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Hannans Annual Report 2007
Hannans Annual Report 2007
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Hannans Reward Limited Annual Report for the financial year ended 30 June 2007
ABN 52 099 862 129 Listed on ASX
Contents
Directors Report Auditors Independence Declaration Independent Audit Report Directors Declaration Financial Statements & Notes 4 30 31 33 34
Corporate Directory
Independent Non-Executive Chairman Mr Richard Scallan Managing Director Mr Damian Hicks Executive Director Mr Frank Cannavo Non-Executive Directors Dr Ernest Dechow Mr William Hicks Mr Terrence Grammer
Company Secretary Mr Ian Gregory Principal Office Level 2, 11 Ventnor Avenue West Perth, Western Australia
Contact Details Telephone: +61 8 9324 3388 Facsimile: +61 8 9324 3366 Email: admin@hannansreward.com www.hannansreward.com (Web) ABN 52 099 862 129
Share Registry Computershare Level 2, 45 St Georges Terrace Perth, Western Australia Telephone: 1300 557 010 www.computershare.com.au ASX: HNR
1. Directors report
The Directors of Hannans Reward Ltd submit herewith the annual financial report of the Company for the financial year ended 30 June 2007. Hannans Reward has the potential to make a significant discovery of nickel, gold, iron and or uranium; its projects are in the right locations with focused exploration taking place at the right time in the commodities cycle. With a view to seeking opportunities to maximize shareholder returns, Hannans Reward will in the future look to expand its activities beyond the confines of Western Australia and potentially beyond minerals. Our aim is to make a significant discovery, establish a reserve base and convert that value into cash flow to fund future activities. With a tight capital structure and well funded exploration programmes, shareholders remain highly leveraged to share price appreciation through exploration, discovery and or project acquisition.
Strategic Plan
Vision
To build a successful exploration and production company Mission Our mission is to develop a company that has a material interest in a portfolio of natural resource prospects that are being rapidly progressed whether they are exploration, development or production assets. We recognise that a professional, knowledgeable and ethical team of directors, employees and consultants is the key to our business.
Our focus is to provide shareholders with a satisfactory return on investment by managing our people, prospects and capital in an entrepreneurial, professional and responsible manner.
4 Hannans Reward Limited Annual Report 2007
Projects
Discovery potential Western Australian projects with multicommodity exposure including gold, nickel, iron and uranium Acquisition of additional tenure more prospective tenure at Forrestania, Jigalong and Queen Victoria Rocks Active exploration deep drilling at Forrestania, Queen Victoria Rocks and Sunday; geophysics at Forrestania, Queen Victoria Rocks, Maggie Hays South and Sunday; soil sampling at Jigalong, Queen Victoria Rocks, Maggie Hays South and Sunday; magnetic surveys at Jigalong and Forrestania and radiometric surveys at Jigalong Targets gold, nickel, uranium, iron and lead International exposure opportunity to assess projects in Papua New Guinea Environment the increasingly difficult regime in Western Australia has significantly increased costs and caused extensive delays in field exploration activity Skilled labour a shortage of skilled labour and contractors in Western Australia has significantly increased costs and caused extensive delays in exploration activity
Capital
Funding sources major shareholders located in Australia, China and South Africa Well funded cash at bank +$4m Expenditure commitment minimum tenement exploration commitment per annum $0.80m Debt nil Capital structure - 85,483,929 shares on issue (fully diluted) Capital raisings $2.5m at 30 cents in March 2007 and $5.5m at 55 cents in April 2007 Top 20 shareholders 55% of issued ordinary shares
People
Appointment of Managing Director Appointment of Executive Director and Non-Executive Director Appointment of Exploration Manager (Minerals) Continuing the search for suitably qualified personnel (technical and corporate) to grow the business towards discovery, resource definition, cash flow and profitability
Price
Highest Lowest Latest $1.09 $0.175 $0.32
Date
22 May 2007 14 & 18 September 2006 17 September 2007
2007
Cash at bank Balance of exploration expenditure at beginning of the year Exploration Expenditure Acquisitions / Options Capitalised Less exploration expenditure written off Balance No. of Issued shares No. of options Share price Market capitalisation (Undiluted) 1. Unlisted public company 2. Listed on ASX on 5 December 2003 4,502,168 1,795,653 79,983,929 5,250,000 $0.61 48,790,197
2006
2,674,406 884,206 67,814,233 4,750,000 $0.15 10,172,135
2005
1,040,600 1,624,528 317,822 125,000 2,067,350 33,016,503 18,248,494 $0.09 2,971,485
20042
2,285,833 144,099 500,429 980,000 1,624,528 32,916,503 16,648,494 $0.16 5,266,640
20031
135,637 123,536 116,000 95,437 144,099 11,350,003 Nil NA NA
Principal Activity
The principal activity of Hannans Reward Ltd is exploring for economic mineral deposits.
Review of operations
Below is a summary of the Companys main exploration projects and activities that have taken place throughout the year to 30 June 2007. We encourage all interested persons to visit www.hannansreward.com for a comprehensive review of the Companys activities.
Project
Location Ownership Prospect Names Targets Highlights
Challenges
Difficult environmental regime within Forrestania region results in substantial delays in gaining access to ground and obtaining clearing approvals Compilation of coherent modern data set for nickel and gold enabling future exploration activities to be well planned Historical data review Ground geophysical surveys at Stormbreaker Deep drill testing of initial geophysical targets at Stormbreaker Flora & fauna studies at Stormbreaker and North Ironcap Clearing permit for North Ironcap granted
Exploration Completed
Exploration Planned
Deep drill testing of known geophysical targets for nickel Geophysical surveys for nickel Geochemical sampling for gold Deep drill testing of gold targets
Project
Location Ownership
Jigalong Project registered in the name of wholly owned subsidiary Errawarra Pty Ltd
East of Newman, Western Australia Subject of a memorandum of understanding between Hannans Reward Ltd and Jigalong Community Inc dated 20 October 2003; a substantive agreement has not yet been signed; the principal terms of the MOU are an equal joint venture with both parties required to contribute to exploration expenditure or be subject to dilution Area A and Area B Gold, base metals, uranium and iron Unique MOU represents opportunity to work in partnership with traditional owners of the Jigalong Aboriginal Reserve Under explored region with minimal historical data Multi-commodity potential including gold, uranium, iron and lead Proximity to iron ore resource on neighboring tenement Large tenement position +1,000km2
Challenges
Early stage exploration Remote location Limited field season due to weather Large land holding
Exploration Completed
Acquisition of satellite imagery Aeromagnetic and radiometric survey Multiple soil sampling surveys Interpretation of data sets
Exploration Planned
Settlement of understanding between Hannans Reward Ltd and Jigalong Community Inc Heritage surveys Helicopter borne geophysical surveys over granted tenements Drilling testing of initial targets (shallow and deep)
Sunday
Approximately 10kms east of Leonora, Western Australia 90% with partner free carried Mt Stewart, Malcolm Creek and Braemore Gold and nickel Well located on the mineralized Keith-Kilkenny lineament Excellent project infrastructure Strong geochemical gold targets Encouraging nickel prospectivity
Transported alluvial cover approximately 60m deep in parts Soil sampling Aircore drilling for gold and nickel Reverse circulation (RC) drilling for gold and nickel Geophysical surveys
Exploration Planned
Soil sampling Aircore drilling for gold and nickel RC drilling for gold
Strict environmental regime results in increased costs and delayed exploration activities Geophysical surveys Geochemical sampling for gold and base metals Air core drilling for gold RC drilling for nickel
Exploration Planned
Project
Location Ownership Prospect Names Targets Highlights
Exploring on the edge of Lake Johnston Comprehensive data review Induced polarisation survey Re-assayed historical samples for nickel pathfinder elements and gold Soil sampling on the eastern edge of the project
Exploration Planned
Mr Hicks is a Member of the Australian Institute of Company Directors. During the past 3 years Mr Hicks has not served as a Director of any other ASX listed companies. Mr Hicks is a non-executive Director of funds management company, Growth Equities Pty Ltd. Mr Frank Cannavo Executive Director (Appointed Director on 3 October 2006) Mr Cannavo was appointed to the Board as a Non-Executive Director on 3 October 2006 and subsequently to the position of Executive Director on 1 July 2007. Mr Cannavo has been a long term supporter of a number of exploration companies that have made the transition to developer/producer and brings this experience and his understanding of the commodities markets to the Company. Mr Cannavo resides in Melbourne, Victoria providing the Company with Board representation in the Eastern States. During the past three years Mr Cannavo has served as a Director of one ASX listed company, Medic Vision Limited. Mr Cannavo is a Member of the Australian Institute of Company Directors. Dr Ernest Dechow Non-Executive Director (Appointed Director on 11 March 2002) Dr Ernest Dechow was a founding Director of Hannans Reward Ltd and has over 40 years of experience in the mining and mineral exploration industry. In the late fifties and early sixties he was engaged in base metal exploration in Zambia, the United States and Canada before arriving in Australia to manage a joint venture of overseas companies exploring in Eastern Australia. In 1968 he formed E. Dechow and Co Pty Ltd, Consulting Geologists and since that time has been consulting and contracting out of Kalgoorlie and Perth for Australian and overseas companies in Australia, Southern Africa and Brazil and for the United Nations in Brazil as well as exploring on a personal basis for potential mines in Indonesia, Vietnam and Namibia. During the past 3 years Dr Dechow has not served as a Director of any other ASX listed companies.
Dr Dechow has a PhD from Yale University in the United States, is a Life Member of the Society of Economic Geologists and a Member of the Australian Institute of Mining and Metallurgy. Mr William Hicks Non-Executive Director (Appointed Director on 11 March 2002) Mr Hicks was a founding Director of Hannans Reward Ltd and has been actively involved in the progress and development of a number of well-known exploration companies. He was a director and secretary of Spargos Reward Gold Mines NL and was instrumental in the listing on the ASX of both Central Kalgoorlie Gold Mines NL and Maritana Gold NL. Mr Hicks is a Fellow of the Australian Institute of Company Directors and a Pharmaceutical Chemist. During the past 3 years Mr Hicks has not served as a Director of any other ASX listed companies. Mr Terrence Grammer Non- Executive Director (Appointed Director on 10 October 2005) Mr Grammer is a geologist with over 30 years experience in mining and mineral exploration with extensive experience in Australia, Southern Africa, East Asia & New Zealand and has operated in Western Australia since 1988. He has extensive experience in exploring for gold and base metals. Mr Grammer was awarded The Association of Mining and Exploration Companies (AMEC) joint Prospector of the Year Award in 2000 for the Discovery of Jubilee Mines NLs Cosmos Nickel Deposit. The initial Cosmos discovery defined a resource of approximately 400,000t @ 8.2% Ni. The project has grown significantly since then. He was also a founder and promoter in 1999 of the successful nickel explorer Western Areas NL where he was the Exploration Manager from 2000 until retiring in 2004. Mr Grammar retired as an Executive Director of Hannans Reward Ltd on 30 June 2007 and is currently a Non-Executive Director. During the past 3 years Mr Grammer has served as a Director of one ASX listed Company, Montezuma Mining Company Limited.
Directors meetings
The following table sets out the number of Directors meetings held during the financial year and the number of meetings attended by each director (while they were a director). During the financial year, ten board meetings were held (including circulating resolutions passed by Directors).
Board Meeting Attendance: 1 July 2006 to 30 June 2007 Board Meetings held while Director
5 5 5 5 5 3
Board Member
Hicks, Damian Scallan, Richard Grammer, Terrence Dechow, Ernest Hicks, Williams Cannavo, Frank
Attended
5 5 5 5 5 3
Attended
5 5 5 5 5 4
Total
10 10 10 10 10 7
Circulating Resolutions
2 October 2006 15 March 2007 4 April 2007 3 May 2007 30 May 2007
Directors shareholdings
The following table sets out each Directors relevant interest in shares, debentures, and rights or options in shares or debentures of the Company or a related body corporate as at the date of this report.
Directors
Richard Scallan Ernest Dechow William Hicks Terrence Grammer Damian Hicks Frank Cannavo
Ordinary Shares
3,100,001 11,153,249 3,675,000 2,278,401 1,200,000
Share options
Share options granted to Directors and executives
During and since the end of the financial year no share options were granted to the Directors and executives of the Company.
Issuing entity
Class of shares
Ordinary Ordinary Ordinary Ordinary Ordinary
Hannans Reward Ltd (held by Director) Hannans Reward Ltd (held by Director) Hannans Reward Ltd (held by Directors) Hannans Reward Ltd (Held by consultants) Hannans Reward Ltd (Held by Employee and Consultants)
The holders of such options do not have the right, by virtue of the option, to participate in any share issue or interest issue of any other body corporate or registered scheme. No shares or interests were issued during and since the end of the financial year as a result of exercise of an option.
Remuneration report
Remuneration policy for Directors and executives
The Board policy for determining emoluments is based on the principle of remunerating Directors and senior executives on their ability to add value to the Company (taking into account the Companys strategic plan and operations) whilst also considering market emolument packages for similar positions within the industry and in consultation with external consultants. The Board appreciates the interrelationship between this policy and Company performance. It acknowledges that it is in the best interests of shareholders to provide challenging but achievable incentives to reward senior executives for reaching the Companys stated goals. The Board will discuss these issues internally and with candidates prior to engaging additional Directors or senior executives in the future.
The Board renegotiated an employment agreement for Damian Hicks as Managing Director for three years commencing on 1 July 2007 with the remuneration package generally comprising $200,000 per annum (inclusive of superannuation entitlements) and reimbursement of work related expenses. Shareholders will vote at the General Meeting scheduled for 1 November 2007 whether to approve the issue of options to Damian Hicks. Mr Cannavo was appointed as an Executive Director for three years commencing on 1 July 2007 with the remuneration package generally comprising $100,000 per annum (inclusive of superannuation entitlements) and reimbursement of work related expenses. Mr Cannavo is contracted to provide 50% of his time to the role of Executive Director. Shareholders will vote at the General Meeting scheduled for 1 November 2007 whether to approve the issue of options to Frank Cannavo.
The following table discloses the remuneration of the Directors of the Company:
Bonus No.
nonmonetary No.
Options No.
Total
No. 30,411 27,900 27,900 150,000 150,000 36,624
No.
27,900 27,900 137,615 137,615 33,600
No.
Project QVR QVR QVR QVR JIGALONG JIGALONG JIGALONG STORMBREAKER NORTH IRONCAP NORTH IRONCAP SUNDAY SUNDAY NORTH IRONCAP QVR QVR QVR QVR SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY
Area 19 62 33 14 70 56 70 5 2 5 1 25 434 118 121 120 115 198 121 122 122 122 47 120 172 151 125 120 120 120 120 120 120 120 50
Area Unit Blocks Blocks Blocks Blocks Blocks Blocks Blocks Blocks Blocks Blocks Hectare Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares
Rent $2,092.09 $6,826.82 $3,633.63 $1,541.54 $7,707.70 $6,166.16 $7,707.70 $2,201.10 $220.22 $550.55 $12.87 $363.00 $6,301.68 $246.62 $252.89 $250.80 $240.35 $413.82 $252.89 $254.98 $254.98 $254.98 $98.23 $250.80 $359.48 $315.59 $261.25 $250.80 $250.80 $250.80 $250.80 $250.80 $250.80 $250.80 $104.50
$10,000.00 $43,400.00 $4,720.00 $4,840.00 $4,800.00 $4,600.00 $7,920.00 $4,840.00 $4,880.00 $4,880.00 $4,880.00 $2,000.00 $4,800.00 $6,880.00 $6,040.00 $5,000.00 $4,800.00 $4,800.00 $4,800.00 $4,800.00 $4,800.00 $4,800.00 $4,800.00 $2,000.00
3 3 3 3 3 3 5 5 5 5 5 5 5
Project SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY MAGGIE HAYS Sth MAGGIE HAYS Sth MAGGIE HAYS Sth MAGGIE HAYS Sth MAGGIE HAYS Sth MAGGIE HAYS Sth MAGGIE HAYS Sth STORMBREAKER
Tenement Number P37/5926 P37/5927 P37/5928 P37/5929 P37/5930 P37/5931 P37/6035 P37/6036 P37/6149 P37/6299 P37/6300 P37/6301 P37/6302 P37/6426 P37/6427 P37/6428 P37/6429 P37/6430 P37/6431 P37/6432 P37/6433 P37/6708 P63/1203 P63/1204 P63/1205 P63/1206 P63/1207 P63/1208 P63/1209 P77/3055
Area 120 120 120 97 120 120 120 120 112 121 122 109 180 174 200 200 199 199 73 192 190 56 117 200 200 97 200 200 193 43
Area Unit Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares
Rent $250.80 $250.80 $250.80 $202.73 $250.80 $250.80 $250.80 $250.80 $234.08 $252.89 $254.98 $227.81 $376.20 $363.66 $418.00 $418.00 $415.91 $415.91 $152.57 $401.28 $397.10 $117.04 $244.53 $418.00 $418.00 $202.73 $418.00 $418.00 $403.37 $89.87 $59,909.08
Expenditure Commitment $4,800.00 $4,800.00 $4,800.00 $3,880.00 $4,800.00 $4,800.00 $4,800.00 $4,800.00 $4,480.00 $4,840.00 $4,880.00 $4,360.00 $7,200.00 $6,960.00 $8,000.00 $8,000.00 $7,960.00 $7,960.00 $2,920.00 $7,680.00 $7,600.00 $2,240.00 $4,680.00 $8,000.00 $8,000.00 $3,880.00 $8,000.00 $8,000.00 $7,720.00 $2,000.00 $743,920.00 $803,829.08
Interest (%) 90 90 90 90 90 90 90 90 90 90 90 90 90 100 100 100 100 100 100 100 100 90 90 90 90 90 90 90 90 80
Note 5 5 5 5 5 5 5 5 5 5 5 5 5
5 5 5 5 5 5 5 5 5
Notes 1. Part interest held on trust for Jigalong Community Inc as per Memorandum of Understanding 2. Gold rights only 3. Subject to a farm-in arrangement with Conquest Mining Ltd 4. The Forrestania project comprises both North Ironcap and Stormbreaker 5. Partners free-carried by Hannans Reward Ltd 6. One graticular block is approximately 2.86 km2 or 286 ha
22 Hannans Reward Limited Annual Report 2007
Project JIGALONG QVR JIGALONG JIGALONG JIGALONG MAGGIE HAYS Sth JIGALONG NORTH IRONCAP QVR QVR SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY MAGGIE HAYS Sth MAGGIE HAYS Sth STORMBREAKER STORMBREAKER STORMBREAKER
Area 48 20 64 57 64 5 55 5 998 474 198 484 120 480 987 112 243 190 73 574 242 288 330 56 290 906 49 595 474
Area Unit Blocks Blocks Blocks Blocks Blocks Blocks Blocks Blocks Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares
Project QVR QVR QVR QVR QVR SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY
Tenement Number P15/4854 P15/4964 P15/4965 P15/4966 P15/4967 P37/7136 P37/7137 P37/7138 P37/7139 P37/7140 P37/7141 P37/7142 P37/7143 P37/7144 P37/7145 P37/7146 P37/7147 P37/7148 P37/7149 P37/7150 P37/7151 P37/7152 P37/7153 P37/7154 P37/7155 P37/7156 P37/7157 P37/7158
Area 120 120 115 121 118 174 200 200 200 122 121 121 122 122 112 120 120 120 120 120 120 120 200 120 120 165 165 120
Area Unit Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares
Project SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY SUNDAY MAGGIE HAYS Sth MAGGIE HAYS Sth MAGGIE HAYS Sth MAGGIE HAYS Sth MAGGIE HAYS Sth MAGGIE HAYS Sth MAGGIE HAYS Sth NORTH IRONCAP NORTH IRONCAP NORTH IRONCAP NORTH IRONCAP NORTH IRONCAP NORTHRONCAP NORTH IRONCAP NORTH IRONCAP NORTH IRONCAP NORTH IRONCAP NORTH IRONCAP
Tenement Number P37/7159 P37/7160 P37/7161 P37/7162 P37/7163 P37/7164 P37/7165 P37/7166 P37/7167 P63/1473 P63/1474 P63/1475 P63/1476 P63/1477 P63/1478 P63/1479 P77/3582 P77/3583 P77/3584 P77/3585 P77/3586 P77/3587 P77/3588 P77/3607 P77/3613 P77/3762 P77/3763
Area 97 120 120 120 121 122 190 109 180 117 200 200 200 200 97 193 180 196 200 172 200 200 197 119 172 49 16
Area Unit Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares Hectares
Security Description Ordinary fully paid shares Options expiring 31 March 2008, exercisable at 20 cents Options expiring 31 March 2010, exercisable at 20 cents Options expiring 2 May 2008, exercisable at 20 cents Options expiring 30 April 2010, exercisable at 20 cents Options expiring 31 December 2010, exercisable at 50 cents
Holders
1 2 1 2 3
* This includes 250,000 shares issued after 30 June 2007 in consideration for the opportunity to assess projects in Papua New Guinea. These shares are voluntarily escrowed for six months from the date of issue. Hannans Reward Ltd has the following substantial shareholders: Name William Hicks Craton Capital Number of shares 11,153,249 6,946,000 Percentage of issued capital 13.9% 8.7%
100%
100%
100%
100%
* Part interest held on trust for Jigalong Community Inc as per Memorandum of Understanding dated 20 October 2003
100%
Hannans Reward Limited Annual Report 2007 27
Recommendation 2.1
Reference/Comment The Board considers that the composition of the existing Board is appropriate given the scope and size of the Companys operations and the skills matrix of the existing Board members. The Board as a whole will identify candidates and assess their skills in deciding whether an individual has the potential to add value to the Company. The Board may also seek independent advice to assist with the identification process. The Board aims to maximize the funds available for exploration in order to implement the Companys strategy and therefore has not gone to the expense of meeting this recommendation. The Board is aware of its legal obligations with respect to trading in securities and is aware of the potential damage to the Companys reputation should a Board member trade in shares prior to release of all material information into the public domain. Whilst the Company does not have a CFO, the Managing Director oversees preparation of the financial statements utilising external professional assistance from a chartered accounting firm and signs the accounts in full knowledge of his legal responsibilities. The Board considers that due to the scope and size of the Companys operations it is not appropriate to establish an audit committee. The Chairman of the Board meets at least annually with both the Auditor and the Accountant to discuss the Companys financial position and adherence to applicable standards. Refer to comments on Recommendation 4.2. Refer to comments on Recommendation 4.2. Refer to comments on Recommendation 2.5.
2.4
2.5
Principle 3: Promote ethical and responsible decision making Principle 4: Safeguard integrity of financial reporting
3.2
4.1
4.2
4.3 4.4 Principle 5: Make timely and balanced disclosures Principle 9: Remunerate fairly and responsibly 5.2
9.2
The Board considers that due to the scope and size of the Companys operations it is not appropriate to establish a remuneration committee.
Refer to comments on Recommendation 2.5. The Board is aware of the complex environment in which it operates and uses its experience and judgment to ensure that it addresses the legitimate concerns and issues of stakeholder organizations and that such an approach is good business practice.
Environmental regulations
The Company is aware of its environmental obligations and acts to ensure its environmental commitments are met.
Dividends
No dividends were paid or declared since the start of the financial year. No recommendation for the payment of dividends has been made.
indemnifying the Company against any payment which it has made and was legally permitted to make arising out of any claim, by reason of any wrongful act, committed by any director or officer in their capacity as a director or officer of the Company or any related corporation, first made against the director or officer during the period of insurance. The insurance policy outlined above does not allocate the premium paid to each individual officer of the Company.
Subsequent events
On 29 August 2007 the Company issued 250,000 fully paid ordinary shares escrowed for a period of six months from the date of issue in consideration for the pre-emptive right to assess opportunities in Papua New Guinea. On 31 August 2007, the Company announced a further extension of time to 30 September 2007 within which Shandong Landbridge Group can complete the 2nd tranche of the placement announced to the ASX on 17 April 2007. The 2nd tranche of the placement comprises $3.5 million at 55 cents per share. Other than the matters noted above, there has been no other matters or circumstance, other than that referred to in the financial statement or notes thereto, that has arisen since the end of the financial year, that has 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.
Non-audit services
There were no non-audit services performed during the year, by the auditor (or by another person or firm on the auditors behalf).
Future developments
Hannans Reward will continue to explore its projects in the search for economic mineral deposits. The Company will simultaneously seek joint venture opportunities for those projects in an effort to balance the risks and rewards associated with exploration thereby maximizing returns to shareholders. The Company will look to expand its activities beyond minerals exploration within Western Australia.
4. Directors declaration
The Directors declare that: (a) in the Directors 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; (b) in the Directors opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Company and consolidated entity; and (c) the Directors have been given the declarations required by s.295A of the Corporations Act for the financial period ending 30 June 2007. Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001. On behalf of the Directors
Balance Sheet
For financial year ended 30 June 2007
Consolidated Note Current assets Cash and cash equivalents Trade and other receivables Other financial assets Total current assets Non-current assets Trade and other receivables Property, plant and equipment Other financial assets Total non-current assets Total assets Current liabilities Trade and other payables Provisions Total current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity 17 18 19 12,234,874 321,626 (8,059,429) 4,497,071 7,821,433 300,192 (5,461,135) 2,660,490 12,234,874 321,626 (8,024,050) 4,532,450 7,821,433 300,192 (5,462,930) 2,658,695 15 16 158,046 15,948 173,994 173,994 4,497,071 112,404 5,000 117,404 117,404 2,660,490 112,857 15,948 128,805 128,805 4,532,450 112,404 5,000 117,404 117,404 2,658,695 12 13 14 49,339 49,862 99,201 4,671,065 46,634 40,493 87,127 2,777,894 49,339 49,862 50,055 149,256 4,661,255 46,634 40,493 53 87,180 2,776,099 28(a) 10 11 4,502,168 69,696 4,571,864 2,627,772 59,120 3,875 2,690,767 4,450,884 61,115 4,511,999 2,627,719 57,325 3,875 2,688,919 2007 $ 2006 $ Company 2007 $ 2006 $
At beginning of year Loss for the year Issue of shares Issue of options Shares issue expenses At end of year
Attributable to equity holders For the year ended 30 June 2006 At beginning of year Loss for the year Issue of shares Issue of options Shares issue expenses At end of year Ordinary Shares $ 4,592,027 3,488,320 (258,914) 7,821,433 Option Reserve $ 25,000 275,192 300,192 Accumulated Losses $ (3,585,484) (1,875,651) (5,461,135) Total Equity $ 1,031,543 (1,875,651) 3,488,320 275,192 (258,914) 2,660,490
At beginning of year Loss for the year Issue of shares Issue of options Shares issue expenses At end of year
Attributable to equity holders For the year ended 30 June 2006 At beginning of year Loss for the year Issue of shares Issue of options Shares issue expenses At end of year Ordinary Shares $ 4,592,027 3,488,320 (258,914) 7,821,433 Option Reserve $ 25,000 275,192 300,192 Accumulated Losses $ (3,585,484) (1,877,446) (5,462,930) Total Equity $ 1,031,543 (1,877,446) 3,488,320 275,192 (258,914) 2,658,695
Notes to the financial statements for the year ended 30 June 2007
1. General Information
Hannans Reward Limited (the Company) is a listed public Company, incorporated in Australia. The Companys registered office and its principal place of business are as follows: Registered office c/o Ord Group Pty Ltd Level 2, 47 Colin Street West Perth WA 6005 Principal place of business Level 2 11 Ventnor Avenue West Perth, WA 6005
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material financial impact on the financial statements of the Company or the Group. These Standards and Interpretations will be first applied in the financial report of the Group that relates to the annual reporting period beginning after the effective date of each pronouncement, which will be the Companys annual reporting period beginning on 1st July 2007.
(d) Financial instruments issued by the Company Debt and equity instruments Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. Transaction costs on the issue of equity instruments Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.
(e) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or ii. for receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. (f) Impairment of assets At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase. (g) Income tax Current tax Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Deferred tax Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the entity is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
Hannans Reward Limited Annual Report 2007 41
(h) Intangible assets Exploration and Evaluation Expenditure Exploration, evaluation and development expenditure incurred may either be expensed immediately to the profit and loss or be accumulated in respect of each identifiable area of interest. These costs are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect of which: (i) such costs are expected to be recouped through successful development and exploitation or from sale of the area; or (ii) exploration and evaluation activities in the area have not, at balance date, reached a stage which permit a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active operations in, or relating to, the area are continuing. Accumulated costs in respect of areas of interest which are abandoned are written off in full against profit in the year in which the decision to abandon the area is made. 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. Notwithstanding the fact that a decision not to abandon an area of interest has been made, based on the above, the exploration and evaluation expenditure in relation to an area may still be written off if considered appropriate to do so. (i) Joint ventures Jointly controlled assets and operations Interests in jointly controlled assets and operations are reported in the financial statements by including the entitys share of assets employed in the joint ventures, the share of liabilities incurred in relation to the joint ventures and the share of any expenses incurred in relation to the joint ventures in their respective classification categories. Jointly controlled entities Interests in jointly controlled entities are accounted for under the equity method in the consolidated financial statements and the cost method in the Company financial statements. (j) Operating cycle The operating cycle of the entity coincides with the annual reporting cycle.
(k) Payables Trade payables and other accounts payable are recognised when the entity becomes obliged to make future payments resulting from the purchase of goods and services.
(l) Presentation currency The entity operates entirely within Australia and the presentation currency is Australian dollars. (m) Principles of consolidation The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the consolidated entity, being the Company (the parent entity) and its subsidiaries as defined in Accounting Standard AASB 127 Consolidated and Separate Financial Statements. A list of subsidiaries appears in note 24 to the financial statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements. On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. If, after reassessment, the fair values of the identifiable net assets acquired exceeds the cost of acquisition, the deficiency is credited to profit and loss in the period of acquisition. The interest of minority shareholders is stated at the minoritys proportion of the fair values of the assets and liabilities recognised. The consolidated financial statements include the information and results of each subsidiary from the date on which the Company obtains control and until such time as the Company ceases to control such entity. In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the consolidated entity are eliminated in full. (n) Plant and equipment Plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. Depreciation is provided on plant and equipment. Depreciation is calculated on a straight line or diminishing value basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method is reviewed at the end of each annual reporting period. The depreciation rates used for each class of depreciable assets are: Class of fixed asset Office furniture Office equipment Motor vehicle 18.75 Depreciation rate (%) 11.25 20.00 7.50 66.67
(o) Provisions Provisions are recognised when the consolidated entity has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably. (p) Revenue recognition Dividend and interest revenue Dividend revenue is recognised on a receivable basis. Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.
6. Income taxes
(a) Income tax recognised in profit or loss
Tax expense comprises: Current tax expense Deferred tax expense relating to the origination and reversal of temporary differences Total tax expense The prima facie income tax expense on pre-tax accounting loss from operations reconciles to the income tax expense in the financial statements as follows: Loss from operations Income tax benefit calculated at 30% (2,598,294) (779,488) (1,875,651) (562,695) (2,561,120) (768,336) (1,877,446) (563,234)
Effect of expenses that are not deductible in determining taxable profit Effect of unused tax losses and tax offsets not recognised as deferred tax assets Income tax attributable to operating loss
16,788 762,700
16,404 546,291
17,160 751,176
16,404 546,830
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.
Consolidated 2007 $ Unrecognised deferred tax balances The following deferred tax assets and (liabilities) have not been brought to account : Tax losses revenue Tax losses capital Net temporary differences 2,345,229 2,386 120,751 2,468,366 1,196,976 1,871 387,992 1,586,839 2,279,703 2,386 189,234 2,471,323 1,191,592 1,871 387,992 1,581,455 2006 $ Company 2007 $ 2006 $
Tax consolidation Relevance of tax consolidation to the consolidated entity Legislation to allow groups, comprising a parent entity and its Australian resident wholly owned entities, to elect to consolidate and be treated as a single entity for income tax purposes was substantively enacted on 21 October 2002. The Company has elected not to proceed with tax consolidation at this stage.
There were no executives of Hannans Reward Ltd during the year. (a) Key management personnel remuneration The Board policy for determining emoluments is based on the principle of remunerating Directors and senior executives on their ability to add value to the Company (taking into account the Companys strategic plan and operations) whilst also considering market emolument packages for similar positions within the industry and in consultation with external consultants. The Board appreciates the interrelationship between this policy and Company performance. It acknowledges that it is in the best interests of shareholders to provide challenging but achievable incentives to reward senior executives for reaching the Companys stated goals. The Board will discuss these issues internally and with candidates prior to engaging additional Directors or senior executives in the future. (b) Directors remuneration
Short-term Salary & Fees $ 27,900 27,900 137,615 137,615 33,600 364,630 Bonus $ Non-Monetary $ Post-Employment Superannuation $ 2,511 27,900 12,385 12,385 3,024 58,205 Prescribed Benefits $ Other $ Equity Options $
Other Benefits
(Insurance)
2007 Richard Scallan Ernest Dechow William Hicks Terrence Grammer Damian Hicks Frank Cannavo Total
During the financial year, Damian Hicks and Terrence Grammer were the Companys Executive Directors. The Board approved two year (expiring 31 December 2007) remuneration packages for both Damian Hicks and Terrence Grammer generally comprising $150,000 per annum (inclusive of superannuation entitlements) and reimbursement of work related expenses. These contracts were due to expire on 31 December 2007. Mr Grammer retired as an Executive Director on 30 June 2007. He is currently a Non-Executive Director. The Board renegotiated an employment agreement for Damian Hicks as Managing Director for three years commencing on 1 July 2007 with the remuneration package generally comprising $200,000 per annum (inclusive of superannuation entitlements) and reimbursement of work related expenses. Shareholders will vote at the General Meeting scheduled for 1 November 2007 whether to approve the issue of options to Damian Hicks. Mr Cannavo was appointed as an Executive Director for three years commencing on 1 July 2007 with the remuneration package generally comprising $100,000 per annum (inclusive of superannuation entitlements) and reimbursement of work related expenses. Shareholders will vote at the General Meeting scheduled for 1 November 2007 whether to approve the issue of options to Frank Cannavo.
2006 Richard Scallan Ernest Dechow William Hicks Damian Hicks Terrence Grammer Total
No share based payments were made to key management personnel during the year.
8. Share-based payments
The Company has an ownership-based compensation arrangement for employees of the Company. Each option issued under the arrangement converts into one ordinary share of Hannans Reward Limited on exercise. No amounts are paid or payable by the recipient on receipt of the option. Options neither carry rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. The number of options granted is at the sole discretion of the Directors. Incentive options issued to Directors (executive and non-executive) are subject to approval by shareholders and attach vesting conditions as appropriate. The following share-based payment arrangements were in existence during the current and comparative reporting periods:
Options series
31 March 2008 31 March 2010 30 April 2010 31 December 2010
Number
1,000,000 3,000,000 250,000 250,000
Grant date
16 June 2005 31 March 2006 11 May 2006 5 February 2007
Expiry date
31 March 2008 31 March 2010 30 April 2010 31 December 2010
Exercise price $
0.20 0.20 0.20 0.50
The fair value of the share options granted during the financial year is $21,434 (2006: 240,330). Options were priced using a Black and Scholes model. The expected life used in the model has not been adjusted. Expected volatility is based on the movement of the underlying share price over the expected term of the option. No allowance has been made for the effects of early exercise.
The following reconciles the outstanding share options granted at the beginning and end of the financial year:
Number of options Balance at beginning of the financial year Granted during the financial year Balance at end of the financial year (i) Exercisable at end of the financial year 4,250,000 250,000 4,500,000 4,500,000 2007 Exercise price $ 0.20 0.50 0.22 0.22 Number of options 1,000,000 3,250,000 4,250,000 4,250,000 2006 Exercise price $ 0.20 0.20 0.20 0.20
(i) Balance at end of the financial year The share options outstanding at the end of the financial year had an exercise price of $0.22 and a weighted average remaining contractual life of 2.36 years.
Consolidated 2007 $ 2006 $
9. Remuneration of auditors
Audit or review of the financial report 20,545 20,545 The auditor of Hannans Reward Ltd is Stantons International. 18,795 18,795 20,545 20,545 18,795 18,795
(i)
The average credit period on purchases of goods and services is 30 days. No interest is charged on the trade payables for the first 30 to 60 days from the date of the invoice. Thereafter, interest is charged at various penalty rates. The consolidated entity has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.
Fully paid ordinary shares carry one vote per share and carry the right to dividends. (i) The fair value was determined by reference to the trading price of the shares at the time of negotiating the acquisition.
18. Reserves
Option reserve 321,626 321,626 Option reserve Balance at beginning of financial year Directors remuneration - 3 April 2006 (2005: 16 June 2005) Payment for services rendered May 2006 Pursuant to an employee incentive scheme May 2006 Pursuant to an employee incentive scheme February 2007 Balance at end of financial year 300,192 21,434 321,626 25,000 220,080 34,862 20,250 300,192 300,192 21,434 321,626 25,000 220,080 34,862 20,250 300,192 300,192 300,192 321,626 321,626 300,192 300,19
Issuing entity
Hannans Reward Ltd Hannans Reward Ltd Hannans Reward Ltd Hannans Reward Ltd Hannans Reward Ltd
(1)
Class of shares
Ordinary Ordinary Ordinary Ordinary Ordinary
Share options are all unlisted, carry no rights to dividends and no voting rights. No options expired during the year. (1) On 5 February 2007, the Board approved the issue of 500,000 options exercisable at 50 cents each on or before 31 December 2010 of which 250,000 were granted under the employee incentive scheme. The remainder 250,000 options were granted after 30 June 2007. Accordingly, the valuation of these options under AASB2: Share Based Payment has been deferred until such time as these options were granted.
Consolidated 2007 $ 2006 $ Company 2007 $ 2006 $
The consolidated entity incurred a loss for the year and the diluted earnings per share is the same as the basic earnings per share.
2007 No.
Weighted average number of ordinary shares for the purposes of basic earnings per share (a)Earnings used in the calculation of total basic earnings per share and basic earnings per share from continuing operations reconciles to net loss in the income statement as follows: Consolidated 2007 $ Net loss Other Earnings used in the calculation of basic EPS (2,598,294) (2,598,294) 71,679,206
2006 No.
52,096,140
2006 %
50%
Principal activity
Exploration
%
80%
Output interest
During the year, the Company acquired an additional 30% interest in Forrestania. The Company agreed to free-carry the joint venture party at 20% to a decision to mine based on completion of a bankable feasibility study. The consolidated entitys interest in assets employed in the above jointly controlled operation is included in the Company and consolidated financial statements but do not form part of the total assets as the expenditure exploration, evaluation and development is expensed. Contingent liabilities and capital commitments The contingent liabilities and capital commitments arising from the consolidated entitys interests in joint ventures are disclosed in notes 21 and 22 respectively.
24. Subsidiaries
Ownership Interest 2007 Name of entity
Parent entity:
2006 %
Country of Incorporation
Australia
% Output interest
Hannans Reward Ltd (i) Subsidiaries: HR Subsidiary Pty Ltd Errawarra Pty Ltd (ii) HR Equities Pty Ltd (iii) HR Forrestania Pty Ltd (iv)
100% 100%
(i) Hannans Reward Ltd is the head entity within the tax consolidated group. All the companies are members of the tax consolidation group. (ii) The 100% interest in Errawarra Pty Ltd is held via HR Subsidiary Pty Ltd. (iii) On 22 May 2007, HR Equities Pty Ltd was incorporated and the parent entity acquired 100% of the issued share capital for $1.00. (iv) On 6 June 2007, HR Forrestania Pty Ltd was incorporated and the HR Subsidiary Pty Ltd acquired 100% of the issued share capital for $1.00.
No.
1,200,000 1,200,000
2006 Richard Scallan Ernest Dechow William Hicks Terrence Grammer Damian Hicks 2,600,001 6,126,249 1,906,001 10,632,251 500,000 5,027,000 3,675,000 372,400 9,574,400 3,100,001 11,153,249 3,675,000 2,278,401 20,206,651
Exercised No.
No.
2007 $
2006 $
(e) Transactions with other related parties Other related parties include: the parent entity; entities with joint control or significant influence over the consolidated entity; associates; joint ventures in which the entity is a venturer; subsidiaries; former key management personnel; and other related parties.
Amounts receivable from and payable to these related parties are disclosed in note 12 to the financial statements. All loans advanced to and payable to related parties are unsecured and subordinate to other liabilities. No interest is charged on the outstanding intercompany loan balance during the financial year, Hannans Reward Ltd received interest of nil (2006: Nil) from loans to subsidiaries, and paid interest of nil (2006: Nil) to subsidiaries. (f) Parent entities The ultimate parent entity in the consolidated entity is Hannans Reward Ltd.
(c) Reconciliation of loss for the year to net cash flows from operating activities
Loss for the year (Gain)/loss on sale or disposal of non-current assets (Gain)/loss on revaluation of fair value through profit or loss financial assets Depreciation of non-current assets Equity settled share-based payment Exploration expenditure written off Provision for loan to subsidiary Changes in net assets and liabilities, net of effects from acquisition and disposal of businesses: (Increase)/decrease in assets: Trade and other receivables Increase/(decrease) in liabilities: Trade and other payables and provisions Net cash from operating activities 58 Hannans Reward Limited Annual Report 2007 36,847 (2,476,593) 25,867 (1,569,101) 11,400 (2,268,294) 25,867 (1,549,363) 6,461 (60,969) (6,495) (59,177) (2,598,294) 438 14,521 21,434 42,000 (1,875,651) 1,250 10,210 275,192 55,000 (2,561,120) 438 14,521 21,434 42,000 209,528 (1,877,446) 1,250 10,210 275,192 55,000 19,741
Maturity dates Weighted average effective interest rate % Variable interest rate $ Less than 1 year $ Non interest bearingt $
2007 Financial assets: Cash and cash equivalents Trade and other receivables
1-5 years $
5+ years $
TOTAL $
6.0% 6.0%
3,309,525 3,309,525
Financial liabilities: TTrade and other payables 158,046 158,046 158,046 158,046
2006 Financial assets: Cash and cash equivalents Trade and other receivables Shares and options
1-5 years $
TOTAL $
4.5% 6.0%
85,619 85,619
Financial liabilities: Trade and other payables 112,404 112,404 112,404 112,404
e) Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The consolidated entity exposure and the credit ratings of its counterparties are continuously monitored. The consolidated entity measures credit risk on a fair value basis. The consolidated entity does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. f) Fair value of financial instruments Except as detailed in the following table, the Directors consider that the carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair values (2006: net fair value). The fair values and net fair values of financial assets and financial liabilities are determined as follows : the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices. (g) Liquidity risk management The consolidated entity manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.