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SCIDEV LTD Annual Report 2010
65761_rns_2010-09-28_bd768f84-ef1d-407f-87d2-dd3f65fabf1e.pdf
Annual Report
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Annual Report 2010
ASX Code: INL ABN: 25 001 150 849
Intec Ltd Contents
Page
| Letter from Chairman and Managing Director & CEO | 1 |
|---|---|
| Review of Operations | 3 |
| Directors' Report | 11 |
| Auditors' Independence Declaration | 21 |
| Consolidated Statement of Comprehensive Income | 22 |
| Consolidated Statement of Financial Position | 23 |
| Consolidated Statement of Changes in Equity | 24 |
| Consolidated Statement of Cash Flows | 25 |
| Notes to the Financial Statements | 26 |
| Directors' Declaration | 70 |
| Audit Report | 71 |
| Schedule of Tenements | 74 |
| Shareholder Information | 75 |
| Corporate Governance Statement | 77 |
| Corporate Directory | 80 |
The Intec Board: (from the left) James Bell (Non-executive Director), Philip Wood (Managing Director & CEO), Kieran Rodgers (Finance Director & CFO), Trevor Jones (Chairman), John Moyes (Technical Director), Robert Waring (Company Secretary).
Cover: The Intec Logo and industrial waste reprocessing
Designed by Maritza Valencia-Bejarano, one of Intec's talented engineers, the Intec Logo incorporates the five elemental symbols from mediaeval alchemy for gold, silver, zinc, lead and copper (left to right, top to bottom) emblazoned over ripples representative of the hydrometallurgical Intec Process.
These five elements represent the core of a wide range of base and precious metals that are the focus of Intec's clean technology applications for mineral feedstocks, and mine and industrial waters, sludges and solids.
Letter from the Chairman and Managing Director & CEO
Dear Intec Shareholder
29 September 2010
This is Intec Ltd's (Intec's or the Company's) ninth Annual Report since listing on the Australian Securities Exchange and includes the financial statements for the year to 30 June 2010.
Intec's recovery from the effects of the Global Financial Crisis has been arduous, reflecting the fact that the Company was left in a severely weakened state following the sharp downturn in metals prices in 2008. As a consequence during the 2008-2009 financial year, Intec was forced to sell most of its key assets in order to repay bank debt, lost significant personnel, incurred bad debts due to the failure of client companies, and saw its projected cashflows slashed as substantial gaps appeared in our project development pipeline due to the widespread minerals processing project suspensions among the Company's clients.
However, during the second half of calendar 2009 the Company's prospects improved as two significant project opportunities were advanced. Firstly, Intec formed a collaborative programme with GB Galvanizing Service Pty Ltd (GBG) in Victoria, for the optimisation of an Intec Process flowsheet for the zero-waste recycling of spent pickle acid from GBG's zinc-bearing industrial waste. This project is ongoing, and based on the success of continuous pilot trials, the Company is optimistic concerning current commercial demonstration plant trials at our research facility at Burnie, Tasmania.
Another new opportunity has been the shareholder/licensing arrangement between Intec and Green Resources (Asia Pacific) Holding Limited for the development of projects utilising the Intec Process in China to recycle industrial waste feedstocks.
Intec was also pleased to be recognised as a finalist or winner of multiple industry awards during 2009 and 2010, all of which relate to the Company's successful application of the Intec Process to the recycling of heavy metal-bearing industrial wastes in commercial operations at the Burnie plant. This version of the technology is now considered proven and ready for wider commercial application, and the Company is looking for further opportunities for comparable waste streams.
Furthermore, recoveries of some metals prices internationally have re-initiated incoming enquiries for international minerals processing project opportunities. Intec has now recommenced profitable testwork and engineering in relation to those opportunities. Thus, at least from the fundamental technical and project perspective, there are solid grounds for optimism in relation to the Company's prospects in 2011.
From a corporate perspective, many challenges remain. A severe lack of available capital has continued to hamper the pace at which projects can be advanced. Just as importantly, the requirement for working capital in the form of an international convertible note, combined with the conversion of debt to equity under that agreement and sale of the resulting INL shares, has had a corresponding negative effect on Intec's share price and resultant market capitalisation through most of fiscal 2010 and up to the time of writing.
The loss after tax attributable to members in the 2010 financial year was $1.780 million compared to a loss of $20.685 million in the previous financial year. The improvement was due to there being no further material asset impairments and the recognition of the value of the Hellyer royalty, which formed part of the consideration payable by Bass Metals Ltd (BSM) for the purchase of the Hellyer Assets. BSM's Hellyer Mine Project continues to be on track for commencement of production in early 2011.
The onus remains on the Board and Management of Intec to ensure that the projects in hand are delivered in a timely fashion, with a particular focus on maintaining and enhancing current and developing revenue streams.
Yours sincerely
Trevor A Jones Philip R Wood
Chairman Managing Director & CEO
Review of Operations
The 2009-2010 financial year has seen Intec's operations and commercial technology prospects improve slowly from a base level following the Global Financial Crisis. Having said this, such growth has been incremental, hampered by the lack of supporting capital and the limited physical and human resources available to implement growth strategies.
Given the stagnation in the minerals processing sector at the time, Intec concentrated its efforts throughout 2009 on the development and implementation of waste processing applications for the Intec Process technology. From a chemical perspective, many inorganic industrial wastes are very similar to many mineral feedstocks, allowing the swift optimisation of the Intec Process for the extraction and recovery of value from materials that potential clients are currently paying to dispose to landfill.
The most rapidly implemented of these opportunities has been the utilisation of Intec's existing highquality plant facilities at Burnie for the profitable recycling of heavy metal sludges and residues from the Tasmanian plating industry. This has been a major technical success and has won significant recognition for the establishment of the Intec Process as a competitor in the clean recycling of industrial wastes. Unfortunately, this success has been partially clouded by the failure early in the 2009-10 financial year of a key client and an associated bad debt of $240,000.
Success at Intec's Burnie recycling operation contributed to the development of another key opportunity for the Intec Process technology, when Intec formed a close relationship with GB Galvanizing Service Pty Ltd (GBG), a major steel galvanising plant operator in Victoria. Together, the two companies have commenced development on the optimisation of the Intec Process for recycling over one million litres per year of spent pickle acid from GBG's two Victorian galvanising plants. Supported by $780,000 of HazWaste funding approved by EPA Victoria to GBG, the project is now well advanced towards the first commercial application of the Intec Process in this area of profitable industrial waste recycling.
Furthermore, the Company has taken its first concrete international recycling steps through the formation of a joint venture project development company in China, Green Resources (Asia Pacific) Holding Ltd. Throughout 2010, Green Resources has progressed a suite of projects that will utilise Intec's technology, or will contribute to future Intec projects through the development of complimentary know-how.
This review of operations outlines current projects, both operating and developing, as well as the status of Intec's strategies for the future application of mineral processing and industrial waste recycling applications of the technology.
Intec's Research and Commercial Recycling Facility at Burnie
Intec's research facility at Burnie, Tasmania was constructed in 2005 as a testing and proving ground for the Intec Process technology, initially for mineral applications. It was deliberately designed for flexibility, and over the last five years has been individually tailored and adjusted for a range of development and optimisation programmes as have best served the Company's needs at the time.
Without compromising the functionality of the plant for its designed purpose, Intec has most recently and very successfully employed a portion of the plant for commercial industrial waste recycling. Throughout calendar years 2009 and 2010, the plant has continued to smoothly recycle industrial waste sludges, solids and residues, primarily containing lead, zinc, copper, nickel and tin.
The useful metals contained in the waste feedstocks are extracted and recovered to a useable mineral product that is returned to the minerals processing industry as the equivalent of base metal concentrate. In doing so, the recycling process produces no solid wastes, leaving only a clear water discharge to sewer under licence from the local water authority.
The stages of heavy metal recycling, from hazardous sludge waste through to mineral product and clear water discharge
Throughout 2009-2010, the Company has continued its efforts to grow the quantities of the wastes being recycled, with the aim of eventually being able to run continuous rather than campaign recycling operations (with the attendant economic advantages), and in future to expand the operations to other sites within Australia and internationally.
Concurrent marketing and technical efforts have sought to expand the range of materials being treated at Burnie, again with the aim of maximising capacity utilisation and therefore minimising unit costs. This has included trials of other industrial wastes containing the same metal 'contaminants', particularly lead, as well as examination of the requirements to expand the range of recyclable metals to include chromium. The latter considerations will be advanced during 2011.
In simple terms, Intec's Burnie recycling operation acts as a competitor to processes that rely on landfill disposal. The most common of these is 'Chemical Fixation and Stabilisation', which adds chemical reagents to the waste to precipitate the metals to a solid residue, and then adds further chemicals in an attempt to render the precipitated mass acceptable for dumping in landfill. Together, these two steps add significantly to the total mass of waste that must be transported and dumped, in many cases so that the total mass of 'stabilised' waste is several times the original mass of industrial residue.
Furthermore, using conventional fixation and stabilisation, all of metals from the original industrial waste that could have been recovered using the Intec Process and returned to active service via the minerals industry, have instead been permanently lost to landfill as an ongoing risk to the environment.
Despite the significant setback associated with the ACL Group going into receivership and administration with its resultant bad debt to Intec, Intec has continued to provide ongoing waste recycling services to ACL, as the Company's primary plating industry client in Tasmania.
In doing so, Intec has solved a legacy hazardous waste problem that had been accumulating at ACL's site in Launceston for 15 years.
The environmental benefits of the Intec Process for extracting and recovering useful metals are clear and obvious, supported by the economic benefits of capturing contained value from the 'wastes' rather than paying extra to add chemical reagents, bulk out, and higher landfill fees. Landfill fees, particularly, are increasing in substantial jumps as the state regulators pay increasing attention to the dwindling supply of landfill space. The Victorian Government, as example, has mandated that once the State's single remaining high-level landfill becomes full in the next couple of years, no further landfills may be created anywhere in the State. This policy position is underpinning a strong drive from Victorian industry and EPA Victoria to maximise the beneficial reuse of materials that would otherwise have been disposed to landfill.
Intec's successful recycling at Burnie has therefore continued to receive widespread recognition as a major component of the technology suite required to minimise landfill disposal across Australia. The Burnie Recycling Facility was Runner-Up for the 2009 Tasmanian Awards for Environmental Excellence and a finalist the 2009 Eco Innovation category of the prestigious Banksia Environmental Awards. This year, it was a finalist for the 2010 Sulo Innovation in Sustainability Award, and was named winner of the Environmental Solution of the Year as part of the 7th Annual Manufacturers' Monthly Endeavour Awards.
This ongoing recognition continues to raise Intec's profile, and has contributed to numerous incoming enquiries about the capabilities and applications of the Intec Process, both for direct industrial waste recycling services at Burnie and for larger-scale industrial waste recycling projects on the Australian mainland. Intec assesses each of the project opportunities as they arise, and where applicable this has contributed to Intec's current project 'pipeline', which is now significantly recovering in the aftermath of the Global Financial Crisis.
Victorian Galvanising Industry Project
Building on Intec's success in commercial recycling at Burnie, it has also initiated a project 'pipeline' of developing and potential opportunities applying the Intec Process to industrial waste feedstocks. Of these, the most developed is the application of the technology for the zero-waste recycling of liquid waste from the Victorian galvanising industry.
Intec first met GBG in November 2008 at an event which had been established and hosted by EPA Victoria with the expressed purpose of encouraging linkages between Victorian industrial companies with waste problems and companies with waste solutions.
Spent pickle liquor is an expensive problem for the galvanising industry, not just in Victoria but worldwide. In short, before steel can be dipped in molten zinc to create a protective galvanised coating, it must first be dipped in acid to remove any rust that might be on the surface, and/or any old zinc that might be left over from previous galvanising. Over time, the acid used for this pre-treatment builds zinc and iron in solution and the acid strength decreases, and eventually it is no longer fit for its purpose.
In most areas, the spent pickle acid (also known as spent pickle liquor) is sent to a waste treatment company that performs chemical fixation and stabilisation, and for every tonne of acid waste generated by the galvaniser, a total of ~2.3 tonnes of waste is generated by the waste treatment company.
By contrast, Intec has proposed a patented variation of the Intec Process by which the zinc, iron and acid can all be recovered to useful products on a zero-waste basis.
Review of Operations
Having visited Intec's recycling operation at Burnie, GBG prepared an application to EPA Victoria (with assistance from Intec) seeking $780,000 of support funding for a programme of work to first optimise the Intec Process for this feedstock (Phase 1), then to prove the technology at a commercial scale using Intec's existing demonstration plant facility at Burnie (Phase 2), and finally to construct and operate a fullscale commercial recycling plant in Victoria (Phase 3) to recycle a minimum of one million litres of GBG's spent pickle liquor per year, from its two Victorian galvanising operations.
EPA Victoria, through the HazWaste Fund, approved this funding to GBG in November 2009, and throughout 2010 Intec has continued to provide this programme of work under sub-contract to GBG. Phase 1 trials were successfully completed during the March 2010 Quarter. Some key outcomes included:
- Testing a range of operating variables in order to frame the key operating parameters for this application of the Intec Process technology.
- A total of 175 hours of operation, during which 289 litres of spent pickle acid were recycled.
- Both the recovery and electrowinning of zinc metal product, and also iron separation and recovery, were successfully demonstrated.
- A provisional patent has been lodged.
Hot-dip galvanising of steel
Intec and GBG representatives holding samples of high-quality zinc sheet from Phase 1 trials at the Brookvale testing facility
Following a period to analyse and report the Phase 1 data, to incorporate that data into the engineering of Phase 2, and to order and install the equipment required to conduct commercial trials of 50,000 litres of spent pickle liquor, Intec has now commenced the Phase 2 trials. It is anticipated that this current phase of the programme will be completed during the December 2010 quarter.
Provided that Phase 2 confirms the technical and economical feasibility of the spent pickle liquor recycling facility in Victoria, it is expected that the Phase 3 full-scale plant will be constructed in 2011. It is reasonable to allow for a period during which the outcomes of that operation can be demonstrated, after which there will be significant drivers to support the replication of this plant at larger scale elsewhere in Australia and internationally. The issues of spent pickle acid are common to the industry, and Intec looks forward to developing the opportunities around the world that can build upon this reference plant in Victoria.
Chinese Projects
The Australian waste recycling market represents an excellent proving ground for the Intec Process, and for the optimised waste recycling applications that derive from the core technology. However, the Australian market is comparatively small and highly fragmented, with long transport distances and substantial differences in the state-based regulatory frameworks, all of which challenge the ability to deliver projects that reflect the investment in the Intec Process development. As such, international market opportunities are key to Intec's strategies to leverage value from its suite of technology applications.
A clear and obvious target market for Intec's technology is China. China alone accounts for about 40% of the global demand for zinc, lead, copper and nickel. The industrial output associated with this metals demand in turn generates quantities of waste that far exceed Australian levels. It is possible in certain regions of China, sometimes on a single site, to access greater quantities of a selected waste stream than are available in an entire Australian state. With larger scale and lower transport distances and costs, lower input costs (notably including labour), the economic opportunities in China should be appreciable.
Review of Operations
Browns Sulphide Project, Northern Territory, Australia
An example of this success may be found in the new intellectual property that continues to be generated in relation to unlocking value from the very large polymetallic Browns Sulphide Project in the Northern Territory of Australia. Throughout 2009 - 2010, Intec has continued to progress an application of the Intec Process to selectively extract and recover lead, copper and nickel-cobalt.
Intec anticipates that the Intec Process has the potential to be transformative to the economics of the Browns Sulphide project.
Intec International Projects Pty Ltd
Through Intec International Projects Pty Ltd, its 50/50 joint venture with Mr Reza Maghzian of the M International Group in the UK, Intec has been active during the year in advancing a project opportunity in the Middle East.
Involving a major primary zinc/lead minerals company, the project seeks to take advantage of the Intec Process's capabilities to unlock value from low grade and polymetallic feedstocks in the region.
Intec International Projects has been engaged by the client to conduct a Conceptual Study based on readily available feedstocks, although the addition of other local feedstocks may also be recommended, to maximise the synergies and advantages available through the Intec Process technology.
If successful, it is anticipated that the project will advance during 2011 and 2012, with the aim of developing and implementing a significant zinc/lead project in the region, potentially with the benefit of other by-products to further enhance the project economics.
The current Conceptual Study results from Reza's ongoing efforts, supported capably by Intec's Corporate Development Manager, Dave Sammut. It is hoped that this represents the first tangible milestone in a sequence of profitable projects over the coming years.
Other International Projects
The increase in incoming enquiry in relation to mineral project opportunities during the 2010 financial year was marked, though much of this enquiry is still emerging from the 'junior' end of the resource market. Thus the Board has established firm guidelines by which the Company can assess not just the technical merit of a project opportunity, but also the specific competitive advantages that the Intec Process might offer the individual project, and the technical and financial capabilities which a prospective client could offer to support an achievable project outcome.
Only when the project offers all three key project 'pillars' (technical need and merit, a viable resource, and a client with the financial and project capabilities to support full implementation), does Intec submit a proposal for (fully externally-funded) work on these project opportunities. The Company have maintained its strategy of applying its limited technical resources only to those projects that it considers have a realistic chance of being implemented within an acceptable timeframe, regardless of the potential short-term profitability of any testwork required.
For example, one testwork and engineering contract currently underway is for AngloGold Ashanti, an important African gold producer. Intec will assess the performance of the Intec Gold Process on a gold concentrate currently being commercially produced by AngloGold. The result will be compared to the performance of conventional technologies for the same mineral feedstock, with the intention that, provided that the Intec Gold Process results are suitably favourable, the Intec technology would be included by AngloGold Ashanti as a viable metallurgical option for its future refractory gold projects under consideration or development.
Corporate Matters
Convertible Note
On 16 November 2009, Intec signed a convertible note facility (the "Facility") with La Jolla Cove Investors, Inc. ("La Jolla") to provide up to a total of US$3 million in working capital.
La Jolla is a California-based private investment company that finances small- to mid-sized listed companies that meet its criteria of growth potential relative to market capitalisation. To date, Intec has drawn down US$2,375,000 of the Facility.
Despite a series of positive operational announcements by Intec during the course of 2010, the conversion and on-market sale of Intec shares has had the directly corresponding effect on the INL share price.
Extraordinary General Meeting
At an Extraordinary General Meeting of shareholders held on 30 June 2010, three resolutions were approved by shareholders:
-
- Approval for the ratification of the issue of the La Jolla convertible note, and the Company's ordinary shares upon conversion thereof, to La Jolla Cove Investors Inc.;
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- Approval for the acquisition of a relevant interest in the Company by La Jolla Cove Investors Inc. and its associates to the extent and on the terms set out in the Explanatory Memorandum; and
-
- Approval for the Company to consolidate its share capital as detailed in the attached Explanatory Statement so that each ten ordinary shares on issue in the capital of the Company at the record date of 8 July 2010 is consolidated into one share, with fractions rounded up.
The three resolutions were passed by unanimous show of hands. Additionally, proxy votes for each resolution were greater than 98% in favour of Resolutions 1 and 2, and greater than 86% in favour of Resolution 3.
Share Placements
During the 2009 - 2010 financial year, several small share placements were made by Intec at the prevailing share price, principally in lieu of cash payment for services rendered. A placement in the equivalent of 2.03% of the issued capital was also made to investors associated with Green Resources as part of the cross-investment on establishment of the joint venture agreement discussed above.
Finance
The Company sold its Hellyer assets to Bass Metals Ltd (BSM) during the 2008-2009 financial year for a total consideration of $10 million, half of which is payable as a throughput-based royalty at a rate of $2.50 per tonne of ore processed through the Hellyer Mill.
BSM provided an operations update on 24 August 2010, in which it noted delays and a review to its development schedule for its Hellyer mine project. BSM noted that "…given the recent issues in the decline development it is considered prudent to complete all of the plant commissioning prior to Christmas and then after the work force has had a break over Christmas, start treating Fossey ore early in the New Year, 2011."
Allowing for ramp-up of the Hellyer mill during the March 2011 Quarter, and for lag in the payment of royalties by BSM, Intec does not expect to receive meaningful cash flow from royalty payments until mid-2011.
Financial
Intec incurred operating losses after income tax of $1.780 million and net cash outflows from operations of $3.489 million in the year ended 30 June 2010. As of balance date, Intec had net assets of $5.475 million and cash balances of $0.192 million.
The operating loss after tax of $1.780 million represents a substantial improvement when compared to the loss recorded at 30 June 2009 of $20.685 million. The improvement was due to there being no further material asset impairments and the recognition of the value of the Hellyer royalty, which formed part of the consideration payable by BSM for the purchase of the Hellyer Assets. Settlement of the sale of the Hellyer Assets occurred in August 2009.
The Hellyer royalty involves the payment to Intec of $2.50 per tonne of ore processed through the Hellyer Mill to a cumulative maximum payment amount of $5 million. BSM has publicly announced its intention to restart the Hellyer Mill during the 2011 March quarter. In its 30 June 2009 financial statements, BSM adopted a valuation of $2.756 million for the Hellyer royalty. BSM's valuation of the Hellyer royalty has been adopted by the Directors and accounted for as a profit from discontinued operations and a non-current asset.
Proceeds from the sale of the Hellyer assets were principally applied to the repayment of the Macquarie Bank debt facility and the replacement of the $3.648 million environmental bond in Victoria (that had been supplied by the Macquarie facility) with an interest-bearing cash deposit.
In November 2009, the Company entered into a multi-part subscription agreement with Green Resources for the licensing of the Intec Process technology in China. Stage 1 of the subscription agreement resulted in Intec receiving seven percent (7%) of the issued capital in Green Resources, satisfied by the issue of 21,659,436 Intec ordinary shares at a price of $0.015 per share to investors nominated by Green Resources and the grant to Green Resources of a conditional royalty-free twenty (20) year Intec Process technology licence, subject to Intec's existing licensing arrangements and specified performance arrangements. The Directors have valued the Company's 7% shareholding investment in Green Resources at $1.137 million of which $0.813 million has been recorded as deferred revenue.
Revenues from continuing operations were generated from the ongoing recycling operations at Burnie, interest from Intec's environmental bonds for the EAF dust stockpile and other minor revenue sources.
Titanium agitators, used in the Intec Process at the Burnie Research Facility
Directors' Report
Your Directors present their report on the Intec Group of Companies (referred to hereafter as the Group) consisting of Intec Ltd (Intec or the Company) and the entities it controlled at the end of, or during, the year ended 30 June 2010.
Directors
The following persons were Directors of the Company during the whole of the financial year and up to the date of this report. Apart from as specified below, no Intec Director has been a director of any other ASX-listed company in the last 3 years.
Trevor A Jones B.Comm. (Melb) Chairman
Mr Jones has spent over 30 years working in the finance industry in Australia, United Kingdom and the USA. During this time he has held senior executive positions in investment funds management, stockbroking and corporate finance, and gained a broad experience of capital structuring and capital raising, particularly in the mining sector. Mr Jones was manager of equity portfolios for Shell Australia and National Employers Mutual in the United Kingdom. He was a Director of County NatWest Securities Australia Limited in London and then Director of Corporate Finance with Westpac Institutional Bank in Sydney. More recently Mr Jones was the Sydney Chief Executive for Melbourne-based Austock Group and was Chairman of both its Corporate Finance and Investment Management divisions. He was appointed as a Nonexecutive Director of Intec on 28 February 2007.
Philip R Wood B.A. (Syd), Ll.B. (Syd), A.S.I.A., Dip. L.C.F. (Sorbonne) Managing Director and Chief Executive Officer
Mr Wood has qualified and practised as a legal and corporate adviser on local and international financial and commercial transactions in Sydney, New York, London, Bahrain and Hong Kong. He has been a Director of the Company since 1993 and was appointed Managing Director and Chief Executive Officer on 26 March 2001. He is responsible for implementation of the corporate, financial and marketing strategies of the Group.
A John Moyes B.A. (Chem) (Macquarie) Technical Director
Mr Moyes has over 40 years of experience in the mining and metals industry, encompassing minerals analysis, laboratory management, hydrometallurgical and electrochemical research, process development, plant design and project management. He has been a Director of the Company since 1995. On 31 July 2009, Mr Moyes retired from a fulltime executive position and entered into a consultancy agreement with the Company. Mr Moyes is currently a Non-executive Director of the Company.
Kieran G Rodgers B.E. (Hons.) Min. (UNSW), M.B.A. (IMD) Finance Director & Chief Financial Officer
Mr Rodgers joined Intec in March 2001 after 13 years of experience in merchant banking and financial consulting, principally at Resource Finance Corporation Ltd, which specifically focused on the Australian and international resources industry. Prior to entering the merchant banking sector, Mr Rodgers gained three years of operational mining engineering experience in the gold and base metals industries. He was appointed as an Executive Director of Intec on 28 February 2007. Until 1 October 2008, Mr Rodgers was a director of ASXlisted Bass Metals Ltd.
James R G Bell B.A. (Syd), Ll.B. (Syd) Non-executive Director
Mr Bell is an Australian barrister and solicitor who has practised as a commercial lawyer for 30 years, including 10 years as a partner in the national law firm of Blake Dawson Waldron and 3 years as head of the Banking and Finance division of that firm in Sydney. In 1995, he established his own law firm and has advised some of Australia's major companies and professional firms across a broad spectrum of endeavour, also providing assistance to the board of Intec in relation to various corporate transactions over several years. He was appointed as a Non-executive Director of Intec on 1 May 2007.
Company Secretaries
Robert J Waring B.Ec., C.A., F.C.I.S., F.Fin., F.A.I.C.D. Company Secretary
Mr Waring was appointed to the position of Company Secretary of Intec in December 1998 and has 39 years' experience in financial and corporate roles including 19 years in company secretarial roles for ASX-listed companies and 14 years as a director of an ASX-listed company. He is a director of the companies in the Spencer Hamilton Limited Group, which provides secretarial and corporate advisory services to a range of listed and unlisted companies including the Intec Group.
David W Clark B.Com. (UNSW), C.A., C.P.A., Registered Tax Agent, M.B.A (Executive) (AGSM). Company Secretary, Intec Group Subsidiaries.
Mr Clark was appointed to the position of Company Secretary of the subsidiary companies in the Intec Group on 20 March, 2008. Mr Clark has over 20 years' experience in public practice as a chartered accountant and has held positions as Financial Controller and Company Secretary providing accounting, taxation and secretarial services and advice to a diverse range of listed and unlisted public and private companies.
Meetings of Directors
The numbers of meetings of the Company's Board of Directors and of each board committee held during the year ended 30 June 2010, and the numbers of meetings attended by each director were:
| Fullmeetings of | Meetings of committees | Nomination | ||||||
|---|---|---|---|---|---|---|---|---|
| Directors | Audit | CorporateGovernance | andRemuneration | |||||
| A | B | A | B | A | B | A | B | |
| T A Jones | 11 | 11 | 2 | 2 | 1 | 1 | 1 | 1 |
| P R Wood | 11 | 11 | * | * | 1 | 1 | * | * |
| A J Moyes | 11 | 11 | * | * | * | * | * | * |
| K G Rodgers | 11 | 11 | * | * | * | * | * | * |
| J R G Bell | 11 | 11 | 2 | 2 | 1 | 1 | 1 | 1 |
A = Number of meetings attended
B = Number of meetings held during the time the Director held office or was a member of the committee during the year
* Not a member of the relevant committee.
Retirement, election and continuation in office of Directors
Mr T A Jones is the Director retiring by rotation, and being eligible, offers himself for re-election to the Board.
Principal activities
During the year to 30 June 2010, the Group continued the commercialisation of the Intec Processes, including the operation of its Research Facility at Burnie and associated activities.
There were no significant changes in the nature of the activities of the Group during the year.
Review of Operations
The Review of Operations are disclosed and discussed on pages 3 to 10 of the Annual Report.
Dividends
No dividends have been paid to members during the financial year and no recommendation is made as to the payment of dividends.
Significant changes in the state of affairs
Significant changes in the state of affairs of the Company during the financial year were as follows:
Sale of Hellyer Assets
The Hellyer asset sale was completed in early August 2009. Funds received from the asset sale program were employed to repay in full the Macquarie Bank facility and provide working capital for the Group.
Compass Resources Limited
The Group was an unsecured creditor to Compass Resources Limited (Administrators Appointed, Receivers & Managers Appointed) for an amount of $138,000. The Group received full payment of this amount in August 2009.
Victorian Galvanising Industry Project
The establishment of a partially-funded $2.1 million programme of works to optimise, prove and implement a zero-waste waste recycling project in Victoria as described in the Review of Operations.
Industrial Waste Treatment
The Group has an ongoing contract for the treatment of industrial wastes generated by the Tasmanian-based ACL Group. On 25 August 2009, Administrators and Receivers & Managers were appointed to the ACL Group. The Directors do not believe that the Group will receive any material payment in relation to the remaining amount owing of $240,000. Accordingly this debt has been written off as an impairment to the Company's accounts.
Convertible Note
The Company's financing via the signing and drawdown of two $1.5 million convertible notes from La Jolla Cove Investors Inc. is described in the Review of Operations.
Share Placement
The establishment of the joint venture with Green Resources (Asia Pacific) Holding Ltd, and the associated placement of shares to investors nominated by Green Resources, is described in the Review of Operations.
Intec Envirometals Pty Ltd
Intec's wholly-owned subsidiary, owner of the Burnie Research Facility and the EAF dust stockpiles, was renamed during the year from Intec Hellyer Metals Pty Ltd to Intec Envirometals Pty Ltd, to reflect the changing emphasis of operations to the clean recycling of industrial inorganic wastes.
Matters subsequent to the end of the financial year
Victorian Galvanising Project
The Company announced on 28 July 2010 that EPA Victoria had approved the commencement of Phase 2 work related to the technology and plant development programme.
Testwork Agreements
Intec signed formal agreements with a large Middle Eastern minerals company and with AngloGold Ashanti. Together the two contracts will yield approximately US$300,000 in testwork fees over the next six months.
Extraordinary General Meeting
Intec held an extraordinary general meeting on 30 June 2010 to approve the following resolutions:
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- Ratification of the La Jolla convertible note facility;
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- The issue of shares to La Jolla; and
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- A 10:1 share consolidation.
All resolutions were passed and in relation to Resolution 3, Intec's post consolidation shares resumed trading on the Australian Securities Exchange (ASX) on 16 July 2010.
Partial Conversion of La Jolla Convertible Note Since 30 June 2010, La Jolla has converted US$360,585 of the principal amount outstanding under the convertible note facility and has been issued 29,176,481 Intec shares. The unconverted principal amount of the convertible note at the date of this report is US$539,291.
No other matters or circumstances have arisen since 30 June 2010 that have significantly affected or may significantly affect the Group's operations in future financial years, or the results of those operations in future financial years, or the Group's state of affairs in future financial years.
Likely developments and expected results of operations
The Group will continue to seek to acquire interests in mineral projects and secondary resources, including industrial waste products, where its technology creates additional value. In addition, the Group will seek to generate revenue from the provision of testwork and engineering services to third parties.
Environmental regulation
The Group's operations are presently subject to environmental regulation under the laws of the Commonwealth of Australia and the States of New South Wales, Victoria and Tasmania.
Intec is licensed to operate under Section 55 of the Protection of the Environment Operations Act 1997 (NSW Environment Protection Authority) and the associated Protection of the Environment Operations (General) Regulation 1998.
Intec Envirometals Pty Ltd is licensed to operate premises in Victoria under Section 20 (9) of the Environmental Protection Act 1970.
Intec Envirometals Pty Ltd is licensed to operate premises in Tasmania under Section 25 (5) of the Environmental Management and Pollution Control Act 1994 (Tas).
The Group is at all times in full environmental compliance with the conditions of its licences.
Review of Operations
Remuneration report
The remuneration report is set out under the following main headings:
- A Principles used to determine the nature and amount of remuneration;
- B Details of remuneration;
- C Service agreements;
- D Share based compensation; and
- E Additional information.
The information provided in this remuneration report has been audited as required by Section 308 (3C) Corporations Act 2001.
A Principles used to determine the nature and amount of remuneration
The objective of the Group's executive reward framework is to ensure that the reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and conforms with market best practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:
- competitiveness and reasonableness;
- acceptability to shareholders;
- performance linkage / alignment of executive compensation;
- transparency; and
- capital management.
The Group has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation.
Alignment to shareholders' interests:
- has economic profit as a core component of plan design;
- focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant return on assets as well as focusing the executive on key non financial drivers of value; and
- attracts and retains high calibre executives.
Alignment to programme participants' interests:
- rewards capability and experience; • reflects competitive reward for contribution to
- growth in shareholder wealth;
- provides a clear structure for earning rewards; and
- provides recognition for contribution.
The framework provides a mix of fixed and variable pay and includes long term incentives. There is no defined relationship between company performance and remuneration at this point in time. However, the matter is under continual review. The fixed proportion of remuneration is currently 100%.
The Board has established a nomination and remuneration committee which provides advice on remuneration and incentive policies and practices and makes specific recommendations on remuneration packages and other terms of employment for executive directors, other senior executives and non-executive directors. The Corporate Governance Statement provides further information on the role of this committee.
Non-executive Directors
Fees and payments to Non-executive Directors reflect the demands which are made on, and the responsibilities of, the Non–executive Directors. The Board reviews Non-executive Directors' fees and payments annually. The Chairman's fees are determined independently to the fees of Nonexecutive Directors. Individual Non-executive Directors are not present at any discussions relating to determination of their own remuneration.
Non-executive Directors' fees are determined within an aggregate Non-executive Directors' cash remuneration limit, which is periodically recommended for approval by shareholders. The current limit of $400,000 was approved by shareholders at the 2007 Annual General Meeting held on 14 November 2007. In addition, Non-executive Directors are able to participate in issues of options pursuant to the Intec Option Plan. The values of any options granted to Non-executive Directors are not included in the aggregate cash remuneration limit as they are not cash based payments.
Executive pay
The executive pay and reward framework has three components:
- base pay and benefits;
- long term incentives through participation in the Intec Option Plan; and
- other remuneration such as superannuation.
The combination of these comprises the executive's total remuneration.
Base pay
Base pay is structured as a total employment cost package, which may be delivered as a combination of cash and prescribed non financial benefits at the executive's discretion.
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for each senior executive is reviewed annually to ensure the executive's pay is competitive with the market. An executive's pay is also reviewed on promotion.
There is no guaranteed base pay increase included in any senior executive's contract.
Intec Option Plan Information on the Intec Option Plan is set out in note 41.
B Details of remuneration
Amounts of remuneration
Details of the remuneration of the Directors and the key management personnel (as defined in AASB 124 Related Party Disclosures) of Intec and the Group are set out in the following tables.
The key management personnel of Intec and the Group include the Directors and the following senior executive officers:
B A Banister – Chief Operating Officer
D W Clark – Financial Controller
D J Purdie – Senior Process Engineer
D L Sammut – Corporate Development Manager
A R Tong – Head of Technology
Remuneration paid to Directors and key management personnel of the Group
| 2010 | Short-term benefits | Postemployment | Sharebased | |||
|---|---|---|---|---|---|---|
| benefits | payment | |||||
| Cash | Directors' | Consulting | Super | |||
| Name | salary | Fees | Fees | annuation | Options | Total |
| $ | $ | $ | $ | $ | $ | |
| Non-executive Directors | ||||||
| T A Jones Chairman | - | 66,359 | - | 5,972 | - | 72,331 |
| J R G Bell | - | 52,924 | 4,063 | 4,763 | - | 61,750 |
| A J Moyes1 | 15,654 | 41,208 | 8,550 | 10,664 | - | 76,076 |
| Sub-total Non-executive | ||||||
| Directors | 15,654 | 160,491 | 12,613 | 21,399 | - | 210,157 |
| Executive Directors | ||||||
| P R Wood | 299,374 | - | - | 27,858 | - | 327,232 |
| K G Rodgers | 252,132 | - | - | 21,912 | - | 274,044 |
| Other key management | ||||||
| personnel | ||||||
| B A Banister | 143,803 | - | - | 73,364 | - | 217,167 |
| D W Clark | 111,036 | - | - | 9,552 | - | 120,588 |
| D J Purdie | 151,316 | - | - | 13,133 | - | 164,449 |
| D L Sammut | 155,909 | - | - | 13,643 | - | 169,552 |
| A R Tong | 150,279 | - | - | 13,309 | - | 163,588 |
| Totals | 1,279,503 | 160,491 | 12,613 | 194,170 | - | 1,646,777 |
1 Mr AJ Moyes retired from the position of an Executive Director on 31 July 2009 and became a Non-executive Director on 1 August 2009.
| 2009 | Short-term benefits | Post | Share | |||
|---|---|---|---|---|---|---|
| employment | based | |||||
| benefits | payment | |||||
| Cash | Directors' | Consulting | Super | |||
| Name | salary | Fees | Fees | annuation | Options | Total |
| $ | $ | $ | $ | $ | $ | |
| Non-executive Directors | ||||||
| T A Jones Chairman | - | 69,189 | - | 6,225 | - | 75,414 |
| K J Severs 1 | - | 38,500 | 6,466 | - | - | 44,966 |
| J R G Bell | - | 54,817 | 22,208 | 5,309 | - | 82,334 |
| Sub-total Non-executive | ||||||
| Directors | - | 162,506 | 28,674 | 11,534 | - | 202,714 |
| Executive Directors | ||||||
| P R Wood | 340,745 | - | - | 29,334 | - | 370,079 |
| A J Moyes | 216,887 | - | - | 18,858 | - | 235,745 |
| K G Rodgers | 256,974 | - | - | 22,210 | - | 279,184 |
| Other key management | ||||||
| personnel | ||||||
| B A Banister | 197,444 | - | - | 17,601 | - | 215,045 |
| D W Clark | 134,412 | - | - | 11,967 | - | 146,379 |
| D J Purdie | 153,656 | - | - | 13,829 | - | 167,485 |
| D L Sammut | 155,560 | - | - | 13,829 | - | 169,389 |
| A R Tong | 145,457 | - | - | 12,572 | - | 158,029 |
| Totals | 1,601,135 | 162,506 | 28,674 | 151,734 | - | 1,944,049 |
1 Resigned 25 February 2009.
An annual performance review of all Executive Directors and key management personnel is undertaken. The result of these reviews forms the basis of remuneration recommendations to the Nomination and Remuneration Committee.
C Service agreements and letters of employment
Remuneration and other terms of employment for the Managing Director and Chief Executive Officer, Finance Director and the other specified executives are formalised in either service agreements or letters of employment. Each of these service agreements and letters of employment provides for the provision of long service leave to accrue at a rate of 0.87 weeks per year up to 10 years' service and 2 weeks per year for each additional year of service, and participation in the Intec Option Plan.
Each service agreement and letter of employment provides the remuneration rate to be paid to the employee. All salaries are paid monthly by direct bank deposit. Full details of remuneration paid are included in the table in part B of this note. Other major provisions relating to remuneration are set out below.
| Start Date | Term ofAgreement | Base Salary plusSuperannuationat 30 June 2010$ | Noticeperiod fortermination(months) | Redundancypayment | |
|---|---|---|---|---|---|
| Directors | |||||
| P R Wood | 1 July 2010 | 3 years | 352,888 | 6 | 12 months salary |
| K G Rodgers | 1 July 2010 | 3 years | 288,850 | 3 | 9 months salary |
| Specified Executives | |||||
| B A Banister | 1 July 2010 | 3 years | 228,900 | 1 | 3 months salary |
| D W Clark | 1 July 2010 | 3 years | 90,743 | 1 | 3 months salary |
| D J Purdie | 1 July 2010 | 3 years | 166,361 | 1 | 3 months salary |
| D L Sammut | 1 July 2010 | 3 years | 179,850 | 1 | 6 months salary |
| A R Tong | 1 July 2010 | 3 years | 179,850 | 1 | 6 months salary |
D Share based compensation
Options
Options are granted under the Intec Option Plan, which was approved by shareholders at the 2001 Annual General Meeting. All directors, employees and consultants are eligible to participate in the plan.
Options are granted under the plan for no additional consideration. Options are granted for a five year period, and vest and are exercisable immediately, unless otherwise stated.
Options are granted to directors, employees and consultants after a review of performances during the preceding year which is carried out in conjunction with the annual salary review. The granting of options is at the Board's discretion and no individual has a contractual right to receive options.
The terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting periods are as follows:
| Grant date | Expiry date | Exerciseprice1 | Value per optionat grant date2 | Date exercisable4 |
|---|---|---|---|---|
| 25 September 2006 | 30 August 2011 | $0.1013 | $0.0670 | 25 September 2006 |
| 15 November 2006 | 30 August 2011 | $0.1013 | $0.1299 | 15 November 2006 |
| 14 November 2007 | 25 September 2012 | $0.1413 | $0.054 | 14 November 2007 |
| 31 January 20083 | 25 September 2012 | $0.1413 | $0.071 | 31 January 2008 |
1 Exercise prices have been adjusted from original exercise prices at the grant date as a consequence of the Company undertaking entitlement issues to all shareholders since the grant date of options as provided for in the terms and conditions of the Intec Option Plan. In addition, the exercise prices have not been adjusted to reflect the 10:1 consolidation of shares approved at an Extraordinary General Meeting held on 30 June 2010.
2 Value per option at grant date have not been adjusted reflect the 10:1 consolidation of shares approved at an Extraordinary General Meeting held on 30 June 2010.
3 These options will not vest, and may not be exercised, until a Trigger Price Threshold of $0.25 is met. To meet the Trigger Price Threshold, the price of Intec Ltd shares traded on the ASX must have closed above $0.25 for 20 consecutive trading days or Intec must have received a bona fide offer for a majority or all of its shares whether by takeover or scheme of arrangement. During the year ended 30 June 2010 the trigger price threshold was not achieved.
4 None of these options either lapsed or were exercised during the year ended 30 June 2010.
Options granted under the plan carry no dividend or voting rights.
The exercise price of the options is based on the current market price on the date the options are granted as determined by the Board.
Details of options over ordinary shares in the Company provided as remuneration to each Director of Intec and each of the key management personnel of the Group are set out below. When exercisable, each option is convertible into one ordinary share of Intec. Further information on the options is set out in notes 27 and 41 to the financial statements.
| 2010 | Granted | Other | Vested and | |||
|---|---|---|---|---|---|---|
| during the | Exercised | changes | Balance at | exercisable | ||
| Name | Balance at the | year as | during | during the | the end of | at the end |
| start of the year | compensation | the year | year | the year | of the year | |
| Directors of Intec Ltd | ||||||
| P R Wood | 5,272,952 | - | - | (1,572,952) | 3,700,000 | 3,700,000 |
| A J Moyes1 | 3,022,675 | - | - | (1,122,675) | 1,900,000 | 1,900,000 |
| T A Jones | 903,800 | - | - | (753,800) | 150,000 | 150,000 |
| K G Rodgers | 2,668,368 | - | - | (568,368) | 2,100,000 | 2,100,000 |
| J R G Bell | 466,000 | - | - | (166,000) | 300,000 | 300,000 |
| Other key management personnel of the Group | ||||||
| B A Banister | 42,000 | - | - | (42,000) | - | - |
| D W Clark | 40,000 | - | - | (40,000) | - | - |
| D J Purdie | - | - | - | - | - | - |
| D L Sammut | 569,093 | - | - | (69,093) | 500,000 | 500,000 |
| A R Tong | 1,495,287 | - | - | (395,287) | 1,100,000 | 1,100,000 |
- Mr AJ Moyes retired from the position of an Executive Director on 31 July 2009 and became a Non-executive Director on 1 August 2009.
Review of Operations
| 2009 | Granted | Other | Vested and | |||
|---|---|---|---|---|---|---|
| during the | Exercised | changes | Balance at | exercisable | ||
| Name | Balance at the | year as | during | during the | the end of | at the end |
| start of the year | compensation | the year | year | the year | of the year | |
| Directors of Intec Ltd | ||||||
| P R Wood | 5,843,215 | - | - | (570,263) | 5,272,952 | 5,272,952 |
| A J Moyes | 3,776,212 | - | - | (753,537) | 3,022,675 | 3,022,675 |
| T A Jones | 903,800 | - | - | - | 903,800 | 903,800 |
| K G Rodgers | 3,095,888 | - | - | (427,520) | 2,668,368 | 2,668,368 |
| K J Severs1 | 1,575,821 | - | - | (140,302) | 1,435,519 | 1,435,519 |
| J R G Bell | 466,000 | - | - | - | 466,000 | 466,000 |
| Other key management personnel of the Group | ||||||
| B A Banister | 42,000 | - | - | - | 42,000 | 42,000 |
| D W Clark | 40,000 | - | - | - | 40,000 | 40,000 |
| D J Purdie | - | - | - | - | - | - |
| D L Sammut | 569,093 | - | - | - | 569,093 | 569,093 |
| A R Tong | 1,495,287 | - | - | - | 1,495,287 | 1,495,287 |
- Resigned 25 February 2009.
The assessed fair value at grant date of options granted to individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are determined using share option valuation models that take into account the exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
There were no options granted in the twelve (12) months to 30 June 2010 (Nil – 2009).
Shares provided on exercise of remuneration options
No ordinary shares in the Company were provided as a result of the exercise of remuneration options by a Director of Intec. No other options were exercised by any other director or key management personnel of the Group.
Shares under option
Unissued ordinary shares of Intec under option at the date of this report are shown in Note 27.
Shares issued on the exercise of options
No ordinary shares of Intec were issued during the year ended 30 June 2010 on the exercise of options granted under the Intec Option Plan. No further shares have been issued on the exercise of options since that date. No amounts are unpaid on any of the shares.
E Shareholdings of Directors and Key Management Personnel
The number of shares in the company held at the end of the financial year by each Director of the Company and other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.
| 2010 | Balance at | Received during | Other | Balance at |
|---|---|---|---|---|
| the start | the year on the | changes | the end of | |
| Name | of the | exercise of | during the | the |
| year | options | year | year | |
| Ordinary shares | ||||
| Directors of Intec Ltd | ||||
| P R Wood | 4,370,168 | - | - | 4,370,168 |
| A J Moyes1 | 2,907,054 | - | - | 2,907,054 |
| T A Jones | 2,689,541 | - | - | 2,689,541 |
| K G Rodgers | 1,129,557 | - | - | 1,129,557 |
| J R G Bell | 1,128,919 | - | - | 1,128,919 |
| Other key management personnel of the Group | ||||
| B A Banister | 1,678,000 | - | - | 1,678,000 |
| D W Clark | 350,000 | - | (250,000) | 100,000 |
| D J Purdie | 200,000 | - | - | 200,000 |
| D L Sammut | 495,612 | - | - | 495,612 |
| A R Tong | - | - | - | - |
- Mr AJ Moyes retired from the position of an Executive Director on 31 July 2009 and became a Non-executive Director on 1 August 2009.
Review of Operations
| 2009 | Balance at | Received during | Other | Balance at |
|---|---|---|---|---|
| the start | the year on the | changes | the end of | |
| Name | of the | exercise of | during the | the |
| year | options | year | year | |
| Ordinary shares | ||||
| Directors of Intec Ltd | ||||
| P R Wood | 2,850,168 | - | 1,520,000 | 4,370,168 |
| A J Moyes | 1,907,054 | - | 1,000,000 | 2,907,054 |
| T A Jones | 2,022,875 | - | 666,666 | 2,689,541 |
| K J Severs1 | 1,744,902 | - | 666,667 | 2,411,569 |
| K G Rodgers | 456,157 | - | 673,400 | 1,129,557 |
| J R G Bell | 1,028,919 | - | 100,000 | 1,128,919 |
| Other key management personnel of the Group | ||||
| B A Banister | 252,000 | - | 1,426,000 | 1,678,000 |
| D W Clark | 70,000 | - | 280,000 | 350,000 |
| D J Purdie | - | - | 200,000 | 200,000 |
| D L Sammut | 414,558 | - | 81,054 | 495,612 |
| A R Tong | - | - | - | - |
- Resigned 25 February 2009.
F Additional Information
During the last five years Directors' total remuneration has increased by an average of 2.4% per annum.
The main principles of the Group's Remuneration Policy are to link executive reward with the strategic goals and performance of the Group; align the interests of executives with those of shareholders; reward individual performance against appropriate benchmarks and targets; and ensure total remuneration is competitive by market standards.
Insurance of officers
The Company has, by Deed of Access, Indemnity and Insurance, paid a premium to insure the Directors and Company Secretaries of the Group in respect of certain legal liabilities, including costs and expenses in successfully defending legal proceedings, whilst they remain as Directors and for seven years thereafter. The insurance contract prohibits the disclosure of the total amount of the premiums and a summary of the nature of the liabilities covered.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001.
Non audit services
The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Company and/or the Group are important.
Details of the amounts paid or payable to the auditor (WHK Horwath Sydney) for audit and taxation services provided during the year are set out below.
The Directors have considered the position and, in accordance with the advice received from the audit committee, are satisfied that the provision of the non audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
- all non audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor; and
- none of the services undermine the general principles relating to auditor independence as set out in Professional Statement F1, including reviewing or auditing the auditor's own work, acting in a management or a decision making capacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards.
Directors' Report
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non related audit firms:
| Consolidated | |||
|---|---|---|---|
| Assurance services | 2010$ | 2009$ | |
| 1. | Audit servicesAudit and review of financial reports and other audit work under theCorporations Act 2001 | ||
| WHK Horwath Sydney | 68,000 | - | |
| PricewaterhouseCoopers | - | 112,000 | |
| Total remuneration for audit services | 68,000 | 112,000 | |
| 2. | Non audit services | ||
| Tax compliance services, including review of company income taxreturns | |||
| PricewaterhouseCoopers | - | 19,000 | |
| Total remuneration for non audit services | - | 19,000 |
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 21.
Rounding of Amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the Directors' report. Amounts in the Directors' report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Authorisation
This report is made in accordance with a resolution of Directors. The financial report was authorised for issue by the Directors on 29 September 2010. The Company has the power to amend and revise the financial report.
Philip R Wood Managing Director & Chief Executive Officer
Sydney 29 September 2010
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2010
| Consolidated | ||||
|---|---|---|---|---|
| 2010 | 2009 | |||
| Notes | $'000 | $'000 | ||
| Revenue from continuing operations | 5 | 759 | 1,451 | |
| Administration expense | (781) | (770) | ||
| Bad and doubtful debts | (218) | (228) | ||
| Burnie Research Facility expenses | (128) | (526) | ||
| Depreciation and amortisation expense | 6 | (807) | (833) | |
| Diminution in value of environmental bonds | - | (4,404) | ||
| Engineering and other consultants expenses | (297) | (298) | ||
| Employee benefits expense | (2,344) | (2,791) | ||
| Finance costs | 6 | (97) | (216) | |
| Impairments expense | (143) | - | ||
| Occupancy expense | 6 | (377) | (479) | |
| Research and development expenses | 6 | (67) | (133) | |
| Exploration expenditure written off | 17 | - | (146) | |
| Interest expense | (117) | - | ||
| Other expenses | (28) | (855) | ||
| Diminution in the value of investments in associates | 37b | - | (2,709) | |
| Share of net profit/(losses) of associates accounted for | ||||
| using the equity method | 37d | - | 823 | |
| Loss before income tax | (4,645) | (12,114) | ||
| Income tax benefit/(expense) | 8 | 206 | (206) | |
| Loss from continuing operations | (4,439) | (12,320) | ||
| Profit/(Loss) from discontinued operations | ||||
| after income tax | 7 | 2,659 | (8,365) | |
| Loss for the year attributable to the parent entity | (1,780) | (20,685) | ||
| Other comprehensive income/loss | - | - | ||
| Income tax relating to componentsof other comprehensive income | - | - | ||
| Other comprehensive income/(loss) for the year, | ||||
| net of income tax | - | - | ||
| Total comprehensive loss for the year | ||||
| attributable to members of the parent entity | (1,780) | (20,685) | ||
| Cents | Cents | |||
| Loss per share from continuing operations attributable to the | ||||
| ordinary equity holders of the Company: | ||||
| Basic loss per share | 40 | (0.49) | (1.82) | |
| Diluted loss per share | 40 | (0.49) | (1.82) | |
| Loss per share attributable to the ordinary equity holders of the | ||||
| Company: | ||||
| Basic loss per share | 40 | (0.20) | (3.06) | |
| Diluted loss per share | 40 | (0.20) | (3.06) | |
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position
As at 30 June 2010
| Consolidated | |||
|---|---|---|---|
| 2010 | 2009 | ||
| Notes | $'000 | $'000 | |
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 9 | 192 | 1,990 |
| Trade and other receivables | 10 | 56 | 326 |
| Inventories | 11 | 38 | 23 |
| Non current assets classified | |||
| as held for sale | 12 | - | 3,715 |
| Total current assets | 286 | 6,054 | |
| Non current assets | |||
| Trade and other receivables | 13 | 2,878 | 121 |
| Other financial assets | 14 | 1,163 | 26 |
| Plant and equipment | 15 | 3,448 | 4,199 |
| Environmental bonds | 16 | 4,425 | 756 |
| Intangible assets | 18 | 10 | 10 |
| Total non current assets | 11,924 | 5,112 | |
| Total assets | 12,210 | 11,166 | |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 19 | 700 | 880 |
| Tax liabilities | 20 | - | 206 |
| Borrowings | 21 | 594 | 42 |
| Refundable deposit | 22 | - | 500 |
| Provisions | 23 | 4,547 | 3,648 |
| Total current liabilities | 5,841 | 5,276 | |
| Non current liabilities | |||
| Deferred revenue | 24 | 813 | - |
| Provisions | 25 | 81 | 860 |
| Total non current liabilities | 894 | 860 | |
| Total liabilities | 6,735 | 6,136 | |
| Net assets | 5,475 | 5,030 | |
| EQUITYContributed equity | 26 | 68,978 | 66,753 |
| Reserves | 28 | 2,577 | 2,577 |
| Accumulated losses | 29 | (66,080) | (64,300) |
| Total equity | 5,475 | 5,030 |
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
For the year ended 30 June 2010
| Consolidated | |||
|---|---|---|---|
| Total equity at the beginning of the financial year | Notes | 2010$'0005,030 | 2009$'00037,050 |
| Current year expenses recognised directly in equityShare of associates reserves accounted | |||
| for using the equity method | - | 24 | |
| Net income recognised directly in equity | - | 24 | |
| Net income recognised directly in equity | - | 24 | |
| Total comprehensive loss for the year | (1,780) | (20,685) | |
| Total recognised incomeand (expense) for the year | (1,780) | (20,661) | |
| Transactions with ownersin their capacity as equity holders | |||
| Contributions of equity,net of transaction costs | 26 | 2,218 | 2,278 |
| Amounts transferred to equityon exercise of options | 26 | 7 | 1 |
| Transfer from asset revaluation reserve on recognition of assets availablefor sale | 28b | - | (13,638) |
| 2,225 | (11,359) | ||
| Total equity at the end of the financial year | 5,475 | 5,030 |
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
For the year ended 30 June 2010
| Consolidated | |||
|---|---|---|---|
| 2010 | 2009 | ||
| Notes | $'000 | $'000 | |
| Cash flows from operating activities | |||
| Receipts from customers | 707 | 7,389 | |
| Payments to suppliers and employees | (4,286) | (14,008) | |
| Interest paid | (97) | (306) | |
| Interest received | 187 | 155 | |
| Other receipts | - | 592 | |
| Net cash used in operating activities | 43 | (3,489) | (6,178) |
| Cash flows from investing activities | |||
| Payments for plant and equipment | (56) | (301) | |
| Payments for security deposits | (3,669) | (756) | |
| Proceeds from security deposits refunded | - | 1,010 | |
| Proceeds from sale of investments | |||
| in associate | - | 2,259 | |
| Proceeds from sale or disposal | |||
| of property, plant & equipment | 3,215 | 514 | |
| Payment for non refundable deposit | - | (300) | |
| Loans to other entities | - | (2) | |
| Net cash inflow (outflow) from investing activities | (510) | 2,424 | |
| Cash flows from financing activities | |||
| Proceeds from issues of shares | 284 | 1,922 | |
| Proceeds from issue of convertible notes | 1,500 | - | |
| Share issue transaction costs | (18) | - | |
| Proceeds from borrowings | 462 | 27 | |
| Repayment of borrowings | (27) | (1,420) | |
| Net cash inflow from financing activities | 2,201 | 529 | |
| Net decrease in cash and cash equivalents | (1,798) | (3,225) | |
| Cash and cash equivalents at the beginning of the financial year | 1,990 | 5,215 | |
| Cash and cash equivalents at end of year | 9 | 192 | 1,990 |
| Financing arrangements | 42 | ||
| Non-cash financing and investing activities | 42 |
The above consolidated statement of cash flow should be read in conjunction with the accompanying notes.
Notes to the Financial Statements 30 June 2010
Contents
- 1 Summary of significant accounting policies
- 2 Financial risk management
- 3 Critical accounting estimates and judgements
- 4 Segment information
- 5 Revenue from continuing operations
- 6 Expenses
- 7 Profit/(Loss) from discontinued operations
- 8 Income tax (benefit)/expense
- 9 Current assets Cash and cash equivalents
- 10 Current assets Trade and other receivables
- 11 Current assets Inventories at cost
- 12 Current assets Non current assets classified as held for sale
- 13 Non current assets Receivables
- 14 Non current assets Other financial assets
- 15 Non current assets Plant and equipment
- 16 Non current assets Environmental bonds
- 17 Non current assets Exploration expenditure
- 18 Non current assets Intangible assets
- 19 Current liabilities Trade and other payables
- 20 Current liabilities Tax liabilities
- 21 Current liabilities Borrowings
- 22 Current liabilities Refundable deposit
- 23 Current liabilities Provisions
- 24 Non current liabilities Deferred revenue
- 25 Non current liabilities Provisions
- 26 Contributed equity
- 27 Options
- 28 Reserves
- 29 Accumulated losses
- 30 Key management personnel disclosures
- 31 Contingencies
- 32 Commitments
- 33 Financial instruments
- 34 Related party transactions
- 35 Parent entity disclosures
- 36 Subsidiaries
- 37 Investments in associates
- 38 Investments in joint ventures
- 39 Events occurring after the statement of financial position date
- 40 Loss per share
- 41 Share based payments
- 42 Non cash investing and financing activities
- 43 Reconciliation of (loss)/profit after income tax to net cash flows from operating activities
- 44 Auditor's remuneration
- 45 Company details
Notes to the Financial Statements 30 June 2010
1 Summary of significant accounting policies
These consolidated financial statements and notes represent those of Intec Ltd and controlled entities ('Consolidated Group' or 'Group'). The separate financial statements of the parent entity, Intec Ltd, have not been presented within this financial report as permitted by amendments made to the Corporations Act 2001 effective as at 28 June, 2010.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.
Compliance with International Financial Reporting Standards (IFRS)
Australian Accounting Standards include AIFRS. Compliance with AIFRS ensures that the consolidated financial statements and notes of the Group comply with IFRS.
Historical cost convention
The financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving either a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed below and in note 3.
Going concern statements
The financial statements have been prepared on a going concern basis. Based on the Group's current position, the Group will require further additional capital and/or revenue in the short term in order to continue meeting its obligations as they become due and payable. Therefore, significant uncertainty exists as to whether or not the Group will be able to continue as a going concern. The Directors are considering a number of plans and initiatives including additional loan funds and capital raisings to ensure that adequate funding continues to be available for the Group to meet its business objectives. The Directors consider it likely that the Group will be successful in ensuring that adequate funding is available and therefore, no adjustments have been made to the financial statements that might be necessary should the Group not continue as a going concern. Accordingly, the Directors have prepared the financial statements on a going concern basis.
Burnie Research Facility
While there is significant uncertainty, the Directors consider that it is unlikely that the carrying value of non-current assets, in particular the Burnie Research Facility, would exceed the realisable value of such assets in an orderly sale process. The carrying value of the Burnie Research Facility is $3.140 million at 30 June 2010. Intec generated revenue through the Burnie Research Facility under contracts for the treatment of industrial wastes and the provision of engineering services to third parties for the year to 30 June 2010 and will continue to do so in the short to medium term under either existing or new commercial arrangements. Accordingly, the Directors have made no adjustment to the carrying value of the Burnie Research Facility at 30 June 2010.
EAF Dust Stockpiles
The Directors are investigating a range of options for the treatment and/or disposal of the EAFD stockpiles, either by the Group itself or by external parties. At the current time the Group has not determined the most advantageous treatment and/or disposal option. In view of this uncertainty, the Directors have provided for a current provision equivalent to the full amount of environmental bonds lodged in relation to the EAFD stockpiles. The Directors consider that while there is significant uncertainty, it is unlikely that the amount of the provisions would exceed the amount of security bonds lodged.
Hellyer Royalty
The Group holds a 100% interest in the Hellyer royalty, which is a unit-based royalty payable at the rate of $2.50 per tonne of ore processed through the Hellyer Mill to a cumulative maximum payment amount of $5.0 million. The non-current assets of the Group include an amount of $2.756 million representing a valuation of the contingent Hellyer royalty. BSM, which purchased the Hellyer Assets, has publicly announced its intention to restart the Hellyer Mill during the 2011 March quarter. In its 30 June 2009 financial statements, BSM adopted a valuation of $2.756 million for the Hellyer royalty. BSM's valuation of the Hellyer royalty has been adopted by the Directors and accounted for as a profit from discontinued operations and a noncurrent asset.
Investment in Green Resources (Asia Pacific) Holding Limited
In November 2009, the Company entered into a multi-part subscription agreement with Green Resources for the licensing of the Intec Process technology in China. Stage 1 of the subscription agreement resulted in Intec receiving seven percent (7%) of the issued capital in Green Resources, satisfied by the issue of 21,659,436 Intec ordinary shares at a price of $0.015 per share to investors
Significant accounting policies
Accounting policies are selected and applied in a manner which ensures that the resultant financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions and other events is reported.
nominated by Green Resources and the grant to Green Resources of a conditional royalty-free twenty (20) year Intec Process technology licence, subject to Intec's existing licensing arrangements and specified performance arrangements. The Directors have valued the Company's 7% shareholding in Green Resources at $1.137 million of which $0.813 million has been recorded as deferred revenue.
The Company has adopted relevant new and revised accounting standards and pronouncements with no material impact.
The following significant accounting policies have been adopted in the preparation and presentation of the financial statements:
(a) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw down of the facility, are recognised as prepayments and amortised on a straight line basis over the term of the facility.
(b) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.
(c) Cash and cash equivalents
For statement of cash flow presentation purposes, cash and cash equivalents includes cash on hand and deposits held at call with financial institutions.
(d) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
(e) Employee benefits
(i) Wages and salaries and annual leave Liabilities for wages and salaries, including non monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
(iii) Share based payments
Share based compensation benefits are provided to employees via the Intec Option Plan. Information relating to the plan is set out in note 41.
The fair value of options granted under the Intec Option Plan is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.
The fair value at grant date is determined using share option valuation models that take into account the exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The fair value of the options granted is adjusted to reflect market vesting conditions, but excludes the impact of any non market vesting conditions (for example, profitability and sales growth targets). Non market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each statement of financial position date, the entity revises its estimate of the number of options that are
(f) Exploration Expenditure
Exploration and evaluation expenditure comprises costs which are directly attributable to:
- researching and analysing existing exploration data;
- conducting geological studies, exploratory drilling and sampling;
- examining and testing extraction and treatment methods; and/or
- compiling pre-feasibility and feasibility studies.
Exploration and evaluation expenditure also includes costs incurred in acquiring mineral rights, the entry premiums paid to gain access to areas of interest and amounts payable to third parties to acquire interests in existing projects.
Exploration and evaluation expenditures in relation to separate areas of interest are capitalised in the year in which they are incurred and are carried at cost less accumulated impairment losses where the following conditions are satisfied:
(i) the rights to tenure of the area of interest are current; and
- (ii) at least one of the following conditions is also met:
- the exploration and evaluation expenditures are expected to be recouped through successful development and production from the area of interest, or alternatively, by its sale, or
(g) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement and for disclosure purposes.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to
(h) Financial instruments
The Group's policy with regard to 'Treasury management and financial instruments' is set out in note 2 and 33. When the Group enters into derivative contracts these transactions are designed to reduce exposures related to assets and liabilities, firm commitments or anticipated transactions.
Fair Value
Where financial instruments are accounted for at fair value, this is the amount at which they could be exchanged in an arm's length transaction between informed and willing parties. Where available, market values have been used to determine fair values. In other cases, fair values have been calculated using quotations from independent
Notes to the Financial Statements
expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate.
Upon the exercise of options, the balance of the share based payments reserve relating to those options is transferred to share capital and the proceeds received, net of any directly attributable transaction costs, are credited to share capital.
- exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to the area of interest are continuing.
Capitalised exploration and evaluation expenditure is reviewed for impairment at each statement of financial position date.
Subsequent recovery of the resulting carrying value depends on successful development of the area of interest or sale of the project. If a project does not prove viable, all irrecoverable costs associated with the project and any related impairment provisions are written off.
Where a decision is made to proceed with development, accumulated expenditure is tested for impairment, and transferred to development properties, and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced.
approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
financial institutions, or by discounting expected cash flows at prevailing market rates. The fair values of the Group's cash, short term borrowings other than convertible notes and loans to subsidiaries and associates approximate to their carrying values, as a result of their short maturity or because they carry floating rates of interest. A further description of the accounting for each class of financial instruments is given below.
Convertible notes are at fair value after taking into account a relevant discount rate.
Financial assets
All financial assets are initially recorded at fair value. The Group may have certain investments in companies that are not associates or subsidiaries. These investments are not classed as 'available for sale'. Such investments are subsequently measured at fair value with unrealised gains and losses recognised directly in the statement of comprehensive income. Other financial assets that the Group has the expressed intent and ability to hold to maturity together with loans and receivables are measured at amortised cost less any impairment charges.
Financial liabilities
Borrowings and other financial liabilities are recognised initially at fair value, net of transaction costs incurred and are subsequently stated at amortised cost. Any difference between the amounts originally received (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period to maturity using the effective interest method.
(i) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured in Australian dollars and the consolidated financial statements are presented in Australian dollars, which is the Group's functional and presentation currency.
(j) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.
(k) Impairment of assets
In respect of non current assets, each asset or cash generating unit is evaluated every reporting period to determine whether there are any indications of impairment. If any such indication exists, a formal estimate of recoverable amount is performed and an impairment loss is recognised to the extent that carrying amounts exceed recoverable amount. The recoverable amount of an asset or cash-generating group of assets is measured at the higher of fair value less costs to sell and value in use.
Fair value is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction between knowledgeable and willing parties, and is generally determined as the present value of the estimated future cash flows Financial assets at fair value through profit or loss Financial assets subject to fair value calculation are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the statement of comprehensive income.
Available-for-sale financial assets
Gains and losses arising from changes in fair value of investments designated as "available for sale" are recognised directly in the available-for-sale reserve, until the investment is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in the available-for-sale reserve within equity is included in the statement of comprehensive income for the period.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
expected to arise from the continued use of the asset and its eventual disposal. Value in use is also generally determined as the present value of the estimated future cash flows, but only those expected to arise from the continued use of the asset in its present form and its eventual disposal. Present values are determined using a risk-adjusted pre-tax discount rate appropriate to the risks inherent in the asset. Future cash flow estimates are based on expected production and sales volumes, commodity prices (considering current and historical prices, price trends and related factors), reserves, operating costs, restoration and rehabilitation costs and future capital expenditure. This policy requires management to make these estimates and assumptions, which are subject to
risk and uncertainty; hence there is a possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the assets may be impaired and the impairment would be charged against the statement of comprehensive income.
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in
(l) Income tax
The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the Australian income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses or to the extent that they will be offset by deferred income tax liabilities which will reverse in the same periods.
Notes to the Financial Statements
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non financial assets other than goodwill that suffer impairment are reviewed for possible reversal of the impairment at each reporting date.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Tax consolidation legislation
Intec Ltd and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under tax consolidation legislation. Each entity in the Group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the 'stand-alone taxpayer' approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity. The Group notified the Australian Taxation Office that it had formed an income tax consolidated group to apply from 1 July 2008. The tax consolidated group has entered a tax funding arrangement whereby each company in the Group contributes to the income tax payable by the Group in proportion to their contribution to the Group's taxable income. Differences between the amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a contribution by, or distribution to the head entity.
(m) Intangible assets
Costs incurred in respect of intellectual property are capitalised to the extent that it is expected that the asset may be realised in the future. Intellectual property has an indefinite useful life and is not subject to amortisation and is tested for impairment annually.
(n) Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is comprised of materials, labour and overheads related to the production of the inventories, on an absorption costing basis. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
The methods used to assign costs to inventories are actual invoiced costs.
(o) Investments
Non current investments in subsidiaries are measured on the cost basis. The carrying amount of non current investments is reviewed annually by Directors to ensure it is not in excess of the recoverable amount of these investments.
(p) Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (note 32). Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight line basis over the period of the lease.
(q) Loss per share
(i) Basic loss per share
Basic loss per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
(r) Plant and equipment
All plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
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 statement of comprehensive income during the financial period in which they are incurred.
Increases in the carrying amounts arising on revaluation of items of plant and equipment are credited, net of tax, to the asset revaluation reserve in shareholders' equity. To the extent that the increase reverses a decrease previously recognised in the statement of comprehensive income, the increase is first recognised in the statement of comprehensive income. Decreases that reverse previous increases of the same asset are first charged against revaluation reserves directly in equity to the extent of the remaining reserve attributable to the asset; all other decreases are charged to the statement of comprehensive income.
(s) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Company as at 30 June 2010 and the results of all subsidiaries for the year then ended. The Company and its subsidiaries together are referred to in these financial statements as the Group.
Lease rental income in respect of assets acquired under the terms of the Hellyer Zinc Concentrate Project Joint Venture Agreement is recognised in the statement of comprehensive income on a straight line basis over the remaining term of the Joint Venture.
(ii) Diluted loss per share
Diluted loss per share adjusts the figures used in the determination of basic loss per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Depreciation on assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:
| • | Burnie Research Facility | 3-40 years |
|---|---|---|
| • | Office equipment | 2-8 years |
• Plant and equipment 4-7 years
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 (note 1(k)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of comprehensive income. When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.
Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Investments in subsidiaries are accounted for at cost in the individual financial statements of the Company.
(ii) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost.
The Group's share of its associates' post acquisition profits or losses is recognised in the statement of comprehensive income, and its share of post acquisition movements in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment.
When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long term
(t) Provisions
(i) General Provisions for legal claims are recognised when:
- the Group has a present legal or constructive obligation as a result of past events;
- it is more likely than not that an outflow of resources will be required to settle the obligation; and
- the amount has been reliably estimated.
Provisions are not recognised for future operating losses.
(ii) Provisions for close down and restoration and for environmental clean up costs
Close down and restoration costs include the dismantling and demolition of infrastructure and the removal of residual materials and remediation of disturbed areas. Estimated close down and restoration costs are provided for in the accounting period when the obligation arising from the related disturbances occurs, whether this occurs during the mine development or during the production phase, based on the net present value of estimated future costs. Provisions for close down and restoration costs receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
(iii) Joint Ventures
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Joint control is the contractually agreed sharing of control such that significant operational and financial decisions require the unanimous consent of the parties sharing control.
Jointly controlled operations ('JCO's): a JCO is a joint venture in which the venturers have joint control over the operations of the joint venture. JCO's do not involve the establishment of a corporation, partnership or other entity. Each participant derives benefit from the joint activity through a share of production, rather than by receiving a share of the results of trading. The Group's proportionate interest in the assets, liabilities, revenues, expenses and cash flows of JCO's are incorporated into the Group's financial statements under the appropriate headings.
Where necessary, adjustments are made to the results of subsidiaries, joint ventures and associates to bring their accounting policies into line with those used by the Group.
do not include any additional obligations which are expected to arise on the basis of a closure plan. The cost estimates are calculated annually during the life of the operation to reflect known developments e.g. updated cost estimates and revisions to the estimated lives of operations, and are subject to formal review at regular intervals.
Close down and restoration costs are a normal consequence of mining, and the majority of close down and restoration expenditure is incurred at the end of the life of the mine. Although the actual cost to be incurred is uncertain, the Group's management has estimated these respective costs based on feasibility studies, relevant government assessments and engineering studies using current restoration standards and techniques.
The amortisation or 'unwinding' of the discount applied in establishing the net present value is charged to the statement of comprehensive income in each accounting period. The amortisation of the discount is shown as a financing cost, rather than as an operating cost.
The initial closure provision together with other movements in the provisions for close down and restoration costs, including those resulting from new disturbance, updated cost estimates, changes to the estimated lives of operations and revisions to discount rates are capitalised within plant and equipment. These costs are then depreciated over the lives of the assets to which they relate.
As noted above, the ultimate cost of environmental remediation is uncertain and cost estimates can
(u) Revenue and other income recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of treatment charges, trade allowances, rebates and amounts collected on behalf of third parties.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and specific criteria have been met for each of the Group's activities described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and specifics of each arrangement.
Revenue is recognised for the major business activities as follows:
(i) Sale of metal in concentrate
The terms of sale are on a cost, insurance and freight (c.i.f.) basis where all of the risks associated with the product remain with the seller until the product has been delivered to the port of discharge, when title passes to the purchaser.
Metal in concentrate is sold under medium to long term contracts. Sales revenue is only recognised in the statement of comprehensive income on individual sales when persuasive evidence exists that all of the following criteria are met:
- the significant risks and rewards of ownership of the product have been transferred to the buyer;
- neither continuing managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold, has been retained;
- the amount of revenue can be measured reliably;
- it is probable that the economic benefits associated with the sale will flow to the Group; and
- the costs incurred or to be incurred in respect of the sale can be measured reliably.
The conditions are generally satisfied when title passes to the customer. Sales revenue is recognised when the product is delivered to the destination specified by the customer, which is the port of discharge.
vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change, for example, in response to changes in ore reserves or production rates. As a result there could be significant adjustments to the provision for close down and restoration and environmental clean up, which would affect future financial results.
The price of metal in concentrate is determined on a provisional basis at the date of despatch. Adjustments to the sales price occur based on movements in quoted market prices up to the date of final pricing. The period between provisional invoicing and final pricing is typically between 60 and 120 days. Revenue on provisionally priced concentrate is recognised based on the estimated fair value of the total consideration receivable. The revenue adjustment mechanism embedded within provisionally priced sales arrangements has the character of a commodity derivative.
At each reporting date provisionally priced zinc, lead and silver are marked to market based on the forward selling price for the quotational period stipulated in the contract. For this purpose, the selling price can be measured reliably for zinc, lead and silver for which there exists active and freely traded commodity markets such as the London Metals Exchange and the value of product sold by the Group is directly linked to the form in which it is traded on that market.
The marking to market of provisionally priced sales contracts is treated as an embedded derivative with changes in value recorded as an adjustment to deferred sales revenue.
(ii) Other sales of Goods and Disposal of Assets Income from other sales of goods and disposal of other assets is recognised when the Group has passed control of the goods or other assets to the buyer.
(iii) Interest revenue
Interest revenue is recognised on an accrual basis, taking into account the interest rates applicable to financial assets.
(iv) Management fees
Management fees are charged to subsidiaries on a cost basis for services provided and recognised as revenue in the statement of comprehensive income of the Company.
(v) Consulting services and treatment fees
Revenue from consulting services and treatment fees are recognised using the percentage-ofcompletion method for fixed-fee arrangements or as the services are provided for time-and-materials arrangements.
(vi) Royalty income
Royalty income is recognised progressively over the term of the Hellyer Zinc Concentrate Project Joint Venture at rates specified in the Joint Venture Agreement.
(vii) Lease rental income
Lease rental income in respect of assets acquired under the terms of the Hellyer Zinc Concentrate Project Joint Venture Agreement is recognised in the statement of comprehensive income on a straight line basis over the remaining term of the Joint Venture.
(v) Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the financial statements.
(w) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director & Chief Executive Officer.
Change in accounting policy
The Group has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 Segment Reporting. The new standard requires
(x) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.
(y) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
(z) Adoption of new and revised accounting standards
During the current year the Group adopted all of the new and revised Australian Accounting Standards and Interpretations applicable to its operations which became mandatory.
The adoption of these standards has impacted the recognition, measurement and disclosure of certain transactions. The following is an explanation of the impact the adoption of these standards and interpretations has had on the financial statements of Intec Ltd.
AASB 8: Operating Segments
In February 2007 the Australian Accounting Standards Board issued AASB 8 which replaced AASB 114: Segment Reporting. As a result, some of the required operating segment disclosures have changed with the addition of a possible impact on the impairment testing of goodwill allocated to the cash generating units (CGUs) of the entity. Below is an overview of the key changes and the impact on the Group's financial statements.
Notes to the Financial Statements
(viii) Other income
Other income, which includes government grants and any other forms of government assistance, is recognised on receipt or when reasonable assurance that income will be earned is established.
(ix) General
All revenue is stated net of goods and services tax (GST).
Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes.
This has resulted in no change to the amount of disclosures in the number of reportable segments presented. The segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. There has not been any other impact on the measurement of the Company's assets and liabilities.
Measurement impact
Identification and measurement of segments — AASB 8 requires the 'management approach' to the identification measurement and disclosure of operating segments. The 'management approach' requires that operating segments be identified on the basis of internal reports that are regularly reviewed by the entity's chief operating decision maker, for the purpose of allocating resources and assessing performance. This could also include the identification of operating segments which sell primarily or exclusively to other internal operating segments. Under AASB 114, segments were identified by business and geographical areas, and only segments deriving revenue from external sources were considered.
The adoption of the 'management approach' to segment reporting has resulted in the identification of reportable segments largely consistent with the prior year.
Under AASB 8, operating segments are determined based on management reports using the 'management approach', whereas under AASB 114 financial results of such segments were recognised and measured in accordance with Australian Accounting Standards.
This has resulted in no change to the amount of disclosures in the number of reportable segments presented. The segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. There has not been any other impact on the measurement of the Company's assets and liabilities.
Disclosure impact
AASB 8 requires a number of additional quantitative and qualitative disclosures, not previously required under AASB 114, where such information is utilised by the chief operating decision maker. This information is now disclosed as part of the financial statements.
AASB 101: Presentation of Financial Statements
In September 2007 the Australian Accounting Standards Board revised AASB 101 and as a result, there have been changes to the presentation and disclosure of certain information within the financial statements. Below is an overview of the key changes and the impact on the Group's financial statements.
Disclosure impact
Terminology changes — the revised version of AASB 101 contains a number of terminology changes, including the amendment of the names of the primary financial statements.
Reporting changes in equity — the revised AASB 101 requires all changes in equity arising from transactions with owners, in their capacity as owners, to be presented separately from non-owner changes in equity. Owner changes in equity are to be presented in the statement of changes in equity, with non-owner changes in equity presented in the statement of comprehensive income. The previous version of AASB 101 required that owner changes in equity and other comprehensive income be presented in the statement of changes in equity.
Statement of comprehensive income — the revised AASB 101 requires all income and expenses to be presented in either one statement, the statement of comprehensive income, or two statements, a separate statement of comprehensive income and a statement of comprehensive income. The previous version of AASB 101 required only the presentation of a single statement of comprehensive income.
The Group's financial statements now contain a statement of comprehensive income.
Other comprehensive income — The revised version of AASB 101 introduces the concept of 'other comprehensive income' which comprises of income and expenses that are not recognised in profit or loss as required by other Australian Accounting Standards. Items of other comprehensive income are to be disclosed in the statement of comprehensive income. Entities are required to disclose the income tax relating to each component of other comprehensive income. The previous version of AASB 101 did not contain an equivalent concept.
(aa) New Accounting Standards for Application in Future Periods
The AASB has issued new and amended accounting standards and interpretations that have mandatory application dates for future reporting periods. The Group has decided against early adoption of these standards. A discussion of those future requirements and their impact on the Group follows:
• AASB 9: Financial Instruments and AASB 2009–11: Amendments to Australian Accounting Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12] (applicable for annual reporting periods commencing on or after 1 January 2013).
These standards are applicable retrospectively and amend the classification and measurement of financial assets. The Group has not yet determined the potential impact on the financial statements.
The changes made to accounting requirements include:
- simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value;
- simplifying the requirements for embedded derivatives;
- removing the tainting rules associated with held-to-maturity assets;
- removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost;
- allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument; and
- reclassifying financial assets where there is a change in an entity's business model as they are initially classified based on:
- a. the objective of the entity's business model for managing the financial assets; and
- b. the characteristics of the contractual cash flows.
• AASB 124: Related Party Disclosures (applicable for annual reporting periods commencing on or after 1 January 2011).
This standard removes the requirement for government related entities to disclose details of all transactions with the government and other government related entities and clarifies the definition of a related party to remove inconsistencies and simplify the structure of the standard. No changes are expected to materially affect the Group.
- AASB 2009–4: Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 2 and AASB 138 and AASB Interpretations 9 & 16] (applicable for annual reporting periods commencing from 1 July 2009) and AASB 2009-5: Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 5, 8, 101, 107, 117, 118, 136 & 139] (applicable for annual reporting periods commencing from 1 January 2010). These standards detail numerous non-urgent but necessary changes to accounting standards arising from the IASB's annual improvements project. No changes are expected to materially affect the Group.
- AASB 2009–8: Amendments to Australian Accounting Standards Group Cash-settled Share-based Payment Transactions [AASB 2] (applicable for annual reporting periods commencing on or after 1 January 2010).
These amendments clarify the accounting for group cash-settled share-based payment transactions in the separate or individual financial statements of the entity receiving the goods or services when the entity has no obligation to settle the share-based payment transaction. The amendments incorporate the requirements previously included in Interpretation 8 and Interpretation 11 and as a consequence, these two Interpretations are superseded by the amendments. These amendments are not expected to impact the Group.
• AASB 2009–9: Amendments to Australian Accounting Standards — Additional Exemptions for First-time Adopters [AASB 1] (applicable for annual reporting periods commencing on or after 1 January 2010).
These amendments specify requirements for entities using the full cost method in place of the retrospective application of Australian Accounting Standards for oil and gas assets, and exempt entities with existing leasing contracts from reassessing the classification of those contracts in accordance with Interpretation 4 when the application of their previous accounting policies would have given the same outcome. These amendments are not expected to impact the Group.
• AASB 2009–10: Amendments to Australian Accounting Standards — Classification of Rights Issues [AASB 132] (applicable for annual reporting periods commencing on or after 1 February 2010).
These amendments clarify that rights, options or warrants to acquire a fixed number of an entity's own equity instruments for a fixed amount in any currency are equity instruments if the entity offers the rights, options or warrants pro-rata to all existing owners of the same class of its own non-derivative equity instruments. These amendments are not expected to impact the Group.
• AASB 2009–12: Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052] (applicable for annual reporting periods commencing on or after 1 January 2011).
This standard makes a number of editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of International Financial Reporting Standards by the IASB. The standard also amends AASB 8 to require entities to exercise judgment in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. These amendments are not expected to impact the Group.
• AASB 2009–13: Amendments to Australian Accounting Standards arising from Interpretation 19 [AASB 1] (applicable for annual reporting periods commencing on or after 1 July 2010).
This standard makes amendments to AASB 1 arising from the issue of Interpretation 19. The amendments allow a first-time adopter to apply the transitional provisions in Interpretation 19. This standard is not expected to impact the Group.
• AASB 2009–14: Amendments to Australian Interpretation — Prepayments of a Minimum Funding Requirement [AASB Interpretation 14] (applicable for annual reporting periods commencing on or after 1 January 2011).
This standard amends Interpretation 14 to address unintended consequences that can arise from the previous accounting requirements when an entity prepays future contributions into a defined benefit pension plan.
• AASB Interpretation 19: Extinguishing Financial Liabilities with Equity Instruments (applicable for annual reporting periods commencing on or after 1 July 2010).
This Interpretation deals with how a debtor would account for the extinguishment of a liability through the issue of equity instruments. The Interpretation states that the issue of equity should be treated as the consideration paid to extinguish the liability, and the equity instruments issued should be recognised at their fair value unless fair value cannot be measured reliably in which case they shall be measured at the fair value of the liability extinguished. The Interpretation deals with situations where either partial or full settlement of the liability has occurred. This Interpretation is not expected to impact the Group.
The Group does not anticipate the early adoption of any of the above Australian Accounting Standards.
2 Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, cash flow and fair value interest rate risk and price risk), credit risk, liquidity risk and commodity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Risk management is carried out by company management and the Board of Directors. Financial risks are identified and evaluated and, where considered necessary, strategies are put in place to investigate and/or minimise such risks. For additional discussion of the Group's financial risks, refer to Note 33.
(a) Foreign exchange risk
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity's functional currency. Currency protection measures may be deemed appropriate in specific
(b) Credit risk
Credit risk arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity. The Group has policies in place to ensure that sales of product are made to customers with an appropriate credit history. There is negligible credit risk on financial assets of the Group since there is limited exposure
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed finance facilities. Due to the dynamic nature of the underlying businesses, the Board aims at maintaining flexibility in funding by keeping
(d) Cash flow and fair value interest rate risk
The Group's interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group does not currently hedge its exposure to movements in variable interest rates.
(e) Commodity price risk
The Group's normal policy is to sell its products at prevailing market prices. Exceptions to this rule are subject to strict limits laid down by the Board and to rigid internal controls. The Group has not entered into any commodity price hedging contracts during the year. Sales of metal in concentrate are initially recognised in deferred revenue at the date of loading based on a provisional invoice. The commodity prices included in the provisional invoice are based on London Metal Exchange (LME) market prices current on that date. The final price received is subject to adjustment based on future LME prices in accordance with the terms of individual sales contracts. At each reporting date, the value of the embedded derivative contained in sales contracts which have not been finalised is recognised in the statement of financial position as a derivative asset or liability.
commercial circumstances and are subject to strict limits laid down by the Board. The Group has not entered into any foreign currency hedging contracts during the year.
to individual customers or countries and the group's exposure is limited to the amount of cash, short term deposits and receivables which have been recognised in the statement of financial position. Deposits and financial arrangements are held in high rated financial institutions.
committed finance facilities available (Refer notes 21, 33(c)(ii) and 42). Finance facilities were repaid in full and cancelled in August 2009 following settlement of the sale of the Hellyer assets to Bass Metals Ltd.
3 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. An estimate of $2.756 million was made of the value of the Hellyer royalty, which formed part of the consideration payable by Bass Metals Ltd (BSM) for the purchase of the Hellyer Assets. An estimate was also made of the value of the company's 7% shareholding in Green Resources at $1.137 million of which $0.813 million has been recorded as deferred revenue.
The preparation of the consolidated financial statements requires management to make judgements and estimates and form assumptions that affect the reported amounts of assets and liabilities
Exploration and evaluation expenditure
The Group's accounting policy for exploration and evaluation expenditure results in certain items of expenditure being capitalised for an area of interest where it is considered likely to be recoverable by future exploitation or sale or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. This policy requires management to make certain estimates and assumptions as to future events and
Provision for restoration and rehabilitation
The Group's accounting policy requires the recognition of provisions for the restoration and rehabilitation of relevant operating sites. The provision recognised represents management's best estimate of the present value of the future costs required. Significant estimates and assumptions are made in determining the amount of restoration and rehabilitation provisions. Those estimates and assumptions deal with uncertainties such as: changes to the relevant legal and regulatory framework; the magnitude of possible contamination and the timing, extent and costs of required restoration and rehabilitation activity. These uncertainties may result in future actual expenditure differing from the amounts currently provided.
Income taxes
The Group is subject to income taxes in Australia. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination and the disclosure of contingent liabilities at the date of the financial statements, and the reported revenue and costs during the periods presented therein. On an ongoing basis, management evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and costs. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the results of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.
The Group has identified the following critical accounting policies under which significant judgements, estimates and assumptions are made and where actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods.
circumstances, in particular whether an economically viable extraction operation can be established.
Any such estimates and assumptions may change as new information becomes available. If, after having capitalised the expenditure under the policy, a judgement is made that recovery of the expenditure is unlikely, the relevant capitalised amount will be written off to the statement of comprehensive income.
The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for operating sites are recognised in the statement of financial position by adjusting both the restoration and rehabilitation asset and provision. Such changes give rise to change in future depreciation and interest charges. For closed sites, changes to estimated costs are recognised immediately in the statement of comprehensive income.
is made. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses or to the extent that they will be offset by deferred income tax liabilities which will reverse in the same periods.
4 Segment information
(a) Geographical segments
The Group operates in primarily one geographical segment, namely Australia. However, the Group also holds a minority equity interest in a Hong Kong based entity.
(b) Business segments
The Group operates in the following industries:
(i) Metal in concentrate
Production of metal in concentrate from tailings at the Hellyer mine site. These operations were carried out until 31 July 2008 by the Hellyer Zinc Concentrate Project Joint Venture in which the Group had a 50% interest. The Joint Venture commenced on 1 December 2006 and ended on 31 July 2008. From 1 August 2008 until 8 September 2008 operations at Hellyer were fully owned and operated by the Group.
(ii) Research and Development
The Group continues to undertake research and development activities with respect to the commercialisation of the Intec Process technology including operation of the Burnie demonstration plant and provision of testwork and engineering services to third parties.
(c) Segment reporting – business segments, 2010
(i) Segment Revenue
| Discontinued operations(Metal in concentrate)$'000 | R & D$'000 | Consolidated$'000 | |
|---|---|---|---|
| Sales to external customers | - | 549 | 549 |
| Total sales revenue | - | 549 | 549 |
| Other revenue | 2,802 | - | 2,802 |
| Total segment revenue | 2,802 | 549 | 3,351 |
| Intersegment elimination | - | ||
| Unallocated revenue | 210 | ||
| Consolidated revenue | 3,561 | ||
| (ii) Segment Result | |||
| Segment profit/(loss) before tax | 2,659 | (1,281) | 1,378 |
| Intersegment elimination | - | ||
| Unallocated profit/ (loss) | (3,364) | ||
| Loss before income tax | (1,986) | ||
| Income tax benefit/(expense) | 206 | ||
| Loss for the year | (1,780) |
| (iii) Segment assets and liabilities | Discontinued operations(Metal in concentrate)$'000 | R & D$'000 | Consolidated$'000 |
|---|---|---|---|
| Segment assets | 2,756 | 7,675 | 10,431 |
| Intersegment elimination | - | ||
| Unallocated assets | 1,778 | ||
| Total assets | 12,209 | ||
| Segment liabilities | - | 4,547 | 4,547 |
| Intersegment elimination | - | ||
| Unallocated liabilities | 2,187 | ||
| Total liabilities | 6,734 | ||
| (iv) Other segment information | |||
| Acquisition of plant & equipment | - | - | - |
| Unallocated | 56 | ||
| Total acquisition | 56 | ||
| Depreciation expense | - | 715 | 715 |
| Unallocated | 92 | ||
| Total depreciation expense | 807 | ||
| (v) Cash flow information | |||
| Net cash flow from operating activities | (352) | (146) | (498) |
| Unallocated | (2,991) | ||
| Total cash flows from operating activities | (3,489) | ||
| Net cash flow from investing activities | 3,215 | (3,669) | (454) |
| Unallocated | (56) | ||
| Total cash flow from investing activities | (510) | ||
| Net cash flow from financing activities | - | - | - |
| Unallocated | 2,201 | ||
| Total cash flow from financing activities | 2,201 |
(d) Segment reporting – business segments, 2009
| (i) Segment Revenue | |||
|---|---|---|---|
| Discontinued operations(Metal in concentrate)$'000 | R & D$'000 | Consolidated$'000 | |
| Sales to external customers | 6,391 | 1,234 | 7,625 |
| Total sales revenue | 6,391 | 1,234 | 7,625 |
| Other revenue | 1,819 | - | 1,819 |
| Total segment revenue | 8,210 | 1,234 | 9,444 |
| Intersegment elimination | - | ||
| Unallocated revenue | 1,051 | ||
| Consolidated revenue | 10,495 | ||
| (ii) Segment Result | |||
| Segment profit/ (loss) | (8,365) | (6,253) | (14,618) |
| Intersegment elimination | - | ||
| Unallocated profit/ (loss) | (5,861) | ||
| Loss before income tax | (20,479) | ||
| Income tax expense | (206) | ||
| Loss for the year | (20,685) |
| (iii) Segment assets and liabilities | Discontinued operations(Metal in concentrate)$'000 | R & D$'000 | Consolidated$'000 |
|---|---|---|---|
| Segment assets | 3,715 | 5,024 | 8,739 |
| Intersegment elimination | - | ||
| Unallocated assets | 2,427 | ||
| Total assets | 11,166 | ||
| Segment liabilities | 600 | 4,420 | 5,020 |
| Intersegment elimination | - | ||
| Unallocated liabilities | 1,116 | ||
| Total liabilities | 6,136 | ||
| (iv) Other segment information | |||
| Acquisition of plant & equipment | 209 | 14 | 223 |
| Unallocated | 78 | ||
| Total acquisition | 301 | ||
| Depreciation expense | 977 | 716 | 1,693 |
| (v) Cash flow information | |||
| Net cash flow from operating activities | (6,710) | (1,167) | (7,877) |
| Unallocated | 1,699 | ||
| Total cash flows from operating activities | (6,178) | ||
| Net cash flow from investing activities | (209) | (14) | (223) |
| Unallocated | 2,647 | ||
| Total cash flow from investing activities | 2,424 | ||
| Net cash flow from financing activities | - | ||
| Unallocated | 529 | ||
| Total cash flow from financing activities | 529 |
(e) Basis of accounting for purposes of reporting by operating segments
(i) Accounting policies adopted
Unless stated otherwise, as detailed in notes 1w and 1z.
(ii) Intersegment transactions
There are no intersegment transactions.
(iii) Segment assets
Where an asset is used across multiple segments, the asset is allocated to that segment that receives majority economic value from that asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location.
(iv) Segment liabilities
Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings.
(v) Unallocated items
The following items of revenue, expenses, assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment:
- impairment of assets and other non-recurring items of revenue or expense
- income tax expense
- current tax liabilities
- other financial liabilities
- intangible assets
(f) Major customers
The Group has a number of customers to whom it provides both products and services. The Group has an ongoing contract for the treatment of industrial wastes generated by the Tasmanian-based ACL Group. On 25 August 2009, Receivers and Managers were appointed to the ACL Group. At balance date, the Group wrote off a bad debt of $0.218 million owing for work completed for the ACL Group prior to the appointment of the Receivers and Managers. The ACL Group accounts for 74% of external revenue (2009: 36%). The next most significant customer accounts for 25% (2009: 33%) of external revenue.
5 Revenue from continuing operations
| Consolidated | ||
|---|---|---|
| 2010 | 2009 | |
| $'000 | $'000 | |
| Sales revenue | ||
| Consulting fees | 549 | 771 |
| EAF dust | - | 154 |
| Other revenue | 549 | 925 |
| Interest – related parties | - | - |
| - other | 187 | 152 |
| Government grants (Bass Strait freight equalisation scheme) | - | 289 |
| Sundry income | 23 | 85 |
| 210 | 526 | |
| Total revenue | 759 | 1,451 |
| 6Expenses | ||
| Consolidated | ||
| 2010 | 2009 | |
| Loss before income tax includes the following specific expenses: | $'000 | $'000 |
| DepreciationPlant and equipment | 81 | 91 |
| Office furniture and equipment | 11 | 35 |
| Burnie Research Facility | 715 | 707 |
| Total depreciation recognised in statement of comprehensive income | ||
| 807 | 833 | |
| Finance costsInterest and finance charges paid/payable – others | 97 | 216 |
| Foreign exchange (gains)/losses | (28) | (394) |
| Net gain/(loss) on disposal of plant and equipment | - | (40) |
| Occupancy expense | 377 | 479 |
| Research and development | 67 | 133 |
| Interest expense – convertible notes | 117 | - |
| 7Profit/(Loss) from discontinued operations | Consolidated |
On 11 December 2008 the Group announced its decision to dispose of its Hellyer assets, thereby discontinuing its operations in this business segment. The sale of the Hellyer mill and associated assets and infrastructure was settled on 6 August 2009. Financial information relating to the discontinued operation to the date of disposal is set out below.
The financial performance of the discontinued operation to the date of settlement which is included in profit/(loss) from discontinued operations per the statement of comprehensive income is as follows: Sale of metal - 6,391 Royalty income 2,756 - Rental and recharged income 46 249
2009 $000
2010 $000
| Consolidated | ||
|---|---|---|
| 2010 | 2009 | |
| $000 | $000 | |
| Hellyer Joint Venture royalty income | - | 167 |
| Sale of inventory | - | 768 |
| Other income | - | 635 |
| Whyalla costs | (103) | - |
| Other expense | (40) | - |
| Zinc cost of sales | - | (11,902) |
| Estimated cost to sell non current assets | - | (295) |
| Hellyer impairments expense | - | (4,378) |
| (Loss)/Profit from discontinued operations | 2,659 | (8,365) |
| Income tax expense | - | - |
| Profit attributable to members of the parent entity | 2,659 | (8,365) |
| Total profit after tax attributable to the discontinued operation | 2,659 | (8,365) |
| The net cash flows of discontinuing operations which have been incorporated | ||
| into the statement of cash flows are as follows: | ||
| Net cash inflow/(outflow) from operating activities | (352) | (6,710) |
| Net cash inflow/(outflow) from investing activities | 3,215 | (209) |
| Net cash increase in cash generated by discontinuing operations | 2,863 | (6,919) |
In 2010, the profit from discontinued operations included sale proceeds of $2.756 million (2009: $3.715 million.)
| 8 | Income tax (benefit)/expense | ||
|---|---|---|---|
| Consolidated | |||
| 2010 | 2009 | ||
| $'000 | $'000 | ||
| (a) | The components of tax expense comprise: | ||
| Current tax | (585) | 206 | |
| Deferred tax | (846) | - | |
| Tax losses not recognised | 1,431 | - | |
| Under/over provision of income tax | (206) | - | |
| Income tax (benefit)/expense | (206) | 206 | |
| (b) | Reconciliation of income tax expense | ||
| to prima facie tax payable | |||
| (Loss)/profit from operations before income tax expense/(benefit) | (1,986) | (20,479) | |
| Tax at the Australian tax rate of 30% (2009 - 30%) | (596) | (6,144) | |
| Tax effect of amounts which are not deductible (taxable) in calculating taxable | |||
| income: | |||
| Permanent differences | 11 | 5 | |
| Tax losses not recognised | 1,431 | - | |
| Temporary differences not recognised | (846) | - | |
| Under/over provision of income tax | (206) | - | |
| Share of net (profit)/loss of associate | - | (247) | |
| Estimated cost to sell non current asset | - | 89 | |
| Previously unrecognised tax losses now recouped | |||
| To reduce current tax expense | - | (242) | |
| Tax losses/temporary differences not recognised | 6,745 | ||
| Income tax (benefit)/expense | (206) | 206 | |
| (c) | Unrecognised tax losses | ||
| Unused tax losses for which no deferred tax asset has been recognised | 58,478 | 64,371 | |
| Potential tax benefit @ 30% (2009 – 30%) | 17,543 | 19,311 | |
All unused tax losses were incurred by Australian entities.
The benefit for tax losses will only be obtained if:
- (i) the Group derives future assessable income of a nature and an amount sufficient to enable the benefit from the deductions for the losses and temporary difference to be realised;
- (ii) the Group comply with the conditions for deductibility imposed by the tax legislation; and
- (iii) no changes in tax legislation adversely affect the Group in realising the benefit from deductions for the losses and temporary differences.
In addition, the availability of certain tax losses is subject to the Group successfully establishing deductibility, and in particular, satisfying the continuity of ownership test and the same business test.
(d) Tax consolidation legislation
The Company and its wholly-owned Australian subsidiaries have implemented the tax consolidation legislation with effect from 1 July 2008.
(e) Dividends
| Consolidated | ||
|---|---|---|
| 2010 | 2010 | |
| $'000 | $'000 | |
| Final Dividend | - | - |
| Franking account credits | - | - |
| 9Current assets - Cash and cash equivalents | ||
| Consolidated | ||
| 2010 | 2009 | |
| $'000 | $'000 | |
| Cash at bank and on hand | 192 | 1,990 |
| 192 | 1,990 | |
(a) Reconciliation to cash at the end of the year
The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows.
(b) Cash at bank and on hand
These are interest bearing at interest rates between 1.6% and 5.05% (2009 – 2.95% and 7.20%) for account balances greater than $500,000.
10 Current assets - Trade and other receivables
| Consolidated | |||
|---|---|---|---|
| 2010 | 2009 | ||
| $'000 | $'000 | ||
| Trade debtors | 8 | 273 | |
| GST receivables | 16 | 14 | |
| Other receivables | 5 | 13 | |
| Prepayments | 27 | 26 | |
| 56 | 326 |
(a) Provision for impairment of receivables
Current trade and term receivables are generally on 30-day terms. Non-current trade and term receivables are assessed for recoverability based on the underlying terms of the contract. A provision for impairment is recognised when there is objective evidence that an individual trade or term receivable is impaired. These amounts have been included in the other expenses item. There is no provision for impairment of receivables at 30 June 2010 and no movement in the provision during the year.
(b) Credit Risk — Trade and other receivables
The Group has no significant concentration of credit risk with respect to any single counterparty or group of counterparties other than those receivables specifically provided for and mentioned within Note 10.
The class of assets described as Trade and other receivables is considered to be the main source of credit risk related to the Group. On a geographical basis, the Group has no significant credit risk exposure. Neither the Group nor parent company holds any financial assets with terms that have been renegotiated, which would otherwise be past due or impaired.
The following table details the Group's trade and other receivables exposed to credit risk (prior to collateral and other credit enhancements) with ageing analysis and impairment provided for thereon. Amounts are considered as 'past due' when the debt has not been settled, with the terms and conditions agreed between the Group and the customer or counterparty to the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided for where there are specific circumstances indicating that the debt may not be fully repaid to the Group.
The balances of receivables that remain within initial trade terms (as detailed in the table) are considered to be of high credit quality.
| 2010 | Gross amount | Past due andimpaired | Past due but not impaired | Withininitial tradeterms | |||
|---|---|---|---|---|---|---|---|
| < 30 | 31-60 | 61-90 | > 90 | ||||
| $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |
| Trade debtors | 8 | - | - | - | - | -8 | |
| GST receivables | 16 | - | - | - | - | -16 | |
| Other receivables | 5 | - | - | - | - | -5 | |
| Prepayments | 27 | - | - | - | - | -27 | |
| Total | 56 | - | - | - | - | -56 |
| 2009 | Gross amount | Past due andimpaired | Past due but not impaired | Withininitial tradeterms | |||
|---|---|---|---|---|---|---|---|
| $'000 | $'000 | < 30$'000 | 31-60$'000 | 61-90$'000 | > 90$'000 | $'000 | |
| Trade debtors | 273 | - | - | - | - | 139 | 134 |
| GST receivables | 14 | - | - | - | - | - | 14 |
| Other receivables | 13 | - | - | - | - | - | 13 |
| Prepayments | 26 | - | - | - | - | - | 26 |
| Total | 326 | - | - | - | - | 139 | 187 |
(c) Collateral held as security
There is no trade debtor or other receivable amounts where collateral has been received as security.
(d) Financial assets classified as loans and receivables
| Note | Consolidated | |||
|---|---|---|---|---|
| 2010 | 2009 | |||
| $'000 | $'000 | |||
| Trade debtors | 8 | 273 | ||
| GST receivables | 16 | 14 | ||
| Other receivables | 5 | 13 | ||
| 33 | 29 | 300 |
(e) Collateral pledged
There is no collateral pledged as security.
11 Current assets - Inventories at cost
| Consolidated | |||
|---|---|---|---|
| 2010 | 2009 | ||
| $'000 | $'000 | ||
| Spares and reagents – finished goods | 38 | 23 | |
| 38 | 23 |
12 Current assets - non current assets classified as held for sale
| Consolidated | ||
|---|---|---|
| 2010 | 2009 | |
| $'000 | $'000 | |
| Non current assets classified as held for sale | - | 4,010 |
| Estimated cost to sell non current assets | - | (295) |
| Total non current assets classified as held for sale | - | 3,715 |
The Hellyer plant & equipment and the associated Hellyer mining lease were the subject of a sale agreement with Bass Metals Ltd (BSM) during the previous year. This agreement provided for a payment of $4.010 million and replacement by BSM of INL's $0.990 million security bond on the Hellyer mining lease, plus a royalty (note 13). The Hellyer asset sale was completed in August 2009.
13 Non current assets – Receivables
| Consolidated | |||
|---|---|---|---|
| 2010 | 2009 | ||
| $'000 | $'000 | ||
| Royalty receivable | 2,756 | - | |
| Tenement security deposits | 121 | 121 | |
| 2,878 | 121 |
The royalty receivable forms part of the consideration payable by Bass Metals Ltd (BSM) for the purchase of the Hellyer Assets. In its 30 June 2009 financial statements, BSM adopted a valuation of $2.756 million for the Hellyer royalty. BSM's valuation of the Hellyer royalty has been adopted by the Directors and accounted for as a profit from discontinued operations and a non-current asset.
(a) Fair values
The fair values of receivables of the Group approximate the carrying values. The Hellyer royalty has been valued at a fair value of $2.756 million.
(b) Interest rate risk
The Group is exposed to interest rate risk to the extent that tenement security deposits are interest bearing while receivables are non-interest bearing.
(c) Credit risk
The Group deals with a small number of customers in relation to sales of metal in concentrate. Credit risk is assessed for each customer on an individual basis. Refer to notes 2 and 33 for more information on the risk management policy of the Group.
The Hellyer royalty forms part of the consideration payable by Bass Metals Ltd (BSM). Payment will depend on commencement of production by BSM. BSM has provided an operations update on 24 August 2010, in which it noted delays and a review to its development schedule for its Hellyer mine project. BSM noted that "…given the recent issues in the decline development it is considered prudent to complete all of the plant commissioning prior to Christmas and then after the work force has had a break over Christmas, start treating Fossey ore early in the New Year, 2011." There is no provision for impairment of the Hellyer royalty receivable at 30 June 2010.
(d) Tenement security deposits
These deposits are bearing floating interest rates between 3% and 5% (2009 – 2.8% and 8.1%). These deposits have an average maturity of 30 days.
14 Non current assets - Other financial assets
| Consolidated | ||
|---|---|---|
| 2010 | 2009 | |
| Financial assets available for sale | $'000 | $'000 |
| Shares in unlisted companies, at cost | 1,163 | 26 |
| 1,163 | 26 |
In November 2009, the Company entered into a multi-part subscription agreement with Green Resources for the licensing of the Intec Process technology in China. Stage 1 of the subscription agreement resulted in Intec receiving seven percent (7%) of the issued capital in Green Resources, satisfied by the issue of 21,659,436 Intec ordinary shares at a price of $0.015 per share to investors nominated by Green Resources and the grant to Green Resources of a conditional royalty-free twenty (20) year Intec Process technology licence, subject to Intec's existing licensing arrangements and specified performance arrangements. The Directors have valued the Company's 7% shareholding investment in Green Resources at $1.137 million of which $0.813 million has been recorded as deferred revenue.
15 Non current assets - Plant and equipment
| Consolidated | Hellyer plantandequipment$'000 | Officeequipment$'000 | Plant andequipment$'000 | BurnieResearchFacility$'000 | Plant andequipmentunderconstruction$'000 | Total$'000 |
|---|---|---|---|---|---|---|
| Year ended 30 June 2009Movement in carryingamounts | ||||||
| Opening net book amount | 26,899 | 44 | 339 | 4,553 | 1,990 | 33,825 |
| Additions | 209 | 3 | 77 | 14 | - | 303 |
| Depreciation charge | (372) | (34) | (81) | (716) | - | (1,203) |
| Impairments | (18,016) | - | - | - | - | (18,016) |
| Disposals | (8,720) | - | - | - | (1,990) | (10,710) |
| Closing net book amount | - | 13 | 335 | 3,851 | - | 4,199 |
| At 1 July, 2009 | ||||||
| Cost or fair value | - | 235 | 572 | 6,323 | - | 7,130 |
| Accumulated depreciation | - | (222) | (237) | (2,472) | - | (2,931) |
| Net book amount | - | 13 | 335 | 3,851 | - | 4,199 |
| Year ended 30 June 2010 | ||||||
| Movement in carryingamounts | ||||||
| Opening net book amount | - | 13 | 335 | 3,851 | - | 4,199 |
| Additions | - | 12 | 40 | 4 | - | 56 |
| Depreciation charge | - | (11) | (80) | (715) | - | (807) |
| Closing net book amount | - | 13 | 295 | 3,140 | 3,448 | |
| At 30 June 2010 | ||||||
| Cost or fair value | - | 247 | 612 | 6,327 | - | 7,186 |
| Accumulated depreciation | - | (234) | (317) | (3,187) | - | (3,738) |
| Net book amount | - | 13 | 295 | 3,140 | - | 3,448 |
Asset Impairments
In the year to 30 June 2009 and as a consequence of the closure of the HZCP and the asset sale program the Group incurred an assets impairments expense of $18.016 million.
16 Non current assets – Environmental bonds
| Consolidated | |||
|---|---|---|---|
| 2010 | 2009 | ||
| $'000 | $'000 | ||
| Environmental bonds | 4,425 | 756 | |
| 4,425 | 756 |
A cash-backed bond of $3,647,500 was lodged in 2009 with the Environmental Protection Authority, Victoria for the EAFD stockpile at Footscray, Victoria. In addition, a cash-backed bond of $756,000 was lodged in 2008 with the Tasmanian Government (now $777,937 with accumulated interest) in relation to the stockpile of EAFD held at the Hellyer mine site in Tasmania. Interest on the cash backed bond of $3,647,500 is 4.65% at 30 June 2010. Interest on the cash backed bond of $756,000 is 2.9% at 30 June 2010.
| 17 | Non current assets - Exploration expenditure | Consolidated | |
|---|---|---|---|
| 2010 | 2009 | ||
| Costs carried forward in respect of areas of interest in exploration andevaluation phases | $'000 | $'000- | |
| Movement for year:Balance at beginning of year | - | 146 | |
| Exploration expenditure written off | - | (146) | |
| Balance at end of year | - | - | |
| 18 | Non current assets - Intangible assets | Consolidated | |
| 2010 | 2009 | ||
| Intellectual property | $'000 | $'000 | |
| Year ended 30 June | |||
| Opening net book amount | 10 | 10 | |
| AdditionsImpairment charge | -- | -- | |
| Closing net book amount | 10 | 10 | |
| At 30 June | |||
| Cost | Accumulated impairment | 10- | 10- |
| Net book amount | 10 | 10 | |
| 19 | Current liabilities – Trade and other payables | ||
| Consolidated2010 | 2009 | ||
| Unsecured liabilities | $'000 | $'000 | |
| Trade payables | 329 | 624 | |
| Other payables | 113 | 56 | |
| Employee entitlements | 258 | 200 | |
| 700 | 880 | ||
| 20 | Current liabilities – Tax liabilities | ||
| Consolidated2010 | 2009 | ||
| $'000 | $'000 | ||
| Income tax payable | - | 206 | |
| - | 206 | ||
| 21 | Current liabilities – Borrowings | ||
| Consolidated | |||
| 2010 | 2009 | ||
| $'000 | $'000 | ||
| Secured Bank Loan | - | 27 | |
| Convertible note | 587 | - | |
| Other borrowings - unsecured | 7 | 15 | |
| 594 | 42 |
(a) Convertible notes
On 16 November 2009, Intec Ltd signed a 4.75% convertible note facility with La Jolla Cove Investors, Inc. ("La Jolla") to provide up to a total of US$3 million in working capital. The notes are convertible into INL ordinary, at the option of the holder, or repayable on 16 November 2011. The conversion rate is at the lesser of A$0.25 per share or a 20% discount to the 15 day volume weighted average INL price calculated immediately prior to the conversion. As at 30 June 2010, Intec has drawn down US$1,750,000 of the Facility and of this amount, La Jolla has in total elected to convert US$1,350,124 into INL shares. The convertible notes are presented in the statement of financial position as follows:
| Consolidated | |||
|---|---|---|---|
| 2010 | 2009 | ||
| $'000 | $'000 | ||
| Face value of unconverted liability | 470 | - | |
| Interest expense | 117 | - | |
| 587 | - | ||
| 22 | Current liabilities – Refundable deposit | ||
| Consolidated | |||
| 2010 | 2009 | ||
| Refundable deposit | $'000- | $'000500 | |
| - | 500 | ||
| 23 | Current liabilities – Provisions | ||
| Consolidated | |||
| 2010$'000 | 2009$'000 | ||
| (a) Balances | |||
| Environmental obligations | 4,426 | 3,648 | |
| Leasing obligations | 121 | - | |
| 4,547 | 3,648 | ||
| (b) Movement in provisionProvision for environmental obligations | |||
| Balance 1 July 2009 | 3,648 | - | |
| Transferred from non current provision during the year | 756 | - | |
| Provided for during the yearReleased during year | 22- | 3,648- | |
| Balance 30 June 2010 | 4,426 | 3,648 | |
| Provision for leasing obligations | |||
| Balance 1 July 2009 | - | - | |
| Provided during yearReleased during year | 121- | -- | |
| Balance 30 June 2010 | 121 | - |
(c) Nature and purpose of provision
The environmental obligations relates to the stockpile of EAF Dust at the Footscray storage facility in Victoria and at Hellyer, Tasmania. The provision for environmental obligations represents management's best estimate of the present value of the future costs required. Refer to Note 3 for further information.
24 Non current liabilities – Deferred revenue
| Consolidated | ||
|---|---|---|
| 2010 | 2009 | |
| $'000 | $'000 | |
| Non current portion of deferred revenue amounts | ||
| Royalty revenue | 813 | - |
| 813 | - |
25 Non current liabilities – Provisions
| Consolidated | ||
|---|---|---|
| (a) Balances | 2010$'000 | 2009$'000 |
| Environmental obligationsLong Service Leave | -81 | 756104 |
| 81 | 860 | |
| (b) Movements in provisions- environmental obligations | 2010$'000 | 2009$'000 |
| Balance 1 July 2009Provided during yearTransferred to current provision during year | 756-(756) | -756- |
| Balance 30 June 2010 | - | 756 |
(c) Nature and purpose of provision
The environmental obligations relates to the stockpile of EAFD at the Hellyer mine site and has been transferred to current liabilities. The provision for environmental obligations represents managements best estimate of the present value of the future costs required. Refer to Note 3 for further information.
26 Contributed equity
| (a)Share capital | 2010 | 2009 | |
|---|---|---|---|
| Ordinary sharesFully paid | Notes(b)(c) | Shares1,065,875,403 | Shares819,173,709 |
| Total contributed equity | 1,065,875,403 | 819,173,709 |
(b) Movements in ordinary share capital
| Date2010 | Details | Number ofshares | Issue price(cents) | $'000 |
|---|---|---|---|---|
| 30-06-2009 | Balance at end of year – Company | 819,173,709 | 67,060 | |
| 01-07-2009 | Cash received from the 2009 Share Purchase Plan | - | 1.5 | 10 |
| 06-07-2009 | Issued pursuant to 2009 Share Purchase Plan andcash received prior to 30 June 2009 | 1,000,015 | 1.5 | - |
| 06-08-2009 | Issued pursuant to 2009 Share Purchase Plan | 1,080,000 | 1.5 | 16 |
| 04-12-2009 | Issued pursuant partial conversion of La Jolla CoveInvestors Convertible Note | 4,661,017 | 1.18 | 55 |
| 22-12-2009 | Issued pursuant partial conversion of La Jolla CoveInvestors Convertible Note | 7,563,025 | 1.19 | 90 |
| 22-12-2009 | Issued from the exercise of options at 8 cents pershare. | 7,747 | 8.0 | 1 |
| 22-12-2009 | Issued pursuant to share placement tosophisticated investors | 8,666,666 | 1.5 | 130 |
| 23-12-2009 | Issued pursuant to share placement tosophisticated investors | 8,000,000 | 1.5 | 120 |
| 07-01-2010 | Issued as consideration for completion of stageone of subscription agreement – Green Resources | 21,659,436 | 1.5 | 325 |
| 07-01-2010 | Issued from the exercise of options at 8 cents pershare. | 81,701 | 8.0 | 6 |
| 22-01-2010 | Issued pursuant partial conversion of La Jolla CoveInvestors Convertible Note | 9,649,123 | 1.14 | 110 |
| 28-01-2010 | Issued pursuant partial conversion of La Jolla CoveInvestors Convertible Note | 9,821,429 | 1.12 | 110 |
| 03-02-2010 | Issued as consideration for representative services | 9,074,502 | 1.49 | 135 |
| 18-02-2010 | Issued pursuant partial conversion of La Jolla CoveInvestors Convertible Note | 25,568,182 | 0.88 | 225 |
| Continued | Details | Number ofshares | Issue price(cents) | $'000 |
|---|---|---|---|---|
| 03-03-2010 | Issued pursuant partial conversion of La Jolla CoveInvestors Convertible Note | 27,108,434 | 0.83 | 225 |
| 25-03-2010 | Issued pursuant partial conversion of La Jolla CoveInvestors Convertible Note | 31,250,000 | 0.72 | 225 |
| 16-04-2010 | Issued pursuant partial conversion of La Jolla CoveInvestors Convertible Note | 42,968,750 | 0.64 | 275 |
| 01-06-2010 | Issued pursuant partial conversion of La Jolla CoveInvestors Convertible Note | 38,541,667 | 0.48 | 185 |
| 23-12-2009 | Transaction costs pursuant to share placement tosophisticated investors | (18) | ||
| 30-6-2010 | 1,065,875,403 | 69,285 |
Consolidated
| 30-6-2008 | Less share of associates capital raising costsexpensed directly in equity | (307) | ||
|---|---|---|---|---|
| 30-6-2010 | Balance at end of year – Consolidated | 1,065,875,403 | 68,978 | |
| Date2009 | Details | Number ofshares | Issue price | $'000 |
| 1-07-2008 | Balance at beginning of year – Company | 671,519,848 | 64,782 | |
| 31-07-200818-12-2008 | Cash received from the 2008 Entitlements IssueIssued as consideration for financial advisory | - | 5.0 | 86 |
| 30-04-2009 | services at 2 cents per share.Issued as consideration for consulting services at | 2,767,000 | 2.0 | 56 |
| 30-04-2009 | 1.725 cents per share.Issued from the exercise of options at 8 cents per | 1,650,179 | 1.725 | 29 |
| 22-06-2009 | share.Issued pursuant to the 2009 Share Purchase Plan | 10,000 | 8.0 | 1 |
| 22-06-2009 | and associated Placement at 1.5 cents per share.Issued as consideration for consulting and | 132,539,834 | 1.5 | 1,988 |
| 30-06-2009 | representative services at 1.5 cents per share.Transaction costs pursuant to the 2009 Share | 10,686,848 | 1.5 | 160 |
| Purchase Plan and associated Placement | (42) | |||
| 30-6-2009 | Balance at end of year – Company | 819,173,709 | 67,060 | |
| Consolidated | ||||
| 30-6-2008 | Less share of associates capital raising costsexpensed directly in equity | (307) | ||
| 30-6-2009 | Balance at end of year – Consolidated | 819,173,709 | 66,753 | |
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the company does not have a limited amount of authorised capital.
(d) Options
Information relating to the Intec Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in notes 27 and 41.
(e) Capital Management
Management controls the capital of the Group in order to maintain a good debt to equity ratio and ensure that the Group can fund its operations and continue as a going concern.
The Group's debt and capital includes ordinary share capital, convertible ordinary shares and financial liabilities, supported by financial assets. There are no externally imposed capital requirements.
Management effectively manages the Group's capital by assessing the Group's financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.
There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year. The quantitative data the Group assesses as capital is $5.475 million which is consistent with the net assets of the Group (2009: $5.030 million).
27 Options
Consolidated
2010
| IssueDate | ExpiryDate | ExercisePrice1 | Balanceat30 June 2009 | Grantedduringyear | Lapsedduringyear | Exercisedduringyear | Vested &exercisableas at30 June 2010 |
|---|---|---|---|---|---|---|---|
| 27-06-2008 | 31-12-2009 | $0.0800 | 111,909,975 | - (111,820,527) | (89,448) | Nil | |
| 27-06-2008 | 31-12-2009 | $0.0800 | 20,000,000 | - | (20,000,000) | - | Nil |
| 05-04-2005 | 24-02-2010 | $0.0603 | 2,406,289 | - | (2,406,289) | - | Nil |
| 16-11-2005 | 24-02-2010 | $0.0603 | 3,462,725 | - | (3,462,725) | - | Nil |
| 25-09-2006 | 30-08-2011 | $0.1013 | 4,610,000 | - | - | - | 4,610,000 |
| 15-11-2006 | 30-08-2011 | $0.1013 | 2,600,000 | - | - | - | 2,600,000 |
| 14-11-2007 | 25-09-2012 | $0.1413 | 4,700,000 | - | - | - | 4,700,000 |
| 31-01-2008 | 25-09-2012 | $0.1413 | 6,350,000 | - | - | - | 6,350,000 |
| Total Options on issue | 156,038,989 | - (137,689,541) | (89,448) | 18,260,000 |
Consolidated
2009
| IssueDate | ExpiryDate | ExercisePrice1 | Balanceat30 June 2008 | Grantedduringyear | Lapsedduringyear | Exercisedduringyear | Vested &exercisableas at30 June 2009 |
|---|---|---|---|---|---|---|---|
| 26-11-2003 | 26-11-2008 | $0.0913 | 3,177,916 | - | (3,177,916) | - | Nil |
| 1999 to 2000 | 30-06-2009 | $0.4876 | 1,275,000 | - | (1,275,000) | - | Nil |
| 27-06-2008 | 31-12-2009 | $0.0800 | 111,919,975 | - | - | (10,000) | 111,909,975 |
| 27-06-2008 | 31-12-2009 | $0.0800 | 20,000,000 | - | - | - | 20,000,000 |
| 05-04-2005 | 24-02-2010 | $0.0603 | 2,406,289 | - | - | - | 2,406,289 |
| 16-11-2005 | 24-02-2010 | $0.0603 | 3,462,725 | - | - | - | 3,462,725 |
| 25-09-2006 | 30-08-2011 | $0.1013 | 4,610,000 | - | - | - | 4,610,000 |
| 15-11-2006 | 30-08-2011 | $0.1013 | 2,600,000 | - | - | - | 2,600,000 |
| 14-11-2007 | 25-09-2012 | $0.1413 | 4,700,000 | - | - | - | 4,700,000 |
| 31-01-2008 | 25-09-2012 | $0.1413 | 6,350,000 | - | - | - | 6,350,000 |
| Total Options on issue | 160,501,905 | - | (4,452,916) | (10,000) | 156,038,989 |
1 Exercise prices have been adjusted from original exercise prices at the grant date as a consequence of the Company undertaking entitlement issues to all shareholders since the grant date of options as provided for in the terms and conditions of the Intec Option Plan.
All options have been issued pursuant to the Intec Option Plan (Refer note 41) except for the following:
(i) The options expiring on 30 June 2009 were issued pursuant to specific contracts with former Directors and a former employee.
(ii) The options which expired on 31 December 2009 were issued in accordance with an Entitlements Issue in June 2008 to shareholders of 111,919,975 new shares together with 111,919,975 free attaching options issued on a 1 for 1 basis. In addition, 20,000,000 options were issued to the underwriter of the Entitlements Issue.
28 Reserves
| Consolidated | ||
|---|---|---|
| 2010$'000 | 2009$'000 | |
| (a)ReservesShare-based payments reserve | 2,577 | 2,577 |
| 2,577 | 2,577 | |
| (b)MovementsShare-based payments reserveBalance 1 JulyShare of associates reserves | 2,577- | 2,55225 |
| Balance 30 June | 2,577 | 2,577 |
| Asset revaluation reserveBalance 1 JulyRecognition of impairment expense of assets available for sale | -- | 13,638(13,638) |
| Balance 30 June | - | - |
| Total reserves | 2,577 | 2,577 |
(c) Nature and purpose of reserves
Share based payments reserve
The share based payments reserve records the value of options issued by the Company. The consolidated share based payments reserve includes the Group's share of the reserves of its associated company, Bass Metals Ltd.
In previous years, the value of options issued under the Intec Option Plan to directors, employees and consultants has been recognised as an employment expense in the statement of comprehensive income.
29 Accumulated losses
Movements in accumulated losses were as follows:
Balance 1 July (64,300) (43,615) Net (loss) /profit for the year (1,780) (20,685)
Balance 30 June (66,080) (64,300)
30 Key management personnel disclosures
(a) Directors
The following persons were Directors of the Company during the financial year: (i) Chairman – Non-executive T A Jones
(ii) Executive Directors P R Wood, Managing Director and Chief Executive Officer
K G Rodgers, Finance Director and Chief Financial Officer
(iii) Non-executive Directors J R G Bell A J Moyes
Asset revaluation reserve The asset revaluation reserve recorded the increase in value of the Hellyer plant and equipment on the receipt of an independent valuation, which was reduced by the deferred income tax liability which arises on the revaluation. The revaluation increment was reversed during the year on sale of the Hellyer plant and equipment to Bass Metals Ltd.
Consolidated 2010 2009 $'000 $'000
(b) Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year:
| Name | Position |
|---|---|
| B A Banister | Chief Operating Officer |
| D W Clark | Financial Controller |
| D J Purdie | Senior Process Engineer |
| D L Sammut | Corporate Development Manager |
| A R Tong | Head of Technology |
(c) Key management personnel compensation
| Consolidated | ||
|---|---|---|
| 2010 | 2009 | |
| $ | $ | |
| Short-term employee benefits | 1,452,607 | 1,797,939 |
| Post-employment benefits | 194,170 | 151,734 |
| 1,646,777 | 1,949,673 |
(d) Equity instrument disclosures relating to key management personnel
(i) Options provided as remuneration and shares issued on exercise of such options Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options, can be found in section D of the remuneration report on pages 14 to 19.
(ii) Option holdings
The numbers of options over ordinary shares in the company held during the financial year by each Director of the Company and other key management personnel of the Group, including their personally related parties, are set out below.
| 2010 | Grantedduring the | Exercised | Otherchanges | Balance at | Vested andexercisable | |
|---|---|---|---|---|---|---|
| Name | Balance at the | year as | during | during the | the end of | at the end |
| start of the year | compensation | the year | year | the year | of the year | |
| Directors of Intec Ltd | ||||||
| P R Wood | 5,272,952 | - | - | (1,572,952) | 3,700,000 | 3,700,000 |
| A J Moyes1 | 3,022,675 | - | - | (1,122,675) | 1,900,000 | 1,900,000 |
| T A Jones | 903,800 | - | - | (753,800) | 150,000 | 150,000 |
| K G Rodgers | 2,668,368 | - | - | (568,368) | 2,100,000 | 2,100,000 |
| J R G Bell | 466,000 | - | - | (166,000) | 300,000 | 300,000 |
| Other key management personnel of the Group | ||||||
| B A Banister | 42,000 | - | - | (42,000) | - | - |
| D W Clark | 40,000 | - | - | (40,000) | - | - |
| D J Purdie | - | - | - | - | - | - |
| D L Sammut | 569,093 | - | - | (69,093) | 500,000 | 500,000 |
| A R Tong | 1,495,287 | - | - | (395,287) | 1,100,000 | 1,100,000 |
- Mr AJ Moyes retired from the position of an Executive Director on 31 July 2009 and became a Non-executive Director on 1 August 2009.
| 2009 | Granted | Other | Vested and | |||
|---|---|---|---|---|---|---|
| during the | Exercised | changes | Balance at | exercisable | ||
| Name | Balance at the | year as | during | during the | the end of | at the end |
| start of the year | compensation | the year | year | the year | of the year | |
| Directors of Intec Ltd | ||||||
| P R Wood | 5,843,215 | - | - | (570,263) | 5,272,952 | 5,272,952 |
| A J Moyes | 3,776,212 | - | - | (753,537) | 3,022,675 | 3,022,675 |
| T A Jones | 903,800 | - | - | - | 903,800 | 903,800 |
| K G Rodgers | 3,095,888 | - | - | (427,520) | 2,668,368 | 2,668,368 |
| K J Severs1 | 1,575,821 | - | - | (140,302) | 1.435,519 | 1,435,519 |
| J R G Bell | 466,000 | - | - | - | 466,000 | 466,000 |
| Other key management personnel of the Group | ||||||
| B A Banister | 42,000 | - | - | - | 42,000 | 42,000 |
| D W Clark | 40,000 | - | - | - | 40,000 | 40,000 |
| D J Purdie | - | - | - | - | - | - |
| D L Sammut | 569,093 | - | - | - | 569,093 | 569,093 |
| A R Tong | 1,495,287 | - | - | - | 1,495,287 | 1,495,287 |
- Resigned 25 February 2009.
(iii) Share holdings
The number of shares in the company held at the end of the financial year by each Director of the Company and other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.
| 2010 | Balance at | Received during the | Other changes | Balance at the |
|---|---|---|---|---|
| the start of | year on the | during the | end of the | |
| Name | the year | exercise of options | year | year |
| Ordinary shares | ||||
| Directors of Intec Ltd | ||||
| P R Wood | 4,370,168 | - | - | 4,370,168 |
| A J Moyes1 | 2,907,054 | - | - | 2,907,054 |
| T A Jones | 2,689,541 | - | - | 2,689,541 |
| K G Rodgers | 1,129,557 | - | - | 1,129,557 |
| J R G Bell | 1,128,919 | - | - | 1,128,919 |
| Other key management personnel of the Group | ||||
| B A Banister | 1,678,000 | - | - | 1,678,000 |
| D W Clark | 350,000 | - | (250,000) | 100,000 |
| D J Purdie | 200,000 | - | - | 200,000 |
| D L Sammut | 495,612 | - | - | 495,612 |
| A R Tong | - | - | - | - |
- Mr AJ Moyes retired from the position of an Executive Director on 31 July 2009 and became a Non-executive Director on 1 August 2009.
| 2009 | Balance at | Received during the | Other changes | Balance at the |
|---|---|---|---|---|
| the start of | year on the | during the | end of the | |
| Name | the year | exercise of options | year | year |
| Ordinary shares | ||||
| Directors of Intec Ltd | ||||
| P R Wood | 2,850,168 | - | 1,520,000 | 4,370,168 |
| A J Moyes | 1,907,054 | - | 1,000,000 | 2,907,054 |
| T A Jones | 2,022,875 | - | 666,666 | 2,689,541 |
| K J Severs1 | 1,744,902 | - | 666,667 | 2,411,569 |
| K G Rodgers | 456,157 | - | 673,400 | 1,129,557 |
| J R G Bell | 1,028,919 | - | 100,000 | 1,128,919 |
| Other key management personnel of the Group | ||||
| B A Banister | 252,000 | - | 1,426,000 | 1,678,000 |
| D W Clark | 70,000 | - | 280,000 | 350,000 |
| D J Purdie | - | - | 200,000 | 200,000 |
| D L Sammut | 414,558 | - | 81,054 | 495,612 |
| A R Tong | - | - | - | - |
- Resigned 25 February 2009.
31 Contingencies
(a) Contingent liabilities
The parent entity and Group had contingent liabilities at 30 June 2010 in respect of:
R&D Start grant repayable component
The Group received an R&D Start grant from the Federal Government which is partly repayable contingent upon the successful commercialisation of the technology for which the R&D Start grant was made. The original contingent liability that may be repaid is $1,832,085. The repayment rate is set at 30% of the revenues generated from the technology annually until the repayable component has been repaid. Interest is currently accruing on this amount, and the current contingent liability including interest is $3,573,773 (2009 - $3,411,879).
There are no other contingent liabilities of the Group.
32 Commitments
(a) Capital commitments
There are no commitments for capital expenditure at the reporting date.
(b) Lease commitments
Operating leases
The Group leases various items of office equipment under non cancellable operating leases expiring within two years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. The Group also leases various items of plant and machinery under cancellable operating leases. The Group is required to give six months notice for termination of these leases.
| Consolidated | ||
|---|---|---|
| 2010 | 2009 | |
| $'000 | $'000 | |
| Commitments for minimum lease payments in relation to non-cancellableoperating leases are payable as follows: | ||
| Within one year | 20 | 17 |
| Later than one year but not later than five years | 60 | 62 |
| Later than five years | - | - |
| 80 | 79 |
(c) Joint Venture capital commitments
The Hellyer Zinc Concentrate Joint Venture ceased on 1 August 2008 and there were no outstanding capital commitments.
(d) Tenement commitments
There are no minimum annual expenditure requirements attached to the tenements held by the Group. Details of tenements held are shown in the Schedule of Tenements.
33 Financial Instruments
(a) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement, and the basis on which income and expenses are recognised, with respect to each class of financial asset, financial liability and equity instrument are disclosed in Note 1 and Note 2 to the financial statements.
(b) Categorisation of financial instruments
The Group and the parent entity hold the following financial instruments:
| ConsolidatedCarrying amount | ||
|---|---|---|
| 2010 | 2009 | |
| Financial assetsCash and cash equivalentsReceivablesAvailable for sale financial assets at cost, unlisted investmentsFinancial liabilitiesTrade and Other Payables (Note 19)Other PayablesRefundable depositInterest Bearing Liabilities | $'000 | $'000 |
| 192 | 1,990 | |
| 4,454 | 1,177 | |
| 1,163 | 26 | |
| 5,809 | 3,193 | |
| 329 | 624 | |
| 113 | 56 | |
| - | 500 | |
| 594 | 42 | |
| 1,036 | 1,222 |
(c) Financial risk management objectives and policies
The main risks arising from the Group's financial instruments are credit risk, liquidity risk, market risk and cash flow and fair value interest rate risk. The Directors review and approve policies for managing each of these risks which are summarised below.
(i) Credit risk
The Group's exposure to credit risk arises from the potential default of counterparties on their contractual obligations resulting in a financial loss to the Group. Credit risk is monitored on a regular basis. Provision for impairment of financial assets is calculated based on past experience, and current and expected changes in client credit ratings. In addition, the Group does not engage in hedging of its financial assets.
The Group has policies in place to ensure that sales of product are made to customers with an appropriate credit history. There is negligible credit risk on financial assets, excluding metal in concentrate debtors. Metal in concentrate debtors cause a concentration of credit risk as there is a small number of debtors and a low volume of high value sales. Exposure to individual customers or countries is limited to the amount of cash, short term deposits and receivables recognised at balance date and is minimised by using recognised financial intermediaries as counterparties and established letters of credit.
The Group does not hold either collateral as security or credit enhancements relating to any of its financial assets. As at the reporting date, there is no evidence to indicate that any of the financial assets were impaired. There are no financial assets that have had their terms renegotiated so as to prevent them from being past due or impaired, and they are stated at the carrying amounts as indicated.
The Group holds a 100% interest in the Hellyer royalty, which is a unit-based royalty payable at the rate of $2.50 per tonne of ore processed through the Hellyer Mill to a cumulative maximum payment amount of $5.0 million. The non-current assets of the Group include an amount of $2.756 million representing a valuation of the Hellyer royalty. BSM, which purchased the Hellyer Assets, has publicly announced its intention to restart the Hellyer Mill during the 2011 March quarter.
(ii) Liquidity risk
Liquidity risk arises when the Group is unable to meet its financial obligations as and when they fall due. The Group generally settles financial obligations within thirty (30) days and in the event of a dispute make payments within thirty (30) days from the date of resolution.
The Group's financing activities are managed centrally by maintaining an adequate level of cash and cash equivalents to finance the Group's operations. The Group's surplus funds are also managed centrally by placing them with reputable financial institutions.
The risk implied from the values shown in the following table, reflects a balanced view of cash inflows and outflows. Trade payables and other financial liabilities originate from the financing of assets used in the Group's ongoing operations such as property, plant and equipment and investments in working capital, inventories and trade receivables.
Borrowings were a secured bank facility of $5.000 million of which $3.650 million was represented as a Bank Guarantee in favour of the Victorian Government for the EAF dust storage facility at Footscray, Victoria. The Bank Guarantee was replaced with a fully cash-backed bond of $3.650 million. The balance of the $5.000 million facility included a fully drawn amount of $1.350 million. The total facility of $5.000 million was repaid in full in August, 2009 following settlement of the sale of the Hellyer assets.
Interest rate exposure and maturity analysis of financial liabilities
| Consolidated | Interest rate exposure | Maturity dates | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | Weightedaverageeffectiveinterestrate% | Carryingamount | Fixedinterestrate | Variableinterestrate | Noninterestbearing | Nominalamount | Lessthan 1month | 1-3months | 3months– 1 year | 1-5years |
| Cash and cash equivalentsReceivablesAvailable for sale financialassets at cost, unlisted | 4.65 | 1924,454 | - | -4,425 | 19229 | -- | 192- | -29 | -- | 4,425 |
| investments | 1,163 | - | - | 1,163 | - | - | - | - | 1,163 | |
| 5,809 | 4,425 | 1,384 | - | 192 | 29 | - | 5,588 | |||
| Payables:Trade Creditors &AccrualsOther PayablesInterest bearing liabilities:Borrowings: | 442- | --- | --- | 442-- | --- | 442-- | --- | --- | --- | |
| Convertible noteOther | 4.755.50 | 5877 | 5877 | - | - | - | - | - | 5877 | - |
| 1,036 | 594 | - | 442 | - | 442 | - | 594 | - | ||
| 2009 | % | |||||||||
| Cash and cash equivalentsReceivablesAvailable for sale financialassets at cost, unlisted | 5.4 | 1,9901,177 | -- | 1,8901,177 | 100- | -- | 100- | 1,890421 | -- | -756 |
| investments | 26 | - | - | 26 | - | - | - | - | 26 | |
| 3,193 | - | 3,067 | 126 | - | 100 | 2,311 | - | 782 | ||
| Payables:Trade Creditors &AccrualsOther PayablesInterest bearing liabilities: | -- | 680500 | -- | -- | 680500 | -- | 680- | -500 | -- | -- |
| Borrowings | 8.0 | 42 | - | 42 | - | - | - | 42 | - | - |
| - | 1,222 | - | 42 | 1,180 | - | 680 | 542 | - | - |
(iii) Market risk
Foreign currency risk
The Group is exposed to foreign currency risk through its borrowings and receivables relating to consulting income and purchases of supplies and consumables from overseas that are denominated in foreign currencies, principally the US dollar. Hence, the Group's statement of financial position can be affected by movements in the Australian dollar/US dollar exchange rate.
At 30 June 2010, the Group had the following exposure to USD foreign currency:
| Consolidated | ||
|---|---|---|
| 2010 | 2009 | |
| USD | $'000 | $'000 |
| Financial Assets | ||
| Cash and cash equivalents | 3 | 28 |
| Financial liabilities | ||
| Trade Creditors & Other Payables | 27 | 19 |
| Convertible Note | 586 | - |
| Net exposure | (610) | 9 |
Based on the financial instruments held at 30 June 2010, had the Australian dollar weakened/ strengthened by 10% against the US dollar with all other variables held constant, the Group's post-tax profit for the year would have been $4,200 higher/lower (2009 – $1,000 higher/lower), mainly as a result of foreign exchange gains/losses on translation of US dollar denominated financial instruments as detailed in the above table.
Profit is more sensitive to movements in the Australian dollar/US dollar exchange rates in 2010 than 2009 because of the increased amount of US dollar denominated receivables and payables. Other components of equity would have been $4,200 higher/lower (2009 – $2,000 higher lower) had the Australian dollar weakened/strengthened by 10% against the US dollar arising from translation of the US dollar denominated financial instruments. Equity is more sensitive to movements in the Australian dollar/US dollar exchange rates in 2010 than 2009 because of the increased amount of US dollar denominated receivables and payables. The Group's exposure to other foreign exchange movements is not material.
Commodity price risk
The Group is not exposed to future movements in the price of zinc and lead at 30 June 2010 following closure of the Hellyer Zinc Concentrate Project on 8 September 2008.
(iv) Cash flow and Fair value interest rate risk The Group's statement of comprehensive income is affected by changes in interest rates due to the impact of such changes on interest income and interest expense from bank balances and interestbearing loans respectively.
The Group's policy is to obtain the most favourable interest rates available. The Group has not used any derivatives to mitigate its interest rate risk exposure.
The following sensitivity analysis is based on the interest rate risk exposures in existence at the balance sheet date.
At 30 June 2010 if interest rates had moved, as illustrated in the table below, with all other variables held constant, the affect to post tax profit and equity is listed as follows:
Sensitivity disclosure analysis Post Tax Profit Equity Higher/(Lower) Higher/(Lower) 2010 2009 2010 2009 $'000 $'000 $'000 $'000 Consolidated +1% (100 Basis points) (6) - (6) - -.5% (50 Basis points) 3 - 3 -
(d) Fair value
The fair values of financial assets and financial liabilities are determined as follows:
- the fair value of financial assets and financial liabilities with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices; and
- the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.
The Hellyer royalty has been valued at a fair value of $2.756 million.
The Consolidated entity considers that the carrying amount of financial assets and financial liabilities recorded in the financial statements to be a fair approximation of their fair values, because of the short-term nature of the financial instruments and the expectation that they will be paid in full.
Financial Instruments Measured at Fair Value
The financial instruments recognised at fair value in the statement of financial position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in making the measurements.
The fair value hierarchy consists of the following levels:
- quoted prices in active markets for identical assets or liabilities (Level 1);
- inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and
- inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
| Level 1 | Level 2 | Level 3 | Total | |
|---|---|---|---|---|
| Consolidated | $'000 | $'000 | $'000 | $'000 |
| 2010 | ||||
| Financial assetsFinancial assets at fair value through profit orloss: | ||||
| Available for sale financial assets | ||||
| - unlisted investments | - | 26 | 1,137 | 1,163 |
| - | 26 | 1,137 | 1,163 | |
| Level 1 | Level 2 | Level 3 | Total | |
| Consolidated | $'000 | $'000 | $'000 | $'000 |
| 2009 | ||||
| Financial assetsFinancial assets at fair value through profit orloss: | ||||
| Available for sale financial assets | ||||
| - unlisted investments | - | 26 | - | 26 |
| - | 26 | - | 26 |
(e) Debt/Equity Management
The Group funds its exploration, development and operating activities using both debt and equity. The mix of debt and equity is determined by consideration of regulatory, commercial and risk factors as well as tax efficiencies and the impact on earnings per share. The Group prepares detailed medium to long term cash forecasts and determines funding requirements accordingly. Equity is ordinary shares, not preference capital.
34 Related party transactions
(a) Parent entities
The parent entity within the Group is Intec Ltd.
(b) Subsidiaries
Interests in subsidiaries are set out in 36.
(c) Key management personnel
Disclosures relating to key management personnel are set out in note 30. There were no outstanding loans with key management personnel.
(d) Transactions with subsidiaries
The following transactions occurred with related parties:
| 2010$ | 2009$ | |
|---|---|---|
| (i)RoyaltiesA subsidiary, Intec Copper Pty Ltd (ICPL) charged royalty fees to anothersubsidiary, Intec Envirometals Pty Ltd (IEM) formerly Intec Hellyer Metals PtyLtd, for the use of technology developed by ICPL in the construction andoperation of the Burnie demonstration plant by IEM. | 500,000 | 755,621 |
| (ii)InterestIntec Ltd charged interest on its loans to subsidiaries during the year. Theinterest rate applicable to intercompany loans is the ATO benchmark interestrate. | ||
| Intec Copper Pty Ltd | 436,577 | 690,777 |
| Intec Envirometals Pty Ltd | 2,638,259 | 4,066,485 |
| Intec Metals Recycling Pty LtdIntec Zeehan Residues Pty Ltd | 29,48832,021 | 23,09148,624 |
| (e)Loans to subsidiaries | ||
| 2010 | 2009 | |
| $ | $ | |
| Beginning of the year | 51,977,867 | 46,971,219 |
| Loans advanced/(received) | 1,844,032 | 177,670 |
| Interest charged | 3,136,345 | 4,828,978 |
| End of year | 56,958,244 | 51,977,867 |
| Less provision for doubtful debts | (56,958,244) | (51,977,867) |
| Carrying value at end of year | - | - |
| Movement in provision for doubtful debts | ||
| Beginning of year | 51,977,867 | 6,969,710 |
| Provided during year | 4,980,377 | 45,008,157 |
| End of year | 56,958,244 | 51,977,867 |
Provisions for doubtful debts have been raised in relation to outstanding balances, and an expense has been recognised in respect of debts due from subsidiaries, which may be considered doubtful based on the net assets of each subsidiary.
(f) Transactions with associates (g) Transactions with joint venture Cash calls 2010 $ 2009 $ Cash calls made in respect of operating expenses of the Hellyer Zinc Concentrate Joint Venture by Intec Hellyer Metals Pty Ltd (IHM). - 1,300,000 Bass Metals Ltd 2010 $ 2009 $ Intec Hellyer Metals Pty Ltd received payments from Bass Metals Ltd relating to the provision of various services at the Hellyer mine site and director's fees and expenses. - 13,606
(h) Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates, except that there are no fixed terms for the repayment of loans between the parties. The average interest rate on loans during the year was 5.75% (2009 – 9.45%). Outstanding balances are unsecured and are repayable in cash.
35 Parent entity disclosures
(a) Financial position
| 2010 | 2009 | ||
|---|---|---|---|
| $'000 | $'000 | ||
| Assets | Current assets | 218 | 1,951 |
| Non current assets | 1,299 | 160 | |
| Total assets | 1,517 | 2,111 | |
| Liabilities | |||
| Current liabilities | 1,184 | 582 | |
| Non current liabilities | 873 | 84 | |
| Total liabilities | 2,057 | 666 | |
| Equity | |||
| Issued capital | 69,285 | 67,060 | |
| Accumulated losses | (72,310) | (68,100) | |
| Reserves | |||
| Option expense reserve | 2,485 | 2,485 | |
| Total equity | (540) | 1,445 | |
| (b) | Financial performance | ||
| 2010 | 2009 | ||
| $'000 | $'000 | ||
| Loss for the year | (4,211) | (43,268) | |
| Other comprehensive income | - | - | |
| Total comprehensive loss | (4,211) | (43,268) | |
| (c) | Guarantees entered into by the parent entity in relation to the debts of its subsidiaries | ||
| 2010 | 2009 | ||
| $'000 | $'000 | ||
| Guarantee provided under the deed of cross guarantee | |||
| with each subsidiary | - | - | |
| (d) | Contingent liabilities of the parent entity | ||
| 2010 | 2009 | ||
| $'000 | $'000 | ||
| Contingent liabilities | - | - | |
| (e) | Commitments for the acquisition of property, plant and equipment by the parent entity | ||
| 2010 | 2009 | ||
| $'000 | $'000 | ||
| Property, plant and equipmentNot longer than one year | - | - | |
| Longer than one year and not longer than five years | - | - | |
| Longer than five years | - | - | |
36 Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(s):
| Country of | ||||
|---|---|---|---|---|
| Name of entity | incorporation | Class of shares | Equity holding | |
| 2010 | 2009 | |||
| Investments held by Intec Ltd | % | % | ||
| Intec Copper Pty Ltd | Australia | Ordinary | 100 | 100 |
| Intec Envirometals Pty Ltd | Australia | Ordinary | 100 | 100 |
| Intec International Projects Pty Ltd | Australia | Ordinary | 50 | 50 |
| Intec Metals Recycling Pty Ltd | Australia | Ordinary | 100 | 100 |
| Investments held by Intec Envirometals Pty Ltd | ||||
| Intec Zeehan Residues Pty Ltd (formerly Encore | ||||
| Metals NL) | Australia | Ordinary | 100 | 100 |
Intec Ltd has the power to govern the financial and operating policies of Intec International Projects Pty Ltd so as to obtain benefits from its activities.
37 Investments in associates
(a) Carrying amounts
Information relating to associates is set out below.
| Name of company | Principal activity | Ownership interest | Consolidated | ||
|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | ||
| % | % | $'000 | $'000 | ||
| Listed | |||||
| Bass Metals Ltd | Minerals Exploration | - | - | - | - |
| UnlistedIntec Exploration | |||||
| Pty Ltd | Minerals Exploration | - | - | - | - |
Each associated company is incorporated in Australia and its reporting date is 30 June.
| (b)Movements in carrying amounts | 2010$'000 | 2009$'000 |
|---|---|---|
| Carrying amount at the beginning of the financial year | - | 4,069 |
| Acquisition of shares in associate | - | - |
| Share of capital raising costs | - | - |
| Share of increase in reserves | - | 24 |
| Share of gains/(losses) after income tax | - | 823 |
| Impairment of investment | - | (2,709) |
| Sale of Investment | - | (2,207) |
| Carrying amount at the end of the financial year (shown as investment at cost) | - | - |
| (c)Fair value of listed investments in associates | 2010 | 2009 |
| $'000 | $'000 | |
| Bass Metals Ltd | - | - |
| (d)Share of associates' profits/(losses)Profit/(loss) before income tax | - | 823 |
| Income tax expense | - | - |
| Profit/(loss) after income tax | - | 823 |
Group's share of:
(e) Summarised financial information of associates
| Assets$'000 | Liabilities$'000 | Revenues$'000 | Profit/Loss$'000 | |
|---|---|---|---|---|
| 2010 | ||||
| Bass Metals Ltd | - | - | - | - |
| Intec Exploration Pty Ltd | - | - | - | - |
| 2009 | ||||
| Bass Metals Ltd | - | - | - | - |
| Intec Exploration Pty Ltd | - | - | - | - |
38 Investments in joint ventures
Jointly controlled operation
A subsidiary, Intec Hellyer Metals Pty Ltd, in December 2006 entered into an unincorporated joint venture with Polymetals (Hellyer) Pty Ltd called the Hellyer Zinc Concentrate Joint Venture to process tailings through the Hellyer Mill to produce metal in concentrate. The subsidiary had a 50% participating interest in this Joint Venture and was entitled to 50% of its output of metal in concentrate. The Joint Venture ceased on 31 July 2008 and the Group assumed full ownership and operational control from 1 August 2008. Final settlement of the joint venture occurred prior to 30 September 2008, resulting in a net payment by the Group of $700,000 to Polymetals (Hellyer) Pty Ltd. In addition, Polymetals (Hellyer) Pty Ltd retained certain rights to receive additional payments if certain specific assets are sold for total consideration above an agreed amount. These rights have subsequently expired. The Group's interests in the assets employed in the Joint Venture are included in the consolidated statement of financial position, in accordance with the accounting policy described in note 1(s), under the following classifications:
| Consolidated | ||
|---|---|---|
| 2010 | 2009 | |
| $'000 | $'000 | |
| Current assets | ||
| Cash and cash equivalents | - | - |
| Receivables | - | - |
| Inventories | - | - |
| Other current assets | - | - |
| Total current assets | - | - |
| Liabilities | ||
| Trade creditors | - | - |
| Provisions | - | - |
| Total liabilities | - | - |
For capital expenditure commitments relating to the Hellyer Zinc Concentrate Joint Venture refer to note 32(c).
39 Events occurring after the balance sheet date
Victorian Galvanising Project
The Company announced on 28 July 2010 that EPA Victoria had approved the commencement of Phase 2 work related to the technology and plant development programme.
Testwork Agreements
Intec signed formal agreements with a large Middle Eastern minerals company and with AngloGold Ashanti. Together the two contracts will yield approximately US$300,000 in testwork fees over the next six months.
Extraordinary General Meeting
Intec held an extraordinary general meeting on 30 June 2010 to approve the following resolutions:
-
- Ratification of the La Jolla convertible note facility;
-
- The issue of shares to La Jolla; and
-
- A 10:1 share consolidation.
All resolutions were passed and in relation to resolution 3, Intec's post consolidation shares resumed trading on the Australian Securities Exchange (ASX) on 16 July 2010.
Partial Conversion of La Jolla Convertible Note Since 30 June 2010, La Jolla has converted US$360,585 of the principal amount outstanding under the convertible note facility and has been issued 29,176,481 Intec shares. The unconverted principal amount of the convertible note at the date of this report is US$539,291.
No other matters or circumstances have arisen since 30 June 2010 that have significantly affected or may significantly affect the Group's operations in future financial years, or the results of those operations in future financial years, or the Group's state of affairs in future financial years.
These financial statements are authorised by the Board of Directors on 29 September 2010.
40 Loss per share
| Consolidated | ||
|---|---|---|
| 2010 | 2009 | |
| Cents | Cents | |
| (a) Basic loss per share | ||
| (Loss) per share from continuing operations | ||
| attributable to the ordinary equity holders of the company | (0.49) | (1.82) |
| Profit/(Loss) Earnings per share from discontinued operations | 0.29 | (1.24) |
| Total (Loss) per shareattributable to the ordinary equity holders of the company | (0.20) | (3.06) |
| (b)Diluted loss per share | ||
| Diluted (Loss) per share from continuing operations | ||
| attributable to the ordinary equity holders of the company | (0.49) | (1.82) |
| Diluted (Loss) Earnings per share from discontinued operationsDiluted loss per share is not reflected for continuing operations and discontinued | 0.29 | (1.24) |
| operations as a result of its anti-dilutive nature. Anti dilutive options on issue | ||
| not used in the EPS calculation were 18,260,000. | ||
| Total Diluted (Loss) per share | ||
| attributable to the ordinary equity holders of the company | (0.20) | (3.06) |
| (c)Reconciliations of loss used in calculating earnings per shareBasic loss per share | ||
| Loss attributable to the ordinary equity holders of the company used in | ||
| calculating basic loss per share | ||
| from continuing operations | (4,439) | (12,320) |
| from discontinued operations | 2,659 | (8,365) |
| (1,780) | (20,685) | |
| Diluted loss per share | ||
| Diluted Loss attributable to the ordinary equity holders of the company used in | ||
| calculating basic loss per share | ||
| from continuing operations | (4,439) | (12,320) |
| from discontinued operations | 2,659 | (8,365) |
| (1,780) | (20,685) | |
| (d)Weighted average number of shares used as the denominator | ||
| 2010 | 2009 | |
| Number | Number | |
| Weighted average number of ordinary shares used as the denominator in | ||
| calculating basic and diluted loss per share | 897,212,630 | 676,414,778 |
| (e)Information concerning the classification of securities | ||
| Diluted loss per shareOptions | ||
| Potential ordinary shares being the balance of theOptions granted to employees under the Intec |
convertible note at balance date and options granted at balance date are not considered dilutive as the conversion of these components to equity would result in a decrease in the net loss per share.
Options granted to employees under the Intec Option Plan and to other entities have not been included in the determination of diluted loss per share. No options have been included in the determination of basic loss per share. Details relating to the options are set out in note 27.
41 Share based payments
(a) Employee Option Plan
The establishment of the Intec Option Plan was approved by shareholders at the 2001 Annual General Meeting. All Directors, employees and consultants are eligible to participate in the Intec Option Plan.
Options are granted under the Intec Option Plan for no consideration. Options are granted for a five year period and vest immediately unless otherwise stated. Options granted under the Intec Option Plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share. The exercise price of the options is the current market price on the date the options are granted as determined by the Board.
The share based options are equity settled.
Set out below are summaries of options granted under the plan and which have not lapsed:
| Grant date | Expiry date | Exerciseprice1 | Value per optionat grant date2 | Date exercisable4 |
|---|---|---|---|---|
| 25 September 2006 | 30 August 2011 | $0.1013 | $0.0670 | 25 September 2006 |
| 15 November 2006 | 30 August 2011 | $0.1013 | $0.1299 | 15 November 2006 |
| 14 November 2007 | 25 September 2012 | $0.1413 | $0.054 | 14 November 2007 |
| 31 January 20083 | 25 September 2012 | $0.1413 | $0.071 | 31 January 2008 |
1 Exercise prices have been adjusted from original exercise prices at the grant date as a consequence of the Company undertaking entitlement issues to all shareholders since the grant date of options as provided for in the terms and conditions of the Intec Option Plan. In addition, the exercise prices have not been adjusted to reflect the 10:1 consolidation of shares approved at an Extraordinary General Meeting held on 30 June 2010.
2 Value per option at grant date have not been adjusted reflect the 10:1 consolidation of shares approved at an Extraordinary General Meeting held on 30 June 2010.
3 These options will not vest, and may not be exercised, until a Trigger Price Threshold of $0.25 is met. To meet the Trigger Price Threshold, the price of Intec Ltd shares traded on the ASX must have closed above $0.25 for 20 consecutive trading days or Intec must have received a bona fide offer for a majority or all of its shares whether by takeover or scheme of arrangement. During the year ended 30 June 2010 the trigger price threshold was not achieved.
4 None of these options either lapsed or were exercised during the year ended 30 June 2010.
The weighted average share price at the date of options exercised during the year ended 30 June 2010 was $Nil (2009 – $Nil) as no options were exercised.
The weighted average remaining contractual life of share options outstanding at the end of the period was 1.82 years (2009 – 0.78 years).
The assessed fair value at grant date of options granted under the Intec Option Plan is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using option valuation models that take into account the exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected
Shares provided on exercise of remuneration options
price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
There were no options granted during the years ending 30 June 2009 and 30 June 2010.
Payment for services rendered of $135,000 provided by the Principal American Liaison in connection with the listing and trading of Intec Ltd securities on the International OTCQX was satisfied by the issue of 9,074,502 INL shares at $0.0149 each. The value of the shares issued was based on the value of services rendered.
There were no employee options granted during the years ending 30 June 2009 and 30 June 2010.
No ordinary shares (2009- Nil) in the Company were provided as a result of the exercise of remuneration options to Directors.
(b) Expenses arising from share based payment transactions
Total expenses arising from share based payment transactions recognised during the period were as follows:
| Consolidated | ||
|---|---|---|
| 2010 | 2009 | |
| $'000 | $'000 | |
| Options issued under Intec Option Plan 1 | - | - |
| - | - |
1 Recognised as employee benefit expense in the statement of comprehensive income.
42 Non cash investing and financing activities
| Consolidated | ||
|---|---|---|
| 2010$'000 | 2009$'000 | |
| Shares issued as consideration for completion of stage one of subscriptionagreement to associates of Green Resources (Asia Pacific) Holding Ltd. | 325 | - |
| Shares issued as consideration services rendered in connection with the listingand trading of INL securities on the International OTCQX. | 135 | - |
| The Group repaid the working capital facility with Macquarie Bank Limitedfollowing settlement of the sale of the Hellyer Mill in August 2009. | ||
| 2010$'000 | 2009$'000 | |
| SecuredWorking capital facility | - | 3,650 |
| Total amounts advanced under working capital facility as at 30 June 2010Total current borrowings | - | 27 |
| - | 27 |
The working capital finance facility was repayable at call and had an interest rate of 8.0% per annum in 2009.
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The working capital finance facility was repaid in full and cancelled in August 2009 following settlement of the sale of the Hellyer assets to Bass Metals Ltd.
(i) Interest rate risk exposures
The Group's exposure to interest rate risk arises predominantly from liabilities bearing variable interest rates. Upon cancellation of the working capital finance facility in August 2009 all security was released by Macquarie
Bank Limited.
(ii) Fair values
The fair values of borrowings at balance date equal the carrying values.
| Consolidated | ||
|---|---|---|
| 2010 | 2009 | |
| The carrying amounts of assets pledged as security forcurrent borrowings: | $'000 | $'000 |
| Current | ||
| Fixed and Floating charge | ||
| Cash and cash equivalents | - | 1,990 |
| Trade and other receivables | - | 326 |
| Inventories | - | 23 |
| Non current assets classified | ||
| as held for saleTotal current assets pledged as security | - | 3,715 |
| - | 6,054 | |
| Non-current | ||
| Fixed and Floating charge | ||
| Plant and equipment | ||
| - | 4,199 | |
| Total non-current assets pledged as security | ||
| - | 4,199 | |
| Total assets pledged as security | - | 10,253 |
| 43 | Reconciliation of (loss)/profit after income tax to net cash flows from operating activities | |
|---|---|---|
| ---- | ---------------------------------------------------------------------------------------------- | -- |
| Consolidated | |||
|---|---|---|---|
| 2010 | 2009 | ||
| $'000 | $'000 | ||
| Operating (loss) after income tax | (1,780) | (20,685) | |
| Non cash items and non operating cash flows | |||
| included in statement of comprehensive income | |||
| Bad and doubtful debts expense | 218 | 228 | |
| Administration expenses | 135 | - | |
| Depreciation and amortisation | 807 | 833 | |
| Interest expense – convertible note | 117 | ||
| Impairments expense | 121 | - | |
| Royalty as part of loss from discontinued operations | (2,756) | - | |
| Depreciation as part of loss from discontinued operations | - | 977 | |
| Estimate cost to sell non current assets held for sale | - | 295 | |
| Diminution in value of environmental bonds | 22 | 4,404 | |
| Exploration expenditure written off | - | 146 | |
| Hellyer assets impairment expense | - | 4,378 | |
| Diminution in value of investments in associates | - | 2,709 | |
| Net (profit)/loss on sale of non current assets | - | 34 | |
| Net profit on sale of investments | - | (63) | |
| Equity share of (profits)/losses of associated entities | - | (823) | |
| (3,116) | (7,567) | ||
| Changes in assets and liabilities | |||
| Decrease/(increase) in receivables | 52 | 2,081 | |
| Decrease/(increase) in inventories | (15) | 3,207 | |
| Increase/(decrease) in trade creditors | (445) | (2,937) | |
| Decrease/(increase) in provisions | 35 | 3,648 | |
| Increase/(decrease) in deferred revenue | - | (4,610) | |
| (373) | 1,389 | ||
| Net cash (outflow) from operating activities | (3,489) | (6,178) | |
| 44 | Auditor's remuneration | ||
| Consolidated | |||
| 2010 | 2009 | ||
| $ | $ | ||
| Assurance services | |||
| a. | Audit services | ||
| Audit and review of financial reports and other audit work under the | |||
| Corporations Act 2001 | |||
| WHK Horwath Sydney | 68,000 | - | |
| PricewaterhouseCoopers | - | 112,000 | |
| Total remuneration for audit services | 68,000 | 112,000 | |
| b. | Non audit services | ||
| Tax compliance services, including review of company income tax | |||
| returns | |||
| PricewaterhouseCoopers | - | 19,000 | |
| Total remuneration for non audit services | - | 19,000 | |
45 Company details
The registered office and principle place of business is Level 3, 2 Elizabeth Plaza, North Sydney NSW 2060.
Directors' Declaration
In the directors' opinion:
- (a) the financial statements and notes set out on pages 22 to 69 are in accordance with the Corporations Act 2001, including:
- (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
- (ii) giving a true and fair view of the company's and Group's financial position as at 30 June 2010 and of its performance for the financial year ended on that date; and
- (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and
- (c) the remuneration disclosures set out on pages 14 to 19 of the directors' report comply with Accounting Standard AASB 124 Related Party Disclosures and the Corporations Regulations; and
- (d) The financial statements comply with International Financial Reporting Standards; and
- (e) The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Philip R Wood Director Sydney 29 September 2010
Schedule of Tenements
The Group held at 30 June 2010 the following tenements:
| Tenementnumber | Tenementname | Expirydate | AreaKm2 | Securitydepositsheld$'000 | Annualexpenditurecommitments$'000 |
|---|---|---|---|---|---|
| Tenements held by Intec Zeehan Residues Pty Ltd | |||||
| RetentionLicenceRL 3/1996 | Zeehan | 28 March 2012 | 1.00 | 5 | - |
Adam Randall, Manager of the Burnie Research Facility, at the Zeehan residue stockpile
Shareholder Information
The shareholder information set out below was applicable as at 28 September 2010.
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
| Class of equity securityOrdinary shares | ||||
|---|---|---|---|---|
| Number of shareholders | Number of shares | |||
| 1 | - | 1,000 | 653 | 366,106 |
| 1,001 | - | 5,000 | 1,002 | 2,816,440 |
| 5,001 | - | 10,000 | 548 | 4,352,334 |
| 10,001 | - | 100,000 | 939 | 32,496,035 |
| 100,001 and over | 237 | 95,733,511 | ||
| 3,379 | 135,764,426 |
At the prevailing market price of shares ($0.009) there were 2,988 shareholders with less than a marketable parcel of ordinary shares worth $500 (being 55,556 shares).
B. Equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
| Name | Ordinary sharesNumber held | Percentage ofissued shares |
|---|---|---|
| JP MORGAN NOMINEES AUSTRALIA LIMITED | 6,372,824 | 4.694 |
| ORIAN HOLDING CORP | 4,117,484 | 3.033 |
| LA JOLLA COVE INVESTORS INC | 4,053,874 | 2.986 |
| LIMESTONE ENTERPRISES PTY LTD | 2,582,200 | 1.902 |
| MR JOSEPH JAAJAA | 2,050,000 | 1.510 |
| MR STEPHEN SCANLAN | 1,685,000 | 1.241 |
| MR PAUL MICHAEL BUTCHER | 1,500,000 | 1.105 |
| MR ANDREW SAUL TELKES | 1,430,000 | 1.053 |
| MR DENIS PASQUALINI & MRS HADY PASQUALINI | 1,400,000 | 1.031 |
| MR KHA NGOC TRAN | 1,356,562 | 0.999 |
| HENIAN ZOU | 1,299,567 | 0.957 |
| DR LEON EUGENE PRETORIUS | 1,250,500 | 0.921 |
| COMSEC NOMINEES PTY LIMITED | 1,205,013 | 0.888 |
| MRS MARIA MARINA THYSSEN | 1,086,106 | 0.800 |
| MR PHILIP JACQUES | 1,000,034 | 0.737 |
| THE GENUINE SNAKE OIL COMPANY PTY LTD | ||
| 1,000,000 | 0.737 | |
| MR ALLAN RONALD JOHNSON & MRS CECILY MARGARET JOHNSON | 1,000,000 | 0.737 |
| OREGON NOMINEES PTY LTD | 998,500 | 0.735 |
| ALLIANCES RESOURCES LIMITED | 954,264 | 0.703 |
| SELECT INVESTMENTS SUPER PTY LTD | 950,000 | 0.700 |
| Total of Top 20 share holdings | 37,291,928 | 27.469 |
| Other shareholders | 98,472,498 | 72.531 |
| Total ordinary shares | 135,764,426 | 100.000 |
C. Substantial holders
Substantial holders in the company are set out below:
| Substantial Shareholder (extracts from Substantial ShareholderRegister) | Number held | ShareholdingPercentage |
|---|---|---|
| Ordinary shares | ||
| No substantial shareholders |
Shareholder Information
D. Voting rights
The voting rights attaching to each class of equity securities are set out below:
(a) Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.
(b) Options No voting rights.
E. Summary of options issued
| No ofoptions | No ofHolders | % OptionsIssued | |
|---|---|---|---|
| Options expiring 30 August 2011 with an exercise price of $0.1013 | 721,000 | 22 | |
| Option holders with more than 20% of above class | Nil | - | 0% |
| Options expiring 27 September 2012 with an exercise price of $0.1413 | 470,000 | 23 | |
| Option holders with more than 20% of above class | - | - | 0% |
| Options expiring 27 September 2012 with an exercise price of $0.1413with a Trigger Price Threshold of $0.25 | 635,000 | 7 | |
| Option holders with more than 20% of above class | 250,000 | ||
| Philip Ronald Wood | 39.37% |
These options are unquoted equity securities
Corporate Governance Statement
The Board of Directors of the Company (the Board) is responsible for the corporate governance of the Company and its controlled entities.
Corporate governance is a matter of high importance in the Company and is undertaken with due regard to all of the Company's stakeholders and its role in the community.
The Board periodically reviews its policies and procedures against the 'Principles of Good Corporate Governance and Best Practice Recommendations' published by the ASX Corporate Governance Council.
ASX BEST PRACTICE RECOMMENDATIONS
The table below contains each of the ASX Best Practice Principles and Guidelines. Where the Company has complied with the principles and guidelines during the reporting period this is indicated with a tick ;. Where the Company has Unless explicitly stated otherwise the Directors believe that the Company complies with the major principles and the underlying guidelines.
The Board has approved and adopted the following policies and charters with which directors and management are required to comply, and which, inter alia, contain the information recommended by the ASX Best Practice Recommendations Guidelines to be made available to shareholders/investors. These policies and Charters can be read on the Company's website www.intec.com.au under 'About Us – Corporate Governance'.
failed to comply with a particular recommendation this is indicated with a cross : and the Company's reasons are set out below the corresponding guideline within the table.
| Note | Complied | |
|---|---|---|
| Principle 1 | To lay solid foundations for management and oversight | |
| Guideline 1.1 | Formalise and disclose the functions reserved to the Board and thosedelegated to management and disclose those functions. | ; |
| Guideline 1.2 | Disclose the process for evaluating the performance of seniormanagement. | ; |
| Guideline 1.3 | Provide the information set out in Guide to reporting on Principle 1. | ; |
| Principle 2 | Structure the Board to add value | |
| Guideline 2.1 | A majority of the Board should be independent directors. | ; |
| Guideline 2.2 | The Chairman should be an independent director. | ; |
| Guideline 2.3 | The roles of Chairman and Chief Executive Officer/Managing Directorshould not be exercised by the same individual. | ; |
| Guideline 2.4 | The Board should establish a nomination committee. | ; |
| Guideline 2.5 | Disclose the process for evaluating the performance of the board, itscommittees and individual directors. | ; |
| Guideline 2.6 | Provide the information set out in Guide to reporting in Principle 2. | ; |
| During the year an executive director retired and was appointed a nonexecutive director. The majority of the Board are now independentdirectors. | ||
| Principle 3 | Promote ethical and responsible decision making | |
| Guideline 3.1 | Establish a code of conduct and disclose the code or a summary of thecode to guide the Directors, the Chief Executive Officer (or equivalent), theChief Financial Officer (or equivalent) and any other key executives as to: | ; |
| 3.1.1 The practices necessary to maintain confidence in the Company'sintegrity; and | ; | |
| 3.1.2 The practices necessary to take into account their legal obligationsand the reasonable expectations of their stakeholders; and | ; | |
| 3.1.3 The responsibility and accountability of individuals for reporting andinvestigating reports of unethical practices. | ; |
| Corporate Directory | ||
|---|---|---|
| Guideline 3.2 | Establish a policy concerning trading in company securities by directors,officers and employees and disclose the policy or a summary of that policy. | ; |
| Guideline 3.3 | Refer to policy set out below.Provide the information set out in Guide to reporting on Principle 3. | ; |
| Principle 4 | Safeguard integrity in financial reporting | |
| Guideline 4.1 | The Board should establish an Audit Committee. | ; |
| ; | ||
| Guideline 4.2 | Structure the Audit Committee so that it consists of:•non-executive Directors only; | ; |
| a majority of independent directors;• | ; | |
| •an independent Chairman who is not the Chairman of the Board; and | ; | |
| •at least 3 members | ; | |
| Guideline 4.3 | The Audit Committee should have a formal Charter. | ; |
| Guideline 4.4 | Provide the information set out in Guide to reporting on Principle 4. | ; |
| Principle 5 | Make timely and balanced disclosure | |
| Guideline 5.1 | Establish written policies and procedures designed to ensure compliancewith ASX Listing Rules disclosure requirements and to ensureaccountability at a senior management level for that compliance. | ; |
| Guideline 5.2 | Provide the information set out in Guide to reporting on Principle 5. | ; |
| Principle 6 | Respect the rights of shareholders | |
| Guideline 6.1 | Design and disclose a communications strategy to promote effectivecommunication with shareholders and encourage effective participation atgeneral meetings. | ; |
| Guideline 6.2 | Provide the information set out in Guide to reporting on Principle 6. | ; |
| Principle 7 | Recognise and manage risk | |
| Guideline 7.1 | The Board or appropriate board committee should establish policies on risk | ; |
| Guideline 7.2 | oversight and management and disclose a summary of those policies.The Board should require management to design and implement the riskmanagement and internal control system to manage the company'smaterial business risks and report to it on whether those risks are being | ; |
| managed effectively. The board should disclose that management hasreported to it as to the effectiveness of the company's management of itsmaterial business risks. | ||
| Guideline 7.3 | The board should disclose whether it has received assurance from the CEO(or equivalent) and the CFO (or equivalent) that the declaration providedin accordance with s.295A of the Corporations Act 2001 is founded on asound system of risk management and internal control and that the systemis operating effectively in all material respects in relation to financialreporting risks. | ; |
| Guideline 7.4 | Provide the information indicated in the Guide to reporting on Principle 7. | ; |
| Principle 8 | Remunerate fairly and responsibly | |
| Guideline 8.1 | The Board should establish a remuneration committee. | ; |
| Guideline 8.2 | Clearly distinguish the structure of Non-executive Directors' remunerationfrom that of executive directors and senior executives. | ; |
| Guideline 8.3 | Provide the information set out in Guide to reporting on Principle 8. | ; |
Securities Trading Policy
The Company's Securities Trading Policy is set out on the website www.intec.com.au as below.
Directors, employees and key consultants may only deal in the Company's shares during 'window periods' nominated for this purpose from time to time by the Managing Director and Chief Executive Officer, or failing him the Chairman. However, Directors, employees and key consultants are prohibited from buying or selling Intec shares at any time if they are aware of price sensitive information that has not been made public.
Mr Philip R Wood, Managing Director & Chief Executive Officer
Corporate Directory
Directors
Chairman Trevor A Jones Managing Director and Chief Executive Officer Philip R Wood Technical Director A John Moyes Finance Director and Chief Financial Officer Kieran G Rodgers Non-executive Director James R G Bell
Company Secretaries
Robert J Waring David W Clark
Senior Management
Chief Operating Officer Brian A Banister Corporate Development Manager Dave L Sammut Head of Technology Andrew R Tong
Notice of Annual General Meeting
The Annual General Meeting of Intec Ltd will be held at Intec's corporate headquarters Level 3, 2 Elizabeth Plaza North Sydney NSW on Thursday 18 November 2010 at 2:00 p.m.
Registered Office and Corporate Headquarters
Level 3, 2 Elizabeth Plaza PO Box 1507 North Sydney NSW 2059 Australia Telephone: (+61 2) 9954 7888 Facsimile: (+61 2) 8904 0334 Email: [email protected] Website: www.intec.com.au
Intec Envirometals Pty Ltd
PO Box 666 10-12 River Road Burnie TAS 7320 Australia Telephone: (+61 3) 6431 9867 Facsimile: (+61 3) 6431 3629
Intec Envirometals Research Facility 20 River Road
Burnie TAS 7320 Australia Telephone: (+61 3) 6431 1835 Facsimile: (+61 3) 6431 3594
Sydney Laboratory
25 Ethel Ave Brookvale NSW 2100 Australia
Melbourne EAFD Storage Site
433-451 Somerville Road West Footscray VIC 3012 Australia
Share Registry
Registries Limited Level 7, 207 Kent Street Sydney NSW 2000 Australia PO Box R67 Royal Exchange Sydney NSW 1223 Australia Telephone: (+61 2) 9290 9600 Facsimile: (+61 2) 9279 0664 Email: [email protected] Website: www.registriesltd.com.au
Auditors
WHK Horwath Sydney Level 15, 309 Kent Street Sydney NSW 2000 Australia
Legal Advisers
Allens Arthur Robinson Level 28, Deutsche Bank Place Corner of Hunter and Phillip Streets Sydney NSW 2000 Australia
Patent Attorneys
Griffith Hack 100 Miller Street North Sydney NSW 2060 Australia
Stock Exchange and Trading Platform Listings
Intec Ltd shares are listed or traded on the Australian Stock Exchange (Code: INL), the Deutsche Boerse (Code: INF), and (as American Depository Receipts on) the OTCQX/Pink Sheets LLC (Code: ICLJY).
Intec Envirometals
Superior and Sustainable Metals Production
For more information about Intec heavy metal recycling, please contact:
At Head Office
Dave Sammut Corporate Development Manager
Intec Ltd Level 3, 2 Elizabeth Plaza North Sydney NSW 2060 Australia
Phone: +61 2 9954 7888 Fax: +61 2 8904 0334 E-mail: [email protected]
At the Intec Research Facility
Brian Banister Chief Operating Officer
Intec Envirometals Pty Ltd 10-12 River Rd, Burnie, Tasmania 7320 Australia
Phone: +61 3 6431 9867 Fax: +61 3 6431 3629 E-mail: [email protected]
www.intec.com.au
Types of Waste for Recycling
Intec's technology has the capacity to recycle metal-bearing and some non-metal bearing inorganic wastes, producing useful mineral products from materials that would usually be disposed to landfill
Industrial waste feedstocks should have the following properties:
- typical heavy metals : Zn, Pb, Ni, Sn, Cu;
- contaminants As, Bi, Cd, Cr, F, Hg, etc on sample testing;
- solids and sludges may be both acceptable;
- no organic content paints, oils, dioxins, etc;
- foreign matter content (such as gloves and debris) increase physical handling costs
Examples of suitable materials
- Plating industry wastes
- Galvanising wastes
- Metal sludges (hydroxides, carbonates, sulphates, etc)
- Metal wastewaters (chlorides, fluorides, sulphates, ammonia, etc)
- Acid mine drainage and mineral residues
