RNS Number:9001Z
Leyshon Resources Limited
16 March 2006
For immediate release 16 March 2006
Leyshon Resources Limited
Interim Financial Report
for the half-year ended 31 December 2005
REVIEW AND RESULTS OF OPERATIONS
Operating Results
Net operating loss after tax attributable to members of the Consolidated Entity
for the half-year ended 31 December 2005 was $2,220,295 (2004: Net operating
loss after tax of $1,140,558).
Operations
Zheng Guang
A 12,100 metre diamond drilling programme at the Zheng Guang gold project was
successfully completed during the half-year. The programme was designed to
infill drill mineralised blocks defined in the 2004 drill programme, test for
extensions at depth and along strike and to gain a better understanding of the
complex geometry of the mineralised system.
The programme, which had eight rigs in operation at its peak, was ahead of
schedule with higher productivity than the previous year and reasonably good
overall core recovery.
When it became clear that a large proportion of the mineralisation comprised
high grade, steeply east-dipping veins (ladder vein arrays) within the
west-dipping faults, two additional rigs with shallow angle drilling and larger
core capacity were mobilised to better test these mineralised blocks. The rigs
were also used to collect representative core for metallurgical testwork.
The angled holes, drilled both across and down the dip of the primary west
dipping faults, have confirmed a greater density of generally thin veins in some
areas and in other areas have intersected zones of thick mineralisation.
As expected with the mesothermal style of Zheng Guang mineralisation, there are
significant base metals associations and in this case there is a strong
correlation between gold grades and the zinc and silver grades reported in the
assays. Interpretation of the geology and geochemistry of the high grade zinc/
silver mineralisation, which ranges up to 18% zinc and 150 g/t silver, has
highlighted a positive association with the strongly gold mineralised
northwest-trending structures.
This association has the potential for significant economic benefit to the
project, enhancing the potential for the economic recovery of gold, zinc and
silver.
These final results have in the Directors' view further enhanced the development
potential of Zheng Guang which is the first resource project to be developed by
a foreign company in the mineral rich province of Heilongjiang.
Duobaoshan Copper Project
The Company is awaiting the outcome of a scoping study being undertaken by
Ausenco to enable it to determine whether it wishes to proceed with a
development proposal for this project.
Corporate
The Company was admitted onto the London Stock Exchange's AIM market and trading
in the Company's securities commenced on 26 October 2005.
The Company continues to evaluate a number of acquisition and development
opportunities both within China and its neighbouring countries taking advantage
of its operating base in Beijing and knowledge gained operating in the country
over the past two years.
IAN MIDDLEMAS
Director
Perth, 16 March 2006
A copy of the audit review report is available from Buchanan Communications on
request.
For further information contact:
Leyshon Resources
Paul Atherley - Managing Director Tel: +86 10 8528 9256
Mob: +61 417 475 038
Buchanan Communications
Tim Thompson/Elly Williamson Tel: +44 20 7466 5000
Geological Information
The information in this report relating to Exploration Results, Mineral
Resources or Ore Reserves is based on information compiled by Mr Malcolm Wilson,
a full time employee of the Company, who is a member of the Australasian
Institute of Mining and Metallurgy.
Mr Wilson has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the activity which
he is undertaking to qualify as a Competent Person as defined in the 2004
Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves'. Mr Wilson consents to the inclusion in the report
of the matters based on his information in the form and context in which it
appears.
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
Note Half-year Ended Half-year Ended
31 Dec 2005 31 Dec 2004
$ $
Revenue 2 207,161 220,241
Other income 3 1,035,000 35,088
Exploration expenses (2,481,222) (795,638)
Administration expenses (957,475) (272,728)
Business development expenses (532,097) (156,993)
Share of net loss of joint venture accounted for - (203,957)
using the equity method
Loss before income tax (2,728,633) (1,173,987)
Income tax expense - -
Loss for the half-year (2,728,633) (1,173,987)
Loss attributable to minority interest 508,338 33,429
Loss attributable to members of Leyshon Resources (2,220,295) (1,140,558)
Limited
Earnings Per Share
Basic loss per share (cents per share) (1.69) (1.02)
Diluted loss per share (cents per share) (1.69) (1.02)
The above Consolidated Income Statement should be read in conjunction with the
accompanying notes.
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2005
Note 31 Dec 2005 30 Jun 2005
$ $
ASSETS
Current Assets
Cash and cash equivalents 6,126,531 9,488,951
Receivables 100,647 53,185
Total Current Assets 6,227,178 9,542,136
Non-Current Assets
Other financial assets at fair value through profit 1,350,001 -
or loss
Other financial assets - 349,442
Property, plant and equipment 11,127 11,447
Exploration and evaluation expenditure 13,171,841 12,722,473
Total Non-Current Assets 14,532,969 13,083,362
TOTAL ASSETS 20,760,147 22,625,498
LIABILITIES
Current Liabilities
Payables 707,277 414,024
Provisions 8,550 28,304
Total Current Liabilities 715,827 442,328
Non-Current Liabilities
Deferred tax liabilities 3,604,688 3,604,688
Total Non-Current Liabilities 3,604,688 3,604,688
TOTAL LIABILITIES 4,320,515 4,047,016
NET ASSETS 16,439,632 18,578,482
EQUITY
Issued capital 8 32,414,432 32,414,432
Reserves 958,664 880,204
Accumulated losses (16,994,379) (14,834,084)
Parent entity interest 16,378,717 18,460,552
Minority interest 60,915 117,930
TOTAL EQUITY 16,439,632 18,578,482
The above Consolidated Balance Sheet should be read in conjunction with the
accompanying notes.
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
Half-year Ended Half-year Ended
31 Dec 2005 31 Dec 2004
$ $
Issued Capital
Issued and paid up capital - at the beginning of the half-year 32,414,432 27,381,759
Transactions with equity holders in their capacity as equity holders:
Contributions of equity - 5,678,319
- 5,678,319
Issued and paid up capital - at the end of the half-year 32,414,432 33,060,078
Option Premium Reserves
Option premium reserve at the beginning of the half-year 880,204 -
Share options 73,897 235,552
Total recognised income and expense for the half-year 73,897 235,552
Option premium reserves at the end of the half-year 954,101 235,552
Foreign Exchange Reserve
Foreign exchange reserves at the beginning of the half-year - -
Exchange differences on translation of foreign operations attributable 4,563 -
to members of Leyshon Resources Limited
Total recognised income and expense for the half-year 4,563 -
Foreign Exchange Reserves at the end of the half-year 4,563 -
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005 (CONTINUED)
Half-year Ended Half-year Ended
31 Dec 2005 31 Dec 2004
$ $
Accumulated Losses
Accumulated losses at the beginning of the half-year (14,834,084) (11,394,325)
Adjustment on adoption of AASB 132 and AASB 139, net of tax 60,000 -
Restated balance after adoption of AASB 132 and 139 (14,774,084) (11,394,325)
Loss for the half-year attributable to members of Leyshon Resources (2,220,295) (1,140,558)
Limited
Accumulated losses at the end of the half-year (16,994,379) (12,534,883)
Minority Interest
Minority interest at the beginning of the half-year 117,930 -
Exchange differences on translation of foreign operations attributable 1,956 -
to the minority interest
Loss for the half-year attributable to the minority interest (508,338) (33,429)
Minority interest in capital at date of obtaining control - 430,362
Minority interest in accumulated losses at date of obtaining control - (276,782)
Additions to the minority interest 449,367 -
Minority interest at the end of the half-year 60,915 120,151
Total recognised income and expense for the half year is
attributable to:
Exchange differences on translation of foreign operations attributable 4,563 -
to members of Leyshon Resources Limited
Net income recognised directly in equity 4,563 -
Loss for the half-year attributable to members of Leyshon Resources (2,220,295) (1,140,558)
Limited
Total recognised income and expense for the half-year is attributable (2,215,732) (1,140,558)
to members of Leyshon Resources Limited
Minority interest (506,382) (33,429)
(2,722,114) (1,173,987)
The above Consolidated Statement of Changes in Equity should be read in
conjunction with the accompanying notes.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
Half-year ended Half-year ended
31 Dec 2005 31 Dec 2004
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees (3,606,185) (1,078,245)
Receipts from customers 22,337 19,983
Interest received 204,648 168,743
Interest paid (134) (637)
(3,379,334) (890,156)
Net cash flows used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of plant and equipment (2,999) (7,781)
Payments for security bonds - (5,000)
Performance deposit paid - (400,504)
Refunds of security bonds 7,500 -
4,501 (413,285)
Net cash flows from/(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares - 5,803,319
- 5,803,319
Net cash flows from financing activities
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (3,374,833) 4,499,878
Cash and cash equivalents at the beginning of the 9,488,951 6,963,532
half-year
Effects of exchange rate changes on cash and cash 12,413 -
equivalents
6,126,531 11,463,410
CASH AND CASH EQUIVALENTS AT THE END OF THE HALF-YEAR
The above Consolidated Cash Flow Statement should be read in conjunction with
the accompanying notes.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1. Summary of significant accounting policies
This general purpose financial report for the interim half-year reporting period
ended 31 December 2005 has been prepared in accordance with Accounting Standard
AASB 134 Interim Financial Reporting and the Corporations Act 2001.
This interim financial report does not include all the notes of the type
normally included in an annual financial report. Accordingly, this report is to
be read in conjunction with the annual report of Leyshon Resources Limited for
the year ended 30 June 2005 and any public announcements made by Leyshon
Resources Limited and its subsidiaries during the interim reporting period in
accordance with the continuous disclosure requirements of the Corporations Act
2001.
(a) Basis of preparation of half-year financial report
The principal accounting policies adopted in the preparation of the financial
report are set out below. These policies have been consistently applied to all
the periods presented, unless otherwise stated.
Application of AASB 1 First-time Adoption of Australian Equivalents to
International Financial Reporting Standards
This interim financial report is the first Leyshon Resources Limited interim
financial report to be prepared in accordance with Australian Equivalents to
International Financial Reporting Standards ("AIFRSs"). AASB 1 First-time
Adoption of Australian Equivalents to International Financial Reporting
Standards has been applied in preparing these financial statements.
Financial statements of Leyshon Resources Limited until 30 June 2005 had been
prepared in accordance with previous Australian Generally Accepted Accounting
Principles (AGAAP). AGAAP differs in certain respects from AIFRS. When
preparing the Leyshon Resources Limited interim financial report for the
half-year ended 31 December 2005, management has amended certain accounting and
valuation methods applied in the previous AGAAP financial statements to comply
with AIFRS. With the exception of financial instruments, the comparative
figures were restated to reflect these adjustments. The Group has taken the
exemption available under AASB 1 to only apply AASB 132 Financial Instruments:
Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and
Measurement from 1 July 2005.
Reconciliations and descriptions of the effect of transition from previous AGAAP
to AIFRSs on the Group's equity and its net income are given in note 9.
Historical cost convention
These financial statements have been prepared under the historical cost
convention, as modified by the revaluation of financial assets (including
derivative instruments) at fair value through profit or loss.
(b) Principles of Consolidation
The consolidated financial statements incorporate the assets and liabilities of
all subsidiaries of Leyshon Resources Limited ("company" or "parent entity") as
at 31 December 2005 and the results of all subsidiaries for the half-year then
ended. Leyshon Resources Limited and its subsidiaries together are referred to
as the Group or the Consolidated Entity.
Subsidiaries are all those entities (including special purpose entities) over
which the Group has the power to govern the financial and operating policies,
generally accompanying a shareholding of more than one-half of the voting
rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group
controls another entity.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1. Summary of significant accounting policies (CONTINUED)
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control
ceases.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group (refer to note 1(h)).
Intercompany transactions and balances, and unrealised gains on transactions
between Group companies, are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Minority interests in the results and equity of subsidiaries are shown
separately in the consolidated income statement and balance sheet respectively.
(c) Segment Reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different to
those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment and is
subject to risks and returns that are different from those of segments operating
in other economic environments.
(d) Foreign Currency Translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The consolidated financial
statements are presented in Australian dollars, which is the Company's
functional and presentation currency. Refer to note 1(d)(iv) for details of a
change in the functional currency of a subsidiary.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and
from the translation at period-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the income
statement.
(iii) Group companies
The results and financial position of all the Group entities (none of which has
the currency of a hyperinflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
* Assets and liabilities for each balance sheet presented are translated
at the closing rate at the date of that balance sheet;
* Income and expenses for each income statement are translated at
average exchange rates (unless this is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the dates of the transactions); and
* All resulting exchange differences are recognised as a separate
component of equity.
Where a foreign operation is sold or borrowings repaid, a proportionate share of
such exchange differences are recognised in the income statement as part of the
gain or loss on sale.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1. Summary of significant accounting policies (CONTINUED)
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
(iv) Change in functional currency of Black Dragon Mining Company Limited
During the financial period, all outstanding approvals in respect of the Zheng
Guang Gold Project were received, including the Exploration Licence being
transferred to Black Dragon Mining Company Limited and the Business Licence
being renewed. Prior to these approvals, the operations of Black Dragon were
conducted through its holding company, China Metals Pty Ltd, primarily in
Australian dollars and accordingly it was accounted for in Australian dollars.
Subsequent to receipt of these approvals, the operations of Black Dragon have
been separated from the holding company and conducted in China, through bank
accounts held in Chinese Renminbi, with payments being made primarily in Chinese
Renminbi. Accordingly, the functional currency of Black Dragon has been changed
to Chinese Renminbi and the accounts of this subsidiary are now being prepared
in this currency.
(e) Revenue Recognition
Revenue is measured at the fair value of the consideration received or
receivable. The following specific recognition criteria must also be met before
revenue is recognised:
Interest
Interest is recognised on a time proportionate basis that takes into account the
effective yield on the financial asset.
Consulting fee
Consulting fees are recognised by reference to the stage of completion of the
contract.
(f) Income Tax
The income tax expense or revenue for the period is the tax payable on the
current period's taxable income based on the national income tax rate for each
jurisdiction adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences between the tax bases of assets and
liabilities and their carrying amounts in the financial statements, and to
unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at
the tax rates expected to apply when the assets are recovered or liabilities are
settled, based on those tax rates which are enacted or substantively enacted for
each jurisdiction. The relevant tax rates are applied to the cumulative amounts
of deductible and taxable temporary differences to measure the deferred tax
asset or liability. An exception is made for certain temporary differences
arising from the initial recognition of an asset or a liability. No deferred
tax asset or liability is recognised in relation to these temporary differences
if they arose in a transaction, other than a business combination, that at the
time of the transaction did not affect either accounting profit or taxable
profit or loss.
Deferred tax assets are recognised for deductible temporary differences and
unused tax losses only if it is probable that future taxable amounts will be
available to utilise those temporary differences and losses.
Current and deferred tax balances attributable to amounts recognised directly in
equity are also recognised directly in equity.
Leyshon Resources Limited and its wholly owned Australian controlled entities
have not implemented the tax consolidation legislation.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1. Summary of significant accounting policies (CONTINUED)
(g) Operating Leased Assets
Leases are classified at their inception as either operating or finance leases
based on the economic substance of the agreement so as to reflect the risks and
benefits incidental to ownership.
Operating leased assets, where the lessor effectively retains substantially all
of the risks and benefits of ownership of the leased item, are not capitalised
and rental payments are expensed to the income statement over the lease term on
a straight line basis except where another systematic basis is more
representative of the time pattern in which economic benefits from the leased
asset are consumed.
(h) Acquisition of Assets
The purchase method of accounting is used to account for all acquisitions of
assets (including business combinations) regardless of whether equity
instruments or other assets are acquired. Cost is measured as the fair value of
the assets given, shares issued or liabilities incurred or assumed at the date
of exchange plus costs directly attributable to the acquisition. Where equity
instruments are issued in an acquisition, the value of the instruments is their
published market price as at the date of exchange unless, in rare circumstances,
it can be demonstrated that the published price at the date of exchange is an
unreliable indicator of fair value and that other evidence and valuation methods
provide a more reliable measure of fair value. Transaction costs arising on the
issue of equity instruments are recognised directly in equity.
Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any minority interest. The
excess of the cost of acquisition over the fair value of the Group's share of
the identifiable net assets acquired is recorded as goodwill. If the cost of
acquisition is less than the fair value of the net assets of the subsidiary
acquired, the difference is recognised directly in the income statement, but
only after a reassessment of the identification and measurement of the net
assets acquired.
Where settlement of any part of cash consideration is deferred, the amounts
payable in the future are discounted to their present value as at the date of
exchange. The discount rate used is the entity's incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
(i) Impairment of Assets
Assets that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset's fair value less costs to sell and value in use. For
the purposes of assessing impairment where an asset does not generate cash flows
that are independent from other assets, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (cash generating units).
(j) Cash and Cash Equivalents
"Cash and cash equivalents" includes cash on hand, deposits held at call with
financial institutions, other short-term highly liquid investments that are
readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value, and bank
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1. Summary of significant accounting policies (CONTINUED)
overdrafts. Bank overdrafts are shown within borrowings in current liabilities
on the balance sheet
(k) Receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost less provision for doubtful debts. Trade receivables
are due for settlement no more than 30 days from the date of recognition.
(l) Other Financial Assets
From 1 July 2004 to 30 June 2005
The Group has taken the exemption available under AASB 1 to apply AASB 132 and
AASB 139 only from 1 July 2005. The Group has applied previous AGAAP to the
comparative information on financial instruments within the scope of AASB 132
and AASB 139. For further information on previous AGAAP refer to the annual
report for the year ended 30 June 2005.
Adjustments on transition date: 1 July 2005
The nature of the main adjustments to make this information comply with AASB 132
and AASB 139 are that, with the exception of loans and receivables which are
measured at amortised cost (refer below), fair value is the measurement basis.
Changes in fair value are taken to the income statement. At the date of
transition (1 July 2005) changes to carrying amounts are taken to retained
earnings (see the Statement of Changes in Equity).
From 1 July 2005
The Group classifies its investments in the following categories: financial
assets at fair value through profit or loss, loans and receivables,
held-to-maturity investments, and available-for-sale financial assets. The
classification depends on the purpose for which the investments were acquired.
(i) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and
those designated at fair value through profit or loss on initial recognition.
Derivatives are also categorised as held for trading unless they are designated
as hedges. Assets in this category are classified as current assets if they are
either held for trading or are expected to be realised within twelve months of
the balance sheet date.
(ii) Available-for-sale financial assets
Available-for-sale financial assets, are non-derivatives that are either
designated in this category or not classified in any of the other categories.
They are included in non-current assets unless management intends to dispose of
the investment within twelve months of the balance sheet date.
Purchases and sales of investments are recognised on trade-date-the date on
which the Group commits to purchase or sell the asset. Investments are
initially recognised at fair value plus transaction costs for all financial
assets not carried at fair value through profit or loss. Financial assets are
derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred
substantially all the risks and rewards of ownership.
Available-for-sale financial assets and financial assets at fair value through
profit or loss are subsequently carried at fair value. Loans and receivables
and held-to-maturity investments are carried at amortised cost using the
effective interest method. Realised and unrealised
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1. Summary of significant accounting policies (CONTINUED)
gains and losses arising from changes in the fair value of the 'financial assets
at fair value through profit or loss' category are included in the income
statement in the period in which they arise. Unrealised gains and losses
arising from changes in the fair value of non-monetary securities classified as
available-for-sale are recognised in equity in the available-for-sale
investments revaluation reserve. When securities classified as
available-for-sale are sold or impaired, the accumulated fair value adjustments
are included in the income statement as gains and losses from investment
securities.
The fair values of quoted investments are based on current bid prices. If the
market for a financial asset is not active (and for unlisted securities), the
Group establishes fair value by using valuation techniques. These include
reference to the fair values of recent arm's length transactions, involving the
same instruments or other instruments that are substantially the same,
discounted cash flow analysis, and option pricing models.
The Group assesses at each balance date whether there is objective evidence that
a financial asset or group of financial assets is impaired.
(iii) Loans and receivables
Trade receivables, loans and other receivables are recorded at amortised costs
less impairment.
(m) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated
for recognition and measurement.
The fair value of financial instruments traded in active markets (such as
publicly traded derivatives, and trading and available-for-sale securities) is
based on quoted market prices at the balance sheet date. The quoted market
price used for financial assets held by the Group is the current bid price; the
appropriate quoted market price for financial liabilities is the current ask
price.
(n) Property, Plant and Equipment
Plant and equipment is stated at historical cost less depreciation. Historical
cost includes expenditure that is directly attributable to the acquisition of
the items.
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.
Plant and equipment are depreciated or amortised at rates based upon their
expected useful lives as follows.
Life Method
Plant and Equipment 2 - 15 years Diminishing value
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1. Summary of significant accounting policies (CONTINUED)
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
(note 1(i)). Gains and losses on disposals are determined by comparing proceeds
with carrying amount. These are included in the income statement.
(o) Payables
These amounts represent liabilities for goods and services provided to the Group
prior to the end of the financial period which are unpaid. The amounts are
unsecured and are usually paid within 30 days of recognition.
(p) Employee Benefits
Liabilities for wages and salaries, including non-monetary benefits, annual
leave, accumulating sick leave and long service leave expected to be settled
within twelve months of the reporting date are recognised in other payables in
respect of employees' services up to the reporting date and are measured at the
amounts expected to be paid when the liabilities are settled. Liabilities for
non-accumulating sick leave are recognised when the leave is taken and measured
at the rates paid or payable.
The liability for long service leave not expected to be settled within 12 months
is recognised in the provision for employee benefits and measured as the present
value of expected future payments to be made in respect of services provided by
employees up to the reporting date. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of
service. Expected future payments are discounted using market yields at the
reporting date on national government bonds with terms to maturity and currency
that match, as closely as possible, the estimated future cash outflows.
Contributions to the defined contribution superannuation fund are recognised as
an expense as they become payable. Prepaid contributions are recognised as an
asset to the extent that a cash refund or a reduction in future payments is
available.
(q) Issued Capital
Issued and paid up capital is recognised at the fair value of the consideration
received by the Company.
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds. Incremental
costs directly attributable to the issue of new shares or options for the
acquisition of a business are included in the cost of the acquisition as part of
the purchase consideration.
(r) Dividends
Provision is made for the amount of any dividend declared on or before the end
of the half-year but not distributed at balance date.
(s) Earnings per Share (EPS)
Basic earnings per share is calculated by dividing the profit/(loss)
attributable to equity holders of the company, excluding any costs of servicing
equity other than ordinary shares, by the
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1. Summary of significant accounting policies (CONTINUED)
weighted average number of ordinary shares outstanding during the half-year,
adjusted for bonus elements in ordinary shares issued during the half-year.
Diluted earnings per share adjusts the figures used in the determination of
basic earnings per share to take into account the after income tax effect of
interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for
no consideration in relation to dilutive potential ordinary shares.
(t) Exploration and evaluation expenditure
Exploration and evaluation expenditure encompasses expenditures incurred by the
Group in connection with the exploration for and evaluation of mineral resources
before the technical feasibility and commercial viability of extracting a
mineral resource are demonstrable.
Exploration and evaluation expenditure incurred by the Group is accumulated for
each area of interest and recorded as an asset if:
(i) the rights to tenure of the area of interest are current; and
(ii) at least one of the following conditions is also met:
(1) the exploration and evaluation expenditures are expected to be recouped
through successful development and exploitation of the area of interest, or
alternatively, by its sale; and/or
(2) exploration and evaluation activities in the area of interest have not at
the reporting date reached a stage which permits a reasonable assessment of the
existence or otherwise of economically recoverable reserves, and active and
significant operations in, or in relation to, the area of interest are
continuing.
For each area of interest, expenditure incurred in the acquisition of rights to
explore is capitalised, classified as tangible or intangible, and recognised as
an exploration and evaluation asset. Exploration and evaluation assets are
measured at cost at recognition. Exploration and evaluation expenditure
incurred by the Group subsequent to acquisition of the rights to explore is
expensed as incurred.
Capitalised exploration costs are reviewed each reporting date to establish
whether an indication of impairment exists. If any such indication exists, the
recoverable amount of the capitalised exploration costs is estimated to
determine the extent of the impairment loss (if any). Where an impairment loss
subsequently reverses, the carrying amount of the asset is increased to the
revised estimate of its recoverable amount, but only to the extent that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset in previous
years.
Where a decision is made to proceed with development, accumulated expenditure is
tested for impairment and transferred to development properties, and then
amortised over the life of the reserves associated with the area of interest
once mining operations have commenced.
Recoverability of the carrying amount of the exploration and evaluation assets
is dependent on successful development and commercial exploitation, or
alternatively, sale of the respective areas of interest.
(u) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of GST except:
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1. Summary of significant accounting policies (CONTINUED)
* where the GST incurred on a purchase of goods and services is
not recoverable from the taxation authority, in which case the GST is recognised
as part of the cost of acquisition of the asset or as part of the expense item
as applicable; and
* receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is
included as part of receivables or payables in the balance sheet.
Cash flows are included in the Cash Flow Statement on a gross basis and the GST
components of cash flows arising from investing and financing activities, which
are recoverable from, or payable to, the taxation authority are classified as
operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable
from, or payable to, the taxation authority.
(v) Share Based Payments
Share based payments may be provided to directors, employees, consultants and
other advisors.
For share options granted before 7 November 2002 and /or after 7 November 2002
but vested before 1 January 2005 no expense is recognised. The shares are
recognised when the options are exercised and the proceeds received allocated to
share capital.
For share options granted after 7 November 2002 and vested after 1 January 2005,
the following treatment is adopted:
The fair value of options granted is recognised as an expense with a
corresponding increase in equity. The fair value is measured at grant date and
recognised over the period during which the holders become unconditionally
entitled to the options.
The fair value at grant date is independently determined using a Black-Scholes
option pricing model that takes into account the exercise price, the term of the
option, the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk-free interest rate
for the term of the option.
The fair value of the options granted excludes the impact of any non-market
vesting conditions. Non-market vesting conditions are included in assumptions
about the number of options that are expected to become exercisable. At each
balance sheet date, the entity revises its estimate of the number of options
that are expected to become exercisable. The expense recognised each period
takes into account the most recent estimate.
Upon the exercise of options, the balance of the share-based payments reserve
relating to those options is transferred to share capital.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
Half-year Half-year
Ended Ended
31 December 2005 31 December 2004
$ $
2. REVENUE
Interest received/receivable 207,161 168,743
Consulting fees - 51,498
207,161 220,241
3. OTHER INCOME
Fair value gains on other financial assets at 1,035,000 -
fair value through profit or loss
Foreign exchange gain - 35,088
1,035,000 35,088
4. DIVIDENDS PAID OR PROVIDED FOR
No dividends have been paid or provided for during the half-year.
5. SEGMENT INFORMATION
The Consolidated Entity operates in one business segment, being the mining and
exploration of gold and other minerals in the resources sector, in the following
geographical segments:
Half-year 2005 Australia China Unallocated Consolidated
Half -Year Half -Year Half -Year Half -Year
2005 2005 2005 2005
$ $ $ $
Revenue
Total segment revenue - - - -
Unallocated revenue - - - -
Total revenue - - - -
Results
Segment result 8,164 (2,943,958) (2,935,794)
Unallocated revenue less unallocated - - 207,161
expenses 207,161
Profit/(loss) before income tax 8,164 (2,943,958) 207,161 (2,728,633)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
Half-year 2004 Australia China Unallocated Consolidated
Half -Year Half -Year Half -Year Half -Year
2004 2004 2004 2004
$ $ $ $
Revenue
Total segment revenue - 51,498 - 51,498
Unallocated revenue - - - -
Total revenue - 51,498 - 51,498
Results
Segment result (678,974) (459,799) - (1,138,773)
Share of net loss of joint venture - (203,957) - (203,957)
accounted for using the equity method
Unallocated revenue less unallocated - - 168,743 168,743
expenses
Loss before income tax (678,974) (663,756) 168,743 (1,173,987)
6. SUBSEQUENT EVENTS AFTER BALANCE DATE
There were no significant events occurring after balance date requiring
disclosure in the financial statements.
7. CONTINGENT ASSETS AND LIABILITIES
At the last annual reporting date, the Consolidated Entity had the following
disclosed contingent liability. There has been no material change in the
contingent assets or liabilities of the Consolidated Entity during the
half-year.
Historical fixed and floating charge
In June 1987 the Company entered into a joint venture agreement ("JVA") with two
other parties. Pursuant to the JVA, a registered cross charge was entered into
with the parties to the JVA to secure payment obligations under a joint venture.
The joint venture no longer operates but the charge remains registered. The
charge was granted in favour of two parties, one of which is deregistered, the
other liquidated. The Company does not believe that there is any liability
outstanding under the charge, however due to the administrative difficulty in
removing the charge resulting from the counterparties being deregistered, the
charge may continue to be registered.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
8. EQUITY SECURITIES ISSUED
Half-year Half-year
2005 2004 2005 2004
Shares Shares $ $
Issues of ordinary shares during the half-year
Issue of Shares - 15,999,160 - 5,678,319
- 15,999,160 - 5,678,319
9. Explanation of transition to Australian equivalents to IFRSs
(a) Reconciliation of equity reported under previous Australian Generally
Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to
IFRSs (AIFRS)
Notes Previous AGAAP Effect of AIFRS
transition to
$ AIFRS $
$
TOTAL EQUITY
(i) At the date of transition to AIFRS: (1) 19,772,122 (3,784,688) 15,987,434
1 July 2004
(ii) At the end of the last half-year reporting (1) 24,665,586 (3,784,688) 20,880,898
period under previous AGAAP:
31 December 2004
(iii) At the end of the last reporting period under (1) 22,183,170 (3,604,688) 18,578,482
previous AGAAP:
30 June 2005
(b) Reconciliation of profit/(loss) under previous Australian Generally
Accepted Accounting Principles (AGAAP) to profit/(loss) under Australian
equivalents to IFRSs (AIFRS)
PROFIT/(LOSS)
(i) Reconciliation of loss for the half-year ended (2) (938,435) (235,552) (1,173,987)
31 December 2004
(ii) Reconciliation of loss for the year ended 30 (1), (2,947,732) (700,204) (3,647,936)
June 2005 (2)
(c) Reconciliation of cash flow statement
The adoption of AIFRSs has not resulted in any material adjustments to the cash
flow statement.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
9. Explanation of transition to Australian equivalents to IFRSs
(CONTINUED)
(d) Notes to the reconciliations
(1) Income Tax
Under AASB 112 Income Taxes, deferred tax balances are determined using the
balance sheet method which calculates temporary differences based on the
carrying amounts of an entity's assets and liabilities in the balance sheet and
their associated tax bases. In addition, current and deferred taxes
attributable to amounts recognised directly in equity are also recognised
directly in equity.
This has resulted in a change to the previous AGAAP accounting policy, under
which deferred tax balances were determined using the income statement method,
items were only tax effected if they were included in the determination of
pre-tax accounting profit or loss and/or taxable income or loss and current and
deferred taxes could not be recognised directly in equity.
Under AIFRS, the criteria for recognition of carried forward tax losses is '
probable' as compared to the current 'virtually certain' test. The Consolidated
Entity has carried forward tax losses which have not been recognised as deferred
tax assets as they do not satisfy the 'probable' criteria under AIFRS.
Adoption of AASB 112 has resulted in an increase in total consolidated deferred
tax liabilities of $3,784,688 and $3,604,688 at 31 December 2004 and 30 June
2005 respectively.
A deferred tax liability of $3,784,688 as at 1 July 2004 relating to exploration
and evaluation expenditure arising from acquisition of a controlled entity. A
reduction of the deferred tax liability was recorded during the year ended 30
June 2005 for the amount of $180,000 relating to the expensing of part of the
above-mentioned exploration and evaluation expenditure asset.
(2) Share Based Payments
Under AASB 2 Share Based Payments, from 1 July 2004 the group is required to
recognise an expense for those options that were issued as compensation to
employees and other consultants after 7 November 2002 but that had not vested by
1 January 2005.
This has resulted in a change to the previous AGAAP accounting policy under
which no expense was recognised for equity based compensation.
Adoption of AASB 2 during the year ended 30 June 2005 resulted in the
consolidated employee benefits expense (included in exploration expenses)
increasing by $462,004, and consolidated administration and corporate expense
increasing by $418,200 with a corresponding increase in the net movement in the
share based payment reserve of $880,204. The adjustment required for the
half-year ended 31 December 2004 was $235,552 comprised totally of employee
benefits expense (included in exploration expenses).
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR AKAKBKBKDPND
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