Mineral Commodities Limited
ABN 39 008 478 653
07
31 DECEMBER 2007
Annual Report
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
Corporate Directory
Directors
Joseph Anthony Caruso – Non-Executive Chairman
Mark Victor Caruso – Managing Director
Gregory Hugh Steemson – Non-Executive Director
Company Secretary
Peter Torre
Registered Office
Solicitors
Auditors
Share Registry
Bankers
Unit 15, Level 1
51–53 Kewdale Road
Welshpool Western Australia 6106
Telephone: (61 8) 9353 4890
Facsimile: (61 8) 9353 4894
info@mncom.com.au
Email:
Website: www.mncom.com.au
Steinepreis Paganin
Level 4, Next Building
16 Milligan Street
Perth WA 6000
BDO Kendalls Audit and Assurance (WA) Pty Ltd
128 Hay Street
Subiaco, Western Australia 6008
Security Transfer Registrars Pty Limited
770 Canning Highway
Applecross, Western Australia 6153
Telephone: (61 8) 9315 0933
Facsimile: (61 8) 9315 2233
Australia & New Zealand Banking Group Ltd
77 St Georges Terrace
Perth WA 6000
Stock Exchange Listing
The Company is Listed on the Australian Stock
Exchange Limited under ASX Code – MRC
For personal use only
Contents
/ 1 /
CORPORATE DiRECTORy ........................ inside Front Cover
CHAiRMAN’S LETTER ........................................................ 2
REViEW OF OPERATiONS .................................................. 3
DiRECTORS REPORT .......................................................... 9
iNCOME STATEMENT ...................................................... 18
BALANCE SHEET ............................................................ 19
CASH FLOW STATEMENT ................................................ 20
STATEMENT OF CHANGES iN EqUiTy ..............................21
NOTES TO THE FiNANCiAL STATEMENTS ........................ 23
DiRECTORS’ DECLARATiON ............................................. 56
AUDiTORS iNDEPENDENCE DECLARATiON..................... 57
iNDEPENDENT AUDiT REPORT ........................................ 58
STATEMENT OF CORPORATE GOVERNANCE ................... 60
SHAREHOLDER iNFORMATiON ........................................ 63
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
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Chairman’s Letter
Dear Shareholders,
your Company is on the verge of an exciting phase in its development. The 2007 year was one in which considerable work
was completed to support the mining right applications for both the Xolobeni and Tormin mineral sands projects.
This effort was rewarded with the decision by the Department of Minerals and Energy in South Africa to grant the mining
right for Tormin. We are confident that a similar decision will be forthcoming for the Xolobeni Project.
The decision vindicates the Company’s persistence and patience on the projects as it has always been the view of the
Board that both projects will add considerable value to the Company.
The Company continued to assess other projects throughout the year. The Sierra Leone diamond project has not delivered
the desired outcome that the Board had expected. issues with the plant and contractors caused significant delays and the
Board will seek to divest this project and extract as much value as possible. Despite this setback, the Board will continue
to assess further projects in the interest of maximising shareholder value.
The continued success of the Company’s associate Allied Gold Limited is outstanding and the value of the company’s
investment has grown significantly throughout the year. Allied Gold has recently entered into a farm in and joint venture
arrangement with the world’s pre-eminent gold producer Barrick Gold Limited which provides for it to invest up to $35
million in Allied Gold. We look forward to sharing in our associate’s success in the future.
The coming year will be a defining one for the future of your Company. New projects will be considered and existing ones
should flourish.
On behalf of the Board, i would like to thank you, our shareholders, for your continued support. We trust this will endure in
the future. i would also like to thank the staff both in Australia and overseas who work tirelessly in ensuring the success or
our Company and projects.
Joseph A. Caruso
Chairman
For personal use only / 3 /
Review of Operations
XOLOBENI MINERAL SANDS PROJECT, SOUTH AFRICA
Location
The Xolobeni mineral sands deposit is located in the Eastern Cape
Province of South Africa approximately 300 kilometres north of East
London and 200 kilometres south of Durban.
The current tenement area is approximately 22 kilometres long and 1,500
metres wide and covers some 2866 hectares within the Xolobeni area.
The area consists of three main dune systems which range from 25m to
95m above sea level. The resource is divided into five blocks bounded
by the Mzamba, Mpahlane, Mnyameni, Kwanyana, Sikombe and Mtentu
Rivers. Each block is named after the river defining the southern boundary.
The current extent of mineralisation proposed to be mined takes in about
855ha or about 30% of the tenement area.
Lodging the application for a Mining Right. (Left to
right XolCo directors – Nomangesi Malunga and
Zeka Mnyamana, DME regional director Nomvuyo
Ketse, John Barnes MRC/TEM operations manager.
Tenure
TEM holds a current Prospecting Right issued under the Minerals and Petroleum Resources Development Act 2002.
in March 2007 under a unique empowerment arrangement between Mineral Commodities Limited (MRC), its South African
subsidiary Transworld Energy and Minerals Resources (SA) (Pty) Limited (TEM) and the Xolobeni community empowerment
company – XolCo (now a 26% shareholder of TEM) lodged the Mining Right for the Xolobeni Heavy Mineral Sands Project
with the department of Minerals and Energy in Port Elizabeth.
The Xolobeni project is more than just a mining operation. When the mining right is granted it will bring socio-economic
upliftment to the impoverished local communities. The benefits will include;
• a solution to the environmental
degradation of the area;
•
the provision of basic
infrastructure and services which
are currently severely lacking;
• a significant impact on the local
and regional economies; and
•
The project will maintain South
Africa’s position as one of top
3 mineral sands producers in
the world.
Figure 1. Location of Xolobeni and Tormin projects.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
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Review of Operations (continued)
Resources
The mineralised sands occur within recent sands and remnant red beds of Pleistocene Berea Formation. The predominant
valuable heavy mineral is ilmenite, the feedstock for titanium slag production. Rutile, zircon and leucoxene add significantly
to the value of the deposit.
in 2002 a detailed drilling programme over the Sikombe, Kwanyana and Mnyameni blocks was completed. The results
were assessed according to the JORC code by SRK Consulting, and used to complete a Resource Estimation Report and
Desktop Mining Study. The Xolobeni mineral resource is estimated to be 346 million tonnes of sand containing nine million
tonnes of ilmenite. Of this total resource 65% is in the measured category. it is the tenth largest mineral sands resource
in the world. The mining study concluded that the Xolobeni mineral sand deposit is economically viable with a mine life
of some 25 years.
Project development
A new order Prospecting Right was granted in October 2005. in March 2007 the Xolobeni Mining Right was lodged.
South African environmental consultants GCS (Pty) Ltd begun working on the EiA for several months as part of the
necessary environmental and social studies required by the MPRD Act.
To compliment this effort, Australian based environmental consultants were engaged to ensure that the work meets
international best practice standards.
The completion and lodgement of the Environmental impact assessment and the formulation and submission of an
Environmental Management Programme were accomplished during the year.
The documents are currently under final review by the DME. The Minister of Minerals and Energy is due to announce
a decision on the Mining Right Application during the first half of 2008.
TAbLE 1 RESOuRCE ESTIMATE SuMMARy
Resource Classification
Tonnes (Mt)
HM Grade (HM%)
Measured
indicated
inferred
Total Resource
224
104
18
346
5.7
4.1
2.3
5.0
TAbLE 2 XOLObENI bLOCk RESOuRCE DATA
Resource Status
Tonnes (Mt)
% HM
% Fines
%Ilm(2)
Area
Mtentu
Sikombe
Kwanyana
Not drilled
Measured
Measured
Mnyameni
indicated
Mpahlane
inferred
TOTAL
85
139
104
18
346
5.5
5.8
4.1
2.3
5.0
17.9
19.6
28.1
28.0
22.2
3.1
3.1
2.2
1.6
2.7
(1) All tonnages are based on a 1% HM cut-off grade.
(2) The reported percentage of ilmenite is a magnetic fraction of the THM.
For personal use only / 5 /
Review of Operations (continued)
No further exploration activity is needed on the area as
the mineral resources are classified as JORC compliant for
measured, indicated and inferred. in 2002 part of the area
was drilled on a grid spacing of 50m x 100m, sufficient
density for mine planning.
Subject to the mining right being granted, it is proposed to
commence a bankable feasibility study in 2008.
Socio–economic aspects
MRC/TEM has entered into a unique agreement with XolCo
the local Amadiba Tribal Community broad based Black
Economic Empowerment (BEE) partner. XolCo as 26%
equity partner will economically empower an impoverished
community by having a significant stake in a major mining
and down-stream processing project. MRC/TEM personnel
have extensive experience in mining and rehabilitation and
by combining this with XolCo as a broad based stakeholder
engaged in operations and management will ensure the
integrity of this unique project.
Consultation between TEM, XolCo and the local, regional and
national government departments is ongoing in order to link
common development plans for the area.
Key issues facing the local community are the creation of
jobs, reduction in poverty, elimination of illiteracy, provision
of water, power and transport and the determination of
sustainable land use. The community’s continued concern over the accelerating degradation of the area in terms of top soil
erosion, wet land destruction and uncontrolled indigenous bush clearing for firewood has been brought to the attention of
key government departments. All parties agree that mining is one activity than can stop the degradation and bring in the
required infrastructure, jobs and wealth.
Figure 2. Xolobeni Project Site Plan.
A number of community development programs are already in place as part of TEM’s long term commitment to the area.
The project has the potential to bring a wide range of basic socio-economic benefits to the region such as improved roads,
access to water and electricity, better education and health facilities providing a higher standard of living for all the people.
infrastructure will also encourage the development of sustainable industries and these together with the down stream
processing of material through the smelter will continue to deliver long term economic benefits to the region.
XolCo represents a number of community base trusts as beneficiaries outlined in the following chart
XolCo Trusts
Youth
Elderly
Tribal
Business
Cultural
Women
Xolobeni resource statement
The Xolobeni resource statement included in this report was prepared by Mr Daniel Guibal (SRK Consulting), a competent
person as defined under the JORC code. Mr Guibal consents to the inclusion in the report of the matters based on his
information in the form and context in which it appears.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
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Review of Operations (continued)
TORMIN MINERAL SANDS PROJECT SOUTH AFRICA
Location
The Tormin mineral sands prospect is a small beach deposit located on the
rugged west coast of South Africa, approximately 400km north of Cape
Town. The deposit is situated about 14km north of Transhex’s diamond
processing operation at De Pont near the Olifants River and about 50km
south of Anglo’s Namakwa Sands operation at Brand se Baai. The project is
some 40 km from Anglo’s mineral separation plant at Lutzville. (Figure 3).
The tenement area covers 90ha of mineralised beach which has
accumulated along the ~12km long, 100m wide beach, to a maximum
depth of 12m. Because of the dynamic beach environment the beach is
continually being supplemented by erosion of a heavy mineral enriched
25m thick paleo-beach terrace 35m above current the sea level. The
predominant heavy mineral is garnet with ilmenite, pyroxene, zircon, rutile,
and leucoxene contained in the heavy mineral assemblage.
Tenure
Mineral Commodities Limited holds its interest in the Tormin project
through South African subsidiary Mineral Sands Resources (Pty) Ltd (MSR).
in late 2003 the Company applied for a Prospecting Permit over the
area. With the introduction of the new MRPD Act a revised Prospecting
Right Application (PRA) was submitted in August 2004. An environment
management plan (EMP) was submitted in December 2004. The Prospecting
Right was granted in March 2006 and the related EMP was also approved.
Figure 3. Location of the Tormin prospecting
permit application in relation to existing regional
infrastructure.
in February 2007 MSR lodged a Mining Right application over the area in concurrence with the EiA that had commenced
and is ongoing as part of the mining right requirement.
The Company has an agreement with the holder of a Mining Permit that covers part of the heavy mineral sand resource which
allows the Company to purchase those rights. This will consolidate the Company’s rights over the full extent of the deposit.
Resources
The Tormin heavy mineral placer deposits overlie diamond bearing gravel beds. in 1992 a feasibility study into mining the
beach deposits and extracting both diamonds and heavy minerals was undertaken by Trans Hex Operations (Pty) Ltd (THG),
a South African diamond producer. in 2002 the Company signed an agreement with THG that allows MSR to apply for the
mineral sand rights. Under this agreement THG would support the Company’s application and in turn THG will retain the
rights to any diamond production from the area.
Bateman Minerals (Pty) Ltd was engaged to undertake a feasibility study for the project in 2004–2005. An internal review
was carried out to consider opportunities for cost savings, changes to the configuration of processing plant and the mining
method to achieve better efficiencies. Based on these criteria independent engineering consultants RSV of South Africa
were commissioned to carry out a formal technical assessment and re design work on the project.
Metallurgical test work carried out indicates the deposit would yield a high quality (ceramic grade) zircon and high grade
Ti product containing Rutile and Luecoxene.
For personal use only / 7 /
Review of Operations (continued)
Based on the Transhex drilling and test work mineral resources were estimated at 3.43Mt containing 81,300t of Zircon and
20,000t of Rutile. As part of a recent review the resource has been re – estimated using the historical Transhex data in
comparison to more recent MSR bulk sampling program. The MSR revised mineral resources for the Tormin beach sands is
now estimated at 2.71Mt containing 76,100tn of Zircon and 18,300tn of Rutile in the inferred category.
Project development
The Mining Right Application was submitted at the beginning of the year for the Tormin Mineral Sands Project. in addition,
the conversion of the existing Old Order Mining Permit to the south of the Prospecting Permit to a New Order Mining Right
was lodged simultaneously. Once approved, the two rights will be consolidated into a single mining tenement.
The final Environmental impact Assessment (EiA) and Environmental Management Programme (EMP) for the project were
submitted to the DME in July 2007.
The Board was pleased to advise that subsequent to year end, the Group received notification that the Mining Right was
granted with an official signing ceremony to take place in late May 2008.
The Company continues to field expressions of interest from parties that wish to secure the rights to the non magnetic
heavy mineral concentrates likely to be produced from the Tormin project. Negotiations have reached an advanced stage
with marketing samples dispatched to the various parties for review.
Socio-economic aspects
The Company will undertake a detailed social and labour plan as part of the feasibility study and local communities have
been identified that would benefit from the project.
Tormin Resources Statement
The information in this report that relates to exploration results for the Tormin project is based on information compiled
by Mr Greg Steemson who is a Fellow of the Australian institute of Geoscientists. Mr Steemson is a competent person
as defined under the JORC Code. Greg Steemson consents to the inclusion in the report of the matters based on his
information in the form and context in which it appears.
INVESTMENT IN KARIBA KONO DIAMONDS, SIERRA LEONE
On 22 May 2006, Mineral Commodities Limited (MRC) announced an offer for all the shares in Erebus PLC (Erebus) that it
did not already own. The offer consisted of 1.5 MRC shares plus half an option for every 1 Erebus share. The options have
an exercise price of $0.40 and expire on 30 June 2007. On 16 June 2006, MRC announced that the offer had been accepted
by holders representing 100% of the ordinary shares of Erebus. The takeover was successfully completed on 23 June, 2006
with the total number of shares and options issued being 9,406,878 and 3,135,626 respectively.
Erebus’s principle activity through its 100% wholly owned Sierra Leone subsidiary, Kariba Kono (SL) Ltd, is diamond tailings
dump re-treatment, diamond mining and mineral exploration in Sierra Leone. Kariba Kono’s principal asset is the No. 11
Oversize Tailings Dump at Koidu.
The No.11 tailings dump resulted from alluvial diamond operations in the 1960’s by the Sierra Leone Diamond Trust
(“SLDT”). Although the plant was advanced for its time, investigation into the operating history of the plant after the
fortuitous discovery of the 969.8 carat “Star of Sierra Leone” diamond indicated that the initial plant design was flawed and
it is believed the operating efficiency would have reduced with time, leading to the loss of diamonds to tailings.
During 2006, MRC awarded the contract for the manufacture, supply, delivery and commissioning of an 80tph ROD
Diamond Pan Plant for the No.11 tailings dump to ProMet Engineers Africa (Pty) Ltd.
in the first half of the 2007 year, ProMet Engineers Africa (Pty) Ltd had erected and commissioned the Diamond Recovery
Plant that it had designed and fabricated from South Africa. The plant was designed to treat 80 tonnes of material per hour,
however metallurgical constraints impeded production to less than half this rate. These constraints were identified and
evaluated and Promet and MRC commenced discussions to deliver the 80tph or to revise the project plan.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
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Review of Operations (continued)
The operations were suspended and the plant was placed under care and maintenance pending an engineering and
design review. The Company held discussions with Promet to deliver the 80tph throughput pursuant to the contractual
performance guarantee. These discussions were not successful and as a result the Company commenced legal
proceedings in the Federal Court of Australia on 12 October 2007 against Promet Engineers Africa (Pty) Ltd (Promet),
Promet Engineers Pty Ltd, James Dinsdale, Cribbes, Robert John Bennett and Richard George Ford.
The proceedings have eventuated as a result of Promets failure to manufacture, supply, install ,erect and commission a
diamond pan plant at the Company’s No 11 Oversize Tailings Dump in accordance with the terms of the contract.
MRC claims in the proceedings that:
(a) Promet breached the terms of the Contract; and
(b) Promet Engineers Africa, Promet Engineers, Cribbes, Bennet and Ford;
(i) Engaged in misleading and deceptive conduct, and
(ii) Breached Section 52 of the Trade Practices Act.
MRC is claiming damages for breach of Contract, as well as damages for contraventions of the Trade Practices Act, interest
and costs.
OTHER PROJECTS AND INVESTMENTS
INVESTMENT IN ALLIED GOLD LIMITED
Allied Gold Limited (ALD) is a listed gold development and exploration company with the Tabar islands Gold Project in
Papua New Guinea as its principal asset. This project consists of the Simberi Oxide Gold Project and all exploration
property on the Tabar islands.
At reporting date, ALD was well advanced in the commissioning of its gold processing operation with the first production
taking place immediately subsequent to year end.
MRC is one of the largest shareholders in ALD and holds a direct interest in 5.71% (approximately 19.5 million shares) of
ALD’s issued fully paid ordinary shares.
The market value of MRC’s shares at 31 December 2006 was $14.2 million.
INVESTMENT IN BLACKHAWK OIL AND GAS LIMITED/PETRO VENTuRES PLC
During the period under review, the Company had entered into a Share Swap Agreement to roll all of its shareholding in
BlackHawk Oil & Gas Limited into London based Petro Ventures Plc, however due to the Dutch Mining Ministry awarding
the offshore licence P1 to a competing consortium, the roll up did not proceed.
However, MRC remains as a significant seed capitalist investor in Petro Venture Plc. Petro Ventures was formed by a
number of senior professionals in the UK and Australia with a view to securing oil and gas opportunities primarily in the UK
and Europe on low risk appraisal/pre-development acreage in the vicinity of upstream infrastructure.
Petro has successfully secured three project areas in the UK, Offshore Romania and onshore Hungary. it is also continuing
its investigations on a number of advanced oil and gas plays in Morocco, Holland and Ukraine.
For personal use only / 9 /
Directors’ Report
The Directors present their report together with the financial report of Mineral Commodities Limited
(“the Company”) and its controlled entities for the year ended 31 December 2007.
DIRECTORS
The Directors of the Company in office during or since the
end of the financial year are:
• Mr Joseph A Caruso – Non Executive Chairman
• Mr Mark V Caruso – Managing Director
• Gregory Hugh Steemson – Non Executive Director
Directors have been in office since the start of the
financial year to the date of this report.
DIRECTORS’ INFORMATION
Joseph Anthony Caruso (61 Years of Age)
Non-Executive Chairman
Mr Caruso is a Director of Zurich Bay Holdings Pty Ltd
and Construction Manager of Simto Australia Pty Ltd,
both of which are involved in mining, earthmoving and
civil engineering construction earthworks. Mr Caruso has
considerable experience in managing and administration of
engineering, mining, raw materials production operations,
earthmoving and related infrastructure utilities services
resource contracts. Mr Caruso has been a director of
Mineral Commodities Limited since September 2000.
Mark Victor Caruso (45 Years of Age)
Managing Director
Mr Caruso is a Director of Zurich Bay Holdings Pty Ltd
and Simto Australia Pty Ltd, both of which are involved in
mining, earthmoving and civil engineering construction
earthworks. Mr Caruso has been a director of Mineral
Commodities Limited since September 2000. He is also
a Director of Allied Gold Limited. Former directorships of
public listed companies in the last 3 years are Fortescue
Metals Group Limited from June 2002 until November
2003 ORT Limited from August 2003 until August 2005
and CI Resources Limited from October 2003 to May 2007.
Gregory Hugh Steemson (54 Years of Age)
Non Executive Director
Mr Steemson is a qualified Geologist and Geophysicist
with an extensive background in exploration, development
and management of mining projects. Mr Steemson has
been a Director of the Company since April 2001.
Mr Steemson is also a Director of Allied Gold Limited.
Former directorships of public listed companies in the last
3 years include Fortescue Metals Group Limited from June
2002 until July 2003 and Sandfire Resources Limited from
June 2003 to August 2007.
Due to the size of the Company all directors are members
of the Audit and Remuneration Committees as described
further in the Corporate Governance statement.
COMPANY SECRETARY
Peter Torre CA, ACIS, MAICD
Mr Torre was appointed Company Secretary of Mineral
Commodities Limited in July 2006. He is a Chartered
Accountant and a Chartered Secretary. He was previously
a partner of an internationally affiliated firm of Chartered
Accountants. Mr Torre is the Company Secretary of
several ASX listed companies and is a Director of ORT
Limited and Carbine Resources Ltd.
PRINCIPAL ACTIVITIES
The principal activity of the consolidated entity during the
year was exploration for mineral sands and other mineral
resources. This has mainly involved exploration and
evaluation of the Xolobeni Mineral Sands Project in the
Eastern Cape Province of South Africa, the Tormin Mineral
Sands Project in the Western Cape Province of South
Africa and diamond mining and tailings dump retreatment
operation in Sierra Leone.
The following significant change in the nature of activities
of the Group occurred during the year:
The diamond mining operations in Sierra Leone were
placed on care and maintenance pending an engineering
and design review
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
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Directors’ Report (continued)
CONSOLIDATED RESULTS
The loss of the consolidated entity after income tax
and outside equity interests was $7,010,080 (2006:
Loss of $1,523,542).
DIVIDENDS
No dividends have been paid, declared or recommended
for payment, in respect of the current financial year.
REVIEW OF OPERATIONS AND FUTURE DEVELOPMENTS
Highlights of the Company’s operations for the period
under review are as follows.
Xolobeni Mineral Sands Project (South Africa)
Mining Right
In March 2007, MRC’s 75% owned South African subsidiary
Transworld Energy and Minerals Resources Pty Ltd (TEM)
lodged the mining right application for the Xolobeni
Mineral Sands Project with the Department of Minerals
and Energy (DME) in Port Elizabeth. The lodgement of
the application was a significant milestone in the future
commercialisation of this project.
The completion and lodgement of the Environmental
impact assessment and the formulation and submission
of an Environmental Management Programme also took
place during the year.
The documents are currently under final review by the
DME. The Minister of Minerals and Energy is due to
announce a decision on the Mining Right Application
during the first half of 2008.
Xolobeni remains regarded as one of the largest
undeveloped mineral sands resources in the world.
Xolobeni Black Empowerment and Consultation
The Group continues to work alongside its BEE Partner
Xolobeni Empowerment Company (Pty) Ltd (Xolco)
throughout the process. The project area was visited
by the South African Government Minister of Minerals
and Energy and the Minister of Social Development in
December 2007. The delegation was accompanied by the
newly appointed Chief Director of the DME for the Eastern
Cape Region and was met by a large community gathering
including Directors of Xolco.
Tormin Zircon Project (South Africa)
Mining Right Application
The Mining Right Application was submitted at the
beginning of the year for the Tormin Mineral Sands
Project. In addition, the conversion of the existing Old
Order Mining Permit to the south of the Prospecting
Permit to a New Order Mining Right was lodged
simultaneously. Once approved, the two rights will be
consolidated into a single mining tenement.
The final Environmental Impact Assessment (EIA) and
Environmental Programme (EMP) for the project were
submitted to the DME in July 2007.
The Board was pleased to advise that subsequent to year
end, the Group received notification that the Mining Right
was granted with an official signing ceremony to take
place in late April 2008.
The Company continues to field expressions of interest
from parties that wish to secure the rights to the non
magnetic heavy mineral concentrates likely to be
produced from the Tormin project. Negotiations have
reached an advanced stage with marketing samples
dispatched to the various parties for review.
Black Economic Empowerment Partner
Underpinning the Mining Right Application is the Company’s
new Black Economic Empowerment (BEE) arrangement
with Marodi Mining (Proprietary) Limited (Marodi). BEE
compliance is a pre-condition to obtaining mining right
approval under the South African Mineral and Petroleum
Resources Development Act and the Broad-Based Socio
Economic Empowerment Charter of South Africa.
The Company’s South African subsidiaries, MRC Resources
and Mineral Sands Resources (Pty) Ltd (MSR), have
entered into a Shareholders Agreement with Marodi which
will establish MSR as a fully compliant BEE company.
For personal use only / 11 /
Directors’ Report (continued)
Erebus PLC.
Investment in Allied Gold Limited
In the first half of the year, ProMet Engineers Africa
(Pty) Ltd had erected and commissioned the Diamond
Recovery Plant that it had designed and fabricated from
South Africa. The plant was designed to treat 80 tonnes
of material per hour, however metallurgical constraints
impeded production to less than half this rate. These
constraints were identified and evaluated and ProMet and
MRC commenced discussions to deliver the 80tph or to
revise the project plan.
The operations were suspended and the plant was placed
under care and maintenance pending an engineering and
design review. The Company held discussions with ProMet
to deliver the 80tph throughput pursuant to the contractual
performance guarantee. These discussions were not
successful and as a result, the Company commenced
legal proceedings in the Federal Court of Australia on
12 October 2007 against ProMet Engineers Africa (Pty)
Ltd (ProMet), ProMet Engineers Pty Ltd, James Dinsdale
Cribbes, Robert John Bennett and Richard George Ford.
The proceedings have eventuated as a result of ProMet’s
failure to manufacture, supply, install, erect and
commission a diamond pan plant at the Company’s No 11
Oversize Tailings Dump in accordance with the terms of
the contract.
MRC claims in the proceedings that:
(a) ProMet breached the terms of the Contract; and
(b) ProMet Engineers Africa, ProMet Engineers, Cribbes,
Bennet and Ford;
(i) Engaged in misleading and deceptive conduct, and
(ii) Breached Section 52 of the Trade Practices Act.
MRC is claiming damages for breach of Contract, as well
as damages for contraventions of the Trade Practices Act,
interest and costs.
Allied Gold Limited (ALD) is a listed gold development
and exploration company with the Tabar Islands Gold
Project in Papua New Guinea as its principal asset. This
project consists of the Simberi Oxide Gold Project and all
exploration property on the Tabar Islands.
At reporting date, ALD was well advanced in the
commissioning of its gold processing operation with the
first production taking place immediately subsequent to
year end.
MRC is one of the largest shareholders in ALD and holds a
direct interest in 5.71% (approximately 19.5 million shares)
of ALD’s issued fully paid ordinary shares.
The market value of MRC’s shares at 31 December 2007
was $14.2 million.
Investment in Blackhawk Oil & Gas Limited
During the period under review, the Company had entered
into a Share Swap Agreement to roll all of its shareholding
in BlackHawk Oil & Gas Limited into London based
Petro Ventures Plc, however due to the Dutch Mining
Ministry awarding the offshore licence P1 to a competing
consortium, the roll up did not proceed.
However, MRC remains as a significant seed capitalist
investor in Petro Venture Plc. Petro Ventures was formed
by a number of senior professionals in the UK and
Australia with a view to securing oil and gas opportunities
primarily in the UK and Europe on low risk appraisal/
pre-development acreage in the vicinity of upstream
infrastructure.
Petro has successfully secured three project areas in the
UK, Offshore Romania and onshore Hungary. It is also
continuing its investigations on a number of advanced oil
and gas plays in Morocco, Holland and Ukraine.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 12 /
Directors’ Report (continued)
FINANCIAL POSITION
The net assets of the economic entity have decreased by $3,657,548 from 31 December 2006 to $19,049,809 at
31 December 2007. This has largely resulted from impairment losses arising from the fair value assessment of the Kariba
Kono project.
FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES
The company will continue the process of development of both the Tormin and Xolobeni projects in South Africa.
The Company will seek to divest its interest in the Sierra Leone Diamond Project at a value acceptable to the Board.
The Board will continue to review other projects and opportunities in the interest of increasing shareholder value.
In the opinion of the directors, it may prejudice the interests of the Company to provide additional information in relation
to likely developments in the operations of the Company and the expected results of those operations in subsequent
financial periods.
ENVIRONMENTAL REGULATIONS
In the course of its normal mining and exploration activities, the Company adheres to environmental regulations
imposed upon it by the relevant regulatory authorities, particularly those regulations relating to ground disturbance
and the protection of rare and endangered flora and fauna. The Company has complied with all material environmental
requirements up to the date of this report.
SCHEDULE OF MINING TENEMENTS
Mining tenements currently held by the economic entity are:
Area
Entity holding the interest
% Held
Title
Status
Xolobeni – South Africa
Transworld Energy &
Minerals Resources
100
New order Prospecting Right
Granted
Tormin – South Africa
Mineral Sands Resources
100
New order Prospecting Right
Geelwal Karoo 262
Koidu – Sierra Leone
Kariba Kono (SL) Ltd
100
Mining Lease 3/04
Granted
Granted
SIGNIFICANT CHANGES IN STATE OF AFFAIRS AND LIKELY DEVELOPMENTS
The following significant changes in the state of affairs of the Consolidated Entity occurred during the year:
•
•
•
•
In June 2007, 4,373,519 shares were issued pursuant to the exercise of options at $0.30 and 183,500 shares were
issued pursuant to the exercise of options at $0.40.
In July 2007, 12,000,000 shares were issued under a placement at $0.26 per share to raise $3,120,000.
In October 2007, 1,250,000 Employee Incentive Options were issued with an exercise price of $0.30 expiring on
30 September 2009.
In November 2007, 500,000 Employee Incentive Options exercisable at $0.30 and 500,000 Employee Incentive Options
exercisable at $0.40 were issued expiring on 30 September 2009.
For personal use only / 13 /
Directors’ Report (continued)
OPTIONS
The total number of unissued ordinary shares under option at the date of this report is 3,600,000, all of which are not
listed. Options do not entitle the holder to receive a dividend paid to ordinary shareholders. New issues of options and
options exercised in the period is as follows:
Date of Grant
Opening Balance
– Options Exercised
– Options Exercised
– Options Lapsed
– Options Issued
– Options Issued
Balance at 31 December 2007
DIRECTORS’ SHAREHOLDING INTERESTS
No of Options
Exercise Price
Expiry date
22,494,233
(4,373,519)
(183,500)
(16,587,214)
1,750,000
500,000
3,600,000
$0.30
$0.30
$0.40
$0.30
$0.40
Various
30 June 2007
–
–
30 September 2009
30 September 2009
Various
The relevant interest of each director in the share capital of the Company, shown in the Register of Directors’ Shareholding
at the date of the Directors’ Report is:
Director
Ordinary Shares
Options over Ordinary Shares
J A Caruso
M V Caruso
G H Steemson
Direct
–
12,627
210,000
Indirect
11,556,726
11,556,726
–
Direct
Indirect
–
–
–
–
–
–
J A Caruso and M V Caruso are both directors of Zurich Bay Holdings Pty Ltd, which has a relevant interest in 11,556,727
shares in the Company.
MEETINGS OF DIRECTORS
The number of directors meetings and number of meetings attended by each of the directors of the Company during the
financial year are:
Meetings Held
Meetings Attended
J A Caruso
M V Caruso
G H Steemson
3
3
3
2
3
3
Other many matters of board business have been resolved by circular resolutions of directors, which are a record of
decisions made at a number of informal meetings of the directors held to control, implement and monitor the Company’s
activities throughout the year.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 14 /
Directors’ Report (continued)
REMUNERATION REPORT (audited)
The remuneration report is set out under the following
main headings:
A. Principles used to determine the nature and amount of
remuneration.
B. Details of remuneration
C. Service Agreements
D. Share-based compensation
E. Additional Information
The information provided in this remuneration report
has been audited as required by section 308(3C) of the
Corporations Act 2001.
A. Principles used to determine the nature and
amount of remuneration
In order to retain and attract executives of sufficient
calibre to facilitate the efficient and effective management
of the Company’s operations, the board reviews the
remuneration packages of all directors and executive
officers on an annual basis and makes recommendations.
Remuneration packages are reviewed with due regard to
performance and other relevant factors.
Remuneration packages may contain the following
key elements:
(a) Directors Fees;
(b) Salary & Consultancy;
(c) Benefits – including provision of motor vehicle,
superannuation.
Fees payable to non-executive directors reflect the
demands which are made on, and the responsibilities of
the directors. Non-Executive directors’ fees and payments
are reviewed annually by the Board.
Executives are offered a competitive base pay that
consists of fixed components. Base pay for senior
executives is reviewed annually to ensure the executives
pay is competitive with the market. Total Base Pay can be
structured as a total employment package which may be
delivered as a combination of cash and prescribed non-
financial benefits at the executives discretion.
There were no short or medium term cash incentives
provided to any executives of the company during the
financial year. Short or medium term cash incentives are
not incorporated into any executives salary packages at
the time of this report.
The directors are not required to hold any shares in the
company under the constitution of the company; however,
to align directors interests with shareholders interests the
directors are encouraged to hold shares in the company.
Remuneration is not directly related to company
performance or key performance indicators.
The board has no separate remuneration committee due
to the size of the company. The directors perform the
role of a remuneration committee as disclosed in the
Corporate Governance statement.
B. Details of Remuneration
Details of the remuneration of directors and the key
management personnel (as defined in AASB 124 Related
Party Disclosures) of Mineral Commodities Limited and
the Mineral Commodities Limited Group are set out in the
following tables.
Other than the directors of the company, the Company
Secretary Mr Peter Torre is the only key management
personnel. The amounts disclosed are therefore applicable
for both Mineral Commodities Limited and the Mineral
Commodities Limited Group.
For personal use only Directors’ Report (continued)
/ 15 /
Short-term
benefits
Post employment
benefits
Share-based
payments
Percentage
performance
based
Cash Salary
and fees
Superannuation
Shares/
Options
Totals
2007
Name
Non Executive Directors
Joe Caruso
Greg Steemson
Sub-total non executive
directors
Executive Directors
44,037
69,800
113,837
Mark Caruso
48,000
Other Key Management
Personnel
Peter Torre
75,000
3,963
–
3,963
–
–
–
–
–
48,000
69,800
117,800
–
48,000
9,800
84,800
–
–
–
–
–
Total Key management
personnel disclosure
236,837
3,963
9,800
250,600
Short-term
benefits
Post employment
benefits
Share-based
payments
Percentage
performance
based
Cash Salary
and fees
Superannuation
Shares/
Options
Totals
2006
Name
Non Executive Directors
Joe Caruso
Greg Steemson
Sub-total non executive
directors
Executive Directors
30,000
58,000
88,000
2,700
–
2,700
–
–
–
–
–
32,700
58,000
90,700
33,000
123,700
–
–
–
–
–
Mark Caruso
33,000
–
Total Key management
personnel disclosure
121,000
2,700
C. Service Agreements
There were no formal service agreements with any directors or key management personnel.
For personal use only
MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 16 /
Directors’ Report (continued)
D. Share Based Compensation
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of Court to bring
proceedings on behalf of the Company or intervene in
any proceedings to which the Company is a party for the
purpose of taking responsibility on behalf of the Company
for all or any part of those proceedings.
INSURANCE OF OFFICERS
During the financial year the Company has paid an
insurance premium to insure the directors and secretaries
of the company and its controlled entities. This contract
prohibits disclosure of the nature of the liability and the
amount of the premium. The liabilities insured are legal
costs that may be incurred in defending civil or criminal
proceedings that may be brought against the officers in
their capacity as of entities in the Group, and any other
payments arising from liabilities incurred by the officers
in connection with such proceedings. This does not
include such liabilities that arise from conduct involving a
wilful breach of duty by the officers or the improper use
by the officers of their position or of information to gain
advantage for themselves or someone else or to cause
detriment to the company.
AUDITORS’ INDEPENDENCE DECLARATION
The Auditors’ Independence Declaration on page 57
forms part of the Directors’ Report for the year ended
31 December 2007. This relates to the audit report,
where they state that they have issued an Independent
Declaration.
Options
Options were granted by the Company to Mr Peter Torre
in November 2007 for no consideration. In addition,
options were granted under the Mineral Commodities
Limited Employee Option Plan which was approved by
shareholders at a general meeting held in November 2007.
All full time employees, part time employees, consultants
and Directors of the Company are eligible to participate in
the plan at the absolute discretion of the board.
Options are granted under the plan for no consideration
and are at terms stipulated at the discretion of the Board.
For further details of the options issued please refer to
note 22(b) and 26.
E. Additional Information
There is no additional information to be provided in
respect to the remuneration of the directors.
INDEMNIFICATION AND INSURANCE OF DIRECTORS
During the year, the Company has paid an insurance
premium in respect of a contract indemnifying the parent
entity’s directors. This contract prohibits disclosure of the
nature of the liability and the amount of the premium.
CORPORATE GOVERNANCE
In recognising the need for the highest standards of
corporate behaviour and accountability, the directors of
Mineral Commodities Limited adhere to strict principles
of corporate governance. The Company’s Corporate
Governance statement is included before the Additional
ASX Information section of the Annual Financial Report.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
No event or transaction has arisen in the interval between
the end of the financial year and the date of this report
of a material and unusual nature likely, in the opinion of
the Directors of the Company, to affect significantly the
operations of the Company or the Consolidated Entity, the
results of those operations or the state of affairs of the
Company or the Consolidated Entity in future financial years.
For personal use only Directors’ Report (continued)
NON-AUDIT SERVICES
The company may decide to employ the auditor on
assignments additional to their statutory audit duties
where the auditor’s expertise and experience with the
company and/or the group are important.
The board of directors has considered the position and,
in accordance with the advice received from the audit
committee, is satisfied that the provision of the non-
audit services is compatible with the general standard of
independence for auditors imposed by the Corporations
Act 2001. The directors are satisfied that the provision of
non-audit services by the auditor as set out below, did not
compromise the auditor independence requirements of
the Corporations Act 2001 for the following reasons:
• All non-audit services have been reviewed by the
audit committee to ensure they do not impact the
impartiality and objectivity of the auditor.
None of the services undermine the general principles
relating to auditor independence as set out in APES 110
Code of ethics for Professional Accountants.
There were no non-audit services provided by
BDO Kendalls in the year.
/ 17 /
During the year the following fees were paid or payable for
services provided by the auditor of the parent entity, its
related practices and non related firms:
Audit Services:
BDO Kendalls –
$
Audit and review of financial reports
45,893
Non BDO Kendalls audit firm
(Tuffias Sandberg)
Total remuneration for audit services
12,713
58,606
This report has been made in accordance with a resolution
of the Directors.
Mark V Caruso
Managing Director
Perth, Western Australia
31 March 2008
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 18 /
Income Statement
For the year ended 31 December 2007
Note
Consolidated
Company
Revenue from continuing operations
2
Exploration written off
2007
$
765,304
(186,867)
2006
$
2007
$
2006
$
333,811
1,176,126
698,674
–
(186,867)
–
General & Administration expenses
(2,310,725)
(1,773,047)
(1,030,581)
(1,115,951)
Impairment of Fixed assets
Impairment of Exploration expenditure
Impairment of investments
Impairment of Loan to subsidiary
Share of net result of associates using the
equity method
Profit/(Loss) before income tax
Income tax expense
(1,385,087)
(3,606,608)
–
–
–
–
–
–
(1,385,087)
–
(2,154,612)
(3,277,369)
11(a)
(286,097)
(167,770)
–
–
–
–
–
–
3
4
(7,010,080)
(1,607,006)
(6,858,390)
(417,277)
–
83,464
–
–
Profit/(Loss) from continuing operations
(7,010,080)
(1,523,542)
(6,858,390)
(417,277)
Profit/(Loss) for the year attributable to
the members of the parent entity
(7,010,080)
(1,523,542)
(6,858,390)
(417,277)
Earnings per share for profit attributable to the ordinary equity holders of the company.
Basic (loss) earnings per share (cents)
19
(6.1)
(1.7)
The income statements are to be read in conjunction with the notes to the financial statements.
For personal use only / 19 /
Balance Sheet
as at 31 December 2007
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Financial assets
Other current assets
Total Current Assets
NON-CURRENT ASSETS
Property, plant and equipment
Exploration & development expenditure
Note
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
5
6
7
8
9
10
2,177,864
2,561,364
2,150,627
2,440,717
499,921
244,729
285,995
436,398
663,574
436,398
16,723
19,640
16,723
128,109
663,574
19,640
3,130,906
3,489,307
2,889,743
3,252,040
1,575,105
2,544,443
1,426,744
2,542,171
11,394,491
8,863,985
–
42,256
Investments accounted for using the equity method
11(a)
3,298,437
3,623,988
4,562,213
4,601,667
Other financial assets
Trade and other receivables
Total Non-Current Assets
Total Assets
CURRENT LIABILITIES
Trade and other payables
Provisions
Total Current Liabilities
Total Liabilities
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
Parent entity interest
Minority interest
TOTAL EQUITY
11(b)
13
–
–
2,296,935
1,551,001
3,846,940
2,261,727
9,917,134
9,100,328
16,268,033
19,591,078
17,457,092
20,133,362
19,398,939
23,080,385
20,346,835
23,385,402
14
15
16
17
18
12
260,647
333,108
88,483
349,130
349,130
39,920
373,028
373,028
91,969
88,483
180,452
180,452
147,440
39,920
187,360
187,360
19,049,809
22,707,357
20,166,383
23,198,043
39,436,350
35,087,042
39,436,350
35,087,042
1,479,897
2,476,672
(8,550)
514,028
(22,000,778)
(14,990,697)
(19,261,417)
(12,403,027)
18,915,469
22,573,017
20,166,383
23,198,043
134,340
134,340
–
–
19,049,809
22,707,357
20,166,383
23,198,043
The balance sheets are to be read in conjunction with the notes to the financial statements.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 20 /
Cash Flow Statement
For the year ended 31 December 2007
Note
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
CASH FLOWS FROM OPERATING ACTIVITIES
Exploration and development expenditure
Interest Received
(2,812,802)
(905,016)
133,000
166,290
(144,611)
127,830
(42,256)
162,811
Payments to suppliers & employees
(1,857,890)
(877,508)
(923,491)
(659,542)
Interest Paid
Sundry Income
–
–
(10,933)
1,020
–
–
(10,933)
1,020
Net cash used in operating activities
24a
(4,537,692)
(1,626,147)
(940,272)
(548,900)
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for plant and equipment
9
(354,890)
(2,521,440)
(330,137)
(2,521,440)
(411,320)
(573,526)
567,207
(99,111)
Purchase of equity investments
(494,601)
(411,320)
(494,601)
Purchase of further investment in associate
11(a)
(632,043)
(573,526)
(632,043)
Proceeds from sales of investments
1,344,513
567,207
1,344,513
Investment in controlled entities
11(b)
Loans advanced to controlled entities
Loans repaid by other entities
Loans to other entities
–
–
(99,111)
–
(1,995,280)
(3,586,856)
(3,216,014)
450,000
–
450,000
–
(450,000)
(100,645)
(450,000)
(100,645)
Net cash used in investing activities
(137,021)
(5,134,115)
(3,699,124)
(6,354,849)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of shares
16
4,349,306
8,437,500
4,349,306
8,437,500
Net cash generated by financing activities
4,349,306
8,437,500
4,349,306
8,437,500
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at beginning of
financial year
Effects of exchange rate changes on cash and
cash equivalents
Cash and cash equivalents at end of
financial year
(325,407)
1,677,237
(290,090)
1,533,750
2,561,364
937,261
2,440,717
906,967
(58,093)
(53,134)
–
–
5
2,177,864
2,561,364
2,150,627
2,440,717
The cash flow statements are to be read in conjunction with the notes to the financial statements.
For personal use only Statement of Changes in Equity
/ 21 /
Contributed
Equity
Accum-
ulated
Losses
General
Reserve
Foreign
Currency
Transaction
Reserve
Share Based
payments
Reserve
Financial
Asset
Reserve
Minority
Interests
Total
Equity
$
$
$
$
$
$
$
$
Consolidated Entity
For the year ended
31 December 2007
Balance at the
beginning of the year
Net Income recognised
directly in equity
Loss for the year
Total recognised
income and expense
during the year
Contributions of equity
Transaction costs on
share issues
Employee share scheme
Balance at the end of
the year
35,087,042
(14,990,697)
2,551,100
(588,456)
Issue of equity
4,505,308
Movement for the year
–
–
–
–
–
–
–
–
–
–
(573,814)
–
–
–
–
–
–
–
–
–
–
78,500
514,028
134,340
22,707,357
–
(501,461)
–
–
4,505,308
(1,075,275)
–
–
–
–
–
(7,010,080)
–
(7,010,080)
–
–
(156,000)
78,500
–
(7,010,080)
–
(7,010,080)
(156,000)
–
–
–
39,436,350
(22,000,777)
2,551,100
(1,162,270)
78,500
12,567
134,340
19,049,810
Parent Entity
For the year ended 31 December 2007
Contributed
Equity
$
Accum-
ulated
Losses
$
Share Based
payments
Reserve
Foreign
Currency
Transaction
Reserve
Financial
Asset
Reserve
$
$
$
Total
Equity
$
Balance at the beginning of the year
35,087,042
(12,403,027)
Issue of equity
Movement for the year
Net Income recognised directly in equity
Loss for the year
Total recognised income and expense during the year
Contributions of equity
Transaction costs on share issues
Employee share scheme
4,505,308
–
–
–
–
–
–
(6,858,390)
(6,858,390)
(156,000)
–
–
–
–
–
–
–
–
–
78,500
–
–
514,028
23,198,043
–
4,505,308
(99,617)
(501,461)
(601,078)
–
–
–
–
–
–
–
–
–
(6,858,390)
(6,858,390)
(156,000)
78,500
Balance at the end of the year
39,436,350
(19,261,417)
78,500
(99,617)
12,567
20,166,383
For personal use only
MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 22 /
Statement of Changes in Equity (continued)
Consolidated Entity
For the year ended
31 December 2006
Contributed
Equity
Accum-
ulated
Losses
General
Reserve
Foreign
Currency
Transaction
Reserve
Financial
Asset
Reserve
Minority
Interests
Total
Equity
$
$
$
$
$
$
$
Balance at the beginning of the year
23,001,718
(13,467,155)
2,551,100
192,493
Issue of equity
Movement for the year
Net Income recognised directly in equity
Loss for the year
Total recognised income and expense
during the year
Contributions of equity
12,647,824
–
–
–
–
–
(1,523,542)
(1,523,542)
Transaction costs on share issues
(562,500)
–
–
–
–
–
–
–
–
–
(780,949)
514,028
–
–
–
–
–
–
134,340
12,412,496
–
–
–
–
–
12,647,824
(266,921)
(1,523,542)
(1,523,542)
(562,500)
Balance at the end of the year
35,087,042
(14,990,697)
2,551,100
(588,456)
514,028
134,340
22,707,357
Parent Entity
For the year ended 31 December 2006
Balance at the beginning of the year
Issue of equity
Movement for the year
Net Income recognised directly in equity
Loss for the year
Total recognised income and expense during the year
Contributions of equity
Transaction costs on share issues
Balance at the end of the year
Contributed
Equity
$
Accum-
ulated
Losses
$
Financial
Asset
Reserve
$
Total
Equity
$
23,001,718
(11,985,750)
12,647,824
–
–
–
–
–
(417,277)
(417,277)
(562,500)
–
–
–
11,015,968
12,647,824
514,028
514,028
–
–
–
(417,277)
(417,277)
(562,500)
35,087,042
(12,403,027)
514,028
23,198,043
For personal use only / 23 /
Notes to the Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Accounting
This financial report is for Mineral Commodities Limited as the parent entity, and Mineral Commodities Limited and controlled
entities, as the consolidated entity. Mineral Commodities Limited is an Australian domiciled public listed company.
This general purpose financial report for the year ended 31 December 2007 has been prepared in accordance with
Australian Accounting Standards, other mandatory professional reporting requirements and Interpretations, other
authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
Compliance with IFRS
Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS).
Compliance with AIFRS ensures that the financial report of Mineral Commodities Limited as the Parent entity and Mineral
Commodities Limited and controlled entities comply with International Financial Reporting Standards (IFRS).
Historical Cost Convention
The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of
selected non current assets, financial assets and financial liabilities for which the fair value basis of accounting has been
applied.
Critical Accounting Estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Groups accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed further on.
The following significant accounting policies have been adopted in the preparation and presentation of the financial report
and have been consistently applied to all the years presented, unless otherwise stated.
(b) Principles of Consolidation
The consolidated financial report incorporates the assets and liabilities of all subsidiaries of Mineral Commodities Ltd
(“Company” or “parent entity”) as at 31 December 2007 and the results of its subsidiaries for the year then ended. Mineral
Commodities Ltd and its subsidiaries together are referred to in this financial report as the consolidated entity.
Intercompany transactions , balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
Subsidiaries are those entities over which the Group has the power to govern the financial and operating policies, generally
accompanying a shareholding of more than one-half of the voting rights.
Where control of an entity is obtained during a financial year, its results are included in the consolidated income statement
from the date on which control commences. Where control of an entity ceases during a financial year, its results are
included for that part of the year during which control existed.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the group – refer to note (f).
The Group applies a policy of treating transactions with minority interests as transactions with parties external to the
Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement.
Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant
share acquired of the carrying value of identifiable net assets of the subsidiary.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 24 /
Notes to the Financial Statements (continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Principles of Consolidation (continued)
Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and
balance sheet respectively.
Investments in subsidiaries are accounted for at cost in the individual financial statements of Mineral Commodities Limited.
On 23 June 2006, Mineral Commodities Limited completed a takeover of Erebus Plc and effectively took control from this
date. Immediately following the handing over of control to Mineral Commodities Limited, the accounting and financial
records of Erebus Plc were requisitioned so that Mineral Commodities Limited could also control this function. Upon receipt
of the accounting records subsequent to the reporting date, it became apparent that the records were incomplete and the
Company began the process of reconstructing the records with the limited information that was available.
As at 31 December 2006, the records were not sufficiently reliable to be able to represent a true and fair view of the
financial position of Erebus Plc and its subsidiary for the full year ended 31 December 2006 due to the incomplete
information received up to the date of acquisition.
The value of the consideration paid for Erebus Plc was $2,297,935 comprising 9,406,878 shares and 3,135,626 unlisted options.
For these reasons, the Directors of Mineral Commodities decided not to consolidate Erebus Plc from 23 June 2006 and to
report its investment in Erebus Ltd at cost in the Economic Entity for the year ended 31 December 2006.
The majority of the expenditure within the Erebus Group relates to the mining activities and is capitalised accordingly in
the balance sheet. The acquisition and consolidation of the Erebus Group would have resulted in assigning a fair value to
the mining right. The Directors believe that this value essentially represents the value of the consideration that was paid to
takeover the company and reflecting the investment at cost at 31 December 2006 was a more appropriate way of reporting
to shareholders given the situation.
As the Company did not consolidate Erebus at 31 December 2006, the Investment in Erebus and loan receivable from
Erebus were not eliminated.
The Mineral Commodities Group that was reported as at 31 December 2006 therefore consists of the Parent Entity, Mineral
Commodities Limited and the subsidiary companies listed in Note 11(b) with the exception of Erebus Ltd and its subsidiary.
Erebus Ltd and its subsidiary were consolidated into the Group for the 2007 financial year.
(c) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of
returns, trade allowances, rebates and amounts collected on behalf of third parties.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can
be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
Interest Income
Interest and other income is recognised as it accrues on a time proportion basis using the effective interest method.
(d) Taxes
Income taxes
The charge for current income tax expense or revenue is based on the profit for the year adjusted for any non-assessable or
disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet
date, Income tax expense is adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
and unused tax losses.
For personal use only / 25 /
Notes to the Financial Statements (continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) Taxes (continued)
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be
recognised from the initial recognition of an asset or liability, excluding a business combination, where this is no effect on
accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is
settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to
equity, in which case the deferred tax is adjusted directly against equity.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse
change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future
assessable income to enable the benefit to be realised and comply with the conditions or deductibility imposed by the law.
The income tax expense for the year is calculated using the 30% tax rate (2006: 30%).
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except where the GST incurred on a purchase of
goods & services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense item as applicable; and where receivables and payables are stated with the
amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables in the
Balance Sheet.
Cash flows are included in the Cashflow Statement on a gross basis and the GST component of cash flows arising from
investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating
cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
(e) Foreign Currency Transactions and Balances
Functional and presentation currency
The functional currency of each of the group’s entities is measured using the currency of the primary economic environment
in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent
entity’s functional and presentation currency.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rated prevailing at the date of the
transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured
at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured
at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the income statement, except where
deferred in equity as a qualifying cash flow or net investment hedge.
Exchange difference arising on the translation of non-monetary items are recognised directly in equity to the extent that the
gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 26 /
Notes to the Financial Statements (continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Foreign Currency Transactions and Balances (continued)
Group Companies
The financial results and position of group entities whose functional currency is different from the group’s presentation
currency are translated into the presentation currency as follows;
Assets and liabilities translated at year-end exchange rates prevailing at that reporting date.
Income and expenses are translated at average exchange rates for the period.
Retained profits are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency
translation reserve in the balance sheet. These differences are recognised in the income statement in the period in which
the operation is disposed.
(f) Acquisitions of Assets
The cost method of accounting is used for all acquisitions of assets regardless of whether shares or other assets are
acquired. Cost is determined as the fair value of the assets given up at the date of acquisition plus costs incidental to the
acquisition. Where shares are issued in an acquisition, the value of the shares is determined by reference to the fair value of
the assets acquired, including goodwill where applicable.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value at the date of acquisition. The discount rate used is the rate at which a similar borrowing could be obtained
under comparable terms and conditions.
Where the fair value of the identifiable net assets acquired, including any liability for restructuring costs, exceeds the cost
of acquisition, the difference, representing a discount on acquisition, is accounted for by reducing proportionately the fair
values of the non-monetary assets acquired until the discount is eliminated.
(g) Property, Plant and Equipment
Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated
depreciation and impairment losses.
Acquisition
Items of plant and equipment are initially recorded at cost and depreciated as outlined below. Subsequent costs are
included in the assets carrying amount or recognised as a separate asset as appropriate. All other repairs and maintenance
are charged to the income statement during the reporting period in which they are incurred.
Depreciation of Plant and Equipment
Plant and equipment are depreciated at rates based upon the expected useful lives of these assets. The expected useful
lives of these assets are 3-10 years.
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An assets
carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its
estimated recoverable amount.
Disposal of Assets
The gain or loss on disposal of assets is calculated as the difference between the carrying amount of the asset at the time of
disposal and the proceeds on disposal and is included in the income statement in the year of disposal.
Any related revaluation increment standing in the asset revaluation reserve at the time of disposal is transferred to the
capital profit reserve.
For personal use only / 27 /
Notes to the Financial Statements (continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Exploration and Evaluation Expenditure
Costs incurred during the exploration and evaluation stages of specific areas of interest are accumulated. Such are only
carried forward if they are expected to be fully recouped through the successful development of the area, or where activities
to date have not yet reached a stage to allow reasonable assessment regarding the existence of economically recoverable
reserves. Costs are written off as soon as an area has been abandoned or considered to be non-commercial or provided
against where an area is considered non-commercial at the period end.
Once production commences, expenditure accumulated in respect of areas of interest is amortised on a unit of production
basis over the life of the total proven economically recoverable reserves. Restoration costs recognised in respect of areas
of interest in the exploration and evaluation stage are carried forward as exploration and evaluation expenditure. Costs
recognised after the commencement of production in areas of interest will be charged to the profit and loss statement.
Potential capital gains tax is not taken into account in determining revaluation amounts unless there is an intention to sell
the asset concerned
(i)
Investments
Interests in – Subsidiaries
Investments in subsidiaries are carried in the Company’s financial report at the lower of cost and recoverable amount. Dividends
and distributions are brought to account in the Company’s income statement when they are declared by the subsidiaries.
Investments in associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a
shareholding of between 20%-50% of the voting rights. Investments in associates are accounted for in the parent entity
financial statements using the cost method and in the consolidated financial statements using the equity method of
accounting, after initially being recognised at cost. The Groups investment in associates includes goodwill (net of any
accumulated impairment loss) identified on acquisition.
The Groups share of its associates post acquisition profits or losses is recognised in the income statement, and its share of
post acquisition movements in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted
against the carrying amount of the investment.
(j)
Impairment of Assets
At each reporting date, the group reviews the carrying values of it tangible assets and intangible assets to determine
whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount
of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying
value. Any excess of the asset’s carrying value over it recoverable amount is expensed to the income statement.
Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
(k) Financial Instruments
The Group classifies its financial assets in the following categories. The classification depends on the purpose for which the
investments were acquired. Management determines the classification of its investments at initial recognition.
Recognition
Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related
contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 28 /
Notes to the Financial Statements (continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) Financial Instruments (continued)
Financial assets at fair value though profit and loss
A financial asset is classified in this category if acquired principally for the purpose of selling in the short term, or if so
designated by management and within the requirement of AASB139: Recognition and Measurement of Financial Instruments.
Derivatives are also categorised as held for trading unless they are designated as hedges. Realised and unrealised gains
and losses arising from changes in the fair value of these assets are included in the Income statement in the period in which
they arise.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market and are stated at amortised cost using the effective interest rate method. They are included within current
assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current
assets.
Held-to-maturity investments
These investments have fixed maturities, and it is the group’s intention to hold these investments to maturity. Any held-to-
maturity investments held by the group are stated at amortised cost using the effective interest rate method.
Available-for-sale financial assets
Available-for-sale financial assets include any financial assets not included in the above categories. Available-for-sale financial
assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity.
Financial Liabilities
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principle payments and
amortisation.
Fair value
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied
to determine the fair value of all unlisted securities, including recent arm’s length transactions, reference to similar
instructions and option pricing models.
Impairment
At each reporting date, the group assess whether there is objective evidence that a financial instrument has been impaired.
In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to
determine whether an impairment has arisen. Impairment losses are recognised in the income statement.
Recognition and derecognition
Regular purchases and sales of financial assets are recognised on trade date- the date on which the Group commits to
purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not
carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised
at fair value and transaction costs are expensed to the income statement. Financial assets are derecognised when the rights
to receive cash flows from the financial assets have expired or been transferred and the Group has transferred substantially
all the risks and rewards of ownership.
Subsequent measurement
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest rate method.
For personal use only / 29 /
Notes to the Financial Statements (continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) Financial Instruments (continued)
Available for sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair
value. Gains or losses arising from changes in the fair value of the financial assets are presented in the income statement
within other income or other expenses in the period in which they arise.
Details on how the fair value of financial instruments is determined are disclosed in note 25.
(l) Contributed Equity
Ordinary share capital is recognised at the fair value of the consideration received by the Company. Any transaction costs
arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.
(m) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-
term borrowings in current liabilities on the balance sheet.
(n) Earnings per Share
Basic Earnings per Share
Basic earnings per share is determined by dividing the profit after income tax attributable to members of Mineral
Commodities Ltd by the weighted average number of ordinary shares outstanding during the financial year.
Diluted Earnings per Share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking into account
amounts unpaid on ordinary shares and any reduction in earnings per share that would arise from the exercise of options
outstanding at the end of the financial year.
(o) Employee Benefits
Wages and Salaries, Annual Leave and Sick Leave
Provision is made for the consolidated entity’s liability for employee entitlements arising from services rendered by
employees to balance date. These benefits include wages and salaries annual leave. Sick leave is non-vesting and has not
been provided for. Employee entitlements expected to be settled within one year have been measured at the amounts
expected to be paid when the liabilities are settled and are recognised in other payables.
The contributions made to superannuation funds by entities within the consolidated entity are charged against profits when due.
Share-Based Payments
Share-based compensation benefits are provided to employees via the Mineral Commodities Employee Incentive Option
Scheme. Information relating to this scheme is set out in Note 26.
The fair value of options granted under the Mineral Commodities Employee Incentive Option Scheme is recognised as an
employee expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the
period during which the employee becomes unconditionally entitled to the options.
The fair value at grant date is independently determined using a Binomial option pricing model that takes into account the
exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 30 /
Notes to the Financial Statements (continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p) Leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as
expenses in the periods in which they are incurred.
(q) Segment reporting
A business segment is identified for a group of assets and operations engaged in providing services that are subject to risks
and returns that are different to those of other business segments. A geographical segment is identified when services are
provided within a particular economic environment subject to risks and returns that are different from those of segments
operating in other economic environments.
(r) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are
unpaid. The amounts are unsecured and are usually paid within 30 days.
(s) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.
(t) Comparatives
Where required by Accounting Standards comparative figures have been adjusted to conform with changes in presentation
for the current financial year.
(u) Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Critical Accounting Estimates
The directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and
best available current information. Estimates assume a reasonable expectation of future events and are based on current
trends and economic data, obtained both externally and within the group.
Critical judgements in applying the entity’s accounting policies
Impairment of available for sale financial assets, Investments in Subsidiaries and Exploration and evaluation costs.
In the 2007 financial report, the Group and the parent entity made a significant judgement about the impairment of its
available for sale financial assets, subsidiaries and exploration and development costs.
The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to
impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value in-use
calculations performed in assessing recoverable amounts incorporate a number of key estimates.
For personal use only / 31 /
Notes to the Financial Statements (continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v) Change in Accounting Policy
Australian Accounting Standards that have recently been issued or amended but are not yet effective for the parent and
consolidated entity have not been adopted for the annual reporting period ended 31 December 2007.
AASB
Amendment
Affected Standard(s)
Nature of Change to Accounting
Policy
Revised AASB
123 and AASB
2007-6
AASB 123 Borrowing Costs and
AASB 2007-6 Amendments to
Australian Accounting Standards
arising from AASB 123,
Revised
AASB 101
AASB 8 and
AASB 2007-3
Revised AASB 101 Presentation
of Financial Statements and AASB
2007-8 Amendments to Australian
Accounting Standards arising from
AASB 101.
AASB 8 Operating Segments and
AASB 2007-3 Amendments to
Australian Accounting Standards
arising from AASB 8.
Removal of option to expense
all borrowing costs and when
adopted will require the
capitalisation of all borrowing
costs directly attributable to the
acquisition of a qualifying asset.
There will be no impact on the
financial report of the Group.
Requires changes to presentation
and disclosure but will not affect
any of the amounts recognised in
the financial statements.
Significant change in the
approach to segment reporting
and disclosure, however it is
not expected to affect any of
the amounts recognised in the
financial statements.
The following amendments are not applicable to the Group and therefore have no impact
AASB
Amendment
Affected Standard(s)
Nature of Change to Accounting
Policy
Application
Date of
Standard*
Application
Date for
Group
1 Jan 09
1 Jan 09
1 Jan 09
1 Jan 09
1 Jan 09
1 Jan 09
Application
Date of
Standard*
Application
Date for
Group
1 Jul 08
1 Jan 09
2007-9
2008-2
AASB-I 14
Amendments to Australian
Accounting Standards arising from
the review of AASs 27, 29 and 31.
Amendments to Accounting
Standards – Puttable Financial
Instruments and Obligations
Arising on Liquidation
AASB-I 14 The limit on a Defined
Benefit Asset, Minimum Funding
Requirements and their Interaction
No change to accounting policy
required. Therefore no impact.
No change to accounting policy
required. Therefore no impact.
1 Jan 09
1 Jan 09
No change to accounting policy
required. Therefore no impact.
1 Jan 08
1 Jan 08
Application date is for the annual reporting periods beginning on or after the date shown in the above table.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 32 /
Notes to the Financial Statements (continued)
2. OTHER REVENUE FROM CONTINUING OPERATIONS
Consolidated
Company
2007
$
2006
$
2007
$
Gain from sales of investments in listed companies
539,419
49,466
539,419
Interest revenue from unrelated entities
133,000
166,290
127,830
Interest revenue from controlled entity
–
–
304,809
Management fees
90,000
100,035
201,183
Reversal of provision for impairment of investment in
listed securities
Other Income
–
2,885
17,000
1,020
–
2,885
2006
$
49,466
162,811
239,241
229,136
17,000
1,020
Total Revenue from continuing operations
765,304
333,811
1,176,126
698,674
3.
PROFIT/(LOSS) FROM ORDINARY ACTIVITIES
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
Profit or/(Loss) from ordinary activities before income
tax has been arrived at after charging the following:
Exploration expenditure written off
186,867
–
186,867
–
Operating Lease rentals
69,741
56,620
69,741
56,620
Depreciation – Plant and Equipment
102,511
25,958
60,477
22,223
Movement in provision for employee entitlements
48,563
14,559
48,563
14,559
Unrealised foreign exchange loss
–
570,114
–
219,614
For personal use only / 33 /
Notes to the Financial Statements (continued)
4.
INCOME TAX
The components of current income tax
expense comprise:
Deferred income tax relating to origination and
reversal of temporary differences
Income tax (benefit) reported in the income statement
The prima facie tax on profit/(loss) from ordinary
activities before income tax is reconciled to the
income tax expense as follows:
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
–
–
(83,464)
(83,464)
–
–
–
–
Profit/(Loss before income tax
(7,010,080)
(1,523,542)
(6,858,390)
(417,277)
Prima facie tax payable/(benefit) on profit/(loss)
from ordinary activities @ 30% (2005:30%)
Non allowable items
Non-assessable income
(2,103,024)
(457,063)
(2,057,517)
(125,183)
(429,596)
(43,110)
99,722
(33,750)
70,113
(43,110)
–
(33,750)
Net deferred tax assets not brought to account
2,575,730
307,627
2,030,514
158,933
Benefit of losses not previously brought to account
Income tax expense/(benefit) reported in the
consolidated income statement
–
–
–
(83,464)
–
–
–
–
Future income tax benefit arising from un-recouped
deductions at balance date, for Australian tax resident
entities.
Revenue losses
Capital losses
2,985,234
2,923,764
1,467,402
1,549,863
4,643,254
4,643,254
4,643,254
4,643,254
In addition the economic entity has unconfirmed tax losses and accumulated exploration expenditure that gives rise to potential
carry forward tax benefits in South Africa amounting to approximately Rand 16.2 million (approximately A$2.7 million). The benefit
of these potential future tax benefits has not been brought to account, and will only be realised if circumstances similar to those
described above, also apply to the economic entity’s future operations in South Africa.
There are no franking credits available.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 34 /
Notes to the Financial Statements (continued)
5.
CASH AND CASH EQUIVALENTS
Cash at Bank
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
2,177,864
2,561,364
2,150,627
2,440,717
2,177,864
2,561,364
2,150,627
2,440,717
The effective interest rate on cash at bank was 6%.
(a)
Interest rate risk exposure
The Group’s and the parent entity’s exposure to interest rate risk is discussed in note 25.
(b) Reconciliation to cash at the end of the year
The above figures represent the cash at the end of the financial year as shown in the statement of cashflows.
6.
TRADE AND OTHER RECEIVABLES – CURRENT
Consolidated
Company
Trade receivables
Term deposits
Other debtors
2007
$
35,634
36,950
2006
$
27,360
38,029
2007
$
2006
$
35,639
27,360
–
361,897
103,695
250,356
–
25,104
75,645
Loans receivable from other entities
65,440
75,645
–
499,921
244,729
285,995
128,109
(a) Fair Values and credit risk
Due to the short term nature of these receivables the carrying values represent their respective fair values as at
31 December 2007.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned
above. Refer to note 25 for more information on the risk management policy of the Group and the credit quality of the
entity’s receivables.
(b) Foreign Exchange and Interest Rate Risk
Information about the Group’s and the parent entity’s exposure to foreign exchange and interest rate Risk in relation to
trade and other receivables is provided in Note 25.
(c) Other Receivables
These amounts generally arise from transactions outside the usual operating activities of the Group. Collateral is not
normally obtained.
For personal use only / 35 /
Notes to the Financial Statements (continued)
7.
FINANCIAL ASSETS – CURRENT
Financial assets at fair value through profit or loss
Investments in companies listed on a recognised stock
exchange – shares at fair value
Total available for sale investments in companies listed
on a recognised stock exchange
Available for sale investment in companies not listed on
a recognised stock exchanges – at cost
Total Financial Assets – Current
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
75,000
613,574
75,000
613,574
75,000
613,574
75,000
613,574
361,398
436,398
50,000
361,398
50,000
663,574
436,398
663,574
Available for sale financial assets comprise investments in the ordinary share capital of various entities. There are no fixed
returns or fixed maturity date attached to these investments.
Changes in fair values of financial assets at fair value through profit or loss are recorded in other income or other expenses
in the income statement.
Non listed investments have been valued at their most recent capital raising.
(a) Risk Exposure
Information about the Group’s and the parent entity’s exposure to credit risk, foreign exchange and interest rate risk is
provided in Note 25.
8. OTHER – CURRENT
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
Prepayments
16,723
19,640
16,723
19,640
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 36 /
Notes to the Financial Statements (continued)
9.
PROPERTY, PLANT AND EQUIPMENT
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
Plant and office equipment – at cost
1,794,056
2,630,835
1,562,562
2,617,511
Accumulated depreciation
(218,951)
(86,392)
(135,818)
(75,340)
Total property, plant and equipment
1,575,105
2,544,443
1,426,744
2,542,171
Reconciliation of the carrying amount of plant &
equipment at the beginning and end of the current
and previous financial year
Plant and office equipment
Carrying amount at beginning of year
2,544,443
52,825
2,542,171
47,230
Additions
Disposal
Impairment
Depreciation
518,260
2,521,440
330,137
2,521,028
–
(3,864)
–
(3,864)
(1,385,087)
–
(1,385,087)
–
(102,511)
(25,958)
(60,477)
(22,223)
Carrying amount at end of year
1,575,105
2,544,443
1,426,744
2,542,171
(a) During the year an impairment loss of $1,385,087 was brought to account in respect of the Diamond pan plant situated in
Sierra Leone. The impairment value has been calculated using the assets fair value less costs to sell.
For personal use only / 37 /
Notes to the Financial Statements (continued)
10. EXPLORATION AND DEVELOPMENT EXPENDITURE
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
Exploration expenditure – costs carried forward in
respect of areas of interest in:
Exploration and evaluation phases
11,394,491
8,863,985
Total exploration and evaluation expenditure
11,394,491
8,863,985
–
–
42,256
42,256
Reconciliation of the carrying amount of mining
tenements
at the beginning and end of the current and the
previous financial year.
Carrying amount at beginning of year
8,863,985
7,749,010
42,256
Exploration expenditure on consolidation of Erebus/
Kariba Kono
Expenditure during the year
4,606,608
2,233,094
–
–
905,016
144,611
42,256
Expenditure outlaid other than in cash
–
1,499,244
Impairment of exploration expenditure
(3,606,608)
–
Foreign exchange translation reserve
(515,721)
(1,289,285)
–
–
–
Write off discontinued projects
Carrying amount at end of year
(186,867)
–
(186,867)
11,394,491
8,863,985
–
42,256
–
–
–
–
–
–
Recoupment of carried forward exploration and evaluation expenditure is dependent upon the successful development and
commercial exploitation of each area of interest, or otherwise by their sale at an amount not less than the carrying value.
The impairment loss of $3,606,608 was brought to account in respect of the exploration assets contained within the
Company’s Sierra Leone project. The impairment value has been calculated using the assets fair value less costs to sell.
11(a) INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
Investment in companies accounted for using the equity
method – at cost
4,562,213
4,601,667
4,562,213
4,601,667
Equity accounting adjustments
(1,263,776)
(977,679)
–
–
3,298,437
3,623,988
4,562,213
4,601,667
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 38 /
Notes to the Financial Statements (continued)
11(a) INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED)
Interests are held in the following associated companies:
Name
Listed
Principal
Activity
Ownership
Interest
Carrying Amount of
Investment
2007
2006
2007
2006
%
%
Ord
5.71
7.15
3,298,437
3,549,814
Ord
–
50.0
–
74,174
Allied Gold Ltd (Incorporated in Australia)
Unlisted
Leonaust Mining Company Ltd
(incorporated in Sierra Leone)
Mineral
exploration
Mineral
exploration
Movements during the year in Equity Accounted
investments in Associated Companies
Carrying amount at beginning of
financial year
Disposal of Leonaust Mining Company Ltd
Investments in associates acquired during the year, at cost
Cost of shares in associates sold during
the year
Share of associate’s net loss
Net gain on deemed disposal
Carrying amount at end of financial year
Summarised Presentation of Aggregate Assets,
Liabilities and Performance of Associates
The Group’s share of the results of its associate and its aggregated
assets (including goodwill) and liabilities are as follows:
Current Assets
Non current assets
Total assets
Current liabilities
Non current liabilities
Total liabilities
Net assets as reported by associates
Share of net (loss) profit from ordinary activities after income tax as reported by
the associate
Although Mineral Commodities Limited owns less than 20% of Allied Gold Limited it is in a position of significant influence
because it is one of the largest shareholders of Allied Gold Limited and two of the Mineral Commodities Limited directors
are also directors of Allied Gold, amounting to 40% Board representation throughout the relevant period.
Fair Value of Investments in Associates
The market value of this investment in Allied Gold at balance date was $14,260,097 based on a price per share of 73 cents.
3,298,437
3,623,988
3,623,988
3,218,232
(74,174)
632,043
(686,890)
–
573,526
–
(286,097)
(167,770)
89,567
–
3,298,437
3,623,988
2007
$
2006
$
528,021
2,415,465
7,541,951
4,026,093
8,069,972
6,441,558
3,096,004
399,908
411,755
–
3,507,759
399,908
4,562,213
6,041,650
(286,097)
(167,770)
For personal use only
/ 39 /
Notes to the Financial Statements (continued)
11(b) SUBSIDIARIES
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
Unquoted investments – at cost
Shares in controlled entities
–
–
2,296,935
1,551,001
3,846,940
2,296,935
1,551,001
3,846,940
Subsidiaries
Class of
Share
Place of
Incorporation
Equity Holding
Cost to Company
Parent Entity
Mineral Commodities Limited
Controlled Entities
Rexelle Pty Ltd
Queensland Minex NL
Q Smelt Pty Ltd
Mincom Waste Pty Ltd
MRC Resources (Pty) Ltd
MRC Africa Pty Ltd
Erebus Plc
Kariba Kono (S.L.) Ltd
Blackhawk Oil & Gas Ltd
Less Impairment
2007
2006
%
–
100
100
90
100
100
100
100
100
100
%
-
100
100
90
100
100
100
100
100
100
Australia
Australia
Australia
Australia
Australia
South Africa
Australia
United Kingdom
Sierra Leone
Australia
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
2007
$
2006
$
–
–
1,450,001
1,450,001
4,718,302
4,718,302
–
–
–
1,000
–
–
–
2
–
2
2,296,935
–
100,000
100,000
6,269,303
8,565,242
(4,718,302)
(4,718,302)
1,551,001
3,846,940
Subsidiaries of MRC
Resources (Pty) Ltd
Class of
Share
Place of
Incorporation
Equity Holding
Cost to Company
Transworld Energy & Minerals
Resources (SA) (Pty) Limited
Mineral Sands Resources (Pty) Ltd
Nyati Titanium Eastern Cape (Pty) Ltd
MRC Metals (Pty) Ltd
Skeleton Coast Resources (Pty) Ltd
Ord
Ord
Ord
Ord
Ord
South Africa
South Africa
South Africa
South Africa
Namibia
2007
2006
%
75
100
100
100
100
%
75
100
100
100
100
2007
$
2006
$
2,500,000
2,500,000
–
–
–
–
–
–
–
–
Please refer to Note 1 (b) in respect to Erebus Ltd and Kariba Kono Pty Ltd.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 40 /
Notes to the Financial Statements (continued)
11(b) SUBSIDIARIES (CONTINUED)
Business combination
On 23 June 2006, Mineral Commodities Limited acquired all the issued shares in Erebus PLC that it did not already own.
The consideration comprised the issue of 9,406,878 shares and 3,135,626 unlisted options with a total consideration value
of $2,297,935. As stated in Note 1(b) to the financial statements, Mineral Commodities Limited did not consolidate Erebus
Ltd at 31 December 2006.
During 2006 a loan payable by Q Smelt Pty Ltd was converted into equity resulting in a dilution in the Group’s holding to 90%.
12. MINORITY INTERESTS
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
Minority interests in subsidiaries comprise:
Interest in retained profits at the beginning of the
financial year after adjusting
for outside equity interests in the entities acquired
during the financial year
Operating loss
Share capital
Reserves
Total minority interests
13. TRADE AND OTHER RECEIVABLES – NON-CURRENT
Opening Balance
Investment in subsidiary
–
–
–
–
54,710
79,630
54,710
79,630
134,340
134,340
2,261,727
–
9,100,328
5,496,236
Adjustment arising from consolidation
(2,261,727)
Loans and advances – controlled entities
Less provision for impairment
Total Trade and other receivables
–
–
–
–
2,261,727
–
–
–
–
4,255,741
3,765,658
(3,438,935)
(161,566)
–
–
–
2,261,727
9,917,134
9,100,328
Recovery of the loans to controlled entities is dependent upon the commercial exploitation of mining tenements held by the
controlled entities.
Please refer to Note 1 (b) in respect to loans to Erebus Ltd and Kariba Kono (S.L.) Ltd.
For personal use only
/ 41 /
Notes to the Financial Statements (continued)
13. TRADE AND OTHER RECEIVABLES – NON-CURRENT (CONTINUED)
(a)
Impaired receivables and receivables past due
As at 31 December 2007 non current loans and advances with a nominal value of $3,438,935 (2006 $161,566) were
impaired. The amount of the provision was $3,438,935 (2006:$161,566). The impaired receivables in 2007 relate to the loans
advanced to Kariba Kono (SL) Ltd. It is expected that the sale of the assets of this entity will not generate sufficient funds in
order for these receivable to be repaid.
The impaired receivable in 2006 relates to the loan advanced to Queensland Minex NL a portion of the loan not expected to
be recovered through the realisation of the net assets of the company.
(b) Fair Values
The carrying values of non-current receivables represent their respective fair values as at 31 December 2007.
(c) Risk Exposure
Information about the Group’s and the parent entity’s exposure to credit risk, foreign exchange and interest rate risk is
provided in Note 25.
14. TRADE AND OTHER PAYABLES – CURRENT
Trade payables – unsecured
Other payables and accruals – unsecured
Consolidated
Company
2007
$
156,517
104,130
2006
$
275,524
57,584
260,647
333,108
2007
$
25,616
66,353
91,969
2006
$
91,840
55,600
147,440
Refer to Note 25 for details of interest rates incurred on payables.
Risk Exposure
Information about the Groups and the parent entity’s exposure to foreign exchange risk is provided in Note 25.
Employee entitlements represent unused annual and long service leave.
15. PROVISIONS – NON-CURRENT
Provision for employee entitlements
Opening balance
Movement for the period
Provision for employee entitlements
Consolidated
Company
2007
$
39,920
48,563
88,483
2006
$
25,361
14,559
39,920
2007
$
39,920
48,563
88,483
2006
$
25,361
14,559
39,920
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 42 /
Notes to the Financial Statements (continued)
16. CONTRIBUTED EQUITY
Balance at beginning of financial year
106,436,002
62,029,124
35,087,042
23,001,718
2007
Number of
shares
2006
Number of
shares
2007
$
2006
$
Placement of shares, May 2006
Placement of shares, May 2006
Placement of shares, June 2006
Placement of options
Placement of shares, July 2007
Conversion of listed 30 cent options
Conversion of 40 cent options
Costs of capital raising
5,000,000
30,000,000
9,406,878
–
–
1,450,000
9,000,000
2,163,582
34,244
3,120,000
1,311,908
73,400
(156,000)
(562,502)
12,000,000
4,373,883
183,500
–
Balance at end of financial year
122,993,385
106,436,002
39,436,350
35,087,042
•
•
In July 2007 the Company placed 12 million shares to various Institutions at 26cents per share to raise $3,120,000
before costs.
In June 2007 4,373,883 options at 30 cents and 183,500 options at 40 cents were exercised to raise a total of
$1,385,308.
(a) Ordinary Shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion
to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a
meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
(b) Capital risk management
The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going
concern, so that they can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital.
Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity as shown
in the balance sheet plus net debt. As the Company is a junior mineral explorer, the gearing ratio has been maintained
throughout the year at 0%.
For personal use only Notes to the Financial Statements (continued)
17. RESERVES
General Reserve
Financial assets reserve
Share based payments reserve
Foreign currency translation reserve
Nature and purpose of reserves
/ 43 /
2006
$
–
514,028
–
–
514,028
Consolidated
Company
2007
$
2006
$
2007
$
2,551,100
2,551,100
12,567
78,500
514,028
–
(1,162,270)
(588,456)
1,479,897
2,476,672
–
12,567
78,500
(99,617)
(8,550)
General Reserve
The General Reserve arose from the issue of shares in MRC Resources Pty Ltd to an entity outside the economic entity. This
entity’s holding gives rise to a minority interest.
Financial assets
The financial asset reserve arises from adjusting the value of options held for trading.
Foreign Currency
The foreign currency translation reserve records the unrealised foreign currency differences arising from the translation of
operations into the presentational currency of the group. Refer to accounting policy Note 1 (e).
Share Based payments
The share based payments reserve is used to recognise the fair value of options issued to employees but not exercised and
the fair value of shares issued to employees.
18. ACCUMULATED LOSSES
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
Accumulated losses at beginning of the year
(14,990,698)
(13,467,155)
(12,403,027)
(11,985,750)
Net profit (loss) attributable to members
(7,010,080)
(1,523,542)
(6,858,390)
(417,277)
Accumulated losses at end of the year
(22,000,778)
(14,990,697)
(19,261,417)
(12,403,027)
For personal use only
MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 44 /
Notes to the Financial Statements (continued)
19
LOSS PER SHARE
Basic loss per share (cents per share)
Weighted average number of ordinary shares outstanding during the year used in
calculation of basic loss per share
Weighted average number of options outstanding
Loss used in the calculation of basic loss per share
Consolidated
2007
$
2006
$
6.1
1.7
114,795,289
87,595,463
–
18,008,607
7,010,080
1,523,542
For personal use only / 45 /
2006
$
333,811
333,811
333,811
Notes to the Financial Statements (continued)
20. SEGMENT INFORMATION
Geographical Segments
The consolidated entity has two geographical segments, Australia and South Africa.
(a) Geographical
Australia
Africa
Total
2007
$
2006
$
2007
$
2006
$
2007
$
Revenue
External segment revenue
Total segment revenue
761,556
761,556
333,811
333,811
3,748
3,748
–
–
765,304
765,304
765,304
Total Revenue
Result
Segment result
Eliminations
Income Tax expense
Net Loss for the year
Segment Assets and
Liabilities
Segment assets
Eliminations
(6,870,688)
(459,099)
(2,182,910)
(823,799)
(9,053,598)
(1,282,898)
–
–
–
83,464
–
83,464
(7,010,080)
(1,523,542)
2,043,518
(324,108)
(7,010,080)
(1,607,006)
20,112,791
20,145,154
11,753,450
7,518,803
31,866,241
27,663,957
(12,467,302)
(4,583,572)
19,398,939
23,080,385
Segment liabilities
180,470
187,378
12,635,962
4,769,222
12,816,432
4,956,600
Eliminations
Net segment assets
Net entity assets
(12,467,302)
(4,583,572)
349,130
373,028
19,049,809
22,707,357
19,049,809
22,707,357
Investment in equity method
associates included in segment
assets
3,298,437
3,623,988
Share of net loss of associate
286,097
167,770
–
–
–
–
3,298,437
3,623,988
286,097
167,770
Acquisition of property plant &
equipment
Depreciation
Secondary Reporting
330,137
2,521,028
60,477
22,223
24,753
42,034
7,768
3,735
354,890
2,528,796
102,511
25,958
Business Segments
The consolidated entity operates in only one business segment being the field of exploration for mineral resources.
For personal use only
MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 46 /
Notes to the Financial Statements (continued)
21. AUDITORS’ REMUNERATION
During the year, the following fees were paid or payable for services provided by the auditor of the parent entity and non-
related audit firms:
Amounts received or due and receivable by auditors for:
Auditors of the parent entity
Auditing – the financial report
Other auditors of subsidiaries
Auditing – the financial report
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
45,893
33,500
45,893
33,500
12,713
58,606
5,859
39,359
–
–
45,893
33,500
22. KEY MANAGEMENT PERSONNEL DISCLOSURES
The following persons were directors of Mineral Commodities during the financial year:
(a) Details of Key Management Personnel
Mr Mark Victor Caruso:
Mr Joseph Anthony Caruso:
Mr Gregory Hugh Steemson:
Mr Peter Torre
Managing Director
Non-Executive Chairman
Non-Executive Director
Company Secretary
There were no further key management personnel during the year.
There were no changes to key management personnel between the reporting date and the date the financial report was
authorised for issue.
(b) Key Management Personnel Compensation
The company has taken advantage of the relief provided by the Corporations Regulations and has transferred the detailed
remuneration disclosures to the Directors’ Report. The relevant information can be found in section A-E of the Remuneration
Report on pages 8 to 10.
Remuneration by Category
Key Management Personnel
Economic Entity
Parent Entity
2007
$
2006
$
2007
$
2006
$
Short-term employee benefits
236,837
121,000
236,837
121,000
Post-employment benefits
Share-based payments
3,963
9,800
2,700
–
3,963
9,800
2,700
–
250,600
123,700
250,600
123,700
For personal use only
/ 47 /
Notes to the Financial Statements (continued)
22. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
(c) Option holdings of key management personnel
The numbers of options over ordinary shares in the company held during the financial year by each director of
Mineral Commodities Limited and other key management personnel of the Group are set out below:
2007
Key Management
Personnel
Balance at
1 January ‘07
Granted as
Remuneration
Options
Exercised
Mark Caruso
Joseph Caruso
Greg Steemson
Peter Torre
2006
3,089,547
3,085,338
53,333
–
–
–
–
250,000
–
–
–
–
Options
Lapsed
3,089,547
3,085,338
53,333
Balance at
31 Dec ‘07
Unvested
–
–
–
–
250,000
Key Management
Personnel
Balance at
1 January ‘06
Granted as
Remuneration
Options
Exercised
Balance at
31 Dec ‘06
Total
Vested and
Exercisable
31 Dec ‘06
Unvested
Mark Caruso
Joseph Caruso
Greg Steemson
3,089,547
3,085,338
53,333
–
–
–
–
–
–
3,089,547
3,089,547
3,085,338
3,085,338
53,333
53,333
(d) Shareholdings of key management personnel
The numbers of ordinary shares in the company held during the financial year by each director of Mineral Commodities
Limited and other key management personnel of the Group are set out below:
2007
Director
Mark Caruso
Joseph Caruso
Greg Steemson
Peter Torre
2006
Director
Mark Caruso
Joseph Caruso
Greg Steemson
Balance at
1 January ‘07
Received as
Remuneration
Options
Exercised
Net change
other
Balance
31 Dec 07
9,268,642
9,256,015
210,000
–
–
–
–
–
–
–
–
–
2,300,711
11,569,353
2,300,711
11,556,726
–
–
210,000
–
Balance at
1 January ‘06
Received as
Remuneration
Options
Exercised
Net change
other
9,268,642
9,256,015
210,000
–
–
–
–
–
–
–
–
–
Balance
31 Dec 06
9,268,642
9,256,015
210,000
Joseph and Mark Caruso are both directors of Zurich Bay Holdings Pty Ltd which has a relevant interest in
11,556,726 shares.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 48 /
Notes to the Financial Statements (continued)
22. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
All equity transactions with key management personnel, other than those arising from the exercise of remuneration options,
have been entered into under terms and conditions no more favourable that those the Group would have adopted if dealing
at arm’s length.
(e) Loans to key management personnel
There were no loans to key management personnel during the period.
(f) Other transactions and balances with key management personnel
There were no transactions or balances with key personnel other than those disclosed in the remuneration report of the
Director’s Report.
23. RELATED PARTY TRANSACTIONS
There were no transactions with directors or director related entities during the financial period other than the payment of
directors’ remuneration as is disclosed on note 22 and the payment of $7,898 for secretarial services provided by Minesite
Constructions Ltd an entity in which Mr Joseph Caruso and Mr Mark Caruso are Directors and have a relevant interest in
the Company.
Mineral Commodities Ltd is a shareholder in Allied Gold Ltd owning 19,534,379 shares or 5.71% of the issued share capital
at balance date. Mineral Commodities Limited has supported Allied Gold throughout the financial period by providing limited
administrative services at an arms length basis to the value of $15,000. Mark Caruso and Greg Steemson are also directors
of Allied Gold Limited.
Wholly owned group
The group consists of Mineral Commodities Limited and its wholly owned subsidiaries. Details of entities in the wholly
owned group are set out in Note 11.
Transactions between Mineral Commodities Limited and other entities in the wholly owned group during the years ended
31 December 2007 and 31 December 2006 consisted of loans advanced and payments received and made on inter company
accounts. These transactions were made on normal commercial terms and conditions and at market rates.
During the financial year, the Company provided management, accounting and administration services to other entities in
the wholly-owned group.
No provisions for doubtful debts have been raised in relation to any outstanding balances. An impairment loss was booked
on the receivable from Kariba Kono please see note 13 for more information.
Loans to/(from) related parties
Opening Balance
Investment in subsidiary
Adjustment arising from consolidation
(2,261,727)
Loans and advances – controlled entities
Less provision for impairment
Total Trade and other receivables
–
–
–
Key management personnel
Disclosures relating to key management personnel are set out in Note 22.
Economic Entity
Parent Entity
2007
$
2006
$
2007
$
2006
$
2,261,727
–
9,100,328
5,496,236
–
2,261,727
–
–
–
–
4,255,741
3,765,658
(3,438,935)
(161,566)
–
–
–
2,261,727
9,917,134
9,100,328
For personal use only
/ 49 /
Notes to the Financial Statements (continued)
24(a) RECONCILIATION OF PROFIT/(LOSS) FROM ORDINARY ACTIVITIES TO NET CASH OUTFLOW FROM
OPERATING ACTIVITIES
Profit/(loss) after income tax and outside equity interest
(7,010,080)
(1,523,542)
(6,858,389)
(417,277)
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
Depreciation
Unrealised foreign exchange loss/(gain)
Non bank interest income not in cash
Impairment losses
Management fees not received in cash
Share Based Payments
(Profit)/loss on sale of investment in listed companies
Provision for impairment of investments in listed
companies
Loss on Sales of fixed assets
Provision – employee entitlements
Equity accounting adjustments
Exploration expenditure written off
Exploration expenditure capitalised
Other non-cash items
Changes in assets and liabilities during the year:
Increase (decrease) in trade payables and other
liabilities
(Increase) decrease in trade and other receivables
(Increase) decrease in prepayments
102,511
–
–
4,991,695
(75,000)
78,500
(539,419)
–
–
48,563
286,097
186,867
25,958
570,114
60,477
3,085
22,223
219,614
–
–
–
–
(304,809)
(239,241)
6,817,068
(111,183)
78,500
–
–
–
(49,466)
(539,419)
(49,466)
(17,000)
3,864
14,559
167,770
–
–
–
48,563
–
186,867
(144,611)
33,919
(17,000)
3,864
14,559
–
–
(42,256)
24,815
(2,233,094)
(905,016)
(49,696)
(21,963)
(72,461)
(255,192)
3,017
141,531
(26,205)
(6,751)
(55,471)
(157,886)
3,017
(32,107)
(29,877)
(6,751)
Net cash inflow/(outflow) from operating activities
(4,537,697)
(1,626,147)
(940,272)
(548,900)
24(b) NON-CASH INVESTING AND FINANCING ACTIVITIES
The group has no available finance facilities as at balance date.
During the 2006 year the Company acquired Erebus PLC. The consideration comprised of 9,406,878 shares and 3,135,626
unlisted options. As set out in Note 1(b), the Company did not consolidate Erebus PLC in the 2006 financial year.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 50 /
Notes to the Financial Statements (continued)
25. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price
risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the financial performance of the Group.
The Group does not hold any derivative financial instruments.
The Group uses sensitivity analysis in the case of interest rate and foreign exchange risks and aging analysis for credit risk,
to measure different types of risk to which it is exposed.
Risk management is carried out by the Board of Directors.
The Group and the parent entity hold the following financial instruments:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
2,177,864
2,561,364
2,150,627
2,440,717
499,921
244,729
10,203,129
2,308,906
Financial assets at fair value through profit or loss
436,398
663,574
436,398
663,574
3,114,183
3,469,667
12,790,154
5,413,197
Financial Liabilities
Trade and other payables
Market Risk
349,130
373,028
180,452
187,378
2,765,053
3,096,639
12,609,702
5,225,819
Foreign exchange risk
The Group and the parent entity operate internationally and are exposed to foreign exchange risk arising from various
currency exposures, primarily with respect to the South African Rand, Great British Pound, and US Dollar.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a
currency that is not the entity’s functional currency and net investments in foreign operations. The risk is measured using
sensitivity analysis and cash flow forecasting.
The Group and the parent entity currently holds no derivatives or foreign exchange contracts to hedge their foreign
exchange risk exposure.
For personal use only
/ 51 /
Notes to the Financial Statements (continued)
25. FINANCIAL RISK MANAGEMENT (CONTINUED)
The Groups exposure to foreign currency risk at the reporting date was as follows:
CAN$
USD $
ZAR $
Leones
USD $
ZAR $
Leones
31-Dec-07
31-Dec-06
Cash and cash
equivalents
Trade and other
receivables
Financial assets
at fair value
through profit
or loss
Trade and other
payables
–
–
2,452
93,247
11,712,580
–
1,095,385
1,250,000
11,628
11,628
–
–
–
2,452
1,188,632
12,962,580
–
–
793,782
–
11,628
2,452
394,850
12,962,580
–
–
–
–
–
–
650,681
516,880
–
1,167,561
1,034,070
133,491
–
–
–
–
–
–
The carrying amounts of the parent entity’s financial assets and liabilities are denominated in Australian dollars except
as set out below:
Trade and other
receivables
Financial assets
at fair value
through profit
or loss
CAN$
USD $
ZAR $
Leones
USD $
ZAR $
Leones
31-Dec-07
31-Dec-06
–
–
10,322,259
11,628
11,628
–
–
–
10,322,259
–
–
–
–
–
–
8,437,516
–
8,437,516
–
–
–
Group and Parent entity sensitivity
Price risk
The Group and the parent entity have limited exposure to equity securities price risk as the value of investments held by the
group and classified on the balance sheet as fair value through profit or loss is immaterial. This arises from investments held
by the Group and classified on the balance sheet as fair value through profit or loss. Neither the Group or the parent entity
are exposed to commodity price risk.
For personal use only
MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 52 /
Notes to the Financial Statements (continued)
25. FINANCIAL RISK MANAGEMENT (CONTINUED)
Cash flow and fair value interest rate risk
The Group’s only interest rate risk arises from cash and cash equivalents held. Deposits and current accounts held with
variable rates expose the Group to cash flow interest rate risk. The Group does not consider this to be material to the group
and have therefore not undertaken any further analysis of risk exposure.
Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks, as well
as credit exposures including outstanding receivables and committed transactions.
All cash balances held at banks are held at internationally recognised institutions. The majority of receivables held are with
related parties and within the Group. Given this the credit quality of financial assets that are neither past due or impaired
can be assessed by reference to historical information about default rates.
The maximum exposure to credit risk at reporting date is the carrying amount of the financial assets as summarised on
page 50.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and the ability to close out market positions. The Group manages
liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets
and liabilities.
As at reporting date the Group had sufficient cash reserves to meet its requirements. The Group therefore had no credit
standby facilities or arrangements for further funding in place.
The only financial liabilities the Group had at reporting date were trade payables incurred in the normal course of the
business. These were non interest bearing and were due within the normal 30 day terms of creditor payments.
Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
The fair value of financial instruments traded in active markets, such as trading and available for sale securities, is based on
quoted market prices as at reporting date. The quoted market price used for financial assets held by the Group is the current
bid price.
The fair value of financial instruments that are not traded in an active market such as unlisted investments and subsidiaries
is determined using valuation techniques where applicable. Where this is unable to be done they are held at cost.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values
due to their short term nature.
For personal use only
/ 53 /
Notes to the Financial Statements (continued)
26. SHARE BASED PAYMENTS
(a) Employee Option Plan
The establishment of the Mineral Commodities Employee Incentive Option Scheme was approved by shareholders at
the 2006 annual general meeting. The incentive scheme is designed to provide long term incentives for senior staff to
deliver long term shareholder returns. Under the plan, participants are granted options which vest immediately but are not
exercisable until 30 September 2009. Participation in the plan is at the Boards discretion and no individual has a contractual
right to participate in the plan or to receive any guaranteed benefits.
Options granted under the plan carry no dividend or voting rights.
When exercisable, each option is convertible into one ordinary share within 10 business days.
Set out below are summaries of options granted under the plan:
Consolidated and parent entity – 2007
Grant date
Expiry date
Exercise
price
Balance at
start of the
year
Granted
during the
year
Exercised
during the
year
Forfeited
during the
year
Balance at
end of the
year
Vested and
exercisable
at end of the
year
16-Nov-07
30-Sep-09
23-Nov-07
30-Sep-09
23-Nov-07
30-Sep-09
$0.30
$0.30
$0.40
Weighted average exercise price
–
–
–
–
1,250,000
500,000
500,000
2,250,000
$0.322
–
–
–
–
–
–
–
–
–
–
1,250,000
1,250,000
500,000
500,000
500,000
500,000
2,250,000
2,250,000
$0.322
$0.322
No options expired during the periods covered by the above table.
The weighted average remaining contractual life of share options outstanding at the end of the period was 1.75 years.
For personal use only
MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 54 /
Notes to the Financial Statements (continued)
26(b) SHARE BASED PAYMENTS (CONTINUED)
Fair value of options granted
The assessed fair value at grant date of options granted during the year ended 31 December 2007 was between $0.02
and $0.039.
The fair value at grant date is independently determined using a Binomial option valuation model that takes into account the
exercise price, the term of the option, the impact of dilution, the share price at grant date and the expected price volatility of
the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The model inputs for options granted during the year ended 31 December 2007 included:
(a) Options are granted for no consideration and vest immediately with no performance criteria required to be met,
however there are rules if an employee terminates employment before exercising the options. Vested options expire 30
September 2009;
(b) Exercise price: $0.30 for 1,750,000 options and $0.40 for 500,000 options;
(c) Grant date: 23 November 2007 for 500,000 options at $0.30 and 500,000 options at $0.40 and 16 November 2007 for
1,250,000 options at $0.30;
(d) Expiry date: 30 September 2009;
(e) Share Price at grant date $0.225;
(f)
(g) Expected dividend yield: Nil; and
(h) Risk free Interest rate: 6.35%.
Expected price volatility of company ‘s shares:50%;
The expected price volatility is based on historic volatility (based on the remaining life of the options) , adjusted for any
expected changes to future volatility due to publicly available information.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit
expense were as follows:
Options issued under employee incentive option scheme
Consolidated
Company
2007
$
78,500
78,500
2006
$
–
–
2007
$
78,500
78,500
2006
$
–
–
For personal use only
/ 55 /
Notes to the Financial Statements (continued)
27. COMMITMENTS
(a) Non-Cancellable Operating Leases
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Total
Consolidated
Company
2007
$
69,720
147,000
216,720
2006
$
59,400
5,040
64,440
2007
$
69,720
147,000
216,720
2006
$
59,400
5,040
64,440
The operating lease is a rental agreement for the Company’s office premises in Welshpool. The lease is for a 3 year term
expiring on 15 February 2008 the company exercised its option to renew for a further 3 years. The lease provides for annual
rent reviews to the higher of CPI or market.
(b) Exploration Tenement Leases – Commitments for Expenditure.
In order to maintain current rights of tenure to exploration tenements, the Company and consolidated entity is required to
outlay lease rentals and to meet the minimum expenditure requirements which are not considered to be material.
28. CONTINGENT LIABILITIES
There are no Contingent Liabilities.
29. SUBSEQUENT EVENTS
No event or transaction has arisen in the interval between the end of the financial year and the date of this report of a
material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations
of the Company or the Consolidated Entity, the results of those operations or the state of affairs of the Company or the
Consolidated Entity in future financial years.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 56 /
Directors’ Declaration
The Directors of the Company declare that:
1. The financial statements, comprising the income statement, balance sheet, cash flow statement, statement of changes
in equity and accompanying notes, are in accordance with the Corporations Act 2001 including;
(a) complying with Australian Accounting Standards, Corporations Regulations 2001; and other mandatory professional
reporting requirements, and
(b) give a true and fair view of the company’s and consolidated entity’s financial position as at 31 December 2007 and
of the performance for the year ended on that date.
2. In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable.
3. The remuneration disclosures set out on pages 14 to 16 of the Directors’ Report comply with Accounting Standard
AASB 124 Related Party Disclosures and the Corporations Regulations 2001
The directors have been given the declarations by the chief executive officer and chief financial officer required by section
295A of the Corporations Act 2001.
Signed in accordance with a resolution of the Directors:
Mark V Caruso
Managing Director
Dated at Perth, Western Australia this 31st day of March 2008
For personal use only / 57 /
BDO Kendalls Audit & Assurance (WA) Pty Ltd
128 Hay Street
SUBIACO WA 6008
PO Box 700
SUBIACO WA 6872
Phone 61 8 9380 8400
Fax 61 8 9380 8499
aa.perth@bdo.com.au
www.bdo.com.au
ABN 79 112 284 787
31st March 2008
The Directors
Mineral Commodities Limited
Unit 15, Level 1
51-53 Kewdale Rd
WELSHPOOL WA 6106
Dear Sirs
DECLARATION OF INDEPENDENCE BY PETER TOLL TO THE DIRECTORS OF MINERAL COMMODITIES LIMITED.
As lead auditor of Mineral Commodities Limited for the year ended 31 December 2007, I declare that, to the best of my
knowledge and belief, there have been:
• no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
• no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Mineral Commodities Limited and the entities it controlled during the period.
Peter Toll
Director
BDO Kendalls Audit & Assurance (WA) Pty Ltd
Perth, Western Australia
BDO Kendalls is a national association of
separate partnerships and entities
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 58 /
BDO Kendalls Audit & Assurance (WA) Pty Ltd
128 Hay Street
SUBIACO WA 6008
PO Box 700
SUBIACO WA 6872
Phone 61 8 9380 8400
Fax 61 8 9380 8499
aa.perth@bdo.com.au
www.bdo.com.au
ABN 79 112 284 787
INDEPENDENT AUDITOR’S REPORT
To the members of Mineral Commodities Ltd
Report on the Financial Report and AASB 124 Remuneration Disclosures Contained in the Directors’ Report
We have audited the accompanying financial report of Mineral Commodities Ltd which comprises the balance sheet as at
31 December 2007, and the income statement, statement of changes in equity and cash flow statement for the year ended
on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the
financial year.
We have also audited the remuneration disclosures contained in the directors’ report. As permitted by the Corporations
Regulations 2001, the consolidated entity has disclosed information about the remuneration of directors and executives
(“remuneration disclosures”), required by Accounting Standard AASB 124 Related Party Disclosures, under the heading
“Remuneration Report” in pages 14 to 16 of the directors’ report and not in the financial report.
Directors’ Responsibility for the Financial Report and the AASB 124 Remuneration Disclosures Contained in the Directors’
Report
The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance
with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001.
This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of
the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with
the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the
consolidated and parent financial statements and notes, complies with International Financial Reporting Standards.
The directors of the company are also responsible for the remuneration disclosures contained in the directors’ report.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the
financial report is free from material misstatement. Our responsibility is to also express an opinion on the remuneration
disclosures contained in the directors’ report based on our audit.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report
and the remuneration disclosures contained in the directors’ report. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material misstatement of the financial report and the remuneration
disclosures contained in the directors’ report, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report and the
remuneration disclosures contained in the directors’ report in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial report and the remuneration
disclosures contained in the directors’ report.
For personal use only / 59 /
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
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 would be in the same terms if it had been given
to the directors at the time that this auditor’s report was made.
Qualification
As disclosed in the audit report to the financial statements for the year ended 31 December 2006, the Company had not
consolidated two subsidiaries being Erebus Plc and Kariba Kono Ltd into the income statement, balance sheet, cash flow
statement, statement of changes in equity or notes to the financial report as at 31 December 2006 due to the fact that the
financial information was not considered reliable by the Board of Directors and ourselves.
As Erebus Plc and Kariba Kono Ltd are controlled by Mineral Commodities Ltd at the 31 December 2006, all assets and
liabilities of these subsidiaries should have been recorded within the consolidated balance sheet of Mineral Commodities
Ltd. These assets and liabilities should have been recorded at their fair value at the date of acquisition, with any excess of
consideration over the net assets acquired being recorded as exploration and evaluation expenditure (goodwill). In addition
the results of these subsidiaries from the date of acquisition (23 June 2006) should have been included in the consolidated
income statement and the cash flows since acquisition should have been included within Mineral Commodities Ltd’s
consolidated cash flow statement.
As at 1 January 2007 the company has now consolidated Erebus Plc and Kariba Kono Ltd. As Erebus Plc and Kariba Kono
Ltd incurred losses from the date of acquisition (23 June 2006) until 31 December 2006 which were not recorded in the
consolidated entity, this has had the effect of overstating the exploration and evaluation expenditure and understating
accumulated losses as at the date of consolidation (1 January 2007). The Company and ourselves are unable to quantify
this amount.
Auditor’s Opinion on the Financial Report
In our opinion, other than the matters mentioned in the qualification, the financial report of Mineral Commodities Ltd is in
accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the company’s and consolidated entity’s financial position as at 31 December 2007 and of
their performance for the year ended on that date; and
(b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001.
Auditor’s Opinion on the AASB 124 Remuneration Disclosures Contained in the Directors’ Report
In our opinion the remuneration disclosures that are contained in pages 14 to 16 of the directors’ report comply with
Accounting Standard AASB 124.
BDO Kendalls Audit & Assurance (WA) Pty Ltd
Peter Toll
Director
Perth, Western Australia 31st March 2008
BDO Kendalls is a national association of
separate partnerships and entities
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 60 /
Statement of Corporate Governance
The Board of Directors of Mineral Commodities Limited has adopted the following set of principles for the corporate
governance of the Company. These principles establish the framework of how the Board carries out its duties and
obligations on behalf of the shareholders and were in place throughout the financial year.
THE BOARD OF DIRECTORS
Role of the Board
The Board of Directors is responsible for setting the strategic direction and establishing the policies of Mineral
Commodities Limited and the consolidated entity. It is responsible for overseeing the financial position, and for monitoring
the business and affairs of the Company and the consolidated entity on behalf of the shareholders, by whom the directors
are elected and to whom they are accountable. It also addresses issues related to internal controls and approaches to risk
management.
Composition of the Board
The directors’ report contains details of the directors’ qualifications, experience and special responsibilities.
Under the Constitution the minimum number of directors is three and the maximum is ten. Directors are not appointed for
a fixed term. At each annual general meeting one third of the directors other than the Managing Director must resign by
rotation, with those serving the longest resigning first. Resigning directors may stand for re-election.
As a general principle the Company considers that the number of non-executive directors must exceed the number of
executive directors. This has been the case throughout this financial year. The Board considers Mr Gregory Steemson to be
an independent director in accordance with the definition used in ASX Principles of Good Corporate Governance.
Details of directors’ shareholdings are disclosed in the directors’ report and financial report. There are no retirement
schemes other than the payment of statutory superannuation contributions.
Any equity based compensation of directors is required to be approved in advance by shareholders.
CHAIR AND MANAGING DIRECTOR
The Company maintains that there must be a separation between the roles of Chairman and the Managing Director.
The Chairman is an independent person who is not involved in any executive management. The Managing Director is
responsible for day to day operations and supervising the management of the business as designated by the Board. This
ensures the appropriate independent functioning of the Board and management.
INDEPENDENT PROFESSIONAL ADVICE
The Company has procedures enabling any director or committee of the Board to seek external professional advice as
considered necessary, at the Company’s expense subject to prior consultation with the Chairman. A copy of any advice
sought by a director would be made available to all directors.
CONFLICT OF INTEREST
In the event that a potential conflict of interest may arise, involved directors must withdraw from all deliberations
concerning the matter. They are not permitted to exercise any influence over other Board members.
For personal use only / 61 /
Statement of Corporate Governance (continued)
TRADING IN THE COMPANY’S SECURITIES
The Company has adopted a policy that imposes certain restrictions on directors and employees trading in the securities
of the Company. Key aspects of the policy are:
• All directors and employees are to formally notify the Company Secretary of their beneficial shareholdings in the
Company and any changes to this within 2 days of such change occurring. The Company Secretary maintains a register
of interests in the Company held by directors.
• No director or employee or any entities controlled by them is allowed to trade in the securities of the Company without
notifying the Chairman.
• No director or employee or any entity controlled by them is allowed to engage in the business of active dealing in the
Company’s securities.
• A director or employee or any entities controlled by them must not trade at any time when he or she is in possession of
information which if generally available would materially affect the price or value of the Company’s securities.
SHAREHOLDERS RELATIONS AND COMMUNICATIONS
The Company’s shareholders are responsible for voting on the appointment of directors. The Board informs shareholders
of all major developments affecting the Company by:
• Preparing half yearly and annual financial reports and making these available to all shareholders.
• Advising the market of matters requiring disclosure under Australian Stock Exchange Continuous Disclosure Rules.
• Maintaining a record of significant ASX announcements on the Company’s website.
• Submitting proposed major changes in the Company’s affairs to a vote of shareholders, as required by the Corporations
Law.
• Reporting to shareholders at annual general meetings on the Company’s activities during the year. All shareholders that
are unable to attend these meeting are encouraged to communicate issues or ask questions by writing to the Company.
BOARD COMMITTEES
The entire Board undertakes the function of an Audit Committee. The duties of this committee include:
•
•
•
•
•
•
•
to be the focal point of communication between the Board, management and the external auditor;
to recommend and supervise the engagement of the external auditor and monitor auditor performance;
review the effectiveness of management information and other systems of internal control;
review all areas of significant financial risk and arrangements in place to contain those to acceptable levels;
review significant transactions that are not a normal part of the Company’s business;
review the year end and interim financial information and ASX reporting statements;
to monitor the internal controls and accounting compliance with the Corporations Act, ASX Listing Rules, external audit
reports and ensure prompt remedial action where required; and
•
review the Company’s financial statements and accounting procedures.
The Company’s auditor is invited to attend the annual general meeting and the Company supports the principle of the
auditor being available to answer questions on the conduct of the audit and the content of the audit report.
The Board has not formally constituted a Nomination Committee or a Remuneration Committee. The whole Board conducts
the functions of a Nomination Committee and Remuneration Committee.
For personal use only MINERAL COMMODITIES LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2007
/ 62 /
Statement of Corporate Governance (continued)
INTERNAL CONTROL FRAMEWORK AND BUSINESS RISK MANAGEMENT
The Board acknowledges that it is responsible for the overall internal control framework, but recognises that no cost
effective internal control system will preclude all errors and irregularities. To assist in discharging this responsibility the
Board has instigated an internal control framework that includes the following.
• Financial reporting – there is a comprehensive budgeting and forecasting system with updates provided to the Board at
each Board meeting. Periodic reports are provided to the Board. Quarterly, half yearly and annual reports are prepared
in accordance with the Corporations Act and ASX Listing Rules.
•
The Managing Director and the Company Secretary are required to confirm in writing that the Company’s financial
reports present a true and fair view, in all material respects, of the Company’s financial condition and operational
results and are in accordance with relevant accounting standards.
•
The Company has written policies covering health, safety and the environment.
ETHICAL STANDARDS
The Board adopts a proactive approach to promoting the practice of high ethical standards. All directors and employees
are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and
performance of the Company, in the following areas;
• professional conduct,
• dealings with suppliers, advisers and regulators,
• dealings with the community and specifically in dealings with traditional landowners, and
• dealings with other employees.
PRIVACY
The company has resolved to comply with the National Privacy Principles contained in the Privacy Act 1988, to the extent
required for a company the size and nature of Mineral Commodities Limited.
ASX GUIDELINES ON CORPORATE GOVERNANCE
Pursuant to ASX Listing Rules the Company must provide a statement disclosing the extent to which the ASX best practice
recommendations have been not been followed in the reporting period. Below the Company provides an explanation of any
areas where Mineral Commodities Limited does not presently comply withy ASX best practice recommendations.
A majority of the Board of directors is not comprised of independent directors under the ASX definition of independent,
and the Chairman is not an independent director.
Mr Joseph Caruso and Mr Mark Caruso both have a relevant interest in Zurich Bay Holdings Pty Ltd a company that is a
substantial shareholder of the Company. ASX considers that a person with an interest in a company with a substantial
shareholding in the reporting company is not independent.
Each individual member of the Board is satisfied that whilst the Company may not comply with this particular best
practice recommendation, the Board always acts with independence and in accordance with the Statement of Corporate
Governance.
The ASX guidelines also prescribe that the Company should maintain a dedicated corporate governance information
section on its website. Such a dedicated information section is not presently available on the Company’s website, although
the annual financial report will be posted to the website and the Statement of Corporate Governance can be viewed there.
For personal use only / 63 /
Shareholder Information
Additional information required by the Australian Stock Exchange Ltd Listing Rules and not disclosed elsewhere in this
report. This information is current as at 04 April 2008.
TWENTY LARGEST SHAREHOLDERS
Name
National Nominees Ltd
HSBC Custody Nom Aust Ltd
HSBC Custody Nom Aust Ltd
Zurich Bay Holdings Pty Ltd
Kathryn Yule
ANZ Nominees Ltd
HSBC Custody Nom Aust Ltd
Scarp Holdings Pty Ltd
Robert Cameron Galbraith
Robert Hayden Aspinall
Kevin Anthony Leo and Leticia Leo
HSBC Custody Nom Aust Ltd
International Mining Services Ltd
Keng Heng Goh
Scarp Holdings Pty Ltd
Kingarth Pty Ltd
Melville AG & ES
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