ABN 80 091 415 968
Annual Report 2010
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
1
0
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
Joint 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
Level 4
130 Stirling Street
Perth, Western Australia
6000 Australia
Solicitors
Allen & Overy
Level 27
Exchange Plaza
2 The Esplanade
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
2
3
10
24
25
34
35
37
38
39
40
41
88
90
Vision and Company Highlights
Review by the Chairman and CEO
Directors’ Report
Auditor’s Independence Declaration
Corporate Governance
Directors’ Declaration
Independent Auditor’s Report
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes In Equity
Statement of Cash Flows
Notes To The Financial Statements
Additional Information for Listed Public Companies
Glossary of Terms
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
2
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 acquire
and develop low-risk tailings
and shallow mining assets.
COMPANY
HIgHLIgHTS
• Important near-surface exploration
assets in the Northern Bushveld
Igneous Complex added to
Sylvania’s PgM producing
operations providing an
opportunity to create further value;
• Additional 42 diamond drill
boreholes yielding 4,200 metres
of borehole core was drilled
providing a five ton metallurgical
bulk sample;
• Year of Plant Construction and
Commissioning;
• Agreements to access and
develop PgM smelting capacity;
• PgM production increased by
10% to 26,204 ounces;
• Total group revenue increased by
54% to A$31.68 million;
• Three plants commissioned
namely Lannex, Mooinooi and
Doornbosch.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
3
REVIEW BY THE
CHAIRMAN AND CEO
Group Overview and Strategy
We are pleased to report that Sylvania Resources Limited
(“Sylvania”) has made significant progress towards achieving its
vision of becoming a pre-eminent South African mid-tier platinum
group metals (“PgM”) producer. Sylvania has seen a year of plant
construction and commissioning, the addition of significant near
surface Platinum group Element (“PgE”) resources and related
agreements to access and develop PgM smelting capacity.
These developments support and enhance Sylvania’s strategy to
build cash generative businesses that fund future growth in the
PgM sector. Most importantly, these milestones have been achieved
without a single serious accident or safety incident and Sylvania is
committed to maintaining its unwavering focus on the health and
safety of our workforce.
Total PgM production for the year increased by 10% to 26,204oz
(vs 23,813 oz in FY’09), largely as a result of volume improvements
related to the ramp up of the new Lannex and Mooinooi plants
and steady performance from the Millsell and Steelpoort plants.
The ramp up of PgE production was hampered by commissioning
issues, regulatory delays at Lannex and reduced supply of fresh feed
from a number of chrome mines, which caused Sylvania’s plants to
rely mostly on older dump material as feed supply. This negatively
affected both PgM recoveries which fell to 40% (vs. 55% in FY’09),
and the commissioning of the new plants.
Financial Performance
Total group revenue, including that of the chromite tailings
retreatment plant (“CTRP”), increased by 54% to A$31.68 million
(vs A$20.54 million in FY’09), driven largely by a 58% increase in
the average basket price received from US$881/oz in FY’09 to
US$1,393/oz in FY’10 and improved production. This was partially
offset by the strength of the Rand which resulted in the average
basket price received in Rand terms rising by 33%. Earnings
before interest, tax, depreciation and amortisation (“EBITDA”) of
A$10.88 million (vs A$7.49 million in FY’09) were realised. This
pleasing result was impacted by a number of non-cash write offs
and corporate actions, detailed below, which took place during
the financial year and resulted in a net loss after tax for the year
amounting to A$8.60 million (vs A$3.76 million in FY’09).
•
In FY’08 Sylvania announced an agreement to treat Run of Mine
(“ROM”) material from Brokenhill, Spitzkop and Buffelsfontein East.
First production of the PgMs from the ROM material retreatment
was expected in the fourth quarter of 2008. However, with
the drastic reduction in the demand for chrome brought on by
the onset of the global financial crisis, the planned mining of the
ROM material at both Lannex and Mooinooi was placed on
hold. In the current financial year, the directors of Sylvania have
resolved to take a conservative approach to the accounting of
this transaction and a portion of the project generation costs for
the ROM project have been applied to the asset valuation of the
Lannex plant, resulting in an impairment of A$5.0 million. Post the
end of this financial period, the Mooinooi mine has been supplying
ROM material to the Sylvania Mooinooi plant. The balance of the
carrying value of the investment is thus being depreciated against
the Mooinooi portion of the ROM project generation costs over
the life of the Sylvania Mooinooi plant.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
4
•
•
Expenditure of A$0.76 million paid to Minex Projects (Pty)
Limited for the cancellation of the royalty agreement, together
with expenses for great Australian Resources Limited and SA
Metals Limited, amounted to A$1.71 million. Expenses during the
year associated with the scheme of arrangement process with the
Ruukki group Plc, which was subsequently cancelled, amounted
to A$0.86 million.
Share based payment expense was increased from A$2.74
million in FY’09 to A$5.10 million in the year ended June 2010.
Funds held in gBP currency were converted during the year to
Australian dollars which resulted in a foreign exchange loss of
A$3.44 million. These funds are now held primarily in Australian
dollars.
Sylvania announced in December that it had raised A$18.23 million
by way of a placement of 25 million new ordinary shares to a new
UK-based institutional investor, M&g Recovery Fund.
Sylvania’s Key Financial and Production Figures
Sylvania Resources Group
2009
2010
% Change
Financials
Revenue
EBITDA
EBIT
Production
A$m
A$m
A$m
20.54
7.49
31.68
11.38
(3.17)
(6.22)
Total feed to plants*
tons
612,462
980,224
Total PgM (3E + Au) produced*
oz
23,813
26,204
Av R/A$
*Includes CTRP 25%
Rate
0.15101
0.15012
55%
52%
96%
60%
10%
Health, Safety and Environment
Sylvania continues in its unwavering commitment to the health
and safety of all its employees, contractors and sub-contractors,
evidenced by the steady decline in our accident frequency rate
since 2008. The Sylvania Dump Operations (“SDO”) experienced
only one Lost Time Injury (“LTI”) during the course of the year and,
at the end of this financial period, SDO had operated for almost
half a million hours, equivalent to 270 calendar days, without an LTI.
The safety of our workforce remains a management priority, with
the aim being a zero accident frequency rate. Sylvania remains
compliant with the host mine’s safety standards and systems as well
as other recognised safety measures. Education of our workforce
will continue to be enhanced in the year ahead to build a culture of
safe behaviour in our company.
We also strive for zero harm in our physical interaction with the
environment. As a company that focuses on the retreatment of
mine tailings, Sylvania is firmly committed to implementing sound
environmental management practices that are aligned with the host
mine’s environmental programmes and the National Environmental
Management Act, and are measured against the highest
international environmental standards. There were no reportable
environmental incidents on any of Sylvania’s sites during the year
ended June 2010.
Markets
The positive trend seen in the second half of 2009 continued into
2010 with platinum prices increasing from US$1,204/oz at the
end of June 2009 to a peak of US$1,760/oz, before declining to
US$1,553/oz at FY’10 year-end.
The underlying fundamentals for PgMs remain strong with
increased demand expected to slightly exceed supply at the end of
2010. The automobile industry was hard-hit by the financial crisis
resulting in a slump in the demand for PgMs for auto catalysts in
2009. Following a period of de-stocking by car companies, signs of
an economic recovery are starting to show and the demand for
auto catalysts is expected to increase.
The drop in the rhodium price had a disproportionately large
impact on Sylvania’s revenue mix given the higher than industry
average proportion of rhodium in the company’s PgM basket.
While Sylvania’s production mix remained constant during the
financial year, its revenue mix has changed with rhodium now
contributing only 26% (vs 36% in FY’09) and platinum is 66% (vs
58% in FY’09). The average gross PgM basket price received by
Sylvania, increased by 58% to US$1,393/oz (vs US$881/oz in FY’09).
JM Base Prices
US$ Daily
2420
2200
1980
1760
1540
1320
1100
880
660
440
220
0
2005
JM Base Prices
US$ Daily
2420
2200
1980
1760
1540
1320
1100
880
660
440
220
0
2005
Platinum & Palladium
FROM:
TO:
01 JUL 2005
19 AUG 2010
2006
2007
2008
2009
2010
Platinum
Palladium
Period Average $1308.72
Period Average $331.94
Rhodium
FROM:
TO:
01 JUL 2005
19 AUG 2010
2006
2007
2008
2009
2010
Rhodium
Period Average $4244.89
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
5
Production mix and revenue mix of the Sylvania Basket
SD0 FY’10 PgM Basket Production Mix
SD0 FY’10 PgM Basket Revenue Mix
Rhodium
14.8%
Gold
0.3%
Palladium
27.3%
Platinum
57.6%
Palladium
8.3%
Platinum
65.9%
Rhodium
25.5%
Gold
0.3%
Operating Performance
During the year, Sylvania’s focus has been on the construction
of additional plants and increasing ounce production, whilst it
continues to strive towards becoming one of the lowest cost
producers of PgM’s in the industry.
Net cash outflow from operating activities was A$2.6 million (vs net
cash inflow of A$19.9 million in FY’ 09), due mainly to higher costs
associated with the start-up of the new plants.
Total capital expenditure incurred to date on the construction of
the five chrome and PGM plants amounted to A$77.6 million.
Capital expenditure
to date
30 June 2009
(A$)*
30 June 2010
(A$)*
Millsell
Steelpoort
Lannex
Mooinooi
Mooinooi Tailings Dam
Doornbosch
Tweefontein & Elandsdrift
Total
9,879,983
10,029,554
20,243,266
8,852,845
-
6,443,993
2,107,233
57,556,874
9,709,706
10,326,720
22,424,329
12,725,635
6,789,004
13,601,899
2,030,425
77,607,718
*Expenditure is incurred in South African Rand and converted at the year-end spot rate
Sylvania Dump Operations (“SDO”)
PgM production for the year increased by 11% to 24,605oz (vs
22,107oz in FY’09), and the SDO saw a significant increase in the
primary feed material processed to 907kt from 551kt in FY’09.
Similarly, the volume of PgM feed tons increased by 86% to 403kt
(vs 217kt in FY’09). This increase was largely due to the excellent
performance at Millsell and the build-up of production at Lannex,
before the suspension of operations in the second half of the year.
The unexpected delays experienced at Lannex in obtaining the
permissions necessary for the construction of the new tailings dam
seriously delayed ramp up to full capacity of the company’s biggest
plant and had a significant impact on the ounces produced by the
group during the last quarter of the period.
The world recession also impacted the company operations as
it led to a reduction in current risings received from the host
mines which meant that the company had to rely upon a greater
proportion of feed from the dump material. This partially oxidised
material had a negative impact on PgM recoveries, which fell to
40% (vs 55% in FY’09).
The other issue influencing the reduction in recoveries derives
from the volume splits of the various plant feeds. The average float
recovery was reduced due to the different types of material treated
at the various plants. The Millsell, Steelpoort and Doornbosch plants
are treating Lg6 material while Lannex and Mooinooi, which both
came on line in the previous financial year, treat MG1 and 2 material.
A 10% difference in the baseline float recovery between LG and
MG material results in a float feed volume variance between the
plants for the year under review.
• On average, the cost per PgE ounce produced was higher than
in FY’09. Start-up costs and training of new employees to bring
Lannex, Mooinooi and Doornbosch to full production contributed
to the higher than normal costs.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
6
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
Statistical Information (SDO) 100%
Revenue
Revenue
gross basket price
Net basket price
Unit
A$’000
US$/oz
US$/oz
gross cash margin – SDO
%
Capital expenditure
Ave R/US$ rate
SDO Cash Cost
Per PgM feed ton
Per PgM feed ton
Per 3E & Au oz
Per 3E & Au oz
Production
Plant feed
Feed head grade
PgM plant feed ton
PgM plant grade
PgM plant recovery
Total 3E and Au
A$’000
R/US$
A$/t
US$/t
A$/oz
US$/oz
tons
g/t
tons
g/t
%
Oz
FY
2009
FY
2010
Variance
%
19,319
29,813
881
659
47%
1,393
1,015
43%
30,771
22,152
9.07
7.55
45
33
440
321
43
38
709
615
550,808
907,032
2.62
2.52
216,971
403,285
5.73
5.02
55.3%
39.9%
22,107
24,605
54%
58%
54%
-8%
-28%
-17%
4%
16%
61%
92%
65%
-4%
86%
-12%
-28%
11%
Millsell
The Millsell operation again delivered an outstanding performance
for the year. November saw record production of 924 ounces
and the plant availability remained stable for the period at above
92% for the entire operation. These favourable results are mainly
attributable to increased head grades coming from the mining of
the inner core of the main dump, and an increased supply of fines
to the PgM plant.
This was also achieved with an impressive quarter-on-quarter
reduction in cost per ton, until the fourth quarter where additional
arrears electricity charges caused a spike in costs. The average cost
for the year was A$12 per feed ton.
With the depletion of the main dump anticipated during the second
quarter, FY’10, the tailings dam was extended to accommodate
new tailings to be processed from the nearby Waterkloof dump.
The new Millsell dump will be reworked towards the end of the
financial year 2011, as it is still recording grades of approximately
1.4g/ton. However, it is expected that when the new dump is
processed, recoveries will be about 23%. This will be lower than
those currently being achieved.
Steelpoort
The operation had a slow start to the year with the oxidised
dump from the old opencast section of Steelpoort being re-mined,
resulting in lower average grade and reduced recoveries.
An investment of A$0.53 million was made into a column cell
which will reduce the chrome content in the final concentrate,
thus reducing smelter penalties. This cell was commissioned in
September 2009. Additional maintenance expenditure on improving
float plant uptime in the second quarter saw an improvement to
97% by year end. In addition to the cell column optimisation, higher
feed grade material, changes to the reagents and reagent ratios, and
changes to the process flow all contributed to improved production
and recoveries in the second half of the year. The average cost for
the year was A$20 per feed ton.
Lannex
The focus for the Lannex operation has been on increasing plant
availability, float recoveries and achieving consistent concentrate grades.
While Lannex showed increased production for the first three quarters,
total feed through the plant was restricted due to a limitation on
tailings disposal.
The company advised shareholders in April 2010 that operations at
the plant would be temporarily suspended until final approvals for the
construction of the new tailings facility had been received from the
authorities. This decision was based largely on the fact that the inflated
operating costs at Lannex, due mainly to the plant operating at only
30% of its design capacity, were impacting negatively on overall SDO
cash costs.
The water licence was granted by the Department of Water Affairs
in July 2010 and construction of the new tailings dam is expected to
be completed by December 2010. An underground backfill project
was started to allow production at the Lannex plant to restart at a
reduced rate. The project aims to deposit 25,000 tons of course tailings
underground over a six month period at a cost of A$0.68 million.
Management is confident that the Lannex plant will quickly ramp-up to
full design capacity, significantly reducing the unit operating costs in line
with those seen at other Sylvania dump operations.
Mooinooi
In November 2009 the first slurry was processed through the
Mooinooi plant, the fourth of Sylvania’s PgE recovery plants
to be commissioned.
The low production levels at the Mooinooi operation during the
first part of the year were mainly due to low PGM grade and poor
recovery from the outer walls of Mg1/2 tailings. This is typical of
new operation start-ups and as processing moves towards the inner
core of the dump, the grades are expected to show consistent
improvement. The breakdown of the new ball-mill shortly after
commissioning and the need to redesign the transfer conveyor
feeding the scrubber also contributed to the slow start of the plant.
The ROM section was commissioned in June 2010 and
management is confident that the ROM material will also improve
recovery and grade with a greater percentage of unoxidised feed.
The acquisition of the Mooinooi tailings dam and the ROM project
will substantially increase the life of the Mooinooi operations. This
dump and current arising section has a life of 20 years at current
design capacity.
Doornbosch
Doornbosch is the fifth Sylvania PGM recovery plant to be
constructed in the Bushveld complex and was commissioned at
the end of June 2010 at a capital cost of A$13.6 million, well within
the total capital expenditure budget of A$15.3 million. This was
achieved without a single lost time injury in the 88,812 hours taken
to complete the construction of the plant.
Saleable concentrate is expected to be produced early in the first
quarter of the new financial year, with the plant building up to a
steady state production. The Doornbosch plant is well positioned to
become the lowest cost producer of the Sylvania plants, supporting
our strategy of low cost extraction from our tailings dumps.
The plant will be fed from the Doornbosch chrome plant at a rate
of approximately 10,000 tons per month of current risings with
a head grade of 2.9g/t. This head grade is set to improve once
completion of the reef development on the mine is stabilised
thus reducing waste dilution. Test work is under way to treat fines
from Tweefontein mine and other surrounding dumps to ensure
that the capacity of the Doornbosch plant is fully utilised. Planning
7
for the new tailings dam hydro-mining project is advanced and
it is expected to balance the feed to the plant, making it more
consistent. The monthly concentrate production is estimated to
increase to over 1,000 ounces.
Tweefontein
Detailed studies are underway for the planning of the equipment
configurations and processing operations for the plant with a view
to fast tracking the Tweefontein plant.
Chrome Tailings Retreatment Project (“CTRP”)
Unit
FY
2009
FY
2010
Variance
%
CTRP (25%)
Revenue
Revenue
Basket price
Ave R/US$
Site Cash Cost
Per PgM feed ton
Per PgM feed ton
Per PgM oz
Per PgM oz
Production
Plant feed ton
grade
Recovery
Total 3E and Au
A$’000
US$/oz
R/US$
A$/t
US$/t
A$/oz
US$/oz
T
g/t
%
Oz
1,225
1,241
9.03
12.5
9
474
332
1,863
1,301
7.58
13.2
11
603
521
61,654
73,192
2.34
38%
2.28
30%
1,706
1,599
52%
5%
-16%
6%
22%
27%
57%
19%
-3%
-21%
-6%
The unincorporated CTRP JV, which is managed by Aquarius
Platinum and 25% owned by Sylvania South Africa (Pty) Limited,
experienced a 6% decline in attributable production to 1,599
ounces, compared to 1,706 ounces in FY’09, at a slightly reduced
head grade of 2.28g/t (vs 2.34g/t in FY’09). Poor recoveries at the
CTRP are attributable mainly to frequent stoppages due to plant
instability. This has also resulted in an increased cost of A$129/oz.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
8
Northern Limb Operations
Last year Sylvania took advantage of the depressed economy
and the company’s relatively robust financial position to build
its portfolio of shallow mining resources and gain access to
downstream processing capacity. The successful scrip bids for SA
Metals and great Australian Resources, announced last year, have
added important near-surface exploration assets in the Northern
Bushveld Igneous Complex to Sylvania’s existing collection of PgM
producing operations, providing an opportunity to create value by
realising exploration and production synergies.
Sylvania now has three projects on the Northern limb of the
Bushveld Igneous Complex:
The Volspruit Project (formerly Grass Valley)
The Volspruit Project is located on the farm Volspruit 326KR and a
portion of the farm Zoetveld 294KR. The two discrete ore bodies,
known as the northern and southern orebodies, are part of a
faulted complex that is up-thrown approximately 1,200m from the
base of the lower zone of the Bushveld Igneous Complex.
The Company is currently upgrading the orebody classification
after drilling an additional 42 diamond drill boreholes yielding 4,200
metres of borehole core which provided a five ton metallurgical
bulk sample. The drilling was completed by the end of February
2010 and will be used to upgrade the resource from a historically
indicated resource to a measured JORC compliant resource.
The bulk sample has been analysed for grade and metallurgical
extraction (flotation). Currently preparations are in progress to
determine a viable project concept, commencement of the EIA
and the preparation for the submission of the mining right
application early in 2011. It is expected that the Volspruit
definitive feasibility study will be completed in mid-2011 and it
is anticipated that the mining right will be awarded early in 2012
when construction of the plant and mine will commence. The
commissioning of the first 100,000 t/month plant module is
currently scheduled for early 2013.
Hacra Project
The Hacra project comprises three farms on the northern limb
of the Bushveld Igneous Complex, Harriet’s Wish 393LR, Aurora
397LR and Cracouw 391LR.
A geological model has been constructed from the five new holes
that were drilled and the historical boreholes. External consultants
are currently conducting an independent review of the geological
model prior to submitting proposals for further exploration for ore
resource definition.
Aurora Project
The Aurora Project is made up of seven farms: Kransplaats 422LR,
Nonnenwerth 421LR, La Pucella 693LR, Altona 696LR, Non Plus
Ultra 683LR, Schaffhausen 689LR and Luge 697LR.
Detailed re-logging of selected borehole cores, interpretation of the
stratigraphy and the stratigraphic review logging of all boreholes has
been completed and a geological model constructed. Management has
commissioned an external independent review of the geological model
to determine the economic parameters for a pre-feasibility study.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
Growth
The five key drivers of Sylvania’s long-term strategy to achieve
sustained growth in the PgM sector are:
• Operational excellence;
•
• Near surface exploration and mining;
•
Increased tailings through current risings and acquisition;
Vertical integration to provide Sylvania with downstream
processing access; and
• Mergers and acquisitions.
Near Surface Mining and Vertical Integration
The three shallow mining projects in the Northern Limb, added
to the company’s portfolio following the successful acquisition of
SA Metals and great Australian Resources, are considered to be
the long-term future of the company with a historically defined
collective resource of 13 million ounces, which the company
plans to ultimately exploit through the construction of up to eight
100,000 t/month processing plants.
The possibility of being able to smelt this lower grade concentrate,
as formulated and tested in the joint venture between Sylvania and
Jubilee Platinum, adds significantly to the economics of the project.
Sylvania’s access to Jubilee’s smelting knowledge and innovative
ConRoast technology, combined with Jubilee’s access to Sylvania’s
secondary PgM recovery experience, is set to offer a total
capability solution for processing the Northern Limb deposits, for
which conventional AC smelting options are not considered optimal.
Jubilee’s industry-accepted ConRoast smelting flexibility offers an
environmentally friendly, safe, cost-effective and chrome insensitive
smelting solution which can potentially liberate value from a range
of PgM resources. Encouragingly, in successful smelting trials of
Sylvania’s low grade PgM concentrate by Jubilee in December
2009, a high percentage of PgMs was recovered. The high
chrome content posed no risk to PgM recovery, safety or smelter
performance, confirming the applicability of Jubilee’s ConRoast
technology for the treatment of low grade PgM concentrates.
Sylvania and Jubilee have now entered into a Framework Agreement
whereby the activities of the strategic alliance have been agreed.
Mergers and Acquisitions
In addition to the successful acquisition of SA Metals and great
Australian Resources, the company embarked on a proposed
merger with Ruukki group Oyj to create a vertically integrated
mine to metals PgM and ferrochrome company. However, due
to difficulties experienced with the implementation of the merger,
Sylvania and Ruukki informed shareholders at the end of October
2009 that the Merger Implementation Agreement had been
terminated by mutual agreement. Sylvania continues to consider
logical value enhancing acquisitions and industry consolidation
opportunities that complement the long term strategic goal of
expanding its low-cost tailings retreatment and near surface PgM
mining business model.
The ongoing dispute between Sylvania and Aquarius Platinum SA
(Pty) Limited regarding Sylvania’s submission of an application for a
Mining Right over Mineral Area 2 of the farm Vygenhoek (Everest
North) in the Mpumalanga province of South Africa looks set to be
settled, via an out of court commercial agreement that will benefit
both parties. Internally, the environmental impact assessment is
being concluded in anticipation of a settlement.
9
Acknowledgement
We are grateful to Sylvania’s Board members, executive
management and all employees who have contributed towards
the Company’s exciting, yet challenging development and growth
achievements during the year.
Outlook
The gradual improvement in the global economy is strengthening
automotive demand for platinum while constraining factors in South
Africa are inhibiting supply growth leading to a positive outlook for
PgM prices in the medium term.
The Board and Executive Management remain focused on delivering
our core strategies. With five plants now completed, our focus is
shifting to enhancing performance and cost containment at the
operations, successfully bringing the near surface mining assets to
account, and implementing the framework agreement with Jubilee
Platinum to deliver downstream processing and smelting capacity for
low grade concentrates. In addition, Sylvania continues to consider
logical value enhancing acquisitions, restructuring and industry
consolidation opportunities aimed at transforming the company into
a significant PGM producer in the future.
TM McConnachie
Chief Executive Officer
R Rossiter
Non-Executive Chairman
Black Economic Empowerment
Subsequent to year end, Ehlobo Metals (Pty) Limited, the Black
Economic Empowerment shareholder of two of our subsidiary
companies, Sylvania Metals (Pty) Limited and Sylvania Minerals
(Pty) Limited, disposed of its 26% interest to Africa Asia Capital
Limited (“AAC”). Sylvania has entered into an agreement dated
29 September 2010 with AAC to purchase its 26% interest on the
terms set out in Note 25 to the accompanying financial statements.
Human Resources
The focus of our organisation to date has been on the recruitment and
placement of the right employees with the right skills to support an
innovative and expanding company. The focus for the year ahead will
shift to the establishment of human resource systems and processes, to
ensure effective management of the workforce. A substantial amount of
training has taken place in the last year to ensure that skills are relevant
and safety procedures are well entrenched.
Recognition agreements were signed with two labour unions during the
course of the year. The El Shadaai Workers Union of South Africa was
verified as enjoying majority recognition at Steelpoort and sufficient
recognition at Lannex, while the National Union of Mineworkers
represents the majority at both Millsell and Mooinooi plants. The
company is committed to engaging with workforce representatives,
within the guidelines of the Labour Relations Act, to ensure a work
environment that is in the best interests of all employees.
Board and Management
With the rapid growth and increased complexity of the company,
it became necessary to strengthen the management team. We
are pleased to welcome Nigel Trevarthen as the Deputy CEO,
from 1 September 2010. Nigel brings with him a wealth of mining
experience in all aspects of the industry. In particular his knowledge
and understanding of mine design and strategic project planning will
be invaluable as we look to develop our shallow mining interests
in the Northern Limb. Terrence McConnachie, previously Managing
Director of the company, becomes its CEO.
In line with the changing circumstances, we are evaluating the Board
and its structure with a view to increasing the number of non-
executive and independent directors.
Terry McConnachie
Richard Rossiter
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
10
Directors’ Report
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 2010. In order to comply with the provisions of the
Corporations Act 2001, the directors report as follows:
Directors
The names of the Directors who held office during or since the end of the year and until the date of this report are as follows.
The Directors were in office for this entire period unless otherwise stated.
T M McConnachie
(Chief Executive Officer)
R D Rossiter
Dr A P Ruiters
L M Carroll
G M Button
(Chairman)
(Non-executive Director)
(Finance Director)
(Executive Director)
Information on Directors
T M McConnachie – Chief Executive Officer
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. 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 services and smelting companies in South
Africa.
Other current directorships
None
Former directorships in the last three years
Ruukki Group Plc (resigned 31 August 2010)
Nyota Minerals Limited (formerly Dwyka Resources Limited (resigned 22 March 2010))
Special responsibilities
Chief Executive Officer
Member of the Remuneration committee
R D 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
Realm Resources Limited (formerly Morning Star Holdings (Australia) Limited)
Former directorships in the last three years
None
Special responsibilities
Non-Executive Chairman of the Board
Member of the Remuneration and Audit Committees
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
11
Directors’ Report (cont.)
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 of a listed oil and gas company.
Other current directorships
None
Special responsibilities
Finance Director and Joint Company Secretary
Member of the Remuneration and Audit committees
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 Metals (Pty) Ltd, 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.
G M Button CPA – 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
Realm Resources Limited (formerly Morning Star Holdings (Australia) Limited)
Ferrum Crescent Limited (formerly Washingon Resources Limited (alternate Director))
Former directorships in the past three years
Washington Resources Limited (1 March 2005 to 1 December 2008)
Special responsibilities
Joint Company Secretary
Member of the Remuneration and Audit committees
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
12
Directors’ Report (cont.)
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:
2010
T M McConnachie
R D Rossiter
L M Carroll
Dr A Ruiters
G M Button
2009
T M McConnachie
R D Rossiter
L M Carroll
Dr A Ruiters
G M Button
Common Shares
Options
Exercisable at $2.89
500,000
1,032,000
-
-
300,000
-
-
-
200,000
-
Options
Exercisable at $1.63
1,750,000
-
300,000
200,000
-
Common Shares
Options
Exercisable at $0.75
Options
Exercisable at $2.89
500,000
1,032,000
-
-
300,000
-
-
200,000
-
-
-
-
-
200,000
-
Options
Exercisable at $1.63
1,750,000
-
300,000
200,000
-
Company secretary
The Company secretary role is jointly held by L M Carroll and G M Button, both Directors of Sylvania Resources Limited. 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.
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 non-controlling interest was A$7,925,116 (2009: consolidated
profit A$3,524,073).
Production from Sylvania dump operations was 24,605 PGM ounces;
Highlights during the year included:
• Acquisition of SA Metals Limited (“SA Metals”) and Great Australian Resources Limited (“GAU”);
•
• CTRP contribution was 1,599 PGM ounces;
• Doornbosch plant was constructed under budget and commissioned in FY2010;
• Mooinooi run of mine (“ROM”) commissioned in June 2010;
•
•
Rights to the Mooinooi Tailings Dump purchased from Western Platinum Limited (“Lonmin”)
Volspruit project (formerly Grass Valley) resource being upgraded from a historically indicated resource to a measured JORC
compliant resource;
Strategic alliance entered into with Jubilee Platinum Plc (“Jubilee”);
•
• A$18 million raised from a 25 million share placement at 40p (approximately A$0.72);
• Appointment of Nigel Trevarthen as Deputy CEO
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
13
Directors’ Report (cont.)
Revenue from Sylvania Dump Operations (“SDO”) ordinary activities for the year increased from A$19.3 million in 2009 to A$29.8 million;
Financial results:
• The average 3E+Au basket price was US$1,393/oz;
•
• The cash balance at 30 June 2010 was A$23.5 million;
• Consolidated loss per share for the year ended 30 June 2010 – 3.53 cents;
•
Partial impairment of the mining property resulting in a A$5 million expense;
•
Share based payment expense of A$5.1 million for the year ended 30 June 2010.
Vygenhoek mining application (Everest North)
On 24 May 2005, a wholly owned subsidiary of Sylvania, Sylvania SA (Pty) Ltd (“SA”) entered into an agreement with Aquarius Platinum SA
(Pty) Ltd (“AQPSA”), whereby SA was appointed as an agent for AQPSA to apply for the mining right for PGMs over Mineral Area 2 of the
Vygenhoek 10TJ farm, in the Lydenburg magisterial district.
Upon completion of the required exploration work, SA submitted the application for the mining right, however AQPSA disputed SA’s right
to do so and the matter was referred to arbitration.
An arbitration hearing date was set for July 2010, however in June 2010 both parties agreed to explore the possibility of a commercial
settlement that would be beneficial to both SA and AQPSA. Should an agreement not be reached between SA and AQPSA the matter will
then be heard by the Arbitrator on a date to be arranged.
Acquisition of Great Australian Resources Limited and SA Metals Limited
In the previous financial year Sylvania announced its intention to make two off-market takeover bids for all the ordinary shares of GAU
and SA Metals.
A bidder’s statement detailing the terms of the offers was sent to both GAU and SA Metals shareholders on 10 July 2009. The all scrip offer
for SA Metals was based on 1 Sylvania share for every 10 SA Metals shares.
Similarly, the all scrip offer for GAU was based on 1 Sylvania share for every 12 GAU shares held. Both offers closed on 11 August 2009.
Sylvania acquired the relevant interest of over 90% of the issued shares in SA Metals by 6 August 2009 and on 7 August 2009 announced
that it would be proceeding with the compulsory acquisition of the remaining SA Metals shares pursuant to Chapter 6A of the
Corporations Act. The compulsory acquisition was completed on 24 September 2009 and Sylvania became the holder of 100% of issued
capital in SA Metals.
SA Metals was delisted from the Australian Securities Exchange on 9 September 2009 and was converted to a Proprietary Limited
company on 23 April 2010.
After the close of the GAU offer, on 12 August 2009, Sylvania announced that it had acquired 89.82% of the issued shares in GAU and that
compulsory acquisition could not proceed. Sylvania was subsequently advised by its share registry that a further 50,000 acceptances were
received prior to 5.00pm (WST) on 11 August 2009. This gave Sylvania a 89.86% interest in the shareholding of GAU. Sylvania was further
advised by its share registry that a number of late acceptances were received after the close of the offer.
An application to the Federal Court of Australia for an order pursuant to the Corporations Act, that Sylvania may compulsorily acquire the
remaining shares in GAU, was lodged on 14 August 2009. The application was successful and on 24 August 2009, Sylvania announced that it
would proceed with the compulsory acquisition of the remaining shares in GAU.
On 16 October 2009, the Company announced that the compulsory acquisition of the remaining shares of GAU had been completed and
that Sylvania holds 100% of the issued share capital in GAU. GAU was delisted from the Australian Securities Exchange on 16 December
2009 and was converted to a Proprietary Limited company on 20 May 2010.
SA Metals Royalty Agreement
Prior to the acquisition of SA Metals by Sylvania, a Royalty Agreement existed between SA Metals and Minex Projects (Pty) Ltd (“Minex”).
This agreement entitled Minex to a future royalty of 3% on sales of minerals extracted from certain defined properties where SA Metals
holds minerals rights. Sylvania successfully negotiated the cancellation of this agreement with Minex and concluded a new agreement
whereby Sylvania paid R5 million and will issue 3,000,000 Sylvania shares in full and final settlement. This represents a substantial discount to
the value of the initial claim.
The payment was split into an initial R1 million on signing of the agreement and the remaining R4 million once Sylvania had conducted
metallurgical testwork to its reasonable satisfaction. This metallurgical testwork was completed by 30 June 2010 as agreed and the balance of
the amount owing was paid in July 2010.
The issue of the 3 million Sylvania shares, which will be issued in tranches of 500,000 on a six monthly basis, is pending receipt of South
African Reserve Bank approval by Minex.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
24
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of the financial report of Sylvania Resources Limited for the year ended
30 June 2010, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
a)
b)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Sylvania Resources Limited
Perth, Western Australia
29 September 2010
M R W OHM
Partner, HLB Mann Judd
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
HLB Mann Judd (WA Partnership) is a member of
International, a worldwide organisation of accounting firms and business advisers.
33
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
15
Directors’ Report (cont.)
Meetings of directors
During the financial year there were 3 formal directors’ meetings. All other matters that required formal Board resolutions were dealt with
via written circular resolutions and through the holding of conference calls. 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
G M Button
Board Meetings
Audit Committee Meetings
Number
of meetings eligible
to attend
3
3
3
3
3
Number
of meetings
attended
3
3
3
2
3
Number
of meetings eligible
to attend
-
2
2
-
2
Number
of meetings
attended
-
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 - Chief Executive Officer;
R D Rossiter - Chairman;
•
•
L M Carroll - Finance Director and Joint Company Secretary;
• G M Button - Executive Director and Joint Company Secretary; and
• A P Ruiters - Non-Executive Director with special portfolio: Transformation.
The executives are:
• Z Marinkovic - Director: Sylvania Metals (Proprietary) Limited;
• Dr P J Cox - Strategic Planner;
•
• C de Vos - Internal legal advisor; and
J Meyer - Managing Director: Sylvania Metals (Proprietary) Limited;
•
P Carter - General manager: Exploration.
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; and
D
Share-based compensation.
A Principles used to determine the nature and amount of remuneration
The objective of the Company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the
results delivered. The framework aims to align executive reward with the creation of value for shareholders. The key criteria for good reward
governance practices adopted by the Board are:
•
•
•
•
•
Competitiveness and reasonableness;
Acceptability to shareholders;
Performance incentives;
Transparency; and
Capital management.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
16
Directors’ Report (cont.)
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 seven 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; and
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.
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 based on performance 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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
17
Directors’ Report (cont.)
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:
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
Z Marinkovic – Director: Sylvania Metals (Pty) Ltd
Dr P J Cox – Strategic Planner
J Meyer – Managing Director: Sylvania Metals (Pty) Ltd
C de Vos – Internal legal advisor
P Carter – General manager: Exploration
Duration of Contract
Fixed term until 31 Dec 2011
Indefinite
Fixed term until 31 July 2011
Fixed term until 31 May 2011
Indefinite
Fixed term until 31 July 2011
Fixed term until 31 July 2011
Fixed term until 31 July 2011
Fixed term until 31 July 2011
Period of Notice
to Terminate
(in months)
Termination Payments
Under Contract
3
3
6
3
1
6
6
6
6
12 months
12 months
12 months
6 months
None
12 months
12 months
12 months
12 months
Table 1: Key management personnel 2010
2010
Short Term Benefits
Post-
employment
benefits
Share-based
payment
TOTAL
Options as
% of total
remuneration
Performance
related %
Cash salary/
consulting
fees
Bonus*
Directors’
fees
Super-
annuation
Name
$
$
$
$
Directors
T M McConnachie
R D Rossiter
L M Carroll
Dr A P Ruiters
G M Button
Key management personnel
Z Marinkovic
Dr P J Cox
J Meyer
C de Vos
P Carter
TOTAL
431,105
261,039
255,133
-
216,629
201,695
218,744
234,688
296,768
225,180
2,340,981
100,000
100,000
100,000
-
100,000
23,938
21,066
-
-
-
445,004
60,000
60,000
60,000
60,000
60,000
-
-
-
-
-
300,000
-
5,400
-
-
5,400
-
-
-
-
-
10,800
Equity
Shares/
Options
$
-
-
-
-
-
-
-
-
-
-
-
$
591,105
426,439
415,133
60,000
382,029
225,633
239,810
234,688
296,768
225,180
3,096,785
-
-
-
-
-
-
-
-
-
-
-
16.92%
23.45%
24.09%
-
26.18%
10.61%
8.78%
-
-
-
14.37%
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
18
Directors’ Report (cont.)
Table 2 : Key management personnel 2009
2009
Short Term Benefits
Post-
employment
benefits
Name
Directors
T M 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
Cash salary/
consulting
fees
$
Bonus*
$
Directors’
fees
$
Super-
Annuation
$
492,913
243,375
244,997
-
40,626
107,083
-
-
-
19,188
-
-
-
-
173,410
229,762
238,596
248,260
201,719
2,220,741
18,876
14,568
18,876
21,292
16,611
109,411
60,000
60,000
60,000
60,000
8,054
9,613
42,246
-
-
-
-
-
299,913
-
5,400
-
-
724
865
3,802
-
-
-
-
-
10,791
* Cash bonuses were awarded to Directors and key personnel based on individual performance.
Option holding of key management personnel (Consolidated)
Options as
% of total
remuneration
Performance
related %
TOTAL
Share-based
payment
Equity
Shares/
Options
$
99,378
371,674
21,954
142,971
-
-
17,056
$
652,291
680,449
346,139
202,971
49,404
117,561
63,104
98,836
95,784
104,437
100,703
211,434
1,264,227
291,122
340,114
361,909
370,255
429,764
3,905,083
15.2%
54.6%
6.3%
70.4%
-
-
27.0%
33.9%
28.2%
28.9%
27.2%
49.2%
32.4%
15.2%
54.6%
11.9%
70.4%
-
-
27.0%
40.4%
32.4%
34.1%
32.9%
53.1%
35.2%
Balance at
start of year
Granted
during year(i)
Exercised
during year
Other
changes
during year(ii)
Balance at end
of the year
Vested and
exercisable at the
end of the year
% Granted
and vested
during the
year(i)
2010
Names
Directors
T M McConnachie
1,750,000
400,000
500,000
Dr A P Ruiters
L M Carroll
Key management personnel
Z Marinkovic
Dr P J Cox
J Meyer
C de Vos
P Carter
(i) No options were granted during the year ended 30 June 2010
(ii) Options expired at 30 June 2010
600,000
700,000
900,000
900,000
800,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,750,000
-
(200,000)
-
-
(100,000)
(100,000)
(200,000)
400,000
300,000
600,000
700,000
800,000
800,000
600,000
875,000
300,000
150,000
300,000
450,000
400,000
400,000
300,000
-
-
-
-
-
-
-
-
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
19
Directors’ Report (cont.)
Option holding of key management personnel (Consolidated)
Balance at
start of year
Granted
during year
500,000
200,000
200,000
2009
Names
Directors
T M McConnachie
Dr A P Ruiters
L M Carroll
Key management personnel
J Meyer
Z Marinkovic
C De Vos
P R Carter
Dr P J Cox
(iii) None of the options granted during the year had vested at 30 June 2009
100,000
-
100,000
200,000
200,000
800,000
600,000
800,000
600,000
500,000
1,750,000
200,000
300,000
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(iii)
(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
-
-
-
-
-
-
-
-
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:
2010
Names
Directors
T M McConnachie
R D Rossiter
G M Button
2009
Names
Directors
T M McConnachie
R D Rossiter
Dr E Kirby
G M Button
Balance at the start of
the year
Issued under share and
option plan
Other changes during
the year
Balance at end of
the year
500,000
1,032,000
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 end of
the year
-
532,000
389,300
-
-
500,000
-
-
500,000
-
(389,300)
300,000
500,000
1,032,000
-
300,000
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
20
Directors’ Report (cont.)
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 1 August 2006 and continues for five 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
•
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.
The Company may immediately terminate the Agreement by giving written notice to the Consultant;
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 12 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.
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:
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
21
Directors’ Report (cont.)
Fair value per
option at
grant date
$0.33
$1.08
$1.14
$0.43
$0.15
$0.91
Vesting dates
50% after 17 October 2007
50% after 17 October 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 18 December 2009
50% after 18 December 2010
50% after 10 June 2010
50% after 10 June 2011
Grant Date
Expiry date
Exercise Price
17 October 2006
30 June 2010
$0.75
17 March 2008
17 March 2008
18 August 2008
30 June 2011
$2.89
30 June 2011
$2.67
30 June 2011
$1.63
18 December 2008
30 June 2011
$1.63
10 June 2009
10 June 2012
$1.05
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 19 to the financial statements.
Directors and Officers
T M McConnachie
L M Carroll
Dr A P Ruiters
Z Marinkovic
Dr P J Cox
J Meyer
C de Vos
P Carter
Number of options granted
during the year
Number of options vested
during the year
2010
2009
1,750,000
300,000
200,000
600,000
500,000
800,000
800,000
600,000
-
-
-
-
-
-
-
-
2010
875,000
150,000
200,000
300,000
350,000
400,000
400,000
300,000
2009
-
100,000
100,000
-
100,000
100,000
100,000
100,000
Options granted, exercised and lapsed during the year to directors and executives:
Directors and Officers
L M Carroll
J Meyer
C de Vos
P Carter
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
$
150,000
75,000
75,000
150,000
-
-
-
-
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
22
Directors’ Report (cont.)
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.
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.
No share options were granted during or subsequent to the financial year ended 30 June 2010.
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.
•
•
•
•
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
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
$0.90
$2.89
$2.67
$1.63
$1.63
$0.23
$1.08
$1.14
$0.43
$0.15
Vesting period
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 28 to the financial statements. These were
issued under the Company employee share plan via a non-recourse interest free loan.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
23
Directors’ Report (cont.)
Number of shares granted
during the year
Number of shares vested
during the year
2010
-
-
2009
500,000
200,000
2010
500,000
100,000
2009
250,000
-
R D Rossiter
J Cooke
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 March 2008
17 March 2008
18 August 2008
18 December 2008
10 June 2009
Date of expiry
30 June 2011
30 June 2011
30 June 2011
30 June 2011
30 June 2012
Exercise price
$2.89
$2.67
$1.63
$1.63
$1.05
Number of options
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.
Shares issued on the exercise of options
The Company did not issue any ordinary shares during or since the end of the year ended 30 June 2010 on the exercise of options granted
under the share option plan.
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 Declarations is set out on page 24 and forms
part of this directors’ report for the year ended 30 June 2010.
Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note 27
to the financial statements. The directors are satisfied that the provision of non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services do not compromise the auditor’s independence as all non-audit services have been
reviewed to ensure that they do not impact the integrity and objectivity of the auditor and none of the services undermine the general
principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by
the Accounting Professional & Ethical Standards Board.
Signed in accordance with a resolution of the directors.
T M McConnachie - Managing Director
Johannesburg, South Africa
29 September 2010
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
24
Auditor’s Independence Declaration(cid:3)
Auditor’s Independence Declaration
As lead auditor for the audit of the financial report of Sylvania Resources Limited for the year ended
30 June 2010, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
a)
b)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Sylvania Resources Limited
Perth, Western Australia
29 September 2010
M R W OHM
Partner, HLB Mann Judd
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au(cid:3)
Liability limited by a scheme approved under Professional Standards Legislation
HLB Mann Judd (WA Partnership) is a member of
International, a worldwide organisation of accounting firms and business advisers.
33
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010(cid:3)
Summary Statement
Recommendation 1.1
Recommendation 1.2
Recommendation 2.1
Recommendation 2.2
Recommendation 2.3
Recommendation 2.4
Recommendation 2.5
Recommendation 2.6³
Recommendation 3.1
Recommendation 3.2
Recommendation 3.3³
Recommendation 4.1
25
Corporate Governance
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
ASX P & R1
If not, why not2
ASX P & R1
If not, why not2
Recommendation 1.3³
n/a
n/a
Recommendation 5.1
Recommendation 4.3
Recommendation 4.4³
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
n/a
n/a
n/a
Recommendation 7.3
Recommendation 7.4³
n/a
n/a
Recommendation 8.1
n/a
Recommendation 8.2
Recommendation 8.3³
n/a
n/a
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.
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 LIMITED ANNUAL REPORT 2010
26
Corporate Governance (cont.)
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
Policy for Trading in Company Securities (summary)
Code of Conduct (summary)
Policy on ASX Listing Rule Compliance (summary) and Compliance Procedures (summary)
Procedure for Selection, Appointment and Rotation of External Auditor
Shareholder Communication Policy
Risk Management Policy (summary)
Disclosure – Principles & Recommendations
Recommendation(s)
1.3
4.4
2.6
8.3
Recommendation(s)
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
The Company reports below on how it has followed (or otherwise departed from) each of the Principles & Recommendations during the
2009/2010 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 Chief Executive Officer and assisting the Chief Executive Officer 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
Chief Executive Officer or, if the matter concerns the Chief Executive Officer, then directly to the Chair or the lead independent director,
as appropriate.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
27
Corporate Governance (cont.)
Recommendation 1.2:
Companies should disclose the process for evaluating the performance of senior executives.
Disclosure:
The Chief Executive Officer is responsible for evaluating the performance of senior executives. The Chief Executive Officer undertakes the
evaluation of senior executives at quarterly management meetings. This process is undertaken by the Chief Executive Officer in conjunction
with the other executive directors of the Company.
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 senior executives took place in accordance with the process disclosed at Recommendation 1.2.
Principle 2 – Structure the board to add value
Recommendation 2.1:
A majority of the Board should be independent directors.
Notification of Departure:
A majority of the Board are not independent directors. Of the five member board, only one director, Richard Rossiter, is independent. The
four non-independent directors are Terry McConnachie, Louis Carroll, Alistair Ruiters and Grant Button.
Explanation for Departure:
Over the past 12 months, the Company has contemplated a number of corporate transactions that would have addressed the number of
independent directors on the Board. However, none of these transactions proceeded. Whilst the Board continues to review its composition,
it believes that its current composition is the most appropriate for the Company’s present operations.
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 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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
28
Corporate Governance (cont.)
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, Board committees and individual directors. The
Nomination Committee (or its equivalent) is responsible for evaluating the Chief Executive Officer.
The Chair reviews the performance of the Board as a whole, and individual directors through formal performance evaluation questionnaires
completed by individual directors. The Chair is responsible for collating the information from the questionnaires and taking action if there are
any issues raised in the questionnaires. This process is undertaken once a year.
The Chair provides informal performance feed back to the directors through regular discussion on an ongoing basis.
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 sole independent director of the Company is Richard Rossiter, who is independent as he is a non-executive director who is not a
member of management and who is 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 his 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:
•
•
•
Statement of financial position 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 statement of financial position 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 two meeting during the Reporting Period. All Board members (Richard
Rossiter, Terry McConnachie, Louis Carroll. Alistair Ruiters and Grant Button) were in attendance at both Committee meetings.
To assist the Board to fulfil its function as the Nomination Committee, it has adopted a Nomination Committee Charter (which is available
on the Company’s website).
The explanation for departure set out under Recommendation 2.4 above explains how the functions of the Nomination Committee
are performed.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
29
Corporate Governance (cont.)
Performance Evaluation
During the Reporting Period an evaluation of the Board and individual directors took place in accordance with the process disclosed at
Recommendation 2.5. An evaluation of the Audit Committee (the only Board committee) did not take place in the Reporting Period.
Selection and (Re)Appointment of Directors
In determining candidates for the Board, the Nomination Committee (or equivalent) follows a prescribed procedure whereby it evaluates
the range of skills, experience and expertise of the existing Board, considers the balance of independent directors on the Board as well as
identifying the particular skills that will best increase the Board’s effectiveness. A potential candidate is considered with reference to their
skills and expertise in relation to other Board members. If relevant, the Nomination Committee recommends an appropriate candidate for
appointment to the Board. Any appointment made by the Board is subject to ratification by shareholders at the next general meeting. The
Board’s Policy and Procedure for Selection and (Re)Appointment of Directors is available on the Company’s website.
The Board recognises that Board renewal is critical to performance and the impact of Board tenure on succession planning. Each director other
than the Managing Director, must not hold office (without re-election) past the third annual general meeting of the Company following the
Director’s appointment or three years following that director’s last election or appointment (whichever is the longer). However, a Director
appointed to fill a casual vacancy or as an addition to the Board must not hold office (without re-election) past the next annual general meeting
of the Company. At each annual general meeting a minimum of one director or a third of the total number of directors must resign. A director
who retires at an annual general meeting is eligible for re-election at that meeting. Re-appointment of directors is not automatic.
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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
30
Corporate Governance (cont.)
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 Audit Committee does not meet the structural requirements of Recommendation 4.2. The Audit Committee comprises three directors,
Richard Rossiter, Louis Carroll and Grant Button.
Richard Rossiter is the only independent non-executive director on the Audit Committee. Louis Carroll and Grant Button are executive and
non-independent directors.
Explanation for Departure:
Given the size and structure of the Board, the Company is unable to meet the structural requirements of Recommendation 4.2. The Board
has adopted, and the Audit Committee applies, an Audit Committee Charter. Further, Grant Button, who is not Chair of the Board, is the
Chair of the Audit Committee. The Company considers that the members of the Audit Committee are the most appropriate, given their
experience and qualifications, for the Company’s current needs.
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 Principle 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
Grant Button (Chair)
Richard Rossiter
Louis Carroll
No. of meetings attended
2
2
2
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 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 (which is available on the
Company’s website). 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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
31
Corporate Governance (cont.)
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.
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 Board has adopted a Risk Management Policy, which sets out the Company’s risk profile (and is available on the Company’s website).
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.
Under the policy, the Board delegates day-to-day management of risk to the Chief Executive Officer, who is responsible for identifying,
assessing, monitoring and managing risks. The Chief Executive Officer is also responsible for updating the Company’s material business risks
to reflect any material changes, with the approval of the Board.
In fulfilling the duties of risk management, the Chief Executive Officer 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 has also established a separate Risk Committee, which is chaired by Louis Carroll.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
32
Corporate Governance (cont.)
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.
•
In 2009, the Board resolved to formalise and document the management of its material business risks. The Company’s risk management system
includes the preparation of a risk report which identifies the Company’s material business risks, prioritises those risks and identifies strategies to
deal with those risks. The risk report is prepared by the Risk Committee. The Risk Committee meets annually to review and if necessary, update
the Company’s risks. The Risk Committee reports to the executive directors, who in turn report to the full Board as required.
As part of the Company’s systems and processes for managing material business risk, the Board considers the following risk areas and has
developed risk management strategies for each area. The major areas of risks identified 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 risk.
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 and the Chief Financial Officer 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 and the Chief Financial Officer under Recommendation 7.3.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
33
Corporate Governance (cont.)
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 comparable companies) for time, commitment and responsibilities. Fees
for non-executive directors are not linked to the performance of the Company. Given the Company’s stage of development, activities and
financial restriction, the Company may consider it appropriate to issue unlisted options to non-executive directors, subject to obtaining the
relevant approvals. This policy is subject to annual review. All of the directors’ option holdings are fully disclosed.
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 (for comparable companies) 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 one meeting during the Reporting Period. All Board members (Richard
Rossiter, Terry McConnachie, Louis Carroll. Alistair Ruiters and Grant Button) were in attendance at the Committee meeting. To assist the
Board to fulfil its function as the Remuneration Committee, it has adopted a Remuneration Committee Charter (which is available on the
Company’s website).
The explanation for departure set out under Recommendation 8.1 above explains how the functions of the Remuneration Committee
are performed.
There are no termination or retirement benefits for non-executive directors (other than for superannuation).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 LIMITED ANNUAL REPORT 2010
34
Director’s Declaration
1. In the opinion of the directors of Sylvania Resources Limited (the “Company”):
(a) the accompanying financial statements, notes and the additional disclosures are in accordance with the Corporations Act 2001
including :
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of its performance for the year
then ended; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations
Regulations 2001.
(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;
and
(c) the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the
International Accounting Standards Board.
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 2010.
This declaration is signed in accordance with a resolution of the Board of Directors.
T M McConnachie - Managing Director
Johannesburg, South Africa
29 September 2010
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
35
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
To the members of
SYLVANIA RESOURCES LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Sylvania Resources Limited (“the company”),
which comprises the statement of financial position as at 30 June 2010, and the statement of
comprehensive income, statement of changes in equity and statement of cash flows for the year
ended on that date, a summary of significant accounting policies, other explanatory notes and the
directors’ declaration of the consolidated entity comprising the company and the entities it controlled
at the year’s end or from time to time during the financial year as set out on page 34 and pages 37 to
87.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial
report in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and
maintaining internal controls relevant to the preparation and fair presentation of the financial report
that is free from material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances.
In Note 1(c), the directors also state, in accordance with Accounting Standard AASB 101:
Presentation of Financial Statements, that the consolidated financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that
we comply with relevant ethical requirements relating to audit engagements and plan and perform the
audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the company’s
preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
An audit also includes evaluating the appropriateness
effectiveness of the company’s internal control.
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or
management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinions.
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
HLB Mann Judd (WA Partnership) is a member of
International, a worldwide organisation of accounting firms and business advisers.
46
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
36
Independent Auditor’s Report (cont.)
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Auditor’s Opinion
In our opinion:
(a)
the financial report of Sylvania Resources Limited is in accordance with the Corporations Act
2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001; and
(b)
the consolidated financial statements also comply with International Financial Reporting
Standards as disclosed in Note 1(c).
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 15 to 23 of the directors’ report for the
year ended 30 June 2010.The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Sylvania Resources Limited for the year ended 30 June
2010 complies with section 300A of the Corporations Act 2001.
HLB MANN JUDD
Chartered Accountants
Perth, Western Australia
29 September 2010
M R W OHM
Partner
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
47
37
Statement of Comprehensive Income
For the year ended 30 June 2010
Revenue
Raw materials and consumables used
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
Transfer of gains on investment from equity upon acquisition of subsidiary
Impairment of mining property
Share based payment expense
Other income
Other expenses
Loss before interest and income tax expense
Finance income
Finance costs
Loss before income tax expense
Income tax expense
Net loss
Other comprehensive (loss) / income
Net change in fair value of available-for-sale financial assets
Exchange differences on translation of foreign operations
Income tax relating to components of other comprehensive income
Other comprehensive (loss) / income for the year, net of tax
Total comprehensive (loss) / income for the year
Loss attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive (loss) / income attributable to:
Owners of the parent
Non-controlling interest
Notes
2(a)
24
2(c)
2(c)
2(b)
2(c)
2(c)
2(b)
2(c)
2(b)
2(c)
Consolidated
2010
$
29,812,970
(17,752,553)
865,972
2009
$
19,318,639
(10,849,719)
317,002
12,926,389
8,785,922
(3,436,741)
(90,000)
5,420,747
(4,923,880)
(5,102,121)
247,406
(11,260,827)
(244,303)
(1,710,898)
-
-
(2,744,523)
274,743
(7,526,382)
(6,219,027)
(3,165,441)
834,197
(157,235)
2,531,679
(62,142)
(5,542,065)
(695,904)
3
(3,061,505)
(3,060,868)
(8,603,570)
(3,756,772)
(5,392,192)
(2,636,008)
738,082
5,853,835
15,274,026
(4,330,834)
(7,290,118)
16,797,027
(15,893,688)
13,040,255
(7,925,116)
(678,454)
(8,603,570)
(3,524,073)
(232,699)
(3,756,772)
(15,893,688)
-
(15,893,688)
11,379,209
1,661,046
13,040,255
Cents
Cents
Loss per share for loss attributable to the ordinary equity holders of the Company:
Basic loss per share
Diluted loss per share
The accompanying notes form part of these financial statements.
4
4
(3.53)
(3.53)
(1.97)
(1.97)
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
38
Statement of Financial Position
As at 30 June 2010
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax asset
Total current assets
Non-current assets
Other financial assets
Investments accounted for using the equity method
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
Parent entity interest
Non-controlling interest
Total equity
The accompanying notes form part of these financial statements.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
Consolidated
2010
$
2009
$
Notes
6
7
8
9
24
11
12
13
14
14
3
15
16
17
18
23,478,101
13,560,454
753,668
2,617,173
40,409,396
32,214,884
7,871,069
441,512
2,203,701
42,731,166
437,275
3,797,167
69,348,483
76,999,597
150,582,522
8,080,416
3,967,132
1,826,958
65,264,576
79,139,082
190,991,918
121,870,248
5,696,097
310,576
11,673
6,018,346
442,019
24,700,159
935,855
26,078,033
7,263,337
149,649
12,114
7,425,100
234,570
7,376,401
912,644
8,523,615
32,096,379
15,948,715
158,895,539
105,921,533
181,216,925
5,974,869
(28,296,255)
158,895,539
-
158,895,539
117,945,504
7,250,196
(20,371,139)
104,824,561
1,096,972
105,921,533
39
Statement of Changes In Equity
For the year ended 30 June 2010
Consolidated
Balance as at 1 July 2008
Loss for the period
Currency translation differences
Net gains revaluation reserve
Income tax relating to components of other
comprehensive income
Total comprehensive income
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
Non-controlling interests premium reserve
Share based compensation reserve
Balance at 30 June 2009
Balance as at 1 July 2009
Loss for the period
Currency translation differences
Net gains revaluation reserve
Income tax relating to components of other
comprehensive income
Total comprehensive income
Shares issued during the year:
Shares issued
Employee share plan loan repaid – proceeds
Replacement options issued as part of
business combination
Share based payment reserve transferred to
contributed equity
Less: capital raising costs
Share based compensation reserve
Balance at 30 June 2010
Issued capital
117,274,097
-
-
-
Accumulated
losses
$
(16,847,066)
(3,524,073)
-
-
Reserves
$
(12,458,835)
-
12,568,676
5,853,835
Non-
controlling
interests
$
1,824,813
(232,699)
2,705,350
-
Total equity
$
89,793,009
(3,756,772)
15,274,026
5,853,835
-
117,274,097
-
(20,371,139)
(3,519,229)
2,444,447
(811,605)
3,485,859
(4,330,834)
102,833,264
250,000
143,000
327,662
(49,255)
-
-
117,945,504
117,945,504
-
-
-
-
-
-
-
-
-
250,000
143,000
-
-
-
-
(20,371,139)
(20,371,139)
(7,925,116)
-
-
(327,662)
-
2,388,887
2,744,524
7,250,196
7,250,196
-
(2,054,733)
(5,392,192)
-
-
(2,388,887)
-
1,096,972
-
(49,255)
-
2,744,524
105,921,533
1,096,972
(678,454)
(581,275)
-
105,921,533
(8,603,570)
(2,636,008)
(5,392,192)
-
117,945,504
-
(28,296,255)
575,325
378,596
162,757
-
738,082
90,027,845
64,106,469
232,500
-
-
-
-
79,983
(1,147,531)
-
181,216,925
-
-
-
(28,296,255)
-
-
574,135
(79,983)
-
5,102,121
5,974,869
-
-
-
-
-
-
-
64,106,469
232,500
574,135
-
(1,147,531)
5,102,121
158,895,539
The accompanying notes form part of these financial statements.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
40
Statement of Cash Flows
For the year ended 30 June 2010
Consolidated
2010
$
2009
$
Notes
24,051,879
(28,854,812)
823,971
645,010
752,868
(2,581,084)
29,572,612
(9,686,549)
2,914,891
300,953
(3,248,283)
19,853,624
(22,233,196)
(30,647,410)
(1,800)
(1,409,522)
388,266
-
120,845
-
-
76,023
(23,059,384)
(1,616,297)
(123,396)
-
(544,458)
-
316,600
25,280
3,612
(32,586,069)
18,699,500
(1,147,530)
93,000
(49,255)
17,551,970
43,745
(8,088,498)
(12,688,700)
(3,676,904)
1,280,020
3,028,619
-
32,214,884
23,478,101
43,623,564
32,214,884
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Other revenue
Income tax paid
Net cash (outflow) / inflow from operating activities
22
Cash flows from investing activities
Payments for property, plant & equipment
Payments for available-for-sale
financial assets
Payments for exploration and evaluation
Proceeds from borrowings
Loans (from)/to related parties
Proceeds from the sale of plant and equipment
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
Payment of finance lease liability
Net cash inflow from financing activities
Net decrease in cash held
Effect of exchange fluctuations on cash held
Cash acquired through business combination
Cash at the beginning of the financial year
Cash at the end of the financial year
The accompanying notes form part of these financial statements.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
21
6
41
Notes To The Financial Statements
For the year ended 30 June 2010
1.
(a)
Significant accounting policies
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 29 September 2010.
The group has applied the revised AASB 101 Presentation of Financial Statements which became effective on 1 January 2009.
The revised standard requires the separate presentation of a statement of comprehensive income and a statement of changes
in equity. All non-owner changes in equity must now be presented in the statement of comprehensive income. As a consequence,
the group had to change the presentation of its financial statements. Comparative information has been re-presented so that it is
also in conformity with the revised standard.
(b)
Adoption of new and revised standards
Changes in accounting policies on initial application of accounting standards
In the year ended 30 June 2010, 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.
During the year, certain accounting policies have changed as a result of new or revised accounting standards which became
operative for the annual reporting period commencing on 1 July 2009.
The affected policies and standards are:
•
•
•
•
Principles of consolidation – revised AASB 127 Consolidated and Separate Financial Statements and changes made by
AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity
and Associate
Business combinations – revised AASB 3 Business Combinations
Segment reporting – new AASB 8 Operating Segments
Financial Instruments – revised AASB 7 Financial Instruments: Disclosures
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 2010. 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 29 September 2010.
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 (“Company” or
“Parent”) 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.
Business combinations have been accounted for using the acquisition method of accounting (refer note 1(q)).
Unrealised gains or transactions between the Group and its associates are eliminated to the extent of the Group’s interests in
the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies
adopted by the Group.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
42
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
1.
(d)
Significant accounting policies (continued)
Basis of consolidation (continued)
Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are
presented separately in the statement of comprehensive income and within equity in the consolidated statement of financial
position. Losses are attributed to the non-controlling interests even if that results in a deficit balance.
The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity
owners of the Group. A change in ownership interest results in a adjustment between the carrying amounts of the controlling
and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the
adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity
attributable to owners of Sylvania.
When the group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to
its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the
purposes of subsequently accounting for the retained interest as an associate, joint controlled entity or financial asset. In addition,
any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had
directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive
income are reclassified to profit or loss.
Changes in accounting policy
The group has changed its accounting policy for transactions with non-controlling interests and the accounting for loss of control,
joint control or significant influence from 1 July 2009 when a revised AASB 127 Consolidated and Separate Financial Statements
became operative.
Previously transactions with non-controlling interests were treated as transactions with parties external to the group. Disposals
therefore resulted in gains and losses in profit and loss and purchases resulted in the recognition of goodwill. On disposal or
partial disposal, a proportionate interest in reserves attributable to the subsidiary was reclassified to profit or loss or directly to
retained earnings.
Previously when the group ceased to have control, joint control or significant influence over an entity, the carrying amount of
the investment at the date control, joint control or significant influence ceased became its cost for the purposes of subsequently
accounting for the retained interests in associates, jointly controlled entity or financial assets.
(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 19.
(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 date. The estimate is based on the expenditure required to undertake
the rehabilitation and dismantling, after taking into account the time value of money.
(iii) Treatment of minority shareholder entitlements
As referred to in the Directors’ Report, under the terms of two shareholder agreements signed on 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 balance date, the required contribution by Ehlobo had not been received.
Due to the failure to contribute the required capital amount by Ehlobo, the Directors consider that it is appropriate to reduce
the non-controlling interest entitlement by a notional interest charge reflective of the non-payment by Ehlobo of its contractually
agreed capital contribution. The non-controlling interest entitlement reflects a full share of equity less a charge equivalent to an
amount calculated using the South African Prime Lending rate on the commitment outstanding since the due date.
Subsequent to balance date, Ehlobo disposed of its interest to Africa Asia Capital Limited (“AAC”) and Sylvania entered into a
Share Exchange Agreement to acquire the non-controlling interest from AAC. The Share Exchange Agreement will result in the
Sylvania Dump Operations becoming fully owned by Sylvania. Further details of this transaction are disclosed in Note 25.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
43
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
1.
(e)
Significant accounting policies (continued)
Significant accounting judgements estimates and assumptions (continued)
(iv) Exploration and evaluation costs carried forward
The recoverability of the carrying amount of exploration and evaluation costs carried forward has been reviewed by the directors.
In conducting the review, the recoverable amount has been assessed by reference to the higher of “fair value less costs to sell”
and “value in use”. In determining value in use, future cash flows are based on:
•
•
•
•
•
•
Estimates of ore reserves and mineral resources for which there is a high degree of confidence of economic extraction;
Estimated production and sales levels;
Estimate future commodity prices;
Future costs of production;
Future capital expenditure; and/or
Future exchange rates.
Variations to expected future cash flows, and timing thereof, could result in significant changes to the impairment test results,
which in turn could impact future financial results.
(v) Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that
sufficient future tax profits will be available to utilise those temporary differences. Significant management judgement is required
to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future
taxable profits over the next two years together with future tax planning strategies.
(vi)
Impairment of available-for-sale financial assets
The Group follows the guidance of AASB 139 Financial Instruments: Recognition and Measurement to determine when an available-
for-sale financial asset is impaired. This determination requires significant judgement. In making this judgement, the Group evaluates,
among other factors, the duration and extent to which the fair value of an investment is less than its cost and the financial health
of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in
technology and operational and financing cash flows.
(vii)
Impairment of mining properties
On 27 April 2008 Sylvania announced that it had signed an amendment to an existing Services and Supply Agreement to treat
run of mine (“ROM”) from the Brokenhill, Spitzkop and Buffelsfontein East mining operations. It was expected that attributable
PGM production would increase by approximately 6,000 ounces per annum in the short term, increasing to approximately 33%
of production in five to six years as current dumps were depleted.
It was estimated that 300,000 tonnes of ROM material a year would be made available to Sylvania for treatment. This ROM was
expected to have an average grade of 1.4 grams/ton and the chrome ore recovered from the treatment was to be returned to
the supplier at a nominal charge.
First production of the PGM’s from the ROM material retreatment was expected in the fourth quarter of 2008, ramping up to
more than 200 ounces per month towards the end of the first quarter of 2009.
Subsequent to the agreement being signed the world economy went into a slump resulting in a change to the chrome market
with the annual demand for chrome products being dramatically reduced. This resulted in the plans for mining of ROM material
planned at Lannex plant serving Brokenhill and Spitzkop and the Mooinooi plant serving Buffelsfontein East being stopped. The
Sylvania Board of Directors can in no way determine whether or not these mines will resume operations. This does not affect the
carrying value of the Lannex plant as sufficient material has been identified for the Lannex plant to operate at design capacity.
The right to treat the ROM material from Brokenhill, Spitzkop and Buffelsfontein East Chrome mines cannot be sold to a third
party and Sylvania is in no way entitled to any form of compensation for operations at these mines ceasing.
Subsequent to the financial year end at 30 June 2010 the Mooinooi Mine has been supplying ROM material to the Sylvania
Mooinooi plant and this mining property is being depreciated at the current estimated useful life of the Mooinooi plant.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
44
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
1.
(f)
Significant accounting policies (continued)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors of Sylvania Resources Limited.
Change in accounting policy
The Group has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 Segment Reporting. The new standard
requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting
purposes. This has not resulted in a change in the number of reportable segments presented by the Group as operating segments are
reported in a manner that is consistent with internal reporting provided to the chief operating decision maker.
(g)
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.
(h)
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.
(i)
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 statement of
financial position 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(h).
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.
(j)
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 statement of financial position.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above,
net of outstanding bank overdrafts.
(k)
Trade and other receivables
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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
45
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
1.
(l)
Significant accounting policies (continued)
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.
(m)
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 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 date and their statements of comprehensive income 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.
(n)
Interest in jointly controlled entities
The interest in the jointly controlled entity is accounted for in the consolidated financial statements using the equity method.
Under the equity method, the share of profits or losses of the jointly controlled entity is recognised in profit or loss, and the share
of post-acquisition movements in reserves is recognised in other comprehensive income.
Profits or losses on transactions establishing the jointly controlled entity are eliminated to the extent of one of the group’s
ownership interest until such time as they are realised by the jointly controlled entity on consumption or sale. However, a loss on
the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of the current
assets, or an impairment loss.
(o)
Income tax
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary
difference and to unused tax losses.
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 date.
Deferred income tax is provided on all temporary differences at the balance 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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
46
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
1.
(o)
Significant accounting policies (continued)
Income tax (continued)
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 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 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 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.
(p)
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 statement of financial position.
Cash flows are included in the statement of cash flows 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.
(q)
Business combinations
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving entities or business under common control, regardless of whether equity instruments or other assets are acquired.
The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities
incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any contingent
consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are
expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are,
with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the
group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate
share of the acquiree’s net identifiable assets.
The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the acquiree over the fair value of the group’s share of the net identifiable assets
acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary
acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a
bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a
similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified as either equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
47
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
1.
(q)
Significant accounting policies (continued)
Business combinations (continued)
Change in accounting policy
A revised AASB 3 Business Combinations became operative on 1 July 2009. While the revised standard continues to apply the
acquisition method to business combinations, there have been some significant changes.
All purchase consideration is now recorded at fair value at the acquisition date. Contingent payments classified as debt are
subsequently remeasured through profit or loss. Under the group’s previous policy, contingent payments were only recognised when
the payments were probable and could be measured reliably and were accounted for as an adjustment to the cost of acquisition.
Acquisition-related costs are expensed as incurred. Previously, they were recognised as part of the cost of acquisition and
therefore included in goodwill.
Non-controlling interests in an acquiree are now recognised either at fair value or at the non-controlling interest’s proportionate
share of the acquiree’s net identifiable assets. This decision is made on an acquisition-by-acquisition basis. Under the previous
policy, the non-controlling interest was always recognised at its share of the acquiree’s net identifiable assets.
If the group recognises previous acquired deferred tax assets after the initial acquisition accounting is completed there will no
longer be any adjustment to goodwill. As a consequence, the recognition of the deferred tax asset will increase the group’s net
profit after tax.
(r)
Property, plant and equipment
The costs of acquiring mining properties are capitalised in the statement of financial position 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.
Plants in the course of construction are capitalised as construction in progress. When the asset has been completed, the
associated construction in progress balance is transferred to plant and equipment. Once the asset is available for use and in the
location and condition necessary for it to be capable of operating in the manner intended by management, it is depreciated over
its useful life or on a units of production basis.
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. Impairment losses are recognised immediately in the statement of
comprehensive income.
(ii) Derecognition 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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
48
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
1.
(s)
Significant accounting policies (continued)
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 transaction 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)
Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss’.
Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are
also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held
for trading are recognised in profit or loss.
(ii)
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.
(iii) 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 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.
(t)
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 revalued 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 LIMITED ANNUAL REPORT 2010
49
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
1.
(u)
Significant accounting policies (continued)
Derecognition of financial assets and financial liabilities
(i) Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
•
•
the rights to receive cash flows from the asset have expired;
the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material
delay to a third party under a ‘pass-through’ arrangement; or
the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material
delay to a third party under a ‘pass-through’ arrangement; or
the Group has transferred its rights to receive cash flows from the asset and either:
•
•
(a) has transferred substantially all the risks and rewards of the asset, or
(b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control
of the asset.
When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained
substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the
Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset
is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that
the Group could be required to repay.
When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar
provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that
the Group may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision)
on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the
transferred asset and the option exercise price.
(ii) Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability
and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.
(v)
Impairment of financial assets
The Group assesses at each balance date whether a financial asset or group of financial assets is impaired.
(i)
Financial assets carried at amortised cost
If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the
amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future
cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest
rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or
through use of an allowance account. The amount of the loss is recognised in profit or loss.
The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually
significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective
evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group
of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment.
Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not
included in a collective assessment of impairment.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of
an impairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised
cost at the reversal date.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
50
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
1.
(v)
Significant accounting policies (continued)
Impairment of financial assets (continued)
(ii) Financial assets carried at cost
If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried
at fair value (because its fair value cannot be reliably measured), or on a derivative asset that is linked to and must be settled by
delivery of such an unquoted equity instrument, the amount of the loss is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows, discounted at the current market rate of return for a similar
financial asset.
(iii) Available-for-sale investments
If there is objective evidence that an available-for-sale investment is impaired, an amount comprising the difference between its
cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in
profit or loss, is transferred from equity to the income statement. Reversals of impairment losses for equity instruments classified
as available-for-sale are not recognised in profit. Reversals of impairment losses for debt instruments are reversed through profit
or loss if the increase in an instrument’s fair value can be objectively related to an event occurring after the impairment loss was
recognised in profit or loss.
(w)
Trade and other payables
Trade payables and other payables are carried at amortised cost 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.
(x)
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 statement of comprehensive income 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.
(y)
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.
(z)
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,
further details of which are given in Note 19.
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).
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
51
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
1.
(z)
Significant accounting policies (continued)
Share-based payment transactions (continued)
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).
(aa)
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.
(ab)
Earnings per share
Basic earnings per share is calculated as net profit or loss 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 or loss 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.
(ac)
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.
(ad)
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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
52
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
1.
Significant accounting policies (continued)
(ae)
Exploration and evaluation
Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and
evaluation asset in the year in which they are incurred where the following conditions are satisfied:
(i)
the rights to tenure of the area of interest are current; and
(ii) at least one of the following conditions is also met:
(a) the exploration and evaluation expenditures are expected to be recouped through successful development and
exploration of the area of interest, or alternatively, by its sale; or
(b) exploration and evaluation activities in the area of interest have not at the balance date reached a stage which permits
a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant
operations in, or in relation to, the area of interest are continuing.
Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploratory
drilling, trenching and sampling and associated activities and an allocation of depreciation and amortised of assets used in
exploration and evaluation activities. General and administrative costs are only included in the measurement of exploration and
evaluation costs where they are related directly to operational activities in a particular area of interest.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount
of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and
evaluation asset (for the cash generating unit(s) to which it has been allocated being no larger than the relevant area of interest)
is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the
carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the
increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset in previous years.
Where a decision has been made to proceed with development in respect of a particular area of interest, the relevant
exploration and evaluation asset is tested for impairment and the balance is then reclassified to development.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
53
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
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
Transfer of gains on investment from equity upon acquisition of subsidiary
Administration recovery
Sundry income
Reduction in decommissioning costs
(c)
Expenses
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
Devaluations of fair value through profit or loss financial assets
Impairment of mining properties
Share based payments expense
Superannuation expense
Consolidated
2010
$
2009
$
29,812,970
19,318,639
834,197
2,531,679
-
(55,274)
-
5,420,747
16,961
35,718
-
3,545,066
3,269,293
114,190
157,235
3,436,741
391,480
90,000
4,923,880
5,102,121
21,476
82,545
(13,272)
5,918
-
64,690
-
134,862
2,335,837
1,786,457
67,275
62,142
244,303
273,929
1,710,898
-
2,744,523
20,826
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
54
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
3.
Income Tax
Major components of tax expense for the years ended 30 June 2010 and 2009
Income tax recognised in profit or loss
Current income tax benefit
Adjustments in respect of current income tax of previous year
Translation of foreign operations
Deferred tax expense relating to origination and reversal of temporary differences
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 of deferred tax assets
Total tax expense
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 loss
Tax expense / (benefit) at statutory rate of 30%
Non-deductible expenses
Benefit of tax losses and timing differences not brought to account
Income tax expense
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
Consolidated
2010
$
2009
$
(2,384,956)
-
836,119
2,335,962
(270,019)
(20,445)
(2,809,748)
6,205,732
-
-
2,274,380
3,061,505
-
(82,429)
37,777
3,060,868
(5,542,065)
(695,904)
(1,662,619)
781,669
3,942,455
3,061,505
(208,771)
3,202,634
67,005
3,060,868
836,119
(2,809,748)
222,266
1,058,385
2,047,101
(762,647)
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
55
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
Consolidated
2010
$
2009
$
-
6,459,635
421,628
6,881,263
(6,881,263)
-
2,410,233
21,662,778
7,474,334
15,160
18,917
31,581,422
(6,881,263)
24,700,159
15,809
535,110
76,081
627,000
(627,000)
-
2,945,387
-
5,042,205
-
15,809
8,003,401
(627,000)
7,376,401
3.
Income Tax (continued)
Deferred tax assets comprise:
Deferred unrealised gains and losses on foreign exchange
Losses available for offset against future taxable income
Other
Set-off against deferred tax liabilities
Deferred tax liabilities comprise:
Deferred unrealised gains and losses on foreign exchange
Fair value adjustments on acquisition
Plant and equipment
Asset revaluation reserve recognised through equity
Other
Set-off deferred tax assets
The Group has an estimated tax losses arising in Australia of $15,903,913 (2009: $5,138,573) 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
9,361,540
3,211,907
1,280,105
13,853,552
2,178,513
1,639,778
754,091
4,572,382
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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
56
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
3.
Income Tax (continued)
Reconciliation of deferred tax assets/(liabilities):
2010
Temporary differences
Plant and equipment
Tax losses
2009
Temporary differences
Plant and equipment
Tax losses
4.
Earnings Per Share
Basic loss per share – cents per share
Diluted loss per share – cents per share
Consolidated
Opening
balance
$
(2,869,307)
(5,042,204)
535,110
(7,376,401)
Charged
to income
statement
$
714,933
(2,576,148)
(97,296)
(1,958,511)
Charged to
equity
$
(15,160)
-
-
(15,160)
Exchange
difference
$
146,851
144,018
(53,443)
237,426
Closing
balance
$
(2,022,683)
(29,137,112)
6,459,636
(24,700,159)
Acquisition/
disposal
$
-
(21,662,778)
6,075,265
(15,587,513)
Consolidated
Opening
balance
$
(301,762)
(5,738,533)
2,496,297
(3,543,998)
Charged
to Income
Statement
$
(4,341,271)
(1,219,133)
(319,100)
(5,879,504)
Charged to
equity
$
2,161,918
1,998,772
(1,631,283)
2,529,407
Exchange
Difference
$
(388,193)
(83,310)
(10,803)
(482,306)
Closing
Balance
$
(2,869,308)
(5,052,204)
535,111
(7,376,401)
Consolidated
2010
Cents per
share
(3.53)
(3.53)
2010
$
2009
Cents per
share
(1.97)
(1.97)
2009
$
(7,925,116)
(7,925,116)
(3,524,073)
(3,524,073)
224,724,096
178,854,273
224,724,096
178,854,273
Reconciliations of loss used in calculating loss per share
Loss attributable to the ordinary equity holders of the company used in calculating basic loss per share
Loss attributable to the ordinary equity holders of the company used in calculating diluted loss per share
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic
loss per share
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in
calculating diluted loss per share
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
57
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
4.
Earnings per share (continued)
Diluted loss per share
At 30 June 2010 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.
5.
Segment reporting
Segment information
For management purposes the chief operating decision maker, being the Board of Directors of Sylvania Resources Limited, reports its results
per project. The Group currently has three operational retreatment processing plants, one retreatment processing plant in its final stages of
commissioning, one retreatment processing plant operating at reduced capacity and an open cast mining exploration project.
The operating results of each project are monitored separately by the Board in order to assist them in making decisions regarding resource
allocation as well as enabling them to evaluate performance. Segment performance is evaluated on PGM ounce production and operating costs.
The following table’s present revenue and profit information and certain asset and liability information regarding business segments for the
years ended 30 June 2010 and 30 June 2009.
2010
Segment assets
Capital expenditure
Other assets
Segment liabilities
Segment revenue
Segment result
Unallocated expenses
Total segment loss
Included within the
segment results:
Depreciation
Direct operating costs
Transfer of gain on
investment from equity
upon acquisition of
subsidiary
Interest revenue
Income tax expense
Cash flow information
Net cash flow from
operating activities
Net cash flow from
investing activities
Millsell
$
Steelpoort
$
Lannex
$
Mooinooi Doornbosch
$
$
Northern
limb
$
Other Consolidated
$
$
6,930,921
4,322,034
1,217,819
12,067,278
7,856,623
4,666,915
1,380,472
11,504,834
21,483,855
906,870
3,774,887
3,389,049
24,333,626
2,277,880
4,275,615
2,851,809
13,884,185
116
2,439,563
-
63,919,198
1,871,759
1,394,163
-
7,939,672 146,348,080
44,643,838
32,096,379
29,812,970
30,598,264
17,613,860
-
7,358,327
6,284,526
(1,291,700)
896,610
(23,442)
898,467
2,912,018
942,760
4,277,548
1,037,566
3,643,183
298,498
1,656,701
20,738
2,704
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(297,932)
(21,529,959)
12,926,389
(21,529,959)
(8,603,570)
-
-
-
-
-
71,264
1,991,106
3,269,293
14,483,260
5,420,747
834,197
3,061,505
5,420,747
834,197
3,061,505
7,358,327
6,284,526
(1,291,700)
896,610
(23,442)
-
(15,805,405)
(2,581,084)
(162,915)
(611,733)
(2,667,439)
(10,969,522)
(7,581,902)
(1,409,522)
343,649
(23,059,384)
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
Millsell
$
Steelpoort
$
Lannex
$
Mooinooi Doornbosch
$
$
Northern
limb
$
Other Consolidated
$
$
58
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
5.
Segment reporting (continued)
2009
Segment assets
Capital expenditure
Other assets
Segment liabilities
Segment revenue
Segment result
Unallocated expenses
Total segment loss
Included within the
segment results:
Depreciation
Direct operating costs
Interest revenue
Income tax expense
Cash flow information
Net cash flow from
operating activities
Net cash flow from
investing activities
7,945,845
3,164,215
1,941,727
7,567,959
8,489,531
2,590,893
2,074,588
11,603,211
25,585,552
35,471
6,252,345
33,611
14,058,158
89,196
3,435,395
-
6,516,901
-
1,592,536
-
2,883,809
6,516,676
(629,923)
(139,298)
(28,694)
837,448
3,009,254
-
-
892,795
3,300,945
-
-
1,463
660,788
-
-
924
137,451
-
-
227
28,421
-
-
2,883,809
6,516,676
(629,923)
(139,298)
(28,694)
(794,293)
(811,305)
(15,315,561)
(7,209,688)
(6,277,518)
-
-
-
-
-
-
-
-
-
-
-
2,668,589
50,725,897
652,124
113,858
183,352
(12,542,649)
65,264,576
56,605,672
15,948,715
19,318,639
8,785,922
(12,542,694)
(3,756,772)
53,600
1,865,000
2,531,679
3,060,868
1,786,457
9,001,859
2,531,679
3,060,868
11,251,054
19,853,264
(2,177,704)
(32,586,069)
Consolidated
2010
$
2009
$
29,812,970
-
-
29,812,970
19,318,639
-
-
19,318,639
(i) Segment revenue reconciliation to the statement of comprehensive income
Total segment revenue
Inter-segment sales elimination
Other revenue from continuing activities
Total revenue
Revenue from external customers by geographical locations is detailed below. Revenue is attributed to geographic location based on the
location of the customers. The company does not have external revenues from external customers that are attributable to any foreign
country other than as shown.
South Africa
Total revenue
29,812,970
29,812,970
19,318,639
19,318,639
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
59
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
Consolidated
2010
$
2,603,934
20,874,167
23,478,101
2009
$
4,046,199
28,168,685
32,214,884
6.
Cash and Cash Equivalents
Cash at bank and on hand
Short term deposits
(a)
Reconciliation to cash flow statement
The above figures agree to cash at the end of the financial year as shown
in the statement of cash flows
23,478,101
32,214,884
(b)
Cash at bank and on hand
These are bearing interest rates of between 0.10% and 4% (2009: 0.15% and 5%).
(c)
Deposits on call
The deposits are bearing floating interest rates between 4% and 5.8% (2009: 1% and 7.15%). These deposits have a maturity
between 30 and 120 days.
7.
Trade and Other Receivables
Trade receivables
Other receivables
Prepayments
No trade receivables are past their contractual terms at 30 June 2010.
8.
Inventories
Stores and materials
Stores and materials
Consolidated
2010
$
11,759,790
94,812
1,705,852
13,560,454
2009
$
5,903,252
414,699
1,553,118
7,871,069
Consolidated
2010
$
753,668
753,668
2009
$
441,512
441,512
Strategic spares held in stock for engineering breakdowns. Spares and materials are carried at the lower of cost or net realisable value.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
60
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
9.
Other financial assets
Available for sale investments carried at fair value
Listed shares
Listed options
Financial assets at fair value through profit and loss
Listed shares
Total
Consolidated
2010
$
2009
$
324,875
32,400
357,275
80,000
8,080,416
-
8,080,416
-
437,275
8,080,416
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)
11.
Deferred exploration expenditure
2010
Balance at beginning of financial year
Acquired through business combination (Note 21)
Foreign currency movements
Direct expenditure for the year
Balance at end of financial year
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
Consolidated
2010
$
2009
$
3,797,167
3,967,132
Mineral
rights
$
316,600
55,922
(10,642)
-
361,880
Mineral rights
$
568,274
(303,474)
51,800
-
316,600
Deferred
exploration
expenditure
$
1,510,358
65,883,405
52,014
1,540,826
68,986,603
Deferred
exploration
expenditure
$
1,160,036
-
232,608
117,714
1,510,358
Total
$
1,826,958
65,939,327
41,372
1,540,826
69,348,483
Total
$
1,728,310
(303,474)
284,408
117,714
1,826,958
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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
61
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
12.
(a)
Property, plant and equipment
Impairment of mining properties
On 27 April 2008 Sylvania announced that it had signed an amendment to an existing Services and Supply Agreement to treat run
of mine (“ROM”) from the Brokenhill, Spitzkop and Buffelsfontein East mining operations. It was expected that attributable PGM
production would increase by approximately 6,000 ounces per annum in the short term, increasing to approximately 33% of production
in five to six years as current dumps were depleted.
It was estimated that 300,000 tonnes of ROM material a year would be made available to Sylvania for treatment. This ROM was
expected to have an average grade of 1.4 grams/ton and the chrome ore recovered from the treatment was to be returned to the
supplier at a nominal charge.
First production of the PGM’s from the ROM material retreatment was expected in the fourth quarter of 2008, ramping up to more
than 200 ounces per month towards the end of the first quarter of 2009.
Subsequent to the agreement being signed the world economy went into a slump resulting in a change to the chrome market with
the annual demand for chrome products being dramatically reduced. This resulted in the plans for mining of ROM material planned at
Lannex plant serving Brokenhill and Spitzkop and the Mooinooi plant serving Buffelsfontein East being stopped. The Sylvania Board of
Directors can in no way determine whether or not these mines will resume operations. This does not affect the carrying value of the
Lannex plant as sufficient material has been identified for the Lannex plant to operate at design capacity.
The right to treat the ROM material from Brokenhill, Spitzkop and Buffelsfontein East Chrome mines cannot be sold to a third party and
Sylvania is in no way entitled to any form of compensation for operations at these mines ceasing.
Subsequent to the financial year end at 30 June 2010 the Mooinooi Mine has been supplying ROM material to the Sylvania Mooinooi
plant and this mining property is being depreciated at the current estimated useful life of the Mooinooi plant.
Based on the above information it was resolved by the Directors of Sylvania to undertake a conservative approach to the accounting of
this transaction by impairing the asset valuation attributed to this transaction at the Sylvania Lannex plant, resulting in an impairment of
R32,799,630 (A$4,923,880). A review was performed on the plants and no further impairment was considered necessary.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
62
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
12.
Property, Plant and Equipment (continued)
Mining
property
$
10,384,363
Consolidated
2010
At 1 July 2009
Cost or fair value 10,384,363
Accumulated
Depreciation
-
Net book value 10,384,363
Year ended 30 June 2010
Opening net
book value
Exchange
differences
Additions
Disposals
Reallocations
between asset
classes
Acquired
through business
combination
Impairment (i)
Depreciation
charge
(457,555)
-
-
-
(4,923,880)
-
-
5,002,928
Construction
in progress
$
Plant &
equipment
$
Equip-
Ment
$
Leasehold
improve-
ments
$
Computer
equipment
and
software
$
Furniture
& fittings
$
Office
equip-
ment
$
Motor
vehicles
$
TOTAL
$
38,073,021 19,420,798
273,508
41,147
151,719
58,605 101,062
530,801 69,035,024
(3,395,329)
-
38,073,021 16,025,469
(54,471)
219,037
(13,267)
27,880
(51,301)
100,418
(23,747)
34,858
(42,199)
58,863
(3,770,448)
(190,134)
340,667 65,264,576
38,073,021 16,025,469
219,037
27,880
100,418
34,858
58,863
340,667 65,264,576
(81,308)
(1,594,817)
7,411,229 14,104,943
(78,064)
-
(1,830)
454,343
-
(1,018)
2,827
-
(3,087)
102,746
(2,792)
(1,227)
3,502
(468)
(1,984)
53,323
-
(2,155,899)
(13,073)
100,285 22,233,198
(120,846)
(39,522)
(20,412,475) 20,412,475
-
-
84,177
-
-
-
-
-
-
-
-
10,950
(10,950)
1,025
-
2,866
-
-
-
-
-
-
-
88,068
(4,923,880)
(3,070,092)
-
23,476,958 47,397,600
(102,284)
569,266
(7,864)
21,825
(68,458)
129,852
(13,134)
37,347
(29,093)
70,159
(3,385,620)
(94,695)
293,662 76,999,597
At 30 June 2010
Cost or
fair value
Accumulated
Depreciation
5,002,928
23,476,958
53,863,021
726,021
42,956
249,611
74,228
141,451
578,491 84,155,665
-
5,002,928
(6,465,421)
-
23,476,958 47,397,600
(156,755)
569,266
(21,131)
21,825
(119,759)
129,852
(36,881)
37,347
(71,292)
70,159
(7,156,068)
(284,829)
293,662 76,999,597
(i) Please refer to disclosure on impairment of mining properties in (a)
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
63
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
12.
Property, Plant and Equipment (continued)
Mining
property
$
-
8,685,342
Consolidated
2009
At 1 July 2008
Cost or fair value 8,685,342
Accumulated
Depreciation
Net book value
Year ended 30 June 2009
Opening net
book value
Exchange
differences
Additions
Disposals
Reallocations
between asset
classes
Depreciation
charge
1,699,021
-
-
8,685,342
-
-
10,384,363
Construction
in progress
$
Plant &
equipment
$
Equip-
Ment
$
Leasehold
improve-
ments
$
Computer
equipment
and
software
$
Furniture
& fittings
$
Office
equip-
ment
$
Motor
vehicles
$
TOTAL
$
6,811,505
15,185,495
235,076
36,013
85,351
53,422
66,871
335,958 31,495,033
-
(1,738,616)
6,811,505 13,446,879
(15,119)
219,957
(5,735)
30,278
(30,619)
54,732
(13,869)
39,553
(25,382)
41,489
(1,916,716)
(87,376)
248,582 29,578,317
6,811,505 13,446,879
219,957
30,278
54,732
39,553
41,489
248,582 29,578,317
2,679,492
28,582,024
-
2,665,406
1,569,897
-
38,432
-
-
5,134
-
-
11,453
58,918
(4,003)
7,009
-
-
5,263
37,594
(10,492)
7,161,360
50,150
144,693 30,393,126
(14,495)
-
-
-
-
-
-
(1,826)
1,826
-
-
-
(1,656,713)
38,073,021 16,025,469
(39,352)
219,037
(7,532)
27,880
(20,682)
100,418
(9,878)
34,858
(16,817)
58,863
(1,853,732)
(102,758)
340,667 65,264,576
At 30 June 2009
Cost or fair value 10,384,363
Accumulated
Depreciation
-
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)
-
38,073,021 16,025,469
(54,471)
219,037
(13,267)
27,880
(51,301)
100,418
(23,747)
34,858
(42,199)
58,863
(3,770,448)
(190,134)
340,667 65,264,576
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
64
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
12.
(b)
Property, plant and equipment (continued)
Leased assets
Equipment and motor vehicles include the following amounts where the Group is a lessee under a finance lease:
Equipment
Cost
Accumulated Depreciation
Motor vehicles
Cost
Accumulated Depreciation
At 30 June 2010
Due within one year
Due between one and five years
At 30 June 2009
Due within one year
Due between one and five years
Consolidated
2010
$
628,046
(103,881)
524,165
442,991
(139,969)
303,022
Finance
Charges
$
(56,725)
(76,808)
(133,533)
(29,078)
(24,157)
(53,235)
2009
$
196,688
(72,027)
124,661
322,150
(62,258)
259,892
Present Value
of Minimum
Lease
Payments Due
$
310,576
442,018
752,594
149,649
234,570
384,219
Future
Minimum
Lease
Payments due
$
367,301
518,826
886,127
178,727
258,727
437,454
(c)
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.
13.
Trade and Other Payables
Trade payables(i)
Other payables
(i) Trade payables are non-interest bearing and are normally settled on 60 day terms
Consolidated
2010
$
3,409,202
2,286,895
5,696,097
2009
$
4,968,534
2,294,803
7,263,337
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
65
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
Consolidated
2010
$
2009
$
310,576
149,649
442,019
234,570
Consolidated
2010
$
935,855
912,644
23,211
935,855
2009
$
912,644
355,158
557,486
912,644
14.
Borrowings
Secured
Current liabilities
Payable within one year (Refer to Note 23)
Non–current liabilities
Payable within 1-5 years (Refer to Note 23)
15.
Provisions
Provision for rehabilitation
Movement in provision
Balance at beginning of financial year
Arising during the year
Balance at end of financial year
Provision is made for close down, restoration and 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 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.
16.
Issued Capital
(a)
Share Capital
Ordinary shares
Ordinary shares fully paid
Employee share plan shares
Consolidated
2010
2009
No of shares No of shares
Consolidated
2010
$
2009
$
240,696,254
2,383,000
243,079,254
179,354,273
2,808,000
182,162,273
181,216,925
-
181,216,925
117,945,504
-
117,945,504
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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
66
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
16.
(b)
Issued Capital (continued)
Movements in ordinary share capital
5 August 2009
5 August 2009
Date
1 July 2009
Details
Opening balance
First tranche of shares under Sylvania Resources Limited
take-over of GAU
First tranche of shares under Sylvania Resources Limited
take-over of SA Metals
Second tranche of shares issued under the Sylvania
Resources Limited takeover of GAU
Second tranche of shares issued under the Sylvania
Resources Limited takeover of SA Metals
21 August 2009
31 August 2009
Issue to ineligible overseas shareholders of SA Metals
23 September 2009 Final issue for the compulsory take-over of SA Metals
9 October 2009
25 November 2009 Transfer from employee share plan
Final issue for the compulsory take-over of GAU
21 August 2009
17 December 2009
18 May 2010
Transfer share based payment reserve
Issue through placement
Share issued from employee share plan
Transfer from share based payment reserve
Transaction costs
On issue at the end of the year
* The issue price has been rounded from 0.72668
Number of
Shares
179,354,273
4,020,754
22,562,120
3,729,475
2,623,903
315,103
1,541,636
1,123,990
375,000
25,000,000
50,000
240,696,254
Issue price
$
117,945,504
-
-
-
-
-
-
-
0.50
0.72*
0.90
5,307,395
29,781,998
4,195,659
2,951,891
365,519
1,903,920
1,433,087
187,500
68,633
18,167,000
45,000
11,350
(1,147,531)
181,216,925
(c)
Movements in employee share plan shares issued with limited recourse employee loans
Details
On issue at beginning of the year
Date
1 July 2009
25 November 2009 Transferred to ordinary shares
Transferred to ordinary shares
18 May 2009
On issue at the end of the year
Number of
Shares
2,808,000
(375,000)
(50,000)
2,383,000
Issue price
$0.50
$0.90
Information relating to the employee share plan, including details of shares issued under the plan, is set out in Note 19.
Share options
Employee option plan options exercisable (refer note 19)
-at $0.75 per share on or before 30 June 2010
-at $1.63 per share on or before 30 June 2011
-at $1.05 per share on or before 30 June 2012
-at $1.40 per share on or before 30 June 2011
-at $2.67 per share on or before 30 June 2011
-at $2.89 per share on or before 30 June 2011
Number of options
2009
2010
-
2,816,500
3,000,000
359,909
600,000
400,000
7,176,409
600,000
-
-
-
300,000
200,000
1,100,000
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
67
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
Net
Unrealised
Gains Reserve
$
Share Based
Payments
Reserve
$
-
989,100
5,853,835
-
-
-
-
-
5,853,835
28,554
(5,420,747)
-
-
-
-
-
-
(327,662)
2,744,524
3,405,962
-
-
-
-
-
-
461,642
494,152
5,102,121
9,002,235
Foreign
Currency
Translation
Reserve
$
(13,447,935)
-
12,927,781
(3,878,334)
-
-
-
(4,398,488)
-
-
(2,054,732)
575,325
-
-
(5,877,895)
Non-
Controlling
Interests
Premium
Reserve
$
-
-
-
-
2,388,887
-
-
2,388,887
Total
$
(12,458,835)
5,853,835
12,927,781
(3,878,334)
2,388,887
(327,662)
2,744,524
7,250,196
-
-
-
-
28,554
(5,420,747)
(2,054,732)
575,325
-
-
2,388,887
494,152
5,102,121
5,974,869
17.
Reserves
Consolidated
At 1 July 2008
Unrealised gain / (loss) on
available-for-sale financial assets
Currency translation differences
Tax effect
Non-controlling interest premium reserve
Share and option-based payments transferred to share
capital
Share and option-based payments expense
At 30 June 2009
Unrealised gain / (loss) on
available-for-sale financial assets
Transfer to profit and loss
Currency translation differences
Tax effect
Share and option-based payments transferred to share
capital
Share and option-based payments expense
At 30 June 2010
Nature and purpose of reserves
•
•
•
•
Net unrealised gains reserve
This reserve records fair value changes on available for sale investments.
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.
Share based payment 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 28.
Non-controlling interests premium reserve.
This reserve arises as a result of the difference between the amount initially recognised in relation to the minority shareholders in
Sylvania Metals (Pty) Ltd and Sylvania Minerals (Pty) Ltd and the nil consideration received.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
68
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
18.
Accumulated Losses
Balance as at 1 July
Loss for the year
Balance as at 30 June
19.
(a)
Share Based Payments
Employee option plan
Consolidated
2010
$
(20,371,139)
(7,925,116)
(28,296,255)
2009
$
(16,847,066)
(3,524,073)
(20,371,139)
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 - 2010
Grant date
Expiry date
Exercise
price
Fair value
at grant
date
17 Oct 2006
17 Mar 2008
17 Mar 2008
18 Aug 2008
18 Dec 2008
10 Jun 2009
31 Jul 2009
31 Jul 2009
30 Jun 2010
30 Jun 2011
30 Jun 2011
30 Jun 2011
30 Jun 2011
30 Jun 2012
30 Jun 2010
30 Jun 2011
$0.75
$2.89
$2.67
$1.63
$1.63
$1.05
$1.40
$1.40
Total
Weighted average exercise price
$0.34
$1.09
$1.14
$1.33
$1.63
$1.55
$1.21
$1.21
Balance at
start of the
year
Number
600,000
400,000
600,000
3,383,000
2,250,000
6,000,000
-
-
13,233,000
$1.41
Granted
during the
year
Number
Exercised
during the
year
Number
-
-
-
-
-
-
457,435
359,909
817,344
$1.40
-
-
-
-
-
-
-
-
-
-
Expired
during the
year
Number
(600,000)
-
-
-
-
-
(457,435)
-
Balance at
the end of
the year
Number
Vested and
exercisable at
end of year
Number
-
400,000
600,000
3,383,000
2,250,000
6,000,000
-
359,909
-
400,000
600,000
1,691,500
1,125,000
3,000,000
-
359,909
7,176,409
$1.53
(1,057,435)
$1.03
12,992,909
$1.44
The weighted average remaining contractual life of the share options is 1.47 years (2009: 2.32 years).
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
69
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
19.
(a)
Share Based Payment (continued)
Employee option plan (continued)
Consolidated and parent entity - 2009
Grant date
Expiry date
Exercise
price
Fair value at
grant date
30 Jun 2009
30 Jun 2010
30 Jun 2011
30 Jun 2011
30 Jun 2011
30 Jun 2011
30 Jun 2012
20 Apr 2006
17 Oct 2006
17 Mar 2008
17 Mar 2008
18 Aug 2008
18 Dec 2008
10 Jun 2009
Total
Weighted average exercise price
$0.50
$0.75
$2.89
$2.67
$1.63
$1.63
$1.05
$0.56
$0.34
$1.09
$1.14
$1.33
$1.63
$1.55
Granted
during the
year
Number
Balance at
start of the
year
Number
500,000
600,000
400,000
600,000
-
-
-
-
-
-
-
3,383,000
2,250,000
6,000,000
2,100,000 11,633,000
$1.33
$1.65
Balance at
the end of
the year
Number
Exercised
during the
year
Number
(500,000)
-
-
-
-
-
-
-
600,000
400,000
600,000
3,383,000
2,250,000
6,000,000
(500,000) 13,233,000
$1.41
$0.50
Vested and
exercisable
at end of
year
Number
-
600,000
200,000
300,000
-
-
-
1,100,000
$1.66
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 2010 was nil as no options
were exercised during the current financial year (2009: $1.41).
The model inputs for options granted during the year ended 30 June 2010 included:
Options granted
at $1.40
Options granted
at $1.40
Options granted as replacement options for no consideration to the Directors of
SA Metals Limited as part of the acquisition (refer Note 21), having a limited life
and exercisable immediately on the date of grant.
(i)
(ii)
(iii)
(iv) Risk-free interest rate
(vi) Option life
Share price at grant date
Share price volatility of the Company’s shares
Expected dividend yield
$1.21
98.10%
Nil
4.89%
11 months
$1.21
98.10%
Nil
4.89%
23 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.
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 LIMITED ANNUAL REPORT 2010
70
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
19.
(b)
Share Based Payment (continued)
Employee share plan (continued)
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(z).
Set out below are summaries of shares issued under the plan:
Consolidated and parent entity - 2010
Issue Date
Expiry Date
21 Dec 2005
20 Dec 2006
17 Mar 2008
17 Mar 2008
18 Aug 2008
23 Dec 2008
Total
21 Dec 2009
20 Dec 2010
30 Jun 2011
30 Jun 2011
30 Jun 2011
30 Jun 2011
Exercise Price
$
0.50
0.90
2.89
2.67
1.63
1.63
Consolidated and parent entity - 2009
Issue Date
Expiry Date
21 Dec 2005
20 Dec 2006
17 Mar 2008
17 Mar 2008
18 Aug 2008
23 Dec 2008
Total
21 Dec 2009
20 Dec 2010
30 Jun 2011
30 Jun 2011
30 Jun 2011
30 Jun 2011
Exercise Price
$
0.50
0.90
2.89
2.67
1.63
1.63
Balance at
start of the
year
Number
375,000
250,000
500,000
33,000
950,000
700,000
2,808,000
Balance at
start of the
year
Number
625,000
270,000
500,000
33,000
-
-
1,428,000
Issued during
the year
Number
-
-
-
-
-
-
-
Other changes
during
the year
Number
(375,000)
(50,000)
-
-
-
-
(425,000)
Balance at the
end of the
year
Number
Vested at the
end of the
year
Number
-
200,000
500,000
33,000
950,000
700,000
2,383,000
-
200,000
500,000
33,000
475,000
350,000
1,558,000
Issued during
the year
Number
-
-
-
-
950,000
700,000
1,650,000
Other changes
during
the year
Number
(250,000)
(20,000)
-
-
-
-
(270,000)
Balance at the
end of the
year
Number
375,000
250,000
500,000
33,000
950,000
700,000
2,808,000
Vested at the
end of the
year
Number
375,000
250,000
250,000
16,500
-
-
891,500
Options issued under employee option plan
Shares issued under employee share plan
Total Expense
Consolidated
2010
$
4,865,709
236,412
5,102,121
2009
$
2,361,336
383,187
2,744,523
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
71
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
20.
(a)
Financial instruments
Capital risk management
The Group manages its capital to ensure that all 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 2009.
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/accumulated losses.
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
Financial assets at fair value through profit & loss
Available for sale financial assets
Financial liabilities
Financial liabilities
Consolidated
2010
$
2009
$
13,560,454
23,478,101
80,000
357,275
37,475,830
7,871,069
32,214,884
-
8,080,416
48,166,369
6,448,692
6,448,692
7,647,556
7,647,556
(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.
(d)
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates, interest 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. Refer to Note (e) for further information.
(i)
Foreign currency sensitivity analysis
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. Refer to Note (e) for further information.
(ii)
Price risk
Trade receivables at year-end
Commodity prices are set in US Dollars but invoiced in South African Rand. 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$746,314 (2009: A$359,437) or a loss of the same amount on a Group level. The effect on equity will be the same.
(iii)
Interest rate risk
All cash balances attract a floating rate of interest. The unsecured loan to another party does not attract interest. Refer to Note
(f) for further information.
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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
72
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
20.
(e)
Financial instruments (continued)
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)
Foreign currency sensitivity analysis
Liabilities
Assets
2010
$
2009
$
-
(5,165,740)
-
(6,936,130)
2010
$
2,310
18,801,504
2009
$
22,813,165
16,867,938
The Group is exposed to Great British Pound (GBP) and South African Rand (ZAR) 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 cash balances held in GBP, external loans as well as loans to
foreign operations within the Group held in ZAR but denominated and repayable in AUD which give rise to a foreign currency
gain or loss on revaluation. A positive number indicates an increase in profit and other equity where the AUD strengthens against
the ZAR. In relation to cash balances held in GBP 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.
2010
2009
Profit / (loss)
$
Profit / (loss)
$
AUD strengthens 10%
-
2,072,736
-
(2,072,736)
(i) Foreign currency gains or losses on intercompany loans are transferred to equity in accordance with Note 1(m). Therefore, there is no impact on profit.
- ZAR(i)
- GBP
- ZAR
- GBP
-
244
-
(244)
AUD weakens 10%
Equity Increase /
(decrease)
$
10,288,475
244
(8,417,843)
(244)
Equity Increase /
(decrease)
$
5,489,112
2,072,736
(4,491,092)
(2,072,736)
This is mainly attributable to the exposure of loans to foreign operations and as well as that of outstanding GBP cash balances
at year end. During the current financial year, all investments in British Pounds were converted to Australian Dollar investments,
thereby reducing the foreign currency risk.
(f)
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, there
would have been an immaterial change in post tax loss for the year. The impact on equity would have been the same.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
73
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
20.
(f)
Financial instruments (continued)
Interest rate risk management (continued)
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 2010 would have been immaterial; and
• Other equity reserves would decrease/increase by $21,864 (2009: decrease/increase by $406,826) for the Group, mainly as a result
of the changes in fair value of available-for-sale shares.
(g)
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.
(h)
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
2010
Non-interest bearing
Finance lease liability
Variable interest rate instruments
Fixed interest rate instruments
2009
Non-interest bearing
Finance lease liability
Variable interest rate instruments
Fixed interest rate instruments
Less than
1 month
%
1 – 3 months
$
3 months –
1 year
$
1 – 5
years
$
5+
years
$
-
-
-
-
-
-
-
-
-
-
5,696,097
-
-
-
5,696,097
7,263,337
-
-
-
7,263,337
-
310,576
-
-
310,576
-
148,665
-
-
148,665
-
442,019
-
-
442,019
-
235,553
-
-
235,553
Total
$
5,696,097
752,595
-
-
6,448,692
7,263,337
384,218
-
-
7,647,555
-
-
-
-
-
-
-
-
-
-
The above tables detail 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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
74
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
20.
(i)
Financial instruments (continued)
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 organised markets in standardised form, other than listed investments. The Company has no financial assets
where carrying amount exceeds net fair value at balance date.
As of 1 July 2009, Sylvania has adopted the amendments to AASB 7 Financial Instruments: Disclosures which require disclosure of
fair value measurements by level of the following fair value measurement hierarchy:
•
•
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or
indirectly ( derived from prices) (level 2), and
•
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The following table present the group’s assets and liabilities measured and recognised at fair value at 30 June 2010. Comparative
information has not been provided as permitted by the transitional provisions of the new rules.
Consolidated
Assets
Available for sale financial assets
Financial assets at fair value through profit or loss
Level 1
$
357,275
80,000
437,275
Level 2
$
Level 3
$
-
-
-
-
-
-
Total
$
357,275
80,000
437,275
21.
Business combinations
Acquisition of Great Australian Resources Limited
On 31 July 2009, Sylvania Resources Limited acquired a controlling interest in Great Australian Resources Limited (“GAU”). On 16 October
2009 acquisition of the remaining non-controlling interest was completed and GAU became 100% owned by Sylvania. The acquisition was
satisfied by the issue of one Sylvania share for every 12 GAU shares held. There was no material interest of the non-controlling interest in
the results of GAU in the intervening period.
The Group had a 19.9% interest in GAR prior to the acquisition of the controlling interest. In accordance with AASB 3, this 19.9% interest
was revalued on acquisition date to $2,445,538 with the gains on revaluation and associated tax effect of the reserves being transferred to
the statement of comprehensive income.
The total cost of the acquisition was $10,936,142 and comprised solely of the issue of 8,874,219 Sylvania shares. The value of the shares
issued was based on the market price of the shares at the date of exchange. The Group has recognised the fair values of the identifiable
assets and liabilities of GAU based upon the best information available as of the reporting date.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
75
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
Consolidated
Carrying value
$
86,734
1,329,933
135,169
170,000
-
(91,056)
-
1,630,780
Fair value at
acquisition date
$
86,734
1,329,933
135,191
170,000
13,637,146
(91,056)
(1,686,268)
13,581,680
10,936,142
2,645,538
13,581,680
283,780
Consolidated
$
-
1,329,933
1,329,933
Business combinations (continued)
21.
Business combination accounting is as follows:
Acquisition of Great Australian Resources Limited
Property, plant and equipment
Cash and cash equivalents
Trade and other receivables
Financial assets through profit and loss
Exploration expenditure
Trade payables
Deferred tax liability
Total consideration
Acquisition date fair value of consideration transferred:
Shares issued, at fair value
Existing equity interest at cost
Consideration transferred
Direct costs relating to the acquisition
The cash inflow on acquisition is as follows:
Cash paid
Net cash acquired with the subsidiary
Net cash inflow
There were no contingent elements to the consideration given.
GAU was delisted from the Australian Securities Exchange on 16 December 2009 and was converted to a Proprietary Limited company on
20 May 2010.
Acquisition of SA Metals Limited
On 31 July 2009, Sylvania Resources Limited acquired a controlling interest in SA Metals Limited (“SAM”). On 24 September 2009
acquisition of the remaining non-controlling interest was completed and SAM became 100% owned by Sylvania. The acquisition was satisfied
by the issue of one Sylvania share for every 10 SAM shares held. There was no material interest of the non-controlling interest in the results
of SAM in the intervening period.
The Group had a 12.3% interest in SAM prior to the acquisition of the controlling interest. In accordance with AASB3, this 12.3% interest
was revalued on acquisition to $4,948,590 with the gains on revaluation and associated tax effect of the reserves being transferred to the
statement of comprehensive income.
The total cost of the acquisition was $35,003,329 and comprised solely of the issue of 27,042,762 Sylvania shares. The value of the shares
issued was based on the market price of the shares at the date of exchange. The Group has recognised the fair values of the identifiable
assets and liabilities of SAM based upon the best information available as of the reporting date.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
76
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
21.
Business combinations (continued)
Acquisition of SA Metals Limited
Property, plant and equipment
Cash and cash equivalents
Trade and other receivables
Exploration expenditure
Trade payables
Deferred tax liability
Total consideration
Acquisition date fair value of consideration transferred:
Shares issued, at fair value
Cost of replacement option awards(i)
Existing equity interest at cost
Consideration transferred
Direct costs relating to the acquisition
The cash outflow on acquisition is as follows:
Cash paid
Net cash acquired with the subsidiary
Net cash outflow
Consolidated
Carrying value
$
3,600
1,698,686
102,509
5,378,953
(134,347)
-
7,049,401
Fair value at
acquisition date
$
3,600
1,698,686
102,509
52,496,849
(134,347)
(13,901,245)
40,266,052
35,003,329
314,133
4,948,590
40,266,052
327,285
Consolidated
$
-
1,698,686
1,698,686
(i) 457,435 options exercisable at $1.40 expiring 30 June 2010 and 359,909 options exercisable at $1.40 expiring 30 June 2010 were issued to certain former directors and officers of SA
Metals Ltd as replacement options for their pre-acquisition options. As no post-combination service is required the value attributed to these options under the Black-Scholes model (refer Note 19)
has been allocated as a cost of the combination.
There were no contingent elements to the consideration given.
SA Metals was delisted from the Australian Securities Exchange on 9 September 2009 and was converted to a Proprietary Limited
company on 23 April 2010.
If the acquisition had taken place at the beginning of the year, the profit or loss of the combined entity for the current reporting period as
though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting
period would be $8,103,605. The two entities acquired did not generate any revenue for the period 1 July 2009 to date of acquisition,
therefore there would have been no increase to the consolidated revenue had the acquisition date for all business combinations occurred at
the beginning of the reporting period.
Acquisition related costs of $611,065 are included in other expenses in the statement of comprehensive income. Directly attributable costs
of raising equity have been included as a deduction from equity.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
77
22.
Reconciliation of profit after tax to net cash outflow from operating activities
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
Consolidated
2010
$
2009
$
(a)
Reconciliation of profit / (loss) from ordinary activities after income tax to net cash inflow /(outflow) from operating activities
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
Payments for exploration & evaluation
Impairment of available for sale assets
Impairment of mining property
Net foreign exchange differences
Gain on investment through business combination
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 tax assets
Net exchange differences on payment to supplies and employees
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
(8,603,570)
-
3,383,482
(725,637)
750,600
55,274
-
126,163
90,000
4,923,880
3,436,741
(5,420,747)
5,102,121
335,056
(6,632,750)
(10,227)
268,487
(334,458)
(61,280)
(607,893)
(1,628,632)
(237,838)
154,359
(5,720)
3,061,505
(2,581,084)
(3,756,772)
-
1,853,732
1,510,100
(270,985)
13,272
(5,918)
-
1,710,898
-
244,303
-
2,744,523
-
(40,208)
8,699,682
383,212
(268,090)
(214,072)
-
(471,950)
3,569,334
1,496,573
(393,027)
(11,851)
3,060,868
19,853,624
(b)
Non-cash financing and investing activities
A total of 35,916,981 shares were issued as consideration for the acquisition of SA Metals Limited and Great Australian
Resources Limited (refer Note 21).
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
78
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
23.
(a)
Commitments and contingencies
Operating lease commitments
Office premises
The Group entered into commercial lease arrangements during the period to lease its current office premises, both in Perth
and Johannesburg.
Future minimum lease payments (net of GST) as at 30 June are as follows:
Within 1 year
After 1 year but not more than 5 years
More than 5 years
Consolidated
Parent
2010
$
288,632
578,285
-
866,917
2009
$
113,153
296,410
-
409,563
2010
$
117,194
241,001
-
358,195
2009
$
129,688
586,921
-
716,609
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
22,544
79,678
-
102,222
20,517
75,112
-
95,629
-
-
-
-
Finance lease commitments
Motor vehicles
Sylvania Metals (Pty) Limited entered into three new instalment sale 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
211,270
After 1 year but not more than 5 years
More than 5 years
63,491
-
178,727
258,727
-
274,761
437,454
-
-
-
-
Plant and equipment
Sylvania Metals (Pty) Limited entered into three new instalment sale agreements during the period in respect of plant
and 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
99,306
378,528
-
477,834
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
79
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
23.
(a)
Commitments and contingencies (continued)
Operating lease commitments (continued)
Commitments for plant construction
At 30 June 2010 commitments were signed for continued improvements of Millsell, Steelpoort, Mooinooi and Doornbosch plants
as well as the construction of the new tailings dam at Lannex.
Within 1 year
After 1 year but not more than 5 years
More than 5 years
(b)
Contingencies
(i) Contingent liabilities
Consolidated
2010
$
5,171,528
-
-
5,171,528
2009
$
4,698,926
-
-
4,698,925
On 6 January 2010, Sylvania signed an agreement with Minex Projects (Pty) Ltd (“Minex”) for the cancellation of a claim against
SA Metals for future royalties of 3% on sales of minerals extracted from certain defined properties where SA Metals holds the
Mineral Rights.
In terms of the new agreement signed with Minex, Sylvania would pay R5 million and issue 3,000,000 shares to Minex in return
for the termination/cancellation of the Royalty Agreement. This represents a substantial discount to the value of the claim.
The agreement between Sylvania and Minex was subject to Sylvania, by 30 June 2010 conducting metallurgical test work on the
properties to its reasonable satisfaction.
A payment of R1 million (A$150,120) was made to Minex on 29 January 2010 as a deposit. The balance of R4 million
(A$600,480) was paid on 1 July 2010, however at reporting date the shares had not yet been issued. The issue of the 3 million
Sylvania shares, which will be issued in tranches of 500,000 on a six monthly basis, is pending receipt of South African Reserve
Bank (“SARB”) approval by Minex.
As a result of the pending SARB approval the value of the shares to be issued on an indeterminable date cannot be
reliably estimated.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
80
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
Consolidated
2010
$
2009
$
1,601,506
(750,600)
865,972
1,716,878
2,794,604
(1,510,100)
317,002
1,601,506
-
-
-
-
5,675,910
-
(750,600)
(140,335)
865,972
5,650,947
6,915,025
-
(1,510,100)
(46,017)
317,002
5,675,910
(1,708,778)
(145,002)
(1,853,780)
(2,510,558)
801,780
(1,708,778)
3,797,167
3,967,132
1,989,487
841,567
2,831,054
319,884
1,691
321,575
2,003,490
86,618
(1,224,135)
865,973
-
865,973
1,904,596
981,505
2,886,101
255,369
-
255,369
1,270,707
(953,705)
-
317,002
-
317,002
81
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
Events after the balance sheet date
25.
On 29 September 2010 Sylvania entered into a Share Exchange Agreement to consolidate its ownership in its dump operations by
acquiring a further 26% shareholding in Sylvania Metals so that Sylvania now owns 100% of Sylvania Metals.
The Share Exchange took place between Sylvania, which previously owned 74% of Sylvania Metals and Africa Asia Capital Ltd (“AAC”),
which recently acquired the remaining 26% of Sylvania Metals, previously held by Ehlobo Metals (Pty) Ltd a Black Economic Empowerment
group whom had previously notified Sylvania of their intent to divest their stake.
Until now it was not possible for Sylvania to acquire the 26% shares of Sylvania Metals as a provision in the Services and Supply Agreement
(“S&SA”), between Sylvania Metals and Samancor, required Sylvania Metals to be BEE compliant whilst operating under the S&SA. This
provision has now been waived by Samancor.
The consideration for the exchange will be the issue of a maximum of 58.8 million Sylvania shares, which will, if all the shares are issued,
comprise 19.5% of Sylvania issued capital post the transaction. Sylvania has agreed to issue 7,711,888 shares immediately to AAC and
will seek shareholder approval for the issue of the remaining shares over the next 13 months. To this end Sylvania intends to shortly call
a meeting of shareholders. In the event of Sylvania not being able to transfer the required shares to AAC, Sylvania will pay a cash amount
equivalent to the share value over a 13 month period using a floor and ceiling mechanism for the share value to ensure that the cash value
will not exceed the intrinsic value of the shares subject to a maximum payment value of US$50 million. Sylvania will pay accrued interest on
the outstanding nominal cash balance over the life of the payment schedule adopted by Sylvania.
Sylvania may also pay for the exchange through a mixture of cash and shares.
As part of this contract, AAC have undertaken not to sell their stake for a twelve month period after the issue of each tranche of shares
unless agreed with Sylvania. The transaction may be subject to FIRB approval which will be sought if required.
26.
Parent entity disclosures
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Accumulated losses
Reserves
Unrealised gains
Share-based payments
Total equity
Year ended
30 June 2010
$
30 June 2009
$
15,401,186
128,866,411
144,267,597
25,417,484
61,267,541
86,685,025
271,854
-
271,854
717,334
-
717,334
181,216,925
(46,235,053)
117,945,504
(41,125,226)
271,636
8,742,235
143,995,743
5,741,451
3,405,962
85,967,691
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
82
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
26.
Parent entity disclosures (continued)
Financial performance
Loss for the year
Other comprehensive income / (loss)
Total comprehensive loss
Contingent liabilities of the parent entity
For details on commitments and contingent liabilities, see Note 23.
27.
Auditors’ Remuneration
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
- Assurance services
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
Year ended
30 June 2010
$
(5,109,827)
(5,469,815)
(10,579,642)
30 June 2009
$
(8,976,968)
5,741,451
(3,235,517)
Consolidated
2010
$
2009
$
135,500
44,000
265,179
66,827
241
511,747
91,000
-
154,537
473
3,048
249,058
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
83
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
28.
(a)
Key management personnel disclosure
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 Managing Director
L M Carroll
G M Button
Finance Director
Executive Director
Non-executive directors
Dr AP Ruiters
(b)
Other key management personnel
J Meyer
Managing Director: Sylvania Metals (Pty) Limited
Z Marinkovic
Director: Sylvania Metals (Pty) Limited
C De Vos
P Carter
Internal Legal Advisor
General Manager: Exploration
Dr P J Cox
Strategic Planner
(c)
Key management personnel compensation
Short-term
Post employment
Share-based payments
Total remuneration
Consolidated
2010
$
3,085,985
10,800
-
3,096,785
2009
$
2,630,065
10,791
1,264,227
3,905,083
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.
(d)
Compensation options: granted under the employee option plan
Options provided as remuneration and shares issued on exercise of such options.
Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and
conditions of the options, can be found in section D of the remuneration report.
(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.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
84
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
28.
(f)
Key management personnel disclosure (continued)
Shares issued on exercise of compensation options
2010
Name
E Kirby
M Burchnall
2009
Name
T McConnachie
M Langoulant
M Burchnall
* This loan was fully repaid on 10 July 2009
# At 30 June 2010 $75,000 was still outstanding
(g)
Option holding
2010
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
Balance at
start of the
year
1,750,000
400,000
500,000
900,000
900,000
600,000
800,000
700,000
Shares Issued
Number
375,000
50,000
Paid per share
(Note 19)
$
0.50
0.90
Shares Issued
Number
500,000
250,000
20,000
Paid Per Share
(note 19)
$
$0.50
$0.50
$0.90
Unpaid per
share
(Note 19)
$
-
-
Unpaid Per
Share
(note 19)
$
(250,000)*
(125,000)#
-
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(200,000)
(100,000)
(100,000)
-
(200,000)
-
1,750,000
400,000
300,000
800,000
800,000
600,000
600,000
700,000
875,000
300,000
150,000
400,000
400,000
300,000
300,000
450,000
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
85
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
28.
(g)
Key management personnel disclosure (continued)
Option holding (continued)
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
(Refer to note 28(f))
Balance at
the 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
(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.
2010
Name
Director
T M McConnachie
R D Rossiter
G M Button
2009
Name
Director
T M McConnachie
R D Rossiter
G M Button
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
500,000
1,032,000
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
-
532,000
-
500,000
500,000
-
-
-
300,000
500,000
1,032,000
300,000
All equity transactions with key management personnel other than those arising under the Group’s Incentive Option Plan (Note
28(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 LIMITED ANNUAL REPORT 2010
86
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
29.
(a)
Related party disclosure
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
Twinloop Nominees (Pty) Ltd
Great Australian Resources Pty Ltd
SA Metals Pty Ltd
Platinum Mining Ventures Limited
Sylvania Holdings Limited
Aralon Holdings Limited
Sylvania Holdings SA (Pty) Ltd
Sylvania South Africa (Pty) Ltd
Sylvania Metals (Pty) Ltd
Sylvania Minerals (Pty) Ltd
Sylvania Mining (Pty) Ltd
Great Australian Resources SA (Pty) Ltd
Hacra Mining & Exploration Company (Pty) Ltd
Pan Palladium SA (Pty) Ltd
Australia
Australia
Australia
Australia
Mauritius
Mauritius
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2010
%
100
100
100
100
100
100
100
100
74
74
100
100
100
100
2009
%
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. All
intergroup transactions and balances are eliminated on consolidation.
(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
2010
Maximum
balance
outstanding
at any point
during the year
$
Consolidated
2010
2009
Year end
Balance
$
Year end
Balance
$
250,000
618,195
868,195
-
618,195
618,195
250,000
577,748
827,748
Loans to related parties
T M McConnachie
Ehlobo Metals (Pty) Ltd
The nature of these transactions represents payments made in South Africa on behalf of the above companies.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
87
Notes To The Financial Statements (cont.)
For the year ended 30 June 2010
29.
(b)
Related party disclosure (continued)
Loans to / (from) related parties (continued)
No allowance for doubtful debts have been raised in relation to any outstanding balances as amounts were either repaid after
reporting date, or full payment is expected where balances are still outstanding.
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.
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 (2009: 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 for expenses incurred on their behalf:
Service fees paid to related parties
Summer Sun Trading 210 (Pty) Ltd
Integrated Geological Solutions (Pty) Ltd
Southridge Properties (Pty) Ltd
Recoveries from related parties
Realm Resources Ltd (formerly Morning Star Holdings (Australia) Ltd)
Dwyka Resources Ltd
Ferrum Crescent Ltd (formerly Washington Resources Ltd)
Consolidated
2010
$
6,152
443,985
16,167
16,961
-
6,946
490,211
2009
$
-
-
137,627
37,358
9,532
9,532
194,049
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
88
Additional Information
For Listed Public Companies
Shareholders Profile as at 31 August 2010
The shareholder information set out below was applicable as at 31 August 2010
A.
Distribution Of Shareholders
1
1,001
5,001
10,001
100,001
Total
1,000
5,000
10,000
100,000
-
-
-
-
and over
Number of
Shareholders
722
544
177
208
47
1,698
There were 515 holders of a less than a marketable parcel of ordinary shares.
Total number of fully paid shares on issue
Percentage holding of 20 largest holders
243,079,254
93.82%
B.
Substantial Shareholders
Shareholder
Computershare Clearing Pty Ltd CCNL DI A/C
Number of
fully paid shares
Percentage fully
paid shares
200,442,822
200,442,822
82.45
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
89
Additional Information For Listed
Public Companies (cont.)
Number of
fully paid shares
Percentage fully
paid shares
200,442,822
6,804,778
4,764,260
3,518,946
2,050,948
1,825,000
1,029,968
916,195
860,506
800,000
710,000
690,000
650,000
533,923
500,000
488,500
407,497
400,000
310,409
305,000
228,008,752
82.45
2.80
1.96
1.48
0.84
0.75
0.42
0.38
0.35
0.33
0.29
0.28
0.27
0.22
0.21
0.20
0.17
0.16
0.13
0.13
93.82
C.
Twenty Largest Holders Of Fully Paid Shares
Shareholder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Computershare Clearing Pty Ltd
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
ANZ Nominees Limited
Citicorp Nominees Pty Limited
Blackmort Nominees Pty Ltd
Bond Street Custodians Limited
JP Morgan Nominees Australia Limited
Bluestar Management Pty Ltd
Imperium Nominees Pty Ltd
UOB Kay Hian (Hong Kong) Limited
Cogent Nominees Pty Limited
Nefco Nominees Pty Ltd
SA Metals Limited
Mr Terence McConnachie
Mrs Tracy Andrea Howell
HSBC Custody Nominees (Australia) Limited – A/C 3
Delfam Pty Limited
Great Australian Resources Limited
Eric Preston Pty Ltd
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.
E.
Restricted Securities
There are no restricted securities on issue.
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
90
GLOSSARY OF TERMS
The following definitions apply throughout the annual financial statements:
AIM
ASX
AUD
GBP
JSE
LSE
PGM
Sylvania
USD
ZAR
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 Resources Limited, a company incorporated in Australia
United States Dollar
South African Rand
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2010
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
Joint 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
Level 4
130 Stirling Street
Perth, Western Australia
6000 Australia
Solicitors
Allen & Overy
Level 27
Exchange Plaza
2 The Esplanade
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
ABN 80 091 415 968
Annual Report 2010
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
1
0
www.sylvaniaresources.com
Unit 2, Level 1,
Churchill Court,
331 - 335 Hay Street, Subiaco,
Western Australia, 6008 Australia