St Barbara Ltd Annual Report 2006

Plain-text annual report

2006 Annual Report St Barbara Limited Kununurra Broome Pt Hedland Newman Carnarvon 200km Mercator (SBM 20.6%) Meekatharra Geraldton Hill 50 Leonora Plutonic Scorpion-Scorpayle Jundee Wiluna Bronzewing Thunderbox Mt Keith Cosmos Leinster �� Lake Wells Laverton Granny Smith Sunrise Dam Saracen (SBM 19.9%) Southern Cross Kanowna Belle Kalgoorlie Kambalda St Ives �� PERTH Forrestania Norseman Bunbury Ravensthorpe Esperance SBM Land Holding Gold Deposit Nickel Deposit Albany Table of Contents Chairman’s Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Managing Director’s Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Reserves & Resources Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Exploration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Safety and Community . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 1 Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Declaration of Auditor Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Income Statements for the year ended 30 June 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Balance Sheets as at 30 June 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Statements of Changes of Equity for the year ended 30 June 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Cash Flow Statements for the year ended 30 June 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Notes to the Financial Statements for the year ended 30 June 2006 . . . . . . . . . . . . . . . . . . . . . . . . . 46 Directors’ Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Independent Audit Report to the Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 Statement of Shareholders as at 13 September 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 Corporate Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Chairman’s Letter Colin Wise Chairman Dear Shareholder The resurgence of St Barbara continued during the 2006 ﬁnancial year. At year-end, the Company was in a sound ﬁnancial position, had an expanded management team in place or in the course of being recruited, was producing gold from Southern Cross Operations at the annual rate of 165,000 ounces, and held a strong land position on which to base future exploration – both in the vicinity of Company operations, and greenﬁelds. The development of Company activities has led to growth of the management team, in number and depth. St Barbara is actively engaging with government, local communities, indigenous groups and land owners in relation to these activities and future planning. All levels of the organisation from the Board of Directors down, maintain a vital interest in the safety of all employees and contractors and in enhancing the environment in which the Company is operating. The former Sons of Gwalia gold assets have been rejuvenated, with the Company advancing its objective of establishing long-life mines for Gwalia Deeps at Leonora and Marvel Loch at Southern Cross. The resource at Tarmoola is also in the feasibility phase. 2 The rising gold price enhanced the Company’s progress. The average price received during the year was A$694/oz. Cash ﬂows generated by Southern Cross gold production funded exploration activities and mine development at Gwalia Deeps. Strong market conditions provided an opportunity to divest the Meekatharra and South Laverton projects on favourable terms. Finance for the March 2005 purchase of the Sons of Gwalia gold division (provided by a A$7 million convertible note issued to Resource Capital Fund III LP), was converted to equity in March 2006, enabling the Company to retire all secured borrowings. In May 2006, with the gold price rising to A$924/oz, and with strong demand for our shares, a placement of 99 million shares was made at 60¢/share, raising a net A$57 million. A number of signiﬁcant international and local institutions are now shareholders. Their presence on the register represents an important recognition of St Barbara’s improved standing as a mid-sized gold mining company. The Company is now included in Standard & Poors ASX300 Index. The improvement in the Company’s standing and the current opportunities for growth, reﬂect well on the hard work and achievements of Eduard Eshuys, his management team and St Barbara’s workforce. Particular mention is made of the successful integration into the new St Barbara culture of Sons of Gwalia personnel who joined the Company last year. During 2006 the composition of the Board is undergoing change. In February we welcomed Doug Bailey as a non-executive director. In August Mark Wheatley resigned as a non-executive director to take up a CEO role with another resources company. In September Richard Knight announced his retirement as a Director, to take effect in December 2006. We thank Mark and Richard for their contributions and wish them well. Replacement non executive directors are now being sought. History demonstrates that buoyant gold price environments do not last indeﬁnitely. The strong ﬁnancial position of the Company provides a springboard for our planned acceleration of the development of two potentially long life gold operations – Gwalia Deeps at Leonora and Marvel Loch at Southern Cross. We also plan to spend A$20.2 million on exploration during the 2007 ﬁnancial year - a signiﬁcant amount for a company of St Barbara’s current size. We have commenced the 2007 year with continued energy and commitment to develop St Barbara into a signiﬁcant Australian gold producer and explorer. Colin Wise Chairman 29 September 2006 Managing Director’s Review St Barbara has successfully integrated the gold assets acquired from Sons of Gwalia in 2005, and reﬁnanced the Company through the timely sale of assets and equity raisings. As a consequence, St Barbara has re-established itself as a gold producer and is well placed to look to the future and pursue success in its operations, development, exploration and corporate activities. Success during the year was achieved by: Generating a proﬁt after tax of A$6 million. Gold operations producing 166,000 ounces at a cash cost of A$443/oz and generating a cash surplus of A$66.4 million before capital and exploration expenses. Divestment of Meekatharra and South Laverton assets at a combined proﬁt of A$19.6 million, with the Company now holding a 19.9% interest in Saracen Mineral Holdings Ltd and 20.6% interest in Mercator Gold plc with a combined market value of A$30 million. Reducing environmental bonds by A$12.2 million. Increasing reserves by 1 million ounces and replacing the production during the year with increases at both Gwalia Deeps at Leonora and at Southern Cross. Raising A$67.2 million of new capital from the exercise of options and a placement of 99 million shares at 60¢. Introducing institutional investors on to the share register through the sell down of Resource Capital Fund’s holding to 22.4%. experienced Recruiting ﬁnancial professionals to support the operations, development and exploration activities. An emphasis on recruitment of graduates has also occurred. technical and Improving safety performance during the course of the year with 120 LTI free days as at 30 June 2006. This improved performance has continued into the current year. Eduard Eshuys Managing Director & CEO Improving environmental and rehabilitation management and introducing a comprehensive data base and management system. Establishing a land management system to assist access to additional land at Southern Cross, Leonora and other areas of interest. Establishing the BigGold Study to identify world-class gold deposits in areas adjacent to highly endowed gold geology and gold production districts in Australia. Safety The All Injuries Frequency Rate for the Company of 12.5 compares with an Industry average of 11.6 and requires improvement. Safety initiatives are concentrating on observing behaviours and increasing managerial inspections of work areas to raise the proﬁle of safe production. Competency based training is also targeting improvement in the areas of manual handling, hazard identiﬁcation and job safety analysis and incident investigation. 3 Environment Re-establishing local fauna where practicable is an important element in rehabilitating former mining sites inherited as part of the purchase of the Sons of Gwalia gold assets. Other ongoing environmental activities include water sampling, fauna surveys, energy generation and efﬁciency programs, pollution prevention, community liaison and environmental education. Community The Company is reconnecting with local communities in the Leonora and Southern Cross regions, to provide a deeper understanding of the Company’s plans, listen to issues of community interest, and promote community interaction. Meetings have taken place during the year with local indigenous groups, shire councils and members of the local community. Strategy for Growth Our principal objective is to establish St Barbara as a 1 million ounces per annum producer with a cash cost margin of at least A$200/oz, and have reserves of 10 million ounces by mid 2010, or four years from now. Managing Director’s Review cont 4 Eduard Eshuys and Shane McLeay inspecting Raise Bore machine, 375 level Gwalia Deeps Achieving this growth and time frame will require focus on: exploration success at Leonora and Southern Cross; continued conversion of resources to reserves; increase in gold production to approximately An 220,000- 230,000 ounces per annum (and an improvement to related operating costs) at Marvel Loch Underground and open pits at the Southern Cross Operations; Development of Gwalia Deeps to commence production during 2008 at a rate of 150,000 ounces per annum; Acquisitions with a gold bias of corporates or assets which are either producing 150,000 ounces per annum or the equivalent, or have the potential to do so, with cash margins in excess of A$200/oz; and A large-scale grass roots discovery either within the Company’s existing in Australia. land holdings or elsewhere Our interim objective of producing 450,000 ounces per annum at a cash cost of A$465/oz commencing during 2008, or two years from now, will include the following: Geologists and mining engineers are dedicated to validating and seeking to extend existing resources at Leonora and Southern Cross to develop open pit reserves. Leonora and Southern Cross land holdings of the Company have total historical production and existing resources of 13 million ounces and 12 million ounces respectively. Analysis of past exploration activity shows that exploration over the past three decades by previous owners has only been 30% effective largely due to the past drilling generally being too shallow, and an apparent lack of understanding of the regolith and geology. Improvements in production at Southern Cross are likely to come from expanding underground production at Marvel Loch (which was 315,000 tonnes for 2005/06) up to 800,000 tonnes per annum over the next two to three years. Results to date suggest that Reserves may extend below the current depth of 500m below surface. Development of a possible ﬁve-year mine plan is in progress. Gwalia Deeps Hoover Decline is now at a vertical depth of 500m below surface, on its way to the top of the Deeps at 1,100m below surface. This high-speed development of the decline advance (approximately 2,400m per year for a single heading) should enable the decline to reach the Deeps towards the end of 2007. Steady state production at Gwalia Deeps is projected to be approximately 500,000 tonnes per annum which at the reserve grade of 9.0g/t will produce 145,000-150,000 ounces per annum, subject to conﬁrmation in the Final Feasibility Study. Future production at Tarmoola is being assessed and remains subject to conﬁrmation in the Final Feasibility Study. 5 A number of potential acquisition opportunities have been identiﬁed and are being analysed. These contemplate additional annual production of 150,000 ounces or the equivalent, with a cash margin in excess of A$200/oz, and may include merger or takeover of corporates, purchase of assets or joint ventures. The BigGold Study, designed to lead to the discovery of world class gold deposits undercover in Australia, has identiﬁed some 49 target areas on which research of past exploration activity is being conducted. Areas are being ranked based on depth of cover preferably less than 200m, mineral endowment of adjacent districts with historical production and evidence of favourable geological settings. Conclusion Considerable progress has been achieved in rebuilding the Company during the year and a solid platform for establishing long life gold operations at Leonora and Southern Cross has been established. This could not have been achieved without the dedicated and disciplined effort by all the Company’s employees and contractors who were very ably lead by senior management. Eduard Eshuys Managing Director & CEO 29 September 2006 Reserves & Resources Statements Proven & Probable Reserves Statement at 30 June 2006 REGION Southern Cross Marvel Loch Hercules Other Total Southern Cross Leonora Gwalia PROVEN PROBABLE TOTAL kTonnes Au g/t koz kTonnes Au g/t koz kTonnes Au g/t Koz 98 190 290 5.1 1.9 2.9 15 12 27 1,300 830 1,400 3,600 3,100 6,700 4.0 3.1 0.8 2.6 9.0 5.5 175 84 36 300 885 1,200 1,400 830 1,600 3,900 3,100 6,000 4.2 3.1 0.9 2.6 9.0 5.4 190 84 48 320 885 1,200 TOTAL ALL AREAS 290 2.9 27 6 Notes – Southern Cross: 1) Information in this report that relates to Southern Cross Ore Reserves is based on information compiled by Mr Sam Larritt (Marvel Loch) and Mr Allan Blair (Hercules) who are Members or Fellows of the Australasian Institute of Mining and Metallurgy. Mr Larritt is a full-time employee of the Company and Mr Blair is employed by Snowden Mining Industry Consultants. Mr Larritt and Mr Blair 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 Larritt and Mr Blair consent to the inclusion in the report of the matters based on their information in the form and context in which it appears. 2) A gold price of A$550/oz and cut-off grade of 1.1g/t has been used for the Reserve estimation. 3) Estimated processing recovery for Southern Cross is 90%. 4) All data is rounded to two signiﬁcant digits. Discrepancies in summations will occur due to rounding. Notes – Leonora: 1) The information in this report that relates to Gwalia Deeps Ore Reserve is based on information compiled by Messrs Stephen Miller and Martin Reed, who are members of the Australasian Institute of Mining and Metallurgy. Messrs Miller and Reed are consultants to St Barbara Limited and have sufﬁcient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Persons as deﬁned in the 2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves”. Messrs Miller and Reed consent to the inclusion in the report of the matters based on the information in the form and context in which it appears. 2) The mining reserve includes dilution of 10% to 15% at 0.0g/t Au depending on stope size. Dilution is applied by factoring the ﬁnal design stope shape volume and tonnes but not increasing contained metal. 3) A mining recovery factor of 95% after dilution is applied. 4) A cut-off grade of 4g/t Au has been applied. 5) A gold price of A$650/ounce has been used for the Reserve estimation. 6) For planning purposes a processing recovery of 95% has been used. 7) All data is rounded to two signiﬁcant digits. Discrepancies in summations will occur due to rounding. Mineral Resource (including Reserves) Statement at 30 June 2006 MEASURED INDICATED INFERRED TOTAL kTonnes Au g/t koz kTonnes Au g/t koz kTonnes Au g/t Koz kTonnes Au g/t koz 560 5.4 99 2,500 190 750 1.8 4.6 11 110 390 1,500 4,600 8,900 4.1 6.6 2.8 2.4 3.1 330 82 130 350 890 980 1,100 4,700 6,800 5.1 3.2 2.9 3.3 160 110 440 710 4000 1,500 1,500 9,500 4.6 3.9 2.8 2.6 590 190 130 800 16,000 3.2 1,700 12,000 1,000 13,000 0.9 0.9 0.9 1.1 350 30 380 490 3,900 8.9 1,100 6,400 6.8 1,400 10,000 8.1 2,600 46,000 1.2 1,800 5,100 1,200 1.2 1.8 200 68 58,000 1.1 2,100 6,600 2.4 500 13,000 1,200 1.7 1.8 700 68 7 56,000 1.8 3,200 13,000 4.5 1,900 82,000 2.1 5,500 65,000 2.0 4,100 20,000 4.0 2,600 99,000 2.3 7,200 REGION Southern Cross Marvel Loch Yilgarn Star Hercules Other Leonora Gwalia Tarmoola Other Celtic/Wonder4 TOTAL ALL AREAS 14,000 Notes: 1) The information contained in this report relating to Mineral Resources has been compiled by Ms Jane Bateman and Mr Peter Thompson. Ms Bateman and Mr Thompson are Members of the Australasian Institute of Mining and Metallurgy and are full time employees of the company. Ms Bateman and Mr Thompson 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 in the 2004 edition of the ‘Australasian Code for Reporting of Mineral Resources and Ore Reserves’. Ms Bateman 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 have been rounded to two signiﬁcant ﬁgures. 3) Discrepancies in summations will occur due to rounding. 4) The Celtic and Wonder Prospects were sold to Terrain Minerals Ltd on 14 July 2006. Operations The Company’s strategic focus has been to sustain and extend the life of the Southern Cross Operations, develop new operations at Leonora, and explore for gold, nickel and copper in Australia. Southern Cross Operations The Southern Cross Operations are centred at Marvel Loch, 30km south of the town of Southern Cross and 360km east of Perth, Western Australia. Current operations are based on the Marvel Loch underground mine and the Hercules open pit. Marvel Loch The Marvel Loch underground mine is adjacent to the processing plant. Gold mineralisation extends over a 1.3km strike length and has been deﬁned to depths of over 500m. 8 The lodes being mined include: Sherwood and Undaunted at the North; Firelight and Exhibition at the Centre; and East and New at the South. Mining methods include uphole benching and open stoping with rock ﬁll, where necessary. The underground mine is scheduled to deliver 0.4 million tonnes during the 2006-07 year. The production rate is expected to rise in subsequent years as the mine is further developed. A drilling program from underground has the objective of outlining extensions to reserves to 650m below surface. Hercules Open pit mining at Hercules, 12km south of the Marvel Loch Processing Plant is in progress. Other Other mineral resources currently being reviewed include Transvaal and Parbo-Nevoria. These resources may be drilled with a view to including any resultant reserves in the mining schedule for Southern Cross in the 2007/08 period. Meanwhile, there are sufﬁcient low grade stockpiles to blend with the underground ore to continue operating the processing plant at full capacity until mid 2008, as part of the three year mine plan. The processing plant located at Marvel Loch treated a total of 2.4 million tonnes for the 12 months to June 2006 at a grade of 2.4g/t. Production Details Open Pit Grade Underground Grade Million t g/t Million t g/t Stockpiles Processed Million t Grade Ore Milled Grade Recovery g/t Million t g/t % Gold Shipped Million ozs 30 June 2006 30 June 2005 1.33 2.10 0.32 5.70 0.71 1.30 2.35 2.40 91.00 0.17 0.54 3.00 0.12 7.02 0.32 1.22 0.98 3.05 93.00 0.08 Cash Cost $/oz 443.00 341.00 Gold production for 2006 was derived from a full year of Southern Cross Operations. For 2005, gold production commenced as from 1 April 2005 and was derived from both Southern Cross and South Laverton Operations. Southern Cross Tenements Development Gwalia Deeps The Sons of Gwalia gold mine has one of the longest operating histories and largest gold production records of all the Archaean lode-gold mines outside Kalgoorlie. Historic production and current resources total over 6 million ounces. Hoover Decline development to extend Gwalia Deeps from 375m below surface recommenced during December 2005 quarter and is scheduled to reach 1,100m below surface during the March 2008 quarter. This development will allow stoping of Gwalia Deeps. A Final Feasibility Study is in progress and is addressing all aspects of the planned operation including ventilation, haulage, backﬁll, power supply and geotechnical considerations. The processing plant located at the Gwalia site was in operation until 2003 and is under care and maintenance. An assessment of the feasibility of refurbishing this plant and treating the ore from the underground mine is in progress. Tarmoola Tarmoola is located 30km northwest of the town of Leonora and the Gwalia Mine. Mining was suspended in 2004. In July 2005 St Barbara commenced a detailed drilling program which resulted in an upgrade of the resource. A Final Feasibility Study is in progress, which is assessing the viability of recommencing operations at a scale of 5 million tonnes per annum. This would require an upgrade of the Tarmoola plant which is currently on care and maintenance. 9 Leonora Tenements Preparing the face for next advance of Hoover Decline, 5.8m high by 6.0m wide Exploration The strategy for exploration has been to re-establish reserves, expand the resource base of the Company, as well as to make new discoveries. Outcomes from the exploration activities from the 2005/06 year included: Historically, 3.95 million ounces of gold was mined at Gwalia down to a vertical depth of 1,100m, with mineralisation dipping at 40 degrees. Drilling by the Company using up to four surface diamond drill rigs and directional drilling technology has extended this mineralisation at depth, with resources below the old workings now totalling 7.5 million tonnes at 8.3g/t for 2 million ounces. establishment of a Probable Ore Reserve for Gwalia Deeps of 3.1 million tonnes at 9.0g/t for 885,000 ounces of gold; 10 increase in Marvel Loch Underground Reserves from Probable Ore Reserves of 240,000 tonnes at 6.0g/t for 46,000 ounces at 30 June 2005 to 1.4 million tonnes at 4.2g/t for 190,000 ounces of gold at 30 June 2006; and upgrading of Tarmoola Inferred Resources to Measured and Indicated. In addition, regional exploration teams, focussing on surface deposits, have been established at both Southern Cross and Leonora. A BigGold Study has been initiated to identify targets for world scale gold deposits within Australia. Gwalia Deeps During 2005 St Barbara conducted an extensive drilling campaign at Gwalia Deeps, utilising up to four surface diamond drill rigs at any one time, to allow ore reserves to be estimated. The current Mineral Resource estimate at Gwalia (Deeps and Intermediates) is 10 million tonnes at 8.1g/t for 2.6 million ounces of gold, including the newly established Probable Ore Reserve of 3.1 million tonnes at 9.0g/t containing 885,000 ounces of gold (all of this Reserve is within the Gwalia Deeps). The Gwalia Deeps Probable Reserves occur within an Indicated and Inferred mineral resource estimate of 2 million ounces, representing a conversion rate of 44.3 per cent to date. 885,000 ounces of Reserves have been established below the current workings (“Gwalia Deeps”) in the Main and South West Branch lodes down to a vertical depth of 1,550m, and deeper drilling has extended known mineralisation down to 1,900m vertically. The mineralisation occurs within discrete sheet-like quartz vein lodes, plunging shallowly towards the south east and varies in width from 2m to 26m. There is considerable history and knowledge of mining this orebody from past operations which will assist in mine planning and bringing the mine back into operation. Leonora Gold Gold endowment in the Leonora region is extensive, with the ﬁve largest known deposits historically producing a total of 13.5 million ounces of gold. The Company inherited a large database of drillhole, geophysical and geochemical data through the acquisition of the Sons of Gwalia gold division and has now completed a detailed assessment of the data, the effectiveness of previous drilling and sampling, the known deposit styles, and their geological controls. This study has generated a signiﬁcant number of targets for possible further large, standalone deposits within the Company’s tenure, and an exploration team will systematically test these targets in the year ahead. Gravity data is recognised as a crucial component in the detailed targeting process for all major deposits at Leonora, and expanded ground-based gravity surveys have been completed and the results are being assessed. Gwalia Deeps West East 11 Exploration cont Southern Cross Exploration activity has been intensiﬁed at Southern Cross, with the establishment of two teams, one focusing on known deposits for open cut opportunities, the other seeking new discoveries. The Company controls the majority of the Southern Cross-Forrestania greenstone belt, over a length of some 200km, which has a known historical gold endowment of over 12 million ounces including 12 deposits of over 300,000 ounces. A comprehensive study of deposit styles, structural associations, the effectiveness of previous exploration and targeting was completed, producing some 51 gold targets within Company tenure. These targets have been ranked and further assessed. Access to most targets has been negotiated and exploration for new, standalone targets is underway. 12 in progress Marvel Loch Deeps A program of diamond drilling from within the current since underground workings has been September 2005, with the aim of establishing Indicated Resources from 500 metres below surface (mbs) to 1,000mbs. This in turn is anticipated to identify mineable inventory below 500mbs, to support a planned ﬁve-year expanded production proﬁle. Ore lodes at Marvel Loch are steeply plunging, continuous quartz veined shoots, each with a length of 30-70m and the Undaunted, Sherlock, Exhibition and New Lodes are being extended down plunge with this drill program. BigGold Study A team of geologists and specialist consultants has been established to identify targets for potential world-scale deposits of gold, nickel and copper within Australia. Initial outcomes from this team effort include a detailed review of new aeromagnetic and gravity data from the Yeenena (Ashburton) region, host to the Nifty (copper) and Telfer (gold) deposits. Targeting faulted antiforms analogous to the Telfer dome resulted in the application for four new exploration licences, covering some 780sqkm. These licences are expected to be granted in the coming year, with work programs planned. Elsewhere in Australia, the Company is at an advanced stage of targeting new gold and copper-gold deposits. Detailed target assessment and ranking of these targets will lead to ground acquisition early in the 2006/07 year. Base Metals Dedicated base metal programs are being implemented on the Company’s Leonora and Southern Cross/Forrestania tenements. Previous operators have historically focused on gold exploration on these tenements, despite the strong nickel sulphide endowment and recent nickel discoveries along strike. Over 300km of komatiite stratigraphy is present on this tenure, including channel-facies prospective for accumulation of Kambalda-style massive sulphide deposits. Base metal programs to be conducted this year will include loop electro magnetic surveys, high-powered moving mapping and gossan search, surface geochemistry and follow up drilling of anomalies. The focus for the 2007 ﬁnancial year, with forecast exploration expenditure of A$20 million, is to: further add to the Gwalia Deeps reserve base; identify surface deposits in proximity to Southern Cross and Leonora operations, to augment existing and planned production plans; and make further standalone discoveries. Marvel Loch Mine, the cornerstone of Southern Cross 13 Environment Management of the environment is an important aspect of St Barbara’s business, with consideration and management of environmental aspects being incorporated into all activities from exploration onwards. The mining activity at the Hercules Open pit continued to dump waste rock on top of a former tailings dam resulting in a long-term stable structure that, when ﬁnished, will be contoured, ripped and revegetated. Environmental activities undertaken include water sampling, fauna & ﬂora surveys, energy generation and efﬁciency programs, pollution prevention, community liaison, education and training and rehabilitation. Over the past 12 months, as part of our rebuilding for a better future, St Barbara has focused on improving its environmental performance. The Company’s Environmental Policy was updated, outstanding rehabilitation activities at historic mining locations situated close to towns were completed, hydrocarbon management across the operations were improved and good environmental standards were incorporated for sites being considered for re-opening. 14 Compliance Compliance with regulatory requirements is a minimum standard and where possible the Company sets its internal standards at a higher level. During the year work began on the development of a Company-based Environmental Management System. This is a signiﬁcant process and is to be progressed over the next two years. The development of a Company-Wide Environmental Obligation Register has commenced. This aims to streamline the compliance process by ensuring all management and staff are aware of their obligations. Rehabilitation The Company continued its program of rehabilitation and clean-up of former mining sites inherited as part of the purchase of the Sons of Gwalia gold assets in 2005. The focus was on areas close to Southern Cross and Bullﬁnch and potentially higher-risk areas. At Frasers, located next to the town of Southern Cross, the former operations area was cleaned up, with rubbish, old buildings and scrap removed. Waste dumps were contoured to a more stable landform and some tailings were relocated. At the Star Mill site, 13km south east of Marvel Loch, the processing plant was dismantled and removed with most of the materials that could be recycled sold to metal traders. In addition, polyethylene pipe was recovered and sold to recyclers. The site was cleaned of other rubbish. At Transvaal certain reactive wastes were covered and stabilised by an innovative technique that had been trialled last year. On other sites, including Bullﬁnch, Cornishman and Southern Star, surplus and disused materials such as powerlines, polyethylene pipe and scrap metals were collected and either reused onsite or sold to recyclers. The Company has continued to consult with government on its rehabilitation plans and has developed its plans in consultation with the relevant ofﬁcers. Water Water is a scarce resource. The Company constantly reviews its water usage and, where possible, has instituted recyling and the use of lower-grade water resources for industrial purposes. At the Leonora township, reverse osmosis is used to upgrade the town’s drinking water supply and the reject water is being sent to waste. The Company is arranging for the reject water to be redirected to its operation for use as industrial water. Training and Education The Company has appointed a Manager Environment and Rehabilitation to manage its commitments and to assist employees and contractors with their obligations. In addition, environmental staff and contractors are employed at its sites to provide advice and training as part of site induction processes and on-going environmental awareness programs. Greenhouse Challenge Plus St Barbara has become a member of the Greenhouse Challenge Plus program. This program is administered by the Australian Greenhouse Ofﬁce of the Department of Environment and Heritage. The next stage in this program will see the establishment of an agreement that records the Company’s commitment to manage and reduce greenhouse gas emissions. The agreement also reﬂects the Australian Government’s commitment to recognise and reward achievements. It is envisaged that this agreement will be ﬁnalised during the 2007 reporting period. 15 Drilling at Gwalia Safety and Community A safe workplace is fundamental to the wellbeing of employees, contractors, consultants and visitors and to the success of the Company. St Barbara is committed to achieving high standards, continuous improvement and the principle that all occupational injuries and illnesses are preventable. As a result, the Company has focussed on the provision of lifting and manual handling training for our workforce and increasing the number of personnel trained in hazard identiﬁcation and job safety analysis. Through training we will continue to increase the skill levels of our workforce and an incident investigation to improve our ability to accurately identify the causes of incidents and accidents. There is a strong safety culture throughout all levels of the Company which is promoted at employment interviews, inductions, on-going safety meetings and training. Risk assessments are carried out prior to the implantation of new tasks and commencing routine activities. 16 General and site-speciﬁc inductions are held for all personnel, including contractors, at our operations and work areas. In addition, safety brieﬁngs are conducted at the commencement of each shift and formal weekly safety meetings are conducted by our employees and contractors. Safety Health Advisory Committees have been established at each site, drawing members from across all aspects of the operations. The Committees’ safety and health initiatives result from the contributions of these representatives from the workforce. In addition to providing a safe working environment, the Company also focuses on its preparedness and ability to respond in case of an emergency. The Emergency Response teams at our operations are trained and capable of responding to the variety of emergency scenarios that may be encountered in our operational areas. While the Company Disabling Injury Frequency Rate (DIFR) of 6.2 was lower than the 2004/05 WA Gold Industry Rate of 7.7, the Lost Time Injury Frequency Rate (LTIFR) was 6.2 compared to the 2004/05 WA Gold Industry Rate of 3.9. This performance is not acceptable and was due to six consecutive lost-time injuries from October to March 2006. Of the injuries sustained, three were lower back cumulative strain injuries. At the end of the ﬁnancial year the Company had achieved 120 days without any time being lost to injury. Local Community Consultation The Company recognises that members of local communities where it operates and interacts are important stakeholders. St Barbara is committed to building and maintaining mutually beneﬁcial and sustainable relationships with the local communities, particularly at Southern Cross and Leonora, the location of its operations. Community involvement and support during the year included: In April 2006 senior management conducted an open brieﬁng at Gwalia House in Leonora to update the Leonora community of its plans for the Tarmoola and Gwalia Deeps projects. A large number of members of the local community attended. In addition, the Company met with indigenous groups at Southern Cross and Leonora. The focus of these meetings was to explain the Company’s plans for the Southern Cross and Leonora operations, in particular the employment and contracting opportunities that exist for the groups. As a result of these meetings, dialogue between the groups and the Company is continuing. Local Government Consultation The Company regularly meets with the Southern Cross and Leonora Shires to update them of the Company’s progress and answer questions in relation to community issues and opportunities. Gwalia Historical Society The Company is represented on the board of the Leonora Gwalia Historical Museum Ltd (LGHM) which was established in 1972 to preserve the heritage of the Gwalia gold mine and associated infrastructure. The preservation of this heritage is important to St Barbara and it is an active member of the LGHM. 17 Belinda Bastow, Manager Environment & Rehabilitation, presenting to Leonora community Financial Review The net proﬁt after tax for the year of $6,019,000 (2005: $6,831,000) was underpinned by a full year of gold production from Southern Cross Operations in Western Australia. Signiﬁcantly, the underlying proﬁt for the year, as disclosed in the ASX Appendix 4E Financial Results release, improved from a loss in 2005 of $6,800,000 to a proﬁt in 2006 of $4,300,000; an improvement of $11,200,000. As at 30 June 2006, the Company is ﬁnancially well placed to pursue its strategic objectives, with cash at bank of $79,336,000 (2005: $16,273,000), investments of $29,569,000 (2005: $6,104,000) and minimal secured debt of $644,000. Proﬁt and Performance The proﬁt for 2006 of $6,019,000 was after expensing exploration expenditure of $16,831,000 (2005: $6,107,000) (excluding salaries, rents and rates) and mine development expenses of $8,908,000 (2005: $7,287,000). 18 Key contributors to the results were a $250/oz cash operating margin (average selling price $694/oz less cash operating cost $443/oz) from operations for $41,500,000 before amortisation and depreciation, proﬁt on the divestment of Meekatharra of $10,500,000 and proﬁt on divestment of South Laverton of $9,300,000. The comparative result for the year ended 30 June 2005 under AGAAP was reported as a loss of $6,697,000. With the introduction of Australian International Financial Reporting Standards (AIFRS) this result is restated to a proﬁt of $6,831,000 due to two non-cash items: Gain on deconsolidation of subsidiary $14,192,000 Share based payments expense Net increase in proﬁt ($664,000) $13,528,000 The gain on deconsolidation of subsidiary relates to NuStar Mining Corporation Limited (NuStar) and represents a difference between accounting treatments under AGAAP and AIFRS. Under AIFRS, the carrying value of NuStar assets was written down for the consolidated entity in the 2004 ﬁnancial year by $14,192,000. In the 2005 year, the gain on deconsolidation of NuStar is increased by an equal amount. There is no cash ﬂow or net tax effect as a consequence of these AIFRS adjustments. Gold production for the year was 166,000 ounces at a cash cost of $443/oz. The Company beneﬁted from rising gold prices with an average price received for gold sold of $694/oz. Included in this total are 31,000 ounces sold under hedge commitments at approximately $770/oz. The remaining ounces were sold at spot. Financing and establishment fees) related primarily to: interest costs of $960,000 (including $7,000,000 convertible note, which was converted into equity on 27 March 2006 $29,000,000 Environmental Bond Facility (Environmental Bonds at 30 June 2006: $20,646,000) $10,000,000 General Purpose Loan Facility Hedging As at 30 June 2006 the Company had 126,000 ounces of committed and hedged gold positions comprising 115,000 ounces of bought put options and sold call options, and 11,000 ounces of gold forward sales. The bought put options are exercisable at A$700/oz, the sold call options are exercisable at A$770/oz and the gold forward sales are priced at A$774/oz. Based on a spot gold price at 30 June 2006 of A$810/oz, the mark-to-market value of the 126,000 ounces was negative $9,371,000. This unrealised loss is allocated $5,029,000 (before tax) to the Gold Hedge Reserve (representing market value movement) and $4,342,000 expensed to the Income Statement (representing the time and volatility value movement). Taxation Under AIFRS, deferred tax is brought to account for movements in reserves, resulting in a deferred income tax beneﬁt for the year of $1,428,000 (2005: $Nil). Equity On 18 May 2006 the Company raised net $57,022,000 from the issue of 99,000,000 shares at 60¢ each to offshore and local institutions and some professional investors. A $7,000,000 convertible note was converted, on terms previously approved by shareholders, to 100,000,000 shares on 27 March 2006. A total of $8,633,000 was received from exercise of unlisted options, including $7,118,000 from the exercise of 49,712,000 options previously held by Resource Capital Fund II LP. Pursuant to an on-market share buy-back program announced on 26 July 2005, to 30 June 2006 the company had bought back a total of 9,805,000 shares for $4,008,000 at an average price of 41¢/share. Investments The Company’s investment portfolio has resulted primarily from the divestment of South Laverton, Meekatharra and non-core assets. As at 30 June 2006, the Company held the following interests in public listed companies: Mercator Gold plc Saracen Mineral Holdings Ltd Terrain Minerals Limited 20.6% 19.9% 17.1% All of the Saracen and Mercator shares and most of the Terrain shares are held in escrow. For accounting purposes, investments in listed securities are valued at the market price, except for shares held in escrow which are valued at market price less 8% discount. As at 30 June 2006, the carrying value of investments was $29,510,000. Finance Facilities and Debt As noted above, a $7,000,000 convertible loan was converted into equity as at 27 March 2006. Through project divestment and rehabilitation programs, the Environmental Bond Facility as at 30 June 2006 had reduced to $20,646,000, secured by $20,000,000 bank guarantees and cash backing. Following the successful equity raising in May 2006, the $10,000,000 General Purpose Loan Facility, which had not been used, was cancelled without pre-payment penalty. Establishment fees totalling $435,000 were expensed during the current ﬁnancial year, in respect of this facility and the Environmental Bond Facility. As at 30 June 2006 the Company had $644,000 of secured debt representing hire purchase and ﬁnance lease commitments. Cash Flows Cash at bank at 30 June 2006 was $79,336,000 (30 June 2005: $16,273,000). Cash inﬂows for the year included: 19 Net proceeds from issue of shares Proceeds from divestment of property, plant and equipment including sale of Meekatharra and South Laverton Proceeds on sale of investments Release of cash from reduced restricted cash Cash outﬂows for the year included: Mine development costs On-market share buy-back $’000 65,660 16,783 5,984 11,648 100,075 $,000 23,770 4,008 27,778 Subsequent Events On 25 July 2006, the Company announced Probable Reserves for Gwalia Deeps at Leonora of 3,100,000 tonnes at 9.0g/t of gold for 885,000 ounces. A Final Feasibility Study is currently underway and is due to be completed in January 2007. 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. 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). 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. St Barbara has in place key corporate governance structures. As the Company grows the suitability of these structures is reviewed and updated on a regular basis. 20 St Barbara is committed to the principles of Good Corporate Governance and Best Practice Recommendations, as published by the ASX Corporate Governance Council in March 2003: 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). Each principle is of equal importance. St Barbara’s corporate governance practices align with these principles and are summarised below. Shareholders Directors and management recognise that shareholders, as the ultimate owners of the Company, are entitled to receive timely and relevant high-quality information about the Company’s performance, strategies and plans. Similarly, investors considering buying or selling shares in the Company are entitled to be able to make informed investment decisions when considering the purchase or sale of shares in the Company. To communicate effectively with shareholders and provide ready access to balanced and understandable information about the Company and its strategies, the Company: ensures that published ﬁnancial and other statutory reports meet or exceed statutory requirements; discloses full and timely information about Company activities and strategies in accordance with the general and continuous disclosure principles in the ASX Listing Rules and the Corporations Act; publicly presents a detailed view of the Company’s achievements and strategies at least twice a year, and reports from the Chairman and Managing Director and Chief Executive Ofﬁcer (CEO) at the Company’s Annual General Meeting (AGM); places all material information released to the market (including notices of meeting and explanatory materials) on the Company’s website as soon as practicable following public release; strives to ensure that all public announcements including annual reports, notices of meeting and other shareholder communications are drafted clearly and concisely. Structure and Operation of the Board The Company has operated during the year with a ﬁve to six-member Board, all of whom, aside from the Managing Director and CEO, are non-executive directors. Mr Tuten is a Partner of RCF Management LLC, the management company of the Company’s substantial shareholders, Resource Capital Fund II and II LP. Mr Tuten abstains from voting on any Board matters relating to either of these entities. Aside from Mr Tuten, all other non executive directors, including the Chairman, are considered to be independent. The role of the Board is to provide a strategic direction for the Company, effective oversight of management and a sound base for maintaining a culture of good corporate governance within the Company. Given the size of the Company, the function of a nomination committee is performed by the Board. The Board has adopted a formal Board Charter which sets out the principles under which the Board operates. The following Board committees are active: - Audit Committee; and - Remuneration Committee. Each of these committees has an independent non-executive director as chairperson, as well as a Board-approved charter. 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 associated with major shareholders, Resource Capital Funds II and 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, policies and procedures designed to safeguard Company assets and to maintain the integrity of ﬁnancial reporting. In respect to safeguarding Company assets, and risk more generally, management is charged with the responsibility of identifying and managing operational, ﬁnancial and corporate risks with regular reports to the Board. An Audit Committee has been established to assist the Board in maintaining the integrity of ﬁnancial reporting. The Audit Committee at the date of this report comprises: D W Bailey, Chairman H G Tuten S J C Wise The primary role of the Audit Committee is to provide an independent and objective review of ﬁnancial and other information prepared by management, in particular that to be provided to members and/or ﬁled with regulators, including: overseeing the Group’s discharge of its responsibilities with respect to: 21 the ﬁnancial statements, ﬁnancial report and annual report; and ﬁnancial risk management systems overseeing the Group’s relationship with external auditors; and determining the independence of the external auditors. The Audit Committee: meets and receives regular reports from its external auditors concerning matters that arise in connection with their audit; and is also responsible for review of performance and nomination of the external auditors. The external auditor, PricewaterhouseCoopers, has conﬁrmed its independence to the Board. The current engagement partner has conducted the audit since 2001. The external auditor is required to attend the Annual General Meeting and will be available to respond to speciﬁc questions from shareholders. Disclosure of Information St Barbara has obligations under the Corporations Act, and ASX 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. Corporate Governance Review cont The Company has adopted a Continuous Disclosure Policy to provide a disciplined framework for complying with these requirements. Remuneration The Remuneration Committee, as at the date of this report comprises: 22 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. Dealing in Company shares by Directors, Ofﬁcers and Employees is governed by a ‘Dealings in Securities’ Policy. This policy allows for a 30-day trading window following signiﬁcant public announcements, provided the Company is not then 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. Having regard to the Company’s size and scale of operations, a formal Code of Conduct is not considered necessary. 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. R Knight, Chairman D W Bailey E Eshuys S J C Wise The duties of the Remuneration Committee include: to commission and consider independent advice on remuneration, and to propose appropriate remuneration policies for Board approval, to provide guidance to the CEO on the appointment of senior executives and their remuneration, to approve the overall percentage increase in ﬁxed annual remuneration for employees, to establish with the CEO the criteria to be applied as the basis for performance management within the Company, to monitor performance against those criteria, and to approve any incentive payments that my result. to review and develop, as required, plans for orderly management development and succession. The Principles used to determine the nature and amount of remuneration are set out in the Remuneration section of the Directors Report set out on pages 28 to 37. Evolving Practices The Company recognises that corporate governance practices will continue to evolve as the Company continues to grow and develop. 23 Ruth Stephenson, Mine Geologist, Hoover Decline, Gwalia Deeps Directors’ Report The Directors present their report on the consolidated entity consisting of St Barbara Limited and the entities it controlled at the end of, or during, the ﬁnancial year ended 30 June 2006. Directors The following persons were Directors of St Barbara Limited during the whole of the year and up to the date of this report: Name S J C Wise E Eshuys R Knight H G Tuten Period of Directorship Appointed 20 July 2004 Appointed 20 July 2004 Appointed 25 May 2005 Appointed 26 March 2002 24 D W Bailey was appointed a Director on 17 January 2006 and continues in ofﬁce at the date of this report. M K Wheatley was a Director throughout the ﬁnancial year, but resigned on 2 August 2006 following his appointment as chief executive of another company. Principal activities During the year the principal activities of the consolidated entity consisted of gold production, gold and mineral exploration. There were no signiﬁcant changes in the nature of activities of the consolidated entity during the year. Dividends There were no dividends paid to members during the ﬁnancial year. Operations overview Refer to page 8 for the Operations Review. Consolidated revenues and results Consolidated revenues and results are summarised as follows: Sale of gold 2006 $’000 115,263 Proﬁt after income tax beneﬁt 6,019 2005 $’000 46,553 6,831 The proﬁt for the year ended 30 June 2006 of $6,019,000 is after expensing exploration expenditure, excluding salaries, rents and rates, of $16,831,000 and depreciation and amortisation charges amounting to $9,540,000. The comparative result for 2005 under AGAAP was reported as a loss of $6,697,000. With the introduction of Australian International Financial Reporting Standards (AIFRS) this result is restated to a proﬁt of $6,831,000 due to two non- cash items: Gain on deconsolidation of subsidiary $14,192,000 Share based payments expense Net increase in proﬁt in 2005 ($664,000) $13,528,000 The gain on deconsolidation of subsidiary relates to NuStar Mining Corporation Limited (NuStar) and represents a difference between accounting treatments under AGAAP and AIFRS. Under AIFRS, the carrying value of NuStar assets was written down for the consolidated entity in the 2004 ﬁnancial year by $14,192,000. In the 2005 year, the gain on deconsolidation of NuStar is increased by an equal amount. There is no cash ﬂow or net tax effect as a consequence of these AIFRS adjustments. Signiﬁcant changes in the state of affairs a) Divestment of Projects On 14 October 2005, the Company announced the sale of its South Laverton project to Saracen Mineral Holdings Limited (Saracen) for consideration of: Cash payment Replacement of South Laverton environmental performance bonds Issue of shares by Saracen, value Cash payment for additional bond reductions $’000) 4,000) 9,200) 3,500) 16,700) 2,700) 19,400) On 28 October 2005, the Company announced the sale of its Meekatharra project to Mercator Gold plc for consideration of: Cash payment Replacement of Meekatharra environmental performance bonds Issue of shares by Mercator, value b) Changes in issued capital Shares on issue 1 July 2005 Add exercise of Options $’000) 5,000) 3,000) 13,000) 21,000) Number of shares 566,533,352) 63,662,275) Conversion of Resource Capital Fund III LP $7 million loan 100,000,000 Equity raising May 2006 at 60 cents per share Less on-market buy-back of shares Shares on issue 30 June 2006 99,000,000) (9,805,060) 819,390,567) c) Sale of investments On 27 July 2005, the Company sold its remaining 63,325,359 shares in NuStar for $3,166,000 and 15,412,082 shares in Sedimentary Holdings Limited for $2,851,000; yielding total consideration of $6,017,000. As a consequence of the extension to operations at Southern Cross as described above, forecast gold production for the ﬁnancial year 2006/07 is 165,000 ounces at an estimated cash cost of $465/oz. Regulatory environment 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. The consolidated entity is subject to signiﬁcant environmental regulation and safety compliance in respect of its mining and exploration activities. Information on Directors S J Colin Wise LL.B, FAICD, FAusIMM Chairman – non-executive Age 60 Mr Wise is an experienced corporate lawyer and consultant with signiﬁcant expertise in the mining and exploration industry and corporate section. He spent 24 years with WMC Limited, 10 of which as General Counsel and subsequently, 4 years as Counsel to a New York law ﬁrm. 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 and Chair of its Quality Committee. 25 Matters subsequent to the end of the ﬁnancial year On 25 July 2006 the Company announced Probable Reserves for Gwalia Deeps at Leonora of 3,100,000 tonnes at 9.0g/t of gold for 885,000 ounces. Other current public company directorships Nil Former public company directorships in last 3 years Nil Likely developments and expected results of operations Likely developments in the operations of the consolidated entity constituted by St Barbara Limited and the entities it controls at the date of this report included: Special responsibilities Chairman of the Board Member of the Audit Committee Member of the Remuneration Committee Interest in shares and options Mr Wise has a beneﬁcial interest in 3,681,709, fully paid ordinary shares of the Company. Directors’ Report cont 26 Eduard Eshuys B.Sc, FAICD, FAusIMM Managing Director and Chief Executive Ofﬁcer Age 61 Mr Eshuys is a geologist with 37 years of experience in mineral exploration, development and operation of gold and nickel mines in Australia. He has a record of success 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 Special responsibilities Member of the Remuneration Committee Interest in shares and options Mr Eshuys has a beneﬁcial interest in 5,100,000 fully paid ordinary shares and holds 25,000,000 executive options to acquire fully paid ordinary shares as detailed later in this Report. Douglas W Bailey, BBus (Acc), CPA, ACIS Non Executive Director Age 53 Mr Bailey was the Chief Financial Ofﬁcer of Woodside Petroleum Ltd between 2002 and 2004 and previously, was an Executive Director of Ashton Mining Limited from 1990 to 2000, including the last 3 years as Chief Executive Ofﬁcer. He also was a Non-Executive Director of Aurora Gold Ltd for the period 1993-2000. Other current public company directorships Nil Former public company directorships in last 3 years Nil Special responsibilities Chairman of the Audit Committee – appointed 17 January 2006 Interest in shares and options Mr Bailey has a beneﬁcial interest in 100,000 fully paid ordinary shares of the Company. Richard Knight MSc(Eng), DIC, BSc(Eng), ARSM, FAICD, C.Eng Non Executive Director Age 65 Mr Knight is a mining engineer with some 40 years experience, both in Australia and internationally. He 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 Resources Australia Limited, an Executive Director of North Limited and Managing Director of Inco Australia Management Pty Ltd. Other current public company directorships Zinifex Limited Northern Orion Resources Inc Former public company directorships in last 3 years Portman Limited Asia Paciﬁc Resources Limited Special responsibilities Chairman of the Remuneration Committee Interest in shares and options Mr Knight has a beneﬁcial interest in 2,505,095 fully paid ordinary shares of the Company. Henderson (Hank) G Tuten, B.A. (Econ) Non Executive Director Age 59 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. He is a Partner in RCF Management LLC, the management company of RCF. He spent over 15 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. Other current public company directorships 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 and III LP of 183,662,230 shares. Mark K Wheatley B.E.((Chem) Hons 1), MBA Non Executive Director Age 45 Mr Wheatley has 26 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 served as Chairman and CEO of Southern Cross Resources Inc up until the completion of the merger with Aﬂease on 27 December 2005 and is now a Non Executive Director of the new merged company called SXR Uranium One Inc, a company which is listed on the Toronto Stock Exchange. Other current public company directorships SXR Uranium One Inc Former public company directorships in last 3 years Southern Cross Resource Inc 27 Special responsibilities Member of the Audit Committee (Chairman until 17 January 2006) Member of the Remuneration Committee Interest in shares and options Mr Wheatley holds 700,000 shares Mr Wheatley resigned as a Director on 2 August 2006. Company Secretary Ross Kennedy BComm, Grad.Dip – Company Secretarial Practice, ACA, FTIA, MAusIMM, FAICD, ACIS Chief Financial Ofﬁcer and Company Secretary Age 46 Mr Kennedy has more than 20 years’ experience as a public company secretary and has held a number of public company directorships in resources and technology companies. He has extensive experience in corporate management, including risk management, ethical standards, ﬁnance, accounting, commercial negotiations, legal contracts, statutory compliance and public reporting. takeovers, Directors’ Report cont 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 2006, and the numbers of meetings attended by each Director were: Full meetings of Directors Meetings of Audit Committee A 12 12 10 10 10 7 B 12 12 12 12 12 7 A 2 2 2 2 - 2 B 2 2 2 2 2 2 S J C Wise E Eshuys * H G Tuten M K Wheatley 28 R Knight D W Bailey 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 * = Managing Director and CEO The Remuneration Committee met informally on a number of occasions and the outcome of the Committee’s deliberations were considered and approved by the Board. Retirement, election and continuation in ofﬁce of Directors D W Bailey was appointed a Director on 17 January 2006. In accordance with the Constitution, he will retire as a Director at the annual general meeting and, being eligible, will offer himself for election. H G Tuten is the Director who will be retiring by rotation and, being eligible, will offer 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 Additional information The information provided under headings A - D includes remuneration disclosures that are required under Accounting Standard AASB 124 Related Party Disclosures. These disclosures have been transferred from the ﬁnancial report and have been audited. The disclosures under heading E are additional disclosures required by the Corporations Act 2001 and the Corporations Regulations 2001, which have not been audited. The Remuneration Committee, as at the date of this report comprises: R Knight, Chairman D W Bailey E Eshuys S J C Wise The duties of the Remuneration Committee include: to commission and consider independent advice on remuneration, and to propose appropriate remuneration policies for Board approval, to provide guidance to the CEO on the appointment of senior executives and their remuneration, to approve the overall percentage increase in ﬁxed annual remuneration for employees, to establish with the CEO the criteria to be applied as the basis for performance management within the Company, to monitor performance against those criteria, and to approve any incentive payments that my result, to review and develop, as required, plans for orderly management development and succession. A Principles used to determine the nature and amount of remuneration (audited) In consultation with external remuneration consultants, the Group has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation. The objective of the Group’s executive reward framework is to ensure that reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of operating and strategic objectives and the creation of value for shareholders, and conforms with market best practice for delivery of reward. The Board ensures that executive reward satisﬁes the following key criteria for good reward governance practices: reasonableness and competitiveness alignment with shareholders’ interests performance linkage / alignment of executive compensation transparency Alignment to shareholders’ interests is structured through: for achieving pre-determined performance reward targets attracting and retaining high calibre executives. Alignment to executives’ interests is structured through: rewarding capability and experience recognising contribution to growth in shareholder wealth providing a clear structure for earning rewards The framework provides a mix of ﬁxed and variable pay, and a blend of short and long term incentives. Non executive Directors fees 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 $750,000 per annum in aggregate (approved in 2005). 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, guided by the advice of independent remuneration consultants to ensure fees and payments are appropriate for the duties performed 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 present at any discussions relating to determination of his own remuneration. Non executive Directors do not receive share options. Non executive Directors may, commencing 1 October 2005, elect to receive all or part of their remuneration (with a 20% minimum) in St Barbara Limited shares, which are acquired on market pursuant to a Non Executive Director Share Plan. Such elections can be made, varied, or cancelled prior to the commencement of each calendar quarter. The current fee levels were last reviewed with effect from 1 July 2005. Directors’ remuneration is inclusive of committee fees. 29 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 Limited Employee Option Plan, and other remuneration such as superannuation. The combination of these comprise the executive’s total remuneration. Directors’ Report cont Base pay Executives are offered a competitive ﬁxed annual remuneration that comprises the ﬁxed component of pay and rewards. External remuneration consultants provide analysis and advice to ensure base pay is set to reﬂect the market for a comparable role. Fixed annual remuneration is structured as a total employment cost package which may be delivered as a combination of cash and prescribed beneﬁts as nominated by each executive. 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. 30 Beneﬁts Executives receive beneﬁts including living away from home allowances, and/or payment for certain professional memberships. Superannuation In addition to statutory superannuation contributions, employees may also elect to salary sacriﬁce. B Details of remuneration (audited) Amounts of remuneration Details of the remuneration of the Directors and the key management personnel (as deﬁned in AASB 124 Related Party Disclosures) of St Barbara Limited and the St Barbara Limited Group are set out in the following tables. The remuneration for Directors and executives is reviewed annually. Cash bonuses are directly related to performance. The Directors of St Barbara Limited at 30 June 2006 were: Colin Wise – Chairman Eduard Eshuys – Managing Director & CEO Doug Bailey – Non Executive Director Richard Knight – Non Executive Director Hank Tuten – Non Executive Director Mark Wheatley – Non Executive Director Short term incentives Key Performance Indicators (KPIs) require performance in improving operational effectiveness as well as other key, strategic ﬁnancial and non-ﬁnancial measures linked to the drivers of performance in current and future reporting periods. The key management personnel of the Group are those executives who have authority and responsibility for planning, directing and controlling the activities of the Company. This includes the ﬁve group executives who received the highest remuneration for the year ended 30 June 2006. The executives are: Ross Kennedy – CFO & Company Secretary Robert Klug – General Manager Business Development Martin Reed – General Manager Development Peter Thompson – General Manager Exploration George Viska – General Manager Commercial The Remuneration Committee is responsible for assessing the extent to which the KPIs have been met. To help make this assessment, the Committee receives a variety of detailed reports and presentations on every aspect of the performance of the business from management, and external remuneration consultants as required. Long term incentives Mr Eshuys has been issued Executive Options pursuant to terms approved by shareholders. All other employee options have been issued pursuant to the St Barbara Limited Employee Option Plan. Information on the St Barbara Limited Employee Option Plan is set out in Note 37 to the attached Financial Statements. Key management personnel of St Barbara Limited 2006 Name Short term beneﬁts Post employment beneﬁts Share- based payment Cash salary and fees $ Non- monetary beneﬁts $ Cash bonus $ Super- annuation $ Retire- ment beneﬁts $ Options $ Total $ Non-executive Directors S J C Wise (Chairman) (1) D W Bailey R Knight (1) H G Tuten M K Wheatley 110,092 - 64,220 - 64,220 Sub total non executive Directors 238,532 - - - - - - - - - - - - 9,908 29,880 5,780 - 5,780 51,348 Executive Directors E Eshuys Other key management personnel R Kennedy R Klug M Reed P Thompson G Viska Totals 274,413 177,000 50,000 100,587 184,183 141,552 353,342 189,440 190,630 40,000 19,240 - - 20,000 - - - - 20,800 16,577 12,740 - 20,560 10,303 1,572,092 237,000 90,040 212,115 - - - - - - - - - - - - - - - - - - - 120,000 29,880 70,000 31 - 70,000 289,880 415,201 1,017,201 - 260,000 102,265 256,557 - - 353,342 230,000 93,832 315,565 611,298 2,722,545 Notes 1 S J C Wise and R Knight elected in lieu of receiving Directors fees as salary to participate in the Non Executive Directors Share Plan for part of the ﬁnancial year. Directors’ Report cont Key management personnel of St Barbara Limited (continued) 2005 Name Short term employee beneﬁts Post employment beneﬁts Share- based payment Cash salary and fees $ Non- monetary beneﬁts $ Cash bonus $ Super- annuation $ Retire- ment beneﬁts $ Options $ Total $ 7,840 423 - 6,571 14,834 8,652 7,543 - - - - - - - - - - - 94,954 5,124 - 79,578 179,656 914,614(3) 1,489,444 245,616 - 290,875 Non executive Directors S J C Wise R Knight H G Tuten M K Wheatley 32 87,114 4,701 - 73,007 Sub total non executive Directors 164,822 - - - - - - - - - - Executive Directors E Eshuys S W Miller Other key management personnel R Kennedy M Reed P Thompson G Viska Totals 276,178(1) 250,000(2) 40,000 - 37,716 148,292(1) 227,788(5) 71,499 131,500 - - - - - 8,333 10,916 - - - - 6,885 - - - - - 46,276(4) - 47,949(4) - 213,817 227,788 126,333 131,500 1,057,795 250,000 48,333 48,830 245,616 1,008,839 2,659,413 Notes 1 Includes consulting fees paid prior to employment. 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. 4 Employee options issued on commencement of employment valued at grant date. 5 Executive engaged as a contractor during the year and in receipt of consulting fees. C Service agreements (audited) Remuneration and other terms of employment for the Managing Director and the other key management personnel 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 Limited 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 three months notice, except where noted below and subject to termination payments as detailed. E Eshuys – Managing Director & CEO Term of agreement – permanent employee commencing 20 July 2004. Base salary, inclusive of superannuation, for the year ended 30 June 2006 of $375,000, to be reviewed annually by the Remuneration Committee. The Company may terminate the contract by providing three months notice and at the end of the notice period paying Mr Eshuys nine months salary other than for gross misconduct. Mr Eshuys may terminate the contract by giving four months notice. R Kennedy CFO/Company Secretary Term of agreement – permanent employee commencement 29 September 2004. Base salary, inclusive of superannuation, for the year ending 30 June 2006 of $220,000, to be reviewed annually by the Remuneration Committee. Payment of a termination beneﬁt on early termination by the Company, other than for gross misconduct, more than 1 years service but not more than 3 years service equal to 4.5 months of base salary and superannuation, more than 3 years service equal to 6 months base salary and superannuation. R Klug, General Manager Business Development Term of agreement – permanent employee commencement 17 October 2005. Base salary, inclusive of superannuation, for the year ended 30 June 2006 of $218,000, to be reviewed annually by the Remuneration Committee. Payment of a termination beneﬁt on early termination by the Company, other than for gross misconduct, 4 weeks of base salary and superannuation, 33 M Reed, General Manager Development Term of agreement – contractor. Engaged as a contractor at $1,650 per day plus business expenses. Termination by one months notice by either party. P Thompson, General Manager Exploration Term of agreement – permanent employee commencement 24 January 2005. Base salary inclusive of superannuation for the year ending 30 June 2006 of $210,000, to be reviewed annually by the Remuneration Committee. Payment of a termination beneﬁt on early termination by the Company, other than for gross misconduct, more than 1 years service but not more than 3 years service equal to 2 weeks of base salary and superannuation, more than 3 years but not more than 5 years service equal to 3 weeks of base salary and superannuation, more than 5 years services 4 weeks of base salary and superannuation G Viska, General Manager Commercial Term of agreement – permanent employee commencement 1 August 2005 Base salary, inclusive of superannuation and living away from home allowance for the year ended 30 June 2006 of $240,000, to be reviewed annually by the Remuneration Committee. Payment of a termination beneﬁt on early termination by the Company, other than for gross misconduct, one month of base salary and superannuation plus an additional 1 week’s payment of base salary and superannuation after 2 years service. Directors’ Report cont D Share based compensation (audited) Options Options other than those issued to Mr Eshuys were granted under the St Barbara Limited Employee Option Plan which was approved by shareholders at the 2001 annual general meeting. All full time employees are eligible to participate in the plan. Options are granted under the plan for no consideration, and for a three or ﬁve year term. Options granted for three years vest ordinarily on granting. Options granted for ﬁve years vest 50% on the ﬁrst anniversary of employment and the remaining 50% on the second anniversary of employment. The terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting periods are as follows: 34 Mr Eshuys: 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 On grant 21 Jul 05 21 Jul 06 14 Sep 05 14 Sep 06 14 Sep 07 14 Sep 08 Vesting condition Nil Vested Vested Vested 1 1 1 1 = vesting condition is continued employment as Managing Director For statutory purposes, E Eshuys’ options are valued as at grant date being the date of shareholder approval in November 2004 and 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) The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables below. Fair values at grant date are independently determined using a Black Scholes option pricing model that takes into account the exercise price (ordinarily linked to the average closing market price for the 5 business days immediately preceding the grant date), the term of the option, the share price at grant date and expected price volatility of the underlying share, no expected dividend yield and the risk free interest rate for the term of the option. Options issued pursuant to the St Barbara Limited Employee Option Plan are granted for no monetary consideration. Name Grant date Expiry date Exercise price Value per option at grant date Number of options issued on grant date Date exercisable Eduard Eshuys 23 Dec 2004 Various Ross Kennedy 2 Dec 2004 2 Dec 2007 Robert Klug 12 Sep 2005 12 Sep 2010 Peter Thompson 16 Dec 2004 16 Dec 2007 George Viska 2 Aug 2005 2 Aug 2008 $0.0472 and $0.15 $0.08 $0.23 $0.08 $0.135 $0.046 35,000,000 Refer vesting conditions above $0.046 $0.171 $0.048 $0.094 1,000,000 Anytime from grant date 1,000,000 50% after 12 months, balance after 24 months 1,000,000 Anytime from grant date 1,000,000 Anytime from grant date Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share. 35 Details of options over ordinary shares in the Company provided as remuneration to each Director of St Barbara Limited and each of the key management personnel of the Group are set out below. Further information on the options is set out in Note 37 to the ﬁnancial statements. Name Number of options granted during the year Number of options vested during the year 2006 2005 2006 2005 Directors of St Barbara Limited E Eshuys Other key management personnel of the Group 35,000,000 10,000,000 5,000,000 R Kennedy R Klug P Thompson G Viska 1,000,000 1,000,000 2,000,000 1,000,000 1,000,000 37,000,000 1,000,000 11,000,000 1,000,000 - 1,000,000 7,000,000 Directors’ Report cont Shares provided on exercise of remuneration options Details of ordinary shares in the Company provided as a result of the exercise of remuneration options to each Director of St Barbara Limited and other key management personnel of the Group are set out below. Name Directors of St Barbara Limited E Eshuys E Eshuys E Eshuys E Eshuys 36 Other key management personnel of the Group P Thompson G Viska E Additional information – unaudited Further details relating to options are set out below: Date of exercise of options Number of ordinary shares issued on exercise of options during the year ($ per share paid) 2006 2005 22 Nov 2005 ($0.0472) 23 Nov 2005 ($0.1500) 4 May 2006 ($0.1500) 4 May 2006 ($0.0472) 22 Dec 2005 ($0.0800) 17 Nov 2005 ($0.1350) 2,100,000 1,300,000 3,700,000 2,900,000 10,000,000 1,000,000 1,000,000 2,000,000 - - - - - - - - Name E Eshuys R Kennedy R Klug M Reed P Thompson G Viska A Remuneration consisting of options B Value at grant date $ C Value at exercise date $ D Total of columns B C $ 0% 0% 52.6% 0% 0% 29.7% - - 171,028 - - - - - - - - - 171,028 - - 93,832 239,521 333,353 A = The percentage of the value of remuneration consisting of options, based on the value at grant date set out in column B for options that were granted in the current year. B = The value at grant date calculated in accordance with AASB 2 Share Based Payment of options granted during the year as part of remuneration for options that were granted in the current year. C = The value at exercise date of options that were granted as part of remuneration in the current year and that were exercised during the current year. No options that were granted as part of remuneration lapsed during the year. Managing Director & CEO KPIs In respect of the 2006 ﬁnancial year, E Eshuys achieved 88.5% of his short-term incentive target for the year, based on the Key Performance Indicators agreed with the Board 12 months ago. The key performance indicators relevant to determination of the bonus for the 2006 ﬁnancial year encompassed the following categories: - Corporate - Finance and administration - Exploration and development - Business development - Human resources / environment / community Loans to Directors and executives There were no loans to Directors or executives during the year. 37 Auditor Independence A copy of the auditor’s independence declaration required under sector 307C of the Corporations Act 2001 is set out on page 40. Indemniﬁcation and Insurance of Ofﬁcers The Company indemniﬁes all Directors of the Company named in this report and current and former executive ofﬁcers of the Company and its controlled entities against all liabilities to persons (other than the Company or a related body corporate) which arise out of the performance of their normal duties as Director or executive ofﬁcer unless the liability relates to conduct involving bad faith. The Company also has a policy to indemnify the Directors and executive ofﬁcers against all costs and expenses incurred in defending an action that falls within the scope of the indemnity and any resulting payments. During the year the Company has paid a premium in respect of Directors’ and executive ofﬁcers’ insurance. The contract contains a prohibition on disclosure of the amount of the premium and the nature of the liabilities under the policy. 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. Directors’ Report cont The Board of Directors has considered the position and, in accordance with the advice received from the Audit Committee is satisﬁed that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisﬁed that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: fees paid to external auditors for non-audit services for the 2005 year were considered to be commercial realistic; and 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. 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 ﬁrms: (a) Assurance Services Audit Services PricewaterhouseCoopers Australian ﬁrm: Audit and review of ﬁnancial reports and other audit work under the Corporations Act 2001(1) 38 (b) Taxation Services PricewaterhouseCoopers Australian ﬁrm: Tax compliance services, including review of Company income tax returns Consolidated 2005 $ 2006 $ 179,190 144,632 93,245 108,726 (1) included in audit fees paid to PwC Australia are amounts of $20,000 (2005: $5,000) for the consolidated entity and for the parent entity for the transition to Australian equivalents of International Financial Reporting Standards. Change of name At the Annual General Meeting held on 16 November 2005, the shareholders approved the change of Company name from St Barbara Mines Limited to St Barbara Limited. The effective date of this change was 20 December 2005. Rounding of Amounts St Barbara Limited is a Company of the kind referred to in Class Order 98/0100 approved by the Australian Securities and Investments Commission, relating to the “rounding up” of amounts in the Directors’ Report and Financial Report. All amounts have been rounded off to the nearest thousand dollars, unless otherwise noted. Subsequent Events Events subsequent to 30 June 2006 are set out in Error! Reference source not found. to the attached ﬁnancial statements. Auditor PricewaterhouseCoopers continues in ofﬁce in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of Directors. For and on behalf of the Board Dated at Perth this 8th day of September 2006 E Eshuys Managing Director & CEO 39 40 INCOME STATEMENTS For the year ended 30 June 2006 Consolidated Parent Entity 30 June 06 30 June 05 30 June 06 30 June 05 Notes $’000 $’000 $’000 $’000 Revenue Other income Changes in inventories of ﬁ nished goods and work in progress Raw materials and consumables used Contract mining, cartage, milling, maintenance, labour and consultants, equipment hire Exploration expenditure Write down of mining exploration tenements Employee beneﬁ ts expenses Share of net loss of associate accounted for using the equity method Depreciation and amortisation Provision for diminution in investments Finance costs Unrealised loss on gold derivatives Royalty Legal Insurance Other expenses Proﬁ t/(loss) before income tax Income tax beneﬁ t Proﬁ t/(loss) for the year 5 6 7 8 116,777 22,933 1,689 (19,405) (60,101) (16,831) - (15,981) - (9,540) - (960) (4,342) (3,881) (1,764) (1,247) (2,756) 4,591 1,428 6,019 46,950 19,893 (687) (6,640) (20,558) (6,107) (775) (7,920) (577) (8,093) (773) (524) - (1,265) (851) (839) (4,403) 6,831 - 6,831 116,777 22,933 1,689 (19,405) (60,101) (16,831) - (15,981) - (9,540) - (960) (4,342) (3,881) (1,764) (1,247) (2,575) 4,772 1,428 6,200 46,950 5,457 (687) (6,640) (20,558) (6,107) (775) (7,920) - (8,093) (773) (524) - (1,265) (851) (839) (3,598) (6,223) - (6,223) 41 Earnings per share for proﬁ t attributable to the ordinary equity holders of the Company: Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 36 36 0.95 0.92 1.06 1.06 The above Income Statements should be read in conjunction with the accompanying notes. BALANCE SHEETS As at 30 June 2006 Consolidated Parent Entity 30 June 06 30 June 05 30 June 06 30 June 05 Notes $’000 $’000 $’000 $’000 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Derivative ﬁ nancial assets Deferred mining costs Non-current assets classiﬁ ed as held for sale Total current assets Non-current assets 9 10 11 12 13 14 Restricted cash and cash equivalents 9(d) Receivables Available for sale ﬁ nancial assets 42 Property, plant and equipment Deferred mining costs Exploration and evaluation Mine properties Other ﬁ nancial assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Interest bearing liabilities Derivative ﬁ nancial liabilities Total current liabilities Non-current liabilities Payables Interest bearing liabilities Provisions Total non-current liabilities Total liabilities Net Assets Equity Contributed equity Reserves Accumulated losses Total equity 79,336 7,296 6,137 59 11,488 104,316 - 104,316 647 - 29,510 9,991 3,744 1,916 16,928 - 62,736 167,052 28,692 1,600 9,372 39,664 - 298 28,003 28,301 67,965 99,087 16,273 6,631 4,448 - - 27,352 21,072 48,424 11,801 - - 8,996 - 9,067 5,781 - 35,645 84,069 16,344 1,541 - 17,885 - 7,000 39,111 46,111 63,996 20,073 79,336 8,072 6,137 59 11,488 105,092 - 105,092 647 - 29,510 9,132 3,744 1,916 16,928 178 62,055 167,147 40,093 1,600 9,372 51,065 - 298 28,003 28,301 79,366 87,781 16,273 6,631 4,448 - - 27,352 21,072 48,424 11,801 595 - 8,137 9,067 5,781 179 35,560 83,984 16,344 1,541 - 17,885 11,402 7,000 39,111 57,513 75,398 8,586 10 15 17 13 18 18 19 20 21 12 22 23 24 25 26(a) 26(b) 205,815 5,365 135,053 3,107 205,815 5,365 135,053 3,107 (112,093) (118,087) (123,399) (129,574) 99,087 20,073 87,781 8,586 The above Balance Sheets should be read in conjunction with the accompanying notes. STATEMENTS OF CHANGES IN EQUITY For the year ended 30 June 2006 Consolidated Parent Entity 30 June 06 30 June 05 30 June 06 30 June 05 Notes $’000 $’000 $’000 $’000 Total equity at the beginning of the ﬁ nancial year 20,073 30,660 8,586 13,383 Adjustment on adoption of AASB 132 and 139, net of tax, to: Investment fair value reserve RCF Convertible liability reserve Restated total equity at the beginning of the ﬁ nancial year 40 40 887 407 - - 887 407 - - 21,367 30,660 9,880 13,383 Changes for fair value of available for sale of ﬁ nancial assets, net of tax Changes for fair value of cash ﬂ ow hedge, net of tax Net income recognised directly in equity 26(a) 26(a) Proﬁ t/(loss) for the year Total recognised income and expense for the year Transaction with equity holders in their capacity as equity holders: Decrease of minority interest on deconsolidation of subsidiary Contributions of equity Share buy backs Share swap buy back Employee share options (share based payment reserve) Total equity at the end of the year 31 25(b) 25(b) 25(b) 37(b) 5,907 (3,521) 2,386 6,019 8,405 - 72,327 (4,008) - 996 69,315 99,087 - - - 6,831 6,831 (18,844) 9,276 - (8,514) 664 (17,418) 20,073 5,907 (3,521) 2,386 6,200 8,586 - 72,327 (4,008) - - - (6,223) (6,223) 43 - 9,276 - - (8,514) 996 69,315 87,781 664 1,426 8,586 The above Statements of Changes of Equity should be read in conjunction with the accompanying notes. CASH FLOW STATEMENTS For the year ended 30 June 2006 Consolidated Parent Entity 30 June 06 30 June 05 30 June 06 30 June 05 Notes $’000 $’000 $’000 $’000 Cashﬂ ows From Operating Activities: Receipts from customers (inclusive of GST) 116,182 44,508 116,182 44,508 (123,697) (44,939) (123,516) (40,348) Payments to suppliers and employees (inclusive of GST) Interest received Interest paid Finance charges - hire purchase agreements Borrowing costs paid and gold lease fees Net cash (outﬂ ow) inﬂ ow from operating activities 34 44 Cashﬂ ows From Investing Activities: Proceeds from sale of property, plant and equipment Proceeds from sale of tenements Proceeds on sale of available for sale ﬁ nancial assets Payment for property, plant and equipment Payments for investments in available for sale ﬁ nancial assets Payments for development of mining properties Payments for investments in investments Payments for exploration interests Payments for acquisition of business combination, including associated expenses Reduction in cash on disposal of controlled entity Net funds from controlled entities 1,514 (409) (44) - (6,454) 16,783 225 5,984 (1,247) (200) (23,770) - (1,916) - - - Net cash (outﬂ ow) inﬂ ow from investing activities (4,140) Cashﬂ ows From Financing Activities: Net proceeds from issue of shares Proceeds from borrowings: premium funding/hire purchases Share buy backs Movement in restricted cash and cash equivalents Principal repayments under secured loans Principal repayments - hire purchase agreements - insurance premium funding Loans to subsidiaries Net cash inﬂ ow (outﬂ ow) from ﬁ nancing activities Net increase in cash & cash equivalents Cash and cash equivalents at the beginning of the year Cash & cash equivalents at the end of the year 65,660 2,605 (4,008) 11,648 - (365) (1,883) - 73,657 63,063 16,273 79,336 301 - (98) (239) (467) 4,706 42 9,862 (202) - - (458) - (2,874) (5,168) - 5,908 4,051 9,035 - (10,430) (3,500) (183) (990) - (2,017) 3,424 12,849 16,273 1,514 (409) (44) 0 (6,273) 16,783 225 5,984 (1,247) (200) (23,770) - (1,916) 301 - (98) (239) 4,124 5,733 42 9,862 (40) - - (458) - - - - (2,874) - 545 (4,140) 12,810 65,660 4,051 2,605 (4,008) 11,648 - (365) (1,883) (181) 73,476 63,063 16,273 79,336 8,853 - (8,940) (3,500) (183) (943) - (662) 16,272 1 16,273 The above Cash Flow Statements should be read in conjunction with the accompanying notes. NOTES TO THE FINANCIAL STATEMENTS Table of Contents Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 Note 8 Note 9 Summary of signiﬁ cant accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Financial risk management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Critical accounting estimates and judgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Segment information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Income tax beneﬁ t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Current assets - cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Note 10 Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Note 11 Current assets - inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Note 12 Derivative ﬁ nancial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Note 13 Deferred mining costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Note 14 Non-current assets classiﬁ ed as held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Note 15 Non current assets available for sale ﬁ nancial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Note 16 Financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Note 17 Non current assets - property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Note 18 Non-current assets - mine properties/exploration and evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Note 19 Non-current assets – other ﬁ nancial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Note 20 Current liabilities - trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Note 21 Current liabilities – interest bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Note 22 Non-current liabilities – payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 45 Note 23 Non current liabilities – interest bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Note 24 Non current liabilities – provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Note 25 Contributed equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Note 26 Reserves and retained proﬁ ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Note 27 Remuneration of auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Note 28 Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Note 29 Commitments for expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Note 30 Related party transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Note 31 Controlled entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Note 32 Interests in joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Note 33 Events occurring after the balance sheet date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Note 34 Reconciliation of proﬁ t/(loss) after income tax to net cash inﬂ ow from operating activities. . . . . . . . . . . . . . . . . . . . . . . . . 79 Note 35 Non cash investing and ﬁ nancing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Note 36 Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Note 37 Share based payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Note 38 Business combination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Note 39 Key management personnel disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Note 40 Explanation of transition to Australian equivalents IFRSs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 This ﬁ nancial report covers both St Barbara Limited (formerly St Barbara Mines Limited) as an individual entity and the consolidated entity consisting of St Barbara Limited and its subsidiaries. The ﬁ nancial report is presented in the Australian currency. St Barbara Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered ofﬁ ce and principal place of business is 1205 Hay Street, West Perth WA 6005. A description of the nature of the consolidated entity’s operations and its principal activities is included in the review of operations and activities in the directors’ report, which is not part of this ﬁ nancial report. The ﬁ nancial report was authorised for issue by the directors on 8 September 2006. The Company has the power to amend and reissue the ﬁ nancial report. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 1 - Summary of signiﬁ cant accounting policies The principal accounting policies adopted in the preparation of the ﬁ nancial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The ﬁ nancial report includes separate ﬁ nancial statements for St Barbara Limited as an individual entity and the consolidated entity consisting of St Barbara Limited and its subsidiaries. (a) Basis of preparation This general purpose ﬁ nancial report has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. Compliance with AIFRS Australian Accounting Standards include AIFRSs. Compliance with AIFRSs ensures that the consolidated ﬁ nancial statements and notes of St Barbara Limited comply with International Financial Reporting Standards (IFRS). The parent entity ﬁ nancial statements and notes also comply with IFRSs except that it has elected to apply the relief provided to parent entities in respect of certain disclosure requirements contained in AASB 132 Financial Instruments: Presentation and Disclosure. Application of AASB 1 First time Adoption of Australian Equivalents to International Financial Reporting Standards. These ﬁ nancial statements are the ﬁ rst St Barbara Limited ﬁ nancial statements to be prepared in accordance with AIFRS. AASB 1 First time Adoption of Australian Equivalents to International Financial Reporting Standards has been applied in preparing these ﬁ nancial statements. Financial statements of St Barbara Limited until 30 June 2005 had been prepared in accordance with previous Australian Generally Accepted Accounting Principles (AGAAP). AGAAP differs in certain respects from AIFRS. When preparing St Barbara Limited 2006 ﬁ nancial statements, management has amended certain accounting, valuation and consolidation methods applied in the AGAAP ﬁ nancial statements to comply with AIFRS. With the exception of ﬁ nancial instruments, the comparative ﬁ gures in respect of 2005 were restated to reﬂ ect these adjustments. The Group has taken the exemption available under AASB 1 to only apply AASB 132 Financial Instruments: Disclosure and Presentation and 46 AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005. Reconciliations and descriptions of the effect of transition from previous AGAAP to AIFRSs on the Group’s equity and its net income are given in Note 40. Early adoption of standards Recently issued or amended Australian Accounting Standards not yet effective and not adopted for the year ended 30 June 2006, are not expected to result in signiﬁ cant accounting policy changes or have a material ﬁ nancial impact on the Group or parent entity. Historical cost convention These ﬁ nancial statements have been prepared under the historical cost convention, as modiﬁ ed by the revaluation of available for sale ﬁ nancial assets, and ﬁ nancial assets and liabilities (including derivative instruments) at fair value through proﬁ t or loss. Critical accounting estimates The preparation of ﬁ nancial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signiﬁ cant to the ﬁ nancial statements, are disclosed in Note 3. (b) Principles of consolidation (i) Subsidiaries The consolidated ﬁ nancial statements incorporate the assets and liabilities of all subsidiaries of St Barbara Limited (‘’Company’’ or ‘’parent entity’’) as at 30 June 2006 and the results of all subsidiaries for the year then ended. St Barbara Limited and its subsidiaries together are referred to in this ﬁ nancial report as the Group or the consolidated entity. Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the ﬁ nancial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de consolidated from the date that control ceases. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 1 - Summary of signiﬁ cant accounting policies cont Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Investments in subsidiaries are accounted for at cost in the individual ﬁ nancial statements of St Barbara Limited. (ii) Joint ventures – jointly controlled assets Details of joint ventures are set out in Note 32. Where material, the proportionate interests in the assets, liabilities and expenses of a joint venture activity are incorporated in the ﬁ nancial statements under the appropriate headings. (c) Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments. (d) Foreign currency translation (i) Functional and presentation currency The consolidated ﬁ nancial statements are presented in Australian dollars, which is St Barbara Limited’s functional and presentation currency. 47 (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash ﬂ ow hedges and qualifying net investment hedges. Translation differences on non monetary ﬁ nancial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non monetary ﬁ nancial assets and liabilities such as equities held at fair value through proﬁ t or loss are recognised in proﬁ t or loss as part of the fair value gain or loss. Translation differences on non monetary ﬁ nancial assets such as equities classiﬁ ed as available for sale ﬁ nancial assets are included in the fair value reserve in equity. (e) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of amounts collected on behalf of third parties. Revenue is recognised for the major business activities as follows: (i) Product sales 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 consolidated entity; the quantity, quality and selling price of the product can be determined with reasonable accuracy; and the product has been despatched to the metals reﬁ nery and is no longer under the physical control of the consolidated entity or the metals reﬁ nery has formally acknowledged legal ownership of the product including all inherent risks. Gains and losses, including premiums paid or received, in respect of forward sales, options and other deferred delivery arrangements which hedge anticipated revenues from future production, are deferred and included in sales revenue when the hedged proceeds are received. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 1 - Summary of signiﬁ cant accounting policies cont (ii) Interest income Interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash ﬂ ow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. (iii) Dividends Dividends are recognised as revenue when the right to receive payment is established. (f) Exploration and evaluation/mine properties (i) Exploration and evaluation All exploration and evaluation expenditure incurred up to establishment of reserves is expensed as incurred. From the point in time when reserves are established, exploration and evaluation expenditure is capitalised and carried forward in the ﬁ nancial statements, in respect of areas of interest for which the rights of tenure are current and where such costs are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale. (ii) Mine properties Mine properties represent the acquisition cost and/or accumulated exploration, evaluation and development expenditure in respect of areas of interest in which mining has commenced. 48 When further development expenditure is incurred in respect of a mine property after the commencement of production, such expenditure is carried forward as part of the mine property only when substantial future economic beneﬁ ts are thereby established, otherwise such expenditure is classiﬁ ed as part of production. 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 mineable reserves. The calculation of amortisation takes into account future costs which will be incurred to develop all the proven and probable reserves. Pre-production credits, including the value of marketable metals extracted during mine development, are credited against costs incurred. Changes to mineable reserves are applied from the beginning of the report period. (g) Deferred mining Certain mining costs, principally those that relate to the stripping of waste and which relate to the future economically recoverable ore to be mined, have been capitalised and included in the balance sheet as deferred mining. These costs are deferred or taken to the production costs as the case may be, so that each ounce of ore produced bears the same average cost of waste removal per ounce of ore, as determined by the waste to ore ratio derived from the current mine plan. The waste to ore ratio and the remaining life of the mine are regularly assessed by the Directors and management to ensure the carrying value and the rate of deferral is appropriate. (h) Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the ﬁ nancial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting proﬁ t or taxable proﬁ t or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 1 - Summary of signiﬁ cant accounting policies cont Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. The Company and its wholly owned Australian entities have elected not to implement the tax consolidation legislation. (i) Leases Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classiﬁ ed as ﬁ nance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of ﬁ nance charges, are included in other long term payables. Each lease payment is allocated between the liability and ﬁ nance charges so as to achieve a constant rate on the ﬁ nance balance outstanding. The interest element of the ﬁ nance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under ﬁ nance leases is depreciated over the shorter of the asset’s useful life and the lease term. Leases in which a signiﬁ cant portion of the risks and rewards of ownership are retained by the lessor are classiﬁ ed as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight line basis over the period of the lease. 49 (j) Business combinations The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Identiﬁ able assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identiﬁ able net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identiﬁ cation and measurement of the net assets acquired. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent ﬁ nancier under comparable terms and conditions. (k) Impairment of assets Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identiﬁ able cash inﬂ ows which are largely independent of the cash inﬂ ows from other assets or groups of assets (cash-generating units). Non-ﬁ nancial assets that suffered an impairment are reviewed for possible impairment at each reporting date. (l) Cash and cash equivalents For cash ﬂ ow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with ﬁ nancial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insigniﬁ cant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 1 - Summary of signiﬁ cant accounting policies cont (m) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are usually due for settlement no more than 30 days from the date of recognition. Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash ﬂ ows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement. (n) Inventories Raw materials and stores, ore stock piles and gold stocks are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and ﬁ xed overhead expenditure relating to mining activities, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. (o) Non current assets (or disposal groups) held for sale Non current assets (or disposal groups) are classiﬁ ed as held for sale and stated at the lower of their carrying amount and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. 50 An impairment loss is recognised for any initial or subsequent write down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non current asset (or disposal group) is recognised at the date of derecognition. Non current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classiﬁ ed as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classiﬁ ed as held for sale continue to be recognised. Non current assets classiﬁ ed as held for sale and the assets of a disposal group classiﬁ ed as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classiﬁ ed as held for sale are presented separately from other liabilities in the balance sheet. (p) Investments and other ﬁ nancial assets From 1 July 2004 to 30 June 2005 The Group has taken the exemption available under AASB 1 to apply AASB 132 and AASB 139 only from 1 July 2005. The Group has applied previous AGAAP to the comparative information on ﬁ nancial instruments within the scope of AASB 132 and AASB 139. Under previous AGAAP, interests in listed and unlisted securities, other than subsidiaries and associates, were brought to account at cost and dividend income was recognised in the income statement when receivable. Transaction costs were excluded from the carrying amounts. Adjustments on transition date: 1 July 2005 The nature of the main adjustments to make this information comply with AASB 132 and AASB 139 are that, with the exception of held to maturity investments and loans and receivables which are measured at amortised cost (refer below), fair value is the measurement basis by reference to the closing market price for investments. Fair value is inclusive of transaction costs. Changes in fair value are either taken to the income statement or an equity reserve (refer below). At the date of transition (1 July 2005) changes to carrying amounts are taken to retained earnings or reserves. For further information concerning the adjustments on transition date reference should be made to the following notes: Available-for-sale ﬁ nancial assets – Note 15 Reserves and retained proﬁ ts – Note 26 Explanation of transition to AIFRS – [Note 40: section 5 of this note discloses the adjustment to each line item in the ﬁ nancial statements on transition date] NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 1 - Summary of signiﬁ cant accounting policies cont From 1 July 2005 The Group classiﬁ es its investments in the following categories: ﬁ nancial assets at fair value through proﬁ t or loss, loans and receivables, held to maturity investments, and available for sale ﬁ nancial assets. The classiﬁ cation depends on the purpose for which the investments were acquired. Management determines the classiﬁ cation of its investments at initial recognition and re evaluates this designation at each reporting date. (i) Financial assets at fair value through proﬁ t or loss Financial assets at fair value through proﬁ t or loss are ﬁ nancial assets held for trading which are acquired principally for the purpose of selling in the short term with the intention of making a proﬁ t. Derivatives are also categorised as held for trading unless they are designated as hedges. (ii) Loans and receivables Loans and receivables are non derivative ﬁ nancial assets with ﬁ xed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classiﬁ ed as non current assets. Loans and receivables are included in receivables in the balance sheet and are shown in Note 10. (iii) Available for sale ﬁ nancial assets Available for sale ﬁ nancial assets, comprising principally marketable equity securities, are non derivatives that are either designated in this category or not classiﬁ ed in any of the other categories. They are included in non current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. 51 Regular purchases and sales of investments are recognised on trade date to the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all ﬁ nancial assets not carried at fair value through proﬁ t or loss. Fair value is determined by reference to closing market prices as at the end of the ﬁ nancial period. Fair value for securities held in escrow is determined by discounting the closing market price. (q) Derivatives Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either; (1) hedges of the fair value of recognised assets or liabilities or a ﬁ rm commitment (fair value hedge); or (2) hedges of the cash ﬂ ows of recognised assets and liabilities and highly probable forecast transactions (cash ﬂ ow hedges). The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash ﬂ ows of hedged items. The fair values of various derivative ﬁ nancial instruments used for hedging purposes are disclosed in Note 12. Movements in the hedging reserve in shareholders’ equity are shown in Note 26. (i) Cash ﬂ ow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash ﬂ ow hedges is recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within other income or other expense. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 1 - Summary of signiﬁ cant accounting policies cont Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect proﬁ t or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the income statement within ‘ﬁ nance costs’. The gain or loss relating to the effective portion of forward foreign exchange contracts hedging export sales is recognised in the income statement within ‘sales’. However, when the forecast transaction that is hedged results in the recognition of a non ﬁ nancial asset (for example, inventory) or a non ﬁ nancial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability. When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. (ii) Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement and are included in other income or other expenses. (r) Fair value estimation The fair value of ﬁ nancial assets and ﬁ nancial liabilities must be estimated for recognition and measurement or for disclosure purposes. 52 The fair value of ﬁ nancial instruments traded in active markets (such as publicly traded derivatives, and trading and available for sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for ﬁ nancial assets held by the Group is the current bid price; the appropriate quoted market price for ﬁ nancial liabilities is the current ask price. The fair value of ﬁ nancial instruments that are not traded in an active market (for example, over the counter derivatives) is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of ﬁ nancial liabilities for disclosure purposes is estimated by discounting the future contractual cash ﬂ ows at the current market interest rate that is available to the Group for similar ﬁ nancial instruments. (s) Property, plant and equipment Buildings, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash ﬂ ow hedges of foreign currency purchases of property, plant and equipment. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic beneﬁ ts associated with the item will ﬂ ow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the ﬁ nancial period in which they are incurred. Depreciation of assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows: Buildings 10 years Plant and equipment 3 - 13 1/3 years Where the carrying value of an asset is less than its estimated residual value, no depreciation is charged. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 1 - Summary of signiﬁ cant accounting policies cont An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 1(k)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement. (t) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of ﬁ nancial year which are unpaid. The amounts are unsecured and are usually paid within 30 days from end of month of recognition. (u) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not incremental costs relating to the actual draw down of the facility, are recognised as prepayments and amortised on a straight line basis over the term of the facility. The fair value of the liability portion of convertible debt is determined using a market interest rate for an equivalent non convertible debt. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the debt. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of income tax effects. Borrowings are classiﬁ ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 53 12 months after the balance sheet date. (v) Borrowing costs Borrowing costs incurred in establishing ﬁ nance facilities are capitalised and amortised over the term of the ﬁ nance facility or ﬁ ve years; whichever is the shorter. (w) Provisions Provisions for legal claims and rehabilitation and restoration costs are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outﬂ ow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outﬂ ow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outﬂ ow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. The discount rate used to determine the present value reﬂ ects current market assessments of the time value of money and the risks speciﬁ c to the liability. The increase in the provision due to the passage of time is recognised as interest expense. (x) Employee beneﬁ ts (i) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non monetary beneﬁ ts, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. (ii) Long service leave The liability for long service leave is recognised in the provision for employee beneﬁ ts and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outﬂ ows. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 1 - Summary of signiﬁ cant accounting policies cont (iii) Share based payments Share based compensation beneﬁ ts are provided to employees via the St Barbara Limited Employees’ Option Plan and shareholder approved executive options. Information relating to these schemes is set out in Note 37. Shares options granted before 7 November 2002 and/or vested before 1 January 2005 No expense is recognised in respect of these options or shares issued to employees for nil consideration. The shares are recognised when the options are exercised and the proceeds received allocated to share capital. Shares options granted after 7 November 2002 and vested after 1 January 2005 The fair value of Executive Options and options granted under the St Barbara Limited Employees’ Option Plan are recognised as an employee beneﬁ t expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The fair value at grant date is independently determined using a Black Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact 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. Upon the exercise of options, the balance of the share based payments reserve relating to those options is transferred to share capital. 54 (iv) Retirement beneﬁ t obligations Contributions to deﬁ ned contribution funds are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. (v) Executive bonuses Senior executives may be eligible for annual bonuses subject to achievement of Key Performance Indicators, as recommended by the Remuneration Committee and approved by the Board of Directors from time to time. (y) Contributed equity Ordinary shares are classiﬁ ed as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration. If the entity reacquires its own equity instruments, eg as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the proﬁ t or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity. (z) Dividends Provision is made for the amount of any dividend declared on or before the end of the ﬁ nancial year but not distributed at balance date. (aa) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the proﬁ t attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the half year, adjusted for bonus elements in ordinary shares issued during the half year. (ii) Diluted earnings per share Diluted earnings per share adjusts the ﬁ gures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other ﬁ nancing 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. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 1 - Summary of signiﬁ cant accounting policies cont (ab) Restricted cash and cash equivalents Funds placed on deposit with ﬁ nancial institutions to secure performance bonds are classiﬁ ed as Non-Current Restricted Cash and Cash Equivalents. (ac) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash ﬂ ows are presented on a gross basis. The GST components of cash ﬂ ows arising from investing or ﬁ nancing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash ﬂ ow. (ad) Rehabilitation and mine closure costs The consolidated entity has obligations to dismantle, remove, restore and rehabilitate certain items of property, plant and equipment. Under AASB 116 Property, Plant and Equipment, the cost of an asset must include any estimated costs of dismantling and removing the asset and restoring the site on which it is located. The capitalised rehabilitation and mine closure costs are depreciated (along with the other costs included in the asset) over the asset’s useful life. The depreciation expense is included in the cost of sales goods. 55 AASB 137 Provisions, Contingent Liabilities and Contingent Assets requires a provision to be raised for the present value of the estimated cost of settling the rehabilitation and restoration obligations existing at balance date. The estimated costs are discounted using a pre-tax discount rate that reﬂ ects the time value of money. The discount rate must not reﬂ ect risks for which future cash ﬂ ow estimates have been adjusted. A discount rate of 7.0% has been used in calculating the rehabilitation and restoration provisions of the consolidated entity. As the value of the provision represents the discounted value of the present obligation to restore, dismantle and rehabilitate, the increase in the provision due to the passage of time is recognised as a borrowing cost. This borrowing cost is excluded from the cost of sales of goods. (ae) Financial instrument transaction costs The consolidated entity has taken exemption available under AASB 1 to apply AASB 132 and AASB 139 from 1 July 2005. The consolidated entity has applied previous AGAAP in the comparative information on ﬁ nancial instruments within the scope of AASB 132 and AASB 139. Under previous AGAAP, transaction costs were excluded from the amounts disclosed in the ﬁ nancial statements. Under AIFRS, such costs are included in the carrying amounts. At the date of transition to AASB 132 and AASB 139 the adjustment to carrying amounts for the consolidated entity was immaterial. (af) 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 ﬁ nancial report. Amounts in the ﬁ nancial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 2 - Financial risk management The Group’s activities expose it to a variety of ﬁ nancial risk, market risk (especially gold price and option volatility risk), credit risk, liquidity risk and cash ﬂ ow interest rate risk. The Group’s overall risk management program focuses on the unpredictability of commodity markets and seeks to minimise potential adverse effects on the ﬁ nancial performance of the Group. The Group uses derivative instruments as appropriate to hedge certain risk exposures. Risk management is carried out by management under policies approved by the Board of Directors. (a) Market risk (i) Commodity price risk The Group is exposed to Australian gold price risk. This arises through sales of the Group’s main commodity, gold. The commodity price risk may be hedged using derivative instruments, to secure cash ﬂ ows from mining operations. (ii) Equity securities price risk The Group is exposed to equity securities price risk. This arises from investments held by the Group and classiﬁ ed on the balance sheet either as available for sale or at fair value through proﬁ t or loss. (iii) Fair value interest rate risk Refer to (d) below. (b) Credit risk 56 The Group has no signiﬁ cant concentrations of credit risk with revenues primarily derived from gold sales direct to reﬁ ners or hedge counter parties. Derivative counterparties and cash transactions are limited to high credit quality ﬁ nancial institutions. (c) Liquidity risk Prudent liquidity risk management implies maintaining sufﬁ cient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. (d) Cash ﬂ ow and fair value interest rate risk The Group has signiﬁ cant interest bearing assets however, as these assets are short dated (90 days or less) the Group’s income and operating cash ﬂ ows are not materially exposed to changes in market interest rates. Note 3 - Critical Accounting Estimates And Judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (a) Critical accounting estimates and assumptions The consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by deﬁ nition, seldom equal the related actual results. The estimates and assumptions that have a signiﬁ cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁ nancial year are discussed below: (i) Impairment of assets The recoverable amount of each Cash Generating Unit (CGU) is determined as the higher of value-in-use and fair value less costs to sell, in accordance with accounting policy 1(k). These calculations require the use of estimates, which have been outlined in accounting policy 1(k). Given the nature of the consolidated entity’s mining activities, future changes in long term assumptions upon which these estimates are based, may give rise to material adjustment to the carrying value of the CGU. This could lead to the recognition of impairment losses in the future. The inter-relationships of the signiﬁ cant assumptions upon which estimated future cash ﬂ ows are based, however, are such that it is impracticable to disclose the extent of the possible effects of a change in a key assumption in isolation. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 3 - Critical Accounting Estimates And Judgements cont The key sources of estimation uncertainty are set out below: estimates of future Australian gold prices; future capital and operating costs for Southern Cross gold operations for which additional information will progressively become available in the next ﬁ nancial year; and extent of economically recoverable reserves for Southern Cross and Leonora gold operations. (ii) Mining and development costs Expenditure for the Gwalia Deeps project at Leonora which does not form part of the Cash Generating Units assessed for impairment has been carried forward in accordance with policy 1(f) on the basis of the existence of sufﬁ ciently economically recoverable reserves, or the Company’s ability through a disposition of its interests to recover its spent costs. (iii) Rehabilitation and mine closure provisions As set out in Note 1(ad), the value of these provisions represents the discounted value of the present obligation to restore, dismantle and rehabilitate certain items of property, plant and equipment. The discounted value reﬂ ects a combination of management’s assessment of the cost of performing the work required, the timing of the cash ﬂ ows and the discount rate of 7%. A change in any, or a combination, of the three key assumptions used to determine the provisions could have a material impact to the carrying value of the provision (refer to Note 24). (iv) Available for sale ﬁ nancial assets Non-derivative investments in marketable securities are valued using fair value accounting principles. The ultimate value achievable for those assets depends on the market value at the time of divestments less transaction costs. (v) Income tax The consolidated entity is subject to income taxes in Australia. Signiﬁ cant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate determination is not ﬁ nalised until statutory tax returns are lodged with the appropriate authorities. Where the ﬁ nal tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination is made which is usually the subsequent ﬁ nancial year. The key assumptions made regarding the income tax expense for the current year are the deductibility for tax purposes of all exploration expenditures and the level of capital gains on asset disposals that can be shielded by available capital losses. (b) Critical judgements in applying the entity’s accounting policies (i) Derivative ﬁ nancial instruments Gold hedge contracts with an aggregate mark-to-market value of negative $9,372,000 have been designated as effective hedges and accounted for in accordance with Note 1(q). Management’s assessment is that the derivatives have been highly effective in offsetting changes in the fair value of the future cash ﬂ ows against which they have been designated and, as such, movements in the intrinsic fair value (before tax) of $5,029,000 that would otherwise have been recorded directly in the Income Statement have been deferred in the Hedging Reserve. (ii) Recovery of deferred tax assets Net deferred tax assets of $19,634,000, including tax losses are not recognised. Management has assessed that it is not yet probable that these tax losses will be recoverable against future taxable proﬁ ts. Note 4 - Segment Information The consolidated entity operates predominantly in the minerals exploration and mining industry in Australia. The consolidated entity’s head ofﬁ ce is in Australia. 57 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 5 - Revenue Sales revenue Sale of gold Other revenue Interest Total revenue Note 6 - Other Income Proﬁ t on sale of assets Gain on subsidiary becoming an associate Other Note 7 - Expenses 58 Proﬁ t/(loss) before income tax includes the following speciﬁ c expenses: Depreciation Buildings Plant and equipment Total depreciation Amortisation Mine development costs Plant/equipment ﬁ nance leases Total amortisation Finance costs Interest and ﬁ nance charges paid/payable Finance costs expensed Rental expense relating to operating leases Lease payments Total rental expense relating to operating leases Note 8 - Income tax beneﬁ t (a) Income tax beneﬁ t Deferred income tax beneﬁ t Consolidated Parent entity 2006 $’000 2005 $’000 2006 $’000 115,263 115,263 46,553 46,553 115,263 115,263 1,514 1,514 397 397 1,514 1,514 2005 $’000 46,553 46,553 397 397 116,777 46,950 116,777 46,950 22,796 - 137 5,809 13,920 164 22,796 5,293 - 137 - 164 22,933 19,893 22,933 5,457 49 583 632 8,641 267 8,908 773 773 365 365 70 736 806 7,287 - 7,287 524 524 188 188 49 583 632 8,641 267 8,908 773 773 365 365 70 736 806 7,287 - 7,287 524 524 188 188 1,428 - 1,428 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 8 - Income tax beneﬁ t cont (b) Numerical reconciliation of income tax expense to prima facie tax payable Proﬁ t/(loss) before income tax beneﬁ t Tax at the Australian tax rate of 30% (2005 – 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income Legal and other capital expenditure Share based payments Information technology costs Share issue costs Sundry items (Prior year tax losses not recognised now recouped)/tax losses not recognised Income tax beneﬁ t Refer to Note 8(c) for details of the deferred tax beneﬁ t. (c) Deferred tax balance Deferred tax liabilities Investment fair value reserve (i) Depreciation Accrued income Mining properties – exploration Mining properties – development Prepayments Inventory Total Tax effect @ 30% Deferred tax assets Tax losses Unrealised Gold Hedging revaluation reserve (i) Unrealised loss on gold derivative Provisions and accruals Depreciation Total Tax effect @ 30% Net deferred tax asset (unbooked) Consolidated Parent entity 2006 $’000 4,591 1,377 106 299 176 (143) 33 (3,276) (1,428) 9,790 260 486 1,916 10,029 - - 22,481 6,744 49,074 5,029 4,342 29,481 - 87,926 26,378 19,634 2005 $’000 6,831 2,049 448 199 - - 310 (3,006) - - - 3 2006 $’000 4,772 1,432 106 299 176 (143) 33 (3,331) (1,428) 9,790 260 486 2005 $’000 (6,223) (1,867) 448 199 - - 235 985 - - - 3 9,066 1,916 9,066 - 10,029 1,864 2,637 13,570 4,071 - - 22,481 6,744 - 1,864 2,637 13,570 4,071 4,267 49,074 4,267 - - 5,948 9,201 19,416 5,825 1,754 5,029 4,342 29,481 - 87,926 26,378 19,634 - - 5,948 9,201 19,416 5,825 1,754 59 (i) These deferred tax balances have initially been recognised via equity. As the deferred tax asset recognised via equity is less than the deferred tax liability recognised via equity this has resulted in an income tax beneﬁ t for the year of $1,428,000 (2005: $nil). NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 9 - Current assets - Cash and cash equivalents Cash at bank and on hand Deposits at call Consolidated Parent entity 2006 $’000 75,361 3,975 79,336 2005 $’000 1,454 14,819 16,273 2006 $’000 75,361 3,975 79,336 2005 $’000 1,454 14,819 16,273 (a) Cash at bank and on hand Cash at bank at 30 June 2006 invested “at call” was earning interest of approximately 4.75% pa calculated daily. (b) Deposits The deposits at 30 June 2006 invested at call were earning 5.65% and deposits invested for 60 days maturing 6 August 2006 at an interest rate of 5.85% per annum. (c) Restricted cash (non-current) Term deposits 647 11,801 647 11,801 60 Restricted cash is cash placed on deposit to secure bank guarantees in respect of obligations entered into for ofﬁ ce rental obligations and environmental performance bonds issued in favour of the Western Australian Department of Industry and Resources. Note 10 - Trade and other receivables Current assets Trade receivables Provision for doubtful receivables Sub-total Subsidiary loans Less provision for non-recovery Other receivables Prepayments Total Non-current assets Subsidiary loans Less provision for non-recovery Total (a) Other receivables 3,057 2,561 3,057 - 3,057 (56) 2,505 - - - 2,624 1,615 7,296 - - - - - 2,262 1,864 6,631 - - - 3,057 1,896 (1,120) 776 2,624 1,615 8,072 - - 2,561 (56) 2,505 - - - 2,262 1,864 6,631 2,225 (1,630) 595 These amounts generally arise from transactions outside the usual operating activities of the Group. Collateral is not normally obtained. (b) Effective interest rates and credit risk Information concerning the effective interest rate and credit risk of both current and non current receivables is set out in Note 16. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 11 - Current assets - Inventories Consumables Less: provision for obsolescence Ore stockpiles Gold in circuit Note 12 - Derivative ﬁ nancial instruments Current assets Listed options at fair market value Current liabilities Commodity hedge contracts (a) Transition to AASB 132 and AASB 139 Consolidated Parent entity 2006 $’000 2,476 - 2,774 887 6,137 59 9,372 2005 $’000 2,635 (130) - 1,943 4,448 - - 2006 $’000 2,476 - 2,774 887 6,137 59 9,372 2005 $’000 2,635 (130) - 1943 4,448 - - The Group has taken the exemption available under AASB 1 First time Adoption of Australian Equivalents to International Financial Reporting Standards to apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005. At the date of transition to these standards of 1 July 2005 listed options held for trading had no signiﬁ cant value. (b) Instruments used by the Group The Group is party to derivative ﬁ nancial instruments in the normal course of business in order to hedge exposure to ﬂ uctuations in the Australian price of gold in accordance with the Group’s ﬁ nancial risk management policies (refer to Note 1(q)). (i) Gold commodity hedges On 6 January 2006, the Company entered into a collar hedge comprising 176,000 ounces bought put options at AUD700 per ounce ﬁ nanced by 176,000 sold call options exercisable at AUD770/oz. As at 30 June 2006, 126,000 ounces of committed and hedged ounces remained, comprising 115,000 ounces of bought put options and sold call options, and 11,000 ounces of gold forward sales at approximately $774 per ounce derived from the exercise of June 2006 sold call options, with a mark-to-market valuation as at that date of negative ($9,371,000) for both the Group and parent entity. Of this sum, $4,342,000 was recognised as an expense in the Income Statement, and $5,029,000 was recognised as a cash ﬂ ow hedge (Gold Hedge Reserve) reduction to equity. (c) Interest rate risk exposures Refer to Note 16 for the Group’s exposure to interest rate risk. (d) Commodity Price Risk The consolidated entity is exposed to Australian dollar gold commodity price risk in the normal course of its business. The consolidated entity managed this risk in the ﬁ nancial year by hedging approximately 60% to 70% of forecast gold production through to June 2007. The current hedge facility was entered into in January, 2006. It comprised the purchase of 176,000 put options at A$700 per ounce ﬁ nanced by selling 176,000 call options at A$770 per ounce. The following table shows the remainder of those hedged ounces undelivered (if called) as at 30th June, 2006. The committed total includes 11,000 ounces, resulting from the exercise of June 2006 sold call options, which will be delivered during July and August 2006. 61 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 12 - Derivative ﬁ nancial instruments cont In compliance with the Company’s accounting policy (Refer Note 1), the hedged commitment of 126,000 ounces has been valued at negative ($9,371,000) as at 30th June, 2006 of which $4,342,000 (time and volatility value movement) is charged to the Income Statement as an expense while the remaining $5,029,000 (market value movement) is debited to Gold Hedge Reserve. Hedged Ounces as at 30 June 2006 Expiry 27 Jul 06 29 Aug 06 27 Sep 06 27 Oct 06 28 Nov 06 22 Dec 06 29 Jan 07 26 Feb 07 28 Mar 07 26 Apr 07 29 May 07 27 Jun 07 31 Jul 07 Total ozs 62 Volume (ozs) Committed Sold Calls/ (ozs) Bought Puts if Called 10,000 12,000 10,000 10,000 12,000 12,000 14,000 12,000 8,000 5,000 5,000 5,000 - 11,000 10,000 12,000 10,000 10,000 12,000 12,000 14,000 12,000 8,000 5,000 5,000 5,000 115,000 126,000 Note 13 - Deferred mining costs Current Deferred mining costs Non-current Deferred mining costs Note 14 - Non-current assets classiﬁ ed as held for sale Current Investments - At cost - Provision for diminution Property, plant and equipment owned - At cost - At fair value - Accumulated depreciation Consolidated Parent entity 2006 $’000 11,488 3,744 - - - - - - - - 2005 $’000 - - 9,173 (3,069) 6,104 14,968 - - 14,968 21,072 2006 $’000 11,488 3,744 - - - - - - - - 2005 $’000 - - 9,173 (3,069) 6,104 14,968 - - 14,968 21,072 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 15 - Non current assets - available for sale ﬁ nancial assets At beginning of year Adjustment on adoption of AASB 132 and AASB 139 Additions Disposals Revaluation surplus transferred to equity At end of year Consolidated Parent entity 2006 $’000 2005 $’000 2006 $’000 2005 $’000 - 3,420 19,779 (3,420) 9,731 29,510 - - - - - - - 3,420 19,779 (3,420) 9,731 29,510 - - - - - - (a) Transition to AASB 132 and AASB 139 The Group has taken the exemption available under AASB 1 First time Adoption of Australian Equivalents to International Financial Reporting Standards to apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005. At the date of transition to these standards of 1 July 2005: equity securities with a carrying amount of $2,533,000 that were classiﬁ ed in the balance sheet under previous AGAAP as other ﬁ nancial assets were designated and re classiﬁ ed as available for sale ﬁ nancial assets; and an adjustment of $887,000 was recognised. This represented an initial gain on remeasurement to fair value of assets that under previous AGAAP had been measured at cost. For further information refer to section 5 of Note 40. 63 (b) Listed securities Listed securities include shares listed on Australian or recognised overseas exchanges. Investments in listed securities during the 2006 year largely arose by receiving shares as part consideration for the sale of strategic assets. These investments include: Shares from the sale of Meekatharra: Name: Mercator Gold plc Number: 11,017,000 Valuation @ 30 June 2006: 17,897,000 (including 8% discount to market) Shares from the sale of South Laverton: Name: Saracen Minerals Limited Number: 23,821,000 Valuation @ 30 June 2006: 9,643,000 (including 8% discount to market) NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 16 - Financial Instruments (a) Credit Risk Exposures The credit risk on ﬁ nancial 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 ﬁ xed rate assets and liabilities to maturity. Fixed interest maturing in: 30 June 2006 Financial assets Cash and cash equivalents Restricted cash and cash equivalents Receivables 64 Available for sale ﬁ nancial assets Weighted average interest rate Financial liabilities Trade and other creditors Lease liabilities Other loans Weighted average interest rate Net ﬁ nancial assets/(liabilities) Non- interest bearing $’000 - - 5,681 29,510 35,191 Total $’000 79,336 647 5,681 29,510 115,174 (28,692) (28,692) - - - - - - (298) - - - (644) (1,254) (298) (28,692) (30,590) Floating 1 year or Over 1 to interest less 5 years rate $’000 $’000 $’000 24,336 55,000 399 - - 55,399 5.85% - (346) (1,254) (1,600) 248 - - 24,584 5.42% - - - - - 24,584 7.97% 53,799 8.17% (298) - - 6,499 84,584 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Fixed interest maturing in: 30 June 2005 Note 16 - Financial Instruments cont Financial assets Cash and cash equivalents Restricted cash and cash equivalents Receivables Investments Weighted average interest rate Financial liabilities Trade and other creditors Other loans Weighted average interest rate Net ﬁ nancial assets/(liabilities) Floating 1 year or Over 1 to interest less 5 years rate $’000 $’000 $’000 16,273 11,801 - - 28,074 5.12% - - - 28,074 - - - - - - (1,541) (1,541) 7.00% (1,541) - - - - - - (7,000) (7,000) 8.00% Non- interest bearing $’000 - - 6,631 6,104 Total $’000 16,273 11,801 6,631 6,104 12,735 40,809 (16,344) (16,344) - (8,541) (16,344) (24,885) (7,000) (3,609) (15,924) 65 (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 ﬁ nancial assets and ﬁ nancial liabilities of the consolidated entity approximates their carrying value. The net fair value of other monetary ﬁ nancial assets and ﬁ nancial liabilities is based upon market prices. (ii) Off-Balance Sheet The consolidated entity has potential ﬁ nancial liabilities that may arise from certain contingencies disclosed in Note 28. 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. (iii) Fair values The carrying amounts and the net fair values of ﬁ nancial assets and liabilities at balance date are: On balance sheet ﬁ nancial instruments Financial assets - Cash and restricted cash - Receivables - Available for sale ﬁ nancial assets - Non-current assets classiﬁ ed as held for sale Financial liabilities - Payables - Other loans 2006 2005 Carrying Net fair Carrying Net fair amount $’000 value $’000 amount $’000 value $’000 79,983 79,983 5,681 5,681 29,510 29,510 - - 115,174 115,174 28,692 28,692 1,898 1,898 30,590 30,590 28,074 6,631 - 6,104 40,809 16,344 8,541 24,885 28,074 6,631 - 6,104 40,809 16,344 8,541 24,885 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 17 - Non current assets - property, plant and equipment Land Buildings Less accumulated depreciation Housing & site buildings Plant and equipment Less accumulated depreciation Total Reconciliation of the carrying amounts for each class of property, plant and equipment are set out below: Land Carrying amount at the beginning of year 66 Disposals Write off of assets Provision for diminution Carrying amount at the end of year Buildings Carrying amount at the beginning of year Disposals Depreciation Write off of assets Carrying amount at the end of year Housing & site buildings Carrying amount at the beginning of year Transferred from plant & equipment Carrying amount at the end of year Plant and equipment Carrying amount at the beginning of year Transfer from assets held for resale Additions Disposals Depreciation Transferred to inventory Transferred to housing & site buildings Carrying amount at the end of year (a) Non current assets pledged as security Consolidated Parent entity 2006 $’000 859 - - 1,500 8,215 2005 $’000 2006 $’000 2005 $’000 972 4,069 (3,964) - 63,167 - - - 1,500 8,215 113 4,069 (3,964) - 63,167 (583) (55,248) (583) (55,248) 9,991 8,996 9,132 8,137 972 (5) (108) - 859 105 (55) (49) (1) - - 1,500 1,500 1,244 (21) - (251) 972 196 (21) (70) - 105 - - - 7,919 3,507 818 (14,967) 1,247 20,200 - (583) (269) (1,500) 7,632 9,991 (85) (736) - - 7,919 8,996 113 (5) (108) - - 105 (55) (49) (1) - - 1,500 1,500 7,919 818 1,247 - (583) (269) (1,500) 7,632 9,132 135 (22) - - 113 196 (21) (70) - 105 - - - 3,490 (14,967) 20,200 (68) (736) - - 7,919 8,137 Refer to Note 23 for information on non current assets pledged as security by the parent entity and its controlled entities. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 18 - Non-current assets - mine properties/exploration and evaluation Mine properties - development Opening balance Direct expenditure Acquired tenements New rehabilitation obligations Amortisation for the year Disposals Closing balance Exploration and evaluation Opening balance Acquired tenements Expenditure for period Provision for diminution Deconsolidation adjustment Disposals Closing balance Consolidated Parent entity 2006 $’000 2005 $’000 2006 $’000 5,781 23,770 - 120 2005 $’000 3,696 - 13,068 - 5,781 23,770 - 120 (12,743) (7,287) (12,743) - (3,696) - 16,928 5,781 16,928 3,696 - 13,068 - (7,287) (3,696) 5,781 9,067 135 1,781 38,705 - - - - (775) (28,863) 9,067 135 1,781 38,705 - - - - (775) (28,863) (9,067) - (9,067) - 1,916 9,067 1,916 9,067 67 Note 19 - Non-current assets – other ﬁ nancial assets Other ﬁ nancial assets - - 178 179 Other ﬁ nancial assets represents the Parent entity’s investment in wholly owned subsidiaries. Refer Note 31 for further detail. Note 20 - Current liabilities - trade and other payables Trade payables Other payables 27,000 1,692 28,692 16,225 119 16,344 38,401 1,692 40,093 16,225 119 16,344 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 21 - Current liabilities – interest bearing liabilities Secured Lease liabilities (Note 29) Unsecured Insurance premium funding Total current borrowings Consolidated Parent entity 2006 $’000 2005 $’000 2006 $’000 2005 $’000 346 76 346 76 1,254 1,600 1,465 1,541 1,254 1,600 1,465 1,541 (a) Insurance premium funding The Company ﬁ nances its annual insurance premiums using unsecured premium funding. (b) Interest rate risk exposures Details of the Group’s exposure to interest rate changes on borrowings are set out in the Financial Instruments Note. Note 22 - Non-current liabilities – payables Loans from controlled entities Note 23 - Non current liabilities – interest bearing liabilities 68 Secured Lease liabilities (Note 29) Other loans (Note 23b) Total secured non current borrowings - 298 - 298 - - 7,000 7,000 - 11,402 298 - 298 - 7,000 7,000 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 23 - Non current liabilities – interest bearing liabilities cont Consolidated Parent entity (a) Total secured liabilities Carrying amounts of assets pledged as security for current and non current borrowings are: 2006 $’000 2005 $’000 2006 $’000 2005 $’000 Current Floating charge Cash and cash equivalents Receivables Inventories Non-current assets held for sale Derivative ﬁ nancial assets Deferred mining costs 79,336 16,273 79,336 16,273 7,296 6,137 - 59 11,488 6,631 4,448 21,072 - - 8,072 6,137 - 59 11,488 6,631 4,448 21,072 - - Total current assets pledged as security 104,316 48,424 105,092 48,424 Non current First mortgage Restricted cash Mine properties/exploration and evaluation Deferred mining costs Finance lease Plant and equipment Floating charge Receivables non current Available for sale ﬁ nancial assets Freehold land and buildings Plant and equipment 647 18,844 3,744 23,235 634 - 29,510 1,500 7,857 38,867 11,801 14,848 - 26,649 - - - 1,077 7,919 8,996 647 18,844 3,744 23,235 11,801 14,848 - 26,649 69 634 - - 29,688 1,500 6,998 38,186 595 179 218 7,919 8,911 Total non current assets pledged as security 58,992 35,645 62,055 35,560 Total assets pledged as security 167,052 84,069 167,147 83,984 As at 30 June 2006, assets pledged as security comprised secured lease liabilities amounting to $644,000 and an environmental performance bond facility amounting to $20,647,000. (b) Convertible notes On 29 March 2005, the Company drew down a $7,000,000 convertible note from a bridge loan facility provided by Resource Capital Funds III LP (“RCFIII”) to assist in ﬁ nancing 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 six monthly in arrears, and with the Company to absorb withholding taxes (currently 10% of gross interest). The $7,000,000 convertible loan was converted to equity on 27 March 2006, on conversion terms approved by shareholders at the Annual General Meeting held on 16 November 2005, being 100,000,000 shares at 7 cents each. (c) Set off of assets and liabilities The parent entity has established a legal right of set off with a ﬁ nancial institution over cash on deposit to secure the issue of environmental performance bonds issued in excess of $20,000,000. At 30 June 2006 restricted cash for this purpose amounted to $647,000 (2005: $11,801,000). NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 24 - Non current liabilities – provisions Provision for rehabilitation Employee beneﬁ ts - long service leave Consolidated Parent entity 2006 $’000 2005 $’000 2006 $’000 2005 $’000 27,951 39,111 27,951 39,111 52 - 52 - 28,003 39,111 28,003 39,111 Movements in provisions Movements in each class of provision during the ﬁ nancial year, other than employee beneﬁ ts, are set out below: Non-current Rehabilitation Balance at start of year Additional provision made on acquisition Additional provision for new activities Reduction related to disposal of tenements Unwinding of discount Payments made 70 Adjustment on re-estimation Balance at end of year Note 25 - Contributed equity (a) Share capital Ordinary shares Fully paid 39,111 - 120 (10,913) 784 (791) (360) 4,191 34,920 - - - (791) - 39,111 - 120 (10,913) 784 (360) 4,191 34,920 - - - - 27,951 39,111 27,951 39,111 Parent entity Parent entity 2006 Shares 2005 Shares 2006 $’000 2005 $’000 819,390,567 566,533,352 205,815 135,053 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 25 - Contributed equity cont (b) Movements in ordinary share capital: Date Details Notes shares Issue price $,000 Number of 1 July 2004 Opening balance Debt conversion Share issue Share placement Share issue costs Share placement Share issue Share buy-back 1 July 2005 Opening balance Plus Share issues (i) (ii) (iii) (iii) (iv) (v) (vi) 574,149,157 55,000,000 17,480,547 42,050,000 26,591,453 21,554,172 (170,291,977) 566,533,352 Exercise of options Placement of new shares Transaction costs arising on share issue Share buybacks Conversion of convertible note Transfer of Option Reserve on conversion of options (viii), (ix), (x) 63,662,275 (f) (f) (vii) 23(b) 99,000,000 (9,805,060) 100,000,000 819,390,567 Less Less Plus Plus 30 June 2006 $0.08 $0.05 $0.04 $0.05 $0.06 $0.05 $0.13 $0.60 $0.41 139,400 4,400 804 1,682 (33) 1,223 1,200 (13,623) 135,053 8,638 59,400 (2,378) (4,008) 6,667 2,443 205,815 71 (i) 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. (ii) Ocean accepted the issue of 17,480,547 fully paid ordinary shares in satisfaction of interest of $804,105 at 4.6¢ per share. (iii) Share issue costs of $33,000 were offset against issued capital as allowed by Australian Accounting Standards. (iv) 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. (v) In July 2004, RCFII advanced the Company $1,200,000 which was converted into 21,554,172 fully paid ordinary shares, following shareholder approval. (vi) 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 Limited share bought back. A total of 170,291,977 St Barbara Limited 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. (vii) On-market buy back of shares (viii) Shares issued on exercise of unlisted options held by Resource Capital Funds LP II (ix) Shares issued on exercise of unlisted options held by executives and employees (x) Shares issued on exercise of unlisted options held by SCSH Investments Pty Ltd (previously held by Resource Capital Funds LP II) (c) 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. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 25 - Contributed equity cont (d) Options Information relating to the St Barbara Employee Option Plan and Executive Options, including details of options issued, exercised and lapsed during the ﬁ nancial year and options outstanding at the end of the ﬁ nancial year, is set out in Note 37. (e) Share buy back The Company announced an on-market buy-back of shares on 26 July 2005. Pursuant to this buy-back, during the ﬁ nancial period, a total of 9,805,060 shares were bought back at a cost of $4,008,000. (f) Share placement On 18 May 2006 the Company placed 99,000,000 shares at 60 cents each to raise $59,400,000 before transaction costs of $2,378,000. Note 26 - Reserves and retained proﬁ ts (a) Reserves Reserves Option reserve Share based payment reserve Investment fair value reserve Convertible liability reserve 72 Gold hedge reserve Movements Option reserve Balance at start of year Options exercised Balance at end of year Share based payment reserve Balance at start of year Option expense Balance at end of year Investments fair value reserve Balance at start of year Adjustment on adoption of AASB 132 and AASB 139 Transfer on disposal Fair value adjustments Tax effect of fair value adjustment @ 30% Balance at end of year RCF Convertible liability reserve Balance at start of year Adjustment on adoption of AASB 132 and AASB 139 Balance at end of year Gold hedge reserve Balance at start of year Fair value adjustment Tax effect of fair value adjustment @ 30% Balance at end of year Consolidated Parent entity 2006 $’000 - 1,660 6,794 432 (3,521) 2005 $’000 2,443 664 - - - 2006 $’000 - 1,660 6,794 432 (3,521) 2005 $’000 2,443 664 - - - 5,365 3,107 5,365 3,107 2,443 (2,443) - 664 996 1,660 - 887 (887) 9,731 (2,937) 6,794 - 432 432 - (5,029) 1,508 (3,521) 1,959 484 2,443 - 664 664 - - - - - - - - - - - - 2,443 (2,443) - 664 996 1,660 - 887 (887) 9,731 (2,937) 6,794 - 432 432 - (5,029) 1,508 (3,521) 1,959 484 2,443 - 664 664 - - - - - - - - - - - - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 26 - Reserves and retained proﬁ ts cont (b) Accumulated losses Movements in accumulated losses were as follows: Balance at start of year Adjustment on adoption of AASB132 and AASB139 Proﬁ t/(loss) attributable to members of St Barbara Limited Share swap/buy back Balance at end of year (c) Investment fair value reserve Consolidated Parent entity 2006 $’000 2005 $’000 2006 $’000 2005 $’000 (118,087) (130,027) (129,574) (128,460) (25) 6,019 - - 6,831 5,109 (25) 6,200 - - (6,223) 5,109 (112,093) (118,087) (123,399) (129,574) Changes in the fair value and exchange differences arising on translation of investments, such as equities, classiﬁ ed as available for sale ﬁ nancial assets, are taken to the available for sale investments revaluation reserve, as described in Note 1(p). Amounts are recognised in proﬁ t and loss when the associated assets are sold or impaired. (d) Gold hedge reserve The hedging reserve is used to record gains or losses on a hedging instrument in a commodity hedge that are recognised directly in equity, as described in Note 1(q). Amounts are recognised in proﬁ t and loss when the associated hedged transaction affects proﬁ t and loss. (e) Share based payments reserve The share based payments reserve is used to recognise the fair value of options issued to executives and employees but not exercised. 73 Note 27 - Remuneration of auditors 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: Consolidated Parent entity 2006 $’000 2005 $’000 2006 $’000 2005 $’000 (a) Assurance services Audit services PricewaterhouseCoopers Australian ﬁ rm: Audit & review of ﬁ nancial reports & other audit work under the Corporations Act 2001 Total remuneration for audit services (b) Taxation Services PricewaterhouseCoopers Australian ﬁ rm: Tax compliance services, including review of Company income tax returns Total remuneration for taxation services 179 179 93 93 145 145 109 109 179 179 93 93 145 145 109 109 It is the Group’s policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties where PricewaterhouseCoopers’ expertise and experience with the Group are important. These assignments are principally tax advice. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 28 - Contingencies (a) Contingent liabilities A summary of current litigation is as follows: (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 approximately $6,230,000. 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 Limited 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 approximately $18,400,000. 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 $19,100,000. Approximately $8,400,000 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. 74 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 ﬁ nancial position when in fact such was not the case. The allegations are denied by the Company, the claim is being robustly defended and the Company is preparing for the matter to go to trial. The Company 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 listed for trial between 6 November and 17 November 2006 inclusive. None of the current Directors of the Company were directors of the Company at the time that the above share transactions took place in 1997. (ii) Kingstream On 2 July 2002, Kingstream Steel Limited (Subject to Deed of Company Arrangement) (“Kingstream”) commenced proceedings in the Supreme Court of Western Australia against the Company and its 100% owned subsidiary, Zygot Ltd (“Zygot”). 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, namely Bryan Kevin Hughes and Vincent Anthony Smith. Kingstream’s claim against the Company and Zygot arises from the withdrawal by Zygot of three mining lease applications (“MLAs”). 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 rectiﬁ cation of the supplementary Deed to include the MLAs on the basis that this was the common intention of the parties. The Company denies that such was the common intention and further denies that rectiﬁ cation is available. Kingstream is also seeking damages from the Company and Zygot for breach of contract and breach of duty of care. In early 2006, Kingstream provided its quantiﬁ cation of the damages that it claims. Such quantiﬁ cation is based on two reports by Snowden Mining Industry Consultants Pty Ltd. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 28 - Contingencies cont Kingstream’s particulars of alleged loss include a claim for the value of the MLAs at the time of withdrawal ($500,000), alternatively the value of the lost opportunity of acquiring the MLAs ($13,070,000), and alternatively the diminution in value of the other tenements acquired by Kingstream under the Option Deed ($14,200,000). The proceedings are still at the interlocutory stage and have been, and will continue to be, defended. None of the current Directors of the Company were directors at the time the relevant activities took place. Note 29 - Commitments for Expenditure Exploration In order to maintain rights of tenure to mining tenements, the consolidated entity is required to outlay for tenement rentals and minimum exploration expenditure requirements of the Western Australian Department of Industry and Resources. This requirement will continue for future years with the amount dependent upon tenement holdings Finance Lease Commitments Analysis of ﬁ nance lease (hire purchase) commitments: - Payable not later than one year (refer Note 21) - Payable later than one year, not later than ﬁ ve years (refer Note 23) 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. Analysis of non-cancellable operating lease commitments Payable not later than one year Payable later than one year, not later than ﬁ ve years Consolidated Parent entity 2006 $’000 2005 $’000 2006 $’000 2005 $’000 9,111 13,746 9,111 13,746 346 298 644 358 1,475 1,833 76 - 76 154 - 154 346 298 644 358 1,475 1,833 75 76 - 76 154 - 154 The non-cancellable operating lease commitments are the net rental payments associated with rental properties Note 30 - Related party transactions a) Directors and speciﬁ ed executives Disclosures relating to Directors and speciﬁ ed executives are set out in Note 39. (b) Transactions with entities in the wholly-owned group St Barbara Limited is the parent entity in the wholly-owned group comprising the Company and its wholly-owned subsidiaries. During the year the Company advanced an additional sum of $181,000 (2005: $nil) to entities in the wholly owned group. Total receivables from subsidiaries amounted to $776,000 (2005: $595,000). 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. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 30 - Related party transactions cont (c) Transactions with non-wholly owned entities in the consolidated entity The Company provided funding to NuStar, a controlled entity but not wholly Company 2006 $’000 2005 $’000 owned, for part of the 2005 year as follows: Balance at beginning of ﬁ nancial year Net funding advanced for exploration and all other activities on normal commercial terms Administration service fee Repayment - - - - - (216) (119) 120 215 - The loan was repaid in full during the 2005 year. NuStar is no longer a controlled entity, and no further loans will be provided. (d) Amounts receivable from and payable to entities in the wholly-owned group and controlled entities Aggregate amounts receivable at balance date from: 76 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: Company 2006 $’000 2005 $’000 1,896 2,225 (1,120) (1,630) 776 595 - - Entities in the wholly-owned group 11,401 11,401 (e) Guarantees Subsidiary companies have guaranteed the parent entity’s obligations under the Environmental Bond Facility provided by Commonwealth Bank of Australia. (f) Terms and conditions Outstanding balances are unsecured, interest free and are repayable in cash. (g) Amounts receivable from Director related entities At 30 June 2006, there were no amounts receivable from Director related entities. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 30 - Related party transactions cont (h) 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 Parent Entity 2006 $ - 2005 $ 2,030 698,380 262,323 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 ﬁ rm, 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 Payments to Resource Capital Fund III LP in respect of ﬁ nance facilities received, comprising a $7M Convertible Note and a $21M bank guarantee facility to secure Environmental performance bonds for the acquisition of the gold division of Sons of Gwalia Limited. H G Tuten is a Partner of RCF Management LLC the management company of Resource Capital Fund III LP. Note 31 - Controlled entities The consolidated entity consists of the Company and its wholly-owned controlled entities as follows. 77 Equity holding Cost of Company’s investment June 2006 June 2005 June 2006 June 2005 Name of entity Class of Shares 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 Vaﬁ tu Pty Ltd Zygot Pty Ltd Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary % 100 100 100 100 100 100 100 100 100 100 100 100 Each company in the consolidated entity was incorporated in Australia. % 100 100 100 100 100 100 100 100 100 100 100 100 $’000 178 $’000 179 - - - - - - - - - - - - - - - - - - - - - - 178 179 The Company ceased consolidating Nustar on 30 September 2004 when it reduced its equity position to 44.7%. This equity position was progressively reduced through the ﬁ nancial year ended 30 June 2005 to 6.4%. The remaining investment was disposed of in the current ﬁ nancial year. Refer to Note 40 for further details in respect of the gain on deconsolidation for the year ended 30 June 2005. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 32 - Interests in joint ventures (a) Jointly controlled assets St Barbara Limited joint venture interests as at 30 June 2006: Joint venture Current SBM equity number Joint venturers WESTERN AUSTRALIA Leonora Region Mount Newman - Victory Sandy Soak Melita Weebo McEast/Pipeline Southern Cross Region Cornishman Exploration Cornishman Mining Silver Phantom South Rankin Copperhead 78 Cheritons Find Southern Cross Kalgoorlie Region New Mexico NORTHERN TERRITORY Alcoota SOUTH AUSTRALIA Coober Pedy 87% 91% 60% 20% 80% 51% 51% 70% 75% 51% 90% Astro Diamond Mines N.L. Hunter Resources Pty Ltd Dalrymple Resources N.L. Plutonic Operations Limited Cheperon Gold Partnership Troy Resources NL Troy Resources NL Bellriver Pty Ltd Comet Resources Limited Troy Resources NL Audax Resources NL earning 60% Troy Resources NL, Aminta Pty Ltd 40% Tasman Exploration Pty Ltd farming out 100% Tanami Exploration NL 12.60% Newmont Exploration Pty Ltd, Sabatica Pty Ltd As at 30 June 2006, there were no joint venture assets recorded in the balance sheet (2005: $nil). Note 33 - Events occurring after the balance sheet date On 25 July 2006, the Company announced Probable Reserves for Gwalia Deeps at Leonora of 3,100,000 tonnes at 9.0g/t of gold for 885,000 ounces. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 34 - Reconciliation of proﬁ t/(loss) after income tax to Notes net cash inﬂ ow from operating activities Proﬁ t/(loss) for the year Depreciation and amortisation Proﬁ t on sale of assets Consolidated Parent entity 2006 $’000 6,019 9,540 2005 $’000 6,831 8,093 2006 $’000 6,200 9,540 2005 $’000 (6,223) 8,093 (22,796) (5,809) (22,796) (5,293) Tax impact of deferred tax balances relating to reserves (1,428) Share of net loss of associate Provision for diminution in investments and assets Gain on subsidiary becoming an associate Provision for rehabilitation Provision for doubtful debts Unrealised gain on options revaluation Unrealised loss on derivative ﬁ nancial instruments Write down of exploration tenements Write off of assets Share-based payments Change in operating assets and liabilities: Increase in receivables (Increase)/decrease in inventories (Increase) in other assets Increase in trade creditors and payables (Decrease)/increase in employee entitlements and provisions Increase in other liabilities Net (outﬂ ow)/inﬂ ow cash from operating activities - - - - - (59) 4,342 - 109 996 - 577 1,023 (13,920) (34) 78 - - 775 - 664 (1,428) - - - - - (59) 4,342 - 109 996 - - 773 - (34) 78 - - 775 - 664 79 (665) (3,100) (665) (4,450) (1,689) (3,283) 12,348 1,059 (1,689) (850) (3,283) - 12,348 1,059 (881) - (11,108) 4,146 (11,108) 9,563 1,220 (6,454) - 1,220 - (467) (6,273) 4,124 Note 35 - Non cash investing and ﬁ nancing activities Acquisition of vehicles and equipment through hire purchase or ﬁ nance leases Conversion of debt to equity Share swap buy-back Sale of assets for part equity consideration and assumption of liabilities 644 6,667 - 28,700 - 5,600 13,623 644 6,667 - - 28,700 - 5,600 13,623 - 1 2 3 Notes 1. Conversion of debt to equity On 27 March 2006, Resource Capital Fund III LP, in accordance with terms approved by shareholders, converted a $7,000,000 convertible note into 100,000,000 fully paid ordinary shares. On 15 July 2004, Ocean Resources Capital Holdings plc converted a $4,400,000 convertible note into 55,000,000 fully paid ordinary shares. On 1 December 2004, Resource Capital Fund II LP converted an unsecured advance of $1,200,000 into 21,554,172 fully paid ordinary shares. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 35 - Non cash investing and ﬁ nancing activities cont 2. Share swap buy-back In December 2004 to January 2005 the Company conducted a share swap buy-back whereby 170,291, 971 Company shares were bought back in exchange for 212,864,971 NuStar shares. As a consequence, the excess of market value over book value of NuStar shares of $5,109,000 was applied to accumulated losses. 3. Sale of assets for part equity consideration On 14 October 2005, the Company announced the sale of its South Laverton project to Saracen Mineral Holdings Limited (Saracen) including non-cash consideration of shares in Saracen with an issue value of $3,500,000 and assumption of environmental performance bond liabilities of $9,200,000. On 28 October 2005, the Company announced the sale of its Meekatharra project to Mercator Gold plc (Mercator) including non-cash consideration of shares in Mercator with an issue value of $13,000,000 and assumption of environmental performance bond liabilities of $3,000,000. Note 36 - Earnings per share (a) Basic earnings per share Proﬁ t attributable to the ordinary equity holders of the Company (b) Diluted earnings per share 80 Proﬁ t attributable to the ordinary equity holders of the Company (c) Reconciliations of earnings used in calculating earnings per share Basic and diluted earnings per share Proﬁ t for the year (d) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in Consolidated 2006 Cents 0.95 0.92 Consolidated 2006 $’000 2005 Cents 1.06 1.06 2005 $’000 6,019 6,831 Consolidated 2006 Number 2005 Number calculating basic earnings per share 633,472,702 644,018,641 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 652,061,008 644,018,641 (e) Information concerning the classiﬁ cation of securities (i) Options Executive Options and Options granted to employees under the St Barbara Limited Employee Option Plan are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in Note 37. Note 37 - Share based payments (a) Employee Option Plan The establishment of the St Barbara Limited Employee Option Plan was approved by shareholders at the 2001 annual general meeting. Options are granted under the plan for no consideration. Options are granted for a three to ﬁ ve year period, and ordinarily 50% of each new tranche vests and is exercisable after each of the ﬁ rst two anniversaries of the date of grant. Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 37 - Share based payments cont Set out below are summaries of options granted to employees under the St Barbara Limited Employee Option Plan and Executive Options approved by shareholders: Consolidated and parent entity - 2006 Grant Date Expiry Date Exercise Price 26-Apr-02 26-Apr-02 26-Apr-02 26-Apr-02 17-Jan-03 2-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 2-Aug-05 2-Aug-05 2-Aug-05 2-Aug-05 17-Jan-06 12-Sep-05 30-Sep-05 30-Sep-05 30-Sep-05 30-Sep-05 30-Sep-05 30-Sep-05 30-Sep-05 30-Sep-05 30-Sep-05 26-Apr-07 26-Apr-07 26-Apr-07 26-Apr-07 17-Jan-08 2-Dec-07 23-Dec-09 23-Dec-09 23-Dec-09 23-Dec-10 23-Dec-11 2-Aug-08 2-Aug-08 2-Aug-08 2-Aug-08 17-Jan-09 12-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 $0.3500 $0.3500 $0.3500 $0.3500 $0.3500 $0.0800 $0.0472 $0.0472 $0.1500 $0.1500 $0.1500 $0.1350 $0.1350 $0.1350 $0.1350 $0.4900 $0.2300 $0.3300 $0.3300 $0.3300 $0.3300 $0.3300 $0.3300 $0.3300 $0.3300 $0.3300 Balance at start Granted during Exercised Expired during Balance at end Exercisable at of the year the year during the year the year of the year end of the year Number Number Number Number 75,000 750,000 100,000 75,000 75,000 1,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 25,000 25,000 25,000 1,000,000 25,000 25,000 25,000 1,000,000 1,000,000 1,000,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 250,000 500,000 Number 75,000 750,000 100,000 75,000 75,000 1,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 Number 75,000 750,000 100,000 75,000 75,000 1,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 250,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 250,000 500,000 81 Total 27,075,000 7,325,000 1,075,000 Weighted average exercise price 0.12 0.31 0.14 - 0.00 33,325,000 33,325,000 0.16 0.16 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 37 - Share based payments cont Consolidated and parent entity - 2005 Grant Date Expiry Date Exercise Price Balance at start of the year Number Granted during the year Number Exercised Expired during Balance at end Exercisable at during the year Number the year Number of the year end of the year Number Number 82 26-Apr-02 26-Apr-02 26-Apr-02 26-Apr-02 26-Apr-02 26-Apr-02 26-Apr-02 26-Apr-02 26-Apr-02 26-Apr-02 15-Jul-02 15-Jul-02 15-Jul-02 6-Aug-02 6-Aug-02 6-Aug-02 13-Sep-02 13-Sep-02 13-Sep-02 15-Oct-02 15-Oct-02 15-Oct-02 7-Jan-03 7-Jan-03 7-Jan-03 7-Jan-03 31-Aug-05 31-Aug-05 31-Aug-05 31-Aug-05 31-Oct-05 26-Apr-07 26-Apr-07 26-Apr-07 26-Apr-07 26-Apr-07 15-Jul-05 15-Jul-05 15-Jul-05 13-Aug-05 13-Aug-05 13-Aug-05 6-Sep-05 6-Sep-05 6-Sep-05 15-Oct-05 15-Oct-05 15-Oct-05 7-Jul-06 7-Jul-06 7-Jul-06 7-Jul-06 17-Jan-03 17-Jan-08 7-Jul-03 7-Jul-03 7-Jul-03 7-Jul-03 28-Nov-03 28-Nov-03 28-Nov-03 28-Nov-03 2-Dec-04 16-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 28-Jan-05 7-Jan-07 7-Jan-07 7-Jan-07 7-Jan-07 24-May-08 24-May-08 24-May-08 24-May-08 2-Dec-07 16-Dec-07 23-Dec-08 23-Dec-09 23-Dec-09 23-Dec-09 23-Dec-09 23-Dec-10 23-Dec-11 31-Dec-05 Total Weighted average exercise price $0.3500 $0.3500 $0.3500 $0.3500 $0.3500 $0.3500 $0.3500 $0.3500 $0.3500 $0.3500 $0.2086 $0.2124 $0.2125 $0.2086 $0.2124 $0.2125 $0.2086 $0.2124 $0.2125 $0.2086 $0.2124 $0.2125 $0.1138 $0.2086 $0.2124 $0.2125 $0.3500 $0.1138 $0.2086 $0.2124 $0.2125 $0.1138 $0.2086 $0.2124 $0.2125 $0.0800 $0.0800 $0.1500 $0.0472 $0.0472 $0.0472 $0.1500 $0.1500 $0.1500 $0.1100 100,000 400,000 75,000 100,000 500,000 100,000 75,000 750,000 100,000 75,000 49,252 241,854 483,482 50,894 249,917 499,597 50,894 249,917 499,597 49,252 241,854 483,482 3,177,890 151,040 741,686 1,482,677 75,000 17,430,243 594,308 2,918,376 5,834,004 14,252,357 485,953 2,386,296 257,857 1,000,000 1,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 1,000,000 93,212,679 0.14 100,000 400,000 75,000 100,000 500,000 49,252 241,854 483,482 50,894 249,917 499,597 50,894 249,917 499,597 100,000 49,252 241,854 483,482 3,177,890 151,040 741,686 1,482,677 17,430,243 594,308 2,918,376 5,834,004 14,252,357 485,953 2,386,296 257,857 1,000,000 5,000,000 5,000,000 1,000,000 75,000 750,000 100,000 75,000 75,000 750,000 100,000 75,000 75,000 75,000 1,000,000 1,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 - 0.00 62,587,275 3,550,404 27,075,000 27,075,000 0.13 0.26 0.12 0.12 No options were forfeited during the periods covered by the above tables. The weighted average remaining contractual life of share options outstanding at the end of the period was 3.9 years (2005 – 4.9 years). NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 37 - Share based payments cont Fair value of options granted The assessed fair value at grant date of options granted during the year ended 30 June 2006 was calculated for each issue of options. The fair value at grant date is independently determined using a Black Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The model inputs for options granted during the year ended 30 June 2006 included: (a) Options are granted for no consideration, in certain cases, options vested on the grant date, but generally 50% of each tranche vests after each of the ﬁ rst two anniversaries of the date of grant. (b) Exercise price: ordinarily the closing market price on the grant date. (c) Grant date: varied with each issue. (d) Expiry date: normally 5 years from grant date. (e) Share price at grant date: varied with each issue and ranged from $0.14 per share to $0.49. (f) Price volatility of the Company’s shares as at the grant date: varied with each issue, and ranged from 92.6% to 105.5%. (g) Risk-free interest rate at grant date: based on bond rates for a similar term as for the options. (b) Expenses arising from share based payment transactions Total expenses arising from share based payment transactions recognised during the period as part of employee beneﬁ t expense were as follows: Consolidated Parent entity 2006 $’000 2005 $’000 2006 $’000 2005 $’000 83 Options issued under employee option plan 996 664 996 664 Note 38 - 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 identiﬁ able 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 identiﬁ able assets acquired $’000 19,762 4,730 285 13,068 (34,920) 2,925 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 39 - Key management personnel disclosures (a) Directors The following persons were Directors of St Barbara Limited during the ﬁ nancial year: Non-executive Chairman S J C Wise Managing Director & CEO E Eshuys Non-executive Directors D W Bailey (appointed 17 January 2006) R Knight H G Tuten M K Wheatley Mr Wheatley resigned from the position of non-executive Director on 2 August 2006. (b) Other key management personnel disclosures The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the ﬁ nancial year: Name Position Ross Kennedy Chief Financial Ofﬁ cer/Company Secretary 84 Robert Klug General Manager, Business Development (appointed 17 October 2005) Martin Reed General Manager, Development Peter Thompson General Manager, Exploration George Viska Acting Chief Operations Ofﬁ cer, General Manager, Commercial (c) Key Management Personnel Compensation Short term employee beneﬁ ts Post employment beneﬁ ts Retirement beneﬁ ts Share-based payments Consolidated Parent entity 2006 2005 2006 2005 1,899,132 1,356,128 1,899,132 1,356,128 212,115 48,830 212,115 48,830 - 245,616 - 245,616 611,298 1,008,839 611,298 1,008,839 2,722,545 2,659,413 2,722,545 2,659,413 The Company has taken advantage of the relief provided by ASIC Class Order 06/50 and has transferred the detailed remuneration disclosures to the Directors’ Report. The relevant information can be found on pages 28 to 37. (d) Equity Instrument Disclosures Relating to Key Management Personnel (i) Options provided as remuneration and shares issued on exercise of such options Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options, can be found in Section D of the remuneration report on pages 34 to 36. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 39 - Key management personnel disclosures cont (ii) Option holdings The numbers of options over ordinary shares in the Company held during the ﬁ nancial year by each Director of St Barbara Limited and other key management personnel of the Group, including their personally related parties, are set out below: Balance at the start of Granted during the year as the year compensation 35,000,000 1,000,000 - - - 1,000,000 Exercised during the year 10,000,000 - - 1,000,000 - - - - - 1,000,000 1,000,000 1,000,000 35,000,000 1,000,000 1,000,000 - - - Other changes during the year Vested and Balance at exercisable the end of the year at the end of the year - - - - - - - - 25,000,000 5,000,000 1,000,000 1,000,000 - - 1,000,000 - - - 85 35,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Balance at the Conversion of start of the Exercise of convertible Balance at the year options note Bought Sold end of the year 2,800,000 1,250,000 - 10,000,000 - - - - 177,887,642 774,588 100,000,000 - - - - - 1,000,000 - 1,000,000 - 1,000,000 881,709 - - 6,150,000 100,000 2,505,095 - - 3,681,709 5,100,000 100,000 2,505,095 - - 95,000,000 183,662,230 300,000 700,000 20,000 - - - - - - 20,000 1,000,000 - 500,000 500,000 Name 2006 Directors E Eshuys Other key management personnel R Kennedy R Klug P Thompson G Viska 2005 Directors E Eshuys Other key management personnel R Kennedy P Thompson (iii) Share holdings Name Directors Colin Wise Eduard Eshuys Doug Bailey Richard Knight Hank Tuten Mark Wheatley Other key management personnel Ross Kennedy Peter Thompson Martin Reed George Viska NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 40 - Explanation of transition to Australian equivalents IFRSs (1) Reconciliation of equity reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to IFRSs (AIFRS). (a) At the date of transition to AIFRS: 1 July 2004 Notes Consolidated Previous Effect of transition Parent Entity Effect of AGAAP $’000 to AIFRS AIFRS Previous AGAAP transition to AIFRS $’000 $’000 $’000 $’000 Assets Current assets Cash and cash equivalents Receivables Inventories Other ﬁ nancial assets Other - Prepayments Sub total Assets classiﬁ ed as held for sale Total current assets Non-current assets 86 Restricted cash and cash equivalents Receivables Property, plant and equipment Mining properties Mining properties - Exploration Mining properties - Development Other ﬁ nancial assets Total non-current assets Total Assets Liabilities Current liabilities Payables Interest bearing liabilities Provisions Total current liabilities Non-current liabilities Payables Interest bearing liabilities Provisions Total non-current liabilities Total Liabilities Net Assets Equity Contributed equity Reserves Accumulated losses Parent entity interest Minority interest Total Equity 4(c) (c) (a),(g) (g) (g) (d) (d) 12,849 1,512 777 188 630 15,956 58 16,014 3,108 - 4,947 42,401 - - - 50,456 66,470 6,691 9,832 751 17,274 - 75 4,269 4,344 21,618 44,852 - 630 - - (630) - - - - - - (42,401) 12,849 2,142 777 188 0 15,956 58 16,014 3,108 - 4,947 - 25,110 25,110 3,099 - (14,192) (14,192) 751 - (751) - - - - - - (14,192) 3,099 - 36,264 52,278 7,442 9,832 - 17,274 - 75 4,269 4,344 21,618 30,660 1 374 777 21,888 599 23,639 58 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 13,383 139,400 2,443 - - 139,400 2,443 139,400 2,443 (h) (115,835) (14,192) (130,027) (128,460) 26,008 18,844 44,852 (14,192) - (14,192) 11,816 18,844 30,660 13,383 - 13,383 AIFRS $’000 1 973 777 21,709 - 23,460 58 23,518 2,765 1,140 3,821 - - 599 - (179) (599) (179) - (179) - - - (13,538) 13,538 13,538 - 179 179 179 751 - (751) - - - - - - - - - - - - - - 179 21,443 44,961 6,818 8,932 - 15,750 11,484 75 4,269 15,828 31,578 13,383 139,400 2,443 (128,460) 13,383 13,383 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 40 - Explanation of transition to Australian equivalents IFRSs cont (b) At the end of the last reporting period under previous AGAAP: 30 June 2005 Notes Consolidated 30-Jun-05 Parent Entity 30-Jun-05 Effect of Effect of Previous transition to Previous transition to AGAAP $’000 AIFRS $’000 AIFRS $’000 AGAAP $’000 AIFRS $’000 AIFRS $’000 Assets Current assets Cash and cash equivalents Receivables Inventories Other ﬁ nancial assets Other – Prepayments Sub total Assets classiﬁ ed as held for sale Total current assets Non-current assets Restricted cash and cash equivalents Receivables Property, plant and equipment Mining properties Mining properties – Exploration Mining properties – Development Other ﬁ nancial assets Total non-current assets Total Assets Liabilities Current liabilities Payables Interest bearing liabilities Provisions Total current liabilities Non-current liabilities Payables Interest bearing liabilities Provisions Total non-current liabilities Total Liabilities Net Assets Equity Contributed equity Reserves Accumulated losses Total Equity 4(c) (c) (g) (g) (g) (d) (d) 16,273 4,767 4,448 - 1,864 27,352 21,072 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 20,073 (b) (h) 135,053 2,443 (117,423) 20,073 - 16,273 16,273 - 16,273 1,864 - - (1,864) - - - - - - (14,848) 9,067 5,781 - - - 119 - (119) - - - - - - - - 6,631 4,448 - - 27,352 21,072 48,424 11,801 - 8,996 - 9,067 5,781 - 35,645 84,069 16,344 1,541 - 17,885 - 7,000 39,111 46,111 63,996 20,073 4,767 4,448 179 1,864 27,531 21,072 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 75,398 8,586 135,053 135,053 1,864 - (179) (1,864) (179) - (179) - - - (14,848) 9,067 5,781 179 179 - 119 - (119) - - - - - - - - 664 3,107 2,443 664 87 6,631 4,448 - - 27,352 21,072 48,424 11,801 595 8,137 - 9,067 5,781 179 35,560 83,984 16,344 1,541 0 17,885 11,402 7,000 39,111 57,513 75,398 8,586 135,053 3,107 (644) (118,087) (128,910) (664) (129,574) - 20,073 8,586 - 8,586 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 40 - Explanation of transition to Australian equivalents IFRSs cont (2) Reconciliation of loss under previous AGAAP to proﬁ t under Australian equivalents to IFRSs (AIFRS) (a) Reconciliation of proﬁ t/(loss) for the year ended 30 June 2005: Consolidated Effect of Previous transition to Note AGAAP $’000 AIFRS $’000 AIFRS $’000 Parent Entity Effect of Previous transition AGAAP to AIFRS $’000 $’000 AIFRS $’000 Revenue Other income (f) (a),(e),(f) 46,553 20,948 397 (1,055) 46,950 19,893 46,553 20,395 397 (14,938) 46,950 5,457 Changes in inventories of ﬁ nished goods Raw materials and consumables used Carrying values of net assets and non- current assets sold (687) (6,640) - - (687) (6,640) (687) (6,640) - - (687) (6,640) (e) (14,578) 14,578 - (14,541) 14,541 - Contract mining, cartage, milling, maintenance, labour and consultants Employee beneﬁ ts expenses 88 Exploration and tenement expenditure Loss on subsidiary becoming an associate (b) (a) Share of net loss of associate Provision for diminution in value of investments Write down of mining exploration tenements Depreciation and amortisation Finance costs Other expenses (Loss)/proﬁ t before income tax Income tax expenses (Loss)/proﬁ t for the year (20,558) (7,256) (6,107) (272) (577) (773) (775) (8,093) (524) (7,358) (6,697) - - (20,558) (20,558) - (20,558) (664) (7,920) - (6,107) (7,256) (6,107) 272 - - - - - - - (577) - - (773) (773) (775) (8,093) (524) (7,358) 13,528 6,831 - - (775) (8,093) (524) (6,553) (5,559) - (664) - - - - - - - - (664) - (7,920) (6,107) - (773) (775) (8,093) (524) (6,553) (6,223) - (6,697) 13,528 6,831 (5,559) (664) (6,223) (3) Reconciliation of cash ﬂ ow statement for the year ended 30 June 2005 The adoption of AIFRSs has not resulted in any material adjustments to the cash ﬂ ow statement. (4) Notes to the reconciliations (a) Impairment Under previous GAAP, the carrying amounts of non-current assets valued on a cost basis were reviewed at each reporting date to determine whether they are in excess of their recoverable amount. When this assessment was made under previous GAAP, the recoverable amount was estimated on an undiscounted basis. This basis did not indicate any impairment in respect of the assets of subsidiary Nustar. On a discount cash ﬂ ow basis, an impairment of $14,192,000 was calculated on transition in respect of Nustar’s assets. Nustar was deconsolidated during the half year ended 31 December 2004, and therefore the provision for impairment reversed at that time. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 40 - Explanation of transition to Australian equivalents IFRSs cont (i) At 1 July 2004 For the Group there has been an increase in accumulated losses of $14,192,000 and a corresponding decrease in mining properties. There was no impact for the parent entity. (ii) At 30 June 2005 At 30 June 2005 there is no impact, as the assets for which the impairment related were no longer consolidated. There was no impact on the parent entity (iii) For the year ended 30 June 2005 Further group loss on a subsidiary becoming an associate of $272,000 becomes a proﬁ t of $13,920,000. The difference of $14,192,000 is as a result of the impact from the previous ﬁ nancial year’s cumulative impairment losses that would have been incurred under AIFRS policies. There was no impact on the parent entity. (b) Share based payments Under AASB 2 Share based Payment from 1 July 2004 the Group is required to recognise an expense for those options that were issued to employees under the St Barbara Limited Option Plan after 7 November 2002 but that had not vested by 1 January 2005. The effect of this is: (i) At 1 July 2004 There is no effect on the Group or the parent entity. (ii) At 30 June 2005 For the Group and parent entity there has been an increase in accumulated losses of $664,000 and a corresponding increase in reserves. (iii) For the year ended 30 June 2005 For the Group and parent entity there has been an increase in employee beneﬁ ts expense of $664,000. (c) Prepayments Under previous AGAAP, prepayments were classiﬁ ed as other assets. The effect of this is: (i) At 1 July 2004 For the Group, receivables have increased and other assets have decreased by $630,000. For the parent entity, receivables have increased and other assets have decreased by $599,000. (ii) At 30 June 2005 For the Group, receivables have increased and other assets have decreased by $1,864,000. For the parent entity, receivables have increased 89 and other assets have decreased by $1,864,000. (iii) For the year ended 30 June 2005 There is no effect on the Group or parent entity. (d) Provision for Employee Entitlements Under previous AGAAP, the liability for annual leave entitlements was classiﬁ ed as a provision. The effect of this is: (i) At 1 July 2004 For the Group, other payables have increased and provisions have decreased by $751,000. For the parent entity, other payables have increased and provisions have decreased by $751,000. (ii) At 30 June 2005 For the Group, other payables have increased and provisions have decreased by $119,000. For the parent entity, other payables have increased and provisions have decreased by $119,000. (iii) For the year ended 30 June 2005 There is no effect on the Group or parent entity. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 40 - Explanation of transition to Australian equivalents IFRSs cont (e) Net gain on disposal of Property Plant and Equipment Under previous AGAAP, proceeds from the sale of non-current assets were included in revenue and the book value of the assets sold was included in other expense. Under AIFRS, net gains on the value of assets are presented in other income and net losses in other expense. The effect of this is: (i) At 1 July 2004 and 30 June 2005 There is no effect on the Group or parent entity. (ii) For the year ended 30 June 2005 For the Group, other income and other expenses have decreased by $14,578,000 and for the parent entity, other income and other expenses have decreased by $14,541,000. (f) Interest Under AGAAP, interest revenue was classiﬁ ed as other income. Under AIFRS, interest revenue is included in Revenue. For the year ended 30 June 2005, interest received amounted to $397,000. (g) Mining properties Under AGAAP, mining properties included both development and exploration assets. Under AIFRS these assets are separately classiﬁ ed. (h) Accumulated losses The effect on accumulated losses of the changes set out above are as follows: 90 Impairment of mining properties Loss on subsidiary becoming an associate Share based payments Total adjustment Notes (a) (a) (b) Consolidated Parent Entity 1 July 30 June 1 July 30 June 2004 $’000 2005 $’000 2004 $’000 2005 $’000 (14,192) 14,192 - - (14,192) (14,192) (664) (664) - - - - - - (664) (664) (5) Adjustments on transition to AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement: 1 July 2005 The consolidated entity has taken the exemption available under AASB 1 to apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005. The Group has applied previous AGAAP in the comparative information on ﬁ nancial instruments within the scope of AASB 132 and AASB 139. The balance sheet below reﬂ ects the adjustments as at 1 July 2005 as a result of applying AASB 132 and AASB 139. NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 40 - Explanation of transition to Australian equivalents IFRSs cont Consolidated Parent Entity 30 June 05 Adjust 1 July 05 30 June 05 Adjust 1 July 05 Notes $’000 $’000 $’000 $’000 $’000 $’000 Assets Current assets Cash and cash equivalents Receivables Inventories Assets classiﬁ ed as held for sale (a) Total current assets Non current assets Restricted cash and cash equivalents Receivables Available for sale ﬁ nancial assets (a) Property, plant and equipment Mining properties – Development Mining properties – Exploration Other ﬁ nancial assets Total non current assets Total assets Liabilities Current liabilities Payables Interest bearing liabilities Total current liabilities Non current liabilities Payables Interest bearing liabilities (b) Provisions Total non current liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total equity 16,273 6,631 4,448 27,352 21,072 48,424 11,801 - - 8,996 5,781 9,067 - 35,645 84,069 16,344 1,541 17,885 - 7,000 39,111 46,111 63,996 20,073 16,273 6,631 4,448 27,352 18,539 45,891 16,273 6,631 4,448 21,072 48,424 11,801 11,801 - - - - (2,533) (2,533) - - 3,420 - - - - - 3,420 8,996 5,781 9,067 - 3,420 887 39,065 84,956 - - - - (407) - (407) (407) 1,294 16,344 1,541 17,885 - 6,593 39,111 45,704 63,589 21,367 595 - 8,137 5,781 9,067 179 35,560 83,984 16,344 1,541 17,885 11,402 7,000 39,111 57,513 75,398 8,586 91 - - - (2,533) (2,533) - - 3,420 - - - - 3,420 887 - - - - (407) - (407) (407) 1,294 16,273 6,631 4,448 18,539 45,891 11,801 595 3,420 8,137 5,781 9,067 179 38,980 84,871 16,344 1,541 17,885 11,402 6,593 39,111 57,106 74,991 9,880 (a), (b) 135,053 3,107 - 135,053 135,053 - 135,053 1,319 4,426 3,107 1,319 4,426 (b) (118,087) (25) (118,112) (129,574) (25) (129,599) 20,073 1,294 21,367 8,586 1,294 9,880 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 Note 40 - Explanation of transition to Australian equivalents IFRSs cont (a) Available for sale ﬁ nancial assets The Group and Parent Entity have investments in traded equity securities. Under AASB 139 these assets are classiﬁ ed as available for sale, and measured at fair value. Changes in fair value are recognised in equity until the underlying asset is sold or impaired. The effect of AASB 139 on available for sale ﬁ nancial assets is as follows: (i) At 1 July 2005 There is an increase for the Group and parent entity in the investment fair value reserve of $887,000, and an increase in available for sale ﬁ nancial assets of $887,000. Assets classiﬁ ed as held for sale of $2,553,000 are also reclassiﬁ ed to available for sale ﬁ nancial assets. (b) Convertible debt On 29 March 2005, the Company drew down $7,000,000 from a bridge loan facility provided by Resource Capital Funds III LP (“RCFIIII”). The loan has a maturity of 31 December 2008 and may, at RCFIII’s election, subject to shareholder approval be converted into 100,000,000 shares in the Company at 7c each. Shareholder approval was obtained on 16 November 2005. In accordance with AASB 132, the issuer of a compound instrument is required to classify the debt and equity components separately. The fair value of the liability portion of this convertible debt is determined using a market interest rate for an equivalent non convertible debt. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the debt. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of income tax effects. (i) At 1 July 2005 Interest bearing liabilities for the Group and parent entity are decreased by $407,000, with an increase in the Conversion option reserve of $432,000. Accumulated losses will increase by $25,000. 92 Directors’ declaration In the Directors’ opinion: (a) the ﬁ nancial statements and notes set out on pages 41 to 92 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 2006 and of its performance, as represented by the results of their operations, changes in equity and their cash ﬂ ows, for the ﬁ nancial year ended on that date; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable4; and (c) the audited remuneration disclosures set out on pages 28 to 37 of the Directors’ report comply with Accounting Standards AASB 124 Related Party Disclosures and the Corporations Regulations 2001; and 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 Managing Director and CEO Perth 8 September 2006 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2006 93 94 95 STATEMENT OF SHAREHOLDERS as at 13 September 2006 Twenty Largest Shareholders Shares Held % of Total 130,275,792 100,000,000 83,662,230 82,273,559 79,265,766 35,419,979 15,401,714 14,384,000 9,784,379 8,000,000 7,076,369 5,600,000 5,500,000 4,968,276 4,600,000 4,591,864 3,300,000 3,123,597 2,639,294 2,457,000 15.87 12.18 10.19 10.02 9.66 4.31 1.88 1.75 1.19 0.97 0.86 0.68 0.67 0.61 0.56 0.56 0.40 0.38 0.32 0.30 Shares Held % of Total 183,662,230 22.38 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 96 Westpac Custodian Nominees Limited Resource Capital Fund III LP Resource Capital Fund II LP JP Morgan Nominees Australia Limited ANZ Nominees Limited (Cash Income A/C) National Nominees Limited AMP Life Limited Merrill Lynch (Australia) Nominees Pty Limited (Berndale A/C) UBS Nominees Pty Ltd Citicorp Nominees Pty Limited (CFS Future Leaders Fund A/C) Queensland Investment Corporation Northwest Accounting Pty Ltd Gee Nominees Pty Ltd UBS Wealth Management Australia Nominees Pty Ltd Mr Eduard Eshuys Citicorp Nominees Pty Limited Colin Wise Consulting Pty Ltd Cogent Nominees Pty Limited (SMP Accounts) Miroma Investment Inc Perpetual Trustee Company Limited Substantial Shareholders Resource Capital Funds II and III LP Distribution of Shareholdings Number Held 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Number of Number of Shareholders 587 1,599 1,386 2,124 387 6,083 Shares 399,093 5,183,619 11,510,559 74,501,972 728,795,324 820,390,567 The number of shareholders holding less than a marketable parcel was 592. 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 D W Bailey R Knight H G Tuten Shares Held 3,681,709 5,100,000 100,000 2,505,095 183,662,230 STATEMENT OF SHAREHOLDERS as at 13 September 2006 Share Price The Company shares were listed on the Australian Stock Exchange throughout the 2005/06 year. The closing share price on 30 June 2006 and on 13 September 2006 was 57 cents and 48 cents respectively. On-Market Share Buy-Back In August 2006 the Company announced a continuation of its on-market share buy-back program. The maximum number of shares to be bought back is 56,653,335. Since the inception of the on-market buy back in August 2005, a total of 9,805,060 shares have been bought back for an outlay of $4,008,000 at an average cost of $0.41 per share. Announcements The Company makes both statutory announcements (activities or quarterly reports, ﬁ nancial reports, Appendix 5B cash statements, changes to Directors’ interest) and speciﬁ c announcements under Continuous Disclosure provisions on a timely basis. Investor Relations This Annual Report has been produced with the objective of ensuring that shareholders and interested parties are informed about Company strategy and performance to assist in deciding whether or not 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 Mines Limited website: www.stbarbara.com.au. Financial institutions, stockbrokers and other non-shareholder entities requiring copies of this report, activities reports and other corporate 97 information should contact the Company Secretary at: 1205 Hay Street West Perth WA 6005 Telephone: +61 8 9476 5555 Facsimile: +61 8 9476 5500 E-mail: perth@stbarbara.com.au Web site: www.stbarbara.com.au Shareholder Enquiries Enquiries relating to shareholding, tax ﬁ le number and notiﬁ cation of change of address should be directed to: Advanced Share Registry Services 110 Stirling Hwy Nedlands WA 6009 Telephone: +61 8 9389 8033 Facsimile: +61 8 9389 7871 98 98 INTENTIONALLY BLANK INTENTIONALLY BLANK 99 99 CORPORATE DIRECTORY Board of Directors Colin Wise (Non Executive Chairman) Eduard Eshuys (Managing Director and CEO) Douglas Bailey (Non Executive Director) Richard Knight (Non Executive Director) Hank Tuten (Non Executive Director) Company Secretary Ross Kennedy Registered Ofﬁ ce 1205 Hay Street West Perth WA 6005 Telephone: +61 8 9476 5555 Facsimile: +61 8 9476 5500 E-mail: perth@stbarbara.com.au Web site: www.stbarbara.com.au Share Registry Advanced Share Registry Services 100 110 Stirling Hwy Nedlands WA 6009 Telephone: +61 8 9389 8033 Facsimile: +61 8 9389 7871 Auditors PricewaterhouseCoopers QV1 Building 250 St George’s Terrace Perth WA 6000 Stock Exchange Listing Shares in St Barbara Limited are quoted on the Australian Stock Exchange Ticker symbol: SBM Inspecting the underground pump station, Gwalia www.stbarbara.com.au reconnectingrebuildingreestablishing

Continue reading text version or see original annual report in PDF format above