ELKEDRA DIAMONDS NL
Level 1, 130 Hay Street
Subiaco WA 6008
PO Box 8035, Subiaco East WA 6008
Telephone: +61-8-6380-2855
Facsimile: +61-8-6380-1644
E-mail: elkedra@elkedra.com.au
Web Site: www.elkedra.com.au
27 February 2006
Alternative Investment Market
London UK
Dear Sir/Madam,
RE: INTERIM FINANCIAL REPORT - DECEMBER 2005
Please find attached herewith a copy of the Company's Interim Financial Report
to 31 December 2005, including the "Independent Review Report" concluded by our
Auditors.
For and on behalf of the Board
M.D.J. Cozijn
Company Secretary
cc: Directors
Interim Financial Report
31 December 2005
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
Incorporated under the Corporations Act 2001 in the State of Western Australia
on 4th April 2000.
INTERIM FINANCIAL REPORT
6 Months Ended 31 DECEMBER 2005
Directors:
D.B. Best BE, CPEng, FIEAustt - Executive Chairman
S. Randazzo B.Bus. CA,FTIA - Executive Director
M.D.J. Cozijn B.Com. ASA. - Director
T Teichmann BA, MBA - Director
Secretary:
M.D.J. Cozijn - B.Com. ASA.
Registered & Principal Office:
Level 1
130 Hay Street
SUBIACO WA 6008
Telephone: + 618 6380 2855
Facsimile: +618 6380 1644
Postal Address:
PO Box 8035
SUBIACO EAST WA 6008
Share Registry Perth:
Security Transfer Registrars Pty Ltd
770 Canning Highway
APPLECROSS WA 6153
Solicitors Perth:
Deacons
Level 31, Bank West Tower
108 St George's Terrace
PERTH WA 6000
Auditors:
Grant Thornton Western Australian Partnership
256 St Georges Terrace
PERTH WA 6000
CONTENTS
Page No.
1. Corporate Details 1
2. Directors' Report 2
3. Auditor's Independence Declaration 4
4. Consolidated Income Statement 5
5. Consolidated Balance Sheet 6
6. Consolidated Statement of Changes in Equity 7
7. Consolidated Cash Flow Statement 8
8. Notes to the Financial Statements 9
9. Directors' Declaration 22
10. Independent Review Report 23
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
INTERIM FINANCIAL REPORT FOR THE HALF YEAR ENDED 31 DECEMBER 2005
DIRECTOR'S REPORT
Your Directors submit the financial report of the Company for the half year
ended 31 December, 2005, made in accordance with a resolution of the Board.
DIRECTORS
The names of directors who held office during or since the end of the half
year:
Mr D.B. Best
Mr S. Randazzo
Mr M.D.J. Cozijn
Mr T. Teichmann
REVIEW OF OPERATIONS
The Company incurred a loss from ordinary activities after income tax of
$1,391,144 for the half year.
Development of the Chapada diamond project in Brazil, which is now approaching
its final development phase remained the Company's priority during the period.
The diamond recovery processing plant with the capacity to process 600,000 bcm
of diamondiferous gravels per annum (around 1.5 million tonnes of gravels per
annum) is scheduled to commence start up at the end of March 2006.
The Chapada diamond project contains a current probable reserve of 5.4 m bcm
(13.3 m tonnes) of diamondiferous gravels and is expected to yield 270,000
carats at an average value in excess of US$411/cts. These reserves are
sufficient to sustain a mine life of approximately 9 years.
The Company holds a further seven granted exploration tenements covering some
274 km2 within the surrounding Chapada basin region and within a 30 km radius
of the new processing plant. Historical exploration activities have shown these
areas to also contain diamondiferous gravel deposits. It is intended that cash
flow generated from the operational phase of Chapada diamond project will fund
an exploration programme on these existing tenements with the objective of fast
tracking expansion of the existing reserves and increasing annual carat
production. The exploration program will also incorporate exploration for the
kimberlite source of the Chapada alluvial diamonds.
A review of data obtained from the Company's exploration activities in the
Altjawarra Craton in the Northern Territory of Australia was completed during
the period and the Company's Australian tenement holdings have since been
consolidated to 5,780 km2 to ensure exploration focus on the most prospective
tenements.
HIGHLIGHTS FOR THE SIX MONTHS
BRAZIL
Chapada Diamond Project
* Project finance facility for A$5 million provided by LinQ Resources Fund
finalised and drawn down.
* Mining licence for the Quilombo tenements issued.
* Chapada project site infrastructure completed.
* Diamond recovery processing plant fabrication and installation well
advanced.
* Senior operational management team employed and remaining workforce being
progressively engaged in accordance with start up schedule requirements.
AUSTRALIA
Diamonds
* Bulk sampling campaign to test for macrodiamonds within southern Altjawarra
tenements (Australia) completed with results due in March 2006 quarter.
Base Metals
* Encouraging Lead, Copper and phosphate assay results from surface samples
encountered at the prospective Marqua and Field River tenements.
* Magnetic anomalies identified in Field River areas for follow up field
investigations.
* Uranium anomalies identified in Field River tenement.
CORPORATE
* Placement of 3,117,059 fully paid ordinary shares to UK investors completed
in December raising $1.2 million.
* As at 31st December 2005, the total issued capital of the company is
69,209,893 shares of which 61,855,978 shares are listed and 7,353,915 are
subject to ASX escrow until 20/12/2006.
* As at 31st December 2005 a total of 17,531,676 unlisted options exercisable
at between 10 pence and A$1.05 are on issue, in addition to 23,487,337
options exercisable at 12 pence listed on AIM in the UK.
* 555,612 unlisted convertible notes are also on issue.
ADOPTION OF AUSTRALIAN EQUIVALENT TO IFRS
This interim financial report has been prepared under Australian equivalents to
IFRS. A reconciliation of differences between previous GAAP and Australian
equivalents to IFRS has been included in Note 2 of the report.
AUDITOR'S INDEPENDENCE DECLARATION
The lead auditor's declaration independence declaration under section 307C of
the Corporations Act 2001 is set out on page 24 for the half-year ended 31
December 2005.
This report is signed in accordance with a resolution of the Board of
Directors.
M.D.J. Cozijn S Randazzo
Director/Company Secretary Executive Director
Dated this 27th day of February 2006
ATTRIBUTION
This report is based on geological information compiled by and reported upon by
Dr. Wayne R Taylor, Consulting Mineralogist, who is a member of the Australian
Institute of Geoscientists, and who has at least 5 years experience in the
field of activities covered.
The resource information on the Brazilian Chapada Alluvial Diamond Project is
based on data compiled by and reported upon by Mr Hugh Durey of Hugh Durey &
Associates Pty Ltd. Mr Durey is a member of the Australasian Institute of
Mining & Metallurgy and qualifies as a competent person as defined in the
September 1999 edition of the Australasian Code for Reporting of Mineral
Resources and Ore Reserves (The JORC Code). He has consented to the inclusion
of the information in the form and context in which it is presented in this
report. Mr Durey holds no interest in the share capital of Elkedra Diamonds NL.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
AUDITOR'S INDEPENDENCE DECLARATION
Grant Thornton Western Australian Partnership
ABN 21 965 022 882
Chartered Accountants, Business Advisers and Consultants
AUDITOR'S INDEPENDENCE DECLARATION
In accordance with the requirements of section 307C of the Corporations Act
2001, as lead auditor for the review of Elkedra Diamonds NL for the half-year
ended 31 December 2005, I declare that, to the best of my knowledge and belief,
there have been:
a. no contraventions of the auditor independence requirements of the
Corporations Act 2001 in relation to the review; and
b. no contraventions of any applicable code of professional conduct in
relation to the review.
GRANT THORNTON WESTERN AUSTRALIAN PARTNERSHIP
GREG LEGUIER
Partner
Dated 27 February 2006
Level 6
256 St Georges Terrace
Perth 6000 Australia
GPO Box P1213
Perth WA 6844
T + 61 8 9481 1448
F + 61 8 9481 0152
E gtperth@gtwa.com.au
W www.grantthornton.com.au
An independent Western Australian partnership entitled to trade under the
international name Grant Thornton.
Grant Thornton is a trademark owned by Grant Thornton International and used
under licence by independent firms and entities throughout the world.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
CONSOLIDATED INCOME STATEMENT
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
Economic Entity
31 December 31 December
2005 2004
$ $
Revenue 300,135 58,279
Depreciation expense (48,643) (35,610)
Employee benefits expense (412,512) (335,674)
Drilling costs - (101,337)
Tenement holding costs (9,684) (157,029)
Other field exploration costs (171,652) (269,268)
Administration expenses (701,072) (335,726)
Finance costs (303,091) (119,817)
Tenements written - off - (3,874)
Tenements provided for - (1,883,482)
Other expenses - (14,317)
Foreign currency translation (44,625) (140,671)
Loss before income tax expense (1,391,144) (3,338,526)
Income tax expense - -
Net loss attributable to members (1,391,144) (3,338,526)
of the parent entity
Basic loss per share (cents per (2.10) (5.06)
share)
Diluted loss per share (cents per (2.10) (5.06)
share)
The accompanying notes form part of these financial statements.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2005
Economic Entity
31 DECEMBER 30 JUNE
2005 2005
$ $
CURRENT ASSETS
Cash and cash equivalents 4,079,379 2,564,273
Receivables 1,506 -
Other current assets 6,294 -
TOTAL CURRENT ASSETS 4,087,179 2,564,273
NON-CURRENT ASSETS
Property Plant & Equipment 14,854,808 10,986,885
Exploration and evaluation 217,878 217,878
Other financial assets 6,000 6,000
TOTAL NON-CURRENT ASSETS 15,078,686 11,210,763
TOTAL ASSETS 19,165,865 13,775,036
CURRENT LIABILITIES
Trade and other payables 627,170 500,531
Short-term borrowings 1,451,764 1,063,327
Short-term provisions 48,583 27,898
TOTAL CURRENT LIABILITIES 2,127,517 1,591,756
NON-CURRENT LIABILITIES
Long-term borrowings 6,882,736 2,089,889
TOTAL NON-CURRENT LIABILITIES 6,882,736 2,089,889
TOTAL LIABILITIES 9,010,253 3,681,645
NET ASSETS 10,155,612 10,093,391
EQUITY
Issued Capital 19,168,886 17,960,750
Reserves 245,229 -
Accumulated losses (9,258,503) (7,867,359)
TOTAL EQUITY 10,155,612 10,093,391
The accompanying notes form part of these financial statements.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
Share
Capital
Ordinary Accumulated Reserves Total
Losses
Balance at 1 July 2004 12,172,148 (3,090,791) - 9,081,357
Shares issued during the 5,796,939 - 5,796,939
year
Loss attributable to members - (3,338,526) - (3,338,526)
of the parent entity
Balance at 31 December 2004 17,969,087 (6,429,317) - 11,539,770
Balance at 1 July 2005 17,960,750 (7,867,359) - 10,093,391
Shares issued during the 1,208,136 - - 1,208,136
year
Loss attributable to members (1,391,144) (1,391,144)
of the parent entity
Foreign Currency - - 187,567 187,567
Translations
Options Reserve - - 57,662 57,662
Balance at 31 December 2005 19,168,886 (9,258,503) 245,229 10,155,612
The accompanying notes form part of these financial statements.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
CONSOLIDATED CASH FLOW STATEMENT
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
Economic Entity
31 December 31 December
2005 2004
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees (766,690) (1,294,650)
Payments for exploration expenditure (228,512) (672,195)
Development costs (3,892,618) (344,594)
Interest received 300,135 58,279
Finance costs (414,764) (119,817)
Net cash flows (used in) operating (5,002,449) (2,372,977)
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and 1,607 -
equipment
Payments for property, plant and (150,708) (26,459)
equipment
Net cash flows (used in) investing (149,101) (26,459)
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of hire purchase/lease (37,402) (7,564)
liabilities
Proceeds from borrowings 5,000,000 -
Repayment of borrowings - (113,525)
Proceeds from issue of shares 1,246,073 6,457,762
Capital raising costs (49,117) (710,742)
Net cash flows provided by financing 6,159,554 5,625,931
activities
Net increase in cash held 1,008,004 3,226,495
Cash at 1 July 2005 2,564,273 1,639,462
Foreign currency translation 507,102 (140,671)
Cash at 31 December 2005 4,079,379 4,725,286
The accompanying notes form part of these financial statements.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
NOTE 1 - BASIS OF PREPARATION
The half-year financial report is a general purpose financial report prepared
in accordance with the requirements of the Corporations Act 2001, Accounting
Standard AASB 134: Interim Financial Reporting, Urgent Issues Group
Interpretations and other authoritative pronouncements of the Australian
Accounting Standards Board.
It is recommended that this financial report be read in conjunction with the
annual financial report for the year ended 30 June 2005 and any public
announcements made by Elkedra Diamonds NL during the half-year in accordance
with continuous disclosure requirements arising under the Corporations Act
2001.
As this is the first interim financial report prepared under Australian
equivalents to IFRS, the accounting policies applied are inconsistent with
those applied in the 30 June 2005 annual report as this report was presented
under previous Australian GAAP. Accordingly, a summary of the significant
accounting policies under Australian equivalents to IFRS has been included
below. A reconciliation of equity and profit and loss between previous GAAP and
Australian equivalents to IFRS has been prepared per Note 2.
The half-year report does not include full disclosures of the type normally
included in an annual financial report.
Accounting Policies
a. Principles of Consolidation
A controlled entity is any entity controlled by Elkedra Diamonds NL. Control
exists where Elkedra Diamonds NL has the capacity to dominate the decision
making in relation to the financial and operating policies of another entity so
that the other entity operates with Elkedra Diamonds NL to achieve the
objectives of Elkedra Diamonds NL.
All controlled entities have a June financial year-end.
All inter-company balances and transactions between entities in the economic
entity, including any unrealised profits or losses, have been eliminated on
consolidation. Accounting policies of subsidiaries have been changed where
necessary to ensure they are consistent with those policies as applied by
Elkedra Diamonds NL.
b. Income Tax
Deferred tax balances are determined using the balance sheet method which
calculates temporary differences based on the carrying amounts of the entity's
assets and liabilities in the balance sheet and their associated tax bases. No
deferred income tax will be recognised from the initial recognition of an asset
or liability, excluding a business combination, where there is no effect on
accounting taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the
period when the asset is realised or liability is settled. Deferred tax is
credited in the income statement except where it relates to items that may be
credited directly to equity, in which case the deferred tax is adjusted
directly against equity.
Deferred income tax assets are recognised to the extent that it is probable
that future tax profits will be available against which deductible temporary
differences can be utilised.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Tax (continued)
The amount of benefits brought to account or which may be realised in the
future is based on the assumption that no adverse change will occur in income
taxation legislation and the anticipation that the economic entity will derive
sufficient future assessable income to enable the benefit to be realised and
comply with the conditions of deductibility imposed by the law
c. Property, Plant and Equipment
Each class of property, plant and equipment is carried at cost less, where
applicable, any accumulated depreciation and impairment losses.
Plant and equipment
Plant and equipment are measured on the cost basis less depreciation and
impairment losses.
The carrying amount of plant and equipment is reviewed annually by directors to
ensure it is not in excess of the recoverable amount from these assets. The
recoverable amount is assessed on the basis of the expected net cash flows
which will be received from the assets employment and subsequent disposal. The
expected net cash flows have not been discounted to their present values in
determining recoverable amounts.
The cost of fixed assets constructed within the economic entity includes the
cost of materials, direct labour, borrowing costs and an appropriate proportion
of fixed and variable overheads.
Subsequent costs are included in the asset's carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the group and the cost of the
item can be measured reliably. All other repairs and maintenance are charged to
the income statement during the financial period in which they are incurred.
Mine Properties
The value of mine properties consists of the accumulation of all exploration,
evaluation and development expenditure relating to areas of interest where
mining has commenced. Further development expenditure incurred relating to
mining properties after the commencement of production is carried forward but
only when substantial future economic benefits are likely to be realised. If
substantial future economic benefits are unlikely, the expenditure is to be
classified as part of the cost of production. The costs of the mine properties
are to be amortised using the units-of-production method.
Depreciation
The depreciable amount of all fixed assets of the parent entity including
capitalised lease assets, but excluding freehold land and computers, is
depreciated on a reducing balance commencing from the time the asset is held
ready for use. Computers are depreciated on a straight line basis over their
useful lives to the parent entity commencing from the time the asset is held
ready for use.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property Plant and Equipment (continued)
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset Depreciation Rate
Office Equipment 25 - 50%
Plant and Equipment 15-50%
Motor Vehicles 22.5%
Office Furniture 10 - 20%
The depreciable amount of all fixed assets held by the controlled entities is
depreciated on a straight line basis.
The assets' residual values and useful lives are reviewed and adjusted if
appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated recoverable
amount.
Gains and losses on disposals are determined by comparing proceeds with the
carrying amount. These gains and losses are included in the income statement.
d. Leases
Lease payments for operating leases, where substantially all the risks and
benefits remain with the lessor, are charged as expenses in the periods in
which they are incurred.
Leases of fixed assets where substantially all the risks and benefits
incidental to the ownership of the asset, but not the legal ownership, are
transferred to entities in the economic entity are classified as finance
leases. Finance leases are capitalised, recording an asset and a liability
equal to the present value of the minimum lease payments, including any
guaranteed residual values. Leased assets are depreciated on a straight line
basis over their estimated useful lives where it is likely that the economic
entity will obtain ownership of the asset or over the term of the lease. Lease
payments are allocated between the reduction of the lease liability and the
lease interest tax expense for the period.
e. Exploration, Evaluation and Development Expenditure
Exploration, evaluation and development expenditure incurred is either written
off as incurred or accumulated in respect of each identifiable area of
interest. Costs are only carried forward to the extent that they are expected
to be recouped through the successful development of the area, sale of the
respective areas of interest or where activities in the area have not yet
reached a stage which permits reasonable assessment of the existence of
economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full
against profit in the year in which the decision to abandon the area is made.
When production commences, the accumulated costs for the relevant area of
interest are amortised over the life of the area according to the rate of
depletion of the economically recoverable reserves.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Exploration, Evaluation and Development Expenditure (Continued)
A regular review is undertaken of each area of interest to determine the
appropriateness of continuing to carry forward costs in relation to that area
of interest.
Restoration, rehabilitation and environmental costs necessitated by exploration
and evaluation activities are expensed as incurred and treated as exploration
and evaluation expenditure.
Any restoration, rehabilitation and environmental costs necessitated by
development of the Chapada mine property is to be expensed immediately in the
income statement as rehabilitation is completed on an ongoing basis. A
provision will be created for any liabilities created for restoration costs to
be incurred in future periods.
f. Employee Benefits
Provision is made for the economic entity's liability for employee benefits
arising from services rendered by employees to the balance date. Employee
benefits expected to be settled within one year together with entitlements
arising from wages and salaries and annual leave which will be settled after
one year, have been measured at the amounts expected to be paid when the
liability is settled, plus related on costs. Other employee benefits payable
later than one year have been measured at the present value of the estimated
future cash outflows to be made for those benefits.
g. Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of
three months or less and bank overdrafts. Bank overdrafts are shown within
short-term borrowings in current liabilities on the balance sheet.
h. Revenue
Revenue from the sale of goods is recognised upon the delivery of goods to
customers.
Interest revenue is recognised on a proportional basis taking into account the
interest rates applicable to the financial assets.
Dividend revenue is recognised when the right to receive a dividend has been
established. Dividends received from controlled entities are bought to account
when they are proposed by the controlled entity.
Revenue from the rendering of a service is recognised upon the delivery of the
service to the customers.
All revenue is stated net of the amount of goods and services tax (GST).
i. Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except
where the amount of GST incurred is not recoverable from the Australian Tax
Office. In these circumstances the GST is recognised as part of the cost of
acquisition of the asset or as part of an item of the expense. Receivables and
payables in the statement of financial position are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except
for the GST component of investing and financing activities, which are
disclosed as operating cash flows.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
j. Issued Capital
Issued and paid up capital is recognised at the fair value of the consideration
received by the company. Any transaction costs arising on the issue of ordinary
shares are recognised directly in equity as a reduction of the share proceeds
received.
k. Provisions
Provisions are recognised when the group has a legal or constructive
obligation, as a result of past events, for which it is probable that an
outflow of economic benefits will result and that the outflow can be reliably
measured.
l. Impairment of Assets
At each reporting date, the group reviews the carrying values of its tangible
and intangible assets to determine whether there is any indication that those
assets have been impaired. If such an indication exists, the recoverable amount
of the asset, being the higher of the asset's fair value less costs to sell and
value in use, is compared to the asset's carrying value. Any excess of the
asset's carrying value over its recoverable amount is expensed to the income
statement.
Where it is not possible to estimate the recoverable amount of an individual
asset, the group estimates the recoverable amount of the cash-generating unit
to which the asset belongs.
m. Comparative Figures
Where required by Accounting Standards, comparative figures have been adjusted
to conform to changes in presentation for the current financial year.
n. Foreign Currency Transactions and Balances
Functional and Presentation Currency
The functional currency of each of the group's entities is measured using the
currency of the primary economic environment in which that entity operates. The
consolidated financial statements are presented in Australian dollars which is
the parent entity's functional and presentation currency.
Exchange differences arising on the translation of monetary items are
recognised in the income statement, except where deferred in equity as a
qualifying cash flow or net investment hedge.
Exchange differences arising on the translation of non-monetary items are
recognised directly in equity to the extent that the gain or loss is directly
recognised in equity, otherwise the exchange difference is recognised in the
income statement.
Group Companies
The financial results and position of foreign operations whose functional
currency is different from the group's presentation currency are translated as
follows:
* Assets and liabilities are transferred at year-end exchange rates
prevailing at the reporting date.
* Income and expenses are translated at average exchange rates for the
period.
* Retained profits are translated at the exchange rates prevailing at the
date of the transaction.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign Currency Transaction and Balances (continued)
Exchange differences arising on translation of foreign operations are
transferred directly to the group's foreign currency translation reserve in the
balance sheet. These differences are recognised in the income statement in the
period in which the operation is disposed.
o. Financial Instruments
Recognition
Financial instruments are initially measured at cost on trade date, which
includes transaction costs, when the related contractual rights or obligations
exist. Subsequent to initial recognition these instruments are measured as set
out below.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market and are stated at
an amortised cost using the effective interest rate method.
Held-to-Maturity Investments
These investments have fixed maturities and it is the group's intentions to
hold these investments to maturity. Any held-to-maturity investments held by
the group are stated at amortised cost using the effective interest rate
method.
Financial Liabilities
Non-derivative financial liabilities are recognised at an amortised cost,
comprising the original debt less principal payments and amortisation.
Impairment
At each reporting date, the group assesses whether there is objective evidence
that a financial instrument has been impaired. Impairment losses are recognised
in the income statement.
Convertible Notes
Convertible notes are brought to account on issue at the value of net proceeds
received. The converting notes are compound financial instruments where the
interest payments are at fixed amounts with scheduled dates of payments and the
number of ordinary shares to be issued on conversion is in part determined by
the market price of ordinary shares at date of conversion. The present value of
the interest and principal payable on conversion are discounted at the market
rate of interest at issue date and are brought to account as borrowings. The
difference between the net proceeds received and the borrowings component is
brought to account as equity. Interest paid on the converting notes are
recognised as interest expense in the profit from ordinary activities.
p. Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or
production of assets that necessarily take a substantial period of time to
prepare for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their intended use or
sale.
All other borrowing costs are recognised in income in the period in which they
are incurred.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
NOTE 2 - FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL
FINANCIAL REPORTING STANDARDS
Reconciliation of Equity at 1 July 2004
Economic Entity
Previous GAAP Adjustments AIFRS
At 1 July 2004 at 1 July
2004
$
$
Current Assets
Cash and cash equivalents 1,639,462 - 1,639,462
Receivables 80,197 - 80,197
Other current assets 127,110 - 127,110
Total Current Assets 1,846,769 - 1,846,769
Non-Current Assets
Property Plant & Equipment 2a 298,452 8,964,030 9,262,482
Exploration and evaluation 2a 11,457,111 (8,964,030) 2,493,081
Other financial assets - - -
Total Non-Current Assets 11,755,563 - 11,755,563
TOTAL ASSETS 13,602,332 - 13,602,332
Current Liabilities
Trade and other payables 1,097,048 - 1,097,048
Short-term borrowings 303,842 - 303,842
Short-term provisions 20,361 - 20,361
Other 29,854 - 29,854
Total Current Liabilities 1,451,105 - 1,451,105
Non-Current Liabilities
Long-term borrowings 3,069,870 - 3,069,870
Total Non-Current 3,069,870 - 3,069,870
Liabilities
TOTAL LIABILITIES 4,520,975 - 4,520,975
NET ASSETS 9,081,357 - 9,081,357
EQUITY
Issued Capital 12,172,148 - 12,172,148
Accumulated Losses (3,090,791) - (3,090,791)
TOTAL EQUITY 9,081,357 - 9,081,357
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
NOTE 2 - FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL
FINANCIAL REPORTING STANDARDS (CONT'D)
Reconciliation of Equity at 31 December 2004
Economic Entity
Previous GAAP Adjustment AIFRS
at 31 December at 31
2004 December 2004
$ $
Current Assets
Cash and cash equivalents 4,725,286 - 4,725,286
Receivables 1,095 - 1,095
Other current assets - - -
Total Current Assets 4,726,381 - 4,726,381
Non-Current Assets
Property Plant & Equipment 2a 633,896 8,964,030 9,597,926
Exploration and evaluation 2a 9,573,628 (8,964,030) 609,598
Other financial assets 167,595 - 167,595
Total Non-Current Assets 10,375,119 - 10,375,119
TOTAL ASSETS 15,101,500 - 15,101,500
Current Liabilities
Trade and other payables 501,122 - 501,122
Short-term borrowings 16,506 - 16,506
Short-term provisions 30,161 - 30,161
Other 3,379 - 3,379
Total Current Liabilities 551,168 - 551,168
Non-Current Liabilities
Long-term borrowings 3,010,562 - 3,010,562
Total Non-Current 3,010,562 - 3,010,562
Liabilities
TOTAL LIABILITIES 3,561,730 - 3,561,730
NET ASSETS 11,539,770 - 11,539,770
EQUITY
Issued Capital 17,969,087 - 17,969,087
Accumulated Losses (6,429,317) - (6,429,317)
TOTAL EQUITY 11,539,770 - 11,539,770
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
NOTE 2 - FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL
FINANCIAL REPORTING STANDARDS (CONT'D)
Reconciliation of Equity at 30 June 2005
Economic Entity
Previous GAAP Adjustment AIFRS
At 30 June at 30 June
2005 2005
$ $
Current Assets
Cash and cash equivalents 2,564,273 - 2,564,273
Receivables - - -
Other current assets - - -
Total Current Assets 2,564,273 - 2,564,273
Non-Current Assets
Property Plant & Equipment 2a 421,977 10,564,908 10,986,885
Exploration and evaluation 2a 10,782,786 (10,564,908) 217,878
Other financial assets 6,000 - 6,000
Total Non-Current Assets 11,210,763 - 11,210,763
TOTAL ASSETS 13,775,036 - 13,775,036
Current Liabilities
Trade and other payables 500,531 - 500,531
Short-term borrowings 1,063,327 - 1,063,327
Short-term provisions 27,898 - 27,898
Total Current Liabilities 1,591,756 - 1,591,756
Non-Current Liabilities
Long-term borrowings 2,089,889 - 2,089,889
Total Non-Current 2,089,889 - 2,089,889
Liabilities
TOTAL LIABILITIES 3,681,645 - 3,681,645
NET ASSETS 10,093,391 - 10,093,391
EQUITY
Issued Capital 17,960,750 - 17,960,750
Accumulated Losses (7,867,359) - (7,867,359)
TOTAL EQUITY 10,093,391 - 10,093,391
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
NOTE 2 - FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL
FINANCIAL REPORTING STANDARDS (CONT'D)
Reconciliation of Profit or Loss for the half year ending 31 December 2004
Economic Entity
Previous Adjustment AIFRS
GAAP $
$
Revenue 58,279 - 58,279
Depreciation expense (35,610) - (35,610)
Employee benefits expense (335,674) - (335,674)
Drilling costs (101,337) - (101,337)
Tenement holding costs (157,029) - (157,029)
Other field exploration (269,268) - (269,268)
costs
Administration expenses (335,726) - (335,726)
Finance costs (119,817) - (119,817)
Tenements written-off (3,874) - (3,874)
Tenements provided for (1,883,482) - (1,883,482)
Other expenses (14,317) - (14,317)
Foreign currency (140,671) - (140,671)
translation
Loss before income tax (3,338,526) - (3,338,526)
expense
Income tax expense - - -
Net loss attributable to (3,338,526) - (3,338,526)
members of the parent
entity
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
NOTE 2 - FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL
FINANCIAL REPORTING STANDARDS (CONT'D)
Reconciliation of Profit or Loss for the full year ending 30 June 2005
Economic Entity
Previous Adjustment AIFRS
GAAP $
$
Revenue 129,724 - 129,724
Depreciation expense (75,004) - (75,004)
Employee benefits expense (888,622) - (888,622)
Drilling costs (101,337) - (101,337)
Tenement holding costs (182,521) - (182,521)
Other field exploration (206,503) - (206,503)
costs
Administration expenses (902,059) - (902,059)
Finance costs (252,737) - (252,737)
Tenements written-off (2,275,202) - (2,275,202)
Tenements provided for - - -
Other expenses (61,653) - (61,653)
Foreign currency 39,346 - 39,346
translation
Loss before income tax (4,776,568) - (4,776,568)
expense
Income tax expense - - -
Net loss attributable to (4,776,568) - (4,776,568)
members of the parent
entity
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
NOTE 2 - FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL
FINANCIAL REPORTING STANDARDS (CONT'D)
Notes to the reconciliation of equity and profit and loss at 1 July 2004, 31
December 2004 and 30 June 2005
a. Under Australian equivalents to IFRS, AASB 6 Exploration for and Evaluation
of Mineral Resources is restricted to the treatment of exploration and
evaluation expenditures. The costs relating to mine development is now
treated under AASB 116 Property, Plant and Equipment and as result the
capitalised development expenditure has been transferred accordingly.
NOTE 3 - CONTINGENT LIABILITIES
There has been no change in contingent liabilities since the last annual
reporting date.
NOTE 4 - LOSS FROM ORDINARY ACTIVITIES
The following revenue and expense items are relevant in explaining the
financial performance for the interim period:
31 December 31 December
2005 2004
$ $
Write-off of capitalised exploration - (3,874)
expenditure on areas of interest abandoned
during the period
Tenements provided for - (1,883,482)
NOTE 5 - EVENTS SUBSEQUENT TO REPORTING DATE
No matters or circumstances have arisen since balance date which significantly
affected or may significantly affect the operations of the economic entity, the
results of those operations, or the state of the affairs of the economic entity
in subsequent reporting periods.
NOTE 6 - SEGMENT INFORMATION
Primary reporting - Geographical segments
For the half year ending 31 December 2005, the economic entity operated in one
business and two geographical segments, being minerals exploration in Australia
and Brazil, as on 14 June 2004 the Company acquired Chapada Diamonds Ltd.
Chapada Diamonds Ltd and its subsidiary operate primarily in Brazil.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2005
NOTE 6 - SEGMENT INFORMATION (CONTINUED)
Primary Reporting - Geographical Segments
Australia Brazil Eliminations Economic Entity
2005 2004 2005 2004 2005 2004 2005 2004
Revenue
External - - - - - - - -
Sales
Other Income 29,886 58,272 270,249 7 - - 300,135 58,279
Total 29,886 58,272 270,249 7 - - 300,135 58,279
Segment
Revenue
Result
Segment (1,142,764) (3,216,931) (248,380) (121,595) - - (1,391,144) (3,338,526)
Result
Unallocated - -
Corporate
Expenses
Result from (1,391,144) (3,338,526)
ordinary
Activities
before
income tax
Result from (1,391,144) (3,338,526)
ordinary
Activities
after income
tax
Net Profit/ (1,391,144) (3,338,526)
(Loss)
Secondary Reporting - Business Segments
The economic entity operates predominantly in one business segment being
diamond mine development in Brazil and diamond exploration in Australia and
Brazil. Reporting on business segments is similar to the main financial
statements and is therefore not applicable to restate.
ELKEDRA DIAMONDS NL
ABN 42 092 334 220
DIRECTORS' DECLARATION
The directors of the company declare that:
a. The financial statements and notes, as set out on pages 4 to 20:
i. comply with Accounting Standard AASB134: Interim Financial Reporting and
the Corporations Regulations; and
ii. give a true and fair view of the economic entity's financial position as at
31 December 2005 and of its performance for the half-year ended on that
date.
b. In the directors' opinion there are reasonable grounds to believe that the
company will be able to pay its debts as and when they become due and
payable.
This declaration is made in accordance with a resolution of the Board of
Directors by:
M.D.J. Cozijn S Randazzo
Director/Company Secretary Executive Director
Perth, Western Australia
27th February 2006
Grant Thornton Western Australian Partnership
ABN 21 965 022 882
Chartered Accountants, Business Advisers and Consultants
INDEPENDENT REVIEW REPORT
TO THE MEMBERS OF ELKEDRA DIAMONDS NL
Scope
The half-year financial report and directors' responsibility
The half-year financial report comprises the balance sheet, income statement,
statement of changes in equity, cash flow statement, notes to the financial
statements and the directors' declaration for the consolidated entity, for the
half-year ended 31 December 2005. The consolidated entity comprises both
Elkedra Diamonds NL (the company) and the entities it controlled during that
half-year.
The directors of the company are responsible for the preparation and true and
fair presentation of the half-year financial report in accordance with the
Corporations Act 2001. This includes responsibility for the maintenance of
adequate accounting records and internal controls that are designed to prevent
and detect fraud and error, and for the accounting policies and accounting
estimates inherent in the half-year financial report.
Review approach
We conducted an independent review of the half-year financial report in order
to state whether, on the basis of the procedures described, anything has come
to our attention that would indicate that the half-year financial report is not
presented fairly in accordance with Accounting Standard AASB 134: Interim
Financial Reporting and other mandatory professional reporting requirements in
Australia and statutory requirements so as to present a view which is
consistent with our understanding of the consolidated entity's financial
position and performance as represented by the results of its operations and
its cash flows, and in order for the company to lodge the half-year financial
report with the Australian Securities & Investments Commission/Australian Stock
Exchange Limited.
Our review has been conducted in accordance with Australian Auditing Standards
applicable to review engagements. A review is limited primarily to inquiries of
company personnel and analytical procedures applied to the financial data.
These procedures do not provide all the evidence that would be required in an
audit, thus the level of assurance provided is less than given in an audit. We
have not performed an audit and, accordingly, we do not express an audit
opinion.
Level 6
256 St Georges Terrace
Perth 6000 Australia
GPO Box P1213
Perth WA 6844
T + 61 8 9481 1448
F + 61 8 9481 0152
E gtperth@gtwa.com.au
W www.grantthornton.com.au
An independent Western Australian partnership entitled to trade under the
international name Grant Thornton.
Grant Thornton is a trademark owned by Grant Thornton International and used
under licence by independent firms and entities throughout the world.
INDEPENDENT REVIEW REPORT
TO THE MEMBERS OF ELKEDRA DIAMONDS NL (cont)
Independence
In conducting our review, we followed the applicable independence requirements
of Australian professional and ethical pronouncements and the Corporations Act
2001.
In accordance with ASIC Class Order 05/83, we declare to the best of our
knowledge and belief that the auditor's independence declaration has not
changed as at the date of providing our review opinion.
Statement
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the half-year financial report of Elkedra
Diamonds NL is not in accordance with:
a. the Corporations Act 2001, including:
i. giving a true and fair view of the consolidated entity's financial position
as at 31 December 2005 and of its performance for the half-year ended on
that date; and
ii. complying with Accounting Standard AASB 134: Interim Financial Reporting
and the Corporations Regulations 2001; and
b. other mandatory professional reporting requirements in Australia.
GRANT THORNTON WESTERN AUSTRALIAN PARTNERSHIP
GREG LEGUIER
Partner
Dated 27 February 2006
Level 6
256 St Georges Terrace
Perth 6000 Australia
GPO Box P1213
Perth WA 6844
T + 61 8 9481 1448
F + 61 8 9481 0152
E gtperth@gtwa.com.au
W www.grantthornton.com.au
An independent Western Australian partnership entitled to trade under the
international name Grant Thornton.
Grant Thornton is a trademark owned by Grant Thornton International and used
under licence by independent firms and entities throughout the world
CORPORATE DETAILS
END
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