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SUNSTONE METALS LTD Annual Report 2008
65870_rns_2008-09-29_d81b3747-b7fb-44e2-beef-6ebc34bf1b74.pdf
Annual Report
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Avalon Minerals Ltd
Financial Report 30 June 2008
Avalon Minerals Ltd ACN 123 184 412
Contents Page
| Corporate directory | 3 |
|---|---|
| Directors' report | 4 |
| Auditor's independence declaration | 17 |
| Corporate Governance Disclosures | 18 |
| Financial report | 19 |
| Directors' declaration | 59 |
| Independent audit report to the members | 60 |
Corporate directory
Non-executive Non-executive Unit 2
Desmond Kelly
Computershare Investor Services Pty Ltd 45 St Georges Terrace Perth WA 6000 Website www.avalonminerals.com.au Telephone +61 8 9323 2000 Facsimile +61 8 9323 2033
Auditor
Ernst & Young The Ernst & Young Building 11 Mounts Bay Road Perth WA 6000
Solicitors
Steinepreis Paganin Level 4 Next Building 16 Milligan Street Perth WA 6000
Bankers
National Australia Bank 1238 Hay Street West Perth WA 6000
Directors Stock exchange listings
David McSweeney Avalon Minerals Ltd shares are Chairman and Managing Director listed on the Australian Securities Exchange, The home branch is Perth Gary Steinepreis Ordinary fully paid shares (ASX code AVI)
Stephen Stone Principal place of business and registered office in Australia
2 Richardson Street, West Perth WA 6005 Secretary PO Box 1170 West Perth 6872
| Telephone | +61 8 9322 2752 | |
|---|---|---|
| Share register | Facsimile | +61 8 9322 2827 |
Level 2 Reserve Bank Building Email [email protected]
Directors' report
Your directors present their report on Avalon Minerals Ltd ("Avalon" or "Company") and the entities it controlled ("Consolidated Entity" or "Group") for the financial year ended 30 June 2008.
Directors
The following persons were directors of Avalon Minerals Ltd during the whole of the financial year and up to the date of this report, unless otherwise stated:
D L McSweeney G C Steinepreis S Stone
Principal activities
During the period the principal activities of the group consisted of mineral exploration and evaluation.
Dividends
No dividends were paid to members during the financial period and the directors do not recommend the payment of a dividend.
Review of operations
A summary of consolidated revenues and results is set out below:
| 2008 | 2007 | ||
|---|---|---|---|
| $ | $ | ||
| Revenue | 190,249 | 33,535 | |
| Loss before income tax expense | (1,733,958) | (367,207) | |
| Income tax expense | - | - | |
| Loss attributable to members of AvalonMinerals Ltd | (1,733,958) | (367,207) |
Financial Position
During the period the Company had a net increase in contributed equity of $1,851,849 (from $5,273,763 to $7,125,612) as a result of:
- The issue of 4,000,000 ordinary fully paid shares at 22 cents each to acquire Resource Properties Pty Ltd;
- a placement of 6,600,000 ordinary fully paid shares at 15.5 cents each to raise $1,023,000; and
- payment of capital raising and share issue costs of $51,151.
At the end of the financial period the group had net cash balances of $1,458,455 and net assets of $5,201,410.
Total liabilities amounted to $541,432 and were limited to trade and other creditors.
Directors' report
Review of operations (continued)
Exploration
Avalon's corporate objective is to build a resource mining group based on cash flows from producing operations.
Lennard Shelf Project Zinc-Lead Project – Rox Resources Earning 60%
Avalon's 2,594km2 Lennard Shelf Project - located in the acclaimed Lennard Shelf zinc province in the East Kimberley region of Western Australia - encompass a number of advanced zinc exploration targets, including the Oscar Range, Barramundi and Lawford Projects.
During the first quarter Avalon signed a major Joint Venture with Rox Resources Ltd. Under the terms of the Joint Venture, Rox had the right to earn up to a 60% interest in the Lennard Shelf Project by the payment of $50,000 upon signing and by completing a minimum expenditure of $500,000 within the first 12 months, followed by the payment of $300,000 in Rox shares and further exploration expenditure totalling $2 million over 4 years. Rox has agreed to pay Avalon $50,000 to withdraw from the JV. The Lennard Shelf tenements have subsequently been relinquished.
Resource Properties Pty Ltd (RPPL) ELA's – Uranium
Avalon strengthened its position in Australian uranium exploration through the acquisition of a substantial exploration portfolio covering 1,900km2 in Western Australia's Kimberley and Yilgarn regions through the 100% acquisition of privately held company RPPL.
Newly established Haliburn Resources Limited has entered into an agreement with Avalon's wholly owned subsidiary Resource Properties Pty Ltd to acquire a 100% interest in the tenements for a consideration of 5,000,000 ordinary shares in the Haliburn Resources Limited IPO. The agreement is subject to the listing of Haliburn on the Australian Securities Exchange.
Empress Springs – Gold, Uranium and Base Metals – Avalon 70%
In 2007, Avalon entered into a Joint Venture agreement with ASX-listed nickel producer, Independence Group NL, to earn a 70% interest in the Empress Springs gold, base metals and uranium project in North Queensland.
The project, located 40km south of Croydon, comprises one granted EPM (15416) and one application EPM (15414) which together cover a total area of 833km².
The project is situated within a well-known gold producing region with historical production of 750,000oz at Croydon and nearby the recent discovery by Gold Aura Ltd of polymetallic mineralisation at Wallabadah, located 30 km north of Croydon.
During the year, Avalon conducted a field program of MMI soil and geobotanical sampling over some of the targets - previously identified by Mining Consultants SRK within EPM 15416 - to assist in defining priority drill targets. The samples were delivered to laboratories in Perth and two large coincident polymetallic geochemical anomalies - T1 & T2 (2150m and 5250m in length) - were confirmed by both geochemical methods.
Further MMI and geobotanical sampling is planned to both infill and extend coverage within EPM15416 and on to EPM15414. Bedrock geochemical drilling and geophysical mapping is also proposed, and will assist with better definition of drill targets.
Funding is to be received by Avalon to the value of $64,250 from the Queensland Government under their Collaborative Drilling Initiative for a program of bedrock drilling to test beneath transported cover target zones of combined soil, geo-botanical and favourable structure.
Directors' report
Review of operations (continued)
Sweden
During the March Quarter 2008, Avalon took a significant step forward in its project acquisition strategy after reaching agreement to acquire the Viscaria and Adak copper projects in northern Sweden. Both projects have been the subject of earlier mining operations and are part of large mineralised systems with strong potential for additional copper and zinc deposits within the landholdings.
The acquisition of the two advanced copper projects is a landmark achievement for the Company and will enable Avalon to progress towards near-term production and early exploration success.
The projects were acquired from Phelps Dodge – a subsidiary of the world's largest publicly traded copper company, Freeport-McMoRan Exploration Corporation – for US$420,000 cash plus an aggregate 1% Net Smelter Royalty (NSR) on production. This represents an attractive entry to a significant brownfields exploration & development opportunity in the Scandinavian region.
Avalon has moved quickly to apply for additional ground surrounding both the Adak and Viscaria mines including an application for the historical Viscaria tailings dam containing 13mt of copper, zinc and iron rich sands not recovered from the original Outokumpu concentration plant.
Exploration is advanced and the Company plans to commence a pre-feasibility study in the second half of 2008.
Project Generation
Avalon continued to assess additional mineral project opportunities both in Australia and internationally.
Corporate
On 2 August 2007 the Company issued 4,000,000 ordinary shares to a vendor as consideration for the purchase of 100% of the issued capital of Resource Properties Pty Ltd.
On 14 April 2008 the Company issued 6,600,000 ordinary shares to a sophisticated investor in order to raise $1,023,000.
| Earnings per share | 2008Cents | 2007Cents |
|---|---|---|
| Basic and diluted earnings per share | (3.85) | (1.32) |
Significant changes in the state of affairs
Other than those matters shown above, no significant changes in the state of affairs of the group occurred during the financial period.
Matters subsequent to the end of the financial period
On 4 August 2008 the Company reached agreement with newly established company Caliburn Resources Limited ("Caliburn") whereby Caliburn will acquire a 100% right to all tenements held by the Company's wholly owned subsidiary Resources Properties Pty Ltd. The consideration for the sale is 5,000,000 ordinary shares in Caliburn. Caliburn plans to list on the Australian Securities Exchange.
On 22 August 2008 Rox Resources Limited withdrew from the Lennard Shelf Joint Venture. These tenements have now been relinquished.
Directors' report
Matters subsequent to the end of the financial period (continued)
On 25 September 2008 the Company announced a 1 for 4 pro rata non-renounceable entitlement issue at an issue price of 15 cents per share to raise up to $1,953,750. Under the terms of the issue the Company proposes to issue up to 13,025,000 shares. The funds will be used to advance the development of the Viscaria Copper Mine in Sweden.
No other matter or circumstance has arisen since 30 June 2008 that has significantly affected, or may significantly affect:
- (a) the Consolidated Entity's operations in future financial years, or
- (b) the results of those operations in future financial years, or
- (c) the Consolidated Entity's state of affairs in future financial years.
Likely developments and expected results of operations
Other than likely developments contained in the "Review of operations", further information on likely developments in the operations of the Consolidated Entity and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the Consolidated Entity.
Environmental regulation
The Consolidated Entity is subject to the environmental laws and regulations imposed under the Mining Act 1978 (Western Australia), the Mineral Resources Act 1989 (Queensland) and the Environmental Code 1998 (Sweden) depending on the activities being undertaken. The group is currently engaged in exploration activities which are governed by conditions or recommendations imposed through the granting of a licence or permit to explore. Compliance with these laws and regulations is regarded as a minimum standard for the Consolidated Entity to achieve. There were no known breaches of any environmental laws or regulations during the year.
Information on directors
DAVID MCSWEENEY Chairman – Executive
Experience and expertise
Mr McSweeney holds a Bachelor of Law degree and is a member of the Institute of Company Directors. He has over 20 years experience in the resource sector ranging from exploration to project management, project finance, commercial and legal structuring and corporate development. A founder of Gindalbie Metals, Mr McSweeney was the Managing Director from 1998 to December 2006 and oversaw the discovery and commissioning of two successful gold production centres.
Other directorships of ASX listed companies in the past three years
Current Bauxite Resources Limited – since 20 November 2007
Former Gindalbie Metals – 1998 to December 2006 Dynasty Metals – 8 January 2007 to 6 September 2007
Directors' report
Information on directors (continued)
GARY STEINEPREIS Non-executive Director
Experience and expertise Mr Steinepreis holds a Bachelor of Commerce degree from the University of Western Australia and is a Chartered Accountant. He provides corporate management and accounting advice to a number of companies involved in the resource, technology and leisure industries.
Other directorships of ASX listed companies in the past three years
Current RMG Limited – since 31 January 2006 Signature Brands Ltd – since 1 June 2006 WAG Limited – since 22 December 2005 Black Fire Energy Limited – since 29 November 2006 Southern Pacific Petroleum – since 11 October 2007 Croesus Mining NL (subject to deed of company arrangement) – since 10 July 2007
Former
Deep Yellow Limited – 20 August 2004 to 10 October 2005 Western Metals Limited – 3 October 2005 to 26 June 2006 Monitor Holdings Ltd – 16 April 2004 to 18 January 2007 KarmelSonix Limited – 18 August 2003 to 21 November 2006 GB Energy Limited – 13 March 2006 to 29 August 2007 Toodyay Resources Ltd – 22 December 2005 to 23 October 2007 Gawler Resources Ltd – 17 May 2006 to 27 November 2007
STEPHEN STONE Non-executive Director
Experience and expertise
Mr Stone graduated with honours in Mining Geology from the University of Cardiff, Wales, and has over 25 years operating, management and corporate experience in the international mining and exploration industry including 18 years as chief executive of publicly listed exploration companies. He is a member of the Australasian Institute of Mining and Metallurgy and a Fellow of the Australian Institute of Company Directors.
Other directorships of ASX listed companies in the past three years
Current Azumah Resources Limited – since 8 November 2006
Former
Apex Minerals NL – 31 October 2001 to 3 July 2006
Company secretary
DESMOND KELLY BComm, CPA, MAICD Company Secretary
Des Kelly has over 30 years financial and corporate management experience focused mainly in the resources sector. He was Dominion Mining's Group Chief Accountant in that company's key growth phase in the mid-eighties and, between 1994 and 1998 held the roles of Finance Director and Managing Director of Horizon Mining NL before establishing his own corporate management consulting business. Mr Kelly now contributes corporate and administration management expertise to several listed groups including Universal Resources, Nylex Limited and CI Resources Ltd.
Directors' report
Directors' interests in shares and options
As at the date of this report the interests of the Directors in the shares and options of the Company were:
| Ordinary Shares | Options over Ordinary Shares | |||
|---|---|---|---|---|
| Direct | Indirect | Direct | Indirect | |
| D McSweeney | 4,510,000 | 3,839,706 | 8,500,000 | 1,500,000 |
| G Steinepreis | 750,000 | 800,000 | 500,000 | - |
| S Stone | 720,000 | 30,000 | 500,000 | - |
Meetings of directors
The number of meetings of the Company's board of directors held during the year ended 30 June 2008 and the number of meetings attended by each director were:
| Full meetings ofDirectors | ||
|---|---|---|
| Held | Attended | |
| D McSweeney | 7 | 7 |
| G Steinepreis | 7 | 7 |
| S Stone | 77 | |
Held – denoted the number of meetings held during the time the director held office.
Retirement, election and continuation in office of directors
Mr G Steinepreis was appointed as a director on 20 December 2006. In accordance with the Constitution Mr Steinepreis will retire as a director at the Annual General Meeting and, being eligible, will offer himself for reelection.
Remuneration report (Audited)
Key management personnel
Key management personnel at the date of this report are:
Directors of the company
D McSweeney – Chairman and Managing Director
- G Steinepreis Non-executive director
- S Stone Non-executive director
Other key management personnel
D Kelly – Company Secretary
G Hewlett – Exploration Manager
The remuneration report is set out under the following main headings:
- A Principles used to determine the nature and amount of remuneration
- B Details of remuneration
- C Service agreements
- D Share-based compensation
- E Additional information
Directors' report
Remuneration report (continued)
A Principles used to determine the nature and amount of remuneration
The objective of the Consolidated Entity's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms with market best practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:
- competitiveness and reasonableness
- acceptability to shareholders
- performance linkage / alignment of executive compensation
- transparency
- capital management.
The Consolidated Entity has structured an executive remuneration framework that is market competitive and complimentary to the reward strategy of the organisation.
Alignment to shareholders' interests:
- focuses on exploration success as the creation of shareholder value and returns
- attracts and retains high calibre executives.
Alignment to program participants' interests:
- rewards capability and experience
- reflects competitive reward for contribution to growth in shareholder wealth
- provides a clear structure for earning rewards
- provides recognition for contribution.
The framework currently consists of fixed salaries.
Director and executive remuneration is currently not linked to either long term or short term performance conditions. The board feels that the expiry date and exercise price of the options currently on issue to the directors and executives is sufficient to align the goals of the directors and executives with those of the shareholders to maximize shareholder wealth, and as seen, has not set any performance conditions for the directors or the executives of the Company. The Board will continue to monitor this policy to ensure that it is appropriate for the Company in future years.
There is no policy for limiting executives exposure to options/shares received as a result of share-based payments.
The overall level of executive reward takes into account the performance of the Consolidated Entity. The Consolidated Entity is involved in mineral exploration and did not derive a profit and therefore growth in earnings is not considered relevant. Shareholder wealth is dependent upon exploration success and has fluctuated accordingly. During the same period, average executive remuneration has been maintained in accordance with industry standards.
Non-executive directors
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors' fees and payments are reviewed annually by the Board. The Board also has agreed to the advice of independent remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line with the market. The Chairman's fees are determined independently to the fees of nonexecutive directors based on comparative roles in the external market. The Chairman is not present at any discussions relating to determination of his own remuneration.
Directors' report
Remuneration report (continued)
Directors' fees
The current base remuneration was last reviewed with effect from 16 January 2007. Directors' remuneration is inclusive of committee fees.
Non-executive directors' fees are determined within an aggregate directors' fee pool limit, which is periodically recommended for approval by shareholders. The total maximum currently stands at $300,000.
Retirement allowances for directors
Directors and employees are permitted to nominate a superannuation fund of their choice to receive superannuation contributions.
Executive pay
The executive pay and reward framework has three components:
- base pay and benefits
- long-term incentives through participation in the Employee Share Option Scheme and
- other remuneration such as superannuation.
The combination of these comprises the executive's total remuneration.
• Base pay
Structured as a total employment cost package which may be delivered as a combination of cash and prescribed non-financial benefits at the executives' discretion.
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for senior executives is reviewed annually to ensure the executive's pay is competitive with the market.
There are no guaranteed base pay increases included in any senior executives' contracts.
• Benefits
Executives may receive benefits including memberships, car allowances and reasonable entertainment.
• Retirement benefits
Directors and employees are permitted to nominate a superannuation fund of their choice to receive superannuation contributions.
• Employee Share Option Scheme Information on the Employee Share Option Scheme is set out on page 50.
Directors' report
Remuneration report (continued)
B Details of remuneration
Details of the remuneration of the directors and the key management personnel of Avalon Minerals Ltd are set out in the following tables.
| 2008 | Short-term benefits | Post-employmentbenefits | Share-based payments | |||
|---|---|---|---|---|---|---|
| Name | Cash salaryand fees$ | Non-monetarybenefits$ | Superannuation$ | Remunerationreceived asoptions% | Options$ | Total$ |
| Directors of Avalon Minerals Ltd | ||||||
| D McSweeney | 300,000 | 3,174 | 29,250 | - | - | 332,424 |
| G Steinepreis | 35,000 | 3,174 | - | - | - | 38,174 |
| S Stone | 36,459 | 3,174 | - | - | - | 39,633 |
| Other key management personnel | ||||||
| D J Kelly | 40,200 | 3,174 | - | 42.63% | 32,239 | 75,613 |
| G Hewlett | 133,333 | - | 12,000 | 32.62% | 70,375 | 215,708 |
| Total | 544,992 | 12,696 | 41,250 | 102,614 | 701,552 |
| 2007 | Short-term benefits | Post-employmentbenefits | Share-based payments | |||
|---|---|---|---|---|---|---|
| Name | Cash salaryand fees$ | Non-monetarybenefits$ | Superannuation$ | Remunerationreceived asoptions% | Options$ | Total$ |
| Directors of Avalon Minerals Ltd | ||||||
| D McSweeney* | 135,031 | 265 | 11,250 | 23.91% | 46,050 | 192,596 |
| G Steinepreis** | 8,750 | 265 | - | 17.37% | 1,895 | 10,910 |
| S Stone*** | 8,750 | 265 | - | 17.37% | 1,895 | 10,910 |
| D Steinepreis**** | - | - | - | - | - | - |
| Other key management personnel | ||||||
| D J Kelly | 9,000 | 265 | - | - | - | 9,265 |
| Total | 161,531 | 1,060 | 11,250 | 49,840 | 223,681 |
* Mr D McSweeney was appointed a director on 20 December 2006. Executive Chairman's salary was paid from 1 February 2007.
** Mr G Steinepreis was appointed a director on 20 December 2006. Non-executive directors' fee was paid from 1 April 2007.
- *** Mr S Stone was appointed a director on 15 January 2007. Non-executive directors' fee was paid from 1 April 2007.
- **** Mr D Steinepreis was appointed a director on 20 December 2006 and resigned on 15 January 2007. No directors fees were paid to Mr Steinepreis.
- ***** Mr D Kelly was appointed Company Secretary on 2 April 2007.
Other transactions with directors
There were no other transactions with directors.
Directors' report
Remuneration report (continued)
C Service Agreements
Remuneration and other terms of employment for the Executive Chairman, Exploration Manager and the Company Secretary are formalised in service agreements.
The agreement for the Executive Chairman provides for the provision of other benefits including car allowances and participation, when eligible, in the Employee Share Option Scheme.
The agreement for the Exploration Manager provides for the provision of other benefits including car allowances and participation, when eligible, in the Employee Share Option Scheme.
The agreement for the Company Secretary provides for the provision of consulting fees and participation, when eligible, in the Employee Share Option Scheme.
Other major provisions of the agreements relating to remuneration are set out below.
D McSweeney, Executive Chairman
Term of agreement – For a period of 3 years with a notice period 3 months and the payment of 9 months salary. Base salary, exclusive of superannuation and other benefits, for the year ended 30 June 2008 of $300,000, to be reviewed annually. Provision of four weeks annual leave.
D Kelly, Company Secretary
Term of agreement – twelve months, notice period of two months. Annual consulting fees of $52,800 for the 12 months from 2 April 2008, renegotiable at the end of the contract period.
G Hewlett, Exploration Manager
Term of agreement – not specified, notice period of one month. Salary of $200,000 to be reviewed annually.
D Share-based compensation
Options were granted pursuant to the Employee Share Option Scheme.
Options were granted for no consideration.
The terms and conditions of each grant of options affecting remuneration in this or future reporting periods are as follows:
| Value per option | |||||
|---|---|---|---|---|---|
| Grant date | Expiry date | Exercise price | Number | at grant date | Date exercisable |
| At any time during the | |||||
| 10 October 2007 | 31 January 2010 | 20 cents | 100,000 | $0.1006 | option period |
| 10 October 2007 | 31 January 2010 | 40 cents | 150,000 | $0.0419 | At any time during theoption period |
| 12 October 2007 | 31 January 2010 | 20 cents | 500,000 | $0.1006 | At any time during theoption period |
| 12 October 2007 | 31 January 2010 | 40 cents | 500,000 | $0.0419 | At any time during theoption period |
| 15 October 2007 | 31 January 2010 | 20 cents | 200,000 | $0.1005 | At any time during theoption period |
| 15 October 2007 | 31 January 2010 | 40 cents | 300,000 | $0.0418 | At any time during theoption period |
| 9 January 2008 | 31 January 2010 | 25 cents | 125,000 | $0.0504 | At any time during theoption period |
| 9 January 2008 | 31 January 2010 | 40 cents | 125,000 | $0.0366 | From 9 January 2009 |
Directors' report
Remuneration report (continued)
Options carry no dividend or voting rights.
When exercisable, each option is convertible into one ordinary share.
The amounts disclosed for emoluments relating to options issued to directors and other key management personnel are the assessed at fair values at the date of grant and allocated equally over the period from grant date to vesting date. Fair values at grant date are independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.
Further details relating to options are set out below.
| A | B | C | D | E | |
|---|---|---|---|---|---|
| Remuneration | Value at grant | Value at | Value at lapse | Total of | |
| consisting of | date | exercise date | date | columns B-D | |
| Name | options | $ | $ | $ | $ |
| D Kelly | 42.63% | 32,239 | - | - | 32,239 |
| G Hewlett | 32.62% | 70,375 | - | - | 70,375 |
| Total | 102,614 | - | - | 102,614 |
A = The percentage of the value of remuneration consisting of options is based on the value at grant date as set out in column B.
B = The value at grant date is calculated in accordance with AASB 2 Share-based Payments for options granted during the year as part of remuneration.
C = The value at exercise date represents intrinsic value and determined at the date of exercise.
D = The value at lapse date of options represents intrinsic value and determined at the date of lapse.
| Number of OptionsGranted During the period | Number of OptionsVested During theperiod | |
|---|---|---|
| 2008 | 2008 | |
| Directors of Avalon Minerals LtdD McSweeneyG SteinepreisS Stone | --- | --- |
| Other key management personnelD J KellyG Hewlett | 500,0001,000,000 | 500,0001,000,000 |
Directors' report
Remuneration report (continued)
| Number of OptionsGranted During the period | Number of OptionsVested During theperiod | |
|---|---|---|
| 2007 | 2007 | |
| Directors of Avalon Minerals Ltd | ||
| D McSweeney | 10,000,000 | 10,000,000 |
| G Steinepreis | 500,000 | 500,000 |
| S Stone | 500,000 | 500,000 |
| Other key management personnel | ||
| D J Kelly | - | - |
There were no ordinary shares issued as a result of the exercise of options.
E Additional information
Given Avalon Minerals Ltd is involved in mineral exploration and performance is measured by exploration success, the remuneration of the persons referred to above is not dependent on the satisfaction of a performance condition or company performance.
Share options granted to directors and the most highly remunerated officers
Options over unissued ordinary shares of Avalon Minerals Ltd granted during or since the end of the financial period to any of the directors and the most highly remunerated officers of the Consolidated Entity as part of their remuneration were as follows:
| Date of grant | Options granted | |
|---|---|---|
| Other key management personnel of Avalon Minerals Ltd | ||
| D Kelly, Company Secretary | 10 October 2007 | 500,000 |
| G Hewlett, Exploration Manager | 10 October 2007 | 1,000,000 |
- End of Remuneration Report -
Share options
Un-issued Shares As at the date of this report, as detailed below, there were 13,000,000 un-issued ordinary shares under option.
Shares under option
Unissued ordinary shares of Avalon Minerals Ltd under option at the date of this report are as follows:
| Date options granted | Expiry date | Issue price of shares | Number under option |
|---|---|---|---|
| 7 February 2007 | 31 January 2010 | 20 Cents | 5,400,000 |
| 7 February 2007 | 31 January 2010 | 40 cents | 5,600,000 |
| 10 October 2007 | 31 January 2010 | 20 Cents | 800,000 |
| 10 October 2007 | 31 January 2010 | 40 cents | 950,000 |
| 9 January 2008 | 31 January 2010 | 25 cents | 125,000 |
| 9 January 2008 | 31 January 2010 | 40 cents | 125,000 |
No option holder has any right under the options to participate in any other share issue of the Company or of any other entity.
Directors' report
Share options (continued)
Option holders do not have any right, by virtue of the options, to participate in any share issue of the Company or any related body corporate.
Shares Issued as a result of the Exercise of Options
There were no shares issued as a result of the exercise of options in the financial period
Insurance of officers
During the period the Company paid a premium to insure the directors and officers of the Company. Under the terms of the policy the Company cannot publish amounts paid for premiums or the extent of the liabilities insured.
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
No non-audit services were provided by the Company's auditor, Ernst & Young.
Auditors' Independence Declaration
A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 17.
This report is made in accordance with a resolution of the directors.
D McSweeney Executive Chairman Perth, Western Australia
30 September 2008
CORPORATE GOVERNANCE DISCLOSURES
From listing on the Australian Stock Exchange on 23 March 2007 the Company has complied with the ASX Principles and Recommendations other than in relation to the matters specified below.
| Principle | Recommendation | ||
|---|---|---|---|
| Ref. | Ref. | Notification of Departure | Explanation for Departure |
| 2 | 2.2; 2.3 | The Chairman is the ManagingDirector of the Company | The board considers that the executive rolecarriedoutbytheChairman(DavidMcSweeney) is in the best interests of theCompany for the following reasons: |
| (a)as the founder of the Company, MrMcSweeney's leadership, both from along-term strategic and short-term day-today operational perspective is critical tothesuccessfuldevelopmentoftheCompany; | |||
| (b)given that the Group is in an explorationand evaluation phase, the board considersthat the need for a separate ManagingDirector is not yet critical; and | |||
| (c)as a result of (a), the carrying out of bothroles by Mr McSweeney is in line withexpectations of current investors and keyto the attraction of future investors. | |||
| The board intends to reconsider the duality ofMr McSweeney's role and the merits ofappointing a new Managing Director as theCompany moves closer to production. | |||
| 2 | 2.4 | There was no NominationCommittee | In the board's view there are no efficiencies tobegainedbyestablishingaseparateNomination Committee. The full board carriesoutthefunctionsoftheNominationCommittee. |
| 4 | 4.3 | There was no audit committee | The full board carries out the functions of theaudit committee. Of the three directors, two areconsidered independent. The Board considersthat it is not necessary to form an auditcommittee at this stage given the size of theCompany. |
| 9 | 9.2 | There was no separateRemuneration Committee | The full board carried out the functions of theRemunerationCommittee.Allmattersofremuneration were determined by the board inaccordance with the Corporations Act 2001requirements, especially in respect of relatedpartytransactions.Thatis,nodirectorparticipated in any deliberation regarding hisown remuneration or related issues. |
Avalon Minerals Ltd Financial report – 30 June 2008
| Contents | Page |
|---|---|
| Financial report | |
| Income Statement | 20 |
| Balance Sheet | 21 |
| Statement of Changes in Equity | 22 |
| Cash Flow Statement | 23 |
| Notes to the Financial Statements | 24 |
| Directors' Declaration | 59 |
| Independent audit report to the members | 60 |
Avalon Minerals Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:
Avalon Minerals Ltd Unit 2, 2 Richardson Street West Perth WA 6005
A description of the nature of the Consolidated Entity's operations and its principal activities is included in the directors' report, which is not part of this financial report.
The financial report was authorised for issue by the directors on 30 September 2008. The Consolidated Entity has the power to amend and reissue the financial report.
Through the use of the internet, we have ensured that our corporate reporting is timely, complete and available globally at minimum cost to the Consolidated Entity. All press releases, financial reports and other information are available on our website: www.avalonminerals.com.au
For queries in relation to our reporting please call +61 8 9322 2752 or e-mail [email protected]
Income Statement
For the year ended 30 June 2008
| Parent entity | |||||
|---|---|---|---|---|---|
| Note | 2008 | 2007 | 2008 | 2007 | |
| $ | $ | $ | $ | ||
| 5 | 190,249 | 33,535 | 190,249 | 33,535 | |
| 6 | (487,190) | (213,622) | (483,669) | (213,622) | |
| (119,221) | (16,403) | (118,911) | (16,403) | ||
| (345,392) | (72,595) | (334,303) | (72,595) | ||
| 6 | (37,158) | (7,076) | (37,070) | (7,076) | |
| 13 | (929,987) | (14,147) | (703,014) | (14,147) | |
| 11 | - | - | (1,250,000) | - | |
| 11 | - | - | (531,677) | - | |
| - | (69,095) | - | (69,095) | ||
| 6 | (806) | - | - | - | |
| (4,453) | (7,804) | (4,450) | (7,804) | ||
| (1,733,958) | (367,207) | (3,272,845) | (367,207) | ||
| 7 | - | - | - | - | |
| (367,207) | |||||
| Cents | Cents | ||||
| Earnings per share for loss attributable to28 | (1,733,958)(3.85) | Consolidated(367,207)(1.32) | (3,272,845) |
(3.85)
(1.32)
The above Income Statements should be read in conjunction with the accompanying notes.
28
Diluted earnings per share
Balance Sheet
As at 30 June 2008
| Consolidated | Parent entity | |||||
|---|---|---|---|---|---|---|
| Note | 2008 | 2007 | 2008 | 2007 | ||
| $ | $ | $ | $ | |||
| Current assets | ||||||
| Cash and cash equivalents | 8 | 1,458,455 | 3,144,308 | 1,365,710 | 3,144,298 | |
| Trade and other receivables | 9 | 86,715 | 56,255 | 65,155 | 56,255 | |
| Non-current assets held for sale | 10 | 111,162 | - | - | - | |
| Total current assets | 1,656,332 | 3,200,563 | 1,430,865 | 3,200,553 | ||
| Non-current assets | ||||||
| Other non-current assets | 11 | 25,354 | - | 2,524,441 | 1,250,000 | |
| Plant and equipment | 12 | 173,060 | 72,101 | 167,868 | 72,101 | |
| Exploration and evaluation | 13 | 3,888,096 | 1,926,667 | 40,498 | 676,677 | |
| Total non-current assets | 4,086,510 | 1,998,768 | 2,732,807 | 1,998,778 | ||
| Total assets | 5,742,842 | 5,199,331 | 4,163,672 | 5,199,331 | ||
| Current liabilities | ||||||
| Trade and other payables | 14 | 541,432 | 242,935 | 501,149 | 242,935 | |
| Total current liabilities | 541,432 | 242,935 | 501,149 | 242,935 | ||
| Total liabilities | 541,432 | 242,935 | 501,149 | 242,935 | ||
| Net assets | 5,201,410 | 4,956,396 | 3,662,523 | 4,956,396 | ||
| Equity | ||||||
| Contributed equity | 15 | 7,125,612 | 5,273,763 | 7,125,612 | 5,273,763 | |
| Reserves | 16 | 176,963 | 49,840 | 176,963 | 49,840 | |
| Accumulated losses | 17 | (2,101,165) | (367,207) | (3,640,052) | (367,207) | |
| Total equity | 5,201,410 | 4,956,396 | 3,662,523 | 4,956,396 |
The above Balance Sheet should be read in conjunction with the accompanying notes.
Statement of Changes in Equity For the year ended 30 June 2008
| Consolidated | Parent entity | |||||
|---|---|---|---|---|---|---|
| Note | 2008 | 2007 | 2008 | 2007 | ||
| $ | $ | $ | $ | |||
| Total equity at the beginning of thefinancial year | 4,956,396 | - | 4,956,396 | - | ||
| Loss for the year | (1,733,958) | (367,207) | (3,272,845) | (367,207) | ||
| Total recognised income and expense forthe year | (1,733,958) | (367,207) | (3,272,845) | (367,207) | ||
| Equity transactions | ||||||
| Share based-paymentsContributions of equity | 127,1231,903,000 | 49,8405,273,763 | 127,1231,903,000 | 49,8405,273,763 | ||
| Share issue costs | (51,151) | - | (51,151) | - | ||
| Total equity at the end of the financialyear | 5,201,410 | 4,956,396 | 3,662,523 | 4,956,396 |
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Cash Flow Statement
For the year ended 30 June 2008
| Consolidated | Parent entity | |||||
|---|---|---|---|---|---|---|
| Note | 2008 | 2007 | 2008 | 2007 | ||
| $ | $ | $ | $ | |||
| Cash flows from operating activities | ||||||
| Payments to suppliers and employees | ||||||
| (inclusive of goods and services tax) | (634,824) | (296,929) | (553,135) | (296,929) | ||
| Security deposits | (11,520) | - | (11,520) | - | ||
| Sundry income | 50,000 | - | 50,000 | - | ||
| Interest received | 140,249 | 33,535 | 140,249 | 33,535 | ||
| Net cash outflow from operating | ||||||
| activities | 27 | (456,095) | (263,394) | (374,406) | (263,394) | |
| Cash flows from investing activities | ||||||
| Payments for plant and equipment | (138,118) | (79,177) | (132,838) | (79,177) | ||
| Payments for investments in controlled | ||||||
| entities | (100,000) | - | (134,902) | - | ||
| Loans to other entities | (25,354) | - | (25,354) | - | ||
| Loans to controlled entities | - | - | (2,015,862) | - | ||
| Payments to acquire exploration | ||||||
| properties | (451,128) | (250,000) | - | (250,000) | ||
| Exploration and evaluation expenditure | (1,487,007) | (136,884) | (67,075) | (136,894) | ||
| Net cash outflow from investing | ||||||
| activities | (2,201,607) | (466,061) | (2,376,031) | (466,071) | ||
| Cash flows from financing activities | ||||||
| Proceeds from issues of securities | 15(b) | 1,023,000 | 4,045,000 | 1,023,000 | 4,045,000 | |
| Costs of share issues | 15(b) | (51,151) | (171,237) | (51,151) | (171,237) | |
| Net cash (outflow)/inflow from | ||||||
| financing activities | 971,849 | 3,873,763 | 971,849 | 3,873,763 | ||
| Net increase/(decrease) in cash and cash | ||||||
| equivalents held | (1,685,853) | 3,144,308 | (1,778,588) | 3,144,298 | ||
| Cash and cash equivalents at the beginning | ||||||
| of the financial year | 3,144,308 | - | 3,144,298 | - | ||
| Cash and cash equivalents at the end of | ||||||
| the financial year | 8 | 1,458,455 | 3,144,308 | 1,365,710 | 3,144,298 | |
The above Cash Flow Statements should be read in conjunction with the accompanying notes.
Notes to the Financial Statements For the year ended 30 June 2008
Note 1. Summary of Significant Accounting Policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied for the financial year to 30 June 2008, unless otherwise stated.
(a) Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board.
Going concern
The financial report has been prepared on the basis of the going concern and historical cost conventions.
The company and the consolidated entity incurred operating losses after income tax of ($3,272,845) (2007: ($367,207)) and ($1,733,959) (2007: ($367,207)) respectively for the year ended 30 June 2008 and incurred net cash outflows of $1,778,588 and $1,685,853 respectively. At balance date the company and consolidated entity had cash of $1,365,710 and $1,458,455 respectively and trade creditors of $501,149 and $541,432 respectively.
The directors announced a (1) for (4) Pro Rata Non- Renounceable Entitlement Issue ("issue") on 25 September 2008 at an issue price of 15 cents per share, to raise up to $1,953,750 . The directors are confident this will be successful. However should it be unsuccessful the directors will need to seek alternative sources of funding or amend the current business plan.
Should the company and consolidated entity not achieve the matters set out above there is significant uncertainty whether the company and consolidated entity will continue as going concerns and therefore whether they will realise their assets and extinguish their liabilities in the normal course of business and at the amounts stated in the financial report.
No adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the company and the consolidated entity and company not continue as a going concern.
The presentation currency is Australian dollars.
(b) Statement of compliance
The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS).
Standards adopted during the year
The Group has adopted AASB 7 Financial Instrument Disclosures and AASB 2008 – 4 Amendments to Australian Accounting Standard – key management personnel disclosures by disclosing entities. Adoption of these standards affected only disclosures and did not have any effect on the financial position or performance.
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Company for the reporting period ending 30 June 2008. These are outlined as follows:
Note 1. Summary of Significant Accounting Policies (continued)
| Reference | Title | Summary | Applicationdate ofstandard* | Impact on Company financialreport | Applicationdate forCompany* |
|---|---|---|---|---|---|
| AASB 8 | Operating Segments | This new standard will replace AASB114 Segment Reporting and adopts amanagement approach to segmentreporting. | 1 January2009 | Refer to AASB 2007-3 below. | 1 July 2009 |
| AASB 123(revised June2007) | Borrowing costs | AASB 123 previously permittedentities to choose between expensingall borrowing costs and capitalisingthose that were attributable to theacquisition, construction orproduction of a qualifying asset. Therevised version of AASB 23 requiresborrowing costs to be capitalised ifthey are directly attributable to theacquisition, construction orproduction of a qualifying asset. | 1 January2009 | Refer to AASB 2007-6 below. | 1 July 2009 |
| AASB 2007-3 | Amendments toAustralian AccountingStandards arising fromAASB 8 [AASB 5,AASB, AASB 6,AASB 102, AASB107, AASB 119,AASB 127, AASB134, AASB 136,AASB 1023 & AASB1038] | Amending standard issued as aconsequence of AASB 8 OperatingSegments. | 1 January2009 | AASB 8 is a disclosure standard sowill have no direct impact on theamounts included in the Company'sfinancial statements. However thenew standard may have an impacton the segment disclosures includedin the Company's financial report. | 1 July 2009 |
|---|---|---|---|---|---|
| ------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- |
| AASB 2007-6 | Amendments toAustralian AccountingStandards arising fromAASB 123 [AASB 1,AASB 101, AASB107, AASB 111,AASB 116 & AASB138 and Interpretations1 and 12] | Amending standard issued as aconsequence of AASB 123 (revised)Borrowing Costs. | 1 January2009 | As the Company does not currentlyconstruct or produce any qualifyingassets which are financed byborrowings the revised standard willhave no impact. | 1 July 2009 |
|---|---|---|---|---|---|
| AASB 101(revised) andAASB 2007-3 | Presentation ofFinancial Statementsand consequentialamendments to otherAustralian AccountingStandards | Introduces a statement ofcomprehensive income. Otherrevisions include impacts on thepresentation of items in the statementof changes in equity, new presentationrequirements for restatements ofreclassifications of items in thefinancial statements, changes in thepresentation requirements fordividends and changes to the titles ofthe financial statements. | 1 January2009 | These amendments are onlyexpected to impact the presentationof the Group's financial report andwill not have a direct impact on themeasurement and recognition of theamounts disclosed in the financialreport. The Group has notdetermines at this stage whether topresent a single statement ofcomprehensive income or twoseparate statements. | 1 July 2009 |
Note 1. Summary of Significant Accounting Policies (continued)
| Reference | Title | Summary | Applicationdate ofstandard* | Impact on Company financialreport | Applicationdate forCompany* |
|---|---|---|---|---|---|
| AASB 2008-1 | Amendments toAustralian AccountingStandard – ShareBased Payments:Vesting Conditionsand Cancellations | The amendments clarify the definitionof 'vesting conditions' introducing theterm 'non-vesting conditions' forconditions other than vestingconditions as specifically defined andprescribe the accounting treatment ofan award that is effectively cancelledbecause a non-vesting condition is notsatisfied. | 1 January2009 | The Group has share-based paymentarrangements that may be affectedby these amendments. However thegroup has not yet determined theextent of the impact, if any. | 1 July 2009 |
| AASB 3(revised) | BusinessCombinations | The revised standard introduces anumber of significant changes to theaccounting for business combinations. | 1 July 2009 | The Group has businesscombinations that may be affectedby these amendments. However thegroup has not yet determined theextent of the impact, if any. | 1 July 2009 |
| AASB 127(revised) | Consolidated andSeparate FinancialStatements | Under the revised standard, a changein the ownership interest of asubsidiary (that does not result in aloss of control) will be accounted foras an equity transaction. | 1 July 2009 | If the Group changes its ownershipinterest in existing subsidiaries inthe future, the change will beaccounted for as an equitytransaction. This will have noimpact on goodwill, nor will it givea rise to a gain or loss in theGroup's income statement. | 1 July 2009 |
|---|---|---|---|---|---|
| AASB 2008-3 | Amendments toAustralian AccountingStandards arising fromAASB 3 and AASB127 | Amending standard issued as aconsequence of revisions to AASB 3and AASB 127. | 1 July 2009 | No change to the accounting policy,therefore no impact. | 1 July 2009 |
Note 1. Summary of Significant Accounting Policies (continued)
| Reference | Title | Summary | Applicationdate ofstandard* | Impact on Company financialreport | Applicationdate forCompany* |
|---|---|---|---|---|---|
| Amendments toInternationalFinancialReportingStandards | Cost of anInvestment in aSubsidiary, JointlyControlled Entity orAssociate | The main amendments of relevance toAustralian entities are those made inIAS 27 deleting the cost method' andrequiring all dividends from asubsidiary, jointly controlled entity orassociate to be recognized in profit orloss in an entity's separate financialstatements (i.e., the parent companyaccounts). The distinction betweenpre and post acquisition profits is nolonger required. However thepayment of such dividends requiresthe entity to consider whether there isan indicator of impairment.AASB 127 has also been amended toeffectively allow the cost of aninvestment in a subsidiary, in limitedreorganizations, to be based on theprevious carrying amount of thesubsidiary (that is, share equity) ratherthan its fair value. | 1 January2009 | No change to the accounting policy,therefore no impact. | 1 July 2009 |
| Amendments toInternationalFinancialReportingStandards | Improvements toInternationalFinancial ReportingStandards | The improvements project is anannual project that provides amechanism for making non-urgent,but necessary amendments to IFRSs.The IASB has separated theamendments into two parts: Part Ideals with changes to IASB identifiedresulting in accounting changes; PartII deals with either terminology oreditorial amendments that the IASBbelieves will have minimal impact. | 1 January2009 exceptforamendmentsto IFRS 5,which areeffectivefrom 1 July2009 | The Group has not yet determinedthe extent of the impact of theamendments, if any | 1 July 2009 |
(c) Basis of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Avalon Minerals Ltd ("Company" or "parent entity") as at 30 June 2008 and the results of all the subsidiaries for the financial period then ended.
Avalon Minerals Ltd and its subsidiaries together are referred to in this financial report as the Group or Consolidated Entity.
Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Note 1. Summary of Significant Accounting Policies (continued)
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(d) Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments.
The group operates in one business segment, being mineral exploration, and currently operates in Australia and Sweden.
(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 and duties and taxes paid. Revenue is recognised when the Group's right to payment is established.
Interest income
Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
(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 income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Note 1. Summary of Significant Accounting Policies (continued)
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.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
(g) Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease (refer to note 21).
(h) Acquisition of assets
The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their published market price as at the date of exchange. Transaction costs arising on the issue of equity instruments are recognised directly in equity.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Consolidated Entity's identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the 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.
(i) Impairment of assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs.
When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.
Notes to the Financial Statements For the year ended 30 June 2008
Note 1. Summary of Significant Accounting Policies (continued)
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at a revalued amount (in which case the impairment loss is treated as a revaluation decrease).
An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
(j) Cash and cash equivalents
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 on the balance sheet.
(k) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are due for settlement no more than 120 days from the date of recognition.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Consolidated Entity will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.
(l) Investments and other financial assets
Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified in the following categories: financial assets at fair value through profit or loss, loans and receivables, held to maturity investments or available for sale investments, as appropriate. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.
Notes to the Financial Statements For the year ended 30 June 2008
Note 1. Summary of Significant Accounting Policies (continued)
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 arise when the Consolidated Entity provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are included in receivables in the balance sheet.
(m) Investment in controlled entities
Investments in controlled entities are held at the lower of cost and recoverable amount.
(n) Plant and equipment
Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Consolidated Entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:
| - Exploration equipment | 5 years |
|---|---|
| - Furniture, fittings and equipment | 5 years |
| - Computer and electronic equipment | 3 years |
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the income statement.
(o) Trade and other payables
Trade payables are carried at amortised cost. These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of financial year which are unpaid and arise when the Consolidated Entity becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.
Notes to the Financial Statements For the year ended 30 June 2008
Note 1. Summary of Significant Accounting Policies (continued)
(p) Provisions
Provisions for legal claims are recognised when: the Consolidated Entity has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
(q) Employee benefits
(i) Wages, salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Retirement benefit obligations
The Consolidated Entity contributes to various defined contribution funds for its employees.
Contributions to the defined contribution funds are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
(iv) Share-based payments
Share-based compensation benefits are provided to employees via the Employee Share Option Scheme.
The fair value of options granted under the Employee Share Option Scheme is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.
Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital.
(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.
Notes to the Financial Statements For the year ended 30 June 2008
Note 1. Summary of Significant Accounting Policies (continued)
(s) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the Consolidated Entity, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the half-year, adjusted for bonus elements in ordinary shares issued during the half-year.
(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 shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
(t) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred by or on behalf of the Consolidated Entity is accumulated separately for each area of interest. Such expenditure comprises net direct costs and an appropriate portion of related overhead expenditure, but does not include general overheads or administrative expenditure not having a specific nexus with a particular area of interest.
Each area of interest is limited to a size related to a known or probable mineral resource capable of supporting a mining operation.
Exploration and evaluation expenditure for each area of interest is carried forward as an asset provided that the rights to tenure of the area of interest are current and one of the following conditions is met:
- such costs are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale; or
- exploration and evaluation activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in relation to the area are continuing.
Expenditure which fails to meet the conditions outlined above is written off, furthermore, the directors regularly review the carrying value of exploration and evaluation expenditure and make write downs if the values are not expected to be recoverable.
Identifiable exploration assets acquired are recognised as assets at their cost of acquisition, as determined by the requirements of AASB 6 Exploration for and evaluation of mineral resources. Exploration assets acquired are reassessed on a regular basis and these costs are carried forward provided that at least one of the conditions referred to in AASB 6 is met.
Exploration and evaluation expenditure incurred subsequent to acquisition in respect of an exploration asset acquired, is accounted for in accordance with the policy outlined above for exploration expenditure incurred by or on behalf of the entity.
Acquired exploration assets are not written down below acquisition cost until such time as the acquisition cost is not expected to be recovered.
Note 1. Summary of Significant Accounting Policies (continued)
When an area of interest is abandoned, any expenditure carried forward in respect of that area is written off.
(u) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the Australian Taxation Office. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the Australian Taxation Office, are presented as operating cash flow.
(v) Foreign currency transactions and balances
(i) Functional and presentation currency
The functional currency of each of the Group's entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period end exchange rate.
Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the income statement, except when deferred in equity as a qualifying cash flow or net investment hedge.
Note 1. Summary of Significant Accounting Policies (continued)
(iii) Group companies
The results and the financial position of all the Group entities (none of which has a 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 are translated at period-end exchange rates prevailing at the reporting date;
- Income and expenses are translated at average exchange rates for the period; and
- Retained profits are exchanged at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on the translation of foreign operations are transferred directly to the Group's foreign currency translation reserve in the balance sheet. These differences are recognised in the income statement in the period in which the operation is disposed.
Note 2. Financial instruments and financial risk management
The Company's activities expose it to a variety of financial risks; market risk (including interest rate risk), credit risk and liquidity risk.
The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company.
Risk management is carried out by the board of directors under policies approved by the Board.
The board identifies and evaluates financial risks and provides written principles for overall risk management.
(i) Market risk
Price risk - The Company is not exposed to equity securities price risk as it holds no investments in securities classified on the balance sheet either as available-for-sale or at fair value through profit or loss. The Company is not exposed to commodity price risk.
(ii) Credit risk
The Company's maximum exposures to credit risk at the reporting date in relation to each class of recognised financial asset is the carrying amount of those assets as indicated in the balance sheet.
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and trade and other receivables.
The Company trades only with recognised, credit worthy third parties. The Company has no significant concentrations of credit risk.
Note 2. Financial instruments and financial risk management (continued)
The Group's primary banker is National Australia Bank Limited, at balance date all operating accounts are with this bank, other than funds transferred to Sweden to meet the working capital needs of the subsidiary companies. The cash needs of the subsidiary operations are monitored by the parent company and funds are advanced to the Swedish operations on a needs basis. The Directors believe this is the most efficient method of combing the monitoring and mitigation of potential credit risks arising out of holding cash assets in overseas jurisdictions, and the funding mechanisms required by the group.
(iii) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash to meet commitments as and when they fall due.
It is the Group's policy to review the Group's liquidity position including cash flow forecasts to determine the forecast liquidity position and maintain appropriate liquidity levels.
The remaining contractual maturities of the Group's and parent entity's financial liabilities are:
| Consolidated | Parent entity | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| $ | $ | $ | $ | |
| Three months or less | 33,744 | 52,822 | 18,280 | 52,822 |
| Greater than three months | 582,353 | 719,746 | 134,360 | 719,746 |
| 616,097 | 772,568 | 152,640 | 772,568 |
The Group funds its activities through capital raising in order to limit its liquidity risk.
(iv) Fair values
All assets and liabilities recognised on the balance sheet, whether they are carried at cost or at fair value, are recognised at amounts that represent a reasonable approximation of fair value unless otherwise stated in the applicable notes.
(v) Interest rate risk
The Group's exposure to interest rates related primarily to the Group's cash and cash equivalents.
At balance date, the Group had the following exposure to Australian variable interest rate risk.
| Consolidated | Parent entity | |||
|---|---|---|---|---|
| 2008 | 2007 | 2007 | ||
| $ | $ | $ | $ | |
| Financial assets | ||||
| Cash and cash equivalents | 1,458,455 | 3,144,308 | 1,365,710 | 3,144,298 |
The following sensitivity analysis is based on the interest rate risk exposure in existence at the balance sheet date. The 1% sensitivity is based on reasonably possible changes over a financial year, using the observed range of actual historical rates for the preceding five year period.
Notes to the Financial Statements For the year ended 30 June 2008
Note 2. Financial instruments and financial risk management (continued)
At 30 June 2008, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit would have been affected as follows:
The average interest rate for the year ended 30 June 2008 was 6.09% (2007: 2.13%)
| ConsolidatedHigher/(Lower) | Parent entityHigher/(Lower) | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| $ | $ | $ | $ | |
| Judgments of reasonably possiblemovements: | ||||
| Post tax profit | ||||
| +1.0% (100 basis points) | 22,219 | 15,673 | 19,631 | 15,673 |
| -1.0% (100 basis points) | (22,219) | (15,673) | (19,631) | (15,673) |
The movements in profit are due to higher/lower interest income from cash balances. The movement in 2008 are more sensitive than in 2007 due to the cash balances being for a whole year rather than a part year as in 2007.
The Group deals with financial institutions that have a AA rating or better.
(vi)Foreign exchange risk
The Group and parent are exposed to fluctuations in the Australian dollar against the Swedish Kroner. The risk is managed by reference to potential adverse effects in the market. For the Group and parent, directors believe the potential exchange rate effects would not have a material effect to the income statement or equity.
Note 3. Accounting estimates and judgments
Estimates and judgments 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 Consolidated Entity and that are believed to be reasonable under the circumstances.
The Consolidated Entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:
Exploration and evaluation expenditure
The Consolidated Entity has carrying balances for exploration and evaluation. Each year the Group assesses whether these balances have suffered any impairment, in accordance with the accounting policy stated in Note 1(t). The recoverable amounts are based on the assumption that the assets will either become economic mining properties or will be sold to a third party.
Notes to the Financial Statements For the year ended 30 June 2008
Note 3. Accounting estimates and judgments (continued)
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they were granted. The fair value is determined using a Binomial pricing model.
Commitments – operating leases
Leases in which the Company does not retain substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the rental income.
The Group measures the commitments for expenditure in relation to operating leases by reference to the current market rate.
Note 4. Segment reporting
| Primary reporting – geographical segmentsYear ended 30 June 2008 | $50,00050,000 | $-- | $-- | $50,000 |
|---|---|---|---|---|
| Revenue | ||||
| Sundry | ||||
| Total segment revenue | 50,000 | |||
| Interest income | 140,249 | |||
| Total consolidated income | 190,249 | |||
| Result | ||||
| Segment result | (3,504,230) | (25,484) | 1,795,756 | (1,733,958) |
| Profit before income tax | (3,504,230) | (25,484) | 1,795,756 | (1,733,958) |
| Income tax expense | - | - | - | - |
| Profit after income tax | (3,504,230) | (25,484) | 1,795,756 | (1,733,958) |
| Assets | ||||
| Segment assets | 4,576,208 | 1,509,991 | (343,357) | 5,742,842 |
| Total assets | 4,576,208 | 1,509,991 | (343,357) | 5,742,842 |
| Liabilities | ||||
| Segment liabilities | 1,400,517 | 1,486,487 | (2,345,572) | 541,432 |
| Total liabilities | 1,400,517 | 1,486,487 | (2,345,572) | 541,432 |
| Capital expenditure | ||||
| Plant & equipment | 132,837 | 5,280 | - | 138,117 |
| Total capital expenditure | 132,837 | 5,280 | - | 138,117 |
Notes to the Financial Statements For the year ended 30 June 2008
Note 4. Segment reporting (continued)
| Australia$ | Sweden$ | Eliminations$ | Consolidated$ | |
|---|---|---|---|---|
| Depreciation | ||||
| Plant & equipment | 37,070 | 88 | - | 37,158 |
| Total depreciation | 37,070 | 88 | - | 37,158 |
| Exploration expenditure | ||||
| Acquisitions of exploration properties | - | 451,128 | 905,741 | 1,356,869 |
| Exploration and evaluation expenditure | 706,233 | 939,476 | - | 1,645,709 |
| Exploration expenditure written off | (929,987) | - | - | (929,987) |
| Total exploration expenditure | (223,754) | 1,390,604 | 905,741 | 2,072,591 |
| Share-based payments | ||||
| Options issued | 127,123 | - | - | 127,123 |
| Total depreciation | 127,123 | - | - | 127,123 |
Year ended 30 June 2007
During the 2007 financial year the Consolidated Entity operated only in Australia.
Secondary reporting – business segments
The Consolidated Entity operates predominantly in mining and exploration sector.
| Consolidated | Parent entity | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| $ | $ | $ | $ | |
| Note 5. Revenue | ||||
| Other revenue | ||||
| Interest | 140,249 | 33,535 | 140,249 | 33,535 |
| Sundry | 50,000 | - | 50,000 | - |
| 190,249 | 33,535 | 190,249 | 33,535 | |
| Loss before income tax includes the following: | ||||
| Employee benefits expense | ||||
| Salaries | 189,154 | 125,000 | 189,154 | 125,000 |
| Directors' fees | 66,230 | 17,500 | 62,709 | 17,500 |
| Superannuation | 44,774 | 11,250 | 44,774 | 11,250 |
| Share based payments | 127,123 | 49,840 | 127,123 | 49,840 |
| Other | 59,909 | 10,032 | 59,909 | 10,032 |
| 487,190 | 213,622 | 483,669 | 213,622 | |
| Rental expense relating to operating leases | 61,892 | 6,415 | 61,892 | 6,415 |
Notes to the Financial Statements
For the year ended 30 June 2008
| Consolidated | Parent entity | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| $ | $ | $ | $ | |
| Note 6. Expenses (continued) | ||||
| Foreign exchange loss | 806 | - | - | - |
| Note 7. Income tax | ||||
| (a) Current income tax | ||||
| Current income tax benefit relating to originationand reversal of temporary differences | - | - | - | - |
| Deferred tax assets not brought to account asrealisation is not considered probable | - | - | - | - |
| Income tax expenses reported in the incomestatement | - | - | - | - |
| (b) Reconciliation between income tax expenseand the product of accounting loss before incometax multiplied by the group's applicable incometax rate as follows: | ||||
| Accounting loss before income tax | (1,733,958) | (367,207) | (3,272,845) | (367,207) |
| At the group's statutory income tax rate of 30% | (520,188) | (110,162) | (981,853) | (110,162) |
| Expenditure not allowable for income tax purposesDeductible share issue costsProvision for impairmentProvision for inter-company non-recoveryUnder/over provision of prior year | 38,137---14,419 | 14,952(14,420)--- | 38,137-375,000159,50391,081 | 14,952(14,420)--- |
| Deferred tax asset not brought to account asrealisation is not considered probable | 467,632 | 109,630 | 318,132 | 109,630 |
| Income tax expense | - | - | - | - |
Notes to the Financial Statements For the year ended 30 June 2008
Note 7. Income tax (continued)
| Balance sheet2008$ | Balance sheet2007$ | IncomeStatement2008$ | Incomestatement2007$ | |
|---|---|---|---|---|
| (c) Deferred assets and liabilities at 30 Junerelates to the following: | ||||
| Consolidated | ||||
| Deferred tax liabilities | ||||
| Exploration expenditure | (33,379) | (578,000) | 544,621 | (578,000) |
| Total deferred tax liabilities | (33,379) | (578,000) | 544,621 | (578,000) |
| Deferred tax assets | ||||
| Employee provisions | 10,984 | 3,009 | 7,975 | 3,009 |
| Share issue costs charged to equity | - | 57,679 | (57,679) | - |
| Income tax losses | 657,336 | 684,621 | (27,285) | 684,621 |
| Total deferred tax assets | 668,320 | 745,309 | (76,989) | 687,630 |
| Deferred tax assets not brought to account asrealisation is not considered probable | (634,941) | (167,309) | (467,632) | (109,630) |
| Net deferred tax recognised | - | - | - | - |
| Balance sheet2008$ | Balance sheet2007$ | IncomeStatement2008$ | Incomestatement2007$ | |
| Company | ||||
| Deferred tax liabilities | ||||
| Exploration expenditure | - | (203,000) | 203,000 | (203,000) |
| Total deferred tax liabilities | - | (203,000) | 203,000 | (203,000) |
Notes to the Financial Statements For the year ended 30 June 2008
Note 7. Income tax (continued)
| Balance sheet2008$ | Balance sheet2007$ | IncomeStatement2008$ | Incomestatement2007$ | |
|---|---|---|---|---|
| Deferred tax assets | ||||
| Employee provisions | 10,984 | 3,009 | 7,975 | 3,009 |
| Share issue costs charged to equity | - | 57,679 | (57,679) | - |
| Income tax losses | 474,458 | 309,621 | 164,837 | 309,621 |
| Total deferred tax assets | 485,442 | 370,309 | 115,133 | 312,630 |
| Deferred tax assets not brought to account asrealisation is not considered probable | (485,442) | (167,309) | 318,133 | (109,630) |
| Net deferred tax recognised | - | - | - | - |
The Company and the Consolidated Entity has not recognised the deferred tax assets in the financial statements as it is not considered probable that sufficient taxable amounts will be available in future periods in which to be offset.
| Consolidated | Parent entity | ||
|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 |
| $ | $ | $ | $ |
Note 8. Current assets – Cash and cash equivalents
| Cash on hand and at bank | 1,458,455 | 3,144,308 | 1,365,710 | 3,144,298 |
|---|---|---|---|---|
Cash at bank earns interest at floating rates based on daily bank deposit rates. The cash at bank is bearing floating interest rates between 2.90% and 7.1% The carrying amounts of cash and cash equivalents represents fair value.
Note 9. Current assets – Trade and other receivables
| Other receivables | 52,958 | 32,181 | 43,906 | 32,181 |
|---|---|---|---|---|
| Deposits | 11,780 | 10,235 | 11,780 | 10,235 |
| Prepayments | 21,977 | 13,839 | 9,469 | 13,839 |
| 86,715 | 56,255 | 65,155 | 56,255 |
Note 10. Current assets – Non-current assets held for sale
| Exploration properties | 111,162 | - | - | - |
|---|---|---|---|---|
Notes to the Financial Statements
For the year ended 30 June 2008
| Consolidated | Parent entity | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| $ | $ | $ | $ | |
| Note 11. Non-current assets – Other non-current assets | ||||
| (a) Other financial assets | ||||
| Loans to controlled entities | - | - | 2,015,862 | - |
| Less: Provision for non-recovery of intercompany | ||||
| loan | - | - | (531,677) | - |
| Loans to other entities | 25,354 | - | 25,354 | - |
| 25,354 | - | 1,509,539 | - | |
| (b) Investments in controlled entities | ||||
| Investments in controlled entities (see note 26) | - | - | 2,264,902 | 1,250,000 |
| Less: Provision for impairment | - | - | (1,250,000) | - |
| - | - | 1,014,902 | 1,250,000 | |
| Total other non-current assets | 25,354 | - | 2,524,441 | 1,250,000 |
Loans to controlled entities are unsecured, interest free and repayable on demand.
Loans to other entities refers to a loan made to Haliburn Resources Limited, a company of which Mr McSweeney is a director. The loan is interest free and is to be repaid on listing of the company on the Australian Securities Exchange.
Refer to Note 13 for impairment discussion.
Note 12. Non-current assets – Plant and equipment
| Plant and equipment | ||||
|---|---|---|---|---|
| Plant & equipment at cost | 217,295 | 79,177 | 212,015 | 79,177 |
| Less accumulated depreciation | (44,235) | (7,076) | (44,147) | (7,076) |
| 173,060 | 72,101 | 167,868 | 72,101 |
Reconciliation
Reconciliation of the carrying amounts of plant and equipment at the beginning and end of each financial period is set out below.
Plant and equipment
| Balance at 1 July | 72,101 | - | 72,101 | - |
|---|---|---|---|---|
| Additions | 138,117 | 79,177 | 132,837 | 79,177 |
| Depreciation expense | (37,158) | (7,076) | (37,070) | (7,076) |
| Balance at 30 June | 173,060 | 72,101 | 167,868 | 72,101 |
Notes to the Financial Statements
For the year ended 30 June 2008
| Consolidated | Parent entity | |||
|---|---|---|---|---|
| 2008$ | 2007$ | 2008$ | 2007$ | |
| Note 13. Non-current assets – Exploration and evaluation | ||||
| Exploration and evaluation | ||||
| Exploration and evaluation – at cost less amountswritten off | 3,888,096 | 1,926,667 | 40,498 | 676,677 |
| Reconciliation | ||||
| Balance at1 July | 1,926,667 | - | 676,677 | - |
| Purchases of mineral tenements | 1,356,869 | 1,650,000 | - | 400,000 |
| Expenditure during the year | 1,645,709 | 276,667 | 66,835 | 276,677 |
| Expenditure written off | (929,987) | - | (703,014) | - |
The ultimate recoupment of exploration and evaluation costs carried forward is dependent upon the successful development and/or commercial exploitation, or alternatively sale, of the respective areas of interest.
for sale (111,162) - - - Balance at 30 June 3,888,096 1,926,667 40,498 676,677
During the year the carrying balances of exploration properties were impaired and the expenditure expensed due to the disposal or relinquishment of exploration tenements. Where the balances were carried in subsidiary companies, a provision for impairment was brought to account against the initial investments and intercompany loans as it was considered unlikely that either the investment cost or the loans would be recovered. (See Note 11)
Note 14. Current liabilities – Trade and other payables
Expenditure transferred to Non-current assets held
| Trade payables | 403,076 | 140,439 | 362,793 | 140,439 |
|---|---|---|---|---|
| Other payables | 101,743 | 92,465 | 101,743 | 92,465 |
| Employee leave liabilities | 36,613 | 10,031 | 36,613 | 10,031 |
| Balance at 30 June | 541,432 | 242,935 | 501,149 | 242,935 |
Trade creditors and other payables are non-interest bearing and generally payable on 30 day terms.
Note 15. Contributed equity
| (a) Share capital | Number of shares | $ |
|---|---|---|
| Ordinary shares – fully paid | 50,600,000 | 7,125,612 |
Notes to the Financial Statements For the year ended 30 June 2008
Note 15. Contributed equity (continued)
(b) Movements in ordinary share capital
| Number of | Issue price | |||
|---|---|---|---|---|
| Date | Details | shares | $ | $ |
| 20 December 2006 | Placement of shares | 9,500,000 | 0.01 | 95,000 |
| Shares issued pursuant to tenement | ||||
| 8 February 2007 | purchase agreements | 2,000,000 | 0.20 | 400,000 |
| 8 February 2007 | Placement of shares | 6,000,000 | 0.075 | 450,000 |
| Shares issued pursuant to anagreement to purchase 100% of the | ||||
| 16 March 2007 | issued capital of Xmin Ltd | 5,000,000 | 0.20 | 1,000,000 |
| Issue of shares pursuant to a | ||||
| 16 March 2007 | prospectusLess: Transaction costs arising on | 17,500,000 | 0.20 | 3,500,000 |
| placement of shares | (171,237) | |||
| Balance at 30 June 2007 | 40,000,000 | 5,273,763 | ||
| Shares issued pursuant to anagreement to purchase 100% of the | ||||
| 2 August 2007 | issued capital of Resource PropertiesPty Ltd | 4,000,000 | 0.22 | 880,000 |
| Shares issued to a sophisticated | ||||
| 14 April 2008 | investorLess: Transaction costs arising on | 6,600,000 | 0.155 | 1,023,000 |
| placement of shares | (51,151) | |||
| Balance at 30 June 2008 | 50,600,000 | 7,125,612 |
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of 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.
Effective 1 July 1998, the corporations legislation abolished the concepts of authorized capital and par value shares. Accordingly the Company does not have authorized capital nor par value in respect of its issued capital.
(d) Employee share option scheme
Information relating to the Employee Share Option Scheme, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year are set out in Note 22.
(e) Options
At the end of the financial period options over ordinary shares on issue are as shown below:
- 5,400,000 options exercisable at 20 cents and expiring 31 January 2010;
- 5,600,000 options exercisable at 40 cents and expiring 31 January 2010;
- 800,000 options exercisable at 20 cents and expiring 31 January 2010;
- 125,000 options exercisable at 25 cents and expiring 31 January 2010; and
- 1,075,000 options exercisable at 40 cents and expiring 31 January 2010;
Notes to the Financial Statements For the year ended 30 June 2008
Note 15. Contributed equity (continued)
(f) Movements in options
| Number of options | |||
|---|---|---|---|
| Date | Details | Notes | |
| 7 February 2007 | Allotment of options | 11,000,000 | |
| Balance at 30 June 2007 | 11,000,000 | ||
| 10 October 2007 | Allotment of options | 250,000 | |
| 12 October 2007 | Allotment of options | 1,000,000 | |
| 15 October 2007 | Allotment of options | 500,000 | |
| 9 January 2008 | Allotment of options | 250,000 | |
| Balance at 30 June 2008 | 13,000,000 |
(g) Capital management
When managing capital, management's objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders.
The Group funds its activities through capital raising, and does not have any debt facilities.
The Group is not subject to any externally imposed capital requirements.
| Consolidated | Parent entity | |||
|---|---|---|---|---|
| 2008$ | 2007$ | 2008$ | 2007$ | |
| Note 16. Reserves | ||||
| Share-based payments reserve | 176,963 | 49,840 | 176,963 | 49,840 |
| Movements in reserves | ||||
| Share-based payments reserve | ||||
| Balance at 1 July | 49,840 | - | 49,840 | - |
| Option expense | 127,123 | 49,840 | 127,123 | 49,840 |
| Balance at 30 June | 176,963 | 49,840 | 176,963 | 49,840 |
Nature and purpose of reserves
Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options issued and not exercised.
Note 17. Accumulated losses
| Balance at July 1 | (367,207) | - | (367,207) | - |
|---|---|---|---|---|
| Net loss attributable to members of Avalon Minerals | (1,733,958) | (367,207) | (3,272,845) | (367,207) |
| Balance at 30 June | (2,101,165) | (367,207) | (3,640,052) | (367,207) |
Notes to the Financial Statements For the year ended 30 June 2008
Note 18. Key management personnel disclosures
(a) Directors
The following persons were directors of Avalon Minerals Ltd during the financial year:
Chairman - executive D McSweeney
Non-executive directors
G Steinepreis
S Stone
(b) Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Consolidated Entity, directly or indirectly, during the financial period:
| Name | Position |
|---|---|
| D J Kelly | Company Secretary/Chief Financial Officer |
| G Hewlett | Exploration Manager |
(c) Key management personnel compensation
| Consolidated | Parent entity | |||
|---|---|---|---|---|
| 2008$ | 2007$ | 2008$ | 2007$ | |
| Short term employee benefits | 544,992 | 162,591 | 544,992 | 162,591 |
| Post employment benefits | 41,250 | 11,250 | 41,250 | 11,250 |
| Share based payments | 102,614 | 49,840 | 102,614 | 49,840 |
| Other | 12,696 | - | 12,696 | - |
| 701,552 | 223,681 | 701,552 | 223,681 |
(d) Equity instrument disclosures relating to key management personnel
Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options, can be found in the Remuneration Report on pages 11 to 15
Option holdings
The numbers of options over ordinary shares in the Company held during the financial period by each director of Avalon Minerals Ltd and other key management personnel of the Company, including their personally-related parties, are set out below.
| 2008Name | Balance atthe beginningof the year | Grantedduring theperiod asremuneration | Exercisedduring theperiod | Otherchangesduring theperiod | Balance atthe end ofthe period | Vested andexercisable atthe end of theperiod |
|---|---|---|---|---|---|---|
| Directors of Avalon Minerals Ltd | ||||||
| D McSweeney | 10,000,000 | - | - | - | 10,000,000 | 10,000,000 |
| G Steinepreis | 500,000 | - | - | - | 500,000 | 500,000 |
| S Stone | 500,000 | - | - | - | 500,000 | 500,000 |
| Other key management personnel | ||||||
| D J Kelly | - | 500,000 | - | - | 500,000 | 500,000 |
| G Hewlett | - | 1,000,000 | - | - | 1,000,000 | 1,000,000 |
Notes to the Financial Statements
For the year ended 30 June 2008
| 2007Name | Balance atthe beginningof the year | Grantedduring theperiod asremuneration | Exercisedduring theperiod | Otherchangesduring theperiod | Balance atthe end ofthe period | Vested andexercisable atthe end of theperiod |
|---|---|---|---|---|---|---|
| Directors of Avalon Minerals Ltd | ||||||
| D McSweeney | - | 10,000,000 | - | - | 10,000,000 | 10,000,000 |
| G Steinepreis | - | 500,000 | - | - | 500,000 | 500,000 |
| S Stone | - | 500,000 | - | - | 500,000 | 500,000 |
| Other key management personnel | ||||||
| D J Kelly | - | - | - | - | - | - |
Note 18. Key management personnel disclosures (continued)
No options were vested and unexercisable at the end of the financial period.
Share holdings
The numbers of shares in the Company held during the financial year by each director and the 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.
| 2008Name | Balance at thebeginning ofthe year | Receivedduring theperiod on theexercise ofoptions | Other changesduring theperiod* | Balance atthe end ofthe period |
|---|---|---|---|---|
| Directors of Avalon Minerals Ltd | ||||
| D McSweeney | 6,237,210 | - | 612,496 | 6,849,706 |
| G Steinepreis | 750,000 | - | - | 750,000 |
| S Stone | 750,000 | - | - | 720,000 |
| Other key management personnel | ||||
| D Kelly | - | - | - | - |
| G Hewlett | - | - | - | - |
* Other changes represent on-market share purchases.
| 2007 | Balance at thebeginning of | Receivedduring theperiod on theexercise of | Other changesduring the | Balance atthe end of |
|---|---|---|---|---|
| Name | the year | options | period | the period |
| Directors of Avalon Minerals Ltd | ||||
| D McSweeney | - | - | 6,237,210 | 6,237,210 |
| G Steinepreis | - | - | 750,000 | 750,000 |
| S Stone | - | - | 720,000 | 720,000 |
| Other key management personnel | ||||
| D Kelly | - | - | - | - |
(e) Loans to key management personnel
There are no loans made to directors or other key management personnel of Avalon Minerals Ltd.
(f) Other transactions with key management personnel
There were no other transactions with directors or key management personnel.
Notes to the Financial Statements
For the year ended 30 June 2008
| Consolidated | Parent entity | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| $ | $ | $ | $ | |
| Note 19. Remuneration of auditors | ||||
| During the period the following fees were paid orpayable for services provided by the auditor of theCompany and its related practices. | ||||
| Assurance servicesAudit services |
| Ernst & Young: | ||||
|---|---|---|---|---|
| Audit and review of financial report | 29,960 | 25,000 | 29,960 | 25,000 |
| Independent Accountant's Report | - | 15,450 | - | 15,450 |
| 29,960 | 40,450 | 29,960 | 40,450 |
Note 20. Contingent liabilities
As at 30 June 2008 the Company has no contingent liabilities. (2007: nil)
Note 21. Commitments for expenditure
| (i) Capital commitmentsCommitments for minimum expenditure on miningtenements contracted for at the reporting date but notrecognised as liabilities, payable: | ||||
|---|---|---|---|---|
| Within one year | 61,857 | 164,651 | - | 164,651 |
| Later than one year but not later than 5 years | 400,000 | 455,277 | - | 455,277 |
| Later than 5 years | - | - | - | - |
| 461,857 | 619,928 | - | 619,928 |
Exploration expenditure commitments are required to keep licences in good standing. The Consolidated Entity is committed to this expenditure on the current tenements. In order to maintain current rights to tenure of its mineral tenements leases, the Consolidated Entity will be required to outlay amounts to meet minimum expenditure requirements to the Department of Mineral and Petroleum Resources. These obligations may be varied from time to time, or subject to approval, and are expected to be fulfilled in the normal course of operations of the Consolidated Entity.
| (ii) Lease commitmentsCommitments in relation to leases contracted for at thereporting date but not recognised as liabilities,payable, representing non-cancellable operatingleases: | ||||
|---|---|---|---|---|
| Within one year | 73,120 | 46,640 | 73,120 | 46,640 |
| Later than one year but not later than 5 years | 81,120 | 106,000 | 81,120 | 106,000 |
| Later than 5 years | - | - | - | - |
| 154,240 | 152,640 | 154,240 | 152,640 |
The Consolidated Entity is currently occupying its registered office and pays rent to the owner on normal commercial terms and conditions.
Notes to the Financial Statements
For the year ended 30 June 2008
Note 22. Share-based payments
a) Employee Share Option Scheme
All staff (including executive directors) are eligible to participate in the scheme.
Shares and options are issued on the following terms:
- The entitlement from time to time of each Eligible Participant shall be determined by the directors in their absolute discretion based on the directors' assessment of length of service, remuneration level and the contribution the Eligible Participant will make to the long term performance of the Consolidated Entity, together with such other criteria as the directors consider appropriate in the circumstances.
- The maximum number of securities which may be issued pursuant to the scheme shall not be greater than 5% of the issued shares of the Consolidated Entity, from time to time.
- Options are granted under the plan for no consideration.
- Options granted under the plan carry no dividend or voting rights.
- When exercisable, each option is convertible into one ordinary share.
The exercise price of options is determined by the directors which is not less than 80% of market price on the date upon which the directors first resolved to grant the options. Amounts receivable on the exercise of options are recognised as share capital.
| Grant date | Expiry date | Exerciseprice | Issuedduring theperiod | Exercisedduring theperiod | Lapsedduring theperiod | Balanceat end ofthe period |
|---|---|---|---|---|---|---|
| $ | Number | Number | Number | Number | ||
| 2008 | ||||||
| 10 October 2007 | 31 January 2010 | 0.20 | 100,000 | - | - | 100,000 |
| 0.40 | 150,000 | - | - | 150,000 | ||
| 12 October 2007 | 31 January 2010 | 0.20 | 500,000 | - | - | 500,000 |
| 0.40 | 500,000 | - | - | 500,000 | ||
| 15 October 2007 | 31 January 2010 | 0.20 | 200,000 | - | - | 200,000 |
| 0.40 | 300,000 | - | - | 300,000 | ||
| 9 January 2008 | 31 January 2010 | 0.25 | 125,000 | - | - | 125,000 |
| 0.40 | 125,000 | - | - | 125,000 | ||
| 2,000,000 | - | - | 2,000,000 |
Set out below are summaries of options granted under the Scheme during the year..
There were no options issued under the scheme during the 2007 financial year, however directors were issued options as part of remuneration pursuant to shareholder approval received at a general meeting held on 7 February 2007.
Set out below are summaries of options granted pursuant to shareholder approval.
| Grant date | Expiry date | Exerciseprice | Issuedduring theperiod | Exercisedduring theperiod | Lapsedduring theperiod | Balanceat end ofthe period |
|---|---|---|---|---|---|---|
| $ | Number | Number | Number | Number | ||
| 2007 | ||||||
| 7 February 2007 | 31 January 2010 | 0.20 | 5,400,000 | - | - | 5,400,000 |
| 7 February 2007 | 31 January 2009 | 0.40 | 5,600,000 | - | - | 5,600,000 |
| 11,000,000 | - | - | 11,000,000 |
There were no shares issued during the period as a result of the exercise of options.
Notes to the Financial Statements For the year ended 30 June 2008
Note 22. Share-based payments (continued)
2008
Fair value of options granted – 20 cent options issued 10 & 12 October 2007
The assessed fair value at grant date of options granted during the year ended 30 June 2008 was 10.06 cents per option. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The model inputs for options granted during the period ended 30 June 2008 included:
| Grant date | 10 & 12 October 2007 |
|---|---|
| Expiry date | 31 January 2010 |
| Quantity | 600,000 |
| Exercise price | $0.20 |
| Consideration | Nil |
| Share price at grant date | 25 cents |
| Expected price volatility of the Company's shares | 70% |
| Expected dividend yield | Nil |
| Risk-free interest rate | 6.45% |
Fair value of options granted – 40 cent options issued 10 & 12 October 2007
The assessed fair value at grant date of options granted during the year ended 30 June 2008 was 4.19 cents per option. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The model inputs for options granted during the period ended 30 June 2008 included:
| Grant date | 10 & 12 October 2007 |
|---|---|
| Expiry date | 31 January 2010 |
| Quantity | 650,000 |
| Exercise price | $0.40 |
| Consideration | Nil |
| Share price at grant date | 25 cents |
| Expected price volatility of the Company's shares | 70% |
| Expected dividend yield | Nil |
| Risk-free interest rate | 6.45% |
Fair value of options granted – 20 cent options issued 15 October 2007
The assessed fair value at grant date of options granted during the year ended 30 June 2008 was 10.05 cents per option. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
Notes to the Financial Statements For the year ended 30 June 2008
Note 22. Share-based payments (continued)
The model inputs for options granted during the period ended 30 June 2008 included:
| Grant date | 15 October 2007 |
|---|---|
| Expiry date | 31 January 2010 |
| Quantity | 200,000 |
| Exercise price | $0.20 |
| Consideration | Nil |
| Share price at grant date | 25 cents |
| Expected price volatility of the Company's shares | 70% |
| Expected dividend yield | Nil |
| Risk-free interest rate | 6.45% |
Fair value of options granted – 40 cent options issued 15 October 2007
The assessed fair value at grant date of options granted during the year ended 30 June 2008 was 4.18 cents per option. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The model inputs for options granted during the period ended 30 June 2008 included:
| Grant date | 15 October 2007 |
|---|---|
| Expiry date | 31 January 2010 |
| Quantity | 300,000 |
| Exercise price | $0.40 |
| Consideration | Nil |
| Share price at grant date | 25 cents |
| Expected price volatility of the Company's shares | 70% |
| Expected dividend yield | Nil |
| Risk-free interest rate | 6.45% |
Fair value of options granted – 25 cent options issued 9 January 2008
The assessed fair value at grant date of options granted during the year ended 30 June 2008 was 5.04 cents per option. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The model inputs for options granted during the period ended 30 June 2008 included:
| Grant date | 9 January 2008 |
|---|---|
| Expiry date | 31 January 2010 |
| Quantity | 125,000 |
| Exercise price | $0.25 |
| Consideration | Nil |
| Share price at grant date | 21 cents |
| Expected price volatility of the Company's shares | 70% |
| Expected dividend yield | Nil |
| Risk-free interest rate | 6.47% |
Notes to the Financial Statements For the year ended 30 June 2008
Note 22. Share-based payments (continued)
Fair value of options granted – 40 cent options issued 9 January 2008
The assessed fair value at grant date of options granted during the year ended 30 June 2008 was 3.66 cents per option. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The model inputs for options granted during the period ended 30 June 2008 included:
| Grant date | 9 January 2008 |
|---|---|
| Expiry date | 31 January 2010 |
| Quantity | 125,000 |
| Exercise price | $0.40 |
| Consideration | Nil |
| Share price at grant date | 21 cents |
| Expected price volatility of the Company's shares | 70% |
| Expected dividend yield | Nil |
| Risk-free interest rate | 6.54% |
See pages 11 – 15 of the Directors Report for details of share options issued to directors during the period.
Volatility
The most appropriate expected volatility value to use in determining the value of an option is the historical volatility of the underlying share over a period equal to the expected life of the options ending on the grant date of the options. However, Avalon Minerals Ltd has had insufficient trading history to determine the historical volatility over this period. As such volatility has been determined with reference to broadly comparable companies listed on the Australian Securities Exchange.
2007
There were no options issued under the Scheme during 2007, however options were issued to directors pursuant to shareholder approval at a general meeting held 7 February 2007.
Fair value of options granted – 20 cent options
The assessed fair value at grant date of options granted during the year ended 30 June 2007 was $0.0087 per option. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The model inputs for options granted during the period ended 30 June 2007 included:
| Grant date | 7 February 2007 |
|---|---|
| Expiry date | 31 January 2010 |
| Quantity | 5,400,000 |
| Exercise price | $0.20 |
| Consideration | Nil |
| Share price at grant date | 7.5 cents |
| Expected price volatility of the Company's shares | 50% |
| Expected dividend yield | Nil |
| Risk-free interest rate | 5.75% |
Notes to the Financial Statements For the year ended 30 June 2008
Note 22. Share-based payments (continued)
Fair value of options granted – 40 cent options
The assessed fair value at grant date of options granted during the year ended 30 June 2007 was $0.00053 per option. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The model inputs for options granted during the period ended 30 June 2007 included:
| Grant date | 7 February 2007 |
|---|---|
| Expiry date | 31 January 2010 |
| Quantity | 5,600,000 |
| Exercise price | $0.40 |
| Consideration | Nil |
| Share price at grant date | 7.5 cents |
| Expected price volatility of the Company's shares | 50% |
| Expected dividend yield | Nil |
| Risk-free interest rate | 5.75% |
c) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period was $127,123.
Note 23. Related party transactions
Directors and other key management personnel
During the financial year the Company advanced funds totalling $25,354 to Haliburn Resources Limited. Mr D McSweeney is the Chairman of Haliburn Resources Limited. The funds are repayable on completion of listing on the Australian Securities Exchange.
During the financial year the Company paid fees of $3,825 to McSweeney Partners, a company of which Mr McSweeney is a shareholder. The transactions were on normal commercial terms.
Controlling entities
The ultimate parent entity in the wholly-owned group is Avalon Minerals Ltd
Ownership interests in related parties
Interests held in the following classes of related parties are set out in the following Notes: Related parties – Note 26
Notes to the Financial Statements For the year ended 30 June 2008
Note 24. Events occurring after reporting date
On 4 August 2008 the Company reached agreement with newly established company Haliburn Resources Limited ("Haliburn") whereby Haliburn will acquire a 100% right to all tenements held by the Company's wholly owned subsidiary Resources Properties Pty Ltd. The consideration for the sale is 5,000,000 ordinary shares in Haliburn. Haliburn plans to list on the Australian Securities Exchange.
On 22 August 2008 Rox Resources Limited withdrew from the Lennard Shelf Joint Venture. These tenements have now been relinquished.
On 25 September 2008 the Company announced a 1 for 4 pro rata non-renounceable entitlement issue at an issue price of 15 cents per share to raise up to $1,953,750. Under the terms of the issue the Company proposes to issue up to 13,025,000 shares. The funds will be used to advance the development of the Viscaria Copper Mine in Sweden.
No other matters or circumstances have arisen since 30 June 2008 that has significantly affected, or may significantly affect:
- (a) the Consolidated Entity's operations in future financial years, or
- (b) the results of those operations in future financial years, or
- (c) the Consolidated Entity's state of affairs in future financial years.
Note 25. Acquisitions of Subsidiaries
On 25 July 2007 the Company acquired 100% of the issued shares in Resource Properties Pty Ltd and issued 4,000,000 shares at a value of 22 cents per share, which did not constitute a business acquisition.
The total cost of acquisition was $980,000 and this comprised an issue of equity instruments and payment of cash.
The acquisition had the following effect on the Group's assets and liabilities after acquiring 100% of shares on Issue.
| Recognised value on acquisition | |
|---|---|
| $ | |
| Loans acquired | (79,710) |
| Exploration and evaluation | 1,059,710 |
| 980,000 | |
| Recognised value on acquisition$ | |
| Cost of the acquisition | |
| Consideration paid in shares | 880,000 |
| Consideration paid in cash | 100,000 |
| Total cost of the acquisition | 980,000 |
Notes to the Financial Statements For the year ended 30 June 2008
Note 25. Acquisitions of Subsidiaries (continued)
On 12 February 2008 the Company acquired 100% of the issued shares in the Swedish company Avalon Minerals Adak AB.
The total cost of acquisition was $17,451 comprised of a payment of cash.
The acquisition had the following effect on the Group's assets and liabilities after acquiring 100% of shares on Issue.
| Cash assets | Recognised value on acquisition$17,451 | |
|---|---|---|
| Recognised value on acquisition$ | ||
| Cost of the acquisition | ||
| Consideration paid in cash | 17,451 | |
| Total cost of the acquisition | 17,451 |
On 12 February 2008 the Company acquired 100% of the issued shares in the Swedish company Avalon Minerals Viscaria AB.
The total cost of acquisition was $17,451 comprised of a payment of cash.
The acquisition had the following effect on the Group's assets and liabilities after acquiring 100% of shares on Issue.
| Cash assets | Recognised value on acquisition$17,451 | ||
|---|---|---|---|
| Recognised value on acquisition$ | |||
| Cost of the acquisition | |||
| Consideration paid in cash | 17,451 | ||
| Total cost of the acquisition | 17,451 |
Notes to the Financial Statements For the year ended 30 June 2008
Note 26. Related party
Subsidiaries
2008
| Country of | |||||
|---|---|---|---|---|---|
| Name of entity | incorporation | Class of shares | Equity holding | ||
| Xmin Pty Ltd | Australia | Ordinary | 100% | ||
| Resource Properties Pty Ltd | Australia | Ordinary | 100% | ||
| Avalon Minerals Adak AB | Sweden | Ordinary | 100% | ||
| Avalon Minerals Viscaria AB | Sweden | Ordinary | 100% | ||
| 2007 | |||||
| Name of entity | Country ofincorporation | Class of shares | Equity holding | ||
| Xmin Ltd | Australia | OrdinaryConsolidated | 100% | ||
| Parent entity | |||||
| 2008 | 2007 | 2008 | 2007 | ||
| $ | $ | $ | $ |
Note 27. Reconciliation of profit(loss) from ordinary activities after income tax to net cash outflow from operating activities
Cash at the end of the financial period is reconciled as follows:
| Operating loss after income tax | (1,733,958) | (367,207) | (3,272,845) | (367,207) |
|---|---|---|---|---|
| Depreciation | 37,158 | 7,076 | 37,070 | 7,076 |
| Exploration expenditure written off | 929,987 | 14,147 | 703,014 | 14,147 |
| Non-cash employee benefits expense – share based | ||||
| payments | 127,123 | 49,840 | 127,123 | 49,840 |
| Provision for impairment | - | - | 1,250,000 | - |
| Provision for non-recovery of intercompany loan | - | - | 531,677 | |
| Changes in operating assets and liabilities | ||||
| (Increase) in other receivables | (26,319) | (56,255) | (8,900) | (56,255) |
| Increase in trade creditors and provisions | 209,914 | 89,005 | 258,455 | 89,005 |
| Net cash outflow from operating activities | (456,095) | (263,394) | (374,406) | (263,394) |
Non-cash transactions
On 25 July 2007 the Company purchased 100% of the issued capital of Resource Properties Pty Ltd. Consideration for the purchase was 4,000,000 ordinary shares issued at a deemed price of 22 cents.
Notes to the Financial Statements For the year ended 30 June 2008
Note 28. Earnings per share
| Consolidated2008$ | |
|---|---|
| Basic and diluted earnings per share | (3.85) |
| 2008Number | |
| Weighted average number of shares used as the denominator | |
| Weighted average number of ordinary shares used as the denominator in calculatingbasic and diluted earnings per share. | 45,059,726 |
| There were a further 13,000,000 potential ordinary shares (options) not considered to bedilutive. | |
| 2008$ | |
| Losses used in calculating basic and diluted losses per share | |
| Net loss | (1,733,958) |
| Consolidated2007$ | |
| Basic and diluted earnings per share | (1.32) |
| 2007Number | |
| Weighted average number of shares used as the denominator | |
| Weighted average number of ordinary shares used as the denominator in calculatingbasic and diluted earnings per share. | 27,901,554 |
| There were a further 10,125,000 potential ordinary shares (options) not considered to bedilutive. | |
| 2007$ | |
| Losses used in calculating basic and diluted losses per share | |
| Net loss | (367,207) |
Note 29. Dividends
No dividend was paid or declared by the Company in the period since the end of the previous financial year, and up to the date of this report. The Directors do not recommend that any amount be paid by way of dividend for the financial period ended 30 June 2008.
The balance of the Company's franking account is Nil.
Directors' declaration
In accordance with a resolution of the Directors of Avalon Minerals Ltd I state that In the directors' opinion:
(a) The financial statements and notes and additional disclosures included in the Directors' Report designated as audited, of the Company and of the Consolidated Entity are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company's and the Consolidated Entity's financial position as at 30 June 2008 and of its performance for the period ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Consolidated Entity will be able to pay its debts as and when they become due subject to disclosures in Note 1(a).
This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial period ended 30 June 2008.
On behalf of the Board
D McSweeney Executive Chairman
Perth 30 September 2008
