Ex 99.1
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
30 JUNE 2007, 2006 and 2005
(With Independent Auditors’ Report Thereon)
AND ITS CONTROLLED ENTITIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
30 JUNE 2007, 2006 and 2005
(With Independent Auditors’ Report Thereon)
1
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
AND ITS CONTROLLED ENTITIES
CONTENTS
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2
The Board of Directors
Bolnisi Gold NL
We have audited the accompanying consolidated balance sheets of Bolnisi Gold NL and its controlled entities as of 30 June 2007 and 2006, and the related consolidated income statements, consolidated statements of recognised income and expense and consolidated statements of cash flows for each of the years in the three year period ended 30 June 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bolnisi Gold NL and it’s controlled entities at 30 June 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three year period ended 30 June 2007 in conformity with Australian equivalents to International Financial Reporting Standards.
Australian equivalents to International Financial Reporting Standards vary in certain significant respects from U.S. Generally Accepted Accounting Principles. Information relating to the nature and effect of such differences is presented in Note 31 to the consolidated financial statements.
![KPMG SIGNATURE](https://capedge.com/proxy/8-KA/0000950124-08-000152/v37045v3704501.gif)
KPMG
BRISBANE, AUSTRALIA
21 SEPTEMBER 2007
3
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
AND ITS CONTROLLED ENTITIES
YEARS ENDED 30 JUNE 2007, 2006 AND 2005
Notes | 2007 | 2006 | 2005 | |||||||||||||
$ | $ | $ | ||||||||||||||
Other income | 4 | 96,071 | 1,612,872 | 11,729 | ||||||||||||
Administrative expenses | (4,528,772 | ) | (3,797,499 | ) | (2,860,095 | ) | ||||||||||
Other expenses | 5 | (2,504,594 | ) | (1,397,210 | ) | (528,668 | ) | |||||||||
Results from operating activities | (6,937,295 | ) | (3,581,837 | ) | (3,377,034 | ) | ||||||||||
Financial income | 7 | 2,361,755 | 1,639,911 | 797,396 | ||||||||||||
Financial expenses | 7 | (90,117 | ) | (1,257,451 | ) | (435,018 | ) | |||||||||
Net financing income/(costs) | 2,271,638 | 382,460 | 362,378 | |||||||||||||
Profit/(loss) before tax | (4,665,657 | ) | (3,199,377 | ) | (3,014,656 | ) | ||||||||||
Income tax expense | 8 | — | (419,371 | ) | (493,723 | ) | ||||||||||
Profit/(loss) after tax but before profit and loss of discontinued operation and gain on sale of discontinued operation | (4,665,657 | ) | (3,618,748 | ) | (3,508,379 | ) | ||||||||||
Profit and loss from discontinued operations and gain on sale of discontinued operations, net of tax | 21 | — | 10,692,878 | 6,423,552 | ||||||||||||
Profit/(loss) for the year | (4,665,657 | ) | 7,074,130 | 2,915,173 | ||||||||||||
Attributable to: | ||||||||||||||||
Equity holders of the parent | (4,366,053 | ) | 3,864,860 | 2,340,537 | ||||||||||||
Minority interests | (299,604 | ) | 3,209,270 | 574,636 | ||||||||||||
Profit/(loss) for the year | (4,665,657 | ) | 7,074,130 | 2,915,173 | ||||||||||||
Earnings per share for profit/(loss) attributable to ordinary equity holders of the Company: | ||||||||||||||||
Basic loss per share from continuing operations | 9 | (1.6) cents | (1.0) cents | (1.3) cents | ||||||||||||
Diluted loss per share from continuing operations | 9 | (1.6) cents | (1.0) cents | (1.3) cents | ||||||||||||
Dividends per share | ||||||||||||||||
Ordinary shares | 19 | — | 1.5 cents | — | ||||||||||||
The accompanying notes form part of these financial statements.
4
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
AND ITS CONTROLLED ENTITIES
YEARS ENDED 30 JUNE 2007, 2006 AND 2005
Notes | 2007 | 2006 | 2005 | |||||||||||||
$ | $ | $ | ||||||||||||||
Foreign exchange translation differences | 19 | (18,323,945 | ) | 4,559,999 | (1,255,512 | ) | ||||||||||
Net income/(expense) recognised directly in equity | (18,323,945 | ) | 4,559,999 | (1,255,512 | ) | |||||||||||
Profit/(loss) for the year | (4,665,657 | ) | 7,074,130 | 2,915,173 | ||||||||||||
Total recognised income and expense for the year | 19 | (22,989,602 | ) | 11,634,129 | 1,659,661 | |||||||||||
Attributable to: | ||||||||||||||||
Equity holders of the parent | (18,030,525 | ) | 7,125,322 | 1,436,468 | ||||||||||||
Minority interest | (4,959,077 | ) | 4,508,807 | 223,193 | ||||||||||||
Total recognised income and expense for the year | 19 | (22,989,602 | ) | 11,634,129 | 1,659,661 | |||||||||||
Other movements in equity arising from transactions with owners as owners are set out in note 19.
The accompanying notes form part of these financial statements.
5
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
AND ITS CONTROLLED ENTITIES
AS AT 30 JUNE 2007 AND 2006
Notes | 2007 | 2006 | ||||||||||
$ | $ | |||||||||||
CURRENT ASSETS | ||||||||||||
Cash and cash equivalents | 10 | (a) | 19,610,905 | 32,816,454 | ||||||||
Short term investments | 10 | (b) | — | 60,465,174 | ||||||||
Trade and other receivables | 11 | 5,176,085 | 3,902,881 | |||||||||
Other | 12 | 55,983 | 143,890 | |||||||||
TOTAL CURRENT ASSETS | 24,842,973 | 97,328,399 | ||||||||||
NON-CURRENT ASSETS | ||||||||||||
Property, plant and equipment | 13 | 62,384,353 | 7,774,359 | |||||||||
Exploration and evaluation expenditure | 14 | 11,354,362 | 39,008,722 | |||||||||
Development expenditure | 15 | 39,417,117 | — | |||||||||
TOTAL NON-CURRENT ASSETS | 113,155,832 | 46,783,081 | ||||||||||
TOTAL ASSETS | 137,998,805 | 144,111,480 | ||||||||||
CURRENT LIABILITIES | ||||||||||||
Trade and other payables | 16 | 6,314,678 | 2,021,906 | |||||||||
Interest bearing liabilities | 17 | 2,472,064 | 3,000,000 | |||||||||
Provisions | 18 | — | 919,344 | |||||||||
TOTAL CURRENT LIABILITIES | 8,786,742 | 5,941,250 | ||||||||||
NON-CURRENT LIABILITIES | ||||||||||||
Interest bearing liabilities | 17 | 9,877,408 | — | |||||||||
TOTAL NON-CURRENT LIABILITIES | 9,877,408 | — | ||||||||||
TOTAL LIABILITIES | 18,664,150 | 5,941,250 | ||||||||||
NET ASSETS | 119,334,655 | 138,170,230 | ||||||||||
EQUITY | ||||||||||||
Issued Capital | 19 | 56,256,621 | 53,767,131 | |||||||||
Reserves | 19 | (11,303,733 | ) | 3,668,574 | ||||||||
Retained profits | 19 | 45,930,375 | 48,761,347 | |||||||||
Total parent entity interest | 90,883,263 | 106,197,052 | ||||||||||
Minority interest | 19 | 28,451,392 | 31,973,178 | |||||||||
TOTAL EQUITY | 119,334,655 | 138,170,230 | ||||||||||
The accompanying notes form part of these financial statements.
6
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
AND ITS CONTROLLED ENTITIES
YEARS ENDED 30 JUNE 2007, 2006 AND 2005
Notes | 2007 | 2006 | 2005 | |||||||||||||
$ | $ | $ | ||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||
Cash receipts in the course of operations | — | 24,325,652 | 30,302,667 | |||||||||||||
Cash payments in the course of operations | (8,548,638 | ) | (15,630,126 | ) | (23,390,689 | ) | ||||||||||
Net cash generated from operations | (8,548,638 | ) | 8,695,526 | 6,911,978 | ||||||||||||
Income taxes paid | — | (3,537,843 | ) | (7,935,861 | ) | |||||||||||
Interest received | 7 | 2,361,755 | 1,639,911 | 797,396 | ||||||||||||
Payments for exploration and evaluation | 14 | (7,674,694 | ) | (18,622,403 | ) | (10,408,031 | ) | |||||||||
NET CASH FROM OPERATING ACTIVITIES | 22 | (13,861,577 | ) | (11,824,809 | ) | (10,634,518 | ) | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||||
Cash acquired from acquisition of controlled entities | — | — | 8,717,924 | |||||||||||||
Deposits to short term investments | 10 | (b) | — | (60,465,174 | ) | — | ||||||||||
Redemption of short term investments | 10 | (b) | 60,465,174 | — | — | |||||||||||
Proceeds from sale of property, plant and equipment | 13 | 924,247 | 273,527 | 76,876 | ||||||||||||
Payments for property, plant and equipment | 13 | (45,950,247 | ) | (6,790,671 | ) | (655,990 | ) | |||||||||
Payments for acquisition of exploration projects | 14 | (499,905 | ) | (1,268,091 | ) | (1,061,504 | ) | |||||||||
Payments for mine development | 15 | (13,402,926 | ) | (568,781 | ) | (206,535 | ) | |||||||||
Proceeds from disposal of controlled entity, net of cash disposed of | 21 | — | 10,837,730 | — | ||||||||||||
NET CASH FROM INVESTING ACTIVITIES | 1,536,343 | (57,981,460 | ) | 6,870,771 | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||||
Proceeds from issue of shares and options | 19 | 2,489,490 | — | 35,872,607 | ||||||||||||
Proceeds from issues of shares and other equity securities by a | ||||||||||||||||
controlled entity to minority interest | 19 | 1,313,144 | 70,402,022 | 256,449 | ||||||||||||
Payment of transaction costs | 19 | — | (697,995 | ) | — | |||||||||||
Repayment of borrowings | 17 | (3,000,000 | ) | — | 3,000,000 | |||||||||||
Interest paid | 7 | (42,461 | ) | (213,310 | ) | (246,883 | ) | |||||||||
Payment of finance lease liabilities | 17 | (1,541,190 | ) | — | — | |||||||||||
Dividends paid to shareholders | 19 | — | (4,148,814 | ) | — | |||||||||||
Dividends paid by a controlled entity to minority interest | 19 | — | (4,193,715 | ) | (5,063,903 | ) | ||||||||||
NET CASH FROM FINANCING ACTIVITIES | (781,017 | ) | 61,148,188 | 33,818,270 | ||||||||||||
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS | (13,106,251 | ) | (8,658,081 | ) | 30,054,523 | |||||||||||
Cash and cash equivalents at the beginning of the financial year | 32,816,454 | 39,790,167 | 10,219,086 | |||||||||||||
Effect of exchange rate fluctuations on the cash held | (99,298 | ) | 1,684,368 | (483,442 | ) | |||||||||||
CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR | 22 | 19,610,905 | 32,816,454 | 39,790,167 | ||||||||||||
The accompanying notes form part of these financial statements.
7
NOTE 1 — | REPORTING ENTITY |
Bolnisi Gold NL (the ‘Company’) is a company domiciled in Australia. The consolidated financial statements of the Company for the year ended 30 June 2007 comprises the Company and its controlled entities (together referred to as the ‘Group’).
NOTE 2 — | BASIS OF PREPARATION |
(a) | Statement of Compliance |
The consolidated financial statements are a general purpose financial report which has been prepared in accordance Australian equivalents to International Financial Reporting Standards (’AIFRS’), comprising Australian Accounting Standards (‘AASBs’) (including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001. The consolidated financial statements of the Group comply with International Financial Reporting Standards (‘IFRS’) and interpretations adopted by the International Accounting Standards Board.
(b) | Basis of Measurement |
The consolidated financial statements have been prepared on the historical cost basis.
(c) | Functional and Presentation Currency |
These financial statements are presented in Australian dollars, which is the Company’s functional currency.
(d) | Use of Estimates and Judgements |
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes:
• | Note 8 — utilisation of tax losses |
NOTE 3 — | SIGNIFICANT ACCOUNTING POLICIES |
The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial statements and have been applied consistently by all entities in the Group.
The entity has elected to early adopt the following accounting standards and amendments:
• | AASB 101 Presentation of Financial Statements (October 2006) | |
• | 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments. |
8
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Basis of Consolidation
Controlled Entities
Controlled entities are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of controlled entities are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Transactions Eliminated and Consolidation
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.
Where a controlled entity issues shares to minority interests which does not result in loss of control by the Group, any gain or loss arising on the Group’s interest in the controlled entity is recognised directly in equity.
Foreign Currency
Foreign Currency Transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.
Financial Statements of Foreign Operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Australian dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Australian dollars at rates approximating to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised directly in a separate component of equity.
Net Investment in Foreign Operations
Exchange differences arising from the translation of the net investment in foreign operations are released into the income statement upon disposal.
Property, Plant and Equipment
Owned Assets
Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see below accounting policy Impairment). The cost of self-constructed assets includes the cost of materials, direct labour, and an appropriate proportion of production overheads.
9
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Depreciation
Depreciation is charged to the income statement using either a reducing balance method from the date of acquisition, or in respect of constructed assets, from the time the asset is completed and held ready for use.
The plant and equipment depreciation rate is applied on the basis of units of production over the life of the economically recoverable reserves. Office equipment is depreciated at rates between 40% and 60% and motor vehicles are depreciated at a rate of 22.5%.
Exploration and Evaluation Expenditure
Exploration and evaluation expenditure, including the costs of acquiring licences, are capitalised as intangible exploration and evaluation assets on an area of interest basis. Costs incurred before the Group has obtained the legal rights to explore an area are recognised in the income statement.
Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:
• | the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or | |
• | activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or other-wise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing. |
Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability and facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. The cash generating unit shall not be larger than the area of interest.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from exploration and evaluation expenditure to development expenditure.
Development Expenditure
Development expenditure represent the accumulation of all exploration and evaluation expenditure and development expenditure incurred by or on behalf of the entity in relation to its area of interest.
When further development expenditure is incurred in respect of a mine property after the commencement of production, such expenditure is carried forward as part of the cost of that mine property only when substantial future economic benefits are established, otherwise such expenditure is expensed.
Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until commercial production commences.
Trade and Other Receivables
Trade and other receivables are stated at their amortised cost less impairment losses.
Inventories
Work in progress is valued at the lower of average cost and net realisable value. Costs of production include fixed and variable costs and an appropriate proportion of fixed overheads. Stores are valued at average cost.
10
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and call deposits.
Short-term Investments
The Group’s short term investments in debt securities with original maturities greater than three months have been designated as available for sale securities. Subsequent to initial recognition, they are measured at fair value and changes therein are recognized as a separate component in equity. When an investment is derecognized, the cumulative gain or loss is transferred to profit and loss.
Impairment
The carrying amounts of the Group’s assets, other than exploration and evaluation expenditure and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement, unless an asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss.
Calculation of Recoverable Amount
The recoverable amount of assets is the greater of their fair value less costs to sell and value in use. 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. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
Reversals of Impairment
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Share Capital
Transaction Costs
Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
Options
The fair value of the options granted is measured using Black-Scholes formula, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of options that vest except where forfeiture is only due to share prices not achieving the threshold for vesting.
11
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Interest Bearing Borrowings
Interest bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.
Share Based Payment Transactions
The Company’s Canadian controlled entity, Palmarejo Silver and Gold Corporation (‘PJO’) has a Stock Option Plan which allows directors, officers and consultants of PJO the opportunity to acquire options over unissued shares in PJO. The fair value of options granted is measured at grant date and recognised as an expense over the period during which the directors, officers and consultants of PJO become unconditionally entitled to the options. The fair value of the options granted is measured using Black-Scholes formula, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of options that vest.
Rehabilitation Costs
In accordance with applicable legal requirements, a provision for the estimated cost of rehabilitation has been made for all areas disturbed during operations based on the current estimates of costs to rehabilitate such areas, discounted to their present value. Significant uncertainty exists as to the amount of rehabilitation obligation which will be incurred due to the impact of changes in environmental legislation.
The provision is recognised as a liability with the corresponding asset included in exploration and evaluation expenditure or development expenditure.
The amount of the provision relating to rehabilitation is recognised at the commencement of the development project where a legal or constructive obligation exists at that time. At each reporting date, the rehabilitation liability is remeasured and changes in the liability are added to or deducted from the related asset.
The amount of the provision relating to rehabilitation of disturbance caused by production activities is recognised in the income statement as incurred. Changes in the liability are charged to the income statement as rehabilitation expense.
Trade and Other Payables
Trade and other payables are stated at their amortised cost. Trade payables are non-interest bearing and are normally settled on30-day terms.
Revenue
Sales revenue is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer.
Expenses
Net Financing Costs
Net financing costs comprise interest payable on borrowings calculated using the effective interest method, and interest earned.
12
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Interest income is recognised in the income statement as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity’s right to receive payments is established.
Borrowing costs are expenses as incurred.
Income Tax
Income tax on the income statement for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in controlled entities to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probably that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.
Tax Consolidation
The Company and its wholly owned Australian resident entities have formed a tax consolidated group with effect from 1 July 2003 and are therefore taxed as a single entity from that date. The head entity within the tax consolidated group is Bolnisi Gold NL.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax consolidated group are recognised in the separate financial statements of the members of the tax consolidated group using the ’group allocation method’ approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation.
Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by the Company (as head entity in the tax consolidated group). Deferred tax assets and deferred tax liabilities are measured by reference to the carrying amounts of the assets and liabilities in the Company’s balance sheet and their tax values applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses assumed by the head entity from the controlled entities in the tax consolidated group are recognised as amounts receivable or payable to other entities in the tax consolidated group in conjunction with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised by the Company as an equity contribution to or distribution from the controlled entity. Distributions firstly reduce the carrying amount of the investment in the controlled entity and are then recognised as revenue.
13
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company recognises deferred tax assets arising from unused tax losses of the tax consolidated group to the extent that it is probable that future taxable profits of the tax consolidated group will be available against which the asset can be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses assumed from controlled entities are recognised by the head entity only.
Nature of Tax Funding Arrangements and Tax Sharing Agreements
The members of the tax consolidated group have entered into a tax funding arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability (asset) assumed by the head entity and any tax loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity receivables (payables) in the separate financial statements of the members of the tax consolidated groups equal in amount to the tax liability (asset) assumed.
The head entity recognises the assumed current tax amounts as current tax liabilities (assets), adding to its own current tax amounts, since they are also due to or from the same taxation authority. The current tax liabilities (assets) are equivalent to the tax balances generated by external transactions entered into by the tax consolidated group. Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.
The members of the tax consolidated group have also entered into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote.
Segment Reporting
Segment information is presented in respect of the Group’s business and geographical segments. The primary format, geographical segments, is based on the Group’s management and internal reporting structure.
Management believes that inter-segment pricing is determined on an arm’s length basis.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.
Non Current Assets Held for Sale and Discontinued Operations
Immediately before classification as held for sale, the measurement of the assets (and all assets and liabilities in a disposal group) is brought up to date in accordance with applicable AIFRS. Then, on initial classification as held for sale, non current assets and disposal groups are recognised at the lower of carrying amount and fair value less costs to sell.
Impairment losses on initial classification as held for sale are included in profit or loss, even when there is a revaluation. The same applies to gains and losses on subsequent remeasurement.
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations or is a controlled entity acquired exclusively with a view to resale.
14
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. A disposal group that is to be abandoned also may qualify.
Goods and Services Tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.
Earnings per Share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
Determination of Fair Values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurementand/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
Trade and Other Receivables
The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.
Non-Derivative Financial Liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements.
New Standards and Interpretations Not Yet Adopted
The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2007, but have not been applied in preparing this financial report:
• | AASB 7 Financial Instruments: Disclosures (August 2005) replaces the presentation requirements of financial instruments in AASB 132. AASB 7 is applicable for annual reporting periods beginning on or after 1 January 2007, and will require extensive additional disclosures with respect to the Group’s financial instruments and share capital. |
15
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
• | AASB2005-10 Amendments to Australian Accounting Standards (September 2005) makes consequential amendments to AASB 132 Financial Instruments: Disclosure and Presentation, AASB 101 Presentation of Financial Statements, AASB 114 Segment Reporting, AASB 117 Leases, AASB 133 Earnings Per Share, AASB 139 Financial Instruments: Recognition and Measurement, AASB 1 First time Adoption of Australian Equivalents to International Financial Reporting Standards, AASB 4 Insurance Contracts, AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts arising from the release of AASB 7. AASB2005-10 is applicable for annual reporting periods beginning on or after 1 January 2007 and is expected to only impact disclosures contained within the consolidated financial report. | |
• | AASB 8 Operating Segments replaces the presentation requirements of segment reporting in AASB 114 Segment Reporting. AASB 8 is applicable for annual reporting periods beginning on or after 1 January 2009 and is not expected to have an impact on the financial results of the Company and the Group as the standard is only concerned with disclosures. | |
• | AASB2007-2 Amendments to Australian Accounting Standards arising from AASB Interpretation 12 makes amendments to AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, AASB 117 Leases, AASB 118 Revenue, AASB 120 Accounting for Government Grants and Disclosures of Government Assistance, AASB 121 The Effects of Changes in Foreign Exchange Rates, AASB 127 Consolidated and Separate Financial Statement, AASB 131 Interest in Joint Ventures, and AASB 139 Financial Instruments: Recognition and Measurement. AASB2007-2 is applicable for annual reporting periods beginning on or after 1 January 2008 and must be applied at the same time as Interpretation 12 Service Concession Arrangements. | |
• | AASB2007-3 Amendments to Australian Accounting Standards arising from AASB 8 makes amendments to AASB 5 Non-current Assets Held for Sale and Discontinued Operations, AASB 6 Exploration for and Evaluation of Mineral Resources, AASB 107 Cash Flow Statements, AASB 119 Employee Benefits, AASB 127 Consolidated and Separate Financial Statements, AASB 134 Interim Financial Reporting, AASB 136 Impairment Assets. AASB2007-3 is applicable for annual reporting periods beginning on or after 1 January 2009 and must be adopted in conjunction with AASB 8 Operating Segments. This standard is only expected to impact disclosures contained within the financial report. | |
• | Interpretation 10 Interim Financial Reporting and Impairment prohibits the reversal of an impairment loss recognised in a previous interim period in respect of goodwill, an investment in an equity instrument or a financial asset carried at cost. Interpretation 10 will become mandatory for the Group’s 2008 financial statements, and will apply to goodwill, investments in equity instruments, and financial assets carried at cost prospectively from the date that the Group first applied the measurement criteria of AASB 136 and AASB 139 respectively (i.e. 1 July 2004 and 1 July 2005, respectively). The potential impact on the Company and the consolidated financial report has not yet been determined. | |
• | AASB2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 and AASB 138 and Interpretations 1 and 12],. AASB2007-3 is applicable for annual reporting periods beginning on or after 1 January 2009 and must be adopted in conjunction with AASB 123 Borrowing Costs. The potential impact on the Company and the consolidated financial report has not yet been determined. | |
• | AASB2007-7 Amendments to Australian Accounting Standards [AASB 1, AASB 2, AASB 4, AASB 5, AASB 107 and AASB 128] is applicable for annual reporting periods beginning on or after 1 January 2009 and must be adopted in conjunction with AASB 123 Borrowing Costs. The potential impact on the Company and the consolidated financial report has not yet been determined. | |
• | AASB 123 Borrowing Costs (revised March 2007) requires the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. Qualifying assets are assets |
16
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
that necessarily take a substantial period of time to get ready for their intended use. All other borrowing costs are immediately recognised as expenses. AASB 123 is applicable for annual reporting periods beginning on or after 1 January 2009. The potential impact on the Company and the consolidated financial report has not yet been determined. |
Reclassification of cash to short-term investments
In its annual financial statements for the year ended 30 June 2006, the Group classified certain short-term deposits as cash and cash equivalents because the securities were highly liquid and there was an insignificant risk of changes in value. Subsequent to the completion of the 30 June 2007 financial statements, the Group determined that, pursuant to AASB 107 “Cash Flow Statements”, certain short term deposits cannot be classified as cash and cash equivalents because their maturity dates exceed 3 months.
The Group has corrected the classification in its financial statement presentation by reclassifying $60,465,174 of short term deposits held at 30 June 2006 from cash and cash equivalents to available for sale short-term investments. The following table shows the amounts as originally presented in the Group’s financial statements for the years ended 30 June 2006 and 30 June 2007, and the amounts following reclassification. The reclassification had no effect on total current assets, total assets, net assets, total equity, loss for the year or loss per share.
As | ||||||||||||
previously | ||||||||||||
reported | Adjustment | Corrected | ||||||||||
Year Ended 30 June 2006 | ||||||||||||
Cash and cash equivalents | 93,281,628 | (60,465,174 | ) | 32,816,454 | ||||||||
Short term investments | — | 60,465,174 | 60,465,174 | |||||||||
Net cash from investing activities | 2,483,714 | (60,465,174 | ) | (57,981,460 | ) | |||||||
Net increase/(decrease) in cash and cash equivalents | 51,807,093 | (60,465,174 | ) | (8,658,081 | ) | |||||||
Year ended 30 June 2007 | ||||||||||||
Net cash from investing activities | (58,928,831 | ) | 60,465,174 | 1,536,343 | ||||||||
Net increase/(decrease) in cash and cash equivalents | (73,571,425 | ) | 60,465,174 | (13,106,251 | ) |
Notes | 2007 | 2006 | 2005 | |||||||||||||
$ | $ | $ | ||||||||||||||
NOTE 4 — OTHER INCOME | ||||||||||||||||
Net gain on disposal of property, plant and equipment | — | 95,985 | 11,729 | |||||||||||||
Net foreign exchange gain | 96,071 | 1,516,887 | — | |||||||||||||
96,071 | 1,612,872 | 11,729 | ||||||||||||||
NOTE 5 — OTHER EXPENSES | ||||||||||||||||
Share based remuneration | 27 | 326,229 | 1,397,210 | 243,520 | ||||||||||||
Net foreign exchange loss | — | — | 285,148 | |||||||||||||
Merger related expenses | 2,178,365 | — | — | |||||||||||||
2,504,594 | 1,397,210 | 526,668 | ||||||||||||||
Merger related expenses are expenses associated with the completion of the Merger Implementation Agreement between the Company and Coeur d’Alene Mines Corporation announced on 4 May 2007.
17
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Notes | 2007 | 2006 | 2005 | |||||||||||||
$ | $ | $ | ||||||||||||||
NOTE 6 — AUDITOR’S REMUNERATION | ||||||||||||||||
Audit services | ||||||||||||||||
Auditors of the Company | ||||||||||||||||
KPMG Australia: | ||||||||||||||||
— Audit and review of financial reports | 75,970 | 91,367 | 48,250 | |||||||||||||
Overseas KPMG Firms: | ||||||||||||||||
— Audit and review of financial reports | 83,113 | 72,088 | 42,517 | |||||||||||||
159,083 | 163,455 | 90,767 | ||||||||||||||
Other services | ||||||||||||||||
Auditors of the Company | ||||||||||||||||
KPMG Australia | ||||||||||||||||
— Other assurance services | 50,000 | 4,741 | 17,744 | |||||||||||||
— Taxation services | — | 7,500 | — | |||||||||||||
Overseas KPMG Firms: | ||||||||||||||||
— Other assurance services | 37,769 | 83,447 | — | |||||||||||||
— Taxation services | 786 | 8,884 | — | |||||||||||||
88,555 | 104,572 | 17,744 | ||||||||||||||
NOTE 7 — NET FINANCING COSTS | ||||||||||||||||
Interest income | (2,361,755 | ) | (1,639,911 | ) | (797,396 | ) | ||||||||||
Financial income | (2,361,755 | ) | (1,639,911 | ) | (797,396 | ) | ||||||||||
Borrowing costs — other parties | ||||||||||||||||
— interest paid | 42,461 | 213,310 | 171,324 | |||||||||||||
— recognition of fair value of options granted over facility term | 47,656 | 1,044,141 | 263,694 | |||||||||||||
Financial expenses | 90,117 | 1,257,451 | 435,018 | |||||||||||||
Net financing costs/(income) | (2,271,638 | ) | (382,460 | ) | (362,378 | ) | ||||||||||
18
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Notes | 2007 | 2006 | 2005 | |||||||||||||
$ | $ | $ | ||||||||||||||
NOTE 8 — INCOME TAX EXPENSE | ||||||||||||||||
Tax expense | ||||||||||||||||
Current year | — | 1,357,258 | 8,860,629 | |||||||||||||
Deferred tax | — | 1,390,888 | (7,844,593 | ) | ||||||||||||
Total income tax expense in income statement | — | 2,478,146 | 1,016,036 | |||||||||||||
Attributable to: | ||||||||||||||||
Continuing operations | — | 419,371 | 493,723 | |||||||||||||
Discontinuing operations | — | 2,058,775 | 522,313 | |||||||||||||
— | 2,478,146 | 1,016,036 | ||||||||||||||
Numerical reconciliation of income tax expense to prima facie tax payable | ||||||||||||||||
Profit/(loss) before tax — continuing operations | (4,665,657 | ) | (3,199,377 | ) | (3,014,656 | ) | ||||||||||
Profit/(loss) before tax — discontinued operations | — | 12,751,653 | 6,945,865 | |||||||||||||
Profit/(loss) before tax | (4,665,657 | ) | 9,552,276 | 3,931,209 | ||||||||||||
Prima facie income tax expense/(benefit) at the Australian tax rate of 30% (2006 and 2005 — 30)% | (1,399,697 | ) | 2,865,683 | 1,179,363 | ||||||||||||
Increase/(decrease) in income tax expense/(benefit) due to: | ||||||||||||||||
— different tax regimes of overseas controlled entities | — | (532,500 | ) | (117,913 | ) | |||||||||||
— disposal of controlled entity | — | — | (1,266,023 | ) | ||||||||||||
— non-deductible expenses, net of non assessable items | 955,549 | 27,724 | (7,869 | ) | ||||||||||||
— effect of net deferred tax assets not brought to account | 444,148 | 117,239 | 1,228,478 | |||||||||||||
Income tax expense | — | 2,478,146 | 1,016,036 | |||||||||||||
The disposal of the Georgian interest (see note 21) during the year ending 30 June 2006 resulted in a decrease to the current tax liability of $3,930,062 and deferred tax liability of $1,655,213.
Unrecognised Deferred Tax Assets
Deferred tax assets have not been recognised in respect of the following items (tax effected at 30%):
Tax capital losses | 3,320,473 | 162,788 | 162,788 | |||||||||
Tax losses | 14,779,843 | 12,607,003 | 4,698,958 | |||||||||
Net deductible temporary differences | (13,361,216 | ) | (11,426,813 | ) | (4,241,460 | ) | ||||||
Potential tax benefit | 4,739,100 | 1,342,978 | 620,286 | |||||||||
The Australian deductible temporary differences and tax losses do not expire under current tax legislation. Mexican tax losses expire after 10 years pursuant to current tax legislation. Deferred tax assets have not been
19
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits.
Notes | 2007 | 2006 | 2005 | |||||||||||||
$ | $ | $ | ||||||||||||||
NOTE 9 — EARNINGS PER SHARE | ||||||||||||||||
Basic and diluted earnings per share have been calculated using: | ||||||||||||||||
Net loss for the year from continuing operations | (4,366,053 | ) | (2,895,444 | ) | (2,996,620 | ) | ||||||||||
Net profit for the year from discontinuing operations | — | 6,760,304 | 5,337,157 | |||||||||||||
Profit for the period attributable to equity holders of the parent | (4,366,053 | ) | 3,864,860 | 2,340,537 | ||||||||||||
Weighted average number of ordinary shares | ||||||||||||||||
Issued ordinary shares at beginning of year | 276,587,321 | 276,587,321 | 172,002,460 | |||||||||||||
Effect of shares issued on exercise of options | 4,857,781 | — | 52,149,164 | |||||||||||||
Weighted average number of ordinary shares at the end of the year | 281,445,102 | 276,587,321 | 224,151,624 | |||||||||||||
Weighted average number of ordinary shares (diluted) | ||||||||||||||||
Weighted average number of ordinary shares at end of year | 281,445,102 | 276,587,321 | 224,151,624 | |||||||||||||
Effect of share options on issue | 3,678,972 | 8,955,000 | 7,155,822 | |||||||||||||
Weighted average number of ordinary shares (diluted) at the end of the year | 285,124,074 | 285,542,321 | 231,307,445 | |||||||||||||
Earnings per share for profit attributable to ordinary equity holders of the Company: | ||||||||||||||||
Basic earnings per share | ||||||||||||||||
From continuing operations | (1.6) cents | (1.0) cents | (1.3) cents | |||||||||||||
From discontinuing operations | — | 2.4 cents | 2.4 cents | |||||||||||||
(1.6) cents | 1.4 cents | 1.1 cents | ||||||||||||||
Diluted earnings per share | ||||||||||||||||
From continuing operations | (1.6) cents | (1.0) cents | (1.3) cents | |||||||||||||
From discontinuing operations | — | 2.4 cents | 2.3 cents | |||||||||||||
(1.6) cents | 1.4 cents | 1.0 cents | ||||||||||||||
20
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Notes | 2007 | 2006 | ||||||||||
$ | $ | |||||||||||
NOTE 10(a) — CASH AND CASH EQUIVALENTS | ||||||||||||
Bank balances | 4,467,992 | 23,312,957 | ||||||||||
Call deposits | 15,142,913 | 9,503,497 | ||||||||||
Cash and cash equivalents in the statement of cash flows | 19,610,905 | 32,816,454 | ||||||||||
NOTE 10(b) — SHORT TERM INVESTMENTS | ||||||||||||
Available for sale short-term investments | — | 60,465,174 | ||||||||||
During the financial year ended 30 June 2006, available for sale short-term investments had interest rates of 4.05 to 4.10% with initial maturities of more than three months but less than six months. | ||||||||||||
NOTE 11 — TRADE AND OTHER RECEIVABLES | ||||||||||||
Current | ||||||||||||
Other debtors | 5,176,085 | 3,902,881 | ||||||||||
NOTE 12 — OTHER ASSETS | ||||||||||||
Current | ||||||||||||
Prepayments | 55,983 | 143,890 | ||||||||||
NOTE 13 — | PROPERTY, PLANT AND EQUIPMENT |
During the year the Group disposed of property, plant and equipment for a consideration of $36,777 (2006 — $1,160,997), resulting in a loss on sale of $11,197 (2006 — gain of $91,118). There was nil amount outstanding at year end in relation to this disposal (2006 — $887,470).
Leased Plant and Equipment
The Group has entered into finance lease agreements to purchase mining development equipment. The leased equipment secures lease obligations (see note 18). At 30 June 2007, the net carrying amount of leased plant and machinery was $12,349,472 (2006 — nil).
21
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2007 | 2006 | |||||||
$ | $ | |||||||
Plant and equipment — cost | 62,099,668 | 7,709,431 | ||||||
Accumulated depreciation | (14,280 | ) | (124,930 | ) | ||||
Net book value | 62,085,388 | 7,584,501 | ||||||
Office equipment — cost | 96,226 | 205,986 | ||||||
Accumulated depreciation | (69,153 | ) | (127,671 | ) | ||||
Net book value | 27,073 | 78,315 | ||||||
Motor vehicles — cost | 334,566 | 238,872 | ||||||
Accumulated depreciation | (62,674 | ) | (127,329 | ) | ||||
Net book value | 271,892 | 111,543 | ||||||
Total property, plant and equipment | 62,384,353 | 7,774,359 | ||||||
Reconciliations of the carrying amounts for each class of plant and equipment are set out below. | ||||||||
Plant and equipment | ||||||||
Carrying amount at beginning of year | 7,584,501 | 2,122,034 | ||||||
Additions | 57,571,187 | 6,516,569 | ||||||
Reclassification from exploration and evaluation | 3,385,153 | — | ||||||
Disposals | (1,060,883 | ) | (1,056,185 | ) | ||||
Depreciation | (9,791 | ) | (214,329 | ) | ||||
Net foreign currency adjustment on translation | (5,384,779 | ) | 216,412 | |||||
Net book value | 62,085,388 | 7,584,501 | ||||||
Office equipment | ||||||||
Carrying amount at beginning of year | 78,315 | 248,510 | ||||||
Additions | 61,743 | 87,483 | ||||||
Disposals | (73,744 | ) | (958 | ) | ||||
Disposals — discontinuing operations | — | (130,530 | ) | |||||
Depreciation | (31,544 | ) | (135,038 | ) | ||||
Net foreign currency adjustment on translation | (7,697 | ) | 8,848 | |||||
Net book value | 27,073 | 78,315 | ||||||
Motor vehicles | ||||||||
Carrying amount at beginning of year | 111,543 | 447,483 | ||||||
Additions | 345,569 | 186,619 | ||||||
Disposals | (86,060 | ) | (12,738 | ) | ||||
Disposals — discontinuing operations | — | (435,278 | ) | |||||
Depreciation | (69,862 | ) | (96,780 | ) | ||||
Net foreign currency adjustment on translation | (29,298 | ) | 22,237 | |||||
Net book value | 271,892 | 111,543 | ||||||
22
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 14 — | EXPLORATION AND EVALUATION EXPENDITURE |
2007 | 2006 | |||||||
$ | $ | |||||||
Opening balance | 39,008,722 | 14,138,199 | ||||||
Additions made during the year | 9,224,660 | 21,635,773 | ||||||
Reclassification to development expenditure | (29,965,354 | ) | — | |||||
Reclassification to property, plant and equipment | (3,385,153 | ) | — | |||||
Net foreign currency adjustment on translation | (3,528,513 | ) | 3,234,750 | |||||
Closing balance | 11,354,362 | 39,008,722 | ||||||
The ultimate recoupment of costs carried forward for exploration and evaluation assets is dependent on the successful development and commercial exploitation or sale of the respective areas.
NOTE 15 — DEVELOPMENT EXPENDITURE | ||||||||
Opening balance | — | — | ||||||
Additions made during the year | 12,488,069 | — | ||||||
Reclassification from exploration and evaluation | 29,965,354 | — | ||||||
Net foreign currency adjustment on translation | (3,036,306 | ) | — | |||||
Closing balance | 39,417,117 | — | ||||||
Expenditure in respect of exploration and evaluation expenditure that was transferred to development expenditure during the year was subject to impairment testing to ensure the carrying value is not in excess of the present value of estimated future cash flows. Key assumptions when conducting the impairment testing were recoverable reserves which are based on third party estimates, a discount rate of 10%, gold and silver prices of US$550 and US$10 per ounce respectively based on an estimate of the maintainable open market price and an exchange rate of A$1.00 = US$0.7468 based on the expected spot rate.
NOTE 16 — TRADE AND OTHER PAYABLES | ||||||||
Current | ||||||||
Accounts payable | 6,314,678 | 2,021,906 | ||||||
2007 | 2006 | |||||||
$ | $ | |||||||
NOTE 17 — INTEREST BEARING LIABILITIES | ||||||||
Current | ||||||||
Finance facility | — | 3,000,000 | ||||||
Finance lease liabilities | 2,472,064 | — | ||||||
2,472,064 | 3,000,000 | |||||||
Non-current | ||||||||
Finance lease liabilities | 9,877,408 | — | ||||||
9,877,408 | — | |||||||
23
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During the financial year ending 30 June 2007, Macquarie Bank Limited exercised 8,955,000 unlisted options, each exercisable at 27.8 cents at any time up to 10 August 2008 to convert to 1 fully paid ordinary share. Proceeds from the exercise of these options have been used to repay the finance facility.
Terms and Debt Repayment Schedule
Terms and conditions of outstanding interest bearing liabilities were as follows:
Carrying | Carrying | |||||||||||||||||||
Interest | Year of | Amount | Amount | |||||||||||||||||
Currency | Rate | Maturity | 2007 | 2006 | ||||||||||||||||
Finance lease liabilities | USD | 6.60 | % | 2009 | 6,963,404 | — | ||||||||||||||
Finance lease liabilities | USD | 8.97 | % | 2012 | 5,386,068 | — | ||||||||||||||
12,349,472 | — | |||||||||||||||||||
Finance Lease Liabilities
Finance lease liabilities of the Group are payable as follows:
Minimum | Minimum | |||||||||||||||||||||||
Lease | Lease | |||||||||||||||||||||||
Payments | Interest | Principal | Payments | Interest | Principal | |||||||||||||||||||
2007 | 2007 | 2007 | 2006 | 2006 | 2006 | |||||||||||||||||||
Less than one year | 3,092,052 | 619,988 | 2,472,064 | — | — | — | ||||||||||||||||||
Between one and five years | 10,952,070 | 1,185,561 | 9,766,509 | — | — | — | ||||||||||||||||||
More than five years | 111,728 | 829 | 110,899 | — | — | — | ||||||||||||||||||
14,155,850 | 1,806,378 | 12,349,472 | — | — | — | |||||||||||||||||||
2007 | 2006 | |||||||
$ | $ | |||||||
NOTE 18 — PROVISIONS | ||||||||
Current | ||||||||
Rehabilitation provision | — | 919,344 | ||||||
Rehabilitation provision | ||||||||
Opening balance | 919,344 | — | ||||||
Provision made during the year | — | 919,344 | ||||||
Payments made during the year | (919,344 | ) | — | |||||
Closing balance | — | 919,344 | ||||||
The Company recorded a rehabilitation provision of $919,344 (US$751,839) at June 30, 2006 equivalent to the amount to be paid to the National Forestry Commission of Mexico to enable the rehabilitation of specified disturbed land. This obligation was determined by the Mexican authorities based on the number of hectares deemed to be disturbed and a fixed amount of rehabilitation per hectare. During the year ended June 30, 2007, the Company paid this obligation with related future rehabilitation work to be undertaken by the National Forestry Commission of Mexico.
The basis for accounting for rehabilitation costs is set out in the significant accounting policies note 3.
24
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 19 — | CAPITAL AND RESERVES |
2007 | 2006 | 2005 | ||||||||||
Share capital | Number | Number | Number | |||||||||
On issue at 1 July | 276,587,321 | 276,587,321 | 172,002,460 | |||||||||
Exercise of options | 8,955,000 | — | 104,584,861 | |||||||||
Ordinary shares on issue at 30 June — fully paid | 285,542,321 | 276,587,321 | 276,587,321 | |||||||||
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. The Company does not have authorised capital or par value in respect of its issued shares.
In the event of winding up of the Company, ordinary shareholders rank after creditors and are fully entitled to any proceeds of liquidation.
Options
During the year ended 30 June 2007:
• | There were no options granted or lapsed unexercised during the financial year. | |
• | Macquarie Bank Limited exercised 8,955,000 unlisted options, each exercisable at 27.8 cents at any time up to 10 August 2008 to convert to 1 fully paid ordinary share per option. Proceeds from the exercise of these options have been used towards repayment of the finance facility. |
During the year ended 30 June 2006:
• | There were no options granted, exercised or lapsed unexercised during the financial year. |
During the year ended 30 June 2005:
• | The Company drew down $3.0 million of the $5.0 million Project Feasibility Finance Facility with Macquarie Bank Limited resulting in the granting of 8,955,000 unlisted options each exercisable to acquire one fully paid ordinary share in the Company at 27.8 cents at any time before 5:00 pm on 10 August 2008. | |
• | 2,533,969 options lapsed, each exercisable at 34.3 cents for one fully paid ordinary shares at any time up to 31 December 2004 lapsed unexercised. |
Nature and Purpose of Reserves
Capital Profits
Upon disposal of revalued assets, any related revaluation increments standing to the credit of the asset revaluation reserve is transferred to the capital profits reserve.
Option Premium Reserve
During the year ended 30 June 2007, there were no options granted by the Company (June 2006 — nil). The issue of Company options in the year ended 30 June 2005 for no consideration with a fair value of $1,307,835 resulting in a credit of $1,307,835 to the option premium reserve.
The exercise of Company options results in a debit to the option premium reserve. During the year ended 30 June 2007 there were 8,955,000 options, with a fair value of $1,307,835, exercised resulting in a transfer of $1,307,835 to retained profits (June 2006 and June 2005 — nil).
25
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Foreign Currency Translation Reserve
The foreign currency translation reserve records the foreign currency differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the reporting entity.
Dividends
Dividends paid or declared by the Company are:
Cents per Share | Total Amount $ | Date of Payment | ||||||||||
2007 | ||||||||||||
There were no dividends paid or declared during the financial year. | ||||||||||||
2006 | ||||||||||||
Interim dividend on ordinary shares | 0.75 | 2,074,407 | 12 April 2006 | |||||||||
Final 2005 dividend on ordinary shares | 0.75 | 2,074,407 | 14 October 2005 | |||||||||
2005 | ||||||||||||
There were no dividends paid or declared during the financial year ended 30 June 2005 |
The dividends are unfranked.
Reconciliation of Movement in Capital and Reserves Attributable to Equity Holders of the Parent
Capital | Option | |||||||||||||||||||||||||||||||||||
Share | Profits | Premium | Translation | Retained | Minority | Total | ||||||||||||||||||||||||||||||
Note | Capital | Reserve | Reserve | Reserve | Profits | Total | Interest | Equity | ||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Balance at 1 July 2004 | 27,674,524 | 4,346 | 24,170 | — | (1,942,516 | ) | 25,760,524 | 7,237,593 | 32,998,117 | |||||||||||||||||||||||||||
31 December 2004 options, lapsed unexercised | — | — | (24,170 | ) | — | 24,170 | — | — | — | |||||||||||||||||||||||||||
Total recognised income and expense | — | — | — | (904,069 | ) | 2,340,537 | 1,436,468 | 223,193 | 1,659,661 | |||||||||||||||||||||||||||
Shares issued | 35,872,607 | — | — | — | — | 35,872,607 | — | 35,872,607 | ||||||||||||||||||||||||||||
Disposal of controlled entities — return of capital | (9,780,000 | ) | — | — | — | — | (9,780,000 | ) | — | (9,780,000 | ) | |||||||||||||||||||||||||
Options issued | — | — | 1,307,835 | — | — | 1,307,835 | — | 1,307,835 | ||||||||||||||||||||||||||||
Minority interest on partial sale of controlled entity | — | — | — | — | — | — | 7,837,007 | 7,837,007 | ||||||||||||||||||||||||||||
Shares issued by controlled entity to minority interest | — | — | — | — | — | — | 312,892 | 312,892 | ||||||||||||||||||||||||||||
Dividends paid to minority interest | — | — | — | — | — | — | (5,063,903 | ) | (5,063,903 | ) | ||||||||||||||||||||||||||
Balance at 30 June 2005 | 53,767,131 | 4,346 | 1,307,835 | (904,069 | ) | 422,191 | 54,597,434 | 10,546,782 | 65,144,216 | |||||||||||||||||||||||||||
Balance at 1 July 2005 | 53,767,131 | 4,346 | 1,307,835 | (904,069 | ) | 422,191 | 54,597,434 | 10,546,782 | 65,144,216 | |||||||||||||||||||||||||||
Total recognised income and expense | — | — | — | 3,260,462 | 3,864,860 | 7,125,322 | 4,508,807 | 11,634,129 | ||||||||||||||||||||||||||||
Dividends to shareholders | — | — | — | — | (4,148,814 | ) | (4,148,814 | ) | — | (4,148,814 | ) | |||||||||||||||||||||||||
Interest in reserves | — | — | — | — | — | — | 1,397,210 | 1,397,210 | ||||||||||||||||||||||||||||
Shares issued by controlled entity to minority interest | — | — | — | — | — | — | 70,402,022 | 70,402,022 | ||||||||||||||||||||||||||||
Dividends paid to minority interest | — | — | — | — | — | — | (4,193,715 | ) | (4,193,715 | ) | ||||||||||||||||||||||||||
Disposal of controlled entities | 21 | — | — | — | — | — | — | (2,064,818 | ) | (2,064,818 | ) | |||||||||||||||||||||||||
Gain/(loss) on dilution of interest in controlled entity | — | — | — | — | 48,623,110 | 48,623,110 | (48,623,110 | ) | — | |||||||||||||||||||||||||||
Balance at 30 June 2006 | 53,767,131 | 4,346 | 1,307,835 | 2,356,393 | 48,761,347 | 106,197,052 | 31,973,178 | 138,170,230 | ||||||||||||||||||||||||||||
26
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Capital | Option | |||||||||||||||||||||||||||||||||||
Share | Profits | Premium | Translation | Retained | Minority | Total | ||||||||||||||||||||||||||||||
Note | Capital | Reserve | Reserve | Reserve | Profits | Total | Interest | Equity | ||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Balance at 1 July 2006 | 53,767,131 | 4,346 | 1,307,835 | 2,356,393 | 48,761,347 | 106,197,052 | 31,973,178 | 138,170,230 | ||||||||||||||||||||||||||||
Total recognised income and expense | — | — | — | (13,664,472 | ) | (4,366,053 | ) | (18,030,525 | ) | (4,959,077 | ) | (22,989,602 | ) | |||||||||||||||||||||||
Shares issued | 2,489,490 | — | — | — | — | 2,489,490 | — | 2,489,490 | ||||||||||||||||||||||||||||
Options exercised | — | — | (1,307,835 | ) | — | 1,307,835 | — | — | — | |||||||||||||||||||||||||||
Shares issued by controlled entity to minority interest | — | — | — | — | — | — | 1,664,537 | 1,664,537 | ||||||||||||||||||||||||||||
Gain/(loss) on dilution of interest in controlled entity | — | — | — | — | 227,246 | 227,246 | (227,246 | ) | — | |||||||||||||||||||||||||||
Balance at 30 June 2007 | 56,256,621 | 4,346 | — | (11,308,079 | ) | 45,930,375 | 90,883,263 | 28,451,392 | 119,334,655 | |||||||||||||||||||||||||||
NOTE 20 — CONSOLIDATED ENTITIES
Particulars in Relation to Controlled Entities
Ordinary Share Consolidated | ||||||||||||
Entity Interest | ||||||||||||
Name | Note | 2007 | 2006 | |||||||||
% | % | |||||||||||
Parent entity | ||||||||||||
Bolnisi Gold NL | ||||||||||||
Controlled entities | ||||||||||||
Bolnisi Mining Operations Pty Limited | (i | ) | 100 | 100 | ||||||||
Cropwood Limited | (ii | ) | 100 | 100 | ||||||||
Fairview Gold Pty Limited | (i | ) | 100 | 100 | ||||||||
Mexco Resources, LLC | (iii | ) | 100 | 100 | ||||||||
Mexco Services, LLC | (iii | ) | 100 | 100 | ||||||||
Darbazi, SA de CV | (iv | ) | 100 | 100 | ||||||||
Minera Bolnisi, SA de CV | (iv | ) | 100 | 100 | ||||||||
Recursos Mineros de Ocampo, SA de CV | (iv | ) | 100 | 100 | ||||||||
Servicios Auxiliares de Mineria, SA de CV | (iv | ) | 100 | 100 | ||||||||
Servicios Administrativos Palmarejo, SA de CV | (iv | ) | 100 | — | ||||||||
Wyalong, SA de CV | (iv | ) | 100 | 100 | ||||||||
Palmarejo Silver and Gold Corporation | (vi | ) | 73.3 | 74.1 | ||||||||
Ocampo Resources, Inc | (vi | ) | 73.3 | 74.1 | ||||||||
Ocampo Services, Inc | (vi | ) | 73.3 | 74.1 | ||||||||
Planet Gold, SA de CV | (vii | ) | 73.3 | 74.1 | ||||||||
Ensign Energy Pty Limited | (i | ) | 100 | 100 |
(i) | Bolnisi Mining Operations Pty Limited, Fairview Gold Pty Limited and Ensign Energy Pty Limited, Australian controlled entities, are small proprietary companies as determined by the Corporations Act 2001 and are not required to be audited for statutory purposes. | |
(ii) | Cropwood Limited, incorporated in Hong Kong, is a wholly owned controlled entity of Bolnisi Mining Operations Pty Limited. |
27
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(iii) | Mexco Resources, LLC and Mexco Services, LLC are incorporated in the USA and are owned by Fairview Gold Pty Limited. | |
(iv) | Darbazi, SA de CV, Minera Bolnisi, SA de CV, Recursos Mineros de Ocampo, SA de CV, Servicios Auxiliares de Mineria, SA de CV, Servicios Administrativos Palmarejo, SA de CV and Wyalong, SA de CV are incorporated in Mexico and are owned by Mexco Resources, LLC and Mexco Services, LLC. | |
(v) | Fairview Gold Pty Limited holds an 73.3% interest in Palmarejo Gold Corporation, which is incorporated in Canada and listed on the TSX-Venture Exchange. | |
(vi) | Ocampo Resources, Inc and Ocampo Services, Inc are incorporated in the USA and are wholly owned by Palmarejo Silver and Gold Corporation. | |
(vii) | Planet Gold, SA de CV is incorporated in Mexico and is wholly owned by Ocampo Resources, Inc and Ocampo Services, Inc. |
Acquisition of Controlled Entities
Servicios Administrativos Palmarejo, SA de CV was acquired on 30 September 2006 for $6,079 representing net assets at date of acquisition and the operating results from that date have been included in the consolidated operating profit.
There were no acquisitions made during the years ended 30 June 2006.
NOTE 21 — | DISCONTINUED OPERATION |
There were no discontinued operations during the financial year ending 30 June 2007.
During the financial year ended 30 June 2006, the Group completed the sale of the consolidated entity’s 50% interests in Quartzite Ltd (’Quartzite’) and Trans Georgian Resources Ltd (’TGR’) and the related loans to Quartzite and TGR (’Georgian Interests’) for US$10.0 million cash. The Georgian Interests had cash inflows from operating activities of $8,615,544, cash outflows from investing activities of $971,736 and cash outflows from financing activities of $4,193,715.
During the financial year ended 30 June 2005, the Company completed the sale of 100% of its interest in Bolnisi Logistics Pty Limited, the Company’s wholly owned subsidiary which held the Company’s 50% joint venture interest in the Roseby Copper Project, to Universal Resources Limited (’Universal’), the holder of the other 50% joint venture interest in the Roseby Copper Project. The Roseby Copper Project had cash outflows from operating activities of $56,347, cash outflows from investing activities of nil and cash outflows from financing activities of nil.
Analysis of profit and loss of the discontinued operations, gain on sale of discontinued operations and related income tax expense
28
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2007 | 2006 | 2005 | ||||||||||
$ | $ | $ | ||||||||||
Revenue from sale of gold and silver | — | 24,325,652 | 30,302,667 | |||||||||
Cost of product sold: | ||||||||||||
— mining and treatment costs | — | (13,002,437 | ) | (22,021,816 | ) | |||||||
Gross profit from the sale of gold and silver | 11,323,305 | 8,280,851 | ||||||||||
Other expenses from ordinary activities: | ||||||||||||
— administrative expenses | — | (4,867 | ) | (13,472 | ) | |||||||
— depreciation and amortisation | — | (668,236 | ) | (444,099 | ) | |||||||
— foreign exchange loss | — | (209 | ) | (564,190 | ) | |||||||
— mineral tenements written off | — | — | (4,825,263 | ) | ||||||||
Operating profit before financing costs | — | 10,649,993 | 2,433,827 | |||||||||
Financial expenses | — | — | (75,559 | ) | ||||||||
Net financing costs | — | — | (75,559 | ) | ||||||||
Profit before tax | — | 10,649,993 | 2,358,268 | |||||||||
Income tax expense | — | (2,058,775 | ) | (522,313 | ) | |||||||
Profit after tax | — | 8,591,218 | 1,835,955 | |||||||||
Gain on sale of discontinued operation | — | 2,101,660 | 4,587,597 | |||||||||
Income tax expense | — | — | — | |||||||||
Gain on sale of discontinued operation after tax | — | 2,101,660 | 4,587,597 | |||||||||
Profit and loss of discontinued operations and gain on sale of discontinued operations, net of tax | — | 10,692,878 | 6,423,552 | |||||||||
29
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Effect of the Disposal on Individual Assets and Liabilities of the Group
2007 | 2006 | 2005 | ||||||||||
$ | $ | $ | ||||||||||
Inventories | — | 17,518,469 | — | |||||||||
Other | — | 971,502 | 106,662 | |||||||||
Trade and other receivables | — | 8,041,507 | — | |||||||||
Investments | — | — | — | |||||||||
Property, plant and equipment | — | 565,808 | — | |||||||||
Exploration and evaluation expenditure | — | — | 5,085,741 | |||||||||
Trade and other payables | — | (10,790,500 | ) | — | ||||||||
Current tax liabilities | — | (2,120,012 | ) | — | ||||||||
Deferred tax liabilities | — | (3,046,101 | ) | — | ||||||||
Minority interest | — | (2,404,395 | ) | — | ||||||||
Net identifiable assets and liabilities | — | 8,736,278 | 5,192,403 | |||||||||
Consideration received, satisfied in cash | — | (12,637,125 | ) | — | ||||||||
Cash disposed of | — | 1,799,187 | — | |||||||||
Net cash (inflow) | — | (10,837,938 | ) | — | ||||||||
Consideration received, non cash | — | — | (9,780,000 | ) | ||||||||
Gain on sale of discontinued operation | — | 2,101,660 | 4,587,597 | |||||||||
30
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 22 — | STATEMENTS OF CASH FLOWS |
Reconciliation of Profit for the Year to Net Cash from Operating Activities
2007 | 2006 | 2005 | ||||||||||
$ | $ | $ | ||||||||||
Profit for the year | (4,665,657 | ) | 7,074,130 | 2,915,173 | ||||||||
Items classified as investing/financing activities | ||||||||||||
Borrowing costs — interest paid | 42,461 | 213,310 | 246,883 | |||||||||
Non-cash items | ||||||||||||
Borrowing costs — recognition of fair value of options granted over facility term | 47,656 | 1,044,141 | 263,694 | |||||||||
Amortisation | — | 350,032 | 206,535 | |||||||||
Depreciation | 17,316 | 318,204 | 237,564 | |||||||||
Foreign exchange loss/(gain) on cash | 99,298 | (1,684,160 | ) | 483,442 | ||||||||
Loss/(gain) on disposal of assets | 11,197 | (91,118 | ) | 11,730 | ||||||||
Exploration and evaluation expenditure written off | — | — | 4,825,263 | |||||||||
Share based payment expense | 326,229 | 1,397,210 | 243,520 | |||||||||
Property, plant and equipment written off | 80,515 | — | — | |||||||||
Gain on sale of discontinued operation | — | (2,101,660 | ) | (4,587,597 | ) | |||||||
Changes in assets and liabilities | ||||||||||||
Receivables | (2,698,474 | ) | (3,340,562 | ) | (2,144,848 | ) | ||||||
Inventories | — | 1,998,827 | 5,593 | |||||||||
Other assets | 3,912 | 104,291 | (2,110,150 | ) | ||||||||
Mineral tenements | (7,674,694 | ) | (17,307,957 | ) | (10,431,350 | ) | ||||||
Payables | 548,664 | 619,664 | 6,092,590 | |||||||||
Tax liabilities | — | (419,161 | ) | (6,892,560 | ) | |||||||
Net used in operating activities | (13,861,577 | ) | (11,824,809 | ) | (10,634,518 | ) | ||||||
Reconciliation of Cash
For the purposes of the Statements of Cash Flows, cash includes cash on hand and at bank and cash on deposit, net of bank overdrafts and excluding security deposits. Cash as at the end of the financial year as shown in the Statements of Cash Flows is reconciled to the related items in the Balance Sheets as follows:
Cash and cash equivalents | 19,610,905 | 32,816,454 | 39,790,167 | |||||||||
31
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 23 — | FINANCIAL INSTRUMENTS DISCLOSURE |
Exposure to interest rate, credit, commodity price and currency risks arise in the normal course of the Group’s business.
The Group does not use derivative financial instruments to hedge its exposure to financial risks.
Interest Rate Risk
The Group is exposed to interest rate risk. The effective weighted average interest rate for classes of financial assets and financial liabilities is as follows:
Effective | Floating | |||||||||||||||
Notes | Interest Rate | Interest Rate | Total | |||||||||||||
% | $ | $ | ||||||||||||||
2007 | ||||||||||||||||
Financial assets | ||||||||||||||||
Cash | 10 | (a) | 4.1 | 19,610,905 | 19,610,905 | |||||||||||
Trade and other receivables | 11 | — | — | 5,176,085 | ||||||||||||
Other | 12 | — | — | 55,983 | ||||||||||||
19,610,905 | 24,842,973 | |||||||||||||||
Financial liabilities | ||||||||||||||||
Trade and other payables | 16 | — | — | 6,314,678 | ||||||||||||
Interest bearing liabilities | 17 | 7.8 | 12,349,472 | 12,349,472 | ||||||||||||
12,349,472 | 18,664,150 | |||||||||||||||
2006 | ||||||||||||||||
Financial assets | ||||||||||||||||
Cash | 10 | (a) | 4.5 | 32,816,454 | 32,816,454 | |||||||||||
Short term investments | 10 | (b) | 4.05-4.10 | 60,465,174 | 60,465,174 | |||||||||||
Trade and other receivables | 11 | — | — | 3,902,881 | ||||||||||||
Other | 12 | — | — | 143,890 | ||||||||||||
93,281,628 | 97,328,399 | |||||||||||||||
Financial liabilities | ||||||||||||||||
Trade and other payables | 16 | — | — | 2,021,906 | ||||||||||||
Interest bearing liabilities | 17 | 7.2 | 3,000,000 | 3,000,000 | ||||||||||||
3,000,000 | 5,021,906 | |||||||||||||||
Credit Risk Exposure
The credit risk exposure on financial assets, excluding investments, of the Group which have been recognised on Balance Sheet, is the carrying amount, net of any impairment losses.
The Group mitigates credit risk by dealing with regulated banks in western countries.
32
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net Fair Values of Financial Assets and Liabilities
The carrying amounts of financial assets and liabilities approximate their net fair values given the short time frames to maturityand/or variable interest rates.
Foreign Exchange Risk
The Group has not entered into derivative financial instruments to hedge purchases and sales denominated in foreign currencies.
NOTE 24 — | KEY MANAGEMENT PERSONNEL DISCLOSURES |
Directors’ Remuneration
The broad remuneration policy is to ensure the remuneration package properly reflects the persons’ duties and responsibilities, and that remuneration is competitive in attracting, retaining and motivating people of the highest quality.
The directors are not employed directly by the Company. Their services are provided by way of arrangements with related parties which provide financial, administrative, geological and exploration services. No options, other benefits or bonuses were granted to directors or executives as part of their remuneration. No directors or executives receive performance related remuneration, and there are no service contracts.
Details of the nature and amount of each major element of the remuneration of each director of the Company and Group are:
Short Term | ||||||||||||
Year | Fees | Total | ||||||||||
$ | $ | |||||||||||
Executive directors | ||||||||||||
Norman A. Seckold | 2007 | 150,000 | 150,000 | |||||||||
(Chairman) | 2006 | 150,000 | 150,000 | |||||||||
Peter J. Nightingale | 2007 | 150,000 | 150,000 | |||||||||
2006 | 150,000 | 150,000 | ||||||||||
Kenneth M. Phillips | 2007 | 117,279 | 117,279 | |||||||||
2006 | 124,071 | 124,071 | ||||||||||
Non-executive directors | ||||||||||||
Dudley R. Leitch | 2007 | 24,000 | 24,000 | |||||||||
2006 | 24,000 | 24,000 | ||||||||||
P. Martin Holt | 2007 | 20,000 | 20,000 | |||||||||
(Alternate director for Peter J. Nightingale) | 2006 | 30,000 | 30,000 | |||||||||
Anthony J. McClure | 2007 | 23,833 | 23,833 | |||||||||
(Alternate director for Kenneth M. Phillips) | 2006 | 110,000 | 110,000 | |||||||||
Total compensation: key management personnel (consolidated) | 2007 | 485,112 | 485,112 | |||||||||
2006 | 588,071 | 588,071 | ||||||||||
Total compensation: key management personnel (Company) | 2007 | 485,112 | 485,112 | |||||||||
2006 | 588,071 | 588,071 | ||||||||||
33
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Key Management Personnel
There are no key management personnel of the Company or Group that are not directors.
Equity Holdings and Transactions
The movement during the reporting period in the number of ordinary shares in the Company held directly, indirectly or beneficially, by each specified director, including their personally-related entities, is as follows:
Received on | ||||||||||||||||||||
Held at | Exercise of | Held at | ||||||||||||||||||
Directors | 1 July 2006 | Purchased | Options | Sales | 30 June 2007 | |||||||||||||||
Norman A. Seckold | 38,602,799 | — | — | — | 38,602,799 | |||||||||||||||
Dudley R. Leitch | 31,185,700 | — | — | — | 31,185,700 | |||||||||||||||
Peter J. Nightingale | 2,575,000 | 500,000 | — | — | 3,075,000 | |||||||||||||||
Kenneth M. Phillips | 10,000,000 | — | — | — | 10,000,000 | |||||||||||||||
P. Martin Holt | — | — | — | — | — | |||||||||||||||
Anthony J. McClure | — | — | — | — | — |
Received on | ||||||||||||||||||||
Held at | Exercise of | Held at | ||||||||||||||||||
Directors | 1 July 2005 | Purchased | Options | Sales | 30 June 2006 | |||||||||||||||
Norman A. Seckold | 38,602,799 | — | — | — | 38,602,799 | |||||||||||||||
Dudley R. Leitch | 31,185,700 | — | — | — | 31,185,700 | |||||||||||||||
Peter J. Nightingale | 2,575,000 | — | — | — | 2,575,000 | |||||||||||||||
Kenneth M. Phillips | 10,000,000 | — | — | — | 10,000,000 | |||||||||||||||
P. Martin Holt | — | — | — | — | — | |||||||||||||||
Anthony J. McClure | — | — | — | — | — |
NOTE 25 — | RELATED PARTY INFORMATION |
Directors
The names of persons who held office as directors of the Company during the year ended 30 June 2007 are Norman A. Seckold, Dudley R. Leitch, Peter J. Nightingale, Kenneth M. Phillips, P. Martin Holt and Anthony J. McClure. Details of directors’ remuneration are set out in the Key Management Personnel disclosures above.
During the year ended 30 June 2007, Norman A. Seckold and Peter J. Nightingale had an interest in an entity, Mining Services Trust, which provided full administrative services, including rental accommodation, administrative staff, services and supplies, to the Group. Fees paid to Mining Services Trust during the year, which were in the ordinary course of business and on normal terms and conditions, amounted to $1,101,658 (2006 — $1,185,972). Amounts unpaid at 30 June 2007 were $142,074 (2006 — $188,934).
During the year ended 30 June 2007, Kenneth M. Phillips, had an interest in an entity, VOP Mining Services Pty Ltd which rendered administrative, geological and exploration services to the Group. Fees paid to VOP Mining Services Pty Ltd during the year, which were in the ordinary course of business and on normal commercial terms and conditions, amounted to $140,882 (2006 — $159,643). Of this figure $117,279 (2006 — $124,071) is included in directors’ remuneration. Amounts unpaid at 30 June 2007 were $11,483 (2006 — $30,878)
Apart from the details disclosed in this note, no director has entered into a material contract with the Company or the Group since the end of the previous financial year and there were no material contracts involving directors’ interests subsisting at year end.
34
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 26 — | SHARE BASED PAYMENTS |
Stock Option Plan
The Company’s Canadian controlled entity, Palmarejo Silver and Gold Corporation (’PJO’) has a Stock Option Plan which allows directors, officers and consultants of PJO the opportunity to acquire options over unissued shares in PJO. These options are governed by the terms of PJO stock option plan.
Options are granted under the plan for no consideration and are granted for a five year period. Options granted under the plan carry no dividend or voting rights. The exercise price of the options is determined by PJO board of directors, subject to applicable exchange approval, at the time any option is granted.
Set out below are summaries of the options granted under the plan:
2007
Granted | Balance at | Exercised | Cancelled | Balance at | Exercisable | |||||||||||||||||||||||||
Exercise | During the | Start of the | During the | During the | End of the | at End of the | ||||||||||||||||||||||||
Grant | Price | Year | Year | Year | Year | Year | Year | |||||||||||||||||||||||
Date | Expiry Date | CDN$ | Number | Number | Number | Number | Number | Number | ||||||||||||||||||||||
23 December 2004 | 23 December 2009 | $ | 1.00 | — | 4,833,332 | (940,999 | ) | (33,333 | ) | 3,859,000 | 3,859,000 | |||||||||||||||||||
5 April 2005 | 5 April 2010 | $ | 1.95 | — | 130,000 | (50,000 | ) | — | 80,000 | 80,000 | ||||||||||||||||||||
8 December 2005 | 8 December 2010 | $ | 3.90 | — | 150,000 | (40,000 | ) | — | 110,000 | 60,000 | ||||||||||||||||||||
— | 5,113,332 | (1,030,999 | ) | (33,333 | ) | 4,049,000 | 3,999,000 | |||||||||||||||||||||||
Weighted Average exercise price | — | $ | 1.11 | $ | 1.16 | $ | 1.00 | $ | 1.10 | $ | 1.06 | |||||||||||||||||||
The weighted average remaining contractual life of share options outstanding at the end of the period was 2.5 years (2006 — 3.9 years).
2006
Granted | Balance at | Exercised | Cancelled | Balance at | Exercisable | |||||||||||||||||||||||||
Exercise | During the | Start of the | During the | During the | End of the | at End of | ||||||||||||||||||||||||
Grant | Price | Year | Year | Year | Year | Year | the Year | |||||||||||||||||||||||
Date | Expiry Date | CDN$ | Number | Number | Number | Number | Number | Number | ||||||||||||||||||||||
23 December 2004 | 23 December 2009 | $ | 1.00 | — | 5,525,000 | (691,668 | ) | (26,000 | ) | 4,833,332 | 4,833,332 | |||||||||||||||||||
5 April 2005 | 5 April 2010 | $ | 1.95 | — | 150,000 | (20,000 | ) | — | 130,000 | 80,000 | ||||||||||||||||||||
8 December 2005 | 8 December 2010 | $ | 3.90 | 150,000 | — | — | — | 150,000 | 50,000 | |||||||||||||||||||||
150,000 | 5,675,000 | (711,668 | ) | (26,000 | ) | 5,113,332 | 4,963,332 | |||||||||||||||||||||||
Weighted Average exercise price | $ | 3.90 | $ | 1.03 | $ | 1.03 | $ | 1.00 | $ | 1.11 | $ | 1.04 | ||||||||||||||||||
The weighted average remaining contractual life of share options outstanding at the end of the period was 3.9 years (2005 — 4.6 years).
Fair Value of Options
The fair value of options granted is measured at grant date and recognised as an expense over the period during which the directors, officers and consultants of PJO become unconditionally entitled to the options. The fair value of the options granted is measured using Black-Scholes formula, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of options that vest.
There were no options granted during the financial year ending 30 June 2007. The fair value of the options granted during the year ended 30 June 2006 was $356,025.
35
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Expenses Arising from Share-Based Payment Transactions
Total expenses arising from share based payment transactions recognized during the period as part of share based remuneration expense were as follows:
Consolidated | ||||||||
2007 | 2006 | |||||||
$ | $ | |||||||
Options issued under PJO stock option plan | 326,229 | 1,397,210 | ||||||
NOTE 27 — | COMMITMENTS |
Exploration Expenditure Commitments
In order to maintain current rights of tenure to exploration tenements, the Group is required to perform minimum exploration work to meet the minimum expenditure requirements specified by tenement licences and acquisition agreements. These obligations are subject to renegotiation when application for a mining lease is made and at other times. These obligations are not provided for in the financial report and are payable:
2007 | 2006 | |||||||
$ | $ | |||||||
Not later than one year | 1,547,008 | 1,051,458 | ||||||
Later than one year but not later than two years | 820,576 | 1,626,683 | ||||||
Later than two years but not later than five years | 890,547 | 1,799,251 | ||||||
3,258,132 | 4,477,392 | |||||||
Capital Expenditure Commitments
Contracted but not provided for and payable:
Within one year | 3,219,093 | 4,579,752 | ||||||
NOTE 28 — | CONTINGENCIES |
Merger Implementation Agreement
On 4 May 2007, the Company announced that Coeur d’Alene Mines Corporation (‘Coeur’), Bolnisi and Bolnisi’s 74% owned Canadian controlled entity Palmarejo Silver and Gold Corporation (‘Palmarejo’) had entered into agreements pursuant to which Coeur will acquire all of the shares of Bolnisi, and all of the shares of Palmarejo not owned by Bolnisi, in a transaction valued at approximately US$1.1 billion (the ‘Transaction’).
Under the terms of the Transaction, Bolnisi shareholders will receive 0.682 Coeur shares for each Bolnisi share they own (or, at the election of the Bolnisi shareholder, CHESS Depositary Interests representing Coeur shares) under a Court approved Scheme of Arrangement pursuant to Australian law, and Palmarejo shareholders will receive 2.715 Coeur shares for each Palmarejo share they own under a Court approved Plan of Arrangement pursuant to Canadian law. In addition, Bolnisi and Palmarejo shareholders will receive a nominal cash payment equal to $0.004 (US$0.003) per Bolnisi share and C$0.004 (US$0.003) per Palmarejo share.
Under the terms of the Transaction, the Company, Palmarejo and Coeur have agreed to give each other exclusivity, subject to certain exceptions and have agreed to a reciprocal break fee payable in certain circumstances equivalent to 1% of the transaction value. The Company’s break fee payable to Coeur is approximately $9.17 million (US$7.78 million) and Palmarejo’s break fee payable to Coeur amounts to approximately $3.77 million (US$3.20 million).
36
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 29 — | SUBSEQUENT EVENT |
Merger Implementation Agreement
Subsequent to the end of the financial year, Coeur completed its due diligence under the terms of the Merger Implementation Agreement with the Company. The companies expect to begin mailing information to Bolnisi, Palmarejo and Coeur shareholders in September 2007. All three companies’ shareholder meetings are expected to be held in October 2007. Assuming timely completion of the required regulatory processes and receipt of the required shareholder and court approvals, the companies expect the Transaction to be completed in the fourth quarter of 2007.
Canadian Asset-Backed Commercial Paper
Bolnisi has, through its Canadian subsidiary company, Palmarejo, an amount of C$6.9 million (A$7.7 million) invested in Canadian Asset-Backed Commercial Paper (“ABCP”), being C$6.4 million (A$7.1 million) in Apsley Trust E and C$0.5 million (A$0.6 million) in Aurora Trust E. These ABCP investments were all rated R1-High (highest rating available for short-term commercial paper) by the Dominion Bond Rating Service (“DBRS”) at the time they were purchased.
Each of these instruments matured on 23 August 2007, but their maturities were not met by the issuers and as at the date of this report they remain outstanding.
A consortium representing banks, asset providers and major investors have agreed in principle to take steps to re-establish normal operations in the market for Canadian asset-backed securities. These steps include the proposal that all investors in such ABCP issuers exchange their holding in each issuer for long-term note on an individual issuer and series basis.
37
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 30 — | FINANCIAL REPORTING BY SEGMENTS |
The Group operates wholly within the mining industry in Australia and Mexico.
Georgia | North | Consolidated | ||||||||||||||
Geographical Segments | Australia | (Discontinued) | America | Total | ||||||||||||
$ | $ | $ | $ | |||||||||||||
2007 | ||||||||||||||||
Revenue | ||||||||||||||||
Unallocated revenue | — | — | — | 2,361,755 | ||||||||||||
2,361,755 | ||||||||||||||||
Result | ||||||||||||||||
Segment result | — | — | (3,751,506 | ) | (3,751,506 | ) | ||||||||||
Tax expense | — | |||||||||||||||
Unallocated corporate income | (914,151 | ) | ||||||||||||||
Net Profit/(loss) | (4,665,657 | ) | ||||||||||||||
Including non-cash expenses: | ||||||||||||||||
Share based remuneration | — | — | 326,229 | 326,229 | ||||||||||||
Assets | ||||||||||||||||
Segment assets | — | — | 137,369,106 | 137,369,106 | ||||||||||||
Unallocated corporate assets | 629,698 | |||||||||||||||
137,998,805 | ||||||||||||||||
Including non-current assets acquired during the year: | ||||||||||||||||
Exploration and evaluation | — | — | 9,922,654 | 9,922,654 | ||||||||||||
Mine development | — | — | 12,488,069 | 12,488,069 | ||||||||||||
Plant and equipment | — | — | 56,886,302 | 56,886,302 | ||||||||||||
— | — | 79,297,025 | 79,297,025 | |||||||||||||
Segment Liabilities | 588,883 | — | 18,075,267 | 18,664,150 | ||||||||||||
38
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Georgia | North | Consolidated | ||||||||||||||
Geographical Segments | Australia | (Discontinued) | America | Total | ||||||||||||
$ | $ | $ | $ | |||||||||||||
2006 | ||||||||||||||||
Revenue | ||||||||||||||||
External segment revenue | — | 24,325,652 | 95,985 | 24,421,637 | ||||||||||||
Unallocated revenue | — | — | — | 3,156,798 | ||||||||||||
27,578,435 | ||||||||||||||||
Result | ||||||||||||||||
Segment result | — | 10,649,993 | (2,756,315 | ) | 7,893,678 | |||||||||||
Tax expense | (2,478,146 | ) | ||||||||||||||
Unallocated corporate income | 1,658,598 | |||||||||||||||
Net Profit/(loss) | 7,074,130 | |||||||||||||||
Including non-cash expenses: | ||||||||||||||||
Amortisation and depreciation | — | 668,236 | — | 668,236 | ||||||||||||
Share based remuneration | — | — | 1,397,210 | 1,397,210 | ||||||||||||
Assets | ||||||||||||||||
Segment assets | — | — | 121,012,771 | 121,012,771 | ||||||||||||
Unallocated corporate assets | 23,098,709 | |||||||||||||||
144,111,480 | ||||||||||||||||
Including non-current assets acquired during the year: | ||||||||||||||||
Exploration and evaluation | — | — | 19,890,494 | 19,890,494 | ||||||||||||
Plant and equipment | — | — | 6,383,922 | 6,383,922 | ||||||||||||
— | — | 26,274,416 | 26,274,416 | |||||||||||||
Segment Liabilities | 4,383,424 | — | 1,557,826 | 5,941,250 | ||||||||||||
39
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Georgia | North | Consolidated | ||||||||||||||
Geographical Segments | Australia | (Discontinued) | America | Total | ||||||||||||
$ | $ | $ | $ | |||||||||||||
2005 | ||||||||||||||||
Revenue | ||||||||||||||||
External segment revenue | — | 30,302,667 | — | 30,302,667 | ||||||||||||
Unallocated revenue | — | — | — | 797,396 | ||||||||||||
31,100,063 | ||||||||||||||||
Result | ||||||||||||||||
Segment result | — | 2,358,268 | (779,751 | ) | 1,578,517 | |||||||||||
Tax expense | (1,016,036 | ) | ||||||||||||||
Unallocated corporate income | 2,352,692 | |||||||||||||||
Net Profit/(loss) | 2,915,173 | |||||||||||||||
Including non-cash expenses: | ||||||||||||||||
Amortisation and depreciation | — | 444,099 | — | 444,099 | ||||||||||||
Share based remuneration | — | — | 243,520 | 243,520 | ||||||||||||
Mineral tenements written off | — | 4,825,263 | — | 4,825,263 | ||||||||||||
Assets | ||||||||||||||||
Segment assets | — | 36,018,115 | 18,397,116 | 54,415,231 | ||||||||||||
Unallocated corporate assets | 31,507,003 | |||||||||||||||
85,922,234 | ||||||||||||||||
Including non-current assets acquired during the year: | ||||||||||||||||
Exploration and evaluation | 163,009 | 17,887 | 11,288,639 | 11,469,535 | ||||||||||||
Mine development | — | 206,535 | — | 206,535 | ||||||||||||
Plant and equipment | — | 497,940 | 158,050 | 655,990 | ||||||||||||
163,009 | 722,362 | 11,446,689 | 12,332,060 | |||||||||||||
Segment Liabilities | 4,274,455 | 16,283,535 | 220,028 | 20,778,018 | ||||||||||||
40
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Division of the Group’s results and assets into geographical segments has been ascertained by direct location of assets. There are no intersegment revenue transactions.
Mining | Exploration and | Consolidated | ||||||||||
Business Segments | (Discontinued) | Development | Total | |||||||||
$ | $ | $ | ||||||||||
2007 | ||||||||||||
Revenue | ||||||||||||
Unallocated revenue | — | — | 2,361,755 | |||||||||
2,361,755 | ||||||||||||
Assets | ||||||||||||
Segment assets | — | 137,369,106 | 137,369,106 | |||||||||
Unallocated corporate assets | 629,698 | |||||||||||
137,998,805 | ||||||||||||
Including non-current assets acquired during the year: | ||||||||||||
Exploration and evaluation | — | 9,922,654 | 9,922,654 | |||||||||
Mine development | — | 12,488,069 | 12,488,069 | |||||||||
Plant and equipment | — | 56,886,302 | 56,886,302 | |||||||||
— | 79,297,025 | 79,297,025 | ||||||||||
2006 | ||||||||||||
Revenue | ||||||||||||
External segment revenue | 24,325,652 | 95,985 | 24,421,637 | |||||||||
Unallocated revenue | — | — | 3,156,798 | |||||||||
27,578,435 | ||||||||||||
Assets | ||||||||||||
Segment assets | — | 121,012,771 | 121,012,771 | |||||||||
Unallocated corporate assets | 23,098,709 | |||||||||||
144,111,480 | ||||||||||||
Including non-current assets acquired during the year: | ||||||||||||
Exploration and evaluation | — | 19,890,494 | 19,890,494 | |||||||||
Plant and equipment | — | 6,383,922 | 6,383,922 | |||||||||
— | 26,274,416 | 26,274,416 | ||||||||||
41
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Mining | Exploration and | Consolidated | ||||||||||
Business Segments | (Discontinued) | Development | Total | |||||||||
$ | $ | $ | ||||||||||
2005 | ||||||||||||
Revenue | ||||||||||||
External segment revenue | 30,302,667 | — | 30,302,667 | |||||||||
Unallocated revenue | — | — | 797,396 | |||||||||
31,100,063 | ||||||||||||
Assets | ||||||||||||
Segment assets | 36,018,115 | 18,397,116 | 54,415,231 | |||||||||
Unallocated corporate assets | 31,507,003 | |||||||||||
85,922,234 | ||||||||||||
Including non-current assets acquired during the year: | ||||||||||||
Exploration and evaluation | — | 11,469,535 | 11,469,535 | |||||||||
Mine development | 206,535 | — | 206,535 | |||||||||
Plant and equipment | 497,940 | 158,080 | 655,990 | |||||||||
704,475 | 11,627,585 | 12,332,060 | ||||||||||
All sales revenue during the prior period was to customers in the United Kingdom
NOTE 31 — | US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES |
The Group’s financial statements are prepared in accordance with AIFRS. The financial information and reconciliations presented in this note set forth certain financial information that would have been presented if US Generally Accepted Accounting Principles (US GAAP) had been applied instead of AIFRS.
42
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Reconciliation to US GAAP
The following is a summary of the adjustments to profit (loss) for the years ended 30 June 2007, 2006 and 2005 that would be required if US GAAP had been applied instead of AIFRS.
Note | 2007 | 2006 | 2005 | |||||||||||||
$ | $ | $ | ||||||||||||||
Reconciliation of net profit/(loss) | ||||||||||||||||
Profit for the year attributable to ordinary equity holders of the Parent as reported under AIFRS | (4,366,053 | ) | 3,864,860 | 2,340,537 | ||||||||||||
Add/(deduct) | ||||||||||||||||
Exploration and evaluation expenditure | (a | ) | (9,224,660 | ) | (21,635,773 | ) | (2,758,818 | ) | ||||||||
Exploration and evaluation reclassified to Property, plant and equipment | (a | ) | 3,385,153 | — | — | |||||||||||
Development expenditure | (b | ) | (12,488,069 | ) | — | — | ||||||||||
Minority interest effect of above adjustments | (c | ) | 4,991,185 | 5,154,102 | (1,345,818 | ) | ||||||||||
Total Adjustment | (13,336,391 | ) | (16,481,671 | ) | (4,104,636 | ) | ||||||||||
Net loss for the year attributable to ordinary equity holders of the Parent as reported under US GAAP | (17,702,444 | ) | (12,616,811 | ) | (1,764,099 | ) | ||||||||||
Earnings (loss) per share for profit/(loss) attributable to ordinary equity holders of the Parent measured under US GAAP: | ||||||||||||||||
Basic loss per share | (6.3 | ) cents | (4.6 | ) cents | (0.8 | ) cents | ||||||||||
Diluted loss per share | (6.3 | ) cents | (4.6 | ) cents | (0.8 | ) cents | ||||||||||
Earnings (loss) per share from discontinued operation attributable to ordinary equity holders of the Parent measured under US GAAP: | ||||||||||||||||
Basic loss per share | — | 2.4 | cents | 4.6 | cents | |||||||||||
Diluted loss per share | — | 2.4 | cents | 4.6 | cents |
The following is a summary of the adjustments to total parent entity interest in equity for the years ended 30 June 2007, 2006 and 2005 that would be required if US GAAP had been applied instead of AIFRS.
Reconciliation of shareholders’ equity | ||||||||||||||||
Total parent entity interest as reported under AIFRS | 90,883,263 | 106,197,052 | 54,597,434 | |||||||||||||
Add/(deduct) | ||||||||||||||||
Exploration and evaluation expenditure | (a | ) | (11,354,362 | ) | (39,008,722 | ) | (14,138,199 | ) | ||||||||
Development expenditure | (b | ) | (39,417,117 | ) | — | — | ||||||||||
Minority interest effect of above adjustment | (c | ) | 12,924,962 | 9,307,778 | 870,210 | |||||||||||
Total Adjustment | (37,846,517 | ) | (29,700,944 | ) | (13,267,989 | ) | ||||||||||
Total parent entity interest in equity under US GAAP | 53,036,746 | 76,496,108 | 41,329,445 | |||||||||||||
43
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Basis of preparation under US GAAP
Consolidated Cash Flow Statement
The consolidated cash flow statement prepared under AIFRS (in accordance with AASB 107 ‘Cash Flow Statements’) presents substantially the same information that is required under US GAAP. However, under AIFRS interest paid has been classified as financing cash flow. Under US GAAP, it should be classified as operating cash flow.
US GAAP adjustments
An explanation of the adjustments from AIFRS to US GAAP are as follows:
(a) | Exploration and Evaluation Expenditure and Acquisition of Exploration Properties |
Under AIFRS the Group follows the ’area of interest’ method in accounting for exploration and evaluation. This method differs from the ’successful efforts’ method adopted in this reconciliation to US GAAP, in that it permits certain exploration costs in defined areas of interest to be capitalised.
Under US GAAP exploration costs are charged to expense. In subsequent financial periods, amortisation or write-offs of expenditure previously capitalised under AIFRS, which would have been expensed for US GAAP purposes, is added back when determining the net loss according to US GAAP.
(b) | Development Expenditure |
Under AIFRS, the Group reclassifies its capitalised exploration and expenditure to development expenditure once the technical feasibility and commercial viability of the extraction of mineral resources are demonstrable. Further development expenditure is capitalised when substantial future economic benefits are established. For US GAAP purposes, the Group expenses as incurred expenditure relating to a mine property until it has been determined that the property can be economically developed, as evidenced when proven and probable reserves are determined.
(c) | Minority Interest Effect of Above Adjustment |
Adjustments to AIFRS profit/(loss) for the year and total parent entity interest in equity are disclosed before minority interest. This adjustment reflects the impact on minority interests. The adjustment also considers the impact on minority interests of adjustments to equity.
(d) | Share-based payments |
The Group adopted the fair value recognition provisions of AASB 2 ’Share-based Payments’ with effect from 1 July 2005, including the retrospective restatement of comparative periods. Under US GAAP, the Group has applied the fair value recognition provisions of Statement of Financial Accounting Standard No. 123, ’Accounting for Stock-Based Compensation’ (SFAS 123) to all awards granted after 1 July 1995. In the current period, the Group adopted SFAS No. 123 (revised 2004) ’Accounting for Stock-Based Compensation’ (SFAS 123R) on a ’modified prospective basis’. However, as the Group has fully applied the fair value recognition provisions of SFAS 123, there are no additional adjustments required in the current period.
(e) | Capital Profits Reserve |
The Company has recorded in its capital profits reserve an amount of $4,346 relating to the carrying amount of the revaluation reserve of a fixed asset disposed of pre 1 July 2004. When the asset was sold, the gain or loss was recorded based on the revalued amount of the asset, and the revaluation reserve transferred to capital profits reserve.
44
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
For US GAAP purposes, long-lived assets are required to be recorded on a depreciable cost basis, and no revaluations of assets are permitted. Thus the amount reflected in the capital profits reserve would have been reflected as part of the gain or loss on disposal for US GAAP purposes. As the revaluation occurred pre 1 July 2004, there is no adjustment required in the US GAAP income or equity reconciliation for the periods presented.
(f) | Income Taxes |
The Group recognises deferred income taxes on temporary differences between the carrying amount of assets and liabilities in the balance sheet and their tax bases and on tax losses. The existing policies for providing for deferred taxes are consistent with the US GAAP pronouncement, SFAS No. 109, “Accounting for Income Taxes”, except that under AIFRS, deferred tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, whereas SFAS No. 109 requires deferred tax assets to be recognized in full, but reduced by a valuation allowance to an amount that is more likely than not to be realized.
The Group has recognized deferred tax assets in respect of income tax losses of $13,361,216 at 30 June 2007, $11,426,813 at 30 June 2006 and $4,241,460 at 30 June 2005 on the basis that deferred tax liabilities of the same amounts relating to net taxable temporary differences are expected to reverse in similar periods in future. In accordance with the requirements of AIFRS, these have offset by the Group in its balance sheet.
The Group however has not recognized deferred tax assets in respect of the remaining income tax capital losses and income losses of $4,739,100 as at 30 June 2007, $1,342,978 as at 30 June 2006 and $620,286 as at 30 June 2005 due to the uncertainties involving their realization.
For U.S. GAAP purposes, the amounts not recognized represent the valuation allowances that would have been recorded in each year under U.S. GAAP. As the difference between AIFRS and US GAAP relating to recognition of deferred tax assets does not affect either net profit/(loss) or shareholders equity, no adjustments have been recorded in the US GAAP reconciliation.
(g) | Income Taxes Effect of Other Adjustments |
Adjustments to the AIFRS net profit/(loss) and shareholders’ equity are disclosed on a before tax basis. No adjustments relating to income tax have been recorded on the following basis:
i) Exploration and evaluation expenditure
The writing off of capitalised exploration and evaluation expenditure of $11,354,362 at 30 June 2007, $39,008,722 at 30 June 2006 and $14,138,199 at 30 June 2005 results in a reduction in the respective deferred tax liabilities for US GAAP purposes of $3,406,308, $11,702,616 and $4,241,459. However the reduction in these deferred tax liabilities is offset by an increase in the valuation allowance for US GAAP purposes, on the basis that the respective income tax losses will no longer be able to offset against taxable temporary differences that were expected to reverse in similar periods in the future. As the net impact between AIFRS and US GAAP relating to recognition of deferred tax assets does not affect either net profit/(loss) or shareholders’ equity, no adjustments for the income tax effect of these adjustments have been recorded in the US GAAP reconciliation.
ii) Development expenditure
The writing off of development expenditure of $39,417,117 at 30 June 2007 results in a reduction in the deferred tax liabilities for US GAAP purposes of $11,825,135. However the reduction in the deferred tax liabilities is offset by an increase in the valuation allowance for US GAAP purposes, on the basis that the income tax loss will no longer be able to offset against taxable temporary differences that were expected to reverse in similar periods in the future. As the net impact between AIFRS and US GAAP relating to
45
BOLNISI GOLD NL
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
recognition of deferred tax assets does not affect either net profit/(loss) or shareholders’ equity, no adjustments for the income tax effect of these adjustments have been recorded in the US GAAP reconciliation.
(h) | Impact of New US GAAP Accounting Standards |
In July 2006, the FASB issued FIN 48, that clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a threshold of more-likely-than-not for recognition of tax benefits of uncertain tax positions taken or expected to be taken in a tax return. FIN 48 also provides related guidance on measurement, derecognition, classification, interest and penalties, and disclosure. The provisions of FIN 48 will be effective for the Group beginning 1 July 2007, with any cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Group is in the process of assessing the impact of adopting FIN 48 on its results of operations and financial position.
In September 2006, the FASB issued SFAS No. 157 — “Fair value measurements”, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. This Statement will be effective for the Group from 1 July 2008. The Group believes that such pronouncement will not have a material impact on the Group’s financial position or results of operations.
In February 2007, the FASB issued SFAS 159 “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS 159, that permits the measurement of certain financial instruments at fair value. Entities may choose to measure eligible items at fair value at specified election dates, reporting unrealized gains and losses on such items at each subsequent reporting period. SFAS 159 will be effective for the Group from 1 July 2008. The Group is currently evaluating the potential impact of the fair value option but it is not expected to have a significant effect on reported financial position or results of operations.
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