ABN 47 109 815 796
annual report 2008
...commodity diversity, geographic focus
Encounter Resources Limited (Encounter) is a mineral exploration
company based in Perth, Western Australia (WA). The company’s
shares are listed on the Australian Stock Exchange (ASX: ENR).
The company’s strategy is focused on the discovery and
development of uranium and base metals resources in WA.
Encounter Resources controls a portfolio comprising over 7,000
square kilometres of highly prospective exploration projects
targeting: surficial uranium in the Yilgarn Craton; unconformity
uranium and base metals in the Paterson Province; and SEDEX
base metal mineralisation, similar to the giant deposits of Century
and McArthur River, in the Bangemall Basin. To drive its growth
strategy the company has assembled a dedicated and experienced
team of geoscientists who are leaders in their field of expertise.
ABN 47 109 815 796
Corporate Directory
Directors
Paul Chapman
Non-Executive Chairman
Will Robinson
Peter Bewick
Managing Director
Exploration Director
Jonathan Hronsky
Non-Executive Director
Company Secretary
Kevin R Hart
Principal Registered Office
Level 7, 600 Murray Street
West Perth, Western Australia 6005
Telephone (08) 9486 9455
Facsimile (08) 6210 1578
Web www.enrl.com.au
Auditor
WHK Horwath Perth Audit 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
Telephone (08) 9315 2333
Facsimile (08) 9315 2233
Stock Exchange Listing
The Company’s shares are quoted
on the Australian Securities Exchange.
The home exchange is Perth,
Western Australia.
ASX Code
ENR – Ordinary shares
Company Information
The Company was incorporated and
registered under the Corporations Act 2001
in Western Australia on 30 June 2004 and
Contents
Letter from the Chairman & Managing Director
Exploration Review
Summary of Tenements
Corporate Governance Statement
Directors’ Report
Auditor’s Independence Statement
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
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became a public company on 26 May 2005.
Directors’ Declaration
The Company is domiciled in Australia.
Independent Audit Report
ASX Additional Information
Front and Back Cover: Mt Augustus, Western Australia.
Highlights and Achievements
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Aggressive exploration strategy resulted in the completion of twelve drill programs at nine
separate projects during the year.
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Initial Inferred Resource estimates were released for the Hillview and Bellah Bore East projects.
The Hillview resource, estimated at over 10 million pounds of near surface U3O8, was
completed within twelve months of the first drill program at the project.
Encounter expanded and consolidated its extensive base metals project portfolio in the
Bangemall Basin to complement its advancing uranium assets.
The Tchintaby Well and Pingandy Creek (Bangemall Basin) base metals projects were advanced
from regional multi-element geochemical anomalies in key structural locations to high quality
Zn-Cu-Pb-Ag drill targets.
Successful geophysical and geochemical programs at the Wanna base metals project
(Bangemall Basin) identified compelling drill targets and led to the acquisition of an extensive
land position prospective for Broken Hill style deposits.
Completed multi-element re-analysis from 18,000 metres of historical drilling at the Yeneena JV
in the Paterson Province with results showing areas of uranium and base metal anomalism
one to two orders of magnitude above background.
Goals for 2009
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Complete initial drill testing of priority uranium and base metals targets identified within
the Yeneena JV.
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Complete initial metallurgical test work for the Hillview uranium project.
Determine scope for higher grade zones at Bellah Bore East uranium resource.
Complete geophysical orientation over base metal mineralisation in the Bangemall Basin
to accelerate definition of high grade positions.
Complete initial drill testing of the Southern Bangemall Basin base metals targets commencing
at the Wanna project.
Complete initial drill program at the multi-metal Wongan Hills and Shackleton projects.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
1
Letter from the Chairman & Managing Director
Dear Fellow Shareholder,
Encounter Resources has made significant progress in our
exploration strategy during the year. The company is also on
target to achieve the key business objectives outlined in the
company’s 2007 Annual Report.
The company maintains a two pronged exploration strategy
focused on uranium and base metals in Western Australia
(WA). This provides commodity diversity and geographical
focus to maximise the return from our exploration dollar.
As a company we believe strongly in investing funds on
in-ground exploration and since listing in 2006 the
company has aggressively and successfully explored its
portfolio. In addition, the company continues to assess new
business opportunities to enhance its asset base.
The company has made significant progress in its
exploration programs on a number of fronts in the last year.
Encounter’s calcrete uranium strategy in the northern
Yilgarn continues to bear fruit. Our exploration to date has
added satellite resources around Yeelirrie/Lake Way and we
discovered the Hillview resource.
The Inferred Resource at Hillview is a big step forward for
Encounter. We commenced our first drill program at
Hillview in July 2007. Within twelve months of that first drill
hole we released our maiden resource at the project at over
10 million lbs of U3O8. This rapid project advancement is a
credit to the project team and is consistent with the
company’s aggressive approach to advancing its uranium
and base metals assets in WA.
The project is well located in a highly endowed area around
Wiluna/Meekatharra including several other uranium
deposits such as BHP Billiton’s giant Yeelirrie deposit, and
has excellent access to infrastructure. This area will be a
future production centre for uranium and is likely to host
one or more uranium processing facilities within the next
five years. While there is considerable evaluation work to be
completed at Hillview, the resource is suited for bulk mining
being a near surface and consistent body of mineralisation.
The company’s second focus for uranium is exploration for
unconformity related uranium at our Yeneena project. The
project is located within the the Paterson Province located
in northern WA and is held in joint venture with Barrick Gold
of Australia. Encounter controls a major position within a
world class mineral province that hosts the Kintye uranium
deposits and the Nifty Copper mine. Kintyre is Australia’s
most recent unconformity uranium discovery, discovered in
1985 by CRA Exploration. We believe that the Paterson
region is one of the most exciting, under-explored
unconformity uranium regions in the world. The project also
has considerable base metals potential. The Yeneena
project will be where most of our uranium exploration effort
will be made in the upcoming year.
In addition to our advancing uranium interests, Encounter
has assembled an extensive base metals portfolio. The
primary target is SEDEX base metal mineralisation similar to
the giant deposits of Century and McArthur River in Eastern
Australia. The base metals exploration to date has focussed
on the Proterozoic Bangemall Basin in central Western
Australia where the company controls a large and strategic
project position. The Tchintaby Well and Pingandy Creek
projects have been advanced to high quality Zn-Cu-Pb-Ag
drill targets.
The company continues to expand its exploration
landholding in the Bangemall Basin. The company has
recently expanded its Wanna base metals project, located
along the central rift of the basin and this project will see its
maiden drill program in 2009.
On the corporate front, the company maintains a sound
financial position with $4.7 million in cash reserves at the
end of June 2008.
The recent state election result means that Western
Australia is now open for uranium business. Western
Australia, through its uranium resource position, can now
play a key role in a global push to reduce carbon
emissions by being a safe and reliable supplier of fuel to
an expanding global nuclear industry.
The company has maintained its exploration focus in
Western Australia where it has secured an extensive
portfolio of assets, a process that began in 2004. We
believe strongly in the geological prospectivity that high
quality projects in Western Australia provide. In 2007/08 a
large part of the exploration effort was focused on uranium
and that effort will continue. In addition, we will be
accelerating our base metals exploration work in 2008/09
to complement our uranium assets.
Finally, the company has assembled a highly respected,
dedicated exploration team with decades of experience
exploring for world class deposits. We would like to
thank the outstanding exploration, field operations and
administration team for their valuable contribution to the
company’s ongoing exploration effort. With a pipeline of
quality projects and a very capable and energetic team in
place we look forward to 2009 with a high degree
of optimism.
We thank the shareholders for their ongoing support.
Paul Chapman
Chairman
Will Robinson
Managing Director
ENCOUNTER RESOURCES ANNUAL REPORT 2008
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Exploration Review
Encounter Resources Limited (Encounter) is a Western Australian (WA) based exploration and resource development
company with projects in four geological regions of WA. Encounter’s portfolio covers over 7,000km2 of strategically located
and highly prospective exploration projects (Figure 1). The portfolio includes:
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a suite of projects located in the Yilgarn Province prospective for calcrete style uranium, base metals and gold;
five projects targeting base metals deposits in the Bangemall Basin;
two multi-metal projects in the South West of WA; and
a joint venture with Barrick Gold of Australia which encompasses a major ground position in the Proterozoic Paterson
mineral province considered highly prospective for unconformity related uranium and base metals mineralisation.
Figure 1: Project Location Plan
ENCOUNTER RESOURCES ANNUAL REPORT 2008
3
Exploration Review continued
Yilgarn
Encounter’s uranium exploration activities in the Yilgarn Province of WA have been the priority programs for the company over
the past year. Drilling completed in that time has focused on progressing initial discoveries into resources. This work
culminated in the announcement of the Hillview and the Bellah Bore East uranium resources.
During the evaluation phase of the numerous uranium projects held by Encounter, it was the company’s philosophy to also
assess the projects for other commodities. This work has lead to the definition of a highly prospective gold project and a
promising base metals opportunity.
Hillview (E51/1127) – Uranium
The Hillview project is located 50km south east of Meekatharra. Broad spaced reconnaissance drilling at Hillview by Western
Mining Corporation in the 1970s identified a 15km long zone of near surface uranium mineralisation.
Multiple phases of aircore drilling were completed by Encounter during the year to test this large scale anomaly. The drilling
successfully outlined a laterally continuous and coherent envelope of near surface uranium mineralisation. Drilling was
completed to a nominal 400m by 100m spacing over the main mineralised zone that extends over a 7km by 1.4km area
with an average thickness of 3.15m (Figure 2).
Coffey Mining, independent consultants engaged by Encounter, estimated an initial Inferred Resource above a 100ppm U3O8
lower cut off at Hillview of 27.6 million tonnes, averaging 174ppm U3O8 for a contained 10.6 million pounds of U3O8
(or approximately 4,800 tonnes contained U3O8) (see Table 1). The Inferred Resource is reported in accordance with the
JORC code (2004) and guidelines.
Figure 2: Resource zone outlines
Figure 3: Average grade of drill intersections
ENCOUNTER RESOURCES ANNUAL REPORT 2008
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Hillview Uranium Project, Western Australia – Inferred Resource Estimate
Reported above a 100ppm and 150ppm U3O8 Lower Cut Off – Reported Using a Bulk Density of 2.0 t/m3
2D Ordinary Kriged Estimate Using Length x Grade and Length as Service Variables
Parent Cell Dimensions of 100m NS by 200m EW by 32m RL
Tonnage (Mt)
Grade (U3O8 ppm)
Contained Metal U3O8 (M lb)
100ppm U3O8 Lower Cut Off
21.6
1.6
4.4
27.6
182
147
146
174
150ppm U3O8 Lower Cut Off
20.6
0.6
1.5
22.7
184
168
153
181
8.7
0.5
1.4
10.6
8.3
0.2
0.5
9.0
Zone
1
2
11
Total
1
2
11
Total
Table 1: Hillview resource tabulation (zones as per Figure 2)
Note: Figures have been rounded
The Hillview resource is a flat lying, consistent body of near surface uranium mineralisation with minimal internal dilution. Initial
metallurgical test work has commenced to provide an indication of the potential leach amenability of the uranium mineralisation.
Yeelirrie Channel
(E53/1154-58, E36/540-542) – Uranium
Encounter controls more than 1,000km2 of tenure
covering over 40kms of the Yeelirrie drainage channel
(see Figure 4). This channel hosts BHP Billiton’s
Yeelirrie uranium deposit located 60kms south west
of Wiluna. The Yeelirrie deposit is the world’s largest
calcrete associated uranium deposit with a published
resource of 52,500 tonnes of U3O8.
Bellah Bore East (E53/1158)
Drilling during the previous financial year defined an
area of near surface uranium mineralisation
approximately 500m by 150m and between 2m to
10m thick at Bellah Bore East, a satellite uranium
discovery within the Yeelirrie Channel.
Resource modelling completed during the year
defined an Inferred Resource of 350,000t averaging
210ppm U3O8 for 160,000lb of U3O8, estimated
in accordance with the JORC Code (2004).
Figure 4: Yeelirrie Uranium channel radiometrics and leasing plan
Potential exists for additional satellite uranium resources and extensions to the higher grade zones within the deposit at
Bellah Bore East. Several drill targets have been defined and will be tested in the coming year.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
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Exploration Review continued
Yeelirrie South (E36/540-542)
Encounter is targeting the basal portion of the main palaeochannel for uranium mineralisation downstream from the BHP
Billiton Yeelirrie South prospect (see Figure 4). The target is based on a model similar to that seen at the Beverley uranium
deposit in South Australia.
A program of hydrogeochemical sampling from historical drill holes in the region will be completed in the coming year
together with targeted drilling to test potential trap sites.
Lake Way South (E53/1010 and E53/1232) – Uranium
The Lake Way South project is located approximately 10kms south of the township of Wiluna and covers an area of 117.3km2.
The tenements cover approximately 12kms of the Lake Way drainage system and are located between Toro Energy’s Lake
Way uranium deposit to the north and its Centipede deposit to the south.
An estimated 200m of the Centipede deposit extends onto Encounter tenure. A uranium resource estimate for the Lake Way
South project is underway.
Toro Energy’s Centipede deposit is well advanced and will possibly be one of the first uranium projects to be developed in
WA. In the next 12 months Encounter will focus on testing the remaining targets on and along the Eastern margin of Lake
Way (see Figure 5).
Figure 5: Lake Way Exploration summary plan
ENCOUNTER RESOURCES ANNUAL REPORT 2008
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McPherson’s Bore (E29/587) – Uranium
The McPherson’s Bore project is located 120km west of Leonora and is situated within the Lake Raeside drainage system.
The project covers a coincident uranium channel radiometric anomaly and a GSWA uranium stream sediment anomaly.
During 2007 drilling defined near surface uranium mineralisation in lake clays which extended over 1.7kms of strike.
Intersections included 1m @ 448ppm U3O8 from surface and 1m @ 283ppm U3O8 from surface.
Shallow trenching across higher grade drill intersections completed during the year indicated that the uranium mineralisation
is concentrated within 20cm from surface. A detailed ground geochemical program is planned to help define mineralisation
trends and potential vectors towards the source of this surficial uranium mineralisation.
Lakeview (E29/577 and ELA37/877) – Diamonds and Uranium
Encounter completed a detailed gravity survey over a discrete magnetic anomaly on the margin of Lake Raeside in the east
of the Lakeview project. Modelling of this data indicated two sub-vertical pipe-like bodies within granitic terrain interpreted as
Kimberlitic intrusions.
A single diamond drill hole (ELV 71) was completed at the Lakeview project during this year into one of the two sub-vertical
pipe-like modelled intrusions. Drilling successfully intersected a volcanic breccia with Kimberlitic affinities.
Four core samples from this hole were submitted for heavy mineral separation, micro diamond, and trace element
geochemical analyses as well as petrological examination. The mineral separation and micro diamond analyses did not
recover any micro diamonds from the samples.
Lake Darlot (E37/830) – Gold
The Lake Darlot project is located 15kms north
of the Darlot Gold Mine on the eastern margin
of the Yandal Greenstone Belt (see Figure 6).
Initial drilling was completed to test a surface
radiometric anomaly within the Lake Darlot
drainage system. Elevated strontium and
uranium anomalism was discovered in shallow
auger drilling that warranted further evaluation.
A series of deeper aircore drilling traverses
were completed to locate a source for this
near surface anomalism.
The aircore drilling program uncovered a
belt of previously unidentified greenstone
lithologies including basalts, dolerites and felsic
volcanic rocks over a 7km strike, masked by
lake sediment cover. Zones of hydrothermal
alteration were noted in the drilling and assay
Figure 6: Darlot project interpreted geology and drilling summary
results included supergene gold anomalism of 250ppb Au over 2m. The identified greenstone rocks are coincident with a
NNW trending structural corridor interpreted from the regional areomagnetics. Together with elevated gold anomalism this
area is considered highly prospective and second phase of aircore drilling will be completed early in 2008.
An additional tenement has been applied for to the SSE of E37/830, along strike of the discovered greenstones which is also
in an area of interpreted structural complexity.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
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Exploration Review continued
Crossland Hill and Gidgee Bore (E51/1096 and E51/1097) – Base Metals
The Crossland Hill and Gidgee Bore projects are located approximately 60kms northwest of Meekatharra. The area contains
extensive granitic and gneissic outcrop. Interpretation of the surface uranium channel radiometrics indicates a broad zone of
metasomatic alteration and elevated uranium anomalism across both projects.
A strong Pb-Zn-Ag anomaly was generated in a regional rock chip program completed in 2007. A detailed magnetic lag
(maglag) sampling program was completed over the anomaly during the year. Samples were collected at a sample spacing
of 200m by 50m and submitted for analysis. Results from this program are currently being interpreted.
Lake Irwin (E38/1784) – Uranium, Base Metals and Gold
The Lake Irwin project is located 95km north east of Leonora. Results from auger drilling completed last year showed
anomalism within the lake sediments of up to 1.7m at 485ppm Zn and 405ppm Cu at the bottom of a 3.2m auger hole. In
addition, a 400m wide gold anomaly of over 10ppb Au in windblown sands and lake sediments was identified along the
northern most section of drilling.
An aircore drill program was completed to test the northern extension of these anomalies. Aircore drilling defined a thick lake
sediment sequence over variably altered granite and gneissic lithologies. Results from this drilling are pending.
Adam Feil (Field Technician),
Glenn Budge (Field Manager) and
Sonja Storm (Graduate Geologist)
at the Andes prospect, Tchintaby Well
ENCOUNTER RESOURCES ANNUAL REPORT 2008
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Bangemall Basin
Encounter controls a large and strategic project position of over 2,000km2 in the prospective Proterozoic Bangemall Basin of
WA (see Figure 7).
Both the northern and southern margins of the Bangemall Basin have the potential to host unconformity related uranium
mineralisation where the Mesoproterozoic Bangemall Basin sediments overlie the Palaeoproterozoic Capricorn Orogen to the
south and Ashburton Basin to the north.
While the uranium potential of the basin remains untested, the compelling and immediate base metals prospectivity has been
the focus of exploration work by Encounter at the Tchintaby Well and Pingandy Creek projects.
Tchintaby Well (E52/1882 and ELA52/1959) – Base Metals and Uranium
The Tchintaby Well project is located 85km south of Paraburdoo and covers over 750km2 along the northern margin of the
Bangemall Basin. The project is considered prospective for high grade SEDEX zinc mineralisation, similar to the Century and
McArthur River deposits in Eastern Australia.
Drilling in the mid 1990s by CRA Exploration intersected an 8km by 5km area of extensive low grade Zn-Cu-Ag mineralisation.
Intersections within this mineralised area were in the order of 10-15m thickness, grading 0.5-1% Zn, 500-1000ppm Cu and
5-15g/t Ag.
Figure 7: Bangemall Basin leasing and simplified geology
ENCOUNTER RESOURCES ANNUAL REPORT 2008
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Exploration Review continued
Figure 8: Tchintaby Well gravity anomalies and historical drilling
Encounter completed 3D modelling of ground gravity data covering a 40km segment of the Flint Hill Lineament which
is interpreted to represent the location of a long lived basement structure and possible conduit for mineralising fluids. Six
areas of excess mass were defined in the Bouguer gravity adjacent to the lineament.
It appears that the low grade Zn-Cu-Ag mineralisation drilled by CRA at the Andes Prospect is associated with a cluster of gravity
features in the north of the project. Significantly, the holes drilled by CRA did not test the highest amplitude gravity features.
Plate modelling of two gravity features south of the Andes Prospect,
Laksa and Rendang (see Figure 8), resolved that the mass
anomalies sit directly downplunge of the known base metals
mineralisation at depths between 150m to 250m from surface. The
flat lying bodies have been modelled as stratabound features with
thicknesses and densities consistent with that of a large scale body
of SEDEX zinc mineralisation.
Pods of brecciated sediments were identified during field
reconnaissance along the south west margin of the Laksa anomaly.
The pods trend in a NNW orientation and appear associated with a
series of discrete lateritic platforms. It is interpreted that this area of
sedimentary breccias is proximal to a syn-sedimentary ‘Growth
Fault’, a key ingredient in the SEDEX deposit model.
Senior Exploration Geologist, Sarah Cooke,
at Mt Augustus
An initial drill program to test these targets commenced in
September 2008.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
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Glenn Budge (Field Manager) at the
Warne Valley Gossan, Pingandy Creek
Pingandy Creek (E08/1779, E08/1578 and
E08/1794) – Base Metals and Uranium
The Pingandy Creek project is located 60km west of the
Tchintaby Well project in a similar geological position.
The project was granted in September 2007 and
covers an area of 425km2.
Historical drilling in the area by Pasminco in the mid
1990s intersected extensive, shallow, low grade
Zn-Cu-Pb mineralisation within a black shale unit
named the Peebeezee Horizon. Historical intersections
from this unit include: 3m @ 1.25% Zn from 19m; 3m
@ 0.67% Zn from 21m; 6m @ 0.54% Zn from 23m.
In May 2008 Encounter completed a 400m by 200m
spaced ground gravity survey over a 15km segment of
the prospective Peebeezee Horizon. The survey area encompassed a number of historic mineralised holes with intersections
shallower than 25m from surface as well as 3kms of the down plunge extension of this target horizon.
The gravity survey defined five excess mass anomalies both down plunge and along strike from the Pasminco drilling
(see Figure 9). Four of the five (G1-G4) gravity anomalies were selected for follow up drill testing, defined as coherent,
multi-point anomalies located in close proximity to interpreted cross cutting structures. It is inferred that these interpreted
structures are the conduits for the mineralising base metal rich fluids.
A heritage survey was completed during June and cleared access tracks to the proposed drill sites at targets G1 to G4. Drilling
of the defined anomalies commenced in August 2008. Results of this program are pending.
Figure 9: Pingandy Creek gravity anomalies and historical drilling
ENCOUNTER RESOURCES ANNUAL REPORT 2008
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Exploration Review continued
Staten and Waldburg Range (E51/2031 and ELA51/2126) – Base Metals/Uranium/Gold
The Staten and Waldburg projects cover over 540km2 and are located near the southern margin of the Bangemall Basin,
60kms east of Mt Augustus. The tenements cover a series of historical BHP regional stream sediment gold anomalies and
an extensive uranium channel radiometric anomaly along the eastern flank of Staten Hill.
A preliminary rock chip sampling program was completed along 200m of the +10km long radiometric anomaly at Staten Hill.
An interesting multi-element U-Ag-Cu-Mo-Ni-Zn anomaly was generated within a highly altered and sheared siltstone. These
metal associations highlight a potentially extensive area of metal enrichment along a key stratigraphic horizon.
Over the coming 12 months Encounter intends to complete a regional ground gravity survey and surface geochemical
program once several key tenement applications are granted.
Wanna and Augustus JV (E09/1297, ELA09/1577 and E09/1268) – Base Metals and Uranium
The Wanna and Augustus projects cover an area of anomalous uranium and base metals geochemistry identified in the GSWA
regional stream sediment surveys. The projects are located along the southern margin of the Bangemall Basin and are
considered prospective for Broken Hill style base metals mineralisation and unconformity related uranium mineralisation.
A ground gravity survey was completed at the project in March 2008. This survey was designed to cover an area of anomalous
groundwater geochemistry surrounding the Koorabooka Spring, as well as a WNW trending magnetic lineament on which a
series of outcropping lead occurrences within dolomitic rocks have been identified (see Figure 10). The results of the survey
were very encouraging as a discrete Bouguer gravity anomaly was defined immediately upstream of Koorabooka Spring.
A regional lag sampling program was subsequently completed at 2km by 400m spacing over the project. The survey defined
a broad multi-metal (Pb, Ag, Mo, As) anomaly coincident with the gravity feature. Encounter entered into a joint venture
agreement with Dolphin Resources Pty Ltd to earn an 80% interest in the area on the south eastern corner of the Wanna
project. In addition a new application has been made over a 30km long corridor to the SSE of the Dolphin joint venture.
The Wanna and Augustus projects cover a 60km long segment of an interpreted major rift zone that has seen minimal
historical exploration. The region is covered by extensive areas of sheetwash making traditional exploration methods less
effective. Encounter’s exploration activities will significantly increase in the region in the next 12 months with the first drilling
campaign planned to commence in 2009.
Figure 10: Wanna project surface geology and exploration summary
ENCOUNTER RESOURCES ANNUAL REPORT 2008
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South West
Wongan Hills and Shackleton
(E70/2957 and E70/2958)
– Gold/Base Metals/Uranium
The Wongan Hills and Shackleton projects are located
in the wheatbelt of WA, within 200kms of Perth. The
projects were secured in March 2006 following the
release of the 9km spaced regional CRC-LEME laterite
geochemical dataset for the South West Yilgarn. These
two projects cover the standout laterite geochemical
uranium sample clusters within this extensive dataset.
Infill laterite sampling was completed at both
projects at 500m spacing along public roads and tracks to locate possible higher grade, discrete zones of geochemical
anomalism. In addition, rock chip sampling of granitic outcrops was completed.
Results from Wongan Hills confirmed the broad corridor of uranium anomalism seen in the CRC-LEME laterite dataset.
In addition, anomalous gold (>20ppb) was recognised in 30% of these laterite samples, with supporting tellurium
and molybdenum (see Figure 11). A series of drill sections are planned at Wongan Hills to further test these areas of
geochemical anomalism.
Laterite and rock chip multi-element assays results from Shackleton have recently been received and are being interpreted.
Figure 11: South West project location and Wongan Hills gold anomalism
ENCOUNTER RESOURCES ANNUAL REPORT 2008
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Exploration Review continued
Yeneena Joint Venture – Uranium and Base Metals
In September 2007, Encounter executed the Yeneena Joint Venture Agreement with Barrick Gold of Australia. The agreement
allows Encounter to earn a 75% interest in a 1,500km2 tenement package in the Paterson Province of WA. The project area
is considered highly prospective for unconformity related uranium mineralisation, SEDEX lead-zinc mineralisation and Nifty/Isa
style copper mineralisation.
The project area covers the northern margin of an anomalously thick sub-basin of Yeneena Group sedimentary rocks.
This margin replicates the geological setting at the southern margin of the sub-basin, 40kms to the south, where the Kintyre
uranium deposits are located (see Figure 12).
Figure 12: Yeneena project regional aeromagnetics and leasing plan
ENCOUNTER RESOURCES ANNUAL REPORT 2008
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The Kintyre uranium deposits lie near the unconformity between Lower Proterozoic metamorphic rocks of the Rudall Complex
and the overlying younger Proterozoic Yeneena Group sandstones. Such unconformities are critical in the formation of
‘unconformity style’ uranium ores like Kintyre and deposits in the Athabasca Basin of Canada.
At the Yeneena project, this unconformity is interpreted to be preserved beneath a thin veneer of Yeneena Group sandstones.
The area contains limited outcrop as it is largely covered with aeolian sand. The Yeneena Group sediments are also considered
prospective for base metals. The Nifty copper mine is hosted in the same stratigraphy 45km to the north west.
During the year, Encounter focused on collating historical exploration data. Encounter also completed multi-element re-
analysis of over 5,400 drill pulps from 18,000m of historical drilling completed by Barrick. Results show areas of uranium and
base metal anomalism one to two orders of magnitude above background. The location of a number of the recently defined
uranium and base metals targets can be seen on Figure 13.
In addition, a program of end-of-hole hyperspectral logging was completed on previously drilled aircore and RC chip trays
provided by Barrick. Results of this hyperspectral logging will be used in conjunction with the multi-element analysis to assist
in prospect prioritisation.
A Tempest© Airborne EM survey was completed along the northern margin of the Yeneena sub-basin late in the year. The
1,000 line km survey was designed to infill the regional Paterson EM survey currently being completed by Geoscience
Australia as part of the Federal Government’s Onshore Energy Initiative. Final results from the AEM survey will be received
following the release of the GA survey data.
Encounter plans to follow up co-incident structural, geochemical and/or geophysical anomalies with detailed ground
geophysical programs and drilling in the coming year.
Figure 13: Yeneena project uranium and base metals anomalies
ENCOUNTER RESOURCES ANNUAL REPORT 2008
15
Exploration Review continued
Hillview Qualifying Statement
The information in this report that relates to Exploration Results is
based on information compiled by Mr Peter Bewick who is a
Member of the Australasian Institute of Mining and Metallurgy. Mr
Bewick is a full time employee of Encounter Resources Ltd
(Encounter) and has sufficient experience which is relevant to
the style of mineralisation under consideration to qualify as a
Competent Person as defined in the 2004 Edition of the
‘Australian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’.
The Mineral Resource is based on information compiled by Mr
Neil Inwood who is employed by Coffey Mining Ltd. Mr Peter
Bewick from Encounter has consented to a joint sign off for the
Resource, Mr Bewick taking responsibility for the quality and
reliability of the drillhole database and Mr Inwood is responsible
for the grade estimate and classification of the resource. Messrs
Inwood and Bewick have sufficient experience which is relevant
to the style of mineralisation and type of deposit under
consideration and to the activity which they have undertaking
to qualify as a Competent Person as defined in the 2004 Edition
of the “Australasian Code for Reporting of Mineral Resources and
Ore Reserves”.
The information in this report that relates to gamma uranium
grades is based on information compiled by David Wilson BSc MSc
MAusIMM from 3D Exploration Ltd based in Western Australia.
Holes were logged with an Auslog A75 total count gamma tool.
The gamma tool was calibrated in Adelaide at the Department of
Water, Land and Biodiversity Conservation in calibration pits
constructed under the supervision of the CSIRO. These calibration
pits have been shown to provide calibration standards for drill hole
logging tools that are comparable to those at the DOE facility in
Grand Junction, Colorado USA. The gamma tool measures the
total gamma ray flux in the drill hole. Readings were averaged
over 2 centimetre intervals and the reading and depth recorded
on a portable computer. The gamma ray readings were then
converted to equivalent U3O8 readings by using the calibration
factors derived in the Adelaide calibration pits. These factors also
take into account differences in hole size and water content.
The gamma radiation used to calculate the equivalent U3O8
is predominately from the daughter products in the uranium
decay chain. When a deposit is in equilibrium, the measurement
of the gamma radiation from the daughter products is
representative of the uranium present. It takes approximately
2.4M years for the uranium decay series to reach equilibrium.
Thus, it is possible that these daughter products, such as radium,
may have moved away from the uranium or not yet have
achieved equilibrium if the deposit is younger than 2.4M years. In
these cases the measured gamma radiation will over or under
estimate the amount of uranium present. At Hillview, the
calculated U3O8 from the measured gamma radiation appears
to be under reporting, by 20%, the true grades when compared
to the ICP assays from 42 holes. Further studies on this apparent
disequilibrium are being conducted.
Mr Wilson is a full-time employee of 3D Exploration Pty Ltd, a
consultant to Encounter Resources Limited. Mr Wilson has
sufficient experience which is relevant to the style of mineralisation
and type of deposit under consideration and to the activity which
he is undertaking to qualify as a Competent Person as defined in
the 2004 Edition of the ‘Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves’.
Messrs Wilson, Inwood and Bewick consent to the inclusion in the
report of the matters based on the information compiled by them,
in the form and context in which it appears.
Bellah Bore East Qualifying Statement
The information in this report that relates to Exploration Results is
based on information compiled by Mr Peter Bewick who is a
Member of the Australasian Institute of Mining and Metallurgy.
Mr Bewick is a full time employee of Encounter Resources Ltd
(Encounter) and has sufficient experience which is relevant to
the style of mineralisation under consideration to qualify as a
Competent Person as defined in the 2004 Edition of the
‘Australian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’.
Resource numbers are rounded to reflect the accuracy of the
estimation process and as a consequence exhibit rounding errors.
Both Contained U3O8 tonnes and Contained U3O8 pounds are
based on contained metal content and at this stage do not
consider any mining, metallurgical or economic parameters.
The estimate is based on a cut off of 100ppm U3O8 over a
minimum downhole distance of 1m. Shallow aircore drilling has
been completed on a nominal 150m by 150m grid. All grade
values used in the calculation are based on chemical analysis of
representative drill samples. A specific gravity of 2.1 was used in
the calculation which is an assumed figure based on a literature
search of similar deposits found in Western Australia and Namibia.
The mineralised zone varies in vertical thickness from 1m to 6m.
The main uranium mineral identified in drilling is carnotite which
is a common mineral found in Surficial style deposit in Western
Australia. All mineralised intervals in the modelled area are within
10m of surface and, therefore, are potentially easily mined.
Additional drilling is required determine the extent of the higher
the mineralisation centred on EYN064
grade core of
(3m@781ppm U3O8 including 1m@2111ppm U3O8). The assay
interval of 1m@2111ppm U3O8 in EYN064 was treated as an
outlier in the resource model and cut to 500ppm U3O8. If further
drilling can extend the high grade area it is anticipated that the
resource grade will increase.
Mr Bewick consents to the inclusion in the report of the matters
based on the information compiled by him, in the form and
context in which it appears.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
16
Summary of Tenements
Lease
Lease Name
Project Name
Area Km2
Title Holder
Encounter Interest
E08/1578
E08/1779
E08/1794
E09/1297
E09/1268
ELA09/1577
E52/1882
ELA52/1959
ELA52/2077
E52/2031
ELA52/2126
ELA09/1561
E09/1197
E09/1296
E53/1010
E53/1232
E29/577
ELA37/877
E29/587
E30/299
E29/674
ELA29/675
E51/1096
E51/1097
E51/1127
E51/1137
E37/830
ELA37/978
E38/1784
E45/2500
E45/2501
E45/2502
E45/2503
E45/2561
E45/2657
E45/2658
ELA45/2805
ELA45/2806
E70/2957
E70/2958
E53/1154
E53/1155
E53/1156
E53/1157
E53/1158
E36/540
E36/541
E36/542
Pingandy Option
Pingandy Creek
Table Top
Wanna
Augustus JV
Austustus
Tchintaby
Tchintaby South
Turkey Creek
Waldburg Range
Statan
Isabella
Minneritchie Well
Stone Tank Well
Wiluna South
Wiluna South
Lakeview
Lakeview East
McPherson’s Bore
Walling Rock
Perrinvale Nth
Perrinvale Sth
Gidgee Bore
Crossland Hill
Hillview
Yalgar
Lake Darlot
Darlot East
Lake Irwin
Yeneena
Yeneena
Yeneena
Yeneena
Yeneena
Yeneena
Yeneena
Yeneena
Yeneena
Shackleton
Wongan Hills
Suprise Bore
Rubble Bore
Mt Merewether
Limestone Well
Bitter Bore
Easter Bore
Altona Bore
Black Tank Well
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Bangemall Basin
Gascoyne
Gascoyne
Lake Way Sth JV
Lake Way Sth JV
Leonora Regional
Leonora Regional
Leonora Regional
Leonora Regional
Leonora Regional
Leonora Regional
Meekatharra
Meekatharra
Meekatharra
Meekatharra
Melrose
Melrose
Melrose
Paterson JV
Paterson JV
Paterson JV
Paterson JV
Paterson JV
Paterson JV
Paterson JV
Paterson JV
Paterson JV
SW Regional
SW Regional
Yeelirrie Nth
Yeelirrie Nth
Yeelirrie Nth
Yeelirrie Nth
Yeelirrie Nth
Yeelirrie Sth
Yeelirrie Sth
Yeelirrie Sth
73.9
332.8
15.7
354.4
Callum Baxter
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
62 Dolphin Resource Pty Ltd
239
172.5
589.1
191.1
224
312.6
112
52.2
100.4
50.7
66.8
126.4
87.3
123.4
62.8
78.5
116
89.3
30.8
202.1
216.1
164
212
109
163.4
82.9
216.3
155.8
178
222.8
222.6
63.7
209.7
583
589.6
44.1
35.2
70.4
9.8
10.5
201.1
176
213.5
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Avoca Resources Ltd
Avoca Resources Ltd
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Barrick Gold of Australia
Barrick Gold of Australia
Barrick Gold of Australia
Barrick Gold of Australia
Barrick Gold of Australia
Barrick Gold of Australia
Barrick Gold of Australia
Barrick Gold of Australia
Barrick Gold of Australia
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Encounter Resources Limited
Option to earn 100%
80%
100%
80%
earning 80%
100%
80%
80%
80%
80%
100%
100%
80%
80%
60% of Uranium Rights
60% of Uranium Rights
80%
80%
80%
80%
100%
100%
80%
80%
80%
80%
80%
100%
80%
earning 75%
earning 75%
earning 75%
earning 75%
earning 75%
earning 75%
earning 75%
earning 75%
earning 75%
80%
80%
80%
80%
80%
80%
80%
80%
80%
80%
ENCOUNTER RESOURCES ANNUAL REPORT 2008
17
Corporate Governance Statement
Introduction
Since the introduction of the ASX Corporate Governance
Explanation for Departures from
Best Practice Recommendations
Council’s Principles of Good Corporate Governance and
During the Company’s 2007/2008 financial year the
Best Practice Recommendations (“ASX Guidelines” or
Company has complied with the Corporate Governance
“the Recommendations”), Encounter Resources Limited
Principles and
the corresponding Best Practice
(“Company”) has made it a priority to adopt systems of
Recommendations as published by the ASX Corporate
control and accountability as the basis for the administration
Governance Council (“Corporate Governance Principles
of corporate governance. Some of these policies and
and Recommendations”) and have early adopted the
procedures are summarised in this report. Commensurate
revised Principles and Recommendations taking effect from
with the spirit of the ASX Guidelines, the Company has
followed each Recommendation where the Board has
reporting periods beginning on or after 1 January 2008.
Significant policies and details of any significant deviations
considered the Recommendation to be an appropriate
from the principles are specified below.
benchmark for corporate governance practices, taking
into account factors such as the size of the Company, the
Board, resources available and activities of the Company.
Where, after due consideration, the Company’s corporate
governance practices depart from the Recommendations,
the Board has offered full disclosure of the nature of, and
reason for, the adoption of its own practice.
The Company has adopted systems of control and
accountability as the basis for the administration of corporate
governance. The Board of the Company is committed to
administering the policies and procedures with openness
and integrity, pursuing the true spirit of corporate governance
commensurate with the Company’s needs.
Further information about the Company’s corporate
governance practices is set out on the Company’s website at
www.enrl.com.au. In accordance with the recommendations
of the ASX, information published on the Company’s
website includes:
Board Charter
Nomination Committee Charter
Remuneration Committee Charter
Code of Conduct
Policy and Procedure for Selection and
Appointment of New Directors
Corporate Governance Council
Recommendation 1
Lay Solid Foundations for Management
and Oversight
Role of the Board of Directors
The role of the Board is to increase shareholder value within
an appropriate framework which safeguards the rights and
interests of the Company’s shareholders and ensure the
Company is properly managed.
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
monitoring the performance of Directors and executives. The
Board relies on senior executives to assist it in approving and
monitoring expenditure, ensuring the integrity of internal
controls and management information systems and
monitoring and approving financial and other reporting.
In broad terms, the Board Charter clarifies the respective
roles of the Board and senior management and assists in
decision making processes.
Board Processes
An agenda for the meetings has been determined to
ensure certain standing information is addressed and other
Summary of Policy for Trading in Company Securities
items which are relevant to reporting deadlines and or
Summary of Compliance Procedures
regular review are scheduled when appropriate. The
Procedure for the Selection, Appointment
agenda is regularly reviewed by the Chairman, the
and Rotation of External Auditor
Shareholder Communication Strategy
Summary of Company’s Risk Management Policy
Managing Director and the Company Secretary.
Evaluation of Senior Executive Performance
The Company has not complied with recommendation 1.2.
Due to the early stage of development of the Company it
ENCOUNTER RESOURCES ANNUAL REPORT 2008
18
is difficult for quantitative measures of performance to be
Independent Chairman
established. As the Company progresses its projects, the
The Chairman is not considered to be an independent
board
intends
to establish appropriate evaluation
director and as such Recommendation 2.2 has not been
procedures. The Chairman assesses the performance of the
complied with. However, the Board believes that Mr
Executive Directors on an informal basis.
Chapman is the most appropriate person for the position as
Corporate Governance Council
Recommendation 2
Structure the Board to Add Value
Board Composition
Chairman because of his industry experience and proven
track record as a public company director.
Roles of Chairman and Chief Executive Officer
The roles of Chairman and Chief Executive Officer are
exercised by different individuals, and as such complies
The Constitution of the Company provides that the number
with Recommendation 2.3
of Directors shall not be less than three. There is no
requirement for any share holding qualification.
Nomination Committee
The Board does not have a separate Nomination Committee
The membership of the Board, its activities and
comprising of a majority of independent Directors and as
composition is subject to periodic review. The criteria for
such does not comply with Recommendation 2.4. The
determining the identification and appointment of a
selection and appointment process for Directors is carried
suitable candidate for the Board shall include the quality of
out by the full Board. The Board considers that given the
the individual, background of experience and achievement,
importance of Board composition it is appropriate that all
compatibility with other Board members, credibility within
members of the Board partake in such decision making. The
the scope of activities of the Company, intellectual ability to
Company adopted the Nomination Committee Charter on
contribute to Board duties and physical ability to undertake
8 February 2006.
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 comprised of four members, two Non-
Executive and two Executive. The Non-Executive Directors
are Mr Paul Chapman (Chairman) and Dr Jonathon
Hronsky. The skills, experience and expertise of all Directors
is set out in the Directors’ Report on page 22.
Evaluation of Board Performance
The Company does not have a formal process for the
evaluation of the performance of the Board and as such
does not comply with Recommendation 2.5. The Board is
of the opinion that the competitive environment in which
the Company operates will effectively provide a measure of
the performance of the Directors, in addition the Chairman
assesses the performance of the Board, individual directors
and key executives on an informal basis.
Education
The Board has assessed the independence of its non
All Directors are encouraged to attend professional
executive directors according to the definition contained
education courses relevant to their roles.
within the ASX Corporate Governance Guidelines and has
concluded that one of the current Non-Executive Directors,
Mr Chapman does not meet
the
recommended
independence criteria, by virtue of his substantial
shareholding in the Company. As a result the Company
does not comply with Recommendation 2.1, 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.
Independent Professional Advice and
Access to Information
Each Director has the right to access all relevant information
in respect of the Company and to make appropriate
enquiries of senior management. Each Director has the
right to seek independent professional advice at the
Company’s expense, subject to the prior approval of the
Chairman, which shall not be unreasonably withheld.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
19
Corporate Governance Statement continued
Corporate Governance Council
Recommendation 3
Promote Ethical and Responsible Decision Making
The Board actively promotes ethical and responsible
decision making.
Code of Conduct
In the absence of a formal audit committee the Non-
executive Directors of the Company are available for
correspondence with the auditors of the Company.
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
The Board has adopted a Code of Conduct that applies to
Managing Director who reports to the Board at the
all employees, executives and Directors of the Company,
scheduled Board meetings.
and as such complies with Recommendation 3.1. This
Code addresses expectations for conduct in the following
areas in accordance with legal requirements and agreed
Corporate Governance Council
Recommendation 5
ethical standards. A copy of the Code is available on the
Make Timely and balanced disclosure
Company’s website.
Security Trading Policy
Continuous Disclosure
The Board is committed to the promotion of investor
The Board has committed to ensuring that the Company, its
confidence by providing full and timely information to all
Directors and executives comply with their legal obligations as
well as conducting their business in a transparent and ethical
manner. 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,
and as such complies with Recommendation 3.2. The policy
security holders and market participants about the Company’s
activities and to comply with the continuous disclosure
requirements contained in the Corporations Act 2001 and
the Australian Securities Exchange’s Listing Rules. The
Company has established written policies and procedures,
designed to ensure compliance with the ASX Listing Rule
Requirements, in accordance with Recommendation 5.1.
also provides that the acknowledgement of the Chairman
Continuous disclosure is discussed at all regular Board
should be obtained prior to trading. A summary of the Policy
meetings and on an ongoing basis the Board ensures that
is available on the Company’s website.
all activities are reviewed with a view to the necessity for
Corporate Governance Council
Recommendation 4
Safeguarding Integrity in Financial Reporting
Audit Committee
The Board does not have a separate Audit Committee with
a composition as suggested by Recommendations 4.1, 4.2
and 4.3. 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. 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 the Chairman meets with them
during the year to review findings and assist with Board
recommendations.
disclosure to security holders.
In accordance with ASX Listing Rules the Company Secretary
is appointed as the Company’s disclosure officer.
Corporate Governance Council
Recommendation 6
Respect the Rights of Shareholders
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, in accordance with Recommendation 6.1. A copy
of the policy is available on the Company’s website.
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 on the Company web site at www.enrl.com.au.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
20
Shareholders are able to pose questions on the audit
process and the financial statements directly to the
Corporate Governance Council
Recommendation 8
independent auditor who attends the Company Annual
General Meeting for that purpose.
Corporate Governance Council
Recommendation 7
Recognise and manage risk
Risk management
Remunerate Fairly and Responsibly
Remuneration Committee
The Board does not have a separate Remuneration
Committee and as such does not comply with
Recommendation 8.1. Remuneration arrangements for
Directors are determined by the full Board. The Board is
also
responsible
for setting performance criteria,
The Board’s has adopted a risk management policy that
performance monitors,
share option
schemes,
sets out a framework for a system of risk management and
superannuation, termination and retirement entitlements,
internal compliance and control, whereby the Board
and professional indemnity and liability insurance cover.
delegates day-to-day management of risk to the Managing
Director, therefore complying with Recommendation 7.1.
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.
Risk Reporting
As the Board has responsibility for the monitoring of risk
management it has not required a formal report regarding
the material risks and whether those risks are managed
effectively therefore not complying with Recommendation
7.2. The Board believes that the Company is not currently
considered to be of a size, nor its affairs of such
complexity to justify the implementation of a formal system
for identifying, assessing monitoring and managing risk
in the Company. The Company does not have an internal
audit function.
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 and have been prepared in accordance with Australian
Accounting Standards and the Corporation Act. The Board
also requires that the Managing Director and Company
Secretary provide sufficient assurance that the declaration is
founded on a sound system of risk management and internal
control, and that the system is working effectively.
The declarations have been received by the Board, in
accordance with Recommendation 7.3.
The Board considers that the Company is effectively served
by the full Board acting as a whole in remuneration matters,
and ensures that all matters of remuneration continue
to be decided upon in accordance with Corporations Act
requirements, by ensuring that no Director participates in
any deliberations regarding their own remuneration or
related issues.
Distinguish Between Executive and
Non-Executive Remuneration
The Company does distinguish between the remuneration
policies of its Executive and Non-Executive Directors in
accordance with Recommendation 8.2.
Executive Directors receive salary packages which may
include performance based components, designed to
reward and motivate, including the granting of share
options, subject to shareholder approval and vesting
conditions relating to continuity of engagement.
Non-Executive Directors receive fees agreed on an annual
basis by the Board, within total Non-Executive remuneration
limits voted upon by shareholders at Annual General
Meetings. During the financial year one Non-Executive
Director received share options as remuneration, which
were subject to shareholder approval and a vesting
condition based upon continuity of engagement. The grant
of options was deemed appropriate by the Board to provide
an incentive and to reward the Director.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
21
Directors’ Report
The Directors present their report on Encounter Resources
Limited (the Company) and the entities it controlled at
the end of, and during the year ended 30 June 2008
(the Group).
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 (now Minara Resources Limited) in
2001 and was 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. Mr Chapman is
currently a director of Albidon Limited, Silver Lake Resources
Limited and Rex Minerals Limited.
Will Robinson – B.Comm, MAusIMM
Managing Director (Executive) appointed 30 June 2004
Mr Robinson is a resources industry commercial and
finance specialist with over fourteen years experience in
commercial management, transaction structuring and
negotiation, business strategy development and London
Metals Exchange metals trading. Mr Robinson held various
senior commercial positions with WMC in Australia and
North America from 1994 to 2003. During his time with
WMC he was instrumental in the success of the Kambalda
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.
Peter Bewick – B.Eng (Hons), MAusIMM
Exploration Director (Executive) appointed 7 October 2005
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.
Jonathan Hronsky – BAppSci, PhD, MAusIMM, FSEG
Non-executive director appointed 10 May 2007
Dr Jon Hronsky has more than twenty five years of
experience in the mineral exploration industry, primarily
focused on project generation, technical innovation and
exploration strategy development. Dr Hronsky has particular
expertise in targeting for nickel sulfide deposits, but has
worked across a diverse range of commodities. His work led
to the discovery of the West Musgrave nickel sulfide
province in Western Australia. Dr Hronsky was most recently
Manager-Strategy & Generative Services for BHP Billiton
Mineral Exploration. Prior to that, he was Global Geoscience
Leader for WMC Resources Ltd.
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.
He is currently a partner in an advisory firm which
specialises in the provision of company secretarial services
to ASX listed entities.
Directors’ Interests
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
J Hronsky
Directors’ Interests
in Ordinary Shares
Directors’ Interests
in Unlisted Options
4,747,400
21,846,900
4,725,000
–
–
–
800,000
500,000
Included in the Directors’ interests in Unlisted Options, there
are no options that are vested and exercisable as at the
date of signing this report.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
22
Directors’ Meetings
The number of meetings of the Company’s Directors held
during the year ended 30 June 2008, and the number of
meetings attended by each Director are as follows:
Director
P Chapman
W Robinson
P Bewick
J Hronsky
Board of Directors’ Meetings
Held
Attended
9
9
9
9
9
9
9
9
Principal Activities
The principal activities of the Company during the financial
year was mineral exploration in Western Australia.
There were no significant changes in these activities during
the financial year.
Results of Operations
The consolidated net loss after income tax for the financial
year was $855,306 (2007: $592,664).
Included in the consolidated loss for the current year is a
write-off of deferred exploration expenditure totalling
$339,998 (2007: $268,472).
Dividends
No dividend has been paid since the end of the previous
financial year and no dividend is recommended for the
current year.
Review of Activities
Exploration
The review of exploration activities has been summarised
by principal areas of exploration, as follows:
1. Yilgarn
Hillview
Multiple phases of aircore drilling were completed at the
Hillview project during the year. The drilling successfully
outlined a laterally continuous and coherent envelope of
near surface mineralisation. Drilling was completed to a
nominal 400m by 100m spacing comprising of a total of
133 vertical aircore holes.
Coffey Mining, independent consultants engaged by
Encounter, estimated an initial Inferred Resource above a
100ppm U3O8 lower cut off at Hillview of 27.6 million
tonnes, averaging 174ppm U3O8 for a contained 10.6
million pounds of U3O8 (or approximately 4,800 tonnes
contained U3O8). The Inferred Resource is reported in
accordance with the JORC code (2004) and guidelines
(see ASX release dated 10 July 2008).
Yeelirrie Channel
Resource modeling of the Bellah Bore East project was
completed during the year defined an Inferred Resource of
350,000 tonnes averaging 210ppm U3O8 for 160,000lb of
U3O8, estimated in accordance with the JORC Code (2004)
(see ASX release dated 31 January 2008).
Lake Way South
An estimated 200m of the Centipede deposit extends onto
Encounter tenure. Historical and recent drilling data from
within Encounter’s Lake Way South tenements has been
compiled and a resource estimate for the Centipede
Extension is in progress.
McPherson’s Bore
During 2007 drilling defined near surface uranium
mineralisation in lake clays which extended over 1.7 kms
of strike. Shallow trenching across higher grade drill
intersections completed during the year indicated that
the uranium mineralisation is concentrated within 20cm
from surface.
Lakeview
A single diamond drill hole was completed at the Lakeview
project during this year into one of the two sub-vertical
pipe-like modeled
intrusions. Drilling successfully
intersected a volcanic breccia with Kimberlitic affinities. The
mineral separation and micro diamond analyses did not
recover any micro diamonds from the samples.
Lake Darlot
The aircore drilling program uncovered a belt of previously
unidentified greenstone lithologies including basalts,
dolerites and felsic volcanic rocks over a 7km strike, masked
by lake sediment cover. Zones of hydrothermal alteration
were noted in the drilling and assay results included
supergene gold anomalism of 250ppb Au over 2m.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
23
Directors’ Report continued
Review of Activities continued
4. Paterson Province
Exploration continued
2. Bangemall Basin
Tchintaby Well
Encounter completed 3D modeling of ground gravity data
and defined six areas of excess mass Bouguer gravity
adjacent to the Flint Hill Lineament. Plate modeling of two
of the gravity features, Laksa and Randang, resolved that
the mass anomalies sit directly downplunge of the known
base metals mineralisation at depths between 150m to
250m from surface. The flat lying bodies have been
modelled as stratabound features with thicknesses and
densities consistent with that of a large scale body of SEDEX
zinc mineralisation.
Pingandy Creek
In May 2008 Encounter completed a 400m by 200m
spaced ground survey gravity over a 15km segment of the
prospective Peebeezee Horizon. The gravity survey defined
five excess mass anomalies both downplunge and along
strike from historical Pasminco drilling. Four of the five
gravity anomalies were selected for follow up drill testing,
defined as coherent, multi-point anomalies located in close
proximity to interpreted cross cutting structures.
Wanna
A ground gravity survey was completed at the project in
March 2008. This survey was designed to test an area of
anomalous groundwater geochemistry surrounding the
Koorabooka Spring, as well as a WNW trending magnetic
lineament on which a series of outcropping lead
occurrences within dolomitic rocks have been identified.
The results of the survey were very encouraging as a
discrete bouguer gravity anomaly was defined immediately
upstream of Koorabooka Spring. A regional LAG sampling
program was then completed at 2km by 400m spacing
over the project.
3. South West
Wongan Hills, Shackleton
Infill laterite sampling was completed at both projects at
500m spacing along public roads and tracks to locate
possible higher grade, discrete zones of geochemical
anomalism.
Results from Wongan Hills confirmed the broad corridor of
uranium anomalism seen in the CRC-LEME laterite dataset.
In addition, anomalous gold (>20ppb) was recognised in
30% of these laterite samples.
Yeneena Joint Venture
(Encounter earning 75% from Barrick)
In September 2007, Encounter executed the Yeneena Joint
Venture Agreement with Barrick Gold of Australia. The
agreement allows Encounter to earn a 75% interest in a
1500km2 tenement package in the Paterson Province of WA.
During the year, Encounter focused on collating historical
exploration data into the database and evaluating that
data. Encounter also completed multi-element re-analysis
of over 5400 drill pulps from 18,000m of historical drilling
completed by Barrick. Results show areas of uranium and
base metal anomalism in the regolith one to two orders of
magnitude above background.
A Tempest© Airborne EM survey was completed along the
northern margin of the Yeneena sub-basin late in the year.
The information in this report that relates to Exploration Results is
based on information compiled by Mr Peter Bewick who is a
Member of the Australasian Institute of Mining and Metallurgy.
Mr Bewick is a full time employee of Encounter Resources Ltd
and has sufficient experience which is relevant to the style of
mineralisation under consideration to qualify as a Competent
Person as defined in the 2004 Edition of the ‘Australian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves’. Mr Bewick consents to the inclusion in the report of
the matters based on the information compiled by him, in the
form and context in which it appears.
Financial Position
At the end of the financial year the Group had $4,701,043
(2007: $6,775,145) in cash and at call deposits. Capitalised
mineral exploration and evaluation expenditure
is
$3,049,420 (2007: $1,420,229). Mineral exploration and
evaluation expenditure during the year for the Group was
$1,963,420 (2007: $1,437,879).
Expenditure was principally focused on the exploration for
uranium and base metals in Western Australia.
Significant Changes in the State of Affairs
There have been no significant changes in the state of
affairs of the Company and Group during or since the end
of the financial year.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
24
Options Over Unissued Capital
Unlisted Options
During the financial year the Company granted 1,550,000 unlisted options over unissued shares to employees and Directors
of the Company.
No ordinary shares were issued during the financial year on the exercise of options.
Since the end of the financial year 350,000* unlisted options have been issued to employees of the Company. No options
have been exercised since the end of the financial year.
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 (i)
250,000 (i)
50,000 (i)
50,000 (i)
150,000 (ii)
500,000 (ii)
400,000 (ii)
400,000 (iii)
350,000* (iv)
20 cents
45 cents
52.5 cents
57 cents
50 cents
50 cents
53.5 cents
55 cents
70 cents
30 cents
23 March 2006
15 May 2006
7 December 2006
6 July 2007
9 August 2007
11 December 2007
11 December 2007
11 December 2007
11 December 2007
1 July 2008
23 March 2011
15 May 2011
7 December 2011
6 July 2012
9 August 2012
30 November 2012
30 November 2012
30 November 2012
30 November 2012
30 June 2013
(i) Unlisted options are vested and exercisable at the reporting date;
(ii) Unlisted options subject to a 12 month vesting period, exercisable after 11 December 2008;
(iii) Unlisted options subject to a 24 month vesting period, exercisable after 11 December 2009;
(iv) Unlisted options subject to a 12 month vesting period, exercisable after 1 July 2009.
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
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 Group, the results of those operations or the state of affairs of the Group in subsequent financial years.
Likely Developments and Expected Results of Operations
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 Group and is dependent upon the results of the future
exploration and evaluation.
Environmental Regulation and Performance
The Group 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.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
25
Directors’ Report continued
Remuneration Report (Audited)
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 26 November 2007, whereby it is
not to exceed $200,000 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.
Details of Remuneration for Directors and Executive Officers
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:
2008
Directors
P Chapman
W Robinson
P Bewick (i)
J Hronsky (ii)
Total
Base
Emolument
$
Superannuation
Contributions
$
Other
Benefits
$
30,000
205,000
187,500
40,000
462,500
2,700
18,319
16,875
3,600
41,494
(i) Options represent 44.2% of P Bewick remuneration for the financial year.
(ii) Options represent 71.9% of J Hronsky remuneration for the financial year.
2007
P Chapman
W Robinson
P Bewick
J Hronsky
Total
20,000
188,750
170,833
5,591
385,174
1,800
16,988
15,375
503
34,666
Value of
Options
$
–
–
162,160
111,800
273,960
–
–
–
–
–
Total
$
32,700
223,319
366,535
155,400
777,954
21,800
205,738
186,208
6,094
419,840
–
–
–
–
–
–
–
–
–
–
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 2008
26
Remuneration Report (Audited) continued
Unlisted Options
The following 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:
Directors
Grant Date
Number
of Options
Value
of Options
(Cents)
Total Value of
Options Granted
($)
Expiry Date
Exercise Price
(Cents)
P Bewick
P Bewick
J Hronsky
11 December 2007
11 December 2007
11 December 2007
400,000
400,000
500,000
21.85
18.69
22.36
87,400
74,760
111,800
30 November 2012
30 November 2012
30 November 2012
55 cents
70 cents
53.5 cents
The fair value of options issued as remuneration is allocated to the relevant vesting period of the options.
The options were provided at no cost to the recipients.
No options were exercised by Key Management Personnel during or since the end of the financial year.
Officer’s Indemnities and Insurance
During the year the Company paid an insurance premium to insure certain officers of the Company. The officers of the
Company covered by the insurance policy include the Directors named in this report.
The Directors and Officers Liability insurance provides cover against all costs and expenses that may be incurred in defending
civil or criminal proceedings that fall within the scope of the indemnity and that may be brought against the officers in their
capacity as officers of the Company. The insurance policy does not contain details of the premium paid in respect of individual
officers of the 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 Group, or to intervene in any proceedings to which the Company or Group is a party, for the purpose of
taking responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company or Group with leave of the Court under section
237 of the Corporations Act 2001.
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of the Company
support and have adhered to the principles of corporate governance. The Company’s corporate governance statement is
contained in the Annual Report.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
27
Directors’ Report continued
Non-audit Services
During the year WHK Horwath the Company’s auditor, has not performed any other services in addition to their statutory duties.
Total remuneration paid to auditors during the financial year:
Audit and review of the Company’s financial statements
Taxation services
Total
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
25,500
–
17,460
4,250
25,500
–
17,460
4,250
25,500
21,710
25,500
21,710
The board considers any non-audit services provided during the year by the auditor and satisfies itself that the provision of
any non-audit services during the year by the auditor is compatible with, and does not compromise, the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
■
■
all non-audit services are 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
APES 110 Code of Ethics for Professional Accountants, as they do not involve reviewing or auditing the auditor’s own
work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or
jointly sharing risks and rewards.
Auditor’s Independence Declaration
A copy of the Auditor’s Independence Declaration as required under Section 307C of the Corporations Act is set out on
page 29.
This report is made in accordance with a resolution of the Directors.
DATED at Perth this 25th day of September 2008.
W Robinson
Director
ENCOUNTER RESOURCES ANNUAL REPORT 2008
28
ENCOUNTER RESOURCES ANNUAL REPORT 2008
29
Consolidated Income Statement
For the financial year ended 30 June 2008
Revenue
Total revenue
Note
5
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
407,287
275,313
407,287
275,313
407,287
275,313
407,287
275,313
Employee expenses
(844,363)
(584,551)
(844,363)
(584,551)
Employee expenses recharged to exploration
497,464
443,416
497,464
443,416
Equity based remuneration expense
(181,721)
(46,294)
(181,721)
(46,294)
Non-executive Director’s fees
Corporate advisory expenses
Operating lease expenses
Depreciation expense
Corporate expenses
(70,000)
(25,591)
(70,000)
(25,591)
–
(90,000)
–
(90,000)
(44,069)
(25,827)
(44,069)
(25,827)
11
(10,087)
(7,529)
(10,087)
(7,529)
(107,376)
(81,757)
(107,376)
(81,757)
Joint venture administration costs recharged
65,566
–
65,566
–
Other expenses from ordinary activities
(228,009)
(181,372)
(228,009)
(181,372)
Exploration costs written off and expensed
(339,998)
(268,472)
(339,998)
(268,472)
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
6
7
17
28
28
(855,306)
(592,664)
(855,306)
(592,664)
–
–
–
–
(855,306)
(592,664)
(855,306)
(592,664)
Cents
Cents
(1.25)
(1.25)
(1.0)
(1.0)
The above consolidated income statement should be read in conjunction with the accompanying notes.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
30
Consolidated Balance Sheet
As at 30 June 2008
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Investment in controlled entities
Loans to controlled entities
Property, plant and equipment
Capitalised mineral exploration and
evaluation expenditure
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
4,701,043
6,775,145
4,701,041
6,775,145
114,066
63,010
142,123
149,226
79,945
63,010
142,123
149,226
4,878,119
7,066,494
4,843,996
7,066,494
–
–
–
–
298,163
92,318
2
375,334
298,163
–
–
92,318
3,049,148
1,420,229
2,707,935
1,420,229
Note
8
9(a)
9(b)
10(a)
10(b)
11
12
Total non-current assets
3,347,311
1,512,547
3,381,434
1,512,547
Total assets
8,225,430
8,579,041
8,225,430
8,579,041
Current liabilities
Trade and other payables
Employee benefits
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Equity remuneration reserve
Total equity
14(a)
14(b)
366,184
50,806
57,216
39,800
366,184
50,806
57,216
39,800
416,990
97,016
416,990
97,016
416,990
97,016
416,990
97,016
7,808,440
8,482,025
7,808,440
8,482,025
15
17
17
9,443,330
9,443,330
9,443,330
9,443,330
(1,865,530)
230,640
(1,010,224)
48,919
(1,865,530)
230,640
(1,010,224)
48,919
7,808,440
8,482,025
7,808,440
8,482,025
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
31
Consolidated Statement of Changes in Equity
For the financial year ended 30 June 2008
Consolidated
Company
Note
2008
$
2007
$
2008
$
2007
$
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
17
17
15
15
8,482,025
4,837,419
8,482,025
4,837,419
(855,306)
(592,664)
(855,306)
(592,664)
181,721
46,294
181,721
46,294
–
–
4,300,000
(109,024)
–
–
4,300,000
(109,024)
Total equity at the end of the financial year
7,808,440
8,482,025
7,808,440
8,482,025
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
32
Consolidated Cash Flow Statement
For the financial year ended 30 June 2008
Consolidated
Company
Note
2008
$
2007
$
2008
$
2007
$
Cash flows from operating activities
Interest received
Payments to suppliers and employees
416,325
282,521
416,325
282,521
(440,107)
(456,974)
(440,107)
(456,974)
Net cash used in operating activities
27
(23,782)
(174,453)
(23,782)
(174,453)
Cash flows from investing activities
Payments for exploration and evaluation
Payments for plant and equipment
(1,796,706)
(1,411,840)
(1,421,372)
(1,411,840)
(253,614)
(38,771)
(253,614)
(38,771)
Net cash used in investing activities
(2,050,320)
(1,450,611)
(1,674,986)
(1,450,611)
Cash flows from financing activities
Expenditure incurred on behalf of
subsidiary company
Proceeds from the issue of shares
Payments for transaction costs relating
to share issues
Net cash provided by financing activities
–
–
–
–
–
(375,334)
–
4,300,000
(109,024)
–
–
4,300,000
(109,024)
4,190,976
(375,334)
4,190,976
Net increase/(decrease) in cash held
(2,074,102)
2,565,912
(2,074,102)
2,565,912
Cash at the beginning of the financial year
6,775,145
4,209,233
6,775,145
4,209,233
Cash at the end of the financial year
8(a)
4,701,043
6,775,145
4,701,043
6,775,145
The above consolidated cash flow statement should be read in conjunction with the accompanying notes.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
33
Notes to the Financial Statements
For the financial year ended 30 June 2008
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 (“Company”) and the consolidated entity consisting of
Encounter Resources Limited and its subsidiaries (“Group”).
(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.
The financial report is presented in Australian dollars and all values are rounded to the nearest dollar.
The financial report of the Group was authorised for issue in accordance with a resolution of Directors on 25 September 2008.
Statement of Compliance
The consolidated 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.
Early adoption of standards
The following standards, amendments to standards and interpretations have been identified as those which may impact
the group in the period of initial application. They are available for early adoption at 30 June 2008, but have not been
applied in preparing this report:
Reference
Title
Impact of Amendment
Interpretation 4
(revised)
Determining Whether an
Arrangement Contains
a Lease
Clarifies the recognition of
infrastructure as financial asset
and/or intangible asset.
AASB 8 &
AASB 2007-3
Operating Segments and
Consequential Amendments
to Other Standards
Replacement standard to AASB
114, which adopts a management
reporting approach to segment
reporting.
AASB 123
(revised) and
AASB 2007-6
Borrowing Costs and
Consequential Amendments
to Other Standards
Amendments to AASB 123 require
borrowing costs associated with
qualifying assets to be capitalised.
AASB 101
(revised),
AASB 2007-8 &
AASB 2007-10
Presentation of Financial
Statements and
Consequential Amendments
to Other Standards
AASB 2008-1
Amendments to Australian
Accounting Standards –
Share Based Payments:
Vesting Conditions and
Cancellations
Introduces a statement of
comprehensive income, changes
to presentation of statement of
changes in equity, reclassifications
and dividends, and changes to the
titles of financial statements.
Amendments clarifying
the definition of vesting conditions,
introducing non-vesting conditions
and prescription of accounting
treatment where an award is
cancelled due to non-vesting
condition not satisfied.
Application Date
of Standard
Application
Date for Group
1 January 2008
1 July 2008
1 January 2009
1 July 2009
1 January 2009
1 July 2009
1 January 2009
1 July 2009
1 January 2009
1 July 2009
ENCOUNTER RESOURCES ANNUAL REPORT 2008
34
Note 1 Summary of significant accounting policies continued
(a) Basis of preparation continued
Early adoption of standards continued
Reference
Title
Impact of Amendment
AASB 3
(revised)
Business Combinations
AASB 127
(revised)
Consolidated and Separate
Financial Statements
AASB 2008-3
Amendments to Australian
Accounting Standards
Arising from AASB 3 and
AASB 127
Introduces choice for each
business combination entered into
regarding the non-controlling
interest on fair value or
proportionate interest in net assets.
Change of ownership interest in
subsidiary (not resulting in a loss
of control) to be accounted for
as an equity transaction.
Amending standard issued as
consequence of revisions to
AASB 3 and AASB 127.
Application Date
of Standard
Application
Date for Group
1 July 2009
1 July 2009
1 July 2009
1 July 2009
1 July 2009
1 July 2009
IAS 18, IAS 26
& IAS 27
Cost of an Investment in a
Subsidiary, Jointly Controlled
Entity or Associate
Deals with the recognition of
dividends from subsidiaries and
associates and recognition of
historic cost of investment.
1 July 2009
1 July 2009
AASB 2008-5 &
AASB2008-6
Improvements to IFRS’s
Various changes from annual
improvements project.
1 January 2009
1 July 2009
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.
Principles of consolidation
The financial statements of subsidiary companies are included in the consolidated financial statements from the date
control commences until the date control ceases. The financial statements of subsidiary companies are prepared for the
same reporting period as the parent company, using consistent accounting policies.
Inter-entity balances resulting from transactions with or between controlled entities are eliminated in full on consolidation.
Investments in subsidiary companies are accounted for at cost in the individual financial statements of the Company.
(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.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
35
Notes to the Financial Statements continued
For the financial year ended 30 June 2008
Note 1 Summary of significant accounting policies continued
(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.
(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 23). 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 2008
36
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
Leasehold improvements
33.3%
33.3%
Over the term of the lease
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.
Immediate restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are
expensed as incurred and treated as exploration and evaluation expenditure. Exploration activities resulting in future
obligations in respect of restoration costs result in a provision to be made by capitalising the estimated costs, on a
discounted cash basis, of restoration and depreciating over the useful life of the asset. The unwinding of the effect of the
discounting on the provision is recorded as a finance cost in the income statement.
(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 13.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
37
Notes to the Financial Statements continued
For the financial year ended 30 June 2008
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
(i) 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.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
38
Note 1 Summary of significant accounting policies continued
(p) Goods and services 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
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 Company 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 Company
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
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.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
39
Notes to the Financial Statements continued
For the financial year ended 30 June 2008
Note 1 Summary of significant accounting policies continued
(s) Fair value estimation
A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial
and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes
based on the following methods:
Investments in equity and debt securities
The fair value of financial assets at fair value through profit or loss, held to maturity investments and available for sale
financial assets is determined by reference to their quoted bid price at the reporting date. The fair value of held to maturity
investments is determined for disclosure purposes only. For investments with no active market, fair value is determined
using valuation techniques. Such techniques include using recent arm’s length market transactions, reference to the current
market value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models.
Trade and other receivables
The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value
of future cash flows, discounted at the market rate of interest at the reporting date.
Note 2 Financial risk management
The Company has exposure to a variety of risks arising from its use of financial instruments. This note presents information about
the Company’s exposure to the specific risks, and the policies and processes for measuring and managing those risks. The Board
of Directors has the overall responsibility for the risk management framework and has adopted a Risk Management Policy.
(a) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from transactions with customers and investments.
Trade and other receivables
The Company has no investments and the nature of the business activity of the Company does not result in trading
receivables. The receivables that the Company does experience through it’s normal course of business are short term
and the most significant recurring by quantity is the receivable from the Australian Taxation Office, the risk of recovery of
no recovery of receivables from this source is considered to be negligible.
Cash deposits
The Company’s primary banker is St George Bank Limited, at balance date significantly all operating accounts and funds
held on deposit are with this bank other than a cash at call deposit with Rabobank Australia. The Directors believe any
risk associated with the use of predominantly only one bank is addressed through the use of an A rated bank as a primary
banker and by the holding of a portion of funds on deposit with an alternative AAA rated institution. Except for this matter
the Company currently has no significant concentrations of credit risk.
(b) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage
to the Company’s reputation.
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, and
consideration is given to the liquid assets available to the Company before commitment is made to future expenditure
or investment.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
40
Note 2 Financial risk management continued
(c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will
affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising any return.
Interest rate risk
The Company has significant cash assets which may be susceptible to fluctuations in changes in interest rates. Whilst the
Company requires the cash assets to be sufficiently liquid to cover any planned or unforeseen future expenditure, which
prevents the cash assets being committed to long term fixed interest arrangements; the Company does mitigate potential
interest rate risk by entering into short to medium term fixed interest investments.
The Company does not have any direct contact with foreign exchange or equity risks other than their effect on the general
economy.
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.
Note 4 Segment information
Business segments
The Group is involved in the mineral exploration sector.
Geographical segments
The Group is organised on a national basis with exploration and development interests in Western Australia.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
41
Notes to the Financial Statements continued
For the financial year ended 30 June 2008
Note 5 Revenue
Operating activities
Interest receivable
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
407,287
275,313
407,287
275,313
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
10,087
7,529
10,087
7,529
44,069
339,998
25,827
268,472
44,069
339,998
25,827
268,472
Note 7 Income tax
(a) Income tax expense
Current income tax:
Current income tax charge (benefit)
Current income tax not recognised
(692,927)
692,927
(373,740)
373,740
(590,563)
590,563
(373,740)
373,740
Deferred income tax:
Relating to origination and reversal of timing differences
Deferred income tax benefit not recognised
(241,289)
241,289
(222,093)
222,093
(241,289)
241,289
(222,093)
222,093
Income tax expense reported in the income statement
–
–
–
–
(b) Reconciliation of income tax expense
to prima facie tax payable
Loss from continuing operations before
income tax expense
(855,306)
(592,664)
(855,306)
(592,664)
Tax at the Australian rate of 30% (2007: 30%)
(256,592)
(177,799)
(256,592)
(177,799)
Tax effect of permanent differences:
Non-deductible share based payment
Non-deductible entertainment
Net deferred tax asset benefit not brought to account
54,516
908
201,168
13,888
625
163,286
54,516
908
201,168
13,888
625
163,286
Tax (benefit)/expense
–
–
–
–
ENCOUNTER RESOURCES ANNUAL REPORT 2008
42
Note 7 Income tax continued
(c) Deferred tax – Balance Sheet
Liabilities
Accrued income
Prepaid expenses
Capitalised exploration expenditure
Assets
Revenue losses available to offset against
future taxable income
Employee provisions
Accrued expenses
Deductible equity raising costs
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
2,689
18,903
914,744
5,401
44,768
291,182
2,689
18,903
812,381
5,401
44,768
291,182
936,337
341,351
833,973
341,351
1,531,631
15,242
4,490
73,342
700,149
11,940
3,000
106,742
1,429,268
15,242
4,490
73,342
700,149
11,940
3,000
106,742
1,624,706
821,831
1,522,342
821,831
Net deferred tax asset/(liability)
688,369
480,480
688,369
480,480
(d) Deferred tax – Income Statement
Liabilities
Accrued income
Prepaid expenses
Capitalised exploration expenditure
Assets
Accruals
Increase in tax losses carried forward
Employee provisions
2,712
25,865
(623,562)
2,162
51,185
(215,936)
2,712
25,865
(521,199)
2,162
51,185
(215,936)
1,490
831,482
3,302
3,000
373,739
7,943
1,490
729,119
3,302
3,000
373,739
7,943
Deferred tax benefit/(expense) not recognised
241,289
222,093
241,289
222,093
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 2008
43
Notes to the Financial Statements continued
For the financial year ended 30 June 2008
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
449,454
4,251,589
8,721
6,766,424
449,454
4,251,589
8,721
6,766,424
4,701,043
6,775,145
4,701,043
6,775,145
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:
Cash and cash equivalents per cash flow statement
4,701,043
6,775,145
4,701,043
6,775,145
(b) Cash at bank and on hand
These attract interest at 4.7% (2007: 2.35%).
(c) Deposits at call
The deposits are bearing fixed interest rates of 7.77% (2007: 6.34%). These deposits have an average maturity of 30 days.
Note 9 Current assets – Receivables
(a) Trade and other receivables
Trade receivables
Accrued interest
Recoverable joint venture expenses
GST recoverable
(b) Other current assets
Prepaid tenement costs
Prepaid insurance
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
–
8,964
70,971
34,131
17,273
18,002
93,263
13,586
–
8,964
70,971
10
17,273
18,002
93,263
13,586
114,066
142,123
79,945
142,123
49,934
13,076
141,541
7,685
49,934
13,076
141,541
7,685
63,010
149,226
63,010
149,226
Details of fair value and exposure to interest risk are included at note 18.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
44
Note 10 Non-current assets
– Investment in controlled entities
(a) Investment in controlled entities
The following amounts represent the respective
investments in the share capital of the wholly owned
subsidiary companies:
Encounter Operations Pty Ltd
Encounter Resources USA LLC
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
–
–
–
–
–
–
2
–
2
–
–
–
Encounter Resources Limited has two subsidiary companies. Encounter Resources USA LLC is dormant and has no assets
or liabilities at the reporting dates or any revenue or expenses for the reporting periods.
Subsidiary Company
Encounter Operations Pty Ltd*
Encounter Resources USA LLC**
Country of
Incorporation
Australia
USA
Ownership Interest
2008
%
100%
100%
2007
%
100%
100%
*Encounter Operations Pty Ltd was incorporated in Western Australia on 27 November 2006.
**Encounter Resources USA LLC was incorporated in the USA on 9 April 2007.
The ultimate controlling party of the group is Encounter Resources Limited.
(b) Loans to controlled entities
The following amounts are payable to the parent company,
Encounter Resources Limited at the reporting date:
Encounter Operations Pty Ltd
Encounter Resources USA LLC
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
–
–
–
–
–
–
375,334
–
375,334
–
–
–
The loan to Encounter Operations Pty Ltd, to fund exploration activity is non interest bearing and is repayable at call. The
Directors of Encounter Resources Limited do not intend to call for repayment within 12 months.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
45
Notes to the Financial Statements continued
For the financial year ended 30 June 2008
Note 11 Non-current assets
– Property, plant and equipment
Field equipment
At cost
Accumulated depreciation
Office equipment
At cost
Accumulated depreciation
Leasehold improvements
At cost
Accumulated depreciation
Reconciliation
Field equipment
Net book value at start of the year
Additions
Depreciation
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
337,154
(71,028)
104,491
(31,057)
337,154
(71,028)
104,491
(31,057)
266,126
73,434
266,126
73,434
43,133
(18,951)
27,748
(8,864)
43,133
(18,951)
27,748
(8,864)
24,182
18,884
24,182
18,884
7,855
–
7,855
–
–
–
7,855
–
7,855
–
–
–
298,163
92,318
298,163
92,318
73,434
232,663
(39,971)
69,702
34,789
(31,057)
73,434
232,663
(39,971)
69,702
34,789
(31,057)
Net book value at end of the year
266,126
73,434
266,126
73,434
Office equipment
Net book value at start of the year
Additions
Depreciation
18,884
15,385
(10,087)
22,431
3,982
(7,529)
18,884
15,385
(10,087)
22,431
3,982
(7,529)
Net book value at end of the year
24,182
18,884
24,182
18,884
Leasehold improvements
Net book value at the start of the year
Additions
Depreciation
Net book value at the end of the year
–
7,855
–
7,855
–
–
–
–
–
7,855
–
7,855
–
–
–
–
No items of property, plant and equipment have been pledged as security by the Company.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
46
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
Note 12 Non-current assets – Capitalised
mineral exploration and evaluation expenditure
In the exploration and evaluation phase
Cost carried forward in respect of:
Incurred at cost on assets not governed by formal
joint venture agreements (i)
899,372
970,610
899,372
970,610
Incurred at cost under Yeneena JV Earn-in Agreement (ii)
341,213
–
–
–
Capitalised share of exploration assets under
contributing JV Agreements (iii)
1,808,563
449,619
1,808,563
449,619
Cost carried forward
3,049,148
1,420,229
2,707,935
1,420,229
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.
(i) Exploration and evaluation expenditure recognised on exploration assets held solely by Encounter Resources Limited and
exploration expenditure not allocable to tenements.
(ii) Exploration and evaluation expenditure recognised on tenements held under the Yeneena Joint Venture earn in
agreement with Barrick Gold of Australia.
(iii) Exploration and evaluation expenditure recognised on tenements under contributing joint venture agreements with Avoca
Resources Limited. This amount includes Encounter Resources Limited’s proportionate share of exploration assets held
by the respective joint venture entities.
The capitalised exploration expenditure written off includes expenditure written off on surrender of, or intended surrender
of tenements for both the group entities and the Group’s proportionate share of the exploration written off by the joint
venture entities.
Capitalised exploration costs at the start of the period
Total exploration costs capitalised for the period
Total exploration costs written off and expensed
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
1,420,229
1,968,917
250,822
1,437,879
1,420,229
1,627,704
250,822
1,437,879
for the period
(339,998)
(268,472)
(339,998)
(268,472)
Capitalised exploration costs at the end of the period
3,049,148
1,420,229
2,707,935
1,420,229
ENCOUNTER RESOURCES ANNUAL REPORT 2008
47
Notes to the Financial Statements continued
For the financial year ended 30 June 2008
Note 13 Interest in joint ventures
Included in the assets and liabilities of the Group were the items below which represented the Group’s interest in the assets
and liabilities employed in joint ventures.
The total amount of the Group’s capitalised exploration and evaluation expenditure capitalised and employed under joint
venture agreements at the reporting date is $2,066,069 (2007: 449,619).
During the reporting period the Group recognised an expense of $105,682 (2007: Nil) being its share of the exploration
expenditure written off by the joint venture entities during the period.
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
(i) Lake Way Joint Venture
The Company has a 60% interest in the Lake Way Joint Venture.
Share of Joint Venture’s assets and liabilities:
Cash and cash equivalents
Trade and other receivables
Capitalised mineral exploration and evaluation expenditure
9,072
5
143,848
4,304
1,033
125,230
9,072
5
143,848
4,304
1,033
125,230
Total Assets
152,925
130,567
152,925
130,567
Trade and other payables
Total Liabilities
Net Assets
Share of Joint Venture’s revenue, expenses and results:
Revenue
Administration expenses
Result before tax
(ii) Uranium Regional Joint Venture
The Company has an 80% interest in a portfolio
of projects and tenements.
Share of Joint Venture’s assets and liabilities:
9,482
9,482
5,919
5,919
9,482
9,482
5,919
5,919
143,443
124,648
143,443
124,648
25
(15)
10
–
–
–
25
(15)
10
–
–
–
Cash and cash equivalents
Trade and other receivables
Capitalised mineral exploration and evaluation expenditure
179,892
41,063
1,922,221
–
–
324,389
179,892
41,063
1,922,221
–
–
324,389
Total Assets
2,143,176
324,389
2,143,176
324,389
Trade and other payables
218,338
324,389
218,338
324,389
Total Liabilities
Net Assets
Share of Joint Venture’s revenue, expenses and results:
Revenue
Exploration costs written off
Administration expenses
Result before tax
218,338
324,389
218,338
324,389
1,924,838
2,653
(105,682)
(133)
(103,162)
–
–
–
–
–
1,924,838
2,653
(105,682)
(133)
(103,162)
–
–
–
–
–
ENCOUNTER RESOURCES ANNUAL REPORT 2008
48
Note 14 Current liabilities
– Trade and other payables
(a) Trade and other payables
Trade payables and accruals
Other payables
(b) Employee benefits
Liability for annual leave
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
366,162
22
41,252
15,964
366,162
22
41,252
15,964
366,184
57,216
366,184
57,216
50,806
39,800
50,806
39,800
Liabilities are not secured over the assets of the company. Details of fair value and exposure to interest risk are included at
note 18.
Note 15 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.
Ordinary shares have no par value. There is no limit to the authorised share capital of the Company.
(b) Share capital
Issued share capital
2008
No.
2007
No.
2008
$
2007
$
68,596,900
68,596,900
9,443,330
9,443,330
(c) Share movements during the year
At the beginning of the year
Issue price
Shares issued 5 April 2007
$0.50
Less: costs related to shares issued
68,596,900
59,996,900
9,443,330
5,252,354
–
–
8,600,000
–
–
–
4,300,000
(109,024)
At the end of the year
68,596,900
68,596,900
9,443,330
9,443,330
(d) Option plan
Information relating to the Encounter Resources Limited Directors, Officers and Employees Option Plan is set out in note 16.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
49
Notes to the Financial Statements continued
For the financial year ended 30 June 2008
Note 16 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, and approved by a special resolution at the Annual General Meeting
of shareholders of the Company on 17 November 2006. 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
50,000
50,000
150,000
500,000
400,000
400,000
1,550,000
Exercise price
57 cents
50 cents
50 cents
53.5 cents
55 cents
70 cents
Expiry date
6 July 2012
9 August 2012
30 November 2012
30 November 2012
30 November 2012
30 November 2012
No options were exercised during the financial year.
(b) Options on issue at the balance date
The number of options outstanding over unissued ordinary shares at 30 June 2008 is 2,000,000 (2007: 450,000).
The terms of these options are as follows:
Number of options outstanding
Exercise price
Expiry date
100,000
100,000
250,000
50,000
50,000
150,000
500,000
400,000
400,000
2,000,000
20 cents
45 cents
52.5 cents
57 cents
50 cents
50 cents
53.5 cents
55 cents
70 cents
23 March 2011
15 May 2011
7 December 2011
6 July 2012
9 August 2012
30 November 2012
30 November 2012
30 November 2012
30 November 2012
(c) Subsequent to the balance date
The following options have been granted subsequent to the balance date and prior to the date of signing this report.
Number of options granted
Exercise price
Grant Date
Expiry date
350,000
30 cents
1 July 2008
30 June 2013
No options have been exercised subsequent to the balance date to the date of signing this report.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
50
Note 16 Option Plan continued
Reconciliation of movement of options over unissued shares during
the period including weighted average exercise price (WAEP)
2008
2007
No.
WAEP
(cents)
No.
Options outstanding at the start of the year
450,000
38.7
200,000
Options granted during the year
Options exercised during the year
Options expiring unexercised during the year
1,550,000
–
–
57.8
–
–
250,000
–
–
Options outstanding at the end of the year
2,000,000
54.6
450,000
WAEP
(cents)
32.5
53.5
–
–
38.7
Basis and assumptions used in the valuation of options
The options were valued using the Black-Scholes option valuation methodology.
Date granted
Number of
options granted
Exercise price
(cents)
Expiry date
11 December 2007
11 December 2007
11 December 2007
11 December 2007
150,000*
500,000*
400,000*
400,000**
*Options are subject to a 12 month vesting period
**Options are subject to a 24 month vesting period
50.0
53.5
55.0
70.0
30 November 2012
30 November 2012
30 November 2012
30 November 2012
Risk free
interest
rate used
6.50%
6.50%
6.50%
6.50%
Volatility
applied
49.53%
49.53%
49.53%
49.53%
Option
valuation
(cents)
23.28
22.36
21.85
18.69
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 17 Reserves and accumulated losses
Consolidated
Balance at the beginning of the year
Loss for the period
Transfer to equity remuneration reserve in respect
2008
Equity
remuneraton
reserve (i)
$
2007
Equity
remuneration
reserve (i)
$
Accumulated
losses
$
Accumulated
losses
$
(1,010,224)
(855,306)
48,919
–
(417,560)
(592,664)
2,625
–
of options issued
–
181,721
–
46,294
Balance at the end of the year
(1,865,530)
230,640
(1,010,224)
48,919
Company
Balance at the beginning of the year
Loss for the period
Transfer to equity remuneration reserve in respect
(1,010,224)
(855,306)
48,919
–
(417,560)
(592,664)
2,625
–
of options issued
–
181,721
–
46,294
Balance at the end of the year
(1,865,530)
230,640
(1,010,224)
48,919
(i) Equity remuneration reserve
The equity remuneration reserve is used to recognise the fair value of options issued but not exercised.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
51
Notes to the Financial Statements continued
For the financial year ended 30 June 2008
Note 18 Financial instruments
Credit risk
The Directors do not consider that the Group’s financial assets are subject to anything more than a negligible level of credit
risk, and as such no disclosures are made, note 2(a).
Impairment losses
The Directors do not consider that any of the Group’s financial assets are subject to impairment at the reporting date.
No impairment expense or reversal of impairment charge has occurred during the reporting period, other than the write off
of deferred exploration assets at note 12.
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements, note 2(b):
2008
Consolidated
Trade and other payables
Company
Trade and other payables
2007
Consolidated
Trade and other payables
Company
Trade and other payables
Carrying Contractual
cash flows
amount
$
$
6 months
or less
$
6-12
months
$
1-2
years
$
2-5 More than
5 years
$
years
$
351,216
351,216
351,216
351,216
351,216
351,216
351,216
351,216
351,216
351,216
351,216
351,216
47,216
47,216
47,216
47,216
47,216
47,216
47,216
47,216
47,216
47,216
47,216
47,216
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Interest rate risk
At the reporting date the interest profile of the Group’s interest-bearing financial instruments was:
2008
Fixed rate instruments
Financial assets
Variable rate instruments
Financial assets
2007
Fixed rate instruments
Financial assets
Variable rate instruments
Financial assets
Carrying Amount ($)
Consolidated
Company
4,260,553
4,260,553
449,454
449,454
6,784,426
6,784,426
8,721
8,721
ENCOUNTER RESOURCES ANNUAL REPORT 2008
52
Note 18 Financial instruments continued
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or
loss by the amounts shown below. This analysis assumes that all other variables remain constant.
2008
Fixed rate instruments*
Variable rate instruments
2007
Fixed rate instruments*
Variable rate instruments
Profit or loss
Equity
1%
increase
42,606
4,495
1%
decrease
(42,606)
(4,495)
1%
increase
42,606
4,495
1%
decrease
(42,606)
(4,495)
67,844
87
(67,844)
(87)
67,844
87
67,844
(87)
*Fixed rate instruments are held for 30 days periods and as such the directors consider that they
should be included in the above disclosures as they are affected by short term interest rate fluctuations.
Fair values
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet are as follows:
Consolidated
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Company
Cash and cash equivalents
Trade and other receivables
Loan to subsidiary
Trade and other payables
2008
2007
Carrying
amount
$
Fair value
$
Carrying
amount
$
Fair value
$
4,701,043
79,935
(351,216)
4,701,043
79,935
(351,216)
6,775,145
128,538
(47,216)
6,775,145
128,538
(47,216)
4,429,762
4,429,762
6,856,467
6,856,467
4,701,043
79,935
375,334
(351,216)
4,701,043
79,935
375,334
(351,216)
6,775,145
128,538
–
(47,216)
6,775,145
128,538
–
(47,216)
4,805,096
4,805,096
6,856,467
6,856,467
The Group’s policy for recognition of fair values is disclosed at note 1(s).
Note 19 Dividends
No dividends were paid or proposed during the financial year.
The Company has no franking credits available as at 30 June 2008.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
53
Notes to the Financial Statements continued
For the financial year ended 30 June 2008
Note 20 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
Jonathan Hronsky, Director
(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.
(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 26 November 2007, whereby it is not
to exceed $200,000 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.
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 Key Management Personnel are as follows:
2008
Directors
P Chapman
W Robinson
P Bewick (i)
J Hronsky (ii)
Total
2007
P Chapman
W Robinson
P Bewick
J Hronsky
Total
Short Term
Post Employment
Base
Emolument
$
Superannuation
Contributions
$
Other
Benefits
$
30,000
205,000
187,500
40,000
462,500
20,000
188,750
170,833
5,591
385,174
2,700
18,319
16,875
3,600
41,494
1,800
16,988
15,375
503
34,666
–
–
–
–
–
–
–
–
–
–
Value of
Options
$
–
–
162,160
111,800
Total
$
32,700
223,319
366,535
155,400
273,960
777,954
–
–
–
–
–
21,800
205,738
186,208
6,094
419,840
(i) Options represent 44.2% of P Bewick remuneration for the financial year.
(ii) Options represent 71.9% of J Hronsky remuneration for the financial year.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
54
Note 20 Key management personnel disclosures continued
(c) Key management personnel compensation continued
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.
(d) Equity instrument disclosures relating to key management personnel
Unlisted Options provided as remuneration and shares issued on exercise of such options
The following options over unissued shares have been issued to key management personnel of the Company during the
financial year:
Directors
Grant Date
Number
of Options
Value
of Options
(Cents)
Total Value of
Options Granted
($)
Expiry Date
Exercise Price
(Cents)
P Bewick
P Bewick
J Hronsky
11 December 2007
11 December 2007
11 December 2007
400,000
400,000
500,000
21.85
18.69
22.36
87,400
74,760
111,800
30 November 2012
30 November 2012
30 November 2012
55 cents
70 cents
53.5 cents
The fair value of options issued as remuneration is allocated to the relevant vesting period of the options.
The options were provided at no cost to the recipients. No options were exercised by Key Management Personnel during the
financial year.
Option holdings
Key Management Personnel have the following interests in unlisted options over unissued shares of the Company:
2008
Name – Directors
P Chapman
W Robinson
P Bewick
J Hronsky
Balance at the
start of the year
Received during the
year as remuneration
Other changes
during the year
Balance at the
end of the year
–
–
–
–
–
–
800,000
500,000
–
–
–
–
–
–
800,000
500,000
There are no options held by Key Management Personnel that are vested and able to be exercised as at 30 June 2008.
There were no options held by Key Management Personnel at anytime during the previous financial year.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
55
Notes to the Financial Statements continued
For the financial year ended 30 June 2008
Note 20 Key management personnel disclosures continued
(d) Equity instrument disclosures relating to key management personnel continued
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.
2008
Name – Directors
P Chapman
W Robinson
P Bewick
J Hronsky
2007
P Chapman
W Robinson
P Bewick
J Hronsky
Balance at the
start of the year
4,710,000
21,796,899
4,700,000
–
4,710,000
21,796,899
4,700,000
–
Received during
the year on exercise
of options
Other changes
during the year
Balance at the
end of the year
–
–
–
–
–
–
–
–
37,400
50,000
25,000
–
–
–
–
–
4,747,400
21,846,900
4,725,000
–
4,710,000
21,796,900
4,700,000
–
(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.
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
Note 21 Remuneration of auditors
Audit and review of the Company’s financial statements
Taxation services
25,500
–
17,460
4,250
25,500
–
17,460
4,250
Total
25,500
21,710
25,500
21,710
ENCOUNTER RESOURCES ANNUAL REPORT 2008
56
Note 22 Contingencies
(i) Contingent liabilities
There were no material contingent liabilities not provided for in the financial statements of the Group as at 30 June 2008 or
30 June 2007 other than:
Native Title and Aboriginal Heritage
Native title claims have been made with respect to areas which include tenements in which the Group has an interest. The
Group 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 Group 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 Group has an interest.
(ii) Contingent assets
There were no material contingent assets as at 30 June 2008 or 30 June 2007.
Note 23 Commitments
(a) Exploration
The Group has certain obligations to perform minimum exploration work on mineral leases held. These obligations may vary
over time, depending on the Group’s exploration programmes and priorities. As at balance date, total exploration expenditure
commitments on tenements held by the Group have not been provided for in the financial statements and which cover the
following twelve month period amount to $2,119,000 (2007: $1,083,800). 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:
Due within one year
Due later than one year but not later than five years
Due later than five years
Total
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
52,500
130,500
–
183,000
–
–
–
–
52,500
130,500
–
183,000
–
–
–
–
The operating lease commitment relates to the lease of the Group’s Perth office. The initial lease period is for three years
commencing from 1 July 2008. At the reporting date there are no other operating lease commitments.
(c) Contractual Commitment
There are no material contractual commitments as at 30 June 2008 other than those disclosed above and not otherwise
disclosed in the Financial Statements.
Note 24 Related party transactions
There were no related party transactions during the year, other than disclosed at note 20.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
57
Notes to the Financial Statements continued
For the financial year ended 30 June 2008
Note 25 Interests in joint ventures
Joint venture agreements have been entered into with third parties. Details of joint venture agreements are disclosed below.
Assets employed by these joint ventures and the Group’s expenditure in respect of them is brought to account initially as
capitalised exploration and evaluation expenditure (Refer Note 12) until a formal joint venture agreement is entered into.
Thereafter, investment in joint ventures is recorded distinctly from capitalised exploration costs incurred on the company’s
100% owned projects.
See note 13 for disclosures of interests in the assets and liabilities employed under formal joint venture agreements.
Joint Venture and Exploration Agreement
Under a Joint Venture and Exploration Agreement dated 1 April 2005 the Company and Avoca Resources Limited (“Avoca”)
have agreed to establish an unincorporated joint venture for the purposes of identifying, acquiring, evaluating and developing
or selling mining tenements with potential uranium deposits within Western Australia. Encounter is the manager of the
joint venture.
Avoca Resources held a 20% free carried interest in Encounter’s exploration projects for the two year period which ended on
1 April 2007. In accordance with the Agreement, Avoca has elected to contribute to the exploration expenditure program
commencing 1 April 2007 to maintain their 20% interest the projects. Either party may elect to dilute their interest to a 1% net
smelter royalty.
Lake Way Uranium Joint Venture
Under the Lake Way Uranium Joint Venture dated 1 July 2007 between Avoca Resources Limited and the Company, the
Company has a 60% joint venture interest in the Uranium at the Lake Way South tenement. The parties are contributing to
expenditure in accordance with their equity interest. Encounter is the manager of the joint venture. The company’s interest in
the joint venture may increase to 75% if Avoca elects to dilute its interest in the tenement and be free carried though to
decision to mine.
Yeneena Joint Venture with Barrick Gold of Australia
The Yeneena JV agreement dated 14 September 2007 covers 1,500km2 of prospective uranium and base metals exploration
ground in the Paterson Province of Western Australia. The Paterson Province lies to the east of the Pilbara Craton, about
1,200km north north east of Perth. The region hosts the Kintyre uranium project and the Nifty copper mine.
Key terms of the earn in agreement are:
■
■
■
Encounter Resources Limited will spend a minimum of A$500,000 on exploration within 15 months, commencing
9 October 2007;
Encounter Resources Limited may spend A$3 million over 5 years to earn a 75% interest in the project;
Following the completion of the earn in period Barrick can contribute to expenditure to maintain an equity interest in the
project or dilute to a 1.5% net smelter royalty.
Note 26 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 Group, the results of those operations or the state of affairs of the Group in subsequent financial years.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
58
Note 27 Reconciliation of loss after tax
to net cash inflow from operating activities
Loss from ordinary activities after income tax
Share of management fee to JV not capitalised
Depreciation
Exploration cost written off
Share based payments expense
(Increase)/decrease in prepaid expenses
(Increase)/decrease in receivables
Increase/(decrease) in payables
Increase/(decrease) in provisions
Consolidated
Company
2008
$
2007
$
2008
$
2007
$
(855,306)
257,506
10,087
339,998
181,721
(5,391)
9,038
27,559
11,006
(592,664)
–
7,529
268,472
46,294
93,135
596
(24,292)
26,477
(855,306)
257,506
10,087
339,998
181,721
(5,391)
9,038
27,559
11,006
(592,664)
–
7,529
268,472
46,294
93,135
596
(24,292)
26,477
Net cash outflow from operating activities
(23,782)
(174,453)
(23,782)
(174,453)
Note 28 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
Consolidated 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
2008
Cents
2007
Cents
(1.25)
(1.0)
(1.25)
(1.0)
2008
$
2007
$
(855,306)
(592,664)
2008
No.
2007
No.
68,596,900
62,046,763
At 30 June 2008 the Company has on issue 2,000,000 unlisted options (2007: 450,000) over ordinary shares that are not
considered to be dilutive..
ENCOUNTER RESOURCES ANNUAL REPORT 2008
59
Directors’ Declaration
In the opinion of the Directors of Encounter Resources Limited (“the Company”)
(a)
the financial statements and notes set out on pages 30 to 59 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 2008 and of the performance for the year ended
on that date of the Group.
(b)
there are reasonable grounds to believe that the Group 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 2008.
This declaration is made in accordance with a resolution of the Directors.
Signed at Perth this 25th day of September 2008.
W Robinson
Director
ENCOUNTER RESOURCES ANNUAL REPORT 2008
60
ENCOUNTER RESOURCES ANNUAL REPORT 2008
61
ASX Additional Information
Pursuant to the Listing Requirements of the Australian Stock Exchange Limited, the shareholder information set out below
was applicable as at 3 October 2008.
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
TToottaallss
Number of
shareholders
80
312
232
304
36
996644
There were 121 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
Eye Investment Fund Limited
Jacmew Pty Ltd
UBS Nominees Pty Ltd and related bodies corporate
Stone Poneys Nominees Pty Ltd
Solvista Pty Ltd
Issued Ordinary Shares
Number of shares
Percentage of shares
16,216,900
6,532,964
5,580,000
5,388,074
4,650,000
4,650,000
23.64%
9.52%
8.13%
7.85%
6.77%
6.77%
ENCOUNTER RESOURCES ANNUAL REPORT 2008
62
C.
Twenty Largest Shareholders
The names of the twenty largest holders of quoted shares are listed below:
Shareholder Name
William Michael Robinson
HSBC Custody Nominees Australia Limited
Citicorp Nominees Pty Ltd
Jacmew Pty Ltd
Stone Poneys Nominees Pty Ltd
Solvista Pty Ltd
National Nominees Limited
Jorge Bernhard
Domain Investment Holdings Pty Ltd
HSBC Custody Nominees Australia Ltd
Charles Arthur Bennett Robinson
Forty Traders Ltd
Pieter Los
Phillip Towzell
UBS Wealth Management Australia Nominees
HSBC Custody Nominees Australia Ltd
Bruce Birnie Pty Ltd
Eric Roles
Andrew Ralph Bewick
SLHH Pty Ltd
TToottaall
Listed Ordinary Shares
Number
Percentage quoted
16,216,900
6,800,764
5,720,810
5,580,000
4,650,000
4,650,000
2,941,800
1,773,300
1,340,486
1,189,279
825,000
550,000
500,000
500,000
461,642
348,200
300,000
300,000
250,000
222,400
5555,,112200,,558811
23.64%
9.91%
8.34%
8.13%
6.78%
6.78%
4.29%
2.59%
1.95%
1.73%
1.20%
0.80%
0.73%
0.73%
0.67%
0.51%
0.44%
0.44%
0.36%
0.32%
8800..3344%%
D. 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.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
63
This page has been left blank intentionally.
ENCOUNTER RESOURCES ANNUAL REPORT 2008
64
...commodity diversity, geographic focus
ENCOUNTER RESOURCES ANNUAL REPORT 2008
www.enrl.com.au
NOTICE OF ANNUAL GENERAL MEETING
&
EXPLANATORY STATEMENT
To be held
At 4.00pm, Thursday, 20 November 2008
at the
Parmelia Hilton, 14 Mill Street
PERTH WA 6000
Level 7, 600 Murray Street
West Perth WA 6005
PO Box 273
West Perth WA 6872
P 08 9486 9455
F 08 6210 1578
www.enrl.com.au
20 October 2008
Dear Fellow Encounter Shareholder,
Please find enclosed the Notice of Annual General Meeting for the Shareholders’ Meeting to be held at the
Parmelia Hilton, 14 Mill Street, Perth 6000 at 4.00pm on Thursday, 20 November 2008.
The purpose of the meeting is to conduct the annual business of the Company, being consideration of the annual
financial statements, the remuneration report and in addition seek shareholder approval in accordance with the
Corporations Act 2001 and the Listing Rules of the ASX to a number of resolutions, which are set out in the
attached Notice of Meeting paper.
Your Directors seek your support and look forward to your attendance at the meeting.
Yours sincerely
Paul Chapman
Chairman
1
ENCOUNTER RESOURCES LIMITED
ABN 47 109 815 796
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting of Encounter Resources Limited will be convened at
4.00pm on Thursday, 20 November 2008 at the Parmelia Hilton, 14 Mill Street, Perth, Western Australia.
AGENDA
ORDINARY BUSINESS
1.
2.
3.
Discussion of Financial Statements and Reports
To discuss the Financial Report, the Directors’ Report and Auditor’s Report for the year ended 30 June
2008.
Adoption of the Remuneration Report
To adopt the Remuneration Report for the financial year ended 30 June 2008.
Election of Director – Mr Paul Chapman
To consider and, if thought fit, to pass with or without modification the following ordinary resolution:
“To elect as a Director, Mr Paul Chapman who retires in accordance with the Company’s Constitution and
being eligible, offers himself for re-election.”
2
ENCOUNTER RESOURCES LIMITED
ABN 47 109 815 796
NOTICE OF ANNUAL GENERAL MEETING
GENERAL NOTES
1. With respect to Agenda Item 2, the vote on this item is advisory only and does not bind the Directors of the
Company. However, the Board will take the outcome of the vote into consideration when reviewing the
remuneration practices and policies of the Company. The Chairman of the meeting intends to vote
undirected proxies in favour of the adoption of the remuneration report.
2.
3.
4.
There are no voting exclusions in respect of Agenda items in this Notice of Annual General Meeting.
The Explanatory Statement to Shareholders attached to this Notice of Annual General Meeting is hereby
incorporated into and forms part of this Notice of General Meeting.
The Directors have determined in accordance with Regulation 7.11.37 of the Corporations Regulations that,
for the purposes of voting at the meeting, shares will be taken to be held by the registered holders at 4.00pm
on 18 November 2008.
BY ORDER OF THE BOARD
Kevin R Hart
COMPANY SECRETARY
Dated this 20th day of October 2008
3
ENCOUNTER RESOURCES LIMITED
ABN 47 109 815 796
EXPLANATORY STATEMENT
The purpose of the Explanatory Statement is to provide shareholders with information concerning all of the Agenda
items in the Notice of Annual General Meeting.
1.
Discussion of Financial Statements & Reports
Encounter Resources Limited’s financial reports and the directors’ declaration and reports and the auditor’s
report are placed before the meeting thereby giving shareholders the opportunity to discuss those
documents and to ask questions. The auditor will be attending the Annual General Meeting and will be
available to answer any questions relevant to the conduct of the audit and his report.
2.
Adoption of Remuneration Report
During this item there will be opportunity for shareholders at the meeting to comment on and ask questions
about the remuneration report. The remuneration report is available in the Directors’ Report section of the
Annual Report.
The vote on the proposed resolution in item 2 is advisory only and will not bind the directors or the Company.
However, the Board will take the outcome of the vote into consideration when reviewing the remuneration
practices and policies of the Company.
A reasonable opportunity will be provided for discussion of the remuneration report at the meeting.
The Chairman of the meeting intends to vote undirected proxies in favour of the adoption of the
remuneration report.
The directors recommend that shareholders vote in favour of item 2.
3.
Re-Election of Director – Mr Paul Chapman
as an Ordinary Resolution
Mr Chapman is a Chartered Accountant and has held senior commercial roles within WMC over a seventeen
year period. This includes experience in North America as CFO of WMC Houston’s 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 (now Minara Resources Limited) in 2001 and
was 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. Mr Chapman is a director of Albidon Limited, Silver Lake Resources Limited
and Rex Minerals Limited.
Mr Chapman was appointed as Director on 7 October 2005.
4
PROXY FORM
To: Encounter Resources Limited (ABN: 47 109 815 796)
Fax No: 61 8 6210 1578
PO Box 273
West Perth WA 6872
Mark this box with an ‘X’ if you have made any changes to your address details (see reverse)
____________________________________________________________________________________________
Name:
(PLEASE PRINT)
Address: ____________________________________________________________________________________________
____________________________________________________________________________________________
Appointment of Proxy:
I/We being a member/s of Encounter Resources Limited and entitled to attend and vote hereby appoint:
The Chairman of the Meeting
(mark with an ‘X’) OR
Write here the name of the
person you are appointing if this
person is someone other than
the Chairman of the Meeting.
Or failing the person name, or if no person is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on
my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the
Annual General Meeting of Encounter Resources Limited to be held at the Parmelia Hilton, 14 Mill Street, Perth on Thursday, 20 November
2008 at 4.00pm (Perth time) and at any adjournment of that meeting.
Voting directions to your proxy – please mark
X
to indicate your directions
Agenda Item
2. Adoption of Remuneration Report
3.
Re-election of Mr Paul Chapman as a Director
Against
*Abstain
For
.
*
If you mark the Abstain box for a particular item, you are directing your proxy not to vote on you behalf on a show of hands or on a
poll and your notes will not be counted in computing the required majority on a poll.
If you do not wish to direct your proxy how to vote, and wish him or her to vote at his or her discretion, please place a mark in this box.
By marking this box, you acknowledge that the Chairman may exercise your proxy even if he has an interest in the outcome of the
resolution, and votes cast by him other than as proxy holder will be disregarded because of that interest. If you do not mark this box, and you
have not directed your proxy how to vote, the Chairman of the meeting will not cast your vote on the resolutions and your vote will not be
counted in computing the required majority if a poll is called.
PLEASE SIGN HERE
implemented.
This section must be signed in accordance with the instructions overleaf to enable your directions to be
Individual or Securityholder 1
Securityholder 2
Securityholder 3
Individual / Sole Director and
Director
Director/Company Secretary
Sole Company Secretary
Contact Name
Contact Daytime Telephone
/ /
Date
5
1
2
3
4
HOW TO COMPLETE THE PROXY FORM
Your Name and Address
This is your name and address as it appears on the company’s share register. If this information is incorrect, please
mark the box and make the correction on the form. Securityholders sponsored by a broker should advise their broker
of any changes. Please note, you cannot change ownership of your securities using this form.
Appointment of a Proxy
If you wish to appoint the Chairman of the Meeting as your proxy, mark the box. If the person you wish to appoint as
your proxy is someone other than the Chairman of the Meeting please write the name of that person in the space
provided. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the
Meeting will be your proxy. A proxy need not be a securityholder of the company. The Chairman intends to vote in
favour of resolutions for which no voting indication has been given.
Votes on Items of Business
You may direct your proxy how to vote by placing a mark in one of the boxes opposite each item of business. All your
securities will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be
voted on any item by inserting the percentage or number of securities you wish to vote in the appropriate box or
boxes. If you do not mark any of the boxes on a given item, your proxy may vote as he or she chooses. If you mark
more than one box on an item your vote on that item will be invalid.
Appointment of a Second Proxy
You are entitled to appoint up to two persons as proxies to attend the meeting and vote on a poll. If you wish to
appoint a second proxy, an additional Proxy Form may be obtained by telephoning the company’s share registry or
you may copy this form.
To appoint a second proxy you must:
(a) on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number
of securities applicable to that form. If the appointments do not specify the percentage or number of votes that
each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded.
return both forms together in the same envelope.
(b)
5
Signing Instructions
You must sign this form as follows in the spaces provided:
Individual: where the holding is in one name, the holder must sign.
Joint Holding: where the holding is in more than one name, all of the securityholders should sign.
Power of Attorney: to sign under Power of Attorney, you must have already lodged the Power of Attorney with the
registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the
Power of Attorney to this form when you return it.
Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be
signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a
Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with
either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.
If a representative of a corporate securityholder or proxy is to attend the meeting, the appropriate "Certificate of
Appointment of Corporate Representative" should be produced prior to admission. A form of the certificate may be
obtained from the Company's share registry.
6.
Lodgement of a Proxy and Deadline for Receipt of Proxy
This Proxy Form (and any Power of Attorney under which it is signed) must be received at the address given below
no later than 4.00 pm (Perth time) on 18 November 2008, being 48 hours before the commencement of the Meeting.
Any Proxy Form received after that time will not be valid for the scheduled meeting.
Documents may be lodged by post, delivery or facsimile to the Registered Office of Encounter Resources
Limited being:
Level 7, 600 Murray Street, West Perth WA 6005
Or by facsimile to fax number +61 8 6210 1578
6