RNS Number:0395Z
GVM Metals Ltd
28 February 2006
FOR IMMEDIATE RELEASE 28 February 2006
GVM METALS LIMITED
(i) ABN 98 008 905 388
HALF-YEAR FINANCIAL REPORT
31 DECEMBER 2005
The directors present their report together with the consolidated financial
report for the half-year ended 31 December 2005 and the auditor's review report
thereon:
1. Directors
The directors of the Company in office during or since the end of the half-year
are:
Name Period of directorship
Mr Richard Linnell Appointed 1 August 2001
Chairman
Mr Simon J Farrell Director since 21 December 2000
(1) Managing Director
Mr Peter G Cordin Director since 1 December 1997
Director
Mr Blair E Sergeant Appointed 30 June 2004
Director
2. Results
The results of the Consolidated Entity for the half-year ended 31 December 2005
after income tax was a loss of $141,447.
3. Review of Activities
Highlights
* Shares commenced trading on the Alternative Investment
Market (AIM) of the London Stock Exchange on 16 December 2005.
* Nimag (Pty) Ltd's nickel magnesium alloy business
operated ahead of budget despite continued pressure as a result of the
strong Rand and reported a profit before interest and tax for the half year
of R5,050,000 (A$1,034,000). The Rand strengthened by some 8% against the
US Dollar over the six month period.
* Following the completion of the scoping study, the
Holfontein Coal Project (GVM 49%) is estimated to contain an indicated
resource of 56 million tonnes.
* R4,325,000 (A$936,800) of Nimag debt and US$151,800
(A$208,000) of MATS debt was repaid during the period under review.
Discussion of the Results
NiMag Group of Companies ("Nimag")
(GVM - 74% with option to acquire balance by share issue)
The overall results of Nimag were pleasing despite the continued strengthening
of the Rand during the period under review. Nickel Magnesium alloy sales remain
very strong and are the core income generator for the group. The smaller FeSi
Mag and Fibres performed below budget as a result of the strong Rand, though
both business units recovered towards the end of the six month period and are
expected to report profits during the latter half of the financial year.
Nimag traditionally earns about 60% of its annual profits during the second half
of its financial year. Though the continued strong performance of the Rand is
less than ideal for the company, it is partly off-set by the high nickel price.
Nimag also continues to seek expansion into new markets and the outlook for the
rest of the year remains positive. In summary, continued earnings growth through
to the end of the financial year is anticipated.
SA Mineral Resources Corporation Limited ("SAMROC")
The company was severely affected by the absence of orders from its major
customer during the first six months of the year. The company commenced
operating at normal levels during January 2006 and is expected to be cash flow
positive during the remainder of the year.
GVM recently announced its intention to dispose of the Samroc investment. It is
anticipated that the disposal will realise approximately A$750,000. Accordingly,
the investment in Samroc has been reclassified as a Non-Current Asset Held for
Sale in the balance sheet. Under applicable accounting standards, GVM will no
longer recognize its share of SAMROC's trading results from 1 January 2006.
Holfontein Coal Project - GVM 49%
The project is estimated to contain an indicated resource of 56 million tonnes
following a scoping study.
The study was based on mining of 140,000 tonnes per month yielding 870,000
tonnes of steaming coal and 420,000 tonnes of coking coal per annum. At current
prices this equates to annual revenue of R200 million. GVM's share of the NPV is
estimated at $19million using a 10% discount rate and its share of the annual
after tax cash flow is $3million, once full production is reached.
The bankable feasibility study will commence once the "new mining titles" are
issued. This is expected during the first quarter of 2006.
Exploration Activities
No exploration activities were undertaken on the Company's limited properties.
Financial review
The Nimag Group's financial results were in line with the results achieved
during the comparative 2004 period and the operations, except for Samroc,
performed in line with budget. The difference between the 2004 and 2005 half
year results are mainly due to:
* $215,000 once-off listing expenses in relation to the AIM listing;
* $366,328 profit on the sale of GMA shares during 2004 compared to a loss of
$67,992 during the December 2005 half year. GVM has now completed its
divestment from GMA; and
* The share of the Samroc loss of $98,630.
The Rand as at 31 December 2005 was 9.4% stronger against the A$ compared to 30
June 2005, resulting in a significant increase in the A$ equivalent of the
Nimag loans at the balance sheet date. However, R4,325,000 (A$936,800) of Nimag
debt and US$151,800 (A$208,000) of MATS debt was repaid during the period under
review.
The December 2004 profit excluding the profit on the sale of the GMA shares
(i.e. profit from normal operations) comprised 33% of the 2005 annual profit.
This is mainly due to the fact that Nimag earns between 60 and 65% of its
profits in the latter half of its financial years. The 2006 forecast is in line
with this tendency and strong profits are expected during the latter half of
the financial year. The Rand has increased on average by 5% against the
Australian Dollar during the first two months. The strong performance of the
Rand against the Australian Dollar could further underpin the Nimag profits
during the second half of the year.
Adoption of Australian Equivalents 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 this report.
EVENTS SUBSEQUENT TO REPORTING DATE
No material events took place between the reporting date and the date of this
report.
AUDITOR'S INDEPENDENCE DECLARATION
A copy of the auditor's independence declaration as required under Section 307C
of the Corporations Act 2001 is set out on page 25.
Dated at Perth, Western Australia, this 28th day of February 2006.
Signed in accordance with a resolution of the directors:
________________________________
S.J. Farrell
Director
CONSOLIDATED INCOME STATEMENT Consolidated Consolidated
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
Note 31.12.2005 31.12.2004
$ (IFRS
restated)
$
Sale of goods 15,137,300 15,532,256
Gain/(Loss) from disposal of investments (67,992) 366,328
Other 176,737 225,293
Total revenue 15,246,045 16,123,877
Changes in inventory of finished goods (947,957) (571,136)
Raw materials and consumables used (10,623,356) (11,372,530)
Consulting, accounting & professional (217,469) (251,056)
expenses
Employee expenses (1,438,889) (1,470,353)
Depreciation and amortisation expenses (126,441) (161,167)
Diminution in investments (1,081) (273,768)
Bad debt expense (1,159) -
Exploration expense - (1,598)
Office rent and outgoings (75,326) (37,768)
Borrowing costs (346,902) (478,899)
Other expenses from ordinary activities (1,377,445) (727,667)
Share of net profit/(losses) of associate
accounted for using the equity method (98,630) 176
(Loss)/Profit from continuing operations (8,610) 778,111
before income tax
Income tax expense (132,837) (223,692)
(Loss)/Profit from continuing operations
after related income tax expense (141,447) 554,419
Outside equity interest (124,690) (124,203)
Net (loss)/profit attributable to members (266,137) 430,216
of the parent entity
Basic (loss)/profit per share for GVM (0.96 cents) 1.64 cents
Metals Limited
There are no dilutive potential ordinary
shares therefore diluted profit per share
has not been calculated or disclosed. The
GVM shares were consolidated in the ratio
10:1 during the period under review and the
comparative earnings per share is restated
accordingly.
The accompanying notes form part of these financial statements.
Consolidated Consolidated
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2005 Note 31 December 2005 30 June 2005
$ (IFRS re-stated)
$
CURRENT ASSETS
Cash assets 1,333,937 1,806,353
Receivables 3,942,083 4,216,583
Inventory 2,709,101 3,363,679
Other financial assets 885,446 1,498,009
Total Current Assets 8,870,567 10,884,624
NON CURRENT ASSETS
Assets held for sale (Investment in 3 124,176 222,806
an associate)
Intangibles 9,206,288 9,206,288
Other financial assets 711,556 925,645
Property, plant and equipment 2,407,471 2,434,245
Deferred tax 26,887 26,886
Total Non Current Assets 12,476,378 12,815,870
TOTAL ASSETS 21,346,945 23,700,494
CURRENT LIABILITIES
Payables 3,726,408 6,178,289
Interest bearing liabilities 3,316,466 2,016,220
Provisions (3,110) 99,986
Current tax liability 123,909 116,810
Total Current Liabilities 7,163,673 8,411,305
NON CURRENT LIABILITIES
Payables 1,367,951 1,580,489
Interest bearing liabilities 4,228,738 4,736,731
TOTAL NON CURRENT LIABILITIES 5,596,689 6,317,220
TOTAL LIABILITIES 12,760,362 14,728,525
NET ASSETS 8,586,583 8,971,969
EQUITY
Issued Capital 4 34,550,936 34,500,935
Reserves 1,030,566 1,244,562
Accumulated losses (30,345,782) (30,079,645)
TOTAL PARENT EQUITY INTEREST 5,235,719 5,665,852
OUTSIDE EQUITY INTEREST 3,350,864 3,306,117
TOTAL EQUITY 8,586,583 8,971,969
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE HALF YEAR
ENDED 31 DECEMBER 2005 $ $ $ $ $
Note Share Capital Foreign Retained Total
Capital Profit Translation profits
Ordinary Reserves Reserve
Balance at 1.7.2004 33,469,250 136,445 599,872 (30,872,984) 3,332,583
Profit attributable to 430,216 430,216
members of parent
entity
Foreign currency 45,543 45,543
translation
adjustments
Balance at 31.12.2004 33,469,250 136,445 645,415 (30,442,768) 3,808,342
Balance at 1.7.2005 34,500,935 136,445 1,108,117 (30,079,645) 5,665,852
Shares issued during 50,000 50,000
the period
Loss attributable to (266,137) (266,137)
members of parent
entity
Foreign currency
translation
adjustments (213,996) (213,996)
attributable to
members of parent
entity
Balance at 31.12.2005 34,550,935 136,445 894,121 (30,345,782) 5,235,719
The accompanying notes form part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENT FOR THE Consolidated Consolidated
HALF-YEAR ENDED 31 DECEMBER 2005
31.12.2005 31.12.2004
$ $
Cash Flows used in Operating Activities
Cash receipts in the course of operations 15,574,251 15,936,129
Interest received 14,287 34,990
Cash payments in the course of operations (15,966,308) (14,667,157)
Interest paid (346,902) (478,899)
Tax paid (125,739) (205,149)
Net cash generated by/(used in) operating (850,411) 619,914
activities
Cash Flows used in Investing Activities
Proceeds from sale of equity investments 169,137 939,827
Payments for investments (24,121) (2,256,168)
Payments for property, plant and equipment (99,668) (39,234)
Net cash provided by investing activities 45,348 (1,355,575)
Cash Flows from Financing Activities
Proceeds from issues of shares and options
to outside equity interest 50,000 -
Proceeds from borrowings - 1,796,183
Repayment of borrowings (533,487) (1,134,773)
Net cash provided by financing activities (483,487) 661,410
NET INCREASE IN CASH HELD (1,288,550) (74,251)
Cash at the beginning of the half-year 1,027,493 767,070
Exchange rate adjustment (297,069) 20,063
Cash at the end of the half-year (558,126) 712,882
The accompanying notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005
NOTE 1 - BASIS OF PREPARATION
The half-year consolidated financial statements are 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 GVM Metals Limited and its controlled entities 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 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
Controlled entities
The financial statements of controlled entities results are included from the
date control commences until the date control ceases.
Outside interests in the equity and results of the entities that are controlled
by the Company are shown as a separate item in the consolidated financial
statements.
Associates
Associates are those entities, other than partnerships, over which the
consolidated entity exercises significant influence and which are not intended
for sale in the near future.
In the consolidated financial statements, investments in associates are
accounted for using equity accounting principles. Investments in associates are
carried at the lower of the equity accounted amount and recoverable amount. The
consolidated entity's equity accounted share of the associates' net profit or
loss is recognised in the consolidated income statement from the date the
significant influence commences until the date the significant influence ceases.
Other movements in reserves are recognised directly in the consolidated
reserves.
Transactions eliminated on consolidation
The balances and effects of transactions, between controlled entities included
in the consolidated financial statements have been eliminated.
(b) Revenue recognition
Revenues are recognised at fair value of the consideration received net of the
amount of goods and services tax ("GST"). Exchanges of goods or services of the
same nature and value without any cash consideration are not recognised as
revenues.
Sale of goods
Revenue from the sale of nickel magnesium alloys (NiMag), ferro-nickel magnesium
alloys (FeNiMag), ferro-silicon magnesium alloys (FeSiMag) and other master
alloys are recognised when control of the goods passes to the customer. For
local sales this is usually when the customer receives the goods. For export
sales it is determined based on individual sales agreements however control
usually passes when the goods are received by the shipping agent and the bill of
lading is sighted by the customer.
Interest revenue
Interest revenue is recognised as it accrues, taking into account the effective
yield of the financial asset.
Sale of non-current assets
The gain or loss on disposal is calculated as the difference between the
carrying amount of the asset at the time of disposal and the net proceeds on
disposal.
(c) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and
services tax (GST), except where the amount of GST incurred is not recoverable
from the Australian Tax Office (ATO). In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of the
item of the expense.
Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the ATO is included as a
current asset or liability in the balance sheet.
Cashflows are included in the statement of cash flows on a gross basis. The GST
components of cashflows arising from investing and financing activities which
are recoverable from, or payable to, the ATO are classified as operating
cashflows.
(d) Cash assets
For the purposes of the Statement of Cashflows, cash includes deposits which are
readily convertible to cash on hand and which are used in the cash management
function on a day-to-day basis, net of outstanding bank overdrafts.
(e) Acquisition of Assets
All assets acquired including property, plant and equipment and intangibles
other than goodwill are initially recorded at their cost of acquisition at the
date of the acquisition, being the fair value of the consideration provided plus
incidental costs directly attributable to the acquisition. When equity
instruments are issued as consideration, their market price at the date of the
acquisition is used as fair value except where the notional price at which they
could be placed in the market is a better indication of fair value.
(f) Property, Plant & Equipment
Each class of property, plant and equipment is carried at cost less, where
applicable, any accumulated depreciation and impairment losses.
Property
Freehold land and buildings are measured on the cost basis, less subsequent
depreciation (for buildings) 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 theses assets. The recoverable amount is assessed on the basis of the
expected net cash flows that will be received from the assets' employment and
subsequent disposal. The expected net cash flows have been discounted to their
present values in determining recoverable amounts.
The costs of fixed assets constructed within the economic entity include the
cost of materials, direct labour, borrowing costs and an appropriate proportion
of fixed and variable costs.
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.
(g) Depreciation and Amortisation
The depreciable amount of all fixed assets including buildings and capitalised
leased assets, but excluding freehold land, is depreciated on a straight line
and reducing balance methods over their estimated useful lives to the economic
entity commencing from the time the asset is held ready for use. Leasehold
improvements are depreciated over the shorter of either the unexpired period of
the lease or the estimated useful lives of the improvements.
The depreciation and amortisation rates used for each class of assets are as
follows:
Range - 2005 Range - 2004
* Furniture, fittings and office equipment 13% - 50% 13% - 33%
* Motor vehicles 20% - 33% 20% - 33%
* Plant & equipment 20% 20%
* Leasehold Improvements 25% 20%
* Buildings 20% 20%
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.
(h) 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 in the income
statement.
Impairment testing is performed annually for goodwill and intangible assets with
indefinite lives.
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.
(i) Income tax
The charge for current income tax expense is based on the profit for the year
adjusted for any non-assessable or disallowed items. It is calculated using the
tax rates that have been enacted or are substantially enacted by the balance
date.
Deferred tax is accounted for using the balance sheet liability method in
respect of temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. No deferred
tax will be recognised from the initial recognition of an asset or liability,
excluding a business combination, where there is no effect on accounting or
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 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.
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 tax
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.
During the 2002/03 financial year, legislation was enacted to allow groups,
comprising of a parent entity and its Australian resident wholly owned entities,
to elect to consolidate and be treated as a single entity for income tax
purposes. The legislation, which includes both elective and mandatory elements,
is applicable to the Consolidated Entity. As at 31 December 2005, the directors
of the Company have not made a decision to elect to be taxed as a single entity.
The financial effect of the legislation has not been brought to account in the
financial statements for the half year 31 December 2005.
(j) Leases
Operating leases
Lease payment for the operating leases, where substantially all the risks and
benefits remain with the lessor are charged as expenses in the period in which
they are incurred.
(k) Exploration and evaluation expenditure
Exploration, evaluation and development expenditure incurred is accumulated in
respect of each identifiable area of interest. These costs are only carried
forward to the extent that they are expected to be recouped through the
successful development of the area or where activities in the area have not yet
reached a stage that 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. 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.
(l) Employee Benefits
Provision is made for the company's liability for employee benefits arising from
services rendered by employees to balance date. Employee benefits that are
expected to be settled within one year have been measured at the amounts
expected to be paid when the liability is settled, plus related on-costs.
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.
(m) Receivables
Amounts receivable from third parties are carried at amounts due. The
recoverability of the debts is assessed at balance date and specific provision
is made for any doubtful accounts.
(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.
Transaction and balances
Foreign currency transactions are translated into functional currency using the
exchange rates prevailing at the date of the transaction. Foreign currency
monetary items are translated at the year-end exchange rate. Non-monetary items
measured at historical cost continue to be carried at the exchange rate at the
date of the transaction. Non-monetary items measured at fair value are reported
at the exchange rate at the date when fair values were determined.
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 difference 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 translated at year-end exchange rates prevailing at
that 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.
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) Inventories
Inventories are measured at the lower of cost and net realisable value. The cost
of manufactured products includes direct materials, direct labour and an
appropriate portion of variable and fixed overheads. Overheads are applied on
the basis of normal operating capacity. Costs are assigned on the basis of
weighted average costs.
(p) Financial Instruments
Recognition
Financial instruments are initially measured at cost on trade date, which
include transaction costs, when the related contractual rights and obligations
exist. Subsequent to initial recognition, these instruments are measured as set
out below.
Financial assets at fair value through profit and loss
A financial asset is classified in this category if acquired principally for the
purpose of selling in the short term or if so designated by management and
within the requirements of AASB 139: Financial Instruments - Recognition and
Measurement. Derivatives are also categorised as held for trading hedges.
Realised and unrealised gains and losses arising from changes in the fair value
of these assets are included in the income statement in the period in which they
arise.
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
amortised cost using the effective interest rate method.
Held-to-maturity investments
These investments have fixed maturities, and it is the group's intention 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.
Available-for-sale financial assets
Available-for-sale financial assets include any financial assets not included in
the above categories. Available-for-sale financial assets are reflected at fair
value. Unrealised gains or losses arising from changes in fair value are taken
directly to equity.
Financial Liabilities
Non-derivative financial liabilities are recognised at amortised cost,
comprising original debt less principal payments and amortisation.
Derivative Instruments
Derivative instruments are measured at fair value. Gains and losses arising from
changes in fair value are taken to income statement unless they are designated
as hedges.
Fair Value
Fair value is determined based on current bid prices for all quoted investments.
Valuation techniques are applied to determine the fair value for all unlisted
securities, including recent arms length transaction, reference to similar
instruments and option pricing models.
Impairment
At each reporting date, the group assess whether there is objective evidence
that a financial instrument has been impaired. In the case of available-for-sale
financial instruments, a prolonged decline in value of the instrument is
considered to determine whether impairment has arisen. Impairment losses are
recognised in the income statement.
(q) Goodwill
Goodwill and goodwill on consolidation are initially recorded at the amount by
which the purchase price for a business or for an ownership interest in a
controlled entity exceeds the fair value attributed to its net assets at date of
acquisition. Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill on acquisition of associates is included in investments in
associates. Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
(r) Investments in Associates
Investment in an associate company is capitalised in the financial statements by
applying the equity method of accounting where significant influence is
exercised over the investee. Significant influence exists where the investor has
the power to participate in the financial and operating policy decisions of the
investee but does not have control or joint control over those policies.
GVM recently announced its intention to dispose of its associate, Samroc. It is
anticipated that the disposal will realise approximately A$750,000. Under
applicable Accounting Standards, the investment in Samroc has been reclassified
as a Non-Current Asset Held for Sale in the balance sheet and is measured at the
lower of its carrying amount and fair value less costs to sell. The carrying
value of the Samroc investment at balance date has been reduced by GVM's share
of Samroc's trading loss for the half year. As the Samroc investment is now
classified as a Non-Current Asset Held for Sale, GVM will no longer recognize
any future share of Samroc's trading results from 1 January 2006.
(s) Accounts payable
Liabilities are recognised for amounts to be paid in the future for goods or
services received, whether or not billed to the Company or consolidated entity.
Trade accounts payable are normally settled within 45 days.
(t) 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.
(u) Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to
conform to changes in presentation for the current financial period.
NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS
Note Previous Adjustments Australian
GAAP at on equivalents
31.12.2004 introduction to IFRS at
of 31.12.2004
Reconciliation of Equity at 31 Australian
December 2004 equivalents
to IFRS
$ $ $
CURRENT ASSETS
Cash assets 712,822 - 712,822
Receivables 3,073,572 - 3,073,572
Inventory 2,132,725 - 2,132,725
Total Current Assets 5,919,119 - 5,919,119
NON CURRENT ASSETS
Investment accounted for using 257,301 - 257,301
the equity method
Intangibles 2a 8,934,461 271,827 9,206,288
Other financial assets 455,652 - 455,652
Property, plant and equipment 2,469,987 - 2,469,987
Total Non Current Assets 12,117,401 271,827 12,389,228
(a) TOTAL ASSETS 18,036,520 271,827 18,308,347
CURRENT LIABILITIES
Payables 1,978,909 - 1,978,909
Interest bearing liabilities 1,548,719 - 1,548,719
Provisions 51,127 - 51,127
Current tax liability 254,885 - 254,885
Total Current Liabilities 3,833,640 - 3,833,640
NON CURRENT LIABILITIES
Payables 1,662,763 - 1,662,763
Interest bearing liabilities 6,122,477 - 6,122,477
Deferred tax liability 50,093 - 50,093
TOTAL NON CURRENT LIABILITIES 7,835,333 - 7,835,333
TOTAL LIABILITIES 11,668,973 - 11,668,973
NET ASSETS 6,367,547 271,827 6,639,374
EQUITY
Issued Capital 33,469,250 - 33,469,250
Reserves 781,860 - 781,860
Accumulated losses 2 a (30,665,588) 222,820 (30,442,768)
TOTAL PARENT EQUITY INTEREST 3,585,522 222,820 3,808,342
OUTSIDE EQUITY INTEREST 2 a 2,782,025 49,007 2,831,032
TOTAL EQUITY 6,367,547 271,827 6,639,374
NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (cont'd)
Note Previous Adjustments Australian
GAAP at on equivalents
30.6.2005 introduction to IFRS at
of 30.6.2005
Reconciliation of Equity at 30 Australian
June 2005 equivalents
to IFRS
$ $ $
CURRENT ASSETS
Cash assets 1,806,353 - 1,806,353
Receivables 4,216,583 - 4,216,583
Inventory 3,363,679 - 3,363,679
Other financial assets 2b 1,498,009 1,498,009
Total Current Assets 9,386,615 1,498,009 10,884,624
NON CURRENT ASSETS
Investment accounted for using -
the equity method 222,806 222,806
Intangibles 2 a 8,736,300 469,988 9,206,288
Other financial assets 925,645 - 925,645
Property, plant and equipment 2,434,245 - 2,434,245
Deferred tax 26,886 26,886
Total Non Current Assets 12,345,882 469,988 12,815,870
(b) TOTAL ASSETS 21,732,497 1967,997 23,700,494
CURRENT LIABILITIES
Payables 2b 4,680,280 1,498,009 6,178,289
Interest bearing liabilities 2,016,220 - 2,016,220
Provisions 99,986 - 99,986
Current tax liability 116,810 - 116,810
Total Current Liabilities 6,913,296 1,498,009 8,411,305
NON CURRENT LIABILITIES
Payables 1,580,489 -
Interest bearing liabilities 4,736,731 - 1,580,489
- 4,736,731
TOTAL NON CURRENT LIABILITIES 6,317,220 - 6,317,220
TOTAL LIABILITIES 13,230,516 1,498,009 14,728,525
NET ASSETS 8,501,981 469,988 8,971,969
EQUITY
Issued Capital 34,500,935 - 34,500,935
Reserves 1,244,562 - 1,244,562
Accumulated losses 2 a (30,449,104) 369,459 (30,079,645)
TOTAL PARENT EQUITY INTEREST 5,296,393 184,729 5,665,852
OUTSIDE EQUITY INTEREST 2 a 3,205,588 100,529 3,306,117
TOTAL EQUITY 8,501,981 469,988 8,971,969
NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (cont'd)
Note Previous GAAP Effect of Australian
transition equivalents
to to IFRS
Australian
Reconciliation of Profit for equivalents
the half-year 31 December 2004 to IFRS
$ $ $
Revenue 2c 16,607,029 (483,152) 16,123,877
Changes in inventory of (571,136) (571,136)
finished goods
Raw materials and consumables (11,372,530) (11,372,530)
used
Consulting, accounting & (251,056) (251,056)
professional expenses
Employee expenses (1,470,353) (1,470,353)
Depreciation and amortisation 2 a (432,994) 271,827 (161,167)
expenses
Diminution in investments (273,768) (273,768)
Carrying value of GMA Resources 2c (483,152) 483,152 -
Plc investment disposed of
Exploration expense (1,598) (1,598)
Office rent and outgoings (37,768) (37,768)
Borrowing costs (478,899) (478,899)
Other expenses from ordinary (727,667) (727,667)
activities
Share of net profit/(losses) of
associate accounted for using
the equity method 176 176
(Loss)/Profit from continuing
operations before income tax 506,284 271,827 778,111
Income tax expense (223,692) (223,692)
Profit from continuing
operations after related income
tax expense 282,592 271,827 554,419
Outside equity interest (75,196) (49,007) (124,203)
Net profit attributable to
members of the parent entity 207,396 222,820 430,216
NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (cont'd)
Note Previous Effect of Australian
GAAP transition equivalents
to to IFRS
Australian
Reconciliation of Profit for the equivalents
full year 30 June 2005 to IFRS
$ $ $
REVENUE 2c 31,520,378 (519,849) 31,000,529
Changes in inventories of finished
goods and work in progress 66,834 66,834
Raw materials and consumables used (22,480,207) (22,480,207)
Consulting expenses (413,652) (413,652)
Employee expenses (2,865,537) (2,865,537)
Borrowing costs (904,206) (904,206)
Depreciation expenses (366,226) (366,226)
Amortisation of goodwill 2 a (469,988) 469,988 -
Office rental , outgoings and (324,941) (324,941)
parking
Decrease/(increase) diminution in (442,265) (442,265)
value of investments
Carrying value of investments 2c (483,152) 483,152 -
disposed of
Carrying value of property, plant
and equipment disposed of 2c (36,697) 36,697 -
Provision for non-recoverability of (137,866) (137,866)
loans
Other expenses from ordinary (1,651,559) (1,651,559)
activities
Share of net profit/(losses) of
associate accounted for using the
equity method 23,230 23,230
Profit from continuing operations
before income tax (expense)/benefit 1,034,147 469,988 1,504,135
Income tax expense (323,535) - (323,535)
Profit from continuing operations 710,612 469,988 1,180,600
after related income tax (expense)/
benefit
Outside equity interest 2 a (286,733) (100,529) (387,262)
Net profit attributable to members 2 a 423,879 369,459 793,338
of the parent entity
2 a) Under AASB 3: Business Combinations, goodwill is no longer amortised but
subject to annual impairment testing. All goodwill amortised under previous GAAP
from 1 July 2004 has been reversed. Goodwill amounting to $469,988 previously
amortised in the 2005 full financial year has been reversed in the income
statement for the year ended 30 June 2005. Goodwill amounting to $271,827
previously amortised for the 2004 half year has been reversed in the income
statement for the half year ended 31 December 2004.
2 b) Under AASB 139: Financial Instruments-Recognition and Measurement,
derivative financial instruments are measured at fair value at reporting date.
Gains and losses resulting from changes to fair value are taken to the income
statement unless they are designated as hedges, in which case the difference is
taken directly to equity. The group held a number of forward exchange contracts
at 30 June 2005 (31 December 2004: Nil). These forward exchange contracts have
been recorded in the 30 June 2005 balance sheet as "Other Financial Assets" and
reflected at fair value. A corresponding increase in current payables has also
been recognised in the balance sheet at 30 June 2005. Under the previous
accounting policy, these forward exchange contracts were not recorded on the
balance sheet. The effect of this change in accounting policy has been to
increase total assets and liabilities at 30 June 2005 by $1,498,009 with no
effect on net assets.
2 c) Under AIFRS, revenue from the sale of non-current assets must be reflected
as the gain or loss on sale rather than the proceeds from sale of those assets.
This reclassification has been adjusted in both the 30 June 2005 and 31 December
2004 Income Statements. The effect of this change in accounting policy was to
reduce reported revenue from outside operating activities in 30.6.2005 and
31.12.2004 by $519,849 and $483,152 respectively. There is however, no effect on
the net results for both years as this is purely a reclassification adjustment
within the Income Statement.
2 d) The reconciliation of equity as at 1 July 2004 has not been disclosed on
the basis that there are no material differences between the financial
statements presented under previous Australian GAAP and Australian equivalents
to IFRS.
Consolidated Consolidated
31 Dec 2005 30 June 2005
3. MOVEMENTS IN ASSETS HELD FOR SALE (PREVIOUSLY $ $
INVESTMENTS EQUITY ACCOUNTED)
Carrying amount of investments in associates at 222,806 525,270
beginning of half-year
Share of associate's net profit/(loss) for the (98,630) 23,230
half year / full year
Diminution in investment - (325,694)
Foreign currency translation adjustment - -
Carrying amount of investments in associates at 124,176 222,806
end of half-year
GVM Metals owns a 30.19% interest in SA Mineral Resources Corporation Limited
("Samroc"), a company listed on the Johannesburg Stock Exchange. Up till 31
December 2005, the investment was accounted for on the equity method. GVM Metals
announced its intention to dispose of the investment during the period under
review. In accordance with applicable Accounting Standards, the investment must,
therefore, be classified as an Asset Held for Sale and be measured at the lower
of its carrying amount and fair value less cost of sale. GVM will no longer
recognize its share of Samroc's trading results from 1 January 2006.
On 31 December 2005, the investment traded on the Johannesburg Stock Exchange at
0.43cents. Hence, the market value of GVM's investment in Samroc was $489,516.
Consolidated
31 Dec 2005
$
4. ISSUED CAPITAL
Issued and Paid-Up Capital
27,698,387 (2005: 274,985,189) fully paid 34,550,936
ordinary shares
Movements in Issued Capital (number of shares)
Opening balance at beginning of the half-year 274,985,189
10:1 share consolidation (247,486,802)
Revised Opening balance post 10:1 consolidation 27,498,387
Movement during 6 month period under review 200,000
Total equity at the end of the half-year 27,698,387
The GVM shares were consolidated in the ratio 10:1 during the period under
review.
The company has entered into an Option Agreement whereby GVM has a call option
granting GVM the right to acquire the remaining 26% of Nimag, for a total
consideration of 6.5 million shares in GVM at 40 cents per share. Similarly, the
shareholders of the remaining 26% of Nimag have a put option granting them the
right to dispose of their holding in Nimag to GVM, for the consideration of 6.5
million shares in GVM at 40 cents per share. The Option Agreement is subject to
certain terms and conditions. The issuing of the GVM shares is also subject to
shareholder approval.
Options
The following options to subscribe for ordinary fully paid shares are
outstanding at balance date:
Number Issued Number Exercise Expiry Date
Quoted Price
750,000 - $0.1923 30 September 2006
56,460,000 quoted options expired during the six months under review.
5. SEGMENT INFORMATION
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Unallocated items mainly comprise interest or dividend-earning assets and
revenue, interest bearing loans, borrowings and expenses, and corporate assets
and expenses.
Business segments
The consolidated entity comprises the following main business segments:
Manufacturing Mineral processing by Samroc and Nimag in South Africa
Investing Equity investments in Australia, Canada and United Kingdom
31 December 2005
Primary reporting industry Manufacturing Investing Consolidated
$ $ $
Revenue
Total segment revenue 15,280,359 (67,992) 15,212,367
Unallocated revenue - - 33,678
Total revenue 15,246,045
Results
Segment results 862,004 (67,992) 794,012
Share of loss of equity accounted (98,630) - (98,630)
investment
Unallocated items - - (703,992)
Net profit (8,610)
Depreciation and amortisation 126,441 - 126,441
Provision for diminution of - 1,081 1,081
investment
Assets
Segment assets 17,944,883 22,706 17,967,589
Unallocated corporate assets - - 3,255,180
Equity accounted investment 124,176 - 124,176
Consolidated total assets 21,346,945
Liabilities
Segment liabilities 10,737,188 - 10,737,188
Unallocated liabilities - - 2,023,174
Consolidated total liabilities 12,760,362
5. SEGMENT INFORMATION (cont'd)
31 December 2004
Primary reporting industry Manufacturing Investing Consolidated
$ $ $
Revenue
Total segment revenue 15,532,256 366,328 15,898,584
Unallocated revenue - - 225,293
Total revenue 16,123,877
Results
Segment results 887,860 366,328 1,254,188
Share of profit of equity accounted 176 - 176
investment
Unallocated items - - (476,253)
Net profit 778,111
Depreciation 151,764 9,403 161,167
Provision for diminution of (273,768) - (273,768)
investment
Assets
Segment assets 15,336,385 455,652 15,792,037
Unallocated corporate assets - - 2,259,009
Equity accounted investment 257,301 - 257,301
Consolidated total assets 18,308,347
Liabilities
Segment liabilities 9,916,028 - 9,916,028
Unallocated liabilities - - 1,752,945
Consolidated total liabilities 11,668,973
6. CONTINGENT LIABILITIES
A controlled entity, Nimag (Proprietary) Ltd, is currently involved in a dispute
with the South African Revenue Service ("SARS") regarding Value Added Tax
("VAT") claimed by SARS. The VAT in dispute is approximately R10m (A$2.2m). This
is in itself not a contingent liability as any VAT paid is claimed back. SARS
may claim interest of R2m (A$447k) and penalties of R1m (A$223k). Should such a
claim arise Nimag would have a counter claim against its supplier or their
import agent.
Other than that disclosed above, the consolidated entity has no contingent
liabilities.
7. EVENTS SUBSEQUENT TO REPORTING DATE
There are no matters or events which have arisen since the end of the financial
period which have significantly affected or may significantly affect the
operations of the consolidated entity, the results of those operations or the
state of affairs of the consolidated entity in subsequent financial years.
DIRECTORS DECLARATION
The directors of the company declare that:
(a) the financial statements and notes set out on pages 5 to 22
(i) comply with Accounting Standard AASB 134: 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.
________________________________
S. J. Farrell
Director
Dated at Perth, Western Australia, this 28th day of February 2006.
INDEPENDENT REVIEW REPORT TO THE MEMBERS OF GVM METALS LTD
SCOPE
The financial report and directors' responsibility
The financial report comprises the balance sheet, income statement, cash flow
statement, statement of changes in equity, accompanying notes to the financial
statements for the consolidated entity comprising both GVM Metals Ltd (the
company) and the entities it controlled during the half year, and the directors'
declaration, for the company, for the half year ended 31 December 2005.
The directors of the company are responsible for preparing a financial report
that gives a true and fair view of the financial position and performance of the
consolidated entity, and that complies with Accounting Standard AASB 134
"Interim Financial Reporting", in accordance with the Corporations Act 2001.
This includes responsibility for the maintenance of adequate accounting records
and internal controls that are designed to prevent and detect fraud and error,
and for the accounting policies and accounting estimates inherent in the
financial report.
Review approach
We conducted an independent review of the financial report in order to make a
statement about it to the members of the company, and in order for the company
to lodge the financial report with the ASX and the Australian Securities and
Investments Commission.
Our review was conducted in accordance with Australian Auditing Standards
applicable to review engagements, in order to state whether, on the basis of the
procedures described, anything has come to our attention that would indicate
that the financial report is not presented fairly in accordance with the
Corporations Act 2001, Accounting Standard AASB 134 "Interim Financial
Reporting" and other mandatory professional reporting requirements in Australia
so as to present a view which is consistent with our understanding of the
consolidated entity's financial position, and of its performance as represented
by the results of its operations and cash flows.
We formed our statement on the basis of the review procedures performed, which
included:
- inquiries of Company personnel, and
- analytical procedures applied to financial data.
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 is
less than given in an audit. We have not performed an audit and, accordingly, we
do not express an audit opinion.
While we considered the effectiveness of management's internal controls over
financial reporting when determining the nature and extent of our procedures,
our review was not designed to provide assurance on internal controls. Our
review did not involve an analysis of the prudence of business decisions made by
directors or management.
Independence
We are independent of the company, and have met the independence requirements of
Australian professional ethical pronouncements and the Corporations Act 2001. We
have given to the directors of the company a written Auditor's Independence
Declaration.
Statement
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the financial report, as defined in the scope
section, of the consolidated entity GVM Metals Ltd and the entities it
controlled during the for the half year ended 31 December 2005 is not in
accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the financial
position of the consolidated entity 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 financial reporting requirements in Australia.
NEIL PACE MOORE STEPHENS
PARTNER CHARTERED ACCOUNTANTS
Signed at Perth this 28th day of February 2006.
24
AUDITOR'S INDEPENDENCE DECLARATION
UNDER SECTION 307c OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF GVM METALS LIMITED
I declare that, to the best of my knowledge and belief, during the half-year
ended 31 December 2005 there have been:
(a) no contraventions of the auditor independence requirements
as set out in 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.
NEIL PACE MOORE STEPHENS
PARTNER CHARTERED ACCOUNTANTS
Signed at Perth this 28th day of February 2006
This information is provided by RNS
The company news service from the London Stock Exchange
END
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