Annual Report 2009 S y l v a n i a R e s o u r c e s A n n u a l R e p o r t 2 0 0 9 www.sylvaniaresources.com Unit 2, Level 1, Churchill Court, 331 - 335 Hay Street, Subiaco, Western Australia, 6008 Australia Corporate Directory Directors T M McConnachie - Managing Director R D Rossiter - Non-Executive Chairman L M Carroll - Finance Director Dr A P Ruiters - Non-Executive Director G M Button - Executive Director Company Secretary L M Carroll/G M Button Principal registered office in Australia Unit 2, Level 1, Churchill Court, 331 - 335 Hay Street, Subiaco, Western Australia, 6008 Australia Telephone: (08) 9226 4777 Facsimile: (08) 9481 5044 Registrar Computershare Investor Services Pty Limited Reserve Bank Building Level 2, 45 St George’s Terrace Perth, Western Australia, 6000 Australia Auditors HLB Mann Judd Chartered Accountants, 15 Rheola Street West Perth, Western Australia, 6005 Australia Solicitors Clayton Utz QV1, 250 St George’s Terrace Perth, Western Australia, 6000 Australia Nominated Advisor and Broker Ambrian Partners Limited Old Change House 128 Queen Victoria Street London, EC4V 4BJ, United Kingdom Stock Exchange Listings Sylvania Resources Limited is listed on the Australian Securities Exchange (Shares:SLV) and on the AIM market of the London Stock Exchange (Shares:SLV) Website www.sylvaniaresources.com Designed by Chameleon Creative Contents Review by Chairman and Managing Director 3 Vision 3 Highlights 4 15 Key Management Personnel 17 Financial Statements 2009 19 Directors’ Report 36 Auditor’s Independence Declaration 37 Corporate Governance Statement 46 Directors’ Declaration 47 49 50 Balance Sheet 51 53 Cash Flow Statement 54 Notes to the Financial Statements 98 Additional Information for Listed Public Companies 100 Glossary of Terms 2009 Independent Auditor’s Report Income Statement Statement of Changes in Equity Sylvania Resources Annual Report 2009 1 2 Sylvania Resources Annual Report 2009 Vision Sylvania’s vision is to become the pre-eminent south african mid-tier PGM producer as measured by its stakeholders, using its metallurgical and engineering expertise to aquire and develop low-risk tailings and shallow mining assets. Highlights • PGM production increas - ed by 43% to 23,813 oz Reflecting process improvements at Millsell and Steelpoort • • • • • PGM plant feed grade 5.73g/t PGM plant recovery 55% No significant incidents or accidents Sylvania Dump Operations (SDO) produces 22,107oz - - - Low cost producer - the ultimate protection in the downturn - Revenue down 40% to A$19.3m due to 65% collapse in net PGM basket price received Profit from operations down 69% to A$8.8m Average site cash cost of A$440/oz (US$321/oz) Growth accelerated with:- - Increased investment (A$30.6m) in organic expansion of SDO - Lannex commissioned and in production build up, construction at Mooinooi progressing well. Doornbosch fast tracked into development Contract operations now undertaken directly by Sylvania - - - - Announced takeovers of SA Metals and Great Australian Resources to secure significant shallow PGM resources Proposed merger with Ruukki Group for potential mines to metal PGM and Ferrochrome expansion • Cash reserves at year end were A$32.2m Sylvania Resources Annual Report 2009 3 Review By the Chairman and Managing Director On the strategic front, Sylvania, like most platinum companies, was affected by the global economic crisis. However, the downturn clearly demonstrated its highly robust model and provided opportunities for the company to access additional resources. These opportunities have resulted in the successful acquisition of SA Metals (SXM:ASX) and Great Australian Resources (GAU:ASX), both holders of significant shallow PGM resources, as well as a proposed merger with Ruukki Group Oyj to create a vertically integrated mines to metals PGM and ferrochrome company. As world economies begin to recover Sylvania is well placed to take advantage of strengthening PGM prices. Health, Safety and Environment Sylvania’s commitment to the health and safety of its employees, contractors, sub contractors and the environment in which we work, is paramount to our continued existence. During 2009 the Sylvania Dump Operations had no significant incidents or accidents. Two Lost Time Injuries occurred and remedial actions were implemented immediately. While this is a commendable result, we continue to strive to improve to zero harm to people and environment. There were no reportable environmental incidents during 2009. Sylvania remains compliant with Samancor Safety standards, Environmental Programs and systems. We also comply with the highest safety (OHSAS) and environmental (ISO) standards as well as the National Environmental Management Act. Overall Sylvania is proud of its commitment to the environment and sustainability given its focus on the retreatment of mine tailings and the production of PGMs, which are largely used in catalytic converters for pollution control in the auto industry. Overview We are pleased to reflect on a year where your company continued to make operating profits and invest in future growth despite the dramatic downturn in the global economy and specifically in platinum group metal (PGM) prices and the chrome industry that provides the feed for our plants. Sylvania has seen a year of new plants being commissioned, further PGM resources being secured and an opportunity to gain access to PGM smelting capacity, which will facilitate further expansion of its business model. PGM production for the year increased by 43% to 23,813 oz (vs. 16,690 oz in FY’08) largely as a result of process improvements and steady performance from the Millsell and Steelpoort plants. Following the temporary closure of a number of chrome mines towards the end of calendar 2008, our plants had to rely almost entirely on dump material and this eventually affected the operating performance of existing plants and the construction planning and commissioning of our new plants at Lannex and Mooinooi. In response, the plant construction programme was reviewed and as a result the Doornbosh plant was fast tracked due to its higher grade profile while the lower grade Mooinooi plant was downscaled. Sylvania is also proud of the fact that despite the significant expansion in PGM production through new plants and optimization of existing operations not a single serious injury was sustained by any of our workforce during the year. A 65% decline in the average net basket price received to US$659/oz saw revenue decline by 40% to AUS$19.3m, despite the increase in PGM production. Profit from operations consequently declined to A$8.8m (vs. A$28.7m in FY’08) and earnings before interest and tax (EBIT) to a loss of A$3.2m (vs. a profit of A$14.3m in FY’08). Cash flow from operations improved significantly to A$19.9m (vs. A$10.5m in FY’08) highlighting the low cost nature of Sylvania’s operations. Cash flow and reserves were largely utilised for investment in growth projects at Lannex, Mooinooi and Doornbosch with expenditure on property, plant and equipment at A$30.6m (vs. A$12.1m in FY’08). Cash reserves at year end were A$32.2m (vs. A$43.6m in FY’08). Terry McConnachie Richard Rossiter 4 Sylvania Resources Annual Report 2009 Review By the Chairman and Managing Director 4 3 2 1 0 Sylvania Dump Operations Safety Statistics 3.37 1.36 0 2007 2008 2009 LTIFR Lost Time Injury Frequency Rate LTI Lost Time Injury JM Base Prices US$ Daily Platinum & Palladium From 1 Jul 2005 To 31 Aug 2009 2420 2200 1980 1760 1540 1320 1100 880 660 440 220 0 2005 2006 2007 2008 2009 Platinum Palladium Period Average $1261.51 Period Average $310.70 Markets The onset of the global financial crisis, and the consequent reduction in demand for vehicles and autocatylists saw the PGM basket price received fall by more than 70% from an average of US$2,692/oz in the last quarter of FY’08 to a low of US$687/ oz in the December quarter 2008. Since then the basket price has gradually recovered to an average of US$1,007/oz in the final quarter of the 2009 financial year. In terms of the price of the individual metals in Sylvania’s basket, the sharp fall in rhodium from a high of above US$10,000/oz to a low of below US$1,000/oz had a disproportionally large impact on Sylvania’s revenue mix given the higher than industry average proportion of rhodium in the company’s PGM basket. While the production mix has not changed during the financial year, the revenue mix has changed where rhodium now contributes 36% (vs. 51% in FY’08) and platinum 58% (vs. 46% in FY’08). JM Base Prices US$ Daily 10120 Rhodium From 1 Jul 2005 To 31 Aug 2009 9200 8280 7360 6440 5520 4600 3680 2760 1840 920 2005 2006 2007 2008 2009 Rhodium Period Average $4677.63 Sylvania Resources Annual Report 2009 5 Review By the Chairman and Managing Director SDO FY’09 PGM Basket Production Mix SDO FY’09 PGM Basket Revenue Mix Gold 0% Rhodium 16% Gold 0% Rhodium 36% Palladium 26% Platinum 58% Platinum 58% Palladium 6% EBIT Waterfall I E B T 2 0 0 8 P r i c e E f f e c t l V o u m e E f f e c t C o s t s O t h e r E x c h a n g e I E B T 2 0 0 9 20 15 10 5 - -5 m $ A -10 -15 -20 -25 Financial and Operating Performance Sylvania continued to make operating profits and invest in future growth despite the dramatic decrease in platinum group metal (PGM) prices and the chrome industry that provides the feed for our plants. The table below sets out a summary of the Sylvania Resources financials and performance. When reconciling FY’09 and FY’08 EBIT, the largest factor impacting the result was the collapse in the PGM basket price over the year. This was in part offset by volume and lower exchange rate gains. Sylvania Resources Financials PGM basket price (Gross) Nett PGM basket price Revenue Profit from Operations EBIT Ave R/US$ Ave R/A$ Production Plant feed tons PGE (3E+Au) 6 Sylvania Resources Annual Report 2009 2008 2009 % Change 2,346 1,903 32.0 28.7 14.3 7.31225 0.15460 575,699 16,690 881 659 19.3 8.8 -3.2 9.04843 0.15101 612,462 23,813 -62% -65% -40% -69% -122% 6% 43% US$/oz US$/oz A$m A$m A$m Rate Rate oz Review By the Chairman and Managing Director Sylvania Dump Operations The Sylvania Dump Operations (“SDO”) processed 550kt (vs. 507kt in FY’08) of primary feed material and 217kt (158kt in FY’08) of PGM feed tons. The 37% increase in volume treated in the PGM plants was largely responsible for the 55% increase in PGE production to 22,107 oz (vs. 14,224 oz in FY’08). While unit costs per PGM ton rose to A$44.86/ton treated (vs. A$36.67/ ton in FY’08), the cost per ounce remained exceptionally low by industry standards at AUS$440/oz (US$321/oz) compared to A$408/oz (US$349/oz) in FY’08. This increase in costs is due largely to costs of employing and training staff for the new plants. These costs will reduce when the plant crew training is completed. The Sylvania operations have achieved steady growth in terms of plant availability and recoveries. The main technical issue affecting all plants is the unknown treatment characteristics of future feed materials. On top of this, individual plants all have site- specific processing issues. Proper management of these process development requirements has the potential to deliver significant PGM recovery benefits. The Company has a structured team of people at each plant, headed by a suitably qualified Plant Manager and technical support staff. Sylvania senior staff provide full support by way of administration, accounting and technical services together with continuing metallurgical technical support from an outside contractor. In March of this year, the Company gave notice to its plant operating contractors and employed its own staff to operate the plants. The decision was in part to dispense with the use of contract labour and to allow the Company to have a direct relationship with all staff. The smooth employment of all previously out sourced employees ensured continued positive attitudes and motivation amongst the workforce. Millsell The Millsell operation has shown steady growth in terms of plant availability and PGM recoveries. Improvements to the pumping infrastructure, the installation of a scrubber to treat high PGM bearing clay, and reagent optimisation all contributed to the improvement in PGM production. Sylvania Dump Operations Summary of Performance (100%) Production – SDO Feed Tons Treated Feed Grade PGM Tons Treated PGM Grade Recovery Ounces Cost AUD/oz (Delivered) Cost AUD/t (Feed Tons) Cost AUD/PGM t (Treated Tons) t g/t t g/t % oz A$/oz A$/t A$/t 2008 507,262 2.22 158,258 5.20 53.7% 14,224 408 11.44 36.67 2009 550,808 2.62 216,971 5.73 55.3% 22,107 440 17.67 44.86 % Change 9% 18% 37% 10% 3% 55% 8% 54% 22% Sylvania Resources Annual Report 2009 7 Review By the Chairman and Managing Director Sylvania Resources Half Yearly Production of PGM (3E+Au) (ounces) s e c n u O 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - D e c 0 7 J u n 0 8 D e c 0 8 J u n 0 9 Steelpoort The Steelpoort operation had an excellent year up until February, when the Phase 1 slimes dam was depleted. Thereafter performance was affected by the introduction of the Phase 2 slimes dam material which had lower grades and recoveries. The efficiency of the PGM flotation plant improved to 76% in the third quarter before being affected by the introduction of new source material with lower recovery characteristics. Improved fine chromite recovery remains a development opportunity and a number of approaches are being implemented. Lannex Commissioning of the 70,000 ton per month plant commenced in March, however, the plant has not achieved satisfactory throughput, recovery or concentrate grade. This in part has been exacerbated by the changed feed material caused by the temporary closure of the associated chrome mine. It is envisaged that the plant will be brought into full production more slowly whilst teething problems are resolved and Samancor’s operations are reopened. 8 Sylvania Resources Annual Report 2009 Review By the Chairman and Managing Director Lannex has approximately 1.2 million tons of chrome tailings dam material to feed to the plant. In addition, it will have current arisings from the Samancor Lannex plant when it resumes normal operations. It will also have a separate feed source derived from run of mine fines when Samancor resumes surface mining. The new tailings dam where the Sylvania final tails will be pumped, has been delayed due to environmental approval processes. In the meantime, the final tails are being pumped to a temporary tailings void. This temporary void has limited capacity and as a result Sylvania can only run the Lannex plant at 50% of design capacity until the new tailings dam is commissioned in approximately six months time. On the 16th April 2009, Sylvania announced that Boynton Investments (Pty) Limited (“Boynton”) had withdrawn its application lodged with the North Gauteng division of the High Court of South Africa for an order declaring Boynton as a co-owner of the Lannex tailings dump. Further, the said court ordered Boynton to pay costs. Mooinooi The Mooinooi project has been downscaled for strategic reasons from a 70,000 ton per month feed plant to a 37,000 ton per month feed plant, due mainly to its lower grade and the unavailability of power. The PGM plant is in construction with completion scheduled for the end of calendar 2009. Mooinooi has approximately 1.95 million tons of dump material at a grade of 1.2 g/t 3PGE + Au. In addition to this, feed will be sourced from the existing Samancor Mooinooi plant (current arisings) and the nearby Buffelsfontein Mine when it is reopened (ROM material). There are on-going negotiations with Lonmin to secure extra dump material from the Mooinooi dump. Doornbosch Construction at Doornbosch is progressing with most of the civil works already completed. Construction completion is expected to be in the Q3 of FY2010, depending on the status of long lead items. Samancor is commissioning a new chrome plant at Doornbosch (about a kilometre from the Sylvania Doornbosch plant). When the Samancor plant is fully operational, it will produce current arisings, which will be supplied directly to the Sylvania Doornbosch plant, which has a feed capacity of 37,000 tons per month. Sylvania Resources Annual Report 2009 9 Review By the Chairman and Managing Director Tweefontein The Tweefontein plant is designed as a 37,000 ton per month feed plant, which is planned to treat 10,000 ton per month current arisings from the Tweefontein mine and 27,000 tons per month of slimes from the Tweefontein void. This project is in the design phase and the current proposal indicates that a plant, if commenced in Q4 FY2010, could be, commissioned in July 2011. The following table sets out the capital expenditure in Rand spent on all plants from inception to 30 June 2009 as well as estimate costs to be incurred during the new financial year ending 30 June 2010: Plant Millsell Steelpoort Lannex Mooinooi Doornbosch Elandsdrift Tweefontein Total Construction June 2009 Improvement June 2009 Committed Cost Total June 2009 536,682 2,888,686 20,529,200 9,565,468 20,326,350 - 46,000 Total 62,949,716 66,246,576 148,408,328 65,489,944 61,033,825 9,920,642 3,437,000 8,961,869 13,387,421 - - - - - 22,349,290 53,892,386 417,486,031 53,451,165 49,970,469 127,879,128 55,924,476 40,707,475 9,920,642 3,391,000 341,244,355 10 Sylvania Resources Annual Report 2009 Review By the Chairman and Managing Director Tailings Estimates Current estimates of available tailings for processing are reflected in the following schedule. It should be noted that the estimates have been calculated at a specific gravity of 2.0, with additional tonnes that have been previously processed by Sylvania, being added, as they will be reworked in the future. 30 June 2009 Eastern Bushveld Tweefontein Lannex Steelpoort Main Steelpoort New Tailings Doornbosch Montrose Groothoek Onverwacht Mooihoek Western Bushveld Waterkloof Buffelsfontein Elandsdrift Total Millsell Main Millsell New Tailings Mooinooi Total Tailings Dump Estimates Tonnages (Tonnes) Dump estimate ore – 30 June 2008 SG Adjustment Processed Current Risings New Tailings Balance – 30 June 2009 909,120 1,222,590 226,049 83,256 165,150 157,990 12,215 7,776 248,065 165,721 316,265 662,784 1,593,000 5,769,981 356,377 63,898 448,057 (22,842) (89,443) (10,489) (41,520) 31,664 18,414 35,141 73,643 153,432 312,293 (257,297) 820,841 (421,591) 420,275 1,268,898 1,265,497 1,263,646 136,606 448,057 72,767 123,630 157,990 12,215 7,776 279,729 184,135 351,406 479,129 820,841 1,746,432 7,349,856 Chrome Tailings Retreatment Plant (CTRP) CTRP’s attributable production declined by 31% to 1,706oz (vs. 2,466oz in FY’08) mainly due to a 44% decline in the grade to 2.3g/t as a result of grade variances in the dump source material. Costs remained steady while recoveries improved to 38%. Aquarius Platinum manages the operation. Production – CTRP (25%) Feed Tons Treated Feed Grade Recovery Ounces Cost AUD/oz (Delivered) Cost AUD/t (Feed Tons) t g/t % oz A$/oz A$/t 2008 2009 68,437 4.20 26.0% 2,466 353 12.7 61,654 2.34 37.8% 1,706 394 12.5 % Change -10% -44% 45% -31% 12% -1% Sylvania Resources Annual Report 2009 11 Review By the Chairman and Managing Director Growth Sylvania’s strategy is to build cash generative businesses that can fund future growth in the PGM sector. Core strategic drivers are: • Operational excellence – “more from what we have”; • Tailings growth – “more of what we have”; • Near surface exploration and mining; • Vertical integration – to provide Sylvania with downstream processing access; and • Mergers and acquisitions. During the year Sylvania continued to improve and expand its existing low risk chrome tailings retreatment business with two plants now successfully commissioned, one plant in commissioning and another three facilities under planning and construction. In relation to exploration and project development, Sylvania continues with the Everest North Project, and is progressing with an application for a mining right to extract platinum and associated minerals on the farm Vygenhoek in the Mpumalanga Province of SA. This was submitted to Aquarius Platinum SA (Pty) Limited (“AQPSA”) for comments prior to the submission thereof to the SA Department of Minerals and Energy (“DME”). At present there is a dispute between Sylvania and AQPSA regarding the submission of the mining application to the DME and the matter has been referred to arbitration in terms of the provisions of the agreement. If the mining right is granted, Sylvania SA would hold a 74% interest in that mining right. Sylvania’s BEE partner for the purposes of the project is African Dune Investments 114 (Proprietary) Limited, which, if the mining right is granted, will hold a 26% interest in that mining right. In addition, the collapse in equity values following the global financial crisis, and Sylvania’s relatively robust financial position provided an opportunity for the company to accelerate its strategy to access additional shallow mining resources and gain access to downstream processing capacity. In the last quarter of the financial year, the company announced takeovers of SA Metals (SXM:ASX) and Great Australian Resources (GAU:ASX), both holders of significant shallow PGM resources. The combination of these near surface exploration assets in the Northern Bushveld Igneous Complex with Sylvania’s present portfolio of PGM producing assets will provide an opportunity to create long term benefits and value though the realisation of exploration and production synergies. SXM’s two principal projects, the Aurora Project and Grass Valley Project, are located in the Northern Limb of the Bushveld Igneous Complex. Great Australian’s projects include the Hacra Platinum Project (adjacent to one of SXM’s properties) and the Mooiplaats Platinum Project. Sylvania is also in negotiations regarding a proposed merger with Ruukki Group Oyi (Ruukki) over the opportunity to vertically integrate mines into PGM and ferrochrome smelting. On 30 June 2009, Sylvania and Ruukki Group Oyj entered into a Merger Implementation Agreement (MIA) in relation to a potential merger between Sylvania and Ruukki (Proposed Ruukki Merger), with the aim of creating an integrated mine to metals PGM and ferrochrome company. Under the Proposed Ruukki Merger, Sylvania shareholders’ will receive 1 Ruukki share for every 1.81 Sylvania shares held on the Proposed Ruukki Merger record date. Should the Proposed Ruukki Merger be successful, Ruukki’s overall strategy to create an integrated mines to metals PGM and ferrochrome Company is consistent with and complements Sylvania’s existing strategy. For further information on the proposed merger please refer to recent announcements and updates on the proposal. Corporate Matters On the 10th June 2009 the company issued 6,000,000 options to selected employees in accordance with its employee incentive program. The options are exercisable at A$1.05 each on or before 30 June 2012. Black Economic Empowerment Sylvania is committed to the spirit and intent of South Africa’s Mining Charter and has incorporated black economic empowerment (BEE) partners in its major operations and assets. 12 12 Sylvania Resources Annual Report 2009 Sylvania Resources Annual Report 2009 KEY Chrome Tailings Plants * Future Plants Near Surface Exploration Exploration Towns Doornbosch* Steelpoort Lannex Tweenfontein* Everest North SOUTH AFRICA NORTHERN LIMB GAU:SAX Cracouw/Harriet’s Wish/Aurora SXM:ASX Aurora Bushveld Igneous Complex Johannesburg Polokwane Cape Town GAU:ASX Mooiplaats EASTERN LIMB WESTERN LIMB SXM:ASX Grass Valley Mooinooi* Rustenburg Brits CTRP Millsell Pretoria Johannesburg Review By the Chairman and Managing Director PGM Production from Chrome Tailings Near Surface PGM Exploration 25% CTRP 74% Sylvania Dump Operations (SDO) - Millsell* - Steelpoort* - Lannex* - Mooinooi+ - Doornbosch+ - Tweenfontein+ *In operation +Future plants 100% 100% Everest North (right to acquire 74% of Vygenhoek) Everest Australian Resources Limited (GAU:ASX) SA Metals Limited (SXM:ASX) - Aurora - Harriet’s Wish - Cracouw - Mooiplaats Project - Aurora - Grass Valley Project KEY Chrome Tailings Plants * Future Plants Near Surface Exploration Exploration Towns Doornbosch* Steelpoort Lannex Tweenfontein* Everest North SOUTH AFRICA NORTHERN LIMB GAU:SAX Cracouw/Harriet’s Wish/Aurora SXM:ASX Aurora Bushveld Igneous Complex Johannesburg Polokwane Cape Town GAU:ASX Mooiplaats EASTERN LIMB WESTERN LIMB SXM:ASX Grass Valley Mooinooi* Rustenburg Brits CTRP Millsell Pretoria Johannesburg Sylvania Resources Annual Report 2009 13 Review By the Chairman and Managing Director Board changes On the 5th May 2009 Sylvania announced the appointment of Mr. Grant Button to the Company’s board of Directors and Chairman of the Board’s Audit Committee and that Mr. John Cooke had resigned from the Company’s board as a Non-Executive Director and Chairman of the Board’s Audit committee. Acknowledgements We are grateful to fellow board members past and present, to executive management and to employees who have contributed towards Sylvania’s exciting yet very demanding development and growth achievements during the year. Whilst operational excellence, plant construction, commissioning and fine-tuning have been a major focus, much energy and expertise has been given to identifying and pursuing growth opportunities and implementing strategies aimed at transforming the company into a significant PGM producer in the future. Outlook The Board and Executive management remain focused on delivering our core strategies to deliver organic and acquisitive growth. We remain focused on enhancing performance at our existing operations and successfully constructing and commissioning the new chrome tailings retreatment plants. The addition of significant near surface PGM exploration and development properties, following the completion of the SXM and GAU acquisitions will also give Sylvania access to new resources which can be efficiently mined from surface. The proposed merger with Ruukki, if successful, provides downstream PGM smelting capacity thereby enabling Sylvania to expand its low cost tailings retreatment and near surface PGM mining business model. Operationally, we are encouraged by the recent resumption of mining and processing at Samancor and we therefore expect more normal feed of current arisings and run of mine ore (ROM) to compliment our traditional dump feed in the future. This is likely to stabilize performance at the operations and improve recoveries as PGM’s are more readily recovered from fresher ore sources. T M McCONNACHIE Managing Director R D ROSSITER Non-Executive Chairman 14 Sylvania Resources Annual Report 2009 Key Management Personnel Zoran Marinkovic - Director of Sylvania Metals (Pty) Ltd BSc (Chem Eng), University of Belgrade Gerbrand Haasbroek - General Manager: Metallurgy BEng (Metallurgy) Hons, University of Pretoria Zoran Marinkovic, who is from Serbia (formerly Yugoslavia), has worked in a number of industries, including the petrochemical, shipping and mining sectors in Europe. Among the senior positions he has held are those of site director and special adviser for Mostec Limited, where he was based at a shipyard in the Ukraine; production director at the High Density PolyEthylene Plant (HDPE) at the Petrochemical Complex of Pancevo in Yugoslavia; and, most recently, co-owner and director of ABM International Limited, a Belgrade-based company trading in chrome and other metals on the European and Russian markets as well as undertaking research and consulting in the area of chromium waste and tailings. Since January 2006, Zoran has been responsible for developing and controlling chromium and platinum group metals (PGM) projects in terms of Sylvania’s contract with Samancor Chrome. He is currently working on extending the existing contract with new projects that will expand Sylvania’s supply of PGM base material. Phil Carter - General Manager: Mining Projects BSc (Mining Eng), University of the Witwatersrand Phil Carter, who holds a Mine Manager’s Certificate of Competency, has been in the mining industry for 30 years. At different stages of his career he has worked for De Beers, AngloGold and SA Chrome and he has experience at a senior management level in diamond, deep-level gold and chrome mines. His particular field of expertise is in mine and project management. At SA Chrome, he started the Horizon Chrome mine as a greenfields project and was responsible for the design, construction and management of the chrome concentrator plant, as well as the opencast and underground mines. The project was completed to full production in 18 months. At Sylvania, Phil is heading up the development of the Everest North mine project and the Capital Construction expansion programme. Gerbrand Haasbroek has broad experience across the mining industry in the fields of coal, iron ore, vanadium, magnesite and aluminium. He has also been involved in the manufacturing of products in the clay, ceramic, enamel and plastics sectors as well as parts for the steel industry. During his career he has held the positions of production manager, production director and operating director. At one stage he managed up to three factories at the same time. Most recently he was managing director of his own consulting company, Metsult (Pty) Ltd. Gerband’s achievements include turning around an aluminium casthouse from 100,000 to 200,000 tonnes a year while reducing costs to reach world benchmark figures; turning around a ceramics/plastics company which consistently delivered a return on investment of 40%; and developing world-class, high-purity vanadium chemicals. Johan Meyer - General Manager: Operations BEng (Mech) (Hons), University of Stellenbosch; GDE (Indus Eng), University of Witwatersrand Johan Meyer started his career in the mining industry as a project engineer, working first for Rio Tinto and afterwards for Anglo American and Gold Fields. He then moved into the manufacturing industry where he held several senior management positions. He has extensive knowledge of business start-up as he was a key member of the team that led an aluminium company through an expansion in which the business quadrupled in size. During this period, he acquired a sound understanding of base metals and metals trading as it relates to the London Metal Exchange. After joining Sylvania, Johan designed and constructed the first two plants which are now operating at design capacity. Currently, he is heading growth projects for the group, focusing on the re- treatment of chrome and platinum. He is also responsible for all commercial aspects of the business. Sylvania Resources Annual Report 2009 15 Key Management Personnel Christo de Vos - Internal Legal Adviser BComm, University of the Free State; LLB, Unisa Christo De Vos is admitted as an attorney, notary and conveyancer in South Africa. He was a senior partner at Wessels & Smith, a law firm in Welkom, South Africa for 28 years, specialising in commercial and mining law, trust law, estate planning and tax law, before being appointed by Sylvania Resources Limited as legal and commercial executive adviser. Christo has vast experience in black empowerment transactions, and acts as a trustee for several black empowerment trusts and employee incentive schemes. Dr Peter Cox - Strategic Planner BSc (Mining Eng) University of the Witwatersrand; MSc, PhD (Mining Eng) Harrington; Dip (Civil Eng), University of Natal Dr Peter Cox started his career in the mining industry 30 years ago as a learner surveyor. After studying mining engineering as a JCI bursar, he worked for that company in various positions at gold and platinum mines, ending as a senior section manager. Peter joined a privately owned mining and exploration company, Severin Southern Sphere Mining, as consulting engineer and general manager. Since mid-1991 he has been the managing director of Goldline Global Consulting (Pty) Ltd, an engineering consulting company which serves the mining industry worldwide. Peter holds a Mine Surveyor’s and a Mine Manager’s Certificate of Competency. He has a number of achievements to his name, including being the youngest certificated surveyor in South African mining history and designing the country’s narrow reef opencast mining method. Lewanne Carminati - Financial Manager BComm (Hons), CA (SA) Lewanne Carminati started her career in finance in 2001, and has gained experience in both the contracting and mining industry. Lewanne joined Sylvania in July 2009. Ben Kruger - Management Accountant NHD (Cost and Management Accounting) Ben Kruger has spent 18 years in the field of cost and financial accounting, working in the mining, manufacturing, printing and services industries. His responsibilities have included general accounting, finance, project accounting and costing. While employed by De Beers and Gold Fields, he was exposed to opencast, shallow underground and deep-level mining. This experience included his involvement in a feasibility study for Gold Fields South Deep mine. He joined Sylvania in October 2007. 16 Sylvania Resources Annual Report 2009 Financial Statements 2009 Contents Independent Auditor’s Report Income Statement 19 Directors’ Report 36 Auditor’s Independence Declaration 37 Corporate Governance Statement 46 Directors’ Declaration 47 49 50 Balance Sheet 51 53 Cash Flow Statement 54 Notes to the Financial Statements 98 Additional Information for Listed Public Companies 100 Glossary of Terms 2009 Statement of Changes in Equity 18 Sylvania Resources Annual Report 2009 Your directors present their report on the consolidated entity (“the Group”) consisting of Sylvania Resources Limited (“the Company”) and the entities it controlled at the end of or during the financial year ended 30 June 2009. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows: Directors’ Report Directors T M McConnachie R D Rossiter Dr A P Ruiters L M Carroll E Kirby J Cooke (Managing Director) (Chairman) (Non-executive Director) (Finance Director) (Resigned 18 August 2008) (Appointed 18 August 2008; Resigned 30 April 2009) G M Button (Appointed 4 May 2009) Information on Directors T M McConnachie – Managing Director Experience and expertise Mr McConnachie has over 25 years of experience in mining, benefication of ferroalloys and precious metals. He was the founder of Merafe Resources Limited (formerly South African Chrome & Alloys Limited), a successful chrome mining company, black empowered and listed on the Johannesburg Stock Exchange with assets worth in excess of a billion rand ($350m). 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. Other current directorships Director of Dwyka Resources Limited (since 2007) Ruukki Group Oyj Former directorships in the last three years None. Special responsibilities Managing Director R Rossiter BSc (Hons) MSc – Non-Executive Chairman Experience and expertise Mr Rossiter was appointed in August 2007 and acts as non-executive Chairman. He leads the Board in implementing its strategy of becoming a significant platinum group metal producer. He began his career as a geologist with General Mining Union Corporation in South Africa. He subsequently qualified in mine management and held various production management and business development roles. He later joined the financial sector as a mining analyst and then moved to Australia where he later was responsible for corporate advisory, mergers and acquisitions and divestments. Other current directorships Morning Star Holdings (Australia) Limited Former directorships in the last three years None. Special responsibilities Chairman of the Board. Sylvania Resources Annual Report 2009 19 Directors’ Report L M Carroll B Com, MAP, H. Dip. Corporate Law, H. Dip. Property Management, Dip Business Management – Finance Director Experience and expertise Mr Carroll was appointed in August 2007 and acts as Finance Director having worked for the Company previously in its South African operations, principally in developing and structuring financial reporting and systems. He has over 40 years experience in the resources industry and has served as executive and non-executive director on a number of private and publicly listed companies. He also served as COO in an oil and gas listed company. Other current directorships None Special responsibilities Financial Director and Joint Company Secretary Dr A P Ruiters BA (Hons), PhD (D.Phil) – Non-Executive Director Experience and expertise Dr Ruiters was appointed in August 2007 and joined the Board as non-executive director and provides guidance on project procurement, development and funding. Dr Ruiters is one of the founders of Ehlobo Holdings Limited, the Company’s Black Economic Empowerment Partner in its tailings retreatment projects in South Africa. Dr Ruiters joined the Public Service in May 1994, after completing a PHD at Oxford University. He has held numerous positions in both the private and public sector, including that of Special Advisor to Trevor Manuel, South Africa’s first Competition Commissioner and Director General of the DTI. Other current directorships None. Former directorships in the last three years None Special responsibilities Non-Executive Director with special portfolio: Transformation. Mr G M Button – Executive Director Experience and expertise Mr Button was a director and company secretary of Sylvania for four years until June 2007. He rejoined Sylvania as company secretary in January 2009 and was appointed to the Board in May 2009. Mr Button is a qualified accountant with 19 years experience at a senior management level in the resources industry. He has acted as an executive director, managing director, finance director, chief financial officer and company secretary for a range of publicly listed companies. Other current directorships Magnum Mining and Exploration Limited Alamar Resources Limited Morning Star Holdings (Australia) Limited Former directorships in the past three years Washington Resources Limited (1 March 2005 to 1 December 2008) Special responsibilities Joint Company Secretary 20 Sylvania Resources Annual Report 2009 Directors’ Report Interest in Shares and Options The following relevant interests in the shares and options of the Company or related body corporate were held by the directors as at the date of this report: 2009 T M McConnachie R D Rossiter L M Carroll Dr A Ruiters G M Button 2008 T M McConnachie R D Rossiter L M Carroll Dr A Ruiters Common Shares 500,000 1,032,000 - - 300,000 Common Shares - 500,000 - - Options Exercisable at $0.75 Options Exercisable at $2.89 Options Exercisable at $1.63 Options Exercisable at $1.05 - - 200,000 - - - - - 200,000 - 1,750,000 - 300,000 - - - - - 200,000 - Options Exercisable at $0.50 Options Exercisable at $0.75 Options Exercisable at $2.89 500,000 - - - - - 200,000 - - - - 200,000 The following share options of Sylvania Resources Limited were granted to directors and to the five most highly remunerated officers of the Company during or since the end of the financial year as part of their remuneration: Directors and Officers T M McConnachie Number of Options Granted 1,750,000 R D Rossiter L M Carroll Dr A Ruiters G M Button J Meyer Z Marinkovic C De Vos P R Carter P J Cox - 300,000 200,000 - 800,000 600,000 800,000 600,000 500,000 Company Secretary The Company Secretary role is jointly held by Mr L M Carroll and Mr G M Button, both Directors of Sylvania Resources Limited. Mr Carroll and Mr Button were appointed to the position of Joint Company Secretary in January 2009. Please refer to the above Information on Directors section for further details. Principal Activities The principal activity of the Group during the financial year was investment in mineral exploration and mineral treatment projects. As new mineral treatment plants become operational, focus will be concentrated on operations. Sylvania Resources Annual Report 2009 21 Directors’ Report 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. Review of Operations Operating results for the year The consolidated loss of the Group for the year after income tax expense and minority interest was A$3,524,073 (2008: consolidated profit A$9,862,186). Highlights during the year included: • Lannex plant commissioned and in production; • Production from Millsell and Steelpoort plants was 22,107 PGM ounces; • CTRP contribution was 1,706 PGM ounces; • Offers for SA Metals Limited and Great Australian Limited to boost opencast ore resource; • Merger proposal with Ruukki Group Plc to take current and future production from “mine to metal production” – completion targeted for first half 2010. Financial results: • The average 3E+Au basket price was US$881/oz; • Revenue from ordinary activities for the year fell from A$32.8million in 2008 to A$19.3million; • The cash balance at 30 June 2009 was A$32.2million; • Consolidated loss per share for the year ended 30 June 2009-1.97 cents Everest North Sylvania SA (Pty) Limited (“Sylvania SA”), a fully owned subsidiary of Sylvania, entered into an agreement with Aquarius Platinum SA (Pty) Limited (“AQPSA”) on 24 May 2005 in terms whereof it was appointed as agent for AQPSA to apply for a mining right for PGMs over Mineral Area 2 (a portion of Mineral Area 1) of the farm Vygenhoek 10 JT, situated in the magisterial district of Lydenburg. The agreement between Sylvania SA and AQPSA furthermore provided for the simultaneous transfer of the mining right to Sylvania SA. AQPSA now disputes Sylvania SA’s rights to apply for a mining right in the name of AQPSA and the simultaneous transfer thereof to Sylvania SA and the matter has been referred to arbitration in terms of the provisions of the agreement. Harriet’s Wish, Aurora and Cracouw On 14 December 2007 Sylvania entered into an agreement with Rustenburg Platinum Mines (Pty) Limited (“RPM”) in terms whereof Sylvania Mining (Pty) Limited (“Sylvania Mining”), a fully owned subsidiary of Sylvania, acquired from RPM the prospecting rights to prospect for Platinum Group Metals (PGMs) in and under: a) An undivided half share of the farm Harriet’s Wish 393; b) The farm Aurora 397; and c) An undivided half share of the farm Cracouw 391. On 18 June 2008 Sylvania Mining entered into an agreement with Sika-Bopha Trading (Pty) Limited (“Sika Bopha”) the then holder of the right to prospect for PGMs on the remaining undivided portions of the farms Harriet’s Wish and Cracouw. It was agreed to pool the prospecting rights in a new company which was formed under the name Hacra Mining & Exploration Company (Pty) Limited (“Hacra Mining”). In return Sylvania Mining obtained 14.2% of the issued share capital of Hacra Mining which it then sold to Great Australia Resources Limited (“GAU”). GAU also acquired a further 56.8% shares in Hacra Mining resulting in a total holding of 71% for GAU. GAU was recently taken over by Sylvania. 22 Sylvania Resources Annual Report 2009 Directors’ Report Matters Subsequent to the End of the Financial Year On 11 May 2009 Sylvania announced its intention to make two off-market takeover offers for all the ordinary shares in SA Metals Limited (SA Metals, ASX: SXM) and Great Australian Limited (Great Australian, ASX: GAU) respectively (Offers). The Offers closed at 5.00pm (WST) on 11 August 2009. The offer for SA Metals, which was recommended by the directors of SA Metals, was based on 1 Sylvania share for every 10 SA Metals shares held by SA Metals shareholders. As at 5.00pm (WST) on 11 August 2009, Sylvania had a relevant interest in 95% of SA Metals shares on issue. Sylvania is proceeding with a compulsory acquisition to acquire the remaining SA Metals shares. Following the completion of the compulsory acquisition, SA Metals will be a wholly owned subsidiary of Sylvania Resources Limited. The offer for Great Australian, which was recommended by the directors of Great Australian, was based on 1 Sylvania share for every 12 Great Australian shares held by Great Australian shareholders. As at 5.00pm (WST) on 11 August 2009, Sylvania had a relevant interest of 89.82% of Great Australian shares on issue. On 13 August 2009, Great Australian sought a trading halt and this company made an urgent application to the Federal Court seeking an order, to allow compulsory acquisition despite the fact that the 90% threshold was not satisfied. The court exercised its power (under Section 661A(3) of the Corporations Act) to allow compulsory acquisition. Great Australian will also be a wholly owned subsidiary of Sylvania Resources Limited. The combination of the PGM assets of Sylvania, SA Metals and Great Australian will provide an opportunity to create long term benefits and value for the shareholders of both companies through improved scale and penetration of the market for the supply of PGM resources. As at 28 September 2009 27,042,762 Sylvania shares had been issued for the takeover bid of SA Metals and 7,750,229 shares for the Great Australian takeover bid. Overview of SA Metals SA Metals is an explorer seeking to become a significant producer of platinum group metals (PGMs) in the Bushveld Igneous Complex of South Africa. SA Metals was incorporated on 2 June 2000, and listed on ASX on 28 November 2000, under the name Rox Limited. Rox Limited changed its name to Pan Palladium Limited in February 2001, and changed its name to SA Metals in May 2009. SA Metals’ two principal projects, the Aurora Project and Grass Valley Project, are located in the Bushveld Igneous Complex. Overview of Great Australian Great Australian is a minerals exploration company focused on the exploration and subsequent development of PGM deposits. Great Australian was incorporated in October 2003 and listed on ASX on 11 March 2004. Great Australian is focused on PGM exploration activities in South Africa. In 2007 Great Australian divested its assets in Australia and South-East Asia to focus on its South African projects. Great Australian’s current projects, the Hacra Platinum Project and the Mooiplaats Platinum Project, are located in the Bushveld Igneous Complex. The Proposed Merger with Ruukki Group Oyj On 30 June 2009, Sylvania and Ruukki Group Oyj (Ruukki) entered into a Merger Implementation Agreement (MIA) in relation to a potential merger between Sylvania and Ruukki (Proposed Ruukki Merger), with the aim of creating an integrated mine to metals PGM and ferrochrome company. Under the Proposed Ruukki Merger, each Sylvania shareholder will receive 1 Ruukki share for every 1.81 Sylvania shares held on the Proposed Ruukki Merger record date. The Proposed Ruukki Merger has been unanimously recommended by the Ruukki independent directors and by each of the independent directors of Sylvania (being each of the directors of Sylvania other than Terry McConnachie who is also a director of Ruukki) in the absence of a superior proposal and subject to confirmation from the independent expert that the Proposed Ruukki Merger is in the best interests of Sylvania shareholders. SA Metals shareholders and Great Australian shareholders who have accepted the respective Sylvania takeover offers will receive Sylvania shares and will then have the opportunity to consider and vote on the Proposed Ruukki Merger as Sylvania shareholders. Sylvania Resources Annual Report 2009 23 Directors’ Report Overview of Ruukki Ruukki is a company incorporated in Finland which specialises in industrial refining of specialised natural resources within two areas: wood processing and minerals. The minerals business has mining and mineral processing operations in South Africa, Turkey and Germany. The wood processing business has a strong presence in the northern part of Finland. The creation of the minerals business, the Mogale acquisition and the Proposed Ruukki Merger demonstrates Ruukki’s shift in focus to minerals processing and extraction. Ruukki aims to become an integrated mine to metals PGM and ferrochrome company. Accordingly, on 7 May 2009, Ruukki announced that its board of directors had resolved to initiate the process to divide its wood processing and minerals businesses, ultimately resulting in two separately listed companies during 2010. The separation of the wood processing and minerals businesses will commence after completion of the Proposed Ruukki Merger. On 25 May 2009, Ruukki announced the acquisition of 84.9% of Mogale. The acquisition of Mogale was a cornerstone transaction in Ruukki’s expansion into South Africa and a major step towards its objective of expanding its existing mineral processing operations. Mogale’s production facilities are located in South Africa, in the vicinity of Johannesburg. It has a total of 96 MVA smelting capacity with four furnaces. Mogale produces silico manganese, ferrochrome and stainless steel alloy and has a combined annual capacity of approximately 100,000 tonnes of ferrometals. Ruukki’s shares are listed on NASDAQ OMX Helsinki Ltd (trading symbol RUG1V). At 1 July 2009, Ruukki had a market capitalisation of approximately €545 million (A$957 million). Black Economic Empowerment Sylvania Metals (Pty) Limited (“Sylvania Metals”) and Sylvania Minerals (Pty) Limited (“Sylvania Minerals”), two subsidiary companies of Sylvania have as shareholders Sylvania (74%) and Ehlobo Metals (Pty) Limited (“Ehlobo Metals”) (26%). In terms of a Shareholders Agreement entered into between Sylvania and Ehlobo Metals, Ehlobo Metals undertook to contribute an amount of R64million towards the initial capital requirements of Sylvania Metals and Sylvania Minerals. Sylvania, however, made the aforementioned contributions on behalf of Ehlobo Metals. Sylvania and Ehlobo Metals have engaged in negotiations with the Industrial Development Corporation (“IDC”) whereby financial assistance would be rendered by the IDC and the Black Economic Empowerment structure of Sylvania Metals and Sylvania Minerals would be re-arranged. At the date of this report the Company has not yet concluded a new agreement although it is considered probable that this will occur in the near term. The directors are of the view, however, that due to the non-payment of Ehlobo’s capital contribution it is inappropriate to attribute to them a full 26% of the equity and results of Sylvania Metals and Sylvania Minerals. Accordingly, the directors have calculated a best estimate of the amount that is considered attributable to the minority. This estimate is on the basis of the full share of the equity less a profit reduction equivalent to an amount calculated using the South African Prime Lending rate on the commitment outstanding since the due date. Significant Changes in the State of Affair Other than the above corporate transactions, there have been no significant changes in the state of affairs of the consolidated entity to the date of this report. Likely Developments and Expected Results Additional comments on expected results of certain operations of the Group are included in the review of operations and activities. Environmental Legislation The Group is subject to significant environmental legal regulations in respect of its exploration and evaluation activities in South Africa. There have been no known breaches of these regulations and principles by the Group. 24 Sylvania Resources Annual Report 2009 Directors’ Report Meetings of Directors During the financial year there were 6 directors’ meetings. All other matters that required formal Board resolutions were dealt with via written circular resolutions. In addition, the directors met on an informal basis at regular intervals during the year to discuss the Group’s affairs. The numbers of meetings of the Company’s Board of Directors attended by each director were: T M McConnachie R D Rossiter L M Carroll Dr A P Ruiters J Cooke (appointed 18 August 2008; resigned 30 April 2009) Dr E Kirby (resigned 18 August 2008) G M Button (appointed 4 May 2009) Board Meetings Audit Committee Meetings Number of Meetings Eligible to Attend 6 Number of Meetings Attended 6 Number of Meetings Eligible to Attend - Number of Meetings Attended - 6 6 - 2 1 3 6 6 - 2 - 3 2 2 - 2 - - 2 2 - 2 - - Remuneration Report (Audited) The key management personnel of the Group are the directors of the Company and those executives that report directly to the Chief Executive Officer. The directors are: • T M McConnachie - Managing Director; • R D Rossiter - Chairman; • L M Carroll - Finance Director; • G M Button - Joint Company Secretary; • A P Ruiters - Non-Executive Director with special portfolio: Transformation; The executives are: • J Meyer - General Manager: Business Development; • Z Marinkovic - Director, Sylvania Metals (Pty) Limited; • P R Carter - General Manager: Capital Projects; • Dr P J Cox - Strategic Planner; • C De Vos - Internal Legal Advisor. 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. Sylvania Resources Annual Report 2009 25 Directors’ Report 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. The Remuneration committee acts 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 new remuneration policy adopted is that in certain circumstances elements of any director/executive package be directly related to the Company’s financial performance. The overall remuneration policy framework however is structured in an endeavour to advance/ create shareholder wealth. This policy has not changed over the past six 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 Some 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 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 the following components: • Base pay and benefits such as superannuation; • Short-term performance incentives; • Long-term incentives through participation in the Employee Share and Option Plan. Base pay All executives are either full time employees or consultants that currently receive a fixed monthly retainer as agreed with the Company. The provision of Consultancy Services has been formalised in individual Consultancy Agreements. 26 Sylvania Resources Annual Report 2009 Directors’ Report Benefits Apart from superannuation paid on directors’ fees and executive salaries there are no additional benefits to executives, other than discretionary bonuses as detailed below. Short term performance incentives There are no current short term incentive remuneration arrangements, however the remuneration committee is currently reviewing this as an incentive for employees and have proposals to be submitted to the Board of Directors. Cash bonuses are paid to directors and key personnel from time to time at the discretion of the Board. Employee share and option plan To ensure that the Company has appropriate mechanisms in place to attract and retain the services of suitable directors and employees, the Company has established the Sylvania Share Plan and Option Plan, which were approved by shareholders on 26 October 2007 at the Company’s Annual general Meeting. The number of ordinary shares or options that may be offered to a participant is at the discretion of the Board of Directors of Sylvania. B Principles Used to Determine the Nature and Amount of Remuneration The key management personnel of the Group are the directors of the Company and those executives that report directly to the Chief Executive Officer. Details of directors and key personnel contracts are as follows: Duration of Contract (in years) Period of Notice to Terminate in months) Termination Payments Under Contract Name & Designation Directors T M McConnachie – Managing Director R D Rossiter – Chairman L M Carroll – Finance Director G M Button – Joint Secretary Key management personnel J Meyer – General Manager Business Development 1 2 5 2 5 Z Marinkovic – Director Sylvania Metals (Pty) Ltd Indefinite C De Vos – Internal Legal Adviser P R Carter – General Manager Capital Projects Dr P J Cox – Strategic Planner 5 5 5 6 3 3 3 3 1 3 3 3 1 2 None 1 2 None 2 2 2 1. Termination without cause by either the Company or 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. 2. Upon termination, consultants are entitled to a termination fee equivalent to, if paid in a lumpsum, 18 times the monthly consultancy fee or, if the election of the consultant, 24 equal monthly instalments. Sylvania Resources Annual Report 2009 27 Directors’ Report Table 1: Key Management Personnel 2009 2009 Short Term Benefits Post- employment Benefits Share-based Payment TOTAL Options as % of Total Remuneration Performance Related % Cash Salary/ Consulting Fees $ 492,913 243,375 244,997 - 40,626 107,083 - Name Directors T McConnachie R D Rossiter L M Carroll Dr A Ruiters Dr E Kirby G M Button J Cooke Key management personnel J Meyer Z Marinkovic C De Vos P R Carter Dr P J Cox TOTAL 173,410 229,762 238,596 248,260 201,719 Bonus* $ - - 19,188 - - - - 18,876 14,568 18,876 21,292 16,611 Directors’ Fees Super- Annuation $ $ 60,000 60,000 60,000 60,000 8,054 9,613 42,246 - - - - - - 5,400 - - 724 865 3,802 - - - - - Equity Shares/ Options $ 99,378 371,674 21,954 142,971 - - 17,056 98,836 95,784 104,437 100,703 211,434 $ 652,291 680,449 346,139 202,971 49,404 117,561 63,104 291,122 340,114 361,909 370,255 429,764 2,220,741 109,411 299,913 10,791 1,264,227 3,905,083 15.2% 54.6% 6.3% 70.4% - - 15.2% 54.6% 11.9% 70.4% - - 27.0% 27.0% 33.9% 28.2% 28.9% 27.2% 49.2% 32.4% 40.4% 32.4% 34.1% 32.9% 53.1% 35.2% 28 Sylvania Resources Annual Report 2009 Directors’ Report Options as % of Total Remuneration Performance Related % TOTAL Share-based Payment Equity Shares/ Options Table 2: Key Management Personnel 2008 2008 Short Term Benefits Post- employment Benefits Cash Salary/ Consulting Fees $ 229,028 224,003 154,602 - 172,920 24,484 11,203 69,077 Name Directors T McConnachie R D Rossiter L M Carroll Dr A Ruiters Dr E Kirby E F G Nealon M J Sturgess K S Huntly Key management personnel M J Langoulant J Meyer Z Marinkovic C De Vos P R Carter G Haasbroek Dr P J Cox TOTAL 54,000 173,565 183,422 154,600 182,428 149,962 180,083 Bonus* $ 38,341 - 28,756 - - - - - - 28,756 22,695 28,987 28,755 24,736 28,756 Directors’ Fees Super- Annuation $ $ $ $ 35,000 30,733 30,733 30,733 35,000 4,411 4,411 4,411 - - - - - - - - 2,766 - - 3,150 397 397 - - - - - - - - 56,872 117,114 26,364 46,846 16,359 16,359 16,359 28,436 5,453 26,364 - 26,364 26,364 49,002 46,845 359,241 374,616 240,455 77,579 227,429 45,651 32,370 101,924 59,453 228,685 206,117 209,951 237,547 223,700 255,684 15.8% 31.3% 11.0% 60.4% 7.2% 35.8% 50.5% 27.9% 9.2% 11.5% - 12.6% 11.1% 21.9% 18.3% 17.5% 26.5% 31.3% 22.9% 60.4% 7.2% 35.8% 50.5% 27.9% 9.2% 24.1% 11.0% 26.4% 23.2% 33.0% 29.6% 25.5% 1,963,377 229,782 175,432 6,710 505,101 2,880,402 *Cash bonuses were awarded to Directors and key personnel based on individual performance. L M Carroll was appointed as a director of Sylvania South Africa (Pty) Limited on 10 October 2007. Before this appointment he was a Financial Officer of Sylvania South Africa (Pty) Limited, a wholly owned subsidiary of the Company. Amounts shown above include Mr Carroll’s remuneration during the reporting period in this capacity. Sylvania Resources Annual Report 2009 29 Directors’ Report Option Holding of Key Management Personnel (Consolidated) Balance at Start of Year Granted During Year Exercised During Year Other Changes During Year Balance at End of the Year Vested and Exercisable at the End of the Year % Granted and Vested During the Year (i) 1,750,000 (500,000) 200,000 300,000 800,000 600,000 800,000 600,000 500,000 - - - - - - - - - - - - - - - 1,750,000 400,000 500,000 900,000 600,000 900,000 800,000 700,000 - 100,000 200,000 100,000 - 100,000 200,000 100,000 - - - - - - - - (i) None of the options granted during the year had vested at 30 June 2009 Balance at Start of Year Granted During Year Exercised During Year Other Changes During Year Balance at End of the Year Vested and Exercisable at the End of the Year % Granted and Vested During the Year (i) 2009 Names Directors T McConnachie Dr A P Ruiters L M Carroll 500,000 200,000 200,000 Key management personnel J Meyer Z Marinkovic C De Vos P R Carter Dr P J Cox 100,000 - 100,000 200,000 200,000 2008 Names Directors T McConnachie Dr A P Ruiters L M Carroll K S Huntley J Meyer C De Vos P R Carter G Haasbroek Key management personnel 500,000 - - 200,000 200,000 250,000 200,000 200,000 200,000 - - - (250,000) (100,000) (100,000) - - - - - - - - - - 500,000 200,000 200,000 - 100,000 100,000 200,000 200,000 500,000 - 100,000 - 100,000 - 100,000 - - - - - - - - - - - - - - - 200,000 (i) None of the options granted during the year had vested at 30 June 2008 30 Sylvania Resources Annual Report 2009 Shareholding of Key Management Personnel (Consolidated) The number of shares in the Company held during the year by each director of the Company and key management personnel of the Group, including their personally related parties, are set out below: Directors’ Report 2009 Names Directors T McConnachie R D Rossiter Dr E Kirby G M Button 2008 Names Directors R D Rossiter Dr E Kirby E F G Nealon G M Button M J Sturgess Key management personnel M J Langoulant Balance at the Start of the Year Issued Under Share and Option Plan Other Changes During the Year Balance at End of the Year - 532,000 389,300 - - 500,000 - - 500,000 - (389,300) 300,000 500,000 1,032,000 - 300,000 Balance at the Start of the Year Issued Under Share and Option Plan Other Changes During the Year Balance at End of the Year 32,000 764,300 750,000 750,000 752,600 350,000 500,000 - - - - - - (375,000) (750,000) (750,000) (752,600) (100,000) 532,000 389,300 - - - 250,000 C Consultancy Agreements Formal Consultancy Agreements are made with the Company and all of its directors. The details of the Managing Director’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 14 June 2006 and continues for 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 the 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. Sylvania Resources Annual Report 2009 31 Directors’ Report D Share-based compensation Employee Option Plan Participants of the plan are determined by the Board and can be employees and directors of, or consultants to, the Company or a controlled entity. The Board considers length of service, seniority, responsibilities, potential contribution and any other relevant matters in determining eligibility of potential participants. The Board has sole responsibility to determine the number of options and terms and conditions of options granted to any participant. Options are granted under the plan for no consideration. Options are granted for a three year period and 50% of each tranche vests and are exercisable on each anniversary of the grant date. The terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting periods are as follows: Grant Date 20 April 2006 Expiry Date Exercise Price Fair Value Per Option at Grant Date Vesting Dates 50% after 20 April 2007 30 June 2009 $0.50 $0.56 50% after 20 April 2008 50% after 17 October 2007 17 October 2006 30 June 2010 $0.75 $0.33 50% after 17 October 2008 17 March 2008 17 March 2008 30 June 2011 $2.89 $1.08 50% after 17 March 2010 30 June 2011 $2.67 $1.14 50% after 17 March 2010 50% after 17 March 2009 50% after 17 March 2009 50% after 18 August 2009 18 August 2008 30 June 2011 $1.63 $0.43 50% after 18 August 2010 18 December 2008 30 June 2011 $1.63 $0.15 50% after 18 December 2010 10 June 2009 10 June 2012 $1.05 $0.91 50% after 10 June 2011 50% after 10 June 2010 50% after 18 December 2009 Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share. The exercise price of options is based on the weighted average price at which the Company’s shares are traded on the Australian Securities Exchange during the five trading days immediately before the options are granted. Details of options over ordinary shares in the Company provided as remuneration to each director of the Company and each of the key management personnel of the Group are set out below. Further information on the options is set out in note 20 to the financial statements. Number of Options Granted During the Year Number of Options Vested During the Year 2009 1,750,000 300,000 800,000 600,000 600,000 200,000 500,000 800,000 2008 2009 - - - - - 200,000 - 200,000 - 100,000 100,000 - 100,000 100,000 100,000 100,000 2008 250,000 100,000 100,000 - 100,000 - - 100,000 T M McConnachie L M Carroll J Meyer Z Marinkovic P R Carter Dr A P Ruiters Dr P J Cox C De Vos 32 Sylvania Resources Annual Report 2009 Options granted, exercised and lapsed during the year to directors and executives: Directors’ Report Directors and Officers T M McConnachie L M Carroll A P Ruiters J Meyer Z Marinkovic C De Vos P R Carter P J Cox Value of Options Granted at the Grant Date $ Value of Options Exercised at the Exercise Date $ Value of Options Lapsed at the Date of Lapse $ 255,894 43,868 29,245 584,546 402,832 584,546 402,832 355,697 250,000 - - - - - - - - - - - - - - - The assessed fair value at grant date of options granted to individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a Black and Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. Options Granted at $1.63 Per Share Options Granted at $1.63 Per Share Options Granted at $1.05 Per Share (i) Options are granted for no consideration, have a three year life, and 50% of each tranche vests and is exercisable on each anniversary of the date of grant (ii) Share price at grant date (iii) Share price volatility of the Company’s shares (iv) Expected dividend yield (v) Risk-free interest rate $1.33 65.36% Nil 5.68% $1.63 89.16% Nil 3.32% $1.55 105.84% Nil 4.47% The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information. Employee Share Plan An Employee Incentive Share Plan was approved at the 2007 Annual General Meeting. Participants of the plan are determined by the Board and can be employees and directors of, or consultants to, the Company or a controlled entity. The Board considers length of service, seniority, responsibilities, potential contribution and any other relevant matters in determining eligibility of potential participants. The issue price for the shares issued under the plan are not less than the weighted average share price for the last five trading days immediately preceding the offer to the participant. A participant who is invited to subscribe for shares under the plan may also be invited to apply for a loan up to the amount payable in respect of the shares accepted by the participant. These loans are to be made on the following terms: • Applied directly against the issue price of the shares to be acquired under the plan; • For a term to be determined by the Board; • Repayable to the extent of the lesser of the issue price of the relevant shares issued, less any cash dividends applied against the outstanding principal, and the last market sale price of the shares on the date of repayment of the loan; • The loan must be repaid in full prior to expiry of the loan; • The Company will have a lien over the shares in respect of which a loan is outstanding; • Shares issued under the plan are not transferable while a loan amount in respect of those shares remains payable; and • Shares issued under the share plan will not be quoted on a publicly traded stock market while a loan amount in respect of those shares remains payable. Sylvania Resources Annual Report 2009 33 Directors’ Report The market value of the option implicit in the share issued under the plan (funded by way of a loan on the conditions noted above), measured using the Black and Scholes option pricing model, is recognised in the financial statements as equity benefits reserve and as employee benefit costs over the period the shares vest. Details of employee shares affecting remuneration in the previous, this or future reporting periods are as follows: Grant date 21 December 2005 20 December 2006 17 March 2008 17 March 2008 18 August 2008 23 December 2008 Fair Value of Option Implicit in Share at Grant Date Issue price $0.50 $0.90 $2.89 $2.67 $1.63 $1.63 $0.17 $0.23 $1.08 $1.14 $0.43 $0.15 Vesting period 50% after 21 December 2006 50% after 21 December 2007 50% after 20 December 2007 50% after 20 December 2008 50% after 17 March 2009 50% after 17 March 2010 50% after 17 March 2009 50% after 17 March 2010 50% after 18 August 2009 50% after 18 August 2010 50% after 23 December 2009 50% after 23 December 2010 Details of ordinary shares in the Company provided as remuneration to each director of the Company and each of the key management personnel of the Group are set out below. Further information on the shares is set out in note 27 to the financial statements. These were issued under the Company employee share plan via a non-recourse interest free loan. E F G Nealon Melissa Sturgess M J Langoulant R A Jarvis M L Burchnall R D Rossiter J Cooke Number of Shares Granted During the Year Number of Shares Vested During the Year 2009 2008 2009 - - - - - - - - - - - - - - - 500,000 200,000 500,000 250,000 - - 2008 750,000 - 250,000 100,000 50,000 - - Shares under option At the date of this report, the only unissued shares of the Company under option were those issued under the share option plan. Outstanding share options at the date of this report are as follows: Grant Date 17 October 2006 17 March 2008 17 March 2008 18 August 2008 18 December 2008 10 June 2009 Date of Expiry 30 June 2010 30 June 2011 30 June 2011 30 June 2011 30 June 2011 30 June 2012 Exercise Price $0.75 Number of Options 600,000 $2.89 $2.67 $1.63 $1.63 $1.05 400,000 600,000 3,383,000 2,250,000 6,000,000 No option holder has any right under the options to participate in any other share issue of the Company or any controlled entity. 34 Sylvania Resources Annual Report 2009 Directors’ Report Shares issued on the Exercise of Options The following ordinary shares of the Company were issued during or since the end of the year ended 30 June 2009 on the exercise of options granted under the share option plan. Issuing Entity Sylvania Resources Limited Sylvania Resources Limited Sylvania Resources Limited Number of Shares Issued 250,000 20,000 500,000 Class Ordinary Ordinary Ordinary Amount Paid for Shares $0.50 $0.90 $0.50 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 confidentiality clauses 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. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. 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 36 and forms part of this directors’ report for the year ended 30 June 2009. The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise with the Company and/or the consolidated entity is important. During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices or other auditors: The auditors of the parent entity are HLB Mann Judd. Amounts received or due and receivable by HLB Mann Judd for: An audit or review of the financial report of the entity • Amounts received or due and receivable by non-HLB Mann Judd audit firms: An audit or review of the financial report of any other entity in the Group • Taxation and advisory services • • Other non-audit services Total auditors’ remuneration During the year ended 30 June 2009, the auditor did not provide any non-audit services. Signed in accordance with a resolution of the directors. Consolidated 2009 $ 91,000 154,537 473 3,048 249,058 T M McConnachie Managing Director Johannesburg, South Africa 30 September 2009 Sylvania Resources Annual Report 2009 35 Auditor’s Independence Declaration 36 Sylvania Resources Annual Report 2009 Corporate Governance Statement Statement Sylvania Resources Limited (“Company”) has made it a priority to adopt systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised in this statement. Commensurate with the spirit of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (“Principles & Recommendations”), the Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. Where the Company’s corporate governance practices follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. Where, after due consideration, the Company’s corporate governance practices depart from a recommendation, the Board has offered full disclosure and reason for the adoption of its own practice, in compliance with the “if not, why not” regime. Disclosure of Corporate Governance Practices Summary Statement ASX P & R1 If not, why not2 ASX P & R1 If not, why not2 Recommendation 1.1 Recommendation 1.2 Recommendation 4.3 Recommendation 4.4³ Recommendation 1.3³ n/a n/a Recommendation 5.1 Recommendation 2.1 Recommendation 2.2 Recommendation 2.3 Recommendation 2.4 Recommendation 2.5 Recommendation 5.2³ Recommendation 6.1 Recommendation 6.2³ Recommendation 7.1 Recommendation 7.2 n/a n/a n/a n/a n/a n/a Recommendation 2.6³ n/a n/a Recommendation 7.3 Recommendation 3.1 Recommendation 3.2 Recommendation 7.4³ n/a n/a Recommendation 8.1 Recommendation 3.3³ n/a n/a Recommendation 8.2 Recommendation 4.1 Recommendation 4.2 1 Indicates where the Company has followed the Principles & Recommendations. 2 Indicates where the Company has provided “if not, why not” disclosure. Recommendation 8.3³ n/a n/a 3 Indicates an information based recommendation. Information based recommendations are not adopted or reported against using “if not, why not” disclosure – information required is either provided or it is not. Sylvania Resources Annual Report 2009 37 Corporate Governance Statement Website Disclosures Further information about the Company’s charters, policies and procedures may be found at the Company’s website at www.sylvaniaresources.com, under the section marked Corporate Governance. A list of the charters, policies and procedures which are referred to in this Corporate Governance Statement, together with the Recommendations to which they relate, are set out below: Charters Board Audit Committee Nomination Committee Remuneration Committee Policies and Procedures Policy and Procedure for Selection and (Re) Appointment of Directors Process for Performance Evaluation Policy on Assessing the Independence of Directors Trading in Company Securities (summary) Code of Conduct (summary) Policy on Continuous Disclosure (summary) Procedure for Selection, Appointment and Rotation of External Auditor Shareholder Communication Strategy Risk Management Policy (summary) Recommendation(s) 1.3 4.4 2.6 8.3 2.6 1.2, 2.5 2.6 3.2, 3.3 3.1, 3.3 5.1, 5.2 4.4 6.1, 6.2 7.1, 7.4 Disclosure - Principles & Recommendations The Company reports below on how it has followed (or otherwise departed from) each of the Principles & Recommendations during the 2008/2009 financial year (“Reporting Period”). Principle 1 - Lay Solid Foundations for Management and Oversight Recommendation 1.1: Companies should establish the functions reserved to the Board and those delegated to senior executives and disclose those functions. Disclosure: The Company has established the functions reserved to the Board and has set out these functions in its Board Charter. The Board is collectively responsible for promoting the success of the Company through its key functions of overseeing the management of the Company, providing overall corporate governance of the Company, monitoring the financial performance of the Company, engaging appropriate management commensurate with the Company’s structure and objectives, involvement in the development of corporate strategy and performance objectives and reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct and legal compliance. The Company has established the functions delegated to senior executives and has set out these functions in its Board Charter. Senior executives are responsible for supporting the Managing Director and assisting the Managing Director in implementing the running of the general operations and financial business of the Company, in accordance with the delegated authority of the Board. Senior executives are responsible for reporting all matters which fall within the Company’s materiality thresholds at first instance to the Managing Director or, if the matter concerns the Managing Director, then directly to the Chair or the lead independent director, as appropriate. Recommendation 1.2: Companies should disclose the process for evaluating the performance of senior executives. Disclosure: The Managing Director is responsible for evaluating the senior executives. The Managing Director undertakes the evaluation of senior executives through both formal and informal interview processes and discussions. Recommendation 1.3: Companies should provide the information indicated in the Guide to reporting on Principle 1. Disclosure: During the Reporting Period, an evaluation of the senior executives did occur in accordance with the process disclosed at Recommendation 1.2 above. 38 Sylvania Resources Annual Report 2009 Corporate Governance Statement Principle 2 - Structure the Board to Add Value Recommendation 2.1: A majority of the Board should be independent directors. Notification of Departure: The Board does not have a majority of independent directors. The independent directors of the Board during the Reporting Period were Richard Rossiter and John Cooke (with Mr Cooke resigning on 5 May 2009). The non independent directors of the Board during the Reporting Period were Terry McConnachie, Louis Carroll, Alistair Ruiters and Grant Button (who was appointed to the Board as an executive director on 5 May 2009). Accordingly, the Board did not have a majority of independent directors at any time during the Reporting Period. Richard Rossiter is currently the only independent director on the Board. Explanation for Departure: During the Reporting Period, there were changes to the Board, in particular one of the Company’s non executive directors who was independent (John Cooke), resigned on 5 May 2009. An executive director was appointed (Grant Button) to fill the vacancy left by Mr Cooke. The Company believes that this is the best structure to assist the Company with its current transactions. Recommendation 2.2: The Chair should be an independent director. Disclosure: The independent Chair of the Board is Richard Rossiter. Recommendation 2.3: The roles of the Chair and Chief Executive Officer should not be exercised by the same individual. Disclosure: The Chief Executive Officer (Managing Director) is Terry McConnachie who is not Chair of the Board. Recommendation 2.4: The Board should establish a Nomination Committee. Notification of Departure: The Company has not established a separate Nomination Committee. Explanation for Departure: The full Board considers those matters that would usually be the responsibility of a Nomination Committee. The Board considers that no efficiencies or other benefits would be gained by establishing a separate Nomination Committee. Accordingly, the Board performs the role of Nomination Committee. Items that are usually required to be discussed by a Nomination Committee are marked as separate agenda items at Board meetings when required. When the Board convenes as the Nomination Committee it carries out those functions which are delegated in the Company’s Nomination Committee Charter. The Board deals with any conflicts of interest that may occur when convening in the capacity of Nomination Committee by ensuring the director with conflicting interests is not party to the relevant discussions. Recommendation 2.5: Companies should disclose the process for evaluating the performance of the Board, its committees and individual directors. Disclosure: The Chair is responsible for evaluation of the Board and, when deemed appropriate, of Board committees and individual directors. The Nomination Committee (or its equivalent) is responsible for evaluating the Managing Director. The Board reviews the performance of the directors and the chairman through formal performance evaluation questionnaires completed by individual directors. The Chairman is responsible for collating the information from the questionnaire and taking action if there are any issues raised in the questionnaire. The Chairman provides informal performance feedback to the directors through regular discussions. Sylvania Resources Annual Report 2009 39 Corporate Governance Statement Recommendation 2.6: Companies should provide the information indicated in the Guide to reporting on Principle 2. Disclosure: Skills, Experience, Expertise and term of office of each Director A profile of each director containing their skills, experience, expertise and term of office is set out in the Directors’ Report. Identification of Independent Directors The independent directors of the Company during the Reporting Period are (or were) Richard Rossiter and John Cooke (who resigned on 5 May 2009). These directors are (and in the case of Mr Cooke, prior to his departure following his resignation on 5 May 2009) independent as they are non-executive directors who are not members of management and who are free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of their judgment. Independence is measured having regard to the relationships listed in Box 2.1 of the Principles & Recommendations and the Company’s materiality thresholds. The materiality thresholds are set out below. Company’s Materiality Thresholds The Board has agreed on the following guidelines for assessing the materiality of matters, as set out in the Company’s Board Charter: • Balance sheet items are material if they have a value of more than 5% of pro-forma net asset. • Profit and loss items are material if they will have an impact on the current year operating result of 5% or more. • • Items are also material if they impact on the reputation of the Company, involve a breach of legislation, are outside the ordinary course of business, they could affect the Company’s rights to its assets, if accumulated they would trigger the quantitative tests, involve a contingent liability that would have a probable effect of 5% or more on balance sheet or profit and loss items, or they will have an effect on operations which is likely to result in an increase or decrease in net income or dividend distribution of more than 5%. Contracts will be considered material if they are outside the ordinary course of business, contain exceptionally onerous provisions in the opinion of the Board, impact on income or distribution in excess of the quantitative tests, there is a likelihood that either party will default, and the default may trigger any of the quantitative or qualitative tests, are essential to the activities of the Company and cannot be replaced, or cannot be replaced without an increase in cost of such a quantum, triggering any of the quantitative tests, contain or trigger change of control provisions, they are between or for the benefit of related parties, or otherwise trigger the quantitative tests. Statement concerning availability of Independent Professional Advice To assist directors with independent judgement, it is the Board’s policy that if a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of their office as a director then, provided the director first obtains approval for incurring such expense from the Chair, the Company will pay the reasonable expenses associated with obtaining such advice. Nomination Matters The full Board, in its capacity as the Nomination Committee, held one meeting during the Reporting Period. All members of the Board attended the meeting. To assist the Board to fulfil its function as the Nomination Committee, it has adopted a Nomination Committee Charter. The explanation for departure set out under Recommendation 2.4 above explains how the functions of the Nomination Committee are performed. Performance Evaluation During the Reporting Period an evaluation of the Board, any applicable committees and individual directors took place in accordance with the process disclosed at Recommendation 2.5 above. Selection and (Re) Appointment of Directors In determining candidates for the Board, the Nomination Committee (or equivalent) follows a prescribed procedure whereby it considers the balance of independent directors on the Board as well as the skills and qualifications of potential candidates that will best enhance the Board’s effectiveness. The Board recognises that Board renewal is critical to performance and the impact of Board tenure on succession planning. One third of the Directors must retire at each Annual General Meeting. A Director who retires by rotation is eligible for re-election. Re-appointment of directors is not automatic. 40 Sylvania Resources Annual Report 2009 Corporate Governance Statement Principle 3 - Promote Ethical and Responsible Decision-making Recommendation 3.1: Companies should establish a Code of Conduct and disclose the code or a summary of the code as to the practices necessary to maintain confidence in the company’s integrity, the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. Disclosure: The Company has established a Code of Conduct as to the practices necessary to maintain confidence in the Company’s integrity, practices necessary to take into account their legal obligations and the expectations of their stakeholders and responsibility and accountability of individuals for reporting and investigating reports of unethical practices. Recommendation 3.2: Companies should establish a policy concerning trading in company securities by directors, senior executives and employees, and disclose the policy or a summary of that policy. Disclosure: The Company has established a policy concerning trading in the Company’s securities by directors, senior executives and employees. Recommendation 3.3: Companies should provide the information indicated in the Guide to reporting on Principle 3. Disclosure: Please refer to the section above marked Website Disclosures. Principle 4 - Safeguard Integrity in Financial Reporting Recommendation 4.1: The Board should establish an Audit Committee. Disclosure: The Company has established an Audit Committee. Recommendation 4.2: The Audit Committee should be structured so that it: • consists only of non-executive directors • consists of a majority of independent directors • is chaired by an independent Chair, who is not Chair of the Board • has at least three members. Notification of Departure: The composition of the Audit Committee does not currently comply with the composition requirements of Recommendation 4.2. Sylvania Resources Annual Report 2009 41 Corporate Governance Statement Explanation for Departure: For the Reporting Period until 5 May 2009 the Audit Committee complied with the compositional requirements of Recommendation 4.2. That is, until 5 May 2009, the Audit Committee comprised three non-executive directors, being John Cooke, Richard Rossiter and Alistair Ruiters. Messrs Cooke and Rossiter were independent with Dr Ruiters being non independent. However, upon the resignation of Mr Cooke on 5 May 2009 the Company was no longer able to comply with the compositional requirements. On 5 May 2009, Mr Button was appointed to the Audit Committee and is the chair of the Audit Committee. Mr Button is an executive of the Company and is not independent. Accordingly, Mr Rossiter is now the only independent director on the Audit Committee, with Messrs Ruiters and Button being the non independent directors on the Audit Committee. Recommendation 4.3: The Audit Committee should have a formal charter. Disclosure: The Company has adopted an Audit Committee Charter. Recommendation 4.4: Companies should provide the information indicated in the Guide to reporting on Principal 4. Disclosure: The Audit Committee held two meetings during the Reporting Period. The following table identifies those directors who are members of the Audit Committee and shows their attendance at Committee meetings: Name John Cooke1 Richard Rossiter Alistair Ruiters Louis Carroll Grant Button2 No. of Meetings Attended 2 2 1 2 Nil Notes: 1) John Cooke was a member of the Audit Committee for the period from 1 July 2009 to 5 May 2009. 2) Grant Button was a member of the Audit Committee for the period from 5 May 2009 to 30 June 2009. Details of each of the director’s qualifications are set out in the Directors’ Report. All Audit Committee members possess industry knowledge and consider themselves to be financially literate. Mr Cooke is a Chartered Accountant and, during his time on the Audit Committee, he brought financial expertise to the Audit Committee. Mr Button is a qualified Certified Practising Accountant and provides financial expertise required for the Audit Committee. The Company has established procedures for the selection, appointment and rotation of its external auditor. The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises, as recommended by the Audit Committee (or its equivalent). Candidates for the position of external auditor must demonstrate complete independence from the Company through the engagement period. The Board may otherwise select an external auditor based on criteria relevant to the Company’s business and circumstances. The performance of the external auditor is reviewed on an annual basis by the Audit Committee (or its equivalent) and any recommendations are made to the Board. Principle 5 - Make Timely and Balanced Disclosure Recommendation 5.1: Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. Disclosure: The Company has established written policies designed to ensure compliance with ASX Listing Rule disclosure and accountability at a senior executive level for that compliance. 42 Sylvania Resources Annual Report 2009 Corporate Governance Statement Recommendation 5.2: Companies should provide the information indicated in the Guide to reporting on Principle 5. Disclosure: Please refer to the section above marked Website Disclosures. Principle 6 - Respect the Rights of Shareholders Recommendation 6.1: Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. Disclosure: The Company has designed a communications policy for promoting effective communication with shareholders and encouraging shareholder participation at general meetings. Recommendation 6.2: Companies should provide the information indicated in the Guide to reporting on Principle 6. Disclosure: Please refer to the section above marked Website Disclosures. Principle 7 - Recognise and Manage Risk Recommendation 7.1: Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. Disclosure: The identification and effective management of risk is viewed as an essential part of the Company’s approach to creating long-term shareholder value. The Board has adopted a Risk Management Policy, which sets out the Company’s risk profile and its material business risks. Under the policy, the Board is responsible for approving the Company’s policies on risk oversight and management and satisfying itself that management has developed and implemented a sound system of risk management and internal control. In doing so, the Board has taken the view that it is crucial for all Board members to be a part of this process and as such has not established a separate risk management committee. Under the policy, the Board delegates the day-to-day management of risk to the Managing Director, who is responsible for identifying, assessing, monitoring and managing risks. The Managing Director is responsible for the establishment and maintenance of a Risk Management Group to assist in the management of risk and to oversee matters relating to risk. The Risk Management Group is to comprise of senior employees and is to be chaired by the Finance Director. The Managing Director and the Risk Management Group reported to the Board during the Reporting Period on the progress of, and on all matters associated with, management of material business risks. The report to the Board by the Managing Director and the Risk Management Group is now a standing item at each Board meeting. The Managing Director has provided the assurance to the Board, on behalf of management, that the Company’s management of its material business risks are effective and appropriate given the risk profile adopted by the Board. In fulfilling the duties of risk management, the Managing Director may have unrestricted access to Company employees, contractors and records and may obtain independent expert advice on any matter they believe appropriate, with the prior approval of the Board. The Board has established a separate Audit Committee to monitor and review the integrity of financial reporting and the Company’s internal financial control systems and risk management systems. The Board undertook a detailed assessment of the risks facing the organisation and the risk profile that the Company was prepared to maintain in relation to each of the risks identified. The Board has subsequently undertaken a review of whether the risks of the Company are being adequately managed. In addition, the following risk management measures have been adopted by the Board to manage the Company’s material business risks: • the Board has established authority limits for management which, if exceeded, will require prior Board approval; • the Board has adopted a compliance procedure for the purpose of ensuring compliance with the Company’s continuous disclosure obligations; and • the Board has adopted a corporate governance manual which contains other policies to assist the Company to establish and maintain its governance practices Sylvania Resources Annual Report 2009 43 Corporate Governance Statement In light of the Company’s recent transactions and takeover reviews, the Company’s was required to review and mitigate its risks as a part of the strategy review. The Managing Director and Finance Director also send regular emails which identify risks; these emails are also discussed at the regular management meetings, a report from the management meeting is then drafted, and the latest report presented at the next Board meeting. Further to this the Company will look to formalise its management of material business risks and hopes to have this finalised by the end of the financial reporting period. As part of the Company’s systems and processes for managing material business risk the Board considered the following risk areas and developed risk management policies for each area. The major areas of risk reviewed by the Board and management were operational risk, strategic risk, commodity prices, exchange rates, financial reporting risks, environmental risk, sustainability, company specific risk, compliance, people and market-related risks. Recommendation 7.2: The Board should require management to design and implement the risk management and internal control system to manage the Company’s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks. Disclosure: The Board has required management to design, implement and maintain risk management and internal control systems to manage the Company’s material business risks. The Board also requires management to report to it confirming that those risks are being managed effectively. Further, the Board has received a report from management as to the effectiveness of the Company’s management of its material business risks. Recommendation 7.3: The Board should disclose whether it has received assurance from the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. Disclosure: The Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) have provided a declaration to the Board in accordance with section 295A of the Corporations Act and have assured the Board that such declaration is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial risk. Recommendation 7.4: Companies should provide the information indicated in the Guide to reporting on Principle 7. Disclosure: The Board has received the report from management under Recommendation 7.2. The Board has received the assurance from the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) under Recommendation 7.3. 44 Sylvania Resources Annual Report 2009 Corporate Governance Statement Principle 8 - Remunerate Fairly and Responsibly Recommendation 8.1: The Board should establish a Remuneration Committee. Notification of Departure: The Company has not established a separate Remuneration Committee. Explanation for Departure: The full Board considers those matters that would usually be the responsibility of a Remuneration Committee. The Board considers that no efficiencies or other benefits would be gained by establishing a separate Remuneration Committee. Items that are usually required to be discussed by a Remuneration Committee are marked as separate agenda items at Board meetings when required. When the Board convenes as the Remuneration Committee it carries out those functions which are delegated in the Company’s Remuneration Committee Charter. The Board deals with any conflicts of interest that may occur, when convening in the capacity of Remuneration Committee, by ensuring the director with conflicting interests is not party to the relevant discussions. Recommendation 8.2: Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives. Disclosure: Non-executive directors are remunerated at market rates for time, commitment and responsibilities. Remuneration for non-executive directors is not linked to the performance of the Company. Given the Company’s stage of development, activities and financial restrictions, the Company may consider it appropriate to issue unquoted options to non-executive directors, subject to obtaining the relevant approvals. This policy is subject to annual review. Pay and rewards for executive directors and senior executives consists of a base salary and performance incentives. Long term performance incentives may include options granted at the discretion of the Board and subject to obtaining the relevant approvals. Executives are offered a competitive level of base pay at market rates and are reviewed annually to ensure market competitiveness. Recommendation 8.3: Companies should provide the information indicated in the Guide to reporting on Principle 8. Disclosure: Details of remuneration, including the Company’s policy on remuneration, are contained in the “Remuneration Report” which forms of part of the Directors’ Report. The full Board, in its capacity as the Remuneration Committee, held two meetings during the Reporting Period. All members of the Board attended the meetings. To assist the Board to fulfil its function as the Remuneration Committee, it has adopted a Remuneration Committee Charter. The explanation for departure set out under Recommendation 8.1 above explains how the functions of the Remuneration Committee are performed. There are termination benefits for non-executive directors (in addition to superannuation). The benefit for non-executive directors is 12 months salary should their position be terminated. The Company’s Remuneration Committee Charter includes a statement of the Company’s policy on prohibiting transactions in associated products which limit the risk of participating in unvested entitlements under any equity based remuneration schemes. Sylvania Resources Annual Report 2009 45 Directors’ Declaration 1. In the opinion of the directors of Sylvania Resources Limited (the ‘Company’): (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 2009 and of their performance for the year then ended; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) 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 2009. This declaration is signed in accordance with a resolution of the Board of Directors. T M McConnachie Managing Director Johannesburg, South Africa 30 September 2009 46 Sylvania Resources Annual Report 2009 Independent Auditor’s Report Sylvania Resources Annual Report 2009 47 Independent Auditor’s Report 48 Sylvania Resources Annual Report 2009 Revenue 2009 $ 19,318,639 2008 $ 32,789,608 Notes 2(a) Raw materials and consumables used 2(c) (10,849,719) (9,129,126) 2009 $ 2008 $ Income Statement For the year ended 30 June 2009 Consolidated Parent Entity 317,002 8,785,922 (244,303) (1,710,898) - - 5,021,508 28,681,990 (4,594,987) (2,567,345) - - - - - - (244,303) (1,710,898) (2) - - - - - (4,594,987) (2,567,345) - 2,916,291 (673,815) 1,927,141 (2,744,523) 274,743 (673,815) (468,376) (1,183,181) 68,915 (7,526,382) (6,060,171) (7,157,434) (2,739,698) (3,165,441) 14,317,294 (10,226,903) (5,732,413) 2,531,679 2,729,211 1,249,935 2,347,788 (62,142) (695,904) (3,060,868) (3,756,772) 232,699 (12,847) 17,033,658 (5,346,659) 11,686,999 (1,824,813) - (8,976,968) (3,384,625) - - (8,976,968) (3,384,625) - - (3,524,073) 9,862,186 (8,976,968) (3,384,625) Cents (1.97) (1.97) Cents 5.64 5.57 Share of net profit of jointly controlled entity accounted for using the equity method Profit from operations Foreign exchange loss Impairment of available-for-sale financial assets Impairment of investment Impairment of loans to subsidiaries Share based payment expense Other income Other expenses (Loss) / profit before interest and income tax expense Finance income Finance costs (Loss) / profit before income tax expense Income tax expense (Loss) / profit after income tax expense Minority interest Net profit / (loss) attributable to the members of the parent Earnings / (loss) per share for profit / (loss) attributable to the ordinary equity holders of the Company: Basic earnings / (loss) per share Diluted earnings / (loss) per share 24 2(c) 2(c) 2(c) 2(c) 2(b) 2(c) 2(b) 2(c) 3 4 4 The above income statement should be read in conjunction with the accompanying notes. Sylvania Resources Annual Report 2009 49 Balance Sheet As at 30 June 2009 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Current tax asset Total current assets Non-current assets Available-for-sale financial assets Investments accounted for using the equity method Other financial assets Deferred exploration expenditure Property, plant & equipment Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Current tax liability Total current liabilities Non-current liabilities Borrowings Deferred tax liability Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Capital and reserves attributable to equity holders of Sylvania Resources Limited Minority interest Total equity Consolidated Parent Entity Notes 2009 $ 2008 $ 2009 $ 2008 $ 6 7 8 9 24 11 12 13 14 15 15 3 16 17 18 19 32,214,884 7,871,069 441,512 2,203,701 43,623,564 15,886,145 227,440 - 24,929,083 32,938,264 488,401 743,690 - - - - 42,731,166 59,737,149 25,417,484 33,681,954 8,080,416 3,967,132 - 1,826,958 65,264,576 79,139,082 121,870,248 7,263,337 149,649 12,114 7,425,100 234,570 7,376,401 912,644 8,523,615 15,948,715 2,252,098 4,404,466 7,879,587 2,252,098 - - - 53,378,832 50,329,422 1,728,310 29,578,317 37,963,191 97,700,340 - 9,122 61,267,541 86,685,025 - 22,009 52,603,529 86,285,483 2,654,108 78,074 1,024,695 3,756,877 251,298 3,543,998 355,158 4,150,454 7,907,331 717,334 170,544 - - - - 717,334 170,544 - - - - - - - - 717,334 170,544 105,921,533 89,793,009 85,967,691 86,114,939 117,945,504 117,274,097 117,945,504 117,274,097 7,250,196 (12,458,835) 9,147,413 989,100 (20,371,139) (16,847,066) (41,125,226) (32,148,258) 104,824,561 1,096,972 105,921,533 87,968,196 1,824,813 89,793,009 85,967,691 86,114,939 - - 85,967,691 86,114,939 The above balance sheet should be read in conjunction with the accompanying notes. 50 Sylvania Resources Annual Report 2009 Statement of Changes in Equity For the year ended 30 June 2009 Consolidated Balance as at 1 July 2007 Shares issued during the year: Shares issued Options exercised Employee share plan loan repaid proceeds Share based payment reserve transferred to contributed equity Less: Capital raising costs Profit for the period Share based compensation reserve Net gains revaluation reserve Currency translation differences Balance as at 1 July 2008 Shares issued during the year: Options exercised Employee share plan loan repaid - proceeds Share based payment reserve transferred to contributed equity Less: Capital raising costs Loss for the period Minority shareholders premium reserve Share based compensation reserve Net gains revaluation reserve Currency translation differences Balance at 30 June 2009 Issued Capital 105,950,221 Accumulated Losses $ (26,709,252) Reserves $ (1,719,109) 8,760,000 275,000 1,614,500 732,008 (57,632) - - - - - - - - - 9,862,186 - - - (732,008) - - - - - 673,815 (394,058) (10,287,475) Minority Equity Interests $ - - - - - - Total Equity $ 77,521,860 8,760,000 275,000 1,614,500 - (57,632) 1,824,813 11,686,999 - - - 673,815 (394,058) (10,287,475) 117,274,097 (16,847,066) (12,458,835) 1,824,813 89,793,009 250,000 143,000 327,662 (49,255) - - - - - - - - - (3,524,073) - - - - 117,945,504 (20,371,139) - - (327,662) - - 2,388,887 2,744,524 5,853,835 9,049,447 7,250,196 - - - - 250,000 143,000 - (49,255) (232,699) (3,756,772) (2,388,887) - - - 1,893,745 1,096,972 2,744,524 5,853,835 10,943,192 105,921,533 Sylvania Resources Annual Report 2009 51 Statement of Changes in Equity (continued) For the year ended 30 June 2009 Parent entity Balance at 1 July 2007 Shares issued during the year: Shares issued Options exercised Employee share plan loan repaid - proceeds Share based payment reserve transferred to contributed equity Less: Capital raising costs Profit for the period Share based compensation reserve Net gains revaluation reserve Balance at 1 July 2008 Shares issued during the year: Options exercised Employee share plan loan repaid - proceeds Share based payment reserve transferred to contributed equity Less: Capital raising costs Loss for the period Share based compensation reserve Net gains revaluation reserve Balance at 30 June 2009 Issued Capital $ 105,950,221 Accumulated Losses $ (28,763,633) Reserves Total Equity $ 1,441,351 $ 78,627,939 8,760,000 275,000 1,614,500 732,008 (57,632) - - - - - - - - (3,384,625) - - 117,274,097 (32,148,258) 250,000 143,000 327,662 (49,255) - - - - - - - (8,976,968) - - 117,945,504 (41,125,226) - - - (732,008) - - 673,815 (394,058) 989,100 - - (327,662) - - 2,744,524 5,741,451 9,147,413 8,760,000 275,000 1,614,500 - (57,632) (3,384,625) 673,815 (394,058) 86,114,939 250,000 143,000 - (49,255) (8,976,968) 2,744,524 5,741,451 85,967,691 The above statement of changes in equity should be read in conjunction with the accompanying notes. 52 Sylvania Resources Annual Report 2009 Cash Flow Statement For the year ended 30 June 2009 Consolidated Parent Entity Notes 2009 $ 2008 $ 2009 $ 2008 $ 29,572,612 26,158,124 - - (9,686,549) (18,014,352) (3,141,242) (3,443,842) 2,914,891 300,953 (3,248,283) 2,323,557 560,826 (494,377) 1,633,146 177,670 - 1,942,134 101,822 - Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Other revenue Income tax paid Net cash inflow / (outflow) from operating activities 22 19,853,624 10,533,778 (1,330,426) (1,399,886) Cash flows from investing activities Payments for property, plant & equipment (30,647,410) (12,085,962) (6,257) (12,162) Payments for available-for-sale financial assets (1,616,297) (4,715,559) (1,616,297) (4,715,559) Payments for exploration and evaluation Payments for mineral rights Loans to related parties Loans to subsidiaries Proceeds from sale of exploration asset Proceeds from sale of available-for-sale financial assets Repayment of loan from related party Net cash (outflow) from investing activities Cash flows from financing activities Proceeds from issue of shares Capital raising costs Net cash inflow from financing activities Net (decrease) / increase in cash held Foreign exchange movement Cash at the beginning of the financial year Cash at the end of the financial year 6 (123,396) - (375,006) (303,474) - - (544,458) (1,314,311) (3,124) - - - - 316,600 25,280 3,612 - - 345,000 - (4,878,048) (10,201,448) - 25,280 - - 345,000 - (32,586,069) (18,449,312) (6,478,446) (14,584,169) 93,000 (49,255) 43,745 (12,688,700) 1,280,020 43,623,564 32,214,884 1,814,500 (57,632) 1,756,868 (6,158,666) (6,443,563) 56,225,793 43,623,564 93,000 (49,255) 43,745 1,814,500 (57,632) 1,756,868 (7,765,127) (14,227,187) (244,054) (4,594,987) 32,938,264 24,929,083 51,760,438 32,938,264 The above cash flow statement should be read in conjunction with the accompanying notes. Sylvania Resources Annual Report 2009 53 Notes to the Financial Statements For the year ended 30 June 2009 1. Significant Accounting Policies (a) 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, Accounting Standards and Interpretations and complies with other requirements of the law. The financial report has also been prepared on a historical cost basis, except for available-for-sale investments, which have been measured at fair value. The Company is a listed public company incorporated and domiciled in Australia, and operating in South Africa. The financial statements are presented in Australian dollars and were authorised for issue by the directors on 30 September 2009. (b) Adoption of new and revised standards Changes in Accounting Policies on Initial Application of Accounting Standards In the year ended 30 June 2009, the Group has reviewed all the new and revised standards and interpretations issued by the AASB that are relevant to its operations and effective for current annual reporting period. It has been determined by the Group that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business, therefore, no change is necessary to Group accounting policies. The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2009. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to Group accounting policies. (c) Statement of compliance The financial report was authorised by the Board of directors for issue on 30 September 2009. 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). (d) 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. Control exists where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Minority interest represents the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in the income statement and within equity in the consolidated balance sheet. (e) 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: (i) 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 20. (ii) Provision for restoration and rehabilitation and dismantling plant and equipment: Provision for restoration and rehabilitation and dismantling plant and equipment is estimated taking into account estimates of expenditure based on information available at the balance sheet date. The estimate is based on the expenditure required to undertake the rehabilitation and dismantling, after taking into account the time value of money. 54 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 1. Significant Accounting Policies (continued) (iii) Treatment of minority shareholder entitlements As referred to in the Directors’ report, under the terms of two shareholder agreements signed 10 January 2007, Ehlobo Metals (Pty) Limited (‘Ehlobo’) acquired a 26% interest in both Sylvania Metals (Pty) Limited (‘Sylvania Metals’) and Sylvania Minerals (Pty) Limited (‘Sylvania Minerals’). Under the terms of the agreements, Ehlobo committed to contribute $10.1 million (R64 million) towards the initial capital requirements of Sylvania Metals and Sylvania Minerals. As at the date of this report, the required contribution by Ehlobo has not been received. Sylvania has the right under the original agreements at its sole discretion to terminate the agreement with Ehlobo should it not fulfil its capital commitment and to put in place a new BEE partner(s). The directors of the Company are in current negotiations with the shareholders of Ehlobo and intend to conclude a new agreement which will have the effect of reducing Ehlobo’s minority shareholder entitlements by an amount which is reflective of the non-payment by Ehlobo of its contractually agreed capital contribution. At the date of this report the Company has not yet concluded a new agreement although it is considered probable that this will occur in the near term. The directors are of the view, however, that due to the non-payment of Ehlobo’s capital contribution it is inappropriate to attribute to them a full 26% of the equity and results of Sylvania Metals and Sylvania Minerals. Accordingly, the directors have calculated a best estimate of the amount that is considered attributable to the minority. This estimate is on the basis of the full share of the equity less a profit reduction equivalent to an amount calculated using the South African Prime Lending rate on the commitment outstanding since the due date. (f) 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. (g) Borrowing costs Borrowing costs are recognised as an expense when incurred except those that relate to the acquisition, construction or production of qualifying assets where the borrowing cost is added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. (h) Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are initially recognised at their fair value or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the general policy on borrowing costs - refer Note 1(g). Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. (i) Cash and cash equivalents Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Sylvania Resources Annual Report 2009 55 Notes to the Financial Statements For the year ended 30 June 2009 1. Significant Accounting Policies (continued) (j) Trade and other receivable Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified. (k) Inventories Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows: • Raw materials – purchase cost on first-in, first-out basis; and • Finished goods and work-in-progress – cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. (l) Foreign currency translation Both the functional and presentation currency of the Company and its Australian controlled entity 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 parent Company’s 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. 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 the Company 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. 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. (m) Interest in jointly controlled entities The Group’s interests in jointly subsidiaries 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. 56 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 1. Significant Accounting Policies (continued) (n) 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. 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. (o) 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 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 authorities 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. Sylvania Resources Annual Report 2009 57 Notes to the Financial Statements For the year ended 30 June 2009 1. Significant Accounting Policies (continued) (p) Property, plant and equipment The costs of acquiring mining properties are capitalised in the balance sheet as incurred. Mining properties are, upon commencement of production, amortised over the remaining life of respective assets on a unit of production basis. The net carrying amounts of mining properties are reviewed for impairment either individually or at the cash-generating unit level when events and changes in circumstances indicate that the carrying amount may not be recoverable. To the extent to which these values exceed their recoverable amounts, that excess is fully provided for in the financial year in which this is determined. 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% to 37% Furniture and fittings - 7.5% (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. (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. (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. 58 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 1. Significant Accounting Policies (continued) (q) Investments and other financial assets 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. (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 in any other category. 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. (r) 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 charged directly to the revaluation reserve to the extent that it reverses a previous revaluation surplus relating to the same assets). 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. Sylvania Resources Annual Report 2009 59 Notes to the Financial Statements For the year ended 30 June 2009 1. Significant Accounting Policies (continued) (s) Trade and other payables 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. (t) 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 asset 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. (u) Employee leave benefits 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. (v) Share-based payment transactions Equity settled transactions: The Group provides benefits to employees and consultants (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 and consultants 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 the Company (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 4). 60 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 1. Significant Accounting Policies (continued) (w) Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (x) 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 are 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. (y) Interest-bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised. (z) Provision for restoration and rehabilitation A provision for restoration and rehabilitation is recognised when there is a present obligation as a result of development activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably. The estimated future obligations include the costs of abandoning sites, removing facilities and restoring the affected areas. The provision for future restoration costs is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date. Future restoration costs are reviewed annually and any changes in the estimate are reflected in the present value of the restoration provision at each reporting date. The initial estimate of the restoration and rehabilitation provision is capitalised into the cost of the related asset and amortised on the same basis as the related asset, unless the present obligation arises from the production of inventory in the period, in which case the amount is included in the cost of production for the period. Changes in the estimate of the provision for restoration and rehabilitation are treated in the same manner, except that the unwinding of the effect of discounting on the provision is recognised as a finance cost rather than being capitalised into the cost of the related asset. (aa) 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: (i) Each area of interest is considered separately when deciding whether and to what extent to carry forward or write off exploration and evaluation costs; (ii) Exploration and evaluation costs related to an area of interest are carried forward provided that rights to tenure of the area of interest are current and provided further that one of the following conditions are met: • such costs are expected to be recouped through successful development and exploration of the area of interest or alternatively, by its sale; • exploration and/or evaluation activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in relation to the area are continuing. Exploration and evaluation costs accumulated in respect to each particular area of interest include only net direct expenditure. (iii) The carrying values of exploration and evaluation costs are reviewed by directors where results of exploration and/or evaluation of an area of interest are sufficiently advanced to permit a reasonable estimate of the costs expected to be recouped through successful development and exploitation of the area of interest or by its sale. Expenditure in excess of this estimate is written off to the income statement in the year in which the review occurs. Sylvania Resources Annual Report 2009 61 Notes to the Financial Statements For the year ended 30 June 2009 2. Revenue and Expenses (a) Revenue Sale of goods (b) Other income Finance income Sale of mining tenements Net gain / (loss) on disposal of non-current asset Net gain / (loss) on sale of available-for-sale financial assets Administration recovery Management fee received Sundry income Reduction in decommissioning costs (c) Expenses Profit / (loss) from ordinary activities before income tax expense includes the following specific expenses: Consulting Depreciation – plant and equipment Depreciation – other assets Finance costs Foreign exchange loss Operating lease payments Consolidated Parent Entity 2009 $ 2008 $ 2009 $ 2008 $ 19,318,639 32,789,608 - - 2,531,679 2,729,211 1,249,935 2,347,788 82,545 (13,272) 5,918 64,690 - - 134,862 2,335,837 1,696,065 157,667 62,142 244,303 273,929 - (5,508) (503,267) - 40,398 - - - (13,272) 5,918 64,690 - 11,579 - 1,298,940 1,505,716 - 12,847 4,594,987 281,837 1,352,898 5,872 - - 244,303 117,524 - (5,508) (503,267) 2,435,916 - - - 839,437 8,848 - - 4,594,987 134,997 2,567,345 (2,916,291) - 673,815 18,565 Impairment of available-for-sale financial asset 1,710,898 2,567,345 1,710,898 Impairment of loans to subsidiaries Impairment on investment in subsidiary Share based payments expense Superannuation expense - - - - - 2 2,744,523 20,826 673,815 18,565 1,183,181 20,826 62 Sylvania Resources Annual Report 2009 3. Income Tax Major components of tax expense for the years ended 30 June 2009 and 2008 Income Statements Income tax recognised in profit or loss Current income tax charge Adjustments in respect of current income tax of previous year Translation of foreign operations Deferred tax expense/(income) relating to origination and reversal of temporary differences Tax losses not previously recognised now brought to account Benefit arising from previously unrecognised tax losses, tax credits or temporary differences of a prior year period that is used to reduce: current tax expense deferred tax expense Write downs/(reversal of write-downs) of deferred tax assets Total tax expense/ (benefit) The prima facie income tax expense on pre-tax accounting result from operations reconciles to the income tax expense in the financial statements as follows: Accounting profit/(loss) Tax expense (revenue) at statutory rate of 30% Non-deductible expenses Benefit of tax losses and timing differences not brought to account Income tax expense Notes to the Financial Statements For the year ended 30 June 2009 Consolidated Parent Entity 2009 $ 2008 $ 2009 $ 2008 $ (270,019) (20,445) (2,809,748) 6,205,732 - - (82,429) 37,777 3,060,868 1,332,607 (36,729) - 3,336,967 47,102 (281,575) - - 141,709 (42,340) - 361,983 (1,661,665) - - - (80,408) 666,712 5,346,659 - - 1,562,296 - (695,904) (208,771) 3,202,634 67,005 3,060,868 17,033,658 5,110,098 (428,037) 664,598 5,346,659 (8,976,968) (2,693,090) 2,773,498 (80,408) - (3,384,625) (1,015,388) (492,081) 1,507,469 The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in this rate since the previous reporting period. Income tax recognised directly in equity: The following amounts were charged / (credited) directly to equity during the period: Current tax - translation of foreign operation Deferred tax - translation of foreign operation (2,809,748) - 2,047,101 (762,647) 135,711 135,711 - - - - - - - Sylvania Resources Annual Report 2009 63 Notes to the Financial Statements For the year ended 30 June 2009 3. Income Tax (continued) Consolidated Parent Entity 2009 $ 2008 $ 2009 $ 2008 $ Deferred tax assets comprise: Deferred gains and losses on foreign exchange contracts Losses available for offset against future taxable income Other 15,809 535,110 76,081 627,000 130,771 2,496,297 23,049 2,650,117 Set-off against deferred tax liabilities (627,000) (2,650,117) Deferred tax liabilities comprise: Deferred gains and losses on foreign exchange contracts Deferred exploration expenditure Plant, mining and equipment Other Set-off deferred tax assets - 2,945,387 - 5,042,205 15,809 8,003,401 - - 324,810 5,738,533 130,772 6,194,115 (627,000) (2,650,117) 7,376,401 3,543,998 15,809 130,771 - - - - 15,809 (15,809) 130,771 (130,771) - - - - - - - - 15,809 15,809 (15,809) - 130,772 130,772 (130,772) - The Group has estimated tax losses arising in Australia of $5,138,573 (2008: $3,814,700) that are available indefinitely for offset against future taxable profits of the company in which the losses arose. Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: Deductible temporary differences Tax losses Capital losses 2,178,513 1,639,778 754,091 4,572,382 2,650,113 1,197,060 611,624 4,458,797 2,178,513 1,541,572 754,091 4,474,176 2,650,113 1,144,410 611,624 4,406,147 The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future tax profits will be available against which the Group can utilise the benefits thereof. Tax Consolidation Sylvania Resources Limited and its 100% owned Australian resident controlled entity 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 controlled entity 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. 64 Sylvania Resources Annual Report 2009 3. Income Tax (continued) Reconciliation of deferred tax assets/(liabilities): 2009 Temporary differences Plant, mining and equipment Tax losses 2008 Temporary differences Plant, mining and equipment Tax losses 2009 Temporary differences Plant, mining and equipment Tax losses 2008 Temporary differences Plant, mining and equipment Tax losses Notes to the Financial Statements For the year ended 30 June 2009 Opening Balance $ (301,762) Charged to Income Statement $ (4,341,271) Consolidated Charged to Equity $ 2,161,918 (5,738,533) (1,219,133) 1,988,772 2,496,297 (319,100) (1,631,283) Exchange Difference $ (388,193) (83,310) (10,803) Closing Balance $ (2,869,307) (5,042,204) 535,110 (3,543,998) (5,879,504) 2,529,407 (482,307) (7,376,401) Opening Balance $ - 97,926 372,514 470,440 Charged to Income Statement $ (319,632) (6,301,448) 2,470,931 (4,150,149) Consolidated Charged to Equity $ Exchange Difference $ - - - - 17,870 464,989 (347,148) 135,711 Parent Closing Balance $ (301,762) (5,738,533) 2,496,297 (3,543,998) Opening balance $ Charged to Income Statement $ Exchange Difference $ Closing Balance $ - - - - - - - - - - - - Parent - - - - Opening Balance $ - - - - Charged to Income Statement $ - - - - Exchange Difference $ - Closing Balance $ - - - - - - - Sylvania Resources Annual Report 2009 65 Notes to the Financial Statements For the year ended 30 June 2009 4. Earnings Per Share Basic earnings / (loss) per share - cents per share Diluted earnings / (loss) per share – cents per share Reconciliations of earnings /(loss) used in calculating earnings / (loss) per share Profit / (loss) attributable to the ordinary equity holders of the company used in calculating basic earnings / (loss) per share Profit / (loss) attributable to the ordinary equity holders of the company used in calculating diluted earnings / (loss) per share Weighted average number of shares used as the denominator Consolidated 2009 Cents Per Share 2008 Cents Per Share (1.97) (1.97) 2009 $ 5.64 5.57 2008 $ (3,524,073) 9,862,186 (3,524,073) 9,862,186 Weighted average number of ordinary shares used as the denominator in calculating basic earnings / (loss) per share 178,854,273 174,879,972 Adjustment for calculation of diluted earnings per share Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings / (loss) per share - - 2,260,882 177,140,854 Diluted loss per share At 30 June 2009 the Group has recorded a loss. Therefore, potential ordinary shares on issue in relation to options are not diluted and no information on diluted loss per share is presented. 66 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 5. 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 2009 and 2008. 2009 Segment revenue Sale of goods Other revenue Share of net profit from jointly controlled entity accounted for on an equity basis Consolidated revenue Segment results (Loss) / profit before tax Income tax expense Profit for the year Segment assets and liabilities Segment assets Segment liabilities Other segment information Depreciation and amortisation Finance costs Foreign exchange losses Impairment of available-for-sale financial asset Impairment of investment in subsidiaries Management fees Share based payment expenses Investment in jointly controlled entity 1,710,898 2 3,401,993 1,183,179 - Continuing Operations Australia $ South Africa $ Inter-segment Eliminations $ Total Operations $ - 1,318,850 19,318,639 3,825,600 - (2,338,028) 19,318,639 2,806,422 - 317,002 - 317,002 1,318,850 23,461,241 (2,338,028) 22,442,063 (8,976,968) 20,004,427 (11,723,363) - (5,870,615) (8,976,968) 14,133,812 2,809,747 (8,913,616) (695,904) (3,060,868) (3,756,772) 86,495,680 717,334 88,533,455 67,018,269 (53,158,887) 121,870,248 (51,786,888) 15,948,715 5,872 - 1,847,860 62,142 - - 244,303 (10,034,813) 10,034,813 - - - (2) (3,529,202) 127,209 1,853,732 62,142 244,303 1,710,898 - - 1,561,344 3,967,132 - - 2,744,523 3,967,132 Sylvania Resources Annual Report 2009 67 Notes to the Financial Statements For the year ended 30 June 2009 5. Segment Reporting (continued) 2008 Segment revenue Sale of goods Other revenue Share of net profit from jointly controlled entity accounted for on an equity basis Consolidated revenue Segment results Profit before tax Income tax expense Profit for the year Segment assets and liabilities Segment assets Segment liabilities Other segment information Depreciation and amortisation Finance costs Foreign exchange losses Impairment of available-for-sale financial asset Impairment of loans to subsidiaries Management fees Share based payment expenses Investment in jointly controlled entity 6. Cash and Cash Equivalents Cash at bank and on hand Short term deposits Continuing Operations Australia $ South Africa $ Inter-segment Eliminations $ Total Operations $ - 4,274,929 - 4,274,929 32,789,608 2,813,342 5,021,508 40,624,458 - (4,827,437) 32,789,608 2,260,834 - 5,021,508 (4,827,437) 40,071,950 (3,384,625) 13,025,713 7,392,570 17,033,658 - (2,817,253) (2,529,406) (5,346,659) (3,384,625) 10,208,460 4,863,164 11,686,999 86,285,483 170,544 61,770,467 56,262,771 (50,355,610) 97,700,340 (48,525,984) 7,907,331 1,496,868 12,847 - - 9,995,707 (9,995,707) - 2,916,291 (313,154) 8,848 - 4,594,987 2,567,345 (2,916,291) (2,435,916) 673,815 - - 2,749,070 - - 4,404,466 1,505,716 12,847 4,594,987 2,567,345 - - - - 673,815 4,404,466 Consolidated Parent Entity 2009 $ 4,046,199 28,168,685 32,214,884 2008 $ 11,873,179 31,750,385 43,623,564 2009 $ 2,413,536 22,515,547 24,929,083 2008 $ 1,187,879 31,750,385 32,938,264 (a) Reconciliation to cash flow statement The above figures agree to cash at the end of the financial year as shown in the cash flow statement 32,214,884 43,623,564 24,929,083 32,938,264 (b) Cash at bank and on hand These are bearing interest rates of between 0.15% and 5% (2008: 4.25% and 6.5%). (c) Deposits on call The deposits are bearing floating interest rates between 1% and 7.15% (2008: 5.75% and 6.85%). These deposits have a maturity between 30 and 90 days. 68 Sylvania Resources Annual Report 2009 7. Trade and Other Receivables Trade receivable Other receivables Prepayments No trade receivables are past their contractual terms at 30 June 2009. 8. Inventories Finished goods stock Stores and materials Notes to the Financial Statements For the year ended 30 June 2009 Consolidated Parent Entity 2009 $ 5,903,252 414,699 1,553,118 7,871,069 2008 $ 14,602,935 1,257,520 25,690 15,886,145 2009 $ 4,245 43,583 440,573 488,401 2008 $ - 738,312 5,378 743,690 Consolidated Parent Entity 2009 $ - 441,512 441,512 2008 $ 34,109 193,331 227,440 2009 $ 2008 $ - - - - - - Finished stock Concentrate in holding tank awaiting despatch. Store materials Strategic spares held in stock for engineering breakdowns. Spares and materials are carried at the lower of cost or net realisable value. 9. Available for Sale Financial Assets Available for sale investments carried at fair value Listed shares Listed options Consolidated Parent Entity 2009 $ 2008 $ 2009 $ 2008 $ 8,080,416 2,252,098 7,879,587 - - - 8,080,416 2,252,098 7,879,587 1,972,435 279,663 2,252,098 Available for sale financial assets consist of investments in ordinary shares and options, and therefore have no fixed maturity date or coupon rate. 10. Investments Accounted for Using the Equity Method Interest in jointly controlled entity (refer to note 24) Consolidated Parent Entity 2009 $ 3,967,132 2008 $ 4,404,466 2009 $ 2008 $ - - Sylvania Resources Annual Report 2009 69 Notes to the Financial Statements For the year ended 30 June 2009 11. Other Financial Assets Investments in subsidiaries Investment in subsidiaries (refer to note 28) Impairment of investment in subsidiaries Loans carried at amortised cost Loans receivable from subsidiaries (refer to note 28) Total other financial assets 12. Deferred Exploration Expenditure 2009 Balance at beginning of financial year Disposal of mining rights Foreign currency movements Direct expenditure for the year Balance at end of financial year 2008 Balance at beginning of financial year Foreign currency movements Direct expenditure for the year Balance at end of financial year Consolidated Parent Entity 2009 $ 2008 $ 2009 $ 2008 $ - - - - - - - - - - - - 3,061,350 1,500,004 (1,500,006) (1,500,004) 1,561,344 - 51,817,488 51,817,488 53,378,832 50,329,422 50,329,422 50,329,422 Mineral Rights $ 568,274 (303,474) 51,800 - Deferred Exploration Expenditure $ 1,160,036 - 232,608 117,714 Total $ 1,728,310 (303,474) 284,408 117,714 316,600 1,510,358 1,826,958 Mineral Rights $ 333,600 (68,800) 303,474 568,274 Deferred Exploration Expenditure $ 988,996 (203,966) 375,006 Total $ 1,322,596 (272,766) 678,480 1,160,036 1,728,310 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. 70 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 13. Property, Plant and Equipment Mining Property $ Construction in Progress $ Plant and Equipment Equipment $ $ Consolidated 2009 At 1 July 2008 Leasehold Improve- ments $ Computer Equipment and Software $ Furniture and Fittings $ Office Equipment $ Motor Vehicles $ TOTAL $ Cost or fair value 8,685,342 6,811,505 15,185,495 235,076 36,013 85,351 53,422 66,871 335,958 31,495,033 Accumulated Depreciation - - (1,738,616) (15,119) Net book value 8,685,342 6,811,505 13,446,879 219,957 (5,735) 30,278 (30,619) (13,869) (25,382) (87,376) (1,916,716) 54,732 39,553 41,489 248,582 29,578,317 Year ended 30 June 2009 Opening net book value Exchange differences Additions Disposals Reallocations between asset classes Depreciation charge At 30 June 2009 Cost or fair value Accumulated Depreciation 8,685,342 6,811,505 13,446,879 219,957 30,278 54,732 39,553 41,489 248,582 29,578,317 1,699,021 2,679,492 2,665,406 38,432 5,134 7,009 5,263 50,150 7,161,360 11,453 58,918 (4,003) - - - - - - - - 37,594 144,693 30,393,126 - - (10,492) - - (14,495) - - (1,826) 1,826 28,582,024 1,569,897 - - - - - - - 10,384,363 38,073,021 16,025,469 219,037 (1,656,713) (39,352) (7,532) 27,880 (20,682) (9,878) (16,817) (102,758) (1,853,732) 100,418 34,858 58,863 340,667 65,264,576 10,384,363 38,073,021 19,420,798 273,508 41,147 151,719 58,605 101,062 530,801 69,035,024 - - (3,395,329) (54,471) (13,267) (51,301) (23,747) (42,199) (190,134) (3,770,448) 10,384,363 38,073,021 16,025,469 219,037 27,880 100,418 34,858 58,863 340,667 65,264,576 Sylvania Resources Annual Report 2009 71 Notes to the Financial Statements For the year ended 30 June 2009 13. Property, Plant and Equipment (continued) Mining Property $ Construction in Progress $ Plant and Equipment Equipment $ $ Leasehold Improve- ments $ Computer Equipment and Software $ Furniture and fFttings $ Office Equipment $ Motor Vehicles TOTAL $ $ - - - 12,447,457 3,481,592 - (337,678) 12,447,457 3,143,914 - 12,447,457 3,143,914 - - - - - - - - 42,114 36,048 43,176 224,811 16,275,198 (10,881) (5,628) (12,254) (44,559) (411,000) 31,233 30,420 30,922 180,252 15,864,198 31,233 30,420 30,922 180,252 15,864,198 (74,658) (2,410,776) (3,001,150) (41,200) (5,616) (12,319) (9,869) (5,661) (64,877) (5,626,126) 8,760,000 7,650,203 3,829,674 276,276 41,629 55,556 32,751 29,356 176,024 20,851,469 - - - - - (10,875,379) 10,875,379 - - - - - - (5,508) - - - - - (5,508) - - (1,400,938) (15,119) (5,735) (19,738) (8,241) (13,128) (42,817) (1,505,716) 8,685,342 6,811,505 13,446,879 219,957 30,278 54,732 39,553 41,489 248,582 29,578,317 Consolidated 2008 At 1 July 2007 Cost or fair value Accumulated Depreciation Net book value Year ended 30 June 2008 Opening net book value Exchange differences Additions Disposals Reallocations between asset classes Depreciation charge At 30 June 2008 Cost or fair value 8,685,342 6,811,505 15,185,495 235,076 36,013 85,351 53,422 66,871 335,958 31,495,033 Accumulated Depreciation - - (1,738,616) (15,119) (5,735) (30,619) (13,869) (25,382) (87,376) (1,916,716) 8,685,342 6,811,505 13,446,879 219,957 30,278 54,732 39,553 41,489 248,582 29,578,317 72 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 13. Property, Plant and Equipment (continued) Parent 2009 At 1 July 2008 Cost or fair value Accumulated Depreciation Net book value Year ended 30 June 2009 Opening net book value Exchange differences Additions Disposals Reallocations between asset classes Depreciation charge At 30 June 2009 Cost or fair value Accumulated Depreciation Mining Property $ Construction in Progress $ Plant and Equipment Equipment $ $ Leasehold Improve- ments $ Computer Equipment and Software $ Furniture and fFttings $ Office Equipment $ Motor Vehicles TOTAL $ $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5,932 (2,596) 3,336 3,336 - (2,780) - (556) - - - - - - - - - - - - - - - - - 34,557 (15,884) 18,673 18,673 6,257 (10,492) - (5,316) 9,122 13,993 (4,871) 9,122 - - - - - - - - - - - - - 40,489 (18,480) 22,009 22,009 - 6,257 (13,272) - (5,872) 9,122 13,993 (4,871) 9,122 Sylvania Resources Annual Report 2009 73 Notes to the Financial Statements For the year ended 30 June 2009 13. Property, Plant and Equipment (continued) Parent 2008 At 1 July 2007 Cost or fair value Accumulated Depreciation Net book value Year ended 30 June 2008 Opening net book value Exchange differences Additions Disposals Reallocations between asset classes Depreciation charge At 30 June 2008 Cost or fair value Accumulated Depreciation Mining Property $ Construction in Progress $ Plant and Equipment Equipment $ $ Leasehold Improve- ments $ Computer Equipment and Software $ Furniture and Fittings $ Office Equipment $ Motor Vehicles TOTAL $ $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4,151 6,365 24,176 (1,296) 2,855 (410) 5,955 (8,783) 15,393 2,855 5,955 15,393 - 1,781 - - (1,300) 3,336 5,932 (2,596) 3,336 - - - 10,381 (5,508) - (447) - - - - - - (7,101) 18,673 34,557 (15,884) 18,673 - - - - - - - - - - - - - 34,692 (10,489) 24,203 24,203 - 12,162 (5,508) - (8,848) 22,009 40,489 (18,480) 22,009 (a) Leased Assets Equipment and motor vehicles include the following amounts where the Group is a lessee under a finance lease: Consolidated Parent Entity 2009 $ 2008 $ 2009 $ 2008 $ 196,688 (72,027) 124,661 322,150 (62,258) 259,892 106,251 (3,542) 102,709 233,384 (33,808) 199,576 - - - - - - - - - - - - Equipment Cost Accumulated Depreciation Motor vehicles Cost Accumulated Depreciation 74 Sylvania Resources Annual Report 2009 13. Property, Plant and Equipment (continued) At 30 June 2009 Due within one year Due between one and five years At 30 June 2008 Due within one year Due between one and five years Notes to the Financial Statements For the year ended 30 June 2009 Future Minimum Lease Payments Due $ 178,727 258,727 437,454 121,118 307,757 428,875 Finance Charges $ (29,078) (24,157) (53,235) (43,044) (56,459) (99,503) Present Value of Minimum Lease Payments Due $ 149,649 234,570 384,219 78,074 251,298 329,372 (b) Non-current assets pledged as security Leased assets are pledged as security for the related finance lease liability. No other non-current assets are pledged as security for any liabilities. (c) Change in useful lives The useful life of plant is recognised as being 10 years. 14. Trade and Other Payables Trade payables Other payables 15. Borrowings Secured Current liabilities Consolidated Parent Entity 2009 $ 4,968,534 2,294,803 7,263,337 2008 $ 1,405,985 1,248,123 2,654,108 2009 $ 112,190 605,144 717,334 2008 $ 127,157 43,387 170,544 Consolidated Parent Entity 2009 $ 2008 $ 2009 $ 2008 $ Payable within one year (Refer to Note 23) 149,649 78,074 Non-current liabilities Payable within 1-5 years (Refer to Note 23) 234,570 251,298 - - - - Sylvania Resources Annual Report 2009 75 Notes to the Financial Statements For the year ended 30 June 2009 16. Provisions Provision for rehabilitation Movement in provision Balance at beginning of financial year Arising during the year Balance at end of financial year Consolidated Parent Entity 2009 $ 912,644 355,158 557,486 912,644 2008 $ 355,158 - 355,158 355,158 2009 $ 2008 $ - - - - - - - - Provision is made for close down, restoration and for environmental rehabilitation costs (which include the dismantling and demolition of infrastructure, removal of residual materials and remediation of disturbed areas) in the financial period when the related environmental disturbance occurs, based on the estimated future costs using information available at the balance sheet date. Rehabilitation is performed and paid for on an on-going basis as mining properties are depleted. The majority of the rehabilitation will be undertaken progressively over the life of the mine during the depletion of each respective mining property. It is expected that the life of each mine could vary between 5 and 50 years. 17. Issued Capital (a) Share Capital Ordinary shares Ordinary shares fully paid Employee share plan shares Consolidated 2009 2008 No of Shares No of Shares Parent Entity 2009 $ 2008 $ 179,354,273 178,584,273 117,945,504 117,274,097 2,808,000 1,428,000 - - 182,162,273 180,012,273 117,945,504 117,274,097 Holders of ordinary shares are entitled to receive dividends as declared from time and are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the parent entity, ordinary shareholders rank after all creditors and are fully entitled to any proceeds on liquidation. (b) Movements in ordinary share capital Date 1 July 2008 1 July 2008 Opening balance Details Employee share loan repaid – transferred to ordinary shares Transfer from share based payments reserve Number of Shares 178,584,273 250,000 1 July 2008 Employee share loan repaid – transferred to ordinary shares 20,000 Transfer from share based payments reserve 30 June 2009 Exercise of options 2006 500,000 Issue Price $ 117,274,097 $0.50 $0.90 $0.50 125,000 41,270 18,000 4,538 250,000 281,854 (49,255) 179,354,273 117,945,504 Transfer from share based payments reserve Transaction costs On issue at the end of the year 76 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 17. Issued Capital (continued) (c) Movements in Employee Share Plan Shares issued with Limited Recourse Employee Loans Date 1 July 2008 1 July 2008 1 July 2008 On issue at beginning of the year Details Employee share plan loan repaid - shares transferred to ordinary share capital Employee share plan loan repaid - shares transferred to ordinary share capital 18 August 2008 Employee share plan issue 23 December 2008 Employee share plan issue On issue at the end of the year Number of Shares 1,428,000 (250,000) (20,000) 950,000 700,000 2,808,000 Issue Price $0.50 $0.90 $1.63 $1.63 Information relating to the employee share plan, including details of shares issued under the plan, is set out in note 20. Share Options Employee option plan options exercisable (refer note 20) -at $0.50 per share on or before 20 June 2008 -at $0.75 per share on or before 30 June 2010 -at $2.89 per share on or before 30 June 2011 -at $2.67 per share on or before 30 June 2011 -at $1.63 per share on or before 30 June 2011 -at $1.05 per share on or before 30 June 2012 Number of Options 2008 2009 - - - - 5,633,000 6,000,000 500,000 600,000 400,000 600,000 - - 11,633,000 2,100,000 Information relating to the employee option plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in note 20. Sylvania Resources Annual Report 2009 77 Notes to the Financial Statements For the year ended 30 June 2009 18. Reserves Consolidated At 30 June 2007 Net Unrealised Gains Reserve $ 394,058 Share Based Payments Reserve $ 1,047,293 Currency Translation Reserve $ (3,160,460) Unrealised gain / (loss) on available-for-sale financial assets Currency translation differences Share and option-based payments transferred to share capital Share and option-based payments At 30 June 2008 Unrealised gain / (loss) on available-for-sale financial assets Currency translation differences Minority shareholders premium reserve Share and option-based payments transferred to share capital Share and option-based payments expense (394,058) - - - - 5,853,835 - - - - At 30 June 2009 5,853,835 Minority Shareholders Premium Reserve $ - - - - - - - - - - - (10,287,475) (732,008) 673,815 - - 989,100 (13,447,935) - - - (327,662) 2,744,524 3,405,962 - 9,049,447 - - - 2,388,887 - - (4,398,488) 2,388,887 Parent At 30 June 2007 Unrealised gain / (loss) on available-for-sale financial assets Share and option-based payments transferred to share capital Share and option-based payments expense At 30 June 2008 Unrealised gain / (loss) on available-for-sale financial assets Share and option-based payments transferred to share capital Share and option-based payments expense At 30 June 2009 Nature and purpose of reserves Net unrealised gains reserve • This reserve records fair value changes on available for sale investments. Net Unrealised Gains Reserve $ 394,058 (394,058) Equity Benefits Reserve $ 1,047,293 - - - 5,741,451 - - 5,741,451 - (732,008) 673,815 989,100 - (327,662) 2,744,524 3,405,962 • • Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of financial statements of foreign controlled entities. Employee equity benefits reserve This reserve is used to record the value of equity benefits provided to employees, consultants and directors as part of their remuneration. Refer note 27. • Minority shareholders premium reserve This reserve arises as a result of the adjustment made to the interest of minority shareholders in the equity of Sylvania Metals (Pty) Ltd and Sylvania Minerals (Pty) Ltd as detailed in note 1(e)(iii). 78 Sylvania Resources Annual Report 2009 Total $ ( 1,719,109) (394,058) (10,287,475) (732,008) 673,815 (12,458,835) 5,853,835 9,049,447 2,388,887 (327,662) 2,744,524 7,250,196 Total $ 1,441,351 (394,058) (732,008) 673,815 989,100 5,741,451 (327,662) 2,744,524 9,147,413 Notes to the Financial Statements For the year ended 30 June 2009 19. Accumulated Losses Balance as at 1 July Net profit / (loss) for the year Balance as at 30 June 2009 $ (16,847,066) (3,524,073) (20,371,139) 2008 $ (26,709,252) 9,862,186 (16,847,066) 2009 $ (32,148,258) (8,976,968) (41,125,226) 2008 $ (28,763,633) (3,384,625) (32,148,258) 20. Share Based Payments (a) Employee Option Plan An employee incentive option plan was approved at the 2007 annual general meeting. Participants of the option plan are determined by the Board and can be employees and directors of, or consultants to, the Company or a controlled entity. The Board considers length of service, seniority, responsibilities, potential contribution and any other relevant matters in determining eligibility of potential participants. The Board has sole responsibility to determine the number of options and terms and conditions of options granted to any participant. The options issued under the option plan will be granted free of charge. The exercise price for the options is to be not less than the weighted average share price for the last five trading days immediately preceding the options being offered to the participant. The expiry date of the options will be determined by the Board and will also lapse within one month of the participant ceasing to be a director, employee or consultant of the Company or a controlled entity (subject to certain exceptions). The Board at its discretion may apply certain vesting conditions upon any options issued under the plan. The options can only be exercised after the expiry of the following periods: • after 12 months have lapsed from the acceptance date, in respect of not more than one half of the total number of options; and • after 24 months have lapsed from the acceptance date, in respect to the balance of those options. The options are not transferable without prior written approval from the Board. The options will not be quoted on a publicly traded stock market; however application will be made for ASX/AIM quotation of the shares issued upon the exercise of the options. Set out below are summaries of options granted under the plan: Consolidated and parent entity - 2009 Grant Date Expiry Date Exercise Price 20 Apr 2006 30 Jun 2009 17 Oct 2006 30 Jun 2010 17 Mar 2008 30 Jun 2011 17 Mar 2008 30 Jun 2011 18 Aug 2008 30 Jun 2011 18 Dec 2008 30 Jun 2011 10 Jun 2009 30 Jun 2012 Total $0.50 $0.75 $2.89 $2.67 $1.63 $1.63 $1.05 Balance at Start of the Year Number 500,000 600,000 400,000 600,000 - - - Granted During the Year Number Exercised During the Year Number Balance at the End of the Year Number Vested and Exercisable at End of Year Number - - - - 3,383,000 2,250,000 6,000,000 (500,000) - - - - - - - 600,000 400,000 600,000 3,383,000 2,250,000 6,000,000 - 600,000 200,000 300,000 - - - 2,100,000 11,633,000 (500,000) 13,233,000 1,100,000 Weighted average exercise price $1.65 $1.33 $0.50 $1.41 $1.66 The weighted average remaining contractual life of the share options is 2.32 years (2008: 1.24 years). Sylvania Resources Annual Report 2009 79 Notes to the Financial Statements For the year ended 30 June 2009 20. Share Based Payment (continued) Grant Date Expiry Date Exercise Price Balance at Start of the Year Number Granted During the Year Number Exercised During the Year Number Balance at the End of the Year Number 20 Apr 2006 17 Oct 2006 17 Mar 2008 17 Mar 2008 Total 30 Jun 2009 30 Jun 2010 30 Jun 2011 30 Jun 2011 $0.50 $0.75 $2.89 $2.67 Weighted average exercise price 750,000 800,000 - - 1,550,000 $0.63 - - (250,000) (200,000) - - 500,000 600,000 400,000 600,000 (450,000) 2,100,000 $0.61 $1.65 400,000 600,000 1,000,000 $2.76 Vested and Exercisable at End of Year Number 500,000 300,000 - - 800,000 $0.59 No options were forfeited during the periods covered by the above tables. The weighted average share price at the date of exercise of options during the year ended 30 June 2009 was $1.41 (2008: $2.82). The assessed fair values at grant date of options granted during the year ended 30 June 2009 was $0.43, $0.15 and $0.91 respectively per option. The fair value at grant date is independently determined using a Black and Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term expected price volatility is based on the Black Scholes model. The model inputs for options granted during the year ended 30 June 2009 included: (i) Options are granted for no consideration, have a three year life, and 50% of each tranche vests and is exercisable on each anniversary of the date of grant (ii) Share price at grant date (iii) Share price volatility of the Company’s shares (iv) Expected dividend yield (v) Risk-free interest rate (vi) Option life Options Granted at $1.63 Per Share Options Granted at $1.63 Per Share Options Granted at $1.05 Per Share $1.33 65.36% Nil 5.68% $1.63 89.16% Nil 3.32% $1.55 105.84% Nil 4.47% 35 months 31 months 36 months (b) Employee share plan An employee incentive share plan was approved at the 2007 Annual General Meeting. Participants of the plan are determined by the Board and can be employees, consultants and directors of, or consultants to, the Company or a controlled entity. The Board considers length of service, seniority, responsibilities, potential contribution and any other relevant matters in determining eligibility of potential participants. The issue price for the shares issued under the plan are not less than the weighted average share price for the last five trading days immediately preceding the offer to the participant. 80 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 20. Share Based Payment (continued) A participant who is invited to subscribe for shares under the plan may also be invited to apply for a loan up to the amount payable in respect of the shares accepted by the participant. These loans are to be made on the following terms: • Applied directly against the issue price of the shares to be acquired under the plan; • For a term to be determined by the Board; • Repayable to the extent of the lesser of the issue price of the relevant shares issued, less any cash dividends applied against the outstanding principal, and the last market sale price of the shares on the date of repayment of the loan; • The loan must be repaid in full prior to expiry of the loan; • The Company will have a lien over the shares in respect of which a loan is outstanding; • Shares issued under the plan are not transferable while a loan amount in respect of those shares remains payable; and • Shares issued under the share plan will not be quoted on a publicly traded stock market while a loan amount in respect of those shares remains payable. The shares can only be transferred or otherwise dealt with until after the expiry of the following periods: • 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 to the balance of those shares. All shares issued under the employee share plan with non-recourse loans are considered to be options and are accounted for in accordance with note 1(v). Set out below are summaries of shares issued under the plan: Consolidated and parent entity - 2009 Issue Date Expiry Date Exercise Price 21 Dec 2005 21 Dec 2009 20 Dec 2006 20 Dec 2010 17 Mar 2008 17 Mar 2008 18 Aug 2008 23 Dec 2008 Total 30 Jun 2011 30 Jun 2011 30 Jun 2011 30 Jun 2011 $0.50 $0.90 $2.89 $2.67 $1.63 $1.63 Consolidated and parent entity - 2008 Balance at Start of the Year Number 625,000 270,000 500,000 33,000 - - Issued During the Year Number Other Changes During the Year Number - - - - 950,000 700,000 (250,000) (20,000) - - - - Balance at the End of the Year Number 375,000 Vested at the End of the Year Number 375,000 250,000 500,000 33,000 950,000 700,000 250,000 250,000 16,500 - - 1,428,000 1,650,000 (270,000) 2,808,000 891,500 Issue Date Expiry Date Exercise Price 21 Dec 2005 21 Dec 2009 20 Dec 2006 20 Dec 2010 17 Mar 2008 17 Mar 2008 Total 30 Jun 2011 30 Jun 2011 $0.50 $0.90 $2.89 $2.67 Balance at Start of the Year Number 3,800,000 300,000 - - 4,100,000 Issued During the Year Number - - 500,000 33,000 533,000 Other Changes During the Year Number (3,175,000) (30,000) - - Balance at the End of the Year Number 625,000 Vested at the End of the Year Number 635,000 270,000 500,000 33,000 120,000 - - (3,205,000) 1,428,000 755,000 Sylvania Resources Annual Report 2009 81 Notes to the Financial Statements For the year ended 30 June 2009 20. Share Based Payment (continued) The model inputs for shares granted during the year ended 30 June 2009 included: (i) Shares are issued for no consideration, have a three year life, and 50% of each tranche vests and is exercisable on each anniversary of the date of grant (ii) Share price at grant date (iii) Share price volatility of the Company’s shares (iv) Expected dividend yield (v) Risk-free interest rate Shares Issued at $1.63 Per Share Shares Issued at $1.63 Per Share $1.33 65.36% Nil 5.68% $0.60 89.16% Nil 3.32% Options issued under employee option plan Shares issued under employee share plan Consolidated Parent Entity 2009 $ 2,361,336 383,187 2,744,523 2008 $ 464,641 209,174 673,815 2009 $ 799,994 383,187 1,183,181 2008 $ 464,641 209,174 673,815 21. Financial Instruments (a) Capital risk management The Company has no debt facilities outside of normal creditor trading terms and thus the board does not deem it necessary for a formal Capital Risk Management Charter. The Group manages its capital to ensure that companies within the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. Due to the inherent risks involved in mining the Directors prefer not to utilise funding from financing institutions. The Group’s overall strategy remains unchanged from 2008. The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent comprising issued capital, reserves and retained earnings. None of the Group’s companies are subject to externally imposed capital requirements. Operating cash flows are used to maintain and expand operations, as well as to make routine expenditures such as tax, dividends and general administrative outgoings. (b) Categories of financial instruments Financial assets Loans and receivables Cash and cash equivalents Available for sale financial assets Financial liabilities Financial liabilities Consolidated Parent Entity 2009 $ 2008 $ 2009 $ 2008 $ 7,871,069 32,214,884 8,080,416 48,166,369 15,886,145 43,623,564 2,252,098 61,761,807 488,401 24,929,083 7,879,587 33,297,071 743,690 32,938,264 2,252,098 35,934,052 7,647,556 7,647,556 2,983,480 2,983,480 717,334 717,334 170,544 170,544 (c) Financial risk management objectives The Group is exposed to market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. 82 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 21. Financial Instruments (continued) (d) Market risk The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates, commodity prices and exchange rates. There has been no change at the reporting date to the Group’s exposure to market risks or the manner in which it manages and measures the risk from the previous period. (i) Foreign exchange risk The Group is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the denomination in which metal prices are determined and year end assets and liabilities are converted. Year-end cash balances in British Pounds: A variance of 10% on the exchange rate of the Australian Dollar to the British Pound would result in a gain of $2,072,736 (2008: gain of $2,970,695) or a loss of $2,072,736 (2008: loss of $2,970,695) to the parent entity and on a Group level. (ii) Price risk Trade receivables at year-end: Commodity prices are set in US Dollars. A variance of 10% in commodity prices or the exchange rate of the US Dollars to the South African Rand, in which commercial activity is undertaken, will result in a gain of A$359,437 (2008: A$1,095,402) or a loss of the same amount on a Group level. (iii) 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 arises from cash balances and long term borrowings, relating to finance leases on motor vehicles and equipment. Cash balances Borrowings (finance leases) 30 June 2009 30 June 2008 Weighted Average Interest Rate % 2.38 10.33 Balance $ 32,214,884 384,219 Weighted Average Interest Rate % 6.71 16.65 Balance $ 43,623,564 329,372 (e) Foreign currency risk management The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows: Great British Pounds (GBP) South African Rand (ZAR) Liabilities Assets 2009 $ 2008 $ - - (6,936,130) (5,933,349) 2009 $ 22,813,165 16,867,938 2008 $ 32,677,647 11,441,046 Sylvania Resources Annual Report 2009 83 Notes to the Financial Statements For the year ended 30 June 2009 21. Financial Instruments (continued) (f) Foreign currency sensitivity analysis The Group is exposed to Great British Pound (GBP) currency fluctuations. The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian Dollar (AUD) against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the currency of the lender or the borrower. A positive number indicates an increase in profit and other equity where the Australian Dollar strengthens against the respective currency. For a weakening of the Australian Dollar against the respective currency there would be an equal and opposite impact on the profit and other equity and the balances below would be negative. Profit or loss GBP Impact Consolidated Company 2009 $ 2,072,736 2008 $ 2,970,695 2009 $ 2,072,736 2008 $ 2,970,695 This is mainly attributable to the exposure outstanding on GBP cash balances at year end. (g) Interest rate risk management The Company and the Group are exposed to interest rate risk as entities in the Group maintain funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate liquid funds. The Company and Group’s exposure to interest rate on financial assets and financial liabilities are detailed in the liquidity risk management section of this note. Interest rate risk sensitivity analysis The sensitivity analysis below have been determined based on the exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the change in interest rates. At reporting date, if interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s: • Net profit / (loss) after tax and equity would increase by approximately $20,231 and decrease by $20,231 (2008: $142,358). This is mainly attributable to the Group’s exposure to interest rate fluctuations on cash balances and lease liabilities. Equity price sensitivity The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date. At reporting date, if the equity prices had been 5% higher or lower: • Net loss for the year ended 30 June 2009 would have been unaffected as the equity investments are classified as available-for-sale and no investments were disposed of or impaired; and • Other equity reserves would decrease/increase by $406,826 (2008: decrease/increase by $112,603 for the Group and $396,826 (2008: $112,603) for the company, mainly as a result of the changes in fair value of available-for-sale shares. 84 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 21. Financial Instruments (continued) (h) Credit risk management Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. This information is supplied by independent rating agencies where available and, if not available, the Group uses publicly available financial information and its own trading record to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions conducted is spread amongst approved counterparties. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The carrying amount of financial assets recorded in the financial statements, net of any allowance for losses, represents the Group’s maximum exposure to credit risk. (i) Liquidity risk management Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long term funding and liquidity management requirements. Consolidated 2009 Non-interest bearing Finance lease liability Variable interest rate instruments Fixed interest rate instruments 2008 Non-interest bearing Finance lease liability Variable interest rate instruments Fixed interest rate instruments Weighted Average Effective Interest Rate % - 10.33 - - - 14.65 - - Less Than 1 Month $ 1-3 Months $ 3 Months-1 Year $ 1-5 Years $ 5+ Years $ - - - - - - - - - - 7,263,336 - - - - - 148,665 235,553 - - - - 7,263,336 148,665 235,553 2,654,108 - - - - - 121,118 307,757 - - - - 2,654,108 121,118 307,757 - - - - - - - - - - Sylvania Resources Annual Report 2009 85 Notes to the Financial Statements For the year ended 30 June 2009 21. Financial Instruments (continued) Parent 2009 Non-interest bearing Finance lease liability Variable interest rate instruments Fixed interest rate instruments 2008 Non-interest bearing Finance lease liability Variable interest rate instruments Fixed interest rate instruments Weighted Average Effective Interest Rate % Less than 1 Month $ 1-3 Months $ 3 Months-1 Year $ 1-5 Years $ 5+ Years $ - - - - - - - - - - - - - - - - - - 717,334 - - - 717,334 170,544 - - - 170,544 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The above tables detail the Company’s and the Group’s remaining contractual maturity for its financial liabilities. These are based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. The following tables detail the Company’s and the Group’s remaining contractual maturity for its financial assets. These are based on the undiscounted cash flows of financial assets based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. Consolidated 2009 Non-interest bearing Variable interest rate instruments Fixed interest rate instruments 2008 Non-interest bearing Variable interest rate instruments Fixed interest rate instruments Weighted Sverage Effective Interest Rate % Less Than 1 Month $ 1-3 Months $ 3 Months-1 Year $ 1-5 Years $ - 3.48 2.22 - 6.71 - 363,401 4,046,200 28,168,684 32,578,285 - 42,555,925 - - - - - 7,507,668 - - 7,507,668 15,886,145 1,077,482 - - - - - 5+ Years $ 8,080,416 - - 8,080,416 2,252,098 - - 2,252,098 - - - - - - - - 42,555,925 16,963,627 86 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 21. Financial Instruments (continued) Parent 2009 Non-interest bearing Variable interest rate instruments Fixed interest rate instruments 2008 Non-interest bearing Variable interest rate instruments Fixed interest rate instruments Weighted Average Effective Interest Rate Less Than 1 Month 1-3 Months % $ - 2.17 1.00 - 5.82 - 363,401 2,413,536 22,515,547 25,292,484 - 31,870,625 - 125,000 - - 125,000 743,690 1,077,482 - 31,870,625 1,821,172 3 Months-1 Year $ 1-5 Years $ - - - - - - - - 5+ Years $ 7,879,587 - - 7,879,587 2,252,098 - - 2,252,098 - - - - - - - - (j) Fair value of financial instruments For financial assets and liabilities, the net fair value approximates their carrying value. No financial assets and financial liabilities are readily traded on organized markets in standardized form, other than listed investments. The Company has no financial assets where carrying amount exceeds net fair value at balance sheet date. Sylvania Resources Annual Report 2009 87 Notes to the Financial Statements For the year ended 30 June 2009 22. Reconciliation of Profit After Tax to Net Cash Outflow from Operating Activities (a) Reconciliation of profit / (loss) from ordinary activities after income tax to net cash inflow / (outflow) from Consolidated Parent Entity 2009 $ 2008 $ 2009 $ 2008 $ operating activities Profit / (Loss) from ordinary activities Administration fee charged to controlled entities Depreciation Joint venture cash distribution Equity accounted net profit from joint venture Capital (gain) on sale of non-current assets Net (gain) / loss on sale of available-for-sale financial assets Write off of investment Impairment of available for sale assets Diminution in value of loans Net foreign exchange differences Project generation costs Share-based compensation Impairment of loan to controlled entity (Increase)/decrease in prepayments & other debtors (Increase)/decrease in debtors (Increase)/decrease in accrued interest (Increase)/decrease in GST/VAT recoverable (Increase)/decrease in inventories (Increase)/decrease in other operating assets (3,756,772) 11,686,999 (8,976,968) (3,384,625) - 3,401,993 (2,435,916) - 1,853,732 1,510,100 1,505,716 3,478,500 (270,985) (4,282,226) 13,272 (5,918) - 5,508 503,267 58,687 5,872 8,848 - - 13,272 (5,918) - - - 5,508 503,267 58,687 1,710,898 2,567,345 1,710,898 2,567,345 - - - - 244,303 4,594,987 244,303 4,594,987 - - - 2,744,523 673,815 1,183,181 - - (40,208) (327,525) 8,699,682 (14,378,302) 383,212 (268,090) (214,072) - (405,654) 172,372 (265,575) - - 673,815 (2,916,291) (170,848) - - - - (49,550) - - (855,111) - - - - 66,459 - 383,212 40,029 - 56,452 - - 587,453 (40,664) - - (1,330,426) (1,399,886) Net exchange differences on payment to supplies and employees (471,950) (1,368,167) Increase/(decrease) in trade creditors Increase/(decrease) in accruals and other creditors Increase/(decrease) in GST/VAT recoverable Increase/(decrease) in group tax clearing Increase/(decrease) in income tax expense Net cash inflow/(outflow) from operating activities 3,569,334 1,496,573 (393,027) (11,851) 3,060,868 19,853,624 (160,374) 833,415 340,514 (46,185) 5,346,659 10,533,778 (b) Non-cash financing and investing activities During the 2008 financial year 3,000,000 shares in the company were issued at a deemed issue price of $2.89 to Portpatrick Inc as consideration for the facilitation to treat all run of mine fines from Samancor Chrome’s Broken Hill, Spitskop and Buffelsfontein East sites, pursuant to the Co-operation Agreement with Portpatrick Inc dated 9 December 2005. 88 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 23. Commitments and Contingencies (a) 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 1 year After 1 year but not more than 5 years More than 5 years Consolidated Parent Entity 2009 $ 113,153 296,410 - 2008 $ 101,137 301,752 - 2009 $ 129,688 586,921 - 2008 $ 25,348 - - 409,563 402,889 716,609 25,348 Office equipment Sylvania South Africa (Pty) 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 1 year After 1 year but not more than 5 years More than 5 years Finance lease commitments Motor vehicles 20,517 75,112 - 95,629 10,644 42,505 - 53,149 Sylvania Metals (Pty) Limited entered into three lease agreements during the period in respect of motor vehicles. Future minimum lease payments (net of GST) as at 30 June are as follows: Within 1 year After 1 year but not more than 5 years More than 5 years 178,727 258,727 - 78,074 301,752 - 437,454 379,826 - - - - - - - - Commitments for plant construction At 30 June 2009 commitments were signed for continued construction of Lannex, Mooinooi and Doornbosch plants. Within 1 year After 1 year but not more than 5 years More than 5 years Consolidated Parent Entity 2009 $ 4,698,926 - - 2008 $ 6,884,800 - - 4,698,925 6,884,800 2009 $ 2008 $ - - - - - - - - - - - - - - - - Additional costs to complete the plants before 30 June 2010 are estimated to be $18,920,925. (b) Contingencies (i) Contingent liabilities The parent entity and Group had no contingent liabilities as at 30 June 2009. Sylvania Resources Annual Report 2009 89 Notes to the Financial Statements For the year ended 30 June 2009 24. Interest in Joint Venture 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 Balance at end of financial period Reserves attributable to interest in jointly controlled entity Carrying amount of investment in jointly controlled entity Balance at beginning of the financial period Other Distribution received from jointly controlled entity Distribution received in respect of management fees Share of jointly controlled entity’s profit from ordinary activities, after income tax Balance at end of financial period Foreign currency translation movements Balance at beginning of financial period Movement during the financial period Balance at end of financial period Share of joint venture entity’s results and financial position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Revenue Expenses Management fees Profit from ordinary activities before income tax Income tax expense Profit from ordinary activities after income tax Contingencies & commitments The jointly controlled entity does not have any contingencies or capital commitments. 90 Sylvania Resources Annual Report 2009 Consolidated 2009 $ 2008 $ 2,794,604 1,251,596 (1,510,100) (3,478,500) 317,002 1,601,506 5,021,508 2,794,604 - - - - 6,915,025 - 5,271,740 839,560 (1,510,100) (3,478,500) (46,017) 317,002 5,675,910 (2,510,558) 801,780 (1,708,778) 3,967,132 1,904,596 981,505 2,886,101 255,369 - 255,369 (739,282) 5,021,508 6,915,025 (579,420) (1,931,138) (2,510,558) 4,404,467 2,808,520 906,185 3,714,705 407,829 6,019 413,848 1,270,707 6,164,053 (953,705) (1,881,827) - 317,002 - 739,282 5,021,508 - 317,002 5,021,508 Notes to the Financial Statements For the year ended 30 June 2009 25. Events After the Balance Sheet Date On 11 May 2009 Sylvania announced its intention to make two off-market takeover offers for all the ordinary shares in SA Metals Limited (SA Metals, ASX: SXM) and Great Australian Limited (Great Australian, ASX: GAU) respectively (Offers). The Offers closed at 5.00pm (WST) on 11 August 2009. The offer for SA Metals, which was recommended by the directors of SA Metals, was based on 1 Sylvania share for every 10 SA Metals shares held by SA Metals shareholders. As at 5.00pm (WST) on 11 August 2009, Sylvania had a relevant interest in 95% of SA Metals shares on issue. Sylvania is proceeding with a compulsory acquisition to acquire the remaining SA Metals shares. Following the completion of the compulsory acquisition, SA Metals will be a wholly owned subsidiary of Sylvania Resources Limited. The offer for Great Australian, which was recommended by the directors of Great Australian, was based on 1 Sylvania share for every 12 Great Australian shares held by Great Australian shareholders. As at 5.00pm (WST) on 11 August 2009, Sylvania had a relevant interest of 89.82% of Great Australian shares on issue. On 13 August 2009, Great Australian sought a trading halt and this company made an urgent application to the Federal Court seeking an order, to allow compulsory acquisition despite the fact that the 90% threshold was not satisfied. The court exercised its power (under Section 661A(3) of the Corporations Act) to allow compulsory acquisition. Great Australian will also be a wholly owned subsidiary of Sylvania Resources Limited. The combination of the PGM assets of Sylvania, SA Metals and Great Australian will provide an opportunity to create long term benefits and value for the shareholders of both companies through improved scale and penetration of the market for the supply of PGM resources. As at 25 September 2009, 27,042,762 Sylvania shares had been issued for the takeover bid of SA Metals and 7,750,229 shares for the takeover bid of Great Australian. Overview of SA Metals SA Metals is an explorer seeking to become a significant producer of platinum group metals (PGMs) in the Bushveld Igneous Complex of South Africa. SA Metals was incorporated on 2 June 2000, and listed on ASX on 28 November 2000, under the name Rox Limited. Rox Limited changed its name to Pan Palladium Limited in February 2001, and changed its name to SA Metals in May 2009. SA Metals’ two principal projects, the Aurora Project and Grass Valley Project, are located in the Bushveld Igneous Complex. Overview of Great Australian Great Australian is a minerals exploration company focused on the exploration and subsequent development of PGM deposits. Great Australian was incorporated in October 2003 and listed on ASX on 11 March 2004. Great Australian is focused on PGM exploration activities in South Africa. In 2007 Great Australian divested its assets in Australia and South-East Asia to focus on its South African projects. Great Australian’s current projects, the HACRA Platinum Project and the Mooiplaats Platinum Project, are located in the Bushveld Igneous Complex. The proposed merger with Ruukki Group Oyj On 30 June 2009, Sylvania and Ruukki Group Oyj (Ruukki) entered into a Merger Implementation Agreement (MIA) in relation to a potential merger between Sylvania and Ruukki (Proposed Ruukki Merger), with the aim of creating an integrated mine to metals PGM and ferrochrome company. Under the Proposed Ruukki Merger, each Sylvania shareholder will receive 1 Ruukki share for every 1.81 Sylvania shares held on the Proposed Ruukki Merger record date. The Proposed Ruukki Merger has been unanimously recommended by the Ruukki independent directors and by each of the independent directors of Sylvania (being each of the directors of Sylvania other than Terry McConnachie who is also a director of Ruukki) in the absence of a superior proposal and subject to confirmation from the independent expert that the Proposed Ruukki Merger is in the best interests of Sylvania shareholders. SA Metals shareholders and Great Australian shareholders who have accepted the respective Sylvania takeover offers will receive Sylvania shares and will then have the opportunity to consider and vote on the Proposed Ruukki Merger as Sylvania shareholders. Sylvania Resources Annual Report 2009 91 Notes to the Financial Statements For the year ended 30 June 2009 25. Events After the Balance Sheet Date (continued) Overview of Ruukki Ruukki is a company incorporated in Finland which specialises in industrial refining of specialised natural resources within two areas: wood processing and minerals. The minerals business has mining and mineral processing operations in South Africa, Turkey and Germany. The wood processing business has a strong presence in the northern part of Finland. The creation of the minerals business, the Mogale acquisition and the Proposed Ruukki Merger demonstrates Ruukki’s shift in focus to minerals processing and extraction. Ruukki aims to become an integrated mine to metals PGM and ferrochrome company Accordingly, on 7 May 2009, Ruukki announced that its board of directors had resolved to initiate the process to divide its wood processing and minerals businesses, ultimately resulting in two separately listed companies during 2010. The separation of the wood processing and minerals businesses will commence after completion of the Proposed Ruukki Merger. On 25 May 2009, Ruukki announced the acquisition of 84.9% of Mogale. The acquisition of Mogale was a cornerstone transaction in Ruukki’s expansion into South Africa and a major step towards its objective of expanding its existing mineral processing operations. Mogale’s production facilities are located in South Africa, in the vicinity of Johannesburg. It has a total of 96 MVA smelting capacity with four furnaces. Mogale produces silico manganese, ferrochrome and stainless steel alloy and has a combined annual capacity of approximately 100,000 tonnes. Ruukki’s shares are listed on NASDAQ OMX Helsinki Ltd (trading symbol RUG1V). At 1 July 2009, Ruukki had a market capitalisation of approximately €545 million (A$957 million). 26. Auditors’ Remuneration Consolidated Parent Entity 2009 $ 2008 $ 2009 $ 2008 $ The auditors of the parent entity are HLB Mann Judd Amounts received or due to be receivable by HLB Mann Judd for: An audit or review of the financial report of the entity 91,000 40,000 91,000 40,000 Amounts received or due and receivable by non-HLB Mann Judd audit firms: An audit or review of the financial report of any other entity in the Group Taxation and advisory services Other non-audit services Total auditors’ remuneration 154,537 59,501 473 3,048 739 3,726 - - - - - - 249,058 103,966 91,000 40,000 92 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 27. Key Management Personnel Disclosure (a) Directors The following persons were directors of Sylvania Resources Limited during the financial year: Chairman - non-executive R D Rossiter Executive directors T M McConnachie L M Carroll G M Button Non-executive directors Dr AP Ruiters J Cooke Managing Director Finance Director (appointed 04 May 2009) (appointed 18 August 2008; resigned 30 April 2009) The following persons were directors from the beginning of the financial year until their resignation: Dr E Kirby T M McConnachie is also a director of the Ruukki Group Oyj (resigned 18 August 2008) (b) Other key management personnel J Meyer Z Marinkovic C De Vos P R Carter Dr P J Cox General Manager: Business Development Director: Sylvania Metals (Pty) Limited Internal Legal Advisor General Manager: Capital Projects Strategic Planner (c) Key management personnel compensation Short-term Post employment Share-based payments Total remuneration Consolidated Parent Entity 2009 $ 2,630,065 10,791 1,264,227 3,905,083 2008 $ 2,368,591 6,710 505,100 2,880,401 2009 $ 510,997 10,791 388,730 910,518 2008 $ 556,898 3,560 202,130 762,588 The Group has applied the exemption available under Corporations Amendments Regulation 2006 to transfer key management personnel remuneration disclosures required by Accounting Standard AASB 124 Related Party Disclosures’ paragraphs Aus 25.4 to Aus 25.7.2 to the Remuneration Report section of the Directors’ report. These transferred disclosures have been audited. Sylvania Resources Annual Report 2009 93 Notes to the Financial Statements For the year ended 30 June 2009 27. Key Management Personnel Disclosure (continued) (d) Compensation options: granted under the Employee Option Plan Options provide as remuneration and shares issued on exercise of such options. Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options, can be found in section D of the remuneration report. (e) Compensation shares: issued under the Employee Share Plan Shares provided as remuneration. Details of shares provided as remuneration can be found in section D of the remuneration report. (f) Shares issued on exercise of compensation options Shares Issued Number 500,000 250,000 20,000 Paid Per Share (note 20) $0.50 $0.50 $0.90 Shares Issued Number 250,000 100,000 100,000 Paid Per Share (note 20) $0.50 $0.75 $0.75 Unpaid Per Share (note 20) $ (250,000)* (125,000)# - Unpaid Per Share (note 20) $ - - - Balance at Start of the Year Granted During the Year Exercised During the Year Other Changes During the Year Balance at End of the Year Vested and Exercisable at End of the Year 500,000 200,000 200,000 100,000 100,000 - 200,000 200,000 1,750,000 200,000 300,000 800,000 800,000 600,000 600,000 500,000 (500,000) - - - - - - - - - - - - - - - 1,750,000 400,000 500,000 900,000 900,000 600,000 800,000 700,000 - 100,000 200,000 100,000 100,000 - 200,000 100,000 2009 Name T McConnachie M Langoulant M Burchnall * This loan was fully repaid on 10 July 2009 # This loan will be fully repaid on 21 December 2009 2008 Name K S Huntly J Meyer C De Vos (g) Option holding 2009 Name Director T M McConnachie Dr A P Ruiters L M Carroll Key management personnel J Meyer C De Vos Z Marinkovic P R Carter Dr P J Cox 94 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 27. Key Management Personnel Disclosure (continued) 2008 Name Director T M McConnachie Dr A P Ruiters L M Carroll K S Huntly Key management personnel J Meyer C De Vos P R Carter G Haasbroek (Refer to note 27(f)) Balance at Start of the Year Granted During the Year Exercised During the Year Other Changes During the Year Balance at End of the Year Vested and Exercisable at End of the Year 500,000 - - 200,000 200,000 250,000 200,000 200,000 200,000 - - - - - - 200,000 - - - (250,000) (100,000) (100,000) - - - - - - - - - - 500,000 200,000 200,000 - 100,000 100,000 200,000 200,000 500,000 - 100,000 - - - 100,000 - (h) Shareholding of key management personnel (consolidated) The number of shares in the Company held during the year by each director of the Company and key management personnel of the Group, including their personally related parties, are set out below. 2009 Name Director T M McConnachie R D Rossiter G M Button 2008 Name Director R D Rossiter Dr E Kirby E F G Nealon G M Button M J Sturgess Key management personnel M J Langoulant Balance at Start of the Year Issued Under Share and Option Plan Other Changes During the Year Balance at the End of the Year - 532,000 - 500,000 500,000 - - - 300,000 500,000 1,032,000 300,000 Balance at the Start of the Year Issued Under Share and Option Plan Other Changes During the Year Balance at the End of the Year 32,000 764,300 750,000 750,000 752,600 350,000 500,000 - - - - - - (375,000) (750,000) (750,000) (752,600) 532,000 389,300 - - - (100,000) 250,000 All equity transactions with key management personnel other than those arising under the Group’s Incentive Option Plan (Note 27(e)) have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length. Sylvania Resources Annual Report 2009 95 Notes to the Financial Statements For the year ended 30 June 2009 28. Related Party Disclosure (a) The consolidated financial statements include the financial statements of Sylvania Resources Limited and the controlled entities listed in the following table: Name of Entity Country of Incorporation Class of Shares Equity Holding Balance at the End of the Year Twinloop Nominees (Pty) Ltd Sylvania Holdings Limited Aralon Holdings Limited Sylvania South Africa (Pty) Ltd Sylvania Metals (Pty) Ltd Sylvania Minerals (Pty) Ltd Sylvania Mining (Pty) Ltd Australia Mauritius Mauritius South Africa South Africa South Africa South Africa Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 2009 % 100 100 100 100 74 74 100 2008 % 100 100 100 100 74 74 100 2009 % 100 100 100 100 74 74 100 2008 % 100 100 100 100 74 74 100 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 loan advances by Sylvania Resources Limited. (b) Loans to/from related parties The following table provides detail of advances to/(from) related parties during the year and outstanding balances at balance date: Consolidated 2009 Maximum Balance Outstanding $ Consolidated Parent Entity 2009 2008 2009 2008 Year End Balance $ Year End Balance $ Year End Balance $ Year End Balance $ 250,000 250,000 - - - - - - 577,748 577,748 - - - - - - 827,748 827,748 - 150 8,226 2,038 291,280 11,009 368 2,607 315,678 250,000 - - - - - - - 250,000 - - - - - - 100 - 100 Loans to related parties T M McConnachie Alumicor Maritzburg (Pty) Ltd Danyland Mining SA (Pty) Ltd Dwyka Resources Ltd Ehlobo Metals (Pty) Ltd Magnum Tantalite (Pty) Ltd Tameka Shelf Company Four (Pty) Ltd Washington Resources Ltd The nature of these transactions represents payments made in South Africa on behalf of the above companies. No provision for doubtful debts have been raised in relation to any outstanding balances as amounts were either repaid after balance sheet due, or full payment is expected where balances are still outstanding. 96 Sylvania Resources Annual Report 2009 Notes to the Financial Statements For the year ended 30 June 2009 28. Related Party Disclosure (continued) Terms and conditions All loans were granted on normal commercial terms and conditions and at market rates, except that there are no fixed terms for the repayment of loans between related parties. No interest is charged on these loans as outstanding balances are normally settled within 30-60 days. The loan to Ehlobo is a long term loan, and interest is charged at the South African prime lending rate. Outstanding balances are unsecured and are repayable in cash. (c) Joint venture The Group has a 25% interest in the assets, liabilities and output of an un-incorporated joint venture, CTRP, which operates a chrome tailings retreatment plant at Kroondal in South Africa (2008: 25%). Terms and conditions with related parties Payments made on behalf of 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. (d) Transactions with related parties Administration recoveries were received from and service fees paid to the following related parties during the year ended 30 June 2009 for expenses incurred on their behalf: Service fees paid to related parties Southridge Properties (Pty) Ltd Recoveries from related parties Morning Star Holdings (Australia) Ltd Dwyka Resources Ltd Washington Resources Ltd Consolidated Parent Entity 2009 $ 137,627 37,358 9,532 9,532 56,422 2008 $ 2009 $ 2008 $ - - - - - - 37,358 9,532 9,532 56,422 - - - - - Sylvania Resources Annual Report 2009 97 Additional Information For Listed Public Companies The shareholder information set out below was applicable as at 31 August 2009. A. Distribution Of Shareholders 1 1,001 5,001 10,001 100,001 Total - - - - and over 1,000 5,000 10,000 100,000 Number of Shareholders 476 456 148 224 67 1371 There were 257 holders of a less than a marketable parcel of ordinary shares. Total number of fully paid shares on issue 215,413,628 Percentage holding of 20 largest holders 90.16% B. Substantial Shareholders Shareholder Computershare Clearing Pty Ltd CCNL DI A/C HSBC Custody Nominees (Australia) Limited Number of Shares Fully Paid Shares Percentage Fully Paid Shares 156,200,080 7,011,764 163,211,844 72.51 3.26 98 Sylvania Resources Annual Report 2009 Additional Information For Listed Public Companies C. Twenty Largest Holders Of Fully Paid Shares Shareholder 1 Computershare Clearing Pty Ltd CCNL DI A/C 2 3 4 5 6 7 8 9 HSBC Custody Nominees (Australia) Limited Cereus Holding Ltd ANZ Nominees Limited Cash Income A/C National Nominees Limited Citicorp Nominees Pty Limited East Chamber Enterprises Ltd Mandalay Investment Ltd Blackmort Nominees Pty Ltd 10 Sorrel Enterprises Limited 11 Mr Richard Rossiter 12 13 14 JP Morgan Nominees Australia Limited Imperium Nominees Pty Ltd Bluestar Management Pty Ltd 15 Nefco Nominees Pty Ltd 16 Africa Pacific Capital Pty Ltd 17 Merrill Lynch (Australia) Nominees 18 UBS Nominees Pty Ltd 19 20 Second Impact Investments Limited Kyanite Assets Corporation 156,200,080 72.51 7,011,764 5,128,200 3,926,687 3,655,764 2,602,703 2,400,000 1,897,500 1,825,000 1,300,000 1,000,000 881,716 867,483 860,506 842,275 833,961 800,000 800,000 740,000 666,667 3.26 2.38 1.82 1.70 1.21 1.11 0.88 0.85 0.60 0.46 0.41 0.40 0.40 0.39 0.39 0.37 0.37 0.34 0.31 D. Voting Rights The voting rights attaching to each class of equity securities are set out below: 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. 194,240,306 90.16 E. Restricted Securities There are no restricted securities on issue. Sylvania Resources Annual Report 2009 99 Glossary of Terms 2009 The following definitions apply throughout the annual financial statements: AIM ASX AUD GBP JSE LSE PGM Alternative Investment Market of the London Stock Exchange Australian Securities Exchange Australian Dollar Great British Pound JSE Limited London Stock Exchange Platinum group metals comprising mainly platinum, palladium, rhodium and gold Sylvania Sylvania Resources Limited, a company incorporated in Australia USD ZAR United States Dollar South African Rand 100 Sylvania Resources Annual Report 2009 Corporate Directory Directors T M McConnachie - Managing Director R D Rossiter - Non-Executive Chairman L M Carroll - Finance Director Dr A P Ruiters - Non-Executive Director G M Button - Executive Director Company Secretary L M Carroll/G M Button Unit 2, Level 1, Churchill Court, 331 - 335 Hay Street, Subiaco, Western Australia, 6008 Australia Telephone: (08) 9226 4777 Facsimile: (08) 9481 5044 Registrar Computershare Investor Services Pty Limited Reserve Bank Building Level 2, 45 St George’s Terrace Perth, Western Australia, 6000 Australia Auditors 15 Rheola Street HLB Mann Judd Chartered Accountants, West Perth, Western Australia, 6005 Australia Solicitors Clayton Utz QV1, 250 St George’s Terrace Perth, Western Australia, 6000 Australia Ambrian Partners Limited Old Change House 128 Queen Victoria Street London, EC4V 4BJ, United Kingdom Stock Exchange Listings Sylvania Resources Limited is listed on the Australian Securities Exchange (Shares:SLV) and on the AIM market of the London Stock Exchange (Shares:SLV) Website www.sylvaniaresources.com Principal registered office in Australia Nominated Advisor and Broker Designed by Chameleon Creative Annual Report 2009 S y l v a n i a R e s o u r c e s A n n u a l R e p o r t 2 0 0 9 www.sylvaniaresources.com Unit 2, Level 1, Churchill Court, 331 - 335 Hay Street, Subiaco, Western Australia, 6008 Australia