SYLVANIA RESOURCES
LIMITED
A.C.N. 091 415 968
ANNUAL REPORT
30 JUNE 2004
SYLVANIA RESOURCES LIMITED
(A.C.N. 091 415 968)
ANNUAL REPORT
30 JUNE 2004
I N D E X
COMPANY PARTICULARS
REVIEW OF OPERATIONS AND ACTIVITIES
DIRECTORS’ REPORT
CORPORATE GOVERNANCE STATEMENT
STATEMENTS OF FINANCIAL PERFORMANCE
STATEMENTS OF FINANCIAL POSITION
STATEMENTS OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDIT REPORT
SHAREHOLDER INFORMATION
2
3
6
9
14
15
16
17
33
34
35
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
COMPANY PARTICULARS
Directors
Grant Michael Button – Managing Director
Kevin Scott Huntly – Non-executive Director
Adrian Stephen Paul – Non-Executive Director
Dr Evan Kirby - Non Executive Director (Appointed 12 November
2003)
Secretary
Grant Michael Button
Registered Office and
Principal Place of Business
Level 4, HPPL House
28 – 42 Ventnor Avenue
WEST PERTH WA 6005
Share Register
Auditor
Solicitors
Telephone: (08) 9481 8711
Facsimile: (08) 9324 2977
Website: www.sylvaniaresources.com
Computershare Investor Services Pty Limited
Reserve Bank Building
Level 2
45 St George’s Terrace
Perth WA 6000
HLB Mann Judd
Chartered Accountants
15 Rheola Street
West Perth WA 6005
Clayton Utz
QV1
250 St Georges Terrace
Perth WA 6000
Stock Exchange Listings
Sylvania Resources Limited shares and options are listed on
the Australian Stock Exchange Ltd (ASX) under the following
codes:
Shares: SLV
Options: SLVO
2
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
REVIEW OF OPERATIONS AND ACTIVITIES
SOUTH AFRICAN OPERATIONS
Chromite Tailings Retreatment Consortium
In March 2004 Sylvania announced that it had entered into an agreement to acquire a 25% interest in a
Consortium (known as RK1) led by Aquarius Platinum Limited which will undertake a project to treat
chromite tailings through a purpose built plant at the Aquarius Kroondal Mine in order to extract the
platinum group metals (platinum, palladium, rhodium and gold). Sylvania’s 25% interest in the
Consortium is held through its 100% owned South African subsidiary, Sylvania South Africa
(Proprietary) Ltd.
The initial year of the project is expected to yield in excess of 20,000 ounces of Platinum group metals
(“PGMs”), growing to 28,000 ounces per year from the second year, with 25% of production attributable
to Sylvania.
The capital cost of the project, which is being managed by Aquarius Platinum (South Africa) (Pty) Ltd, is
estimated to be R28.5 million (including working capital). The modelling of the project’s projected cash
flows indicates that at R7/US$1, operating costs are expected to be US$170 per PGM ounce in Year one
reducing to US$145 per PGM ounce thereafter.
The project economics which have been conservatively modelled are very robust over a wide range of
metal price and exchange rate assumptions. An after-tax internal rate of return of 72% is generated at the
current basket price of US$521 per PGM ounce with an exchange rate of R7/US$1.
Construction of the RK1 processing plant has progressed according to schedule. By July 2004, the
concrete bases for the flotation cells had been completed and the remaining civil works are also
completed. By mid September, all of the flotation cells, tanks and umps had been delivered to site and
installed in the plant. Good progress was being made with piping and the electrical work had
commenced. Construction costs were being well controlled although there had been minor additions to
the scope of work.
During July an additional flotation test was performed by Lakefield Research to generate a concentrate
sample for Anglo Platinum. This work was undertaken on a new sample of current tailings from the
Xstrata Chrome mine. A laboratory locked cycle test procedure was used to simulate the performance of
a full-scale flotation circuit with recycle streams. An excellent grade/recovery result was obtained, further
supporting the financial robustness of the project.
Please refer to the Sylvania website at www.sylvaniaresources.com for photographs providing regular
updates on the progress of the construction.
The Consortium has commenced work on RK2, which is planned to be a similar style retreatment project
centred upon the Marikana Mine operated by Aquarius Platinum. Discussions relating to a proposed RK3
project have also commenced.
The Directors of Sylvania see participation in this consortium as a rare opportunity to gain access to PGM
cashflow, with relatively low risk, and near term potential for growth of the earnings stream via the
development of further chromite retreatment projects.
3
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
REVIEW OF OPERATIONS AND ACTIVITIES
(cont’d)
Sylvania entered into a Deed of Novation with Victoria Global Holdings (“Victoria”) which outlined the
terms of Sylvania’s entry into the Consortium. Under the terms of the Deed of Novation, Sylvania has
acquired its 25% interest in the Consortium by agreeing to fund £615,000 towards the capital costs of the
project, and by issuing 6 million fully paid shares in the Company to Victoria. The Company issued 6
million of its fully paid shares to Victoria in June 2004.
Shareholder approval for the completion of the transaction and for the Placement of shares was received
on 22 April 2004.
During April/May 2004 the Company issued and allotted 16,677,652 fully paid ordinary shares at an
average price of A$0.324 which raised A$5.0 million after capital raising costs. These funds will be
utilised to fund Sylvania’s commitment to the RK1 Project, and provide Sylvania with additional funds to
assess a number of other PGM projects in South Africa.
AUSTRALIAN OPERATIONS
Exploration by Sylvania within Australia has been focused on the Archean Sylvania Inlier, situated in
Western Australia. Within this area the Company still retains mineral exploration projects known as
Copper Knob and Jimblebar. The projects lie east and south of Newman and are located within the Peak
Hill Mineral Field. Exploration on these tenements has targeted gold, copper-zinc, nickel and platinum
group element mineralisation.
Jimblebar Copper/Gold
The Jimblebar tenements lie immediately south east of the currently operating Jimblebar iron ore mine.
Sylvania’s interests now relate to two prospecting licences, with one of the latter associated with a mining
lease application, covering an area of approximately 200 hectares.
The main area of interest for copper in the Jimblebar tenements is a prospective sequence of
metamorphosed felsic and intermediate volcanics containing magnetite outcrops as well as several
occurrences of outcropping secondary copper mineralisation.
Copper Knob
The Mining Lease 52/211 at Copper Knob, covers a very large body of disseminated low grade sulphide
copper mineralisation with some gold values that have been drilled by previous explorers. This
mineralization lies within a sequence of felsic and intermediate volcanic rocks that extend for over 9 km
forming the Jimblebar copper area. The Copper Knob mining lease has untested potential for an oxide
copper resource and for discrete massive copper bearing sulphide bodies.
4
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
REVIEW OF OPERATIONS AND ACTIVITIES
(cont’d)
Subsequent to year end, Sylvania entered into an Option Agreement with Warwick John Flint (“Flint”)
over all of the Australian tenements of Sylvania at Jimblebar and Copper Knob. Under the terms of the
Option Agreement Flint has the right to exercise the Option within 12 months, from 16 August 2004, to
acquire Sylvania’s interests in its Australian tenements for the consideration of A$55,000, and the
issuance to Sylvania of fully paid ordinary shares in a listed entity to the value of A$200,000. Flint has
the obligation to maintain the tenements in good standing during the life of the Option Agreement. Flint
has the right to extend the Option Agreement for a further 12 month period through the payment of
A$10,000 and the share consideration increasing to A$300,000.
Sylvania entering into this Option Agreement is consistent with the Board’s stated intention of focusing
its attention on the activities of the RK1Consortium and opportunities to develop further chromite
retreatment projects.
5
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
DIRECTORS’ REPORT
Your Directors present their report on the Company and its controlled entities for the financial year ended
30 June 2004.
Directors
The names and particulars of the Directors of the Company who held office during or since the end of the
financial year are:
Name
Formal
Qualifications
Particulars
Grant M Button
B.Bus.(Acc), CPA
Adrian S Paul
B.Bus (Acc)
Kevin S Huntly GDE MSc (Eng)
Evan Kirby
BSc(Hons) Metallurgy,
PhD Metallurgy,
MAusIMM,
MSthAfrIMM
Managing Director
aged 42. Appointed
December 2002. He has over 14 years
experience at a senior management level in the
resources industry. He has acted as an Executive
Director, Finance Director, CFO and Company
Secretary of a
listed
companies.
range of publicly
Non-executive Director aged 41. Appointed
March 2002. He has 17 years experience in the
securities industry, and was previously a partner
in stockbroking firm D.J. Carmichael & Co. He
now manages a private investment company.
Non-executive Director aged 42. Appointed
December 2002. He has over 24 years
the South African mining
experience
industry. He operates his own consultancy
business advising a number of international
mining companies.
in
Non-executive Director aged 53. Appointed
November 2003. He is a metallurgist who
worked in South Africa for a total of 17 years.
He then moved to Australia in 1992 and worked
for Minproc Engineers and Bechtel before
starting his own consulting business in 2002. He
has broad experience with the development of a
wide range of mining and minerals processing
projects in Africa, Australia and other parts of
the world.
Gerard Nealon
Resigned 12 November 2003
Principal activities
The principal activity of the consolidated entity during the financial year was investment in mineral exploration
and mineral treatment projects.
6
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
DIRECTORS’ REPORT
(cont’d)
Dividends
No dividend has been paid or declared during the financial year. The Directors do not recommend the payment
of a dividend.
Review of operations and results
The consolidated loss of the consolidated entity after income tax expense was $469,793 (2003 - $2,088,884).
Refer to the Review of Operations as set out on page 3.
Subsequent Events
There has not arisen in the interval between the end of the financial year and the date of this report any item,
transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to
affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs
of the consolidated entity, in subsequent financial years.
Likely developments and expected results of operations
Additional comments on expected results of certain of the operations of the consolidated entity are included in
the Review of Operations as set out on page 3.
Environmental regulation
The consolidated entity is subject to significant environmental regulations in respect to its exploration and
evaluation activities in Australia under State law. There have been no known breaches of these regulations and
principles.
Directors’ shareholdings
The following table sets out the number of shares owned by each Director, directly or indirectly, at the date of this
Report.
Director
Grant Button
Adrian Paul
Kevin Huntly
Evan Kirby
Fully paid ordinary shares
30 June 2005 options
exercisable @ 20 cents
250,000
6,750,000
Nil
14,300
250,000
7,191,081
Nil
Nil
Significant changes in the state of affairs
Significant changes in the state of affairs of the consolidated entity during the financial year were:
•
In June 2004, the Company completed a placement of 16,677,652 ordinary shares at an average price of $0.324
per share to raise $5,035,485 after capital raising costs; and
In June 2004, the Company issued 6,000,000 ordinary shares at a deemed price of $0.30 each as consideration
for the purchase of a 25% interest in the RK1 consortium.
•
Share and option schemes
There are no share and/or option schemes in existence at the date of this Report.
7
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
DIRECTORS’ REPORT
(cont’d)
Shares under option
At the date of this report there are 32,287,523 options to acquire un-issued ordinary shares in Sylvania
Resources Limited exercisable at $0.20 each at any time on or before 30 June 2005. Option holders do not have
any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate.
Meetings of directors
During the financial year there were three formal director meetings. All other matters that required formal board
resolutions were dealt with via circulating written rotary resolutions. In addition the Directors met on an
informal basis at regular intervals during the year to discuss the Company’s affairs. Due to the size of the Board
and the nature of the Company’s operations there are now no separate committees of the Board of Directors. The
number of meetings of the Company’s Board of Directors attended by each Director were:
G Button
A Paul
Evan Kirby
S Huntley
G Nealon
Directors’ meetings
held whilst in office
3
3
2
3
-
Directors’ meetings
attended
3
3
2
3
-
Directors’ and executive officers’ emoluments
The broad remuneration policy for determining the nature and amount of emoluments of board members and
senior executives of the Company is to ensure the remuneration package properly reflects the person’s duties
and responsibilities; and that remuneration is competitive in attracting, retaining and motivating people of the
highest quality. The emoluments of each Director were as follows:
Directors
A S Paul
G M Button
K S Huntly
E Kirby
G A Nealon
Base
salary
$
-
-
-
-
-
Primary benefits
Consulting
fee
$
-
-
26,064
-
17,500
Director’s
fees
$
20,000
20,000
20,000
12,931
-
Post employment
Equity
Superannuation
$
-
-
-
-
-
Options
$
-
-
-
-
-
Total
$
20,000
20,000
46,064
12,931
17,500
For the period to 30 June 2004 there were no executive officers of the Company. Since 1 July 2004 the
Company has had 1 executive officer.
Insurance of officers
During the year the Company has paid premiums in respect of a contract insuring all Directors and officers of
the Company against liabilities incurred as Directors or officers to the extent permitted by the Corporations Act
2001. Due to confidentiality clause in the contract the amount of the premium has not been disclosed.
This report is made in accordance with a resolution of the Directors.
Grant M Button
Managing Director
Perth, Western Australia
28 September 2004
8
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
CORPORATE GOVERNANCE STATEMENT
Introduction
The Company has adopted systems of control and accountability as the basis for the administration of Corporate
Governance. Some of these policies and procedures are summarised below.
The following additional information about the Company's Corporate Governance practices is set out on the
Company's website at www.sylvaniaresources.com:
• Corporate Governance disclosures and explanations;
• Statement of Board and Management Functions;
• Nomination Committee Charter;
• Policy and Procedure for Selection and Appointment of New Directors;
• Summary of Code of Conduct for Company Executives;
• Summary of Policy for Trading in Company Securities;
• Audit Committee Charter;
• Procedure for the Selection, Appointment and Rotation of External Auditor;
• Summary of Compliance Procedures for ASX Listing Rule Disclosure Requirements;
• Shareholder Communication Strategy;
• Company's Risk Management Policy and Internal Compliance and Control System;
• Statement of process for performance evaluation of the Board, Board committees, individual directors and
key executives;
• Remuneration Committee Charter; and
• Corporate Code of Conduct.
Explanations for departures from best practice recommendations
During the Company's 2003/2004 financial year ("Reporting Period"), the Company has complied with each of
the Ten Essential Corporate Governance Principles1 and the corresponding Best Practice Recommendations2 as
published by the ASX Corporate Governance Council ("ASX Principles and Recommendations"), other than in
relation to the matters specified in the table below.
1 A copy of the Ten Essential Corporate Governance Principles are set out on the Company’s website under the Section entitled "Corporate
Governance".
2 A copy of the Best Practice Recommendations are set out on the Company’s website under the section entitled "Corporate Governance".
9
Principle
Ref
1
Recommendation
Ref
1.1A
2
2
2
3
4
5
6
2.1
2.2, 2.3
2.4
3.1
4.2, 4.3
5.1
6.1
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
CORPORATE GOVERNANCE STATEMENT
Notification of Departure
Explanation for Departure
the
Formalisation and disclosure of the functions reserved for
the Board and those delegated to management occurred on
23 September 2004.
Two of the four directors considered to be independent,
for
the section headed
reasons provided
"Identification of Independent Directors".
During the Reporting Period the Board did not have a
formally appointment chairman. The Managing Director,
Grant Button, informally acted in the role of chairman.
From 23 September 2004, the full Board will act as the
nomination committee, in accordance with a nomination
committee charter.
in
A Code of Conduct was formalised and adopted by the
Company on 23 September 2004.
From 23 September 2004, the full Board will act as the
audit committee in accordance with an audit committee
charter.
Until 23 September 2004 there were no written policies
and procedures designed to ensure compliance with ASX
Listing Rule disclosure requirements and accountability
for the compliance.
The Company’s shareholder communication strategy was
designed and disclosed in a formal way on 23 September
2004.
10
As from 23 September 2004 the Company achieved compliance. Prior
to this time the functions were delegated as now disclosed but without
formalisation and disclosure.
The Board considers that its current composition is adequate for the
Company's current size and operations, and includes an appropriate mix
of skills and expertise, relevant to the Company's business.
The Board acknowledges the importance of appointing an independent
chairman and expects to resolve this matter in its 2004/2005 financial
year.
The role of the nomination committee is carried out by the full Board in
accordance with the Nomination Committee Charter. The Board
considers that at this stage, no efficiencies or other benefits would be
gained by establishing a separate nomination committee. Prior to 23
September 2004, the full Board reviewed and considered the selection
and appointment of directors on an as required basis.
Prior to 23 September 2004 the Board considers that its business
practices, as led by the example of Board and key executives, were the
equivalent of a code of conduct. These practices are now reflected in the
Code of Conduct adopted by the Company on 23 September 2004.
The Company's financial statements are prepared by an external
consultant and reviewed in detail by the full Board. The Board considers
that it has an adequate balance of independent representation and
financial experience to operate the audit committee in this manner.
Informal procedures were in place prior to 23 September 2004 which
have been formulated into the written policies and procedures.
The Company has a positive strategy to communicate with shareholders,
the expectations of shareholders and actively promote
identify
shareholder involvement in the Company. These strategies have now
been documented and disclosed on 23 September 2004.
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
CORPORATE GOVERNANCE STATEMENT
Notification of Departure
Explanation for Departure
Principle
Ref
7
Recommendation
Ref
7.1
8
9
8.1
9.1
9
9.2
The Company did not have a formal framework of risk
oversight and management policy and internal compliance
and control system until 23 September 2004.
During the Reporting Period there was no formal
performance evaluation of the Board, its committees and
individual directors.
The Company does not have a formal remuneration
policy.
From 23 September 2004 the full Board will meet as the
Remuneration Committee,
in accordance with a
Remuneration Committee charter. The Company adopted
the Remuneration Committee Charter on 23 September
2004.
10
10.1
A code of conduct was adopted on 23 September 2004.
11
The Company has developed a framework for risk management, which
the Company intends to enhance as the Company's operations grow.
The Board has undergone continuous performance evaluation, which has
resulted in significant changes to the composition of the Board in the last
two financial years of the Company. The Board will consider whether
such procedures should be formalised in its 2004/2005 financial year.
Remuneration has been, and continues to be, in accordance with the
general principles recommended by the ASX; that is, non-executive
directors receive a fixed fee for their services and do not receive
performance-based remuneration. There is only 1 key executive in the
Company, who receives a fixed fee remuneration package that is subject
to adjustment in accordance with performance. To the extent that
additional executives are appointed in the future and the scope of the
Company's activities expands the Company will reconsider whether a
change in the structure of executive remuneration is appropriate.
The Board considers that due to its small size, all members should be
involved in determining remuneration levels. Accordingly, time is set
aside at one Board meeting each year specifically to address the matters
usually considered by a remuneration committee and function in
accordance with the Remuneration Committee Charter. Executive
directors absent themselves during discussion of their remuneration.
Although until 23 September 2004 there was no code of conduct
documented or disclosed, the Board considered its business practices, as
led by the example of the Board and key executives, were the equivalent
of a code of conduct. The Company has now documented these
practices and principles into a written code of conduct.
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
CORPORATE GOVERNANCE STATEMENT
Skills, experience, expertise and term of office of each director
A profile of each director containing the applicable information is set out in the Directors' Report.
Identification of independent directors
The independent directors of the Company are Kevin Huntly and Adrian Paul.
Mr Huntly is an independent director in accordance with the criteria of independence as set out in Box 2.1 of the
commentary that supplements the Principles of Good Corporate Governance and Best Practice Recommendations
as published by the ASX Corporate Governance Council ("Independence Criteria").
Mr Paul is also considered to be an independent director. Mr Paul is a representative of Sunshore Holdings Pty
Ltd, a major shareholder of the Company (approximately 13% shareholding). As a result he does not fall within
paragraph 1 of the Independence Criteria. However he fulfils the other Independence Criteria. The Board of the
Company (in the absence of Mr Paul) considers he is capable of making decisions and taking actions which are
designed to be in the best interests of the Company, and therefore considers him to be independent. The Board
notes the potential for conflict in matters where Mr Paul is involved and recognises that in such circumstances Mr
Paul would declare such interest and not participate in the decision making process unless otherwise sanctioned by
the Board, as is required under the Corporations Act.
Statement concerning availability of independent professional advice
If a director considers it necessary to obtain independent professional advice to properly discharge the
responsibility of his/her office as a director, then, provided the director first obtains approval for incurring such
expense from the chairperson, the Company will pay the reasonable expenses associated with obtaining advice.
Names of nomination committee members and their attendance at committee meetings
The full Board will formally carry out the functions of a nomination committee in accordance with a nomination
committee charter from 23 September 2004. Prior to this date, any relevant matters were discussed on an as-
required basis during regular meetings of the Board.
Names and qualifications of audit committee members
The full Board will carry out the functions of the audit committee in accordance with an audit committee charter.
Each of the Board members has the relevant financial and industry experience required to perform audit committee
functions. Details regarding the relevant qualifications of each of the directors are set out in the Directors' Report.
Number of audit committee meetings and names of attendees
The full Board met 3 times in the Reporting Period in respect of the financial accounts.
Performance evaluation of the board and its members
During the Reporting Period the composition and functioning of the Board as a whole was discussed from time to
time at regular meetings of the Board. The Board considers that more formal procedure is not warranted at present
in view of the small size, and overlap of many of the key functions, of the Board and management.
12
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
CORPORATE GOVERNANCE STATEMENT
Company’s remuneration policies
As there is only one key executive, Grant Button, who is also a director of the Company, a detailed policy which
distinguishes between executive and non-executive remuneration has not been warranted to date. All of the
directors receive a fixed fee for their services, which fees are set in accordance with a shareholder-approved
threshold. There is no bonus system in place or other performance-based remuneration such as the achievement of
certain key performance indicators. Executive remuneration is determined by the full Board in accordance with
fair market rates.
Names of remuneration committee members and their attendance at committee meetings.
From 23 September 2004, the full Board will carry out the function of the remuneration committee, in accordance
with a remuneration committee charter. During the Reporting Period, any relevant matters were addressed on an
as-required basis from time to time during regular meetings of the Board.
Existence and terms of any schemes for retirement benefits for non-executive directors
There are no retirement benefits for non-executive directors.
13
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
STATEMENTS OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2004
Consolidated
Parent entity
Notes
2004
$
2003
$
2
3
3
4
Revenue from ordinary activities
Borrowing costs expense
Cost of exploration tenements sold
Exploration expenditure written off
Write down of exploration expenditure
to recoverable amount
Write down of non-current assets
Other expenses from ordinary activities
Provision for diminution of investment
in controlled entity
Provision for non-recovery of loan to
controlled entity
Loss from ordinary activities before
income tax expense
Income tax expense
Loss from ordinary activities after
income tax expense
Net loss
Total revenues, expenses and valuation
adjustments attributable to members of
Sylvania Resources Limited recognised
directly in equity
Total changes in equity other than
those resulting from transactions with
owners as owners
50,912
-
-
(25,323)
1,214,196
-
(448,768)
(2,243,512)
-
(9,633)
(485,749)
-
(374,988)
(17,030)
(218,782)
-
2004
$
50,912
-
-
(12,738)
-
(9,633)
(485,749)
-
2003
$
16,128
-
-
(118,941)
-
(17,030)
(118,134)
(1,500,004)
-
-
(12,585)
(304,550)
(469,793)
-
(2,088,884)
-
(469,793)
-
(2,042,531)
-
(469,793)
(2,088,884)
(469,793)
(2,042,531)
(469,793)
(2,088,884)
(469,793)
(2,042,531)
-
-
-
-
(469,793)
(2,088,884)
(469,793)
(2,042,531)
Basic earnings per share (cents)
Diluted earnings per share (cents)
18
18
(1.46)
(1.46)
(6.78)
(6.78)
The accompanying notes form part of these financial statements.
14
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
STATEMENTS OF FINANCIAL POSITION
AS AT 30 JUNE 2004
Current assets
Cash assets
Receivables
Total current assets
Non-current assets
Investments
Mining tenements
Receivables
Consolidated
Parent entity
Notes
2004
$
2003
$
2004
$
2003
$
4,023,120
7,493
511,322
35,399
4,023,120
257,493
511,322
285,399
4,030,613
546,721
4,280,613
796,721
2,552,347
250,000
-
30,359
250,000
-
21,519
-
2,530,828
30,359
-
-
5
6
7
5
Total non-current assets
2,802,347
280,359
2,552,347
30,359
Total assets
6,832,960
827,080
6,832,960
827,080
Current liabilities
Payables
8
189,200
258,797
189,200
258,797
Total current liabilities
189,200
258,797
189,200
258,797
Non-current liabilities
Payables
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
9
-
-
290,215
290,215
-
-
290,215
290,215
189,200
549,012
189,200
549,012
6,643,760
278,068
6,643,760
278,068
10
11
12
11,957,781
285,375
(5,599,396)
5,122,296
285,375
(5,129,603)
11,957,781
285,375
(5,599,396)
5,122,296
285,375
(5,129,603)
Total equity
6,643,760
278,068
6,643,760
278,068
The accompanying notes form part of these financial statements.
15
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2004
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Net cash inflow/(outflow) from operating
activities
Cash flows from investing activities
Loans from/(to) controlled entity
Proceeds from the sale of tenements
Exploration & evaluation expenditure
Purchase of equity investments
Net cash inflow/(outflow) from investing
activities
Cash flows from financing activities
Repayment of loan from other party
Proceeds from issue of shares
Capital raising costs
Notes
Consolidated
Parent entity
2004
$
2003
$
2004
$
2003
$
31,568
(639,563)
50,912
-
23,840
(262,733)
16,128
-
-
(635,901)
50,912
23,840
(103,645)
16,128
-
-
17
(557,083)
(222,765)
(584,989)
(63,677)
-
-
(25,323)
(731,621)
-
375,000
(216,993)
-
(715,507)
-
(12,738)
(793)
117,860
-
(118,941)
-
(756,944)
158,007
(729,038)
(1,081)
(290,215)
5,404,571
(288,531)
-
(290,215)
450,000 5,404,571
(288,531)
-
-
450,000
-
Net cash inflow from financing activities
4,825,825
450,000 4,825,825
450,000
Net increase/(decrease) in cash held
Cash at the beginning of the financial year
3,511,798
511,322
385,242 3,511,798
126,080
511,322
385,242
126,080
Cash at the end of the financial year
4,023,120
511,322
4,023,120
511,322
The accompanying notes form part of these financial statements.
16
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This general purpose financial report has been prepared in accordance with Accounting Standards, other
authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus
Views and the Corporations Act 2001.
The financial report covers the consolidated entity of Sylvania Resources Limited and controlled entities, and
Sylvania Resources Limited as an individual parent entity. Sylvania Resources Limited is a listed public company
registered and domiciled in Australia.
The financial report has been prepared on an accruals basis and is based on historical costs, except for certain
assets that, as noted, are at valuation. Unless otherwise stated, the accounting policies adopted are consistent with
those of the previous year.
The following is a summary of the material accounting policies adopted by the consolidated entity in the
preparation of the financial report.
(a) Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by
Sylvania Resources Limited ("Company" or "parent entity") as at 30 June 2004 and the results of all
controlled entities for the year then ended. Sylvania Resources Limited and its controlled entities together are
referred to in this financial report as the Consolidated Entity. The effects of all transactions between entities
in the Consolidated Entity are eliminated in full.
Where control of an entity is obtained during a financial year, its results are included in the consolidated
statement of financial performance from the date on which control commences.
(b) Income tax
Tax effect accounting procedures are followed whereby the income tax expense in the statements of financial
performance is matched with the accounting profit/loss after allowing for permanent differences. The future
tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of
realisation. Income tax on cumulative timing differences is set aside to the deferred income tax or the future
income tax benefit accounts at the rates which are expected to apply when those timing differences reverse.
(c) Acquisitions of assets
The purchase method of accounting is used for all acquisitions of assets regardless of whether equity
instruments or other assets are acquired. Cost is measured as the fair value of the assets given up, shares
issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the
acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their market
price as at the acquisition date. Transaction costs arising on the issue of equity instruments are recognised
directly in equity.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of the acquisition. The discount rate used is the incremental
borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier
under comparable terms and conditions.
17
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(d) Recoverable amount of non-current assets
The carrying amounts of non-current assets valued on the cost basis, other than exploration and evaluation
expenditure carried forward (note 1(i)), are reviewed to determine whether they are in excess of their
recoverable amount at balance date. If the carrying amount of a non-current asset exceeds its recoverable
amount, the asset is written down to the lower amount. The write-down is recognised as an expense in the
net profit or loss in the reporting period in which it occurs.
Where a group of assets working together supports the generation of cash inflows, recoverable amount is
assessed in relation to that group of assets.
In assessing recoverable amounts of non-current assets the relevant cash flows have not been discounted to
their present value, except where specifically stated.
(e) Investments
Interests in listed and unlisted securities, other than controlled entities and associates in the consolidated
financial statements are brought to account at the lower of cost or market value and dividend income is
recognised in the statement of financial performance when receivable. Controlled entities and associates are
accounted for in the consolidated financial statements as set out in note 1(a).
(f) Payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end
of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days
of recognition.
(g) Revenue
Revenue from the sale of assets is recognised upon the transfer of asset title to the purchaser. Interest revenue
is recognised on a proportionate basis taking into account the interest rates applicable to the financial assets.
(h) Earnings per share
(i) Basic earnings per share
Basic earnings per share is determined by dividing net profit/loss attributable to members, adjusted to
exclude costs of servicing equity (other than dividends) and preference share dividends, by the weighted
average number of ordinary shares, adjusted for any bonus element.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking
into account the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares and the weighted average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares.
18
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(i) Exploration and evaluation expenditure
The Consolidated Entity’s policy with respect to exploration and evaluation expenditure is to use the “area of
interest” method. Under this method, exploration and evaluation costs are carried forward on the following
basis:
(i)
Each area of interest is considered separately when deciding whether and to what extent to carry
forward or write off exploration and evaluation costs.
(ii) Exploration and evaluation costs related to an area of interest are carried forward provided that rights
to tenure of the area of interest are current and provided further that one of the following conditions are
met:
•
•
such costs are expected to be recouped through successful development and exploitation of the
area of interest or alternatively, by its sale; or
exploration and/or evaluation activities in the area of interest have not yet reached a stage which
permits a reasonable assessment of the existence or otherwise of economically recoverable
reserves and active and significant operations in relation to the area are continuing.
Exploration and evaluation costs accumulated in respect to each particular area of interest includes
only net direct expenditure.
(iii) The carrying values of exploration and evaluation costs are reviewed by Directors where results of
exploration and/or evaluation of an area of interest are sufficiently advanced to permit a reasonable
estimate of the costs expected to be recouped through successful development and exploitation of the
area of interest or by its sale. Expenditure in excess of this estimate is written off to the statements of
financial performance in the year in which the review occurs.
(j) Goods and services tax (GST)
Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST is
not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of
the cost of the acquisition of the asset or as part of an item of the expense. Receivables and payables in the
Statement of Financial Position are shown exclusive of GST.
(k) Cash
For purposes of the statement of cash flows, cash includes deposits at call which are readily convertible to
cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts.
19
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(l) Adoption of Australian Equivalents to International Financial Reporting Standards
Australia is currently preparing for the introduction of International Financial Reporting Standards (IFRS)
effective for financial periods commencing 1 January 2005. This requires the production of accounting data
for future comparative purposes at the beginning of the next financial year.
The Company’s management is assessing the significance of these changes and preparing for their
implementation. An IFRS committee will be established to oversee and manage the Consolidated Entity’s
transition to IFRS. The Company will seek to keep stakeholders informed as to the impact of these new
standards as they are finalised. The directors are of the opinion that the key differences in the Consolidated
Entity’s accounting policies which will arise from the adoption of IFRS are:
Impairment of Assets
The Consolidated Entity currently determines the recoverable amount of an asset on the basis of
undiscounted net cash flows that will be received from the assets’ use and subsequent disposal. In terms of
AASB 136: Impairment of Assets, the recoverable amount of an asset will be determined as the higher of fair
value less costs to sell and value in use. It is likely that this change
to
impairments being recognised more often than under the existing policy.
in accounting policy will
lead
Income Tax
Currently, the Consolidated Entity adopts the liability method of tax-effect accounting whereby the income
tax expense is based on the accounting profit adjusted for any permanent differences. Timing differences are
currently brought to account as either a provision for deferred income tax or future income tax benefit. Under
AASB 112: Income Taxes, the Consolidated Entity will be required to adopt a balance sheet approach under
which temporary differences are identified for each asset and liability rather than the effects of the timing and
permanent differences between taxable income and accounting profit.
The Consolidated Entity also has carried forward income tax losses which have not been recognised as
deferred tax assets as they do not satisfy the “virtually certain” test under current Australian Accounting
Standards. Under AASB 112, it will be easier to recognise these tax losses as deferred tax assets due to the
recognition test being based on whether it is “probable” that the losses will be recovered.
Share-based Payment
Although share based compensation does not form part of the remuneration of directors/employees of the
Consolidated Entity the Consolidated Entity currently does not recognise an expense for any share-based
compensation granted. Under AASB 2: Share-Based Payments, the Consolidated Entity will be required to
recognise an expense for such share-based compensation. Share-based compensation is measured at the fair
value of the share options determined at grant date and recognised over the expected vesting period of the
options. A reversal of the expense will be permitted to the extent that non-market based vesting conditions
such as service are not met.
Extractive Industries
The International Accounting Standards Board is yet to release an IFRS based on Exposure Draft 6
“Exploration for and Evaluation of Mineral Resources”. There remains uncertainty as to whether or not
deferred exploration expenditure can continue to be capitalised.
20
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
NOTE 2 – REVENUE
Operating activities
Sale of goods
Interest received
Non-operating activities
Proceeds from sale of tenements
Total revenue
NOTE 3 - OPERATING LOSS
Consolidated
Parent entity
2004
$
2003
$
2004
$
2003
$
-
50,912
50,912
-
16,128
16,128
-
50,912
50,912
-
16,128
16,128
-
-
1,198,068
1,198,068
-
-
-
-
50,912
1,214,196
50,912
16,128
Loss from ordinary activities before income tax expense
includes the following specific net gains and expenses:
Gains
Profit on sale of tenements
Expenses
Provision for non-recovery of loan to controlled entity
Provision for diminution of equity investment
Provision for diminution of investment in controlled entity
Write down of tenement exploration to recoverable amount
Tenement exploration expenses written off
Write down of other non-current assets to recoverable
amount
Other expenses from ordinary activities includes the
following:
Administration costs
Compliance cost
Consulting fees
Directors fees
Legal fees
Project generation costs
Travel
-
749,300
-
-
-
9,633
-
-
25,323
-
-
-
-
374,988
2,243,512
17,030
12,585
9,633
-
-
12,738
-
304,550
-
1,500,004
-
118,941
17,030
38,322
66,507
110,456
32,931
36,445
115,111
53,752
25,449
50,227
8,853
39,066
105,394
-
4,676
38,322
66,507
110,456
32,931
32,931
115,111
53,752
25,449
50,227
8,853
39,066
39,066
-
4,676
21
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
NOTE 4 - INCOME TAX
Consolidated
Parent entity
2004
$
2003
$
2004
$
2003
$
a) The income tax expense for the financial year differs from the prima facie tax applicable to the loss for the year
as follows:
Loss from ordinary activities before income tax expense
(2,088,884)
(2,042,531)
(469,793)
(469,793)
Income tax calculated @ 30%
(140,938)
(626,665)
(140,938)
(612,759)
Tax effect of permanent differences:
Non deductible expenses
Tax benefit not recognised
38,358
102,580
-
626,665
38,358
102,580
541,366
71,393
Income tax expense
-
-
-
-
b) The directors estimate that the potential future income
tax benefit in respect of tax losses not brought to account
calculated at 30% is:
1,059,973
958,677
1,022,975
925,454
This benefit for tax losses will only be obtained if:
(i)
the consolidated entity derives future assessable income of a nature and of an amount sufficient to enable
the benefit from the deductions for the losses to be realised;
(ii) the consolidated entity continues to comply with the conditions for deductibility imposed by tax legislation,
and
(iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit from the
deductions for the losses.
c) Tax consolidation
During the year legislation was enacted to allow groups, comprising a parent entity and its Australian resident
wholly-owned entities to elect to be consolidated and be treated as a single entity for income tax purposes. The
legislation, which includes both mandatory and elective elements, is applicable to Sylvania Resources Limited.
At the reporting date the Directors have decided to elect to be taxed as a single entity. In accordance with Urgent
issues Group (UIG) Consensus Views, UIG 39 “Effect of proposed tax consolidation legislation on deferred tax
balances”, the financial effect of the legislation has not been brought to account in the financial statements for the
year ended 30 June 2004, except to the extent that the adoption of the tax consolidation would impair the carrying
value of any deferred tax assets.
NOTE 5 – RECEIVABLES
Current
Sundry debtors
Net GST receivable
Amount receivable from controlled entity
Provision for non-recovery of loan to controlled entity
-
7,493
-
-
31,568
3,831
-
-
-
7,493
567,135
(317,135)
-
3,831
586,118
(304,550)
7,493
35,399
257,493
285,399
22
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
NOTE 5 – RECEIVABLES (CONT)
Non-current
Amount receivable from controlled entity
NOTE 6 – INVESTMENTS
Consolidated
Parent entity
2004
$
2003
$
2004
$
2003
$
-
-
2,530,828
-
RK1 Consortium investment – at cost
Unlisted equity investments – at cost
Listed investments – at valuation
Investment in controlled entity
Provision for diminution in value of investment in
controlled entity
2,530,828
-
21,519
-
-
-
20,000
10,359
-
-
-
-
21,519
1,500,004
(1,500,004)
-
20,000
10,359
1,500,004
(1,500,004)
2,552,347
30,359
21,519
30,359
NOTE 7 – MINING TENEMENTS
Acquisition, exploration and evaluation expenditure at
written down recoverable amount in respect of areas of
interest in the exploration phase
Less: Write down to recoverable amount
Movements:
Australia:
Opening balance
Direct expenditure for the year
Cost of tenements sold
Amounts written off
Write down to recoverable amount
Balance at end of financial year
250,000
-
624,988
(374,988)
250,000
250,000
-
-
-
-
250,000
25,323
-
(25,323)
-
250,000
3,100,275
216,993
(448,768)
(2,243,512)
(374,988)
250,000
-
12,738
-
(12,738)
-
-
-
118,941
-
(118,941)
-
-
Ultimate recovery of exploration and evaluation expenditure carried forward is dependent upon the recoupment of
costs through successful development and commercial exploitation, or alternatively by sale of the respective areas.
NOTE 8 – CURRENT LIABILITIES
Payables - sundry creditors
189,200
258,797
189,200
258,797
Of the payables $50,074 (2003: $117,335) is denominated and payable in South African rand.
NOTE 9 – NON-CURRENT LIABILITIES
Payable- unsecured loan from other corporation
-
290,215
-
290,215
23
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
Consolidated
Parent entity
2004
$
2003
$
2004
$
2003
$
NOTE 10 - CONTRIBUTED EQUITY
a) Ordinary shares
51,883,883 fully paid ordinary shares (2003: 29,206,231)
Movements in share capital:
Balance at the beginning of the financial year
16,677,652 ordinary shares issued at an average price of
$0.324 each
6,000,000 ordinary shares issued at $0.30 each to acquire a
25% interest in the RK1 consortium
3,000,000 ordinary shares issued at $0.15 each
6,331,292 ordinary shares cancelled at a deemed value of
$0.13 each in consideration for the sale of certain mineral
tenements
Capital raising costs
Balance at the end of the financial year
11,957,781
5,122,296
5,122,296
5,404,571
5,495,364
-
1,800,000
-
-
450,000
-
(369,086)
(823,068)
-
11,957,781,
5,122,296
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one
vote per share at shareholders’ meetings. In the event of winding up of the parent entity, ordinary shareholders rank
after all creditors and are fully entitled to any proceeds on liquidation.
b) Options
At as year-end there were 32,287,523 (2003: 32,287,523) options to acquire ordinary fully paid shares at $0.20 at
any time on or before 30 June 2005.
NOTE 11 – RESERVES
Option reserve
285,375
285,375
285,375
285,375
The option reserve comprises amounts paid by option holders in the past on the issue of options.
NOTE 12 - ACCUMULATED LOSSES
Accumulated losses at the beginning of the financial year
Net loss for the year
5,129,603
469,793
3,040,719
2,088,884
5,129,603
469,793
3,087,072
2,042,531
Balance at the end of the financial year
5,599,396
5,129,603
5,599,396
5,129,603
24
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
NOTE 13 - FINANCIAL INSTRUMENTS
(a) Credit risk exposures
Credit risk relates to the risk that counterparties will default on its contractual obligations resulting in financial
loss to the consolidated entity. The consolidated entity has adopted a policy of only dealing with credit worthy
counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating
the risk of financial loss from any defaults.
The exposure of the consolidated entity to credit risk in relation to each class of recognised financial asset is
the carrying amount as indicated in the statements of financial position.
(b) Net fair values
The fair values of all financial assets and liabilities approximate their carrying values as indicated in the
statements of financial position.
(c) Interest rate risk
All cash balances attract a floating rate of interest. The unsecured loan from another corporation does not
attract interest. The consolidated entity’s exposure to interest rate risk and the effective interest rate by
maturity periods is set out below.
Net financial assets/(liabilities)
(160,188)
4,023,120
2004
Financial assets
Cash and deposits
Receivables
Investments
Financial liabilities
Payables
2003
Financial assets
Cash and deposits
Receivables
Investments
Financial liabilities
Payables
Weighted
Average
Interest
Rate
4.3%
-
-
Weighted
Average
Interest
Rate
3.75%
-
-
Non-
Interest
Bearing
Floating
interest rate
Fixed interest :
1 year
or less
Over 1
to 5
years
-
7,493
21,519
29,012
4,023,120
-
-
4,023,120
-
(189,200)
-
Non-
Interest
Bearing
Floating
interest rate
Fixed interest :
1 year
or less
Over 1
to 5
years
-
35,399
30,359
65,758
511,322
-
-
511,322
-
(549,012)
-
Total
4,023,120
7,493
21,519
4,052,132
(189,200)
3,862,932
Total
511,322
35,399
30,359
577,080
(549,012)
28,068
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net financial assets/(liabilities)
(483,254)
511,322
25
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
NOTE 14 – REMUNERATION OF DIRECTORS AND EXECUTIVES
(a) Names and positions held of parent entity directors and specific executives in office at any time during
the financial year are:
Parent Entity Directors
Mr. G Button
Mr. A Paul
Mr. E Kirby
Mr. S Huntley
Mr. G Nealon (resigned 12 November 2003)
Specified Executives
Managing Director
Director
Director
Director
Director
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Due to the size of the company and its current level of operations, there were no executives employed
during the financial year.
(b)
Parent Entity Directors’ Remuneration
2004
Mr Button
Mr Paul
Mr Kirby
Mr Huntley
Mr Nealon
2003
Mr Button
Mr Paul
Mr Huntley
Mr Nealon
Mr Jessup
Mr Mews
Mr Griffin
Primary Benefits
Salary & Directors fees
20,000
20,000
12,931
20,000
-
Consulting fees
-
-
-
26,064
17,500
Post employment
Superannuation
-
-
-
-
-
72,931
43,564
-
-
-
-
-
9,166
-
9,166
-
-
3,980
29,900
25,284
-
-
59,164
-
-
-
-
-
-
-
-
-
Total
20,000
20,000
12,931
46,064
17,500
116,495
-
-
3,980
29,900
25,284
9,166
-
68,330
There has been no equity based compensation paid to directors in the last two financial years.
26
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
NOTE 14 – REMUNERATION OF DIRECTORS AND EXECUTIVES
(c) Shares and options held by Parent Entity Directors
Fully paid ordinary shares
Director
Balance at 1 July 2003
Net Changes*
Balance at 30 June 2004
Grant Button
Adrian Paul
Kevin Huntly
Evan Kirby
250,000
6,750,000
Nil
14,300
30 June 2005 options exercisable at 20 cents
Director
Balance at 1 July 2003
Net Changes*
Grant Button
Adrian Paul
Kevin Huntly
Evan Kirby
250,000
6,511,980
Nil
Nil
* Refers to securities purchased or sold during the year.
-
-
-
-
-
250,000
6,750,000
Nil
14,300
Balance at 30 June 2004
250,000
7,191,081
Nil
Nil
679,101
-
-
(c) Remuneration practices
The Company’s policy for determining the nature and amount of emoluments of board members and senior
executives of the company is as follows:
Remuneration levels are competitively set to attract the most qualified and experienced directors and senior
executive officers.
All directors receive fees for services as a director. These fees are paid in cash, the fees are fixed and
approved by shareholders and are not related to the performance of the Company. The Company’s
Constitution provides that directors may collectively be paid a fixed sum not exceeding the aggregate
maximum per annum from time to time as determined by the Company. A director may be paid fees or
other amounts as the directors determine where a director performs special duties or otherwise performs
services outside the scope of the ordinary duties of a director.
Since 30 June 2004 Messrs Button, Kirby and Huntley have entered into consulting agreements with the
Company pursuant to which they each receive a fixed monthly retainer.
27
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
NOTE 15 – REMUNERATION OF AUDITORS
Audit and review services
Other services –tax compliance
Consolidated
Parent entity
2004
$
2003
$
2004
$
2003
$
12,300
4,495
16,115
11,467
12,300
4,495
16,115
11,467
16,795
27,582
16,795
27,582
NOTE 16 - INVESTMENTS IN CONTROLLED ENTITIES
(a) Investment in controlled entities
Name of entity
Country of
registration
Class of
shares
Equity
holding
Book value of parent
entity’s investment
2004
%
2003
%
2004
$
2003
$
Twinloop Nominees Pty Ltd
Australia
Ordinary
100
100
Sylvania South Africa (Proprietary)
Ltd
South Africa Ordinary
100
-
Nil
Nil
Nil
-
(b) Transactions between wholly-owned group
The wholly owned group consists of Sylvania Resources Limited and its wholly owned controlled entities,
Twinloop Nominees Pty Ltd and Sylvania South Africa (Proprietary) Ltd. The ownership interest in these
controlled entities are set out above. Transactions between Sylvania Resources Limited and its controlled entities
during the year consisted of loans advanced interest-free by Sylvania Resources Limited.
Aggregate amounts receivable from entities in the wholly-
owned group at balance date:
Current receivables (loans)
Provision for non-recovery of loans
Non-current receivables (loans)
Parent entity
2004
$
2003
$
567,135
(317,135)
586,188
(304,550)
250,000
281,638
2,530,828
-
28
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
Consolidated
Parent entity
2004
$
2003
$
2004
$
2003
$
NOTE 17 - CASH FLOW INFORMATION
a) Reconciliation of loss from ordinary activities
after income tax to net cash outflow from
operating activities
Loss from ordinary activities after income tax
(469,793)
(2,088,884)
(469,793)
(2,042,531)
Profit on sale of tenements
Write down of other non-current assets to
(749,300)
-
recoverable amount
9,633
17,030
9,633
17,030
Write down of exploration expenditure
to
recoverable amount
Mining tenement expenditure written off
Write down of investment in and loan to
controlled entity
(Increase) / Decrease in receivables
Increase/(Decrease) in payables
-
25,323
-
374,988
2,243,512
-
-
12,738
12,585
-
118,941
1,804,554
27,906
(150,152)
(11,559)
(8,552)
(3,662)
(146,490)
20,009
18,320
Net cash outflow from operating activities
(557,083)
(222,765)
(584,989)
(63,677)
b) Non-cash financing and investing activities
During the financial year the following non-cash financing or investing activities occurred:
• 6,000,000 ordinary shares were issued at a deemed issue price of $0.30 each as part consideration for
the acquisition of a 25% interest in the RK1 consortium.
29
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
Consolidated
2004
$
2003
$
NOTE 18 - EARNINGS PER SHARE
a) Earnings used in the calculation of earnings per share
(469,793)
(2,088,884)
b) Weighted average number of ordinary shares used in the
calculation of basic earnings per share
Number
Number
32,174,713
30,829,949
Options are considered to be potential ordinary shares. However, they are not considered to be dilutive in nature,
as their exercise will not result in a diluted earnings per share that shows an inferior view of earnings performance
of the consolidated entity than is shown by basic earnings per share.
NOTE 19 – COMPANY DETAILS
Sylvania Resources Limited is a publicly listed company limited by shares, registered and domiciled in Australia.
At reporting date, the consolidated entity had no employees.
NOTE 20 – COMMITMENTS
Exploration Expenditure Commitments
Under the terms of tenement licences granted by the relevant Australian State Department, minimum annual
expenditure obligations must be met in order for mining tenements to maintain a status of good standing. The
following amounts may be required to be expended on exploration expenditure on mining tenements in which the
consolidated entity has an interest.
Rk1 Consortium Expenditure Commitments
Under the terms of the RK1 consortium agreement the Company has certain obligations to fund a portion of the RK1
capital costs incurred. Sylvania is committed to GBP615,000 of the initial capital construction costs plus 25% of any
capital expenditure in excess of budget.
The above obligations are not provided for in the financial report and are payable as set out below:
Within one year
Later than one year but not later than five years
Later than five years
NOTE 21 – SEGMENT REPORTING
Consolidated
2004
$
1,615,000
-
-
2003
$
24,800
-
-
Parent entity
2003
$
-
-
-
2004
$
-
-
-
The consolidated controlled entity has mineral exploration and investment interests in both Australia and South
Africa.
30
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
Australia
South Africa
Elimination
Consolidated
2004
$
2003
$
2004
$
2003
$
2004
$
NOTE 21 – SEGMENT REPORTING
(Cont’d)
REVENUE
External sales
Total sales revenue
Other revenue
Share of net profits of equity accounted
associates and joint venture entities
Total segment revenue
Unallocated revenue
Total revenue
RESULT
Segment result
Unallocated expenses net of unallocated
revenue
Loss from ordinary activities
Income tax expense
Net profit
ASSETS
Segment assets
Unallocated assets
Total assets
2004
$
-
50,912
2003
$
-
-
1,214,196
-
-
50,912
1,214,196
-
-
-
-
-
-
-
-
-
(341,944) (1,969,943)
(127,849)
(118,941)
4,302,132
827,080
2,530,828
-
31
-
-
-
-
-
-
-
-
-
-
-
-
-
2003
$
-
-
1,214,196
-
50,912
-
-
50,912
-
50,912
1,214,196
-
1,214,196
(469,793)
-
(2,088,884)
-
(469,793)
-
(469,793)
(2,088,884)
-
(2,088,884)
6,832,960
-
6,832,960
827,080
-
827,080
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
NOTE 21 – SEGMENT REPORTING (Cont’d)
Australia
2004
$
2003
$
South Africa
Elimination
Consolidated
2004
$
2003
$
2004
$
2003
$
-
2004
$
189,200
-
189,200
2003
$
549,012
-
549,012
-
9,633
17,030
LIABILITIES
Segment liabilities
Unallocated liabilities
Total liabilities
139,126
312,736
50,074
236,276
OTHER
Write down of non-current assets
recoverable amount
to
9,633
17,030
-
-
-
-
32
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004
DIRECTORS’ DECLARATION
The directors declare that:
1. The financial statements and notes set out on pages 14 to 32 are in accordance with the Corporations Act 2001
and:
(a) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
(b) give a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2004
and of their performance, as represented by the results of their operations and their cash flows, for the
financial year ended on that date.
2. In the directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts
as and when they become due and payable.
This declaration is made in accordance with a resolution of the directors.
G M Button
Managing Director
Perth, Western Australia
28 September 2004
33
INDEPENDENT AUDIT REPORT
To the members of
SYLVANIA RESOURCES LIMITED
Scope
The Financial Report and Directors' Responsibility
The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows,
accompanying notes to the financial statements, and the directors' declaration for both Sylvania Resources Limited (“the company”)
and the consolidated entity for the year ended 30 June 2004. The consolidated entity comprises both the company and the entities it
controlled during the year.
The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance
with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls
that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the
financial report.
Audit Approach
We conducted an independent audit in order to express an opinion to the members of the company. Our audit was conducted in
accordance with Australian Auditing and Assurance Standards in order to provide reasonable assurance as to whether the financial
report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement,
selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence.
Therefore, an audit cannot guarantee that all material misstatements have been detected.
We performed procedures to assess whether in all material respects, the financial report presents fairly, in accordance with the
Corporations Act 2001, Accounting Standards and other mandatory professional reporting requirements in Australia, a view which is
consistent with our understanding of the company's financial position, and of its performance as represented by the results of its
operations and cash flows.
We formed our audit opinion on the basis of these procedures, which included:
•
•
examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and
assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting
estimates made by the directors.
While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and
extent of our procedures, our audit was not designed to provide assurance on internal controls.
Independence
In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements, the
Corporations Act 2001.
Audit Opinion
In our opinion, the financial report of Sylvania Resources Limited is in accordance with:
(a)
the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the financial position of Sylvania Resources Limited and the consolidated entity as at
30 June 2004 and of their performance for the year then ended; and
complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
(b)
other mandatory financial reporting requirements in Australia.
HLB MANN JUDD
Chartered Accountants
Perth, Western Australia
28 September 2004
L DI GIALLONARDO
Partner
HLB Mann Judd (WA Partnership)
15 Rheola Street West Perth 6005. PO Box 263 West Perth 6872 Western Australia. DX 238 (Perth) Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686.
Email: hlb@mjwa.com.au. Website: http://www.hlb.com.au
Partners: Ian H Barsden, Terry M Blenkinsop, Litsa Christodulou, Wayne M Clark, Lucio Di Giallonardo, Colin D Emmott, Trevor G Hoddy, Norman G Neill, Peter J Speechley
34
HLB Mann Judd (WA Partnership) is a member of
International and the HLB Mann Judd National Association of independent accounting firms
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES
The shareholder information set out below was applicable as at 31 August 2004.
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
1,000
1 −
1,001 −
5,000
5,001 − 10,000
10,001 − 100,000
100,001 and over
Class of equity security
Ordinary shares
3
43
117
159
47
369
Options
3
16
111
175
56
361
There were 7 holders of less than a marketable parcel of ordinary shares.
B. Equity security holders
Twenty largest quoted equity security holders – ordinary shares
Name
National Nominees Ltd
Sunshore Holdings Pty Ltd
Victoria Global Holdings Limited
WB Nominees Limited
Westpac Custodian Nominees Limited
ANZ Nominees Limited
Darenth Securities Limited
Fisherstreet Management Limited
Bell Potter Nominees Pty Ltd
Nefco Nominees Pty Ltd
HSBC Custody Nominees (Australia) Ltd
Dr Salim Cassin
Timriki Pty Ltd
Mr See Chong Cheong
Ferlim Nominees Limited
Vidacos Nominees Limited
Danyland Limited
JM Finn Nominees Limited
Mirabaud & Cie
Penally Management Limited
35
Ordinary shares
No. held
7,915,000
6,750,000
6,000,000
2,614,437
1,900,000
1,790,000
1,625,000
1,500,000
1,170,000
1,000,000
825,973
682,360
650,000
625,000
600,000
600,000
575,000
537,700
520,000
500,000
38,380,470
% of issued
shares
15.26
13.01
11.56
5.04
3.66
3.45
3.13
2.89
2.26
1.93
1.59
1.32
1.25
1.20
1.16
1.16
1.11
1.04
1.00
0.96
73.98
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES (cont)
B. Equity security holders (cont)
Twenty largest quoted equity security holders - 30 June 2005 options
Name
Sunshore Holdings Pty Ltd
Mr C Almondbur
Mr Warwick John Flint
ANZ Nominees Pty Ltd
Goldbull Pty Ltd
Timriki Pty Ltd
Westpac Custodian Nominees Pty Limited
Hopetoun Nominees Pty Ltd
Roxtel Pty Ltd
Bell Potter Nominees Pty Ltd
Mr Donald Maloney
Mr Peter McAleer
Fortis Clearing Nominees Pty Ltd
Fisherstreet Management Limited
Mr A Hurwitz
Mr K Rogerson
Howells Kidner Pty Ltd
Mr Donald Maloney
Mr G Button
Najava Pty Ltd (Macintosh Super Fund A/C)
C. Substantial shareholders
Substantial shareholders in the Company are set out below:
Ordinary shares
Sunshore Holdings Pty Ltd
Victoria Global Holdings Limited
Option holders
No. held
7,191,081
1,295,880
1,050,000
800,000
600,000
600,000
600,000
500,000
500,000
436,719
375,000
375,000
340,000
325,000
300,000
300,000
290,000
255,000
250,000
250,000
% of issued
options
22.27
4.01
3.25
2.48
1.86
1.86
1.86
1.55
1.55
1.35
1.16
1.16
1.05
1.01
0.93
0.93
0.90
0.79
0.77
0.77
16,633,680
51.51
Number
Held
Percentage
6,750,000
6,000,000
13.01
11.56
D. Voting rights
The voting rights attaching to each class of equity securities are set out below:
(a) Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon
a poll each share shall have one vote.
(b) Options
No voting rights.
36
SYLVANIA RESOURCES LIMITED
(ACN 091 415 968)
ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES (cont)
E. Tenement schedule
Project
Tenement Number
% Held
Copper Knob
M52/211
Jimblebar
P52/869
MLA52/739
P52/972
RK1 Consortium
South Africa chrome tailings
re-treatment project
100
80
80
100
25
37