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:69281
3 September 2007
Company Announcements Office
Australian Stock Exchange Limited
20 Bridge Street
Sydney NSW 2000
Dear Sir/Madam
By Electronic Lodgement
2007 Annual Report
Attached please find the 2007 Annual Report including the Management Discussion and Analysis
and CEO/CFO certification as required in accordance with Canadian reporting requirements
together with the news release covering the results. The printed version is expected to be
released early October with the Annual General Meeting scheduled for 21 November 2007.
Yours faithfully
Paladin Resources Ltd
JOHN BORSHOFF
Managing Director
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
NEWS RELEASE
For Immediate Distribution
30 JUNE 2007 ANNUAL REPORT
Perth, Western Australia – 3 September 2007: Paladin Resources Ltd (“Paladin” or
“the Company”) (TSX:PDN / ASX:PDN) announces the release of its 30 June 2007
Annual Report.
Projects:
• Operations commenced at the Langer Heinrich Uranium Project, Namibia with
production of 119,586 pounds of U3O8 to 30 June 2007. Expect 2.6Mlb U3O8 pa
nameplate production starting early calendar 2008
• Shipments of Langer Heinrich uranium concentrate made to conversion facilities with
first sale of U3O8 made under long term contract
• Completion of Bankable Feasibility Study for the Kayelekera Uranium Project,
Malawi with construction commencing as scheduled for the designed 3.3Mlb U3O8 pa
nameplate production at an estimated cost of US$185 million
• Focus on exploration and evaluation of Australian projects, in particular the Bigryli
Uranium Joint Venture in Northern Territory and the Mount Isa Uranium Joint
Venture in Queensland
• Completed acquisitions of Summit Resources Ltd (81.9%) and Valhalla Uranium Ltd
(100%) with substantial Australian uranium resources
Corporate:
• Loss after tax for the year ending 30 June 2007 of US$38 million – consisting of
US$7 million loss for Langer Heinrich as a consequence of extended operational
ramp up activities; US$7 million
in exploration and evaluation
expenditure; US$13 million finance costs; and US$11 million in net corporate costs
• Strong balance sheet at 30 June 2007 with net assets of US$1.3 billion including
investment
US$183 million in cash (US$159 million invested in US treasury bonds)
• Transition to sources of debt and hybrid financing with completion of a US$250
million Convertible Bond issue on 15 December 2006 and drawdown of Langer
Heinrich Project Finance Facilities
• Third party uranium purchase of 250,000 pounds of U3O8 as a strategic holding and
to assist meeting some early contracted deliveries of Langer Heinrich production
while conversion facility inventories are accumulated
• Expanded corporate capability and personnel numbers to enable future growth
These results may be found shortly with the Company’s other documents filed on Sedar
(http://www.sedar.com)
site
(http://www.paladinresources.com.au.). The documents filed comprise the Annual
Report, including the Management Discussion and Analysis, Directors’ Report, Financial
Report, Independent Audit Report and CEO/CFO certifications.
Company’s
through
web
the
or
For additional information, please contact:
John Borshoff
Managing Director
Tel: +61-8-9381-4366 or Mobile: +61-419-912-571
2
Ron Chamberlain
Chief Financial Officer
Tel: +61-8-9381-4366 or Mobile: +61-410-421-776
Greg Taylor
Investor Relations Contact
Tel: +416-605-5120 (Toronto)
Email: greg.taylor@paladinresources.com.au
Company Web site: www.paladinresources.com.au
PALADIN RESOURCES LTD
ACN 061 681 098
ANNUAL
REPORT
2007
2
CONTENTS
_________________________________________________________________________________
CORPORATE DIRECTORY.................................................................................................................... 3
CHAIRMAN’S LETTER ........................................................................................................................... 4
NUCLEAR POWER - CONTINUED GROWTH STRONGLY CONFIRMED........................................... 6
MANAGEMENT DISCUSSION AND ANALYSIS .................................................................................... 8
REVIEW OF OPERATIONS............................................................................................................. 13
FINANCIAL REVIEW ....................................................................................................................... 28
CORPORATE GOVERNANCE STATEMENT ...................................................................................... 38
DIRECTORS' REPORT......................................................................................................................... 48
REMUNERATION REPORT ............................................................................................................ 53
CONTENTS OF THE FINANCIAL REPORT......................................................................................... 66
CONSOLIDATED INCOME STATEMENTS ......................................................................................... 68
CONSOLIDATED BALANCE SHEETS................................................................................................. 69
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY............................................................. 70
PARENT ENTITY STATEMENTS OF CHANGES IN EQUITY............................................................. 71
CONSOLIDATED CASH FLOW STATEMENTS .................................................................................. 72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ......................................................... 73
DIRECTORS’ DECLARATION............................................................................................................ 143
INDEPENDENT AUDIT REPORT....................................................................................................... 144
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 are available on our website www.paladinresources.com.au.
68757_1
CORPORATE DIRECTORY
_________________________________________________________________________________
DIRECTORS
INVESTOR RELATIONS
3
Australia – Corporate 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: (+1) 416 605 5120
Facsimile:
(+1) 905 844 6532
Email: greg.taylor@paladinresources.com.au
AUDITORS
Ernst & Young
11 Mounts Bay Road
Perth Western Australia 6000
STOCK EXCHANGE LISTINGS
Australian Stock Exchange and
Toronto Stock Exchange
Code: PDN
Munich, Berlin, Stuttgart and
Frankfurt Stock Exchanges
Code: PUR
Non-executive Chairman
Mr Rick Crabb
Managing Director
Mr John Borshoff
Non-executive Directors
Mr Sean Llewelyn
Mr Donald Shumka
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 Ltd
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
68757_1
4
CHAIRMAN’S LETTER
_________________________________________________________________________________
Dear Shareholders
The Paladin Board of Directors, management and staff have worked with common purpose and steady
resolve over the past 12 months to achieve a number of hefty milestones, any one of which would be
enough for the average company.
An enduring strategy held by Paladin, to which I have referred in previous letters, is to establish the
Company as a substantial, international uranium supplier. At Paladin, our objective is to create
sustainable value for our shareholders, employees, host communities, contractors, suppliers and
customers. Importantly, we aim to do this whilst achieving leading industry practice in the areas of
safety, business conduct, environmental management and social responsibilities.
The Paladin Board, backed by the unique experience, skills and foresight of our Managing Director
John Borshoff, laid the foundation for such strategy many years ago. The past 12 months or so has
seen Paladin unleashing its strategy on several fronts – Langer Heinrich, Kayelekera and through
merger and acquisition activity.
The transformation of Paladin from uranium explorer to miner took place during the 2006/2007
financial year. Commissioning of the Langer Heinrich uranium plant in Namibia proceeded on
schedule and shipment of product commenced. Although the production ramp up has been slower
than planned, our experienced team is rectifying process bottlenecks and nameplate production of 2.6
million pounds per annum is expected to be achieved by early 2008.
By successfully proving the production model for Langer Heinrich and with a significant resource base,
the foundations are now laid for expansion plans to cement Langer Heinrich as a stable long-term
uranium production centre.
Concurrently with the Langer Heinrich start up, the Paladin team and its consultants completed the
Bankable Feasibility Study for Kayelekera, negotiated a Development Agreement with the Malawian
Government, attained a mining licence and environmental approvals (based on international
standards) and commenced development of its Kayelekera mine.
On another front, as the uranium phenomenon gathered momentum around the world, Paladin moved
to acquire the Valhalla and Skal deposits and highly prospective surrounding ground at Mt Isa, by the
takeover of Valhalla Uranium Limited and Summit Resources Limited. I am confident that the strategic
value of these acquisitions will further unfold as the current aggressive exploration program completes
and political attitudes to uranium evolve in Queensland.
The Company undertook a US$250 million convertible note raising in December 2006 to ensure that it
has ample funding for its immediate plans.
I have been pleased to see growth in the competent and dedicated staff within the Group. A fortunate
legacy of Paladin’s early start and uranium heritage is that a core group of experts now drive the
passing of essential knowledge and skills to enthusiastic young professionals keen to build a career in
this industry.
Paladin’s share price experienced another year of excellent growth. Changes in overall market
conditions, some fallback in the uranium spot price and perhaps some concerns over the rate of
Langer Heinrich ramp up saw a recent retreat in the share price. However my Board has no concerns
at all about the fundamental strengths of your Company nor the positive long-term outlook for uranium.
As our existing projects continue to bed down and our broader international uranium strategies unfold,
I am confident we will see renewed strong growth in your Company’s share price.
68757_1
5
CHAIRMAN’S LETTER (continued)
_________________________________________________________________________________
On behalf of my Board I extend congratulations and a hearty thank you to all employees and
consultants worldwide for their hard work and contribution to this landmark year in our Company’s life.
Sadly, we will also remember this year for the sudden and tragic death of Garnet Halliday, who
through his immense skills and unwavering dedication, contributed so much to our Company’s
success.
Rick Crabb
Chairman
68757_1
6
NUCLEAR POWER - Continued Growth Strongly Confirmed
_________________________________________________________________________________
This year has provided another dramatic upward shift in projected new reactor builds.
The changing reality is reflected in the World Nuclear Association’s (WNA) own predictions
about nuclear power growth. In 2006 the WNA forecast 180 new nuclear plants as “proposed or
planned” worldwide. By 2007 that number has been raised to 288! China, Russia, and India
have stated plans to significantly increase their use of nuclear power completely reaffirming
their need for additional reactor capacity. In the United States there are plans for more than 20
new reactors now in the early licensing and permitting phase.
A robust industry at work
The importance of nuclear power as a source of clean base load electricity has long been recognised
by policy makers worldwide. Nuclear power today accounts for 16% of the world’s electricity
production, a share that has remained almost constant over the last decade. Commitments made
during the 1970’s and 1980’s have resulted in more than thirty countries now operating 438 nuclear
power plants. 140 of these reactors were commissioned at least 25 years ago, highlighting the fact
that nuclear power is no longer a new technology. Nuclear power is now entrenched as a significant
component of electricity production in Europe, Japan and Korea, Russia, and North America. 32 new
nuclear power plants are currently under construction in 14 countries, which will raise world nuclear
electricity production capacity to 396.3 GWe.
The scale of the recommitment to nuclear power is still not yet widely understood. The International
Energy Agency (IEA) notes that nuclear power capacity will grow to around 416 GWe by 2030 under
its Reference Scenario, but “more favourable nuclear policies” would see capacity grow to 519 GWe in
2030 as the world energy mix changes. The European Commission’s World Energy Technology
Outlook -2050 predicts “massive” use of new technologies, including Generation 4 nuclear plants, with
a rapid increase in nuclear occurring from 2020. These views could well be conservative.
Changing attitudes
Ambivalent public attitudes towards nuclear power have been an impediment to the expansion of
nuclear programs in some countries. The causes of public anxiety about nuclear power have been
widely analysed and the nuclear industry has consistently advocated the merits of nuclear power to a
largely unconvinced audience.
It is now clear that attitudes towards nuclear power are undergoing a fundamental re-appraisal
worldwide. The catalyst for this is the growing concern about climate change, which is forcing people
to start thinking again about energy production and use, and the challenges created by rapid economic
growth in populous developing countries.
The big picture begins with energy consumption. The IEA predicts that world energy consumption by
2030 will be two thirds more than today on a business-as-usual forecast. Comparatively low energy
consumption growth in the “mature” economies is swamped by the enormous growth rates in China
and India. Prices for all energy fuels have been rising in real terms, and there is now significant
conjecture about whether world oil production is about to “peak”.
Organisations which have been historically negative, or indifferent, towards nuclear power have been
revising their policies. Some countries with nuclear “phase out” legislation are reconsidering the
wisdom of shutting good nuclear facilities when there are no easy alternatives for replacement power.
Some environmental groups have abandoned their past antagonism to nuclear power as they
recognise the incontrovertible fact that a nuclear power plant emits very little greenhouse gas while
producing large amounts of electricity. Higher prices for oil, gas, and coal have brought the
comparative cost of nuclear electricity back into contention.
68757_1
7
NUCLEAR POWER - Continued Growth Strongly Confirmed
(continued)
_________________________________________________________________________________
Impact of climate change
The problems of meeting increasing energy demand are further complicated by the implications of
climate change and rising global greenhouse gas emissions. The Intergovernmental Panel on Climate
Change (IPCC) has issued its Fourth Assessment Report which renewed warnings about the impact of
man-made greenhouse gas emissions causing higher temperatures and rising sea levels.
Many countries are now grappling with the twin problems of sustaining economic growth with
adequate energy supplies while also developing credible greenhouse gas abatement measures.
Nuclear power is one technology that is available now which can play an important role in the
technological response to climate change. Nuclear power in use today avoids the production of about
2 billion tonnes of carbon dioxide each year. In the United States it is estimated that nuclear electricity
avoids the emission of more than 700 million tonnes of carbon dioxide, more than 3 million tonnes of
sulphur dioxide, and over 1 million tonnes of nitrogen dioxide.
A bright outlook
Paladin’s long held belief that the world has to move back firmly in favour of nuclear power because of
its inherent benefits and its good track record over the past fifty years is being vindicated.
New reactor construction will inevitably speed up as worldwide engineering capacity is reinvigorated
and government policies become more supportive. Some countries which currently do not have
nuclear power stations are evaluating proposals for new plants. Reactor vendors are working on new
designs for future reactors which will offer enhanced safety and proliferation-resistant technology. The
United States and Russia are developing plans to provide reactor technology and fuel services to
countries which do not have their own nuclear facilities in order to provide security of energy supply
without any increased nuclear proliferation risk.
It is Paladin’s contention that as the enormity of the twin challenges of securing energy supply while
simultaneously exercising greenhouse gas emissions restraint becomes apparent the world will move
even more rapidly towards nuclear electricity. Nuclear plants will also play a significant role in the
proposed hydrogen cycle, and will also be more commonly combined with other energy-intensive
projects such as desalination.
68757_1
8
MANAGEMENT DISCUSSION AND ANALYSIS
The following Management Discussion and Analysis (MD&A) for Paladin Resources Ltd (Paladin)
should be read in conjunction with the Directors’ Report and the audited Financial Report for the year
ended 30 June 2007. The effective date of this report is 3 September 2007.
The financial information presented in this MD&A has been prepared in accordance with Australian
equivalents to International Financial Reporting Standards (AIFRS), other mandatory professional
reporting requirements and the Corporations Act 2001.
In addition to these Australian requirements further information has been included in the Consolidated
Financial Statements for the year ended 30 June 2007 in order to comply with applicable Canadian
securities law, as the Company is listed on the Toronto Stock Exchange.
Additional information relating to the Company, including public announcements, is available at
www.paladinresources.com.au.
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.
PALADIN STATUS
“ACHIEVING ACROSS THE SPECTRUM WITH A CLEAR AND ENDURING COMMITMENT TO
BECOME A MAJOR GLOBAL URANIUM SUPPLIER”
• Operating mine at Langer Heinrich, Namibia
-
-
ramping up to 2.6Mlb U3O8 per annum
design Stage II expansion to 3.7Mlb U3O8 per annum 2007/2008
• Constructing another mine at Kayelekera, Malawi
-
-
design at 3.3Mlb U3O8 per annum
commissioning quarter ending December 2008
• M&A successes introduce future potential developments
-
-
Valhalla/Skal Deposits Mt Isa Region (QLD)
Bigrlyi Deposit Ngalia Basin (NT)
• Continuing evaluation of further M&A opportunities on defined strategic expansion
path
• Aggressive exploration programmes at Langer Heinrich, Kayelekera, Mt Isa and Bigrlyi
regions expected to expand resource base significantly
• Establishing an integrated uranium trading entity designed to take advantage of
fundamental uranium market changes
• Cash position US$182.8M and a strong balance sheet
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS (continued)
9
OVERVIEW
The Company operates in the minerals resources industry with a principal business focus on
development and operation of uranium projects in Africa and Australia, as well as evaluation and
acquisition opportunities throughout the world. 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.
2007 has been a momentous year for Paladin. The year signified the achievement of numerous
milestones, each one significant in its own right.
Most notable has been the Langer Heinrich Uranium Mine in Namibia coming into operation and
achieving first production. Construction of the US$95M mining and processing facility was completed
in 2006 and, although production ramp up has been extended, the project fundamentals are in place
to develop a viable long-term uranium production centre for Paladin.
In Malawi, after successful completion of a Bankable Feasibility Study (BFS) and a comprehensive
Environmental Impact Assessment (EIA), Paladin received Government approval for the Kayelekera
Uranium Project and has, as scheduled, commenced construction in May 2007 at an estimated cost of
US$185M.
In parallel with these activities Paladin secured control of the 3rd largest uranium province in Australia
through the acquisition of Valhalla Uranium Limited (VUL) and by achieving an 82% interest in and
effective control of Summit Resources Limited (SMM).
Finally, the successful and timely fundraising of US$250M through a Convertible Bond issue in
November 2006 has enabled the Company to move forward in a well funded manner.
Paladin remains confident of the positive outlook for the nuclear industry. Its strategy to establish
progressive development of uranium mines and, via M&A activity, achieve a global footprint to give
added depth to its project pipeline is essential both to meet growing demand for uranium and for
Paladin to become a major player in the uranium supply industry.
SAFETY
The construction of Langer Heinrich was completed with only one lost time injury over a period of 1.35
million worked hours. This considerable achievement reflects the dedication and attention of
management and staff.
Since operations commenced in January 2007 there have been two lost time injuries at Langer
Heinrich and at the end of June the Lost Time Injury Frequency Rate (LTIFR)1 was 7.0. The severity
rate (days lost per million hours worked) was 8.6. Both of the injuries were minor and the workers were
able to return to work quickly and without impairment. The Company continues to focus on the training
of its workforce and the elimination, as far as possible, of hazards in the workplace.
1 LTIFR calculated by dividing the number of injuries by the number of hours worked in the year and
multiplying by one million.
OPERATIONS – LANGER HEINRICH URANIUM MINE, NAMIBIA.
Langer Heinrich was officially opened by His Excellency, President Hifikepunye Pohamba of the
Republic of Namibia at a formal opening ceremony at the mine on 15 March 2007.
Langer Heinrich produced 119,586lb of uranium oxide (on a contained U3O8 basis) to 30 June 2007
which was below the Company’s initial expectations due to several issues primarily revolving around
deteriorating leach tank liners and consequent damage to the heat exchangers which slowed the ramp
up schedule by 3 to 4 months. The heat exchanger problems were resolved in June 2007. A
comprehensive plan is in place to increase operating efficiencies, now that plant throughput can be
maintained and also to resolve production bottlenecks that have emerged. Nameplate production rate
of 2.6Mlb U3O8 per annum is anticipated to be achieved by January 2008.
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10
MANAGEMENT DISCUSSION AND ANALYSIS (continued)
Shipments of Langer Heinrich uranium concentrates have been made to conversion facilities in the
USA and Canada, and the first sale of uranium was made under a long-term contract in June 2007.
Sales of concentrates (which means transfer of title) are made by book transfer at a conversion facility
which is usually several months after physical despatch of concentrates from the mine to allow time for
analysis and quality acceptance by the converter. Cash receipts are received within 30 days of each
sale.
The Company purchased 250,000lb of uranium (U3O8) as a strategic holding and to assist meeting
some early contracted deliveries of Langer Heinrich production while the process of inventory-building
at each conversion facility takes place. This amount of material is expected to be replaced as
inventory by June 2008 from Langer Heinrich production.
Resource drilling program at Langer Heinrich during the year resulted in an increase of 12% in
measured and indicated resources and 6% in inferred resources within the Mining Lease. Areas
within the Mining Lease still remain open which hold the potential to prove additional uranium
resources.
A further 6km of fertile prospective palaeodrainage also remains to be tested on the Company’s
exploration tenement situated immediately west of the Mining Lease.
DEVELOPMENT – KAYELEKERA URANIUM PROJECT, MALAWI
The BFS was completed in late 2006 and the Company approved the development of the mine and
processing plant at Kayelekera in northern Malawi. A comprehensive EIA was undertaken as part of
the BFS and submitted to the Malawi statutory authorities for review and approval. In February 2007
the Company, through its subsidiary Paladin (Africa) Limited, and the Government of Malawi executed
a Development Agreement covering the Kayelekera Uranium Project which provides fiscal stability for
the Project and also obliges the Company to undertake specified community development and
infrastructure investment during the life of the Project. Environmental approval was received and a
mining licence granted in April 2007.
Capital expenditure for the Project will be approximately US$185M. On currently stated resources and
reserves the project has an 11 year operating life and is designed to produce 3.3Mlb uranium (U3O8)
per annum for the first 7 years and 1.2Mlb for the remaining period, treating the low grade stockpiles.
Paladin will carry out extensive exploration on defined targets in surrounding tenements and is
confident additional resources will be discovered to extend the operating life of Kayelekera. The plant
will have a 1,500,000tpa throughput. The processing circuit as planned at May 2007 utilises an acid
leach/SX flowsheet.
Construction of mine access roads and establishment of construction infrastructure have started and
preparations for the erection of the main construction camp, which has been relocated from Langer
Heinrich, are well advanced.
A group of Civil Society Organisations (CSO) commenced legal action against Paladin (Africa) Limited
and the Government of Malawi challenging certain aspects of the Project approvals. Paladin (Africa)
Limited and the Government of Malawi are vigorously defending the proceedings and remain confident
that the outcome will be favourable.
ACQUISITIONS – VALHALLA URANIUM LIMITED (VUL) AND SUMMIT RESOURCES LIMITED
(SMM)
In July 2006 the Company made a takeover offer for all the shares of VUL which was subsequently
declared unconditional on 7 September 2006. The Company obtained acceptances pursuant to the
takeover offer for 94.27% of VUL shares and compulsory acquisition of the remaining shareholdings
was completed on 27 October 2006.
On 27 February 2007 the Company made a takeover offer for SMM which subsequently became
unconditional on 19 March 2007. The Company’s initial offer of 1 fully paid ordinary Paladin share for
every 2.04 fully paid ordinary SMM shares was raised on 12 April 2007 to 1 Paladin share for every
1.67 SMM shares. The SMM directors unanimously recommended acceptance of the Paladin offer
which closed on 1 June 2007 with Paladin holding 81.9% of SMM’s issued capital.
68757_1
11
MANAGEMENT DISCUSSION AND ANALYSIS (continued)
The Mt Isa region represents the 3rd largest uranium province in Australia. The major part of the
uranium resources in this region was essentially held by two companies - SMM and VUL (which
shared some core assets through joint venture with SMM). Paladin has always regarded the takeover
of both of these companies as one strategic play. The outlay by Paladin amounted to US$153M for
VUL and US$818M for SMM which, when averaged, resulted in a relatively modest overall cost to the
Company for such strategic uranium assets.
Directors and Management of Paladin firmly consider the price paid for SMM was justified on the basis
of the longer term prospects of the province and the fact that the SMM acquisition only constituted part
of the overall acquisition strategy.
Paladin expects that the Mt Isa region will become a cornerstone of its global uranium production
objective.
EXPLORATION AND EVALUATION
The Company authorised expenditure on a comprehensive exploration and evaluation program on
tenements acquired through the acquisitions of VUL and SMM, primarily in the Mt Isa region of
Queensland. An aggressive resource delineation programme involving 50,000m of drilling in the next
12 months is underway to establish an 80Mlb to 100Mlb U3O8 resource base.
Exploration and evaluation work also continued at the Bigrlyi Uranium Project in the Northern Territory
and, utilising a 0.05% U3O8 cut off, this resulted in an increase in indicated resources by 26% to 7Mlb
U3O8 and inferred resources of 7Mlb U3O8. These resources have insignificant vanadium association.
CORPORATE
The Company issued US$250M in convertible bonds on 15 December 2006 with an underlying
coupon rate of 4.5%, maturing on 15 December 2011 and with a conversion price of US$7.685 for
Company shares. Proceeds are being used to further advance the Kayelekera Uranium Project,
establish a uranium marketing subsidiary, fund opportunities as they arise for acquisitions and
corporate growth, and for general corporate purposes.
AUSTRALIA’S URANIUM POLITICS
Australia’s policies on uranium mining and the nuclear industry have undergone significant change
during the year. The Federal Government has supported the conclusions of the Uranium Mining,
Processing and Nuclear Energy Review Taskforce which endorsed nuclear power as a viable strategy
for Australia to combat rising greenhouse gas emissions over the next decades. The review
foreshadowed the building of up to 25 nuclear plants in Australia by 2050.
The Australian Labor Party (ALP), currently in opposition federally, abandoned its long-held policy of
prohibiting the development of new uranium mines at its National Conference in April. The ALP’s
decision means that the approval or prohibition of uranium mining will now be a matter for each state
under a federal Labor government. South Australia and the Northern Territory are currently receptive
to new uranium projects. The states of Queensland and Western Australia are opposed to uranium
mining. Paladin believes that both states will reassess their bans as they become more aware of the
environmental, economic and strategic significance of their uranium resources.
CURRENT MARKET VOLATILITY AND LONG-TERM URANIUM OUTLOOK
In early July, 2007, the uranium spot market price indicators showed a decline for the first time in more
than four years. The spot market price had risen from US$10.90/lb U3O8 (June 2003), reaching more
than US$135.00/lb U3O8 in June 2007. Reasons for that persistent price trend included demand as
well as uranium supply factors.
The spot market for uranium (near-term delivery of up to 12 months) represents a small proportion of
annual uranium transactions, usually no more than 10%-15% of the aggregate market but, at times,
has risen to as much as 20% of the overall market activity. The balance of uranium deliveries takes
place under long-term (multi-year) sales agreements between uranium suppliers and nuclear utilities.
68757_1
12
MANAGEMENT DISCUSSION AND ANALYSIS (continued)
The period from mid-2003 until mid-2007 reflected a change in uranium market structure as near-term
uranium requirements exerted increasing pressure on available near-term supplies. Key components
of uranium demand includes nuclear utilities which needed relatively small quantities of uranium to
complete load batches, spot market purchasing by a number of primary uranium producers forced to
purchase uranium to cover delivery commitments under long-term sales agreements, as well as
inventory accumulation by uranium investment funds, both public and private.
The uranium spot market price began to decline in mid-2007 for a variety of reasons. First of all, on
the demand side, nuclear utilities had covered their near-term needs and opted not to purchase any
additional material which was not immediately required as approved annual budgets fell short due to
the rapidly rising uranium spot price. Primary producers also had reportedly satisfied their short-term
needs while some of the privately-held uranium investment funds took the decision to sell some of
their inventoried uranium. All of these factors resulted in a slow-down in spot market activity.
Furthermore, the U.S. Department of Energy opted to enter the uranium spot market to sell a small
portion of its uranium inventory (equivalent to 520,000lb U3O8) and that uranium auction led to a
withdrawal from the market of potential demand waiting until that tranche of uranium cleared.
Historically, the Northern Hemisphere summer months have been characterized by relatively low spot
market activity, due to holiday/vacation periods. Spot market demand has tended to increase
beginning with the fourth calendar quarter of each year. However, over the past few years, that
traditional seasonality trend in uranium demand was masked by escalating demand pressures.
Although price volatility is being experienced with the recent downturn this is expected to be a short
lived phenomenon as it has little to do with the macro uranium market outlook which remains very
strong. Uranium supply is expected to lag demand as the reactor construction programmes begin in
earnest and the number of projected new reactor builds continues to increase in the major economies
of US, China, Russia and India.
MANAGEMENT TEAM DEVELOPMENT
Paladin recognises that continued growth and development not only hinges on project opportunities
but also on the quality and skills of its management team and staff. Uranium presents specific
difficulties in this respect as the industry seriously lacks “across the board” expertise due to the
downturn this sector has suffered over the past 20 years.
Paladin has an executive team with substantial uranium and resource industry experience operating
over a wide spectrum of activities covering production, operations development and construction,
technical (geology, engineering, metallurgical, environmental and radiological), marketing, corporate
and finance - all in a global context. As the Company grows it will be necessary to expand this team
and Paladin, as the premier emerging uranium company, is in the fortunate position of being an
attractive employer as there are few companies of scale able to offer such an exciting basis for career
development in this growing industry.
M&A ACTIVITIES
Paladin continues to evaluate uranium opportunities as part of its stated strategic objective to achieve
an appropriate global production footprint. The Company is considering both specific advanced
project opportunities and corporate acquisitions where good assets with clear production potential are
identified that show value accretion potential.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS
13
Paladin’s total mineral resource inventory includes 60,900t U3O8 (134.3Mlbs of U3O8) at 0.076% U3O8
in the Indicated and Measured categories, a 45% increase from that reported in the previous year.
Paladin also holds 39,700t of U3O8 (88Mlb of U3O8) at 0.06% U3O8 in the Inferred Resource category a
39% increase from that reported for the previous year. A summary of the status of each of the
advanced projects is detailed in the following table.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
The summary of status for each of the advanced projects is detailed in the following table:-
14
KAYELEKERA
PROJECT*
MANYINGEE
PROJECT**
OOBAGOOM
A PROJECT
VALHALLA
DEPOSIT*
SKAL
PROJECT
BIGRLYI
DEPOSIT*
85%
100%
100%
90.9%
90.9%
41.7%
CRITERIA
Paladin
equity
Location
Deposit
Type
Measured &
Indicated
Resources
Inferred
Resource
Historic
Resources
(non-JORC
compliant)
Mining
Method
Previous
Owners
Activity
Periods
Project
Status
Project
Significance
Timeframe
LANGER
HEINRICH
PROJECT*
100%
Namibia,
Southern
Africa
Calcrete
Malawi,
Southern Africa
West Pilbara,
West Australia
Sandstone
Sandstone
West
Kimberley,
West Australia
Sandstone
-----------------
37.1Mt @
0.06% U3O8
(22,500t U3O8)
49.7Mlbs
15.3Mt @
0.09% U3O8
(13,630t U3O8)
30.0Mlbs
7.9Mt @
0.1% U3O8
(8,080t U3O8)
17.8Mlbs
43Mt @
0.06% U3O8
(25,308t U3O8)
55.9Mlbs
3.4Mt @
0.06% U3O8
(2,040t U3O8)
4.5Mlbs
4.2Mt @
0.07% U3O8
(2,810t U3O8)
6.2Mlbs
-----------------
-----------------
-----------------
-----------------
8.3Mt @
0.12%-0.14%
U3O8
(9,950t U3O8)
21.9Mlbs
In-Situ Leach
In-Situ Leach
Cogema
(French utility)
Cogema
(French utility)
1979 - 1988
Acquired 1998
1982 - 1985
Acquired 1998
On hold.
Feasibility
Study in
readiness.
One of only
three
Australian
advanced ISL
projects.
On hold.
Resource
definition
drilling
required.
Large
resource
potential.
Conventional
open pit
Gencor
Limited (South
African Mining
Company) and
Acclaim
1973 - 1980,
1999 to
present
Production
ramp up to
2.6Mlb
U3O8pa.
Globally first
new uranium
mine and mill
in a decade.
Production
commenced in
2007.
27 year project
life.
Conventional
open pit
Central
Electricity
Generating
Board
(UK utility)
1982 – 1990,
1998 to present
Development
commenced
Significant
contributor to
Malawi
economy
3.3Mlbs U3O8
pa production
Production to
commence in
late 2008.
11 year project
life.
Queensland,
Australia
Queensland,
Australia
Metasomatic
Metasomatic
21.3Mt @
0.08% U3O8
(16,900t
U3O8)
37.2Mlbs
12Mt @
0.075% U3O8
(9,000t U3O8)
19.8Mlbs
-----------------
Open pit /
Underground
Queensland
Mines Ltd
-----------------
-----------------
4.2Mt @
0.1%-0.13%
U3O8
(5,000t U3O8)
11.0Mlbs
Open pit /
Underground
Queensland
Mines Ltd
1968-1972,
1997 to
present
Resource
definition
drilling in
progress.
1970-1980,
2005 to
present
Resource
definition
drilling in
progress.
Large uranium
resource.
Large uranium
resource.
Northern
Territory,
Australia
Sandstone
1.94Mt @
0.17% U3O8
(3,250t U3O8)
7.2Mlbs
2.59Mt @
0.13% U3O8
(3,260t
U3O8)
7.2Mlbs
-----------------
Open pit /
Underground
AGIP
Australia Pty
Ltd
1974-1983,
2005 to
present
Resource
definition
drilling in
progress.
High
uranium
grades.
Vanadium
credits.
3 year staged
feasibility
study required.
2 year reserve
/ resource
drilling
required.
Development
dependent on
Government
U Policy
changes.
Development
dependent on
Government U
Policy
changes.
Prefeasibility
Study if
sufficient
resources.
Resources are quoted inclusive of any reserves that may be applicable.
Resources detailed above in all cases represent 100% of the resource – not the participant’s share.
*JORC(2004) & NI 43-101 Compliant.
**JORC(1999) Compliant.For Valhalla and Skal, Paladin’s interest is based on 50% deriving from the Mt. Isa Joint
Venture and 40.9% via Paladin’s 81.9% ownership of Summit Resources.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
15
NAMIBIA
LANGER HEINRICH URANIUM PROJECT
The Langer Heinrich Uranium Mine in Namibia is owned 100% by Paladin through its wholly owned
Namibia 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 47,930t
U3O8 at a grade of 0.06% U3O8 (250ppm cut off) in seven mineralised zones designated Detail 1 to 7,
within a 15 km length of a contiguous paleodrainage system. The deposit is located in the Namib
Desert, 80km from the major seaport of Walvis Bay. The attached figure shows the location of the
uranium mineralisation along the length of the Langer Heinrich valley and its potential in the
Exploration Licence at the western end of the mining lease.
Construction of the mine started in September 2005 and staged commissioning of the plant
commenced in late 2006. Langer Heinrich was officially opened by His Excellency, President
Hifikepunye Pohamba, of the Republic of Namibia, on the 15th March 2007 in a ceremony attended by
over 200 guests.
In 2006 Paladin carried out a 6,400m RC drilling program to further define the project resources in
Details 3, 4, 5 and 6. Mineral resource specialists Hellman & Schofield (H&S) have completed and
independently verified a revised mineral resource estimate for Langer Heinrich conforming to both
JORC (2004) Code and NI 43-101 guidelines.
The Mineral Resource estimate is shown in Table 1
JORC CATEGORY CUT OFF
%U3O8
0.025
0.025
kt
14.6
7.9
22.6
25.4
Table 1: Langer Heinrich Mineral Resource Statement
RESOURCE GRADE U3O8
Mt
22.7
14.5
37.2
43.4
%U3O8
0.060
0.060
0.060
0.060
0.025
Measured
Indicated
Total
Inferred
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
16
A further resource definition drilling campaign comprising over 10,000m of RC drilling has
commenced, with the aim of defining all the mineralisation within the Langer Heinrich Mining Lease. At
the same time a resource infill drilling program will upgrade those Inferred Resources in the western
portion of Detail 1 and the majority of Detail 2. The intention of the infill drilling is to more than replace
those resources depleted by mining during the next two years. An additional 3,500m of drilling is
planned for exploration of the recently granted Exploration Licence, EPL3500, to the immediate west
of the current Langer Heinrich Mining Lease.
The Ore Reserves shown in Table 2 are based on a US$30/lb U3O8 price and a cut off grade of
250ppm U3O8 and are included in the Measured and Indicated Resources shown in Table 1.
JORC CATEGORY TONNES
Proved
Probable
Total
Mt
25.4
16.7
8.6
GRADE
%U3O8
0.069
0.067
0.068
U3O8
kt
11.6
5.5
17.0
Table 2: Langer Heinrich Ore Reserves Statement
The mining operation is designed to produce 1,180tpa (2.6Mlb) of uranium oxide concentrate (U3O8)
from 1.5Mtpa of calcrete and associated ores by beneficiation, alkaline leaching, counter current
decantation, ion exchange, precipitation and drying to produce saleable product.
The 800 strong construction workforce deployed at Langer Heinrich recorded over 1.35 million work
hours with only one lost time injury (LTI) during the construction of the project, a credit to both the
management team and the largely Namibian work force. The camp used to house the construction
workforce has now been disassembled and shipped to Malawi where it will be used in the construction
of the Kayelekera process plant. The site currently has 137 employees, all except 6 of these being
Namibian nationals.
Staged commissioning of the plant commenced in late 2006 and progressed through scrubber and
attrition, leach, counter current decantation, ion exchange, precipitation and packaging. The
processing plant continues to ramp up to full capacity at the same time as optimisation of recoveries in
the various sections of the plant and improving overall efficiencies. The crushing and scrubbing area of
the plant has now been proven to be capable of consistent delivery of 100% of its design capacity;
feed tonnage is varied dependant on the characteristics of the ore being processed.
The leaching area of the plant has been the most evident area of difficulty in achieving design
capacities and the area of biggest success. Recent installation of screens ahead of the ten spiral heat
exchangers and implementing on-site maintenance facilities for the exchangers has resulted in a
major improvement to this section of the plant. The consistent delivery of 90t/hr solids at design slurry
temperatures to the leach circuit is now achievable. Mineral extraction in leaching was expected to be
a challenge and this continues to be an area of focus.
The elution of resins in the ion exchange process is providing higher than design concentrate liquors
with 10g/l product easily achievable versus design levels of 7.8g/l. Clarity of liquor from CCD in
conjunction with improved backwash capabilities has been valuable in achieving design throughputs.
The precipitation circuits have been successfully run at or near design capacities including the
conversion of sodium diuranate to UO4. The dryer circuit is a current focus of attention and has taken
longer than expected to optimise, however, this has not hampered production levels.
The site currently has a number of programs in place to improve operational efficiencies and to
continue to de-bottleneck the processing plant. Mining systems are being put in place to optimise the
delivery of ore to the plant with the aim of achieving design and better production of uranium oxide
concentrate.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
17
MALAWI
KAYELEKERA URANIUM PROJECT
Kayelekera is located in northern Malawi, 40km west of the provincial town of Karonga and 12 km
south of the main road that connects Karonga with the township of Chitipa to the west.
Kayelekera is a sandstone hosted uranium deposit associated with the Permian Karoo sediments and
is hosted by the Kayelekera member of the North Rukuru sediments of the Karoo. The mineralisation
is associated with 7 variably oxidised, coarse grained arkoses, separated by shales and chocolate
coloured mudstones. Uranium mineralisation occurs as lenses within these arkose units the lowest of
which is at a depth of approximately 130m.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
18
The Kayelekera Uranium Project is currently owned 100% by Paladin through its wholly owned
subsidiary Paladin (Africa) Ltd (PAL). Paladin will transfer a 15% shareholding in PAL to the
Government of Malawi under the terms of the Development Agreement signed between PAL and the
Government in February 2007.
Several important milestones were achieved during the year which enabled Paladin to start
construction of Kayelekera in May 2007.
• A comprehensive Development Agreement was concluded with the Government of Malawi
and executed in February 2007.
• The EIA was completed, submitted, and approved by the Government of Malawi.
• The BFS was completed and Project approval given by the Paladin Board.
• The Mining Licence covering the Kayelekera Uranium Project was granted in April 2007 for an
initial period of fifteen years (renewable for additional ten year periods).
The Development Agreement provides a stable fiscal regime for the Project for at least ten years from
the start of production and will provide a high degree of certainty on a number of matters. Key terms of
the Development Agreement are:
• A 15% shareholding in PAL is to be transferred to the Government of Malawi.
• The corporate tax rate applicable to PAL will be reduced from 30% to an effective 27.5%.
• The resource rent tax will be reduced to zero.
• The mineral royalty rate will be reduced from 5% to 1.5% for the first three years of operations,
and then set at 3% for the rest of the Project output.
• The 17.5% VAT, and import duties, will not be imposed.
• An immediate 100% capital write-off for tax purposes is permitted.
• PAL has committed to social infrastructure investment in the Kayelekera region, including
education and health facilities for the local community, to be funded from the third year of
production at the Project.
• A fiscal stability period of ten years during which there will be no increase in taxes or royalties
and a commitment to pass on the benefit to PAL of any reductions in taxes or royalties (should
they occur).
A comprehensive EIA was undertaken and the EIA document was submitted to the Government of
Malawi for stakeholder review in October 2006. The Government’s EIA review process included
reviews and comments by government agencies, the general public, international experts, Non-
Government Organisations, and the International Atomic Energy Agency in Vienna. Following
consideration of and in response to the comments a Final EIA was prepared and submitted to the
Government in February 2007. The project was then approved and a certificate of project approval
was issued to PAL in March 2007 containing conditions covering reporting, environmental
management, monitoring, training, and compliance with the terms of the Development Agreement.
The BFS for the Kayelekera Uranium Project was completed in February 2007. Highlights of the BFS
are:
• The Kayelekera Uranium Project is financially and technically viable with a planned 11 year
operating life.
• Annual production will be 3.3Mlbs U3O8 for the first 7 years of the Project (instead of the
2.3Mlbs U3O8 originally planned).
• Capital expenditure of US$185M.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
19
The BFS document covers all aspects of the Project including resources/reserves, mining, production,
tailings disposal and uranium marketing. The BFS is supported by comprehensive environmental
studies and management plans. The Project is designed to give an annual production of 3.3Mlbs
U3O8 from the processing of 1.5Mtpa of sandstone and associated ores by grinding, acid leaching,
counter-current decantation, solvent extraction, precipitation and drying to produce saleable product.
The process plant design including infrastructure and utilities has been developed with capital and
operating estimates to 15% accuracy and also addresses mining, processing, general administration
costs and environmental implications.
Mineral Resources and Reserves
The JORC (2004) and NI 43-101 Code compliant Mineral Resource base (comprising both arkose and
mudstone components) used for the BFS pit optimisation work is summarised in Table 3:-
JORC CATEGORY
Measured
Indicated
Total
Inferred
Measured
Indicated
Total
Inferred
CUT OFF
%U3O8
0.03
0.03
0.03
RESOURCE
Mt
2.2
13.1
15.3
3.4
GRADE
%U3O8
0.12
0.083
0.088
0.060
0.06
0.06
1.6
7.0
8.6
1.2
Table 3: Mineral Resources inclusive of Ore Reserves
0.16
0.12
0.13
0.09
0.06
U3O8
kt
2.7
10.9
13.6
2.0
2.5
8.2
10.7
1.1
The BFS results utilising the Measured and Indicated resources stated above (using a blend of 83%
arkose and 17% mudstone) and estimated using a uranium price of US$30/lb U3O8 for pit optimisation
purposes resulted in Ore Reserves as shown in Table 4.
Type
Probable
Proved
Tonnes Grade Metal Tonnes Grade Metal
Mt
Arkose
1.60
Mudstone 0.18
1.78
Total
%U3O8 kt
7.6
0.098
1.2
0.13
8.8
0.10
%U3O8 kt
0.14
0.15
0.14
Mt
7.80
0.91
8.70
2.27
0.28
2.54
Total
Tonnes Grade Metal
Mt
9.40
1.10
10.50
%U3O8 kt
9.9
0.11
1.5
0.14
11.4
0.11
Table 4: Ore Reserves, arkose cut-off 400ppm, mudstone cut-off 600ppm
Additional marginal material within the pit design not included in the Ore Reserves but expected to be
processed at end of mine life (i.e. years 8 to 11) is shown in Table 5. This consists of arkose above
200ppm, mudstone above 400ppm and Inferred Resources contained within the pit design.
Type
Arkose
Mudstone
Total
Tonnes Grade Metal
% U3O8
Mt
0.03
5.7
0.08
0.7
0.04
6.4
kt
2.0
0.5
2.5
Table 5: Marginal mineralised material contained within the pit design (Non-JORC)
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
20
BFS Results
The Ore Reserves, generated from the Measured and Indicated Resources, occur within a single open
pit. The BFS indicated a scheduled mine life of 7 years using the ore reserve base of 10.5Mt at an
average grade of 0.11% U3O8 and a process plant life of 11 years (including treatment of the marginal
material shown in Table 3). Based on the mill throughput of 1.5Mtpa of ore and a 90% recovery an
average 1,500tpa (3.3Mlb) U3O8 will be produced for the first 7 years from a feed grade of 0.11% U3O8
and 530tpa (1.2Mlb) U3O8 over the last 4 years, using the accumulated marginal material grading
0.039% U3O8.
The BFS cashflow incorporates a flat real price for U3O8 of US$60/lb over the 7 and 11 year period.
The BFS financial modelling shows highly attractive returns can be achieved based on using defined
reserves only. Even with this conservative pricing schedule, the Project is expected to pay back initial
and working capital 30 months after commencement of operations (scheduled to start ramp up in
December Quarter 2008) emphasising the robust nature of the Project.
With a focus on exploration drilling planned to test existing uranium targets in the surrounding tenements
over the next 3 to 4 years, Paladin is confident satellite deposits will be discovered, offering the potential to
extend the project life of Kayelekera beyond the 11 years currently identified in the BFS.
Civil Societies’ Action
As announced on 28 May 2007 a group of Malawian Civil Society Organisations (Societies)
commenced an action against Paladin and the Government of Malawi. To date a number of
preliminary matters of this action has been heard by the Court. Paladin and the Government have
prepared and filed their affidavits in defence of all accusations. Paladin considers it is acting in
accordance with its legal and contractual rights.
Paladin has endeavoured to engage the disaffected Societies to clarify any misunderstanding, to
resolve differences and to involve the groups with the majority of people in the northern part of Malawi
(who fully support the project). The matter is still before the Court and Paladin is confident it will be
resolved satisfactorily.
Project Development
Paladin is now moving forward with its construction program and expects the operation to be
commissioned during the December Quarter 2008.
Site works preparatory to construction start-up have commenced. The 12km branch road is
completed, lay down areas for construction material and equipment are established and the 800
person construction camp is currently being transported by truck convoy from Langer Heinrich in
Namibia to Kayelekera. A 1MW diesel power station has also been brought to site to supply electricity
for the construction phase. Key long lead-time items such as the SAG mill and 10MW diesel powered
electricity generating station have been ordered.
Paladin has awarded the EPCM contract to Engineering & Projects Company Ltd (E&PC) a subsidiary
of the Aveng Group, a Johannesburg listed multi disciplinary mining, manufacturing, engineering and
construction group. “Front End Engineering Design” work is well advanced.
The mining and earth moving contractor has also been selected and civil earthworks commence
shortly.
Technical experts involved in environmental, tailings and radiological and engineering areas have
visited Malawi and the project site on a number of occasions during the past months both to explain
issues to community groups and to conduct reviews as an ongoing part of the project development
activities.
Community liaison activities are being increased as a more formal staffing structure takes shape at
Kayelekera.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
21
QUEENSLAND
Summit Resources (Aust) Pty Ltd (Summit), a wholly owned subsidiary of SMM, controls
approximately 18,800km² of tenements in three major project areas centred on Mt Isa. The Isa North
and Isa South areas cover approximately 5,500km² and host a number of uranium – vanadium
deposits and resources including the Valhalla and Skal deposits.
The recently acquired Georgina Basin covers approximately 11,800km² to the west and southwest of
Mt Isa. The Georgina Basin is prospective for a variety of styles of uranium deposit along with Mt Isa
style base metal deposits.
Centred approximately 250km NNW of Mt Isa and close to Zinifex’s Century zinc mine, the Constance
Range Project, covering 1,500km², is highly prospective for iron ore, base metals and phosphate.
ISA URANIUM JOINT VENTURE
Summit Resources (Aust) Pty Ltd 50% and Manager
Mt Isa Uranium Pty Ltd 50%
The Isa Uranium Joint Venture (IUJV) covers ground containing the Valhalla and Skal uranium
deposits 40km north of Mt Isa in Queensland. Participants in the Joint Venture are Summit and Mt Isa
Uranium Pty Ltd (Mt Isa Uranium), each holding a 50% interest with Summit acting as manager.
Mt Isa Uranium is a wholly owned subsidiary of VUL, a formerly listed public company and now a
wholly owned subsidiary of Paladin. Following Paladin’s successful takeover of VUL in 2006 and
Paladin’s acquisition of 81.9% of the issued capital in SMM earlier this year Paladin’s effective
participating interest in the IUJV is now 90.95%.
Ground subject to the IUJV covers 17km2 at Valhalla and 10km2 at Skal. These two areas lie within a
much larger holding of contiguous tenements of 1,827km2 held 100% and managed by Summit.
The IUJV operating committee has approved a budget of A$8M (US$7M) for the financial year
2007/08 (a 320% increase over the previous year’s expenditure). This amount includes a proposed
drilling program (see below), metallurgical test work, environmental and radiation baseline studies.
The drilling program at Valhalla and Skal is aimed at extending the existing resource envelopes along
strike and improving the current resource classification.
Valhalla Uranium Deposit
The Valhalla uranium - vanadium deposit is located 40km northwest of Mt Isa on Exploration Permit
for Minerals (EPM) 9221. Previous drilling by Queensland Mines Ltd in the 1960’s, and Summit in the
1990’s, established a combined Measured, Indicated and Inferred resource of 56Mlb of U3O8 grading
0.14%. Substantial widths of high grade uranium mineralisation in hematite-albite altered mafic
schists have been intersected in the latest drilling at Valhalla. The deposit is hosted within basalts and
basaltic sediments of the Eastern Creek Volcanics, trends north–south, is approximately 800m in
strike length and is open to the south and at depth.
The drilling plan for 2007 includes 147 drill holes at Valhalla for a total of 50,000m including 33,000m
RC and 17,000m diamond drilling. The program is aimed at ensuring that the majority of the upper
400m of the resource will fall into the Measured and Indicated Resource categories. This depth has
been targeted as it is the current economic limit of any open pit development and extension into areas
that would be mined from underground is not seen as a priority at this time.
In addition, a number of 80m spaced drill lines have been planned to test the expected strike
extension of the mineralisation and add to the Inferred portion of the resource. Radiometric down-hole
logging will be used to check all drill hole samples in conjunction with geochemical assaying of
selected drill holes for verification.
A JORC compliant resource estimate, shown in Table 6, was prepared by Summit and reported during
2006. The resource estimate will be updated at the conclusion of the 2007/2008 drilling campaign.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
22
JORC
CATEGORY
Indicated
Inferred
Total
CUT OFF
%U3O8
0.023
0.023
RESOURCE GRADE METAL
Mt
21.3
12.0
33.3
%U3O8
0.080
0.075
0.078
kt
16.9
9.0
25.9
Indicated
Inferred
Total
11.2
5.1
16.3
Table 6: Valhalla Resource Statement (resources quoted at 100%)
0.11
0.11
0.11
12.6
6.0
18.6
0.064
0.064
Resource estimation consultants, Hellman & Schofield, have independently checked and validated
Summit’s resource estimate.
The resource at Valhalla remains open to the north and south along strike, and down plunge. Along
with near surface metallurgical diamond drilling, resource drilling will now be targeted at extending the
resource along strike and down plunge.
Metallurgical test work to establish the metallurgical flow sheet, recoveries and metallurgical
compatibility with the Skal uranium deposit is ongoing.
Skal Uranium Deposit
The Skal uranium-vanadium deposit is located 32km north of Mt Isa on EPM 14048. Summit
commenced drilling the Skal deposit in 2005. Queensland Mines Ltd had previously released a non-
JORC compliant resource estimate for the deposit shown in Table 7, based on their 1960’s drilling.
Summit has now released the results of further drilling at Skal but has yet to finalise a resource
estimation.
NON-JORC
Historic Resources
RESOURCE
Mt
4.2
GRADE
% U3O8
0.1
U3O8
kt
5.0
Table 7: Skal Historic Resource Statement (resources quoted at 100%)
Two mineralised shoots have now been defined at Skal. The uranium mineralisation in both the
southern and northern shoots at Skal is yet to be closed off by drilling either along strike or at depth.
Approximately 28 drill holes for 5,000m are planned to test the Skal North and King George
mineralised areas during 2007 with the intention of converting historic resources to JORC standards.
The program is also aimed at extending and infilling the area between the two deposits. Historic
information has recently been sourced indicating the potential for additional mineralisation at King
George.
Metallurgical test work to establish the metallurgical flowsheet, recoveries and metallurgical
compatibility with Valhalla is ongoing.
MOUNT ISA NORTH URANIUM PROJECT
Summit Resources (Aust) Pty Ltd 100% and Operator
Outside the IUJV ground which contains the Valhalla and Skal uranium deposits, Summit has
investigated a number of uranium prospects in the 1,827km2 Mt Isa North tenement block. Summit has
progressively drilled a number of uranium deposits that have the potential to expand the Valhalla-Skal
resource base. These uranium deposits and targets now being drilled by Summit at Mt Isa are all
uranium bearing iron oxide copper gold (IOCG) style hematite breccias. Deposits that have been
drilled and resource estimates completed are shown in Table 8 Andersons and Table 9 Watta:
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
23
JORC CATEGORY
Inferred
Inferred
Inferred
Table 8: Andersons Resource Statement (resources quoted at 100%)
CUT OFF
%U3O8
0.023
0.046
0.069
CUT OFF
%U3O8
0.011
0.023
0.046
RESOURCE
Mt
2.0
1.8
1.4
RESOURCE
Mt
5.2
4.2
1.3
GRADE
%U3O8
0.11
0.12
0.13
GRADE
%U3O8
0.037
0.041
0.062
Inferred
Inferred
Inferred
Table 9: Watta Resource Statement (resources quoted at 100%)
JORC CATEGORY
METAL
kt
2.1
2.1
1.8
METAL
kt
1.9
1.7
0.8
Summit will explore a further fifteen known uranium mineral occurrences within its Mt Isa North
Uranium Project area.
GEORGINA BASIN URANIUM PROJECT
Summit Resources (Aust) Pty Ltd 100%
Summit has applied for 16 EPM’s covering 12,000km2 of the Georgina Basin to the west of the Mt Isa
Inlier in northwest Queensland. The Cambrian Georgina Basin has geological characteristics which
are similar to known sedimentary type uranium deposits being mined and evaluated elsewhere in the
world and within Australia. These deposits are in the order of 10 to 200Mlb resources and generally
exploited by conventional shallow open pit or in situ leach (ISL) operations.
The Georgina Basin tenement applications are subject to a joint venture with Newland Resources
Limited (Newland). Newland has sole funded the first A$1.0M (US$0.8M) of exploration expenditure
giving it the right to fund a further A$4.0M (US$3.5M) to earn a 50% interest in the project. Summit is
manager and operator of the joint venture.
This uranium search for basin hosted calcrete channel, paleochannnel and roll front style deposits will
also include Proterozoic basement uranium deposits under the Cambrian sediments, associated with
magnetic features similar to Summit’s Mt Isa deposits, the Ernest Henry and Olympic Dam complex
breccia deposits.
OTHER PROJECTS (URANIUM PROJECT)
MOUNT ISA SOUTH
Summit Resources (Aust) Pty Ltd 100%
The Mt Isa South Project comprises over 2,140km2 of prospective Proterozoic terrane along the Mt Isa
Paroo Fault (MIPF) from 40km to 160km south of Mt Isa.
To date five of the EPM’s have been granted and the remaining four EPM applications are expected to
be granted in the coming months. Glengarry Resources Ltd has a 10% carried interest to mine
development in EPM14233.
EPM14233 covers 13km of the southern strike extension of the MIPF, which is known to be the
structural control on a number of world class deposits to the north including the Mt Isa copper and the
Mt Isa, Hilton and George Fisher lead zinc mines.
Three priority base metal targets, located 38km to 50km south of Mt Isa, have been delineated and the
first holes drilled. Drilling, totalling 1,600m in four holes, has been completed on two of the targets.
An IP geophysical survey has been completed along the MIPF over the shale sequence. The information
will be used to design the next round of drill tests searching for deep-seated copper bodies similar to
those being mined by Xstrata to the north at Mt Isa.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
24
MAY DOWNS
Summit Resources (Aust) Pty Ltd 100%
The potential for gold mineralisation in shale sequences along the 12km Golden Fault structure, 35km
west of Mt Isa, was drill tested in 2005. Several holes intersected narrow zones of anomalous gold
generally associated with elevated copper values.
In September 2005, a further 290 sub block EPM was applied for at May Downs covering the Big Toby
uranium prospects to the west and south of the May Downs fault structure. These uranium prospects
were previously drilled by Urangesellschaft in the 1970’s. On grant uranium exploration will
recommence on these prospects and the structures associated with the Big Toby alkaline intrusive
stockworks in the area.
As well, sampling massive hematite shale rocks in the southern portion of the tenements at Carters
Ridge have returned anomalous gold (40ppbAu), copper (2,545ppmCu) and zinc (2,848ppmZn).
CONSTANCE RANGE
Pacific Mines Limited 100% (owned 100% by Summit)
In the late 1950’s and early 1960’s BHP identified in excess of 200Mt of iron ore (non JORC) in a
number of deposits, hosted by the Train Range Ironstone member of the Middle Proterozoic Mullera
Formation, in the area. BHP also identified 38Mt of phosphate rock at Babbling Brook Hill and a
further 11Mt at Riversleigh.
The Constance Range project covers 1,480km2 in seven EPMs. The tenements are centred 30km
southwest to 45km northwest of Zinifex’s Century zinc mine in far northwest Queensland. Two of the
tenements are subject to a joint venture where Summit as the right to earn an 85% interest.
Sample results have identified several areas with greater than 50% Fe (maximum values of 59% Fe),
silica between 8% and 17%, and with low Al and P contaminants. These results are seen as very
encouraging. Summit is examining options for future exploration of the Constance Range tenements.
MOUNT KELLY
Summit Resources (Aust) Pty Ltd 100%
EPM14694 of 20km2 near CopperCo’s Mt Kelly copper gold discovery, 95km northwest of Mt Isa, was
granted in October 2005. The target here is copper gold mineralisation in middle Proterozoic shales
along northwest trending fault structures.
Satellite imagery and geophysical survey data has been acquired for the area, a review of all previous
exploration is underway and field mapping and geochemical sampling to delineate drill targets are
planned.
NORTHERN TERRITORY
BIGRLYI URANIUM JOINT VENTURE
Energy Metals Limited 53.29% and Manager
Northern Territory Uranium Pty Ltd 41.71%
Southern Cross Exploration NL 5%
The Bigrlyi Uranium Joint Venture covers ten granted Exploration Retention Licences located
approximately 390km northwest of Alice Springs in the Northern Territory. Participants in the joint
venture are Energy Metals Limited (53.3% and Manager), Northern Territory Uranium Pty Ltd (41.7%,
wholly owned subsidiary of Paladin) and Southern Cross Exploration NL (5.00%).
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
25
Bigrlyi is located on the northern margin of the Neoproterozoic to Paleozoic Ngalia Basin in central
Australia. Uranium mineralisation at Bigrlyi is confined to a specific narrow horizon within the lower Mt
Eclipse Sandstone for which a local stratigraphic succession has been defined. The principal 16
uranium deposits at Bigrlyi were discovered in 1973 in the course of regional exploration managed by
Central Pacific Minerals NL on behalf of various joint venture partners including Magellan Petroleum
Australia Ltd, Agip Nucleare Pty Ltd, Urangesellschaft mBH & Co. and the Atomic Energy
Commission.
The current JORC (2004) Code compliant uranium resources reported for Bigrlyi are shown in Table
10:
JORC CATEGORY
(2004)
Indicated
Inferred
Total
CUT OFF
%U3O8
0.05
0.05
RESOURCE
Mt
1.94
2.59
4.53
GRADE
%U3O8 %V2O5
0.17
0.13
0.14
0.19
0.14
0.16
Indicated
Inferred
Total
0.23
0.18
0.20
Table 10: Bigrlyi Resource Statement (resources quoted at 100%)
0.23
0.19
0.21
1.2
1.23
2.43
0.1
0.1
U3O8
kt
3.25
3.26
6.50
2.71
2.30
5.00
V2O5
kt
3.78
3.60
7.41
2.79
2.20
4.95
Most of the resources lie within 200m of the surface and are potentially accessible via open pit mining.
There is excellent potential to increase resources at depth and along strike at all the current resource
areas. Metallurgical testwork has indicated recoveries of 98-99% uranium can be achieved.
Work in progress at Bigrlyi during the 2007 field season has been dominated by drilling. In early April
2007 the Bigrlyi Joint Venture participants approved a substantial drilling program (262 holes for
51,000m) for the annual program with drilling commencing in late April 2007. To date (August 2007)
138 holes have been completed comprised of 20,000m of RC and 7,600m of diamond drilling.
It is expected that the 2007 drilling program will result in a substantial increase in resources and this is
likely to positively impact the Project, given the current state of the uranium market and the expected
outlook for sustained high prices.
A scoping study on the economics of establishing a uranium mining operation at Bigrlyi commenced
earlier this year and is nearing completion with results expected during the September Quarter of
2007.
WESTERN AUSTRALIA
MANYINGEE URANIUM PROJECT
The Manyingee Uranium Project is 100% owned by Paladin and is located in the northwest of Western
Australia, 1,100km north of Perth and 85km inland from the coastal township of Onslow. The property
is comprised of three mining leases covering 13km2.
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 some 400 holes were drilled
and this established the extent and continuity of the sediment hosted uranium mineralisation in
permeable sandstone in palaeochannels. Field trials by AFMEX demonstrated that the Manyingee
sandstone hosted uranium deposit is amenable to extraction by in-situ leaching (ISL).
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
The Manyingee Project contains JORC (1999) Code compliant resources as shown in Table 11:
26
JORC CATEGORY
(1999)
Indicated
Inferred
Total
CUT OFF
% U3O8
0.03
0.03
RESOURCE
Mt
7.9
5.5
13.4
Table 11: Manyingee Resource Statement
GRADE
% U3O8
0.10
0.05
0.08
U3O8
kt
8.1
2.8
10.9
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 URANIUM PROJECT
The Oobagooma Project 100% owned by Paladin is located in the West Kimberley region of Western
Australia, 1,900km north-north-east of Perth and 75km 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
the Commonwealth
Government and the Department of Defence will be required before mining tenements can be granted
by the State.
licences covering 392km2. Consent of
for exploration
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.
An estimate of the uranium resources using geostatistical methods was carried out by AFMEX. This
work was done before the JORC Code had been formulated and was thus not carried out in
accordance with the Code. The AFMEX historical estimate is shown in Table 12:
NON-JORC
Historic Resources
RESOURCE
Mt
8.3
Table 12: Oobagooma Historical Resource Statement
CUT OFF
% U3O8
0.03
GRADE
% U3O8
0.12
U3O8
kt
10.0
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
preparation of a JORC compliant resource estimate. The mineralisation in this sandstone hosted
uranium deposit 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 by ISL methods.
SOUTH AUSTRALIA
QUASAR URANIUM JOINT VENTURE
Paladin 15-20%
Quasar Resources Pty Ltd 80% and Manager
The Joint Venture with Quasar Resources Pty Ltd covers two exploration licences in the northern
Frome Basin in South Australia. The two licences cover 1,051km2. 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 subsidiary of General
Atomics of the USA.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
REVIEW OF OPERATIONS (continued)
27
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 100%
Paladin owns a unique uranium database, compiled over 30 years of investigations by the
international uranium mining house Uranerzbergbau GmbH of 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.
INVESTMENTS
DEEP YELLOW LTD (DYL)
(Paladin 14.34%)
DYL is a dedicated uranium exploration company listed on the Australian Stock Exchange with
exploration holdings in Namibia and Australia. Through its wholly owned Namibian subsidiary, Reptile
Uranium Namibia (Pty) Ltd, DYL is actively exploring for uranium on its four 100% owned exclusive
prospecting licences covering 2,872km2 in the Namib Naukluft Desert inland from Walvis Bay and
south and west of Paladin’s Langer Heinrich uranium mine. Reverse circulation percussion drilling on
regional targets and previously known resources has commenced with early results confirming the
nature of the Tubas resource discovered by Anglo American in the 1970’s.
In Australia DYL is focused on uranium exploration in the Mt Isa district in northwest Queensland and
the Tanami Arunta Province in the Northern Territory.
Paladin is also entitled to a 2% gross royalty on production from the Napperby and North East Arunta
projects in the Northern Territory.
Paladin’s equity in DYL increased to 14.34% on 8 August 2007 via an entitlement issue and
subscription to the subsequent shortfall. The additional investment totalled A$20.7M (US$17.8M)
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW
28
CHANGE IN FUNCTIONAL AND PRESENTATION CURRENCY
The functional currency for a company is the currency of the primary economic environment in which
the Company operates. Up to December 2006 the functional currency of the primary economic
environment in which the Paladin Group operates was Australian dollars. In December 2006 there
were several factors which produced a change in functional currency for the majority of the Paladin
Group to United States (US) dollars. These include completion of construction and commissioning at
the Langer Heinrich Uranium Project, issue of US$250 million in convertible bonds, conversion of
excess group cash into US dollars resulting in derivation of US interest revenue, and redesignation of
all intercompany group loans into US dollars.
The presentation currency for a company is the currency in which the company chooses to present its
financial reports. As the functional currency of Paladin Resources Ltd and the majority of the Paladin
Group changed in December 2006 to US dollars, the Company has decided to change the
presentation currency for financial reporting to US dollars in order to better reflect the Paladin Group’s
financial position and financial performance.
INCOME STATEMENTS
Revenue from continuing operations
Gross (loss)/profit
Exploration and evaluation expenses
Other expenses net of other income
Finance costs
Income tax benefit
Minority interests
YEAR ENDED 30 JUNE
2006
US$m
2007
US$m
11.2
(0.8)
(7.4)
(28.5)
(13.0)
11.7
0.4
3.2
3.2
(3.2)
(5.5)
(0.1)
-
-
Loss after tax from continuing operations attributable to the
ordinary equity holders of the Company
(37.6)
(5.6)
Loss per share – basic and diluted
US$
(0.07)
US$
(0.01)
Revenue from Continuing Operations has increased substantially to US$11.2 million in 2007 as a
result of both the first uranium sale to a US energy utility of US$3.3 million and higher interest revenue
derived from higher average cash holdings for the period in 2007 when compared to 2006.
Gross Profit/(loss) in 2007 is a gross loss of US$0.8 million despite the increase in revenue from
continuing operations, as a consequence of the commencement of ramp up activities for Langer
Heinrich. From an accounting perspective the project was deemed to be in operation from 1 April
2007, which is the date that the project was in the location and condition necessary for it to be capable
of operating in the manner intended by management. As a consequence the year ended 30 June
2007 income statement only includes the Langer Heinrich operation result for three months. The
gross loss includes a loss of US$5.4 million relating to the first uranium sale as the sales commitment
was met by third party uranium purchase and a loss of US$3.3 million from operations for the three
months ended 30 June 2007 relating to delayed ramp up in production; both net of US$7.9 million in
interest and other revenue.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
29
Exploration and Evaluation Expenditure increased in 2007 to US$7.4 million primarily as a result of the
completion of the Bankable Feasibility Study for the Kayelekera Uranium Project and the addition of
expenditure on the Summit, Valhalla/Skal and Bigrlyi Uranium Projects since they were acquired.
Other Expenses Net of Other Income has increased in 2007 to US$28.5 million net expense as a
result of a sales contracts expense and higher corporate/marketing costs, share based payments and
employee benefits expenses. The sales contracts expense amounts to US$7.8 million and is
attributable to the requirement to meet July 2007 Langer Heinrich sales commitments by use of third
party uranium purchases. The higher expenses relate to both the growth of the Company and the
expanded corporate capability in the last year to enable future growth.
Finance Costs of US$13.0 million in 2007 relates to both the issue of the US$250 million in convertible
bonds in December 2006 and the Langer Heinrich project finance facilities from 1 April 2007 being the
accounting operation date - prior to this date finance costs for the project were capitalised as part of
the costs of construction.
Income Tax Benefit of US$11.7 million relates to both the recognition of Namibian deferred net tax
assets and the reversal of a deferred net tax liability relating to the convertible bonds over the term of
the bond. As a consequence of commencing ramp up activities at the Langer Heinrich Uranium
Project realisation of Namibian net tax benefits has been deemed to be probable resulting in a
US$10.4 million income tax benefit for the year ending 30 June 2007. The convertible bond deferred
tax liability has been recognised through reserves and relates to the equity component of the
convertible bonds - US$1.3 million has been reversed as an income tax benefit during the year ending
30 June 2007.
Minority Interests of US$0.4 million have been recorded in 2007 attributable to the 18.1% of Summit
Resources Ltd not acquired by the Company during the year.
The Loss after tax for the year ended 30 June 2007 of US$37.6 million is an increase to the year
ended 30 June 2006 loss after tax of US$5.6 million as a consequence of the gross loss in 2007, an
increased investment in exploration and evaluation expenditure, higher other net expenses and
recognition of interest expense and minority interests; despite the income tax benefit recorded in 2007.
Earnings Per Share
The Earnings per Share noted on the Income Statements reflected the underlying result for the
specific reported periods and the additional shares issued in 2007 compared to 2006.
Segment Disclosure
In the Namibian geographical segment the Company reflected a loss after tax of US$7.0 million as the
Langer Heinrich Uranium Project production ramp up phase was slower than anticipated. The
Malawian geographical segment loss after tax of US$4.2 million primarily reflected the exploration and
evaluation expenditure for the Kayelekera Uranium Project Bankable Feasibility Study. In the
Australian geographical segment the Company reflected the remaining Income Statement activities.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
30
BALANCE SHEETS
Total Current Assets
Total Non Current Assets
Total Assets
Total Current Liabilities
Total Non Current Liabilities
Total Liabilities
Net Assets
30 JUNE 2007
US$m
30 JUNE 2006
US$m
233.4
1,825.0
2,058.4
30.2
719.9
750.1
1,308.3
46.3
70.6
116.9
8.5
17.4
25.9
91.0
Current Assets have increased to US$233.4 million at 30 June 2007 attributable to higher cash levels
and recognition of inventories for the Langer Heinrich Uranium Project and third party uranium
purchases.
Cash has increased as a result of the issue of US$250 million in convertible bonds, proceeds from
exercise of share options, interest received and cash acquired from both the Valhalla and Summit
acquisitions. This increase occurred despite the cash spend on the Bankable Feasibility Study and
construction work for the Kayelekera Uranium Project, exploration and evaluation project expenditure,
additional Deep Yellow Ltd share investment, third party uranium purchases and corporate costs for
the year ended 30 June 2007. Funding for the Langer Heinrich Uranium Project construction,
commissioning and commencement of ramp up activities did not significantly impact cash as it has
been primarily provided by drawdown of project finance facilities and use of third party uranium
purchases.
Of the US$182.8 million held in cash as at 30 June 2007, US$159.1 million has been invested in short-
term US treasury bonds and the balance of cash is held with banks.
Inventories of US$38.0 million have been recognised at 30 June 2007 relating to both inventories for
the Langer Heinrich Uranium Project of US$13.3 million and third party uranium purchases of US$24.7
million. The project inventories relate to finished goods, work in progress and stores and spares for
the Langer Heinrich Uranium Project.
Non Current Assets increased to US$1,825.0 million during the year mainly attributable to the
acquisition of both Summit Resources Ltd and Valhalla Uranium Ltd; mine construction,
commissioning and ramp up activities for the Langer Heinrich Uranium Project; increased market
value and percentage holding in Deep Yellow Ltd; and recognition of deferred net tax assets for the
Langer Heinrich Uranium Project.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
31
The Summit Resources Ltd acquisition has resulted in the recognition of a US$1,433.1 million
additional exploration and evaluation expenditure asset as part of the allocation of the consideration
paid, which consisted of 101,157,400 shares plus acquisition costs and the tax effect of the
acquisition.
The Valhalla Uranium Ltd acquisition has resulted in the additional recognition of a US$149.8 million
additional exploration and evaluation expenditure asset as part of the allocation of the consideration
paid, which consisted of 37,974,256 shares plus acquisition costs.
The Langer Heinrich Uranium Project assets have primarily been classified under property, plant and
equipment at 30 June 2007, with the power and water supply rights classified under intangible assets.
From an accounting perspective the project has been depreciated from 1 April 2007 which is the date
that it was in the location and condition necessary for it to be capable of operating in the manner
intended by management.
At 30 June 2007 the Company holds 117,585,704 shares in Deep Yellow Ltd (12% interest) with a
value of US$59.9 million.
Deferred tax net assets of US$10.4 million have been recognised at 30 June 2007 as a consequence
of commencing ramp up activities at the Langer Heinrich Uranium Project with realisation of all
Namibian tax net benefits now deemed to be probable.
Current Liabilities have increased to US$30.2 million at 30 June 2007 as a result of ramp up activities
for the Langer Heinrich Uranium Project, interest payable on both the Langer Heinrich project finance
facilities and the convertible bonds, initial recognition of a rehabilitation provision for the Langer
Heinrich Uranium Project, acquisition of Summit Resources Ltd, booking of sales contracts provision
and classification of a portion of the Langer Heinrich project finance facilities as current.
At 30 June 2007 a US$7.8 million sales contracts provision has been recognised attributable to the
requirement to meet July 2007 Langer Heinrich sales commitments by use of third party uranium
purchases.
Non Current Liabilities increased to US$719.9 million at 30 June 2007 attributable to the issue of
convertible bonds, the drawdown on the Langer Heinrich project finance facilities and the recognition
of deferred tax liabilities.
On 15 December 2006, the Company issued US$250 million in convertible bonds with an underlying
coupon rate of 4.5%, maturity 15 December 2011 and a conversion price of US$7.685 for Company
shares. Under AIFRS these convertible bonds are essentially both a liability (underlying bond) and
equity instrument (conversion rights into Company shares). Based on AIFRS US$212.2 million has
been initially allocated to a non-current liability (underlying effective interest rate of 8.75%) and
US$37.8 million to a non-distributable convertible bonds reserve.
At 30 June 2007 the Langer Heinrich project finance facilities have been drawn down to US$66.6
million (current US$5.6 million and non current US$61.0 million) to fund construction, commissioning
and ramp up activities, leaving available facilities of US$4.4 million at year end.
In relation to the Summit Resources Ltd acquisition a US$415.7 million deferred tax liability was
initially recorded relating to the recognition of acquired exploration and evaluation expenditure from the
allocation of consideration paid. No deferred tax liability was recognised for the Valhalla Uranium Ltd
acquisition as this was deemed not to meet the definition of a business combination and as a
consequence, in accordance with the Company accounting policy for income tax, no temporary
differences were recorded upon the initial recognition of this asset.
A deferred tax liability of US$23.4 million has been recognised through reserves which relates to both
the equity component of the convertible bonds and the increase in value of Deep Yellow share
investments above cost.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
32
Segment Disclosure
In the Balance Sheet at 30 June 2007 the Company reflected a significant increase in the Australian
geographical segment assets and liabilities as a result of acquisition of both Summit Resources Ltd
and Valhalla Uranium Ltd, issue of the convertible bonds, increase in value of Deep Yellow share
investments and third party uranium purchases. For the Namibian geographical segment an increase
occurred in assets and liabilities attributable to construction, commissioning and ramp up activities for
the Langer Heinrich Uranium Project. For the Malawi geographical segment an increase occurred in
assets and liabilities as a result of construction activities for the Kayelekera Uranium Project.
STATEMENTS OF CHANGES IN EQUITY
YEAR ENDED 30 JUNE
2006
2007
US$m
US$m
Total Equity at the Beginning of the Financial Year
91.0
Loss for the Year Ended 30 June, after Minority Interests
(37.6)
Movement in Reserves, net of Foreign Currency
Movement in Equity, net of Foreign Currency
Foreign Currency Translation
Minority Interests, net of Foreign Currency
70.9
959.2
40.1
184.7
33.5
(5.6)
4.4
62.1
(3.4)
-
Total Equity at the End of the Financial Year
1,308.3
91.0
Loss for the Year Ended 30 June 2007 is discussed under the Income Statements section and is an
increase from the loss in the comparative period.
Movement in Reserves in 2007 of US$70.9 million increase is higher than 2006 and relates to the
creation of the non-distributable reserve for the convertible bonds (net of tax), the revaluation
increment attributable to the increase in Deep Yellow Ltd share price from the prior period (net of tax),
acquisition reserve for Summit Resources Ltd and recognised value of unlisted employee options.
Unlisted employee options exercised during the year amounted to 8,770,000 with an exercise price
between A$1.00 and A$2.80; and 4,533,670 unlisted employee options were granted during the year
with an exercise price between A$5.50 and A$8.77.
Movement in Equity increased to US$959.2 million in 2007 as a consequence of the issue of
101,157,400 shares to acquire 81.9% of Summit Resources Ltd and 37,974,256 shares to acquire
100% of Valhalla Uranium Ltd, which were valued at US$798.9 million and US$151.4 million
respectively, and exercise of unlisted employee options. The number of fully paid ordinary shares on
issue at 30 June 2007 is 602,437,369 an increase of 148,201,656 during the year.
Share options of 19,678,670 remain outstanding at 30 June 2007 to Directors, employees, and
consultants directly engaged in corporate, mine construction, operations, exploration and evaluation
work for the Company.
Foreign Currency Translation relates to both the transition of functional and presentation currency from
Australian dollars to United States dollars in December 2006, and the translation of presentation
currency into US dollars on an ongoing basis and for the comparative year.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
33
Minority Interests recognised during the year relate to the 18.1% interest in Summit Resources Ltd not
acquired from the takeover bid that closed on 1 June 2007. The Development Agreement for the
Kayelekera Uranium Project signed on 23 February 2007 entitles the Government of Malawi with 15%
of Paladin (Africa) Ltd, owner of the project, in exchange for a reduction of 2.5% in corporate tax, the
full amount of rent resource tax and royalty offsets. No minority interests have been reflected for this
as at 30 June 2007 as Paladin (Africa) Ltd is in a net liability position as a consequence of the
Company’s policy to expense exploration and evaluation expenditure prior to the decision made to
proceed to development.
CASH FLOW STATEMENTS
Net Cash (Outflow)/Inflow from Operating Activities
Net Cash Outflow from Investing Activities
Net Cash Inflow from Financing Activities
Net Increase in Cash Held
Cash at the Beginning of Financial Year
Effects of Exchange Rate Changes
YEAR ENDED 30 JUNE
2006
2007
US$m US$m
(38.6)
(122.0)
298.7
138.1
43.6
1.1
0.5
(57.2)
71.0
14.3
30.1
(0.8)
Cash at the End of the Financial Year
182.8
43.6
Net Cash Outflow from Operating Activities was US$38.6 million outflow in 2007 primarily from higher
payments to suppliers and employees relating to the ramp up activities for the Langer Heinrich
Uranium Project, the growth of the Company, expanded corporate capability and interest payments on
debt facilities. Included in cash outflows from operating activities is US$10.7 million of Summit
Resources Ltd takeover defence activities from 27 April 2007, the acquisition date by the Company.
This occurred despite an increase in interest receipts as a consequence of higher average cash
holdings. No uranium sales receipts occurred to 30 June 2007 as a result of the standard industry
credit terms of sale.
Net Cash Outflow from Investing Activities increased to US$122.0 million in 2007 as a result of the
construction, commissioning and initial ramp up activities for the Langer Heinrich Uranium Project,
completion of the Bankable Feasibility Study for the Kayelekera Uranium Project, exploration and
evaluation project expenditure, acquisition of additional investments in Deep Yellow Ltd and third party
uranium purchases. This increase occurred despite proceeds from sale of investments and property,
plant and equipment and US$21.3 million cash acquired from the Summit Resources Ltd and Valhalla
Uranium Ltd acquisitions net of payments for these acquisitions.
Net Cash Inflow from Financing Activities of US$298.7 million in 2007 is attributable to US$250 million
received from issue of convertible bonds, US$49.6 million drawn under the project finance facilities for
the Langer Heinrich Uranium Project and proceeds from the exercise of 8,770,000 unlisted employee
options; despite US$7.7 million in establishment costs for the convertible bonds and project finance
facilities.
Net Increase in Cash in 2007 was US$138.1 million, which is higher than the net increase in cash in
2006 of US$14.3 million, as a consequence of the issue of the convertible bonds and amounts drawn
under the project finance facilities for the Langer Heinrich Uranium Project; despite increased cash
outflows from investing and operating activities.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
34
Effects of Exchange Rate Changes reflects a US$1.1 million gain for 2007 and a US$0.8 million loss
for 2006.
The Cash at 30 June 2007 of US$182.8 million represents a significant increase in cash to the
comparative period of 2006.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s principal source of liquidity as at 30 June 2007 is cash of US$182.8 million (30 June
2006 – US$43.6 million). Of this amount in 2007 US$159.1 million has been invested in short-term US
treasury bonds.
The Company’s principal sources of cash for the year ended 30 June 2007 were the issue of US$250
million in convertible bonds, project finance facilities drawdowns, interest received from cash
investments, proceeds from exercise of unlisted employee options and cash acquired on acquisition of
Summit Resources Ltd and Valhalla Uranium Ltd.
The Company has in place Langer Heinrich project finance facilities of US$71 million of which a total
of US$66.6 million had been drawn by 30 June 2007, leaving available facilities of US$4.4 million.
The following is a summary of the Company’s outstanding commitments as at 30 June 2007:
Payments due by period
Total
US$m
Less than 1 yr
US$m
1 to 5yrs
US$m
Unknown
US$m
Tenements
Mine construction
Operating leases
Manyingee acquisition costs
2.6
9.3
0.5
0.6
Total commitments
13.0
2.6
9.3
0.2
-
12.1
-
-
0.3
-
0.3
-
-
-
0.6
0.6
In relation to the Manyingee Uranium Project, the acquisition terms provide for a payment of A$0.75
million (US$0.6 million) 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$0.75
million (US$0.6 million) and are subject to the Western Australian Department of Minerals & Energy
granting tenements comprising 2 exploration licence applications. The A$0.75 million (US$0.6 million)
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.
The Company has no other off balance sheet arrangements.
68757_1
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
35
OUTSTANDING SHARE INFORMATION
As at 3 September 2007 the Company had 654,646,943 fully paid ordinary shares issued and
outstanding. The following table sets out the fully paid ordinary outstanding shares and those issuable
under the Company Executive Share Option Plan and in relation to the Convertible Bond:
As at 3 September 2007
Outstanding shares
Issuable under Executive Share Option Plan
Issuable in relation to the Convertible Bond
Total
CRITICAL ACCOUNTING ESTIMATES
Number
602,437,369
19,678,670
32,530,904
654,646,943
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 following: carrying value
or impairment of inventories, financial investments, property, plant and equipment, intangibles, mineral
properties and deferred tax assets; carrying value of rehabilitation, mine closure, sales contracts
provisions and deferred tax liabilities; allocation of convertible bond debt and equity components;
calculation of share based payments expense; assessment of reserves; and commencement date of
operations for the Langer Heinrich Uranium Project.
FINANCIAL INSTRUMENTS
At 30 June 2007 the Company has exposure to interest rate risk which is limited to the floating market
rate for cash and project finance debt facilities. As the convertible bonds are a fixed interest financial
instrument, the Company has no exposure to interest rate risk for the convertible bonds.
The Company does not have significant foreign currency translation risk for non-monetary assets and
liabilities of the Namibian and Malawian operations as these are deemed to have a functional currency
of United States dollars, and the Company has adopted a presentation currency of United States
dollars. The Company does have significant foreign currency translation risk for non-monetary assets
and liabilities of the Australian exploration and evaluation operations as these are deemed to have a
functional currency of Australian dollars, and the Company has adopted a presentation currency of
United States dollars. The Company has no significant monetary foreign currency assets and
liabilities apart from Namibian dollar cash, receivables, payables and provisions and Australian dollar
cash, payables and deferred tax liabilities.
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 2007 no payments were made to Director related entities. Directors of
the Company receive standard personal based compensation.
68757_1
36
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
_________________________________________________________________________________
DISCLOSURE CONTROLS
The Company has applied its Disclosure Control Policy to the preparation of the Annual Report for the
year ended 30 June 2007, associated Consolidated Financial Statements, Management Discussion
and Analysis and Directors’ Report. An evaluation of the Company’s disclosure controls and
procedures used has been undertaken and concluded that the disclosure controls and procedures
were effective.
INTERNAL CONTROLS
The Company has designed appropriate internal controls over financial reporting (ICFR) and ensured
that these were in place for the year ended 30 June 2007. An evaluation of the design of ICFR has
concluded that it is adequate to prevent a material misstatement of the Company’s annual financial
statements as at 30 June 2007.
During the year the Company has implemented an internal audit function which is externally
contracted to Deloitte Touche Tohmatsu. Internal audit reports were completed on the key finance
processes in Namibia and Australia during the year and the Company is well advanced in addressing
the recommendations from these reports.
The resultant changes to the internal controls over financial reporting have improved and will continue
to improve the Company’s framework of internal control in relation to financial reporting.
SUBSEQUENT EVENTS
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 2007 Financial Report:
Board Changes
On 9 July 2007, the Company appointed Mr Donald Shumka as a Non-executive Director of Paladin
Resources Ltd. Mr Shumka is Vancouver based and is the President and Managing Director of
Walden Management Ltd., a consulting firm specialising in natural resources.
Mr. Shumka’s appointment followed the resignation of Mr. George Pirie who, due to his increasing
time commitment as the President and Chief Executive Officer of Breakwater Resources Ltd (a TSX
listed company), no longer had sufficient time available to undertake his duties in his role as a Non-
executive Director of Paladin.
Increased Holding in Deep Yellow Ltd
On 26 July 2007, the Consolidated Entity acquired an additional 9,789,808 shares in Deep Yellow Ltd
pursuant to an entitlement issue. Subsequently, on 8 August 2007, the Consolidated Entity acquired
an additional 31,673,949 shares in Deep Yellow Ltd via subscription for the shortfall of the entitlement
issue. The additional investments totalled A$20.7 million (US$17.8 million). After these acquisitions
the Consolidated Entity now holds 14.34% of Deep Yellow Ltd.
Mt Isa Uranium Joint Venture Litigation
On 3 August 2007, the Company announced that its wholly owned subsidiary, Mt Isa Uranium Pty Ltd
had settled the court proceedings commenced by Summit Resources (Aust) Pty Ltd (ultimately 81.9%
owned by the Company) against it and Resolute Ltd in relation to alleged breaches of confidentiality
provisions in the Mt Isa Uranium Project joint venture agreement.
68757_1
37
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW (continued)
_________________________________________________________________________________
Subsequently, Areva NC (Australia) Pty Ltd has advised that it intends to apply to the Supreme Court
of Western Australia for orders under Section 237 of the Corporations Act 2001 to be granted leave to
intervene in the court proceedings.
The Company has always remained confident that the court proceedings could be successfully
defended but a change in ownership of the joint venture deposits is not of significance to the
Company, as a consequence of the indemnity given by Resolute Ltd and the fact that the Company
holds an ultimate 81.9% interest in Summit Resources (Aust) Pty Ltd.
Kayelekera Uranium Project, Malawi – Major Development Contracts Signed
On 15 August 2007, the Company announced that its subsidiary Paladin (Africa) Ltd had signed three
major contracts for the development of its Kayelekera Uranium Project.
The EPCM contract was awarded to Engineering and Projects Company appointing them as the
Project Engineers and the mining and earthworks contracts were awarded to Mota Engil Engineering.
68757_1
CORPORATE GOVERNANCE STATEMENT
38
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 also complies with the Ontario Securities Commission’s corporate
governance requirements as set out in National Instrument 58-101.
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;
68757_1
39
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; and
• Providing the Annual Report in a “user friendly” electronic format on its website.
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.
At the 2007 Annual General Meeting to be held in November 2007, a resolution will be proposed to
allow for direct voting by shareholders. This will enable shareholders to vote directly, as an alternative
to appointing a proxy to vote on their behalf. Direct voting is similar to voting by postal vote in an
election.
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.
68757_1
40
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 has been within the last 3 years a material 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. The Board also noted that another law firm (Freehills) also provided legal services of a
material nature to the Company over the previous 18 month period. 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 day preceding the Board meeting, members of senior management
attend and make presentations to the Board covering all aspects of the Company’s operations. 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 as
part of the budget review process in May 2007. The Managing Director encourages full access to
executive Managers by the Board to ensure transparency at a senior management level and Non-
executive Directors are encouraged to visit the Company’s operations.
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 without submitting themselves for re-
election. Retiring Directors are eligible for re-election by shareholders. Details of those Directors
seeking re-election at the 2007 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.
68757_1
41
CORPORATE GOVERNANCE STATEMENT (continued)
Retirement and Re-election
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 13 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. The Board considers that Mr Borshoff’s uranium
experience and Mr Crabb’s international resource law experience remains valuable at Board level
during this critical stage of the Company’s development.
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.
During the past year, Mr George Pirie indicated that, due to his increasing time commitment as the
President and Chief Executive Officer of Breakwater Resources Ltd (a TSX listed company), he no
longer had sufficient time available to undertake his duties in his role as a Non-executive Director of
Paladin. Accordingly, following an extensive search and review period by the Nomination Committee,
the Board was pleased to secure the appointment of Mr Donald Shumka.
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 2007 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 in an open forum and recommendations for improvement considered.
68757_1
42
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 familiarise
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 2007.
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.
68757_1
43
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 and 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;
• 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:-
• Donald Shumka – Chairman (appointed 9 July 2007)
Non-executive, Independent Director
(George Pirie undertook this role to the date of his resignation , 9 July 2007)
• 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 each quarterly meeting
and on other occasions where circumstances warrant. At the discretion of the Chairman, having
regard to the nature of the agenda, relevant members of management may be invited to attend
meetings.
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.
68757_1
44
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. The Board considers that given the
importance of Board composition, it is appropriate that all members of the Board are members of the
Nomination Committee.
The number of meetings of the Nomination Committee during the reporting period and the names on
the attendance record is set out in the Directors’ Report.
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:-
• 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 given the increasing complexity of the Paladin Group and such factors as fees paid
to 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.
68757_1
CORPORATE GOVERNANCE STATEMENT (continued)
45
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
• Donald Shumka – Non-executive Director (appointed 10 August 2007)
Independent Director
(George Pirie undertook this role to the date of his resignation , 9 July 2007)
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 2007 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
Financial Officer.
RISK MANAGEMENT
The Company has established policies on risk oversight and management and has a risk management
and internal control system to manage the Company’s material business risks. The Company has
developed its risk management policy in line with the implementation of the risk management system
and a risk management framework.
68757_1
46
CORPORATE GOVERNANCE STATEMENT (continued)
RISK MANAGEMENT (continued)
The Company’s Risk Management Policy is to identify, assess, and mitigate risks which are deemed
unacceptable to the Company. Operational business controls have been identified and are in place to
ensure unwanted threats to the business are managed. Paladin has also developed the business
environment for managers and senior personnel to assess risks and make sound business decisions.
Whilst all personnel have a responsibility to identify and report to management risks which may
materially affect the Company, the Managing Director has the overall responsibility for the
management of risk in the Company. Paladin has adopted the Australian and New Zealand Standard
4360:2004, “Risk Management” in managing the risk management process.
The risk management system is designed and implemented by the Managing Director, with assistance
from senior executives, and is subject to the review of the Board of Directors.
The Company maintains a Risk Register, which sets out all of the enterprise risks that have been
identified and includes an assessment of the risk (risks analysed and evaluated), and treatment plans
to mitigate risks. The risk register has been compiled and is subject to periodic review by the
Managing Director and senior management to ensure adequate risk control measures have been
identified. An operational risk assessment system is in place at the Langer Heinrich operations, 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.
68757_1
47
CORPORATE GOVERNANCE STATEMENT (continued)
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
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 recognises 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.
68757_1
48
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 2007.
Directors
The following persons were Directors of Paladin Resources Ltd (Company) and were in office for this
entire period unless otherwise indicated:
Mr Rick Wayne Crabb (Non-executive Chairman)
Mr John Borshoff (Managing Director)
Mr Sean Llewelyn (Non-executive Director)
Mr George Pirie (Non-executive Director), resigned 9 July 2007
Mr Ian Noble (Non-executive Director)
Mr Donald Shumka (Non-executive Director), appointed 9 July 2007
Principal Activity
The principal activity of the Consolidated Entity was exploration, evaluation, development and operation
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 8 to 37 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 or listed below.
The takeover bid for Valhalla Uranium Ltd was announced on 10 July 2006 and completed on 27 October
2006 with acquisition of 100% of the issued capital.
The takeover bid for Summit Resources Ltd was announced on 27 February 2007 and eventually closed
on 1 June 2007 with acquisition of 81.9% of the issued capital.
68757_1
49
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 2007 Financial Report:
Board Changes
On 9 July 2007, the Company appointed Mr Donald Shumka as a Non-executive Director of Paladin
Resources Ltd. Mr Shumka is Vancouver based and is the President and Managing Director of Walden
Management Ltd., a consulting firm specialising in natural resources.
Mr. Shumka’s appointment followed the resignation of Mr. George Pirie who, due to his increasing time
commitment as the President and Chief Executive Officer of Breakwater Resources Ltd (a TSX listed
company), no longer had sufficient time available to undertake his duties in his role as a Non-executive
Director of Paladin.
Increased Holding in Deep Yellow Ltd
On 26 July 2007, the Consolidated Entity acquired an additional 9,789,808 shares in Deep Yellow Ltd
pursuant to an entitlement issue. Subsequently, on 8 August 2007, the Consolidated Entity acquired an
additional 31,673,949 shares in Deep Yellow Ltd via subscription for the shortfall of the entitlement issue.
The additional investments totalled A$20.7 million (US$17.8 million). After these acquisitions the
Consolidated Entity now holds 14.34% of Deep Yellow Ltd.
Mt Isa Uranium Joint Venture Litigation
On 3 August 2007, the Company announced that its wholly owned subsidiary, Mt Isa Uranium Pty Ltd had
settled the court proceedings commenced by Summit Resources (Aust) Pty Ltd (ultimately 81.9% owned
by the Company) against it and Resolute Ltd in relation to alleged breaches of confidentiality provisions in
the Mt Isa Uranium Project joint venture agreement.
Subsequently, Areva NC (Australia) Pty Ltd has advised that it intends to apply to the Supreme Court of
Western Australia for orders under Section 237 of the Corporations Act 2001 to be granted leave to
intervene in the court proceedings.
The Company has always remained confident that the court proceedings could be successfully defended
but a change in ownership of the joint venture deposits is not of significance to the Company, as a
consequence of the indemnity given by Resolute Ltd and the fact that the Company holds an ultimate
81.9% interest in Summit Resources (Aust) Pty Ltd.
Kayelekera Uranium Project, Malawi – Major Development Contracts Signed
On 15 August 2007, the Company announced that its subsidiary Paladin (Africa) Ltd had signed three
major contracts for the development of its Kayelekera Uranium Project.
The EPCM contract was awarded to Engineering and Projects Company appointing them as the Project
Engineers and the mining and earthworks contracts were awarded to Mota Engil Engineering.
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.
68757_1
50
DIRECTORS' REPORT (continued)
Environmental Regulations
The Consolidated Entity is subject to significant environmental regulation in respect to its exploration,
evaluation, development and operational activities for uranium projects under the laws of the countries in
which its activities are conducted. The Consolidated Entity currently has an operation in Namibia, a
development in Malawi and exploration projects in Australia. The Consolidated Entity’s Policy is to
comply with all applicable environmental laws and regulations in the countries in which it conducts
business.
Specific environmental regulations contained within the approvals and licences for the exploration,
development and operation apply to the activities conducted at each site. In addition there are many
other international and industry standards applied to the Consolidated Entity’s activities. These
environmental laws, regulations and standards relate to environmental factors such as radiation, water,
flora, fauna, air quality, noise, waste management and pollution control.
The Directors are not aware of any environmental matters which would have a significant adverse effect
on the Consolidated Entity.
Information on Directors
Mr Rick Wayne Crabb (Non-executive Chairman) Age 50
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 Golden Rim Resources Ltd (since 2001), Ashburton
Minerals Ltd (since 1999), Otto Energy Ltd (since 2004), Port Bouvard Ltd (since 1996) and Royal
Resources Limited (since 2004).
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
Aldershot Resources Ltd from 2004 to 2005
Thundelarra Exploration Ltd from 2003 to 2007
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 62
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 over 30 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
68757_1
51
DIRECTORS' REPORT (continued)
Information on Directors (continued)
He has extensive knowledge of the uranium industry and experience in company management, strategic
planning and administration. He serves on a number of industry organisations including the board of the
Australian Uranium Association, he is Chair of the Association of Mining and Exploration Companies’
Uranium Working Committee and is a member of the Steering Committee of the Uranium Industry
Framework established by the Commonwealth Government.
Mr Borshoff founded Paladin Resources Ltd and was appointed a Director on 24 September 1993.
Special Responsibilities
Managing Director
Member of Nomination Committee from 1 June 2005
Mr Sean Reveille Llewelyn (Non-executive Director) Age 59
LL.B
Mr Llewelyn first qualified as a solicitor in Australia and England, however he has worked in the finance
and merchant banking industries for more than 20 years 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 12 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 Donald Shumka (Non-executive Director) Age 65
B.A., MBA
Mr Shumka is Vancouver based and is the President and Managing Director of Walden Management
Ltd., a consulting firm specialising in natural resources. From 1989 to 2004, he was Managing Director,
Investment Banking with CIBC World Markets and Raymond James Ltd. Prior to 1989, Mr Shumka was
Vice President, Finance and Chief Financial Officer of West Fraser Timber Co. Ltd., one of Canada’s
largest forest products companies. He holds a Bachelor of Arts Degree in Economics from the University
of British Columbia and a Master of Business Administration Degree from Harvard University. He
currently sits on the boards of Eldorado Gold Corporation and Northern Peru Copper Corp.
Mr Shumka was appointed to the Board on 9 July 2007.
Special Responsibilities
Chairman of Audit Committee from 9 July 2007
Member of Remuneration Committee from 10 August 2007
Member of Nomination Committee from 10 August 2007
68757_1
52
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Information on Directors (continued)
Mr George Edward Pirie (Non-executive Director) Age 54
B.Com (Hons)
Mr Pirie has over 20 years experience in the mining business, more recently as President and Chief
Executive Officer of Placer Dome, Canada. Mr Pirie resigned his position with that company effective 31
December 2004 and effective 4 July 2005, was appointed President and Chief Executive Officer of
Breakwater Resources Inc.
Mr Pirie was appointed to the Board on 1 June 2005 and resigned on 9 July 2007.
Special Responsibilities
Chairman of Audit Committee from 1 June 2005 to 9 July 2007
Member of Remuneration Committee from 1 June 2005 to 9 July 2007
Member of Nomination Committee from 1 June 2005 to 9 July 2007
Mr Ian Urquhart Noble (Non-executive Director) Age 66
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
Interests in the shares and options of the Company
As at date of this report, the interests of the Directors in the shares and options of Paladin Resources Ltd
were:
Number of
Ordinary
Shares
8,964,746
18,091,394
16,000
Number of
Options over
Ordinary
Shares
3,250,000
5,250,000
-
Mr Rick Crabb
Mr John Borshoff
Mr Ian Noble
68757_1
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
53
Company Secretary
Ms Gillian Swaby Age 47
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.
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. She currently serves as a Non-executive Director on Deep Yellow Limited, in which Paladin holds
a 14.34% interest at 3 September 2007.
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
Nomination
Committee meetings Committee meetings
Name
Number
attended
Number
eligible
to attend
Number
Number eligible
attended to attend
Number
attended
Number
Number
eligible
to attend attended
Number
eligible
to attend
Mr Rick Crabb
Mr John Borshoff
Mr Sean Llewelyn
Mr George Pirie
Mr Ian Noble
19
19
19
11
19
19
19
19
19
19
-
-
6
3
6
-
-
6
6
6
3
-
3
2
-
3
-
3
3
-
3
3
3
1
3
3
3
3
3
3
Resignation, Election and Continuation in Office of Directors
In accordance with the Constitution of the Company, Rick Crabb and Ian Noble retire by rotation at the
Annual General Meeting and, being eligible, offer themselves for re-election. Mr Donald Shumka seeks
re-appointment at the Annual General Meeting as he was appointed by the Board to fill a casual vacancy
on 9 July 2007 following the resignation of George Pirie and, in accordance with the Constitution, must
seek re-election at the first Annual General Meeting following his appointment.
Remuneration Report
This Remuneration Report outlines the director and executive remuneration arrangement of the Company
and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. It
also provides the remuneration disclosures required by paragraphs Aus 25.4 to Aus 25.7.2 of AASB 124
Related Party Disclosures, which have been transferred to the Remuneration Report in accordance with
Corporations Regulation 2M.6.04.
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.
68757_1
54
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Remuneration Report (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 programme 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, 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. During the year, it undertook an extensive review with the assistance of external
specialist remuneration consultants to both revise the share option plan and determine parameters for the
payment of cash bonuses. The new Executive Share Option Plan, approved by shareholders at the
Annual General Meeting held in November 2006, is designed to increase the motivation of key staff and
create a stronger link between increasing shareholder value and employee reward.
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 A$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.
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
)
D
U
A
(
0
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
The Company
S&P/ASX 200 Index
The Company
S&P/ASX 200 Index
A$100
A$100
A$1,227
A$117
A$10,682
A$141
A$37,364
A$168
30 June 2003
30 June 2004
30 June 2005
30 June 2006
30 June 2007
A$75,091
A$207
68757_1
55
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
Remuneration Report (continued)
i) Compensation Policy (audited) (continued)
As the Company has only recently entered the production phase and is still in ramp up, the overall level of
compensation does not focus on the earnings of the Company. The Board is, however, cognisant of
general shareholder concern that long-term equity-based reward for key staff should be linked to the
achievement by the Company of a performance condition. Accordingly, options granted are subject to
performance conditions which must be satisfied before the options vest.
Directors’ Fees
At the 2006 Annual General Meeting, shareholders approved an increase in the total pool of fees
available to be paid to Non-executive Directors to A$500,000. Given 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 and to remunerate them appropriately for the expectations
placed upon them both by the Company and the regulatory environment in which it operates.
Fees payable to Non-executive Directors are set at A$105,000 per annum each, effective 1 January
2007, 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$70,000 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 compiled from a variety of
sources, including surveys conducted by independent consultants and national and international
publications. In addition, external remuneration consultants are involved in the process of salary
determination.
Expatriate Benefits
Executives who are required to fulfil their responsibilities as an expatriate receive benefits which may
include 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. The short-term
bonuses are based on achieving the following measures where these are applicable to the specific
Executive:
(a) production performance;
(b) project development performance;
(c) additional uranium resources delineated;
(d) performance of the Company in meeting its various other objectives;
(e)
(f) such other matters determined by the Remuneration Committee in its discretion.
financial performance of the Company; and
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.
68757_1
DIRECTORS' REPORT (continued)
_________________________________________________________________________________
56
Remuneration Report (continued)
i) Compensation Policy (audited) (continued)
Outcomes to be considered include:
-
-
-
-
-
-
-
-
acceptable safety and environmental performance by the Group;
Langer Heinrich commissioning, ramp up and production;
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.
The above measures have been selected to align the interests of Executives with shareholders. The
Remuneration Committee is responsible for assessing whether the measures are met.
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.
Share Incentive Option Plan
The Company believes that encouraging its key employees to become shareholders is the best way of
aligning their interests with those of its shareholders. Equity participation is accomplished through the
Company’s Executive Share Option Plan which was approved by shareholders in November 2006. This
replaced the previous plan and the Board believes that grants made under this Plan provide a powerful
tool to achieve the following objectives:-
-
enable the Company to recruit and retain the talented people needed to achieve the Company’s
business objectives;
link the reward of key staff with the achievement of strategic goals and the long-term performance
of the Company;
align the financial interests of Plan participants with those of the shareholders; and
provide incentives to Plan participants to focus on superior performance that creates shareholder
value.
-
-
-
The Board determines the number of options offered to an employee by reference to their base package
and the option value, based on the binomial tree method with reference to the following formula:-
Number of Options =
Base Package x Stretch LTI%
Option value (based on the binomial tree model)
The resultant number of options may be adjusted, at the Board’s discretion, to deal with any special
circumstances or other factors.
“Stretch LTI” refers to the long-term incentive percentage of the Base Package that allows the maximum
number of options to vest (i.e. become able to be exercised) if the performance condition is satisfied to
the maximum.
The “binomial tree model” for determining the option value is the mathematical model used in accordance
with the International Accounting Practice.
By way of example, the stretch LTI is, in the case of the Managing Director, 180%; and senior executives
100%.
Information on the Option Plan is set out under Note 28 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.
68757_1
DIRECTORS' REPORT (continued)
_____________________________________________________________________________________________________________________________
57
Remuneration Report (continued)
ii) Compensation of Key Management Personnel for the year ended 30 June 2007 (audited)(Consolidated and Company)
Short-term
Post Share Based
Total
Total
Employment
Payment
Other
Superannuation
Options
Total
Performance
Related
Salary
& fees
Cash
bonus
A$000
A$000
Non
Monetary
Benefits
A$000
A$000
A$000
A$000
A$000
US$’000
A$000
Directors
Mr Rick Crabb
Mr John Borshoff
Mr Sean Llewelyn
Mr George Pirie
Mr Ian Noble
Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr Ron Chamberlain
Mr Wyatt Buck
Mr James Eggins
Mr Dustin Garrow
Mr David Marsh
Mr Brendan O’Hara
174
988
95
109
95
355
-
212
315
264
266
263
180
-
600
-
-
-
150
50
20
30
35
-
38
5
Total
3,390
928
-
-
-
-
-
-
-
-
-
-
-
-
-
21
-
-
127
-
148
178 (1)
302 (2)
-
-
-
5,249 (3)
-
-
5,729
13
13
9
-
9
9
-
13
-
13
-
13
12
-
1,098
-
-
-
-
55
167
1,136
532
554
1,354
1,052
215
2,632
104
109
104
692
407
432
1,502
920
6,069
1,812
1,249
169
2,064
82
85
82
543
319
339
1,178
722
4,760
1,421
980
104
5,948
16,247
12,744
-
1,698
-
-
-
150
105
187
1,166
567
554
1,392
1,057
6,876
(1) Other represents a death benefit.
(2) Other represents fees paid for company secretarial services to a company of which Ms Gillian Swaby is a director and shareholder.
(3) Other represents a discretionary payment relating to the 2004 to 2006 formative period for the Company.
68757_1
58
DIRECTORS' REPORT (continued)
____________________________________________________________________________________________________________________________
Remuneration Report (continued)
ii) Compensation of Key Management Personnel for the year ended 30 June 2006 (audited) (Consolidated and Company)
Short-term
Salary
& fees
A$’000
Cash
Non
bonus Monetary
Benefits
A$’000
A$’000
Employment
Post Share Based
Payment
Total
Total
Total
Performance
Related
Other
Superannuation
Options
A$’000
A$’000
A$’000
A$’000
US$’000
A$’000
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
86
488
61
75
61
460
-
163
81
110
-
-
-
200
-
-
-
-
-
-
-
-
-
-
Total
1,585
200
-
-
-
-
-
46
-
-
16
12
-
-
74
-
-
-
-
-
-
153 (1)
-
-
-
144 (2)
-
297
8
12
5
-
5
12
-
12
9
6
-
-
69
321
370
-
-
-
256
244
134
506
247
259
225
415
1,070
66
75
66
774
397
309
612
375
403
225
310
800
49
56
49
579
297
231
458
280
301
168
321
570
-
-
-
256
244
134
506
247
259
225
2,562
4,787
3,578
2,762
(1) Other represents fees paid for company secretarial services to a company of which Ms Gillian Swaby is a director and shareholder.
(2) Other represents fees paid for marketing consulting services to a company of which Mr Dustin Garrow is a director and shareholder.
68757_1
_________________________________________________________________________________
DIRECTORS' REPORT (continued)
Remuneration Report (continued)
iii) Compensation by Category: Key Management Personnel
59
Short-Term
Post Employment
Share-Based Payment
CONSOLIDATED/
COMPANY
2007
US$’000
2006
US$’000
7,998
81
4,665
1,613
51
1,914
12,744
3,578
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$600,000 increased to A$1,400,000 effective 1 January 2007.
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 (deceased 8 March 2007)
Term of agreement – no fixed term.
Base salary, inclusive of superannuation, of A$400,000 plus 20% expatriate allowance, increased to A$550,000
plus 20% expatriate allowance effective 1 January 2007.
No termination benefit was 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.
68757_1
_________________________________________________________________________________
DIRECTORS' REPORT (continued)
60
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$196,585 increased to A$250,000 effective 1 January 2007.
No termination benefit is specified in the agreement.
Mr Wyatt Buck, General Manager – Langer Heinrich Operations
Term of agreement – no fixed term.
Base salary, inclusive of superannuation, of A$220,000 + 10% expatriate allowance increased to A$280,000
plus 10% expatriate effective 1 January 2007.
No termination benefit is specified in the agreement.
Mr James Eggins, Executive General Manager - Sales and Contract
Term of agreement – no fixed term.
Base salary, inclusive of superannuation, of A$231,585, increased to A$320,000 effective 1 January 2007.
No termination benefit is specified in the agreement.
Mr Dustin Garrow, Executive General Manager - Marketing
Term of agreement – no fixed term.
Base salary, of US$310,000, effective 1 January 2007.
No termination benefit is specified in the agreement.
Mr Brendan O’Hara, General Manager – Special Projects (commenced 14 August 2006)
Term of agreement – no fixed term.
Base salary, inclusive of superannuation, of A$210,000, increased to A$220,000 effective 1 January 2007.
No termination benefit is specified in the agreement.
Mr David Marsh, Executive General Manager - New Business Development
Term of agreement – no fixed term.
Base salary, inclusive of superannuation, of A$250,000, increased to A$300,000 effective 1 January 2007.
No termination benefit is specified in the agreement.
Options were granted on acceptance of the position prior to his commencement on 1 July 2006.
Remuneration for all parties referred to above includes provision of an annual discretionary bonus and initial and
ongoing discretionary grant of options.
68757_1
61
_________________________________________________________________________________
DIRECTORS' REPORT (continued)
Remuneration Report (continued)
v) Compensation Options: Granted and vested during the year (audited) (Consolidated and Company)
During the financial year options were granted as equity compensation benefits under the long-term incentive
plan to certain Key Management Personnel. The options were issued at no consideration. Each option entitles
the holder to subscribe for one fully paid ordinary share in the entity at the exercise price. The contractual life of
each option granted is five years (2006: three years). There are no cash settlement alternatives. No options
have been granted since the end of the year to the Key Management Personnel listed below. For further details
relating to the options, refer to Note 28.
Vested
Granted
Terms & Conditions for each Grant
30 June 2007
No.
No.
Fair Value
per option
at grant
Grant date (A$)
(Note 28)
Date
Exercise
Price per
option
(A$)
(Note 28)
Expiry
Date
First
Exercise
Date
Last
Exercise
Date
Directors
Mr John Borshoff
Executives
- 1,500,000
1/02/07
A$5.27
A$8.77
1/02/12
1/02/10
1/02/12
Ms Gillian Swaby
Mr Ron Chamberlain
Mr Wyatt Buck
Mr James Eggins
Mr Dustin Garrow
Mr David Marsh
Mr Brendan O’Hara
Mr Brendan O’Hara
75,000
-
35,700
-
150,000
500,000
100,000
-
78,570
-
-
100,000
- 1,000,000
31,400
-
1/02/07
1/02/07
1/02/07
1/02/07
1/02/07
1/02/07
5/07/06
1/02/07
A$5.27
A$4.65
A$4.65
A$4.65
A$4.65
A$4.65
A$1.96
A$4.65
A$8.77
A$8.77
A$8.77
A$8.77
A$8.77
A$8.77
A$5.50
A$8.77
1/02/12
1/02/12
1/02/12
1/02/12
1/02/12
1/02/12
5/07/09
1/02/12
1/02/10
1/02/10
1/02/10
1/02/10
1/02/10
1/02/10
5/01/08
1/02/10
1/02/12
1/02/12
1/02/12
1/02/12
1/02/12
1/02/12
5/07/09
1/02/12
Total
500,000 3,070,670
Vested
Granted
Terms & Conditions for each Grant
30 June 2006
No.
No.
Fair Value
per option
at grant
Grant date (A$)
(Note 28)
Date
Exercise
Price per
option
(A$)
(Note 28)
Directors
Mr Rick Crabb
Mr John Borshoff
Executives
3,250,000
3,750,000
-
-
-
-
-
-
-
-
Expiry
Date
-
-
First
Exercise
Date
Last
Exercise
Date
-
-
-
-
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$5.50
-
-
13/01/09
13/01/09
13/01/09
13/01/09
28/04/09
-
-
13/01/08
16/02/07
19/01/08
19/01/08
27/10/07
-
-
13/01/09
13/01/09
13/01/09
13/01/09
28/04/09
Total
14,300,000 3,450,000
68757_1
62
_________________________________________________________________________________
DIRECTORS' REPORT (continued)
Remuneration Report (continued)
vi) Shares Issued on Exercise of Compensation Options (audited)(Consolidated and Company)
30 June 2007
No.
Shares issued
Executives
Mr Ron Chamberlain
Mr Ron Chamberlain
Mr Garnet Halliday
Mr Garnet Halliday
Mr James Eggins
Mr Dustin Garrow
Total
500,000
300,000
2,000,000
1,000,000
350,000
400,000
4,550,000
Paid per share
(Note 28)
A$
A$1.00
A$1.25
A$1.00
A$1.25
A$1.00
A$1.00
Unpaid per share
A$
-
-
-
-
-
-
Value at
exercise date
A$
3,990,000
1,248,000
14,240,000
7,120,000
1,456,000
1,816,000
No other Key Management Personnel exercised options during the year ended 30 June 2007.
30 June 2006
Directors
Mr Rick Crabb
Mr John Borshoff
Executives
Ms Gillian Swaby
Total
Shares issued
No.
Paid per share
(Note 28)
A$
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.
vii) Options granted as part of remuneration
Value of
options
granted
during the
Year
Value of
options
exercised
during the
year
Value of
options
lapsed
during the
year
A$000
A$000
A$000
7,905
395
166
697
465
365
465
2,102
-
-
-
187
-
85
97
-
-
705
-
-
-
-
-
-
-
-
-
Total value
of options
granted,
exercised and
lapsed
during the
year
A$000
7,905
395
353
697
550
463
465
2,102
705
%
Remuneration
consisting of
options for the
year
41.7%
13.5%
38.7%
75.6%
57.8%
9.1%
74.7%
84.2%
Nil
John Borshoff
Gillian Swaby
Ron Chamberlain
Wyatt Buck
James Eggins
Dustin Garrow
David Marsh
Brendan O’Hara
Garnet Halliday
There were no alterations to the terms and conditions of options granted as remuneration since their grant date.
There were no forfeitures during the period.
The maximum grant, which will be payable assuming that all service and performance criteria are met, is equal
to the number of options granted multiplied by the fair value at the grant date. The minimum grant payable
assuming that service and performance criteria are not met is zero.
68757_1
63
_________________________________________________________________________________
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
20 December 2004
15 July 2005
13 January 2006
19 January 2006
16 February 2006
27 April 2006
3 July 2006
20 July 2006
1 February 2007
29 June 2007
Total
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
1 February 2012
29 June 2012
A$1.00
A$1.00
A$1.50
A$2.80
A$2.80
A$2.80
A$5.50
A$5.50
A$5.50
A$8.77
A$8.77
3,570,000
7,000,000
190,000
1,020,000
600,000
1,200,000
1,565,000
1,000,000
400,000
2,733,670
400,000
19,678,670
____________________________________________________________________________________________________________________________________________________________________
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, directors, employees and consultants have exercised options to acquire 9,070,000
fully paid ordinary shares in Paladin Resources Ltd at a weighted average price of A$1.04. Since the end of the
financial year, no further options have been exercised.
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.
Rounding
The amounts contained in this report, the Financial Report and the Management, Discussion and Analysis have
been rounded to the nearest US$100,000 (where rounding is applicable) under the option available to the
Company under ASIC Class Order 98/0100. The Company is an entity to which the Class Order applies.
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.
68757_1
_________________________________________________________________________________
DIRECTORS' REPORT (continued)
Auditor Independence and Non-Audit Services
The Directors received the following declaration from the auditor of Paladin Resources Ltd.
64
Auditor’s Independence Declaration to the Directors of Paladin Resources Limited
In relation to our audit of the financial report of Paladin Resources Limited for the financial year ended 30 June
2007, to the best of my knowledge and belief, there have been no contraventions of the auditor independence
requirements of the Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
V W Tidy
Partner
Perth
3 September 2007
VT;HG;PALADIN;027
68757_1
Liability limited by a scheme approved under
Professional Standards Legislation.
65
_________________________________________________________________________________
DIRECTORS' REPORT (continued)
Non-Audit Services
The following non-audit and assurance services were provided by the Company’s auditor, Ernst & Young. The
Directors are satisfied that the provision of non-audit and assurance 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 and assurance service provided means that auditor independence was not compromised.
Ernst & Young received or are due to receive US$167,000 for the year ended 30 June 2007 for the provision of
taxation services.
Signed in accordance with a resolution of the Directors.
Mr John Borshoff
Managing Director
Perth, Western Australia
3 September 2007
68757_1
66
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
CONTENTS OF THE FINANCIAL REPORT
NOTE
PAGE NUMBER
_________________________________________________________________________________
TITLE
CONSOLIDATED INCOME STATEMENTS ........................................................ 68
CONSOLIDATED BALANCE SHEETS ............................................................... 69
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ........................... 70
PARENT ENTITY STATEMENTS OF CHANGES IN EQUITY ........................... 71
CONSOLIDATED CASH FLOW STATEMENTS ................................................. 72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS........................ 73
CORPORATE INFORMATION ............................................................................ 73
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.................................. 73
CHANGE IN FUNCTIONAL AND PRESENTATION CURRENCY...................... 88
SEGMENT INFORMATION ................................................................................. 88
REVENUES AND EXPENSES ............................................................................ 91
INCOME TAX....................................................................................................... 92
CASH AND CASH EQUIVALENTS ..................................................................... 95
TRADE AND OTHER RECEIVABLES................................................................. 96
INVENTORIES..................................................................................................... 97
NOTE 1.
NOTE 2.
NOTE 3.
NOTE 4.
NOTE 5.
NOTE 6.
NOTE 7.
NOTE 8.
NOTE 9.
NOTE 10.
OTHER FINANCIAL ASSETS.............................................................................. 98
NOTE 11.
DEFERRED BORROWING COSTS.................................................................. 100
NOTE 12.
PROPERTY, PLANT AND EQUIPMENT........................................................... 100
NOTE 13.
EXPLORATION AND EVALUATION EXPENDITURE ...................................... 102
NOTE 14.
INTANGIBLE ASSETS....................................................................................... 107
NOTE 15.
TRADE AND OTHER PAYABLES..................................................................... 108
NOTE 16.
UNEARNED REVENUE..................................................................................... 108
NOTE 17.
INTEREST BEARING LOANS AND BORROWINGS........................................ 109
NOTE 18.
PROVISIONS..................................................................................................... 111
NOTE 19.
CONTRIBUTED EQUITY AND RESERVES ..................................................... 113
NOTE 20.
MINORITY INTERESTS .................................................................................... 121
NOTE 21.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES .................. 122
NOTE 22.
68757_1
FINANCIAL INSTRUMENTS ............................................................................. 124
67
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
CONTENTS OF THE FINANCIAL REPORT
NOTE
PAGE NUMBER
_________________________________________________________________________________
TITLE
NOTE 23.
DIRECTOR AND EXECUTIVE DISCLOSURES ............................................... 128
NOTE 24.
AUDITORS’ REMUNERATION.......................................................................... 132
NOTE 25.
COMMITMENTS AND CONTINGENCIES ........................................................ 133
NOTE 26.
EMPLOYEE BENEFITS..................................................................................... 135
NOTE 27.
RELATED PARTIES .......................................................................................... 135
NOTE 28.
SHARE BASED PAYMENT PLAN..................................................................... 136
NOTE 29.
INTERESTS IN JOINTLY CONTROLLED OPERATIONS ................................ 139
NOTE 30.
BUSINESS COMBINATION AND ASSET ACQUISITION ................................ 140
NOTE 31.
EVENTS AFTER THE BALANCE SHEET DATE .............................................. 141
NOTE 32.
NON CASH FINANCING AND INVESTMENT ACTIVITIES.............................. 142
NOTE 33.
EARNINGS PER SHARE................................................................................... 142
68757_1
68
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
CONSOLIDATED INCOME STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
Notes
CONSOLIDATED
2006
2007
US$m
US$m
PARENT ENTITY
2006
2007
US$m
US$m
Revenue from continuing
operations
Revenue
Cost of sales
5(a)
11.2
5(c)
(12.0)
Gross (loss)/profit
(0.8)
Other income
5(b)
0.1
Exploration and evaluation expenses
13
(7.4)
Other expenses
Finance costs
5(e)
(28.6)
5(d)
(13.0)
Loss before income tax benefit
(49.7)
3.2
-
3.2
0.8
(3.2)
(6.3)
(0.1)
(5.6)
10.8
-
10.8
0.1
-
3.2
-
3.2
1.9
-
(28.0)
(14.8)
(11.1)
-
(28.2)
(9.7)
Income tax benefit
6
11.7
-
1.2
-
Loss after tax from continuing
operations
(38.0)
(5.6)
(27.0)
(9.7)
Minority interests
20
0.4
-
-
-
Loss after tax from continuing operations
attributable to the ordinary equity holders of
the Company
(37.6)
(5.6)
(27.0)
(9.7)
Earnings per share
US$
US$
Loss from continuing operations attributable
to ordinary equity holders
– basic and diluted
33
(0.07)
(0.01)
The above Consolidated Income Statements should be read in conjunction with the accompanying notes.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
CONSOLIDATED BALANCE SHEETS
AS AT 30 JUNE 2007
_________________________________________________________________________________
69
Notes
CONSOLIDATED
2007
US$m
2006
US$m
PARENT ENTITY
2006
2007
US$m
US$m
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
TOTAL CURRENT ASSETS
7
8
9
Non current assets
8
Trade and other receivables
10
Other financial assets
11
Deferred borrowing costs
Property, plant and equipment
12
Exploration and evaluation expenditure 13
6
Deferred tax asset
14
Intangible assets
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
Current liabilities
15
Trade and other payables
Unearned revenue
16
Interest bearing loans and borrowings 17
18
Provisions
TOTAL CURRENT LIABILITIES
Non current liabilities
Trade and other payables
15
16
Unearned revenue
Interest bearing loans and borrowings 17
6
Deferred tax liabilities
18
Provisions
TOTAL NON CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
Equity
Contributed equity
Reserves
Accumulated losses
Parent interests
Minority interests
TOTAL EQUITY
19(a)
19(d)
20
182.8
12.6
38.0
233.4
-
60.3
0.2
135.1
1,601.4
10.4
17.6
1,825.0
43.6
2.7
-
46.3
-
5.6
-
58.7
6.3
-
-
70.6
169.7
4.2
-
173.9
81.3
1,027.3
-
17.3
-
-
-
1,125.9
2,058.4
116.9
1,299.8
13.8
0.2
5.6
10.6
30.2
-
0.6
268.0
448.2
3.1
719.9
750.1
1,308.3
1,075.3
113.2
(65.0)
1,123.5
184.8
1,308.3
8.1
0.2
-
0.2
8.5
-
0.7
14.1
-
2.6
17.4
25.9
91.0
112.3
5.1
(26.4)
91.0
-
91.0
16.6
0.1
-
16.7
32.3
36.2
-
0.3
-
-
-
68.8
85.5
0.8
-
-
0.2
1.0
0.1
-
-
-
-
0.1
1.1
2.8
-
-
0.5
3.3
2.7
-
209.2
16.1
-
228.0
231.3
1,068.5
84.4
1,075.3
51.0
(57.8)
1,068.5
-
1,068.5
112.3
2.0
(29.9)
84.4
-
84.4
The above Consolidated Balance Sheets should be read in conjunction with the accompanying notes.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2007
______________________________________________________________________________________
70
CONSOLIDATED
At 1 July 2005
Contributed
Accumulated Minority
Notes Equity
US$m
Reserves Losses
US$m
US$m
Interests Total
US$m
US$m
50.2
4.1
(20.8)
-
33.5
-
(5.6)
-
-
2.1
(5.6)
Changes in fair value of available-for-sale
financial assets
Loss for the year ended
Recognised value of unlisted employee options
over vesting period
Exercise of unlisted employee
options
Contributions of equity, net of transactions
costs
Foreign currency translation
-
-
-
19(b)
0.4
19(b)
61.7
-
2.1
-
2.7
(0.4)
-
(3.4)
-
-
-
-
At 30 June 2006
CONSOLIDATED
At 1 July 2006
112.3
5.1
(26.4)
112.3
5.1
(26.4)
-
-
-
-
-
-
2.7
-
61.7
(3.4)
91.0
91.0
Changes in fair value of available-for-sale
financial assets
Loss for the year ended
Recognised value of unlisted employee options
over vesting period
Exercise of unlisted employee
options
Contributions of equity, net of transactions
costs
Convertible bonds - equity component
Foreign currency translation (Note 3)
Functional currency transition adjustment (Note 3)
Income tax on items taken directly to equity
Acquisition of Summit Resources Ltd
Recognition of minority interests on acquisition of
Summit Resources Ltd
19(b)
19(b)
-
-
-
1.8
957.4
-
-
3.8
-
-
-
37.5
-
6.2
(1.8)
-
37.8
33.5
3.7
(23.7)
14.9
-
-
(37.6)
-
(0.4)
37.5
(38.0)
-
-
-
-
-
(1.0)
-
-
-
-
-
-
-
0.1
-
-
-
185.1
6.2
-
957.4
37.8
33.6
6.5
(23.7)
14.9
185.1
At 30 June 2007
1,075.3
113.2
(65.0)
184.8
1,308.3
The above Consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
PARENT ENTITY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
71
PARENT ENTITY
At 1 July 2005
Contributed
Accumulated
Notes Equity
US$m
Reserves Losses
US$m
US$m
Total
US$m
50.2
2.8
(20.0)
33.0
-
(9.7)
2.7
-
61.7
(3.3)
84.4
Change in fair value of available-for-sale
financial assets
Loss for the year ended
Recognised value of unlisted employee options
over vesting period
Exercise of unlisted employee
options
Contributions of equity, net of transactions
costs
Foreign currency translation
-
-
-
19(b)
0.4
19(b)
61.7
-
-
-
2.7
(0.4)
-
(3.1)
-
(9.7)
-
-
-
(0.2)
At 30 June 2006
PARENT ENTITY
At 1 July 2006
Change in fair value of available-for-sale
financial assets
Loss for the year ended
Recognised value of unlisted employee options
over vesting period
Exercise of unlisted employee
options
Contributions of equity, net of transactions
costs
Convertible bonds - equity component
Foreign currency translation (Note 3)
Functional currency transition adjustment (Note 3)
Income tax on items taken directly to equity
19(b)
19(b)
112.3
2.0
(29.9)
112.3
2.0
(29.9)
84.4
-
-
-
1.8
957.4
-
-
3.8
-
18.6
-
6.2
(1.8)
-
37.8
2.0
3.1
(16.9)
-
(27.0)
-
-
-
-
-
(0.9)
-
18.6
(27.0)
6.2
-
957.4
37.8
2.0
6.0
(16.9)
At 30 June 2007
1,075.3
51.0
(57.8)
1,068.5
The above Parent Entity Statements of Changes in Equity should be read in conjunction with the accompanying notes.
68757_1
72
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
Notes
CONSOLIDATED
2007
US$m
2006
US$m
PARENT ENTITY
2006
2007
US$m
US$m
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees
Interest received
Interest received from controlled entities
Interest paid
Dividend received from controlled entities
(38.2)
6.8
-
(7.2)
-
(2.7)
3.2
-
-
-
(11.4)
6.3
3.6
(5.6)
-
(2.6)
3.1
0.3
-
0.3
NET CASH (OUTFLOW)/INFLOW
FROM OPERATING ACTIVITIES
7(a)
(38.6)
0.5
(7.1)
1.1
CASH FLOWS FROM INVESTING ACTIVITIES
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 from sale of available-for-sale investments
Payments for third party uranium
10(a)
(8.6)
(88.9)
-
-
-
(13.2)
21.3
0.2
0.6
(33.4)
(3.5)
(53.2)
-
-
-
(0.5)
-
-
-
-
-
(18.7)
(56.7)
2.6
-
(12.3)
(5.5)
-
0.6
-
(0.1)
-
(35.4)
-
(35.5)
-
-
-
-
-
NET CASH OUTFLOW FROM
INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING
ACTIVITIES
Share placement
Proceeds from exercise of share options
Equity fundraising costs
Convertible bonds and project finance facility
establishment costs
Repayment of borrowings
Proceeds from convertible bonds and borrowings
NET CASH INFLOW FROM
FINANCING ACTIVITIES
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
(122.0)
(57.2)
(90.0)
(71.0)
-
7.4
(0.3)
(8.0)
-
299.6
57.6
2.6
(3.3)
(2.8)
(0.4)
17.3
-
7.4
(0.3)
(7.9)
-
250.0
57.6
2.6
(3.3)
-
(0.4)
-
298.7
71.0
249.2
56.5
138.1
14.3
152.1
(13.4)
43.6
30.1
16.6
29.7
1.1
(0.8)
1.0
0.3
7
182.8
43.6
169.7
16.6
The above Consolidated Cash Flow Statements should be read in conjunction with the accompanying notes.
68757_1
73
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 1. CORPORATE INFORMATION
The financial report of Paladin Resources Limited (the Company) for the year ended 30 June 2007 was
authorised for issue in accordance with a resolution of the Directors on 10 August 2007 subject to final drafting
and 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 Management Discussion and
Analysis on pages 8 to 37.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
The financial report is a general purpose financial report, which complies with the requirements of the
Corporations Act 2001 and Australian Accounting Standards which include Australian equivalents to
International Financial Reporting Standards. The financial report also complies with International Financial
Reporting 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 2007 in order to comply with applicable Canadian securities law.
The financial report is presented in United States dollars and all values are rounded to the nearest hundred
thousand dollars (US$100,000) unless otherwise stated under the option available to the Company under
Australian Securities and Investments Commission (ASIC) Class Order 98/100. The Company is an entity to
which the class order applies.
68757_1
74
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Statement of compliance
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:
Reference
Title
Summary
AASB
ASSB
2007-1
AASB
2007-2
AASB
2007-3
Amendments to
Australian Accounting
Standards [AASB 132,
AASB 101, AASB 114,
AASB 117, AASB 133,
AASB 139, AASB 1,
AASB 4, AASB 1023 &
AASB 1038]
Amendments arise
from the release in
August 2005 of AASB
7 Financial
Instruments:
Disclosures.
Amendments to
Australian Accounting
Standards arising from
AASB Interpretation 11
[AASB 2]
Amendments to
Australian Accounting
Standards arising from
AASB Interpretation 12
[AASB 1, AASB 117,
AASB 118, AASB 120,
AASB 121, AASB 127,
AASB 131 & AASB 139]
Amending standard
issued as a
consequence of
AASB Interpretation
11 Group and
Treasury Share
Transactions
Amending standard
issued as a
consequence of
AASB Interpretation
12 Service
Concession
Arrangements.
Amending standard
issued as a
consequence of
Amendments to
Australian Accounting
Standards arising from
AASB 8 [AASB 5, AASB AASB 8 Operating
6, AASB 102, AASB 107, Segments.
AASB 119, AASB 127,
AASB 134, AASB 136,
AASB 1023 & AASB
1038]
AASB
2007-4
Amendments to
Australian Accounting
Standards arising from
ED 151 and Other
Amendments
The standard is a
result of the AASB
decision that, in
principle, all
accounting policy
options currently
existing in IFRS
should be included in
the Australian
equivalents to IFRS
and the additional
Australian disclosures
should be eliminated,
other than those
considered
particularly relevant in
the Australian
reporting environment
Application
Date of
Standard
1 January
2007
1 March
2007
1 January
2008
1 January
2009
1 July 2007
Application
Date of
Group*
1 July 2007
1 July 2007
1 July 2008
1 July 2009
1 July 2007
Impact on Group
Financial report
AASB 7 is a disclosure
standard so will have no direct
impact on the amounts
included in the Group’s
financial statements.
However, the amendments will
result in changes to the
financial instrument
disclosures included in the
Group’s financial report.
This is consistent with the
Group’s existing accounting
policies for share-based
payments so will have no
impact.
As the Group currently has no
service concession
arrangements or public-
private-partnerships (PPP), it
is expected that this
Interpretation will have no
impact on its financial report.
AASB 8 is a disclosure
standard so will have no direct
impact on the amounts
included in the Group’s
financial statements.
However, the new standard
may have an impact on the
segment disclosures included
in the Group’s financial report.
As the Group does not
anticipate changing any of its
accounting policy choices as a
result of the issue of AASB
2007-4 this standard will have
no impact on the amounts
included in the Group’s
financial statements.
Changes to disclosure
requirements will have no
direct impact on the amounts
included in the Group’s
financial statements.
However, the new standard
may have an impact on the
disclosures included in the
Group’s financial report.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
75
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Statement of compliance (continued)
Reference
Title
Summary
Application
Date of
Standard
Impact on Group
Financial report
Application
Date of
Group*
1 July 2009
AASB
2007-6
AASB
2007-7
Amendments to
Australian Accounting
Standards arising from
AASB 123 [AASB 1,
AASB 101, AASB 107,
AASB 111, AASB 116 &
AASB 138 and
Interpretations 1 & 12]
Amendments to
Australian Accounting
Standards [AASB 1,
AASB 2, AASB 4, AASB
5, AASB 107 & AASB
128]
AASB 7
Financial Instruments:
Disclosures.
AASB 8
Operating Segments
Amending standard
issued as a consequence 2009
of AASB 123 (revised)
Borrowing Costs.
1 January
The Group does currently
construct qualifying assets
which are financed by
borrowings, however, the
revised standard will have
no impact as it is
consistent with the current
group policy.
Amending standard
issued as a consequence
of AASB 2007-4.
1 July 2007 Refer to AASB 2007-4
above.
1 July 2007
1 January
2007
Refer to AASB 2005-10
above.
1 July 2007
1 January
2009
Refer to AASB 2007-3
above.
1 July 2009
New standard replacing
disclosure requirements
of AASB 132.
This new standard will
replace AASB 114
Segment Reporting and
adopts a management
approach to segment
reporting.
AASB 101
(revised
October
2006)
Presentation of Financial Many of the disclosures
Statements
1 January
from previous GAAP and 2007
all of the guidance from
previous GAAP are not
carried forward in the
October 2006 version of
AASB 101. The revised
standard includes some
text from IAS 1 that is not
in the existing AASB 101
and has fewer additional
Australian disclosure
requirements than the
existing AASB 101.
1 July 2007
AASB 101 is a disclosure
standard so will have no
direct impact on the
amounts included in the
Group’s financial
statements. However, the
revised standard may
result in changes to the
disclosures included in the
Group’s financial report.
1 January
2009
Refer to AASB 2007-6
above.
1 July 2009
AASB 123
(revised
June 2007)
Borrowing Costs
68757_1
AASB 123 previously
permitted entities to
choose between
expensing all borrowing
costs and capitalising
those that were
attributable to the
acquisition, construction
or production of a
qualifying asset. The
revised version of AASB
23 requires borrowing
costs to be capitalised if
they are directly
attributable to the
acquisition, construction
or production of a
qualifying asset.
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
76
(b) Statement of compliance (continued)
Reference
Title
Summary
AASB
Interpretation Reporting and
10
Impairment
Interim Financial
Group and Treasury
ASSB
Interpretation Share Transactions
11
AASB
Interpretation Arrangements
12
Service Concession
Service Concession
ASSB
Interpretation Arrangements:
129 (revised Disclosures
June 2007)
Addresses an
inconsistency
between AASB 134
Interim Financial
Reporting and the
impairment
requirements relating
to goodwill in AASB
136 Impairment of
Assets and equity
instruments classified
as available-for-sale
in AASB 139
Financial Instruments:
Recognition and
Measurement.
Specifies that a
share-based payment
transaction in which
an entity receives
services as
consideration for its
own equity
instruments shall be
accounted for as
equity-settled.
Clarifies how
operators recognise
the infrastructure as
a financial asset and/or
as intangible asset –
not as property, plant
and equipment.
The revised
interpretation was
issued as a result of
the issue of
Interpretation 12 and
requires specific
disclosures about
service concession
arrangements
entered into by an
entity, whether as a
concession provider
or a concession
operator.
Application
Date of
Group*
1 July 2007
Application Impact on Group
Financial report
Date of
Standard
1 November The prohibitions on reversing
2006
impairment losses in AASB
136 and AASB 139 to take
precedence over the more
general statement in AASB
134 that interim reporting is
not expected to have any
impact on the Group’s
financial report.
1 March
2007
Refer to AASB 2007-1 above
1 July 2007
1 January
2008
Refer to AASB 2007-2 above.
1 July 2008
1 January
2008
Refer to AASB 2007-2 above.
1 July 2008
* designates the beginning of the applicable annual reporting period
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Basis of consolidation
77
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Paladin
Resources Ltd (Company or Parent Entity) as at 30 June 2007 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.
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)
Net realisable value of inventories
The Group reviews the carrying value of inventories regularly to ensure that their cost does not exceed net
realisable value. In determining net realisable value various factors are taken into account including sales
prices and costs to complete inventories to their final form.
(ii)
Impairment of property, plant and equipment; and intangibles
The Group determines whether property, plant and equipment; and intangibles are impaired at least on a
quarterly basis. This requires an estimation of the recoverable amount of cash-generating units to which the
property, plant and equipment; and intangibles are allocated.
(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 securities is determined by
an external valuer using a binomial model.
(iv) Carrying value of exploration and evaluation expenditure
The Group reviews the carrying value of exploration and evaluation expenditure at least on a quarterly basis.
This requires judgement as to the status of the individual projects and their future economic value.
(v) Deferred tax assets and liabilities
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant
judgement is required in determining deferred tax assets and liabilities. There are many transactions and
calculations for which the ultimate tax determination is uncertain during the ordinary course of business.
68757_1
78
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Significant accounting judgements, estimates and assumptions (continued)
(vi)
Mine closure provision
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 provision could have a
material impact to the carrying value of the provision.
(vii) 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 28.
(viii) Proved and probable reserves
The Group uses the concept of a life of mine as an accounting value to determine such things as depreciation
rates and the appropriate period to discount mine closure provisions. In determining life of mine the proved and
probable reserves measured in accordance with the 2004 edition of the Joint Ore Reserves Committee (JORC)
Code specific to a mine are taken into account which by their very nature require judgements, estimates and
assumptions.
(ix) Commencement of operations for Langer Heinrich Uranium Project
The Company has concluded that the Langer Heinrich Uranium Project was in the location and condition
necessary for it to be capable of operating in the manner intended by management on 1 April 2007.
This requires judgements, estimates and assumptions based on statistics including plant run time, plant
throughput, operating recoveries and plant production.
(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.
(f)
(i)
Foreign currency translation
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 United States dollars, which is Paladin Resources Ltd’s functional and
presentation currency from 1 December 2006. Prior to this date the functional and presentation currency for
Paladin Resources Ltd was Australian dollars – see Note 3.
(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. Translation differences on available-for-sale financial assets
are included in the available-for-sale reserve.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
79
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f)
Foreign currency translation (continued)
(iii) Group companies
Some Group entities have a functional currency of United States dollars which is consistent with the
presentation currency of this financial report. For all other group entities the functional currency has been
translated into United States dollars for presentation purposes. Assets and liabilities are translated using
exchange rates prevailing at the balance sheet date; revenues and expenses are translated using average
exchange rates prevailing for the income statement year; and equity transactions are translated at exchange
rates prevailing at the dates of transactions. The resulting difference from translation is recognised in a foreign
currency translation reserve.
(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)
Sale of uranium
Revenue from sale of uranium is recognised when the product passes from the control of the Consolidated
Entity pursuant to an enforceable contract, when selling prices are known or can be reasonably estimated and
when the product is in a form that requires no further treatment by the Consolidated Entity.
(ii)
Interest revenue
Interest revenue from investments in cash and convertible notes is recognised in the Income Statement as
interest accrues using the effective interest method. This is a method of calculating the amortised cost of a
financial asset and allocating the interest income over the relevant period using the effective interest rate, which
is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to
the net carrying amount of the financial asset.
(iii) 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.
(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.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(h)
Income tax (continued)
80
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. The head entity, Paladin Resources Ltd and the controlled entities in the tax
consolidated group continue to account for their own current and deferred tax amounts. The Group has applied
the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to
allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts,
Paladin Resources Ltd also recognises the current tax liabilities (or assets) and the deferred tax assets arising
from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as
amounts receivable from or payable to other entities in the group. Any difference between the amounts
assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution
to (or distribution from) wholly-owned tax consolidated entities.
(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.
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.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(k)
Impairment of assets
81
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, which generally have 30 day terms, are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less an allowance for any uncollectible
amounts.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are
written off when identified. An allowance for doubtful debts is raised when there is objective evidence that the
group will not be able to collect the debt.
(n)
Inventories
Consumable stores inventory are valued at the lower of cost and net realisable value using the average cost
method; after appropriate allowances for redundant and slow moving items.
Finished goods and work in progress inventory are valued at the lower of cost and net realisable value using the
average cost method. Cost is derived on an absorption costing basis including both fixed and variable
production costs and attributable overheads incurred up to the delivery point where legal title to the product
passes. No accounting value is attributed to ore in situ or stockpiles containing ore at less than the cut-off
grade.
Any inventory produced during the pre-production phase is recognised at net realisable value and deducted
from capitalised development costs.
The costs of production include labour costs, materials and contractor expenses which are directly attributable
to the extraction and processing of ore (including any recognised expense of stripping costs); the depreciation of
property, plant and equipment used in the extraction and processing of ore; and production overheads.
(o)
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.
68757_1
82
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(o)
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.
(p)
Interests in jointly controlled operations
The Group has interests in joint ventures that are jointly controlled operations. A joint venture is a contractual
arrangement whereby two or more parties undertake an economic activity that is subject to joint control. A
jointly controlled operation involves use of assets and other resources of the venturers rather than
establishment of a separate entity. The Group recognises its interest in jointly controlled operations by
recognising its interest in the assets and the liabilities of the joint venture. The Group also recognises the
expenses that it incurs and its share of the income that it earns from the sale of goods or services by jointly
controlled operations.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(q)
Fair value estimation
83
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, unlisted securities) 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.
(r)
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.
Pre-production costs are deferred as development costs until such time as the asset is able to be used as
intended by management. Post-production costs are recognised as a cost of production.
For the Langer Heinrich Uranium Project the Company has concluded that the asset was in the location and
condition necessary for it to be capable of operating in the manner intended by management on 1 April 2007.
As a consequence all pre-production costs up to and including 31 March 2007 has been deferred as
development costs.
Stripping costs (removal of overburden and other mine waste material) are deferred as a classification within
property, plant and equipment where actual stripping ratios vary from average stripping ratios. Stripping costs
are recognised as production costs on a unit of production basis utilising average stripping ratios.
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
-
-
-
-
- Mine plant and equipment
20 years
10 years
3-6 years
2-5 years
lesser of life of mine and life of asset
Property, plant and equipment for an operating mine are depreciated to estimated residual value over the
shorter of the life of mine or the specific period that the asset will be utilised, using the units of production
method.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(r)
Property, plant and equipment (continued)
84
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.
(s)
Exploration and evaluation expenditure
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 the exploration and evaluation capitalised to that area is
transferred to mine development within property, plant and equipment. 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 may be written down if discounted future cash flows related to the
area of interest are projected to be less than its carrying value.
(t)
Intangibles
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an
intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated
impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not
capitalised and expenditure is recognised in the income statement in the year in which the expenditure is
incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite
lives are amortised over the useful life and tested for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset
with a finite useful life is reviewed at least at each financial year-end. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the asset are accounted for
prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting
estimate. The amortisation expense on the intangible assets with finite lives is recognised in profit or loss in the
expense category consistent with the function of the intangible asset.
Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-
generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an
indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be
supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a
change in an accounting estimate and is thus accounted for on a prospective basis.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
85
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t)
Intangibles (continued)
A summary of the policies applied to the Group’s intangible assets is as follows:
Right to use water and power supply
Useful lives
Finite
Amortisation method used
Amortised over the life of the mine on a straight-line basis
Impairment testing
Annually and more frequently when an indication of impairment exists. The amortisation method is reviewed
at each financial year-end.
The rights to use water and power supply have been granted for a minimum of 17 years by the relevant utilities
with the option of renewal without significant cost at the end of this period.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when
the asset is derecognised.
(u)
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.
(v)
Interest bearing loans and borrowings
Bank loan borrowings are initially recognised at fair value, net of transaction costs incurred. Bank loan
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.
The component of convertible bonds that exhibits characteristics of a borrowing is recognised as a liability in the
balance sheet, net of transaction costs. On issue of convertible bonds, the fair value of the liability component
is determined using a market rate for an equivalent non-convertible bond and this amount is carried as a long-
term liability on the amortised cost basis until extinguished on conversion or redemption. The increase in the
liability due to the passage of time is recognised as a finance cost. The remainder of the proceeds is allocated
to a convertible bond reserve that is recognised and included in shareholders’ equity. The carrying amount of
the reserve is not remeasured in subsequent years.
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.
(w) 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 as incurred including the unwinding of discounts related to mine closure provisions, and amortisation
of ancillary costs incurred in connection with the arrangement of borrowings.
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.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
86
(x)
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 were provided to employees via the Paladin Resources Ltd Employee
Share Incentive Option Plan (ESOP). Following the implementation of the Paladin Resources Ltd Executive
Share option Plan (EXSOP) detailed in Note 28, no further options will be issued pursuant to the ESOP.
The fair value of options granted under both the ESOP after 7 November 2002 and the EXSOP 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.
(y) Mine closure and rehabilitation
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 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.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(y) Mine closure and rehabilitation (continued)
87
As the value of the provision for mine closure 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.
Provision is made for rehabilitation work when the obligation arises and this is recognised as a cost of
production or development. Mining areas are rehabilitated systematically over the life of the mine operation,
and as such the effect of the time value of money is not considered material. All costs for this rehabilitation
work are charged to the provision as incurred.
(z) Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a
contract are lower than the unavoidable cost of meeting the obligations under the contract. The provision is
stated at the present value of the future net cash outflows expected to be incurred in respect of the contract.
(aa) 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.
(ab) 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.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 3. CHANGE IN FUNCTIONAL AND PRESENTATION CURRENCY
88
The functional currency for a company is the currency of the primary economic environment in which the
company operates. Up to 30 November 2006 the functional currency of the Paladin Group was Australian
dollars. In December 2006 there were several factors which produced a change in functional currency for the
majority of the Paladin Group to United States (US) dollars. These include completion of construction and
commissioning at the Langer Heinrich Uranium Project, issue of US$250 million convertible bonds, conversion
of excess group cash into US dollars resulting in derivation of US interest revenue, and redesignation of all
intercompany group loans into US dollars.
The presentation currency for a company is the currency in which the company chooses to present its financial
reports. As the functional currency of Paladin Resources Ltd and the majority of the Paladin Group changed on
30 November 2006 to US dollars, the Company has decided to change the presentation currency for financial
reporting to US dollars in order to better reflect the Paladin Group’s financial position and financial performance.
The Paladin Group has accounted for the change in functional currency in December 2006 in accordance with
Australian Accounting Standards which involves initial translation of Australian dollar functional currency
accounts into US dollars at a fixed exchange rate on the day of transition – 1 December 2006, rate US$ : A$
1.27647.
In order to derive US dollar comparatives for the consolidated financial statements, the Paladin Group has
accounted for this change in presentation currency in accordance with Australian Accounting Standards which
involves translation of assets and liabilities at the 30 June 2006 rate US$ : A$ 1.36966; revenue and expenses
at the twelve month average rate US$ : A$ 1.33720 and equity balances at historical rates from 1 July 2005,
rates US$ : A$ 1.32897 to 1.30939.
The following material operating subsidiaries have a US dollar functional currency:
– Paladin Finance Pty Ltd
– Paladin (Africa) Ltd
– Langer Heinrich Uranium (Pty) Ltd
– Paladin Nuclear Ltd
The following material operating subsidiaries have a Australian dollar functional currency:
– Northern Territory Uranium Pty Ltd
– Mt Isa Uranium Pty Ltd
– Paladin Energy Minerals NL
– Summit Resources (Aust) Pty Ltd
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.
The Group does not separately disclose any financial information for business segments (secondary reporting)
as it only operates in the resource industry.
Geographical segments - primary reporting
The Company operates in Australia, Namibia and Malawi. The principal activity in these locations is the
exploration, evaluation, development and operation of uranium projects.
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PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
89
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 2007 and 30 June 2006.
Year Ended
30 June 2007
Australia
US$m
Namibia
US$m
Malawi
US$m
Consolidated
US$m
Sales to external customers
Other revenue
-
7.8
3.3
0.1
-
-
3.3
7.9
____________________________________________________________________________________________________________________________________________________________________
Total segment revenue
7.8
3.4
-
11.2
____________________________________________________________________________________________________________________________________________________________________
Loss from ordinary activities
before income tax benefit
(28.1)
(17.4)
(4.2)
(49.7)
Income tax benefit
1.3
10.4
-
11.7
____________________________________________________________________________________________________________________________________________________________________
Loss from ordinary activities
after income tax benefit/segment
result
(26.8)
(7.0)
(4.2)
(38.0)
____________________________________________________________________________________________________________________________________________________________________
Total assets/segment assets
1,882.3
163.0
13.1
2,058.4
____________________________________________________________________________________________________________________________________________________________________
Segment liabilities
732.3
16.3
1.5
750.1
____________________________________________________________________________________________________________________________________________________________________
Acquisitions of non current
assets
1,434.9
64.0
8.2
1,507.1
____________________________________________________________________________________________________________________________________________________________________
Cash flow information
Net cash outflow from
operating activities
Net cash outflow from
investing activities
Net cash inflow/(outflow) from
financing activities
(25.7)
(12.9)
-
(38.6)
(45.7)
298.9
(64.9)
(11.4)
-
(0.2)
(122.0)
298.7
____________________________________________________________________________________________________________________________________________________________________
Non cash expenses:
Depreciation and amortisation
Inventory impairment losses
Sales contract impairment provision
(0.3)
-
-
(1.8)
(3.3)
(7.8)
-
-
-
(2.1)
(3.3)
(7.8)
____________________________________________________________________________________________________________________________________________________________________
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
90
NOTE 4. SEGMENT INFORMATION (continued)
Geographical segments – primary reporting (continued)
Year Ended
30 June 2006
Other revenue
Australia
US$m
Namibia
US$m
Malawi
US$m
Consolidated
US$m
3.1
0.1
0
3.2
____________________________________________________________________________________________________________________________________________________________________
Total segment revenue
3.1
0.1
0
3.2
____________________________________________________________________________________________________________________________________________________________________
Loss from ordinary activities
before income tax expense
(1.7)
(1.0)
(2.9)
Income tax expense
-
-
-
(5.6)
-
____________________________________________________________________________________________________________________________________________________________________
Loss from ordinary activities
after income tax expense/segment
result
(1.7)
(1.0)
(2.9)
(5.6)
____________________________________________________________________________________________________________________________________________________________________
Total assets/segment assets
45.6
66.8
4.5
116.9
____________________________________________________________________________________________________________________________________________________________________
Segment liabilities
18.9
6.3
0.7
25.9
____________________________________________________________________________________________________________________________________________________________________
Acquisitions of non current
assets
0.1
58.8
4.2
63.1
____________________________________________________________________________________________________________________________________________________________________
Cash flow information
Net cash inflow from
operating activities
Net cash outflow from
investing activities
Net cash inflow from
financing activities
0.4
0.1
-
0.5
(1.0)
(54.0)
(2.2)
(57.2)
71.0
-
-
71.0
____________________________________________________________________________________________________________________________________________________________________
Non cash expenses:
Depreciation and amortisation
0.2
-
-
0.2
____________________________________________________________________________________________________________________________________________________________________
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 5. REVENUES AND EXPENSES
CONSOLIDATED
2007
US$m
2006
US$m
PARENT ENTITY
2006
US$m
2007
US$m
91
(a) Revenue
Sale of uranium
Interest income from non related parties
Interest income from wholly owned Group
Database licence revenue
Other revenue
(b) Other income
Profit on sale of tenements
Profit on sale of investments
Dividends received from wholly owned Group
Foreign exchange gains (net)
(c) Cost of sales (1)
Cost of production
Royalties
Depreciation – property, plant and equipment
Amortisation – intangibles
Product distribution costs
3.3
7.6
-
0.2
0.1
11.2
-
0.1
-
-
0.1
(9.7)
(0.3)
(1.6)
(0.2)
(0.2)
(12.0)
-
3.0
-
0.2
-
3.2
0.3
-
-
0.5
0.8
-
-
-
-
-
-
-
7.1
3.6
-
0.1
10.8
-
0.1
-
-
0.1
-
-
-
-
-
-
-
2.9
0.3
-
-
3.2
0.3
-
0.3
1.3
1.9
-
-
-
-
-
-
(1)
Includes both a US$3.3 million (2006: US$Nil) impairment of inventories as a consequence of the extended
ramp up of operations for the Langer Heinrich Uranium Project; and US$8.7 million (2006: US$Nil) relating
to the first uranium sale which was met by third party uranium purchase.
(d) Finance costs
Interest expense
Mine closure provision discount interest expense
Facility costs
(e) Other expenses
Corporate and marketing costs
Employee benefits expense
Share-based payments expense
Minimum lease payments – operating lease
Write down of intercompany investments
Write down of intercompany receivables
Sales contracts expense (1)
Foreign exchange loss (net)
Depreciation – property, plant and equipment
Loss on sale of property, plant and equipment
(11.8)
(0.1)
(1.1)
(13.0)
(9.6)
(3.3)
(6.2)
(0.2)
-
-
(7.8)
(1.0)
(0.3)
(0.2)
(28.6)
(0.1)
-
-
(0.1)
(2.2)
(1.0)
(2.7)
(0.2)
-
-
-
-
(0.2)
-
(6.3)
(10.2)
-
(0.9)
(11.1)
(8.6)
(2.8)
(6.2)
(0.2)
-
(9.9)
-
(0.1)
(0.2)
-
(28.0)
-
-
-
-
(2.0)
(1.0)
(2.7)
(0.2)
(0.2)
(8.6)
-
-
(0.1)
-
(14.8)
(1) The sales contracts expense is attributable to the requirement to meet July 2007 Langer Heinrich sales
commitments by use of third party uranium purchases.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 6. INCOME TAX
92
CONSOLIDATED
2006
2007
US$m
US$m
PARENT ENTITY
2007
US$m
2006
US$m
(14.7)
(1.2)
(6.8)
(2.4)
5.5
1.5
(2.5)
(0.3)
5.6
-
2.6
(0.2)
(11.7)
-
(1.2)
-
(49.7)
(5.6)
(28.2)
(9.8)
(14.9)
(1.7)
(8.5)
(2.9)
1.9
0.1
(0.3)
(13.2)
(1.5)
(2.5)
5.5
0.8
-
(0.2)
(1.1)
(0.1)
(0.3)
1.5
1.9
0.1
(0.3)
(6.8)
-
-
5.6
0.8
-
(0.3)
(2.4)
-
(0.2)
2.6
(11.7)
-
(1.2)
-
(a) Income tax benefit
Current income tax
Current income tax credit
Deferred income tax
Tax benefits not brought to account
as future income tax benefits
Prior year tax benefits brought
to account as current income tax
Income tax benefit reported in the income
statement
(b) Numerical reconciliation of income
tax benefit to prima facie tax payable
Loss from continuing operations before
income tax expense
Tax at the Australian tax rate of 30%
(2006 – 30%)
Tax effect of amounts which are not
deductible (taxable) in calculating taxable
income:
Share-based payments
Other expenditure not allowable
Specific tax expenditure allowable
Difference in overseas tax rates
Prior year tax benefits not recognised
now recouped
Current year tax benefits not recognised
Income tax benefit reported in the
income statement
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 6. INCOME TAX (continued)
CONSOLIDATED
2006
2007
US$m
US$m
PARENT ENTITY
2007
2006
US$m
US$m
93
(c) Deferred income tax
Deferred tax liabilities
Accelerated prepayment deduction for tax purposes
Accelerated stores and consumables deduction for
tax purposes
Revaluations of available-for-sale investments
to fair value
Accelerated deduction for debt establishment and
interest costs
Accelerated depreciation for tax purposes
Recognition of fair value of acquired exploration
and evaluation expenditure
Delayed revenue recognition for tax purposes
Recognition of convertible bond for accounting
purposes
Gross deferred tax liabilities
Set off of deferred tax assets
Net deferred tax liabilities
Deferred tax assets
Revenue losses available for offset against future
taxable income
Equity raising costs
Foreign currency balances
Provision for sales contracts
Investment cash acquisition costs for accounting
Purposes
Provisions for employee benefits
Delayed exploration expenditure recognition for
tax purposes
Provisions for write down of intercompany
receivables
Provisions for write down of intercompany
investments
Gross deferred tax assets
Set off of deferred tax assets
Deferred tax assets not recognised as not
probable
Net deferred tax assets recognised
(0.1)
(0.6)
(13.2)
(2.5)
(20.8)
(425.8)
(0.1)
(10.1)
(473.2)
25.0
(448.2)
32.8
0.9
0.6
2.9
0.9
0.2
-
-
-
38.3
(25.0)
(2.9)
10.4
-
-
(1.0)
-
(0.1)
-
(0.1)
-
(1.2)
1.2
-
4.8
-
-
-
-
0.1
0.5
-
-
5.4
(1.2)
(4.2)
-
-
-
(6.0)
-
-
-
-
(10.1)
(16.1)
-
(16.1)
5.4
0.9
-
-
-
0.2
-
9.4
0.4
16.3
-
(16.3)
-
-
-
-
-
(0.1)
-
-
-
(0.1)
0.1
-
1.7
-
-
-
-
0.1
-
4.4
0.3
6.5
(0.1)
(6.4)
-
The net deferred tax assets recognised are attributable to Langer Heinrich Uranium (Pty) Ltd, a Namibia
company that owns the Langer Heinrich Uranium Project. The utilisation of the net deferred tax assets is
dependent upon future taxable profits in excess of profits arising from reversal of existing temporary differences
and Langer Heinrich Uranium (Pty) Ltd has suffered a loss in the current and preceding periods in Namibia.
The recognition of the net deferred tax assets is supported by the production ramp up at the Langer Heinrich
Uranium Project.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
94
NOTE 6. INCOME TAX (continued)
(d) Tax losses
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
Total unused tax losses for which no deferred
tax asset has been recognised
CONSOLIDATED
2006
2007
US$m
US$m
PARENT ENTITY
2007
2006
US$m
US$m
27.8
-
2.7
5.1
7.7
1.2
18.0
5.5
-
-
-
-
30.5
14.0
18.0
5.5
Potential tax benefit at tax rates between 30% - 37.5%
This benefit for tax losses will only be obtained if:
9.2
4.8
5.4
1.7
(i)
(ii)
(iii)
the Consolidated Entity derives future assessable income of a nature and of an amount sufficient to
enable the benefit from the deductions for the losses to be realised;
the Consolidated Entity continues to comply with the conditions for deductibility imposed by tax
legislation; and
no changes in tax legislation adversely affect the Consolidated Entity in realising the benefit from the
deductions for the losses.
(e) Members of the tax consolidation group and the tax sharing arrangements
Paladin Resources Ltd and its 100% owned Australian resident subsidiaries formed a tax consolidated group
(the Group) with effect from 1 July 2003. Paladin Resources Ltd is the head entity of the Group. Members of
the Group have entered into a tax sharing agreement that provides that the head entity will be liable for all taxes
payable by the Group from the consolidation date. The parties have agreed to apportion the head entity’s
taxation liability within the Group based on each contributing member’s share of the Group’s taxable income.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 7. CASH AND CASH EQUIVALENTS
95
Cash at bank and in hand
Short-term bank deposits
US$ treasury bonds
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
4.3
19.4
159.1
182.8
3.8
39.8
-
0.4
10.2
159.1
43.6
169.7
0.1
16.5
-
16.6
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 2007, the Group had available US$4.4million (2006: US$54.0million) of undrawn committed
borrowing facilities in respect of which all conditions precedent have been met.
(a) Reconciliation of net loss after tax to net
cash flows from operating activities
Net loss
(38.0)
(5.6)
(27.0)
(9.7)
Adjustments for
Depreciation and amortisation
Exploration expenditure
Provision for non-recovery
of intercompany loan
Provision for non-recovery of
intercompany investments
Loss on disposal of land and buildings
Profit on sale of investments
Profit on disposal of tenements
Database licence revenue
Net exchange differences
Share options expensed
Changes in assets and liabilities
(Increase)/decrease in trade and other
receivables
(Decrease)/increase in trade and other payables
Increase in provisions
Increase in borrowings
Increase in inventories
Decrease in deferred tax liabilities
Increase in deferred tax assets
Net cash from operating activities
(b) Disclosure of financing facilities
Refer to Note 17.
2.1
7.4
-
-
0.2
(0.1)
-
(0.2)
1.0
6.2
(6.3)
(12.2)
8.5
5.3
(0.9)
(1.2)
(10.4)
(38.6)
0.2
3.2
-
-
-
-
(0.3)
(0.2)
(0.5)
2.7
0.3
0.5
0.2
-
-
-
-
0.5
0.2
-
9.9
-
-
(0.1)
-
-
0.1
6.2
(2.5)
1.9
0.4
5.0
-
(1.2)
-
(7.1)
0.1
-
8.6
0.2
-
-
(0.3)
-
(1.3)
2.7
0.2
0.4
0.2
-
-
-
-
1.1
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 8. TRADE AND OTHER RECEIVABLES
96
Current
Trade receivables - (a)
Less provision for doubtful debts
Net trade receivables
Interest receivable
Prepayments
GST and VAT - (b)
Sundry debtors - (c)
Total current receivables
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
3.3
-
3.3
0.8
0.3
6.6
1.6
12.6
-
-
-
-
0.1
2.6
-
2.7
-
-
-
0.8
0.2
2.1
1.1
4.2
-
-
-
-
-
0.1
-
0.1
(a)
Trade receivables are non-interest bearing and are generally on 30 day terms. An allowance for doubtful
debts is made when there is objective evidence that a trade receivable is impaired. An allowance of
US$Nil (2006: US$Nil) has been recognised as an expense for the current year for specific debtors for
which such evidence exists.
(b) GST and VAT debtor relates to Australia and Namibia respectively. 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. Sundry debtors includes amounts receivable by the Company from subsidiaries US$1.0m
(2006: US$Nil).
Non Current
CONSOLIDATED
2006
2007
US$m
US$m
PARENT ENTITY
2006
2007
US$m
US$m
Unsecured loans to wholly owned Group - (d)
Less provision for non-recovery
Net unsecured loans to the wholly owned Group
Total non current receivables
-
-
-
-
-
-
-
-
107.1
(25.8)
81.3
81.3
47.1
(14.8)
32.3
32.3
(d) Of the unsecured loans to the wholly owned Group, the Company charges interest only on the loan to
Paladin Finance Pty Ltd (2006: Paladin Finance Pty Ltd). At 30 November 2006 the loan was converted
from A$ to US$ as part of the change in functional currency. The interest rate payable is the one month
US$ LIBOR plus 2% (2006: standard commercial lending rate of National Australia Bank plus 2%). In the
year ending 30 June 2007 the average rate charged was 11.87% for 1 July 2006 to 30 November 2006
and 7.32% from 1 December 2007 to 30 June 2007 (2006: 11.4%) and disclosure of interest revenue
earned is set out in Note 5(a).
The other unsecured loans are repayable on demand however Paladin Resources Ltd will, for the
foreseeable future, continue to provide financial support and has no intention of demanding repayment
until the subsidiary has the capacity to repay.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 9. INVENTORIES
97
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
1.8
2.1
24.7
9.4
38.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Stores and spares (at cost)
Work-in-progress (at net realisable value)
Finished goods (at cost)
Finished goods (at net realisable value)
Total inventories at the lower of cost and
net realisable value
(a)
Inventory expense
Inventories sold recognised as an expense for the year ended 30 June 2007 totalled US$8.7million (2006:
US$Nil) for the Group and US$Nil (2006: US$Nil) for the Company. This expense has been included in the
cost of sales -refer Note 5(c). Impairment of inventories included in the cost of sales for the Consolidated
Entity is US$3.3M (2006: US$Nil).
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
98
NOTE 10. OTHER FINANCIAL ASSETS
Non Current
Investments in controlled entities – (a)
Less provision for non-recovery
Net investment in controlled entities
Available-for-sale financial assets – (b)
Total non current other financial assets
CONSOLIDATED
2006
2007
US$m
US$m
PARENT ENTITY
2006
2007
US$m
US$m
-
-
-
60.3
60.3
-
-
-
994.4
(1.2)
993.2
5.6
34.1
35.9
(1.2)
34.7
1.5
5.6
1,027.3
36.2
(a)
Investments in material controlled entities
NAME
COUNTRY OF
INCORPORATION
INVESTMENT
PERCENTAGE
INTEREST HELD
COST OF PARENT
ENTITY’S
INTEREST
Australia
Australia
Australia
Malawi
Paladin Finance Pty Ltd (i)(ii)
Paladin Energy Minerals NL (i)
Eden Creek Pty Ltd (ii)(i)
Paladin (Africa) Ltd (iii)
Langer Heinrich
Uranium (Pty) Ltd
Tarquin Investments
(Pty) Ltd (vii)
Namibia
Valhalla Uranium Ltd (i)(viii)
Australia
Northern Territory Uranium Pty Ltd (iv)(ii) Australia
Mt Isa Uranium Pty Ltd (iv)(ii)
Australia
Paladin Nuclear Ltd (i)(ix)
Australia
Summit Resources Ltd (i)(x)
Australia
Summit Resources (Aust) Pty Ltd (v)(ii) Australia
Pacific Mines Ltd (vi)
Australia
Namibia
2007
%
100
100
100
85 *
100
-
100
100
100
100
81.9
81.9
81.9
2006
%
100
100
100
100
2007
US$m
37.2 #
-
1.3 #
-
2006
US$m
34.7
-
1.2
-
100
100
-
-
-
-
-
-
-
-
-
153.2
-
-
-
802.7
-
-
-
-
-
-
-
-
-
-
-
Total investments in controlled entities
Less provision for non-recovery of investments
Net investments in controlled entities
994.4
(1.2)
993.2
35.9
(1.2)
34.7
(*) The Development Agreement for the Kayelekera Uranium Project signed on 23 February 2007 provides the
Government of Malawi with 15% of Paladin (Africa) Ltd, owner of the project, in exchange for a reduction of
25% in corporate tax, the full amount of rent resource tax and royalty offsets.
(#) Adjustment relates to the transition from a functional and presentation currency of Australian dollars to a
functional and presentation currency of United States dollars – refer Note 3.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
99
NOTE 10. OTHER FINANCIAL ASSETS (continued)
(a)
Investments in controlled entities (continued)
All investments comprise ordinary shares and all shares held are unquoted, with the exception of Summit
Resources Ltd shares which are quoted on the Australian Stock Exchange.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
Held by Paladin Resources Ltd
These entities are not required to prepare or lodge audited accounts
Held by Paladin Energy Minerals NL
Held by Valhalla Uranium Ltd
Held by Summit Resources Ltd
Held by Summit Resources (Aust) Pty Ltd
Disposed of on 15 February 2007
Acquired on 7 September 2006 with the eventual issue of 37,974,256 Paladin shares plus US$1.7
million in transaction costs
Incorporated on 27 April 2007
Acquired majority interest on 27 April 2007 with the eventual issue of 101,157,400 Paladin shares plus
US$3.8 million in transaction costs
Acquisition Disclosure
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
Inflow of cash on acquisition of controlled entities
Cash balances acquired
Less: Cash consideration
Net inflow/(outflow) of cash
26.8
(5.5)
21.3
-
-
-
-
(5.5)
(5.5)
-
-
-
Included in the net inflow of cash is US$1.9 million from the acquisition of Valhalla Uranium Ltd and US$19.4
million from the acquisition of Summit Resources Ltd – refer Note 30.
(b)
Available-for-Sale financial assets
The Consolidated Entity has an investment in Deep Yellow Ltd (Deep Yellow) and at 30 June 2007 holds
117,585,704 (2006: 30,450,000) fully paid ordinary shares and 12,500,000 unlisted securities exercisable at
8.1(1) Australian cents on or before 31 July 2008 (2006: 25,000,000 unlisted securities exercisable at 1
Australian cent on or before 31 December 2007, and 12,500,000 unlisted securities exercisable at 12 Australian
cents on or before 31 July 2008).
The holding of these fully paid ordinary shares represents 12% interest at 30 June 2007 (2006: less than 5%
interest) of the ordinary shares of Deep Yellow, a uranium explorer listed on ASX. The market value of the
shares and unlisted securities in Deep Yellow at 30 June 2007 is A$76.5 million (US$59.9 million) (2006: A$7.7
million/ US$5.4 million) based on a share price of 55 Australian cents per share (2006: 12.5 Australian cents).
(1) The exercise price has been revised after adjustments for entitlement issues.
The Consolidated Entity also holds other minor investments in other companies.
68757_1
100
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 11. DEFERRED BORROWING COSTS
Non Current
Deferred borrowing costs
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
0.2
-
-
-
Deferred borrowing costs represent the initial capitalised costs of establishing project finance for the
Kayelekera Uranium Project.
NOTE 12. PROPERTY, PLANT AND EQUIPMENT
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
Plant and equipment – at cost
Less provision for depreciation
Total plant and equipment
Mine development
Less provision for depreciation
Total mine development
Technical database – at cost
Less provision for amortisation
Total technical database
Land and buildings - at cost
Less provision for depreciation
Total land and buildings
Construction work in progress – at cost
124.1
(2.4)
121.7
2.1
(0.1)
2.0
0.7
(0.6)
0.1
3.4
(0.2)
3.2
8.1
Total non current property, plant and equipment
135.1
0.9
(0.5)
0.4
-
-
-
0.6
(0.5)
0.1
0.2
-
0.2
58.0
58.7
17.8
(0.5)
17.3
0.7
(0.4)
0.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17.3
0.3
Property, plant and equipment pledged as security for liabilities
Refer to Note 17 for information on property, plant and equipment pledged as security.
68757_1
101
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 12. PROPERTY, PLANT AND EQUIPMENT (continued)
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment at the
beginning and end of the year are set out below:
Total
Plant and Databases Land and Mine
Equipment
Building Development Work in
Construction
Consolidated – 2007
Carrying amount at start
of year
Additions
Acquisition of subsidiary
(Note 30)
Depreciation and
amortisation expense
Disposals
Reclassification to intangibles
Reallocation from exploration
Reclassification of assets
Functional currency
transition adjustment (1)
Foreign currency translation
reserve
Carrying amount at end
of year
US$m
US$m
US$m
US$m
US$m
58.7
89.2
0.4
20.6
0.1
-
1.4
0.5
(1.9)
(0.3)
(17.8)
1.6
-
4.3
(0.1)
(1.6)
(0.1)
-
-
101.8
0.1
-
-
-
-
-
-
-
-
-
0.2
-
0.9
(0.2)
(0.2)
-
-
2.5
-
-
-
0.5
-
(0.1)
-
-
1.6
-
-
-
135.1
121.7
0.1
3.2
2.0
Parent Entity - 2007
Carrying amount at
start of year
Additions
Depreciation and
amortisation expense
Carrying amount at end
of year
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
0.3
17.2
0.3
17.2
(0.2)
(0.2)
17.3
17.3
0.8
58.1
0.4
0.2
(0.2)
(0.2)
-
-
-
-
0.1
-
-
-
-
-
-
0.2
-
-
58.7
0.4
0.1
0.2
0.3
0.1
0.3
0.1
(0.1)
(0.1)
0.3
0.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Progress
US$m
58.0
68.1
-
-
-
(17.8)
-
(104.3)
4.2
(0.1)
8.1
-
-
-
-
0.1
57.9
-
58.0
-
-
-
-
(1) Adjustment relates to the transition from a functional and presentation currency of Australian dollars to
a functional and presentation currency of United States dollars – refer Note 3.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 13. EXPLORATION AND EVALUATION EXPENDITURE
102
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.
Construction of the processing plant was commenced in late 2005 with staged commissioning being completed
in December 2006. The plant and mine are currently in ramp up status with full production expected to be
achieved in financial year 2007-2008. Paladin has also had an additional Exploration Licence to the west of the
mining licence, EPL 3500, covering 30 sq. km. granted.
Kayelekera Uranium Project (Malawi) – Paladin 85%
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.
A Development Agreement was enacted between the Government of Malawi and Paladin (Africa) Ltd in which
Paladin received certain taxation and royalty concessions and in return the Government of Malawi received a
free carried interest in the project of 15% thus reducing Paladin’s share to 85%. Subsequent to the
Development Agreement and the acceptance of the project Environmental Impact Assessment the Government
of Malawi granted a Mining Licence covering the project area to Paladin (Africa) Ltd. Paladin retains the original
Exploration Licence outside the Mining licence and has had 3 additional Exploration Licences, within the
northern Malawi area, granted.
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$0.75 million 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.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 13. EXPLORATION AND EVALUATION EXPENDITURE (continued)
103
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 overlie 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$0.75 million 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.
Bigrlyi Deposit (Australia) - Paladin 41.7%
The Bigrlyi deposit project covers a number of ERL’s (46-55) amounting to some 1213 hectares, these were
originally granted in 1983 and have been subject to 5 yearly renewals since 1988. The project is a Joint
Venture between Energy Metals 53.3%, Southern Cross Exploration 5% and Northern Territory Uranium Pty Ltd
41.7% (100% owned by Paladin Resources Ltd) with Energy Metals as operator and manager. Resource
definition drilling is ongoing at the project and an engineering and metallurgy scoping study is currently
underway. The project lies in the Northern Territory of Australia approximately 320km north west of Alice
Springs and was originally discovered by Agip in the mid 1970’s before being transferred to Central Pacific
Minerals in the early 1980’s. Ore resource studies were carried out during the 1980’s and 1990’s but no drilling
was undertaken until recently. During 2005/2006 a drilling campaign was undertaken by the Joint Venture
partners which resulted in an initial JORC Resource. Resource definition drilling on the project is on going with
an updated resource expected later this year.
Valhalla (Australia) - Paladin 90.9%
The Valhalla project in Northern Queensland is a 50:50 joint venture between Summit Resources Ltd (Paladin
81.9% ownership) and Mt Isa Uranium Pty Ltd (100% owned by Paladin Resources Ltd) in which Summit
Resources Ltd is the operator and manager. The Valhalla deposit is situated on EPL 9221 and is located some
40km North of Mt Isa and straddles the Berkly Highway. EPL 9221 was originally granted to Summit Resources
Ltd in 1993 but had been worked on, particularly by Mt Isa Mines and Queensland Mines from the mid 1950’s to
the early 1970’s. Queensland Mines, particularly conducted extensive exploration over the Valhalla project
between 1968 and 1972 including the estimation of resources and reserves. Queensland Mines allowed the
tenement to lapse in 1991 and this was subsequently acquired by Summit in 1992. Paladin’s share in the
deposit was increased from 50% to 90.9% following the acquisition of 81.9% of Summit Resources Ltd.
Skal (Australia) - Paladin 90.9%
The Skal deposit is located approximately 8km away from the Valhalla deposit and 32km north of Mt Isa in
Northern Queensland and is a 50:50 joint venture between Summit Resources Ltd (Paladin 81.9% ownership)
and Mt Isa Uranium Pty Ltd (100% owned by Paladin Resources Ltd). Skal was originally discovered by Mt Isa
Mines in the mid 1950’s and was subject to mapping and drilling at that time. Queensland Mines acquired the
project in the 1960’s and conducted further drilling resulting in an estimation of a resource for the project. The
deposit is situated on EPM14048 and the joint venture re-commenced drilling in 2005. The intention of the joint
venture partners is to estimate a JORC compliant resource in the near future.
Summit Resources Ltd (Australia) - Paladin 81.9%
Paladin acquired an 81.9% interest in Summit Resources Ltd as a result of a takeover bid which closed on 1
June 2007. Summit Resources Ltd has a large number of exploration tenements surrounding and to the north
of Mt Isa in Northern Queensland. Other than the Andersons, Bikini & Watta Projects, limited exploration
activities have taken place on these leases in recent years and as such they are not considered material to
Paladin at this point in time. Paladin’s share in these deposits was increased from 50% to 90.9% following the
acquisition of 81.9% of Summit Resources Ltd.
68757_1
104
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 13. EXPLORATION AND EVALUATION EXPENDITURE (continued)
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, development and operation 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.
68757_1
105
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
NOTE 13. EXPLORATION AND EVALUATION EXPENDITURE (continued)
The following table details the Consolidated expenditures (Parent Entity expenditure US$Nil) on interests in mineral properties by area of interest for the year ended 30
June 2007:
Areas of interest
Langer
Heinrich
Project
US$m
Kayelekera Manyingee Oobagooma Bigrlyi Valhalla/Skal Summit
Project
Project Projects
Project
Project
US$m
US$m
US$m
US$m US$m
Other
Group (1) Projects
Projects
US$m
US$m
Total
US$m
Balance 30 June 2006
1.149
4.223
0.845
0.127
-
-
-
-
6.344
Acquisition
Property
Payments
-
-
-
-
13.908 135.915
1,433.100
-
1,582.923
Project exploration and evaluation expenditure
Tenement costs
Labour
Consultants and contractors
Materials and utilities
Transportation and communications
Outside services
Legal and accounting
Camp expenses
Overheads
Joint venture contributions
Other
0.001
0.050
0.002
0.005
0.029
0.254
-
0.002
-
-
0.008
Total expenditure
0.351
0.005
0.443
0.566
0.122
0.312
2.168
0.185
0.098
0.048
-
0.103
4.050
0.027
-
0.006
-
-
-
0.018
-
-
-
-
0.051
-
-
0.001
-
-
-
-
-
-
-
-
0.001
-
0.006
0.017
-
-
-
-
-
-
1.345
-
-
0.009
0.026
-
-
-
-
-
-
0.671
-
1.368
0.706
0.004
0.168
0.174
0.031
0.047
0.958
-
0.017
0.044
(0.577)
0.028
0.894
0.007
0.107
0.032
0.011
0.059
-
0.089
0.017
0.048
-
0.005
0.375
0.044
0.783
0.824
0.169
0.447
3.380
0.292
0.134
0.140
1.439
0.144
7.796
Exploration expenditure expensed
-
(4.050)
(0.051)
(0.001)
(1.368)
(0.706)
(0.894)
(0.375)
(7.445)
Exploration expenditure capitalised
0.351
-
-
-
-
-
-
Foreign exchange differences
Transferred to property, plant and
equipment
Balance 30 June 2007
0.083
0.337
0.147
0.010
1.157
11.310
0.310
(1.583)
-
-
4.560
-
0.992
-
0.137
-
-
15.065 147.225
-
1,433.410
-
-
-
-
0.351
13.354
(1,583)
1,601.389
(1) The Summit Group projects were acquired on 27 April 2007 and allocation of the acquisition value to each project has yet to be completed.
68757_1
106
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 13. EXPLORATION AND EVALUATION EXPENDITURE (continued)
The following table details the Consolidated expenditures (Parent Entity expenditures US$Nil) on interests in
mineral properties by area of interest for the year ended 30 June 2006:
Langer Kayelekera Manyingee Oobagooma Other
Project
Heinrich
US$m
US$m
Project
US$m
Project
US$m
US$m
Total
US$m
Projects Projects
0.140
0.130
0.881
0.132
-
1.283
Areas of
Interest
Balance
30 June 2005
Acquisition
Property
Payments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4.295
(0.009)
0.004
0.102
0.027
0.578
0.082
0.460
0.003
0.080
0.110
0.420
-
2.170
-
-
0.013
0.031
0.137
0.019
0.093
0.229
0.345
4.204
(0.345)
(3.165)
-
-
-
1.039
(0.273)
6.344
-
4.295
-
0.055
(0.009)
-
0.191
0.001
0.285
Project exploration and evaluation expenditure
Interest received
Tenement
costs
Labour
Consultants and
contractors
Materials and
utilities
Transportation and
communications
Outside
services
Legal and
accounting
Insurance
Camp expenses
Other
0.001
-
0.010
0.042
0.136
0.019
0.070
0.156
0.322
0.240
0.070
0.051
0.026
0.653
1.517
-
-
0.022
-
0.001
-
-
-
-
-
-
-
Total
expenditure
1.039
2.797
0.023
Exploration
expenditure expensed
-
(2.797)
(0.023)
Exploration
expenditure capitalised 1.039
Foreign exchange
differences
(0.030)
-
-
(0.202)
(0.036)
(0.005)
Balance
30 June 2006
1.149
4.223
0.845
0.127
68757_1
107
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 14. INTANGIBLE ASSETS
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
(a) Reconciliation of carrying amount at the beginning and end of the period
Year ended 30 June 2007
At 1 July 2006,
net of accumulated amortisation
Reclassification from property, plant and equipment
Amortisation
At 30 June 2007,
Net of accumulated amortisation
At 30 June 2007
Cost (gross carrying amount)
Accumulated amortisation
Net carrying amount
-
17.8
(0.2)
17.6
17.8
(0.2)
17.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Amortisation of US$0.2million (2006: US$Nil) is included in costs of sales in the income statement.
(b) Description of the Group’s intangible assets
(i)
Right to supply of power
Langer Heinrich Uranium Pty Ltd has entered into a contract with NamPower in Namibia for the
right to access power at the Langer Heinrich mine. In order to obtain this right, the power line
connection to the mine was funded by Langer Heinrich; however, ownership of the power line
rests with NamPower. The amount funded is being amortised over the life of mine on a
straight–line basis.
(ii)
Right to supply of water
Langer Heinrich Uranium Pty Ltd has entered into a contract with NamWater in Namibia for the
right to access water at the Langer Heinrich mine. In order to obtain this right, the water
pipeline connection to the mine was funded by Langer Heinrich; however, ownership of the
pipeline rests with NamWater. The amount funded is being amortised over the life of mine on a
straight-line basis.
68757_1
108
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 15. TRADE AND OTHER PAYABLES
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
Current
Trade and other payables
Total current payables
13.8
13.8
8.1
8.1
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
-
-
-
-
-
-
2.8
2.8
-
2.7
2.7
0.8
0.8
0.1
-
0.1
The unsecured loans from wholly owned Group are interest free and have no fixed terms of repayment.
NOTE 16. UNEARNED REVENUE
Current
Unearned revenue
Non Current
Unearned revenue
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
0.2
0.6
0.2
0.7
-
-
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.
68757_1
109
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 17. INTEREST BEARING LOANS AND BORROWINGS
Maturity
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
Current
Secured bank loan
5.6
Non-Current
Unsecured convertible bonds
2011
216.3
-
-
-
216.3
Secured bank loan
2012
Deferred borrowing costs
61.0
(9.3)
17.0
-
(2.9)
(7.1)
Total non current
268.0
14.1
209.2
Fair value disclosures
Details of the fair value of the Group’s interest bearing liabilities are set out in Note 22.
-
-
-
-
-
Unsecured convertible bonds
On 15 December 2006, the Company issued US$250 million in convertible bonds with an underlying coupon
rate of 4.5%, maturity 15 December 2011 and a conversion price of US$7.685 for Company shares.
In disclosing the convertible bonds in the consolidated financial statements, the Company has accounted for
them in accordance with Australian Accounting Standards. Under these standards the convertible bonds are
essentially both a liability (underlying bond) and an equity instrument (conversion rights into Company shares).
Based on this allocation of the convertible bonds, US$212.2 million has been initially allocated to interest
bearing loans and borrowings in non-current liabilities (underlying effective interest rate of 8.75%) and US$37.8
million to non-distributable convertible bond reserve in equity. A deferred tax liability of US$11.3 million has
been recognised through reserves which relates to the equity component of the bond and this deferred tax
liability reverses to the Income Statement over the term of the bond.
Secured bank loan
During the year ended 30 June 2006 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 2007 US$66.6 million (2006: US$17.0 million) had been drawn of the project finance facilities,
leaving available facilities of US$4.4 million (2006: US$54.0 million).
Deferred borrowing costs capitalised during the year relating to establishment of facilities
Consolidated Entity – US$8.3 million (2006: US$2.9 million)
Parent Entity – US$8.0 million (2006: US$Nil)
100% of borrowing costs incurred for the construction of any qualifying asset are capitalised.
68757_1
110
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 17. 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 convertible bonds
Secured bank loans
Facilities used at reporting date
Unsecured convertible bonds
Secured bank loans
Facilities unused at reporting date
Unsecured convertible bonds
Secured bank loans
Total facilities
Facilities used at reporting date
Facilities unused at reporting date
CONSOLIDATED
2006
2007
US$m
US$m
PARENT ENTITY
2007
US$m
2006
US$m
250.0
71.0
-
71.0
250.0
-
321.0
71.0
250.0
250.0
66.6
-
17.0
250.0
-
316.6
17.0
250.0
-
4.4
4.4
316.6
4.4
-
54.0
54.0
17.0
54.0
-
-
-
250.0
-
321.0
71.0
250.0
-
-
-
-
-
-
-
-
-
-
-
-
Assets pledged as security
The carrying amounts of assets pledged as security for non current interest bearing liabilities (secured bank
loans) are:
CONSOLIDATED
2006
2007
US$m
US$m
PARENT ENTITY
2007
US$m
2006
US$m
2.6
7.7
13.4
23.7
108.3
-
10.4
17.6
136.3
160.0
26.9
2.6
-
29.5
58.2
1.1
-
-
59.3
88.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Current
Floating charge
-Cash and cash equivalents
-Trade and other receivables
-Inventories
Total current assets pledged as security
Non current
-Property, plant and equipment
-Exploration and evaluation expenditure
-Deferred tax asset
-Intangible assets
Total non current assets pledged as security
Total assets pledged as security
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
111
NOTE 18. PROVISIONS
Current
Rehabilitation
Sales contracts
Employee benefits (Note 26)
Total current provisions
Non Current
Employee benefits (Note 26)
Mine closure
Total non current provisions
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
2.0
7.8
0.8
10.6
0.1
3.0
3.1
-
-
0.2
0.2
-
2.6
2.6
-
-
0.5
0.5
-
-
-
-
-
0.2
0.2
-
-
-
For a description of the nature and timing of cash flows associated with the above provisions, refer to section (b)
below :
(a) Movements in provisions
Movements in each class of provision during the financial year, other than provisions relating to employee
benefits, are set out below :-
Rehabilitation
US$m
Sales
Mine
Contracts Closure Total
US$m
US$m
US$m
CONSOLIDATED
At 1 July 2006
Arising during the year
Utilised
Functional currency transition adjustment (1)
Foreign currency movements
At 30 June 2007
Current 2007
Non Current 2007
Current 2006
Non Current 2006
-
1.9
-
-
0.1
2.0
2.0
-
2.0
-
-
-
-
7.8
-
-
-
7.8
7.8
-
7.8
-
-
-
2.6
0.3
-
0.2
(0.1)
3.0
-
3.0
3.0
-
2.6
2.6
2.6
10.0
-
0.2
-
12.8
9.8
3.0
12.8
-
2.6
2.6
(1) Adjustment relates to the transition from a functional and presentation currency of Australian dollars to a
functional and presentation currency of United States dollars – refer Note 3.
(b) Nature and timing of provisions
(i) Rehabilitation
A provision for rehabilitation has been recorded in relation to Langer Heinrich Uranium Project. A provision
is made for rehabilitation work when the obligation arises and this is recognised as a cost of production or
development as appropriate. Mining areas are rehabilitated systematically over the life of the mine
operation, and as such the effect of the time value of money is not considered material. All costs for this
rehabilitation work are charged to the provision as incurred.
68757_1
112
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 18. PROVISIONS (continued)
(ii) Sales contracts
A provision for sales contracts is recognised when the expected benefits to be derived by the Group from a
sales contract are lower than the unavoidable cost of meeting the obligations under the sales contract. The
provision is stated at the present value of the future net cash outflows expected to be incurred in respect of
the contract. At 30 June 2007 a US$7.8 million sales contract provision has been recognised attributable
to the requirement to meet July 2007 Langer Heinrich sales commitments by use of third party uranium
purchases.
(iii) Mine Closure
A provision for mine closure has been recorded in relation to the Langer Heinrich Uranium Project for the
costs of dismantling and demolition of infrastructure or decommissioning, the removal of residual material
and the remediation of disturbed areas specific to the infrastructure to a state acceptable to various
authorities. Final mine closure is not expected until the cessation of operations, currently estimated to be
beyond 2020.
(iv) Employee Benefits
Refer to Note 26.
68757_1
113
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 19. CONTRIBUTED EQUITY AND RESERVES
(a) Issued and paid up capital
Ordinary shares
Number of Shares
2006
2007
CONSOLIDATED/
PARENT ENTITY
2007
US$m
2006
US$m
Issued and fully paid
602,437,369 454,235,713
1,075.3
112.3
____________________________________________________________________________________________________________________________________________________________________
Effective 1 July 1998, the Corporations legislation in place abolished the concepts of authorised capital and par
value shares. Accordingly, the Company does not have authorised capital nor par value in respect of its issued
shares.
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
(b) Movements in ordinary shares on issue
Date
Number of Shares
Price
Balance 30 June 2005
400,885,713
Option conversions
July 2005
August 2005
Option conversions
September 2005 Option conversions
September 2005 Kayelekera acquisition
October 2005
October 2005
October 2005
February 2006
May 2006
May 2006
Option conversions
Option conversions
Placement
Option conversions
Option conversions
Option conversions
Transfer from reserves
Less: Transaction
costs arising on share issues
150,000
350,000
550,000
4,350,000
2,250,000
750,000
35,000,000
100,000
7,600,000
2,250,000
Balance 30 June 2006
454,235,713
Issue
Rate
A$
Exchange Total
US$ : A$
US$m
50.2
0.22
0.22
0.22
1.29
0.22
0.32
2.20
0.22
0.22
0.32
1.32897
1.31317
1.30712
1.30712
1.32580
1.32580
1.32580
1.34809
1.30939
1.30939
-
0.1
0.1
4.3
0.4
0.2
58.1
-
1.3
0.5
0.4
(3.3)
112.3
68757_1
114
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 19. CONTRIBUTED EQUITY AND RESERVES (continued)
(b) Movements in ordinary shares on issue (continued)
Date
July 2006
July 2006
August 2006
September 2006
September 2006
September 2006
October 2006
October 2006
November 2006
November 2006
November 2006
December 2006
December 2006
January 2007
March 2007
April 2007
April 2007
May 2007
June 2007
June 2007
Number of Shares
Price
Issue
Rate
A$
Exchange Total
US$ : A$
US$m
Balance 30 June 2006
454,235,713
112.3
Option conversions
Option conversions
Option conversions
Option conversions
Option conversions
Valhalla acquisition
Valhalla acquisition
Option conversions
Option conversions
Option conversions
Option conversions
Functional currency
Transition adjustment (1)
Option conversions
Option conversions
Summit acquisition
Option conversions
Summit acquisition
Summit acquisition
Summit acquisition
Option conversions
Transfer from reserves
Less: Share issue costs
350,000
300,000
400,000
600,000
6,000
37,151,830
822,426
3,400,000
2,090,000
1,000,000
4,000
590,000
30,000
691,117
275,000
71,633,205
27,825,681
1,007,397
25,000
1.00
1.25
1.00
1.00
1.50
5.09
5.09
1.00
1.00
1.25
1.50
1.00
2.80
9.52
1.00
9.70
9.04
8.60
1.00
1.27647
1.27647
1.27647
1.27647
1.27647
1.27647
1.27647
1.27647
1.27647
1.27647
1.27647
1.27175
1.26855
1.24395
1.23753
1.20060
1.21269
1.21219
1.21215
0.3
0.3
0.3
0.5
-
148.1
3.3
2.6
1.6
1.0
-
3.8
0.4
0.1
5.3
0.3
579.0
207.4
7.2
-
1.8
(0.3)
Balance 30 June 2007
602,437,369
1,075.3
(1) Adjustment relates to the transition from a functional and presentation currency of Australian dollars to
functional and presentation currency of United States dollars – refer Note 3.
68757_1
115
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 19. CONTRIBUTED EQUITY AND RESERVES (continued)
(c) Issued Options
(i) Exercisable at A$0.22 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
Number of Options
2006
2007
-
-
11,000,000
(11,000,000)
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
-
-
____________________________________________________________________________________________________________________________________________________________________
In July 2005 150,000 options above were exercised raising A$33,000
(US$24,831) 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
(US$58,637) 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
(US$92,570) 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
(US$373,359) 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
(US$16,319) 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
(US$1,276,930) in contributed equity and at the time of exercise the shares had a
market value of A$34,428,000.
(ii)
Exercisable at A$0.32 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
Number of Options
2006
2007
-
-
3,000,000
(3,000,000)
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
-
-
____________________________________________________________________________________________________________________________________________________________________
In October 2005 750,000 options above were exercised raising A$240,000
(US$181,023) 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
(US$549,874) in contributed equity and at the time of exercise the shares had a
market value of A$10,192,500.
68757_1
116
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 19. CONTRIBUTED EQUITY AND RESERVES (continued)
(c) Issued Options (continued)
(iii)
Exercisable at A$1.00, on or before
30 November 2007 (granted 30 November 2004)
Balance at 1 July
Exercised during year
Number of Options
2006
2007
8,050,000
(4,480,000)
8,050,000
-
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
3,570,000
8,050,000
____________________________________________________________________________________________________________________________________________________________________
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.
In July 2006 350,000 options above were exercised raising A$350,000 (US$274,194) in contributed equity and
at the time of exercise the shares had a market value of A$1,456,000.
In August 2006 400,000 options above were exercised raising A$400,000 (US$313,364) in contributed equity
and at the time of exercise the shares had a market value of A$1,816,000.
In September 2006 600,000 options above were exercised raising A$600,000 (US$470,046) in contributed
equity and at the time of exercise the shares had a market value of A$2,640,000.
In October 2006 150,000 options above were exercised raising A$150,000 (US$117,512) in contributed equity
and at the time of exercise the shares had a market value of A$866,500.
In November 2006 2,090,000 options above were exercised raising A$2,090,000 (US$1,637,328) in contributed
equity and at the time of exercise the shares had a market value of A$14,880,800.
In December 2006 590,000 options above were exercised raising A$590,000 (US$463,928) in contributed
equity and at the time of exercise the shares had a market value of A$4,708,200.
In April 2007 275,000 options above were exercised raising A$275,000 (US$222,217) in contributed equity and
at the time of exercise the shares had a market value of A$2,655,500.
In June 2007 25,000 options above were exercised raising A$25,000 (US$20,625) in contributed equity and at
the time of exercise the shares had a market value of A$206,500.
(iv)
Exercisable at A$1.00, on or before
20 December 2007 (granted 20 December 2004)
Balance at 1 July
Exercised during year
Number of Options
2006
2007
10,250,000 10,250,000
-
(3,250,000)
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
7,000,000 10,250,000
____________________________________________________________________________________________________________________________________________________________________
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.
In October 2006 3,250,000 options above were exercised raising A$3,250,000 (US$2,546,084) in contributed
equity and at the time of exercise the shares had a market value of A$16,737,500.
68757_1
117
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 19. CONTRIBUTED EQUITY AND RESERVES (continued)
(c) Issued Options (continued)
(v)
Exercisable at A$1.25, on or before
30 November 2007 (granted 30 November 2004)
Balance at 1 July
Exercised during year
Number of Options
2006
2007
1,300,000
(1,300,000)
1,300,000
-
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
-
1,300,000
____________________________________________________________________________________________________________________________________________________________________
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.
In July 2006 300,000 options above were exercised raising A$375,000 (US$293,779) in contributed equity and
at the time of exercise the shares had a market value of A$1,248,000.
In November 2006 1,000,000 options above were exercised raising A$1,250,000 (US$979,263) in contributed
equity and at the time of exercise the shares had a market value of A$7,120,000.
(vi)
Exercisable at A$1.50, on or before 15 July 2008
(granted 15 July 2005)
Balance at 1 July
Granted during year
Lapsed during year
Exercised during year
Number of Options
2006
2007
200,000
-
-
(10,000)
-
250,000
(50,000)
-
____________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
(190,000)
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.
In September 2006 6,000 options above were exercised raising A$9,000 (US$7,051) in contributed equity and
at the time of exercise the shares had a market value of A$26,400.
In November 2006 4,000 options above were exercised raising A$6,000 (US$4,700) in contributed equity and at
the time of exercise the shares had a market value of A$27,000.
(vii)
Exercisable at A$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).
Balance at 1 July
Granted during year
Exercised during year
Number of Options
2006
2007
2,850,000
-
(30,000)
-
2,850,000
-
______________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
2,820,000
2,850,000
______________________________________________________________________________________________________________________________________________________________________
In January 2007 30,000 options above were exercised raising A$84,000 (US$66,217) in contributed equity and
at the time of exercise the shares had a market value of A$261,000.
68757_1
118
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 19. CONTRIBUTED EQUITY AND RESERVES (continued)
(c) Issued Options (continued)
Number of Options
2006
2007
(viii)
Exercisable at A$5.50, on or before 28 April 2009
(granted 27 April 2006)
(782,500 vest 31 October 2007 and 782,500 vest
31 October 2008).
Balance at 1 July
Granted during year
Exercised during year
1,565,000
-
-
-
1,565,000
-
______________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
1,565,000
1,565,000
______________________________________________________________________________________________________________________________________________________________________
(ix)
Exercised at A$5.50 on or before 5 July 2009
(granted 5 July 2006 to 20 July 2006)
(700,000 vest 5 January 2008 and 700,000 vest 5 January 2009).
Balance at 1 July
Granted during year
-
1,400,000
-
-
______________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
1,400,000
-
______________________________________________________________________________________________________________________________________________________________________
(x)
Exercisable at A$8.77 on or before 1 February 2012
(granted 1 February 2007)
(2,733,670 vest 1 February 2010)
Balance at 1 July
Granted during year
-
2,733,670
-
-
______________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
2,733,670
-
______________________________________________________________________________________________________________________________________________________________________
(xi)
Exercisable at A$8.77 on or before 29 June 2012
(granted 29 June 2007)
(400,000 vest 29 June 2010)
Balance at 1 July
Granted during year
-
400,000
-
-
______________________________________________________________________________________________________________________________________________________________________
Balance at 30 June
400,000
-
______________________________________________________________________________________________________________________________________________________________________
68757_1
119
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
NOTE 19. CONTRIBUTED EQUITY AND RESERVES (continued)
(d) Reserves
Share
based
Listed
option
application payments
reserve
US$m
reserve
US$m
CONSOLIDATED
At 1 July 2005
Net unrealised gains on available-for-sale
investments
Share based payments
Foreign currency translation
At 30 June 2006
Net unrealised gains on available-for-sale
investments
Share based payments
Functional currency transition adjustment
Foreign currency translation
Convertible bonds – equity component
Acquisition of Summit Resources Ltd
Income tax
At 30 June 2007
0.1
-
-
-
0.1
-
-
-
-
-
-
-
0.1
2.7
-
2.3
-
5.0
-
4.4
-
0.3
-
-
-
9.7
68757_1
Available
for sale
reserve
US$m
1.3
2.1
-
-
3.4
37.5
-
-
3.2
-
-
(12.4)
31.7
Convertible
Foreign
currency
bond
translation non-distributable
reserve
US$m
reserve
US$m
US$m
Acquisition
reserve
Total
US$m
4.1
2.1
2.3
(3.4)
5.1
37.5
4.4
3.7
33.5
37.8
14.9
(23.7)
-
-
-
-
-
-
-
-
-
-
14.9
-
14.9
113.2
-
-
-
(3.4)
(3.4)
-
-
3.7
30.0
-
-
-
30.3
-
-
-
-
-
-
-
-
-
37.8
-
(11.3)
26.5
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
120
NOTE 19. CONTRIBUTED EQUITY AND RESERVES (continued)
(d) Reserves (continued)
Listed
option
Share Available Convertible
for sale
bond non-
based
application payments
reserve distributable
reserve
reserve
reserve
Total
Foreign
currency
translation
reserve
US$m
US$m
US$m
US$m
US$m
US$m
PARENT
At 1 July 2005
Share based payments
Foreign currency translation
At 30 June 2006
Functional currency transition
adjustment
Foreign currency translation
Convertible bonds – equity
Component
Income tax
Net unrealised gains
on available-
for-sale investments
Share based payments
0.1
-
-
0.1
-
-
-
-
-
-
At 30 June 2007
0.1
2.7
2.3
-
5.0
-
0.3
-
-
-
4.4
9.7
-
-
-
-
-
1.7
-
-
-
-
-
-
-
37.8
(5.6)
(11.3)
18.6
-
-
-
14.7
26.5
-
-
(3.1)
(3.1)
3.1
-
-
-
-
-
-
2.8
2.3
(3.1)
2.0
3.1
2.0
37.8
(16.9)
18.6
4.4
51.0
68757_1
121
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 19. CONTRIBUTED EQUITY AND RESERVES (continued)
(d) Reserves (continued)
Nature and purpose of reserves
Listed option application reserve
This reserve consists of proceeds from 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 28 for further details on share based payments.
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).
Foreign currency translation reserve
This reserve is used to record exchange differences arising on translation of the group entities that do not
have a functional currency of United States dollars and have been translated into United States dollars for
presentation purposes, as described in Note 2(f).
Convertible bond non-distributable reserve
This reserve records the equity portion of the convertible bonds issued on 15 December 2006, as described
in Note 17.
Acquisition reserve
This reserve recognises the difference in value of investments in Summit Resources Ltd, at the share price
on the date control was obtained (27 April 2007), and the share price on the date of acquisitions after the
date of control.
NOTE 20. MINORITY INTERESTS
Minority interests comprise:
Share capital
Accumulated losses
Reserves
Loss for the period 27 April to 30 June 2007
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2007
US$m
2006
US$m
11.0
(6.5)
180.7
(0.4)
184.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The minority interests recognised during the year relate to the 18.1% interest in Summit Resources Ltd not
acquired from the takeover bid that closed on 1 June 2007. No minority interests have been reflected for the
15% of Paladin (Africa) Ltd to which the Government of Malawi is entitled. As this company is in a net
liability position as a consequence of the policy to expense exploration and evaluation expenditure prior to
the decision made to proceed to development.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 21. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
122
The Group’s principal financial instruments comprise bank loans, convertible bonds, cash, short-term
deposits, US treasury bonds 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.
(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, US treasury bonds 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. The
convertible bonds are a fixed interest rate debt instrument and as such do not expose the group to 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, secured bank loans, convertible bonds 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.
68757_1
123
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 21. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(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 and convertible bonds.
(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 United States dollars and the Group
has adopted a presentation currency of United States dollars. The Group had no significant monetary
foreign currency assets and liabilities during the year apart from Namibian dollar cash, receivables and
payables and Australian dollar cash and payables.
The Group currently does not engage in any hedging or derivative transactions to manage foreign currency
risk.
68757_1
124
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 22. 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.
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.
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
CARRYING AMOUNT/FAIR VALUE
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
182.8
12.6
43.6
2.7
169.7
4.2
16.6
0.1
-
-
60.3
13.8
5.6
-
-
5.6
8.1
-
81.3
993.2
34.1
32.3
34.7
1.5
2.8
-
0.8
-
0.1
-
Non current liabilities
Trade and other payables
Interest bearing loans and borrowings
-
268.0
-
14.1
2.7
209.2
68757_1
125
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 22. FINANCIAL INSTRUMENTS (continued)
Interest rate risk
The following tables set out the carrying amount, by maturity, of the financial instruments exposed to interest
rate risk:
<1-year
>3-<4
Total
years
US$m US$m US$m US$m US$m US$m US$m
>4-<5
years
>2-<3
years
>1-<2
years
>5
years
Weighted
Average
Effective
Interest
rate
%
182.8
4.8%
-
-
64.4
8.9%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
209.2
4.5%
-
-
182.8
4.8%
209.2
4.5%
64.4
8.9%
-
-
-
-
-
-
Year ended 30 June 2007
CONSOLIDATED
FINANCIAL ASSETS
Floating rate
Cash assets
Weighted average effective
Interest rate
FINANCIAL LIABILITIES
Fixed rate
Unsecured convertible bonds
Weighted average effective
Interest rate
Floating rate
Secured bank loans
Weighted average effective
Interest rate
68757_1
126
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 22. FINANCIAL INSTRUMENTS (continued)
Interest rate risk (continued)
<1-year
>3-<4
Total
years
US$m US$m US$m US$m US$m US$m US$m
>4-<5
years
>1-<2
years
>2-<3
years
>5
years
Weighted
Average
Effective
Interest
rate
%
169.7
31.5
201.2
5.1%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
209.2
4.5%
169.7
31.5
201.2
4.7%
7.3%
5.1%
209.2
4.5%
-
-
-
-
-
-
<1-year
>3-<4
Total
years
US$m US$m US$m US$m US$m US$m US$m
>4-<5
years
>2-<3
years
>1-<2
years
>5
years
Weighted
Average
Effective
Interest
rate
%
43.6
5.6%
14.1
9.1%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
43.6
5.6%
14.1
9.1%
Year ended 30 June 2007
PARENT
FINANCIAL ASSETS
Floating rate
Cash assets
Intercompany receivables
Weighted average effective
Interest rate
FINANCIAL LIABILITIES
Fixed rate
Unsecured convertible bonds
Weighted average effective
Interest rate
Year ended 30 June 2006
CONSOLIDATED
FINANCIAL ASSETS
Floating rate
Cash assets
Weighted average effective
Interest rate
FINANCIAL LIABILITIES
Floating rate
Secured bank loans
Weighted average effective
Interest rate
68757_1
127
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 22. FINANCIAL INSTRUMENTS (continued)
Interest rate risk (continued)
Year ended 30 June 2006
PARENT
FINANCIAL ASSETS
Floating rate
Cash assets
Intercompany receivables
Weighted average effective
Interest rate
<1-year
>3-<4
Total
years
US$m US$m US$m US$m US$m US$m US$m
>4-<5
years
>1-<2
years
>2-<3
years
>5
years
Weighted
Average
Effective
Interest
rate
%
16.6
31.8
48.4
9.7%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16.6
31.8
48.4
5.9%
11.6%
9.7%
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 unsecured
convertible bond is considered a fixed interest financial 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.
68757_1
128
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 23. 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
Mr Brendan O’Hara
Chairman (Non-executive)
Managing Director
Director (Non-executive)
Director (Non-executive)
Director (Non-executive)
Executive General Manager – Operations and Development –
deceased 8 March 2007
Company Secretary
Chief Financial Officer
General Manager – Langer Heinrich Operations
Executive General Manager – Sales and Contract Administration
Executive General Manager – Marketing
Executive General Manager – New Business Development
General Manager – Special Projects – appointed 14 August 2006
(b) Compensation of Key Management Personnel: Compensation by Category
Short-Term
Post Employment
Share-Based Payment
CONSOLIDATED/
PARENT ENTITY
2007
2006
US$000 US$000
7,998
81
4,665
1,613
51
1,914
12,744
3,578
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.
68757_1
129
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 23. DIRECTOR AND EXECUTIVE DISCLOSURES (continued)
(c) Option Holdings of Key Management Personnel (Consolidated and Parent Entity)
Balance at
beginning Granted as
Remune
of period
-ration
01 Jul 06
Net
Options Change
Exercised Other #
Balance at
end of
period
30 Jun 07
Not vested/
Not
Total Exercisable Exercisable
Vested/
3,250,000
3,750,000
-
1,500,000
-
-
-
-
3,250,000
5,250,000
3,250,000
5,250,000
3,250,000
3,750,000
-
1,500,000
30 June 2007
Directors
Mr Rick Crabb
Mr John Borshoff
Executives
3,000,000
Mr Garnet Halliday
Ms Gillian Swaby
2,750,000
Mr Ron Chamberlain 1,000,000
1,000,000
Mr Wyatt Buck
1,000,000
Mr James Eggins
1,000,000
Mr Dustin Garrow
1,000,000
Mr David Marsh
-
Mr Brendan O’Hara
-
75,000
35,700
150,000
100,000
78,570
100,000
1,031,400
(3,000,000)
-
(800,000)
-
(350,000)
(400,000)
-
-
-
-
-
-
-
-
-
-
-
2,825,000
235,700
1,150,000
750,000
678,570
1,100,000
1,031,400
-
2,825,000
235,700
1,150,000
750,000
678,570
1,100,000
1,031,400
-
2,750,000
-
500,000
-
-
-
-
-
75,000
235,700
650,000
750,000
678,570
1,100,000
1,031,400
Total
17,750,000
3,070,670
(4,550,000)
- 16,670,670 16,270,670 10,250,000
6,020,670
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 vested/
Not
Total Exercisable Exercisable
Vested/
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
Mr James Eggins commenced as 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 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.
68757_1
130
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 23. 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 06 Remuneration
Granted as On Exercise Net Change
of Options
Other
Balance
30 June 07
30 June 2007
Directors
Mr Rick Crabb
Mr John Borshoff
Mr Ian Noble
8,964,746
18,091,394
16,000
Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr Ron Chamberlain
Mr James Eggins
Mr Dustin Garrow
Mr David Marsh
Total
125,000
10,216,140
-
25,000
-
-
37,438,280
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,964,746
18,091,394
16,000
3,000,000
-
800,000
350,000
400,000
-
(3,125,000)
-
(400,000)
(50,000)
(400,000)
9,050
-
10,216,140
400,000
325,000
-
9,050
4,550,000
(3,965,950)
38,022,330
No other Key Management personnel held shares during the year ended 30 June 2007.
Mr Garnet Halliday deceased on 8 March 2007 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.
30 June 2006
Directors
Mr Rick Crabb
Mr John Borshoff
Mr Ian Noble
Executives
Mr Garnet Halliday
Ms Gillian Swaby
Mr James Eggins
Balance
01 Jul 05 Remuneration
Granted as On Exercise Net Change
of Options
Other
Balance
30 June 06
6,464,746
14,591,394
-
-
6,600,000
-
-
-
-
-
-
-
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
Total
27,656,140
-
9,000,000
782,140
37,438,280
No other Key Management Personnel held shares during the year ended 30 June 2006.
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.
68757_1
131
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 23. DIRECTOR AND EXECUTIVE DISCLOSURES (continued)
(e) Other Transactions and Balances with Key Management Personnel
Fees paid in the normal course of business in 2007 for company secretarial services totalling US$259,616
(2006: US$114,418) were paid/payable (balance outstanding at 30 June 2007 and included in trade creditors
US$27,053 (2006: US$24,823)) to a company of which Ms Gillian Swaby is a director and shareholder.
Fees paid in the normal course of business in 2007 for marketing consulting services totalling US$130,571
(2006: US$107,580) were paid/payable (balance outstanding at 30 June 2007 and included in trade creditors
US$Nil (2006: US$Nil)) to a company of which Mr Dustin Garrow is a director and shareholder.
Amounts recognised at the reporting date in relation to other transactions:
CONSOLIDATED/
PARENT ENTITY
2006
2007
US$000 US$000
27
24
390
222
Liabilities
Current liabilities
Trade and other payables
Expenses
Other expenses
68757_1
132
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 24. AUDITORS’ REMUNERATION
The auditor of the Paladin Resources Ltd Group is Ernst & Young.
Amounts received or due and receivable by
Ernst & Young (Australia) for:
• Audit or review of the financial
report of the entity and any other entity
in the consolidated Group
• Other assurance services:
Compilation report
Convertible bonds comfort letter
• Taxation services:
Tax compliance services
International tax consulting
Tax advice on mergers and acquisitions
Other tax advice
Sub-total
Amounts received or due and receivable by related
practices of Ernst & Young (Australia) for:
• Audit or review of the financial
report of subsidiaries
• Other assurance services:
Malawi development agreement
• Taxation services:
Tax compliance services
International tax consulting
Amounts received or due and receivable by non
Ernst & Young audit firms for:
• Audit or review of the financial
report of subsidiaries
• Taxation services:
Tax compliance services
CONSOLIDATED
2007
US$000
2006
US$000
PARENT ENTITY
2006
2007
US$000
US$000
255
85
206
73
12
53
-
109
25
23
477
18
3
8
2
-
-
5
-
-
5
95
18
23
-
-
12
53
-
109
25
23
428
-
-
-
-
-
-
4
-
-
5
82
13
-
-
-
508
136
428
95
17
1
18
-
-
-
-
-
-
-
-
-
68757_1
133
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 25. COMMITMENTS AND CONTINGENCIES
There were no outstanding commitments or contingencies, which are not disclosed in the financial report of
the Consolidated Entity and the Company as at 30 June 2007 other than:
(a) Tenements
CONSOLIDATED
2007
US$m
2006
US$m
PARENT ENTITY
2007
US$m
2006
US$m
Commitments for tenements
contracted for at the reporting date but not
recognised as liabilities, payable:
Within one year
Later than one year but not later than 5 years
More than 5 years
2.6
-
-
0.4
-
-
-
-
-
-
-
-
____________________________________________________________________________________________________________________________________________________________________
Total tenements commitment
2.6
0.4
-
-
____________________________________________________________________________________________________________________________________________________________________
These include commitments relating to tenement lease rentals and, the minimum expenditure requirements
of the Namibia, Malawi, Western Australian, South Australian, Northern Territory and Queensland Mines
Departments attaching to the tenements and are subject to re-negotiation upon expiry of the exploration
leases or when application for a mining licence is made.
These are necessary in order to maintain the tenements in which the Consolidated Entity and other parties
are involved. All parties are committed to meet the conditions under which the tenements were granted in
accordance with the relevant mining legislation in Namibia, Malawi and Australia.
(b) Mine Construction Commitments
CONSOLIDATED
2007
US$m
2006
US$m
PARENT ENTITY
2007
US$m
2006
US$m
Commitments for mine construction
contracted for at the reporting date but not
recognised as liabilities, payable:
Within one year
Later than one year but not later than 5 years
More than 5 years
9.3
-
-
23.0
-
-
-
-
-
-
-
-
____________________________________________________________________________________________________________________________________________________________________
Total mine construction
9.3
23.0
-
-
____________________________________________________________________________________________________________________________________________________________________
These commitments in 2007 relate to mine construction in Malawi (2006: Namibia).
(c) Operating Lease Commitments
The Group has entered into commercial property leases relating to rental of offices.
These non-cancellable leases have remaining terms of between 1 and 3 years. All leases include a clause
to enable upward revision of rental charge on an annual basis according to prevailing market conditions.
68757_1
134
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 25. COMMITMENTS AND CONTINGENCIES (continued)
(c) Operating Lease Commitments (continued)
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
Within one year
Later than one year but not later than 5 years
More than 5 years
0.2
0.3
-
0.2
0.4
-
0.2
0.3
-
0.2
0.4
-
____________________________________________________________________________________________________________________________________________________________________
Total operating lease commitment
0.5
0.6
0.5
0.6
____________________________________________________________________________________________________________________________________________________________________
(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$0.75 million (US$0.6 million) and are subject to the
Department of Minerals & Energy granting tenements comprising 2 exploration licence applications. The
A$0.75 million (US$0.6 million) 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$0.75 million (US$0.6 million) by the Consolidated Entity to the vendors when all project development
approvals are further obtained.
(e) Bank Guarantees
As at 30 June 2007 the Group has outstanding A$60,000 (2006: A$60,000) as a current guarantee provided
by a bank for the corporate office lease.
(f) Legal Actions
(i) Kayelekera Uranium Project, Malawi
On 28 May 2007, the Company announced that its subsidiary Paladin (Africa) Ltd and the Government of
Malawi had been named defendants in two legal actions in Malawi commenced by a group of Malawian Civil
Society Organisations. The two actions seek to delay the Kayelekera Uranium Project until, amongst other
things; alleged deficiencies in the process associated with the grant of approval under the Malawi
Environment Management Act are rectified, and additional protective measures affecting both the local
community and the country are put in place. Both the Government of Malawi and Paladin (Africa) Ltd intend
to rigorously defend all claims. No orders, interim or otherwise, have to date been made by the court and
Project construction is continuing as usual.
(ii) Mt Isa Uranium Joint Venture
On 3 August 2007, the Company announced that its wholly owned subsidiary, Mt Isa Uranium Pty Ltd had
settled the court proceedings commenced against it and Resolute Ltd by Summit Resources (Aust) Pty Ltd in
relation to alleged breaches of confidentiality provisions in the Mt Isa Uranium Project joint venture
agreement. Subsequently, Areva NC (Australia) Pty Ltd has advised that it intends to apply to the Supreme
Court of Western Australia for orders under Section 237 of the Corporations Act 2001 to be granted leave to
intervene in the court proceedings.
68757_1
135
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 25. COMMITMENTS AND CONTINGENCIES (continued)
(f)
Legal Actions (continued)
(ii) Mt Isa Uranium Joint Venture (continued)
The Company has always remained confident that the court proceedings could be successfully defended.
Further, the Company has the benefit of an indemnity from Resolute Ltd and an ultimate 81.9% interest in
Summit Resources (Aust) Pty Ltd. As a consequence, a change in the ownership of the joint venture
deposits would not be of significance to the Company.
NOTE 26. EMPLOYEE BENEFITS
Provision for annual leave and long service leave
aggregate employment benefit liabilities
0.9
0.2
0.5
0.2
____________________________________________________________________________________________________________________________________________________________________
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
Employee numbers
Average number of employees
during the financial year
Superannuation
Number
Number
41
31
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 28.
NOTE 27. RELATED PARTIES
(a)
Subsidiaries
Interests in subsidiaries are set out in Note 10(a).
(b) Ultimate parent
The ultimate Parent Entity in the wholly owned Group is Paladin Resources Ltd.
(c) Key management personnel
Details relating to key management personnel, including remuneration paid, are included in the Directors’
Report under the section entitled Remuneration Report and in Note 23.
(d)
Transactions with subsidiaries
Transactions entered into with subsidiaries during the years ended 30 June 2007 and 2006 consisted of:
(a) sundry debtors receivable by the Company (Note 8(c));
(b)
(c)
(d)
(e)
loans advanced by the Company (Note 8(d));
loans advanced to the Company (Note 15);
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)).
68757_1
136
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
______________________________________________________________________________________________________
NOTE 28. SHARE-BASED PAYMENT PLAN
The share-based payment plans are described below. There have been no cancellations or modifications to
any of the plans during 2007 and 2006.
(a) Types of share-based payment plans
Employee Share Incentive Option Plan (ESOP)
On 23 March 2004, the Directors approved the ESOP.
Staff eligible to participate in the plan were those who had been continuously employed by the Company for
a period of at least one year.
Options were granted under the plan for no consideration. Options were granted for a three year period, and
100% of each new tranche became exercisable after one year of the date of grant. Entitlements to the
options were vested as soon as they become exercisable and performance conditions had been met. There
were no cash settlement alternatives. Options granted under the plan carried no dividend or voting rights.
Following implementation of the EXSOP detailed below, no further options will be issued pursuant to the
ESOP.
Executive Share Option Plan (EXSOP)
On 21 November 2006, the EXSOP was approved by shareholders at the Company’s Annual General
Meeting. The number of shares that may be issued under the EXSOP must not exceed 5% of the total
number of shares on issue.
Share options are granted to employees under the EXSOP which is designed to create a stronger link
between increasing shareholder value and employee reward. Under the EXSOP, the exercise price of the
options is set at the market price of the shares on the date of grant and performance is measured by
comparing the Company’s Total Shareholder Return (‘TSR’) (share price appreciation plus dividends
reinvested) with a group of peer companies. The Company’s performance will be measured over three years
from the date of grant. To the extent that maximum performance is not achieved under the performance
condition, performance will be retested every six months following the first three years until the end of the
fourth year.
In assessing whether the TSR hurdle for each grant has been met, the Group receives independent data
from an external advisor, who provides both the Group’s TSR growth from the commencement of each grant
and that of the pre-selected peer group. The peer group chosen for comparison is the resource companies
in the S&P/ASX200 Index at the date of grant. This peer group reflects the Group’s competitors for capital
and talent.
The Group’s performance against the hurdle is determined according to Paladin Resources Limited’s ranking
against the peer group TSR growth over the performance period.
• when Paladin Resources Limited is ranked over the 75th percentile, 100% of the share options will vest;
for rankings above the 50th and below the 75th percentile, the percentage of options to vest will be pro-
•
rata between 50% and 100%.
• when Paladin Resources Limited is ranked at the 50th percentile, 50% of the share options will vest;
• when Paladin Resources Limited is ranked below the 50th percentile the share options will not vest.
When a participant ceases employment prior to the vesting of their share options, the share options are
forfeited unless cessation of employment is due to termination initiated by the Group or death. In the event
of a change of control all the awards will vest and may be exercised by the participant.
The contractual life of each option granted is five years. There are no cash settlement alternatives.
The expense recognised in the income statement in relation to share-based payments is disclosed in Note
5(e).
68757_1
137
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
______________________________________________________________________________________________________
NOTE 28. SHARE BASED PAYMENT PLAN (continued)
(b) Summaries of options granted under ESOP and EXSOP arrangements:
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and
movements in share options issued during the year:
2007
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
24,215,000
4,533,670
-
(9,070,000)
-
19,678,670
2007
WAEP
A$
1.52
7.76
-
1.04
-
3.18
1
2006
No.
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
2
Exercisable at the end of the year
11,630,000
1.14
20,225,000
1.03
1. The weighted average share price at the date of exercise is A$6.03
2. The weighted average share price at the date of exercise is A$3.81
The outstanding balance as at 30 June 2007 represented by:
Date options granted
______________________________________________________________________________________________________
Exercisable
Expiry date
option
Exercise price
of options
Number under
30 November 2004
3,570,000
20 December 2004
7,000,000
15 July 2005
190,000
13 January 2006
170,000
13 January 2006
850,000
19 January 2006
600,000
16 February 2006
700,000
16 February 2006
500,000
27 April 2006
782,500
27 April 2006
782,500
5 July 2006
500,000
5 July 2006
500,000
20 July 2006
200,000
20 July 2006
200,000
1 February 2007
2,733,670
400,000
29 June 2007
______________________________________________________________________________________________________
Total
19,678,670
______________________________________________________________________________________________________
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
5 July 2009
5 July 2009
5 July 2009
5 July 2009
1 February 2012
29 June 2012
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
5 January 2008
5 January 2009
5 January 2008
5 January 2009
1 February 2010
29 June 2010
A$1.00
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
A$5.50
A$5.50
A$5.50
A$5.50
A$8.77
A$8.77
Please refer to Shares Under Option table in the Directors’ Report for movements since the year end.
68757_1
138
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 28. SHARE BASED PAYMENT PLAN (continued)
(c) Weighted average remaining contractual life
The weighted average remaining contractual life for the share options outstanding as at 30 June 2007 is
between 1 and 3 years (2006: 1 and 3 years).
(d) Range of exercise price
The range of exercise prices for options outstanding at the end of the year was A$1.00 – A$8.77 (2006:
A$1.00 – A$5.50).
(e) Weighted average fair value
The weighted average fair value of options granted during the year was A$4.04 (2006: A$1.87).
(f) Option pricing model: ESOP and EXSOP
The fair value of the equity-settled share options granted under the option plan is estimated as at the date of
grant using a binominal model taking into account the terms and conditions upon which the options were
granted.
The following table lists the inputs to the model used for the years ended 30 June 2006 and 30 June 2007:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Option exercise price ($)
Weighted average share price at grant date ($)
2007
2006
Nil%
60% - 81%
5.81% - 6.44%
2.5 - 5 years
A$5.50 - A$8.77
A$4.16 - A$9.07
Nil%
83% - 126%
5.13% - 5.67%
2.5 years
A$1.50 - A$5.50
A$1.36 - A$4.88
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.
68757_1
139
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 29. INTERESTS IN JOINTLY CONTROLLED OPERATIONS
(a)
Joint venture details
Mount Isa Uranium joint venture
The Mount Isa Uranium joint venture, which includes the Valhalla and Skal uranium deposits, is involved in
the identification of and exploration for uranium resources in Queensland, Australia. Summit Resources
(Australia) Pty Ltd (SRA) is manager and operator, holding a 50% interest. Mount Isa Uranium Pty Ltd (MIU)
holds the other 50% interest. Paladin Resources Ltd ultimately owns 81.9% of SRA and 100% of MIU.
Bigrlyi Uranium joint venture
The Bigrlyi Uranium joint venture is involved in the identification of and exploration for uranium resources in
the Northern Territory, Australia. The joint venture is between Energy Metals Ltd 53.3%, Southern Cross
Exploration NL 5% and Northern Territory Uranium Pty Ltd (NTU) 41.7% (NTU is 100% owned by Paladin
Resources Ltd) with Energy Metals Ltd as manager and operator of the joint venture.
Other joint ventures
The Consolidated Entity also has a number of other 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(s) and no revenue is generated. The
Consolidated Entity’s share of the assets and liabilities in respect of these joint ventures is not material.
(b) Assets utilised in the Mount Isa and Bigrlyi Uranium joint ventures
The Group’s share of the assets utilised in these jointly controlled operations, which are included in the
consolidated financial statements, are as follows:
Non-current assets
Exploration and evaluation expenditure
Total assets
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
164.0
164.0
-
-
-
-
-
-
The interests of MIU in the Mount Isa Uranium joint venture and of NTU in the Bigrlyi Uranium joint venture
were acquired on 7 September 2006 and include the allocation of the acquisition value.
The interest of SRA in the Mount Isa Uranium joint venture was acquired on 27 April 2007 and the allocation
of the acquisition value to this project has yet to be completed.
(c) Commitments relating to the joint venture
Share of tenement commitments (Note 25)
-
-
-
-
Impairment
(d)
No assets employed in the jointly controlled operation were impaired during the year (2006: US$Nil).
68757_1
140
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 30. BUSINESS COMBINATION AND ASSET ACQUISITION
Acquisition of Summit Resources Ltd
Paladin Resources Ltd acquired a controlling interest on 27 April 2007 of the voting shares of Summit
Resources Ltd, a public company based in Australia and listed on the Australian Stock Exchange involved in
the exploration for uranium resources. The takeover bid closed on 1 June 2007 with the acquisition of 81.9%
of the issued share capital.
The total cost of the combination was US$817.6 million and comprised an issue of equity instruments and
costs directly attributable to the combination. The Company issued 101,157,400 ordinary shares with an
average fair value of A$9.51 each, based on the quoted price of the shares of Paladin Resources Ltd at the
date of exchange.
The initial accounting for the acquisition of Summit Resources Ltd can be determined only provisionally at 30
June 2007 because the fair values assigned to the identifiable assets, liabilities and the cost of the
combination can be determined only provisionally.
The provisional fair value of the identifiable assets and liabilities of the Summit Resources Ltd Group as at
the date of acquisition were:
CONSOLIDATED
Cash and cash equivalents
Trade and other receivables
Plant and equipment
Capitalised exploration and evaluation expenditure
Trade and other payables
Deferred tax liability
Net assets
Minority interests
Fair value of net identifiable assets acquired
Cost of the combination:
Shares issued, at fair value
Direct costs relating to the acquisition
Total cost of the combination
The cash inflow on acquisition is as follows:
Net cash acquired with the subsidiary
Direct costs relating to acquisition
Net consolidated cash inflow
Carrying Value
US$m
23.2
1.1
1.6
13.1
39.0
14.2
-
14.2
24.8
Recognised on
Acquisition
US$m
23.2
1.1
1.6
1,402.6
1,428.5
14.2
415.7
429.9
998.6
(181.0)
817.6
813.8
3.8
817.6
23.2
(3.8)
19.4
From the date of acquisition, the Summit Resources Ltd Group has contributed US$2.0 million to the net loss
of the Group (including Minority Interests).
If the combination had taken place at the beginning of the year, the loss from continuing operations for the
Summit Resources Ltd Group would have been US$33.7 million and revenue from continuing operations
would have been US$1.2 million.
Acquisition of Valhalla Uranium Ltd
Paladin Resources Ltd acquired a controlling interest on 7 September 2006 of the voting shares of Valhalla
Uranium Ltd, a public company based in Australia involved in the exploration for uranium resources. The
takeover was completed on 27 October 2006 with the acquisition of 100% of the issued share capital for the
issue of 37,974,256 Paladin shares plus US$1.7 million in transaction costs for a total cost of US$153.1
million.
The acquisition was treated as an acquisition of an asset as the Valhalla Uranium Ltd Group had no
employees and its business consisted of minority or non-manager joint venture interests.
68757_1
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 31. EVENTS AFTER THE BALANCE SHEET DATE
141
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 2007 Financial Report:
Board Changes
On 9 July 2007, the Company appointed Mr Donald Shumka as a Non-executive Director of Paladin
Resources Ltd. Mr Shumka is Vancouver based and is the President and Managing Director of Walden
Management Ltd., a consulting firm specialising in natural resources.
Mr. Shumka’s appointment followed the resignation of Mr. George Pirie who, due to his increasing time
commitment as the President and Chief Executive Officer of Breakwater Resources Ltd (a TSX listed
company), no longer had sufficient time available to undertake his duties in his role as a Non-executive
Director of Paladin.
Increased Holding in Deep Yellow Ltd
On 26 July 2007, the Consolidated Entity acquired an additional 9,789,808 shares in Deep Yellow Ltd
pursuant to an entitlement issue. Subsequently, on 8 August 2007, the Consolidated Entity acquired an
additional 31,673,949 shares in Deep Yellow Ltd via subscription for the shortfall of the entitlement issue.
The additional investments totalled A$20.7 million (US$17.8 million). After these acquisitions the
Consolidated Entity now holds 14.34% of Deep Yellow Ltd.
Mt Isa Uranium Joint Venture Litigation
On 3 August 2007, the Company announced that its wholly owned subsidiary, Mt Isa Uranium Pty Ltd had
settled the court proceedings commenced by Summit Resources (Aust) Pty Ltd (ultimately 81.9% owned by
the Company) against it and Resolute Ltd in relation to alleged breaches of confidentiality provisions in the
Mt Isa Uranium Project joint venture agreement.
Subsequently, Areva NC (Australia) Pty Ltd has advised that it intends to apply to the Supreme Court of
Western Australia for orders under Section 237 of the Corporations Act 2001 to be granted leave to intervene
in the court proceedings.
The Company has always remained confident that the court proceedings could be successfully defended but
a change in ownership of the joint venture deposits is not of significance to the Company, as a consequence
of the indemnity given by Resolute Ltd and the fact that the Company holds an ultimate 81.9% interest in
Summit Resources (Aust) Pty Ltd.
Kayelekera Uranium Project, Malawi – Major Development Contracts Signed
On 15 August 2007, the Company announced that its subsidiary Paladin (Africa) Ltd had signed three major
contracts for the development of its Kayelekera Uranium Project.
The EPCM contract was awarded to Engineering and Projects Company appointing them as the Project
Engineers and the mining and earthworks contracts were awarded to Mota Engil Engineering.
68757_1
142
PALADIN RESOURCES LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
_________________________________________________________________________________
NOTE 32. NON CASH FINANCING AND INVESTMENT ACTIVITIES
CONSOLIDATED
2006
US$m
2007
US$m
PARENT ENTITY
2006
2007
US$m
US$m
Non Cash Financing and Investment Activities
Issue of shares to acquire 100% of Valhalla
Uranium Ltd
Issue of shares to acquire 81.9% of Summit
Resources
Disposal of 15% interest in Paladin (Africa) Ltd on
Signing of development agreement
Issue of shares to acquire remaining 10% joint
venture interest in the Kayelekera Uranium Project
Value of Deep Yellow shares and unlisted securities
acquired from the sale of exploration properties
Value of Deep Yellow shares and unlisted securities
acquired from grant of licence over the Frome Basin
database
151.4
798.9
-
-
-
-
-
-
-
4.3
0.3
1.1
-
151.4
798.9
-
-
-
-
-
-
4.3
0.3
-
NOTE 33. EARNINGS PER SHARE
(i)
Basic earnings per share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company
by the weighted average number of ordinary shares outstanding during the period.
(ii)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares and the weighted average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares. Diluted earnings per share is the same as basic
earnings per share in 2007 and 2006 as the Consolidated Entity is in a loss position.
The following reflects the income and share data used in the basic and diluted earnings per share
computations:
Net loss attributable to ordinary equity holders of the Parent from
continuing operations
Weighted average number of ordinary shares
for basic earnings per share
68757_1
CONSOLIDATED
2007
US$m
2006
US$m
(37.6)
(5.6)
2007
#
2006
#
511,189,193 433,062,353
_________________________________________________________________________________
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 2007 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
2007.
On behalf of the Board
Mr John Borshoff
Managing Director
Perth, Western Australia
3 September 2007
68757_1
INDEPENDENT AUDIT REPORT
_________________________________________________________________________________
144
Independent auditor’s report to the members of Paladin Resources Limited
We have audited the accompanying financial report of Paladin Resources Limited which comprises the
balance sheet as at 30 June 2007 and the income statement, statement of changes in equity and cash
flow statement for the year ended on that date, a summary of significant accounting policies, other
explanatory notes and the directors’ declaration of the consolidated entity comprising the company
and the entities it controlled at the year’s end or from time to time during the financial year.
The company has disclosed information as required by paragraphs Aus 25.4 to Aus 25.7.2 of
Accounting Standard AASB 124 Related Party Disclosures (“remuneration disclosures”), under the
heading “Remuneration Report” on pages 53 to 62 of the directors’ report, as permitted by
Corporations Regulation 2M.6.04.
Directors Responsibility for the Financial Report
The directors of the Company are responsible for the preparation and fair presentation of the financial
report in accordance with the Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and
maintaining internal controls relevant to the preparation and fair presentation of the financial report that
is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In
Note 2(a), the directors also state that the financial report, comprising the consolidated financial
statements and notes complies with International Financial Reporting Standards. The directors are
also responsible for the remuneration disclosures contained in the directors’ report.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the
audit to obtain reasonable assurance whether the financial report is free from material misstatement
and that the remuneration disclosures comply with Accounting Standard AASB 124 Related Party
Disclosures.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on our judgment, including the assessment of
the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, we consider internal controls relevant to the entity’s preparation and fair
presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal controls. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by the directors, as well as evaluating the
overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
VT;HG;PALADIN;026
68757_1
Liability limited by a scheme approved under
Professional Standards Legislation.
145
INDEPENDENT AUDIT REPORT
_________________________________________________________________________________
Independence
In conducting our audit we have met the independence requirements of the Corporations Act 2001.
We have given to the directors of the Company a written Auditor’s Independence Declaration, a copy
of which is included in the directors’ report. In addition to our audit of the financial report and the
remuneration disclosures, we were engaged to undertake the services disclosed in the notes to the
financial statements. The provision of these services has not impaired our independence.
Auditor’s Opinion
In our opinion:
1.
the financial report of Paladin Resources Limited is in accordance with the Corporations Act
2001, including:
(i)
giving a true and fair view of the financial position of Paladin Resources Limited and
the consolidated entity at 30 June 2007 and of their performance for the year ended
on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations); and the Corporations Regulations 2001.
(ii)
2.
3.
the consolidated financial report also complies with International Financial Reporting
Standards as disclosed in Note 2(a).
the remuneration disclosures that are contained on pages 53 to 62 of the directors’ report
comply with Accounting Standard AASB 124 Related Party Disclosures.
Ernst & Young
V W Tidy
Partner
Perth
3 September 2007
VT;HG;PALADIN;026
68757_1