St Barbara Ltd Annual Report 2005

Plain-text annual report

1 a n n u a l r e p o r t 2 0 0 5 St Barbara Mines Limited St Barbara’s key features are: • Extensive Landbank • Mineral Resources of 9.3Moz • Strong Shareholder Support • Quality Management & Staff • Financial Strength • Robust Operations 2 Table of Contents Chairman’s Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Managing Director’s Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Exploration Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Reserves & Resources Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Operations Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Heath, Safety & Environmental Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Finance Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Corporate Governance Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Directors’ Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Declaration of Auditor Independence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Statements of Financial Performance for the year ended 30 June 2005 . . . . . . . . 38 Statements of Financial Position as at 30 June 2005 . . . . . . . . . . . . . . . . . . . . . 39 Statements of Cashﬂows for the year ended 30 June 2005 . . . . . . . . . . . . . . . . . 40 Notes to the Financial Statements for the year ended 30 June 2005 . . . . . . . . . . 41 Directors’ Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Independent Audit Report to the Members . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Statement of Shareholders as at 19 September 2005 . . . . . . . . . . . . . . . . . . . . 75 Shareholder Information as at 19 September 2005 . . . . . . . . . . . . . . . . . . . . . . 76 Corporate Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Chairman’s Review During the year ending 30 June 2005 the Company was rescued from a difﬁ cult ﬁ nancial situation and re-emerged as a signiﬁ cant exploration and gold production company, with a sound basis for optimism about the immediate and long-term future. There were a number of signiﬁ cant achievements during the year: • An increase in gold sales from 40,000oz in 2003/04, to 84,000 ounces; • A substantial increase in announced Company resources from 825,000 ounces to 9.4 million ounces; • A substantial increase in the Company’s landholdings from 2,000km2 to 15,000km2; • A dramatic improvement in the cash at bank position from $1,000 plus $3 million cash backing of bonds at the end of the 2004 year, to $16 million cash at bank plus $12 million cash backing of bonds, one year later; • Exploration expenditure of $3.9 million at Meekatharra and at various locations previously owned by the Sons of Gwalia Ltd Gold Division; and • An increase in the share price from 4.8 cents on 30 June 2004 to 10.5 cents on 30 June 2005. These outstanding achievements are attributable to four key factors: • The ﬁ nancial support of the Company’s largest shareholder, Resource Capital Fund II LP following the shareholders voting to appoint Ed Eshuys and myself as directors of the Company on 20 July 2004; • The hard work and technical and commercial prowess of Ed Eshuys and his management team; • The Company’s purchase in March 2005 of the assets owned by Sons of Gwalia Ltd’s Gold Division; and Left to right | Richard Knight, Mark Wheatley (sitting), Ross Kennedy, Colin Wise, Hank Tuten, Eduard Eshuys • An increase in the gold price and more favourable operating conditions at the purchased mines. This allowed the Company to generate higher than forecast gold production at a lower than forecast cost. The future is exciting for the ‘new’ St Barbara, with drilling to extend the existing mineral inventory base underway at four locations - Marvel Loch, Tarmoola, Gwalia Deeps and Meekatharra, the construction of a new open pit mine at Hercules near Marvel Loch, and exploration drilling for nickel at Sullivans, near Leonora, due to commence next month. The Company is well placed to continue its growth in the coming years. The collective experience and expertise at Board level and within the management team will be drawn on to seek to continue to increase shareholder wealth, especially as other opportunities (such as the acquisition of the Sons of Gwalia gold assets) become available. All at St Barbara look forward to the future with excitement and anticipation. Colin Wise Chairman 30 September 2005 Managing Director’s Review The prime objective at the beginning of the year was to re-establish the integrity and credibility of the Company with its shareholders, investors, employees, consultants, contractors and suppliers and the communities in which the Company was operating. For this to occur it became clear that to start the process the Company’s 54.8% interest in NuStar Mining Corporation Limited (“NuStar”) and the 5% royalty over NuStar’s Paulsens gold deposits needed to be sold to reﬁnance the Company and to repay the substantial debts which had been previously incurred. The sale of our interest in NuStar occurred in several stages during November 2004 through to February 2005 and resulted in the Company becoming debt free. During this time, the gold division of Sons of Gwalia Ltd (Administrators Appointed) (“SGWGD”) became available for possible acquisition. In conjunction with expert consultants a comprehensive and disciplined assessment of the assets was undertaken. The thoroughness of our preparation together with the ﬁnancial support of our largest shareholder Resource Capital Funds enabled the Company to bid for the assets and successfully close the purchase in a short period of time. The purchase of the SGWGD assets enabled the Company to re-establish itself as a gold producer and provides the opportunity to explore the well endowed Southern Cross, Leonora and South Laverton areas of the Eastern Goldﬁelds, which will complement the Company’s long held home base at Meekatharra in the Murchison Goldﬁelds. Cashﬂow from the operations at Southern Cross, the sale of surplus assets and the planned divestment of non-core land holdings will support the planned corporate and exploration activities of the Company in the year ahead. Having established a more secure ﬁnancial footing for the Company, the job ahead is to: • Extend the mine life of the Southern Cross operations beyond June 2006 and further explore the region; • Seek to establish a mining inventory at Tarmoola and Gwalia Deeps with a production commencement target of the December 2007 quarter; • Evaluate production at Meekatharra; the possibility of recommencing gold • Explore for nickel sulphides particularly in the Leonora and Southern Cross regions; and • Identify and seek to acquire other opportunities. Gold production at Southern Cross for the 2006 year is on target to achieve our forecast of 150,000 ounces at a cash cost of $415 per ounce. Drilling of the high grade shoots at Marvel Loch to deﬁne a mining inventory down to a vertical depth of 500 metres below the surface is underway. Earlier drilling has already established that the gold mineralisation extends to that depth but is of insufﬁcient density to outline reserves. To extend the mine life beyond June 2006 it is the conceptual aim to deﬁne at least 1.2 million tonnes at 6.0g/t for 230,000 ounces from within the current indicated and inferred resources of 4.2 million tonnes at 4.5g/t of gold for 610,000 ounces. The reported drilling results since July 2005 suggest this is achievable. Production to support the Marvel Loch underground operation is projected to be sourced from open pit mining at Hercules. The Company will also seek to reopen Yilgarn Star and pursue discoveries on the basis of the comprehensive geological reassessment that has been completed of the Southern Cross region. The famous Sons of Gwalia Mine which has historically produced 5 million ounces to a depth of 1,075 metres and the well known Tarmoola Mine (35 kilometres to the north 3 Managing Director’s Review continued Eduard Eshuys Managing Director & CEO Ross Kennedy Company Secretary & CFO George Viska GM Commercial of Leonora) which has historically produced 1.7 million ounces still have resources of 7.2 million tonnes at 7.3g/t of gold for 1.7 million ounces and 56 million tonnes at 1.2g/t of gold for 2.2 million ounces respectively for a total of 3.9 million ounces. This is a substantial inventory particularly with a rising gold price. Deep drilling is underway at Gwalia to complete the drilling conducted during 2001 to seek to improve the status of the current inferred resources to indicated resources. is a very favourable location in the Eastern Goldﬁelds for hosting substantial mineral deposits. The Tarmoola pit is two kilometres long and up to 250 metres deep. A wall failure on the northern side of the pit in February 2004 ultimately led to the closure of Tarmoola in September 2004. The current drilling is focusing on the western and south western ﬂanks of the pit where, previous drilling had intersected gold associated with fractures in the granite. The geology of the Gwalia gold mineralisation is well understood as a result of the mining activity extending over more than 100 years. Resource modeling is now in progress and for the ﬁrst time is treating the entire Tarmoola deposit as one, rather than as previously consisting of nine separate components. The Gwalia Deeps inferred resources starts at a vertical depth of 1,100 metres; thus a number of other issues need to be addressed in conjunction with drilling. A Task Force of geologists, resource modelers, mining engineers, metallurgists and geotechnical specialists has been established to address the geology, geotechnical, mine planning, hydrology, metallurgy and project development schedules with the objective of deﬁning a mining inventory by March 2006, and a timetable for future development. Gwalia Deeps ore in concept would be processed at Tarmoola and be blended with the ore from Tarmoola. Modern day mining at Tarmoola produced 1.7 million ounces. There is now an opportunity for the ﬁrst time in nearly a decade, unhindered by production pressures and mining equipment movements, to take an overall view of the gold mineralisation which incurs in granite and ultramaﬁcs at Tarmoola. The gold mineralisation is located at a major structural position adjacent to the Keith Kilkenny lineament which The Company’s objective is to develop a mining inventory from Gwalia Deeps and Tarmoola that can produce initially 250,000 ounces per year commencing in the December 2007 quarter, and 400,000 ounces per year when fully developed by 2011. A separate Task Force to assess all aspects of the potential future redevelopment of Tarmoola has also been established with the objective of outlining a reserve by March 2006 and a timetable for future development. Successful drilling at Paddys Flat and Reedys, Meekatharra has resulted in an increase in 100% owned resources to 1.6 million ounces. A co-venturer has also increased resources at Bluebird and Surprise to 690,000 ounces subsequent to the end of the ﬁnancial year, for a total Company resource at Meekatharra in excess of 2.2 million ounces. The possibility of recommencing gold production from the Company’s 100% owned Paddys Flat and Reedys and/or in conjunction with Mercator Gold plc at Bluebird and Surprise is to be further investigated. Importantly, the Company retains full ownership of the Bluebird processing plant and George Viska GM Commercial Martin Reed GM Operations Julia Martin Snr Mining Engineer/ Analyst Graham Miller GM Special Projects & JVs Peter Thompson GM Exploration associated infrastructure such as power station, tailings dams, water, housing in Meekatharra and ﬂ y-in ﬂ y-out accommodation. Nickel sulphide exploration has commenced on the Company’s tenements particularly in the Leonora region which is transected by the geologically important Keith Kilkenny lineament, which has Cosmos, Leinster, and Mt Keith nickel sulphide mineralisation structurally associated with it to the north. The Sullivans nickel sulphide target has an ultramaﬁ c unit with a strike length of some 8 kilometres. The ultramaﬁ c occurs under a shallow cover of alluvium, and thus remains to be explored effectively. New ground electromagnetic geophysical techniques which have the ability to identify massive nickel sulphides at depth below the cover, have identiﬁ ed a number of anomalies at the basal contact of the ultramaﬁ c unit. This is a typical target location for massive nickel sulphides. The Company’s other nickel sulphide opportunities will be progressively advanced to the drilling stage during the year ahead. Rehabilitation of the mined areas and management of the environmental performance bonds is a major focus of the Company’s efforts. Environmental matters and issues have been elevated in importance as part of future planning. In conclusion, to continue to re-establish and maintain the credibility and integrity of the Company will require a dedicated effort. A three year plan encompassing the SGWGD acquisition is being followed while a longer term ﬁ ve year plan is being developed. The Company is striving to achieve exploration success at Southern Cross, Leonora and Meekatharra, and its planned strategy is to redevelop those assets to enable the conceptual production of 400,000-500,000 proﬁ table ounces of gold per annum commencing in the December 2007 quarter, with production of 150,000-200,000 proﬁ table ounces of gold per annum in the intervening period. Nickel sulphide exploration will also be an important part of the future of the Company. Achievement of these objectives will require the further recruitment of senior management, graduates and skilled people to complement the existing dynamic and energetic management team. The strategy is to build up a portfolio of nickel sulphide properties either through conceptual research, joint venturing into properties held by others or acquisition. Worldwide demand for nickel remains strong, which is reﬂ ected in the current prices, and supports the strategy of an aggressive approach to nickel sulphide exploration. Finally, I acknowledge the signiﬁ cant contribution made by senior management and all staff, with a special mention for the former SGWGD employees who have embraced our enthusiasm and energy, and for the collective efforts in helping to turn around the Company’s performance and create improved value for our shareholders. To conduct the mining and exploration activities effectively requires the maintenance of a safe workplace. Management and staff have achieved an acceptable safety performance and regime, which will continue to require a dedicated and disciplined effort to maintain and improve on current performance levels. Eduard Eshuys Eduard Eshuys Managing Director & CEO 30 September 2005 5 Exploration Review The Company has a strong and enviable land position; a solid foundation upon which to pursue the Company’s strategic focus on exploring for gold, nickel and copper in Australia. The Company will also remain vigilant to identify and take advantage of new exploration opportunities, as they arise. Continuing the search with an expanded data base and healthy budget The exploration budget for the 2005/06 year is $10 million. The exploration work will be carried out using the Company’s vastly expanded database which has been successfully merged with the datasets acquired from the Sons of Gwalia Ltd Gold Division . The database now includes data from an additional 464,818 drill holes. Southern Cross – attractive exploration targets Drilling of the high grade shoots at Marvel Loch to deﬁne a mining inventory down to a vertical depth of 500 metres below the surface is underway. Earlier drilling has already established that the gold mineralisation extends to that depth but is of insufﬁcient density to outline reserves. Exploration drilling has also commenced with diamond drilling programs at Yilgarn Star, located 14km south of the Marvel Loch plant. exploration. This study has already identiﬁed some attractive exploration targets which are being investigated. Leonora – towards realising its potential A specialist Company taskforce has been established to consider, coordinate and manage the Leonora region’s planned development into production. Tarmoola An evaluation of the Tarmoola resource (currently 56Mt @ 1.2g/t, containing 2.2Moz) geological model and geophysical data has demonstrated potential for expansion of this mineral inventory with the conceptual prospect of developing an enlarged Tarmoola mining operation. A program of extensional drilling commenced in July 2005. The targets being drilled are largely hosted by the Tarmoola granite, to the west of the current pit, where mineralisation is known to exist, and on the interpreted granite greenstone contacts to the north and south of the current pit area. Gwalia Deeps Drilling commenced in July 2005, in a program designed to allow the calculation of Indicated Resources. The Gwalia Deeps Inferred Resource (currently 4.3Mt @ 8.2g/t for 1.1Moz) lies between 1,100 metres and 1,680 metres below the surface. This resource is intact, with down-dip continuity of the lodes mined historically by shaft and decline. The resource at Yilgarn Star is currently 1.5Mt @ 4.1g/t containing 190,000oz, with a decline established to a depth of 465 metres. Rather than re-drill from the surface, inﬁll drilling is being undertaken with ‘daughter’ holes from existing deep holes. A regional gold targeting exercise was recently initiated, to identify and prioritise targets in the Southern Cross land package, and to review the effectiveness of previous The ‘daughter’ holes commence at depths from 1,100 metres to 1,400 metres. This drilling requires careful navigational control and planning but is expected to save considerable time and cost. South Laverton An assessment of gold exploration potential in the South Laverton project has highlighted some high ranking targets, some of which lie below salt lake sediments. Several multi-million-ounce gold deposits, including Granny Smith, Sunrise Dam and Wallaby are located on the northern margin of this region, and potential for similar deposits may exist within this project area. These targets are being assessed and prioritised, in the same manner as at Southern Cross. Meekatharra – more progress and promising results Gold exploration recommenced at Meekatharra in late 2004, with the intention of re-establishing a mining inventory and production through the Bluebird plant. Exploration drilling was focused on the Vivian-Consols (porphyry-hosted mineralisation), Prohibition (banded iron- hosted mineralisation) and the Mickey Doolan (ultramaﬁc host) at Paddy’s Flat, and on the Rand deposit at Reedys, all of which are 100% owned by St Barbara. Drilling was undertaken with up to three rigs; using deep RC and diamond drill rigs. This zone is described as the ‘Mudlode’ and is interpreted to be an extension of the historically mined Mudlode, which occurs 300 metres further north. The host for this mineralisation is strong quartz carbonate- pyrite alteration in high magnesium ultramaﬁc. No resource estimate has to date been made for the Mudlode. Construction of a geological model and further drilling are currently in progress. Current work at Meekatharra includes ongoing delineation drilling, as well as mining and metallurgical studies, to consider the proposed recommencement of processing at Bluebird. Wallal, Pardoo, Scorpion & Scorpayle – more nickel targets The company’s nickel exploration strategy has seen the completion during the year of a comprehensive review of nickel sulphide exploration opportunities in Western Australia, on both Company and non-Company-held ground. This has lead to the application for tenements over high- priority nickel targets on the Wallal, Pardoo, Scorpion and Scorpayle projects, totalling 3,900km2 in area. These licence applications are pending. Many signiﬁcant intersections were reported from this drilling, indicating extensions to known mineralisation, and leading to substantial increases in resources. With the SGWGD acquisition, several strategic exploration targets became part of the Company’s portfolio and are now being developed as exploration projects. Signiﬁcantly, during May 2005, a broad, new zone of mineralisation, adjacent to and east of the Vivian Consols deposit was intersected. The ﬁrst of these to be explored is Sullivans, 35km north of Leonora, where signiﬁcant copper and nickel enrichment are present in a poorly drilled ultramaﬁc unit over an 8km strike length. 7 Exploration Review continued Southern Cross Tenement Map Opposite page | Drillrigs at Gwalia Deeps 9 Reserves & Resources Statement RESERVES AT END OF JUNE 2005 Proved Probable Tonnes Au g/t oz Tonnes Au g/t oz Tonnes Total Au g/t oz 240,000 6.0 46,000 240,000 6.0 46,000 170,000 170,000 1.8 1.8 10,000 520,000 10,000 3,100,000 2,300,000 2.4 1.3 2.5 180,000 2,300,000 22,000 690,000 250,000 3,200,000 2.4 1.4 2.5 180,000 32,000 260,000 Region/Project Southern Cross Marvel Loch Yilgarn Star Hercules Other Total Southern Cross Leonora Gwalia Tarmoola Other Total Leonora South Laverton All Projects Total South Laverton Meekatharra (100% SBM) Paddys Flat Reedys Other Total Meekatharra (100% SBM) Meekatharra (JV) Annean JV (SBM reducing to 30%) Polelle JV (SBM reducing to 35%) Total Meekatharra (JV) Total All Regions 170,000 1.8 10,000 3,100,000 2.5 250,000 3,200,000 2.5 260,000 1. The information in this report that relates to Ore Reserves is based on information compiled by Mr Martin Reed (Marvel Loch), Mr Allan Blair (Hercules) and Mr Michael Bartholomaeus (Southern Cross – Other) who are Members or Fellows of the Australasian Institute of Mining and Metallurgy. Mr Reed and Mr Bartholomaeus are full-time employees of the company. Mr Blair is employed by Snowden Mining Industry Consultants. Mr Reed, Mr Blair and Mr Bartholomaeus have sufﬁcient experience relevant to the style of mineralisation, type of deposit under consideration and to the activity being undertaken to qualify as Competent Persons as deﬁned by the 2004 edition of the ‘ Australasian Code for Reporting of Mineral Resources and Ore Reserves’. Mr Reed, Mr Blair and Mr Bartholomaeus consent to the inclusion in the report of the matters based on their information in the form and context in which it appears. 2. All data is rounded to two signiﬁcant ﬁgures 3. Discrepancies in summations will occur due to rounding Discussing Southern Cross Exploration Strategies Left to right | Peter Thompson, David Broomﬁeld, Eduard Eshuys, Michael Bartholomaeus, Alex Hatch Region / Project Southern Cross Marvel Loch Yilgarn Star Hercules Other Total Southern Cross Leonora Gwalia Tarmoola Other Total Leonora South Laverton All Projects Total South Laverton Meekatharra (100% SBM) Paddys Flat Reedys Other Meekatharra (JV) Annean JV (SBM reducing to 30%) Polelle JV (SBM reducing to 35%) Total Meekatharra (JV) RESOURCES AT END OF JUNE 2005 (INCLUDES RESERVES) Measured Indicated Inferred Total Tonnes Au g/t oz Tonnes Au g/t oz Tonnes Au g/t oz Tonnes Au g/t oz 61,000 4.0 7,900 3,000,000 390,000 3,600,000 15,000 3,000,000 3.8 6.6 2.2 3.1 370,000 1,100,000 82,000 1,100,000 250,000 300,000 4,700,000 23,000 10,000,000 3.1 1,000,000 6,900,000 330,000 390,000 1.4 1.8 6.5 3.2 3.0 3.5 7.3 1.2 1.8 230,000 4,200,000 110,000 1,500,000 3,600,000 450,000 7,700,000 4.5 3.9 2.2 3.0 610,000 190,000 250,000 750,000 790,000 17,000,000 3.3 1,800,000 1,700,000 7,200,000 1,400,000 56,000,000 400,000 13,800,000 7.3 1.2 2.0 1,700,000 2,200,000 900,000 7,200,000 400,000 36,000,000 330,000 6,800,000 730,000 50,000,000 2.2 3,500,000 77,000,000 1.9 4,800,000 450,000 3,600,000 450,000 3,600,000 920,000 9,300,000 140,000 15,000 310,000 2.6 2.6 1.4 5.0 300,000 9,800,000 300,000 9,800,000 420,000 26,000,000 49,000 1,900,000 150,000 2.4 2.4 1.6 4.2 3.1 760,000 760,000 1,300,000 260,000 15,000 10,000,000 1,000,000 1.5 1.2 460,000 10,000,000 40,000 7,000,000 11,000,000 1.4 500,000 17,000,000 170,000 170,000 0.9 0.9 4,900 5,900,000 4,900 5,900,000 840,000 2.7 74,000 17,000,000 800,000 150,000 1.2 1.5 1.3 2.4 2.4 1.7 5.5 3.1 Total Meekatharra (100% SBM) 840,000 2.7 74,000 18,000,000 1.9 1,100,000 9,600,000 1.5 470,000 28,000,000 1.8 1,600,000 4,800,000 1.5 230,000 1,600,000 2.2 110,000 6,300,000 1.7 350,000 Total All Regions 12,000,000 1.5 600,000 55,000,000 2.0 3,500,000 72,000,000 4,800,000 1.5 230,000 2,700,000 1,100,000 1.6 2.0 2.3 58,000 1,100,000 170,000 7,400,000 1.6 1.7 58,000 410,000 5,300,000 140,000,000 2.1 9,400,000 1. The information in this report that relates to Mineral Resources is based on information compiled by Mr Michael Bartholomaeus, Ms Jane Bateman, Mr Graham Miller and Mr Peter Thompson who are Members or Fellows of the Australasian Institute of Mining and Metallurgy. Mr Bartholomaeus, Ms Bateman, Mr Miller and Mr Thompson are full-time employees of the company. Mr Bartholomaeus, Ms Bateman, Mr Miller and Mr Thompson have sufﬁ cient experience relevant to the style of mineralisation, type of deposit under consideration and to the activity being undertaken to qualify as Competent Persons as deﬁ ned by the 2004 edition of the ‘ Australasian Code for Reporting of Mineral Resources and Ore Reserves’. Mr Bartholomaeus, Ms Bateman, Mr Miller and Mr Thompson consent to the inclusion in the report of the matters based on their information in the form and context in which it appears. 2. All data is rounded to two signiﬁ cant ﬁ gures 3. Discrepancies in summations will occur due to rounding 11 CI 9 1 2 1 0 1 1 6 6 2 2 8 8 4 6 4 4 2 2 8 5 2 4 1 6 6 5 1 0 59 1 1 2 1 5 8 M M 1 2 3 1 3 52 3 21 5 22 1 11 8 52 0 61 8 91 8 71 8 71 6 71 6 71 6 81 5 0 1 1 81 5 61 8 71 2 62 2 62 5 47 9 1 2 51 2 11 3 57 9 2 5 M b 90 m Operations Review The Company’s strategic focus is build on its core production strengths and to introduce innovative and sustainable improvements to achieve measurable lifts in performance. Southern Cross Operations The Southern Cross Operations are centred at Marvel Loch (30km south of the town of Southern Cross). Sons of Gwalia Ltd Gold Division (SGWGD) St Barbara’s purchase of SGWGD included two operating mines, one at Southern Cross and the other at South Laverton. The Company took over management of the SGWGD operations on 28 March 2005. Gold sales for 2005 were 83,646ozs at a cash cost of $341/oz.The forecast at the time of the purchase of SGWGD was for production of 82,000ozs at a cash cost of $415/oz. The improved performance of the operations was due to achieving higher grades than were predicted, successful cost-reduction measures implemented by the Company, and improved mining productivity at both Marvel Loch and Safari Bore. Operational Health and Safety The Company’s strong focus on health and safety saw a uniformly high performance level achieved. The speciﬁc results are detailed in the Health, Safety and Environmental Review. Prior to purchase by St Barbara, gold production had been derived from open pits at Marvel Loch and Cornishman and underground mining at Golden Pig and Marvel Loch. Mining at Cornishman and Golden Pig was concluded during the year. In the Marvel Loch Open Pit, a change to the mine plan in the last quarter resulted in a higher grade tonnage being extracted and mining was completed in August 2005. There are no plans to extend the life of this pit. Two underground areas located at the northern end of the deposit were mined in the Marvel Loch underground mine in the Sherwood and Undaunted lodes. Both Sherwood and Undaunted are being drilled for extensions which are planned to be mined commencing in the March 2006 quarter. Development of a further stoping area at New Lode commenced towards the end of the ﬁnancial year and stope production will commence in the December 2005 quarter. Extension drilling is also underway for this lode and it is anticipated that additional production stoping will be carried out in the second half of 2006. A new open pit is being developed at Hercules, which is located 12km south of the Marvel Loch Processing Plant, with activity commencing in August 2005. Mining operations in the June quarter were concentrated at the Safari Bore Pit which is located 70km north of the Carosue Dam plant. The first stage of this pit comprises 1.1Mt at a grade of 2.1g/t for 74,000oz within the previously announced probable reserve of 180,000 ounces of gold for the whole pit. A dry-hired mining ﬂeet, managed by the Company, was used to mine the pit in the last quarter and it achieved better than expected productivities and costs. It is planned that further development of this pit would extend operations at Southern Cross to the end of 2007 and this will be evaluated once production commences at Hercules. The processing plant located at Marvel Loch, treated a total of 2,525,451 tonnes derived from the operating mines and stockpiled ore for the period of which 663,365 tonnes, at a grade of 2.94g/t, was processed. Attributable gold production shipped from Southern Cross Operations during the June quarter was 53,719oz. Details of 2005 Production Open Pit Grade Underground Grade Stockpiles Processed Grade Ore Milled Grade Recovery Gold Shipped Southern Cross Carosue Dam Total t g/t t g/t t g/t t g/t % oz 287,356 2.25 116,944 7.02 259,065 1.32 663,365 2.94 92 53,719 256,848 544,204 3.00 3.84 - 116,944 - 7.02 56,750 315,815 1.22 0.77 313,598 976,963 3.05 3.28 96 29,528 93 83,247 Cash Cost $/oz 336 349 341 Forecast gold production from Southern Cross for 2006 is 150,000oz at a cash cost of $415/oz. In addition to gold shipped from operations of 83,247oz, 399oz was generated from other site clean-ups. South Laverton Operations Processing was completed at Carosue Dam during the last quarter of 2005, with the plant now on care and maintenance, as scheduled. Care and maintenance activities are being continued at Meekatharra, Gwalia, Tarmoola and Carosue Dam. Single-person operated Jumbo at Marvel Loch Underground Tarmoola overall plan 13 Health, Safety & Environmental Review St Barbara appreciates the important connection between ﬁnancial performance and the safety and welfare of its workforce. The Company is committed to achieving high standards and continuous improvement with respect to health, safety and environment in the work place. Most importantly, there were no disabling injuries in the quarter and the operations achieved a rolling Disabling Injury Frequency Rate of 3.5, compared with the 2003/04 WA Gold Industry rate of 12.1. Health and safety The Company recognises its obligation to provide safe work places for employees, contractors and the community and is committed to the principle that all occupational injuries and illness are preventable. Encouraging results There are clear and encouraging indications that the commitment to achieving health and safety excellence is reﬂected in reduced injuries. At the end of the year, Southern Cross operations had completed 370 days without any time being lost to injury and Carosue Dam, 276 days. The rolling 12-month Lost Time Injury Frequency Rate for the two operations was 0.7, compared with the 2003/04 WA Gold Industry Rate of 4.3. During the quarter there were ﬁve medically treated, on-site injuries resulting in a Medical Treatment Injury Frequency Rate of 20 for this period. A shared responsibility for workforce health and safety The Company recognises that imposing welfare initiatives developed in isolation is not ideal. The approach taken has been to provide all employees and contractors with the opportunity to contribute to the development and implementation of safety and welfare programs and individual initiatives. Daily on-site meetings are held to facilitate this process. Environmental management for generations to come St Barbara is committed to conducting its activities in a socially responsibly manner that is designed to protect the natural environment in which we operate and the local communities with whom we interact. The Company also recognises that the application of thoughtful and innovative solutions to rehabilitation programs can result in sustainable environments as well as commercial beneﬁts for shareholders through the cost effective reduction of security bonds required by the Western Australian Government. Sons of Gwalia acquired sites As part of the Company’s acquisition of the Sons of Gwalia Ltd Gold Division, a complete evaluation of the related rehabilitation programs has been carried out. Detailed plans are now being developed and will be progressively implemented over the coming year. To reduce the disturbance of the land surface at various sites, rock waste has been disposed of in the existing pits. Southern Cross At Southern Cross, rehabilitation trials have commenced at an historic legacy site. The trial involves employing a new technique designed speciﬁcally to beneﬁt sites with a topsoil deﬁciency. The Hercules Site The waste rock from a new pit being mined at Hercules will be used to cap a nearby old tailings dam and secure it properly for the future. The Company’s commitment to environmental management is reﬂected in the appointment of a full time environmental ofﬁcer, to work with our environmental advisers and site based staff. Examples of environmental programs already in place include: • The progressive rehabilitation of newly mined areas, particularly those likely to be inactive for some time. • A renewed focus on site-waste management, especially with regard to the careful and safe disposal of hydrocarbon products. • Improved workforce education to empower individual employees to be better able to ensure their own safety. Signiﬁcant progress was made during the year at the Carosue Dam site where several pits and disturbed areas have been rehabilitated. As part of the closure plan for this site, further work will be carried out and completed. 15 Finance Review Focus on positive cash ﬂow generation The focus throughout the year has been on restructuring business activities through divestment and acquisitions to generate positive cash ﬂows. During the ﬁrst half of the year, the key events were the sell down of NuStar Mining Corporation Limited (“NuStar”) shares and the sale of the Paulsen’s Royalty to NuStar for $5.1M. During the second half of the year, gold operations acquired at the end of the March 2005 quarter contributed strongly to operating cashﬂows and proﬁtability. The cash position of the chief entity improved signiﬁcantly to $16.2M as at 30 June 2005, with a further $11.8M cash backing for environmental performance bonds. Financial performance The net loss for the year of $6.7M represents a substantial improvement from the net loss reported in the year ended 30 June 2004 of $24.3M. Gold revenue from operations of $46.6M was signiﬁcantly higher than gold revenue from operations in the previous year of $22.0M. The recently acquired gold operations at Southern Cross and South Laverton generated production of 83,646ozs at a cash cost of $341/oz for revenue of $46.4M during the June 2005 quarter. The net cash cost of $341/oz reﬂected higher grades than forecast, reduced unit costs and improved mining productivity. Gold production in ﬁscal year 2004 was derived from the Meekatharra operations before they were placed on care and maintenance in June 2004. The weighted average price realised of $557/oz was up from $546/oz achieved in 2004. Earnings before interest, tax, depreciation, amortisation and write downs improved signiﬁcantly to $6.2M loss (2004: $11.6M loss). Other revenue of $20.9M includes $5.1M realised on the sale of the Paulsen’s Royalty in the December 2004 half year, $9.7M realised on the sale of shares in NuStar to third parties and deemed revenue of $3.9M on accepting a share swap offer from Sedimentary Holdings Limited (“Sedimentary”) for 69.4M NuStar shares and $0.5M from the sale of cattle and other items of equipment on the Company’s pastoral leases which were sub-let to a third party in the December 2004 quarter. Interest costs of $0.5M (2004: $4.0M) reduced signiﬁcantly as a consequence of the Company repaying its secured debt in October 2004 and remaining debt free up to 29 March 2005 when $7M was drawn down on a facility provided by Resource Capital Funds III LP to assist with ﬁnancing the acquisition of the Gold Division of Sons of Gwalia Ltd (Administrators Appointed) (“SGWGD”). Cash Flows Cash at the end of the year for the chief entity was $16.2M cash at bank plus $11.8M cash backing of environmental performance bonds. This compares favourably with a cash balance for the chief entity, excluding NuStar which was deconsolidated during the year, as at 30 June 2004 of $1,000 plus $3M cash backing of bonds. During the ﬁrst half of the ﬁnancial year the Company raised $4.1M for working capital. Key sources of cash ﬂow included: • Capital raisings • Proceeds from the sale of NuStar shares to 30 June 2005 • Sale of Paulsen’s royalty • Proceeds from borrowing (RCF convertible loan) • Net operating cash ﬂows from the acquired gold operation (SGWGD) during the June 2005 quarter 17.4 $’M 4.1 9.7 5.1 7.0 Financial Position The following illustrates the key events that impacted on the Company’s shareholders’ equity during the ﬁnancial year: Loss for the year Capital reduction (share swap) Capital raising Debt to equity conversions Net impact of deconsolidating NuStar Total movement in shareholders’ equity $’000 (6,697) (8,514) 4,072 5,204 (18,844) (24,779) A capital management strategy was implemented to reduce the number of shares on issue through offering all shareholders the opportunity to participate in a share buy back, with NuStar shares being offered as consideration in the ratio of 1.25 NuStar shares for each St Barbara share being bought back. A total of 170M St Barbara shares were bought back and 213M NuStar shares provided as consideration. As a result, the number of shares on issue reduced from 737M to 567M and shareholders’ funds reduced by $8.5M. Subsequent Events • Sale of Shares On 27 July 2005, the Company sold its remaining shares in NuStar (6.4%) and Sedimentary (5.5%) for a combined total of $6.0M and net proﬁt on sale of $100,000. • Capital Management On 26 July 2005, the Company announced: An on-market buy-back of up to 10% of its capital over the next 12 months in accordance with ASX guidelines; and Sale of unmarketable parcels of shares, unless holders of unmarketable parcels of shares notify the Company in writing of their intention to hold their shares, by 5pm WST 23 September 2005. A total of 3.2M shares were bought back on-market to 30 September 2005 and 6.2M shares held by holders of unmarketable parcels have been sold on their behalf. 17 Corporate Governance Review Corporate governance is the process by which companies are directed and managed. It inﬂuences how the objectives of the Company are set and achieved, how risk is monitored and assessed, and how performance is optimised. Good corporate governance structures encourage companies to create sustainable value (particularly through the exercise of integrity at all levels, entrepreneurism, innovation, development and exploration) and provide accountability and control systems commensurate with the risks involved. The ASX Corporate Governance Council, in March 2003, published Principles of Good Corporate Governance and Best Practice Recommendations. These principles are summarised as follows: Fundamental to any corporate governance structure is establishing the roles of management and the Board (Principle 1), with a balance of skills, experience and independence on the Board appropriate to the nature and extent of company operations (Principle 2). There is a basic need for integrity among those who can inﬂuence a company’s strategy and ﬁnancial performance, together with responsible and ethical decision-making (Principle 3). Meeting the information needs of a modern investment community is also paramount in terms of accountability and attracting capital. Presenting a company’s ﬁnancial and non-ﬁnancial position requires processes that safeguard, both internally and externally, the integrity of company reporting (Principle 4), and provide a timely and balanced picture of all material matters (Principle 5). The rights of company shareholders need to be clearly recognised and upheld (Principle 6). Every business decision has an element of uncertainty and carries a risk that can be managed through effective oversight and internal control (Principle 7). Keeping pace with the modern risks of business and other aspects of governance requires formal mechanisms that encourage enhanced board and management effectiveness (Principle 8). Rewards are also needed to attract the skills required to achieve the performance expected by shareholders (Principle 9). The impact of company actions and decisions is increasingly diverse and good governance recognises the legitimate interest of all stakeholders (Principle 10). Each principle is of equal importance. St Barbara is committed to these principles. Key elements of the Company’s corporate governance principles in place at the date of this report include: Structure and Operation of the Board The Company has a ﬁve member Board, four of whom are non-executive directors. A majority of the directors are also independent. The role of the Board is to provide strategic guidance to the Company, effective oversight of management and a sound base for a culture of good corporate governance within the Company. The Board has adopted a formal Board Charter which sets out the principles under which the Board operates. The following Board committees are operative: • Audit Committee; and • Remuneration Committee. Each of these committees has an independent non-executive director as chairperson, as well as a Board approved charter. The role of the Audit Committee function has recently been extended to include a review of Company procedures for reviewing and independently verifying resources and reserves. None of the directors has a trading relationship with the Company nor a conﬂict of interest in any business or relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company, noting that Mr Tuten is an ofﬁcer of major shareholder Resource Capital Funds II LP, and the principal ﬁnancier, Resource Capital Funds III LP and abstains from voting on any Board matters relating to either of these entities. Risk The Board is responsible for the establishment and maintenance of a framework of internal control and policies and procedures designed to safeguard Company assets and to maintain the integrity of ﬁnancial reporting. In respect of safeguarding Company assets, and risk more generally, the management is charged with the responsibility of identifying and managing operational, ﬁnancial and corporate risks with regular reports to the Board. To assist the Board in managing the integrity of ﬁnancial reporting, an Audit Committee has been established. The primary role of the Audit Committee is to monitor and review, on behalf of the Board, the effectiveness of the ﬁnancial control environment in the St Barbara Mines Limited group in the areas of operational and balance sheet risk and ﬁnancial reporting. For the ﬁrst part of the 2005 ﬁnancial year this function was performed by the entire Board. The external auditor, PricewaterhouseCoopers, has engagement terms refreshed annually and has conﬁrmed its independence to the Board. The current engagement partner has conducted the audit since 2001 with rotation due no later than 2006. The external auditor is required to attend the Annual General Meeting and be available to respond to speciﬁc questions from shareholders. Disclosure of Information St Barbara has obligations under the Corporations Act, and ASX and AIM Listing Rules to keep the market fully informed of information which may have a material effect on the price or value of St Barbara’s securities and to correct any material mistake or misinformation in the market. The Company has adopted a Continuous Disclosure Policy to provide a disciplined framework for complying with these requirements. Ethics The Board Charter provides that, in performing its role, the Board should act at all times: • in recognition of its overriding responsibility to act honestly, fairly and in accordance with the law in serving the interests of the Company, its shareholders, employees, and other stakeholders • with integrity and objectivity and consistently with the ethical, professional and other standards set out in the Company’s corporate governance policies. Heritage Listed Gwalia State Hotel now owned by the Company 19 Corporate Governance Review continued Dealing in Company shares by directors, ofﬁcers and employees is governed by a Dealings in Securities Policy. Except for a closed period imposed by AIM Listing Rules where no trading in company securities is allowed by Directors, Ofﬁcers and Employees from balance date until the release of full year results, and from 31 December until the release of the half year results, this policy allows for a 30 day trading window following signiﬁcant public announcements, provided the company is not in possession of undisclosed potentially price sensitive information. Company policies on Occupational Health and Safety and Environment acknowledge the Company’s fundamental commitment to providing a safe workplace, and the Company’s and employee responsibilities to the environment and local communities with whom we interact. Remuneration The Board has established a Remuneration Committee, and adopted a Remuneration Policy, key principles of which are: • Remuneration is linked to the creation of value for • Remuneration will reward ﬁnancial and non-ﬁnancial shareholders; performance; • Remuneration will reﬂect the market in which the Company operates; and • Remuneration will recognise the contribution of individuals and teams. Details of remuneration of Directors, the Managing Director and CEO, and senior executives are disclosed in the Directors’ Report. Issues of substance are considered by the Board with external advice from its professional advisers as required. The Board’s individual members can seek independent professional advice at the Company’s expense in carrying out their duties. Prior written approval of the Chairman is required, but may not be unreasonably withheld. Key elements of remuneration for senior executive employees comprise: • Base salary; • Total possible remuneration at risk, subject to meeting prescribed key performance indicators; and • Equity participation through executive and employee options. Evolving Practices The Company recognises that corporate governance practices will continue to evolve as the Company continues to grow and develop. Opposite page | Bill Rose, Peter Thompson, Ian O’Grady, Jane Bateman and Martin Reed at Leonora discussing Tarmoola drilling strategy 21 05 Directors Report Colin Wise Chairman Eduard Eshuys Managing Director & CEO Hank Tuten Non Executive Director This ﬁnancial report covers both St Barbara Mines Limited as an individual entity and the consolidated entity consisting of St Barbara Mines Limited and the entities it controlled at the end of, or during the ﬁnancial year ended 30 June 2005. Sons of Gwalia Ltd Gold Division (SGWGD) St Barbara’s purchase of SGWGD included two operating mines, one at Southern Cross and the other at South Laverton. Directors present their report on the consolidated entity consisting of St Barbara Mines Limited (“St Barbara”) and the entities it controlled at the end of, or during, the year ended 30 June 2005. Directors The following persons were directors of St Barbara during the whole of the ﬁnancial year and up to the date of this report: H G Tuten M K Wheatley S J C Wise and E Eshuys were appointed directors on 20 July 2004 and continue in ofﬁce at the date of this report. R Knight was appointed a director on 25 May 2005 and continues in ofﬁce at the date of this report. S W Miller was a director from the beginning of the ﬁnancial year until removed as chairman and director on 20 July 2004. K A Dundo was a director from the beginning of the ﬁnancial year until his resignation on 18 July 2004. Principal activities During the year the principal activities of the consolidated entity consisted of gold production, gold and mineral exploration, pastoral activities and investments. The only signiﬁcant changes in the nature of the activities of the consolidated entity during the year were the sale of the majority of the Company’s equity interest in a listed subsidiary, NuStar Mining Corporation Limited (“NuStar”), the acquisition of the Gold Division of Sons of Gwalia Ltd (Administrators Appointed) as of 28 March 2005 and the sale of cattle and sub-letting of Murchison pastoral lease interests to a third party, on 4 November 2004. Dividends There were no dividends paid to members during the ﬁnancial year. Review of operations The Company’s strategic focus is build on its core production strengths and to introduce innovative and sustainable improvements to achieve measurable lifts in performance. The Company took over management of the SGWGD operations on 28 March 2005. Gold sales for 2005 were 83,646oz at a cash cost of $341/oz.The forecast at the time of the purchase of SGWGD was for production of 82,000oz at a cash cost of $415/oz. The improved performance of the operations was due to achieving higher grades than were predicted, successful cost-reduction measures implemented by the Company, and improved mining productivity at both Marvel Loch and Safari Bore. Operational Health and Safety The Company’s strong focus on health and safety saw a uniformly high performance level achieved. The speciﬁc results are detailed in the Health, Safety and Environment Report. Southern Cross Operations The Southern Cross Operations are centred at Marvel Loch (30km south of the town of Southern Cross). Prior to purchase by St Barbara, gold production had been derived from open pits at Marvel Loch and Cornishman and underground mining at Golden Pig and Marvel Loch. Mining at Cornishman and Golden Pig was concluded during the year. In the Marvel Loch Open Pit, a change to the mine plan in the last quarter resulted in a higher grade tonnage being extracted and mining was completed in August 2005. There are no plans to extend the life of this pit. Two underground mining areas located at the northern end of the deposit were mined in the Marvel Loch underground mine in the Sherwood and Undaunted lodes. Both Sherwood and Undaunted are being drilled for extensions which are planned to be mined commencing in the March 2006 quarter. Development of a further stoping area at New Lode commenced towards the end of the ﬁnancial year and stope production will commence in the December 2005 quarter. Hank Tuten Non Executive Director Mark Wheatley Non Executive Director Richard Knight Non Executive Director Ross Kennedy CFO & Company Secretary Extension drilling is also underway for this lode and it is anticipated that additional production stoping will be carried out in the second half of 2006. Mining operations in the June quarter were concentrated at the Safari Bore Pit which is located 70km north of the Carosue Dam plant. A new open pit is being developed at Hercules, which is located 12km south of the Marvel Loch Processing Plant, with activity commencing in August 2005. A dry-hired mining ﬂeet, managed by the Company, was used to mine the pit in the last quarter and it achieved better than expected productivities and costs. The ﬁrst stage of this pit comprises 1.1Mt at a grade of 2.1g/t for 74,000oz within the previously announced probable reserve of 180,000 ounces of gold for the whole pit. It is planned that further development of this pit would extend operations at Southern Cross to the end of 2007 and this will be evaluated once production commences at Hercules. The processing plant located at Marvel Loch, treated a total of 2,525,451 tonnes derived from the operating mines and stockpiled ore for the period of which 663,365 tonnes, at a grade of 2.94g/t, was processed. Attributable gold production shipped from Southern Cross Operations during the June quarter was 53,719oz. Forecast gold production from Southern Cross for 2006 is 150,000oz at cash cost of $415/oz. South Laverton Operations Processing was completed at Carosue Dam during the last quarter of 2005, with the plant now on care and maintenance, as scheduled. Details of 2005 Production Open Pit Grade Underground Grade Stockpiles Processed Grade Ore Milled Grade Recovery Gold Shipped Southern Cross Carosue Dam Total 287,356 256,848 544,204 2.25 3.84 3.00 116,944 7.02 - - 116,944 7.02 259,065 56,750 315,815 1.32 0.77 1.22 663,365 313,598 976,963 2.94 92 3.28 96 3.05 93 53,719 29,528 83,247 t g/t t g/t t g/t t g/t % ozs Cash Cost $/oz 336 349 341 In addition to gold shipped from operations of 83,247oz, 399oz was generated from other site clean-ups. Care and maintenance activities are being continued at Meekatharra, Gwalia, Tarmoola and Carosue Dam. 23 Directors Report continued Consolidated revenues and results Consolidated revenues and results are summarised as follows: Gold Share investments Proceeds on sale of royalty, property, plant and equipment Other Loss from ordinary activities before related income tax expense Income tax expense Loss from ordinary activities after related income tax expense Less: Net loss attributable to outside equity interest Net loss attributable to members of St Barbara 2005 $’000 46,553 13,675 2004 $’000 21,972 5,063 6,662 611 3,486 1,911 67,501 32,432 (6,697) (25,228) - - (6,697) (25,228) - 913 (6,697) (24,315) a) Changes in Substantial Shareholdings NuStar Mining Corporation Limited 30 June 2004 Shares held as at: 30 June 2005 542,719,338 63,325,359 54.8% 6.4% On 30 September 2004, the Company sold 100M shares at 4¢ each in NuStar and as a consequence deconsolidated its investment for accounting purposes as from that date. Also on 30 September 2004, the Company granted an option to Claymore Capital Pty Ltd and its nominees to purchase up to 100M NuStar shares at 5¢ each. The option agreement expired on 16 May 2005, and resulted in the sale of 36,674,700 NuStar shares. On 17 January 2005, the Company completed a share swap buy-back whereby 212,864,971 NuStar shares were provided as consideration for buying back 170,291,977 St Barbara shares. The issued capital of St Barbara reduced from 736,825,329 fully paid ordinary shares to 566,533,352 fully paid ordinary shares. On 28 January 2005, the Company accepted an offer for 69,354,367 NuStar shares from Sedimentary Holdings Limited (“Sedimentary”) and as a result received 15,412,082 Sedimentary shares representing 5.5% of the issued capital of that company. The shareholding in Sedimentary was sold on 27 July 2005. As a result of the transactions in NuStar shares described above and further on-market share sales, the Company’s investment in NuStar reduced from 54.8% as at 30 June 2004 to 6.4% as at 30 June 2005 and nil as at 27 July 2005. b) Changes in Operations Divestment of NuStar The Company’s investment in NuStar was deconsolidated as from 30 September 2004 following the sale of 100M shares as described above. Divestment of Paulsens Royalty On 29 November 2004, shareholders approved the sale of the Company’s Paulsen’s royalty to NuStar for $5,100,000. Termination of Reedys Joint Venture On 9 December 2004, by mutual agreement, Elara Mining Limited (“Elara”) withdrew from the Reedys Joint Venture at Meekatharra, and expenditure incurred by Elara of $593,213 was agreed to be deemed expenditure towards its expenditure commitments for the Polelle Joint Venture. Acquisition of Gold Division of Sons of Gwalia Ltd (Administrators Appointed) On 20 March 2005, the Company announced the acquisition of the Gold Division of Sons of Gwalia Ltd (Administrators Appointed) (“SGWGD”) for a cash payment of $2,285,000, the replacement of existing bank guaranteed environmental Performance Bonds totalling $29,960,000 and the assumption of additional Performance Bonds of up to $5,700,000. The effective date of acquisition was 28 March 2005. Through this acquisition the Company acquired: • Land positions totalling 10,000km2 in the Leonora, Southern Cross and South Laverton regions of Western Australia; • Gold operations in production at Marvel Loch, Southern Cross, and Carosue Dam, South Laverton; and • A portfolio of property, plant and equipment. The results of gold production from these acquired assets are described in the section titled Operations Review, on pages 12 to 13. On 9 August 2005, the Company announced a reserve estimate upgrade for Hercules, near Marvel Loch, Southern Cross as at 30 June 2005 using a gold price of A$550/oz and cut-off grade of 1.1g/t, to Probable Reserves of 2.3Mt @ 2.5g/t for 180,000oz of gold. Likely developments and expected results of operations Likely developments in the operations of the consolidated entity constituted by St Barbara and the entities it controls at the date of this report included: • As a consequence of the extension to operations at Southern Cross as described above, forecast gold production for the ﬁnancial year 2005/06 is 150,000 ounces at an estimated cash cost of $415/oz. • Exploration activities are planned to continue at Leonora (both at Tarmoola and Gwalia Deeps), Southern Cross and Meekatharra. Regulatory environment The consolidated entity is subject to signiﬁcant environmental its mining and exploration regulation activities. in respect of Mining and exploration The Company’s mining activities are all in Western Australia, and are governed by the Mines Act Western Australia, the Mines Safety and Inspection Act and other mining related legislation. Exploration activities are also primarily in Western Australia. Details of mining and exploration activities during the year are set out in separate reports included in this Annual Report. 25 c) Changes in Issued Capital Issued capital at 30 June 2004 On 15 July 2004, the Company announced the conversion by Ocean Resources Capital Holdings plc of the face value of its convertible note of $4.4M into 55,000,000 ordinary shares at 8¢ each On 20 July 2004, the Company issued 42,050,000 fully paid ordinary shares at 4¢ per share to raise $1,682,000 for working capital On 20 July 2004, the Company issued 17,480,547 fully paid ordinary shares to Ocean Resources Capital Holdings plc at 4.6¢ per share in satisfaction of interest of $804,105 On 23 July 2004, the Company issued 26,591,453 fully paid ordinary shares to Resource Capital Funds II LP (“RCFII”) at 4.6¢ per share to raise $1,223,207 for working capital On 1 December 2004, following shareholder approval, the Company converted a $1,200,000 loan from RCFII into 21,554,172 fully paid ordinary shares On 17 January 2005 the Company completed a share buy-back (offering 1.25 NuStar shares as consideration for every 1 St Barbara share bought back) and as a result cancelled 170,291,977 shares Shares on Issue 574,149,157 629,149,157 671,199,157 688,679,704 715,271,157 736,825,329 566,533,352 Matters subsequent to the end of the ﬁnancial year On 26 July 2005, the Company announced: • Extension to operations at Southern Cross based on open pit mining of Hercules and continuing underground operations at Marvel Loch; • An on-market share buy-back to buy back up to 10% of the Company’s issued capital (56,653,335 shares); and • The proposed sale of unmarketable parcels of shares, on behalf of holders of unmarketable parcels. On 27 July 2005, the Company sold its remaining shares in NuStar (63,325,359 shares) and Sedimentary (15,412,082 shares) for $3,166,268 and $2,851,234 respectively, yielding total proceeds of $6,108,000. Directors Report continued Information on directors Special responsibilities Member of the Remuneration Committee S J Colin Wise LL.B, FAICD, FAusIMM Chairman – non-executive Age 59 Experience and expertise Mr Wise is an experienced corporate lawyer and consultant with signiﬁcant expertise in the mining and exploration industry and corporate sector. He spent 24 years with WMC Limited, 10 of which as General Counsel and subsequently, 4 years as Counsel to the New York law ﬁrm of Howard, Smith and Levin LLP. He has had extensive practical experience in Australia and internationally with a wide range of corporate, operational and legal matters. He is a Fellow of both the Australian Institute of Company Directors and of the Australasian Institute of Mining and Metallurgy. He is a non- executive director of Southern Health, the largest health care service in Melbourne. Other current public company directorships Nil Former public company directorships in last 3 years Nil Special responsibilities Chairman of the Board Member of the Audit Committee Interest in shares and options Mr Eshuys has a beneﬁcial interest in 1,250,000 fully paid ordinary shares and holds 35,000,000 executive options to acquire fully paid ordinary shares as detailed later in this Report. Henderson (Hank) G Tuten, B.A. (Econ) Non Executive Director Age 57 Experience and expertise Mr Tuten is actively involved in a consolidated entity of private equity funds as a founding partner. These are the Resource Capital Funds (“RCF”), the e-Century Capital Fund and the CIP Fund. Mr Tuten is the Chairman of RCF Management LLC, the management company of RCF. He spent over ﬁfteen years with the NM Rothschild and Sons consolidated entity. During that period, he was the chief executive ofﬁcer of Rothschild Australia Limited, Rothschild North America Inc. and Continuation Investments NV, the private equity vehicle for Rothschild Continuation Holdings AG consolidated entity. Prior to that, he was a commercial banker with the Philadelphia National Bank. Mr Tuten serves on several boards in connection with his investment activities. He graduated from the University of Virginia with a BA in Economics. Interest in shares and options Mr Wise has a beneﬁcial interest in 3,100,000, fully paid ordinary shares of the Company. Other current public company directorships Nil Eduard Eshuys B.Sc, FAICD, FAusIMM Managing Director and Chief Executive Ofﬁcer Age 60 Experience and expertise Mr Eshuys is a geologist with 36 years of experience in mineral exploration, development and operation of gold and nickel mines in Australia. He has a credible record in exploration having led the exploration teams that discovered several major gold deposits, including Plutonic, Bronzewing and Jundee. He brought Bronzewing and Jundee as well as the Cawse Nickel mine into production. Mr Eshuys was awarded the Geological Society of Australia’s Joe Harms medal for distinction in exploration success and project development in 1996. He is a Fellow of both the Australian Institute of Company Directors and the Australian Institute of Mining and Metallurgy. Other current public company directorships Nil Former public company directorships in last 3 years Nil Former public company directorships in last 3 years Nil Special responsibilities Member of the Audit Committee Interest in shares and options Mr Tuten has a beneﬁcial interest in shares and options held by Resource Capital Funds II LP of 177,887,642 shares and 52,088,091 options. Mark K Wheatley B.E.((Chem) Hons 1), MBA Non Executive Director Age 44 Experience and expertise Mr Wheatley has 25 years resource industry experience within Australia and overseas. In his 17 years with BHP until 1996, he was involved in engineering, research, business development and commercial roles within the steel, minerals and corporate business groups. He then joined BT and became a Senior Vice President within the Global Metals and Mining Group where he was involved in project ﬁnance and corporate advisory activities over the next 3 years. He moved to the gold industry in 1999 where, as General Manager Corporate Development with Goldﬁelds/Aurion Gold Limited and a period as Acting Managing Director of Goldﬁelds, he completed a number of successful mergers and acquisitions before it was taken over by Placer Dome Inc. in 2002. Mr Wheatley is currently Chairman and CEO of Southern Cross Resources Inc, a company which is listed on the Toronto Stock Exchange. Other current public company directorships Southern Cross Resources Inc Mr Knight was responsible for the redesign and reorganisation of the Goro lateritic nickel project in New Caledonia. Other current public company directorships Zinifex Limited and Northern Orion Resources Inc Former public company directorships in last 3 years Portman Limited and Asia Paciﬁc Resources Limited Special responsibilities Chairman of the Remuneration Committee – appointed 25 July 2005 Former public company directorships in last 3 years Nil Interest in shares and options None Special responsibilities Chairman of the Audit Committee – appointed 25 July 2005 (previously Chairman of the Remuneration Committee) Member of the Remuneration Committee Interest in shares and options Mr Wheatley holds 1,000,000 unlisted options as detailed later in this Report. Richard Knight MSc(Eng), DIC, BSc(Eng), ARSM, FAICD, C.Eng Non Executive Director Age 64 Experience and expertise Mr Knight is a mining engineer with some forty years experience, both in Australia and internationally. Mr Knight is a Director of Zinifex Limited and Northern Orion Resources Inc, Chairman of Heuris Partners, a Melbourne-based advisory and strategic planning practice and Senior Advisor to Inco Limited. He has previously been CEO of Energy Australia Limited, an Executive Director of North Limited and Managing Director of Inco Australia Management Pty Ltd. As the Managing Director of Inco Australia Management Pty Ltd, Company secretary Ross Kennedy BComm, Grad.Dip – Company Secretarial Practice, ACA, FTIA, MAusIMM, FAICD, ACSA Chief Financial Ofﬁcer and Company Secretary Age 45 Mr Kennedy was appointed to the position of company secretary in 2004. Mr Kennedy has more than 17 years’ experience as a public company secretary and has held a number of public company directorships in resources and technology companies. He has commercial experience in the acquisition and sale of mineral assets and extensive corporate experience in public company administration including treasury, IT, risk management, ethical standards, capital and ﬁnance raisings, statutory accounting, takeovers, legal contracts and statutory compliance with a diverse range of public companies. Meetings of directors The number of meetings of the company’s board of directors and of each board committee held during the year ended 30 June 2005, and the numbers of meetings attended by each director were: Full meetings of directors Meetings of non - executive directors Meetings of committees Audit Remuneration 27 S J C Wise E Eshuys H G Tuten M K Wheatley R Knight S W Miller K A Dundo * * A 17 17 18 20 1 5 4 B 17 17 22 22 1 5 4 A - - - - - - - B - - - - - - - A 2 2 - 1 B 2 2 2 2 A 1 1 ** 1 B 1 1 ** 1 A = Number of meetings attended B = Number of meetings held during the time the director held ofﬁce or was a member of the committee during the year * = Not a non-executive director ** = Not a member of the relevant committee Directors Report continued Retirement, election and continuation in ofﬁce of directors R Knight was appointed a director on 25 May 2005. In accordance with the Constitution, R Knight retires as a director at the annual general meeting and, being eligible, offers himself for re-election. S J C Wise is the director retiring by rotation who, being eligible, offers himself for re-election. Remuneration report The remuneration report is set out under the following main headings: A Principles used to determine the nature and amount of remuneration B Details of remuneration C Service agreements D Share-based compensation E Managing Director & CEO KPIs F Valuation of options A Principles used to determine the nature and amount of remuneration The Company’s remuneration policy and practices have been evolving, with a recently adopted Remuneration Policy. A summary of key elements of the Remuneration Policy is as follows: Overview The board recognizes that in order to meet and exceed its business objectives, the Company must be able to attract, motivate and retain key executives. Key Principles The key principles that underlie St Barbara’s Remuneration Policy are: • remuneration will be linked to the creation of value for shareholders; • remuneration will reward both ﬁnancial and non-ﬁnancial performance; • remuneration will reﬂect the market in which the Company operates; and • remuneration will recognise the contribution of individuals and teams. Executive Remuneration • Aim of Remuneration Policy To achieve its goals in relation to executive staff, the Remuneration Policy is designed to: o align individual and team reward with business performance in both the short term and long term; o encourage executives to align their interest with those of shareholders; o encourage executives to perform to their fullest capacity; o be business focused and ﬂexible; and o be competitive and cost effective in each relevant employment market. • Content of Remuneration Packages Remuneration may incorporate ﬁxed and variable pay performance elements with both a short-term and long- term focus. Remuneration packages may contain any or all of the following: o annual salary – with provision to recognize the value of the individual’s personal performance and their ability and experience; o rewards, bonuses, special payments and other measures available to reward individuals and teams following a particular outstanding business contribution; o share participation – St Barbara has adopted an Employee Share Option Plan; and o other beneﬁts, such as holiday leave, sickness beneﬁts, superannuation payments and long service beneﬁts. Non executive directors Fees and payments to non executive directors reﬂect the demands which are made on, and the responsibilities of, the directors. Non executive directors’ fees and payments are reviewed annually by the Board. The Board also considers the advice of independent remuneration consultants to ensure non executive directors’ fees and payments are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of non executive directors based on comparative roles in the external market. The Chairman is not involved in any discussions relating to determination of his own remuneration. Non executive directors do not receive employee share options. M K Wheatley received 1,000,000 unlisted options as detailed in note 23 from Resource Capital Fund II LP. Non executive directors may, commencing 1 October 2005 elect to receive all or part of their remuneration with a 20% minimum in St Barbara shares, which would be acquired on-market, pursuant to a non executive director share plan. Directors’ fees The current base remuneration was last reviewed with effect from 1 July 2005. The Chairman’s remuneration is inclusive of committee fees while non-executive directors receive additional yearly fees for their membership on committees of the Board. Non executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $215,000 per annum in aggregate (approved in 1991), and shareholders will be asked to consider an increase to $750,000 per annum in aggregate at the 2005 Annual General Meeting. Retirement allowances for directors Non executive directors are not entitled to retirement allowances. Executive pay The executive pay and reward framework has four components: • base pay and beneﬁts • short-term performance incentives • long-term incentives through participation in Executive Options or the St Barbara Employee Option Plan, and • other remuneration such as superannuation. The combination of these comprises the executive’s total remuneration. Base pay Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed beneﬁts at each executive’s discretion. Executives are offered a competitive base pay. External remuneration consultants provide analysis and advice to assist in determining base pay that reﬂects a comparable market role. Base pay for senior executives is reviewed annually to ensure the executive’s pay is competitive with the market. An executive’s pay is also reviewed on promotion. There are no guaranteed base pay increases included in any senior executive’s contracts. Beneﬁts Executives receive beneﬁts including as appropriate, car and/or living away from home allowances. Superannuation Employees have a choice of superannuation funds and all beneﬁts accumulate. Short-term incentives For the year ended 30 June 2005, KPIs required performance in improving operational efﬁciencies as well as other key, strategic ﬁnancial and non-ﬁnancial measures linked to drivers of performance in future reporting periods. The Remuneration Committee is responsible for assessing whether the KPIs are met. To help make this assessment, the committee receives detailed reports on performance from management and as appropriate, external remuneration consultants. St Barbara Employee Option Plan Information on the St Barbara Option Plan is set out on page 63. B Details of remuneration Amounts of remuneration Details of the remuneration of each director of St Barbara and each of the ﬁve executives of the company and the consolidated entity who received the highest remuneration for the year ended 30 June 2005 as reﬂected in the results of the Company for that year are set out in the following tables. Remuneration for directors and executives is reviewed annually. Cash bonuses are directly related to performance. 29 Directors Report continued Directors of St Barbara 2005 Primary Post-employment Cash salary and fees $ Non- monetary beneﬁts $ Cash bonus $ Super- annuation $ Retirement beneﬁts $ 87,114 - - 7,840 1 276,178 2 250,000 40,000 8,652 - - Option Value Current Date $ Remuner -ation as Option Value % Total $ - 94,954 - 3 914,614 1,489,444 61.4 7,543 4 245,616 37,716 4,701 - 5 73,007 - - - - - - - - 478,716 250,000 40,000 423 - 6,571 31,029 - - - - 290,875 5,124 - 79,578 - - - - - - - 245,616 914,614 1,959,975 Chairman S J C Wise Managing Director & CEO E Eshuys Former Executive Chairman S W Miller Non executive directors R Knight * H G Tuten ** M K Wheatley Total Includes consulting fees paid prior to employment. 1 2 Provision for bonus included in the 2005 ﬁnancial year results, and paid subsequent to balance date. 3 During the 2005 ﬁnancial year, E Eshuys was issued executive options, with the approval of shareholders at the 2004 Annual General Meeting. Details are as follows: Grant date 23 Dec 04 23 Dec 04 23 Dec 04 23 Dec 04 23 Dec 04 23 Dec 04 23 Dec 04 Number 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 Exercise price 0.0472 0.0472 0.0472 0.1500 0.1500 0.1500 0.1500 Expiry 23 Dec 09 23 Dec 09 23 Dec 09 23 Dec 08 23 Dec 09 23 Dec 10 23 Dec 11 Vesting condition Continued employment as Managing Director & CEO Vesting On grant 21 Jul 05 21 Jul 06 14 Sep 05 14 Sep 06 14 Sep 07 14 Sep 08 For statutory purposes, E Eshuys’ options are valued as at grant date being the date of shareholder approval apportioned on a pro-rata basis for the period of service to vesting dates. The valuation assumes that all options granted will vest. The pricing of the exercise terms of these options was agreed at prior dates; - 21 July 2004 15,000,000 options exercisable at $0.0472 (being the volume weighted average share price for the month after Mr Eshuys was ﬁrst appointed a Director) - 14 September 2004 20,000,000 options exercisable at $0.15 (closing market price of $0.044) 4 S W Miller received a termination package comprising accrued leave entitlements and redundancy. 5 * R Knight was appointed a director on 25 May 2005 ** H G Tuten has declined to receive directors’ fees Includes back pay of $27,135 and superannuation thereon of $2,442 relating to the previous ﬁnancial year. Total remuneration of directors of St Barbara for the year ended 30 June 2004 is set out below. Information is aggregated except for Directors in ofﬁce during both the current and preceding year. 2004 Primary Post-employment Cash salary and fees $ Non- monetary beneﬁts $ Cash bonus $ Super- annuation $ Retirement beneﬁts $ Option Value Current Date $ Former Executive Chairman S W Miller Non executive directors H G Tuten ** M K Wheatley KA Dundo (resigned 18/07/04) GB Speechly (resigned 28/11/03) Total 400,000 - 27,135 100,000 20,833 547,968 Other executives of St Barbara - - - - - 11,324 80,000 - - - - 2,446 9,000 1,875 93,321 - - - - - - - - - - Remuner -ation as Option Value % - - - - Total $ 491,324 29,581 109,000 - 652,613 2005 Primary Post-employment Cash salary and fees $ 1 148,292 71,499 227,788 145,000 3 131,500 724,079 R J Kennedy CFO & Company Secretary P Thompson GM – Exploration M R Reed 3 GM – Operations G C Miller GM – Special Projects G Viska GM - Commercial Total Non- monetary beneﬁts $ Cash bonus $ Super- annuation $ Retirement beneﬁts $ - - - - - - 8,333 10,916 - - - - 6,885 - 21,750 - 8,333 39,551 - - - - - - Option Value Current Date $ Remuner -ation as Option Value % Total $ 2 46,276 213,817 21.6 2 47,949 126,333 38.0 - - - 227,788 166,750 131,500 - - - 31 94,225 866,188 includes consulting fees paid prior to employment 1 2 employee options issued on commencement of employment valued at grant date in accordance with AASB 1046 Director and Executive Disclosures 3 executives in receipt of consulting fees All executives commenced with St Barbara during the 2005 ﬁnancial year save for G C Miller who is a continuing executive. Directors Report continued Total remuneration of executives of St Barbara for the year ended 30 June 2004 is set out below. Information is aggregated except for executives in ofﬁce during both the current and preceding year. 2004 Primary Post-employment Cash salary and fees Cash bonus $ Non- monetary beneﬁts Super- annuation $ Retirement beneﬁts $ Options $ Total $ G C Miller G M – Special Projects R T Calnan (Resigned 31/10/04) 145,000 169,000 P J Richardson 150,000 (Resigned 30/11/04) C W Davis (Resigned 31/10/04) E L Boyd (Resigned 31/12/04) A D Rule (Resigned 15/12/03) Total 142,622 120,698 87,796 815,116 - - - - - - - 3,320 11,446 21,750 62,600 10,789 15,000 9,048 21,393 214 9,511 - - - - - 3,320 11,875 71,250 38,137 142,129 71,250 - - - - - - - $170,070 243,046 175,789 173,063 130,423 174,241 1,066,632 C Service agreements Remuneration and other terms of employment for the Managing Director and the speciﬁed executives are formalised in service agreements. Each of these agreements provide for the provision of performance-related cash bonuses, other beneﬁts including allowances and participation, when eligible, in the St Barbara Employee Option Plan. Other major provisions of the agreements relating to remuneration are set out below. All contracts with executives may be terminated early by either party with one month’s notice, subject to termination payments as detailed below. E Eshuys, Managing Director & CEO The Company may terminate the contract by providing three months’ notice and at the end of the notice period paying the executive nine months’ salary. E Eshuys may terminate the contract by giving four months’ notice. R J Kennedy, Chief Financial Ofﬁcer & Company Secretary The notice period for terminating R Kennedy’s contract is three months’ during his ﬁrst year of service, four and a half months for between one and three years of service and six months after three years. R Kennedy is required to give three month’s notice of termination. D Share-based compensation Options other than those issued to Mr Eshuys (refer Section E) were granted under the St Barbara Employee Option Plan which was approved by shareholders at the 2001 annual general meeting. Staff eligible to participate in the plan are generally either of supervisor level and above or employees who have been continuously employed by the consolidated entity for a period of at least one year. Options are granted under the plan for no consideration. Options granted during the year had a three year term and vested on the grant date. The terms and conditions of each grant of options granted under the St Barbara Employee Option Plan affecting remuneration in this or future reporting periods are as follows: Issued to Grant date Expiry date Exercise price Value per option at grant date Date exercisable R Kennedy 2 Dec 04 2 Dec 07 P Thompson 16 Dec 04 2 Dec 07 $0.08 $0.08 $0.46 $0.48 Anytime from grant date Anytime from grant date Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share. The exercise price of options is equal to or greater than the closing market price on the Australian Stock Exchange on the day the options are granted. E Managing Director & CEO KPIs In respect of the 2005 ﬁnancial year, E Eshuys achieved 100% of the potential bonus available for that year. The key performance indicators relevant to determination of the bonus for the 2005 ﬁnancial year encompassed the following categories: - Corporate - Finance and administration - Investor relations - Exploration and development - Business development - Human resources/environment/community F Valuation of options The amounts disclosed for emoluments relating to options above are the assessed fair values at grant date of options granted to executive directors and other executives. Fair values at grant date are independently determined using a Black-Scholes option pricing model of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. options are granted for no consideration exercise price The model inputs for options granted during the year ended 30 June 2005 included: i) ii) iii) grant date iv) expiry date v) vi) expected price volatility of the company’s shares vii) expected dividend yield viii) risk-free interest rate share price at grant date Loans to directors and executives There were no loans to directors or executives during the year. 33 Directors Report continued Share options granted to directors and the most highly remunerated ofﬁcers Options over unissued ordinary shares of St Barbara granted during or since the end of the ﬁnancial year to any of the directors or the ﬁve most highly remunerated ofﬁcers of the company and consolidated entity as part of their remuneration were to E Eshuys, Managing Director and CEO as set out in Section B of this report and otherwise as follows: Other executives of St Barbara R J Kennedy, CFO & Company Secretary P Thompson, General Manager Exploration G Viska, General Manager Commercial Options granted Grant date 1,000,000 1,000,000 1,000,000 2 Dec 04 16 Dec 04 2 Aug 05 Shares under option Unissued ordinary shares of St Barbara under option at the date of this report are as follows: Type RCF II Expiry Issue price of shares Number under option Between 15 Jul 05 and 24 May 08 Between 11.4¢ and 21.3¢ Executive options Employee options Between 31 Dec 05 and 23 Dec 11 Between 4.7¢ and 15¢ Between 31 Aug 05 and 17 Jan 08 Between 8¢ and 35¢ 52,862,679 36,000,000 4,750,000 93,612,679 No option holder has any right under the options to participate in any other share issue of the Company or of any other entity. Shares issued on the exercise of options There were no ordinary shares of St Barbara issued during the year ended 30 June 2005 on the exercise of options granted under the St Barbara Employee Option Plan. No other shares have been issued since that date. Insurance of ofﬁcers During the ﬁnancial year, St Barbara paid a premium of $172,373 including GST and charges, to insure the directors and ofﬁcers of the company and its Australian-based controlled entities. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the ofﬁcers in their capacity as ofﬁcers in their capacity as ofﬁcers of entities in the consolidated entity, and any other payments arising from liabilities incurred by the ofﬁcers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the ofﬁcers or the improper use by the ofﬁcers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001. Non-audit services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the consolidated entity are important. Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services provided during the year are set out below. The board of directors has considered the position and, in accordance with the advice received from the Audit Committee is satisﬁ ed that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisﬁ ed that the provision of non-audit services by the auditor, as set out below, did not comprise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor • none of the services undermine the general principles relating to auditor independence as set out in Professional Statement F1, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards. A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 36. During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit ﬁ rms: Audit services PricewaterhouseCoopers Australian ﬁ rm: Audit and review of ﬁ nancial reports and other audit work under the Corporations Act 2001 Total remuneration for audit services Taxation services PricewaterhouseCoopers Australian ﬁ rm: Consolidated 2005 $ 2004 $ 126,632 126,632 117,786 117,786 Tax compliance services, including review of company income tax returns Total remuneration for taxation services 108,726 108,726 29,200 29,200 Rounding of amounts The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the directors’ report. Amounts in the directors’ report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. 35 Auditor PricewaterhouseCoopers continues in ofﬁ ce in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of the directors. E Eshuys E Eshuys Director Perth, 30 September 2005 Auditors’ Independence Declaration Financials 37 Statements of Financial Performance for the year ended 30 June 2005 Revenue from sale of gold Other revenues from outside operating activities Total revenue from ordinary activities Changes in inventories of ﬁnished goods Raw materials and consumables used Carrying value of net assets and non current assets sold Contract mining, cartage, milling, maintenance, labour and consultants Tenement rent and rates Royalty cost expenses Employee beneﬁts expenses Exploration drilling and assay expenditure Loss on subsidiary becoming an associate Share of net loss of associate Provision for diminution in value of investments Provision controlled entities for diminution in investment in Write down of mining development expenses Write down of exploration tenements Depreciation and amortisation expenses Other expenses from ordinary activities Earnings/(loss) before interest and tax (EBIT) Borrowing cost expense Loss from ordinary activities before related income tax expense Income tax expense Loss from ordinary activities after related income tax expense Consolidated Company 30 June 2005 $’000 46,553 20,948 67,501 30 June 2004 30 June 2005 $’000 21,972 10,460 32,432 $’000 46,553 20,395 66,948 30 June 2004 $’000 21,972 10,871 32,843 Notes 3 3 (687) (6,640) (3,691) (9,359) (687) (6,640) (3,691) (9,359) (14,578) (6,849) (14,541) (6,849) (20,558) (2,211) (1,265) (7,256) (3,896) (272) (577) (773) -. -. (775) (8,093) (6,093) (6,173) (524) (8,685) (1,329) (671) (6,165) (4,360) -. -. -. -. (6,497) (318) (2,726) (2,930) (21,148) (4,080) (20,558) (2,211) (1,265) (7,256) (3,896) -. -. (773) -. -. (775) (8,093) (5,288) (5,035) (524) (8,000) (1,329) (671) (5,876) (1,566) -. -. -. (12,348) (6,497) (318) (2,721) (1,806) (28,188) (3,741) (6,697) (25,228) (5,559) (31,929) -. -. -. -. (6,697) (25,228) (5,559) (31,929) 4 4 Net loss attributable to outside equity interests -. 913 -. -. loss attributable to members of the Net Company Total changes in equity attributable to members of the Company other than those resulting from transactions with owners as owners (6,697) (24,315) (5,559) (31,929) (6,697) (24,315) (5,559) (31,929) Basic and diluted loss per share (cents per share) 32 (1.04). (4.70). The above Statements of Financial Performance should be read in conjunction with the accompanying notes. Statements of Financial Position as at 30 June 2005 Assets Current assets Cash assets Receivables Other ﬁnancial assets Inventories Assets held for resale Other Non-current assets Restricted cash Receivables Property, plant and equipment Mining properties Total Assets Liabilities Current liabilities Payables Interest bearing liabilities Provisions Non-current liabilities Payables Interest bearing liabilities Provisions Total Liabilities Net Assets Equity Contributed equity Option reserve Accumulated losses Parent entity interest Outside equity interest Total Equity Consolidated Company 30 June 2005 $’000 30 June 2004 $’000 30 June 2005 $’000 30 June 2004 $’000 Notes 6 8 14 9 10 11 7 8 12 13 15 16 17 15 16 17 18 19 20 21 16,273 4,767 -. 4,448 21,072 1,864 48,424 11,801 -. 8,996 14,848 35,645 84,069 16,225 1,541 119 17,885 -. 7,000 39,111 46,111 63,996 12,849 1,512 188 777 58 630 16,014 3,108 -. 4,947 42,401 50,456 66,470 6,691 9,832 751 17,274 -. 75 4,269 4,344 16,273 4,767 179 4,448 21,072 1,864 48,603 11,801 595 8,137 14,848 35,381 83,984 16,225 1,541 119 17,885 11,402 7,000 39,111 57,513 21,618 75,398 1 374 21,888 777 58 599 23,697 2,765 1,140 3,821 13,538 21,264 44,961 6,067 8,932 751 15,750 11,484 75 4,269 15,828 31,578 20,073 44,852 8,586 13,383 135,053 2,443 139,400 2,443 135,053 139,400 2,443 2,443 (117,423) (115,835) (128,910) (128,460) 20,073 -. 20,073 26,008 18,844 44,852 8,586 13,383 -. -. 8,586 13,383 39 The above Statements of Financial Position should be read in conjunction with the accompanying notes. Statements of Cash Flows for the year ended 30 June 2005 Cash Flows from Operating Activities Cash receipts in the course of operations (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest received Borrowing costs paid and gold lease fees Finance charges - ﬁnance leases - hire purchase agreements Net cash ﬂows (used in)/provided by operating activities 30 Cash Flows from Investing Activities Payments in respect of exploration, evaluation and development Payments for property, plant and equipment Payments for acquisition of business combination, including associated expenses Cash received from tenements sold Cash received from investments sold Payments for investment in listed securities Net funds from controlled entities Cash disposed on sale of controlled entity Proceeds from sale of royalties, property, plant and equipment Net cash ﬂows provided by investing activities Cash Flows from Financing Activities Principal repayments under secured loans Movement in restricted cash Proceeds from borrowings Proceeds from issue of shares and other equity securities Principal repayments - ﬁnance leases - hire purchase agreements - other Net cash ﬂows (used in)/provided by ﬁnancing activities Net increase/(decrease) in cash Cash at the beginning of the ﬁnancial year Cash at the end of the ﬁnancial year Non-cash ﬁnancing and investing activities Financing facilities 6 30 31 Consolidated Company 30 June 2005 $’000 30 June 2004 $’000 30 June 2005 $’000 30 June 2004 $’000 Notes 44,508 24,684 44,508 24,507 (44,939) (31,712) (40,348) (27,799) 301 (239) -. (98) (467) -. (202) (2,874) 42 9,862 (458) -. (5,168) 4,706 5,908 (3,500) (10,430) 9,035 4,051 -. (183) (990) (2,017) 3,424 12,849 16,273 1,343 (2,662) (162) (133) 301 (239) -. (98) 1,056 (1,732) (162) (133) (8,642) 4,124 (4,263) -. (40) (3,327) (38) (5,043) (42) (2,874) 1,020 4,984 (500) -. -. 3,584 4,003 (5,000) 465 4,500 20,017 (2,315) (776) -. 16,891 12,252 597 42 9,862 (458) 545 -. 5,733 12,810 (3,500) (8,940) 8,853 4,051 -. (183) (943) (662) 16,272 1 1,000 4,984 -. 490 -. 3,483 6,592 (5,000) 808 3,500 860 (2,315) (776) -. (2,923) (594) 595 1 12,849 16,273 The above Statements of Cash Flows should be read in conjunction with the accompanying notes Notes to the Financial Statement for the year ended 30 June 2005 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This general purpose ﬁnancial report has been prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act 2001. It is prepared in accordance with the historical cost convention, except for certain assets which, as noted, are at valuation. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year. The following accounting policies have been used by the consolidated entity for the periods presented: a) Principles of Consolidation The consolidated ﬁnancial statements incorporate the assets and liabilities of all entities controlled by St Barbara Mines Limited as at 30 June 2005 and the results of all controlled entities for the year then ended. St Barbara Mined Limited and its controlled entities are together referred to in this ﬁnancial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full. Outside equity interests in the results and equity of controlled entities are shown separately in the consolidated statement of ﬁnancial performance and statement of ﬁnancial position respectively. Where control of an entity is obtained during a ﬁnancial year, its results are included in the consolidated statement of ﬁnancial performance from the date on which control commences. Where control of an entity ceases during a ﬁnancial year its results are included for that part of the year during which control existed. b) Acquisition of Assets The purchase method of accounting is used for all acquisitions of assets regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition the value of the instruments is their market price as at the acquisition date, unless the notional price at which they could be placed in the market is a better indicator of fair value. Transaction costs arising from the issue of equity instruments are charged directly against the equity raised. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of the acquisition. The discount rate used is the incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent ﬁnancier under comparable terms and conditions. c) Recoverable Amount of Non-Current Assets The recoverable amount of an asset is the net amount expected to be recovered through the cash inﬂows and outﬂows arising from its continued use and subsequent disposal. Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. Where net cash inﬂows are derived from a group of assets working together, recoverable amount is determined on the basis of the relevant group of assets. The decrement in the carrying amount is recognised as an expense in net proﬁt or loss in the reporting period in which the recoverable amount write-down occurs. The expected net cash ﬂows included in determining the recoverable amounts of non current assets are not discounted. d) Treatment of Mining Properties All exploration and evaluation expenditure incurred by or on behalf of the Company up to the decision by the Board to proceed with development of a mining property, is expensed as incurred. Acquired exploration assets are not written down below acquisition cost until such time as the acquisition cost is not expected to be recovered. Mining properties consists only of acquired exploration assets together with related mine development costs and capital assets. The cost of mineral properties includes the cash consideration and/or the fair value of shares issued on the date the property is acquired. The recoverability of amounts shown for mining properties is dependent upon the existence of economically recoverable reserves; the acquisition and maintenance of appropriate permits, licenses and rights; the ability of the Company to obtain ﬁnancing to complete the development of the properties where necessary and upon future proﬁtable production; or, alternatively, upon the Company’s ability to recover its spent costs through a disposition of its interests. Mine development costs relating to mineral properties are deferred until the properties are brought into commercial production, at which time they are amortised over the estimated useful life of the related property or on a unit-of-production basis over proven and probable reserves. Pre-production credits, including the value of marketable metals extracted during mine development, are credited against costs incurred. 41 Notes to the Financial Statement for the year ended 30 June 2005 continued 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued e) Depreciation and Amortisation of Property, Plant and Equipment The Directors have considered the economic life of mine buildings, machinery and equipment with due regard to both the physical life limitations, assessments of economically recoverable reserves of the mine property at which the items are located, and to possible future variations in those assessments. The estimated remaining useful life for all such assets is reviewed regularly with annual reassessments being made for major items. The majority of mine buildings, plant and equipment (other than freehold land) are written off over their expected economic life. The expected useful lives are as follows: 10 years 3 to 131⁄3 years Buildings Plant and Equipment The total net carrying values of mine buildings, machinery and equipment at the mine property are reviewed regularly and, to the extent by which these values exceed their recoverable amounts, that excess is fully provided against in the ﬁnancial year in which this is determined. Proﬁts and losses on disposal of property, plant and equipment are taken into account in determining the result for the year. f) Depreciation and Amortisation of Assets Held for Resale Plant and equipment which is currently surplus to requirements and not used is not depreciated if already written down to residual value. When those assets are used, they are depreciated on an hourly basis. The total carrying value of these assets is not in excess of estimated market value. g) Accounting for Income Tax Income tax has been brought to account using the liability method of tax effect accounting. Future income tax beneﬁts relating to tax losses are only recognised and brought to account to the extent that their realisation is virtually certain. Income tax on cumulative timing differences is set aside to the deferred income tax or the future income tax beneﬁt accounts at the rates which are expected to apply when those timing differences reverse. Tax consolidation legislation The Company and its wholly-owned Australian controlled entities have decided not to implement the tax consolidation legislation as of 1 July 2003. The Australian Taxation Ofﬁce has not yet been notiﬁed of this decision. h) Investments Investments in listed and unlisted securities, other than controlled entities, are stated at cost unless, in the opinion of the Directors, a provision for diminution in value is considered necessary. Income from investments is brought to account by the consolidated entity when dividends are received. Controlled entities are accounted for as set out in Note 1a. Investments in associates are accounted for in the consolidated ﬁnancial statements using the equity method. Under this method, the consolidated entity’s share of the post-acquisition proﬁts or losses of associates is recognised in the consolidated statement of ﬁnancial performance, and its share of post acquisition movements in reserves is recognised in consolidated reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment. Associates are those entities over which the consolidated entity exercises signiﬁcant inﬂuence, but not control. i) Inventories Inventories are valued at the lower of cost and net realisable value. The cost of ore stockpiles and gold stocks includes direct material, direct labour, transportation costs, and variable and ﬁxed overhead costs relating to mining activities. Costs have been assigned to inventory quantities on hand at balance date using the weighted average basis. j) Maintenance and Repairs Plant of the consolidated entity is required to be overhauled on a regular basis. This is managed as part of an ongoing major cyclical maintenance programme. The costs of this maintenance are charged as expenses as incurred, except where they relate to the replacement of a component of an asset, in which case the costs are capitalised and depreciated in accordance with note 1e). Other routine operating maintenance, repair and minor renewal costs are also charged as expenses as incurred. k) Employee Beneﬁts i) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries and annual leave are recognised, and measured as the amount unpaid at the reporting date at the amounts expected to be paid when the liabilities are settled. Liabilities for non accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. ii) Long service leave The liability for long service leave expected to be settled within twelve months of the reporting date is recognised in the provisions for employee entitlements and is measured in accordance with (i) above. The liability for long service leave expected to be settled more than twelve months from the reporting date is recognised in the provisions for employee entitlements and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to the length of service and the probability of achievement of long service leave anniversary dates. iii) Ownership-based remuneration schemes Ownership-based remuneration is provided to employees via the Employee Option Plan. Information relating to this scheme is set out in Note 27. No accounting entries are made in relation to the Employee Option Plan until options are exercised, at which time the amounts receivable from employees are recognised in the statement of ﬁnancial position as share capital. The amounts disclosed for remuneration of Directors and executives in the Directors Report include the assessed fair values of options at the date they were granted. l) Leased Assets Assets acquired under ﬁnance leases are included as property, plant and equipment in the statement of ﬁnancial position. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and beneﬁts incidental to ownership of the leased property. Where assets are acquired by means of ﬁnance leases, the present value of the minimum lease payments is recognised as an asset at the beginning of the lease term and amortised on a straight line basis over the expected useful life of the leased asset. A corresponding liability is also established and each lease payment is allocated between the liability and ﬁnance charge. Other leases under which all the risks and beneﬁts of ownership are effectively retained by the lessor are classiﬁed as operating leases. Operating lease payments are charged to expense over the period of expected beneﬁt. m) Receivables A provision is raised for any doubtful debts based on a review of all outstanding amounts at year end. Bad debts are written off during the year in which they are identiﬁed. n) Revenue Amounts are recognised as sales revenue when, there has been a passing of risk to a customer, and: - the product is in a form suitable for delivery and no further processing is required by, or on behalf of, the producer; - the quantity and quality of the product can be determined with reasonable accuracy; - the product has been despatched to the customer and is no longer under physical control of the producer (or property in the product has earlier passed to the customer); and - the selling price can be determined with reasonable accuracy. Sales revenue represents gross proceeds from the customer. Certain sales are initially recognised at estimated sales value when the product is shipped. Adjustments are made for variations in metal price, assay, weight and currency between the time of shipment and the ﬁnal settlement of sales proceeds. Revenue on sale of investments and tenements is recognised at disposal. Interest revenue is recognised when it accrues taking into account interest rates applicable to ﬁnancial assets. 43 o) Cash Flows For the purpose of the statements of cash ﬂows, cash includes cash on hand, deposits held at call which are readily convertible to cash on hand and which are used in the cash management function on a day-to-day basis, net of outstanding bank overdrafts. Exploration expenditure is treated as an operating cashﬂow in the current year to reﬂect the nature of the Company’s business. Previously it was classiﬁed as investing. Notes to the Financial Statement for the year ended 30 June 2005 continued 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued p) Foreign Currency Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. Foreign currency receivables and payables at balance date are translated at exchange rates at balance date. Exchange gains and losses are brought to account in determining the proﬁt or loss for the year. Exchange gains and losses and hedging costs arising on forward foreign exchange contracts entered into as hedges of speciﬁc commitments are deferred on the statement of ﬁnancial position and included in the determination of the amounts at which the hedged transactions are brought to account. All exchange gains and losses relating to other hedge transactions are brought to account in the statement of ﬁnancial performance in the same year as the exchange differences on the items covered by the hedge transactions. Gains and losses on foreign currency transactions that are not accounted for as speciﬁc hedges, if any, are brought to account as they arise and disclosed as speculative gains or losses. q) Trade and Other Creditors These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the ﬁnancial year and which are unpaid. These amounts are unsecured. r) Rehabilitation and Restoration Costs Provision is made on a straight line basis for the consolidated entity’s estimated liability under speciﬁc legislative requirements and the conditions of its mining leases for future costs expected to be incurred in restoring areas of interest. The estimated liability is based on the restoration work required, using existing technology, as a result of activities to date. s) Borrowing Costs Borrowing costs are recognised as expenses in the year in which they are incurred. Borrowing costs include interest on bank overdrafts, short-term and long-term borrowings, ﬁnance lease charges, the fair value of equity securities issued in satisfaction of interest and facility fees and amortisation of establishment costs and facility fees in connection with the arrangement of borrowings. t) Interest Bearing Liabilities Loans are carried at their principal amounts which represent the present value of future cash ﬂows associated with servicing the debt. Interest is accrued over the period it becomes due and is recorded as part of other creditors. u) Rounding of Amounts The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the ﬁnancial report. Amounts in the report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. v) Earnings per Share i) Basic earnings per share Basic earnings per share is determined by dividing net proﬁt after income tax attributable to members 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. Details of the impact of adopting Australian Equivalents to International Financial Reporting Standards are detailed in Note 35 to the ﬁnancial statements. 2) SEGMENT INFORMATION The Consolidated Entity operates predominantly in the gold mining and exploration industry in Australia. The Consolidated Entity’s head ofﬁce is in Australia. 3) REVENUE Revenue from operating activities Revenue from sale of gold Revenue from non-operating activities Proceeds on sale of investments Proceeds on sale of tenements Proceeds on sale of royalty, property, plant and equipment Interest received Other Consolidated Company 30 June 2005 $’000 30 June 2004 30 June 2005 $’000 $’000 30 June 2004 $’000 46,553 21,972 46,553 21,972 13,675 50 6,662 397 164 5,063 1,020 3,486 502 389 13,675 50 6,109 397 164 4,984 1,000 3,483 1,056 348 Total revenue from ordinary activities 67,501 32,432 66,948 32,843 4) LOSS FROM ORDINARY ACTIVITIES Loss from ordinary activities before income tax expense includes the following speciﬁc net gains and expenses: Net Gains Net gain on disposal of: - Investments - Property, plant and equipment - Tenements Expenses Cost of gold sales Amortisation: - Mining expenses Write down of mining development expenses Write-down of exploration tenements Loss on disposal of property, plant and equipment Depreciation: - Buildings - Plant and equipment Borrowing costs expensed: - Interest paid - Convertible Note borrowing cost - Finance charges relating to: - ﬁnance leases - hire purchase Rental of premises Royalties Provision for: - Rehabilitation - Inventories - Diminution of exploration tenements 4,319 1,369 42 172 -. 1,020 4,319 853 42 93 -. 1,000 31,360 21,165 31,360 21,165 7,287 -. 775 -. 70 736 806 513 -. -. 11 524 263 1,265 216 -. -. 1,200 1,241 318 2,462 102 1,424 1,526 1,523 2,262 162 133 4,080 274 671 495 (204) 5,256 7,287 -. 775 -. 70 736 806 513 -. -. 11 524 263 1,265 216 -. -. 45 1,200 1,241 318 2,462 102 1,419 1,521 1,434 2,012 162 133 3,741 274 671 495 (204) 5,256 Notes to the Financial Statement for the year ended 30 June 2005 continued 5) INCOME TAX a) Tax Expense The amount of income tax expense for the ﬁnancial year differs from the amount calculated on the loss. The differences are reconciled as follows: Consolidated Company 30 June 2005 $’000 30 June 2004 $’000 30 June 2005 $’000 30 June 2004 $’000 Loss from ordinary activities before income tax expense (6,697) (25,228) (5,559) (31,929) Income tax calculated at 30% (2004: 30%) 2,009 7,568 1,668 9,579 Tax effect of permanent differences: - Provision for diminution in investments - Legal and other capital expenditure - Sundry items Income tax adjusted for permanent differences Net future income tax beneﬁt not brought to account Income tax (expense) b) Unbooked future income tax beneﬁt Future income tax beneﬁt attributable to operating losses Less: offset to provision for deferred income tax Future income tax beneﬁt attributable to timing differences not brought to account Future income tax beneﬁt not brought to account These beneﬁts will only be obtained if: (307) (448) (3) (758) 1,251 (1,251) -. 1,280 (4,071) (2,791) 4,545 1,754 (90) (91) (3) (184) 7,384 (7,384) -. 33,263 (1,357) 31,906 1,674 33,580 (232) (448) (3) (683) 985 (985) -. 1,280 (4,071) (2,791) 4,545 1,754 (3,720) (91) (3) (3,814) 5,765 (5,765) -. 25,809 (834) 24,975 1,602 26,577 i) the consolidated entity derives future assessable income of a nature and of an amount sufﬁcient to enable the beneﬁt from the deductions for the loss to be realised; or the consolidated entity continues to comply with the conditions for deductibility imposed by the law; and ii) iii) no changes in tax legislation adversely affect the consolidated entity in realising the beneﬁt from the deductions for the losses. c) Tax consolidation legislation The Company and its wholly-owned Australian subsidiaries have decided not to implement tax consolidation in respect of the year ended 30 June 2005. The Australian Taxation Ofﬁce has not yet been notiﬁed of this decision. 6) CASH ASSETS Current Current cash on hand Cash on call 7) RESTRICTED CASH Non-Current Term deposit i Term deposit ii iii Consolidated Company 30 June 2005 $’000 1,454 14,819 16,273 30 June 2004 $’000 1 12,848 12,849 47 11,754 11,801 40 3,068 3,108 30 June 2005 $’000 30 June 2004 $’000 1,454 14,819 16,273 47 11,754 11,801 1 -. 1 40 2,725 2,765 i ii iii Funds placed on security deposit for lease rental. The current lease expires on 31 January 2006. Funds placed on security deposit with Macquarie Bank Limited as security for performance bonds issued by Macquarie Bank Limited to WA Department of Industry and Resources. Funds placed on security deposit with Westpac Banking Corporation as security for performance bonds issued by Westpac Banking Corporation to WA Department of Industry and Resources. 8) RECEIVABLES Current Trade debtors Provision for doubtful debts Other debtors i i Other debtors in the consolidated entity includes a GST receivable of $1,445,005 Non-Current Non-trade receivables from controlled entities Less: provision for non-recovery 9) INVENTORIES Current Consumables and spares - at cost Less: provision for obsolescence Gold in circuit – at cost 2,561 (56) 2,262 4,767 -. -. -. 2,635 (130) 2,505 1,943 4,448 576 (222) 1,158 1,512 2,561 (56) 2,262 4,767 382 (222) 214 374 -. -. -. 2,225 (1,630) 595 2,770 (1,630) 1,140 47 870 (130) 740 37 777 2,635 (130) 2,505 1,943 4,448 870 (130) 740 37 777 Notes to the Financial Statement for the year ended 30 June 2005 continued 10) ASSETS HELD FOR RESALE Current Investments - At cost - Provision for diminution Property, plant and equipment owned - At cost - At fair value - Accumulated depreciation 11) OTHER ASSETS Current Prepayments 12) PROPERTY, PLANT AND EQUIPMENT Non-Current Property, plant and equipment – at cost Land Buildings Less: Accumulated depreciation Plant and equipment Less: Accumulated depreciation and provision for diminution Written down value of plant and equipment Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below: Land Carrying amount at the beginning of year Disposals Provision for diminution Carrying amount at the end of the year Buildings Carrying amount at the beginning of year Disposals Depreciation Carrying amount at the end of the year Consolidated Company 30 June 2005 $’000 30 June 2004 30 June 2005 $’000 $’000 30 June 2004 $’000 9,173 (3,069) 6,104 -. -. -. 9,173 (3,069) 6,104 14,968 1,587 14,968 -. -. 14,968 21,072 -. (1,529) 58 58 -. -. 14,968 21,072 -. -. -. 1,587 -. (1,529) 58 58 1,864 630 1,864 599 972 4,069 (3,964) 105 63,167 (55,248) 7,919 8,996 1,244 (21) (251) 972 196 (21) (70) 105 1,244 4,434 (4,238) 196 55,457 (51,950) 3,507 4,947 1,249 (5) -. 1,244 383 (85) (102) 196 113 4,069 (3,964) 105 63,167 (55,248) 7,919 8,137 135 4,434 (4,238) 196 55,270 (51,780) 3,490 3,821 135 (22) -. 113 196 (21) (70) 105 140 (5) -. 135 383 (85) (102) 196 Consolidated Company 30 June 2005 $’000 30 June 2004 $’000 30 June 2005 $’000 30 June 2004 $’000 12) PROPERTY, PLANT AND EQUIPMENT continued Plant and equipment Carrying amount at the beginning of year Additions Disposals Depreciation 3,507 20,200 (85) (736) 6,748 42 (1,859) (1,424) 3,490 20,200 (68) (736) Transfer from plant and equipment to assets held for resale (14,967) -. (14,967) Carrying amount at the end of the year 7,919 8,996 3,507 4,947 7,919 8,137 13) MINING PROPERTIES Non-Current Opening balance Direct expenditure Acquired tenements Provision for diminution Deconsolidation adjustment Amortisation charge for the year Write down as per Director’s recommendation Disposal of royalty Closing balance Mining properties Areas of interest in the exploration/evaluation stage Areas of interest in the development and production phase 42,401 -. 13,068 (775) (28,863) (7,287) -. (3,696) 14,848 9,067 5,781 14,848 46,372 4,383 13,538 -. -. 13,068 (6,497) -. (1,539) (318) -. 42,401 38,705 3,696 42,401 (775) -. (7,287) -. (3,696) 14,848 9,067 5,781 14,848 6,730 38 (1,859) (1,419) -. 3,490 3,821 19,224 2,668 -. (6,497) -. (1,539) (318) -. 13,538 9,842 3,696 13,538 Certain exploration interests are subject to farm-in agreements, which may result in the establishment of joint ventures in the future. 49 Notes to the Financial Statement for the year ended 30 June 2005 continued 14) OTHER FINANCIAL ASSETS Current Investments in controlled entities: - Unlisted securities (at cost) - Listed securities (at cost) Provision for diminution - Market value Consolidated Company 30 June 2005 $’000 30 June 2004 $’000 30 June 2005 $’000 30 June 2004 $’000 -. -. -. -. -. -. 500 (312) 188 188 179 -. -. -. 179 179 38,138 (16,429) 21,709 21,888 On 30 September 2004, the Company sold 100,000,000 shares in NuStar, a Company that was previously controlled. As a result of this sale, the Company no longer exerted control and ceased to consolidate the results of NuStar from that date. From 1 October 2004, the investment in NuStar was accounted for in the consolidated ﬁnancial statements using the equity method of accounting and was carried at cost by the parent entity. Details of the disposal are set out as follows: Net assets of controlled entity disposed of: Cash Restricted cash Receivables Mining properties Property, plant and equipment Creditors Interest bearing liabilities Outside equity interest in controlled entity Cash proceeds for sale of shares in controlled entity Carrying value of equity accounted investment following deconsolidation Loss on subsidiary becoming an associate $’000 5,168 1,956 1,585 34,463 172 (896) (1,082) 41,366 (18,595) 22,771 4,000 18,499 22,499 (272) On 17 January 2005, the Company’s shareholding in NuStar reduced to 161,254,426 shares, representing 16.3%, and from this date the Company ceased to account for this investment in NuStar using the equity method. The Company’s investment was carried at the lower of cost and net realisable value at 30 June 2005. 15) PAYABLES Current Trade creditors and accruals Loans from controlled entities – unsecured Non-Current Consolidated Company 30 June 2005 $’000 30 June 2004 $’000 30 June 2005 $’000 30 June 2004 $’000 16,225 6,691 16,225 -. -. -. 16,225 6,691 16,225 5,851 216 6,067 Loans from controlled entities – unsecured -. -. 11,402 11,484 16) INTEREST BEARING LIABILITIES Current Hire purchase liability – secured Convertible notes – secured 1 2 Insurance premium funding – unsecured Other loans - secured 3 4 Non Current Hire purchase liability – secured Other loans - secured 3 76 -. 1,465 -. 1,541 -. 7,000 7,000 188 6,144 76 -. -. 1,465 3,500 9,832 75 -. 75 - 1,541 -. 7,000 7,000 188 5,244 -. 3,500 8,932 75 -. 75 1 On 15 July 2004, the Company announced the conversion by Ocean Resources Capital Holdings Limited (“Ocean”) of the face value of its convertible note of $4.4 million into 55 million ordinary shares at $0.08 per share. Interest due on the convertible note loan of $804,105 was also satisﬁed by the issue of 17,480,547 fully paid ordinary shares at $0.046 per share. 2 A subsidiary at 30 June 2004, NuStar, had a $900,000 unsecured convertible note with Claymore Capital Pty Ltd which was repaid in October 2004. The Company deconsolidated NuStar with effect as from 30 September 2004. 3 On 29 March 2005, the Company drew down $7,000,000 from a bridge loan facility provided by Resource Capital Funds III LP (“RCFIII”) to assist in ﬁnancing the acquisition of the gold division of Sons of Gwalia Ltd (Administrators Appointed) (“SGWGD”). Interest is payable on funds drawn at the rate of 8% per annum, payable 6 monthly in arrears, and with the Company to absorb withholding taxes (currently 10% of gross interest). The loan has a maturity date of 31 December 2008 and may, at RCFIII’s election, and subject to prior shareholder approval, be converted into 100,000,000 shares in the Company at 7¢ each. The Company has the option to repay the loan before maturity, but if it does so, RCFIII is entitled to be issued 100,000,000 options over unissued shares in the Company’s capital with an exercise price of 7¢ each, expiring 31 December 2008. The exercise of these options is subject to shareholder approval. In addition, RCFIII procured ﬁnancial backing for a $21,000,000 bank guarantee facility to assist the Company replacing $30,000,000 in performance bonds with the Department of Industry and Resources WA, attaching to the tenements acquired through SGWGD acquisition. The bank guarantee facility has an annual cost of approximately 2% per annum and expires 30 April 2007. The loan and ﬁnancial backing for the performance bond facility are secured by ﬁrst ranking ﬁxed and ﬂoating charges over the assets of the Company. In addition, RCFIII has been granted a 1.5% royalty on future gold production from Meekatharra from 1 July 2007 and on the acquired SGWGD assets from 1 January 2006, for arranging the acquisition of the ﬁnancing facilities. 4 On 8 May 2004, the Company entered into a margin lending facility with Galviston Pty Limited for $3,500,000. The amount was secured over the investment in NuStar and was repaid in full in October 2004. 51 Notes to the Financial Statement for the year ended 30 June 2005 continued 16) INTEREST BEARING LIABILITIES continued Assets pledged as security The carrying amounts of assets pledged as security are: Secured loan Consolidated Company 30 June 2005 $’000 30 June 2004 $’000 30 June 2005 $’000 30 June 2004 $’000 - Market value of listed securities 6,104 18,452 6,104 18,452 First Mortgage - Property, plant and equipment - Other ﬁnancial assets - Mining properties Finance Lease 8,926 - 14,848 - - 14,848 8,067 - - - Plant and equipment under ﬁnance lease 70 759 70 759 Floating Charge - Restricted cash - Inventories - Receivables Total assets pledged as security 17) PROVISIONS Current Employee beneﬁts Non-Current Employee beneﬁts Rehabilitation 11,801 4,448 4,767 50,964 3,067 - - 22,278 11,801 4,448 4,767 50,105 2,725 - - 21,936 119 751 119 751 - 39,111 39,111 78 4,191 4,269 - 39,111 39,111 78 4,191 4,269 Movements in Provisions Movements in each class of provision during the ﬁnancial year, other than employee beneﬁts, are set out below: Non-Current Carrying amount at start of the year Additional provision made on acquisition Carrying amount at end of the year Rehabilitation $’000 Total $’000 4,191 34,920 39,111 4,191 34,920 39,111 18) CONTRIBUTED EQUITY Ordinary Share Capital Issued and paid up share capital Consolidated Company 30 June 2005 $’000 30 June 2004 $’000 30 June 2005 $’000 30 June 2004 $’000 135,053 139,400 135,053 139,400 These shares have no par value and are fully paid ordinary shares. 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. Movements in Ordinary Share Capital Date Details Notes Number of shares Issue price 1 Jul 04 Opening Balance 15 Jul 04 Debt equity conversion 20 Jul 04 Share issue 20 Jul 04 Share placement 20 Jul 04 Share issue costs 23 Jul 04 Placement 1 Dec 04 Share issue 17 Jan 05 Share swap buy back 30 Jun 05 Closing Balance 1 2 3 4 5 6 574,149,157 55,000,000 17,480,547 42,050,000 26,591,453 21,554,172 (170,291,977) 566,533,352 0.080 0.046 0.040 0.046 0.056 0.050 $’000 139,400 4,400 804 1,682 (33) 1,223 1,200 (13,623) 135,053 1 Ocean Resources Capital Holdings Limited (“Ocean”) converted a convertible note for $4,400,000 into 55,000,000 fully paid ordinary shares at 8¢ each. 2 Ocean accepted the issue of 17,480,547 fully paid ordinary shares in satisfaction of interest of $804,105 at 4.6¢ per share. 3 Share issue costs of $33,000 were offset against issued capital as allowed by Australian Accounting Standards. 4 Resource Capital Funds II LP (“RCFII”) accepted a placement of 26,591,453 fully paid ordinary shares at 4.6¢ per share to raise $1,223,207 for working capital. 5 In July 2004, RCFII advanced the Company $1,200,000 which was converted into 21,554,172 fully paid ordinary shares, following shareholder approval. 6 In the December 2004/January 2005 period the Company conducted a share swap buy back of shares, whereby 1.25 NuStar shares owned by the Company were offered for every 1 St Barbara share bought back. A total of 170,291,977 St Barbara shares, representing 23% of share capital at that time, were bought back in exchange for 212,864,971 NuStar shares. As a result of the buy back, the excess of the market value over book value of NuStar shares of $5,109,000 has been applied to accumulated losses. 53 Notes to the Financial Statement for the year ended 30 June 2005 continued Consolidated Company 30 June 2005 $’000 30 June 2004 $’000 30 June 2005 $’000 30 June 2004 $’000 19) OPTIONS a) Option Reserve Option reserve at the beginning of the ﬁnancial period Options issued during the ﬁnancial period Option reserve at the end of the ﬁnancial period 2,443 -. 2,443 1,959 484 2,443 2,443 -. 2,443 1,959 484 2,443 This option reserve arises from 44,159,394 unlisted options being issued during previous years. b) Listed Share Options The consolidated entity had no listed share options on issue at 30 June 2005. c) Unlisted Share Options At 30 June 2005, the consolidated entity had 93,612,679 unlisted share options on issue. Unlisted options are not admitted to the ofﬁcial list of ASX. On 20 October 1995, shareholders at a general meeting approved the Employee Share Option Plan (“ESOP”). The purpose of the ESOP is to provide an incentive to executive ofﬁcers on the Company. No new options will be issued in the future under this ESOP. On 28 November 2001, shareholders at a general meeting approved a new Employee Option Plan. Each unlisted share option entitles the holder to subscribe for one ordinary share on, substantially, the following terms: i) ii) each unlisted option entitles the holder to subscribe for one ordinary share at the speciﬁed exercise prices set out below; the unlisted options are exercisable at any time up to 5.00pm Perth, Western Australia time on the dates set out below by completing an option exercise form and delivering it together with the required payment for the relevant number of ordinary shares in respect of which the unlisted options are exercised to the registered ofﬁce of the Company. Any unlisted options not exercised by that time will lapse. Movements in Unlisted Options Date Details 30 Jun 03 Balance 7 Jul 03 7 Jul 03 7 Jul 03 7 Jul 03 7 Jul 03 7 Jul 03 7 Jul 03 7 Jul 03 RCF Facility RCF Facility RCF Facility RCF Facility RCF Facility RCF Facility RCF Facility RCF Facility 13 Jul 03 Employee Option Plan 2001 - cancelled 26 Nov 03 RCF Facility 26 Nov 03 RCF Facility 26 Nov 03 RCF Facility 26 Nov 03 RCF Facility 3 Dec 03 3 Dec 03 3 Dec 03 Employee Option Plan 2001 – cancelled Employee Option Plan 2001 - cancelled B Speechly 29 Feb 04 Employee Option Plan 2001- cancelled 29 Feb 04 Employee Option Plan 2001 - cancelled 15 Jun 04 Employee Option Plan 2001 - adjustment 30 Jun 04 Employee Option Plan 2001 – cancelled 30 Jun 04 Employee Option Plan 2001 – cancelled 30 Jun 04 Closing Balance Options issued: 2 Dec 04 Employee options 16 Dec 04 Employee options 23 Dec 04 Executive options 23 Dec 04 Executive options Options expired: Employee options Other unlisted options 30 Jun 05 Closing Balance The closing balance is comprised as follows: Unlisted options issued in prior years to RCFII Unlisted options transferred from RCFII to Mr Wheatley Executive options issued during the year Employee options issued during the year Employee options issued in previous years Number of 0ptions Exercise Price Expiry Date $0.1138 $0.2086 $0.2124 $0.2125 $0.1138 $0.2086 $0.2124 $0.2125 $0.3500 $0.1138 $0.2086 $0.2124 $0.2125 $0.3500 $0.3500 $0.4000 $0.3500 $0.3500 $0.3500 $0.3500 $0.3500 $0.0800 $0.0800 $0.0472 7 Jan 07 7 Jan 07 7 Jan 07 7 Jan 07 7 Jan 07 7 Jan 07 7 Jan 07 7 Jan 07 26 Apr 07 24 May 08 24 May 08 24 May 08 24 May 08 26 Apr 07 17 Jan 08 31 Dec 04 26 Apr 07 17 Jan 08 26 Apr 07 26 Apr 07 17 Jan 08 2 Dec 07 16 Dec 07 23 Dec 09 $0.1500 23 Dec 08 to11 Various Various Various Various 55 44,905,632 11,555,962 394,016 1,934,835 3,867,849 5,874,281 200,292 983,541 1,966,155 (75,000) 14,252,357 485,953 2,386,296 257,857 (1,550,000) (750,000) (500,000) (275,000) (225,000) 50,000 (775,000) (125,000) 84,840,026 1,000,000 1,000,000 15,000,000 20,000,000 37,000,000 26,100,000 2,127,347 28,227,347 93,612,679 52,862,679 1,000,000 35,000,000 2,000,000 2,750,000 93,612,679 Notes to the Financial Statement for the year ended 30 June 2005 continued 20) ACCUMULATED LOSSES Accumulated losses at the beginning of the ﬁnancial period Net loss attributable to members of the Company Share swap/buy-back (refer to Note 18) Consolidated Company 30 June 2005 $’000 (115,835) (6,697) 5,109 30 June 2004 $’000 (91,520) (24,315) -. 30 June 2005 $’000 (128,460) (5,559) 5,109 30 June 2004 $’000 (96,531) (31,929) -. Accumulated losses at the end of the ﬁnancial period (117,423) (115,835) (128,910) (128,460) 21) OUTSIDE EQUITY INTEREST Outside equity interest in: - contributed equity - accumulated losses opening balance - retained loss current period -. -. -. -. 22,160 (2,403) (913) 18,844 -. -. -. -. -. -. -. -. The outside equity interest arose from the Company’s 54.8% interest at 30 June 2004 in NuStar which reduced from 88.3% during the previous ﬁnancial year. Refer to Note 29 for further details. 22) FINANCIAL INSTRUMENTS a) Credit Risk Exposures The credit risk on ﬁnancial assets of the consolidated entity which have been recognised, other than investments in shares, is generally the carrying amount, net of any provisions for doubtful debts. b) Interest Rate Risk Exposures The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods is set out in the following tables. Exposures arise predominantly from assets and liabilities bearing variable interest rates as the consolidated entity intends to hold ﬁxed rate assets and liabilities to maturity. 22) FINANCIAL INSTRUMENTS continued 30 June 2005 Financial assets Floating Interest rate Cash Restricted cash Receivables Investments Weighted average interest rate Financial liabilities Trade and other creditors Other loans Weighted average interest rate Net ﬁnancial assets/(liabilities) 30 June 2004 Financial assets Cash Restricted cash Receivables Investments Weighted average interest rate Financial liabilities Trade and other creditors Lease liability Other loans Weighted average interest rate Net ﬁnancial assets/(liabilities) Fixed interest maturing in: 1 year or less Over 1 to 5 years $’000 $’000 - . - . - . - . - . - . - . - . - . - . Non- interest bearing $’000 - . - . 4,767 6,104 10,871 Total $’000 16,273 11,801 4,767 6,104 38,945 $’000 16,273 11,801 - . - . 28,074 5.12% - . - . - . 7.00% - . (1,541) (1,541) 8.00% - . (16,225) (7,000) (7,000) - . (16,225) (16,225) (8,541) (24,766) 28,074 (1,541) (7,000) (5,354) 14,179 12,849 3,108 - . - . 15,957 4.72% - . - . - . - . 12.08% 15,957 - . - . - . - . - . - . - . (9,832) (9,832) 7.63% (9,832) - . - . - . - . - . - . - . (75) (75) - . - . 1,512 188 1,700 12,849 3,108 1,512 188 17,657 (6,691) (6,691) - . - . (6,691) - . (9,907) (16,598) 57 (75) (4,991) 1,059 c) Net Fair Value of Financial Assets and Liabilities i) On-Balance Sheet The net fair value of cash and cash equivalents and non-interest bearing monetary ﬁnancial assets and ﬁnancial liabilities of the consolidated entity approximates their carrying value. The net fair value of other monetary ﬁnancial assets and ﬁnancial liabilities is based upon market prices. ii) Off-Balance Sheet The consolidated entity has potential ﬁnancial liabilities that may arise from certain contingencies disclosed in Note 25. As explained in that note, no material losses are anticipated in respect of any of those contingencies and the net fair value disclosed is the Directors’ estimate of amounts which would be payable by the consolidated entity as consideration for the assumption of those contingencies by another party. Notes to the Financial Statement for the year ended 30 June 2005 continued 22) FINANCIAL INSTRUMENTS continued The carrying amounts and the net fair values of ﬁnancial assets and liabilities at balance date are: On balance sheet ﬁnancial instruments Financial assets - Cash and restricted cash - Receivables - Traded investments Financial liabilities - Payables - Other loans 2005 2004 Carrying Amount Net Fair Value $’000 $’000 Carrying Amount $’000 Net Fair Value $’000 28,074 4,767 6,104 38,945 16,225 8,541 24,766 28,074 4,767 6,991 39,832 16,225 8,541 24,766 15,957 1,512 188 17,657 10,191 6,407 16,598 15,957 1,512 188 17,657 10,191 6,407 16,598 23) DIRECTORS AND EXECUTIVE DISCLOSURES Directors The following persons were directors of St Barbara Mines Limited during the ﬁnancial year. Executive Directors - E Eshuys (appointed on 20 July 2004) - S W Miller (removed as director and chairman on 20 July 2004) Non-Executive Directors - H G Tuten - M K Wheatley - S J C Wise (appointed Director and Chairman on 20 July 2004) - R Knight (appointed Director on 25 May 2005) - K A Dundo (resigned 18 July 2004) Executives (other than directors) with the greatest authority for strategic direction and management The following persons were the executives with the greatest authority for the strategic direction and management of the consolidated entity (“speciﬁed executives”) during the ﬁnancial year. Name R Kennedy P Thompson G Viska M Reed Position Chief Financial Ofﬁcer & Company Secretary General Manager Exploration General Manager Commercial General Manager Operations Appointment date 27 October 2004 16 December 2004 20 March 2005 20 March 2005 In accordance with the Company’s constitution, S J C Wise & R Knight are due for re-election at the 2005 Annual General Meeting. There were no loans to directors of entities in the consolidated entity during the year to 30 June 2005. Remuneration Details of Director and Executive Remuneration are set out in the Directors’ Report. Shareholding Relevant and beneﬁcial interests in shares of the Company held by directors of the Company and consolidated entity or their director-related entities in the Company: Ordinary Shares – fully paid Balance at start of year Movements during the year Balance at end of year Directors S J C Wise E Eshuys R Knight H G Tuten 1 M K Wheatley S W Miller 2 K A Dundo -. -. -. -. -. -. -. 2,800,000 1,250,000 2,800,000 1,250,000 -. -. -. -. -. -. -. -. -. -. -. 177,887,642 Connected Persons Strata Mining Corporation Limited 2 RCF 1 32,200,000 129,742,017 (32,000,000) 48,145,625 1 H G Tuten is the Chairman of RCF Management LLC, the management company of RCF 2 S W Miller is a director and shareholder of Strata Mining Corporation Limited which held a relevant interest in the ordinary share capital of St Barbara at the start of the year Options Relevant interests in options of the Company held by directors of the Company and consolidated entity or their director-related entities in the Company: Ordinary Shares – fully paid Balance at start of year Movements during the year Balance at end of year S J C Wise E Eshuys R Knight H G Tuten 1 M K Wheatley S W Miller K A Dundo Connected Persons RCF 1 - - - - 750,000 17,500,000 - -. 35,000,000 -. -. 250,000 (17,500,000) -. - 35,000,000 - -. 1,000,000 - - 59 55,990,026 (3,127,347) 52,862,679 1 H G Tuten is the Chairman of RCF Management L L C, the management company of RCF. During the year in accordance with a pre-existing agreement, RCF transferred 1,000,000 unlisted options, exercisable at 11¢ each and expiring 31 December 2005 to M K Wheatley. The options granted to RCF were in consideration for facility fees. All other options were granted for no consideration by the Company. There are no voting, conversion or dividend rights related to these options. Notes to the Financial Statement for the year ended 30 June 2005 continued 24) REMUNERATION OF AUDITORS During the year the auditor of the Company, and its related practices earned the following remuneration: PricewaterhouseCoopers Consolidated Company 30 June 2005 $ 30 June 2004 $ 30 June 2005 $ 30 June 2004 $ Remuneration for audit or review of the ﬁnancial reports of the Company or any entity in the consolidated entity 126,632 117,786 126,632 74,486 Remuneration for other services: - Taxation service and general advice 108,726 235,358 29,200 146,986 108,726 235,358 17,200 91,686 25) CONTINGENT LIABILITIES Details and estimated maximum amounts of contingent liabilities, for which no provisions are included in the accounts, are as follows: Consolidated Company 30 June 2005 $’000 30 June 2004 $’000 30 June 2005 $’000 30 June 2004 $’000 a) Guarantees and Undertakings i) The Company has given undertakings to two of its controlled entities that it intends to provide the necessary ﬁnancial or other support to enable them to meet their obligations as and when they fall due ii) Indemnity to the Company’s ﬁnanciers in respect of guarantees provided by the bankers to the Western Australian Department of Industry and Resources – see Note 7 (cash backing of bonds) and Note 16 (details of a bank guarantee facility) 32,754 3,068 32,754 2,725 b) Native Title It is possible that Native Title, as deﬁned in the Native Title Act 1993, may be established over land in which the consolidated entity has an interest. The Company is not currently engaged in any negotiations. c) Litigation i) Westgold In late September 2000, a demand was made against the Company by Westgold Resources NL (“Westgold”) alleging loss and damages in the sum of $6,229,921. A Writ of Summons was issued by Westgold against the Company in the Supreme Court of Western Australia in CIV 2427 of 2000 on 20 October 2000. The claim by Westgold arises from a series of share transactions in the Company’s shares which took place between May and August 1997 as follows: • On 12 May 1997, Westgold purchased 10,350,000 St Barbara shares at $0.72 per share from Mr Woss who was a director of the Company at the time (“Woss Shares”). This share purchase took the total shares owned in the Company by Westgold to 23,898,951 (approximately 13% of the Company equity at the time) at a total cost of $18.4 million. • On 9 July 1997, Westgold sold all of its shareholding in the Company (which included the Woss Shares) to Montleigh Investments Pty Ltd, a company associated with Mr Ross Atkins who was a director of the Company at the time. The total sale consideration was $19.1 million. Approximately $8.4 million of the sale consideration was due to be paid by 30 June 1998. During 1998, Montleigh Investments Pty Ltd defaulted on payment of the deferred consideration and Westgold recovered only $991,931 of the deferred consideration. In these proceedings Westgold has sought to recover the balance of the deferred consideration plus interest from the Company and Mr Woss. The principal causes of action in Westgold’s statement of claim against the Company are as follows: • An alleged breach of section 1001A(2) of the Corporations Act in that the Company allegedly contravened the ASX Listing Rules by failing to notify the ASX of information alleged to have been known to it on or before 30 April 1997. • An alleged contravention of the previous section 995(2) of the Corporations Law (being a misleading or deceptive statement made in relation to securities in the legislation prior to the current Corporations Act) which Westgold alleges to have been made in public releases made on or about 30 April 1997. Westgold alleges that the Company represented that, save for certain matters, the Company’s operations were proceeding satisfactorily and that there were no further adverse factors affecting or likely to affect the Company’s operations or ﬁnancial position when in fact such was not the case. All of these allegations are denied by St Barbara and the claim is being robustly defended. St Barbara has joined one of the directors who was a director of the Company at the time to the action and in the event that the Company is found liable (which is denied) it will seek contribution from such director. The matter has been entered for trial but is not expected to receive a trial date until the ﬁrst quarter of 2006. The Company has incurred legal costs to date in the order of $900,000 and will incur substantial further costs in relation to the preparation of the matter for trial and the trial itself. Such costs could escalate in the event that there is an appeal from the decision at ﬁrst instance. None of the current directors of the Company were directors of the Company at the time that the above share transactions took place. ii) Kingstream On 2 July 2002, Kingstream Steel Limited (Subject to Deed of Company Arrangement) commenced proceedings in the Supreme Court of Western Australia against the Company and its 100% owned subsidiary, Zygot Ltd. In early 2005, Kingstream obtained the leave of the Court to substitute the trustees of Kingstream Steel’s Creditors Trust as plaintiffs in these proceedings. Kingstream’s claim against the Company and Zygot Ltd arises from the withdrawal by Zygot of three mining lease applications (“MLA’s”). Kingstream alleges that these applications were part of the subject matter of an Option Deed between the Company and Kingstream dated 26 March 1997 as supplemented by a Deed dated 20 January 1998 and a letter dated 29 January 1999 from the Company’s lawyers to Kingstream. Kingstream exercised the option in February 1999. Kingstream is seeking rectiﬁcation of the supplemental Deed to include the applications on the basis that this was the common intention of the parties. Kingstream is seeking unquantiﬁed damages from the Company and Zygot. The company denies that such was the common intention and denies that rectiﬁcation is available. The proceedings are at an early stage and have been, and will continue to be, defended. 61 Notes to the Financial Statement for the year ended 30 June 2005 continued 26) COMMITMENTS FOR EXPENDITURE a) Exploration In order to maintain rights of tenure to mining tenements, the consolidated entity is required to outlay in 2004/05 for tenement rentals and minimum exploration expenditure requirements of the Western Australian Department of Industry and Resources. This requirement in 2004/05 will continue for future years with the amount dependent upon tenement holdings b) Hire Purchase Commitments Analysis of hire purchase commitments: - Payable not later than one year (refer Note 16) - Payable later than one year, not later than ﬁve years (refer Note 16) These commitments relate to plant and equipment and are based on the cost of the vehicles and are payable over a period of up to 48 months. c) Analysis of Non-Cancellable Operating Lease Commitments Payable not later than one year Payable later than one year, not later than two years The non-cancellable operating lease commitments are the net rental payments associated with rental properties 27) EMPLOYEES a) Employment Beneﬁt Liabilities Provision for employee beneﬁts and directors’ beneﬁts and related on-cost liabilities - Current (Note 17) - Non-current (Note 17) Consolidated Company 30 June 2005 $’000 30 June 2004 $’000 30 June 2005 $’000 30 June 2004 $’000 13,746 2,669 13,746 1,762 76 - 76 154 - 154 119 - - 119 188 75 263 239 147 386 751 78 78 829 76 - 76 154 - 154 119 - - 119 188 75 263 239 147 386 751 78 78 829 b) Number of Employees Number of employees at ﬁnancial year end 33 41 33 36 Number 2005 Number 2005 Number 2005 Number 2005 c) Superannuation The Company participates in an “accumulation” superannuation plan under which all employees are entitled to lump sum beneﬁts on retirement, disability or death. The Company contributes various percentages of wages and salaries to the plan. The contributions made are legally enforceable. No actuarial assessment of the plan has been made as such assessments are inappropriate to an “accumulation” plan. The assets of the plan are sufﬁcient to satisfy all beneﬁts that have vested under the plan in the event of its termination, or in the event of voluntary or compulsory termination, of the employment of each employee. d) Employee Option Plan Shareholders approved an Employee Option Plan in November 2001. The term of options issued under the plan is ﬁve years and the vesting period is three years from the date of grant. A total of 2,000,000 options were issued under the plan during the year to 30 June 2005, with Directors exercising their discretion to issue them with a three year term and no vesting period. These options are cancelled when the employee leaves the Company. A total of 2,675,000 options previously issued under the plan were cancelled due to employees leaving the Company. There are no voting rights and no dividend rights attached to these options. No options issued under this plan were exercised during the year to 30 June 2005. As at 30 June 2005, there were 4,750,000 options on issue under the plan with exercise prices ranging from $0.08 per share to $0.35 per share and with expiry dates ranging from 31 August 2005 to 16 December 2007. 28) RELATED PARTIES a) Directors and speciﬁed executives Disclosures relating to directors and speciﬁed executives are set out in Note 23. b) Transactions with entities in the wholly-owned group St Barbara Mines Limited is the parent entity in the wholly-owned group comprising the Company and its wholly-owned subsidiaries. During the year the Company advanced loans of $nil (2004: $61,733) to entities in the wholly owned group. Repayments and advances were received of $545,000 (2004: nil) from entities in the wholly owned group. The Company provided accounting and administrative assistance free of charge to all its wholly-owned subsidiaries. Loans payable to and advanced from wholly-owned subsidiaries to the Company are interest free. c) Transactions with non-wholly owned entities in the consolidated entity The Company provided funding to NuStar, a controlled entity but not wholly owned, for part of the year as follows: Balance at beginning of ﬁnancial year - net funding advanced for exploration and all other activities on normal commercial terms - shares issued in satisfaction of debt - administration service fee - interest - repayment 30 June 2005 $’000 (216) (119) 30 June 2004 $’000 16,848 (1,703) - . (17,600) 120 - . 215 - . 1,398 841 -. (216) 63 The loan was repaid in full during the year. NuStar is no longer a controlled entity, and no further loans will be provided. Notes to the Financial Statement for the year ended 30 June 2005 continued 28) RELATED PARTIES continued d) Amounts receivable from and payable to entities in the wholly-owned group and controlled entities Aggregate amounts receivable at balance date from: Non-current: Entities in the wholly-owned group Less provision for doubtful receivables Aggregate amounts payable at balance date to: Current: Controlled entities Non-current: Entities in the wholly-owned group Company 30 June 2005 30 June 2004 $’000 $’000 2,225 (1,630) 595 2,770 (1,630) 1,140 - . 216 11,401 11,484 e) Amounts receivable from Director related entities At 30 June 2005, there were no amounts receivable from Director related entities. f) Other Transactions with Directors of the Company and their Director related entities The aggregate amounts brought to account in respect of the following types of transactions with Directors of entities in the consolidated entities and their Director related entities were: Director K A Dundo H G Tuten Consolidated and Company 30 June 2005 $ 2,030 30 June 2004 $ 4,243 262,323 8,249,863 Notes 1 2 1 K A Dundo was a non-executive director of the Company up to the date of his resignation on 18 July 2004. K A Dundo is also a partner of the legal ﬁrm, Q Legal. For the month of July 2004, Q Legal invoiced the Company for legal services provided at normal commercial rates, amounting to $2,030 plus GST and disbursements. 2 Paid to RCF in 2005 in respect of borrowing costs relating to ﬁnance facilities and in 2004 by way of issuance of shares and options as required under the RCF Facility. H G Tuten is the Chairman of RCF Management LLC the management company of RCF. 29) INVESTMENTS IN CONTROLLED ENTITIES The consolidated entity consists of the Company and its wholly-owned controlled entities as follows. Name of entity Australian Eagle Oil Co Pty Ltd St Barbara Pastoral Co Pty Ltd Capvern Pty Ltd Eagle Group Management Pty Ltd Murchison Gold Pty Ltd Kingkara Pty Ltd Oakjade Pty Ltd Regalkey Holdings Pty Ltd Silkwest Holdings Pty Ltd Sixteenth Ossa Pty Ltd Vaﬁtu Pty Ltd Zygot Pty Ltd NuStar Mining Corporation Limited 1 Bushsun Pty Ltd* 1 * 100% subsidiary of NuStar Class of Shares Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Equity holding Cost of Company’s investment June 2005 June 2004 June 2005 June 2004 % 100 100 100 100 100 100 100 100 100 100 100 100 6.4 6.4 % 100 100 100 100 100 100 100 100 100 100 100 100 54.8 54.8 $’000 179 $’000 179 - - - - - - - - - - - - - 179 - - - - - - - - - - - 38,138 - 38,317 Each company in the consolidated entity was incorporated in Australia. 1 The Company ceased consolidating NuStar on 30 September 2004 when it reduced its equity position to 44.72%. This equity position was progressively reduced through the ﬁnancial year and at 30 June 2005 was 6.4%. Subsequent to 30 June 2005 the remaining holding was disposed of. The aggregate loss on the deconsolidation of NuStar was $272,000. 65 Notes to the Financial Statement for the year ended 30 June 2005 continued 30) RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Operating loss after income tax Depreciation and amortisation Provision for diminution in investments and assets Write down of exploration tenements Provision for diminution of exploration tenements (Proﬁt)/ loss on sale of property, plant and equipment Proﬁt on sale of shares Borrowing expenses paid with shares Convertible note borrowing cost Interest on NuStar loan account NuStar administration service fee Provision for non-recovery of subsidiary loan Loss on subsidiary becoming an associate Share of net loss of associate Provision for doubtful debts Provision for rehabilitation Changes in assets and liabilities: - Decrease in trade and other debtors - Decrease in inventories - Decrease in other assets Consolidated Company 30 June 2005 30 June 2004 30 June 2005 30 June 2004 $ $ $ $ (6,697) (25,228) (5,559) (31,929) 2,726 8,093 8,093 1,023 775 -. (2,795) (2,915) -. -. -. -. -. 272 577 78 (34) 312 318 5,256 2,462 (93) 1,707 739 -. -. -. -. -. -. -. (3,100) 1,059 (949) 2,676 3,487 620 773 775 -. (2,279) (2,915) -. -. -. -. -. -. -. 78 (34) (4,450) 1,059 (980) 2,721 12,348 318 5,256 2,462 (93) 1,707 739 (841) (182) 270 -. -. -. -. 3,314 3,487 620 Increase in trade and other creditors, employee entitlements and provisions Net cash (used in)/provided by operating activities 4,146 (467) (3,624) (8,642) 9,563 4,124 (4,460) (4,263) Non-Cash Financing and Investing Activities The following transactions occurred which affected assets and liabilities which are not reﬂected in the Statements of Cash Flows. Year ended 30 June 2005 During the year, the following transactions occurred which affected assets and liabilities and did not result in cash ﬂows: - The conversion by Ocean Resources Capital Holdings plc (Ocean) of the face value of its convertible note of $4,400,000 into 55,000,000 ordinary shares on 15 July 2004. - On 20 July 2004, the Company issued 17,480,547 fully paid ordinary shares to Ocean in satisfaction of interest of $804,105. - On 1 December 2004, the Company issued 21,554,172 fully paid ordinary shares to Resource Capital Fund to convert an unsecured advance of $1,200,000 to equity as approved at the 2005 Annual General Meeting. - On 17 January 2005, the Company completed a share buy-back of 170,291,977 fully paid ordinary shares and in consideration transferred to accepting shareholders 212,864,971 fully paid NuStar shares. Year ended 30 June 2004 During the year, the following transactions occurred which affected assets and liabilities and did not result in cash ﬂows: - The issue of 111,595,854 fully paid ordinary shares to RCF in satisfaction of the RCF interest and facility fees and the debt for equity swap approved by shareholders at the Annual General Meeting on 25 November 2003. The value ascribed to this issue is $8,249,863. - Pursuant to a resolution by shareholders at the NuStar Annual General Meeting held on 12 December 2003, the Company converted $17.6 million owing by NuStar to the Company into 352,000,000 fully paid ordinary shares in NuStar. - Pursuant to a resolution by shareholders at the NuStar Annual General Meeting held on 12 December 2003, Claymore Capital converted $0.1 million owing by NuStar to Claymore Capital by way of a convertible note into 2,000,000 fully paid ordinary shares in NuStar. - On 5 December 2003, the Company issued 35 million fully paid ordinary shares at $0.08 per share for $2.8 million to partly satisfy the convertible note loan. This resulted in the remaining face value owing being reduced to $4.4 million. 31) FINANCING FACILITIES Other than as set out in Note 16(iii) regarding the RCF Facility, neither the Company nor the consolidated entity have access to lines of credit that were unutilised. 32) LOSS PER SHARE Basic and diluted loss per share Retained loss for the year used in the calculation of basic earnings per share Weighted average number of fully paid ordinary shares on issue during the year used in the calculation of basic loss per share Weighted average number of fully paid ordinary shares on issue during the year used in the calculation of diluted loss per share Consolidated 30 June 2005 cents/share 30 June 2005 cents/share (1.04) (4.70) $’000 $’000 (6,697) (24,315) Number Number 644,018,641 517,843,596 644,018,641 517,843,596 33) EVENTS OCCURRING AFTER BALANCE DATE On 26 July 2005, the Company announced: - Extension to operations at Southern Cross based on open pit mining of Hercules and continuing underground operations at 67 Marvel Loch; - An on-market share buy-back to buy back up to 10% of the Company’s issued capital (56,653,335 shares); and - The proposed sale of unmarketable parcels of shares. On 27 July 2005, the Company sold its remaining shares in NuStar (63,325,359 shares) and Sedimentary (15,412,082 shares) for $3,166,268 and $2,851,234 respectively, yielding total proceeds of $6M. On 9 August 2005, the Company announced a reserve estimate upgrade for Hercules, near Marvel Loch, Southern Cross as at 30 June 2005 using a gold price of A$550/oz and cut-off grade of 1.1g/t, to Probable Reserves of 2.3Mt at 2.5g/t for 180,000oz of gold. Notes to the Financial Statement for the year ended 30 June 2005 continued 34) BUSINESS COMBINATION On 28 March 2005, the Company acquired the Gold Division of Sons of Gwalia Ltd (Administrators Appointed) for consideration consisting of a cash payment of $2,285,000, the replacement of existing bank guaranteed environmental performance bonds totalling $30,000,000 and the assumption of additional performance bonds of up to $5,700,000. The fair value of net identiﬁable assets acquired was $2,925,000. Direct transaction costs of $640,000 were also incurred. Details of the assets and liabilities arising from the acquisition are as follows: Property, plant and equipment Inventories Prepayments Mining properties Provision for rehabilitation Net identiﬁable assets acquired $’000 19,762 4,730 285 13,068 (34,920) 2,925 35) AUSTRALIAN EQUIVALENTS TO IFRS The Australian Accounting Standards Board (AASB) has adopted International Financial Reporting Standards (IFRS) for application to reporting periods beginning on or after 1 January 2005. The AASB has issued Australian equivalents to IFRS, and the Urgent Issues Group has issued interpretations corresponding to IASB interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee. These Australian equivalents to IFRS are referred to hereafter as AIFRS. The adoptions of AIFRS will be ﬁrst reﬂected in the consolidated entity’s ﬁnancial statements for the half-year ending 31 December 2005 and the year ending 30 June 2006. Entities complying with AIFRS for the ﬁrst time will be required to restate their comparative ﬁnancial statements to amounts reﬂecting the application of AIFRS to the comparative period. Most adjustments required on transition to AIFRS will be made, retrospectively, against opening retained earnings as at 1 July 2004. To facilitate the transition to AIFRS the consolidated entity has established a project team. The priority of this project team has been to identify differences between accounting principles generally accepted in Australia (AGAAP) and AIFRS as they are applied to the group. The project team has analysed all of the AIFRS and has identiﬁed the accounting policy changes that will be required. In some cases choices of accounting policies are available; including elective exemptions under Accounting Standards AASB 1 First Time Adoption of Australian Equivalents to International Financial Reporting Standards. These choices have been analysed to determine the most appropriate accounting policy for the consolidated entity. The known or reliably estimable impacts on the ﬁnancial report for the year ended 30 June 2005 had it been prepared using AIFRS are set out below. The expected ﬁnancial effects of adopting AIFRS are shown below with descriptions of the differences in the form of reconciliations of equity and proﬁt under AGAAP to that under AIFRS. No material impacts are expected in relation to the statements of cashﬂows. Although the descriptions disclosed in the note are based on management’s best knowledge of expected standards and interpretations, and current facts and circumstances, these may change. For example, ongoing work by the project team may identify further changes amended or additional standards or interpretations may be issued by the AASB and the IASB. Therefore, until the company prepares its ﬁrst full AIFRS ﬁnancial statements, the possibility cannot be excluded that the accompanying disclosures may have to be adjusted. The Alternative Investment Market of the London Stock Exchange, on which the Company is listed, requires a reconciliation of the effect of applying IFRS for the year ended 30 June 2005 on net proﬁt and equity where IFRS are considered to be materially different to Australian Generally Accepted Accounting Principles (“AGAAP”). This requirement has been addressed in the reconciliation below. Consolidated Company 30 June 30 June 30 June 30 June Notes 2005 $000 2004 $000 2005 $000 2004 $000 Adjustments Required on Implementation of IFRS 30 June 2005 a) Reconciliation of equity as presented under AGAAP to that under AIFRS Total equity under AGAAP 20,073 44,852 8,586 13,383 Adjustments to accumulated losses (net of tax) Share based payment expense Revaluation of available for sale investments Accounting for impairment of assets Proﬁt on deconsolidation of controlled entity Adjustments to other reserves (net of tax) Share based payment reserve Investments fair value reserve Total equity under AIFRS b) Reconciliation of net loss as presented under AGAAP to that under AIFRS Net loss attributable to members of the Company as reported under AGAAP Adjustments to net loss Share based payment expense Revaluation of investments available for sale Proﬁt on deconsolidation of controlled entity Accounting for impairment of assets Net loss attributable to outside equity interests Net loss attributable to members of the Company under AIFRS i v iii iii i v i v iii (664) 773 (14,192) 14,192 109 664 113 777 20,959 -. -. (14,192) -. (14,192) -. -. -. 30,660 (664) 773 -. -. 109 664 113 777 9,472 - . - . - . - . - . - . - . - . 13,383 (6,697) (24,315) (5,559) (31,929) (664) 773 14,192 -. -. -. -. -. (5,621) 6,369 (664) 773 -. -. -. - . - . - . - . - . 69 7,604 (23,567) (5,450) (31,929) Notes to the Financial Statement for the year ended 30 June 2005 continued Notes Explaining the Impact of Adopting AIFRS i) Equity-based compensation beneﬁts Under AASB 2 Share based Payments, the Company would recognise the fair value of options granted to employees as remuneration as an expense on a pro-rata basis over the vesting period in the income statement with a corresponding adjustment to equity. Share-based payment costs are not recognised under AGAAP. AASB 1 states that on initial adoption of AIFRS an entity is encouraged, but not required, to apply AASB 2 to equity instruments that were granted on or before 7 November 2002. A ﬁrst time adopter is also encouraged, but not required, to apply AASB 2 to equity instruments that were granted after 7 November 2002 that vested before the later of (a) the date of transition to AIFRS and (b) 1 January 2005. This guidance has been used in determining the share based payments recognised in this disclosure. ii) Non-current assets held for sale Under AASB 5 Non-current assets held for Sale and Discontinued Operations, a non-current asset will be classiﬁed as held for sale if its carrying amount is to be recovered principally through a sale transaction rather than through continued use. The asset will be measured at the lower of carrying amount and fair value, less costs to sell. Under AGAAP such investments are valued at the lower of cost or realisable value. There is no signiﬁcant impact as at 30 June 2005, as the measurement of the assets would have remained unchanged. iii) Impairment of assets Under current AGAAP, the carrying amounts of non-current assets valued on a cost basis are reviewed at each reporting date to determine whether they are in excess of their recoverable amount. If the carrying amount of a non-current asset exceeds its recoverable amount, the asset is written down to the lower amount, with the write-down recognised in the statement of ﬁnancial performance in the period in which it occurs. In assessing the recoverable amounts, the relevant cash ﬂows have not been discounted to their present value. Under AASB 136 Impairment of Assets, the carrying amount of the consolidated entity’s non-current assets will be reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists, the asset will be tested for impairment by comparing its recoverable amount to its carrying amount. If there is any indication that any asset is impaired, the recoverable amount will be estimated for the individual asset. If it is not possible to estimate the recoverable amount for the individual asset, the recoverable amount of the cash generating unit to which the asset belongs will be determined. An impairment loss will be recognised whenever the carrying amount of an asset or its cash- generating unit exceeds its recoverable amount. If the policy required under AIFRS had been applied during the year ended 30 June 2005, the consolidated net proﬁt would have been $14,192,000 higher as a result of the impact from the previous ﬁnancial year’s cumulative impairment losses that would have been incurred under AIFRS policies. This is due to the deconsolidation of NuStar, for which the impairment was related. iv) Revenue disclosures in relation to the sale of non current assets Under AIFRS, the revenue recognised in relation to the sale of non current assets is the net gain on the sale. This is in contrast to the current Australian GAAP treatment under which the gross proceeds from the sale are recognised as revenue and the carrying amount of the assets sold is recognised as an expense. The net impact on the proﬁt or loss of this difference is nil. v) Financial instruments AASB 139 is likely to have the following impacts: Classiﬁcation and measurement of ﬁnancial assets and liabilities Under AASB 139, ﬁnancial assets held by entities in the consolidated entity will be classiﬁed as either at fair value through proﬁt or loss, held-to-maturity, available for sale or loans and receivables and, depending upon classiﬁcation, be measured at fair value or amortised cost. Under AASB 139: - Investments in traded equity securities as at 30 June 2005 would be classiﬁed as available for sale and measured at fair value, with changes in fair value recognised directly in equity until the underlying asset is derecognised. - Receivables and ﬁnancial liabilities classiﬁcations will remain unchanged. Measurement of these instruments will initially be at fair value with subsequent measurement at amortised cost, using the effective interest rate method. This will result in a change of the current accounting policy, under which ﬁnancial assets are carried at the lower of cost and recoverable amount, with changes recognised in proﬁt or loss. vi) Income tax Under AASB 112 Income taxes, deferred tax balances are determined using the balance sheet method which calculates temporary differences based on the carrying amounts of an entity’s assets and liabilities in the statement of ﬁnancial position and their associated tax bases. In addition, current and deferred taxes attributable to amounts recognised directly in equity are also recognised directly in equity. This will result in a change to the current accounting policy, under which deferred tax balances are determined using the income statement method, items are only tax-effected if they are included in the determination of pre tax accounting proﬁt or loss and/or taxable income or loss and current and deferred taxed cannot be recognised directly in equity. If the policy required by AASB 112 had been applied during the year ended 30 June 2005 there would not have been any signiﬁcant differences in deferred tax balances as a result of the application of the balance sheet method. vii) Exploration and evaluation The Group’s existing policy for exploration and evaluation activity provides that exploration expenditure is expensed as it is incurred. Amounts allocated to exploration as part of an acquisition are capitalised. This policy complies with AIFRS requirements and therefore no difference is expected to result from either the treatment of costs or from impairment testing. 71 Directors’ Declaration In the directors’ opinion: a) the ﬁ nancial statements and notes set out on pages 38 to 71 are in accordance with the Corporations Act 2001, including: i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and ii) giving a true and fair view of the company’s and consolidated entity’s ﬁ nancial position as at 30 June 2005 and of their performance, as represented by the results of their operations and their cashﬂ ows, for the ﬁ nancial year ended on that date; and b) c) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and the remuneration disclosures set out on pages 28 to 34 of the Directors Report comply with Accounting Standard AASB 1046 Director and Executive Disclosures by Disclosing Entities and the Corporations Regulations 2001. The directors have been given the declarations by the chief executive ofﬁ cer and chief ﬁ nancial ofﬁ cer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. Eduard Eshuys Director Perth, 30 September 2005 73 Statement of Shareholders as at 19 September 2005 Twenty Largest Shareholders 1 Resource Capital Fund II LP 2 Westpac Custodian Nominees Limited 3 4 5 6 7 8 9 ANZ Nominees Limited National Nominees Limited Saracen Mineral Holdings Limited Yamatji Marlpa Barna Baba Maaja Aboriginal Corporation Gee Nominees Pty Ltd Mr Yoshihito Koguchi Colin Wise Consulting Pty Ltd 10 HSBC Custody Nominees (Australia) Limited 11 Miroma Investment Inc 12 13 Simpson Podiatry Services Pty Ltd Citicorp Nominees Pty Limited 14 Mr Ritesh Mistry 15 Mr Koichi Sugimura 16 Mr Andrew Podgornik 17 Gull Management Pty Ltd 18 WG Holding Co Pty Ltd 19 Balcony Developments Pty Ltd 20 Mr Paul Varrone & Mrs Jennifer Viviette Varrone Substantial Shareholders Resource Capital Fund II LP St James’ Place Recovery Trust Distribution of Shareholdings Number Held 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Shares Held % of Total 177,887,642 91,142,755 31.40 16.09 9,157,533 7,702,800 6,000,000 5,600,000 5,000,000 3,210,000 3,100,000 3,000,000 2,737,449 2,440,000 2,223,534 2,220,000 2,150,000 2,060,000 2,000,000 2,000,000 1,948,400 1,700,000 1.62 1.36 1.06 0.99 0.88 0.57 0.55 0.53 0.48 0.43 0.39 0.39 0.38 0.36 0.35 0.35 0.34 0.30 Shares Held % of Total 177,887,642 40,430,000 31.40 5.65 Number of Shareholders Number of Shares 3,364 3,343 1,181 2,231 436 10,555 2,017,589 8,603,205 9,861,794 83,457,687 462,593,077 566,533,352 75 The number of shareholders holding less than a marketable parcel was 4,241. Directors’ Interests As at the date of the Directors’ Report, the director or indirect interest of each Director of the Company in the issued securities of the Company, or in a related corporation, was as follows: S J C Wise E Eshuys R Knight H G Tuten Shares Held 3,100,000 1,250,000 - 177,887,642 M K Wheatley - Shareholder Information as at 19 September 2005 Share Price The Company shares were listed on the Australian Stock Exchange during the 2004/05 year. The closing share price on 30 June 2005 and on 19 September 2005 was 10 cents and 33 cents respectively. Announcements The Company makes both statutory announcements (activities or quarterly reports, ﬁnancial reports, changes to Directors’ interest) and speciﬁc announcements under Continuous Disclosure provisions on a timely basis. Signiﬁcant announcements made during the year and subsequently include: Date 15/09/05 13/09/05 12/09/05 02/09/05 31/08/05 28/08/08 24/08/08 09/08/08 09/08/05 03/08/05 01/08/05 28/07/05 26/07/05 19/07/05 28/06/05 27/05/05 27/05/05 26/05/05 28/04/05 27/04/05 30/03/05 23/03/05 21/03/05 21/03/05 16/03/05 28/02/05 07/02/05 02/02/05 01/02/05 01/02/05 01/02/05 27/01/05 25/01/05 21/01/05 21/01/05 21/01/05 18/01/05 18/01/05 Announcement Appendix 3E On-Market Share Buy-Back Appendix 3E On-Market Share Buy-Back Appendix 3E On-Market Share Buy-Back Appendix 3Y for Colin Wise Preliminary Financial Results Amended Drilling Result High Grade Drilling Results Diggers & Dealers Presentation Hercules Reserve Upgrade Sale of Unmarketable Parcels Appendix 3D Changes to Buy-Back Sale of NuStar & Sedimentary Shareholdings Hercules, Buy-Back & Unmarketable Parcels June 2005 Quarterly Report Corporate File Brieﬁng Appendix 3X for Richard Knight Appointment of Richard Knight as Director Form 604 – St Barbara holding in NuStar Mining Corporation Sydney Presentation to Investors March 2005 Quarterly Report Appendix 3Y for Colin Wise Melbourne Presentation to Investors Trading Halt Acquisition of Sons of Gwalia Gold Division Assets Response to ASX Query 2004/05 Interim Financial Results Further High Grade Gold Drill Hole Intersections Appendix 3Y for Eduard Eshuys Form 604 – St Barbara holding in NuStar Mining Corporation Form 604 – St Barbara holding in Sedimentary Holdings Information Summary Form 604 – Resource Capital Fund holding in St Barbara Appendix 3Y for Eduard Eshuys Sedimentary Offer Form 604 – St Barbara holding in NuStar Mining Corporation Conﬁrmation of cancellation of shares December 2004 Quarterly Report Results of Buy-Back Offer Date 22/12/04 15/12/04 10/12/04 10/12/04 07/12/04 06/12/04 06/12/04 03/12/04 03/12/04 02/12/04 02/12/04 29/11/04 29/11/04 29/11/04 26/11/04 24/11/04 19/11/04 27/10/04 27/10/04 27/10/04 25/10/04 21/10/04 07/10/04 01/10/04 30/09/04 27/09/04 20/09/04 31/08/04 26/08/04 12/08/04 03/08/04 30/07/04 27/07/04 26/07/04 23/07/04 23/07/04 23/07/04 20/07/04 20/07/04 19/07/04 15/07/04 Announcement Shareholders Update Dispatch of Buy-Back Booklet Buy-Back Booklet Appendix 3Y for Colin Wise Appendix 3Y for Hank Tuten Appendix 3Y for Colin Wise Form 604 – Excalibur Mining holding in St Barbara Form 604 – Resource Capital Fund holding in St Barbara Form 604 – Ocean Resource Capital holding in St Barbara Share Buy-Back Offer Appendix 3B Notice AGM Results AGM Presentation AGM Chairman’s Address Form 604 – NuStar Mining Corporation holding in St Barbara Form 604 - NuStar Mining Corporation holding in St Barbara Form 604 - Ocean Resource Capital holding in St Barbara September 2004 Quarterly Report 2004 Notice of Meeting and Proxy Form 2004 Annual Report to Shareholders Appendix 3Y for Colin Wise Exploration Drilling to Recommence at Meekatharra Form 603 – NuStar Mining Corporation holding in St Barbara Conﬁrm sale of NuStar Mining Corporation shares and Paulsen’s Royalty 30 June 2004 Financial Report Presentation to Tokyo Investors NuStar Mining Corporation Transaction June 2004 Preliminary Final Report Form 604 – Ocean Resource Capital holding in St Barbara Settlement with Former Executive Chairman Appendix 3Z for Stephen Miller and Kevin Dundo June 2004 Quarterly Report Appendix 3Y for Hank Tuten Appendix 3Y for Eduard Eshuys and Colin Wise Appendix 3B – Ocean Resource Capital Issue and allotment of shares Changes to St Barbara Board Results of General Meeting Issue and allotment of shares Resignation of Kevin Dundo Conversion convertible notes 77 Shareholder Information as at 19 September 2005 continued Investor Relations This Annual report has been produced with the objective of ensuring that shareholders are informed on Company strategy and performance sufﬁcient to make or retain an investment in the Company. Announcements, statutory reports and the latest information on the Company’s projects are available on the St Barbara website: www.stbarbara.com.au. Financial institutions, stockbrokers and other non-shareholder entities requiring copies of this report, activities reports and other corporate information should contact the Directors at: Level 2, 16 Ord Street West Perth WA 6005 Telephone: Facsimile: E-mail: Web site: +61 8 9476 5555 +61 8 9476 5500 perth@stbarbara.com.au www.stbarbara.com.au Shareholder Enquiries Enquiries relating to shareholding, tax ﬁle number and notiﬁcation of change of address should be directed to: Australia Advanced Share Registry Services 110 Stirling Hwy Nedlands WA 6009 Telephone: Facsimile: +61 8 9389 8033 +61 8 9389 7871 or United Kingdom Computershare Investor Services The Pavilions, Bridgwater Road Bristol BS99 7NH, England Telephone: Facsimile: +44 870 703 6088 +44 870 703 6142 Corporate Directory This page was intentionally left blank. This page was intentionally left blank. Corporate Directory Board of Directors S J Colin Wise (Non Executive Chairman) Eduard Eshuys (Managing Director and CEO) Richard Knight (Non Executive Director) Hank G Tuten (Non Executive Director) Mark K Wheatley (Non Executive Director) Company Secretary Ross J Kennedy Registered Ofﬁce Level 2, 16 Ord Street West Perth WA 6005 Telephone: Facsimile: E-mail: Web site: +61 8 9476 5555 +61 8 9476 5500 perth@stbarbara.com.au www.stbarbara.com.au Share Registry Australia Advanced Share Registry Services 110 Stirling Hwy Nedlands WA 6009 Telephone: Facsimile: United Kingdom Computershare Investor Services The Pavilions, Bridgwater Road Bristol BS99 7NH, England Telephone: Facsimile: +61 8 9389 8033 +61 8 9389 7871 +44 870 703 6088 +44 870 703 6142 Bankers Commonwealth Bank of Australia 150 St George’s Terrace Perth WA 6000 Auditors PricewaterhouseCoopers QV1 Building 250 St George’s Terrace Perth WA 6000 Solicitors Freehills QV1 Building 250 St George’s Terrace Perth WA 6000 Stock Exchange Listing Shares in St Barbara Mines Limited are quoted on both the Australian Stock Exchange Limited and the AIM (London Stock Exchange). Ticker symbol: SBM 81 w w w . s t b a r b a r a . c o m . a u St Barbara Mines Limited

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