2 | chairman’s review
2 Chairman’s Review
4 Review of Operations
4 about Lulo Diamond concession
6 Kimberlite exploration Program
8 alluvial sampling Program
10 Additional Information
13 Corporate Governance Statement
19 Financial Report
comPetent Persons’ statement
information in this report that relates to exploration results, mineral resources or ore reserves is
based on information compiled by David Jones Bsc (hons) msc of ascidian Prospecting Pty Ltd, who is
a corporate member of the australasian institute of mining and metallurgy and manfred marx Bsc G
Dip env sc Fausimm. mr Jones is a director of Lonrho mining Limited. mr marx is a consultant to Lonrho
mining Limited. messrs Jones and marx have sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the activity which they are undertaking to
qualify as a competent Persons as defined in the 2004 edition of the australasian code for reporting
exploration results, mineral resources and ore reserves. messrs Jones and marx consent to the inclusion
in the presentation of the matters based on this information in the form and context in which it appears.
unlocking the
world-class
potential of
the lulo
diamond
concession
ChAIRm An’S RevIew
Dear shareholders
it is with pleasure that i present to you
the 2012 annual report for Lonrho
mining Limited at a time in which the
company enters the most exciting phase
in its history.
i refer, of course, to the kimberlite drilling
and bulk sampling program at the Lulo
Diamond concession, which has been
described by international diamond
expert manfred marx as one of the most
prospective diamond projects in angola.
it was the world-class exploration potential
of the 3,000km2 Lulo concession, as
highlighted by mr marx, which attracted
me to join the company as chairman in
march of this year as part of a review of
the Lonrho board.
as you may be aware, i am no stranger
to the global diamond industry, having
previously served as the managing Director
of argyle Diamond mines (1993-2002)
before taking up the position of founding
managing Director of rio tinto Diamonds.
i would like to pay tribute to the work
done by Lonrho’s previous chairman,
David Lenigas, in helping to position the
company to where its true potential can
be unlocked.
the kimberlite exploration program at
Lulo is the culmination of almost four years
of systematic exploration work. it was
back in 2008 when Lonrho conducted a
low-level miDas aeromagnetic survey
over a 1,000km2 section of the Lulo
concession, which identified no less than
247 kimberlite targets.
in a report prepared published in June
2011, mr marx identified 61 of those
247 kimberlite targets as immediate
exploration priorities for Lonrho.
as a result, Lonrho has committed to a
$12 million program to drill test and bulk
sample those 61 priority kimberlite targets.
this follows a successful $12.7 million
capital raising completed by the company
in march 2012 and approvals being
granted from our angolan joint venture
partner endiama.
the significant progress made by your
company in recent months in preparation
for this kimberlite exploration program has
included negotiating a $2.2 million contract
with specialist south african drilling group
BaUer technologies to drill and bulk
sample the kimberlite targets at Lulo.
BaUer is scheduled to have its drill rig
on site at Lulo in July 2012.
in addition, Lonrho has significantly
upgraded its fleet of caterpillar earth
moving equipment for the kimberlite
exploration program and engaged Bond
industries in south africa to manufacture
a new $3.5 million Dense media separation
(Dms) plant.
‘the lulo diamond
concession has
been described
by international
diamond expert
manfred marx
as one of the
most prospective
diamond projects
in angola.’
the kimberlite exploration program aims
to find the source, or sources, of the large
numbers of gem-quality diamonds which
Lonrho continues to recover from its
alluvial diamond operations at Lulo.
this includes the 53.2 carat diamond
recovered by Lonrho in november 2011
from the BLK_06 alluvial bulk sample pit.
this was more than twice the size of the
22.2 carat diamond recovered from the
Lulo concession in 2010.
adding to the excitement surrounding
the kimberlite exploration project is that
Lulo is located within 150km of the giant
catoca diamond mine in angola and on the
same geological setting. catoca, which is
operated by russian giant alrosa, is
considered the third largest kimberlite
mine in the world, producing approximately
60 percent of angola’s diamonds.
catoca is also the target model for Lonrho’s
kimberlite exploration program.
as is often the case in the diamond
exploration industry, Lonrho shareholders
have had to show great patience as the
company has conducted its systematic
exploration programs.
however, Lonrho is now in a position to
reward that patience as we seek to unlock
the world-class potential of the Lulo
Diamond concession.
GorDon GiLchrist
June 2012
| 3
RevIew OF OpeRA tIOnS
anGoL a | LULo DiamonD concession
about lulo
the Lulo Diamond concession covers
about 3,000km2 and is located in the
cuango river Basin within the Lunda
norte Province of north-eastern angola
in southern africa. the project area is
situated approximately 750km from
angola’s capital city of Luanda and can
be accessed via sealed road.
Lulo is surrounded by concessions held by
some of the world’s biggest diamond
miners and is located about 150km west of
the 170-million carat catoca diamond mine.
the Lulo Project and catoca both lie within
the Lucarpa Graben an area considered
tectonically favourable for kimberlite
emplacement. operated by russian giant
alrosa, catoca is considered the third
largest kimberlite mine in the world.
4 |
the Lulo Project is operated as a joint
venture between Lonrho and the
Government-owned diamond company
endiama, which is the exclusive concessionary
for angolan diamond mining rights.
Lonrho’s kimberlite exploration program is
based on a report examining the economic
potential of the Lulo Project prepared by
international diamond expert manfred
marx in June 2011.
Under the joint venture arrangement,
Lonrho holds a 40 per cent interest in the
concession relating to alluvials (39 per
cent for kimberlites), with endiama and
private angolan interests holding the
balance. Lonrho is the manager and
operator on the concession and funds
all exploration activities.
Lulo has world-class diamond exploration
potential, with a major kimberlite field
identified within the concession and
extensive diamond-bearing alluvials
occurring along the cacuilo and Lulo rivers.
Lonrho began recovering gem-quality
alluvial diamonds from its Dense media
separation (Dms) plant at Lulo in late
2010, with the biggest diamond recovered
to date weighing 53.2 carats. the company
has also commenced a kimberlite
exploration program at Lulo, using the
catoca diamond mine as the target model.
in his report, mr marx concluded that
angola was one of the most attractive
diamond exploration target areas in the
world and that Lulo was one of the most
prospective projects, at this stage of its
development, in angola.
mr marx also identified 61 of the 247
kimberlite targets at Lulo for priority
drilling and bulk sampling. having adopted
those recommendations, the Lonrho Board
has committed to a new exploration
program to drill and bulk sample the
61 priority kimberlite targets.
this follows the successful completion of
a $12.7 million capital raising in march 2012
to fund the kimberlite program.
lulo is surrounded by
concessions held by some
of the world’s biggest
diamond miners
LULo DiamonD
concession
18°40’
19°00’
19°00’
19°20’
19°20’
19°40’
s d m
Sociedade de
Desenvolvimento
Mineiro de
angola S.a.R.l
muacapenda
30 KIloMEtRES
l u a n gu e
Xamufinda
Lubalo
Popi
cambungo
lulo River
capenda camulemba
C
a
c
u
i
l
o
R
i
v
e
r
d e b e e r s
loNRHo CaMP
chitamba
l o N R H o M ININ G
l u l o
(3000sq km)
| 5
Luangue
samugaiche
cassange
cambolo
m e ta l e x
s d m
sacafunfo
muanda
a l ro s a
RuSSIa’S l aRGESt
DIaMo ND CoMPaNy
Priority Kimberlite target
Exposed Calonda Formation
alluvial bulk Sample
a lt o c u il o
a nG oL a
9°00’9°20’9°40’10°00’18°40’ 19°40’
RevIew OF OpeRA tIOnS
anGoL a | LULo DiamonD concession
KIMbERl ItE
ExPloR atIoN
PRoGR aM
the kimberlite exploration program being
undertaken at Lulo is the culmination of
four years of systematic diamond
exploration work carried out by Lonrho.
in 2008, the company completed a
low-level miDas aeromagnetic survey
of the upper cacuilo and Lulo rivers
covering a 1,000km2 section of the
3,000km2 Lulo concession.
although kimberlites had been recorded
in the area, the results from the
aeromagnetic survey were a revelation.
a preliminary interpretation of the
aeromagnetic data was undertaken by
independent consulting geophysicist
e. o. Kostlin. he concluded that the 217
magnetic anomalies which were clearly
visible on the magnetic and radiometric
data were, in all likelihood, kimberlite
intrusives. subsequent interpretation of
the data by Lonrho’s geological team
increased the number of likely kimberlite
intrusives to 247.
soil sampling of selected anomalies by Lonrho
has confirmed high counts of kimberlitic
indicator minerals, supporting the
probability of underlying kimberlite pipes.
in his June 2011 report examining Lulo’s
economic diamond potential, international
diamond expert manfred marx said it was
highly probable that the primary kimberlite
source, or sources, of the alluvial diamonds
6 |
being mined by the garimpeiros within the
cacuilo river catchment awaited discovery
within the Lulo concession.
mr marx concluded that most of the 247
magnetic anomalies identified within the
Lulo concession were likely to be classified
as kimberlites. he selected 61 of those 247
kimberlite targets for priority drilling and
bulk sampling.
those recommendations were adopted by
Lonrho and the kimberlite exploration
program was approved by Lonrho’s joint
venture partner endiama in December 2011.
in march 2012, Lonrho completed a $12.7
million capital raising to fund the
kimberlite exploration program.
the target model for this program is the
170-million catoca diamond mine, which
is located about 150km east of Lulo. the
60-hectare catoca mine is considered the
third biggest kimberlite mine in the world
and supplies about 60% of angola’s
diamonds.
the kimberlite exploration program at
Lulo includes:
• On-going surface sampling of the
61 priority targets for kimberlitic
indicator minerals
• Construction of access roads and bridges
• Manufacture of a new 50tph DMS plant
• Purchase of a new fleet of earthmoving
equipment
• Using an excavator to begin sampling
shallow buried kimberlite targets
• Narrow diameter diamond drilling of
kimberlite targets to a 50m depth
• Large diameter drilling to a 100m depth
to extract 25 tonne kimberlite samples
for treatment through the Dms plant
By the end of march 2012, Lonrho had
engaged Bond industries in south africa
to manufacture the new $3.5 million Dms
diamond recovery plant and purchased a
$1 million fleet of new caterpillar
earthmoving equipment, including a
bulldozer, excavator, dump truck and
two front end loaders.
the company had also finalised a $2.2
million contract with BaUer technologies
south africa to undertake the kimberlite
drilling programs (both narrow and large
diameter drilling).
the kimberlite exploration program seeks
to find the source, or sources, of the
significant numbers of gem-quality
diamonds being recovered from Lonrho’s
alluvial sampling programs at Lulo.
892430
Probably
Kimberlite limit
Kimberlite in Pit
8924100
Sandstone in Pit
Sandstone outcrop
Mini-bulk Sample
8923900
8923700
8923500
8923300
894500
894500
893500
893000
892500
892000
287900
288100
288300
288500
288700
KimBerLite K170
| 7
reGionaL maGnetics
anD Location oF
Priority KimBerLite
tarGets
Priority Magnetic anomolies
Confirmed Kimberlite
Probably Kimberlite
> 100 Indicators
> 50 Indicators
low Indicators
Not Sampled
Garimperio Diggings
Inferred Calonda Formation
alluvial bulk Sample
891500
Background Image is of
total magnetic Intensity
260000
265000
270000
275000
280000
285000
290000
alluvIal
SaMPl ING
PRoGRaM
Lonrho is attempting to identify a
commercial alluvial diamond resource
within both the calonda and younger
lateritic gravels along an 8km stretch of
the cacuilo river valley, located within the
western part of the Lulo concession.
the company’s ongoing alluvial diamond
programs continued to meet with success
in 2012. at the time of writing, Lonrho
had recovered more than 300 carats of
diamonds from the company’s Dms plant.
most significantly, a gem quality 53.2
carat diamond was recovered from alluvial
gravels in november 2011. the 53.2 carat
diamond was more than twice the size
of the next biggest diamond recovered
at Lulo, which was a 22.2 carat stone
recovered in 2010.
while a variety of different diamondiferous
gravels occur within the cacuilo river
valley, Lonrho is primarily targeting
the diamond-rich gravels of an ancient
sedimentary unit known as the calonda
Formation.
the calonda Formation is usually covered
by a significant thickness of wind-blown
(aeolian) Kalahari sand. however, within
the cacuilo river valley, most of the
Kalahari sand has been removed by
erosion, which has provided the company
with an accessible window where the
calonda gravels can be more easily
accessed and evaluated.
the 53.2 carat stone was one of seven
diamonds weighing more than 5 carats
recovered from the BLK_06 bulk sample.
By the end of February 2012, Lonrho had
recovered a total of 116 diamonds from
the BLK_06 bulk sample weighing a total
of 183.8 carats. this equated to a grade
of 40.16 carats per hundred cubic metres
(cphm) with an average stone size of
1.58 carats.
the diamonds recovered through Lonrho’s
Dms plant from the BLK_07 bulk sample
during the reporting period were also
considered significant.
8 |
at the time of writing, Lonrho had
recovered 43 mostly gem-quality diamonds
weighing 25.4 carats from BLK_07, at an
average grade of 8.17 cphm.
these diamond recoveries are significant
because the BLK_07 bulk sample is
targeting lateritic gravels which commonly
contain much lower concentrations of
diamonds. these lateritic gravels were
deposited within the cacuilo river valley
during recent geological times and are
widespread within the valley. the lateritic
gravels are much younger than the ancient
calonda Formation sedimentary unit,
which is Lonrho’s primary alluvial diamond
target within the Lulo concession.
Bulk sampling is a pre-cursor to trial
mining of alluvials and ultimately diamond
production. Lonrho will continue its alluvial
bulk sampling programs throughout 2012.
a gem quality 53.2 carat
diamond was recovered
from alluvial gravels
in november 2011
OppOSIte
aLLUviaL ProGram –
Location oF BULK samPLes
Review of opeRations angola | lulo diamond concession Caculio valley
River terrace Gravels
Calonda Conglomerate
Infered Calonda Conglomerate
bulk Sample Site
Haul Road
894600
894500
blK-01
pLAnt
SIte
894400
blK-03
blK-02
894300
894200
894100
894000
893900
blK-04
LOnRhO CAmp
blK-07
blK-05
blK-06
Namuluri
261000
| 9
blK-08
260000262000263000264000265000 additional information current as at 18 June 2012 required by australia securities exchange Limited rules and not disclosed
elsewhere in this report.
1.
CaPItal StRuCtuRE
ORdInARy ShARe C ApItAL
2,547,463,070 ordinary fully paid shares held by 2,403 shareholders.
Spread
1
1,001
5,001
10,001
100,001
to
to
to
to
1,000
5,000
10,000
100,000
-
number of holders
number of Shares
33
37
54
769
1,510
3,925
143,502
490,916
45,142,714
2,501,682,013
as at 18 June 2012 there were 571 fully paid ordinary shareholders holding less than a marketable parcel.
OptIOnS
135,629,982 listed options expiring 30 June 2012 exercisable at $0.15 held by 88 option holders.
Spread
1
1,001
5,001
10,001
100,001
to
to
to
to
1,000
5,000
10,000
100,000
-
number of holders
number of 30/6/12 Options
1
-
1
14
72
1
-
6,666
825,165
134,798,150
10 |
1,566,223,074 listed options expiring 2 December 2013 exercisable at $0.02 held by 591 option holders.
Spread
1
1,001
5,001
10,001
100,001
to
to
to
to
to
1,000
5,000
10,000
100,000
-
number of holders
number of 02/12/13 Options
2
1
4
131
453
1,040
5,000
37,741
7,464,680
1,566,223,074
19,750,000 unlisted options expiring 30 september 2012 exercisable at $0.50
30,000,000 unlisted options expiring 1 august 2013 exercisable at $0.02
2. oN-MaRKEt buy-baCK
there is no current on-market buy back.
3. SubStaNtIal SHaREHolDERS
Lonrho africa holdings Ltd holds 212,031,498 ordinary fully paid shares, being 8.32 percent of the company’s issued capital.
additional information
4. toP 20 Hol DERS oF Quot ED SECuRItIES
Fully paid Ordinary Shares
Lonrho africa holdings Ltd
Khoo seah Kee
Lujeta Pty Ltd
cs Fourth nominees Pty Ltd
D Forshaw Batley
nutsville Pty Ltd
maK super (wa) Pty Ltd
robert n arnold
Peter D adamas
Benjamin Dark
aG and Pc Brooks
nutsville Pty Ltd
sinbad Jackson Pty Ltd
international Plant construction
Bond street custodians Ltd
one Dog one Bone Pty Ltd
tt nicholls Pty Ltd
BP Byass
s and Lr sammut
rec wa Pty Ltd
Listed Options expiring 30 June 2012
exercisable at $0.15
Lonrho africa holdings Ltd
cs Fourth nominees Pty Ltd
Lujeta Pty Ltd
ross J taylor
one Dog one Bone Pty Ltd
Delene h wood
maK super wa Pty Ltd
G white
Delstar international Ltd
John LG Firth
oglobry Kagiso chikane
middle east Petroleum svc
nutsville Pty Ltd
Perizia investment Pty Ltd
Jomot Pty Ltdcm Keating
hsBc custody noms aust Ltd
sinbad Jackson Pty Ltd
santosh Bhat
rh and Fm Beevor
craig m Keating
AddItIOnAL InFORm AtIOn
% of Issued Capital
8.32
3.93
2.00
1.96
1.65
1.20
0.94
0.88
0.79
0.79
0.75
0.72
0.69
0.67
0.67
0.67
0.65
0.65
0.64
0.63
number held
212,031,498
100,000,000
50,989,997
49,999,999
42,000,000
30,482,000
24,000,000
22,523,000
20,000,000
20,000,000
19,000,000
18,284,518
17,544,400
17,030,000
17,000,000
17,000,000
16,654,008
16,559,588
16,390,000
16,100,000
743,589,008
29.20
| 11
number held
% of Issued Capital
28,333,332
13,000,000
11,426,666
8,000,000
7,000,000
5,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
3,333,332
3,166,666
1,642,500
1,545,590
1,500,000
1,500,000
1,400,000
1,333,332
1,300,000
20.89
9.58
8.42
5.90
5.16
3.69
2.95
2.95
2.95
2.95
2.95
2.46
2.33
1.21
1.14
1.11
1.11
1.03
0.98
0.96
109,481,418
80.72
Listed Options expiring 2 december 2013
exercisable at $0.02
one Dog one Bone Pty Ltd
Pershing aust noms Pty Ltd
indian ocean capital Pty Ltd
nutsville Pty Ltd
Perizia inv Pty Ltd
hsBc custody noms aust Ltd
JK Patoir
s and Lr sammut
Peter D adams
ross J taylor
KJ and Ja Faulkner
Don F Batley
Portmore corp Pty Ltd
Fleubaix Pty Ltd
John musca
Gerald wells
tt nicholls Pty Ltd
aG and Pc Brooks
Kapiri holdings Pty Ltd
Gary c castledine
12 |
Unlisted Options
expiring 30 September 2012 at $0.50
c mostert
w Burbury
B van Deventer
G white
D Lenigas
wills and trust Drafting services
mandfred r marx & associates Pty Ltd
s mapengu
G Du Plessis
c nienabar
expiring 1 August 2013 @ $0.02
Farfel Pty Ltd
Da Lenigas
G white
international Plant construction
J mathie
% of Issued Capital
4.45
3.91
2.86
2.86
2.75
2.23
2.22
1.94
1.91
1.59
1.33
1.33
1.30
1.27
1.04
0.97
0.95
0.95
0.95
0.95
37.76
number
held
70,000,000
61,500,000
45,000,000
45,000,000
43,222,864
35,065,000
35,000,000
30,454,400
30,000,000
25,000,000
21,000,000
21,000,000
20,404,500
20,000,000
16,300,000
15,250,000
15,000,000
15,000,000
15,000,000
15,000,000
594,196,764
number
held
3,000,000
2,500,000
2,500,000
2,000,000
2,000,000
2,000,000
1,750,000
1,750,000
1,750,000
500,000
10,000,000
5,000,000
5,000,000
5,000,000
5,000,000
additional information CORpORAte GOveRnAnCe St Atement
the asX Listing rules require listed companies to include in their annual report a statement disclosing the extent to which they have
complied with the commendations of the asX corporate Governance council in the reporting period. these recommendations are
guidelines designed to improve the efficiency, quality and integrity of the company. the recommendations are not prescriptive so that
if a company considers that a recommendation is inappropriate having regard to its own circumstances, the company has the flexibility
not to follow it. where a company has not followed all the recommendations, the annual report must identify which recommendations
have not been followed and give reasons for not following them.
the company’s corporate Governance charter, this corporate Governance statement and other information for shareholders is displayed
on the company’s website www.lonrho.com.au.
at the end of this statement there is a table which sets out the recommendations and states whether the company has complied with
each recommendation in the reporting period and the reasons for non-compliance of any recommendation are given.
RolE oF tHE boaRD
the Board’s primary responsibility is to oversee the company’s business activities and management for the benefit of shareholders
which it accomplishes by:
- establishing corporate governance and ethical business standards;
- setting and monitoring objectives, goals and strategic direction with a view to maximising shareholder value;
- approving and monitoring budgets and financial performance;
- ensuring adequate internal controls exist and are appropriately monitored for compliance;
- ensuring significant business risks are identified and appropriately managed;
- approving financial and other reporting prior to lodgement with statutory bodies and release to shareholders;
- ensuring the composition of the Board is appropriate, selecting directors for appointment to the Board and reviewing the performance
of the Board and the contributions of individual directors;
- setting remuneration policy and evaluating the performance of senior executives.
| 13
boaRD CoMPoSItIoN
the Board comprises one non-executive director (Gordon Gilchrist, who is chairman), a chief executive officer (miles Kennedy) and
an executive technical director (David Jones).
at present the composition of the Board does not meet the suggested standard of independent directors.
all directors have a broad range of qualifications, experience and expertise in managing diamond exploration companies, as set out
in the Directors’ report. there is no requirement for any director’s shareholding qualification.
as the company’s activities increase in size and scope the composition and size of the Board will be reviewed periodically to ensure
it comprises the optimum number of directors required to adequately supervise the company’s business.
the evaluation of individual director’s performance is undertaken by the chairman as and when appropriate.
all directors, apart from the chief executive officer, are subject to shareholder re-election by rotation at least every three years.
the company’s constitution provides that one-third of the directors retire by rotation at each annual General meeting. those directors
who are retiring may submit themselves for re-election by shareholders, including a director appointed to fill a casual vacancy since the
date of the last aGm.
aCCESS to INDEPENDENt PRoFESSIoNal aDvICE
the company acknowledges that directors require high quality information and advice on which to base their decisions and conditions.
with the prior approval of the chairman, all directors have the right to seek independent legal and other professional advice at the
company’s expense concerning any aspect of the company’s operations or undertakings in order to fulfil their duties and responsibilities
as directors. if the chairman is unable or unwilling to give approval, Board approval will be sufficient.
boaRD PRoCESSES
the Board of the company meets on a regular basis. the agenda for these meetings is prepared by the chief executive officer and the
company secretary in conjunction with the directors. relevant information is circulated to directors in advance of Board meetings.
boaRD CoMMIttEES
the company does not have at this time any of the recommended committees covering nomination, audit or remuneration. the full
Board undertakes the functions of these individual committees. Given the composition of the Board and the size of the company it
is considered that individual committees are not presently warranted.
CORpORAte GOveRnAnCe St Atement
RolE oF MaNaGEMENt
the Board has delegated responsibilities and authorities to the executive staff to enable management to conduct the company’s
day-to-day activities. matters which are not covered by these delegations, such as approvals which exceed certain limits or do not form
part of the approved budget require Board approval.
an evaluation of the performance of senior management during each financial year, including the chief executive officer is undertaken
at a meeting of the non-executive members of the Board, with the chairman discussing this review separately with the chief executive
officer. this is considered to be an appropriate process as the company is in the exploration and evaluation stage therefore it is not
possible to evaluate performance against revenue or profit targets.
EtHICal StaNDaRDS
as part of the Board’s commitment to the highest standard of conduct, the company has adopted a code of conduct to guide
executives, management and employees in carrying out their duties and responsibilities. the code of conduct is incorporated with
the charter and encompasses:
- responsibilities to shareholders;
- compliance with laws and regulations;
- relationships with clients and customers
- conflicts of interest;
- employment practices; and
- responsibilities to the community.
all directors are required to adhere to a corporate ethics policy and they are restricted from dealing in company securities when they
are in possession of price sensitive information and during specified periods before or after the release of half and full year results.
the corporate ethics policy and the securities dealings restrictions are also detailed in the charter.
the Board has resolved that the relevant sections of the charter, particularly the code of conduct, corporate ethics policy, securities
dealings restrictions and continuous disclosure obligations should also extend to cover all executives, employees and consultants of
the company.
14 |
CoNtINuouS DISCloSuRE aND SHaREHolDER CoMMuNICatIoN
the Board is committed to the promotion of investor confidence by ensuring that trading in the company’s securities takes place
in an efficient, competitive and informed market in accordance with continuous disclosure obligations under the asX Listing rules,
the company has procedures in place to ensure that all price sensitive information is identified, reviewed by management and
disclosed to the asX in a timely manner. these are also detailed in the charter. all information disclosure to the asX is posed on
the company’s website.
shareholders are forwarded the company’s annual report if requested and documents relating to each general meeting, being the
notice of meeting, any explanatory memorandum and a proxy form, and are invited to attend these meetings. the company’s external
auditor is also required to be present at the annual General meetings to answer any queries shareholders may have with regard to the
audit and preparation and content of the audit report.
MaNaGING buSINESS RISK
the Board constantly monitors the operational and financial aspects of the company’s activities and is responsible for the
implementation and ongoing review of the business risks that could affect the company. Duties in relation to risk management
that conducted by the Board include, but are not limited to:
- initiate action to prevent or reduce the adverse effects of risk;
- control further treatment of risks until the level of risk becomes acceptable;
- identify and record any problems relating to the management of risk;
- initiate, recommend and provide solutions through designated channels;
- verify the implementation of solutions; and
- communicate and consult internally and externally as appropriate.
in accordance with section 295a of the corporations act 2001, the persons performing the roles of chief executive officer and chief
Financial officer are required to provide a declaration to the Board that the financial records of the company have been properly
maintained, the financial statements comply with the accounting standards and give a true and fair view of the company’s financial
position and performance. in addition, as required by the recommendations, the declaration is founded on a found system of risk
management and internal control which implements policies adopted by the Board and the company’s risk management and internal
compliance control system is operating efficiently and effectively in all material respects in relation to the financial reporting risks.
CORpORAte GOveRnAnCe St Atement
the company summarises below its compliance with the asX corporate Governance council’s revised Principles and recommendations.
PrinciPLes & recommenDations
comPL iance
comPLy
principle 1 – Lay Solid Foundations for management and Oversight
1.1 establish the functions reserved to the
Board of directors (Board) of Lonrho
mining Limited (company) and those
delegated to manage and disclose those
functions
compliant.
the Board is responsible for the overall
corporate governance of the company.
the Board has adopted a Board charter
that formalises its roles and responsibilities
and defines the matters that are reserved
for the Board and specific matters that
are delegated to management. on
appointment of a director, the company
issues a letter of appointment setting out
the terms and conditions of appointment
to the Board.
1.2 Disclose the process for evaluating the
performance of senior executives
the non-executive members of the Board
undertake annual assessment of the
executives’ performance.
complies to the extent that non-executive
members of the Board undertake
assessment of executives’ performance.
1.3 Provide the information indicated in
Guide to reporting on Principle 1
a summary of the Board’s functions and
responsibilities has been disclosed on the
company’s website and is summarised in
this corporate Governance statement.
complies.
principle 2 – Structure the Board to Add value
2.1 a majority of the Board should be
independent directors
2.2 the chair should be an independent
director
2.3 the roles of chair and chief executive
officer should not be exercised by the
same individual
2.4 the Board should establish a
nomination committee
2.5 Disclose the process for evaluating
the performance of the Board, its
committees and individual directors.
2.6 Provide the information indicated in
the Guide to reporting on Principle 2
the majority of the Board’s directors
are not independent as a majority of the
Board executive directors of the company.
mr Gordon Gilchrist is a non-executive
director. messrs miles Kennedy and David
Jones are executive directors.
mr Gordon Gilchrist is a non-executive
director of the Board but is not
independent.
Does not comply however the skills and
experience of both the independent and
non-independent directors allow the Board
to act in the best interests of shareholders.
Does not comply – refer explanation in 2.1.
| 15
mr Gordon Gilchrist is the chairman and mr
miles Kennedy is the chief executive officer.
complies.
Does not comply for reasons given under
2.6 below.
Does not comply. refer 1.2 above.
Does not comply. Given the size of the
Board, the Directors determined that it
will execute the functions of a nomination
committee and that a separate nomination
committee is unnecessary. in addition, the
Board does not consist of a majority of
independent directors however the skills
and experience of both the independent
and non-independent directors allows the
Board to act in the best interests
of shareholders.
Given the size of the Board, it was
determined that the Board will execute
the functions of a nomination committee
and that a separate nomination committee
is unnecessary.
the company did not conduct a
performance evaluation of the Board,
and has not adopted a performance
evaluation policy.
this information has been disclosed
(where applicable) in the Directors’
report in the company’s 2012 annual
report. a director is considered
independent when he substantially
satisfies the test for independence as
set out in the asX corporate Governance
recommendations. members of the Board
are able to take independent professional
advice at the expense of the company.
the Board carries out the functions of a
nomination committee. in accordance with
the information suggested in Guide to
reporting on Principle 2, the company has
disclosed full details of its Directors in the
Director’s report. other disclosure material
as suggested in Guide to reporting on
Principle 2 has been made available on
the company’s website.
CORpORAte GOveRnAnCe St Atement
principle 3 – promote ethical and Responsible decision making
3.1 establish a code of conduct and disclose
the code or a summary of the code.
3.2 establish a policy concerning trading in
company securities by directors, senior
executives and employees and disclose
the policy or a summary of that policy.
3.3 Provide the information indicated in
Guide to reporting on Principle 3.
the Board has adopted a code of
conduct that is contained within the
Board charter. the code establishes a
clear set of values that emphasise a
culture encompassing strong corporate
governance, sound business practices and
good ethical conduct. the code of conduct is
encompassed within the Board charter and
is available on the company’s website.
the company has adopted a securities
trading policy that applies to trading in
shares in the company by any director or
employee of the company. this policy is
available on the company’s website.
the code of conduct and securities trading
policy are available on the company’s
website. the securities trading policy is
summarised in this corporate Governance
statement.
complies.
complies.
complies.
principle 4 – Safeguard Integrity in Financial Reporting
4.1 the Board should establish an audit
committee
an audit committee has not been
established by the Board.
Does not comply. Given the size of the
Board, the Directors determined that
it will execute the functions of an audit
committee and that a separate audit
committee is unnecessary.
Does not comply, for reasons given
in 4.1 above.
16 |
4.2 the audit committee should be
structured so that it consists of only
non-executive directors, a majority of
independent directors, is chaired by an
independent chair who is not chair of
the Board and have at least 3 members.
4.3 the audit committee should have
a formal charter
4.4 Provide the information indicated
in Guide to reporting on Principle 4
an audit committee has not been
established by the Board. the functions of
an audit committee are reserved for the
Board and operate under the Board charter
the functions associated with safeguarding
the integrity in financial reporting are
carried out by the Board; is encompassed
within the Board charter which is available
on the company’s website and summarised
in this corporate Governance statement.
Does not comply, for reasons given
in 4.1 above.
Does not comply, for reasons given
in 4.1 above.
principle 5 – make timely and Balanced disclosure
5.1 establish written policies designed to
ensure compliance with asX Listing
rule disclosure requirements and
to ensure accountability at a senior
executive level for that compliance and
disclose those policies or a summary of
those policies
the company has adopted a continuous
disclosure policy, to ensure that it
complies with the continuous disclosure
regime under the asX Listing rules and
the corporations act 2001. this policy is
available on the company’s website.
complies.
5.2 Provide the information indicated in the
Guide to reporting on Principle 5
the company’s continuous disclosure policy
is available on the company’s website.
complies.
CORpORAte GOveRnAnCe St Atement
principle 6 – Respect the Rights of Shareholders
6.1 Design a communications policy for
promoting effective communication
with shareholders and encouraging their
participation at general meetings and
disclose that policy or a summary of
that policy.
complies.
the company has adopted a shareholder
communications policy. the company
uses its website www.lonrho.com.au,
annual report, market announcements
and media disclosures to communicate
with its shareholders, as well as encourage
participation at general meetings. this
policy is available on the company’s website.
6.2 Provide the information indicated in
the Guide to reporting on Principle 6
the company’s shareholder
communications policy is available
on the company’s website.
complies.
principle 7 – Recognise and manage Risk
7.1 establish policies for the oversight and
management of material business risks
and disclose a summary of these policies
7.2 the Board should require management
to design and implement the risk
management and internal control
system to manage the company’s
material business risks and report to
it on whether those risks are being
managed effectively. the Board should
disclose that management has reported
to it as to the effectiveness of the
company’s management of its material
business risks.
7.3 the Board should disclose whether it
has received assurance from the chief
executive officer and chief financial
officer that the declaration provided in
accordance with section 295a of the
corporations act 2001 is founded on a
sound system of risk management and
internal control and that the system is
operating efficiently and effectively in
all material respects in relation to the
financial reporting risks.
7.4 Provide the information indicated in
Guide to reporting on Principle 7
Does not comply. however ultimate
responsibility for risk oversight and risk
management rests with the Board and
operates under the Board charter.
complies.
complies.
| 17
the company has not adopted a risk
management statement.
the company has identified key risks
within the business. in the ordinary course
of business, management monitor and
manage these risks. Key operational
and financial risks are presented to
and reviewed by the Board at each
Board meeting.
the Board as a whole has made a
declaration under section 295a of the
corporations act 2001 that the financial
accounting system is founded on a sound
system of risk management and internal
control and that the system is operating
efficiently and effectively in all material
respects in relation to the financial
reporting risks.
the Board has not adopted an audit and
risk charter, however has identified key
risks within the business.
complies.
principle 8 – Remunerate Fairly and Responsibly
8.1 the Board should establish a
remuneration committee
the Board has not established a
remuneration committee and has not
adopted a remuneration charter.
Does not comply. Given the size of
the Board, the Directors have determined
that it will execute the functions of a
remuneration committee and that a
separate remuneration committee
is unnecessary.
8.2 clearly distinguish the structure of
non-executive directors’ remuneration
from that of executive directors and
senior executives.
8.3 Provide the information indicated in
the Guide to reporting on Principle 8
the company complies with the guidelines
for executive remuneration packages and
non-executive director remuneration.
complies.
the Board has not adopted a remuneration
committee charter. the company does not
have any schemes for retirement benefits
other than superannuation for non-
executive directors.
Does not comply. Given the size of the
Board, the Board has determined that it will
execute the functions of a remuneration
committee and that a separate
remuneration committee is unnecessary.
with respect to this compliance issue, the
Board will review its position annually.
FINaNCIal REPoR t
1 Directors’ report
9 auditor’s independence Declaration
10 statement of comprehensive income
11 statement of Financial Position
12 statement of changes in equity
18 |
13 statement of cash Flows
14 notes to the Financial statements
35 Directors’ Declaration
36 independent auditor’s report
$12.7 million
capital raised
in march 2012
to fund
lonrho’s
major
kimberlite
exploration
program
focusing on
61 priority
targets
the directors present their report together with the financial report of Lonrho mining Limited (the company or Lonrho) and of the
Group, being the company and its jointly controlled entity, for the financial year ended 29 February 2012 and independent auditor’s
report thereon.
1. DIRECtoRS
the directors of the company at any time during or since the end of the financial year are:
name
m Kennedy
D Jones
D Lenigas
G white
G Gilchrist
position
chief executive officer
exploration Director
non-executive chairman
non-executive Director
non-executive chairman
date of appointment
12 september 2008
26 February 2010
21 august 2006
1 July 2007
27 march 2012
date of resignation
-
-
27 march 2012
27 march 2012
-
the qualifications, experience and other directorships of the directors in office at the date of this report are:
miles Alistair Kennedy chief executive officer
mr Kennedy has held directorships of australian listed resource companies for the past 29 years. he is chairman of resource and
investment nL and moD resources Ltd. mr Kennedy was chairman of sandfire resources nL, Kimberley Diamond company nL,
Blina Diamonds nL, macraes mining company Ltd and has extensive experience in the management of public companies with
specific emphasis in the resources industry. he lives in Perth, western australia.
david Jones exploration Director
mr Jones is one of australia’s most experienced and successful diamond exploration geologists. he began his diamond exploration
career in 1976 as part of the ashton Joint venture team conducting regional exploration programs in the Kimberley including
preliminary exploration in the ellendale Field. he has held senior exploration and management positions with a number of diamond
exploration companies including ashton mining, cluff resources, metana minerals, western reefs, Kimberley Diamond company
nL and was managing Director of Blina Diamonds nL. he lives in Perth, western australia.
1 |
david Anthony Lenigas non-executive chairman
mr Lenigas holds a Bachelor of applied science in mining engineering. he has extensive experience operating in the public company
environment and is currently chairman of Lonrho Plc, LonZim Plc, Leni Gas & oil Plc, is an executive Director of vatukoula Gold
mines Plc and non-executive Director of Zest Group. he lives in London, United Kingdom.
Geoffrey white non-executive Director
mr white holds a Bsc in economics and management science. During his 28 year career he has held senior management roles
with thomas tiling Plc, Btr Plc, Dee corporation Plc, asda Plc and latterly worked for five years for a private investment fund
based in London. he is currently chief executive officer of Lonrho Plc and an executive Director LonZim Plc. he lives in London,
United Kingdom.
Gordon Gilchrist non-executive chairman
mr Gilchrist holds a msc in Business and ma in Physics. in 1993, mr Gilchrist was appointed managing Director of argyle Diamond
mines in western australia, a position he held until 2002. During that time, argyle grew to become the world’s biggest diamond
producer, by volume. mr Gilchrist then became the founding managing Director of rio tinto Diamonds, based out of antwerp in
Belgium, and served in that capacity until 2005. he lives in Perth, western australia.
2. CoMPaNy SECREtaRy
ms Jean mathie holds the position of company secretary and was appointed to the position in september 2008. she is also
company secretary for listed australian entity resource and investment nL.
3. DIRECtoRS’ MEEtINGS
no directors’ meetings were held during the year. all resolutions of the Board were made by circular resolution.
directors’ rePort for the year ended 29 february 2012 4. NatuRE oF oPERatIoNS aND PRINCIPal aCtIvItIES
the Group’s principal activity during the course of the financial year was the exploration of diamond projects in angola.
5. oPERatING aND FINaNCIal REvIEw
the consolidated loss for the year ended 29 February 2012 was $1,268,813 (2011: $1,694,152).
the total comprehensive income for the period attributable to owners of the Group for the year ended 29 February 2012 was loss
of $2,146,719 (2011: loss of $2,532,785).
pROJeCt RevIew, StRAteGIeS A nd FUtURe pROSpeCtS
LULO dIAmOnd COnCeSSIOn
About Lulo
the Lulo Diamond concession covers a total area of about 3,000km2 and is located in the cuango river Basin within the Lunda
norte Province of north-eastern angola in southern africa. the project area is situated approximately 750km from angola’s capital
city of Luanda and can be accessed via sealed road.
Lulo is surrounded by concessions held by some of the world’s biggest diamond miners and is located about 150km west of the
170-million carat catoca diamond mine. operated by russian giant alrosa, catoca is considered the third largest kimberlite mine
in the world.
the Lulo Project is operated as a joint venture between Lonrho and the Government-owned diamond company endiama, which
is the exclusive concessionary for angolan diamond mining rights.
Under the joint venture arrangement, Lonrho holds a 40 per cent interest in the concession relating to alluvials (39 per cent for
kimberlites), with endiama and private angolan interests holding the balance. Lonrho is the manager and operator on the
concession and funds all exploration activities.
in the event that a mining operation is commenced within the Lulo concession, Lonrho is entitled to first recover all of its
exploration and development costs, after which the proceeds will be shared proportionally between the stakeholders.
Lulo has world-class diamond exploration potential, with a major kimberlite field identified within the concession and extensive
diamond-bearing alluvials occurring along the cacuilo and Lulo rivers.
| 2
Lonrho began recovering gem-quality alluvial diamonds from Lulo in late 2010, with the biggest diamond recovered to date
weighing 53.2 carats. the company has also commenced a kimberlite exploration program, which was approved by endiama on
7 December 2011. the kimberlite exploration program is based on a report examining the economic potential of the Lulo Project
prepared by international diamond expert manfred marx in June 2011.
Alluvial Sampling program
the early alluvial exploration programs included an extensive review of old alluvial operations within the Lulo concession covering
an area of shallow diggings by artisanal miners (garimpeiros) within gravels located in the valley of the cacuilo river.
the garimpeiro operations were not mechanised and targeted exposed and easily accessible gravels.
a mapping program was also conducted at Lulo to locate and characterise the alluvial deposits within the cacuilo river valley.
significantly, preliminary work demonstrated that gravel deposits of at least three different ages were present within the
mapping area. these included the cretaceous-aged calonda Formation gravels, which were identified as the main target for the
garimpeiro diggings.
the calonda Formation occurs beneath the overlying Kalahari sands and vastly increases the potential for the area to host alluvial
diamond deposits.
a systematic exploration pitting program was then commenced to define and delineate gravel distribution within the broader
cacuilo river valley, with emphasis placed on identifying areas of calonda Formation gravels and to locate potential bulk sample
sites.
the Lulo Project reached a significant milestone in 2010 when Lonrho established and re-commissioned a 15-tonne per hour Dense
media separation (Dms) plant near the field camp to test the diamond content of the alluvial bulk samples.
other key items of equipment – including an excavator, front end loader, bulldozer and six-wheel dump truck – also arrived on site
at Lulo in 2010 to undertake preliminary earthmoving operations.
the first diamond recovered from the Dms plant from the alluvial bulk sampling operations was a gem-quality stone weighing
22.2 carats in november 2010.
directors’ rePort for the year ended 29 february 2012 the recent BLK_06 bulk sample has produced the best results to date. By the end of march 2012, a total of 116 diamonds had been
recovered from BLK_06 weighing 183.8 carats.
this produced an exceptional average grade of 40.16 carats per 100 cubic metres. the biggest diamond recovered from BLK_06 was
a gem-quality stone weighing 53.2 carats.
in total, Lonrho had recovered 238 diamonds from its alluvial bulk sampling operations by the end of march 2012.
significantly, Lonrho has also recovered large numbers of gem-quality diamonds from lateritic gravels at Lulo, which are much
younger than the calonda Formation gravels. this is significant because the lateritic gravels are widespread throughout the Lulo
concession.
Bulk sampling is a pre-cursor to trial mining of alluvials and ultimately diamond production. Lonrho will continue its alluvial bulk
sampling programs throughout 2012.
Kimberlite exploration program
Lonrho completed a low-level miDas aeromagnetic survey of the upper cacuilo and Lulo rivers in 2008 covering a 1,000km2
section of the 3,000km2 Lulo concession.
although kimberlites had been recorded in the area, the results from the aeromagnetic survey were a revelation. a preliminary
interpretation of the aeromagnetic data was undertaken by independent consulting geophysicist e.o. Kostlin. he concluded that
the 217 magnetic anomalies which were clearly visible on the magnetic and radiometric data were, in all likelihood, kimberlite
intrusives. subsequent interpretation of the data by Lonrho’s geological team increased the number of likely kimberlite intrusives
to 247.
subsequent soil sampling of selected anomalies by Lonrho has confirmed high counts of kimberlitic indicator minerals, supporting
the probability of underlying kimberlite pipes.
in June 2011, international diamond expert manfred marx prepared a report into the economic diamond potential of the Lulo
Project. in his report, mr marx indicated it was highly probable that the primary kimberlite source or sources of the alluvial
diamonds being mined by the garimpeiros within the cacuilo river catchment awaited discovery within the Lulo concession.
3 |
mr marx concluded that most of the 247 magnetic anomalies identified by Lonrho within the Lulo concession were likely to be
classified as kimberlites. this view was based on the magnetic signatures of the 24 known kimberlite pipes within this province at
Lulo, supported by the surface indicator mineral and diamond distribution patterns.
in December 2011, Lonrho outlined plans for a major kimberlite exploration program to focus on the 61 priority targets identified by
mr marx in his June 2011 report.
this new kimberlite work program was approved by Lonrho’s joint venture partner endiama on 7 December 2011. in march 2012,
Lonrho completed a $12.7 million capital raising to fund the kimberlite exploration program.
the target model for this new exploration program is the 170-million catoca diamond mine in angola, which is located about 150km
east of Lulo. the 60-hectare catoca mine is considered the third biggest kimberlite mine in the world and supplies about 60% of
angola’s diamonds.
the kimberlite exploration program at Lulo includes:
- on-going surface sampling of the 61 priority targets for kimberlitic indicator minerals;
- construction of access roads and bridges;
- purchase of a new 50tph Dms plant and earthmoving equipment;
- using an excavator to begin sampling shallow buried kimberlite targets;
- narrow diameter diamond drilling of kimberlite targets to a 50m depth;
- large diameter drilling to a 100m depth to extract 25 tonne kimberlite samples for treatment through the Dms plant.
By the end of march 2012, Lonrho had purchased a new $3.5 million Dms diamond recovery plant and a $1 million fleet of new
caterpillar earthmoving equipment, including a bulldozer, excavator, dump truck and two front end loaders.
the company had also finalised a $2.2 million contract with BaUer technologies south africa to undertake the kimberlite drilling
programs (both narrow and large diameter drilling).
directors’ rePort for the year ended 29 february 2012 Review of financial condition
For the year ended 29 February 2012 the Group recorded a loss of $1,268,813 and as at 29 February 2012 had net assets of
$12,829,918.
the Group is focused on its angolan diamond exploration interests in the Lulo Project. this project requires ongoing exploration
work and funding. Based on the cash flow forecasts, the directors are satisfied that the going concern basis of preparation is
appropriate.
Significant changes in the state of affairs
corporate
the company completed the following issued capital and option transactions during the period.
transaction
issue of shares
issue of options
expiry of options
6. DIvIDENDS
number
Issue/exercise price
Funds raised
Option expiry
400,808,671
400,808,671
10,000,000
$0.01
$0.02
$0.375
$4,008,086.71
-
-
2 December 2013
15 December 2011
no dividends were paid or declared during the current or prior financial year.
7.
ENvIRoNMENtal REGulatIoN
the Group’s exploration activities are subject to various environmental regulations. the Board is responsible for the regular
monitoring of environmental exposures and compliance with environmental regulations. the Group is committed to achieving a
high standard of environmental performance and conducts its activities in a professional and environmentally conscious manner
and in accordance with each country’s applicable laws and permit requirements. the Board believes that the Group has adequate
systems in place for the management of its environmental requirements and is not aware of any breach of those environmental
requirements as they apply to the company and the Group.
| 4
8. EvENtS SubSEQuENt to REPoRtING DatE
in march 2012, the company completed its $12.7 million entitlement issue, under which a total of 1,273,731,500 shares and options
were issued to raise $12.7 million. as at 29 February 2012 the company had received $7,705,586 and issued 400,808,671 shares in
relation to this issue. indian ocean capital Pty Ltd received 300 million options and $636,850 as fees for acting as lead manager of
the issue.
other than the above, there has not arisen in the interval between the end of the year and the date of this report any item,
transaction or event of a material and unusual nature likely, in the opinion of the directors of the company, to affect significantly
the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
9. lIKEly DE vEloPMEN tS
expected results of certain operations of the Group and likely developments in those operations are included within this Directors’
report. Disclosure of any further information has not been included in this Directors’ report because, in the opinion of the
directors, to do so would result in unreasonable prejudice to the Group.
10. DIRECtoRS’ INtEREStS
the relevant interest of each director in the shares and options over such instruments issued by the Group and other related bodies
corporate, as notified by the directors to the asX in accordance with s205G(1) of the corporations act 2001, at the date of this
report is as follows.
Ordinary shares
Fully paid
32,000,000
2,660,000
700,000
expiring
30 Sep 2012
(LOmAI)
-
-
-
Options over
ordinary shares
expiring
30 Jun 2012
(LOmO)
4,000,000
-
-
expiring
1 Aug 2013
(LOmAK)
-
10,000,000
-
expiring
2 dec 2013
(LOmOA)
16,000,000
-
-
director
m Kennedy
D Jones
G Gilchrist
directors’ rePort for the year ended 29 february 2012 11. SHaRE oPtIoNS
UnISSUed S hAReS Unde R OptIOnS
at the date of this report unissued ordinary shares of the company under option are:
expiry date
30 June 2012
30 september 2012
1 august 2013
2 December 2013
exercise price
number of shares
$0.15
$0.50
$0.02
$0.02
135,629,982
19,750,000
30,000,000
400,808,671
these options do not entitle the holder to participate in any share issue of the company or any other body corporate.
OptIOnS GRA nted tO dIReCtORS A nd exeCUtIveS OF the C OmpAny
During or since the end of the financial year, the company has not granted any options to its directors and/or executives.
ShARe O ptIOnS
the following options over ordinary shares were issued by the company during or since the end of the financial year.
expiry date
exercise price
number of shares
2 December 2013
$0.02
400,808,671
exeRCISe OF Opt IOnS
no options over ordinary shares were exercised during or since the end of the financial year.
LApSe OF Opt IOnS
the following options over ordinary shares lapsed during or since the end of the financial year.
5 |
expiry date
exercise price
number of shares
15 December 2011
$0.375
10,000,000
12. REMuNERatIoN REPoRt – auDItED
12.1 pRInCIpLe S OF COmpenSAtIOn
Key management personnel (KmP) have authority and responsibility for planning, directing and controlling the activities of the
company and the Group, including directors of the company and other executives. Key management personnel comprise the
directors of the company.
compensation levels for key management personnel are competitively set to attract and retain appropriately qualified and
experienced directors and executives. the directors of the company obtain independent advice on the appropriateness of
compensation packages of both KmP given trends in comparative companies both locally and internationally, and the objectives
of the company’s compensation strategy.
the compensation structures are designed to attract suitably qualified candidates, reward the achievement of strategic
objectives, and achieve the broader outcome of creation of value for shareholders. compensation packages include a mix of fixed
compensation, equity-based compensation as well as employer contributions to superannuation funds.
shares and options may only be issued to directors subject to approval by shareholders in general meeting.
Fixed compensation
Fixed compensation consists of base compensation, determined from a market review, to reflect core performance requirements
and expectations of the relevant position and statutory employer contributions to superannuation funds. compensation levels
are reviewed periodically by the remuneration committee through a process that considers individual, segment and overall
performance of the Group.
directors’ fees
total compensation for directors and non-executive directors is set based on advice from external advisors with reference to fees
paid to other directors of comparable companies. Directors’ fees are presently limited to a total of a$950,000 per annum, excluding
the fair value of any options granted. Directors’ fees cover all main Board activities and membership of any committee. the Board
has no established retirement or redundancy schemes in relation to directors.
directors’ rePort for the year ended 29 february 2012 equity-based compensation (Long term incentive)
none
Short-term and long-term incentive structure and consequences of performance on shareholder wealth
Given the company’s principal activity during the course of the financial year consisted of exploration and evaluation of mineral
resources, the Board has given more significance to service criteria instead of market related criteria in setting the company’s
incentive schemes. accordingly, at this stage the Board does not consider the company’s earnings or earning measures to be an
appropriate key performance indicator. the issue of options as part of the remuneration package of directors is an established
practice for listed exploration companies and has the benefit of conserving cash whilst appropriately rewarding the directors.
in considering the relationship between the company’s remuneration policy and the consequences for the company’s shareholder
wealth, changes in share price are analysed.
Service contracts
miles Kennedy
mr Kennedy has been engaged to act as the company’s chief executive officer. mr Kennedy is entitled to receive director fees
of aU$200,000 (gross) per annum which is subject to review by the Board from time to time. During the previous financial
year additional amounts were paid to mr Kennedy, as shown in 12.2. below, relating to prior year remuneration and as a result
remuneration for the period being reported is above the stated annual contract value. the appointment may be terminated for
various causes of a standard nature. Upon termination, no benefits are due.
David Jones
mr Jones has been engaged to act as the company’s exploration Director. mr Jones is entitled to receive director fees of aU$48,000
(gross) per annum, which is subject to review by the Board from time to time. the appointment may be terminated for various
causes of a standard nature. Upon termination, no benefits are due.
David Lenigas
mr Lenigas was entitled to receive director fees of GBP33,000 (gross) per annum, subject to review by the Board from time to time.
mr Lenigas resigned on 27 march 2012.
Geoffrey white
mr white was entitled to receive director fees of GBP24,000 (gross) per annum, subject to review by the Board from time to time.
mr white resigned on 27 march 2012.
| 6
other than the directors, no other person is concerned in, or takes part in, the management of the company and Group, or has the
authority and responsibility for planning, directing and controlling the activities of the company or the Group. as such, during the
financial year, the company did not have any person, other than directors, that would meet the definition of “Key management
Personnel” for the purposes of aasB124 company executive or relevant Group executive for the purposes of section 300a of the
corporations act 2001 (“act”).
all service contracts noted above are subject to no notice periods for termination, and have no fixed terms.
directors’ rePort for the year ended 29 february 2012 12.2 dIReCtORS’ And exeCUtIveS’ RemUneRAtIOn
Details of the nature and amount of each major element of remuneration (in $aUs) of each key management person of the
Group are:
Short-term
benefits
post
employment
benefits
equity-settled
share based
payments
date
Salary & fees
Superannuation
benefits
Options
(A)
Key management
personnel
executive directors
mr m Kennedy, chief
executive officer
mr David
Jones (appointed
26 February 2010)
Former directors
mrs K chikane
(appointed 26 april
2006, not re-elected
30 July 2010)
mr D Lenigas,
chairman
mr G white
total
7 |
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
201,880
289,597
48,000
48,000
-
16,933
50,574
54,465
36,781
39,611
337,235
448,606
21,056
41,897
-
-
-
-
-
-
-
-
21,056
41,897
proportion of
remuneration
performance
related
%
value of
options as
portion of
remuneration
%
-
-
-
-
-
-
-
-
-
-
-
-
-
10%
-
61%
-
-
-
41%
-
48%
-
27%
total
222,936
368,596
48,000
-
37,102
-
74,204
122,204
-
-
-
37,102
-
37,102
-
185,510
-
16,933
50,574
91,567
36,781
76,713
358,291
676,013
notes in relation to the table of directors’ and executive officers’ remuneration
(a) the fair value of the options are calculated at the date of grant using the Black-scholes option valuation model and allocated
to each reporting period evenly over the period from grant date to vesting date. the values disclosed are the portion of the fair
value of the options allocated to each reporting period.
12.3 eqUIty InStRUmentS
all options refer to options over ordinary shares of Lonrho mining Limited, which are exercisable on a one-for-one basis.
12.3.1 AnALySIS OF m OvementS In OptIOnS
the movement during the reporting period, by value, of options over ordinary shares in the company held by each key management
person are detailed below.
director
D Jones
m Kennedy
D Lenigas
G white
end of audited section
Granted in year $ (A)
value of Options
exercised in year $
Lapsed in year $
-
-
-
-
-
-
-
-
-
-
-
-
directors’ rePort for the year ended 29 february 2012 13.
INDEMNIFICatIoN aND INSuRaNCE oF oFFICERS aND auDItoRS
the company has entered into deeds of indemnity, insurance and access (“Deeds”) with each of its directors. Under these Deeds,
the company indemnifies each director or officer to the maximum extent permitted by the corporations act 2001 from liability
to third parties (unless the liability arises out of conduct involving lack of good faith), and in successfully defending legal and
administrative proceedings and applications for such proceedings. the company must use its best endeavours to insure a director
or officer against any liability, which does not arise out of conduct constituting a wilful breach of duty or a contravention of the
corporations act 2001. the company must also use its best endeavour to insure that a director or officer against liability for costs
and expenses incurred in defending proceedings whether civil or criminal.
the company has during and since the end of the year, in respect of any person who is an officer of the company or a related
body corporate, paid a premium in respect of Directors and officer liability insurance which indemnifies directors, officers and the
company of any claims made against the directors, officers of the company and the company, except where the liability arises out
of conduct involving a lack of good faith and subject to conditions contained in the insurance policy. the directors have not included
details of the premium paid in respect of the directors’ and officers’ liability and legal expenses’ insurance contracts, as such
disclosure is prohibited under the terms of the contract.
the company has not entered into any agreement to indemnify the auditors against any claims by third parties arising from their
reports on the Financial report for the years ended 28 February 2011 and 29 February 2012.
14. NoN-auDIt SERvICES
During the year somes cooke, the company’s auditors, have not performed any other services for the company or Group in addition
to their statutory audit and as a result the directors are satisfied that auditors have not compromised the auditor independence
requirements of the corporations act 2001.
Details of the amounts paid to the current auditor of the company, somes cooke are set out below:
Consolidated - in AUd
audit services:
audit and review of financial reports
2012
2011
37,300
37,300
27,750
27,750
| 8
15. auDItoR’S INDEPENDENCE DEClaRatIoN
the Lead auditor’s independence declaration, as set out on the following page, forms part of the directors’ report for the financial
year ended 29 February 2012.
signed in accordance with a resolution of the directors, on behalf of the directors
GorDon GiLchrist
chairman
Dated at subiaco this 31st day of may 2012.
information in this Directors’ report that relates to exploration results, mineral resources or ore reserves is based on information compiled by David Jones Bsc
(hons) msc of ascidian Prospecting Pty Ltd, who is a corporate member of the australasian institute of mining and metallurgy and manfred marx Bsc G Dip
env sc Fausimm. mr Jones is a director of Lonrho mining Limited. mr marx is a consultant to Lonrho mining Limited. messrs Jones and marx have sufficient
experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as
a competent Persons as defined in the 2004 edition of the australasian code for reporting exploration results, mineral resources and ore reserves. messrs
Jones and marx consent to the inclusion in the presentation of the matters based on this information in the form and context in which it appears.
directors’ rePort for the year ended 29 february 2012 auDItoR’S INDEPENDENCE DEClaRatIoN
to those charged with governance of Lonrho mining Limited.
as auditor of Lonrho mining Limited for the year ended 29 February 2012, i declare that, to the best of my knowledge and belief,
there have been:
a) no contraventions of the independence requirements of the corporations act 2001 in relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
SomeS Cooke
9 |
kevin SomeS
Perth
31 may 2012
auditor’s independence declaration for the year ended 29 february 2012
in aUD
note
2012
2011
consoLiDateD
Finance income
consulting expenses
Depreciation expense
employee benefits expenses
Finance expense
other expenses
Loss before income tax
income tax expense
Loss after income tax for the year
Other comprehensive income
exchange differences on translation of foreign jointly
controlled entity
total other comprehensive income for the year
total comprehensive income for the period attributable
to owners of the company
Loss per share
Basic (loss) per share (cents)
Diluted (loss) per share (cents)
7
5
7
6
9
10
10
25,538
(116,090)
(4,655)
(625,661)
-
(547,945)
(1,268,813)
-
27,643
(118,662)
(40,499)
(902,688)
(53,660)
(606,286)
(1,694,152)
-
(1,268,813)
(1,694,152)
(877,906)
(877,906)
(838,633)
(838,633)
(2,146,719)
(2,532,785)
(0.09)
(0.09)
(0.19)
(0.19)
the statement of comprehensive income is to be read in conjunction with the accompanying notes.
| 10
Statement of ComprehenSive inCome for the year ended 29 february 2012 in aUD
Assets
cash and cash equivalents
trade and other receivables
other assets
total current assets
other receivables
Deferred exploration costs
Property, plant and equipment
total non-current assets
total assets
Liabilities
trade and other payables
other liabilities
total current liabilities
total liabilities
net assets
equity
share capital
reserves
11 |
accumulated losses
total equity
note
18a
11
12
11
13
14
15
16
17
17
consoLiDateD
2012
2011
6,032,728
97,192
223,233
6,353,153
6,048,472
4,753,493
635,202
11,437,167
17,790,320
1,262,902
3,697,500
4,960,402
4,960,402
12,829,918
48,472,073
2,761,052
(38,403,207)
12,829,918
2,587,029
1,398,833
-
3,985,862
4,832,680
2,260,136
860,889
7,953,705
11,939,567
254,477
-
254,477
254,477
11,685,090
45,180,526
6,401,958
(39,897,394)
11,685,090
the statement of financial position is to be read in conjunction with the accompanying notes.
Statement of financial PoSition as at 29 February 2012 Consolidated
in aUD
Share capital
Reserves
Accumulated losses
total
Balance at 1 march 2010
38,498,650
7,571,676
(38,756,938)
7,313,388
total comprehensive income for the period
Loss for the period
total comprehensive income for the period
transactions with owners, recorded directly
in equity
issue of share capital
exercise of options
transfer on exercise of options
expiry of options
issue of shares in repayment of loans and
borrowings
share issue expenses
share based payments
total transactions with owners
Closing balance at 28 Feb 2011
Balance at 1 march 2011
total comprehensive income for the period
Loss for the period
other comprehensive income
total comprehensive income for the period
transactions with owners, recorded directly
in equity
issue of share capital
expiry of options
share issue expenses
total transactions with owners
Closing balance at 29 Feb 2012
-
-
-
-
(1,694,152)
(838,633)
(838,633)
-
(1,694,152)
(1,694,152)
(838,633)
(2,532,785)
679,000
4,644,494
37,102
-
1,653,597
(332,317)
-
6,681,876
45,180,526
45,180,526
-
-
(37,102)
(553,696)
-
-
259,713
(331,085)
6,401,958
6,401,958
-
-
-
553,696
-
-
-
553,696
(39,897,394)
(39,897,394)
679,000
4,644,494
-
-
1,653,597
(332,317)
259,713
6,904,487
11,685,090
11,685,090
-
-
-
-
(1,268,813)
(877,906)
(877,906)
-
(1,268,813)
(1,268,813)
(877,906)
(2,146,719)
| 12
4,008,086
-
-
4,008,086
-
(2,763,000)
2,763,000
-
(716,539)
3,291,547
-
-
(716,539)
(2,763,000)
2,763,000
48,472,073
2,761,052
(38,403,207)
3,291,547
12,829,918
the statement of changes in equity is to be read in conjunction with the accompanying notes.
Statement of ChangeS in equity for the year ended 29 february 2012
note
2012
2011
consoLiDateD
in aUD
Cash flows from operating activities
cash paid to suppliers and employees
interest received
net cash used in operating activities
18b
Cash flows from investing activities
Payments for exploration costs
Purchases of property, plant and equipment
contributions to joint venture entity
net cash used in investing activities
Cash flows from financing activities
Proceeds from investors for share capital
Proceeds from exercise of options
share issue costs
Proceeds from related party loan
net cash from financing activities
net increase in cash and cash equivalents
13 |
cash and cash equivalents at beginning of year
effect of exchange rate fluctuation
16,17
17,18c
(1,091,164)
25,538
(1,065,626)
(1,350,162)
-
(1,641,289)
(2,991,451)
7,705,586
-
(202,810)
-
7,502,776
3,445,699
2,587,029
-
(1,439,206)
27,643
(1,411,563)
-
(856,076)
(2,268,550)
(3,124,626)
679,000
4,644,494
(332,317)
1,600,000
6,591,177
2,054,988
1,171,666
(639,625)
2,587,029
Cash and cash equivalents at end of year
18a
6,032,728
the statement of cash flows is to be read in conjunction with the accompanying notes.
Statement of CaSh flowS for the year ended 29 february 2012 1. REPoRtING ENtIty
Lonrho mining Limited (the ‘company’) is a company domiciled and incorporated in australia. the address of the company’s
registered office is 34 Bagot road, subiaco wa 6008. the consolidated financial statements of the Group as at and for the year
ended 29 February 2012 comprise the company and its jointly controlled entity (together referred to as the ‘Group’). the Group is
primarily involved in the exploration of diamond projects in africa, specifically angola.
2. baSIS oF PREPaRatIoN
(A) StAtement OF CO mpLIAnCe
the financial report is a general purpose financial report which has been prepared in accordance with australian accounting
standards (aasBs) (including australian interpretations) adopted by the australian accounting standards Board (aasB) and the
corporations act 2001. the consolidated financial report of the Group complies with international Financial reporting standards
(iFrss) and interpretations adopted by the international accounting standards Board (iasB).
the consolidated financial statements were authorised for issue by the Board of Directors on the date of the directors’ report.
(B) BASIS OF me ASURement
the consolidated financial statements have been prepared on the historical cost basis, except for equity settled share-based
payments. the methods used to determine fair values of equity settled share-based payments are discussed further in note 3.
the consolidated financial statements have been prepared on the going concern basis.
(C) FUnCtIOnAL And p Re SentAtIOn CURRen Cy
these consolidated financial statements are presented in australian Dollars, which is the company’s functional currency.
the functional currency of the Lulo Diamond joint venture is Us Dollars (UsD).
(d) USe OF eStImAteS A nd JUdGementS
the preparation of financial statements requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets, liabilities, income and expenses. actual results may differ from
those estimates. estimates and underlying assumptions are reviewed on an ongoing basis. revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.
| 14
Judgements made by management in the application of australian accounting standards that have significant effect on the
financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 3(s).
3. SIGNIFICaNt aCCouNtING PolICIES
the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements, and have been applied consistently by the Group.
certain comparative amounts have been reclassified to conform with the current year’s presentation.
(A )
JOInt ventURe S
a joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to
joint control. the Groups interest in the joint venture entity is accounted for using the proportionate consolidation method of
accounting. the Group recognises its interests in the assets that it controls and the liabilities that it incurs and the expenses that
it incurs and its share of the income that it earns from the sale of goods or services by the joint venture, classified according to the
nature of the assets, liabilities, income and expense.
transactions with the joint ventures are eliminated to the extent of the Groups ownership interest until such time as they are
realised by the joint venture entity on consumption or sale, unless they relate to an unrealised loss that provides evidence of the
impairment of an asset transferred.
(B) FOReIGn CURR enCy
Foreign currency transactions and balances
transactions in foreign currencies are translated to the respective functional currencies of the Group at exchange rates at the dates
of the transactions. monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the
functional currency at the foreign exchange rate at that date. Foreign exchange differences arising on retranslation are recognised
in the statement of comprehensive income.
the assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated
to australian dollars at foreign exchange rates ruling at the reporting date. the income and expenses of foreign operations are
translated to australian dollars at exchange rates approximating the foreign exchange rates ruling at the dates of the transactions.
Foreign exchange differences arising on retranslation are recognised directly in a separate component of equity.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 when a foreign operation is disposed of in part or in full, the relevant amount in equity is transferred to the statement of
comprehensive income.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement
of which is neither planned nor likely in the foreseeable future, are considered to form part of the net investment in a foreign
operation and are recognised directly in equity.
(C) FInAn CIAL InStRUmentS
non-derivative financial instruments
non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings,
and trade and other payables.
non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit
or loss, any directly attributable transaction costs. subsequent to initial recognition non-derivative financial instruments are
measured as described below.
a financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets
are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the
financial asset to another party without retaining control or substantially all risks and rewards of the asset. regular way purchases
and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the
asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.
cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the
statement of cash flows.
accounting for finance income and expense is discussed in note 3(l).
other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any
impairment losses.
15 |
Share capital
equity instruments, including preference shares, issued by the company are recorded at the proceeds received. incremental costs
directly attributable to the issue of equity instruments are recognised as a deduction from equity, net of any tax effects.
(d) pROpeRty, pLAnt And eqUIpment
Recognition and measurement
items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
cost includes expenditure that is directly attributable to the acquisition of the asset. the cost of self-constructed assets includes
the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its
intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.
when parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items
(major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal
with the carrying amount of property, plant and equipment and are recognised net within “other income” in the statement of
comprehensive income.
Subsequent costs
the cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of an item if it is
probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can be
measured reliably. the carrying amount of the replaces part is derecognised. all other costs are recognised in the statement of
comprehensive income as an expense incurred.
depreciation
Depreciation is recognised in the statement of comprehensive income on a straight-line basis over the estimated useful lives of
each part of an item of property, plant and equipment.
the estimated useful lives in the current and comparative periods are as follows:
Plant and machinery
computer equipment
office equipment
5-10 years
3 years
5-10 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012
(e) deFeRRed exp LORAtIOn COS tS
exploration expenditure incurred is accumulated in respect of each identifiable area of interest. these costs are only carried
forward to the extent that they are expected to be recouped through successful development of the area or where activities in
the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.
as the exploration assets are currently not available for use they are not amortised.
exploration assets are initially measured at cost and include acquisition of mining tenements, studies, exploratory drilling,
trenching and sampling and associated activities and an allocation of depreciation of assets used in exploration activities. General
and administrative costs are only included in the measurement of exploration costs where they are related directly to operational
activities in a particular area of interest.
Deferred exploration costs in relation to an abandoned area are written off in full against profit or loss in the period in which the
decision to abandon that area is made.
a regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs
in relation to that area of interest.
income earned from the discovery of diamonds during the exploration phase is offset against the capitalised exploration costs.
(F)
InventORIeS
inventories are measured at the lower of cost and net realisable value. the cost of inventories is based on the first-in first-out
principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred
in bringing them to their existing location and condition.
net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and
selling expenses.
(G)
ImpAIRment
Financial assets
a financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired.
a financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect
on the estimated future cash flows of that asset.
| 16
an impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying
amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.
individually significant financial assets are tested for impairment on an individual basis. the remaining financial assets are
assessed collectively in groups that share similar credit risk characteristics.
all impairment losses are recognised in the statement of comprehensive income.
an impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was
recognised. For financial assets measured at amortised cost the reversal is recognised in the statement of comprehensive income.
non-financial assets
the carrying amounts of the Group’s non-financial assets, other than inventories, are reviewed at each reporting date to determine
whether there is any indication of impairment. if any such indication exists, the asset’s recoverable amount is estimated.
the recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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 the purpose of impairment
testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
an impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
impairment losses are recognised in the statement of comprehensive income. impairment losses recognised in respect of cash-
generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of
units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased
or no longer exists. an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. an impairment loss is reversed only to the extent that the asset’s carrying amount dies not exceed the carrying amount
that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012
(h) empLOyee BeneFItS
defined contribution plans
a defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity
and will have no legal or constructive obligation to pay further amounts. obligations for contributions to defined contribution
superannuation funds are recognised as an expense in the statement of comprehensive income as incurred.
Short-term employee benefits
Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months of the
reporting date represent present obligations resulting from employees’ services provided to reporting date and are calculated at
undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at reporting date including
related on-costs, such as workers compensation insurance and payroll tax.
Long-term employee benefits
the Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned
in return for their service in the current and prior periods plus related on-costs: that benefit is discounted to determine its present
value, and the fair value of any related assets is deducted. the discount rate is the yield at the reporting date on government bonds
that have maturity dates approximating the terms of the Group’s obligations.
termination benefits
termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of
withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination
benefits as a result of an offer made to encourage voluntary redundancy.
Share-based payment transactions
the fair value of options granted is recognised as an expense with a corresponding increase in equity. the fair value is measured
at grant date and spread over the period during which the employees become unconditionally entitled to the options. the fair value
of the options granted is measured using the Black-scholes option pricing model, taking into account the terms and conditions
upon which the options were granted. the amount recognised is adjusted to reflect the actual number of share options that vest
except where forfeiture is only due to market conditions not being met.
17 |
where 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 increase in the value of the transaction as a result of the modification,
as measured at the date of modification.
where 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.
(I) pROvISIOnS
a provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and, when appropriate, the risks specific to the liability.
Site restoration
in accordance with the Group’s environmental policy and applicable legal requirements, a provision for site restoration in respect
of disturbed land is recognised when the land is disturbed.
the provision is the best estimate of the present value of the expenditure required to settle the restoration obligation at the
reporting date, based on current legal requirements and technology. Future restoration costs are reviewed annually and any
changes are reflected in the present value of the restoration provision at the end of the reporting period.
the amount of the provision for future restoration costs is capitalised in accordance with the policy set out in note 3(s).
the unwinding of the effect of discounting on the provision is recognised as a finance cost.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 (J) RevenUe
provision of services
revenue from services rendered is recognised in the statement of comprehensive income in proportion to the stage of completion
of the transaction at the reporting date.
Sale of non-current assets
the net gain/(loss) on the sale of non-current assets is included as revenue or expense at the date control of the assets passes
to the buyer. the gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time
of disposal and the net proceeds on disposal (including incidental costs).
(K) Le ASeS
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases.
Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the
minimum lease payments. subsequent to the initial recognition, the asset is accounted for in accordance with the accounting policy
applicable to that asset.
other leases are operating leases and the leased assets are not recognised in the Group’s balance sheet.
Payments made under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the
term of the lease.
minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the
outstanding liability. the finance expense is allocated to each period during the lease term so as to produce a constant periodic rate
of interest on the remaining balance of the liability.
(L) FInAnCe InCOme And expenSeS
Finance income and expenses comprises interest income on funds invested, interest expense on borrowings calculated using
the effective interest method and unwinding of discounts on provisions.
interest income is recognised in the statement of comprehensive income as it accrues, using the effective interest method.
all borrowing costs are recognised in the statement of comprehensive income using the effective interest method.
| 18
(m) InCOme tAx
income tax expense represents the sum of the tax currently payable and deferred tax. the tax currently payable is based on taxable
profit (loss) for the year. taxable profit differs from net profit as reported in the statement of comprehensive income because
it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible. the Group’s liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using
the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilised. such assets and liabilities are not recognised if the temporary difference arises from
goodwill (or negative goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities
in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future.
the carrying amount of deferred 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 asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.
Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net basis.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 (n) GOOdS A nd SeRvICeS tAx
revenues, expenses and assets are recognised net of the amount of goods and services tax (Gst) or value added tax (vat), except
where the amount of Gst or vat incurred is not recoverable from the taxation authority, it is recognised as part of the cost of
acquisition of an asset or as part of an item of expense. receivables and payables are stated with the amount of Gst or vat
included.
the net amount of Gst and vat recoverable from, or payable to, the taxation authority is included as part of receivables or
payables.
cash flows are included in the statement of cash flows on a gross basis. the Gst and vat component of cash flows arising
from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating
cash flows.
(O) OpeRAtIOnS In LIqUIdAtIOn
when an operation is classified as an operation placed into liquidation, the comparative statement of comprehensive income is
re-presented as if the operation had been discontinued from the start of the comparative period.
(p) SeGment R epORtInG
the Group determines and presents operating segments based on the information that internally is provided to the ceo, who is
the Group’s chief operating decision maker.
an operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. all operating
segments’ operating results are regularly reviewed by the Group’s ceo to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete financial information is available.
the Group engages in business activities within one segment, being the exploration of diamond projects in africa. the Group
maintains an administrative office in western australia to support and promote the exploration activities in africa.
(q) AdOptIOn OF new A nd RevISed ACCOUntInG S tAndARdS
19 |
the Group did not early adopt any australian accounting standards that are not yet mandatory. From 1 march 2011 the Group has
adopted all australian accounting standards and interpretations mandatory for annual periods beginning on or after 1 march 2011,
including:
aasB 124 related Party transactions (amendment) - the amended standard clarifies the definitions of related party. secondly, the
amendment introduces an exemption from the general related party disclosure requirement for transactions with a government
and entities that are controlled, jointly controlled or significantly influenced by the same government entity as the reporting entity.
the amendment had no impact on the Group during the year.
aasB 132 Financial instruments: Presentation (amendment) - the amendment alters the definition of a financial liability to enable
entities to classify rights issues and certain options or warrants as equity instruments. the amendment had no impact on the
Group during the year.
aasB 3 Business combinations (amendment) - the measurement options available for non-controlling interest (nci) have been
amended. the amendment has no impact on the group during the year
aasB 7 Financial instruments – Disclosures (amendment) - the amendment was intended to simplify the disclosures provided
by reducing the volume of disclosures around collateral held and improving disclosures by requiring qualitative information to put
the quantitative information into context. the amendment had no impact on the Group during the year.
aasB 101 Presentation of Financial statements (amendment) - the amendment clarifies that an option to present an analysis
of each component of other comprehensive income may be included either in the statement of changes in equity or in the notes
to the financial statements. the amendment had no impact on the group during the year.
(R) LOSS peR ShARe
Basic loss per share is calculated by dividing the net loss attributable to the ordinary shareholders of the company by the weighted
average number of ordinary shares of the company during the period. Diluted loss per share is determined by adjusting the net
loss attributable to the ordinary shareholders and the number of shares outstanding for the effects of all dilutive potential shares,
which comprise share options.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 (S) ACCOUntInG eStImAteS A nd JUdGementS
management discusses with the Board the development, selection and disclosure of the Group’s critical accounting policies and
estimates and the application of these policies and estimates. the estimates and judgements that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
exploration and evaluation assets
the Group assesses the carried value of exploration and evaluation assets in accordance with the accounting policy noted above.
as noted in that policy, the basis of carrying value involves numerous estimated and judgements resulting from the assessment
of ongoing exploration activities.
Share-based payment transactions
the Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date
at which they are granted. the fair value of options granted is measured using the Black-scholes option pricing model, taking into
account the terms and conditions as set out within note 17. the accounting estimates and assumptions relating to equity-settled
share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting
period but may impact expenses and equity.
estimated useful lives of assets
estimated useful lives of assets have been based on historical experience. the condition of the assets is assessed at least once
per year and considered against the remaining life. adjustments to useful lives are made when considered necessary.
Site restoration provision
the Group assesses its site restoration provision at each balance date in accordance with accounting policy 3(i). significant
judgement is required in determining the provision for site restoration as there are many transactions and other factors that will
affect the ultimate liability payable to rehabilitate and restore the exploration sites and related assets. Factors that will affect
this liability include future development, changes in technology, price increases and changes in interest rates. when these factors
change or become known in the future, such differences will impact the site restoration provision and asset in the period in which
they change or become known.
(t) deteRmInAtIOn OF FAIR vALUeS
trade and other receivables
| 20
the fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate
of interest at the reporting date.
non derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest
cash flows, discounted at the market rate of interest at the reporting date.
Share-based payment transactions
the fair value of options issued is measured using the Black-scholes option pricing formula or direct method. measurement inputs
include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic
volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments
(based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on
government bonds). service and non-market performance conditions attached to the transactions are not taken into account in
determining fair value.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 4. SEGMENt REPoRtING
the Group determines and presents operating segments based on the information that internally is provided to the ceo, who is the
Group’s chief operating decision maker.
an operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. all operating
segments’ operating results are regularly reviewed by the Group’s ceo to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete financial information is available.
the Group engages in business activities within one segment, being the exploration of diamonds angola. the Group maintains an
administrative office in western australia to support and promote the exploration activities in angola.
5. EMPloyEE bENEFItS ExPENSES
in aUD
wages, salaries and director remuneration
superannuation costs
equity settled share-based payment transactions
6. otHER E xPENSES
in aUD
administrative expenses
21 |
operating lease rental expense
site expenses
7.
FINaNCE INCoME aND E xPENSE
in aUD
Finance income
interest on bank deposits
Finance expense
interest on loans and borrowings
8. auDItoRS REMuNER atIoN
in aUD
Audit services:
audit and review of financial reports (somes cooke)
consoLiDateD
2011
601,044
41,931
259,713
902,688
consoLiDateD
2011
294,288
153,647
158,351
606,286
consoLiDateD
2011
27,643
27,643
(53,660)
(53,660)
2011
27,750
27,750
consoLiDateD
2012
586,681
38,980
-
625,661
2012
420,660
127,285
-
547,945
2012
25,538
25,538
-
-
2012
37,300
37,300
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 9.
INCoME tax (bENEFIt) ExPENSE
in aUD
Current tax expense
Domestic
Foreign
deferred tax expense
Domestic
Foreign
total income tax expense
numerical reconciliation between income tax expense and loss before income tax
in aUD
Loss for the period
total income tax (benefit) expense
Loss excluding income tax
income tax benefit using the company’s domestic tax rate of 30% (2011:
30%) and foreign tax rate of 29% (2011: 29%)
non-deductible expenses
current year tax losses not recognised
movement in unrecognised temporary differences
Deductible equity raising costs
income tax (benefit) / expense
deferred tax assets not brought to account
consoLiDateD
2012
2011
-
-
-
-
-
-
-
-
-
-
-
-
-
-
consoLiDateD
2012
(1,268,813)
-
2011
(1,694,152)
-
(1,268,813)
(1,694,152)
(380,644)
62,270
352,922
(4,171)
(30,377)
-
(508,246)
400,562
258,621
10,009
(160,946)
-
| 22
as at 29 February 2012, the Group had estimated tax losses of approximately $9,843,877 (2011: $9,023,466), which may be
available to be offset against taxable income in future years. the availability of these losses is subject to satisfying australian
taxation legislative requirements. the deferred tax asset attributable to tax losses has not been brought to account in these
financial statements because the directors believe it is not presently appropriate to regard realisation of the future income tax
benefits as probable. the deferred tax assets have not been brought to account in respect to the following:
in aUD
Deductible temporary differences
tax revenue losses
tax capital losses
consoLiDateD
2012
688,937
2,485,570
6,669,371
9,843,878
2011
430,889
1,923,206
6,669,371
9,023,466
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 10. loSS PER SH aRE
Basic loss per share
Basic loss per share (cents)
consoLiDateD
2012
(0.09)
2011
(0.19)
the calculation of basic loss per share at 29 February 2012 was based on the loss attributable to ordinary shareholders of
$1,268,813 (2011: $1,694,152) and a weighted average number of ordinary shares outstanding of 1,346,892,056 (2011: 876,985,689),
calculated as follows.
weighted average number of shares
issued ordinary shares at beginning of year
effect of shares issued on weighted average
weighted average number of ordinary shares held during the year
diluted loss per share
Diluted loss per share (cents)
consoLiDateD
2012
1,273,731,535
73,160,520
1,346,892,055
2011
673,915,647
203,070,042
876,985,689
consoLiDateD
2012
(0.09)
2011
(0.19)
the Group is in a loss making position and it is unlikely that the conversion to, calling of, or subscription for, ordinary share capital in
respect of potential ordinary shares would lead to diluted earnings per share that shows an inferior view of the earnings per share.
For this reason, the diluted loss per share is the same as the basic loss per share.
23 |
11. tRaDE aND otHER RECEIvablES
in aUD
Current
Gst receivable
Bond
other current receivables
non current
Lulo joint venture
note
consoLiDateD
2012
41,924
-
55,268
97,192
6,048,472
6,048,472
(i)
(ii)
2011
9,632
1,374,570
14,631
1,398,833
4,832,680
4,832,680
(i) Under the terms of the joint venture agreement between the company and empresa nacional De Damantes De angola
(‘endiama’) (‘the agreement’), the company had previously lodged a bond of Us$1.4 million to endiama in relation to the Lulo
Diamond joint venture (‘joint venture’) based in angola. as announced to the asX on 12 December 2011, the company finalised
negotiations with endiama and the Us$1.4 million was credited as exploration expenditure incurred by the company (note 13)
with Us$1 million applied to the kimberlite permit and Us$ 400,000 applied to the alluvial permit.
(ii) this amount is due to the company from the joint venture. the company has advanced the funds to the joint venture to fund
the exploration program under the agreement. the amount is denominated in UsD, is interest free and has no set payment
date.
the Group’s exposure to credit and currency risks related to trade and other receivables are disclosed in note 21.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 12. otHER aSSEtS
in aUD
Cost
Deposit for plant and machinery
13. DEFERRED ExPloR atIoN CoStS
in aUD
cost
Balance at beginning of year
consoLiDateD
2012
223,233
2011
-
note
consoLiDateD
2012
2011
Bond transferred to deferred exploration
11
exploration costs incurred in the year
effect of foreign currency translation
Balance at end of year
2,260,136
1,382,875
1,443,520
(333,038)
4,753,493
1,736,470
-
855,696
(332,030)
2,260,136
recovery of the carrying amount is dependent upon successful development and commercial exploitation, or alternatively, sale of
the respective area of interest.
| 24
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 14. PRoPERty, PlaNt aND EQuIPMENt
plant and
machinery
Camp equipment
Computer
equipment
Office equipment
total
in aUD
Cost
Balance at 1 march 2010
additions
Balance at 28 February 2011
Balance at 1 march 2011
additions
effect of foreign currency
translation
Balance at 29 February 2012
Depreciation
Balance at 1 march 2010
Depreciation for the year
Balance at 28 February 2011
Balance at 1 march 2011
25 |
Depreciation for the year
effect of foreign currency
translation
Balance at 29 February 2012
carrying amounts
at 1 march 2010
at 28 February 2011
at 29 February 2012
15,741
856,076
871,817
871,817
-
(158,564)
713,253
-
37,467
37,467
37,467
70,067
(5,306)
102,228
15,741
834,350
611,025
15. tRaDE aND otHER PayablES
in aUD
trade payables
accruals and other payables
Director fees payable
8,383
-
8,383
8,383
-
(732)
7,651
-
-
-
-
-
-
-
8,383
8,383
7,651
4,379
3,139
7,518
7,518
-
-
7,518
892
1,756
2,648
2,648
1,488
-
4,136
4,379
4,870
3,382
1,000
13,691
14,691
14,691
3,025
-
17,716
129
1,276
1,405
1,405
3,167
-
4,572
1,000
13,286
13,144
29,503
872,906
902,409
902,409
3,025
(159,296)
746,138
1,021
40,499
41,520
41,520
74,722
(5,306)
110,936
29,503
860,889
635,202
note
consoLiDateD
(i)
2012
137,853
997,070
127,979
1,262,902
2011
19,514
201,424
33,539
254,477
(i) the balance as at 29 February 2012 includes $513,730 accrued to indian ocean capital Pty Ltd (‘ioc’) for fees to act as the lead
manager to the non-renounceable rights issue, as outlined in note 17.
(ii) the Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 21.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 16. otHER lIabIlItIES
in aUD
share application monies received
note
(i)
consoLiDateD
2012
3,697,500
2011
-
(i) share application monies received to 29 February 2012 for which shares had yet to be issued as at 29 February 2012. the shares
were subsequently issued on 14 march 2012 (note 24).
17.
ISSuED C aPItal aND RESERvES
in aUD
issued and ordinary fully paid shares
movement in ordinary shares
consoLiDateD
2012
48,472,073
2011
45,180,526
in shares
orDinary shares
aUD
on issue at beginning of year
1,273,731,535
673,915,647
issue of shares for cash
(i)
400,808,671
48,500,000
note
2012
2011
issue for repayment of related party loan
issue on exercise of options
transfer from reserves on exercise of
options
transaction expenses
on issue at end of year
(ii)
2012
45,180,526
4,008,086
-
-
-
(716,539)
2011
38,498,650
679,000
1,653,597
4,644,494
37,102
(332,317)
-
-
-
-
91,866,500
459,449,388
-
-
1,674,540,206
1,273,731,535
48,472,073
45,180,526
| 26
(i) the company issued the following shares and options during the year to 29 February 2012.
transaction
issue of shares
issue of options
number
400,808,671
400,808,671
Issue/exercise price
$0.01
$0.02
Funds raised
$4,008,086
Option expiry
-
2 December 2013
(ii) transaction expenses for the year to 29 February 2012 include:
- $385,279 paid and accrued to ioc for fees to act as the lead manager to the non-renounceable rights issue; and
- $265,292 accrued to ioc, being a portion (based on the number of shares issued to 29 February 2012) of the fair value (using
the Black-scholes option pricing model) of 300 million options to ioc as consideration for acting as the lead manager to the
non-renounceable rights issue. the options were issued to ioc on 14 march 2012 (note 25). the following table sets out the
assumptions made in determining the fair value of the options granted:
Grant date
Dividend yield
expected volatility
risk-free interest rate
option exercise price
expected life (years)
4 october 2011
0.00%
100%
4%
2 cents
2
share price on date of grant
0.86 cents
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012
terms and conditions
the holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of the company.
Unissued ordinary shares of the company under option at 29 February 2012 were:
expiry date
30 June 2012
30 september 2012
1 august 2013
2 December 2013
exercise of options
exercise price
number of shares
$0.15
$0.50
$0.02
$0.02
135,629,982
19,750,000
30,000,000
400,808,671
no options over ordinary shares were exercised during the financial year.
Lapse of options
the following options over ordinary shares lapsed during the financial year:
expiry date
15 December 2011
Reserves
in aUD
exercise price
$0.375
number of shares
10,000,000
Foreign currency
translation reserve
Share-based
payments reserve
Option premium
reserve
Consolidated
Balance at 1 march 2010
1,286,452
6,099,262
185,962
27 |
transfer to issued capital on exercise
of options
expiry of options
share based payments
Foreign exchange differences
Balance at 28 February 2011
expiry of options
Foreign exchange differences
Balance at 29 February 2012
nature and purpose of reserves
-
-
-
(838,633)
447,819
-
(877,906)
(430,087)
(37,102)
(553,696)
259,713
-
5,768,177
(2,763,000)
-
-
-
-
-
185,962
-
-
3,005,177
185,962
total
7,571,676
(37,102)
(553,696)
259,713
(838,633)
6,401,958
(2,763,000)
(877,906)
2,761,052
share-based payments reserve
the share-based payments reserve represents the fair value of equity instruments issued to employees as compensation and
issued to external parties for the receipt of goods and services. this reserve will be reversed against issued capital when the
underlying shares are converted.
option premium reserve
the option premium reserve records amounts paid by shareholders in acquiring options over ordinary shares. the balance in the
option premium reserve is transferred to issued capital on option conversion and transferred to accumulated losses on option
expiry.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 18a. CaSH aND C aSH EQuIvalENtS
in aUD
Bank balances
the Group’s exposure to interest rate risk is discussed in note 21.
18b. RECoNCIlIatIoN oF C aSH FlowS FRoM oPERatING aCtIvItIES
consoLiDateD
2012
6,032,728
2011
2,587,029
consoLiDateD
in aUD
Loss for the period
adjustments for:
interest incurred but not paid
Depreciation expense
share based payments
operating loss before changes in working capital and
provisions
(increase) in trade and other receivables
(increase) in other assets
increase/(decrease) in trade and other payables
less share based payment accrued (note 17)
less costs of capital accrued (note 15)
net cash used in operating activities
18C. NoN C aSH FINaNCING aCtIvItIES
refer to notes 17 for further details.
19. CoNtINGENt lIabIlItIES
2012
(1,268,813)
-
4,655
-
(1,264,158)
(72,929)
(223,233)
1,008,425
(265,292)
(248,438)
(1,065,625)
2011
(1,694,152)
53,597
40,499
259,713
(1,340,343)
(3,590)
-
(67,630)
-
-
(1,411,563)
| 28
the Group did not have any contingent liabilities as at 29 February 2012 (2011: nil).
20. CoMMItMENtS
capital commitments
in aUD
approved, not yet contracted for:
Less than one year
Between one and five years
consoLiDateD
2012
2011
-
-
-
-
-
-
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012
21. FINaNCIal RISK M aNaGEMENt
the Group has exposure to credit, liquidity and market risks from their use of financial instruments.
this note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes
for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout
this financial report.
the Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.
risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits
and controls, and to monitor risks and adherence to limits. risk management policies and systems are reviewed to reflect changes
in market conditions and the Group’s activities. the Group, through its training and management standards and procedures, aims
to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
market risk
commodity price risk
the Group is focused on its angolan diamond exploration interests in the Lulo Project. accordingly, the Group is exposed to the
global pricing structures of the diamond market.
Foreign exchange risk
the Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to the Us dollar and australian dollar. Foreign exchange risk arises from future commercial transactions, recognised assets
and liabilities and net investments in foreign operations that are not in the entity’s functional currency. the company does not use
hedging, or any other active risk reduction strategy, in managing its foreign exchange risk.
the functional and presentation currency of Lonrho mining Limited is australian Dollars. the functional currency of the Groups joint
venture is Us dollar.
the Group’s exposure to foreign currency risk at balance date was a follows, based on notional amounts:
29 |
in aUD
Financial assets
2012
2011
A$
US$
A$
US$
cash and cash equivalents
6,024,816
trade and other receivables
other receivables
Financial liabilities
trade and other payables
other financial liabilities
97,192
-
(796,797)
-
7,912
-
6,048,472
(466,105)
-
net balance sheet exposure
5,325,211
5,590,279
the following significant exchange rates applied during the year:
2,540,609
24,263
-
(131,158)
-
2,433,714
46,420
1,425,807
4,832,680
(123,319)
-
6,181,588
a$ = Us$
Average rate
Reporting date spot rate
2012
0.96
2011
0.98
2012
0.93
2011
0.98
sensitivity analysis
a weakening/strengthening by 10% from the spot rate at 29 February 2012 of the Us dollar against the australian dollar would
have the following impact on these financial statements:
in aUD
current assets
non-current assets
total assets
current liabilities
net assets
total comprehensive income
weakening
dR/(CR)
24,881
1,110,402
1,135,283
(50,172)
1,085,111
(1,085,111)
Strengthening
dR/(CR)
(24,881)
(1,110,402)
(1,135,283)
50,172
(1,085,111)
1,085,111
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012
Cash flow interest rate risk
cash flow interest rate risk, is the risk that a financial instrument’s value will fluctuate as a result of changes in the market interest
rates on interest-bearing financial instruments.
the Group is not exposed to significant interest rate risk. any residual cash flow interest rate risk is in relation to the Group’s cash
and cash equivalent balances. the Group does not currently use derivatives to mitigate these exposures.
the following table details the Group’s exposure to interest rate risk on its interest-bearing financial instruments at
29 February 2012.
Financial Assets
cash
trade and other
receivables
other receivables
Financial Liabilities
trade and other
payables
Fixed Interest Rate maturity
Average
Interest
Rate %
variable
Interest Rate
A$
Less than
1 year
A$
1 to 5 years
A$
more than
5 years
A$
non-Interest
Bearing
A$
total
A$
4.6
6,032,728
-
-
-
-
-
6,032,728
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,032,728
97,192
97,192
6,048,472
6,048,472
6,145,664
12,178,392
1,262,902
1,262,902
1,262,902
1,262,902
the following table details the Group’s exposure to interest rate risk on its interest-bearing financial instruments at
28 February 2011.
| 30
Financial Assets
cash
trade and other
receivables
other receivables
Financial Liabilities
trade and other
payables
Fixed Interest Rate maturity
Average
Interest
Rate %
variable
Interest Rate
A$
Less than 1
year
A$
1 to 5 years
A$
more than 5
years
A$
non- Interest
Bearing
A$
total
A$
4.5
2,587,029
-
-
-
-
-
2,587,029
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,587,029
1,398,833
1,398,833
4,832,680
4,832,680
6,231,513
8,818,542
254,477
254,477
254,477
254,477
cash flow sensitivity analysis for variable rate instruments
the sensitivity analysis below has been prepared to demonstrate the sensitivity to a reasonably possible change in interest rates,
with all other variables held constant through the impact on floating rate interest rates.
a change of 100 basis points in interest rates at the reporting date would not have a material impact on the statement of
comprehensive income. there would be no effect on the equity reserves other than those directly related to statement of
comprehensive income. the analysis is performed on the same basis as for 2011.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 Credit risk
credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial loss to the Group.
the Group’s potential concentration of credit risk consists mainly of cash deposits with banks and other receivables. the Group’s
short term cash surpluses are placed with banks that have investment grade ratings. the maximum credit risk exposure relating
to the financial assets is represented by their carrying values as at the balance sheet date.
other receivables of $6,048,472 are due to the Group from the joint venture (note 11). the company has advanced the funds to the
joint venture to fund the exploration program under the agreement. the other main party to the joint venture is endiama, angola’s
state-run diamond company.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. the Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
Ultimate responsibility for liquidity risk management rests with the Board of Directors. the Group manages liquidity risk by
maintaining adequate cash reserves from funds raised in the market and by continuously monitoring forecast and actual cash flows.
the following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact
of netting agreements.
in aUD
trade and other payables
- within one year
- one to five years
- Greater than five years
total
31 |
Capital risk management
consoLiDateD
2012
2011
1,262,902
254,477
-
-
-
-
1,262,902
254,477
the Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so as to maintain
a strong capital base sufficient to maintain future exploration and development of its projects. in order to maintain or adjust the
capital structure, the Group may return capital to shareholders, issue new shares or sell assets to reduce debt. the Group’s focus
has been to raise sufficient funds through equity to fund exploration and evaluation activities.
Fair value
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which revenues and expenses are recognised, in respect of each class of financial asset, financial liability and
equity instrument are disclosed in note 3 to the financial statements.
the financial assets and liabilities included in the assets and liabilities of the Group approximate net fair value, determined in
accordance with the accounting policies disclosed in note 3 to the financial statements.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012
22. JoINt vENtuRE
the consolidated Group includes a proportional consolidation of the Lulo Diamond joint venture. the company’s participating
interest in the joint venture is 39% relating to the alluvial deposits (which will decrease to 30% after recoupment of its investment
in the Project, should this occur) and 40% for the kimberlites.
information relating to the joint venture is set out below:
in aUD
Share of assets and liabilities
current assets
non-current assets
total assets
current liabilities
net assets
Share of expenses and results
expenses
Loss before tax
consoLiDateD
2012
2011
231,144
4,267,275
4,498,419
(466,105)
4,032,314
-
-
46,420
3,105,125
3,151,545
(123,319)
3,028,226
-
-
23. RElatED PaRtIES
Key management personnel compensation
the key management personnel compensation included in employee benefits expense (see note 5) is as follows:
in aUD
short-term employee benefits
Post-employment benefits
share-based payments
consoLiDateD
2012
337,235
21,056
-
358,291
2011
448,606
41,897
185,510
676,013
| 32
Individual directors’ and executives’ compensation disclosures
information regarding individual directors’ and executives’ compensation and some equity instruments disclosures as required by
corporations regulations 2m.3.03 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 other material contracts involving directors interests at year-end.
Key management personnel and director transactions
a number of key management persons, or their related parties, hold positions in other entities that result in them having control
or significant influence over the financial or operating policies of those entities. a number of these entities transacted with the
company or the joint venture in the reporting period. the terms and conditions of the transactions with management persons
and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on
similar transactions to non-director related entities on an arm’s length basis.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012
Options over equity instruments
the movement during the reporting period in the number of options over ordinary shares in Lonrho mining Limited held, directly,
indirectly or beneficially, by each key management person, including their related parties, is as follows.
held at
1 march 2011
or date of
appointment
directors
mr m Kennedy 4,000,000
mr D Jones
10,000,000
mr D Lenigas
11,000,000
mr G white
11,000,000
held at
1 march 2010
or date of
appointment
directors
Granted as
compensation Rights Issue
held at
resignation
held at 29
February 2012
Released
from escrow
during the
year
vested during
the year
vested &
exercisable
-
-
-
-
12,000,000
-
-
-
-
-
-
16,000,000
10,000,000
11,000,000
11,000,000
-
-
-
-
16,000,000
16,000,000
10,000,000
10,000,000
11,000,000
11,000,000
11,000,000
Granted as
compensation
exercised or
lapsed
held at
resignation
held at 28
February 2011
Released
from escrow
during the
year
vested during
the year
vested &
exercisable
mr m Kennedy
7,750,000
5,000,000 (8,750,000)
mr D Jones
150,000
10,000,000
(150,000)
mr D Lenigas
10,000,000
5,000,000 (4,000,000)
4,000,000
10,000,000
11,000,000
mrs K chikane
8,000,000 (2,000,000)
(2,000,000)
4,000,000
mr G white
6,000,000
5,000,000
-
11,000,000
-
-
-
-
5,000,000
4,000,000
10,000,000
10,000,000
5,000,000
11,000,000
5,000,000
11,000,000
no options held by key management personnel are vested but not exercisable at 29 February 2012.
33 |
movements in shares
the movement during the reporting period in the number of ordinary shares in Lonrho mining Limited held, directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows.
held at
1 march 2011
or date of
appointment
purchases
Received on
exercise of
options
16,000,000
16,000,000
2,500,000
150,000
-
-
-
-
-
-
-
-
held at
1 march 2010
or date of
appointment
purchases
Received on
exercise of
options
Sales
6,250,000
1,000,000
8,750,000
750,000
1,750,000
-
-
-
-
-
-
-
-
-
-
Sales
held at
resignation
held at 29
February 2012
-
-
-
-
-
-
-
-
-
held at
resignation
-
-
-
-
-
-
-
-
-
32,000,000
2,650,000
-
-
held at 28
February 2011
16,000,000
2,500,000
-
-
-
directors
mr m Kennedy
mr D Jones
mr D Lenigas
mr G white
directors
mr m Kennedy
mr D Jones
mr D Lenigas
mrs K chikane
mr G white
no shares were granted to key management personnel during the reporting period as compensation in 2011 or 2010.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012 Other related party transactions
an amount of $131,968 (2011: $92,878) was paid to the Bagot road Property Partnership, associated with director miles Kennedy,
relating to office rent and associated costs during the period. an amount of $10,059 was paid to the Bagot road Group Pty Ltd,
associated with director miles Kennedy, relating to the provision of payroll and Bas services during the period. Payments for the
provision of director services, as disclosed within remuneration in the directors’ report, were paid to ascidian Prospecting Pty Ltd
and turnicate consulting, entities associated with director David Jones.
Joint venture
the company has previously signed a joint venture agreement with empresa nacional De Damantes De angola (endiama), the
national diamond company of angola and exclusive concessionary for angolan diamond mining rights. within the 3,000km2 Lulo
concession, the company’s participating interest in the kimberlite deposits is 39% of the joint venture which will decrease to 30%
after recoupment of its investment in the Project, should this occur. on all alluvial deposits Lonrho’s participating interest is 40%
in the joint venture.
in terms of the joint venture agreement the company is required to fund an exploration work program and during the year loan
advances were made to the joint venture for this purpose. Details of the balances due from the joint venture at the end of the
financial year are as follows.
in aUD
Lulo Joint venture (note 11)
24. SubSEQuENt EvENtS
consoLiDateD
2012
6,048,472
2011
4,832,680
in march 2012, the company completed its $12.7 million entitlement issue, under which a total of 1,273,731,500 shares and options
were issued to raise $12.7 million. as at 29 February 2012 the company had received $7,705,586 and issued 400,808,671 shares in
relation to this issue. indian ocean capital Pty Ltd received 300 million options and $636,850 as fees for acting as lead manager of
the issue.
other than the above, there has not arisen in the interval between the end of the year and the date of this report any item,
transaction or event or a material and unusual nature likely, in the opinion of the directors of the company, to affect significantly
the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
| 34
25. PaRENt CoMPaNy
the following information has been extracted from the books and records of the parent company, Lonrho mining Ltd and has been
prepared in accordance with australia accounting standards.
the financial information for the parent company has been prepared on the same basis as the consolidated financial statements.
in aUD
Statement of Financial position
assets
current assets
non-current assets
total assets
Liabilities
current liabilities
total Liabilities
equity
issued capital
retained earnings
reserves
total equity
Statement of Comprehensive Income
total comprehensive income
2012
2011
6,122,008
11,398,025
17,520,033
3,936,420
8,072,623
12,009,043
(4,494,297)
(4,494,297)
(131,157)
(131,157)
52,399,367
(42,134,683)
2,761,052
13,025,736
49,107,820
(43,631,892)
6,401,958
11,877,886
(2,146,719)
(2,532,785)
the parent company did not have any contingent liabilities as at 29 February 2012 or 28 February 2011.
Contractual commitments
the parent company did not have any commitments as at 29 February 2012 or 28 February 2011.
Notes to the FiNaNcial statemeNt for the year ended 29 february 2012
1.
in the opinion of the directors of Lonrho mining Limited (“the company”):
(a) the financial statements and notes, as set out on pages 11 to 34, and the remuneration report in the Directors’ report, as set out
on pages 5 to 7, are in accordance with the corporations act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 29 February 2012 and of its performance for the financial year
ended on that date; and
(ii) complying with australian accounting standards (including the australian accounting interpretations) and the corporations
regulations 2001;
(b) the financial report also complies with international Financial reporting standards as disclosed in note 1; and
(c) 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. the directors have been given the declarations required by section 295a of the corporations act 2001 from the chief executive officer
and chief Financial officer for the financial year ended 29 February 2012.
signed in accordance with a resolution of the directors
GorDon GiLchrist
chairman
Dated at subiaco this 31st day of may 2012.
35 |
Directors’ Declaration for the year ended 29 february 2012
INDEPENDENt auDItoR’S REPoRt
to tHE MEMbERS oF loNRHo MINING lIMItED
RepORt On the FInAn CIAL RepORt
we have audited the accompanying financial report of Lonrho mining Limited, which comprises the consolidated statement of financial
position as at 29 February 2012, the consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and
other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entity it jointly
controlled during the financial year.
directors’ Responsibility for the Financial Report
the directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with
australian accounting standards and the corporations act 2001 and for such internal control as the directors determine is necessary
to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. in note 2,
the directors also state, in accordance with accounting standard aasB 101 Presentation of Financial statements, that the financial
statements comply with international Financial reporting standards.
Auditor’s Responsibility
our responsibility is to express an opinion on the financial report based on our audit. we conducted our audit in accordance with
australian auditing standards. those standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from
material misstatement.
| 36
an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. the
procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of financial
report, whether due to fraud or error. in making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. an audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the financial report.
we believe that the audit evidenece we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
in conducting our audit, we have complied with the independence requirements of the corporations act 2001. we confirm that the
independence declaration required by the corporations act 2001, which has been given to the directors of Lonrho mining Limited, would
be in the same terms if given to the directors as at the time of this auditor’s report.
Opinion
in our opinion:
(a) the financial report of Lonrho mining Limited is in accordance with the corporations act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 29 february 2012 and of its performance for the year
ended on that date; and
(ii) complying with australian accounting standards and the corporations regulations 2001; and
(b) the financial report also complies with international Financial reporting standards as disclosed in note 2.
Independent AudItor’s report for the year ended 29 february 2012
RepORt On the RemUneRAtIOn RepORt
we have audited the remuneration report included in pages 5 to 7 of the directors’ report for the year ended 29 February 2012.
the directors of the company are responsibility for the preparation and presentation of the remuneration report in accordance with
section 300a of the corporations act 2001. our responsibility is to express an opinion on the remuneration report, based on our audit
in accordance with australian auditing standards.
Opinion
in our opinion, the remuneration report of Lonrho mining Limited for the year ended 29 February 2012, complies with section 300a
of the corporations act 2001.
37 |
SomeS Cooke
kevin SomeS
31 may 2012
Perth
Independent AudItor’s report for the year ended 29 february 2012
CoRPoR atE DIRECtoR y
boaRD oF DIRECtoRS
auS tRalIaN buSINESS NuMbER
GorDon GiLchrist
non-executive chairman
miLes KenneDy
chief executive officer
DaviD Jones
executive technical Director
CoMPaNy SECREtaRy
Jean mathie
REGIStERED oFFICE aND
PRINCIPal PlaCE oF buSINESS
34 Bagot road
subiaco 6008
western australia
Po Box 298
west Perth 6872
western australia
telephone +61-8 9489 9200
Facsimile +61-8 9489 9201
email general@lonrho.com.au
website: www.lonrho.com.au
44 111 501 663
SHaRE REGIS tRy
security transfer registrars Pty Ltd
770 canning highway
applecross 6153
western australia
auDItoRS
somes cooke
1304 hay street
west Perth 6005
western australia
lawyERS
Drummond Law
48 matheson road
applecross 6153
western australia
| 38
a FIRStNatuREDESIGN.CoM .au
Corporate direCtory