contains a corporate governance section that includes copies of the Company’s corporate governance policies. BOARD OF DIRECTORS Role of the Board (1.1) In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company. Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following: To set the strategic direction for the Company and monitor progress of those strategies; • • Establish policies appropriate for the Company; • Monitor the performance of the Company, the Board and management; • Approve the business plan and work programmes and budgets; • Authorise and monitor investment and strategic commitments; • Review and ratify systems for health, safety and environmental management; risk and internal control; codes of conduct and regulatory compliance; • Report to shareholders, including but not limited to, the Financial Statements of the Company; and • Take responsibility for corporate governance. Composition of the Board To add value to the Company the Board has been formed so that it has effective composition, size and commitment to adequately discharge its responsibilities and duties given its current size and scale of operations. The names of Directors of the Company in office at the date of this statement are set out in the Directors’ Report. Information regarding Directors’ experience and responsibilities will be included in the Directors’ Report section of the Annual Report (2.5). The number of Directors is specified in the Constitution of the Company as a minimum of three up to a maximum of ten. The preferred skills and experiences for a Director of the Company include: • Mineral Resources; • Corporate and Business Development; and • Public Company administration. 12 CORPORATE GOVERNANCE STATEMENT (continued) Chairman of the Board The Chairman of the Board will be a Non-Executive Director and the Chairman will be elected by the Directors. The Board considers that the Chairman, Mr Reg Gillard is independent (2.2/2.3). Independent Directors (2.1) The Board considers that a Director is independent if that Director complies with the following criteria: • Apart from Director’s fees and shareholding, independent Directors should not have any business dealings which could materially affect their independent judgment; • Must not have been in an Executive capacity in the Company in the last 3 years; • Must not have been in an advisory capacity to the Company in the last 3 years; • Must not be a significant customer or supplier for the Company; • Must not be appointed through a special relationship with a board member; • Must not owe allegiance to a particular group of shareholders which gives rise to a potential conflict of interest; • Must not hold conflicting cross Directorships; and • Must not be a substantial shareholder or a nominee of a substantial shareholder (as defined under section 9 of the Corporations Act). Using the ASX Best Practice Recommendations on the assessment of the independence of Directors, the Board considers that of a total of four Directors, two are considered to be independent (Mr Reg Gillard and Mr Patrick Flint). Mr Greg Smith is an Executive Director of the Company and is not considered to be independent. However, his experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain on the Board. Mr Gavin Argyle is a Non-Executive Director of the Company and is not considered to be independent. However, his experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain on the Board. Retirement and Rotation of Directors Retirement and rotation of Directors are governed by the Corporations Act 2001 and the Constitution of the Company. Each year one third Directors must retire and offer themselves for re-election. Any casual vacancy filled will be subject to shareholder vote at the next Annual General Meeting of the Company. Independent Professional Advice (2.5) Each Director has the right to seek independent professional advice at the Company’s expense after consultation with the Chairman. Once received the advice is to be made immediately available to all board members. Access to Employees Directors have the right of access to any employee. Any employee shall report any breach of corporate governance principles or Company policies to the Executive Director and/or Company Secretary/Financial Controller who shall remedy the breach. If the breach is not rectified to the satisfaction of the employee, they shall have the right to report any breach to an independent Director without further reference to senior managers of the Company. Share Ownership Directors are encouraged to own Company shares. 13 CORPORATE GOVERNANCE STATEMENT (continued) Board Meetings The following points identify the frequency of Board Meetings and the extent of reporting from management at the meetings: • A minimum of four meetings are to be held per year; • Other meetings will be held as required, meetings can be held by telephone link; and • Information provided to the Board includes all material information on: operations, budgets, cash flows, funding requirements, shareholder movements, broker activity in the Company’s securities, assets and liabilities, disposals, financial accounts, external audits, internal controls, risk assessment, new venture proposals, and health, safety and environmental reports. The number of Directors’ meetings and the number of meetings attended by each of the Directors of the Company during the financial year are set out in the Directors’ Report. Board Performance Review (8.1) It is the policy of the Board to conduct an evaluation of its performance. Performance is measured by the efficiency and effectiveness of the designing and implementation of the exploration and development programme, the enhancement of the Company’s mineral interest portfolio, the maintenance of relationships with joint venture partners, the securing of required funding and the success of the Company’s exploration and development activities. Performance evaluation is not based on specific financial indicators such as earnings or dividends as the Company is at the exploration stage and during this period is expected to incur operating losses. Other Areas for Board Review • Reporting to shareholders and the market to ensure trade in the Company’s securities takes place in an efficient, competitive and informed market; and Insurance, both corporate and joint venture related insurances. • Board Committees Audit Committee (4.2) The Company does not have an audit committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by an audit committee can be adequately handled by the full Board. A Director and the Company Secretary have declared in writing to the Board that the Company’s financial statements for the year ended 30 June 2007 present a true and fair view, in all material aspects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards. This representation is made by a Director and Company Secretary/Financial Controller prior to the Director’s approval of the release of the annual and six monthly accounts. This representation is made after enquiry of, and representation by, appropriate levels of management (4.1). Nomination Committee (2.4) The Board of Directors of the Company does not have a nomination committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by a nomination committee can be adequately handled by the full Board. Remuneration Committee (8.1) (9.2) (9.5) The Company does not have a remuneration committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by a remuneration committee can be adequately handled by the full Board. The Company’s policy for determining the nature and amount of emoluments of Board members is as follows: • Remuneration of Executive and Non –Executive Directors is reviewed annually by the Board. • Remuneration packages are set at levels intended to attract and retain Directors and Executives capable of managing the Company’s operations and adding value to the Company. • For details of remuneration paid to Directors and officers for the financial year please refer to the Directors’ Report and Note 20 to the Financial Statements. 14 CORPORATE GOVERNANCE STATEMENT (continued) Risk Management (7.1) The Company’s risk management policy is designed to provide the framework to identify, assess, monitor and manage the risks associated with the Company’s business. The Board adopts practices designed to identify significant areas of business risk and to effectively manage those risks in accordance with the Company’s risk profile. The risks involved in a resources sector company and the specific uncertainties for the Company continue to be regularly monitored and the full Board of the Company meets on an annual basis to formally review such risks. All proposals reviewed by the Board include a consideration of the issues and risks of the proposal. The potential exposures associated with running the Company have been managed by the Directors and Company Secretary who have significant broad-ranging industry experience, work together as a team and regularly share information on current activities. Where necessary, the Board draws on the expertise of appropriate external consultants to assist in dealing with or mitigating risk. The Company’s main areas of risk include: • • • • • • • • exploration; new project acquisitions; security of tenure; environment; government policy changes and political risk; occupational health and safety; financial reporting; and continuous disclosure obligations. Additionally, it is the responsibility of the Board to assess the adequacy of the Company’s internal control systems and that its financial affairs comply with applicable laws and regulations and professional practices. Regular consideration is given to all these matters by the Board. The Company has in place an internal control framework to assist the Board in identifying, assessing, monitoring and managing risk. The Company’s internal control system is monitored by the Board and assessed regularly to ensure effectiveness and relevance to the Company’s current and future operations. Procedures have been put into place to ensure a Director and the Company Secretary/Financial Controller state in writing to the Board that the integrity of the financial statements is founded on a sound system of risk management and internal compliance and control and that the Company’s risk management and internal compliance and control system is operating efficiently and effectively. This representation is made by a Director and Company Secretary/Financial Controller prior to the Director’s approval of the release of the annual and six monthly accounts. This representation is made after enquiry of, and representation by, appropriate levels of management (4.1) (7.2). The Company is not currently of a size to require the formation of committees. The full Board has the responsibility for the risk management of the Company. PROMOTION OF ETHICAL AND RESPONSIBLE DECISION-MAKING Code of Conduct (10.1) The goal of establishing the Company as a significant resources company is underpinned by its core values of honesty, integrity, common sense and respect for people. The Company desires to remain a good corporate citizen and appropriately balance, protect and preserve all stakeholders’ interests. The Board has adopted a Code of Conduct for Directors and employees of the Company. The Company’s goal of achieving above average wealth creation for our shareholders should be enhanced by complying with this code of conduct which provides principles to which Directors and employees should be familiar and to which they are expected to adhere and advocate (3.1). The Company does not currently believe it is of a size to warrant the development of formal ethical guidelines however, the company subscribes to a general Code of Conduct. All Directors, officers and any employees are required to meet the following standards of ethical behaviour: 15 CORPORATE GOVERNANCE STATEMENT (continued) PROMOTION OF ETHICAL AND RESPONSIBLE DECISION-MAKING (continued) • Act honestly, in good faith and in the best interests of the company as a whole. • Exercise care and diligence in carrying out all duties. • Recognise and respect the responsibility to shareholders and other stakeholders of the Company. • Not misuse information, property or position for an improper purpose including for personal gain or to compete with the company. • Avoid conflicts of interest and manage conflicts of interest appropriately if the arise. • Observe the principles of independence in decision making. • Respect the confidentiality of all confidential information acquired as a result of position and not disclose such information without (cid:31)uthorization. • Not engage in conduct likely to bring the company into disrepute. • Observe the spirit and letter of the law and comply with ethical and technical requirements of the appropriate regulatory bodies. In addition to the general Code of Conduct all Directors and employees who are members of a professional body are required to comply with their respective body’s ethical standards. Any breaches of the Code of Conduct should be reported to the chair in the first instance for notification to the board. Any disciplinary action including formal warning or dismissal will be decided by the board and where necessary cases may be referred to the appropriate authorities. It is the responsibility of the Board to ensure the Company’s performance under this Code and for its regular review. Trading in Company Securities by Directors, officers and employees Trading of shares is covered by, amongst other things, the Corporations Act and the ASX Listing Rules. The Board has established a Securities Trading Policy that establishes strict guidelines as to when a Director, officer or an employee can deal in Company shares. The policy prohibits trading in the Company’s securities whilst the Directors, officer or employee is in the possession of price sensitive information. For details of shares held by Directors and officers please refer to the Directors’ Report and Note 20 to the Financial Statements (3.2). SHAREHOLDER COMMUNICATION The Board aims to ensure that shareholders and investors have equal access to the Company’s information. The Company has policies and procedures that are designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance. This disclosure policy includes processes for the identification of matters that may have a material effect on the price of the Company’s securities, notifying them to the ASX and posting them on the Company’s website (5.1). The Company also has a strategy to promote effective communication with shareholders (6.1) and encourage effective participation at general meetings through a policy of open disclosure to shareholders, regulatory authorities and the broader community of all material information with respect to the Company’s affairs including, but not limited to: • Conflicts of interest and related party transactions; • Executive remuneration; • • • • Shorter, more comprehensible notices of meetings. The grant of options and details of Share Option Plans; The process for performance evaluation of the Board, its committees, individual Directors and key managers; The link between remuneration paid to Directors and Executives and corporate performance; and The following information is communicated to shareholders: The Annual Report and notices of meetings of shareholders; • • Monthly and Quarterly reports reviewing the operations, activities and financial position of the Company; • All documents that are released to the ASX are made available on the Company’s website; and • All other information on the Company’s website is updated on an ongoing basis. 16 CORPORATE GOVERNANCE STATEMENT (continued) ASX BEST PRACTICE RECOMMENDATIONS The table below identifies the ASX Best Practice Recommendations and whether or not the Company has complied with the recommendations during the reporting period: Complied Note 1.1 2.1 2.2 2.3 2.4 2.5 3.1 3.2 3.3 4.1 4.2 4.3 4.4 4.5 5.1 Formalise and disclose the functions reserved to the Board and those delegated to management. A majority of the Board should be independent Directors. The Chairperson should be an independent Director. The roles of Chairperson and Chief Executive Officer should not be exercised by the same individual. The Board should establish a Nomination Committee. Provide the information indicated in Guide to Reporting on Principle 2. Establish a code of conduct to guide the Directors, the Chief Executive Officer (or equivalent), the Chief Financial Officer (or equivalent) and any other key Executives as to: 3.1.1 the practices necessary to maintain confidence in the Company’s integrity. 3.2.1 the responsibility of and accountability of individuals for reporting and investigating of unethical practices. Disclose the policy concerning trading in Company securities by Directors, officers and employees. Provide information indicated in Guide to reporting on Principle 3. Require the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) to state in writing to the board that Company’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards. The Board should establish an Audit Committee. Structure the Audit Committee so that it consists of: - Only Non-Executive Directors; - A majority of independent Directors; - An independent Chairperson, who is not Chairperson of the Board; and - At least three members. The Audit Committee should have a formal charter. Provide the information indicated in Guide to reporting on Principle 4. Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for the compliance. 5.2 Provide the information indicated in Guide to reporting on Principle 5. X X X X X X X X X X X 17 1 2 3 3 3 6.1 6.2 7.1 7.2 7.3 8.1 9.1 9.2 9.3 9.4 Design and disclose a communication strategy to promote effective communication with shareholders and encourage effective participation at general meetings. Request the external auditor to attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the Auditors’ Report. The Board or appropriate Board Committee should establish policies on risk oversight and management. the statement given The Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) should state to the Board in writing that: 7.2.1 the best practice recommendation 4.1 (the integrity of financial statements) is founded on a system of risk management and internal compliance and control which implements the policies adopted by the board. 7.2.2 the Company’s risk management and internal compliance and control system is operating efficiently in all material respects. in accordance with Provide the information indicated in Guide to reporting on Principle 7. Disclose the process for performance evaluation of the board, its committees and individual Directors, and key Executives and corporate performance. Provide disclosure in relation to the Company’s remuneration policies to enable investors to understand (i) The costs and benefits of these policies; and (ii) The link between remuneration paid to Directors and key Executives and corporate performance. The Board should establish a Remuneration Committee. Clearly distinguish the structure of Non-Executive Directors’ remuneration from that of Executives. Ensure that payment of equity-based Executive remuneration is made in accordance with thresholds set in plans approved by shareholders. 9.5 Provide the information indicated in Guide to reporting on Principle 9. 10.1 Establish and disclose a code of conduct to guide compliance with legal and other obligations to legitimate stakeholders. X X X X X X X X X X X 4 Note 1: Two out of four Directors are not considered to be independent. However, the skills, experience and knowledge of these two Directors makes their contribution to the Company and the Board such that it is appropriate for them to remain on the Board. Note 2: The Board of Directors of the Company does not have a Nomination Committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by a Nomination Committee can be adequately handled by the full Board. Note 3: The Company does not have an Audit Committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by an Audit Committee can be adequately handled by the full Board. Note 4: The Company does not have a Remuneration Committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by a Remuneration Committee can be adequately handled by the full Board. 18 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2007 Revenue Other income Revenue Administration expense Depreciation expense Exploration expenditure written off Occupancy expense Employee benefit expenses Loss before income tax benefit Income tax benefit Consolidated Parent Notes 2007 $ 2006 $ 2007 $ 2006 $ 2 2 2 2 2 4 37,251 135,831 37,251 135,831 262,140 66,994 262,140 66,994 299,391 202,825 299,391 202,825 (1,133,946) (207,143) (1,133,796) (23,626) (269,391) (9,986) (693,141) (59,908) - (17,082) (87,830) (23,626) (269,391) (9,986) (693,141) (206,963) (59,908) - (17,082) (87,830) (1,830,699) (169,138) (1,830,549) (168,958) - - - - Loss after income tax benefit (1,830,699) (169,138) (1,830,549) (168,958) Net loss attributable to members of parent (1,830,699) (169,138) (1,830,549) (168,958) Basic loss per share (cents per share) 5 (6.22) (0.89) The accompanying notes form part of these financial statements 20 CONSOLIDATED BALANCE SHEET FOR THE YEAR ENDED 30 JUNE 2007 Assets Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-Current Assets Financial assets Exploration and evaluation expenditure Plant and equipment Total Non-Current Assets Total Assets Liabilities Current Liabilities Trade and other payables Total Current Liabilities Total Liabilities Net Assets Equity Issued capital Option premium reserve Accumulated losses Total Equity Consolidated Parent Notes 2007 $ 2006 $ 2007 $ 2006 $ 6 7 8 9 10 11 12 13 14 3,463,272 2,331,187 3,463,211 2,330,976 40,086 4,707 40,086 4,707 3,503,358 2,335,894 3,503,297 2,335,683 - 120,250 12,807 133,057 - - 90,938 90,938 473 120,250 12,807 133,530 473 - 90,938 91,411 3,636,415 2,426,832 3,636,827 2,427,094 184,193 184,193 184,193 41,743 41,743 41,743 184,193 184,193 184,193 41,743 41,743 41,743 3,452,222 2,385,089 3,452,634 2,385,351 11,526,830 9,651,848 11,526,830 9,651,848 1,024,650 1,800 1,024,650 1,800 (9,099,258) (7,268,559) (9,098,846) (7,268,297) 3,452,222 2,385,089 3,452,634 2,385,351 The accompanying notes form part of these financial statements 21 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2007 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Consolidated Parent Note 2007 $ 2006 $ 2007 $ 2006 $ Inflows/(Outflows) Inflows/(Outflows) 37,251 68,027 37,251 68,027 (616,001) (332,326) (615,851) (332,146) 182,587 66,994 182,587 66,994 Net cash from / (used in) operating activities 6 (396,163) (197,305) (396,013) (197,125) Cash flows from investing activities Payments for exploration and evaluation expenditure Purchase of plant and equipment Proceeds from sale of assets Proceeds of loan to subsidiary Net cash from / (used in) investing activities Cash flows from financing activities Proceeds from issue of shares Capital raising costs (149,641) (13,996) 148,053 - (15,584) - - - - - (149,641) (13,996) 148,053 - (15,584) - - - (312) (312) 1,759,089 1,525,000 1,759,089 1,525,000 (215,257) (78,278) (215,257) (78,278) Net cash provided by financing activities 1,543,832 1,446,722 1,543,832 1,446,722 Net increase/(decrease) in cash and cash equivalents 1,132,085 1,249,417 1,132,235 1,249,285 Cash and cash equivalents at the beginning of the financial year 2,331,187 1,081,770 2,330,976 1,081,691 Cash and cash equivalents at the end of the financial year 6 3,463,272 2,331,187 3,463,211 2,330,976 The accompanying notes form part of these financial statements 22 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2007 Consolidated Note Balance as at 1 July 2005 Loss for the period Shares issued Options issued Balance as at 30 June 2006 Loss for the period Shares issued Options issued Share issue costs Issued Capital $ 8,206,926 - 1,444,922 - 9,651,848 - 2,090,239 Option Premium Reserve - - - 1,800 1,800 - - - 1,022,850 (215,257) - Accumulated Losses $ Total $ (7,099,421) 1,107,505 (169,138) (169,138) - - 1,444,922 1,800 (7,268,559) 2,385,089 (1,830,699) (1,830,699) - - - 2,090,239 1,022,850 (215,257) Balance as at 30 June 2007 11,526,830 1,024,650 (9,099,258) 3,452,222 Parent Balance as at 1 July 2005 Loss for the period Shares issued Options issued Balance as at 30 June 2006 Loss for the period Shares issued Options issued Share issue costs 8,206,926 - 1,444,922 - 9,651,848 - 2,090,239 - - - 1,800 1,800 - - - 1,022,850 (215,257) - (7,099,339) 1,107,587 (168,958) (168,958) - - 1,444,922 1,800 (7,268,297) 2,385,351 (1,830,549) (1,830,549) - - - 2,090,239 1,022,850 (215,257) Balance as at 30 June 2007 11,526,830 1,024,650 (9,098,846) 3,452,634 The accompanying notes form part of these financial statements 23 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (a) (b) (c) Basis of Preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards (including the Australian Accounting Interpretations) and complies with other requirements of the law. The financial report has also been prepared on a historical cost basis. The financial report is presented in Australian dollars. The company is a listed public company, incorporated in Australia and operating in Australia. Adoption of new and revised standards In the year ended 30 June 2007, the Company has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2006. It has been determined by the Company that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to the Company’s accounting policies. Statement of Compliance The financial report was authorised for issue on 26 September 2007. The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS). (d) Basis of Consolidation The consolidated financial statements comprise the financial statements of Lindian Resources Limited and its subsidiaries as at 30 June each year (the Group). The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Control exists where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. 24 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (e) Significant accounting judgments, estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: Exploration and evaluation expenditure The Board of Directors determines when an area of interest should be abandoned. When a decision is made that an area of interest is not commercially viable, all costs that have been capitalised in respect of that area of interest are written off. The Directors’ decision is made after considering the likelihood of finding commercially viable reserves. Share-based payment transactions: The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using a Black and Scholes model. (f) Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (i) Sale of goods Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the goods to the customer. (ii) Interest income Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. (g) Cash and cash equivalents Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short term deposits with an original maturity of three months or less. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. (h) Trade and other receivables Trade receivables, which generally have 30 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified. 25 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (i) Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: • • when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: • • when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. (j) Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. 26 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (j) Other taxes (continued) Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (k) Plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: Computer hardware – 40% Computer software and licenses – 40% Furniture and fittings – 20% The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. (i) Impairment The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash- generating unit to which the asset belongs, unless the asset's value in use can be estimated to be close to its fair value. An impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. (l) Exploration and Evaluation Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied: (i) the rights to tenure of the area of interest are current; and (ii) at least one of the following conditions is also met: (a) the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale; or (b) exploration and 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. Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation and amortised of assets used in exploration and evaluation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest. 27 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (l) Exploration and Evaluation (continued) Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and evaluation asset (for the cash generating unit(s) to which it has been allocated being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years. Where a decision has been made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment and the balance is then reclassified to development. (m) Trade and other payables Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. (n) Share-based payment transactions The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Company’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share. (o) Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 28 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (p) Earnings per share Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for: • • • costs of servicing equity (other than dividends) and preference share dividends; the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. (q) Segment Reporting Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash, receivables, property, plant and equipment net of accumulated depreciation and mineral interest acquisitions, exploration and development expenditure. Whilst most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities consist principally of accounts payable, employee entitlements, accrued expenses, provisions and borrowings. Segment assets and liabilities do not include deferred income taxes. Where segment revenues and expenses include transfers between segments, these are at the same rates which would apply to parties outside the Group on an arm’s length basis. These transfers are eliminated on consolidation. 29 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 2: REVENUES AND EXPENSES (a) Revenue Rendering of services (b) Other income Interest Received Gain on sale of assets (c) Depreciation Depreciation (d) Exploration expenditure written off Exploration expenditure written off (e) Employee benefits expense Directors salaries, fees and superannuation Share based payments expense Employee salaries and superannuation (f) Other share based payments Corporate advisory fees Consolidated Parent 2007 $ 2006 $ 2007 $ 2006 $ 37,251 135,831 37,251 135,831 182,587 79,553 262,140 66,994 182,587 66,994 - 79,553 - 66,994 262,140 66,994 23,626 59,908 23,626 59,908 269,391 - 269,391 - 236,425 444,000 12,716 693,141 96,030 1,800 - 97,830 63,911 444,000 185,230 693,141 96,030 1,800 - 97,830 790,000 - 790,000 - 30 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2007 NOTE 3: SEGMENT REPORTING Segment Information The consolidated entity operated in the information technology industry in Australia and the mineral exploration industry in the Democratic Republic of Congo during the financial year. Business Segment Revenue Unallocated revenue Total revenue Share of profit / (loss) Assets Liabilities Other segment information Depreciation 2007 $ 116,804 - 116,804 116,804 - - Technology 2006 $ 202,825 - 202,825 Mineral Exploration 2006 2007 $ $ - - - (169,138) 2,426,832 41,743 (1,947,503) 3,636,415 184,193 22,438 59,908 1,189 Consolidated 2007 $ 116,804 182,587 299,391 2006 $ 202,825 - 202,825 (1,830,699) 3,636,415 184,193 (169,138) 2,426,832 41,743 23,626 59,908 - - - - - - - Geographical Segments (secondary segment) Segment revenue Segment assets Australia Democratic Republic of Congo Elimination Consolidated 2007 $ 2006 $ 2007 $ 2006 $ 2007 $ 2006 $ 2007 $ 2006 $ 299,391 3,503,358 202,825 2,426,832 - 133,057 - - - - - - 299,391 3,636,415 202,825 2,426,832 Consolidated Parent 2007 $ 2006 $ 2007 $ 2006 $ NOTE 4: INCOME TAX Income tax recognised in profit or loss The prima facie income tax benefit on pre-tax accounting loss from operations reconciles to the income tax benefit in the financial statements as follows: Accounting loss before income tax (1,830,699) (169,138) (1,830,549) (168,958) Income tax benefit calculated at 30% Non-deductible expenses Deferred tax asset not brought to account Income tax benefit reported in the consolidated income statement (549,210) (50,741) (549,165) (50,687) 373,195 176,015 - 373,195 - 50,741 175,970 50,687 - - - - 31 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 4: INCOME TAX (continued) Income tax recognised directly in equity The following current and deferred amounts were charged directly to equity during the period: Current tax: • Share-issue expenses Deferred tax assets comprise: Income tax losses Temporary differences Losses available for offset against future taxable income Consolidated Parent 2007 $ 2006 $ 2007 $ 2006 $ 215,257 215,257 80,078 215,257 80,078 215,257 80,078 80,078 2,233,761 2,008,943 2,233,687 2,008,914 2,392 (31,294) 2,392 (31,294) 2,236,153 1,977,649 2,236,079 1,977,620 The Group has tax losses arising in Australia of $7,445,870 (2006: $6,851,085) that are available for offset against future taxable profits of the companies in which the losses arose. The potential deferred tax asset will only be obtained if: (a) the relevant Company derives future assessable income of a nature and an amount sufficient to enable the benefit to be realised, b) the relevant Company continues to comply with the conditions for deductibility imposed by the Law including the continuity of ownership and same business tests; and (c) no changes in tax legislation adversely affect the relevant Company and/or consolidated entity in realising the benefit. NOTE 5: EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing net profit/(loss) for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Basic earnings per share Diluted earnings per share Basic Earnings per share The net loss and weighted average number of ordinary shares used in the calculation of basic earnings per share is as follow: Net loss Consolidated 2007 2006 Cents per share Cents per share (6.22) (6.22) (0.89) (0.89) $ $ (1,830,698) (169,138) No. of shares No. of shares Weighted average number of ordinary shares for the purposes of basic earnings per share 29,416,266 18,973,915 32 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 6: CASH AND CASH EQUIVALENTS Cash at bank and on hand Short term deposit Cash at bank earns interest at floating rates based on daily bank deposit rates. (i) Reconciliation to Cash Flow Statement: For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and at bank and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows: Cash and cash equivalents Reconciliation of profit for the year to net cash flows from operating activities Consolidated Parent 2007 $ 320,399 3,142,873 2006 $ 2,331,187 2007 $ 320,338 2006 $ 2,330,976 - 3,142,873 - 3,463,272 2,331,187 3,463,211 2,330,976 3,463,272 2,331,187 3,463,211 2,330,976 3,463,272 2,331,187 3,463,211 2,330,976 Loss for the year Depreciation Net gain on sale of assets Exploration expenditure written off Non-cash share option expenditure Change in net assets and liabilities (Increase)/decrease in assets: Current receivables Increase/(decrease) in liabilities: Current payables Unearned income Net cash from operating activities (1,830,699) (169,138) (1,830,549) (169,958) 23,626 59,908 23,626 59,908 (79,553) 269,391 1,234,000 - - - (79,553) 269,391 1,234,000 - - - (2,821) 24,645 (2,821) 25,645 (10,107) - (25,655) (87,065) (10,107) - (25,655) (87,065) (396,163) (197,305) (396,013) (197,125) 33 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 7: CURRENT TRADE AND OTHER RECEIVABLES Trade receivables Consolidated Parent 2007 $ 2006 $ 2007 $ 2006 $ 40,086 4,707 40,086 4,707 Trade receivables are non-interest bearing and are generally on 30 day terms. An allowance for doubtful debts is made when there is objective evidence that a trade receivable is impaired. The amount of the allowance/impairment loss has been measured as the difference between the carrying amount of the trade receivables and the estimated future cash flows expected to be received from the relevant debtors. NOTE 8: OTHER FINANCIAL ASSETS (NON-CURRENT) Loan to controlled entity Investments in controlled entities - - - - - - 472 1 473 472 1 473 NOTE 9: DEFERRED EXPLORATION & EVALUATION EXPENDITURE (a) Expenditure carried forward in respect of mineral areas of interest Exploration and evaluation – at cost 120,250 - 120,250 - The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective mineral interests. (b) Reconciliation: Exploration and evaluation phases Carrying amounts at the beginning of the period Additions through cash expenditure Additions through share based payment Exploration expenditure written off Carrying amounts at the end of the period - 149,641 240,000 (269,391) 120,250 - - - - - - 149,641 240,000 (269,391) 120,250 - - - - - Carried forward expenditure costs relate to the Company’s farm-in agreement into the Tshikapa Diamond Project, located in the Tshikapa diamond field in the Democratic Republic of Congo. 34 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 10 : PLANT AND EQUIPMENT Year ended 30 June 2007 At 1 July 2006, net of accumulated depreciation and impairment Additions Depreciation charge for the year Written down value of assets sold Consolidated Parent Computer Hardware, Software and Licences $ Furniture and Fittings $ Computer Hardware, Software and Licences $ Furniture and Fittings $ Total $ Total $ 89,787 1,151 90,938 89,787 1,151 90,938 13,996 - 13,996 13,996 - 13,996 (23,483) (143) (23,626) (23,483) (143) (23,626) (67,493) (1,008) (68,500) (67,493) (1,008) (68,500) At 30 June 2007, net of accumulated depreciation and impairment 12,807 - 12,807 12,807 - 12,807 At 30 June 2006 Cost Accumulated depreciation and impairment Net carrying amount At 30 June 2007 Cost Accumulated depreciation and impairment Net carrying amount 1,291,376 5,132 1,296,508 1,291,376 5,132 1,296,508 (1,201,589) (3,981) (1,205,570) (1,201,589) (3,981) (1,205,570) 89,787 1,151 90,938 89,787 1,151 90,938 13,996 (1,189) 12,807 - - - 13,996 (1,189) 12,807 13,996 (1,189) 12,807 - - - 13,996 (1,189) 12,807 The useful life of the assets was estimated as follows for both 2006 and 2007: Computer Hardware Computer Software and Licences Furniture and Fittings 2.5 years 2.5 years 5 years 35 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 11: TRADE AND OTHER PAYABLES (CURRENT) Trade payables Accrued expenses Consolidated Parent 2007 $ 40,776 143,417 184,193 2006 $ - 41,743 41,743 2007 $ 40,776 143,417 184,193 2006 $ - 41,743 41,743 NOTE 12: ISSUED CAPITAL Consolidated Parent Ordinary shares issued and fully paid 11,526,830 9,651,848 11,526,830 9,651,848 2007 $ 2006 $ 2007 $ 2006 $ Fully paid ordinary shares carry one vote per share and carry the right to dividends. (a) Movement in ordinary shares on issue Number $ Number $ At 1 July 2005 17,025,363 8,206,926 17,025,363 8,206,926 Issue of shares on 23 March 2006 2,428,571 255,000 2,428,571 Issued on 24 March 2006 for cash on exercise of share options 50,000 10,000 50,000 255,000 10,000 Issue of shares on 18 May 2006 6,000,000 1,200,000 6,000,000 1,200,000 Issue on 22 June 2006 for cash on exercise of share options 300,000 60,000 300,000 Transaction costs on share issue At 30 June 2006 - (80,078) - 25,803,934 9,651,848 25,803,934 9,651,848 Issue of shares pursuant to funds raised in prospectus 5,316,000 1,594,800 5,316,000 1,594,800 Issue of shares for acquisition of Tshikapa Diamond Project (i) 400,000 120,000 400,000 Issue of shares for identification of Tshikapa Diamond Project (ii) 1,250,000 375,000 1,250,000 Options converted to shares during year Transaction costs on share issue At 30 June 2007 1,463 439 1,463 - (215,257) - (215,257) 32,771,397 11,526,830 32,771,397 11,526,830 (i) 400,000 shares were issued to Masters sprl as part consideration to earn an 80% interest in the Tshikapa Diamond Project. (ii) 1,250,000 shares were issued to Corporate and Resource Consultants Pty Ltd as consideration for the identification of the Tshikapa Diamond Project in the Democratic Republic of Congo. 36 60,000 (80,078) 120,000 375,000 439 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 (b) Share Options Options to take up ordinary shares in the capital of the Company have been granted as follows: Exercise Period Note Exercise Price Opening Balance 1 July 2006 Options Issued 2006/07 Closing Balance 30 June 2007 Options Exercised/ Cancelled/ Expired 2006/07 Number Number Number Number On or before 31 December 2010 On or before 1 July 2011 On or before 15 September 2009 (i) (ii) On or before 31 December 2009 (iii) (iv) $0.20 $0.20 $0.30 $0.30 550,000 - 1,000,000 3,000,000 - - - - - - 550,000 1,000,000 3,000,000 17,384,967 (1,463) 17,383,504 550,000 21,384,967 (1,463) 21,933,504 (i) 1,000,000 options were issued to Corporate & Resource Consultants Pty Ltd as consideration for the identification of the Tshikapa Diamond Project in the Democratic Republic of Congo. (ii) 3,000,000 options were issued to Messrs Gillard, Smith and Flint as an incentive for them to provide ongoing services to the Company. (iii) 1,000,000 options were issued to Capital Investments Partners Pty Ltd for corporate advisory services. (iv) 16,383,504 options were issued at a price of $0.01 each on the basis of one option for every two shares held at the record date per the prospectus. (c) Terms and conditions of ordinary shares Ordinary shares have the right to receive dividends as declared and, in the event of winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. NOTE 13: Option Premium Reserve Consolidated Balance at beginning of period Fair value of options issued Balance at end of period 2007 $ 1,800 1,022,850 1,024,650 2006 $ - 1,800 1,800 Parent 2007 $ 1,800 1,022,850 1,024,650 2006 $ - 1,800 1,800 The option premium reserve is used to accumulate proceeds received from the issuing of options and accumulate the value of options issued in consideration for services rendered. NOTE 14: Accumulated Losses Balance at beginning of period Net losses attributable to members Balance at end of period 7,268,559 7,099,421 7,268,297 7,099,339 1,830,699 169,138 1,830,549 168,958 9,099,258 7,268,559 9,098,846 7,268,297 37 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 15: FINANCIAL INSTRUMENTS Set out below is a comparison by category of carrying amounts and fair values of all of the Group’s financial instruments recognised in the financial statements. The fair values of loan notes and other financial assets have been calculated using market interest rates. Consolidated Financial assets Cash Trade receivables Financial liabilities On balance sheet Trade payables and accruals Carrying Amount 2007 $ 2006 $ Fair Value 2007 $ 2006 $ 3,463,272 2,331,187 3,463,272 2,331,187 40,086 4,707 40,086 4,707 3,503,358 2,335,894 3,503,358 2,335,894 64,193 64,193 41,743 41,743 64,193 41,743 64,193 41,743 Interest rate risk The following table sets out the carrying amount, by maturity, of the financial instruments exposed to interest rate risk: Year ended 30 June 2007 Consolidated Floating rate Cash Assets <1year $ Total $ Weighted average effective Interest rate % 3,463,272 3,463,272 5.76% Weighted average effective interest rate 5.76% - Year ended 30 June 2006 Consolidated Financial Assets Floating rate Cash Assets 2,331,187 2,331,187 5.42% Weighted average effective interest rate 5.42% 38 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 16: COMMITMENTS AND CONTINGENCIES (a) Exploration expenditure commitments For those mineral concessions where the consolidated entity is not the titleholder, the earning of equity interest is by incurring exploration expenditure of specified amounts by certain dates. Where the consolidated entity or its joint venture partners are the concession holder, renewal will be subject to satisfying the relevant authority as to the adequacy of exploration programs by comparison to work programs submitted at the time of grant of the concession. It is estimated that the consolidated entity is required to make the following outlays to satisfy joint venture and exploration permit conditions. These commitments are subject to variation dependent upon matters such as the results of exploration on the mineral concessions. Within one year One year or later and not later than five years Later than five years (b) Contingent Liabilities Consolidated Parent 2007 $ 824,694 1,164,782 - 1,989,476 2006 $ - - - - 2007 $ 824,694 1,164,782 - 1,989,476 2006 $ - - - - Future revenue derived by the Company from the production of precious stones will be subject to a 4% royalty payable to the Government of the Democratic Republic of Congo. NOTE 17: RELATED PARTY DISCLOSURE The consolidated financial statements include the financial statements of Lindian Resources Limited and the subsidiary listed in the following table. Name Virtualplus Australia Pty Ltd Country of Incorporation Australia % Equity Interest Investment ($) 2007 100 2006 100 2007 1 2006 1 Lindian Resources Limited is the ultimate parent entity of the Group. NOTE 18: EVENTS AFTER THE BALANCE SHEET DATE No matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly affect the operations, results or state of affairs of the Company in subsequent financial years. NOTE 19: AUDITORS' REMUNERATION The auditor of Lindian Resources Limited is RSM Bird Cameron Partners. Amounts received or due and receivable by RSM Bird Cameron Partners for: An audit or review of the financial report of the entity and any other entity in the consolidated group Other services Consolidated Parent 2007 $ 2006 $ 2007 $ 2006 $ 15,000 13,500 15,000 14,640 29,640 500 14,000 14,640 29,640 13,500 500 14,000 39 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 20: KEY MANAGEMENT PERSONNEL (a) Details of Key Management Personnel (i) Directors Reginald N Gillard Chairman (non-executive) – appointed 30 October 2006 Gregory Smith Patrick Flint Gavin Argyle Geoff Gander Robert Franco Executive director – appointed 30 October 2006 Non-executive director – appointed 30 October 2006 Non-executive director Executive director – resigned 30 October 2006 Non-executive director – resigned 30 October 2006 There were no other changes of key management personnel after reporting date and the date the financial report was authorised for issue. Individual directors and executives compensation disclosures Information regarding individual directors and executives compensation and some equity instruments disclosures as permitted by Schedule 5B to the Corporations Regulations 2001 is provided in the Remuneration Report section of the Directors’ report. Apart from the details disclosed in this note, no director has entered into a material contract with the Company or the Group since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year-end. Loans to key management personnel and their related parties There were no loans outstanding at the reporting date to key management personnel and their related parties. 40 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 20: KEY MANAGEMENT PERSONNEL (continued) iii)Compensation by category: Key Management Personnel Short-Term Post Employment Share-based Payments Consolidated Parent 2007 $ 2006 $ 2007 $ 2006 $ 244,260 12,180 444,000 700,440 140,868 - 1,800 142,668 244,260 12,180 444,000 700,440 140,868 - 1,800 142,668 (c) Compensation options: Granted and vested during the year (Consolidated) During the financial year options were granted as equity compensation benefits to certain key management personnel. All options vested at grant date. The options were issued free of charge. Each option entitles the holder to subscribe for one fully paid share in the entity at an exercise price of 20 cents. The contractual life of each option granted is five years. 30 June 2007 Directors R N GIllard G L Smith P J Flint Vested Granted No. No. Grant Date Terms and Conditions for each Grant Fair Value per option at grant date ($) Exercise price per option($) First Exercise Date Last Exercise Date 1,000,000 1,000,000 27-10-06 1,000,000 1,000,000 27-10-06 1,000,000 1,000,000 27-10-06 0.148 0.148 0.148 0.30 0.30 0.30 27-10-06 15-09-09 27-10-06 15-09-09 27-10-06 15-09-09 Total 3,000,000 3,000,000 30 June 2006 Directors G J Argyle G A Gander Executives A L Meloncelli 330,000 330,000 17-11-05 300,000 300,000 17-11-05 0.002 0.002 0.20 0.20 17-11-05 31-12-10 17-11-05 31-12-10 50,000 50,000 17-11-05 0.002 0.20 17-11-05 31-12-10 Total 680,000 680,000 41 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 20: KEY MANAGEMENT PERSONNEL (continued) (d) Shares issued on Exercise of Compensation Options (Consolidated) 30 June 2007 No shares were issued during the year on exercise of compensation options. 30 June 2006 Directors G A Gander Executives A L Meloncelli Total Shares issued No. Paid per share $ Unpaid per share $ 300,000 50,000 350,000 0.20 0.20 - - (e) Option holdings of Key Management Personnel (Consolidated) 30 June 2007 Directors R N Gillard (i) G L Smith (ii) P J Flint (i) G J Argyle (iii) G A Gander (iv) R M Franco (iv) Balance at beginning of period Granted as remune- ration Options exercised Net change Other (i-iv) Balance at end of period Vested as at 30 June 2007 Total Exercisable Not Exercisable - - - 1,000,000 1,000,000 1,000,000 330,000 - - - - - 330,000 3,000,000 - - - - - - - 676,103 1,676,103 1,676,103 1,676,103 366,976 1,366,976 1,366,976 1,366,976 493,603 1,493,603 1,493,603 1,493,603 255,000 585,000 585,000 585,000 - - - - - - - - 1,791,682 5,121,682 5,121,682 5,121,682 - - - - - - - (i) Mr Gillard and Mr Flint each received 270,833 options due to their interest in Corporate & Resource Consultants Pty Ltd, an entity that received 1,000,000 unlisted options for the identification of the Tshikapa Diamond project. The balance of the options issued was due to their participation in the non-renounceable entitlements issue of one option for every two shares held. (ii) Mr Smith participated in the non-renounceable entitlements issue of one option for every two shares held. (iii) Mr Argyle received 255,000 options due to his interest in Capital investment Partners Pty Ltd, an entity that provided corporate advisory services during the year. (iv) Mr Franco and Mr Gander resigned as directors during the year 42 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 20: KEY MANAGEMENT PERSONNEL (continued) 30 June 2006 Directors G J Argyle G A Gander Executives M L Meloncelli Balance at beginning of period Granted as remune- ration Options exercised Net change Other (i) Balance at end of period Vested as at 30 June 2006 Total Exercisable Not Exercisable - - - - 330,000 - 300,000 (300,000) 50,000 (50,000) 680,000 (350,000) - - - - 330,000 330,000 330,000 - - - - - - 330,000 330,000 330,000 - - - - (f) Number of shares held by Key Management Personnel 30 June 2007 Directors R N Gillard (i) G L Smith (ii) P J Flint (i) G J Argyle G A Gander (iii) R M Franco (iii) Balance 01 July 06 Ord Granted as remuneration On Exercise of Options Net Change Other Ord Ord Ord Balance 30 June 07 Ord - - - - 300,000 1,815,473 2,115,473 - - - - - - - - - - - - - - 810,541 733,952 517,541 - - - 810,541 733,952 517,541 - 300,000 1,815,473 2,062,034 4,177,507 (i) Mr Gillard and Mr Flint each received 338,541 shares due to their interest in Corporate & Resource Consultants Pty Ltd, an entity that received 1,250,000 shares for the identification of the Tshikapa Diamond project. The balance was held by Mr Gillard and Mr Flint directly or through director-related entities prior to their appointment as directors. (ii) Mr Smith held shares directly or through director-related entities prior to his appointment as a director. (iii) Mr Franco and Mr Gander resigned as directors during the year. The amounts shown as held at 30 June 2007 are the number of shares held as of their resignation date. 43 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 20: KEY MANAGEMENT PERSONNEL (continued) 30 June 2006 Directors G J Argyle G A Gander R M Franco Executives A Meloncelli S A Mison Balance 01 July 05 Ord Granted as remuneration On Exercise of Options Net Change Other Ord Ord Ord Balance 30 June 06 Ord - 250,000 1,565,473 - - - - - - - - 300,000 - - (250,000) 250,000 50,000 (50,000) - - - 300,000 1,815,473 - - 1,815,473 - 350,000 (50,000) 2,115,473 All equity transactions with key management personnel other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm's length. Other transactions and balances with Key Management Personnel Corporate Consultants Pty Ltd (“CCPL”) provide accounting, administrative and company secretarial services on commercial terms. Total amounts paid to CCPL were $30,430 during the reporting period. Mr Gillard and Mr Flint are directors of and have a beneficial interest in CCPL. Ledgar Road Partnership charges rent at commercial rates, totalling $3,960 for the period. Mr Gillard has a beneficial interest in the Ledgar Road Partnership. Corporate & Resource Consultants Pty Ltd (“CRCPL”) received 1,250,000 shares at 30 cents and 1,000,000 options exercisable at 20 cents each on or before 1 July 2011 (valued at 20.7 cents (total $582,000)) during the financial year in consideration for identifying the Tshikapa Diamond Project. The options were valued based on the Black & Scholes pricing model (refer Note 21). Mr Gillard and Mr Flint are directors of and have a beneficial interest in CRCPL. During the year the Company issued 5,316,000 shares at 30 cents to raise $1,594,800 pursuant the prospectus dated 13 September 2006. Capital Investment Partners Pty Ltd (“CIP”) acted as corporate advisor and received 6% of the gross amount raised ($95,688). The Company also issued 1,000,000 options to CIP for additional corporate advisory services performed during the year. The options were valued at $208,000 based on the Black & Scholes pricing model (refer Note 21). CIP provided accounting, administrative and company secretarial services on commercials terms during the year. Total amounts paid to CIP were $25,000. Mr Gavin Argyle is a director of CIP. All transactions above were completed at arms length. 44 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 21: SHARE BASED PAYMENTS The Company makes share based payments to consultants and / or service providers from time to time, not under any specific plan. The Company also may issue options to directors of the parent entity. Specific shareholder approval is obtained for any share based payments to directors of the parent entity. The expense recognised in the income statement in relation to share-based payments is disclosed in Note 2. The following table illustrates the number and weighted average exercise prices of and movements in share options issued during the year: Weighted average price 2007 Number of options 2007 Weighted average price 2006 Number of options 2006 Balance at beginning of period Granted during the year Forfeited during the year Exercised during the year $0.20 $0.28 - - 550,000 5,000,000 - - - - $0.20 900,000 - - $0.20 (350,000) Balance at the end of the year 5,550,000 550,000 The outstanding balance as at 30 June 2007 is shown in Note 12(b). The fair value of the equity-settled share options is estimated as at the date of grant using a binomial model taking into account the terms and conditions upon which the options were granted. The fair value of shares issued is calculated by reference to the market value of the shares trading on the Australian Stock Exchange on or around the date of grant. The following table lists the inputs to the model used for the years ended 30 June 2007and 30 June 2006: Volatility (%) – range Risk-free interest rate (%) - range Expected life of option (years) Exercise price (cents) Weighted average share price at grant date (cents) 2007 70% 5.5% 3 to 5 years 20- 30 32 2006 50% 5.28% 5 years 20 2 The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value. Other share based payments, not under any plans are as follows (with additional information provided in Note 18 above): • • 400,000 Ordinary Shares were issued to Masters sprl at a deemed issue price of 30 cents each as part consideration to earn an 80% interest in the Tshikapa Diamond Project (refer to Note 9). 1,250,000 shares were issued to Corporate and Resource Consultants Pty Ltd at a deemed issue price of 30 cents each as consideration for the identification of the Tshikapa Diamond Project in the Democratic Republic of Congo. 45 DIRECTORS’ DECLARATION 1. In the opinion of the directors: a. the financial statements and notes of the company and of the consolidated entity are in accordance with the Corporations Act 2001 including: i. ii. giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2007 and of their performance for the year then ended; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001; and b. there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. 2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2007. This declaration is signed in accordance with a resolution of the Board of Directors. R N Gillard Chairman Dated this 26th day of September 2007 46 ASX ADDITIONAL INFORMATION Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in this report is set out below. SHAREHOLDINGS (as at 21 September 2007) (a) Distribution of equity securities (i) Ordinary Share Capital 32,772,897 fully paid ordinary shares are held by 1,465 individual shareholders. • All issued ordinary shares carry one vote per share and carry the rights to dividends. (ii) Listed Options • 17,382,004 listed options are held by 436 individual option holders. (iii) Unlisted Options • • • 550,000 options exercisable at 20 cents each and expiring on 31 December 2010 are held by 6 individual option holders. 1,000,000 options exercisable at 20 cents each and expiring on 1 July 2011 are held by 1 individual option holder. 3,000,000 options exercisable at 30 cents each and expiring on 15 September 2009 are held by 3 individual option holders. Options do not carry a right to vote. The number of shareholders, by size of holding, in each class are: Fully paid ordinary shares Listed Options 1 - 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Holding less than a marketable parcel (b) Substantial shareholders 90 186 33 100 27 436 505 538 176 208 38 1,465 679 Unlisted Options Exercisable at 20 cents Expiring on 31 Dec 2010 - - - 5 1 6 Unlisted Options Exercisable at 20 cents Expiring on 1 July 2011 - - - - 1 1 Unlisted Options Exercisable at 30 cents Expiring on 15 Sept 2009 - - - 3 3 - Ordinary Shareholder Number Percentage Fully Paid ANZ Nominees Limited Mr Franco and RM Franco and LM Franco / Mario Franco Superannuation Fund 10,707,808 1,815,473 12,523,281 32.67 5.54 38.21 49 ASX ADDITIONAL INFORMATION (Continued) (c) Twenty largest holders of quoted equity securities Ordinary Shareholder Number Percentage Fully Paid ANZ NOMINEES LIMITED MR MICHAEL ROBERT FRANCO + MR ROBERT MARIO FRANCO + MISS LAURA MICHELLE FRANCO CORPORATE & RESOURCE CONSULTANTS PTY LTD EAGLE RIVER HOLDINGS PTY LTD CRESTLINE INVESTMENTS PTY LTD NEFCO NOMINEES PTY LTD MANIKATO FINANCIAL SERVICES PTY LTD DR TODD ANDREW SILBERT NATIONAL NOMINEES PTY LTD MR DAVID ARGYLE MR JOHN FRANCIS CORR SHAH NOMINEES PTY LTD MASTERS SPRL MR STUART WINSTON BELL MR MARIO GIOSUE FRANCO + MRS IMMACOLATA FRANCO MR MARCEL ANTHONY REUBEN ECONOMIST HOLDINGS PTY LTD NEWMEK INVESTMENTS PTY LIMITED DR GEORG SCHNURA CORPORATE SYSTEMS PUBLISHING PTY LTD 10,707,808 32.67 1,500,000 1,250,000 650,000 600,952 600,000 581,640 500,000 433,000 417,411 400,000 400,000 400,000 343,038 315,473 300,000 279,000 237,000 220,000 200,000 20,335,322 4.58 3.81 1.98 1.83 1.83 1.77 1.53 1.32 1.27 1.22 1.22 1.22 1.05 0.96 0.92 0.85 0.72 0.67 0.61 62.03 50 ASX ADDITIONAL INFORMATION (Continued) (d) Twenty largest holders of quoted listed options Ordinary Shareholder ANZ NOMINEES LIMITED MR MICHAEL ROBERT FRANCO + MR ROBERT MARIO FRANCO + MISS LAURA MICHELLE FRANCO CORPORATE & RESOURCE CONSULTANTS PTY LTD MR NATHAN VADALA CLODENE PTY LTD MR DAVID ARGYLE BAYONET INVESTMENTS PTY LTD MR MICHAEL JOSEPH DE MARTE CRESTLINE INVESTMENTS PTY LTD NEFCO NOMINEES PTY LTD MANIKATO FINANCIAL SERVICES PTY LTD MR GAVIN JOHN ARGYLE DR GEORG SCHNURA MR MICHAEL JOHN FENNELL CUNNINGHAM SECURITIES PTY LTD MASTERS SPRL MR THOMAS FRANCIS CORR MR JOHN FRANCIS CORR MR DAVID LEONE MR MARIO GIOSUE FRANCO + MRS IMMACOLATA FRANCO Listed options exercisable at $0.30 expiring on 31 December 2009 Number Percentage 5,202,782 29.93 750,000 625,000 607,855 596,334 542,428 412,500 330,250 300,476 300,000 290,820 255,000 220,000 213,000 201,000 200,000 186,125 178,500 173,500 157,737 11,743,307 4.31 3.60 3.50 3.43 3.12 2.37 1.90 1.73 1.73 1.67 1.47 1.27 1.23 1.16 1.15 1.07 1.03 1.00 0.91 67.58 (e) TENEMENT DIRECTORY Mineral tenements held at 21 September 2007 are as follows: Project Tenement Reference Company Interest % Comment Tshikapa Diamond Project PR 4431, 4432, 4433 and 4611 Nil ) Refer Note 1 Notes: 1. The Company is earning an 80% interest in the tenements by (i) funding exploration expenditure for a period of three years with a minimum expenditure of US$700,000 per annum; and (ii) issuing the tenement holder (Masters sprl) 400,000 shares in October 2008. 51 

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