ABN 47 109 815 796
a n n u a l r e p o r t 2 0 1 0
ABN 47 109 815 796
Corporate Directory
Directors
Paul Chapman
Will Robinson
Peter Bewick
Jonathan Hronsky
Non-Executive Chairman
Managing Director
Exploration Director
Non-Executive Director
Company Secretary
Kevin Hart
Dan Travers (Joint Company Secretary)
Principal and Registered Office
Level 7, 600 Murray Street
West Perth, Western Australia 6005
Telephone (08) 9486 9455
Facsimilie (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
Facsimilie (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
became a public company on 26 May 2005.
The Company is domiciled in Australia.
Front Cover and Contents: Drill chips from BM1 Copper
discovery. Crysocolla (copper silicate) is the blue mineral.
Encounter Resources Ltd 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 to grow shareholder
value through focused, methodological exploration and the
development of base metals, manganese and uranium
resources in Australia. To drive its growth strategy the
company has assembled a dedicated and experienced team
of geoscientists who are leaders in their field of expertise.
Contents
Letter from the Chairman & Managing Director
Exploration Review
Summary of Tenements
Corporate Governance Statement
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
ASX Additional Information
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Competent persons 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 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.
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Letter from the Chairman & Managing Director
Dear Fellow Shareholder,
Encounter Resources is a truly diversified exploration company with clear focus on discovering new mineral resources in
Western Australia (WA). The past year has been an exciting one in our development with our main exploration focus being
the Yeneena project in the Paterson Province of WA.
The Yeneena project is located 450km south east of Port Headland and about 60km south west of Newcrest’s giant
gold/copper deposit at Telfer.
This region has demonstrated the capacity to produce world class mines. The high grade manganese deposit of Woodie
Woodie owned by Consolidated Minerals sits 70km to our north west. Aditya Birla’s Nifty copper mine, with a pre-mined
resource of over 2 million tonnes of copper, is located 35kms to the north west. To our south, Cameco is advancing the
Kintyre uranium deposit. Importantly, all of these deposits were discovered in areas with outcropping mineralisation.
There remains minimal systematic exploration across the vast sand cover in the region which we believe is masking other
large mineral deposits. Accordingly, we are applying modern exploration techniques and models to the sand covered
terrain in this fertile mineral field.
In April 2010, we purchased the remaining 25% of the Yeneena project and we now control 100% of this major
(1,300km2), strategic land position in the shadows of some of Australia’s most significant mineral deposits.
Targeted drilling resulted in high grade intersections of copper, zinc and manganese.
These results have caught the attention of many resource industry participants.
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Letter from the Chairman & Managing Director continued
We completed drill programs at six separate prospects within the multi-commodity Yeneena project over the past year.
Targeted drilling resulted in high grade intersections of copper (BM1 prospect), zinc (BM5 prospect) and manganese
(MN1 prospect). These results have caught the attention of many resource industry participants.
The discovery of shallow, high grade copper in multiple intersections over an extensive area at the BM1 prospect within the
Yeneena project is very encouraging. Drilling results received so far from the BM1 discovery have shown thick intersections
of near surface copper mineralisation, including:
n 20m @ 2.0% Cu from 22m (incl. 12m @ 3.2% Cu)
n 12m @ 1.5% Cu from 16m (incl. 2m @ 2.7% Cu)
n 10m @ 1.1% Cu from 36m (incl. 2m @ 2.5% Cu)
n 4m @ 5.5% Cu from 66m
n 8m @ 1.1% Cu from 24m
We have just scratched the surface at BM1. Drilling has been highly successful at defining coherent copper mineralisation over
an extensive area. Importantly all of the mineralised intersections are within 70 metres of surface. The copper mineralisation at
BM1 is found together with highly anomalous cobalt with intersections up to 14m @ 0.5% Co (including 2m @ 1.5% Co).
We believe that the drilling at BM1 shows strong similarities to the near surface blanket of secondary oxide copper at the
Nifty copper deposit. The discovery of the secondary copper oxide position at Nifty ultimately led to the primary copper
source where the majority of the copper tonnes were later found. The main objective of our upcoming drilling programs
is to identify the primary source of the secondary copper mineralisation at BM1. In August 2010, the company raised $3.1
million (before costs) which will provide additional funding to expand and accelerate exploration at the Yeneena project.
… an exploration company with clear focus on discovering new mineral resources in WA.
On the uranium front we also control 11 million lbs of near surface uranium resources in the northern Yilgarn region.
These uranium resources were new discoveries made by the company in 2007. We continue to assess commercial and
development options to realise the value for these resources. The uranium market is improving and the uranium industry
is developing in WA on a number of fronts.
We are also exploring the Bangemall Basin in WA where the primary target is SEDEX Century style zinc/lead and sedimentary
hosted copper.
This year we were successful in our two applications for co-funded drilling under the WA Government Exploration Incentive
Scheme. The funding from the WA Government will contribute up to $150,000 towards the drilling costs of the planned
diamond drill program at the Yeneena project and up to $100,000 towards the planned program at the Wanna project
in the Bangemall Basin. The co-funding provides further recognition of the quality and the potential of the exciting drill
targets defined by the company.
We continue to apply a disciplined and methodical approach to the exploration for, and the discovery of, mineral deposits
in Australia. The discovery of new mineral resources in Australia is essential to maintaining and growing the country’s largest
export industry. A strong mining industry is crucial to improving the standard of living for all Australians. The availability
of reliable supplies of mineral and energy resources is also absolutely vital to improving the standard of living across the
developing world.
In closing we would like to thank our committed team for their professionalism and dedication. We have an exceptional
exploration team in place, an exciting suite of large scale exploration targets and we are well funded to complete our
exploration plans. We would also take this opportunity to thank our fellow shareholders for their ongoing support.
Yours sincerely
Paul Chapman
Chairman
Will Robinson
Managing Director
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Exploration Review
Encounter Resources Limited (Encounter) is a Western Australian (WA) based exploration and resource development
company with projects in three geological regions of WA. Encounter’s portfolio covers over 4,500km2 of strategically
located and highly prospective exploration projects (Figure 1). The portfolio includes:
n A major ground position in the Paterson mineral province between the Nifty copper mine, Woodie Woodie manganese
operation and the Kintyre uranium deposit, considered highly prospective for Proterozoic copper and silver-lead-zinc
mineralisation, unconformity related uranium and carbonate hosted manganese deposits;
n 11 million pounds of near surface, calcrete style uranium resources in the Yilgarn Province; and
n
Four projects targeting base metals deposits in the Bangemall Basin.
Figure 1: Project Location Plan.
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Exploration Review continued
Paterson Province
Yeneena proJeCt – Copper, uranium and base metals
(E45/2500, E45/2501, E45/2502, E45/2503, E45/2561, E45/2657, E45/2658,
ELA45/2805 and ELA45/2806 – 100% Encounter)
The Yeneena project covers a 1,300km2 tenement package in the Paterson Province of WA located between the
Nifty copper mine, the Woodie Woodie manganese mine and the Kintyre uranium deposit (Figure 2). The project is
considered highly prospective for Nifty/Isa style copper mineralisation, silver-lead-zinc mineralisation, Woodie Woodie
style manganese mineralisation and unconformity related uranium mineralisation. In April 2010 Encounter acquired
100% of the Yeneena project through the purchase of Barrick (Australia Pacific) Limited’s remaining 25% interest.
Outside of the known discoveries at Nifty (Cu) and Kintyre (U), found in areas of outcrop, the greenfields Yeneena Basin in
the Paterson Province is significantly under-explored due to extensive sand cover and the remoteness of the location.
Simplified geological stratigraphy for the Yeneena Basin comprises the Palaeo-Proterozoic Rudall Complex as the
lowermost unit, overlain by the Neo-Proterozoic Coolbro Sandstone. The Broadhurst Formation sits stratigraphically above
the Coolbro Sandstone and is the host to the base metals targets and the Nifty copper mine. The Kintyre uranium
deposit sits directly below the unconformity between the Coolbro Sandstone and the Rudall Complex.
Two new and significant geological domains have been identified at the project during 2009/2010. These domains were
recognised through a review of independent geophysical datasets, the diamond drill core from mid 2009 drill program
and re-logging of historical aircore drilling.
Figure 2: Yeneena project regional aeromagnetics, leasing and target plan.
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Palaeo-Proterozoic Rudall Complex metamorphic basement rocks have been identified at the T4 prospect, 5kms north of
BM5 on the north eastern side of the Kintyre Fault. In addition, a shallow water, stromatolitic, carbonate shelf depositional
environment has been recognised to the west of the McKay Fault. This significantly increases the prospective project area
for carbonate hosted Woodie Woodie style manganese mineralisation. Importantly, neither of these two newly recognised
geological domains had been documented in previous regional geological mapping. Encounter was successful in its
application for co-funded drilling under the WA Government Exploration Incentive Scheme to test these newly identified
geological domains. This funding will contribute up to $150,000 towards the drilling costs of a planned diamond drill
program at the Yeneena project. The co-funding recognises the quality and the potential of these exciting drill targets.
BM1 Copper Discovery
The BM1 target is located within the Broadhurst Formation and consists of a coincident magnetic and AEM anomaly
located along the McKay Fault approximately 60km south of the Nifty copper mine (Figure 2).
During June 2009 three aircore drill traverses were completed by Encounter across the northern and eastern (up dip)
extents of the AEM conductor at the BM1 target. This drilling successfully defined a coherent, under cover, near
surface copper regolith anomaly that was open and north and south. Anomalous results included 16m @ 0.23% Cu
from 24m and 12m @ 0.23% Cu from 54m. Numerous regolith intersections over 0.1% Cu and results of up to 2m @
0.89% Cu highlighted the potential of this area to host a substantial body of copper oxide mineralisation.
In September 2009 two diamond drill holes were completed to test both the AEM conductor and below the zone of
regolith copper anomalism identified in a shallow aircore program completed in June 2009. Diamond drilling was co-
funded by the WA Government Exploration Incentive Scheme.
Drill hole EPT057 intersected two thick (greater than 80m) zones of brecciated and altered dolomite hosted within
carbonaceous shales. Alteration included intense carbonate veining, silicification, disseminated pyrite and sporadic
occurrences of chalcopyrite. Extensive and pervasive silica, carbonate and hematite alteration (Figure 3) together with
elevated cobalt is associated with the zone of anomalous copper. This association of alteration and metal anomalism
shows similarities to the Zambian style “Red Bed” copper deposits. Zones of intense hydrothermal alteration are
important plumbing pathways for mineralising fluids.
Copper anomalism at the BM1 target is focused along two geological contacts, one to the west and one to the east of
a black shale unit. Interpretation and geological analyses of diamond core indicates that the western contact represents
the structural boundary between deep water black shales of
the Broadhurst Formation to the east and shallow water
carbonates and cherts to the west. This contact corresponds
to the regionally significant McKay Fault.
Aircore drilling completed at the BM1 prospect during
May and June 2010 significantly extended the area
of near surface copper mineralisation that was first
identified in June 2009. The area of anomalism in excess
of 0.2% copper now extends over 3kms in strike and
remains open to the north, south and east (Figure 4). In
addition, zones of high grade copper mineralisation were
intersected which include 4m @ 5.45% Cu from 66m
in EPT 220 and 8m @ 1.09% Cu from 24m in EPT 219
(Figure 5) and 6m @ 1.41% Cu from 54m to end of hole
in EPT 181 (Figure 6).
Figure 3: Silica, carbonate and hematite alteration
EPT057 380-383m.
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Exploration Review continued
Figure 4: BM1 maximum drill hole copper results.
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Figure 5: BM1 aircore drill section 7543100mN.
Figure 6: BM1 aircore drill section 7542700mN.
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Exploration Review continued
Figure 7: Nifty copper mine idealised cross section.
This significant area of copper anomalism indicates that the primary source of the regolith hosted copper at BM1 is
possibly very large or a series of multiple sources. While the mineralisation remains open in three directions the BM1
prospect already has a world class copper regolith footprint. The observed geological, geochemical and geophysical
features at BM1 show strong similarities to that of the 2 million metal tonne Nifty copper deposit (Figure 7).
BM5 target
The BM5 target is located along the regionally extensive Kintyre Fault (Figure 2). The area was initially drilled by WMC in
the early 1990s at the end of their exploration program in this area. A series of 800m spaced RC traverses were drilled
across the NW trending Kintyre Fault where it separates two large zones of conductive Broadhurst Formation. These RC
traverses were followed up by one deeper diamond drill hole.
This early WMC drilling program intersected a thick body of iron-manganese rich material below Permian and Recent
cover over 1km in strike which is associated with strong copper, silver, lead and zinc anomalism. The anomalous body
appears to be controlled by the intersection of the underlying dolomitic unit with the Kintyre Fault. It is interpreted that
this iron-manganese rich body represents a potentially significant base metal gossan.
Seven drill holes were completed by Encounter at the BM5 prospect in June 2009. Compilation and interpretation of
the results from this drill program was undertaken during September 2009. A strong geochemical gradient was defined
within the gossanous horizon indicating increased prospectivity towards
the interpreted fault-bounded western margin of the dolomite unit. This
geochemical target is coincident with an interpreted NW to NNW structural
jog along this western dolomite contact.
BM1 EPT 220 copper oxides at 24m.
During October 2009 diamond drill hole EPT062 was drilled to test
beneath a gossanous iron manganese horizon associated with copper-
lead-zinc-silver geochemical anomalism. EPT062 was co-funded through
the WA Government’s Exploration Incentive Scheme. Drilling confirmed the
gossanous horizon sits at the upper stratigraphic contact of a carbonate unit
which is the host to the base metal deposits in this region. The primary target
for base metals mineralisation is the lower contact of this carbonate unit.
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Drilling conditions were difficult resulting in the hole not
reaching target depth and being abandoned at 306m. A
vein of massive sulphide containing sphalerite and galena
was intersected between 301.6m and 301.7m within 5m
of the end of hole in brecciated dolomite (Figure 8). Assay
results for the interval returned 0.1m @ 28.5% zinc, 2.3%
lead and 33.9g/t silver.
A downhole electromagnetic survey from drill hole EPT062
identified a significant, greater than 500m long, offhole
conductor approximately 60m below the bottom of hole.
The conductive body is interpreted to be at or near the base
of the host carbonate sequence. No conductive stratigraphy
was intersected in EPT062 other than the massive sulphide
vein and it is interpreted that the offhole conductor may
represent additional base metal sulphide mineralisation.
Figure 8: Massive sphalerite and galena vein
EPT062 301.6 to 301.7m.
A detailed ground gravity survey was completed in April 2010 over an extensive area surrounding the BM5 prospect
to help resolve structure, geology and drill targets. New gravity data has been collected at 100m x 100m spacing over
the area of the high grade zinc intersection. A broad gravity survey at 200m x 400m spacing has also been completed
to the north of the BM5 prospect to encompass the T4 prospect. Preliminary results indicate that an excess mass feature
occurs in close proximity to the identified offhole EM conductor at BM5 (Figure 9).
Diamond drilling during May 2010
successfully tested the modelled EM
conductor and excess mass feature
identified in the ground gravity survey at
the prospect. Geological logging indicates
the modelled EM conductor represents
an apparent westerly dipping contact
between the upper carbonate unit and
carbonaceous shales below (Figure 10).
Geological observations suggest that
this contact is structurally controlled and
includes zones of strong faulting and
veining. Primary stratigraphic layering
in the carbonate unit is observed to
apparently dip shallowly to the east. A
thick sequence of brecciated carbonate
including pervasive disseminated pyrite
is present at the modelled position of
the excess mass anomaly on the drill
section.
Figure 9: Residual Gravity Image of the BM5 target from April 2010 ground survey.
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Exploration Review continued
Figure 10: BM5 Cross Section 7565150mN.
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Figure 11: AEM stacked Conductivity Depth Inversions (CDIs) showing intersection of structures at BM2 target.
BM2 target
The BM2 target is also beneath an area of extensive sand cover at the intersection between a north-south trending,
westerly dipping fault and the regional north west striking Tabletop Fault (Figure 2). The AEM conductive profiles show the
structural termination at the eastern margin of a conductive horizon against the major regional fault (Figure 11). The AEM
target was refined by a ground EM survey completed in July 2009. Copper regolith
anomalism up to 521ppm Cu has been intersected in 1km spaced historical aircore
drill holes. This broad base metal regolith anomaly extends over an interpreted strike
of 3kms.
Aircore drilling was completed at the BM2 target during June 2010 (Figure 11).
Mn1 target
The MN1 prospect is located 70kms south east of the Woodie Woodie manganese
mine (Figure 2) on the regionally extensive McKay Fault. In November 2009, the
Company announced the discovery of high grade manganese at the MN1 prospect.
Two high grade, near surface manganese intersections were reported, 200m apart
in adjacent vertical aircore holes at the southern end of a 14km long regional gravity
anomaly. The regional gravity anomaly sits to the west of, and parallel to, the McKay
Fault. Intersections were identified in the re-analysis of samples from the drilling
program completed by Barrick Gold of Australia in 2006. Intersections include 2m
@ 20% Mn from 25 metres in YNAC 168 (including 1m @ 28% Mn from 26m)
and 3m @ 16% Mn from 21 metres in YNAC 169 (Figure 12).
Figure 12: Manganese
mineralisation in YNAC 169.
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Exploration Review continued
The geology in the MN1 area is masked by sand cover with only isolated surface
outcrops. Manganese anomalism occurs within the newly recognised geological
domain of shallow marine carbonates bounded to the east by the McKay Fault. This
new geological interpretation significantly increases the potential for manganese
discoveries within this extensive area of prospective stratigraphy.
An orientation ground gravity program covering the southern 4kms of the 14km
long regional gravity ridge at the MN1 prospect was completed in December 2009
to define drill targets within the broad regional anomaly. The program successfully
resolved the regional anomaly into a number of discrete pod-like anomalies.
A series of drill sections were drilled during May 2010 around the existing
manganese intersections and across the newly defined gravity targets (Figure 13).
Glenn Budge (Field Manager)
Aircore drilling intersected extensions to
the manganese mineralisation intersected
in YNAC 168 and YNAC 169. New
intersections include 1m @ 17.7% Mn
from 26m and 1m @ 15.4% Mn from
27m. The cluster of significant manganese
intersections is broadly coincident with a
residual gravity anomaly in this Southern
Zone.
The most northern drill traverse at the MN1
prospect intersected near surface high
grade manganese over a residual gravity
feature. Drill hole EPT159 intersected
1m @ 21.2% Mn from 9m depth. The
hole terminated in hard, massive silicified
carbonate at a depth of 15m.
A deeper RC drill program to test for a
potential hydrothermal ore system below
the identified manganese mineralisation
was also completed at the MN1 prospect
during June 2010.
The discovery of high grade manganese
over a length of 2.5km along the regionally
significant McKay Fault is encouraging. High
grade manganese also exists up to 1km
west of the fault. The aircore drill results
have expanded the area of manganese
prospectivity at the MN1 target.
Figure 13: MN1 prospect showing drill hole locations and
maximum manganese in hole.
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Mn2 target
A second area of manganese anomalism has been identified at MN2, 20km to the
east of the MN1 prospect. Anomalous manganese intersections were identified in
the re-analysis of samples from the drilling program completed by Barrick Gold of
Australia in 2006.
Logging descriptions of historic holes drilled at the MN2 prospect noted the
presence of a shallow, flat lying layer of manganese oxide in five adjacent, 200m
spaced aircore holes (Figure 14). This 1km wide zone of manganese oxide is
located in an area of extensive sand cover and no surface outcrop. The highly
anomalous manganese starts 30m below the surface and is 2-9m thick. The zone
of logged manganese oxide in the historic drilling was only partially sampled with
no samples taken from 2 of the 5 mineralised holes.
Geological descriptions for holes YNAC160 to YNAC164 indicate the manganese
anomalism is located at the boundary between the overlying Tertiary and the
Air core drilling at MN2. James Purchase
(Geologist) collecting rock chip samples.
underlying Permian sediments. This infers that the manganese may have been deposited through hydromorphic
dispersion from a primary manganese-rich source area.
A series of aircore drilling traverses were completed at MN2 during June 2010 aimed at identifying vectors towards
the potential primary source.
The MN2 prospect represents a compelling exploration target and has significantly expanded the area of prospective
manganese mineralisation at the project.
Figure 14: MN2 cross section of historical drilling.
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Figure 15: T4 Palaeo-Proterozoic basement block interpretation over AEM CDIs & TMI magnetics image.
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t2 target
The T2 target is a discrete AEM conductor located on the McKay Fault 20km north of BM1. This target area was
originally highlighted as a key regional structural target and later confirmed as an area of interest following the interpretation
of the infill AEM survey completed in 2008. Proterozic outcrop is rare and geology poorly understood due to extensive
sand dune cover. A series of ground EM traverses were completed in 2009 at the T2 target which further delineated
the airborne EM conductor.
A single diamond hole was drilled during October 2009 to test the 600 metre long, discrete conductive body at a
depth of 100-150m. A weakly sulphidic black shale was intersected at the interpreted position of the conductor. Assays
returned no significant base metals anomalism.
Geological logging of the diamond hole was instrumental in defining a new and significant geological domain. A shallow
water, stromatolitic, carbonate shelf depositional environment was recognised to the west of the McKay fault.
t4 target
The Company has confirmed the presence of a horst block of Palaeo-Proterozoic basement rocks (5.5km x 3.5km) in
an area of no outcrop at the T4 prospect which is located approximately 5km north of the BM5 prospect. The block was
observed in three independent datatsets (magnetics, gravity and AEM) (Figure 15).
Re-logging of isolated historical drill chips confirmed the presence of metamorphic schists similar to Rudall Complex
rocks known in the area. A gravity survey at a spacing of 200m x 400m was completed over the T4 prospect in
April 2010. Sedimentary units on the margins of the horst block are considered highly prospective for SEDEX Cu
and Pb-Zn mineralisation. The T4 target represents a compelling structural, geological and geophysical target at the
Yeneena project.
Encounter was successful in its application for co-funded drilling under the WA Government Exploration Incentive
Scheme. This funding reflects the quality of the target and will contribute up to $150,000 towards the drilling costs of a
planned diamond drill program at the T4 and MN1 targets at the Yeneena project.
Chairman’s Lounge, Yeneena
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Figure 16: Location of uranium resources in the north east Yilgarn Province.
Yilgarn District
CalCrete uranIuM reSourCeS
A strategic review of the calcrete uranium resource has been initiated by the company to consider the potential
development and commercial alternatives to advance the projects. The area of interest is shown in Figure 16.
HIllVIeW (E51/1127 – 80% Encounter, 20% Avoca)
The Hillview uranium project is located 50kms south east of Meekatharra and contains an Inferred Resource of 27.6 million
tonnes, averaging 174ppm U3O8 for a contained 10.6 million pounds of U3O8. The Inferred Resource is reported in
accordance with the JORC code (2004) and guidelines.
The main mineralised zone at Hillview is 7km long by 1.4km wide with an average thickness of 3.15m. The resource is
a flat lying, consistent body of near surface uranium mineralisation with minimal internal dilution.
laKe WaY SoutH (E53/1232 – 60% Encounter, 40% Avoca uranium rights only)
The Lake Way South project is located approximately 10kms south of Wiluna, between Toro Energy’s Lake Way and
Centipede uranium deposits. An Inferred Resource for the area of the Centipede Extension resource within the JV
tenement has been calculated. This resource contains 220,000t @ 244ppm U3O8 for 120,000lbs of U3O8. The
Inferred Resource is reported in accordance with the JORC code (2004) and guidelines.
BellaH Bore eaSt (E53/1158 – 80% Encounter, 20% Avoca)
The Bellah Bore East is situated in the upper reaches of the Yeelirrie Channel. An Inferred Resource of 350,000t
averaging 210ppm U3O8 for 160,000lb of U3O8 has been calculated for the Bellah Bore East prospect. The Inferred
Resource is reported in accordance with the JORC code (2004) and guidelines.
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Bangemall Basin
BeYonDIe (ELA 69/2692, ELA69/2493 AND ELA69/2694 – 100% Encounter)
A regional targeting exercise was initiated during late 2009 incorporating key learnings
from the work completed at the Yeneena project and building on our understanding
of the formation of large scale base metal systems.
The targeting program highlighted an area on the eastern margin of the Bangemall
Basin that demonstrates a number of key structural ingredients. Applications have
been over an area of 1500km2 located approximately 150kms south south east of
Newman. The tenements capture the intersection of the Tangadee Lineament with
the margin of the Bangemall Basin and northern Yilgarn block (Figure 17). A series
of field visits to the project are planned prior to the grant of the tenements.
Wanna (E08/1779 – 85% Encounter, 15% Avoca)
Sarah James (Senior Exploration Geologist)
and Glenn Budge (Field Manager)
during field reconnaissance.
The Wanna project is located 120km south west of Paraburdoo on the southern
margin of the Bangemall Basin, approximately 40kms WNW of Mt Augustus. The project sits along the interpreted
western extension of the Augustus Rift, to the east of the Gifford Creek Complex. The stratigraphy and key structures that
host the Abra base metal deposit are interpreted to extend through the Wanna project area (Figure 17).
A hydrogeochemical survey, utilising existing pastoral bores, defined a coincident Pb-Mo-As-Ba anomaly at Koorabooka
Spring. This suite of anomalous elements in the groundwater is indicative of the type of response that could be seen
proximal to a zone of base metal mineralisation.
A ground gravity survey was completed at the project and was designed to test the area of anomalous groundwater
surrounding the Koorabooka Spring as well as along a WNW trending magnetic lineament where a series of outcropping
lead occurrences within dolomitic rocks were identified.
Figure 17: Location of Encounter Tenements in the Bangemall Basin.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
17
Exploration Review continued
The results of the survey were very encouraging with a discrete bouguer gravity anomaly defined immediately upstream
of Koorabooka Spring coincident with a base metal LAG geochemical anomaly (Figure 18). This excess mass anomaly
does not show the magnetic character of a mafic dyke and therefore remains unexplained. It is interpreted that this
gravity anomaly at Koorabooka Spring may represent the accumulation of dense base metal sulphide emplaced in the
sedimentary sequence adjacent to the Augustus Rift.
Encounter was successful in its application for co-funded drilling under the WA Government Exploration Incentive
Scheme. This funding will contribute up to $100,000 towards the drilling costs of a planned diamond drill program at
the coincident geochemical anomaly and unexplained Koorabooka Spring gravity anomaly within the Wanna project.
Drilling is expected to be completed in the first half 2011. The co-funding provides recognition of the quality and the
potential of this exciting drill target.
Figure 18: Koorabooka Spring anomaly at the Wanna project.
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’.
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 Mineral Resource is based on information compiled by Mr
Neil Inwood who is employed by Coffey Mining Ltd. Mr Peter
The information in this report that relates to gamma uranium
grades is based on information compiled by David Wilson BSc
18
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
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
grade core of
the mineralisation centred on EYN064
(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.
lake Way 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 figures 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 70ppm U3O8 over a
minimum downhole distance of 1m. Shallow aircore drilling has
been completed on a nominal 200m by 200m grid. All grade
values used in the calculation are based on chemical analysis
of representative drill samples.
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.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
19
Summary of Tenements
Lease
Lease Name
Project Name
Area
km2 Managing Company
Encounter Interest
E09/1297
Wanna
Bangemall Basin
65.1
Encounter Resources Limited
ELA69/2692 Beyondie
Bangemall Basin
353
Encounter Resources Limited
ELA69/2693 Beyondie
Bangemall Basin
625
Encounter Resources Limited
ELA69/2694 Beyondie
Bangemall Basin
593
Encounter Resources Limited
E52/1882
Tchintaby
Bangemall Basin
172.5
Encounter Resources Limited
E08/1779
Pingandy Creek Bangemall Basin
332.8
Encounter Resources Limited
85%
100%
100%
100%
83%
80%
E53/1232
Wiluna South
Lake Way South JV
66.8
Avoca Resources Limited
60% of Uranium Rights
E53/1158
Bitter Bore
Yeelirrie/Yilgarn
10.5
Encounter Resources Limited
ELA53/1427 Yeelirrie North
Yeelirrie/Yilgarn
168
Encounter Resources Limited
E29/577
Lakeview
Yilgarn
62.2
Encounter Resources Limited
E51/1127
Hillview
Yilgarn
202.1
Encounter Resources Limited
E37/978
Darlot East
Yilgarn
212.4
Encounter Resources Limited
ELA37/1062 Darlot East
Yilgarn
72.8
Encounter Resources Limited
E38/1784
Lake Irwin
Yilgarn
54.5
Encounter Resources Limited
ELA57/832
Nesbitt Soak
Yilgarn
200
Encounter Resources Limited
ELA57/833
Nesbitt Soak
Yilgarn
193.8
Encounter Resources Limited
E45/2500
Yeneena
Paterson
163.4
Encounter Resources Limited
E45/2501
Yeneena
Paterson
41.4
Encounter Resources Limited
E45/2502
Yeneena
Paterson
216.3
Encounter Resources Limited
E45/2503
Yeneena
Paterson
76.3
Encounter Resources Limited
E45/2561
Yeneena
Paterson
86
Encounter Resources Limited
E45/2657
Yeneena
Paterson
222.8
Encounter Resources Limited
E45/2658
Yeneena
Paterson
222.8
Encounter Resources Limited
ELA45/2805 Yeneena
Paterson
209.7
Encounter Resources Limited
ELA45/2806 Yeneena
Paterson
63.7
Encounter Resources Limited
82%
100%
81%
82%
100%
100%
83%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
20
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Corporate Governance Statement
Introduction
Since the introduction of the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best
Practice Recommendations (“ASX Guidelines” or “the Recommendations”), Encounter Resources Limited (“Company”)
has made it a priority to adopt systems of control and accountability as the basis for the administration of corporate
governance. Some of these policies and procedures are summarised in this report. Commensurate with the spirit of the ASX
Guidelines, the Company has followed each Recommendation where the Board has considered the Recommendation to be
an appropriate 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
Summary of Policy for Trading in Company Securities
Summary of Compliance Procedures
Procedure for the Selection, Appointment and Rotation of External Auditor
Shareholder Communication Strategy
Summary of Company’s Risk Management Policy
Explanation for Departures from Best Practice Recommendations
During the Company’s 2009/2010 financial year the Company has complied with the Corporate Governance Principles and
the corresponding Best Practice Recommendations as published by the ASX Corporate Governance Council (“Corporate
Governance Principles and Recommendations”)1 and has adopted the revised Principles and Recommendations
taking effect from reporting periods beginning on or after 1 January 2008. Significant policies and details of any significant
deviations from the principles are specified below.
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 complying with Recommendation 1.1 of the Corporate Governance Council, the Company has adopted a Board Charter
which clarifies the respective roles of the Board and senior management and assists in decision making processes. A copy
of the Board Charter is available on the Company’s website.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
21
Corporate Governance Statement continued
Board Processes
An agenda for the meetings has been determined to ensure certain standing information is addressed and other items which
are relevant to reporting deadlines and or regular review are scheduled when appropriate. The agenda is regularly reviewed
by the Chairman, the Managing Director and the Company Secretary.
Evaluation of Senior Executive Performance
The Company has not complied with Recommendation 1.2 of the Corporate Governance Council. Due to the early stage
of development of the Company it is difficult for quantitative measures of performance to be established. As the Company
progresses its projects, the board intends to establish appropriate evaluation procedures. The Chairman assesses the
performance of the Executive Directors on an informal basis.
Corporate Governance Council Recommendation 2
Structure the Board to Add Value
Board Composition
The Constitution of the Company provides that the number of Directors shall not be less than three. There is no requirement
for any share holding qualification.
The membership of the Board, its activities and composition is subject to periodic review. The criteria for determining the
identification and appointment of a suitable candidate for the Board shall include the quality of the individual, background of
experience and achievement, compatibility with other Board members, credibility within the scope of activities of the Company,
intellectual ability to contribute to Board duties and physical ability to undertake Board duties and responsibilities.
Directors are initially appointed by the Board and are subject to re election by shareholders at the next general meeting.
In any event one third of the Directors are subject to re election by shareholders at each general meeting.
The Board is comprised of four members, two Non-Executive and two Executive. The Non-Executive Directors are Mr
Paul Chapman (Chairman) and Dr Jonathan Hronsky. The skills, experience and expertise of all Directors is set out in the
Directors’ Report included in this Annual Report.
The Board has assessed the independence of its non executive directors according to the definition contained within the
ASX Corporate Governance Guidelines and has concluded that 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 of the Corporate Governance Council. 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 Chairman
The Chairman is not considered to be an independent director and as such Recommendation 2.2 of the Corporate Governance
Council has not been complied with. However, the Board believes that Mr Chapman is the most appropriate person for the
position as Chairman because of his industry experience and proven track record as a public company director.
Roles of Chairman and Chief Executive Officer
The roles of Chairman and Chief Executive Officer are exercised by different individuals, and as such the Company complies
with Recommendation 2.3 of the Corporate Governance Council.
Nomination Committee
The Board does not have a separate Nomination Committee comprising of a majority of independent Directors and as
such does not comply with Recommendation 2.4 of the Corporate Governance Council. The selection and appointment
process for Directors is carried out by the full Board. The Board considers that given the importance of Board composition
it is appropriate that all members of the Board partake in such decision making. The Company adopted the Nomination
Committee Charter on 8 February 2006.
22
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
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 of the Corporate Governance Council. 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
All Directors are encouraged to attend professional education courses relevant to their roles.
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.
Corporate Governance Council Recommendation 3
Promote Ethical and Responsible Decision Making
The Board actively promotes ethical and responsible decision making.
Code of Conduct
The Board has adopted a Code of Conduct that applies to all employees, executives and Directors of the Company, and
as such complies with Recommendation 3.1 of the Corporate Governance Council. This Code addresses expectations
for conduct in accordance with legal requirements and agreed ethical standards. A copy of the Code is available on the
Company’s website.
Security Trading Policy
The Board has committed to ensuring that the Company, its 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 of the Corporate
Governance Council. The policy also provides that the acknowledgement of the Chairman should be obtained prior to
trading. A summary of the Policy is available on the Company’s website.
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 of the Corporate Governance Council. 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.
Financial reporting
The Board relies on senior executives to monitor the internal controls within the Company. Financial performance is monitored
on a regular basis by the Managing Director who reports to the Board at the scheduled Board meetings.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
23
Corporate Governance Statement continued
Corporate Governance Council Recommendation 5
Make Timely and balanced disclosure
The Board reviews the performance of the external auditors on an annual basis and meets with them during the year to
review findings and assist with Board recommendations.
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.
Continuous Disclosure
The Board is committed to the promotion of investor confidence by providing full and timely information to all security
holders and market participants about the Company’s activities and to comply with the continuous disclosure requirements
contained in the Corporations Act 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 of the Corporate Governance Council.
Continuous disclosure is discussed at all regular Board meetings and on an ongoing basis the Board ensures that all activities
are reviewed with a view to the necessity for 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 of the Corporate Governance Council. 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 in both hardcopy on request and on the Company website
at www.enrl.com.au.
Shareholders are able to pose questions on the audit process and the financial statements directly to the independent
auditor who attends the Company Annual General Meeting for that purpose.
Corporate Governance Council Recommendation 7
Recognise and manage risk
Risk management policy
The Board has adopted a risk management policy that sets out a framework for a system of risk management and internal
compliance and control, whereby the Board delegates day-to-day management of risk to the Managing Director, therefore
complying with Recommendation 7.1 of the Corporate Governance Council. The Board is responsible for supervising
management’s framework of control and accountability systems to enable risk to be assessed and managed.
Risk management and the internal control system
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.
24
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Corporate Governance Council Recommendation 7 continued
Recognise and manage risk
In order to implement the Company’s Risk Management Policy, it was considered important that the Company establish
an internal control regime in order to:
• Assist the Company to achieve its strategic objectives;
• Safeguard the assets and interests of the Company and its stakeholders; and
• Ensure the accuracy and integrity of external reporting.
Key identified risks to the business are monitored on an ongoing basis as follows:
• Business risk management
The Company manages its activities within budgets and operational and strategic plans.
•
Internal controls
The Board has implemented internal control processes typical for the Company’s size and stage of development.
It requires the senior executives to ensure the proper functioning of internal controls and in addition it obtains advice
from the external auditors as considered necessary.
• Financial reporting
Directors approve an annual budget for the Company and regularly review performance against budget at Board
Meetings.
• Operations review
Members of the Board regularly visit the Company’s exploration project areas, reviewing both geological practices, and
environmental and safety aspects of operations.
• Environment and safety
The Company is committed to ensuring that sound environmental management and safety practices are maintained on
its exploration activities. As the Company is an active uranium explorer it has also incorporated a radiation management
plan into its occupational health and safety policies. Reports on levels of radiation exposure during the Company’s
activities are made available to the Board.
The Company’s risk management strategy is evolving and will be an ongoing process and it is recognised that the level and
extent of the strategy will develop with the growth and change in the Company’s activities.
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 of the
Corporate Governance Council. The Board believes that the Company is currently effectively communicating its significant
and material risks to the Board and its affairs are not of sufficient complexity to justify the implementation of a more 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 of the Corporate
Governance Council.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
25
Corporate Governance Statement continued
Corporate Governance Council Recommendation 8
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
of the Corporate Governance Council. Remuneration arrangements for Directors are determined by the full Board. The
Board is also responsible for setting performance criteria, performance monitors, share option schemes, superannuation,
termination and retirement entitlements, and professional indemnity and liability insurance cover.
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 of the Corporate Governance Council.
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. In the current financial year, no Non-Executive Director
received share options as remuneration. Share options which were issued to a Non-Executive Director in a prior reporting
period, and are currently still held by the Director, 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.
26
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
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 2010 (the Group).
Directors
The names and details of the Directors of Encounter
America based in Denver, Colorado. Whilst at WMC, Mr
Resources Limited during the financial year and until the
Bewick gained extensive experience in project generation
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 Paul Chapman is a chartered accountant with over
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.
twenty years experience in the resources sector gained
Jonathan Hronsky – BAppSci, PhD, MAusIMM, FSEG
in Australia and the United States. Mr Chapman has
Non-executive director appointed 10 May 2007
experience across a range of commodity businesses
Dr Jon Hronsky has more than twenty five years of
including gold, nickel, uranium, manganese, bauxite/
experience in the mineral exploration industry, primarily
alumina and oil/gas. Mr Chapman has held managing
focused on project generation, technical innovation
director and other senior management roles in public
and exploration strategy development. Dr Hronsky has
companies of various sizes. Mr Chapman was a director
particular expertise in targeting for nickel sulfide deposits,
of Albidon Limited until 22 April 2009 and is the chairman
but has worked across a diverse range of commodities.
of ASX listed gold producer Sliver Lake Resources Ltd and
His work led to the discovery of the West Musgrave nickel
minerals explorer Rex Minerals Ltd.
Will Robinson – B.Comm, MAusIMM
Managing Director (Executive) appointed 30 June 2004
Mr Robinson is a resources industry commercial and finance
specialist with over sixteen 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. 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. Mr Robinson founded
Encounter Resources Limited in 2004 and has overseen
the development of the Company as its Managing Director.
Mr Robinson is the President of the Association of Mining
and Exploration Companies (AMEC).
Peter Bewick – B.Eng (Hons), MAusIMM
Exploration Director (Executive) appointed 7 October 2005
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. He is currently
a Director of exploration consulting group Western Mining
Services and Chairman of the board of management of
the Centre for Exploration Targeting at the University of
Western Australia.
Company Secretary
Kevin Hart – B.Comm, CA
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, Endeavour
Corporate, which specialises in the provision of company
secretarial services to ASX listed entities.
Mr Bewick is an experienced geologist and has held a
Dan travers – B.Sc (Hons), FCCA
number of senior mine and exploration geological roles
Mr Travers is a member of the Association of Chartered
during a fourteen year career with WMC. These roles
Certified Accountants and was appointed to the position
include Exploration Manager and Geology Manager of
of Joint Company Secretary on 20 November 2008. He is
the Kambalda Nickel Operations, Exploration Manager for
an employee of Endeavour Corporate, which specialises in
St Ives Gold Operation, Exploration Manager for WMC’s
the provision of company secretarial services to ASX listed
Nickel Business Unit and Exploration Manager for North
entities in the mining and exploration industry.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
27
Directors’ Report continued
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
Options vested at
the reporting date
4,747,400
21,846,900
4,725,000
–
–
–
800,000
500,000
–
–
800,000
500,000
Included in the Directors’ interests in Unlisted Options, there are 1,300,000 options that are vested and exercisable as at
the date of signing this report.
Directors’ Meetings
Review of Activities
The number of meetings of the Company’s Directors held
during the year ended 30 June 2010, and the number of
Exploration
In the 2009/10 financial year the main exploration focus
meetings attended by each Director are as follows:
for the company was the Yeneena project in the Paterson
Board of Directors’ Meetings
Held
Attended
Province of Western Australia.
Director
P Chapman
W Robinson
P Bewick
J Hronsky
5
5
5
5
5
5
5
5
Principal Activities
The principal activity 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 company completed drill programs at six separate
prospects within
this extensive exploration project
(1300km2) located south-west of the giant Telfer gold/
copper deposit. The targeted drilling resulted in high
grade intersections of copper (BM1 prospect), zinc (BM5
prospect) and manganese (MN1 prospect).
The discovery of high grade copper in multiple intersections
over an extensive area at the BM1 prospect is a very
encouraging development for the company.
Financial Position
At the end of the financial year the Group had $2,374,645
(2009: $2,278,318) in cash and at call deposits.
The consolidated net loss after income tax for the financial
year was $918,288 (2009: $1,987,843).
Capitalised mineral exploration and evaluation expenditure
is $6,052,602 (2009: $3,716,716).
Included in the consolidated loss for the current year is
Expenditure was principally focused on the exploration for
a write-off of deferred exploration expenditure totalling
base metals and manganese at the Company’s Yeneena
$666,519 (2009: $1,311,311).
Project in the Paterson Province of Western Australia.
Dividends
No dividend has been paid since the end of the previous
financial year and no dividend is recommended for the
current year.
28
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Significant Changes in the State of Affairs
During the year the Group acquired the remaining 25% interest in the Yeneena Joint Venture from Barrick (Australia
Pacific) Limited.
On 2 October 2009 the Company completed a placement of 10,289,535 shares at $0.34 cents each, raising $3,489,442
before costs. Subsequent to the balance date the Company completed a placement of 11,482,925 shares at $0.27 each,
raising $3,100,390 before costs.
Other than the above, 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.
Options over unissued Capital
unlisted Options
During the financial year the Company granted no unlisted options (2009: 1,125,000) over unissued shares to employees
of the Company.
During the year no options were cancelled or expired (2009: 100,000 unlisted options were cancelled on the cessation
of employment of an employee).
During the financial year 275,000 (2009: nil) ordinary shares were issued on the exercise of options. The shares were
issued at 10 cents each and were exercisable on or before 28 February 2014.
Since the end of the financial year no options have been issued by the Company. No options have been exercised since
the end of the financial year.
As at the date of this report 2,750,000 unissued ordinary shares of the Company are under option as follows:
Number of Options Granted
Exercise Price
Grant Date
Expiry Date
100,000
100,000
250,000
50,000
125,000
500,000
400,000
400,000
325,000
500,000
20 cents
45 cents
52.5 cents
50 cents
50 cents
53.5 cents
55 cents
70 cents
30 cents
10 cents
23 March 2006
15 May 2006
23 March 2011
15 May 2011
7 December 2006
7 December 2011
9 August 2007
9 August 2012
11 December 2007
30 November 2012
11 December 2007
30 November 2012
11 December 2007
30 November 2012
11 December 2007
30 November 2012
1 July 2008
1 March 2009
30 June 2013
28 February 2014
All options on issue at the date of this report are vested and exercisable.
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.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
29
Directors’ Report continued
Matters Subsequent to the End of the Financial Year
The Company completed a share placement on 26 August 2010 by the issue of 11,482,925 ordinary fully paid shares
at $0.27 each, raising $3,100,390 before costs.
Other than the above, 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.
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:
2010
Directors
P Chapman
W Robinson
P Bewick
J Hronsky
total
Base
Emolument
$
Superannuation
Contributions
$
Other
Benefits
$
Value of
Options Granted
$
39,267
213,513
196,333
40,600
3,534
19,216
17,670
3,654
489,713
44,074
–
–
–
–
–
–
–
–
–
–
Total
$
42,801
232,729
214,003
44,254
533,787
30
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
2009
Directors
P Chapman
W Robinson
P Bewick
J Hronsky
total
Base
Emolument
$
Superannuation
Contributions
$
Other
Benefits
$
Value of
Options Granted
$
38,667
210,250
193,333
40,000
3,480
18,923
17,400
3,600
482,250
43,403
–
–
–
–
–
–
–
–
–
–
Total
$
42,147
229,173
210,733
43,600
525,653
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 two year term commencing
23 January 2009 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.
unlisted Options
No options over unissued shares have been issued to Directors or Key Management Personnel of the Company during
or since the end of the financial year.
No options were exercised by Key Management Personnel during or since the end of the financial year.
End of Remuneration Report
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.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
31
Directors’ Report continued
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.
Non-audit Services
During the year WHK Horwath the Company’s auditor, has not performed any other services in addition to their
statutory duties:
Consolidated
Company
2010
$
2009
$
2010
$
2009
$
Total remuneration paid to auditors during the financial year:
Audit and review of the Company’s financial statements
30,500
27,800
30,500
27,800
Other services
Total
–
–
–
–
30,500
27,800
30,500
27,800
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:
n all non-audit services are reviewed by the board to ensure they do not impact the impartiality and objectivity of the
auditor; and
n
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 33.
This report is made in accordance with a resolution of the Directors.
Dated at Perth this 28th day of September 2010.
W Robinson
Director
32
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
AUDITOR’S INDEPENDENCE DECLARATION
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of
Encounter Resources Limited for the year ended 30 June 2010, I declare that, to the best of my knowledge and
belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
WHK HORWATH PERTH AUDIT PARTNERSHIP
NICHOLAS HOLLENS
Partner
Perth, WA
Dated this 28th day of September 2010
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
33
Total Financial SolutionsHorwath refers to Horwath International Association, a Swiss verein. Each member of the Association is a separate and independent legal entity.Member Horwath International WHK Horwath Perth Audit Partnership ABN 96 844 819 235 Level 6, 256 St Georges Terrace Perth WA 6000 Australia GPO Box P1213 Perth WA 6844 Australia Telephone +61 8 9481 1448 Facsimile +61 8 9481 0152 Email perth@whkhorwath.com.au www.whkhorwath.com.au A WHK Group firm
Consolidated Statement of Comprehensive Income
For the financial year ended 30 June 2010
Revenue
total revenue
Employee expenses
Employee expenses recharged to exploration
Equity based remuneration expense
Non-executive Director’s fees
Depreciation expense
Corporate expenses
Joint venture administration costs recharged
Other expenses from ordinary activities
Exploration costs written off and expensed
Loss before income tax
Income tax benefit/(expense)
Loss after tax
Consolidated
2010
$
2009
$
305,373
305,373
(896,280)
716,688
(44,762)
(79,867)
(16,629)
(105,536)
383
(303,227)
(666,519)
174,288
174,288
(935,703)
685,461
(230,297)
(78,667)
(23,103)
(100,868)
24,806
(305,635)
(1,311,311)
(1,090,376)
(2,101,029)
172,088
113,186
(918,288)
(1,987,843)
Note
5
11
6
7
17
Other comprehensive income
–
–
total comprehensive income for the year
(918,288)
(1,987,843)
Earnings per share for loss attributable to the
ordinary equity holders of the Company
Cents
Cents
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
28
28
(1.2)
(1.2)
(2.9)
(2.9)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
34
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Consolidated Statement of Financial Position
As at 30 June 2010
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
total current assets
Non-current assets
Property, plant and equipment
Capitalised mineral exploration and evaluation expenditure
total non-current assets
total assets
Current liabilities
Trade and other payables
Employee benefits
total current liabilities
total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Equity remuneration reserve
total equity
Note
8
9(a)
9(b)
Consolidated
2010
$
2009
$
2,374,645
320,961
96,079
2,278,318
160,374
43,586
2,791,685
2,482,278
11
12
152,274
6,052,602
220,907
3,716,716
6,204,876
3,937,623
8,996,561
6,419,901
14(a)
14(b)
454,483
62,973
517,456
517,456
322,422
46,585
369,007
369,007
8,479,105
6,050,894
15
17
17
12,745,067
(4,742,176)
476,214
9,443,330
(3,823,888)
431,452
8,479,105
6,050,894
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
35
Consolidated Statement of Changes in Equity
For the financial year ended 30 June 2010
Issued
capital
$
Accumulated
losses
$
Equity
remuneration
reserve
$
total
$
2009
Balance at the start of the financial year
9,443,330
(1,836,045)
201,155
7,808,440
Loss for the financial year
Movement in equity remuneration reserve
–
–
(1,987,843)
–
(1,987,843)
–
230,297
230,297
Balance at the end of the financial year
9,443,330
(3,823,888)
431,452
6,050,894
2010
Balance at the start of the financial year
9,443,330
(3,823,888)
431,452
6,050,894
Loss for the financial year
Movement in equity remuneration reserve
–
–
Transactions with equity holders in their
capacity as equity holders:
Shares issued
3,301,737
(918,288)
–
(918,288)
–
–
44,762
44,762
–
3,301,737
Balance at the end of the financial year
12,745,067
(4,742,176)
476,214
8,479,105
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
36
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Consolidated Statement of Cash Flows
For the financial year ended 30 June 2010
Cash flows from operating activities
State Government funded drilling rebate
R&D tax concession tax refund
Interest received
Payments to suppliers and employees
Note
2010
$
150,000
113,732
157,352
(629,858)
Consolidated
2009
$
–
–
181,023
(525,733)
Net cash used in operating activities
27
(208,774)
(344,710)
Cash flows from investing activities
Payments for project acquisition costs
Payments for exploration and evaluation
Payments for plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from the issue of shares
Payments for share issue costs
Net cash used in financing activities
Net increase/(decrease) in cash held
Cash at the beginning of the financial year
(400,000)
(2,568,314)
(7,333)
–
(2,040,876)
(37,139)
(2,975,647)
(2,078,015)
3,291,745
(10,997)
3,280,748
96,327
2,278,318
–
–
–
(2,422,725)
4,701,043
Cash at the end of the financial year
8(a)
2,374, 645
2,278,318
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
37
Notes to the Financial Statements
For the financial year ended 30 June 2010
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 financial
statements for 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.
On 28 June 2010, the government announced the passage of the Corporations Amendment (Corporate Reporting
Reform) Bill 2010. The changes contained within the Bill have come into effect for the financial year ended 30 June
2010. A key change that impacted the financial report of the Group is the abolition of the requirement to prepare
parent company financial statements in addition to consolidated financial statements. As a result of this, the separate financial
statements of the parent entity, have not been presented within this group financial report. Certain disclosures required
by the Corporations Act 2001 in relation to the parent entity are detailed in Note 30 to the financial statements.
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 28th
September 2010.
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.
Changes in accounting policies on initial application of Accounting Standards
During the year, certain accounting policies have changed as a result of new or revised accounting standards which
became operative for the annual reporting period commencing on 1 July 2009.
The affected policies and standards, relevant to the Group are:
n
Principles of consolidation – revised AASB 127 Consolidated and Separate Financial Statements and changes
made by AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary,
Jointly Controlled Entity and Associate
n Business combinations – revised AASB 3 Business Combinations
n
n
Segment reporting – new AASB 8 Operating Segments
Financial Instruments – revised AASB 7 Financial Instruments: Disclosures
n Borrowing Costs – revised AASB 123 Borrowing Costs
n
Presentation of Financial Statements – AASB 101
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 2010, but have
not been applied in preparing this report:
n AASB 9 Financial Instruments includes requirements for the classification and measurement of financial assets
resulting from the first part of Phase 1 of the project to replace AASB 139 Financial Instruments: Recognition
and Measurement.
38
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Note 1 Summary of significant accounting policies continued
(a) Basis of preparation continued
AASB 9 will become mandatory for the Group’s 30 June 2014 financial statements. Retrospective application
is generally required, although there are exceptions, particularly if the entity adopts the standard for the year
ended 30 June 2012 or earlier. The Group has not yet determined the potential effect of the standard.
n AASB 124 Related Party Disclosures (revised December 2009) simplifies and clarifies the intended meaning
of the definition of a related party and provides a partial exemption from the disclosure requirements for
government-related entities. The amendments, which will become mandatory for Group’s 30 June 2012 financial
statements, are not expected to have any impact on the financial statements.
n AASB 2009-5 Further amendments to Australian Accounting Standards arising from the Annual Improvements
Process affect various AASBs resulting in minor changes for presentation, disclosure, recognition and measurement
purposes. The amendments, which become mandatory for the Group’s 30 June 2011 financial statements,
are not expected to have a significant impact on the financial statements.
n AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issue [AASB 132]
(October 2010) clarify that rights, options or warrants to acquire a fixed number of an entity’s own equity
instruments for a fixed amount in any currency are equity instruments if the entity offers the rights, options
or warrants pro-rata to all existing owners of the same class of its own non-derivative equity instruments. The
amendments, which will become mandatory for the Group’s 30 June 2011 financial statements, are not expected
to have any impact on the financial statements.
n
IFRIC19 Extinguishing Financial Liabilities with Equity Instruments addresses the accounting by an entity when
the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor
of the entity to extinguish all or part of the financial liability. IFRIC 19 will become mandatory for the Group’s
30 June 2011 financial statements, with retrospective application required. The Group has not yet determined the
potential effect of the interpretation.
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 Group’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
Operating segments are identified and segment information disclosed, where appropriate, on the basis of internal reports
reviewed by the Company’s board of directors, being the Group’s Chief Operating Decision Maker, as defined by AASB 8.
Adoption of AASB 8 by the Group has not resulted in a redefinition of previously reported operating segments.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
39
Notes to the Financial Statements continued
For the financial year ended 30 June 2010
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.
Amounts receivable from the Australian Tax Office in respect of research and development tax concession claims
are recognised in the year in which the expenditure on which the claim was incurred.
(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.
40
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Note 1 Summary of significant accounting policies continued
(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.
(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 Group 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 Group and the cost of
the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the
financial period in which they are incurred.
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 is written off as incurred or accumulated in respect of each
identifiable area of interest and capitalised. 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:
n such costs are expected to be recouped through the successful development and exploitation of the area of
interest, or alternatively by its sale; or
n 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.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
41
Notes to the Financial Statements continued
For the financial year ended 30 June 2010
Note 1 Summary of significant accounting policies continued
(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.
(l) trade and other payables
These amounts represent liabilities for goods and services provided to the Group 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.
42
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Note 1 Summary of significant accounting policies continued
(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.
(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 Group determines the classification of
its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each
financial year-end.
All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Group
commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under
contracts that require delivery of the assets within the period established generally by regulation or convention in the
marketplace.
(i) Financial assets at 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.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
43
Notes to the Financial Statements continued
For the financial year ended 30 June 2010
Note 1 Summary of significant accounting policies continued
(r) Investments and other financial assets continued
(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.
(s) Fair value estimation
A number of the Group’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.
44
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Note 2 Financial risk management
The Group 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 Group 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 Group has no investments and the nature of the business activity of the Group does not result in trading
receivables. The receivables that the Group 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 non-recovery
of receivables from this source is considered to be negligible.
Cash deposits
The Group’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 AA 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 Group currently has no significant concentrations of credit risk.
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’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 Group’s reputation.
The Group 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.
(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 Group’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 Group has significant cash assets which may be susceptible to fluctuations in changes in interest rates. Whilst the
Group 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 Group does mitigate potential
interest rate risk by entering into short to medium term fixed interest investments.
The Group does not have any direct contact with foreign exchange or equity risks other than their effect on the
general economy.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
45
Notes to the Financial Statements continued
For the financial year ended 30 June 2010
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 Group and that are believed to be reasonable under
the circumstances.
Accounting for capitalised exploration and evaluation expenditure
The Group’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
The group has identified its operating segments based on the internal reports that are reviewed and used by the board of
directors in assessing performance and determining the allocation of resources. Reportable segments disclosed are based
on aggregating operating segments, where the segments have similar characteristics. The group’s sole activity is mineral
exploration and resource development wholly within Australia, therefore it has aggregated all operating segments into the
one reportable segment being mineral exploration.
The reportable segment is represented by the primary statements forming these financial statements.
Note 5 Revenue
Operating activities
State Government funded drilling rebate
Interest receivable
Other income
Note 6 Loss for the year
Loss before income tax includes the following specific expenses:
Depreciation
Office equipment
Leasehold improvements
Rental expenses on operating leases – minimum lease payments
Exploration expenditure written off and expensed
Consolidated
2010
$
2009
$
150,000
155,123
250
305,373
–
174,288
–
174,288
9,250
7,379
16,629
28,142
666,519
15,724
7,379
23,103
29,492
1,311,311
46
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Note 7 Income tax
(a) Income tax expense
Current income tax:
Current income tax charge (benefit)
Current income tax not recognised
R&D tax refund receivable
Deferred income tax:
Relating to origination and reversal of timing differences
Deferred income tax benefit not recognised
Consolidated
2010
$
2009
$
(993,401)
993,401
(172,088)
(21,865)
21,865
(784,446)
784,446
(113,186)
(664,887)
664,887
Income tax expense/(benefit) reported in the income statement
(172,088)
(113,186)
The Group submitted a claim to the Australian Taxation Office for a Research and Development tax concession in respect
of qualifying transactions occurring during the year ended 30 June 2009. The $171,542 refund (2009: $113,186) has
been received by the Group prior to the date of signing this financial report.
(b) Reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
(1,090,376)
(1,987,843)
Tax at the Australian rate of 30% (2009: 30%)
(327,113)
(596,353)
Tax effect of permanent differences:
Non-deductible share based payment
R&D tax refund receivable
Exploration costs written off
Non-deductible entertainment
Capital raising costs claimed
Net deferred tax asset benefit not brought to account
13,429
(172,088)
199,956
–
(46,902)
160,630
69,089
(113,186)
364,926
622
(33,400)
195,116
Tax (benefit)/expense
(172,088)
(113,186)
(c) Deferred tax – Balance Sheet
Liabilities
Prepaid expenses
Capitalised exploration expenditure
Assets
Revenue losses available to offset against future taxable income
Employee provisions
Accrued expenses
Deductible equity raising costs
Net deferred tax asset/(liability)
28,823
1,815,781
13,076
1,115,015
1,844,604
1,128,091
3,118,000
18,892
6,000
60,550
2,386,343
13,976
7,685
39,942
3,203,442
2,447,946
1,358,838
1,319,855
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
47
Notes to the Financial Statements continued
For the financial year ended 30 June 2010
Note 7 Income tax continued
(d) Deferred tax – Income Statement
Liabilities
Accrued income
Prepaid expenses
Capitalised exploration expenditure
Assets
Accruals
Increase in tax losses carried forward
Employee provisions
Consolidated
2010
$
2009
$
–
(12,257)
(700,766)
(1,685)
731,657
4,916
2,689
5,827
(200,270)
3,195
854,712
(1,266)
Deferred tax benefit/(expense) not recognised
21,865
664,887
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 of $10,393,333 (2009: $7,954,477) were incurred by Australian entities.
Note 8 Current assets – Cash and cash equivalents
Cash at bank and on hand
Deposits at call
Consolidated
2010
$
2009
$
61,863
2,312,782
143,954
2,134,364
2,374,645
2,278,318
(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 statement of cash flows as follows:
Cash and cash equivalents per statement of cash flows
2,374,645
2,278,318
(b) Deposits at call
The deposits are bearing fixed interest rates of 5.35% (2009: 4.0%).
These deposits have an average maturity of 30 days.
48
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Note 9 Current assets – Receivables
(a) Trade and other receivables
Other receivables
Recoverable joint venture expenses
GST recoverable
(b) Other current assets
Prepaid tenement costs
Prepaid insurance
Details of fair value and exposure to interest risk are included at note 18.
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 Encounter Resources Limited’s wholly owned subsidiary companies:
Encounter Operations Pty Ltd
Hamelin Resources Pty Ltd
Subsidiary Company
Encounter Operations Pty Ltd
Hamelin Resources Pty Ltd
Country of
Incorporation
Australia
Australia
Consolidated
2010
$
2009
$
185,327
4,808
130,826
320,961
84,444
11,635
96,079
124,527
12,792
23,055
160,374
30,678
12,908
43,586
Company
2010
$
2009
$
2
1
2010
%
100%
100%
2
–
Ownership Interest
2009
%
100%
N/a
Encounter Operations Pty Ltd was incorporated in Western Australia on 27 November 2006.
n
n Hamelin Resources Pty Ltd was incorporated in Western Australia on 24 November 2009, and has been dormant
since its incorporation.
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
Hamelin Resources Pty Ltd
Company
2010
$
2009
$
3,878,589
–
1,123,268
–
The loan to Encounter Operations Pty Ltd, to fund exploration activity is non interest bearing. The Directors of Encounter
Resources Limited do not intend to call for repayment within 12 months.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
49
Notes to the Financial Statements continued
For the financial year ended 30 June 2010
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
Net book value at end of the year
Office equipment
Net book value at start of the year
Additions
Depreciation
Net book value at end of the year
Leasehold improvements
Net book value at the start of the year
Additions
Depreciation
Net book value at the end of the year
Consolidated
2010
$
2009
$
339,457
(219,206)
337,594
(159,869)
120,251
177,725
68,569
(43,925)
24,644
22,137
(14,758)
7,379
63,099
(34,675)
28,424
22,137
(7,379)
14,758
152,274
220,907
177,725
1,863
(59,337)
120,251
28,424
5,470
(9,250)
24,644
14,758
–
(7,379)
7,379
266,126
440
(88,841)
177,725
24,182
19,966
(15,724)
28,424
7,855
14,282
(7,379)
14,758
No items of property, plant and equipment have been pledged as security by the Group.
50
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
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 by Encounter Resources Limited on assets
not governed by joint venture agreements (i)
Costs capitalised by Encounter Operations Pty Ltd
in respect of the Yeneena Project (ii)
Capitalised share of exploration assets under JV Agreements (iii)
Cost carried forward
Consolidated
2010
$
2009
$
455,301
646,598
3,725,243
1,872,058
1,078,365
1,991,753
6,052,602
3,716,716
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.
(ii) Exploration and evaluation expenditure recognised incurred on tenements under the Yeneena Project, includes pre
and post earn in spend plus $400,000 in respect of the acquisition of the remaining 25% interest in the Yeneena
Project from Barrick (Australia Pacific) Limited.
(iii) Exploration and evaluation expenditure recognised on tenements under 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.
Consolidated
2010
$
2009
$
Capitalised exploration costs at the start of the period
3,716,716
3,049,148
Capitalised costs in respect of the acquisition of the remaining
25% interest in the Yeneena Project from Barrick (Australia Pacific) Limited
Total exploration costs capitalised for the period
400,000
2,602,405
–
1,978,879
Total exploration costs written off and expensed for the period
(666,519)
(1,311,311)
Capitalised exploration costs at the end of the period
6,052,602
3,716,716
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
51
Notes to the Financial Statements continued
For the financial year ended 30 June 2010
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 $1,872,058 (2009: $1,991,753).
During the reporting period the Group recognised an expense of $289,495 (2009: $885,185) being its share of the
exploration expenditure written off by the joint venture entities during the period.
(i) Lake Way Joint Venture
Cash and cash equivalents
Trade and other receivables
Capitalised mineral exploration and evaluation expenditure
Total Assets
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 originally had an 80% interest in a portfolio of projects and
tenements which is increasing due to the election of the Joint Venture
partner Avoca Resources Limited to cease contributing to Joint Venture
activities and hence diluting its own interest.
Cash and cash equivalents
Trade and other receivables
Capitalised mineral exploration and evaluation expenditure
Total Assets
Trade and other payables
Total Liabilities
Net Assets
Share of Joint Venture’s revenue, expenses and results:
Revenue
Exploration costs written off
Administration expenses
Result before tax
2010
$
5,680
1,146
174,711
181,537
7,213
7,213
Consolidated
2009
$
17,482
1,318
170,301
189,101
19,188
19,188
174,324
169,913
1
–
1
17
–
17
9,053
381
2,140,673
18,579
3,890
2,239,309
2,150,107
2,261,778
3,693
3,693
16,608
16,608
2,146,414
2,245,170
2
(289,495)
(123)
2,714
(885,185)
(124)
(289,616)
(882,595)
52
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
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
2010
$
2009
$
396,406
58,077
454,483
301,717
20,705
322,422
62,973
46,585
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
2010
No.
2009
No.
2010
No.
2009
No.
79,161,435
68,596,900
12,745,067
9,443,330
(c) Share movements during the year
Balance at the start of the financial year
Share placement
Issued on exercise of options
Less share issue costs
$0.34
$0.10
68,596,900
10,289,535
275,000
–
68,596,900
–
–
–
9,443,330
3,489,442
27,500
(215,205)
9,443,330
–
–
–
Balance at the end of the financial year
79,161,435
68,596,900
12,745,067
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.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
53
Notes to the Financial Statements continued
For the financial year ended 30 June 2010
Note 16 Option Plan
The establishment of the Encounter Resources Limited Directors, Officers and Employees Option Plan (‘the Plan”) was
last approved by a resolution at the Annual General Meeting of shareholders of the Company on 30 November 2009.
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 no options over unissued shares.
(b) Options exercised during the year
During the financial year the Company issued shares on the exercise of 275,000 unlisted employee options (2009: Nil).
The options were exercised at $0.10 each and were to expire 28 February 2014.
(c) Options cancelled during the year
During the year no options (2009: 100,000) were cancelled upon termination of employment.
(d) Options on issue at the balance date
The number of options outstanding over unissued ordinary shares at 30 June 2010 is 2,750,000 (2009: 3,025,000).
The terms of these options are as follows:
Number of options outstanding
Exercise price
Expiry date
100,000
100,000
250,000
50,000
125,000
500,000
400,000
400,000
325,000
500,000
2,750,000
20 cents
45 cents
52.5 cents
50 cents
50 cents
53.5 cents
55 cents
70 cents
30 cents
10 cents
23 March 2011
15 May 2011
7 December 2011
9 August 2012
30 November 2012
30 November 2012
30 November 2012
30 November 2012
30 June 2013
28 February 2014
54
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Note 16 Option Plan continued
(e) Subsequent to the balance date
No options have been granted subsequent to the balance date to the date of signing this report.
No options have been exercised subsequent to the balance date to the date of signing this report.
Reconciliation of movement of options over unissued shares
during the period including weighted average exercise price (WAEP)
2010
2009
No.
WAEP
(cents)
No.
Options outstanding at the start of the year
3,025,000
40.5
2,000,000
Options granted during the year
Options exercised during the year
Options expiring unexercised during the year
–
(275,000)
–
–
10.0
–
1,125,000
–
(100,000)
Options outstanding at the end of the year
2,750,000
43.6
3,025,000
WAEP
(cents)
54.6
16.2
20.0
40.5
Basis and assumptions used in the valuation of options
The options were valued using the Black-Scholes option valuation methodology.
2010
No options granted during the financial year.
Date granted
2009
1 July 2008
1 March 2009
Number of
options granted
Exercise price
(cents)
Expiry date
Risk free
interest
rate used
Volatility
applied
Option
valuation
(cents)
350,000*
775,000*
30.0
10.0
30 June 2013
28 February 2014
6.75%
3.61%
52%
120%
12.06
5.65
*Options are subject to a 12 month vesting period
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.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
55
Notes to the Financial Statements continued
For the financial year ended 30 June 2010
Note 17 Reserves and accumulated losses
Consolidated
Balance at the beginning of the year
Loss for the period
Movement in equity remuneration reserve
in respect of options issued
Transfer to accumulated losses on exercise of options
Transfer to accumulated losses on cancellation of options
2010
Equity
remuneraton
reserve (i)
$
2009
Equity
remuneration
reserve (i)
$
Accumulated
losses
$
Accumulated
losses
$
(3,823,888)
(918,288)
431,452
–
(1,865,530)
(1,987,843)
230,640
–
–
–
–
44,762
–
–
–
–
29,485
230,297
–
(29,485)
Balance at the end of the year
(4,742,176)
476,214
(3,823,888)
431,452
(i) Equity remuneration reserve
The equity remuneration reserve is used to recognise the fair value of options issued but not exercised.
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):
2010
Consolidated
Trade and other payables
2009
Consolidated
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
$
376,406 376,406 376,406
376,406 376,406 376,406
276,099 276,099 276,099
276,099 276,099 276,099
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
56
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Note 18 Financial instruments
Interest rate risk
At the reporting date the interest profile of the Group’s interest-bearing financial instruments was:
Fixed rate instruments
Financial assets
Variable rate instruments
Financial assets
Carrying amount ($)
2010
–
2009
–
2,374,645
2,278,318
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.
2010
Profit or loss
Equity
1%
increase
1%
decrease
1%
increase
1%
decrease
Variable rate instruments
23,746
(23,746)
23,746
(23,746)
2009
Variable rate instruments
22,783
(22,783)
22,783
(22,783)
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
2010
2009
Carrying
amount
$
Fair value
$
Carrying
amount
$
Fair value
$
2,374,645
–
(376,406)
2,374,645
–
(376,406)
2,278,318
129,352
(276,099)
2,278,318
129,352
(276,099)
1,998,239
1,998,239
2,131,571
2,131,571
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 ended 30 June 2010 or 30 June 2009.
The Company has no franking credits available as at 30 June 2010 or 30 June 2009.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
57
Notes to the Financial Statements continued
For the financial year ended 30 June 2010
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) Equity instrument disclosures relating to key management personnel
Unlisted Options provided as remuneration and shares issued on exercise of such options
No options over unissued shares have been issued to key management personnel of the Company during the current
or prior financial year.
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.
Name – Directors
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
2010
P Chapman
W Robinson
P Bewick
J Hronsky
2009
P Chapman
W Robinson
P Bewick
J Hronsky
–
–
800,000
500,000
–
–
800,000
500,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
800,000
500,000
–
–
800,000
500,000
Vested and
exercisable at
end of the year
–
–
800,000
500,000
–
–
400,000
500,000
58
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Note 20 Key management personnel disclosures continued
(c) 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 related parties are set out below. There were no shares granted during the reporting period as compensation.
Name – Directors
2010
P Chapman
W Robinson
P Bewick
J Hronsky
2009
P Chapman
W Robinson
P Bewick
J Hronsky
Balance at the
start of the year
Received during
the year on exercise
of options
Other changes
during the year
Balance at the
end of the year
4,747,000
21,846,800
4,725,000
–
4,747,400
21,846,900
4,725,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,747,400
21,846,900
4,725,000
–
4,747,400
21,846,900
4,725,000
–
(d) Loans made to key management personnel
No loans were made to key personnel, including personally related entities during the reporting period.
(e) Other transactions with key management personnel
There were no other transactions with key management personnel.
Note 21 Remuneration of auditors
Audit and review of the Company’s financial statements
Other services
Total
2010
$
30,500
–
30,500
Consolidated
2009
$
27,800
–
27,800
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
59
Notes to the Financial Statements continued
For the financial year ended 30 June 2010
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 2010
or 30 June 2009 other than:
Yeneena Project Gold Claw-back
Included in the agreement for the Group’s acquisition of the remaining 25% interest in the Yeneena Project is a gold
claw-back right in the event of a major discovery of a deposit of minerals dominant in gold, with gold revenue measured
in a mining study equal to or exceeding 65% of total revenue and where a JORC compliant mineral resources exceeds
4,000,000 ounces of gold or gold equivalent, or is capable of producing at least 200,000 ounces of gold or gold equivalent
per year for 10 years. Under the agreement Barrick (Australia Pacific) Limited retains the right to regain an interest of
between 70 and 100% in the gold discovery at a price of between US$40-100 per ounce, with a 1.5% net smelter royalty
to Encounter Resources.
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 2010 or 30 June 2009.
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 $1,144,500 (2009: $1,649,750). 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
Total
2010
$
73,431
–
73,431
Consolidated
2009
$
68,931
73,431
142,362
The operating lease commitment relates to the lease of the Group’s Perth office plus car park. 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 2010 other than those disclosed above and not otherwise
disclosed in the Financial Statements.
60
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Note 24 Related party transactions
There were no related party transactions during the year, other than disclosed at note 20.
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 1st April 2007. In accordance with the Agreement, Avoca had elected to contribute to the exploration expenditure
program commencing 1st April 2007 to maintain their 20% interest the projects. Under the terms of the agreement either
party may elect to dilute their interest to a 1% net smelter royalty. On 30 September 2008, Avoca Resources elected
to cease contributing to the Joint Venture and is diluting its interest in the projects in accordance with the terms of the
Joint Venture agreement.
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
During the financial year Encounter Resources Limited completed its initial earn in of 75% of the Yenenna Project
from Barrick (Australia Pacific) Limited. In addition Encounter acquired the remaining 25% interest in the Yeneena Project
on the following terms:
n
Payment of $400,000 cash, which was settled on 30 April 2010;
n Net smelter royalty of 1.5% on all minerals; and
n A gold claw-back right to Barrick (Australia Pacific) Limited in the event of a major discovery of a dominant gold
system in excess of 4 million ounces of gold or gold equivalent. Barrick will then have the right to regain an interest
in the gold discovery at a price between US$40-100/oz.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
61
Notes to the Financial Statements continued
For the financial year ended 30 June 2010
Note 26 Events occurring after the balance sheet date
The Company completed a share placement on 26 August 2010 by the issue of 11,482,925 ordinary fully paid shares at
$0.27 each, raising $3,100,390 before costs.
Other than the above, 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.
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
Movement in assets and liabilities:
(Increase)/decrease in R&D tax refundable
(Increase)/decrease in prepaid expenses
(Increase)/decrease in receivables
Increase/(decrease) in payables
Consolidated
2010
$
2009
$
(918,288)
25,470
16,629
666,519
44,762
(58,356)
1,273
2,229
10,988
(1,987,843)
160,351
23,103
1,311,311
230,297
(113,186)
168
11,582
19,507
Net cash outflow from operating activities
(208,774)
(344,710)
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
2010
Cents
(1.2)
(1.2)
2010
Cents
2009
Cents
(2.9)
(2.9)
2009
Cents
(c) Loss used in calculation of basic and diluted loss per share
Consolidated loss after tax from continuing operations
(918,288)
(1,987,843)
(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
2010
Cents
2009
Cents
76,317,458
68,596,900
At 30 June 2010 the Company has on issue 2,750,000 unlisted options (2009: 3,025,000) over ordinary shares that
are not considered to be dilutive.
62
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Note 29 Parent entity Information
Financial position
Assets
Current assets
Non-current assets
Total Assets
Liabilities
Current liabilities
Total Liabilities
NEt ASSEtS
Equity
Issued Capital
Equity remuneration reserve
Accumulated losses
tOtAL EQuItY
Financial performance
Loss for the year
Other comprehensive income
Total comprehensive income
Company
2010
$
2009
$
2,791,685
6,204,876
2,459,221
3,982,528
8,996,561
6,441,749
517,456
517,456
390,855
390,855
8,479,105
6,050,894
12,745,067
476,214
(4,742,176)
9,443,330
431,452
(3,823,888)
8,479,105
6,050,894
(918,288)
–
(1,987,843)
–
(918,288)
(1,987,843)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
No guarantees have been entered into by the parent entity in relation to the debts of its subsidiary companies.
Contingent liabilities
For full details of contingencies see Note 22.
Commitments
For full details of commitments see Note 23.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
63
Directors’ Declaration
In the opinion of the Directors of Encounter Resources Limited (“the Company”)
(a)
the financial statements and notes set out on pages 34 to 63 are in accordance with the Corporations Act 2001,
including:
(i)
complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
(ii)
give a true and fair view of the financial position as at 30 June 2010 and of the performance for the year
ended on that date of the Group.
(b)
the remuneration disclosures that are contained in the Remuneration Report in the Directors Report comply with
Australian Accounting Standard AASB 124 Related Party Disclosures, The Corporations Act 2001 and the Corporations
Regulations 2001.
(c)
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due
and payable.
(d)
the financial statements comply with International Financial Reporting Standards as set out in Note 1.
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 2010.
This declaration is made in accordance with a resolution of the Directors.
Signed at Perth this 28th day of September 2010.
W Robinson
Director
64
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
INDEPENDENT AUDIT REPORT TO MEMBERS OF ENCOUNTER RESOURCES LIMITED
We have audited the accompanying financial report of Encounter Resources Limited, which comprises the
consolidated statement of financial position as at 30 June 2010 and the consolidated statement of comprehensive
income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended
on that date, a summary of significant accounting policies and other explanatory notes and the directors’
declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or
from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial report in
accordance with Australian Accounting Standards and the Corporations Act 2001. This responsibility includes
establishing and maintaining internal control relevant to the preparation and fair presentation of the financial
report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note1, the
directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements,
that compliance with the Australian equivalents to International Financial Reporting Standards (IFRS) ensures
that the financial report, comprising the financial statements and notes, complies with IFRS.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable
assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial
report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s Opinion
In our opinion, the financial report of Encounter Resources Limited is in accordance with the Corporations Act
2001 including:
(a)
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of
its performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b)
the financial report also complies with International Financial Reporting Standards as disclosed
in Note 1.
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
65
Total Financial SolutionsHorwath refers to Horwath International Association, a Swiss verein. Each member of the Association is a separate and independent legal entity.Member Horwath International WHK Horwath Perth Audit Partnership ABN 96 844 819 235 Level 6, 256 St Georges Terrace Perth WA 6000 Australia GPO Box P1213 Perth WA 6844 Australia Telephone +61 8 9481 1448 Facsimile +61 8 9481 0152 Email perth@whkhorwath.com.au www.whkhorwath.com.au A WHK Group firm
REPORT ON THE REMUNERATION REPORT
We have audited the Remuneration Report included in pages 30 to 31 of the directors’ report for the year ended
30 June 2010. The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to
express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report for Encounter Resources Limited for the year ended 30 June 2010,
complies with section 300A of the Corporations Act 2001.
WHK HORWATH PERTH AUDIT PARTNERSHIP
NICHOLAS HOLLENS
Partner
Perth, WA
Dated this 28th day of September 2010
66
EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
ASX Additional Information
Pursuant to the Listing Requirements of the Australian Securities Exchange, the shareholder information set out below was
applicable as at 30 September 2010
A. Distribution of Equity Securities
Analysis of numbers of shareholders by size of holding:
Distribution
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
More than 100,000
totals
Number of
shareholders
83
305
221
443
88
1,140
There were 46 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
Stone Poneys Nominees Pty Ltd
Solvista Pty Ltd
Issued Ordinary Shares
Number of shares
Percentage of shares
21,846,900
10,971,980
4,650,000
4,650,000
24.05%
12.10%
5.13%
5.13%
an n u a l r e p o r t 2 0 1 0 EN C Ou NtE R R E S Ou R C E S
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ASX Additional Information continued
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
Jacmew Pty Ltd
Stone Poneys Nominees Pty Ltd
Solvista Pty Ltd
Jorge Bernhard
Pieter Los
JP Morgan Nominees Australia Ltd
HSBC Custody Nominees Australia Ltd
Charles Arthur Bennett Robinson
National Nominees Limited
Willstreet Pty Ltd
Forty Traders Limited
Custodial Services Pty Ltd
UBS Wealth Management Australia Nominees Pty Ltd
HSBC Custody Nominees Australia Ltd
Tierra Rist Pty Ltd
Dolerite Investments Pty Ltd
Brian Barnicott
Andrew Ralph Bewick
total
D. Voting Rights
Listed Ordinary Shares
Number
Percentage Quoted
16,216,900
10,971,980
5,580,000
4,650,000
4,650,000
2,107,375
2,000,000
1,553,500
1,355,629
1,200,000
1,024,200
1,000,000
925,000
880,516
797,551
719,400
700,000
675,000
600,000
534,170
17.89%
12.10%
6.16%
5.13%
5.13%
2.32%
2.21%
1.71%
1.50%
1.32%
1.13%
1.10%
1.02%
0.97%
0.88%
0.79%
0.77%
0.74%
0.66%
0.59%
58,141,221
64.12%
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.
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EN C Ou NtE R R E S Ou R C E S an n u a l r e p o r t 2 0 1 0
Yeneena Project
www.enrl.com.au