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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Elkedra | LSE:EDN | London | Ordinary Share | AU000000EDN2 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 14.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Level 1, 130 Hay Street
Subiaco WA 6008
PO Box 8035, Subiaco East WA 6008
Telephone: +61-8-6380 2855
Facsimile: +61-8-6380 1644
E-mail: elkedra@elkedra.com.au
Web Site: www.elkedra.com.au
31 August 2007
Centralised Company Announcement Office
Australian Stock Exchange Limited
10th Floor, 20 Bond Street
Sydney NSW 2000
Dear Sir,
APPENDIX 4E - PRELIMINARY FINAL REPORT
We attach hereto the Preliminary Final Report and Financial Report for the
year ended 30 June 2007.
For and behalf of the Board
Max Cozijn
Company Secretary/Director
cc:DB/SR/TT
Elkedra Diamonds NL
ABN 42 092 334 220
Appendix 4E
Preliminary Final Report
Period ending 30 June 2007
1. Current reporting period and the previous corresponding period
The reporting period: 12 months ended 30 June 2007
The previous corresponding period: 12 months ended 30 June 2006
2. Results for announcement to the market
$
2.1 Revenue from ordinary activities No comparative 10,386,999
(Loss) from ordinary activities after tax Up 111% to (8,848,387)
2.2 attributable to members
2.3 (Loss for the period attributable to members Up 111% to (8,848,387)
2.4/2.5 It is not proposed to pay any dividends
2.6 For further information regarding the financial performance of the
consolidated group refer to the attached financial report.
Highlights
Initial Chapada processing bottlenecks encountered during the first 7 months
of the financial year were overcome. Fourth quarter plant throughput of just
under 200,000 bcm was substantially in excess of targeted throughput of
600,000 bcm annually.
Production for the year was 21,666 carats with an average stone size of 0.53
carats and average value of US$389 per carat. Production during the second and
third quarters yielded values in excess of the targeted value of US$400 per
carat.
Adjustments to mining methods during the second half have lowered mining costs
and improved production efficiencies during the wet season months of November
to March.
Elkedra's portfolio of uranium and base metal prospects in the southern
Georgina Basin in the Northern Territory and Queensland were spun-off into a
new listed company, Uramet Minerals Limited (Uramet). Elkedra has retained the
diamond exploration and mining rights. Uramet's initial public offering
prospectus seeking $7,000,000 closed oversubscribed and the company commenced
trading on the ASX on 19 June 2007.
Elkedra retained 25,000,000 shares in Uramet which, following shareholder
approval given on 17 August, will be distributed in specie pro-rata to Elkedra
shareholders on the register as at the close of business 3 September 2007.
On 4 July 2007 the Company announced that it had received an offer from
Canadian listed diamond group Vaaldiam Resources Ltd (TSX:VAA) (Vaaldiam) to
acquire all of the outstanding shares of Elkedra in exchange for Vaaldiam
common shares by way of a Scheme of Arrangement. At the date of the
announcement the offer of 0.52 Vaaldiam shares for each Elkedra share valued
Elkedra shares at A$0.53, a 60% premium to the then share price.
PRODUCTION STATISTICS
Production Month Plant Average Diamonds Recovered Average Stone Average Value
Throughput Grade Size per Carat
(bcm)(1) (cts/stone) (US$)
Stones Carats
Start up 114,707 0.038 10,114 4,338 0.43 382
to 30 Sep 06
Dec 06 Qtr 154,630 0.038 10,581 5,974 0.56 406
Mar 06 Qtr 155,936 0.037 10,221 5,775 0.57 415
Jun 06 Qtr 199,252 0.028 10,138 5,606 0.55 349
Year end 30 Jun 624,525 0.035 41,054 21,694 0.53 389
07
(1) "bcm" means "bank cubic metre" of insitu gravel in mining benches and plant
throughput is based on total run of mine production including all under and
oversize material.
3. Statement of financial performance together with notes to the statement
To review the financial performance for the year ended 30 June 2007 refer to
the financial statements and supporting notes within the attached financial
report.
4. Statement of financial position together with notes to the statement
To review the statement of financial position at 30 June 2007 refer to the
attached financial statements and supporting notes within the annual report.
5. Statement of cash flows together with notes to the statement
To review the cash flow statement for the year ended 30 June 2007 refer to the
attached financial statements and supporting notes within the financial
report.
6. Details of individual and total dividends or distributions and dividend or
distribution payments
No dividend was paid or declared during the year and the Directors do not
recommend the payment of a dividend.
7. Details of any dividend or distribution reinvestment plans in operation
None.
8. A statement of retained earnings showing movements
To review the statement of changes in equity for the year ended 30 June 2007
refer to the attached financial statements and supporting notes within the
attached financial report.
9. Net tangible assets per security
Reporting period: 16.8 cents per share
Previous period: 15.5 cents per share
10. Details of associates and joint ventures
Uramet Minerals Limited was incorporated on 5 March 2007 and after
successfully completing an Initial Public Offering, was admitted to the
Official List of ASX on 15 June 2007 with the Official Quotation of its
securities commencing on 19 June 2007. At 30 June 2007, the Company held
38.46% in Uramet Minerals Limited. For details of the share of the associates'
losses and the equity accounted investment refer to note 28 of the financial
report.
11. Other significant information needed by an investor to make an informed
assessment of the entity's financial performance and position
Refer to the attached financial report.
12. For foreign entities, which set of accounting standard is used in compiling
the report.
Not applicable. The attached financial report has been prepared in accordance
with Accounting Standards, including Australian Accounting Interpretations,
other authoritative pronouncements of the Australian Accounting Standards
Board and the Corporations Act 2001.
13. Commentary on the results
13.1 The earnings per security and the nature of any dilution aspects
The basic loss per share for the year ended 30 June 2007 was (9.53 cents). For
details refer to note 20 of the annual report.
13.2 Returns to shareholders including distributions and buy backs
Not applicable.
13.3 Significant features of operating performance
Refer attached financial report.
13.4 The results of segments that are significant to an understanding of the
business as a whole.
Refer note 18 of the financial report.
13.5 A discussion of trends in performance
Refer attached financial report.
13.6 Any other factors which have affected the results in the period or which are
likely to affect results in the future, including those where the effect could
not be quantified.
14. Refer attached financial report.
Audited or subject to a review
The financial report has been audited and is not subject to any dispute or
qualification. The audit report has been included in the financial report.
FINANCIAL REPORT 2007
CONTENTS
1 The Board of Directors
2 Corporate Governance Statement
7 Directors' Report
13 Auditor's Independence Declaration
14 Financial Statements
47 Directors' Declaration
48 Independent Audit Report
BOARD OF DIRECTORS
Mr Don Best
- Chief Executive Officer and Executive Chairman BE, CPEng, FIEAust
Executive Chairman of Elkedra since June 2004. Mr Best has over 26 years
experience in mineral project engineering, construction and project management.
He has held various senior management positions within the head office of Minproc
Engineers in Western Australia. Mr Best has worked on major developments for
companies such as North Limited and Rio Tinto Group through phases of project
evaluation, detailed design and construction. Since February 2005, he has been
based in Brazil and has led the development of the Chapada Project.
Mr Sam Randazzo
- Executive Director and Chief Financial Officer BBus, CA
Executive Director since June 2004. Mr Randazzo is a Chartered Accountant with
over 25 years professional experience including six years with Arthur Young in
Australia. Since 1991, prior to joining Elkedra, Mr Randazzo was an independent
consultant to a number of companies, predominantly operating in the resources
sector. He first visited Brazil in 1997, and over the past nine years, has
developed a thorough understanding of the law, customs and mineral resource
opportunities of that country. He was responsible for identifying the potential
of the Chapada Project and led the project team which first brought the project
to Elkedra's attention.
Mr Max Cozijn
- Non Executive Director & Company Secretary B.Com. ASA. MAICD
Founding Director and Company Secretary since April 2000. Mr Cozijn has a
Bachelor of Commerce degree from the University of Western Australia having
graduated in 1972, and is an Associate of the Australian Society of Certified
Practising Accountants. He has over 30 years experience in the administration of
listed mining and industrial companies; Director of Metex Resources Limited since
1992; Director of Oilex NL since 1997 (listed in October 2003); Director of Magma
Metals Limited since June 2005 (listed June 2006); Former Director of Kagara Zinc
Ltd from 1983 to 2003. Mr Cozijn is also a member of the Australian Institute of
Company Directors.
Mr Thomas Teichmann
- Non Executive Director BA (Economics), MBA
Mr Teichmann is Director General of LGC - Leviev Group of Companies in Angola, he
is responsible for overseeing LGC's diamond interests in Angola and South America
as well as developing the group's interests in gold mining, real estate
development, BOT infrastructure and other businesses in these markets. Previously
he held the position of Vice President of LLM Mining Corporation the mining
operations and investment arm of the Leviev Diamond Group, the world's second
largest diamond group. Mr Teichmann is a Brazilian citizen and is fluent in 5
languages including English, Portuguese and Spanish.
CORPORATE GOVERNANCE STATEMENT
Elkedra Diamonds NL ("Company") continues to adhere to systems of control and
accountability as the basis for the administration of corporate governance in
accordance with the ASX Principles of Good Corporate Governance and Best
Practice Recommendations ("ASX Guidelines"). Commensurate with the spirit of
the ASX Guidelines, the Company has followed each Recommendation where the
Board has considered the Recommendation to be an appropriate benchmark for
corporate governance practices, taking into account factors such as the size
of the Company and the Board, resources available and activities of the
Company. Where, after due consideration, the Company's corporate governance
practices depart from the Recommendations, the Board has offered full
disclosure of the nature of, and reason for, the adoption of its own practice.
As a general comment, there have not been substantial changes to the
activities of the Company or its management in the past financial year, and
this has in turn meant that there have been minimal changes to the Company's
corporate governance structures and systems, as this report reflects.
In March 2003 the ASX Corporate Governance Council issued "Principles of Good
Corporate Governance and Best Practice Recommendations". These are:
1. Lay solid foundations for management and oversight.
2. Structure the board to add value.
3. Promote ethical and responsible decision-making.
4. Safeguard integrity in financial reporting.
5. Make timely and balanced disclosure.
6. Respect the rights of shareholders.
7. Recognise and manage risk.
8. Encourage enhanced performance.
9. Remunerate fairly and responsibly.
10. Recognise the legitimate interests of stakeholders.
One factor that initially influenced the Company's corporate governance
structures and practices was the acquisition of Chapada Diamonds Limited in
June 2004. The transition period of the Company as a result of the acquisition
of Chapada Diamonds Limited made the initial adoption of some of the ASX
Recommendations impracticable. Currently, the Company considers that it is
well served by those original structures, in particular the structure of the
Board. While the Company does not consider all of the ASX Recommendations
suitable for its operations, the Company is nonetheless committed to adopting
practices that ensure the utmost degree of accountability for the Company's
activities.
Further information about the Company's corporate governance practices is set
out on the Company's website at www.elkedra.com.au. In accordance with the
Recommendations of the ASX, information published on the Company's website
includes charters (for the board and its sub-committees), code of conduct and
other policies and procedures relating to the board and its responsibilities.
EXPLANATIONS FOR DEPARTURES FROM BEST PRACTICE RECOMMENDATIONS
During the Company's 2005/2006 financial year ("Reporting Period") the Company
has complied with each of the Ten Essential Corporate Governance Principles
and the corresponding Best Practice Recommendations as published by the ASX
Corporate Governance Council ("ASX Principles and Recommendations"), other
than in relation to the matters specified below.
Principle 2 Recommendation 2.1
Notification of Departure:
The Board considers two out of its four directors, Max Cozijn and Thomas
Teichmann, to be independent. An explanation of independence criteria applied
and the rationale for considering these directors independent is set out in
this statement below.
Explanation for Departure:
The Board was restructured in the previous Reporting Period as a direct result
of the Company's acquisition of Chapada Diamonds Limited. The factors that
influenced the current composition included the requirements of major
investors and clients, the desire to maintain continuity to serve the best
interests of shareholders, the voting power of major shareholders and
suitability of candidates for the roles available.
The Company continues to adhere to its policy that it will alter the structure
of the Board as deemed fit to achieve the Company's objectives, it is
currently satisfied that the Board composition remains suitable in the
circumstances. The Company has no imminent plans to make any changes. However,
it is mindful of the recommendation for a majority of independent directors
and will continue to consider whether such an appointment would be in the best
interests of the Company.
Principle 2 Recommendation 2.2, 2.3
Notification of Departure:
The Managing Director, Don Best, is also the chairman.
Explanation for Departure:
The dual role of Mr Best was influenced by factors described in relation to
explanation for departure from recommendation 2.1 above, in particular the
negotiations during the Chapada takeover. Mr Best will continue in this role
until such time that the structure enables a suitably qualified independent
director to be appointed to the role. In the meantime, Mr Best is not involved
in the preparation of the financial accounts and is not on the audit committee
that reviews the financial reporting function.
Principle 2 Recommendation 2.4
Notification of Departure:
The full Board carries out the role of the Nomination Committee.
Explanation for Departure:
The Board continues to be of the view that no efficiencies or other benefits
would be gained by establishing a separate committee or further formalisation
of this function.
Principle 4 Recommendation 4.2, 4.3
Notification of Departure:
The composition of the audit committee has not changed during the last
reporting period, which is attributable to the composition of the Board not
having altered. The audit committee does not meet the recommendations for
composition as there are only two members.
Explanation for Departure:
The Board considers it a priority to restrict membership of the audit
committee to the independent directors. Accordingly, due to the current
(unchanged) structure of the Board, only Messrs Cozijn and Teichmann are
eligible to be members of the audit committee (and were so appointed on 20
June 2005). Both are suitably qualified to be members of the audit committee.
Therefore, the Board considers the composition of the audit committee the best
possible structure in the circumstances to ensure the integrity of the
financial reporting, and is satisfied with the way the audit committee has
conducted its business to date.
Principle 8 Recommendation 8.1
Notification of Departure:
During the Reporting Period there was no formal performance evaluation of the
Board, its committees and individual directors.
Explanation for Departure:
The Chairman assesses the performance of the Board, individual directors and
key executives on an informal basis. As a number of specific factors have
determined the Board composition to date, as outlined in the explanation
related to Recommendation 2.1 (above), it is the Chairman's view that a formal
review process would add little benefit to shareholders at this stage. The
Board notes that its two executive directors, Mr Best and Mr Randazzo continue
to be reviewed annually in their capacity as executives. The Company will
continue to monitor whether more formal procedures for Board assessment are
warranted.
Principle 9 Recommendation 9.2
(Note: Shareholders should refer to the Remuneration Report, which forms a
separate part of this Annual Report, for details of remuneration-related
matters.)
Notification of Departure:
The Company has not established a separate Remuneration Committee. The full
Board acts as the Remuneration Committee.
Explanation for Departure:
The Board continues to be of the view that, due to its small size, all members
should be involved in determining remuneration levels.
IDENTIFICATION OF INDEPENDENT DIRECTORS
Materiality Thresholds
The Board has not changed its criteria as applied in previous years for
assessing independence of directors. These are set out as follows:
When determining whether a non-executive director is independent the director
must not fail any of the following materiality thresholds:
less than 10% of company shares are held by the director and any entity or
individual directly or indirectly associated with the director;
no sales are made to or purchases made from any entity or individual directly
or indirectly associated with the director; and
none of the directors income or the income of an individual or entity directly
or indirectly associated with the director is derived from a contract with any
member of the economic entity other than income derived as a director of the
entity.
Assessment of Directors
The Board continues to consider both of the non-executive directors, Mr Cozijn
and Mr Teichmann, independent in accordance with these criteria.
When considering Mr Cozijn, the Board also took into account his executive
role prior to 31 January 2005. However, on the basis that the Company's
activities are now significantly different from those during the period when
Mr Cozijn was the chief executive of the Company, the Board, in the absence of
Mr Cozijn, considered that Mr Cozijn past role has little or no effect on his
current position and his ability to exercise independent judgement in the
current context of the Company's activities. Mr Cozijn is not considered to be
an executive as his services are restricted to solely that of the Company
Secretary. In all of the circumstances, the Board considers Mr Cozijn to be
independent.
Mr Teichmann was appointed to the Board as a representative of LL Mining
Corporation BV (LLM), an investor of approximately 6% in the Company. LLM's
parent company is a participant in a 100% off-take agreement with the Company.
Notwithstanding this relationship, the Board is of the view that Mr Teichmann
is capable of exercising independent judgement when it comes to the Company's
affairs. Furthermore, the Board considers there to be limited scope for
conflict between the interests of LLM or its parent and other shareholders. To
the extent that a conflict does arise, Mr Teichmann would be excluded from the
decision-making process in accordance with normal conflict of interest
procedures.
NOMINATION COMMITTEE
The full Board acts as the nomination committee. All matters concerning the
structure of the Board have been considered from time to time during regular
meetings of the Board.
AUDIT COMMITTEE
Names and Qualifications of Audit Committee Members
The Audit Committee comprises Max Cozijn and Thomas Teichmann. Their
qualifications are set out in the Director's Report, which forms part of this
Annual Report.
The Audit Committee convened twice during the Reporting Period.
REMUNERATION POLICY
Executive Remuneration
The Company's remuneration policy in relation to executives was developed by
the Board after seeking professional advice from independent consultants and
was approved by the Board. Shareholders should refer to the Remuneration
Report which forms part of this Annual Report for further, more detailed
information on remuneration.
Non-executive directors
There is no incentive-based, equitable remuneration for non-executive
directors. Mr Cozijn receives a fixed, monthly fee for his services as company
secretary/director. Mr Teichmann receives a fixed annual fee paid quarterly.
The non-executive directors do not receive incentive-based remuneration.
REMUNERATION COMMITTEE
All matters concerning remuneration of the Board have been considered from
time to time during regular meetings of the Board.
OTHER
Skills, Experience, Expertise and term of office of each Director
A profile of each director containing the applicable information is set out in
the Directors' Report.
Statement concerning availability of Independent Professional Advice
If a director considers it necessary to obtain independent professional advice
to properly discharge the responsibility of his/her office as a director,
then, provided the director first obtains approval for incurring such expense
from the chairperson, the Company will pay the reasonable expenses associated
with obtaining such advice.
Confirmation whether performance Evaluation of the Board and its members have
taken place and how conducted
During the Reporting Period a formal evaluation of the Board and its members
was not carried out. Shareholders should refer to the explanation for
departure in respect of Recommendation 8.1 above.
Existence and Terms of any Schemes for Retirement Benefits for Non-Executive
Directors
There are no termination or retirement benefits for non-executive directors.
DIRECTORS' REPORT
Your Directors present their report on the company and its controlled entities
for the financial year ended 30 June 2007.
Directors
The names of Directors in office at any time during or since the end of the
year are:
D.B. Best
S. Randazzo
M.D.J. Cozijn
T. Teichmann
Directors have been in office since the start of the financial year to the
date of this report unless otherwise stated. The qualifications, experience
and special responsibilities of the directors have been shown elsewhere in
this report.
Company Secretary
The following person held the position of company secretary at the end of the
financial year:
Mr Max Dirk Jan Cozijn: Bachelor of Commerce. ASA. - Mr Cozijn was the
founding director and has been the Company Secretary of Elkedra Diamonds NL
since April 2000.
Principal Activities
The principal continuing activities of the consolidated group during the
financial year were diamond production and investment of surplus funds.
Elkedra Diamonds NL became a diamond producer after the commencement of
continuous 24-hour processing operations in late June 2006 at the Chapada
Diamond Project in Brazil.
Operating Results
The consolidated loss of the economic entity after providing for income tax
and eliminating outside equity interests amounted to $8,848,387 (2006:
$4,199,862).
Financial Position
The net assets of the economic entity have increased by $4,453,864 from 30
June 2006 to $17,551,736.
Dividends Paid or Recommended
No dividend was paid or declared during the year and the Directors do not
recommend the payment of a dividend.
Review of Operations
Brazil
In late June 2006 the company commenced diamond production at the Chapada
Alluvial Diamond Project in Brazil.
The initial focus was to ramp up throughput to the process plant design
capacity of 50,000 bank cubic metres per month. After resolving various plant
debottlenecking issues full production was achieved in March 2007.
During the 2007 financial year, 11 diamond sales were completed with total
sales of $10,386,999. During the year 21,666 carats and 40,959 stones were
recovered. The average value per carat was US$389.
Australia
Magnetic surveys were evaluated for the Tiwi Islands tenements and for the
Cravens Peak tenement in Queensland. Gravity surveys were completed at Box
Hole with 14 positive residual gravity anomalies identifying potential MVT
lead/zinc targets.
A detailed review of the Economic Entity's operations during the year and the
results of those operations are contained in the Review of Operations in
this Annual Report.
Significant Changes in State of Affairs
The following significant changes in the state of affairs of the parent entity
occurred during the financial year:
(i)On 29 September 2006, the Company allotted and issued 1,731,898 fully paid
ordinary shares at 51.1 cents per share through a placement to Australian
institutional investors.
(ii)On 4 December 2006, the Company issued 200,000 unlisted options to directors
and 250,000 options to employees. The options are exercisable at 65 cents per
share by 31 December 2009.
(iii)On 11 December 2006 allotted and issued 7,713,830 fully paid ordinary shares
at 47 cents per share through a placement to sophisticated investors.
(iv)During the year 1,707,058 options lapsed.
(v)The Company completed a spin-off of its uranium and base metal assets in the
Northern Territory and Queensland through an IPO and ASX listing of an
exploration company, Uramet Minerals Limited. At 30 June 2007, the Company
held a 38.46% interest in Uramet Minerals Limited.
After Balance Date Events
There were no material events arising subsequent to 30 June 2007 to the date
of this report other than on:
On 4 July 2007 the Company executed a Merger Acquisition Agreement with
Canadian listed diamond group Vaaldiam Resources Ltd to acquire all of the
outstanding shares of the Company in exchange for Vaaldiam common shares by
way of a scheme of arrangement. The proposed terms are 0.52 Vaaldiam shares
for each Elkedra share.
The Directors of Elkedra Diamonds NL have unanimously agreed to recommend the
Vaaldiam offer to Elkedra Diamonds NL shareholders, subject to no competing
and more favourable bid being received.
Since the financial year ended 30 June 2007, 1,528,907 12 pence warrants have
been exercised.
Future Developments
In view of the proposed acquisition by Vaaldiam of all the outstanding shares
in Elkedra Diamonds NL, in the opinion of the directors, it would be
inappropriate to speculate on what the directors and management of Vaaldiam
intentions are for the future.
Environmental Issues
i)Australia
The economic entity's operations are subject to environmental regulation under
the Laws of the Commonwealth, the Northern Territory and Queensland. Presently
rehabilitation bonds for a value of $16,000 have been lodged over certain
leases held by the company in the Northern Territory and Queensland. It is
anticipated that these bonds will not be called on as the company maintains a
strict policy of appropriate rehabilitation over its exploration sites. The
majority of the company's activities involve low level disturbance associated
with its exploration programs, as it is not presently involved in any mining
activities.
ii)Brazil
The economic entity's operations in Brazil are subject to environmental
regulation under a well-developed system of environmental legislation in
Brazil. Under that legislation any mineral activities are subject to
licensing, environmental impact assessment and obligations to rehabilitate
degraded areas. The economic entity has been granted an Operating Licence for
mining and for operation of the diamond recovery processing plant by the
Environmental State Agency of Mato Grosso (SEMA) in Brazil in relation to the
Chapada Diamond Project.
Remuneration Report
Executive Remuneration
The Company's remuneration policy in relation to executives was developed by
the Board after seeking professional advice from independent consultants and
was approved by the Board.
All executives receive a base salary, superannuation, fringe benefits,
performance incentives and retirement benefits. The Board reviews executive
packages annually by reference to company performance, executive performance,
comparable information from industry sectors and other listed companies and
independent advice. The performance of executives is reviewed annually, in
December, by the Board, with revised remuneration packages generally taking
effect from the 1st of January of the following Calendar year. Executives are
also entitled to participate in the employee option plan from time-to-time, as
determined by the Board.
All remuneration paid to executives is valued at the cost to the Company and
expensed. Options are valued using the Black-Scholes methodology.
The Board expects that the remuneration structure implemented for executives
will result in the company being able to attract and retain the best
executives to run the economic entity. It will also provide executives with
the necessary incentives to work to grow long-term shareholder value.
The payment of bonuses, stock options and other incentive payments are
reviewed by the Board annually as part of the review of executive remuneration
and a recommendation is put to the Board for approval. All bonuses, options
and incentives must be linked to predetermined performance criteria. The Board
can exercise its discretion in relation to approving incentives, bonuses and
options. Any changes must be justified by reference to measurable performance
criteria.
The services agreements between the Company and each of Mr Randazzo and Mr
Best contain provision for the award of a bonus. Since the acquisition of
Chapada Diamonds Limited, performance criteria relate to predetermined
project-related milestones. Mr Best and Mr Randazzo do not receive a separate
fee for their services as directors.
Non-executive directors
In contrast with the remuneration structure for executives, there is no
incentive-based, equitable remuneration for non-executive directors. Mr Cozijn
receives a fixed, monthly fee for his services as company secretary/director.
Mr Teichmann receives a fixed annual fee paid quarterly. The non-executive
directors do not receive incentive-based remuneration.
Employment Contracts of Directors
Remuneration and other terms of employment for the two current executive
directors are formalised in service agreements. Each of these agreements
provide for the participation, when eligible, in the employee share incentive
scheme. Other major provisions of the agreements relating to remuneration are
set out below:
Mr D.B. Best, Executive Chairman
Expiry Date - 30 November 2007
Base Salary, inclusive of superannuation of $272,500
Payment of termination benefit on early termination by the employer by giving
3 months notice, other than for gross misconduct, equal to base salary and
superannuation of 12 months. The executive is unable to resign unless any
person acquires 50% or more of the issued shares of the company and if the
company breaches the term of the agreement.
Mr S. Randazzo, Executive Director
Expiry Date - 30 November 2007
Base Salary, inclusive of superannuation of $245,250
Payment of termination benefit on early termination by the employer by giving
3 months notice, other than for gross misconduct, equal to base salary and
superannuation of 12 months. The executive is unable to resign unless any
person acquires 50% or more of the issued shares of the company and if the
company breaches the term of the agreement.
Mr M.D.J. Cozijn, Non Executive Director & Company Secretary
Agreement to act as non executive director and company secretary
Fixed fee, inclusive of superannuation of $39,240 per annum, to be reviewed
annually
Mr T. Teichmann, Non Executive Director
Agreement to act as non executive director
Fixed fee of $15,000 per annum to be reviewed annually
The remuneration for each director and each of the 4 executives receiving the
highest remuneration of the economic entity during the year was as follows:
Short-Term Benefits
Key Management Cash Salary Super- Non cash Non Cash Total Performance
Person & annuation benefit Options Related %
2007 Commissions Value
Parent Entity:
Mr D. Best 200,000 18,000 - - 218,000 -
Mr S Randazzo 176,567 16,200 3,433 - 196,200 -
Mr MDJ Cozijn 12,000 27,240 - 17,201 56,441 -
Mr T Teichmann 15,000 - - 17,201 32,201 -
403,567 61,440 3,433 34,402 502,842 -
Short-Term Benefits
Key Management Cash Salary Super- Other Non Cash Total Performance
Person & annuation Post Options Related %
2006 Commissions Employment Value
Parent Entity:
Mr D. Best 200,000 18,000 - - 218,000 -
Mr S Randazzo 180,000 16,200 - - 196,200 -
Mr MDJ Cozijn 36,000 3,240 - - 39,240 -
Mr T Teichmann 15,000 - - - 15,000 -
431,000 37,440 - - 468,440 -
Options Issued as Part of Remuneration for the Year Ended 30 June 2007
2007 Granted Options Total Options Options Total
No Granted as Remuneration Exercised Lapsed $
part of Represented $ ($)
Remuneration by Options
$ %
Directors
Mr MDJ Cozijn 100,000 17,201 38.48 17,201
Mr T Teichmann 100,000 17,201 53.42 17,201
200,000 34,402 - - - 34,402
Options Granted as Compensation
Key Management Vested Granted Grant Date Value per Exercise Exercise
Person No No option at Price Date
2007 Grant Date $
$
Mr D. Best - - - - - -
Mr S Randazzo - - - - - -
Mr M.D.J. Cozijn 100,000 100,000 4 Dec 2006 0.65 0.65 31 Dec 2009
Mr T Teichmann 100,000 100,000 4 Dec 2006 0.65 0.65 31 Dec 2009
200,000 200,000
Note: The holder is able to convert each option into 1 ordinary fully paid
share in Elkedra Diamonds NL
There has been no change in the shareholdings and option-holdings of the
directors since 30 June 2007. The current holdings are shown in Note 6 to the
financial statements.
Meetings of Directors
During the financial year, 29 meetings of directors (including committees of
directors) were held, with the following attendances:
Director's Meetings Audit Committee
Directors Meetings Meetings Meetings Meetings
Eligible to Attended Eligible to Attended
Attend Attend
Mr D Best 27 17 - -
Mr MDJ Cozijn 27 25 2 2
Mr S Randazzo 27 24 - -
Mr T Teichmann 27 14 2 2
Indemnifying Officers and Auditors
The company had up to April 2004 an insurance policy insuring Directors and
officers of the company against any liability arising from a claim brought by
a third party against the company or its Directors and officers, and against
liabilities for costs and expenses incurred by them in defending any legal
proceedings arising out of their conduct while acting in their capacity as a
Director or officer of the Company, other than conduct involving a wilful
breach of duty in relation to the Company. Since April 2004, no indemnities
have been given or agreed to be given or insurance premiums paid or agreed to
be paid, during or since the end of the financial year, to any person who is
or has been an officer or auditor of the company.
Shares under Option
There are 13,338,871 unissued ordinary shares for which options are
outstanding at the date of this report.
Unlisted Options
40 cent options due by 30/11/09 1,250,000
60 cent options due by 30/11/09 1,250,000
45 cent options due by 3/9/08 333,334
40 cent options due by 30/9/08 6,250,000
90 cent options due by 31/5/10 2,000,000
$1.20 options due by 31/5/10 200,000
35 cent options due by 30/11/09 400,000
65 cent options due by 31/12/09 450,000
AIM Listed Options/Warrants
12 pence warrants due by 31/8/07 1,205,537
TOTAL 13,338,871
During the financial year ended 30 June 2007, 1,707,058 options expired.
Since the financial year ended 30 June 2007, no options have been issued and
1,528,907 12 pence warrants have been exercised.
No person entitled to exercise an option had or has any right by virtue of the
option to participate in any share issue of any other body corporate.
Shares Issued on the Exercise of Options
For details of the ordinary shares issued during the year or since the year
ended 30 June 2007 on the exercise of options refer to note 16 of the
financial report.
Proceedings on behalf of the Company
No person has applied for leave of Court to bring proceedings on behalf of the
Company or intervene in any proceedings to which the company is a party for
the purpose of taking responsibility on behalf of the company for all or any
part of those proceedings.
The company was not a party to any such proceedings during the year.
Non-Audit Services
The board of directors, in accordance with advice from the audit committee is
satisfied there was no provision of non-audit services during the year, and
therefore has complied with the general standard of independence of auditors
imposed by the Corporations Act 2001.
Auditor's Independence Declaration
The lead auditor's independence declaration for the year ended 30 June 2007
has been received and can be found on page 13.
Signed in accordance with a resolution of the Board of Directors.
D. Best S. Randazzo
Chairman Director
Subiaco
Western Australia
30 August 2007
AUDITOR'S INDEPENDENCE DECLARATION
AUDITOR'S INDEPENDENCE DECLARATION
In accordance with the requirements of section 307C of the Corporations Act
2001, as lead auditor for the audit of Elkedra Diamonds NL for the period
ending 30 June 2007, I declare that, to the best of my knowledge and belief,
there have been:
(a) no contraventions of the auditor independence requirements of the Corporations
Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation
to the audit.
WHK HORWATH PERTH AUDIT PARTNERSHIP
CYRUS PATELL
Principal
Dated 30th day of August 2007
INCOME STATEMENT
FOR YEAR ENDED 30 JUNE 2007
CONSOLIDATED GROUP PARENT ENTITY
Notes 2007 2006 2007 2006
$ $ $ $
Revenue from sale of 2 10,386,999 - - -
product
Cost of sales 3 13,015,452 - - -
Gross loss (2,628,453) - - -
Other income 2 241,987 452,737 1,340,438 677,260
Depreciation and
amortisation expense 4 (299,307) (121,479) (31,796) (46,082)
Employee benefits (2,391,767) (945,301) (763,442) (601,536)
expense
Site infrastructure
costs (468,381) - - -
Other site expenses (350,465) - - -
Other field
exploration costs (257,953) (430,282) (198,118) (328,569)
Administration
expenses (1,512,124) (1,194,545) (884,484) (842,803)
Tenements written-off - (152,400) - (152,400)
Finance costs (1,023,497) (276,162) (1,000,248) (243,872)
Share based payment 25 (70,714) (1,577,444) (70,714) (1,577,444)
Foreign exchange
translations 173 45,014 (246,021) 101,907
Share of net losses of
associates (45,912) - - -
Other expenses (41,974) - (323,787) -
Loss before income tax
expense (8,848,387) (4,199,862) (2,178,172) (3,013,539)
Income tax expense 5 - - - -
Net loss attributable
to members of the
parent entity (8,848,387) (4,199,862) (2,178,172) (3,013,539)
Basic earnings (loss)
per share - cents per 20
share (9.53) (5.94)
Diluted earnings
(loss) per share - 20
cents per share (9.53) (5.94)
The accompanying notes form part of these financial statements
BALANCE SHEET
AS AT 30 JUNE 2007
CONSOLIDATED GROUP PARENT ENTITY
Notes 2007 2006 2007 2006
$ $ $ $
Current Assets
Cash and cash 7 2,019,668 4,235,270 1,387,672 3,342,499
equivalents
Trade and other 8 35,355 6,100 1,798,539 617,638
receivables
Inventories 9 230,527 52,182 - -
Other current assets 10 - 6,294 - 6,294
Financial assets 12 - - 5,750,000 -
Investments
accounted for using 27 5,704,088 - - -
the equity method
Total Current Assets 7,989,638 4,299,846 8,936,211 3,966,431
Non-Current Assets
Trade and other 8 - - 18,052,959 14,222,914
receivables
Property, plant and 11 18,730,742 20,614,490 72,126 185,532
equipment
Other non current 10 43,702 - - -
assets
Financial assets 12 16,000 13,500 6,769,972 6,767,472
Total Non-Current 18,790,444 20,627,990 24,895,057 21,175,918
Assets
TOTAL ASSETS 26,780,082 24,927,836 33,831,268 25,142,349
LIABILITIES
Current Liabilities
Trade and other 13 668,475 751,334 278,872 397,430
payables
Short-term 14 3,190,215 2,853,314 3,161,999 2,743,591
borrowings
Short-term 15 369,656 196,529 124,310 71,477
provisions
Total Current 4,228,346 3,801,177 3,565,181 3,212,498
Liabilities
Non-Current
Liabilities
Long-term borrowings 14 5,000,000 8,028,787 5,000,000 8,000,000
Total Non-Current 5,000,000 8,028,787 5,000,000 8,000,000
Liabilities
TOTAL LIABILITIES 9,228,346 11,829,964 8,565,181 11,212,498
NET ASSETS 17,551,736 13,097,872 25,266,087 13,929,851
EQUITY
Issued capital 16 30,696,272 23,002,328 30,696,272 23,002,328
Reserves 17 7,771,072 2,162,765 7,477,442 1,656,978
Accumulated losses (20,915,608) (12,067,221) (12,907,627) (10,729,455)
TOTAL EQUITY 17,551,736 13,097,872 25,266,087 13,929,851
The accompanying notes form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2007
Consolidated Group
Share Accumulated Reserves Total
Capital Losses
Ordinary
$ $ $ $
Balance at 1 July 2005 17,960,750 (7,867,359) - 10,093,391
Shares issued during the 5,087,508 5,087,508
year
Transaction costs (45,930) (45,930)
Loss attributable to members
of the parent entity (4,199,862) (4,199,862)
Foreign currency 505,787 505,787
translations
Options reserve 1,656,978 1,656,978
Balance at 30 June 2006 23,002,328 (12,067,221) 2,162,765 13,097,872
Shares issued during the 7,909,954 7,909,954
year
Transaction costs (216,010) (216,010)
Loss attributable to members
of the parent entity (8,848,387) (8,848,387)
Foreign currency (212,157) (212,157)
translations
Options reserve 70,714 70,714
Financial assets reserve 5,749,750 5,749,750
Balance at 30 June 2007 30,696,272 (20,915,608) 7,771,072 17,551,736
The accompanying notes form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2007
Parent Entity
Share Accumulated Reserves Total
Capital Losses
Ordinary
$ $ $ $
Balance at 1 July 2005 17,960,750 (7,715,916) - 10,244,834
Shares issued during the 5,087,508 5,087,508
year
Transaction costs (45,930) (45,930)
Loss attributable to members
of the parent entity (3,013,539) (3,013,539)
Options reserve 1,656,978 1,656,978
Balance at 30 June 2006 23,002,328 (10,729,455) 1,656,978 13,929,851
Shares issued during the 7,909,954 7,909,954
year
Transaction costs (216,010) (216,010)
Loss attributable to members
of the parent entity (2,178,172) (2,178,172)
Options reserve 70,714 70,714
Financial assets reserve 5,749,750 5,749,750
Balance at 30 June 2007 30,696,272 (12,907,627) 7,477,442 25,266,087
The accompanying notes form part of these financial statements.
CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
CONSOLIDATED GROUP PARENT ENTITY
Notes 2007 2006 2007 2006
$ $ $ $
Cash Flows from
Operating
Activities
Receipts from
customers 10,422,274 - 35,275 -
Payments to
suppliers and
employees (15,199,918) (1,577,535) (1,807,455) (1,179,393)
Cash generated from
operations (4,777,644) (1,577,535) (1,772,180) (1,179,393)
Payments for
exploration (469,475) (566,391) (200,607) (338,721)
expenditure
Development costs (1,021,828) (8,728,365) - -
Finance costs (1,197,676) (61,041) (1,173,297) (61,041)
Interest received 154,084 435,271 100,889 48,256
Net cash (used in)
operating 23 (3,045,195) (1,530,898)
activities (7,312,539) (10,498,061)
Cash flows from
Investing
Activities
Purchase of plant
and equipment (30,611) (1,018,936) (8,670) (55,085)
Purchase of (250) -
investments (250) -
Merger investment (37,190) -
costs (37,190) -
Proceeds from sale
of plant and 124,414 54,334
equipment 124,414 54,334
Net cash provided
by (used in)
investing
activities 56,363 (964,602) 78,304 (751)
Cash flows from
Financing
Activities
Proceeds from
issues of shares 6,284,151 4,843,524 6,284,151 4,843,524
Capital raising (197,128) (49,117) (197,128) (49,117)
costs
Proceeds from 500,000 8,000,000 500,000 8,000,000
borrowings
Repayment of (1,591,829) (312,165) (1,481,534) (180,565)
borrowings
Loans to controlled
entities/associates (17,359) - (4,101,564) (8,911,332)
Net cash flows
provided by 4,977,835 12,482,242 1,003,925 3,702,510
financing
activities
Net increase
(decrease) in cash (2,278,341) 1,019,579 (1,962,966) 2,170,861
held
Cash at the
beginning of the 4,235,270 2,564,273 3,342,499 1,143,689
financial year
Exchange rate 62,739 651,418 8,139 27,949
adjustments
Cash at the end of
the financial year 7 2,019,668 4,235,270 1,387,672 3,342,499
The accompanying notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The financial report is a general purpose financial report that has been
prepared in accordance with Accounting Standards, including Australian
Accounting Interpretations, other authoritative pronouncements of the
Australian Accounting Standards Board and the Corporations Act 2001.
The financial report covers the consolidated group of Elkedra Diamonds NL and
controlled entities, and Elkedra Diamonds NL as an individual parent entity.
Elkedra Diamonds NL is a listed public company, incorporated and domiciled in
Australia.
The financial report of Elkedra Diamonds NL and controlled entities and
Elkedra Diamonds NL as an individual parent entity comply with all
International Financial Reporting Standards (IFRS) in their entirety.
The following is a summary of the material accounting policies adopted by the
consolidated group in the preparation of the financial report. The accounting
policies have been consistently applied, unless otherwise stated.
Basis of Preparation
The accounting policies set out below have been consistently applied to all
years presented.
Reporting Basis and Conventions
The financial report has been prepared on an accruals basis and is based on
historical costs modified by the revaluation of selected non-current assets,
financial assets and financial liabilities for which the fair value basis of
accounting has been applied.
Accounting Policies
(a) Principles of Consolidation
A controlled entity is any entity controlled by Elkedra Diamonds NL. Control
exists where Elkedra Diamonds NL has the power to control the financial and
operating policies so as to obtain benefits from its activities. A list of
controlled entities is contained in Note 26 to the financial statements. All
controlled entities have a June financial year-end.
All inter-company balances and transactions between entities in the
consolidated group, including any unrealised profits or losses, have been
eliminated on consolidation. Accounting policies of subsidiaries have been
changed where necessary to ensure consistencies with those policies applied by
the parent entity.
(b) Income Tax
The charge for current income tax expense is based on the profit for the year
adjusted for any non-assessable or disallowed items. It is calculated using
the tax rates that have been enacted or are substantially enacted by the
balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in
respect of temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. No
deferred income tax will be recognised from the initial recognition of an
asset or liability, excluding a business combination, where there is no effect
on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the
period when the asset is realised or liability is settled. Deferred tax is
credited in the income statement except where it relates to items that may be
credited directly to equity, in which case the deferred tax is adjusted
directly against equity.
Deferred income tax assets are recognised to the extent that it is probable
that future tax profits will be available against which deductible temporary
differences can be utilised.
The amount of benefits brought to account or which may be realised in the
future is based on the assumption that no adverse change will occur in income
taxation legislation and the anticipation that the consolidated group will
derive sufficient future assessable income to enable the benefit to be
realised and comply with the conditions of deductibility imposed by the law.
(c) Inventories
Inventories are measured at the lower of cost and net realisable value. Cost
includes direct materials, direct labour and an appropriate portion of
variable and fixed overheads. Overheads are applied on the basis of normal
operating capacity. Costs are assigned on the basis of weighted average costs.
(d) Property, Plant and Equipment
Each class of property, plant and equipment is carried at cost less, where
applicable, any accumulated depreciation and impairment losses.
Property
Freehold land and buildings are carried at cost less, where applicable any
accumulated depreciation and impairment losses.
Plant and equipment
Plant and equipment are measured on the cost basis.
The carrying amount of plant and equipment is reviewed annually by directors
to ensure it is not in excess of the recoverable amount from these assets. The
recoverable amount is assessed on the basis of the expected net cash flows
that will be received from the asset's employment and subsequent disposal. The
expected net cash flows have been discounted to their present values in
determining recoverable amounts.
The cost of fixed assets constructed within the consolidated group includes
the cost of materials, direct labour, borrowing costs and an appropriate
proportion of fixed and variable overheads.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the group and the cost
of the item can be measured reliably. All other repairs and maintenance are
charged to the income statement during the financial period in which they are
incurred.
Depreciation
The depreciable amount of all fixed assets of the parent entity including
capitalised lease assets, but excluding freehold land and computers, is
depreciated on a reducing balance commencing from the time the asset is held
ready for use. Computers are depreciated on a straight line basis over their
useful lives to the parent entity commencing from the time the asset is held
ready for use.
The depreciation rates used for each class of depreciable assets are:
The depreciable amount of all fixed assets held by the controlled entities is
depreciated on a straight line basis.
The assets' residual values and useful lives are reviewed and adjusted if
appropriate, at each balance sheet date. An asset's carrying amount is written
down immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount. Gains and losses on disposals
are determined by comparing proceeds with the carrying amount. These gains and
losses are included in the income statement.
(e) Leases
Lease payments for operating leases, where substantially all the risks and
benefits remain with the lessor, are charged as expenses in the periods in
which they are incurred.
Leases of fixed assets where substantially all the risks and benefits
incidental to the ownership of the asset, but not the legal ownership, are
transferred to entities in the consolidated group are classified as finance
leases. Finance leases are capitalised, recording an asset and a liability
equal to the present value of the minimum lease payments, including any
guaranteed residual values. Leased assets are depreciated on a straight line
basis over the shorter of their estimated useful lives or the lease term.
Lease payments are allocated between the reduction of the lease liability and
the lease interest expense for the period.
(f) Exploration and Development Expenditure
Exploration, evaluation and development expenditure incurred is either written
off as incurred or accumulated in respect of each identifiable area of
interest. Costs are only carried forward to the extent that they are expected
to be recouped through the successful development of the area or where
activities in the area have not yet reached a stage which permits reasonable
assessment of the existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full
against profit in the year in which the decision to abandon the area is made.
When production commences, the accumulated costs for the relevant area of
interest are amortised over the life of the area according to the rate of
depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the
appropriateness of continuing to carry forward costs in relation to that area
of interest.
Restoration, rehabilitation and environmental costs necessitated by
exploration and evaluation activities are expensed as incurred and treated as
exploration and evaluation expenditure.
Any restoration, rehabilitation and environmental costs necessitated by
development of the Chapada mine property is to be expensed immediately in the
income statement as rehabilitation is completed on an ongoing basis. A
provision will be created for any liabilities created for restoration costs to
be incurred in future periods.
(g) Employee Benefits
Provision is made for the consolidated group's liability for employee benefits
arising from services rendered by employees to balance date. Employee benefits
expected to be settled within one year have been measured at the amounts
expected to be paid when the liability is settled, plus related on costs.
Employee benefits payable later than one year have been measured at the
present value of the estimated future cash outflows to be made for those
benefits.
Contributions are made by the consolidated group to employee superannuation
funds and are charged as expenses when incurred.
Equity-Settled Compensation
The bonus element over the exercise price of the employee services rendered in
exchange for the grant of shares and options is recognised as an expense in
the income statement. The total amount to be expensed over the vesting period
is determined by the reference to the fair value of the shares and the options
granted.
(h)Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of
three months or less and bank overdrafts. Bank overdrafts are shown within
short-term borrowings in current liabilities on the balance sheet.
(i)Revenue
Revenue from the sale of goods is recognised upon the delivery of goods to
customers.
Interest revenue is recognised on a proportional basis taking into account the
interest rates applicable to the financial assets.
Dividend revenue is recognised when the right to receive a dividend has been
established. Dividends received from controlled entities are brought to
account when they are proposed by the controlled entity.
Revenue from the rendering of a service is recognised upon the delivery of the
service to the customers.
All revenue is stated net of the amount of goods and services tax (GST).
(j)Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except
where the amount of GST incurred is not recoverable from the Australian Tax
Office. In these circumstances the GST is recognised as part of the cost of
acquisition of the asset or as part of an item of the expense. Receivables and
payables in the balance sheet are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except
for the GST of investing and financing activities, which are disclosed as
operating cash flows.
(k)Issued Capital
Issued and paid up capital is recognised at the fair value of the
consideration received by the company. Any transaction costs arising on the
issue of ordinary shares are recognised directly in equity as a reduction of
the share proceeds received.
(l)Foreign Currency Transactions and Balances
Functional and Presentation Currency
The functional currency of each of the group's entities is measured using the
currency of the primary economic environment in which that entity operates.
The consolidated financial statements are presented in Australian dollars
which is the parent entity's functional and presentation currency.
Transaction and Balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the date of the transaction. Foreign
currency monetary items are translated at the year-end exchange rate.
Non-monetary items measured at historical cost continue to be carried at the
exchange rate at the date of the transaction. Non-monetary items measured at
fair value are reported at the exchange rate at the date when fair values were
determined.
Exchange differences arising on the translation of monetary items are
recognised in the income statement, except where deferred in equity as a
qualifying cash flow or net investment hedge.
Exchange differences arising on the translation of non-monetary items are
recognised directly in equity to the extent that the gain or loss is directly
recognised in equity otherwise the exchange difference is recognised in the
income statement.
Group Companies
The financial results and position of foreign operations whose functional
currency is different from the group's presentation currency are translated as
follows:
Assets and liabilities are transferred at year-end exchange rates prevailing
at the reporting date. Income and expenses are translated at average exchange
rates for the period. Retained profits are translated at the exchange rates
prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations are
transferred directly to the group's foreign currency translation reserve in
the balance sheet. These differences are recognised in the income statement in
the period in which the operation is disposed.
(m)Financial Instruments
Recognition
Financial instruments are initially measured at cost on trade date, which
includes transaction costs, when the related contractual rights or obligations
exist. Subsequent to initial recognition these instruments are measured as set
out below.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market and are stated
at an amortised cost using the effective interest rate method.
Available-For-Sale Financial Assets
Available-for-sale financial assets include any financial assets not included
in the above categories. Available-for-sale financial assets are reflected at
fair value. Unrealised gains and losses arising from changes in fair value are
taken directly to equity.
Financial Liabilities
Non-derivative financial liabilities are recognised at an amortised cost,
comprising the original debt less principal payments and amortisation.
Fair Value
Fair value is determined based on current bid prices for all quoted
investments. Valuation techniques are applied to determine the fair value for
all unlisted securities, including recent arms length transactions, reference
to similar instruments and option pricing models.
Impairment
At each reporting date, the group assesses whether there is objective evidence
that a financial instrument has been impaired. In the case of
available-for-sale financial instruments, a prolonged decline in the value of
the instrument is considered to determine whether an impairment has arisen.
Impairment losses are recognised in the income statement.
Convertible Notes
Convertible notes are brought to account on issue at the value of net proceeds
received. The converting notes are compound financial instruments where the
interest payments are at fixed amounts with scheduled dates of payments and
the number of ordinary shares to be issued on conversion is in part determined
by the market price of ordinary shares at date of conversion. The present
value of the interest and principal payable on conversion are discounted at
the market rate of interest at issue date and are brought to account as
borrowings. The difference between the net proceeds received and the
borrowings component is brought to account as equity. Interest paid on the
converting notes is recognised as interest expense in the profit from ordinary
activities.
(n)Impairment of Assets
At each reporting date, the group reviews the carrying values of its tangible
and intangible assets to determine whether there is any indication that those
assets have been impaired. If such an indication exists, the recoverable
amount of the asset, being the higher of the asset's fair value less costs to
sell and value in use, is compared to the asset's carrying value. Any excess
of the asset's carrying value over its recoverable amount is expensed to the
income statement.
Where it is not possible to estimate the recoverable amount of an individual
asset, the group estimates the recoverable amount of the cash-generating unit
to which the asset belongs.
(o)Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or
production of assets that necessarily take a substantial period of time to
prepare for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their intended use
or sale.
All other borrowing costs are recognised in the income statement in the period
in which they are incurred.
(p)Provisions
Provisions are recognised when the group has a legal or constructive
obligation, as a result of past events, for which it is probable that an
outflow of economic benefits will result and that the outflow can be reliably
measured.
(q)Investments in Associates
Investments in associate companies are recognised in the financial statements
by applying the equity method of accounting. The equity method of accounting
recognised the group's share of post-acquisition reserves of it associates.
(r)Comparative Figures
Where required by Accounting Standards, comparative figures have been adjusted
to conform to changes in presentation for the current financial year.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
CONSOLIDATED GROUP PARENT ENTITY
2007 2006 2007 2006
NOTE 2 - REVENUE $ $ $ $
Operating activities
- Sale of product 10,386,999 - - -
Revenue from operating 10,386,999 - - -
activities
Non-operating activities
- Interest received 154,084 435,271 1,252,535 659,794
- Administrative services 53,270 - 53,270 -
- gain on sale of property
plant and equipment 34,633 17,466 34,633 17,466
Total revenue from
non-operating activities 241,987 452,737 1,340,438 677,260
Total revenues from
ordinary activities 10,628,986 452,737 1,340,438 677,260
NOTE 3 - COST OF SALES
Production costs 10,790,440 - - -
Depreciation of plant & 1,174,854 - - -
equipment
Amortisation of mining 1,050,158 - - -
properties
Total cost of sales 13,015,452 - - -
NOTE 4 - LOSS FROM
ORDINARY ACTIVITIES
Loss from ordinary
activities before income
tax has been determined
after
(a) Expenses
Depreciation of
non-current assets
- Motor vehicles 84,966 83,225 10,108 23,825
- Plant and equipment 158,409 10,964 7,178 10,531
- Office furniture and
equipment. 55,932 27,290 14,510 11,726
Total depreciation 299,307 121,479 31,796 46,082
Rental on operating lease
payments 108,500 100,185 75,516 63,712
- minimum lease payments
Loss on write-off of
non-current assets - 3,429 - 3,429
CONSOLIDATED GROUP PARENT ENTITY
2007 2006 2007 2006
$ $ $ $
NOTE 5 - INCOME TAX
EXPENSE
(a) Income Tax Expense
The prima facie tax
(benefit) on loss from
ordinary activities is
reconciled to the income
tax as follows:
Prima facie tax (benefit)
on loss from ordinary
activities before income
tax at 30% (2006: 30%) (2,654,517) (1,259,959) (653,452) (904,062)
Add tax effect of:-
Non-deductible items 67,176 447,189 67,176 447,189
Deferred tax assets not
brought to account 2,587,341 812,770 586,276 456,873
Income tax expense
attributable to operating
loss - - - -
(b) Deferred Tax Assets
Deferred tax assets not
brought to account, the
benefits of which will
only be realised if the
conditions for
deductibility set out in
Note 1 (b) occur
Timing differences (642,389) (314,674) (642,389) (314,674)
Tax losses 6,355,878 3,651,344 4,037,432 3,128,074
Total deferred tax assets 5,713,489 3,336,670 3,395,043 2,813,400
NOTE 6 - KEY MANAGEMENT PERSONNEL COMPENSATION
(a) Names and position of economic and parent entity key management personnel in
office at any time during the financial year are:
D.B. Best - Executive Chairman
S. Randazzo - Executive Director
M.D.J. Cozijn - Non Executive Director and Company Secretary
T. Teichmann - Non Executive Director
Key management personnel remuneration has been included in the Remuneration
Report section of the Directors' Report.
(b)Option Holdings
Number of Options Held by Key Management Personnel and Related Entities
Balance Net Change Balance Total Total Total
Key Management 1-Jul-06 Other* 30-Jun-07 Vested Exercisable Unexercisable
Person 30-Jun-07 30-Jun-07 30-Jun-07
Mr D.B. Best 1,707,291 (172,770) 1,534,521 - 1,534,521 -
Mr S. Randazzo 3,314,389 (1,367,620) 1,946,769 - 1,946,769 -
Mr M.D.J. Cozijn - 100,000 100,000 - 100,000 -
Mr T Teichmann - 100,000 100,000 - 100,000 -
5,021,680 (1,340,390) 3,681,290 - 3,681,290 -
* Net Change Other refers to options issued and also includes options that have
expired during the year.
(c)Shareholdings
Number of Shares Held by Key Management Personnel and Related Entities
Balance Options Net Change Balance
Key Management Person 1-Jul-06 Exercised Other* 30-Jun-07
Mr D.B. Best 999,151 - - 999,151
Mr S. Randazzo 8,302,644 - - 8,302,644
Mr M.D.J. Cozijn 200,000 - - 200,000
Mr T Teichmann - - - -
9,501,795 - - 9,501,795
CONSOLIDATED GROUP PARENT ENTITY
NOTE 7 - CASH AND CASH 2007 2006 2007 2006
EQUIVALENTS $ $ $ $
Cash at bank and on hand 1,850,586 3,605,765 1,387,672 3,342,499
Deposits at call 169,082 629,505 - -
Total cash assets 2,019,668 4,235,270 1,387,672 3,342,499
NOTE 8 - TRADE AND OTHER
RECEIVABLES
Current
Amounts receivable from:
- wholly-owned subsidiaries - - 1,763,184 611,538
Trade receivables 17,996 - 17,996 -
Sundry debtors - 6,100 - 6,100
Other receivables 17,359 - 17,359 -
Total current receivables 35,355 6,100 1,798,539 617,638
Non-Current
Amounts receivable from:
- wholly-owned subsidiaries - - 18,052,959 14,222,914
Total non-current - - 18,052,959 14,222,914
receivables
NOTE 9 - INVENTORIES
Current
At cost
Raw materials and stores 230,527 52,182 - -
Total inventories 230,527 52,182 - -
CONSOLIDATED GROUP PARENT ENTITY
2007 2006 2007 2006
NOTE 10 - OTHER ASSETS $ $ $ $
Current
Prepayments - 6,294 - 6,294
Total other current assets - 6,294 - 6,294
Non-Current
Exploration Expenditure
Costs carried forward in
respect of
Areas of interest in:
- exploration and evaluation 43,702 - - -
phases
Total exploration 43,702 - - -
expenditure (a)
Total capitalised 43,702 - - -
exploration expenditure
(a) Reconciled as follows:
Opening Balance - 152,400 - 152,400
Expenditure written off - (152,400) - (152,400)
during the year
Expenditure incurred and
capitalised 43,702 - - -
during the year
Total exploration 43,702 - - -
expenditure
NOTE 11 - PROPERTY, PLANT
AND EQUIPMENT
Land - cost 43,934 44,822 - -
43,934 44,822 - -
Motor vehicles - cost 78,055 223,494 - 143,859
Less accumulated (34,722) (101,574) - (79,283)
depreciation
43,333 121,920 - 64,576
Leased motor vehicles - cost 312,729 319,056 - -
Less accumulated (125,663) (64,398) - -
depreciation
187,066 254,658 - -
Total motor vehicles 230,399 376,578 - 64,576
Plant and equipment - cost 11,591,956 10,931,722 40,138 117,630
Less accumulated (1,361,407) (64,551) (26,558) (63,787)
depreciation
10,230,549 10,867,171 13,580 53,843
Mineral properties 9,115,071 9,129,730 - -
Less accumulated (1,050,158) - - -
amortisation
8,064,913 9,129,730 - -
Office furniture & equipment 283,065 265,693 111,227 107,085
- cost (122,118) (69,504) (52,681) (39,972)
Less accumulated
depreciation
160,947 196,189 58,546 67,113
Total property, plant and 18,730,742 20,614,490 72,126 185,532
equipment
(a) Movements in carrying amounts
Movement in the carrying amounts for each class of property, plant and equipment
between the beginning and the end of the current financial year:
Land Motor Leased Plant & Mineral Office Total
Vehicles Motor Equipment Properties Furniture
Vehicles &
Equipment
$ $ $ $ $ $ $
Consolidated Group:
Balance at the
beginning of the
year 44,822 121,920 254,658 10,867,171 9,129,730 196,189 20,614,490
Additions - - - 911,730 - 30,611 942,341
Disposals - (54,468) - (33,085) - (6,107) (93,660)
Depreciation - (22,982) (61,984) (1,333,263) - (55,932) (1,474,161)
expense
Amortisation - - - - (1,050,158) - (1,050,158)
expense
Foreign currency (888) (1,137) (5,608) (182,004) (14,659) (3,814) (208,110)
translation
Carrying amount at
the end of year 43,934 43,333 187,066 10,230,549 8,064,913 160,947 18,730,742
Parent Entity:
Balance at the
beginning of year - 64,576 - 53,843 - 67,113 185,532
Additions - - - - - 8,670 8,670
Disposals - (54,468) - (33,085) - (2,727) (90,280)
Depreciation - (10,108) - (7,178) - (14,510) (31,796)
expense
Amortisation - - - - - - -
expense
Carrying amount at
the end of year - - - 13,580 - 58,546 72,126
CONSOLIDATED GROUP PARENT ENTITY
NOTE 12 - OTHER FINANCIAL 2007 2006 2007 2006
ASSETS $ $ $ $
Current
Available-for-sale financial - - 5,750,000 -
assets (a)
Total other current financial - - 5,750,000 -
assets
(a) Available-for-sale financial assets
comprise:
- shares in listed entity - - 5,750,000 -
Non-Current
Available-for-sale financial - - 6,753,972 6,753,972
assets (a)
Government bonds 16,000 13,500 16,000 13,500
Total other non-current 16,000 13,500 6,769,972 6,767,472
financial assets
(a) Available-for-sale financial assets
comprise:
- shares in controlled - - 6,753,972 6,753,972
entities
CONSOLIDATED GROUP PARENT ENTITY
2007 2006 2007 2006
NOTE 13 - TRADE AND $ $ $ $
OTHER PAYABLES
Current
Unsecured trade 478,152 689,337 123,807 340,239
creditors
Sundry payables and
accrued expenses 190,323 61,997 155,065 57,191
Total payables 668,475 751,334 278,872 397,430
NOTE 14 - BORROWINGS
Current
Shareholder and - 934,827 - 934,827
executive loans (i)
Debt facility loans 3,000,000 - 3,000,000 -
(iii)
Hire purchase/lease 28,216 149,588 - 39,865
liabilities
Convertible notes (ii) 161,999 1,768,899 161,999 1,768,899
Total current borrowings 3,190,215 2,853,314 3,161,999 2,743,591
Non Current
Hire purchase/lease - 28,787 - -
liabilities
Debt facility loans 5,000,000 8,000,000 5,000,000 8,000,000
(iii)
Total non-current 5,000,000 8,028,787 5,000,000 8,000,000
borrowings
Note: The hire purchase and lease agreements are secured over the motor
vehicles.
(i)Shareholder and executive director loans
These unsecured 5% per annum loans were repaid on 3rd October 2006.
(ii)The 10% $3.60 unsecured convertible notes expired on 24th June 2007 with
438,279 notes being converted into 4,382,790 fully paid ordinary shares on
28th June 2007. The remaining 45,000 convertible notes were redeemed for cash
($161,999) which was repaid on 2nd July 2007.
(iii)On 2 September 2005 the Company executed Loan Agreements with LinQ Capital
Limited (LinQ) covering a $5 million Project Debt facility to be used for the
completion of construction of the Chapada Diamond Project and working capital.
This $5 million facility was drawndown on 5 September 2005. On 22 June 2006,
the Company executed a Standby Facility Agreement for the provision of $5
million of standby finance by LinQ. The standby facility was provided in two
tranches. On 26 June 2006 a first tranche of $3 million was drawn down. These
loans are secured by a fixed and floating charge over the Group's Australian
and UK assets.
CONSOLIDATED GROUP PARENT ENTITY
2007 2006 2007 2006
NOTE 15 - PROVISIONS $ $ $ $
Employee Entitlements 369,656 196,529 124,310 71,477
No. No. No. No.
(a) Number of employees at 123 105 4 4
year end
CONSOLIDATED GROUP PARENT ENTITY
2007 2006 2007 2006
NOTE 16 - ISSUED CAPITAL $ $ $ $
104,596,211 fully paid
ordinary shares
(2006: 84,701,388) 30,696,272 23,002,328 30,696,272 23,002,328
The company has authorised share capital amounting to 104,596,211 ordinary shares of no par
value.
Ordinary Shares
At the beginning of the 23,002,328 17,960,750 23,002,328 17,960,750
reporting year
Shares issued during the
year
- 83,330 on 31 October 29,999 29,999
2005
- 3,117,059 on 16 December 1,246,825 1,246,825
2005
- 140,000 on 18 January 50,400 50,400
2006
- 81,667 on 24 February 18,783 18,783
2006
- 277,780 on 24 March 2006 100,000 100,000
- 13,677,289 on 21 April 3,282,549 3,282,549
2006
- 453,477 on 18 May 2006 108,834 108,834
- 100,125 on 18 May 2006 30,038 30,038
- 138,890 on 22 May 2006 50,000 50,000
- 33,330 on 22 May 2006 11,999 11,999
- 153,694 on 6 June 2006 46,108 46,108
- 48,937 on 13 June 2006 14,681 14,681
- 76,306 on 15 June 2006 22,892 22,892
- 310,000 on 19 June 2006 74,400 74,400
- 938 on 4 August 2006 281 281
- 1,731,898 on 29 885,000 885,000
September 2006
- 297,949 on 3 November 89,385 89,385
2006
- 7,713,830 on 11 December 3,625,500 3,625,500
2006
- 9,900 on 3 January 2007 2,970 2,970
- 5,000,000 on 17 January 1,500,000 1,500,000
2007
- 19,000 on 27 March 2007 5,510 5,510
- 133,330 on 20 April 2007 47,999 47,999
- 174,500 on 27 April 2007 50,605 50,605
- 230,000 on 3 May 2007 66,700 66,700
- 75,100 on 14 May 2007 21,779 21,779
- 70,900 29 May 2007 20,561 20,561
- 24,688 on 4 June 2007 7,160 7,160
- 30,000 on 28 June 2007 8,700 8,700
- 4,382,790 on 28 June 1,577,804 1,577,804
2007
30,912,282 23,048,258 30,912,282 23,048,258
Less Transaction costs
relating to share issues (216,010) (45,930) (216,010) (45,930)
Total paid up capital at
reporting date 30,696,272 23,002,328 30,696,272 23,002,328
Ordinary shares participate in dividends and the proceeds on
winding up of the parent entity in proportion to the number
of shares held.
At shareholders meetings each ordinary share is entitled to
one vote when a poll is called, otherwise each shareholder
has one vote on a show of hands.
Share Issues:
On 4 August 2006, 938 Warrants (Options) were exercised @12p (A$0.30) into 938
ordinary shares. On 29 September 2006, 1,731,898 shares were issued as a
placement. On 3 November 2006, 297,949 Warrants (Options) were exercised @12p
(A$0.30) into 297,949 ordinary shares. On 11 December 2006, 7,713,830 shares
were issued as a placement. On 3 January 2007, 9,900 Warrants (Options) were
exercised @12p (A$0.30) into 9,900 ordinary shares. On 17 January 2007,
5,000,000 Warrants (Options) were exercised @12p (A$0.30) into 5,000,000
ordinary shares. On 27 March 2007, 19,000 Warrants (Options) were exercised
@12p (A$0.29) into 19,000 ordinary shares. On 20 April 2007, 13,333 10% $3.60
convertible notes were converted into 133,330 shares. On 27 April 2007,
174,500 Warrants (Options) were exercised @12p (A$0.29) into 174,500 ordinary
shares. On 3 May 2007, 230,000 Warrants (Options) were exercised @12p (A$0.29)
into 230,000 ordinary shares. On 14 May 2007, 75,100 Warrants (Options) were
exercised @12p (A$0.29) into 75,100 ordinary shares. On 29 May 2007, 70,900
Warrants (Options) were exercised @12p (A$0.29) into 70,900 ordinary shares.
On 4 June 2007, 24,688 Warrants (Options) were exercised @12p (A$0.29) into
24,688 ordinary shares. On 28 June 2007, 30,000 Warrants (Options) were
exercised @12p (A$0.29) into 30,000 ordinary shares. On 28 June 2007, 438,279
10% $3.60 convertible notes were converted into 4,382,790 shares.
Options:
As at the year end the Company had on issue a total of 14,867,778 unlisted
options as follows: 1,250,000 Options exercisable at 40 cents by 30 November
2009 1,250,000 Options exercisable at 60 cents by 30 November 2009
333,334 Options exercisable at 45 cents by 3 September 2008
2,734,444 12 Pence Warrants (Options) exercisable by 31 August 2007
6,250,000 Options exercisable at 40 cents by 30 September 2008
2,000,000 Options exercisable at 90 cents by 31 May 2010
200,000 Options exercisable at $1.20 by 31 May 2010
150,000 Options exercisable at 35 cents by 30 November 2009
100,000 Options exercisable at 35 cents by 30 November 2009
150,000 Options exercisable at 35 cents vesting 1 November expiring by 30
November 2009 200,000 Options exercisable at 65 cents by 31 December 2009
250,000 Options exercisable at 65 cents by 31 December 2009 (50% vesting 4
December 2007 and balance vesting 4 December 2008
Option Issues
200,000 Options exercisable at 65 cents by 31 December 2009
250,000 Options exercisable at 65 cents by 31 December 2009 (50% vesting 4
December 2007 and balance vesting 4 December 2008
Convertible Notes
At as year end, 45,000 Convertible Notes were outstanding. These notes were
repaid on 2 July 2007.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
NOTE 17 - RESERVES
a.Foreign Currency Translation Reserve: The foreign currency translation reserve
records exchange differences arising on translation of Chapada Brasil
Mineracao Limitada, a foreign controlled subsidiary.
b. Options Reserve: The options reserve records items recognised as expenses on
the valuation of employee share options.
c. Financial Assets Reserve: The financial assets reserve recognises the
restatement of listed investments to market value.
NOTE 18 - STATEMENT OF OPERATIONS BY SEGMENTS
From 14 June 2004, following the Company's acquisition of Chapada Diamonds
Ltd, the newly formed consolidated group has operated in one business and two
geographical segments, being diamond mine development in Brazil and mining
exploration in Australia and Brazil. Chapada Diamonds Ltd and its subsidiary
operate primarily in Brazil.
Primary Reporting - Geographical Segments
Australia Brazil Eliminations Consolidated Group
2007 2006 2007 2006 2007 2006 2007 2006
Revenue
External - - 10,386,999 - - - 10,386,999 -
sales
Other income 1,305,805 659,794 207,354 387,015 (1,151,646) (611,538) 361,513 435,271
Total
segment 1,305,805 659,794 10,594,353 387,015 (1,151,646) (611,538) 10,748,512 435,271
revenue
Result
Segment (2,178,172) (3,013,539) (6,670,215) (1,186,323) - - (8,848,387) (4,199,862)
result
Unallocated
corporate - -
expenses
Result from
ordinary
activities
before (8,848,387) (4,199,862)
income tax
Result from
ordinary
activities
after income (8,848,387) (4,199,862)
tax
Net loss
after income (8,848,387) (4,199,862)
tax
Segment 15,778,309 10,919,435 11,001,773 14,008,401 - - 26,780,082 24,927,836
assets
Segment
liabilities (8,565,181) (11,212,498) (663,165) (617,466) - - (9,228,346) (11,829,964)
Acquisitions
of
non-current 8,670 55,085 933,671 8,890,435 - - 942,341 8,945,520
segment
assets
Tenements
provided for
or written - (152,400) - - - - - (152,400)
off
Depreciation
and (31,796) (46,082) (2,492,523) (75,397) - - (2,524,319) (121,479)
amortisation
Non-cash
(income) /
expenses
other than
depreciation 282,102 1,809,378 (292,106) 174,063 - - (10,004) 1,983,441
Secondary Reporting - Business Segments
The consolidated group operates predominantly in one business segment being
diamond production in Brazil and diamond exploration in Australia and Brazil.
Reporting on business segments is similar to the main financial statements and
is therefore not applicable to restate.
Accounting policies
Segment assets include all assets used by a segment and consist principally of
cash, receivables, inventories and property, plant and equipment, net of
allowances and accumulated depreciation and amortisation. While most such
assets can be directly attributed to individual segments, the carrying amount
of certain assets used jointly by two or more segments is allocated to the
segments on a reasonable basis. Segment liabilities consist principally of
accounts payable, employee entitlements, accrued expenses, provisions and
borrowings. Segment assets and liabilities do not include deferred income
taxes.
NOTE 19 - FINANCIAL INSTRUMENTS
(a) Interest Rate Risk
The consolidated group's exposure to interest rate risk, which is the risk
that a financial instrument's value will fluctuate as a result of changes in
market interest rates and the effective weighted average interest rates on
classes of financial assets and financial liabilities, is as follows:
Weighted Floating Fixed Non-interest Total
Ave Effective Interest Rate Interest Rate Bearing $'000
Interest Rate $'000 $'000 $'000
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
% % $ $ $ $ $ $ $ $
Financial Assets
Cash 4.51% 5.82 2,020 577 - 3,658 - - 2,020 4,235
Receivables - - - - - - 35 6 35 6
Other - - - - - - 5,704 13 5,704 13
Total financial
assets 2,020 577 - 3,658 5,739 19 7,759 4,254
Financial Liabilities
Trade - - - - - - 668 749 668 749
& other payables
Hire purchase/lease
liability - 6.57 - - 28 178 - - 28 178
Convertible notes - 10.00 - - 162 1,769 - - 162 1,769
Shareholder loans - 5.00 - - - 935 - - - 935
Debt facility loans - 10.00 - - 8,000 8,002 - - 8,000 8,002
Total financial
liabilities - - 8,190 10,884 668 749 8,858 11,633
(b) Net Fair Value
For unlisted investments where there is no organised financial
market, the net fair value has been based on a reasonable
estimation of the underlying net assets of the investment.
For other assets and other liabilities the net fair value
approximates their carrying value, as disclosed in the Balance
Sheet.
(c) Credit Risk
The maximum exposure to credit risk, excluding the value of any collateral or
other security, at balance date of recognised financial assets is the carrying
amount, net of any provisions for doubtful debts of those assets as disclosed
in the Balance Sheet and notes to the financial statements.
CONSOLIDATED GROUP
2007 2006
NOTE 20 - EARNINGS PER $ $
SHARE
(a) Reconciliation of earnings to net profit or loss
Net profit (loss) (8,848,387) (4,199,862)
Earnings in the calculation of basic EPS (8,848,387) (4,199,862)
Earnings used in the calculation of dilutive EPS (8,848,387) (4,199,862)
(b) Weighted average number of ordinary shares
outstanding during the year used in calculation of 92,836,531 70,639,957
basic EPS
Weighted average number of options outstanding - 7,148,508
Weighted average number of options outstanding
Weighted average number of ordinary shares
outstanding during the year used in calculation of 92,836,531 77,788,465
dilutive EPS
Of the 14,867,778 options outstanding at 30 June 2007, 14,867,778 are not
considered potential ordinary shares and are therefore not dilutive.
CONSOLIDATED GROUP PARENT ENTITY
NOTE 21 - CAPITAL & LEASING 2007 2006 2007 2006
COMMITMENTS $ $ $ $
(a) Finance Lease Commitments
Payable
- not later than one year 29,586 165,362 - 40,439
- later than one year but not
later than - 30,184 - -
five years
Minimum lease payments 29,586 195,546 - 40,439
less: future finance charges (1,370) (17,171) - (574)
Present value of finance lease
payments 28,216 178,375 - 39,865
In May 2003, Elkedra executed two hire purchase agreements for two field motor
vehicles. Amounts payable for each contract over 49 months, including the deposit,
term charges and residual payment, totaled $57,755.
During the 2006 financial year, Chapada Brasil Mineracao Limitada executed a further
five lease agreements for the purchase of five motor vehicles, each contract being
over 24 months.
Note: The hire purchase and lease agreements are secured over the motor vehicles.
(b) Operating Lease Commitments
Payable:
- not later than one year 58,194 115,890 32,044 75,516
- later than one year but not
later than five years - 31,465 - 31,465
Total operating lease 58,194 147,355 32,044 106,981
commitments
This relates to six property leases. One is in Australia for 2 years commencing from
1 December 2005 which has one 2 year option to renew. The remaining period of the
existing lease as at 30 June 2006 was 5 months. The other four properties are in
Brazil, one for the office and three for accommodation for employees. The office is
for a term of 3 years commencing from 1 January 2005. The remaining period of the
existing lease as at 30 June 2007 was 6 months. The three accommodation properties
are all on a term of 1 year from various dates. The remaining period of the existing
leases as at 30 June 2007 was 12 months, 1.50 months and 6.50 months respectively.
The Australian lease contains an escalation clause which states that there is a fixed
increase of 3% annually and there is also a market review at the end of the term.
NOTE 22 - CONTINGENT LIABILITIES AND COMMITMENTS
(a) Exploration Commitments
Ongoing annual exploration expenditure is required to maintain
title to the consolidated group's mineral exploration
tenements. No provision has been made in the financial
statements for these amounts as the amounts are expected to be
fulfilled in the normal course of the operations of the
consolidated group.
The consolidated group has certain statutory obligations to
perform minimum exploration work on its granted tenements.
CONSOLIDATED GROUP PARENT ENTITY
2007 2006 2007 2006
$ $ $ $
These obligations which are
not provided for in the
financial statements and are
payable:
- not later than one year 80,000 108,000 80,000 108,000
The Statutory expenditure requirement may be renegotiated with the relevant state
department of Minerals and Energy, and expenditure commitments may be varied
between tenements, or reduced subject to reduction of exploration area and/or
relinquishment of non-prospective tenements.
(b) Claims of Native Title - Australia
The Company is aware of Native Title claims, which cover certain of its
tenements. At the present date no claims for Native Title have seriously affected
exploration by the Company, however, there have been delays in the granting of
new exploration tenements and consequently exploration of those tenements due to
the Native Title process.
The Company is unable to give a definitive statement on the impact, if any, of
Native Title claims on the company's future exploration and mining operations.
(c) Vaaldiam Merger Break Fee
Certain events, including
Elkedra accepts an alternative bid for the Company; or
The Elkedra directors withdraws their recommendations to shareholders to accept
the Vaaldiam offer
may cause Elkedra to be liable to pay Vaaldiam a break fee equal to 1% of the
enterprise value of Elkedra calculated by the Elkedra volume weighted average
share price (VWAP) for the 20 trading days prior to the execution of the Merger
Implementation Deed.
(d) Unfair Dismissal Claims
A number of claims by ex-employees of the Brazilian subsidiary for unfair
dismissal have been made. Legal advice received by the Company states that these
claims are unlikely to succeed and in any event if a claim were to be successful
the amount payable would be immaterial.
CONSOLIDATED GROUP PARENT ENTITY
2007 2006 2007 2006
NOTE 23 - CASH FLOW $ $ $ $
INFORMATION
Reconciliation of cash flow
from operations with loss
from ordinary activities
after income tax
Loss from ordinary activities
after income tax (8,848,387) (4,199,862) (2,178,172) (3,013,539)
Non-cash flows in loss from
ordinary activities
Foreign currency translation
(unrealised) (173) (45,014) 246,021 (101,907)
Depreciation 2,524,319 121,479 31,796 46,082
Write-off of capitalised
exploration expenditure - 152,400 - 152,400
Net gain on sale of property
plant and equipment (29,850) (14,037) (34,144) (14,037)
Share options expensed 70,714 1,656,978 70,714 1,656,978
Share of associate net losses 45,912 - - -
Changes in assets and
liabilities
- (Increase) in other non (1,021,828) (8,676,181) - -
current assets
- (Increase)/decrease in (15,526) (12,766) (15,526) (12,766)
receivables
- (Increase)/decrease in
interest receivable - - (1,151,646) (611,538)
- (Increase) in prepayments 6,294 (6,294) 6,294 (6,294)
- (Increase) in inventories (178,344) (52,183) - -
- Increase/(decrease) in
trade creditors and accruals (38,797) 408,788 (73,365) 330,144
- Increase/(decrease) in 173,127 168,631 52,833 43,579
provisions
Cash flows from operations (7,312,539) (10,498,061) (3,045,195) (1,530,898)
NOTE 24 - RELATED PARTY TRANSACTIONS
Transactions between related parties are on usual commercial terms
and conditions no more favourable than those available to other
parties unless otherwise stated.
2007 2006
No. No.
(a) Directors' Share
Transactions:
Directors and director
related entities hold
directly, indirectly or
beneficially as at the
reporting date the following
equity interests in the
Company
Ordinary Shares 9,501,795 9,501,795
Options 3,681,290 5,021,680
CONSOLIDATED GROUP PARENT ENTITY
2007 2006 2007 2006
$ $ $ $
(b) Related Party
Transactions
Transactions between related
parties are on normal
commercial terms and
conditions no more favourable
than those available to other
parties unless otherwise
stated
Transactions with related
parties
(i) Other Related Parties
Administration service fee
and cost recoveries paid to
Metex Resources Ltd of which
Mr Cozijn is a director,
pursuant to a cost sharing - 8,207 - 8,207
agreement
Administration service fee
charged to Uramet Minerals
Limited of which Mr Randazzo
and Mr Best are directors and
Uramet Minerals Limited is an
associate of the group. 53,270 - 53,270 -
As at year end, current loans
and receivables outstanding
from Uramet Minerals Limited,
amounted to: 34,901 - 34,901 -
Gain on sale of equipment
sold to Uramet Minerals 34,633 - 34,633 -
Limited:
CONSOLIDATED GROUP PARENT ENTITY
NOTE 24 - RELATED PARTY 2007 2006 2007 2006
TRANSACTIONS (CONTINUED) $ $ $ $
(ii) Director Related
Entities
Samcor Investments, a company
controlled by Mr S. Randazzo
has provided unsecured
current shareholder loans at
5%pa (Note 14) totalling: - 340,931 - 340,931
Interest expensed on the loan 4,262 17,047 4,262 17,047
was:
Samcor Investments, a company
controlled by Mr S. Randazzo
has provided an unsecured
short term loan of $500,000
at 10% pa (Note 14): - - - -
Interest expensed on the loan 8,696 - 8,696 -
was:
Best Nominees Pty Ltd, a
company controlled by Mr D.
Best has provided unsecured
current shareholder loans at
5% pa (Note 14) totalling: - 144,639 - 144,639
Interest expensed on the loan 1,808 7,231 1,808 7,231
was:
Devmin Pty Ltd, a company of
which Mr D. Best and Mr S.
Randazzo are directors, has
provided consulting services
to Elkedra Diamonds NL
- Geological services of
Australian tenements (1) 3,368 5,550 3,368 5,550
- Project development and
mining engineering services 53,980 84,616 53,980 84,616
(1)
- Accounts payable (current)
outstanding at year end - 4,125 - 4,125
Note (1): Neither Mr Best or Mr Randazzo received any financial
rewards or remuneration from income earned by Devmin Pty Ltd through services
provided to the consolidated group during the year.
NOTE 25 - SHARE-BASED PAYMENTS
The following share-based payment arrangements existed at 30 June 2007:
As approved at the Annual General Meeting on 9 November 2006, 200,000 were
granted to directors and 250,000 options were granted to employees. The
options were granted with an exercise price of $0.65 and are exercisable on or
before 31 December 2009. Of the 250,000 options granted to employees, 50% vest
4 December 2007 and the remaining 50% vest 4 December 2008 subject to
continuous employment.
The options hold no voting or dividend rights and are not transferable. At
balance date, no options have been exercised and 400,000 have yet to vest.
Consolidated Group Parent Entity
2007 2006 2007 2006
Number Weighted Number Weighted Number Weighted Number Weighted
of Average of Average of Average of Average
Options Exercise Options Exercise Options Exercise Options Exercise
Price Price Price Price
Outstanding at
the beginning of 8,850,000 - - - 8,850,000 - - -
the year
Granted 450,000 0.65 8,850,000 0.53 450,000 0.65 8,850,000 0.53
Forfeited - - - - - - - -
Exercised - - - - - - - -
Expired - - - - - - - -
Outstanding at 9,300,000 0.53 8,850,000 0.53 9,300,000 0.53 8,850,000 0.53
year end
Exercisable at 8,900,000 0.53 8,700,000 0.53 8,900,000 0.53 8,700,000 0.53
year end
Note: The holder is able to convert each option into 1 ordinary
fully paid share in Elkedra Diamonds NL
All of the options outstanding at 30 June 2007 had a weighted average exercise
price of $0.53.
The weighted average fair value of the options granted during the year was
$0.51.
The value was calculated by using a Black Scholes option pricing model
applying the following inputs:
Weighted average exercise price $0.65
Weighted average life of the 3.08 years
option
Underlying share price $0.53
Expected share price volatility 50%
Risk free interest rate 5.25%
Historical volatility has been the basis for determining expected share price
volatility as it is assumed that this is indicative of future tender, which
may not eventuate.
The life of the options is based on the weighted average life of the current
options outstanding at 30 June 2007.
Total equity-settled share-based expenditure for the year of $70,714 has been
included in the income statement:
2007 2006
$ $
- Share based 70,714 1,656,978
payment
NOTE 26 - CONTROLLED ENTITIES
Controlled entities and their contribution to consolidated profit:
Country of Percentage
Incorporation Owned
2007 2006
% %
Parent Entity:
- Elkedra Diamonds NL Australia - -
Subsidiaries of Elkedra Diamonds NL:
- Chapada Diamonds Ltd United Kingdom 100 100
- Chapada Brasil Mineracao Limitada Brazil 100 100
- Uramet Resources Limited Australia 100 -
CONSOLIDATED GROUP PARENT ENTITY
NOTE 27 - INVESTMENTS Note 2007 2006 2007 2006
ACCOUNTED FOR USING THE $ $ $ $
EQUITY METHOD
Associated companies 28a 5,704,088 - - -
NOTE 28 - ASSOCIATED COMPANIES
Interests are held in the following associated companies
Principal Country of Shares Country Ownership Carry amount of
Activities Incorporation of Interest Investment
Incorporation
2007 2006 2007 2006
% % $ $
Listed:
- Uramet Minerals Exploration Australia Ord Australia 38 - 5,704,088 -
Limited
5,704,088
CONSOLIDATED GROUP PARENT ENTITY
2007 2006 2007 2006
$ $ $ $
(a) Movements during the year in equity accounted investment in associated companies
Balance at the beginning of
the financial year - - - -
Add:
New investments during the 250 - - -
year
Market value revaluation 5,749,750
Less:
Share of associated company's
loss after income tax (45,912) - - -
Balance at the end of the 5,704,088 - - -
financial year
(b) Equity accounted profits of associates are broken down as follows
Share of associated company's
loss before income tax (45,912) - - -
Share of associated company's
income tax expense - - - -
Share of associated company's
loss after income tax (45,912) - - -
(c) Summarised presentation of aggregate assets, liabilities and performance of associates
Current assets 6,486,076 - - -
Non-current assets 223,443 - - -
Total assets 6,709,519 - - -
Current liabilities 170,675 - - -
Non-current liabilities - - - -
Total liabilities 170,675 - - -
Net assets 6,538,844 - - -
Revenues 35,521 - - -
Loss after income tax of (172,647) - - -
associates
(d) Ownership interest in
Uramet Minerals Limited at
that company's balance date
was 38.46% of ordinary
shares. The reporting date of
Uramet Minerals Limited is 30
June 2007. This reporting
date coincides with the
entity's holding company.
(e) Market value of listed
investment in associate 5,750,000 - - -
NOTE 29 - PRIOR PERIOD RESTATEMENTS
During the current reporting period it has been discovered that 2 errors were
made during the 2006 financial year.
On consolidation of the consolidated group the foreign currency translation
effect on intercompany loans ($230,956) was presented in the income statement.
Under AASB 121: The Effects of Changes in Foreign Exchange Rates these
translations should have been presented in equity.
During the 2006 financial year interest expense ($417,677) incurred on the
debt facility loan was expensed where under AASB 123: Borrowing Costs the
interest should have been capitalised as a borrowing cost.
The adjustments are as follows:
Previously Stated Adjustment Restated
2006 2006 2006
Consolidated Group
Balance Sheet
Property plant and equipment 20,196,813 417,677 20,614,490
Reserves (1,931,809) (230,956) (2,162,765)
Accumulated losses (12,253,943) 186,722 (12,067,221)
Income Statement
Finance costs (693,839) 417,677 (276,162)
Foreign exchange 275,970 (230,956) 45,014
translations
Earnings per share (6.21) - (5.94)
Parent Entity
Balance Sheet
Loans to controlled entities 13,805,237 417,677 14,222,914
Accumulated losses (11,147,132) 417,677 (10,729,455)
Income Statement
Finance costs (661,549) 417,677 (243,872)
NOTE 30 - EVENTS SUBSEQUENT TO BALANCE DATE
No matters or circumstances have arisen since the end of the financial year
which significantly affected or may significantly affect the operations of the
consolidated group, the results of those operations, or the state of the
affairs of the consolidated group in subsequent financial years other than:
On 4 July 2007 the Company executed a Merger Acquisition Agreement with
Canadian listed diamond group Vaaldiam Resources Ltd to acquire all of the
outstanding shares of the Company in exchange for Vaaldiam common shares by
way of a scheme of arrangement. The proposed terms are 0.52 Vaaldiam shares
for each Elkedra share.
The Directors of Elkedra Diamonds NL have unanimously agreed to recommend the
Vaaldiam offer to Elkedra Diamonds NL shareholders, subject to no competing
and more favourable bid being received.
Since the financial year ended 30 June 2007, 1,528,907 12 pence warrants have
been exercised.
The financial effects of these transactions have not been brought to account
at balance date.
CONSOLIDATED GROUP PARENT ENTITY
NOTE 31 - AUDITORS 2007 2006 2007 2006
REMUNERATION $ $ $ $
Remuneration of the auditor
of the parent entity for:
- auditing or reviewing the
financial report 38,281 22,150 38,281 22,150
- taxation and other services 550 - 550 -
NOTE 32 - COMPANY DETAILS
The registered office of the company is:
Level 1
130 Hay Street
Subiaco WA 6008
AUSTRALIA
DIRECTORS' DECLARATION
The directors of the Company declare that:
The financial statements and notes, as set out on pages 14 to 46, are in
accordance with the Corporations Act 2001:
comply with Accounting Standards and the Corporations Regulations 2001; and
give a true and fair view of the financial position as at 30 June 2007 and of
the performance for the year ended on that date of the company and
consolidated group.
The Chief Executive Officer and Chief Finance Officer have each declared that:
The financial records of the company for the financial year have been properly
maintained in accordance with section 286 of the Corporations Act 2001;
The financial statements and notes for the financial year comply with the
Accounting Standards; and
The financial statements and notes for the financial year give a true and fair
view.
In the director's opinion there are reasonable grounds to believe that the
company will be able to pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of
Directors and is signed for and on behalf of the directors by:
D. Best S. Randazzo
Chairman Director
Subiaco, Western Australia
30 August 2007
INDEPENDENT AUDIT REPORT
INDEPENDENT AUDIT REPORT TO MEMBERS OF ELKEDRA DIAMONDS NL
We have audited the accompanying financial report of Elkedra Diamonds NL (the
company) and Elkedra Diamonds NL and Controlled Entities (the consolidated
entity), which comprises the balance sheet as at 30 June 2007, and the income
statement, statement of changes in equity and cash flow statement for the year
ended on that date, a summary of significant accounting policies and other
explanatory notes and the directors' declaration of the consolidated entity
comprising the company and the entities it controlled at the year's end or
from time to time during the financial year.
As permitted by the Corporations Regulations 2001, the company has disclosed
information about the remuneration of directors and executives (remuneration
disclosures), required by Accounting Standard AASB 124: Related Party
Disclosures, under the heading `Remuneration Report' in pages 9 to 10 of the
directors' report and not in the financial report.
Directors' Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair
presentation of the financial report in accordance with Australian Accounting
Standards (including the Australian Accounting Interpretations) and the
Corporations Act 2001. This responsibility includes establishing and
maintaining internal control relevant to the preparation and fair presentation
of the financial report that is free from material misstatement, whether due
to fraud or error; selecting and applying appropriate accounting policies; and
making accounting estimates that are reasonable in the circumstances. In
Note1, the directors also state, in accordance with Accounting Standard AASB
101: Presentation of Financial Statements, that compliance with the Australian
equivalents to International Financial Reporting Standards (IFRS) ensures that
the financial report, comprising the financial statements and notes, complies
with IFRS.
The directors also are responsible for preparation and presentation of the
remuneration disclosures contained in the directors' report in accordance with
the Corporations Regulations 2001.
Audit Responsibility
Our responsibility is to express an opinion on the financial report based on
our audit. We conducted our audit in accordance with Australian Auditing
Standards. These Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the
audit to obtain reasonable assurance whether the financial report is free from
material misstatement and that the remuneration disclosures in the directors'
report comply with Accounting Standard AASB 124.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial report. The procedures selected
depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the financial
report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements
of the Corporations Act 2001. We confirm that the independence declaration
required by the Corporations Act 2001, provided to the directors of Elkedra
Diamonds NL on 30 August 2007, would be in the same terms if provided to the
directors as at the date of this auditor's report.
Auditor's Opinion
In our opinion, the financial report of Elkedra Diamonds NL is in accordance
with the Corporations Act 2001 including:
(i) giving a true and fair view of the company's and consolidated entity's
financial position as at 30th June 2007 and of their performance for the year
ended on that date; and
(ii) complying with Australian Accounting Standards (including Australian
Accounting Interpretations) and the Corporations Regulations 2001.
the remuneration disclosures that are contained in pages 9 to 10 of the
directors' report comply with Accounting Standard AASB 124.
(c) the financial report also complies with International Financial Reporting
Standards as disclosed in Note 1.
WHK HORWATH PERTH AUDIT PARTNERSHIP
CYRUS PATELL
Principal
Perth, WA
Dated this 30th day of August 2007
END
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