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NEURIZER LTD — Annual Report 2008
Sep 24, 2008
65442_rns_2008-09-24_8674d8cd-f892-461b-9413-13d40e10ecae.pdf
Annual Report
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ANNUAL REPORT TWO THOUSAND AND EIGHT
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CONTENTS
Company Highlights 01
Chairman’s Address 02
General Manager’s Report 04
Directors’ Review of Operations 06
Directors’ Report 12
Corporate Governance Statement 20
Directors’ Declaration 23
Auditors Independence Declaration 24
Independent Audit Report 25
Financial Statements 28
Notes to Financial Statements 32
Shareholder Information 51
Corporate Directory 52
IN 2008 SOUTH AUSTRALIA
HAS TWO OPERATING
URANIUM MINES. BY 2010
THIS NUMBER WILL MORE
THAN DOUBLE.
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OPERATIONAL HIGHLIGHTS CORPORATE HIGHLIGHTS
1. Upgrade of the Mt Gee Resource 1. Company Review
In September 2008 the company released a resource The company conducted a comprehensive review
upgrade to 31,400tonnes of contained U3O8 in 51 million of matters of accountability and its culture following
tonnes of mineralisation. At a cut-off of 300 U3O8 ppm the suspension in January 2008 by PIRSA of its
the average grade was 615 ppm. drilling program.
2. Rights Issue 2. Paralana Mineral System
In October 2007 the company raised $15.5m in a rights The Mt Gee uranium deposit was upgraded to 31,400
issue to shareholders. 57% of entitlements were taken tonnes of contained U3O8 and the company confirmed
up representing the issue of 6.2 million new shares. its belief in the outstanding resource of the uranium-rich
3. Corporate Office Paralana Mineral System.
The company moved to new offices in July 2007. 3. Policy Paper
The offices, in Hindmarsh Adelaide, are ideally located In August 2008 the company published a major Policy
and house operational and corporate headquarters. Paper entitled “Learning from Waste in the Wilderness”
4. Environmental Referral which dealt with issue arising at Mt Gee, the need to
promote a new corporate culture and the commitment
The company has nominated the Mt Gee project as a
controlled action under the Commonwealth EPBC Act the company has made to strengthen our culture and
practices.
and has volunteered to complete an EIS as part of the
project evaluation. 4. Nuclear Power Generation
5. Mt Gee Issues Strong global demand for uranium has occurred in this
year and an increase in forecast demand enhances the
In January 2008 the company’s drilling program was
market for nuclear power generation.
suspended by PIRSA following an investigation of
unauthorised burial of drill cuttings and other rubbish 5. Board & Management
at Mt. Gee. The company plans to remove bags and rubbish The company has strengthened the Board and
under the direction of the EPA and PIRSA and to remediate management as it strives towards its commitment to
the site. best practice and implementing change. There will be
further recruitment of directors and executives in the
current year.
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1
CHAIRMAN’S ADDRESS
I have pleasure in presenting the fifth Annual Report to shareholders for Marathon Resources Limited (Marathon) and to outline to you a summary of activities which have been undertaken by the company in the 2007/2008 year.
Over the last year Marathon has received public attention requiring the company to address matters of accountability and culture, but we are confident that the company has built a sustainable platform for its future in an industry which has tremendous growth prospects. Further we have confirmed that an outstanding resource is contained within the Paralana Mineral System in the North Flinders region of South Australia.
The first half of the year saw us delivering an exploration program which culminated in an improved resource at the Mt Gee deposit of 30.0kt of contained U3O8 in 46.1 million tonnes of mineralisation with an average grade of 651 ppm. We have increased the inferred resource from the previous calculation of 26.9kt and the re-evaluation of the existing drill core and the re-interpretation of the major geological units have given us a better understanding of the mineralisation. There is potential for further mineralisation in the north east quadrant of Mt Gee.
There has also been a great deal of work done on data acquisition and geotechnical analysis so that we are well placed to proceed to the next phase of environmental work, regulatory reports and pre-feasibility study.
In January 2008 our drilling program was suspended by the Department of Primary Industries & Resources SA (PIRSA) following discovery of the unauthorised burial of drill cuttings at Mt Gee. The suspension profoundly affected Marathon and we have worked very hard to both address the issues surrounding rectification of the site and restoring the damage to our reputation.
It is appropriate to note that in this Annual Report that Marathon released a major policy paper on 15 August 2008 titled “Learning from Waste in the Wilderness”. The policy paper has been widely distributed and is publicly available. We wrote to shareholders directly so that they could hear from us what happened and what we have done to address all the operational and cultural issues which arose from the problem we caused.
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It is with confidence that Marathon can now show we have the policies, procedures and commitment in place to deliver our goals to the highest environmental and community standards.
Our aim is to be a major and worthy contributor to Australia’s economic development and social welfare and we will strive for world-leading practice and balance the interests of all key stakeholders.
Marathon acknowledges that Mt Gee is located in a wild and beautiful place in the North Flinders Ranges. We strongly believe that Marathon can co-exist with other business operators and cultural guardians to ensure there is appropriate and sustainable development in the region. Marathon will embrace the opportunity to work closely with others in the vicinity to make sure the whole area is managed in an environmentally sensitive way. We feel there is a great opportunity for the Company to contribute to this special region of South Australia by providing opportunities such as employment, academic study and conservation as well as demonstrating the benefits of ecologically sensitive mining operations.
In August 2008 PIRSA approved the Rectification Plan for Mt Gee and we have committed to complete the work under PIRSA’s direction during the next few months.
Marathon responded positively to the recent issue at Mt Gee and a complete review of our structure, objectives and operations was conducted. We have made significant changes to the Board and executive management already this year and we have recruited, and will continue to recruit, the best people to achieve our plans.
Our General Manager has done a review of activities on page 4, the directors review of operations sets out assessments of other tenements held by Marathon on page 6 of this report. There have been several other investments made during the year which will give us the opportunity to develop a portfolio of investments to balance our activities and operating costs.
OUR AIM IS TO BE A MAjOR AND WORTHY CONTRIBUTOR TO AUSTRALIA’S ECONOMIC DEvELOPMENT AND SOCIAL WELfARE
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The Nuclear Industry and Outlook
There are two important factors affecting the future value of Marathon which have received attention in the last year.
Firstly, there has been some consolidation in the industry in Australia and a recent sale of a uranium enterprise in Western Australia indicates that the uranium exploration industry has strong growth prospects. Marathon has always stated that major mining houses prefer large-scale deposits for investment so that amortisation of capital costs over a 15 -20 year period can profitably recover infrastructure costs.
Marathon’s current resources and prospects at Mt Gee have the potential for a mining operation delivering approximately 1000 tpa over that period.
The recent sale in Western Australia places a value of about $US6/lb for the underlying uranium resources and, based on this transaction and with Marathon’s current estimate of resources of 30,030 tonnes, the future value of the company should far exceed the present market capitalisation.
Secondly, the global market for nuclear power generation has seen a resurgence in 2008. The World Nuclear Association published data as at 31 July 2008 stating there were 430 operating nuclear plants, 36 plants under construction, 93 planned and 219 proposed plants around the world. The plants under construction will require more than 20,000tpa to operate and this represents an increase in present world-wide supply of uranium of 40 -50%.
The forecast demand therefore for the resource will be high for the period in which Marathon intends to mine and current planned mining operations are unlikely to deliver excess supply. The uranium spot price has risen in recent months too and there is confidence in the market that the long-term indicators are favourable.
Board and Executive Management Appointments
In January 2008 Marathon appointed the Honourable Chris Schacht – a former Labour Federal Minister - to the Board and in June 2008 the company appointed Dr John G (Shad) Linley also as a Non-Executive Director.
Chris Schacht served in the senate of the federal Parliament for 15 years until 2002 and was a Minister from 1993 -1996. He has vast government experience and in recent years he has developed strong economic, trading and cultural links with China
Dr Linley’s extensive corporate and resources industry experience will be invaluable for the company’s planned transition from explorer to miner, and his most recent position as Chief Executive Officer for the major zinc refining group Sun Metals Corporation will provide Marathon with the leadership experience for large-scale capital intensive operations.
In June 2008 we announced the retirement of Dr Vic Bogacz and Dr John Santich as Executive Directors. Drs Bogacz and Santich were founding directors of Marathon. They have elected to pursue new business interests and have joined the board of Primary Resources Ltd., a company is which Marathon holds a joint venture interest in the Warburton deposit in WA. Their contribution to establishing and developing the portfolio of exploration tenements along with their technical leadership with the Paralana Mineral System, have been inspirational and we thank them both for their outstanding efforts.
Mr Denis Wood retired as a Director in August 2008. He is Director-Resources of one of Marathon’s major shareholders, Talbot Group Holdings Pty Ltd (TGH) and he is retiring to concentrate on the active investment portfolio of TGH. His dedication to the company’s development since 2006 has been tremendous and his contribution to and the experience with environmental and regulatory processes have been immeasurable. We thank his also for his guidance and support.
Mr W Ian McRae joined the company in January 2008 as the Mt Gee Project Executive and was promoted to General Manager in May 2008. Mr McRae brings a wealth of experience to the company from the mining industry as he was formerly the Manager Operations for Peko Mines at Tenant Creek in the 1980’s and 1990’s and General Manager for the Pilbara operations of Robe River Mining Company in the 1990’s. He later provided executive consulting services for Macarthur Coal Limited and Macmahon Contractors Pty Ltd.
The experience and judgment of Mr McRae combined with his fine personal skills have enabled Marathon to build a committed team of dedicated people. The Board thanks Mr McRae and his staff for their commitment and dedication especially during a difficult period of review in 2008.
Conclusion
The second half of this year has been an extremely difficult and testing period for Marathon but I am pleased to report that it has sparked a greater resolve within the Company which has resulted in better systems following reviews of every aspect of our operations. I thank all the staff and Directors for their application and perseverance. Everyone in the company has developed a strong culture and a greater appreciation of the expectations which are reasonably placed on us as we move to mine development.
I am confident that we have the structure and the will to succeed as leaders in an exciting industry and I look forward to the coming year.
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Peter L Williams
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GENERAL MANAGER’S REPORT
The financial year ending 30th June 2008 has been one of two distinct parts for Marathon and has seen great changes and challenges for our Company.
From July to December 2007 the Company experienced a period of good progress including relocation to new premises, the establishment of the North Flinders Community Consultation Committee (NFCCC), a Rights Issue, the completion of preliminary metallurgical test work and the finalisation of a Scoping Study for Mt Gee.
New offices
In July 2007, Marathon moved into new office premises in Hindmarsh, Adelaide. The new office was officially opened on 20 July by the Honourable Paul Holloway, State Minister for Mineral Resources Development.
North flinders Community Consultation Committee (NfCCC)
Following stakeholder consultation, Marathon announced the formation of the NFCCC, which comprises local members from the State and Federal governments (or their alternates) and representatives of local landowners, graziers, tourism operators and the indigenous community.
The aim of the Committee is to act as a forum for the Company and the local community to regularly meet and discuss progress at Mt Gee and any issues of concerns that may arise.
The NFCCC is chaired by the Honourable Neil Andrew, the former Federal Speaker of the House of Representatives. It held its first meeting on 28th August 2007 at Leigh Creek.
The NFCCC were scheduled to meet again on 18 December at Arkaroola however the Chairman postponed the meeting as several committee members were unable to attend the meeting owing to its proximity to the festive season, and the additional challenge of travel to such a remote location at this time.
Rights Issue
On 31 October, Marathon announced it had raised $15.5 million of its $27 million, one-for-five rights issue. The rights issue closed with Marathon shareholders taking up about 57% of the entitlement, representing the issue of 6.2 million new shares.
Talbot Group Holdings Pty Ltd and CITIC Australia Pty Ltd, which together hold approximately 19.59% of Marathon’s share capital, took up fully their respective entitlements under the Rights Issue. Marathon’s Directors, who collectively control 11.23% of the Company, also took up the majority of their full entitlements.
Phoenix Copper IPO
On 9 November 2007, Marathon agreed to sell Exploration Licence 3164 (Mongolata Project), located in the Burra region of South Australia to Phoenix Copper Limited (Phoenix Copper).
Marathon shareholders were offered an opportunity to take part in the Initial Public Offering (IPO) of Phoenix Copper, an exploration company focussed on the Burra region and an area on the eastern edge of the Gawler Craton on the southern Yorke Peninsula. The offer was a first-come-first-served priority right to subscribe for up to a total of 15,000,000 shares ($3 million) in the Company’s IPO.
Environmental Protection & Biodiversity Conservation Act referral
In September 2007, an application for a ‘‘referral’’ was submitted to the Commonwealth Department for the Environmental and Water Resources (DEWR) under the Commonwealth Environmental Protection and Biodiversity Conservation Act 1999 (the EBPC Act) for the Mt Gee uranium project.
The purpose of the submission is to seek confirmation that the project is a ‘‘controlled action’’ under the Act, and to trigger a consultation process between DEWR and the relevant South Australian authorities as to the appropriate environmental approval processes for the project.
Marathon has nominated the project as a ‘‘controlled action’’ and volunteered to complete an Environmental Impact Statement (EIS) as part of its Mt Gee project evaluation.
Recent issues at Mt Gee
Our exploration drilling program at Mt Gee was suspended in January 2008 by the independent regulator PIRSA.
The reason for the suspension of the drilling program was that at Mt Gee East during June and July 2007, the company buried exploration drill cuttings and assay samples contained in bags together with general waste returned from an off-site laboratory, and at Mt Gee West, the company burnt cardboard boxes and bags in a sump during exploration drilling operations.
The correct procedure was that the bags and general rubbish should have been removed to an Environment Protection Authority licensed waste depot.
In 2005 the company buried steel and plastic drums containing assay samples being retained for future analyses. This material needs to be removed from Mt Gee to another site for long term storage.
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On 8th May 2008 PIRSA issued the company with ‘Formal Instructions’ to submit a Rectification Plan no later than 30th May to address matters of non compliance with the conditions of their Exploration Licence. The company submitted a draft Rectification Plan for PIRSA’s review on 28th May 2008, which was approved by PIRSA on 11th August 2008.
This has had a financial impact on Marathon Resources but more importantly the suspension of the drilling program caused a significant delay to the development program of the Mt Gee project and the company’s reputation with its key stakeholders has been affected.
In addition to the preparation of a Rectification Plan, the company has extensively reviewed its policies and practices, and has produced a policy paper examining the issues that led to the suspension of the drilling program.
Upgrade of the Mt Gee resource
On the 2nd of September 2008, the company announced a further upgrade of the resource at Mt Gee following its previous resource estimate in September 2007. The upgrade highlighted:
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Significant improvements in the understanding of the mineralisation.
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Increase of contained U3O8 from 26.9 thousand tonnes (Kt) to 31.4Kt.
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Increase of resource tonnes from 42.8 million tonnes (Mt) to 51.0Mt.
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Increase of resource in the ‘indicated’ category from 3.1Mt to 4.0Mt.
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Potential for further mineralisation in the north east quadrant of Mt Gee.
Marathon misread the risks associated with uranium exploration, inadequately managed the environmental hazards and did not adequately address community concern. At that time, the company had not developed the culture to sustain leading practice environmental management policies and behaviours and our stakeholder engagement strategy was not sufficiently advanced to be able to proactively address all the issues that caused concern among key stakeholders.
Marathon’s review has been undertaken with the assistance of independent consultants to address these issues, and to formulate a plan that reflects the company’s commitment to change its organisational structure, policies, and practices.
By committing to this plan, Marathon will be able to demonstrate that it is capable of operating responsibly and accountably.
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DIRECTORS’ REvIEW Of OPERATIONS
MT GEE (U) EL3258
The revised resource estimate is based on an independent assessment of the resource prepared by Tony Marshall of SMG Consultants Pty Ltd (“SMGC”). SMGC previously completed a resource estimate on the Mt Gee deposit in September 2007.
Mt Gee uranium deposit is part of the uranium-rich Paralana Mineral System within EL3258 in the northern Flinders Ranges of South Australia. During late 2007 and early 2008, a diamond drilling program of 27 diamond drill holes was completed (MN 87 - 99, MN104 - 117). This takes the total holes drilled by Marathon Resources at Mt Gee to 33 diamond and 63 RC drill holes. The interpretation of new drilling data together with re-evaluation of the existing data provides a better understanding of the more continuous Mt Gee mineralisation.
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Resource Resources Grade U3O8 Tonnes
Category Tonnes U3O8
Indicated 3.8 Mt 705 ppm 2.7 Kt
Inferred 42.3 Mt 646 ppm 27.3 Kt
Total 46.1 Mt 651 ppm 30.0 Kt
At 300 ppm U3O8 cut-off
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Hole ID from-to (m) Average assay Total 46.1 Mt 651 ppm 30.0 Kt
(U3O8ppm)
At 300 ppm U3O8 cut-off
MN091 188-194 6m @ 505ppm
209-218 9m @ 571ppm This compares to the previous estimate released in September
2007 of 42.8 Mt of mineralisation at 629 ppm for 26.9 Kt of U3O8
MN092 150-166 16m @ 648ppm contained, also at 300 ppm U3O8 cut-off.
183-188 5m @ 1,135ppm Detailed mapping completed in late 2007 and drill core
MN093 181-186 5m @ 522ppm interpretation has indicated mineralised zones with strike
varying from WNW to NNW and a shallow dip to the NNE
205-214 9m @ 1,161ppm to ENE.
MN094 151-162 11m @ 514ppm The relationship between Mt Gee Unit and the haematite
breccias that host the majority of the mineralisation zone has
MN095 25-31 6m @ 849ppm also been identified. The mineralisation is not excluded from
39-44 5m @ 571ppm Mt Gee Units as was previously interpreted. It also appears to
concentrate at the footwall and hanging wall contacts of the
67-76 9m @ 584ppm Mt Gee Unit (Figure 1).
MN096 113-135 22m @ 748ppm
Figure 1– Topography surface with Mt Gee Unit (in yellow) and mineralised zones
MN097 166-207 41m @ 718ppm (in red). Viewed toward North
Topography
MN098 80-89 9m @ 493ppm
162-204 42m @ 955ppm
MN099 99-105 6m @ 493ppm Mt Gee Unit
>300ppm U308 mineralisation
154-175 21m @ 704ppm
MN104 47-52 5m @ 929ppm
MN105 20-26 6m @ 801ppm Potential for further mineralisation is likely in the NE quadrant
of the Mt Gee area. This will be tested with future drilling
37-42 5m @ 1,114ppm (Figure 2).
MN106 22-29 7m @ 1,092ppm Figure 2 – Location of recent diamond holes with Mt Gee resource outline at 300ppm
U3O8 cut-off. Note the open directions of mineralisation to the East and Northeast
MN107 57-68 11m @ 1,026ppm
131-139 8m @ 539ppm
MN108 41-47 6m @ 1,418ppm
MN110 197-203 6m @ 932ppm
MN112A 168-176 5m @ 404ppm
MN115 168-175 7m @ 737ppm
180-186 6m @ 622ppm
193-200 7m @ 554ppm
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~~Glendambo Project U, IOCG (EL3211, EL3474, EL3540, EL3593)~~
This Project consists of four tenements, EL 3211 Mulga Well, EL 3474 McDowell Hill, EL3540 Bon Bon and EL3593 Coondambo located approximately 250 kilometres northwest of Port Augusta, in central South Australia. ASX listed UraniumSA Ltd continued exploration over ELs 3211, 3474 and 3540 for palaeochannel uranium under its joint venture agreement with Marathon. UraniumSA has been advised by the Royal Australian Air Force Aerospace Operational Support Group who administers the Woomera Prohibited Area that they have declined a request to enter onto EL 3474 McDowell Hill to conduct drilling.
The area is underlain by mid-Protorozoic Pandurra Formation resting on Neo-Proterozoic complexes of the Gawler Range Volcanics. The Pandurra Formation is conceptually viewed as a potential host for unconformity related uranium deposits similar to the Athabasca Sandstone of Canada and the Kombolgie Sandstone of the Northern Territory. Anomalous geochemical responses along structures suggest the presence of leakage anomalies from such a source.
Marathon completed detailed close spaced soil sampling to target structures hosting radiometric anomalism within Mulga Well and Coondambo. Results from Mulga Well confirmed the location a structure and a proposal to drill has been finalised. Regional calcrete sampling was completed over the Coondambo tenement to create total coverage. Subsequent in-fill sampling over a fault structure has identified possible drill targets.
~~Pinda Springs Cu-Au, Pb – Zn (EL 3159)~~
EL 3159 Pinda Springs is located in the north Flinders Ranges. A total of 249 (-2mm) stream samples were collected over the northern portion of the tenement. Sampling focussed along and around the diapiric breccia, and excluded most of the Adelaidean quartzite ridges. Anomalous Pb and Zn responses occur along the margin of the diapiric breccia, while anomalous Cu and Au responses occur within the diapiric breccia. The anomalous responses from the sampling are significant, but generally from single point values with no clustering, suggesting the sources are unlikely to be large. Limited follow-up is planned.
~~Blanchetown Heavy Mineral Sands (EL 4052)~~
EL 4052 Blanchetown, located approximately 120 km northeast of Adelaide was granted during the year. The area was selected to follow-up previously identified monazite and other heavy minerals, using geochemistry as an exploration tool. Initial reconnaissance calcrete sampling was completed along the edge of selected public roads, following approval by the local government authority. Subsequent selected infill confirmed the presence of several strandlines. Geophysical techniques will be used to follow-up these strandlines
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DIRECTORS’ REvIEW Of OPERATIONS
~~Mongolata Au (EL 3164)~~
The eastern portion of EL 3164 was joint-ventured with Australian Field Services Pty Ltd. Subsequently Marathon entered a sale agreement of the tenement with Phoenix Copper Ltd.
~~Western victoria Au, Cu (EL 4526)~~
At EL 4526 Kalymna, 30km southwest of Ararat in Victoria, previous air core and RC drilling defined a zone about 900 metres along the Moyston Fault showing anomalous gold values.
Four diamond drill holes were completed to investigate the character and nature of mineralisation along the Moyston Fault. Only two drill holes successfully intersected the shear zone thought to represent the Moyston Fault, with the best intersection being: 2m @ 1.63 g/t Au from 86 -88 m in KLYDDH01.
Previous evidence indicated the Moyston Fault to have a moderate east dip, but in the area of Marathon’s drilling, the fault has marked flexure and dips steeply to the west.
~~Eastern victoria Au, Porphyry Cu (ELA 5085 and ELA 5086)~~
Marathon has applied for two exploration licences (ELA 5085 Little Yalmy and ELA 5086 Deddick River) covering 589 km2 in eastern Victoria, located at the southern limits of the Lachlan Fold Belt. The tenements have potential for large low grade Cu/Au mineralising systems or smaller high grade gold deposits. Gold anomalism has been recorded in stream sediments, and there are large areas that have not been subject to modern exploration.
The tenements are yet to be granted.
~~Warburton, WA IOCG, Cu –Ni- PGEs~~
(E69/1564, E69/2177, E69/2178, E69/2179, E69/2180, E69/2181, E69/2211)
The Warburton Project consists of seven exploration licences covering an area of approximately 1055 sq km, located approximately 150 kilometres west of the SA/WA border, and 550 kilometres south south west of Uluru.
A detailed ground gravity survey was completed within E69/1564 in early September, 2007. These data were combined with existing aeromagnetics and the interpretation identified two strong targets and a third weaker target in the combined area. Drill targets were derived from this interpretation.
Drilling commenced on drill hole WA01 on 8th of June and was completed at 654.5 metres on 27th June. This drill hole was designed to deepen an existing drill hole MB106-2, drilled previously by our Joint venture partner Primary Resources. The hole intersected variably brecciated mafics consisting of gabbro norite and gabbro. A sulphur event is clearly evident with much of the core containing pyrite and pyrrhotite, with an overprint of calcite veining. Sampling for assay has commenced.
A helicopter supported reconnaissance programme was completed over all the tenements of the Warburton Project to provide information about material available for regional regolith sampling, access problems and examine mapped areas of mafic outcrop. A total of 60 samples were collected. The sample material collected represented either “residual” or “transported” regime. Two residual samples were highlighted, with one having anomalous Cu and Co, while the other showed pegmatitic affinities. Two transported samples were anomalous in Cu, Zn, Bi and U respectively.
The reconnaissance also confirmed the difficulty of access for a large part of the tenements, and the problem of gaining aboriginal clearance to conduct ground-based activities. Consequently Marathon is pursuing an initial assessment of the rest of the tenements using airborne geophysics. This will allow us to identify smaller areas to concentrate our exploration effort.
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MINERALISATION
IS OfTEN HIDDEN.
IT TAKES A MARATHON
EffORT TO DISCOvER.
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11
DIRECTORS’ REPORT
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The directors present their report on the company and its controlled entities for the year ended 30 june 2008.
DIRECTORS
The names of the directors in office at any time during or since the end of the year are:
Peter Leonard Williams John Reginald Santich (retired 30.06.2008) Wieslaw Bogacz (retired 30.06.2008) Denis Wood (resigned 27.8.2008) Chen Zeng Christopher Schacht (appointed 24.01.2008) John G. Linley (appointed 30.06.2008)
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.
INfORMATION ON DIRECTORS
Peter Williams BEc FCA
CHAIRMAN (NON-EXECUTIVE) | Appointed 21st May 2004
Peter Williams is a chartered accountant with extensive professional and commercial experience. He has broad experience as managing director and chairman of public companies. He was a partner of Deloitte for 17 years and managing director of the Lloyd Helicopter group then Enterprise Solutions Asia Pacific Limited. Since then he has acted as a nonexecutive director of venture capital company Playford Capital Pty Ltd. He is a member of the Company’s Audit Committee.
Chen Zeng BA (Economics), Masters Degree in International Finance Shanghai University of Finance and Economics NON-EXECUTIVE | Appointed 27th December 2006
Chen has been the Managing Director of CITIC Australia Pty Ltd (CA) since November 2002. CA is the Australian arm of China’s giant state-owned CITIC Group, which has substantial assets and investments in banking, financial, energy and raw materials businesses.
He has over 20 years experience managing various business operations, corporate and asset restructures, and has developed a number of projects for the CITIC and CITIC Australia Groups.
He is an Executive Director of the Hong Kong-listed CITIC Resources Holdings Ltd (appointed 1 April 2004), and non executive director (since 3 April 2002) and Chairman (since 14 May 2004) of CITIC Australia Trading Ltd. He is also a non executive director of ASX listed Macarthur Coal Ltd (appointed 23 July 2007 and to its Special Projects Committee in August 2007), a director of the China Chamber of Commerce in Australia.
john G (Shad) Linley Doctorate of Philosophy (Adelaide University), BSc (Hons), F AusIMM NON-EXECUTIVE | Appointed 30th June 2008
Dr Linley is a qualified geologist holding a PhD from the University of Adelaide. Recently CEO of Sun Metals the world’s most efficient and environmentally sensitive zinc refinery successfully built and operated under his stewardship on the edge of the Great Barrier Reef. Dr Linley’s career has also included roles such as the Vice President of TexasGulf Australia, Director of the Centre for Strategic Industrial and Resource Development in Brisbane and positions with Fluor Engineers and Constructions where he was involved in the Olympic Dam project.
Christopher Schacht Dip T (Prim)
NON-EXECUTIVE | Appointed 24th January 2008
Christopher Schacht is a qualified teacher who entered political service in the 1970’s as a ministerial advisor to both SA state government then Federal government. Mr Schacht served in the Senate of the Federal Parliament for 15 years until 2002. During his time as a minister from 1993 to 1996, he held the portfolios at various times of Science, Small Business, Customs and Construction. Currently, a self employed consultant, advisor and investor, Mr Schacht is the President of the Australian Volleyball Federation and in October 2006 he was elected to the Legal Commission of the FIVB (Federation Internationale de Volleyball) for a four year term. He is the chairman of the Company’s Audit Committee.
He is a member of Marathon’s Audit and Risk Committee.
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john Santich BE MEngSc PhD DipLaw MSocSc EXECUTIVE DIRECTOR Appointed 28th January 2004 | Retired 30th June 2008
Wieslaw Bogacz Msc Eng PhD Eng EXECUTIVE DIRECTOR Appointed 28th January 2004 | Retired 30th June 2008
Denis Wood BSc (Geology) NONEXECUTIVE Appointed 29th November 2006 | Resigned 27th August 2008
COMPANY SECRETARY
Stuart Appleyard LLB Appointed 28th January 2004
Stuart Appleyard is a practising lawyer with extensive experience in corporate, commercial and property law. A consultant at Lynch Meyer, Lawyers, he has a particular focus on complex commercial agreements, joint ventures, property advising and development, and due diligence associated with those areas. He has advised on mining, resource and native title issues in both South Australia and the Northern Territory. He is secretary of the Company’s Audit Committee.
CORPORATE GOvERNANCE
The Board of Marathon Resources Limited is committed to achieving and demonstrating the highest standards of corporate governance and has adopted practices and policies in accordance with the ASX Corporate Governance Best Practice Recommendations. The Corporate Governance Statement forms a separate part of the Annual Report.
SIGNIfICANT CHANGES IN THE STATE Of AffAIRS
During the Year under review:
The Group made a major resource announcement, on the 17th September 2007, which was updated on 16th June 2008 and 2nd September 2008.
The Group benefited from a shareholder rights issue in November 2007.
AfTER BALANCE DATE EvENTS
The Company received approval for its Mt Gee rectification plan on 11th August 2008 in connection with the matter detailed under environmental issues in this report.
Other than as disclosed above there is no matter or circumstance that has arisen since 30th June 2008 that has significantly affected, or may significantly affect:
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(a) the consolidated entity’s operations in future financial years, or
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(b) the results in future financial years, or
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(c) the consolidated entity’s state of affairs in future financial years.
PRINCIPAL ACTIvITIES
The principal activity of the Group during the year was mineral exploration. There were no significant changes in the nature of these activities during the year.
REvIEW Of OPERATIONS AND OPERATING RESULTS
The Company’s Directors have set out a review of operations for the year in a separate report.
The consolidated operating loss of the Group for the financial year to 30 June 2008 after applicable income taxes was $ 5,351,634 (2007 Loss of $ 5,862,541).
DIvIDENDS
The directors do not recommend the payment of a dividend and no amount has been paid or declared since the end of the previous financial year.
fUTURE DEvELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES
The Group is a mineral explorer and, potentially, a miner of uranium, gold and other metals in future years. The outcomes of these operations cannot be predicted at this time. The Group may require further capital to sustain these activities.
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13
DIRECTORS’ REPORT
ENvIRONMENTAL ISSUES
The Group’s operations are subject to environmental regulation.
Pursuant to complaints by the leaseholder of the Company’s Mt Gee exploration tenement (EL 3258) to the Minerals and Energy division of PIRSA about alleged environmental breaches in the burial of refuse material on the Arkaroola tenement, PIRSA advised the Company on 4th January 2008 that the burial site (s) is subject to a joint investigation by EPA (under the EP Act) and PIRSA (under the Mining Act). The Company confirmed its cooperation and assistance in the conduct of the investigation.
Against a background of speculative media attention the investigation confirmed that the burial of the material, being mainly drill core assay samples and bulk cuttings, did not constitute a significant environmental risk to the surrounding environment; nor did the material constitute a health risk to visitors and wildlife at Arkaroola. While this fact was communicated to the Company on 12th February 2008 PIRSA also advised other findings which related to breaches of the conditions of the approved DEF (Declaration of Environmental Factors) for EL 3258.
As a consequence of the findings the following instructions were issued to the Company by PIRSA. In summary:
-
PIRSA directed that all unauthorised buried material and general waste at this site must be safely excavated and removed from EL 3258. The site must be rehabilitated back to as close as possible to original condition.
-
No new holes to be drilled and no further drilling authorised on existing drill holes.
-
PIRSA required the Company to promptly rehabilitate all outstanding sites impacted by exploration activities conducted under approved DEFs.
-
PIRSA required Marathon Resources to review and report on the company’s environment management systems and procedures and to fully consult with all stakeholders before any consideration is given by Government to further drilling programs in EL 3258.
On the 22nd February PIRSA advised it wished to investigate two additional burial sites advised to it by the Company on 1st February 2008 and which also then became the subject of a rectification requirement.
On the 30th May 2008 a rectification / rehabilitation plan was submitted to PIRSA in respect of these matters. Approval for the Company to execute the required work under PIRSA supervision was given on 11th August 2008.
At the date of this report work on rectification of the burial sites had not yet commenced. The start date is to be advised by PIRSA.
No notification of any breach of any environmental regulation has been received in respect of any of the Company’s other tenements.
EXPLORATION COMMENCES WITH SMALL HANDS AND NEEDS DEEP POCKETS.
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OPTIONS
At the date of this report, the unissued ordinary shares of Marathon Resources Limited under options are as follows:
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Grant Date of Exercise Number
Date Expiry Price under Option
31 March 2005 30 June 2009 $0.20 1,055,700
31 December 2005 30 June 2010 $0.20 30,000
31 March 2006 30 June 2010 $0.45 45,000
16 November 2006 30 June 2011 $1.18 3,000,000
2 August 2007 (1) 6 August 2010 $4.36 500,000
4,630,700
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(1) Pursuant to his employment contract, Mr Hall had an entitlement to the grant of 500,000 options. These options were issued on 2 August 2007 with an expiry date of 6 August 2010 and an exercise price of $4.36 each.
During the year ended 30 June 2008, and to the date of this report the following ordinary shares of Marathon Resources Limited were issued on the exercise of options. No amounts are unpaid on any of the shares.
| Grant Date Exercise Price Number of Shares Issued |
||
|---|---|---|
| 3 July 2007 $0.20 1,000,000 24 July2007 $0.20 33,600 1 August 2007 $0.20 36,300 29 August 2007 $0.20 9,300 31 August 2007 $0.20 1,034,300 3 September 2007 $0.20 500,000 3 October 2007 $0.45 15,000 19 October 2007 $0.20 18,600 12 December 2007 $0.20 18,600 21 April 2008 $0.45 100,000 3 July 2008 $0.20 50,000 |
||
| 2,815,700 |
None of the options entitles the holders to participate, by virtue of the options, in any dividend or share issue of any other corporation.
AUDITORS INDEPENDENCE
The auditor has not been engaged during the year for any nonaudit services which may have impaired the auditor’s independence. The auditor’s independence declaration for the year ended 30 June 2008 has been received and is included in this report.
15
DIRECTORS’ REPORT
DIRECTORS’ AND EXECUTIvES’ REMUNERATION - AUDITED
The Information in this remuneration report has been audited as required by Sec 308 (3c) of the Corporations Act 2001.
The Board, where appropriate, seeks independent advice on generally accepted remuneration policies and practices for directors and packages are benchmarked against comparable industry levels.
The size of the organisation is such that decisions that affect the whole or a substantial part of the business and the Group’s financial standing are made by or in conjunction with Directors.
The Group has determined by resolution at the Annual General Meeting on 15th November 2007 that fees for NonExecutive Directors be set in aggregate at $ 300,000 in the year ended 30 June 2008 accruing on a weekly basis; being an increase of $150,000 on the previous year.
There are no elements of Directors remuneration that are performance related.
There are no contractual termination or retirement benefits for NonExecutive Directors.
At the date of this report the board is wholly comprised of nonexecutive directors.
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Directors Directors Salary & Bonus Superannuation Ex gratia Other Sharebased Total
fees wages contributions payments (1) Payments
Options
P.L. Williams 2008 50,000 - - 4,500 - - - 54,500
2007 50,000 - - 4,500 - - - 54,500
J. Santich 2008 - - - - 236,733 - 236,733
2007 - - - - 223,840 790,465 1,014,305
W. Bogacz 2008 - - - - 264,333 - 264,333
2007 - - - - 257,952 790,465 1,048,417
D Wood 2008 30,000 - - 2,700 - - - 32,700
2007 17,500 - - 1,575 - - - 19,075
C Zeng 2008 30,000 - - - - - - 30,000
2007 15,000 - - - - - - 15,000
C. Schacht 2008 12,500 - - 1,125 - - - 13,625
2007 - - - - - - - -
J Linley 2008 - - - - - - - -
2007 - - - - - - - -
Executives
S. Appleyard 2008 - 80,000 5,400 15,000 - - 100,400
2007 15,000 15,000 2,700 - - - 32,700
I. McRae 2008 - 20,852 20,833 102,965 - - - 144,650
2007 - - - - - - - -
S. Hall 2008 - 80,306 - 26,325 - - 1,234,000 1,340,631
2007 - 50,154 - 17,133 - - - 67,287
Total 2008 122,500 181,158 20,833 143,015 15,000 501,066 1,234,000 2,217,572
2007 97500 65,154 - 25,908 - 481,792 1,581,930 2,251,284
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(1) Executive Directors, Dr J.R. Santich and Dr W. Bogacz, elected on the 1 April 2006 to convert to a consultancy based emolument arrangement from salaried benefits in accordance with the relevant terms and conditions of their employment contracts. The 2008 amounts include $ 90,133 each for early contract termination.
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OPTIONS ISSUED AS PART Of REMUNERATION fOR THE YEAR ENDED 30 jUNE 2008
Options are issued to executive directors and executives as part of their remuneration. The options are not issued based on performance criteria, but are issued to the relevant directors and executives of Marathon Resources Limited and its subsidiary to increase goal congruence between executives, directors and shareholders.
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Director / Granted No Grant Date value per Exercise Price first Exercise Last Exercise
Executive Option at Grant $ Date Date
Date $
S Hall 500,000 02-08-07 2.468 4.360 02-08-07 06-08-10
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All options were granted for nil consideration.
Contracts of Service
Mr Ian McRae was appointed general manager on 19th February 2008 and is employed on a three year contract. Mr McRae’s primary responsibility is the supervision of the Mt Gee project. In this respect an element of his remuneration is performance related. A bonus is earned on achievement of quarterly KPI’s set by the board. At balance date performance hurdles have been reached and bonuses paid.
Mr Stuart Hall was appointed Chief Executive Officer on 15 April 2007 and was initially employed on a fixed two year contract. The contract was terminated by the Company effective 31st October 2007.
The two Executive Directors, Dr J.R. Santich and Dr W. Bogacz, entered into service agreements whereby they were employed by the company for a period of 3 years commencing on 15 March 2005. Pursuant to an agreement on 18th December 2006 the service contracts were extended to 31st March 2009.The terms of these agreements provided that their services to the Company could at their option be provided by their consulting companies. On 1 April 2006 both Executive Directors elected to provide their services under consultancy company arrangements and as a consequence of their resignations on 30th June 2008 the agreements were terminated on that date.
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DIRECTORS’ REPORT
MEETINGS Of DIRECTORS
During the financial year, the number of Board meetings held at which a director was eligible to attend and the number actually attended by each director were:
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Appointed Meeting Held Meetings Attended Retired
Peter Williams 21 May 2004 12 12
John Santich 28 January 2004 12 12 30June 2008
Wieslaw Bogacz 28 January 2004 12 9 30June 2008
Denis Wood 29 November 2006 12 10 27 August 2008
Chen Zeng 27 December 2006 12 11
Christopher Schacht 24 January 2008 6 6
John Linley 30 June 2008 - -
Committee Meetings Meetings Held Meeting Attended
Audit Committee
Peter Williams 2 2
Denis Wood 1 1
Chen Zeng 2 2
Christopher Schacht 1 1
(Chairman)
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INDEMNITIES INSURANCE
Directors and officers insurance had been renewed at year end and insurance premiums have been paid during the year amounting to $ 17,936.
PROCEEDINGS
The Company is party to legal proceedings brought against it during the year by an ex employee for alleged breach of contract. Directors are defending the legal action but have nevertheless made a provision in the accounts to 30th June 2008. At the date of this report the matter is unresolved and a contingent liability may arise for an amount in addition to the provision. Directors are not aware of any other proceeding initiated during the year or contemplated against or on behalf of the company.
Signed in accordance with a resolution of the Board
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Christopher Schacht DIRECTOR
Peter L Williams DIRECTOR
Dated at Adelaide, South Australia this 24th day of September 2008
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19
CORPORATE GOvERNANCE STATEMENT
The Board of Directors (the Board) of Marathon Resources Limited (the Company) is committed to achieving and demonstrating the highest standard of Corporate Governance.
The Board guides the affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable. The Board has responsibility for the overall Corporate Governance of the Company including its strategic direction, establishment of goals for its management and monitoring the achievement of these goals.
Senior management are subject to an Annual Performance Evaluation which is undertaken by the Board. The reviews are internal. The use of external facilitators is not warranted as the members of the Board have direct access to Management. The Chairman presides over the review process with input from other Directors. For some job functions a basis of evaluation of performance is measuring an individual’s output against Board agreed KPI’s. With the exception of Management the last review of senior staff performance was on July 2007.
2. STRUCTURE Of THE BOARD TO ADD vALUE
The individual Directors recognise that their primary responsibility is to the owners of the Company, its shareholders, while simultaneously having regard for the interests of all stakeholders of the company and the broader community.
This statement outlines the Company’s Corporate Governance Practices in place during the financial year. The Company’s statement is made based on the ASX Corporate Governance Councils revised Corporate Governance Principles and recommendations (the revised principles) released on 2 August 2007. The Company has decided on early adoption of the revised principles in the 2008 Annual Report.
Although the ASX Corporate Governance Council’s Best Practice Recommendations are not mandatory, under listing rule 4.10.3 companies are required to provide a statement in their annual report disclosing the extent to which they have followed the recommendations in the reporting period, identifying any principles which have not been followed with reasons for not having done so.
The revised principles and the Company’s compliance with each principle is as follows:
1. LAY SOLID fOUNDATIONS fOR MANAGEMENT AND OvERSIGHT
The role of the Board is covered by the Corporations Act 2001, ASX listing rules and the formal constitution of the Company. Its primary role is the creation of long term shareholder wealth and its protection. In achieving these ends the Board overviews the development of strategies, the setting of objectives, the establishment of policies to be implemented by management and assumes responsibility for ensuring adequate systems or internal control, risk management and financial reporting. The Board also ensures the provision of resources to senior management to achieve the Company’s objectives and undertakes subsequent monitoring of their performance.
The board charter is set out on the company’s website: www.marathonresources.com.au
Pursuant to their appointment letter Non-Executive Directors have no involvement in the day to day management of the Company. The board has appointed a Chief General Manager, who is not a Director, responsible for the operational and administrative performance of the Company and the provision of relevant information and input to the Board to enable it to discharge its responsibilities.
The Board of Marathon Resources Limited consists wholly of independent Directors. Those Directors holding shares in the Company either directly or indirectly, are not considered to be substantial shareholders. No Director of the Company has a material contractual relationship with the Company, other than as a Director. No Director is or has been employed in an executive capacity or acts or has acted as a material professional advisor.
Accordingly in the opinion of the Company all Directors are independent. The role of the Chair is undertaken by a separate dedicated Director.
The Board is cognisant of the need to focus on its renewal from time to time to ensure an appropriate balance of skills and experience relevant to the nature and extent of company operations and its future direction at any given point of time.
The Board does not have a separate nomination committee to oversee the procedure for the selection and appointment of new Directors.
The scope and size of the Company dictates a small independent Board. When a need arises and where it’s considered the Board would benefit from the appointment of a Director with specific skills and experience all members of the Board participate in seeking out appropriate potential candidates. In some instances assistance from external sources if necessary may be sought.
The Board has in the past and may regularly change members and therefore does not undertake a formal performance evaluation of either each of the Directors or the Board as a whole.
The statutory Directors report sets out Relevant experience and expertise on each Director, their period in office and status. More detailed particulars of each Director are set out in the company’s web site at www.marathonresources.com.au
ACCESS TO INFORMATION
Any Director has the right to seek independent professional advice in connection with their duties and responsibilities at the Company’s expense.
Each Director has access to the Company Secretary. The Secretary is accountable to the Board through the Chair on all governance matters. The appointment or removal of the Secretary is a matter of decision for the Board.
20
3. PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING
The Directors are aware of and subscribe to the Code of Conduct of the Australian Institute of Company Directors.
Additionally the Company has a Code of Conduct built on highest standards of ethical behaviour. Directors and employees are expected to act with the upmost personal integrity, as required by the Company’s Code of Conduct.
The Company’s Code of Conduct is set out on the Company’s website www.marathonresources.com.au
To meet these obligations Directors and Senior Management seek to:
- Comply with all legal obligations in a timely manner and promote active compliance within the Company.
4. SAfEGUARD INTEGRITY IN fINANCIAL REPORTING
Directors have established an Audit and Risk committee comprising three members from a Board of five, all of whom as previously stated are independent. The committee is chaired by a Director who is not the Chair of the Board.
The Statutory Directors Report details the number of meetings held and attendees.
The Audit and Risk committee charter is set out on the Company’s website www.marathonresources.com.au
The committee’s principle responsibilities are:
-
liaise with external auditors on matters arising from conduct of external audits,
-
ensure compliance with ASX listing rules,
-
Adopt practices necessary to meet the reasonable expectations of all of the Company’s stakeholders and the wider community.
Specifically Directors and senior management must:
-
Use the Company’s assets appropriately and efficiently for the Company’s benefit.
-
Ensure the securities market is fully informed of all matters requiring disclosure.
-
Not misuse information or their position for their own personal gain.
-
Avoid or fully disclose conflict of interest events or situations.
Further, conflicts of interest that arise must be disclosed to the Board immediately and addressed by elimination of the conflict, abstaining from participation in decision making, or if in insoluble circumstances by resignation.
TRADING IN COMPANY SECURITIES
The Board policy is strict compliance with the requirements of section 1043A of the Corporations Act 2001 which prohibits individual Directors and senior management from trading in the Company’s securities whilst in possession of inside information.
The Company has no established trading windows and does not otherwise preclude Directors and management trading in the Company’s securities where the Board is formally notified via the Board Chair and permission sought.
-
review management reporting and financial controls,
-
overview company policy and procedure development,
-
assess and manage the Company’s risk profile.
5. MAKE TIMELY AND BALANCED DISCLOSURE
The Board’s policy is to ensure strict compliance with the continuous disclosure regime to ensure that its obligations to disclose relevant information under the requirements of The Australian Securities Exchange, Australian Securities & Investment Commission are met.
Board processes are structured to ensure all information particularly any that may be considered price sensitive is released in a timely manner, is factual and does not omit material information.
Company announcements to the ASX are simultaneously posted on the Company’s website.
The Company uses external geological services in developing the material for ASX JORC code reporting to ensure balance in reporting of resources.
An external Public Relations Consultant is used to disseminate information released to the market to ensure the widest possible circulation of material to external parties including Stockholders, Analysts, the media and most importantly the Company’s shareholders.
Any acquisition or disposal of securities by Directors is reported to the ASX in compliance with the Corporations Act and ASX listing rules.
The company’s share trading policy is set out on the company’s website: www.marathonresources.com.au
21
CORPORATE GOvERNANCE STATEMENT
6. RESPECT THE RIGHTS Of SHAREHOLDERS
The Board seeks to ensure that shareholders are informed of all major developments affecting the Company’s state of affairs.
In addition to communication through its statutory reporting obligations via:
-
The Annual Report
-
The Interim Report
-
ASX disclosures
-
Explanatory memorandum for AGM resolutions.
The Company uses its website and external public relations services to disseminate information as widely as possible.
A Communications Manager is employed by the company to among other things, promote the interests of shareholders.
The Company periodically issues a newsletter and uses audio/ visual presentations in some media releases.
The statutory annual report is available to shareholders electronically.
The Company requires the attendance of a representative of its external auditors at its annual general meeting and encourages shareholders to attend and raise questions with the auditors representative or Directors.
7. RECOGNISE AND MANAGE RISK
The Board assumes responsibility for establishing the Company’s risk profile focus and for ensuring management has developed and adequately reports against sound systems of risk control.
The size and nature of the Company’s operations is such that risk is focused on a smaller than normal range of potential adverse events while not impacting potential opportunities.
The Company’s Risk management policy is set out on the Company’s website www.marathonresources.com.au
Key areas of risk which are regularly monitored are:
OPERATIONAL RISK
-
acquisition of new exploration tenements and their subsequent status,
-
land access and native title considerations,
-
physical exploration activities
These matters are regularly reported on to the Board in Managements’ Operation Reports.
INDIGENOUS PEOPLE
The Company acknowledges and accepts the bond and special interests that the Indigenous people have over areas where the company carries out operations.
The Company proactively seeks to foster a respectful, cooperative and trusting relationship through honest and open communication with Indigenous people and their advisors.
The Company recognises the legal, social, and economic obligations to develop and sustain relationships with Indigenous Traditional Owners at all sites. It recognises that during exploration and mining operational phases, it must comply with State and Commonwealth legal requirements relating to Native Title matters.
HSE&C
The Company operates under a health, safety and environment system developed by management. Pursuant to a Board review of the adequacy and effectiveness of the system an upgrading has been mandated for completion in the 08/09 year.
The primary focus in this area is environmental management and compliance.
ENVIRONMENT
The Company has always recognised the importance of sound environmental practice and promoted environmental awareness by all of its employees and contractors. Major exploration operations by the Company are conducted in an area of the Flinders Ranges that is considered by many to be highly environmentally sensitive.
This has necessitated a commitment to continuous improvement of practices. The Board following independent appraisal has initiated the development of a full EMS system ultimately leading to ISO 14001 standard.
FINANCIAL REPORTING
Management operate with Board defined limits of authority and a requirement to present monthly financial reports at a detailed level to Directors. These requirements assist in managing the risk of failure to achieve business objectives and protecting the Company’s assets.
In accordance with the requirements of Sec 295A of the Corporations Act 2001 The Board audit committee confirms to the Board that is has received assurance from the General Manager and Chief Financial Officer that:
-
Financial statements are in compliance with accounting standards as required by Sec 296 of The Corporations Act.
-
Financial statements give a true and fair view of finance performance and position at balance date required by Sec 297 of The Corporations Act.
22
- Records have been properly maintained and that risk management and internal compliance and control systems are operating efficiently and effectively in all material respects.
Confirmation that the Board has received the assurance is set out in the Statutory Annual Directors Declaration.
8. REMUNERATE fAIRLY AND RESPONSIBLY
The performance in establishing the remuneration of Executive Management and Executive Directors, when such office is held, is reviewed by the Board with the exclusion of the Executive concerned.
External advice is sought on remuneration matters when deemed necessary.
The company does not have a remuneration committee, as this role is undertaken by the Board.
The details of remuneration of Directors and Senior Management are set out in the Statutory Director’s Report. The contribution of each Non Executive Director is taken into account in arriving at individual remuneration levels having regard for reasonable and competitive market rates.
The remuneration of Non Executive Directors is set by reference to an aggregate cap approved by shareholders from time to time at the annual general meeting.
In accordance with listing rule 4.10.3 the company summarises its departures from the ASX’s principles of good corporate governance best practice recommendations.
| Best Practice Recommendations | Notifcation of Departure | Explanation | |
|---|---|---|---|
| 2.4 | The Board should establish a | The Company does not have a | The Board is of the opinion that it is not of |
| nomination committee. | nomination committee. | a suffcient size to warrant a nomination | |
| committee at this time. | |||
| 2.5 | Companies should disclose | The Company does not have a formal | Changing composition of the Board |
| the process for evaluating the | documented process. | is indicative of an ongoing process of | |
| performance of the Board, its | evaluation. | ||
| committees and individual Directors. | |||
| 8.1 | The Board should establish a | The Company does not have a | The Board is of the opinion that it is not a |
| remuneration committee. | remuneration committee. | suffcient size to warrant a remuneration | |
| committee at this time. This role is | |||
| undertaken by the Board. |
DIRECTORS’ DECLARATION
The Directors of the company declare that:
-
The financial statements and notes set out on pages 13 to 38, are in accordance with the Corporations Act 2001 and:
-
(a) complying with Accounting Standards and the Corporate Regulations 2001; and
-
(b) giving a true and fair view of the financial position as at 30 June 2008 and of the performance for the year ended on that date of the company and consolidated group.
-
The General Manager and Chief Finance Officer have each declared that:
-
(a) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001;
-
(b) the financial statements and notes for the financial year comply with Australian Standards; and
-
(c) the financial statements and notes for the financial year give a true and fair view.
-
In the directors opinion there are reasonable grounds to believe that the company will be able to pay its debits as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors.
Christopher Schacht DIRECTOR Dated at Adelaide, South Australia this 24th day of September 2008
Peter L Williams DIRECTOR
23
AUDITORS INDEPENDENCE DECLARATION
Grant Thornton South Australian Partnership ABN 27 244 906 724 Level 1, 67 Greenhill Rd Wayville SA 5034 GPO Box 1270 Adelaide SA 5001 DX 275 Adelaide T 61 8 8372 6666 F 61 8 8372 6677 E [email protected] W www.grantthornton.com.au
-
-
[]
24
INDEPENDENT AUDIT REPORT TO MEMBERS Of MARATHON RESOURCES LTD AND CONTROLLED ENTITIES
Grant Thornton South Australian Partnership ABN 27 244 906 724 Level 1, 67 Greenhill Rd Wayville SA 5034 GPO Box 1270 Adelaide SA 5001 DX 275 Adelaide T 61 8 8372 6666 F 61 8 8372 6677 E [email protected] W www.grantthornton.com.au
25
INDEPENDENT AUDIT REPORT TO MEMBERS Of MARATHON RESOURCES LTD AND CONTROLLED ENTITIES
-
-
-
-
26
[]
27
fINANCIAL STATEMENTS
INCOME STATEMENT fOR THE YEAR ENDED 30 jUNE 2008
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Consolidated Parent
Notes 2008 2007 2008 2007
$ $ $ $
Revenue 2 637,449 1,139,947 637,449 1,139,947
Depreciation 5 (116,932) (56,048) (116,932) (56,048)
Exploration expenditure written off
- Current period expenditure (5,267) (515,122) (5,267) (501,265)
- Prior period expenditure (916,831) (218,809) (916,831) (218,809)
Financial assets fair value 6 218,500 (115,000) 218,500 (115,000)
adjustment
Employee benefits expense 11 (2,148,307) (715,287) (2,148,307) (715,287)
Share based payment expense 14 (1,234,000) (1,580,930) (1,234,000) (1,580,930)
Occupancy expense (127,514) (71,516) (127,514) (71,516)
Consulting expense (783,836) (344,552) (783,836) (344,552)
Travel expense (135,639) (146,271) (135,639) (146,271)
ASX listing and registry expense (92,004) (148,125) (92,004) (148,125)
Corporate administration 2 (647,509) (474,303) (647,509) (474,303)
Takeover defence costs 2 (2,598,525) (2,598,525)
Takeover defence costs
– over accrued prior year 2 61,380 61,380
Finance costs (16,486) (16,486)
Loss before income tax (5,306,996) (5,844,541) (5,306,996) (5,830,684)
Income tax expense 3 (44,638) (18,000) (44,638) (18,000)
Loss for the year (5,351,634) (5,862,541) (5,351,634) (5,848,684)
Loss attributable to the members
of Marathon Resources Limited (5,351,634) (5,862,541) (5,351,634) (5,848,684)
Earnings per share
Basic (cents per share) 24 (9.2) (12.2)
Diluted (cents per share) (9.2) (12.2)
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The accompanying notes form part of these financial statements.
28
BALANCE SHEET AS AT 30 jUNE 2008
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Consolidated Parent
CURRENT ASSETS Notes 2008 2007 2008 2007
$ $ $ $
Cash and Cash Equivalents 19(a) 5,448,765 2,140,972 5,378,765 2,070,972
Trade and Other Receivables 4 290,542 425,397 251,587 284,760
Financial Assets 6 563,500 345,000 563,500 345,000
Total Current Assets 6,302,807 2,911,369 6,193,852 2,700,732
NON-CURRENT ASSETS
Property, Plant & Equipment 5 600,886 268,783 600,886 268,783
Financial Assets 6 468,717 1,069,403 468,717 1,069,403
Exploration & Evaluation
Expenditure 7 15,234,817 8,072,858 1,825,856 1,251,890
Related Party Receivable 8 13,376,937 6,890,626
Investment in Controlled Entity 9 230,000 230,000
Total Non-Current Assets 16,304,420 9,411,044 16,502,396 9,710,702
TOTAL ASSETS 22,607,227 12,322,413 22,696,248 12,411,434
CURRENT LIABILITIES
Trade and Other Payables 10 1,033,967 2,573,821 1,033,967 2,573,821
Short Term Provisions 11 822,548 30,947 822,548 30,947
Total Current Liabilities 1,856,515 2,604,768 1,856,515 2,604,768
NET ASSETS 20,750,712 9,717,645 20,839,733 9,806,666
EQUITY
Issued Capital 12 31,807,520 15,828,305 31,807,520 15,828,305
Reserves 13 2,199,323 1,826,521 2,199,323 1,826,521
Retained Losses (13,256,131) (7,937,181) (13,167,110) (7,848,160)
TOTAL EQUITY 20,750,712 9,717,645 20,839,733 9,806,666
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The accompanying notes form part of these financial statements.
29
fINANCIAL STATEMENTS
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STATEMENT Of CHANGES IN EQUITY fOR THE YEAR ENDED 30 jUNE 2008
Notes Share Retained Share Option financial Asset Total
Capital Earnings Reserve Revaluation $
$ $ $ Reserve $
Consolidated
BALANCE 01/07/2006 8,344,585 (2,101,840) 77,400 - 6,320,145
Share Issues
(net of transaction costs) 7,483,720 - - - 7,483,720
- -
Option Issues / exercised 27,200 1,553,730 1,580,930
Financial asset revaluation - - - 195,391 195,391
Loss attributable to members
of parent company - (5,862,541) - - (5,862,541)
BALANCE AT 30/06/2007 15,828,305 (7,937,181) 1,631,130 195,391 9,717,645
Share Issues
(net of transaction costs) 15,979,215 - - - 15,979,215
- -
Option Issues/Exercised 32,684 1,201,316 1,234,000
Financial Asset Revaluation - - - (828,514) (828,514)
Loss attributable to members
of parent company - (5,351,634) - - (5,351,634)
BALANCE AT 30/06/2008 31,807,520 (13,256,131) 2,832,446 (633,123) 20,750,712
Parent
BALANCE AT 01/07/2006 8,344,585 (2,026,676) 77,400 - 6,395,309
Share Issues
(net of transaction costs) 7,483,720 - - - 7,483,720
- -
Option Issues / exercised 27,200 1,553,730 1,580,930
Financial asset revaluation - - - 195,391 195,391
Loss attributable to members
of parent company - (5,848,684) - - (5,848,684)
BALANCE AT 30/06/2007 15,828,305 (7,848,160) 1,631,130 195,391 9,806,666
Share Issues
(net of transaction costs) 15,979,215 - - - 15,979,215
- -
Option Issues / exercised 32,684 1,201,316 1,234,000
Financial Asset Revaluation - - - (828,514) (828,514)
Loss attributable to members
of parent company - (5,351,634) - - (5,351,634)
BALANCE AT 30/06/2008 31,807,520 (13,167,110) 2,832,446 (633,123) 20,839,733
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The accompanying notes form part of these financial statements.
30
CASH fLOW STATEMENT fOR YEAR ENDED 30 jUNE 2008
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Consolidated Parent
Notes 2008 2007 2008 2007
$ $ $ $
Cash flows from
operating activities
Interest and sundry
income received 409,621 265,935 409,621 265,935
Payments to suppliers
and employees (4,486,631) (3,116,234) (4,588,313) (2,989,247)
Finance costs (16,486) - (16,486) -
Net cash provided by
(used in) operating activities 19b (4,093,496) (2,850,299) (4,195,178) (2,723,312)
Cash flows from
investing activities
Proceeds on disposal
plant equipment 992 4,233 992 4,233
Purchase of plant and equipment (455,490) (149,202) (455,490) (149,202)
- -
Payment for financial assets (460,000) (460,000)
Payment for exploration activities (8,078,790) (6,069,964) (1,490,797) (1,080,586)
Amount advanced to
- -
controlled entity (6,486,311) (5,116,365)
Amount repaid to
shareholder companies (750,000) - (750,000) -
Net cash provided by
(used in) investing activities (9,283,288) (6,674,933) (9,181,606) (6,801,920)
Cash flows from
financing activities
Proceeds from issue of shares 16,083,371 7,525,720 16,083,371 7,525,720
Payment of expenses of the
issue of shares (148,794) (60,000) (148,794) (60,000)
Amount advanced by
shareholder companies 750,000 - 750,000 -
Net cash provided by
(used in) financing activities 16,684,577 7,465,720 16,684,577 7,465,720
Net (decrease)/increase
in cash held 3,307,793 (2,059,512) 3,307,793 (2,059,512)
Cash at 30 June 2007 2,140,972 4,200,484 2,070,972 4,130,484
Cash at 30 June 2008 19a 5,448,765 2,140,972 5,378,765 2,070,972
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The accompanying notes form part of these financial statements.
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NOTES TO THE fINANCIAL STATEMENTS fOR THE YEAR ENDED 30 jUNE 2008
NOTE 1 – STATEMENT Of SIGNIfICANT ACCOUNTING POLICIES
The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, including Australian Accounting interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
The financial report covers the consolidated group of Marathon Resources Limited and controlled entities, and Marathon Resources Limited as an individual parent entity. Marathon Resources Limited is a listed public company, incorporated and domiciled in Australia.
Compliance with IFRS
Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the consolidated financial statements and notes of Marathon Resources Limited comply with International Financial Reporting Standards (IFRS).
The following is a summary of the material accounting policies adopted by the consolidated group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.
Basis of Preparation
The accounting policies set out below have been consistently applied to all years presented.
Reporting Basis and Conventions
The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.
Accounting policies
a) Principles of Consolidation
A controlled entity is any entity of which Marathon Resources Limited has the power to control the financial and operating policies so as to obtain benefits from its activities.
The controlled entities are disclosed in Note 21 to the financial statements. All controlled entities have a June financial year-end.
All inter-company balances and transactions between entities in the consolidated entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries are consistent with those policies applied by the parent entity.
b) Income Tax
Current tax
The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date.
Deferred tax
Deferred tax is accounted for using the balance sheet 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 there is 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 in the income statement 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 income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.
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 condition of deductibility imposed by the law.
Tax consolidation
Marathon Resources Limited and its wholly-owned Australian subsidiary are part of a tax-consolidated group under Australian taxation law. Each entity in the group recognises its own current and deferred liabilities, except for any deferred tax liabilities resulting from unused tax losses and tax credits, which are immediately assumed by the parent entity. The current tax liability of each group entity is then subsequently assumed by the parent entity. The tax consolidated group has entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the consolidated group.
c) Property, Plant and Equipment
Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.
Plant and equipment
Plant and equipment are measured on the cost basis.
The carrying amount of plant and equipment is reviewed annually to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.
Assets acquired are recorded at the cost of acquisition being the purchase consideration determined as at the date of acquisition plus costs incidental to the acquisition.
32
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets is calculated on a straight-line basis over the useful life of those assets to the consolidated entity commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
| assets are: | |
|---|---|
| Class of Fixed Asset | Depreciation Rate |
| Plant and equipment | 5-33% |
| Offce equipment Motor vehicles |
10-20% 15% |
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement.
d) Exploration and Evaluation Expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.
Where a decision is made to proceed with development, the accumulated costs for the relevant area of interest will be amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.
Any change in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs will be determined on the basis that the restoration will be completed within one year of abandoning the site.
e) Financial Instruments
Recognition
Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity is no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
Classification and subsequent measurement
Financial assets at fair value through profit and loss A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management and within the requirements of AASB 139: Recognition and Measurement of Financial Instruments. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the income statement in the period in which they arise.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method.
Available-for-sale financial assets
Available-for-sale financial assets include any financial assets not included in the above categories. Available-forsale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity.
Fair value
Costs of site restoration are expended over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs may ultimately include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with generally accepted clauses of the mining permit. Such costs will be determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.
33
NOTES TO THE fINANCIAL STATEMENTS fOR THE YEAR ENDED 30 jUNE 2008
e) Financial Instruments (con’t)
Impairment
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 prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement.
f) Impairment of Assets
At each reporting date, the group reviews the carrying values of its 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 its recoverable amount is expensed to the income statement. 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.
g) Interests in Joint Ventures
The consolidate group’s share of the assets, liabilities, revenue and expenses of joint venture operations are included in the appropriate items of the consolidated financial statements. Details of the consolidated group’s interest are shown at Note 15.
The consolidated group’s interests in joint venture entities are brought to account using the equity method of accounting in the consolidated financial statements. The parent entity’s interest in joint venture entities are brought to account using the cost method.
h) Employee Benefits
Provision is made for the group’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.
i) Provisions
Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
j) Cash and Cash Equivalents
Cash and cash equivalents include 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 on the balance sheet where applicable.
k) Revenue
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.
l) Good and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financial activities, which are disclosed as operating cash flows.
m) Comparative Figures
Unless otherwise required by an accounting standard comparative information is disclosed in respect of the previous corresponding period, including for narrative and descriptive information. To the extent that items are amended or reclassified comparative amounts are also amended or reclassified. Prior period errors are retrospectively corrected in the next financial report following discovery.
n) Share Based Payments
The company issues shares and options from time to time for no consideration. Equity-settled share based payments are measured at fair value at the date of grant. Fair value is determined by the use of a Black-Scholes pricing model. The fair value is fully expensed on a straight line basis by the date of vesting.
o) Leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.
p) Critical Accounting Estimates and Judgments
The directors evaluate estimates and judgments 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.
Exploration and evaluation
The group’s policy for exploration and evaluation is discussed in note 1(d). The application of this policy requires management to make certain assumptions as to future events and circumstances. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised exploration and evaluation expenditure, management concludes that the capitalised expenditure is unlikely to be recovered by future sale or exploration, then the relevant capitalised amount will be written off through the income statements.
Critical judgement – no impairment of Mt Gee exploration and development asset of $12,901,554
On the 10th June 2008 and 2nd September 2008 resource upgrade announcements highlighted significant improvement in the understanding of the mineralisation, increased tonnage with improved grade and potential for further mineralisation. The Company was directed by PIRSA to cease drilling at Mt Gee due to environmental breaches.
34
Subsequently agreement was obtained from PIRSA to a rectification / rehabilitation plan in respect of the burial of waste by the Company at Mt Gee. The Company expects to successfully complete the work under PIRSA supervision and having done so to meet the reasonable requirements of PIRSA to enable a return to drilling at Mt Gee. Having regard for achieving these expectations Directors are of the opinion that there is no impairment of the Mt Gee exploration and development asset of $ 12,901,554.
Critical estimate – Provision of $800,000 on a legal action with claim of $1,600,000 Proceedings have been brought against the Company by an ex employee for alleged breach of contract. The Company denies the claim and is defending the proceedings. The nature of the action is based on an all or nothing claim with a maximum exposure to the Company of $1.6 million.
The Company’s legal advice is that it’s more likely than not to successfully defend the claim in its entirety. In view of the fact that the matter is complex and not without attendant risk of an adverse outcome Directors are of the view that a provision of 50% of the maximum exposure is reasonable.
New Accounting Standards and Interpretations
The following Australian Accounting Standards have been issued or amended that are applicable to the parent and consolidated group but are not yet effective. The parent and the consolidated group’s assessment of the impact of these new standard and interpretations is set out below:
- (i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 [AASB5, AASB6, AASB 102, AASB 107, AASB 119, AASB 127, AASB134, AASB 136, AASB 1023, AASB 1038]
AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2009. AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a ‘management approach’ to reporting on the financial performance. The information being reported will be based on what the key decision-makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments. The company has not yet adopted AASB 8. Application of AASB 8 may result in different segments, segment results and different type of information being reported in the segment note of the financial report. However, at this stage, it is not expected to affect any of the amounts recognised in the financial statements.
- (ii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12]
The revised AASB 123 is applicable to annual reporting periods commencing on or after 1 January 2009. It has removed the option to expense all borrowing costs and - when adopted - will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. No material impact on the financial report of the company is expected.
- (iii) Revised AASB 101 Presentation of Financial Statements and AASB 2007 8 Amendments to Australian Accounting Standards arising from AASB 101
A revised AASB 101 was issued in September 2007 is applicable for annual reporting periods beginning on or after 1 January 2009. It requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. If an entity has made a prior period adjustment or has reclassified items in the financial statements, it will need to disclose a third balance sheet (statement of financial position), this one being as at the beginning of the comparative period. The company intends to apply the revised standard from 1 July 2009.
- (iv) AASB 2008-1 Amendments to Australian Accounting Standard - Share-based Payments: Vesting Conditions and Cancellations
AASB 2008-1 was issued in February 2008 and will become applicable for annual reporting periods beginning on or after 1 January 2009. The revised standard clarifies that vesting conditions are service conditions and performance conditions only and that other features of a share-based payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The company will apply the revised standard from 1 July 2009, but it is not expected to affect the accounting for the company’s share-based payments.
35
NOTES TO THE fINANCIAL STATEMENTS fOR THE YEAR ENDED 30 jUNE 2008
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NOTE 2 – REvENUE AND EXPENSES fROM CONTINUING OPERATIONS
Consolidated Parent
Notes 2008 $ 2007 $ 2008 $ 2007 $
a. Revenue
- -
Disposal of interest in tenement 227,828 227,828
- -
Consideration for entering 874,012 874,012
Joint Venture
Interest 395,433 265,654 395,433 265,654
Diesel fuel rebate 11,243 - 11,243 -
Sundry Income 2,945 281 2,945 281
637,449 1,139,947 637,449 1,139,947
b. Expenses - Corporate administration include:
Administration accounting
and auditing 22 30,475 25,175 30,475 25,175
Computer costs 54,866 10,419 54,866 10,419
Insurance 37,168 37,308 37,168 37,308
Communication costs 43,504 33,405 43,504 33,405
Printing, office supplies 39,810 37,450 39,810 37,450
Public relations 141,403 104,494 141,403 104,494
Legal fees 102,188 74,154 102,188 74,154
Other expenses 198,095 151,898 198,095 151,898
647,509 474,303 647,509 474,303
c. Significant revenue and expenses
The following significant revenue and expense items are relevant in explaining items of financial performance.
Takeover defence costs - 2,598,525 - 2,598,525
(Excess) accrual reversed
in current year (61,380) - (61,380) -
d. Employee benefits expense
Included in employee benefits expense is a provision in respect of legal action by an ex employee for breach of contract.
800,000 - 800,000 -
NOTE 3 – INCOME TAX
Consolidated Parent
2008 $ 2007 $ 2008 $ 2007 $
The components of tax expense comprise:
Write off of deferred tax asset recognised
on capital raising cost 44,638 18,000 44,638 18,000
The prima facie income tax expense from
ordinary activities before tax is reconciled to
the income tax as follows:
Loss from continuing operations (5,306,996) (5,844,541) (5,306,996) (5,830,684)
Prima facie tax benefit on profit from
ordinary activities before income tax at
30% (2007:30%) (1,592,099) (1,753,362) (1,592,099) (1,749,204)
Non-deductible expenses 375,957 477,679 375,957 477,679
Non recognised temporary differences (3,935) (3,935) (3,935) (3,935)
Movement in recognised tax assets
and liabilities (2,344,394) (1,117,311) (367,960) 379,502
Current year tax loss not brought to account 3,609,109 2,414,929 1,632,675 913,958
Income tax attributable to entity 44,638 18,000 44,638 18,000
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Unrecognised deferred tax assets:
Deferred tax assets have not been recognised in respect of the following items:
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Consolidated Parent
2008 $ 2007 $ 2008 $ 2007 $
Tax value of carried forward tax losses
- Revenue 3,326,934 2,058,284 3,250,736 1,618,061
- Capital 85,563 85,563 9,680 9,680
- -
Temporary differences 70,283 434,344
Temporary differences not recognised - 3,935 - 3,935
3,412,497 2,147,782 3,330,699 2,066,020
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Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the consolidated entity can utilise the benefits from them.
NOTE 4 – TRADE AND OTHER RECEIvABLES
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Consolidated Parent
2008 $ 2007 $ 2008 $ 2007 $
GST recoverable 180,003 379,482 141,048 238,845
Other debtors 360 43,960 360 43,960
Prepayments 110,179 1,955 110,179 1,955
290,542 425,397 251,587 284,760
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NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
| Consolidated Parent |
||
|---|---|---|
| 2008 $ 2007 $ 2008 $ 2007 $ |
||
| Plant and equipment 803,151 361,017 803,151 361,017 Less Accumulated Depreciation (202,265) (92,234) (202,265) (92,234) |
||
| Total Plant and Equipment 600,886 268,783 600,886 268,783 |
||
| Movement in carrying amounts Balance at beginning of fnancial year 268,783 184,989 268,783 184,989 Additions 455,490 149,198 455,490 149,198 Disposals (6,455) (9,356) (6,455) (9,356) Depreciation (116,932) (56,048) (116,932) (56,048) |
||
| Balance at end of fnancial year 600,886 268,783 600,886 268,783 |
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NOTES TO THE fINANCIAL STATEMENTS fOR THE YEAR ENDED 30 jUNE 2008
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NOTE 6 – fINANCIAL ASSETS
Consolidated Parent
Notes 2008 $ 2007 $ 2008 $ 2007 $
Current
Financial assets at fair value
through profit loss 6a 563,500 345,000 563,500 345,000
Non-Current
Available-for-sale financial assets 6b 468,717 1,069,403 468,717 1,069,403
a. Financial assets at fair value through profit and loss
Listed investments, at fair value: -
Shares in Primary Resources Ltd 563,500 345,000 563,500 345,000
Pursuant to a joint venture agreement with Primary Resources Limited, the company purchased 2,300,000 ordinary shares at an
issue price of 20 cents each fully paid as follows:
Issue Date No $
2 May 2007 1,150,000 230,000
28 June 2007 1,150,000 230,000
460,000
The market value of these shares at balance date was $0.245 ($0.15). The gain in the fair value to balance date of $218,500 (loss
$115,000) has been recorded through the profit and loss in the financial assets fair value adjustment.
b. Available-for-sale financial assets
Listed investments, at fair value: -
Shares in UraniumSA Ltd 405,342 1,069,403 405,342 1,069,403
Pursuant to a joint venture agreement with UraniumSA Limited, the company was allotted 4,370,061 ordinary shares at an issue
price of 20 cents each fully paid on the listing of UraniumSA Limited 18 October 2006.
These shares are subject to Australian Stock Exchange escrow conditions for 2 years from listing. As the shares are subject to
escrow and therefore not readily tradeable, the fair value has been calculated using a discounted market value by applying the
following inputs:
Market price at year end $0.10 $0.315
Discount factor 7.8% 6%
Volatility factor 5.4% 19.72%
The write down arising from the change in fair value of $664,061 has been has been recognised in the Financial Asset Revaluation
Reserve.
- -
- Shares in Phoenix Copper Ltd 63,375 63,375
- - - -
- Options in Phoenix Copper Ltd
Pursuant to the disposal of a tenement interest to Phoenix Copper Ltd the Company was allotted 750,000 ordinary shares at an
issue price of 20 cents each fully paid on the listing of Phoenix Copper Ltd 30th January 2008 and in addition 750,000 options
having an exercise price of 25 cents were granted to the Company on 25th January 2008 and are exercisable at any time up to
expiry date 25th January 2013, as follows:
Issues No $
Shares 750,000 150,000
Options 750,000 77,828
227,828
The shares and options are subject to Australian Stock Exchange Escrow conditions for 1 year from listing. As the shares are
subject to Escrow and therefore not readily tradeable, the fair value has been calculated using a discounted market place value by
applying the following inputs:
Shares Options
Market price at year end $0.09 Call value at year end 0
Discount Factor 7.8% Stock price $0.09
Volatility factor 1.92% Strike price $0.25
Volatility 3.75%
The write down arising from the change in fair value of has been recognised in the financial asset revaluation reserve.
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NOTE 7 – EXPLORATION AND EvALUATION EXPENDITURE
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Consolidated Parent
2008 $ 2007 $ 2008 $ 2007 $
Exploration and Evaluation Costs 15,383,537 8,221,578 1,974,576 1,400,610
Less Provision for Impairment (148,720) (148,720) (148,720) (148,720)
Total Exploration and Evaluation 15,234,817 8,072,858 1,825,856 1,251,890
Expenditure
Movement
Balance at beginning of financial year 8,072,858 2,221,703 1,251,890 390,113
Additions 8,078,790 6,069,964 1,490,797 1,080,586
Write-down of exploration permits (916,831) (218,809) (916,831) (218,809)
Impairment - - - -
Balance at end of financial year 15,234,817 8,072,858 1,825,856 1,251,890
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The recoverability of the carrying value of exploration and expenditure assets is dependant upon the successful development and commercial exploitation or alternatively, sale of respective area of interest. For details of the Company’s interests in tenements and Joint Ventures, refer to Note 15.
NOTE 8 – RELATED PARTY RECEIvABLES
| Consolidated | Consolidated | Parent | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2008 | $ | 2007 | $ | 2008 $ | 2007 $ | ||||||||||
| Receivable | from | Bonanza | Gold | Pty | Ltd | - | - | 13,376,937 | 6,890,626 |
The parent entity provides financial support to the subsidiary to ensure it can pay its debts as and when they fall due and payable. The parent loan to its subsidiary has no fixed date for repayment and is non interest bearing. The Company will not seek repayment where such repayment would prejudice the subsidiaries ability to meet any obligations as and when they fall due.
NOTE 9 – INvESTMENT IN CONTROLLED ENTITY
| Entities | Country of | Class of share | Class of share | Interest | Interest | Held | Cost of Investment | Cost of Investment | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| incorporation | |||||||||||||
| 2008 | 2007 | 2008 | 2007 | ||||||||||
| Bonanza | Gold | Pty | Ltd | Australia | Ordinary | 100% | 100% | 230,000 | 230,000 |
These financial assets are carried at cost.
The consolidated financial statements incorporate the assets, liabilities and results of the above subsidiary in accordance with the accounting policy described in Note 1(a).
NOTE 10 – TRADE AND OTHER PAYABLES
| Consolidated | Consolidated | Parent | |||||
|---|---|---|---|---|---|---|---|
| 2008 $ | 2007 $ | 2008 $ | 2007 $ | ||||
| Trade payables | 648,441 | 547,896 | 648,441 | 547,896 | |||
| Other payables | 102,924 | 83,348 | 102,924 | 83,348 | |||
| Accrued commitments | 282,602 | 1,942,577 | 282,602 | 1,942,577 | |||
| 1,033,967 | 2,573,821 | 1,033,967 | 2,573,821 |
39
NOTES TO THE fINANCIAL STATEMENTS fOR THE YEAR ENDED 30 jUNE 2008
NOTE 11 – SHORT TERM PROvISIONS
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----- Start of picture text -----
Consolidated Parent
2008 $ 2007 $ 2008 $ 2007 $
Employee benefits
Balance at beginning of financial year 30,947 15,277 30,947 15,277
Additional provisions 17,711 15,670 17,711 15,670
Amounts paid out (26,110) - (26,110) -
Balance at end of financial year 22,548 30,947 22,548 30,947
Provision in respect of legal action by an ex
employee for breach of contract 800,000 - 800,000 -
822,548 30,947 822,548 30,947
----- End of picture text -----
| NOTE 12 – ISSUED CAPITAL Consolidated Parent |
||
|---|---|---|
| 2008 $ 2007 $ 2008 $ 2007 $ |
||
| 60,690,287 (2007: 51,723,995) fully paid ordinary shares 31,807,520 15,828,305 31,807,520 15,828,305 Movements in ordinaryshares 2008 2007 |
||
| Number $ Number $ |
||
| Balance at beginning of report period 51,723,995 15,828,305 43,345,395 8,344,585 Issued at 20 cents(03/07/07) – Options Exercised 1,000,000 200,000 Issued at 20 cents(24/07/07) – Options Exercised 33,600 6,720 Issued at 20 cents(01/08/07) – Options Exercises 36,300 7,261 Issued at 20 cents(29/08/07) – Options Exercised 9,300 1,860 Issued at 20 cents(31/08/07) – Options Exercised 1,034,300 206,860 Issued at 20 cents( 03/09/07) – Options Exercised 500,000 100,000 Issued at 45 cents(03/10/07) – Employee Options Exercised 15,000 6,750 Issued at 20 cents(19/10/07) – Options Exercised 18,600 3,720 Issued at $2.50(07/11/07) – Rights Issues 6,200,592 15,501,480 Issued at 20 cents(12/12/07) – Options Exercised 18,600 3,720 Issued at 45 cents(02/04/08) – Employee Options Exercised 100,000 45,000 Issued at 110 cents(29/11/06) – Placement 3,250,000 3,575,000 Issued at 110 cents(22/12/06) – Placement 3,250,000 3,575,000 Issued at 20 cents(07/12/06) – Employee Options Exercised 40,000 8,000 Issued at 20 cents(29/01/07) – Options Exercised 100,000 20,000 Issued at 20 cents(31/01/07) – Options Exercised 25,000 5,000 Issued at 20 cents(05/02/07) – Options Exercised 1,605,000 321,000 Issued at 20 cents(29/03/07) – Options Exercised 10,000 2,000 Issued at 20 cents(29/03/07) – Employee Options Exercised 30,000 6,000 Issued at 20 cents(17/05/07) – Options Exercised 25,000 5,000 Issued at 20 cents(27/06/07) – Options Exercised 18,600 3,720 Issued at 20 cents(28/06/07) – Options Exercised 25,000 5,000 60,690,287 31,911,676 51,723,995 15,870,305 Less share issue and capital raising expenses (net of tax) (104,156) (42,000) At reporting date 60,690,287 31,807,520 51,723,995 15,828,305 |
40
NOTE 12 – ISSUED CAPITAL (continued)
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.
At the shareholders’ meeting each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.
Movement in Options
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----- Start of picture text -----
Consolidated Parent
2008 2007 2008 2007
Number of Weighted Number of Weighted Number of Weighted Number of Weighted
Options Average Options Average Options Average Options Average
Exercise Exercise Exercise Exercise Price
Price $ Price $ Price $ $
Outstanding
at the
beginning of
the year 6,946,400 0.63 5,825,000 0.21 6,946,400 0.63 5,825,000 0.21
Granted 500,000 4.36 3,000,000 1.18 500,000 4.36 3,000,000 1.18
Forfeited - - - - - - - -
Exercised (2,765,700) 0.21 (1,878,600) 0.20 (2,765,700) 0.21 (1,878,600) 0.20
- - - - - - - -
Expired
Outstanding
at year end 4,680,700 1.27 6,946,400 0.63 4,680,700 1.27 6,946,400 0.63
Exercisable
at year end 4,680,700 1.27 6,946,400 0.63 4,680,700 1.27 6,946,400 0.63
----- End of picture text -----
The options outstanding at 30 June 2008 had a weighted average exercise price of $1.27 and a weighted average remaining contractual life of 2.42 years. Exercise prices range from $0.20 to $4.36 in respect of options outstanding 30 June 2008.
Included in the options outstanding are employee options disclosed under Note 14.
NOTE 13 – RESERvES
Option Reserve
The option reserve records items recognised as expenses on valuation of employee share options.
Financial Assets Revaluation Reserve
The financial assets revaluation reserve records revaluations of available for sale financial assets
41
NOTES TO THE fINANCIAL STATEMENTS fOR THE YEAR ENDED 30 jUNE 2008
NOTE 14 – SHARE-BASED PAYMENTS
Employee Option Plan
The Company has established an Employee Share Option Plan (‘the Plan’) to assist in the attraction, retention and motivation of employees or officers of the Company. All employees (full and part-time) and consultants will be eligible to participate in the Plan after a qualifying period of 6 months’ employment (or, in the case of a consultant, having provided consulting services on a continuous basis for at least 6 months). The allocation of options to each employee, officer or consultant is in the discretion of the Board. Each option is to subscribe for one fully paid ordinary share in the Company and will expire 5 years from its date of issue. An option is exercisable at any time from its date of issue. The total number of shares the subject of options issued under the plan, when aggregated with issues during the previous five years pursuant to the plan, must not exceed 10% of the Company’s issued share capital.
The following share-based payment arrangements existed at 30 June 2008:
On 31 December 2005, 200,000 share options were granted to employees under the Marathon Resources Limited employee option plan to take up ordinary shares at an exercise price of $0.20 each. The options are exercisable on or before 30 June 2010. At balance date 30,000 options remained unexercised.
On 31 March 2006, 160,000 share options were granted to employees under the Marathon Resources Limited employee option plan to take up ordinary shares at an exercise price of $0.45 each. The options are exercisable on or before 30 June 2010. At balance date 45,000 options remain unexercised.
On 16 November 2006, 3,000,000 share options were granted to executive directors following shareholder approval at the 2006 Annual General Meeting to take up ordinary shares at an exercise price of $1.18 each. The options are exercisable on or before 30 June 2011. At balance no share options had been exercised.
On 2nd August 2007, 500,000 share options were granted to an employee under the Marathon Resources Limited Employee Option Plan to take up ordinary shares at an exercise price of $4.36 each. The options are exercisable on or before 6th August 2010. At balance date no share options have been exercised.
All employee options granted are ordinary shares in Marathon Resources Limited, which confer a right of one ordinary share for every option held.
The employee options is part of the total options granted as disclosed under Note 12.
The employee options outstanding at 30 June 2008 had a weighted average exercise price of $1.61 and a weighted average remaining contractual life of 2.85 years. Exercise prices range from $0.20 to $4.36 in respect of options outstanding 30 June 2008.
The weighted average fair value of the employee options granted during the year was $2.468.
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Consolidated Parent
2008 2007 2008 2007
Number of Weighted Number of Weighted Number of Weighted Number of Weighted
Options Average Options Average Options Average Options Average
Exercise Exercise Exercise Exercise Price
Price $ Price $ Price $ $
Outstanding
at the
beginning of
the year 3,190,000 1.10 360,000 0.31 3,190,000 1.10 360,000 0.31
Granted 500,000 4.36 3,000,000 1.18 500,000 4.36 3,000,000 1.18
Forfeited - - - - - - - -
Exercised (115,000) 0.45 (170,000) 0.20 (115,000) 0.45 (170,000) 0.20
- - - - - - - -
Expired
Outstanding
at year end 3,575,000 1.61 3,190,000 1.10 3,575,000 1.61 3,190,000 1.10
Exercisable
at year end 3,575,000 1.61 3,190,000 1.10 3,575,000 1.61 3,190,000 1.10
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The employee options is part of the total options granted as disclosed under Note 12.
The employee options outstanding at 30 June 2008 had a weighted average exercise price of $1.61 and a weighted average remaining contractual life of 2.85 years. Exercise prices range from $0.20 to $4.36 in respect of options outstanding 30 June 2008.
The weighted average fair value of the employee options granted during the year was $2.468.
42
NOTE 14 – SHARE-BASED PAYMENTS (continued)
This price was calculated using a Black Scholes option pricing model applying the following inputs:
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----- Start of picture text -----
Weighted average exercise price $4.36
Weighted average life of the option 4.58 years
Underlying share price $1.22
Expected share price volatility 40%
Risk free interest rate 5.6%
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Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future trends, which may not eventuate.
Included under share based payments expense in the income statement is $ 1,234,000 (2007 $ 1,580,930) which relates in full to equity-settled share-based payment transactions.
NOTE 15 – TENEMENTS AND jOINT vENTURES
The Company’s interests in tenements and unincorporated joint venture operations at the date of this report are as follows:
| Project Tenement Commodity Consolidated Parent |
||
|---|---|---|
| 2008 $ 2007 $ 2008 $ 2007 $ |
||
| 100% Interest South Australia Blanchetown EL 4052 Mineral sands 57,150 57,150 Pinda Springs EL 3159 Base Metals, Copper, Gold 109,615 73,067 109,615 73,067 Mongalata EL 3164 Gold, Copper 894,631 894,631 Mt Gee EL 3258 Uranium, Rare earths 12,901,554 6,589,882 - Talaringa EL 3497 Uranium, Copper, Gold 3,416 3,416 Paragon Bore ** EL 3562 Uranium, Copper, Gold 15,675 15,675 Mulga Well – Hard rock rights EL 3211 Uranium, Copper, Gold 245,992 164,792 245,992 164,792 Victoria Deddick River ELA 5086 Copper, Gold 21,310 - 21,310 - Little Yalmy ELA 5085 Copper, Gold 19,793 - 19,793 - Joint Ventures South Australia Coondambo EL 2819 Copper, Gold, Uranium 342,075 224,580 342,075 224,580 Western Australia Warburton E69/1564 Copper, Nickel, Uranium 1,133,517 14,397 1,133,517 14,397 Victoria Kalymna EL 4526 Copper, Gold 507,407 231,086 - - |
||
| 15,338,413 8,211,526 1,929,452 1,390,558 Application Monies for Grants of New Tenements - 10,052 - 10,052 Accrued commitments 45,124 - 45,124 - Total exploration costs 15,383,537 8,221,578 1,974,576 1,400,610 Less provided for impairment (148,720) (148,720) (148,720) (148,720) Carrying value of exploration costs Per Note 7 15,234,817 8,072,858 1,825,856 1,251,890 |
- Mongalata EL 3164 was disposed of to Phoenix Copper Ltd effective 30th January 2008.
** Talaringa EL 3497 was allowed to lapse on 17th January 2008.
*** Paragon Bore EL 3562 was allowed to lapse on 4th June 2008.
43
NOTES TO THE fINANCIAL STATEMENTS fOR THE YEAR ENDED 30 jUNE 2008
NOTE 15 – TENEMENTS AND jOINT vENTURES (continued)
In respect of the Mulga Well tenement (EL 3211) the company continues to hold a 100% interest in the rights to hard rock exploration while being a party to a joint venture in respect of Palaeochannel exploration over the tenement.
Interests in unincorporated joint venture operations at the date of this report were as follows:
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----- Start of picture text -----
Name of entity Principal activity joint venture Partner 2008 2007
Coondambo Mineral exploration Platsearch NL 50% 50%
Bon Bon Mineral exploration UraniumSA 30% 30%
MacDowell Hill Mineral exploration UraniumSA 30% 30%
Mulga Well* Mineral exploration UraniumSA 30% 30%
Kalymna Mineral exploration PS & GF Forwood 90% 90%
Warburton Mineral exploration Primary Resources Ltd 15% 15%
----- End of picture text -----**
The company’s interest in the unincorporated joint ventures are earned pursuant to agreements providing for minimum exploration expenditures over defined time lines, as follows: -
-
The Company’s interest in these joint ventures entered into on 18 October 2006 is free carried. All expenditures are to be met by the joint venture partner.
-
** The Company meets all exploration costs of these joint ventures.
NOTE 16 – COMMITMENTS fOR EXPENDITURE AND CONTINGENT LIABILITIES
Exploration Expenditure Commitments
The Company has certain statutory obligations to perform exploration work and expend minimum amounts of money on its mineral exploration tenements.
The terms of current and future joint ventures, granting of new licences and changes to existing licences will impact on the Company’s expenditure commitments.
Total annual expenditure commitments at balance date in respect of minimum expenditure requirements not provided for in the financial statements are approximately:
| Consolidated | ||
|---|---|---|
| 2008$ 2007$ |
||
| Tenement maintenance commitment - Not longer than 1 year 145,000 1,084,000 - Longer than 1 year and not longer than 5 years - 440,000 Operating lease commitments - No longer than 1 year 135,196 108,333 - Longer than 1year and no longer than 5years 383,044 498,333 |
||
| Aggregate commitments - No longer than 1 year 280,196 1,192,333 - Longer than 1 year and no longer than 5 years 383,044 938,333 Contingent liability The Company is defending a litigation claim by a former employee in relation to his dismissal. The Company has received legal advice that it has a strong defence and should be successful. However, if this is not the case then an additional cost will be incurred over that provided in the accounts 800,000 - 1,463,240 2,130,666 |
44
NOTE 17 – SEGMENT INfORMATION
The consolidated entity operates solely in the mining and exploration industry in Australia.
NOTE 18 – fINANCIAL INSTRUMENTS
-
(a) Financial Risk Management
-
The group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts payable, loans to and from subsidiaries and leases.
-
The main purpose of non-derivative financial instruments is to raise finance for group operations.
The group does not hold any derivative instruments.
i. Treasury Risk Management
-
A finance committee consisting of senior executives of the group meet on a regular basis to evaluate management strategies in the context of the most recent economic conditions and forecasts.
-
ii. Finance Risks
-
The risks the group is exposed to through its financial instruments are liquidity risk and interest rate risk.
Liquidity risk
The group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate sources of funding are available.
Interest rate risk
The consolidated group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and liabilities, is as follows:
-
The company has term deposits of $5,368,856 as at 30th June 2008 (2007: $1,812,058) which are deposited for less than one year at an average weighted interest rate of 7.47% (2007: 6.4%).
-
The Company has no formal overdraft facility and no term borrowing arrangements.
-
All other financial assets and liabilities are non-interest bearing.
-
Sensitivity: At 30th June 2008, if interest rates had changed by -/+ 10 basis points from the year end rates with all other variables held constant post tax loss would have been $ 3,500 more/less as a result of lower/higher interest income form term deposits.
-
(b) Financial Instruments Net fair value
The carrying amount of financial assets and financial liabilities recorded in the financial statements represent their respective net fair values, determined in accordance with the accounting policies disclosed in Note 1.
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45
NOTES TO THE fINANCIAL STATEMENTS fOR THE YEAR ENDED 30 jUNE 2008
NOTE 19 – NOTES TO THE STATEMENT Of CASH fLOWS
(a) Reconciliation of cash
For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments. Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows:
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----- Start of picture text -----
Consolidated Parent
2008 $ 2007 $ 2008 $ 2007 $
Cash on hand 500 500 500 500
Cash at call 79,409 328,414 79,409 328,414
Short-term bank deposit 5,368,856 1,812,058 5,298,856 1,742,058
5,448,765 2,140,972 5,378,765 2,070,972
----- End of picture text -----
The effective interest rate on short-term bank deposits is 7.47% (2007: 6.4%). All deposits are for less than 12 months.
(b) Reconciliation of Cash Flow from Operations with Loss after Tax
| Consolidated Parent |
||
|---|---|---|
| 2008 $ 2007 $ 2008 $ 2007 $ |
||
| Loss after income tax (5,429,462) (5,862,541) (5,429,462) (5,848,684) Cash fows excluded from proft attributable to operating activities: Loss on disposal of plant and equipments 5,463 5,127 5,463 5,127 Non-cash fows in proft Depreciation 116,932 56,048 116,932 56,048 Employee benefts expense – share based payments 1,234,000 1,580,930 1,234,000 1,580,930 Fair value adjustment on fnancial assets (218,500) 115,000 (218,500) 115,000 Exploration expenditure written off 916,831 218,809 916,831 218,809 Income tax attributable to share issue costs 44,638 18,000 44,638 18,000 Financial assets received for entering Joint Venture (150,000) (874,012) (150,000) (874,012) Change in assets and liabilities (Increase) Decrease in receivables 134,855 (389,350) 33,173 (276,220) Increase (Decrease) in payables (1,539,854) 2,266,020 (1,539,854) 2,266,020 Increase (Decrease) inprovisions 791,601 15,670 791,601 15,670 |
||
| Net Cash provided by (used in) operating activities (4,093,496) (2,850,299) (4,195,178) (2,723,312) |
46
NOTE 20 – KEY MANAGEMENT PERSONNEL COMPENSATION
Names and positions of key management personnel in office at any time during the financial year are:
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----- Start of picture text -----
Peter Williams Chairman (non-executive) Appointed 21/05/2004
John Santich Managing Executive Director Resigned 30/06/2008
Wieslaw Bogacz Executive Director Resigned 30/06/2008
Denis Wood (Non-Executive Director) Resigned 27/08/2008
Chen Zeng (Non-Executive Director) Appointed 27/12/2006
Chris Schacht (Non-Executive Director) Appointed 24/01/2008
John Linley (Non Executive Director) Appointed 30/06/2008
Stuart Appleyard Secretary Appointed 28/01/2004
W Ian McRae General Manager Appointed 28/01/2008
Stuart Hall CEO Terminated 31/10/2007
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Key Management Personnel Remuneration
| Directors fees Salary and wages Bonus Superannuation contributions Ex gratia payments Other (1) Share- based Payments Options Total |
||
|---|---|---|
| P.L. Williams 2008 50,000 - 4,500 - - - 54,500 2007 50,000 - 4,500 - - - 54,500 J. Santich 2008 - - - - 236,733 - 236,733 2007 - - - - 223,840 790,465 1,014,305 W. Bogacz 2008 - - - - 264,333 - 264,333 2007 - - - - 257,952 790,465 1,048,417 D Wood 2008 30,000 - 2,700 - - - 32,700 2007 17,500 - 1,575 - - - 19,075 C Zeng 2008 30,000 - - - - - 30,00 2007 15,000 - - - - - 15,000 C Schacht 2008 12,500 - 1,125 - - - 13,625 2007 - - - - - - - J Linley 2008 - - - - - - - 2007 - - - - - - - S. Appleyard 2008 - 80,000 5,400 15,000 - - 100,400 2007 15,000 15,000 2,700 - - - 32,700 I McRae 2008 - 20,852 20,833 102,965 - - - 144,650 2007 - - - - - - - S. Hall 2008 - 80,306 26,325 - - 1,234,000 1,340,631 2007 - 50,154 17,133 - - - 67,287 |
||
| Total 2008 122,500 181,158 20,833 143,015 15,000 501,066 1,234,000 2,217,572 |
||
| 2007 97,500 65,154 - 25,908 - 481,792 1,580,930 2,251,284 |
(1) Executive Directors, Dr J.R. Santich and Dr W. Bogacz, elected on the 1 April 2006 to convert to a consultancy based emolument arrangement from salaried benefits in accordance with the relevant terms and conditions of their employment contracts. The 2008 amounts include $90,133 each for early contract termination.
47
NOTES TO THE fINANCIAL STATEMENTS fOR THE YEAR ENDED 30 jUNE 2008
NOTE 20 – KEY MANAGEMENT PERSONNEL COMPENSATION (continued)
Options issued as part of remuneration for the year ended 30 June 2008
Options are issued to directors and executives as part of their remuneration. The options are not issued based on performance criteria, but are issued to the majority of directors and executives of Marathon Resources Limited and its subsidiary to increase goal congruence between executives, directors and shareholders.
Options Granted as Remuneration during the year
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----- Start of picture text -----
Key Granted No Grant Date value per Exercise first Exercise Last Exercise
Management Option at Grant Price $ Date Date
Personnel Date $
Stuart Hall 500,000 02/08/07 2.468 4.36 02/08/07 06/08/10
Details of the valuation methodology and inputs used to calculate the fair value at grant date have been included in Note 14. All
options were granted for nil consideration.
Number of Options Held by Key Management Personnel
Balance Granted as Option Net Change Balance 30/6/08
1/7/2007 Compensation Exercised Other
Peter Williams 500,000 - (500,000) - -
John Santich 1,500,000 - - - 1,500,000
- - -
Wieslaw Bogacz 1,500,000 1,500,000
Denis Wood - - - - -
- - - - -
Chen Zeng
Chris Schacht - - - - -
- - - - -
John Linley
- -
Stuart Appleyard 1,025,000 (525,000) (500,000)
Ian McRae - - - - -
Stuart Hall - 500,000 - - 500,000
Total 4,525,000 500,000 (1,025,000) (500,000) 3,500,000
----- End of picture text -----
- ‘Net Change Other’ refers to options purchased or sold during the financial year.
** All options on issue at year end are exercisable.
Number of Shares Held by Key Management Personnel
| Balance 1/7/2007 Received as Compensation Option Exercised Net Change Other Balance 30/6/08*** |
||
|---|---|---|
| Peter Williams 70,000 - 500,000 110,000 680,000 John Santich 2,020,000 - - 204,000 2,224,000 Wieslaw Bogacz 2,210,000 - - 212,557 2,422,557 Denis Wood 136,364 - - - 136,364 Chen Zeng - - - - - Chris Schacht - - - 45,000 45,000 John Linley - - - - - Stuart Appleyard 630,000 - 534,300 132,718 1,297,018 Ian McRae - - - 1,000 1,000 Stuart Hall - - - - - Total 5,066,364 1,034,300 705,275 6,805,939 Net Change Other refers to shares purchased or sold during the fnancial year. * In addition to the shares and options detailed above, Mr Appleyard had an interest in a service trust entitlement to options as follows: Options Stuart Appleyard 2008 - 2007 9,300 (Exercised |
48
NOTE 21 – RELATED PARTY TRANSACTIONS
Transactions between related parties are on normal commercial terms and conditions no more favourable than those to other parties, unless otherwise stated.
The company has had no dealings with Cluan Capital Management Pty Ltd during 2008 (2007: $84,000). This company is associated with Mr P.L. Williams, the Chairman of Marathon Resources Limited.
The Company‘s lawyers are Lynch Meyer of which Mr S M. Appleyard is a partner. Lynch Meyer received payments for professional services during the year of $1820 (2007: $82,042).
The two Executive Directors, Dr J.R. Santich and Dr W. Bogacz, are directors of Archon Pty Ltd and Archon Technologies Pty Ltd respectively. Both companies provided services to Marathon Resources Limited in connection with the provision by them of Executive Directors to the Company and were paid $236,733 (2007 $233,840) and $264,333 (2007 $257,952) respectively, in this regard.
The Company has advanced funds to its subsidiary during the year amounting to $ 6,486,311 (2007: $5,116,365). The balance owing from the subsidiary at year end was $ 13,376,937 (2007: $6,890,626).
During the year the Company received short term funding from its substantial share holders Talbot Group Holdings Pty Ltd and Citic Australia Pty Ltd amounting to $ 375,000 each all of which has been repaid at year end together with interest of $ 7,538 each. (There were no loan transactions in the previous year).
NOTE 22 – AUDITOR’S REMUNERATION
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----- Start of picture text -----
Consolidated Parent
2008 $ 2007 $ 2008 $ 2007 $
Amounts received or due & receivable by the
Auditor of the company for:
- auditing & review services 25,750 21,500 25,750 21,500
- other services - - - -
----- End of picture text -----
NOTE 23 – MATTERS SUBSEQUENT
TO THE END Of THE YEAR
On 11th August 2008 the Company received approval from PIRSA to execute work pursuant to its rectification / rehabilitation plan in connection with waste disposal by the Company on its Mt Gee exploration tenement. More detailed particulars are set out under Environmental Issues in the Director’s report.
Other than as disclosed above, there is no matter or circumstance that has arisen since 30 June 2008 that has significantly affected, or may significantly affect:
-
(a) the consolidated entity’s operations in future financial years, or
-
(b) the results in future financial years, or
-
(c) the consolidated entity’s state of affairs in future financial years
49
NOTES TO THE fINANCIAL STATEMENTS fOR THE YEAR ENDED 30 jUNE 2008
NOTE 24 – EARNINGS PER SHARE
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----- Start of picture text -----
Consolidated
2008 $ 2007 $
Basic earnings per share (0.092) (0.122)
Loss used to calculate basic EPS (5,351,634) (5,862,541)
Weighted average number of ordinary
shares outstanding during the year used in
calculating basic EP 58,101,455 48,247,775
----- End of picture text -----
The weighted number of share options on issue during the year is not included in the calculation of diluted earnings per share because they are anti-dilutive for both reported years. These options could potentially dilute basic earnings per share in the future.
NOTE 25 – ECONOMIC DEPENDENCY
As a junior explorer the Group has generally only sufficient funds on hand to meet ongoing minimum short term corporate and exploration commitments. As a consequence the Directors periodically consider the following activities:
-
negotiate to farm out the Group’s surplus exploration commitments;
-
steps to identify sources of additional capital; and
-
reduction in the rate of expenditure.
The Group is economically dependent on the achievement of one or all of the above options.
NOTE 26 – COMPANY DETAILS
The registered office and principal place of business is: Marathon Resources Limited 235 Port Road Hindmarsh South Australia 5007
50
SHAREHOLDER INfORMATION
At the date of this report all the issued securities of the Company comprised ordinary shares none of which were subject to any restrictions.
SUBSTANTIAL SHAREHOLDERS AT 9[TH] SEPTEMBER 2008
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Name fully Paid Shares Ordinary Shares %
National Nominees Limited 7,486,300 12.34
CITIC Australia Pty Ltd 6,342,164 10.45
Talbot Group Holdings Pty Ltd 6,342,164 10.45
ANZ Nominees Limited 3,935,281 6.48
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DISTRIBUTION Of SHAREHOLDINGS AT 9[TH] SEPTEMBER 2008
All securities issued by the Company are fully paid ordinary shares entitling the holders to participate in dividends and proceeds on winding up of the Company in proportion to the number of shares held. On a show of hands every holder of the shares present at a meeting in person or by proxy is entitled to one vote and upon a poll each share counts as one vote.
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Range Total Holders Number of Shares
1 – 1,000 697 433,097
1,001 – 5,000 1030 2,747,241
5,001 – 10,000 381 2,986,648
10,001 – 100,000 409 11,818,653
100,001 – maximum 45 42,704,648
Total 2,562 60,690,287
At 9th September 2008 a marketable parcel constituted 399 shares.
The number of shareholders holding less than a marketable parcel was 202 44,623
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TWENTY LARGEST SHAREHOLDERS AT 9[TH] SEPTEMBER 2008
| Name | fully Paid Ordinary Shares | % of Issued Capital | ||
|---|---|---|---|---|
| National Nominees Limited | 7,486,300 | 12.34 | ||
| Citic Australia Pty Ltd | 6,342,164 | 10.45 | ||
| Talbot Holdings | 6,342,164 | 10.45 | ||
| ANZ Nominees Limited | 3,935,281 | 6.48 | ||
| Citicorp Nominees Pty Ltd | 2,278,284 | 3.75 | ||
| Archon Resource Technologies Pty Ltd | 1,568,648 | 2.58 | ||
| HSBC Custody Nominees (Australia) Limited | 1,199,990 | 1.98 | ||
| Sheoak Runner Pty Ltd (JR Santich S/F A/C) | 1,178,000 | 1.94 | ||
| Credit Suisse Securities (Europe) Ltd | 1,153,000 | 1.90 | ||
| FMS Pty Ltd | 1,111,318 | 1.83 | ||
| Sheoak Runner Pty Ltd (Santich Media A/C) | 1,022,000 | 1.68 | ||
| Wieslaw Bogacz + Halina Bogacz | 782,559 | 1.29 | ||
| UBS Wealth Management Australia Nominees Pty Ltd | 766,330 | 1.26 | ||
| AMMF Investments Pty Ltd | 600,000 | 0.99 | ||
| Cluan Capital Management Pty Limited | 600,000 | 0.99 | ||
| Merrill Lynch (Australia) Nominees Pty Limited | 454,176 | 0.75 | ||
| Mr William Sydney Latimer | 450,000 | 0.74 | ||
| Mrs Georgia Georgaklis | 415,500 | 0.68 | ||
| Ms Carol Ann Agnew | 364,210 | 0.60 | ||
| PM Dight & Associates Pty Ltd | 354,220 | 0.58 | ||
| Total | 38,404,144 | 63.26 |
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Marathon uses Greenhouse Friendly ™ ENVI 50/50 Carbon Neutral Paper ENVI is an Australian Government certified Greenhouse Friendly™ Product.
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Photography by Bryan Charlton
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