MINERAL COMMODITIES LIMITED
ABN 39 008 478 653
ANNUAL FINANCIAL REPORT
31 DECEMBER 2010
For personal use only
Mineral Commodities Limited
Annual Financial Report for the year ended 31 December 2010
Corporate Directory
Directors
Joseph Anthony Caruso - Non-Executive Chairman
Mark Victor Caruso - Non-Executive Director
Peter Patrick Torre - Non-Executive Director
Company Secretary
Peter Patrick Torre
Registered Office
Solicitors
Auditors
Share Registry
Unit 27, Level 1
133 Kewdale Road
Kewdale,
Western Australia 6105
Telephone:
Facsimile:
Email:
Website:
(61 8) 9353 4890
(61 8) 9353 4894
info@mncom.com.au
www.mncom.com.au
Steinepreis Paganin
Level 4, Next Building
16 Milligan Street
Perth WA 6000
BDO Audit (WA) Pty Ltd
38 Station St
Subiaco, Western Australia 6008
Link Market Services Limited
Ground Floor, 178 St Georges Terrace
PERTH WA 6000
Telephone 1300 554 474
Stock Exchange Listing
The Company is listed on the Australian Stock
Exchange Limited under ASX Code - MRC
For personal use only
Mineral Commodities Limited
Annual Financial Report for the year ended 31 December 2010
Contents
DIRECTORS’ REPORT
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CASH FLOWS
STATEMENT OF CHANGES IN EQUITY
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
AUDITOR’S INDEPENDENCE DECLARATION
INDEPENDENT AUDITOR’S REPORT
CORPORATE GOVERNANCE STATEMENT
ADDITIONAL SHAREHOLDER INFORMATION
2
11
12
13
14
15
45
46
47
49
53
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Directors Report
The Directors present their report together with the financial report of Mineral Commodities Limited (“the Company”) and its controlled
entities (the “Group”) for the year ended 31 December 2010.
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 – Non Executive Director
. Gregory Hugh Steemson – Managing Director (resigned 31 March 2010)
. Peter Patrick Torre – Non Executive Director and Company Secretary (appointed as a director on 1 April 2010)
DIRECTORS’ INFORMATION
Joseph Anthony Caruso (65 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 (49 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 Executive Chairman of Allied Gold Limited. Former directorships of public listed companies in the last 3 years are CI
Resources Limited from October 2003 to May 2007.
Peter Torre CA, ACIS, MAICD (38 Years of Age)
Mr Torre was appointed Company Secretary of Mineral Commodities Limited in July 2006, and as a director of the Company on 1 April
2010. He is a Chartered Accountant, a Chartered Secretary and a member of the Australian Institute of Company Directors. 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 Neo Resources Limited and Mission New Energy Limited.
Due to the size of the Company, all directors consider matters which would normally be dealt with by Audit and Remuneration
Committees.
PRINCIPAL ACTIVITIES
The principal activity of the Group during the year was undertaking procedures for the development of mineral sands projects and
investigations into other mineral resources. This has mainly involved the evaluation of the Xolobeni Mineral Sands Project in the
Eastern Cape Province of South Africa and the Tormin Mineral Sands Project in the Western Cape Province of South Africa.
There were no significant changes in the nature of activities of the Group during the year.
CONSOLIDATED RESULTS
The loss of the group after income tax and non-controlling interests was $1,625,021 (2009: $642,991).
DIVIDENDS
No dividends have been paid, declared or recommended for payment, in respect of the current financial year.
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Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Directors Report (continued)
REVIEW OF OPERATIONS AND FUTURE DEVELOPMENTS
Highlights of the Company’s operations for the period under review are as follows:
South African Projects
Tormin Mineral Sands Project
Tormin is located on the west coast of South Africa, approximately 400km north of Cape Town. The predominant minerals of value are
zircon and rutile, which are contained in a high grade beach placer deposit north of the Oliphants River outfall.
A Definitive Feasibility Study (DFS) commissioned by MRC demonstrated that Tormin can produce an enriched non-magnetic saleable
concentrate containing predominately zircon and rutile. The base case derived from the DFS provided for hydraulic mining of the beach
deposits and hydraulically transferring the sand from the beach to a stockpile. The primary spiral plant followed by a wet high intensity
magnetic separation (WHIMS) circuit was designed for a nominal throughput capacity of 1.6 Mtpa producing 30,000 to 40,000 tonnes of
concentrates per annum grading up to 80% zircon and 10% rutile. The tailings, totaling in excess of 1.5Mtpa, were to be subsequently
hydraulically transferred back to the beach for deposition.
The results of the DFS were incorporated into a financial model developed on behalf of the Company by MSP Engineering. During the
course of trade-off and optimisation studies two additional opportunities were identified. The first of these involved primary concentration
on the beach. Locating the primary gravity circuit on the beach reduces the volume of sand and tailings to be hydraulically transferred
off and back to the beach with an associated reduction in operating costs (Opex), capital expenditure (Capex) and the environmental
impact of the project.
Significant work was undertaken to further the development of the Tormin Mineral Sands Project (the Project) during the year.
Perth based MSP Engineering Pty Ltd completed most of the process engineering, including PFD’s, P&ID’s, Mass Balances and
Process Design Criteria, and submitted initial designs for a primary wet concentrator based on the beach and the secondary
concentration plant.
Amendments to the Environment Management Plan were submitted to the DMR during the last quarter of the year. Subsequent
meetings were held with the DMR’s Regional Manager of the Western Cape. The DMR appeared content with the Company’s progress
to finalise outstanding regulatory matters to enable it to proceed to develop and mine.
The Company held discussions with parties to assist with the management and development of the Project to ensure it is undertaken in
the most expeditious and efficient manner. At the date of this report, the Company is finalising these discussions which will see the
appointment of a contractor to assist with the development, mining, processing, and administration associated with the Project.
Xolobeni Mineral Sands Project
The Xolobeni Project is located in the Eastern Cape Province of South Africa approximately 300km north of East London and 200km
south of Durban.
The Xolobeni Project is regarded as one of the largest undeveloped mineral sands resources in the world containing in excess of
9,000,000 tonnes of ilmenite.
The Company is awaiting the outcome of an appeal lodged with the Minister of the Department of Minerals and Energy (“DME”) against
the grant of the Mining Right over the Kwanyana block. This appeal was lodged in September 2008.
The Company is aware that the task team established to advise the Mineral Resources Minister in South Africa on the Mining Right has
submitted its report and recommendations to the Director-General without a public hearing as was initially anticipated.
The Department of Mineral Resources then advised the Company in meetings that consultation with various government departments is
required prior to handing down a final decision.
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Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Directors Report (continued)
In response to the Company’s request for clarity over the appeal, the DME has responded by informing the Company that the Minister
has appointed a Task Team, consisting of the Mining and Minerals development Board. The term of office of this Board expired and a
new board is yet to be appointed.
The Director-General then issued an instruction that the appeal be finalised by the establishment of a new panel, which will hear oral
arguments by the relevant parties and then make a recommendation to the Minister. It was envisaged that the hearing would be
arranged at the DME Durban regional Office in mid February 2011.
In March the Director General of Mineral Resources (DG) in South Africa advised MRC’s subsidiary Transworld Energy and Mineral
Resources (SA) (Pty) Ltd (TEM) that the Department of Mineral Resources in South Africa (DMR) no longer intends to embark on oral
hearings in respect of the appeal against the Xolobeni mining right awarded to TEM on the Kwanyana Block as previously advised. The
DG has advised that the DMR will now proceed to advise the Minister on the appeals based on the available documentation. TEM has
been advised that the Minister will consider the appeals towards the end of March 2011. To this date of this report, the Company still
awaits the outcome from the Minister.
Investment in Allied Gold Limited (ASX listed: ALD)
MRC currently holds 6.5 million shares of ALD’s issued fully paid ordinary shares.
Allied Gold is an emerging 200,000 ounce per annum gold producer with production and exploration assets in Papua New Guinea and
the Solomon Islands approximately 3 hours by plane from Brisbane, Australia. The company’s 100%-owned Simberi gold mine is 85
kilometres from Lihir Island in the Tabar Islands group in Papua New Guinea. Simberi commenced gold production in 2008, produced
64,000 ounces in 2009-10 and its process plant is being expanded to a throughput of 3.5 Mtpa to produce 100,000 ounces per annum
by late 2011. Allied Gold acquired Gold Ridge in the Solomon Islands in late 2009 when it acquired Toronto-listed Australian Solomons
Gold. Allied has invested $150 million to refurbish and redevelop Gold Ridge which is expected to produce an average 120,000 ounces
per annum for a minimum ten years. Allied Gold Limited is listed on the ASX, TSX and the London AIM exchanges.
The market value of MRC’s shareholding at 31 December 2010 was $5.1 million.
Investment in Petro Ventures International Limited
The Company maintains a significant investment in Petro Ventures International Ltd (“PVIL”) an E & P company operating in the
Northern Hemisphere. Petro has strategic oil & gas working interests in Romania (20%), Hungary (11.4%), Holland 30%) and France
(between 25% to 50%).
The Company was informed in the last quarter of the year that drilling of the Eugenia (Pelican NE) and Ioana (Midia SE) has been
approved by NAMR and assignment of the Romanian licences has been indicated by the Romanian Government to occur at the end of
January 2011.
Following assignment, the value of Petro’s Romanian assets has been independently valued by RPS Energy at US$109m.
Following the Annual General Meeting of PVIL on 15 December, 2010 the Company settled the Deed of Termination with Macquarie
Bank Ltd and consequently, 45,269,280 Options held by Macquarie were cancelled, PVIL issued 8,876,329 ordinary shares to
Macquarie at a deemed issue price of 51 cents per share and:
· the Option Deeds were terminated;
· the Heads of Agreement dated 7 July, 2010 was terminated; and
· the Subscription Agreement was terminated.
Following the transaction, PVIL had 67,038,938 ordinary shares on issue and A$10.3m cash at bank.
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Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Directors Report (continued)
In February 2011, the Company received a Notice of Meeting from Petro whereby it sought shareholder approval to transfer the
Company to the UK. This will involve the formation of a limited company in the UK then undertaking a share exchange on a share for
share basis.
Following the share exchange, PVIL has advised that a prospectus will be submitted to seek admission to the Alternative Investment
Market in London (“AIM”). A listing on AIM will provide the necessary platform to recognise the value of PVIL and its assets.
The Company received a further update from PVIL in March 2011 advising that the general meeting of shareholders would be deferred
due to PVIL receiving notification from the Romanian Authorities that the assignment of the Romanian Licenses had not been granted.
The Directors of PVIL have advised that they are considering their options in this regard and will update their shareholders accordingly.
Investment in Africa Uranium Limited
The Company holds an approximate 12% interest in Africa Uranium Limited. AUL’s main exploration assets are located in Namibia and
South Africa. AUL’s Namibian interests are located in the area east of Swakopmund in the same general area as the Langer Heinrich
uranium mine operated by Paladin Energy and the Rossing uranium mine operated by Rio Tinto.
In March 2010, Oklo Uranium Limited announced that it had entered into a transaction with Africa Uranium Limited to acquire its 70%
interest in the Hoasib Project for an estimated value of approximately $20 million.
On 31 May 2010, Oklo Uranium Limited announced that following due diligence, Oklo formed the view that whilst the project remained
prospective for uranium mineralisation, it was unable to support the key commercial terms of the acquisition and consequently
terminated the transaction with Africa Uranium Limited. Oklo noted that it was in discussions with Africa Uranium Limited on the basis
that it recognises the potential in the project and these discussions may or may not result in a new agreement with Africa Uranium
Limited.
The Company understands that discussions with Oklo have now ceased and AUL may seek to raise capital itself to further the
exploration and development of its assets.
FINANCIAL POSITION
The net assets of the group have increased from $19,844,256 at 31 December 2009 to $20,371,853 at 31 December 2010.
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 Board will
continue to review other projects and opportunities in the interest of increasing shareholder value.
ENVIRONMENTAL REGULATIONS
The Directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which requires entities to
report annual greenhouse gas emissions and energy use in Australia. For the first measurement period the directors have assessed that
there are no current reporting requirements, but may be required to do so in the future.
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.
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Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Directors Report (continued)
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
and Mining Right over Kwinyana
Block
Granted – subject
to appeal
Tormin – South Africa
Mineral Sands Resources
100
Mining Right
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:
OPTIONS
•
In July 2009, 57,357,208 listed options to acquire shares at 20cents with an expiry date of 31 December 2012 were issued under
the terms of a non-renounceable entitlement issue at an issue price of $0.005 per option to raise $286,786 excluding costs.
Options do not entitle the holder to receive a dividend paid to ordinary shareholders.
New issues of options and options exercised in the period are as follows:
Listed options
No of Options
Exercise Price
Expiry date
Opening Balance 1 January 2010
57,357,208
20 cents
31 December 2012
- Options issued
- Options Exercised
-
-
-
-
-
-
Balance at 31 December 2010
57,357,208
20 cents
31 December 2012
DIRECTORS’ SHAREHOLDING INTERESTS
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:
2010
Ordinary Shares
Balance at
1 January 2010
Received as
Remuneration
Options
Exercised
Net change
other
Balance
31 Dec 2010
Mark Caruso -Indirect
- Direct
Joseph Caruso
Peter Torre
19,050,988
12,627
19,050,988
-
-
-
-
-
-
-
-
-
2,519,000
-
2,519,000
500,000
21,569,988
12,627
21,569,988
500,000
J A Caruso and M V Caruso are both directors of and have a relevant interest in Zurich Bay Holdings Pty Ltd, which holds 21,569,988
shares and 7,380,396 listed options in the Company.
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Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Directors Report (continued)
2010
Listed Options
Mark Caruso
Joseph Caruso
Peter Torre
Balance at
1 January
2010
7,380,396
7,380,396
-
MEETINGS OF DIRECTORS
Granted as
Remuneration
Options
Exercised
Options
Lapsed
Net change
other
Balance at
31 Dec 2010
-
-
-
-
-
-
-
-
-
-
-
7,380,396
7,380,396
200,000
200,000
The number of directors meetings and number of meetings attended by each of the directors of the Company during the financial year
are:
J A Caruso
M V Caruso
G H Steemson
P P Torre
Meetings Held
Meetings Attended
2
2
0
2
2
2
0
2
Other 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.
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, if any, 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)
(b)
(c)
Directors Fees;
Salary & Consultancy; and
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. The Board
reviews non-executive directors’ fees and payments annually.
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Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Directors Report (continued)
REMUNERATION REPORT (Continued)
Executives are offered a competitive base pay that consists of fixed components. Base pay for senior executives, if any, 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
The key management personnel of Mineral Commodities Ltd Group are the directors of Mineral Commodities Ltd and the Company
Secretary Mr Peter Torre who reports directly to the Director’s of the Company. The amounts disclosed are therefore applicable for both
Mineral Commodities Limited and the Mineral Commodities Limited Group.
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.
There are no long term benefits amounts due to Directors and key management personnel.
Share-
based
payments
Post
employment
benefits
Cash benefits
Percentage
performance
based
Non Executive Directors
Joe Caruso
Mark Caruso
Peter Torre
Sub-total non executive
directors
Executive Directors
Greg Steemson
Other Key Management
Personnel
Peter Torre
Total Key management
personnel
compensation
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
$
$
44,037
44,037
48,000
48,000
54,000
N/A
146,037
92,037
60,000
188,200
18,000
72,000
224,037
352,237
3,963
3,963
-
-
N/A
3,963
3,963
-
-
-
-
3,963
3,963
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$
-
-
-
-
N/A
-
-
-
-
-
-
-
Totals $
48,000
48,000
48,000
48,000
54,000
N/A
150,000
96,000
60,000
188,200
18,000
72,000
228,000
356,200
-
-
-
-
-
-
-
-
-
-
-
-
-
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Directors Report (continued)
No options were issued to Directors or other Key Management Personnel during 2010 or the previous year as part of their remuneration.
C. Service Agreements
In accordance with the terms of the agreement with Mr Steemson, he was paid a fixed sum of $20,000 per month from 1 January 2010
until he resigned on 31 March 2010. There were no short or long term incentives to be provided to Mr Steemson.
There were no payments upon termination of the contract.
There are no other service agreements.
D. Share Based Compensation
No options or shares were issued to Directors or other Key Management Personnel during 2010 or the previous year as part of their
remuneration.
E. Additional Information
There is no additional information to be provided in respect to the remuneration of the directors.
End of the Audited Remuneration Report
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 will be included before the
Additional ASX Information section of the Annual Financial Report.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
Share Capital
In March 2011, the Company raised $1.2 million via a placement of 10,000,000 fully paid ordinary shares at $0.12 cents per share. The
placement was made to M&G Investments Limited a UK based Institution.
Xolobeni Project
The Director General of Mineral Resources (DG) in South Africa advised MRC’s subsidiary Transworld Energy and Mineral Resources
(SA) (Pty) Ltd (TEM) that the Department of Mineral Resources in South Africa (DMR) no longer intends to embark on oral hearings in
respect of the appeal against the Xolobeni mining right awarded to TEM on the Kwanyana Block as previously advised. The DG has
advised that the DMR will now proceed to advise the Minister on the appeals based on the available documentation. TEM has been
advised that the Minister will consider the appeals towards the end of March 2011.
Sale of Investments
A further 1,000,000 Ordinary Shares in Allied Gold Ltd were sold in February 2011 net proceeds received were $577,993.
Petro Ventures International Ltd (PVIL)
The Company received a further update from PVIL in March 2011 advising that the general meeting of shareholders would be deferred
due to PVIL receiving notification from the Romanian Authorities that the assignment of the Romanian Licenses had not been granted.
The Directors of PVIL have advised that they are considering their options in this regard and will update their shareholders accordingly.
No other 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, other than what has been disclosed elsewhere in this financial report, in the opinion of the Directors of the
Company, to affect significantly the operations of the Group, the results of those operations or the state of affairs of the Company or the
Consolidated Entity in future financial years unless otherwise disclosed in this Directors Report.
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Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Directors Report (continued)
PROCEEDINGS ON BEHALF OF THE GROUP
No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the
Group 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 Group has paid an insurance premium to insure the directors and secretaries of the company and its
controlled entities. The premium paid was $31,500 representing $10,500 per director. The liabilities insured are legal costs that may be
incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the
Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not
include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their
position or of information to gain advantage for themselves or someone else or to cause detriment to the Group.
AUDITOR’S INDEPENDENCE DECLARATION
The Auditor’s Independence Declaration as required by Section 307C of the Corporations Act 2001 is set out on page 46 and forms part
of this report.
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.
Non audit services totalling $6,670 were charged by a BDO Audit (WA) Pty Ltd related entity, BDO Tax (WA) Pty Ltd.
There were no further non–audit services provided by BDO Audit (WA) Pty Ltd in the year.
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 Audit (WA) Pty Ltd
Audit and review of financial reports
Non BDO audit firm (Tuffias Sandberg)
Total remuneration for audit services
BDO Audit (WA) Pty Ltd continues in office.
$
39,492
6,558
46,050
This report has been made in accordance with a resolution of the Directors.
Mark Caruso
Perth, Western Australia
31 March 2011
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Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Statement of Comprehensive Income
For the year ended 31 December 2010
Note
Consolidated
Revenue from continuing operations
2
Administration expenses
Employees and consultants remuneration
2010
$
525,700
(455,071)
(205,117)
(10,564)
(11,250)
(8,588)
13
12 (a)
12 (a)
2009
$
995,439
(567,677)
(270,906)
(133,783)
(14,356)
-
-
10
(1,488,644)
(5,413)
(16,239)
(2,184,647)
(1,002,961)
(1,658,947)
(7,522)
4
5
-
(1,658,947)
33,926
(1,625,021)
-
(7,522)
(635,469)
(642,991)
Exploration and evaluation costs
Depreciation and amortisation
Loss on disposal of assets
Impairment of Investments
Finance costs
Loss before income tax
Income tax expense
(Loss) from continuing operations
Profit from discontinued operations
(Loss) for the year
Other comprehensive income
Changes in the fair value of available-for- sale
financial assets
Exchange differences on translation of foreign
operations
Other comprehensive income for the year net of
tax
10
2,390,277
(1,165,147)
(237,660)
(173,901)
2,152,617
(1,339,048)
Total comprehensive income for the year
527,596
(1,982,039)
Loss / Profit is attributable to:
Owners of Mineral Commodities Ltd
(1,625,021)
(642,991)
Non-controlling interest
Total comprehensive income for the year is
attributable to
Owners of Mineral Commodities Ltd
Non-controlling interest
-
-
(1,625,021)
(642,991)
527,596
(1,982,039)
-
-
527,596
(1,982,039)
Earnings/(Loss) per share from continuing operations attributable to the ordinary equity holders of the company.
Basic Loss per share
From continuing operations attributable to the ordinary
shareholders of the company (cents per share)
From discontinued operations (cents per share)
Total basic loss per share attributable to the ordinary
equity holders of the company (cents per share)
(0.045)
(0.005)
( 0.445)
(1.134)
(1.158)
cents
cents
0.024
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
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Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Statement of Financial Position
as at 31 December 2010
Note
Consolidated
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Available for sale financial assets
Other current assets
Non-Current asset held for sale
Total Current Assets
NON-CURRENT ASSETS
Property, plant and equipment
Exploration & development expenditure
Other financial assets
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
8
9
10
11
12
13
16
2010
$
191,506
527,986
2009
$
153,566
539,358
6,277,651
6,070,777
10,376
-
13,351
165,639
7,007,519
6,942,691
7,377
26,515
13,928,167
13,159,249
-
6
13,935,544
13,185,770
20,943,063
20,128,461
541,540
29,670
571,210
571,210
251,699
32,506
284,205
284,205
20,371,853
19,844,256
17
18
40,004,350
40,004,350
5,825,595
3,672,977
(25,636,941)
(24,011,920)
20,193,004
19,665,407
Non-controlling interest
15
178,849
178,849
TOTAL EQUITY
20,371,853
19,844,256
The above Statements of Financial Position should be read in conjunction with the accompanying notes.
- 12 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Statement of Cash Flows
For the year ended 31 December 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Exploration and development expenditure
Interest received
Payments to suppliers & employees
Interest paid
Sundry income
Note
Consolidated
2010
$
2009
$
(661,773)
(1,307,142)
25,711
50,937
(678,586)
(494,625)
(5,413)
4,789
(16,239)
100
Net cash (outflows) / inflows from operating
activities
23(a)
(1,315,272)
(1,766,969)
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for plant and equipment
12 (a)
(700)
(28,942)
Purchase of investments
Proceeds from sales of investments
-
(1,488,644)
1,189,361
2,154,216
Proceeds from sale of assets held for resale
12 (b)
164,551
-
Net cash inflow/(outflow) from investing activities
1,353,212
636,630
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of shares and options
17
Net cash inflow from financing activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of financial
year
Cash and cash equivalents at end of financial
year
-
-
486,578
486,578
37,940
(643,761)
153,566
797,328
8
191,506
153,566
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
- 13 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Statement of Changes in Equity
Consolidated Entity
For the year ended 31 December 2010
Contributed
Equity
$
Listed
options
reserve
$
Accum-
ulated
Losses
$
General
Reserve
$
Currency
Translation
Reserve
$
Financial Asset
Revaluation
Reserve
$
Total
$
Non-controlling
interest
$
$
Total
Equity
Balance at 1 January 2010
40,004,350
286,578
(24,011,920)
2,437,582
(758,112)
1,706,929
19,665,407
178,849
19,844,256
Loss for the year
Exchange differences on translation of foreign operations
Changes in the fair value of available for sale financial assets
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Contributions of equity net of transaction costs
Issue of listed options net of costs
Increase in non controlling interest
Balance at the end of the year
-
-
-
-
-
-
-
-
40,004,350
-
-
-
-
-
-
-
-
286,578
(1,625,021)
-
-
(1,625,021)
-
-
-
-
(25,636,941)
-
-
-
-
-
-
-
-
2,437,582
-
(237,660)
-
(237,660)
-
-
-
-
(995,772)
-
-
2,390,277
2,390,277
-
-
-
-
4,097,206
(1,625,021)
(237,660)
2,390,277
527,596
-
-
-
-
20,193,003
-
-
-
-
-
-
-
-
178,849
(1,625,021)
(237,660)
2,390,277
527,596
-
-
-
-
20,371,852
Statement of Changes in Equity
Consolidated Entity
For the year ended 31 December 2009
Balance at 1 January 2009
Contributed
Equity
$
39,804,350
Loss for the year
Exchange differences on translation of foreign operations
Changes in the fair value of available for sale financial
assets
Transfer from reserve – on expiry of options
Total comprehensive income for the year
Transactions with owners in their capacity as owners
-
-
-
-
-
-
Contributions of equity net of transaction costs
200,000
-
-
-
-
-
-
-
-
Listed
options
reserve
$
Accum-
ulated
Losses
$
General
Reserve
$
Currency
Translation
Reserve
$
Share Based
Payments
Reserve
$
Financial Asset
Revaluation
Reserve
$
Total
$
Non-controlling
interest
$
$
Total
Equity
(23,516,438)
2,551,100
(584,211)
78,500
2,872,076
21,205,377
134,340
21,339,717
(642,991)
-
-
78,500
(564,491)
-
-
-
-
-
-
-
-
-
-
-
69,009
(113,518)
-
(173,901)
-
-
(173,901)
-
-
-
-
-
-
-
(78,500)
(78,500)
-
-
-
-
-
-
-
(642,991)
(173,901)
(1,165,147)
(1,165,147)
-
-
(1,165,147)
(1,982,039)
-
-
-
-
-
200,000
286,578
(44,509)
1,706,929
19,665,407
-
-
-
-
-
-
-
-
44,509
178,849
(642,991)
(173,901)
(1,165,147)
-
(1,982,039)
-
200,000
286,578
-
19,844,256
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
- 14 -
Issue of listed options net of costs
Increase in non controlling interest
Balance at the end of the year
-
-
286,578
-
40,004,350
286,578
(24,011,920)
2,437,582
(758,112)
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements
1.
(a)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
These financial statements are for Mineral Commodities Limited and its controlled entities, as the consolidated entity (group).
Mineral Commodities Limited is an Australian domiciled public listed company.
The general purpose financial statements for the year ended 31 December 2010 have been prepared in accordance with
Australian Accounting Standards and Interpretations, other authoritative pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001.
Compliance with IFRS
The financial statements of Mineral Commodities Limited and controlled entities also 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
available for sale financial assets for which the fair value basis of accounting has been applied.
The following significant accounting policies have been adopted in the preparation and presentation of the financial statements
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 2010 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 group.
Intercompany transactions, balances and unrealised gains on transactions between parent and or subsidiary 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 parent company.
Subsidiaries are those entities over which the Parent company 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 statements of comprehensive
income 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 – refer to note (h).
The Consolidated entity applies a policy of treating transactions with non-controlling interests as transactions with external
parties to the entity. Disposals to non-controlling interests result in gains and losses for the Consolidated entity are recorded in
the statement of comprehensive income. Purchases from non-controlling 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.
- 15 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
1.
(c)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 date of the
Statements of Financial Position. Income tax expense is adjusted by changes in deferred tax assets and liabilities attributable
to temporary differences and unused tax losses.
Deferred tax is accounted for using the 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 has 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 to profit or loss 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 (2009: 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
Statements of Financial Position.
Cash flows are included in the Statements of Cash Flows 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.
- 16 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 profit for the year except where
deferred in equity as a qualifying net investment hedge.
Subsidiary Companies
The financial results and position of subsidiary companies whose functional currency is different from the consolidated entities
presentation currency are translated into the presentation currency as follows;
Assets and liabilities are translated at year-end exchange rates prevailing at that reporting date.
Income and expenses are translated at average exchange rates for the period.
Hedge of a net investment in a foreign operation
The group applies hedge accounting to foreign currency differences arising between the functional currency of the foreign
operation and the parent entity’s functional currency (AUD), regardless of whether the investment is held directly or through an
intermediate parent.
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a
foreign operation are recognised in other comprehensive income to the extent that the hedge is effective, and are presented
within equity in the foreign currency translation reserve. To the extent that the hedge is ineffective, such differences are
recognised in profit or loss. When the hedged part of a net investment is disposed of, the relevant amount in the foreign
currency translation reserve is transferred to profit or loss as part of the profit or loss on disposal.
(f)
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.
Items of plant and equipment are initially recorded at cost and includes any expenditure that is directly attributable to
acquisition of the items. 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 profit for the year 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.
- 17 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 profit for the year of disposal.
(g)
Exploration and Development Expenditure
Costs incurred during the exploration and development stages of specific areas of interest are accumulated. Such costs 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, otherwise this expenditure is recognised in the profit for the year. Costs are written off as soon as an
area has been abandoned or considered to be non-commercial or impaired 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 for the year.
(h)
Investments
Interests in Subsidiaries
Investments in subsidiaries are carried in the Company’s financial report at cost less any impairment losses. Dividends and
distributions are brought to account in profit when they are declared by the subsidiaries.
Investments in associates
Associates are all entities over which the Consolidated entity 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 Consolidated entity’s investment in associates includes goodwill (net of any
accumulated impairment loss) identified on acquisition.
The Consolidated entity’s share of its associates post acquisition profits or losses is recognised in profit for the year, and its
share of post acquisition movements in reserves is recognised directly in reserves. The cumulative post acquisition
movements are adjusted against the carrying amount of the investment.
(i)
Impairment of Assets
At each reporting date, the Consolidated entity reviews the carrying values of it’s 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 profit or loss.
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.
(j)
Financial Instruments
The Consolidated entity classifies its financial instruments on initial recognition. The classification depends on the purpose for
which the financial instrument was acquired.
Recognition and de-recognition
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. Financial assets are
- 18 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
(k)
Financial Instruments (continued)
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 instruments and other
pricing models.
Loans and receivables
Loans and receivables are recognised initially at fair value and subsequently 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.
Available-for-sale financial assets
Available-for-sale financial assets are recognised at fair value. Unrealised gains and losses arising from changes in fair value
are taken directly to equity until the instrument is sold at which time any balance in equity relating to the instrument is recycled
to profit or loss as part of the profit or loss on sale.
Financial Liabilities
Financial liabilities are recognised initially at fair value and subsequently at amortised cost, comprising original debt less
principle payments and amortisation of transaction costs.
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 significant or prolonged decline in the value of the instrument is
considered to determine whether an impairment has arisen. Impairment losses are recognised in profit or loss. Impairment
losses recognised on equity instruments classified as available for sale are not reversed through the income statement.
(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 in the statement of financial position.
(n)
Earnings /(Loss) per Share
Basic Earnings /(Loss) 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 /(Loss) 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 would arise from the exercise of options
outstanding at the end of the financial year.
- 19 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
1.
(o)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Employee Benefits
Wages and Salaries, Annual Leave, Long Service 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 annual and long service 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 defined contribution superannuation funds by entities within the consolidated entity are charged
against profits when due.
Share-Based Payments
Share-based compensation benefits were provided to employees via the Mineral Commodities Employee Incentive Option
Scheme approved by shareholders in 2006. This Scheme has now expired. The fair value of options granted under the
Mineral Commodities Employee Incentive Option Scheme were 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.
(p)
Leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised on a
straight line basis.
(q)
Segment reporting
Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker has been identified as the Directors that make strategic decisions.
There is no goodwill attached to any of the segments. There has been no impact on the measurement of the assets and
liabilities reported for each segment.
(r)
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 can be reliably estimated.
(s)
Comparatives
Where required by Accounting Standards comparative figures have been adjusted to conform with changes in presentation for
the current financial year.
(t)
Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally
through a sale or transaction rather than continuing use. They are measured at the lower of their carrying amount and fair
value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets,
investment property and non-current biological assets that are carried at fair value.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increase in fair value less costs to sell of an asset (or disposal group),
but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the
date of the sale of the non-current asset (or disposal group) is recognised at the date of de-recognition.
- 20 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified
as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
continue to be recognised.
A discontinued operation is a component of the entity that has been disposed of or has been abandoned, or is classified as
held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-
ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to
resale. The results of discontinued operations are presented separately on the face of the statement of comprehensive
income.
(u)
Critical accounting estimates and judgements
The Group makes significant estimates and judgements concerning the future. The resulting accounting estimates may not
equal the related actual results. The estimates and judgements that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year are discussed below.
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.
Significant judgements and critical estimate in applying the entity’s accounting policies
Impairment
During the previous year, the consolidated entity impaired its property, plant and equipment (Note 12), in relation to the Sierra
Leone assets as the directors assessed that these amounts were no longer recoverable.
Available for sale financial assets
During the year, the company sold 3 million shares in Allied Gold Limited (2009 5 million shares). The Directors classify the
investment in Allied Gold as “available for sale” financial assets because (they intend to hold the investments to earn benefits
in the medium to long term increases in the value of these investments) or (they do not meet the criteria to be held as financial
assets through profit and loss as they are not monitored and evaluated on a fair value basis).
Exploration and development expenditure
Recoupment of the capitalised exploration and evaluation expenditure is dependant on the successful development and
commercial exploitation of the Xolobeni Mineral Sands and the Tormin Mineral Sands areas of interest in South Africa. The
capitalised expenditure in relation to the Xolobeni project is $9,610,919 (2009: $9,722,704) is expected to be fully recoverable
once the grant of the mining right has been affirmed by the Minister of Minerals and Energy in South Africa and the Company
proceeds to further develop this project.
Investment in Unlisted Entities
The investments in Africa Uranium Ltd has been fully impaired $1,488,643 (2009: nil) The remaining investment in an unlisted
entity Petro Ventures International Ltd has been valued by using information provided by the Company together with
information from an independent source. Assumptions and estimates have been used in this valuation. Should any of these
assumptions or estimates change, this could significantly effect the carrying value of this investment.
- 21 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
1.
(v)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounting Standards not yet effective
The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the
period of initial application. They are available for early adoption at 31 December 2010, but have not been applied in preparing this
financial report.
• AASB 9 Financial Instruments includes requirements for the classification and measurement of financial assets resulting from the
first part of Phase 1 of the project to replace AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 will become
mandatory for the Group’s 31 December 2014 financial statements. Retrospective application is generally required, although there
are exceptions, particularly if the entity adopts the standard for the year ended 30 June 2012 or earlier. The Group has not yet
determined the potential effect of the standard.
• AASB 124 Related Party Disclosures (revised December 2009) simplifies and clarifies the intended meaning of the definition of a
related party and provides a partial exemption from the disclosure requirements for government-related entities. The amendments,
which will become mandatory for the Group’s 31 December 2012 financial statements, are not expected to have any impact on the
financial statements.
• AASB 2009-5 Further amendments to Australian Accounting Standards arising from the Annual Improvement Process affect
various AASBs resulting in minor changes for presentation, disclosure, recognition and measurement purposes. The amendments,
which become mandatory for the Group’s 31 December 2012 financial statements, are not expected to have a significant impact on
the financial statements.
• AASB 2009-8 Amendments to Australian Accounting Standards - Group Cash settled Share-based Payment Transactions resolves
diversity in practice regarding the attribution of cash-settled share-based payments between different entities within a group. As a
result of the amendments AI 8 Scope of AASB 2 and AI 11 AASB 2 - Group and Treasury Share Transactions will be withdrawn
from the application date. The amendments, which become mandatory for the Group’s 31 December 2012 financial statements, are
not expected to have a significant impact on the financial statements.
•
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments addresses the accounting by an entity when the terms of a
financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part
of the financial liability. IFRIC 19 will become mandatory for the Group’s 31 December 2011 financial statements, with retrospective
application required. The Group has not yet determined the potential effect of the interpretation.
No other standards, interpretations or amendments which have been issued are expected to have an impact on the group.
- 22 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
2.
OTHER REVENUE FROM CONTINUING OPERATIONS
Interest
Interest revenue from unrelated entities
Other Income
Profit from sales of investments in listed
companies
Miscellaneous and other income
Total Other Revenue from Continuing
Operations
Consolidated
2010
$
25,711
495,200
4,789
499,989
2009
$
50,937
944,402
100
944,502
Total Revenue from continuing operations
525,700
995,439
From discontinued operations
Other income (refer note 5)
3.
EXPENSES
45,209
45,209
-
-
Consolidated
2010
$
2009
$
Loss before income tax has been arrived at after
charging the following:
Exploration expenditure written off
Operating lease rentals
Depreciation - plant and equipment
Superannuation contributions
10,564
76,444
11,250
18,927
Movement in provision for employee entitlements
(2,836)
Impairment of investments
(1,488,644)
133,783
70,133
14,356
14,329
4,359
-
- 23 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
4.
INCOME TAX
Consolidated
2010
$
2009
$
-
-
-
-
The components of current income tax expense
comprise:
Current taxation
Income tax (benefit) reported in the income
statement
The prima facie tax on loss before income tax is
reconciled to the income tax expense as follows:
(Loss) / Profit before income tax
(1,625,021)
(642,991)
Prima facie tax payable / (benefit) on loss
@ 30% (2009:30%)
Non allowable items
Non-assessable income
Net deferred tax assets not brought to account
(127,479)
Income tax expense / (benefit)
-
(487,506)
(192,897)
3,167
(542,252)
611,818
(43,110)
778,259
-
Future income tax benefit arising from
un-recouped deductions at balance date,
for Australian tax resident entities.
Revenue losses
Capital losses
4,152,853
3,984,681
4,689,637
4,689,637
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 97 million (approximately A$14million
(2009:13 million). The benefit of these potential deferred tax assets 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.
- 24 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
5
(a)
DISCONTINUED OPERATIONS
Description
Kariba Kono (SL) Ltd
Operations ceased in 2008, mining equipment was removed and sold during 2009-10.
(b)
Financial performance and cash flow information
Revenue
Other income
Total revenue
Expenses
Site Operating expenses
General & administration expenses
Loss on disposal of fixed assets (refer note 12)
Impairment of fixed assets
Total expenses
Loss before income tax
Income tax expense
Profit /(Loss) after income tax from
discontinued operations
Consolidated
2010
$
2009
$
45,209
-
10,196
1,088
-
11,283
-
-
(314,220)
(125,758)
-
(195,491)
(635,469)
-
-
33,926
(635,469)
Net cash inflow/(outflow) from operating activities
33,926
Net cash inflow /(outflow) from investing activities
-
(439,978)
(195,491)
Net Cash generated (used) by discontinued
operations
33,926
(635,469)
(c) Carrying amounts of assets and liabilities
Cash and cash equivalents
Property plant and equipment
Non – current assets held for sale
Receivables & Prepayments
Total Assets
Trade Creditors
Total Liabilities
Net Assets
- 25 -
-
-
165,639
5
165,644
(46,024)
(46,024)
119,620
-
5
5
(46,024)
(46,024)
(46,019)
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
6.
SEGMENT INFORMATION
Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker has been identified as the Board of Directors which makes strategic decisions.
There is no goodwill attaching to any of the segments. There has been no impact on the measurement of the assets and liabilities
reported for each segment.
There are two operating segments for South Africa, these are exploration and development projects one Tormin Mineral Sands held in
Minerals Sands Resources Ltd and located on the West coast. The other is the Xolobeni Mineral Sands projected held in Transworld
Energy and Minerals located on the East coast.
In Australia the Group operates in two segments, investing in the securities of unrelated entities and interest on the deposit of surplus
funds. The other segment is the corporate overhead associated with the management and administration of the company’s projects and
corporate administration.
2010
Africa
Australia
Discontinued
operations
Totals
Tormin
Xolobeni
Investing
Unallocated
Revenue from operations
$
$
$
$
$
Gain from sales of investments
in listed companies
Interest earned from unrelated
entities
Interest earned from controlled
entity
Management fees from
controlled entity
Other revenue
Inter segment revenue
-
-
495,200
16,348
860
8,503
-
-
-
-
-
-
-
-
-
-
-
-
-
-
560,657
97,787
4,789
(658,444)
-
-
-
-
495,200
25,711
560,657
97,787
45,209
49,998
-
(658,444)
Total segment revenue
16,348
860
503,703
4,789
45,209
570,909
Segment results
(Loss) / Profit before income tax
Included in segment results is
the following:
(1,411)
(75)
(984,941)
(672,520)
33,926
(1,625,021)
Impairment of Investment
-
-
(1,488,644)
-
-
(1,488,644)
Total segment assets
4,751,504
9,610,919
6,277,651
254,846
48,143
20,943,063
Total segment liabilities
19,137
4,259
-
501,790
46,024
571,210
- 26 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
SEGMENT INFORMATION (CONTINUED)
2009
South Africa
Australia
Discontinued
operations
Totals
Tormin
$
Xolobeni
$
Investing
Unallocated
$
$
$
Revenue from operations
Profit from sales of investments in
listed companies
Interest earned from unrelated
entities
Interest earned from controlled
entity
Management fees from controlled
entity
Other income
Inter segment revenue
-
-
944,402
26,594
1,400
22,943
-
-
-
-
-
-
-
-
-
-
-
-
-
-
553,453
100,641
100
(654,094)
Total segment revenue
26,594
1,400
967,345
100
Segment results
-
-
-
-
-
-
-
944,402
50,937
553,453
100,641
100
(654,094)
995,439
Profit / (Loss) before income tax
2
-
967,345
(974,869)
(635,469)
(642,991)
Total segment assets
3,953,063
9,722,704
6,070,777
Total segment liabilities
23,922
1,087
-
216,278
213,172
165,639
20,128,461
46,024
284,205
7. PARENT ENTITY INFORMATION
The following details information related to the parent entity, Mineral Commodities Limited, at 31 December 2010.
The information presented here has been prepared using consistent accounting policies as presented in Note 1.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total Liabilities
Net Assets
Contributed equity
Retained earnings / (accumulated losses)
Option reserve
Other reserves
Total equity
(Loss) / Profit for the year
Other comprehensive income / (loss) for the year
Total comprehensive income / (loss) for the year
2010
$
6,572,260
17,242,283
23,814,543
501,772
-
501,772
2009
$
6,430,030
15,712,689
22,142,719
213,154
-
213,154
23,312,771
21,929,565
40,004,350
(20,792,991)
286,578
3,814,834
23,312,771
(965,091)
2,348,297
1,383,206
- 27 -
40,004,350
(19,827,900)
286,578
1,466,537
21,929,565
91,707
(1,193,263)
(1,101,556)
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
PARENT ENTITY INFORMATION (Continued)
TRADE AND OTHER RECEIVABLES – NON-CURRENT
Opening Balance
Loans and advances - controlled entities
Interest on Loans
Less impairment
Total Trade and other receivables
Parent Entity
2010
14,240,022
984,224
560,657
2009
11,841,568
2,203,374
553,453
-
(358,373)
15,784,903
14,240,022
Recovery of the loans to controlled entities is dependent upon the commercial exploitation of mining tenements held by the
controlled entities.
(a)
Impaired receivables and receivables past due
As at 31 December 2010 non current loans and advances with a nominal value of $1,804,651 (2009: $1,804,651) were
impaired.
This related to the following loans:
(i) $1,773,619 (2009:1,773,619) advanced to Kariba Kono (SL) Ltd. This company has been struck off the register refer note
14
(ii) $31,033 (2009: $31,033) advanced to Blackhawk Oil & Gas Ltd and Queensland Minex NL were also considered to be
impaired.
.
Risk Exposure
(b)
Information about the Group’s exposure to credit risk, foreign exchange and interest rate risk is provided in Note 24.
8.
CASH AND CASH EQUIVALENTS
Cash at Bank
Consolidated
2010
$
191,506
191,506
2009
$
153,566
153,566
The effective interest rate on cash at bank in 2010 was 3.50% (2009:3.00%)
(a)
Interest rate risk exposure
The consolidated entity’s exposure to interest rate risk is discussed in Note 24.
(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 Cash Flows.
- 28 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
9.
TRADE AND OTHER RECEIVABLES – CURRENT
Trade receivables
Security deposits¹
Other receivables
Consolidated
2010
$
145
409,569
118,272
527,986
2009
$
167
423,352
115,839
539,358
¹
Includes a secured deposit of $397,037 (2009 $410,574) with First Rand bank held as security for a performance guarantee
issued by the Bank in favour of the South African Department of Minerals and Energy in respect of Mineral Sands Resources
(Pty) Ltd obligations under the Tormin Mining right.
There are no receivables past due and impaired
(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
2010 and 2009
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned
above. Refer to Note 24 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 exposure to foreign exchange and interest rate Risk in relation to trade and other receivables is
provided in Note 24.
- 29 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
10.
FINANCIAL ASSETS - CURRENT
Available for sale Investments
Investments in companies listed on a recognised
stock exchange - shares at fair value
At the beginning of the year
Cost of Allied Gold Ltd Shares sold
Disposal of other listed shares
Fair value movement
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
Consolidated
2010
$
2009
$
3,477,483
6,580,870
(694,760)
(1,144,814)
-
(65,000)
2,390,277
(1,893,573)
5,173,000
3,477,483
At the beginning of the year
2,593,294
Investment this year
Fair value movement
Impairment
Total available for sale investments in companies
not listed on a recognised stock exchange
376,224
1,488,643
728,427
-
-
(1,488,643)
-
1,104,651
2,593,294
Total Financial Assets - Current
6,277,651
6,070,777
Available for sale financial assets comprise investments in the ordinary share capital of various entities. There are no fixed
returns or fixed maturity dates attached to these investments.
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been
defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices)
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
- 30 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
10.
FINANCIAL ASSETS – CURRENT (Continued)
2010
Level 1
Level 2
Level 3
Total
Available for sale financial assets
Total
2009
5,173,000
5,173,000
-
-
1,104,651
6,277,651
1,104,651
6,277,651
Level 1
Level 2
Level 3
Total
Available for sale financial assets
Total
3,477,483
3,477,483
-
-
2,593,294
6,070,777
2,593,294
6,070,777
Fair Value of Investment in Allied Gold Limited
The market value of the investment in Allied Gold at balance date was $5,100,000 based on a price of 68 cents per share. The
remaining available for sale assets had a market value of $73,000 at balance date.
The level 3 investment in an unlisted entity has been valued by using information provided by the Company together with
information from an independent source. Assumptions and estimates have been used in this valuation. Should any of these
assumptions or estimates change, this could significantly effect the carrying value of this investment.
(a) Risk Exposure
Information about the Group’s exposure to credit risk, foreign exchange and interest rate risk is provided in Note 24.
11.
OTHER – CURRENT
Prepayments
12.
PROPERTY, PLANT AND EQUIPMENT
(a)
Plant and office equipment - at cost
Accumulated depreciation
Total property, plant and equipment
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
Additions
Impairment
Depreciation
Loss on disposal of fixed assets
Transferred to Available for sale assets
Carrying amount at end of year
- 31 -
Consolidated
2010
$
10,376
2010
72,147
(64,770)
7,377
26,515
700
-
(11,250)
(8,588)
2009
$
13,351
2009
307,753
(281,238)
26,515
373,060
28,942
(195,491)
(14,356)
-
-
(165,639)
7,377
26,515
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
12.
PROPERTY, PLANT AND EQUIPMENT (Continued)
(b) Non-current asset held for sale
Available for sale plant and equipment 31 December 2009
Transferred from fixed assets
Proceeds of sale
Loss on disposal (refer note 5)
2010
$
165,639
2009
$
-
-
165,639
(164,551)
(1,088)
-
-
Available for sale plant and equipment 31 December 2010
-
165,639
In 2009 adjustments to impairment losses of $195,491 were brought to account in respect of the available for sale Plant and
Equipment ex Sierra Leone. The impairment value was calculated to write off the full carrying value less the estimated net sale
value.
13.
EXPLORATION AND DEVELOPMENT EXPENDITURE
Exploration expenditure - costs
carried forward in respect of areas of
interest in:
Exploration and evaluation phases
Total exploration and evaluation
expenditure
Reconciliation of the carrying
amount of exploration and
development expenditure at the
beginning and end of the current and
the previous financial year.
Carrying amount at beginning of
year
Expenditure during the year
Impairment of exploration
expenditure
Foreign exchange movements
Write off discontinued projects
Consolidated
2010
$
2009
$
13,928,167
13,159,249
13,928,167
13,159,249
13,159,249
12,026,008
1,005,691
1,394,052
(226,209)
(10,564)
-
(127,028)
(133,783)
Carrying amount at end of year
13,928,167
13,159,249
- 32 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
13.
EXPLORATION AND DEVELOPMENT EXPENDITURE (Continued)
In March 2007, Mineral Commodities Limited’s (“MRC’s”) majority owned South African subsidiary Transworld Energy and
Minerals Resources SA Pty Ltd (“TEM”) lodged the Mining Right Application for the Xolobeni Project with the Department of
Minerals and Energy (“DME”).
On 4 August 2008 MRC announced that it had received notification from the DME that the Mining Right for the Kwanyana
block within the Xolobeni Project area would be granted. The remaining blocks (Sikombe, Mnyameni and Mpahlane) would
then be held under a Prospecting Right valid to 2010 which could be extended until applications are made to convert each
block into a Mining Right.
The Kwanyana block represents approximately 30% of the mining area and contains around 46% of the total insitu ilmenite
resource.
However, in September 2008, the Company was advised that, on behalf of the AmaDiba Crisis Committee (“ACC”) and its
members, the Grahamstown office of the Legal Resources Centre filed a Notice of Appeal (“the Appeal”) with the Minister of
the DME. The ACC requested the Minister to suspend and then appeal the decision to grant the Mining Right.
The Company is awaiting the outcome of an appeal lodged with the Minister of the Department of Minerals and Energy
(“DME”).
The Company is aware that the task team established to advise the Mineral Resources Minister in South Africa on the Mining
Right has submitted its report and recommendations to the Director-General without a public hearing as was initially
anticipated.
The Department of Mineral Resources then advised the Company in meetings that consultation with various government
departments is required prior to handing down a final decision.
In response to the Company’s request for clarity over the appeal, the DME has responded by informing the Company that the
Minister has appointed a Task Team, consisting of the Mining and Minerals development Board. The term of office of this
Board expired and a new board is yet to be appointed.
The Director-General then issued an instruction that the appeal be finalised by the establishment of a new panel, which will
hear oral arguments by the relevant parties and then make a recommendation to the Minister. It was envisaged that the
hearing would be arranged at the DMR Durban regional Office in mid February 2011.
In March the Director General of Mineral Resources (DG) in South Africa advised MRC’s subsidiary Transworld Energy and
Mineral Resources (SA) (Pty) Ltd (TEM) that the Department of Mineral Resources in South Africa (DMR) no longer intends to
embark on oral hearings in respect of the appeal against the Xolobeni mining right awarded to TEM on the Kwanyana Block as
previously advised. The DG has advised that the DMR will now proceed to advise the Minister on the appeals based on the
available documentation. TEM has been advised that the Minister will consider the appeals towards the end of March 2011. To
this date of this report, the Company still awaits the outcome from the Minister.
MRC believes that due to the importance of the Xolobeni Project to the area, the Minister will continue to support the issuing of
the Xolobeni Mining Right. The Company has therefore taken steps to minimise expenditure on the project pending a
resolution of the Appeal.
Recoupment of carried forward exploration and evaluation expenditure is dependent upon the granting of mining rights and
successful development and commercial exploitation of each area of interest, or otherwise by their sale at an amount not less
than the carrying value.
- 33 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
14
SUBSIDIARIES
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
Kariba Kono (S.L.) Ltd ¹
Blackhawk Oil & Gas Ltd
Less Impairment
Class of
Share
Place of
Incorporation
Equity Holding
Cost to Company
2010
%
2009
%
2010
%
2009
$
Australia
Australia
Australia
Australia
Australia
South Africa
Australia
Sierra Leone
Australia
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
100
100
90
100
100
100
-
100
100
100
90
100
100
100
100
100
1,450,001
1,450,001
4,718,302
4,718,302
-
-
-
1,000
-
-
-
-
1,000
-
100,000
100,000
6,269,303
6,269,303
(4,818,302)
(4,818,302)
1,451,001
1,451,001
¹ The Company received confirmation from the Registrar of Companies in Sierra Leone that in accordance with a request from the
shareholder Mineral Commodities Ltd Kariba Kono (S.L) Ltd had been struck off the Register of companies on 27th October 2010.
Place of
Incorporation
Equity Holding
Cost to Company
2010
%
2009
%
2010
$
2009
$
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
56
50
100
100
100
56
50
100
100
100
2,500,000
2,500,000
-
-
-
-
-
-
-
-
- 34 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
15.
NON-CONTROLLING INTERESTS
Non-controlling interests in subsidiaries comprise:
Interest in retained earnings at the beginning
of the financial year after adjusting for non-
controlling equity interests in the entities
acquired during the financial year
Operating loss
Share capital
Reserves
Total non-controlling interests
Consolidated
Entity
2010
$
2009
$
-
-
54,748
124,101
178,849
-
-
54,748
124,101
178,849
During 2008 two subsidiaries’ ownership interests were restructured to comply with South African legislation. Ordinary shares
were issued to the Black Empowerment Parties to effect these changes in accordance with the respective agreements entered
into with the Black Empowerment partners.
16.
TRADE AND OTHER PAYABLES - CURRENT
Trade payables - unsecured
Other payables and accruals - unsecured
(a)
Fair Values and credit risk
Consolidated
2010
340,660
200,880
541,540
2009
$
67,488
184,211
251,699
Due to the short term nature of these payables the carrying values represent their respective fair values as at 31 December
2010 and 2009.
(b)
Foreign Exchange and Interest Rate Risk
Information about the Group’s exposure to foreign exchange and interest rate Risk in relation to trade and other payables is
provided in Note 24.
17.
CONTRIBUTED EQUITY
Balance at beginning of financial year
Consideration for shares in Africa Uranium Ltd
Costs of capital raising
2010
Number of
shares
143,393,385
-
-
2009
Number of
shares
141,393,385
2,000,000
-
2010
$
40,004,350
-
-
2009
$
39,804,350
200,000
-
Balance at end of financial year
143,393,385
143,393,385
40,004,350
40,004,350
In June 2009 the Company issued 2 million shares as part consideration to acquire a 10% interest in Africa Uranium Ltd.
- 35 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
CONTRIBUTED EQUITY (Continued)
(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 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 issue new shares or sell assets in order to maintain
sufficient funds necessary to continue its operations.
As a junior mineral explorer debt financing is not an option until such time at the Group’s projects have reached a stage at
which debt financing can be obtained, therefore the Company considers its contributed equity as it’s capital during this period.
Investments such as the shareholding in Allied Gold Ltd are also regarded as part of the capital base and sold as required to
fund ongoing operations.
18.
RESERVES
Consolidated
2010
$
2009
$
General Reserve
2,437,582
2,437,582
Financial asset revaluation reserve
4,097,207
1,706,929
Listed options reserve
286,578
286,578
Foreign currency translation reserve
(995,772)
(758,112)
5,825,595
3,672,977
Nature and purpose of reserves
General Reserve
The General Reserve arose from the issue of shares in MRC Resources Pty Ltd to an entity outside the economic entity.
Financial asset revaluation reserve
The financial asset revaluation reserve arises from the revaluation at balance date of available for sale financial assets.
Foreign Currency Translation reserve
The foreign currency translation reserve records the unrealised foreign currency differences arising from the translation of
operations into the presentation currency of the group. Refer to accounting policy Note 1 (e).
Share Based Payments Reserve
The share based payments reserve was used to recognise the fair value of options issued to employees but not exercised and
the fair value of shares issued to employees. These options were not exercised by the expiry date of 30 September 2009 and
have thus lapsed.
Listed Options Reserve
Proceeds form the issue of 57,357,208 listed options pursuant to an entitlement issue.
- 36 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
19.
LOSS PER SHARE
(a) Basic loss per share
From continuing operations attributable to the ordinary
shareholders of the company (cents per share)
From discontinued operations (cents per share)
Total basic loss per share attributable to the ordinary
equity holders of the company (cents per share)
Weighted average number of ordinary shares outstanding during the
year used in calculation of basic loss per share
Loss used in the calculation of basic loss per share from
continued operations
Profit / (Loss)Loss used in the calculation of basic loss
per share from discontinued operations
Consolidated
2010
cents
(1.158)
0.024
(1.134)
2009
cents
(0.005)
(0.445)
(.045)
143,393,021
142,434,481
(1,660,034)
(7,522)
35,013
(635,469)
There are 57,357,208 options with an exercise price of 20 cents and an expiry date of 31 December 2012 on issue as at 31 December
2010. These potential ordinary shares are not considered dilutive and accordingly have not been used to calculate dilutive earnings per
share.
20.
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 paid or due and payable to the auditors
Auditors of the parent entity
Audit and review
Non-related practice of the auditors
Audit of subsidiaries
21.
KEY MANAGEMENT PERSONNEL DISCLOSURES
Key Management Personnel Compensation
Key Management Personnel
Short-term employee benefits
Post-employment benefits
Consolidated
2010
$
2009
$
39,492
48,752
6,558
46,050
6,364
55,116
Economic Entity
2009
$
352,237
3,963
356,200
2010
$
224,037
3,963
228,000
- 37 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (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 Consolidated entity are set out below:
2010
Key Management
Personnel
Mark Caruso
Joseph Caruso
Greg Steemson
Peter Torre
2009
Key Management
Personnel
Mark Caruso
Joseph Caruso
Greg Steemson
Peter Torre
Balance at
1 January
2010
7,380,396
7,380,396
604,000
-
Balance at
1 January
2009
-
-
-
250,000
Granted as
Remuneration
Options
Exercised
Options
Lapsed
Net change
other
Balance at
31 Dec 2010
Vested and
exercisable
Unvested
-
-
-
-
-
-
-
-
-
-
-
-
7,380,396
7,380,396
7,380,396
7,380,396
-
-
-
604,000¹
200,000
200,000
604,000
200,000
-
-
-
-
Granted as
Remuneration
Options
Exercised
Options
Lapsed
Net change
other
Balance at
31 Dec 2009
Vested and
exercisable
Unvested
-
-
-
-
-
-
-
-
-
-
-
7,380,396
7,380,396
7,380,396
7,380,396
7,380,396
7,380,396
604,000
604,000
604,000
(250,000)
-
-
-
-
-
-
-
The net change other above was the take up of the entitlement issued undertaken by the Company during the period.
¹
Options held on 31 March 2011 (date of resignation)
(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 Consolidated entity are set out below:
2010
Director
Mark Caruso
Joseph Caruso
Greg Steemson
Peter Torre
2009
Director
Mark Caruso
Joseph Caruso
Greg Steemson
Peter Torre
Balance at
1 January 2010
Received as
Remuneration
Options
Exercised
Net change other
Balance
31 Dec 2010
19,063,615
19,050,988
1,510,000
-
-
-
-
-
Balance at
1 January ‘09
Received as
Remuneration
Options
Exercised
18,463,615
18,450,988
1,510,000
-
-
-
-
-
- 38 -
-
-
-
-
-
-
-
-
2,519,000
2,519,000
-
500,000
21,582,615
21,569,988
1,510,000²
500,000
Net change other
600,000
600,000
-
-
Balance
31 Dec ‘09
19,063,615
19,050,988
1,510,000
-
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
Shareholdings of key management personnel (Continued)
Joseph and Mark Caruso are both directors of Zurich Bay Holdings Pty Ltd which has a relevant interest in 21,569,988 shares.
The net change other above was the take up of the entitlement issue in 2009 undertaken by the Company during that period
and acquisitions on market in 2010.
² Shareholding at 31 March 2010 (date of resignation)
All equity transactions with key management personnel, other than those arising from the exercise of remuneration options,
have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at
arm’s length.
(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 except as disclosed in this note and Note 22.
22.
RELATED PARTY TRANSACTIONS
There were no transactions with directors or director related entities during the financial period other than the payment of
directors’ remuneration and the sale of an excavator retrieved from Sierra Leone to Zurich Bay holdings a company associated
with Mark & Joseph Caruso for $115,000.(2009:Nil)
Mineral Commodities Ltd is a shareholder in Allied Gold Ltd owning 7,500,000 shares (2009: 10,534,379) of the issued share
capital at balance date. Mark Caruso, Greg Steemson and Peter Torre are also officers of Allied Gold Limited.
Wholly owned group
The group consists of Mineral Commodities Limited and its subsidiaries. Details of entities in the group are set out in Note 14.
Transactions between Mineral Commodities Limited and other entities in the group during the years ended 31 December 2010
and 31 December 2009 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.
An impairment loss was booked on the receivable from Kariba Kono in 2009 all other inter company receivables are expected
to be receivable in full.
Key management personnel
Disclosures relating to key management personnel are set out in Note 21.
- 39 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
23(a)
RECONCILIATION OF LOSS FOR THE YEAR TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Profit/(loss) after income tax and outside equity
interest
Depreciation
Impairment losses
Consolidated
2010
$
2009
$
(1,625,021)
(642,991)
11,250
1,488,644
14,356
195,491
Provision for Employee Entitlements
(2,836)
4,359
(Profit)/loss on sale of investment in listed
companies
Loss on sale of available for sale assets
Loss on disposal of fixed assets
Exploration expenditure written off
(495,200)
(944,402)
1,088
8,589
10,564
-
-
133,783
Exploration expenditure capitalised
(1,015,529)
(1,394,052)
Other non-cash items
1,827
(46,866)
Changes in assets and liabilities during the year:
Increase (decrease) in trade payables and other
liabilities
(Increase) decrease in trade and other
receivables
287,005
(789,357)
11,372
1,702,916
(Increase) decrease in prepayments
2,975
(206)
Net cash inflow / (outflow) from operating
activities
(1,315,272)
(1,766,969)
23(b)
Non-cash Investing and Financing Activities
The group has no available finance facilities as at balance date.
- 40 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
24.
FINANCIAL RISK MANAGEMENT
The Group and the Parent entity hold the following financial instruments:
Financial Assets
Cash at bank and short term bank deposits
AA1
BBB
Total Cash at bank and short term bank deposits
Trade and other receivables
Counterparties with external credit rating (Moody’s)
AAA
BBB
Counterparties without external credit rating
Sundry trade receivables
Total Receivables
Consolidated
2010
$
2009
$
188,895
151,739
2,611
1,827
191,506
153,566
46,535
431,645
478,180
21,353
509,837
531,190
49,806
527,986
8,168
539,358
Available for sale investments
6,277,651
6,070,777
Financial Liabilities
Trade Creditors
Other payables
6,997,143
6,763,701
340,660
200,880
541,540
67,488
184,211
251,699
6,455,603
6,512,002
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. Risk management is
carried out by the Board of Directors.
The Group does not hold any derivative financial instruments.
- 41 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
24.
FINANCIAL RISK MANAGEMENT (Continued)
Financial Risk
The main risk the Group is exposed to through its financial instruments are exchange rate risk, interest rate risk, liquidity risk,
credit risk and price risk.
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. The
primary exposure is in respect to the South African Rand arising from the investments in and loans to South African entities.
Foreign exchange risk arises from assets and liabilities denominated in a currency that is not the Reporting company’s
functional currency and net investments in foreign operations.
The Group does not hold any derivatives or foreign exchange contracts to hedge it’s foreign exchange risk exposure.
Based on the financial instruments held at the reporting date, the sensitivity of the Group’s profits after tax for the year and
equity at the reporting date to movements in the Australian Dollar to South African Rand was:
o Had the Australian Dollar weakened / strengthened by 5% against the South African Rand with all other variables
remaining constant, the Group’s profit after tax would have been $755,946 lower / higher (2009: 678,702 lower /
higher) and equity would have been $755,946 lower / higher (2009:678,702 lower / higher) The reasonable possible
change is based on historical changes in rates estimated by management.
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 investments in unlisted entities.
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 carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the
economic entity’s maximum exposure to credit risk without taking account of the value of any collateral or other security
obtained.
Interest Rate Risk
The Group’s exposure to interest rate risk relates primarily to the Group’s floating interest rate cash balance which is subject to
movements in interest rates. The Board monitors its cash balance on an ongoing basis and liaises with its financiers regularly to
mitigate cash flow interest rate risk. Interest is charged on the loans from the parent company to the South African subsidiaries
at rates permitted by the South African reserve bank. This interest is eliminated on consolidation.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash to meet commitments as and when they fall due. The
Board monitors rolling cash flow forecasts to manage liquidity risk. The only financial liabilities of the Group at balance date
are trade and other payables, these amounts are unsecured.
As at reporting date the Group had sufficient cash reserves to meet its requirements. Should additional cash be required to
fund operations this may be raised from the sale of listed equities held as available for sale. The Group therefore had no other
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.
Price Risk
The Group has an exposure to equity securities price risk. This arises from investments held by the Group and classified on
the Statement of Financial Position as available for sale financial assets. The Group is not exposed to commodity price risk.
- 42 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
FINANCIAL RISK MANAGEMENT (Continued)
The following table summarises the impact of any increases/decreases in the market price of available for sale equity
investments. The percentage used is based on possible volatility of the share price and market value of the investments held.
The 30% reasonable movement is based on managements estimate of historical changes.
2010
Carrying
amount
$
Price Risk
-30%
+30%
Profit
$
Equity
$
Profit
$
Equity
$
Available for sale
investments
Listed Shares & Options
Unlisted shares
5,173,000
1,104,651
6,277,651
(1,551,900)
(331,395)
(1,883,295)
1,551,900
331,395
1,883,295
2009
Carrying
amount
$
Price Risk
-30%
+30%
Profit
$
Equity
$
Profit
$
Equity
$
Available for sale
investments
Listed Shares & Options
Unlisted shares
3,477,483
2,593,294
6,070,777
(1,043,245)
(777,988)
(1,821,233)
-
-
-
-
-
-
1,043,245
777,988
1,821,233
25.
(a)
SHARE BASED PAYMENTS
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 was designed to provide long term incentives for senior staff to deliver long
term shareholder returns. Under the plan, participants were granted options which vested immediately but were not
exercisable until 30 September 2009. Participation in the plan was at the Boards discretion and no individual had a contractual
right to participate in the plan or to receive any guaranteed benefits. At the expiry date none of the options were exercised and
consequently lapsed.
Options granted under the plan did not carry any dividend or voting rights. When exercisable, each option was convertible into
one ordinary share within 10 business days.
Set out below are summaries of options granted under the plan:
2009
Grant date
Expiry date
16-Nov-07
30-Sep-09
23-Nov-07
30-Sep-09
23-Nov-07
30-Sep-09
Exercise
price
Balance at
start of the
year
Granted
during the
year
Exercised
during
the year
Forfeited
during the
2009 year
Balance
at end of
the year
Vested and
exercisable
at end of
the year
$0.30
$0.30
$0.40
1,250,000
500,000
500,000
2,250,000
-
-
-
-
- 43 -
-
-
-
-
(1,250,000)
(500,000)
(500,000)
(2,250,000)
-
-
-
-
-
-
-
-
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Notes to the Financial Statements (continued)
26 .
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
2010
$
21,447
1,875
23,322
2009
$
76,444
9,572
86,016
The operating lease is a rental agreement for the Group’s office premises in Welshpool. The previous lease expired in February
2011 and the Group relocated to smaller premises in Kewdale. The new lease is for a term of 1 year with an option to renew for
a further year.
(b)
Exploration Tenement Leases – Commitments for Expenditure.
In order to maintain current rights of tenure to exploration tenements, the consolidated entity is required to outlay lease rentals
and to meet the minimum expenditure requirements which are not considered to be material.
27
CONTINGENT LIABILITIES
There are no Contingent Liabilities.
28.
SUBSEQUENT EVENTS
Share Issue
In March 2011, the Company raised $1.2 million via a placement of 10,000,000 fully paid ordinary shares at $0.12 cents per
share. The placement was made to M&G Investments Limited a UK based Institution.
Xolobeni Project
The Director General of Mineral Resources (DG) in South Africa advised MRC’s subsidiary Transworld Energy and Mineral
Resources (SA) (Pty) Ltd (TEM) that the Department of Mineral Resources in South Africa (DMR) no longer intends to embark
on oral hearings in respect of the appeal against the Xolobeni mining right awarded to TEM on the Kwanyana Block as
previously advised. The DG has advised that the DMR will now proceed to advise the Minister on the appeals based on the
available documentation. TEM has been advised that the Minister will consider the appeals towards the end of March 2011.
Investments
Allied Gold Ltd
A further 1,000,000 Ordinary Shares in Allied Gold Ltd were sold in February 2011 net proceeds received were $577,993.
Petro Ventures International Ltd (PVIL)
The Company received a further update from PVIL in March 2011 advising that the general meeting of shareholders would be
deferred due to PVIL receiving notification from the Romanian Authorities that the assignment of the Romanian Licenses had
not been granted. The Directors of PVIL have advised that they are considering their options in this regard and will update
their shareholders accordingly.
No other 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, other than what has been disclosed elsewhere in this financial report, in the opinion of the
Directors of the Company, to affect significantly the operations of the Group, the results of those operations or the state of
affairs of the Group in future financial years unless otherwise disclosed in this Directors Report.
- 44 -
For personal use only
Mineral Commodities Limited
Annual Financial Statements for the year ended 31 December 2010
Directors’ Declaration
The Directors of the Company declare that:
1.
The financial statements, comprising the statement of comprehensive income, statement of financial position, statement of cash
flow, statement of changes in equity and accompanying notes, are in accordance with the Corporations Act 2001 including;
(a)
complying with Australian Accounting Standards and the Corporations Regulations 2001 and,
(b)
give a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and of it’s performance for
the year ended on that date.
The Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with
International Financial Reporting Standards.
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.
2.
3.
The remuneration disclosures set out on pages 7 to 9 of the Directors Report as part of the audited remuneration report comply
with S300A of the Corporations Act 2001 for the year ended 31 December 2010.
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 Caruso
Non Executive Director
Dated at Perth, Western Australia this 31st day of March 2011
- 45 -
For personal use only
Tel: +8 6382 4600
Fax: +8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
31 March 2011
Mineral Commodities Limited
The Board of Directors
Unit 15, Level 1
51 – 53 Kewdale Road
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 2010, I declare
that to the best of my knowledge and belief, there have been no contraventions of:
(cid:127)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
(cid:127)
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 Audit (WA) Pty Ltd
Perth, Western Australia
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards
Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
-46-
For personal use only
Tel: +8 6382 4600
Fax: +8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF MINERAL COMMODITIES LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Mineral Commodities Limited, which
comprises the consolidated statement of financial position as at 31 December 2010, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity
and the consolidated statement of cash flows for the year then ended, notes comprising a summary
of significant accounting policies and other explanatory information, and the directors’ declaration
of the consolidated entity comprising the company and the entities it controlled at the year’s end
or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act
2001 and for such internal control as the directors determine is necessary to enable the preparation
of the financial report that is free from material misstatement, whether due to fraud or error. In
Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101 Presentation
of Financial Statements, that the financial statements comply with International Financial
Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation of the financial report that gives a true and fair view in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made
by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,
which has been given to the directors of Mineral Commodities Limited, would be in the same terms
if given to the directors as at the time of this auditor’s report.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards
Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
-47-
For personal use only
Opinion
In our opinion:
(a) the financial report of Mineral Commodities Limited is in accordance with the Corporations Act
2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 31
December 2010 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
(b) the financial report also complies with International Financial Reporting Standards as disclosed
in Note 1(a)
Emphasis of Matter
Without qualification to the opinion expressed above, attention is drawn to Note 13 in the financial
statements regarding the Notice of Appeal filed in relation to the Mining Right over the Xolobeni
area of interest. Pending the outcome of this appeal the issue date of the Mining Right has been
deferred. Expenditure has been minimised until outcome of the appeal has been resolved. The
ultimate outcome of the matter cannot presently be determined, and no impairment in respect of
this area has been recognised. If the appeal by third parties is successful, the capitalised
expenditure of $9,610,919 in relation to the Xolobeni area of interest may not be recoverable at
the amounts stated in the financial statements.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 31
December 2010. The directors of the company are responsible for the preparation and presentation
of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Mineral Commodities Limited for the year ended 31
December 2010 complies with section 300A of the Corporations Act 2001.
BDO Audit (WA) Pty Ltd
Peter Toll
Director
Perth, Western Australia
Date this 31st day of March 2011
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Mineral Commodities Limited
Statement of Corporate Governance
Statement of Corporate Governance
The Board of Directors of Mineral Commodities Limited (MRC) is responsible for the corporate governance of the Company. The Board
guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they
are accountable.
In accordance with the Australian Securities Exchange (ASX) Corporate Governance Council’s (“CGC”) “Principles of Good Corporate
Governance and Best Practice Recommendations” the Corporate Governance Statement must contain certain specific information and
must disclose the extent to which the Company has followed the guidelines during the period. Where a recommendation has not been
followed, that fact must be disclosed together with the reasons for the departure.
The Company’s corporate governance practices were in place throughout the year and are compliant, unless otherwise stated, with the
Corporate Governance Council’s principles and recommendations, which are noted below.
Principle 1.
Principle 2.
Principle 3.
Principle 4.
Principle 5.
Principle 6.
Principle 7.
Principle 8.
Lay solid foundations for management and oversight
Structure the Board to add value
Promote ethical and responsible decision making
Safeguard integrity in financial reporting
Make timely and balanced disclosure
Respect the rights of shareholders
Recognise and manage risk
Remunerate fairly and responsibly
A summary of the corporate governance policies and practices adopted by MRC is set out below.
Role of the Board of Directors
The Board of MRC is responsible for setting the Company’s strategic direction and providing effective governance over MRCs’ affairs in
conjunction with the overall supervision of the Company’s business with the view of maximising shareholder value. The Board's key
responsibilities are to:
(a) chart the direction, strategies and financial objectives for MRC and monitor the implementation of those policies, strategies and
financial objectives;
(b) monitor compliance with regulatory requirements, ethical standards and external commitments;
(c) appoint, evaluate the performance of, determine the remuneration of, plan for the succession of and, where appropriate, remove the
Chief Executive Officer if in place or similar person acting in the executive capacity; and
(d) ensure that the Board continues to have the mix of skills and experience necessary to conduct MRCs' activities, and that appropriate
directors are selected and appointed as required.
In accordance with MRCs’ Constitution, the Board delegates responsibility for the day–to–day management of MRC to the Managing
Director (subject to any limits of such delegated authority as determined by the Board from time to time). Management as a whole is
charged with reporting to the Board on the performance of the Company.
Board structure and composition
The Board currently is comprised of 3 directors, none of which are independent non–executive Directors. Details of each directors skill,
expertise and background are contained within the directors report included with the company’s annual financial statements.
Independence, in this context, is defined to mean a non–executive Director who is free from any interest and any business or other
relationship that could, or could reasonably be perceived to, materially interfere with the Director's ability to act in the best interests of MRC.
The definition of independence in ASX Recommendation 2.1 is taken into account for this purpose.
It is the Board’s intention to increase the size of the Board as the scale of activities develops, and such expansion will see an introduction
of independent non-executive directors. In the absence of such scale, the Board does not believe that the existence of further independent
non-executive directors would be of benefit to the Company.
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.
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Mineral Commodities Limited
Statement of Corporate Governance
Statement of Corporate Governance (Cont’d)
Any equity based compensation of directors is required to be approved in advance by shareholders.
Presently, the roles of Chairman and Managing Director have been separated.
The Managing Director is responsible for supervising the management of the business as designated by the Board. This ensures the
appropriate independent functioning of the Board and management.
MRCs’ non–executive Directors may not hold office for a continuous period in excess of three years or past the third annual general
meeting following their appointment, whichever is longer, without submitting for re–election. Directors are elected or re–elected, as the case
may be, by shareholders in a general meeting. Directors may offer themselves for re–election. A Director appointed by the Directors (e.g.,
to fill a casual vacancy) will hold office only until the conclusion of the next annual general meeting of MRC but is eligible for re–election at
that meeting.
Under MRCs’ Constitution, voting requires a simple majority of the Board. The Chairman holds a casting vote.
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.
Board and management effectiveness
Responsibility for the overall direction and management of MRC, its corporate governance and the internal workings of MRC rests with the
Board notwithstanding the delegation of certain functions to the Managing Director and management generally (such delegation effected at
all times in accordance with MRC’ Constitution and its corporate governance policies).
An evaluation procedure in relation to the Board, individual Directors and Company Executives has not taken place since the inception of
the Company. Given the small scale of the Company’s current activities, the performance of the executives and directors is easily
monitored and discussed in Board meetings. Once the nature and scale of activities increases, the Company will initiate formal evaluation
procedures.
Financial reporting, Internal Control and Risk Management
The Board has overall responsibility for MRC;s systems of internal control. These systems are designed to ensure effective and efficient
operations, including financial reporting and compliance with laws and regulation, with a view to managing risk of failure to achieve
business objectives. It must be recognized however that internal control systems provide only reasonable and not absolute assurance
against the risk of material loss.
The Board reviews the financial position of MRC on a weekly basis. For annual financial statements, the Managing Director and the
Company Secretary are required to state 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 in accordance with the relevant accounting standards; and
are founded on a system of risk management and internal compliance and control and the Company’s risk management and
internal compliance and control system is operating efficiently and effectively in all material respects.
Management has not formally reported to the Board on the effectiveness of the Company’s management of material business risk.
Management and the Board interact on a day to day basis and risk is currently being considered on an informal day to day basis across the
financial, operational and organisation aspects of the Company’s business.
Committees of the Board of Directors
The Board has not established any permanent committees, namely an Audit and Risk Committee and a Remuneration and Nomination
Committee. The Board and scale of actives is not of a sufficient size to warrant separate committees in this regard.
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Mineral Commodities Limited
Statement of Corporate Governance
Statement of Corporate Governance (Cont’d)
In the absence of an audit committee, 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.
Timely and balanced disclosure
MRC is committed to promoting investor confidence and ensuring that shareholders and the market have equal access to information and
are provided with timely and balanced disclosure of all material matters concerning the Company. Additionally, MRC recognises its
continuous disclosure obligations under the ASX Listing Rules and the Corporations Act.
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.
• Preparing quarterly activity and cash flow reports.
• 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 Corporation Law.
• Reporting to shareholders at annual general meetings on the Company’s activities during the year. All shareholders that are unable to
attend these meetings are encouraged to communicate issues or ask questions by writing to the Company.
The Company has adopted a formal disclosure policy. The Board and management are aware of their responsibilities in respect of
identifying material information and coordinating disclosure of that information where required by the ASX Listing Rules.
Ethical and responsible decision–making
Code of Conduct
The Board has created a framework for managing the Company including internal controls, business risk management processes and
appropriate ethical standards.
The Board has adopted practices for maintaining confidence in the Company's integrity including promoting integrity, trust, fairness and
honesty in the way employees and Directors conduct themselves and MRCs' business, avoiding conflicts of interest and not misusing
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Mineral Commodities Limited
Statement of Corporate Governance
Statement of Corporate Governance (Cont’d)
company resources. A formal Code of Conduct has not been adopted for all employees and Directors of MRC due to the total number of
employees and director’s only being 6.
Securities Trading Policy
A Securities Trading Policy has been adopted by the Board to set a standard of conduct, which demonstrates MRC’s commitment to
ensuring awareness of the insider trading laws, and that employees and Directors comply with those laws. The Securities Trading Policy
imposes additional share trading restrictions on Directors, the Company Secretary, executives and employees involved in monthly financial
accounting processes ("specified persons").
Under the Securities Trading Policy, specified persons are only permitted to buy and sell securities if they do not possess non–public price
sensitive information and trading occurs outside of specified restricted periods. These periods are the periods commencing on the first day
of the month before the end of the half–year or full year period and ending on the next business day after the announcement of the results
for that period. In addition, before a specified person can deal in MRC’s securities they must obtain clearance from the appropriate officer,
confirming that there is no reason why they cannot trade.
Other Information
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.
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Mineral Commodities Limited
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 8 April 2011.
Twenty Largest Shareholders
RRaannkk
NNaammee
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
16
16
16
16
16
16
16
16
17
18
19
20
HSBC Custody Nominees (Australia) Limited
Zurich Bay Holdings Pty Ltd
JP Morgan Nominees Australia Limited
Mr Anthony Grant Melville & Mrs Elaine Sandra Melville < Melville Family
Super A/C>
Mr Keng Heng Goh
Miss Kathryn Yule
Mr Kevin Anthony Leo & Mrs Leticia Leo
International Mining Services Limited
Mr David Geoffrey Vincent & Mrs Giuseppina Antonina Vincent
Iec Investment Pty Ltd
National Nominees Limited
International Mining Services Ltd
Mr Robert Cameron Galbraith
MS Kathryn Yule
Mr David Geoffrey Vincent
Mr Emanuel Richard Brian Dillon
Zurich Bay Holdings Pty Ltd
Mr Gregory Hugh Steemson & Mrs Barbara Fay Steemson
Naranda Falls Pty Ltd
Mr William Davidson Meek
Mr Ian Thompson
Mr Ashwini Chandra
Mr Ashlley Walliss
Kingarth Pty Ltd
Mr Hayden Robert Aspinall
Mr Donald Boyd
Mr Harry Katsamakis
Mr Christopher Victor Caruso
NNuummbbeerr ooff
oorrddiinnaarryy
sshhaarreess
22,999,858
20,605,988
16,843,235
PPeerrcceennttaaggee
ooff iissssuueedd
sshhaarreess
14.99%
13.43%
10.98%
5,199,250
5,175,000
4,800,000
3,400,000
2,750,000
2,170,000
2,147,596
1,611,442
1,500,000
1,459,221
1,282,500
1,036,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
967,530
900,000
765,000
750,000
3.39%
3.37%
3.13%
2.22%
1.79%
1.41%
1.40%
1.05%
0.98%
0.95%
0.84%
0.68%
0.65%
0.65%
0.65%
0.65%
0.65%
0.65%
0.65%
0.65%
0.65%
0.63%
0.59%
0.50%
0.49%
TOTAL
105,362,620
68.69%
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Mineral Commodities Limited
Shareholder Information
Twenty Largest Option Holders
Rank
Name
1
2
3
4
5
6
7
8
9
9
9
10
11
12
13
14
15
16
17
18
18
18
19
20
Zurich Bay Holdings Pty Ltd
JP Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
Kathryn Yule
Charliv Investments Pte Ltd
Mr Christopher Victor Caruso
Mr Anthony Grant Melville & Mrs Elaine Sandra Melville
Dr Rosamund Julian Banyard & Mr Phillip Stanley Holten
Mr Emanuel Richard Brian Dillon
Kevin Leo
International Mining Services Pty Ltd
Mr Kevin Anthony Leo & Mrs Leticia Leo
Goffacan Pty Ltd
Mr David Geoffrey Vincent & Mrs Giuseppina Antonina Vincent
National Nominees Limited
Mr Gerald Magree
Mr David Phillip Whitehead & Mrs Linda Susan Whitehead
Mr Gregory Hugh Steemson & Mrs Barbara Fay Steemson
Mr Robert Cameron Galbraith
Mr Ross Nicholaidis
Ian Randal Thompson
Arie Vrolijk
Ms Janet Irene Foster & Mr Daniel Marino
Ohs Global Pty Ltd
NNuummbbeerr ooff
OOppttiioonnss
6,980,396
6,246,636
3,659,813
3,403,000
3,000,000
1,700,000
PPeerrcceennttaaggee ooff
iissssuueedd OOppttiioonnss
12.17%
10.89%
6.38%
5.93%
5.23%
2.96%
1,500,000
2.62%
1,430,000
1,400,000
1,400,000
1,400,000
1,360,000
1,251,874
1,234,000
1,067,200
1,028,600
2.49%
2.44%
2.44%
2.44%
2.37%
2.18%
2.15%
1.86%
1.79%
616,000
1.07%
604,000
583,689
500,000
500,000
500,000
429,213
415,132
1.05%
1.02%
0.87%
0.87%
0.87%
0.75%
0.72%
TOTAL
42,209,553
73.59%
Range of holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Number of
shareholders
Number of
shares
Number of option
holders
Number of
Options
136
385
180
383
142
44,389
1,335,877
1,504,608
14,313,231
136,194,916
24
86
44
130
65
349
12,766
235,395
323,327
5,464,833
51,320,887
57,357,208
Total holders
1,226
153,393,021
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Mineral Commodities Limited
Shareholder Information
Marketable Parcels
Number of shareholders holding less than a marketable parcel of ordinary shares is 522.
Voting Rights
Every ordinary shareholder present in person or by proxy at meetings of shareholders shall have one vote
for every share held.
Option holders have the right to attend meetings but have no voting rights until the options are exercised.
Substantial shareholders
The following shareholders are considered substantial shareholders:
- M&G Investment Management Limited. 6.5% of the issued ordinary shares
- Mirabaud Investment Limited holding approximately 10.0% of the issued ordinary shares based on their
disclosure in their last substantial interest notice to the Company.
- Zurich Bay Holdings Pty Ltd holding 13.43% of the issued ordinary shares.
Restricted securities
There are no restricted securities.
Share buy backs
There is no current on market share buy back.
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