SYLVANIA RESOURCES
LIMITED
ABN 80 091 415 968
ANNUAL REPORT
For the year ended
30 June 2006
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
CONTENTS
CORPORATE INFORMATION
OPERATIONS AND FINANCIAL REVIEW
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
CORPORATE GOVERNANCE STATEMENT
INCOME STATEMENTS
BALANCE SHEETS
STATEMENTS OF CHANGES IN EQUITY
CASH FLOW STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDIT REPORT
ASX ADDITIONAL INFORMATION
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Directors
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
CORPORATE INFORMATION
Terence M McConnachie – Chief Executive Officer
Edward F G Nealon – Non-executive Chairman
Grant M Button –- Executive Director
Dr Evan Kirby – Chief Operating Officer
Melissa J Sturgess Smith – Non-executive Director
Kevin S Huntly – Non-executive Director
Company Secretary
Michael James Langoulant
Registered Office and
Principal Place of Business
98 Colin Street
West Perth, Western Australia 6005 Australia
Share Register
Auditors
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, Western Australia 6000 Australia
HLB Mann Judd
Chartered Accountants
15 Rheola Street
West Perth, Western Australia 6005 Australia
Clayton Utz
QV1
250 St Georges Terrace
Perth, Western Australia 6000 Australia
Stock Exchange Listings
Sylvania Resources Limited is listed on the Australian Stock
Exchange (Shares: SLV) and on the Alternative Investment Market
of the London Stock Exchange (Shares: SLV)
2
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
OPERATIONS AND FINANCIAL REVIEW
AIM LISTING
Admission to the Alternative Investment Market of the London Stock Exchange Plc (“AIM”)
Subsequent to the year end, the shares of Sylvania Resources Limited (“the company”) commenced trading on AIM
after a placing of new shares which raised £12 million (A$29.6 million) (before expenses). The company issued
40,000,000 placing shares, representing 27.5 per cent of the enlarged issued share capital of the company, at 30 pence
(A$0.74) per ordinary share. Williams de Broë acted as the company’s Nominated Adviser and Broker. The
placement was approved at a general meeting of shareholders of the company, which was held on 26 June 2006.
SOUTH AFRICAN OPERATIONS
Chromite Tailings Retreatment Project (Sylvania 25%)
The company has a 25% interest in a consortium which owns the Chrome Tailings Retreatment Project (“CTRP”) which is
managed by Aquarius Platinum Limited.
The CTRP operation had a positive year with Platinum Group Metal (“PGM”) production for the year increasing nearly three
fold to 6,234 PGM ounces (1,558 PGM ounces attributable to the company).
CTRP: Metal in concentrate produced (PGM ounces)
Year Ended
Pt
Pd
2006
2005
3,799
1,321
1,378
439
Rh
1,044
353
Au
13
4
PGM (4E)
6,234
2,117
PGM (4E)
Attributable to
the company
1,558
529
Over the year recoveries and production have improved markedly as the technical enhancements to the Plant began to take
effect. This led to consistent and stable operation being achieved with recoveries rising to 68% against 51% in the previous
quarter. The average PGM basket price received for the year increased by an average 45% to US$1,207 per PGM ounce. As a
result of the increased production levels and basket prices, revenue increased to R43 million (R10.7 million attributable to the
company). The cash operating margin for the year increased to 63% from 37.5% in the previous year.
During the year, the management team at CTRP commissioned test work at Mintek to better understand the metallurgical
characteristics of the feed sources. This work primarily identified the material being treated from Bayer as the source of the
production and recovery problems and consequently CTRP stopped treating this material during the March quarter. During the
fourth quarter, only current arisings from the Krooondal Chrome Mine were fed to CTRP. This led to monthly tonnages being
treated falling to roughly half design capacity at 10,000 tonnes per month. However despite the lower monthly throughput,
PGM production levels actually increased as recoveries and grade improved.
CTRP is currently completing a project to add dump material from the Kroondal Chrome Mine to the CTRP feed, which is
scheduled for completion at a cost of approximately R2 million. This is planned to increase feed tonnages back to current
design capacity of 20,000 tonnes per month and consequently it is anticipated that PGM production will continue to increase
throughout the 2007 financial year.
Additional staged expansions, including the pipeline to feed Bayer current arisings, plus additional flotation cells at CTRP to
increase the capacity beyond 20,000 tonnes per month, are under consideration by the consortium. Test work is in progress,
which is aimed at gaining a better understanding of the processing requirements of the Bayer current arisings and dump
material.
Samancor Dumps
During the year the company signed a range of agreements with Samancor in relation to the retreatment of chromite mine
tailings for the extraction of chrome and PGM’s. The Samancor Agreement (“Agreement”) expires on the later of 30 April
2011 or the date on which all of the chrome in the relevant tailings dumps has been processed. The Agreement provides that
following the expiry of its initial term (as referred to above) it can be renewed by agreement between the parties. The
company estimates that it should take just under 5 years to complete the washing of the historical chrome dumps covered by
the Agreement, however, the rewashing of current arisings should last considerably longer.
3
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
OPERATIONS AND FINANCIAL REVIEW (CONTINUED)
Under the terms of the Agreement, the company will be able to process five Samancor tailings dumps at its Western Chrome
Mines (Buffelsfontein, Waterkloof, Mooinooi, Elandsdrift and Millsell), and eight at its Eastern Chrome Mines (Tweefontein,
Lannex, Steelport, Doornbosch, Montrose, Groothoek, Onverwacht and Mooihoek). The company will recover for Samancor
the chrome washed from the tailings at a price agreed by reference to a sliding price scale that is dependent upon the volume of
chrome recovered and will receive in exchange the resultant tailings to be processed for PGM recovery. Full details of the
Agreements are disclosed in the AIM Listing document dated 17 July 2006.
The company plans to construct a total of six chrome washing plants (“CWP’s”) and four PGM recovery plants (“PRP’s”) to
treat both current tailings arisings and stockpiled dump tailings from the Samancor mines.
The company has constructed a CWP which is located at the Samancor Millsell Mine near Kroondal. This plant is producing
chrome concentrates from Millsell dump and current arisings tailings. Additional facilities which will allow increased
throughput as well as PGM concentrate production are currently being constructed at Millsell. The operation of the processing
facilities has been contracted out to Tailings Technology Pty Ltd, a South African company with extensive experience in PGM
recovery by flotation.
A project to construct CWP’s and PRP’s at Samancor’s Steelpoort mine has commenced and Matomo Projects (Pty) Ltd
(Matomo) has been awarded the contracts for this work. Matomo has extensive experience with small minerals processing
plants and their core team of engineers were involved with the design and construction of CTRP. The company anticipates
working with Matomo on the remaining CWP’s and PRP’s.
The company has scheduled the construction of the six CWP’s by July 2007. The company’s current intention is for each
CWP (except Mooinooi which is planned for a capacity of 57,000 tonnes per month) to be designed to treat a minimum of
30,000 tonnes of input tailings per month to recover approximately 7,500 to 10,000 tonnes of saleable chrome product per
plant per month.
Once the chrome tailings have been washed and the extracted chrome has been returned to Samancor, the company will pipe
the resultant tailings to one of the four PRP’s for recovery of PGMs.
The company plans to construct and commission four PRP’s by October 2008, which will be located at Waterkloof,
Buffelsfontein, Tweefontein and Steelport. Each of the plants has planned capacity to treat 20,000 tonnes per month of final
tailings, with the exception of Buffelsfontein where the design capacity will be for 40,000 tonnes per month
The company has announced that it intends to finalise an agreement with a self funding, broad based BEE partner, to ensure
compliance with South Africa’s Broad Based Economic Empowerment Act No. 53 of 2003 and the codes of good practice
published in terms of the South African Mining Charter. It is anticipated that the company will hold a 74% interest in each of
the CWP’s and PRP’s, with the remaining 26% held and funded by the BEE partner.
Everest North PGM Project
The Everest North project lies on the Farm Vygenkoek JT 10 in the eastern Bushveld of South Africa, and is prospective for
PGMs. Previous work has outlined an inferred resource of 4.2 million tonnes grading 5.87 g/t PGM, for an inferred resource
of 796,000 ounces of PGMs.
A full feasibility study commenced in April 2006, with a diamond drilling programme commencing in the forth quarter and
Metago Environmental Engineers being awarded the Environmental Impact Assessment study work.
To date, five boreholes and deflections have been drilled on the Vygenhoek Farm at the Everest North Project site. Drilling
commenced in June 2006 and currently two rigs are deployed on site. A third rig will commence operation in October. To
date 546.56 metres have been drilled. The average reef thickness obtained in 11 UG2 intersections is 1.42 metres, with the
narrowest measuring 1.21 metres and thickest reef seam measuring 2.00 metres. The entire reef intersected so far has been
composite UG2 reef comprising the full UG2 package with no interstitial pyroxenite waste. It would appear at this stage that
the composite reef is present on the bulk of the of the Vygenhoek portion of the reserve.
It is pleasing to note that the reef intersected appears solid and the top and bottom waste intersections are characterized by
competent rock implying that the underground extraction thereof is a viable and feasible proposition.
Results of the feasibility study are anticipated by the end of the 2006 calendar year.
4
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
OPERATIONS AND FINANCIAL REVIEW (CONTINUED)
AUSTRALIAN OPERATIONS
Exploration by the company 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.
The company had previously entered into an Option agreement with Warwick John Flint (Flint) over all of its Australian
tenements at Jimblebar and Copper Knob. Under the terms of the Option Agreement, Flint had the right to exercise the Option
at any time up until 16 August 2005, to acquire the company’s interests in its Australian tenements for the consideration of
A$55,000, and the issuance to the company 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.
During the year Flint exercised his right to extend the Option Agreement for a further 12 month period until 16 August 2006
through the payment of $10,000. Under the terms of the Option extension, the share consideration component of the exercise
price of the Option has increased to $300,000.
Subsequent to year end, Flint and the company extended the Option Agreement until 16 February 2007 for an Option fee of
$7,500. Under the terms of the Option Agreement extension, the share consideration component of the exercise price of the
Option remains at $300,000.
Entering into this Option Agreement is consistent with the Board’s intention of focusing its attention on its platinum related
activities in Southern Africa.
5
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
DIRECTORS’ REPORT
Your directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Sylvania
Resources Limited and the entities it controlled at the end of, or during, the financial year ended 30 June 2006.
Directors
The names of directors who held office during or since the end of the year and until the date of this report are as follows.
Directors were in office for the entire period unless otherwise stated.
Name
Qualifications
Particulars
Terrence M McConnachie
Chief Executive Officer
Edward F G Nealon
Non-executive Chairman
BSc Geol
(Hons),
MSc Geol,
MAusIMM
Grant M Button
Executive Director
B.Bus.(Acc),
CPA
Dr Evan Kirby
Chief Operating Officer
BSc(Hons)
Metallurgy,
PhD
Metallurgy,
MAusIMM,
MSthAfrIMM
Melissa J Sturgess Smith
BSc, MBA
Non-executive Director
Appointed as a Director in June 2005 and subsequently Chief Executive
Officer of the company in March 2006. Aged 50, Mr McConnachie has
over 25 years of experience in mining, beneficiation of ferroalloys and
precious metals. He was the founder of Merefe Resources Limited
(formerly South African Chrome & Alloys Ltd), a successful chrome
mining company; black empowered and listed on the Johannesburg Stock
Exchange with assets worth in excess of a billion rand ($350 million). He is
well known for identifying mining opportunities and has started many new
green-field operations in gold, manganese, aluminium, graphite and
tantalite. He has been CEO of a number of mining, mining services and
smelting companies in South Africa. He has held no other listed public
company directorships in the past 3 years.
Appointed in December 2004. Aged 55, Mr Nealon is a qualified geologist
with over 25 years experience in the mining and exploration industry. He
has worked around the world with major companies such as Anglo-
America Corporation, Rio Tinto and Aquarius Platinum. He founded his
own consulting company in 1983. He is a non-executive director of Dwyka
Diamonds Limited (since 2001) and Tanzanite One Limited (since 2004).
From 1997 to 2002 he acted as both executive and non-executive director
of Aquarius Platinum Limited.
Appointed in December 2002. Aged 44, Mr Button has 15 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
range of publicly listed companies. Mr Button is also a Director of
Washington Resources Limited (appointed 2005) and Magnum Gold NL
(appointed 2006)
Appointed in November 2003. Aged 55 Dr Kirby has worked for major
companies such as Impala Platinum, Rand Mines, Rustenburg Platinum
Mines, 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 particularly in Africa and
Australia. He is also Chief Operations Officer of Dwyka Diamonds Limited
(since 2002) and a non-executive director of Wedgetail Exploration NL
(since 2004). He has held no other public company directorships in the past
3 years.
Appointed in December 2004. Aged 40, Ms Sturgess has over 10 years
experience in corporate development and promotion with an emphasis on
attracting institutional shareholders for a range of public companies,
including Aquarius Platinum Limited and Dwyka Diamonds Limited. She
is Executive Chairman of Dwyka Diamonds Limited (since 2001) and a
non-executive director of Churchill Mining plc (since 2005). She has held
no other listed public company directorships in the past 3 years.
Kevin S Huntly
Non-executive Director
GDE
(Eng)
MSc
Appointed in December 2002. Aged 44, Mr Huntly has 25 years experience
in the South African mining industry. He operates his own consultancy
business advising a number of international mining companies. Mr Huntly
is also a Director of Washington Resources Limited (appointed 2005).
6
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
DIRECTORS’ REPORT (CONTINUED)
Company Secretary
The company secretary is Michael Langoulant, B.Com, CA. Mr Langoulant was appointed to the position of company
secretary in February 2005. Mr Langoulant operates a corporate consulting business that specialises in public company
corporate secretarial/administration and fundraising. After 10 years with large international accounting firms he has acted
as CFO, company secretary and non-executive director with a number of publicly listed companies.
Interests in the shares and options of the company and related bodies corporate
During and since the end of the financial year a total of 3,000,000 shares and 750,000 share options were granted to the
directors and executives of the company. As at 30 June 2006, share and option holdings are as follows:
Terry M McConnachie
Edward F G Nealon
Grant M Button
Melissa J Sturgess Smith
Kevin S Huntly
Dr Evan Kirby
Number of options
granted during year
500,000
-
-
-
250,000
-
Number of options over
ordinary shares
500,000
-
-
-
250,000
-
Number of fully paid
ordinary shares
-
750,000
1,250,000
815,000
-
764,300
Dividends
No dividend has been paid or declared since the start of the financial year and the directors do not recommend the payment
of a dividend in respect of the financial year.
Principal activities
The principal activity of the Group during the financial year was investment in mineral exploration and mineral treatment
projects.
Review of operations
A review of the operations of the Group is contained within the Operations and Financial Review.
Operating result for the year
The consolidated loss of the Group for the year after income tax expense was $8,981,807 (2005: $1,011,374).
Significant changes in the state of affairs
There have been no significant changes in the state of affairs of the Group to the date of this report.
Significant events after balance date
On the 21 July 2006, the company commenced trading its shares on AIM in London after a placing raised £12 million (AUS
$29.6 million) (before expenses). The company has issued 40,000,000 placing shares, representing 27.5 per cent of the
enlarged issued share capital of the company at 30 pence (AUS $0.74) per ordinary share.
On the 25 July 2006, the company announced that further to its contract with Samancor Limited, the company has been
granted prospecting rights over dumps at several of Samancor’s Western and Eastern Chrome Mines located in the
Bushveld Complex of South Africa.
In accordance with its facilitation agreement with Portpatrick Ltd a further 5.275 million ordinary fully paid shares have
been issued to Portpatrick Ltd for securing the prospecting rights to these highly prospective tailings dumps. The company
intends to retreat these tailings for the extraction of chrome and platinum group metals. Under the terms of the agreement
between the company and Portpatrick dated 7 December 2005, a further 4,725,000 Ordinary Shares remain to be issued to
Portpatrick as further consideration should extraction rights to these prospective tailings dumps be obtained.
Other than the above, there has not been any matter or circumstance that has arisen after balance date that has significantly
affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the
Group in future financial periods.
Likely developments and expected results
Additional comments on expected results of certain operations of the Group are included in the Operations and Financial
Review.
7
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
DIRECTORS’ REPORT (CONTINUED)
Environmental legislation
The Group is subject to significant environmental legal regulations in respect to its exploration and evaluation activities in
Australia and South Africa. There have been no known breaches of these regulations and principles.
Indemnification and insurance of Directors and Officers
During the year the company 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 a
confidentiality clause in the contract the amount of the premium has not been disclosed. The company has no insurance
policy in place that indemnifies the company’s auditors.
Meetings of directors
During the financial year there were 6 formal directors’ meetings and 3 meetings of a sub-committee established to issue
new shares following the exercise of options. All other matters that required formal Board resolutions were dealt with via
circulating written resolutions. In addition the directors met on an informal basis at regular intervals during the year to
discuss the Group’s affairs.
The number of meetings of the company’s board of directors attended by each director were:
Terry M McConnachie
Edward F G Nealon
Grant M Button
Melissa J Sturgess Smith
Kevin S Huntly
Dr Evan Kirby
Directors’ meetings held
whilst in office
Directors’ meetings
attended
6
6
6
6
6
6
6
6
6
6
5
6
8
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
DIRECTORS’ REPORT (CONTINUED)
Remuneration report
Details of directors’ and executives’ remuneration are set out under the following main headings:
A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Consultancy agreements
D Share-based compensation
A Principles used to determine the nature and amount of remuneration
The objective of the company’s executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aims to align executive reward with the creation of value for shareholders.
The key criteria for good reward governance practices adopted by the Board are:
•
•
•
•
•
competitiveness and reasonableness
acceptability to shareholders
performance incentives
transparency
capital management
The framework provides a mix of fixed fee, consultancy agreement based remuneration, and share based incentives.
The broad remuneration policy for determining the nature and amount of emoluments of Board members and senior executives
of the company is governed by a Board Remuneration Committee. At present the full Board acts as the remuneration
committee in accordance with a written Remuneration Committee Charter. The Remuneration Committee’s aim is to ensure
the remuneration packages properly reflect directors and executives duties and responsibilities. The Committee assesses the
appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant
employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention and
motivation of a high quality Board and executive team.
The current remuneration policy adopted is that no element of any director/executive package be directly related to the
company’s financial performance. Indeed there are no elements of any director or executive remuneration that is dependent
upon the satisfaction of any specific condition. The overall remuneration policy framework however is structured in an
endeavour to advance/create shareholder wealth. This policy has not changed over the past five (5) financial years.
Non-executive directors
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors.
Non-executive directors’ fees and payments are reviewed annually by the Board and are intended to be in line with the market.
Directors are not present at any discussions relating to determination of their own remuneration.
Directors’ fees
All of the directors perform at least some executive or consultancy services. However, each of the directors receives a separate
fixed fee for their services as directors, as the Board considers it important to distinguish between the executive and non-executive
roles held by those individuals.
The maximum aggregate remuneration for the directors was last determined at the Annual General Meeting held on the 30
November 2005, when shareholders approved an aggregate remuneration of $300,000 per year. The amount of aggregate
remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed
annually. The Board considers advice from external shareholders as well as the fees paid to non-executive directors of
comparable companies when undertaking the annual review process.
Retirement allowances for directors
Apart from superannuation payments paid on base director fees there are no retirement allowances for directors.
Executive pay
The executive pay and reward framework has four components:
•
•
•
base pay and benefits such as superannuation
short-term performance incentives
long-term incentives through participation in the Employee Share/Option Plan
9
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
DIRECTORS’ REPORT (CONTINUED)
Remuneration report (continued)
Base pay
All executives currently receive a fixed monthly retainer as agreed with the company. The provision of Consultancy Services
has been formalised in individual Consultancy Agreements, dated 14 June 2006.
Benefits
Apart from superannuation paid on directors’ fees there are no additional benefits paid to executives.
Short-term incentives
There are no current short term incentive remuneration arrangements.
Employee share/option plan
To ensure that the company has appropriate mechanisms in place to continue to attract and retain the services of suitable
directors and employees, the company has established the Share Plan and the Option Plan, which were approved by the
Shareholders on the 30 November 2005 at the company’s Annual General Meeting.
The number of Ordinary Shares or Options that may be offered to a Participant is entirely within the discretion of the Board.
The company does not intend to offer more than 6,000,000 securities (being a combination of Ordinary Shares under the Share
Plan and Options under the Option Plan) under the Share Plan and the Option Plan, which represented approximately 4.1% of
the Ordinary Shares in issue at the time of approval.
Amounts of remuneration
Details of the remuneration of the directors and executives of the company and the Group for the year ended 30 June 2005 and
2006 are set out in the following tables. There are no elements of remuneration that are directly related to performance. The
remuneration shown for E Nealon and M Sturgess for the year ended 30 June 2005 includes fees paid to them as consultants
prior to their appointment as directors of the company.
Table 1: Directors’ remuneration for the year ended 30 June 2006
Primary benefits
Post employment
Directors
Terry M McConnachie
Edward F G Nealon
Grant M Button
Dr Evan Kirby
Melissa J Sturgess Smith
Kevin S Huntly
Salary and
Consulting fees
$
103,167
169,600
120,000
54,167
99,600
27,830
Director’s fees
$
Superannuation
$
35,000
35,000
25,000
35,000
35,000
35,230
-
3,150
13,150
3,150
3,150
-
Equity
Shares/
Options
$
41,101
51,388
51,388
51,388
51,388
20,551
Total
$
179,268
259,138
209,538
143,705
189,138
83,611
Other key management personnel
Michael James Langoulant
36,000
-
-
17,129
53,129
A cash bonus of $71,962 was paid to the CEO during the year. This is included within Salary and Consultancy fees. No other
cash bonuses were issued to directors or executives during the year.
10
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
DIRECTORS’ REPORT (CONTINUED)
Remuneration report (continued)
Table 2: Directors’ remuneration for the year ended 30 June 2005
Primary benefits
Post employment
Directors
Terry M McConnachie
Edward F G Nealon
Grant M Button
Dr Evan Kirby
Melissa J Sturgess Smith
Kevin S Huntly
Adrian S Paul
Salary and
Consulting
fees
$
-
99,600
110,000
40,000
99,600
17,020
-
Director’s fees
$
Superannuation
$
493
11,370
20,000
20,000
11,370
20,000
19,506
-
1,023
1,800
1,800
1,023
-
1,756
Other key management personnel
Michael James Langoulant
18,160
-
-
Equity
Shares/
Options
$
-
-
-
-
-
-
-
-
Total
$
493
111,993
131,800
61,800
111,993
37,020
21,262
18,160
Table 3: Options granted as part of the Directors and Employees Incentive Option Plan for the year ended 30 June 2006
Directors
T M McConnachie
Vested
No.
Granted
No.
- 500,000
K S Huntly
- 250,000
Grant Date
20 April
2006
20 April
2006
Fair Value
per option
at grant
date
$
Exercise
price per
option
$
Total value of
options granted
$
Expiry Date
Value of
options
included in
remuneration
for the year
$
0.56
0.56
0.50 30 June 2009
281,853
41,101
0.50 30 June 2009
140,927
20,551
No compensation options were granted or vested during the year ended 30 June 2005.
For details on the valuation of the options, including models and the assumptions used, please refer to note 15.
Table 4: Shares granted as part of the Directors and Employees Incentive Share Plan for the year ended 30 June 2006
Directors
Edward F G
Nealon
Grant M Button
Dr Evan Kirby
J
Melissa
Sturgess Smith
Michael
Langoulant
James
Vested
No.
Granted
No.
Grant Date
- 750,000 21 December
2005
- 750,000 21 December
2005
- 750,000 21 December
2005
- 750,000 21 December
2005
- 250,000 21 December
2005
Fair Value
of option
implicit in
share at
grant date
$
Exercise
price per
share
$
Value of shares
included in
remuneration
for the year
$
Total value of
shares granted
$
Expiry Date
0.165
0.50 30 June 2009
123,812
51,388
0.165
0.50 30 June 2009
123,812
51,388
0.165
0.50 30 June 2009
123,812
51,388
0.165
0.50 30 June 2009
123,812
51,388
0.165
0.50 30 June 2009
41,271
17,129
No compensation shares were granted or vested during the year ended 30 June 2005.
For details on the valuation of the options, including models and the assumptions used, please refer to note 15.
11
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
DIRECTORS’ REPORT (CONTINUED)
Remuneration report (continued)
Consultancy agreements
C
Formal Consultancy Agreements were made with the company and all directors on the 14 June 2006.
The details of the Chief Executive Officer’s Consultancy Agreement are summarised below:
•
•
•
Engagement
The company engages the Consultant to provide the company with the Consultancy Services during the Term, on and
subject to the terms of the Agreement, and the Consultant accepts the Engagement.
Term
The initial term of the engagement commences on the 14 June 2006 and continues for a two years, unless that period is
extended or terminated in accordance with the following summarised terms:
Extension of Term
Following the completion of the term indicated above, if the parties agree, the engagement will be extended for rolling
periods of one year thereafter.
Termination by Company
The company may immediately terminate this agreement by giving written notice to the Consultant.
Entitlements on termination
Upon termination of the Agreement the Consultant (pursuant to additional clauses) is entitled to the Consultancy Fee up
to and including the date of termination.
Termination by notice by Company or Consultant
The Agreement may be terminated without cause by either the company or the Consultant upon giving the other party
notice in writing for a period of 6 months or the company paying 6 months Consultancy Fee in lieu of notice.
Remuneration
In consideration for the Consultancy Services, the company will pay the Consultancy Fee to the Consultant in monthly
instalments in arrears at the end of each month. In addition, the company may, if the Board (following a
recommendation by the Remuneration Committee) so resolves, offer to the Consultant or the Nominated Executive,
securities in accordance with the company’s share or option incentive plan.
Share-based compensation
D
As detailed above, shareholders approved an employee share and option plan at the Annual General Meeting on the 30
November 2005. The aim of the employee share and option plan is be to provide long term incentives to directors and
executives to create and enhance shareholder wealth and to provide a mechanism to assist the company in its endeavours to
retain key executives.
Options
At the date of this report, the only options on issue by the company were those issued under the Employee Option Plan.
Details of these options over un-issued ordinary shares of the company are as follows:
Grant Date
Date of expiry
Exercise price
Number of options
20 April 2006
30 June 2009
0.50
750,000
Option holders have no rights by virtue of the option to participate in any share issue of any other body corporate. During or
since the year ended 30 June 2006, no ordinary shares of the company were issued on the exercise of any options granted by
the company.
Additionally the company has issued 3,850,000 shares under the Employee Share Plan. Full details of the issue are disclosed
in Note 15.
Auditor Independence and Non-Audit Services
Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the directors of the company
with an Independence Declaration in relation to the audit of the annual report. This Independence Declaration is set out on page
14 and forms part of this directors’ report for the year ended 30 June 2006.
12
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
DIRECTORS’ REPORT (CONTINUED)
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.
During the year the following fees were paid or payable for services provided by the auditor of the parent entity or its related
practices:
Assurance services
HLB Mann Judd Australian firm:
Audit and review of financial statements
Related practices of HLB Mann Judd (HLB Barnett Chown Inc.)
Total remuneration for audit services
Taxation services
HLB Mann Judd Australian firm:
Tax compliance services, including review of company income tax returns
Related practices of HLB Mann Judd (HLB Barnett Chown Inc.)
Total remuneration for taxation services
Advisory services
HLB Mann Judd Australian firm:
Services in respect to AIM Listing
Advice regarding Share and Options valuations
Total remuneration for advisory services
Total auditors’ remuneration
Consolidated
2006
$
21,640
28,032
49,672
3,958
1,626
5,584
16,600
2,400
19,000
74,256
The full board of directors (as the audit committee) has considered the position and is satisfied that the provision of the non-
audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The
nature and scope of the non-audit service provided means that auditor independence was not compromised.
Proceedings on behalf of 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.
This report is made in accordance with a resolution of the directors.
Edward Nealon
Non-executive Chairman
Perth, Western Australia
28 September, 2006
13
Auditor’s Independence Declaration
As lead auditor for the audit of the financial report of Sylvania Resources Ltd for the year ended 30
June 2006, I declare that to the best of my knowledge and belief, there have been:
a)
b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Sylvania Resources Ltd.
Perth, Western Australia
28 September 2006
W M Clark
Partner, HLB Mann Judd
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
HLB Mann Judd (WA Partnership) is a member of
International and the HLB Mann Judd National Association of independent accounting firms
14
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
CORPORATE GOVERNANCE STATEMENT
Introduction
Since the introduction of the ASX Principles of Good Corporate Governance and Best Practice Recommendations ("ASX
Guidelines"), Sylvania Resources Limited ("the company") has made it a priority to adopt systems of control and
accountability as the basis for the administration of corporate governance. Some of these policies and procedures are
summarised in this report. Commensurate with the spirit of the ASX Guidelines, the company has followed each
Recommendation where the Board has considered the recommendation to be an appropriate benchmark for corporate
governance practices, taking into account factors such as the size of the company and the Board, resources available and
activities of the company. Where, after due consideration, the company's corporate governance practices depart from the
Recommendations, the Board has offered full disclosure of the nature of, and reason for, the adoption of its own practice.
Further information about the company's corporate governance practices is set out on the company's website at
www.sylvaniaresources.com. In accordance with the ASX Principles and Recommendations, information published on the
Company's website includes charters (for the Board and its sub-committees), codes of conduct and other policies and
procedures relating to the Board and its responsibilities.
Explanations for departures from best practice recommendations
Principle:
2
Recommendation:
2.1 – A majority of the Board should be independent directors
Notification of departure:
Two of the six directors are considered to be independent.
Explanation for departure:
The Board considers that its structure has been, and continues to be, appropriate in the
context of the company's recent history and that each of the non-independent directors
possess skills and experience suitable for building the company.
Principle:
2
Recommendation:
2.2 – The Chairperson should be an independent director
Notification of departure:
Explanation for departure:
The chairperson does not satisfy the test of independence as set out in Box 2.1 of the ASX
Principles of Good Corporate Governance and Best Practice Recommendations
Independence Test ("Independence Test").
While the Board recognises the importance of independence in decision making, it does not
comply with best practice recommendation 2.2 as Edward Nealon, the current chairperson,
does not satisfy paragraph 3 of the Independence Test. The Board believes that Mr Nealon
is the most appropriate person for the position because of his ability to pursue strategic
opportunities and relationships for the company and his experience in the corporate
development of a range of public companies.
Principle:
2
Recommendation:
2.4 – The Board should establish a Nomination Committee
Notification of departure:
A separate nomination committee has not been formed.
Explanation for departure:
The full Board considers those matters that would usually be the responsibility of a
nomination committee. The composition of the Board does not make the establishment of a
separate nomination committee practicable. The Board has adopted a Nomination
Committee Charter, which it applies when convening as the nomination committee.
Principle:
4
Recommendation:
4.2 – The Board should establish an Audit Committee.
Notification of departure:
For a portion of the reporting period, a separate Audit Committee was not formed.
Explanation for departure:
At the time, the formation of an Audit Committee was not considered appropriate or
necessary. The Board had adopted, and applied, an Audit Committee Charter when
considering all matters relating to the financial affairs of the Company. In addition, the
Board liaised with the external auditors in both Australia and South Africa in connection
with the audit of the financial accounts. However, due to changes in the Group’s activities
a separate Audit Committee has now been formed.
15
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Principle:
Recommendation:
4
4.3 – Structure the Audit Committee so that it consists of only non-executive directors; a
majority of independent directors; an independent chairperson, who is not chairperson to
the Board; and at least 3 members.
Notification of departure:
The composition of the Audit Committee is not as recommended.
Explanation for departure:
As there are only 2 independent directors on the Board the structure of the audit committee
is not as recommended in that it consists of 2 independent directors and one non-
independent director.
Principle:
Recommendation:
9
9.2 – The Board should establish a Remuneration Committee.
Notification of departure:
For a portion of the reporting period, a separate remuneration committee has not been
formed.
Explanation for departure:
At the time, the formation of a Remuneration Committee was not considered appropriate
or necessary. The Board had adopted, and applied, a Remuneration Committee Charter
when considering remuneration matters. However, due to changes in the Group’s
activities a separate Remuneration Committee has now been formed.
Nomination committee
During the year there were no meetings of the full Board, in its capacity as the Nomination Committee.
Audit committee
During the reporting period, a separate Audit Committee was formed. The members are Melissa Sturgess (Chair), Scott Huntly,
Evan Kirby and Michael Langoulant (Company Secretary). There has yet to be a meeting of this committee. For the portion of
the year where the full Board met in its capacity as the Audit Committee one meeting was held which was attended by all
members.
Remuneration committee
Company's remuneration policies
The Company’s remuneration policies are discussed in the “Remuneration Report” section of the Directors’ Report.
The Remuneration Committee did not meet during the reporting period.
Other
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
In considering independence of directors, the Board refers to the criteria for independence as recommended by the ASX. To
the extent that it is necessary for the Board to consider issues of materiality, the Board refers to the thresholds for qualitative
and quantitative materiality as adopted by the Board and contained in the Statement of Board and Management Functions,
which is disclosed in full on the company’s website.
Applying the independence criteria, the Board considers that Melissa Strugess and Scott Huntly are independent.
16
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
In the interests of disclosure, through their respective consultancy companies, Ms Sturgess and Mr Huntly provide expertise
and know-how in relation to the Company's business, which services are provided at normal commercial rates.
Notwithstanding the relationships between each of Ms Sturgess and Mr Huntly and the Company, the Company considers that
in neither case relevant materiality thresholds are exceeded, and neither Ms Sturgess nor Mr Huntly are impeded from
exercising independent judgment in their roles as directors.
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 such advice.
Confirmation whether performance evaluation of the Board and its members have taken place and how conducted
During the Reporting Period a formal evaluation of the non-executive members of the Board was not carried out, as it was not
considered to be a beneficial procedure given the size and composition of the Board and the nature of the Company's
operations. However, the composition of the Board and its suitability to carry out the Company's objectives is discussed on an
as-required basis during regular meetings of the Board and any adjustments made accordingly.
17
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
INCOME STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
Other income
Share of net profit of joint venture entity
accounted for on an equity basis
Depreciation
Exploration expenditure written off
Foreign exchange gain / (loss)
Project generation costs
Impairment of loans to subsidiaries
Write down of non-current assets
Other expenses
Loss before income tax expense
Income tax benefit
Loss after income tax expense from
continuing operations
Net loss for the period
Net loss attributable to members of
parent
Basic earnings per share (cents)
Diluted earnings per share (cents)
Consolidated
Parent entity
Notes
2006
$
2005
$
2006
$
2005
$
2
439,220
114,720
429,220
114,720
1,148,649
143,079
-
-
(5,633)
(251,855)
135,209
(7,294,461)
-
-
(3,311,065)
(9,139,936)
-
(10,705)
(59,995)
(106,661)
-
(1,783)
(1,090,029)
(1,011,374)
(2,673)
-
135,209
(7,200,000)
(706,693)
-
(2,510,945)
(9,855,882)
-
(19,926)
(59,995)
-
9,221
(1,783)
(1,184,285)
(1,142,048)
158,129
-
-
-
(8,981,807)
(1,011,374)
(9,855,882)
(1,142,048)
(8,981,807)
(1,011,374)
(9,855,882)
(1,142,048)
(8,981,807)
(1,011,374)
(9,855,882)
(1,142,048)
(9.40)
(9.40)
(1.92)
(1.92)
14 (a)
2
3
5
5
The accompanying notes form part of these financial statements.
18
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
BALANCE SHEETS
AS AT 30 JUNE 2006
Consolidated
Parent entity
Notes
2006
$
2005
$
2006
$
2005
$
Assets
Current Assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Available-for-sale investments
Investments accounted for using the
equity method
Other financial assets
Plant and equipment
Deferred exploration expenditure
Deferred tax asset
6
7
8
9
10
11
12
3
5,945,746
10,133,474
5,850,676
10,131,243
208,942
319,491
36,108
569,491
6,154,688
10,452,965
5,886,784
10,700,734
322,779
19,736
322,779
19,736
4,761,496
114,731
1,404,044
490,693
158,129
4,042,475
-
4,003
644,400
-
-
7,016,919
15,811
-
-
-
4,819,190
4,003
-
-
Total non-current assets
7,251,872
4,710,614
7,355,509
4,842,929
Total assets
13,406,560
15,163,579
13,242,293
15,543,663
Current liabilities
Payables
13
569,221
244,875
Total current liabilities
569,221
244,875
385,156
385,156
242,903
242,903
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
569,221
244,875
385,156
242,903
12,837,339
14,918,704
12,857,137
15,300,760
14
14
14
29,242,204
(812,288)
(15,592,577)
22,042,204
(512,730)
(6,610,770)
29,242,204
212,259
(16,597,326)
22,042,204
-
(6,741,444)
12,837,339
14,918,704
12,857,137
15,300,760
The accompanying notes form part of these financial statements.
19
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2006
Consolidated
Issued capital
$
Accumulated
losses
$
Reserves
Total equity
$
$
Balance at 1 July 2004
11,957,781
(5,599,396)
285,375
6,643,760
to
transferred
Loss for the period
Option
reserve
contributed equity
Shares issued during the year:
Options exercised
Placement
Less: Capital raising costs
Currency translation differences
Balance at 30 June 2005
Shares issued during the year
Loss for the period
Share based compensation reserve
Net gains revaluation reserve
Currency translation differences
-
(1,011,374)
-
(1,011,374)
285,375
6,403,078
3,501,000
(105,030)
-
22,042,204
7,200,000
-
-
-
-
-
(285,375)
-
-
-
-
-
(6,610,770)
-
(8,981,807)
-
-
-
-
-
-
(512,730)
(512,730)
-
-
325,441
(113,182)
(511,817)
6,403,078
3,501,000
(105,030)
(512,730)
14,918,704
7,200,000
(8,981,807)
325,441
(113,182)
(511,817)
Balance at 30 June 2006
29,242,204
(15,592,577)
(812,288)
12,837,339
Parent entity
Issued capital
$
Accumulated
losses
$
Reserves
Total equity
$
$
Balance at 1 July 2004
11,957,781
(5,599,396)
285,375
6,643,760
to
transferred
Loss for the period
reserve
Option
contributed equity
Shares issued during the year:
Options exercised
Placement
Less: Capital raising costs
Balance at 30 June 2005
Shares issued during the year
Loss for the period
Share based compensation reserve
Net gains revaluation reserve
-
(1,142,048)
-
(1,142,048)
285,375
6,403,078
3,501,000
(105,030)
22,042,204
7,200,000
-
-
-
-
(285,375)
-
-
-
-
(6,741,444)
-
(9,855,882)
-
-
-
-
-
-
-
-
325,441
(113,182)
6,403,078
3,501,000
(105,030)
15,300,760
7,200,000
(9,855,882)
325,441
(113,182)
Balance at 30 June 2006
29,242,204
(16,597,326)
212,259
12,857,137
The accompanying notes form part of these financial statements.
20
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Net cash inflow/(outflow) from operating
activities
Cash flows from investing activities
Proceeds from sale of investments
Loans from/(to) subsidiaries
Loans to other parties
Repayment of loan from other party
Exploration & evaluation expenditure
Purchase of investments
Purchase of plant & equipment
Purchase of exploration projects
Purchase of equity accounted investments
Net cash inflow/(outflow) from investing
activities
Cash flows from financing activities
Proceeds from issue of shares
Capital raising costs
Net cash inflow from financing activities
Notes
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
262,531
(3,040,050)
429,763
111,391
(1,270,047)
114,720
97,141
(2,332,403)
429,763
44,840
(1,249,694)
114,720
24
(2,347,756)
(1,043,936)
(1,805,499)
(1,090,134)
19,193
-
(114,731)
297,721
(113,903)
(435,961)
(1,405,674)
-
-
-
-
(297,721)
-
(10,705)
-
(4,003)
(388,576)
(1,943,753)
19,193
(2,427,547)
(57,347)
305,866
-
(435,961)
(14,481)
-
-
--
(2,279,141)
(297,721)
--
(19,926)
--
(4,003)
--
--
(1,753,355)
(2,644,758)
(2,610,277)
(2,600,791)
-
-
-
9,904,078
(105,030)
9,799,048
-
-
-
9,904,078
(105,030)
9,799,048
Net increase/(decrease) in cash held
(4,101,111)
6,110,354
(4,415,776)
6,108,123
Foreign exchange movement
(86,617)
-
135,209
--
Cash at the beginning of the financial year
10,133,474
4,023,120
10,131,243
4,023,120
Cash at the end of the financial year
6
5,945,746
10,133,474
5,850,676
10,131,243
The accompanying notes form part of these financial statements.
21
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(a)
(b)
Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001 and Australian Accounting Standards. The financial report has
also been prepared on a historical cost basis, except for derivative financial instruments and available-for-
sale investments, which have been measured at fair value. The company is registered and domiciled in
Australia.
Statement of compliance
The financial report was authorised for issue on 28 September 2006.
The financial report complies with Australian Accounting Standards, which include Australian equivalents
to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the
financial report, comprising the financial statements and notes thereto, complies with International
Financial Reporting Standards (IFRS).
This is the first financial report prepared based on AIFRS and comparatives for the year ended 30 June
2005 have been restated accordingly except for the adoption of AASB 132 Financial Instruments:
Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement. The
Company has adopted the exemption under AASB 1 First-time Adoption of Australian Equivalents to
International Financial Reporting Standards from having to apply AASB 132 and AASB 139 to the
comparative period. Reconciliations of AIFRS equity and profit for 30 June 2005 to the balances reported
in the 30 June 2005 financial report and at transition to AIFRS are detailed in Note 25.
New Accounting Standards and Interpretations
As at 30 June 2006, a number of accounting standards have been issued or amended with applicable
commencement dates subsequent to the year end. The company has not elected to early adopt these
accounting standards. The expected impact of these accounting standards should not materially alter the
accounting policies of the company at the date of the report.
The company is currently assessing the impact of the adoption of the above, which will be effective from
the 1 July 2006.
(c)
Basis of consolidation
The consolidated financial statements comprise the financial statements of Sylvania Resources Limited
and its subsidiaries as at 30 June each year (the Group).
The financial statements of the subsidiaries are prepared for the same reporting period as the parent
company, using consistent accounting policies.
In preparing the consolidated financial statements, all intercompany balances and transactions, income and
expenses and profit and losses resulting from intra-group transactions have been eliminated in full.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to
be consolidated from the date on which control is transferred out of the Group.
(d)
Significant accounting judgements estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and
assumptions of future events. The key estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of certain assets and liabilities within the next annual
reporting period are:
22
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d)
(e)
(f)
(g)
Significant accounting judgements estimates and assumptions (continued)
Share-based payment transactions:
The Group measures the cost of equity-settled transactions with employees by reference to the fair value
of the equity instruments at the date at which they are granted. The fair value is determined by using a
Black and Scholes model, using the assumptions detailed in Note 15.
The Group measures the cost of cash-settled share-based payments at fair value at the grant date using the
Black-Scholes formulas, taking into account the terms and conditions upon which the instruments were
granted, as discussed in Note 15.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group
and the revenue can be reliably measured. The following specific recognition criteria must also be met
before revenue is recognised:
(i) Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to
the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the goods to
the customer.
(ii) Interest income
Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on
the financial asset.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short term
deposits with an original maturity of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash
equivalents as defined above.
Foreign currency translation
Both the functional and presentation currency of Sylvania Resources Limited and its Australian
subsidiaries is Australian dollars. Each entity in the Group determines its own functional currency and
items included in the financial statements of each entity are measured using that functional currency.
Transactions in foreign currencies are initially recorded in the functional currency by applying the
exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.
All exchange differences in the consolidated financial report are taken to profit or loss with the exception
of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign
entity. These are taken directly to equity until the disposal of the net investment, at which time they are
recognised in profit or loss.
Tax charges and credits attributable to exchange differences on those borrowings are also recognised in
equity.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate as at the date of the initial transaction.
The functional currency of the foreign operations is South African Rand (ZAR).
As at the reporting date the assets and liabilities of these subsidiaries are translated into the presentation
currency of Sylvania Resources Limited at the rate of exchange ruling at the balance sheet date and their
income statements are translated at the weighted average exchange rate for the year.
23
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g)
(h)
(i)
Foreign currency translation (continued)
The exchange differences arising on the translation are taken directly to a separate component of equity.
On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that
particular foreign operation is recognised in profit or loss.
Interest in jointly controlled entities
The Group’s interests in jointly controlled entities are brought to account using the equity method of
accounting in the consolidated financial statements. The parent entity’s interests in jointly controlled
entities are brought to account using the cost method. Where the Group acquires an interest in a jointly
controlled entity, the acquisition cost is amortised on a basis consistent with the method of amortisation
used by the jointly controlled entity in respect to assets to which the acquisition costs relate.
Income tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to
be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
• when the deferred income tax liability arises from the initial recognition of goodwill or of an asset
or liability in a transaction that is not a business combination and that, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; or
• when the taxable temporary difference is associated with investments in subsidiaries, associates or
interests in joint ventures, and the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary difference will not reverse in the foreseeable
future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of
unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences and the carry-forward of unused tax credits
and unused tax losses can be utilised, except:
• when the deferred income tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
• when the deductible temporary difference is associated with investments in subsidiaries, associates
or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that
it is probable that the temporary difference will reverse in the foreseeable future and taxable profit
will be available against which the temporary difference can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of
the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to
the extent that it has become probable that future taxable profit will allow the deferred tax asset to be
recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the balance sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or
loss.
24
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i)
Income tax (continued)
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same
taxable entity and the same taxation authority.
(j)
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
• when the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as
part of the expense item as applicable; and
•
receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the balance sheet.
Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash
flows arising from investing and financing activities, which is recoverable from, or payable to, the
taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to,
the taxation authority.
(k)
Plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment
losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of
replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised
in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows:
Plant and equipment – 10%
Fixtures and fittings – 7.5%
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if
appropriate, at each financial year end.
(i) Impairment
The carrying values of plant and equipment are reviewed for impairment at each reporting date, with
recoverable amount being estimated when events or changes in circumstances indicate that the carrying
value may be impaired.
The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset.
For an asset that does not generate largely independent cash inflows, recoverable amount is determined
for the cash-generating unit to which the asset belongs, unless the asset's value in use can be estimated to
be close to its fair value.
Impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated
recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.
For plant and equipment, impairment losses are recognised in the income statement in the cost of sales
line item.
25
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k)
(l)
Plant and equipment (continued)
(ii) Revaluations
Where applicable, fair value is determined by reference to market-based evidence, which is the amount
for which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable
willing seller in an arm’s length transaction as at the valuation date.
Any revaluation increment is credited to the asset revaluation reserve included in the equity section of
the balance sheet, except to the extent that it reverses a revaluation decrease of the same asset previously
recognised in profit or loss, in which case the increase is recognised in profit or loss.
Any revaluation decrease is recognised in profit or loss, except that a decrease offsetting a previous
revaluation increase for the same asset is debited directly to the asset revaluation reserve to the extent of
the credit balance existing in the revaluation reserve for that asset.
An annual transfer from the asset revaluation reserve to retained earnings is made for the difference
between depreciation based on the re-valued carrying amounts of the assets and depreciation based on
the assets' original costs.
Additionally, any accumulated depreciation as at the revaluation date is eliminated against the gross
carrying amounts of the assets and the net amounts are restated to the re-valued amounts of the assets.
Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained
earnings.
Independent valuations are performed with sufficient regularity to ensure that the carrying amounts do
not differ materially from the assets' fair values at the balance sheet date.
(iii) De-recognition and disposal
An item of plant and equipment is derecognised upon disposal or when no further future economic
benefits are expected from its use or disposal.
Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset
is derecognised.
Investments and other financial assets
The Group has elected to apply the option available under AASB 1 of adopting AASB 132 and AASB
139 from 1 July 2005. Outlined below are the relevant accounting policies for investments and other
financial assets applicable for the years ended 30 June 2006 and 30 June 2005.
Accounting policies applicable for the year ended 30 June 2006
Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are
classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-
maturity investments, or available-for-sale investments, as appropriate. When financial assets are
recognised initially, they are measured at fair value, plus, in the case of investments not at fair value
through profit or loss, directly attributable transactions costs. The Group determines the classification of
its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this
designation at each financial year-end.
All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that
the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of
financial assets under contracts that require delivery of the assets within the period established generally
by regulation or convention in the marketplace.
26
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l)
Investments and other financial assets (continued)
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. Such assets are carried at amortised cost using the effective interest method.
Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or
impaired, as well as through the amortisation process.
(ii) Available-for-sale investments
Available-for-sale investments are those non-derivative financial assets that are designated as available-
for-sale or are not classified as any of the three preceding categories. After initial recognition available-for
sale investments are measured at fair value with gains or losses being recognised as a separate component
of equity until the investment is derecognised or until the investment is determined to be impaired, at
which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.
The fair value of investments that are actively traded in organised financial markets is determined by
reference to quoted market bid prices at the close of business on the balance sheet date. For investments
with no active market, fair value is determined using valuation techniques. Such techniques include using
recent arm’s length market transactions; reference to the current market value of another instrument that is
substantially the same; discounted cash flow analysis and option pricing models.
Accounting policies applicable for the year ended 30 June 2005
Listed shares held for trading were carried at net market value. Changes in net market value were
recognised as a revenue or expense in determining the net profit for the period.
All other non-current investments were carried at the lower of cost and recoverable amount. Non-current
financial assets measured using the cost basis were not carried at an amount above their recoverable
amount, and when a carrying value exceeded this recoverable amount, the financial asset was written
down to its recoverable amount.
(m)
Impairment of assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If
any such indication exists, or when annual impairment testing for an asset is required, the Group makes an
estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value
less costs to sell and its value in use and is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups of assets and the
asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for
impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset
or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the risks specific
to the asset. Impairment losses relating to continuing operations are recognised in those expense categories
consistent with the function of the impaired asset unless the asset is carried at re-valued amount (in which
case the impairment loss is treated as a revaluation decrease).
27
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m)
(n)
(o)
Impairment of assets (continued)
Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of
cash-generating units), to which the goodwill relates. When the recoverable amount of the cash-
generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is
recognised. When goodwill forms part of a cash-generating unit (group of cash-generating units) and an
operation within that unit is disposed of, the goodwill associated with the operation disposed of is
included in the carrying amount of the operation when determining the gain or loss on disposal of the
operation. Goodwill disposed of in this manner is measured based on the relative values of the operation
disposed of and the portion of the cash-generating unit retained.
An assessment is also made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. If such indication exists, the
recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its
recoverable amount. That increased amount cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case
the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted
in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic
basis over its remaining useful life.
Trade and other payables
The Group has elected to apply the option available under AASB 1 of adopting AASB 132 and AASB
139 from 1 July 2005. Outlined below are the relevant accounting policies for trade and other payables
applicable for the years ending 30 June 2006 and 30 June 2005.
Accounting policies applicable for the year ended 30 June 2006
Trade payables and other payables are carried at amortised costs and represent liabilities for goods and
services provided to the Group prior to the end of the financial year that are unpaid and arise when the
Group becomes obliged to make future payments in respect of the purchase of these goods and services.
Accounting policies applicable for the year ended 30 June 2005
Trade payables and other payables are carried at costs which is the fair value of the consideration to be
paid in the future for goods and services received, whether or not billed to the consolidated entity.
Provisions
Where applicable, provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance
contract, the reimbursement is recognised as a separate assets but only when the reimbursement is
virtually certain. The expense relating to any provision is presented in the income statement net of any
reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate
that reflects the risks specific to the liability.
When discounting is used, the increase in the provision due to the passage of time is recognised as a
borrowing cost.
28
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p)
(q)
Employee leave benefits
(i) Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, 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. They are measured at the amounts expected to
be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when
the leave is taken and are measured at the rates paid or payable.
Share-based payment transactions
Equity settled transactions:
The Group provides benefits to employees (including senior executives) of the Group in the form of
share-based payments, whereby employees render services in exchange for shares or rights over shares
(equity-settled transactions).
The cost of these equity-settled transactions with employees is measured by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined by using the
black and scholes model.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than
conditions linked to the price of the shares of Sylvania Resources Limited (market conditions) if
applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity,
over the period in which the performance and/or service conditions are fulfilled, ending on the date on
which the relevant employees become fully entitled to the award (the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting
date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of
the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of
market performance conditions being met as the effect of these conditions is included in the
determination of fair value at grant date. The income statement charge or credit for a period represents
the movement in cumulative expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only
conditional upon a market condition.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the
terms had not been modified. In addition, an expense is recognised for any modification that increases
the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee,
as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately. However, if a new award is
substituted for the cancelled award and designated as a replacement award on the date that it is granted,
the cancelled and new award are treated as if they were a modification of the original award, as described
in the previous paragraph.
The dilutive effect of outstanding shares and options issued is reflected as additional share dilution in the
computation of earnings per share (see Note 5).
(r)
Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the proceeds.
29
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s)
Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to
exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by
the weighted average number of ordinary shares.
Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:
•
•
•
costs of servicing equity (other than dividends) and preference share dividends;
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that
have been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from
the dilution of potential ordinary shares, divided by the weighted average number of ordinary
shares and dilutive potential ordinary shares.
(t)
Exploration and evaluation expenditure
The Group’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:
Each area of interest is considered separately when deciding whether and to what extent to carry
(i)
forward or write off exploration and evaluation costs.
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:
(ii)
•
•
•
•
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.
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.
(iii)
Exploration and evaluation costs accumulated in respect to each particular area of interest
includes only net direct expenditure.
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 income statement in the year in which the review occurs.
30
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 2: REVENUE AND EXPENSES
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
(a) Revenue
Tenement option funds
Interest received
Net capital gain / (loss) on sale of investments
10,000
429,763
(543)
-
114,720
-
-
429,763
(543)
-
114,720
-
439,220
114,720
429,220
114,720
(b) Expenses
Loss from ordinary activities before income tax expense
includes the following specific net gains and expenses:
Impairment of loans to subsidiaries
Impairment of equity investment
Tenement exploration expenses written off
Foreign exchange (gain) / loss
(c) Other expenses from ordinary activities includes the
following:
Consulting
Depreciation of non-current assets
Share based payments expense
-
-
251,855
(135,209)
116,646
-
1,783
10,705
3,365
15,853
706,693
-
-
(135,209)
571,484
(9,221)
1,783
19,926
59,995
72,483
982,521
5,633
325,441
1,313,595
483,559
-
-
483,559
955,973
2,673
325,441
1,284,087
474,147
-
-
474,147
31
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 3: INCOME TAX
Major components of income tax expense for the years
ended 30 June 2005 and 2006 are:
Income Statement
Current income tax
Current income tax benefit
Adjustments in respect of current income tax of previous
years
Deferred income tax
Relating to origination and reversal of temporary
differences
Tax losses not previously recognised now brought to
account
Current year tax losses not recognized in the current
period
Income tax expense reported in income statement
Unrecognised Deferred Tax Balances
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
(187,698)
(208,467)
(62,046)
(204,746)
(10,428)
-
(10,428)
-
(132,907)
9,563
(132,907)
9,563
(158,129)
-
-
-
331,033
(158,129)
198,904
-
205,381
-
195,183
-
Unrecognised deferred tax assets - Losses
Unrecognised deferred tax assets - Capital Losses
Unrecognised deferred tax assets - Temporary differences
Unrecognised deferred tax liabilities
Net unrecognised deferred tax assets
792,126
13,898
801,287
(49,222)
1,558,089
510,871
-
567,954
-
1,078,825
577,174
13,898
184,921
(49,222)
726,771
507,143
-
26,587
-
533,730
Reconciliation to income tax benefit on accounting loss
Accounting loss
Tax expense (benefit) at the statutory income tax rate of
30%
Sundry non-deductible(deductible) expenses
- non deductible expenses
Share issue costs taken to equity
Over-provision of tax in prior year
Tax losses not previously recognised now brought
to account
Benefit of tax losses and timing differences
not brought to account
Income Tax expense
(9,139,936)
(1,011,374)
(9,855,882)
(1,142,048)
(2,741,981)
(303,412)
(2,956,765)
(342,614)
2,448,142
(26,766)
(10,428)
(158,129)
331,033
(158,129)
85,382
-
19,126
2,788,577
(26,766)
(10,428)
128,305
-
19,127
-
-
-
198,904
-
205,382
-
195,182
-
32
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 3: INCOME TAX (CONTINUED)
At 30 June 2006, there is no recognised or unrecognised deferred income tax liability for taxes that would be payable
on the unremitted earnings of certain of the Group’s subsidiaries, associate or joint venture, as the Group has no
liability for additional taxation should such amounts be remitted.
Tax Consolidation
Sylvania Resources Limited and its 100% owned Australian resident subsidiary have formed a tax consolidated
group with effect from 1 July 2003. Sylvania Resources Limited is the head entity of the tax consolidated group.
Members of the group have entered into a tax sharing arrangement in order to allocate income tax expense to the
wholly owned subsidiaries on a pro-rata basis. In addition the agreement provides for the allocation of income tax
liabilities between the entities should the head entity default on its tax payment obligations. At the balance date,
the possibility of default is remote.
33
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 4: SEGMENT REPORTING
Segment Information
The Group’s primary segment reporting format is geographical segments.
Geographical segments
The following table presents revenue, results and certain asset and liability information regarding geographical
segments for the years ended 30 June 2006 and 30 June 2005.
30 June 2006
Continuing operations
Australia
South Africa
$
$
Total operations
$
Segment revenue
Other revenue
Share of net profit from jointly
controlled entity accounted for
on an equity basis
Total segment revenue
Segment results
Segment Assets
Segment Liabilities
30 June 2005
Segment revenue
Other revenue
Share of net profit from jointly
controlled entity accounted for
on an equity basis
Total segment revenue
Segment results
Segment Assets
Segment Liabilities
439,220
-
439,220
-
1,148,649
439,220
(8,877,137)
6,282,722
385,156
1,148,649
(104,670)
7,123,838
184,065
Continuing operations
Australia
South Africa
$
$
1,148,649
1,587,869
(8,981,807)
13,406,560
569,221
Total operations
$
114,720
-
114,720
-
114,720
(803,480)
10,426,753
129,078
143,079
143,079
(207,894)
4,736,826
115,797
34
143,079
257,799
(1,011,374)
15,163,579
244,875
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 5: EARNINGS PER SHARE
Consolidated
2006
Cents per share
2005
Cents per share
Total Basic Loss per share
(9.40)
(1.92)
The loss used in the calculation is as follows:
Total Basic Loss per share
(8,981,807)
(1,011,374)
The weighted average number of ordinary shares used in the calculation is
as follows:
Total Basic Loss per share
95,564,205
52,738,939
The Diluted Loss per Share is not reflected as the result is anti-dilutive.
NOTE 6: CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Short term deposits
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
250,382
5,695,364
5,945,746
10,133,474
-
10,133,474
155,312
5,695,364
5,850,676
10,131,243
-
10,131,243
(a) Reconciliation to Cash Flow Statement
The above figures agree to cash at the end of the financial year as shown in the cash flows statement.
(b) Cash at bank and on hand
These are bearing interest rates of between 3.75% and 5.25% (2005: 4% and 4.10%)
(c) Deposits at call
The deposits are bearing floating interest rates between 4.45% and 5.73% (2005: n/a). These deposits have a maturity
of between 30 and 31 days.
(d) Cash balances not available for use
An amount of R600,000 (A$113,340) is currently held on trust with Phillip Silver Sweidan Inc (Attorneys, Notaries
and Conveyancers) based in Johanesburg. The amount has been lodged as a security deposit against a claim that has
been made against the company by an external creditor. The company is currently defending the claim in full.
35
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 7: CURRENT TRADE AND OTHER RECEIVABLES
Trade receivables
Sundry loan to unrelated party
GST recoverable
Loan receivable from subsidiary
Impairment of loan to subsidiary
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
172,834
-
36,108
-
-
208,942
-
297,721
21,770
-
-
319,491
-
-
36,108
549,769
(549,769)
36,108
-
297,721
21,770
557,914
(307,914)
569,491
NOTE 8: AVAILABLE-FOR-SALE FINANCIAL INVESTMENTS
At fair value
Listed shares
Listed options
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
272,476
50,303
322,779
19,736
-
19,736
272,476
50,303
322,779
19,736
-
19,736
Available-for-sale investments consist of investments in ordinary shares and options, and therefore have no fixed
maturity date or coupon rate.
NOTE 9: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
Interest in jointly controlled entity (Refer Note 19)
4,761,496
4,042,475
-
-
NOTE 10: OTHER FINANCIAL ASSETS (NON-CURRENT)
Non interest-bearing loans
Loan receivable from subsidiary
Impairment of loan to subsidiary
Investment in subsidiary
Impairment of investment in subsidiary
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
114,731
-
-
-
-
114,731
-
-
-
-
-
-
57,347
7,424,410
(464,838)
1,500,004
(1,500,004)
7,016,919
-
4,819,190
-
1,500,004
(1,500,004)
4,819,190
36
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 11: PLANT AND EQUIPMENT
Consolidated
Parent entity
Plant and
equipment
$
Total
$
Plant and
equipment
$
Total
$
Year ended 30 June 2006
At 1 July 2005, net of accumulated depreciation and
impairment
Additions
Disposals
Depreciation charge for the year
At 30 June 2006, net of accumulated depreciation and
impairment
At 1 July 2005
Cost
Accumulated depreciation and impairment
Net carrying amount
4,003
1,405,395
-
(5,354)
4,003
1,405,395
-
(5,354)
1,404,044
1,404,044
4,003
14,481
-
(2,673)
15,811
4,003
-
4,003
4,003
-
4,003
4,003
-
4,003
4,003
14,481
-
(2,673)
15,811
4,003
-
4,003
Included in plant and equipment at 30 June 2006 is an amount of $1,271,554 (2005: Nil) relating to expenditure for
plant in the course of construction.
NOTE 12: DEFERRED EXPLORATION EXPENDITURE
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
Acquisition, exploration and evaluation expenditure at
cost in respect of areas of interest in the exploration phase
626,790
644,400
-
Costs carried forward in respect of:
Exploration and evaluation phase – at cost
Balance at beginning of financial year
Direct expenditure for the year
Cost of tenements acquired
Foreign currency movements
Expenditure written off
Balance at end of financial year
644,400
113,903
-
(15,755)
(251,855)
490,693
250,000
10,705
388,576
5,824
(10,705)
644,400
-
-
-
-
-
-
-
-
-
-
-
-
-
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.
37
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 13: TRADE AND OTHER PAYABLES
Trade payables
GST payable
Group tax payable
Accrued expenses
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
491,437
1,641
66,143
10,000
569,221
214,144
-
20,731
10,000
244,875
307,372
1,641
66,143
10,000
385,156
212,172
-
20,731
10,000
242,903
Of the payables $314,065 (2005: $101,972) is denominated and payable in South African Rand.
NOTE 14: CONTRIBUTED EQUITY AND RESERVES
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
(a) Ordinary shares issued
105,529,273 ordinary shares (2005: 91,679,273)
29,242,204
22,042,204
29,242,204
22,042,204
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Movement in ordinary shares on issue
At 1 July 2004
Issued during the year
Share issue costs
Transfer from option issue reserve
At 1 July 2005
Share issue on 9 December 2005
Share issue on 21 December 2005
Share issue on 11 May 2006
At 30 June 2006
Notes
Number
$
Number
$
(i)
(ii)
(iii)
91,679,273
6,000,000
3,850,000
4,000,000
105,529,273
22,042,204
3,600,000
-
3,600,000
29,242,204
51,883,883
39,795,390
-
-
11,957,781
9,904,078
(105,030)
285,375
91,679,273
22,042,204
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.
38
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 14: CONTRIBUTED EQUITY AND RESERVES (CONTINUED)
Notes
(i)
(ii)
(iii)
6,000,000 shares in the company were issued at a deemed issue price of $0.60 per share in consideration for
assistance in identifying the tender opportunity and in the preparing the tender to retreat chrome tailings at
Millsell and Waterloof.
3,850,000 shares in the company were issued at a deemed issue price of $0.50 in accordance with the
company’s Employee Share Plan funded by way of a limited recourse loan repayable in 2 years from the
date of issue. The equity contribution from these shares will be recognised upon receipt of funds by the
company at the later of the loan being repaid by the employee or from funds recovered at the termination of
the loan in accordance with the Share Plan terms and conditions. Refer Note 15.
4,000,000 shares in the company were issued at a deemed issue price of $0.90 for services rendered in
securing opportunities to participate in eligible projects involving the re-treatment of Samancor’s tailings for
the extraction of chrome at Samancor’s tailing dumps at its Western and Eastern Chrome mines.
(b) Options
The company has established an Employee Option Plan (“Option Plan”), which was approved by Shareholders at the
company’s Annual General Meeting on the 30 November 2005.
On the 20 April 2006 the company issued 750,000 options exercisable at $0.50 on or before the 30 June 2009 in
accordance with the terms and conditions of the Option Plan. Refer Note 15.
During the year ended 30 June 2005 there were 32,015,390 June 2005 options exercised to acquire ordinary fully paid
shares at $0.20. A further 272,133 June 2005 options lapsed as they were not exercised by 30 June 2005.
(c) Accumulated Losses
Balance as at 1 July 2005
Net loss for the year
Balance as at 30 June 2006
(d) Reserves
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
6,610,770
8,981,807
15,592,577
5,599,396
1,011,374
6,610,770
6,741,444
9,855,882
16,597,326
5,599,396
1,142,048
6,741,444
Nature and purpose of reserves
Net unrealised gains reserve
This reserve records fair value changes on available-for-sale investments.
Employee equity benefits reserve
This reserve is used to record the value of equity benefits provided to employees and directors as part of their
remuneration. Refer Note 15.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the
financial statements of foreign subsidiaries. It is also used to record the foreign exchange effect of net investments
in foreign operations.
39
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 14: CONTRIBUTED EQUITY AND RESERVES (CONTINUED)
Reserves
Consolidated
Parent
Net
Unrealised
Gains
Reserve
$
Equity
Benefits
Reserve
$
Currency
Translation
Reserve
$
Total
$
Net
Unrealised
Gains
Reserve
$
Equity
Benefits
Reserve
$
Currency
Translation
Reserve
$
Total
$
At 1 July 2004
Currency translation differences
Share-based payments
At 30 June 2005
-
-
-
-
Unrealised gains / (losses) on available-for-
sale investments reclassified to the income
statement
(113,182)
Currency translation differences
Share and option-based payments
-
-
-
-
(512,730)
(512,730)
-
-
(512,730)
(512,730)
-
-
-
-
-
(113,182)
(113,182)
-
-
-
-
-
-
(511,817)
(511,817)
325,441
-
325,441
-
-
-
-
-
-
-
-
325,441
At 30 June 2006
(113,182)
325,441
(1,024,547)
(812,288)
(113,182)
325,441
40
-
-
-
-
-
-
-
-
-
-
-
-
(113,182)
-
325,441
212,259
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 15: SHARE BASED PAYMENT PLANS
Directors and Employees Share and Option Plans
To ensure that the company has appropriate mechanisms in place to continue to attract and retain the services of
suitable directors and employees, the company has established the Directors and Employees Incentive Option Plan
(“Option Plan”) and the Directors and Employees Incentive Share Plan (“Share Plan”), which were approved by the
Shareholders at the company’s Annual General Meeting on the 30 November 2005.
The number of Options or Ordinary Shares that may be offered to a Participant is entirely within the discretion of the
Board. The company does not intend to offer more than 6,000,000 securities (being a combination of Options under
the Option Plan or Ordinary Shares under the Share Plan) under the Option Plan and the Share Plan, which represents
approximately 5.7% of the Ordinary Shares in issue.
A participant who is invited to subscribe for Ordinary Shares under the Share Plan may also be invited to apply for an
interest free loan (“Loan”) up to the amount payable in respect of the Ordinary Shares accepted by the Participant.
Any Loan made available to a participant shall be applied by the company directly toward payment of the issue price
of the Ordinary Shares to be acquired under the Share Plan. The term of the Loan, the time in which repayment of
the Loan must be made by the Participant and the manner for making such payments shall be determined by the
Board and set out in the invitation.
Option Plan
The following table illustrates the number (No.) and weighted average exercise prices of and movements in share
options issued under the Option Plan during the year:
2006
No.
2005
No.
2006
Weighted
average
exercise price
2005
Weighted
average exercise
price
Outstanding at the beginning of the
year
Granted during the year
Outstanding at the end of the year
-
750,000
750,000
-
$0.50
$0.50
-
-
-
-
-
-
The weighted average fair value of options granted during the year was $0.56 per option (2005: Nil).
The fair value of the options is measured at the grant date using the Black-Scholes option pricing model taking into
account the terms and conditions upon which the instruments were granted. The services received and the expense in
relation to those services is recognised in profit and loss over the expected vesting period.
The following table lists the inputs to the model used for the years ended 30 June 2005 and 30 June 2006:
Volatility (%)
Risk-free interest rate (%)
Expiry date
Exercise price (cents)
Weighted average share price at grant date (cents)
2006
0.4256
5.5000
30 June 2009
0.5000
0.9500
2005
-
-
-
-
-
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may
also not necessarily be the actual outcome. No other features of options granted were incorporated into the
measurement of fair value.
41
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 15: SHARE BASED PAYMENT PLANS (CONTINUED)
Share Plan
The following table illustrates the number (No.) and weighted average exercise prices of and movements in share
issued under the Share Plan during the year:
2006
No.
Outstanding at the beginning of the
year
Granted during the year
Outstanding at the end of the year
-
3,850,000
3,850,000
2006
Weighted
average
exercise price
-
See below
See below
2005
No.
-
-
-
2005
Weighted
average
exercise price
-
-
-
The shares issued under the Share Plan will not be quoted on the ASX and may not be sold or otherwise dealt with
until the latter of the following occurs:
a) any loan in respect of the share is repaid; and
b) in respect of:
i.
one half of the shares (1,950,000 being Tranche 1) issued under this offer, 12 months after the date of
issue of the shares (21 December 2006); and
the remaining one half of the shares (1,950,000 being Tranche 2) issued under this offer, 24 months
after the date of issue of the shares (21 December 2007).
ii.
The weighted average fair value of the shares issued under the Share Plan during the year was $0.165 per share
(2005: Nil)
The fair value of the shares issued is measured as the value of the option inherent within the shares issued as at the
grant date using the Black-Scholes option pricing model taking into account the terms and conditions upon which the
instruments were granted. The services received and the expense in relation to those services is recognised in the
profit or loss over the expected vesting period.
The following table lists the inputs to the model used for the year ended 30 June 2006 for the two (2) tranches noted
above:
Volatility (%)
Risk-free interest rate (%)
Expiry date
Exercise price (cents)
Weighted average share price at grant date (cents)
Tranche 1
Tranche 2
0.4876
5.5900
21 December 2006
0.5000
0.6400
0.4876
5.5900
21 December 2007
0.5000
0.6400
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may
also not necessarily be the actual outcome. No other features of options granted were incorporated into the
measurement of fair value.
42
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 16: FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise of cash and short-term deposits.
The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various
other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its
operations. It is, and has been throughout the period under review, the Group’s policy that no trading in financial
instruments shall be undertaken. The main risks arising from the Group’s financial instruments are interest rate risk
and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised
below.
Interest rate risk
All cash balances attract a floating rate of interest. The unsecured loan to another party does not attract interest. The
Group’s exposure to interest rate risk and the effective interest rate by maturity periods is set out below.
Credit risk
Credit risk relates to the risk that counterparties will default on their contractual obligations resulting in financial loss
to the Group. The Group 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 Group to credit risk in relation to each class of recognised financial asset is the carrying amount
as indicated in the balance sheet.
NOTE 17: FINANCIAL INSTRUMENTS
Set out below is a comparison by category of carrying amounts and fair values of all of the Group’s financial
instruments recognised in the financial statements.
Market values have been used to determine the fair value of listed available-for-sale investments.
The fair values of all financial assets and liabilities approximate their carrying values as indicated in the balance
sheet.
Non-
Interest
Bearing
Floating
interest
rate
1 year
Or less
Over 1
to 5
years
Weighted
Average
Interest
Rate
5.05%
2006
Financial assets
Cash and deposits
Receivables
Investments
Loans
Financial liabilities
Payables
140
208,942
322,779
114,731
646,592
5,945,606
-
-
-
5,945,606
(569,221)
-
Net financial assets/(liabilities)
77,371
5,945,606
43
Total
5,945,746
208,942
322,779
114,731
6,592,198
(569,221)
6,022,977
-
-
-
-
-
-
-
-
-
-
-
-
-
-
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 17: FINANCIAL INSTRUMENTS (CONTINUED)
Non-
Interest
Bearing
Floating
interest
rate
1 year
Or less
Over 1
to 5
years
Weighted
Average
Interest
Rate
4.9%
2005
Financial assets
Cash and deposits
Receivables
Investments
Financial liabilities
Payables
140
319,491
19,736
339,367
10,133,334
-
-
10,133,334
(244,875)
-
Net financial assets/(liabilities)
94,492
10,133,334
Total
10,133,474
319,491
19,736
10,472,701
(244,875)
10,227,826
-
-
-
-
-
-
-
-
-
-
-
-
NOTE 18: COMMITMENTS AND CONTINGENCIES
Operating lease commitments
Office Premises
The Group entered into commercial lease arrangements during the period to lease its current office premises, both in
Perth and Johannesburg.
Future minimum lease payments (net of GST) as at 30 June are as follows:
Within one year
After one year but not more than five years
More than five years
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
111,749
120,997
-
232,746
-
-
-
-
71,892
110,834
-
182,726
-
-
-
-
44
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 18: COMMITMENTS AND CONTINGENCIES (CONTINUED)
Office equipment
Sylvania South Africa (Propriety) Limited entered into a number of lease agreements during the period in respect to
office equipment.
Future minimum lease payments (net of GST) as at 30 June are as follows:
Within one year
After one year but not more than five years
More than five years
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
9,020
30,067
-
39,087
-
-
-
-
-
-
-
-
-
-
-
-
Exploration expenditure commitments
Everest North
Aquarius Platinum SA holds a prospecting right in respect of the Everest North property, a Platinum Group Metal
(“PGM”) project on Farm Vygenhoek JT 10 in the Mpumalanga province of South Africa. On 26 May 2005, Sylvania
announced that it had entered into the Everest North Agreement with Aquarius Platinum SA whereby Sylvania,
through Sylvania SA, will take control of the exploration of the Everest North project. The initial consideration paid
by Sylvania under the Everest North Agreement was R2 million, with a further R6 million payable once a right to
mine has been obtained by Aquarius Platinum from the DME and transferred to Sylvania SA.
Commitments contracted for at the reporting date, which relate to a full feasibility study that commenced in April
2006, but are not recognised as a liability are as follows:
Within one year
After one year but not more than five years
More than five years
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
640,526
-
-
640,526
-
-
-
-
-
-
-
-
-
-
-
-
45
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 19: INTEREST IN JOINT VENTURE ENTITY
The Group has a 25% interest in an un-incorporated joint venture, CTRP, which operates a chrome tailings re-
treatment plant at Kroondal in South Africa for the purpose of extracting platinum group metals. The Group has
accounted for this interest on an equity accounting basis.
Consolidated
2006
2005
(a) Retained earnings attributable to interest in jointly controlled entity
Balance at beginning of financial period
Distribution received from jointly controlled entity
Share of jointly controlled entity’s profit from ordinary activities after income tax
143,079
(155,390)
1,148,649
-
-
143,079
Balance at end of financial period
1,136,338
143,079
(b) Reserves attributable to interest in jointly controlled entity
-
-
(c) Carrying amount of investment in jointly controlled entity
Balance at beginning of the financial period
Additional investment made during period
Distribution received from jointly controlled entity
Share of jointly controlled entity’s profit from ordinary activities, after income tax
Balance at end of financial period
4,617,660
-
(155,390)
1,148,649
5,610,919
2,530,828
1,943,753
-
143,079
4,617,660
Foreign currency translation movements
Balance at beginning of the financial period
Movement during the financial period
Balance at end of financial period
(d) Share of jointly controlled entity’s results and financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Revenue
Expenses
Profit from ordinary activities before income tax
Income tax expense
Profit from ordinary activities after income tax
46
(575,185)
(274,238)
(849,423)
-
(575,185)
(575,185)
4,761,496
4,042,475
929,472
2,460,045
3,389,517
2,085,687
177,918
2,263,605
434,565
1,768,815
2,203,380
177,034
143,086
320,120
2,257,982
(1,109,333)
456,954
(313,875)
1,148,649
-
143,079
-
1,148,649
143,079
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 20: EVENTS AFTER THE BALANCE SHEET DATE
On the 21 July 2006, the company commenced trading its shares on AIM in London after a placing raised £12 million
(AUS $29.6 million) (before expenses). The company has issued 40,000,000 placing shares, representing 27.5 per
cent of the enlarged issued share capital of the company at 30 pence (AUS $0.74) per ordinary share.
On the 25 July 2006, the company announced that further to its contract with Samancor Limited, the company has
been granted prospecting rights over dumps at several of Samancor’s Western and Eastern Chrome Mines located in
the Bushveld Complex of South Africa.
Also on the 25 July 2006 and in accordance with its facilitation agreement with Portpatrick Ltd a further 5,275,000
million ordinary fully paid shares have been issued to Portpatrick Ltd for securing the prospecting rights to these
highly prospective tailings dumps. The company intends retreat these tailings for the extraction of chrome and
platinum group metals. Under the terms of the agreement between the company and Portpatrick dated 7 December
2005, a further 4,725,000 Ordinary Shares remain to be issued to Portpatrick as further consideration in respect of
prospective tailings dumps.
NOTE 21: AUDITORS’ REMUNERATION
The auditors of the parent entity are HLB Mann Judd.
Assurance services
HLB Mann Judd Australian firm:
Audit and review of financial statements
Related practices of HLB Mann Judd (HLB Barnett
Chown Inc.)
Total remuneration for audit services
Taxation services
HLB Mann Judd Australian firm:
Tax compliance services, including review of company
income tax returns
Related practices of HLB Mann Judd (HLB Barnett
Chown Inc.)
Total remuneration for taxation services
Advisory services
HLB Mann Judd Australian firm:
Services in respect to AIM Listing
Advice regarding Share and Options valuations
Total remuneration for advisory services
Total auditors’ remuneration
Total auditors remuneration
47
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
21,640
13,300
21,640
13,300
28,032
49,672
2,153
15,453
-
21,640
-
13,300
3,958
1,626
5,584
16,600
2,400
19,000
1,281
2,331
3,612
3,958
-
3,958
-
-
-
16,600
2,400
19,000
1,281
-
1,281
-
-
-
74,256
19,065
44,598
14,581
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 22: KEY MANAGEMENT PERSONNEL DISCLOSURES
The company has applied the exemption available under Schedule 5B of the Corporations Regulations 2001 which
exempts listed companies from providing certain remuneration disclosures in relation to key management personnel if
these are contained within the Directors’ Report. These remuneration disclosures are provided in the Remuneration
Report section of the Directors’ Report and are designated as audited.
(a) Details of Key Management Personnel
(i) Directors
Terrence M McConnachie
Edward F G Nealon
Grant M Button
Dr Evan Kirby
Melissa J Sturgess Smith
Kevin S Huntly
(ii) Executives
Michael James Langoulant
Chief Executive Officer
Chairman (non-executive)
Director (Executive)
Chief Operating Officer
Director (non-executive)
Director (non-executive)
Company Secretary
On the 8 March 2006, the company announced a re-organisation of its executive team in response to expanding
activities in South Africa.
Mr Terrence M McConnachie was appointed as Chief Executive Officer (formerly Chief Operations Officer), Dr Evan
Kirby was appointed as Chief Operating Officer (formerly Non-executive Director) and Mr Edward F G Nealon was
appointed as Non-executive Chairman (formerly Executive Chairman).
Other than the above re-organisation, there were no other changes of the key management personnel after the
reporting date and the date the financial report was authorised for issue.
(b) Compensation of Key Management Personnel
Short-Term
Post Employment
Share-based Payments
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
810,594
22,600
284,333
1,117,527
487,119
7,402
-
494,521
679,597
22,600
222,681
924,878
470,099
7,402
-
477,501
48
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 22: KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
(c) Compensation options: Granted and vested during the year (Consolidated)
During the financial year options were granted as equity compensation benefits under the long-term incentive plan
to certain key management personnel as disclosed above. No share options have been granted to the non-executive
members of the Board of Directors under this scheme.
30 June 2006
Vested Granted
Terms and Conditions for each Grant
Directors
No.
No.
Grant Date
T M McConnachie
K S Huntly
Total
-
-
500,000
250,000
-
750,000
20 April
2006
20 April
2006
Fair Value
per option at
grant date
$
Exercise
price per
option
$
Expiry Date
First Exercise
Date
Last Exercise
Date
$0.56
$0.50
$0.56
$0.50
30 June
2009
30 June
2009
See below
note
See below
note
30 June
2009
30 June
2009
The shares issued pursuant to the exercise of Options can only be delivered and paid for after the expiry of
the following periods and in the following proportions:
•
after 12 months have lapsed from the acceptance date, in respect of not more than one half of the total
number of shares; and
after 24 months have lapsed from the acceptance date, in respect of the balance of those shares.
•
No compensation options were granted or vested during the year ended 30 June 2005.
(d) Shares issued under the Directors and Employees Incentive Share Plan during the year (Consolidated)
Directors
Edward F G Nealon
Grant M Button
Dr Evan Kirby
Melissa J Sturgess
Smith
Michael
Langoulant
J
Vested
-
-
No. Granted No. Grant Date
750,000 21 December
2005
750,000 21 December
2005
750,000 21 December
2005
750,000 21 December
2005
250,000 21 December
2005
-
-
-
3,250,000
Exercise
price per
share
$
Expiry Date
0.50 30 June 2009
Total value of
shares granted
$
123,812
Value of
options
included in
remuneration
for the year
$
51,388
0.50 30 June 2009
123,812
51,388
0.50 30 June 2009
123,812
51,388
0.50 30 June 2009
123,812
51,388
0.50 30 June 2009
123,812
17,129
Fair Value
per share
at grant
date
$
0.64
0.64
0.64
0.64
0.64
49
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 22: KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
(e) Shares issued on Exercise of Compensation Options
No shares were issued on exercise of Compensation Options during the year.
(f) Option holdings of Key Management Personnel (Consolidated)
The only Option holdings of Key Management Personnel are as detailed in note (c) above.
(g) Shareholdings of Key Management Personnel (Consolidated)
30 June 2006
Directors
T M McConnachie
E FG Nealon
G M Button
Dr E Kirby
M J Sturgess
K S Huntly
Executives
M J Langoulant
30 June 2005
Directors
T M McConnachie
E FG Nealon
G M Button
Dr E Kirby
M J Sturgess
K S Huntly
Executives
M J Langoulant
Balance
1 July 2005
Ordinary
Issued under
Incentive Share
Plan
(Note 22(d))
On Exercise of
Options
Ordinary
-
-
500,000
14,300
65,000
-
100,000
679,300
-
750,000
750,000
750,000
750,000
-
250,000
3,250,000
-
-
-
-
-
-
-
-
Balance
1 July 2004
Ordinary
Issued under
incentive Share
Plan
(Note 22(d))
On Exercise of
Options
Ordinary
-
-
250,000
14,300
-
-
100,000
364,300
-
-
-
-
-
-
-
-
-
-
250,000
-
65,000
-
-
315,000
Balance
30 June 2006
Ordinary
-
750,000
1,250,000
764,300
815,000
-
350,000
3,929,300
Balance
30 June 2005
Ordinary
-
-
500,000
14,300
65,000
-
100,000
679,300
All equity transactions with key management personnel other than those arising under the Group’s Incentive
Option Plan (Note 22(c)) and Incentive Share Plan (Note 22(d)) have been entered into under terms and conditions
no more favourable than those the Group would have adopted if dealing at arm's length.
50
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 23: RELATED PARTY DISCLOSURE
The consolidated financial statements include the financial statements of Sylvania Resources Limited and the
subsidiaries listed in the following table:
Name of entity
Country of
incorporation
Class of shares
Equity holding
Twinloop Nominees Pty Ltd
Sylvania South Africa (Pty) Ltd
Sylvania Metals (Pty) Ltd
Sylvania Minerals (Pty) Ltd
Sylvania Mining (Pty) Ltd
Australia
South Africa
South Africa
South Africa
South Africa
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2006
%
100
100
100
100
100
2005
%
100
100
-
-
-
Sylvania Resources Limited is the ultimate Australian parent entity and the ultimate parent of the Group.
Transactions between Sylvania Resources Limited and its controlled entities during the year consisted of loans
advanced by Sylvania Resources Limited.
Related Party
The following table provides details of advances to related parties during the year and outstanding balances at
balance date:
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
Magnum Gold NL
114,731
-
57,347
-
Joint venture in which the entity is a venturer
The Group has a 25% interest in the assets, liabilities and output of an un-incorporated joint venture, CTRP, which
operates a chrome tailings re-treatment plant at Kroondal in South Africa (2005: 25%)
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made in arm's length transactions both at normal market prices and
on normal commercial terms.
Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash.
51
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 24: RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH OUTFLOW FROM
OPERATING ACTIVITIES
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
a) Reconciliation of loss from ordinary activities
after income tax to net cash outflow from
operating activities
Loss from ordinary activities after income tax
(8,981,807)
(1,011,374)
(9,855,882)
(1,142,048)
Administration fee charged to subsidiaries
Equity accounted net profit from joint venture
Joint venture cash distribution
Project generation costs
Depreciation
Non-cash employee benefits expense –
share-based payments
Net exchange differences
Write down of other non-current assets to
recoverable amount
Net (gain) / loss on sale of non-current assets
Mining tenement expenditure written off
Write down of loan to subsidiaries
(Increase) / Decrease in trade and other debtors
(Increase) / Decrease in deferred tax asset
Increase / (Decrease) in trade creditors
-
(1,148,649)
155,390
7,200,000
5,633
-
(143,079)
-
-
-
(177,672)
-
-
7,200,000
2,673
325,441
(135,209)
-
543
251,855
-
(187,170)
(158,129)
324,346
-
56,630
325,441
(135,209)
1,783
-
10,705
-
(14,277)
-
55,676
-
543
-
706,693
(14,339)
-
142,253
-
-
-
-
-
-
-
1,783
-
19,926
(9,221)
(14,277)
-
53,703
Net cash outflow from operating activities
(2,347,756)
(1,043,936)
(1,805,499)
(1,090,134)
b) Non-cash financing and investing activities
During the 2006 financial year the following non-cash financing or investing activities occurred:
• 6,000,000 shares in the company were issued at a deemed issue price of $0.60 per share in consideration
for assistance in identifying the tender opportunity and in the preparing the tender to retreat chrome
tailings at Millsell and Waterloof; and
• 4,000,000 shares in the company were issued at a deemed issue price of $0.90 for services rendered in
securing opportunities to participate in eligible projects involving the re-treatment of Samancor’s tailings
for the extraction of chrome at Samancor’s tailing dumps at its Western and Eastern Chrome mines.
52
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 25: TRANSITION TO AIFRS
For all periods up to and including the year ended 30 June 2005, the Group prepared its financial statements in
accordance with Australian generally accepted accounting practice (‘AGAAP’). These financial statements for the
year ended 30 June 2006 are the first the Group is required to prepare in accordance with Australian equivalents to
International Financial Reporting Standards (‘AIFRS’).
Accordingly, the Group has prepared financial statements that comply with AIFRS applicable for periods beginning
on or after 1 January 2005 and the significant accounting policies meeting those requirements are described in Note
1. In preparing these financial statements, the Group has started from an opening balance sheet as at 1 July 2004,
the Group’s date of transition to AIFRS, and made those changes in accounting policies and other restatements
required by AASB 1 First-time adoption of AIFRS.
This note explains the principal adjustments made by the Group in restating its AGAAP balance sheet as at 1 July
2004 and its previously published AGAAP financial statements for the year ended 30 June 2005.
Exemptions applied
AASB 1 allows first-time adopters certain exemptions from the general requirement to apply AIFRS
retrospectively.
The Group has taken the following exemptions:
• Comparative information for financial instruments is prepared in accordance with AGAAP and the
company and group have adopted AASB 132: Financial Instruments: Disclosure and Presentation and
AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005.
• Cumulative currency translation differences for all foreign operations are deemed to be zero as at 1 July
2004.
• AASB 2 Share-based Payment has not been applied to any equity instruments that were granted on or
before 7 November 2002, nor has it been applied to equity instruments granted after 7 November 2002 that
vested before 1 January 2005.
Explanation of material adjustments to the cash flow statement
There are no material differences between the cash flow statement presented under AIFRS and the cash flow
statement presented under previous AGAAP.
53
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
NOTE 25: TRANSITION TO AIFRS (CONTINUED)
Impact of adoption of AIFRS
The impacts of adopting AIFRS on the total equity and loss after tax as reported under Australian Accounting
Standards applicable before 1 January 2005 (previous Australian GAAP) are illustrated below.
(i) Reconciliation of total equity as presented under previous Australian GAAP to that under AIFRS
Consolidated
Total equity under previous Australian GAAP
Adjustments to equity:
Currency translation differences
Total equity under AIFRS
1 July
2004
$
6,643,760
-
6,643,760
30 June 2005
$
15,488,064
(569,360)
14,918,704
(ii) Reconciliation of profit after tax under previous Australian GAAP to that under AIFRS
Loss after tax as previously reported
Foreign currencies translations
Loss after tax under AIFRS
Consolidated
Year ended
30 June 2005
$
(954,744)
(56,630)
(1,011,374)
The foreign currency translation difference has no effect on income tax expense under either Australian GAAP or
AIFRS.
54
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
DIRECTORS’ DECLARATION
1.
In the opinion of the directors:
a.
the financial statements and notes of the company and of the consolidated entity are in accordance
with the Corporations Act 2001 including:
i. giving a true and fair view of the company’s and consolidated entity’s financial position as at 30
June 2006 and of their performance for the year then ended; and
ii. complying with Accounting Standards and Corporations Regulations 2001; 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 payable.
2. This declaration has been made after receiving the declarations required to be made to the directors in
accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2006.
This declaration is signed in accordance with a resolution of the Board of Directors.
Edward Nealon
Non-executive Chairman
Perth, Western Australia
28 September 2006
55
INDEPENDENT AUDIT REPORT
To the members of
Sylvania Resources Limited
Scope
The Financial Report and Directors’ Responsibility
The financial report comprises the balance sheet as at 30 June 2006, and the income statement,
statement of changes in equity, cash flow statement, accompanying notes to the financial statements
and the directors’ declaration for the year then ended for both Sylvania Resources Limited (‘the
company’) and the consolidated entity. The consolidated entity comprises both the company and
the entities it controlled during that 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 designed to prevent and
detect fraud and error, for the accounting policies and for the accounting estimates within 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 Standards, in order to provide
reasonable assurance that the financial report is free of material misstatement. The nature of an
audit is influenced by several factors including the use of professional judgement, selective testing,
the inherent limitations of internal control and the availability of audit evidence which may be
persuasive rather than conclusive. Accordingly, 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, including compliance with Accounting
Standards and other mandatory financial reporting requirements in Australia, a view which is
consistent with our understanding of the company’s and the consolidated entity’s financial position,
and of their performance as represented by the results of their operations, changes in equity 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.
When determining the nature and extent of our procedures we considered the effectiveness of
management’s internal controls over financial reporting. Our audit was not designed to provide
assurance in relation to internal controls.
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
HLB Mann Judd (WA Partnership) is a member of
International and the HLB Mann Judd National Association of independent accounting firms
56
Independence
In conducting our audit, we followed applicable independence requirements of Australian
professional ethical pronouncements and the Corporations Act 2001.
The Directors’ Report attached to the financial statements includes a copy of the Independence
Declaration given to the Directors by the lead auditor for the audit. That Declaration would be on
the same terms if it had been given to the Directors at the time this audit report was made.
Audit Opinion
In our opinion, the financial report of Sylvania Resources Limited is in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position at
30 June 2006 and of their performance for the year then ended; and
(ii) 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 2006
W M CLARK
Partner
57
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES
The shareholder information set out below was applicable as at 31 August 2006.
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
Class of equity security
Ordinary shares
11
85
112
209
82
499
Ordinary shares
No. held
42,928,899
19,232,559
16,388,533
9,586,766
6,336,696
4,351,801
4,126,850
3,275,000
3,037,200
2,447,500
1,900,000
1,754,928
1,600,000
1,351,700
1,230,000
1,200,000
1,200,000
1,000,000
750,000
750,000
124,448,432
% of issued
shares
28.47
12.75
10.87
6.36
4.20
2.89
2.74
2.17
2.01
1.62
1.26
1.16
1.06
0.90
0.82
0.80
0.80
0.66
0.50
0.50
82.54
1,000
1 −
1,001 −
5,000
5,001 − 10,000
10,001 − 100,000
100,001 and over
There were 5 holders of less than a marketable parcel of ordinary shares.
B. Equity security holders
Twenty largest quoted equity security holders – ordinary shares
Name
Computershare Clearing Pty Ltd
ANZ Nominees Limited
National Nominees Limited
Sunshore Holdings Pty Ltd
J P Morgan Nominees Australia Limited
Portpatrick Inc
HSBC Custody Nominees (Australia) Limited
Levante Shipping Est
Westpac Custodian Nominees Limited
Mellon Nominees (UK) Ltd
Victoria Global Holdings Limited
Fortis Clearing Nominees
Bell Potter Nominees Ltd
Citicorp Nominees Pty Limited
Golden Food Pty Ltd
Dr Salim Cassim
Flue Holdings Pty Ltd
Mr Christopher Robert Rogerson
Mr Grant Button
Mr Evan Kirby
58
SYLVANIA RESOURCES LIMITED
ABN 80 091 415 968
ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES
C. Substantial shareholders
Substantial shareholders in the Company are set out below:
Ordinary shares
Sunshore Holdings Pty Ltd
FRM Corp
Number
Held
Percentage
9,586,766
8,256,550
6.36
9.01
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.
E. Tenement schedule
Project
Tenement details
% Held
Copper Knob
M52/211
100 (subject to option to sell 100%)
Jimblebar
P52/869
80 (subject to option to sell 100%)
MLA52/739
P52/972
80 (subject to option to sell 100%)
100 (subject to option to sell 100%)
Everest North
Mineral Area 2 on farm Vygenhoek
No 10 JT measuring 180 hectares
Right to acquire 100%
59