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STRIKE RESOURCES LIMITED Annual Report 2012
65855_rns_2012-09-25_3c654beb-d9ab-4a15-8adf-b2701631a7a0.pdf
Annual Report
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Annual Financial Report
Strike Resources Limited and its controlled entities for the year ended 30 June 2012
Strike Resources Limited ASX Code: SRK Share Registry A.B.N. 94 088 488 724
Local T | 1300 974 700
Level 2, 160 St Georges Terrace Advanced Share Registry Services Perth, Western Australia 6000 Suite 2, 150 Stirling Highway Nedlands Western Australia 6009
T | + 61 8 9324 7100 T | + 61 8 9389 8033 F | + 61 8 9324 7199 F | + 61 8 9389 7879 E | [email protected] E | [email protected] W | www.strikeresources.com.au W | www.advancedshare.com.au
| CONTENTS1 |
|---|
| CORPORATE DIRECTORY2 |
| DIRECTORS' REPORT3 |
| AUDITOR'S INDEPENDENCE DECLARATION 19 |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME20 |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION21 |
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY22 |
| CONSOLIDATED STATEMENT OF CASH FLOWS 23 |
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24 |
| DIRECTORS' DECLARATION59 |
| INDEPENDENT AUDITOR'S REPORT60 |
Corporate Directory
| Directors | Mr Malcolm RichmondChairman / Non-Executive Director |
|---|---|
| Mr Ken HellstenManaging Director | |
| Mr Matthew HammondNon-Executive Director | |
| Mr William JohnsonNon-Executive Director | |
| Ms Samantha ToughNon-Executive Director | |
| Chief Financial Officer | Mr Julian Tambyrajah |
| Company Secretary | Mr Stephen Gethin |
| Registered Office | Level 2, 160 St George's TerracePerth, Western Australia, 6000Telephone:+61 8 9324 7100Facsimile:+61 8 9324 7199Local telephone: 1300 974 700 |
| Web Site | www.strikeresources.com.au |
| Information Email | [email protected] |
| Share Registry | Advanced Share Registry ServicesSuite 2, 150 Stirling HighwayNedlands, Western Australia, 6009Telephone:+61 8 9389 8033Facsimile:+61 8 9389 7871Email:[email protected]Website: www.advancedshare.com.au |
| Auditors | BDO Audit (WA) P/L38 Station StreetSubiaco, Western Australia 6008Telephone:+61 8 9382 4600Facsimile:+61 8 9382 4601Website:www.bdo.com.au |
| Solicitors to the Company | AshurstLevel 36, Grosvenor Place225 George StSydney, NSW 2000Telephone:+61 2 9258 6000Facsimile:+61 2 9258 6999Website:www.ashurst.com |
| Stock Exchange Listing | Strike Resource Limited's shares are listed on the AustralianSecurities Exchange ("ASX") |
| ASX Code: SRK |
Directors' Report
Your Directors present their report on the Consolidated Entity consisting of Strike Resources Limited ("Company" or "Strike") and the entities it controlled at the end of, or during, the year ended 30 June 2012.
Directors
The following persons were Directors of Strike during the whole of the financial year and up to the date of this report:
Malcolm Richmond Ken Hellsten Matthew Hammond William Johnson Samantha Tough was appointed as a Director on 23 January 2012 and continues in office at the date of this report.
Principal Activities
The principal activities of the Consolidated Entity during the financial year consisted of the ongoing exploration and evaluation of the Consolidated Entity's interest in the Apurimac and Cusco Iron Ore Projects located in Peru, South America.
In addition, the Consolidated Entity is also involved in the resale of land and its rights in the Berau Thermal Coal Project in Indonesia.
Dividends
No dividends have been paid or declared during the financial year. At the date of this report, no dividend has been recommended for payment in respect of the reporting period.
Review of Operations
Strike Resources is an Australian-listed resources company with two principal projects in the attractive bulk commodities market.
The Apurimac and Cusco Iron Ore Projects are large-scale iron ore projects in southern Perú, with Apurimac the most advanced with a high quality Concept-level Study completed in 2008. The Company is seeking to establish an iron ore mining operation based on its Opaban concessions located at Apurimac.
The Company has strengthened its resource and exploration position in Perú through the acquisition of an additional 6% of Apurimac Ferrum S.A. (AF) - taking Strike to 50% of AF - and entering into a strategic option to acquire a major stake in Cuervo Resources Inc. (Cuervo) which holds high-quality exploration concessions in the Cusco district of southern Perú, and which are complimentary to Strike's own concession interests in the same area.
Strike holds 100% of the rights to mine coal at the Berau Thermal Coal Project in Indonesia, subject to a royalty to the concession owner, through a Co-operation Agreement. The Company is in dispute with the owner over the terms of the agreement and currently negotiating a settlement.
A detailed discussion and analysis of Strike's operations will be set out in the annual report.
Significant Changes in the State of Affairs
During the year the Consolidated Entity continued to implement changes which were the result of a strategic review of the Company's operations.
On 1 July 2011 the Company announced that it had entered into an agreement dated 30 June 2011 with Iron Associates Corporation ("IAC") to purchase IAC's 12% shareholding in Apurimac Ferrum S.A. ("AF"). Key terms of the agreement are as follows:
- Strike acquired IAC's 12% shareholding in AF.
- IAC assigned to Strike a loan of US$ 5.462 million owed by AF to IAC. This loan is convertible to AF shares in July 2012 under the terms of the Settlement Agreement between the AF shareholders.
- IAC held a right, in certain circumstances, to convert its AF shareholding to a royalty from AF's future production. This royalty right was extinguished as a result of the IAC share purchase transaction.
- Strike paid IAC US$1.2m in cash on the execution of the agreement and has issued IAC 9 million Strike shares as consideration under the agreement. These shares represent 6.3% of Strike's issued capital.
Significant Changes in the State of Affairs (continued)
On 19 July 2011 the Company announced that it had entered into an agreement with Canadian explorer, Cuervo Resources Inc. ("Cuervo"), to potentially earn up to 49.2% in Cuervo in return for Strike loaning Cuervo up to 15m Canadian dollars ("C$"). These funds are to be used by Cuervo to undertake advanced exploration activities on their Peruvian iron ore concessions. The program of work to be undertaken has been agreed by both parties. Cuervo is a junior iron ore explorer with concessions in Peru that are complementary to AF's concessions in the Cusco region in southern Peru. Cuervo's main project area, Cerro Ccopane, is 65km south of the city of Cusco and hosts four (4) zones of magnetite mineralisation being the Aurora, Orcopura, Huillque and Bob 1 prospects.
The first tranche of loan funds C$5.25m has been provided to Cuervo and drilling commenced in May 2012. The second tranche of C$9.75m is expected to be called on or about November 2012. Strike has the option whether to provide the second tranche funding.
On 13 October 2011 the Company announced that D&C had exercised an option to acquire 6% of AF shares and US$2.73m of debt which had been previously acquired by Strike in June 2011. The option was part of the IAC transaction (where Strike acquired 12% AF shares plus US$5.462m debt from IAC).
On 9 December 2011 the Company announced that it had substantially reduced AF's work programmes due to a failure to negotiate a financing agreement with D&C Group. At this time and based on budgeted expenditure, it was expected that the current AF loan facility would reach its US$20m limit by about March 2012.
The Company announced on 21 December 2011 that a court action by Millenium Trading against AF (Strike's Peruvian joint venture company) has been dismissed. Millenium sought to invalidate an agreement under which it relinquished options over certain mining concessions which were purchased by AF.
On 14 February 2012 the Company announced an increase in iron ore inferred resources at the Cerro Ccopane Project, Peru (with Strike's interest held via its investment in Cuervo Resources Inc.) of 72 million tonnes at 52.6%. The Cerro Ccopane Project lies with 10km of the Cusco Iron Ore Project owned Apurimac Ferrum SA, a joint venture between Strike and D&C Group.
On 18 May 2012 the Company announced that it had issued a "shootout notice" to its Peruvian partner D&C Group in the AF joint venture pursuant to the Settlement Agreement signed in July 2009. The shootout process provides the Company with a unique opportunity to either move to 100% ownership in AF or to sell its shares and receive repayment of its loans to AF of approximately US$33m (as at May 2012).
Matters Subsequent to the End of the Financial Year
The Company announced on 31 July 2012 that Cuervo had commenced drilling at the Bob 1 prospect at its Cerro Ccopane Project.
On 23 July PMI informally advised Strike that it intends to terminate the agreement, although it has not yet given a formal notice. The Company is assessing its options in relation to this project.
On 15 August the Company announced the results of the initial drill hole completed by Cuervo Resources Inc. (Cuervo) on the "Bob 1" target zone of its Cerro Ccopane iron ore project in southern Perú. The initial drill hole (No. 2, drilled vertically) intersected 182.15 metres (m) of iron mineralisation (from 12.35m to 194.5m) at an average grade of 39.6% iron (Fe) with 23.2% Silica (SiO2), 2.3% Sulphur (S), 0.08% Phosphorous (P), 0.16% Manganese (Mn) and 0.10% Copper (Cu).
On 31 August 2012 Strike announced the results of the next two holes completed by Cuervo Resources Inc. (Cuervo) on the "Bob 1" target zone of its Cerro Ccopane iron ore project in southern Perú. Hole BDH-03, drilled adjacent to the initial hole BDH12-02 but angled at 60° to the south east intersected 156.0 metres (m) of iron mineralisation (from 19.2m to 175.2m) at an average grade of 40.9% Iron (Fe), 23.3% Silica (SiO2), 2.92% Sulphur (S), 0.06% Phosphorous (P), 0.19% Manganese (Mn) and 0.12% Copper (Cu) with higher grade zones of 43.35m of 50.4% Fe and 24.00m of 49.0% Fe.
Hole BDH 12-04 was drilled vertically 100 metres south of BDH-02 and 03 intersected 188.9m of iron mineralisation from 66.1m to 255.0m) at an average grade of 32.6% Fe, with 28.5% SiO2,1.8% S, 0.08% P, 0.23% Mn and 0.06% Cu including 22.50m of 55.9% Fe and 47.35m of 42.5% Fe.
Seven drill holes have been completed to date and results of samples for two of those holes are awaited from the laboratory and will be released once available.
On 6 September 2012 the Company announced that AF had restructured the organisation in line with current programmes and as a precursor to the result of the shootout. The shootout will result in one shareholder owning 100% of AF therefore enabling AF to be consolidated. The cost savings from the restructure are estimated at approximately US$250k per month from the December quarter onwards.
There have been no further changes of significance since then.
Likely Developments and Expected Results of Operations
By the end of the year Strike had given D&C Group a notice triggering the "shootout" process under the Settlement Agreement. On or about 6 August 2012, the Company gave notice to D&C Group of its shootout price, which gave an implied value of US$37m. By 6 October 2012 D&C Group must either provide a superior offer to Strike or accept the offer Strike has made. As a result one party will acquire the other party's AF shares and pay out the debt that AF owns it within 30 days and this will move to 100% of AF. Strike believes it has made a superior offer, and that it is unlikely D&C Group will beat it.
The Company has been in negotiations with its Indonesian partner to settle a long standing dispute. The current status of negotiations is a proposed settlement, where Strike will sell the land, data, reports and rights in relation to the Berau Thermal Coal Project. At the time of writing no documents had been executed, however, Strike was hopeful that this transaction would complete in the short term.
Environmental Regulation
The Consolidated Entity notes the reporting requirements of both the Energy Efficiency Opportunities Act 2006 ("EEOA") and the National Greenhouse and Energy Reporting Act 2007 ("NGERA").
The Energy Efficiency Opportunities Act 2006 requires an affected company to assess its energy usage, including the identification, investigation and evaluation of energy saving opportunities, and to report publicly on the assessments undertaken, including what action the company intends to take as a result.
The Consolidated Entity has determined that it does not operate a recognised facility requiring registration and reporting under the NGERA and, in any event it would fall under the threshold of greenhouse gas emissions required for registration and reporting. Similarly, the Consolidated Entity's energy consumption would fall under the threshold required for registration and reporting under the EEOA.
The Consolidated Entity is not otherwise subject to any particular or significant environmental regulation under either Commonwealth or State legislation. To the extent that any environmental regulations may have an incidental impact on the Consolidated Entity's operations, the Directors are not aware of any breach by the Consolidated Entity of those regulations.
Information on Directors
| Malcolm Richmond | Chairman |
|---|---|
| Appointed | 13 July 2011 |
| Previous positionsheld | Acting Chairman (3 February 2011 to 13 July 2011)Non-Executive director (25 October 2006 to 3 February 2011) |
| Qualifications | BSc Hons (Metallurgy) and B. Comm. Merit (Econs) (New South Wales) |
| Experience | Professor Richmond has 30 years' experience with the Rio Tinto and CRA Groups in a number ofpositions including: Vice President, Strategy and Acquisitions; Managing Director, Research andTechnology; Managing Director, Development (Hamersley Iron Pty Limited) and Director ofHismelt Corporation Pty Ltd. He was formerly Deputy Chairman of the Australian MineralIndustries Research Association and Vice President of the WA Chamber of Minerals and Energy.Professor Richmond has also served as a Member on the Boards of a number of public andgovernmental bodies and other public listed companies. |
| He is a qualified metallurgist and economist with extensive senior executive and board experiencein the resource and technology industries both in Australia and internationally. His specialinterests include corporate strategy and the development of markets for internationally tradedminerals and metals - particularly in Asia. | |
| Professor Richmond is a nominee director on the board of Cuervo Resources Inc. for StrikeResources Limited. | |
| Professor Richmond served as Visiting Professor at the Graduate School of Management andSchool of Engineering, University of Western Australia until January 2012, and is a Fellow of theAustralian Academy of Technological Sciences & Engineering, a Fellow of Australian Institute ofMining and Metallurgy and a Member of Strategic Planning Institute (US). | |
| Specialresponsibilities | Chairman of the Remuneration and Nomination Committee and member of the Audit Committee |
| Interests in shares | 100,000 Shares (indirect) |
| and options | 600,000 Unlisted directors' options |
| Other currentdirectorships in listedentities | Non-Executive Director of:Advanced Braking Technology Ltd (appointed August 2006)Cuervo Resources Inc (appointed July 2011)Argonaut Resources Ltd (appointed March 2012)Water Resources Group Ltd (appointed July 2012) |
| Former directorshipsin other listed entitiesin past 3 years | Structural Monitoring Systems Plc (October 2006 to November 2010)MIL Resources Limited (August 2001 to November 2011) |
Information on Directors (continued)
| Ken Hellsten | Managing Director |
|---|---|
| Appointed | 24 March 2010 |
| Qualifications | BSc Geology Hons (Monash University) |
| Experience | Mr Hellsten is a Geologist with over 30 years' experience in the resources industry. He has beenemployed in senior executive roles ranging from exploration to development and operations withboth large multi-national and smaller resources companies, including BHP Billiton, CentaurMining, Ironclad Mining and Polaris Metals. During the past 20 years Mr. Hellsten has lead teamsresponsible for the definition and development of significant gold and nickel projects. Prior to hisappointment to Strike, he served as Managing Director of Polaris Metals NL, where he addedsignificant value for shareholders by progressing that company's iron-ore assets towardsdevelopment, and leading a strategic partner search, which ultimately resulted in the acquisition ofPolaris by Mineral Resources Limited in January 2010. |
| Mr Hellsten is a nominee director on the board of Cuervo Resources Inc. for Strike ResourcesLimited. | |
| Mr Hellsten is a fellow of the Australasian Institute of Mining and Metallurgy and a member of theAustralian Institute of Company Directors. He has previously served on the Executive Councils ofthe Association of Mining and Exploration Companies and the Northern Territory Chamber ofMines. | |
| Specialresponsibilities | Executive Director |
| Interests in sharesand options | 217,083 Shares1,500,000 Unlisted directors' options |
| Other currentdirectorships in listedentities | Non-Executive Director of:Heron Resources Ltd (appointed December 2006)Brierty Limited (appointed February 2010)Cuervo Resources Inc (appointed July 2011) |
| Former directorshipsin other listed entitiesin past 3 years | Polaris Metals NL (March 2009 to January 2010) |
| Matthew Hammond | Non-Executive Director |
| Appointed | 25 September 2009 |
| Qualifications | BA (Hons) (Bristol) |
| Experience | Mr Hammond is the Group Managing Director of Mail.ru, one of the largest European internetbusinesses. Prior to that he was Group Strategist at Metalloinvest Holdings, where he hadresponsibility for part of the non-core asset portfolio. Prior to joining Metalloinvest, Mr Hammondwas a director at Credit Suisse, where he worked for 12 years as an investment analyst. Duringhis time with Credit Suisse Mr. Hammond was ranked number one 8 times in the Extell,Institutional Investor and Reuters surveys. |
| Specialresponsibilities | Member of the Audit and Remuneration and Nomination Committees |
| Interests in sharesand options | Nil |
| Other currentdirectorships in listedentities | Mail.Ru. (appointed April 2011)Nautilus Minerals Inc (appointed October 2009)Puricore Inc. (appointed May 2010) |
| Former directorshipsin other listed entitiesin past 3 years | Nil |
Information on Directors (continued)
| William Johnson | Non-Executive Director |
|---|---|
| Appointed | 30 April 2010 |
| Previous positionheld | Executive Director (14 July 2006 to 30 April 2010) |
| Qualifications | MA (Oxon), MBA |
| Experience | Mr Johnson commenced his career in resource exploration and has held senior management andexecutive roles in a number of public companies in Australia, New Zealand and Asia.Mostrecently, Mr Johnson has acted as an executive and non-executive director of a number of ASXlisted resource exploration and development companies and brings a considerable depth ofexperience in business strategy, investment analysis, finance and execution. |
| Specialresponsibilities | Chairman of the Audit Committee and member of the Remuneration and Nomination Committee |
| Interests in sharesand options | 390,000 Unlisted Directors' Options |
| Other currentdirectorships in listedentities | Executive Director of:Orion Equities Limited (appointed February 2003)Bentley Capital Limited (appointed March 2009)Non-Executive Director of:Alara Resources Limited (appointed October 2009) |
| Former directorshipsin other listed entitiesin past 3 years | Nil |
| Samantha Tough | Non-Executive Director |
| Appointed | 23 January 2012 |
| Qualifications | LIB, BJuris Western Australia, GAICD |
| Experience | Ms Tough is a professional company director and chairman, with more than 14 years' experiencein public and private companies, including four positions as Chairman. She has strong, provenstrategic expertise, particularly in identifying and implementing growth strategies for complex andsubstantial businesses and early-stage propositions. |
| Ms Tough has served at senior executive level or on the Board in a wide range of industries,including metals and mining in particular iron ore, oil and gas, engineering services, infrastructure,energy and energy efficiency, venture capital, e-commerce, international telecommunications andlaw. Her previous executive roles include Senior Vice President, Strategic Counsel – NaturalResources at the Commonwealth Bank, General Manager North West Shelf at Woodside EnergyLtd and Director Strategy Hardman Resources Ltd. She also led the Pilbara Power Project onbehalf of the Premier's Department. Samantha's involvement in these industries has given her asound understanding of conducting business internationally. | |
| Specialresponsibilities | None |
| Interests in sharesand options | Nil |
| Other currentdirectorships in listedentities | Non-Executive Chairman of:Southern Cross Goldfields Ltd (appointed July 2007) |
| Former directorshipsin other listed entitiesin past 3 years | Murchison Metals Ltd (May 2011 - Feb 2012)Enerji Ltd (February 2010 - July 2010) |
Information on Chief Financial Officer
| Julian Tambyrajah | Chief Financial Officer |
|---|---|
| Appointed | 2 April 2012 |
| Qualifications | BCom, ASA, ACIS, FIPA |
| Experience | Mr Tambyrajah is a global mining executive, a qualified Accountant and Company Secretary with21 years' experience in the resources (mining, oil & gas) and manufacturing industries, working indifferent environments such as operator, service contractor, explorer, construction, joint venturesand alliances. Julian's extensive experienced covers financial and techno-commercial areas suchas treasury, financing, accounting, supply and logistics, business development/acquisitions,investor relations, project evaluation, feasibility studies, life of mine modelling and economics,construction and development, and operations management. |
| Mr Tambyrajah has held the position of Chief Financial Officer, Director and Company Secretaryat several Australian mining and petroleum companies, including Central Petroleum Limited,Crescent Gold Limited, Rusina Mining NL, DRDGold Limited, Dome Resources NL and heldmanagement and accounting roles for Hills Industries, Brown & Root, Woodside and NormandyMining. Mr Tambyrajah has experience in raising equity and debt from national and internationalfinancial markets, some of which includes raising A$122m whilst at Crescent Gold and A$31mwhilst at Central Petroleum. | |
| Specialresponsibilities | Chief Financial Officer |
| Interests in sharesand options | 1,000,000 Unlisted Employee Options |
| Other currentdirectorships in listedentities | None |
| Former directorshipsin other listed entitiesin past 3 years | None |
Company Secretary
The Company Secretary is Mr Stephen Gethin Barrister and Solicitor of the Supreme Court of Western Australia, Grad Cert Tax (Curtin). Mr Gethin was appointed to the position of Company Secretary on 30 April 2010. Prior to joining Strike, Mr Gethin previously served as Company Secretary and General Counsel for ERG Limited from 2006 to 2008. Mr Gethin worked in the Corporate and Finance practice group in a national law firm from 2001 to 2004.
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 2012, and the numbers of meetings attended by each director were:
| Name of Director | Board MeetingsCommittee MeetingsCommittee Meetings(Audit)(Remuneration/Nomination) | |||||
|---|---|---|---|---|---|---|
| Attended | MeetingsHeld1 | Attended | Meetingsheld1 | Attended | Meetingsheld1 | |
| M Richmond | 11 | 12 | 2 | 2 | 1 | 1 |
| K Hellsten | 12 | 12 | 1* | 2* | ** | ** |
| W Johnson | 12 | 12 | 2 | 2 | - | 1 |
| M Hammond | 10 | 12 | 1 | 2 | 1 | 1 |
| S Tough | 5 | 5 | ** | ** | ** | ** |
* Attended by invitation, not a member of the relevant committee
** Not a member of the relevant committee
Retirement, Election and Continuance in Office of Directors
Mr Hammond retired as Director by rotation under the Company's Constitution at the November 2011 AGM and was re-elected at that meeting.
Remuneration Report (Audited)
The Directors are pleased to present the Company's 2012 remuneration report which sets out remuneration information for Strike Resources Limited's Non-Executive Directors, Executive Director and other key management personnel.
Directors and Key Management Personnel Disclosed in This Report
| Name | Position | ||||
|---|---|---|---|---|---|
| Non-executive and executive directors – see pages 6 –9 above | |||||
| Other key management personnel | |||||
| Julian Tambyrajah1 | Chief Financial Officer | ||||
| David Lim2 | Chief Financial Officer | ||||
| Ian Cullen3 | General Manager Exploration and Development |
-
Mr Tambyrajah was appointed as Chief Financial Officer on 2 April 2012
-
Mr Lim ceased from the position of Chief Financial Officer on 10 April 2012
-
Mr Cullen was appointed as General Manager Exploration and Development on 1 July 2011 and ceased on 15 July 2012.
Role of Remuneration and Nomination Committee
The Remuneration and Nomination Committee is a committee of the Board. It is primarily responsible for making recommendations to the Board on:
- the necessary and desirable competencies of Directors and the extent to which these are reflected in the Board
- suitable candidates for the position of Managing Director, when required
- the development and review of Board succession plans
- the appointment and re-election of Directors
- making recommendations to the Board on policy governing the benefits of the Managing Director and any other Executive Director, including equity-based remuneration
- making recommendations to the Board on the specific benefits to be provided to the Managing Director within the policy
- conducting an annual review of Non-Executive Directors' fees and determining whether the limit on the Non-Executive Directors' fee pool remains appropriate, and
- assisting the Managing Director to determine the remuneration (including equity- based remuneration) of Senior Management and advise on those determinations
The purposes of the Remuneration and Nomination Committee are:
- assist the Managing Director and the Board to adopt and implement a remuneration system that is required to attract, retain and motivate the personnel who will enable the Company to achieve long-term success; and
- identify appropriate candidates for membership of the Board and, when necessary, identify suitable candidates for the role of Managing Director.
In doing this, the Remuneration and Nomination Committee seeks advice from independent remuneration consultants and consults market and industry surveys (see page 14 below).
Ultimate responsibility for the Company's remuneration and nomination policies and practices remains with the full Board.
The Corporate Governance Statement provides further information on the role of this Committee.
A copy of Strike's Remuneration and Nomination Committee Charter can be found on the Company's website at www.strikeresources.com.au.
Non-Executive Director Remuneration Policy
Fees and payments to Non-Executive Directors reflect the demands which are made on, and the responsibilities of, the directors. The Remuneration and Nomination Committee is responsible to review Non-Executive Directors' fees annually and makes recommendation to the Board. The Board has also considered the advice of independent market consultants to ensure Non-Executive Directors' fees and payments are appropriate and in line with the market. The Chair's fees are determined independently to the fees of Non-Executive Directors' based on comparative roles in the external market.
Pursuant to the Company's Constitution, each Director is entitled to receive:
- Payment for the performance of extra services and the undertaking of any executive or other work for the Company beyond his or her general duties; and
- Payment for travelling and other expenses properly incurred by a Director in attending meetings of the Company or the Board or in connection with the Company's business.
Non-Executive Director Remuneration Policy (continued)
Historically the Board had resolved to remunerate Non-Executive Directors for work over and above that included in their base Director's fee under a Special Exertion Policy. Where additional services are approved by the Board the Non-Executive Director is entitled to receive $350 per hour plus reimbursement of expenses.
With the exception of the above Special Exertion Policy, Non-Executive Directors do not receive performancebased pay. The Board had also previously resolved and issued Non-Executive Directors with options at various exercise prices and maturity dates as deemed appropriate at that time, however, in line with Corporate Governance Principles and Recommendations this is no longer the practice.
Directors' fees
M Hammond1
Non-executive Directors' fees are determined within an aggregate Directors' fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $500,000 per annum and was approved by shareholders at the annual general meeting on 25 November 2009.
The Chair's remuneration was reviewed upon his appointment, in February 2011.
Each Non-Executive Director receives $45,000 per year, except for Ms Tough. Ms Tough receives a higher fee, being the market rate that the Company determined was appropriate at the time she was appointed.
| Director | Office held | Gross Salary/fees and Superannuation for the Period | ||||||
|---|---|---|---|---|---|---|---|---|
| Fees | Specialexertions | Superannuation | Total | |||||
| $ | $ | $ | $ | |||||
| M Richmond | Chairman | 70,000 | 33,250 | 9,293 | 112,543 |
Non-Executive Director 45,000 - - 45,000
During the year the aggregate fees paid to Non-Executive Directors of the Company were as follows:
-
The Director's fee for Mr Hammond was reviewed in October 2010.
-
Ms Tough was appointed as a Non-Executive Director on 23 January 2012. Her Director's fee was approved upon appointment.
Retirement Allowances for Non-Executive Directors
In line with the guidance from the ASX Corporate Governance Council on Non-Executive Directors' remuneration, no Non-Executive Directors receive retirement allowances. Superannuation contributions required under the Australian superannuation guarantee legislation continue to be made and are deducted from the directors' overall fee entitlements.
W Johnson Non-Executive Director 45,000 41,300 7,767 94,067 S Tough 2 Non-Executive Director 40,000 - 3,600 43,600
Executive Remuneration Policy and Framework
In determining executive remuneration, the Board aims to ensure that remuneration practices are:
- competitive and reasonable, enabling the Company to attract and retain key talent
- aligned to the Company's strategic and business objectives and the creation of shareholder value
- transparent, and
- acceptable to shareholders.
The executive remuneration framework has three components:
- base pay and benefits, including superannuation
- short-term performance incentives, and
- long-term incentives through participation in the Strike Resources Limited Employee Option Plan.
Executive Remuneration Mix
In accordance with the Company's objective to ensure that executive remuneration is aligned to Company performance, a significant portion of the Managing Director's target pay is "at risk". The following chart sets out the Executives' target remuneration mix:
Base Pay and Benefits
Executives receive their base pay and benefits structured as a total employment cost (TEC) 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. Independent remuneration consultants and/or reports provide analysis and advice to ensure base pay is set to reflect the market for a comparable role. Base pay for executives is also reviewed on promotion.
There are no guaranteed base pay increases included in the executives' contracts.
Short-term Incentives
The Managing Director has the opportunity to earn an annual short-term incentive (STI) if predefined targets are achieved. The targets are reviewed annually.
STI awards for the Managing Director and Other Executives in the 2012 calendar year were based on the scorecard measures and weighting as disclosed below. These targets were set by the Remuneration Committee for the Managing Director and by the Managing Director for Other Executives, which align management to the Company's strategic and business objectives.
STI targets – Managing Director
| Metrics | Weighting |
|---|---|
| To maintain develop and lead a lean, effective organisation in both Peru and Perth,capable of meeting the broad objectives contained within the annual plan, yet acceptingthe reality of a volatile political environment | 25% |
| To successfully provide guidance to the Cuervo organisation in their own orebodydevelopment and to develop the synergistic potential with Strike in an effective manner | 25% |
| To achieve a satisfactory resolution to the dispute on the Berau Thermal Coal Projectassets | 25% |
| To achieve the best possible arrangements with regard to ownership and control of theAF Joint Venture | 25% |
Short-term Incentives (continued)
STI targets – Other Executives
| Metrics | Weighting |
|---|---|
| Safety/Security improvements on noncompliance and LTIs | 10% |
| Community approvals Opaban I & III and Satellite Concessions | 20% |
| Drilling at Bob1, Opaban and selected Satellite sites | 15% |
| Satellite Concession Exploration | 15% |
| Budget or better achieved | 10% |
| Berau Thermal Coal Project dispute resolution | 10% |
| Peru Iron Ore Resource potential improved | 10% |
| Reporting superior quality and on time | 5% |
| Corporate: no material issues audit or corporate governance | 5% |
The Remuneration and Nomination Committee is responsible for assessing whether the KPIs are met. To assist in this assessment, the Committee receives detailed reports on performance from management which are verified by industry surveys and, where deemed appropriate, independent remuneration consultants. The Committee will make recommendations to the Board to adjust short-term incentives downwards in light of unexpected or unintended circumstances.
Other senior executives currently do not have any short term incentives such as cash bonuses included in their employment contracts. The executives' performance is assessed on an annual basis and bonuses may be awarded on achievement of key performance objectives by recommendation of the Managing Director and at the discretion of the Board.
Long-term Incentives
Long-term incentives are provided to certain employees via the Strike Resources Limited Employee Option Plan which was approved by shareholders at the 6 November 2008 annual general meeting. The Employee Option Plan was subsequently amended on 8 November 2011.
The Strike Resources Limited Employee Option Plan is designed to provide long-term incentives for executives to deliver long-term shareholder returns. Under the plan, participants are granted options which are vested on issue. The Board has discretion to determine the exercise price and maturity date. Participation in the plan is at Board discretion and will often form part of an employment contract.
In order to derive long-term shareholder returns, options granted in the financial year 2012 are exercisable from the grant date to 23 November 2016, in 3 equal tranches with exercise prices of 130%, 150%, and 200% of the one month volume-weighted average price at the grant date.
Share Trading Policy
The Company's Share Trading Policy regulates all Directors' and, employees' of Strike Resources Limited and its subsidiaries, and certain contractors', dealings in the Company's securities. The Policy prohibits:
- subscribing for, purchasing or selling Company securities or entering into an agreement to do any of those things; and
- advising, procuring or encouraging another person (including a family member, friend, associate, colleague, family company or family trust) to trade in Company securities,
whilst in possession of market-sensitive information, prior to disclosure of that information to the market and thereafter until adequate time has elapsed for this to be reflected in the security's price, in accordance with the Corporations Act 2001. The Policy also prohibits communicating inside information to any other person when directors, employees of Strike Resources Limited and its subsidiaries, and certain contractors should reasonably know that they may deal in the Company's securities or encourage another person to do so.
In order to further reduce the risk of inappropriate securities dealing, directors, employees of Strike Resources Limited and its subsidiaries, and certain contractors, must not deal in Company securities without the written consent of the "Trading Officers" nominated in the Company's Share Trading Policy. Consent will not be given during certain "Prohibited Periods" before key reporting dates or while inside information exists. Directors, employees of Strike Resources Limited and its subsidiaries, and certain contractors must inform the Company Secretary of all transactions they enter into involving the Company's securities to enable disclosure to the market, where required.
A copy of Strike's Share Trading Policy can be found on the Company's website as www.strikeresources.com.au.
Use of Remuneration Consultant
During the year, the Company entered an agreement with PJ Kinder Consulting Pty Ltd ("Kinder") for the provision of remuneration recommendations in relation to the review of the Managing Director's benefits. Under the term of the engagement, Kinder provided remuneration recommendations as defined in section 9B of the Corporations Act 2001 and was paid $500 for this service.
Kinder confirms that the above recommendations have been made free of undue influence by members of the group's key management personnel.
The following arrangements were made to ensure that the remuneration recommendations were free from undue influence:
- Kinder was engaged by, and reported directly to, the chair of the Remuneration and Nomination Committee. The agreement for the provision of remuneration consulting services was executed by the chair of the Remuneration and Nomination Committee under delegated authority on behalf of the Board; and
- The report containing the remuneration recommendations was provided by Kinder directly to the chair of the Remuneration and Nomination Committee; and
- PJ Kinder Consulting was not permitted to provide any member of management with a copy of its draft or final report that contained the remuneration recommendations.
As a consequence, the Board is satisfied that the recommendations were made free from undue influence from any members of the key management personnel.
Remuneration reviews and recommendations for executives and employees are generally based on salary surveys from Godfrey Remuneration Group Pty Ltd as recommended by the Managing Director and the Remuneration and Nomination Committee and at the discretion of the Board.
Voting and Comments Made at the Company's 2011 Annual General Meeting
Strike Resources Limited received more than 94% of "yes" votes on its remuneration report for the 2011 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.
Detail of Remuneration
The following tables show details of the remuneration received by the Directors and the key management personnel of the Consolidated Entity for the current and previous financial year.
| Short-term employee benefits | Postemploymentbenefits | Long-termbenefits | Sharebasedpayments | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Cashsalary andfees | Cashbonus | Nonmonetarybenefit | Other | Superannuation | Longserviceleave | Options | ||
| 2012 | $ | $ | $ | $ | $ | $ | $ | $ |
| Non-ExecutiveDirectors: | ||||||||
| M Richmond | 103,250 | - | - | - | 9,293 | - | - | 112,543 |
| M Hammond | 45,000 | - | - | - | - | - | - | 45,000 |
| W Johnson | 86,300 | - | - | - | 7,767 | - | - | 94,067 |
| S Tough 1 | 40,000 | - | - | - | 3,600 | - | - | 43,600 |
| ExecutiveDirector: | ||||||||
| K Hellsten | 325,000 | 75,000 | 8,400 | - | 36,000 | - | 115,395 | 559,795 |
| Other keymanagementpersonnel | ||||||||
| J Tambyrajah2 | 52,500 | - | 1,832 | - | 4,725 | - | 83,742 | 142,799 |
| D Lim3 | 173,687 | 15,000 | 2,100 | 7,258 | 15,883 | - | 76,930 | 290,858 |
| I Cullen4 | 217,752 | 9,668 | 53,761 | 21,784 | 19,056 | - | 57,697 | 379,718 |
| Total | 1,043,489 | 99,668 | 66,093 | 29,042 | 96,324 | - | 333,764 | 1,668,380 |
-
Ms Tough was appointed as Non-Executive Director on 23 January 2012.
-
Mr Tambyrajah was appointed as Chief Financial Officer on 2 April 2012.
-
Mr Lim ceased from the position of Chief Financial Officer on 10 April 2012.
-
Mr Cullen was appointed as General Manager Exploration and Development on 1 July 2011 and ceased on 15 July 2012.
Detail of Remuneration (continued)
| Short-term employee benefitsPostemploymentbenefits | Long-term benefits | ShareTotalbasedpayments | |||||
|---|---|---|---|---|---|---|---|
| Cash salaryand fees | Cashbonus | Non-monetarybenefit | Superannuation | Long- service leave | Options | ||
| 2011 | $ | $ | $ | $ | $ | $ | $ |
| Non-ExecutiveDirectors: | |||||||
| M Richmond | - | - | - | 55,436 | - | - | 55,436 |
| M Hammond | 46,235 | - | - | - | - | - | 46,235 |
| M Horn7 | 33,600 | - | - | - | - | - | 33,600 |
| W Johnson | 59,000 | - | - | 5,310 | - | - | 64,310 |
| F Khan5 | 93,602 | - | - | 8,424 | - | - | 102,026 |
| S Madan.6 | 49,821 | - | - | 4,483 | - | - | 54,304 |
| F Moshiri7 | 22,404 | - | - | - | - | - | 22,404 |
| ExecutiveDirector: | |||||||
| K Hellsten | 325,000 | 25,000 | 41,230 | 29,250 | - | - | 420,480 |
| Other keymanagementpersonnel | |||||||
| D Lim | 193,211 | 3,600 | - | 17,713 | - | 12,197 | 226,721 |
| M Lowry8 | 295,973 | - | 13,324 | 21,181 | - | - | 330,478 |
| A Napier | 160,655 | 2,050 | 1,456 | 14,481 | - | - | 178,642 |
| Total | 1,279,501 | 30,650 | 56,010 | 156,278 | - | 12,197 | 1,534,636 |
-
Mr Khan ceased being a director on 3 February 2011.
-
Mr Madan ceased being a director on 3 February 2011.
-
Mr Moshiri ceased being a director on 3 February 2011 (Mr Horn was Mr Moshiri's alternate).
-
Mr Lowry ceased being an employee of the Company on 30 April 2011.
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
| Name | Fixedremuneration | At risk - STI | At risk – LTI # | |||
|---|---|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |
| Executive DirectorK Hellsten | 66% | 93% | 13% | 7% | 21% | - |
| Other Key Management Personnel | ||||||
| J Tambyrajah | 42% | - | - | - | 58% | - |
| D Lim | 68% | 93% | 5% | 2% | 27% | 5% |
| I Cullen | 82% | - | 3% | - | 15% | - |
| M Lowry | - | 100% | - | - | - | - |
| A Napier | - | 99% | - | 1% | - | - |
Long-term incentives are provided exclusively by way of options, the percentages disclosed also reflect the value of remuneration consisting of options, based on the value of options expensed during the year. Negative amounts indicate expenses reversed during the year due to a failure to satisfy the vesting conditions.
Service Agreements
Appointment to the Board as a Director is via resolution which outlines the Director's agreed remuneration. The appointment is later ratified by shareholders at the next general meeting. No formal service agreements are executed for Non-Executive Directors. On the appointment to the Board, the Company enters into a deed with each Non-Executive Director to regulate certain matters between the Company and that Non-Executive Director, however Matthew Hammond has not executed such a deed.
Remuneration and other terms of employment for the Managing Director, Chief Financial Officer and other key management personnel are formalised in Employment Agreements. The Employment Agreement of the Managing Director provides for the provision of performance-related cash bonuses, which are reviewed annually by the Remuneration and Nomination Committee. No specific cash bonuses are provided in the Employment Agreements of other key management personnel.
Major provisions of the agreements relating to remuneration are set out below.
All agreements with Executives may be terminated early by either party with notice periods from 1-3 months, subject to termination payments as detailed below.
Service Agreements (continued)
| Name | Term of agreement | Base salaryincludingsuperannuation | Terminationbenefit |
|---|---|---|---|
| Ken Hellsten – Managing Director | On-going commencing1 March 2010 | $354,250 | * |
| J Tambyrajah – Chief Financial Officer | On-going commencing2 April 2012 | $238,000 | ** |
| I Cullen - General Manager Explorationand Development | On-going commencing1 July 2011- terminated on 15 July 2012 | $227,000 | ** |
| D Lim – Chief Financial Officer | On-going commencing9 December 2009 - terminated on 10 April 2012 | $225,000 | ** |
* Six months' gross base salary on termination other than for termination due to misconduct; breach of contract; removal as a director by shareholders.
** No specific termination benefits are payable on termination of the service agreement.
Share-based Compensation
The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows:
| Grant date | Vesting andexercise date | Expiry date | Exerciseprice | Value peroption atgrant date | Performanceachieved | % Vested |
|---|---|---|---|---|---|---|
| 24 November 2011 | 24 November 2011 | 23 November 2016 | $0.36 | $0.085 | N/A | 100% |
| 24 November 2011 | 24 November 2011 | 23 November 2016 | $0.42 | $0.079 | N/A | 100% |
| 24 November 2011 | 24 November 2011 | 23 November 2016 | $0.56 | $0.067 | N/A | 100% |
| 5 April 2012 | 5 April 2012 | 23 November 2016 | $0.36 | $0.091 | N/A | 100% |
| 5 April 2012 | 5 April 2012 | 23 November 2016 | $0.42 | $0.085 | N/A | 100% |
| 5 April 2012 | 5 April 2012 | 23 November 2016 | $0.56 | $0.075 | N/A | 100% |
Options granted under the plan carry no dividend or voting rights.
When exercisable, each option is convertible into one ordinary share within 5 business days after the exercise.
Details of options over ordinary shares in the Company provided as remuneration to each director of Strike Resources Limited and each of the key management personnel of the Company and the Consolidated Entity are set out below. When exercisable, each option is convertible into one ordinary share of Strike Resources Limited. Further information on the options is set out in note 28 to the financial statements.
| Name | Number of optionsgranted during theyear | Value of optionsat grant date* | Number ofoptions vestedduring the year | Number ofoptions lapsedduring the year | Value atlapse date** | ||
|---|---|---|---|---|---|---|---|
| Directors of Strike Resources Limited | |||||||
| M Richmond | - | - | - | - | - | ||
| M Hammond | - | - | - | - | - | ||
| W Johnson | - | - | - | - | - | ||
| S Tough | - | - | - | - | - | ||
| K Hellsten | 1,500,000 | $115,395 | 1,500,000 | - | - | ||
| Other key management personnel of the Consolidated Entity | |||||||
| J Tambyrajah | 1,000,000 | $83,742 | 1,000,000 | - | - | ||
| I Cullen | 750,000 | $57,697 | 750,000 | - | - | ||
| D Lim | 1,000,000 | $76,930 | 1,000,000 | 1,600,000 | $76,576 |
* The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year as part of remuneration. ** The value at lapse date of options that were granted as part of remuneration and that lapsed during the year because a vesting condition was not satisfied, or the participant ceased to be employee of the Company. The value is determined at the time of lapsing, but assuming the condition was satisfied.
The assessed fair value at grant date of options granted to the 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 independently determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.
Shares Provided on Exercise of Remuneration Options
There were no shares issued as a result of the exercise of Directors' or employee options which were issued as part of remuneration during the current year (2011: nil).
Details of Remuneration: Bonuses and Share-based Compensation Benefits
For each cash bonus and grant of options included in the tables on pages 14 – 16, the percentage of the available bonus or grant that was paid, or that vested, in the financial year and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below. No part of the bonus is payable in future years. The options vest immediately and will lapse on termination of employment, except due to redundancy or disability, in which case they will continue for 12 months or until any earlier expiry date. The Board has discretion to vary the lapse dates of terminating employees' options.
| Name | Bonus | Share-based compensation benefit (options) | ||||
|---|---|---|---|---|---|---|
| Paid | Forfeited | Yeargranted | Vested | Forfeited/Lapsed | Financialyears inwhichoptions mayvest | |
| M Richmond | - | - | - | - | - | - |
| M Hammond | - | - | - | - | - | - |
| W Johnson | - | - | - | - | - | - |
| S Tough | - | - | - | - | - | - |
| K Hellsten | 75% | 25% | 2012 | 100% | - | 2012 |
| J Tambyrajah | * | * | 2012 | 100% | - | 2012 |
| D Lim | * | * | 2012 | 100% | 100%*** | 2012 |
| 2011 | 100% | 100%** | 2011 | |||
| I Cullen | * | * | 2012 | 100% | - | 2012 |
* Service agreement does not contain cash bonuses.
** Options were cancelled in 2012.
***Options lapsed in 2012 due to the termination of employment.
Shares under Options
Unissued ordinary shares of Strike Resources Limited under option at the date of this report are as follows:
| Date of options granted | Expiry date | Issue price of shares | Number under option |
|---|---|---|---|
| 3 December 2007* | 2 December 2012 | $3.978 | 3,500,000 |
| 5 March 2008 | 3 March 2013 | $2.878 | 250,000 |
| 25 November 2009 | 24 November 2012 | $2.50 | 750,000 |
| 25 November 2009 | 24 November 2012 | $2.75 | 750,000 |
| 25 November 2009 | 24 November 2012 | $3.25 | 750,000 |
| 24 November 2011* | 23 November 2016 | $0.36 | 1,083,334 |
| 24 November 2011* | 23 November 2016 | $0.42 | 1,083,333 |
| 24 November 2011* | 23 November 2016 | $0.56 | 1,083,333 |
| 5 April 2012* | 23 November 2016 | $0.36 | 333,334 |
| 5 April 2012* | 23 November 2016 | $0.42 | 333,333 |
| 5 April 2012* | 23 November 2016 | $0.56 | 333,333 |
* Included in these options were options granted as remuneration to the directors and the five most highly remunerated officers during the year. Details of options granted to key management personnel are disclosed on page 14 – 16 above.
No option holder has any right under the options to participate in any other share issue of the Company.
This concludes the Audit Remuneration Report
JORC Code Competent Person Statement
The information in this document which relates to Mineral Resources at the Apurimac, Cusco and Cerro Ccopane projects and to exploration results has been prepared by Mr Ken Hellsten, who is an employee of Strike Resources Limited and is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Hellsten has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as Competent Persons as defined in the 2004 Edition of the "Australasian Code for Reporting of Mineral Resources and Ore Reserves" (the JORC Code). Mr Hellsten consents to the inclusion in this document of the matters based on this information in the form and context in which it appears.
Insurance of Officer
The Directors have not included details of the nature of the liabilities covered or the amount of premiums paid in respect of a Directors' and Officers' liability and legal expenses insurance contract, as such disclosure is prohibited under the terms of the contract.
The Company has executed Directors' deeds with each Director (other than Matthew Hammond) to indemnify the directors for liabilities or legal costs incurred as an officer and advance monies to meet costs in relation to the indemnities under the deed.
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 Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Company and/or the Consolidated Entity are important.
Details of the amounts paid or payable to the auditor (BDO Audit (WA) Pty Ltd) and to other parties for work performed on behalf of the auditor, for audit and non-audit services provided during the year are set out below.
The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is 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 impartially and objectivity of the auditor.
- none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.
During the year the following fees were paid or payable for audit and non-audit services provided by the auditor of the Company, its related practices and non-related audit firms:
| Consolidated | ||
|---|---|---|
| 2012 | 2011 | |
| $ | $ | |
| Audit & Review Fees – BDO Audit (WA) Pty Ltd | 84,774 | 51,934 |
| Fees for non-audit services | - | 795 |
| Audit & Review Fees – Affiliated practices of BDO International | 6,830 | 7,187 |
| Total | 91,604 | 59,916 |
Auditors' 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 19.
Auditor
BDO Audit (WA) Pty Ltd continues in office in accordance with section 327 of the Corporation Act 2001.
This report is made in accordance with a resolution of directors.
Ken Hellsten Managing Director 25 September 2012
Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia
25 September 2012
Strike Resources Limited The Board of Directors Level 2, 160 St Georges Terrace PERTH WA 6000
Dear Sirs,
DECLARATION OF INDEPENDENCE BY BRAD MCVEIGH TO THE DIRECTORS OF STRIKE RESOURCES LIMITED
As lead auditor of Strike Resources Limited for the year ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been no contraventions of:
- the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
- any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Strike Resources Limited and the entities it controlled during the period.
Brad McVeigh Director
BDO Audit (WA) Pty Ltd Perth, Western Australia
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2012
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| Note | $ | $ |
| 5 | 5,630,977 | 2,663,221 |
| 5 | 1,558,348 | 1,704,408 |
| 7,189,325 | 4,367,629 | |
| 5 | (271,616) | (346,057) |
| (2,210,535) | ||
| (1,682,301) | ||
| - | ||
| (22,644,435) | ||
| 1,785,620 | ||
| (85,665) | ||
| - | ||
| (3,636,311) | ||
| (24,452,055) | ||
| (439,564) | ||
| (24,891,619) | ||
| (13,040,722) | (24,891,619) | |
| (24,891,619) | ||
| (271,626) | ||
| (271,626) | ||
| (25,163,245) | ||
| (13,595,943) | (25,163,245) | |
| 2727 | (9.20)(9.20) | (18.95)(18.95) |
| 555555556 | (2,235,607)(2,025,915)(2,055,850)(12,570,185)-(40,577)(826,397)-(12,836,822)(203,900)(13,040,722)(13,040,722)(555,221)(555,221)(13,595,943) |
This consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position
as at 30 June 2012
| Consolidated Entity | |||
|---|---|---|---|
| 2012 | 2011 | ||
| Note | $ | $ | |
| Current assets | |||
| Cash and cash equivalents | 8 | 20,551,679 | 34,176,329 |
| Trade and other receivables | 9 | 3,583,457 | 688,261 |
| Financial assets at fair value through profit or loss | 10 | 1,742,253 | - |
| Assets classified as held for sale | 7 | 4,353,106 | - |
| Total current assets | 30,230,495 | 34,864,590 | |
| Non-current assets | |||
| Trade and other receivables | 9 | 26,335 | 97,806 |
| Financial assets at fair value through profit or loss | 10 | 114,364 | - |
| Property, plant and equipment | 12 | 59,291 | 849,460 |
| Exploration and evaluation expenditure | 13 | - | 8,239,883 |
| Total non-current assets | 199,990 | 9,187,149 | |
| Total assets | 30,430,485 | 44,051,739 | |
| Current liabilities | |||
| Trade and other payables | 14 | 499,151 | 2,785,485 |
| Provisions | 15 | 61,418 | 56,545 |
| Total current liabilities | 560,569 | 2,842,030 | |
| Non-current liabilities | |||
| Trade and other payables | 14 | 219,395 | 132,999 |
| Total non-current liabilities | 219,395 | 132,999 | |
| Total liabilities | 779,964 | 2,975,029 | |
| Net assets | 29,650,521 | 41,076,710 | |
| Equity | |||
| Contributed equity | 16 | 148,109,255 | 145,632,412 |
| Reserves | 17 | 12,004,905 | 12,149,433 |
| Retained earnings | (130,463,639) | (116,705,135) | |
| Total equity | 29,650,521 | 41,076,710 |
This 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 2012
| Coibutedntr | CurrencyTralationns | Sh-badaresePantsyme | Retaidnerni | ||
|---|---|---|---|---|---|
| Equity$ | Reserve$ | Reserve$ | Eangs$ | TotalEquity$ | |
| Balanat30Ju2010ceasneTotalince ftheriodomorpe | 144,846,669 | (4)359,27 | 12991,282, | (7)92048,85, | 65429,820, |
| Curiod lntrrepeossOthrehsive inercompencomeExchae diffelationoftrangrencesonns | - | - | - | (24891,619), | (24891,619), |
| foreigionratn opes | - | (271,626) | - | - | (271,626) |
| Totalrehsive ifor thcompenncomee year | - | ()271,626 | - | ()24891,619, | ()25163245,, |
| Tractiowith ointheircitynsanswnerscapaasowners:ShtioareopnsOptiorsioonn | -789,667 | - | (210,949) | 233415, | 24392,789,667 |
| n cveShisstsareuecos | (4)3,92 | - | - | - | (4)3,92 |
| Balan30Ju2011atceasne | 145,632,412 | -(630,900) | -12780,333 | -(116,705,135) | 41076,710 |
| Totalince ftheriodomorpeCuriod lntrrepeossOthrehsive inercompencomeExchae diffelationoftrangrencesonns | - | - | ,- | (13040,722), | ,(13040,722), |
| foreigionratn opes | - | (1)555,22 | - | - | (1)555,22 |
| Totalrehsive ifor thcompenncomee yearTractiowith ointheircitynsanswnerscapaasowners: | - | (1)555,22 | - | (2)13040,72, | ()13595,943, |
| Shtioareopns | 2,250,000 | - | 410,693 | (23303)5, | 2,423905, |
| Optiorsion conven | 235,303 | - | - | - | 235,303 |
| Exloration iairntpmpme | - | - | - | ()482,479 | ()482,479 |
| Shisstsareuecos | (8,460) | - | - | - | (8,460) |
| Balanat30Ju2012ceasne | 148,109,255 | (1)1,186,12 | 13191,026, | ()130,463,639 | 29650,521, |
This 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 2012
| Consolidated Entity | |||
|---|---|---|---|
| 2012 | 2011 | ||
| Note | $ | $ | |
| Cash flows from operating activities | |||
| Receipts from customers and associate | 1,763,473 | - | |
| Payments to suppliers and employees | (4,232,584) | (3,188,005) | |
| Tax paid | (203,900) | (439,564) | |
| Interest received | 1,688,264 | 1,956,266 | |
| Net cash outflow from operating activities | 25 | (984,747) | (1,671,303) |
| Cash flows from investing activities | |||
| Exploration and evaluation expenditure | (2,712) | (713,279) | |
| Payments for property, plant and equipment | (63,769) | (114,215) | |
| Proceeds from sale of investments | 1,889,236 | 3,209,309 | |
| Proceeds from sale of fixed assets | 70,200 | 37,140 | |
| Investment in listed entity | (214,563) | - | |
| Investment in associate | (23,101) | (1,149,115) | |
| Loan to associate – Apurimac Ferrum | (9,310,500) | (7,578,294) | |
| Loan to others | (5,001,943) | (97,751) | |
| Net cash outflow from investing activities | (12,657,152) | (6,406,205) | |
| Cash flows from financing activities | |||
| Proceeds from exercise of share options | - | 789,667 | |
| Payments for share issue cost | (8,460) | (3,924) | |
| Net cash inflow from financing activities | (8,460) | 785,743 | |
| Net increase/(decrease) in cash and cashequivalents | (13,650,359) | (7,291,765) | |
| Cash and cash equivalents at beginning of the year | 34,176,329 | 41,445,175 | |
| Effect of exchange rate changes on cash balance | 25,709 | 22,919 | |
| Cash and cash equivalents at year end | 8 | 20,551,679 | 34,176,329 |
This consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Notes to the Consolidated Financial Statements
1. Summary of Significant Accounting Policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all yeas presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Strike Resources Limited, its subsidiaries and its interest in associate entities.
a) Basis of Preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Strike Resources Limited is a for-profit entity for the purpose of preparing the financial statements.
(i) Compliance with IFRS
The consolidated financial statements of Strike Resources Limited also comply with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (IASB).
(ii) New and amended standards adopted by the Consolidated Entity
None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2011 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future periods. However, the adoption of the revised AASB 124 Related Party Disclosures resulted in the disclosure of additional related party transactions and required the restatement of some comparative information in note 22, and the adoption of AASB 1054 Australian Additional Disclosures and AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project enabled the removal of certain disclosures in relation to commitments and the franking of dividends.
(iii)Early adoption of standards
The Consolidated Entity has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2011.
(iv) Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities at fair value though profit or loss, assets of disposal group held for sale and capitalised exploration expenditure.
(v)Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Consolidated Entity's accounting policies. The area involving a higher degree of judgement or complexity, or area where assumptions and estimates are significant to the financial statements, are disclosed in note 3.
b) Principles of Consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Strike Resources Limited ("Company" or "Strike") as at 30 June 2012 and the results of all subsidiaries for the year then ended. Strike Resources Limited and its subsidiaries together are referred to in this financial report as Consolidated Entity.
Subsidiaries are all entities over which the Consolidated Entity 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 Consolidated Entity controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are de-consolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Consolidated Entity (refer to note 1(h)).
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 assets transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the Consolidated Statement of Comprehensive Income, Statement of Changes in Equity, and Consolidated Statement of Financial Position respectively.
(ii) Associates
Associates are all entities over which the Consolidated Entity has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. The Consolidated Entity's investment in associates includes goodwill identified on acquisition.
The Consolidated Entity's share of its associates' post-acquisition profits or losses is recognised in profit or loss and its share of post-acquisition other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised as a reduction in the carrying amount of the investment.
When the Consolidated Entity's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, the Consolidate Entity does not recognise any further losses, unless it has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Consolidated Entity and its associates are eliminated to the extent of the Consolidated Entity'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 Consolidated Entity.
(iii)Changes in ownership interests
The Consolidated Entity treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Consolidated Entity. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Strike Resources Limited.
When the Consolidated Entity ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for retained interest as an associate. In addition, any amounts previously recognised in Other Comprehensive Income in respect of that entity are accounted for as if the Consolidated Entity had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in Other Comprehensive Income are reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in Other Comprehensive Income are reclassified to profit or loss where appropriate.
c) Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Managing Director. The Managing Director is responsible for allocating resources and assessing performance of the operating segments.
d) Foreign Currency Translation
(i) Functional and presentation currency
Items included in the financial statements of each company in the Consolidated Entity are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in Australian dollars, which is Strike Resources Limited's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into 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 the year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.
Foreign exchange gains or losses that relate to borrowings are presented in the Consolidated Statement of Comprehensive Income within finance costs. All other foreign exchange gains and losses are presented in the Consolidated Statement of Comprehensive Income on a net basis within other income or operating expenses.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
(iii)Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
- income and expenses for Consolidated Statement of Comprehensive Income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
- all resulting exchange differences are recognised in Other Comprehensive Income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in Other Comprehensive Income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
e) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.
The Consolidated Entity recognises revenue when the amount of revenue can be reliably measured. It is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Consolidated Entity's activities as described below. The Consolidate Entity bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities as follows:
(i) Consultancy fees
Revenue from consulting services is recognised in the accounting period in which the services are rendered.
(ii) Sale of goods and disposal of assets
Revenue from the sale of goods and disposal of other assets is recognised when the Consolidated Entity has passed control and the risks and rewards of ownership of the goods/assets to the buyer.
(iii)Interest income
Interest income is recognised using the effective interest method. When a receivable is impaired, the Consolidated Entity reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.
(iv)Dividends
Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence, refer note 1(m).
(v) Other revenues
Other revenues are recognised on a receipts basis.
f) 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 applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and for unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
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.
Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the Company 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.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities, and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in Other Comprehensive Income or directly in equity. In this case, the tax is also recognised in Other Comprehensive Income or directly in equity, respectively.
g) Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Consolidated Entity as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the period of the lease.
h) Business Combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Consolidated Entity. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identified assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an-acquisition-by-acquisition basis, the Consolidated Entity recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets.
The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in the Consolidated Statement of Comprehensive Income as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted at their present value as at the date of exchange. The discount rate used is the Consolidated Entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
i) Impairment of Assets
Goodwill and 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 tested for impairment whenever events or changes in 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 purpose of assessing impairment, assets are grouped at the lowest levels for which they are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
j) Cash and Cash Equivalents
For the purpose of presentation in the Consolidate Statement of Cash Flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Consolidated Statement of Financial Position.
k) 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. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Consolidated Entity will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.
The amount of impairment loss is recognised in the Consolidated Statement of Comprehensive Income within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectable in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss.
l) Assets (or disposal groups) Held for Sale and Discontinued Operations
Assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the asset (or disposal group) is recognised at the date of de-recognition.
Assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
Assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the Consolidated Statement of Financial Position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the Consolidated Statement of Financial Position.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of the business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Consolidated Statement of Comprehensive Income.
m) Investments and Other Financial Assets
Classification
The Consolidated Entity classifies its financial assets in the following categories: financial assets at fair value through profit or loss, and loans and receivables. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investment at initial recognition.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Assets in this category are classified as current assets if they are expected to be settled within 12 months; otherwise they are classified as non-current.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets.
Financial assets-reclassification
The Consolidated Entity may choose to reclassify non-derivative trading financial assets out of the held for trading category if the financial asset is no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be reclassified out of the held for trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. In addition, the Consolidated Entity may choose to reclassify financial assets that would meet the definition of loans and receivables out of held for trading if the Consolidated Entity has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification.
Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables are determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates prospectively.
Recognition and de-recognition
Regular way purchases and sales of financial assets are recognised on trade-date - the date on which the Consolidated Entity commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Consolidated Entity has transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Consolidated Entity measures a financial asset at its fair value plus, in case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the profit or loss.
Loans and receivables are subsequently carried at amortised cost using the effective interest method.
Financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the "financial asset at fair value through profit or loss" category are presented in profit or loss within Other Comprehensive Income or Other Operating Expenses in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the Consolidated Statement of Comprehensive Income as part of revenue from continuing operations when the Consolidated Entity's right to receive payments is established. Interest income from these financial assets is included in the net gains/(losses).
Details on how the fair value of financial instruments is determined are disclosed in note 2.
Impairment
The Consolidated Entity assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset (or a group of financial assets) is impaired and the impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event") and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
(i) Assets carried at amortised cost
For loans and receivables, the amount of loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.
n) Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. 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 Consolidated Entity and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or re-valued amounts, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements, the shorter lease term as follows:
| Furniture & fittings | 15% to 66.67% |
|---|---|
| Computer equipment | 33.33% to 66.67% |
| Plant & equipment | 20% |
| Leasehold improvements | 15% |
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
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(i).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
o) Intangible Assets
(i) Goodwill
Goodwill is measured as detailed in note 1(h). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purposes of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segments (note 4).
(ii) Mineral exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is initially capitalised in respect of each identifiable area of interest where the Consolidated Entity has right of tenure. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence or otherwise of economicallyrecoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.
Under AASB 6 Exploration for and Evaluation of Mineral Resources, if facts and circumstances suggest that the carrying amount of any recognised exploration and evaluation assets may be impaired, the Consolidated Entity must perform impairment tests on those assets and measure any impairment in accordance with AASB 136 Impairment of Assets. Any impairment loss is to be recognised as an expense. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.
p) Trade and Other Payables
These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
q) Employee Benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.
(ii) Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service 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 end of the reporting period using the projected unit credit method. 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 end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
The obligations are presented as current liabilities in the Consolidated Statement of Financial Position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur.
(iii)Share-based payments
Shared-based compensation benefits are provided to employees via the Strike Resources Limited Employee Option Plan. Information on these schemes is set out in note 28.
The fair value of options granted under Strike Resources Limited Employee Option Plan is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted, which includes any market performance conditions and the impact of any non-vesting conditions but excludes the impact of any service and non-market performance vesting conditions.
Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss with a corresponding adjustment to equity.
r) 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. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are included in the cost of the acquisition as part of the purchase consideration.
s) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
t) Earnings per Share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
- the profit attributable to owners 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 and excluding treasury shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings 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 additional shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.
u) Goods and Services Tax ("GST") (including Value Added Tax – "VAT")
Revenues, expenses and assets are recognised net of the amount of any associated GST (VAT), unless the GST (VAT) 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 (VAT) 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 balance sheet.
Cash flows are presented on a gross basis. The GST (VAT) 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.
v) New Accounting Standards and Interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2012 reporting periods. The Consolidated Entity's assessment of the impact of these new standards and interpretations is set out below:
| AASB | Title and Affected | Nature of Change | Application | Impact on Initial Application |
|---|---|---|---|---|
| reference | Standard(s) | date | ||
| AASB10(issuedAugust 2011) | ConsolidatedFinancial Statements | Introduces a single 'control model' for allentities, including special purpose entities(SPEs), whereby all of the followingconditions must be present:Power over investee (whether or notpower used in practice)Exposure, or rights, to variablereturns from investeeAbility to use power over investee toaffect the entity's returns frominvestee. | Annualreportingperiodscommencingon or after 1January 2013 | When this standard is first adoptedfor the year ended 30 June 2014,therewillbenoimpactontransactionsandbalancesrecognisedinthefinancialstatements because the entity doesnothaveanyspecialpurposeentities. |
| AASB10(issuedAugust 2011) | ConsolidatedFinancial Statements | Introduces the concept of 'de facto'control for entities with less than a 50%ownership interest in an entity, but whichhave a large shareholding compared toother shareholders. This could result inmore instances of control and moreentities being consolidated. | Annualreportingperiodscommencingon or after 1January 2013 | When this standard is first adoptedfor the year ended 30 June 2014,therewillbenoimpactontransactionsandbalancesrecognisedinthefinancialstatements. |
| AASB10(issuedAugust 2011) | ConsolidatedFinancial Statements | Potential voting rights are only consideredwhen determining if there is control whenthey are substantive (holder has practicalability to exercise) and the rights arecurrently exercisable. This may result inpossibly fewer instances of control. | Annualreportingperiodscommencingon or after 1January 2013 | Potentialvotingrightsarenotsubstantive. |
| AASB11(issuedAugust 2011) | Joint Arrangements | Joint arrangements will be classified aseither 'joint operations' (where parties withjoint control have rights to assets andobligations for liabilities) or 'joint ventures'(where parties with joint control haverightstothenetassetsofthearrangement).Joint arrangements structured as aseparate vehicle will generally be treatedas joint ventures and accounted for usingtheequitymethod(proportionateconsolidation no longer allowed). | Annualreportingperiodscommencingon or after 1January 2013 | When this standard is first adoptedfor the year ended 30 June 2014,therewillbenoimpactontransactionsandbalancesrecognisedinthefinancialstatements because the entity hasnotenteredintoanyjointarrangements. |
| AASB13(issuedSeptember2011) | FairValueMeasurement | Currently,fairvaluemeasurementrequirements are included in severalAccountingStandards.AASB13establishesasingleframeworkformeasuring fair value of financial and nonfinancial items recognised at fair value inthe statement of financial position ordisclosed in the notes in the financialstatements. | Annualreportingperiodscommencingon or after 1January 2013 | The entity has yet to conduct adetailed analysis of the differencesbetween the current fair valuationmethodologiesusedandthoserequired by AASB 13. However,when this standard is adopted for thefirst time for the year ended 30 June2014, there will be no impact on thefinancial statements because therevised fair value measurementrequirementsapplyprospectivelyfrom 1 July 2013. |
| AASB13(issuedSeptember2011) | FairValueMeasurement | Additional disclosures required for itemsmeasured at fair value in the statement offinancial position, as well as items merelydisclosed at fair value in the notes to thefinancial statements. Extensive additionaldisclosurerequirementsforitemsmeasured at fair value that are 'level 3'valuations in the fair value hierarchy thatare not financial instruments, e.g. landand buildings, investment properties etc. | Annualreportingperiodscommencingon or after 1January 2013 | When this standard is adopted forthe first time for the year ended 30June 2014, additional disclosureswill be required about fair values. |
| AASBreference | Title and AffectedStandard(s) | Nature of Change | Applicationdate | Impact on Initial Application |
|---|---|---|---|---|
| AASB 2011-9(issuedSeptember2011) | AmendmentstoAustralianAccountingStandards-Presentation of ItemsofOtherComprehensiveIncome | Amendments to align the presentation ofitems of other comprehensive income(OCI) with US GAAP.Various name changes of statements inAASB 101 as follows:statement of comprehensive income– to be referred to as 'statement ofprofitorlossandothercomprehensive income'statements – to be referred to as'statement of profit or loss' and'statementofcomprehensiveincome'.OCI items must be grouped together intotwosections:thosethatcouldsubsequently be reclassified into profit orloss and those that cannot. | Annualperiodscommencingon or after 1July 2012 | When this standard is first adoptedfor the year ended 30 June 2013,there will be no impact on amountsrecognised for transactions andbalances for 30 June 2013 (andcomparatives).However,thestatement of comprehensive incomewill include name changes andinclude subtotals for items of OCIthat can subsequently be reclassifiedto profit or loss in future (e.g. foreigncurrency translation reserves) andthose that cannot subsequently bereclassified(e.g.fixedassetrevaluation surpluses). |
| AASB119(reissuedSeptember2011) | Employee Benefits | Main changes include:Eliminationofthe'corridor'approach for deferring gains/lossesfor defined benefit plansActuarialgains/lossesonremeasuring the defined benefitplanobligation/assettoberecognised in OCI rather than inprofit or loss, and cannot bereclassified in subsequent periodsSubtle amendments to timing forrecognitionofliabilitiesfortermination benefitsEmployee benefits expected to besettled (as opposed to due to settledundercurrentstandard)whollywithin 12 months after the end ofthe reporting period are short-termbenefits,andthereforenotdiscounted when calculating leaveliabilities. Annual leave not expectedto be used wholly within 12 monthsof end of reporting period will infuturebediscountedwhencalculating leave liability. | AnnualperiodscommencingonorafterJanuary 2013 | The entity currently calculates itsliability for annual leave employeebenefits on the basis that it is due tobe settled within 12 months of theend of the reporting period becauseemployees are entitled to use thisleave at any time. The amendmentsto AASB 119 require that suchliabilities be calculated on the basisof when the leave is expected to betaken, i.e. expected settlement.When this standard is first adoptedfor 30 June 2014 year end, annualleave liabilities will be recalculatedon 1 July 2012 as short-termbenefits because they are expectedto be settled wholly within 12 monthsafter the end of the reporting period,there will be no impact on theclassificationandbalancesrecognisedinthefinancialstatements. |
| AASB12(issuedAugust 2011) | DisclosureofInterestsinOtherEntities | Combines existing disclosures from AASB127 Consolidated and Separate FinancialStatements, AASB 128 Investments inAssociates and AASB 131 Interests inJoint Ventures. Introduces new disclosurerequirements for interests in associatesand joint arrangements, as well as newrequirementsforunconsolidatedstructured entities. | Annualreportingperiodscommencingon or after 1January 2013 | As this is a disclosure standard only,there will be no impact on amountsrecognisedinthefinancialstatements.However,additionaldisclosures will be required forinterests in associates and jointarrangements,aswellasforunconsolidated structured entities. |
| IFRS (issuedDecember2011) | Mandatory EffectiveDate of IFRS 9 andTransitionDisclosures | Entities are no longer required to restatecomparatives on first time adoption.Instead, additional disclosures on theeffects of transition are required. | Annualreportingperiodscommencingon or after 1January 2015 | As comparatives are no longerrequired to be restated, there will beno impact on amounts recognised inthe financial statements. However,additionaldisclosureswillberequired on transition, including thequantitative effects of reclassifyingfinancial assets on transition. |
There are no other standards that are not yet effective and that are expected to have material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
w) Parent Entity Financial Information
The financial information for the parent entity, Strike Resources Limited, disclosed in Note 29 has been prepared on the same basis as the consolidated financial statements.
2. Financial Risk Management
Financial Risk Management Objectives and Policies
The Consolidated Entity's financial instruments mainly consist of deposits with banks, accounts receivable and payable and loans to related parties. The main risks arising from the Consolidated Entity's financial instruments are interest rate risk, foreign exchange risk, credit risk, equity price risk and liquidity risk.
The Board of Directors' is responsible for the overall internal control framework (which includes risk management) but no cost-effective internal control system will preclude all errors and irregularities. The system is based, in part, on the appointment of suitably-qualified management personnel in conjunction with a range of policies and procedures, which incorporate monitoring and reporting mechanisms, to assist in the management of the various risks to which the business is exposed. The effectiveness of the system is continually reviewed by management and at least annually by the Board.
The Consolidated Entity holds the following instruments.
| Variable interest rate | Fixed interest rateNon-interest bearing | Total | ||||||
|---|---|---|---|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |
| Financial | $ | $ | $ | $ | $ | $ | $ | $ |
| assets | ||||||||
| Cash | 380,586 | 1,152,637 | 18,236,381 32,525,164 | 1,924,634 | 498,528 | 20,541,601 | 34,176,329 | |
| Receivables | - | - | - | - | 570,795 | 786,067 | 570,795 | 786,067 |
| Loan receivable | 3,038,997 | - | - | - | - | - | 3,038,997 | - |
| Financial assets | - | - | - | - | 1,856,617 | - | 1,856,617 | - |
| 3,419,583 | 1,152,637 18,236,381 32,525,164 | 4,352,046 | 1,284,595 | 26,008,010 | 34,962,396 | |||
| Financial | ||||||||
| liabilities | ||||||||
| Payables | - | - | - | - | (741,915) | (2,703,170) | (741,915) | (2,703,170) |
| Net financial | ||||||||
| assets | 3,419,583 | 1,152,637 18,236,381 32,525,164 | 3,610,131 | (1,418,575) | 25,266,095 | 32,259,226 |
a) Market Risk
(i) Foreign Exchange Risk
The Consolidated Entity operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, Indonesian Rupiah (IDR), Peruvian Nuevo Soles and Canadian dollar.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
The Consolidated Entity has a policy of not hedging foreign exchange risk and therefore has not entered into any hedging against movements in foreign currencies against the Australian dollar, including forward exchange contracts, as at the reporting date and is currently fully exposed to foreign exchange risk.
The Consolidated Entity's exposure to foreign exchange risk expressed in Australian dollar at the reporting date was as follows:
| USD | CAD | Others | ||||
|---|---|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |
| Financial assets | ||||||
| Cash at bank | 1,622,747 | 350,179 | - | - | 46,113 | 23,566 |
| Receivables | 183,032 | - | - | 97,750 | - | - |
| Financial assets at | ||||||
| fair value through | ||||||
| profit or loss | - | - | 1,856,617 | - | - | - |
| Loan receivable | 25,796 | - | 3,013,201 | - | - | - |
| Financial liabilities | ||||||
| Payables | (410,802) | (174,719) | - | (149,145) | (12,799) | (36,090) |
| 1,420,773 | 175,460 | 4,869,818 | (51,395) | 33,314 | (12,524) |
Sensitivity
The Consolidated Entity has performed a sensitivity analysis on its exposure to exchange risk. The management assessment is based upon an analysis of current and future market position. The analysis demonstrates the effect on the current-year results and equity when the Australian dollar strengthened or weakened by 10% (2011: 10%) against the foreign currencies detailed above, with all the other variables held constant.
2 Financial Risk Management (continued)
| Consolidated Entity | ||||
|---|---|---|---|---|
| 2012 | 2011 | |||
| Change in profit | $ | $ | ||
| increase by 10% | (574,900) | (17,397) | ||
| decrease by 10% | 702,656 | (4,298) | ||
| Change in equity | ||||
| increase by 10% | (574,900) | (17,397) | ||
| decrease by 10% | 702,656 | (4,298) |
(ii) Price Risk
The Consolidated Entity is exposed to equity securities price risk. This arises from investments held by the Consolidated Entity and classified in the balance sheet as fair value through profit or loss. The Consolidated Entity is not exposed to commodity price risk.
At the share investment portfolio level, the Consolidated Entity is not overly exposed (by majority of its net assets) to one company or one particular industry sector of the market.
The table below summaries the impact of increases/decreases of the equity index on the Consolidated Entity's post-tax profit for the year. The analysis is based on the assumption that the equity index has increased by 9%/decreased by 6% with all other variables held constant.
| Impact on post-tax profit | Impact on othercomponents of equity | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| $ | $ | $ | $ | |
| increase by 9% | 10,293 | - | - | - |
| decrease by 6% | (6,862) | - | - | - |
(iii)Interest Rate Risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Consolidated Entity's exposure to market risk for changes in interest rates relate primarily to investments held in interest-bearing cash deposits.
| Consolidated Entity | |||
|---|---|---|---|
| 2012 | 2011 | ||
| $ | $ | ||
| Cash at bank | 2,305,220 | 1,651,165 | |
| Term deposit | 18,236,381 | 32,525,164 | |
| 20,541,601 | 34,176,329 | ||
| Weighted average interest rates | 5.06% | 6.04% |
The Consolidated Entity has performed a sensitivity analysis on its exposure to interest rate risk at the reporting date. The management assessment is based upon an analysis of current and future market conditions, in particular comments from the Reserve Bank of Australia on the likely movement of interest rates. The analysis demonstrates the potential effect on the current year results and equity which could result from a change in these risks.
| Consolidated Entity | ||||
|---|---|---|---|---|
| 2012 | 2011 | |||
| Change in profit | $ | $ | ||
| increase by 25bps (2011: 25bps) | 46,542 | 81,438 | ||
| decrease by 25bps (2011: 25bps) | (46,542) | (81,438) | ||
| Change in equity | ||||
| increase by 25bps (2011: 25bps) | 46,542 | 81,438 | ||
| decrease by 25bps (2011: 25bps) | (46,542) | (81,438) |
b) Credit Risk
Credit risk refers to the risk that a counterparty under a financial instrument will default (in whole or in part) on its contractual obligations resulting in financial loss to the Consolidated Entity. Concentrations of credit risk are minimised primarily by undertaking appropriate due diligence on potential investments, carrying out all market transactions through approved brokers, settling non-market transactions with the involvement of suitably qualified legal and accounting personnel (both internal and external), and obtaining sufficient collateral or other security (where appropriate) as a means of mitigating the risk of financial loss from defaults.
2 Financial Risk Management (continued)
Pursuant to the Cuervo Investment Agreement, the Company has a mortgage over the concessions held by Minera Cuervo S.A.C a wholly owned subsidiary of Cuervo Resources Inc. In addition, the Company holds a pledge over the shares of Minera Cuervo S.A.C., both securities are exercisable if Cuervo defaults under Investment Agreement.
The loan to Apurimac Ferrum S.A. is secured through a first ranking mortgage over all of the concessions included in the Mortgage Agreement signed between Strike Finance Pty Ltd and Apurimac Ferrum S.A.
The credit quality of the financial assets are neither past due nor impaired and can be assessed by reference to external credit ratings (if available with Standard & Poor's) or to historical information about counterparty default rates:
| Consolidated Entity | |||
|---|---|---|---|
| 2012 | 2011 | ||
| $ | $ | ||
| Cash and cash equivalentsAAA+A | 14,376,627500,0005,649,550 | 27,466,4696,300,000403,717 | |
| BBBBB+No external credit rating available | --15,42420,541,601 | --6,14334,176,329 | |
| Receivables and loansAAA+ABBBBB+No external credit rating available | 133,4261,52847,260--3,427,578 | 474,69292,032---219,343 | |
| 24,151,393 | 34,962,396 |
The Consolidated Entity measures credit risk on a fair-value basis. The carrying amount of financial assets recorded in the financial statements, net of any provision for losses, represents the Consolidated Entity's maximum exposure to credit risk.
All receivables noted above, except interest on term deposits, are due within 30 days. None of the above receivables are past due.
c) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities to meet obligations when due and to close out the market positions. At the end of the reporting period the Consolidated Entity held deposits of $18,236,381 (2011: $32,525,164) that mature within the next 3 months after 30 June 2012 that are expected to readily generate cash inflows for managing liquidity risk.
The financial liabilities disclosed have the following maturity obligation:
| Consolidated Entity | ||||
|---|---|---|---|---|
| 2012 | 2011 | |||
| Non-interest bearing | $ | $ | ||
| less than 6 months | 522,520 | 2,785,485 | ||
| 6 to 12 months | 219,395 | - | ||
| 741,915 | 2,785,485 | |||
| Interest-bearing | ||||
| between 1 & 2 years | - | 132,999 | ||
| between 2 & 5 years | - | - | ||
| - | 132,999 |
The amounts disclosed are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
d) Net Fair Value of Financial Assets and Liabilities
The carrying amounts of financial instruments recorded in the financial statements represent their fair value determined in accordance with the accounting policies disclosed in Note 3(f). The aggregate fair value and carrying amount of financial assets at the reporting date are set out in Notes 9 and 10. The carrying amount of the financial liabilities at the reporting date as set out in Note 14 approximates the current fair value.
2 Financial Risk Management (continued)
e) Fair Value Measurements
The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Consolidated Entity is the current bid price. These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.
The fair value of financial instruments must be estimated for recognition and measurement or for disclosure purposes.
AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
- (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
- (b) 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).The following table presents the Consolidated Entity's financial instruments measured and recognised at fair value at 30 June 2012 and 30 June 2011.
| Level 1 | Level 2 | Level 3 | Total$ |
|---|---|---|---|
| 114,364 | 1,742,253 | - | 1,856,617 |
| - | - | - | -1,856,617 |
| $Available-for-sale financial assets | $ | $114,3641,742,253- |
| 2011 | Level 1$ | Level 2$ | Level 3$ | Total$ |
|---|---|---|---|---|
| Assets | ||||
| Financial assets at fair value through profit or | ||||
| loss | ||||
| Trading securities | - | - | - | - |
| Available-for-sale financial assets | ||||
| Equity securities | - | - | - | - |
| Total assets | - | - | - | - |
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.
a) Impairment of Assets Classified as Held for Sale
The Consolidated Entity, through a co-operation agreement with the concession holder PT KJB, holds a coal mining right over the Berau coal concession. As a result of changes to the Indonesian mining law which resulted in inconsistencies between the enacted legislation and the Co-operation Agreement, both parties to the agreement are in the process of negotiating to resolve the issues that have arisen.
The Co-operation Agreement provides that if any of its provisions conflict with any law the parties must negotiate in good faith to agree on amendments to address the issue(s). Due to drawn out nature of the negotiations and the failure to date of Strike and PT KJB to resolve the dispute over the future development of the Berau Thermal Coal Project, management has deemed it prudent to impair the carrying value of the capitalised exploration and evaluation expenditure in relation to this project.
3 Critical Accounting Estimates and Judgements (continued)
The impairment charge against the value of the capitalised exploration and evaluation expenditure in relation to the Berau Project has been expensed through the Consolidated Statement of Comprehensive Income in the calculation of profit or loss in the current period. Management continues to monitor the status of negotiations with PT KJB in relation to the Berau Project and will review the carrying value of the exploration and evaluation asset accordingly.
b) Impairment of Capitalised Exploration and Evaluation expenditure
The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including the Consolidated Entity's ability to develop the relevant area of interest itself or, if not, whether it can successfully recover the capitalised exploration and evaluation asset through sale.
Factors that could impact the future recoverability include the grade and quantity of mineral resources, future technological changes which impact the cost of mining, future legal changes (including changes to environmental restoration obligations), changes to commodity prices and right of tenure.
c) Share-based Payment Transactions
The Consolidated Entity measures the cost of equity-settled transactions with Directors and employees by reference to the fair value of the equity instruments at the date at which they are granted, and applying an estimated probability that they will vest. The fair value is determined using a Black-Scholes option valuation model, with the assumptions detailed in Note 28. The accounting estimates and assumptions relating to equitysettled, share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.
d) Fair Value of Investment in Associate
On the reclassification of a subsidiary to an associate due to the "loss of control", the Consolidated Entity is required to fair-value the investment in the associate on initial recognition. Where the investment relates to an investment in an entity with quoted securities the Consolidated Entity values the investment with reference to the bid price of the securities on the day the control is lost. Where there is no active market in the securities of the fair-valued financial asset the Consolidated Entity determines the fair value of the investment by reference to, among other things, the following:
- Current market conditions;
- Expected future cash flows; and
- Fair value of similar financial instruments or entities based on arm's length market transactions between knowledgeable willing parties.
When determining the fair value of an investment for which there is no active market the Consolidated Entity uses valuation techniques that best suit the financial asset being valued. Valuations are inherently subjective and the Consolidated Entity makes critical judgements and estimates when determining both the type and quantum of inputs used in the valuation model.
During a prior reporting period the Consolidated Entity engaged an "Independent Expert" to fair-value its investment in an associate entity (Apurimac Ferrum S.A.). As the value of the associate was deemed to be represented by the value of the underlying exploration projects held by the entity and, due to the early exploration phase of the project, it was determined that the empirical/yardstick valuation method would be the most appropriate method to use in determining a fair value.
After receiving an initial independent valuation of the investment, due to the inherently uncertain nature of the inputs used in the valuation model (including the uncertainty surrounding the global economic climate, at the reporting date) the Board of the Consolidated Entity exercised its discretion and decided that for financial reporting purposes, it would be prudent to maintain a full impairment of the value of its shareholding in Apurimac Ferrum S.A. (2011: full impairment). The Board and management of the Consolidated Entity continue to pursue the development of the iron ore projects held by Apurimac Ferrum S.A., along with its partners, and expect to reevaluate the carrying value of the asset when a more robust valuation model is able to be used.
e) Treatment of Investment in Apurimac Ferrum S.A. as an Associate
On 30 June 2011 Strike Resources Limited increased its shareholding in Apurimac Ferrum S.A. ("AF") from 44% to 56%. This shareholding was maintained until 22 June 2012, when the Company sold 50% of the shareholding (being 6% of shareholding in Apurimac Ferrum S.A.), and 50% of the debt owned by AF, which were acquired from Iron Associates Corporation on 30 June 2011.
Pursuant to AASB 127 Consolidated and Separate Financial Statements control is defined as "the power to govern the financial and operating policies so as to obtain a benefit from those activities", and is normally presumed for a shareholding of greater than 50%. However, in the case of Strike's investment in AF, the voting rights of AF's shareholders are governed by the terms of the "AF Settlement Agreement", which was executed in July 2009, until July 2012. This agreement requires unanimous support from all AF shareholders for a motion to be carried at a shareholders meeting. As a result of this requirement the board of Strike has determined that "control" does not exist and therefore Strike doesn't consolidate AF when presenting its consolidated financial statements.
3 Critical Accounting Estimates and Judgements (continued)
f) Fair Value Estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets (such as publicly-traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Consolidated Entity is the current bid price and the appropriate quoted market price for financial liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active market (for example over-the-counter derivatives) is determined using valuation techniques. The Consolidated Entity may use a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to 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 Consolidated Entity for similar financial instruments.
4. Segment Information
a) Description of segments
Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions.
The Board of Directors considers the business from both a product and a geographic perspective and has identified three reportable segments as follows:
- Australia
- Indonesia (Thermal Coal)
- Peru (Iron Ore)
b) Segment information provided to the Board of Directors
The segment information provided to the Board of Directors for the reportable segments for the year ended 30 June 2012 and 30 June 2011 are as follows:
| 2012 | Indonesia | Peru | Australia | Total |
|---|---|---|---|---|
| Interest revenue | 84 | - | 5,630,893 | 5,630,977 |
| Fees for consulting to Apurimac Ferrum S.A. | - | - | 835,942 | 835,942 |
| Foreign exchange gain/(loss) | (541,818) | - | 1,264,224 | 722,406 |
| Inter-segment revenue | - | - | - | - |
| Revenue from external customers | (541,734) | - | 7,731,059 | 7,189,325 |
| Adjusted EBITDA | (3,632,418) | (370,906) | (24,412,801) | (28,416,125) |
| Depreciation and amortisation | (2) | - | (77,521) | (77,523) |
| Personnel costs | - | - | (2,235,607) | (2,235,607) |
| Impairment losses: | ||||
| - Resource projects | (2,657,633) | (218,303) | - | (2,875,936) |
| - Land | (219,305) | - | - | (219,305) |
| - Investment in associated entity | - | - | 1,688,034 | 1,688,034 |
| - Loan to Cuervo Resources Inc | - | - | (2,125,576) | (2,125,576) |
| - Loans to associated entity | - | - | (7,326,445) | (7,326,445) |
| Fair value adjustment – financial assets held as | - | - | 2,055,850 | 2,055,850 |
| fair value through profit or loss | ||||
| Loss/(gain) on sale of investment | - | - | (2,537,354) | (2,537,354) |
| Total segment assets | 4,363,184 | 477,501 | 25,810,008 | 30,650,693 |
| Total segment liabilities | (10,619,550) | (3,443,885) | (426,889) | (14,490,324) |
4 Segment Information (continued)
| 2011 | Indonesia | Peru | Australia | Total |
|---|---|---|---|---|
| Interest revenue | 456 | - | 2,662,765 | 2,663,221 |
| Consulting fees | 16,820 | - | 1,638,726 | 1,655,546 |
| Other income | - | - | 48,862 | 48,862 |
| Inter-segment revenue | - | - | - | - |
| Revenue from external customers | 17,276 | - | 4,350,353 | 4,367,629 |
| Adjusted EBITDA | (13,787,146) | (53,534) | (20,375,707) | (34,216,387) |
| Depreciation and amortisation | (15,729) | (2,158) | (128,741) | (146,628) |
| Personnel costs | (57,554) | - | (2,152,980) | (2,210,534) |
| Impairment losses: | ||||
| - Resource projects | (13,465,031) | - | (2,879) | (13,467,910) |
| - Investment in associated entity | - | - | (3,399,115) | (3,399,115) |
| - Loans to associated entity | - | - | (5,777,410) | (5,777,410) |
| Loss/(gain) on sale of investment | - | - | 1,785,620 | 1,785,620 |
| Total segment assets | 8,665,001 | 659,400 | 50,202,206 | 59,526,607 |
| Total segment liabilities | (10,683,971) | (3,115,311) | (2,794,477) | (16,593,759) |
c) Other segment information
(i) Segment revenue
Segment revenue reconciles to total revenue as per the Consolidated Comprehensive Income:
| 2012$ | 2011$ | |
|---|---|---|
| Revenue | ||
| Revenue | 5,630,977 | 2,663,221 |
| Other income | 1,558,348 | 1,704,408 |
| 7,189,325 | 4,367,629 |
(ii) Adjusted EBITDA
A reconciliation of adjusted EBITDA to operating profit before income tax is provided as follows:
| 2012$ | 2011$ | |
|---|---|---|
| Adjusted EBITDA | (28,416,125) | (34,216,387) |
| Intersegment eliminations | 15,656,826 | 9,910,960 |
| Depreciation | (77,523) | (146,628) |
| (12,836,822) | (24,452,055) | |
| Profit before tax from continuing operations | (12,836,822) | (24,452,055) |
| (12,836,822) | (24,452,055) |
(iii) Segment assets and segment liabilities
Reportable segments' assets and liabilities are reconciled to total assets and liabilities respectively as follows:
| 2012$ | 2011$ | |
|---|---|---|
| Segment assetsIntersegment eliminations | 30,650,693(220,208) | 59,526,607(15,474,868) |
| Total assets as per the Consolidated Statement of FinancialPosition | 30,430,485 | 44,051,739 |
| Segment liabilitiesIntersegment eliminations | (14,490,324)13,710,360 | (16,593,759)13,618,730 |
| Total liabilities as per the Consolidated Statement of FinancialPosition | (779,964) | (2,975,029) |
5. Profit/(Loss) for the Year
| Consolidated Entity | |||
|---|---|---|---|
| (a) | Revenue | 2012 | 2011 |
| Revenue from continuing operations | $ | $ | |
| Interest received – Cuervo loan | 3,697,727 | - | |
| Interest received – Cash on deposit | 1,933,250 | 2,663,221 | |
| 5,630,977 | 2,663,221 | ||
| Other income | |||
| Foreign exchange gain | 722,406 | - | |
| Consulting fees | 835,942 | 1,655,546 | |
| Other income | - | 48,862 | |
| 1,558,348 | 1,704,408 | ||
| Total revenue and other income | 7,189,325 | 4,367,629 | |
| (b) | Expenses | ||
| Operating expenses | |||
| Occupancy costs | 257,804 | 327,309 | |
| Finance costs | 13,812 | 18,748 | |
| Borrowing costs – interest paid | - | - | |
| 271,616 | 346,057 | ||
| Personnel costs | |||
| Cash remuneration | 1,824,914 | 2,186,141 | |
| Directors' and employees' options | 410,693 | 24,394 | |
| 2,235,607 | 2,210,535 | ||
| Administration costs | |||
| Consultancy fees | 386,999 | 229,255 | |
| Professional fees | 350,109 | 417,507 | |
| Depreciation | 77,523 | 146,629 | |
| Other corporate expenses | 1,211,284 | 888,910 | |
| 2,025,915 | 1,682,301 | ||
| Impairment losses | |||
| Resource projects | 2,875,936 | 13,467,910 | |
| Land | 219,305 | - | |
| Investment in associate entity | 22,923 | 3,399,115 | |
| Loan to Cuervo Resources Inc. | 2,125,576 | - | |
| Loans to associated entity | 7,326,445 | 5,777,410 | |
| 12,570,185 | 22,644,435 | ||
| Fair value adjustment – financial assets held as fair value through profit | |||
| or loss | 2,055,850 | - | |
| Loss/(gain) on sale of investment | 826,397 | (1,785,620) | |
| Loss on disposal of property, plant and equipment | 40,577 | 85,665 | |
| Foreign exchange loss | - | 3,636,311 | |
| 2,922,824 | 1,936,356 | ||
| Total expenses | |||
| 20,026,147 | 28,819,684 |
6. Income Tax Expense
| Consolidated Entity | |||
|---|---|---|---|
| 2012 | 2011 | ||
| $ | $ | ||
| (a) | Income tax expense | ||
| Current tax | 203,900 | 439,564 | |
| Deferred tax | - | - | |
| 203,900 | 439,564 | ||
| Income tax expense attributable to: | |||
| Profit from continuing operations | 203,900 | 439,564 | |
| Profit from discontinued operations | - | - | |
| Aggregate income tax expense | 203,900 | 439,564 | |
| (b) | Numerical reconciliation between tax expense and pre-tax netprofit/(loss) | ||
| Profit/(loss) from continuing operations before income tax | (12,836,822) | (24,452,055) | |
| (12,836,822) | (24,452,055) | ||
| Income-tax expense/(benefit) on above at 30%Increase in income tax due to: | (3,851,046) | (7,335,616) | |
| Non-deductible expenses and foreign losses | 2,214,454 | 4,320,752 | |
| Current year tax losses not recognised | 55,608 | - | |
| Movement in unrecognised temporary differences | 2,558,411 | - | |
| Capital gains | - | 731,811 | |
| Decrease in income tax expenses due to: | |||
| Non assessable income | - | 1,096,202 | |
| Utilisation of prior year tax losses | (719,752) | (731,811) | |
| Deductible equity raising costs | (257,675) | (328,368) | |
| Net gain on loss of control of AF and IAC | - | - | |
| Effect of current-year revenue losses not recognised | - | 2,247,030 | |
| Under provision for prior-year taxable income | - | 653 | |
| Foreign jurisdiction withholding tax | 203,900 | 438,911 | |
| Income-tax expense attributable to operating profit | 203,900 | 439,564 | |
| (c) | Deferred tax assets not brought to accountOn income-tax account | ||
| Carry-forward tax losses | 6,612,251 | 7,448,146 | |
| Other | 20,633,332 | - | |
| 27,245,583 | 7,448,146 | ||
| On capital account | |||
| Carry-forward tax losses | - | - | |
| Unrealised capital losses | -- | -- | |
| Total deferred tax assets not brought to account | 27,245,583 | 7,448,146 | |
| (d) | Deferred tax liabilities | ||
| Timing differences | 482,465 | 628,619 | |
| Offset by deferred tax assets recognised | (482,465) | (628,619) | |
| - | - | ||
The deferred tax asset not brought to account for the 2012 and 2011 years will only be obtained if:
- (i) the Consolidated Entity derives future assessable income of a nature and of an amount sufficient to enable the benefit to be realised;
- (ii) the Consolidated Entity continues to comply with the conditions for deductibility imposed by tax legislation; and
- (iii) in relation to Australian carry forward income tax losses the Consolidated Entity is able to meet the continuity of ownership and/or continuity of business tests.
The Company and controlled entities of the Company have not elected to consolidate for taxation purposes and have not entered into a tax sharing and funding agreement in respect of such arrangements.
7. Assets and Liabilities Classified as Held for Sale
a) Description
The Company having undertaken a strategic review of its operations during the year, and due to the legal dispute, the Board resolved to seek a settlement which involves an exit of the operations in Indonesia.
The results of Land and Exploration and Evaluation of Berau Thermal Coal Project have been recorded in these financial statements as being held for sale. Under AASB 5 Non-current Assets Held for Sale and Discontinued Operations, an asset is either held for recovery through use or for sale. As the Company is seeking settlement it has been classified as held for sale. The impairment of Berau Exploration and Evaluation to $4,021,028 is not a reflection of its commercial value rather a result of a prolonged dispute with the Indonesian partner which has excluded the possibility of a commercial sale. Related financial information is set out below. Further information is set out in note 4 – Segment Information and note 3(a) – Critical Accounting Estimates and Judgements/Impairment of Assets Classified as Held for Sale.
b) Assets classified as held for sale
| 2012 | 2011 | |
|---|---|---|
| $ | $ | |
| Land | 332,078 | - |
| Exploration and Evaluation | 4,021,028 | - |
| 4,353,106 | - | |
c) Liabilities directly associated with assets classified as held for sale
| 2012 | 2011 | |
|---|---|---|
| $ | $ | |
| Trade creditorsProvision | -- | -- |
| - | - |
8. Cash and Cash Equivalents
| Consolidated Entity | ||||
|---|---|---|---|---|
| 2012 | 2011 | |||
| $ | $ | |||
| Cash at bank | 2,315,298 | 1,651,165 | ||
| Term deposits | 18,236,381 | 32,525,164 | ||
| 20,551,679 | 34,176,329 |
Risk exposure
The Consolidated Entity's exposure to interest rate risk is discussed in note 2. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above.
9. Trade and Other Receivables
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| Current: | $ | $ |
| Amounts receivable from sundry debtors | 535,537 | 697,759 |
| Provision for doubtful debts | - | (32,675) |
| Loan to Cuervo Resources Inc | 5,216,470 | - |
| Provision for impairment | (2,203,269) | - |
| 3,548,738 | 665,084 | |
| Goods and service tax (GST) recoverable in Australia | 19,674 | 9,152 |
| Prepayments | 15,045 | 14,025 |
| 3,583,457 | 688,261 | |
| Non-Current: | ||
| Amounts receivable from sundry debtors | 539 | 55 |
| Loans to associated entity (Apurimac Ferrum S.A.) | 33,160,045 | 25,714,498 |
| Provision for impairment* | (33,134,249) | (25,714,498) |
| Loan to Cuervo Resources Inc | - | 97,751 |
| Provision for impairment | - | - |
| 26,335 | 97,806 |
* 2010 - $8,559,441 of this loan was provided for while the entity was a subsidiary.
Refer to Note 2 for the Consolidated Entity's exposure to credit risk, foreign exchange risk and interest rate risk.
10. Financial Assets at Fair Value through Profit or Loss
Financial assets at fair value through profit or loss are held for trading and include the following:
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| Investments comprise: | $ | $ |
| Current: | ||
| Cuervo Resources Inc. warrants – initial recognition | 3,697,727 | - |
| Add: net change in fair value | (1,955,474) | - |
| 1,742,253 | - | |
| Non-current: | ||
| Financial assets at fair value through profit and loss | ||
| Cuervo Resources Inc. shares – at cost | 214,563 | - |
| Add: net change in fair value | (100,199) | - |
| 114,364 | - |
Changes in fair value of financial assets at fair value through profit or loss are recorded as an expense in the current reporting period (Note 1(m)). The fair value of listed shares in financial assets at fair value through profit or loss has been determined directly by reference to bid prices in an active market.
Information about the Consolidated Entity's exposure to market and price risk is provided in Note 2(a).
11. Investments Accounted for using the Equity Method
Apurimac Ferrum S.A. ("AF") is a company incorporated and domiciled in Peru, South America. During the financial year Strike Resources Limited's shareholding in AF decreased from 56% as at 30 June 2011 to 50% on 22 June 2012. Due to the operation of a series of agreements between the AF shareholders executed between 21 July and 5 August 2009 Strike is not deemed to control AF pursuant to AASB 127 Consolidated and Separate Financial Statements and therefore does not consolidate the accounts of AF.
Summarised financial information of associate entity:
The Consolidated Entity's share of the results of its associate and its' aggregate assets and liabilities are as follows:
| Ownershipinterest1 | Assets | Liabilities | Loss | |
|---|---|---|---|---|
| Apurimac Ferrum S.A. | $ | $ | $ | |
| 2012 | 50% | 16,487,774 | 18,987,832 | 1,826,840 |
| 2011 | 56% | 11,441,652 | 12,108,636 | 941,005 |
- Strike Resources Limited decreased its shareholding in Apurimac Ferrum S.A. from 56% to 50% on 22 June 2012.
Consolidated Entity's share of associate losses not bought to account:
| 2012 | 2011 | ||
|---|---|---|---|
| $ | $ | ||
| Opening share of carry-forward losses | 1,741,520 | 800,515 | |
| Current year share of loss | 1,826,840 | 941,005 | |
| Closing share of carry-forward losses | 3,568,360 | 1,741,520 |
The Consolidated Entity's share of the associate's loss has not been brought to account as the investment in the associate is fully impaired, refer Note 1(b) and 3(d).
12. Property, Plant and Equipment
| Plant and | Leasehold | ||||
|---|---|---|---|---|---|
| Capital WIP | Land | equipment | improvements | Total | |
| At 1 July 2010 | $ | $ | $ | $ | $ |
| Cost or fair value | 218,856 | 678,267 | 510,068 | 95,935 | 1,503,126 |
| Accumulated | |||||
| depreciation andimpairment | - | - | (236,111) | (29,301) | (265,412) |
| Net carrying amount | 218,856 | 678,267 | 273,957 | 66,634 | 1,237,714 |
| 2011 Consolidated | |||||
| Carrying value at 1 | |||||
| July 2010 | 218,856 | 678,267 | 273,957 | 66,634 | 1,237,714 |
| Adj. to opening | |||||
| balance | (102,891) | (37,628) | - | - | (140,519) |
| Additions to CWIPTransfers out of CWIP | 35,252 | - | - | - | 35,252 |
| Transfers from CWIP | (150,257)- | -- | -30,853 | -119,070 | (150,257)149,923 |
| Depreciation expense | - | - | (125,103) | (21,526) | (146,629) |
| Cost of asset | |||||
| disposals | - | - | (217,518) | (93,262) | (310,780) |
| Accumulated | |||||
| depreciation on | |||||
| disposed assets | - | - | 143,046 | 31,710 | 174,756 |
| Carrying value at 30June 2011 | 960 | 640,639 | 105,235 | 102,626 | 849,460 |
| At 30 June 2011 | |||||
| Cost or fair value | 960 | 640,639 | 219,755 | 121,743 | 983,097 |
| Accumulated | |||||
| depreciation and | |||||
| impairment | - | - | (114,520) | (19,117) | (133,637) |
| Net carrying amount | 960 | 640,639 | 105,235 | 102,626 | 849,460 |
| 2012 Consolidated | |||||
| Carrying value at 1July 2011 | 960 | 640,639 | 105,235 | 102,626 | 849,460 |
| Foreign exchange | |||||
| adjustment | - | - | (29) | - | (29) |
| Additions to CWIP | 41,769 | - | - | - | 41,769 |
| Transfers out of CWIP | (42,449) | - | - | - | (42,449) |
| Transfers from CWIP | - | - | 27,513 | 14,936 | 42,449 |
| Depreciation expense | - | - | (70,063) | (7,458) | (77,521) |
| Cost of asset | |||||
| disposalsAccumulated | - | - | (77,905) | (121,743) | (199,648) |
| depreciation on | |||||
| disposed assets | - | - | 59,999 | 25,900 | 85,899 |
| Reclassed to Assets | |||||
| classified as held for | |||||
| sale | - | (640,639) | - | - | (640,639) |
| Carrying value at 30June 2012 | 280 | - | 44,750 | 14,261 | 59,291 |
| At 30 June 2012 | |||||
| Cost or fair value | 280 | - | 169,323 | 14,936 | 184,539 |
| Accumulated | |||||
| depreciation and | |||||
| impairment | - | - | (124,573) | (675) | (125,248) |
| Net carrying amount | 280 | - | 44,750 | 14,261 | 59,291 |
13. Exploration and Evaluation Expenditure
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| $ | $ | |
| Balance at the beginning of the year | 8,239,883 | 21,129,916 |
| Foreign exchange adjustment | (1,345,053) | - |
| Exploration and evaluation expenditure additions | 2,134 | 577,877 |
| Impairment loss – exploration and evaluation | (2,875,936) | (13,467,910) |
| Reclassed to assets classified as held for sale | (4,021,028) | - |
| Balance at the end of the year | - | 8,239,883 |
The impairment of Berau Exploration and Evaluation to $4,021,028 is not a reflection of its commercial value rather a result of a prolonged dispute with the Indonesian partner which has excluded the possibility of a commercial sale.
The ultimate recoverability of deferred exploration and evaluation expenditure is dependent on the successful development or sale of the relevant area of interest. Refer to Note 1 (o) (ii) & 3(b).
14. Trade and Other Payables
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| $ | $ | |
| Current | ||
| Trade creditors | 95,635 | 504,781 |
| Other creditors and accruals | 403,516 | 2,280,704 |
| 499,151 | 2,785,485 | |
| Non Current | ||
| Loan from associate | 219,395 | 132,999 |
Details of the Consolidated Entity's exposure to risks arising from current payables are set out in Note 2.
15. Provisions
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| Current | $ | $ |
| Provision for employee entitlements – annual leave | 61,306 | 56,545 |
| Other | 112 | - |
| 61,418 | 56,545 |
16. Issued Capital
| Consolidated Entity | ||
|---|---|---|
| 20122011 | ||
| 145,632,412 |
142,534,268 (2011: 133,534,268) fully-paid ordinary shares 148,109,255
Each fully-paid, ordinary share carries one vote per share and the right to participate in dividends.
| Date of |
|---|
| movementNo.$ |
| 130,034,268144,846,669 |
| 11 Feb 20113,500,000789,667 |
| -(3,924) |
| 133,534,268145,632,412 |
| -235,303 |
| 5 Aug 20119,000,0002,250,000 |
| -(8,460) |
| 142,534,268148,109,255 |
16 Issued Capital (continued)
Ordinary share
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
Options
Information relating to the Strike Resources Limited Employee Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period, is set out in note 28.
Capital risk management
The Consolidated Entity's objectives when managing capital are to safeguard their ability to continue as a going concern so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure the Consolidated Entity may return capital to shareholders, issue new shares or sell assets to reduce debt. The Consolidated Entity's non-cash investments can be realised to meet accounts payable arising in the normal course of business.
17. Reserves
| Consolidated Entity | |||
|---|---|---|---|
| 2012 | 2011 | ||
| $ | $ | ||
| Foreign currency translation reserve | (1,186,121) | (630,900) | |
| Share-based payments reserve | 13,191,026 | 12,780,333 | |
| 12,004,905 | 12,149,433 |
Nature and Purpose of Other Reserves
(i) Share-Based Payment
The share-based payments reserve records the consideration (net of expenses) received by the Company on the issue of options. In relation to options issued to Directors and employees for nil consideration, the fair values of these options are included in the share-based payments reserve.
(ii) Foreign Currency Translation
Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation reserve as described in Note 1(d) and accumulate in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.
17 Reserves (continued)
| Consolidated Entity | |||
|---|---|---|---|
| 2012 - Movement in share-based payment reserve | Grant date | No. | $ |
| The number of unlisted options outstanding over unissued | |||
| ordinary shares at the reporting date is as follows: | |||
| Opening balance at 1 July 2011 | 17,786,404 | 12,780,333 | |
| Granted options | |||
| Employee Options | |||
| Unlisted options exercisable at $0.36; expiring 23 Nov 16 | 24 Nov 11 | 1,416,668 | 120,386 |
| Unlisted options exercisable at $0.42; expiring 23 Nov 16 | 24 Nov 11 | 1,416,666 | 111,456 |
| Unlisted options exercisable at $0.56; expiring 23 Nov 16 | 24 Nov 11 | 1,416,666 | 95,106 |
| Unlisted options exercisable at $0.36; expiring 23 Nov 16 | 5 Apr 12 | 333,334 | 30,365 |
| Unlisted options exercisable at $0.42; expiring 23 Nov 16 | 5 Apr 12 | 333,333 | 28,458 |
| Unlisted options exercisable at $0.56; expiring 23 Nov 16 | 5 Apr 12 | 333,333 | 24,922 |
| Lapsed options | |||
| Other Options | |||
| Lapsed options exercisable at $0.938; expired 21 Jul 11 | (4,600,000) | - | |
| Lapsed options exercisable at $0.938; expired 13 Sep 11 | (500,000) | - | |
| Lapsed options exercisable at $2.788; expired 7 Mar 12 | (3,300,000) | - | |
| Lapsed options exercisable at $2.078; expired 7 Mar 12 | (500,000) | - | |
| Lapsed options exercisable at $3.978; cancelled 7 Oct 11 | (500,000) | - | |
| Lapsed options exercisable at $2.75; expired 29 Jul 11 | (903,404) | - | |
| Lapsed options exercisable at $1.30; cancelled 23 Nov 11 | (400,000) | - | |
| Lapsed options exercisable at $1.50; cancelled 23 Nov 11 | (400,000) | - | |
| Lapsed options exercisable at $1.75; cancelled 23 Nov 11 | (400,000) | - | |
| Lapsed options exercisable at $2.75; expired 4 Mar 12 | (250,000) | - | |
| Lapsed options exercisable at $0.36; cancelled 12 Apr 12 | (333,334) | - | |
| Lapsed options exercisable at $0.42; cancelled 12 Apr 12 | (333,333) | - | |
| Lapsed options exercisable at $0.56; cancelled 12 Apr 12 | (333,333) | - | |
| Lapsed options exercisable at $2.878; expired 1 May 12 | (33,000) | - | |
| Closing balance at 30 June 2011 | 10,250,000 | 13,191,026 |
| Consolidated Entity | ||
|---|---|---|
| Grant date | No. | $ |
| 20,086,404 | 12,991,282 | |
| 6 May 11 | 400,000 | 9,264 |
| 6 May 11 | 400,000 | 8,698 |
| 6 May 11 | 400,000 | 6,432 |
| 13 Feb 07 | (1,833,333) | - |
| 13 Feb 07 | (1,666,667) | - |
| - | (235,343) | |
| 17,786,404 | 12,780,333 | |
Equity-based Remuneration
On 24 November 2011 and 5 April 2012 the Company granted 5,250,000 unlisted Employee Options with exercise prices of $0.36 (1,750,002), $0.42 (1,749,999) and $0.56 (1,749,999), vesting immediately. The expiry date of these options is 23 November 2016.
The fair value of these options are expensed over the period from their date of grant to each respective vesting date. The fair value is calculated using a Black-Scholes options valuation model with an assumed volatility rate of 70.5% and 80.19% for the underlying SRK shares (Note 28).
18. Key Management Personnel Disclosures
a) Details of Key Management Personnel during the financial year:
| Current | |||
|---|---|---|---|
| Malcolm Richmond | Chairman/Non-Executive Director |
|---|---|
| Matthew Hammond | Non-Executive Director |
| William Johnson | Non-Executive Director |
| Tough Samantha | Non-Executive Director |
| Ken Hellsten | Managing Director |
| Julian Tambyrajah | Chief Financial Officer (appointed 2 April 2012) |
| Ian Cullen | General Manager Exploration and Development (appointed 1 July 2011 andceased on 15 July 2012) |
Past
| David Lim | Chief Financial Officer (ceased on 10 April 2012) |
|---|---|
| Mark Horn | Alternate Director for Mr F Moshiri (ceased 3 February 2011) |
| Farooq Khan | Non-Executive Director (ceased 3 February 2011) |
| Mike Lowry | General Manager – Berau (ceased 30 April 2011) |
| H. Shanker Madan | Non-Executive Chairman (ceased 3 February 2011) |
| Farhad Moshiri | Non-Executive Director (ceased 3 February 2011) |
| Andrew Napier | Process Engineer (ceased 29 April 2011) |
b) Compensation of Key Management Personnel
| Consolidated Entity | ||||
|---|---|---|---|---|
| 2012 | 2011 | |||
| $ | $ | |||
| Short-term employee benefits | 1,238,292 | 1,366,161 | ||
| Post-employment benefits | 96,324 | 156,278 | ||
| Long-term benefits | - | - | ||
| Termination benefits | - | - | ||
| Share-based payments | 333,764 | 12,197 | ||
| 1,668,380 | 1,534,636 |
Detailed remuneration disclosures are provided in the remuneration report on pages 10 to 17.
c) 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 are disclosed in the Remuneration Report section of the Directors' Report. There were no shares issued on the exercise of these options during the financial year.
(ii) Options holdings
The numbers of options over ordinary shares in the Company held during the financial year by each director of Strike Resources Limited and other key management personnel of the Consolidated Entity, including their personally related parties, are set out below:
| Balance at1 July 2011 | Balance atappointment | Granted ascompensation | Net changeother7 | Balance at30 June 2012 | Vested andexercisable | Unvested | |
|---|---|---|---|---|---|---|---|
| 2012 | |||||||
| M Richmond | 1,700,000 | - | - | (1,100,000) | 600,000 | 600,000 | - |
| M Hammond | - | - | - | - | - | - | - |
| W Johnson | 1,240,000 | - | - | (850,000) | 390,000 | 390,000 | - |
| S Tough 1 | - | - | - | - | - | - | - |
| K Hellsten | - | - | 1,500,000 | - | 1,500,000 | 1,500,000 | - |
| J Tambyrajah 2 | - | - | 1,000,000 | - | 1,000,000 | 1,000,000 | - |
| I Cullen 3 | - | - | 750,000 | - | 750,000 | 750,000 | - |
| D Lim 4 | 600,000 | - | 1,000,000 | (1,600,000) | - | - | - |
| Total | 3,540,000 | - | 4,250,000 | (3,550,000) | 4,240,000 | 4,240,000 | - |
-
Ms Tough was appointed as Non-Executive Director on 23 January 2012.
-
Mr Tambyrajah was appointed as Chief Financial Officer on 2 April 2012.
-
Mr Lim ceased his position as the Chief Financial Officer on 10 April 2012.
-
Mr Ian was appointed as General Manager Exploration and Development on 1 July 2011 and ceased on 15 July 2012.
| Balance at | Balance at | Granted as | Net change | Balance at | Vested and | Unvested | |
|---|---|---|---|---|---|---|---|
| 1 July 2010 | appointment | compensation | other7 | 30 June 2011 | exercisable | ||
| 2011 | |||||||
| M Hammond | - | - | - | - | - | - | - |
| M Horn1 | - | - | - | - | - | - | - |
| K Hellsten | - | - | - | - | - | - | - |
| W Johnson | 1,240,000 | - | - | - | 1,240,000 | 1,240,000 | - |
| F Khan2` | 3,050,000 | - | - | (3,050,000) | - | - | - |
| D Lim | - | - | 600,000 | - | 600,000 | 1,250,000 | - |
| M Lowry3 | 250,000 | - | - | - | 250,000 | 250,000 | - |
| H S Madan4 | 6,130,000 | - | - | (6,130,000) | - | - | - |
| F Moshiri5 | - | - | - | - | - | - | - |
| A Napier 6 | - | - | - | - | - | - | - |
| M Richmond | 1,700,000 | - | - | - | 1,700,000 | 1,700,000 | - |
| Total | 12,370,000 | - | 600,000 | (9,180,000) | 3,790,000 | 3,790,000 | - |
18 Key Management Personnel Disclosures (continued)
-
Mr Horn ceased holding the office of alternate director on 3 February 2011.
-
Mr Khan ceased holding the office of director on 3 February 2011.
-
Mr Lowry ceased as a member of Key Management Personnel on 30 April 2011.
-
Mr Madan ceased holding the office of director on 3 February 2011.
-
Mr Moshiri ceased holding the office of director on 3 February 2011.
-
Mr Napier was deemed to be a member of Key Management Personnel from 7 July 2010 to 29 April 2011. 7. Figures in "net change other" column represent final holding when the individual ceased being a KMP.
(iii)Share holdings
The numbers of shares in the Company held during the financial year by each director of Strike Resources Limited and other key management personnel of the Consolidated Entity, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.
| Balance atbeginning ofyear | Receivedduring theyear on theexercise ofoptions | Net changeother | Balance atthe end of theyear | |
|---|---|---|---|---|
| 2012 | ||||
| M Richmond | 100,000 | - | - | 100,000 |
| M Hammond | - | - | - | - |
| W Johnson | ||||
| S Tough 1 | ||||
| K Hellsten | 187,083 | - | 30,000 | 217,083 |
| J Tambyrajah2 | - | - | - | - |
| I Cullen3 | - | - | - | - |
| D Lim4 | 38,100 | - | (38,100) | - |
| Total | 325,183 | - | (8,100) | 317,083 |
-
Ms Tough was appointed as Non-Executive Director on 23 January 2012.
-
Mr Tambyrajah was appointed as Chief Financial Officer on 2 April 2012.
-
Mr Lim ceased his position as Chief Financial Officer on 10 April 2012.
-
Mr Ian was appointed as General Manager Exploration and Development on 1 July 2011 and ceased on 15 July 2012.
| Balance atbeginning ofyear | Receivedduring theyear on theexercise ofoptions | Net changeother | Balance atthe end of theyear | |
|---|---|---|---|---|
| 2011 | ||||
| M Hammond | - | - | - | - |
| K Hellsten. | 187,083 | - | - | 187,083 |
| M Horn4 | - | - | - | - |
| W Johnson | - | - | - | - |
| F Khan1 | 13,941,605 | - | (13,941,605) | - |
| D Lim | 38,100 | - | - | 38,100 |
| M Lowry2 | - | - | - | - |
| H S Madan3 | 496,343 | - | (496,343) | - |
| F Moshiri4 | - | - | - | - |
| A Napier5 | - | - | - | - |
| M Richmond | 100,000 | - | - | 100,000 |
| Total | 14,763,131 | - | (14,437,948) | 325,183 |
-
Mr Khan ceased being a director on 3 February 2011.
-
Mr Lowry ceased being a member of Key Management Personnel on 30 April 2011.
-
Mr Madan ceased being a director on 3 February 2011.
-
Mr Moshiri ceased be a director on 3 February 2011. (Mr. Horn was alternate director for Mr Moshiri).
-
Mr Napier was deemed to be a member of Key Management Personnel from 7 July 2010 to 29 April 2011.
18 Key Management Personnel Disclosures (continued)
d) Loans to Key Management Personnel
There were no loans to Key Management Personnel (or their personally-related entities) during the financial year.
e) Other Transactions with Key Management Personnel
During the year, the Company paid Mrs Helen Hellsten, a related party of Mr Ken Hellsten, $5,668 for services provided during the year.
There were no other transactions with Key Management Personnel (or their personally-related entities) during the financial year.
19. Auditors' Remuneration
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 Entity | |||
|---|---|---|---|
| 2012 | 2011 | ||
| $ | $ | ||
| Auditors of the Consolidated Entity | |||
| Audit and review of financial statements | |||
| - BDO Audit (WA) Pty Ltd | 84,774 | 51,934 | |
| Other services – technical updates | |||
| - BDO (WA) Pty Ltd | - | 795 | |
| Auditors of the Peruvian subsidiaries | |||
| Audit and review of financial statements | |||
| - BDO Pazos, Lopez de Romana, Rodriguez | 6,830 | 7,187 | |
| 91,604 | 59,916 |
20. Contingent Assets and Liabilities
a) Strike Resources Peru S.A.C. option
Strike Resources Peru S.A.C. (the Company's Peruvian subsidiary) granted Apurimac Ferrum S.A. an option over its mining concessions exercisable for US$1.75 million.
b) Cristoforo Agreement
On 15 June 2010, Strike Resources Peru S.A.C. ("Strike Peru") entered into an assignment of mining rights and option agreement with the Peruvian owner of three mineral concessions in the Apurimac District totalling 1,900 hectares, being the Cristoforo 14, Cristoforo 28 and Ferroso 29 concessions ("Cristoforo Agreement"). The consideration paid (and payable) under the agreement was US$31,250 (paid on execution), US$50,000 payable within 12 months and 15 business days from execution, US$50,000 payable within 6 months thereafter and a further US$1.05 million is payable if Strike Peru exercises the option to acquire the concessions. The option may be exercised on or before 13 June 2013. Under the terms of the AF Settlement Agreement Strike Peru was required to assign the Cristoforo Agreement to Apurimac Ferrum S.A. (AF) for no consideration (other than reimbursement of the money paid by Strike Peru to the Cristoforo vendor). Accordingly, Strike Peru assigned this option to AF on 15 March 2011.
c) Native Title
The Consolidated Entity's tenements in Australia may be subject to native title applications in the future. At this stage it is not possible to quantify the impact (if any) that native title may have on the operations of the Consolidated Entity.
d) Government Royalties
The Consolidated Entity is liable to pay royalties on production obtained from its mineral tenements/concessions. For example, the applicable Government royalties in Peru are between 1% to 3% based on the value of production. At this stage it is not possible to quantify the potential financial obligation of the Consolidated Entity under Government royalties
e) Berau Thermal Coal Project Royalties
The Consolidated Entity is liable to pay a royalty to PT Kaltim Jaya Bara ("KJB"), the owner of the mining concession on which the Consolidated Entity's Berau Thermal Coal Project is located. As a result of changes to the Indonesian mining law it is unclear if Strike would legally be able to pay this royalty should it commence production at Berau. Due to uncertainty created by the mining law changes and issues concerning the estimation of such a royalty at this stage of the project, it is not possible to quantify the potential financial obligation of the Consolidated Entity to pay a royalty to KJB.
20 Contingent Assets and Liabilities (continued)
f) Directors' Deeds
The Consolidated Entity has entered into deeds of indemnity with certain Strike Resources Limited Directors, indemnifying them against liability incurred in discharging their duties as Directors/officers of the Consolidated Entity. As at the reporting date, no claims have been made under any such indemnities and, accordingly, it is not possible to quantify the potential financial obligation of the Consolidated Entity under these indemnities.
g) Millenium Legal Dispute
The On 20 December 2011 the Company announced that a court in Lima has dismissed Millenium Trading's legal action against Strike's joint venture vehicle Apurimac Ferrum (AF). Millenium's case sought to invalidate a 2006 agreement under which it relinquished options over certain mining concessions to enable AF to buy them (Cancellation Agreement). An appeal lodged by Millennium has also been dismissed on procedural grounds.
Despite AF's efforts the identity of the relevant concession has not yet been agreed. AF therefore commenced an arbitration to resolve this issue. The arbitration is ongoing. A mining operation of this kind by Milllenium will not materially affect AF's development plans.
An arbitration hearing to define the issues in dispute was held on 27 April 2012. The arbitrator agreed with AF's proposed statement of the issues to be resolved. A further hearing was held on 16 May 2012 to consider certain questions about the arbitrator's jurisdiction before the substantive hearing to resolve the dispute could be scheduled.
Millenium has the right to conduct a small-scale mining operation on an AF concession, the identity of which is to be agreed. As the parties have been unable to agree on the identity of the concession, AF referred the matter to arbitration. In early July the arbitrator asked the parties to make submissions about which concession would be most suitable for Millenium to conduct this operation. Submissions were made in August and a decision on this matter and the jurisdictional question is pending.
21. Commitments
a) Lease Commitments
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| Non-cancellable operating lease commitments: | ||
| not longer than one year | 160,638 | 220,365 |
| between 2 years and 5 years | 236,388 | 675,212 |
| 397,026 | 895,577 |
The Consolidated Entity leases an office in Perth, Australia under a non-cancellable operating lease with an expiry date between 2 and 4 years.
The lease rent is subject to a fixed 4.5% increase on each anniversary of the term. Strike is required to pay the annual outgoings incurred by the lessor in respect of the premises. This figure varies on an annual basis.
b) Mineral Tenement/Concession/Mining Rights - Commitments for Expenditure
Australian tenements
In order to maintain current rights of tenure to exploration tenements, the holders of Australian mineral tenements are required to outlay lease rentals and meet minimum expenditure commitments. In the financial year ended 30 June 2010 the Consolidated Entity entered into a farm-in agreement with Process Minerals International Pty Ltd ("PMI"), a subsidiary of ASX-listed Mineral Resources Limited. Under this agreement PMI is required to meet the minimum expenditure commitments over the Australian tenements in which Strike holds an interest. Financial commitments for subsequent periods are contingent upon the continuity of the farm-in arrangement with PMI, future exploration and evaluation results, and as such cannot be reliably estimated.
Peruvian concessions
The Consolidated Entity is required to pay annual licence fees by 30 June of each year, at rates which vary on an amount per-hectare basis. The total amount of this commitment will depend upon the area of concessions relinquished (if any) and the area of new concessions granted (if any) and therefore cannot be reliably estimated. As a result of finalising the arbitration process with the shareholders of Apurimac Ferrum S.A.("AF"), the Consolidated Entity granted on option over Peruvian tenements held by its subsidiary, Strike Resources Peru S.A.C. Under the terms of the AF Settlement Agreement AF is obliged to make all necessary payments to keep the concessions in good standing. Financial commitments for subsequent periods are contingent upon the continuity of the agreement with AF, future exploration and evaluation results, and as such cannot be reliably estimated.
21 Commitments (continued)
Australian heritage protection agreements
These agreements facilitate the preservation of Aboriginal heritage through the protection of Aboriginal sites and objects upon the grant of mining tenements in Western Australia. The Heritage Protection Agreements require the Consolidated Entity to conduct Aboriginal heritage surveys prior to conducting exploration that is not low-impact in nature and detail procedures to be followed if an Aboriginal site is identified.
Agreements with Peruvian landowners and community groups
The Company notes that holding a mineral concession in Peru does not grant automatic access to the surface land. Notwithstanding an easement procedure is contemplated in Peruvian law, in practice, mining companies have to negotiate and enter into private agreements with landowners/community groups in order to have access to their land for the purposes of conducting mining activities (exploration, evaluation, development and mining). Multiple landowners/community groups are affected by the Consolidated Entity's proposed mining activities on a majority of the Consolidated Entity's Peruvian concessions. To date, approvals have been sought and obtained for drilling on a programme by programme basis.
Obtaining approvals from landowners/community groups can be a complicated and lengthy process. The Consolidated Entity will have to commit funds to community groups and/or landowners to secure land access agreements to develop its Peruvian projects. There can be no guarantees that such approvals will be obtained, or as to the terms upon which they will be obtained. At this stage it is not possible to quantify the potential financial obligation of the Consolidated Entity in this regard.
22. Related-Party Disclosures
a) Subsidiaries
Interests in subsidiaries are set out in Note 23.
During the year $ nil (2011: $6,232,056) was loaned to subsidiaries to fund exploration activities.
b) Associates
Apurimac Ferrum S.A. is an associate as set out in Note 11.
Loans to associates - Apurimac Ferrum
On 21 July 2009, through the AF Settlement Agreement, Strike Resources Limited entered into a replacement loan agreement with Apurimac Ferrum S.A.("AF") in which US$20 million may be advanced to AF to undertake exploration on the Apurimac and Cusco Iron Ore projects. This loan is interest bearing (USD Monthly LIBOR rate + 2% per annum) as provided for under the AF Settlement Agreement.
On 16 May 2012, Apurimac Ferrum S.A. entered into the AF Finance Agreement with Strike Finance Pty Ltd for a principal amount US$6m, interest rate is 10% for principal amounts drawn and repaid before 31 December 2012 and 15% for principal amounts repaid after 31 December 2012. The latest repayment date is 31 January 2014.
| 2012$ | 2011$ | |
|---|---|---|
| Balance at 1 July | 25,714,498 | 14,957,202 |
| Loans advanced | 9,310,500 | 7,663,226 |
| Interest charged | 607,044 | 348,399 |
| Loan and interest purchased from IAC (Iron Associates Corporation) | - | 5,086,334 |
| Loan and interest sold to D&C Group S.A.C | (2,715,628) | - |
| Expenses paid on behalf of AF | 543,578 | 1,164,800 |
| Reclassed to Expense Claim | (1,708,378) | - |
| Foreign exchange movements | 1,408,431 | (3,505,463) |
| Balance at 30 June | 33,160,045 | 25,714,498 |
| Less provision for impairment | 33,134,249 | 25,714,498 |
| Carrying value | 25,796 | - |
Claimable expenses - Apurimac Ferrum
According to the Technical Service Agreement between Strike Resources Limited and Apurimac Ferrum S.A. (AF), Strike Resources Limited will invoice AF expenses of personnel who provide services to AF. This has been effective since 10 November 2009.
22 Related-Party Disclosures (continued)
| 2012$ | 2011$ | |
|---|---|---|
| Opening Balance | 80,014 | (26,433) |
| Reclassed from Loans to AF | 1,708,378 | - |
| Expenses paid on behalf of AF | 146,256 | 106,447 |
| Collected from AF | (1,741,052) | - |
| Closing Balance | 193,596 | 80,014 |
| Less provision for impairment | - | 80,014 |
| Carrying value | 193,596 | - |
| c.Transactions with related parties |
Fees for services provided by:
| 2012$ | 2011$ |
|---|---|
- Ms Helen Hellsten a related party of Mr Ken Hellsten 5,668 -
- Mr Mark Horn, Alternate Director for Mr Farhad Moshiri (paid to M Horn and Co, a business of which Mr Horn is a principal) - 33,600
23. Investment in Controlled Entities
| Country of | Percentage of | ||
|---|---|---|---|
| Incorporation | Ownership | ||
| 2012 | 2011 | ||
| Strike Finance Pty Ltd | Australia | 100% | 100% |
| Strike Australian Operations Pty Ltd | Australia | 100% | 100% |
| Strike Operations Pty Ltd ("SOPL") | Australia | 100% | 100% |
| PT Indo Batubara (100% beneficially owned by SOPL) | Indonesia | 100% | 100% |
| Strike Indo Operations Pty Ltd ("SIOPL") | Australia | 100% | 100% |
| PT Orion Indo Mining (100% beneficially owned by SIOPL) | Indonesia | 100% | 100% |
| Ferrum Holdings Limited | British Anguilla | 100% | 100% |
| Strike Resources Peru S.A.C. | Peru | 100% | 100% |
24. Events Occurring after the Reporting Period
The Company announced on 31 July 2012 that Cuervo had commenced drilling at the Bob 1 project.
On 6 September 2012 the Company announced that AF had restructured the organisation in line with current programmes and as a precursor to the result of the shootout. The shootout will result in one shareholder owning 100% of AF and therefore enabling AF to be consolidated. The cost savings are estimated at approximately US$250k per month from the December quarter onwards.
The Consolidated Entity entered into a farm-in agreement with Process Minerals International Pty Ltd ("PMI"), a subsidiary of ASX listed Mineral Resources Limited for the potential mining of iron ore from Strike's Paulsens East project (EL47/1328 and PL47/1170) located in the Pilbara. Under this agreement PMI has exclusive rights to explore for and mine iron ore from Paulsens East in return Strike will pay a royalty of A$ 3.20 per dry tonne of ore mined. As this royalty is contingent on the successful development of a mine and due to the uncertain nature of mine production it is not possible to quantify the potential financial benefit to the Consolidated Entity of this royalty.
On 23 July PMI informally advised Strike that it intends to terminate the agreement, although it has not yet given a formal notice. The Company is assessing its options in relation to this project.
There have been no further changes of significance since then.
25. Reconciliation of Profit after Income Tax to Net Cash Inflow from Operating Activities
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| $ | $ | |
| Operating profit/(loss) after tax | (13,040,722) | (24,891,619) |
| Interest received – Cuervo loan | (3,697,727) | - |
| Consulting fees | (835,942) | - |
| Non cash flows in profit/(loss) from ordinary activities: | ||
| Depreciation - plant & equipment | 77,522 | 146,629 |
| Adjustment for movement in foreign exchange | (1,011,269) | 3,979,521 |
| Adjustment on deconsolidation of subsidiary | - | - |
| Fair value adjustments | ||
| Loan to associated entity | 9,310,500 | 5,777,410 |
| Loan to Cuervo Resources Inc. | 2,125,576 | - |
| Fair value through profit and loss financial assets | 2,055,850 | - |
| Available-for-sale financial assets | - | (2,268,015) |
| Investment in associate | 22,923 | 1,149,115 |
| Exploration and evaluation projects | 2,875,936 | 13,467,910 |
| Land | 219,305 | - |
| Directors' and employees' options | 410,693 | 24,394 |
| Loss on sale of fixed assets | 40,577 | 85,665 |
| Loss on sale of investments | 826,397 | 482,395 |
| Decrease/(increase) in assets: | ||
| Receivables | (362,162) | (1,604,161) |
| Increase/(decrease) in liabilities: | ||
| Trade creditors and accruals | 11,978 | 2,640,742 |
| Provisions | (14,182) | (661,289) |
| Net cash outflows from operating activities | (984,747) | (1,671,303) |
26. Non – cash Investing and Financing Activities
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| $ | $ | |
| Shares issued to acquire Apurimac Ferrum S.A. | 2,250,000 | - |
On 5 August 2011, Strike Resources Limited issued 9,000,000 shares, as part of the acquisition costs, to Iron Associates Corporation to acquire 12% share and US$5m debts of Apurimac Ferrum S.A.
27. Earnings per Share
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| cents | cents | |
| (a) Basic earnings/(loss) per share | ||
| From continuing operations attributable to the ordinary equity holders ofthe Company | (9.20) | (18.95) |
| From discontinued operation | - | - |
| Total basic earnings per share attributable to the ordinary equity holders | ||
| of the Company | (9.20) | (18.95) |
| (b) Diluted earnings/(loss) per share | ||
| From continuing operations attributable to the ordinary equity holders of | (9.20) | (18.95) |
| the Company | ||
| From discontinued operation | - | - |
| Total diluted earnings per share attributable to the ordinary equity holdersof the Company | (9.20) | (18.95) |
27 Earnings per Share (continued)
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| (c) Reconciliations of earnings used in calculating earnings per shareBasic earnings per shareLoss attributable to the ordinary equity holders of the Company used inCalculating basic earnings per share:From continuing operationsFrom discontinued operation | (13,040,722)- | (24,891,619)- |
| (d) Weighted average number of shares used as the denominator | ||
| Weighted average number of ordinary shares used as the denominatorin calculating basic earnings per shareWeighted average number of ordinary shares and potential ordinary | 141,671,254 | 131,367,145 |
| shares used as the denominator in calculating diluted earnings per share | 141,671,254 | 131,367,145 |
28. Share-Based Payments
The establishment of the Strike Resources Limited Employee Option Plan was approved by shareholders on 6 November 2008. Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share within 5 business days after the exercise.
A total of 5,250,000 Employee Options were granted during the year (Note 17). The reasons for the grant of these options to the employees are as follows:
- (a) The options issue was designed to act as an incentive for the recipients to strive to achieve the Company's goals with the aim of enhancing shareholder value.
- (b) The options provide an equity holding opportunity for the recipients which is linked to the Company's share price performance.
- (c) Based on the option exercise price and the rate at which the options vest, the exercise of the options by the recipient is potentially only likely to occur if there is sustained upward movement in the Company's share price.
- (d) The number of options issued to recipients has been determined having regard to the level of employees' salaries being paid and is a cash-free, effective and efficient way of providing an appropriate level of remuneration as well as providing ongoing equity-based incentives for the recipients to remain with the Company with a view to improving the future growth of the Company.
- (e) As a relatively-small company, with much of its available funds dedicated or committed to its resource projects (and also in seeking opportunities in relation to the same), and in financing its day to day working capital requirements, the Company is not always in a position to maintain competitive cash salary ranges for its directors and employees within the industry in which it operates.
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| $ | $ | |
| Share-based payments expense | 410,693 | 24,394 |
28 Share-Based Payments (continued)
| Grantdate | Expirydate | Exerciseprice$ | Balance atstart of year | Grantedduring theyear | Exercisedduringthe year | Forfeitedduring theyear | Balance atend of theyear | Vested andexercisableat end ofyear |
|---|---|---|---|---|---|---|---|---|
| Consolidated entity - 2012 | ||||||||
| 21 Jul 06 | 21 Jul 11 | 0.938 | 4,600,000 | - | - | (4,600,000) | - | - |
| 13 Sep 06 | 12 Sep 11 | 0.938 | 500,000 | - | - | (500,000) | - | - |
| 7 Mar 07 | 7 Mar 12 | 2.788 | 3,300,000 | - | - | (3,300,000) | - | - |
| 7 Mar 07 | 7 Mar 12 | 2.078 | 500,000 | - | - | (500,000) | - | - |
| 5 Jun 07 | 1 May 12 | 2.878 | 33,000 | - | - | (33,000) | - | - |
| 3 Dec 07 | 3 Dec 12 | 3.978 | 4,000,000 | - | - | (500,000) | 3,500,000 | 3,500,000 |
| 4 Mar 08 | 4 Mar 13 | 2.878 | 250,000 | - | - | - | 250,000 | 250,000 |
| 14 Oct 08 | 13 Oct 13 | 2.75 | 250,000 | - | - | (250,000) | - | - |
| 25 Nov 09 | 25 Nov 12 | 2.50 | 750,000 | - | - | - | 750,000 | 750,000 |
| 25 Nov 09 | 25 Nov 12 | 2.75 | 750,000 | - | - | - | 750,000 | 750,000 |
| 25 Nov 09 | 25 Nov 12 | 3.25 | 750,000 | - | - | - | 750,000 | 750,000 |
| 6 May 11 | 23 Mar 13 | 1.30 | 400,000 | - | - | (400,000) | - | - |
| 6 May 11 | 23 Mar 13 | 1.50 | 400,000 | - | - | (400,000) | - | - |
| 6 May 11 | 23 Mar 13 | 1.75 | 400,000 | - | - | (400,000) | - | - |
| 24 Nov 11 | 23 Nov 16 | 0.36 | - | 1,416,668 | - | (333,334)* | 1,083,334 | 1,083,334 |
| 24 Nov 11 | 23 Nov 16 | 0.42 | - | 1,416,666 | - | (333,333)* | 1,083,333 | 1,083,333 |
| 24 Nov 11 | 23 Nov 16 | 0.56 | - | 1,416,666 | - | (333,333)* | 1,083,333 | 1,083,333 |
| 5 Apr 12 | 23 Nov 16 | 0.36 | - | 333,334 | - | - | 333,334 | 333,334 |
| 5 Apr 12 | 23 Nov 16 | 0.42 | - | 333,333 | - | - | 333,333 | 333,333 |
| 5 Apr 12 | 23 Nov 16 | 0.56 | - | 333,333 | - | - | 333,333 | 333,333 |
| 16,883,000 | 5,250,000 | - | (11,883,000) | 10,250,000 | 10,250,000 | |||
| Weighted-average exercise price | 2.55 | 0.45 | 1.69 | 2.24 | 2.24 |
* Options issued to individuals who ceased employment with Strike Resources Limited during the year, these options were not forfeited and did not lapse during the year.
| Grant date | Expirydate | Exerciseprice$ | Balance atstart of year | Grantedduringthe year | Exercisedduring theyear | Forfeitedduringthe year | Balance atend of theyear | Vested andexercisableat end ofyear |
|---|---|---|---|---|---|---|---|---|
| Consolidated entity - 2011 | ||||||||
| 21 Jul 06 | 21 Jul 11 | 0.938 | 4,600,000 | - | - | - | 4,600,000 | 4,600,000 |
| 13 Sep 06 | 13 Sep 11 | 0.938 | 500,000 | - | - | - | 500,000 | 500,000 |
| 13 Feb 07 | 9 Feb 11 | 0.178 | 1,833,333 | - | (1,833,333) | - | - | - |
| 13 Feb 07 | 9 Feb 11 | 0.278 | 1,666,667 | - | (1,666,667) | - | - | - |
| 7 Mar 07 | 7 Mar 12 | 2.788 | 3,300,000 | - | - | - | 3,300,000 | 3,300000 |
| 7 Mar 07 | 7 Mar 12 | 2.078 | 500,000 | - | - | - | 500,000 | 500,000 |
| 5 Jun 07 | 1 May 12 | 2.878 | 33,000 | - | - | - | 33,000 | 33,000 |
| 3 Dec 07 | 3 Dec 12 | 3.978 | 4,000,000 | - | - | - | 4,000,000 | 4,000,000 |
| 4 Mar 08 | 4 Mar 13 | 2.878 | 250,000 | - | - | - | 250,000 | 250,000 |
| 14 Oct 08 | 13 Oct 13 | 2.75 | 250,000 | - | - | - | 250,000 | 250,000 |
| 25 Nov 09 | 24 Nov 12 | 2.50 | 750,000 | - | - | - | 750,000 | 750,000 |
| 25 Nov 09 | 24 Nov 12 | 2.75 | 750,000 | - | - | - | 750,000 | 750,000 |
| 25 Nov 09 | 24 Nov 12 | 3.25 | 750,000 | - | - | - | 750,000 | 750,000 |
| 6 May 11 | 23 Mar 13 | 1.30 | - | 400,000 | - | - | 400,000 | 400,000 |
| 6 May 11 | 23 Mar 13 | 1.50 | - | 400,000 | - | - | 400,000 | 400,000 |
| 6 May 11 | 23 Mar 13 | 1.75 | - | 400,000 | - | - | 400,000 | 400,000 |
| 19,183,000 | 1,200,000 | (3,500,000) | - | 16,883,000 | 16,883,000 | |||
| Weighted-average exercise price | 2.06 | 1.52 | 0.23 | 2.55 | 2.55 |
No options were exercised during the period.
The weighted-average remaining contractual life of share options outstanding at the end of the period was 2.08 years (2011: 0.89 years).
Fair value of options granted
The assessed fair value at grant date of options granted during the year ended 30 June 2012 was $0.086 for $0.36 options, $0.08 for $0.42 options and $0.07 for $0.56 options (2011: $0.023 for $1.30 options, $0.022 for $1.50 options and $0.016 for $1.75 options). The fair value at grant date is independently determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the riskfree interest rate for the term of the option.
The model inputs for options granted during the year ended 30 June 2012 included:
28 Share-Based Payments (continued)
Options granted on 24 November 2011
- a. the options were granted for no consideration and vest immediately. Vested options are exercisable for a period of five years after vesting.
- b. exercise prices of $0.36, $0.42 and $0.56 (2011: $1.30, $1.50 and $1.75)
- c. grant date: 24 November 2011 (2011: 6 May 2010)
- d. expiry date: 23 November 2016 (2011: 23 March 2013)
- e. share price at grant date: $0.185 (2011: $0.365)
- f. expected price volatility of the Company's shares: 70.5% (2011: 68%)
- g. expected dividend yield: 0% (2011: 0%)
- h. risk-free interest rate: 3.29% (2011: 5.145%)
Options granted on 5 April 2012
- a. the options were granted for no consideration and vest immediately. Vested options are exercisable for a period of four and a half years after vesting.
- b. exercise prices of $0.36, $0.42 and $0.56 (2011: $1.30, $1.50 and $1.75)
- c. grant date: 5 April 2012 (2011: 6 May 2010)
- d. expiry date: 23 November 2016 (2011: 23 March 2013)
- e. share price at grant date: $0.180 (2011: $0.365)
- f. expected price volatility of the Company's shares: 80.19% (2011: 68%)
- g. expected dividend yield: 0% (2011: 0%)
- h. risk-free interest rate: 3.555% (2011: 5.145%)
The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information.
29. Parent Entity Information
The following details information related to the parent entity, Strike Resources Limited, at 30 June 2012 and 30 June 2011. The information presented here has been prepared using consistent accounting policies as presented in Note 1.
| 2012 | 2011 | |
|---|---|---|
| $ | $ | |
| Current assets | 25,633,433 | 34,670,794 |
| Non-current assets | 199,990 | 19,023,382 |
| Total assets | 25,833,423 | 53,694,176 |
| Current liabilities | 395,249 | 2,793,971 |
| Non-current liabilities | - | - |
| Total liabilities | 395,249 | 2,793,971 |
| Net assets | 25,438,174 | 50,900,205 |
| Contributed equity | 148,109,255 | 145,632,412 |
| Accumulated losses | (135,862,107) | (107,512,540) |
| Option reserve | 13,191,026 | 12,780,333 |
| Total equity | 25,438,174 | 50,900,205 |
| Profit/(loss) for the year | (28,114,264) | (27,831,215) |
| Other comprehensive income/(loss) for the year | (235,303) | 235,341 |
| Total comprehensive income/(loss) for the year | (28,349,567) | (27,595,874) |
The parent entity does not have any contingent assets or liabilities.
Directors' Declaration
In the Directors' opinion:
- a) The Financial Statements, comprising the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows and accompanying notes as set out on pages 20-58 above, are in accordance with the Corporations Act 2001, and:
- (i) comply with Accounting Standards and the Corporations Regulations 2001;
- (ii) give a true and fair view of the Consolidated Entity's financial position as at 30 June 2012 and of its performance for the financial year ended on that date;
- 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 in the Directors' Report on pages 3-18 (as the audited Remuneration Report) comply with section 300A of the Corporations Act 2001.
Note 1 confirms that the Financial Statements also comply with the International Financial Reporting Standards as issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Managing Director (the person who performs the chief executive function) and the Chief Financial Officer as required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Ken Hellsten Managing Director 25 September 2012
38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF STRIKE RESOURCES LIMITED
We have audited the accompanying financial report of Strike Resources Limited, which comprises the consolidated statement of financial position as at 30 June 2012, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year.
Directors' Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1(a)(i), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor's Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company's preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Strike Resources Limited, would be in the same terms if given to the directors as at the time of this auditor's report.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
Opinion
In our opinion:
- (a) the financial report of Strike Resources Limited is in accordance with the Corporations Act 2001, including:
- (i) giving a true and fair view of the consolidated entity's financial position as at 30 June 2012 and of its performance for the year ended on that date; and
- (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
- (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a)(i).
Emphasis of Matter
Without qualifying our audit opinion, we draw attention to the matter disclosed in Note 1(l) and Note 13. There remains a dispute as to the mining rights of the Berau coal concession. Given this dispute there may be uncertainty as to the recoverability of the exploration and evaluation expenditure assets, which are classified as held for sale assets, of Strike Resources Limited. The recoverability of the exploration and evaluation expenditure assets is dependent upon successful resolution of this dispute and the successful development and commercialisation of the underlying areas of interests or their sale. This material uncertainty may cast doubt about the company's ability to realise the asset at the values stated in the statement of financial position. Our opinion is not qualified in respect of this matter.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2012. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Strike Resources Limited for the year ended 30 June 2012 complies with section 300A of the Corporations Act 2001.
BDO Audit (WA) Pty Ltd
Brad McVeigh Director
Perth, Western Australia Dated this 25th day of September 2012