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MINERAL COMMODITIES LTD — Interim / Quarterly Report 2008
Sep 14, 2008
65371_rns_2008-09-14_a240e28f-5747-4cd9-acda-10570b169f50.pdf
Interim / Quarterly Report
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Mineral Commodities Ltd
ABN 39 008 478 653
Half-Year Financial Report 30 June 2008
This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 December 2007 and any public announcements made by Mineral Commodities Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act.
Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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Directors’ Report
The Directors present their report on the Consolidated Entity, consisting of Mineral Commodities Ltd and the entities it controlled at the end of or during the half-year ended 30 June 2008.
Directors
The following persons were Directors of the Company in office during the whole of the half year, and up to the date of this report:
Joseph Anthony Caruso Non-Executive Chairman Mark Victor Caruso Managing Director Gregory Hugh Steemson Executive Director
Results
The loss of the consolidated entity after income tax attributable to members of the parent entity was $855,305 (2007: loss $1,022,758).
Review of Operations
Highlights of the Company’s operations for the period under review are as follows.
South African Projects
Xolobeni Mineral Sands Project
In March 2007, Mineral Commodities Limited’s (MRC’s) majority owned South African subsidiary Transworld Energy and Minerals Resources SA Pty Ltd (TEM) lodged the Mining Right Application for the Xolobeni Heavy Mineral Sands Project with the Department of Minerals and Energy (DME) in Port Elizabeth.
TEM has since completed the Environmental Impact Assessment (EIA), which was submitted to the DME on 22 October 2007. After a series of government department and public meetings aimed at reviewing the scope and outcomes of the EIA and accompanying Environmental Management Programme (EMP), an updated report was resubmitted on 20 December 2007. This report addressed the various matters arising from the consultation process.
During the period, TEM attended meetings at the DME’s head offices in Pretoria and regional office in Port Elizabeth to clarify various aspects of the application. Briefing sessions with XolCo (MRC’s BEE partner) and the Tribal Authority also continued during the period to update the community on the Mining Right Application process and position.
On 4 August 2008, the Department of Minerals and Energy of the Republic of South Africa advised that they granted to MRC’s South African subsidiary, Transworld Energy and Mineral Resources (SA) (Pty) Ltd (TEM), the Mining Right for the Kwanyana block within the Xolobeni Mineral Sands tenement area. The remaining areas will be held under a Prospecting Right valid to 2010 which can be extended until applications are made to convert the remaining areas to Mining Rights on a block by block requirement.
The Xolobeni Mining Right is expected to be signed on 31 October 2008, along with the Environmental Management Plan.
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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The Company has been advised that on behalf of the AmaDiba Crisis Committee (the ACC) and its members, the Grahamstown office of the Legal Resources Centre filed a Notice of Appeal with the Minister of Minerals and Energy (the Minister). The ACC requested the Minister to suspend and then appeal the decision to grant the mining right.
The Minister and a high level delegation visited the Xolobeni project area last month and in an open meeting with the AmaDiba community members addressed by the minister in their native language “Xhosa”, advised that the Xolobeni mining right will be granted on the 31[st] October 2008.
MRC believes that due to the socio – economic importance of the Xolobeni mining project to the area, the Minister and the Department of Minerals and Energy will continue to support the issuing of the Xolobeni Mining Right.
Tormin Mineral Sands Project
The Tormin deposit is covered by two tenements, one held by the Company and the other held in the name of Steenvas Pty Ltd but under option to the Company.
As previously announced, the Tormin Mining Right was expected to be signed on 29 August 2008. Due to some inconsistencies in the documentation provided for execution, the signing has been delayed until the documents have been corrected which is currently taking place.
The Steenvas Mining Right conversion is currently awaiting approval by the DME and is expected in the near future.
The Company announced during the quarter that it is currently reviewing its options regarding its Black Economic Empowerment (BEE) partner for the Tormin project due to the failure of its existing partner to meets it’s contractual and funding obligation.
Once approved, the two Mining Rights will be amalgamated.
The company has received interest from major industry participants and end users for the Tormin product and we are confident once the Tormin Project mining right is fully approved and executed, off-take agreements will be finalised.
Sierra Leone Operations
The Company’s wholly owned Sierra Leone subsidiary, Kariba Kono (SL) Ltd, owns the No. 11 Oversize Tailings Dump at Koidu. The operations remain under care and maintenance pending an engineering and design review following the failure of the 80tph diamond pan plant supplied by ProMet Engineers Africa (Pty) Ltd.
The MRC Board has resolved to divest either Kariba Kono (SL) Ltd or its assets. On 4 June 2008 the Company announced that it had entered into a Heads of Agreement with ROK Diamonds Ltd to sell the No 11 diamondiferous gravel dump at Koidu, Sierra Leone.
Consideration for the sale was to be US$2M apportioned as follows:
-
(1) US$1.5M payable at settlement
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(2) The balance of US$0.5M may be converted to ordinary seed shares in ROK Diamonds Limited at MRC’s election within 12 months or the float of ROK Diamonds Limited whichever occurs first.
The sale was not to include the Diamond Pan Plant.
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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On 25 August 2008, the Company announced that due to certain legal impediments currently in place in Sierra Leone which prevent the divestment of these assets, the current Agreement with ROK was terminated.
The Company is currently in the process of ensuring the legal impediments are removed so that it may proceed to divest these assets accordingly.
Legal Proceedings
On 12 October 2007 the Company commenced legal proceedings in the Federal Court of Australia against Promet Engineers Africa (Pty) Ltd (Promet), Promet Engineers Pty Ltd, James Dinsdale Cribbes, Robert John Bennett, and Richard George Ford for breach of contract, misleading and deceptive conduct, and breaches of the Trade Practices Act.
On 10 April 2008 leave was granted to MRC and Kariba Kono (SL) Ltd to serve an amended Application and Statement of Claim on Messrs Ford and Bennett. Following a directions hearing on 17 June 2008 orders were made that MRC and Kariba Kono provide discovery by 31 July 2008.
Petro Ventures International Limited
During the quarter the Company continued as a seed capital investor in Petro Ventures International Limited (Petro Ventures). Petro Ventures has presently secured three project areas in the UK, offshore Romania, and onshore Hungary.
In April 2008, Macquarie Bank Limited (“MBL”) participated in a US$1M Private Placement of Ordinary shares in Petro Ventures and advanced Petro Ventures US$4M as part of a larger US$10M Convertible Facility. Further funds have been advanced under this facility to meet the operator cash calls.
In early June 08, Petro Ventures was notified that MBL’s Credit Committee had approved a contribution of $10M towards Petro Venture’s forthcoming $25m equity financing.
Investment in Allied Gold Limited
Allied Gold Limited (ALD) is a listed gold production and exploration company with the Tabar Islands Gold Project in Papua New Guinea as its principal asset. This comprises the Simberi Oxide Gold Project and exploration property on the Tabar Islands Group. ALD successfully commissioned its processing plant operation and poured its first gold in February 2008.
MRC is one of the largest shareholders in ALD and currently holds a direct interest in 4.92% (approximately 18.5 million shares) of ALD’s issued fully paid ordinary shares.
The market value of MRC’s shareholding at 30 June 2008 was $10.93 million.
Events Subsequent to Balance Date
Other than disclosed under the review of operations above, no other matters or circumstances have arisen since the end of the half-year which significantly affected or may significantly affect the economic entity’s operations, the results of those operations or the economic entity’s state of affairs in future financial years.
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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Auditor’s Independence Declaration
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 16.
Signed in accordance with a resolution of the Directors.
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Mark Caruso Managing Director Perth, Western Australia 12 September 2008
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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Consolidated Income Statement
For The Half-Year Ended 30 June 2008
| Note Revenues from continuing operations Interest income Other income Total Revenues 2 General & administration expenses Corporate costs including directors remuneration Employees and consultants remuneration Depreciation Exploration and evaluation costs Receivable written off Share of net result of associates accounted for using the equity method 5 Loss before income tax Income tax expense Loss for the half year from continuing operations Loss for the half year from discontinued operations 6 Equity holders of Mineral Commodities Ltd Basic (loss) per share (cents) from continuing operations Loss per share attributable to the ordinary equity holders of the Company. |
Half-year Ended 2008 $ 2007 $ 60,161 40,370 456,721 554,413 |
Half-year Ended 2008 $ 2007 $ 60,161 40,370 456,721 554,413 |
|---|---|---|
| 516,882 | 594,783 | |
| (287,062) (250,187) (270,978) (30,063) (10,060) (60,845) - (392,313) - (392,313) (462,992) (855,305) (3.1) (7.0) |
(252,247) (159,067) (260,091) (32,275) - - (60,758) |
|
| (169,655) - |
||
| (169,655) | ||
| (853,103) | ||
| (1,022,758) | ||
| (0.15) (0.96) |
The above consolidated income statement should be read in conjunction with the accompanying notes.
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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Consolidated Balance Sheet
as at 30 June 2008
| Note CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other current assets Non current assets held for sale 6 Total Current Assets NON-CURRENT ASSETS Available for sale financial assets 5 Property, plant and equipment Exploration & development expenditure Investments accounted for using the equity method 5 Total Non-current Assets Total Assets CURRENT LIABILITIES Trade and other payables Short term provisions Total Current Liabilities Total Liabilities NET ASSETS EQUITY Contributed equity 7 Reserves 8 Accumulated losses Capital and reserves attributable to equity holders as Mineral Commodities Ltd Minority equity interest TOTAL EQUITY |
30 June 2008 $ 673,387 686,863 39,431 2,530,851 3,930,532 11,202,470 39,573 8,970,331 - 20,212,374 24,142,906 174,091 91,624 265,715 265,715 23,877,191 39,436,350 7,162,584 (22,856,083) 23,742,851 134,340 23,877,191 |
31 December 2007 $ 2,177,864 499,921 16,723 - |
|---|---|---|
| 2,694,508 | ||
| 436,398 1,575,105 11,394,491 3,298,437 |
||
| 16,704,431 | ||
| 19,398,939 | ||
| 260,647 88,483 |
||
| 349,130 | ||
| 349,130 | ||
| 19,049,809 | ||
| 39,436,350 1,479,897 (22,000,778) |
||
| 18,915,469 134,340 |
||
| 19,049,809 |
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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Consolidated Cash Flow Statement
for the half-year ended 30 June 2008
| Note CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees Exploration and development expenditure Interest received Sundry income Net cash outflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payment for plant and equipment Proceeds from sales of investments 7 Purchase of equity investments Loans advanced to other entities Net cash inflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares, net of capital raising costs Net cash inflow from financing activities Net (decrease) in cash and cash equivalents held Cash and cash equivalents at the beginning of the half-year Differences arising from movements in foreign currency Cash and cash equivalents at the end of the half-year |
Half-year Ended 2008 2007 $ $ (1,125,039) (1,119,060) (493,367) (1,204,836) 30,045 40,370 - - (1,588,361) (2,283,526) (4,444) (315,690) 658,020 1,226,310 - (619,598) (500,000) - 153,576 291,022 - 1,026,921 - 1,026,921 (1,434,785) (965,583) 2,177,864 2,561,364 (69,692) (38,520) 673,387 1,557,261 |
Half-year Ended 2008 2007 $ $ (1,125,039) (1,119,060) (493,367) (1,204,836) 30,045 40,370 - - (1,588,361) (2,283,526) (4,444) (315,690) 658,020 1,226,310 - (619,598) (500,000) - 153,576 291,022 - 1,026,921 - 1,026,921 (1,434,785) (965,583) 2,177,864 2,561,364 (69,692) (38,520) 673,387 1,557,261 |
|---|---|---|
| (2,283,526) | ||
| (315,690) 1,226,310 (619,598) - |
||
| 291,022 | ||
| 1,026,921 | ||
| 1,026,921 | ||
| (965,583) 2,561,364 (38,520) |
||
| 1,557,261 |
The above cashflow statement should be read in conjunction with the accompanying notes.
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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Consolidated Statement of Changes in Equity
for the half-year ended 30 June 2008
| Total equity at the beginning of the half year Exchange differences on translation of foreign operations and unrealised foreign exchange losses Changes in the fair value of available for sale financial assets Gain on deemed disposal on equity accounted investment Net income (loss) recognised directly in equity Loss for the half year Total recognised income and expense for the year Transactions with equity holders in their capacity as equity holders Contributions of equity net of transactions costs Total equity at the end of the half year Total recognised income and expense for the half-year is attributable to: Members of the company Minority interests |
Half-Year 2008 $ 19,049,809 (1,997,779) 7,680,466 - 5,682,687 (855,305) 4,827,382 - 23,877,191 (855,305) - (855,305) |
Ended 2007 $ 22,707,357 (554,240) (47,000) 1,843,008 |
|---|---|---|
| 1,241,768 (1,022,758) |
||
| 219,010 1,026,921 |
||
| 23,953,288 | ||
| (219,010) - |
||
| (219,010) |
The above statement of changes in equity should be read in conjunction with the accompanying notes.
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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Notes to the Consolidated Financial Statements
for the half year ended 30 June 2008
1. Basis of Preparation
This general purpose financial report for the interim half-year reporting period ended 30 June 2008 has been prepared in accordance with Australian Accounting Standard 134 "Interim Financial Reporting" and the Corporations Act 2001.
It is recommended that this financial report be read in conjunction with the annual financial report for the year ended 31 December 2007 and any public announcements made by Mineral Commodities Limited during the half year in accordance with the continuous disclosure requirements arising under the Corporations Act 2001.
This interim report does not include all the notes of the type normally included in an annual financial report.
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.
2. Revenue
| Interest – other persons Profit on the sale of investments in listed companies Other revenue Total Revenue from continuing activities |
Half-Year 2008 $ 60,161 429,057 27,664 516,882 |
Half-Year 2007 $ 40,370 539,419 14,994 |
|---|---|---|
| 594,783 |
3. Loss for the Half-Year
| Half-Year | Half-Year | |
|---|---|---|
| 2008 | 2007 | |
| $ | $ | |
| Loss before income tax has been | ||
| determined after: | ||
| Depreciation and amortisation | 51,278 | 51,352 |
| Site operating costs | 415,086 | 686,639 |
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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4. Segment Information
Primary Reporting
(a) Geographical Segments
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Africa Australia Discontinued Consolidated
Operations
2008 2007 2008 2007 2008 2007 2008 2007
$ $ $ $ $ $ $ $
5,506 1,027 511,376 593,756 6,859 6 523,741 594,789
(277,200) (301,587) (115,113) 131,932 (462,992) (853,103) (855,305) (1,022,758)
(277,200) (301,587) (115,113) 131,932 (462,992) (853,103) (855,305) (1,022,758)
Total segment revenue
Segment Result
Loss before income tax
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5. Available for Sale Financial Assets
| Listed equity securities Unlisted equity securities Total |
Half-Year 2008 $ 10,826,246 376,224 11,202,470 |
Half-Year 2007 $ 40,000 50,000 |
|---|---|---|
| 90,000 |
Included in the listed equity securities is the investment in Allied Gold Ltd which was previously equity accounted for and has been reclassified as follows:
| Carrying value of investment in Allied Gold Ltd Equity accounted balance 1 January 2008 Less 1 million shares sold Revaluation to market value on reclassification at 30 June 2008 Available for sale financial assets 30 June 2008 |
3,298,437 (228,963) |
|---|---|
| 3,069,474 7,680,466 |
|
| 10,749,940 |
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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5. Available for Sale Financial Assets (cont’d)
Mineral Commodities Limited (“MRC”) previously accounted for its investment in Allied Gold Limited (“ALD”) as an associate company, as MRC was deemed to exert significant influence over ALD due its shareholding, as well as having two of the Company’s directors as directors of ALD.
As a result of ALD issuing a significant amount of shares over a period of time, coupled with the divestment of one million shares, MRC’s interest in ALD has reduced to a level below 5%. MRC’s projects are reaching a stage where further investment and time is required to develop them to the next level.
ALD has appointed a new Chief Executive Officer during the period. Mr. Mark Caruso has remained as Executive Chairman to ensure a smooth transition to the new CEO occurs. The Board of ALD is seeking new appointees to restructure to a level which is consistent with the ASX Corporate Governance Principles. The influence that MRC exerts over ALD has been diluted to the extent that it is now only one of the larger shareholders.
Previously, the carrying value of Allied Gold Limited was determined as the cost of its investment adjusted for the share of any profits and losses of ALD throughout each reporting period. The reclassification of this investment to an available for sale financial asset has resulted in MRC fair valuing the investment under AASB 139, based on the bid price of Allied Gold Limited at 30 June 2008.
As at the date of this report, the share price of Allied Gold had decreased to 27 cents per share, which values MRC’s investment in Allied Gold at $5,004,282.
6.
Discontinued Operation
(a) Description
During the half year, the Company announced its intention to divest its interest in its Sierra Leone Diamond Operations and initiated an active program to locate a buyer.
The Board of Mineral Commodities Limited announced on 3 June 2006 that the Company had entered into a conditional Heads of Agreement with ROK Diamonds Ltd, a wholly owned subsidiary of ROK Entertainment Group, to sell the No 11 diamondiferous gravel dump at Koidu in Sierra Leone.
The divestment was to proceed via the sale of the Company’s wholly owned subsidiary MRC Africa Pty Ltd, the entity which holds the Company’s interests in Sierra Leone.
The agreement also included the sale of items of plant and equipment but excluded the Diamond Pan Plant.
Consideration for the sale was to be US$2,000,000 apportioned as follows:
-
(i) US$1,500,000 payable at settlement;
-
(ii) the balance of US$500,000 may be converted to ordinary seed shares in ROK Diamonds Limited at MRC’s election within 12 months or the float of ROK Diamonds Limited whichever occurs first.
On 25 August 2008, the Company announced that due to certain legal impediments currently in place in Sierra Leone which prevent the divestment of these assets, the current Agreement with ROK was terminated.
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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The Company is currently in the process of ensuring the legal impediments are removed so that it may proceed to divest these assets accordingly.
Financial Information relating to the discontinued operation for the period is set out below.
(b) Financial Performance and Cash Flow Information.
The financial performance and cashflow information presented are for the entire period to 30 June 2008.
| Revenue Expenses Profit before income tax Income Tax Expense Profit after income tax of discontinued operations Net cash outflow from ordinary activities Net cash inflow /(outflow) from investing activities Net cash outflow from financing activities Net Cash used by discontinued operations |
Half-Year 2008 $ 6,859 (469,851) (462,992) - (462,992) (488,406) 56,733 - (431,673) |
Half-Year 2007 $ 6 (853,109) |
|---|---|---|
| (853,103) | ||
| - | ||
| (853,103) | ||
| (942,489) (287,268) - |
||
| (1,229,757) |
(c) Carrying amounts of assets and liabilities
The carrying amount of assets and liabilities as at 30 June 2008 were:
| Property Plant and equipment Exploration & Development Receivables & prepayments Total Assets Trade Creditors Total Liabilities Net Assets |
Half-year 2008 $ 1,488,698 983,070 92,354 |
|---|---|
| 2,564,122 (33,271) |
|
| (33,271) | |
| 2,530,851 |
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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7. Issued capital
| Ordinary Shares Fully Paid Balance at beginning of period Conversion of $0.30 options – June 2007 Conversion of $0.40 options – June 2007 Balance at the end of the period |
2008 2007 Half-Year Half-Year Number of Shares Number of Shares 2008 $ 2007 $ 122,993,385 106,436,002 39,436,350 35,087,042 - 3,178,404 - 953,522 - 183,500 - 73,400 |
|---|---|
| 122,993,385 109,797,906 39,436,350 36,113,964 |
The following are the balances of options over fully paid ordinary shares at balance date:
| Exercise Price | |||
|---|---|---|---|
| No of | Cents per | ||
| Category | Options | Share | Expiry Date |
| Unlisted Options | 1,750,000 | 30 | 30 September 2009 |
| Unlisted Options | 500,000 | 40 | 30 September 2009 |
| Reserves | |||
| Half-Year | Half-Year | ||
| 2008 | 2007 | ||
| $ | $ | ||
| General Reserve | 2,551,100 | 2,551,100 | |
| Financial asset reserve | 6,429,257 | 2,310,036 | |
| Share based payments | reserve | 78,500 | |
| Foreign currency translation reserve | (1,896,273) | (1,142,696) | |
| 7,162,584 | 3,718,440 |
8. Reserves
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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9. Contingent liabilities
The Company has provided bank guarantees with a total value of $11,043 (2007 - $13,950) to the Department of Minerals & Energy South Africa as security on tenements. These guarantees are backed by term deposits. Guarantees totalling $23,000 to the Department of Mines in Queensland were released during 2008 and the underlying deposits have been returned
10. Related party transactions
There were no transactions or balances with directors or director related entities during the period other than the payment of Directors remuneration.
Transactions between Mineral Commodities Limited and other entities in the wholly owned group during the period consisted of loans advanced and payments received and made on intercompany accounts. These transactions were made on normal commercial terms and conditions and at market rates.
During the period, the Company provided management, accounting and administration services to other entities in the wholly-owned group.
11. Subsequent Events
Other than disclosed elsewhere in this financial report, no other matters or circumstances have arisen since the end of the half-year which significantly affected or may significantly affect the economic entity’s operations, the results of those operations or the economic entity’s state of affairs in future financial years.
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Mineral Commodities Ltd Half-Year Financial Report – 30 June 2008
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Directors’ Declaration
Declaration by Directors
The directors of the company declare that:
-
The financial statements, comprising the Income Statement, Balance Sheet, Cash Flow Statement, Statement of Changes in Equity and accompanying notes:
-
(a) Comply with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and
-
(b) Give a true and fair view of the entity's financial position as at 30 June 2008 and of its performance for the half-year ended on that date.
-
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.
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and behalf of the directors by:
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Mark Caruso Managing Director Perth, Western Australia 12 September 2008
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BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay Street SUBIACO WA 6008 PO Box 700 WEST PERTH WA 6872 Phone 61 8 9380 8400 Fax 61 8 9380 8499 [email protected] www.bdo.com.au
ABN 79 112 284 787
12 September 2008
The Directors Mineral Commodities Ltd Unit 15, Level 1 51-53 Kewdale Rd Welshpool WA 6106
Dear Sirs
DECLARATION OF INDEPENDENCE BY PETER TOLL TO THE DIRECTORS OF MINERAL COMMODITIES LTD
As lead auditor of Mineral Commodities Ltd for the 6 months ended 30 June 2008, I declare that, to the best of my knowledge and belief, there have been no contraventions of:
-
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
-
any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Mineral Commodities Ltd and the entities it controlled during the period.
Peter Toll Director
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BDO Kendalls Audit & Assurance (WA) Pty Ltd Perth, Western Australia.
BDO Kendalls is a national association of separate partnerships and entities
BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay Street SUBIACO WA 6008 PO Box 700 WEST PERTH WA 6872 Phone 61 8 9380 8400 Fax 61 8 9380 8499 [email protected] www.bdo.com.au
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ABN 79 112 284 787
INDEPENDENT AUDITOR’S REVIEW REPORT TO THE MEMBERS OF MINERAL COMMODITIES LIMITED
We have reviewed the accompanying half-year financial report of Mineral Commodities Limited, which comprises the condensed balance sheet as at 30 June 2008, and the condensed income statement, condensed statement of changes in equity and condensed cash flow statement for the half-year ended on that date, other selected explanatory notes and the directors’ declaration of the consolidated entity comprising the disclosing entity and the entities it controlled at the half-year end or from time to time during the half-year.
Directors’ Responsibility for the Half-Year Financial Report
The directors of the disclosing entity are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the disclosing entity’s financial position as at 30 June 2008 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Mineral Commodities Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.
A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Independence
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .
BDO Kendalls is a national association of separate partnerships and entities
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Basis for Qualified Conclusion
As disclosed in the audit report to the financial statements for the year ended 31 December 2006, the Company had not consolidated two subsidiaries being Erebus Plc and Kariba Kono Ltd into the consolidated income statement, balance sheet, cash flow statement, statement of changes in equity or notes to the financial report as at 31 December 2006 due to the financial information not being considered reliable by the Board of Directors.
For the year ended 31 December 2007 the group has now consolidated Erebus Plc and Kariba Kono Ltd. Erebus Plc and Kariba Kono Ltd including losses from the date of acquisition (23 June 2006) until 31 December 2006 which were not previously recorded in the consolidated entity.
Accordingly the scope of our audit has been limited as we have been unable to perform sufficient audit procedures in relation to the operations of the two subsidiaries for the period from 23 June 2006 to 31 December 2006 to correctly record the prior periods financial performance.
Qualified Conclusion
Except for the effects of such adjustments, if any on the financial statements as might be determined necessary had we been able to satisfy ourselves of the matter referred to in the preceding paragraph, based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Mineral Commodities Limited is not in accordance with the Corporations Act 2001 including:
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(a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2008 and of its performance for the half-year ended on that date; and
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(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.
BDO Kendalls Audit & Assurance (WA) Pty Ltd
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Peter Toll Director
Perth, Western Australia Dated this 12th day of September 2008