ABN 47 109 815 796
annual report 2006
PAUL CHAPMAN
WILL ROBINSON
PETER BEWICK
Corporate Directory
Directors
Paul Chapman
Will Robinson
Peter Bewick
Non-Executive Chairman
Managing Director
Exploration Director
Company Secretary
Kevin Hart
Principal Registered Office
Level 1, 46 Parliament Place
West Perth, Western Australia 6005
Auditor
Grant Thornton Western Australia Partnership
Level 6, 256 St Georges Terrace
Perth, Western Australia 6000
Share Registry
Security Transfer Registrars Pty Ltd
770 Canning Highway
Applecross, Western Australia 6153
Stock Exchange Listing
The Company’s shares are quoted
on the Australian Stock Exchange.
The Home Exchange is Perth,
Western Australia.
ASX Code
ENR – Ordinary shares
ABN 47 109 815 796
Contents
Chairman’s Letter to Shareholders
Review of Exploration
Project Location Plan
Summary of Tenements
Corporate Governance Statement
Directors’ Report
Auditor’s Independence Declaration
Income Statement
Balance Sheet
Statement of Changes in Equity
Cash Flow Statement
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
ASX Additional Information
Uranium and Nuclear Energy Facts
Page
1
2
12
13
14
18
23
24
25
26
27
28
48
49
51
53
Company Information
The Company was incorporated and registered under the Corporations Act 2001 in
Western Australia on 30 June 2004 and became a public company on 26 May 2005.
KEVIN HART
The Company is domiciled in Australia.
Chairman’s
Letter to Shareholders
Dear Fellow Shareholders
I am pleased to present this first Annual Report of
Encounter Resources Limited (Encounter or the Company).
Encounter was listed on the Australian Stock Exchange on
24 March 2006 following a $5 million initial public offering
which received overwhelming support. Since listing, the
Company has commenced implemention of its uranium
exploration strategy.
Encounter is an exploration company focused on unlocking
the uranium potential of its quality portfolio of assets
in Western Australia (WA). To complement this quality
portfolio, the Company has assembled a management
team with proven corporate and exploration track records.
Uranium is the fuel of the future. Rising gas prices and
greenhouse constraints on coal have combined to put
nuclear power back on the agenda for projected new
power capacity throughout the Western world. In addition,
both China and India are expanding their domestic nuclear
capacity to meet their rapidly expanding energy needs. In
a world short of energy options, providing long term
energy security is an imperative.
WA hosts a wide variety of geological environments that
are highly prospective for the formation of uranium
deposits. As a result of the implementation of the “three
mines policy” by the federal government in the early
1980’s, minimal uranium exploration has taken place in
WA over the past two decades. In this time, there have
been considerable advances in technologies and a series
of data acquisition programs that can be applied to
uranium exploration.
This presented a significant opportunity for uranium
explorers and Encounter moved early, establishing an
extensive, quality project portfolio targeting both surfical
and unconformity style uranium deposits in WA. It is very
rare that an opportunity arises to explore for energy
resources in a virtually unexplored Western world country
using modern exploration techniques.
Despite the current regulatory environment for uranium
mining in WA, Encounter believes that uranium resources
in WA will be premium assets as Australia advances its
energy policies. The WA Labor government maintains its
restrictive policy on uranium mining and processing. This
position is consistent with current federal Labor party
policy. The federal Labor Party conference in early 2007
will debate the issue of ending the ALP “no new mines”
policy. We believe that this process, combined with the
weight of scientific, environmental and economic factors,
will ultimately result in uranium mining in WA.
There is sure to be continuing public debate on the utilisation
of Australia’s energy resources. To assist our shareholders
we have provided a fact sheet on uranium and nuclear
energy on the inside back cover of this Annual Report.
Encounter commenced its maiden drill program in May
2006 which successfully identified a new zone of uranium
mineralisation at the Bellah Bore East project 30km north
west of BHP Billiton’s world class Yeelirrie uranium deposit.
This early exploration success provides further confidence
in the Company’s exploration strategy and the potential of
the project portfolio controlled by Encounter.
Activities during the second half of 2006 will include follow
up drilling at the Yeelirrie Channel project and drill programs
at the Company’s Lake Way South and Throssell projects.
Encounter has an experienced management team that will
take a disciplined commercial and technical approach to
maximise the value of the current portfolio and to take
advantage of future opportunities as they arise.
Finally, I would like to thank all those who have made this
a successful year for Encounter. This includes our
shareholders for their initial support with the listing and
their ongoing support since. In addition, thanks to the
operating team at Encounter for their efforts during the
year. The successful maiden drill program following the
listing in March 2006 provides a sound platform to build
on with further exploration success in 2006/07.
Paul I Chapman
Chairman
ENCOUNTER RESOURCES ANNUAL REPORT 2006
1
1
Review of Exploration
PROJECTS
Yeelirrie Channel Project
Encounter 80%, Avoca 20%
(E53/1154-1158, ELA53/1251, E36/540-542 and 569)
Encounter’s exploration tenement holding of over 1,000km2
at the Yeelirrie Channel Project encompasses in excess of
40 strike kms of the defined drainage channel to the
northwest and southeast of BHP Billiton’s (BHPB) Yeelirrie
uranium deposit.
Encounter commenced its maiden drilling program at the
Yeelirrie project in May and then completed a follow up
drilling program in early July.
Reconnaissance drilling at Middle Bore utilised existing
station tracks and fence line roads to minimise environmental
impact. The program centred on a station bore located
15kms south of the Yeelirrie homestead where a historical
hydrogeochemical sample returned an anomalous result of
175ppb uranium. This sample indicated the potential for a
southwest trending tributary to the Yeelirrie palaeochannel.
mineralisation of up to 2m @ 91ppm U3O8, intersected on
the southernmost drill line. Additional drill sections have
been planned to define vectors to mineralisation within the
newly outlined channel.
At Bellah Bore East drilling identified a new near surface
zone of high grade uranium mineralisation. The area was
targeted on a discrete high amplitude uranium channel
radiometric anomaly. A field visit identified a zone of
outcropping silicified calcrete containing traces of carnotite
mineralisation. The results are highly encouraging. The
better intersections include:
EYN001 - 7m @ 100ppm U3O8 from 1m
EYN005 - 8m @ 123ppm U3O8 from surface
EYN064 - 3m @ 781ppm U3O8 from 4m
including 1m @ 2,111ppm U3O8.
Mineralisation has a north to north-easterly trend. Follow up
drilling plans to infill current drilling on a 200m by 100m
drill grid and test for northern and southern extensions to
the anomalous trends.
The drilling program successfully identified a broad
southwest trending tributary containing anomalous uranium
The initial drill campaign at Yeelirrie has confirmed
Encounter’s belief that there is significant potential for the
Station track at Yeelirrie
ENCOUNTER RESOURCES ANNUAL REPORT 2006
2
discovery of high grade satellite uranium occurrences within
the Yeelirrie catchment area. The next target to be drill
tested for a similar satellite occurrence is at Bellah Bore
West where an outcropping silcrete body sits coincidently
over a uranium channel radiometric anomaly.
Tenements covering the Geological Survey of Western
Australia (GWSA) uranium geochemical anomaly at Yeelirrie
South (Anomaly 5) were recently granted. The anomaly is
located 50km directly down stream of the Yeelirrie Deposit
in an area of minimal historical uranium exploration.
Systematic traverse drilling has been planned to cover the
southern extension of the Yeelirrie Channel. In addition, a
number of specifically targeted drill sections have been
planned to cover Anomaly 5.
Bellah Bore West
Bellah Bore East
Will Robinson and Peter Bewick at Encounter’s maiden
drill program at Middle Bore (Yeelirrie Channel Project)
Anomaly 5
ENCOUNTER RESOURCES ANNUAL REPORT 2006
3
Review of Exploration (continued)
Lake Way South Project
Encounter 60%, Avoca 40%
uranium rights only
(E53/1010)
Encounter has earned a 60% interest of
the uranium rights on the Lake Way South
tenement from Avoca.
The tenement covers 12kms of the Lake
Way drainage system located between
Nova Energy’s Lake Way deposit to the north
and the Centipede deposits to the south.
Historical exploration data from the Lake
Way area corroborates that the calcrete
channel extends under the current lake
through the south-western boundary of
E53/1010. Uranium mineralisation is well
developed in holes adjacent to the lease
boundary and the most northern hole assayed by previous explorers contains 0.45m @ 787ppm U3O8. This hole is located
approximately 80m east of the Nova Energy resource boundary and is within the Lake Way South tenement.
A detailed (200m by 200m) 50 hole drilling program is planned to test the interpreted extensions to the Centipede
mineralisation to the north-northeast of Nova’s current resource boundary. A further 70 holes plan to test a series of
radiometric anomalies within and along the eastern shoreline of Lake Way.
Area of radiometric anomalism along the eastern shoreline of Lake Way
ENCOUNTER RESOURCES ANNUAL REPORT 2006
4
Shallow gravel pit at Throssell exposing the calcrete horizon
Officer Basin Projects
Encounter 80%, Avoca 20%
(E38/1786, E38/1787, ELAs38/1790-1792)
A review of the mutli-client regional radiometrics dataset for
WA identified a series of large unexplained uranium channel
anomalies within palaeochannels in the southwest of the Officer
Basin. Encounter has three projects covering these untested
radiometric anomalies.
The Throssell project is the northernmost of these projects
located 280km by road northeast of Laverton. The project
covers a 10km long radiometric anomaly associated with
extensive near surface development of calcrete. A series of
variably spaced (600m to 1800m) regional drill traverses,
totalling 50 aircore holes, are planned to test the radiometric
anomaly.
The Lake Yeo tenement applications are wholly within the
bounds of the Lake Yeo nature reserve. The Lake Yeo
radiometric anomaly stretches over 40km in strike and is most
intense at the western margin of the lake.
The Lake Rason project is located 180km east of Laverton. The
project covers the western side of Lake Rason where the
uranium channel radiometric data defines two parallel trends that mirror the lake shoreline. Sand dunes at the lake margins
mask any significant radiometric response onshore. A program of shallow geochemical auger sampling is proposed to
determine the source of the radiometric response and test the lake margin.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
5
Review of Exploration (continued)
Leonora Regional Projects
Encounter 80%, Avoca 20%
(E29/577, E29/587, E30/299 and E30/300)
A key feature in the targeting of calcrete uranium deposits is the identification of hydrological trap sites within the palaeo-
channel systems. Both the intersection of major palaeochannels and significant bends in these channels are considered
potential trap sites for uranium mineralisation.
A review of the radiometrics and regional geochemical data to the west of Leonora identified a number of unexplained
regional scale anomalies. These anomalies are coincident with interpreted trap sites along the mapped palaeochannel and
are considered by Encounter as prospective for uranium mineralisation.
The Lakeview project is located 60km west of Leonora and adjacent to the historical uranium occurrences of Stakeyard Well
and Peninsula, now held by Energy Metals. The target area is centred on a large scale uranium channel radiometric anomaly
and an area of intense uranium anomalism in the GSWA regional sampling. A series of regional gravity sections was
completed over the lake area in September 2006 to map the channel morphology and thereby assist with drill planning.
Included as part of this program is a detailed gravity survey, that covers an area of 2km by 1.5km in the east of the tenement,
to test a circular bipolar magnetic anomaly. This anomaly may represent a kimberlite and the detailed gravity survey is aimed
at defining any preferential weathering associated with the magnetic anomaly.
The McPherson’s Bore project is located within the Lake Raeside drainage system approximately 50km upstream of the
Lakeview project. The project covers a coincident uranium channel radiometric anomaly and a GSWA uranium geochemical
anomaly.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
6
The Galah Rocks and Walling Rock
projects are positioned within the
western extension of the Lake Barlee
drainage system. The targets were
selected based on the coincident U, V
and P2O5 anomalism, within the
GSWA regional geochemical dataset.
Historical radiometrics data was
recently purchased and indicates
radiometric
uranium
channel
the
anomalism coincident with
surface geochemical anomalies.
Regional auger drilling is planned to
test these project areas and to direct
follow up drilling.
Melrose Projects
Encounter 80%, Avoca 20%
(E37/830 and E38/1784)
The Lake Irwin and Lake Darlot projects are located downstream of the drainage systems that host the Lake Maitland and
Yeelirrie deposits. In both project areas, local parts of the lake surface appear highly anomalous in the regional radiometric
data. A series of shallow auger holes are planned to determine the nature and source of the airborne radiometric anomalies.
Southwest WA Projects
Encounter 80%, Avoca 20%
(ELAs70/2956-2958)
Encounter applied for three new exploration licences within the wheatbelt of WA following the release by the Cooperative
Research Centre for Landscape Environments and Mineral Exploration (CRC LEME) of the south west Yilgarn laterite multi-
element geochemical dataset. This regional laterite sampling was completed on a 9km spacing and has identified a series of
anomalies that are considered prospective for uranium mineralisation. The Wongan Hills, Shackleton and Talbot targets
show coincident anomalism in uranium, vanadium, phosphorous oxide (P2O5) and arsenic. The tenement applications are
currently progressing through the grant process and it is anticipated that they will be granted in the first half of 2007.
Encounter’s Jacqui Chapman
(Project Geologist) and Glenn Budge
(Field Logistics Manager)
ENCOUNTER RESOURCES ANNUAL REPORT 2006
7
Review of Exploration (continued)
Meekatharra Regional Projects
Encounter 80%, Avoca 20%
(E51/1096, E51/1097, ELA51/1127 and ELA51/1137)
Previous exploration at Hillview in the 1970s identified a 15km long, near surface zone of low grade uranium mineralisation.
Typical holes within the low grade zone are between 0.5m and 2m thick at grades between 100ppm to 200ppm eU3O8*.
Historical drill traverse spacing was greater than 1.5km. Encounter believes there is the potential for higher grade
mineralisation to occur between existing traverses.
A review of historical data identified a series of higher grade uranium intersections over an isolated lobe of calcrete to the east
of the main channel including:
4.88m @ 352ppm eU3O8* including 0.46m @ 970ppm from 0.3m
4.42m @ 349ppm eU3O8* including 0.45m @ 865ppm from 0.3m
4.87m @ 309ppm eU3O8* including 0.3m @ 1,001ppm from surface.
*All quoted assays are estimated U3O8 values determined from down-hole gamma logging.
This project will need to be re-drilled in order to confirm the grade of the uranium mineralisation.
Upon grant of the tenement Encounter will conduct a drill program to test along strike of the eastern lobe mineralisation and
to test for higher grade regions within the Main Channel.
Intense uranium channel radiometric responses at Crossland Hill and Gidgie Bore appear associated with highly altered
granitoids, and are unexplained by previous explorers in the area. The projects are located within pastoral country to the
northwest of Meekatharra. A program of field mapping and regional geochemistry is planned for these two targets.
The Yalgar project located 120km northwest of Meekatharra is located within the Yalgar River catchment, part of the upper
reaches of the Murchison River drainage system. The radiometric response in the area is not coherent, which may be
explained by significant Recent cover in the area. Once granted a program of surface sampling and regional traverse drilling
will be completed to assess the uranium prospectivity of the target area.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
8
Bangemall Basin Projects
Encounter 80%, Avoca 20%
(E52/1882, ELA52/1959, ELA52/1942, ELA08/1651,
ELA09/1297)
Unconformity style deposits, such as those found in the
Athabasca Basin in Canada and East Alligator River district in
the Northern Territory, are located within Middle-Proterozoic
sandstone-dominated sediments unconformably overlying
metamorphosed Proterozoic basement.
Encounter targeted the northern and southern margins of
the Bangemall Basin for unconformity style uranium
mineralisation where the Mesoproterozoic Bangemall Basin
sediments overlie the Palaeoproterozoic Capricorn Orogen
to the south and Ashburton Basin to the north.
Outcrop of laminated chert (Pingandy Creek Project)
ENCOUNTER RESOURCES ANNUAL REPORT 2006
9
Review of Exploration (continued)
Bangemall Basin Projects (continued)
Encounter 80%, Avoca 20%
(E52/1882, ELA52/1959, ELA52/1942, ELA08/1651, ELA09/1297)
It is noted that unconformity style deposits are associated with anomalous concentrations of Co, As, Se, Ag, Ni and Mo. Principle
Component Analysis on GSWA regional geochemical samples, located within 5km of the Proterozoic rocks of WA, generated a
factor which highlighted anomalism in As, Mo, Sb and Uranium. Plotting this factor, along with individual scores for U, As, Co and
Ni, highlighted several areas of coincident anomalism within the Mesoproterozoic rocks of the Edmund Group of the Bangemall
Basin. Four targets selected by Encounter following the review of the GSWA data are the Pingandy Creek, Tchintaby Well,
Waldburg Range and Wanna targets.
Tenement applications over these targets were extended outside the bounds of the specific unconformity targets to capture
any significant adjacent areas of drainage that contain mapped calcrete bodies. These calcrete bodies may host secondary
uranium mineralisation and will be explored in conjunction with the primary target zones.
A review of historical exploration within the area of the four Bangemall Basin projects identified an extensive area of low grade
zinc and silver mineralisation within the Tchintaby Well project. Historical exploration has focused on the base metals potential
of the shale units within the Bangemall sediments where intersections of up to 12m @ 1.1% Zn and 16g/t Ag were returned
at the Andes Prospect. Recently an exploration licence application was made to cover the interpreted plunge direction of the
base metals mineralisation south of Tchintaby.
Wanna Project (Mt Augustus in the distance)
ENCOUNTER RESOURCES ANNUAL REPORT 2006
10
Ironstone outcrop at the Minneritchie Well Project
Gascoyne Projects
Encounter 80%, Avoca 20%
(E09/1197, ELA09/1296)
Extensive historical exploration conducted within the Gascoyne complex in the 1970s identified numerous surfical and
basement uranium occurrences, but little focused follow up work was completed.
Regional exploration in the late 1970s identified high grade uranium mineralisation in surface samples at Minneritchie Well.
Assay results of >5kg/t U3O8 were collected from an area of intense radiometric anomalism. Although recommended, the
area was never drill tested. Several additional radiometric anomalies within the project area were not visited in the initial
evaluation of the area but will be included in Encounter’s regional assessment program. This work will initially consist of
a program of surface geochemistry to
determine the source of the radiometric
anomalism and to define drill targets
to test the extent of the uranium
mineralisation.
In an area approximately 80kms
northwest of Minneritchie Well, an
extensive zone of surface calcrete
development lies within a tributary of the
Lyons River. The Stone Tank Well
radiometric anomaly stretches over
7.5kms and has not been the focus of any
previous uranium exploration. A series of
reconnaissance drill traverses will be
completed to test drainage system and
associated area of calcrete development.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
11
Project Location Plan
Exmouth
■
º
5
1
1
PILBARA
PILBARA
PILBARA
PILBARA
PILBARA
PILBARA
PILBARA
PILBARA
PILBARA
CRATON
CRATON
CRATON
CRATON
CRATON
CRATON
CRATON
CRATON
CRATON
º
0
2
1
º
5
2
1
Stone
Tank Well
Pingandy
Creek
Gascoyne
Gascoyne
Gascoyne
Gascoyne
Gascoyne
Gascoyne
Gascoyne
Gascoyne
Gascoyne
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
★
★
★
Wanna
★
★
★
■
Tchintaby
Well
Newman
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
BANGEMALL
BANGEMALL
BANGEMALL
BANGEMALL
BANGEMALL
BANGEMALL
BANGEMALL
BANGEMALL
BANGEMALL
BASIN
BASIN
BASIN
BASIN
BASIN
BASIN
BASIN
BASIN
BASIN
-25º
-30º
-35º
Minneritchie
Well
Yalgar
Gidgee
Bore
Meekatharra
Meekatharra
Meekatharra
Meekatharra
Meekatharra
Meekatharra
Meekatharra
Meekatharra
Meekatharra
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Waldburg
Range
★
★★
Crossland
Hill
★
Hillview
★
-25º
OFFICER
OFFICER
OFFICER
OFFICER
OFFICER
OFFICER
OFFICER
OFFICER
OFFICER
BASIN
BASIN
BASIN
BASIN
BASIN
BASIN
BASIN
BASIN
BASIN
Lake Way South
Lake Way South
Lake Way South
Lake Way South
Lake Way South
Lake Way South
Lake Way South
Lake Way South
Lake Way South
★
Throssell
Yeelirrie Channel
Yeelirrie Channel
Yeelirrie Channel
Yeelirrie Channel
Yeelirrie Channel
Yeelirrie Channel
Yeelirrie Channel
Yeelirrie Channel
Yeelirrie Channel
★
Melrose
Melrose
Melrose
Melrose
Melrose
Melrose
Melrose
Melrose
Melrose
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
★
Lake
Darlot
Lake
Irwin
McPherson's
Bore
★
★
Leonora Regional
Leonora Regional
Leonora Regional
Leonora Regional
Leonora Regional
Leonora Regional
Leonora Regional
Leonora Regional
Leonora Regional
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
★
★
★
Wongan
Hills
South West
South West
South West
South West
South West
South West
South West
South West
South West
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Lake View
Walling Rock
Galah Rocks
■
Kalgoorlie
★
★
★
Lake
Yeo
Lake
Rason
Officer Basin
Officer Basin
Officer Basin
Officer Basin
Officer Basin
Officer Basin
Officer Basin
Officer Basin
Officer Basin
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
Projects
-30º
Perth
■
★
Talbot
★
YILGARN CRATON
YILGARN CRATON
YILGARN CRATON
YILGARN CRATON
YILGARN CRATON
YILGARN CRATON
YILGARN CRATON
YILGARN CRATON
YILGARN CRATON
Shackleton
-35º
0
200
400
Kilometres
º
5
2
1
º
5
1
1
º
0
2
1
ENCOUNTER RESOURCES ANNUAL REPORT 2006
12
Summary of Tenements
Projects
Tenements
Area
(km2)
Registered Holder / Applicant
Encounter
Interest
Yeelirrie North
Main Channel
Youno Downs
Bellah Bore West
Bellah Bore East
Yeelirrie South
Middle Bore
Anomaly 5 (GSWA)
E53/1154
E53/1155
E53/1156
E53/1157
E53/1158
ELA53/1251
E36/541
E36/569
E36/540
E36/542
Lake Way South
E53/1010
Officer Basin
Throssell
Lake Rason
Lake Yeo
Leonora Regional
Lake View
McPherson’s Bore
Walling Rock
Galah Rocks
Melrose
Lake Darlot
Lake Irwin
South West WA
Talbot
Shackleton
Wongan Hills
Meekatharra Regional
Gidgee Bore
Crossland Hill
Hillview
Yalgar
Bangemall Basin
Pingandy Creek
Tchintaby Well
Waldburg Range
Wanna
Gascoyne
Minneritchie Well
Stone Tank Well
E38/1786
E38/1787
ELA38/1790
ELA38/1791
ELA38/1792
E29/577
E29/587
E30/299
E30/300
E37/830
E38/1784
ELA70/2956
ELA70/2957
ELA70/2958
E51/1096
E51/1097
ELA51/1127
ELA51/1137
ELA08/1651
E52/1882
ELA52/1959
ELA52/1942
ELA09/1297
E09/1197
ELA09/1296
44
35
70
10
10
126
176
213
201
214
117
63
124
194
212
133
126
123
63
66
164
109
408
583
590
89
31
202
216
333
172
589
219
354
52
100
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
Avoca Resources Ltd
60% uranium rights
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
Encounter Resources Ltd
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
ENCOUNTER RESOURCES ANNUAL REPORT 2006
13
Corporate Governance Statement
Introduction
Since the introduction of the ASX Principles of Good
Explanation for Departures from
Best Practice Recommendations
Corporate Governance and Best Practice Recommen-
During the Company’s 2005/2006 financial year the
dations (“ASX Guidelines” or “the Recommendations”),
Company has complied with each of the Ten Essential
Encounter Resources Limited (“Company”) has made it a
Corporate Governance Principles and the corresponding
priority to adopt systems of control and accountability as
Best Practice Recommendations as published by the
the basis for the administration of corporate governance.
Some of these policies and procedures are summarised
in this report. Commensurate with the spirit of the
ASX Guidelines, the Company has followed each
Recommendation where the Board has considered the
ASX Corporate Governance Council (“ASX Principles and
Recommendations”)i. Significant policies and details of any
significant deviations from the principles are specified below.
Corporate Governance Council Recommendation 1
Recommendation to be an appropriate benchmark for
Role of the Board of Directors
corporate governance practices, taking into account factors
The role of the Board is to increase shareholder value within
such as the size of the Company and the Board, resources
an appropriate framework which safeguards the rights and
available, activities of the Company. Where, after due
interests of the Company’s shareholders and ensure the
consideration, the Company’s corporate governance
Company is properly managed.
practices depart from the Recommendations, the Board
has offered full disclosure of the nature of, and reason for,
the adoption of its own practice.
In order to fulfil this role, the Board is responsible for the
overall corporate governance of the Company including
formulating its strategic direction, setting remuneration and
The Company has adopted systems of control and
monitoring the performance of Directors and executives.
accountability as the basis for the administration of corporate
The Board relies on senior executives to assist it in approving
governance. The Board of the Company is committed to
and monitoring expenditure, ensuring the integrity of
administering the policies and procedures with openness
internal controls and management information systems
and integrity, pursuing the true spirit of corporate governance
and monitoring and approving financial and other reporting.
commensurate with the Company’s needs.
In broad terms, the Board Charter clarifies the respective
Further information about the Company’s corporate
roles of the Board and senior management and assists in
governance practices is set out on the Company’s website
decision making processes.
at www.enrl.com.au. In accordance with the recommenda-
tions of the ASX, information published on the Company’s
website includes:
Board Charter
Audit Committee Charter
Nomination Committee Charter
Remuneration Committee Charter
Code of Conduct
Policy and Procedure for Selection and Appointment
of New Directors
Summary of Policy for Trading in Company Securities
Summary of Compliance Procedures
Procedure for the Selection, Appointment and
Rotation of External Auditor
Shareholder Communication Strategy
Summary of Company’s Risk Management Policy
Board processes
An agenda for the meetings has been determined to
ensure certain standing information is addressed and other
items which are relevant to reporting deadlines and or
regular review are scheduled when appropriate. The
agenda is regularly reviewed by the Chairman, the
Managing Director and the Company Secretary.
Prior to 8 February 2006 the functions of the board and
management were not formalised or documented.
Corporate Governance Council Recommendation 2
Board composition
The Constitution of the Company provides that the number
of Directors shall not be less than three. There is no
requirement for any share holding qualification.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
14
The membership of the Board, its activities and
Corporate Governance Council Recommendation 3
composition is subject to periodic review. The criteria for
determining the identification and appointment of a
suitable candidate for the Board shall include the quality of
the individual, background of experience and achievement,
compatibility with other Board members, credibility within
the scope of activities of the Company, intellectual ability to
contribute to Board duties and physical ability to undertake
Board duties and responsibilities.
Directors are initially appointed by the Board and are
subject to re election by shareholders at the next general
meeting. In any event one third of the Directors are subject
to re election by shareholders at each general meeting.
The Board is presently comprised of three members, one
non-executive and two executive.
The Board has assessed the independence of its non
executive directors according to the definition contained
within the ASX Corporate Governance Guidelines and has
concluded that the current non executive director does not
meet the recommended independence criteria, by virtue of
his substantial shareholding in the Company.
The Non-Executive Director
is Mr Paul Chapman
(Chairman). The Board believes that Mr Chapman is the
most appropriate person for the position as Chairman
because of his industry experience and proven track record
as a public company director. The skills, experience and
expertise of all Directors is set out in the Directors’ Report
on page 18.
The Board does not have a separate Nomination
Committee as the selection and appointment process
Ethical and responsible decision making
The Board actively promotes ethical and responsible
decision making.
Code of Conduct
The Board has adopted a Code of Conduct that applies to
all employees, executives and Directors of the Company on
8 February 2006. This Code addresses expectations for
conduct in the following areas:
Ethical and responsible decision making
• Responsibility to shareholders;
•
Integrity and honesty;
• Respect for laws;
• Conflicts of interests;
• Protection of assets;
• Confidential information;
• Employment practices;
• Respect for the community;
• Respect for individuals;
•
Fair trading and dealing;
• Compliance with Code of Conduct: and
• Periodic review of Code.
Security Trading Policy
The security trading policy was adopted on 8 February
2006. The Board has adopted a policy and procedure on
dealing in the Company’s securities by directors, officers
and employees which prohibits dealing in the Company’s
securities when those persons possess inside information.
It also provides that the written acknowledgement of the
Chairman should be obtained prior to trading.
for Directors is carried out by the full Board. The Company
Corporate Governance Council Recommendation 4
is not of a sufficient size to warrant a separate committee.
However,
the Company adopted
the Nomination
Committee Charter on 8 February 2006.
None of the three Directors’ are considered to satisfy
the test of independence as set out in the best practice
recommendations. However, the Board considers that
both its structure and composition are appropriate given
the size of the Company and that the interests of the
Company and its shareholders are well met.
Integrity in financial reporting
Managing Director and Chief Financial Officer
Written Statement
The Board requires the Managing Director and the Company
Secretary provide a written statement that the financial
statements of company present a true and fair view, in all
material aspects, of the financial position and operational
results. In addition, confirmation is provided that all relevant
accounting standards have been appropriately applied.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
15
Corporate Governance Statement (continued)
Audit Committee
Corporate Governance Council Recommendation 6
The full Board fills the role of an Audit Committee. The
relevant experience of Board members is detailed in the
Directors’ section of the Directors’ Report.
The Board reviews the performance of the external auditors
on an annual basis and meets with them during the year to
review findings and assist with Board recommendations.
The Board does not have a separate Audit Committee with
a composition as suggested in the best practice
recommendations. The full Board carries out the function
of an audit committee. The Board believes that the
Company is not of a sufficient size to warrant a separate
committee and that the full Board is able to meet
objectives of the best practice recommendations and
discharge its duties in this area.
Financial reporting
The Board relies on senior executives to monitor the
internal controls within
the Company. Financial
performance is monitored on a regular basis by the
Managing Director who reports to the Board at the
scheduled Board meetings.
Corporate Governance Council Recommendation 5
Timely and balanced disclosure
The Board is committed to the promotion of investor
confidence by providing full and timely information to all
security holders and market participants about the
Company’s activities and to comply with the continuous
disclosure requirements contained in the Corporations Act
Rights of security holders
Communications
The Board fully supports security holder participation at
general meetings as well as ensuring that communications
with security holders are effective and clear. This has been
incorporated into a formal shareholder communication
strategy, as adopted 8 February 2006.
In addition to electronic communication via the ASX web
site, the Company publishes all significant announcements
together with all quarterly reports. These documents are
available in both hardcopy form on request and on the
Company web site at www.enrl.com.au
Corporate Governance Council Recommendation 7
Recognise and manage risk
Risk management
The Board adopted a formal risk management policy on
8 February 2006. The risk management policy sets out a
framework for a system of risk management and internal
compliance and control, whereby the Board delegates
day-to-day management of risk to the managing director.
The managing director, with the assistance of senior
management as required, has responsibility for identifying,
assessing, treating and monitoring risks and reporting to the
Board on risk management.
Corporate Governance Council Recommendation 8
Encourage enhanced performance
2001 and the Australian Stock Exchange Listing Rules. The
Performance review
Company established written policies and procedures
The Board has not undertaken a formal review of its
designed to ensure compliance with the ASX Listing Rule
performance for the year ended 30 June 2006.
Requirements.
The Chairman assesses the performance of the Board,
Continuous disclosure is discussed at all regular Board
individual directors and key executives on an informal basis.
meetings and on an ongoing basis the Board ensures that
Due to the early stage of development of the Company, it is
all activities are reviewed with a view to the necessity for
difficult for quantitative measures of performance to be
disclosure to security holders.
In accordance with ASX Listing Rules the Company
Secretary is appointed as the Company’s disclosure officer.
established. As the Company progresses its current projects,
the Board intends to establish appropriate evaluation
procedures.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
16
Education
Remuneration is currently in accordance with the general
All executives and Directors are encouraged to attend
principals recommended by the ASX, that is, non-executive
professional education courses relevant to their roles.
Directors receive a fixed fee for their services and do not
Independent professional advice and access
to information
Each Director has the right to access all relevant information
in respect to the Company and to make appropriate
enquiries of senior management.
Corporate Governance Council Recommendation 9
Remunerate Fairly and Responsibly
The executive Directors and senior executives receive salary
packages which may
include performance based
components designed to reward and motivate. Non
executive Directors receive fees agreed on an annual basis
by the Board.
receive performance based remuneration.
The Board ensures that, all matters of remuneration will
continue to be in accordance with Corporations Act
requirements, by ensuring that none of the Directors
participate in any deliberations regarding their own
remuneration or related issues. To the extent that additional
executives are appointed in the future and the scope of
the Company’s activities expands the Company will
reconsider whether a change in the structure of executive
remuneration is appropriate.
Corporate Governance Council Recommendation 10
Recognise the legitimate interests of stakeholders
The Board acknowledges the rights of stakeholders and has
Current remuneration of Directors is disclosed in the
adopted a Code of Conduct (refer Principle 3) in-line with
Remuneration Report included in the Directors’ Report.
the recommendations of this Principle 10.
Shareholders will be invited to consider and approve the
Remuneration Report at the Annual General Meeting.
Remuneration Committee
The Board determines all compensation arrangements for
Directors. It is also responsible for setting performance
criteria, performance monitors, share option schemes,
incentive performance
schemes,
superannuation
entitlements, retirement and termination entitlements and
professional indemnity and liability insurance cover.
The Board has not created a separate Remuneration
Committee. Due to the early stage of development and
small size of the Company, a separate remuneration
committee was not considered to add any efficiency to the
process of determining the levels of remuneration for the
Directors and key executives. The Board considers that it is
more appropriate to set aside time at two Board meetings
each year to specifically address matters that would
ordinarily fall to a remuneration committee.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
17
Directors’ Report
The Directors present their report on Encounter Resources
Peter Bewick – B.Eng (Hons), MAusIMM
Limited for the year ended 30 June 2006.
Exploration Director (Executive) appointed 7 October 2005
Directors
The names and details of the Directors of Encounter
Resources Limited during the financial year and until the
date of this report are:
Paul Chapman – B.Comm, ACA, Grad. Dip. Tax, CFTP(Snr), MAICD, SA Fin
Non-Executive Chairman appointed 7 October 2005
Mr Chapman is a Chartered Accountant and has held
various senior commercial roles within WMC over a
seventeen year period. This includes experience in North
America as CFO of WMC’s Houston based oil and gas
division as well as time in Pittsburgh working on the
formation of the AWAC bauxite and Alumina business. Mr
Chapman was appointed CFO of Anaconda Nickel Limited
Mr Bewick is an experienced geologist and has held a
number of senior mine and exploration geological roles
during a fourteen year career with WMC. These roles
include Exploration Manager and Geology Manager of the
Kambalda Nickel Operations, Exploration Manager for St
Ives Gold Operation and Exploration Manager for WMC’s
Nickel Business Unit. Most recently he held the position of
Exploration Manager for North America based in Denver,
Colorado. Whilst at WMC, Mr Bewick gained extensive
experience in project generation for a range of commodities
including nickel, gold and bauxite. Mr Bewick has been
associated with a number of brownfields exploration
successes at Kambalda and with the greenfield Collurabbie
NI-CU-PGE discovery.
(now Minara Resources Limited) in 2001 and was
Stephen Abbott
responsible for its US$700 million debt restructuring
process. Mr Chapman was a founding shareholder and
Managing Director of Reliance Mining Limited (2003-
2005) culminating in the recommended takeover by
Consolidated Minerals Limited. Paul is now Managing
Director of OM Holdings Limited’s Australian operations.
Will Robinson – B.Comm
Managing Director (Executive) appointed 30 June 2004
Mr Robinson is a resources industry commercial and
finance specialist with over twelve years experience in
commercial management, transaction structuring and
Non-executive director resigned 17 October 2005
Edward Robinson
Non-executive director resigned 17 October 2005
Company Secretary
Kevin Hart
Mr Hart is a Chartered Accountant and was appointed to
the position of Company Secretary on 4 November 2005.
He has over 20 years experience in accounting and the
management and administration of public listed entities
in the mining and exploration industry.
negotiation, business strategy development and London
He is currently a partner in an advisory firm which
Metals Exchange metals trading. Mr Robinson held various
specialises in the provision of company secretarial services
senior commercial positions with WMC in Australia and
to ASX listed entities.
North America from 1994 to 2003. During his time with
WMC he was instrumental in the success of the Kambalda
Directors’ Interests
nickel mine outsourcing strategy as the Commercial
Manager of the Kambalda Nickel Operations. Mr Robinson
has extensive experience in the sale and distribution of
commodities and was Vice President – Marketing for
WMC’s nickel business from 2001 to 2003. After leaving
WMC Mr Robinson formed a consulting company and
advised numerous mining companies with interests in
Australia, South America and Africa. Mr Robinson founded
Encounter Resources Limited in 2004 and has overseen
the development of the Company as its Managing Director.
As at the date of this report the Directors’ interests in shares
and unlisted options of the Company are as follows:
Director
P Chapman
W Robinson
P Bewick
Directors’ Interests
in Ordinary Shares
Directors’ Interests
in Unlisted Options
4,710,000
21,796,900
4,700,000
–
–
–
ENCOUNTER RESOURCES ANNUAL REPORT 2006
18
Directors’ Meetings
The number of meetings of the Company’s Directors held
Expenditure was principally focused on the Yeelirrie
Channel and Lake Way Projects.
during the year ended 30 June 2006 and the number of
Impact of Legislation and other External Requirements
meetings attended by each Director were:
Board of Directors’ Meetings
Held
Attended
3
4
3
1
1
3
4
3
1
1
Director
P Chapman
W Robinson
P Bewick
S Abbott
E Robinson
Principal Activities
Since 1 July 2005 the Company has been required to
comply with Australian equivalents to International Financial
Reporting Standards (AIFRS) issued by the Australian
Accounting Standards Board. The impact of the resulting
changes in accounting policies is disclosed in Note 28 of
the Financial Report.
Significant Changes in the State of Affairs
Significant changes in the state of affairs of the Company
during the financial year were as follows:
The principal activities of the Company during the financial
year consisted of mineral exploration in Western Australia.
Conversion of one ordinary share held by Mr Will Robinson
at 30 June 2005 into 33,000 ordinary shares.
There were no significant changes in these activities during
the financial year.
Results of Operations
The net loss after income tax for the financial year was
$346,270 (2005: $71,290).
Included in the loss for the current year is a write-off of
deferred exploration expenditure totalling $132,409 (2005:
$34,360).
Dividends
During September 2005, 100,000 ordinary shares were
issued to directors to raise $100,000.
During September 2005, 200,000 ordinary shares were
issued to Mr Will Robinson in satisfaction of $200,000 loans
made to the Company.
During October 2005 there was a share split on the basis
93 for 1 ordinary share applying to each ordinary share on
issue at the time.
During November 2005, seed capital investors were issued
with 4,000,000 ordinary shares at 10c each, to raise
No dividend has been paid since the end of the previous
$400,000.
financial year and no dividend is recommended for the
current year.
Review of Activities
Exploration
In accordance with the Company’s prospectus, 25,000,000
ordinary shares were issued in March 2006 raising
$5,000,000. The Company was listed on the Australian
Stock Exchange on 24 March 2006.
A detailed review of the Company’s activities during the
Options Over Unissued Capital
financial year is set out in the section titled “Review of
Unlisted Options
Exploration” in this Annual Report.
Financial Position
At the end of the financial year the Company had
During the financial year the Company granted 200,000
unlisted options over unissued shares to employees of the
Company. No ordinary shares were issued on the exercise
$4,209,233 (2005: $22,315) in cash and at call deposits.
of options.
Capitalised mineral exploration and evaluation expenditure
is $250,822 (2005: $Nil). Mineral exploration and
evaluation expenditure during the year for the Company
was $383,231 (2005: $34,360).
Since the end of the financial year no unlisted options have
been exercised.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
19
Directors’ Report (continued)
Options Over Unissued Capital (continued)
As at the date of this report unissued ordinary shares of the Company under option are:
Number of Options Granted
Exercise Price
Grant Date
Expiry Date
100,000 (i)
100,000 (ii)
20 cents
45 cents
23 March 2006
15 May 2006
23 March 2011
15 May 2011
(i) Unlisted options have a 12 month vesting period upon grant whereby option exercise can occur after 23 March 2007.
(ii) Unlisted options have a 12 month vesting period upon grant whereby option exercise can occur after 15 May 2007.
These unlisted options do not entitle the holder to participate in any share issue of the Company or any other body corporate.
The holders of unlisted options are not entitled to any voting rights until the options are exercised into ordinary shares.
Matters Subsequent to the End
of the Financial Year
Remuneration Report
Remuneration Policy
There has not arisen in the interval between the end of the
Remuneration levels are competitively set to attract and
financial year and the date of this report any item,
retain appropriately qualified and experienced Directors and
transaction or event of a material and unusual nature likely,
senior executives. Remuneration packages include fixed
in the opinion of the Directors of the Company to affect
remuneration with bonuses or equity based remuneration
substantially the operations of the Company, the results of
entirely at the discretion of the Board based on the
those operations or the state of affairs of the Company in
performance of the Company.
subsequent financial years.
Likely Developments and Expected Results
of Operations
Likely developments in the operations of the Company are
included elsewhere in this Annual Report. Disclosure of any
further information has not been included in this report
because, in the reasonable opinion of the Directors to do
so would be likely to prejudice the business activities of the
Company and is dependent upon the results of the future
exploration and evaluation.
Total remuneration for all Non-Executive Directors was last
voted on by shareholders on 4 November 2005, whereby
it is not to exceed $80,000 per annum. Non-Executive
Directors do not receive bonuses. Directors’ fees cover all
main Board activities.
At the date of this report the Company has not entered into
any agreements with Directors or senior executives which
include performance based components.
Refer also to the Corporate Governance Statement for
more detail on the Boards policy in this area.
Environmental Regulation and Performance
Details of Remuneration for Directors and
The Company holds various exploration licences to regulate
its exploration activities in Australia. These licences include
conditions and regulations with respect to the rehabilitation
of areas disturbed during the course of its exploration
activities.
So far as the Directors are aware, all exploration activities
have been undertaken in compliance with all relevant
environmental regulations.
Executive Officers
During the year there were no senior executives which were
employed by the Company for whom disclosure is
required.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
20
Details of the remuneration of each Director of the Company are as follows:
2006
Directors
P. Chapman
W. Robinson
P. Bewick
S. Abbott
E. Robinson
Total
2005
W. Robinson
S. Abbott
E. Robinson
Total
Base
Emolument
$
Superannuation
Contributions
$
Other
Benefits
$
Value of
Options
$
3,922
74,559
96,616
–
–
2,006
6,710
8,695
–
–
175,097
17,411
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
5,928
81,269
105,311
–
–
192,508
–
–
–
–
Executive Employment Agreements
The Directors and Officers Liability insurance provides cover
Remuneration and other terms of employment for the
against all costs and expenses that may be incurred in
Managing Director and Exploration Director are set out
defending civil or criminal proceedings that fall within the
in their respective Executive Employment Agreements.
scope of the indemnity and that may be brought against
Both employment contracts are for a three year term
the officers in their capacity as officers of the Company.
commencing 23 January 2006 and are subject to a three
The insurance policy does not contain details of the
month notice of termination of contract.
premium paid in respect of individual officers of the
The contractual arrangements contain certain provisions
typically found in contracts of this nature.
Payment of termination benefit by the employer, other than
amongst other things for gross misconduct is equal to the
payment limit set by Sub-section 200G of the Corporations
Act 2001.
Unlisted Options
No options over unissued shares have been issued to
directors or key management personnel of the Company
during or since the end of the financial year.
Company. Disclosure of the nature of the liability cover and
the amount of the premium is subject to a confidentiality
clause under the insurance policy.
The Company has not provided any insurance for an
auditor of the Company.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of
the Corporations Act 2001 for leave to bring proceedings
on behalf of the Company, or to intervene in any
proceedings to which the Company is a party, for the
purpose of taking responsibility on behalf of the Company
Officer’s Indemnities and Insurance
for all or part of those proceedings.
During the year the Company paid an insurance premium
No proceedings have been brought or intervened in on
to insure certain officers of the Company. The officers of the
behalf of the Company with leave of the Court under
Company covered by the insurance policy include the
section 237 of the Corporations Act 2001.
Directors named in this report.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
21
Directors’ Report (continued)
Corporate Governance
Auditor’s Independence Declaration
In recognising the need for the highest standards of
A copy of the Auditor’s Independence Declaration as
corporate behaviour and accountability, the Directors of
required under Section 307C of the Corporations Act is
the Company support and have adhered to the principles
set out on page 23.
of corporate governance. The Company’s corporate
governance statement is contained in the Annual Report.
Auditor
Non-audit Services
Grant Thornton Western Australian Partnership continues in
office in accordance with section 327 of the Corporations
During the year Grant Thornton, the Company’s auditor,
Act 2001.
has performed certain other services in addition to their
statutory duties.
This report is made in accordance with a resolution of the
Total remuneration paid to auditors during the financial year:
Directors.
2006
$
2005
$
DATED at Perth this 19th day of September 2006.
W Robinson
Director
Audit and review of the
Company’s financial statements
Taxation services
8,700
3,500
Independent Accountants Report
11,300
4,750
–
–
Total
23,500
4,750
The board has considered the non-audit services provided
during the year by the auditor and is satisfied that the
provision of those non-audit services during the year by the
auditor is compatible with and did not compromise, the
auditor independence requirements of the Corporations Act
2001 for the following reasons:
•
all non-audit services have been reviewed by the board
to ensure they do not impact the impartiality and
objectivity of the auditor; and
•
the non-audit services provided do not undermine the
general principles relating to auditor independence
as set out in Professional Statement F1 Professional
independence, as they did not involve reviewing or
auditing the auditor’s own work, acting in a manage-
ment or decision making capacity for the Company,
acting as an advocate for the Company or jointly sharing
risks and rewards.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
22
Grant Thornton Western Australian Partnership
ABN 21 965 022 882
Chartered Accountants, Business Advisers and Consultants
Auditor’s Independence Declaration
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit Encounter
Resources Limited for the year ended 30 June 2006, I declare that, to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
GRANT THORNTON WESTERN AUSTRALIAN PARTNERSHIP
Greg Leguier
Partner
Dated 19th September 2006
Level 6
256 St Georges Terrace
Perth 6000 Australia
GPO Box P1213
Perth WA 6844
T
F
E
W
+ 61 8 9481 1448
+ 61 8 9481 0152
gtperth@gtwa.com.au
www.grantthornton.com.au
An independent Western Australian partnership entitled to trade under the international name Grant Thornton.
Grant Thornton is a trademark owned by Grant Thornton International and used under licence by independent firms and entities throughout the world.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
23
Income Statement
For the financial year ended 30 June 2006
Revenue
Total revenue
Employee expenses
Employee expenses recharged to exploration
Equity based remuneration expense
Non-executive Director’s fees
Consultants fees
Corporate advisory expenses
Operating lease expenses
Depreciation expense
Corporate expenses
Legal costs
Other expenses from ordinary activities
Exploration costs written off and expensed
Loss before income tax
Income tax expense
Loss attributable to members for the year
Earnings per share for loss attributable to the
ordinary equity holders of the Company
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Note
5
10
6
7
16
27
27
2006
$
90,131
90,131
(244,339)
164,803
(2,625)
(5,928)
2005
$
–
–
–
–
–
–
–
(27,526)
(30,000)
(20,464)
(1,335)
(59,328)
(23,653)
(81,123)
(132,409)
(346,270)
–
–
–
–
–
–
(9,404)
(34,360)
(71,290)
–
(346,270)
(71,290)
Cents
(1.1)
(1.1)
Cents
–
–
The above income statement should be read in conjunction with the accompanying notes.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
24
Balance Sheet
As at 30 June 2006
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Capitalised mineral exploration and evaluation expenditure
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Short term borrowings
Total current liabilities
Total liabilities
Net/(deficiency of) assets
Equity
Issued capital
Accumulated losses
Equity remuneration reserve
Total equity
Note
8
9(a)
9(b)
10
11
12
13
14
16
16
2006
$
4,209,233
56,278
319,842
4,585,353
92,133
250,822
342,955
2005
$
22,315
1,876
116,820
141,011
–
–
–
4,928,308
141,011
90,889
–
90,889
90,889
7,964
204,336
212,300
212,300
4,837,419
(71,289)
5,252,354
(417,560)
2,625
4,837,419
1
(71,290)
–
(71,289)
The above balance sheet should be read in conjunction with the accompanying notes.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
25
Statement of Changes in Equity
For the financial year ended 30 June 2006
Total equity at the beginning of the financial year
Loss for the year
Movement in equity remuneration reserve
Transactions with equity holders in their capacity
as equity holders:
Contributions of equity
Transaction costs of equity issued
Note
16
16
14
14
2006
$
(71,289)
2005
$
–
(346,270)
(71,290)
2,625
5,700,000
(447,647)
–
1
–
Total equity at the end of the financial year
4,837,419
(71,289)
The above statement of changes in equity should be read in conjunction with the accompanying notes.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
26
Cash Flow Statement
For the financial year ended 30 June 2006
Cash flows from operating activities
Receipts from operations
Interest received
Payments to suppliers and employees
Note
2006
$
2005
$
–
64,921
(388,946)
15,882
–
(193,637)
Net cash used in operating activities
26
(324,025)
(177,755)
Cash flows from investing activities
Payments for exploration and evaluation
Payments for plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Proceeds from the issue of shares
Payments for transaction costs relating to share issues
Net cash provided by financing activities
Net increase in cash held
Cash at the beginning of the financial year
Cash at the end of the financial year
8(a)
(443,606)
(93,468)
(537,074)
30,000
(34,336)
5,500,000
(447,647)
5,048,017
4,186,918
22,315
4,209,233
–
–
–
200,070
–
–
–
200,070
22,315
–
22,315
The above cash flow statement should be read in conjunction with the accompanying notes.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
27
Notes to the Financial Statements
For the financial year ended 30 June 2006
Note 1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial
statements for Encounter Resources Limited as an individual entity.
(a) Basis of preparation
This general purpose financial report has been prepared in accordance with Australian equivalents to International
Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board,
Urgent Issues Group Interpretations and the Corporations Act 2001.
Compliance with IFRS
The financial report of Encounter Resources Limited complies with Australian Accounting Standards, which include
Australian Equivalents to International Financial Reporting Standards (AIFRS), in their entirety. Compliance with AIFRS
ensures that the financial report also complies with International Financial Reporting Standards (IFRS) in their entirety.
Application of AASB1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards
These financial statements are the first Encounter Resources Limited financial statements to be prepared in accordance
with AIFRS. AASB1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards has been
applied in preparing these financial statements.
Financial statements of Encounter Resources Limited until 30 June 2005 had been prepared in accordance with previous
Australian Generally Accepted Accounting Principles (AGAAP). AGAAP differs in certain aspects from AIFRS. When
preparing the Encounter Resources Limited 2006 financial statements, management has amended certain accounting,
valuation and consolidation methods applied in the AGAAP financial statements to comply with AIFRS. The comparative
figures in respect of 2005 were restated to reflect these adjustments.
Reconciliations and descriptions of the effect of transition from previous AGAAP to AIFRS on the Company’s equity and
its net income are given in note 28.
Early adoption of standards
The Company has not elected to adopt any standards early as permitted under AASB1 First-time Adoption of Australian
Equivalents to International Financial Reporting Standards.
Reporting basis and conventions
These financial statements have been prepared under the historical cost convention, and on an accrual basis.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Company’s accounting policies.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are
significant to the financial statements, are disclosed in note 3.
(b) Segment reporting
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. A geographical segment is 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.
(c) Revenue recognition and receivables
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net
of returns, allowances and amounts collectable on behalf of third parties.
Interest income
Interest income is recognised on a time proportion basis and is recognised as it accrues.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
28
Note 1 Summary of significant accounting policies (continued)
(d) Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on
the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
the 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 timing 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 substantially 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 those timing
differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not
affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax
bases of investments in controlled entities where the parent 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.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are
offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly
in equity.
(e) Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases (note 22). Payments made under operating leases (net of any incentives received from the lessor) are
charged to the income statement on a straight line basis over the period of the lease.
(f)
Impairment of assets
Assets 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. For
the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating
units). Non financial assets, other than goodwill, that suffered an impairment are reviewed for possible reversal of the
impairment at each reporting date.
(g) Cash and cash equivalents
For cash flow statement presentation purposes, 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.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
29
Notes to the Financial Statements (continued)
For the financial year ended 30 June 2006
Note 1 Summary of significant accounting policies (continued)
(h) Fair value estimation
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their
fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual
cash flows at the current market interest rate that is available to the Company for similar financial instruments.
(i) Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the assets.
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 Company 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.
Depreciation of property, plant and equipment is calculated using the straight line and written down value methods to
allocate their cost, net of residual values, over their estimated useful lives, as follows:
Field equipment
Office equipment
3 years
3 years
The asset’s 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 (note 1(f)). Gains and losses on disposal are determined by comparing proceeds
with the carrying amount. These gains and losses are included in the income statement.
(j) Mineral exploration and evaluation expenditure
Mineral exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest.
These costs are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect
of which:
•
such costs are expected to be recouped through the successful development and exploitation of the area of interest,
or alternatively by its sale; or
• exploration and/or evaluation activities in the area have not reached a stage which permits a reasonable assessment
of the existence or otherwise of economically recoverable reserves and active or significant operations in, or in relation
to, the area of interest are continuing.
In the event that an area of interest is abandoned or if the Directors consider the expenditure to be of reduced value,
accumulated costs carried forward are written off in the year in which that assessment is made. A regular review is
undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to
that area of interest.
Restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are expensed as
incurred and treated as exploration and evaluation expenditure.
(k) Joint ventures
Interests in joint ventures have been brought to account by including the appropriate share of the relevant assets,
liabilities and costs of the joint ventures in their relevant categories in the financial statements. Details of these interests
are shown in Note 24.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
30
Note 1 Summary of significant accounting policies (continued)
(l) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year
which are unpaid. The amounts are unsecured and usually paid within 30 days of recognition.
(m) Employee benefits
Wages, salaries and annual leave.
Liabilities for wages and salaries, including non-monetary benefits, and annual 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.
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
using the projected unit credit method. Consideration is given to expected future salaries, 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.
Share based payments.
Share based compensation payments are made available to Directors and employees.
The fair value of options granted is 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 a Black-Scholes option pricing model that takes into
account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price
volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option.
The fair value of the options granted is adjusted to reflect market vesting conditions. 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 and the proceeds received, net of any directly attributable transaction costs, are credited to share capital.
(n) Issued capital
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.
(o) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to equity holders of the Company, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
31
Notes to the Financial Statements (continued)
For the financial year ended 30 June 2006
Note 1 Summary of significant accounting policies (continued)
(o) Earnings per share (continued)
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.
(p) Goods and service tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as a
part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to, the taxation authority, are presented as operating cash flow.
(q) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation
for the current financial year.
(r) Investments and other financial assets
The Group has elected to apply the option available under AASB 1 of adopting AASB 132 and AASB 139 from 1 July
2005. Outlined below is the relevant accounting policy for investments and other financial assets applicable from 1 July
2005. For the applicable policy for the year ending 30 June 2005, refer to the annual financial report at 30 June 2005.
Accounting policies applicable from 1 July 2005.
Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either
financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-
sale investments, as appropriate.
Recognition
When financial assets are recognised initially, they are measured at fair value, plus in the case of investments not at fair
value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial
assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end.
All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Group
commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts
that require delivery of the assets within the period established generally by regulation or convention in the marketplace.
(i) Financial assets are fair value through profit or loss
Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or
loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term.
Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or
losses on investments held for trading are recognised in profit or loss.
(ii) Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity
when the Group has the positive intention and ability to hold to maturity. Investments included to be held for an
ENCOUNTER RESOURCES ANNUAL REPORT 2006
32
Note 1 Summary of significant accounting policies (continued)
(r) Investments and other financial assets (continued)
undefined period are not included in this classification. Investments that are intended to be held-to-maturity, such as
bonds, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus
principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference
between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or
received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all
other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit or
loss when the investments are derecognised or impaired, as well as through the amortisation process.
(iii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market and are stated at amortised cost using the effective interest rate method.
(iv) Financial liabilities
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and
amortisation.
Note 2 Financial risk management
The Company’s activities expose it to a variety of financial risks; market risk, credit risk, liquidity risk and cash flow interest risk.
The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the Company.
(a) Market risk
Currently the Company is not exposed to any significant market risk.
(b) Credit risk
The Company currently has no significant concentrations of credit risk.
(c) Liquidity risk
The Company manages its liquidity risk by monitoring its cash reserves and forecast spending. Management is cognisant
of the future demands for liquid finance resources to finance the Company’s current and future operations.
(d) Cash flow and fair value interest rate risk
As the Company has significant interest bearing assets, the Company’s income and operating cash flows are materially
exposed to changes in market interest rates. The assets are short term interest bearing deposits, and no financial
instruments are employed to mitigate risk. (Note 17 – Financial Instruments).
Note 3 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under
the circumstances.
Accounting for capitalised exploration and evaluation expenditure
The Company’s accounting policy is stated at 1(j). There is some subjectivity involved in the carrying forward as capitalised
or writing off to the income statement exploration and evaluation expenditure, however management give due consideration
to areas of interest on a regular basis and are confident that decisions to either write off or carry forward such expenditure
reflect fairly the prevailing situation.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
33
Notes to the Financial Statements (continued)
For the financial year ended 30 June 2006
Note 4 Segment information
Business segments
The Company is involved in the mineral exploration sector.
Geographical segments
The Company is organised on a national basis with exploration and development interests within Western Australia.
Note 5 Revenue
Operating activities
Interest receivable – other persons
Note 6 Loss for the year
Loss before income tax includes the following specific expenses:
Depreciation
Office equipment
Rental expenses on operating leases – minimum lease payments
Exploration expenditure written off and expensed
Note 7 Income tax expense
a) Reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
Tax at the Australian rate of 30% (2005 – 30%)
Deferred tax benefit not brought to account
Non-deductible expenditure
b) Deferred tax assets not brought to account
and carried forward in relation to:
Tax losses
Temporary differences
2006
$
2005
$
90,131
–
1,335
20,464
132,409
–
–
34,360
(346,270)
(103,881)
103,500
381
–
258,492
(160,795)
97,697
(71,290)
(21,387)
20,136
1,251
–
20,136
35,046
55,182
c)
The deferred tax assets of tax losses not brought to account will only be obtained if:
(i) The Company derives future assessable income of a nature and an amount sufficient to enable the benefit from
the tax losses to be realised;
(ii) The Company continues to comply with the conditions for deductibility imposed by tax legislation; and
(iii) No changes in tax legislation adversely affect the Company realising the benefit from the deduction of the losses.
All unused tax losses were incurred by Australian entities.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
34
Note 8 Current assets – Cash and cash equivalents
Cash at bank and on hand
Deposits at call
a) Reconciliation to cash at the end of the year
The above figures are reconciled to cash at the end of the
financial year as shown in the cash flow statement as follows:
2006
$
87,255
4,121,978
4,209,233
2005
$
22,315
–
22,315
Balances as per above and per cash flow statement
4,209,233
22,315
b) Cash at bank and on hand
These attract interest at 2.45% (2005: nil%).
c) Deposits at call
The deposits are bearing fixed interest rates between 5.87% and 5.95%
(2005: nil%). These deposits have an average maturity of 82 days.
Note 9 Current assets – Receivables
a) Trade and other receivables
Accrued interest
GST recoverable
b) Other current assets
Prepaid tenement costs
Prepaid insurance
Prepaid corporate advisory expenses
25,210
31,068
56,278
219,022
10,820
90,000
319,842
–
1,876
1,876
116,820
–
–
116,820
ENCOUNTER RESOURCES ANNUAL REPORT 2006
35
Notes to the Financial Statements (continued)
For the financial year ended 30 June 2006
2006
$
2005
$
Note 10 Non-current assets –
Property, plant and equipment
Field equipment
At cost
Accumulated depreciation
Office equipment
At cost
Accumulated depreciation
Reconciliation
Field equipment
Net book value at start of the year
Additions
Depreciation
Net book value at end of the year
Office equipment
Net book value at start of the year
Additions
Depreciation
Net book value at end of the year
No items of property, plant and equipment have been pledged
as security by the Company.
Note 11 Non-current assets – Capitalised
mineral exploration and evaluation expenditure
In the exploration and evaluation phase
Cost brought forward
Exploration and acquisition expenditure incurred during the year at cost
Exploration expenditure written off
Cost carried forward
69,702
–
69,702
23,766
(1,335)
22,431
92,133
–
69,702
–
69,702
–
23,766
(1,335)
22,431
–
383,231
(132,409)
250,822
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The recoverability of the carrying amount of the exploration and evaluation assets is dependent upon successful
development and commercial exploitation, or alternatively, sale of the respective areas of interest.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
36
Note 12 Current liabilities – Trade and other payables
Trade payables and accruals
Other payables
Employee benefits payable
2006
$
46,568
30,998
13,323
90,889
2005
$
7,964
–
–
7,964
Note 13 Current liabilities – Short term borrowings
Loan from director
–
204,336
a) Interest rate risk exposure
Details of the Company’s exposure to interest rate changes on borrowings are set out in note 17.
b) Fair value disclosures
Details of the fair value of borrowings for the Company are set out in note 17.
c) Security
There are no secured liabilities.
Note 14 Issued capital
a) Ordinary shares
The Company is a public company limited by shares. The Company was incorporated in Perth, Western Australia.
The Company’s shares are limited whereby the liability of its members is limited to the amount (if any) unpaid on the
shares respectively held by them.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote,
and upon a poll each share is entitled to one vote.
2006
No.
2005
No.
2006
$
2005
$
b) Share capital
Issued share capital
c) Share movements during the year
At the beginning of the year
Share issued on formation 30 June 2004
Share split (33,000:1) 7 October 2005
Share issue 17 October 2005
Share split (93:1) 26 October 2005
Share issue 4 November 2005
Shares issued on IPO 20 March 2006
Less: costs related to shares issued
At the end of the year
Issue price
$1.00
–
$1.00
–
$0.10
$0.20
59,996,900
1
–
33,299
300,000
30,663,600
4,000,000
25,000,000
–
59,996,900
1
–
1
–
–
–
–
–
–
1
5,252,354
1
–
–
300,000
–
400,000
5,000,000
(447,647)
5,252,354
1
–
1
–
–
–
–
–
–
1
Ordinary shares have no par value. There is no limit to the authorised share capital of the Company.
d) Option plan
Information relating to the Encounter Resources Limited Directors, Officers and Employees Option Plan is set out in note 15.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
37
Notes to the Financial Statements (continued)
For the financial year ended 30 June 2006
Note 15 Option Plan
The establishment of the Encounter Resources Limited Directors, Officers and Employees Option Plan (‘the Plan”) was
adopted at a Meeting of Directors on 8 February 2006, subject to approval by a special resolution at the next General
Meeting of shareholders of the Company. All eligible Directors, executive officers and employees of Encounter Resources
Limited who have been continuously employed by the Company are eligible to participate in the Plan.
The Plan allows the Company to issue free options to eligible persons. The options can be granted free of charge and
are exercisable at a fixed price in accordance with the Plan.
Options issued under the Plan have a 12 month vesting period prior to exercise, except under certain circumstances
whereby options may be capable of exercise prior to the expiry of the vesting period.
a) Options issued during the year
During the financial year the Company granted the following unlisted options over unissued shares:
Number of options granted
Exercise price
Expiry date
100,000
100,000
$0.20
$0.45
23 March 2011
15 May 2011
During the year no options were exercised.
b) Options on issue at the balance date
The number of options outstanding over unissued ordinary shares at 30 June 2006 is 200,000 (2005: Nil).
The terms of these options are as follows:
Number of options outstanding
Exercise price
Expiry date
100,000
100,000
200,000
$0.20
$0.45
23 March 2011
15 May 2011
c) Subsequent to the balance date
No options have been granted or exercised subsequent to the balance date to the date of signing this report.
Reconciliation of movement of options over unissued shares during the period
including weighted average exercise price (WAEP)
Options outstanding at the start of the year
Options granted during the year
Options exercised during the year
Options expiring unexercised during the year
Options outstanding at the end of the year
2006
2005
WAEP
(cents)
No.
WAEP
(cents)
–
32.5
–
–
32.5
–
–
–
–
–
–
–
–
–
–
No.
–
200,000
–
–
200,000
ENCOUNTER RESOURCES ANNUAL REPORT 2006
38
Note 15 Option Plan (continued)
Basis and assumptions used in the valuation of options.
The options were valued using the Black-Scholes option valuation methodology.
All options are subject to a 12 month vesting period.
Date granted
23 March 2006
15 May 2006
Number of
options granted
Exercise price
(cents)
Expiry date
100,000
100,000
20.00
45.00
23 March 2011
15 May 2011
Risk free
interest
rate used
5.28%
5.28%
Volatility
applied
50%
50%
Option
valuation
(cents)
10.5
5.0
Historical volatility has been used as the basis for determining expected share price volatility, as it is assumed that this is
an indicator of future tender, which may not eventuate.
Note
Note 16 Reserves and accumulated losses
Balance brought forward at 1 July 2005
Loss for the period
Transfer to equity remuneration reserve in respect
of options issued
Balance carried forward at 30 June 2006
Accumulated
losses
$
(71,290)
(346,270)
–
(417,560)
Equity
remuneration
reserve (i)
$
–
–
2,625
2,625
(i) Equity remuneration reserve
The equity remuneration reserve is used to recognise the fair value of options issued but not exercised.
Note 17 Financial instruments
The Company’s exposure to interest rate risk (note 2(d)) is as follows:
Weighted
average
effective
interest
%
Funds
available at
floating
interest rate
$
Assets/
(liabilities)
non interest
bearing
$
Total
$
Note
2006
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial liabilities
Trade and other payables
Total financial liabilities
5.89%
2.64%
4,209,233
25,210
–
31,068
4,209,233
56,278
4,234,443
31,068
4,265,511
–
–
(90,889)
(90,889)
(90,889)
(90,889)
Net financial assets/(liabilities)
4,234,443
(59,821)
4,174,622
ENCOUNTER RESOURCES ANNUAL REPORT 2006
39
Notes to the Financial Statements (continued)
For the financial year ended 30 June 2006
Note 17 Financial instruments (continued)
Weighted
average
effective
interest
%
Funds
available at
floating
interest rate
$
Assets/
(liabilities)
non interest
bearing
$
Total
$
Note
2005
Financial assets
Cash and cash equivalents
Total financial assets
Financial liabilities
Short term borrowings
Trade and other payables
Total financial liabilities
Net financial assets/(liabilities)
Note 18 Dividends
–
–
–
–
–
–
–
–
–
22,315
22,315
22,315
22,315
(204,336)
(7,964)
(204,336)
(7,964)
(212,300)
(212,300)
(189,985)
(189,985)
No dividends were paid or proposed during the financial year.
The Company has no franking credits available as at 30 June 2006.
Note 19 Key management personnel disclosures
(a) Directors
The following persons were directors of Encounter Resources Limited during the financial year:
(i) Chairman – non-executive
Paul Chapman
(ii) Executive directors
Will Robinson, Managing Director
Peter Bewick, Exploration Director
(iii) Non-executive directors
Steve Abbott, Director
Edward Robinson, Director
(appointed 7 October 2005)
(appointed 7 October 2005)
(resigned 17 October 2005)
(resigned 17 October 2005)
(b) Other key management personnel
There were no other persons employed by or contracted to the Company during the financial year, having responsibility
for planning, directing and controlling the activities of the Company, either directly or indirectly.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
40
Note 19 Key management personnel disclosures (continued)
(c) Key management personnel compensation
Remuneration Policy
Remuneration levels are competitively set to attract and retain appropriately qualified and experienced Directors and senior
executives. Remuneration packages include fixed remuneration with bonuses or equity based remuneration entirely at the
discretion of the Board based on the performance of the Company.
Total remuneration for all Non-Executive Directors was last voted on by shareholders on 4 November 2005, whereby it is not
to exceed $80,000 per annum. Non-Executive Directors do not receive bonuses. Directors’ fees cover all main Board activities.
At the date of this report the Company has not entered into any agreements with Directors or Senior Executives which
include performance based components.
Refer also to the Corporate Governance Statement for more detail on the Boards policy in this area.
Details of Remuneration for Key Management Personnel
During the year there were no Senior Executives which were employed by the Company for whom disclosure is required.
Details of the remuneration of each Director of the Company are as follows:
2006
Directors
P Chapman
W Robinson
P Bewick
S Abbott
E Robinson
Total
2005
W Robinson
S Abbott
E Robinson
Total
Short Term
Post Employment
Base
Emolument
$
Superannuation
Contributions
$
Other
Benefits
$
Value of
Options
$
3,922
74,559
96,616
–
–
2,006
6,710
8,695
–
–
175,097
17,411
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
5,928
81,269
105,311
–
–
192,508
–
–
–
–
Executive Employment Agreements
Remuneration and other terms of employment for the Managing Director and Exploration Director are set out in their
respective Executive Employment Agreements. Both employment contracts are for a three year term commencing
23 January 2006 and are subject to a three month notice of termination of contract.
The contractual arrangements contain certain provisions typically found in contracts of this nature.
Payment of termination benefit by the employer, other than amongst other things for gross misconduct is equal to the
payment limit set by Sub-section 200G of the Corporations Act 2001.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
41
Notes to the Financial Statements (continued)
For the financial year ended 30 June 2006
Note 19 Key management personnel disclosures (continued)
d) Equity instrument disclosures relating to key management personnel
Unlisted Options provided as remuneration and shares issued on exercise of such options
No options over unissued shares have been issued to key management personnel of the Company during or since then
end of the financial year.
Option holdings
The numbers of options over ordinary shares in the Company held during the financial year by key management personnel
of the Company, are set out below:
2006
Name
Directors
P. Chapman
W. Robinson
P. Bewick
S. Abbott
E. Robinson
2005
W. Robinson
S. Abbott
E. Robinson
Balance
at start of
the year
Granted
during
the year
Exercised
during
the year
Other
changes
during
the year
Balance at
the end of
the year
Vested and
exercisable
at the end of
the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Share holdings
The number of shares in the Company held during the financial year by key management personnel of the Company,
including their personally related parties are set out below. There were no shares granted during the reporting period
as compensation.
2006
Name
Directors
P. Chapman
W. Robinson
P. Bewick
S. Abbott
E. Robinson
2005
W. Robinson
S. Abbott
E. Robinson
Balance at
start of
the year
Received during
the year
on exercise
of options
–
1
–
–
–
1
–
–
–
–
–
–
–
–
–
–
Other
changes
during
the year
4,710,000
21,796,899
4,700,000
–
–
–
–
–
Balance at
the end of
the year
4,710,000
21,796,900
4,700,000
–
–
1
–
–
Other changes to the share holdings are in respect of shares purchased or as a result of share splits prior to the Initial
Public Offering. Also included in other changes in share holdings are 200,000 ordinary shares issued to Mr Will Robinson
in settlement of a $200,000 loan previously made to the company.
e) Loans made to key management personnel
No loans were made to key personnel, including personally related entities during the reporting period.
f) Other transactions with key management personnel
There were no other transactions with key management personnel.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
42
Note 20 Remuneration of auditors
Audit and review of the Company’s financial statements
Taxation services
Independent Accountants Report
2006
$
8,700
3,500
11,300
23,500
2005
$
4,750
–
–
4,750
Note 21 Contingencies
(i) Contingent liabilities
There were no material contingent liabilities not provided for in the financial statements of the Company as at 30 June
2006 or 30 June 2005 other than:
Native Title and Aboriginal Heritage
Native title claims have been made with respect to areas which include tenements in which the Company has an interest.
The Company is unable to determine the prospects for success or otherwise of the claims and, in any event, whether or
not and to what extent the claims may significantly affect the Company or its projects. Agreement is being or has been
reached with various native title claimants in relation to Aboriginal Heritage issues regarding certain areas in which the
Company has an interest.
(ii) Contingent assets
There were no material contingent assets as at 30 June 2006 or 30 June 2005.
Note 22 Commitments
(a) Exploration
The Company has certain obligations to perform minimum exploration work on mineral leases held. These obligations may
vary over time, depending on the Company’s exploration programmes and priorities. As at balance date, total exploration
expenditure commitments on tenements held by the Company have not been provided for in the financial statements and
which cover the following twelve month period amount to $470,800 (2005: $Nil). These obligations are also subject to
variations by farm-out arrangements or sale of the relevant tenements. This commitment does not include the expenditure
commitments which are the responsibility of the joint venture partners.
(b) Operating Lease Commitments
Commitments for minimum lease payments in relation to non-cancellable operating leases are as follows:
Within one year
Later than one year but not later than five years
Later than five years
2006
$
26,870
–
–
26,870
2005
$
–
–
–
–
The operating lease commitment relates to the lease of the Company’s Perth office. The initial lease period is 12 months,
thereafter becoming a monthly lease. There are no provisions in the terms of the lease for rental increases.
(c) Contractual Commitment
There are no contractual commitments as at 30 June 2006.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
43
Notes to the Financial Statements (continued)
For the financial year ended 30 June 2006
Note 23 Related party transactions
There were no related party transactions during the year, other than disclosed at note 19.
Note 24 Interests in joint ventures
Joint venture agreements have been entered into with third parties, whereby the third parties can earn an interest
in exploration areas by expending specified amounts in the exploration areas.
There are no assets employed by these joint ventures and the Company’s expenditure in respect of them is brought
to account initially as capitalised exploration and evaluation expenditure (Refer Note 11).
Note 25 Events occurring after the balance sheet date
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction
or event of a material and unusual nature likely, in the opinion of the Directors of the Company to affect substantially
the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent
financial years.
Note 26 Reconciliation of loss after tax
to net cash inflow from operating activities
Loss from ordinary activities after income tax
Depreciation
Exploration cost written off
Non cash flows in loss from operating activities
Share based payments expense
(Increase)/decrease in prepaid expenses
(Increase)/decrease in receivables
Increase/(decrease) in payables
Increase/(decrease) in provisions
Net cash outflow from operating activities
2006
$
2005
$
(346,270)
1,335
132,409
–
2,625
(100,820)
(32,508)
5,037
14,167
(324,025)
(71,290)
–
–
4,267
–
(116,820)
(1,876)
7,964
–
(177,755)
ENCOUNTER RESOURCES ANNUAL REPORT 2006
44
Note 27 Earnings per share
a) Basic earnings per share
Loss attributable to ordinary equity holders of the Company
b) Diluted earnings per share
Loss attributable to ordinary equity holders of the Company
c) Loss used in calculation of basic and diluted loss per share
Loss after tax from continuing operations
d) Weighted average number of shares used as the denominator
Weighted average number of shares used as the denominator in
calculating basic and dilutive loss per share
At 30 June 2006 the Company has on issue 200,000 unlisted options
(2005: nil) over ordinary shares that are not considered to be dilutive.
2006
Cents
2005
Cents
(1.1)
(1.1)
2006
$
–
–
2005
$
(346,270)
(71,290)
No.
No.
30,648,129
1
Note 28 Explanation of transition to Australian equivalents to IFRS
(1) Reconciliation of equity reported under previous Australian Generally Accepted Accounting Principles (AGAAP)
to equity under Australian equivalents to IFRS (AIFRS)
(a) At the date of transition to AIFRS: 1 July 2004
Previous
AGAAP
$
Effect of
transition
$
AIFRS
$
Cash and cash equivalents
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total liabilities
NET ASSETS
Equity
Issued capital
TOTAL EQUITY
1
1
–
–
–
–
–
1
1
–
–
–
–
–
–
–
–
–
1
1
–
–
–
–
–
1
1
ENCOUNTER RESOURCES ANNUAL REPORT 2006
45
Notes to the Financial Statements (continued)
For the financial year ended 30 June 2006
Note 28 Explanation of transition to Australian equivalents to IFRS (continued)
(b) At the last reporting date under AGAAP: 30 June 2005
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Capitalised mineral exploration and evaluation expenditure
Total non-current assets
Total assets
Current liabilities
Short term borrowings
Trade and other payables
Total current liabilities
Total liabilities
NET ASSETS
Equity
Issued capital
Accumulated losses
Equity remuneration reserve
TOTAL EQUITY
Previous
AGAAP
$
22,315
1,876
116,820
141,011
–
–
–
141,011
204,336
7,964
212,300
212,300
(71,289)
1
(71,290)
–
(71,289)
Effect of
transition
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
AIFRS
$
22,315
1,876
116,820
141,011
–
–
–
141,011
204,336
7,964
212,300
212,300
(71,289)
1
(71,290)
–
(71,289)
ENCOUNTER RESOURCES ANNUAL REPORT 2006
46
Note 28 Explanation of transition to Australian equivalents to IFRS (continued)
(2) Reconciliation of loss for the year ended 30 June 2005 reported under previous Australian Generally Accepted
Accounting Principles (AGAAP) to loss under Australian equivalents to IFRS (AIFRS)
Revenue
Consultant fees
Exploration costs written off and expensed
Other expenses
Loss from continuing operations before income tax
Income tax
Loss for the year attributable to members
Previous
AGAAP
$
–
(27,526)
(34,360)
(9,404)
(71,290)
–
(71,290)
Effect of
transition
$
–
–
–
–
–
–
–
AIFRS
$
–
(27,526)
(34,360)
(9,404)
(71,290)
–
(71,290)
(3) Reconciliation of cash flow statement for the year ended 30 June 2005 reported under previous Australian Generally
Accepted Accounting Principles (AGAAP) to cash flow statement under Australian equivalents to IFRS (AIFRS)
The adoption of AIFRS has not resulted in any material adjustments to the cash flow statement.
(4) Notes to the AGAAP to AIFRS reconciliations
There were no reconciling items on transition from AGAAP to AIFRS.
Issued standards not early adopted
The following standards and amendments were available for early adoption but have not been applied by the Company
in these financial statements:
•
•
AASB 7 Financial Instruments: Disclosure (August 2005) replacing the presentation requirements of financial
instruments in AASB 132. AASB 7 is applicable for annual reporting periods beginning on or after 1 January 2007
AASB 2005-10 Amendments to Australian Accounting Standards (September 2005) makes consequential amendments
to AASB 132 Financial Instruments: Disclosures and Presentation, AASB 101 Presentation of Financial Statements,
AASB 114 Segment Reporting, AASB 117 Leases, AASB 133 Earnings per Share, AASB 139 Financial Instruments:
Recognition and Measurement, AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting
Standards. AASB 2005-10 is applicable for annual reporting periods beginning on or after 1 January 2007.
The Company plans to adopt AASB 7, and AASB 2005-10 in the 2007 financial year.
The initial application of AASB 7 and AASB 2005-10 is not expected to have an impact on the financial results of the
Company as the standard and amendment are only concerned with disclosures.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
47
Directors’ Declaration
In the opinion of the Directors of Encounter Resources Limited (“the Company”)
(a)
the financial statements and notes set out on pages 24 to 47 are in accordance with the Corporations Act 2001,
including:
(i)
(ii)
complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
give a true and fair view of the financial position as at 30 June 2006 and of the performance for the year
ended on that date of the Company.
(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.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief
Executive Officer and Chief Financial Officer for the financial year ended 30 June 2006.
This declaration is made in accordance with a resolution of the Directors.
Signed at Perth this 19th day of September 2006.
W Robinson
Director
ENCOUNTER RESOURCES ANNUAL REPORT 2006
48
Grant Thornton Western Australian Partnership
ABN 21 965 022 882
Chartered Accountants, Business Advisers and Consultants
Independent Audit Report
to the Members of Encounter Resources Limited
Scope
The Financial Report and Directors’ Responsibility
The financial report comprises the balance sheet, income statement, statement of changes in equity, statement of cash
flows, accompanying notes to the financial statements, and the directors’ declaration for the year ended 30 June 2006.
The directors of the company are responsible for the preparation and true and fair presentation of the financial report in
accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting
records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and
accounting estimates inherent in the financial report.
Audit approach
We conducted an independent audit in order to express an opinion to the members of the company. Our audit was
conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the
financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of
professional judgment, selective testing, the inherent limitations of internal control, and the availability of persuasive rather
than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.
We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with
the Corporations Act 2001, including compliance with Accounting Standards and other mandatory financial reporting
requirements in Australia, a view which is consistent with our understanding of the company’s financial position, and of
its performance as represented by the results of its operations and cash flows.
We formed our audit opinion on the basis of these procedures, which included:
•
•
examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial
report; and
assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant
accounting estimates made by the directors.
Level 6
256 St Georges Terrace
Perth 6000 Australia
GPO Box P1213
Perth WA 6844
T
F
E
W
+ 61 8 9481 1448
+ 61 8 9481 0152
gtperth@gtwa.com.au
www.grantthornton.com.au
An independent Western Australian partnership entitled to trade under the international name Grant Thornton.
Grant Thornton is a trademark owned by Grant Thornton International and used under licence by independent firms and entities throughout the world.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
49
Grant Thornton Western Australian Partnership
ABN 21 965 022 882
Chartered Accountants, Business Advisers and Consultants
While we considered the effectiveness of management’s internal controls over financial reporting when determining the
nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.
Our audit did not involve an analysis of the prudence of business decisions made by the directors or management.
We have read the other information in the annual report to determine whether it contained any material inconsistencies
with the financial report.
Independence
In conducting our audit, we followed the applicable independence requirements of Australian professional and ethical
pronouncements and the Corporations Act 2001.
In accordance with ASIC Class Order 05/83, we declare to the best of our knowledge and belief that the auditor’s
independence declaration has not changed as at the date of providing our audit opinion.
Audit opinion
In our opinion, the financial report of Encounter Resources Limited is in accordance with:
a)
the Corporations Act 2001, including:
i)
giving a true and fair view of the company’s financial position as at 30 June 2006 and of its performance for
the year ended on that date; and
ii)
complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
b)
other mandatory financial reporting requirements in Australia.
GRANT THORNTON WESTERN AUSTRALIAN PARTNERSHIP
Greg Leguier
Partner
Perth, WA
Dated this 19th day of September 2006
An independent Western Australian partnership entitled to trade under the international name Grant Thornton.
Grant Thornton is a trademark owned by Grant Thornton International and used under licence by independent firms and entities throughout the world.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
50
ASX Additional Information
Pursuant to the Listing Requirements of the Australian Stock Exchange Limited, the shareholder information set out below
was applicable as at 14 September 2006.
A. Distribution of Equity Securities
Analysis of numbers of shareholders by size of holding:
Distribution
1- 1,000
1,001- 5,000
5,001- 10,000
10,001-100,000
More than 100,000
Totals
Number of
shareholders
107
530
374
482
36
1529
There were 130 shareholders holding less than a marketable parcel of ordinary shares.
B.
Substantial Shareholders
An extract of the Company’s Register of Substantial Shareholders (who hold 5% or more of the issued capital) is
set out below:
Shareholder Name
William Michael Robinson
Jacmew Pty Ltd
Stone Poneys Nominees Pty Ltd
Solvista Pty Ltd
C.
Restricted Securities
Issued Ordinary Shares
Number of shares
Percentage of shares
16,216,900
5,580,000
4,650,000
4,650,000
27.03%
9.30%
7.75%
7.75%
There are 29,496,900 restricted ordinary shares that are held in escrow until 24 March 2008, and 2,000,000
restricted ordinary shares that are held in escrow until 4 November 2006.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
51
ASX Additional Information (continued)
D.
Twenty Largest Shareholders
The names of the twenty largest holders of quoted shares are listed below:
Shareholder Name
William Michael Robinson
Jacmew Pty Ltd
Stone Poneys Nominees Pty Ltd
Solvista Pty Ltd
Jorge Bernhard
Perpetual Trustees Nominees Ltd
ANZ Nominees Ltd
Charles Arthur Bennett
Domain Investment Holdings Pty Ltd
National Nominees Ltd
Forty Traders Ltd
Pieter Los
Fangrove Pty Ltd
Eric Roles
Bruce Birnie Pty Ltd
French Consulting Pty Ltd
Wei Zhang Min
Dominion Pty Ltd
Andrew Ralph Bewick
K & S De Bruin
Listed Ordinary Shares
Number
Percentage quoted
16,216,900
5,580,000
4,650,000
4,650,000
1,567,100
1,000,000
883,283
825,000
650,000
615,000
550,000
500,000
390,000
350,000
300,000
300,000
250,000
250,000
250,000
200,000
27.03%
9.30%
7.75%
7.75%
2.61%
1.67%
1.47%
1.38%
1.08%
1.03%
0.92%
0.83%
0.65%
0.58%
0.50%
0.50%
0.42%
0.42%
0.42%
0.33%
E.
Voting Rights
In accordance with the Company’s Constitution, voting rights in respect of ordinary shares are on a show of hands
whereby each member present in person or by proxy shall have one vote and upon a poll, each share will have
one vote.
F.
Use of Capital
Pursuant to the requirements of ASX Listing Rule 4.10.19 the Company has used all funds raised from its Initial Public
Offering (IPO) in a manner that is consistent with the projections and objectives outlined in the IPO document.
ENCOUNTER RESOURCES ANNUAL REPORT 2006
52
Uranium and Nuclear Energy Facts
Uranium
Uranium occurs naturally in most rocks in concentrations of
2 to 4 parts per million and is as common in the Earth’s crust
as tin.
Uranium, as exported from Australia, contains 20,000 times
as much energy per kilogram as coal.
Australia
Australia has 36% of the world’s low-cost uranium
resources.
Current Australian uranium production amounts to about
11,000 tonnes of uranium oxide concentrate per year from
the existing three operating mines.
Australia provides about 20% of the world’s uranium,
representing 42% of Australia’s energy exports in thermal
terms.
Australian uranium is sold only to countries which are
signatories of the Nuclear Non-Proliferation Treaty, and which
allow international inspection to verify that it is used only for
peaceful purposes. Customer countries for Australia’s
uranium must also have a bilateral safeguards agreement
with Australia.
Nuclear Energy
Nuclear energy provides 16% of world electricity (24% in
developed countries).
France generates over 75% of its electricity from nuclear
power.
There are some 440 nuclear reactors in 31 countries,
totalling 369 million kilowatts (GWe) capacity, and producing
2,626 billion kilowatt-hours (kWh) in 2005.
Nuclear power is cost competitive with coal and gas in most
parts of the world.
Ex-weapons uranium is now well established as a source
of fuel for power generation. Currently, one tenth of US
electricity (ie half of the nuclear electricity) is generated from
Russian ex-weapons uranium.
China is planning a fivefold increase in nuclear power
capacity by 2020 (from 2005 level).
Radioactive Waste
Nuclear power is the only energy producing industry which
takes full responsibility for all its wastes, and fully costs this
into the product.
About 27 tonnes of spent fuel is taken each year from the
core of a 1,000 MWe nuclear reactor. The spent fuel can be
regarded entirely as waste, or it can be reprocessed.
The costs of dealing with high-level waste disposal are built
into electricity tariffs in countries that generate nuclear
power. In the USA, consumers pay 0.1 cents per kilowatt-
hour, which utilities pay into a special fund. So far more than
US$18 billion has been collected.
The radioactivity of all nuclear waste decays with time. The
level of radioactivity in spent fuel is reduced by 99.9% within
50 years of removal from the reactor.
Greenhouse Gas Emissions
Nuclear power generation emits no carbon dioxide.
Taking account of the greenhouse gases from the
production, treatment and transport of the uranium, it is still
responsible for less than 5% of the CO2 emissions
compared to producing the same amount of energy from
fossil fuels.
Coal-fired power station
1,000 megawatt (MWe)
Nuclear power station
1,000 megawatt (MWe)
Typical fuel requirement
3.2 million tonnes of black coal per year
Wastes produced
Approximately:
– 7 million tonnes of carbon dioxide.
– 200,000 tonnes of sulphur dioxide.
– 200,000 tonnes of solid emissions,
mostly fly ash.
(Source: Uranium Information Centre, Melbourne, Australia)
27 tonnes of fuel per year (after the initial
fuel loading of 75 tonnes of low-enriched
uranium). Producing 27 tonnes of uranium
fuel requires about 200 tonnes of uranium
oxide concentrate (U3O8).
Virtually all wastes are contained in the
27 tonnes or so of used fuel and are
therefore not released to the environment
ENCOUNTER RESOURCES ANNUAL REPORT 2006
53
www.enrl.com.au