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MATSA RESOURCES LIMITED Interim / Quarterly Report 2007
65296_rns_2007-03-18_84f0632e-cf11-464a-aedb-e4ba56ccf51a.pdf
Interim / Quarterly Report
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KALGOORLIE-BOULDER RESOURCES LIMITED
ABN 48 106 732 487
AND CONTROLLED ENTITIES
CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT 31 December 2006
KALGOORLIE-BOULDER RESOURCES LIMITED AND CONTROLLED ENTITIES
COMPANY DIRECTORY
Directors
Trevor Matthews BComm, GradDip (App Fin & Inv), CPA (Managing Director) David Prentice GradDip BA, MBA (Non-Executive Director) Ken Allen BBus, FAICD, FTNA, FTIA, MTMA (Non-Executive Director)
Company Secretary
John Coles BComm, GradDip (App Fin & Inv), GradDip (App Corp Gov), MBA, ACIS, CA
Registered Office
48 Lake Street Northbridge WA 6003 Tel: (08) 9228 9742 Fax: (08) 9228 8685 Email: [email protected]
Postal Address
PO Box 312 Northbridge WA 6865
Website
www.kalgoorlieboulderres.com.au
Auditors
Ord Partners Level 2 47 Colin Street West Perth WA 6005
Share Registry
Advanced Share Registry Services 110 Stirling Highway Nedlands WA 6909 Tel: (08) 9389 8033 Fax: (08) 9389 7871
Home Stock Exchange
Australian Stock Exchange Ltd Exchange Plaza 2 The Esplanade Perth WA 6000 ASX Code: KAL and KALO
DIRECTORS' REPORT
The directors present their report together with the consolidated financial report for the halfyear ended 31 December 2006 and the review report thereon.
DIRECTORS
The names of directors who held office during or since the end of the half-year are:
Mr Trevor Matthews Mr David Prentice Mr Kenneth Allen
REVIEW OF OPERATIONS
Acquisition of Significant Goldfields Project
On 8 December 2006, Kalgoorlie-Boulder Resources Ltd ('Company' or 'KBRL') announced that, subject to shareholder approval and settlement of the transaction detailed within the announcement, the Company is to acquire a large highly prospective gold project located in Norseman, Western Australia. The acquisition of the 'Norseman Project' is to be effected through the acquisition of 100% of the issued share capital of Australia Gold Investments Pty Ltd ('AGI') which is the sole registered and beneficial owner of the Norseman Project.
The Norseman Project consists of a series of granted mining leases, prospecting licences, exploration licence applications and mining lease applications. The total area of the licences is more than 124 square kilometres covering the prospective south Yilgarn Greenstone belt.
The Norseman Project is located in the Norseman region of the Goldfields of Western Australia, 6 to 25 kilometres south of the Norseman town site where Croesus Mining NL operations produce in excess of 100,000 ounces of gold per annum and hold 2 million ounces of gold resources and 454,000 ounces of gold reserves. In excess of 5 million ounces of gold has been produced from this prolific region.
The Directors engaged an Independent Expert (BDO Consultants (WA) Pty Ltd) to express an opinion as to whether the proposal to acquire AGI, and thereby the Norseman Project, is fair and reasonable. The Independent Expert concluded that the transaction is both fair and reasonable and placed a range for the value of the Company's shares post the completion of the proposed transaction at between \$0.186 and \$0.354.
As part of the abovementioned process, an Independent Geologist (RSG Global) was engaged to determine a technical value for the Norseman Project. RSG Global calculated a provisional valuation for the Norseman Project of between \$23.12 million and \$49.88 million. with a preferred provisional value of \$29.17 million.
RSG Global reported total inferred mineral resources for the Norseman Project of 29.047M tonnes at 1.3 g/t for 1.2Mozs (at a 0.7 g/t cut-off). The Company, as part of its due diligence, conducted a high level initial scoping study on the project which showed that a large portion of the aforementioned resource could be economically exploited in large scale open pits and conventional Carbon in Pulp process plant.
In addition to the acquisition of the shares in AGI, a \$3 million Promissory Note owed by AGI to the vendors, RASL AU LLC ('RASL'), which will be endorsed in favour of KBRL.
$\pm$
The consideration for the acquisition is the payment of up to \$2.65 million cash and the issue of 50 million fully paid ordinary shares to RASL and/or its nominees. In addition, the Company will issue \$3 million of convertible notes to RASL and/or its nominees with an 8% pa coupon. The notes are redeemable within 36 months and can be converted into 30 million ordinary shares no earlier than 12 months at the election of the holder of the note. In
DIRECTORS' REPORT
addition, Delta Capital Pty Ltd is to receive 1.5 million fully paid ordinary shares and \$330,000 in accordance with the terms of the agreement with RASL.
The 50 million fully paid ordinary shares to be issued to RASL and/or its nominees is comprised of 48.5 million fully paid ordinary shares which RASL has agreed to enter into a voluntary restriction agreement for a period of 24 months from the date of issue, and 1.5 million fully paid ordinary shares which the Company and RASL have agreed will not be subject to any restriction on their trading subject to ASX approval. Subsequently, ASX have placed a 12 month restriction on the trading of the aforementioned 1.5 million shares.
On 6 March 2007, shareholders of Kalgoorile-Boulder Resources Ltd approved the acquisition by the Company of 100% of the issued shares of Australian Gold Investments Pty Ltd and the associated transactions as described above. On 9 March 2007, the Company announced the substantial completion of the aforementioned acquisition and the allotment and issue of the securities to RASL and Delta Capital Pty Ltd.
Entitlements Issue to Raise \$4.865 Million
On 13 December 2006, the Company lodged a prospectus for a non-renounceable entitlements issue to Shareholders to raise \$4.865 million before costs ('Offer'). The purpose of the Entitlements Issue ('issue') is to fund the cash component of the AGI acquisition in the event the agreements to acquire AGI become unconditional, meeting the expenses of the Issue, ongoing development, and working capital.
The Offer entitled eligible Shareholders registered on 27 December 2006 to subscribe for one new share for every two shares held at an issue price of 10 cents per new share. The Company is to also issue to eligible Shareholders one free listed option for every two new shares issued under the Offer. The listed options are exercisable at 20 cents expiring on 31 July 2008.
The Issue was not underwritten and the Directors reserved the right to place any shortfall at their discretion in accordance with the ASX Listing Rules. The Company entered into letters of commitment with various parties who agreed to take up all of the shortfall in the event the Directors exercise their discretion to place the shortfall with them.
On 17 January 2007, the Company announced the successful completion of the Issue. The Company received acceptances from Shareholders totalling 19,488,796 shares from a total of 48,654,694 offered. The Directors decided to place 100% of the shortfall with the various parties who entered into letters of commitment to take up all of the shortfall as explained above. The placement of the shortfall with said parties ensures the maximum amount under the Issue was raised.
Placements
On 10 July 2006, five million fully paid ordinary shares at 20 cents per share to raise \$1 million (before costs) were allotted and issued to sophisticated investors. The purpose of the placement was to provide working capital in the lead up to the development of the Jackpot Gold Mine. The placement was made with, subject to shareholder approval, one free attaching listed option to acquire one fully paid ordinary share in the Company for 20 cents expiring on 31 July 2008 for every two shares applied for and allotted. Shareholder approval was granted at the Annual General Meeting held on 29 November 2006 and 2,500,000 listed options were allotted and issued on 5 January 2007.
At the Annual General Meeting held on 29 November 2006, Shareholders approved the placement of 10 million shares at an issue price of 10 cents per share, together with one free attaching listed option exercisable at 20 cents expiring on 31 July 2008 for each share applied for and issued pursuant to the placement. The placement was completed and the shares and options allotted and issued to sophisticated investors on 9 January 2007. The purpose of the
DIRECTORS' REPORT
placement was to raise funds to meet costs associated with assessing new projects and business opportunities, and to meet corporate overheads and provide additional working capital.
Capital Reduction and In-Specie Distribution
On 13 September 2006, the Company and Burey Gold Ltd ('Burey Gold' ASX Code: BYR) have entered into an option agreement whereby Burey Gold is granted an exclusive option ('Option') to purchase the Company's rights, title and interest in its uranium assets in exchange for paying an option fee of \$50,000 to KBRL plus a further \$50,000 and issue 17.2 million fully paid ordinary shares in the capital of Burey Gold to KBRL.
The exercise of the Option is subject to conditions precedent which include Burey Gold's shareholders passing all resolutions required to give effect to the provisions of the agreement, and the successful admission of Burey Gold to the Official List of the ASX. The Option will lapse and will have no further effect if the conditions precedent are not fulfilled and it is not exercised within six months of Burey Gold's admission to the Official List of ASX. Burey Gold was admitted to the Official List on 12 December 2006.
At a meeting of Shareholders held on 15 December 2006, Shareholders unanimously agreed to authorise the Directors, at their discretion, to make an in-specie distribution of the 17.2 million Burey Gold shares to KBRL shareholders recorded on the members' register on 27 December 2006 ('Record Date') on a pro rata basis pursuant to an equal capital reduction under section 256B of the Corporations Act. Under the reduction of capital, KBRL shareholders will be entitled to approximately 3.5 Burey Gold shares for every ten KBRL shares held on the Record Date.
When and if the capital reduction is effected through the in-specie distribution of Burey Gold shares, the number of options on issue will remain the same, however, the exercise price per option will be reduced by the same amount as the amount returned in respect to each KBRL. share in accordance with the ASX Listing Rules.
The Directors convened the meeting of Shareholders in order to establish a Record Date (in accordance with the ASX Listing Rules). The Directors objective in setting this date was to ensure that only shares currently on issue on that date would be entitled to participate in the proposed in-specie distribution without being diluted by further share issues after that date. Neither the shares issued pursuant to the entitlements issue nor placement, both described above, are entitled to participate in the in-specie distribution of Burey Gold shares pursuant to the capital reduction.
Refer to Note 10 of the Notes to the Condensed Consolidated Interim Financial Report for details concerning the contingent liability for income tax associated with the proposed sale of the Company's uranium assets and the proposed capital reduction to be satisfied by the inspecie distribution of the Burey Gold shares.
Jackpot Gold Mine
During the period mining operations commenced at the Jackpot Gold Mine with the first gold being produced during the month of August 2006.
The mining operations commenced with the stripping and removal of topsoil on 18 May 2006, with the first mining bench established by late May. Mining progressed at a rate suitable to the mill campaigns set by the milling contractor.
$\ddot{\phantom{a}}$
The first mill campaign resulted in an overcall of 38% over the forecast recovered ounces of 1,603 ounces. This overcall was both in calculated grade and tonnes indicating that the grade top cut used in the ore body model could be underestimating the grade of the ore body.
DIRECTORS' REPORT
Operating statistics for the period ended 31 December 2006 are as follows:
| 31 December 2006 | ||
|---|---|---|
| Ore Mined | 33,202 | tonnes |
| Ore Grade | 1.95 | g/t Au |
| Ore Processed | 23,909 | tonnes |
| Reconciled Feed Grade | 2.22 | g/t Au |
| Recovery | 93.9 | % |
| Gold Produced | 1.603 | ounces |
The total gold production forecast for the project is 5,500 ounces with completion of mining in April. It is anticipated that the milling of the ore from the Jackpot Gold Mine will be completed in the early part of the second quarter of the 2007 calendar year at which time the Company will be in a position to properly evaluate the deep higher grade Inferred mineralisation at Jackpot for a possible larger scale open pit or underground operation.
Nickel and Gold Exploration and Evaluation
Broad Arrow (Au)
The historical data from AMX Resources, a previous explorer of the Broad Arrow project, has been collated into digital format. A Reverse Circulation ('RC') drilling programme is being planned to be carried out over the previously explored London, Munich, Madrid and Karachi prospects during the first half of the 2007 calendar year.
Significant previous RC drill intercepts from AMX Resources' included:
| Intercept width | Grade – uncut o/t | Hole number | |
|---|---|---|---|
| C 026 | |||
| 7m | NRC 008 | ||
| ን ሰ25 . NGC |
Further work on the Broad Arrow tenements included the logging and sampling of previously untested RC drill holes producing an intersection of 10 metres at 4.51 g/t, which includes 4 metres at 14.6 g/t.
Clinker Hill (Ni)
Dr Martin Gole, a nickel sulphide specialist with over 20 years of experience in the field has been commissioned to review, assess and direct exploration efforts. He has been able to identify the Basal contact and the Ultramafic suite required to form a nickel sulphide deposit.
Historical geochemistry and geophysics data has been compiled into a comprehensive digital database which has allowed for this data to be analysed. Six separate target areas within the lease area with suitable geochemistry have been identified from this work.
Analysis of historic diamond drill hole data has revealed previously unknown intersections of nickel mineralisation. Intersections include 19.2 metres of 0.36% Ni including 1.6 metres at 0.62%Ni and a further intersection of 1.6 metres at 0.47% Ni. This data is encouraging as the nickel mineralisation is coincident with higher than usual copper assays, indicating the potential for Kambalda style mineralisation.
Exploration in the first half of the 2007 calendar year will comprise of infill geochemical sampling for Ni, Cu and PGE mineralisation followed by ground EM surveys.
DIRECTORS' REPORT
Dunnsville (Au)
A geochemical sampling program has been carried out. The geochemical program was undertaken using a powered hand auger to capture the sample. An anomalous zone has been identified that is eight kilometres long. Of this there is a plus 75ppb (parts per billion) Au anomaly that measures three kilometres long by one kilometre wide. The anomaly is in a favourable geological environment for gold mineralisation and will be drill tested in the near future.
Oil and Gas
Production testing continues. The Company's operator is considering the most appropriate completion technique(s) for the several productive zones identified in the Wilson #3-10. This will include consideration of the completion of the Woodford Shale, a known gas producer in the region.
AUDITOR'S DECLARATION
The lead auditor's independence declaration under section 307C of the Corporations Act 2001 is set out on page 7 and forms part of the directors' report for the half-year ended 31 December 2006.
This report is signed in accordance with a resolution of the Board of Directors.
Trevor Matthews Managing Director
Dated this 14 day of March 2007
14 March 2007
To the Board of Directors of Kalgoorlie-Boulder Resources Limited
Dear Sirs
AUDITORS INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
I declare that, to the best of my knowledge and belief, in relation to the review for the half year ended 31st December 2006 there have been:
- no contraventions of the auditor independence requirements as set out in the è Corporations Act 2001 in relation to the review; and
- no contraventions of any applicable code of professional conduct in relation to the $\hat{\mathbf{c}}$ review.
Yours sincerely ORD PARTMERS
Ian Keith Macpherson Partner
ORD PARTNERS CHARTERED ACCOUNTANTS
Ian K Macpherson CA
Robert W Parker CA
Craig A Vivian CA
a sa maraysan na mara
Level 2, 47 Colin Street West Perth WA 6005
PO Box 359 West Perth WA 6872
■ +61 8 9321 3514 圖 +61 8 9321 3523
[email protected] www.ordgroup.com.au
CONSOLIDATED INTERIM INCOME STATEMENT For the six months ended 31 December 2006
| 2006 | 2005 | |
|---|---|---|
| \$ | \$ | |
| Revenue from continuing operations | 1,291,816 | |
| Cost of sales | (1,683,498) | |
| Gross loss | (391, 682) | |
| Option fee | 50,000 | |
| Profit on sale of investment | 14,263 | |
| Foreign currency translation differences | 12.012 | |
| Interest income | 5,078 | 36,450 |
| Amortisation of development costs | (378, 811) | |
| Consultants' expense | (175, 153) | (63, 864) |
| Corporate compliance expense | (26,086) | (19, 350) |
| Depreciation expense | (13, 293) | (13, 439) |
| Directors' fees and benefits | (48,000) | (144,000) |
| Exploration and evaluation | (114, 329) | |
| Occupancy expense | (29,081) | (20, 850) |
| Other administration expenses | (130, 179) | (40, 942) |
| Promotional expense | (4, 540) | |
| Finance costs | (37, 602) | |
| Loss before income tax | (1, 262, 863) | (270, 535) |
| Income tax benefit | 23,761 | |
| Net loss for the period | (1,239,102) | (270, 535) |
| Overall Operations: | ||
| Basic loss per share (cents per share) | (3) | (1) |
| Diluted loss per share (cents per share) | (2) | (1) |
The accompanying notes form part of these financial statements.
CONSOLIDATED INTERIM BALANCE SHEET As at 31 December 2006
| 31 Dec 06 \$ |
30 Jun 06 \$ |
|
|---|---|---|
| Current Assets | ||
| Cash and cash equivalents | 360,157 | 887,329 |
| Trade and other receivables | 120,298 | 85,654 |
| Inventories | 697,780 | |
| Other current assets | 58,065 | 122,262 |
| Total Current Assets | 1,236,300 | 1,095,245 |
| Non-Current Assets | ||
| Plant and equipment | 43,441 | 56,734 |
| Other assets | 375,400 | 15,000 |
| Exploration and evaluation asset | 6,767,129 | 7,389,395 |
| Total Non-Current Assets | 7,185,970 | 7,461,129 |
| Total Assets | 8,422,270 | 8,556,374 |
| Current Liabilities | ||
| Trade and other payables | 2,500,498 | 2,332,140 |
| Interest bearing liabilities | 750,000 | 750,000 |
| Provision | 78,779 | 47,000 |
| Total Current Liabilities | 3,329,277 | 3,129,140 |
| Non Current Liabilities | ||
| Deferred tax liabilities | 536 | 24,297 |
| Total Non Current Liabilities | 536 | 24,297 |
| Total Liabilities | 3,329,813 | 3,153,437 |
| Net Assets | 5,092,457 | 5,402,937 |
| Equity | ||
| Issued capital | 6,431,745 | 5,497,843 |
| Reserves | 1,085,625 | 1,090,905 |
| Accumulated losses | (2, 424, 913) | (1, 185, 811) |
| Total Equity | 5,092,457 | 5,402,937 |
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 31 December 2006
| Share Capital Ordinary \$ |
Accumulated Losses \$ |
Equity Settled Benefits Reserve \$ |
Asset Revaluation Reserve \$ |
Total \$ |
|
|---|---|---|---|---|---|
| Balance at 1 July 2005 | 4,295,629 | (208, 079) | 750,000 | 1,280 | 4,838,830 |
| Revaluation increment Recognition of equity- based transactions: - options granted to Directors and senior |
1,500 | 1,500 | |||
| management Loss attributable to members of parent |
90,000 | 90,000 | |||
| entity | (270, 535) | (270, 535) | |||
| Total recognised income and expense for the |
|||||
| period | (270, 535) | 90,000 | 1,500 | (179, 035) | |
| Shares issued during the period Capital raising costs |
1,562,440 | 1,562,440 | |||
| during the period Recognition of equity- based transactions: - options granted to promoter of capital |
(291, 333) | (291, 333) | |||
| raising | 172,500 | 172,500 | |||
| Balance at 31 December 2005 |
5,566,736 | (478,614) | 1,012,500 | 2,780 | 6,103,402 |
| Balance at 1 July 2006 | 5,497,843 | (1, 185, 811) | 1,085,625 | 5,280 | 5,402,937 |
| Transfer to profit or loss on sale of available for |
|||||
| sale investments Loss for the period |
(1,239,102) | (5,280) | (5,280) (1, 239, 102) |
||
| Total recognised income | |||||
| and expense for the period Shares issued during |
$\bullet$ | (1,239,102) | (5,280) | (1, 244, 382) | |
| the period Capital raising costs |
1,000,000 | 1,000,000 | |||
| during the period | (66,098) | (66,098) | |||
| Balance at 31 December 2006 |
6,431,745 | (2,424,913) | 1,085,625 | 5,092,457 | |
The accompanying notes form part of these financial statements.
$\frac{1}{2}$ $\begin{array}{c} 1 \ 1 \ 1 \end{array}$
$\pm$
CONSOLIDATED INTERIM CASH FLOW STATEMENT For the six months ended 31 December 2006
| 2006 | 2005 | |
|---|---|---|
| \$ | \$ | |
| Cash flows from operating activities | ||
| Cash receipts from sale of gold and silver | 1,291,816 | |
| Cash paid to suppliers and employees | (309, 146) | (130, 237) |
| Interest received | 5,078 | 36,449 |
| Interest paid | (37,602) | (41) |
| Option fee received | 50,000 | |
| Net cash provided by/(used in) operating activities | 1,000,146 | (93, 829) |
| Cash flows from investing activities | ||
| Purchase of plant and equipment | (18,608) | |
| Purchase of tenements and leases | (1,040,002) | (2, 133, 028) |
| Exploration and evaluation expenditure | (127, 801) | (506, 854) |
| Proceeds from sale of financial asset | 23,983 | |
| Acquisition costs of financial asset acquired | (375, 400) | |
| Net cash used in investing activities | (1,519,220) | (2,658,490) |
| Cash flows from financing activities | ||
| Proceeds from issue of shares | 58,000 | 1,562,440 |
| Capital raising costs | (66,098) | (118, 833) |
| Net cash provided by financing activities | (8,098) | 1,443,607 |
| Net decrease in cash and cash equivalents | (527, 172) | (1,308,712) |
| Cash and cash equivalents at 1 July | 887,329 | 2,424,449 |
| Cash and cash equivalents at 31 December | 360,157 | 1,115,737 |
The accompanying notes form part of these financial statements.
Condensed notes to the consolidated interim financial report
1. Reporting Entity
Kalgoorlie-Boulder Resources Limited ('Company') is a company domiciled in Australia. The condensed consolidated interim financial report of the Company as at and for the six months ended 31 December 2006 comprises the Company and its subsidiaries (together referred to as the 'consolidated entity').
The consolidated annual financial report of the consolidated entity as at and for the year needed 30 June 2006 is available upon request from the Company's registered office at Lake 48 Street. Northbridge, Western Australia, 6003 $\alpha$ r яt www.kalgoorlieboulderres.com.au.
2. Statement of Compliance
The consolidated interim financial report is a general purpose financial report which has been prepared in accordance with AASB 134: Interim Financial Reporting and the Corporations Act 2001.
The consolidated interim financial report does not include all of the information required for a full annual financial report, and should be read in conjunction with the consolidated annual financial report of the consolidated entity as and for the year ended 30 June 2006.
This consolidated interim financial report was approved by the Board of Directors on 14 March 2006.
3. Significant Accounting Policies
Except as described below, the accounting policies applied by the consolidated entity in this consolidated interim financial report are the same as those applied by the consolidated entity in its consolidated financial report as at and for the year ended 30 June 2006.
Going Concern
The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business.
The economic entity has incurred a net loss after tax for the half-year ended 31 December 2006 of \$1,239,102 (31 December 2005: \$270,535) and experienced net cash outflows of \$527,172 (31 December 2005: \$1,308,712). As at 31 December 2006 the consolidated entity had net current asset deficiencies of \$2,092,977 (30 June 2006: \$2,033,895).
The Company has commenced production at its Jackpot mine with proceeds from the sale of gold and silver of approximately \$1.3 million being received in August and September of 2006 and further proceeds anticipated to be received from the processing of gold bearing ore scheduled for milling in April 2007. The Company is also entitled to receive a total of \$50,000 as part consideration for the sale of its uranium assets to Burey Gold Ltd.
The ability of the economic entity to continue as a going concern and to pay its debts as and when they fall due is dependent on the following:
- The ability of the economic entity to secure further working capital by the issue of additional equities, debt, the sale of non-core assets, or a combination of debt, equity and/or the sale of assets.
- Cash inflows and outflows from the Jackpot mine being received and paid in accordance with the mine timetable.
Condensed notes to the consolidated interim financial report
The directors believe that they will continue to be successful in securing additional funds through debt or equity issues.
Since the reporting date, the Company has raised approximately \$5.9 million through a placement and entitlement issue. Refer to Note 12 for further details concerning these capital raisings.
The directors have reviewed the business outlook and are of the opinion that the use of the going concern basis of accounting is appropriate as they believe the economic entity will achieve the matters set out above.
Notwithstanding this, there is significant uncertainty whether the economic entity will be able to continue as a going concern.
Should the economic entity be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different from those stated in the financial report.
The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary should the economic entity be unable to continue as a going concern.
4. Estimates
The preparation of the interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
Except as described below, in preparing this consolidated interim financial report, the significant judgements made by management in applying the consolidated entity's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial report as at and for the year ended 30 June 2006.
Key Estimates - Impairment
The economic entity assesses impairment at each reporting date by evaluating conditions specific to the economic entity that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-inuse calculations performed in assessing recoverable amounts incorporate a number of key estimates.
Ì
Condensed notes to the consolidated interim financial report
5. Segment Information
For the six months ended 31 December
Primary reporting - Geographic segments
The economic entity's business segments are located in two geographic locations:
- Australia mineral exploration $\bullet$
- United States of America oil and gas exploration
The following is an analysis of the revenue and results for the period, analysed by geographical segment, the consolidated entity's primary basis of segmentation:
| Australia S |
USA S |
Consolidated Ж |
|
|---|---|---|---|
| 2006 | |||
| Revenue | 1,361,157 | 12,012 | 1,373,169 |
| Loss before income tax | (1, 274, 875) | 12,012 | (1, 262, 863) |
| Income tax benefit | 23,761 | 23,761 | |
| Net loss for the period | (1, 251, 114) | 12.102 | (1, 239, 102) |
| 2005 | |||
| Revenue | 36,450 | 36,450 | |
| Loss before income tax Income tax expense |
(269, 380) | (1, 155) | (270, 535) |
| Net loss for the period | (269, 380) | (1, 155) | (270, 535) |
6. Acquisition of Subsidiary
On 15 October 2006 the consolidated entity subscribed for all of the shares in USA Kal Energy Inc. for \$1,000, a company registered in the State of Oklahoma, United States of America. The company was incorporated, and the shares acquired by the Group, in order to hold the Wilson Prospect leases as required by US law. The assignment of the interests in the oil and gas leases was effected on 24 October 2006.
The company had as at the date of acquisition, no assets nor liabilities.
7. Exploration and Evaluation Asset
| 31 Dec 06 \$ |
30 Jun 06 \$ |
|---|---|
| 2.523.115 | 2,344,480 |
| 170.801 | 178,635 |
| 2,693,916 | 2,523,115 |
| 1,045,597 | |
| 1,045,597 | |
| (793,067) | |
| 252,530 | 1,045,597 |
| 3,820,683 | |
| 3,820,683 | |
| 6,767,129 | 7,389,395 |
| 3,820,683 3,820,683 |
Condensed notes to the consolidated interim financial report
8. Issued Capital
| 31 Dec 06 \$ |
30 Jun 06 S |
|
|---|---|---|
| 48,645,694 (30 June 2006: 43,645,694) ordinary shares | 6,431,745 | 5,497,843 |
| Ordinary Shares | ||
| At the beginning of the reporting period | 5,497,843 | 4,295,629 |
| Shares issued during the reporting period: | ||
| 14 December 2005 | 1,562,440 | |
| 21 April 2006 | ||
| 11 July 2006 | 1,000,000 | |
| Transaction costs relating to issue | (66.098). | (360,226) |
| At reporting date | 6.431.745 | 5,497,843 |
| No. | No. | |
| At the beginning of the reporting period | 43,645,694 33,505,444 | |
| Shares issued during the reporting period: | ||
| 14 December 2005 | 9,765,250 | |
| 21 April 2006 | 375,000 | |
| 11 July 2006 | 5,000,000 | |
| At reporting date | 48,645,694 | 43,645,694 |
9. Commitments
Exploration and Expenditure Commitments
In order to maintain the mineral tenements in which the Company and other parties are involved, the economic entity is committed to fulfil the minimum annual expenditure conditions under which the tenements are granted. The minimum estimated expenditure commitment requirements for the next year is \$608,295 (30 June 2006: \$361,081). These obligations are capable of being varied from time to time. Exploration expenditure commitments beyond twelve months cannot be reliably determined.
Option Commitments
The Company entered into an option agreement for a six year period which, following payment of the exercise consideration, will give the Company a 90% interest in the Lyndon Uranium Project. In consideration for granting the option, the Company paid a sum of \$25,000 and must pay the sum of \$25,000 on each anniversary of the execution of the agreement which occurs prior to the exercise of the option, and the expiry or termination of the option period. The exercise consideration of the option is to be determined by reference to the spot price for uranium when the option is exercised and ranges from \$700,000 for a spot price of US\$25 or less and \$1,500,000 for a spot price of US\$50 or more. The Company may at any time abandon the option and upon such abandonment the option period terminates and the obligation to pay the \$25,000 annual option payments is extinguished.
The abovementioned option is included within the proposed disposal of the Company's uranium assets to Burey Gold Ltd. For details on these arrangements, refer to the 30 June 2006 annual financial report.
Australia Gold Investments Pty Ltd Acquisition Consideration
On 8 December 2006, Kalgoorlie-Boulder Resources Ltd ('KBRL' or 'Company') announced that, subject to shareholder approval and settlement of the transaction detailed within the announcement, the Company is to acquire 100% of the issued share capital of Australia Gold Investments Pty Ltd ('AGI'). In addition to the acquisition of the shares in AGI, a \$3 million Promissory Note owed by AGI to RASL AU LLC ('RASL') will be endorsed in favour of KBRL.
Condensed notes to the consolidated interim financial report
The consideration for the acquisition is the payment of up to \$2.65 million cash and the issue of 50 million fully paid ordinary shares to RASL and/or its nominees. In addition, the Company will issue \$3 million of convertible notes to RASL and/or its nominees with an 8% pa coupon. The notes are redeemable within 36 months and can be converted into 30 million ordinary shares no earlier than 12 months at the election of the holder of the note. In addition, Delta Capital Pty Ltd is to receive 1.5 million fully paid ordinary shares and \$330,000 in accordance with the terms of the agreement with RASL.
On 6 March 2007, shareholders of Kalgoorlie-Boulder Resources Ltd approved the acquisition by the Company of 100% of the issued shares of Australian Gold Investments Pty Ltd and the associated transactions as described above. On 9 March 2007, the Company announced the substantial completion of the aforementioned acquisition and the allotment and issue of the securities to RASL and Delta Capital Pty Ltd. The consideration of \$2.65 million was paid at settlement with the \$330,000 being deferred until after the completion of the milling of the Jackpot ore.
10. Contingencies
Tax Consequences on Proposed Disposal of Uranium Assets
The Company and Burey Gold Ltd ('Burey Gold' ASX Code: BYR) have entered into an option agreement whereby Burey Gold is granted an exclusive option ('Option') to purchase the Company's rights, title and interest in its uranium assets in exchange for paying an option fee of \$50,000 to KBRL plus a further \$50,000 and issue 17.2 million fully paid ordinary shares in the capital of Burey Gold to KBRL.
The exercise of the Option is subject to conditions precedent which include Burey Gold's shareholders passing all resolutions required to give effect to the provisions of the agreement, and the successful admission of Burey Gold to the Official List of the ASX. The Option will lapse and will have no further effect if the conditions precedent are not fulfilled and it is not exercised within six months of Burey Gold's admission to the Official List of ASX. Burey Gold was admitted to the Official List on 12 December 2006. The Option has not been exercised as at the date of preparing this report.
The uranium assets held by the Company represent depreciable assets for income tax purposes on the basis they satisfy the definition of 'mining, quarrying or prospecting right.' Consequently, any gain arising from their disposal will be included in the assessable income of the Company in the year of the disposal.
Tax Consequences of Proposed In-Specie Distribution of Burey Gold Shares
At a meeting of Shareholders held on 15 December 2006, Shareholders unanimously agreed to authorise the Directors, at their discretion, to make an in-specie distribution of the 17.2 million Burey Gold shares to KBRL shareholders recorded on the members' register on 27 December 2006 ('Record Date') on a pro rata basis pursuant to an equal capital reduction under section 256B of the Corporations Act.
For Capital Gains Tax ('CGT') purposes, the cost base of the Burey Gold shares received pursuant to the abovementioned transaction should be their market value at the date the uranium assets are disposed of to Burey Gold. The proposed in-specie distribution of the Burey Gold shares would constitute a disposal of the shares for CGT purposes with the capital proceeds for the purposes of determining a capital gain or loss being the market value of the Burey Gold shares at the date the shares are distributed to shareholders. If a capital loss results from the distribution of the Burey Gold shares to shareholders, it will not be deductible against the Company's assessable income and will only be available to be offset against any present or future capital gains.
The Company is taking advice on whether Demerger Relief will be available in respect of the transaction and will be seeking a Private Ruling in connection with this from the Australian Taxation Office.
Condensed notes to the consolidated interim financial report
At the date of this report it has not been possible to quantity the potential financial effects of these transactions.
11. Related Parties
Transactions with key management personnel
Arrangements with related parties continue to be in place. For details on these arrangements, refer to the 30 June 2006 annual financial report.
Key management personnel continue to receive compensation in the form of short term employee benefits, post employment benefits and share based payments.
The Company had a loan due to John Coles, the Company Secretary, which amounted to \$20,000 at the end of December 2006 and has been repaid since the period end.
12. Subsequent Events
Subsequent to the interim balance sheet date:
- $(a)$ On 9 January 2007 the Company completed a share placement which raised \$1 million (before costs) through the issue of 5 million fully paid ordinary shares with one free attaching listed option exercisable at 20 cents expiring on 31 July 2008 for each share applied for and issued pursuant to the placement.
- $(b)$ On 17 January 2007 the Company announced the successful completion of the Non-Renounceable Entitlements Issue ('Issue'). The Company received acceptances from Shareholders totalling 19,488,796 shares from a total of 48.654.694 offered raising \$1,948.880 before costs. The Directors have decided to place 100% of the shortfall with the various parties who entered into letters of commitment to take up all of the shortfall as explained above. The placement of the shortfall with said parties ensures the maximum amount under the Issue (\$4,865,469) is raised.
- On 6 March 2007, shareholders of Kalgoorlie-Boulder Resources Ltd approved the $(c)$ acquisition by the Company of 100% of the issued shares of Australian Gold Investments Pty Ltd and the associated transactions. On 9 March 2007, the Company announced the substantial completion of the aforementioned acquisition and the allotment and issue of the securities to RASL and Delta Capital Pty Ltd. The consideration of \$2.65 million was paid at settlement with the \$330,000 being deferred until after the completion of the milling of the Jackpot ore.
- (d) The secured interest bearing liability of \$750,000 due to Murchison Metals Ltd has been repaid in full.
DIRECTORS' DECLARATION
In the opinion of the directors of Kalgoorlie-Boulder Resources Limited ('Company'):
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- the financial statements and notes, as set out on pages 8 to 17, are in accordance with the Corporations Act 2001 including:
- (a) comply with Australian Accounting Standard AASB134: Interim Financial Reporting and the Corporations Regulations: and
- (b) giving a true and fair view of the financial position of the consolidated entity as at 31 December 2006 and of its performance, as represented by the results of its operations and cash flows for the half-year ended on that date.
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- there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the directors.
Trevor Matthews Managing Director
Dated this 14 day of March 2007
INDEPENDENT AUDITORS' REVIEW REPORT TO THE MEMBERS OF KALGOORLIE-BOULDER RESOURCES LIMITED
Scope
The financial report and directors' responsibility
We have reviewed the interim financial report of Kalgoorlie-Boulder Resources Limited ('the Company') for the half year ended 31 December 2006, consisting of the consolidated income statement, consolidated balance sheet, consolidated statement of changes in equity, consolidated statement of cash flows, accompanying notes, and the directors' declaration. The consolidated entity comprises the Company and the entities it controlled at the half year's end or from time to time during the half year.
The Company's directors are responsible for the preparation and fair presentation of the interim financial report in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the interim financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditor's responsibility
Our responsibility is to express an opinion on the interim financial report based on our review. We conducted our review in accordance with Auditing Standard ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the interim financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Company's financial position as at $31st$ December 2006 and its performance for the half year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As auditor of the Company, ASRE 2410 requires that we comply with the ethical requirements relevant to the review of the interim financial report.
A review of an interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical or other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion.
Independence
In conducting our review, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.
Ian K Macpherson CA
Robert W Parker CA
Craig A Vivian CA
ang pangangang manang kalendary.
Kabupatèn Kabupatèn Propinsi Jawa
Level 2, 47 Colin Street West Perth WA 6005
PO Box 359 West Perth WA 6872
■ +61 8 9321 3514 盘 +61 8 9321 3523
[email protected] www.ordgroup.com.au
Conclusion
Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of the Company is not in accordance with the Corporations Act 2001, including:
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- (a) giving a true and fair view of the consolidated entity's financial position as at $31st$ December 2006 and of its performance for the half year ended on that date; and
- (b) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.
Inherent uncertainty regarding going concern
Without qualification to the review opinion expressed above, attention is drawn to the following matter. As discussed in Note 1 to the financial report, the ability of the Company and of its subsidiaries to continue as going concerns and meet their commitments for planned and proposed exploration activities is dependent upon the Company and its subsidiaries raising further working capital, and/or commencing profitable operations. In the event that the Company cannot raise further equity or achieve profitability, the Company and its subsidiaries may not be able to meet their liabilities as they fall due and the realisable value of the Company's and consolidated entity's non-current assets may be significantly less than book values.
ORD PARTNERS
Chartered Accountants
Ian Macpherson
Partner
Dated this 14 day of March 2007 Perth, WA