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MINERAL COMMODITIES LTD — Annual Report 2013
Apr 28, 2013
65371_rns_2013-04-28_a6f9ddf5-4da4-4700-8ea9-e4dbf08bcafd.pdf
Annual Report
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A N N U A L R E P O R T 2 01 2
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C O R P O R AT E D I R E C T O R Y
D I R E C T O R S
Mr Joseph Anthony Caruso Mr Mark Victor Caruso Mr Peter Patrick Torre Mr James Gerald Leahy Mr Guy Redvers Walker
Non-Executive Director Executive Chairman Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director
C O M PA N Y S E C R E TA R Y
Mr Peter Patrick Torre
R E G I S T E R E D O F F I C E
40 Murray Road North Welshpool, Western Australia 6106 Telephone: Facsimile: Email: Website:
(61 8) 6253 1100 (61 8) 9258 3601 [email protected] www.mncom.com.au
S O L I C I T O R S
Steinepreis Paganin Level 4, Next Building 16 Milligan Street Perth WA 6000
A U D I T O R S
BDO Audit (WA) Pty Ltd 38 Station St Subiaco, Western Australia 6008
S H A R E R E G I S T R Y
Link Market Services Limited Ground Floor, 178 St Georges Terrace PERTH WA 6000 Telephone 1300 554 474
S T O C K E X C H A N G E L I S T I N G
The Company is listed on the Australian Securities Exchange Limited under ASX Code - MRC
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C O N T E N T S
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| C H A I R M A N ’ S L E T T E R | 7 |
|---|---|
| C H I E F E X E C U T I V E O F F I C E R ’ S L E T T E R | 8 |
| D I R E C T O R ’ S R E P O R T | 10 |
| C O N S O L I D AT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E | 2 8 |
| C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N | 2 9 |
| C O N S O L I D AT E D S TAT E M E N T O F C A S H F LO W S | 3 0 |
| C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y | 3 1 |
| N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S | 3 2 |
| D I R E C T O R S ’ D E C L A R AT I O N | 7 1 |
| A U D I T O R ’ S I N D E P E N D E N C E D E C L A R AT I O N | 7 3 |
| I N D E P E N D E N T A U D I T O R ’ S R E P O R T | 74 |
| S TAT E M E N T O F C O R P O R AT E G O V E R N A N C E | 7 6 |
| S H A R E H O L D E R I N F O R M AT I O N | 8 0 |
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C H A I R M A N ’ S L E T T E R
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Dear Shareholders,
Your Company has commenced an exciting phase in its development. The 2012 year was one in which considerable milestones were achieved to proceed with the development of the Company’s Tormin Mineral Sands Project (Tormin).
The Company’s efforts and patience over the years was rewarded with the decision by the Department of Environmental Affairs and Development Planning in South Africa to approve the Environmental Management Programme (EMP) for Tormin. The EMP was the final material impediment to the Company proceeding to undertake accelerated development activities.
The decision vindicates the Company’s persistence and patience on the project as it has always been the view of the Board that the Tormin project will add considerable value to the Company.
The same persistence and patience will be applied in respect to the Company’s Xolobeni Mineral Sands Project (Xolobeni). The Company is encouraged by the continuing momentum that is building for the development of Xolobeni and is confident that, once all final studies are completed, the economic and social benefits of Xolobeni, including the upliftment of the local Amadiba population, will create a compelling case for its development and show beyond doubt that responsible mining can make a significant contribution to sustainable development.
The value of the Company’s investment in Allied Gold Mining PLC was fully realised during the year with the completion of a merger with St Barbara Limited. This investment has provided considerable benefit to the Company over the years. The Company continued to assess its non-core investments in an effort to realise value for its shareholders. The Company continued to assess other projects throughout the year and will continue to assess further projects in the interest of maximizing shareholder value.
The coming year will be a defining one for the future of your Company. On behalf of the Board, I would like to thank you, our shareholders, for your continued support and trust your support will endure in the future. I would also like to thank the staff both in Australian and overseas who work tirelessly in ensuring the success or our Company and projects.
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Mark V. Caruso Chairman
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C H I E F E X E C U T I V E O F F I C E R ’ S L E T T E R
Dear Shareholders,
I believe that we will be able to look back and mark 2012 as the point in Mineral Commodities’ history when so much changed.
This is as much true personally given my appointment this year as Chief Executive of Mineral Commodities, as it is for the Company given the great strides we have made towards the development of all of our projects, and as it is for the loyal shareholders whose patience and faith in the Company is soon to be rewarded.
It is therefore worthwhile for us to look back with a sense of pride on all that was achieved in 2012.
S U M M A R Y O F O U R A C H I E V E M E N T S I N 2 01 2
Regulatory Approval for Tormin Project
A significant amount of work was undertaken during the year on the Tormin Mineral Sands Project (Tormin). As a result of these efforts, the Company received the final major regulatory approvals necessary to commence construction and development of Tormin.
Tormin is a World-Class resource with robust economics which will underpin the transition of Mineral Commodities from explorer to miner and provide the catalyst to support ongoing development of its mineral sands project development pipeline in South Africa without further shareholder dilution and also explore other opportunities in the industrial minerals sector.
Whilst a number of objections to the prospecting right application were received, the Company remains optimistic that these objections will be responded to comprehensively and satisfactorily and expects the right to be granted in 2013
A P P O I N T M E N T O F I N D E P E N D E N T N O N - E X E C U T I V E D I R E C T O R S
Last, but not least, Mr James Leahy and Mr Guy Walker were appointed as directors of the Company in December 2012. Both James and Guy have already made a significant contribution to the executive management team as the Company evolves from a pure exploration entity to being a significant participant in the global mineral sands market.
P R I O R I T I E S A N D O U T LO O K F O R 2 01 3
Despite having achieved so much in 2012, it is clearly only the beginning of the transformation of Mineral Commodities and there is so much that lies ahead for 2013.
Completing the construction and commissioning of Tormin on time and on budget is clearly of paramount importance. This is followed closely in priority by the conclusion of off-take agreements for the products to be produced from Tormin. Initial discussions started at the end of the 2012 and the market response to the products has been very promising. Every effort will therefore be made to finalise comprehensive offtake agreements early in 2013.
F u n d i n g
Based on the shareholder and regulatory approvals, a successful capital raising was undertaken. The AUD$14.5 million raised in a difficult economic and commodity environment provided further evidence of the exceptional quality of Tormin and ensured that the Company was able to proceed with the full scale development of Tormin.
EPCM Contractor appointed for Tormin
By the end of 2012 the Company had taken the first steps in the development of Tormin by appointing an EPCM contractor. Perth-based MSP Engineering Pty Ltd was appointed in this capacity given their extensive experience in projects of this nature, successful involvement in many aspects of the design and feasibility studies for the project, and financial benefit to Mineral Commodities from leveraging this combined experience.
By the end of 2012, MSP Engineering had prepared scope specifications and most of the tender documents had been distributed. This will ensure that all major contracts will be awarded within the first quarter of 2013 and that Tormin will be in full production during the fourth quarter of 2013.
To r m i n O f f s h o r e P r o s p e c t i n g
During 2012, the Company applied for and was granted the prospecting rights to the offshore area at Tormin. The offshore prospecting area extends 1km out to sea from the low water mark and covers the full length of the existing 12km Tormin tenement. Based on the proven geology of the area, the offshore rights represent the first step in MRC’s initiatives to significantly extend the Tormin Life of Mine. A comprehensive test program to prove and quantify the extent of replenishment from this offshore zone will be undertaken in 2013.
The value of the relatively unique offshore zone and its ability to replenish Tormin should substantially extend the project’s Life of Mine can also not be understated. As indicated previously, a full program to prove and quantify the extent of this will commence later this year.
The Xolobeni Project not only has the capacity to be a world-class ilmenite asset, but also the catalyst for social transformation of one of South Africa’s poorest communities. As previously indicated, the Company believes that it has and will continue to successfully deal with the objections to the project. Of greater significance is the recent groundswell of support for the project, including the ANC secretary-general, Gwede Mantashe, who called on all mayors and councillors in the Eastern Cape to unite behind the granting of mining licences in the area to unlock its development potential ability to create jobs in poverty-stricken communities. This makes the Company even more determined to finalise the outstanding background studies required for the mining right application.
I am grateful to have been part of the wonderful year of change in 2012, but even more so to the executive team and consultants who have supported me. I would also like to thank the Board and shareholders for the faith and they have shown in us. The trust you have placed in us is not taken likely and we look forward to completing the transformation of Mineral Commodities in 2013.
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Andrew Lashbrooke Chief Executive Officer
X o l o b e n i P r o j e c t
A new prospecting right application was submitted for the Kwanyana block of the Xolobeni Project. The prospecting right would restore all blocks within the Xolobeni Project to the same status and enable the Company to complete the background studies necessary to make an application for a mining right over the entire area.
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D I R E C T O R S R E P O R T
D I R E C T O R S
The Directors present their report together with the financial report of Mineral Commodities Limited (“the Company”) and its controlled entities (“the Group”) for the year ended 31 December 2012.
Mr Mark Victor Caruso Executive Chairman Mr Joseph Anthony Caruso Non-Executive Director Mr Peter Patrick Torre Non-Executive Director Mr James Gerald Leahy Independent Non-Executive Director Mr Guy Redvers Walker Independent Non-Executive Director
M R P E T E R T O R R E
Non Executive Director and Company Secretary
Mr Torre was appointed Company Secretary of Mineral Commodities Limited in July 2006, and as a director of the Company on 1 April 2010. He is a Chartered Accountant, a Chartered Secretary and a member of the Australian Institute of Company Directors. He was previously a partner of an internationally affiliated firm of Chartered Accountants. Mr Torre is the Company Secretary of several ASX listed companies and is a Director of Neo Resources Limited and Mission New Energy Limited.
D I R E C T O R S ’ I N F O R M AT I O N
M R M A R K V I C T O R C A R U S O Executive Chairman
Mr Caruso has extensive experience in mining, earthmoving and civil engineering construction earthworks. Mr Caruso has been a director of Mineral Commodities Limited since September 2000. He was previously Chairman of Allied Gold Mining PLC,(AGMP) responsible for the delivery of the Gold Ridge Project in the Solomon Islands and the Simberi Gold Project in Papua New Guinea. After resigning from AGMP Mr Caruso transitioned into the position of Executive Chairman of Mineral Commodities in August 2012.
M R J O S E P H A N T H O N Y C A R U S O Non-Executive Director
Mr Caruso is a Director of Zurich Bay Holdings Pty Ltd and Construction Manager of Simto Australia Pty Ltd, both of which are involved in mining, earthmoving and civil engineering construction earthworks. Mr Caruso has considerable experience in managing and administration of engineering, mining, raw materials production operations, earthmoving and related infrastructure utilities services resource contracts. Mr Caruso has been a director of Mineral Commodities Limited since September 2000. He was previously Non-Executive Chairman of the Company, moving to the position of Non-Executive Director in August 2012.
M R J A M E S G E R A L D L E A H Y Non Executive Director
Following a period on the London Metal Exchange, Mr Leahy has spent the past 27 years in the mining industry as a specialist corporate broker, including mining finance, origination and equity sales. He has worked on a wide range of projects, worldwide, ranging from industrial minerals, precious metals, copper, diamonds, coal, uranium and iron ore. Mr Leahy has substantial experience with international institutional fund managers, hedge funds and sector specialists. Over the years Mr Leahy has been involved in more than 30 IPO’s and a large number of primary and secondary placings, developing junior companies through to production and beyond. Mr Leahy is currently a director of Continental Coal, Bacanora Minerals and Forte Energy.
M R G U Y R E D V E R S W A L K E R Non Executive Director
Mr Walker is a highly accomplished director and senior investment management executive with over 20 years financial markets experience. Mr Walker currently sits on the boards of several mining companies at different stages of development including Metals Exploration plc. (an AIM listed gold development company), Navigator Resources (an ASX listed gold production company) and ENK plc. (a Nickel mining company). Mr Walker has extensive experience in capital raising through both traditional banks and alternative lenders.
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D I R E C T O R S R E P O R T
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Due to the size of the Company, all directors considered matters which would normally be dealt with by Audit and Remuneration Committees during the year.
P R I N C I PA L A C T I V I T I E S
The principal activity of the Group during the year was undertaking procedures for the development of mineral sands projects and investigations into other mineral resources. This has mainly involved the evaluation of the Tormin Mineral Sands Project in the Western Cape Province of South Africa and the Xolobeni Mineral Sands Project in the Eastern Cape Province of South Africa.
C O N S O L I D AT E D R E S U LT S
The loss of the group after income tax and non-controlling interests was $1,191,061 (2011: $2,135,788).
D I V I D E N D S
R E V I E W O F O P E R AT I O N S A N D F U T U R E D E V E LO P M E N T S
Highlights of the Company’s operations for the period under review are as follows:
S o u t h A f r i c a n P r o j e c t s
To r m i n M i n e r a l S a n d s P r o j e c t
During the period, the Company completed and submitted all the necessary documentation required for the remaining regulatory matters in relation to the Tormin Mineral Sands Project (Tormin) and in July 2012, the Company received notification of the approval of its Environmental Management Plan by Department of Environmental Affairs and Development Planning (DEADP). The Company was therefore in a position to proceed to ensure appropriate financing was in place to develop Tormin for production to commence in 2013.
The Company successfully completed the book build for a placement of new fully paid shares to institutional and sophisticated investors and related parties, to raise approximately A$14.5 million (before costs) (“Capital Raising”).
The shares under the Capital Raising were issued at a price of A$0.085 per share (“Issue Price”), which represents the closing price of MRC’s shares on 22 October 2012.
London Based Mirabaud Securities LLP acted as Sole Broker and Bookrunner on the Capital Raising.
The Capital Raising was completed in three tranches: the first tranche of approximately A$10.25 million to institutional and sophisticated investors (“Placement”); the second tranche of approximately A$3.4 million was issued to related parties of the Company; and the third tranche was issued issued by way of a private placement of approximately $850,000 to a sophisticated investor who participated in the first tranche (“Private Placement”).
MRC issued approximately 170.5 million Shares in total pursuant to the Capital Raising. The first tranche of the Shares issued pursuant to the Placement of approximately 120.6 million Shares were admitted to trading on the ASX on 30 October 2012 and completed in accordance with shareholder approval received on 31 May 2012.
Existing directors of MRC subscribed for up to A$3.4 million in Shares on the same terms as those issued to third party investors under the Placement. The issue of Shares to directors of MRC was approved by shareholders on 21 December 2012 and was completed in January 2013.
The issue of approximately 9.9 million Shares pursuant to the Private Placement occured immediately following the issue to existing directors of MRC.
The Company is now positioned to proceed with the full scale development of Tormin, particularly as there is sufficient indication from the ongoing tender process that the capital required to complete the development will be available to the Company when required.
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D I R E C T O R S R E P O R T
P R O J E C T E C O N O M I C S A N D D E V E LO P M E N T C O S T S
Based on TZMI product pricing and Definitive Feasibility Study (DFS) estimates, the project economics for Tormin are robust. On an initial 5-year Life of Mine extracting primarily Zircon and Rutile Non-Magnetic concentrate, economic models suggest an NPV of AUD$68.9m with an IRR of 87.9%.
Demand for the Tormin Ilmenite and Non-Magnetic concentrate has been strong and the Company is advanced with negotiations for all products.
O F F S H O R E P R O S P E C T I N G R I G H T S
Engineering plans were substantially progressed for dry separation of the magnetic concentrates, which would enable the separation and sale of Ilmenite and Garnet which will further enhance Tormin’s economics i.e an NPV of AUD$94m and IRR of 97%. Development of the required dry processing facilities is expected to cost approximately AUD$4 million.
The Company has noted recent reports of a softening market for zircon and rutile. Despite this, demand for the products to be produced from Tormin remains strong. In addition, given the extremely low operating costs (Opex) based substantially in South African Rand (ZAR), Tormin is largely insensitive to changes in capital expenditure or Opex. Importantly in this regard, a 10% reduction in commodity prices is offset by a 5% evaluation of the ZAR. Accordingly, the recent 15% devaluation of the ZAR to the AUD (8.2 to 9.4) allows for a 30% reduction in commodity prices before the economic models are negatively affected. Based on the above, the Company does not believe that it is appropriate to change its economic forecasts at this time.
A P P O I N T M E N T O F E P C M C O N T R A C T O R
The Company was pleased to advise during the last quarter that its subsidiary, Mineral Sands Resources (Pty) Ltd (MSR), has appointed Perth-based MSP Engineering Pty Ltd (MSP Engineering) as EPCM contractor to complete the construction and commissioning of the plant required for Tormin.
During the period, the Company also advised that its subsidiary, MSR, received notification from the Department of Mineral Resources (DMR) that the application for the prospecting rights for the offshore area immediately adjacent to Tormin had been approved.
The offshore prospecting area covers an area of 12 square kilometres and extends 1km out to sea from the low water mark and covers the full length of the existing 12km Tormin tenement.
The established geology of the region confirms that the source of the beach deposits is a Heavy Mineral-rich offshore zone and that the dynamic coastline serves to replenish the beaches by transporting sediment from deeper waters. The Company is optimistic that that replenishment from, or exploitation of this area could at least double the expected Life of Mine of Tormin.
The offshore prospecting right consequently represents the first step in MRC’s initiatives to significantly extend the Tormin Life of Mine. The Company intends to commence a test program to identify and quantify the beach replenishment in the first quarter of 2013.
MSP Engineering has been appointed as engineering contractor to complete the process and engineering design, and support the construction management and commissioning of the Tormin Development and Processing Plants. The decision to engage MSP Engineering as engineering contractor was based on the quality of the previous and ongoing project work undertaken, and its detailed understanding of the ore body and development of process flow design and plant requirements. In addition, MSP Engineering has a strong track record in engineering and delivering projects in the mineral sands sector. The appointment of MSP Engineering and its historical and continuing involvement with Tormin significantly shortens the overall delivery timetable for the project and will provide greater certainty that the budgeted capital expenditure for Tormin of $16 million will be maintained.
By the end of the financial year, MSP Engineering had prepared scope specifications and most of the tender documents had been distributed.
P R O D U C T O F F- TA K E D I S C U S S I O N S
Tormin will produce approximately 48,000 tonnes pa of enriched Non-Magnetic concentrate containing 38,000 tonnes of Zircon and 5,500 tonnes of Rutile. This material will require secondary treatment through a third party dry separation plant. In addition, the Company will produce approximately 100,000 tonnes to 125,000 tonnes f finished IImenite product once MRC installs its own dry processing infrastructure in early 2014. Garnet concentrate will also be sold to Blastrite for secondary treatment.
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D I R E C T O R S R E P O R T
X O LO B E N I P R O J E C T ( S O U T H A F R I C A )
The Xolobeni Mineral Sands Project (Xolobeni) resource is 346 million tonnes of 5.0% heavy mineral, with 65% of this resource in the Measured category.
Xolobeni is therefore regarded as one of the largest undeveloped mineral sands resources in the world containing in excess of 9,000,000 tonnes of ilmenite.
In November 2011 the Department of Mineral Resources (DMR) extended the prospecting rights over the Xolobeni project, excluding the Kwanyana block, for a further period of 3 years. During the first quarter of 2012, this right was executed and submitted for registration and subsequently registered by the DMR in the third quarter of 2012.
MRC has also previously advised that the DMR had withdrawn the previously granted Conditional Mining Right over the Kwanyana block and that it was engaging with the DMR and Minister in relation to these matters. Based on this, the Company resolved to withdraw all previous applications in respect of the Kwanyana block and immediately file a new PRA over the same block.
The benefit of this approach is that the Kwanyana block will be re-aligned with the rest of the Xolobeni project which will enable the Company to progress its application to develop Xolobeni in its entirety and, in so doing, demonstrate that this can be undertaken responsibly and sustainably in the interests of all stakeholders.
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The DMR accepted the new PRA over the Kwanyana block in the first quarter of 2012 and, in accordance with prevailing legislation, directed the Company to submit an Environmental Management Plan (EMP) for the prospecting work and details of its engagement with all stakeholders with an interest in the project. The Company compiled an EMP for the Kwanyana block prospecting work and undertook a comprehensive stakeholder engagement process (SEP) during the second quarter of 2012. The EMP and SEP report were also lodged with the DMR in accordance with the required timetable.
A number of objections to the PRA were received. Accordingly, the DMR was required by law to call a meeting to consider the objections and representations made by the Company. This meeting was held on 28 November 2012.
Based on the information presented at that meeting, the DMR has instructed the Company to undertake additional consultation with parties that have an interest in the project. Planning for this consultation is currently in progress and the consultation is expected to be concluded within the first quarter of 2013.
In a significant development, online news service Fever-red reported that ANC Secretary-General, Gwede Mantashe, has publicly called on mayors and councilors to change the mindsets of communities fighting against the proposed N2 toll road and granting of licenses for mining at Xolobeni.
Mantashe also pointed out that the region “is one of the poorest areas” and “he believes it will be well served by a road system and mining that will increase access, which in turn will create an enabling environment for unlocking the development potential of the area.”
The Company is encouraged by the continuing momentum that is building for the development of Xolobeni and is confident that, once all final studies are completed, the economic and social benefits of Xolobeni to uplift the local Amadiba population will create a compelling case for the continued support of its development and show beyond doubt that mining can co-exist with environmentally responsible development.
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D I R E C T O R S R E P O R T
I N V E S T M E N T I N A L L I E D G O L D M I N I N G P L C ( A S X L I S T E D : A L D )
On 29 June 2012, Allied Gold Mining PLLC (AGMPLC) announced that it had reached an agreement with St Barbara Limited (St Barbara) on a recommended offer to combine the two companies through a scheme of arrangement.
Under the terms of the offer, AGMPLC shareholders received A$1.025 in cash and 0.8 St Barbara shares for each AGMPLC share held. Based on AGMPLC’s share price on 28 June 2012 (the day before the announcement), this represented a 92.3% premium.
St Barbara and AGMPLC advised the market that the combination has a clear strategic and financial rationale, is value enhancing, and provides various benefits for shareholders of the combined group.
The scheme became effective as at 7 September 2012. The Company disposed of its remaining holding in AGMPLC during the period.
I n v e s t m e n t i n P e t r o Ve n t u r e s I n t e r n a t i o n a l L i m i t e d
The Company maintains a significant investment in Petro Ventures International Ltd (“PVIL”) an Exploration & Prospecting company operating in the Northern Hemisphere. PVIL has strategic oil & gas working interests in Romania, Hungary, Holland and France.
In the course of its normal mining and exploration activities, the Company adheres to environmental regulations imposed upon it by the relevant regulatory authorities, particularly those regulations relating to ground disturbance and the protection of rare and endangered flora and fauna.
S C H E D U L E O F M I N I N G T E N E M E N T S
Mining tenements currently held by the economic entity are:
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Area Entity holding the interest % Held Title Status
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| Area | Entity holding the interest | % Held | Title | Status |
|---|---|---|---|---|
| Xolobeni – South Africa | Transworld Energy & Minerals Resources |
100 | New order Prospecting Right | Granted |
| Tormin – South Africa | Mineral Sands Resources | 100 | Mining Right | Granted |
| Tormin – South Africa | Mineral Sands Resources | 100 | Offshore Prospecting Right | Granted |
S I G N I F I C A N T C H A N G E S I N S TAT E O F A F F A I R S A N D L I K E LY D E V E LO P M E N T S
During the period London broker Mirabaud Securities LLP were appointed to undertake an IPO however they withdrew from the IPO placing due to volatility in the capital markets in the later half of the period. Alternative financing arrangements are being concluded.
PVIL is currently seeking to divest its Romanian interests, which should result in a redistribution of capital to PVIL shareholders.
F I N A N C I A L P O S I T I O N
The net assets of the group have increased from $14,415,126 at 31 December 2011 to $20,962,421 at 31 December 2012.
F U T U R E D E V E L O P M E N T S , P R O S P E C T S A N D B U S I N E S S S T R AT E G I E S
S H A R E S
120,615,000 new fully paid ordinary shares were issued on 30 October 2012 pursuant to the capital raising noted previously.
The Placement was completed in October 2012 in accordance with shareholder approval received on 31 May 2012. Existing directors of MRC subscribed for up to A$3.4 million in shares in MRC (Shares) on 21 January 2013 on the same terms as those issued under the Placement. The issue of Shares to directors of MRC was approved by shareholders on 21 December 2012.
The final issue of approximately 9.9 million Shares pursuant to the Private Placement was also approved by shareholders on 21 December 2012 and took place on 24 January 2013 following the issue to existing directors of MRC.
The company will continue the process of development of both the Tormin and Xolobeni projects in South Africa. The Board will continue to review other projects and opportunities in the interest of increasing shareholder value.
E N V I R O N M E N TA L R E G U L AT I O N S
The Directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and energy use in Australia. For the first measurement period the directors have assessed that there are no current reporting requirements, but may be required to do so in the future.
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D I R E C T O R S R E P O R T
O P T I O N S
During the period 1,000,000 Unlisted Options exercisable at $0.20 on or before 31 December 2015 were issued to directors of the Company pursuant to shareholder approval received on 21 December 2012 (5,000,000 in total).
5,000,000 Unlisted Options exercisable at $0.20 on or before 31 December 2015 and 1,000,000 Unlisted Options exercisable at $0.35 on or before 31 December 2015 were issued to the CEO of the Company.
57,357,208 listed options exercisable at $0.20 expired on 31 December 2012.
Options do not entitle the holder to receive a dividend paid to ordinary shareholders.
New issues of options and options exercised in the period are as follows:
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Options No of Options Exercise Price Expiry Date
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| Options | No of Options | Exercise Price | Expiry Date |
|---|---|---|---|
| Opening Balance 1 January 2012 |
57,357,208 | $0.20 | 31 December 2012 |
| Options issued | 10,000,000 | $0.20 | 31 December 2015 |
| 1,000,000 | $0.35 | 31 December 2015 | |
| Options Exercised | - | - | |
| Options Lapsed | 57,357,208 | $0.20 | 31 December 2012 |
| Balance at 31 December 2012 |
10,000,000 | $0.20 | 31 December 2015 |
| 1,000,000 | $0.35 | 31 December 2015 |
D I R E C T O R S ’ S H A R E H O L D I N G I N T E R E S T S
The relevant interest of each director in the share capital of the Company, shown in the Register of Directors’ Shareholding at the date of the Directors’ Report is:
D I R E C T O R S ’ S H A R E H O L D I N G I N T E R E S T S
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2012
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| 2012 | ||||||
|---|---|---|---|---|---|---|
| Options | Balance at 1 Jan2012/ appointment |
Received as Remuneration |
Options Exercised |
Options Lapsed |
Net change other |
Balance at 31 Dec 2012 |
| Mark Caruso | 7,380,396 | - | - | 7,380,396 | 1,000,000 | 1,000,000 |
| Joseph Caruso | 7,380,396 | - | - | 7,380,396 | 1,000,000 | 1,000,000 |
| Peter Torre | 200,000 | - | - | 200,000 | 1,000,000 | 1,000,000 |
| Guy Walker | 40,000 | - | - | 40,000 | 1,000,000 | 1,000,000 |
| James Leahy | - | - | - | - | 1,000,000 | 1,000,000 |
M E E T I N G S O F D I R E C T O R S
The number of directors meetings and number of meetings attended by each of the directors of the Company during the financial year are:
| Meetings Held | Meetings Attended | |
|---|---|---|
| J A Caruso | 6 | 3 |
| M V Caruso | 6 | 6 |
| P P Torre | 6 | 6 |
| G R Walker | - | - |
| J G Leahy | - | - |
Other matters of board business have been resolved by circular resolutions of directors, which are a record of decisions made at a number of informal meetings of the directors held to control, implement and monitor the Company’s activities throughout the year.
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2012
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| 2012 | |||||
|---|---|---|---|---|---|
| Ordinary Shares | Balance at 1 January 2012 / on Appointment |
Received as Remuneration |
Options Exercised |
Net change other |
Balance 28 March 2013 |
| Mark Caruso -Indirect | 21,569,988 | - | - | 40,000,000 | 61,569,988 |
| - Direct | 12,627 | - | - | - | 12,627 |
| Joseph Caruso | 21,569,988 | - | - | 40,000,000 | 61,569,988 |
| Peter Torre | 500,000 | - | - | - | 500,000 |
| Guy Walker | 100,000 | - | - | - | 100,000 |
| James Leahy | - | - | - | - | - |
J A Caruso and M V Caruso are both directors of and have a relevant interest in Zurich Bay Holdings Pty Ltd, which holds 61,569,988 shares in the Company.
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R E M U N E R AT I O N R E P O R T
R E M U N E R AT I O N R E P O R T ( A u d i t e d )
The remuneration report is set out under the following main headings:
- A. P R I N C I P L E S U S E D T O D E T E R M I N E T H E N AT U R E A N D A M O U N T O F R E M U N E R AT I O N
The board had no separate remuneration committee during the year due to the size of the Company. The directors performed the role of a remuneration committee as disclosed in the Corporate Governance statement. A Remuneration and Nomination Committee was established subsequent to the reporting period.
-
B. D E TA I L S O F R E M U N E R AT I O N
-
C. S E R V I C E A G R E E M E N T S
Vo t i n g a n d c o m m e n t s m a d e a t t h e C o m p a n y ’s 2 01 2 A n n u a l G e n e r a l M e e t i n g
-
D. S H A R E - B A S E D C O M P E N S AT I O N
-
E. A D D I T I O N A L I N F O R M AT I O N
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
A. P R I N C I P L E S U S E D T O D E T E R M I N E T H E N AT U R E A N D A M O U N T O F R E M U N E R AT I O N
In order to retain and attract executives of sufficient calibre to facilitate the efficient and effective management of the Company’s operations, the board reviews the remuneration packages of all Key Management Personnel, if any, on an annual basis and makes recommendations. Remuneration packages are reviewed with due regard to performance and other relevant factors. No remuneration consultants have been used due to the small number of employees and Key Management Personnel.
Remuneration packages may contain the following key elements:
- (a) Directors Fees;
Mineral Commodities Limited received the unanimous support of shareholders present on the remuneration report at the Annual General Meeting for the 2012 financial year and 94% of proxy votes were in favour of the resolution to approve the remuneration report. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.
B. D E TA I L S O F R E M U N E R AT I O N
The key management personnel of Mineral Commodities Limited Group are the directors of Mineral Commodities Limited and Mr Andrew Lashbrooke, the CEO. The amounts disclosed are therefore applicable for both Mineral Commodities Limited and the Mineral Commodities Limited Group.
Details of the remuneration of directors and the key management personnel (as defined in AASB 124 Related Party Disclosures) of Mineral Commodities Limited and the Mineral Commodities Limited Group are set out in the following tables.
- (b) Salary & Consultancy; and
Fees payable to non-executive directors reflect the demands which are made on, and the responsibilities of the directors. The Board reviews non-executive directors’ fees and payments annually.
Executives are offered a competitive base pay that consists of fixed components. Base pay for senior executives, if any, is reviewed annually to ensure the executive pay is competitive with the market. Total Base Pay can be structured as a total employment package which may be delivered as a combination of cash and prescribed nonfinancial benefits at the executives’ discretion.
There were no short or medium term cash incentives provided to any executives of the Company during the financial year. Short or medium term cash incentives are not incorporated into any executives salary packages at the time of this report. Long-term incentives are provided to directors and other Key Management Personnel to incentivise them to deliver long-term shareholder returns. These are determined based on what the Board vies as reasonable based on market conditions. Any grant of securities to directors of the Company must be approved by shareholders in general meeting.
The directors are not required to hold any shares in the company under the constitution of the Company; however, to align directors’ interests with shareholders interests the directors are encouraged to hold shares in the company.
Remuneration is not directly related to company performance or key performance indicators. Directors Fees and the Remuneration of the CEO is fixed. There is no at risk component of any remuneration of the Key Management Personnel.
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22
R E M U N E R AT I O N R E P O R T
The following fees are applicable to non-executive directors of the Company
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Share based
Post Percentage
Cash Share-based payments as a
employment Totals performance
benefits payments percentage of
benefits based
remuneration
$ $ $ $ %
Non Executive Directors
Joseph Caruso 2012 45,107 4,060 33,500 82,667 - 40.52
2011 44,037 3,963 - 48,000 - -
Mark Caruso 2012 140,333 10,044 33,500 183,877 18.21
2011 48,000 - - 48,000 - -
Peter Torre 2012 83,083 - 33,500 116,583 - 28.73
2011 72,000 - - 72,000 - -
Guy Walker 2012 1,521 137 33,500 35,158 - 95.28
2011 - - - - - -
James Leahy 2012 1,521 137 33,500 35,158 - 95.28
2011 - - - - - -
Sub-total non executive 2012 271,565 14,378 167,500 453,443 - 36.94
directors 2011 164,037 3,963 - 168,000 - -
Other Key Management
Personnel CEO
Andrew Lashbrooke 2012 50,000 - 189,830 239,830 79.15
2011 - - - - -
Total Key management 2012 321,565 14,378 357,330 693,273 - 51.54
personnel compensation 2011 164,037 3,963 - 168,000 - -
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| Base Fees | From 1 December 2012 | Up to 30 November 2012 |
|---|---|---|
| Non-Executive Directors | $55,000 | $48,000 |
| Additional Fees | From 9 February 2013 | Up to 9 February 2012 |
| Audit Committee Chair | $10,000 | - |
| Audit Committee Member | $5,000 | - |
| Remuneration and Nomination Committee Chair |
$10,000 | - |
| Remuneration and Nomination Committee Member |
$5,000 | - |
C. S E R V I C E A G R E E M E N T S
The following service agreements are in effect at 31 December 2012.
| M A R K C A R U S O | |
|---|---|
| Commenced | 6 August 2012 |
| Term | No fxed term |
| Total Remuneration package | $250,000 per annum |
| Termination benefts | 12 months base salary plus any payment in lieu of notice |
| P E T E R T O R R E | |
| Commenced | 1 November 2012 |
| Term | No fxed term |
| Total Remuneration package | $150,000 per annum |
| Termination benefts | 12 months base salary plus any payment in lieu of notice |
| A N D R E W L A S H B R O O K E | |
| Commenced | 1 November 2012 |
| Term | No fxed term |
| Total Remuneration package | $300,000 |
| Termination benefts | None |
There are no other service agreements.
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24
R E M U N E R AT I O N R E P O R T
D. S H A R E - B A S E D C O M P E N S AT I O N
During the period 1,000,000 Unlisted Options exercisable at $0.20 on or before 31 December 2015 were issued to all 5 directors of the Company pursuant to shareholder approval received on 21 December 2012 (5,000,000 in total) and a further 5,000,000 Unlisted Options exercisable at $0.20 on or before 31 December 2015 to the CEO of the Company. These were independently valued using the Black Scholes method at $0.0335 per option.
1,000,000 Unlisted Options exercisable at $0.35 on or before 31 December 2015 were issued to the CEO of the Company. These were independently valued using the Black Scholes method at $0.0233 per option.
All options issued vested immediately upon issue.
No Options issued as remuneration were exercised or lapsed during the period.
Details of options over ordinary shares in the Company provided as remuneration to each director of Mineral Commodities Limited and each of the key management personnel are set out below;
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Name Number of Op- Value of Options Number of Number of Value at lapse
tions granted at grant date Options vested options lapsed date.
during the year during the year during the year
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| Name | Number of Op- tions granted duringthe year |
Value of Options at grant date |
Number of Options vested duringthe year |
Number of options lapsed duringthe year |
Value at lapse date. |
|---|---|---|---|---|---|
| Directors | |||||
| Mr Mark Caruso | 1,000,000 | $33,500 | 1,000,000 | - | - |
| Mr Joseph Caruso |
1,000,000 | $33,500 | 1,000,000 | - | - |
| Mr Peter Torre | 1,000,000 | $33,500 | 1,000,000 | - | - |
| Mr James Leahy | 1,000,000 | $33,500 | 1,000,000 | - | - |
| Mr Guy Walker | 1,000,000 | $33,500 | 1,000,000 | - | - |
| Other Key Management Personnel |
|||||
| Mr Andrew Lashbrooke |
5,000,000 | 167,500 | 5,000,000 | - | - |
| 1,000,000 | 22,330 | 1,000,000 | - | - |
E. A D D I T I O N A L I N F O R M AT I O N
There is no additional information to be provided in respect to the remuneration of the directors.
End of the Audited Remuneration Report
S I G N I F I C A N T E V E N T S A F T E R T H E R E P O R T I N G D AT E
No event or transaction has arisen in the interval between the end of the financial year and the date of this report of a material and unusual nature likely, other than what has been disclosed elsewhere in note 27 of this financial report, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations or the state of affairs of the Company or the Consolidated Entity in future financial years unless otherwise disclosed in this Directors Report.
P R O C E E D I N G S O N B E H A L F O F T H E G R O U P
No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.
I N S U R A N C E O F O F F I C E R S
During the financial year the Group has paid an insurance premium to insure the directors and secretaries of the company and its controlled entities. The premium paid was $34,745 representing $6,949 per director. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as Directors or Officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Group.
A U D I T O R ’ S I N D E P E N D E N C E D E C L A R AT I O N
The Auditor’s Independence Declaration as required by Section 307C of the Corporations Act 2001 is set out on page 73 and forms part of this report.
N O N - A U D I T S E R V I C E S
The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the group are important.
There were no non–audit services provided by BDO Audit (WA) Pty Ltd in the year.
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non related firms:
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Audit Services: $
Audit and review of financial reports
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| Audit Services: | $ |
|---|---|
| Audit and review of fnancial reports | |
| BDO Audit (WA) Pty Ltd | 64,122 |
| BDO Cape Town South Africa | 11,726 |
| Total remuneration for audit services | 75,848 |
C O R P O R AT E G O V E R N A N C E
In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Mineral Commodities Limited adhere to strict principles of corporate governance. The Company’s Corporate Governance statement will be included before the Additional ASX Information section of the Annual Financial Report.
This report has been made in accordance with a resolution of the Directors.
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Mark Caruso Perth, Western Australia 28 March 2013
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26
C O N S O L I D AT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E For the year ended 31 December 2012
C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N as at 31 December 2012
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Note Consolidated Consolidated
31 Dec 2012 31 Dec 2011
$ $
Revenue from continuing operations 2 42,282 31,515
Other Income 476,769 756,936
519,051 788,451
Administration expenses (668,978) (535,939)
Employees and consultants remu- (204,934) (156,689)
neration
Exploration and evaluation costs 12 - (253)
Depreciation and amortisation 11 (28,428) (4,998)
Loss on disposal of assets (152) (5,307)
Impairment of Investments 9 (227,110) (54,000)
Share based payments 24 (357,330) -
Abandoned acquisition costs 3 (123,243) (2,164,281)
Finance costs (99,937) (2,772)
(1,710,112) (2,924,239)
Loss before income tax (1,191,061) (2,135,788)
Income tax expense 4 - -
(Loss) from continuing operations (1,191,061) (2,135,788)
(Loss) for the year (1,191,061) (2,135,788)
Other comprehensive income
Changes in the fair value of available- 9 (1,588,095) (2,509,112)
for-sale financial assets
Exchange differences on translation 17 (738,688) (2,511,827)
of foreign operations
Other comprehensive income for the (2,326,783) (5,020,939)
year net of tax
Total comprehensive income for the (3,517,844) (7,156,727)
year
Loss is attributable to:
Owners of Mineral Commodities (1,191,061) (2,135,788)
Limited
Non-controlling interest - -
(1,191,061) (2,135,788)
Total comprehensive income for the
year is attributable to
Owners of Mineral Commodities (3,517,844) (7,156,727)
Limited
Non-controlling interest - -
(3,517,844) (7,156,727)
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| Note | Consolidated | Consolidated | |
|---|---|---|---|
| 31 Dec 2012 | 31 Dec 2011 | ||
| $ | $ | ||
| C U R R E N T A S S E T S | |||
| Cash and cash equivalents | 7 | 7,769,202 | 249,389 |
| Trade and other receivables | 8 | 148,087 | 101,344 |
| Available for sale fnancial assets | 9 | 532,113 | 3,027,651 |
| Other current assets | 10 | 10,925 | 11,163 |
| Total Current Assets | 8,460,327 | 3,389,547 | |
| N O N - C U R R E N T A S S E T S | |||
| Receivables | 8 | 427,272 | 333,736 |
| Property, plant and equipment | 11 | 68,689 | 21,582 |
| Exploration & development expenditure | 12 | 12,996,362 | 12,506,413 |
| Total Non-Current Assets | 13,492,323 | 12,861,731 | |
| Total Assets | 21,952,650 | 16,251,278 | |
| C U R R E N T L I A B I L I T I E S | |||
| Trade and otherpayables | 15 | 966,802 | 1,799,752 |
| Provisions | 23,427 | 36,400 | |
| Total Current Liabilities | 990,229 | 1,836,152 | |
| Total Liabilities | 990,229 | 1,836,152 | |
| NET ASSETS | 20,962,421 | 14,415,126 | |
| E Q U I T Y | |||
| Contributed equity | 16 | 50,912,158 | 41,204,350 |
| Reserves | 17 | (1,451,375) | 804,656 |
| Accumulated losses | (28,677,211) | (27,772,729) | |
| Parent entity interest | 20,783,572 | 14,236,277 | |
| Non-controllinginterest | 14 | 178,849 | 178,849 |
| T O TA L E Q U I T Y | 20,962,421 | 14,415,126 |
The above Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes.
Earnings/(Loss) per share from continuing operations attributable to the ordinary equity holders of the company.
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Basic Loss per share Cents Cents
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| Basic Loss per share | Cents | Cents |
|---|---|---|
| From continuing operations attributable to the ordinary shareholders of the company (cents per share) |
(0.687) | (1.40) |
| From discontinued operations (cents per share) | - | - |
| Total basic loss per share attributable to the ordinary equity holders of the company (cents per share) |
(0.687) | (1.40) |
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
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28
C O N S O L I D AT E D S TAT E M E N T O F C A S H F LO W S
C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y
For the year ended 31 December 2012
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Note Consolidated Consolidated
31 Dec 2012 31 Dec 2011
$ $
C A S H F L O W S F R O M O P E R AT I N G A C T I V I T I E S
Interest received 42,282 31,515
Payments to suppliers & employees (744,254) (1,625,251)
-
Discontinued acquisition (1,427,776)
Interest paid (99,937) (2,772)
-
Sundry income 12,750
Net cash outflows from operating activities 22(a) (2,229,685) (1,583,758)
C A S H F L O W S F R O M I N V E S T I N G A C T I V I T I E S
Exploration and development expenditure (914,089) (964,523)
Investment in listed shares (350,000) -
Payment for plant and equipment 11 (79,687) (24,910)
Proceeds from sale of plant and equipment 4,000 -
Loan to associated company (113,636) -
Proceeds from sales of investments 1,495,102 1,431,074
Net cash inflow from investing activities 41,690 441,641
C A S H F L O W S F R O M F I N A N C I N G A C T I V I T I E S
Proceeds from the issue of shares and options (net of costs) 16 9,707,808 1,200,000
Loan received 1,407,509 -
Loan repaid (1,407,509) -
Net cash inflow from financing activities 9,707,808 1,200,000
Net increase in cash and cash equivalents 7,519,813 57,883
Cash and cash equivalents at beginning of financial year 248,260 191,026
Exchange rate movement on opening balances 1,129 480
Cash and cash equivalents at end of financial year 7 7,769,202 249,389
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Contributed Accumulated Non-control-
Consolidated Entity Reserves Totals Total Equity
Equity Losses ling interest
For the year ended 31 December 2012 $ $ $ $ $ $
Balance at 1 January 2012 41,204,350 804,656 (27,772,729) 14,236,278 178,849 14,415,127
- -
Loss for the year (1,191,061) (1,191,061) (1,191,061)
- -
Other Comprehensive loss for the year (2,326,783) (2,326,783) (2,326,783)
- -
Total comprehensive loss for the year (2,326,783) (1,191,061) (3,517,844) (3,517,844)
Transactions with owners in their
capacity as owners
- - -
Contributions of equity net of 9,707,808 9,707,808 9,707,808
transaction costs
Unlisted Options issued 357,330 357,330 357,330
- -
Reclassify Option Reserve for expired (286,578) 286,578
options
Balance at the end of the year 50,912,158 (1,451,375) (28,677,212) 20,783,572 178,849 20,962,421
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Contributed Accumulated on-controlling
Consolidated Entity Reserves Totals Total Equity
Equity Losses interest
For the year ended 31 December 2011 $ $ $ $ $ $
Balance at 1 January 2011 40,004,350 5,825,595 (25,636,941) 20,193,004 178,849 20,371,853
- - -
Loss for the year (2,135,788) (2,135,788) (2,135,788)
- - -
Other comprehensive income for (5,020,939) (5,020,939) (5,020,939)
the year net of tax
- -
Total comprehensive loss for the year (5,020,939) (2,135,788) (7,156,727) (7,156,727)
Transactions with owners in their - - -
capacity as owners
- -
Contributions of equity net of 1,200,000 1,200,000 1,200,000
transaction costs
Balance at the end of the year 41,204,350 804,656 (27,772,729) 14,236,277 178,849 14,415,126
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The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
31
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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
1. S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S
( A ) B A S I S O F A C C O U N T I N G
These financial statements are for Mineral Commodities Limited and its controlled entities, as the consolidated entity (group). Mineral Commodities Limited is an Australian domiciled public listed company.
The general purpose financial statements for the year ended 31 December 2012 have been prepared in accordance with Australian Accounting Standards and Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
C o m p l i a n c e w i t h I F R S
The financial statements of Mineral Commodities Limited and controlled entities also comply with International Financial Reporting Standards (IFRS).
H i s t o r i c a l C o s t C o n v e n t i o n
The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of available for sale financial assets for which the fair value basis of accounting has been applied.
The following significant accounting policies have been adopted in the preparation and presentation of the financial statements and have been consistently applied to all the years presented, unless otherwise stated.
( B ) P R I N C I P L E S O F C O N S O L I D AT I O N
The consolidated financial report incorporates the assets and liabilities of all subsidiaries of Mineral Commodities Limited (“Company” or “parent entity”) as at 31 December 2012 and the results of its subsidiaries for the year then ended. Mineral Commodities Limited and its subsidiaries together are referred to in this financial report as the group.
( D ) TA X E S
I n c o m e t a x e s
The charge for current income tax expense or revenue is based on the profit for the year adjusted for any nonassessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted at the reporting date. Income tax expense is adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.
Deferred tax is accounted for using the liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where this has no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited to profit or loss except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions or deductibility imposed by the law.
The income tax expense for the year is calculated using the 30% tax rate (2011: 30%).
G o o d s a n d S e r v i c e s Ta x ( G S T )
Intercompany transactions, balances and unrealised gains on transactions between parent and or subsidiary companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the parent company.
Subsidiaries are those entities over which the Parent company has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights.
Where control of an entity is obtained during a financial year, its results are included in the statements of comprehensive income from the date on which control commences. Where control of an entity ceases during a financial year, its results are included for that part of the year during which control existed.
Revenues, expenses and assets are recognised net of the amount of GST except where the GST incurred on a purchase of goods & services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and where receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables in the Statements of Financial Position.
Cash flows are included in the Statements of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
The purchase method of accounting is used to account for the acquisition of subsidiaries – refer to note 1 (h).
( E ) F O R E I G N C U R R E N C Y T R A N S A C T I O N S A N D B A L A N C E S
The Consolidated entity applies a policy of treating transactions with non-controlling interests as transactions with external parties to the entity. Disposals to non-controlling interests result in gains and losses for the Consolidated entity are recorded in the statement of comprehensive income. Purchases from non-controlling interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of identifiable net assets of the subsidiary.
F u n c t i o n a l a n d p r e s e n t a t i o n c u r r e n c y
The functional currency of each of the group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.
( C ) R E V E N U E R E C O G N I T I O N
Tr a n s a c t i o n a n d b a l a n c e s
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
Foreign currency transactions are translated into functional currency using the exchange rated prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.
I n t e r e s t I n c o m e
Interest and other income is recognised as it accrues on a time proportion basis using the effective interest method.
Exchange differences arising on the translation of monetary items are recognised in the profit for the year except where deferred in equity as a qualifying net investment hedge.
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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
1. S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( C O N T I N U E D )
S u b s i d i a r y C o m p a n i e s
The financial results and position of subsidiary companies whose functional currency is different from the consolidated entities presentation currency are translated into the presentation currency as follows; Assets and liabilities are translated at year-end exchange rates prevailing at that reporting date. Income and expenses are translated at average exchange rates for the period.
H e d g e o f a n e t i n v e s t m e n t i n a f o r e i g n o p e r a t i o n
The group applies hedge accounting to foreign currency differences arising between the functional currency of the foreign operation and the parent entity’s functional currency (AUD), regardless of whether the investment is held directly or through an intermediate parent.
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised in other comprehensive income to the extent that the hedge is effective, and are presented within equity in the foreign currency translation reserve. To the extent that the hedge is ineffective, such differences are recognised in profit or loss. When the hedged part of a net investment is disposed of, the relevant amount in the foreign currency translation reserve is transferred to profit or loss as part of the profit or loss on disposal.
Once production commences, expenditure accumulated in respect of areas of interest is amortised on a unit of production basis over the life of the total proven economically recoverable reserves. Restoration costs recognised in respect of areas of interest in the exploration and evaluation stage are carried forward as exploration and evaluation expenditure. Costs recognised after the commencement of production in areas of interest will be charged to the profit for the year.
(H) Investments
I n t e r e s t s i n S u b s i d i a r i e s
Investments in subsidiaries are carried in the Company’s financial report at cost less any impairment losses. Dividends and distributions are brought to account in profit when they are declared by the subsidiaries.
I n v e s t m e n t s i n a s s o c i a t e s
Associates are all entities over which the consolidated entity has significant influence but not control, generally accompanying a shareholding of between 20%-50% of the voting rights. Investments in associates are accounted for in the parent entity financial statements using the cost method and in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost. The Consolidated entity’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.
The Consolidated entity’s share of its associates post acquisition profits or losses are recognised in profit for the year, and its share of post acquisition movements in reserves is recognised directly in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment.
(F) Property, Plant and Equipment
(I) Impairment of Assets
Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.
Items of plant and equipment are initially recorded at cost and includes any expenditure that is directly attributable to acquisition of the items. Subsequent costs are included in the assets carrying amount or recognised as a separate asset as appropriate. All other repairs and maintenance are charged to the profit for the year in which they are incurred.
D e p r e c i a t i o n o f P l a n t a n d E q u i p m e n t
Plant and equipment are depreciated at rates based upon the expected useful lives of these assets. The expected useful lives of these assets are 3-10 years.
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An assets carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount.
At each reporting date, the consolidated entity reviews the carrying values of it tangible assets and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over it recoverable amount is expensed to profit or loss.
Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
(J) Financial Instruments
The Consolidated entity classifies its financial instruments on initial recognition. The classification depends on the purpose for which the financial instrument was acquired.
R e c o g n i t i o n a n d d e - r e c o g n i t i o n
D i s p o s a l o f A s s e t s
The gain or loss on disposal of assets is calculated as the difference between the carrying amount of the asset at the time of disposal and the proceeds on disposal and is included in profit for the year of disposal.
Regular purchases and sales of financial assets are recognised on trade date; the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or been transferred and the Group has transferred substantially all the risks and rewards of ownership.
(G) Exploration and Development Expenditure
(K) Financial Instruments (continued)
Costs incurred during the exploration and development stages of specific areas of interest are accumulated. Such costs are only carried forward if they are expected to be fully recouped through the successful development of the area, or where activities to date have not yet reached a stage to allow reasonable assessment regarding the existence of economically recoverable reserves, otherwise this expenditure is recognised in the profit for the year. Costs are written off as soon as an area has been abandoned or considered to be non-commercial or impaired where an area is considered non-commercial at the period end.
F a i r v a l u e
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value of all unlisted securities, including recent arm’s length transactions, reference to similar instruments and other pricing models.
L o a n s a n d r e c e i v a b l e s
Where the Directors conclude that the technical feasibility and commercial viability of extracting a mineralresource are demonstrable and that future economic benefits are probable, further expenditure is capitalised as part of property, plant and equipment.
Loans and receivables are recognised initially at fair value and subsequently at amortised cost using the effective interest rate method. They are included within current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets.
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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
1. S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( C O N T I N U E D )
S h a r e - B a s e d P a y m e n t s
A v a i l a b l e - f o r- s a l e f i n a n c i a l a s s e t s
Available-for-sale financial assets are recognised at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity until the instrument is sold at which time any balance in equity relating to the instrument is recycled to profit or loss as part of the profit or loss on sale.
F i n a n c i a l L i a b i l i t i e s
Financial liabilities are recognised initially at fair value and subsequently at amortised cost, comprising original debt less principle payments and amortisation of transaction costs.
I m p a i r m e n t
At each reporting date, the group assess whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant or prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in profit or loss. Impairment losses recognised on equity instruments classified as available for sale are not reversed through the income statement.
(L) Contributed Equity
Ordinary share capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.
(m) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities in the statement of financial position.
(N) Trade and Other receivables
Trade and other receivables are recognised initially at fair value. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date.
Collectability of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. The amount of the impairment loss is recognised in profit and loss within other expenses.
(O) Earnings / (Loss) per Share
Basic Earnings / (Loss) per Share
Basic earnings per share is determined by dividing the profit after income tax attributable to members of Mineral Commodities Limited by the weighted average number of ordinary shares outstanding during the financial year.
Diluted Earnings / (Loss) per Share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings per share would arise from the exercise of options outstanding at the end of the financial year.
(P)
The issue of Employee options was approved by shareholders at a general meeting of the Company held on 21 December 2012 and the fair value of these has been expensed. The total Share Based payment expense for the period was $357,330 (2011 $0).The fair value at grant date is independently determined using an appropriate option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
(Q) Leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised on a straight line basis.
(R) Segment reporting
Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Directors that make strategic decisions. There is no goodwill attached to any of the segments. There has been no impact on the measurement of the assets and liabilities reported for each segment.
(S) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
(T) Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale or transaction rather than continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets, investment property and non-current biological assets that are carried at fair value.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increase in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of de-recognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
A discontinued operation is a component of the entity that has been disposed of or has been abandoned, or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the statement of comprehensive income.
Wa g e s a n d S a l a r i e s , A n n u a l L e a v e , L o n g S e r v i c e a n d S i c k L e a v e Provision is made for the consolidated entity’s liability for employee entitlements arising from services rendered by employees to reporting date. These benefits include annual and long service leave. Sick leave is non-vesting and has not been provided for. Employee entitlements expected to be settled within one year have been measured at the amounts expected to be paid when the liabilities are settled and are recognised in other payables. The contributions made to defined contribution superannuation funds by entities within the consolidated entity are charged against profits when due.
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36
(v) Accounting Standards not yet effective
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Reference Title Nature of Change Application date Impact on Consolidated Application date
of standard financial statements for Group
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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
- S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( C O N T I N U E D )
(u) Critical accounting estimates and judgements
The Group makes significant estimates and judgements concerning the future. The resulting accounting estimates may not equal the related actual results. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
C r i t i c a l A c c o u n t i n g E s t i m a t e s
The directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group. Significant judgements and critical estimate in applying the entity’s accounting policies.
E x p l o r a t i o n a n d d e v e l o p m e n t e x p e n d i t u r e
Recoupment of the capitalised exploration and evaluation expenditure is dependant on the successful development and commercial exploitation of the Xolobeni Mineral Sands and the Tormin Mineral Sands areas of interest in South Africa. The capitalised expenditure in relation to the Xolobeni project is $7,924,368 (2011:$8,191,050) refer note 12 is expected to be fully recoverable once the grant of the mining right has been affirmed by the Minister of Minerals and Energy in South Africa and the Company proceeds to further develop this project.
I n v e s t m e n t i n U n l i s t e d E n t i t i e s
The investments in Africa Uranium Ltd has been fully impaired $1,488,643 (2011 $1,488,643). The remaining investment in an unlisted entity Petro Ventures International Ltd has been valued by using information provided by the Company including unaudited financial statements. Assumptions and estimates have been used in this valuation refer note 9. Should any of these assumptions or estimates change, this could significantly effect the carrying value of this investment.
| Reference | Title | Nature of Change | Application date of standard |
Impact on Consolidated fnancial statements |
Application date for Group |
|---|---|---|---|---|---|
| AASB 9 (issued December 2009 and amended December 2010) |
Financial Instruments |
Amends the requirements for classifcation and measurement of fnancial assets. The available-for- sale and held-to-maturity categories of fnancial assets in AASB 139 have been eliminated. AASB 9 requires that gains or losses on fnancial liabilities measured at fair value are recognised in proft or loss, except that the effects of changes in the liability’s credit risk are recognised in other comprehensive income. |
Periods beginning on or after 1 January 2015 |
Adoption of AASB 9 is only mandatory for the year ending 31 December 2015. The Group has not yet made an assessment of the impact of these amend- ments. |
1 January 2015 |
| AASB 10 (issued August 2011) |
Consolidated Financial Statements |
Introduces a single ‘control model’ for all entities, including special purpose entities (SPEs), whereby all of the following conditions must be present: Power over investee (whether or not power used in practice) Exposure, or rights, to variable returns from investee Ability to use power over investee to affect the Group’s returns from investee. Introduces the concept of ‘defacto’ control for entities with less than 50% owner- ship interest in an entity, but which have a large shareholding compared to other shareholders. This could result in more instances of control and more entities being consolidated. |
Annual reporting periods commencing on or after 1 January 2013 |
When this standard is frst adopted for the year ended 31 December 2013, there will be no impact on transactions and balances recognised in the fnancial statements because the [Entity] does not have any special purpose entities. The Group does not have ‘defacto’ control of any entities with less than 50% ownership interest in an entity. |
1 January 2013 |
| AASB 11 (issued August 2011) |
Joint Arrangements |
Joint arrangements will be classifed as either ‘joint operations’ (where parties with joint control have rights to assets and obligations for liabilities) or ‘joint ventures’ (where parties with joint control have rights to the net assets of the arrangement). |
Annual reporting periods commencing on or after 1 January 2013 |
When this standard is frst adopted for the year ended 31 December 2013, there will be no impact on transactions and balances recognised in the fnancial statements because the Group has not entered into any joint arrangements. |
1 January 2013 |
| AASB 12 (issued August 2011) |
Disclosure of Interests in Other Entities |
Combines existing disclosures from AASB 127 Consolidated and Separate Financial Statements, AASB 128 Investments in Associates and AASB 131 Interests in Joint Ventures. Introduces new disclosure requirements for interests in associates and joint arrangements, as well as new requirements for unconsolidated structured entities. |
Annual reporting periods commencing on or after 1 January 2013 |
As this is a disclosure standard only, there will be no impact on amounts recognised in the fnancial statements. However, additional disclosures will be required for interests in associates and joint arrangements, as well as for unconsolidated structured entities. |
1 January 2013 |
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Reference Title Nature of Change Application date Impact on Consolidated Application date
of standard financial statements for Group
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| Reference | Title | Nature of Change | Application date of standard |
Impact on Consolidated fnancial statements |
Application date for Group |
|---|---|---|---|---|---|
| AASB 13 (issued September 2011) |
Fair Value Measurement |
AASB 13 establishes a single framework for measuring fair value of fnancial and non-fnancial items recog- nised at fair value in the statement of fnancial posi- tion or disclosed in the notes in the fnancial statements. Additional disclosures required for items measured at fair value in the statement of fnancial position, as well as items merely disclosed at fair value in the notes to the fnancial statements. Extensive additional disclo- sure requirements for items measured at fair value that are ‘level 3’ valuations in the fair value hierarchy that are not fnancial instruments |
Annual reporting periods commencing on or after 1 January 2013 |
When this standard is adopted for the frst time for the year ended 31 December 2013, additional disclosures will be required about fair values. |
1 January 2013 |
| AASB 119 (reissued September 2011 |
Employee Benefts |
Employee benefts expected to be settled (as opposed to due to settled under current standard) wholly within 12 months after the end of the reporting period are short-term benefts, and therefore not discounted when calculating leave liabilities. Annual leave not expected to be used wholly within 12 months of end of reporting period will in future be discounted when calculating leave liability. |
Annual periods commencing on or after 1 January 2013 |
When this standard is frst adopted for 31 December 2013 year end, annual leave liabilities will be recalculated on 1 January 2012 as long- term benefts because they are not expected to be settled wholly within 12 months after the end of the reporting period. This will result in a reduction of the annual leave liabilities recognised on 1 January 2012, and a corresponding increase in retained earnings at that date |
1 January 2013 |
| AASB 2011-4 (issued July 2011) |
Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements |
Amendments to remove individual key management personnel (KMP) disclosure requirements from AASB 124 to eliminate duplicated information required under the Corporation Act 2001 |
Annual periods com- mencing on or after 1 January 2013 |
When this standard is frst adopted for the year ended 31 December 2013 the [Entity] will show reduced disclosures under Key Management Personnel note to the fnancial statements |
1 January 2013 |
| Interpretation 20 (issued November 2011) |
Stripping Costs in the Production Phase of a Surface Mine |
Clarifes that costs of remov- ing mine waste materials (overburden) to gain access to mineral ore deposits during the production phase of a mine must be capital- ised as inventories under AASB 102 Inventories if the benefts from stripping activity is realised in the form of inventory produced. Otherwise, if stripping activity provides improved access to the ore, stripping costs must be capitalised as a non-current, stripping activity asset if certain recognition criteria are met. |
Annual periods commencing on or after 1 January 2013 |
The [Entity] does not oper- ate a surface mine. There will therefore be no impact on the fnancial statements when this interpretation is frst adopted. |
1 January 2013 |
| AASB 2012-5 (is- sued June 2012) |
Annual Improvements to Australian Accounting Standards 2009-2011 Cycle |
Non-urgent but necessary changes to IFRSs (IAS1, IAS 16 & IAS 32) e.g: AASB 116 clarifes that items such as spare parts, stand-by or service equipment are required to be classifed as property, plant and equipment and not inventory |
Periods commencing on or after 1 January 2013 |
When this standard is frst adopted for the year ended 31 December 2013, there will be no material impact. |
1 January 2013 |
| IFRS (issued) December 2011 |
Mandatory Effective Date of IFRS 9 and Transition Disclosures |
Entities are no longer required to restate comparatives on frst time adoption. In- stead, additional disclosures on the effects of transition are required. |
Annual reporting periods commencing on or after 1 January 2015 |
As comparatives are no longer required to be restated, there will be no impact on amounts recognised in the fnancial statements. However, additional disclosures will be required on transi- tion, including the quantitative effects of reclassifying fnancial assets on transition. |
1 January 2015 |
|---|---|---|---|---|---|
| AASB 2012-9 (is- sued December 2012) |
Amendment to AASB 1048 arising from the Withdrawal of Australian Inter- pretation 1039 |
Deletes Australi- an Interpretation 1039 Substan- tive Enactment of Major Tax Bills In Australia from the list of mandatory Australian Inter- pretations to be applied by enti- ties preparing fnancial state- ments under the Corporations Act 2001 or other general purpose fnancial state- ments. |
Annual reporting periods begin- ning on or after 1 January 2013 |
There will be no impact on frst-time adoption of this amendment as the [entity] does not account for proposed changes in taxation legislation until the relevant Bill has passed through both Houses of Parliament, which is consistent with the views expressed by the Australian Accounting Stand- ards Board in their agenda decision of December 2012. |
1 January 2013 |
No other standards, interpretations or amendments which have been issued are expected to have an impact on the group.
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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ( C O N T I N U E D )
2 . I N C O M E
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Consolidated Consolidated
31 Dec 2012 31 Dec 2011
$ $
Revenue
Interest revenue from unrelated entities 42,282 31,515
Other Income
Profit from sales of investments in available 464,769 744,186
for sale financial assets
Miscellaneous and other income 12,000 12,750
Total Other Income 476,769 756,936
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3 . E X P E N S E S
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Consolidated Consolidated
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| Consolidated | Consolidated | |
|---|---|---|
| 31 Dec 2012 | 31 Dec 2011 | |
| $ | $ | |
| Loss before income tax has been arrived at after chargingthe following: |
||
| Abandoned acquisition costs¹ | 123,243 | 2,164,281 |
| Exploration expenditure written off | - | 253 |
| Operatinglease rentals | 49,238 | 36,178 |
| Depreciation - plant and equipment | 28,428 | 4,998 |
| Superannuation contributions | 50,322 | 75,029 |
| Movement in provision for employee entitle- ments |
2,250 | 6,730 |
| Impairment of investments | 227,110 | 54,000 |
¹ In July 2011 the Company entered into a Share Sale Agreement with subsidiaries of Cristal Australia Pty Ltd (Cristal) pursuant to which the Company would acquire 100% of the issued capital in Cable Sands (W.A.) Pty Ltd and Cable Sands Pty Ltd (together Cable Sands) for a total consideration of A$96 million, with a further A$5 million payment contingent upon Zircon prices reaching US$2,700 by the end of 2013. The final material condition precedent to the Acquisition was the procurement of funding for the Acquisition. Prevailing global markets provided for difficult conditions in which to raise funds and as a result the necessary funding has not been secured. On 20 December 2011, MRC advised that the conditions precedent, as set out in the Share Sale Agreement had not been met within the required timeframe. As a result the proposed Acquisition came to an end.
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4 . I N C O M E TA X Consolidated Consolidated
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| 4 . I N C O M E TA X |
Consolidated | Consolidated |
|---|---|---|
| 31 Dec 2012 | 31 Dec 2011 | |
| $ | $ | |
| The components of current income tax expense comprise: |
||
| Current taxation | - | - |
| Income tax (beneft) reported in the income statement |
- | - |
| The prima facie tax on loss before income tax is reconciled to the income tax expense as fol- lows: |
||
| (Loss) / Proft before income tax | (1,191,061) | (2,135,788) |
| Prima facie tax payable / (beneft) on loss | ||
| @ 30% (2011:30%) | (357,318) | (640,736) |
| Non allowable items | 108,591 | (2,026,120) |
| Non-assessable income | (790,806) | (847,294) |
| Net deferred tax assets not brought to account | 1,039,533 | 3,514,150 |
| Income tax expense / (beneft) | - | - |
| Future income tax beneft arisingfrom | ||
| un-recouped deductions at reportingdate | ||
| for Australian tax resident entities. | ||
| Revenue losses | 4,612,124 | 4,430,446 |
| Capital losses | 4,689,637 | 4,689,637 |
In addition the economic entity has unconfirmed tax losses and accumulated exploration expenditure that gives rise to potential carry forward tax benefits in South Africa amounting to approximately Rand 133 million (approximately A$15 million (2011:14 million). The benefit of these potential deferred tax assets has not been brought to account, and will only be realised if circumstances similar to those described above, also apply to the economic entity’s future operations in South Africa.
There are no franking credits available.
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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ( C O N T I N U E D )
5 . S E G M E N T I N F O R M AT I O N
Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors which makes strategic decisions.
There is no goodwill attaching to any of the segments. There has been no impact on the measurement of the assets and liabilities reported for each segment.
There are two operating segments for South Africa, these are exploration and development projects one Tormin Mineral Sands held in Minerals Sands Resources Ltd and located on the West coast. The other is the Xolobeni Mineral Sands projected held in Transworld Energy and Minerals located on the East coast.
In Australia the Group operates in two segments, investing in the securities of unrelated entities and interest on the deposit of surplus funds. The other segment is the corporate overhead associated with the management and administration of the company’s projects and corporate administration.
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2012 Africa Australia
Tormin Xolobeni Investing Corporate Totals
Revenue from operations $ $ $ $ $
Gain from sales of invest-
ments in listed companies
Interest earned from unre- 9,120 1,013 32,149 42,282
lated entities
Other income 464,769 12,000 476,769
Total segment revenue/ 9,120 1,013 496,918 12,000 519,051
income
Segment results
Profit/(Loss) before in- 15,580 1,730 146,565 (1,354,936) (1,191,061)
come tax
Included in segment re-
sults are the following:
Abandonment of acquisi- (123,243) (123,243)
tion
Total segment assets 5,688,876 7,934,347 532,113 7,797,315 21,952,650
Total segment liabilities 256.598 28,511 - 705,121 990,229
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2011 Africa Australia
Tormin Xolobeni Investing Corporate Totals
Revenue from operations $ $ $ $ $
Interest earned from 11,131 1,237 19,147 - 31,515
unrelated entities
Other revenue - - 744,186 12,750 756,936
Total segment revenue 11,131 1,237 763,333 12,750 788,451
Segment results
(Loss) before income tax (42,343) (4,705) (1,454,948) (633,792) (2,135,788)
Included in segment re-
sults is the following:
- - -
Abandonment of acquisi- (2,164,281) (2,164,281)
tion
Total segment assets 4,688,269 8,191,050 3,027,651 344,309 16,251,279
Total segment liabilities 64,542 7,171 - 1,764,439 1,836,152
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- 6 . PA R E N T E N T I T Y I N F O R M AT I O N
The following details information related to the parent entity, Mineral Commodities Limited, at 31 December 2012.
The information presented here has been prepared using consistent accounting policies as presented in Note 1.
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31 Dec 2012 31 Dec 2011
$ $
Current assets 8,321,359 3,350,369
Non-current assets 14,343,036 12,783,155
Total assets 22,664,395 16,133,524
Current liabilities 705,103 1,718,397
Non-current liabilities - -
Total Liabilities 705,103 1,718,397
Net Assets 21,959,292 14,415,127
Contributed equity 50,912,158 41,204,350
Accumulated losses (28,265,939) (27,789,386)
Option reserve 357,330 286,578
Other reserves (1,044,257) 713,585
Total equity 21,959,292 14,415,127
Loss for the year (763,131) (6,996,396)
Other comprehensive income / (loss) for the year (1,400,512) (2,509,112)
Total comprehensive income / (loss) for the year (2,163,643) (9,505,508)
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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ( C O N T I N U E D )
7. C A S H A N D C A S H E Q U I VA L E N T S
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Consolidated Consolidated
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| Consolidated | Consolidated | |
|---|---|---|
| 31 Dec 2012 $ |
31 Dec 2011 $ |
|
| Cash at Bank | 7,769,202 | 249,389 |
| 7,769,202 | 249,389 |
The effective interest rate on cash at bank in 2012 was 2.30% (2011:4.25%).
(a) Interest rate risk exposure
-
The consolidated entity’s exposure to interest rate risk is discussed in Note 23.
-
(b) Reconciliation to cash at the end of the year
-
The above figures represent the cash at the end of the financial year as shown in the Statement of Cash Flows.
8 . T R A D E A N D O T H E R R E C E I VA B L E S
| Consolidated | Consolidated | |
|---|---|---|
| Current | 31 Dec 2012 $ |
31 Dec 2011 $ |
| Trade receivables | 22,871 | 7,144 |
| Other receivables | 125,216 | 94,200 |
| 148,087 | 101,344 | |
| Non-Current | ||
| Security deposits¹ | 313,636 | 333,736 |
| Advance to Blue Bantry² | 113,636 | - |
| 427,272 | 333,736 |
¹ Includes a secured deposit of $313,636 (2011 $324,063 ) with First Rand bank held as security for a performance guarantee issued by the Bank in favour of the South African Department of Minerals and Energy in respect of Mineral Sands Resources (Pty) Ltd obligations under the Tormin Mining right.
² An amount of Rand 1 million has been advanced to the BEE partner Blue Bantry refer note 25.
There are no receivables past due and impaired
- (a) Fair Values and credit risk
Due to the short term nature of these receivables the carrying values represent their respective fair values as at 31 December 2012 and 2011.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. Refer to Note 23 for more information on the risk management policy of the Group and the credit quality of the entity’s receivables.
(b) Foreign Exchange and Interest Rate Risk
Information about the Group’s exposure to foreign exchange and interest rate Risk in relation to trade and other receivables is provided in Note 23.
9 . F I N A N C I A L A S S E T S - C U R R E N T
| Consolidated | Consolidated | |
|---|---|---|
| Available for sale Investments | 31 Dec 2012 $ |
31 Dec 2011 $ |
| Investments in companies listed on a recognised stock exchange - shares at fair value |
||
| At the beginningof the year | 1,653,000 | 5,173,000 |
| Cost of Allied Gold MiningPlc Shares sold | (1,030,333) | (686,888) |
| Fair value movement | - | (1,440,000) |
| Impairment of listed shares | (14,000) | (54,000) |
| Subscription monies paid for Perpetual Resources Ltd | 350,000 | - |
| Transfer from Financial asset revaluation reserve on shares sold |
(589,667) | (1,339,112) |
| Total available for sale investments in companies listed on a recognised stock exchange |
369,000 | 1,653,000 |
| Available for sale investment in companies not listed on a recognised stock exchange |
||
| At the beginningof the year | 1,374,651 | 1,104,651 |
| Fair value movement | (998,428) | 270,000 |
| Impairment of unlisted shares | (213,110) | - |
| Total available for sale investments in companies not listed on a recognised stock exchange |
163,113 | 1,374,651 |
| Total Financial Assets | 532,113 | 3,027,651 |
Available for sale financial assets comprise investments in the ordinary share capital of various entities. There are no fixed returns or fixed maturity dates attached to these investments. Total impairment recognised during the period is $227,110 (2011:54,000)
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
-
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-
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-
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-
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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ( C O N T I N U E D )
9 . F I N A N C I A L A S S E T S – C U R R E N T ( C o n t i n u e d )
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2012 Level 1 Level 2 Level 3 Total
Available for sale financial assets 369,000 163,113 532,113
Total 369,000 163,113 532,113
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2011 Level 1 Level 2 Level 3 Total
-
Available for sale financial assets 1,653,000 1,374,651 3,027,651
Total 1,653,000 - 1,374,651 3,027,651
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Fair Value of Investment in Allied Gold Mining Plc
The remaining shares held in Allied Gold Mining Plc were sold during the year. In 2011 the market value of the investment in Allied Gold Mining Plc at balance date was $1,620,000 based on a price of $2.16 per share.
The level 3 investment in an unlisted entity has been valued by using information provided by the Company together with information from an independent source. Assumptions and estimates have been used in this valuation. Should any of these assumptions or estimates change, this could significantly effect the carrying value of this investment.
(a) Risk Exposure
Information about the Group’s exposure to credit risk, foreign exchange and interest rate risk is provided in Note 23.
10 . O T H E R – C U R R E N T
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Consolidated Consolidated
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| Consolidated | Consolidated | |
|---|---|---|
| 31 Dec 2012 | 31 Dec 2011 | |
| $ | $ | |
| Prepayments | 10,925 | 11,163 |
11. P R O P E R T Y, P L A N T A N D E Q U I P M E N T
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31 Dec 2012 31 Dec 2011
$ $
Plant and office equipment - at cost 149,095 74,952
Accumulated depreciation (80,406) (53,370)
Total property, plant and equipment 68,689 21,582
Reconciliation of the carrying
amount of plant & equipment at the
beginning and end of the current
and previous financial year
Plant and office equipment
Carrying amount at beginning of 21,582 7,377
year
Additions 79,687 24,910
Disposals (4,152) (5,707)
Depreciation (28,428) (4,998)
Carrying amount at end of year 68,689 21,582
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1 2 . E X P LO R AT I O N A N D D E V E LO P M E N T E X P E N D I T U R E
| Consolidated | Consolidated | |
|---|---|---|
| 31 Dec 2012 | 31 Dec 2011 | |
| $ | $ | |
| Exploration expenditure - costs carried for- ward in respect of areas of interest in: |
||
| Exploration and evaluation phases | 12,996,362 | 12,506,413 |
| Total exploration and evaluation expenditure | 12,996,362 | 12,506,413 |
| Reconciliation of the carrying amount of exploration and development expenditure at the beginning and end of the current and the previous fnancial year. |
||
| Carryingamount at beginningof year | 12,506,413 | 13,928,167 |
| Expenditure duringthe year | 1,169,193 | 896,573 |
| Foreign exchange movements | (679,244) | (2,318,074) |
| Write off discontinued projects | - | (253) |
| Carryingamount at end of year | 12,996,362 | 12,506,413 |
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S O U T H A F R I C A N P R O J E C T S
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T O R M I N M I N E R A L S A N D S P R O J E C T
B a ck g r o u n d
During the period, the Company completed and submitted all the necessary documentation required for the remaining regulatory matters in relation to the Tormin Mineral Sands Project (Tormin) and in July 2012, the Company received notification of the approval of its Environmental Management Plan by DEADP. The Company was therefore in a position to proceed to ensure appropriate financing was in place to develop Tormin for production to commence in 2013.
The Company is now positioned to proceed with the full scale development of Tormin, particularly as there is sufficient indication from the ongoing tender process that the capital required to complete the development will be available to the Company when required.
P r o j e c t E c o n o m i c s a n d D e v e l o p m e n t C o s t s
Based on TZMI product pricing and Definitive Feasibility Study (DFS) estimates, the project economics for Tormin are robust. On an initial 5-year Life of Mine extracting primarily Zircon and Rutile Non-Magnetic concentrate, economic models suggest an NPV of AUD$68.9m with an IRR of 87.9%.
Engineering plans were substantially progressed for dry separation of the magnetic concentrates, which would enable the separation and sale of Ilmenite and Garnet which will further enhance Tormin’s economics i.e an NPV of AUD$94m and IRR of 97%. Development of the required dry processing facilities is expected to cost approximately AUD$4 million.
The Company has noted recent reports of a softening market for zircon and rutile. Despite this, demand for the products to be produced from Tormin remains strong. In addition, given the extremely low operating costs (Opex) based substantially in South African Rand (ZAR), Tormin is largely insensitive to changes in capital expenditure or Opex. Importantly in this regard, a 10% reduction in commodity prices is offset by a 5% devaluation of the ZAR. Accordingly, the recent 15% devaluation of the ZAR to the AUD (8.2 to 9.4) allows for a 30% reduction in commodity prices before the economic models are negatively affected. Based on the above, the Company does not believe that it is appropriate to change its economic forecasts at this time.
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S O U T H A F R I C A N P R O J E C T S
A p p o i n t m e n t o f E P C M C o n t r a c t o r
The Company was pleased to advise during the last quarter that its subsidiary, Mineral Sands Resources (Pty) Ltd (MSR), has appointed Perth-based MSP Engineering Pty Ltd (MSP Engineering) as EPCM contractor to complete the construction and commissioning of the plant required for Tormin.
MSP Engineering has been appointed as engineering contractor to complete the process and engineering design, and support the construction management and commissioning of the Tormin Development and Processing Plants. The decision to engage MSP Engineering as engineering contractor was based on the quality of the previous and ongoing project work undertaken, and its detailed understanding of the ore body and development of process flow design and plant requirements. In addition, MSP Engineering has a strong track record in engineering and delivering projects in the mineral sands sector. The appointment of MSP Engineering and its historical and continuing involvement with Tormin significantly shortens the overall delivery timetable for the project and will provide greater certainty that the budgeted capital expenditure for Tormin of $16 million will be maintained.
By the end of the financial year, MSP Engineering had prepared scope specifications and most of the tender documents had been distributed.
P r o d u c t O f f - t a k e d i s c u s s i o n s
Tormin will produce approximately 48,000 tonnes pa of enriched Non-Magnetic concentrate containing 38,000 tonnes of Zircon and 5,500 tonnes of Rutile. This material will require secondary treatment through a third party dry separation plant. In addition, the Company will produce approximately 100,000 tonnes to 125,000 tonnes of finished IImenite product once MRC installs its own dry processing infrastructure in early 2014. Garnet concentrate will also be sold to Blastrite for secondary treatment.
Demand for the Tormin Ilmenite and Non-Magnetic concentrate has been strong and the Company is advanced with negotiations for all products.
O f f s h o r e P r o s p e c t i n g R i g h t s
During the period, the Company also advised that its subsidiary, MSR, received notification from the Department of Mineral Resources (DMR) that the application for the prospecting rights for the offshore area immediately adjacent to Tormin had been approved.
The offshore prospecting area covers an area of 12 square kilometres and extends 1km out to sea from the low water mark and covers the full length of the existing 12km Tormin tenement.
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S O U T H A F R I C A N P R O J E C T S
X O LO B E N I P R O J E C T ( S O U T H A F R I C A )
B a ck g r o u n d
The Xolobeni Mineral Sands Project (Xolobeni) resource is 346 million tonnes of 5.0% heavy mineral, with 65% of this resource in the Measured category.
Xolobeni is therefore regarded as one of the largest undeveloped mineral sands resources in the world containing in excess of 9,000,000 tonnes of ilmenite.
In November 2011 the DMR extended the prospecting rights over the Xolobeni project, excluding the Kwanyana block, for a further period of 3 years. During the first quarter of 2012, this right was executed and submitted for registration and subsequently registered by the DMR in the third quarter of 2012.
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MRC has also previously advised that the DMR had withdrawn the previously granted Conditional Mining Right over the Kwanyana block and that it was engaging with the DMR and Minister in relation to these matters. Based on this, the Company resolved to withdraw all previous applications in respect of the Kwanyana block and immediately file a new PRA over the same block.
The benefit of this approach is that the Kwanyana block will be re-aligned with the rest of the Xolobeni project which will enable the Company to progress its application to develop Xolobeni in its entirety and, in so doing, demonstrate that this can be undertaken responsibly and sustainably in the interests of all stakeholders.
The DMR accepted the new PRA over the Kwanyana block in the first quarter of 2012 and, in accordance with prevailing legislation, directed the Company to submit an Environmental Management Plan (EMP) for the prospecting work and details of its engagement with all stakeholders with an interest in the project. The Company compiled an EMP for the Kwanyana block prospecting work and undertook a comprehensive stakeholder engagement process (SEP) during the second quarter of 2012. The EMP and SEP report were also lodged with the DMR in accordance with the required timetable.
A number of objections to the PRA were received. Accordingly, the DMR was required by law to call a meeting to consider the objections and a representations made by the Company. This meeting was held on 28 November 2012.
Based on the information presented at that meeting, the DMR has instructed the Company to undertake additional consultation with parties that have an interest in the project. Planning for this consultation is currently in progress and the consultation is expected to be concluded within the first quarter of 2013.
In a significant development, online news service Fever-red reported that ANC Secretary-General, Gwede Mantashe, has publicly called on mayors and councillors to change the mindsets of communities fighting against the proposed N2 toll road and granting of licenses for mining at Xolobeni.
Mantashe also pointed out that the region “is one of the poorest areas” and “he believes it will be well served by a road system and mining that will increase access, which in turn will create an enabling environment for unlocking the development potential of the area.”
The Company is encouraged by the continuing momentum that is building for the development of Xolobeni and is confident that, once all final studies are completed, the economic and social benefits of Xolobeni to uplift the local Amadiba population will create a compelling case for the continued support of its development and show beyond doubt that mining can co-exist with environmentally responsible development.
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1 3 . S U B S I D I A R I E S
1 4 . N O N - C O N T R O L L I N G I N T E R E S T S
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Equity Equity Consolidated Consolidated
Class of Share Place of Incorporation
Holding Holding Entity Entity
2012 2011 31 Dec 2012 31 Dec 2011
% % $ $
Parent Entity Non-controlling interests in subsidiaries comprise:
Mineral Commodities Limited Australia Interest in retained earnings at the beginning of the -
financial year after adjusting for non-controlling
Controlled Entities
equity interests in the entities acquired during the
Rexelle Pty Ltd Ord Australia 100 100 financial year
Queensland Minex NL Ord Australia 100 100 Operating loss -
Q Smelt Pty Ltd Ord Australia 90 90 Share capital 54,748 54,748
Mincom Waste Pty Ltd Ord Australia 100 100 Reserves 124,101 124,101
MRC Resources (Pty) Ltd Ord South Africa 100 100 Total non-controlling interests 178,849 178,849
MRC Africa Pty Ltd Ord Australia 100 100
Blackhawk Oil & Gas Ltd Ord Australia 100 100 During 2008 two subsidiaries’ ownership interests were restructured to comply with South African legislation.
MRC Cable Sands Pty Ltd Ord Australia 100 100 Ordinary shares were issued to the Black Empowerment Parties to effect these changes in accordance with the
respective agreements entered into with the Black Empowerment partners.
Transworld Energy & Minerals Ord South Africa 56 56
Resources (SA) (Pty) Limited
Mineral Sands Resources Ord South Africa 50 50
1 5 . T R A D E A N D O T H E R PAYA B L E S - C U R R E N T
(Pty) Ltd
Nyati Titanium Eastern Cape Ord South Africa 100 100
(Pty) Ltd
Consolidated Consolidated
MRC Metals (Pty) Ltd Ord South Africa 100 100
31 Dec 2012 31 Dec 2011
Skeleton Coast Resources Ord Namibia 100 100
(Pty) Ltd $ $
Trade payables - unsecured 530,916 640,914
Other payables and accruals - unsecured 435,886 1,158,838
966,802 1,799,752
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During 2008 two subsidiaries’ ownership interests were restructured to comply with South African legislation. Ordinary shares were issued to the Black Empowerment Parties to effect these changes in accordance with the respective agreements entered into with the Black Empowerment partners.
(a) Fair Values and credit risk
Due to the short term nature of these payables the carrying values represent their respective fair values as at 31 December 2012 and 2011.
(b) Foreign Exchange and Interest Rate Risk
Information about the Group’s exposure to foreign exchange and interest rate Risk in relation to trade and other payables is provided in Note 23.
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1 6 . C O N T R I B U T E D E Q U I T Y
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2012 Number 2011 Number of 2012 2011
of shares shares $ $
Balance at beginning of financial 153,393,385 143,393,385 41,204,350 40,004,350
year
Placement of 10 Million shares in 10,000,000 1,200,000
March 2011
Placement of 120,615,000 shares 120,615,000 10,252,864
as approved by shareholders at
the Annual General Meeting on 31
May 2012
- - -
Costs of capital raising (545,056)
Balance at end of financial year 274,008,385 153,393,385 50,912,158 41,204,350
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(a) Ordinary Shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
(b) Capital risk management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
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Consolidated Entity General Financial Asset Foreign Unlisted Listed Total
Reserve revaluation Currency Options Options
$ $ $ $ $ $
-
Balance at 1 January 2011 2,437,582 4,097,207 (995,772) 286,578 5,825,595
Revaluation - (2,509,112) (2,509,112)
Exchange differences on (2,511,827) (2,511,827)
translation of foreign opera-
tions
Balance at 31 December 2011 2,437,582 1,588,095 (3,507,599) - 286,578 804,656
Revaluation on disposal of (589,667) (589,667)
listed shares
Revaluation of unlisted (998,428) (998,428)
shares held for resale
Issue of unlisted options 357,330 357,330
Transfer to Accumulated (286,578) (286,578)
Losses
Exchange differences on (738,688) (738,688)
translation of foreign opera-
tions
Balance at 31 December 2012 2,437,582 - (4,246,287) 357,330 - (1,451,375)
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In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets in order to maintain sufficient funds necessary to continue its operations.
As a junior mineral explorer debt financing is not an option until such time at the Group’s projects have reached a stage at which debt financing can be obtained, therefore the Company considers its contributed equity as it’s capital during this period.
Investments such as the shareholding in Perpetual Resources Ltd are also regarded as part of the capital base and sold as required to fund ongoing operations.
N a t u r e a n d p u r p o s e o f r e s e r v e s
General Reserve
The General Reserve arose from the issue of shares in MRC Resources Pty Ltd to an entity outside the economic entity.
Financial asset revaluation reserve
1 7. R E S E R V E S
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Consolidated
31 Dec 2012 31 Dec 2011
$ $
General Reserve 2,437,582 2,437,582
Financial asset revaluation reserve - 1,588,095
Foreign currency translation re- (4,246,287) (3,507,599)
serve
-
Unlisted options reserve 357,330
-
Listed options reserve 286,578
(1,451,375) 804,656
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The financial asset revaluation reserve arises from the revaluation at reporting date of available for sale financial assets.
Foreign Currency Translation reserve
The foreign currency translation reserve records the unrealised foreign currency differences arising from the translation of operations into the presentation currency of the group. Refer to accounting policy Note 1 (e).
Listed Options Reserve
Records the amounts received in a prior year from the issue of listed options.
Un-listed Options Reserve
The value of the share based payment options issued in 2012
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1 8 . L O S S P E R S H A R E
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Consolidated Consolidated
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| Consolidated | Consolidated | |
|---|---|---|
| 31 Dec 2012 | 31 Dec 2011 | |
| (a) Basic loss per share | cents | cents |
| From continuing operations attributable to the ordinary shareholders of the company (cents per share) |
(0.68) | (1.40) |
| Total basic loss per share attributable to the ordinary equity holders of the company (cents per share) |
(0.68) | (1.40) |
| Weighted average number of ordinary shares outstanding during the year used in calculation of basic loss per share |
173,495,885 | 151,667,357 |
| Loss used in the calculation of basic loss per share from continued operations |
(1,191,061) | (2,315,788) |
2 0 . K E Y M A N A G E M E N T P E R S O N N E L D I S C L O S U R E S
K e y M a n a g e m e n t P e r s o n n e l C o m p e n s a t i o n
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Consolidated Group Consolidated Group
31 Dec 2012 31 Dec 2011
$ $
Key Management Personnel
Short-term employee benefits 321,565 164,037
Post-employment benefits 14,378 3,963
-
Share based payments 357,330
693,273 168,000
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( a ) O p t i o n h o l d i n g s o f k e y m a n a g e m e n t p e r s o n n e l
The numbers of options over ordinary shares in the company held during the financial year by each director of Mineral Commodities Limited and other key management personnel of the consolidated entity are set out below:
There were 57,357,208 options with an exercise price of 20 cents and an expiry date of 31 December 2012 on issue as at 31 December 2011. These potential ordinary shares are not considered dilutive and accordingly were not used to calculate dilutive earnings per share. The options were unexercised and therefore lapsed at 31 December 2012.
19 . A U D I T O R S ’ R E M U N E R AT I O N
During the year, the following fees were paid or payable for services provided by the auditor of the parent entity and non-related audit firms:
| Consolidated | Consolidated | |
|---|---|---|
| 31 Dec 2012 | 31 Dec 2011 | |
| $ | $ | |
| Amounts paid or due and payable to the auditors |
||
| Auditors of the parent entity | ||
| Audit and review | 64,122 | 61,368 |
| Non Assurance services | ||
| BDO (WA) Tax | - | 140,129 |
| Audit of subsidiaries | ||
| BDO Cape Town South Africa | 11,726 | - |
| Non-related practice of the auditors | - | 17,179 |
| 75,848 | 218,676 |
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2012
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| 2012 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Key Management Personnel |
Balance at 1 January 2012 or on appoint- ment |
Granted as Remuneration |
Options Exercised |
Options Lapsed |
Net change other |
Balance at 31 Dec 2012 |
Vested and exercisable |
Unvested |
| Mark Caruso | 7,380,396 | 1,000,000 | - | 7,380,396 | - | 1,000,000 | 1,000,000 | - |
| Joseph Caruso | 7,380,396 | 1,000,000 | - | 7,380,396 | - | 1,000,000 | 1,000,000 | - |
| Peter Torre | 200,000 | 1,000,000 | - | 200,000 | - | 1,000,000 | 1,000,000 | - |
| Guy Walker | 40,000 | 1,000,000 | - | 40,000 | - | 1,000,000 | 1,000,000 | - |
| James Leahy | - | 1,000,000 | - | - | - | 1,000,000 | 1,000,000 | - |
| Andrew Lashbrooke | 6,000,000 | - | - | - | 6,000,000 | 6,000,000 |
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O p t i o n h o l d i n g s o f k e y m a n a g e m e n t p e r s o n n e l ( c o n t i n u e d )
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2011
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| 2011 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Key Management Personnel |
Balance at 1 January 2012 or on appointment |
Granted as Remuneration |
Options Exercised |
Options Lapsed |
Net change other |
Balance at 31 Dec 2012 |
Vested and exercis- able |
Unvested |
| Mark Caruso | 7,380,396 | - | - | - | - | 7,380,396 | 7,380,396 | - |
| Joseph Caruso | 7,380,396 | - | - | - | - | 7,380,396 | 7,380,396 | - |
| Peter Torre | 200,000 | - | - | - | - | 200,000 | 200,000 | - |
( b ) S h a r e h o l d i n g s o f k e y m a n a g e m e n t p e r s o n n e l
The numbers of ordinary shares in the company held during the financial year by each director of Mineral Commodities Limited and other key management personnel of the consolidated entity are set out below:
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2012
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| 2012 | |||||
|---|---|---|---|---|---|
| Director | Balance at January 2012 or on appointment |
Received as Remuneration |
Options Exercised |
Net change other |
Balance |
| Mark Caruso | 21,582,615 | - | - | - | 21,582,615 |
| Joseph Caruso | 21,569,988 | - | - | - | 21,569,988 |
| Peter Torre | 500,000 | - | - | - | 500,000 |
| Guy Walker | 100,000 | - | - | - | 100,000 |
| James Leahy | - | - | - | - | - |
| Andrew Lashbrooke | - | - | - | - | - |
2 1. R E L AT E D PA R T Y T R A N S A C T I O N S
Minesite Construction Services a Company associated with Mr Mark Caruso and Mr Joseph Caruso has provided office space to Mineral Commodities Limited (MRC) throughout 2012. The amount paid by MRC was $54,000. This is considered to be an arms length commercial rent. There is no formal sub lease in place.
Zurich Bay Holdings Ltd a Company associated with Mr Mark Caruso and Mr Joseph Caruso provided an unsecured loan facility of $1,407,509 for which it received interest of $99,937. This loan was made on a commercial arms-length basis and was repaid in full prior to 31 December 2012.
Mineral Commodities Limited was a shareholder in Allied Gold Mining PLC owning 750,000 shares at 31 December 2011 these were sold during the year. Mark Caruso and Peter Torre were also officers of Allied Gold Mining PLC but resigned during 2012.
Wholly owned group
The group consists of Mineral Commodities Limited and its subsidiaries. Details of entities in the group are set out in Note 13.
Transactions between Mineral Commodities Limited and other entities in the group during the years ended 31 December 2012 and 31 December 2011 consisted of loans advanced and payments received and made on inter-company accounts. These transactions were made on normal commercial terms and conditions and at market rates.
During the financial year, the Company provided management, accounting and administration services to other entities in the wholly owned group.
Key management personnel
Disclosures relating to key management personnel are set out in Note 20.
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2011
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| 2011 | |||||
|---|---|---|---|---|---|
| Director | Balance at January 2012 or on appointment |
Received as Remuneration |
Options Exercised |
Net change other |
Balance |
| Mark Caruso | 21,582,615 | - | - | - | 21,582,615 |
| Joseph Caruso | 21,569,988 | - | - | - | 21,569,988 |
| Peter Torre | 500,000 | - | - | - | 500,000 |
Joseph and Mark Caruso are both directors of Zurich Bay Holdings Pty Ltd which has a relevant interest in 21,569,988 shares.
All equity transactions with key management personnel, other than those arising from the exercise of remuneration options, have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.
(c) Loans to key management personnel
There were no loans to key management personnel during the period.
- (d) Other transactions and balances with key management personnel
There were no transactions or balances with key personnel except as disclosed in this note and Note 21.
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- 2 2 ( a ) . R E C O N C I L I AT I O N O F L O S S F O R T H E Y E A R T O N E T C A S H O U T F LO W F R O M O P E R AT I N G A C T I V I T I E S
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Consolidated Consolidated
31 Dec 2012 31 Dec 2011
$ $
Profit/(loss) after income tax and outside equity interest (1,191,061) (2,135,788)
Depreciation 28,428 4,998
Impairment losses 227,110 54,000
Provision for Employee Entitlements (12,973) 6,730
(Profit) on sale of investment in listed companies (464,769) (744,186)
-
Value of un-listed options issued 357,330
Loss on disposal of fixed assets 152 5,707
Exploration expenditure written off - 253
Changes in assets and liabilities during the year:
Increase/(decrease) in trade payables and other liabilities (1,046,345) 1,210,890
(Increase) decrease in trade and other receivables (127,795) 14,425
(Increase) decrease in prepayments 238 (787)
Net cash inflow / (outflow) from operating activities (2,229,685) (1,583,758)
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2 2 ( B ) . N O N - C A S H I N V E S T I N G A N D F I N A N C I N G A C T I V I T I E S
The group has no available finance facilities as at reporting date. The group did not undertake any non-cash financing or investing activities during the period (2011: none).
2 3 . F I N A N C I A L R I S K M A N A G E M E N T
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Consolidated Consolidated
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| Consolidated | Consolidated | |
|---|---|---|
| 31 Dec 2012 | 31 Dec 2011 | |
| $ | $ | |
| Financial Assets | ||
| Cash at bank and short term bank deposits | ||
| AA - (Standard & Poor’s/Fitch) | 7,569,613 | 230,642 |
| BBB+ (Fitch) | 199,589 | 18,747 |
| Total Cash at bank and short term deposits | 7,769,202 | 249,389 |
| Trade and other receivables | ||
|---|---|---|
| Counterparties with external credit rating | ||
| 31 December 2012 | 31 December 2012 | |
| $ | $ | |
| AAA (Fitch) | 45,631 | 25,696 |
| BBB+ (Fitch) | 348,724 | 333,736 |
| 394,355 | 359,432 | |
| Counterparties without external credit rating | ||
| Sundry trade receivables | 78,293 | 75,648 |
| Total Receivables | 472,648 | 435,080 |
| Available for sale investments | 532,113 | 3,027,651 |
| 8,773,963 | 3,712,120 | |
| Financial Liabilities | ||
| Trade Creditors | 530,916 | 640,914 |
| Otherpayables | 435,886 | 1,158,838 |
| 966,802 | 1,799,752 | |
| 7,807,161 | 1,912,368 |
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the group. Risk management is carried out by the Board of Directors.
F i n a n c i a l R i s k
The main risk the Group is exposed to through its financial instruments are exchange rate risk, interest rate risk, liquidity risk, credit risk and price risk.
F o r e i g n e x ch a n g e r i s k
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. The primary exposure is in respect to the South African Rand arising from the investments in and loans to South African entities.
Foreign exchange risk arises from assets and liabilities denominated in a currency that is not the Reporting Company’s functional currency and net investments in foreign operations.
The Group does not hold any derivatives or foreign exchange contracts to hedge it’s foreign exchange risk exposure.
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2 3 . F I N A N C I A L R I S K M A N A G E M E N T ( C o n t i n u e d )
Based on the financial instruments held at the reporting date, the sensitivity of the Group’s profits after tax for the year and equity at the reporting date to movements in the Australian Dollar to South African Rand was:
Had the Australian Dollar weakened / strengthened by 19% against the South African Rand with all other variables remaining constant, the Group’s profit after tax would have been $3,289 lower / higher (2011: $8,940 lower / higher) and equity would have been $2,310,089 lower / higher (2011: $2,022,662 lower / higher) The reasonable possible change is based on historical changes in rates estimated by management.
C r e d i t R i s k
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks, as well as credit exposures including outstanding receivables and investments in unlisted entities.
All cash balances held at banks are held at internationally recognised institutions. The majority of receivables held are with related parties and within the Group. Given this, the credit quality of financial assets that are neither past due or impaired can be assessed by reference to historical information about default rates.
The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the economic entity’s maximum exposure to credit risk without taking account of the value of any collateral or other security obtained.
I n t e r e s t R a t e R i s k
The Group’s exposure to interest rate risk relates primarily to the Group’s floating interest rate cash balance which is subject to movements in interest rates. The Board monitors its cash balance on an ongoing basis and liaises with its financiers regularly to mitigate cash flow interest rate risk. Interest is charged on the loans from the parent company to the South African subsidiaries at rates permitted by the South African reserve bank. This interest is eliminated on consolidation.
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Price Risk Price Risk Price Risk Price Risk Price Risk
-30% -30% +30% +30%
2012 Carrying amount Profit Equity Profit Equity
$ $ $ $ $
Available for
sale investments
Listed Shares & 369,000 (110,700) 110,700
Options
Unlisted shares 163,113 (48,934) 48,934
532,113 (159,634) 159,634
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Price Risk Price Risk Price Risk Price Risk Price Risk
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| Price Risk | Price Risk | Price Risk | Price Risk | Price Risk | |
|---|---|---|---|---|---|
| -30% | -30% | +30% | +30% | ||
| 2011 | Carrying amount $ |
Proft $ |
Equity $ |
Proft $ |
Equity $ |
| Available for sale investments |
|||||
| Listed Shares & Options |
1,653,000 | (495,900) | 495,900 | ||
| Unlisted shares | 1,374,651 | (412,395) | 412,395 | ||
| 3,027,651 | (908,295) | 908,295 |
L i q u i d i t y r i s k
Prudent liquidity risk management implies maintaining sufficient cash to meet commitments as and when they fall due. The Board monitors rolling cash flow forecasts to manage liquidity risk. The only financial liabilities of the Group at balance date are trade and other payables, these amounts are unsecured.
As at reporting date the Group had sufficient cash reserves to meet its requirements. Should additional cash be required to fund operations this may be raised from the sale of listed equities held as available for sale. The Group therefore had no other credit standby facilities or arrangements for further funding in place.
The only financial liabilities the Group had at reporting date were trade payables incurred in the normal course of the business. These were non-interest bearing and were due within the normal 30 day terms of creditor payments.
P r i c e R i s k
The Group has an exposure to equity securities price risk. This arises from investments held by the Group and classified on the Statement of Financial Position as available for sale financial assets. The Group is not exposed to commodity price risk.
The following table summarises the impact of any increases/decreases in the market price of available for sale equity investments. The percentage used is based on possible volatility of the share price and market value of the investments held. The 30% reasonable movement is based on management’s estimate of historical changes.
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2 4 . S H A R E B A S E D PAY M E N T S
2 5 . C O M M I T M E N T S
( a ) N o n - C a n c e l l a b l e O p e r a t i n g L e a s e s
The issue of Employee options was approved by shareholders at a general meeting of the Company held on 21 December 2012. The Employee option plan is designed to provide long-term incentives for senior managers and above (including directors) to deliver long-term shareholder returns. Options granted under the plan carry no dividend or voting rights. When exercisable each option is convertible into one ordinary share at the predetermined exercise
| Grant Date 2012 |
Expiry date |
Exercise price |
Fair Value at grant date |
Options at the start of the year |
Granted during the year |
Exercised during the year |
Forfeited during the year |
Balance at the end of the year |
Vested at the end of the year |
|---|---|---|---|---|---|---|---|---|---|
| 21 Dec 2012 |
31 Dec 2015 |
20 cents¹ | 3.35 cents |
- | 10,000,000 | - | - | 10,000,000 | 10,000,000 |
| 21 Dec 2012 |
31 Dec 2015 |
35 cents² | 2.23 cents |
- | 1,000,000 | - | - | 1,000,000 | 1,000,000 |
| - | 11,000,000 | - | - | 11,000,000 | 11,000,000 |
F a i r v a l u e o f o p t i o n s g r a n t e d
The assessed fair value at grant date of options during the year ended 31 December 2012 was independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The total Share Based payment expense for the period was $357,330 (2011 $0).
The model inputs for options granted during the year ended 31 December 2012 included:
| a. | Options granted for no consideration with the expectation that the majority of these Options would be | Options granted for no consideration with the expectation that the majority of these Options would be |
|---|---|---|
| exercised towards the end of the term of the Options | and there are no market based vesting conditions. | |
| b. | Exercise price ¹ 20 cents |
² 35 cents |
| c. | Grant date ¹ 21 December 2012 |
² 21 December 2012 |
| d. | Risk-free interest rate ¹ 2.50% |
² 2.57% |
| e. | Exercise date 31 December 2015 |
-
f. Share price at grant date 8.08 cents
-
g. Expected price volatility of the company’s shares : 86%
-
h. Expected dividend yield – nil
The expected price volatility is based on the historic volatility and the general trend in share prices of the companies in similar businesses and trading on the ASX over the past 4 and 12 months.
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
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Consolidated Consolidated
31 Dec 2012 31 Dec 2011
$ $
-
Within one year 1,875
- -
Later than one year but not later
than five years
Total - 1,875
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The operating lease was a short term rental agreement for the Group’s previous office premises in Kewdale. The Company presently occupies office space leased by Zurich Bay Holdings, refer note 21. There is currently no formal sub-lease or rental agreement in place however this will be at commercial rate for the space occupied.
(b) The Company, via MRCR, and Blue Bantry are both 50% shareholders in Mineral Sands Resources Pty Ltd (MSR), the entity which owns the Tormin Mineral Sands Project (Tormin).
MRC has agreed to provide Blue Bantry access to an amount of funding to support the original objective by advancing through the Loan certain benefits Blue Bantry would expect to receive from Tormin. The Loan consists of an upfront amount of ZAR1 million (approx AUD$114K) which has already been paid with a further ZAR13 million (approx AUD$1.50M) payable no later than 31 December 2012, subject to the successful capital raising for the development of Tormin. Blue Bantry will repay the Loan from distributions that it will receive in the future from MSR. The additional ZAR 13 million was outstanding at 31 December 2012 pending completion of administrative procedures.
- ( c ) E x p l o r a t i o n Te n e m e n t L e a s e s – C o m m i t m e n t s f o r E x p e n d i t u r e
In order to maintain current rights of tenure to exploration tenements, the consolidated entity is required to outlay lease rentals and to meet the minimum expenditure requirements which are not considered to be material.
2 6 . C O N T I N G E N T L I A B I L I T I E S
There are no Contingent Liabilities.
2 7. S U B S E Q U E N T E V E N T S
Share Capital
Further placements of 49,937,000 were issued in January 2013 raising a further $ 4,202,413 net of expenses.
No other event or transaction has arisen in the interval between the end of the financial year and the date of this report of a material and unusual nature likely, other than what has been disclosed elsewhere in this financial report, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years unless otherwise disclosed in this Directors Report.
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D I R E C T O R ’ S D E C L A R AT I O N
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T H E D I R E C T O R S O F T H E C O M PA N Y D E C L A R E T H AT:
-
The financial statements, comprising the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of cash flow, consolidated statement of changes in equity and accompanying notes, are in accordance with the Corporations Act 2001 including;
-
(a) complying with Australian Accounting Standards and the Corporations Regulations 2001 and, (b) give a true and fair view of the consolidated entity’s financial position as at 31 December 2012 and of its performance for the year ended on that date.
-
The Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards.
-
In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the Directors:
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Mark Caruso Non Executive Director Dated at Perth, Western Australia this 28th day of March 2013
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S TAT E M E N T O F C O R P O R AT E G O V E R N A N C E
S TAT E M E N T O F C O R P O R AT E G O V E R N A N C E
The Board of Directors of Mineral Commodities Limited (MRC) is responsible for the corporate governance of the Company. The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable.
In accordance with the Australian Securities Exchange (ASX) Corporate Governance Council’s (“CGC”) “Principles of Good Corporate Governance and Best Practice Recommendations” the Corporate Governance Statement must contain certain specific information and must disclose the extent to which the Company has followed the guidelines during the period. Where a recommendation has not been followed, that fact must be disclosed together with the reasons for the departure.
The Company’s corporate governance practices were in place throughout the year and are compliant, unless otherwise stated, with the Corporate Governance Council’s principles and recommendations, which are noted below.
- Principle 1. Lay solid foundations for management and oversight Principle 2. Structure the Board to add value Principle 3. Promote ethical and responsible decision making Principle 4. Safeguard integrity in financial reporting Principle 5. Make timely and balanced disclosure Principle 6. Respect the rights of shareholders Principle 7. Recognise and manage risk Principle 8. Remunerate fairly and responsibly
A summary of the corporate governance policies and practices adopted by MRC is set out below.
R O L E O F T H E B O A R D O F D I R E C T O R S
The Board of MRC is responsible for setting the Company’s strategic direction and providing effective governance over MRCs’ affairs in conjunction with the overall supervision of the Company’s business with the view of maximising shareholder value. The Board’s key responsibilities are to:
(a) chart the direction, strategies and financial objectives for MRC and monitor the implementation of those policies, strategies and financial objectives;
(b) monitor compliance with regulatory requirements, ethical standards and external commitments;
(c) appoint, evaluate the performance of, determine the remuneration of, plan for the succession of and, where appropriate, remove the Chief Executive Officer if in place or similar person acting in the executive capacity; and (d) ensure that the Board continues to have the mix of skills and experience necessary to conduct MRCs’ activities, and that appropriate directors are selected and appointed as required.
In accordance with MRCs’ Constitution, the Board delegates responsibility for the day–to–day management of MRC to the Chief Executive Officer (subject to any limits of such delegated authority as determined by the Board from time to time). Management as a whole is charged with reporting to the Board on the performance of the Company.
B O A R D S T R U C T U R E A N D C O M P O S I T I O N
The Board currently is comprised of 5 directors, two of which are independent non–executive Directors who were appointed in December 2012. Details of each directors skill, expertise and background are contained within the directors report included with the company’s annual financial statements.
Independence, in this context, is defined to mean a non–executive Director who is free from any interest and any business or other relationship that could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of MRC. The definition of independence in ASX Recommendation 2.1 is taken into account for this purpose.
Any equity based compensation of directors is required to be approved in advance by shareholders. Presently, the roles of Chairman and Chief Executive Officer have been separated. The present Chairman of the Company is not considered to be an independent director. Notwithstanding this, all directors of the Company are, and were during the reporting period, independent in character and judgment.
The Chief Executive Officer is responsible for supervising the management of the business as designated by the Board. This ensures the appropriate independent functioning of the Board and management.
MRCs’ non–executive Directors may not hold office for a continuous period in excess of three years or past the third annual general meeting following their appointment, whichever is longer, without submitting for re–election. Directors are elected or re–elected, as the case may be, by shareholders in a general meeting. Directors may offer themselves for re–election. A Director appointed by the Directors (e.g., to fill a casual vacancy) will hold office only until the conclusion of the next annual general meeting of MRC but is eligible for re–election at that meeting.
Under MRCs’ Constitution, voting requires a simple majority of the Board. The Chairman holds a casting vote.
The Company has procedures enabling any director or committee of the board to seek external professional advice as considered necessary, at the Company’s expense subject to prior consultation with the Chairman. A copy of any advice sought by a director would be made available to all directors.
B OA R D A N D M A N A G E M E N T E F F E C T I V E N E S S
Responsibility for the overall direction and management of MRC, its corporate governance and the internal workings of MRC rests with the Board notwithstanding the delegation of certain functions to the Chief Executive Officer and management generally (such delegation effected at all times in accordance with MRC’ Constitution and its corporate governance policies).
An evaluation procedure in relation to the Board, individual Directors and Company Executives has not taken place since the inception of the Company. Given the small scale of the Company’s current activities, the performance of the executives and directors is easily monitored and discussed in Board meetings. Once the nature and scale of activities increases, the Company will initiate formal evaluation procedures. With the appointment of a Chief Executive Officer and additional directors during the second half of 2012, evaluation procedures are expected to take place during the current financial year.
F I N A N C I A L R E P O R T I N G , I N T E R N A L C O N T R O L A N D R I S K M A N A G E M E N T
The Board has overall responsibility for MRC’ systems of internal control. These systems are designed to ensure effective and efficient operations, including financial reporting and compliance with laws and regulation, with a view to managing risk of failure to achieve business objectives. It must be recognized however that internal control systems provide only reasonable and not absolute assurance against the risk of material loss.
The Board reviews the financial position of MRC on a weekly basis. For annual financial statements, the Chief Executive Officer and the Company Secretary are required to state in writing that:
�������������������������������������������������������������������������������������������������� Company’s financial condition and operational results in accordance with the relevant accounting standards; and ������������������������������������������������������������������������������������������������������������ management and internal compliance and control system is operating efficiently and effectively in all material respects.
Management has not formally reported to the Board on the effectiveness of the Company’s management of material business risk. Management and the Board interact on a day to day basis and risk is currently being considered on an informal day to day basis across the financial, operational and organisation aspects of the Company’s business. On the commencement of operations, the process of risk reporting will be formalized.
In the absence of any significant scale in the Company’s existing operations, the Board does not believe that the existence of further independent non-executive directors would be of any additional benefit to the Company. As stated above, the Board will ensure that it continues to have the mix of skills and experience necessary to conduct MRCs’ activities, and that appropriate directors are selected and appointed as required.
Details of directors’ shareholdings are disclosed in the directors’ report and financial report. There are no retirement schemes other than the payment of statutory superannuation contributions.
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S TAT E M E N T O F C O R P O R AT E G O V E R N A N C E ( C O N T ’ D )
C O M M I T T E E S O F T H E B O A R D O F D I R E C T O R S
The Board established two permanent Board committees In February 2013 to assist the Board in the performance of its functions:
- (a) the Audit, Compliance and Risk Committee; and
E T H I C A L A N D R E S P O N S I B L E D E C I S I O N – M A K I N G
C O D E O F C O N D U C T
- (b) the Remuneration and Nomination Committee.
These Committees were not in existence throughout the 2012 financial year. The Board and scale of activities was not of a sufficient size to warrant separate committees in this regard.
Each committee has a charter, which sets out the Committee’s purpose and responsibilities. The Committees are described further below.
A U D I T, C O M P L I A N C E A N D R I S K C O M M I T T E E
The purpose of the Audit, Compliance and Risk Committee is to provide assistance to the Board in its review of:
-
(b) the internal and external audit functions; and
-
(c) MRC’s compliance with legal and regulatory requirements in relation to the above.
The Audit, Compliance and Risk Committee has specific responsibilities in relation to MRC’s financial reporting process; the assessment of accounting, financial and internal controls; the appointment of external auditor; the assessment of the external audit; the independence of the external auditor; and setting the scope of the external audit.
The Audit, Compliance and Risk Committee must comprise at least three non–executive Directors that have diverse, complementary backgrounds, with two independent non–executive Directors. The Chairman of the Audit, Compliance and Risk Committee must be an independent non–executive Director.
The members of the Audit, Compliance and Risk Committee are: Mr Walker (Chairman), Mr Leahy, and Mr Torre.
R E M U N E R AT I O N A N D N O M I N AT I O N C O M M I T T E E
The purpose of the Remuneration and Nomination Committee is to discharge the Board’s responsibilities relating to the nomination and selection of Directors and the compensation of the Company’s executives and Directors. The key responsibilities of the Remuneration and Nomination Committee are to:
-
(a) ensure the establishment and maintenance of a formal and transparent procedure for the selection and appointment of new Directors to the Board; and
-
(b) establish transparent and coherent remuneration policies and practices, which will enable MRC to attract, retain and motivate executives and Directors who will create value for shareholders and to fairly and re sponsibly reward executives.
The Remuneration and Nomination Committee must comprise at least three non–executive Directors, two of which must be independent non–executive Directors. The Chairman of the Remuneration and Nomination Committee must be an independent non–executive Director.
The members of the Remuneration and Nomination Committee are: Mr Leahy (Chairman), Mr Walker, and Mr Joseph Caruso.
The remuneration policy which sets out the terms and conditions for the Chief Executive Officer and other senior executives is set out in the Remuneration Report included in the Directors Report.
T I M E LY A N D B A L A N C E D D I S C L O S U R E
MRC is committed to promoting investor confidence and ensuring that shareholders and the market have equal access to information and are provided with timely and balanced disclosure of all material matters concerning the Company. Additionally, MRC recognises its continuous disclosure obligations under the ASX Listing Rules and the Corporations Act.
The Company’s shareholders are responsible for voting on the appointment of directors. The Board informs shareholders of all major developments affecting the Company by:
-
������������������������������������������������������������������������������������������������������ �������������������������������������������������������
-
�����Advising the market of matters requiring disclosure under Australian Stock Exchange Continuous Disclosure Rules. �����������������������������������������������������������������������������������
-
���������������������������������������������������������������������������������������������������������������� Corporation Law.
-
������������������������������������������������������������������������������������������������������� All shareholders that are unable to attend these meetings are encouraged to communicate issues or ask questions by writing to the Company.
The Board has created a framework for managing the Company including internal controls, business risk management processes and appropriate ethical standards.
The Board has adopted practices for maintaining confidence in the Company’s integrity including promoting integrity, trust, fairness and honesty in the way employees and Directors conduct themselves and MRCs’ business, avoiding conflicts of interest and not misusing company resources. A formal Code of Conduct was adopted in February 2013.
D I V E R S I T Y
The Company only consists of 8 employees and directors. Where possible and when the Company expands, the Company will employ a broad mix of individuals reflecting its philosophy of hiring the best candidate for all positions at all levels irrespective of race, religion or gender. In terms of the composition of the Board and Board nominations, the Board will consider the requirements of the Davies Report and the Australian Stock Exchange Corporate Governance Principles as part of the overall Board appointment process of determining the composition of the Board that is the most appropriate for the Group.
At present, the Company does not have a diversity policy due to the small number of emnployees. The Company employs 1 female, representing 12.5% of the total employees and directors.
A policy is currently being developed. The objective of the policy will be for the Company to embrace the diversity of skills, ideas and experiences of an individual and recognise that a workforce is made up of people with differences in age, gender, sexual orientation, disability, religion or national origin or social origin contributes to MRC’s success and organizational strength. It ensures all employees are treated with fairness and respect.
MRC is committed to embedding a corporate culture that embraces diversity through;
-
����������������������������������������������������������������������������������������������������������� of qualified candidates
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S E C U R I T I E S T R A D I N G P O L I C Y
A Securities Trading Policy has been adopted by the Board to set a standard of conduct, which demonstrates MRC’s commitment to ensuring awareness of the insider trading laws, and that employees and Directors comply with those laws. The Securities Trading Policy imposes additional share trading restrictions on Directors, the Company Secretary, executives and employees involved in monthly financial accounting processes (“specified persons”).
Under the Securities Trading Policy, specified persons are only permitted to buy and sell securities if they do not possess non–public price sensitive information and trading occurs outside of specified restricted periods. These periods are the periods commencing on the first day of the month before the end of the half–year or full year period and ending on the next business day after the announcement of the results for that period. In addition, before a specified person can deal in MRC’s securities they must obtain clearance from the appropriate officer, confirming that there is no reason why they cannot trade.
O T H E R I N F O R M AT I O N
The ASX guidelines also prescribe that the Company should maintain a dedicated corporate governance information section on its website. Such a dedicated information section is not presently available on the Company’s website, although the annual financial report will be posted to the website and the Statement of Corporate Governance can be viewed there.
The Company has adopted a formal disclosure policy. The Board and management are aware of their responsibilities in respect of identifying material information and coordinating disclosure of that information where required by the ASX Listing Rules.
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S H A R E H O L D E R I N F O R M AT I O N
T W E N T Y L A R G E S T S H A R E H O L D E R S
Additional information required by the Australian Stock Exchange Ltd Listing Rules and not disclosed elsewhere in this report. This information is current as at 3 April 2013.
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Number of Percentage
Rank Name Ordinary of issued
Shares shares
1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 82,623,746 25.50%
2 AU MINING LIMITED 64,464,000 19.90%
3 ZURICH BAY HOLDINGS PTY LTD 40,000,000 12.35%
4 ZURICH BAY HOLDINGS PTY LTD 20,605,988 6.36%
5 J P MORGAN NOMINEES AUSTRALIA LIMITED 12,039,402 3.72%
6 CITICORP NOMINEES PTY LIMITED 11,529,307 3.56%
7 MISS KATHRYN YULE 10,059,500 3.11%
8 JP MORGAN NOMINEES AUSTRALIA LIMITED 5,296,843 1.64%
9 INTERNATIONAL MINING SERVICES LIMITED 4,565,500 1.41%
10 BLASTRITE GULF FZE 3,473,515 1.07%
11 MR KEVIN ANTHONY LEO & MRS LETICIA LEO 2,902,709 0.90%
12 NATIONAL NOMINEES LIMITED 2,805,442 0.87%
13 IEC INVESTMENTS PTY LTD 2,147,596 0.66%
14 MR DAVID GEOFFREY VINCENT & MRS GIUSEPPINA ANTONINA VINCENT 1,870,000 0.58%
15 INTERNATIONAL MINING SERVICES LTD 1,500,000 0.46%
16 MR ROBERT CAMERON GALBRAITH 1,459,221 0.45%
17 MS KATHRYN YULE 1,282,500 0.40%
18 MR WILLIAM DAVIDSON MEEK 1,000,000 0.31%
18 ZURICH BAY HOLDINGS PTY LTD 1,000,000 0.31%
18 KINGARTH PTY LTD 1,000,000 0.31%
18 MR ASHLLEY WALLISS 1,000,000 0.31%
19 MR DONALD BOYD 900,000 0.28%
20 MR DAVID GEOFFREY VINCENT 836,000 0.26%
TOTAL 274,361,269 84.69%
Range of Number of Number of
holdings shareholders shares
1 – 1,000 136 40,619
1,001 – 5,000 363 1,268,790
5,001 – 10,000 175 1,462,012
10,001 – 353 13,436,875
100,000
100,001 – and 134 307,745,047
over
Total holders 1,161 323,953,343
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M a r k e t a b l e P a r c e l s
Number of shareholders holding less than a marketable parcel of ordinary shares is 391.
Vo t i n g R i g h t s
Every ordinary shareholder present in person or by proxy at meetings of shareholders shall have one vote for every share held.
Option holders have the right to attend meetings but have no voting rights until the options are exercised.
S u b s t a n t i a l s h a r e h o l d e r s
The following shareholders are substantial shareholders of the Company:
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R e s t r i c t e d s e c u r i t i e s
There are no restricted securities.
S h a r e b u y b a ck s
There is no current on market share buy back.
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