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IRON BEAR RESOURCES LTD Annual Report 2007
65091_rns_2007-09-30_8b83d1e1-6364-4991-b110-2c27a2c70a3a.pdf
Annual Report
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28 September 2007
The Company Announcements Office Australian Stock Exchange Limited
Via E Lodgement
FINACIAL REPORT YEAR END 30 JUNE 2007
Please find attached the Company's Financial Report for the year end 30 June 2007.
Yours faithfully CAPE LAMBERT IRON ORE LIMITED Timothy Turner
Company Secretary
For more information please contact:
Cape Lambert Iron Ore Limited Timothy Turner +61 8 9380 9555
Website www.capelam.com.au
CAPE LAMBERT IRON ORE LIMITED and Controlled Entities
ABN 71 095 047 920
Financial report for the financial year ended 30 June 2007
Annual financial report for the financial year ended 30 June 2007
Page
| Corporate governance statement | 1 |
|---|---|
| Directors' report | 8 |
| Auditors' independence declaration | 20 |
| Independent audit report | 21 |
| Directors' declaration | 23 |
| Income statement | 24 |
| Balance sheet | 25 |
| Statement of changes in equity | 26 |
| Cash flow statement | 27 |
| Notes to the financial statements | 28 |
Corporate governance statement
CORPORATE GOVERNANCE
The Company is committed to implementing the highest standards of corporate governance. In determining what those high standards should involve the Company has turned to the ASX Corporate Governance Council's Principles of Good Corporate Governance and Best Practice Recommendations. The Company is pleased to advise that the Company's practices are largely consistent with those ASX guidelines. As consistency with the guidelines has been a gradual process, where the Company did not have certain policies or committees recommended by the ASX Corporate Governance Council (the Council) in place during the reporting period, we have identified such policies or committees.
Where the Company's corporate governance practices do not correlate with the practices recommended by the Council, the Company is working towards compliance however it does not consider that all the practices are appropriate for the Company due to the size and scale of Company operations.
To illustrate where the Company has addressed each of the Council's recommendations, the following table crossreferences each recommendation with sections of this report. The table does not provide the full text of each recommendation but rather the topic covered. Details of all of the recommendations can be found on the ASX Corporate Governance Council's website at http://www.asx.com.au/about/CorporateGovernance_AA2.shtm.
| Recommendation | Section |
|---|---|
| Recommendation 1.1 Functions of the Board and Management | 1.1 |
| Recommendation 2.1 Independent Directors | 1.2 |
| Recommendation 2.2 Independent Chairman | 1.2 |
| Recommendation 2.3 Role of the Chairman and CEO | 1.2 |
| Recommendation 2.4 Establishment of Nomination Committee | 2.3 |
| Recommendation 2.5 Reporting on Principle 2 | 1.2, 1.4.6, 2.3.2 and the Directors' Report |
| Recommendation 3.1 Directors' and Key Executives' Code of Conduct | 1.1 |
| Recommendation 3.2 Company Security Trading Policy | 1.4.9 |
| Recommendation 3.3 Reporting on Principle 3 | 1.1 and 1.4.9 |
| Recommendation 4.1 Attestations by CEO and CFO | 1.4.11 |
| Recommendation 4.2 Establishment of Audit Committee | 2.1 |
| Recommendation 4.3 Structure of Audit Committee | 2.1.2 |
| Recommendation 4.4 Audit Committee Charter | 2.1 |
| Recommendation 4.5 Reporting on Principle 4 | 2.1 |
| Recommendation 5.1 Policy for Compliance with Continuous Disclosure | 1.4.4 |
| Recommendation 5.2 Reporting on Principle 5 | 1.4.4 |
| Recommendation 6.1 Communications Strategy | 1.4.8 |
| Recommendation 6.2 Attendance of Auditor at General Meetings | 1.4.8 |
| Recommendation 7.1 Policies on Risk Oversight and Management | 2.1.3 |
| Recommendation 7.2 Attestations by CEO and CFO | 1.4.11 |
| Recommendation 7.3 Reporting on Principle 7 | 2.1.3 |
| Recommendation 8.1 Evaluation of Board, Directors and Key Executives | 1.4.10 |
| Recommendation 9.1 Remuneration Policies | 2.2.4 |
| Recommendation 9.2 Establishment of Remuneration Committee | 2.2 |
| Recommendation 9.3 Executive and Non-Executive Director Remuneration | 2.2.4.1 and 2.2.4.2 |
| Recommendation 9.4 Equity-Based Executive Remuneration | 2.2.4.1 |
| Recommendation 9.5 Reporting on Principle 9 | 2.2.2 and 2.2.4 |
| Recommendation 10.1 Company Code of Conduct | 3 |
Corporate governance statement
1. Board of Directors
1.1 Role of the Board
The Board's role is to govern the Company rather than to manage it. In governing the Company, the Directors must act in the best interests of the Company as a whole. It is the role of senior management to manage the Company in accordance with the direction and delegations of the Board and the responsibility of the Board to oversee the activities of management in carrying out these delegated duties.
In carrying out its governance role, the main task of the Board is to drive the performance of the Company. The Board must also ensure that the Company complies with all of its contractual, statutory and any other legal obligations, including the requirements of any regulatory body. The Board has the final responsibility for the successful operations of the Company.
To assist the Board in carrying out its functions, it has developed a Code of Conduct to guide the Directors, the Chief Executive Officer, the Chief Financial Officer and other key executives in the performance of their roles.
1.2 Composition of the Board
To add value to the Company the Board has been formed so that it has effective composition, size and commitment to adequately discharge its responsibilities and duties given its current size and scale of operations. The names of the Directors and their qualifications and experience are stated in the Directors' Report along with the term of office held by each of the Directors. Directors are appointed based on the specific skills required by the Company and on their decision-making and judgment skills.
The Company recognises the importance of Non-Executive Directors and the external perspective and advice that Non-Executive Directors can offer. Mr Timothy Turner, Mr Peter Landau and Mr Brian Maher are Non-Executive Directors, and are independent directors as they meet the following criteria for independence adopted by the Company.
An Independent Director is a Non-Executive Director and:
- is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company;
- within the last three years has not been employed in an executive capacity by the Company or another group member, or been a Director after ceasing to hold any such employment;
- within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another group member, or an employee materially associated with the service provided;
- is not a material supplier or customer of the Company or another group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer;
- has no material contractual relationship with the Company or other group member other than as a Director of the Company;
- has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director's ability to act in the best interests of the Company; and
- is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director's ability to act in the best interests of the Company.
Mr Antony Sage is the Executive Director of the Company and does not meet the Company's criteria for independence. However, his experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain on the Board.
Dr Ian Burston is the Executive Chairman of the Company and does not meet the Company's criteria for independence. However, his experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain on the Board.
1.3 Responsibilities of the Board
In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company.
Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following.
- Leadership of the Organisation: overseeing the Company and establishing codes that reflect the values of the Company and guide the conduct of the Board.
- Strategy Formulation: to set and review the overall strategy and goals for the Company and ensuring that there are policies in place to govern the operation of the Company.
- Overseeing Planning Activities: the development of the Company's strategic plan.
- Shareholder Liaison: ensuring effective communications with shareholders through an appropriate communications policy and promoting participation at general meetings of the Company.
- Monitoring, Compliance and Risk Management: the development of the Company's risk management, compliance, control and accountability systems and monitoring and directing the financial and operational performance of the Company.
- Company Finances: approving expenses and approving and monitoring acquisitions, divestitures and financial and other reporting.
- Human Resources: appointing, and, where appropriate, removing the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) as well as reviewing the performance of the CEO and monitoring the performance of senior management in their implementation of the Company's strategy.
- Ensuring the Health, Safety and Well-Being of Employees: in conjunction with the senior management team, developing, overseeing and reviewing the effectiveness of the Company's occupational health and safety systems to ensure the well-being of all employees.
- Delegation of Authority: delegating appropriate powers to the CEO to ensure the effective day-to-day management of the Company and establishing and determining the powers and functions of the Committees of the Board.
Full details of the Board's role and responsibilities are contained in the Board Charter, a copy of which is available for inspection at the Company's registered office.
1.4 Board Policies
1.4.1 Conflicts of Interest
Directors must:
- disclose to the Board actual or potential conflicts of interest that may or might reasonably be thought to exist between the interests of the Director and the interests of any other parties in carrying out the activities of the Company; and
- if requested by the Board, within seven days or such further period as may be permitted, take such necessary and reasonable steps to remove any conflict of interest.
If a Director cannot or is unwilling to remove a conflict of interest then the Director must, as per the Corporations Act, absent himself or herself from the room when discussion and/or voting occurs on matters about which the conflict relates.
1.4.2 Commitments
Each member of the Board is committed to spending sufficient time to enable them to carry out their duties as a Director of the Company.
1.4.3 Confidentiality
In accordance with legal requirements and agreed ethical standards, Directors and key executives of the Company have agreed to keep confidential, information received in the course of the exercise of their duties and will not disclose non-public information except where disclosure is authorised or legally mandated.
1.4.4 Continuous Disclosure
The Board has designated the Company Secretary as the person responsible for overseeing and coordinating disclosure of information to the ASX as well as communicating with the ASX. In accordance with the ASX Listing Rules the Company immediately notifies the ASX of information:
Corporate governance statement
- concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company's securities; and
- that would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company's securities.
1.4.5 Education and Induction
It is the policy of the Company that new Directors undergo an induction process in which they are given a full briefing on the Company. Where possible this includes meetings with key executives, tours of the premises, an induction package and presentations. Information conveyed to new Directors include:
- details of the roles and responsibilities of a Director;
- formal policies on Director appointment as well as conduct and contribution expectations;
- access to a copy of the Board Charter;
- guidelines on how the Board processes function;
- details of past, recent and likely future developments relating to the Board;
- background information on and contact information for key people in the organisation;
- an analysis of the Company;
- a synopsis of the current strategic direction of the Company; and
- a copy of the Constitution of the Company.
In order to achieve continuing improvement in Board performance, all Directors are encouraged to undergo continual professional development. Specifically, Directors are provided with the resources and training to address skills gaps where they are identified.
1.4.6 Independent Professional Advice
The Board collectively and each Director has the right to seek independent professional advice at the Company's expense, up to specified limits, to assist them to carry out their responsibilities.
1.4.7 Related Party Transactions
Related party transactions include any financial transaction between a Director and the Company. Unless there is an exemption under the Corporations Act from the requirement to obtain shareholder approval for the related party transaction, the Board cannot approve the transaction.
1.4.8 Shareholder Communication
The Company respects the rights of its shareholders and to facilitate the effective exercise of those rights the Company is committed to:
- communicating effectively with shareholders through releases to the market via ASX, information mailed to shareholders and the general meetings of the Company;
- giving shareholders ready access to balanced and understandable information about the Company and corporate proposals;
- making it easy for shareholders to participate in general meetings of the Company; and
- requesting the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor's report.
The Company also makes available a telephone number and email address for shareholders to make enquiries of the Company.
1.4.9 Trading in Company Shares
As per directors minutes dated 24 October 2006 it was suggested as a minimum the policy prohibit any share trading until two (2) days after an announcement for a period of seven (7) days. Any deviation from this time frame is to be discussed with the Chairman.
Furthermore, as Cape Lambert Iron Ore Ltd is also listed on AIM, directors are cognisant of the AIM trading compliance rules.
1.4.10 Performance Review/Evaluation
It is the policy of the Board to conduct evaluation of its performance. The objective of this evaluation is to provide best practice corporate governance to the Company.
1.4.11 Attestations by CEO and CFO
It is the Board's policy, that the CEO and the CFO make the attestations recommended by the ASX Corporate Governance Council as to the Company's financial condition prior to the Board signing the Annual Report. However, as at the date of this report the Company does not have a designated CEO or CFO. Due to the size and scale of operations of the Company these roles are performed by the Board as a whole.
2. Board Committees
2.1 Audit Committee
Due to the size and scale of operations of the Company the full Board undertakes the role of the Audit Committee. Below is a summary of the role and responsibilities of an Audit Committee.
2.1.1 Role
The Audit Committee is responsible for reviewing the integrity of the Company's financial reporting and overseeing the independence of the external auditors.
As the whole Board only consists of five (5) members, the Company does not have an audit committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues and an audit committee cannot be justified based on a cost-benefit analysis. However, in accordance with the ASX Listing Rules, the Company is moving towards establishing an audit committee consisting primarily of Independent Directors.
In the absence of an audit committee, the Board sets aside time to deal with issues and responsibilities usually delegated to the audit committee to ensure the integrity of the financial statements of the Company and the independence of the external auditor.
2.1.2 Responsibilities
The Audit Committee reviews the audited annual and half-yearly financial statements and any reports which accompany published financial statements and recommends their approval to the members.
The Audit Committee each year reviews the appointment of the external auditor, their independence, the audit fee, and any questions of resignation or dismissal.
The Audit Committee is also responsible for establishing policies on risk oversight and management.
2.2 Remuneration Committee
2.2.1 Role
The role of a Remuneration Committee is to assist the Board in fulfilling its responsibilities in respect of establishing appropriate remuneration levels and incentive policies for employees.
As the whole Board only consists of five (5) members, the Company does not have a remuneration committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues.
2.2.2 Responsibilities
The responsibilities of a Remuneration Committee include setting policies for senior officers' remuneration, setting the terms and conditions of employment for the Chief Executive Officer, reviewing and making recommendations to the Board on the Company's incentive schemes and superannuation arrangements, reviewing the remuneration of both Executive and Non-Executive Directors and making recommendations on any proposed changes and undertaking reviews of the Chief Executive Officer's performance, including, setting with the Chief Executive Officer goals and reviewing progress in achieving those goals.
Corporate governance statement
2.2.3 Remuneration Policy
Directors' Remuneration has been approved by resolutions of the Board on various dates as and when Directors have been appointed to the Company.
2.2.3.1 Senior Executive Remuneration Policy
The Company is committed to remunerating its senior executives in a manner that is market-competitive and consistent with best practice as well as supporting the interests of shareholders. Consequently, under the Senior Executive Remuneration Policy the remuneration of senior executive may be comprised of the following:
- fixed salary that is determined from a review of the market and reflects core performance requirements and expectations;
- a performance bonus designed to reward actual achievement by the individual of performance objectives and for materially improved Company performance;
- participation in any share/option scheme with thresholds approved by shareholders;
- statutory superannuation.
By remunerating senior executives through performance and long-term incentive plans in addition to their fixed remuneration the Company aims to align the interests of senior executives with those of shareholders and increase Company performance.
The value of shares and options were they to be granted to senior executives would be calculated using the Black and Scholes method.
The objective behind using this remuneration structure is to drive improved Company performance and thereby increase shareholder value as well as aligning the interests of executives and shareholders.
The Board may use its discretion with respect to the payment of bonuses, stock options and other incentive payments.
2.2.3.2 Non-Executive Director Remuneration Policy
Non-Executive Directors are to be paid their fees out of the maximum aggregate amount approved by shareholders for the remuneration of Non-Executive Directors. Non-Executive Directors do not receive performance based bonuses and do not participate in equity schemes of the Company.
Non-Executive Directors are entitled to but not necessarily paid statutory superannuation.
2.2.4 Current Director Remuneration
Full details regarding the remuneration of Directors, is included in the Directors' Report.
2.3 Nomination Committee
2.3.1 Role
The role of a Nomination Committee is to help achieve a structured Board that adds value to the Company by ensuring an appropriate mix of skills are present in Directors on the Board at all times.
As the whole Board only consists of five (5) members, the Company does not have a nomination committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues.
2.3.2 Responsibilities
The responsibilities of a Nomination Committee would include devising criteria for Board membership, regularly reviewing the need for various skills and experience on the Board and identifying specific individuals for nomination as Directors for review by the Board. The Nomination Committee would also oversee management succession plans including the CEO and his/her direct reports and evaluate the Board's performance and make recommendations for the appointment and removal of Directors. Currently the Board as a whole performs this role.
Corporate governance statement
2.3.3 Criteria for selection of Directors
Directors are appointed based on the specific governance skills required by the Company. Given the size of the Company and the business that it operates, the Company aims at all times to have at least one Director with experience appropriate to the Company's target market. In addition, Directors should have the relevant blend of personal experience in accounting and financial management and Director-level business experience.
3. Company Code Of Conduct
The Board has decided against the implementation of a code of conduct as it does not believe that it is in the best interests of its employees or other stakeholders to have what purports to be an exhaustive code of conduct. The Board feels that such a code may be too prescriptive and not allow the employees the discretion they need to best serve the Company's stakeholders.
Directors' report
The directors of Cape Lambert Iron Ore Limited submit herewith the annual financial report of the Company for the financial year ended 30 June 2007. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:
The names and particulars of the directors of the company during or since the end of the financial year are:
Directors Name Particulars Ian Burston Executive Chairman Antony Sage Executive Director Brian Maher Non-Executive Director Timothy Turner Non-Executive Director Peter Landau Non-Executive Director (Appointed 15 May 2007) Ian Burston Executive Chairman Qualifications AM, CitWA, B.E(Mech), DipAeroEng (RMIT), HonDSc, FIEAust, CPEng, FAusIMM, FAICD Experience Dr Burston has exceptional skills in resource management and has more than 30 years of top-level experience in extractive and related industries. Dr Burston holds a Bachelor of Engineering (Mech) degree from Melbourne University and a Diploma in Aeronautical Engineering from Royal Melbourne Institute of Technology. He has completed the Insead Management Paris and the Harvard Advanced Management Program in Boston. Formerly Dr Burston has held positions as Managing Director of Portman Limited, Managing Director and Chief Executive Officer of Aurora Gold Ltd, Chief Executive Officer of Kalgoorlie Consolidated Mines Pty Ltd, Vice President – WA Business Development CRA Ltd and Managing Director Hamersley Iron Pty Ltd. He was a nonexecutive Director of the Esperance Port Authority for ten years. Dr Burston is currently a non-executive Chairman of Broome Port Authority, NRW Ltd and Imdex Ltd, and a non-executive Director of Mincor Resources NL. Antony William Paul Sage Executive Director Qualifications B.Com, FCPA, CA, FTIA Experience Mr Sage has in excess of 22 years experience in the fields of corporate advisory services, funds management and capital raising. Mr Sage is based in Western Australia and has been involved in the management and financing of listed mining companies for the last 14 years. Mr Sage was a founding Director of International Goldfields Limited and its merger partner Hamill Resources Limited (the merged entity now being Cape Lambert Iron Ore Limited). Mr Sage is also a Director of currently listed International Goldfields
Limited (ASX Code IGC).
| Brian Maher | Non-Executive Director |
|---|---|
| Qualifications | B.E(Min.), FAusIMM, FIMM |
| Experience | Mr Maher has over 40 years experience in the mining industry, covering both underground and open cut operations, as a miner, supervisor, mining engineer, mine manager consultant, contractor and managing director. He has worked throughout the world, including Australia, Liberia, Guyana and the Philippines. He has spent over 12 years in the iron ore industry. |
| Mr Maher has a Bachelor of Mining Engineering from the University of Melbourne, and is a fellow of both the Australian Institute of Mining and Metallurgy and The Institution of Mining and Metallurgy. Mr Maher has held senior management positions with leading mining and engineering companies throughout the world including Hamersley Iron, Broken Hill South, Griffin Coal, Thyssen Mining Construction, Lameco Iron Ore, Kinhill Engineers, Linden Mining, Minproc Engineers and Nissho Iwai Mineral Sands. |
|
| Peter Landau | Non-Executive Director |
| Qualifications | LLB BCom |
| Experience | Mr Landau is a corporate lawyer and advisor who has previously worked with Grange Consulting Group, Clayton Utz and general counsel at Co-operative Bulk Holdings. Mr Landau is responsible for providing general corporate, capital raising, transaction and strategic advice to numerous ASX listed and unlisted companies. Mr Landau has project managed a significant number of mining exploration and development transactions including capital raisings, M & A joint ventures and financings. Mr Landau is a Director of a number of ASX listed companies with particular focus on mining, oil and gas exploration and development in Australia and Africa. Mr Landau is currently a non executive director of View Resources Limited, and executive director of NKWE Platinum Limited and Range Resources Limited. |
| Timothy Paul Turner | Non-Executive Director and Company Secretary |
| Qualifications | B.Bus, FCPA, FTIA, Registered Company Auditor |
| Experience | Mr Timothy Paul Turner has joined Cape Lambert Iron Ore Ltd in the dual position of Director and Company Secretary. As senior partner with Accounting firm, Hewitt Turner & Gelevitis, Mr Turner specialises in domestic business structuring, corporate and trust tax planning and the issuing of audit opinions. He also has in excess of 20 years experience in new ventures, capital raisings and general business consultancy. |
| Mr Turner has a Bachelor of Business (Accounting and Business Administration), is a Registered Company Auditor, a Fellow of CPA Australia, a Fellow of the Taxation Institute of Australia. Mr Turner is also a Director of currently listed International |
Goldfields Limited (ASX Code IGC).
Directorships of other listed companies
Directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year are as follows:
| Name | Company | Period of directorship |
|---|---|---|
| Ian Burston | Aztec Resources Ltd | 2004 to 2006 |
| Imdex Limited | 2000 to present | |
| Mincor Resources NL | 2003 to present | |
| Aviva Corporation Ltd | 2003 to 2006 | |
| NRW Ltd | 2006 to present | |
| Antony Sage | International Goldfields Limited | January 2006 to present |
| NFX Gold Inc (TSX VE) | June 2004 to January 2006 | |
| Brian Maher | - | - |
| Peter Landau | View Resources Limited | 2003 to July 2007 |
| Konekt Limited | 2002 to July 2006 | |
| Continental Goldfields Limited | 2002 to present | |
| Nuenco NL | 2004 to October 2006 | |
| Blaze International Limited | 2005 to April 2007 | |
| NKWE Platinum Limited | March 2007 to present | |
| Range Resources Limited | 2005 to present | |
| Timothy Turner | International Goldfields Limited | January 2006 to present |
Company Secretary
The following person held the position of Company Secretary at the year end:
Mr Timothy Paul Turner has joined Cape Lambert Iron Ore Ltd in the dual position of Director and Company Secretary. As senior partner with Accounting firm, Hewitt Turner & Gelevitis, Mr Turner specialises in domestic business structuring, corporate and trust tax planning and the issuing of audit opinions. He also has in excess of 20 years experience in new ventures, capital raisings and general business consultancy.
Mr Turner has a Bachelor of Business (Accounting and Business Administration), is a Registered Company Auditor, a Fellow of CPA Australia, a Fellow of the Taxation Institute of Australia. Mr Turner is also a Director of currently listed International Goldfields Limited (ASX Code IGC).
Principal activities
The principal activity of the economic entity during the financial year was mineral exploration.
There were no significant changes in the nature of the economic entity's principal activities during the financial year.
Review of operations
CAPE LAMBERT IRON ORE PROJECT
Work during the financial year focused on recommencing exploration programs, advancing the preliminary engineering and infrastructure studies and initiating baseline environmental surveys with the objective of defining a sufficient resource base to produce 10–15 million tonnes per annum of magnetite concentrate over a 20 year mine life.
Resource Estimate
During the financial year, international mining consultancy groups Golders & Associates and RSG Global Consulting Pty Ltd (RSG) as auditor completed a mineral resource estimate for the Central Target Area at the Cape Lambert Iron Ore Project. The estimate is based on the Company's 2006 drilling program and the earlier program of Robe River Mining Pty Ltd, totaling over 40,000 m of drilling and utilises a cut-off grade of 20% Fe. RSG has advised that the Indicated component of its Mineral Resource estimate exceeds the minimum requirement of 300 million tonnes.
Metallurgical Flowsheet Development and Testwork
During the financial year, refinements and improvements to preliminary process flowsheets prepared by Met- Chem Canada Inc. were completed. Mineral Engineering Technical Services Pty Ltd was engaged to develop a metallurgical testwork program using diamond core with the aim of validating the process flowsheet and this work is continuing.
Engineering Study
Work on the preliminary engineering and infrastructure study ("Engineering Study") commenced during the financial year and continued through the year end. Metplant Engineering completed preliminary major equipment selection and layouts for the process plant. Connel Wagner reviewed infrastructure requirements such as; accommodation camp, water supply, power station and concentrate storage facility. Coffey Mining Pty Ltd completed a conceptual design for the tailings storage facility. Currie and Brown Pty Ltd was engaged to provide quantity surveying and estimating services, to assist in evaluating the cost estimates for the project.
Mining Study
Mining Solutions Consultancy Pty Ltd was engaged late in the financial year to undertake preliminary open pit mining studies utilising the resource estimate prepared by Golder Associates. This work is continuing.
Geotechnical and Hydrogeological Studies
Coffey Mining and Coffey Geotechnics were engaged to undertake preliminary geotechnical and hydrogeological studies. These studies continue into the 2007 / 08 financial year.
Port Options Study
URS Australia Pty Ltd ("URS") completed the Port Options Study late in the March quarter of the 2007 financial year. During the June quarter the preferred option was identified and incorporated into the Engineering Study.
EVANSTON AGREEMENT – PORTMAN LIMITED
On 6 March 2007, the Company announced to ASX that it had signed a letter agreement with Portman Iron Ore Limited ("Portman"), which will enable Portman to explore for, and develop iron ore resources on 5 tenements located in the Evanston region, near Portman's Koolyanobbing operations.
Cape Lambert holds the iron ore rights on these tenements. It is expected that any iron ore resource(s) that are delineated would become a satellite mining operation to the Koolyanobbing operations.
The agreement requires Portman;
- to spend a total of \$1,000,000 on exploration within 3 years to earn 100% of the iron ore rights, with a minimum of \$300,000 to be spent in the first 12 months; and
- to pay Cape Lambert a royalty of 1.5% of average per tonne value for iron ore products removed from the tenements.
Portman commenced desktop work late in the June quarter as a precursor to ground evaluation in respect of the 5 tenements.
CORPORATE
Sale of 70% Interest in Cape Lambert Iron Ore Project
During the March quarter of the financial year, the Company signed a binding sale agreement with Mr Ding Liguo (Mr Ding) to sell 70% of the Cape Lambert iron ore project ("the Project") to Mr Ding (the Purchaser) for US\$192.5 million cash. The sale agreement was conditional on, amongst other things, shareholder approval and Cape Lambert defining a minimum Indicated Mineral Resource of 300 Mt. This resource was then required to be reviewed by an Independent Geologist. On 13 July 2007, the Company notified the ASX that the Independent Geologist had confirmed a minimum Indicated Mineral Resource of 300 Mt. Shareholder approval, the final condition precedent required to be satisfied by Cape Lambert, was received at a General Meeting of Shareholders on 16 July 2007.
The satisfaction of the final sale agreement condition precedent is now dependent upon the Chinese Investor, Mr Ding Liguo, obtaining Foreign Investment Review Board approval.
Under the terms of the binding agreement, the purchaser has paid Cape Lambert a \$2,000,000 deposit of which \$750,000 is non-refundable.
Global Iron Limited
On 1 June 2007, the Company notified the market of its intention to spin out its rights to explore for and mine iron ore over approximately 160 tenements into a separate company, Global Iron Limited ("Global Iron"). Global Iron is expected to list on the ASX during September 2007, through an initial public offering of 12,500,000 shares at 20 cents per share to raise \$2,500,000.
At the General Meeting of Shareholders held on 16 July 2007, the Company received Shareholder approval to proceed with the listing of Global Iron.
On 20 September 2007, the Company announced it had confirmed the completion of the in-specie distribution of 3,125,000 Global Iron Shares to its members as approved at the General Meeting of Shareholders held 16 July 2007.
Results for the Year
The economic entity made an after tax loss for the year of \$3,945,284 (2006: \$15,030,508).
Events Subsequent to Reporting Date
Cape Lambert Iron Ore Project Sale Agreement
On 27 March 2007 , the Company signed a binding sale agreement with Mr Ding to sell 70% of the Cape Lambert iron ore project ("the Project") to Mr Ding for US\$192.5 million cash (approximately AUD\$240m). (Sale Agreement). The Sale Agreement was conditional on, amongst other things, shareholder approval and Cape Lambert defining a minimum Indicated Mineral Resource of 300 Mt. This resource was then required to be reviewed by an Independent Geologist. On 13 July 2007, the Company notified the ASX that the Independent Geologist had confirmed a minimum Indicated Mineral Resource of 300 Mt. Shareholder approval, the final condition precedent required to be satisfied by Cape Lambert, was received at a General Meeting of Shareholders on 16 July 2007.
The satisfaction of the final Sale Agreement condition precedent is now dependent upon the Chinese Investor, Mr Ding, obtaining Foreign Investment Review Board approval.
Under the terms of the binding agreement, the purchaser has paid Cape Lambert a \$2,000,000 deposit of which \$750,000 is non-refundable. There remains a contingent liability in the amount of \$1,250,000 should the Sale Agreement be terminated.
On 5 September 2007, the Company announced that the Singapore listed company Delong Holdings Ltd (Delong), a company associated with the Purchaser, took an initial 4.4% stake in the Company through the conversion of 12,000,000 unlisted 2010 Options (at an exercise price of \$0.377). The conversion of the options provided approximately AUD\$4.6million to the existing cash reserves of the Company.
Delong's major shareholder and Chairman Mr Ding acquired 40million options through a private transaction announced to the market on 30 March 2007 and Mr Ding has on sold these Options to Delong. At the time Mr Ding indicated that he wanted to convert the options so as to provide a tangible example of his long-term commitment to the Company and its operations.
Delong has indicated it will convert the balance of the 40,000,000 unlisted Options (being 28,000,000 - raising a further approximately \$10,000,000) on finalisation of minor outstanding issues associated with the Sale Agreement. It is expected that this will occur in early October 2007. At the completion of this conversion Delong will hold 13.25% of the issued capital of the Company.
As a consequence of the above delay, the first payment of \$72,000,000 under the Sale Agreement has also been delayed until early October 2007.
In the event that the Sale Agreement is not completed with Mr Ding, the Company will seek alternative funding sources to continue with the strategy of developing the Cape Lambert Iron Ore Project.
Global Iron Limited
On 1 June 2007, the Company notified the market of its intention to spin out its rights to explore for and mine iron ore over approximately 160 tenements into a separate company, Global Iron Limited ("Global Iron"). The Company received 3,125,000 ordinary fully paid shares in Global Iron as consideration for the rights. Global Iron is expected to list on the ASX during September 2007, through an initial public offering of 12,500,000 shares at 20 cents per share to raise \$2,500,000.
At the General Meeting of Shareholders held on 16 July 2007, the Company received Shareholder approval to proceed with the listing of Global Iron.
On 20 September 2007, the Company announced it had confirmed the completion of the in-specie distribution of 3,125,000 Global Iron Shares to its members as approved at the General Meeting of Shareholders held 16 July 2007. The financial effect of the in-specie distribution has not been brought to account at balance date as it was approved post year end, however the effect will be to reduce the Company's equity by \$625,000.
Conversion of Options
Subsequent to the year end, the following options have been converted into ordinary fully paid shares in the Company:
On 2 July 2007 the Company issued 650,000 ordinary fully paid shares pursuant to the exercise of options for consideration of \$229,250.
On 4 July 2007 the Company issued 1,239,917 ordinary fully paid shares pursuant to the exercise of options for consideration of \$343,457.
On 16 July 2007 at the general meeting of members, the shareholders approved the issue of 7,000,000 \$0.49 Options expiring on 30 June 2008 to employees and contractors. On 26 July 2007 the Company issued 6,350,000 \$0.49 Options to employees and contractors of the Company.
On 24 July 2007 the Company issued 8,221,196 ordinary fully paid shares pursuant to the exercise of options for consideration of \$2,821,549.
On 30 July 2007 the Company issued 2,525,000 ordinary fully paid shares pursuant to the exercise of options for consideration of \$1,010,000.
On 31 July 2007 the Company issued 131,857 ordinary fully paid shares pursuant to the exercise of options for consideration of \$36,524.
On 6 September 2007 the Company issued 12,000,000 ordinary fully paid shares pursuant to the exercise of options for consideration of \$4,524,000.
Other than the above, no event has arisen since 30 June 2007 that would be likely to materially affect the operations of the consolidated entity, or its state of affairs not otherwise disclosed in the entity's financial report.
Changes in state of affairs
During the financial year there was no significant change in the state of affairs of the consolidated entity other than that referred to in the Review of Operations.
Future developments
The economic entity will continue its mineral exploration activity at and around its exploration projects with the object of identifying commercial resources.
Dividends
No dividends were paid during the year and the Directors do not recommend the payment of a dividend.
Environmental regulations
The economic entity is aware of its environmental obligations with regards to its exploration activities and ensures that it complies with all regulations when carrying out any exploration work.
Share options
Share options granted to directors and executives
During and since the end of the financial year an aggregate of 16,000,000 share options were granted to the following directors and executives of the company:
| Directors and executives | Number of options granted | Issuing entity | Number of ordinary shares under option |
|---|---|---|---|
| Ian Burston | 10,000,000 | CFE | 10,000,000 |
| Antony Sage | 6,000,000 | CFE | 6,000,000 |
| Brian Maher | - | - | - |
| Timothy Turner | - | - | - |
| Peter Landau | - | - | - |
| 16,000,000 | - | 16,000,000 |
Share options on issue at year end or exercised during the year
Details of unissued shares or interests under option are:
| Issuing entity | Number of shares under option |
Class of shares | Exercise price of option |
Expiry date of options |
|---|---|---|---|---|
| CFE | 135,936,805 | ORD | \$0.277 | 31 October 2008 |
| CFE | 50,000,000 | ORD | \$0.327 | 31 October 2009 |
| CFE | 40,000,000 | ORD | \$0.377 | 31 October 2010 |
| CFE | 500,000 | ORD | \$0.367 | 9 February 2009 |
| CFE | 550,000 | ORD | \$0.427 | 22 October 2008 |
| CFE | 14,675,000 | ORD | \$0.40 | 31 December 2007 |
| CFE | 3,300,000 | ORD | \$0.90 | 30 June 2008 |
| CFE | 3,300,000 | ORD | \$1.40 | 30 June 2009 |
The holders of such options do not have the right, by virtue of the option, to participate in any share issue or interest issue of any other body corporate or registered scheme.
Details of shares or interests issued during the financial year as a result of exercise of an option are:
| Issuing entity | Number of shares issued | Class of shares | Amount paid for shares |
Amount unpaid on shares |
|---|---|---|---|---|
| CFE | 2,300,000 | ORD | \$849,275 | - |
Indemnification of officers
In accordance with the constitution, except as may be prohibited by the Corporations Act 2001 every Officer or agent of the Company shall be indemnified out of the property of the Company against any liability incurred by him in his capacity as Officer, auditor or agent of the Company or any related corporation in respect of any act or omission whatsoever and howsoever occurring or in defending any proceedings, whether civil or criminal.
During the financial year, the Company has paid insurance premiums in respect of directors' and officers' liability. The insurance premiums relate to:
• Costs and expenses incurred by the relevant officers in defending legal proceedings, whether civil or criminal and whatever their outcome; and
• Other liabilities that may arise from their position, with the exception of conduct involving wilful breach of duty or improper use of information to gain a personal advantage.
In accordance with a confidentiality clause under the insurance policy, the amount of the premium paid to insurers has not been disclosed. This is permitted under S300(9) of the Corporations Act 2001.
Directors' meetings
The following table sets out the number of directors' meetings (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or committee member). During the financial year, 6 board meetings were held.
| Board of directors |
|---|
| Attended |
| 6 |
| 6 |
| - |
| 6 |
| 6 |
Directors' shareholdings
The following table sets out each director's relevant interest in shares, debentures, and rights or options in shares or debentures of the company or a related body corporate as at the date of this report.
| Directors | Ordinary Shares | 31 October 2008 Options |
31 December 2007 Option |
30 June 2008 Options |
30 June 2009 Options |
|---|---|---|---|---|---|
| Ian Burston | 1,750,000 | - | 2,150,000 | 3,300,000 | 3,300,000 |
| Antony Sage | 13,630,075 | 9,960,000 | 4,500,.000 | - | - |
| Brian Maher | 65,000 | 1,350,000 | - | - | - |
| Timothy Turner | 169,004 | 1,100,000 | - | - | - |
| Peter Landau | - | - | - | - | - |
| 15,614,079 | 12,410,000 | 6,650,000 | 3,300,000 | 3,300,000 |
Directors' report
Remuneration report
Remuneration policy for directors and executives
This report details the nature and amount of remuneration for each director and executive of Cape Lambert.
Details of Directors and Executives
(i) Directors Ian Burston – Executive Chairman Antony Sage – Executive Director Peter Landau – Non-Executive Director Timothy Turner – Non-Executive Director Brian Maher – Non-Executive Director
The remuneration policy of Cape Lambert has been designed to align director objectives with shareholder and business objectives by providing a fixed remuneration component which is assessed on an annual basis in line with market rates. The board of Cape Lambert believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best directors to run and manage the company.
The Board's policy for determining the nature and amount of remuneration for board members is as follows: The remuneration policy, setting the terms and conditions for the executive directors and other senior staff members, was developed by the Executive Chairman and approved by the Board after seeking professional advice from independent external consultants.
In determining competitive remuneration rates, the Board seeks independent advice on local and international trends among comparative companies and industry generally. It examines terms and conditions for employee incentive schemes, benefit plans and share plans. Independent advice is obtained to confirm that executive remuneration is in line with market practice and is reasonable in the context of Australian executive reward practices.
All executives receive a base salary (which is based on factors such as length of service and experience), superannuation and fringe benefits.
The economic entity is an exploration entity, and therefore speculative in terms of performance. Consistent with attracting and retaining talented executives, directors and senior executives are paid market rates associated with individuals in similar positions, within the same industry. The Board endorses the use of incentive and bonus payments for directors and senior executives. Certain Board members were issued shares as part of the terms of the Initial Public Offer and also upon appointment to the Board as part of their salary packages. Board members have largely retained these securities which assist in aligning their objectives with overall shareholder value.
Options and performance incentives may also be issued as the entity moves from exploration to producing entity, and key performance indicators such as profits and growth can then be used as measurements for assessing Board performance. At present there are no performance based options or incentives on issue.
The executive directors and executives receive a superannuation guarantee contribution required by the government, which is currently 9% and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation.
All remuneration paid to directors is valued at the cost to the company and expensed. Shares given to directors and executives are valued as the difference between the market price of those shares and the amount paid by the director or executive. Options are valued using the Black-Scholes methodology.
The Board's policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The Executive Chairman in consultation with independent advisors determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the Company. However, to align directors' interests with shareholder interests, the directors are encouraged to hold shares in the company and are able to participate in the employee option plan.
Company Performance, Shareholder Wealth and Directors' and Executives' Remuneration
The remuneration policy aims to increase goal congruence between shareholders and directors via the issue of options to the majority of directors to encourage the alignment of personal and shareholder interests. During the financial period the Company's share price traded between a low of \$0.28 and a high of \$0.80. The price volatility is a concern to the Board but is not considered abnormal for a junior explorer such as Cape Lambert. In order to keep all investors fully-informed and minimise market fluctuations the Board is determined to maintain promotional activity amongst the investment community so as to increase awareness of the Company and to stabilise the Company's share price in line with a consistent and stable financial position and base value of assets.
Director and executive details
The directors and executives of Cape Lambert Iron Ore Limited during the year were:
- Ian Burston
- Antony Sage
- Brian Maher
- Timothy Turner
- Peter Landau
Elements of director and executive remuneration
Remuneration packages contain the key elements incorporated in the Company's Remuneration Policy as detailed above.
The following table discloses the remuneration of the directors of the company:
| Primary | Post-employment | Equity | Other | Total | |||||
|---|---|---|---|---|---|---|---|---|---|
| Salary & fees |
Bonus | Non monetary |
Super annuation |
Prescribed benefits |
Other | Options | benefits | ||
| 2007 | \$ | \$ | \$ | \$ | \$ | \$ | \$ | \$ | \$ |
| Ian Burston | 214,408 | - | - | - | - | - | 342,453 | - | 556,861 |
| Antony Sage | 350,000 | - | - | - | - | - | 366,462 | - | 716,462 |
| Brian Maher | 31,800 | - | - | - | - | - | - | - | 31,800 |
| Timothy Turner | 24,000 | - | - | - | - | - | - | - | 24,000 |
| Peter Landau | 4,000 | - | - | - | - | - | - | - | 4,000 |
| Total | 624,208 | - | - | - | - | - | 708,915 | - | 1,333,123 |
| Primary | Post-employment | Equity | Other | Total | |||||
|---|---|---|---|---|---|---|---|---|---|
| Salary & fees |
Bonus | Non monetary |
Super annuation |
Prescribed benefits |
Other | Options (i) |
benefits | ||
| 2006 | \$ | \$ | \$ | \$ | \$ | \$ | \$ | \$ | \$ |
| Ian Burston | - | - | - | - | - | - | - | - | - |
| Antony Sage | 258,333 | - | - | - | - | - | 1,006,562 | - | 1,264,895 |
| Brian Maher | 17,400 | - | - | - | - | - | - | - | 17,400 |
| Timothy Turner | 30,000 | - | - | - | - | - | 150,984 | - | 180,984 |
| Peter Del Fante | - | - | - | - | - | - | - | - | - |
| Stockley Davis | - | - | - | - | - | - | 100,656 | - | 100,656 |
| Total | 305,733 | - | - | - | - | - | 1,258,202 | - | 1,563,935 |
Value of options issued to directors and executives
| Options Granted Value at grant date |
Options Exercised Value at exercise date |
Options Lapsed Value at time of lapse |
Total value of options granted, exercised and lapsed |
Percentage of total remuneration for the year |
|
|---|---|---|---|---|---|
| that consists of options |
|||||
| \$ | \$ | \$ | \$ | % | |
| Ian Burston | 342,453 | - | - | 342,543 | 61.50 |
| Antony Sage | 366,462 | 487,500 | - | 853,962 | 51.1 |
| Brian Maher | - | - | - | - | |
| Timothy Turner | - | - | - | - | |
| Peter Landau | - | - | - | - | |
| Total | 708,915 | 487,500 | - | 1,196,505 |
The following table discloses the value of options granted, exercised or lapsed during the year:
Employment Contracts of Directors and Senior Executives
The employment conditions of the executive director, Tony Sage was approved by the Board on 17 June 2006 with a salary of \$350,000 (2006: \$250,000) per annum plus GST.
The employment conditions of the managing director, Ian Burston were approved by the Board on 3 July 2006 with a salary of \$350,000 per annum plus GST.
Under the terms of both contracts, employment may be terminated by the Company or respectively either Mr Burston or Sage (whichever relevant) by giving the other 4 weeks notice in writing. Alternatively, the employment may be terminated by the Company providing compensation instead of the period of notice required. Termination payments due are four weeks lieu of notice if the termination period is not worked out. Termination payments are not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the company can terminate employment at any time.
The employment contracts are for a period of three (3) years from the date of entering the agreement.
Proceedings on behalf of the company
No person has applied for leave of Court to bring proceedings on behalf of the economic entity or intervene in any proceedings to which the economic entity is a party for the purpose of taking responsibility on behalf of the economic entity for all or any part of those proceedings.
The economic entity was not a party to any such proceedings during the year.
Auditor's independence declaration
The auditor's independence declaration is included on page 20 of the financial report.
Signed in accordance with a resolution of the directors made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the Directors
Timothy Turner Director Perth, 28 September 2007
Directors' declaration
In accordance with a resolution of the Directors of Cape Lambert Iron Ore Limited, I state that:
-
- In the opinion of the Directors:
- (a) the financial statements and notes of the Company and of the consolidated entity, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company's and consolidated entity's financial position as at 30 June 2007 and of their performance for the year ended on that date; and
(ii) complying with Accounting Standards and Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
- This declaration has been made after receiving the declarations required to be made to the Directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2007.
On behalf of the Board
Timothy Turner Director Perth, 28 September 2007
Income statement for the financial year ended 30 June 2007
| Consolidated | Company | ||||
|---|---|---|---|---|---|
| Note | 2007 \$ |
2006 \$ |
2007 \$ |
2006 \$ |
|
| Revenue | 2(a) | 968,095 | 616,410 | 965,202 | 610,499 |
| Other income | 2(a) | 1,658,927 | 3,691,068 | 1,658,927 | 3,691,068 |
| Employee benefits expense | (1,415,166) | (1,654,022) | (1,415,166) | (1,650,022) | |
| Consulting expenses | (556,171) | (382,563) | (524,386) | (382,563) | |
| Occupancy expenses | (141,317) | (49,437) | (141,317) | (49,437) | |
| Compliance and regulatory expenses | (169,044) | (388,375) | (166,227) | (391,511) | |
| Travel and Accommodation | (347,705) | - | (347,705) | - | |
| Other expenses | (1,493,380) | (1,255,703) | (1,462,113) | (1,258,642) | |
| Depreciation and amortisation expense | 11 | (70,753) | (54,797) | (70,200) | (53,083) |
| Impairment of exploration expenditure | 12 | (2,803,195) | (15,632,042) | - | (5,152,785) |
| Reversal of impairment of exploration | |||||
| expenditure | - | 493,725 | - | 493,725 | |
| Impairment of investment in controlled entities |
- | - | - | (13,557,160) | |
| (Impairment)/reversal of impairment of | |||||
| loan to controlled entity | - | - | - | 21,706 | |
| Loss on revaluation of investments | (248,931) | (414,772) | (248,931) | (414,772) | |
| Reversal of loss on revaluation of | |||||
| investments | 689,595 | - | 689,595 | - | |
| Loss on disposal of plant and equipment | (16,239) | - | (16,239) | - | |
| Loss before income tax expense | 2(b) | (3,945,284) | (15,030,508) | (1,078,560) | (18,092,977) |
| Income tax expense | 3 | - | - | - | - |
| Loss after income tax expense | (3,945,284) | (15,030,508) | (1,078,560) | (18,092,977) | |
| Loss for the year | (3,945,284) | (15,030,508) | (1,078,560) | (18,092,977) | |
| Loss per share: | |||||
| Basic (cents per share) | 17 | (1.58) | (7.57) | ||
| Diluted (cents per share) | 17 | (1.58) | (7.57) |
Balance sheet
Balance sheet as at 30 June 2007
| Consolidated | Company | ||||
|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | ||
| Note | \$ | \$ | \$ | \$ | |
| Current assets | |||||
| Cash and cash equivalents | 1,917,384 | 12,709,573 | 1,837,787 | 12,636,049 | |
| Trade and other receivables | 7 | 5,047,730 | 390,508 | 5,052,170 | 394,707 |
| Total current assets | 6,965,114 | 13,100,081 | 6,889,957 | 13,030,756 | |
| Non-current assets | |||||
| Trade and other receivables | 8 | 11,541 | - | 6,693,090 | - |
| Financial assets | 9 | 4,429,490 | 2,810,016 | 36,958,841 | 35,339,367 |
| Other non-current assets | 10 | 288,448 | 155,376 | 266,448 | 155,376 |
| Plant and equipment | 11 | 238,561 | 151,650 | 235,676 | 148,212 |
| Exploration, evaluation and development | |||||
| expenditure | 12 | 38,324,659 | 34,504,276 | - | - |
| Total non-current assets | 43,291,699 | 37,621,318 | 44,154,055 | 35,642,955 | |
| Total assets | 50,256,813 | 50,721,399 | 51,044,012 | 48,673,711 | |
| Current liabilities | |||||
| Trade and other payables | 13 | 2,261,318 | 879,216 | 3,243,260 | 1,893,997 |
| Total current liabilities | 2,261,318 | 879,216 | 3,243,260 | 1,893,997 | |
| Total liabilities | 2,261,318 | 879,216 | 3,243,260 | 1,893,997 | |
| Net assets | 47,995,495 | 49,842,183 | 47,800,752 | 46,779,714 | |
| Equity | |||||
| Issued capital | 14 | 54,094,995 | 52,993,719 | 54,094,995 | 52,993,719 |
| Reserves | 15 | 17,663,230 | 16,664,908 | 17,663,230 | 16,664,908 |
| Accumulated losses | 16 | (23,761,730) | (19,816,444) | (23,957,473) | (22,878,913) |
| Total equity | 47,996,495 | 49,842,183 | 47,800,752 | 46,779,714 |
Statements of Changes in Equity for the financial year ended 30 June 2007
| Consolidated Entity | Issued Capital |
Accumulated Losses |
Share Based Payment Reserve |
Asset Revaluation Reserve |
Total |
|---|---|---|---|---|---|
| \$ | \$ | \$ | \$ | \$ | |
| Balance at 1 July 2005 | 31,169,764 | (4,785,938) | - | - | 26,383,828 |
| Loss for year Available for sale financial instruments • |
- | (15,030,508) | - | - (15,030,508) | |
| Reversal of valuation gain taken to equity transferred to profit or loss on sale |
- | - | - | 1,565,942 | 1,565,942 |
| - | - | - | (1,427,812) | (1,427,812) | |
| Total recognised income and expense | - | (15,030,508) | - | 138,130 (14,892,378) | |
| Share based payments Contributions of equity net of |
- | - | 16,526,778 | - | 16,526,778 |
| transaction costs Capital reduction |
27,487,004 (5,663,049) |
- - |
- - |
- - |
27,487,004 (5,663,049) |
| Transactions with equity holders in their capacity as equity holders |
21,823,955 | - | 16,526,778 | - | 38,350,733 |
| Balance at 30 June 2006 | 52,993,719 | (19,816,446) | 16,526,778 | 138,130 | 49,842,181 |
| Balance at 1 July 2006 | 52,993,719 | (19,816,446) | 16,526,778 | 138,130 | 49,842,181 |
| Loss for year Available for sale financial instruments |
- | (3,945,284) | - | - | (3,945,284) |
| • transferred to profit or loss on sale |
(138,130) | (138,130) | |||
| Total recognised income and expense | - | (3,945,284) | - | (138,130) | (4,083,414) |
| Share based payments Contributions of equity net of |
- | - | 1,136,,452 | - | 1,136,452 |
| transaction costs | 1,101,276 | - | - | - | 1,101,276 |
| Transactions with equity holders in their capacity as equity holders |
1,101,276 | - | 1,136,452 | - | 2,237,728 |
| Balance at 30 June 2007 | 54,094,995 | (23,761,730) | 17,663,230 | - | 47,996,495 |
Cash flow statement for the financial year ended 30 June 2007
| Company | |||
|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 |
| \$ | |||
| - | |||
| (2,327,285) | |||
| 472,292 | |||
| (688,239) | |||
| (35,719) | |||
| 613,000 | 83,980 | 613,000 | 81,637 |
| (7,806,481) | (3,099,553) | (1,572,164) | (2,497,314) |
| (173,903) | (57,206) | (173,903) | (57,206) |
| (200,000) | (9,002,960) | - | - |
| (228,335) | (771,913) | (228,335) | (9,774,873) |
| (137,104) | (13,997) | (115,104) | (13,997) |
| 193,974 | 4,330,415 | 193,974 | 4,330,415 |
| (3,862,323) | - | (3,893,534) | -- |
| - | - | (6,431,179) | (544,547) |
| (4,407,691) | (5,515,661) | (10,648,081) | (6,060,208) |
| 1,421,983 | 22,047,280 | 1,421,983 | 22,047,280 |
| - | (1,777,197) | - | (1,777,197) |
| 1,421,983 | 20,270,083 | 1,421,983 | 20,270,083 |
| (10,792,189) | 11,654,869 | (10,798,262) | 11,712,561 |
| 923,488 | |||
| 12,636,049 | |||
| \$ (2,578,486) 585,513 (6,426,208) (300) 12,709,573 1,917,384 |
Consolidated \$ - (2,240,669) 475,860 (1,383,005) (35,719) 1,054,704 12,709,573 |
\$ (2,512,613) 582,379 (254,630) (300) 12,636,049 1,837,787 |
Notes to the financial statements for the financial year ended 30 June 2007
| Note | Contents | Note | Contents |
|---|---|---|---|
| 1 | Summary of accounting policies | 14 | Issued capital |
| 2 | Loss from operations | 15 | Reserves |
| 3 | Income taxes | 16 | Accumulated losses |
| 4 | Key management personnel remuneration | 17 | Loss per share |
| 5 | Share based payment arrangements | 18 | Commitments for expenditure |
| 6 | Remuneration of auditors | 19 | Contingent liabilities |
| 7 | Current trade and other receivables | 20 | Subsidiaries |
| 8 | Non-current financial assets | 21 | Acquisition of businesses |
| 9 | Financial assets | 22 | Segment information |
| 10 | Other non-current assets | 23 | Related party disclosures |
| 11 | Plant and equipment | 24 | Subsequent events |
| 12 | Exploration, evaluation and development assets |
25 | Notes to the cash flow statement |
| 13 | Current trade and other payables | 26 | Financial instruments |
| 27 | Additional company information |
1. Summary of accounting policies
Statement of compliance
The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
The financial report covers Cape Lambert Iron Ore Limited and Controlled Entities. Cape Lambert Iron Ore Limited is a public listed company, incorporated and domiciled in Australia.
The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). The financial report also complies with International Financial Reporting Standards (IFRS).
The following is a summary of the material accounting policies adopted by the Company in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.
The financial statements were authorised for issue by the directors on 28 September 2007.
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 reporting periods beginning on or after |
Expected to be initially applied in the financial year ending |
|---|---|---|
| AASB 7 'Financial Instruments: Disclosures' and consequential amendments to other accounting standards resulting from its issue |
1 January 2007 | 30 June 2008 |
| AASB 8 'Operating Segments' | 1 January 2009 | 30 June 2010 |
| AASB 101 'Presentation of Financial Statements' – revised standard |
1 January 2007 | 30 June 2008 |
| AASB 123 'Borrowing Costs' – revised standard |
1 January 2009 | 30 June 2010 |
| AASB 2007-1 "Amendments to Australian Accounting Standards arising from AASB Interpretation 11' |
1 March 2007 | 30 June 2008 |
| AASB 2007-2 'Amendments to Australian Accounting Standards arising from AASB Interpretation 12' |
1 January 2008 | 30 June 2009 |
| AASB 2007-4 'Amendments to Australian Accounting Standards arising from ED 151 and other amendements' |
1 July 2007 | 30 June 2008 |
| AASB 2007-6 'Amendments to Australian Acccounting Standards arising from AASB 123' |
1 January 2009 | 30 June 2010 |
| AASB 2007-7 'Amendments to Australian Accounting Standards' |
1 July 2007 | 30 June 2008 |
| AASB Interpretation 10 'Interim Financial Reporting and |
1 November 2006 | 30 June 2008 |
NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 30 June 2007
| Impairment' | ||
|---|---|---|
| AASB Interpretation 11 'AASB | ||
| 2 – Group and Treasury Share | 1 March 2007 | 30 June 2008 |
| Transactions' | ||
| AASB Interpretation 12 'Service | 1 January 2008 | 30 June 2009 |
| Concession Arrangements' | ||
| AASB Intepretation 13 | 1 July 2008 | 30 June 2009 |
| 'Customer Loyalty Programmes' | ||
| AASB Interpretation 14 'AASB | ||
| 19 – TheLimit on a Defined | ||
| Benefit Asset, Minimum Funding | 1 January 2008 | 30 June 2009 |
| Requirements and their | ||
| Interaction' |
The directors note that the impact of the initial application of the Standards and Interpretations 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.
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.
The financial report is presented in Australian dollars.
Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.
The following significant accounting policies have been adopted in the preparation and presentation of the financial report:
(a) Borrowings
Borrowings are recorded initially at fair value, net of transaction costs.
Subsequent to initial recognition, borrowings are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the borrowing using the effective interest rate method.
(b) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
(c) Employee benefits
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.
Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.
Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the consolidated entity in respect of services provided by employees up to reporting date.
1. Summary of accounting policies (cont'd)
(d) Financial assets
Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs.
Other financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss', 'held-to-maturity' investments, 'available-for-sale' financial assets, and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Financial assets at fair value through profit or loss
The consolidated entity has classified certain shares and options as financial assets at fair value through profit or loss. Financial assets held for trading purposes are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in profit or loss. The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments with no active market, fair value is determined using valuation techniques. Such techniques include using recent arm's length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models.
Held-to-maturity investments
Bills of exchange and debentures are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.
Available-for-sale financial assets
Certain shares and convertible notes held by the consolidated entity are classified as being availablefor-sale and are stated at fair value less impairment. The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments with no active market, fair value is determined using valuation techniques. Such techniques include using recent arm's length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models.. Gains and losses arising from changes in fair value are recognised directly in the available-for-sale revaluation reserve, until the investment is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in the available-for-sale revaluation reserve is included in profit or loss for the period.
Loans and receivables
Trade receivables, loans, and other receivables are recorded at amortised cost less impairment. Impairment is determined by review of the nature and recoverability of the loan or receivable with reference to its terms of repayments and capacity of the debtor entity to repay the debt. If the recoverable amount of a receivable is estimated to be less than its carrying amount, the carrying amount of receivable is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately.
(e) Financial instruments issued by the company
Debt and equity instruments
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement.
Transaction costs on the issue of equity instruments
Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.
Interest and dividends
Interest and dividends are classified as expenses or as distributions of profit consistent with the balance sheet classification of the related debt or equity instruments or component parts of compound instruments.
(f) Foreign currency
Foreign currency transactions
All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at reporting date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.
Exchange differences are recognised in profit or loss in the period in which they arise except that exchange differences which relate to assets under construction for future productive use are included in the cost of those assets where they are regarded as an adjustment to interest costs on foreign currency borrowings.
1. Summary of accounting policies (cont'd)
(g) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
- i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or
- ii. for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.
(h) Goodwill
Goodwill, representing the excess of the cost of acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities acquired, is recognised as an asset and not amortised, but tested for impairment annually and whenever there is an indication that the goodwill may be impaired. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.
(i) Impairment of assets
At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired. An impairment of goodwill is not subsequently reversed.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.
1. Summary of accounting policies (cont'd)
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) 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 (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.
(j) Income tax
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the consolidated entity is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the consolidated entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the company/consolidated entity intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.
1. Summary of accounting policies (cont'd)
Tax consolidation
The Company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Cape Lambert Iron Ore Limited is the head entity in the taxconsolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the 'separate taxpayer within group' approach. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by the company (as head entity in the tax-consolidated group).
Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in note 3 to the financial statements. Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants.
(k) Intangible assets
Intangible assets acquired in a business combination
All potential intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair value can be measured reliably.
(l) Payables
Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make future payments resulting from the purchase of goods and services.
(m) Principles of consolidation
The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the consolidated entity, being the company (the parent entity) and its subsidiaries as defined in Accounting Standard AASB 127 'Consolidated and Separate Financial Statements'. A list of subsidiaries appears in note 20 to the financial statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements.
On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. If, after reassessment, the fair values of the identifiable net assets acquired exceeds the cost of acquisition, the deficiency is credited to profit and loss in the period of acquisition.
The interest of minority shareholders is stated at the minority's proportion of the fair values of the assets and liabilities recognised.
The consolidated financial statements include the information and results of each subsidiary from the date on which the company obtains control and until such time as the company ceases to control such entity.
In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the consolidated entity are eliminated in full.
(n) Property, plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.
Depreciation is provided on plant and equipment. Depreciation is calculated on a diminishing value basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method is reviewed at the end of each annual reporting period.
The following estimated useful lives are used in the calculation of depreciation:
- Plant and equipment 2.5 5.55 years
- (o) Provisions
Provisions are recognised when the consolidated entity has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.
(p) Revenue recognition
Sale of goods
Revenue from the sale of goods is recognised when the consolidated entity has transferred to the buyer the significant risks and rewards of ownership of the goods.
Royalties
Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement.
Interest revenue
Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.
(q) Share-based payments
Equity-settled share-based payments granted after 7 November 2002 that were unvested as of 1 January 2005, are measured at fair value at the date of grant. Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the consolidated entity's estimate of shares that will eventually vest.
For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.
(r) Investment in subsidiaries
Subsequent to initial recognition, investments in subsidiaries are measured at cost. Subsequent to initial recognition, investments in associates are accounted for under the equity method in the consolidated financial statements and the cost method in the company financial statements
(s) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. Costs associated with these identifiable areas of interests are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.
When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.
Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining or petroleum permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.
Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.
NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 30 June 2007
| Consolidated | Company | ||||
|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | ||
| \$ | \$ | \$ | \$ | ||
| 2. | Loss from operations | ||||
| (a) Revenue and other income |
|||||
| Interest received | 655,095 | 532,430 | 652,202 | 528,862 | |
| Revenue from services | 313,000 | 83,980 | 313,000 | 81,637 | |
| 968,095 | 616,410 | 965,202 | 610,499 | ||
| Other income | 1,658,927 | 3,691,068 | 1,658,927 | 3,691,068 | |
| (b) Loss before income tax Loss before income tax has been arrived at after (crediting)/ charging the following expenses |
|||||
| Depreciation of non-current assets | 70,753 | 52,603 | 70,200 | 50,889 | |
| Amortisation of non-current assets | |||||
| - leasehold improvements | - | 2,194 | - | 2,194 | |
| Loss on revaluation of listed investments | 248,931 | 414,772 | 248,931 | 414,772 | |
| Reversal of loss on revaluation of listed investments |
(689,595) | - | (689,595) | - | |
| Impairment of investment in controlled entities | - | - | - | 13,557,160 | |
| (Reversal)of impairment/impairment of loans to controlled entities |
- | (21,706) | |||
Net gain on the disposal of equity investments (77,853) (3,460,483) (77,853) (3,460,483)
| investments | (689,595) | - | (689,595) | - |
|---|---|---|---|---|
| Impairment of investment in controlled entities | - | - | - | 13,557,160 |
| (Reversal)of impairment/impairment of loans to controlled entities |
- | (21,706) | ||
| Exploration expenditure write-off (tangible) | 2,803,195 | 6,662,241 | - | 5,152,785 |
| Exploration expenditure write-off (intangibles) | - | 8,969,801 | - | - |
| Rental expense on operating leases | ||||
| - minium lease payments | 109,151 | 48,066 | 109,151 | 48,066 |
| Proceeds on the disposal of plant and equipment | - | - | - | - |
| Carrying amount of plant and equipment disposed | 16,239 | - | 16,239 | - |
| Net loss on disposal of plant and equipment | 16,239 | - | 16,239 | - |
| Proceeds on the disposal of investment assets | (193,974) | (4,099,830) | (193,974) | (4,099,830) |
| Carrying amount of investment assets sold | 116,121 | 639,347 | 116,121 | 639,347 |
NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 30 June 2007
| Consolidated | Company | |||
|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | |
| 3. Income taxes |
\$ | \$ | \$ | \$ |
| (a) Income tax recognised in profit or loss |
||||
| Tax income comprises: | ||||
| Deferred tax expense/(income) relating to the origination and reversal of temporary differences |
- | - | - | - |
| Total tax income | - | - | - | - |
| The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows: |
||||
| Loss from operations | 3,945,284 | 15,030,508 | 1,078,560 | 18,092,977 |
| Income tax expense calculated at 30% | (1,183,585) | (4,509,152) | (323,568) | (5,427,893) |
| Increase in income tax due to | ||||
| - non-deductible expenses |
1,183,100 | 3,171,989 | 342,590 | 3,171,989 |
| - fair value adjustments on formation of a |
||||
| tax consolidated group | - | - | - | 887,485 |
| - effect of current year tax losses not | ||||
| recognised | - | 1,498,184 | - | 1,498,184 |
| - realisation of prior year tax losses not | ||||
| previously recognised | 2,827,168 | - | 843,288 | - |
| - tax deductible equity raising costs |
- | (161,021) | - | (129,765) |
| - temporary differences previously not brought to account now recognised as a |
||||
| deferred tax asset | (2,826,683) | - | (862,310) | |
| Income tax attributable to operating loss | - | - | - | - |
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.
Tax consolidation
The company and its 100% owned controlled entities have formed a tax consolidated group. Members of the Consolidated Entity have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly owned controlled entities on a pro-rate basis. The agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At balance date, the possibility of default is remote. The head entity of the tax consolidated group is Cape Lambert Iron Ore Limited.
Tax Effect accounting by members of the tax consolidated group
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group. Deferred taxes are allocated to members of the tax consolidated group in accordance with a group allocation approach which is consistent with the principles of AASB 112 Income Taxes.
The allocation of tax under the tax funding agreement is recognised as an increase/decrease in the controlled entities' intercompany accounts with the tax consolidated group head company, Cape Lambert Iron Ore Ltd. In this regard the Company has assumed the benefit of tax losses from controlled entities of \$1,983,880 (2006: \$Nil) as of the balance date. The nature of the tax funding agreement is such that no tax consolidation contributions by or distributions to equity participants are required.
NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 30 June 2007
| Consolidated | Company | |||
|---|---|---|---|---|
| 2007 \$ |
2006 \$ |
2007 \$ |
2006 \$ |
|
| Unrecognised deferred tax balances | ||||
| The following deferred tax assets have not been brought to account as | ||||
| assets: | ||||
| Deferred Tax Assets | ||||
| Tax revenue losses | 18,010,269 | 13,871,998 | 16,026,389 | 13,871,998 |
| Investments | - | 258,141 | 3,891,647 | 258,141 |
| Accruals and provisions | 14,584 | 6,462 | 275,147 | 7,002 |
| Capital raising costs | 1,000,317 | 165,326 | 1,000,317 | 165,326 |
| Deductible temporary differences | - | 504,065 | - | 472,809 |
| 19,025,170 | 14,805,992 | 21,193,500 | 14,775,276 | |
| The following deferred tax liabilities have not been brought to account as liabilities: |
||||
| Deferred Tax Liabilities | ||||
| Exploration | 2,050,861 | 10,351,283 | - | 10,351,283 |
| Other items | 38,333 | 17,459 | 38,333 | 17,999 |
| Property plant and equipment | 298 | - | 400 | - |
| 2,089,492 | 10,368,742 | 38,733 | 10,369,282 | |
| Net unrecognized deferred tax asset | 16,935,678 | 4,437,250 | 21,154,767 | 4,405,994 |
NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 30 June 2007
4. Key management personnel remuneration
The key management personnel of Cape Lambert Iron Ore Limited during the year were: Ian Burston –Executive Chairman Antony Sage – Executive Chairman Timothy Turner – Non-Executive Director Brian Maher – Non-Executive Director Peter Landau – Non-Executive Director
(a) Key management personnel remuneration
The Board's policy of determining the nature and amount of compensation of key management is as follows:
The remuneration policy of Cape Lambert has been designed to align director objectives with shareholder and business objectives by providing a fixed remuneration component which is assessed on an annual basis in line with market rates. The board of Cape Lambert believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best directors to run and manage the company.
The Board's policy for determining the nature and amount of remuneration for board members is as follows:
The remuneration policy, setting the terms and conditions for the executive directors and other senior staff members, was developed by the Executive Chairman and approved by the Board after seeking professional advice from independent external consultants.
In determining competitive remuneration rates, the Board seeks independent advice on local and international trends among comparative companies and industry generally. It examines terms and conditions for employee incentive schemes, benefit plans and share plans. Independent advice is obtained to confirm that executive remuneration is in line with market practice and is reasonable in the context of Australian executive reward practices.
All executives receive a base salary (which is based on factors such as length of service and experience), superannuation and fringe benefits.
The economic entity is an exploration entity, and therefore speculative in terms of performance. Consistent with attracting and retaining talented executives, directors and senior executives are paid market rates associated with individuals in similar positions, within the same industry. The Board endorses the use of incentive and bonus payments for directors and senior executives. Certain Board members were issued shares as part of the terms of the Initial Public Offer and also upon appointment to the Board as part of their salary packages. Board members have largely retained these securities which assist in aligning their objectives with overall shareholder value.
Options and performance incentives may also be issued as the entity moves from exploration to producing entity, and key performance indicators such as profits and growth can then be used as measurements for assessing Board performance. At present there are no performance based options or incentives on issue.
The executive directors and executives receive a superannuation guarantee contribution required by the government, which is currently 9% and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation.
All remuneration paid to directors is valued at the cost to the company and expensed. Shares given to directors and executives are valued as the difference between the market price of those shares and the amount paid by the director or executive. Options are valued using the Black-Scholes methodology.
The Board's policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The Executive Chairman in consultation with independent advisors determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. The maximum aggregate amount of fees that can be paid to nonexecutive directors is subject to approval by shareholders at the Annual General Meeting. Fees for nonexecutive directors are not linked to the performance of the Company. However, to align directors'
interests with shareholder interests, the directors are encouraged to hold shares in the company and are able to participate in the employee option plan.
Company Performance, Shareholder Wealth and Directors' and Executives' Remuneration
The remuneration policy aims to increase goal congruence between shareholders and directors via the issue of options to the majority of directors to encourage the alignment of personal and shareholder interests. During the financial period the Company's share price traded between a low of \$0.28 and a high of \$0.80. The price volatility is a concern to the Board but is not considered abnormal for a junior explorer such as Cape Lambert. In order to keep all investors fully-informed and minimise market fluctuations the Board is determined to maintain promotional activity amongst the investment community so as to increase awareness of the Company and to stabilise the Company's share price in line with a consistent and stable financial position and base value of assets.
| Primary | Post-employment | Equity | Other | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Salary & fees |
Bonus | Non monetary |
Super annuation |
Prescribed benefits |
Other | Options (i) |
benefits | ||
| 2007 | \$ | \$ | \$ | \$ | \$ | \$ | \$ | \$ | \$ |
| Ian Burston | 214,408 | - | - | - | - | - | 342,453 | - | 556,861 |
| Antony Sage | 350,000 | - | - | - | - | - | 366,462 | - | 716,462 |
| Brian Maher | 31,800 | - | - | - | - | - | - | 31,800 | |
| Timothy Turner | 24,000 | - | - | - | - | - | - | 24,000 | |
| Peter Landau | 4,000 | - | - | - | - | - | - | ,4,000 | |
| Total | 624,208 | - | - | - | - | - | 708,915 | - | 1,333,123 |
The following table discloses the remuneration of the directors of the company:
| Primary | Post-employment | Equity | Other | Total | |||||
|---|---|---|---|---|---|---|---|---|---|
| Salary & fees |
Bonus | Non monetary |
Super annuation |
Prescribed benefits |
Other | Options (i) |
benefits | ||
| 2006 | \$ | \$ | \$ | \$ | \$ | \$ | \$ | \$ | \$ |
| Ian Burston | - | - | - | - | - | - | - | - | - |
| Antony Sage | 258,333 | - | - | - | - | - | 1,006,562 | - | 1,264,895 |
| Brian Maher | 17,400 | - | - | - | - | - | - | - | 17,400 |
| Timothy Turner | 30,000 | - | - | - | - | - | 150,984 | - | 180,984 |
| Peter Del Fante | - | - | - | - | - | - | - | - | - |
| Stockley Davis | - | - | - | - | - | - | 100,656 | - | 100,656 |
| Total | 305,733 | - | - | - | - | - | 1,258,202 | - | 1,563,935 |
(i) The fair value of the Options is calculated at the date of grant using a Black-Scholes model. Further details are set out in Note 5 to the Financial Statements.
(ii) An aggregate amount of \$350,000 (2006:\$250,000) was paid or was due and payable to Okewood Pty Ltd, a company controlled by Mr Antony Sage, for the provision of financial and management consulting services to the economic entity.
(iii) An aggregate amount of \$24,000 (2006:\$ 30,000) was paid, or was due and payable to Corporate Resource and Mining Services Pty Ltd, a company controlled by Mr Timothy Turner, for the provision of director services to the economic entity.
4. Key management personnel remuneration (Cont.)
Employment Contracts of Directors and Senior Executives
The employment conditions of the executive director, Tony Sage was approved by the Board on 17 June 2006 with a salary of \$350,000 (2006: \$250,000) per annum plus GST.
The employment conditions of the managing director, Ian Burston were approved by the Board on 3 July 2006 with a salary of \$350,000 per annum plus GST.
Under the terms of both contracts, employment may be terminated by the Company or respectively either Mr Burston or Sage (whichever relevant) by giving the other 4 weeks notice in writing. Alternatively, the employment may be terminated by the Company providing compensation instead of the period of notice required. Termination payments due are four weeks lieu of notice if the termination period is not worked out. Termination payments are not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the company can terminate employment at any time.
The employment contracts are for a period of three (3) years from the date of entering the agreement.
5. Share-based payment arrangements
| Exercise price |
Fair value at grant date |
||||
|---|---|---|---|---|---|
| Options series | Number | Grant date | Expiry date | \$ | \$ |
| 31 December 2007 | 16,400,000 | 22.12.06 | 31.12.07 | 0.40 | 0.061 |
| 30 June 2008 | 3,300,000 | 22.12.06 | 30.06.08 | 0.90 | 0.019 |
| 30 June 2009 | 3,300,000 | 22.12.06 | 30.06.09 | 1.40 | 0.021 |
| 31 October 2008 | 12,500,000 | 20.12.05 | 31.10.08 | 0.277 | 0.101 |
| 09 February 2009 | 500,000 | 09.02.04 | 09.02.09 | 0.367 | 0.061 |
| 22 October 2008 | 550,000 | 22.10.03 | 22.10.08 | 0.427 | 0.160 |
The following share-based payment arrangements were in existence during the period:
The fair value of options granted during the year was \$1,136,452 (2006: \$1,258,202). The options were issued to Directors and consultants to the Company for no consideration as part of their remuneration packages. Holders of options do not have any voting or dividend rights in relation to the options.
The weighted average fair value of the share options granted during the financial year is \$0.049 (2006: \$0.101). Options were priced using the Black and Scholes model. Expected volatility is based on the historical volatility. No allowance has been made for the effects of early exercise.
| 31 | Option series | |||||
|---|---|---|---|---|---|---|
| Inputs into the model | December 2007 |
30 June 2008 |
30 June 2009 |
31 October 2008 |
9 February 2009 |
22 October 2008 |
| Grant date share price | \$0.360 | \$0.360 | \$0.360 | \$0.300 | \$0.345 | \$0.365 |
| Exercise price | \$0.40 | \$0.90 | \$1.40 | \$0.300 (i) | \$0.390 (i) | \$0.450 (i) |
| Expected volatility | 60% | 60% | 60% | 60% | 50% | 50% |
| Option life | 1.025 years | 1.521 years | 2.521 years | 2.863 years | 5.0 years | 5.0 years |
| Dividend yield | - | - | - | - | - | - |
| Risk-free interest rate | 5.58% | 5.58% | 5.58% | 5.70% | 4.85% | 4.85% |
(i) pursuant to the in-specie distribution of the Company's holding in International Goldfields Limited, the exercise price of all options was reduced by 2.3 cents.
The following reconciles the outstanding incentive share options granted by the Company at the beginning and end of the financial year:
| 2007 | 2006 | |||
|---|---|---|---|---|
| Number of | Weighted | Number of | Weighted | |
| options | average exercise price \$ |
options | average exercise price \$ |
|
| Balance at beginning of the financial year | 13,550,000 | 0.349 | 4,150,000 | 0.405 |
| Granted during the financial year | 23,000,000 | 0.615 | 1,250,000 | 0.277 |
| Forfeited during the financial year | - | - | - | - |
| Exercised during the financial year (i) | 1,725,000 | 0.40 | - | - |
| Expired during the financial year | - | - | (3,100,000) | 0.400 |
| Balance at end of the financial year (ii) | 34,825,000 | 0.498 | 13,550,000 | 0.349 |
| Exercisable at end of the financial year | 34,825,000 | 0.498 | 13,550,000 | 0.349 |
(i) Exercised during the financial year
During the financial year, 1,725,000 incentive options were exercised.
(ii) Balance at end of the financial year
The incentive share options outstanding at the end of the financial year had a weighted average exercise price of \$0.498 and the weighted average remaining contractual life was 373 days.
NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 30 June 2007
| Consolidated | Company | ||||
|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | ||
| \$ | \$ | \$ | \$ | ||
| 6 | Remuneration of auditors | ||||
| Auditor of the parent entity | |||||
| Audit or review of the financial report | 69,573 | 31,750 | 69,573 | 31,750 | |
| Taxation services | - | - | - | - | |
| Other non-audit services | - | - - |
- | - | |
| 69,573 | 31,750 | 69,573 | 31,750 |
The auditor of Cape Lambert Iron Ore and controlled entities is Ernst & Young (2006: Ord Partners).
7
| Current trade and other receivables | ||||
|---|---|---|---|---|
| GST recoverable and other debtors Amounts receivable from non |
1,196,948 | 390,508 | 1,201,388 | 394,707 |
| associated entities (i) | 3,850,782 | - | 3,850,782 | - |
| 5,047,730 | 390,508 | 5,052,170 | 394,707 |
(i) Subsequent to balance date, \$2,000,000 of this amount has been received by the Company.
8 . Non-current trade and other
receivables
| Amounts receivable from wholly owned |
||||
|---|---|---|---|---|
| subsidiaries | - | - | 7,551,094 | 868,545 |
| Provision for impairment | - | - | (868,545) | (868,545) |
| - | - | 6,682,549 | - | |
| Amounts receivable from non-associated entities | 11,,541 | - | 11,541 | - |
| Consolidated | Company | ||||
|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | ||
| 9. | Financial assets | \$ | \$ | \$ | \$ |
| Available-for-sale: | |||||
| At fair value (2006: fair value): | |||||
| Shares in listed entities | 4,429,490 | 2,810,016 | 4,429,490 | 2,810,016 | |
| At cost (2006:cost) | |||||
| Shares in controlled entities | - | - | 46,086,511 | 46,086,511 | |
| Less provision for impairment | - | - | (13,557,160) | (13,557,160) | |
| - | - | 32,529,351 | 32,529,351 | ||
| 4,429,490 | 2,810,016 | 36,958,841 | 35,339,367 | ||
| 10. | Other non-current assets | ||||
| Deposits | 288,448 | 155,376 | 266,448 | 155,376 |
11,541 - 6,693,090 -
The deposits are term deposits held with the National Australia Bank as bonds for the potential rehabilitation of exploration assets held and bonds on rental properties contracted. As such, the term deposits are not accessible to the consolidated entity and the Company.
11. PLANT AND EQUIPMENT
| Consolidated | Company | |||
|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | |
| \$ | \$ | \$ | \$ | |
| Plant and Equipment | ||||
| At cost | 413,581 | 374,765 | 384,401 | 337,090 |
| Accumulated depreciation | (176,351) | (224,073) | (150,056) | (189,836) |
| 237,230 | 150,692 | 234,345 | 147,254 | |
| Leasehold Improvements | ||||
| At cost | 17,807 | 16,438 | 17,807 | 16,438 |
| Accumulated depreciation | (16,476) | (15,480) | (16,476) | (15,480) |
| 1,331 | 958 | 1,331 | 958 | |
| Total Property, Plant and Equipment | 238,561 | 151,650 | 235,676 | 148,212 |
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below.
| Consolidated Entity | Parent Entity | |||||
|---|---|---|---|---|---|---|
| 2007 | Plant & Equipmen t |
Leasehold Improvem ents |
Total | Plant & Equipment |
Leasehold Improveme nts |
Total |
| \$ | \$ | \$ | \$ | \$ | \$ | |
| Balance at beginning of the year | 150,692 | 958 | 151,650 | 147,254 | 958 | 148,212 |
| Additions | 172,534 | 1,369 | 173,903 | 172,534 | 1,369 | 173,903 |
| Disposals | (16,239) | - | (16,239) | (16,239) | - | (16,239) |
| Depreciation expense | (69,757) | (996) | (70,753) | (69,204) | (996) | (70,200) |
| Carrying amount at 30 June 2007 | 237,230 | 1,331 | 238,561 | 234,345 | 1,331 | 235,676 |
| Consolidated Entity | Parent Entity | |||||
|---|---|---|---|---|---|---|
| 2006 | Plant & Equipmen t |
Leasehold Improvem ents |
Total | Plant & Equipment |
Leasehold Improveme nts |
Total |
| \$ | \$ | \$ | \$ | \$ | \$ | |
| Balance at beginning of the year | 146,089 | 3,152 | 149,241 | 140,937 | 3,152 | 144,089 |
| Additions | 57,206 | - | 57,206 | 57,206 | - | 57,206 |
| Depreciation expense | (52,603) | (2,194) | (54,797) | (50,889) | (2,194) | (53,083) |
| Carrying amount at 30 June 2006 | 150,692 | 958 | 151,650 | 147,254 | 958 | 148,212 |
NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 30 June 2007
| Consolidated | Company | |||
|---|---|---|---|---|
| 12. Exploration evaluation and development assets |
2007 \$ |
2006 \$ |
2007 \$ |
2006 \$ |
| Costs carried forward in respect of | ||||
| areas of interest in: | ||||
| - Exploration and evaluation phases – at cost (Note 12a) |
6,384,204 | 3,015,821 | - | - |
| - Fair value of exploration assets |
||||
| acquired | 31,940,455 | 31,488,455 | - | - |
| - Development costs (Note 12b) |
- | - | - | - |
| Carried forward exploration, evaluation and development expenditure |
38,324,659 | 34,504,276 | - | - |
| (a) Exploration and evaluation phases – at | ||||
| cost | ||||
| Movement in carrying amounts Brought forward |
34,504,276 | 20,711,740 | - | 6,871,688 |
| Write off of exploration expenses | (2,803,195) | (15,632,042) | - | (5,152,785) |
| Reversal of impairment on exploration | ||||
| assets acquired Exploration and evaluation expenditure |
- | 493,725 | - | 493,725 |
| capitalised during the year | 6,171,578 | 1,384,706 | - | 762,604 |
| Consideration for exploration assets | ||||
| acquired during the year – at valuation | 452,000 | 31,488,455 | - | - |
| Exploration assets disposed of during the year |
- | (3,942,308) | - | (2,975,232) |
| Total exploration and evaluation phases | 38,324,659 | 34,504,276 | - | - |
| (b) Development | ||||
| Movement in carrying amounts | ||||
| Brought forward | - | 3,057,692 | - | 3,057,692 |
| Development expenditure capitalised | ||||
| during the year Development expenditure disposed of |
- | - | - | - |
| during the year | - | (3,057,692) | - | (3,057,692) |
| At reporting date | - | - | - | - |
| Total | 38,324,659 | 34,504,276 | - | - |
The value of the exploration expenditure is dependent upon:
- the continuance of the rights to tenure of the areas of interest;
- the results of future exploration; and
- the recoupment of costs through successful development and exploitation of the areas of interest, or alternatively, by their sale.
The economic entity's exploration properties may be subjected to claim(s) under native title, or contain sacred sites, or sites of significance to Indigenous people. As a result, exploration properties or areas within the tenements may be subject to exploration restrictions, mining restrictions and/or claims for compensation. At this time, it is not possible to quantify whether such claims exist, or the quantum of such claims.
NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 30 June 2007
| Consolidated | Company | ||||
|---|---|---|---|---|---|
| 2007 \$ |
2006 \$ |
2007 \$ |
2006 \$ |
||
| 13. | Current trade and other payables | ||||
| Unsecured | |||||
| Trade payables | 1,485,974 | 879,216 | 1,472,893 | 852,979 | |
| Other creditors and accruals | 775,344 | - | 762,190 | - | |
| Amounts payable to wholly owned subsidiaries | - | - | 1,008,177 | 1,041,018 | |
| 2,261,318 | 879,216 | 3,243,260 | 1,893,997 |
Terms and conditions
Terms and conditions relating to the above financial instruments
(i) Trade creditors are non-interest bearing and are normally settled on 45 day terms.
(ii) Sundry creditors and accruals are non-interest bearing and have an average term of 45 days.
NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 30 June 2007
| Consolidated | Company | ||||
|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | ||
| \$ | \$ | \$ | \$ | ||
| 14. | Issued capital | ||||
| 252,224,531 fully paid ordinary shares | |||||
| (2006: 249,324,531) | 54,094,995 | 52,993,719 | 54,094,995 | 52,993,719 | |
| 2007 | 2006 | ||||
| No. | \$ | No. | \$ | ||
| Fully paid ordinary shares | |||||
| Balance at beginning of financial year | 249,324,531 | 52,993,719 | 139,164,532 | 31,169,764 | |
| Issue of shares pursuant to tenement | |||||
| acquisition (i) | 600,000 | 252,000 | - | - | |
| Options exercised 28 June 2007 (ii) | 1,610,000 | 642,770 | - | - | |
| Options exercised 28 June 2007 (iii) | 690,000 | 206,506 | - | - | |
| Issue of shares pursuant to Mt Anketell | |||||
| acquisition | - | - | 36,656,799 | 10,997,040 | |
| Issue of shares pursuant to the Prospectus dated | |||||
| 21 November 2005 | - | - | 73,343,200 | 22,002,960 | |
| Options exercised 19 May 2006 | - | - | 155,000 | 42,935 | |
| Options exercised 16 May 2006 | - | - | 5,000 | 1,385 | |
| Capital reduction – In specie distribution of IGC | |||||
| Shares | - | - | - | (5,663,049) | |
| Transaction costs relating to share issues | - | - | - | (5,557,316 | |
| Balance at end of financial year | 252,224,531 | 54,094,995 | 249,324,531 | 52,993,719 |
(i) On 15 April 2007 the Company issued 600,000 ordinary shares at 42 cents each pursuant to the Share Sale Agreement with Norwest Sand and Gravel Pty Ltd..
(ii) On 28 June 2007 the Company issued 1,610,000 ordinary shares pursuant to the exercise of options.
(iii) On 28 June 2007 the Company issued 690,000 ordinary shares pursuant to the exercise of options.
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held and in proportion to the amount paid up on the shares held.
At shareholders meetings each ordinary share is entitled to one vote in proportion to the paid up amount of the share when a poll is called, otherwise each shareholder has one vote on a show of hands.
| Consolidated | Company | ||||
|---|---|---|---|---|---|
| 2007 2006 |
2007 | 2006 | |||
| \$ | \$ | \$ | \$ | ||
| 15. | Reserves | ||||
| Share based payments reserve | 17,663,230 | 16,526,778 | 17,663,230 | 16,526,778 | |
| Asset appreciation reserve | - | 138,130 | - | 138,130 | |
| 17,663,230 | 16,664,908 | 17,663,230 | 16,664,908 |
15. Reserves (Cont.)
| (a) Share based payments reserve | ||||
|---|---|---|---|---|
| Balance at beginning of financial year | 16,526,778 | - | 16,526,778 | - |
| Options issued 22 December 2006 (i) | 708,916 | - | 708,916 | - |
| Options issued 22 December 2006 (ii) | 19,849 | - | 19,849 | - |
| Options issued 22 December 2006 (iii) | 407,687 | - | 407,687 | - |
| Options issued 15 December 2005 | - | 4,263,860 | - | 4,263,860 |
| Options issued 15 December 2005 | - | 4,069,787 | - | 4,069,787 |
| Options issued 15 December 2005 | - | 3,154,808 | - | 3,154,808 |
| Options issued 15 December 2005 | - | 3,780,121 | - | 3,780,121 |
| Options issued 20 December 2005 | - | 1,258,202 | - | 1,258,202 |
| Balance at end of financial year | 17,663,230 | 16,526,778 | 17,663,230 | 16,526,778 |
During the period the Company issued the following securities:
(i) • On 22 December 2006, the Company issued 16,400,000 options exercisable at \$0.40 each on or before 31 December 2007 issued to Brokers, Consultants, Staff and Directors as approved at the Annual General Meeting of shareholders held 28 November 2006. The options were valued at \$0.0611 each (total \$1,001,662) using the Black and Scholes Option Pricing Model on the following assumptions:
Stock price: 36 cents Days to expiration: 374 days Forecast volatility: 60% Risk free rate: 5.58% Discount for unlisted securities: 30%
(ii) • On 22 December 2006, the Company issued 3,300,000 options exercisable at \$0.90 each on or before 30 June 2008 issued to Directors as approved at the Annual General Meeting of shareholders held 28 November 2006. The options were valued at \$0.0195 each (total \$64,223) using the Black and Scholes Option Pricing Model on the following assumptions:
Stock price: 36 cents Days to expiration: 555 days Forecast volatility: 60% Risk free rate: 5.58% Discount for unlisted securities: 30%
(iii) • On 22 December 2006, the Company issued 3,300,000 options exercisable at \$1.40 each on or before 30 June 2009 issued to Directors as approved at the Annual General Meeting of shareholders held 28 November 2006. The options were valued at \$0.0214 each (total \$70,569) using the Black and Scholes Option Pricing Model on the following assumptions:
Stock price: 36 cents Days to expiration: 920 days Forecast volatility: 60% Risk free rate: 5.58% Discount for unlisted securities: 30%.
These share options carry no rights to dividends and no voting rights. Further details of the share based payments are contained in note 4 to the financial statements.
15. Reserves (Cont.)
| Consolidated | Company | |||
|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | |
| \$ | \$ | \$ | \$ | |
| (b) Asset appreciation reserve | ||||
| Balance at beginning of financial year | 138,130 | - | 138,130 | - |
| Reversal of valuation gain taken to | ||||
| equity | (138,130) | (138,130) | ||
| Change in fair value of available for | ||||
| sale financial assets | - | 138,130 | - | 138,130 |
| Balance at end of financial year | - | 138,130 | - | 138,130 |
Nature and purpose of reserves
Share based payments reserve
The shar based payments reserve records items recognised as expenses on valuation of employee share options, and options issued to directors and advisors.
Asset Appreciation Reserve
The asset appreciation reserve records revaluations of available-for-sale financial assets.
| Consolidated | Company | ||||||
|---|---|---|---|---|---|---|---|
| 2007 \$ |
2006 \$ |
2007 \$ |
2006 \$ |
||||
| 16. | Accumulated losses | ||||||
| Balance at beginning of financial year | (19,816,446) | (4,785,936) | (22,878,913) | (4,785,936) | |||
| Loss for the year | (3,914,073) | (15,030,508) | (1,078,560) | (18,092,977) | |||
| Balance at end of financial year | (23,730,519) | (19,816,444) | (23,957,473) | (22,878,913) | |||
NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 30 June 2007
17. Loss per share
| Consolidated | |||
|---|---|---|---|
| 2007 | 2006 | ||
| Cents per share | Cents per share | ||
| Basic loss per share | 1.57 | 7.57 | |
| Diluted loss per share | 1.57 | 7.57 |
Basic loss per share
The loss and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:
| 2007 \$ |
2006 \$ |
|
|---|---|---|
| Loss for the year | 3,914,073 | 15,030,508 |
| 2007 No. |
2007 No. |
|
| Weighted average number of ordinary shares for | ||
| the purposes of basic loss per share | 249,471,134 | 198,552,847 |
Diluted earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:
| 2007 \$ |
2006 \$ |
|
|---|---|---|
| Loss for the year | 3,914,073 | 15,030,508 |
| 2007 No. |
2006 No. |
|
| Weighted average number of ordinary shares for the | ||
| purposes of diluted loss per share | 249,471,134 | 198,552,847 |
18. Commitments for expenditure
| COMPANY AND CONSOLIDATED 30 June 2007 \$ |
COMPANY AND CONSOLIDATED 30 June 2006 \$ |
|
|---|---|---|
| Operating lease commitments | ||
| Minimum lease payments not provided for in the | ||
| financial report and payable: (i) (ii) |
||
| - not later than one year | 188,648 | 42,000 |
| - later than one year but not later than five | ||
| years | 831,396 | - |
| - later than five years | - | - |
| - aggregate expenditure contracted for at balance date but not provided for |
1,020,044 | 42,000 |
(i) The Company entered into a lease commencing on 1 July 2007 for office premises at 18 Oxford Close, Leederville, for a period of 5 years, terminating on 30 June 2012.
(ii) The Company entered into a lease commencing on 1 May 2007 for office premises at 2 Ord Street West Perth, for a period of 5 years, terminating on 30 April 2012.
Mineral tenement discretionary commitments
In order to maintain current rights of tenure to mining tenements, the economic entity has the following discretionary exploration expenditure and rental requirements up until expiry of leases. These obligations, which are subject to renegotiation upon expiry of the leases, are not provided for in the financial statements and are payable:
NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 30 June 2007
| Economic Entity | Parent Entity | |||
|---|---|---|---|---|
| 2007 \$ |
2006 \$ |
2007 \$ |
2006 \$ |
|
| Not longer than one year Longer than one year, but |
185,459 | 746,244 | - | - |
| not longer than five years Longer than five years |
916,614 - |
798,720 - |
- - |
- - |
| 1,102,073 | 1,544,964 | - | - |
If the economic entity decides to relinquish certain leases and/or does not meet these obligations, assets recognised in the balance sheet may require review to determine the appropriateness of carrying values. The sale, transfer or farm-out of exploration rights to third parties will reduce or extinguish these obligations.
19. Contingent liabilities
On 27 March 2007 , the Company signed a binding sale agreement with Mr Ding to sell 70% of the Cape Lambert iron ore project ("the Project") to Mr Ding for US\$192.5 million cash (approximately AUD\$240m). (Sale Agreement). The Sale Agreement was conditional on, amongst other things, shareholder approval and Cape Lambert defining a minimum Indicated Mineral Resource of 300 Mt. This resource was then required to be reviewed by an Independent Geologist. On 13 July 2007, the Company notified the ASX that the Independent Geologist had confirmed a minimum Indicated Mineral Resource of 300 Mt. Shareholder approval, the final condition precedent required to be satisfied by Cape Lambert, was received at a General Meeting of Shareholders on 16 July 2007.
The satisfaction of the final Sale Agreement condition precedent is now dependent upon the Chinese Investor, Mr Ding Liguo, obtaining Foreign Investment Review Board approval.
Under the terms of the binding agreement, the purchaser has paid Cape Lambert a \$2,000,000 deposit of which \$750,000 is non-refundable. There remains a contingent liability in the amount of \$1,250,000 should the Sale Agreement be terminated.
Other than the above, the economic entity has no contingent liabilities or assets at the year end.
20. Subsidiaries
| Ownership interest | |||
|---|---|---|---|
| Country of | 2007 | 2006 | |
| Name of entity | incorporation | % | % |
| Parent entity | |||
| Cape Lambert Iron Ore Limited | Australia | - | - |
| Subsidiaries | |||
| International Goldfields (Romania) Pty Ltd | Australia | 100% | 100% |
| Dempsey Resources Pty Ltd | Australia | 100% | 100% |
| Evanston Resources Pty Ltd | Australia | 100% | 100% |
| Mt Anketell Pty Ltd | Australia | 100% | 100% |
| Global Iron Limited | Australia | 100% | - |
21. Acquisition of businesses
| Names of businesses acquired | Principal activity |
Date of acquisition |
Proportion of shares acquired (%) |
Cost of acquisition \$ |
|---|---|---|---|---|
| 2006: | ||||
| Mt Anketell Pty Ltd | Exploration | 16 December 2005 |
100% | 31,488,455 |
The parent entity acquired 100% of Mt Anketell Pty Ltd on 16 December 2005, the holder of the Cape Lambert Iron Ore project located in the Pilbara region of Western Australia. The purchase was satisfied by the issue of 36,656,799 shares at an issue price of \$0.30 each, 140,000,000 options valued using the Black Scholes Option Pricing Model at \$11,488,455, an initial option fee of \$100,000 and the deferred cash payment of \$8,902,960. The issue was based on the market price at the date of purchase.
| Mt Anketell Pty Ltd | |||||||
|---|---|---|---|---|---|---|---|
| Book value Fair value Fair value on adjustment acquisition |
|||||||
| Net assets acquired | \$ | \$ | \$ | ||||
| Non-current assets: | |||||||
| Exploration and | |||||||
| evaluation expenditure | - | 31,488,455 | 31,488,455 | ||||
| - | 31,488,455 | 31,488,455 |
Further details of the businesses acquired during the financial year are disclosed in note 26(b).
22. Segment information
The group has two geographic segments, being Australia and Romania and one business segment, mineral mining and exploration and substantially all of the entity's resources are deployed for this purpose.
Geographical segment revenues
| External sales | Inter-segment | Other revenue from ordinary activities |
Total | ||||||
|---|---|---|---|---|---|---|---|---|---|
| 2007 \$ |
2006 \$ |
2007 \$ |
2006 2007 2006 \$ \$ \$ |
2007 \$ |
2006 \$ |
||||
| Australia | - | - | - | - | 968,095 | 616,410 | 968,095 | 610,499 | |
| Romania | - | - | - - |
- | - | - | - | ||
| Consolidated | 968,095 | 610,499 |
Geographical segment result
| 2007 \$ |
2006 \$ |
|
|---|---|---|
| Australia | (1,142,089) | (15,030,508) |
| Romania | (2,803,195) | - |
| Loss before income tax expense | (3,945,284) | (15,030,508) |
| Income tax expense | - | - |
| Loss for the year | (3,945,284) | (15,030,508) |
Geographical segment assets and liabilities
| Assets | Liabilities | ||||
|---|---|---|---|---|---|
| 2007 \$ |
2006 \$ |
2007 \$ |
2006 \$ |
||
| Australia | 50,256,813 | 47,963,148 | 2,261,318 | 879,216 | |
| Romania | - | 2,758,251 | - | - | |
| Consolidated | 50,256,813 | 50,721,399 | 2,261,318 | 879,216 |
Other geographical segment information
| Australia | Romania | Total | |||||
|---|---|---|---|---|---|---|---|
| 2007 \$ |
2006 \$ |
2007 \$ |
2006 \$ |
2007 \$ |
2006 \$ |
||
| Acquisition of segment assets | 6,903,165 | 39,896,658 | 44,934 | 33,708 | 6,948,099 | 39,930,366 | |
| Impairment losses | - | 16,046,814 | 2,803,195 | - | 2,803,195 | 16,046,814 | |
| Reversals of impairment losses | - | 493,725 | - | - | - | 493,725 | |
| Depreciation and amortisation of segment | |||||||
| assets | 70,753 | 54,797 | - | - | 70,753 | 54,797 |
23. 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 20 to the financial statements.
(b) Key management personnel remuneration
Details of key management personnel remuneration are disclosed in note 4 to the financial statements.
23. Related party disclosures (cont'd)
(c) Key management personnel equity holdings
Fully paid ordinary shares of Cape Lambert Iron Ore Limited
| 2007 | Balance@ 01/07/06 |
Balance held on appointment |
Received on exercise of options |
On Market purchases (sales) |
Balance@ 30/06/07 |
Balance held nominally |
|---|---|---|---|---|---|---|
| No. | No. | No. | No. | No. | No. | |
| Anthony Sage | 11,930,075 | - | 1,500,000 | 200,000 | 13,630,075 | - |
| Timothy Turner | 544,004 | - | - | (375,000) | 169,004 | - |
| Ian Burston | 500,000 | - | - | - | 500,000 | - |
| Brian Maher | 65,000 | - | - | - | 65,000 | - |
| Peter Landau | - | - | - | - | - | - |
| 13,039,079 | - | 1,500,000 | (175,000) | 14,364,079 | - |
| 2006 | Balance@ 01/07/05 |
Balance held on appointment |
Received on exercise of options |
On Market purchases |
Balance@ 30/06/06 |
Balance held nominally |
|---|---|---|---|---|---|---|
| No. | No. | No. | No. | No. | No. | |
| Anthony Sage | 11,930,075 | - | - | - | 11,930,075 | - |
| Timothy Turner | 544,004 | - | - | - | 544,004 | - |
| Ian Burston | - | - | - | 500,000 | 500,000 | - |
| Brian Maher | - | 15,000 | - | 50,000 | 65,000 | - |
| Peter del Fante | - | - | - | - | - | - |
| Stockley Davis | - | - | - | - | - | - |
| 12,474,079 | 15,000 | - | 550,000 | 13,039,079 | - |
Share options of Cape Lambert Iron Ore Limited
| 2007 | Bal @ 01/07/06 |
Granted as remu neration |
Exer-cised | Net other change |
Bal @ 30/06/07 |
Bal vested @ 30/06/07 |
Vested but not exerci sable |
Vested and exerci-sable |
Options during |
|---|---|---|---|---|---|---|---|---|---|
| No. | No. | No. | No. | No. | No. | No. | No. | No | |
| Anthony Sage | 9,960,000 | 6,000,000 | (1,500,000) | - | 14,460,000 | 14,460,000 | - | 14,460,000 | 6,0 |
| Timothy Turner | 1,500,000 | - | (400,000) | 1,100,000 | 1,100,000 | - | 1,100,000 | ||
| Ian Burston | - | 10,000,000 | - | - | 10,000,000 | 10,000,000 | - | 10,000,000 | 10,0 |
| Brian Maher | 1,350,000 | - | 1,350,000 | 1,350,000 | - | 1,350,000 | |||
| Peter Landau | n/a | - | - | - | - | - | - | - | |
| 12,810,000 | 16,000,000 | (1,500,000) | (400,000) | 26,910,000 | 26,910,000 | - | 26,910,000 | 16,0 |
Share options of Cape Lambert Iron Ore Limited
| 2006 | Bal @ 01/07/05 |
Granted as remu neration |
Exer cised |
Net other change |
Bal @ 30/06/06 |
Bal vested @ 30/06/06 |
Vested but not exerci |
Vested and exerci sable |
Options vested during |
|---|---|---|---|---|---|---|---|---|---|
| sable | year | ||||||||
| No. | No. | No. | No. | No. | No. | No. | No. | No. | |
| Anthony Sage | 700,000 | 10,000,000 | - | (740,000) (i) |
9,960,000 | 9,960,000 | - | 9,960,000 | 10,000,000 |
| Timothy Turner | - | 1,500,000 | - | - | 1,500,000 | 1,500,000 | - | 1,500,000 | 1,500,000 |
| Ian Burston | - | - | - | - | - | - | - | - | - |
| Brian Maher | - | - | - | 1,350,000 | 1,350,000 | 1,350,000 | - | 1,350,000 | - |
| (ii) | |||||||||
| Peter del Fante | - | - | - | - | n/a | n/a | n/a | n/a | n/a |
| Stockley Davis | - | 1,000,000 | - | - | 1,000,000 | 1,000,000 | - | 1,000,000 | 1,000,000 |
| 700,000 | 12,500,000 | 610,000 | 13,810,000 | 13,810,000 | - | 13,810,000 | 12,500,000 |
(i) 700,000 options lapsed on 31 August 2005. 40,000 options sold off market.
(ii) 350,000 options purchased on market, 1,000,000 options granted as part of consultants options issued 15 December 2005, prior to Mr Maher's appointment to the Board on 20 December 2005.
All share options issued to directors during the financial year were made under the terms and conditions as approved in general meetings by Shareholders.
During the 2006 financial year, no options were exercised by directors and executives for ordinary shares in Cape Lambert Iron Ore Limited.
Further details of the Cape Lambert Iron Ore Limited Employee Option Scheme and of share options granted during the financial year is contained in notes 4 and 5 to the financial statements.
23. Related party disclosures (cont'd)
(d) Transactions with other related parties
- Other related parties include:
- subsidiaries;
- former key management personnel.
Amounts receivable and payable from these related parties are disclosed in notes 4 and 8 to the financial statements.
(e) Parent entity
The ultimate Australian parent entity is Cape Lambert Iron Ore Limited.
Transactions between related parties are on commercial terms and conditions, no more favourable than those available to other parties unless otherwise stated.
24. Subsequent events
Cape Lambert Iron Ore Project Sale Agreement
On 27 March 2007 , the Company signed a binding sale agreement with Mr Ding to sell 70% of the Cape Lambert iron ore project ("the Project") to Mr Ding for US\$192.5 million cash (approximately AUD\$240m). (Sale Agreement). The Sale Agreement was conditional on, amongst other things, shareholder approval and Cape Lambert defining a minimum Indicated Mineral Resource of 300 Mt. This resource was then required to be reviewed by an Independent Geologist. On 13 July 2007, the Company notified the ASX that the Independent Geologist had confirmed a minimum Indicated Mineral Resource of 300 Mt. Shareholder approval, the final condition precedent required to be satisfied by Cape Lambert, was received at a General Meeting of Shareholders on 16 July 2007.
The satisfaction of the final Sale Agreement condition precedent is now dependent upon the Chinese Investor, Mr Ding, obtaining Foreign Investment Review Board approval.
Under the terms of the binding agreement, the purchaser has paid Cape Lambert a \$2,000,000 deposit of which \$750,000 is non-refundable. There remains a contingent liability in the amount of \$1,250,000 should the Sale Agreement be terminated.
On 5 September 2007, the Company announced that the Singapore listed company Delong Holdings Ltd (Delong), a company associated with the Purchaser, took an initial 4.4% stake in the Company through the conversion of 12,000,000 unlisted 2010 Options (at an exercise price of \$0.377). The conversion of the options provided approximately AUD\$4.6million to the existing cash reserves of the Company.
Delong's major shareholder and Chairman Mr Ding acquired 40million options through a private transaction announced to the market on 30 March 2007 and Mr Ding has on sold these Options to Delong. At the time Mr Ding indicated that he wanted to convert the options so as to provide a tangible example of his long-term commitment to the Company and its operations.
Delong has indicated it will convert the balance of the 40,000,000 unlisted Options (being 28,000,000 raising a further approximately \$10,000,000) on finalisation of minor outstanding issues associated with the Sale Agreement. It is expected that this will occur in early October 2007. At the completion of this conversion Delong will hold 13.25% of the issued capital of the Company.
As a consequence of the above delay, the first payment of \$72,000,000 under the Sale Agreement has also been delayed until early October 2007.
In the event that the Sale Agreement is not completed with Mr Ding, the Company will seek alternative funding sources to continue with the strategy of developing the Cape Lambert Iron Ore Project.
Global Iron Limited
On 1 June 2007, the Company notified the market of its intention to spin out its rights to explore for and mine iron ore over approximately 160 tenements into a separate company, Global Iron Limited ("Global Iron"). The Company received 3,125,000 ordinary fully paid shares in Global Iron as consideration for the rights. Global Iron is expected to list on the ASX during September 2007, through an initial public offering of 12,500,000 shares at 20 cents per share to raise \$2,500,000.
At the General Meeting of Shareholders held on 16 July 2007, the Company received Shareholder approval to proceed with the listing of Global Iron.
On 20 September 2007, the Company announced it had confirmed the completion of the in-specie distribution of 3,125,000 Global Iron Shares to its members as approved at the General Meeting of Shareholders held 16 July 2007. The financial effect of the in-specie distribution has not been brought to account at balance date as it was approved post year end, however the effect will be to reduce the Company's equity by \$625,000.
Conversion of Options
Subsequent to the year end, the following options have been converted into ordinary fully paid shares in the Company:
On 2 July 2007 the Company issued 650,000 ordinary fully paid shares pursuant to the exercise of options for consideration of \$229,250.
On 4 July 2007 the Company issued 1,239,917 ordinary fully paid shares pursuant to the exercise of options for consideration of \$343,457.
On 16 July 2007 at the general meeting of members, the shareholders approved the issue of 7,000,000 \$0.49 Options expiring on 30 June 2008 to employees and contractors. On 26 July 2007 the Company issued 6,350,000 \$0.49 Options to employees and contractors of the Company.
On 24 July 2007 the Company issued 8,221,196 ordinary fully paid shares pursuant to the exercise of options for consideration of \$2,821,549.
On 30 July 2007 the Company issued 2,525,000 ordinary fully paid shares pursuant to the exercise of options for consideration of \$1,010,000.
On 31 July 2007 the Company issued 131,857 ordinary fully paid shares pursuant to the exercise of options for consideration of \$36,524.
On 6 September 2007 the Company issued 12,000,000 ordinary fully paid shares pursuant to the exercise of options for consideration of \$4,524,000.
Other than the above, no event has arisen since 30 June 2007 that would be likely to materially affect the operations of the consolidated entity, or its state of affairs not otherwise disclosed in the entity's financial report.
25. Notes to the cash flow statement
(a) Reconciliation of cash and cash equivalents
(b) Businesses acquired
Consideration
Net cash outflow on acquisition
| Consolidated | Company | |||||
|---|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | |||
| 25. | Notes to the cash flow statement | \$ | \$ | \$ | \$ | |
| (a) | Reconciliation of cash and cash | |||||
| equivalents | ||||||
| For the purposes of the cash flow statement, cash and cash equivalents includes cash on |
||||||
| hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. 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: | ||||||
| Cash and cash equivalents (i) | 1,917,384 | 12,709,573 | 1,837,787 | 12,636,049 | ||
| (i) Refer Note 20, Contingent Liabilities in relation to a refund due and payable in relation to the Sale Agreement should the Sale Agreement be terminated. |
||||||
| (b) | Businesses acquired | |||||
| During the financial year there were no businesses acquired. During 2006, one business was acquired. Details of the |
||||||
| acquisition are as follows: | ||||||
| Consideration | ||||||
| Cash and cash equivalents | - | - | - | 8,902,960 | ||
| Ordinary shares | - | - | - | 10,997,040 | ||
| Options over ordinary shares | - | - | - | 11,488,455 | ||
| Other – Option fee - cash | - | - | - | 100,000 | ||
| - | - | - | 31,488,455 | |||
| Assets and liabilities acquired at acquisition date |
||||||
| Exploration and evaluation expenditure | - | - | - | 31,488,455 | ||
| - | 31,488,455 | |||||
| Net cash outflow on acquisition | ||||||
| Cash and cash equivalents consideration | - | - | - | 9,002,960 | ||
| Less cash and cash equivalent balances acquired |
- | - | - | - | ||
| - | - | - | 9,002,960 | |||
25. Notes to the cash flow statement (con't)
(c) Reconciliation of net loss to net cash flows from operating activities
| Loss from ordinary activities | (3,945,284) | (15,030,508) | (1,078,560) | (18,092,977) |
|---|---|---|---|---|
| Gain on sale or disposal of investments | (77,853) | (3,460,483) | (77,853) | (3,460,483) |
| Loss on sale or disposal of investments | - | 9,952 | - | 9,952 |
| Gain on revaluation of investments | (1,281,073) | - | (1,281,073) | - |
| Loss on revaluation of investments | 248,931 | 414,772 | 248,931 | 414,772 |
| Reversal of loss on revaluation of | ||||
| investments | (689,595) | - | (689,595) | - |
| Impairment of investment in controlled | ||||
| entities | - | - | 13,557,160 | |
| Depreciation and amortisation of non | ||||
| current assets | 70,753 | 54,797 | 70,200 | 53,083 |
| Foreign exchange (gain)/loss realised on | ||||
| disposal of financial assets held for resale | - | (230,585) | - | (230,585) |
| Equity settled share-based payment | 1,136,452 | 1,258,204 | 1,136,452 | 1,258,204 |
| Impairment of exploration assets | 2,803,195 | 15,632,042 | - | 5,152,785 |
| Reversal of impairment of exploration | ||||
| assets | - | (493,725) | - | (493,725) |
| Changes in net assets and liabilities, net of | ||||
| effects from acquisition and disposal of | ||||
| businesses: | ||||
| (Increase)/decrease in assets: | ||||
| Current receivables | (802,411) | (256,508) | (802,648) | (367,236) |
| Exploration, evaluation and development | ||||
| expenditure | (6,426,208) | (1,383,005) | (254,630) | (688,239) |
| Book value of plant and equipment disposed |
||||
| Increase/(decrease) in liabilities: | 16,239 | - | 16,239 | - |
| Current payables | ||||
| Current provisions | 1,140,373 | 425,126 | 1,140,373 | 429,608 |
| Net cash from operating activities | - (7,806,481) |
(39,632) (3,099,553) |
- (1,572,164) |
(39,632) (2,497,314) |
26. Financial instruments
(a) Financial risk management objectives
The Company's principal financial instruments comprise cash, short term deposits and equity securities. The main purpose of the financial instruments is to earn the maximum amount of interest at a low risk to the company. The Company also has other financial instruments such as trade debtors and creditors which arise directly from its operations.
The main risks arising from the Company's financial instruments are interest rate risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below:
a) Interest Rate Risk Exposures
The Company is exposed to movements in market interest rates on short term deposits. The policy is to monitor the interest rate yield curve out to 120 days to ensure a balance is maintained between the liquidity of cash assets and the interest rate return. The Company does not have short or long term debt, and therefore this risk is minimal.
b) Credit Risk Exposures
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted the policy of only dealing with credit worthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults.
The credit risk on financial assets, excluding investments, of the Company, which have been recognised on the balance sheet, is the carrying amount, net of any provision for doubtful debts.
The Company is not materially exposed to any individual overseas country or individual customer.
(b) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income 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.
(c) Foreign currency risk management
The group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise.
26. Financial instruments (cont'd)
Maturity profile of financial instruments
The following table details the consolidated entity's exposure to interest rate risk as at 30 June 2007:
| Weighted | Variable | Maturity dates | Non interest | ||||
|---|---|---|---|---|---|---|---|
| average effective interest rate |
interest rate | Less than 1 year |
1-5 years | More than 5 years |
bearing | Total | |
| 2007 | % | \$ | \$ | \$ | \$ | \$ | \$ |
| Financial assets: | |||||||
| Cash and cash equivalents | 6.21 | 1,917,384 | - | - | - | - | 1,917,384 |
| Trade and other | |||||||
| receivables | - | - | - | - | 5,058,272 | 5,090,482 | |
| Other financial assets | 0.0 | - | 288,448 | - | - | 4,429,490 | 4,717,938 |
| 1,917,384 | 288,448 | - | - | 9,488,244 | 11,694,076 | ||
| Financial liabilities: | |||||||
| Trade payables | 0.0 | - | - | - | - | 2,261,318 | 2,261,318 |
| Net financial assets | 1,917,384 | 288,448 | - | - | 7,226,926 | 9,432,758 |
The following table details the consolidated entity's exposure to interest rate risk as at 30 June 2006:
| Weighted | Variable | Maturity dates | |||||
|---|---|---|---|---|---|---|---|
| average effective |
interest rate |
Less than 1 | 1-5 years | More than | bearing | Total | |
| interest rate |
year | 5 years | |||||
| 2006 | % | \$ | \$ | \$ | \$ | \$ | \$ |
| Financial assets: | |||||||
| Cash and cash equivalents | 5.74 | 726,380 | 11,983,193 | - | - | - | 12,709,573 |
| Trade and other | |||||||
| receivables | - | - | - | - | 390,508 | 390,508 | |
| Other financial assets | 0.0 | - | 155,376 | - | - | 2,810,016 | 2,965,392 |
| 726,380 | 12,138,569 | - | - | 3,200,524 | 16,065,473 | ||
| Financial liabilities: | |||||||
| Trade payables | 0.0 | - | - | - | - | 879,216 | 879,216 |
| - | - | - | - | 879,216 | 879,216 | ||
| Net financial assets | 726,380 | 12,138,569 | - | - | 2,321,308 | 15,186,257 |
(d) Fair value of financial instruments
The Directors consider that the carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair values.
(e) Liquidity risk management
The consolidated entity manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
27. Additional company information
Cape Lambert Iron Ore Limited is a listed public company, incorporated and operating in Australia and Europe.
18 Oxford Close 18 Oxford Close West Leederville West Leederville
Registered office Principal place of business
Western Australia 6008 Western Australia 6008