PALADIN RESOURCES LTD
A.C.N. 061 681 098
GRAND CENTRAL 1ST FLOOR, 26 RAILWAY ROAD
SUBIACO WESTERN AUSTRALIA 6008
PO BOX 201, SUBIACO WESTERN AUSTRALIA 6904
TELEPHONE: (+61 8) 9381 4366 FAX: (+61 8) 9381 4978
EMAIL: paladin@paladinresources.com.au
Web: www.paladinresources.com.au
Ref:40018
30 August 2006
Company Announcements Office
Australian Stock Exchange Limited
20 Bridge Street
Sydney NSW 2000
Dear Sir/Madam
By Electronic Lodgement
2006 Annual Report
Attached please find the 2006 Annual Report including the Management Discussion and Analysis
and CEO/CFO certification as required in accordance with Canadian reporting requirements. The
printed version is expected to be released early October with the Annual General Meeting
scheduled for 9 November 2006.
Yours faithfully
Paladin Resources Ltd
JOHN BORSHOFF
Managing Director
PALADIN RESOURCES LTD
ACN 061 681 098
ANNUAL
REPORT
2006
2
CONTENTS
_________________________________________________________________________________
CORPORATE DIRECTORY.................................................................................................................... 3
PALADIN – THE COMPANY................................................................................................................... 4
COMPANY SNAPSHOT.......................................................................................................................... 5
CHAIRMAN’S LETTER ........................................................................................................................... 6
NUCLEAR ENERGY – A PARADIGM SHIFT ......................................................................................... 7
MANAGEMENT DISCUSSION AND ANALYSIS .................................................................................. 11
REVIEW OF OPERATIONS............................................................................................................. 13
FINANCIAL REVIEW ....................................................................................................................... 21
CORPORATE GOVERNANCE STATEMENT ...................................................................................... 29
DIRECTORS' REPORT......................................................................................................................... 39
REMUNERATION REPORT ............................................................................................................ 44
CONTENTS OF THE FINANCIAL REPORT......................................................................................... 59
CONSOLIDATED INCOME STATEMENTS ......................................................................................... 61
CONSOLIDATED BALANCE SHEETS................................................................................................. 62
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY............................................................. 63
CONSOLIDATED CASH FLOWS STATEMENTS................................................................................ 65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ......................................................... 66
DIRECTORS’ DECLARATION............................................................................................................ 143
INDEPENDENT AUDIT REPORT - AUSTRALIA................................................................................ 144
INDEPENDENT AUDIT REPORT - CANADA..................................................................................... 146
ADDITIONAL INFORMATION............................................................................................................. 147
The annual report covers both Paladin Resources Ltd as an individual entity and the
Consolidated Entity consisting of Paladin Resources Ltd and its controlled entities.
Paladin Resources Ltd is a company limited by shares, incorporated and domiciled in
Australia. Its registered office and principal place of business is:
Paladin Resources Ltd
Grand Central, 1st Floor, 26 Railway Road
SUBIACO WA 6008
Through the use of the internet, we have ensured that our corporate reporting is timely,
complete, and available globally at minimum cost to the Company. All press releases, financial
statements and other information is available on our website www.paladinresources.com.au.
CORPORATE DIRECTORY
_________________________________________________________________________________
DIRECTORS
INVESTOR RELATIONS
3
Non-executive Chairman
Mr Rick Crabb
Managing Director
Mr John Borshoff
Non-executive Directors
Mr Sean Llewelyn
Mr George Pirie
Mr Ian Noble
COMPANY SECRETARY
Ms Gillian Swaby
REGISTERED OFFICE
Grand Central, 1st Floor, 26 Railway Road
Subiaco Western Australia 6008
(PO Box 201, Subiaco, 6904)
Telephone: (+61 8) 9381 4366
Facsimile: (+61 8) 9381 4978
Email: paladin@paladinresources.com.au
Web: www.paladinresources.com.au
SHARE REGISTERS
Australia
Computershare Investor Services Pty Limited
Level 2, 45 St Georges Terrace
Perth Western Australia 6000
Telephone: (+61 8) 9323 2000
Facsimile: (+61 8) 9323 2033
Canada
Computershare Investor Services Pty Ltd
100 University Avenue, 11th Floor
Toronto Ontario M5J 2Y1
Telephone: (+1) 416 263 9200
Facsimile: (+1) 416 263 9261
Australia – Head Office
Ms Gillian Swaby
Grand Central, 1st Floor, 26 Railway Road
Subiaco Western Australia 6008
(PO Box 201, Subiaco, 6904)
Telephone: (+61 8) 9381 4366
Facsimile: (+61 8) 9381 4978
Email: gillian.swaby@paladinresources.com.au
North America
Mr Greg Taylor
Ontario Canada
Business/Cell: (416) 605 5120
Facsimile: (905) 844 - 6532
Email: greg.taylor@paladinresources.com.au
AUDITORS
Ernst & Young
11 Mounts Bay Road
Perth Western Australia 6000
SOLICITORS TO THE COMPANY
Blakiston & Crabb
1202 Hay Street
West Perth Western Australia 6005
STOCK EXCHANGE LISTINGS
Australian Stock Exchange and
Toronto Stock Exchange
Code: PDN
Munich, Berlin, Stuttgart and
Frankfurt Stock Exchanges
Code:
PUR
4
PALADIN – THE COMPANY
_________________________________________________________________________________
THE MEANING AND SIGNIFICANCE OF “PALADIN”
Charlemagne (742-814AD) was a Germanic King who ruled with the assistance of his Paladins, a
legendary company of knights who formed the elite of the King’s army. These Paladins later became a
source of inspiration for the romantic poets for whom they symbolised the highest virtues of chivalry
and valour.
The word Paladin was originally derived from the early Byzantine era to signify those who were the
highest dignitaries of the Court and usually referred to a lord or chieftain, and later a knight errant – a
champion on a quest for adventure.
Paladin came to describe a person or a special group possessing superlative qualities of loyalty,
diligence, and honesty, which is firm and united in support of an honourable cause or objective.
Paladin is an apt name for our Company.
CORPORATE VALUES
• Create shareholder wealth and develop the considerable opportunities it has generated to become
a major player in the global uranium supply market.
• Operate with a safe best practice philosophy having due regard for the environment.
• Reward employee performance and provide a fulfilling work environment.
• Contribute to the growth and prosperity of the countries in which Paladin operates by conducting
operations in an efficient and effective manner and by seeking out opportunities for expansion.
• Respond to the attitudes and expectations of the communities in which it operates as part of its
corporate social responsibility obligations.
• Act with integrity, honesty and cultural sensitivity in all of its dealings.
PALADIN TODAY
• Strong project pipeline
• Extensive uranium experience
• Strong project development team
•
In good position to expand and attain advantage through M&A by
-
-
-
-
successfully leading development for new U production
proving up a highly competent management team
attaining essential recognised company credibility
maintaining clear vision for global market outlook
COMPANY SNAPSHOT
_________________________________________________________________________________
5
The New Energy in the Market
• Emerging producer with a primary focus in Southern Africa
– Paladin clearly differentiated in its market space
• Focused uranium energy company
Large resource base in 4 deposits with excellent upside
–
– Strength through geographic diversification
– Expertise and funding to deliver
• Staged commissioning of Langer Heinrich operations
–
–
–
commenced end August 2006 – 1 MONTH EARLY
project handover late December 2006 as anticipated
ramp up to initial stated production of 2.6Mlb U3O8 by June 2007
• BFS completion on Kayelekera December 2006
• Strategy for expansion in place
• Uranium price at all time high
– Mid to long term supply shortages
Paladin Share Price Performance
AUD
1 Sep
2005
1 Nov
2005
1 Jan
2006
1 Mar
2006
1 May
2006
1 Jul
2006
29 Aug
2006
6
CHAIRMAN’S LETTER
_________________________________________________________________________________
Dear Shareholder
In my past two annual Chairman’s letters, I noted that our Company had experienced and expected to
continue to experience exciting times. This has of course been true of the past year but what I wish to
now focus on is our Company’s evolution into a “major”.
Such was the dire state of the uranium production industry and the rapid change in the global
dynamics of fuels for electricity generation, that in the past 2 years (particularly last year) Paladin
Resources Limited has emerged as virtually a household name in this business.
Our Company occupies a unique position, as the only publicly listed company capable in the short
term of creating new uranium supply of sufficient quantity to make a real contribution to world needs.
The stock markets in Australia, Canada and Europe have recognised this and accordingly from July
2005 to June 2006 Paladin’s market capitalisation grew from A$471,040,712 to A$1,866,908,708.
Paladin’s Directors, staff and consultants are highly conscious of the focus that is upon our Company.
Under the strong leadership of Mr John Borshoff, our team is committed to meeting the targets set for
the Company’s growth. We have a goal for Paladin to become a major world supplier of uranium with
an international multi-mine profile. This involves a long term strategy which recognises, amongst other
things, that our Company must achieve world’s best practice in all activities, particularly operating
efficiency, mine safety and environment practices.
As explained elsewhere in this Annual Report, our Company’s 2 leading Projects (Langer Heinrich and
Kayelekera) are progressing on schedule and our growth strategy, through mergers and acquisitions,
is in play. Paladin will hold a significant amount of Australian uranium resources in Western Australia
(its existing projects) and potentially elsewhere in Australia. With its strong production profile from its
African projects and opportunities elsewhere in the world, Paladin can afford to take a patient
approach in Australia. Given, as mentioned, the world dynamics for energy fuels, it is in my view
inevitable that the opportunity for Paladin to produce Australian sourced uranium will arise in due
course.
I must express my gratitude to the many loyal shareholders who have supported us; particularly over
recent years and those who have injected further equity capital into our Company.
Congratulations and thanks to the growing team of Paladin employees and consultants who have all
worked, I know, with genuine devotion and drive to what I believe is a noble cause. We are primarily a
business enterprise dedicated to achieving a solid return for shareholders but we will also contribute to
improving the world environment, by delivering a clean source of fuel. We will also make a valuable
contribution to the wellbeing of the peoples of Namibia and Malawi with the establishment of mining
operations at Langer Heinrich and Kayelekera.
I look forward to sharing the ongoing journey with all shareholders, as Paladin commences production
and delivery of uranium from Langer Heinrich.
Mr Rick Crabb
CHAIRMAN
7
NUCLEAR ENERGY – A PARADIGM SHIFT
_________________________________________________________________________________
The availability of energy, particularly electricity, dictates economic well-being. The world as a
whole is undergoing drastic reappraisal of its energy needs and the mix of fuels that will
sustain production.
High oil prices have focused attention on the inexorable growth in demand for energy, and made even
the most indifferent of people think about the global implications of continued economic growth in
China, and India, as well as the emergence of Russia as a global energy supplier and consumer.
In last year’s Annual Report we described the milestones which marked the world’s acceptance and
implementation of nuclear electricity. It is now obvious that the change in attitudes to nuclear power
reflects a fundamental shift in thinking about the provision of energy worldwide. This change, a
paradigm shift, will have enormous implications for the uranium industry.
Nuclear power will be, in many countries, the preferred technology for significant new base-load
electricity generation. Nuclear power offers energy security without compromising climate change
defences or undermining economic performance. The uranium industry must adjust to this new
paradigm in terms of undertaking more exploration, creating more production, improving technical and
operational efficiency, and developing a sophisticated dialogue with nuclear power utilities to ensure
the market adequately reflects the costs of providing nuclear fuel on a sustainable and secure basis.
Demand – needs re-appraisal
Thirty-one countries currently operate 441 nuclear power reactors, contributing 16% of world electricity
production. Electricity production represents 40% of world primary energy consumption, and is
growing at an annual rate of 2.7%, which is twice the rate of growth for all energy sources.
Last year we said that world uranium requirements for the existing, and currently planned new reactors
is about 77,000 mt U3O8 per year, rising by about 1.5% each year to reach a forecast peak of 125,000
mt U3O8 by the early 2020’s.
We identified the historical importance of inventories and down-blended weapons grade material in
maintaining a market “balance” between primary uranium production, 49,000 mt U3O8 in 2005, and
reactor consumption. There was a clear uranium supply deficit which we predicted would exert
considerable upwards pressure on uranium prices. In fact, the spot uranium price has risen from
US$29 per lb U3O8 in June 2005 to over $47 per lb U3O8 in June 2006. However, these figures do not
take account of the new paradigm.
8
NUCLEAR ENERGY – A PARADIGM SHIFT (continued)
_________________________________________________________________________________
The challenge of the new paradigm, and Paladin’s opportunities –
Supply continues to lag demand
Despite the significant rise in reported uranium prices, world primary uranium production only
increased by 2,540 mt U3O8 (5%) in calendar year 2005. In fact, in the first six months of 2006,
uranium production in the two dominant production centres, Canada and Australia, actually declined
by 2,610 mt U3O8 (19.5%), demonstrating the fragility of the existing supply chain.
Worldwide the only new uranium production facility built and brought on line in 2006 as part of the
industry’s supply response is Paladin’s Langer Heinrich Uranium Project. This illustrates both the
difficulty of bringing new production to market, and the skill and dedication of the Paladin people who
have made it happen.
New reactors and a new nuclear industry
There are significant developments at international and national levels which will facilitate the building
of new nuclear power stations and increase our reliance on nuclear energy.
• USA Resurgence of a major influence
-
-
-
-
Wide public acceptance with at least 68% of Americans favouring the use of
nuclear power
New national Enrichment facility granted construction and operation licence
Global Energy Partnership proposed to facilitate world nuclear fuel trade
19 applicants expected to seek licences for construction of up to 25 new reactors
• Canada Refurbishing a successful program
-
-
Refurbishment and recommissioning of 2 nuclear power plants
Applications filed possible 4 new plants
• EU Revising nuclear energy policies
Finland – New 1600 MWe plant under construction
UK Complete turnaround
UK Energy Review supports building new nuclear power plants and recommends
streamlining licensing process to facilitate construction by private operators.
• France Committed to renewing its fleet
-
New 1600 MWe reactor at Flamanville begins construction
9
NUCLEAR ENERGY – A PARADIGM SHIFT (continued)
_________________________________________________________________________________
• Turkey Recognising nuclear’s value
-
Plans for up to 5 new nuclear plants
• Russia World’s most ambitious nuclear energy plans
-
-
-
-
Structural reorganization of the civil nuclear sector to reflect world’s most ambitious
nuclear energy plans
10 new reactors to be built by 2015, with plans for a further 10 announced
High Enriched Uranium program terminates in 2013
Significant investments needed to secure long term uranium supplies will impact
world market
• China Powering up its nuclear energy needs
-
-
-
Plans to increase nuclear power to 40 GWe by 2020 (30 new reactors)
Entering world uranium market with significant new demand
Bi-lateral safeguards agreement signed with Australia
•
Japan Revitalised plans
-
3 yearly revision of the Basic Energy Plan reaffirms commitment to nuclear power in
order to meet Kyoto Protocol CO2 targets
•
India Joining the world nuclear community
-
-
US-India Nuclear Agreement will end nuclear sanctions and open market for
uranium and civil technology
Significant domestic nuclear program will expand rapidly
• Australia A major supplier growing bigger
-
-
-
Prime Minister’s Taskforce established to review entire nuclear fuel cycle
Bi-lateral safeguards agreement signed with China opens market for Australian
uranium sales
Federal Labor Party Leader announces proposed abandonment of restrictive “no
new uranium mines” policy at 2007 National Conference
NUCLEAR ENERGY – A PARADIGM SHIFT (continued)
_________________________________________________________________________________
10
URANIUM SPOT PRICE GRAPH (HISTORICAL)
HISTORICAL URANIUM PRICES
US$48.50/lb
(Term Contracts
US$51.00/lb)
8
O
3
U
b
l
/
$
S
U
60
50
40
30
20
10
0
n
a
J
r
p
A
l
u
J
t
c
O
n
a
J
r
p
A
l
u
J
t
c
O
n
a
J
r
p
A
l
u
J
t
c
O
n
a
J
r
p
A
l
u
J
t
c
O
n
a
J
r
p
A
l
u
J
g
u
A
t
c
O
n
a
J
r
p
A
l
u
J
g
u
A
2001
2002
2003
2004
2005
2006
YEAR
MANAGEMENT DISCUSSION AND ANALYSIS
11
The following Management Discussion and Analysis (MD&A) for Paladin Resources Ltd should be
read in conjunction with the Directors’ Report and Financial Report for the year ended 30 June 2006.
The effective date of this discussion and analysis is 29 August 2006.
The financial information presented in this MD&A has been prepared in accordance with Australian
(AIFRS), other authoritative
equivalents
pronouncements of the Australian Accounting Standard Board, Urgent Issues Group Interpretations
and the Corporations Act 2001.
International Financial Reporting Standards
to
This MD&A also includes additional information in order for the Company to comply with reporting
requirements of applicable Canadian securities law, as the Company is listed on the Toronto Stock
Exchange.
Overview
The Company operates in the resource industry with a principal business of evaluation and
development of uranium projects in Africa and Australia. The Company is incorporated under the laws
of Western Australia with a primary share market listing on the Australian Stock Exchange and
additional listings on the Toronto Stock Exchange in Canada; and Munich, Berlin, Stuttgart and
Frankfurt Stock Exchanges in Europe.
The main activities undertaken during the year were:
– commencement of construction at the Langer Heinrich Uranium Project in Namibia after
granting of a 25 year mining licence and finalisation of US$71 million in bank project finance;
– acquisition of the remaining 10% joint venture interest in the Kayelekera Uranium Project in
Malawi;
– continuing negotiation of development agreement and the Bankable Feasibility Study for the
Kayelekera Uranium Project;
– completion of resource drilling programs at both Langer Heinrich and Kayelekera Uranium
Projects with additional resources discovered;
– sale of non-core uranium exploration property and grant of licence over Frome Basin database
to Deep Yellow Ltd;
–
repayment and cancellation of the debt facility established for the Langer Heinrich Bankable
Feasibility Study; and
– allotment of 35 million fully paid shares via private placement raising A$77 million principally to
complete the funding for construction of the Langer Heinrich Uranium Project, fund worldwide
uranium project generation activities and provide general working capital.
MANAGEMENT DISCUSSION AND ANALYSIS
12
Overview (continued)
On 10 July 2006, the Company announced an off-market takeover bid for all the fully paid ordinary
shares in Valhalla Uranium Ltd (“Valhalla”). The offer was subject to various conditions, some of
which are currently still outstanding.
Valhalla is a Western Australian based resource company listed on the ASX with interests in a number
of uranium projects in Queensland and the Northern Territory. The most advanced project in
Valhalla’s portfolio is the Valhalla/Skal uranium deposits situated in northern Queensland. Valhalla has
a 50% interest in these deposits with Summit Resources Limited (“Summit”), which is the manager of
the project. Valhalla also holds 41% interests in the Ngalia Basin uranium project containing the Bigrlyi
Deposit as well as the Pine Creek uranium project in the East Alligator River area.
Valhalla’s share of resources via the Mt Isa Joint Venture according to Summit market releases is
28.5Mlbs U3O8 (230ppm cut off) in the JORC compliant Inferred Resources category. In addition,
Valhalla’s share of incremental historical estimates for the adjacent Skal Deposit is 5.5Mlbs U3O8
(based on information released by Valhalla’s joint venture partners). In addition JORC resources have
been released for the Bigrlyi Deposit and Valhalla’s shares are 3.5Mlbs U3O8 (100ppm cut off).
Should the offer be accepted, Paladin will significantly increase its global uranium resource base.
The proposed acquisition is an excellent opportunity to add up to three potential projects to Paladin’s
medium to long term project development pipeline. Paladin believes the Valhalla/Skal deposits are
deposits with significant resource potential at reasonable grades. While ultimate development of the
resource depends not only on further technical and resource definition but also on a change of policy
in Queensland, Paladin plans to support Summit in progressing the exploration and appraisal of this
deposit to ensure readiness if and when this policy change occurs.
The on market, all scrip offer will comprise 1 fully paid ordinary Paladin share for every 3.16 fully paid
ordinary Valhalla shares.
On 28 August 2006 the Company announced that commencement of commissioning of the Langer
Heinrich plant had been achieved one month earlier than originally planned with the successful
commissioning of the crusher and associated conveyers to produce a crushed ore stockpile. Staged
commissioning will progressively continue through the scrubber and attrition, leach and CCD, the
uranium precipitation and reagent areas and the Company is confident that the remaining construction
work will be finalised in line with the program.
Forward Looking Statements
Some of the statements contained in this MD&A, including those relating to strategies and other
statements, are predictive in nature, and depend upon or refer to future events or conditions, or
include words such as “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates” or similar
expressions that are forward looking statements. Forward looking statements include, without
limitation, the information concerning possible or assumed further results of operations as set forth
herein. These statements are not historical facts but instead represent only expectations, estimates
and projections regarding future events and are qualified in their entirety by the inherent risks and
uncertainties surrounding future expectations generally.
The forward looking statements contained in this MD&A are not guarantees of future performance and
involve certain risks and uncertainties that are difficult to predict. The future results of the Company
may differ materially from those expressed in the forward looking statements contained in this MD&A
due to, among other factors, the risks and uncertainties inherent in the business of the Company. The
Company does not undertake any obligation to update or release any revisions to these forward
looking statements to reflect events or circumstances after the date of this MD&A or to reflect the
occurrence of unanticipated events.
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS
13
Uranium Resources
Paladin’s total mineral resource inventory includes 41910t of U3O8 (92.4Mlbs of U3O8) at 0.076% U3O8
in the Indicated and Measured categories and 38.600t of U3O8 (85Mlbs of U3O8) at 0.061% U3O8 in the
Inferred Resource category. The summary of status for each of the advanced projects is detailed in
the following table.
Uranium Project Summary Table
CRITERIA
Paladin equity
Location
Deposit Type
Measured &
Indicated Resources
Inferred Resource
Mining Method
Previous Owners
Past Expenditure
Activity Periods
Project Status
LANGER
HEINRICH
PROJECT
100%
Namibia, Southern
Africa
Calcrete
32.2Mt of ore @
0.07% U3O8
(20,200t U3O8)
40Mt of ore @
0.06% U3O8
(23,800t U3O8)
Conventional open
pit
Gencor Limited
(South African
Mining Company)
and Acclaim
A$20M
KAYELEKERA
PROJECT
MANYINGEE
PROJECT
OOBAGOOMA
PROJECT
100%
100%
100%
Malawi, Southern
Africa
Sandstone
15Mt of ore @
0.09% U3O8
(13,630t U3O8)
3.4Mt of ore @
0.06% U3O8
(2,040t U3O8)
Conventional
open pit
Central Electricity
Generating Board
(UK utility)
West Pilbara
(West Australia)
Sandstone
7.9Mt of ore @
0.1% U3O8
(8,080t U3O8)
4.2Mt of ore @
0.07% U3O8
(2,810t U3O8)
West Kimberley
(West Australia)
Sandstone
-----------------
9,950t U3O8 @
0.12%
In-Situ Leach
In-Situ Leach
Cogema
(French utility)
Cogema
(French utility)
A$9M
A$16M
A$5M
1973 - 1980, 1999
to present
1982 – 1990,
1998 to present
1979 - 1988
Acquired 1998
• Bankable
Feasibility
Study for
completion
December
2006.
• Revised mining
concept
positive
indicating
potential for
development
• Advanced
development
project.
• On hold.
• Feasibility
Study in
readiness.
• One of only
three
Australian
advanced
ISL projects
1982 - 1985
Acquired 1998
• Advanced
exploration
project.
• On hold.
• Resource
definition
drilling
completed.
• Large resource
potential
• Staged
commissioning
commenced
August 2006.
Project Significance
• Globally first new
uranium mine
and mill in 25
years
Timeframe
• Production to
commence in
2006
• Production to
commence in
2008
• 17 year project
• 10 year project
life
life
• 3 year
staged
feasibility
study
required
• 2 year reserve /
resource
drilling required
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
14
Project Locations
LANGER HEINRICH URANIUM PROJECT
The Langer Heinrich Uranium Project in Namibia is owned 100% by Paladin through its wholly owned
Namibian subsidiary, Langer Heinrich Uranium (Pty) Ltd. Paladin purchased the Langer Heinrich
Project in August 2002.
Langer Heinrich is a surficial, calcrete type uranium deposit containing a mineral resource of 40,000t
U3O8 at a grade of 0.06% (250ppm cut off) in seven designated mineralised zones, named as Details 1
to 7, within a 15 kilometre length of an extensive palaeodrainage system. The deposit is located in the
Namib Desert, 80 kilometres east of the major seaport of Walvis Bay. The attached Figure shows the
location of the uranium mineralisation along the Langer Heinrich valley.
A positive Bankable Feasibility Study for the project was completed in April 2005, a 25 year mining
lease was obtained in July 2005 and construction started in September 2005 with the Namibian
Minister of Mines and Energy commemorating the event with a ground breaking ceremony at the LHU
mine site.
In 2005 Paladin carried out a 11.534mRC drilling program to test prospective targets along 5km of
previously unknown palaeochannel discovered in the 2004 drilling program. The drilling programme
consisted of 245 RC drill holes and was confined to certain areas in Detail 2 and Detail 7. Mineral
resource specialists Hellman and Schofield (H&S) have completed and independently verified a
revised JORC (2004) Code mineral resource estimate of Langer Heinrich.
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
15
The Mineral Resource estimation has been calculated by H&S as follows:-
All Details: 1 to 7 (including new channel drilling)
250ppm Cut-off
Measured Resources
Indicated Resources
Total Measured & Indicated
Inferred Resources
Mt
19.9
12.4
32.3
40.0
Grade % U3O8
0.07
0.06
0.07
0.06
Tonnes U3O8
13,250
6,950
20,200
23,800
Currently a 4000 metre drilling program is in progress to evaluate similar targets within the
palaeochannel in Details 3, 4, 5 and 6.
Current total reserves based on a $30/lb U3O8 price are as follows:-
Proven Ore Reserves
Probable Ore Reserves
Mt
16.74
8.63
Grade % U3O8
0.069
0.063
Tonnes U3O8
11,580
5,451
The mining operation is designed to produce 1,180 tonnes (2.6Mlbs) per annum (tpa) of uranium oxide
concentrate (U3O8) from 1.5Mtpa of calcrete associated ores by ore beneficiation, alkaline leaching
(heating to 75°C), counter-current decantation, ion exchange, precipitation and calcining to produce
saleable U3O8.
Project construction is progressing within budget and on schedule for project completion by end
December 2006. By the end of June 2006, the total project was 83% complete with engineering at
99% complete and all contracts awarded. The 600 strong construction workforce deployed at Langer
Heinrich has worked with no lost time incidents and recorded over 600,000 man hours without a Loss
of Time through Injury (LTI) for the project to date.
Commencement of commissioning of the Langer Heinrich plant was achieved in August 2006, one
month earlier than originally planned, with the successful commissioning of the crusher and associated
conveyers to produce a crushed ore stockpile. Staged commissioning will now progressively continue
through the scrubber and attrition, leach and CCD, the uranium precipitation and reagent areas.
The on site high voltage substation and transformers were commissioned and energised early in
August 2006, with water flowing along the 85km pipeline from the coast to fill the onsite reservoirs.
The contract miner is established on site and has commenced mining the initial pit undertaking topsoil
removal and supplying feed for the crusher commissioning while establishing the mine infrastructure.
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
16
Continual optimisation of the BFS alkaline leach process and subsequent positive confirmatory work
by the internationally regarded Australian Nuclear Science and Technology Organisation (“ANSTO”)
metallurgical laboratories has resulted in several upgrades in the uranium precipitation and reagent
areas. Although the enhancements have impacted the construction schedule they are not expected,
at this stage, to impact the staged commissioning of the plant or the project completion date.
An 8000m grade control drilling program was carried out to define the reserves for the first 6 months of
mining the results showed strong correlation to the resource model used in the BFS.
A skilled operational team has been recruited, led by Wyatt Buck (ex Cameco production chief) with
necessary business systems and operating processes in place. This group is ready to assist GRD
Minproc in the planned commissioning of the plant and then seamlessly accept full responsibility at the
operational handover late December 2006. Ramp up to initial annualised design output of 2.6Mlb
U3O8 remains as planned for 3rd quarter 2007. The first contracted shipment of uranium oxide
concentrate is expected to be shipped late 1st quarter 2007.
Paladin was successful in securing three sales contracts which account for more than 6.6 million
pounds of Langer Heinrich production over the period 2007 to 2012 and underline Paladin’s
confidence in the success of this project. Pricing in all three contracts is market-related at the time of
delivery and is subject to escalating floor and ceiling components.
LANGER HEINRICH URANIUM (PTY) LTD
LANGER HEINRICH URANIUM PROJECT
GEOLOGY, ACTIVITY AREAS, BFS MINE MODEL AREA
Area of 2005
Resource Addition
BFS Mine model
Plant Area
2006 resource
drilling
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
17
KAYELEKERA PROJECT
The Kayelekera Uranium Project is located in northern Malawi, 40 kilometres west of the provincial
town of Karonga and 11 kilometres south of the main road that connects Karonga with the township of
Chitipa to the west.
The Kayelekera Uranium Project is owned 100% by Paladin through its wholly owned Malawi
subsidiary Paladin (Africa) Ltd having purchased the remaining 10% equity interest in August 2005
from Balmain Resources Pty Ltd for a consideration of 4,350,000 fully paid shares in Paladin, valued
at the time at A$1.235 per share.
In 2004 the original Paladin 2000 Pre-Feasibility Study was updated in the light of increasing uranium
prices and in April 2005, Paladin announced the go-ahead of a US$2.3M BFS as a result of the
improved economics shown by the pre-feasibility work. Overall project management of the BFS has
been awarded to GRD Minproc, based in Johannesburg.
On current scheduling it is anticipated the BFS will be completed by December 2006. With early
approvals, production start-up is expected in mid to late 2008 with annual production of 1,000t of U3O8
(2.3Mlb) over the currently planned ten-year mine life.
A 5394m, 120 hole RC drilling programme commenced in August 2005 to more clearly define the
peripheral mineralisation for pit optimisation purposes and increase the resource base.
New Mineral Resource estimations, carried out by independent Mineral Resource specialist Hellman
and Schofield to JORC (2004) standards, are based on the use of a combination of analytical assays
(XRF) and downhole gamma logging results, following the application of standard practice radiometric
calibration methods for U3O8. Approximately 50% of the mineralized holes were assayed for U3O8
using analytical methods (XRF) for check purposes and to establish disequilibrium parameters for
subsequent application to un-assayed radiometrically logged drill hole intervals.
At 300ppm U3O8 Cut-off
Measured Resources
Indicated Resources
Total Measured & Indicated
Inferred Resources
At 600ppm U3O8 Cut-off
Measured Resources
Indicated Resources
Total Measured & Indicated
Inferred Resources
Mt
2.20
13.11
15.31
3.40
Mt
1.58
6.98
8.56
1.19
Grade % U3O8
0.12
0.08
0.09
0.06
Grade % U3O8
0.16
0.12
0.13
0.09
Tonnes U3O8
2,730
10,880
13,630
2,040
Tonnes U3O8
2,460
8,240
10,690
1,110
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
18
The BFS is progressing well. The metallurgical test work is progressing through South Africa
metallurgical laboratory Mintek with encouraging results that should lead to a more simplified process
based on the conventional acid leaching and solvent extraction process and flow sheet. For the
environmental, geotechnical, hydrological and tailings evaluation, Knights Piesold, a highly reputable
South African firm, were selected to carry out this work. Their work is progressing as scheduled with
25 groundwater monitoring wells completed and the geotechnical drilling currently being carried out.
The attached Figure shows the current layout of the Kayelekera mine site.
The BFS and EIA are planned to be completed for the final submission to the Government and
application for a mining licence in December 2006.
Paladin (Africa) Limited has been granted three exclusive prospecting licences in Malawi covering an
aggregate 1,139 km2. Two of these are contiguous with the Kayelekera exclusive prospecting licence
while the third lies along the western shore of Lake Malawi. All three cover areas of Karroo Sandstone
which hosts the Kayelekera orebody and the three areas are considered prospective for Kayelekera
type uranium deposits. Airborne radiometric and geochemical anomalies were identified during
previous work in the 1980’s.
PROPOSED MINESITE LAYOUT
19
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
MANYINGEE PROJECT
The Manyingee Uranium Project is located in the north west of Western Australia, 1,100 kilometres
north of Perth, the State Capital and 85 kilometres inland from the coastal township of Onslow. The
property is comprised of three mining leases covering 13 square kilometres.
Paladin purchased the Manyingee Project in 1998 from Afmeco Mining and Exploration Pty Ltd
(AFMEX), a subsidiary company of Cogema of France. Paladin’s 100% interest in Manyingee is held
through its wholly owned subsidiary, Paladin Energy Minerals NL.
AFMEX (previously named Total Mining Australia Pty Ltd) discovered uranium mineralisation at
Manyingee in 1973 during regional exploration. Between 1973 and 1984 400 holes were drilled and
this established the extent and continuity of sedimentary uranium mineralisation in permeable
sandstone in palaeochannels. Field trials by AFMEX demonstrated that the Manyingee uranium
deposit is amenable to extraction by in-situ leaching (ISL).
The Manyingee Project contains JORC (1999) Code compliant resources as follows:
At 300ppm U3O8 Cut-off
Indicated Resources
Inferred Resources
Mt
7.9
4.2
Grade % U3O8
0.10
0.07
Tonnes U3O8
8,080
2,810
The Manyingee project is currently mothballed due to the negative uranium policies of the State
Government and feasibility work has been deferred until the policies are reversed by government.
OOBAGOOMA PROJECT
The Oobagooma Project is located in the West Kimberley Region of Western Australia, 1,900
kilometres north-north-east of Perth, the State Capital, and 75 kilometres north east of Derby on
freehold land owned by the Commonwealth Government and used by the military for training
purposes. The area is covered by two applications for exploration licences covering 392 square
kilometres. Consent of the Commonwealth Government and the Department of Defence will be
required before mining tenements can be granted by the State.
Paladin acquired a call option in 1998 in relation to the purchase of the Oobagooma Project and, in
turn, granted a put option to the original holder of the Project. Both options are subject to the
exploration licences being granted by the State.
The Oobagooma project area was explored by AFMEX from 1983 to 1986 during which time extensive
zones of uranium mineralisation were discovered.
Using geostatistical methods AFMEX calculated a historical estimate of uranium mineralisation at
Oobagooma. This work was done before the JORC Code had been formulated and was thus not
carried out in accordance with the Code. The AFMEX estimate is as follows:
At 300ppm U3O8 Cut-off
Historic Resources
Mt
8.2
Grade % U3O8
Tonnes U3O8
0.12
9,950
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
20
The main exploration effort, once the tenements have been granted, will be to confirm continuity of the
uranium mineralisation by infill drilling concentrating on mineralised redox fronts as re-interpreted and
allow JORC compliant resource estimates to be made. The mineralisation is open and potential exists
to increase the currently known resource base. The style of mineralisation is believed to be amenable
to recovery of uranium in a future ISL mining operation.
QUASAR URANIUM JOINT VENTURE
The Joint Venture with Quasar Resources Pty Ltd covers two exploration licences in the northern
Frome Basin in South Australia. The two licences cover 1,051 square kilometres. Paladin holds a
15% free carried interest in Exploration Licence 3001 and a 20% free carried interest in Exploration
Licence 3078. Quasar is a wholly owned subsidiary of Heathgate Resources Pty Ltd, operator of the
Beverley ISL uranium mine which is situated immediately south of the Joint Venture tenements.
Quasar is operator and manager of the Joint Venture. Heathgate Resources is an Australian affiliate of
General Atomics of the USA.
The exploration licences are considered prospective for palaeochannel uranium mineralisation and
Quasar has conducted a number of exploration campaigns on the ground.
URANIUM DATABASE
Paladin owns a unique uranium database, compiled over 30 years of investigations by the
international uranium mining house Uranerzbergbau in Germany. The database incorporates all
aspects of the uranium mining and exploration industry and includes detailed exploration data for
Africa and Australia. It can be used to quickly research uranium prospects, deposits and mineralisation
on a country by country basis. Paladin continues to evaluate opportunities for acquiring additional
uranium projects from this database.
DEEP YELLOW LTD
In 2005 Paladin sold three non-core Australian uranium projects to Deep Yellow Ltd which is an
Australian company listed on the ASX. As a result of these sales Paladin now holds 6,550,000 fully
paid shares in Deep Yellow Ltd, 25,000,000 one-cent options expiring on 31 December 2007 and
12,500,000 twelve-cent options expiring on 15 July 2008. Paladin is also entitled to a 2% gross royalty
on production from the Napperby and North East Arunta projects in the Northern Territory.
Deep Yellow Ltd is a dedicated uranium exploration company with exploration holdings covering over
75,000 square kilometres in Northern Territory, Queensland and South Australia.
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW
21
INCOME STATEMENTS
Revenue from Continuing Operations
Other Income
Shared Based Payments Expense
Exploration and Evaluation Expenditure
Write Down of Convertible Note
YEAR ENDED 30 JUNE
2005
A$000
2006
A$000
4,298
1,057
772
810
(3,650)
(3,009)
(4,233)
(5,113)
-
(894)
Other Expenses from Continuing Operations
(4,958)
(2,104)
Loss from Continuing Operations
Profit from Discontinued Operations
(7,486)
(9,538)
-
128
Loss Before and After Income Tax
(7,486)
(9,410)
Loss Per Share (Australian Dollars)
- basic and diluted
(0.02)
(0.03)
Revenue from Continuing Operations has increased to A$4,298,364 in 2006 as a result of an increase
in interest revenue derived from higher cash holdings in 2006 when compared to 2005, and the
revenue earned from the Frome Basin database licence to Deep Yellow in 2006.
Other Income in 2006 relates to a A$441,117 profit on sale of non-core uranium exploration property
to Deep Yellow and a A$615,642 foreign exchange gain primarily attributable to cash holdings in
South African rand and Namibian dollars for the funding of construction activities of the Langer
Heinrich Uranium Project. In 2005 the other income represented a A$810,000 profit on sale of non-
core uranium exploration properties to Deep Yellow.
Share Based Payments Expense relates to the requirement to recognise the cost of granting options
to Directors, employees and consultants under AIFRS over the option vesting period. The first options
granted by the Company with vesting periods were in November and December 2004, as a result the
expense was lower in 2005 at A$3,008,850. The expense in 2006 of A$3,650,260 reflects the full year
impact of the costs of granting options over their vesting periods.
22
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
The valuation of options under AIFRS does not allow the consideration of non-market related vesting
conditions, which precludes the Company from discounting the option valuations to reflect the vesting
conditions relating to positive outcome for the Langer Heinrich Uranium Project bankable feasibility
study and completion of acceptable project funding. This has the result of increasing the option
valuation when compared to the previously disclosed valuations by the Company, which were
prepared based on the normal commercial practice of discounting valuations for non-market related
vesting conditions.
A change in Exploration and Evaluation Expenditure accounting policy has been retrospectively
applied during the year. The new exploration and evaluation expenditure accounting policy is to
charge exploration and evaluation expenditure against earnings as incurred; except for acquisition
costs and for expenditure incurred after a decision to proceed to development is made, in which case
the expenditure is capitalised as an asset. A decrease in exploration and evaluation expenditure in
the Income Statement to A$4,232,651 has occurred in 2006 as a decision to proceed to development
has been made for the Langer Heinrich Uranium Project, which results in the capitalisation of this
project’s expenditure.
Write Down of Convertible Note in 2005 of $894,438 related to the provision for non-recovery of
convertible note and interest receivable owing from Didasko Technologies Pty Ltd.
Other Expenses from Continuing Operations have increased to A$4,958,397 in 2006 as a result of the
expanded corporate activities attributable to the significant growth of the Company in the last year.
The Profit from Discontinued Operations in 2005 of A$127,739 relates to the commercial property sold
on 24 June 2005.
The Loss for the year ended 30 June 2006 of A$7,486,185 compares favourably to the loss for the
year ended 30 June 2005 of A$9,410,228 as a result of higher revenue and other income, lower
exploration and evaluation expenditure and no write down of convertible note in the 2006 Income
Statement; despite the higher Share Based Payment Expense and the expanded corporate activities
attributable to the significant growth of the Company in the last year.
Earnings Per Share
The Loss per Share noted on the Income Statements reflects the result for the specific reported
periods and the additional shares issued in 2006 compared to 2005.
Segment Disclosure
In the Namibia geographical segment the Company reflected a foreign exchange loss (primarily on
cash holdings of Namibian dollars) as exploration expenditure for the Langer Heinrich Uranium Project
has been capitalised as an asset. The Malawi geographic segment primarily reflected the exploration
and evaluation expenditure for the Kayelekera Uranium Project. In the Australian geographic segment
the Company reflected the remaining Income Statement activities.
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
23
BALANCE SHEETS
Total Current Assets
Total Non Current Assets
Total Assets
Total Current Liabilities
Total Non Current Liabilities
Total Liabilities
Net Assets
30 JUNE 2006
A$000
30 JUNE 2005
A$000
63,473
96,835
160,308
11,644
23,939
35,583
40,057
5,384
45,441
1,325
-
1,325
124,725
44,116
Current Assets have increased to A$63,472,754 at 30 June 2006 as a result of the A$77 million
private placement completed in October 2005 and US$17 million (A$23.2 million) project finance debt
drawdown for Langer Heinrich Uranium in June 2006; less the cash spend on construction activities
for the Langer Heinrich Uranium Project, bankable feasibility study expenditure for the Kayelekera
Uranium Project, project generation exploration and evaluation activities and corporate costs for the
year ended 30 June 2006. Of the A$59,777,956 held in cash as at 30 June 2006, A$54,530,658 has
been invested in short term commercial bank bills and term deposits.
Non Current Assets have increased to A$96,835,232 during the year as a result of mine construction
activities/exploration and evaluation expenditure for the Langer Heinrich Uranium Project, acquisition
of the remaining 10% joint venture interest in the Kayelekera Uranium Project and increased
investment in and financial value of Deep Yellow shares and options.
The consideration for the acquisition of the remaining 10% joint venture interest in the Kayelekera
Uranium Project from Balmain Resources Pty Ltd was satisfied by the issue of 4,350,000 fully paid
ordinary shares which is valued at A$5,611,500.
During the year ended 30 June 2006 the Company acquired an additional 15,450,000 shares and
12,500,000 unlisted options (with an exercise price of A$0.12 and expiry of 31 July 2008) in Deep
Yellow – 6,950,000 shares from participation in a non-renounceable entitlement issue, 1,000,000
shares from on-market purchase, and the balance of 7,500,000 shares and the options from the sale
of a non-core uranium exploration property and grant of licence over the Frome Basin database.
Under AIFRS the investments in Deep Yellow are required to be stated at fair value at each reporting
date, and the Company has adopted a policy of recording the revaluation amount in Reserves. At 30
June 2006 the Company has a revaluation increment for the investments in Deep Yellow as a result of
its share price increasing to A$0.125 from A$0.067 at 30 June 2005.
Current Liabilities increased to A$11,643,641 at 30 June 2006 as a result of Langer Heinrich Uranium
Project mine construction activities. This increase occurred despite the repayment and cancellation of
the debt facility established for the Langer Heinrich Bankable Feasibility Study on 31 October 2005 -
the principal repayment was A$500,000.
24
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
Non Current Liabilities of A$23,938,271 exist as at 30 June 2006 relating primarily to the US$17
million (A$23.2 million) project finance debt drawdown for the Langer Heinrich Uranium Project in June
2006. The total facilities available are US$71 million consisting of a US$65 million project finance
facility and US$6 million cost over-run facility.
In addition non current liabilities also relate to the grant of licence for the Frome Basin database to
Deep Yellow, and the Company has allocated Deep Yellow shares and options to the value of
A$1,452,633 to the granting of this licence which is for a six year period commencing 15 July 2005. Of
this unearned licence revenue A$978,510 is non current at 30 June 2006. Non current liabilities also
include the recognition of a mine closure and restoration provision for the construction activities of the
Langer Heinrich Uranium Project.
Segment Disclosure
In the Balance Sheet in 2006 the Company reflected a significant increase in the Namibia
geographical segment attributable to the focus on the Langer Heinrich Uranium Project. In the Malawi
geographical segment the main activity was the acquisition of the remaining 10% joint venture interest
in the Kayelekera Uranium Project.
STATEMENTS OF CHANGES IN EQUITY
Total Equity at the Beginning of the Financial Period
Loss for the Year Ended 30 June
Movement in Reserves
Movement in Equity
YEAR ENDED 30 JUNE
2006
A$000
2005
A$000
44,116
(7,486)
5,905
82,190
7,112
(9,410)
4,687
41,727
Total Equity at the End of the Financial Period
124,725
44,116
Loss for the Year Ended 30 June 2006 is discussed under the Income Statements section.
Movement in Reserves increased to A$5,905,699 in 2006 relating to both the revaluation increment
attributable to the increase in Deep Yellow share price to A$0.125 from A$0.067 at 30 June 2005 and
the recognised value of unlisted employee options. This increase is after deduction for the exercise of
14,000,000 unlisted employee options – 11,000,000 exercisable at A$0.22 on or before 26 May 2006
and 3,000,000 exercisable at A$0.32 on or before 26 May 2006.
Movements in Equity increased to A$82,190,030 in 2006 from the completion of a 35,000,000 share
global private placement, exercise of unlisted employee options and issue of shares to acquire the
remaining 10% joint venture interest in the Kayelekera Uranium Project. The number of fully paid
ordinary shares on issue at 30 June 2006 is 454,235,713, an increase of 53,350,000 during the year.
Share options of 24,215,000 remain outstanding at 30 June 2006 to Directors, employees, and
consultants directly engaged in corporate, construction and exploration and evaluation work for the
Company.
25
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
_________________________________________________________________________________
CASH FLOW STATEMENTS
YEAR ENDED 30 JUNE
2005
2006
A$000 A$000
Net Cash Inflow/(Outflow) from Operating Activities
648
(1,281)
Net Cash Outflow from Investing Activities
(76,496)
(5,000)
Net Cash Inflow from Financing Activities
Net Increase in Cash Held
Cash at the Beginning of Financial Period
Effects of Exchange Rate Changes
95,080
19,232
39,489
1,057
41,131
34,850
4,639
-
Cash at the End of the Financial Period
59,778
39,489
The Net Cash Inflow from Operating Activities in 2006 of A$648,517 is attributable to the increase in
interest received from higher cash holdings in 2006 when compared to 2005, despite higher payments
to suppliers and employees relating to expanded corporate activities attributable to the significant
growth of the Company in the last year.
In 2006 Net Cash Outflow from Investing Activities increased to A$76,496,148 as a result of mine
construction/exploration and evaluation expenditure for the Langer Heinrich Uranium Project, bankable
feasibility study for the Kayelekera Uranium Project, project generation exploration and evaluation
activities and acquisition of additional shares in Deep Yellow.
Net Cash Inflow from Financing Activities represented a net cash inflow of A$95,079,960 in 2006 as a
result of the A$77 million private placement completed in October 2005, net proceeds from exercise of
14,000,000 unlisted employee options, and US$17 million (A$23.2 million) project finance debt
drawdown for the Langer Heinrich Uranium Project in June 2006. This inflow was net of share issue
costs, establishment costs for the Langer Heinrich project finance facility, and repayment in October
2005 of the debt facility established for the Langer Heinrich Bankable Feasibility Study. The number
of shares issued in 2006 was 53,350,000 (including 4,350,000 relating to the non cash acquisition of
the remaining 10% joint venture interest in the Kayelekera Uranium Project) a decrease from the
67,200,000 issued in 2005.
Overall the Net Increase in Cash in 2006 was A$19,232,329 lower than the net increase in cash in
2005 as a result of the significantly higher cash outflows from investing activities, despite higher cash
inflows from financing activities.
In 2006 an A$1,056,601 Effects of Exchange Rate Changes exists from the translation of foreign
currency holdings of South African rand and Namibian dollars for the funding of construction activities
of the Langer Heinrich Uranium Project.
The cash at 30 June 2006 of A$59,777,956 represents a considerable increase in cash compared to
the year ended 30 June 2005.
26
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
_________________________________________________________________________________
LIQUIDITY AND CAPITAL RESOURCES
The Company’s principal source of liquidity as at 30 June 2006 is cash of A$59,777,956 (30 June
2005 – A$39,489,026) and project finance debt. Of the total cash an amount of A$54,530,658 has
been invested in short term commercial bank bills and term deposits.
The Company’s principal sources of cash for the year ended 30 June 2006 were proceeds from a
private placement, project finance debt drawdown, receipts from exercise of unlisted employee options
and interest received from cash investments.
During the year the Company completed Langer Heinrich project finance facilities of US$71 million
and a total of US$17 million had been drawn by 30 June 2006, leaving available facilities of US$54
million.
The following is a summary of the Company’s outstanding commitments as at 30 June 2006:
Payments due by period
Mine construction
Mineral properties
Operating leases
Manyingee acquisition
Total
Less than 1 yr
$A
$A
1 to 5 yrs Unknown
A$
A$
31,248,279
482,800
724,940
750,000
31,248,279
482,800
221,558
-
-
-
503,382
-
-
-
-
750,000
Total commitments
33,206,019
31,952,637
503,382
750,000
In relation to the Manyingee Uranium Project, the acquisition terms provide for a payment of
A$750,000 by the Company to the vendors when all project development approvals are obtained.
In addition to the outstanding commitments above, the Company acquired a call option on 19 June
1998 in relation to the purchase of the Oobagooma Uranium Project and, in turn, granted a put option
to the original holder of the Project. Both the call and put options have an exercise price of A$750,000
and are subject to the Western Australian Department of Minerals & Energy granting tenements
comprising 2 exploration licence applications. The A$750,000 is payable by the Company within 10
business days of the later of the grant of the tenements or the exercise of either the call or put option.
The options will expire 3 months after the date the tenements are granted.
As at 30 June 2006 the Group has outstanding A$2,750,628 in current bank guarantees issued to
contractors in relation to the mine construction activities for the Langer Heinrich Uranium Project.
The Company has no other off Balance Sheet arrangements.
OUTSTANDING SHARE INFORMATION
As at 29 August 2006 the Company had 455,285,713 fully paid ordinary shares issued and
outstanding. The following table sets out the fully paid ordinary shares issuable under the Company
Employee Share Incentive Option Plan:
As at 29 August 2006
Outstanding shares
Issuable under Employee Share Option Plan
Total
Number
455,285,713
24,565,000
479,850,713
27
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
_________________________________________________________________________________
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amount of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during the reporting period. Significant areas
requiring the use of management estimates relate to the determination of the carrying value or
impairment of interests in mineral properties, financial investments, and property, plant and equipment.
FINANCIAL INSTRUMENTS
At 30 June 2006 the Company has exposure to interest rate risk which is limited to the floating market
rate for cash.
The Company does not have foreign currency risk for non-monetary assets and liabilities of the
Namibia and Malawi operations as these are deemed to have a functional currency of Australian
dollars. The Company had no significant monetary foreign currency assets and liabilities apart from
South African rand cash term deposits and United States dollar bank loans held for the purposes of
funding a portion of the mine construction for the Langer Heinrich Uranium Project.
The Company currently does not engage in any hedging or derivative transactions to manage interest
rate or foreign currency risks.
TRANSACTIONS WITH RELATED PARTIES
During the year ended 30 June 2006 no payments were made to Director-related entities as all
Directors throughout this period were employees of the Company and received employee based
compensation.
INTERNAL CONTROLS
The Company has made no changes to its internal controls over financial reporting since 30 June
2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
DISCLOSURE CONTROLS
The Company has applied its Disclosure Control Policy to the preparation of the Consolidated
Financial Statements for the year ended 30 June 2006 and associated Management Discussion and
Analysis. An evaluation of the Company’s disclosure controls and procedures used has been
undertaken and concluded that the disclosure controls and procedures were effective.
28
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
_________________________________________________________________________________
SUBSEQUENT EVENTS
Takeover bid for Valhalla Uranium Ltd
On 10 July 2006, the Company announced an off-market takeover bid for all the fully paid ordinary
shares in Valhalla Uranium Ltd (Valhalla). Under the terms of the offer, each Valhalla shareholder will
receive one share of Paladin in exchange for every 3.16 shares of Valhalla held. The offer is subject
to various conditions, some of which are currently still outstanding. The directors of Valhalla have
unanimously recommended that Valhalla shareholders accept the Company’s offer in the absence of a
superior offer. On 24 July 2006 the Company lodged the Bidder’s Statement for the offer with the
Australian Securities and Investment Commission. The proposed acquisition represents a significant
step forward in the Company’s growth strategy.
Allotment of Shares
On 20 July 2006, the Company announced the allotment of 650,000 fully paid ordinary shares after
exercise of employee options. On 18 August 2006, the Company announced the allotment of 400,000
fully paid ordinary shares after exercise of employee options.
Appointment of Mr Brendan O’Hara
On 3 July 2006, the Company announced the appointment of Mr Brendan O'Hara as General Manager
– Special Projects, based in Perth. Mr O'Hara graduated with Bachelors of Laws and Jurisprudence
(with First Class Honours) from the University of Western Australia in 1988, before joining a national
Australian law firm specialising in mergers and acquisitions, fundraising, securities industry law and
corporate regulation, and then spent 13 years with the Australian Stock Exchange in various roles
including Manager, Companies (WA) and WA State Executive Director. Mr O’Hara will assist with the
Company’s global expansion strategy and is responsible for development and implementation of a
global investor relations strategy. Mr O’Hara has been offered one million unlisted incentive options,
exercisable at $5.50; with 500,000 vesting after 18 months and 500,000 vesting after 30 months with a
3 year expiry.
Appointment of Mr David Princep
On 20 July 2006, the Company announced the appointment of Mr David Princep as Principal
Geologist, based in Perth. Mr Princep graduated with a degree in Geology from the University of
Liverpool in the UK in 1976 and has had extensive experience in the mineral resource industry
including analytical laboratory work. In 2003 he joined Hellman and Schofield, a mineral resource
specialist group, as a consulting geologist specialising in resource estimation and assessment, grade
control practices and project data management. Mr Princep has been issued 400,000 unlisted
incentive options, exercisable at $5.50; with 200,000 vesting after 18 months and 200,000 vesting
after 30 months with a 3 year expiry.
CORPORATE GOVERNANCE STATEMENT
29
INTRODUCTION
CORPORATE GOVERNANCE FRAMEWORK
The Board of Directors of Paladin Resources Ltd is responsible for the corporate governance of the
Consolidated Entity.
Paladin has adopted systems of control and accountability as the basis for the administration of
corporate governance.
This Corporate Governance Statement outlines the key principles and practices of the Company
which, taken as a whole, is the system of governance.
Shareholders are reminded that Paladin operates with a dual listing in Australia on the Australian
Stock Exchange (ASX) and in Canada on the Toronto Stock Exchange (TSX). In formulating our
governance framework, the regulatory requirements in both Australia and Canada have been taken
into account.
The Company has complied with each of the Ten Essential Corporate Governance Principles and the
corresponding Best Practice Recommendations as published by the ASX Corporate Governance
Council. Further the Company has also complied with the Ontario Securities Commission’s corporate
governance requirements as set out in National Instrument 58-101, Disclosure of Corporate
Governance Practices, which came into force on June 30, 2005.
The Company reviews and amends its corporate governance policies as appropriate to reflect the
growth of
The website
(www.paladinresources.com.au) includes copies or summaries of key corporate governance policy
documents.
legislation and good practice.
the Company,
current
RELATIONSHIP WITH SHAREHOLDERS
The Company places a high priority on communications with and accountability to shareholders. The
Board recognises that shareholders, as the ultimate owners of the Company, are entitled to receive
timely and relevant high quality information about their investment. Similarly, prospective investors
should be able to make an informed decision when considering the purchase of shares in Paladin.
To safeguard the effective dissemination of information, the Board has implemented a Disclosure
Control Policy, detailed later in this Statement, and adopted a Shareholder Communications Policy.
These reinforce the Company’s commitment to its continuous disclosure obligations imposed by law.
Information will be communicated to shareholders by:-
• Ensuring that published financial and other statutory reports are prepared in accordance with
applicable laws and industry best practice;
• Ensuring the disclosure of full and timely information about the Company’s activities in
accordance with the general and continuous disclosure principles in the ASX Listing Rules,
the Corporations Act in Australia and all relevant legislation in Canada;
• Providing detailed reports from the Chairman and the Managing Director at the Annual
General Meeting;
• Placing all material information released to the market (including notices of meeting and
explanatory materials) on the Company’s website as soon as practical following release; and
30
CORPORATE GOVERNANCE STATEMENT (continued)
RELATIONSHIP WITH SHAREHOLDERS (continued)
• Placing the Company’s market announcements and financial data for the preceding three
years on its website. Earlier announcements are available on request.
In addition, the website includes a facility to allow interested parties to subscribe to receive,
electronically, public releases and other relevant material concerning the Company.
Shareholders are encouraged to attend Annual General Meetings and ask questions of Directors and
senior management and also the Company’s external auditors, who are required to be in attendance.
In the event that shareholders are unable to attend meetings, they are encouraged to lodge proxies
signifying their approval or otherwise of the business to be considered.
BOARD OF DIRECTORS
Role of the Board
The Board guides and monitors the business of Paladin on behalf of shareholders, by whom they are
elected and to whom they are accountable. The Board is responsible for setting corporate direction,
defining policies and monitoring the business of the Company, to ensure it is conducted appropriately
and in the best interests of shareholders.
The role of the Board is to oversee and guide the management of the Company with the aim of
protecting and enhancing the interests of its shareholders, taking into account the interests of other
stakeholders including employees, customers, suppliers and the wider community.
The Board operates under a Charter and has a written Code of Conduct which establishes guidelines
for its conduct. The purpose of the Code is to ensure that Directors act honestly, responsibly, legally
and ethically and in the best interests of the Company.
The Board is responsible for setting the strategic direction and establishing goals for management and
the monitoring of the achievements against these goals.
Composition of the Board
The Board comprises four Non-executive Directors, including the Chairman and one Executive
Director, being the Managing Director. The names of the Directors, both in office at the date of this
report and those who held the position during the past year, are set out in the Directors’ Report. This
information includes their status as Non-executive, executive or independent, their qualifications and
experience and length of service.
The structure of the Board has evolved over time to reflect the changing needs of the Company to
ensure an appropriate mix of skills and experience are available to oversee the growth of Paladin to its
full potential. This was particularly relevant given the progress towards becoming a uranium supplier
and, in the last quarter of the 2005 financial year, Board membership underwent a major restructure.
Skills sets represented at Board level include managerial, technical, financial, corporate, legal and
commercial. Particularly, members have a broad range of qualifications, experience and expertise in
the uranium business.
31
CORPORATE GOVERNANCE STATEMENT (continued)
Director Independence
Directors are expected to bring independent views and judgement to the Board’s deliberations. All of
the Non-executive Directors are considered by the Board to be independent. In considering whether a
Director is independent, the Board has regard to the independence criteria set out in the ASX
Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice
Recommendations and the Corporate Governance Guidelines developed by the Ontario Securities
Commission pursuant to National Policy 58-201 and other facts, information and circumstances that
the Board considers relevant.
The Board assesses the independence of new Directors prior to appointment and reviews the
independence of all Directors as appropriate.
Mr Rick Wayne Crabb was a principal of the legal firm, Blakiston and Crabb, until 30 June 2004.
Blakiston and Crabb is the main provider of legal services to the Company in respect of matters
concerning Australian law. Accordingly, Mr Crabb does not fit within paragraph 3 of the Independence
Test as determined by box 2.1 of ASX Corporate Governance Council Principles (“Independence
Test”) because this paragraph excludes any person who has been a principal of a material advisor
within the previous 3 year period. Mr Crabb passes all other aspects of the Independence Test. The
Board of Paladin (in the absence of Mr Crabb) considered Mr Crabb demonstrates he consistently
makes decisions and takes actions which are designed to be in the best interest of the Company. The
Board notes the fees paid to Blakiston and Crabb are not material to the Company and were not high
enough to be material to Mr Crabb’s practice at the firm Blakiston and Crabb during the time he was a
partner there and are not relevant at all past his date of retirement from that firm. Therefore, the Board
considers Mr Crabb to be independent.
Meetings of the Board
The Board meets formally at least four times a year (each over a 2 day period) and on other
occasions, as required. On the invitation of the Board, members of senior management attend and
make presentations to the Board. Non-executive Directors are able to meet without the Managing
Director and management being present, as considered appropriate. Each of the four principle Board
meetings provided this opportunity.
The Board holds an annual strategic planning session with management at which the Company’s
strategic plans for each operating activity and the Group as a whole are presented. This was held in
February 2006 over a 2 day period, on site at the Langer Heinrich Project in Namibia. The Managing
Director encourages full access to executive Managers by the Board to ensure transparency at a
senior management level.
Retirement and Re-election
The Constitution of the Company requires one third of the Directors, other than the Managing Director,
to retire from office at each Annual General Meeting. Directors who have been appointed by the
Board are required to retire from office at the next Annual General Meeting and are not taken into
account in determining the number of Directors to retire by rotation at that Annual General Meeting.
Directors cannot hold office for a period in excess of three years or later than the third Annual General
Meeting following their appointment without submitting themselves for re-election. Retiring Directors
are eligible for re-election by shareholders. Details of those Directors seeking re-election at the 2006
Annual General Meeting are set out in the Directors’ Report.
The Board does not believe that any Director has served on the Board for a period which could, or be
perceived to, materially interfere with his ability to act in the best interests of the Company.
In reaching this conclusion, the Board has noted that each of R Crabb (the Chairman) and J Borshoff
(the Managing Director) will have each served on the Board for 12 years. Notwithstanding their period
of service, the Board concluded that both Directors retain independence of character and judgement
and continue to make outstanding contributions at Board level. Both bring their unique skills to the
Board and participate in robust constructive debate.
32
CORPORATE GOVERNANCE STATEMENT (continued)
Nomination and Appointment of New Directors
If it is necessary to appoint a new Director to fill a vacancy on the Board or to complement the existing
Board, a wide potential base of possible candidates is considered and external consultants are
engaged to assist in the selection process, if required. The Board assesses the qualifications of the
proposed new Director against a range of criteria including background, experience, professional
skills, personal qualities, the potential for the candidate’s skills to augment the existing Board and the
candidate’s availability to commit to the Board’s activities. If these criteria are met and the Board
appoints the candidate as a Director, that Director must retire at the next following Annual General
Meeting and will be eligible for re-election by shareholders at that Annual General Meeting.
New Directors appointed to the Board are invited to participate in an induction programme which
includes provision of comprehensive written material regarding the Company such as:-
•
Information on the financial, strategic and operational position of the Company;
• A comprehensive letter of appointment which sets out the Company’s expectations on
acceptance of the position;
• A written statement which sets out the duties, rights and responsibilities they undertake on
becoming a Director together with material detailing the operations, policies and practices of
the Company; and
• Copies of previous minutes of Board meetings together with recent Annual Reports and
interim financial statements.
Further, new Directors are invited to attend briefing sessions with the Managing Director and key
members of the senior management team where they may ask questions and direct any queries they
may have to the Chairman or the Managing Director or obtain any other briefings they feel necessary
from the Chairman or the Managing Director. They are encouraged to attend site visits in liaison with
the Managing Director, at appropriate times. Directors agree to participate in continuous improvement
programs from time to time, as considered appropriate.
Evaluation of Board Performance
Improvement in Board processes and effectiveness is a continuing objective and the primary purpose
of Board evaluation is to identify ways to improve performance. The Chairman is responsible for
conducting an annual review of the Board performance.
An evaluation of the performance of the Board was carried out in the last quarter of the 2006 financial
year. This process involved completion of individual questionnaires focused on process, structure,
effectiveness and contributions. Responses to the questionnaire were collated and discussed by the
Board and recommendations for improvement considered.
33
CORPORATE GOVERNANCE STATEMENT (continued)
Knowledge, Skills and Experience
To assist Directors to maintain an appropriate level of knowledge, skill and experience in the
operations of the Company, Directors have the opportunity to undertake site visits to familiarize
themselves with the Company’s operations.
Directors are also provided with papers, presentations and briefings on the Company’s operations and
on matters which may affect the Company. These are provided in addition to Board papers and are
designed to assist the Directors to gain relevant and timely information to assist in their decision
making process. Directors are also encouraged to undertake continuing education relevant to the
discharge of their obligations as Directors of the Company. Subject to prior approval by the Company
Secretary, the reasonable cost of such education is met by the Company.
Position Descriptions
The Board has developed and adopted written position descriptions for the Non-executive Chairman of
the Board, the Chairman of each Board Committee, the Managing Director and the Company
Secretary.
These delineate the role and responsibility of each position and provide clarity on the expectations for
those individuals occupying these key positions within the Company.
Conflicts of Interest
The Code of Conduct for Directors, a copy of which is available on the Company’s website, sets out
the procedure to be followed if there is, or may be, a conflict between the personal or other interests of
a Director and the business of the Company. A Director with an actual or potential conflict of interest
in relation to a matter before the Board does not receive the Board papers relating to that matter and
when the matter comes before the Board for discussion, the Director withdraws from the meeting for
the period the matter is considered and takes no part in the discussions or decision-making process.
Minutes reporting on matters in which a Director is considered to have a conflict of interest are not
provided to that Director, however, the Director is given notice of the nature of the matter for
discussions and, as much as practicable, of the general nature of the discussion or decision reached.
Remuneration
Details of the remuneration policies and practices of the Company and the remuneration paid to the
Directors (Executive and Non-executive) and Senior Executives are set out in the Remuneration
Report included in the Directors’ Report. Shareholders will be invited to consider and to approve the
Remuneration Report at the Annual General Meeting in November 2006.
In relation to the Non-executive Directors there are no termination or retirement benefits.
Independent advice
The Board and its Committees may seek advice from independent experts whenever it is considered
appropriate. With the consent of the Chairman, individual Directors may seek independent
professional advice, at the expense of the Company, on any matter connected with the discharge of
their responsibilities. No Director availed himself of this right during the course of the year.
34
CORPORATE GOVERNANCE STATEMENT (continued)
BOARD COMMITTEES
The Board has established Audit, Nomination and Remuneration Committees which assist in the
discharge of the Board’s responsibilities.
Board approved charters set out the terms of reference and rules governing these Committees.
Audit Committee
The Audit Committee assists the Board in discharging its responsibilities to ensure that the Company
complies with appropriate and effective accounting, auditing, internal control, business risk
management, compliance and reporting practices in accordance with the Audit Committee Charter.
The role of the Audit Committee is to:
• Monitor the integrity of the financial statements of the Company, reviewing significant financial
reporting judgments;
• Review the Company’s internal financial control system and, unless expressly addressed by a
separate risk committee or by the Board itself, risk management systems;
• Monitor and review the effectiveness of the Company’s internal audit function (if any);
• Monitor and review the external audit function including matters concerning appointment and
remuneration, independence and non-audit services; and
• Perform such other functions as assigned by law, the Company's constitution, or the Board.
The Audit Committee comprises three members, all of whom are independent Non-executive
Directors. The current members of the Audit Committee are:-
• George Pirie – Chairman
Non-executive, Independent Director
• Sean Llewelyn – Non-executive Director
Independent Director
•
Ian Noble – Non-executive Director
Independent Director
The Audit Committee meets at least once a quarter and at any other time requested by a Board
member, Company Secretary or external auditor. The external auditors attend at least twice a year
and on other occasions where circumstances warrant.
The number of meetings of the Audit Committee during the reporting period and the names on the
attendance record is set out in the Directors’ Report.
The external auditors are Ernst and Young who were appointed as the Company’s auditors in June
2005.
35
CORPORATE GOVERNANCE STATEMENT (continued)
Nomination Committee
The responsibilities of the Nomination Committee include:-
• Reviewing the size and composition of the Board and making recommendations to the Board
on any appropriate changes;
• Developing and planning for identifying, assessing and enhancing Director competencies;
• Making recommendations on the appointment and removal of Directors;
• Evaluating Board performance so that individual and collective performance is regularly and
fairly assessed; and
• Providing new Directors with an induction into the Company and provide all Directors with
access to on going education relevant to their position.
The Chairman of the Board chairs the Nomination Committee and having regard to the size of the
Board, it is considered appropriate that all members of the Board are members of the Nomination
Committee.
No meetings of the Nomination Committee were held during the financial year to 30 June 2006 as the
Board underwent a comprehensive restructure to accommodate the needs of the Company in the last
quarter of the 2005 financial year.
Remuneration Committee
The role of the Committee, in accordance with the Remuneration Committee Charter, is to assist the
Board with respect to remuneration by reviewing and making appropriate recommendations on:-
a)
b)
Remuneration packages of executive Directors, Non-executive Directors and senior
executives; and
Employee incentive and equity based plans including the appropriateness of
performance hurdles and total payments proposed.
The ASX Listing Rules and the Constitution require that the maximum aggregate amount of
remuneration to be allocated among the Non-executive Directors be approved by the shareholders in
general meeting. In proposing the maximum amount for consideration by shareholders, and in
determining the allocation, the Remuneration Committee will take into account the time demands
made on Directors and such factors as fees paid on Non-executive Directors in comparable Australian
companies.
The remuneration paid to Directors and senior executives is shown in the Directors’ Report.
The Remuneration Committee comprises three members, all of whom are independent Directors. The
Chairman of the Board is the Chairman of the Remuneration Committee and the Committee shall meet
at least twice a year and otherwise as required.
CORPORATE GOVERNANCE STATEMENT (continued)
36
Remuneration Committee (continued)
The current members of the Remuneration Committee are:-
• Rick Crabb – Chairman
Non-executive, Independent Director
• Sean Llewelyn – Non-executive Director
Independent Director
• George Pirie – Non-executive Director
Independent Director
The number of meetings of the Remuneration Committee during the reporting period and the names
on the attendance record is set out in the Directors’ Report.
FINANCIAL REPORTING
CEO and CFO Sign-offs
In accordance with the Corporations Act 2001, ASX Corporate Governance Principle 4 (Safeguard
Integrity in Financial Reporting) and Canadian Securities Law, relevant declarations, statements and
certifications have been provided by the Managing Director and the Chief Financial Officer in relation
to the Company’s 30 June 2006 Annual Report, including financial statements.
DISCLOSURE CONTROLS
Paladin is committed to ensuring that shareholders and the market are provided with full and timely
information and that all stakeholders have equal and timely access to material information concerning
the Company.
The Company understands and respects that timely disclosure of price sensitive information is central
to the efficient operation of the Australian Stock Exchange’s and Toronto Stock Exchange’s securities
market and has adopted a Disclosure Control Policy with underlying procedures covering public
announcements, the prevention of selective or inadvertent disclosure, conduct of investor and analysts
briefings, and media communications. This policy reflects the commitment of the Directors and
management to promoting consistent disclosure practices aimed at accurate, timely and broadly
disseminated disclosure of material information to the market. The Company has formed a Disclosure
Control Committee which has responsibility for overseeing and co-ordinating disclosure of all public
information. Members of this Committee are the Managing Director, Company Secretary and Chief
Finance Officer.
37
CORPORATE GOVERNANCE STATEMENT (continued)
RISK MANAGEMENT
The Company has established a Risk Management Policy which sets out a framework for a system of
risk management and internal compliance and control, whereby the Board delegates day-to-day
management of risk to the Managing Director. The Managing Director, with the assistance of senior
management as required, has responsibility for identifying, assessing, treating and monitoring risks
and reporting to the Board on risk management.
A master risk register has been compiled and is subject to periodic review by senior management to
ensure adequate risk control measures have been identified. An operational risk assessment system
is in place at Langer Heinrich which is continuously reviewed and updated.
ENVIRONMENT
The Company seeks to prevent, minimise, mitigate and remediate any harmful effects of its operations
on the environment and strives to achieve continuous improvement in environmental performance.
The Company promotes an excellent standard of environmental performance across its business and
has adopted an environmental policy which includes compliance with all applicable environmental laws
as a minimum standard, development and implementation of Environmental Management Systems,
including Environmental and Radiological Management Plans to identify, assess and manage
environmental risks, ensuring its employees and contractors are aware of their environmental
responsibilities, consulting with government and community in relation to the Company’s operations
and proposed projects, and undertaking regular audits and reviews on environmental performance.
SAFETY AND OCCUPATIONAL HEALTH
The safety, health and wellbeing of employees, contractors and the community are of core value to
Paladin Resources’ operations. A healthy workforce contributes to business success and Paladin’s
aim is for zero injuries. The safety and health performance of Paladin will be measured through
internal and external internationally recognised auditing and reporting processes.
SECURITIES OWNERSHIP AND DEALINGS
The Company has a Policy for Trading in Company Securities which is binding on all Directors and
employees. The purpose of this policy is to provide a brief summary of the law on insider trading and
other relevant laws, set out the restrictions on dealing in securities by people who work for or are
associated with Paladin and assist in maintaining market confidence in the integrity of dealings in
Paladin’s securities.
The Company’s policy prohibits hedging of options granted under share options plans. This relates to
both vested and unvested options. Prohibited hedging practices include put/call arrangements over “in
money” options to hedge against a future drop in share price. The Board considers such hedging to
be against the spirit of a share option plan and inconsistent with shareholder objectives.
CODES OF CONDUCT
The Board has approved a Code of Conduct for Directors (incorporating underlying Guidelines for
the Interpretation of Principles) together with a Code of Business Conduct and Ethics, which
applies to all Directors, Officers and Employees including those employed by subsidiaries, in all
countries where Paladin does business. A copy of the Code is available on the Company’s website.
These Codes demonstrate and codify Paladin’s commitment to appropriate and ethical corporate
practices. Compliance with the Codes will also assist the Company to effectively manage its operating
38
CORPORATE GOVERNANCE STATEMENT (continued)
CODES OF CONDUCT (continued)
risks and meeting its legal and compliance obligations, as well as enhancing Paladin’s corporate
reputation.
The principles outlined in this document are intended to:
• Establish a minimum global standard of conduct by which all Paladin employees are expected
to abide;
• Protect the business interests of Paladin, its employees and customers;
• Maintain Paladin’s reputation for integrity; and
• Facilitate compliance by Paladin employees with applicable legal and regulatory obligations.
The Code of Business Conduct and Ethics addresses honesty and integrity, following the law, conflicts
of interest, confidentiality, protection of Company assets, dealing with public officials, responsibility for
international operations, employment practices, record keeping and community relations.
The Board has appointed the Company Secretary as the Company’s compliance officer in the case of
employees, and the Chairman of the Audit Committee in the case of Directors and officers, as the
person responsible for receiving reports of breaches of the Code and this is the mechanism by which
compliance with the Code is monitored.
The Board has also approved a Whistleblower Policy which documents commitment to maintaining
an open working environment in which employees and contractors are able to report instances of
unethical, unlawful or undesirable conduct without fear of intimidation or reprisal.
The purpose of the Whistleblower Policy is to:
• Help detect and address unacceptable conduct;
• Help provide employees and contractors with a supportive working environment in which they
feel able to raise issues of legitimate concern to them and to the Company; and
• Help protect people who report unacceptable conduct in good faith.
The Company has a firm commitment to protecting the privacy of any personal information that it
collects and holds and recognizes its obligations under the existing privacy legislation. It has adopted
a Privacy Policy which provides details on the collection and use of personal information,
circumstances under which it can be disclosed, management and security of personal information and
how it can be accessed.
Any changes to the above Codes and Policies are considered by the Board for approval.
39
DIRECTORS' REPORT
_________________________________________________________________________________
The Directors present their report on the Consolidated Entity consisting of Paladin Resources Ltd and
the entities it controlled at the end of, or during, the year ended 30 June 2006.
Directors
The following persons were Directors of Paladin Resources Ltd (“Company”) and were in office for this
entire period:
Current
Mr Rick Wayne Crabb (Non-executive Chairman)
Mr John Borshoff (Managing Director)
Mr Sean Llewelyn (Non-executive Director)
Mr George Pirie (Non-executive Director)
Mr Ian Noble (Non-executive Director)
Principal Activity
The principal activity of the Consolidated Entity was evaluation and development of uranium projects
in Africa and Australia.
Review and Results of Operations
A detailed operational and financial review of the Consolidated Entity is set out on pages 11 to 28 of
this report under the section entitled Management Discussion and Analysis.
Dividends
No dividend has been paid during the financial year and no dividend is recommended for the current
year.
Significant Changes in the State of Affairs
There were no significant changes in the state of affairs of the Consolidated Entity during the financial
year not otherwise dealt with in this report.
40
DIRECTORS' REPORT (continued)
Significant Events After The Balance Sheet Date
Since the end of the financial period, the Directors are not aware of any other matter or circumstance
not otherwise dealt with in this report or the Financial Statements, that has significantly or may
significantly affect the operations of the Consolidated Entity, the results of those operations or the
state of affairs of the Consolidated Entity in subsequent years with the exception of the following the
financial effects of which have not been provided for in the 30 June 2006 Financial Report:
Takeover bid for Valhalla Uranium Ltd
On 10 July 2006, the Company announced an off-market takeover bid for all the fully paid ordinary
shares in Valhalla Uranium Ltd (Valhalla). Under the terms of the offer, each Valhalla shareholder will
receive one share of Paladin in exchange for every 3.16 shares of Valhalla held. The offer is subject
to various conditions, some of which are currently still outstanding. The directors of Valhalla have
unanimously recommended that Valhalla shareholders accept the Company’s offer in the absence of a
superior offer. On 24 July 2006 the Company lodged the Bidder’s Statement for the offer with the
Australian Securities and Investment Commission. The proposed acquisition represents a significant
step forward in the Company’s growth strategy.
Allotment of Shares
On 20 July 2006, the Company announced the allotment of 650,000 fully paid ordinary shares after
exercise of employee options. On 18 August 2006, the Company announced the allotment of 400,000
fully paid ordinary shares after exercise of employee options.
Appointment of Mr Brendan O’Hara
On 3 July 2006, the Company announced the appointment of Mr Brendan O'Hara as General Manager
– Special Projects, based in Perth. Mr O'Hara graduated with Bachelors of Laws and Jurisprudence
(with First Class Honours) from the University of Western Australia in 1988, before joining a national
Australian law firm specialising in mergers and acquisitions, fundraising, securities industry law and
corporate regulation, and then spent 13 years with the Australian Stock Exchange in various roles
including Manager, Companies (WA) and WA State Executive Director. Mr O’Hara will assist with the
Company’s global expansion strategy and is responsible for development and implementation of a
global investor relations strategy. Mr O’Hara has been offered one million unlisted incentive options,
exercisable at $5.50; with 500,000 vesting after 18 months and 500,000 vesting after 30 months with a
3 year expiry.
Appointment of Mr David Princep
On 20 July 2006, the Company announced the appointment of Mr David Princep as Principal
Geologist, based in Perth. Mr Princep graduated with a degree in Geology from the University of
Liverpool in the UK in 1976 and has had extensive experience in the mineral resource industry
including analytical laboratory work. In 2003 he joined Hellman and Schofield, a mineral resource
specialist group, as a consulting geologist specialising in resource estimation and assessment, grade
control practices and project data management. Mr Princep has been issued 400,000 unlisted
incentive options, exercisable at $5.50; with 200,000 vesting after 18 months and 200,000 vesting
after 30 months with a 3 year expiry.
Likely Developments
Likely developments in the operations of the Consolidated Entity constituted by the Company and the
entities it controls from time to time are set out under the section entitled Management, Discussion and
Analysis.
DIRECTORS' REPORT (continued)
41
Environmental Regulations
The Consolidated Entity is subject to significant environmental regulation in respect to its evaluation
and development activities.
The Company aims to ensure the appropriate standard of environmental care is achieved, and in
doing so, that it is aware of and is in compliance with all environmental legislation. The Directors of
the Company reviewed the Company’s projects during the year and are not aware of any breach of
environmental legislation for the financial year under review.
Information on Directors
Mr Rick Wayne Crabb (Non-executive Chairman) Age 49
B. Juris (Hons), LLB, MBA, FAICD
Mr Crabb holds degrees of Bachelor of Jurisprudence (Honours), Bachelor of Laws and Master of
Business Administration from the University of Western Australia. He has practiced as a solicitor from
1980 to 2004 specialising in mining, corporate and commercial law. He has advised on all legal
aspects including financing, marketing, government agreements and construction contracts for many
resource development projects in Australia and Africa. Mr Crabb now focuses on his public company
directorships and investments. He has been involved as a director and strategic shareholder in a
number of successful public companies. He is presently also a director of Alcaston Mining NL (since
2001), Ashburton Minerals Ltd (since 1999), Otto Energy Ltd (since 2004), Port Bouvard Ltd (since
1996), Royal Resources Limited (since 2004) and Thundelarra Exploration Ltd (since 2003).
Mr Crabb was appointed a director on 8 February 1994 and Chairman on 27 March 2003.
Former directorships of listed companies in last three years
ST Synergy Ltd from 2001 to 2005
Deep Yellow Ltd from 2003 to 2004
Aldershot Resources Ltd from 2004 to 2005
Special Responsibilities
Chairman of the Board
Chairman of Remuneration Committee from 1 June 2005
Chairman of Nomination Committee from 1 June 2005
Mr John Borshoff (Managing Director) Age 61
B.Sc., F.AusIMM, FAICD
joining a German mining group, Uranerz
Mr Borshoff is a geologist who has been involved in the Australian and African exploration and mining
industry for 34 years. Mr Borshoff worked for International Nickel and Canadian Superior Mining
before
to 1991. He became Chief
Geologist/Exploration Manager during the period 1981-1986 and served as its chief executive from
1987 to mid 1991 when the German parent of Uranerz made the decision to close its Australian
operations. The primary focus of the Uranerz Group was the search and development of uranium with
the company operating extensively throughout Australia, North America and Africa.
from 1976
Mr Borshoff founded Paladin Resources Ltd and was appointed a Director on 24 September 1993. He
has extensive knowledge of the uranium industry and experience in company management, strategic
planning and administration.
Special Responsibilities
Managing Director
Member of Nomination Committee from 1 June 2005
42
DIRECTORS' REPORT (continued)
Information on Directors (continued)
Mr Sean Reveille Llewelyn (Non-executive Director) Age 58
LL.B
Mr Llewelyn, first qualified as a solicitor in Australia and England. His life work however has been in
finance and merchant banking having worked for more than 20 years in this capacity in Australia, the
UK, the USA and South Africa. His considerable experience has been on derivatives, structured
finance and early stage investment relating to the metal markets. He has been involved with uranium
for over 10 years and has a comprehensive understanding of the uranium market.
Mr Llewelyn was involved as a key player in the formation of a joint venture company between Anglo
Gold and First Rand International to assume marketing responsibility for uranium on behalf of Nuclear
Fuels Corporation of South Africa (Nufcor).
Mr Llewelyn was appointed to the Board on 12 April 2005.
Special Responsibilities
Member of Audit Committee from 12 April 2005
Member of Remuneration Committee from 1 June 2005
Member of Nomination Committee from 1 June 2005
Mr George Edward Pirie (Non-executive Director) Age 53
B.Com (Hons)
Mr Pirie has 24 years experience in the mining business. In 1980 he was with Pamour Porcupine
Mines, a division of Noranda and then joined Dome Mines Limited in 1985, holding various positions
until April 1999 when he was promoted to Chief Financial Officer for Placer Dome North America,
where he was responsible for re-establishing both Placer Dome U.S. and Placer Dome Canada. In
January 2000, he joined Placer Dome Canada as Chief Financial Officer and was appointed Acting
President and Chief Executive Officer of Placer Dome Canada in October 2001. He was responsible
for the formation of the Porcupine Joint Venture in July of 2002 and was promoted to Executive Vice
President of Placer Dome Inc. and President and Chief Executive Officer of Placer Dome Canada in
December 2002. Mr Pirie resigned his position with Placer Dome effective 31 December 2004.
Mr Pirie currently serves on several boards including: Ontario Mining Association, Mining Association
of Canada, Canadian Mineral Industry Education Foundation, Mirarco Mining Innovation, Co-Chair of
the Mining Cluster Initiative for the Ministry of Northern Development & Mines, and effective 4 July
2005 appointed President and Chief Executive Officer of Breakwater Resources Inc.
Mr Pirie was appointed to the Board on 1 June 2005.
Special Responsibilities
Chairman of Audit Committee from 1 June 2005
Member of Remuneration Committee from 1 June 2005
Member of Nomination Committee from 1 June 2005
43
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Information on Directors (continued)
Mr Ian Urquhart Noble (Non-executive Director) Age 65
BSc (Metallurgy), F.AusIMM, ARCST
Mr Noble has more than 40 years experience covering the mining, chemical and nuclear industries
with a strong emphasis in the mining and mineral processing fields. He is an internationally
recognised consultant, specialising in hydrometallurgy and comminution, and has been involved in
many of the major mining developments within Australia and overseas. He has held senior
management positions with both Wright Engineers Australia Ltd and Fluor Australia and took a lead
role in the design of Australia’s two major uranium processing plants.
Mr Noble’s initial involvement with uranium was with Wright Engineers Pty Limited on the Rabbit Lake
project in Canada. In Australia, in 1976, he was Lead Engineer on the Ranger Uranium Feasibility
Study, followed by a three year involvement in the design construction phase, initially as Process
Engineering Manager, and then a period as Project Engineer for the hydrometallurgical plant, and
finally a year on site as Pre-Commissioning and Commissioning Manager. He was subsequently Lead
Process Engineer for the design of Western Mining Corporation’s Olympic Dam Project.
Mr Noble was appointed to the Board on 29 June 2005.
Special Responsibilities
Member of Audit Committee from 29 June 2005
Member of Nomination Committee from 29 June 2005
Company Secretary
Ms Gillian Swaby Age 46
B.Bus, FCIS, FAICD
Ms Swaby has been involved in financial and corporate administration for listed companies, as both
Director and Company Secretary covering a broad range of industry sectors, for over 25 years. Ms
Swaby has extensive experience in the area of secretarial practice, management accounting and
corporate and financial management and sits on a number of advisory committees.
Ms Swaby is past Chair of the Western Australian Council of Chartered Secretaries of Australia, a
former Director on their National Board and lecturer for the Securities Institute of Australia. Ms Swaby
is the principal of a corporate consulting company and was a member of the Paladin Board for a
period of 9 years.
44
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Directors’ Meetings
The number of Directors’ meetings and meetings of committees held in the period each Director held
office during the financial year, and the number of meetings attended by each Director are:
Board of
Directors’ meetings
Audit Committee
meetings
Remuneration
Committee meetings
Name
Number
attended
Number
eligible
to attend
Number
attended
Number
eligible
to attend
Number
attended
Number
eligible
to attend
Mr Rick Crabb
Mr John Borshoff
Mr Sean Llewelyn
Mr George Pirie
Mr Ian Noble
8
8
8
8
6
8
8
8
8
8
-
-
5
5
5
-
-
5
5
5
5
-
5
3
-
5
-
5
5
-
Resignation, Election and Continuation in Office of Directors
In accordance with the Constitution of the Company Messrs Crabb and Llewelyn retire by rotation at
the Annual General Meeting and, being eligible, offer themselves for re-election.
Remuneration Report
Details of Key Management Personnel
(i) Directors
Mr Rick Crabb
Mr John Borshoff
Mr Sean Llewelyn
Mr George Pirie
Mr Ian Noble
Chairman (Non-executive)
Managing Director
Director (Non-executive)
Director (Non-executive)
Director (Non-executive)
(ii) Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr Ron Chamberlain
Mr Wyatt Buck
Mr James Eggins
Executive General Manager –Operations and Development
Company Secretary
Chief Financial Officer
General Manager – Langer Heinrich Operations
Executive General Manager – Sales and Contract
Administration – appointed 1 January 2006
Mr Dustin Garrow
Mr David Marsh
Director of Marketing – commenced as Key Management
Personnel on 1 January 2006
Executive General Manager – New Business Development –
appointed 1 July 2006
Compensation of Key Management Personnel
i) Compensation Policy (audited)
The Remuneration Committee, on behalf of the Board of Directors, monitors compensation of
Directors and Executives of the Company.
45
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Remuneration Report (continued)
i) Compensation Policy (audited)(continued)
Generally, compensation is provided by the Company to its Executives (including the Managing
Director), by way of base salary, short-term bonus, granting of employee options and superannuation.
The overall objective is to ensure that remuneration is fair and reasonable and sufficient to attract and
retain qualified and experienced Directors and Executives.
The compensation program for the Executives of the Company is designed to ensure that the level
and form of compensation achieves certain objectives, including:
attracting and retaining talented, qualified and effective Executives;
(a)
(b) motivating their short and long-term performance; and
(c)
aligning their interests with those of the Company's shareholders.
In line with Corporate Governance principles, Non-executive Directors are remunerated solely by way
of fees and statutory superannuation. The total pool of fees available is set by shareholders in general
meeting.
Given the evolving nature of the Company’s business, (particularly as production start-up is scheduled
for the 2006/2007 financial year) the Remuneration Committee continues to review and redesign the
overall compensation plan for all employees so as to continue to address the objectives identified
above. It is currently undertaking a review with the assistance of external consultants to both revise
the share option plan and determine parameters for the payment of cash bonuses to be made in the
next financial year, following commencement of production.
Company Performance
The overall level of compensation takes into account the growth in shareholder wealth of the
Company. The chart below compares, assuming an initial investment of $100, the yearly percentage
change in the cumulative total shareholder return on the Company’s Ordinary Shares against the
cumulative total shareholder return of the S&P/ASX 200 Index for the Company's five most recently
completed financial years.
1 4 0 0 0
1 2 0 0 0
1 0 0 0 0
8 0 0 0
6 0 0 0
4 0 0 0
2 0 0 0
0
J u n . 0 2
J u n . 0 3
J u n . 0 4
J u n . 0 5
J u n . 0 6
T h e C o m p a n y
S & P / A S X 2 0 0 I n d e x
30 June 2002
30 June 2003 30 June 2004
30 June 2005 30 June 2006
The Company
A$100.00
A$35.15
A$468.26
A$4,055.63
A$14,260.41
S&P/ASX 200
Index
A$100.00
A$94.09
A$109.85
A$133.01
A$157.77
46
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Remuneration Report (continued)
i) Compensation Policy (audited) (continued)
As a result of the evaluation and development nature of the Company’s activities the overall level of
compensation does not focus on the earnings of the Company.
Directors’ Fees
At the 2005 Annual General Meeting, shareholders approved an increase in the total pool of fees
available to be paid to Non-executive Directors to $400,000. Given the expansion of the Board and
the growth of the Company such an increase was considered necessary to attract and retain directors
of a calibre required to effectively guide and monitor the business of the Company.
Fees payable to Non-executive Directors are set at A$80,000 per annum, effective 1 November 2005,
inclusive of any superannuation obligations. Exceptions to this fee structure are the Chairman of the
Audit Committee who receives an additional A$5,000 per annum, and the Chairman of the Board who
receives an additional A$35,000 per annum. The increased fees were arrived at on the basis of a
review by external independent remuneration consultants looking at companies with similar market
capitalisation.
Compensation paid to the Managing Director is set out under (iv) Contracts for Services.
In addition, the Company’s Constitution provides for additional compensation to be paid if any of the
Directors are called upon to perform extra services or make any special exertions on behalf of the
Company or the business of the Company. The Directors may compensate such Director in
accordance with such services or exertions, and such compensation may be either in addition to or in
substitution for the Directors’ fees referred to above.
Base Salary
The first step to attracting and retaining talented, qualified and effective Executives is paying base
salaries which are competitive in the markets in which the Company operates. Competitive salary
information on companies of a comparable size in the resource industry is complied from a variety of
sources, including surveys conducted by independent consultants and national and international
publications.
Expatriate Benefits
Executives who are required to fulfil their responsibilities as an expatriate receive benefits including
health insurance, housing and car allowances, educational fees and tax advisory services.
Short-term Bonus
The Company provides short-term bonuses to Executives of up to 20% of base salary. In respect of
the Managing Director, a bonus of up to 100% of base salary can be achieved, to be determined by
the Remuneration Committee having consideration to outcomes achieved during the year.
Outcomes to be considered include:
-
-
-
-
-
-
-
acceptable safety and environmental performance by the Group;
completion of the Kayelekera Bankable Feasibility Study;
increases in uranium resource under Company control;
continued successful recruitment of senior personnel;
increase in market capitalisation;
acquisition of new projects; and
achievement of financial budget targets.
47
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Remuneration Report (continued)
i) Compensation Policy (audited) (continued)
The short-term bonuses are based on achieving the following measures where these are applicable to
the specific Executive:
(a) performance of the Company in meeting its objectives;
(b) additional uranium resources delineated;
(c)
(d)
(e) such other matters determined by the Remuneration Committee in its discretion.
financial performance of the Company;
increase in market capitalisation of the Company; and
These measures have been selected to align the interests of Executives with shareholders. The
Remuneration Committee is responsible for assessing whether the measures are met and will take
into account, amongst other things, the progress of the Company in meeting its objectives, the
increase in uranium resources, the financial performance of the Company, and the growth in market
capitalisation.
The short term bonus payments may be adjusted up or down in line with under or over achievement
against the measures. This is at the discretion of the Remuneration Committee.
Company Employee Share Incentive Option Plan
The Company believes that encouraging its Executives to become shareholders is the best way of
aligning their interests with those of its shareholders. Equity participation is accomplished through the
Company’s employee option plan which is currently under review to more appropriately deal with the
Company’s emerging producer status. Options are granted to Executives taking into account a
number of factors, including the amount and term of options previously granted, base salary, short-
term bonuses and competitive factors. Vesting of options will be subject to attainment of targeted
measurements aligned with Total Shareholder Return. One feature will be a minimum vesting period
of 3 years.
Information on the Employee Share Incentive Option Plan is set out under Note 26 Share Based
Payment Plan. During the financial year, a number of options were granted to attract high calibre
executives, in what continues to be a highly competitive and tight market for human capital. These
options granted during the year included specific vesting periods.
The Company’s policy prohibits hedging of options granted under share option plans. Prohibited
hedging practices include put/call arrangements over “in money” options to hedge against a future
drop in share price. The Board considers such hedging to be against the spirit of a share option plan
and inconsistent with shareholder objectives.
48
DIRECTORS' REPORT (continued)
_____________________________________________________________________________________________________________________________
Remuneration Report (continued)
ii) Compensation of Key Management Personnel for the year ended 30 June 2006 (audited)(Consolidated and Company)
Short-term
Post Employment
Share Based
Payment
Total Total
Performance
Related
Salary
& fees
Cash
bonus
Non
Other
Superannuation
Options
Monetary
Benefits
A$
A$
A$
A$
Directors
Mr Rick Crabb
Mr John Borshoff
Mr Sean Llewelyn
Mr George Pirie
Mr Ian Noble
Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr Ron Chamberlain
Mr Wyatt Buck
Mr James Eggins
Mr Dustin Garrow
Mr David Marsh
Total
85,627
488,415
61,162
75,417
61,162
-
200,000
-
-
-
-
-
-
-
-
459,625
-
162,500
81,435
110,000
-
-
1,585,343
-
-
-
-
-
-
-
200,000
46,408
-
-
16,009
12,348
-
-
74,765
-
-
-
-
-
-
153,000
-
-
-
143,856
-
296,856
A$
7,706
11,585
5,505
-
5,505
A$
A$
A$
320,942
370,318
-
-
-
414,275
1,070,318
66,667
75,417
66,667
320,942
570,318
-
-
-
11,585
-
11,585
9,480
5,792
-
-
68,743
256,256
243,600
134,335
506,152
246,534
258,996
224,807
2,561,940
773,874
396,600
308,420
613,076
374,674
402,852
224,807
4,787,647
256,256
243,600
134,335
506,152
246,534
258,996
224,807
2,761,940
49
DIRECTORS' REPORT (continued)
____________________________________________________________________________________________________________________________
Remuneration Report (continued)
ii) Compensation of Key Management Personnel for the year ended 30 June 2005 (audited)(Consolidated and Company)
Short-term
Post Employment Share Based
Total Total
Salary
& fees
Cash
bonus
A$
A$
Non
Monetary
Benefits
A$
Other
Superannuation
Options
Payment
Performance
Related
A$
A$
A$
A$
A$
Directors
Directors
Mr Rick Crabb
Mr John Borshoff
Mr Sean Llewelyn
Mr George Pirie
Mr Ian Noble
Mr Michael Blakiston
Dr Leon Pretorius
Mr Cliff Davis
23,991
64,736
7,645
3,750
-
-
-
-
Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr Ron Chamberlain
Total
226,576
-
81,667
408,365
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,675
-
-
2,675
-
212,184
-
-
-
69,788
120,000
-
-
70,000
-
471,972
2,159
5,826
688
-
-
-
-
-
500,983
578,057
-
-
-
-
500,983
-
527,133
860,803
8,333
3,750
-
69,788
620,983
-
500,983
578,057
-
-
-
-
500,983
-
6,758
-
7,350
22,781
448,445
426,300
119,032
2,573,800
684,454
496,300
208,049
3,479,593
448,445
426,300
119,032
2,573,800
50
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Remuneration Report (continued)
iii) Compensation by Category: Key Management Personnel
Short-Term
Post Employment
Share-Based Payment
CONSOLIDATED/
COMPANY
2006
A$
2005
A$
2,156,964
68,743
883,012
22,781
2,561,940 2,573,800
4,787,647 3,479,593
iv) Contracts for Services (audited)
Remuneration and other terms of employment for the Key Management Personnel are normally
formalised in contracts for services.
All contracts with Key Management Personnel may be terminated early by either party providing
between 3 to 6 months written notice or providing payments in lieu of the notice period (based on fixed
component of remuneration). On termination notice by the Company, any options that have vested, or
that will vest during the notice period, will be released. Options that have not yet vested will be forfeited.
Mr John Borshoff, Managing Director
Term of agreement – 3 years commencing 1 March 2005 renewable for a further 2 year term subject to
agreement.
Base salary, inclusive of superannuation, of A$400,000 increased to A$600,000 effective 1 January
2006.
Payment of a benefit on retirement or early termination by the Company, other than for gross
misconduct, equal to 2 times base salary for the two years immediately preceding the termination date.
This benefit was approved by the Company shareholders on 9 November 2005.
Mr Garnet Halliday, Executive General Manager - Operations and Development
Term of agreement – no fixed term.
Base salary, inclusive of superannuation, of A$400,000 + 20% expatriate allowance from 1 August 2005
to be reviewed annually, together with standard expatriate benefits.
No termination benefit is specified in the agreement.
Ms Gillian Swaby, Company Secretary
No contract for service exists for Ms Gillian Swaby and fees are paid in the ordinary course of business
for company secretarial services to a company of which Ms Gillian Swaby is a director and shareholder.
51
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Remuneration Report (continued)
iv) Contracts for Services (audited)(continued)
Mr Ron Chamberlain, Chief Financial Officer
Term of agreement – no fixed term.
Base salary, inclusive of superannuation, of A$151,585 increased to A$196,585 effective 1 January
2006.
No termination benefit is specified in the agreement.
Mr Wyatt Buck, General Manager – Langer Heinrich Operations (from 1 February 2006)
Term of agreement – no fixed term.
Base salary, inclusive of superannuation, of A$220,000 + 10% expatriate allowance to be reviewed
annually, together with standard expatriate benefits.
No termination benefit is specified in the agreement.
Mr James Eggins, Executive General Manager - Sales and Contract Administration (from 1 January
2006)
Term of agreement – no fixed term.
Base salary, inclusive of superannuation, of A$231,585 to be reviewed annually.
No termination benefit is specified in the agreement.
Mr Dustin Garrow, Director of Marketing (from 1 January 2006)
A contract for service exists for Mr Dustin Garrow with no fixed term at a rate of US$210,000 per annum
paid in the ordinary course of business for marketing consulting services to a company of which Mr
Dustin Garrow is a director and shareholder. No termination benefit or rate review date is specified in
the contract.
Mr David Marsh, Executive General Manager - New Business Development (from 1 July 2006)
Term of agreement – no fixed term.
Base salary, inclusive of superannuation, of A$250,000 to be reviewed annually.
No termination benefit is specified in the agreement.
Options were granted on acceptance of position prior to his commencement on 1 July 2006.
52
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Remuneration Report (continued)
v) Compensation Options: Granted and vested during the year (audited)(Consolidated and Company)
During the financial year options were granted as equity compensation benefits under the long term
incentive plan to certain Key Management Personnel. The options were issued at no consideration.
Each option entitles the holder to subscribe for one fully paid ordinary share in the entity at the exercise
price. The contractual life of each option granted is three years. There are no cash settlement
alternatives. No options have been granted since the end of the year to the Key Management
Personnel listed below. For further details relating to the options, refer to Note 26.
Vested
Granted
Terms & Conditions for each Grant
30 June 2006
No.
No.
Fair Value
per option
at grant
Grant date (A$)
(Note 26)
Date
Exercise
Price per
option
(A$)
(Note 26)
Directors
Mr Rick Crabb
Mr John Borshoff
3,250,000
3,750,000
-
-
-
-
-
-
-
-
Expiry
Date
-
-
First
Exercise
Date
Last
Exercise
Date
-
-
-
-
Executives
3,000,000
Mr Garnet Halliday
Ms Gillian Swaby
2,750,000
Mr Ron Chamberlain 800,000
Mr Wyatt Buck
Mr James Eggins
Mr Dustin Garrow
Mr David Marsh
350,000
400,000
-
-
200,000
- 1,000,000
650,000
600,000
- 1,000,000
-
-
13/01/06
16/02/06
13/01/06
19/01/06
27/04/06
-
-
A$1.44
A$1.84
A$1.44
A$1.68
A$2.42
-
-
A$2.80
A$2.80
A$2.80
A$2.80
A$5.50
-
-
13/01/09
13/01/09
13/01/09
13/01/09
28/04/09
-
-
13/01/08
16/02/07
19/01/08
19/01/08
27/10/07
-
-
13/01/09
13/01/09
13/01/09
13/01/09
28/04/09
Total
14,300,000 3,450,000
Vested
Granted
Terms & Conditions for each Grant
30 June 2005
No.
No.
Fair Value
per option
at grant
Grant date (A$)
(Note 26)
Date
Exercise
Price per
option
(A$)
(Note 26)
Expiry
Date
First
Exercise
Date
Last
Exercise
Date
Directors
Mr Rick Crabb
Mr John Borshoff
Dr Leon Pretorius
Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr Ron Chamberlain
- 3,250,000
- 3,750,000
- 3,250,000
20/12/04
20/12/04
20/12/04
A$0.25
A$0.25
A$0.25
- 3,000,000
- 2,750,000
800,000
-
30/11/04
30/11/04
30/11/04
A$0.23
A$0.24
A$0.23
$1.00
$1.00
$1.00
$1.08
$1.00
$1.09
20/12/07
20/12/07
20/12/07
30/06/06
30/06/06
30/06/06
20/12/07
20/12/07
20/12/07
30/11/07
30/11/07
30/11/07
30/06/06
30/06/06
30/06/06
30/11/07
30/11/07
30/11/07
Total
- 16,800,000
53
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Remuneration Report (continued)
vi) Shares Issued on Exercise of Compensation Options (audited)(Consolidated and Company)
Shares issued
30 June 2006
No.
Paid per share
(Note 26)
A$
Directors
Mr Rick Crabb
Mr John Borshoff
Executives
Ms Gillian Swaby
Total
2,250,000
750,000
2,500,000
1,000,000
2,000,000
500,000
9,000,000
A$0.22
A$0.32
A$0.22
A$0.32
A$0.22
A$0.32
Unpaid per share
A$
-
-
-
-
-
-
Value at
exercise date
A$
10,192,500
3,397,500
11,325,000
4,530,000
9,060,000
2,265,000
No other Key Management Personnel exercised options during the year ended 30 June 2006.
Shares issued
30 June 2005
No.
Paid per share
(Note 26)
A$
Directors
Mr Rick Crabb
Mr John Borshoff
Executives
Ms Gillian Swaby
1,000,000
1,500,000
A$0.15
A$0.15
1,200,000
A$0.15
Total
3,700,000
Unpaid per share
A$
-
-
-
Value at
exercise date
A$
485,000
727,500
582,000
No other Key Management Personnel exercised options during the year ended 30 June 2005.
54
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Remuneration Report (continued)
vii) Options Holdings of Key Management Personnel (Consolidated and Company)
Balance at
beginning Granted as
Remune
of period
-ration
01 Jul 05
Net
Options Change
Exercised Other #
Balance at
end of
period
30 Jun 06
Not
Total Exercisable Exercisable
6,250,000
7,250,000
-
-
(3,000,000)
(3,500,000)
-
-
3,250,000
3,750,000
3,250,000
3,750,000
3,250,000
3,750,000
-
-
3,000,000
5,250,000
800,000
-
-
-
-
-
-
200,000
1,000,000
650,000
600,000
1,000,000
-
-
-
(2,500,000)
-
-
-
-
- 350,000
- 400,000
-
-
3,000,000
2,750,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
3,000,000
2,750,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
3,000,000
2,750,000
800,000
-
350,000
400,000
-
-
-
200,000
1,000,000
650,000
600,000
1,000,000
30 June 2006
Directors
Mr Rick Crabb
Mr John Borshoff
Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr Ron Chamberlain
Mr Wyatt Buck
Mr James Eggins
Mr Dustin Garrow
Mr David Marsh
Total
22,550,000
3,450,000
(9,000,000) 750,000 17,750,000 17,750,000 14,300,000
3,450,000
Balance at
beginning Granted as
Remune
of period
-ration
01 Jul 04
Options
Exercised
Net
Change
Other #
Balance at
end of
period
30 Jun 05
Not
Total Exercisable Exercisable
4,000,000
5,000,000
3,000,000
3,250,000 (1,000,000)
3,750,000 (1,500,000)
3,250,000
-
-
- (6,250,000)
6,250,000
7,250,000
-
6,250,000
7,250,000
-
3,000,000
3,500,000
-
3,250,000
3,750,000
-
-
3,700,000
-
3,000,000
-
2,750,000 (1,200,000)
-
800,000
-
-
-
3,000,000
5,250,000
800,000
3,000,000
5,250,000
800,000
-
2,500,000
-
3,000,000
2,750,000
800,000
30 June 2005
Directors
Mr Rick Crabb
Mr John Borshoff
Dr Leon Pretorius
Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr Ron Chamberlain
Total
15,700,000 16,800,000 (3,700,000) (6,250,000) 22,550,000 22,550,000
9,000,000
13,550,000
Mr James Eggins commenced as a Key Management Personnel on 1 January 2006 and as such the
required disclosure at this date in the above table has been reflected in the net change other column.
Mr Dustin Garrow commenced as a Key Management Personnel on 1 January 2006 and as such the
required disclosure at this date in the above table has been reflected in the net change other column.
Dr Leon Pretorius resigned from the Board on 12 April 2005 and as such is no longer required to be
disclosed in the above table and this fact has been reflected in the net change other column.
55
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Remuneration Report (continued)
viii) Shareholdings of Key Management Personnel (Consolidated and Company)
Shares held in Paladin Resources Ltd (number)
Balance
01 Jul 05 Remuneration
Granted as On Exercise Net Change
of Options
Other
Balance
30 June 06
30 June 2006
Directors
Mr Rick Crabb
Mr John Borshoff
Mr Ian Noble
6,464,746
14,591,394
-
Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr James Eggins (1)
-
6,600,000
-
Total
27,656,140
-
-
-
-
-
-
-
3,000,000
3,500,000
-
(500,000)
-
16,000
8,964,746
18,091,394
16,000
-
2,500,000
-
125,000
1,116,140
25,000
125,000
10,216,140
25,000
9,000,000
782,140
37,438,280
No other Key Management personnel held shares during the year ended 30 June 2006.
30 June 2005
Balance
01 Jul 04 Remuneration
Granted as On Exercise Net Change
of Options
Other
Balance
30 June 05
Directors
Mr Rick Crabb
Mr John Borshoff
Dr Leon Pretorius (2)
5,464,746
13,091,394
8,550,000
Executives
Ms Gillian Swaby
Total
5,595,515
32,701,655
-
-
-
-
-
1,000,000
1,500,000
-
-
-
(8,550,000)
6,464,746
14,591,394
-
1,200,000
(195,515)
6,600,000
3,700,000
(8,745,515)
27,656,140
No other Key Management personnel held shares during the year ended 30 June 2005.
(1) Mr James Eggins commenced as a Key Management Personnel on 1 January 2006 and as
such this fact has been reflected in the net change other column.
(2) Dr Leon Pretorius resigned from the Board on 12 April 2005 and as such is no longer required
to be disclosed in the above table and this fact has been reflected in the net change other
column.
56
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Shares Under Option
Unissued ordinary shares of the Company under option at the date of this report are as follows:
Date options granted
Expiry date
Exercise price
of options
Number under
option
____________________________________________________________________________________________________________________________________________________________________
30 November 2004
30 November 2004
20 December 2004
15 July 2005
13 January 2006
19 January 2006
16 February 2006
27 April 2006
3 July 2006
20 July 2006
30 November 2007
30 November 2007
20 December 2007
15 July 2008
13 January 2009
13 January 2009
13 January 2009
28 April 2009
3 July 2009
20 July 2009
A$1.00
A$1.25
A$1.00
A$1.50
A$2.80
A$2.80
A$2.80
A$5.50
A$5.50
A$5.50
7,300,000
1,000,000
10,250,000
200,000
1,050,000
600,000
1,200,000
1,565,000
1,000,000
400,000
____________________________________________________________________________________________________________________________________________________________________
Total
24,565,000
____________________________________________________________________________________________________________________________________________________________________
No option holder has any right under the options to participate in any other share issue of the Company
or of any other entity.
Shares issued as a result of the exercise of options
During the financial year, employees and executives have exercised options to acquire 14,000,000 fully
paid ordinary shares in Paladin Resources Ltd at a weighted average price of $0.24. Since the end of
the financial year, a further 1,050,000 options have been exercised, at a weighted average price of
$1.07.
Insurance of Officers
During the financial year, the Company has paid premiums to insure the Directors and Specified
Executives against certain liabilities arising out of their conduct while acting as an officer of the
Company. Under the terms and conditions of the insurance contract, the nature of liabilities insured
against and the premium paid cannot be disclosed.
Auditor
Ernst & Young were appointed auditors for the Company on 21 June 2005, which was approved by
shareholders at the 2005 Annual General Meeting on 9 November 2005.
57
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Auditor Independence and Non-Audit Services
The Directors received the following declaration from the auditor of Paladin Resources Ltd.
58
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Non-Audit Services
The following non audit services were provided by the Company’s auditor, Ernst & Young. The
Directors are satisfied that the provision of non audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act. The nature and scope of each type of non-
audit service provided means that auditor independence was not compromised.
Ernst & Young received or are due to receive the following amounts for the year ended 30 June 2006
for the provision of non-audit services relating to the provision of Tax Compliance services of A$11,547.
Signed in accordance with a resolution of the Directors.
Mr John Borshoff
Managing Director
Perth, Western Australia
29 August 2006
59
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
CONTENTS OF THE FINANCIAL REPORT
NOTE
PAGE NUMBER
_________________________________________________________________________________
TITLE
CONSOLIDATED INCOME STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
PARENT ENTITY STATEMENTS OF CHANGES IN EQUITY
CONSOLIDATED CASH FLOW STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CORPORATE INFORMATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VOLUNTARY CHANGE IN ACCOUNTING POLICY
SEGMENT INFORMATION
REVENUES AND EXPENSES
INCOME TAX
DISCONTINUED OPERATION
CASH AND CASH EQUIVALENTS
TRADE AND OTHER RECEIVABLES
OTHER FINANCIAL ASSETS
DEFERRED BORROWING COSTS
PROPERTY, PLANT AND EQUIPMENT
EXPLORATION AND EVALUATION EXPENDITURE
TRADE AND OTHER PAYABLES
UNEARNED REVENUE
INTEREST BEARING LOANS AND BORROWINGS
PROVISIONS
CONTRIBUTED EQUITY AND RESERVES
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
FINANCIAL INSTRUMENTS
DIRECTOR AND EXECUTIVE DISCLOSURES
AUDITORS’ REMUNERATION
COMMITMENTS AND CONTINGENCIES
EMPLOYEE BENEFITS
RELATED PARTIES
61
62
63
64
65
66
66
66
78
79
83
84
86
88
89
91
93
93
95
100
100
101
103
104
113
115
119
123
124
126
126
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
60
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
CONTENTS OF THE FINANCIAL REPORT
NOTE
PAGE NUMBER
_________________________________________________________________________________
TITLE
26.
27.
28.
29.
30.
31.
SHARE BASED PAYMENT PLAN
INTERESTS IN JOINT VENTURES
EVENTS AFTER THE BALANCE SHEET DATE
NON CASH FINANCING AND INVESTMENT ACTIVITIES
EARNINGS PER SHARE
TRANSITION TO AIFRS AND CHANGE IN ACCOUNTING POLICY
127
129
130
131
131
132
61
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
CONSOLIDATED INCOME STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
REVENUE FROM CONTINUING
OPERATIONS
Other income
Notes
CONSOLIDATED
2005
2006
A$000
A$000
5(a)
5(b)
4,298
1,057
772
810
PARENT ENTITY
2005
2006
A$000
A$000
4,251
2,487
1,165
-
Share based payments expense
5(c)
(3,650)
(3,009)
(3,650)
(3,009)
Interest expense
(149)
(354)
(16)
(354)
Exploration and evaluation expenditure 13
(4,233)
(5,113)
Write down of convertible note
Write down of intercompany loans
Write off of intercompany investment
Write down of intercompany investments
-
-
-
-
Depreciation and amortisation
12
(223)
Employee benefits expense
Operating lease expense
(1,346)
(204)
(894)
-
-
-
(90)
(482)
(118)
-
-
-
(894)
(11,464)
(3,624)
(261)
(58)
(95)
-
-
(32)
(1,346)
(482)
(204)
(102)
Other expenses
(3,036)
(1,060)
(2,765)
(1,114)
LOSS BEFORE INCOME TAX
(7,486)
(9,538)
(13,121)
(8,446)
Income tax expense
6(a)
-
-
-
-
Loss after tax from continuing operations
(7,486)
(9,538)
(13,121)
(8,446)
Profit after tax from discontinued
operations
7(a)
-
128
-
-
LOSS ATTRIBUTABLE
TO MEMBERS OF PALADIN
RESOURCES LTD
(7,486)
(9,410)
(13,121)
(8,446)
Loss per share attributed to
ordinary equity holders - basic and
diluted
30
A$
(0.02)
A$
(0.03)
The above Consolidated Income Statements should be read in conjunction with the accompanying
notes.
62
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
CONSOLIDATED BALANCE SHEETS
AS AT 30 JUNE 2006
_________________________________________________________________________________
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Notes
CONSOLIDATED
2005
2006
A$000
A$000
PARENT ENTITY
2005
2006
A$000
A$000
8
9
59,778
3,695
39,489
568
22,677
151
39,000
472
TOTAL CURRENT ASSETS
63,473
40,057
22,828
39,472
Non current assets
9
Trade and other receivables
10
Other financial assets
11
Deferred borrowing costs
Property, plant and equipment
12
Exploration and evaluation expenditure 13
-
7,703
-
80,442
8,690
-
2,430
170
1,098
1,686
44,231
49,637
-
456
-
4,650
426
-
390
-
TOTAL NON CURRENT ASSETS
96,835
5,384
94,324
5,466
TOTAL ASSETS
LIABILITIES
160,308
45,441
117,152
44,938
Current liabilities
14
Trade and other payables
Unearned revenue
15
Interest bearing loans and borrowings 16
Provisions
17
TOTAL CURRENT LIABILITES
Non current liabilities
14
Trade and other payables
Unearned revenue
15
Interest bearing loans and borrowings 16
17
Provisions
11,074
242
-
328
11,644
41
979
19,334
3,585
TOTAL NON CURRENT LIABILITES
23,939
727
-
533
65
1,325
-
-
-
-
-
1,103
-
-
266
1,369
41
-
-
54
95
591
-
533
65
1,189
334
-
-
-
334
TOTAL LIABILITES
35,583
1,325
1,464
1,523
NET ASSETS
Equity
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
124,725
44,116
115,688
43,415
18(a)
18(d)
148,182
11,311
(34,768)
65,992
5,406
(27,282)
148,182
6,890
(39,384)
65,992
3,686
(26,263)
124,725
44,116
115,688
43,415
The above Consolidated Balance Sheets should be read in conjunction with the accompanying notes.
63
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
CONSOLIDATED
At 1 July 2004
Contributed
Notes Equity
A$000
Reserves
A$000
Accumulated
Losses
A$000
Total
A$000
24,265
719
(17,872)
7,112
Change in fair value of available for
sale financial assets
(Loss) for the year ended
Recognised value of unlisted employee
options that have vested
Grant of Société Générale Australia
Branch share options
Exercise of Société Générale
Australia Branch share options
Exercise of unlisted employee
options
Contributions of equity, net of transaction
costs
-
-
-
-
1,720
-
3,009
321
18(b)
321
(321)
18(b)
42
18(b)
41,364
(42)
-
-
(9,410)
1,720
(9,410)
-
-
-
-
-
3,009
321
-
-
41,364
At 30 June 2005
CONSOLIDATED
At 1 July 2005
Changes in fair value of available for sale
financial assets
(Loss) for the year ended
Recognised value of unlisted employee options
that have vested
Exercise of unlisted employee
options
Contributions of equity, net of transactions
costs
18(b)
18(b)
65,992
5,406
(27,282)
44,116
65,992
5,406
(27,282)
44,116
-
-
-
2,758
-
3,650
503
(503)
81,687
-
-
(7,486)
2,758
(7,486)
-
-
-
3,650
-
81,687
At 30 June 2006
148,182
11,311
(34,768)
124,725
The above Consolidated Statements of Changes in Equity should be read in conjunction with the
accompanying notes.
64
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
PARENT ENTITY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
PARENT ENTITY
At 1 July 2004
Notes
Contributed
Equity
A$000
Reserves
A$000
Accumulated
Losses
A$000
Total
A$000
24,265
719
(17,817)
7,167
(Loss) for the year ended
Recognised value of unlisted employee
options that have vested
Grant of Société Générale Australia
Branch share options
Exercise of Société Générale
Australia Branch share options
Exercise of unlisted employee
options
Contributions of equity, net of transaction
costs
At 30 June 2005
PARENT ENTITY
At 1 July 2005
-
-
-
3,009
321
18(b)
321
(321)
18(b)
42
18(b)
41,364
(42)
-
-
(8,446)
(8,446)
-
-
-
-
-
3,009
321
-
-
41,364
Change in fair value of available for sale
financial assets
(Loss) for the year ended
Recognised value of unlisted employee options
that have vested
Exercise of unlisted employee
options
Contributions of equity, net of transactions
costs
18(b)
18(b)
65,992
3,686
(26,263)
43,415
65,992
3,686
(26,263)
43,415
-
-
-
57
-
3,650
503
(503)
81,687
-
-
(13,121)
57
(13,121)
-
-
-
3,650
-
81,687
At 30 June 2006
148,182
6,890
(39,384)
115,688
The above Parent Entity Statements of Changes in Equity should be read in conjunction with the
accompanying notes.
65
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
CONSOLIDATED CASH FLOWS STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
Notes
CONSOLIDATED
2006
A$000
2005
A$000
PARENT ENTITY
2006
A$000
2005
A$000
CASH FLOWS FROM OPERATING ACTIVITES
Payments to suppliers and employees
Interest received
Interest received from controlled entities
Interest paid
Dividend received from controlled entities
Property rental income
Other receipts
(3,658)
4,315
-
(49)
-
-
40
(1,831)
414
-
(58)
-
116
78
(3,506)
4,122
402
(49)
348
-
40
(1,665)
414
-
-
-
-
76
NET CASH INFLOW/(OUTFLOW)
FROM OPERATING ACTIVITES
8(a)
648
(1,281)
1,357
(1,175)
CASH FLOWS FROM INVESTING ACTIVITES
Exploration and evaluation expenditure
Payments for property, plant and equipment
Loans to controlled entities
Loans from controlled entities
Additional investment in controlled entities
Payments for available for sale financial assets
Payments for controlled entities
net of cash acquired
Proceeds on sale of land and buildings
Proceeds on sale of tenements
(4,711)
(71,165)
-
-
-
(620)
-
-
-
(5,151)
(946)
-
-
-
-
(203)
1,200
100
-
(161)
(47,314)
-
(47,478)
-
-
-
-
-
(396)
(6,311)
500
-
-
-
-
-
NET CASH (OUTFLOW) FROM
INVESTING ACTIVITES
CASH FLOWS FROM FINANCING
ACTIVITIES
Share placement
Proceeds from exercise of share options
Equity fundraising costs
Project finance facility establishment costs
Repayment of borrowings
Proceeds from borrowings
NET CASH INFLOW FROM
FINANCING ACTIVITES
NET INCREASE/(DECREASE)
IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the
beginning of the financial year
Effects of exchange rate changes on cash
and cash equivalents
CASH AND CASH EQUIVALENTS AT
END OF THE FINANCIAL PERIOD
(76,496)
(5,000)
(94,953)
(6,207)
77,000
3,380
(4,305)
(3,736)
(500)
23,241
40,800
1,574
(1,010)
-
(733)
500
77,000
3,380
(4,305)
-
(500)
-
40,800
1,574
(1,010)
-
-
500
95,080
41,131
75,575
41,864
19,232
34,850
(18,021)
34,482
39,489
4,639
39,000
4,518
1,057
-
1,698
-
8
59,778
39,489
22,677
39,000
The above Consolidated Cash Flow Statements should be read in conjunction with the accompanying
notes.
66
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 1. CORPORATE INFORMATION
The financial report of Paladin Resources Limited (the Company) for the year ended 30 June 2006 was
authorised for issue in accordance with a resolution of the Directors on 11 August 2006 subject to final
audit clearance.
Paladin Resources Limited is a company limited by shares incorporated and domiciled in Australia
whose shares are publicly traded on Australian Stock Exchange Ltd, with additional listings on the
Toronto Stock Exchange in Canada, and Munich, Berlin, Stuttgart and Frankfurt stock exchanges in
Germany.
The nature of the operations and principal activities of the Group are described in Note 4.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
The financial report is a general purpose financial report, which has been prepared in accordance with
the requirements of the Corporations Act 2001 and Australian Accounting Standards. The financial
report has also been prepared on a historical cost basis, except for available-for-sale investments,
which have been measured at fair value.
In addition to these Australian requirements further information has been included in the Consolidated
Financial Statements for the year ended 30 June 2006 in order to comply with applicable Canadian
securities law.
The financial report is presented in Australian dollars and all values are rounded to the nearest
thousand dollars (A$’000) unless otherwise stated under the option available to the Company under
ASIC Class Order 98/100. The Company is an entity to which the class order applies.
(b) Statement of Compliance
The financial report complies with Australian Accounting Standards, which include Australian
equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures
that the financial report, comprising the financial statements and notes thereto, complies with
International Financial Reporting Standards (IFRS).
This is the first financial report prepared based on AIFRS and comparatives for the year ended 30 June
2005 have been restated accordingly. Reconciliations of AIFRS equity and profit for 30 June 2005 to
the balances reported in the 30 June 2005 financial report and at transition to AIFRS are detailed in
Note 31.
67
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Statement of Compliance (continued)
The following Australian Accounting Standards that have recently been issued or amended but are not
yet effective, have not been applied by Paladin Resources Ltd:
AASB
Amendment
2004-3
Affected Standard (s)
Nature of change to
accounting policy
AASB 1 First-time Adoption
of AIFRS, AASB 101
Presentation
of Financial Statements,
and AASB 124
Related Party Disclosures
No change to accounting
policy required. Therefore
no impact
Application
date of
standard
Application
date to
Group
1-Jan-06
1-July-06
2005-1
2005-4
2005-5
2005-6
2005-10
AASB 139 Financial
Instruments: Recognition
and Measurement
No change to accounting
policy required. Therefore
no impact
1-Jan-06
1- July -06
No change to accounting
policy required. Therefore
no impact
1-Jan-06
1- July -06
No change to accounting
policy required. Therefore
no impact.
1-Jan-06
1- July -06
1-Jan-06
1- July -06
1- Jan-07
1- July -07
No change to accounting
policy required. Therefore
no impact.
No change to accounting
policy required. However
there will be changes to the
the level of disclosures
required in respect of financial
instruments.
ASSB 1 First–time
Adoption of AIFRS,
Financial
AASB139
Instruments: Recognition
and Measurement
AASB 132 Financial
Instruments: Disclosure
And Presentation
AASB 1 First-time
Adoption of AIFRS, and
AASB 139 Financial
Instruments: Recognition
And Measurement
ASSB 3 Business
Combinations
AASB 132 Financial
Instruments Presentation
and Disclosure,
AASB 101 Presentation of
Financial Statements,
AASB 114 Segment
Reporting,
AASB 117 Leases,
AASB 133 Earnings per
Share,
AASB 139 Financial
Instruments: Recognition
and Measurement
AASB 1 First-time adoption
of AIFRS
2006-1
AASB 121 The Effects
Of Change in Foreign
Currency Rates.
No change to accounting
policy required. Therefore
no impact.
1- Jan-06
1- July -06
68
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Statement of Compliance (continued)
New Standard
AASB 7 Financial
Instruments: Disclosures
1-Jan-07
1- July -07
No change to accounting
policy required. However
there will be changes to the
the level of disclosures
required in respect of financial
instruments.
UIG
UIG
UIG 4 Determining whether
an Arrangement contains a
Lease
No change to accounting
policy required. Therefore
no impact.
1- Jan-06
1- July -06
UIG 5 Rights to Interests in
Decommissioning,
Restoration and
Environmental Rehabilitation
Funds
No change to accounting
policy required. Therefore
no impact.
1- Jan-06
1- July -06
The following amendments are not applicable to the Group and therefore have no impact:
AASB
Amendment
New Standard
2005-4
2005-9
2005-10
UIG
UIG
UIG
Affected Standard (s)
AASB 119 Employee Benefits (Revised Dec 04) – Accounting policy options contained within the revised
standard affect accounting for defined benefit schemes only. As Paladin Resources Ltd does not
contribute to a defined benefit scheme, there is no impact of this change.
AASB 1023 General Contracts and AASB 1028 Life Insurance Contracts
AASB 4 Insurance Contracts, AASB 1023 General Insurance Contracts, AASB 139 Financial Instruments:
Recognition and Measurement and AASB 132 Financial Instruments: Disclosure and Presentation.
AASB 4 Insurance Contracts, AASB 1023 General insurance Contracts and AASB 1038 Life Insurance
Contracts
UIG 7 Applying the Restatement Approach under AASB 129 Financial Reporting in Hyperinflationary
Economies
UIG 8 Scope of AASB 2
UIG 9 Reassessment of Embedded Derivatives
(c) Basis of Consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Paladin
Resources Ltd (Company or Parent Entity) as at 30 June 2006 and the results of all subsidiaries for the
twelve months then ended. Paladin Resources Ltd and its subsidiaries together are referred to in this
financial report as the Group or the Consolidated Entity.
Subsidiaries are all those entities (including special purpose entities) over which the Group has the
power to govern the financial and operating policies, generally accompanying a shareholding of more
than one-half of the voting rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease
to be consolidated from the date on which control is transferred out of the Group.
69
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Basis of Consolidation (continued)
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group
(refer to Note 2(j)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the
impairment of the asset transferred. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
(d) Significant accounting judgements, estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and
assumptions of future events. The key estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of certain assets and liabilities within the next
annual reporting period are:
(I)
Impairment of exploration and evaluation expenditure; and property, plant and equipment
The Group determines whether exploration and evaluation expenditure; and property, plant and
equipment are impaired at least on an annual basis. This requires an estimation of the recoverable
amount of cash-generating units to which the exploration and evaluation expenditure; and property,
plant and equipment are allocated.
(ii) Share based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair
value of the equity instruments at the date at which they are granted. The fair value is determined by an
external valuer using a binomial model using assumptions detailed in Note 26.
(iii) Available for sale financial assets
The Group measures the fair value of available for sale financial assets by reference to the fair value of
the equity instruments at the date at which they are valued. The fair value of the unlisted options is
determined by an external valuer using a binomial model.
(iv) Restoration provision
As set out in Note 2(v), the value of this provision represents the discounted value of the present
obligation to restore, dismantle and close the mine. The discounted value reflects a combination of
management’s assessment of the cost of performing the work required, the timing of the cash flows and
the discount rate.
A change in any, or a combination, of the three key assumptions used to determine the provisions could
have a material impact to the carrying value of the provision (refer to Note 17).
(e)
Segment reporting
A geographical segment is a group of assets and operations engaged in providing products or services
within a particular economic environment and is subject to risks and returns that are different from those
of segments operating in other economic environments. A business segment is a group of assets and
operations engaged in providing products or services that are subject to risks and returns that are
different to those of other business segments.
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
70
(f)
Foreign currency translation
(i)
Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the
currency of the primary economic environment in which the entity operates ('the functional currency').
The consolidated financial statements are presented in Australian dollars, which is Paladin Resources
Ltd’s functional and presentation currency.
(ii)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised in the Income Statement, except when
deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
(iii) Group companies
All Group entities have a functional currency of Australian dollars which is consistent with the
presentation currency of this financial report.
(g) 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 and duties and taxes paid. Revenue is recognised for
the major business activities as follows:
(i)
Interest revenue
Interest revenue from investments in cash and convertible notes is recognised in the Income Statement
in the periods in which it is receivable, as this represents the pattern of legal benefit to the Group.
(ii) Database licence revenue
Licence revenue generated from granting third parties access to proprietary databases information on
mineral property regions is recognised in the Income Statement on a straight line basis over the licence
term.
(iii) Rental revenue
Rental revenue from leasing of the investment property is recognised in the Income Statement in the
periods in which it is receivable, as this represents the pattern of service rendered through the provision
of the property.
71
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(h)
Income tax
The income tax expense or benefit for the period is the tax payable on the current period's taxable
income based on the notional income tax rate for each jurisdiction adjusted by changes in deferred tax
assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities
and their carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to
apply when the assets are recovered or liabilities are settled, based on those tax rates which are
enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the
cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset
or liability. An exception is made for certain temporary differences arising from the initial recognition of
an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary
differences if they arose in a transaction, other than a business combination, that at the time of the
transaction did not affect either accounting profit or taxable profit or loss.
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.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying
amount and tax bases of investments in controlled entities where the Parent Entity is able to control the
timing of the reversal of the temporary differences and it is probable that the differences will not reverse
in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised directly in equity are also
recognised directly in equity.
Paladin Resources Ltd and all its wholly-owned Australian resident entities are part of a tax-
consolidated group under Australian tax law. Paladin Resources Ltd is the head entity in the tax-
consolidated group. Tax expense, deferred tax liabilities and deferred tax assets arising from temporary
differences of the members of the tax-consolidated group are recognised in the separate financial
statements of the members of the tax-consolidated group using the 'separate taxpayer within group'
approach by reference to the carrying amounts in the separate financial statements of each entity and
the tax values applying under tax consolidation.
(i)
Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor
are classified as operating leases.
Incentives received on entering into operating leases are recognised as liabilities. Lease payments are
allocated between rental expense and reduction of the lease incentive liability on a straight line basis
over the period of the lease.
(j)
Acquisitions of assets
The purchase method of accounting is used to account for all acquisitions of assets (including business
combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured
as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of
exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an
acquisition, the value of the instruments is their published market price as at the date of exchange.
Transaction costs arising on the issue of equity instruments are recognised directly in equity.
72
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(j)
Acquisitions of assets (continued)
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination
are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority
interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable
net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the
net assets of the subsidiary acquired, the difference is recognised directly in the Income Statement, but
only after a reassessment of the identification and measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rate used is the entity's
incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
(k)
Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash generating units).
(l)
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other
short-term, highly liquid investments with original maturities of three months or less that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value,
and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the Balance
Sheet.
(m) Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost,
less provision for doubtful debts. Trade receivables are due for settlement no more than 30 days for
other debtors.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectible are written off. A provision for doubtful receivables is established when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of
receivables. The amount of the provision is the difference between the asset's carrying amount and the
present value of estimated future cash flows, discounted at the effective interest rate. The amount of
the provision is recognised in the Income Statement.
(n)
Investments and other financial assets
The Group classifies its investments in the following categories: loans and receivables, held-to-maturity
investments, and available-for-sale financial assets. The classification depends on the purpose for
which the investments were acquired. Management determines the classification of its investments at
initial recognition and re-evaluates this designation at each reporting date.
73
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(n)
Investments and other financial assets (continued)
(i)
Loans and receivables
Loans and receivables are non derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They arise when the Group provides money, goods or services directly
to a debtor with no intention of selling the receivable. They are included in current assets, except for
those with maturities greater than 12 months after the balance sheet date which are classified as non
current assets. Loans and receivables are included in receivables in the Balance Sheet.
(ii)
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments
and fixed maturities that the Group's management has the positive intention and ability to hold to
maturity.
(iii) Available-for-sale financial assets
Available-for-sale
financial assets, comprising principally marketable equity securities, are
non-derivatives that are either designated in this category or not classified in any of the other
categories. They are included in non current assets unless management intends to dispose of the
investment within 12 months of the balance sheet date.
Purchases and sales of investments 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 derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred substantially all the risks and
rewards of ownership.
Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables and
held-to-maturity investments are carried at amortised cost using the effective interest method.
Unrealised gains and losses arising from changes in the fair value of non monetary securities classified
as available-for-sale are recognised in equity in the available-for-sale reserve. When securities
classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are
included in the Income Statement as gains and losses from investment securities.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset
is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques.
These include reference to the fair values of recent arm's length transactions, involving the same
instruments or other instruments that are substantially the same, discounted cash flow analysis, and
option pricing models refined to reflect the issuer's specific circumstances.
The Group assesses at each balance date whether there is objective evidence that a financial asset or
group of financial assets is impaired. In the case of equity securities classified as available for sale, a
significant or prolonged decline in the fair value of a security below its cost is considered in determining
whether the security is impaired. If any such evidence exists for available-for-sale financial assets, the
cumulative loss - measured as the difference between the acquisition cost and the current fair value,
less any impairment loss on that financial asset previously recognised in profit and loss - is removed
from equity and recognised in the Income Statement.
74
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(o)
Fair value estimation
The fair value of financial assets must be estimated for recognition and measurement or for disclosure
purposes.
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and
trading and available-for-sale securities) is based on quoted market prices at the balance sheet date.
The quoted market price used for financial assets held by the Group is the current bid price.
The fair value of financial instruments that are not traded in an active market (for example, convertible
notes and unlisted options) is determined using valuation techniques. The Group uses a variety of
methods and makes assumptions that are based on market conditions existing at each balance date.
Estimated discounted cash flows are used to determine the fair value of most financial instruments.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to
approximate their fair values.
(p) Property, plant and equipment
All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers
from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of
property, plant and equipment.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. All other repairs and maintenance are
charged to the Income Statement during the financial period in which they are incurred.
Property, plant and equipment costs include both the costs associated with construction of equipment
associated with establishment of an operating mine, and the estimated costs of dismantling and
removing the asset and restoring the site on which it is located.
The cost of improvements to or on leasehold properties is amortised over the unexpired period of the
lease or the estimated useful life of the improvement to the Group, whichever is the shorter.
Land is not depreciated. Depreciation on other assets is calculated using the straight line method to
allocate their cost amount, net of their residual values, over their estimated useful lives, as follows:
-
-
-
-
Buildings
Databases
Plant and equipment
Leasehold improvements
20 years
10 years
3-6 years
2-5 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance
sheet date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These
are included in the Income Statement. When revalued assets are sold, it is Group policy to transfer the
amounts included in other reserves in respect of those assets to retained earnings.
75
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(q) Exploration and evaluation expenditure
The Company has made a voluntary change to its accounting policy for exploration and evaluation
expenditure – refer to Note 31(3)(vi) for disclosure regarding this change.
Exploration and evaluation expenditure is charged against earnings as incurred.
Exploration and evaluation expenditure is allocated separately to specific areas of interest. Each area
of interest is limited to a size related to a known or probable mineral resource capable of supporting a
mining operation. Such expenditure comprises net direct costs and an appropriate portion of related
overhead expenditure directly related to activities in the area of interest.
Costs related to the acquisition of properties that contain mineral resources are allocated separately to
specific areas of interest. These costs are capitalised until the viability of the area of interest is
determined.
If no mineable ore body is discovered, capitalised acquisition costs are expensed in the period in which
it is determined that the area of interest has no future economic value.
When a decision to proceed to development is made, all costs subsequently incurred to develop a mine
prior to the start of mining operations within the area of interest are capitalised and carried at cost.
These costs include expenditure incurred to develop new ore bodies within the area of interest, to define
further mineralisation in existing areas of interest, to expand the capacity of a mine and to maintain
production.
Capitalised amounts for an area of interest maybe written down if discounted future cash flows related
to the area of interest are projected to be less than its carrying value.
(r)
Trade and other payables
Trade payables and other payables are carried at amortised costs and represent liabilities for goods and
services provided to the Group prior to the end of the financial year that are unpaid and arise when the
Group becomes obliged to make future payments in respect of the purchase of these goods and
services. The amounts are unsecured and are usually paid within 30 days of recognition.
(s)
Interest bearing loans and borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any difference between the proceeds (net of transaction
costs) and the redemption amount is recognised in the Income Statement over the period of the
borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the balance sheet date.
(t)
Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of
time that is required to complete and prepare the asset for its intended use or sale. Other borrowing
costs are expensed.
76
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t)
Borrowing costs (continued)
The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the
weighted average interest rate applicable to the entity's outstanding borrowings during the year.
The fair value of unlisted options granted in relation to establishment of a loan facility is recognised as a
borrowing cost with a corresponding increase in equity and is measured at the date a commitment for
the loan facility is obtained. The fair value at measurement date is independently determined using the
Cox, Ross and Rubinstein Binomial Tree Model that takes into account the exercise price, the term of
the option, the vesting and performance criteria, the impact of dilution, the non tradable nature of the
option, the share price at measurement 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.
Upon the exercise of options, the balance of the Option Premium Reserve relating to these options is
transferred to share capital.
(u) Employee benefits
(i) Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick
leave expected to be settled within 12 months of the reporting date are recognised in other payables in
respect of employees' services up to the reporting date and are measured at the amounts expected to
be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when
the leave is taken and measured at the rates paid or payable.
(ii)
Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as
the present value of expected future payments to be made in respect of services provided by
employees up to the reporting date. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted
using market yields at the reporting date on national government bonds with terms to maturity and
currency that match, as closely as possible, the estimated future cash outflows.
Contributions to defined contribution funds are recognised as an expense as they become payable.
Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the
future payments is available.
(iii) Share-based payments
Share-based compensation benefits are provided to employees via the Paladin Resources Ltd
Employee Share Incentive Option Plan.
Share options granted on or before 7 November 2002
No expense is recognised in respect of these options. The shares are recognised when the options are
exercised and the proceeds received allocated to share capital.
77
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(u) Employee benefits (continued)
(iii) Share-based payments (continued)
Shares options granted after 7 November 2002
The fair value of options granted under the Paladin Resources Ltd Employee Share Incentive Option
Plan after 7 November 2002 are recognised as an employee benefit expense with a corresponding
increase in equity. The fair value is measured at grant date and recognised over the period during
which the employees become unconditionally entitled to the options.
The fair value at grant date is independently determined using the Cox, Ross and Rubinstein Binomial
Tree option pricing model that takes into account the exercise price, the term of the option, the vesting
and performance criteria, the impact of dilution, the non-tradable nature of the option, 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.
The fair value of the options granted excludes the impact of any non-market vesting conditions (for
example, positive outcome of bankable feasibility study and completion of acceptable project funding).
Non-market vesting conditions are included in assumptions about the number of options that are
expected to become exercisable. At each balance sheet date, the entity revises its estimate of the
number of options that are expected to become exercisable. The employee benefit expense recognised
each period takes into account the most recent estimate.
Upon the exercise of options, the balance of the share-based payments reserve relating to those
options is transferred to share capital.
(v)
Mine closure and restoration
Mine closure and restoration costs include the costs of dismantling and demolition of infrastructure or
decommissioning, the removal of residual material and the remediation of disturbed areas specific to the
infrastructure. Mine closure and restoration costs are provided for in the accounting period when the
obligation arising from the related disturbance occurs, whether this occurs during the mine development
or during the production phase, based on the net present value of estimated future costs.
As the value of the provision for mine closure and restoration represents the discounted value of the
present obligation to restore, dismantle and close the mine, the increase in this provision due to the
passage of time is recognised as a borrowing cost. The discount rate used is a pre-tax rate that reflects
the current market assessments of the time value of money and the risks specific to the liability.
78
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(w)
Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs
directly attributable to the issue of new shares or options, or for the acquisition of a business, are
included in the cost of the acquisition as part of the purchase consideration.
(x)
Earnings per share
(i)
Basic earnings per share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the
company by the weighted average number of ordinary shares outstanding during the period.
(ii)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares and the weighted average number of shares assumed to have been issued for
no consideration in relation to dilutive potential ordinary shares.
NOTE 3. VOLUNTARY CHANGE IN ACCOUNTING POLICY
The financial report has been prepared on the basis of a retrospective application of a voluntary change
in exploration and evaluation expenditure accounting policy.
The new exploration and evaluation expenditure accounting policy is to charge exploration and
evaluation expenditure against earnings as incurred; except for acquisition costs and for expenditure
incurred after a decision to proceed to development is made, in which case the expenditure is
capitalised as an asset – refer Note 2(q) for the full detail of the new accounting policy.
The previous exploration and evaluation expenditure accounting policy was to carry forward exploration
and evaluation expenditure as an asset; subject to ongoing review of the potential for development and
that rights to tenure were current.
This voluntary change in accounting policy was made at 31 December 2005 as the Group is undergoing
a transition from explorer to producer. AASB 6 Exploration for and Evaluation of Mineral Resources
allows both the previous and the new accounting policies of the Group.
The impact of this change in accounting policy up to 30 June 2005 on the Group is represented in Note
31(3)(vi).
79
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 3. VOLUNTARY CHANGE IN ACCOUNTING POLICY (continued)
The carry forward exploration and evaluation asset at 31 December 2005 was decreased by
A$8,635,055 to reflect the application of the new accounting policy. Of this adjustment A$7,315,408
represents an increase to accumulated losses at 30 June 2005 in the Balance Sheet and A$1,319,647
as an increase in exploration and evaluation expense for the six months ended 31 December 2005 in
the Income Statement.
Basic and diluted earnings per share have also been restated. The amount of the impact of the change
in accounting policy is a reduction of 0.31 cents per share for the six months ending 31 December 2005;
and a reduction of 0.73 cents per share for the six months ending 31 December 2004.
NOTE 4. SEGMENT INFORMATION
The Group’s primary segment reporting format is geographical segments as the Group’s risks and rates
of return are affected predominately by differences in the particular economic environments in which it
operates. Secondary segment information is reported by business segments.
Geographical segments - primary reporting
The Company operates in Australia and in Namibia and Malawi in Africa. The principal activity in these
locations is the evaluation and development of uranium projects.
Business segments – secondary reporting
Resources
The resource segment includes ownership of a proprietary database with primary focus on uranium.
Financial Investments (consequential activity)
This segment consists of investment in listed company shares and options over listed company shares,
and in 2005 an unlisted convertible note.
The Company has shares and options in Deep Yellow Ltd, a company listed on the Australian Stock
Exchange, from the sale of non core uranium properties – refer Note 10(b).
Property (consequential activity)
Ownership and lease of commercial premises consisting of buildings and telecommunications tower
located in Belmont, Perth, Western Australia. The commercial premises were sold on 24 June 2005 –
refer Note 7.
80
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 4. SEGMENT INFORMATION (continued)
Geographical segments –primary reporting
The Group’s geographical segments are determined based on the location of the Group’s assets.
The following tables present revenue, expenditure and certain asset information regarding geographical
segments for the years ended 30 June 2006 and 30 June 2005.
Year Ended
30 June 2006
Other revenue
Australia
A$000
Namibia
A$000
Malawi
A$000
Consolidated
A$000
4,105
192
1
4,298
____________________________________________________________________________________________________________________________________________________________________
Total segment revenue
4,105
192
1
4,298
____________________________________________________________________________________________________________________________________________________________________
Loss from ordinary activities
before income tax expense
(2,340)
(1,304)
(3,842)
(7,486)
Income tax expense
-
-
-
-
____________________________________________________________________________________________________________________________________________________________________
Loss from ordinary activities
after income tax expense/segment
result
(2,340)
(1,304)
(3,842)
(7,486)
____________________________________________________________________________________________________________________________________________________________________
Total assets/segment assets
62,551
91,585
6,172
160,308
____________________________________________________________________________________________________________________________________________________________________
Segment liabilities
26,077
8,616
890
35,583
____________________________________________________________________________________________________________________________________________________________________
Acquisitions of non current
assets
79
80,540
5,694
86,313
____________________________________________________________________________________________________________________________________________________________________
Cash flow information
Net cash inflow/(outflow) from
operating activities
Net cash (outflow) from
investing activities
Net cash inflow from
financing activities
558
129
(39)
648
(1,419)
(72,136)
(2,941)
(76,496)
95,080
-
-
95,080
____________________________________________________________________________________________________________________________________________________________________
Non cash expenses:
Depreciation and amortisation
155
37
31
223
____________________________________________________________________________________________________________________________________________________________________
81
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 4. SEGMENT INFORMATION (continued)
Geographical segments – primary reporting (continued)
Year Ended
30 June 2005
Other revenue
Australia
A$000
Namibia
A$000
Malawi
A$000
Consolidated
A$000
965
-
-
965
____________________________________________________________________________________________________________________________________________________________________
Total segment revenue
965
-
-
965
____________________________________________________________________________________________________________________________________________________________________
Loss from ordinary activities
before income tax expense
(4,441)
(4,145)
(824)
(9,410)
Income tax expense
-
-
-
-
____________________________________________________________________________________________________________________________________________________________________
Loss from ordinary activities
after income tax expense/
segment result
(4,441)
(4,145)
(824)
(9,410)
____________________________________________________________________________________________________________________________________________________________________
Total assets/segment assets
43,831
1,145
465
45,441
____________________________________________________________________________________________________________________________________________________________________
Segment liabilities
1,195
125
5
1,325
____________________________________________________________________________________________________________________________________________________________________
Acquisitions of non current
Assets
1,105
843
112
2,060
____________________________________________________________________________________________________________________________________________________________________
Cash flow information
Net cash (outflow) from
operating activities
Net cash inflow/(outflow) from
investing activities
Net cash inflow from
financing activities
(1,258)
(13)
(10)
(1,281)
768
(4,851)
(917)
(5,000)
41,131
-
-
41,131
____________________________________________________________________________________________________________________________________________________________________
Non cash expenses:
Depreciation and amortisation
Provision for doubtful debts
Bad debts written off
Write down of convertible note
90
17
5
894
-
-
-
-
-
-
-
-
90
17
5
894
____________________________________________________________________________________________________________________________________________________________________
82
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 4. SEGMENT INFORMATION (continued)
Business segments – secondary reporting
The following tables present revenue, expenditure and certain asset information regarding business
segments for the years ended 30 June 2006 and 30 June 2005.
Year Ended
30 June 2006
Total segment revenue
Resources
A$000
4,298
Discontinued
Operations Consolidated
Financial
Investments
A$000
Property
A$000
A$000
4,298
-
-
____________________________________________________________________________________________________________________________________________________________________
Total assets/segment assets
152,605
7,703
-
160,308
____________________________________________________________________________________________________________________________________________________________________
Acquisitions of non current
86,313
assets
______________________________________________________________________________________________________________________________________
85,693
620
-
Year Ended
30 June 2005
Resources
A$000
Financial
Investments
A$000
Discontinued
Operations
Property
A$000
Total segment revenue
742
30
193
Consolidated
A$000
965
____________________________________________________________________________________________________________________________________________________________________
Total assets/segment assets
42,996
2,430
15
45,441
____________________________________________________________________________________________________________________________________________________________________
Acquisitions of non current
assets
1,350
710
-
2,060
____________________________________________________________________________________________________________________________________________________________________
83
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 5. REVENUES AND EXPENSES
CONSOLIDATED
2006
A$000
2005
A$000
PARENT ENTITY
2005
A$000
2006
A$000
(a) Revenue from continuing operations
Interest income from non related parties
Interest income from wholly owned
Group
Database licence revenue
Other revenue
(b) Other income
Other income includes the following specific income:
Profit on sale from tenements
Dividends received from wholly owned Group
Foreign exchange gains (net)
4,026
769
3,809
-
232
40
4,298
441
-
616
1,057
-
-
3
402
-
40
768
322
-
75
772
4,251
1,165
810
-
-
810
441
348
1,698
2,487
-
-
-
-
(c) Share based payments expense
3,650
3,009
3,650
3,009
This share based payments expense relates to the requirement to recognise the cost of granting options
to Directors, employees and consultants under AIFRS over the option vesting period which impacts all
periods presented.
A greater impact exists for the twelve months ended 30 June 2006 for share based payments expense
when compared to 2005, as a result of the larger proportion of options vesting in 2006.
The valuation of options under AIFRS does not allow the consideration of non-market related vesting
conditions, which precludes the Company from discounting the option valuations to reflect the vesting
conditions relating to positive outcome for the Langer Heinrich Uranium Project bankable feasibility
study and completion of acceptable project funding. This has the result of increasing the option
valuation when compared to the previously disclosed valuations by the Company, which were prepared
based on the normal commercial practice of discounting valuations for non-market related vesting
conditions.
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 6. INCOME TAX
84
(a) Income tax expense
Current income tax
Current income tax charge
Deferred income tax
Tax losses not brought to account as future
income tax benefits
Temporary differences not brought to account
as future income tax benefits
Prior year tax losses brought
to account as current income tax
Income tax expense reported in the income
statement
(b) Numerical reconciliation of income
tax expense to prima facie tax payable
Loss from continuing operations before
income tax expense
Profit from discontinued operations before
income tax expense
Tax at the Australian tax rate of 30%
(2005 – 30%)
Tax effect of amounts which are not
deductible (taxable) in calculating taxable
income:
Depreciation and amortisation
Share-based payments
Grant of options to Société Générale
Australia Branch
Write down of convertible note
Other expenditure not allowable
Capital gain on sale of Belmont Property
Other income not assessable
Specific tax expenditure allowable
Difference in overseas tax rates
Prior year tax losses not recognised
now recouped
Current year tax benefits not recognised
Income tax expense reported in the
income statement
CONSOLIDATED
PARENT ENTITY
2006
A$000
2005
A$000
2006
A$000
2005
A$000
(1,564)
(2,229)
(3,174)
(1,368)
801
1,913
-
160
1,176
(413)
332
(16)
(261)
3,435
1,208
-
-
-
-
-
(7,486)
(9,538)
(13,121)
(8,446)
-
128
-
-
(7,486)
(9,410)
(13,121)
(8,446)
(2,246)
(2,823)
(3,936)
(2,534)
18
1,095
-
-
15
-
-
(348)
18
902
96
268
11
(103)
(21)
(90)
-
1,095
-
-
15
-
-
(348)
-
902
96
268
11
-
(21)
(90)
(1,466)
(1,742)
(3,174)
(1,368)
(98)
(487)
-
-
(413)
1,977
(16)
2,245
(261)
3,435
-
1,368
-
-
-
-
85
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 6. INCOME TAX (continued)
CONSOLIDATED
2006
A$000
2005
A$000
PARENT ENTITY
2006
2005
A$000
A$000
(c) Deferred income tax
Deferred tax liabilities
Revaluations of available for sale investments
to fair value
Recognition of restoration asset for accounting
purposes
Accelerated depreciation for tax purposes
Delayed revenue recognition for tax purposes
Deferred tax assets
Delayed exploration expenditure recognition for
tax purposes
Revenue losses available for offset against future
taxable income
Capital losses available for offset against
revaluations of investments to fair value
Recognition of restoration liability for accounting
purposes
Provisions for employee benefits
Lease incentive recognition for accounting purposes
Provisions for write down of intercompany
receivables
Provisions for write down of intercompany
investments
Net deferred tax assets not recognised as not
probable
Net deferred tax assets recognised
(d) Tax losses
(1,344)
(516)
(17)
(1,325)
(165)
(107)
-
(98)
-
-
(107)
-
-
-
(27)
-
702
267
-
-
6,543
5,766
2,260
2,521
1,344
1,325
115
17
-
-
7,105
(7,105)
-
516
-
20
20
-
17
-
96
17
-
-
20
20
6,080
2,641
-
5,975
478
8,824
461
5,636
(5,975)
-
(8,824)
-
(5,636)
-
Australian unused tax losses for which no deferred
tax asset has been recognised
Namibia unused tax losses for which no deferred
tax asset has been recognised
Malawi unused tax losses for which no deferred
tax asset has been recognised*
7,028
8,404
7,535
8,404
10,556
8,226
1,588
534
-
-
-
-
Total unused tax losses for which no deferred
tax asset has been recognised
19,172
17,164
7,535
8,404
Potential tax benefit at tax rates between 30% - 37.5%
6,543
5,766
2,260
2,521
* In addition to Malawi unused tax losses the Group has available Malawi accumulated tax exploration
expenditure of $A3.5 million at 30 June 2006 (2005: A$1.2 million).
86
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 6. INCOME TAX (continued)
This benefit for tax losses will only be obtained if:
the Consolidated Entity continues to comply with the conditions for deductibility imposed by
the Consolidated Entity derives future assessable income of a nature and of an amount
(i)
sufficient to enable the benefit from the deductions for the losses to be realised;
(ii)
tax legislation; and
(iii)
from the deductions for the losses.
no changes in tax legislation adversely affect the Consolidated Entity in realising the benefit
(e) Tax Consolidation Legislation
The Company and its wholly owned Australian controlled entities have decided to implement the tax
consolidation legislation as of 1 July 2003. The Australian Taxation Office has been notified of this
decision. The accounting policy on implementation of the legislation is set out in Note 2(h).
NOTE 7. DISCONTINUED OPERATION
On 24 June 2005 settlement occurred on the sale of land and buildings at 5-7 Belmont Avenue, Belmont
which represented the property business segment operations of the Group.
Financial information relating to the discontinued operation for the period to the date of disposal is set
out below.
(a) Financial performance and cash flow information for the year ended
30 June 2006 and the period 1 July 2004 to 24 June 2005
Revenue
Expenses
Profit before income tax expense
Income tax expense
Profit from discontinued operation
Basic and diluted earnings per share (cents)
Net cash inflow from ordinary activities
Net cash inflow from sale of commercial premises
Net cash outflow from repayment of secured bank loans
Net cash outflow from other financing activities
Net increase in cash generated by the commercial premises
Consolidated
2006
A$000
-
-
-
-
-
-
-
-
-
-
-
2005
A$000
193
(65)
128
-
128
0.04
60
1,200
(733)
(99)
428
87
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 7. DISCONTINUED OPERATION (continued)
(b) Carrying amount of assets and liabilities
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Total assets
Trade and other payables
Interest bearing loans and borrowings
Intercompany loan
Total liabilities
Net assets
(c) Details of the sale of the commercial premises for the year ended
30 June 2006 and the period 1 July 2004 to 24 June 2005
are as follows:
Cash consideration received
Carrying amount of net assets sold
Gain on sale before related income tax
Income tax expense
Gain on sale after related income tax expense
As at
30 June
2006
A$000
-
-
-
As at
24 June
2005
A$000
10
6
1,114
-
-
-
-
-
-
1,130
(3)
(738)
(324)
(1,065)
65
Consolidated
2006
A$000
-
-
2005
A$000
1,200
(1,114)
-
-
-
86
-
86
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 8. CASH AND CASH EQUIVALENTS
88
Cash at bank and in hand
Bank bills
Short-Term deposit
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2005
2006
A$000
A$000
5,247
21,995
32,536
1,244
38,185
60
160
21,995
522
755
38,185
60
59,778
39,489
22,677
39,000
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Short-Term deposits are made for varying periods of between one day and three months, depending on
the immediate cash requirements of the Group, and earn interest at the respective short-term deposit
rates.
At 30 June 2006, the Group had available A$74,005,000 (2005: A$1,467,000) of undrawn committed
borrowing facilities in respect of which all conditions precedent have been met.
(a) Reconciliation of net loss after tax to net
cash flows from operating activities
Net loss
(7,486)
(9,410)
(13,121)
(8,446)
Adjustments for
Depreciation and amortisation
Exploration expenditure
Provision for non-recovery
of intercompany loan
Provision for non-recovery of
intercompany investments
Provision for non-recovery
of convertible note
Profit on disposal of land and buildings
223
4,233
90
5,113
95
-
32
-
-
-
-
-
-
-
894
(86)
11,464
3,624
319
-
-
-
894
-
89
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 8. CASH AND CASH EQUIVALENTS (continued)
(a) Reconciliation of net profit after tax to net
cash flows from operating activities (continued)
Profit on disposal of tenements
Bad debts written off
Provision for doubtful debts
Database licence revenue
Grant of options on establishment of loan facility
Net exchange differences
Share options expensed
Changes in assets and liabilities
Decrease/(increase) in trade and other
receivables
Increase in trade and other payables
Increase in provisions
(Decrease)/increase in borrowings
Net cash from operating activities
(b) Disclosure of financing facilities
Refer to Note 16.
NOTE 9. TRADE AND OTHER RECEIVABLES
Current
Trade receivables - (a)
Less provision for doubtful debts
Net trade receivables
Interest receivable
Deferred lease rental
Prepayments
GST and VAT - (b)
Sundry debtors - (c)
Total current receivables
CONSOLIDATED
2005
2006
A$000
A$000
PARENT ENTITY
2005
A$000
2006
A$000
(441)
-
-
(232)
-
(616)
3,650
362
672
316
(33)
(810)
5
17
-
321
-
3,009
(492)
4
31
33
(441)
-
-
-
-
(1,698)
3,650
321
546
255
(33)
-
-
-
-
321
-
3,009
(799)
126
31
33
648
(1,281)
1,357
(1,175)
-
-
-
36
-
70
3,583
6
3,695
27
(17)
10
324
33
84
97
20
568
-
-
-
11
-
47
91
2
151
-
-
-
324
33
7
90
18
472
90
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 9. TRADE AND OTHER RECEIVABLES (continued)
Current (continued)
(a)
Trade receivables are non-interest bearing and are generally on 30-90 day terms. An allowance
for doubtful debts is made when there is objective evidence that a trade receivable is impaired.
An allowance of A$NIL (2005: A$17,469) has been recognised as an expense for the current
year for specific debtors for which such evidence exists.
(b) GST and VAT debtor primarily arises from the Langer Heinrich Uranium Project in Namibia.
Interest is not normally charged and collateral is not normally obtained.
(c)
Sundry debtors generally arise from transactions outside the usual operating activities of the
Consolidated Entity and Company. Interest is not normally charged and collateral is not normally
obtained.
Non Current
Unsecured loans to wholly owned Group - (d)
Less provision for non-recovery
Net unsecured loans to the wholly owned Group
Interest receivable - (e)
Less provision for non-recovery
Net interest receivable
Total non current receivables
CONSOLIDATED
2005
2006
A$000
A$000
PARENT ENTITY
2005
A$000
2006
A$000
-
-
-
-
-
-
-
-
-
-
94
(94)
-
-
64,498
(20,267)
13,453
(8,803)
44,231
4,650
-
-
-
94
(94)
-
44,231
4,650
(d) Of the unsecured loans to the wholly owned Group, the Company charges interest only on the
loan to Paladin Finance Pty Ltd (2005: Langer Heinrich Uranium (Pty) Ltd). The interest rate
payable is the standard commercial lending rate of National Australia Bank plus 2% (2005: NAB
plus 2%). In the year ending 30 June 2006 the average rate charged was 11.4% (2005: 11.2%)
and disclosure of interest revenue earned is set out in Note 5(a).
(e) During the year ended 30 June 2006 the Company resolved to write-off the interest receivable
from Didasko Technologies Pty Ltd. These amounts had been fully provided for in previous
periods.
91
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 10. OTHER FINANCIAL ASSETS
Non Current
Investments in controlled entities – (a)
Less provision for non-recovery
Net investment in controlled entities
CONSOLIDATED
2005
2006
A$000
A$000
PARENT ENTITY
2005
A$000
2006
A$000
-
-
-
-
-
-
49,180
(1,593)
1,961
(1,535)
47,587
426
Available for sale financial assets – (b)
7,703
2,430
2,050
-
Held to maturity investment – (c)
Less provision for non-recovery
Net held to maturity investment
-
-
-
800
(800)
-
-
-
-
800
(800)
-
Total non current other financial assets
7,703
2,430
49,637
426
(a)
Investments in material controlled entities
NAME
COUNTRY OF
INCORPORATION
INVESTMENT
PERCENTAGE
INTEREST HELD
COST OF PARENT
ENTITY’S
INTEREST
Paladin Finance Pty Ltd ∫3
Paladin Energy Minerals NL ∫
Eden Creek Pty Ltd * ∫
Etron Properties Pty Ltd ∫
Paladin (Africa) Ltd #
Lahndrik Holdings SA¹
Langer Heinrich
Uranium (Pty) Ltd
Tarquin Investments
(Pty) Ltd^ 2
Australia
Australia
Australia
Australia
Malawi
Luxembourg
Namibia
2006
%
100
100
100
-
100
-
100
Namibia
100
Total investments in controlled entities
Less provision for non-recovery of investments
Net investments in controlled entities
2005
%
-
100
100
100
100
100
100
100
2006
A$000
47,480
-
1,700
-
-
-
2005
A$000
-
-
1,700
261
-
-
-
-
-
-
49,180
(1,593)
47,587
1,961
(1,535)
426
92
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 10. OTHER FINANCIAL ASSETS (continued)
(a)
Investments in controlled entities (continued)
All investments comprise ordinary shares and all shares held are unquoted.
∫
^
*
#
1
2
³
Held by Paladin Resources Ltd
Held by Langer Heinrich Uranium (Pty) Ltd
These entities are not required to prepare or lodge audited accounts
Held by Paladin Energy Minerals NL
Liquidated in June 2006.
Acquired on 27 September 2004 for N$900,000 (Namibian dollars) (A$202,548). The only
asset in this company is land and building in the form of an office and apartment with a fair
value of A$202,548 which equates to the cash consideration paid. No goodwill has arisen on
acquisition of this entity.
Incorporated on 22 November 2005.
Acquisition Disclosure
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2005
2006
A$000
A$000
Outflow of cash to acquire controlled
entities, net of cash acquired
Cash consideration
Less: balances acquired
Cash
Outflow of cash
-
-
-
203
-
203
-
-
-
-
-
-
(b)
Available for Sale Financial Assets
The Consolidated Entity has an investment in Deep Yellow Ltd (Deep Yellow) as a result of the sale of
non-core uranium properties. The Consolidated Entity holds 30,450,000 (2005:15,000,000) fully paid
ordinary shares, 25,000,000 (2005: 25,000,000) unlisted options exercisable at one cent on or before 31
December 2007, and 12,500,000 (2005: Nil) unlisted options exercisable at twelve cents on or before 15
July 2008. The holding of these fully paid ordinary shares represents less than 5% (2005: less than 5%)
of the ordinary shares of Deep Yellow, a uranium explorer. The quoted market value of the shares and
options in Deep Yellow at 30 June 2006 is A$7,703,000 (2005: A$2,430,000) based on a share price of
12.5 cents per share (2005: 6.7 cents).
(c)
Held to Maturity Investment
During the year ended 30 June 2006 the Company resolved to write off the amounts owing from
Didasko Technologies Pty Ltd. These amounts had been fully provided for in previous periods.
93
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 11. DEFERRED BORROWING COSTS
Non Current
Deferred borrowing costs
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2006
A$000
2005
A$000
-
170
-
-
Deferred borrowing costs represent the capitalised costs of establishing the secured bank loan
disclosed in Note 16.
NOTE 12. PROPERTY, PLANT AND EQUIPMENT
Plant and equipment – at cost
Less provision for depreciation
Total plant and equipment
Leasehold improvements – at cost
Less provision for depreciation
Total leasehold improvements
Technical database – at cost
Less provision for amortisation
Total technical database
Project generation database – at cost
Less provision for amortisation
Total project generation database
Land and buildings - at cost
Less provision for depreciation
Total land and buildings
Construction work in progress – at cost
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2006
A$000
2005
A$000
1,008
(562)
446
324
(85)
239
270
(263)
7
579
(475)
104
203
(15)
188
79,458
753
(480)
674
(445)
527
(410)
273
294
(14)
280
262
(262)
-
579
(415)
164
203
(6)
197
184
229
301
(74)
227
117
287
(14)
273
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total non current property, plant and equipment
80,442
1,098
456
390
94
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 12. PROPERTY, PLANT AND EQUIPMENT (continued)
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning
and end of the year are set out below:
Equipment
Total Plant and Databases Land and Leasehold Construction
Building Improvements Work in
Progress
A$000
A$000
A$000
A$000
A$000
A$000
Consolidated – 2006
Carrying amount at start
of year
Additions
Depreciation and
amortisation expense
Depreciation capitalised
Carrying amount at end
of year
Parent Entity - 2006
Carrying amount at
start of year
Additions
Depreciation and
amortisation expense
Carrying amount at end
of year
Consolidated – 2005
Carrying amount at start
of year
Additions
Depreciation and
amortisation expense
Depreciation capitalised
Carrying amount at end
of year
Parent Entity - 2005
Carrying amount at
start of year
Additions
Depreciation and
amortisation expense
Carrying amount at end
of year
1,098
79,567
(223)
-
80,442
390
161
(95)
456
249
979
(90)
(40)
1,098
26
396
(32)
390
273
255
(82)
-
446
117
147
(35)
229
26
298
(17)
(34)
273
26
109
(18)
117
164
8
(61)
-
111
-
-
-
-
223
-
(59)
-
164
-
-
-
-
197
-
(9)
-
188
-
-
-
-
-
203
-
(6)
197
-
-
-
-
280
30
(71)
-
239
273
14
(60)
227
-
294
(14)
-
280
-
287
(14)
273
184
79,274
-
-
79,458
-
-
-
-
-
184
-
-
184
-
-
-
-
95
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 13. EXPLORATION AND EVALUATION EXPENDITURE
Canadian securities law requires the following description of the Consolidated Entity’s interests in
mineral property tenements:
Langer Heinrich Uranium Project (Namibia) - Paladin 100%
The Langer Heinrich Uranium Project consists of one Mining Licence – ML 140 - covering 4,375
hectares in the Namibia Naukluft Desert 180km west of Windhoek, the capital of Namibia, and 80
kilometres east of the major seaport of Walvis Bay. The licence was granted on 26 July 2005 for a 25
year term expiring on 25 August 2030. Rights conferred by the licence include the right to mine and sell
base and rare metals and nuclear fuel groups of minerals and to carry on prospecting operations. The
project was purchased from Acclaim Uranium NL (now Aztec Mining Ltd) in August 2002. The Langer
Heinrich Uranium Project is owned through a wholly owned Namibian entity, Langer Heinrich Uranium
(Pty) Ltd.
Kayelekera Uranium Project (Malawi) – Paladin 100%
The Kayelekera Uranium Project consists of one exclusive prospecting licence – EPL 070 - covering
15,700 hectares in northern Malawi 650 kilometres north of Lilongwe, the capital of Malawi, and 40
kilometres west of the provincial town of Karonga on the shore of Lake Malawi. Rights conferred by the
licence include the exclusive right to carry on prospecting operations for uranium and associated
minerals. EPL 070 was granted on 26 January 1998 and the licence was renewed on 25 July 2005 for
a further two years to 25 July 2007. The Consolidated Entity acquired its interest in the Kayelekera
Uranium Project in February 1988 when it entered into a joint venture with Balmain Resources Pty Ltd,
an unlisted company based in Perth Western Australia. In 2000 the Consolidated Entity increased its
interest in the Kayelekera Project to 90% and in July 2005 acquired the remaining 10% interest held by
Balmain Resources Pty Ltd. The Kayelekera Uranium Project is now held 100% through a wholly
owned Malawian entity, Paladin (Africa) Limited.
Manyingee Uranium Project (Australia) – Paladin 100%
The Manyingee Uranium Project consists of three granted mining leases – M08/86, M08/87 and M08/88
- covering 1,307 hectares in the North West of Western Australia, 1,100 kilometres north of Perth, the
State Capital and 90 kilometres south of the township of Onslow on the North West coast. The
Consolidated Entity purchased the Manyingee Uranium Project in 1998 from Afmeco Mining and
Exploration Pty Ltd (“AFMEX”), a subsidiary company of Cogema of France. Under the terms (as
amended) of the purchase agreement a final payment of A$750,000 is payable to AFMEX when all
development approvals have been obtained. Royalties of 2.5% for the first 2,000 tonnes of uranium
oxide and 1.5% for the following 2,000 tonnes of uranium oxide are also payable to AFMEX and
associated companies which formerly held interests in the project. The three mining leases were
granted on May 18, 1989 for a 21-year term renewable for a further term or terms of 21 years. Rights
conferred by the three mining leases include the exclusive right to explore and mine minerals, subject to
environmental and other approvals. The interest in Manyingee is held through the wholly owned entity,
Paladin Energy Minerals NL.
96
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 13. EXPLORATION AND EVALUATION EXPENDITURE (continued)
Oobagooma Uranium Project (Australia) – Paladin 100%
The Oobagooma Uranium Project consists of four applications for exploration licences covering 45,200
hectares in the West Kimberley region of northern Western Australia, 1,900 kilometres north-north-east
of Perth, the State Capital and 70 kilometres north east of the regional town of Derby. The four
applications for exploration licences are 04/145 and 04/146 lodged on December 28, 1983 and 04/776
and 04/777 lodged on November 28, 1991 which largely overly the earlier applications. The
Consolidated Entity purchased the Oobagooma Project in 1998 from AFMEX. Under the terms of the
purchase agreement a final payment of A$750,000 is payable to AFMEX when the tenements are
granted. A gross royalty of 1.0% on production is also payable to AFMEX. The applications for
exploration licences remain in the name of Afmeco Pty Ltd (a company associated with AFMEX) until
the date that they are granted after which title will be transferred. The interest in Oobagooma is held
through the wholly owned entity, Paladin Energy Minerals NL.
Other mineral property interests
The Consolidated Entity holds various other mineral property interests, however, these are not
considered material and as a result no further disclosure of mineral property tenement information has
been included in the consolidated schedules of information.
Environmental contingency
The Consolidated Entity’s exploration, evaluation and development activities are subject to various
national, federal, provincial and local laws and regulations governing the protection of the environment.
These laws and regulations are continually changing and generally becoming more restrictive. The
Consolidated Entity has made, and expects to make in the future, expenditures to comply with such
laws and regulations. The impact, if any, of future legislative or regulatory changes cannot be
determined.
97
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 13. EXPLORATION AND EVALUATION EXPENDITURE (continued)
The following table summarises the Consolidated Entity’s interest in mineral properties as at 30 June
2006:
Areas of Interest
Acquisition
A$000
Expenditure
A$000
Carrying value
A$000
Langer Heinrich Uranium Project
Kayelekera Uranium Project
Manyingee Uranium Project
Oobagooma Uranium Project
Other Projects
Balance 30 June 2006
15
5,785
1,157
174
-
7,131
1,559
-
-
-
-
1,559
1,574
5,785
1,157
174
-
8,690
The following table summarises the Consolidated Entity’s interest in mineral properties as at 30 June
2005:
Areas of Interest
Acquisition
A$000
Expenditure
A$000
Carrying value
A$000
Langer Heinrich Uranium Project
Kayelekera Uranium Project
Manyingee Uranium Project
Oobagooma Uranium Project
Other Projects
Balance 30 June 2005
15
171
1,157
174
-
1,517
169
-
-
-
-
169
184
171
1,157
174
-
1,686
98
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 13. EXPLORATION AND EVALUATION EXPENDITURE (continued)
The following table details the Consolidated expenditures (Parent Entity expenditures $Nil) on interests
in mineral properties by area of interest for the year ended 30 June 2006:
Langer Kayelekera Manyingee Oobagooma Other
Project
Heinrich
A$000
A$000
Project
A$000
Project
A$000
Projects Projects
A$000
A$000
Total
184
171
1,157
174
-
1,686
Areas of
Interest
Balance
30 June 2005
Acquisition
Property
Payments
-
5,614
-
-
-
73
(12)
-
255
1
381
Project exploration and evaluation expenditure
Interest received
Joint venture
contributions
Tenement
Costs
Labour
Consultants and
contractors
Materials and
utilities
Transportation and
communications
Outside
services
Legal and
accounting
Insurance
Camp expenses
Overheads
Other
1
-
13
-
59
182
25
93
-
209
2,029
431
321
873
93
35
68
-
-
-
30
-
1
-
-
-
-
-
-
-
-
Total
expenditure
Exploration
expenditure expensed
1,390
3,740
31
-
(3,740)
(31)
Exploration
expenditure capitalised 1,390
-
-
-
-
-
Cost of
tenements sold
Balance
30 June 2006
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5
137
110
4
147
5,614
(12)
-
36
773
615
107
561
-
2,902
1
-
17
-
41
184
25
123
-
309
462
5,623
(462)
(4,233)
-
-
-
1,390
-
8,690
1,574
5,785
1,157
174
99
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 13. EXPLORATION AND EVALUATION EXPENDITURE (continued)
The following table details the Consolidated expenditures (Parent Entity expenditures $Nil) on interests
in mineral properties by area of interest for the year ended 30 June 2005:
Langer Kayelekera Manyingee Oobagooma Other
Project
Heinrich
A$000
A$000
Project
A$000
Project
A$000
Projects Projects
A$000
A$000
Total
15
171
1,157
174
-
1,517
Areas of
Interest
Balance
30 June 2004
Acquisition
Property
Payments
-
-
-
-
-
(5)
202
6
431
-
201
Project exploration and evaluation expenditure
Interest received
Joint venture
contributions
Tenement
costs
Labour
Consultants and
contractors
Materials and
utilities
Transportation and
communications
Outside
services
Legal and
accounting
Insurance
Camp expenses
Overheads
Other
109
31
50
228
225
21
5
32
136
58
2,661
293
149
157
34
47
19
-
-
-
30
2
-
-
-
-
-
-
-
5
2
Total
expenditure
4,278
812
39
-
-
-
-
-
-
-
-
-
-
-
-
-
1
1
-
-
(9)
20
38
37
4
19
-
(5)
(9)
56
672
258
85
461
2
2,820
5
2
3
19
12
135
38
85
388
298
152
5,282
Exploration
expenditure expensed (4,109)
Exploration
expenditure capitalised
169
Cost of
tenements sold
Balance
30 June 2005
(812)
(39)
(1)
(152)
(5,113)
-
-
-
-
-
-
-
184
171
1,157
174
-
-
-
169
-
1,686
100
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 14. TRADE AND OTHER PAYABLES
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2006
A$000
2005
A$000
Current
Trade and other payables
Lease incentive
Total current payables
11,059
15
11,074
660
67
727
1,088
15
1,103
Trade payables are non-interest bearing and are normally settled on 60 day terms.
Non Current
Lease incentive
Unsecured loans from wholly owned Group
Total non current payables
41
-
41
-
-
-
41
-
41
524
67
591
-
334
334
The unsecured loans from wholly owned Group are interest free and have no fixed terms of repayment.
NOTE 15. UNEARNED REVENUE
Current
Unearned revenue
Non Current
Unearned revenue
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2006
A$000
2005
A$000
242
979
-
-
-
-
-
-
Unearned revenue represents the database licence revenue received from Deep Yellow Ltd for the use
of the Frome Basin database from 15 July 2005 for a period of 6 years.
101
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 16. INTEREST BEARING LOANS AND BORROWINGS
Current
Unsecured bank loans
Non Current
Secured bank loan
Deferred borrowing costs
Total non current
Maturity
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2006
A$000
2005
A$000
2007
-
533
2012
23,241
(3,907)
19,334
-
-
-
-
-
-
-
533
-
-
-
Fair value disclosures
Details of the fair value of the Group’s interest bearing liabilities are set out in Note 20.
Unsecured bank loan
The bank loan from Société Générale Australia Branch related to funding the Bankable Feasibility Study
for the Langer Heinrich Uranium Project and was repaid during the year. This facility was unsecured
but had a negative pledge which imposed certain covenants on the Consolidated Entity. The bank loan
bears interest at the bank bill standard yield plus 3%. At 30 June 2005 A$500,000 plus interest had
been drawn of the total facility of A$2,000,000.
Secured bank loan
During the year the Consolidated Entity completed project finance facilities amounting to US$71 million
for construction of the Langer Heinrich Uranium Project. The financing has been provided by Société
Générale Australia Branch (as lead arranger), Nedbank Capital and Standard Bank Plc and consists of
a 7 year Project Finance Facility of US$65 million and a Standby Cost Overrun Facility of US$6 million.
The Project Finance Facility bears interest at the London Interbank Offered Rate (LIBOR) plus 3.5% up
to and including practical completion of the project, and the interest cost reduces to LIBOR plus 2.5%
after practical completion. No requirement for political risk insurance exists under the terms of the
Project Finance Facility The facilities are secured with fixed and floating charges over the assets of
Langer Heinrich Uranium (Pty) Ltd and its immediate holding companies. Paladin Resources Ltd has
provided a project completion guarantee as part of the facilities.
At 30 June 2006 US$17 million had been drawn of the project finance facilities, leaving available
facilities of US$54 million. The deferred borrowing costs represent the capitalised costs of establishing
the facilities.
102
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 16. INTEREST BEARING LOANS AND BORROWINGS (continued)
Financing facilities available
At reporting date, the following financing facilities had been negotiated and were available:
Total facilities:
Unsecured bank loans
Secured bank loans
Facilities used at reporting date
Unsecured bank loans
Secured bank loans
Facilities unused at reporting date
Unsecured bank loans
Secured bank loans
Total facilities
Facilities used at reporting date
Facilities unused at reporting date
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2006
A$000
2005
A$000
-
97,246
2,000
-
97,246
2,000
-
23,241
23,241
533
-
533
-
74,005
1,467
-
74,005
1,467
23,241
74,005
533
1,467
97,246
2,000
-
-
-
-
-
-
-
-
-
-
-
-
2,000
-
2,000
533
-
533
1,467
-
1,467
533
1,467
2,000
Assets pledged as security
The carrying amounts of assets pledged as security for current and non current interest bearing
liabilities are:
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2006
A$000
2005
A$000
Current
Floating charge
-Cash and cash equivalents
-Trade and other receivables
Total current assets pledged as security
Non current
-Property, Plant and equipment
-Exploration and evaluation expenditure
36,862
3,543
40,405
79,719
1,574
Total non current assets pledged as security
81,293
Total assets pledged as security
121,698
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 17. PROVISIONS
103
Current
Employee benefits (Note 24)
Non Current
Employee benefits (Note 24)
Restoration
Total non current provisions
Restoration – Non Current
At 1 July 2005
Arising during the year
Utilised
FX Movements
Discount rate adjustment
At 30 June 2006
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2006
A$000
2005
A$000
328
65
266
65
54
3,531
3,585
-
-
-
54
-
54
-
-
-
CONSOLIDATED
2006
A$000
-
3,574
-
(43)
-
3,531
Restoration
A provision for restoration has been recorded in relation to the Langer Heinrich uranium plant operations
for the costs of dismantling and demolition of infrastructure or decommissioning, the removal of residual
material and the remediation of disturbed areas specific to the infrastructure to a state acceptable to
various authorities. Final restoration is not expected until the cessation of operations, currently
estimated to be beyond 2020.
Employee Benefits
Please refer to Note 24.
104
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 18. CONTRIBUTED EQUITY AND RESERVES
(a) Issued and paid up capital
Ordinary shares
Number of Shares
2005
2006
CONSOLIDATED
PARENT ENTITY
2006
A$000
2005
A$000
Issued and fully paid
454,235,713 400,885,713
148,182
65,992
____________________________________________________________________________________________________________________________________________________________________
Effective 1 July 1998, the Corporations legislation in place abolished the concepts of authorised capital
and par value shares. Accordingly, the Parent does not have authorised capital nor par value in respect
of its issued shares.
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
(b) Movements in ordinary shares on issue
Date
August 2004
August 2004
September 2004
December 2004
December 2004
March 2005
April 2005
Balance 30 June 2004
Options conversions
Options conversions
Placement
Options conversions
Options conversions
Options conversions
Placement
Transfer from reserves
Less: Transaction costs
arising on share issues
Number of Shares
Issue Price
A$
333,685,713
4,200,000
3,800,000
7,500,000
4,700,000
10,000,000
1,000,000
36,000,000
0.01
0.01
0.40
0.15
0.06
0.22
1.05
Total
A$000
24,265
50
49
3,000
705
550
220
37,800
363
(1,010)
____________________________________________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________________________________________
Balance 30 June 2005
400,885,713
65,992
105
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 18. CONTRIBUTED EQUITY AND RESERVES (continued)
(b) Movements in ordinary shares on issue (continued)
Date
Number of Shares
Issue Price
A$
Balance 30 June 2005
Option conversions
July 2005
Option conversions
August 2005
September 2005 Option conversions
September 2005 Kayelekera acquisition
October 2005
October 2005
October 2005
February 2006
May 2006
May 2006
Option conversions
Option conversions
Placement
Option conversions
Option conversions
Option conversions
Transfer from reserves
Less: Transaction
costs arising on share issues
400,885,713
150,000
350,000
550,000
4,350,000
2,250,000
750,000
35,000,000
100,000
7,600,000
2,250,000
0.22
0.22
0.22
1.29
0.22
0.32
2.20
0.22
0.22
0.32
Total
A$000
65,992
33
77
121
5,612
495
240
77,000
22
1,672
720
503
(4,305)
____________________________________________________________________________________________________________________________________________________________________
Balance 30 June 2006
454,235,713
148,182
(c) Issued Options
Unlisted Options
(i)
Exercisable at 1.2 cents, on or before
31 December 2004
Number of Options
2005
2006
Balance at 1 July
Exercised during year
-
-
4,200,000
(4,200,000)
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
-
-
____________________________________________________________________________________________________________________________________________________________________
The options above were exercised in August 2004 raising A$50,400 in
contributed equity and at the time of exercise the shares had a market
value of A$651,000.
106
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 18. CONTRIBUTED EQUITY AND RESERVES (continued)
(c) Issued options (continued)
Unlisted options (continued)
(ii)
Exercisable at 1.3 cents, on or before
30 November 2005
Number of Options
2005
2006
Balance at 1 July
Exercised during year
-
-
3,800,000
(3,800,000)
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
-
-
____________________________________________________________________________________________________________________________________________________________________
The options above were exercised in August 2004 raising A$49,400 in
contributed equity and at the time of exercise the shares had a market
value of A$570,000.
(iii)
Exercisable at 5.5 cents, on or before
30 September 2007
Balance at 1 July
Granted during year
Exercised during year
-
-
-
-
10,000,000
(10,000,000)
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
-
-
____________________________________________________________________________________________________________________________________________________________________
These options above were granted to Société Générale Australia Branch
as part of the establishment of a A$2,000,000 loan facility on 30
September 2004, refer Note 16. The options were exercised in December
2004 raising A$550,000 in contributed equity and at the time of exercise
the shares had a market value of A$4,850,000.
Unlisted Options – Directors, Employees and Consultants
On 23 March 2004 the Directors approved the Employee Share Incentive Option Plan (Plan) for which
up to ten percent of the ordinary shares on issue can be on offer at any one time to Directors,
employees and consultants directly engaged in corporate, project development, exploration and
evaluation work for the Company. The maximum term of the options is 5 years, with the vesting
requirements and exercise price of the options determined by the Directors at the time of grant. The
options are convertible into fully paid ordinary shares of the Company on a one for one basis and may
not be exercised within 12 months of their date of grant, except in the case of a takeover bid or a
scheme of arrangement. Options are granted at no cost under the plan and carry no dividend or voting
rights.
On 23 February 2006 the Board resolved that Non-executive Directors would be remunerated solely by
way of fees and statutory superannuation and would not be eligible to receive an allocation of incentive
options.
107
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 18. CONTRIBUTED EQUITY AND RESERVES (continued)
(c) Issued Options (continued)
Unlisted Options – Directors, Employees and Consultants (continued)
(iv)
Exercisable at 15 cents, on or before
30 November 2004 (granted 20 June 2002)
(No vesting requirements)
Number of Options
2005
2006
Balance at 1 July
Exercised during year
-
-
4,700,000
(4,700,000)
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
-
-
____________________________________________________________________________________________________________________________________________________________________
in December 2004 raising
The options above were exercised
A$705,000 in contributed equity and at the time of exercise the shares
had a market value of A$2,279,500.
(v)
Exercisable at 22 cents, on or before
26 May 2006 (granted 28 May 2004 to 30 June 2004)
(No vesting requirements)
Balance at 1 July
Exercised during year
11,000,000 12,000,000
(1,000,000)
(11,000,000)
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
- 11,000,000
____________________________________________________________________________________________________________________________________________________________________
In July 2005 150,000 options above were exercised raising A$33,000 in
contributed equity and at the time of exercise the shares had a market
value of A$208,500.
In August 2005 350,000 options above were exercised raising A$77,000
in contributed equity and at the time of exercise the shares had a market
value of A$546,000.
In September 2005 550,000 options above were exercised raising
A$121,000 in contributed equity and at the time of exercise the shares
had a market value of A$1,078,000.
In October 2005 2,250,000 options above were exercised raising
A$495,000 in contributed equity and at the time of exercise the shares
had a market value of A$4,905,000.
In February 2006 100,000 options above were exercised raising
A$22,000 in contributed equity and at the time of exercise the shares had
a market value of A$340,000.
In May 2006 7,600,000 options above were exercised
raising
A$1,672,000 in contributed equity and at the time of exercise the shares
had a market value of A$34,428,000.
108
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 18. CONTRIBUTED EQUITY AND RESERVES (continued)
(c) Issued Options (continued)
In March 2005 1,000,000 options above were exercised raising
A$220,000 in contributed equity and at the time of exercise the shares
had a market value of A$1,160,000.
(vi)
Exercisable at 32 cents, on or before
26 May 2006 (granted 28 May 2004 to 30 June 2004)
(No vesting requirements)
Number of Options
2006 2005
Balance at 1 July
Exercised during year
3,000,000
(3,000,000)
3,000,000
-
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
-
3,000,000
____________________________________________________________________________________________________________________________________________________________________
In October 2005 750,000 options above were exercised raising
A$240,000 in contributed equity and at the time of exercise the shares
had a market value of A$1,635,000.
In May 2006 2,250,000 options above were exercised raising A$720,000
in contributed equity and at the time of exercise the share has a market
value of A$10,192,500.
109
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 18. CONTRIBUTED EQUITY AND RESERVES (continued)
(c) Issued Options (continued)
Unlisted Options – Directors, Employees and Consultants (continued)
(vii)
Exercisable at $1.00, on or before
30 November 2007 (granted 30 November 2004)*
Number of Options
2005
2006
Balance at 1 July
Granted during year
8,050,000
-
-
8,050,000
___________________________________________________________________________________________________________________________________________________________________
_
Balance at 30 June
8,050,000
8,050,000
____________________________________________________________________________________________________________________________________________________________________
(viii)
Exercisable at $1.00, on or before
20 December 2007 (granted 20 December 2004)*
Balance at 1 July
Granted during year
10,250,000
-
- 10,250,000
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
10,250,000 10,250,000
____________________________________________________________________________________________________________________________________________________________________
(ix)
Exercisable at $1.25, on or before
30 November 2007 (granted 30 November 2004)*
Balance at 1 July
Granted during year
1,300,000
-
-
1,300,000
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
1,300,000
1,300,000
____________________________________________________________________________________________________________________________________________________________________
(x)
Exercisable at $1.50, on or before 15 July 2008
(granted 15 July 2005)*
Balance at 1 July
Granted during year
Lapsed during year
-
-
-
_ ___________________________________________________________________________________________________________________________________________________________________
-
-
250,000
(50,000)
Balance at 30 June
200,000
____________________________________________________________________________________________________________________________________________________________________
* Vest on positive outcome for Langer Heinrich Uranium Project Bankable Feasibility Study together
with completion of acceptable project funding. Vesting conditions were met by 30 June 2006.
110
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 18. CONTRIBUTED EQUITY AND RESERVES (continued)
(c) Issued Options (continued)
Unlisted Options – Directors, Employees and Consultants (continued)
(xi)
Exercisable at $2.80, on or before 13 January 2009
(granted 13 January 2006 to 16 February 2006)
(900,000 vest 13 January 2007 and 1,950,000 vest 13
January 2008).
Number of Options
2005
2006
Balance at 1 July
Granted during year
-
2,850,000
-
-
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
2,850,000
-
____________________________________________________________________________________________________________________________________________________________________
(xii)
Exercisable at $5.50, on or before 28 April 2009
(granted 27 April 2006)
(782,500 vest 31 October 2007 and 782,500 vest October
2008).
Balance at 1 July
Granted during year
-
1,565,000
-
-
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
1,565,000
-
____________________________________________________________________________________________________________________________________________________________________
111
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 18. CONTRIBUTED EQUITY AND RESERVES (continued)
(d) Reserves
CONSOLIDATED
PARENT
Listed
option
application
reserve
A$000
Share
based
payments
reserve
A$000
Available
for sale
reserve
Total
A$000
A$000
Listed
option
application
reserve
A$000
Share
based
payments
reserve
A$000
Available
for sale
reserve
Total
A$000
A$000
At 1 July 2004
174
545
-
719
174
545
Net unrealised gains/
(losses)on available-
for-sale investments
Share based payments
-
-
At 30 June 2005
174
Net unrealised gains/
(losses)on available-
for-sale investments
Share based payments
-
-
At 30 June 2006
174
-
1,720
2,967
3,512
-
1,720
1,720
2,967
5,406
-
2,758
2,758
3,147
6,659
-
4,478
3,147
11,311
-
-
174
-
-
174
-
2,967
3,512
-
3,147
6,659
-
-
-
-
57
-
57
719
-
2,967
3,686
57
3,147
6,890
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 18. CONTRIBUTED EQUITY AND RESERVES (continued)
112
(d) Reserves (continued)
Nature and purpose of reserves
Listed option application reserve
This reserve consists of proceeds for the issue of listed options, net of expenses of issue. These
listed options expired unexercised and no restriction exists for the distribution of this reserve.
Share based payments reserve
This reserve is used to record the value of equity benefits provided to Directors, employees and
consultants as part of their remuneration. Refer to Note 26 for further details of the share option plan.
Available for sale reserve
This reserve records the fair value changes on the available for sale financial assets as set out in Note
10(b).
113
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 19. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise bank loans, cash, short-term deposits,
commercial bank bills and investment in shares.
The main purpose of these financial instruments is to either raise finance, or maintain finance for the
Group’s operations. The Group has various other financial assets and liabilities such as trade
receivables and trade payables, which arise directly from its operations. It is, and has been
throughout the period under review, the Group’s policy that no trading in financial instruments shall be
undertaken. The main risks arising from the Group’s financial instruments are cash flow interest rate
risk, liquidity risk, foreign currency risk and credit risk.
Details of the significant accounting policies and methods adopted, including the criteria for
recognition, the basis of measurement and the basis on which income and expenses are recognised,
in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note
2 to the Financial Statements.
(a)
Credit Risk Exposure
The credit risk on financial assets of the Group which have been recognised on the Consolidated
Balance Sheets, other than investments in shares, equates to the carrying amount, net of any
provisions for doubtful debts or non-recovery. The Group trades only with recognised, credit worthy
third parties. In addition, receivable balances are monitored on an ongoing basis with the result that
the Group’s exposure to bad debts is not significant. With respect to credit risk arising from other
financial assets of the Group, which comprise cash and cash equivalents, the Group’s exposure to
credit risk arises from default of the counter party, with a maximum exposure equal to the carrying
amount of these instruments.
During the year ended 30 June 2005 the Company made full provision for non-recovery of the Didasko
Technologies Pty Ltd convertible note and interest receivable, refer Note 10(c). These amounts have
been written off in the year to 30 June 2006.
114
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 19. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(b)
Interest Rate Risk Exposure
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s
cash, short-term deposits, commercial bank bills and long term debt obligations with floating interest
rates. These financial assets and liabilities with variable rates expose the Group to cash flow interest
rate risk. All other financial assets and liabilities, in the form of receivables, investments in shares,
payables and provisions, are non-interest bearing.
The Group currently does not engage in any hedging or derivative transactions to manage interest rate
risk.
(c)
Net Fair Value of Financial Assets and Liabilities
The net fair value of cash, convertible note, both secured and unsecured bank loans and non-interest
bearing financial assets and financial liabilities of the Group equates to their carrying amount, net of
any provision for doubtful debts or non-recovery.
The net fair value of other monetary financial assets and financial liabilities is based upon market
prices where a market exists or by discounting the expected future cash flows by the current interest
rates for assets and liabilities with similar risks profiles.
The net fair value of equity investments traded on organised markets have been valued by reference
to market prices prevailing at balance date. For non-traded equity investments, the net fair value is an
assessment of circumstances pertaining to a particular investment.
(d)
Price risk
The Group is exposed to uranium price risk. Uranium prices can be volatile and are influenced by
factors beyond the Group’s control. In order to reduce the exposure to extreme price volatility the
Group enters into sales contracts for future production which contain floor prices set at reasonable
levels to provide protection in the event of significant price reduction.
(e)
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the
use of bank loans.
(f)
Foreign currency risk
The Group does not have foreign currency risk for non-monetary assets and liabilities of the Namibia
and Malawi operations as these are deemed to have a functional currency of Australian dollars. The
Group had no significant monetary foreign currency assets and liabilities during the year apart from
South African rand cash term deposits and United States dollar bank loans held for the purposes of
funding a portion of the mine construction for the Langer Heinrich Uranium Project.
The Group currently does not engage in any hedging or derivative transactions to manage foreign
currency risk.
115
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 20. FINANCIAL INSTRUMENTS
Fair values
Set out below is a comparison by category of carrying amounts and fair values of all of the Group’s
financial instruments recognised in the financial statements, including those classified under
discontinued operations.
Market values have been used to determine the fair value of listed available-for-sale investments.
The fair values of interest bearing loans and borrowings have been calculated by discounting the
expected future cash flows at prevailing interest rates.
CARRYING AMOUNT/FAIR VALUE
CONSOLIDATED
2005
2006
A$000
A$000
PARENT ENTITY
2005
2006
A$000
A$000
59,778
3,695
39,489
568
22,677
151
39,000
472
-
-
7,703
-
-
2,430
44,231
47,587
2,050
4,650
426
-
FINANCIAL ASSETS
Current financial assets
Cash and cash equivalents
Trade and other receivables
Non current financial assets
Trade and other receivables
Other financial assets
Available for sale financial assets
FINANCIAL LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Non current liabilities
Trade and other payables
Interest bearing loans and borrowings
41
19,334
-
-
41
-
11,074
-
727
533
1,103
-
591
533
334
-
116
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 20. FINANCIAL INSTRUMENTS (continued)
Interest rate risk
The following tables sets out the carrying amount, by maturity, of the financial instruments exposed to
interest rate risk:
Year ended 30 June 2006
CONSOLIDATED
FINANCIAL ASSETS
Floating rate
Cash assets
Weighted average effective
Interest rate
FINANCIAL LIABILITIES
Floating rate
Secured bank loans
Weighted average effective
Interest rate
<1-year
>3-<4
Total
years
A$000 A$000 A$000 A$000 A$000 A$000 A$000
>4-<5
years
>2-<3
years
>1-<2
years
>5
years
Weighted
Average
Effective
Interest
rate
%
59,778
5.6%
19,334
9.1%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 59,778
5.6%
-
- 19,334
9.1%
-
117
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 20. FINANCIAL INSTRUMENTS (continued)
Interest rate risk (continued)
Year ended 30 June 2006
PARENT
FINANCIAL ASSETS
Floating rate
Cash assets
Intercompany
Weighted average effective
Interest rate
Year ended 30 June 2005
CONSOLIDATED
FINANCIAL ASSETS
Fixed rate
Convertible notes
Weighted average effective
Interest rate
Floating rate
Cash assets
Weighted average effective
Interest rate
FINANCIAL LIABILITIES
Floating rate
Unsecured bank loans
Weighted average effective
Interest rate
<1-year
>3-<4
Total
years
A$000 A$000 A$000 A$000 A$000 A$000 A$000
>4-<5
years
>2-<3
years
>1-<2
years
>5
years
Weighted
Average
Effective
Interest
rate
%
22,677
43,519
66,196
9.7%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 22,677
- 43,519
- 66,196
5.9%
11.6%
9.7%
-
<1-year
>3-<4
Total
years
A$000 A$000 A$000 A$000 A$000 A$000 A$000
>4-<5
years
>2-<3
years
>1-<2
years
>5
years
Weighted
Average
Effective
Interest
rate
%
-
-
-
5%
39,489
5.6%
533
8.9%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5%
-
-
- 39,489
5.6%
-
-
-
533
8.9%
118
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 20. FINANCIAL INSTRUMENTS (continued)
Interest rate risk (continued)
Year ended 30 June 2005
PARENT
FINANCIAL ASSETS
Fixed rate
Convertible notes
Weighted average effective
Interest rate
Floating rate
Cash assets
Intercompany receivables
Weighted average effective
Interest rate
FINANCIAL LIABILITIES
Floating rate
Unsecured bank loans
Weighted average effective
Interest rate
<1-year
>3-<4
Total
years
A$000 A$000 A$000 A$000 A$000 A$000 A$000
>4-<5
years
>2-<3
years
>1-<2
years
>5
years
Weighted
Average
Effective
Interest
rate
%
-
-
-
5%
39,000
1,066
40,066
5.8%
533
8.9%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5%
-
-
- 39,000
-
1,066
- 40,066
5.6%
11.2%
5.8%
-
-
-
533
8.9%
Interest on financial instruments classified as floating rate is repriced at intervals of less than one year.
Interest on financial instruments classified as fixed rate until maturity of instrument. The other financial
instruments of the Group and Parent Entity that are not included in the above tables are non-interest
bearing and are therefore not subject to interest rate risk.
119
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 21. DIRECTOR AND EXECUTIVE DISCLOSURES
(a) Details of Key Management Personnel
(i) Directors
Mr Rick Crabb
Mr John Borshoff
Mr Sean Llewelyn
Mr George Pirie
Mr Ian Noble
(ii) Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr Ron Chamberlain
Mr Wyatt Buck
Mr James Eggins
Mr Dustin Garrow
Mr David Marsh
Chairman (Non-executive)
Managing Director
Director (Non-executive)
Director (Non-executive)
Director (Non-executive)
Executive General Manager –Operations and Development
Company Secretary
Chief Financial Officer
General Manager – Langer Heinrich Operations
Executive General Manager – Sales and Contract
Administration – appointed 01/01/06
Director of Marketing – commenced as Key Management
Personnel on 01/01/06
Executive General Manager – New Business Development –
appointed 01/07/06
(b) Compensation of Key Management Personnel: Compensation by Category
Short-Term
Post Employment
Share-Based Payment
CONSOLIDATED/
PARENT ENTITY
2005
2006
A$
A$
2,156,964
68,743
883,012
22,781
2,561,940 2,573,800
4,787,647 3,479,593
The Company has applied the exemption under Corporations Amendments Regulation 2006 which
exempts listed companies from providing remuneration disclosures in relation to their Key
Management Personnel in the annual financial reports by Accounting Standard AASB 124 Related
Party Disclosures. These remuneration disclosures are provided in the Remuneration Report
contained in the Directors’ Report and are designated as audited.
120
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 21. DIRECTOR AND EXECUTIVE DISCLOSURES (continued)
(c) Options Holdings of Key Management Personnel (Consolidated and Parent Entity)
Balance at
beginning Granted as
Remuner
of period
-ation
01 Jul 05
Net
Options Change
Exercised Other #
Balance at
end of
period
30 Jun 06
Not
Total Exercisable Exercisable
6,250,000
7,250,000
- (3,000,000)
- (3,500,000)
-
-
3,250,000
3,750,000
3,250,000
3,750,000
3,250,000
3,750,000
-
-
3,000,000
5,250,000
800,000
-
-
-
-
-
-
-
-
- (2,500,000)
-
-
-
-
- 350,000
- 400,000
-
-
200,000
1,000,000
650,000
600,000
1,000,000
3,000,000
2,750,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
3,000,000
2,750,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
3,000,000
2,750,000
800,000
-
350,000
400,000
-
-
-
200,000
1,000,000
650,000
600,000
1,000,000
30 June 2006
Directors
Mr Rick Crabb
Mr John Borshoff
Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr Ron Chamberlain
Mr Wyatt Buck
Mr James Eggins
Mr Dustin Garrow
Mr David Marsh
Total
22,550,000
3,450,000 (9,000,000) 750,000 17,750,000
17,750,000 14,300,000
3,450,000
Balance at
beginning Granted as
Remuner
of period
-ation
01 Jul 04
Options
Exercised
Net
Change
Other #
Balance at
end of
period
30 Jun 05
Not
Total Exercisable Exercisable
4,000,000
5,000,000
3,000,000
3,250,000 (1,000,000)
3,750,000 (1,500,000)
3,250,000
-
-
- (6,250,000)
6,250,000
7,250,000
-
6,250,000
7,250,000
-
3,000,000 3,250,000
3,500,000 3,750,000
-
-
-
3,700,000
-
3,000,000
-
2,750,000 (1,200,000)
-
800,000
-
-
-
3,000,000
5,250,000
800,000
3,000,000
5,250,000
800,000
- 3,000,000
2,500,000 2,750,000
800,000
-
30 June 2005
Directors
Mr Rick Crabb
Mr John Borshoff
Dr Leon Pretorius
Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr Ron Chamberlain
Total
15,700,000 16,800,000 (3,700,000) (6,250,000) 22,550,000 22,550,000
9,000,000 13,550,000
Mr James Eggins commenced as a Key Management Personnel on 1 January 2006 and as such the
required disclosure at this date in the above table has been reflected in the net change other column.
Mr Dustin Garrow commenced as a Key Management Personnel on 1 January 2006 and as such the
required disclosure at this date in the above table has been reflected in the net change other column.
Dr Leon Pretorius resigned from the Board on 12 April 2005 and as such is no longer required to be
disclosed in the above table and this fact has been reflected in the net change other column.
121
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 21. DIRECTOR AND EXECUTIVE DISCLOSURES (continued)
(d) Shareholdings of Key Management Personnel (Consolidated and Parent Entity)
Shares held in Paladin Resources Ltd (number)
Balance
01 Jul 05 Remuneration
Granted as On Exercise
of Options
Net Change
Other
Balance
30 June 06
30 June 2006
Directors
Mr Rick Crabb
Mr John Borshoff
Mr Ian Noble
6,464,746
14,591,394
-
Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr James Eggins (1)
-
6,600,000
-
Total
27,656,140
-
-
-
-
-
-
-
3,000,000
3,500,000
-
(500,000)
-
16,000
8,964,746
18,091,394
16,000
-
2,500,000
-
125,000
1,116,140
25,000
125,000
10,216,140
25,000
9,000,000
782,140
37,438,280
No other Key Management Personnel held shares during the year ended 30 June 2006.
30 June 2005
Balance
01 Jul 04 Remuneration
Granted as On Exercise
of Options
Net Change
Other
Balance
30 June 05
Directors
Mr Rick Crabb
Mr John Borshoff
Dr Leon Pretorius (2)
5,464,746
13,091,394
8,550,000
Executives
Ms Gillian Swaby
Total
5,595,515
32,701,655
-
-
-
-
-
1,000,000
1,500,000
-
-
-
(8,550,000)
6,464,746
14,591,394
-
1,200,000
(195,515)
6,600,000
3,700,000
(8,745,515)
27,656,140
No other Key Management Personnel held shares during the year ended 30 June 2005.
(1) Mr James Eggins commenced as a Key Management Personnel on 1 January 2006 and as
such this fact has been reflected in the net change other column.
(2) Dr Leon Pretorius resigned from the Board on 12 April 2005 and as such is no longer required
to be disclosed in the above table and this fact has been reflected in the net change other
column.
122
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 21. DIRECTOR AND EXECUTIVE DISCLOSURES (continued)
(e) Other Transactions and Balances with Key Management Personnel
Fees paid in the normal course of business in 2006 for geological and consulting services totalling
A$NIL (2005: A$212,184) were paid/payable (balance outstanding at 30 June 2006 and included in
trade creditors A$NIL (2005: A$NIL)) to a company of which Mr John Borshoff is a director and
shareholder.
Fees paid in the normal course of business in 2006 for geological and consulting services totalling
A$N/A (2005: A$120,000) were paid/payable (balance outstanding at 30 June 2006 and included in
trade creditors A$N/A (2005: A$NIL)) to a company of which Dr Leon Pretorius is a director and
shareholder.
Fees paid in the normal course of business in 2006 for legal services totalling A$N/A (2005: A$24,689)
were paid/payable (balance outstanding at 30 June 2006 and included in trade creditors A$N/A (2005:
A$ NIL)) to a firm in which Mr Michael Blakiston is a partner. Mr Michael Blakiston was an Alternate
Director for Mr Rick Wayne Crabb up until 20 December 2004 and as such ceases to be a Key
Management Personnel from this date.
Fees paid in the normal course of business in 2006 for company secretarial services totalling
A$153,000, (2005: A$70,000) were paid/payable (balance outstanding at 30 June 2006 and included
in trade creditors A$34,000, (2005: A$19,800)) to a company of which Ms Gillian Swaby is a director
and shareholder.
Fees paid in the normal course of business from 1 January 2006 for marketing consulting services
totalling A$143,856, (2005: A$N/A) were paid/payable (balance outstanding at 30 June 2006 and
included in trade creditors A$NIL, (2005: A$N/A)) to a company of which Mr Dustin Garrow is a
director and shareholder.
Amounts recognised at the reporting date in relation to other transactions:
Liabilities
Current liabilities
Trade and other payables
Expenses
Other expenses
CONSOLIDATED/
PARENT ENTITY
2006
2005
A$000
A$000
47
20
297
427
123
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 22. AUDITORS’ REMUNERATION
The auditor of the Paladin Resources Ltd Group is Ernst & Young.
Amounts received or due and receivable by
Ernst & Young (Australia) for:
• an audit or review of the financial
report of the entity and any other entity
in the consolidated Group
• other services in relation to the entity and any
other entity in the consolidated Group.
CONSOLIDATED
2006
A$
2005
A$
PARENT ENTITY
2005
A$
2006
A$
93,000
66,500
87,000
63,000
-tax compliance
Sub-total
11,547
-
11,183
-
104,547
66,500
98,183
63,000
Amounts received or due and receivable by related
practices of Ernst & Young (Australia) for:
• an audit or review of the financial
report of subsidiaries
Amounts received or due and receivable by non Ernst
&Young audit firms for:
Review of the financial report
Taxation services
Other non-audit services
Amounts received or due and receivable by related
practices of non Ernst & Young audit firms for:
Other non-audit services
33,565
27,343
18,000
22,503
138,112
93,843
116,183
85,503
-
-
-
-
-
13,516
14,095
2,836
30,447
-
-
-
-
-
-
10,350
9,800
285
20,435
-
124
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 23. COMMITMENTS AND CONTINGENCIES
There were no outstanding commitments or contingencies, which are not disclosed in the financial
report of the Consolidated Entity and the Company as at 30 June 2006 other than:
(a) Tenements
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2005
2006
A$000
A$000
Commitments for tenements
contracted for at the reporting date but not
recognised as liabilities, payable:
Within one year
Later than one year but not later than 5 years
More than 5 years
483
-
-
1,776
1,300
-
-
-
-
-
-
-
____________________________________________________________________________________________________________________________________________________________________
Total tenements commitment
483
3,076
-
-
____________________________________________________________________________________________________________________________________________________________________
These include commitments relating to tenement lease rentals and, the minimum expenditure
requirements of the Namibia, Malawi, Western Australian, and South Australian Mines Departments
attaching to the tenements and are subject to re-negotiation upon expiry of the exploration leases or
when application for a mining licence is made.
These are necessary in order to maintain the tenements in which the Consolidated Entity and other
parties are involved. All parties are committed to meet the conditions under which the tenements were
granted in accordance with the relevant mining legislation in Namibia, Malawi and Australia.
(b) Mine Construction Commitments
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2005
2006
A$000
A$000
Commitments for mine construction
contracted for at the reporting date but not
recognised as liabilities, payable:
Within one year
Later than one year but not later than 5 years
More than 5 years
31,248
-
-
-
-
-
-
-
-
-
-
-
____________________________________________________________________________________________________________________________________________________________________
Total mine construction
31,248
-
-
-
____________________________________________________________________________________________________________________________________________________________________
These commitments relate to mine construction in Namibia.
(c) Operating Lease Commitments
The Group has entered into commercial property leases relating to rental of offices.
These non-cancellable leases have remaining terms of between 1 and 4 years. All leases include a
clause to enable upward revision of rental charge on an annual basis according to prevailing market
conditions.
125
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 23. COMMITMENTS AND CONTINGENCIES (continued)
(c) Operating Lease Commitments (continued)
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2005
2006
A$000
A$000
Within one year
Later than one year but not later than 5 years
More than 5 years
222
503
-
143
542
-
183
503
-
100
511
-
____________________________________________________________________________________________________________________________________________________________________
Total operating lease commitment
725
685
686
611
____________________________________________________________________________________________________________________________________________________________________
(d) Acquisition Costs
The Consolidated Entity acquired a call option on 19 June 1998 in relation to the purchase of the
Oobagooma Uranium Project and, in turn, granted a put option to the original holder of the Project.
Both the call and put options have an exercise price of A$750,000 and are subject to the Department
of Minerals & Energy granting tenements comprising 2 exploration licence applications. The
A$750,000 is payable by the Consolidated Entity within 10 business days of the later of the grant of
the tenements or the exercise of either the call or put option. The options will expire 3 months after
the date the tenements are granted.
In relation to the Manyingee Uranium Project, the re-negotiated acquisition terms provide for a
payment of A$750,000 by the Consolidated Entity to the vendors when all project development
approvals are further obtained.
(e) Bank Guarantees
As at 30 June 2006 the Group has outstanding A$2.75 million (2005:A$Nil) in current bank guarantees
issued to contractors in relation to the mine construction activities for the Langer Heinrich Uranium
Project, and a A$60,000 (2005:A$60,000) current bank guarantee for the corporate office lease.
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
126
NOTE 24. EMPLOYEE BENEFITS
Provision for Annual Leave
and Long Service Leave
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2005
2006
A$000
A$000
Aggregate employment benefit liability
382
65
320
65
____________________________________________________________________________________________________________________________________________________________________
Employee numbers
Average number of employees
during the financial year
Superannuation
Number
Number
31
14
The Company contributes to employees’ superannuation plans in accordance with the requirements of
Occupational Superannuation Legislation. Contributions by the Company represent a defined
percentage of each employee's salary. Employee contributions are voluntary.
Employee Share Incentive Option Plan
Details of the Employee Share Incentive Option Plan for the Company are disclosed in Note 26.
NOTE 25. RELATED PARTIES
Directors and Specified Executives
Disclosures relating to Directors and Specified Executives are set out in the Directors’ Report under
the section entitled Remuneration Report and in Note 21.
Wholly Owned Group
The wholly owned Group consists of the Company and its wholly owned controlled entities set out in
Note 10(a).
Transactions between the Company and other entities in the wholly owned Group during the years
ended 30 June 2006 and 2005 consisted of:
(a)
(b)
(c)
(d)
loans advanced by the Company (Note 9(d));
loans advanced to the Company (Note 14);
the payment of interest on the loans advanced by the Company (Note 5(a)); and
the receipt of dividends by the Company (Note 5(b)).
Controlled Entities
The ultimate Parent Entity in the wholly owned Group is Paladin Resources Ltd.
127
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 26. SHARE BASED PAYMENT PLAN
Employee Share Incentive Option Plan
Options are granted under the Company Employee Share Incentive Option Plan which was approved
by the Directors on 23 March 2004. Staff eligible to participate in the plan is those who have been
continuously employed by the Company for a period of at least one year.
Options are granted under the plan for no consideration. Options are granted for a three year period,
and 100% of each new tranche becomes exercisable after one year of the date of grant. Entitlements
to the options are vested as soon as they become exercisable and performance conditions have been
met. There are no cash settlement alternatives. Options granted under the plan carry no dividend or
voting rights.
The expense recognised in the income statement in relation to share-based payments is disclosed in
Note 5(c).
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and
movements in share options issued during the year:
2006
No.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
33,600,000
4,665,000
(50,000)
(14,000,000)
-
24,215,000
2006
WAEP
A$
0.69
3.64
1.50
0.24
-
1.52
1
2005
No.
19,700,000
19,600,000
-
(5,700,000)
-
33,600,000
2005
WAEP
A$
0.22
1.02
-
0.16
-
0.69
2
Exercisable at the end of the year
20,225,000
1.03
14,000,000
0.24
1. The weighted average share price at the date of exercise is A$3.81
2. The weighted average share price at the date of exercise is A$0.60
The outstanding balance as at 30 June 2006 represented by:
Date options granted Exercisable
Expiry date
of options
option
____________________________________________________________________________________________________________________________________________________________________
Exercise price Number under
30 November 2004
30 November 2004
20 December 2004
15 July 2005
13 January 2006
13 January 2006
19 January 2006
16 February 2006
16 February 2006
27 April 2006
27 April 2006
30 June 2006
30 June 2006
30 June 2006
30 June 2006
13 January 07
13 January 08
13 January 08
13 January 07
13 January 08
31 October 07
31 October 08
30 November 2007
30 November 2007
20 December 2007
15 July 2008
13 January 2009
13 January 2009
13 January 2009
13 January 2009
13 January 2009
28 April 2009
28 April 2009
A$1.00
A$1.25
A$1.00
A$1.50
A$2.80
A$2.80
A$2.80
A$2.80
A$2.80
A$5.50
A$5.50
8,050,000
1,300,000
10,250,000
200,000
200,000
850,000
600,000
700,000
500,000
782,500
782,500
____________________________________________________________________________________________________________________________________________________________________
Total
24,215,000
____________________________________________________________________________________________________________________________________________________________________
Please refer to Shares Under Option table in the Directors’ Report for movements since the year end.
128
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 26. SHARE BASED PAYMENT PLAN (continued)
The weighted average remaining contractual life for the share options outstanding as at 30 June 2006
is between 1 and 3 years (2005: 1 and 3 years).
The range of exercise prices for options outstanding at the end of the year was A$1.00 – A$5.50
(2005: A$0.22 – A$1.25).
The weighted average fair value of options granted during the year was A$1.87 (2005: A$0.25).
The fair value of the equity-settled share options granted under the option plan is estimated as at the
date of grant using a binominal model taking into account the terms and conditions upon which the
options were granted.
The following table lists the inputs to the model used for the years ended 30 June 2005 and 30 June
2006:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Option exercise price ($)
Weighted average share price at grant date ($)
2006
2005
Nil%
83%-126%
5.13%-5.67%
2.5 years
$1.50-$5.50
$1.36-$4.88
Nil%
100%-112%
4.90%-4.97%
2.5 years
A$1.00-A$1.25
A$0.52-A$0.53
The expected life of the options is based on historical data and is not necessarily indicative of exercise
patterns that may occur. The expected volatility reflects the assumption that the historical volatility is
indicative of future trends, which may also not necessarily be the actual outcome. No other features of
options granted were incorporated into the measurement of fair value.
The fair value of the cash-settled options is measured at the grant date using the Cox, Ross and
Rubinstein Binomial Tree option pricing model taking into account the terms and conditions upon
which the instruments were granted. The services received are recognised over the expected vesting
period.
129
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 27. INTERESTS IN JOINT VENTURES
(a) Kayelekera Uranium Project – Malawi
On 6 July 2005, the Company announced the purchase of the remaining 10% joint venture interest in
the Kayelekera Uranium Project in Malawi. The consideration of A$5,611,500 was satisfied by the
issue by the Company of 4,350,000 ordinary fully paid shares at an issue price of A$1.29 per share.
The purchase was conditional upon the joint venture partner entering into a private escrow agreement
in dealing with the 4,350,000 shares in the Company.
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2005
2006
A$000
A$000
Non current assets
Other - mineral properties
-
171
-
-
____________________________________________________________________________________________________________________________________________________________________
Share of assets employed in joint venture
-
171
-
-
____________________________________________________________________________________________________________________________________________________________________
For exploration tenement commitments relating to the Kayelekera Uranium Project refer to Note 23(a).
(b)
The Consolidated Entity also has a number of interests in joint ventures to explore for uranium
and other minerals. The Consolidated Entity’s share of expenditure in respect of these exploration
activities is expensed in accordance with the accounting policy stated in Note 2(q) and no revenue is
generated. The Consolidated Entity’s share of the assets and liabilities in respect of these joint
ventures is not material.
130
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 28. EVENTS AFTER THE BALANCE SHEET DATE
Since the end of the financial period, the Directors are not aware of any other matter or circumstance
not otherwise dealt with in this report or the Financial Statements, that has significantly or may
significantly affect the operations of the Consolidated Entity, the results of those operations or the
state of affairs of the Consolidated Entity in subsequent years with the exception of the following, the
financial effects of which have not been provided for in the 30 June 2006 Financial Report:
Takeover bid for Valhalla Uranium Ltd
On 10 July 2006, the Company announced an off-market takeover bid for all the fully paid ordinary
shares in Valhalla Uranium Ltd (Valhalla). Under the terms of the offer, each Valhalla shareholder will
receive one share of Paladin in exchange for every 3.16 shares of Valhalla held. The offer is subject
to various conditions, some of which are currently still outstanding. The directors of Valhalla have
unanimously recommended that Valhalla shareholders accept the Company’s offer in the absence of a
superior offer. On 24 July 2006 the Company lodged the Bidder’s Statement for the offer with the
Australian Securities and Investment Commission. The proposed acquisition represents a significant
step forward in the Company’s growth strategy.
Allotment of Shares and Issue of Employee Options
On 5 July 2006, the Company announced the granting of one million unlisted incentive options,
exercisable at $5.50; with 500,000 vesting after 18 months and 500,000 vesting after 30 months with a
3 year expiry. On 20 July 2006, the Company announced the allotment of 650,000 fully paid ordinary
shares after exercise of employee options and the granting of 400,000 unlisted incentive options,
exercisable at $5.50; with 200,000 vesting after 18 months and 200,000 vesting after 30 months with a
3 year expiry. On 18 August 2006, the Company announced the allotment of 400,000 fully paid
ordinary shares after exercise of employee options.
131
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 29. NON CASH FINANCING AND INVESTMENT ACTIVITIES
CONSOLIDATED
2005
A$000
2006
A$000
PARENT ENTITY
2006
A$000
2005
A$000
Non Cash Financing and Investment Activities
Issue of shares to acquire remaining 10% joint
venture interest in the Kayelekera Uranium Project
5,612
-
5,612
Value of Deep Yellow shares and options acquired
from the sale of exploration properties
441
810
441
Options granted to Société Générale Australia
Branch on establishment of loan facility
-
321
Value of Deep Yellow shares and options acquired
from grant of licence over the Frome Basin database
1,453
-
-
-
-
-
321
-
NOTE 30. EARNINGS PER SHARE
(i)
Basic earnings per share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the
Company by the weighted average number of ordinary shares outstanding during the period.
(ii)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account the after income tax effect of interest and other financing costs associated with
dilutive potential ordinary shares and the weighted average number of shares assumed to have been
issued for no consideration in relation to dilutive potential ordinary shares. Diluted earnings per share
is the same as basic earnings per share in 2006 and 2005 as the Consolidated Entity is in a loss
position.
The following reflects the income and share data used in the basic and diluted earnings per share
computations
Net loss attributable to ordinary equity holders of the Parent from
continuing operations
Profit attributable to ordinary equity holders of the Parent from
discontinued operations
CONSOLIDATED
2005
A$000
2006
A$000
(7,486)
(9,538)
-
128
Net loss attributable to ordinary equity holders of the Parent
(7,486)
(9,410)
Weighted average number of ordinary shares
(excluding reserved shares) for basic earnings per share
2006
#
2005
#
433,062,353 363,040,234
132
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 31. TRANSITION TO AIFRS AND CHANGE IN ACCOUNTING POLICY
For all periods up to and including the year ended 30 June 2005, the Group prepared its financial
statements in accordance with Australian generally accepted accounting practices (AGAAP). These
annual financial statements for the year ended 30 June 2006 are the first the Group is required to
prepare in accordance with Australian equivalents to International Financial Reporting Standards
(AIFRS).
Accordingly, the Group has prepared financial statements that comply with AIFRS applicable for
periods beginning on or after 1 January 2005 and the significant accounting policies meeting those
requirements are described in Note 2. In preparing these financial statements, the Group has started
from an opening balance sheet as at 1 July 2004, the Group’s date of transition to AIFRS, and made
those changes in accounting policies and other restatements required by AASB 1 First-time adoption
of AIFRS.
This note explains the principal adjustments made by the Group in restating its AGAAP balance sheet
as at 1July 2004 and its previously published AGAAP financial statements for the year ended 30 June
2005.
Exemptions Applied
AASB 1 allows first-time adopters certain exemptions from the general requirement to apply AIFRS
retrospectively.
The Group has taken the following exemption:
• AASB 2 Share-based Payment has not been applied to any equity instruments that
were granted on or before 7 November 2002.
Change in accounting policy
In addition the financial report has been prepared on the basis of a retrospective application of a
voluntary change in exploration and evaluation expenditure accounting policy.
Explanation of material adjustments to the cash flow statement
There are no material differences between the cash flow statement presented under AIFRS and the
cash flow statement presented under previous AGAAP.
133
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 31. TRANSITION TO AIFRS AND CHANGE IN ACCOUNTING POLICY (continued)
(1) Reconciliation of Equity reported under previous Australian Generally Accepted Accounting
Principles (AGAAP) to Equity under Australian equivalents to IFRS (AIFRS)
(a)
At the date of transition to AIFRS: 1 July 2004
CONSOLIDATED
Notes
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Assets held for sale
TOTAL CURRENT ASSETS
Non current assets
Trade and other receivables
Held to maturity investments
Property, plant and equipment
Exploration and evaluation
expenditure
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Provisions
TOTAL CURRENT LIABILITES
TOTAL LIABILITES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Previous Effect of
transition
AGAAP
A$000
A$000
Accounting
policy
A$000
AIFRS
A$000
4,639
49
1,114
-
-
(1,114)
5,802
(1,114)
-
1,114
i
i
5,802
64
800
249
vi
3,815
4,928
10,730
554
733
33
1,320
1,320
9,410
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,639
49
-
4,688
1,114
5,802
64
800
249
(2,298)
1,517
(2,298)
(2,298)
2,630
8,432
-
-
-
-
-
554
733
33
1,320
1,320
(2,298)
7,112
ii
ii, vi
24,265
174
(15,029)
9,410
-
545
(545)
-
-
-
(2,298)
(2,298)
24,265
719
(17,872)
7,112
134
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 31. TRANSITION TO AIFRS AND CHANGE IN ACCOUNTING POLICY (continued)
(1) Reconciliation of Equity reported under previous Australian Generally Accepted Accounting
Principles (AGAAP) to Equity under Australian equivalents to IFRS (AIFRS) (continued)
(a)
At the date of transition to AIFRS: 1 July 2004
Previous
AGAAP
A$000
Effect of
transition
A$000
Accounting
policy
A$000
AIFRS
A$000
TOTAL CURRENT ASSETS
4,542
PARENT ENTITY
Notes
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Assets held for sale
Non current assets
Trade and other receivables
Held to maturity investments
Available for sale financial assets
Property, plant and equipment
Exploration and evaluation
expenditure
TOTAL NON CURRENT ASSETS
vii
vii
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Provisions
TOTAL CURRENT LIABILITES
TOTAL LIABILITES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
4,518
24
-
4,542
-
4,106
1,352
-
26
-
5,484
10,026
528
-
33
561
561
9,465
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,231)
(67)
-
-
4,518
24
-
4,542
-
4,542
1,875
1,285
-
26
-
-
(2,298)
3,186
(2,298)
7,728
-
-
-
-
-
528
-
33
561
561
(2,298)
7,167
ii
ii, vii
24,265
174
(14,974)
-
545
(545)
-
-
(2,298)
24,265
719
(17,817)
TOTAL EQUITY
9,465
-
(2,298)
7,167
135
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 31. TRANSITION TO AIFRS AND CHANGE IN ACCOUNTING POLICY (continued)
(1) Reconciliation of Equity reported under previous Australian Generally Accepted Accounting
Principles (AGAAP) to Equity under Australian equivalents to IFRS (AIFRS) (continued)
(b)
At the end of the reporting period under previous AGAAP: 30 June 2005
CONSOLIDATED
Notes
Previous
AGAAP
A$000
Effect of
transition
A$000
Accounting
policy
A$000
AIFRS
A$000
39,489
568
-
40,057
-
-
710
170
1,098
-
-
-
-
-
-
1,720
-
-
iii
-
-
-
-
-
-
-
-
-
39,489
568
-
40,057
-
-
2,430
170
1,098
vi
9,001
-
(7,315)
1,686
10,979
51,036
1,720
1,720
(7,315)
5,384
(7,315)
45,441
727
533
65
1,325
1,325
-
-
-
-
-
-
-
-
-
-
727
533
65
1,325
1,325
49,711
1,720
(7,315)
44,116
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
TOTAL CURRENT ASSETS
Non current assets
Trade and other receivables
Held to maturity investments
Available for sale financial assets
Deferred borrowing costs
Property, plant and equipment
Exploration and evaluation
expenditure
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Provisions
TOTAL CURRENT LIABILITES
TOTAL LIABILITES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
iv
ii,iii,iv
ii, vi
65,950
174
(16,413)
42
5,232
(3,554)
-
-
(7,315)
65,992
5,406
(27,282)
TOTAL EQUITY
49,711
1,720
(7,315)
44,116
136
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 31. TRANSITION TO AIFRS AND CHANGE IN ACCOUNTING POLICY (continued)
(1) Reconciliation of Equity reported under previous Australian Generally Accepted Accounting
Principles (AGAAP) to Equity under Australian equivalents to IFRS (AIFRS) (continued)
(b)
At the end of the reporting period under previous AGAAP: 30 June 2005
PARENT ENTITY
Notes
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
TOTAL CURRENT ASSETS
vii
vii
Non current assets
Trade and other receivables
Held to maturity investments
Available for sale financial assets
Deferred borrowing costs
Property, plant and equipment
Exploration and evaluation
expenditure
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Provisions
TOTAL CURRENT LIABILITES
Non current liabilities
Trade and other payables
TOTAL NON CURRENT LIABILITIES
Previous
AGAAP
A$000
Effect of
transition
A$000
Accounting
policy
A$000
AIFRS
A$000
39,000
472
-
39,472
10,183
488
-
-
390
-
11,061
50,533
591
533
65
1,189
334
334
1,523
-
-
-
-
1,720
-
-
-
-
-
1,720
1,720
-
-
-
-
-
-
-
-
-
-
-
39,000
472
-
39,472
(7,253)
(62)
-
-
-
4,650
426
-
-
390
-
(7,315)
5,466
(7,315)
44,938
-
-
-
-
-
-
-
591
533
65
1,189
334
334
1,523
TOTAL LIABILITES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
49,010
1,720
(7,315)
43,415
iv
ii,iv
ii, vii
65,950
174
(17,114)
42
3,512
(1,834)
-
-
(7,315)
65,992
3,686
(26,263)
49,010
1,720
(7,315)
43,415
137
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 31. TRANSITION TO AIFRS AND CHANGE IN ACCOUNTING POLICY (continued)
(2) Reconciliation of Loss under previous AGAAP to Loss under AIFRS
(a)
Reconciliation of Loss for the year ended 30 June 2005
CONSOLIDATED
Notes
Previous
AGAAP
Effect of
transition
A$000
A$000
Accounting
policy
A$000
AIFRS
A$000
REVENUE FROM CONTINUING
OPERATIONS
Other income
Cost of tenements sold
Share based payments expense
Interest expense
Exploration and evaluation
expenditure
Write down of convertible note
Depreciation and amortisation
Employee benefits expense
Other expenses
)
v
v
v
ii
vi
1,582
(810)
-
(24)
-
(354)
(72)
(894)
(90)
(482)
(1,178)
786
24
(3,009)
-
-
-
-
-
-
-
24
-
-
-
(5,041)
-
-
-
-
772
810
-
(3,009)
(354)
(5,113)
(894)
(90)
(482)
(1,178)
LOSS BEFORE INCOME TAX
(1,512)
(3,009)
(5,017)
(9,538)
Income tax expense
-
-
-
-
Loss from continuing operations
(1,512)
(3,009)
(5,017)
(9,538)
Profit from discontinued operations
i
128
-
-
128
LOSS ATTRIBUTABLE TO
MEMBERS OF PALADIN
RESOURCES LTD
(1,384)
(3,009)
(5,017)
(9,410)
138
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 31. TRANSITION TO AIFRS AND CHANGE IN ACCOUNTING POLICY (continued)
(2) Reconciliation of Loss under previous AGAAP to Loss under AIFRS
(a)
Reconciliation of Loss for the year ended 30 June 2005
PARENT ENTITY
Notes
Previous
AGAAP
Effect of
transition
A$000
A$000
Accounting
policy
AIFRS
A$000 A$000
REVENUE FROM CONTINUING
OPERATIONS
1,165
-
Other income
Cost of tenements sold
Share based payments expense
Interest expense
Exploration and evaluation
expenditure
Write down of convertible note
Write down of intercompany loan
Depreciation and amortisation
Employee benefits expense
Other expenses
ii
vii
-
-
-
(354)
-
(894)
(327)
(32)
(482)
(1,216)
-
-
(3,009)
-
-
-
1,720
-
-
-
-
-
-
-
-
-
-
(5,017)
-
-
-
1,165
-
-
(3,009)
(354)
-
(894)
(3,624)
(32)
(482)
(1,216)
LOSS BEFORE INCOME TAX
(2,140)
(1,289)
(5,017)
(8,446)
Income tax expense
-
-
-
-
Loss from continuing operations
(2,140)
(1,289)
(5,017)
(8,446)
Profit from discontinued operations
-
-
-
-
LOSS ATTRIBUTABLE TO
MEMBERS OF PALADIN
RESOURCES LTD
(2,140)
(1,289)
(5,017)
(8,446)
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 31. TRANSITION TO AIFRS AND CHANGE IN ACCOUNTING POLICY (continued)
139
(3)
Notes to the reconciliations
(i)
Non current assets held for sale
Under AASB 5 Non current Assets Held for Sale and Discontinuing Operations, a non current asset
will be classified as held for sale if its carrying amount is to be recovered principally through a sale
transaction rather than through continued use. The asset will be measured at the lower of carrying
amount and fair value, less costs to sell.
Under AASB 5 a non current asset once classified as held for sale is no longer required to be
depreciated up to the date of sale.
The Group met the definition under AASB 5 of a non current asset held for sale in relation to
commercial property located in Belmont, Western Australia at 1 July 2004, with settlement on the
property occurring on 24 June 2005.
At 1 July 2004
For the Group A$1,114,242 (Company: not applicable) of current property, plant and equipment has
been reclassified to assets held for sale.
At 30 June 2005 and for the Year Ended 30 June 2005
For the Group there has been a decrease in accumulated losses of A$18,404 (increase in profit from
discontinued operation – depreciation expense) (Company: not applicable) and a corresponding
decrease in profit on sale (decrease in profit from discontinued operation).
(ii)
Share-based payment transactions
Under AASB 2 Share-based Payment, from 1 July 2004 the Group is required to recognise an
expense for those options that were issued to employees under the Company Employee Share
Incentive Option Plan after 7 November 2002 but that had not vested by 1 January 2005. The
valuations for the options have been determined using the Cox, Ross and Rubinstein Binomial Tree
Model. The expense for the options is recognised over the vesting period of the options.
At 1 July 2004
For the Group and Company there has been an increase in accumulated losses of A$545,000 and a
corresponding increase in reserves.
At 30 June 2005 and for the Year Ended 30 June 2005
For the Group and Company there has been a increase in accumulated losses of A$3,552,851
(including recognition of a share based payments expense of $3,008,851) and a increase in reserves
of A$3,552,851.
(iii)
Financial instruments
The Group has applied AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139
Financial Instruments: Recognition and Measurement from 1 July 2004.
Under AASB 132, the existing classification of financial instruments issued by the Group does not
change.
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 31. TRANSITION TO AIFRS AND CHANGE IN ACCOUNTING POLICY (continued)
140
(3)
Notes to the reconciliations (continued)
(iii)
Financial instruments (continued)
Under AASB 139, financial assets held by the Group will be classified as either at fair value through
the profit and loss, held-to-maturity, available for sale or loans and receivables and, depending upon
classification, measured at fair value or amortised cost.
Non-traded equity securities will be classified as available for sale and measured at fair value, with
changes in fair value recognised directly in equity until the underlying asset is derecognised.
At 1 July 2004
There is no effect on the Group and Company.
At 30 June 2005 and for the Year Ended 30 June 2005
For the Group there has been an increase in available for sale financial assets of A$1,720,000,
(Company: not applicable) and a corresponding increase in reserves.
(iv) Exercise of unlisted employee options
Under AASB 2 Share-based Payment the Group is required to recognise an expense for options that
are issued to employees under the Company Employee Share Incentive Option Plan, with a
corresponding increase to reserves.
Where options are exercised the balance of the reserve relating to the options is required to be
transferred to contributed equity.
At 1 July 2004
There is no effect on the Group and Company.
At 30 June 2005 and for the Year Ended 30 June 2005
In March 2005 1,000,000 shares were issued in relation to the exercise of unlisted employee options
with an exercise price of A$0.22. In relation to this for the Group and Company there has been an
increase in contributed equity of A$41,900 and a corresponding decrease in reserves.
(v)
Revenue disclosures in relation to sale of tenements
Under AIFRS the net gain on the sale of tenements is required to be recognised as other income,
which is in contrast to the Australian GAAP treatment under which the gross proceeds from the sale
are recognised as revenue and the carrying amount of the tenements sold is recognised as an
expense.
No net impact exists on the Income Statement in relation to these adjustments.
At 1 July 2004
There is no effect on the Group and Company.
141
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 31. TRANSITION TO AIFRS AND CHANGE IN ACCOUNTING POLICY (continued)
(3)
Notes to the reconciliations (continued)
(v)
Revenue disclosures in relation to sale of tenements (continued)
At 30 June 2005 and for the Year Ended 30 June 2005
For the Group there has been a decrease in revenue from continuing operations of A$810,000,
(Company: not applicable) a decrease in cost of assets sold of A$24,425 and an increase in other
income of A$785,575.
(vi) Voluntary change of exploration and evaluation expenditure accounting policy
The Group has changed its accounting policy in relation to the treatment of exploration and evaluation
expenditure.
The new exploration and evaluation expenditure accounting policy is to charge exploration and
evaluation expenditure against earnings as incurred; except for acquisition costs and for expenditure
incurred after a decision to proceed to development is made, in which case the expenditure is
capitalised as an asset – refer Note 2(q) for the full detail of the new accounting policy.
The previous exploration and evaluation expenditure accounting policy was to carry forward
exploration and evaluation expenditure as an asset; subject to ongoing review of the potential for
development and that rights to tenure were current.
This voluntary change in accounting policy has been made as the Group is undergoing a transition
from explorer to producer. The Langer Heinrich Uranium Project in Namibia is currently under
construction and commissioning of the mine is planned to commence in September 2006.
The previous accounting policy of the Group is common for exploration companies as a result of this
expenditure representing the main asset. The new accounting policy of the Group is common for large
mining companies as this expenditure does not represent the main activities and is viewed as an
expense of discovery.
This does not represent a change in accounting policy as a result of AIFRS, as AASB 6 Exploration for
and Evaluation of Mineral Resources allows both the previous and the new accounting policies of the
Group.
Under AIFRS, the comparatives have been adjusted to reflect the change in exploration and
evaluation expenditure accounting policy. The effect of the change in accounting policy is:
142
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
_________________________________________________________________________________
NOTE 31. TRANSITION TO AIFRS AND CHANGE IN ACCOUNTING POLICY (continued)
(3)
Notes to the reconciliations (continued)
(vi) Voluntary change of exploration and evaluation expenditure accounting policy (continued)
At 1 July 2004
For the Group there has been an increase in accumulated losses of A$2,298,834 (Company: not
applicable) and a decrease in exploration and evaluation expenditure asset of A$2,298,834.
At 30 June 2005 and for the Year Ended 30 June 2005
For the Group there has been an increase accumulated losses of A$7,315,408 (including increases in
exploration and evaluation expense from continuing operations of A$5,042,202, and other income of
A$24,425 relating to the sale of tenements now written off) (Company: not applicable) and a decrease
in exploration and evaluation expenditure asset of A$7,315,408.
Basic and diluted earnings per share have also been restated.
(vii)
Impact on Parent Entity of change in accounting policy and AIFRS
The voluntary change of exploration and evaluation expenditure accounting policy and AIFRS impacts
the Parent Entity’s assessment of the net tangible asset backing of both intercompany receivables and
intercompany investments.
At 1 July 2004
As a consequence of the voluntary change in accounting policy the Company has had to reduce
intercompany receivables by A$2,231,476 and intercompany investments by A$67,358 (Group: not
applicable) by way of write down of these assets which impacted accumulated losses by A$2,298,834,
as the net tangible assets of subsidiaries has decreased.
At 30 June 2005 and for the Year Ended 30 June 2005
As a consequence of the voluntary change in accounting policy, the Company has had to reduce
intercompany receivables by A$7,253,191 and intercompany investments by A$62,217 (Group: not
applicable) by way of write down of these assets which impacted accumulated losses by A$7,315,408
(including increase in write down of intercompany loan from continuing operations of A$5,016,574) as
the net tangible assets of subsidiaries has decreased.
As a consequence of AIFRS, the Company has increased intercompany receivables by A$1,720,000
(Group: not applicable) by way of reducing the write down of intercompany receivables by
A$1,720,000 (and as such accumulated losses decreased by the same amount).
DIRECTORS’ DECLARATION
_________________________________________________________________________________
143
In accordance with a resolution of the Directors of Paladin Resources Ltd, I state that:
1.
In the opinion of the Directors:
(a)
the financial report and the additional disclosures included in the Directors’ Report
designated as audited, of the Company and of the Consolidated Entity are in
accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Company’s and Consolidated Entity’s
financial position as at 30 June 2006 and of their performance for the year
ended on that date; and
(ii)
complying with Accounting Standards and Corporation Regulations 2001;and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts
as and when they become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the
Directors in accordance with sections 295A of the Corporations Act 2001 for financial period
ending 30 June 2006.
On behalf of the Board
Mr John Borshoff
Managing Director
Perth, Western Australia
29 August 2006
INDEPENDENT AUDIT REPORT - AUSTRALIA
_________________________________________________________________________________
144
INDEPENDENT AUDIT REPORT - AUSTRALIA (continued)
_________________________________________________________________________________
145
INDEPENDENT AUDIT REPORT - CANADA
_________________________________________________________________________________
146
ADDITIONAL INFORMATION
_________________________________________________________________________________
Pursuant to the Listing Requirements of Australian Stock Exchange Limited as at 28 August 2006:
147
(a)
Distribution and number of holders
SHAREHOLDERS
1
1,001
5,001
10,001
100,001
-
-
-
-
-
1,000
5,000
10,000
100,000
maximum
3,230
3,728
944
923
148
8,973
104 shareholders hold less than a marketable parcel of shares.
(b)
The twenty largest shareholders hold 80.74% of the total shares issued.
Holder
No. of Shares %
CDS & CO
Westpac Custodian Nominees Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
ANZ Nominees Limited Cash Income A/C
Citicorp Nominees Pty Limited
Aylworth Holdings Pty Ltd
Mr Robert Anthony Healy & Mrs Helen Maree Healy
Gillian Swaby
HSBC Custody Nominees (Australia) Limited-GSCO ECSA
Mr Rick Wayne Crabb & Mrs Carol Jean Crabb
CEDE & CO
Queensland Investment Corporation
Mr James U Blanchard Ii C/- Jefferson Financial Inc
HSBC Custody Nominees (Australia) Limited
John Borshoff
Mr Zaccaria Rossi & Mrs Thelma Rossi
Neoprotec Pty Limited
Societe Generale
UBS Nominees Pty Ltd
136,971,068
48,566,500
28,938,990
27,034,710
26,977,900
25,044,768
15,976,237
13,012,159
9,411,655
7,793,857
6,198,050
5,117,294
3,356,683
2,777,778
2,572,462
1,605,157
1,601,000
1,600,000
1,530,966
1,481,640
30.08
10.67
6.36
5.94
5.93
5.50
3.51
2.86
2.07
1.71
1.36
1.12
0.74
0.61
0.57
0.35
0.35
0.35
0.34
0.32
__________________
367,568,874
__________________
80.74
(c)
Voting rights
For all shares, voting rights are one vote per member on a show of hands and one vote per
share in a poll.
148
ADDITIONAL INFORMATION (continued)
_________________________________________________________________________________
Pursuant to the Listing Requirements of Australian Stock Exchange Limited as at 28 August 2006:
(d)
Tenements held –
NAMIBIA – AFRICA
URANIUM PROJECTS
Project
Tenement
Interest %
JV Partner/s
Operator
Langer Heinrich
Gawib
1 MLI
1 EPL (A)
100%
100%
-
-
-
-
MALAWI – AFRICA
Project
Tenement
Interest %
JV Partner/s
Operator
Kayelekera
Chilumba
Chilongo
Mpata
1 EPL
1 EPL
1 EPL
1 EPL
100%
100%
100%
100%
WESTERN AUSTRALIA
-
-
-
-
-
-
-
-
Project
Tenement
Interest %
JV Partner/s
Operator
Manyingee
Spinifex Well
Oobagooma
Ponton
3 ML’s
1 EL
4 EL’s (A)
1 EL (A)
100%
100%
100%
100%
SOUTH AUSTRALIA
-
-
-
-
-
-
-
-
Project
Tenement
Interest %
JV Partner/s
Operator
Petermorra
Mt Yerila
1 EL
1 EL
20%
15%
Quasar Resources Pty Ltd Quasar Resources Pty Ltd
Quasar Resources Pty Ltd Quasar Resources Pty Ltd
Red Metal Limited
J E Risinger
Red Metal Limited
SOUTH AUSTRALIA
NON-URANIUM PROJECTS
Project
Tenement
Interest %
JV Partner/s
Operator
Mt Lofty Ranges
Reaphook JV
1 EL
1 EL
90%
Absolut Resources Corporation Paladin Resources Ltd
7.5%
Perilya Limited
Signature Resources NL
Perilya Limited
Tenement Types
EL
EPL
ML
MLI
(A)
Exploration Licence (Australia)
Exclusive Prospecting Licence (Africa)
Mining Lease (Australia)
Mining Licence (Africa)
Pending Application
Form 52-109F1 – Certification of Annual Filings
I, John Borshoff, Managing Director of Paladin Resources Ltd, certify that:
1.
2.
3.
4.
I have reviewed the annual filings (as this term is defined in Multilateral
Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim
Filings) of Paladin Resources Ltd (the issuer) for the year ending 30 June 2006;
Based on my knowledge, the annual filings do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated or that is
necessary to make a statement not misleading in light of the circumstances under
which it was made, with respect to the period covered by the annual filings;
Based on my knowledge, the annual financial statements together with the other
financial information included in the annual filings fairly present in all material
respects the financial condition, results of operations and cash flows of the issuer,
as of the date and for the periods presented in the annual filings;
The issuer’s other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures and internal control over financial
reporting for the issuer, and we have:
(a) designed such disclosure controls and procedures, or caused them to be
designed under our supervision, to provide reasonable assurance that
its consolidated
the
material
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the annual filings are being prepared;
information relating
issuer, including
to
(b) designed such internal control over financial reporting, or caused it to be
designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with the issuer’s GAAP; and
(c) evaluated the effectiveness of the issuer’s disclosure controls and procedures
as of the end of the period covered by the annual filings and have caused the
issuer to disclose in the annual MD&A our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of the
period covered by the annual filings based on such evaluation; and
5.
I have caused the issuer to disclose in the annual MD&A any change in the
issuer’s internal control over financial reporting that occurred during the issuer’s
most recent interim period that has materially affected, or is reasonably likely to
materially affect, the issuer’s internal control over financial reporting.
Dated: 29 August 2006
John Borshoff
Managing Director
Form 52-109F1 – Certification of Annual Filings
I, Ron Chamberlain, Chief Financial Officer of Paladin Resources Ltd, certify that:
1.
2.
3.
4.
I have reviewed the annual filings (as this term is defined in Multilateral
Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim
Filings) of Paladin Resources Ltd (the issuer) for the year ending 30 June 2006;
Based on my knowledge, the annual filings do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated or that is
necessary to make a statement not misleading in light of the circumstances under
which it was made, with respect to the period covered by the annual filings;
Based on my knowledge, the annual financial statements together with the other
financial information included in the annual filings fairly present in all material
respects the financial condition, results of operations and cash flows of the issuer,
as of the date and for the periods presented in the annual filings;
The issuer’s other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures and internal control over financial
reporting for the issuer, and we have:
(a) designed such disclosure controls and procedures, or caused them to be
designed under our supervision, to provide reasonable assurance that
its consolidated
the
material
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the annual filings are being prepared;
information relating
issuer, including
to
(b) designed such internal control over financial reporting, or caused it to be
designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with the issuer’s GAAP; and
(c) evaluated the effectiveness of the issuer’s disclosure controls and procedures
as of the end of the period covered by the annual filings and have caused the
issuer to disclose in the annual MD&A our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of the
period covered by the annual filings based on such evaluation; and
5.
I have caused the issuer to disclose in the annual MD&A any change in the
issuer’s internal control over financial reporting that occurred during the issuer’s
most recent interim period that has materially affected, or is reasonably likely to
materially affect, the issuer’s internal control over financial reporting.
Dated: 29 August 2006
Ron Chamberlain
Chief Financial Officer