RNS Number:2919E
Leyshon Resources Limited
21 September 2007
LEYSHON RESOURCES LIMITED
ABN 75 010 482 274
FINANCIAL REPORT
FOR THE FINANCIAL YEAR ENDED
30 JUNE 2007
CORPORATE DIRECTORY
Directors Share Register
John Fletcher - Non-Executive UK
Chairman
Paul Atherley - Managing Director Computershare Investor Services plc
Richard Seville - Non-Executive 2nd Floor, Vintners Place
Director 68 Upper Thames Street
London
EC4V 3BJ
United Kingdom
Stacey Apostolou - Executive Director Australia
Company Secretary Computershare Investor Services Pty
Ltd
Stacey Apostolou Level 2, Reserve Bank Building
Principal and Registered Offices 45 St Georges Terrace
China Perth WA 6000
Suite 2502, Tower D, Australia
China International Trade Centre Telephone: 1300 557 010
6A Jianguomenwai Avenue
Chaoyang District International: +618 9323 2000
Beijing 100022
China
Telephone: +86 10 5869 9382 Facsimile: +618 9323 2033
Facsimile: +86 10 5869 9384
Australia Solicitors
Ground Floor Jun He Law Offices - Beijing
Hardy Bowen Solicitors - Perth
16 Ord Street Stock Exchange Listings
West Perth WA 6000 Alternative Investment Market
London Stock Exchange
10 Paternoster Square
London EC4M 7LS
Telephone: +618 9324 8525 Australian Stock Exchange
Fasimile: +618 9324 8560 Home Branch - Perth
2 The Esplanade
Perth WA 6000
Auditor AIM and ASX Code
LRL
Deloitte Touche Tohmatsu
Bankers
Bank of China - Beijing
Bank of New Zealand
Compliance with ASX Corporate Governance Recommendations
The Company's Corporate Governance Statement has been made publicly available on
its website at www.leyshonresources.com.
During the 2007 financial year, the Company complied with the ASX Principles and
Recommendations other than in relation to the matters specified below:
Recommendation Notification Explanation for Departure
Ref of
Departure
2.1, 2.2 Only one The Board believes that the individuals on the
independent Board can make, and do make, quality and
director independent judgments in the best interests of the
Company on all relevant issues. Directors having a
conflict of interest in relation to a particular
item of business must absent themselves from the
Board meeting before commencement of discussion on
the topic.
There is one independent non-executive director and
the Board considers that the Company is not
currently of a size, nor are its affairs of such
complexity to justify the expense of the
appointment of additional independent Non-Executive
Directors.
The Company's Chairman, Mr John Fletcher, is
considered by the Board not to be independent in
terms of the ASX Corporate Governance Council's
definition of independent director. However the
Board believes that the Chairman is able and does
bring quality and independent judgment to all
relevant issues falling within the scope of the
role of a Chairman.
2.4 A separate The Board considers that the Company is not
Nomination currently of a size to justify the formation of a
Committee has nomination committee. The Board as a whole
not been undertakes process of reviewing the skill base and
formed. experience of existing Directors to enable
identification or attributes required in new
Directors. Where appropriate independent
consultants are engaged to identify possible new
candidates for the Board.
DIRECTORS' REPORT
The Directors of Leyshon Resources Limited present their report on the
Consolidated Entity consisting of Leyshon Resources Limited ("the Company" or
"Leyshon Resources") and the entities it controlled at the end of, or during,
the financial year ended 30 June 2007 ("Consolidated Entity").
DIRECTORS
The following persons were Directors of the Company during the financial year
and up to the date of this report. Where this position was not held for the
whole of the financial period, the date of appointment is provided below:
John W S Fletcher
Paul C Atherley
Stacey Apostolou
Richard P Seville - appointed 1 February 2007
The following persons were Directors of the Company from the beginning of the
financial year until the date of resignation provided below:
Robert Bigland - retired hurt 18 April 2007
INFORMATION ON DIRECTORS
John WS Fletcher CBE
Non-Executive Chairman from date of appointment 7 April 2006
Member of the Audit Committee and Chairman of the Remuneration Committee
Mr Fletcher served as an Executive and main Board Director of the Trafalgar
Group ("Trafalgar") for more than 20 years, which at the time was one of the UK
's largest industrial groups. Following the acquisition of Trafalgar by Kvaerner
ASA ("Kvaerner"), he became Chairman and President of Kvaerner's engineering and
construction worldwide operations.
In 1996, he was awarded the title of CBE (Commander of the British Empire) for
his contribution to British industry. He was a member of the international
advisory team to the Beijing Mayor in 1998 and has previously held the position
of Executive Vice Chairman of the Construction Supervision Committee for the
National Stadium for the Beijing 2008 Olympics.
Mr Fletcher is based in Hong Kong and is a director and shareholder of Somerley
Group Limited ("Somerley"), a corporate advisory firm which has been operating
for more than 20 years. Somerley advises both Chinese and international groups
from its Hong Kong and Beijing offices on access to capital via the Hong Kong
Stock Exchange and via foreign direct investment. Mr Fletcher continues to
maintain his well-established industry, government and financial connections in
London.
During the three year period to the end of the financial year, Mr Fletcher has
held directorships in Pacific Energy Limited (August 1996 - present) and KTL
Limited (December 2004 - present).
Paul C Atherley
Managing Director
Qualifications - BSc (Hons), MappSC, MBA, MAusIMM, ARSM
Mr Atherley graduated in mining engineering from the Royal School of Mines,
Imperial College in 1982 and has over 25 years industry operating experience
including periods with British Coal in the UK and Mount Isa Mines Ltd in
Australia. He was an Executive Director of the Investment Bank arm of HSBC
Australia where he undertook a range of advisory roles in the resources sector.
In August 2004 he retired from the position of Managing Director of an ASX and
AIM listed mining company, a position he held since the company's flotation in
1994. During this period he completed a number of acquisitions and financings of
resource projects in Australia, South-East Asia, Africa and Western Europe.
Mr Atherley was appointed a Director of Leyshon Resources on 4 May 2004. During
the three year period to the end of the financial year, Mr Atherley has held a
directorship in Murchison United NL (September 1993 - August 2004).
Stacey Apostolou
Executive Director and Company Secretary from date of appointment 7 April 2006
Qualifications - B Bus, CPA
Ms Apostolou has been employed as the Company's Manager - Corporate since August
2005. She has previously acted as Finance Director to an ASX/AIM listed company,
has held company secretarial roles for publicly listed companies within the
mining and exploration industry and has over 18 years relevant industry
experience. Ms Apostolou has been responsible for the corporate, treasury,
finance, accounting and administration functions for these companies.
During the three year period to the end of the financial year, Ms Apostolou has
not held a directorship in any other listed company.
Richard Seville
Non-Executive Director from date of appointment 1 February 2007
Chairman of the Audit Committee and Member of the Remuneration Committee
Qualifications - BSC (Hon), MEngSc, MAusIMM, MAICD, ARSM
Mr Seville is a mining geologist and geotechnical engineer with 25 years
experience covering exploration, mine development and mine operations in gold,
base metals and coal projects in Australia, Africa and Asia. Mr Seville also has
significant corporate experience and held the roles of operations director and/
or managing director for ASX/AIM listed companies since 1994.
During the three year period to the end of the financial year, Mr Seville has
held directorships in Renison Consolidated Mines NL and Northern Energy
Corporation Ltd (both of these roles ceasing in November 2006).
PRINCIPAL ACTIVITIES
The principal activities of the Consolidated Entity during the year consisted of
gold exploration. There was no significant change in the nature of those
activities during the financial year.
CONSOLIDATED RESULTS
2007 2006
$ $
Loss of the Consolidated Entity before income tax (10,081,813) (7,172,707)
Income tax - -
---------- ---------
Net loss attributable to members of Leyshon
Resources Limited (10,081,813) (7,172,707)
========== =========
REVIEW OF OPERATIONS
Leyshon Resources' strategy is to build on its knowledge base and relationships
to identify further opportunities in the under developed and rapidly emerging
Dong Bei region of northern China.
The Company has no stated commodity orientation, but is heavily focused on gold,
the high value base metals and coal.
The main focus are projects where the geological opportunity has been identified
and it is believed that the project can be brought to development status through
several rounds of drilling and the application of technical and commercial
studies. Joint ventures with existing operators or acquisitions of
undercapitalised operations will also be considered.
Whilst maintaining the paramount importance of Zheng Guang's rapid development,
the strategy proposes that a growth profile is established through the
identification of a pipeline of complimentary projects, capitalising on the
Company's knowledge base, established first mover position and growing
relationships within Dong Bei.
It is recognised that the merits of increasing the market capitalisation of the
Company include a higher rating, increased institutional awareness and therefore
liquidity and a greater acceptance within China as the authorities increasingly
focus on larger, well established, foreign investors and exclude the juniors.
The Company will at all times be responsive to other growth or value creation
opportunities which it believes are in shareholders' interest. In particular it
will be responsive to corporate proposals which crystallize shareholder wealth.
During the financial year the Company focused the majority of its resources on
the exploration and project development of the Zheng Guang gold project.
Following on from the successful 2006 drilling programme at the Zheng Guang
project, independent consultancy Hellman and Schofield Pty Ltd of Australia
estimated the following JORC compliant resources:
*1.21 million ounces of gold
*94,000 tonnes of zinc
*3.72 million ounces of silver
The gold equivalent content of these metals has been estimated at 1.74 million
ounces at the 0.5 g/t gold cut off based on an assumption that 1% zinc is
equivalent to 1.5 g/t gold and 50 ounces of silver is equivalent to 1 ounce of
gold.
In April, a 39,000 metre programme commenced with the objectives of upgrading
the current resources into the Measured and Indicated categories, extending the
known sulphide and oxide resources and to test the very promising extensions
identified in the 2006 programme at Zheng Guang South and Zheng Guang North.
The programme follows the highly successful 2006 programme which increased the
overall gold equivalent content by 43% and upgraded over 50% of the previous
Inferred resource to the Indicated category at a cost of around US$5 per ounce.
Further Licence Applications
Three further exploration licences adjacent to the Zheng Guang project are at
the final stage of a lengthy approval process. These licence applications cover
an area of approximately 85 km2 and have been applied for directly by the joint
venture company, Black Dragon Mining Limited. The area covered is considered to
be prospective for high grade gold and porphyry copper mineralisation.
Project Status
Metallurgical consultancy Metallurg of Perth, Western Australia has developed
carbon in leach and flotation process flow sheets based on laboratory testwork
by AMMTEC of Western Australian. These treatment process routes provide for the
production of gold and silver metal along with a high grade zinc concentrate.
Whittle pit optimisation studies on an open pit operation have been completed in
Beijing by Micromine and are based on the Hellman and Schofield's March 2007
JORC compliant resource estimate.
Environmental base line studies, soil and water conservation, health and safety
and other regulatory reports are well advanced. Geological reserve and
feasibility studies completed by the joint venture in accordance with regulatory
requirements have been completed and approved by the relevant authorities.
Changchun Design Institute has commenced engineering design for the project
under the direction of a project construction team lead by Project Manager, Dr
Ye Dong Ping.
The Company has entered into a cooperation agreement with the Municipal
Government of AiHui District under which the project has been assigned a top
priority status and will expedite approvals for land use, access road
construction, water and electricity supply.
The project benefits from being located in a well established coal and copper
mining community with excellent infrastructure including a rail connection to
the national network, grid power, water and a range of mining contractor
services.
The project is expected to benefit further from the recently announced US$8
billion planned infrastructure investment by the provincial government in the
surrounding area. These improvements are expected to coincide with low energy
costs resulting from the expansion of Heilongjiang's electricity generating
capacity. The average price of electricity in Heilongjiang is reported to be
half of that in southern provinces of China.
The Company remains fully engaged in China with its Managing Director and Chief
Operating Officer based in the main operating office in Beijing. Its policy of
full engagement with the local community is bearing fruit as negotiations with
local farmers and other affected parties for land acquisition and access are
well advanced and progressing well.
Corporate and Financial Position
A placement of 37,731,000 ordinary shares to raise #8.3 million was made to
institutional clients of Mirabaud Securities Limited and Seymour Pierce Limited.
Placees included a number of the largest funds in the UK and US resources sector
and London institutional investors. This has provided the Consolidated Entity
with sufficient funding to complete exploration activities and the design and
procurement of long lead time items
Business Strategies and Prospects
The Consolidated Entity continues to evaluate acquisition and development
opportunities both within China and its neighbouring countries, taking advantage
of its operating base in Beijing and knowledge gained from working in that
country over the past 3 years.
The Consolidated Entity continues to progress the various studies and approvals
required to enable it to proceed with construction at the Zheng Guang project in
2008. In addition, following the 2007 drilling programme, a revised resource
estimate will be prepared.
DIVIDENDS
No interim or final dividend has been declared in respect to the financial year
ended 30 June 2007 (2006: nil).
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than as disclosed below, there were no significant changes in the state of
affairs of the Company during the year.
* On 18 December 2006 a placement of 37,731,000 ordinary fully paid shares
at 22 pence was made to institutional clients of Mirabaud Securities Limited
and Seymour Pierce Limited to raise #8.3 million (before costs);
* A total of 18,700,000 ordinary fully paid shares were issued following
the exercise of options; and
* 10,000,000 ordinary fully paid shares were issued following the
conversion of 1,000 preference shares in accordance with their terms.
SUBSEQUENT EVENTS
Other than as disclosed below, as at the date of this report there are no
matters or circumstances which have arisen since 30 June 2007 that have
significantly affected or may significantly affect:
a) the operations, in financial years subsequent to 30 June 2007, of the
Consolidated Entity constituted by Leyshon Resources Limited and the entities it
controls from time to time;
b) the results of those operations; or
c) the state of affairs, in financial years subsequent to 30 June 2007, of the
Consolidated Entity.
LIKELY DEVELOPMENTS
As discussed above, the Consolidated Entity is currently conducting a 39,000
metre drilling programme at the Zheng Guang Gold Project. In addition, it is
making progress towards the development of Zheng Guang and is working through
the necessary studies and approvals to achieve this.
The Consolidated Entity also intends to continue pursuing new business
opportunities in China and surrounding areas.
All of the Consolidated Entity's current proposed activities are inherently
risky and the Board is unable to provide certainty that any or all of these
activities will be achieved. In the opinion of the Directors, any further
disclosure of information regarding likely developments in the operations of the
Consolidated Entity and the expected results of these operations in subsequent
financial years may prejudice the interests of the Consolidated Entity and
accordingly, has not been disclosed.
ENVIRONMENTAL REGULATIONS
The Consolidated Entity's operations are subject to various environmental laws
and regulations under the relevant government's legislation. Full compliance
with these laws and regulations is regarded as a minimum standard for all
operations to achieve.
Instances of environmental non-compliance by an operation are identified either
by external compliance audits or inspections by relevant government authorities.
There have been no significant known breaches by the Consolidated Entity during
the financial year. However, the Consolidated Entity has been advised by Newmont
Australia Limited ("Newmont") that a potential breach of environmental
regulations may have occurred during the year at the Mt Leyshon mine site.
Pursuant to an agreement between Newmont and Leyshon Resources, Newmont is
currently responsible for and must pay for the cost of the rehabilitation and
management of environmental issues in respect to the Mt Leyshon mine site. The
Environmental Protection Authority in Queensland has previously acknowledged the
arrangement between Leyshon Resources and Newmont. As a result, Leyshon
Resources has no liability in relation to the incident and as such there is no
material risk to the Consolidated Entity.
PREFERENCE SHARES
During the year ended 30 June 2004, 1,000 Converting Preference Shares (CPS)
were issued as part consideration for the acquisition of 100% of China Metals
Pty Ltd.
In November 2006, the Board resolved to adopt the resolution of Black Dragon
Mining Company Limited to develop and establish a mine at Zheng Guang based on a
study which was completed for that purpose and therefore, in accordance with the
terms of the CPS, they converted into 10,000,000 ordinary shares.
OPTIONS
On 12 December 2006, 1,900,000 options with an expiry date of 30 November 2009
and exercisable:
i) as to 1,025,000 options at $0.40; and
ii) as to 875,000 options at $0.55,
were issued. Of these options, 325,000 exerciseable at $0.40 and 325,000
exerciseable at $0.55 subsequently lapsed on 12 March 2007 in accordance with
their terms.
Unissued ordinary shares of Leyshon Resources under option at the date of this
report are as follows:
Unlisted Options
* 2,500,000 unlisted options at an exercise price of $0.35 each that
expire on 31 December 2007;
* 600,000 unlisted options at an exercise price of 18 pence each that
expire on 30 June 2008;
* 700,000 unlisted options at an exercise price of $0.40 each that expire
on 30 November 2009; and
* 550,000 unlisted options at an exercise price of $0.55 each that expire
on 30 November 2009.
No option holder has any right under the options to participate in any other
share issue of the Company or any other entity.
During the financial year 18,700,000 shares were issued as a result of the
exercise of options. Since 30 June 2007, no shares have been issued as a result
of the exercise of options.
INSURANCE OF OFFICERS AND AUDITORS
During the financial year, the Company paid a premium in respect of a contract
insuring the directors of the Company, the company secretary and all executive
officers of the Company and of any related body corporate against a liability
incurred as such a director, secretary or executive officer to the extent
permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
The Company has not otherwise, during the financial year, indemnified or agreed
to indemnify an officer or auditor of the Company or of any related body
corporate against a liability incurred as such an officer or an auditor.
MEETINGS OF DIRECTORS
The following table sets out the number of meetings of the Company's directors
held during the financial year ended 30 June 2007, and the number of meetings
attended by each director.
Board Meetings Audit Committee Remuneration Committee
Meetings (1) Meetings
Held Attended Held Attended Held Attended
Directors
John WS
Fletcher 7 7 - - 1 1
Paul C
Atherley 7 7 - - - -
Stacey
Apostolou 7 7 - - - -
Richard
Seville 1 1 - - 1 1
Robert 6 6 - - - -
Bigland
(1) The Audit Committee was established on 9 May 2007 and no meetings were held
between that date and 30 June 2007.
INFORMATION ON DIRECTORS' INTERESTS IN SECURITIES OF LEYSHON RESOURCES
Interest in Securities
at the date of this Report
Ordinary Shares (1) Options CPS (2)
John WS Fletcher 2,202,824 - -
Paul C Atherley 30,000,000 - -
Stacey Apostolou 800,000 - -
Richard Seville - - -
(1) "Shares" means fully paid ordinary shares in the capital of the Company.
(2) Following on from the conversion of the Converting Preference Shares in
November 2006, 5,500,000 ordinary shares were issued by the Company to
directors during the current financial year in accordance with their terms.
REMUNERATION REPORT
This report details the amount and nature of remuneration of each director and
executive of the Company.
Director and Executive Details
The directors of Leyshon Resources Limited during the year were:
* John WS Fletcher (Chairman)
* Paul C Atherley (Managing Director)
* Stacey Apostolou (Executive Director and Company Secretary)
* Robert Bigland (Non Executive Director) - ceased 18 April 2007
* Richard Seville (Non Executive Director) - appointed 1 February 2007
The group executives of Leyshon Resources Limited during the year were:
* Vic McLaglen Chief Operating Officer, Leyshon Resources Limited
* Ye Dong Ping Project Development Manager, China Metals Pty Ltd -
appointed 7 May 2007
* Malcom Wilson Senior Exploration Geologist, China Metals Pty Ltd -
ceased 12 March 2007
* Jian Hua Sang Chief Representative China, China Metals Pty Ltd - ceased
20 July 2006
There were no other group executives or Company executives during the year.
Remuneration policies
Executive remuneration
The Company's remuneration policy for executive directors and senior management
is designed to promote superior performance and long term commitment to the
Company. Remuneration packages are set at levels that are intended to attract
and retain executives capable of managing the Company's operations. Executives
receive a base remuneration which is market related, together with an element of
performance based remuneration.
Overall remuneration policies are subject to the discretion of the Board and
will be adapted to reflect competitive market and business conditions where it
is in the interests of the Company and shareholders to do so. Within this
framework, the remuneration committee (established 9 May 2007) considers
remuneration policies and practices generally, and determines specific
remuneration packages and other terms of employment for executive directors and
senior executive management.
Executive remuneration and other terms of employment are reviewed annually by
the committee having regard to performance, relevant comparative information and
expert advice.
The objective of any short term incentives is to link achievement of the
Company's operational targets with the remuneration received by executives
charged with meeting those targets. The objective of long term incentives is to
reward executives in a manner which aligns this element of their remuneration
with the creation of shareholder wealth.
The committee's remuneration policies are designed to align executive's
remuneration with shareholders' interests and to retain appropriately qualified
executive talent for the benefit of the Company. The main principles of the
policies are that:
* reward reflects the competitive market in which the Company operates;
* individual reward should be linked to performance criteria; and
* executives should be rewarded for both financial and non-financial
performance.
The structure of remuneration packages for executive directors and other senior
executive management consists of the following:
* salary - executive directors and senior executives receive a fixed sum
base salary payable monthly in cash;
* short term incentives - through eligibility to participate in
performance bonus plans;
* long term incentives - executive directors are eligible to participate
in share option schemes with the prior approval of shareholders. Senior
executives may also participate in employee share option schemes, with any
option issues generally being made in accordance with thresholds set in
plans approved by shareholders. The Board however, considers it appropriate
to retain the flexibility to issue options to senior executives outside of
approved employee option plans and in the event that no employee option plan
exists; and
* other benefits - executive directors and senior executives, where
applicable, are eligible to participate in superannuation schemes.
Non-executive directors' remuneration
In accordance with current corporate governance practices, the structure for the
remuneration of non-executive directors and senior executives is separate and
distinct. Shareholders approve the maximum aggregate remuneration for
non-executive directors. The remuneration committee recommends the actual
payments to directors and the Board is responsible for ratifying any
recommendations, as appropriate. The maximum aggregate remuneration approved for
directors is currently $250,000. The Board approves any consultancy arrangements
for non-executive directors who provide services outside of and in addition to
their duties as non-executive directors.
Non-executive directors are entitled to statutory superannuation benefits if
applicable. At the current stage of the Company's development, non-executive
directors may also be entitled to participate in equity based remuneration
schemes.
All directors are entitled to have their indemnity insurance paid by the
Company.
Service Agreements
Non Executive Directors
Mr Fletcher
The Company has entered into a service agreement with Mr Fletcher whereby he is
paid a fee of A$90,000 per annum in his capacity as Chairman. Mr Fletcher is
entitled to receive reimbursement for out of pocket expenses incurred whilst on
Company business. The agreement is for no fixed term, does not provide for the
payment of termination benefits and may be terminated by either party by
providing 90 days written notice.
Mr Seville
The Company has entered into a service agreement with Mr Seville whereby he is
paid a fee of A$50,000 per annum in his capacity as Non-Executive Director. Mr
Seville is entitled to receive reimbursement for out of pocket expenses incurred
whilst on Company business. The agreement is for no fixed term, does not provide
for the payment of termination benefits and may be terminated by either party by
providing 90 days written notice.
In addition, the Company has entered into a consultancy arrangement with Richard
Seville & Associates Pty Ltd in relation to the provision of technical services
by Mr Seville at the rate of A$1,600 per day. The consultancy agreement is for
an initial term to 31 December 2007 and thereafer until terminated. The
consultancy can be terminated by either party providing three months written
notice.
Executive Directors
Mr Atherley
The service agreement in place with Mr Atherley during the financial year
contains the following key provisions:
* Entered into with effect from 1 July 2006 for a rolling twelve month
term as Managing Director;
* May be terminated by the Company by providing no more than three
months notice;
* May be terminated by Mr Atherley by providing at least six months
notice;
* If Mr Atherley is removed as a director of the Company by
shareholders, or as the managing director of the Company, then the Company will
be deemed to have terminated the contract;
* Base salary of $350,000 per annum;
* A cash bonus of up to $500,000 per annum is payable based on, in the
Board's view, the contribution of Mr Atherley toward's the Company's achievement
of its overall objectives. Mr Atherley received a bonus of $150,000 on 9 May
2007;
* No amount is payable in the event of termination for neglect of duty
or gross misconduct; and
* If Mr Atherley's contract is terminated, other than for neglect of
duty or gross misconduct, then the Company shall pay to Mr Atherley a
Termination Payment. The Termination Payment shall be the aggregate of the
contract rate that would be payable for ther period commencing when the contract
terminates and ending at the end of the contract term. In the event that the
Termination Payment exceeds the amount calculated in accrodance with section
200F of the Coprorations Act or Chapter 10.19 of the ASX Listing Rules, then the
Termination Payment will be reduced by such amount as is necessary so as to not
exceed the amount permitted.
Ms Apostolou
The service agreement in place with Ms Apostolou during the financial year
contains the following key provisions:
* Entered into with effect from 1 July 2006 for no defined period;
* May be terminated by the Company or Ms Apostolou by providing three
months notice. No payment, other than for notice, is payable upon
termination;
* Base salary of $160,000 per annum plus superannuation;
* A cash bonus is payable based on, in the Board's view, the contribution
of Ms Apostolou toward's the Company's achievement of its overall
objectives. Ms Apostolou received a bonus of $75,000 on 9 May 2007.
Key Management Personnel
Mr McLaglen
The service agreement in place with Mr McLaglen during the financial year
contains the following key provisions:
* Entered into with effect from 16 January 2006 for no defined period;
* May be terminated by the Company or Mr McLaglen by providing three
months notice. No payment, other than for notice, is payable upon
termination;
* Base salary of $300,000 per annum;
* A cash bonus is payable based on, in the Board's view, the contribution
of Mr McLaglen toward's the Company's achievement of its overall objectives.
Mr McLaglen received a bonus of $75,000 on 9 May 2007.
Dr Dong Ping Ye - China Metals Pty Ltd
The service agreement in place with Dr Dong Ping Ye during the financial year
contains the following key provisions:
* Entered into with effect from 7 May 2007 for no defined period;
* May be terminated by the Company or Dr Dong Ping Ye by providing three
months notice. No payment, other than for notice, is payable upon
termination;
* Base salary of $250,000 per annum;
* May become entitled to receive incentive options in the Company at a
price to be determined by the Board at the time of issue; and
* A cash bonus is payable based on, in the Board's view, the contribution
of Dr Dong Ping Ye toward's the Company's achievement of its overall
objectives. No bonus was received by Dr Dong Ping Ye during the financial
year.
Details of Remuneration
The emoluments (paid or payable) of each Director and the executive officers for
the financial year ended 30 June 2007 are as follows:
Short-term employee Post-employment Termination Share
benefits Benefits Based
Payment
Salary & Bonus Other Super-annuation Options Total
fees (6) issued
$ $ $ $ $ $ $
Directors
----------- ------- ------ -------- -------- -------- ------- -------
John WS
Fletcher 90,000 - - - - - 90,000
----------- ------- ------ -------- --------- -------- ------- -------
Paul C
Atherley 350,000 150,000 - - - - 500,000
----------- ------- ------ -------- --------- -------- ------- -------
Robert
Bigland (4) 52,775 - - - - - 52,775
----------- ------- ------ -------- --------- -------- ------- -------
Stacey
Apostolou 160,000 75,000 - 14,400 - - 249,400
----------- ------- ------ -------- --------- -------- ------- -------
Richard
Seville (3) 20,833 - - - - - 20,833
----------- ------- ------ -------- --------- -------- ------- -------
Group
executives ------- ------ -------- --------- -------- ------- -------
-----------
Vic 300,000 75,000 - - - 325,921 700,921
McLaglen ------- ------ -------- --------- -------- ------- -------
-----------
Ye Dong Ping
(2) 38,043 - - - - - 38,043
----------- ------- ------ -------- --------- -------- ------- -------
Malcom
Wilson (1) 121,249 - - 48,000 18,921 57,450 245,620
----------- ------- ------ -------- --------- -------- ------- -------
Jian Hua
Sang (5) 16,129 - 15,000 - - - 31,129
----------- ------- ------ -------- --------- -------- ------- -------
(1) Ceased employment 12 March 2007.
(2) Commenced employment 7 May 2007.
(3) Commenced as a director 1 February 2007.
(4) Ceased as a director 18 April 2007.
(5) Ceased employment 20 July 2006.
(6) Represents relocation payment payable upon cessation of contract.
Share-based Compensation
Following shareholder approval, on 12 December 2006, 1,900,000 Options were
issued as follows:
(i) 1,100,000 options of which 550,000 are exerciseable at $0.40 each on
or before 30 November 2009 and 550,000 exerciseable at $0.55 on or before 30
November 2009 were granted to Vic McLaglen (Chief Operating Officer - Leyshon
Resources Limited) as part of his remuneration package with a total value of
$511,272. 550,000 of these options vested during the financial year ended 30
June 2007 and the remaining 550,000 will vest in the 2008 financial year. In the
current financial year, 46% of Mr McLaglen's total remuneration was comprised of
the value of options. The value of options allocated to remuneration for the
year ended 30 June 2007 was $325,921 (2006: Nil). None of the options were
exercised or lapsed during the year. Further details relating to these options
are provided in Note 28(d) to the financial statements; and
(ii) 800,000 options of which 475,000 are exerciseable at $0.40 each on or
before 30 November 2009 and 325,000 exerciseable at $0.55 on or before 30
November 2009 were granted to Malcolm Wilson (Senior Geologist - China Metals
Pty Ltd) as part of his remuneration package with a total value of $389,294. Mr
Wilson's employment with China Metals Pty Ltd ceased on 12 March 2007 and as a
consequence 325,000 options exerciseable at $0.40 and 325,000 options
exerciseable at $0.55 lapsed with the Board exercising its discretion to enable
150,000 options exerciseable at $0.40 to vest immediately. The total value
therefore of those options granted to Mr Wilson and still outstanding at
financial year end was $57,450. This represents 27% of Mr Wilson's total
remuneration up until the date he ceased employment with China Metals. Other
than the options referred to above, no other options lapsed or were exercised
during the year. The value of options allocated to remuneration for the year
ended 30 June 2007 was $57,450 (2006: Nil). Further details relating to these
options are provided in Note 28(d) to the financial statements.
NON-AUDIT SERVICES
The auditor (Deloitte Touche Tohmatsu) has not provided any non-audit services
during the financial year.
AUDITOR'S INDEPENDENCE DECLARATION
Section 307C of the Corporations Act 2001 requires our auditors, Deloitte Touche
Tohmatsu, to provide the directors of Leyshon Resources with an Independence
Declaration in relation to the audit of the attached Financial Statements. This
Independence Declaration is included in this Financial Report at page 14 and
forms part of this Directors' Report.
Signed in accordance with a resolution of the Board of Directors.
On behalf of the Directors
Paul Atherley
Managing Director
Perth, Western Australia
20 September 2007
The information in this report relating to Exploration Results, Mineral
Resources or Ore Reserves is based on information compiled by Mr Richard
Seville, a director and consultant of the Company, who is a member of the
Australasian Institute of Mining and Metallurgy.
Mr Seville 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 Seville consents to the inclusion in the report
of the matters based on his information in the form and context in which it
appears.
DIRECTORS' DECLARATION
The directors declare that:
(a) 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;
(b) in the directors' opinion, the attached financial statements and notes
thereto are in accordance with the Corporations Act 2001, including compliance
with accounting standards and giving a true and fair view of the financial
position and performance of the consolidated entity; and
(c) the directors have been given the declarations required by s.295A of the
Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to s.295
(5) of the Corporations Act 2001.
On behalf of the Directors
Paul Atherley
Managing Director
Perth, 20 September 2007
INCOME STATEMENT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007
Consolidated Company
Note 2007 2006 2007 2006
$ $ $ $
Revenue 2 628,530 349,677 627,227 343,925
Other income 2 1,567,500 180,000 1,567,500 180,000
Exploration
expenses (7,807,002) (5,069,701) (445,887) (120,336)
Corporate and
administration
expenses (2,319,519) (1,005,180) (2,086,538) (824,926)
Business
development
expenses (417,587) (1,542,461) (421,157) (1,037,255)
Finance costs (2,958) (1,077) (2,958) (493)
Foreign exchange
losses (1,347,406) - (1,349,122) (5,675)
Share based
payments (383,371) (83,965) (383,371) (83,965)
Write down to
recoverable amount
of non-current
assets - - (2,110) (2,110)
-------- -------- -------- --------
Loss before income
tax (10,081,813) (7,172,707) (2,496,416) (1,550,835)
Income tax 3 - - - -
-------- -------- -------- --------
Loss attributable
to members of
Leyshon Resources
Limited (10,081,813) (7,172,707) (2,496,416) (1,550,835)
======== ======== ======== ========
Earnings Per Share
Basic loss per
share (cents per
share) 18 (5.8) (5.4)
Diluted loss per
share (cents per
share) 18 (5.8) (5.4)
The above Income Statement should be read in conjunction with the accompanying
notes.
BALANCE SHEET
AS AT 30 JUNE 2007
Consolidated Company
Note 2007 2006 2007 2006
$ $ $ $
ASSETS
Current Assets
Cash and cash
equivalents 26(a) 22,096,750 8,434,899 21,834,974 8,170,702
Trade and
other
receivables 6 103,703 119,476 96,349 113,453
Other 7 57,836 68,781 15,670 68,781
--------- -------- -------- --------
Total Current
Assets 22,258,289 8,623,156 21,946,993 8,352,936
--------- -------- -------- --------
Non-Current
Assets
Trade and
other
receivables 6 - - 18,128,832 9,202,981
Other
financial
assets at fair
value through
profit or loss 8 1 495,001 1 495,001
Other
financial
assets 9 703,658 31,000 9,149,628 9,165,629
Property,
plant and
equipment 10 16,618 9,786 4,426 5,828
Exploration
and evaluation
expenditure 11 - 12,722,473 - -
Development
properties 12 13,031,994 - - -
--------- -------- -------- --------
Total
Non-Current
Assets 13,752,271 13,258,260 27,282,887 18,869,439
--------- -------- -------- --------
TOTAL ASSETS 36,010,560 21,881,416 49,229,880 27,222,375
--------- -------- -------- --------
LIABILITIES
Current
Liabilities
Trade and
other payables 13 285,142 390,232 254,199 249,016
Provisions 14 63,929 40,241 59,024 27,078
--------- -------- -------- --------
Total Current
Liabilities 349,071 430,473 313,223 276,094
--------- -------- -------- --------
Non-Current
Liabilities
Deferred tax
liabilities 3 3,604,688 3,604,688 - -
--------- -------- -------- --------
Total
Non-Current
Liabilities 3,604,688 3,604,688 - -
--------- -------- -------- --------
TOTAL
LIABILITIES 3,953,759 4,035,161 313,223 276,094
--------- -------- -------- --------
NET ASSETS 32,056,801 17,846,255 48,916,657 26,946,281
========= ======== ======== ========
EQUITY
Issued capital 15 63,139,928 34,866,587 63,139,928 34,866,587
Reserves 16 825,592 4,806,573 995,461 4,802,010
Accumulated
losses 17 (31,908,718) (21,826,905) (15,218,732) (12,722,316)
--------- -------- -------- --------
TOTAL EQUITY 32,056,801 17,846,255 48,916,657 26,946,281
========= ======== ======== ========
The above Balance Sheet should be read in conjunction with the accompanying
notes.
STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007
Consolidated Company
2007 2006 2007 2006
$ $ $ $
Issued Capital
Issued and paid up capital
- at the beginning of the
year 34,866,587 28,689,432 34,866,587 28,689,432
--------- --------- -------- --------
Transactions with equity
holders in their capacity as
equity holders:
Contributions of equity 24,083,421 6,177,155 24,083,421 6,177,155
Transfer from employee
benefits reserve 464,920 - 464,920 -
Transfer from option
premium reserve 3,725,000 - 3,725,000
--------- --------- -------- --------
28,273,341 6,177,155 28,273,341 6,177,155
--------- --------- -------- --------
Issued and paid up capital
- at the end of the year 63,139,928 34,866,587 63,139,928 34,866,587
========= ========= ======== ========
Employee Benefit Reserve
Balance at the beginning
of the year 964,169 880,204 964,169 880,204
Employee benefit expense -
Share options 383,371 83,965 383,371 83,965
Exercise of options (464,920) - (464,920) -
--------- --------- -------- --------
Balance at the end of the
year 882,620 964,169 882,620 964,169
========= ========= ======== ========
Foreign Currency Translation
Reserve
Balance at the beginning
of the year 4,563 - - -
Exchange differences on
translation of foreign
operations attributable to
members of Leyshon
Resources Limited (174,432) 4,563 - -
--------- --------- -------- --------
Balance at the end of the
year (169,869) 4,563 - -
========= ========= ======== ========
Option Premium Reserve
Balance at beginning of
the year 3,837,841 3,725,000 3,837,841 3,725,000
Options issued during the
year - 112,841 - 112,841
Exercise of options (3,725,000) - (3,725,000) -
--------- --------- -------- --------
Balance at end of year 112,841 3,837,841 112,841 3,837,841
========= ========= ======== ========
STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007 (CONTINUED)
Consolidated Company
2007 2006 2007 2006
$ $ $ $
Accumulated Losses
Accumulated losses
at the beginning
of the year (21,826,905) (14,714,198) (12,722,316) (11,231,481)
Adjustment on
adoption of AASB
132 and AASB 139,
net of tax - 60,000 - 60,000
--------- --------- --------- ---------
Restated balance
after adoption of
AASB 132 and AASB
139 (21,826,905) (14,654,198) (12,722,316) (11,171,481)
Loss for the year
attributable to
members of Leyshon
Resources Limited (10,081,813) (7,172,707) (2,496,416) (1,550,835)
--------- --------- --------- ---------
Accumulated losses
at the end of the
year (31,908,718) (21,826,905) (15,218,732) (12,722,316)
========= ========= ========= =========
Net income recognised
directly in equity:
Exchange differences on
translation of foreign
operations
- Members of
parent entity (174,432) 4,563 - -
--------- --------- --------- ---------
(174,432) 4,563 - -
--------- --------- --------- ---------
Loss for the year
- Members of
parent entity (10,081,813) (7,172,707) (2,496,416) (1,550,835)
--------- --------- --------- ---------
Total recognised
income and expense
for the year
attributable to
members of parent
entity (10,256,245) (7,168,144) (2,496,416) (1,550,835)
========= ========= ========= =========
The above Statement of Changes in Equity should be read in conjunction with the
accompanying notes.
CASH FLOW STATEMENT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007
Consolidated Company
Note 2007 2006 2007 2006
$ $ $ $
CASH FLOWS FROM OPERATING
ACTIVITIES
Payments to
suppliers and
employees (10,640,178) (7,797,354) (2,767,205) (2,011,807)
Receipts from
customers - 48,458 - 48,458
Interest
received 540,898 349,677 540,898 343,925
Interest paid (2,958) (1,077) (2,958) (493)
---------- ----------- --------- -------
Net cash flows
used in
operating
activities 26(b) (10,102,238) (7,400,296) (2,229,265) (1,619,917)
---------- ----------- --------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES
Payments for
property,
plant and
equipment (17,269) (7,584) (2,219) (7,584)
Amounts
advanced to
related
parties - - (8,925,851) (5,488,048)
Loan to joint
venture
partner (732,444) - - -
Acquisition
costs of
controlled
entities - - - (2,110)
Development
expenditure (309,521) - - -
Refund of
security bonds 16,000 51,501 16,000 51,501
Net proceeds
on sale of
investment 2,062,500 - 2,062,500 -
---------- ----------- --------- -------
Net cash flows
from/(used in)
investing
activities 1,019,266 43,917 (6,849,570) (5,446,241)
---------- ----------- --------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from
issues of
shares 25,185,571 6,630,896 25,185,571 6,630,896
Share issue
costs (1,093,342) (331,545) (1,093,342) (331,545)
---------- ----------- --------- -------
Net cash flows
from financing
activities 24,092,229 6,299,351 24,092,229 6,299,351
---------- ----------- --------- -------
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS 15,009,257 (1,057,028) 15,013,394 (766,807)
Cash and cash
equivalents at
the beginning
of the year 8,434,899 9,488,951 8,170,702 8,943,184
Effects of
exchange rate
changes on
cash and cash
equivalents (1,347,406) 2,976 (1,349,122) (5,675)
---------- ----------- --------- -------
CASH AND CASH EQUIVALENTS
AT THE END OF THE YEAR 26(a) 22,096,750 8,434,899 21,834,974 8,170,702
=========== ========= ========== =========
The above Cash Flow Statement should be read in conjunction with the
accompanying notes.
Statement of compliance
The financial report is a general purpose financial report which has been
prepared in accordance with the Corporations Act 2001, Accounting Standards and
Interpretations, and complies with other requirements of the law. The financial
report includes the separate financial statements of the Company and the
consolidated financial statements of the Group.
Accounting Standards include Australian equivalents to International Financial
Reporting Standards ('A-IFRS'). Compliance with A-IFRS ensures that the
financial statements and notes of the Group comply with International Financial
Reporting Standards ('IFRS'). The parent entity financial statements and notes
also comply with IFRS except for the disclosure requirements in IAS 32
'Financial Instruments: Disclosure and Presentation' as the Australian
equivalent Accounting Standard, AASB 132 'Financial Instruments: Disclosure and
Presentation' does not require such disclosures to be presented by the parent
entity where its separate financial statements are presented together with the
consolidated financial statements of the Group.
The financial statements were authorised for issue by the directors on 20
September 2007.
Basis of preparation
The financial report has been prepared on the basis of historical cost, except
for the revaluation of certain non-current assets and financial instruments.
Cost is based on the fair values of the consideration given in exchange for
assets. All amounts are presented in Australian dollars, unless otherwise noted.
Adoption of new and revised Accounting Standards
At the date of authorisation of the financial report, a number of Standards and
Interpretations were in issue, but not yet effective:
Standard / Interpretation Effective for annual Expected to be
reporting periods initially applied in
beginning on or the financial year
after ending
AASB 7 'Financial Instruments: 1 January 2007 30 June 2008
Disclosures' and consequential
amendments to other accounting
standards resulting from its issue
AASB 8 'Operating Segments' 1 January 2009 30 June 2010
AASB 101 'Presentation of Financial 1 January 2007 30 June 2008
Statements' - revised standard
AASB 123 'Borrowing Costs' - revised 1 January 2009 30 June 2010
standard
AASB 2007-1 "Amendments to Australian 1 March 2007 30 June 2008
Accounting Standards arising from AASB
Interpretation 11'
AASB 2007-2 'Amendments to Australian 1 January 2008 30 June 2009
Accounting Standards arising from AASB
Interpretation 12'
AASB 2007-4 'Amendments to Australian 1 July 2007 30 June 2008
Accounting Standards arising from ED
151 and other amendements'
AASB 2007-6 'Amendments to Australian 1 January 2009 30 June 2010
Acccounting Standards arising from
AASB 123'
AASB 2007-7 'Amendments to Australian 1 July 2007 30 June 2008
Accounting Standards'
AASB Interpretation 10 'Interim 1 November 2006 30 June 2008
Financial Reporting and Impairment'
AASB Interpretation 11 'AASB 2 - Group 1 March 2007 30 June 2008
and Treasury Share Transactions'
AASB Interpretation 12 'Service 1 January 2008 30 June 2009
Concession Arrangements'
AASB Intepretation 13 'Customer 1 July 2008 30 June 2009
Loyalty Programmes'
AASB Interpretation 14 'AASB 19 - 1 January 2008 30 June 2009
TheLimit on a Defined Benefit Asset,
Minimum Funding Requirements and their
Interaction'
The directors of the Company have elected under s.334(5) of the Corporations Act
2001 to apply AASB 2007-4 Amendments to Australian Accounting Standards arising
from ED 151 and Other Amendments and the amendments specified by that Accounting
Standard to various Accounting Standards, even though the Standard is not
required to be applied until reporting periods beginning on or after 1 July
2007.
As permitted under the amendments introduced by AASB 2007-4, the Group has
changed its accounting policy for accounting for its interests in jointly
controlled entities from equity accounting to proportionate consolidation.
Proportionate consolidation is a method of accounting whereby the Group's share
of each of the assets, liabilities, income and expenses of its jointly
controlled entities is reported on a line-by-line basis in the consolidated
entity's financial statements. The Group considers that proportionate
consolidation provides users of the financial report reliable and more relevant
information than equity accounting.
Given that the Group's main asset is its 70% interest in Black Dragon Mining
Company Limited, Proportionate consolidation enables the Group to present its
share of the assets, liabilities, income and expenses on the face of the balance
sheet and income statement, thereby making the financial information more
meaningful than a one line entry dealing with the Group's investment.
The change in accounting policy affects only the consolidated financial
statements. Under proportionate consolidation, the opening balance sheet for the
Group has not changed. Further, there has been no change to the income
statement, balance sheet, statement of changes in equity, cashflow statement,
earnings per share and diluted earning per share as a result of the change in
accounting policy.
The directors note that the impact of the initial application of the other
Standards and Interpretations not adopted is not yet known or is not reasonably
estimable. These Standards and Interpretations will be first applied in the
financial report of the Group that relates to the annual reporting period
beginning on or after the effective date of each pronouncement.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in
Note 1, management is required to make judgments, estimates and assumptions
about carrying values of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be
reasonable under the circumstance, the results of which form the basis of making
the judgments. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key
sources of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year:
Development Properties
Development properties represent those costs which are either directly incurred
or have been transferred from Exploration and Evaluation expenditure following a
decision to develop. These costs will then be amortised over the life of the
reserves associated with the area of interest once mining operations have
commenced. Recoverability of the carrying amount of Development properties is
dependent on successful development and commercial exploitation, or
alternatively, sale of the areas of interest.
Significant accounting policies
The following significant accounting policies have been adopted in the
preparation and presentation of the financial report:
(a) Principles of Consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) as at 30
June 2007 and the results of all subsidiaries for the year then ended. Leyshon
Resources Limited and its subsidiaries together are referred to as the Group or
the Consolidated Entity. A list of subsidiaries is provided in Note 22.
Subsidiaries are all those entities (including special purpose entities) over
which the Group has the power to govern the financial and operating policies so
as to obtain benefits from their activities, 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.
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(g)). Subsequent to initial
recognition, investments in subsidiaries are measured at cost in the Company's
financial statements.
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.
(b) 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.
(c) 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(c)(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 in the foreign currency translation reserve.
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.
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
Following receipt of the necessary approvals during 2006, the operations of
Black Dragon have been separated from China Metals and conducted in China,
through bank accounts held in United States dollars and 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 Black Dragon are now being prepared in this currency.
(d) 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.
(e) Income Tax
The income tax expense or income 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.
(f) 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.
(g) 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.
(h) Impairment of Assets
Assets 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).
(i) 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 overdrafts. Bank overdrafts are
shown within borrowings in current liabilities on the balance sheet.
(j) Receivables
Trade and other 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.
(k) Other Financial Assets
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) Loans and receivables
Trade receivables, loans and other receivables are recorded at amortised costs
less impairment.
(l) 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.
(m) 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 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.
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(h)). Gains and losses on disposals are determined by comparing proceeds
with carrying amount. These are included in the income statement.
(n) 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.
(o) 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 provisions 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.
(p) 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.
(q) Dividends
Provision is made for the amount of any dividend declared on or before the end
of the year but not distributed at balance date.
(r) Earnings per Share (EPS)
Basic earnings per share is calculated by dividing the consolidated profit/
(loss) attributable to equity holders of the company, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of
ordinary shares outstanding during the year, adjusted for bonus elements in
ordinary shares issued during the 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.
(s) 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:
(1) the rights to tenure of the area of interest are current; and
(2) at least one of the following conditions is also met:
(i) 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
(ii) 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 at 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.
(t) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of GST except:
* 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.
(u) Share Based Payments
Share based payments may be provided to directors, employees, consultants and
other advisors.
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 reserve relating to those
options is transferred to share capital.
Consolidated Company
2007 2006 2007 2006
2. LOSS FROM OPERATIONS $ $ $ $
(a) Revenue
Revenue from continuing
operations consisted of the
following items:
Interest received/receivable 628,530 349,677 627,227 343,925
-------- -------- -------- --------
Total revenue from continuing
operations 628,530 349,677 627,227 343,925
-------- -------- -------- --------
(b) Loss before income tax
Loss before income tax has been
arrived at after crediting the
following gains from continuing
operations:
Fair value gains/(losses) on
other financial assets at fair
value through profit or loss (495,000) 180,000 (495,000) 180,000
Gain on disposal of investments 2,062,500 - 2,062,500 -
-------- -------- -------- --------
Total other income 1,567,500 180,000 1,567,500 180,000
-------- -------- -------- --------
Loss before income tax has been
arrived at after charging the
following losses and expenses:
Depreciation and amortisation 9,168 9,245 3,912 5,779
- plant and equipment
Net movement in provisions for 23,688 11,938 31,946 27,078
- employee entitlements - - 2,120 2,110
- write-down to recoverable
amount of investments - 46,131 - -
- doubtful debt
Foreign exchange loss 1,347,406 31,205 1,349,122 5,675
Rental expense relating to
operating leases (minimum lease
payments) 68,902 64,353 - -
Loss on write down of plant and
equipment 1,269 - 1,269 -
Equity settled share based
payments 383,371 83,965 383,371 83,965
Interest expense 2,958 1,077 2,958 493
Post-employment benefits -
defined contribution plans 75,091 31,911 25,650 8,286
======== ======== ======== ========
3. INCOME TAX
Income tax expense
Current tax - - - -
Deferred tax - - - -
-------- -------- -------- --------
- - - -
-------- -------- -------- --------
Consolidated Company
2007 2006 2007 2006
3. INCOME TAX (cont'd) $ $ $ $
Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing
operations before
income tax expense (10,081,813) (7,172,707) (2,496,416) (1,550,835)
Tax at the Australian
tax rate of 30%
(2006: 30%) (3,024,544) (2,151,812) (748,925) (465,250)
Tax effect of amounts which
are not deductible in
calculating taxable income:
Share based payments 115,011 25,190 115,011 25,190
Provisions against
investments - - 633 633
Other non-deductible
expenditure 2,871,599 1,836,875 553,883 315,965
-------- -------- -------- --------
(37,935) (289,747) (79,398) (123,462)
Tax losses not
brought to account 37,935 289,747 79,398 123,462
-------- -------- -------- --------
Income tax expense - - - -
======== ======== ======== ========
Deferred tax liabilities
The balance comprises temporary
differences attributable to:
Fair value adjustments on acquisition
of subsidiary (i) 3,604,688 3,604,688 - -
-------- -------- -------- --------
3,604,688 3,604,688 - -
-------- -------- -------- --------
(i) The deferred tax liability arises upon adoption of the balance sheet method
required by AASB 112 Income Taxes. Although this does not represent a cash
liability payable by the controlled entity, nonetheless the adoption of AASB 112
requires that it be brought to account. On the basis that the controlled entity
receives revenue in the future from its operations in China, it will receive an
income tax benefit to its Income Statement representing the amortization of the
deferred tax liability in line with the amortization of the Exploration and
Evaluation expenditure which has been carried forward in respect of this asset.
Movements
Opening balance at 1 July 3,604,688 3,604,688 - -
Charged/(credited) to the
income statement - - - -
Closing balance at 30 June 3,604,688 3,604,688 - -
-------- -------- -------- --------
Unrecognised Deferred Tax Balances
The following deferred tax assets have not been brought to account as assets:
Tax losses - revenue 7,432,185 7,300,212 7,297,071 6,629,468
-------- -------- -------- --------
7,432,185 7,300,212 7,297,071 6,629,468
-------- -------- -------- --------
Tax Consolidations
Legislation to allow groups, comprising 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 was substantively enacted on 21 October
2002. The Company and its wholly owned Australian resident entities are
eligible to consolidate for tax purposes under this legislation.
The Board has not yet resolved to consolidate eligible entities within the
Consolidated Entity for tax purposes. The Board will review this position
annually, before lodging of that year's income tax return.
4. KEY MANAGEMENT PERSONNEL COMPENSATION
Details of Key Management Personnel and Compensation
The directors' and key management personnel of the Consolidated Entity during
the year were as follows. Unless otherwise specified each person has held their
position for the full financial year.
* John WS Fletcher (Chairman, Non-executive)
* Paul C Atherley (Managing Director)
* Stacey Apostolou (Executive Director and Company Secretary)
* Robert Bigland (Non-executive Director) - ceased 18 April 2007
* Richard Seville (Non-executive Director) - commenced 1 February 2007
* Vic McLaglen Chief Operating Officer, Leyshon Resources Limited
* Ye Dong Ping Project Development Manager, China Metals Pty Ltd -
appointed 7 May 2007
* Malcom Wilson Senior Exploration Geologist, China Metals Pty Ltd -
ceased 12 March 2007
* Jian Hua Sang Chief Representative China, China Metals Pty Ltd - ceased
20 July 2006
4. KEY MANAGEMENT PERSONNEL COMPENSATION (cont'd)
Details of the compensation of key management personnel of the Consolidated
Entity and Company are set out below.
Short term employee benefits Post Termination Share
employment benefits based
benefits payments
Cash salary Bonus Other Super- Equity Total
& fees annuation settled
benefits options
$ $ $ $ $ $ $
------------- ------ -------- ------- ------- --------- ------- ------- --------
Mr John
Fletcher 2007 90,000 - - - - - 90,000
2006 22,500 - - - - - 22,500
Mr Paul
Atherley 2007 350,000 150,000 - - - - 500,000
2006 250,000 50,000 40,526 - - - 340,526
Mr Robert
Bigland 2007 52,775 - - - - - 52,775
2006 11,614 - - - - - 11,614
Mr Richard
Seville 2007 20,833 - - - - - 20,833
Ms Stacey
Apostolou 2007 160,000 75,000 - 14,400 - - 249,400
2006 84,278 - - 7,585 - - 91,863
Mr Ian
Middlemas 2007 - - - - - - -
2006 25,000 - - - - - 25,000
Mr Gary 2007 - - - - - - -
Pearce 2006 3,750 - - 337 - - 4,087
Mr Mark 2006 - - - - - - -
Pearce 2006 11,250 - - - - - 11,250
Mr Vic
McLaglen 2007 300,000 75,000 - - - 325,921 700,921
2006 135,447 - - - - - 135,447
Mr Malcolm
Wilson 2007 121,249 - - 48,000 18,921 57,450 245,620
2006 137,500 - - 12,375 - - 149,875
Dr Ye Dong
Ping 2007 38,043 - - - - - 38,043
Mr Jian Hua
Sang 2007 16,129 - 15,000 - - - 31,129
2006 300,000 - 15,157 - - - 315,157
Mr Greg 2007 - - - - - - -
Jones 2006 125,000 - 11,250 - 39,299 175,549
-------- ------- ------- --------- ------- ------- --------
Total
Remuneration
-
Key 2007 1,149,029 300,000 15,000 62,400 18,921 383,371 1,928,721
Management ======== ======= ======= ========= ======= ======= ========
Personnel
Total
Remuneration
-
Key 2006 1,106,339 50,000 55,683 31,547 - 39,299 1,282,868
Management ======== ======= ======= ========= ======= ======= ========
Personnel
4. KEY MANAGEMENT PERSONNEL COMPENSATION (cont'd)
Remuneration policies
Executive remuneration
The Company's remuneration policy for executive directors and senior management
is designed to promote superior performance and long term commitment to the
Company. Remuneration packages are set at levels that are intended to attract
and retain executives capable of managing the Company's operations. Executives
receive a base remuneration which is market related, together with an element of
performance based remuneration.
Overall remuneration policies are subject to the discretion of the Board and
will be adapted to reflect competitive market and business conditions where it
is in the interests of the Company and shareholders to do so. Within this
framework, the remuneration committee (established 9 May 2007) considers
remuneration policies and practices generally, and determines specific
remuneration packages and other terms of employment for executive directors and
senior executive management.
Executive remuneration and other terms of employment will be reviewed annually
by the committee having regard to performance, relevant comparative information
and expert advice.
The objective of any short term incentives is to link achievement of the
Company's operational targets with the remuneration received by executives
charged with meeting those targets. The objective of long term incentives is to
reward executives in a manner which aligns this element of their remuneration
with the creation of shareholder wealth.
The committee's remuneration policies are designed to align executive's
remuneration with shareholders' interests and to retain appropriately qualified
executive talent for the benefit of the Company. The main principles of the
policies are that:
* reward reflects the competitive market in which the Company operates;
* individual reward should be linked to performance criteria; and
* executives should be rewarded for both financial and non-financial
performance.
The structure of remuneration packages for executive directors and other senior
executive management consists of the following:
* salary - executive directors and senior executives receive a fixed sum
base salary payable monthly in cash;
* short term incentives - through eligibility to participate in
performance bonus plans;
* long term incentives - executive directors are eligible to participate
in share option schemes with the prior approval of shareholders. Senior
executives may also participate in employee share option schemes, with any
option issues generally being made in accordance with thresholds set in
plans approved by shareholders. The Board however, considers it appropriate
to retain the flexibility to issue options to senior executives outside of
approved employee option plans and in the event that no employee option plan
exists; and
* other benefits - executive directors and senior executives, where
applicable, are eligible to participate in superannuation schemes.
Non-executive directors' remuneration
In accordance with current corporate governance practices, the structure for the
remuneration of non-executive directors and senior executives is separate and
distinct. Shareholders approve the maximum aggregate remuneration for
non-executive directors. The remuneration committee recommends the actual
payments to directors and the Board is responsible for ratifying any
recommendations, as appropriate. The maximum aggregate remuneration approved for
directors is currently $250,000. The Board approves any consultancy arrangements
for non-executive directors who provide services outside of and in addition to
their duties as non-executive directors.
Non-executive directors are entitled to statutory superannuation benefits if
applicable. At the current stage of the Company's development, non-executive
directors may also be entitled to participate in equity based remuneration
schemes.
All directors are entitled to have their indemnity insurance paid by the
Company.
Service Agreements
Non Executive Directors
Mr Fletcher
The Company has entered into a service agreement with Mr Fletcher whereby he is
paid a fee of A$90,000 per annum in his capacity as Chairman. Mr Fletcher is
entitled to receive reimbursement for out of pocket expenses incurred whilst on
Company business. The agreement is for no fixed term, does not provide for the
payment of termination benefits and may be terminated by either party by
providing 90 days written notice.
Mr Seville
The Company has entered into a service agreement with Mr Seville whereby he is
paid a fee of A$50,000 per annum in his capacity as Non-Executive Director. Mr
Seville is entitled to receive reimbursement for out of pocket expenses incurred
whilst on Company business. The agreement is for no fixed term, does not provide
for the payment of termination benefits and may be terminated by either party by
providing 90 days written notice.
In addition, the Company has entered into a consultancy arrangement with Richard
Seville & Associates Pty Ltd in relation to the provision of technical services
by Mr Seville at the rate of A$1,600 per day. The consultancy agreement is for
an initial term to 31 December 2007 and thereafer until terminated. The
consultancy can be terminated by either party providing three months written
notice.
Executive Directors
Mr Atherley
The service agreement in place with Mr Atherley during the financial year
contains the following key provisions:
* Entered into with effect from 1 July 2006 for a rolling twelve month
term as Managing Director;
* May be terminated by the Company by providing no more than three months
notice;
* May be terminated by Mr Atherley by providing at least six months
notice;
* If Mr Atherley is removed as a director of the Company by shareholders,
or as the managing director of the Company, then the Company will be deemed
to have terminated the contract;
* Base salary of $350,000 per annum;
* A cash bonus of up to $500,000 per annum is payable based on, in the
Board's view, the contribution of Mr Atherley toward's the Company's
achievement of its overall objectives. Mr Atherley received a bonus of
$150,000 on 9 May 2007;
* No amount is payable in the event of termination for neglect of duty or
gross misconduct; and
* If Mr Atherley's contract is terminated, other than for neglect of duty
or gross misconduct, then the Company shall pay to Mr Atherley a Termination
Payment. The Termination Payment shall be the aggregate of the contract rate
that would be payable for ther period commencing when the contract
terminates and ending at the end of the contract term. In the event that the
Termination Payment exceeds the amount calculated in accrodance with section
200F of the Coprorations Act or Chapter 10.19 of the ASX Listing Rules, then
the Termination Payment will be reduced by such amount as is necessary so as
to not exceed the amount permitted.
Ms Apostolou
The service agreement in place with Ms Apostolou during the financial year
contains the following key provisions:
* Entered into with effect from 1 July 2006 for no defined period;
* May be terminated by the Company or Ms Apostolou by providing three
months notice. No payment, other than for notice, is payable upon
termination;
* Base salary of $160,000 per annum plus superannuation;
* A cash bonus is payable based on, in the Board's view, the contribution
of Ms Apostolou toward's the Company's achievement of its overall
objectives. Ms Apostolou received a bonus of $75,000 on 9 May 2007.
Key Management Personnel
Mr McLaglen
The service agreement in place with Mr McLaglen during the financial year
contains the following key provisions:
* Entered into with effect from 16 January 2006 for no defined period;
* May be terminated by the Company or Mr McLaglen by providing three
months notice. No payment, other than for notice, is payable upon
termination;
* Base salary of $300,000 per annum;
* A cash bonus is payable based on, in the Board's view, the contribution
of Mr McLaglen toward's the Company's achievement of its overall objectives.
Mr McLaglen received a bonus of $75,000 on 9 May 2007.
Dr Dong Ping Ye - China Metals Pty Ltd
The service agreement in place with Dr Dong Ping Ye during the financial year
contains the following key provisions:
* Entered into with effect from 7 May 2007 for no defined period;
* May be terminated by the Company or Dr Dong Ping Ye by providing three
months notice. No payment, other than for notice, is payable upon
termination;
* Base salary of $250,000 per annum;
* May become entitled to receive incentive options in the Company at a
price to be determined by the Board at the time of issue; and
* A cash bonus is payable based on, in the Board's view, the contribution
of Dr Dong Ping Ye toward's the Company's achievement of its overall
objectives. No bonus was received by Dr Dong Ping Ye during the financial
year.
Share-based Compensation
Following shareholder approval, on 12 December 2006, 1,900,000 Options were
issued as follows:
(i) 1,100,000 options of which 550,000 are exerciseable at $0.40 each on or
before 30 November 2009 and 550,000 exerciseable at $0.55 on or before 30
November 2009 were granted to Vic McLaglen (Chief Operating Officer -
Leyshon Resources Limited) as part of his remuneration package with a total
value of $511,272. 550,000 of these options vested during the financial year
ended 30 June 2007 and the remaining 550,000 will vest in the 2008 financial
year. In the current financial year, 46% of Mr McLaglen's total remuneration was
comprised of the value of options. The value of options allocated to
remuneration for the year ended 30 June 2007 was $325,921 (2006: Nil). None of
the options were exercised or lapsed during the year. Further details relating
to these options are provided in Note 28(d) to the financial statements; and
(ii) 800,000 options of which 475,000 are exerciseable at $0.40 each on or
before 30 November 2009 and 325,000 exerciseable at $0.55 on or before 30
November 2009 were granted to Malcolm Wilson (Senior Geologist - China
Metals Pty Ltd) as part of his remuneration package with a total value of
$389,294. Mr Wilson's employment with China Metals Pty Ltd ceased on 12 March
2007 and as a consequence 325,000 options exerciseable at $0.40 and 325,000
options exerciseable at $0.55 lapsed with the Board exercising its discretion to
enable 150,000 options exerciseable at $0.40 to vest immediately. The total
value therefore of those options granted to Mr Wilson and still outstanding at
financial year end was $57,450. This represents 27% of Mr Wilson's total
remuneration up until the date he ceased employment with China Metals. Other
than the options referred to above, no other options lapsed or were exercised
during the year. The value of options allocated to remuneration for the year
ended 30 June 2007 was $57,450 (2006: Nil). Further details relating to these
options are provided in Note 28(d) to the financial statements.
Consolidated Company
2007 2006 2007 2006
5. REMUNERATION OF AUDITORS $ $ $ $
Auditor of the parent entity
-------- -------- -------- --------
Audit Services 40,750 33,000 40,750 33,000
Fees paid to Deloitte Touche Tohmatsu
- Audit and review of the financial reports
and other audit work -------- -------- -------- --------
Total remuneration for audit services 40,750 33,000 40,750 33,000
======== ======== ======== ========
Other auditors of subsidiaries
Audit of financial reports - 680 - -
-------- -------- -------- --------
- 680 - -
======== ======== ======== ========
6. TRADE AND OTHER RECEIVABLES
Current
Amounts owing by
- other persons 103,703 165,607 96,349 113,453
-------- -------- --------- -------
103,703 165,607 96,349 113,453
-------- -------- --------- -------
Allowance for doubtful debts - (46,131) - -
- other persons
-------- -------- --------- -------
103,703 119,476 96,349 113,453
======== ======== ========= =======
Non-Current
Amounts owing by
- controlled entities (a) - - 18,128,832 9,202,981
======== ======== ========= =======
(a) Recovery of the non-current amount owing by controlled entities is dependent
upon the discovery of commercially viable reserves and the successful
development or alternatively sale, of the respective tenements which comprise
the underlying assets of the controlled entity. Refer to note 11 and 12 for
further details regarding the tenements and recoverability.
7. OTHER ASSETS
Consolidated Company
2007 2006 2007 2006
$ $ $ $
Current
Prepayments 57,836 68,781 15,670 68,781
======== ======= ======= ========
8. OTHER FINANCIAL ASSETS AT
FAIR
VALUE THROUGH PROFIT OR LOSS
Non-current
Shares in other entities 1 1 1 1
Unlisted options in other entities - 495,000 - 495,000
(i) -------- -------- -------- --------
1 495,001 1 495,001
======== ======== ======== ========
(i) This represents the value of 2,500,000 options (exercise price of $0.20 each
which expire on 31 December 2007) received from Echelon Resources Limited
("Echelon") as consideration for assets sold to Echelon. These options were
exercised and the shares subsequently sold on 21 May 2007 for $1.025 per share.
9. OTHER FINANCIAL ASSETS
Non-current
Investments - controlled entities
(Note 22)
- At cost - - 11,947,474 11,945,356
- Recoverable amount write down
provision - - (2,812,845) (2,810,727)
-------- ------- --------- ---------
Total Investments - controlled
entities - - 9,134,629 9,134,629
-------- ------- --------- ---------
Security deposits 14,999 31,000 14,999 31,000
-------- ------- --------- ---------
Loans to other entities (1) 688,659 - - -
-------- ------- --------- ---------
703,658 31,000 9,149,628 9,165,629
======== ======= ========= =========
(1) This represents money paid on behalf of the Consolidated Entity's joint
venture partner, Qiqiha'er Brigade ("Qiqiha'er Brigade") of the Heilongjiang
Bureau of Geology and Mineral Resources, in accordance with the joint venture
agreement entered into in April 2006. The loan to the Qiqiha'er Brigade
commenced accruing in September 2006 when the Consolidated Entity had satisfied
its expenditure commitment for a 70% interest in Black Dragon Mining Company
Limited. The loan is to be interest bearing and repayable from surplus cashflow
from the Zheng Guang project once it is in operation. At financial year end the
interest rate applicable to the loan is still to be finalised.
Each reporting period, the recoverable amount of all non-current assets is
assessed. Where the carrying amount of a non-current asset is greater than its
recoverable amount, the asset is written down to its recoverable amount. The
recoverable amount of the asset has been based on its fair value less costs to
sell. The recoverable amount write down represents the excess of the carrying
amount over the recoverable amount as determined by the directors.
10. PROPERTY, PLANT AND EQUIPMENT
Consolidated Company
2007 2006 2007 2006
$ $ $ $
Plant & equipment
At cost 44,192 29,922 15,502 14,722
Accumulated depreciation (27,574) (20,136) (11,076) (8,894)
-------- -------- -------- --------
Total plant and equipment
(Note10(a)) 16,618 9,786 4,426 5,828
======== ======== ======== ========
(a) Reconciliation
Plant and Equipment
Carrying amount at beginning of
year 9,786 11,447 5,828 4,023
Additions 17,269 7,584 3,779 7,584
Disposals (1,269) - (1,269) -
Depreciation expense (9,168) (9,245) (3,912) (5,779)
-------- -------- -------- --------
Total plant & equipment 16,618 9,786 4,426 5,828
-------- -------- -------- --------
11. EXPLORATION AND EVALUATION
EXPENDITURE
Balance brought forward 12,722,473 12,722,473 - -
Transferred to development (12,722,473) - - -
properties --------- --------- -------- --------
Closing balance - 12,722,473 - -
========= ========= ======== ========
12. DEVELOPMENT PROPERTIES
Balance brought forward - - - -
Transferred from exploration and
evaluation 12,722,473 - - -
expenditure
Development expenditure incurred 309,521 - - -
--------- --------- -------- --------
Closing balance (i) 13,031,994 - - -
========= ========= ======== ========
(i) The value of the development properties is dependent upon the successful
development or alternatively sale, of the respective tenements.
13. TRADE AND OTHER PAYABLES
Trade creditors and accruals
(unsecured) 285,142 390,232 254,199 249,016
======== ======== ======== ========
14. PROVISIONS
Employee benefits 63,929 40,241 59,024 27,078
======== ======== ======== ========
15. ISSUED CAPITAL
Consolidated Company
2007 2006 2007 2006
$ $ $ $
(a) Issued and paid up capital
215,610,891 (2006:
149,179,891) fully paid
ordinary shares 63,139,928 34,666,587 63,139,928 34,666,587
Nil (2006: 1,000) fully
paid preference shares(1) - 200,000 - 200,000
-------- -------- -------- --------
Total 63,139,928 34,866,587 63,139,928 34,866,587
======== ======== ======== ========
Changes to the then Corporations Law abolished the authorised capital and par
value concept in relation to share capital from 1 July 1998. Therefore, the
Company does not have a limited amount of authorised capital and issued shares
do not have a par value.
(1) The preference shares converted into ordinary shares in accordance with
their terms on 14 December 2006 (see note 15(b)(ii)).
(b) Movements in share capital during the past two years were as follows
(Consolidated Entity and Company):-
Date Details Ordinary Preference Ordinary Preference Total
Shares Shares Shares Shares
(Number) (Number) ($) ($) ($)
------- ------------- --------- -------- -------- -------- --------
1/07/ Opening 131,466,558 1,000 28,489,432 200,000 28,689,432
05 Balance
21/06/ Issues of 17,713,333 - 6,630,896 - 6,630,896
06 shares (i)
Share issue - - (453,741) - (453,741)
costs --------- -------- -------- -------- --------
30/06/ Closing 149,179,891 1,000 34,666,587 200,000 34,866,587
06 Balance
14/12/ Conversion of 10,000,000 (1,000) 200,000 (200,000) 34,866,587
06 preference
shares (ii)
18/12/ Issue of 23,786,984 - 13,081,860 - 47,948,447
06 shares (iii)
Share issue - - (673,900) - 47,274,547
costs
4/1/ Exercise of 500,000 - 142,400 - 47,416,947
07 options (v)
Share issue - - (1,412) - 47,415,535
costs
29/1/ Issue of 13,944,016 - 7,764,911 - 55,180,446
07 shares (iv)
Share issue - - (411,557) - 54,768,889
costs
19/3/ Exercise of 100,000 - 35,000 - 54,803,889
07 options (v)
Transfer from - - 16,210 - 54,820,099
employee
benefits
reserve
26/3/ Exercise of 1,000,000 - 284,800 - 55,104,899
07 options (v)
Transfer from - - 173,000 - 55,277,899
employee
benefits
reserve
Share issue - - (2,199) - 55,275,700
costs
8/5/ Exercise of 1,500,000 - 427,200 - 55,702,900
07 options (v)
Transfer from - 259,500 - 55,962,400
employee
benefits
reserve
11/5/ Exercise of 500,000 - 142,400 - 56,104,800
07 options (v)
21/5/ Exercise of 100,000 - 35,000 - 56,139,800
07 options (v)
Transfer from - - 16,210 - 56,156,010
employee
benefits
reserve
Share issue - (4,272) - 56,151,738
costs
29/6/ Exercise of 15,000,000 - 3,272,000 - 59,423,738
07 options (v)
Transfer from - - 3,725,000 - 63,148,738
option
premium
reserve
Share issue - (8,810) - 63,139,928
costs --------- -------- -------- -------- --------
30/06/ Closing 215,610,891 - 63,139,928 - 63,139,928
07 Balance
--------- -------- -------- -------- --------
Note
(i) On 21 June 2006, the Company issued 17,713,333 shares at 15 pence per share
at an exchange rate of 0.4007;
(ii) On 14 December 2006, 1,000 preference shares converted into 10,000,000
ordinary shares in accordance with their terms.
(iii)On 18 December 2006, the Company issued 23,786,984 shares at 22 pence per
share at an exchange rate of 0.40;
(iv) On 29 January 2007, the Company issued 13,944,016 shares at 22 pence per
share at an exchange rate of 0.395.
(v) The Company issued shares resulting from the exercise of options as follows:
Date Number Exercise Price
4/1/07 500,000 $0.2848
19/3/07 100,000 $0.35
26/3/07 1,000,000 $0.2848
8/5/07 1,500,000 $0.2848
11/5/07 500,000 $0.2848
21/5/07 100,000 $0.35
29/6/07 10,000,000 $0.1848
29/6/07 5,000,000 $0.2848
Consolidated Company
2007 2006 2007 2006
16. RESERVES $ $ $ $
Employee benefits reserve 882,620 964,169 882,620 964,169
Foreign currency translation
reserve (169,869) 4,563 - -
Option premium reserve 112,841 3,837,841 112,841 3,837,841
-------- -------- -------- --------
825,592 4,806,573 995,461 4,802,010
-------- -------- -------- --------
Movement in reserves
The movement in each of the reserves has been set out in the Statement of
Changes in Equity.
Nature and purpose of reserves
Employee benefits reserve
The employee benefits reserve is used to recognise the fair value of services
provided to the Company by employees which are paid through the issue of options
in the Company.
Details of the options that comprise the employee benefits reserve are as
follows:
700,000 (2006: Nil) $0.40 options 268,100 - 268,100 -
550,000 (2006: Nil) $0.55 options 115,271 - 115,271 -
Nil (2006: 3,500,000) $0.2848 options - 432,500 - 432,500
2,500,000 (2006: 2,700,000) $0.35
options 499,249 531,669 499,249 531,669
-------- -------- -------- --------
882,620 964,169 882,620 964,169
-------- -------- -------- --------
Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity are
taken to the foreign currency translation reserve as described in note 1(c). The
accumulated exchange difference is recognised in profit and loss when the net
investment is disposed of.
Option premium reserve
The option premium reserve is used to recognise the fair value of options issued
in connection with acquisitions or services provided to the Company by
individuals other than employees.
Details of the options that comprise the option premium reserve are as follows:
Nil (2006: 10,000,000) $0.1848
options (i) - 2,630,000 - 2,630,000
Nil (2006: 5,000,000) $0.2848
options (i) - 1,095,000 - 1,095,000
600,000 (2006: 600,000) 18 pence
options (ii) 112,841 112,841 112,841 112,841
-------- -------- -------- --------
112,841 3,837,841 112,841 3,837,841
-------- -------- -------- --------
i) Following shareholder approval on 4 May 2004 the Company completed the
acquisition of a 100% interest in China Metals Pty Ltd. Options issued comprised
10,000,000 $0.20 options and 5,000,000 $0.30 options. The exercise price of
these options was later reduced by 1.52 cents following the return of capital
resulting from the demerger of Echelon Resources. These options were converted
on 29 June 2007 and accordingly the amounts carried as part of the option
premium reserve transferred to Issued Capital; and
ii) 600,000 options were issued to Mirabaud Securities with an exercise price
of 18 pence as part consideration for undertaking the share placement undertaken
by the Company in June 2006.
Consolidated Company
2007 2006 2007 2006
17. ACCUMULATED LOSSES $ $ $ $
Balance at the
beginning of
the financial
year (21,826,905) (14,714,198) (12,722,316) (11,231,481)
Adjustments on
adoption of
accounting
policies
specified by
AASB 132 and
AASB 139 - 60,000 - 60,000
--------- --------- --------- ---------
Restated
balance at
beginning of
financial year (21,826,905) (14,654,198) (12,722,316) (11,171,481)
Net loss
attributable to
members of
Leyshon
Resources (10,081,813) (7,172,707) (2,496,416) (1,550,835)
--------- --------- --------- ---------
Balance at the
end of the
financial year (31,908,718) (21,826,905) (15,218,732) (12,722,316)
========= ========= ========= =========
Adjusted
franking
account balance
(tax paid
basis) 6,913,764 6,913,764 6,913,764 6,913,764
========= ========= ========= =========
18. EARNINGS PER SHARE
The following reflects the earnings and average number of ordinary shares and
potential ordinary shares used in the calculations of basic and diluted earnings
per share:
Consolidated Entity
2007 2006
$ $
Net loss used in calculating basic earnings per
share (10,081,813) (7,172,707)
----------- ----------
Earnings used in calculating basic and diluted
earnings per share (10,081,813) (7,172,707)
=========== ==========
Number of Number of
Shares shares
2007 2006
Weighted average number of ordinary shares used in
calculating basic earnings per share 174,108,374 131,951,855
Effect of dilutive securities - -
----------- ----------
Adjusted weighted average number of ordinary
shares and potential ordinary shares used in
calculating diluted earnings per share 174,108,374 131,951,855
=========== ==========
(a) Conversions, calls, subscriptions or issues after 30 June 2007
There have been no conversions to, calls of, or subscriptions for ordinary
shares or issues of potential ordinary shares since the reporting date and
before the completion of this financial report.
(b) Non-dilutive securities
The following potential ordinary shares are not dilutive as they would decrease
the loss per share and are therefore excluded from the weighted average number
of ordinary shares used in the calculation of diluted earnings per share:
Number of Number of Number of Number of
securities securities potential potential
shares shares
2007 2006 2007 2006
Converting Preference Shares - 1,000 - 10,000,000
Options - 18.48 cents
exercise - 10,000,000 - 10,000,000
price
Options - 28.48 cents
exercise - 8,500,000 - 8,500,000
price
Options - 35 cents exercise
price 2,500,000 2,700,000 2,500,000 2,700,000
Options - 18 pence exercise
price 600,000 - 600,000 -
Options - 40 cents exercise
price 700,000 - 700,000 -
Options - 55 cents exercise
price 550,000 - 550,000 -
19. DIVIDENDS PAID OR PROVIDED FOR
No dividends have been paid or provided for during the year.
Consolidated Company
2007 2006 2007 2006
20. COMMITMENTS FOR EXPENDITURE $ $ $ $
Exploration Expenditure
Not longer than 1 year 1,033,478 4,202,975 - -
Longer than 1 year and not longer than - 1,143,827 - -
5 years
Longer than 5 years - - - -
-------- -------- -------- --------
1,033,478 5,346,802 - -
======== ======== ======== ========
21. LEASE COMMITMENTS
Operating leases
Leasing arrangements
The operating lease relates to the lease of an office in China. The current
lease was entered into on 20 March 2007 for a period of three years with effect
from 1 April 2007. The Consolidated Entity does not have an option to acquire
the leased asset at the expiry of the lease period.
Non-cancellable operating leases
Not longer than 1 year 136,838 27,873 - -
Longer than 1 year and not longer than 5 228,063 23,228 - -
years
Longer than 5 years - - - -
-------- -------- -------- --------
364,901 51,101 - -
======== ======== ======== ========
22. SUBSIDIARIES
Name of Entity Country of Class of Equity
Incorporation Shares Holding
2007 2006
Parent Entity % %
Leyshon Resources Australia
Limited
Controlled Entities
China Metals Pty
Ltd (i) Australia Ordinary 100 100
Leyshon Red
Dragon Limited
(ii) British Virgin Ordinary 100 100
Islands
Leyshon
Resources (Coal)
Pty Ltd (i) Australia Ordinary 100 100
Leyshon Coal
Limited (iii) British Virgin Ordinary 100 100
Islands
Leyshon JDK plc
(i) United Kingdom Ordinary 100 100
Note
(i) Interest held by Leyshon Resources;
(ii) Interest held by China Metals Pty Ltd; and
(iii) Interest held by Leyshon Resources (Coal) Pty Ltd.
23. SEGMENT INFORMATION
The Consolidated Entity operates in one business segment, being the exploration
of gold and other minerals, in the following geographical segments:
Geographical Australia China Consolidated
Segment
2007 2006 2007 2006 2007 2006
$ $ $ $ $ $
Revenue
Other
revenue/income 627,227 523,925 1,303 5,752 628,530 529,677
---------- ---------- ---------- ----------- ---------- -----------
Total segment
revenue/income 627,227 523,925 1,303 5,752 628,530 529,677
Unallocated -
revenue ---------- -----------
Total
consolidated
revenue/ 628,530 529,677
income ========== ===========
Results
Segment result (2,496,416) (1,550,835) (7,585,397) (5,621,872) (10,081,813) (7,172,707)
---------- ---------- ---------- ----------- ---------- -----------
Unallocated
expenses - -
Loss before
income tax (10,081,813) (7,172,707)
Income tax
(expense)/
benefit - -
Net loss (10,081,813) (7,172,707)
========== ===========
Assets
Segment assets 21,951,419 8,389,764 14,059,141 13,491,652 36,010,560 21,881,416
Unallocated - -
assets ---------- -----------
Total assets 36,010,560 21,881,416
- -
Liabilities
Segment
liabilities 313,223 276,093 3,640,536 3,759,068 3,953,759 4,035,161
---------- ---------- ---------- ----------- ---------- -----------
Unallocated
liabilities - -
Total
liabilities 3,953,759 4,035,161
========== ===========
Other
Acquisition
of
non-current
assets 2,219 7,584 15,051 - 17,270 7,584
Depreciation
of segment
assets 3,912 5,779 5,256 3,466 9,168 9,245
Share based 383,371 83,965 - - 383,371 83,965
payments ---------- ---------- ---------- ----------- ---------- -----------
24. RELATED PARTY DISCLOSURES
(a) Equity interests in related parties
Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed
in Note 22 to the financial statements.
(b) Key management personnel compensation
Details of key management personnel compensation are disclosed in Note 4 to the
financial statements.
(c) Key management personnel equity holdings
Fully paid ordinary shares of Leyshon Resources
Balance at Purchases Received on Other Sales Balance at
the start exercise of changes the end of
of the options the year
year
(i)
2007
Mr Paul
Atherley 10,000,000 - 15,000,000 5,000,000 - 30,000,000
Mr John
Fletcher 1,202,824 1,000,000 - - - 2,202,824
Mr Robert
Bigland 411,000 - - (411,000) - -
Ms Stacey
Apostolou 300,000 - - 500,000 - 800,000
Mr Richard - - - - - -
Seville
2006
Mr Ian Middlemas 42,291,611 - - (42,291,611) - -
Mr Paul Atherley 10,000,000 - - - - 10,000,000
Mr Gary Pearce 1,000,000 - - (1,000,000) - -
Mr Mark Pearce 200,000 - - (200,000) - -
Mr John Fletcher - - - 1,202,824 - 1,202,824
Mr Robert Bigland - - - 411,000 - 411,000
Ms Stacey Apostolou - - - 300,000 - 300,000
(i) 2007 - This includes, with respect to Mr Atherley and Ms Apostolou, the
shares issued following conversion of the converting preference shares and with
respect to Mr Bigland, the adjustment following his ceasing to
be a director.
2006 - This includes an adjustment in the balance for key management personnel
who have resigned or were appointed during the financial year.
Options exercisable @ $0.1848 or $0.2848 (as appropriate) each on or before 30
June 2007
Balance at Granted as Exercised Other Balance Vested Vested and
the start of remuneration changes at the during exercisable
the year end of the at the end
the year of the
year year
(i) (ii)
2007
Mr Paul
Atherley
$0.1848 Options 10,000,000 - (10,000,000) - - - -
Mr Paul
Atherley
$0.2848 Options 5,000,000 - (5,000,000) - - - -
2006
Mr Paul
Atherley
$0.1848 Options 10,000,000 - - - 10,000,000 - 10,000,000
Mr Paul
Atherley
$0.2848 Options 5,000,000 - - - 5,000,000 - 5,000,000
Mr Greg
Jones
$0.2848 Options 2,500,000 - - (2,500,000) - 1,500,000 -
(i) Includes reduction in balance for key management personnel who have resigned
during the financial year.
(ii) All options referred to had vested and were exerciseable at 1 July 2005.
24. RELATED PARTY DISCLOSURES (cont'd)
Options exercisable @ $0.40 or $0.55 (as appropriate) each on or before 30
November 2009
Balance Granted as Exercised Other Balance Vested Vested and
at the remuneration changes at the during exercisable
start (i) end of the at the end
of the the year of the
year year year
2007
Mr Vic
McLaglen
$0.40 Options - 550,000 - - 550,000 275,000 275,000
Mr Vic
McLaglen-
$0.55 Options - 550,000 - - 550,000 275,000 275,000
Mr Malcolm
Wilson
$0.40 Options - 475,000 - (475,000) - 150,000 150,000
Mr Malcolm
Wilson - 325,000 - (325,000) - - -
$0.55 Options
(i) Includes reduction in balance for key management personnel who have resigned
during the financial year and those options which lapsed due to the vesting
conditions not having been satisfied. The board exercised its discretion on 19
January 2007 to allow 150,000 options exerciseable at $0.40 to vest immediately.
Preference shares convertible into 10,000 ordinary fully paid shares each
Balance at Purchases Received on Other Sales Balance at
the start of exercise of changes the end of
the year options (i) the year
2007
Mr Paul
Atherley 500 - - (500) - -
Ms Stacey
Apostolou 50 - - (50) - -
Mr Jian
Hua 450 - - (450) - -
Sang
2006
Mr Paul
Atherley 500 - - - - 500
Ms Stacey - - - 50 - 50
Apostolou
Mr Jian
Hua Sang - - - 450 - 450
(i) Includes adjustment in balance for key management personnel who have
resigned during the financial year and for the conversion of preference shares.
(d) Other transactions with key management personnel (and their related parties)
of Leyshon Resources
Richard Seville & Associates Pty Ltd, a company of which Mr Richard Seville is a
director and beneficial shareholder, was paid $41,900 (2006: Nil) for the
provision of technical services. This amount is included in exploration expenses
for the year.
(e) Transactions with other related parties
Transactions between Leyshon and its subsidiaries
Inter-company Account
Leyshon provides working capital to its controlled entities. Transactions
between Leyshon and other controlled entities in the wholly owned group during
the financial year ended 30 June 2007 consisted of:
(i) Working capital advanced by Leyshon;
(ii) Working capital repaid to Leyshon; and
(iii) Provision of services by Leyshon to its controlled entities.
The above transactions were made interest free with no fixed terms for the
repayment of principal on the working capital advanced by Leyshon.
At balance date amounts receivable from controlled entities totalled $18,128,832
(2006: $9,202,981).
(f) Parent entities
The parent entity in the consolidated entity and the ultimate parent entity is
Leyshon Resources Limited.
25. SUBSEQUENT EVENTS AFTER BALANCE DATE
There were no significant events occurring after balance date requiring
disclosure in the financial statements.
26. notes to the CASH FLOW STATEMENT
(a) Reconciliation of cash and cash equivalents
Cash and cash equivalents at the end of the financial year as shown in the cash
flow statement is reconciled to the related items in the balance sheet as
follows:
Consolidated Company
2007 2006 2007 2006
$ $ $ $
Cash and cash equivalents 22,096,750 8,434,899 21,834,974 8,170,702
========= ======== ======== ========
(b) Reconciliation of loss for the year to net cash provided (used) by operating
activities
Loss for the year (10,081,813) (7,172,707) (2,496,416) (1,550,835)
Depreciation and
amortisation 9,168 9,245 3,912 5,779
Increase in provision
for doubtful debt - 46,131 - -
Increase in provision
for employee
entitlements 23,688 11,938 31,946 27,078
Write down to
recoverable amount of
investments - - 2,120 2,110
Loss on write down of
non-current assets 1,269 - 1,269 -
Exchange differences 1,347,406 (2,976) 1,349,122 5,675
Fair value
(gain)/loss on
financial instruments 495,000 (180,000) 495,000 (180,000)
Gain on sale of
financial instruments (2,062,500) - (2,062,500) -
Share based payment
expense 383,371 83,965 383,371 83,965
(Increase)/decrease
in other assets (103,926) (169,264) 70,215 (175,181)
(Decrease)/increase
in payables (113,901) (26,628) (7,304) 161,492
--------- -------- --------- ---------
Net cash provided
(used) by operating
activities (10,102,238) (7,400,296) (2,229,265) (1,619,917)
========= ======== ========= =========
(c) Non cash transactions
30 June 2007
During the financial year:
a) 1,000 converting preference shares converted into 10,000,000 ordinary
shares in accordance with their terms. The converting preference shares had been
carried at $200,000 as part of issued capital and as a result, there was no
change to issued capital following their conversion;
b) On each of 19 March and 21 May, 100,000 options with an exercise date
of 31 December 2007 were exercised. An amount of $32,420 relating to these
200,000 options exercised had previously been credited to the employee benefit
reserve. Following exercise, issued capital has been increased by this amount
with a similar reduction to the employee benefit reserve;
c) On 26 March and 8 May, 1,000,000 options and 1,500,000 options with an
exercise date of 30 June 2007 were exercised. An amount of $432,500 relating to
these 2,500,000 options exercised had previously been credited to the employee
benefit reserve. Following exercise, issued capital has been increased by this
amount with a similar reduction to the employee benefit reserve;
26. notes to the CASH FLOW STATEMENT (cont'd)
d) On 29 June, the 15,000,000 options that had been issued as part
consideration for the acquisition of China Metals Pty Ltd were exercised. The
value originally attributed to these options of $3,725,000 had been carried as
part of the option premium reserve. Subsequent to exercise, issued capital has
been increased by this amount with a similar reduction to the option premium
reserve; and
e) Grant of options - refer to note 16.
30 June 2006
Grant of options
During the financial year ended 30 June 2006, the Company entered into an
agreement for and completed a share placement. Consideration provided to the
placement company included a cash component and the grant of 600,000 options in
the Company which have an exercise price of 18 pence and an expiry date of 30
June 2008. The Directors have sought advice on the value of these options and
based on that advice have determined the value of each option to be GBP0.075
(refer Note 28(d)), resulting in total consideration arising from the options of
$112,841. The option premium reserve has been increased by this value and the
transaction has been recorded as a share issue cost in share capital.
27. JOINTLY CONTROLLED ENTITY
The Group is a venturer in the following jointly controlled entity:
Interest
Name of venture Principal activity 2007 2006
% %
Black Dragon Mining Company Limited Exploration and development 70 -
The Group's interest in assets employed in the above jointly controlled entity
is detailed below. The amounts are included in the consolidated financial
statements under their respective assets categories:
Consolidated
2007 2006
$ $
Current assets
Cash 234,618 -
Other 42,166 -
Total current assets 276,784 -
Total assets 276,784 -
28. FINANCIAL INSTRUMENTS
Details of the significant accounting policies and methods adopted, including
the criteria for recognition, the basis for measurement and the basis on which
revenues and expenses are recognised in respect of each class of financial
asset, financial liability and equity instrument are disclosed in Note 1 to the
financial statements.
The Consolidated Entity's activities expose it primarily to the financial risks
of changes in foreign currency exchange rates and interest rates. The
Consolidated Entity does not enter into derivative financial instruments.
(a) Interest rate risk
The Consolidated Entity is exposed to floating interest rates on the cash
balance and other financial assets. The effective weighted average interest rate
for each class of financial assets and liabilities is set out below.
Fixed Interest
Maturing
Weighted Variable 1 Year From 1 Non-Interest Total
Average Interest or to 5 Bearing
Effective Rate Less Years
Interest
Rate
2007 $ $ $ $ $
Financial
Assets
Cash and cash
equivalents 5.3% 22,096,750 - - - 22,096,750
Receivables - - - 118,702 118,702
Other
financial
assets - - - 688,660 688,660
-------- ------- ------- -------- --------
22,096,750 - - 807,362 22,904,112
======== ======= ======= ======== ========
Financial
Liabilities
Payables - - - 285,142 285,142
Employee
benefits - - - 63,929 63,929
-------- ------- ------- -------- --------
- - - 349,071 349,071
======== ======= ======= ======== ========
Fixed Interest
Maturing
Weighted Variable 1 Year From 1 Non-Interest Total
Average Interest or to 5 Bearing
Effective Rate Less Years
Interest
Rate
2006 $ $ $ $ $
Financial
Assets
Cash and cash
equivalents 4.8% 8,434,899 - - - 8,434,899
Receivables 5.8% 16,000 - - 134,476 150,476
Other
financial
assets - - - 495,001 495,001
-------- ------- ------- -------- --------
8,450,899 - - 629,477 9,080,376
======== ======= ======= ======== ========
Financial
Liabilities
Payables - - - 390,232 390,232
Employee
benefits - - - 40,241 40,241
-------- ------- ------- -------- --------
- - - 430,473 430,473
======== ======= ======= ======== ========
(b) Credit risk
The Consolidated Entity is exposed to credit related losses in the event of
non-performance by counter parties (banks) with respect to the financial
instruments, however exposures to individual counter parties are limited in
accordance with policy set by the Board.
28. FINANCIAL INSTRUMENTS (cont'd)
The credit risk on financial assets which have been recognised on the balance
sheet is generally the carrying amount of the asset.
(c) Net fair value of financial assets and liabilities
The carrying amount of financial assets and financial liabilities of the
Consolidated Entity approximates their net fair value.
Options over unissued shares in Echelon Resources Limited at 1 July 2005 and 30
June 2006.
The fair value of each option was estimated on the date of grant using the Black
Scholes Option Valuation Model with the following assumptions:
Assumption Options - $0.20
Underlying Security spot price $0.35
Exercise price $0.20
Dividend rate Nil
Standard deviation of returns (annualised) 75%
Risk free rate 5.8%
Expiration date 31 December 2007
Valuation date 30 June 2006
The directors again sought advice in respect to the value of the options over
unissued Echelon shares at 30 June 2006, and based on that advice determined the
value of each option as at that date to be $0.198, for a total net fair value of
$495,000. This value has been reflected in the financial statements resulting in
a net gain on revaluation recorded in the income statement during the financial
year of $180,000.
The options in Echelon Resources Limited were exercised during the financial
year and the shares subsequently sold on 21 May 2007 for $1.025 per share (refer
note 8(i)).
(d) Valuation of Securities
30 June 2007
Advice was sought by the Company in relation to the value of options granted
during the year. Based on this advice, the value of the securities was
calculated as follows:
The fair value of the options was estimated on the date of grant using the
Binomial Option Valuation Model with the following assumptions:
$0.40 Options $0.55 Options
Dividend yield - -
Volatility 75% 75%
Risk-free interest rate 5.97% 5.97%
Expected life of option 3 years 3 years
Underlying security spot price $0.605 $0.605
The dividend yield reflects the assumption that the current dividend payout will
remain unchanged. The expected life of the options is based on historical data
and is not necessarily indicative of exercise patterns that may occur. The
expected volatility reflects the assumption that the historical volatility is
indicative of future trends, which may also not necessarily be the actual
outcome.
28. FINANCIAL INSTRUMENTS (cont'd)
The resulting fair values per option for the options granted are:
Number of Exercise Grant Vesting dates Fair
Options price date value
1,025,000 $0.40 15 Nov 50% on each of 15 May 2007 and $0.383
2006 15 Nov 2007
875,000 $0.55 15 Nov 50% on each of 15 May 2007 and $0.337
2006 15 Nov 2007
30 June 2006
Advice was sought by the Company in relation to the value of options granted
during the year. Based on this advice, the value of the securities was
calculated as follows:
The fair value of the options was estimated on the date of grant using the
Black-Scholes Option Valuation Model with the following assumptions:
18 pence Options
Dividend yield -
Volatility 75%
Risk-free interest rate 4.66%
Expected life of option 2.06 years
The dividend yield reflects the assumption that the current dividend payout will
remain unchanged. The expected life of the options is based on historical data
and is not necessarily indicative of exercise patterns that may occur. The
expected volatility reflects the assumption that the historical volatility is
indicative of future trends, which may also not necessarily be the actual
outcome.
The resulting fair value per option for the options granted is:
Number of Exercise Grant Vesting Fair Fair value in
Options price date date value $A
600,000 18 pence 7 June 7 June 7.5 $0.188
2006 2006 pence
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LBMITMMITBRR
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