| Mon 1 Oct 2007, 8:39 | | GVM-GVM Metals Limited-Abridged annual financial r |
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GVM
GVGVM
GVM-GVM Metals Limited-Abridged annual financial report: year ended 30 June 2007
GVM METALS LIMITED
(Incorporated and registered in Australia)
ABN 98 008 905 388
Share code on the JSE Limited: GVM & ISIN: AU000000GVM1
ABRIDGED ANNUAL FINANCIAL REPORT
for the Year Ended 30 June 2007
GVM METALS LIMITED
Contents
The Directors submit their report together with the financial statement of GVM
Metals Limited ("GVM" or the "Company") and the consolidated accounts of the
Company and its controlled entities (the "Consolidated Entity") for the year
ended 30 June 2007. The complete document and the Auditors` Report thereon can
be found on the Company`s website www.gvm.com.au.
Principal Activities
Whilst the principal trading activity of the Consolidated Entity is the
manufacture and distribution of Nickel and Magnesium alloys, the Company`s
primary focus is to expand its coal interests in South Africa. During the June
2007 financial year the Company completed the acquisition of significant coal
interests, namely:
- Acquisition of a 74% interest in the Limpopo (Thuli) coal project in November
2006.
- Acquisition of 50% of the Baobab coal project, some 50km`s south of the
Limpopo coal project.
- Completion of the merger of the GVM and Motjoli Resources (Pty) Ltd coal
projects. Motjoli are GVM`s Black Economic Empowerment partner in South
Africa. The merger increased the Company`s interest in the Holfontein coal
project from 49% to 100% and in the Baobab coal project from 50% to 100%.
Results
The loss of the Consolidated Entity for the 2007 financial year after income
tax and minority interests was $4,026,048 (2006: loss of $587,011).
Dividends Paid or Recommended
No amounts were paid or declared by way of dividend by the Company. The
Directors do not recommend payment of a dividend in respect of the financial
year ended 30 June 2007.
Review of Operations
During the year the operations of the Consolidated Entity included:
NiMag Group - manufacturing and distribution of nickel and magnesium alloys;
Master Alloy Traders Limited - trading of minerals from South Africa;
Holfontein Coal Project - coal project based in South Africa;
Baobab Coal Project - coal project based in South Africa; and
Thuli Coal Project - coal project based in South Africa.
GVM METALS LIMITED
Directors` Report
Nimag Group ("NiMag")
GVM Metals Limited acquired a controlling interest in the Nimag Group of
Companies (Nimag Group) in December 2003, and acquired the remaining 26% in
December 2006.
Nimag Group is engaged principally in the manufacture and distribution of
nickel magnesium alloys, ferro silicon magnesium alloys and metal fibres and
began producing alloys in 1962 and currently manufactures specialised master
alloys of nickel and magnesium for the specialised foundry industry including
aerospace, aeronautical, motor, steel mill roll and associated industries.
Ductile iron (also called spheroidal graphite iron or nodular cast iron) was
discovered in the 1940s. The introduction of magnesium into the melt results in
nodular rather than flaky graphite in the resultant cast iron, giving the cast
iron properties approaching those of steel, while maintaining the advantages of
the casting process. The magnesium is usually added as a nickel alloy, making
it easier to add and contribute to product quality. NiMag supplies the ductile
iron market as a specialist supplier with a world market share of about 35% in
its core product line. 95% of sales are exported through 35 distributors world
wide. Demand for NiMag`s alloys is proportional with world demand for ductile
iron, principally for automotive parts and industrial machinery. Demand for
NiMag products has grown gradually to meet current capacity of 287 tonnes per
month (all products). Potential for expansion of the core nickel-magnesium
alloy product is presently limited by the size of end markets. NiMag is
increasing the penetration of a variety of other products developed for
alternative markets. NiMag produces approximately 300 tonnes of cast and slit
fibres which are used in reinforced concrete by domestic mining and tunnelling
operations.
NiMag`s competitive advantages include low electricity and labour costs. The
main input cost is locally sourced nickel raw material, which is matched with
sales to minimi se nickel price exposure.
GVM acquired 74% of NiMag from a management group in January 2004. The
consideration was R37 Million (A$8 million) comprising ZAR7.5 million in cash
up front, R20 million borrowed against the business and R9.5 million in vendor
finance. On GVM`s listing on the JSE, the Company exercised its option to
acquire the balance of NiMag for 4,620,557 GVM shares.
Depreciation of the Rand and strengthening of Nickel prices widened NiMag`s
profit margins resulting in NiMag generating substantially higher operational
cash flows over the 2006/07 financial year. NiMag traded profitably,
contributing approximately A$4,6m in surplus funds and repaying the remaining
bank financed acquisition costs. At the end of June 2007, GVM`s acquisition
loans comprised $506,278 to the NiMag vendors.
Magberg Manufacturing
A specialised producer of ferro silicon magnesium alloys used to manufacture
Ductile Iron. Capacity is limited and the production is split equally between
local and export markets. This is a commodity product and almost all costs are
Rand denominated.
Metalloy Fibres (Pty) Ltd
The only specialised cast fibre reinforcing manufacturer in Africa. A weakening
of the Rand and the "go ahead" of the Gautrain rail project and the general
increase in construction expenditure promises to substantially improve this
business both in terms of volumes and margins.
Metal Alloy Traders Limited ("MATS")
MATS is incorporated in Jersey in the Channel Islands and it trades various
metals purchased from Nimag in South Africa.
SA Mineral Resources Corporation Limited ("Samroc")
Samroc is a Johannesburg Stock Exchange listed company which produces manganese
sulphate chemicals. During the latter half of 2005 GVM stated its intention to
dispose of its entire investment in Samroc.
As a result of its intended disposal, the Samroc investment has been
reclassified as a Non-current Investment Held for Sale.
Holfontein Coal Project
GVM acquired Motjoli Resources` 51% stake in the Holfontein coal project
through the issue of 14,868,283 GVM shares and paid ZAR 21 million (A$ 3.5
million) for the initial 49% acquisition.
Holfontein is situated in the traditional coal mining area south and west of
Witbank where coal mining has taken place for over a hundred years. It is on
the main road between Kinross and Trichard in Mpumalanga, South Africa, and a
main line railway siding is situated on the property at Leven which can be
upgraded for export purposes.
Currently the resources are in the inferred category and stand at 55 million
tonnes. It is planned to produce 400,000 tpa of soft coking coal from the 5
seam and 800,000 tpa of thermal coal from the 4 seam. The Holfontein
exploration program undertaken at the end of 2006 to confirm the structure,
tonnage and quality of the Holfontein coal resource was completed during the
2007. An additional 37 boreholes were completed constituting 5,557 metres
drilled and yielding 150 samples for analysis. The geological model based on
these results is currently being updated with Mine feasibility planning done
once the laboratory results have been received. There are now 67 boreholes in
the Holfontein resource area resulting in a drilling density of just less than
14 boreholes per hectare for the 5 seam resource and 12 boreholes per hectare
for the 4 seam resource. Once modelling is completed, this will bring the
Holfontein property into a measured resource category.
Geotechnical tests were conducted on the diamond drill cores to establish the
competence of the roof and floor conditions of both the 5 Seam and 4 Seam
resources. Initial perusal of the results has confirmed the low phosphorus
metallurgical qualities of the 5 Seam with no change in expected yields.
The 4 Seam resources still need to be modelled analytically but the indications
are that the coal is suitable for SASOL or Eskom feedstock. Composite samples
of the 5 Seam are to be reconstituted to test for certain metallurgical
properties. Similarly, 4 Seam samples are to be reconstituted to test for the
suitability of the coal for Eskom.
Baobab Coal Project
The acquisition of Petmin Ltd`s 50% interest in the Baobab Coal Project was
completed during 2007 through the issue of 8,333,333 GVM shares to raise the
required purchase price of GBP2.5 million (A$ 6.2 million). During June, GVM
acquired the remaining 50% of the Joint Venture held by Motjoli Resources with
the issue of 20,000,000 GVM shares.
Consultants have been mandated to assess railway and related transport
infrastructure from GVM`s Baobab and Thuli coal projects to the Richards Bay
and Maputo coal terminals. Management envisage this project will be completed
later in 2007. Drilling on the Baobab coal project is expected to commence
early in 2008 financial year.
Thuli Coal Project (Limpopo)
GVM acquired its 74% interest in the project by the issue of 20,812,500 shares
in December 2006. Potential drilling contractors have performed site
inspections, and drilling on the Thuli Coal Project started in August. Data
collected in the terrain model completed earlier in the year will be used in
the identification of drilling targets.
Preliminary discussions with various infra-structure participants are underway
to ascertain the export capacity of the coal mined. Management have received
valuations from independent third parties mandated to assess the value of the
surface rights comprising the Thuli Coal Project. Preliminary consultations
with the current surface rights owners on GVM`s potential acquisition of these
rights have been undertaken. GVM will continue these discussions together with
the Thuli Coal Project drilling program during the first quarter of the 2008
financial year.
Mooiplaats Coal Project
70% on Completion of the Coal Acquisition
The major drilling programme continued at Mooiplaats during the fourth quarter
of the 2007 financial year and 23,867 metres (164 holes) were drilled. Seven
thousand of the total twenty-three thousand hectares have now been drilled on
`inferred` spacing densities and during the period infill drilling commenced on
`measured` and `indicated` spacings. The goal of the programme is to bring a
minimum of 60 million tonnes of the resource into measured and indicated
categories. The tonnage represents ten years consumption at the adjacent Camden
Power Station.
SRK Consultants are overseeing the drilling programme and a resource statement
will be released during the first quarter of the 07/08 financial year. The
results of the drilling program to date are in line with management
expectations.
Review of Financial Position
Liquidity and funding
The net assets of the consolidated entity increased from $7,661,354 in June
2006 to $150,878,555 in June 2007. This was primarily due to the acquisition of
the Thuli, Baobab and Holfontein coal projects. The Group also incurred
$3,294,600 in expenses related to share based payments, $1,666,792 in
diminution of investments, $629,033 in foreign currency losses, depreciation of
$175,532 and $313,870 in expenses related to GVM `s November 2006 listing on
the JSE. When the previous mentioned accounting entries are excluded, the loss
of $3,547,306 recorded for the year ended June 2007 is converted to an
`operational` profit of A$4,994,231. The `operational` profit is primarily due
to Nimag `s contributed profit to the Group of $4,823,494.
EBIT Reconstruction
2007 2006
$ $
Profit/ (loss) after tax for the year (3,547,306) (233,141)
Tax 2,216,264 566,732
Interest paid 800,799 669,044
Interest received (555,353) (84,578)
EBIT (1,085,596) 918,057
`Non-ordinary` items recognised
Options granted 3,294,600 551,200
Diminution in value of investments 1,666,792 4,325
Currency adjustment 629,033 -
Depreciation 175,532 242,768
JSE listing expenses 313,870 404,335
`Operating` profit/ (loss) 4,994,231 2,120,685
The Group raised over $70 million during the year through the placing of
shares. The funds raised will be used to fund acquisitions, and to satisfy
exploration working capital requirements in the development of the coal
projects. As at 30 June 2007, GVM had no long term debt apart from the Nimag
vendor loans of $506,261.
Impact of legislation and other external requirements
There were no changes in environmental or other legislative requirements during
the year that have significantly impacted the results or operations of the
Consolidated Entity.
Future Developments, Prospects and Business Strategies
Strategic direction
GVM is primarily focused on the acquisition, exploration and development of
thermal and metallurgical coal projects in South Africa. The Company currently
has four coal projects in various stages of exploration as well as Nimag, GVM`s
interim cash producing asset which manufactures Nickel Magnesium Alloys.
Nimag`s growth strategy will be via the acquisition of similar alloy or foundry
supply manufacturing enterprises.
The exploration and development of the four coal projects during the short and
medium term will qualify GVM as a significant coal producer, supplying millions
of tonnes of thermal and metallurgical coal annually to South African and
export customers.
GVM`s Mooiplaats coal project is 2km from the recently re-commissioned Camden
Power Station - near Ermelo in Mpumalanga and is expected to start producing
thermal and anthracitic coal in mid 2008.
Exploratory drilling on GVM`s other coal projects - Baobab and Thuli - located
in the Limpopo province of South Africa will commence late 2007. Consultants
have been briefed to undertake feasibility studies on the transport
infrastructure from these coal projects to the Matola (Maputo, Mozambique) and
Richards Bay export coal terminals.
Signed on this 29th day of September 2007 in accordance with a resolution of
the Directors.
Simon Farrell
Managing Director
GVM METALS LIMITED
Income Statements
For the Year Ended 30 June 2007
Consolidated Entity
2007 2006
Note $ $
REVENUE 2 62,595,362 32,340,604
Changes in inventories of finished
goods
and work in progress - (367,491)
Raw materials and consumables used (48,078,842) (23,529,689)
Consulting expenses (328,744) (400,187)
Employee expenses (6,410,948) (3,516,128)
Borrowing costs 3 (800,799) (669,044)
Depreciation expenses 3 (175,532) (242,768)
Office rental , outgoings and parking (425,164) (204,865)
Decrease/(increase) diminution in
value
of investments (1,666,792) (4,325)
Loss on investments disposed of (40,197)
Bad debt expense (306,066) (1,159)
Provision for non-recoverability of
loans/
debtors (664,067) -
Diminution in value of control entities (6,488) -
Other expenses from ordinary activities (5,062,962) (2,932,530)
Share of net profit/(losses) of
associate
accounted for using the equity method 8 - (98,630)
Profit/(Loss) before income tax
(expense)/benefit 3 (1,331,042) 333,591
Income tax (expense) / benefit 4 (2,216,264) (566,732)
Profit/(Loss) after tax (3,547,306) (233,141)
Outside equity interest 20 (478,742) (353,870)
Net profit/(loss) attributable to
members of the parent entity (4,026,048) (587,011)
Basic earnings/(loss) per share
(in cents) 5 (4.72) (2.04)
Headline earnings/(loss) per share
(in cents) 5 (1.96) (1.54)
Parent Entity
2007 2006
$ $
REVENUE 1,105,766 380,250
Changes in inventories of finished goods
and work in progress - -
Raw materials and consumables used - -
Consulting expenses (328,744) (342,066)
Employee expenses (4,026,233) (970,187)
Borrowing costs - -
Depreciation expenses (12,923) (16,043)
Office rental , outgoings and parking (5,380) (60,385)
Decrease/(increase) diminution in value
of investments (1,666,792) (4,325)
Loss on investments disposed of - (40,197)
Bad debt expense - (1,159)
Provision for non-recoverability of loans/
debtors (375,000) -
Diminution in value of control entities (6,488) -
Other expenses from ordinary activities (1,162,894) (658,856)
Share of net profit/(losses) of associate
accounted for using the equity method - -
Profit/(Loss) before income tax
(expense)/benefit (6,478,688) (1,712,968)
Income tax (expense) / benefit - -
Profit/(Loss) after tax (6,478,688) (1,712,968)
Outside equity interest - -
Net profit/(loss) attributable to members
of the parent entity (6,478,688) (1,712,968)
Basic earnings/(loss) per share (in cents)
Headline earnings/(loss) per share
(in cents)
The accompanying notes form part of these financial statements
GVM METALS LIMITED
Balance Sheets
as at 30 June 2007
Consolidated Entity
2007 2006
Note $ $
CURRENT ASSETS
Cash assets 27(a) 61,530,490 985,333
Receivables 7 8,984,168 6,374,684
Inventory 9 5,519,744 3,245,656
TOTAL CURRENT ASSETS 76,034,402 10,605,673
NON CURRENT AS SETS
Receivables 7 - -
Assets held for sale 8 94,596 94,596
Intangibles 12 3,964,042 7,441,280
Other financial assets 10 12,928,598 699,992
Property, plant and equipment 11 1,648,834 1,803,312
Deferred tax assets 4 239,686 36,669
Mining assets 13 67,852,973 -
Exploration expenditure 13 1,123,850 -
TOTAL NON CURRENT ASSETS 87,852,579 10,075,849
TOTAL ASSETS 163,886,981 20,681,522
CURRENT LIABILITIES
Payables 14 9,319,361 5,940,126
Interest bearing liabilities 15 - 2,451,628
Provisions 16 95,355 125,790
Current tax liability 1,711,840 459,586
TOTAL CURRENT LIABILITIES 11,126,555 8,977,130
NON CURRENT LIABILITIES
Payables 14 1,375,608 1,340,777
Interest bearing liabilities 15 506,261 2,702,261
TOTAL NON CURRENT LIABILITIES 1,881,869 4,043,038
TOTAL LIABILITIES 13,008,424 13,020,168
NET ASSETS 150,878,557 7,661,354
EQUITY
Contributed equity 17 177,189,359 35,396,353
Reserves 18 5,310,652 426,521
Accumulated losses 19 (34,692,704) (30,666,656)
TOTAL PARENT EQUITY INTEREST 147,807,306 5,156,218
OUTSIDE EQUITY INTEREST 20 3,071,250 2,505,136
TOTAL EQUITY 150,878,557 7,661,354
Parent Entity
2007 2006
$ $
CURRENT ASSETS
Cash assets 52,909,170 78,191
Receivables 4,809,348 722,916
Inventory - -
TOTAL CURRENT ASSETS 57,718,518 801,107
NON CURRENT AS SETS
Receivables 12,097,685 4,522,652
Assets held for sale - -
Intangibles - -
Other financial assets 82,942,434 4,465,409
Property, plant and equipment 29,134 27,845
Deferred tax assets - -
Mining assets - -
Exploration expenditure - -
TOTAL NON CURRENT ASSETS 95,069,253 9,015,906
TOTAL ASSETS 152,787,771 9,817,013
CURRENT LIABILITIES
Payables 218,856 328,915
Interest bearing liabilities - -
Provisions 232 212
Current tax liability (7,776) -
TOTAL CURRENT LIABILITIES 211,312 329,127
NON CURRENT LIABILITIES
Payables 7,046,990 6,601,208
Interest bearing liabilities - -
TOTAL NON CURRENT LIABILITIES 7,046,990 6,601,208
TOTAL LIABILITIES 7,258,302 6,930,335
NET ASSETS 145,529,468 2,886,678
EQUITY
Contributed equity 177,189,359 35,396,353
Reserves 8,016,118 687,645
Accumulated losses (39,676,009) (33,197,320)
TOTAL PARENT EQUITY INTEREST 145,529,468 2,886,678
OUTSIDE EQUITY INTEREST - -
TOTAL EQUITY 145,529,468 2,886,678
The accompanying notes form part of these financial statements
GVM METALS LIMITED
Cash Flow Statements
For the year ended 30 June 2007
Consolidated Entity
2007 2006
Note $ $
Cash flows from operating activities
Interest received 555,353 84,578
Cash receipts in the course of 59,382,997 31,48 2,520
operations
Interest paid (800,799) (669,044)
Payments to suppliers and employees (56,475,498) (30,499,820)
Net cash generated by /(used in)
operating activities 27(b) 2,662,053 398,234
Cash flows from investing activities
Payments for property, plant and
equipment (198,163) (148,489)
Proceeds from the sale of property,
plant and equipment 3,350 -
Mineral assets acquired (10,516,450) -
Proceeds from sale of equity - 226,511
investments
Payments for equity investments - (47,576)
Loans (made to)/from other entities - -
Net cash received/ (paid) on
acquisition of subsidiary 26(b) (75,000) -
Exploration costs (477,667) -
Net cash generated by / (used in)
investing activities (11,263,930) 30,446
Cash flows from financing activities
Loans from controlled entities - -
Proceeds from issue of shares 78,334,038 543,750
Transaction costs from issue of
shares (2,778,509) (57,707)
Loans to controlled entities - -
Loans repaid to other entities (4,647,628) (1,892,452)
Loans from other entities 34,831 -
Net cash generated by financing
activities 70,942,732 (1,406,409)
Net increase/(decrease) in cash held 62,340,855 (977,729)
Effect of exchange rates of cash
holdings in foreign currencies (820,129) -
Cash at beginning of financial year 49,764 1,027,493
Cash at end of financial year 27(a) 61,530,49 49,764
Parent Entity
2007 2006
$ $
Cash flows from operating activities
Interest received 474,576 30,280
Cash receipts in the course of 241,337 312,266
operations
Interest paid - -
Payments to suppliers and employees (1,717,433) (1,327,010)
Net cash generated by /(used in)
operating activities (1,001,520) (984,464)
Cash flows from investing activities
Payments for property, plant and
equipment (14,212) -
Proceeds from the sale of property,
plant and equipment - -
Mineral assets acquired - -
Proceeds from sale of equity - 226,511
investments
Payments for equity investments (10,516,450) (47,576)
Loans (made to)/from other entities - 34,084
Net cash received/ (paid) on
acquisition of subsidiary - -
Exploration costs - -
Net cash generated by / (used in)
investing activities (10,530,662) 213,019
Cash flows from financing activities
Loans from controlled entities - 175,391
Proceeds from issue of shares 78,334,038 543,750
Transaction costs from issue of shares (2,778,509) (57,707)
Loans to controlled entities (10,563,335) -
Loans repaid to other entities - -
Loans from other entities - -
Net cash generated by financing
activities 64,992,194 661,434
Net increase/(decrease) in cash held 53,460,012 (110,011)
Effect of exchange rates of cash
holdings in foreign currencies (629,033) -
Cash at beginning of financial year 78,191 188,202
Cash at end of financial year 52,909,170 78,191
The accompanying notes form part of these financial statements
GVM METALS LIMITED
Statements of Changes in Equity
as at 30 June 2007
Foreign
Ordinary Capital currency Share
share profits translation options
capital reserve reserve reserve
$ $ $ $
Consolidated entity
Balance at 1 July 2006 35,396,353 136,445 (261,124) 551,200
Shares issued during
the year 144,571,514 - - -
Capital raising costs
incurred (2,778,509) - - -
Adjustments from
translation of foreign
controlled entities - - (2,444,342) -
Share based
payments - - - 7,328,473
Loss attributable to
members of parent
entity - - - -
Profit attributable to
minority shareholders - - - -
Minority interest in
reserves - - - -
100% acquisition of a
controlled entity - - - -
Minority interest in a
controlled entity - - - -
Balance at 30 June
2007 177,189,359 136,445 (2,705,466) 7,879,673
Parent entity
Balance at 1 July 2006 35,396,353 136,445 - 551,200
Shares issued during
the year 144,571,514 - - -
Transaction costs (2,778,509) - - -
Share based
payments - - - 7,328,473
Loss attributable to
members of parent
entity - - - -
Balance at 30 June
2007 177,189,359 136,445 - 7,879,673
Outside
Accumulated Equity
losses Total interests
$ $ $
Consolidated entity
Balance at 1 July 2006 (30,666,656) 5,156,218 2,505,136
Shares issued during
the year - 144,571,514 -
Capital raising costs
incurred - (2,778,509) -
Adjustments from
translation of foreign
controlled entities - (2,444,342) -
Share based
payments - 7,328,473 -
Loss attributable to
members of parent
entity (4,026,048) (4,026,048) -
Profit attributable to
minority shareholders - - 478,742
Minority interest in
reserves - - (31,133)
100% acquisition of a
controlled entity - - (2,952,745)
Minority interest in a
controlled entity - - 3,071,251
Balance at 30 June
2007 (34,692,704) 147,807,306 3,071,251
Parent entity
Balance at 1 July 2006 (33,197,320) 2,886,678 -
Shares issued during
the year - 144,571,514 -
Transaction costs - (2,778,509) -
Share based
payments - 7,328,473 -
Loss attributable to
members of parent
entity (6,478,688) (6,478,688) -
Balance at 30 June
2007 (39,676,008) 145,529,468 -
Foreign
Capital currency
Ordinary profits translation Share
share capital reserve reserve options
$ $ $ $
34,500,935 136,445 1,108,117 -
Balance at 1 July
2005
Shares issued
during the year 953,125 - - -
Capital raising costs
incurred (57,707) - - -
Adjustments from
translation of foreign
controlled entities - - (1,369,241)
Share based
payments - - - 551,200
Loss attributable to
members of parent entity - - - -
Loss attributable to
minority
shareholders - - - -
Minority interest
in reserves - - - -
Preference shares
acquired by
parent entity - - - -
Balance at 30
June 2006 35,396,353 136,445 (261,124) 551,200
Parent entity
Balance at 1 July
2005 34,500,935 136,445 - -
Shares issued
during the year 953,125 - -
Transaction costs (57,707) - - -
Share based
payments - - - 551,200
Loss attributable to
members of parent
entity - - - -
Balance at 30
June 2006 35,396,353 136,445 - 551,200
Outside
Accumulat Equity
ed losses Total interests
$ $ $
(30,079,645) 5,665,852 3,306,117
Balance at 1 July 2005
Shares issued during the year - 953,125 -
Capital raising costs incurred - (57,707) -
Adjustments from
translation of foreign
controlled entities - (1,369,241) -
Share based payments - 551,200 -
Loss attributable to
members of parent entity (587,011) (587,011) -
Loss attributable to
minority shareholders - - (353,870)
Minority interest in reserves - - 221,480
Preference shares
acquired by parent entity - - (668,591)
Balance at 30 June 2006 (30,666,656) 5,156,218 2,505,136
Parent entity
Balance at 1 July 2005 (31,484,352) 3,153,028 -
Shares issued during the year - 953,125 -
Transaction costs - (57,707) -
Share based payments - 551,200 -
Loss attributable to
members of parent entity (1,712,968) (1,712,968) -
Balance at 30 June 2006 (33,197,320) 2,886,678 -
GVM METALS LIMITED
Notes to and forming part of the Financial Statements
for the year ended 30 June 2007
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The financial report is a general purpose financial report that has been
prepared in accordance with Australian Accounting Standards, including
Australian Accounting Interpretations, other authoritative pronouncements of
the Australian Accounting Standards Board and the Corporations Act 2001.
The financial report covers the economic entity of GVM Metals Limited and
controlled entities, and GVM Metals Limited as an individual parent entity. GVM
Metals Limited is a listed public company, incorporated and domiciled in
Australia.
The financial report of GVM Metals Limited and controlled entities, and GVM
Metals Limited as an individual parent entity comply with all Australian
equivalents to International Financial Reporting Standards (AIFRS) in their
entirety.
The following is a summary of the material accounting policies adopted by the
economic entity in the preparation of the financial report. The accounting
policies have been consistently applied, unless otherwise stated.
(a) Basis of Preparation
Reporting Basis and Conventions
The financial report has been prepared on an accruals basis and is based on
historical costs modified by the revaluation of selected non-current assets,
financial assets and financial liabilities for which the fair value basis of
accounting has been applied.
(b) Principles of Consolidation
A controlled entity is any entity GVM Metals Limited has the power to control
the financial and operating policies of so as to obtain benefits from its
activities.
A list of controlled entities is contained in note 26 the financial statements.
All controlled entities have a June financial year-end.
All inter-company balances and transactions between entities in the economic
entity, including any unrealised profits or losses, have been eliminated on
consolidation. Accounting policies of subsidiaries have been changed where
necessary to ensure consistencies with those policies applied by the parent
entity.
Where controlled entities have entered or left the economic entity during the
year, their operating results have been included/excluded from the date control
was obtained or until the date control ceased.
Minority equity interests in the equity and results of the entities that are
controlled are shown as a separate item in the consolidated financial report.
(c) Revenue Recognition
Revenues are recognised at fair value of the consideration received net of the
amount of goods and services tax ("GST"). Exchanges of goods or services of the
same nature and value without any cash consideration are not recognised as
revenues.
Sale of goods
Revenue from the sale of nickel magnesium alloys (NiMag), ferro-nickel
magnesium alloys (FeNiMag), ferro-silicon magnesium alloys (FeSiMag) and other
master alloys are recognised when control of the goods passes to the customer.
For local sales this is usually when the customer receives the goods. For
export sales it is determined based on individual sales agreements,
however, control usually passes when the goods are received by the shipping
agent and the bill of lading is sighted by the customer.
Interest Revenue
Interest revenue is recognise as it accrues, taking into account the effective
yield of the financial asset.
Sale of non-current assets
The gain or loss on disposal is calculated as the difference between the
carrying amount of the asset at the time of disposal and the net proceeds on
disposal.
(d) Mining Tenements and Exploration and Development Expenditure
Mining tenements are carried at cost, less accumulated impairment losses.
Exploration, evaluation and development expenditure incurred is accumulated in
respect of each identifiable area of interest. These costs are only carried
forward to the extent that they are expected to be recouped through the
successful development of the area or where activities in the area have not yet
reached a stage that permits reasonable assessment of the existence of
economically recoverable reserves. Accumulated costs in relation to an
abandoned area are written off in full against profit in the year in which the
decision to abandon the area is made.
When production commences, the accumulated costs for the relevant area of
interest are amortised over the life of the area according to the rate of
depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the
appropriateness of continuing to carry forward costs in relation to that area
of interest.
Costs of site restoration are provided over the life of the facility from when
exploration commences and are included in the costs of that stage. Site
restoration costs include the dismantling and removal of mining plant,
equipment and building structures, waste removal, and rehabilitation of the
site in accordance with clauses of the mining permits. Such costs have been
determined using estimates of future costs, current legal requirements and
technology on an undiscounted basis.
Any changes in the estimates for the costs are accounted on a prospective
basis.
(e) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of GST, except
where the amount of GST incurred is not recoverable from the Australian Tax
Office. In these circumstances the GST is recognised as part of the cost of
acquisition of the asset or as part of an item of the expense. Receivables and
payables in the balance sheet are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except
for the GST component of investing and financing activities, which are
disclosed as operating cash flows.
(f) Acquisition of Assets
All assets acquired including property, plant and equipment and intangibles
other than goodwill are initially recorded at their cost of acquisition at the
date of the acquisition, being the fair value of the consideration provided
plus incidental costs directly attributable to the acquisition. When equity
instruments are issued as consideration, their market price at the date of the
acquisition is used as fair value except where the notional price at which they
could be placed in the market is a better indication of fair value.
(g) Property, Plant & Equipment
Each class of property, plant and equipment is carried at cost less, where
applicable, any accumulated depreciation and impairment losses.
Property
Freehold land and buildings are shown at cost. The carrying amount of freehold
and buildings are reviewed annually by directors to ensure it is not in excess
of the recoverable amount from these assets.
Plant and Equipment
Plant and equipment are measured on the cost basis.
The carrying amount of plant and equipment is reviewed annually by directors to
ensure it is not in excess of the recoverable amount from these assets. The
recoverable amount is assessed on the basis of the expected net cash flows that
will be received from the asset`s employment and subsequent disposal. The
expected net cash flows have been discounted to their present values in
determining recoverable amounts.
The cost of fixed assets constructed within the economic entity includes the
cost of materials, direct labour, borrowing costs and an appropriate proportion
of fixed and variable overheads.
Subsequent costs are included in the asset`s carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the group and the cost of the
item can be measured reliably. All other repairs and maintenance are charged to
the income statement during the financial period in which they are incurred.
Increases in the carrying amount arising on revaluation of land and buildings
and property plant and equipment are credited to a revaluation reserve in
equity. Decreases that offset previous increases of the same asset are charged
against fair value reserves directly in equity; all other decreases are charged
to the income statement. Each year the difference between depreciation based on
the revalued carrying amount of the asset charged to the income statement and
depreciation based on the asset`s original cost is transferred from the
revaluation reserve to retained earnings.
(h) Depreciation and Amortisation
The depreciable amount of all fixed assets including buildings and capitalised
leased assets, but excluding freehold land, is depreciated on the straight line
and reducing balance methods over their estimated useful lives to the economic
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 and amortisation rates used for each class of assets are as
follows:
Range - 2007 Range - 2006
Furniture, fittings and office equipment 13% - 50% 13% - 50%
Motor vehicles 20% - 33% 20% - 33%
Plant & equipment 20% 20%
Leasehold Improvements 25% 20%
Buildings 20% 20%
The assets` residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date. An asset`s carrying amount is written
down immediately to its recoverable amount if the asset`s carrying amount is
greater than its estimated recoverable amount. Gains and losses on disposals
are determined by comparing proceeds with the carrying amount. These gains and
losses are included in the income statement. When revalued assets are sold,
amounts included in the revaluation reserve relating to that asset are
transferred to retained earnings.
(i) Impairment of Assets
At each reporting date, the group reviews the carrying values of its tangible
and intangible assets to determine whether there is any indication that those
assets have been impaired. If such an indication exists, the recoverable amount
of the asset, being the higher of the asset`s fair value less costs to sell and
value in use, is compared to the asset`s carrying value. Any excess of the
asset`s carrying value over its recoverable amount is expensed in the income
statement.
Impairment testing is performed annually for goodwill and intangible assets
with indefinite lives.
Where it is not possible to estimate the recoverable amount of an individual
asset, the group estimates the recoverable amount of the cash -generating unit
to which the asset belongs.
(j) Income Tax
The charge for current income tax expense is based on the profit for the year
adjusted for any non-assessable or disallowed items. It is calculated using the
tax rates that have been enacted or are substantially enacted by the balance
date.
Deferred tax is accounted for using the balance sheet liability method in
respect of temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. No deferred
tax will be recognised from the initial recognition of an asset or liability,
excluding a business combination, where there is no effect on accounting or
taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the
period when the asset is realised or liability is settled. Deferred tax is
credited in the income statement except where it relates to items that may be
credited directly to equity, in which case the deferred tax is adjusted against
equity.
Deferred income tax assets are recognised to the extent that it is probable
that future tax profits will be available against which deductible temporary
differences can be utilised.
The amount of benefits brought to account or which may be realised in the
future is based on the assumption that no adverse change will occur in income
tax legislation and the anticipation that the economic 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.
During the 2002/03 financial year, legislation was enacted to allow groups,
comprising of 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. The legislation, which includes both elective and mandatory
elements, is applicable to the Consolidated Entity. As at 30 June 2007, the
directors of the Company have not made a decision to elect to be taxed as a
single entity. The financial effect of the legislation has not been brought to
account in the financial statements for the year 30 June 2007.
(k) Leases
Leases of fixed assets where substantially all the risks and benefits
incidental to the ownership of the asset (but not the legal ownership) are
transferred to entities in the economic entity, are classified as finance
leases.
Finance leases are capitalised by recording an asset and a liability at the
lower of the amounts equal to the fair value of the leased property or the
present value of the minimum lease payments, including any guaranteed residual
values. Lease payments are allocated between the reduction of the lease
liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over the shorter of
their estimated useful lives or the lease term.
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.
Lease incentives under operating leases are recognised as a liability and
amortised on a straight- line basis over the life of the lease term.
(l) Receivables
Amounts receivable from third parties are carried at amounts due. The
recoverability of the debts is assessed at balance date and specific provision
is made for any doubtful accounts.
(m) Foreign Currency Transactions and Balances
Functional and presentation currency
The functional currency of each of the group`s entities is measured using the
currency of the primary economic environment in which that entity operates. The
consolidated financial statements are presented in Australian dollars which is
the parent entity`s functional and presentation currency.
Transaction and balances
Foreign currency transactions are translated into functional currency using the
exchange rates prevailing at the date of the transaction. Foreign currency
monetary items are translated at the year-end exchange rate. Non-monetary items
measured at historical cost continue to be carried at the exchange rate at the
date of the transaction. Non-monetary items measured at fair value are reported
at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are
recognised in the income statement, except where deferred in equity as a
qualifying cash flow or net investment hedge.
Exchange difference arising on the translation of non-monetary items are
recognised directly in equity to the extent that the gain or loss is directly
recognised in equity, otherwise the exchange difference is recognised in the
income statement.
Group companies
The financial results and position of foreign operations whose functional
currency is different from the group`s presentation currency are translated as
follows:
1. Assets and liabilities are translated at year-end exchange rates prevailing
at that reporting date;
2. Income and expenses are translated at average exchange rates for the period;
and
3. Retained profits are translated at the exchange rates prevailing at the date
of the transaction.
Exchange differences arising on translation of foreign operations are
transferred directly to the group`s foreign currency translation reserve in the
balance sheet. These differences are recognised in the income statement in the
period in which the operation is disposed.
(n) Inventories
Inventories are measured at the lower of cost and net realisable value. The
cost of manufactured products includes direct materials, direct labour and an
appropriate portion of variable and fixed overheads. Overheads are applied on
the basis of normal operating capacity. Costs are assigned on the basis of
weighted average costs.
(o) Financial Instruments
Recognition
Financial instruments are initially measured at cost on trade date, which
include transaction costs, when the related contractual rights and obligations
exist. Subsequent to initial recognition, these instruments are measured as set
out below.
Financial assets at fair value through profit and loss
A financial asset is classified in this category if acquired principally for
the purpose of selling in the short term or if so designated by management and
within the requirements of AASB 139: Financial Instruments - Recognition and
Measurement. Derivatives are also categorised as held for trading unless they
are designated as hedges. Realised and unrealised gains and losses arising from
changes in the fair value of these assets are included in the income statement
in the period in which they arise.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market and are stated at
amortised cost using the effective interest rate method.
Held-to-maturity investments
These investments have fixed maturities, and it is the group`s intention to
hold these investments to maturity. Any held-to-maturity investments held by
the group are stated at amortised cost using the effective interest rate
method.
Available-for-sale financial assets
Available-for-sale financial assets include any financial assets not included
in the above categories. Available-for-sale financial assets are reflected at
fair value. Unrealised gains or losses arising from changes in fair value are
taken directly to equity.
Financial Liabilities
Non-derivative financial liabilities are recognised at amortised cost,
comprising original debt less principal payments and amortisation.
Derivative Instruments
Derivative instruments are measured at fair value. Gains and losses arising
from changes in fair value are taken to income statement unless they are
designated as hedges.
GVM Metals Limited and Controlled Entities designate certain derivatives as
either;
1. hedges of the fair value of recognised assets or liabilities or a firm
commitment (fair value hedge); or
2. hedges of highly probable forecast transactions (cash flow hedges).
At the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management objective and
strategy for undertaking various hedge transactions is documented.
Assessments, both at hedge inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions have been and will continue
to be highly effective in offsetting changes in fair values or cash flows of
hedged items, are also documented.
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as
fair value hedges are recorded in the income statement, together with any
changes in the fair value of the hedge asset or liability that are attributable
to the hedged risk.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges is deferred to a hedge reserve in
equity. The gain or loss relating to the ineffective portion is recognised
immediately in the income statement.
Amounts accumulated in the hedge reserve in equity are transferred to the
income statement in the periods when the hedged item will affect profit or
loss.
Fair Value
Fair value is determined based on current bid prices for all quoted
investments. Valuation techniques are applied to determine the fair value for
all unlisted securities, including recent arms length transactions, reference
to similar instruments and option pricing models.
Impairment
At each reporting date, the group assess whether there is objective evidence
that a financial instrument has been impaired. In the case of
available-for-sale financial instruments, a prolonged decline in value of the
instrument is considered to determine whether impairment has arisen.
Impairment losses are recognised in the income statement.
(p) Goodwill
Goodwill and goodwill on consolidation are initially recorded at the amount by
which the purchase price for a business or for an ownership interest in a
controlled entity exceeds the fair value attributed to its net assets at date
of acquisition. Goodwill on acquisition of subsidiaries is included in
intangible assets. Goodwill on acquisition of associates is included in
investments in associates. Goodwill is tested annually for impairment and
carried at cost less accumulated impairment losses. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating to the
entity sold.
(q) Accounts Payable
Liabilities are recognised for amounts to be paid in the future for goods or
services received, whether or not billed to the Company or Consolidated Entity.
Trade accounts payable are normally settled within 45 days.
(r) Investments in Associates
Investments in associate companies are recognised in the financial statements
by applying the equity method of accounting. The equity method of accounting
recognised the Group`s share of post-acquisition reserves of its associates.
(s) Employee Benefits
Provision is made for the company`s liability for employee benefits arising
from services rendered by employees to balance sheet date. Employee benefits
that are expected to be settled within one year have been measured at the
amounts expected to be paid when the liability is settled, plus related
on-costs. Employee benefits payable later than one year have been measured at
the present value of the estimated future cash outflows to be made for those
benefits.
Equity-settled compensation
Share-based compensation benefits are provided to employees via an Executive
Share Option Scheme.
Share options granted before 7 November 2002 and/or vested before 1 July 2006
No expense is recognised in respect of these options. The shares are recognised
when the options are exercised and the proceeds received allocated to share
capital.
Share options granted after 7 November 2002 and/or vested after 1 July 2006
The fair value of options under the Executive Share Option Scheme is recognised
as an employee benefit expense with a corresponding increase in equity. The
fair value is measured at grant date and recognised over the period during
which the employees become unconditionally entitled to the options.
The fair value at grant date is independently determined using a Binomial
option valuation model that takes into account the exercise price, the term of
the option, the vesting and performance criteria, the impact of dilution, the
non-tradable nature of the option, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield and the
risk-free interest rate for the term of the option.
Upon the exercise of options, the balance of the share-based payments reserve
relating to those options is transferred to share capital.
(t) Provisions
Provisions are recognised when the group has a legal or constructive
obligation, as a result of past events, for which it is probable that an
outflow of economic benefits will result and that outflow can be reliably
measured.
(u) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with
banks, other short- term highly liquid investments with original maturities of
twelve months or less, and bank overdrafts. Bank overdrafts are shown within
short-term borrowings in current liabilities on the balance sheet.
(v) Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or
production of assets that necessarily take a substantial period of time to
prepare for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their intended use or
sale.
All other borrowing costs are recognised in income in the period in which they
are incurred.
(w) Earnings per Share
Basic earnings per share ("EPS") is calculated by dividing the net profit
attributable to members of the parent entity for the reporting period, after
excluding any costs of servicing equity (other than ordinary shares), by the
weighted average number of ordinary shares of the Company, adjusted for any
bonus issue.
(x) Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted
to conform to changes in presentation for the current financial period.
(y) Critical Accounting Estimates and Judgements
The directors evaluate estimates and judgments incorporated into the financial
report based on historical knowledge and best available current information.
Estimates assume a reasonable expectation of future events and are based on
current trends and economic data, obtained both externally and within the
group.
The resulting accounting estimates and judgements may differ from the related
actual results and may have a significant effect on the carrying amounts of
assets and liabilities within the next financial year and on the amounts
recognised in the financial statements. Information on such estimates and
judgements are contained in the accounting policies and/or notes to the
financial statements.
Key accounting estimates include:
- Asset carrying value and impairment charges;
- Capitalisation and impairment of exploration and evaluation expenditure.
- Critical judgements in applying the entity`s accounting policies include
determining:
- The effectiveness of forward foreign exchange contracts (Note 1(p)).
COMPANY DETAILS
The registered office of the Company is:
GVM Metals Limited
Level 1, 173 Mounts Bay Road
Perth WA 6000
Australia
The principal places of business are:
GVM Metals Limited
1st Floor, GVM House
Pinewood Office Park
33 Riley Street
Woodmead 2191
South Africa
Portion 33
Farm Steenkoppies
Rustenburg road
Magaliesburg
Gauteng
South Africa
Dated at London, United Kingdom this 29th day of September 2007.
Simon Farrell
Managing Director
JSE Limited Sponsor:
PricewaterhouseCoopers Corporate Finance (Pty) Limited
Date: 01/10/2007 08:39:01 Produced by the JSE SENS Department.
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