(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