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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Gippsland | LSE:GIP | London | Ordinary Share | AU000000GIP1 | ORD SHS NPV |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 2.125 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
RNS Number:0042S Gippsland Limited 30 September 2005 GIPPSLAND LIMITED AND ITS CONTROLLED ENTITIES FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 DIRECTORS' REPORT The Directors present their report on the Gippsland Limited ("the Company" or "Parent Entity") and of the consolidated entity, being Gippsland Limited and its controlled entities, for the financial year ended 30 June 2005 and the auditor's report thereon. DIRECTORS The names and details of the Directors of Gippsland Limited during the financial year and until the date of this report are: Robert John Telford John Morrison Chisholm John Stuart Ferguson Dunlop (appointed 1July 2005) John Damian Kenny DIRECTORS QUALIFICATIONS AND EXPERIENCE Robert John Telford (Executive Chairman) AWAIT (Chem), M RACI Mr Telford holds an Associate degree in Pure Chemistry (Organic and Inorganic) having graduated from the Institute of Technology of Western Australia (now Curtin University) in 1967. Mr Telford has been a major shareholder in technology-based industries for some 30 years in the capacity of chief executive officer ("CEO"). He has been involved in the pharmaceutical industry having been a past chairman and major shareholder of the company Inovax Limited. Mr Telford has held the position of CEO in companies involved in inorganic and organic chemical manufacture for some 15 years. He has been involved in the international resource industry for some 15 years via private and public companies and in the main is responsible for securing the Company's interest in its Egyptian resource projects. Mr Telford has an interest in 13,788,124 ordinary shares and 6,658,280 listed options to acquire ordinary shares exercisable at 9 cents each on or before 31 December 2007. John Morrison Chisholm (Executive Director) B Sc (Hons), PhD, F AusIMM, F AIG Dr Chisholm is a consulting geologist with a wide experience in exploration geology and exploration management having worked as a lecturer at the University of Western Australia and Curtin University prior to working for various international mining companies. He was formerly an adjunct associate professor in economic geology at Curtin University. In 1984 he joined Western United Mining Services Pty Ltd during which time as managing director he managed a large group of geoscientists and was involved in the discovery of the Transvaal and Bounty mines. He is a Fellow of both the Australian Institute of Geoscientists and the Australasian Institute of Mining and Metallurgy with Chartered Practising status in Geology. Dr Chisholm was one of the first geologists in Australia to have been awarded Practising Chartered Status in geology by the Australasian Institute of Mining and Metallurgy which is the highest level of recognition that can be attained by professional geologists. Dr Chisholm has an interest in 50,000 ordinary shares and 2,260,000 listed options to acquire ordinary shares exercisable at 9 cents each on or before 31 December 2007. John Stuart Ferguson Dunlop (Non-Executive Director) BE, M Eng Sc, P Cert Arb, CP, F AusIMM, F IMMM, M SME, M CIMM, M MICA John Stuart Ferguson Dunlop holds Bachelors and Masters Degrees in Mining Engineering from the University of Melbourne. He is a certified Mine Manager having approximately 35 years of international surface and underground mining experience in a variety of base metal, industrial and precious metal production and management situations. He is a Director of the Australasian Institute of Mining and Metallurgy (AusIMM) and Chairman of its affiliate, the Mineral Industry Consultants Association (MICA). Mr Dunlop is a highly experienced mining professional having been involved in the design, construction and on-going operation of a number of major resource projects throughout the world. He has a detailed knowledge of the Company's 40Mt Abu Dabbab tantalum project in Egypt having been involved in the preparation of the project's Bankable Feasibility Study. He has operated his own mining consulting firm based in Perth since 1992 and was previously a senior executive with BHP's (now BHP Billiton) Minerals Division, before becoming General Manager Operations for Aztec Mining Co Ltd until this company's takeover by Normandy Mining Ltd. Mr Dunlop currently serves as Chairman of the Australian Listed explorer Alliance Resources Limited, a position he has held since 9 May 1994, and since 27 December 1995 was a Non executive Director of Australian Gold Fields NL. He is also a non executive director of Encore Metals NL since 22 December 1999. Mr Dunlop has no interest in any shares or options in the company. John Damian Kenny (Non-Executive Director) B Com (Hons), LLB Mr Kenny is a lawyer having a specialised interest in venture capital, initial public offerings property developments and agribusiness schemes. He has extensive experience in public equity fundraisings and the pricing of equity, debt and derivative securities. Mr Kenny has been involved in the listing on ASX of a number of mining, oil and gas and technology companies. Mr Kenny is currently the Chairman of ASX Listed Public Company Chester Mining Limited, a post he has held since 17 June 2003. Mr Kenny has an interest in 2,250,000 listed options to acquire ordinary shares exercisable at 9 cents each on or before 31 December 2007. COMPANY SECRETARY Mr Robert Samuel Middlemas B Com, CA, Grad Dip Acc was appointed to the position of company secretary on 22 March 2005. Mr Middlemas has been involved in the mining industry for the last 15 years, providing secretarial services to a number of ASX listed Companies. PRINCIPAL ACTIVITIES The principal activity of the consolidated entity during the financial year was the prospecting and exploration for commercially and economically viable mineral resources. There were no significant changes in the nature of the consolidated entity's principal activity during the year. OPERATING RESULTS The consolidated loss after providing for income tax for the year ended 30 June 2005 amounted to $1,995,208 (2004: $1,411,990). DIVIDENDS No dividend was paid or declared during the year and the Directors do not recommend the payment of a dividend for the year ended 30 June 2005. REVIEW OF OPERATIONS A detailed review of the Company and consolidated entity's activities during the financial year is set out in the section titled "Review of Operations" in this Annual Report. FINANCIAL POSITION A full review of the financial position of the Company is contained in the Discussion and Analysis attached to the Statements of Financial Performance, Statements of Financial Position, and Statements of Cashflows. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the year and to the date of this report, there has not arisen any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, which may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company, in future financial years other than: (i) On 3 December 2004 the Company issued 20,000,000 ordinary shares at an issue price of 3 UK pence (approx 7 cents) each and 10,000,000 free attaching unlisted options exercisable at 4 UK Pence (approx 9.5 cents) each on or before 31 December 2007 raising a total of #600,000 ($1,491,612) (before issue costs) for the purpose of furthering the bankable feasibility study for the Abu Dabbab Project; (ii) On 3 March 2005 the Company issued 500,000 ordinary shares at an issue price of 11 cents each under a revised employment contract; and (iii)On 27 March 2005 the Company issued 2,790,567 ordinary shares at an issue price of 2.8 UK pence (approx 7 cents) each following conversion of unlisted options raising a total of $192,293. AFTER BALANCE DATE EVENTS 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 entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years except: FUTURE DEVELOPMENTS Information as to likely developments in the operations of the Company and the consolidated entity and the expected results of those operations in future financial years has not been included in this report because, in the opinion of the Directors, it would prejudice the interests of the Company and the consolidated entity. ENVIRONMENTAL REGULATION The consolidated entity's operations are not subject to any significant environmental regulations under either Commonwealth or State legislation. However, the Board is committed to achieving a high standard of environmental performance, and regular monitoring of potential environmental exposures is undertaken by management. The Board considers that the consolidated entity has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to the consolidated entity. The consolidated entity is required to carry out its activities in accordance with the Mining Laws and regulations in the areas in which it undertakes its exploration activities. PROCEEDINGS ON BEHALF OF 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. LEGAL PROCEEDINGS One of Gippsland Limited's investee companies is Here2win.com Pty Ltd in which Gippsland Limited owns a 90% interest. Here2win.com Pty Ltd is the owner of various Internet horse racing gaming concepts. On 14 August 2000 Gippsland Limited announced to the Australian Stock Exchange Ltd that the services of the Chief Executive Officer of Here2win.com Pty Ltd, Mr Alex Aguero, had been terminated. Mr Aguero, through Highforce Investments Pty Ltd, continues to hold a 10% equity stake in Here2win.com Pty Ltd. Mr Aguero has commenced litigation against Gippsland Limited seeking payment of what he alleges is unpaid compensation for his services rendered while CEO. The statement of claim filed by Mr Aguero with the Supreme Court of Western Australia claims, amongst other things, damages or alternatively the sum of $1,840,000 plus costs. Gippsland Limited holds the view that the claim is completely without merit and accordingly the claim is being vigorously defended. OPTIONS OVER UNISSUED CAPITAL Listed Options As at 30 June 2005 and the date of this report the following listed options were on issue: Option expiry date Exercise price Number on issue 31 December 2007 9 cents 43,771,393 During the financial year there were no listed options exercised. Unlisted Options As at 30 June 2005 and the date of this report the following unlisted options were on issue: Option expiry date Exercise price Number on issue 31 December 2007 4 UK pence 10,000,000 During the financial year a total of 2,790,567 unlisted options exercisable at 2.8 UK Pence were exercised. MEETINGS OF DIRECTORS During the financial year, 13 meetings of Directors were held. Attendances were as follows: NUMBER OF NUMBER OF MEETINGS MEETINGS ATTENDED ELIGIBLE TO ATTEND Robert John Telford 13 13 John Morrison Chisholm 13 13 John Dunlop 0 0 John Damian Kenny 13 13 REMUNERATION REPORT The Company's policy for determining the nature and amount of emoluments of Board members and senior executives of the Company is considered by the Directors following a review of the market rates and performance. Non-Executive Directors are remunerated on a fixed fee basis for the performance of services as a Director. Details of the nature and amount of each element of the emoluments of each Director are as set out in the following table: Directors Consolidated Entity and Parent Entity Name Director's Consulting and Superannuation Total Fees ($) Management Fees ($) Robert John - 174,960 (i) - 174,960 Telford John Morrison 36,000 24,650 (i) - 60,650 Chisholm John Damian Kenny - 36,000 (i) - 36,000 The consulting and management fees include fees paid to related parties of the Directors. (i) The Company has entered into a consulting arrangement with a company controlled by Mr RJ Telford to carry out management and administration services on behalf of the Company based upon an annual fee of $175,000. A company in which Dr J M Chisholm has an interest supplies geological services to the Company (Refer Note 17). The Company has an arrangement with a company associated with Mr J Kenny to supply corporate services to the Company at normal commercial rates and conditions (Refer Note 17). There are no other contracts to which a Director is a party or under which a Director is entitled to a benefit other than as disclosed in these financial statements. Other than the Directors there are no executive officers of the Company or parent entity. NON-AUDIT SERVICES The board of directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed in Note 15 did not compromise the external auditor's independence financial years. AUDITOR'S INDEPENDENCE DECLARATION The lead auditor's independence declaration for the year ended 30th June 2005 has been received and can be found on the page following this directors' report. INDEMNIFYING OFFICERS AND AUDITOR During or since the end of the financial year, the Company has not given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay an insurance premium for Officers and Auditors indemnity. The Constitution of the Company allows for an indemnity in respect of legal liability for damages and legal costs arising from claims made by reason of any omissions or acts (other than dishonesty) by them, whilst acting in their individual or collective capacity as Directors or Officers of the Company or its controlled entities. Dated at Perth this 29th day of September 2005. Signed in accordance with a resolution of the Board. RJ TELFORD DIRECTOR AUDITOR'S INDEPENDENCE DECLARATION UNDER S307C OF THE CORPORATIONS ACT 2001 YEAR END AUDIT In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Gippsland Limited for the year ended 30 June 2005, 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. Sean McGurk Partner Grant Thornton Perth Dated this 29th day of September 2005 GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 STATEMENTS OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2005 Consolidated Entity Parent Entity 2005 2004 2005 2004 Note $ $ $ $ Revenues from ordinary activities 2 22,941 14,539 22,941 14,539 Foreign exchange (losses) gains 3 (96,093) 79,950 (96,093) 79,950 Employee expenses (128,278) (68,313) (128,278) (68,313) Management and consulting expenses (139,968) (134,269) (139,968) (134,269) Exploration and feasibility expenses (1,134,564) (941,081) (1,098,146) (941,081) Corporate office expenses (60,958) (47,922) (60,958) (47,922) Depreciation expense 3 (11,496) (6,465) (11,496) (6,465) Provision for non-recovery of loans 3 (13,123) (59,039) (109,623) (126,687) Provision for diminution in value of investment 3 (13,124) (59,039) - - Travel and accommodation expenses (85,315) (73,619) (85,315) (73,619) AIM administration expenses (156,309) (66,229) (156,309) (66,229) Other expenses from ordinary activities (178,921) (50,503) (131,963) (41,894) --------- --------- --------- --------- Loss from ordinary activities before income tax (1,995,208) (1,411,990) (1,995,208) (1,411,990) Income tax relating to ordinary activities 4 - - - - --------- --------- --------- --------- Net loss attributable to members of the parent entity 13 (1,995,208) (1,411,990) (1,995,208) (1,411,990) ========= ========= ========= ========= Adjustments recognised directly in equity. 12(a) (74,581) (299,574) (74,581) (299,574) ========= ========= ========= ========= Total Equity changes (2,069,789) (1,711,564) (2,069,789) (1,711,564) ========= ========= ========= ========= Basic loss per share (cents per share) 16 (1.3) (1.2) ========= ========= Diluted loss per share (cents per share) 16 (1.3) (1.2) ========= ========= Discussion and Analysis - Financial Performance The Consolidated Operating Loss for the financial year increased by $583,218, mainly due to the increased level of activities surrounding the finalisation of the bankable feasibility study on the Abu Dabbab Tantalum project in Egypt, and the additional work done to attract potential financiers for the project (refer operations review in this report for additional information) Additionally, increased expenditure was undertaken in respect to the exploration of the eight Wadi Allaqi gold and one copper/nickel projects located to the southeast of Aswan in Egypt. Additional costs were also incurred as the Company completed its first full year trading on the London AIM market, following the successful dual listing with the ASX in March 2004. This dual listing has enabled the Company to access the significantly larger equity markets in London, and it is anticipated that additional equity funding required to finance the Abu Dabbab Tantalum project will be raised predominantly in this market. The UK listing has led to fund raisings being made in UK Pounds, and the Company has suffered an exchange loss during this financial year compared to an exchange gain in the 2004 financial year as the UK Pound has depreciated against the Australian Dollar. Other operating expenses have also increased in line with the increased activities undertaken by the Company related to the Abu Dabbab project The statements of financial performance are to be read in conjunction with the accompanying notes to the financial statements. GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2005 Consolidated Entity Parent Entity 2005 2004 2005 2004 Note $ $ $ $ CURRENT ASSETS Cash assets 5 589,522 1,050,459 589,417 1,050,359 Receivables 6 33,078 46,343 33,078 46,343 Other financial assets 7 15,270 15,249 15,270 15,249 --------- --------- --------- --------- TOTAL CURRENT ASSETS 637,870 1,112,051 637,765 1,111,951 --------- --------- --------- --------- NON CURRENT ASSETS Receivables 6 - - - - Other financial assets 7 - - 305 300 Property, plant and equipment 8 41,942 13,476 41,942 13,476 --------- --------- --------- --------- TOTAL NON CURRENT ASSETS 41,942 13,476 42,247 13,776 --------- --------- --------- --------- TOTAL ASSETS 679,812 1,125,527 680,012 1,125,727 --------- --------- --------- --------- CURRENT LIABILITIES Payables 9 99,225 218,014 99,225 218,014 Provisions 10 9,000 5,042 9,000 5,042 --------- --------- --------- --------- TOTAL CURRENT LIABILITIES 108,225 223,056 108,225 223,056 --------- --------- --------- --------- TOTAL LIABILITIES 108,225 223,056 108,225 223,056 --------- --------- --------- --------- NET ASSETS 571,587 902,471 571,787 902,671 ========= ========= ========= ========= EQUITY Contributed equity 12 15,868,236 14,203,912 15,868,236 14,203,912 Accumulated losses 11 (15,296,649) (13,301,441) (15,296,449) (13,301,241) --------- --------- --------- --------- TOTAL EQUITY 13 571,587 902,471 571,787 902,671 ========= ========= ========= ========= Discussion and Analysis - Financial Position During the year the main changes to the financial position have occurred in the equity contributed, with a total net $1,664,324 of new equity raised through the London AIM Market. These funds were used predominantly to fund the exploration and feasibility costs which have been fully expensed in the current year accounts. There has also been a decrease in the cash on hand, reflecting the increased costs involved with the activities undertaken by the Company in finalising the bankable feasibility study on the Abu Dabbab Tantalum project in Egypt, and the additional work done to attract potential financiers for the project (refer operations review in this report for additional information). Other Balance Sheet items also reflect the increased activity undertaken by the Company during the year. The statements of financial position are to be read in conjunction with the accompanying notes to the financial statements GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2005 Consolidated Entity Parent Entity 2005 2004 2005 2004 Note $ $ $ $ CASH FLOWS FROM OPERATING ACTIVITIES Other receipts 101,906 83,653 101,906 83,653 Interest received 2 22,941 14,539 22,941 14,539 Payments for exploration and feasibility expenditure (1,219,906) (808,168) (1,183,487) (808,168) Payments for administrative expenditure (884,774) (528,973) (837,817) (520,364) -------- -------- -------- -------- Net cash used in operating activities 14(b) (1,979,833) (1,238,949) (1,896,457) (1,230,340) ======== ======== ======== ======== CASH FLOWS FROM INVESTING ACTIVITIES Payments for investment in Tantalum Egypt LLC 7 (13,124) (59,039) - - Loan to Egyptian Company for Mineral Resources 6 (13,123) (59,039) - - Payment for investment in subsidiary - - (5) - Loans to subsidiaries - - (109,623) (126,687) Purchase of plant and equipment (39,962) (8,082) (39,962) (8,082) -------- -------- -------- -------- Net cash used in investing activities (66,209) (126,160) (149,590) (134,769) ======== ======== ======== ======== CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares 1,738,905 2,561,052 1,738,905 2,561,052 Transaction costs from issue of shares (57,707) (316,447) (57,707) (316,447) -------- -------- -------- -------- Net cash provided by financing activities 1,681,198 2,244,605 1,681,198 2,244,605 -------- -------- -------- -------- Net increase/(decr ease) in cash held (364,844) 879,496 (364,849) 879,496 Effects of exchange rate changes on cash (96,093) 79,950 (96,093) 79,950 Cash at the beginning of the financial year 1,050,459 91,013 1,050,359 90,913 -------- -------- -------- -------- Cash at the end of the financial year 14(a) 589,522 1,050,459 589,417 1,050,359 ======== ======== ======== ======== Discussion and Analysis - Cashflows The main cashflow items during the year were the proceeds from new share issues made through the London AIM Markets. These were lower than the previous year, as the company finalised the bankable feasibility study on the Abu Dabbab Tantalum project in Egypt, and completed additional work to attract potential financiers for the project (refer operations review in this report for additional information). Payments for administrative expenditure also increased reflecting the increased level of activity undertaken by the Company during the financial year. The additional expenditures have led to a decrease in cash on hand at the end of the financial year, as expenses have been greater than the inflow of funds through new equity issues. The statements of cash flows are to be read in conjunction with the accompanying notes to the financial statements. GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial report is a general purpose financial report that has been prepared in accordance with applicable Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. This financial report has been prepared on the basis of accounting principles applicable to a going concern, which assumes the commercial realisation of the future potential of the consolidated entity's assets and the discharge of its liabilities in the normal course of business. The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values, or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets. The accounting policies have been consistently applied, unless otherwise stated. The following is a summary of the material accounting policies adopted by the consolidated entity in the preparation of the financial report. (a) Principles of Consolidation The consolidated financial statements comprise the financial statements of Gippsland Limited and all of its controlled entities. A controlled entity is any entity controlled by Gippsland Limited. Control exists where Gippsland Limited has the capacity to dominate the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with Gippsland Limited to achieve the objectives of Gippsland Limited. A list of controlled entities is contained in Note 7 to the financial statements. All inter-company balances and transactions between entities in the consolidated entity, including any unrealised profits or losses, have been eliminated on consolidation. Outside interests in the equity and results of the entities that are controlled are shown as a separate item in the consolidated financial report. (b) Income Tax The consolidated entity adopts the income statement liability method of tax-effect accounting. Income tax expense is calculated on the operating result adjusted for permanent differences. Timing differences which arise due to the different accounting periods in which items of revenue and expense are included in the determination of accounting profit and taxable income are brought to account as either a provision for deferred income tax or as a future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable. Future income tax benefits are not brought to account unless realisation of the asset is assured beyond any reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the benefit. 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 entity 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) Mineral Exploration Expenditure Exploration, evaluation and development costs include expenditure on prospects still at an exploratory or development stage and are expensed as incurred. These costs include costs of acquisition, exploration, determination of recoverable reserves, economic feasibility studies and all technical and administrative overheads directly associated with those projects. Recoupment of capitalised exploration, evaluation and development costs is dependent upon the successful development and commercial exploitation of each area of interest and are amortised over the expected commercial life of each area once production commences. GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (d) Going Concern Basis of Accounting The general purpose financial report has been prepared on the basis of a going concern. The consolidated entity's ability to continue as a going concern is contingent upon raising additional capital to fund exploration commitments, other principal activities and for use as working capital. If additional capital is not raised, the going concern basis may not be appropriate with the result that the entity may have to realise its assets and extinguish its liabilities other than in the ordinary course of business and at amounts different from those stated in the financial report. No allowance for such circumstances have been made in the financial report. (e) Property, Plant and Equipment Property, plant and equipment are carried at cost, less, where applicable, any accumulated depreciation or amortisation. The carrying amount of property, plant and equipment is reviewed annually by the 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 which will be received from the assets employment and subsequent disposal. The expected net cash flows have not been discounted to their present values in determining recoverable amounts. The depreciable amount of all fixed assets is depreciated on a straight line basis over their useful lives to the consolidated entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates for plant and equipment range between 13% and 33%. (f) Foreign currency transactions Foreign currency transactions during the year are converted to Australian currency at the rates of exchange applicable at the dates of the transactions. Amounts receivable and payable in foreign currencies at the reporting date are translated at the rates of exchange ruling on that date. Exchange differences relating to amounts payable and receivable in foreign currencies are brought to account as exchange gains or losses in the statement of financial performance in the year in which the exchange rates change. (g) 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. (h) Investments Non-current investments are measured on the cost basis. The carrying amount of non-current investments is reviewed annually by Directors to ensure it is not in excess of the recoverable amount of these investments. The recoverable amount is assessed from the shares' current market value or the underlying net assets in the particular entities. (i) Interests in Joint Ventures Interests in joint ventures are brought to account by including in the respective classifications the share of individual assets employed and liabilities and expenses incurred in the Statement of Financial Position and Statement of Financial Performance. (j) Employee Benefits Provision is made for the Company's liability for employee benefits arising from services rendered by employees to balance date. Employee benefits are expected to be settled within one year together with benefits arising from wages and salaries, annual leave and sick leave which will be settled after one year, have been measured at their nominal value. Liabilities for other employee entitlements, which are not expected to be paid or settled within 12 months of balance date, are accrued at undiscounted amounts, where material, in respect of all employees at the present values of future amounts expected to be paid. Contributions are made by the consolidated entity to employee superannuation funds and are charged as expenses when incurred. GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (k) Cash For the purpose of the statement of cash flows, cash includes cash on hand and at call deposits with banks or financial institutions, net of bank overdrafts. (l) Receivables and Revenue Recognition Interest revenue is recognised on an accruals basis taking into account the interest rates applicable to the financial assets. Sundry debtors are settled within 60 days and are carried at amounts due. The collectibility of debts is assessed at the reporting date and specific provision is made for any doubtful debts. (m) Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to the ATO are classified as operating cash flows. (n) Payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (o) Contributed Equity Issued capital is recognised as 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. (p) Earnings per Share Basic earnings per share ("EPS") are calculated based upon the net loss divided by the weighted average number of ordinary shares. Diluted EPS are calculated as the net loss divided by the weighted average number of ordinary shares and dilutive potential ordinary shares. (q) Comparative Figures Where required by Accounting Standards comparative figures have been adjusted to conform with changes in presentation for the current financial year. GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 Consolidated Entity Parent Entity 2005 2004 2005 2004 $ $ $ $ NOTE 2 REVENUE FROM ORDINARY ACTIVITIES Operating activities: - Interest received from 22,941 14,539 22,941 14,539 other persons -------- -------- -------- -------- Total revenue from ordinary 22,941 14,539 22,941 14,539 activities ======== ======== ======== ======== NOTE 3 LOSS FROM ORDINARY ACTIVITIES The loss from ordinary activities before income tax has been determined after: Expenses: Rental expense on operating 20,412 21,800 20,412 21,800 leases Contributions to employees 4,320 5,760 4,320 5,760 superannuation plans Depreciation of plant and 11,496 6,465 11,496 6,465 equipment Movements in provisions: - Employee entitlements 3,958 (1,447) 3,958 (1,447) - Provision against loan to - - 26,247 118,079 Tantalum Int Pty Ltd - Provision against loan to - - 46,957 8,608 Here2win.com Pty Ltd - Provision against of loan - - 36,419 - to Nubian Resources plc - Provision for 13,123 59,039 - - non-recovery of loan to other parties - Provision for 13,124 59,039 - - diminution Foreign exchange losses 96,093 - 96,093 Exploration expenditure 1,134,564 941,081 1,098,145 941,081 incurred and written off ======== ======== ======== ======== Income: Foreign exchange gains - 79,950 - 79,950 ======== ======== ======== ======== NOTE 4 INCOME TAX (a) Income Tax Expense -------------------- The aggregate amount of income tax attributable to the financial year differs by more than 15% from the prima facie tax benefit on the operating loss. The differences are reconciled as follows: Loss from ordinary (1,995,208) (1,411,990) (1,995,208) (1,411,990) activities ======== ======== ======== ======== Prima facie tax benefit on (598,562) (423,597) (598,562) (423,597) operating loss before income tax at 30% (2004: 30%) Add: tax effect of 32,887 38,006 32,887 38,006 non-allowable items -------- -------- -------- -------- Income tax benefit (565,675) (385,591) (565,675) (385,591) attributable to operating loss not brought to account Future income tax benefit not 565,675 385,591 565,675 385,591 brought to account -------- -------- -------- -------- Income tax expense shown in - - - - the financial statements ======== ======== ======== ======== (b) Future Income Tax Benefit --------------------------- Future income tax benefits 3,110,238 2,517,385 2,361,703 1,768,850 relating to tax losses not ======== ======== ======== ======== brought to account as their recoverability is not virtually certain The benefit will only be obtained if the Company derives future assessable income of a nature and of an amount sufficient to enable the benefits from the deductions for these losses to be realised; the Company continues to comply with the condition for deductibility imposed by tax legislation; and no changes to tax legislation adversely affect the Company in realising the benefit from the deductions for the losses. The consolidated entity has not entered into a tax consolidated group and there has been no impact on the tax position as a consequence of the introduction of the revised tax legislation. GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 Consolidated Entity Parent Entity 2005 2004 2005 2004 $ $ $ $ NOTE 5 CASH ASSETS Cash at bank and on hand 136,507 59,607 136,402 59,507 Cash held in foreign currency 453,015 990,852 453,015 990,852 -------- -------- -------- -------- Cash at bank and on hand 589,522 1,050,459 589,417 1,050,359 ======== ======== ======== ======== The cash held in foreign currency pays interest at an average rate of 2.9% at 30 June 2005 NOTE 6 RECEIVABLES CURRENT Sundry debtors 33,078 46,343 33,078 46,343 ======== ======== ======== ======== NON CURRENT Amounts owed from controlled entities (i) - - 2,738,360 2,628,737 Provision for non-recovery - - (2,738,360) (2,628,737) -------- -------- -------- -------- - - - - -------- -------- -------- -------- Amounts owed from other parties - Egyptian Mineral Resources Authority 72,162 59,039 - - Provision for non-recovery (72,162) (59,039) - - -------- -------- -------- -------- - - - - -------- -------- -------- -------- - - - - ======== ======== ======== ======== (i) The loans to controlled entities are advanced interest free, are unsecured and there are no set terms for repayment. NOTE 7 OTHER FINANCIAL ASSETS CURRENT Prepayments 15,270 15,249 15,270 15,249 ======== ======== ======== ======== NON CURRENT Shares in subsidiaries, at cost Country of Incorporation Class of Shares Percentage Holding Cost of Parent Entity's Investment 2005 2004 2005 2004 % % $ $ Abutan Pty Ltd Australia Ordinary 100 100 100 100 Ltd Tantalum International Pty Ltd Australia Ordinary 100 100 100 100 Here2win.com Pty Ltd Australia Ordinary 90 90 100 100 Nubian Resources plc United Kingdom Ordinary 100 - 5 - -------- -------- 305 300 ======== ======== (a) The controlled entities are not audited as they are small proprietary companies not required to prepare financial statements. (b) The ultimate parent entity is Gippsland Limited. (c) On 20 May 2004 Nubian Resources PLC was incorporated in the United Kingdom for the purpose of exploring eight gold areas and one copper-nickel area in the Wadi Allaqi region of Egypt. All the issued shares were held in trust as at 30 June 2004 and were transferred to Gippsland Limited in the current financial year. During 2003 a wholly-owned subsidiary of the Company, Tantalum International Pty Ltd acquired a 50% interest in Tantalum Egypt LLC for cash consideration of US$40,000 (A$59,039) and a further amount of US$10,000 (A$13,124) during the current financial year. The remaining 50% interest in Tantalum Egypt LLC is held by the Egyptian Mineral Resources Authority which in turn is 100% owned by the Egyptian Ministry of Petroleum, which is itself owned by the sovereign state that is the Arab Republic of Egypt. The investment by Tantalum International Pty Ltd has been fully provided against as at 30 June 2005. GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 NOTE 8 Consolidated Entity Parent Entity PROPERTY, PLANT AND EQUIPMENT 2005 2004 2005 2004 $ $ $ $ Plant and equipment - at cost 177,313 137,352 177,313 137,352 Less: Accumulated depreciation (135,371) (123,876) (135,371) (123,876) -------- -------- -------- ------- Total property, plant and equipment 41,942 13,476 41,942 13,476 ======== ======== ======== ======= Movement in carrying amounts: Movement in the carrying amounts for each class of, property, plant and equipment between the beginning and end of the current financial year. Balance at the beginning of year 13,476 11,859 13,476 11,859 Additions 39,962 8,082 39,962 8,082 Depreciation expense (11,496) (6,465) (11,496) (6,465) -------- -------- -------- ------- 41,942 13,476 41,942 13,476 ======== ======== ======== ======= NOTE 9 PAYABLES CURRENT (Unsecured) Sundry creditors and accrued expenses 90,225 208,114 90,225 208,114 Amounts payable to Director related entities (Refer Note 17(e)) 9,000 9,900 9,000 9,900 -------- -------- -------- ------- 99,225 218,014 99,225 218,014 ======== ======== ======== ======= NOTE 10 PROVISIONS CURRENT Employee entitlements 9,000 5,042 9,000 5,042 ======== ======== ======== ======= Number of employees at year end 1 1 1 1 ======== ======== ======== ======= NOTE 11 ACCUMULATED LOSSES Accumulated losses at the beginning of the financial year (13,301,441) (11,889,451) (13,301,241) (11,889,251) Net loss attributable to members of the parent entity (1,995,208) (1,411,990) (1,995,208) (1,411,990) -------- -------- -------- -------- Accumulated losses at the end of the financial year (15,296,649) (13,301,441) (15,296,449) (13,301,241) ======== ======== ======== ======== GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 Consolidated Entity Parent Entity 2005 2004 2005 2004 $ $ $ $ NOTE 12 CONTRIBUTED EQUITY (a) Paid up capital: ------------------ 162,818,926 (2004: 15,868,236 14,203,912 15,868,236 14,203,912 139,528,359) fully paid ======== ======= ======== ======== ordinary shares Share Movements ----------------- * Opening balance 14,203,912 11,942,434 14,203,912 11,942,434 * On 3 December 2004 1,491,612 - 1,491,612 - the Company issued 20,000,000 ordinary shares at 3 pence (7.5 cents) each (refer b(i)) * On 3 March 2005 the 55,000 - 55,000 - Company issued 500,000 shares under an employment contract at 11 cents each * On 27 April 2005 the 192,293 - 192,293 - Company issued 2,790,567 following an option conversion at 2.8 pence (7 cents) each (refer (b) (ii)) * On 5 August 2003 the - 560,000 - 560,000 Company issued 14,000,000 ordinary shares at 4 cents each * On 5 December 2003 - 300,000 - 300,000 the Company issued 6,000,000 ordinary shares at 5 cents each * On 8 March 2004 the - 1,701,052 - 1,701,052 Company issued 25,000,000 ordinary shares at 6.8 cents (2.8 UK pence) cents each * Less: Issue costs (74,581) (299,574) (74,581) (299,574) associated with capital -------- ------- -------- -------- raisings * Closing balance 15,868,236 14,203,912 15,868,236 14,203,912 ======== ======= ======== ======== The purpose of the share issues above were to support the ongoing operations of the Company. NOTES: (i) Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. (ii) Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. (b) Options on issue Number of Number of Options Options The following options over ordinary shares are on issue: Options exercisable at 9 cents on or before 31/12/2007 (listed) 43,771,393 43,771,393 Options exercisable at 4 UK pence on or before 31/12/2007 (unlisted) (i) 10,000,000 - Options exercisable at 2.8 UK pence on or before 8/03/2007(unlisted)(ii) - 2,790,567 -------- -------- 53,771,393 46,561,960 ======== ======== During the year a total of 10,000,000 unlisted options exercisable at 4 UK pence on or before 31/12/2007 were issued as securities offered under capital raising initiatives (Refer Note 12(a)). On 27 April 2005 a total of 2,790,567 unlisted options were exercised at 2.8 UK pence (7 cents) (Refer Note 12(a)). GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 Consolidated Consolidated Parent Parent Entity Entity Entity Entity 2005 2004 2005 2004 $ $ $ $ NOTE 13 TOTAL EQUITY RECONCILIATION Balance at the beginning of the 902,471 52,983 902,671 53,183 year Total changes in equity (1,995,208) (1,411,990) (1,995,208) (1,411,990) recognised in the Statement of Financial Performance attributable to members of the parent entity Net proceeds from the issue of 1,664,324 2,261,478 1,664,324 2,261,478 shares --------- -------- -------- -------- Balance at the end of the 571,587 902,471 571,787 902,671 year ========= ======== ======== ======== NOTE 14 CASH FLOW INFORMATION (a) Reconciliation of cash ------------------------ Cash on hand and foreign 589,522 1,050,459 589,417 1,050,359 currency cash reserves ========= ======== ======== ======== The Company has no unused, standby or other credit facilities. (b) Reconciliation of cash flow from operations to loss from ordinary activities after income tax -------------------------------------------------- Loss from ordinary activities after income tax (1,995,208) (1,411,990) (1,995,208) (1,411,990) ------------------------------------------------ Non cash items: Depreciation 11,496 6,465 11,496 6,465 Provision for non- recovery of loans to - - 109,623 126,687 subsidiaries Provision for non-recovery of other loans 13,124 59,039 - - Provision for diminution in investments 13,123 59,039 - - Foreign exchange loss (gain) 96,093 (79,950) 96,093 (79,950) Issue of shares - non cash - - - - Changes in assets and liabilities: - (increase) decrease in sundry debtors (3,608) (11,978) (3,608) (11,978) - (increase) decrease in prepayments (21) (15,248) (21) (15,248) - increase (decrease) payables (118,790) 157,121 (118,790) 157,121 - increase (decrease) in provisions 3,958 (1,447) 3,958 (1,447) --------- -------- -------- -------- Net cash flow used in operating activities (1,979,833) (1,238,949) (1,896,457) (1,230,340) ========= ======== ======== ======== (c) There were no material non cash items during the financial year. NOTE 15 AUDITORS' REMUNERATION Remuneration of the auditors of the parent entity for auditing 12,450 11,350 12,450 11,350 and audit review of the financial and half yearly reports ========= ======== ======== ======== GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 Consolidated Entity 2005 2004 Cents per Share Cents per Share NOTE 16 LOSS PER SHARE Loss per share - Basic loss per share (cents per share) (1.3) (1.2) ========== ========== Diluted loss per share - Diluted loss per share (cents per share) (1.3) (1.2) ========== ========== (a) The weighted average number of ordinary shares used in calculating basic loss per share 151,695,172 117,020,162 ========== ========== (b) Adjusted weighted average number of ordinary shares used in calculating diluted loss 151,468,789 117,828,359 per share ========== ========== (c) Loss used in the calculation of basic and diluted loss per share (1,995,208) (1,411,990) ========== ========== (d) The 2,790,567 unlisted options exercisable at 2.8 UK pence each on or before 8 March 2007, and exercised on 27 April 2005 have been included as potential ordinary shares in the determination of diluted loss per share. The 43,771,393 listed options exercisable at 9 cents each on or before 31 December 2007 have not been included as potential ordinary shares in the determination of diluted loss per share. NOTE 17 DIRECTORS' AND EXECUTIVES' DISCLOSURES (a) Remuneration of Specified Directors and Specified Executives by the consolidated entity Remuneration levels are competitively set to attract and retain appropriately qualified and experienced Directors and senior executives. The Board obtains independent advice on the appropriateness of remuneration packages, given trends in comparative companies both locally and internationally. Remuneration packages include fixed remuneration with bonuses or equity based remuneration entirely at the discretion of the Board based on the performance of the consolidated entity. Non-Executive Directors' base fees are presently $36,000 per annum. Non-Executive Directors do not receive bonuses. Directors' fees cover all main Board activities. The following table provides the details of all Directors of the Company ("Specified Directors") and the nature and amount of the elements of their remuneration for the year ended 30 June 2005. There are no "Specified Executives" that are involved in the strategic direction of the Company, as this role is completed by the Executive Chairman and the Non-Executive Directors. 2005 Primary Post Employment Specified Directors' Fees Consulting & Super Retirement Total Directors Management -annuation Benefits Fees $ $ $ $ $ RJ Telford - 174,960 - - 174,960 JM Chisholm 36,000 24,650 - - 60,650 JD Kenny - 36,000 - - 36,000 ---------- ---------- ---------- ---------- ---------- 36,000 235,610 - - 271,610 ========== ========== ========== ========== ========== 2004 Primary Post Employment Specified Directors' Fees Consulting & Super Retirement Total Directors Management -annuation Benefits Fees $ $ $ $ $ RJ Telford - 169,220 - - 169,220 JM Chisholm 15,000 18,000 1,350 - 34,350 JD Kenny - 36,000 - - 36,000 ---------- ---------- ---------- ---------- ---------- 15,000 223,220 1,350 - 239,570 ========== ========== ========== ========== ========== There were no loans made to any Directors as at 30 June 2005 (30 June 2004: $Nil). GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 NOTE 17 DIRECTORS' AND EXECUTIVES' DISCLOSURES (Continued) (b) Equity instruments All options refer to options over ordinary shares of Gippsland Limited, which are exercisable on a one for one basis. Options over equity instruments granted as remuneration During the reporting period there were no options over ordinary shares granted and/or vested to Specified Directors or their nominees. No options have been granted to Specified Directors since the end of the financial year. During and since the reporting period no options have been exercised by Specified Directors. (c) Specified Directors' Share and Option Holdings in the Parent Entity 2005 The aggregate numbers of ordinary shares and options of the Company held directly, indirectly or beneficially by Specified Directors of the Company or their personally-related entities is as follows: Specified Ordinary Shares Listed Options Directors 1 July Purchases Sales 30 June 30 June 30 June 2004 2005 2005 2004 RJ Telford 13,788,124 - (220,000) 13,568,124 6,558,322 6,658,280 JM Chisholm 50,000 - - 50,000 2,260,000 2,260,000 JD Kenny - - - - 2,250,000 2,250,000 2004 The aggregate numbers of ordinary shares and options of the Company held directly, indirectly or beneficially by Specified Directors of the Company or their personally-related entities is as follows: Specified Ordinary Shares Listed Options Directors 1 July Purchases Sales 30 June 30 June 30 June 2003 2004 2004 2003 RJ Telford 13,973,124 - (185,000) 13,788,124 6,658,280 6,758,280 JM Chisholm 50,000 - - 50,000 2,260,000 2,260,000 JD Kenny - - - - 2,250,000 2,250,000 (d) Other Transactions with the Company or its controlled entities A number of Specified Directors or their personally-related entities, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities. A number of these entities transacted with the Company or its subsidiaries in the reporting period. The terms and conditions of those transactions were no more favourable than those available, or might reasonably be expected to be available, on similar transactions to unrelated entities on an arm's length basis. GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 NOTE 17 DIRECTORS' AND EXECUTIVES' DISCLOSURES (Continued) (d) Other Transactions with the Company or its controlled entities (Continued) The aggregate amounts recognised during the year relating to Specified Directors and their personally-related entities were as detailed below: Consolidated Entity & Parent Entity Specified Transaction 30 June 2005 30 June 2004 Directors $ $ JM Chisholm Geological consulting services 24,650 2,915 (i) JD Kenny Legal services (ii) - 11,842 (i) Fees for geological consulting services were paid to an entity in which Dr JM Chisholm has an interest. Amounts were billed based on normal market rates for such services and were due and payable under normal payment terms. (ii) Fees for legal services were paid to an entity in which Mr JD Kenny has an interest. Amounts were billed based on normal market rates for such services and were due and payable under normal payment terms. Fees for management and administration were paid to an entity controlled by Mr RJ Telford. These fees have been disclosed in Note 17(a). (e) Payables to Specified Directors of the Company and their personally related entities Consolidated Entity & Parent Entity 30 June 2005 30 June 2004 $ $ Aggregate amount payable at balance date 9,000 9,900 Current - Accounts payable (Refer Note 9) The amounts payable as at 30 June 2005 comprised amounts owed in relation to Director consultancy fees owed to Dr JM Chisholm of $6,000 (2004: $6,000) and Director consultancy fees owed to Mr JD Kenny of $3,000 (2004: $3000). NOTE 18 RELATED PARTY TRANSACTIONS Gippsland Limited is the ultimate parent entity. The only non Director related party to the Company are its controlled entities. Refer Note 7 for further details. Gippsland Limited (the parent entity) has made loans to its controlled entities totalling $2,738,360 (2004: $2,628,737). Refer Note 6 for further details. There were no other related party transactions during the year. NOTE 19 STATEMENT OF OPERATIONS BY SEGMENT The Company operates within the mineral exploration industry predominantly in the geographical segment of Egypt. There are no assets or liabilities recorded with respect to the operations in Egypt and all expenditure is written off to the Statement of Financial Performance. NOTE 20 CONTINGENT LIABILITIES (a) In accordance with normal industry practice the Company has entered into a joint venture agreement with other parties for the purpose of exploring and developing various mineral interests. If a party to a joint venture defaults and does not contribute its share of joint venture obligations, then the other joint venturers are liable to meet those obligations. In this event the interest in the permit held by the defaulting party may be redistributed to the remaining joint venturers. GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 NOTE 20 CONTINGENT LIABILITIES (Continued) (b) In June 1992 the High Court of Australia held in "the Mabo case" that the common law of Australia recognises a form of native title. The full impact that the Mabo decision may have on tenements held by the Company is not yet known. (c) One of Gippsland Limited's investee companies is Here2win.com Pty Ltd in which Gippsland Limited owns a 90% interest. Here2win.com Pty Ltd is the owner of various Internet horse racing gaming concepts. On 14 August 2000 Gippsland Limited announced to the Australian Stock Exchange Ltd that the services of the Chief Executive Officer of Here2win.com Pty Ltd, Mr Alex Aguero, had been terminated. Mr Aguero, through Highforce Investments Pty Ltd, continues to hold a 10% equity stake in Here2win.com Pty Ltd. Mr Aguero has commenced litigation against Gippsland Limited seeking payment of what he alleges is unpaid compensation for his services rendered while CEO. The statement of claim filed by Mr Aguero with the Supreme Court of Western Australia claims, amongst other things, damages or alternatively the sum of $1,840,000 plus costs. Gippsland Limited holds the view that the claim is completely without merit and accordingly the claim is being vigorously defended. NOTE 21 COMMITMENTS FOR EXPENDITURE In order to maintain the mining and exploration tenements in which the Company and consolidated entity is involved, the Company and consolidated entity is committed to meet the conditions under which the tenements were granted and the obligations of the joint venture arrangement which is subject to the conditions contained in the Joint Venture Agreement and the Mining Licence. As at balance date, total estimated exploration expenditure commitments on tenements held by the consolidated entity have not been provided for in the financial statements and which cover the following twelve month period amount to up to $500,000 (2004: $1,000,000). NOTE 22 LEASING COMMITMENTS Consolidated Parent Entity Entity 2005 2004 2005 2004 $ $ $ $ Total operating lease expenditure contracted for at balance date but not provided for in the consolidated financial statements, payable: - not later than 1 year 20,400 20,400 20,400 20,400 - later than 1 year but not later than 3,400 23,800 3,400 23,800 5 years -------- ------- -------- ------- Total Operating Lease Commitments 23,800 44,200 23,800 44,200 ======== ======= ======== ======= NOTE 23 SUPERANNUATION COMMITMENTS The Company contributes to individual employee superannuation plans at the statutory rate of the employee's wages and salaries, in accordance with statutory requirements, to provide benefits to employees on retirement, death or disability. GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 NOTE 24 FINANCIAL INSTRUMENTS (a) Interest Rate Risk The consolidated entity's exposure to the interest rate risk which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rate and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows: Weighted Average Floating Non Interest Total Effective Interest Interest Rate Bearing Rate 2005 2004 2005 2004 2005 2004 2005 2004 Financial assets Cash assets 3.16% 3.4% 589,522 1,050,459 - - 589,522 1,050,459 Receivables 33,078 46,343 33,078 46,343 Total financial assets 589,522 1,050,459 33,078 46,343 622,600 1,096,802 ======= ======= ======= ======= ======= ======= Financial liabilities: Payables 99,225 218,014 99,225 218,014 Total financial liabilities 99,225 218,014 99,225 218,014 ======= ======= ======= ======= ======= ======= (b) Credit Risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the statement of financial position and notes to the financial statements. The consolidated entity does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the consolidated entity. (c) Net Fair Values For other assets and other liabilities the net fair value approximates their carrying value. No financial assets and financial liabilities are readily traded on organised markets in standardised form. (d) Currency Risk The Company has a Great British Pound foreign currency cash account as at 30 June 2005 holding #191,141 (2004 - #378,158) which equates to $453,015 (2004 - A$990,852) based upon the year end exchange rate of A$1:GBP0.4219 (2004 - A$1: GBP 0.382). The Company has no hedging in place in relation to managing any foreign exchange currency exposure. NOTE 25 INTERESTS IN JOINT VENTURES At 30 June 2005, the Company has interests in the following joint venture whose principal activities are the exploration for gold, precious metals and base metals. Name of Project % Interests Other Parties 2005 2004 Zeehan Tin Deposit - Tasmania 40% 40% Western Metals Ltd 60% Abu Dabbab - Egypt 50% 50% Egyptian Mineral Resources Authority - 50% Wadi Allaqi, Egypt* 50% 50% Egyptian Mineral Resources Authority - 50% * consists of ten separate tenement holdings The Joint Venture is of the type where initially one party contributes tenements with the other party earning a specified percentage by funding exploration activities. The Joint Venture does not hold any assets and accordingly the Company's share of exploration expenditure is accounted for in accordance with the policy set out in Note 1(i). GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 NOTE 26 SUBSEQUENT EVENTS 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 entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years. NOTE 27 IMPACT OF THE ADOPTION OF AUSTRALIAN EQUIVILANTS TO IFRS Gippsland Limited is in the process of transitioning its accounting policies and financial reporting from current Australian Accounting Standards (AGAAP) to Australian equivalents of International Financial Reporting Standards (AIFRS) which will be applicable for the financial year ending 30 June 2006. In 2004, the Company allocated internal resources to conduct impact assessments to identify key areas that would be impacted by the transition to AIFRS. Priority has been given to the preparation of an opening balance sheet in accordance with AIFRS as at 1 July 2004, Gippsland's transition date to AIFRS. This will form the basis of accounting for AIFRS in the future, and is required when Gippsland prepares its first fully AIFRS compliant financial report for the year ending 30 June 2006. Set out below are the key areas where accounting policies are expected to change on adoption of AIFRS and our best estimate of the quantitative impact of the changes on total equity as at the date of transition and 30 June 2005 and on net profit for the year ended 30 June 2005. The figures disclosed are management's best estimates of the quantitative impact of the changes as at the date of preparing the 30 June 2005 financial report. The actual effects of transition to AIFRS may differ from the estimates disclosed due to ongoing work being undertaken by the Company in relation to AIFRS, potential amendments to AIFRS's and interpretations thereof being issued by the standard-setters and IFRIC and emerging accepted practice in the interpretation and application of AIFRS and UIG interpretations. (a) Reconciliation of equity as presented under AGAAP to that under AIFRS No material impacts are expected to the equity presented under AGAAP on adoption of AIFRS. (b) Reconciliation of net loss under AGAAP to that under AIFRS No material impacts are expected to the loss presented under AGAAP on adoption of AIFRS. (c) Restated AIFRS Statement of Cash Flows for the year ended 30 June 2005 No material impacts are expected to the cash flows presented under AGAAP on adoption of AIFRS. (d) Income Taxes Under AIFRS, tax balances are determined using a 'balance sheet' approach, which significantly differs from the current methodology prescribed and applied as described in Note 1(b). Changes in deferred tax assets and deferred tax liabilities may arise as a consequence of the different method of measurement, including changes in deferred tax assets and deferred tax liabilities arising as a consequence of the recognition of the fair value of exploration assets and investments quoted on prescribed stock exchanges. The impact of these changes have not yet been quantified. Under AIFRS, the criteria for recognition of carried forward tax losses is 'probable' as compared to the current 'virtually certain' test. The consolidated entity has carried forward tax losses which have not been recognised as deferred tax assets as they do not satisfy the 'probable' criteria under AIFRS. (e) Financial Instruments The directors have elected to apply the first-time adoption exemption available to the consolidated entity to defer the date of transition of AASB 132 'Financial Instruments: Disclosure and Presentation' and AASB 139 'Financial Instruments: Recognition and Measurement' to 1 July 2005. Accordingly, there are no quantitative impacts on the 30 June 2005 financial statements GIPPSLAND LIMITED and its CONTROLLED ENTITIES ABN 31 004 766 376 DIRECTORS' DECLARATION The directors of Gippsland Limited declare that: 1. the financial statements and notes are in accordance with the Corporations Act 2001 and: (a) comply with Accounting Standards and Corporations Regulations 2001; and (b) give a true and fair view of the financial position as at 30 June 2005 and of the performance for the year ended on that date of the Company and economic entity; 2. the Chief Executive Officer and Chief Finance Officer have declared that: (a) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporation Act 2001; and (b) the financial statements and notes for the financial year comply with Accounting Standards; and (c) the financial statements and notes for the financial year give a true and fair view. 3. 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 dated this 29th day of September 2005. R J TELFORD DIRECTOR INDEPENDENT AUDIT REPORT TO MEMBERS OF GIPPSLAND LIMITED Scope The financial report and directors' responsibility The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors' declaration for both Gippsland Limited (the company) and Gippsland Limited and Controlled Entities (the consolidated entity), for the year ended 30 June 2005. The consolidated entity comprises both the company and the entities it controlled during that year. The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report. Audit approach We conducted an independent audit in order to express an opinion to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgment, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected. We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company's and the consolidated entity's financial position, and of their performance as represented by the results of their operations and cash flows. We formed our audit opinion on the basis of these procedures, which included: examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report; and assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors. While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls. Our audit did not involve an analysis of the prudence of business decisions made by the directors or management. We have read the other information in the annual report to determine whether it contained any material inconsistencies with the financial report Independence In conducting our audit, we followed the applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001. Audit opinion In our opinion, the financial report of Gippsland Limited is in accordance with: (a) the Corporations Act 2001, including: (i) giving a true and fair view of the company's and consolidated entity's financial position as at 30 June 2005 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and (b) other mandatory financial reporting requirements in Australia. Inherent Uncertainty Regarding Continuation as a Going Concern Without qualification to the audit opinion expressed above, attention is drawn to the following matter. As a result of the matters described in Note 1(d) to the financial statements, there is significant uncertainty whether the consolidated entity will be able to continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. GRANT THORNTON SEAN MCGURK Chartered Accountants Partner Perth - Dated this 29th day of September 2005 This information is provided by RNS The company news service from the London Stock Exchange END FR LMMPTMMAJMRA
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