| Mon 20 Sep 2010, 17:22 | | FSE - Firestone Energy Limited - Unqualified audited annual financial statements |
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FSE
FSE
FSE - Firestone Energy Limited - Unqualified audited annual financial statements
of Firestone Energy Limited for the year ended 30 June 2010
FIRESTONE ENERGY LIMITED
(Registration number: ABN 058 436 794)
(SA company registration number: 200/023973/10
Share code on the JSE: FSE
Share code on the ASX: FSE
ISIN: AU000000FSE6
("FSE" or "the Company")
Unqualified Audited Annual Financial Statements of Firestone Energy Limited for
the year ended 30 June 2010
CORPORATE DIRECTORY
DIRECTORS
John Dreyer
Non Executive Director Chairman
Tim Tebeila
Non Executive Director Deputy Chairman
Non Executive Directors
Amanda Matthee
Colin McIntyre
John Wallington
MANAGEMENT
Jerry Monzu
Company Secretary
REGISTERED OFFICE
Level 1, 63 Hay Street
SUBIACO W A 6008
Telephone: (08) 9381 2755
Facsimile: (08) 9381 4799
Email: enquiries@firestoneenergy.net
SHARE REGISTRY
Computershare Investor Services
Level 2, Reserve Bank Building
45 St Georges Terrace
PERTH W A, 6000
Ph 08 9323 2000
Fax 08 9323 2033
AUDITORS
BDO Audit (W A) Pty Ltd
38 Station Street
SUBIACO W A 6008
STOCK EXCHANGE LISTING
Securities of Firestone Energy Limited are dual listed
on ASX Limited and the Johannesburg Stock
Exchange
ASX and JSE Code: FSE - ordinary shares
MANAGEMENT DISCLOSURE REPORT
Overview
The financial year 2010 has been very productive and progressive for Firestone
Energy in its South African based Waterberg project.
The highlights of the year are:
* four further contiguous properties were acquired through a transaction with
its Joint Venture partner, Sekoko Coal (Pty) Ltd;
* the funding of A$25million was secured in the form of convertible notes;
* a pre-feasibility study was concluded and the definitive feasibility study was
completed after the end of the financial year;
* a significant increase in reportable coal resources;
* an application for a mining right permit was submitted;
* a process to secure a Cornerstone Investor was started; and
* focussed off-take negotiations are positive and advanced.
Corporate Developments
The second Joint Venture agreement with Sekoko Coal was announced on 3 July
2009. The agreement covers four farms - Smitspan 306LQ, Hooikraal 315LQ,
Minnasvlakte 258LQ, and Massenberg 305LQ. Under the terms of the Joint Venture
Agreement, approved by Shareholders, Firestone`s wholly owned subsidiary
Lexshell (Pty) Ltd will earn an initial 30% interest in the Properties in
consideration for:
* the issue to Sekoko of new shares in Firestone in the amount of ZAR293
million (approximately A$43.4 million) at an issue price of A$0.05 per share,
which amounts to approximately 868,176,563 Firestone shares;
* a reimbursement of expenses to Sekoko of up to ZAR32.99 million (approx A$5.1
million) which has been utilised by Sekoko in the exploration and development
of the Properties; and following the approval of the Bankable Feasibility Study
(BFS) and decision to mine by the Management Board of the joint venture, a
management fee of ZAR50 million (approximately A$7.41 million) is to be paid to
Sekoko (or it`s nominee) over a 7 year period from the date of commercial
production;
Firestone has the opportunity to earn a further 30% interest (for a total of
60%) upon expenditure of ZAR50 million (approximately A$7.41 million) to
complete a Bankable Feasibility Study (BFS) enabling the establishment of a
future commercial mining operation.
Joint Venture Agreement 3
A term sheet and a deposit of A$200,000 has been paid to Sekoko Coal in order to
purchase a further two properties Swanepoelpan and Duikerfontein. This will
result in all eight properties being owned in joint venture with Sekoko Coal
(Pty) Ltd. A further A$1.8 million is payable on the earlier of transfer of
concessions to the joint venture company by 30 June 2011.
Surface Rights
During the year the company purchased Smitspan, the priority property where the
company is going to start mining. The company also entered into an agreement to
purchase Hooikraal, the South Eastern property intersected by the provincial
road and property at which the company is hoping to locate the loading
infrastructure.
Board of Directors
The company has a strong and experienced board of directors. During the year Mr
Timothy Tebeila, the founder of Sekoko Resources (Pty) Limited, was appointed as
Non-Executive Deputy Chairman.
Following the resignation of Mr Garth Higgo, the Company was fortunate to secure
the services of Mr John Wallington as Managing Director from 1 November 2009. Mr
Wallington, based in Johannesburg, brought a wealth of coal experience to this
new executive position. Mr John Wallington stepped down as the Managing Director
on 14 June 2010, but has remained as a valuable non-executive director of the
company. The search for a permanent Managing Director is progressing. The
company also appointed Mr Jerry Monzu as the Company Secretary.
Financial
The Company initially raised A$2.68 million of funding through convertible loans
from sophisticated and professional investors. Interest of 9% per annum was
payable on the loans. The lenders agreed to apply the proceeds of repayment of
the loans to subscribe for fully paid ordinary shares in Firestone at a price of
A$0.04 per share and as a result 67 million ordinary shares were issued. The
funds were applied for progressing the Company`s Waterberg Coal joint venture
with Sekoko Coal (Pty) Ltd and for other short term working capital
requirements.
In addition, during the year the Company announced that it had executed binding
documentation for a fully underwritten $25m capital raising involving the issue
of convertible notes. BBY Limited is the Underwriter to the entire Issue.
Firestone allocated the net proceeds of the raising towards:
* the "BFS" for a large scale mining operation at the Company`s W aterberg coal
project in South Africa;
* meeting all financial commitments due to its Joint Venture partner, Sekoko
Coal (Pty) Limited;
* purchase of key surface rights; and
* working capital requirements.
Cornerstone Investor
The Company decided to raise further funding for purposes of constructing and
commissioning the mine. The mode of raising such finance was decided to be
through securing an appropriate long term Cornerstone Investor(s). A data room
was therefore created as source of information to invited companies. The
cornerstone investor process is ongoing and various companies have been given
access to the data room.
REVIEW OF OPERATIONS
Exploration Undertaken
During the year Firestone Energy completed an in-fill drilling programme on
Smitspan, which consisted of a total of 12 holes drilled, all logged and sampled
and sent to laboratories for analysis.
The holes consisted of six PQ diameter holes, four XF holes and two T146 holes.
All the results were received by the end of the reporting period. This round of
drilling was critical for the following reasons:
* completion of "BFS" coal processing design;
* update of the Resource Statement to include measured resources, and;
* compilation of a bulk sample for laboratory condition combustion tests.
Drilling of PQ diameter holes was also completed on Vetleegte (6 holes) and
Massenberg (2 holes). One Vetleegte hole had a "no coal" intersection but on the
remainder, zones 1, 2 or 3 were intersected at expected thicknesses with
generally less than 30 metres of overburden cover. These coal zones have been
sampled and results have been received from the laboratory. A composite sample
of the number 2 zone will be prepared for possible use by potential customers.
The Company identified, through exploration activities, that the Vetleegte area
was a potential low volume producer of high grade, low phosphorous coal suitable
for use as blend metallurgical product.
Updated Coal Resource Statement
Venmyn Rand (Pty) Ltd was commissioned by the Company to undertake Mineral
Resource estimates for eight farms constituting the Waterberg Coal Project.
The resource has been estimated in accordance with the SAMREC and JORC codes and
the SANS 10320:2004 (South African National Standard) method of classification
of thick interbedded coal deposits, the following highlights were taken from the
Venmyn report:
* significant increase of total Coal Zone Resource to 5.173 billion tonnes
(+36%) and Coal Gross Tonnes In-situ (GTIS) of 1.881 billion tonnes (+41%)
compared to the October 2009 coal resource summary;
* main Smitspan farm has now a Measured Resource of 238.67 million tonnes Coal
GTIS (+145%) where the 21 year mine life open cast was located and highlighted
within the DFS release on 29 June 2010 which included total coal sales of 120.8
million tonnes;
* total measured and indicated resource at Smitspan has increased to 714.51
million tonnes (+39%) where the last 12 recent in fill holes all intersected
coal; and
* relatively undrilled Swanepoelpan farm (4 holes) is located directly west and
adjacent to the Smitspan large open cast and creates the potential to
dramatically extend the DFS open cast design to the west and northwest.
The total coal resource estimate based on the data available at 1 August 2010
(Venmyn) is tabled below whilst coal quality by resource category and farm is
tabled at the end of this announcement.
FARM ZONE MEASURED INDICATED
TONNAGE COAL COAL
MT GTIS MT GTIS MT GTIS MT
SMITSPAN 1,881.758 238.667 475.844
HOOIKRAAL 358.444 0 7 .282
MINNASVLAKTE 755.805 0 26.507
MASSENBERG 337.034 0 20.797
VETLEEGTE 570.265 1.224 204.499
SW ANEPOELPAN 615.553 0 1.072
DUIKERFONTEIN 30.200 0 0
TOTAL 5,173.480 239.891 736.001
FARM INFERRED TOTAL COAL
TONNAGE
MT GTIS MT
SMITSPAN 0 714.511
HOOIKRAAL 155.491 162.773
MINNASVLAKTE 230.687 257.194
MASSENBERG 109.539 130.336
VETLEEGTE 17.893 223.816
SW ANEPOELPAN 378.227 379.299
DUIKERFONTEIN 13.949 13.949
TOTAL 905.786 1,882.463
Waterberg coal typically occurs interlaminated with shale which for the most
part cannot be mined separately from the coal and thus the zone gross in-situ
tonnage is the tonnage of coal and shale.
In the interest of balanced reporting it is the Company`s intention to also
report the gross in-situtonnage of coal rather than the tonnage of coal and
shale. In order to estimate the gross in-situtonnage of coal in each zone,
rather than the zone tonnage including the rock, each zone tonnage was
discounted by the percent yield at a relative density of 1.9gm/cc (in effect
removing the influence of the shale) to derive an estimate of the coal tonnage.
Information in this report that relates to exploration results, coal resources
or reserves on the properties Smitspan 306 LQ, Hooikraal 315 LQ, Minnasvlakte
258 LQ and Massenberg 305 LQ and Vetleegte 304 LQ is based on information
compiled by Ms Catherine Telfer who is employed by Venmyn Rand (Pty) Ltd and is
a member of The Australasian Institute of Mining and Metallurgy and the South
African Institute of Mining and Metallurgy. Ms Telfer has sufficient experience
which is relevant to the style of mineralisation and type of deposit under
consideration and to the activity which she is undertaking to quality as a
Competent Person as defined in the 2004 Edition of the "Australasian Code for
the Reporting of Exploration Results, Mineral Resources and Ore Reserves". Ms
Telfer consents to the inclusion in the report of the matters based on her
information in the form and context in which it appears.
The significant changes from the previous Resource statement of October 2009 are
as follows:
Farm Reporting Measured Coal Indicated Coal Inferred Coal
Period GTIS MT GTIS MT GTIS MT
October 2009 97.152 416.109 106.836
Smitspan August 2010 238.667 475.844 0
Gain/ Loss +141.515 +59.735 -106.836
Vetleegte October 2009 0 28.873 131.303
August 2010 1.224 204.499 17.893
+1.224 +175.626 -113.41
Gain/ Loss 0 28.873 131.303
In addition, the inclusion of the Swanepoelpan resources have significantly
added to the potential life of mine for the preferred mining shell on Smitspan,
by providing a natural extension across the farm boundary.
FEASIBILITY STUDY REVIEW
Definitive Feasibility Study
The DFS for the establishment of the first phase open cast mine which can be
expanded to meet market demand was completed and indicated that such mine would
be economically viable.
Coal Markets and Logistics
During the year the company
* held positive discussions with power generators which is hoped to be finalised
before the end of December 2010. This will culminate into first delivery of coal
toward the end of first quarter of 2012;
* held discussions with metallurgical industries and various overseas coal;
* Transnet Freight Rail (TFR) who has completed a draft pre-feasibility study
of the rail connection from Waterberg to Witbank that is likely to further
improve the supply of both power station to Witbank stations and premium coal
to export market.
Mining Rights Application
The application for Mining Rights for the W aterberg Colliery was submitted to
the Department of Mineral Regulation (DMR) in July 2010. The consultation
process continues to ensure that all parties are involved, including local
communities, farmers and authorities. Final approval of the Mining Right is
contingent on acceptance of a Mine Works Programme, Environmental Impact
Assessment (EIA) / Environment Management Plan (EMP), Social and Labour Plan.
Outlook
The evaluation of the W aterberg Coal Project will continue with a view to
receiving necessary regulatory approvals. Negotiations with potential
developers, financiers and off-take parties will be progressed as the final
"BFS" is advanced. The amount of activity within the power sector and coal
export sectors reveals a consistent and growing interest in South African coal.
Directors` Report
Your directors submit the annual financial report of the consolidated entity for
the financial year ended 30 June 2010. In order to comply with the provisions of
the Corporations Act, the directors report as follows:
1 DIRECTORS
The names of directors who held office during or since the end of the year and
until the date of this report are as follows. Directors were in office for this
entire period unless otherwise stated.
MR JOHN DREYER
Non-Executive Chairman
John Dreyer, a lawyer by profession, has held a number of senior executive
positions through his career including the position of Executive Director of
Anglo Platinum, Business Development. In 2004 Mr. Dreyer retired from Anglo
American Platinum and joined Pangea Diamond Fields as a director and
shareholder. He was instrumental in the listing of that company on AIM (LSE).
Prior to joining Anglo, Mr. Dreyer was Chief Executive Officer of Tavistock Coal
and Managing Director of Shell South Africa. He is also a former Director of the
Richards Bay Coal Terminal Company. John Dreyer currently holds no other
directorships.
MS AMANDA MATTHEE
Non-Executive Director
Amanda Matthee is a Chartered Accountant (CA) and holds an Advance Executive
Program Diploma from Unisa. She has over 20 years of corporate and business
management experience; and serves as Financial Director of Sekoko Resources.
With more than 20 years of financial management experience in the defence
technology and mining sectors, Ms Matthee has worked with many of the industry`s
leading companies. Before joining Sekoko in January 2007, she served as
Executive and chief financial officer of Khusela Women Investments and prior to
that she served on the Executive Committee of Harmony Gold Limited. Ms Matthee
does not currently hold any other Directorships.
MR COLIN MCINTYRE (appointed 17 July 2009)
Non-Executive Director
Colin McIntyre is an experienced and credentialed mining engineer, mining
manager and company director, with 35 years experience in the mining industry,
including fourteen years with Western Mining Corporation.
Mr McIntyre previously held executive management positions with Western Mining
Corporation, National Mine Management Pty Ltd and Macmahon Contractors (W A). He
was previously non executive chairman of Tectonic Resources Ltd and Perilya Ltd
for 12 years and 2 years respectively.
He has had extensive operational experience in open pit and underground mining
spread amongst several commodities, in addition to listed company board
experience. Mr McIntyre does not currently hold any other Directorships.
MR TIM TEBEILA
Non-Executive Director - Deputy Chairman
Tim Tebeila is the founder and currently the Executive Chairman of Sekoko
Resources. He is a mining entrepreneur with more than eight years of successful
active involvement in exploring and developing mining projects. He is a former
President of Limpopo`s National Federated Chamber of Commerce (NAFCOC).
MR JOHN WALLINGTON
Non-Executive Director
John Wallington, a mining engineer by profession, is an experienced Mining
Executive with a proven track record in delivering results and transforming
global organizations. Mr. Wallington was previously the Global Chief Executive
Officer (CEO) of Anglo Coal for 6 years; and in a career spanning 28 years, he
has held a number of other senior positions at Anglo. While CEO of Anglo Coal,
Mr. Wallington developed and implemented the Coal Division strategy, which
integrated the vision and direction of the business unit with profit, safety,
operational performance and strategic growth targets. He was a major player in
bringing together the Black Empowerment transaction in 2007 that enabled Anglo
Coal to meet its Transformation Targets. He is currently the CEO and Executive
Director of Coal of Africa Limited.
COMPANY SECRETARY
MR JERRY MONZU (appointed 30 April 2010)
Mr Monzu has over 20 years experience in publicly listed multinational
corporations predominantly in the resources and mining sectors. He has
previously held senior management positions in companies such as Woodside Energy
and Normandy Mining.
Mr Monzu graduated with a Bachelor of Business (Accounting and Finance) from
Curtin University and is a member of CPA Australia and Chartered Secretaries
Australia.
2 DIRECTORS` MEETINGS
The number of directors meetings held and the number of meetings attended by
each of the directors of the Company during the year to 30 June 2010 are:
Meetings Meetings held
attended during time as
Director
John Dreyer 12 12
John Wallington 9 12
Amanda Matthee 12 12
Tim Tebeila 9 12
Colin McIntyre 10 12
There are no Board committees therefore no committee meetings were held during
the period.
3 PRINCIPAL ACTIVITIES
The principal activities of the entities within the consolidated entity during
the year were to continue to identify, evaluate and develop potential mineral
exploration and mining projects principally located in Africa.
4 OPERATING AND FINANCIAL REVIEW
An operating review of the consolidated entity for the financial year ended 30
June 2010 is set out in the Management Discussion Analysis.
Shareholder returns 2010 2009
Net loss attributable to equity holders of the
parent (3,436,308) (1,316,064)
Basic EPS (loss) - cents (0.16)cps (0.12)cps
Share price as at 30 June 1.3cps 3.0cps
During the year, a total of 976,349,169 shares were issued, majorly for the
entering of the T2 Joint Venture agreement with Sekoko Coal (Pty) Ltd, which has
derived a 60% interest in the following properties located in the Waterberg
locality of South Africa; Hooikraal, Massenberg and Minnasvlakte.
5 DIVIDENDS
There have been no dividends declared or paid during the period.
6 REMUNERATION REPORT (AUDITED)
This report outlines the remuneration arrangements in place for directors and
executives of Firestone Energy Limited. The information provided in this
remuneration report has been audited as required by section 308(3C) of the
Corporations Act 2001.
The Company`s broad remuneration policy is to ensure the remuneration package
properly reflects the person`s duties and responsibilities and that remuneration
is competitive in attracting, retaining and motivating people of the highest
quality.
Policy for determining remuneration
The board is responsible for determining the remuneration policy for all
directors and company executives based upon the company`s nature, scale and
scope of operating requirements and any other factors which the board determines
to be appropriate in determining said remuneration policy.
Short Term Cash Incentives
Key Management personnel are paid a fixed, cash amount plus any additional
statutory superannuation requirements. The board has determined the current key
management personnel remuneration as detailed in the below table. No short term
cash incentives were provided to Key Management Personnel during the year.
Other Payments
No other payments are due to key management personnel.
Long Term Benefits
Key management personnel currently have no right to long term leave payments.
Service contracts
The contract duration, period of notice and termination conditions for key
management personnel are as follows:
Mr Jerry Monzu the Company Secretary is engaged through a Consultancy Agreement
with Monzu Corporate Consulting, with no fixed date of expiry. Termination by
the Company is with 3 months notice or payment in lieu thereof. Termination by
the consultant is with 3 months notice. Consulting fees are on an hourly rate of
$150 (GST exclusive).
There were no formal service agreements with Directors. On appointment to the
Board, all Non-Executive Directors enter into a service agreement with the
Company, in the form of a letter of appointment. The letter summarises the Board
policies and terms which mirror those set out within the Corporations Act 2001,
including compensation, relevant to the office of Director.
Post Employment Benefits
Key management personnel or other personnel do not receive retirement benefits
in any form upon termination of their employment or service.
Performance Related Benefits
The company provides incentive and performance based payments/benefits,
typically in the way of equity options. There were no performance related
benefits during the year.
Financial Performance of the Company
There is no relationship between the company`s current remuneration policy for
key management personnel and the company`s performance or shareholder wealth.
Directors` and key management personnel remuneration, Company and consolidated
Details of the nature and amount of each element of remuneration of each Key
Management Personnel of Firestone Energy Limited are set out in the following
tables; each Key Management Personnel was in office for the full year unless
otherwise specified:
The fair value of options is calculated at the date of grant using the Black-
Scholes Option Pricing Model. There were no options issued in the current
period.
Short term Post
employee employment
benefits benefits
Directors Salary/Fees Super
Specified
Directors
Non-Executive
J Dreyer 2010 55,000 -
2009 12,500 -
A Matthee 2010 248,978* -
2009 8,333 -
C McIntyre(1) 2010 47,910 -
2009 - -
T Tebeila 2010 50,000 -
2009 8,333 -
J Wallington 2010 182,215** -
2009 12,500 -
L Boyd(6) 2010 - -
2009 138,220 -
D Henthorn 2010 - -
2009 62,604 -
M Smartt(7) 2010 - -
2009 133,161 15,134
Total Specified 2010 584,103 -
Directors 2009 375,651 15,134
Executives
G Higgo(2) 2010 133,481 12,013
2009 221,124 19,901
S Storm(3) 2010 59,550 -
2009 28,575 -
R Dorrington(4) 2010 28,132 -
2009 - -
J Monzu(5) 2010 23,102 -
2009 - -
Total Executives 2010 244,265 12,013
2009 249,699 19,901
Total Key
Management 2010 828,368 12,013
Personnel 2009 625,350 35,035
Share
based Termination
payments payments
Directors
Specified
Directors
Non-Executive
J Dreyer 2010 - -
2009 - -
A Matthee 2010 - -
2009 - -
C McIntyre(1) 2010 - -
2009 - -
T Tebeila 2010 - -
2009 - -
J Wallington 2010 - -
2009 - -
L Boyd(6) 2010 - -
2009 - -
D Henthorn 2010 - -
2009 - -
M Smartt(7) 2010 - -
2009 - -
Total Specified 2010 - -
Directors 2009 - -
Executives
G Higgo(2) 2010 - 60,000
2009 - -
S Storm(3) 2010 - -
2009 - -
R Dorrington(4) 2010 - -
2009 - -
J Monzu(5) 2010 - -
2009 - -
Total Executives 2010 - 60,000
2009 - -
Total Key
Management 2010 - 60,000
Personnel 2009 - -
Directors Total
Specified
Directors
Non-Executive
J Dreyer 2010 55,000
2009 12,500
A Matthee 2010 248,978
2009 8,333
C McIntyre(1) 2010 47,910
2009 -
T Tebeila 2010 50,000
2009 8,333
J Wallington 2010 182,215
2009 12,500
L Boyd(6) 2010 -
2009 138,220
D Henthorn 2010 -
2009 62,604
M Smartt(7) 2010 -
2009 148,295
Total Specified 2010 584,103
Directors 2009 390,785
Executives
G Higgo(2) 2010 205,494
2009 241,025
S Storm(3) 2010 59,550
2009 28,575
R Dorrington(4) 2010 28,132
2009 -
J Monzu(5) 2010 23,102
2009 -
Total Executives 2010 316,278
2009 269,600
Total Key
Management 2010 900,381
Personnel 2009 660,385
* Includes an amount 198,977 that was paid via Sekoko Resources, and reimbursed
by Firestone Energy Ltd.
** Includes an amount 132,215 that was paid via Sekoko Resources, and reimbursed
by Firestone Energy Ltd.
Notes
1. Appointed - 17 July 2009
2. Resigned - 16 October 2009
3. Resigned - 1 December 2009
4. Appointed/ Resigned - 1 December 2009 / 30 March 2010
5. Appointed - 30 March 2010
6. Resigned - 12 June 2009
7. Resigned - 14 April 2009
Share Based Remuneration
Under current Accounting Standards any share based remuneration must be valued
and the most common method of valuation is Black Scholes model. Options carry no
voting rights and each option is convertible into one ordinary share in the
company. No options have been granted to Directors in the current year or last
financial year.
Equity Based Benefits
There were no options over ordinary shares issued in the current period, for Key
Management Personnel equity holding at year end refer to Note 18.
This is the end of the audited Remuneration Report.
7 LIKELY DEVELOPMENTS
Disclosure of any further information in relation to further developments has
not been included in this Directors` Report because, in the opinion of the
Directors, to do so would be speculative and is therefore not in the best
interests of the Group.
8 ENVIRONMENTAL REGULATION
The group has done everything to the best of its knowledge to comply with all
applicable legislation and has no reason to believe that they did not comply
with any of the legislative requirements during the year and subsequent to year
end.
9 DIRECTORS` INTERESTS
The following relevant interests in shares and options of the company were held
by the directors as at the date of this report.
Number of fully
Director paid ordinary Unlisted options
shares
J Dreyer - -
A Matthee 1,018,237,832* 110,000,000*
C McIntyre 27,075,000 3,125,000
T Tebeila 997,937,832* 110,000,000*
J Wallington - -
* Balance includes amounts nominally held through directorship of a related
entity, Sekoko Coal, whereby Sekoko Coal has 997,937,832 shares and 110,000,000
options held in Firestone Energy Ltd.
10 INDEMNIFICATION AND INSURANCE OF OFFICERS
Indemnification
The Company has agreed to indemnify the directors and officers of the Company
against all liabilities to another person (other than the Company or related
body corporate) that may arise from their position as directors of the Company
and it`s controlled entities, except where the liability arises out of conduct
involving a lack of good faith. During the financial year the Company paid a
premium in respect of a contract insuring the directors and officers of the
company and its controlled entities against any liability incurred in the course
of their duties to the extent permitted by the Corporations Act 2001. The
contract of insurance prohibits disclosure of the nature of the liability and
the amount of the premium.
11 NON-AUDIT SERVICES
During the year the consolidated group paid $7,975 to a related entity of the
auditor for non-audit services provided as outlined in Note 20 to the financial
statements. The directors are satisfied that the provision of non- audit
services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001.
The directors are of the opinion that the services do not compromise the
auditor`s independence as all non-audit services have been reviewed to ensure
that they do not impact the integrity and objectivity of the auditor and none of
the services undermine the general principles relating to auditor independence
as set out in APES 110 Code of Ethics for Professional Accountants issued by the
Accounting Professional & Ethical Standards Board.
12 PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave under section 237 of the Corporations Act 2001
to bring, or intervene in, proceedings on behalf of the company.
13 AUDITOR`S INDEPENDENCE DECLARATION
The auditor`s independence declaration, under section 307C of the Corporations
Act 2001, is attached behind the auditor`s report and forms part of this
directors` report.
14 SUBSEQUENT EVENTS
Subsequent to year end:-
(a) On 12 August 2010 the Company announced that it had decided to make
amendments to the Convertible Note Deed Poll entered into in September 2009. The
amendments are intended to position the Company to be better able to attract
investors to rapidly progress FSE`s W aterberg project and allow the Company to
undertake its stated objectives. Further, the Company has agreed with BBY
Limited to amend the terms of the Underwriting Agreement of the Convertible Note
Deed Poll. The amendments to the convertible note deed are as follows;
* The pricing of the securities to be issued by FSE pursuant to subscription
payments made after 13 July 2010, upon conversion of convertible notes will be
the higher of:
(a) a 7.5% discount to the 5 day VW AP up to but not including the date upon
which the note is issued by the issuer; and
(b) A$0.02c per FSE share issued
* Convertible Notes issued after 4 June 2010 shall be in denominations of A$500k
or A$100k at the election of the subscriber.
* Convertible notes may be converted monthly.
(b) On 23 August 2010 the Company announced that it had a significant increase
in the total Coal Zone Resource to 5.173 billion tonnes (+36%) and Coal Gross
Tonnes In-situ (GTIS) of 1.881 billion tonnes (+41%) compared to the October
2009 coal resource summary.
Other than this there has not arisen in the interval between the end of the year
and the date of this report any item, transaction or event of a material and
unusual nature likely, in the opinion of the Directors of the Company, to affect
significantly the operations of the Consolidated Entity, the results of those
operations, or the state of affairs of the Consolidated Entity in future
periods.
Signed in accordance with a resolution of the directors.
John Dreyer
Chairman
Perth
Western Australia
17 September 2010
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2010
Consolidated Group
Note 2010 2009
$ $
Revenue 2(a) 62,386 55,667
Other Income 28,863 -
Accounting fees (4,437) (33,803)
Administration expenses (538,204) (25,133)
ASX fees and share registry expenses (237,201) (122,629)
Directors` fees (252,911) (164,705)
Foreign exchange gain / (loss) 144,762 (9,921)
Employee and consultant expenses (420,075) (550,336)
Finance Expenses 2(b) (1,281,555) (35,466)
Legal and professional fees (642,791) (202,447)
Occupancy costs (76,242) (108,603)
Share based payments - (11,645)
Travel and accommodation (218,903) (107,043)
Loss before income tax expense (3,436,308) (1,316,064)
Income tax expense 3 - -
Loss for the year (3,436,308) (1,316,064)
Other comprehensive income for the year
Foreign currency translation reserve - -
Total comprehensive income for the year
attributable to the owners of the Group (3,436,308) (1,316,064)
Basic and diluted loss per share (cents) 4 (0.16) (0.12)
Parent Entity
Note 2010 2009
$ $
Revenue 2(a) 62,386 55,667
Other Income 28,863 -
Accounting fees (4,300) (33,803)
Administration expenses (172,676) (25,133)
ASX fees and share registry expenses (237,201) (122,629)
Directors` fees (252,911) (164,705)
Foreign exchange gain / (loss) 144,762 (9,921)
Employee and consultant expenses (348,497) (550,336)
Finance Expenses 2(b) (1,239,642) (35,466)
Legal and professional fees (352,844) (202,447)
Occupancy costs (74,659) (108,603)
Share based payments - (11,645)
Travel and accommodation (189,295) (107,043)
Loss before income tax expense (2,636,014) (1,316,064)
Income tax expense 3 - -
Loss for the year (2,636,014) (1,316,064)
Other comprehensive income for the year
Foreign currency translation reserve - -
Total comprehensive income for the year
attributable to the owners of the Group (2,636,014) (1,316,064)
Basic and diluted loss per share (cents) 4
The statements of comprehensive income are to be read in conjunction with the
notes to the financial statements.
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2010
Consolidated Group
Note 2010 2009
$ $
CURRENT ASSETS
Cash and cash equivalents 6(a) 2,130,542 1,870,754
Trade and other receivables 7 420,031 38,047
Total Current Assets 2,550,573 1,908,801
NON-CURRENT ASSETS
Receivables 7 147,119 171,649
Interest in joint venture 8 79,371,322 19,645,502
Other financial assets 9 - -
Plant & equipment 10 113,330 30,454
Total Non-Current Assets 79,631,771 19,847,605
TOTAL ASSETS 82,182,344 21,756,406
CURRENT LIABILITIES
Trade and other payables 11 3,489,487 1,914,532
Borrowings 12 - 100,000
Total Current Liabilities 3,489,487 2,014,532
NON-CURRENT LIABILITIES
Borrowings 12 14,530,114 500,000
14,530,114 500,000
TOTAL LIABILITIES 18,019,601 2,514,532
64,162,743 19,241,874
NET ASSETS
EQUITY
Issued capital 13 62,704,850 14,781,022
Reserves 14 6,210,265 5,776,916
Accumulated losses 15 (4,752,372) (1,316,064)
TOTAL EQUITY 64,162,743 19,241,874
Parent Entity
Note 2010 2009
$ $
CURRENT ASSETS
Cash and cash equivalents 6(a) 1,208,828 1,870,754
Trade and other receivables 7 20,595,944 5,120,749
Total Current Assets 21,804,772 6,991,503
NON-CURRENT ASSETS
Receivables 7 26,758 171,649
Interest in joint venture 8 - -
Other financial assets 9 56,276,357 12,867,529
Plant & equipment 10 27,385 30,454
Total Non-Current Assets 56,330,500 13,069,632
TOTAL ASSETS 78,135,272 20,061,135
CURRENT LIABILITIES
Trade and other payables 11 770,741 1,914,532
Borrowings 12 - 100,000
Total Current Liabilities 770,741 2,014,532
NON-CURRENT LIABILITIES
Borrowings 12 14,530,114 500,000
14,530,114 500,000
TOTAL LIABILITIES 15,300,855 2,514,532
62,834,417 17,546,603
NET ASSETS
EQUITY
Issued capital 13 62,704,850 14,781,022
Reserves 14 4,081,645 4,081,645
Accumulated losses 15 (3,952,078) (1,316,064)
TOTAL EQUITY 62,834,417 17,546,603
The statements of financial position are to be read in conjunction with the
notes to the financial statements.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2010
Consolidated Group
2010 2009
Note $ $
Inflows/(Outflows)
Cash Flows from Operating Activities
Payments to suppliers and employees (4,129,775) (1,360,194)
Interest received 62,386 41,818
Interest Paid (338,122) -
Net cash used in operating activities 6(b) (4,405,511) (1,318,376)
Cash Flows from Investing Activities
Purchase of property, plant and equipment (109,709) (21,436)
Proceeds on sale of property, plant and equipment - 58,205
Expenditure to acquire joint venture interest (11,993,976) (3,721,019)
Loans to controlled entities - -
Net cash used in investing activities (12,103,685) (3,684,250)
Cash Flows from Financing Activities
Proceeds from issue of shares, net of issue costs - 4,007,000
Proceeds from borrowings 16,869,167 600,000
Loans repaid (100,000) 106,497
Net cash provided by financing activities 16,769,167 4,713,497
Net (decrease)/ increase in cash held 259,971 (289,129)
Cash at the beginning of the financial year 1,870,754 2,169,804
Effect of exchange rate changes on the
balance of cash held in foreign currencies (183) (9,921)
Cash at the end of the financial year 6(a) 2,130,542 1,870,754
Parent Entity
2010 2009
Note $ $
Inflows/(Outflows)
Cash Flows from Operating Activities
Payments to suppliers and employees (3,159,799) (1,360,194)
Interest received 62,376 41,818
Interest Paid (325,980) -
Net cash used in operating activities 6(b) (3,423,403) (1,318,376)
Cash Flows from Investing Activities
Purchase of property, plant and equipment (9,335) (21,436)
Proceeds on sale of property, plant and equipment - 58,205
Expenditure to acquire joint venture interest - -
Loans to controlled entities (13,959,005) (3,721,019)
Net cash used in investing activities (13,968,340) (3,684,250)
Cash Flows from Financing Activities
Proceeds from issue of shares, net of issue costs - 4,007,000
Proceeds from borrowings 16,830,000 600,000
Loans repaid (100,000) 106,497
Net cash provided by financing activities 16,730,000 4,713,497
Net (decrease)/ increase in cash held (661,743) (289,129)
Cash at the beginning of the financial year 1,870,754 2,169,804
Effect of exchange rate changes on the
balance of cash held in foreign currencies (183) (9,921)
Cash at the end of the financial year 6(a) 1,208,828 1,870,754
The statements of cash flows are to be read in conjunction with the notes to the
financial statements
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2010
Share
based
Issued Accumulated payment
Capital Losses reserve
Consolidated Group $ $ $
Balance at 1 July 2008 57,819,281 (58,297,793) 2,590,000
Comprehensive Income for the year
Loss for the year - (1,316,064) -
Other comprehensive income
Total other comprehensive income - - -
Total comprehensive income for the year - (1,316,064) -
Transactions with owners recorded
directly in equity contributions by and
distributions to owners
Shares issued during the year, net
of costs 15,259,534 - -
Options issued during the year - - 1,491,645
Reduction of Capital /accumulated
losses (58,297,793) 58,297,793 -
Net exchange differences on
translation of the financial
reports of foreign subsidiaries - - -
Balance at 30 June 2009 14,781,022 (1,316,064) 4,081,645
Foreign
Currency
Translation
Reserve Total
Consolidated Group $ $
Balance at 1 July 2008 - 2,111,488
Comprehensive Income for the year
Loss for the year - (1,316,064)
Other comprehensive income
Total other comprehensive income - -
Total comprehensive income for the year - (1,316,064)
Transactions with owners recorded
directly in equity contributions by and
distributions to owners
Shares issued during the year, net of costs - 15,259,534
Options issued during the year - 1,491,645
Reduction of Capital /accumulated losses - -
Net exchange differences on translation of
the financial reports of foreign subsidiaries 1,695,271 1,695,271
Balance at 30 June 2009 1,695,271 19,241,874
Share
based
Issued Accumulated payment
Capital Losses reserve
Consolidated Group $ $ $
Balance at 1 July 2009 14,781,022 (1,316,064) 4,081,645
Comprehensive Income for the year
Loss for the year - (3,436,308) -
Other comprehensive income
Foreign currency translation - - -
Total other comprehensive income - - -
Total comprehensive income for the year - (3,436,308) -
Transactions with owners recorded
directly in equity contributions by and
distributions to owners
Shares issued during the year, net of
costs 47,923,828 - -
Options issued during the year - - -
Balance at 30 June 2010 62,704,850 (4,752,372) 4,081,645
Foreign
Currency
Translation
Reserve Total
Consolidated Group $ $
Balance at 1 July 2009 1,695,271 19,241,874
Comprehensive Income for the year
Loss for the year - (3,436,308)
Other comprehensive income
Foreign currency translation 433,349 433,349
Total other comprehensive income 433,349 433,349
Total comprehensive income for the year 433,349 (3,002,959)
Transactions with owners recorded
directly in equity contributions by and
distributions to owners
Shares issued during the year, net of costs - 47,923,828
Options issued during the year - -
Balance at 30 June 2010 2,128,620 64,162,743
Parent
Issued Accumulated
Capital Losses
$ $
Balance at 1 July 2008 57,819,281 (58,297,793)
Comprehensive Income for the year
Loss attributable to members of the parent entity - (1,316,064)
Other comprehensive income
Total other comprehensive income - -
Total comprehensive income for the year - (1,316,064)
Transactions with owners recorded
directly in equity contributions by and
distributions to owners
Shares issued during the year, net of costs 15,259,534 -
Options issued during the year - -
Reduction of Capital /accumulated losses (58,297,793) 58,297,793
Balance at 30 June 2009 14,781,022 (1,316,064)
Balance at 1 July 2009 14,781,022 (1,316,064)
Comprehensive Income for the year
Loss attributable to members of the parent entity - (2,636,014)
Other comprehensive income
Total other comprehensive income - -
Total comprehensive income for the year - (2,636,014)
Transactions with owners recorded
directly in equity contributions by and
distributions to owners
Shares issued during the year, net of costs 47,923,828 -
Options issued during the year - -
Reduction of Capital /accumulated losses - -
Balance at 30 June 2010 62,704,850 (3,952,078)
Share based
payment
reserve Total
Parent $ $
Balance at 1 July 2008 2,590,000 2,111,488
Comprehensive Income for the year
Loss attributable to members of the parent entity - (1,316,064)
Other comprehensive income
Total other comprehensive income - -
Total comprehensive income for the year - (1,316,064)
Transactions with owners recorded
directly in equity contributions by and
distributions to owners
Shares issued during the year, net of costs - 15,259,534
Options issued during the year 1,491,645 1,491,645
Reduction of Capital /accumulated losses - -
Balance at 30 June 2009 4,081,645 17,546,603
Balance at 1 July 2009 4,081,645 17,546,603
Comprehensive Income for the year
Loss attributable to members of the parent entity - (2,636,014)
Other comprehensive income
Total other comprehensive income - -
Total comprehensive income for the year - (2,636,014)
Transactions with owners recorded
directly in equity contributions by and
distributions to owners
Shares issued during the year, net of costs - 47,923,828
Options issued during the year - -
Reduction of Capital /accumulated losses - -
Balance at 30 June 2010 4,081,645 62,834,417
The statements of changes in equity are to be read in conjunction with the notes
to the financial statements.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
The financial statements are general purpose financial statements, which has
been prepared in accordance with the requirements of the Corporations Act 2001,
Australian Accounting Standards and Interpretations and complies with other
requirements of the law.
The financial statements are prepared on a historical cost basis. Cost is based
on the fair values of the consideration given in exchange for assets.
The financial statements disclose information with respect to the Parent Entity
of the Group. This is contrary to the requirements of the Corporations Amendment
Bill 2010, which was passed by Parliament on 24 June 2010 and received Royal
Assent on 28 June 2010. In order to do this, the Company has applied ASIC Class
Order 10/654. The Class Order allows companies, registered schemes and
disclosing entities that present consolidated financial statements to include
parent entity financial statements as part of their financial report under
Chapter 2M of the Corporations Act 2001.The Company is an entity to which this
class order applies.
The financial report is presented in Australian dollars, which is the functional
currency of the parent.
The company is a listed public company, incorporated in Australia and operating
in Australia and South Africa. The entity`s principal activities are mineral
exploration and subsequent development.
(b) Statement of compliance
The financial report was authorised for issue on 17 September 2010.
The financial statements comply with Australian Accounting Standards, which
include Australian equivalents to International Financial Reporting Standards
(AIFRS). Compliance with AIFRS ensures that the financial report, comprising the
financial statements and notes thereto, complies with International Financial
Reporting Standards (IFRS).
Australian Accounting Standards and Interpretations that have recently been
issued or amended but are not yet effective have not been adopted by the Group
for the annual reporting period ended 30 June 2010. These are outlined in the
table below:
Reference Title Summary
AASB 5 Non-current Clarifies that disclosures
Assets Held required for non-current
for Sale and assets (or disposal
Discontinued groups) classified as held
Operations for sale or discontinued
operations are limited to
those required by AASB
5 unless:
Disclosures are
specifically required for
these assets by other
AASBs; or
Assets and liabilities of a
disposal group are not
within the measurement
requirements of AASB 5
and disclosures are
required by other AASBs.
AASB 107 Statement of Clarifies that only
Cash Flows expenditures that result in a
recognised asset in the
statement of financial
position are eligible for
classification as cash flows
from investing activities.
Application Impact on Group Application
date of financial report date for
standard Group
Periods There will be no 1 July 2010
commencing impact as these
on or after requirements are only
1 January 2010 required to be applied
prospectively to
disclosures for non-
current assets (or
disposal groups)
classified as held for
sale or discontinued
operations.
Periods Initial adoption of this 1 July 2010
commencing on amendment will have
or after no impact as the
1 January 2010 entity only recognises
cash flows from
investing activities for
expenditures that
result in a recognised
asset in the statement
of financial position.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
Reference Title Summary
AASB 117 Leases Land can be classified as
a finance lease for very
long leases where the
significant risks and
rewards are effectively
transferred, despite there
being no transfer of title.
AASB 136 Impairment Clarifies that CGUs to
of Assets which goodwill is
allocated cannot be
larger than an operating
segment as defined in
AASB 8 Operating
Segments before aggregation.
IFRS 7 Financial Deletes various disclosures
Instruments: relating to credit risk,
Disclosures renegotiated loans and
receivables and the fair
value of collateral held.
IAS 1 Presentation A detailed reconciliation of
of Financial each item of other
Statements comprehensive income may
be included in the statement
of changes in equity or in
the notes to the financial
statements.
Application Impact on Group Application
date of financial report date for
standard Group
Periods Initial adoption of this 1 July 2010
commencing on amendment will have
or after no impact as the
1 January 2010 entity has no leases
for land.
Periods There will be no impact 1 July 2010
commencing as these requirements
on or after are only required to be
1 January 2010 applied prospectively to
goodwill impairment
calculations for periods
commencing on or after
Periods There will be no impact 1 July 2011
commencing on on initial adoption to
or after amounts recognised in
1 January 2011 the financial statement
as the amendments
result in fewer
disclosures only.
Periods There will be no impact 1 July 2011
commencing on on initial adoption of this
or after amendment as a
1 January 2011 detailed reconciliation of
each item of other
comprehensive income
has always been
included in the
statement of changes in
equity.
Australian Accounting Standards and Interpretations that have recently been
issued or amended and have been early adopted by the Group for the annual
reporting period ended 30 June 2010 are outlined in the table below:
Reference Title Summary Application date
of standard
AASB 101 Presentation Clarifies that terms of a liability Periods
of Financial that could, at the option of the commencing
Statements counterparty, result in the on or after
liability being settled by the 1 January 2010
issue of equity instruments, do
not affect its classification. This
means that unless the terms of such
liabilities require a transfer of cash or
other assets within 12 months, they do
not necessarily have to be classified
as current liabilities.
(c) Basis of consolidation
The consolidated financial statements comprise the financial statements of
Firestone Energy Ltd (the Company) and its subsidiaries (the Group) as at
30 June each year.
Subsidiaries are all those entities (including special purpose entities)
over which the Group has the power to govern the financial and operating
policies so as to obtain benefits from their activities. The existence and
effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether a group controls another
entity.
The financial statements of the subsidiaries are prepared for the same
reporting period as the Company, using consistent accounting policies.
In preparing the consolidated financial statements, all intercompany
balances and transactions, income and expenses and profit and losses
resulting from intra-group transactions have been eliminated in full.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group and cease to be consolidated from the date on which
control is transferred out of the Group. Investments in subsidiaries are
accounted for at cost in the individual financial statements of Firestone
Energy Ltd.
(d) Critical accounting judgements and significant estimates
l experience and other factors that are considered to be relevant. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions are recognised in the period in which the estimate is revised if it
affects only that period, or in the period of the revision and future periods
if the revision affects both current and future periods.
Recoverability of interest in joint venture
The Group considers the interest in the joint venture asset is recoverable
based on future coal sales from a developed coal mine, and has not been
impaired on the basis that the underlying asset will be successfully
commercialised.
Share-based payment transactions:
The Group measures the cost of equity-settled transactions with employees and
consultants and shares issued in consideration for business combinations by
reference to the fair value of the equity instruments at the date at which they
are granted. The fair value is determined by using a Black and Scholes model,
using the assumptions detailed in Note 16.
(e) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of
three months or less, and bank overdrafts. Bank overdrafts are shown within
short-term borrowings in current liabilities on the statement of financial
position.
(f) Income Tax
The charge for current income tax expenses is based on the profit for the year
adjusted for any non-assessable or disallowed items. It is calculated using tax
rates that have been enacted or are substantively enacted by the balance date.
Deferred tax is accounted for using the liability method in respect of temporary
differences arising between the tax base of assets and liabilities and their
carrying amounts in the financial statements. No deferred income tax will be
recognised from the initial recognition of an asset or liability, excluding a
business combination, where this 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 statement of comprehensive income except where it relates to
items that may be credited directly to equity, in which case the deferred tax is
adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that
future tax profits will be available against which deductible temporary
differences can be utilised.
The amount of benefits brought to account or which may be realised in the future
is based on the assumption that no adverse change will occur in income taxation
legislation and the anticipation that the Company will derive sufficient future
assessable income to enable the benefit to be realised and comply with the
conditions or deductibility imposed by the law.
(g) Jointly controlled operations and assets
The interest of the Group in unincorporated joint ventures are jointly brought
to account by recognising in its financial statements the assets it controls,
the liabilities that it incurs, the expenses it incurs and its share of income
that it earns from the sale of goods or services by the joint venture.
(h) Investment in joint venture
Investment in an incorporated joint venture entity is accounted for using the
equity method of accounting in the consolidated financial statements.
Under the equity method, the investment in the joint venture is carried in the
consolidated statement of financial position at cost plus post-acquisition
changes in the Group`s share of net assets of the joint venture.
After application of the equity method, the Group determines whether it is
necessary to recognise any additional impairment loss with respect to the
Group`s net investment in the joint venture.
The Group`s share of the joint venture post-acquisition profits or losses are
recognised in the statement of comprehensive income. The cumulative post-
acquisition movements are adjusted against the carrying amount of the
investment. When the Group`s share of losses in the joint venture equals or
exceeds its interest in the joint venture, including any unsecured long-term
receivables and loans, the Group does not recognise further losses, unless it
has incurred obligations or made payments on behalf of the joint venture.
The reporting dates of the joint venture and the Group are identical and the
joint venture`s accounting policies conform to those used by the Group for like
transactions and events in similar circumstances.
(i) Mineral Exploration and Evaluation and Development Expenditure
The Group has adopted the policy of capitalising the costs of purchasing its
mining tenements and all exploration and evaluation expenditure in relation to
its mineral tenements as incurred.
All projects are subject to detailed review on an annual basis and accumulated
costs written off to the extent that they will not be recoverable in the future.
(j) Property, Plant and Equipment
Plant and equipment are measured on the cost basis less depreciation and
impairment losses.
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 assets 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 Group will include 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
profit or loss during the financial period in which they are incurred.
Depreciation
The depreciation amount of all fixed assets including building and capitalised
lease assets is depreciated on a straight line basis over their useful lives to
the Group commencing from the time the asset is held ready for use. Leasehold
improvements are depreciated over the shorter of either the unexpired period of
the lease or the estimated useful lives of the improvements.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset Depreciation Rate
Motor vehicles 5 years
Office Furniture & Equipment 4 years
Software 3 years
Leasehold Improvements 3 years
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 profit or loss.
(k) Impairment of Assets
At each reporting date, the Group reviews the carrying values of tangible assets
and intangible assets to determine whether there is any indication that those
assets have been impaired. If such an indication exists, the recoverable amount
of the asset, being the higher of the asset`s fair value less costs to sell and
value in use, is compared to the asset`s carrying value. Any excess of the
asset`s carrying value over its recoverable amount is expensed to the profit or
loss.
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.
(l) Financial Instruments
At present, the Group does not undertake any hedging or deal in derivative
instruments.
Recognition
Financial instruments are initially measured at cost on trade date, which
includes transaction costs, when the related contractual rights or obligations
exist. Subsequent to initial recognition these instruments are measured as set
out below.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market and are stated at
amortised cost using the effective interest rate method. They are included in
current assets, except for those maturities greater than 12 months after the
balance sheet date which are classified as non current assets. Loans and
receivables are included in trade and other receivables (note 7). They are
measured initially at fair value and subsequently at amortised cost.
Financial Liabilities
Non-derivative financial liabilities are recognised initially at fair value and
subsequently at amortised cost, comprising original debt less principle payments
and amortisation.
Impairment
At each reporting date, the Group assesses whether there is objective evidence
that a financial instrument has been impaired. If there is evidence of
impairment for any of the Group`s financial assets carried at amortised cost,
the loss is measured as the difference between the assets carrying amount and
the present value of estimated future cash flows, excluding future credit losses
that have not been incurred. The cash flows are discounted at the asset`s
original effective interest rate. Any impairment losses are taken to the
statement of comprehensive income.
(m) Revenue Recognition
Revenue from the sale of goods and disposal of other assets is recognised when
the Group has passed control of the goods or other assets to the buyer.
Interest income is recognised when it is credited by the relevant financial
institution.
(n) Borrowing Costs
Borrowing costs are recognised as an expense when incurred except those that
relate to the acquisition, construction or production of qualifying assets where
the borrowing cost is added to the cost of those assets until such time as the
assets are substantially ready for their intended use or sale. Assets
capitalised within IFRS 6 have not been considered to be qualifying assets.
(o) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the company, excluding any loss of servicing equity other than
ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued
during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of
basic earnings per share to take into account the after income tax effect of
interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of additional ordinary shares that would
have been outstanding assuming the conversion of all dilutive potential ordinary
shares.
(p) Leases
Lease payments for operating leases, where substantially all the risks and
benefits remain with the lessor, are charged as expenses on a straight line
basis over the lease term.
(q) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the
consideration received less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest method.
Gains and losses are recognised in profit or loss when the liabilities are
derecognised.
(r) Share-based payment transactions
Equity settled transactions:
The Group provides benefits to employees (including senior executives) or
consultants of the Group in the form of share-based payments, whereby employees
or consultants render services in exchange for shares or rights over shares
(equity-settled transactions).
The cost of these equity-settled transactions with employees or consultants is
measured by reference to the fair value of the equity instruments at the date at
which they are granted. The fair value is determined by an internal valuation
using a Black-Scholes option pricing model for options or market price for
ordinary shares or the fair value of the services received.
In valuing equity-settled transactions, no account is taken of any performance
conditions, other than conditions linked to the price of the shares of Firestone
Energy Limited (market conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a
corresponding increase in equity, over the period in which the performance
and/or service conditions are fulfilled, ending on the date on which the
relevant employees become fully entitled to the award (the vesting period).
The cumulative expense recognised for equity-settled transactions at each
reporting date until vesting date reflects (i) the extent to which the vesting
period has expired and (ii) the Group`s best estimate of the number of equity
instruments that will ultimately vest. No adjustment is made for the likelihood
of market performance conditions being met as the effect of these conditions is
included in the determination of fair value at grant date. The statement of
comprehensive income charge or credit for a period represents the movement in
cumulative expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is only conditional upon a market condition. If the terms
of an equity-settled award are modified, as a minimum an expense is recognised
as if the terms had not been modified. In addition, an expense is recognised for
any modification that increases the total fair value of the share-based payment
arrangement, or is otherwise beneficial to the employee, as measured at the date
of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on
the date of cancellation, and any expense not yet recognised for the award is
recognised immediately. However, if a new award is substituted for the cancelled
award and designated as a replacement award on the date that it is granted, the
cancelled and new award are treated as if they were a modification of the
original award, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional
share dilution in the computation of earnings per share.
(s) Employee leave benefits
Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual
leave and accumulating sick leave expected to be settled within 12 months of the
reporting date are recognised in other payables in respect of employees`
services up to the reporting date. They are measured at the amounts expected to
be paid when the liabilities are settled. Liabilities for non-accumulating sick
leave are recognised when the leave is taken and are measured at the rates paid
or payable.
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.
(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 results and that outflow can be reliably measured.
Provisions are measured at the present value of management`s best estimate of
the expenditure required to settle the present obligation at the balance sheet
date. The discount rate used to determine the present value reflects current
market assessments of the time value of money and the risks specific to the
liability. The increase in the provision due to the passage of time is
recognized as interest expense.
(u) Foreign currency translation
Both the functional and presentation currency of Firestone Energy Limited is
Australian dollars. Each entity in the Group determines its own functional
currency and items included in the financial statements of each entity are
measured using that functional currency.
Transactions:
Transactions in foreign currencies are initially recorded in the functional
currency by applying the exchange rates ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance date.
All exchange differences in the consolidated financial report are taken to
profit or loss with the exception of differences on foreign currency borrowings
that provide a hedge against a net investment in a foreign entity. These are
taken directly to equity until the disposal of the net investment, at which time
they are recognised in profit or loss.
Tax charges and credits attributable to exchange differences on those borrowings
are also recognised in equity.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate as at the date of the initial
transaction.
Non-monetary items measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value was determined.
Foreign Subsidiaries Translation:
The functional currency of the foreign operations, Checkered Flag Investments 2
(Pty) Ltd, Lexshell 126 General Trading (Pty) Ltd and Utafutaji Trading 75 (Pty)
Ltd is South African Rand (ZAR). As at the reporting date the assets and
liabilities of these subsidiaries are translated into the presentation currency
of Firestone Energy Limited at the rate of exchange ruling at the balance date
and their income statements are translated at the weighted average exchange rate
for the year.
Equity accounts are translated at their historical exchange rates. The exchange
differences arising on the translation are taken directly to a separate
component of equity.
On disposal of a foreign entity, the deferred cumulative amount recognised in
equity relating to that particular foreign operation is recognised in statement
of comprehensive income.
(v) Issued capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. Incremental costs directly
attributable to the issue of new shares or options for the acquisition of a
business are not included in the cost of the acquisition as part of the purchase
consideration.
(w) Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to
conform to changes in presentation for the current financial year.
(x)
(y) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group
prior to the end of the financial year which are unpaid. The amounts are
unsecured and are usually paid within 30 days of recognition.
(z) Goods and services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated
GST, unless the GST incurred is not recoverable from the taxation authority. In
this case it is recognised as part of the cost of acquisition of the asset or as
part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or
payable. The net amount of GST recoverable from, or payable to, the taxation
authority is included with other receivables or payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows
arising from investing or financing activities which are recoverable from, or
payable to the taxation authority, are presented as operating cash flows.
2. REVENUE & EXPENSES
Consolidated Group
2010 2009
$ $
(a) Revenue
Interest received 62,386 55,667
62,386 55,667
(b) Finance Expenses
Interest expense 901,441 35,466
Amortisation of transaction costs 380,114 -
1,281,555 35,466
Parent Entity
2010 2009
$ $
(a) Revenue
Interest received 62,376 55,667
62,376 55,667
(b) Finance Expenses
Interest expense 859,528 35,466
Amortisation of transaction costs 380,114 -
1,239,642 35,466
3. INCOME TAX EXPENSE
(a) Income tax recognised in profit
No income tax is payable by the parent or consolidated entities as they recorded
losses for income tax purposes for the year.
(b) Numerical reconciliation between income tax expense and the loss before
income tax.
The prima facie income tax benefit on pre-tax accounting loss from operations
reconciles to the income tax expense in the financial statements as follows:
Consolidated Group
2010 2009
$ $
Accounting loss before tax (3,436,308) (1,316,064)
Income tax benefit at 30% (2009:30%) 1,030,892 394,819
Non-deductible expenses:
Foreign tax rate adjustment 20,617 -
Foreign exchange gain (43,581) (2,976)
Share based payment - (3,494)
Other non deductible expenses 428,970 (920)
Unrecognised tax losses 624,886 (387,429)
Income tax benefit attributable to loss from
ordinary activities before tax - -
Parent Entity
2010 2009
$ $
Accounting loss before tax (2,636,014) (1,316,064)
Income tax benefit at 30% (2009:30%) 790,804 394,819
Non-deductible expenses:
Foreign tax rate adjustment - -
Foreign exchange gain (43,581) (2,976)
Share based payment - (3,494)
Other non deductible expenses 428,970 (920)
Unrecognised tax losses 405,415 (387,429)
Income tax benefit attributable to loss from
ordinary activities before tax - -
Consolidated Group
2010 2009
$ $
(c) Unrecognised deferred tax balances
Tax losses attributable to members of the
Company - revenue 9,505,658 10,300,060
Potential tax benefit at 30% 2,851,697 3,090,018
Deferred tax liability not recognised
Deferred expenditure on African projects - (922,617)
Deferred tax asset not recognised
Amounts recognised in profit & loss
-employee provisions 1,432 3,046
-other 4,770 15,500
Net unrecognised deferred tax asset at 30% 2,857,899 2,185,947
Parent Entity
2010 2009
$ $
Tax losses attributable to members of the
Company - revenue 8,254,541 10,300,060
Potential tax benefit at 30% 2,476,362 3,090,018
Deferred tax liability not recognised
Deferred expenditure on African projects - (922,617)
Deferred tax asset not recognised
Amounts recognised in profit & loss
-employee provisions 1,432 3,046
-other 4,770 15,500
Net unrecognised deferred tax asset at 30% 2,482,564 2,185,947
4. LOSS PER SHARE
Consolidated Group and
Parent
2010 2009
Cents Cents
Basic loss per share (cents per share) (0.16) (0.12)
The loss and weighted average number of
ordinary shares used in the calculation of
basic earnings per share is as follows:
Loss for the year (3,436,308) (1,316,064)
Weighted average number of shares outstanding
during the
year used in calculations of basic loss per
share 2,084,646,605 1,112,280,531
Diluted loss per share
There is no dilution of shares due to options as the potential ordinary shares
are not dilutive and are therefore not included in the calculation of diluted
loss per share
5. SEGMENT INFORMATION
Management has determined that the consolidated group has one reportable
segment, being coal exploration in South Africa. As the company is focused on
mineral exploration, the Board monitors the consolidated group based on actual
versus budgeted exploration expenditure incurred by area of interest.
This internal reporting framework is the most relevant to assist the Board with
making decisions regarding the consolidated group and its ongoing exploration
activities, while also taking into consideration the results of exploration work
that has been performed to date. As the company is in the exploration phase it
has no major customers.
Segment information provided to the Board:
Consolidated Group
2010 2009
$ $
Revenue from external sources - -
Reportable segment loss 150,172 -
Reported segment assets 79,371,322 19,645,502
A reconciliation of reportable segment loss to
operating
loss before income tax is provided as follows:
Total loss for reportable segment (150,172) -
Other revenue and Income 236,011 55,667
Administration expenses (539,527) (68,857)
Finance Costs (1,239,642) (35,466)
ASX fees and share registry expenses (237,201) (122,629)
Employee and consultant expenses (601,445) (715,041)
Legal and professional fees (642,791) (202,447)
Occupancy costs (76,242) (108,603)
Share based payments - (11,645)
Travel and accommodation (185,299) (107,043)
Loss before income tax from continuing operations (3,436,308) (1,316,064)
6. (a) CASH AND CASH EQUIVALENTS
Consolidated Group
2010 2009
$ $
Cash at bank 2,130,542 1,870,754
2,130,542 1,870,754
Cash at bank earns interest at floating rates based on daily bank deposit
rates. The Group and the parent entities exposure to interest rate risk is
discussed in note 15. The maximum exposure to credit risk at the end of the
reporting period is the carrying amount of cash and cash equivalents mentioned
above.
Reconciliation to Statement of Cash Flows
For the purposes of the cash flow statement, cash and cash equivalents comprise
the following at 30 June:
Cash and cash equivalents 2,130,542 1,870,754
Parent Entity
2010 2009
$ $
Cash at bank 1,208,828 1,870,754
1,208,828 1,870,754
Cash at bank earns interest at floating rates based on daily bank deposit
rates. The Group and the parent entities exposure to interest rate risk is
discussed in note 15. The maximum exposure to credit risk at the end of the
reporting period is the carrying amount of cash and cash equivalents mentioned
above.
Reconciliation to Statement of Cash Flows
For the purposes of the cash flow statement, cash and cash equivalents comprise
the following at 30 June:
Cash and cash equivalents 1,208,828 1,870,754
(b) RECONCILIATION TO STATEMENT OF CASH FLOWS
Reconciliation of loss after income tax to net
cash flows from operating activities:
Consolidated Group
2010 2009
$ $
Loss after income tax (3,436,308) (1,316,064)
Non cash flows in operating loss:
Depreciation 26,833 8,083
Amortisation of borrowing costs 380,114 -
Foreign exchange loss (1,146) 9,921
Share based payments expense 85,000 11,645
(2,945,508) (1,286,415)
Changes in operating assets and liabilities:
(Increase)/decrease in trade debtors - (21,119)
(Increase)/decrease in other receivables (389,984) (26,505)
Increase/(decrease) in other provisions (5,381) 15,663
Increase/(decrease) in trade and other Payables (1,064,638) -
Net cash outflow from operating activities (4,405,511) (1,318,376)
Parent Entity
2010 2009
$ $
Loss after income tax (2,636,014) (1,316,064)
Non cash flows in operating loss:
Depreciation 12,404 8,083
Amortisation of borrowing costs 380,114 -
Foreign exchange loss (1,146) 9,921
Share based payments expense 85,000 11,645
(2,159,643) (1,286,415)
Changes in operating assets and liabilities:
(Increase)/decrease in trade debtors - (21,119)
(Increase)/decrease in other receivables (129,299) (26,505)
Increase/(decrease) in other provisions (5,381) 15,663
Increase/(decrease) in trade and other Payables (1,129,081) -
Net cash outflow from operating activities (3,423,403) (1,318,376)
For the purposes of the statements of cash flows, cash and cash equivalents
comprise cash on hand and at bank and investments in money market instruments,
net of outstanding bank overdrafts.
(c) NON CASH INVESTING AND FINANCING ACTIVITIES
Consolidated Group
2010 2009
$ $
Repayment of borrowings via equity 3,225,000 -
Acquisition of Joint Venture Properties via equity 43,408,828 12,680,549
Consultancy costs paid via equity 1,290,000 146,978
Parent Entity
2010 2009
$ $
Repayment of borrowings via equity 3,225,000 -
Acquisition of Joint Venture Properties via equity 43,408,828 12,680,549
Consultancy costs paid via equity 1,290,000 146,978
7. TRADE AND OTHER RECEIVABLES
Consolidated Group
2010 2009
$ $
Current
Trade receivables - 13,564
Amount receivable from controlled entity - -
GST recoverable 328,356 16,483
Security bond 8,000 8,000
Prepayments 83,162 -
Other receivables 513 -
420,031 38,047
Non-Current
Security bond 26,758 26,758
Deferred project costs - 144,891
Environmental rehabilitation bond 120,361 -
147,119 171,649
Parent Entity
2010 2009
$ $
Current
Trade receivables - 13,564
Amount receivable from controlled entity 20,436,598
GST recoverable 144,754 5,082,702
Security bond 8,000 16,483
Prepayments 6,592 8,000
Other receivables - -
20,595,944 5,120,749
Non-Current
Security bond 26,758 26,758
Deferred project costs - 144,891
Environmental rehabilitation bond - -
26,758 171,649
As at 30 June 2010 current trade debtors of the company were nil (2009:$13,564)
and were not impaired as management is confident that these amounts will be
recovered.
The ageing of these receivables is as follows:
Consolidated Group
2010 2009
$ $
1 to 3 months - -
3 to 6 months - -
Over 6 months - 13,564
Parent Entity
2010 2009
$ $
1 to 3 months - -
3 to 6 months - -
Over 6 months - 13,564
Maturity of Security Bonds
a) Lease # 1 $26,758 30 April 2012
b) Lease # 2 $ 8,000 21 February 2010
8. INTEREST IN JOINT VENTURE
Consolidated
2010 2009
$ $
Interest in capitalised exploration and evaluation
expenditure 79,371,322 19,645,502
Parent
2010 2009
$ $
Interest in capitalised exploration and evaluation
expenditure - -
In the prior year, the Company had entered into a Joint Venture Agreement (T1)
with Sekoko Coal (Pty) Ltd for a coal project in the W aterberg locality in
South Africa comprising the Olieboomsfontein and Vetleegte properties. The
participation interest is that Checkered Flag (a wholly owned subsidiary) has a
total holding of 30% in the projects relating to this joint venture. At 30 June
the company has the rights to earn up to an interest of 55%.
In September 2009, Firestone Energy Ltd issued 868,176,563 shares on behalf of
Lexshell Trading which was deemed to have a fair value of $43,408,828 at the
transaction date.
The issue of shares was consideration for entering into another Joint Venture
Agreement (T2) with Sekoko Coal (Pty) Ltd for a coal project in the Waterberg
locality in South Africa, comprising the Hooikraal, Massenberg and Minnasvlakte
properties. At 30 June Firestone Energy has full participation interest and is
entitled earn up to a 60% in the project
The Joint Venture is unincorporated at 30 June 2010 and is accounted for in
accordance with note 1(g).
9. OTHER FINANCIAL ASSETS
Consolidated
2010 2009
$ $
Non-Current
Investments carried at cost:
Investments in subsidiaries - -
Parent
2010 2009
$ $
Non-Current
Investments carried at cost:
Investments in subsidiaries 56,276,357 12,867,529
(b) Subsidiaries of Firestone Energy
Limited are set out below:
Place of Equity holding
Incorporation
2010 2009
% %
Parent Entity:
Firestone Energy Limited Australia
Controlled Entities:-
Checkered Flag Investments 2 (Pty) Ltd
Lexshell 126 General Trading (Pty) Ltd South Africa 100 100
South Africa 100 100
Place of Carrying Value of Parent
Incorporation Entity`s Investment
2010 2009
$ $
Parent Entity:
Firestone Energy Limited Australia
Controlled Entities:-
Checkered Flag Investments 2 (Pty) Ltd 1 1
Lexshell 126 General Trading
(Pty) Ltd South Africa 12,867,514 12,867,514
South Africa 43,408,843 15
56,276,357 12,867,529
Lexshell 126 General Trading (Pty) Ltd acquired a 100% interest in Utafutaji
Trading 75 (Pty) Ltd during the period, at a cost of $15.
1 In the prior period, the entity had acquired all the issued shares in
Checkered Flag Investments 2 (Pty) Ltd, a South African exploration company, for
a consideration of 180,000,000 fully paid ordinary shares, 90,000,000 options
with an expiry of 30 June 2013, and a payment of up to USD 150,000.
Details of net assets acquired are as follows:
Business Combination - 2009
Purchase consideration
Issue 180,000,000 fully paid ordinary shares at market value 5,040,000
Issue 90,000,000 options 666,000
Accrued expense reimbursement 187,500
Total purchase consideration 5,893,500
Fair value of net identifiable assets acquired (refer below) 5,893,500
The options were valued using a Black-Scholes option pricing model applying the
following inputs:
Weighted average exercise price 0.06
4.589
Weighted average life of the option years
Underlying share price 0.025
Expected share price volatility 60.0%
Risk free interest rate 5.79%
Fair value per option $0.0074
The assets and liabilities arising from the acquisition are as follows:
Acquiree`s
carrying Fair value
amount
$ $
Cash and cash equivalents 16 16
Option to acquire interest in JV Net identifiable
assets acquired - 5,893,484
16 5,893,500
The acquired business contributed revenues of nil and net loss of nil to the
group for the period to 30 June 2009.
10. PLANT AND EQUIPMENT
Consolidated Group
2010 2009
$ $
Office furniture and equipment
Cost 122,779 41,591
Accumulated depreciation (35,396) (11,137)
87,383 30,454
Leasehold improvements
Cost - -
Accumulated depreciation - -
- -
Motor Vehicles
Cost 28,830 -
Accumulated depreciation (2,883) -
25,947 -
Total Plant and Equipment 113,330 30,454
Parent Entity
2010 2009
$ $
Office furniture and equipment
Cost 50,926 41,591
Accumulated depreciation (23,541) (11,137)
27,385 30,454
Leasehold improvements
Cost - -
Accumulated depreciation - -
- -
Motor Vehicles
Cost - -
Accumulated depreciation - -
- -
Total Plant and Equipment 27,385 30,454
Movements in the carrying amounts of each class of property, plant & equipment
at the beginning and end of the current financial period is as set out below:
Consolidated Group
2010 2009
Office furniture and equipment $ $
Balance at the beginning of year 30,454 69,718
Additions 81,188 21,436
Depreciation expense (24,259) (8,083)
Disposals - (52,617)
Carrying amount at the end of the year 87,383 30,454
Leasehold improvements
Balance at the beginning of year - 5,589
Additions - -
Depreciation expense - -
Disposals - (5,589)
Carrying amount at the end of the year - -
Motor Vehicles
Balance at the beginning of year - -
Additions 28,830 -
Depreciation expense (2,883) -
Disposals - -
Carrying amount at the end of the year 25,947 -
Parent Entity
2010 2009
Office furniture and equipment $ $
Balance at the beginning of year 30,454 69,718
Additions 9,335 21,436
Depreciation expense (12,404) (8,083)
Disposals - (52,617)
Carrying amount at the end of the year 27,385 30,454
Leasehold improvements
Balance at the beginning of year - 5,589
Additions - -
Depreciation expense - -
Disposals - (5,589)
Carrying amount at the end of the year - -
Motor Vehicles
Balance at the beginning of year - -
Additions - -
Depreciation expense - -
Disposals - -
Carrying amount at the end of the year - -
11. TRADE, OTHER PAYABLES AND PROVISIONS
Consolidated Group
2010 2009
$ $
Current
Trade payables 1,323,782 525,077
Employee entitlements 4,772 10,153
Accruals 620,853 1,363,364
Other payables 1,540,080 15,938
3,489,487 1,914,532
Parent Entity
2010 2009
$ $
Current
Trade payables 228,318 525,077
Employee entitlements 4,772 10,153
Accruals 537,651 1,363,364
Other payables - 15,938
770,741 1,914,532
Trade payables are non-interest bearing and are normally settled on 30-day
terms, information about the Group and the parent entity`s exposure to foreign
exchange risk is provided in note 15.
12. BORROWINGS
Consolidated Group
2010 2009
$ $
Current
Loans carried at amortised cost
Unsecured loans - 100,000
Non-Current
Loans carried at amortised cost
Convertible note (Face Value) 15,923,080 500,000
Transaction Costs (Convertible notes) (1,392,966) -
14,530,114 500,000
Parent Entity
2010 2009
$ $
Current
Loans carried at amortised cost
Unsecured loans - 100,000
Non-Current
Loans carried at amortised cost
Convertible note (Face Value) 15,923,080 500,000
Transaction Costs (Convertible notes) (1,392,966) -
14,530,114 500,000
The total draw down facility is $25 million with a maturity date of 3 years from
the date of issue. The notes can be converted at any time before the maturity
date and bears interest at a fixed rate of 10% per annum.
Details of the group`s exposure to risks arising from current and non-current
borrowings are set out in note 15.
13. ISSUED CAPITAL
Consolidated Group
2010 2009
$ $
2,331,300,464 (2009: 1,354,951,295 ) fully paid
ordinary shares 62,704,850 14,781,022
Parent Entity
2010 2009
$ $
2,331,300,464 (2009: 1,354,951,295 ) fully paid
ordinary shares 62,704,850 14,781,022
Consolidated Group
2010 2009
(i) Ordinary shares - number No. No.
At start of period 1,354,951,295 709,208,879
Options converted at 1 cent - -
Options converted 11 Jul 2008 at 1 cent - 24,000,000
Options converted 13 Aug 2008 at 1 cent - 67,500,000
Issue to Sekoko 29 Oct 2008 at 2.8 cents - 220,000,000
Issue for Checkered Flag acquisition 29 Oct 2008
at 2.8 cents - 180,000,000
Options converted 19 Nov 2008 at 1 cent - 49,750,000
Issue to consultant 23 Nov 2008 at 2.8 cents - 4,833,325
Placement for working capital 23 Dec 09 at 1.1 cents - 22,727,273
Placement for working capital 24 Feb 09 at 1.1 cents - 22,681,818
Options exercised 4 May 2009 at 1 cent - 1,250,000
Options exercised 19 May 2009 at 1 cent - 1,250,000
Placement for working capital 16 Jun 09 at 4 cents - 45,500,000
Placement for working capital 30 Jun 09 at 4 cents - 6,250,000
Conversion of Convertible loan 16 Sept at 4
cents 67,000,000 -
Conversion of Convertible note 16 Sept at 3.6
cents 15,172,606 -
Issued for the Sekoko coal transaction 30 Sept
2009 at 5 cents 868,176,563 -
Issue to consultant 30 Sept 2009 at 5.0 cents 25,000,000 -
Issue to consultant 30 Sept 2009 at 4.0 cents 1,000,000 -
Balance at 30 June 2,331,300,464 1,354,951,295
Parent Entity
2010 2009
(i) Ordinary shares - number No. No.
At start of period 1,354,951,295 709,208,879
Options converted at 1 cent - -
Options converted 11 Jul 2008 at 1 cent - 24,000,000
Options converted 13 Aug 2008 at 1 cent - 67,500,000
Issue to Sekoko 29 Oct 2008 at 2.8 cents - 220,000,000
Issue for Checkered Flag acquisition 29 Oct 2008
at 2.8 cents - 180,000,000
Options converted 19 Nov 2008 at 1 cent - 49,750,000
Issue to consultant 23 Nov 2008 at 2.8 cents - 4,833,325
Placement for working capital 23 Dec 09 at 1.1 cents - 22,727,273
Placement for working capital 24 Feb 09 at 1.1 cents - 22,681,818
Options exercised 4 May 2009 at 1 cent - 1,250,000
Options exercised 19 May 2009 at 1 cent - 1,250,000
Placement for working capital 16 Jun 09 at 4 cents - 45,500,000
Placement for working capital 30 Jun 09 at 4 cents - 6,250,000
Conversion of Convertible loan 16 Sept at 4
cents 67,000,000 -
Conversion of Convertible note 16 Sept at 3.6
cents 15,172,606 -
Issued for the Sekoko coal transaction 30 Sept
2009 at 5 cents 868,176,563 -
Issue to consultant 30 Sept 2009 at 5.0 cents 25,000,000 -
Issue to consultant 30 Sept 2009 at 4.0 cents 1,000,000 -
Balance at 30 June 2,331,300,464 1,354,951,295
Consolidated Group
2010 2009
(ii) Ordinary shares - value $ $
At start of period 14,781,022 57,819,281
Options converted at 1 cent - -
Options converted 11 Jul 2008 at 1 cent - 240,000
Options converted 13 Aug 2008 at 1 cent - 675,000
Issue to Sekoko 29 Oct 2008 at 2.8 cents - 6,160,000
Issue for Checkered Flag acquisition 29 Oct 2008
at 2.8 cents - 5,040,000
Options converted 19 Nov 2008 at 1 cent - 497,500
Issue to consultant 23 Nov 2008 at 2.8 cents - 135,334
Placement for working capital 23 Dec 09 at 1.1 cents - 250,000
Reduction of capital - (58,297,793)
Placement for working capital 24 Feb 09 at 1.1 cents - 249,500
Options exercised 4 May 2009 at 1 cent - 12,500
Options exercised 19 May 2009 at 1 cent - 12,500
Placement for working capital 16 Jun 09 at 4 cents - 1,820,000
Placement for working capital 30 Jun 09 at 4 cents - 250,000
Conversion of Convertible loan 16 Sept at 4 cents 2,680,000 -
Conversion of Convertible note 16 Sept at 3.6
cents 545,000 -
Issued for the Sekoko coal transaction 30 Sept
2009 at 5 cents 43,408,828 -
Issue to consultant 30 Sept 2009 at 5.0 cents 1,250,000 -
Issue to consultant 30 Sept 2009 at 4.0 cents 40,000 -
Less: Share issue costs - (82,800)
Balance at 30 June 62,704,850 14,781,022
Parent Entity
2010 2009
(ii) Ordinary shares - value $ $
At start of period 14,781,022 57,819,281
Options converted at 1 cent - -
Options converted 11 Jul 2008 at 1 cent - 240,000
Options converted 13 Aug 2008 at 1 cent - 675,000
Issue to Sekoko 29 Oct 2008 at 2.8 cents - 6,160,000
Issue for Checkered Flag acquisition 29 Oct 2008
at 2.8 cents - 5,040,000
Options converted 19 Nov 2008 at 1 cent - 497,500
Issue to consultant 23 Nov 2008 at 2.8 cents - 135,334
Placement for working capital 23 Dec 09 at 1.1 cents - 250,000
Reduction of capital - (58,297,793)
Placement for working capital 24 Feb 09 at 1.1 cents - 249,500
Options exercised 4 May 2009 at 1 cent - 12,500
Options exercised 19 May 2009 at 1 cent - 12,500
Placement for working capital 16 Jun 09 at 4 cents - 1,820,000
Placement for working capital 30 Jun 09 at 4 cents - 250,000
Conversion of Convertible loan 16 Sept at 4 cents 2,680,000 -
Conversion of Convertible note 16 Sept at 3.6
cents 545,000 -
Issued for the Sekoko coal transaction 30 Sept
2009 at 5 cents 43,408,828 -
Issue to consultant 30 Sept 2009 at 5.0 cents 1,250,000 -
Issue to consultant 30 Sept 2009 at 4.0 cents 40,000 -
Less: Share issue costs - (82,800)
Balance at 30 June 62,704,850 14,781,022
Unlisted Options
Unissued ordinary shares of the Company under option are as follows:
Number Exercise price
under option Expiry date of option
30,000,000 30-Nov-12 $0.05
110,000,000 31-May-13 $0.06
96,904,767 30-Jun-13 $0.06
25,875,000 30-Jun-14 $0.06
No option holder has any right under the options to participate in any other
share issue of the Company.
14. RESERVES
Consolidated Group
2010 2009
$ $
Reserves 6,210,265 5,776,916
Parent Entity
2010 2009
$ $
Reserves 4,081,645 4,081,645
Reserves comprise the following:
Share based payment reserve
Consolidated Group
2010 2009
Options - number No. No.
At start of period 262,779,767 173,750,000
Options issued in consideration for project purchase - 200,000,000
Options issued in consideration for consulting services - 6,904,767
Free attaching options issued with share placement - 25,875,000
Exercised during the period - (143,750,000)
Balance at 30 June 262,779,767 262,779,767
Parent Entity
2010 2009
Options - number No. No.
At start of period 262,779,767 173,750,000
Options issued in consideration for project purchase - 200,000,000
Options issued in consideration for consulting services - 6,904,767
Free attaching options issued with share placement - 25,875,000
Exercised during the period - (143,750,000)
Balance at 30 June 262,779,767 262,779,767
Consolidated Group
2010 2009
Options - value $ $
At start of period 4,081,645 2,590,000
Options issued - -
Options issued in consideration for project purchase - 1,480,000
Options issued in consideration for consulting services - 11,645
Balance at 30 June 4,081,645 4,081,645
Foreign Currency Translation Reserve
At start of period 1,695,271 -
Currency translation differences 433,349 1,695,271
Balance at 30 June 2,128,620 1,695,271
Parent Entity
2010 2009
Options - value $ $
At start of period 4,081,645 2,590,000
Options issued - -
Options issued in consideration for project purchase - 1,480,000
Options issued in consideration for consulting services - 11,645
Balance at 30 June 4,081,645 4,081,645
Foreign Currency Translation Reserve
At start of period - -
Currency translation differences - -
Balance at 30 June - -
Nature and purpose of reserves
Share based payments reserve
This reserve is used to record the value of equity benefits provided to
employees and directors or consultants as part of their remuneration or services
to the entity. Refer to Note 16 for further details.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences
arising from the translation balances of foreign subsidiaries.
15. FINANCIAL INSTRUMENTS
(i) Capital Risk Management
The Group manages its capital to ensure that entities in the Group will be able
to continue as a going concern while maximising the return to stakeholders
through the optimisation of the debt and equity balance.
The Group`s overall strategy remains unchanged from 2010.
The capital structure of the Group consists of debt, cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued
capital, reserves and accumulated losses.
None of the Group`s entities are subject to externally imposed capital
requirements.
Gearing levels are reviewed by the Board on a regular basis after factoring in
the cost of capital and the risks associated with each class of capital.
The company`s objectives when managing capital are to safeguard their ability to
continue as a going concern, so that they can continue to provide returns to
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
(ii) Financial risk management objectives
The Group`s activities may expose it to a variety of financial risks in the
future: market risk (including currency risk and interest rate risk), credit
risk and liquidity risk. The Groups overall risk management program does focus
on the unpredictable nature of the financial markets and seek to minimise
potential adverse effects on the financial performance of the Group.
Risk management is carried out under an approved framework covering a risk
management policy and internal compliance and control by management. The Board
identifies, evaluates and approves measures to address financial risks.
(iii) Market risk
Cash flow interest rate risk
The Consolidated entity`s main interest rate risk arises from cash deposits to
be used in investment, exploration and development of areas of interest.
Deposits at variable rates expose the Group to cash flow interest rate risk.
During 2010 and 2009, the Groups deposits at variable rates were denominated in
Australian Dollars and South African Rand.
As at the reporting date, the Parent and Consolidated entity had the following
variable rate deposits and there were no interest rate swap contracts
outstanding:
2010
Parent
Weighted
average interest
rate Balance
% $
Deposit - Cash 4.5% 1,208,828
Consolidated
Deposit - Cash 2.5% 2,130,542
2009
Parent
Weighted
average interest
rate Balance
% $
Deposit - Cash 4.5% 1,870,754
Consolidated
Deposit - Cash 4.5% 1,870,754
Summarised Sensitivity Analysis - Interest Rate Risk and Foreign Currency Risk
The effect of possible interest rate movements used to determine the impact upon
profit and loss and equity have been determined based upon management`s
assessment of current and future market conditions.
As a result of increasing investment overseas, large transactions are
denominated in South African Rand, and the Group`s balance sheet can be affected
significantly by movements in the ZAR/AUD exchange rates. The Group seeks to
mitigate some of the effect of its foreign currency exposure by holding South
African Rand.
The Group also has transactional currency exposures. Such exposure arises from
sales or purchases by an operating entity in currencies other than the
functional currency.
The Group does not have a policy to enter into forward contracts and does not
negotiate hedge derivatives to exactly match the terms of the hedged item.
At 30 June, the Group had the following exposure to Australian dollar short term
interest rates, South African prime overdraft rate and ZAR foreign currency
expressed in AUD equivalents that are not designated in cash flow hedges:
Consolidated Consolidated
Group Group
2010 2009
$ $
Subject to Foreign Currency Risk:
Financial assets
Cash and cash equivalents 921,969 22,820
Trade and Other Receivables 129,593 -
1,051,562 22,820
Financial liabilities
Trade and other payables 1,549,312 1,435,173
Subject to Interest Rate Risk:
Financial assets
Cash and cash equivalents 2,130,797 1,870,754
Financial liabilities
Trade and other payables 1,531,394 -
Parent Entity Parent Entity
2010 2009
$ $
Subject to Foreign Currency Risk:
Financial assets
Cash and cash equivalents - 22,820
Trade and Other Receivables - -
-
Financial liabilities
Trade and other payables - 1,435,173
Subject to Interest Rate Risk:
Financial assets
Cash and cash equivalents 1,208,828 1,870,754
Financial liabilities
Trade and other payables - -
The following sensitivity is based on the foreign currency risk and interest
rate risk exposures in existence at the reporting date.
Based on historical information, and market trends, management`s assessment of
the possible change in foreign exchange rates are between the range of 10%
either way. As for interest rates, management has determined a range of 50 basis
points decrease and a 100 basis point increase is appropriate.
Based on these factors, at 30 June the effects on post tax loss and equity
would be as follows;
Consolidated Consolidated
Group Group
Future possible changes in interest rates and
foreign exchange rates based on managements estimates.
2010 2009
$ $
Interest Rates + 100 bp 5,994 18,708
Interest Rates - 50 bp (2,997) (9,354)
AUD/ZAR+10% (49,775) 2,589
AUD/ZAR - 10% 49,775 (1,127)
Parent Entity Parent Entity
Future possible changes in interest rates and
foreign exchange rates based on managements estimates.
2010 2009
$ $
Interest Rates + 100 bp 12,088 18,708
Interest Rates - 50 bp (6,044) (9,354)
AUD/ZAR+10% - 2,589
AUD/ZAR - 10% - (1,127)
(iv) Credit risk
The Group has no significant concentrations of credit risk. Cash transactions
are limited to high credit quality financial institutions. The company has a
concentration in the receivable from its subsidiaries.
Credit risk arises from cash and cash equivalents, deposits with banks and
financial institutions, as well as credit exposures on outstanding receivables
and committed transactions. In relation to other credit risk areas management
assesses the credit quality of the customer, taking into account its financial
position, past experience and other factors.
(v) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash, the
availability of funding through an adequate amount of committed credit
facilities. The Consolidated entity manages liquidity risk by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities. The Group will aim at maintaining flexibility
in funding by accessing appropriate committed credit lines available from
different counterparties where appropriate and possible. Surplus funds when
available are generally only invested in high credit quality financial
institutions in highly liquid markets.
Maturity analysis of financial assets and liability based on management`s
expectation
Consolidated
6-12
Year ended 30 June 2010 <6 months months 1-5 years
Financial assets
Trade & other receivables 1 513 - 147,119
513 - 147,119
Financial liabilities
Trade & other payables (3,489,487) - -
Borrowings 2 - (1,081,808) (18,803,080)
Net maturity (3,069,456) (1,081,808) (18,655,961)
Parent 6-12
Year ended 30 June 2010 <6 months months 1-5 years
Financial assets
Trade & other receivables 1 - - 26,758
- - 26,758
Financial liabilities
Trade & other payables (770,741) - -
Borrowings 2 - (1,081,808) (18,803,080)
Net maturity (3,069,456) (1,081,808) (18,776,322)
Carrying
Year ended 30 June 2010 >5 years Total Amount
Financial assets
Trade & other receivables 1 - 147,119 147,632
- 147,119 147,632
Financial liabilities
Trade & other payables - (3,489,487) (3,489,487)
Borrowings 2 - (19,884,888) (15,923,080)
Net maturity - (23,227,256) (19,265,448)
Parent Carrying
Year ended 30 June 2010 >5 years Total Amount
Financial assets
Trade & other receivables 1 - 26,758 26,758
- 26,758 26,758
Financial liabilities
Trade & other payables - (770,741) (770,741)
Borrowings 2 - (19,884,888) (15,923,080)
Net maturity - (20,628,871) (16,667,063)
1 No impairment is required on long term receivables, as these are long term
deposits.
2 The note holder has the option to convert the face value of the liability to
equity, in align with the terms stated in note 21.
Maturity analysis of financial assets and liability based on management`s
expectation
6-12
Year ended 30 June 2009 <6 months months 1-5 years
Parent & Consolidated
Financial assets
Trade & other receivables 1 30,047 - 34,758
30,047 - 34,758
Financial liabilities
Trade & other payables (2,014,532) (101,973) (519,644)
Net maturity (1,984,485) (101,973) (484,886)
Carrying
Year ended 30 June 2009 >5 years Total Amount
Parent & Consolidated
Financial assets
Trade & other receivables 1 - 64,805 64,805
- 64,805 64,805
Financial liabilities
Trade & other payables - (2,636,149) (2,636,149)
Net maturity - (2,571,344) (2,571,344)
16. SHARE-BASED PAYMENTS
The following table illustrates the number (No.) and weighted average exercise
prices of and movements in share options issued during the year:
2010 2010
Weighted
average
exercise
No. price
$
Outstanding at the beginning of the period 262,779,767 0.059
Granted during the period - -
Forfeited during the period - -
Exercised during the period - -
Expired during the period - -
Outstanding at the end of the period 262,779,767 0.059
Exercisable at the end of the year 262,779,767 0.059
2009 2009
Weighted
average
exercise
No. price
$
Outstanding at the beginning of the period 173,750,000 0.017
Granted during the period 232,779,767 0.06
Forfeited during the period - -
Exercised during the period (143,750,000) 0.01
Expired during the period - -
Outstanding at the end of the period 262,779,767 0.059
Exercisable at the end of the year 262,779,767 0.059
The fair value of the equity-settled share options granted have been estimated
as at the date of grant using a Black- Scholes option pricing model taking into
account the terms and conditions upon which the options were granted.
The following table lists the inputs to the model:
2010 2009
Weighted average exercise price - $0.059
W eighted average life of the option - 4.62 years
Underlying share price - $0.025
Expected share price volatility - 60%
Risk free interest rate - 5.75%
Fair value per option - $0.0072
The outstanding balance as at 30 June 2010 is represented by:
Number Under Option Expiry Exercise Price
30,000,000 30 Nov 2012 $0.05
110,000,000 30 May 2013 $0.06
96,904,767 30 June 2013 $0.06
25,875,000 30 June 2014 $0.06
262,779,767
There were no options granted during the period (2009: $1,491,645).
The expected life of the options is based on historical data and is not
necessarily indicative of exercise patterns that may occur. The expected
volatility reflects the assumption that the historical volatility is indicative
of future trends, which may also not necessarily be the actual outcome. No other
features of options granted were incorporated into the measurement of fair
value.
17. COMMITMENTS
Consolidated Group
2010 2009
$ $
(i) Operating Lease Commitments
Non-cancellable operating leases contracted for
but not capitalised in the financial statements
Payable - minimum lease payments
- not later than 12 months 71,429 68,028
- between 12 months and 5 years 62,501 133,930
133,930 201,958
Parent Entity
2010 2009
$ $
(i) Operating Lease Commitments
Non-cancellable operating leases contracted for
but not capitalised in the financial statements
Payable - minimum lease payments
- not later than 12 months 71,429 68,028
- between 12 months and 5 years 62,501 133,930
133,930 201,958
The company entered into an operating lease on 1 May 2007 for office space it
occupies in Subiaco. The term of the lease is 5 years.
Consolidated Group
(ii) Expenditure commitments contracted for: 2010 2009
$ $
Exploration Tenements
At year-end the entity had committed to
purchase the Hooikraal farm. These obligations
are not provided for in the financial statements
and are payable:
- not later than 12 months 2,374,352 -
- between 12 months and 5 years - -
2,374,352 -
Parent Entity
(ii) Expenditure commitments contracted for: 2010 2009
$ $
Exploration Tenements
At year-end the entity had committed to
purchase the Hooikraal farm. These obligations
are not provided for in the financial statements
and are payable:
- not later than 12 months - -
- between 12 months and 5 years - -
- -
Further to the above, Checkered Flag will commit to spending a maximum of ZAR50
million, approximately $7.65million, (2009: ZAR 50 Million) to earn a further
25% interest (for a total of 55%) on the farms Vetleegte 304LQ and
Olieboomsfontein 220LQ to advance to a Bankable Feasibility Study ("BFS") level
enabling the establishment of a future commercial mining operation. A production
royalty, equivalent to ZAR0.50 (A$0.07) per tonne of coal sold is payable during
the term of the mining operations to a maximum aggregated amount of ZAR25
million (A$3.83million).
18. DIRECTORS AND EXECUTIVE DISCLOSURES
(a) Compensation by category of Key Management Personnel for the year ended 30
June 2010
Consolidated Group
2010 2009
$ $
Short-term employee benefits 828,368 625,350
Termination benefits 60,000 -
Post-employment benefits 12,013 35,035
Share-based payments - -
900,381 660,385
Parent Entity
2010 2009
$ $
Short-term employee benefits 828,268 625,350
Termination benefits 60,000 -
Post-employment benefits 12,013 35,035
Share-based payments - -
900,381 660,385
(b) Compensation options: Granted and vested during the year
No options were granted during the year
(c) Shares issued on Exercise of Compensation Options
No options were exercised during the period
(d) Option holdings of Key Management Personnel - Unlisted
Balance at the
2010 start of the Granted as Options
year remuneration Exercised
Directors
J Dreyer - - -
A Matthee 110,000,000 - -
C McIntyre - - -
T Tebeila 110,000,000 - -
J Wallington - - -
Executives
G Higgo 1 250,000 - -
S Storm 1 - - -
R Dorrington 1 - - -
J Monzu 2 - - -
220,250,000 - -
Vested and
Balance at the exercisable
2010 Net change end of the at 30 June
other period* 2010
Directors
J Dreyer - - -
A Matthee - 110,000,000 110,000,000
C McIntyre 3,125,000 3,125,000 3,125,000
T Tebeila - 110,000,000 110,000,000
J Wallington - - -
Executives
G Higgo 1 (250,000) - -
S Storm 1 - - -
R Dorrington 1 - - -
J Monzu 2 - - -
24,875,000 223,125,000 223,125,000
Note 1 - resigned during the financial year
Note 2 - appointed during the financial year
Balance at the
2009 start of the Granted as Options
year remuneration Exercised
Directors
J Dreyer - - -
A Matthee - - -
C McIntyre 3 - - -
T Tebeila 2 - - -
J Wallington - - -
E Boyd 1 10,000,000 - -
M Smartt 1 10,000,000 - -
D Henthorn 1 10,000,000 - -
Executives
G Higgo - - -
S Storm - - -
30,000,000 - -
Vested and
Balance at the exercisable
2009 Net change end of the at 30 June
other period* 2009
Directors
J Dreyer - - -
A Matthee 110,000,000 110,000,000 110,000,000
C McIntyre 3 - - -
T Tebeila 2 110,000,000 110,000,000 110,000,000
J Wallington - - -
E Boyd 1 (10,000,000) - -
M Smartt 1 (10,000,000) - -
D Henthorn 1 (10,000,000) - -
Executives
G Higgo 250,000 250,000 250,000
S Storm - - -
190,250,000 220,250,000 220,250,000
Note 1 - resigned during the financial year
Note 2 - appointed during the financial year
Note 3 - appointed subsequent to financial year end
* Balance includes amounts nominally held through directorship of a related
entity, Sekoko Coal, whereby Sekoko Coal has 997,937,832 shares and 110,000,000
options held in Firestone Energy Ltd.
(e) Shareholdings of Key Management Personnel
Balance at the On
2010 start of the Granted as exercise of
period remuneration options
Directors
J Dreyer - - -
A Matthee 165,000,000 - -
C McIntyre - - -
T Tebeila 165,000,000 - -
J Wallington - - -
Executives
G Higgo 1 500,000 - -
S Storm 1 - - -
R Dorrington 1 - - -
J Monzu 2 - - -
330,500,000 - -
Balance at the
2010 Net change end of the
other period*
Directors
J Dreyer - -
A Matthee 853,237,832 1,018,237,832
C McIntyre 27,075,000 27,075,000
T Tebeila 832,937,832 997,937,832
J Wallington - -
Executives
G Higgo 1 (500,000) -
S Storm 1 - -
R Dorrington 1 - -
J Monzu 2 150,000 150,000
1,712,900,664 2,043,400,664
Note 1 - resigned during the financial year
Note 2 - appointed during the financial year
Balance at the On
2009 start of the Granted as exercise of
period remuneration options
Directors
J Dreyer - - -
A Matthee 2 - - -
C McIntyre 3 - - -
T Tebeila 2 - - -
J Wallington - - -
E Boyd 1 1,035,000 - -
M Smartt 1 350,000 - -
D Henthorn 1 183,000 - -
Executives
G Higgo - - -
S Storm - - -
1,568,000 - -
Balance at the
2009 Net change end of the
other period
Directors
J Dreyer - -
A Matthee 2 165,000,000 165,000,000
C McIntyre 3 - -
T Tebeila 2 165,000,000 165,000,000
J Wallington - -
E Boyd 1 (1,035,000) -
M Smartt 1 (350,000) -
D Henthorn 1 (183,000) -
Executives
G Higgo 500,000 500,000
S Storm - -
328,932,000 330,500,000
Note1 - resigned during the financial year
Note2 - appointed during the financial year
Note3 - appointed subsequent to year end
* Includes amounts held nominally
All equity transactions with key management personnel other than those arising
from the issue or exercise of compensation options have been entered into under
terms and conditions no more favourable than those the Group would have adopted
if dealing at arm`s length.
(f) Loans to Key Management Personnel (Consolidated)
No loans have been provided to key management personnel during the year.
(g) Other transactions and balances with Key Management Personnel
No other transactions with key management personnel have occurred during the
year.
19. RELATED PARTY INFORMATION
The consolidated financial statements include the financial statements of
Firestone Energy Limited and its wholly owned subsidiaries Checkered Flag
Investments 2 (Pty) Ltd, Lexshell 126 General Trading (Pty) Ltd and Utafutaji
Trading 75 (Pty) Ltd.
Parent Entity
2010 2009
$ $
Amounts owed by Related Parties
Subsidiaries
Checkered Flag Investments 2
(Pty) Ltd
(`CF`) 6,211,596 12,056,717
Utafutaji Trading 75 (Pty) Ltd - -
Lexshell 126 General Trading
(Pty) Ltd
(`Lexshell`) 14,225,002 (15)
Total 20,436,598 12,056,702
Provision for impairment - -
20,436,598 12,056,702
Amounts payable to Directors
for Directors
Fees 2,500 41,667 2,500 41,667
Firestone Energy Limited is the ultimate Australian parent entity and ultimate
parent of the Group.
Outstanding balances at year-end are unsecured and settlement will occur in cash
once these subsidiaries become financially self sufficient.
An impairment assessment is undertaken each financial year by examining the
financial position of the related party and the market in which the related
party operates to determine whether there is objective evidence that a related
party receivable is impaired. W hen such objective evidence exists, the Group
recognises an allowance for the impairment loss.
Sekoko Coal (Pty) Ltd is an entity controlled by Mr Timothy Tebeila and Amanda
Matthee, directors of the Company and accordingly, Sekoko Coal is a related
party of the Company.
As disclosed in not 8, an amount of 868,176,563 fully paid up shares were issued
to Sekoko Coal (Pty) Ltd during the period as part consideration for the 2nd
joint venture transaction with Sekoko Coal (Pty) Ltd through its wholly owned
subsidiary Lexshell 126 General Trading (Pty) Ltd.
The Company, through Checkered Flag Investments 2 (Pty) Ltd and Lexshell 126
General Trading (Pty) Ltd, has management control of all JV planning and
expenditure.
During the year the following payments have been made to Sekoko Resources Pty
Ltd, a company associated with Sekoko Coal Pty Ltd. Sekoko Resources is a
related entity through common directorship of Ms A Matthee and Mr T Tebeila.
Consolidated Group
2010 2009
Expenditure $ $
Management Fees 299,850 123,648
Reimbursement of expenditure incurred on behalf of
joint venture with CF and Sekoko 230,976 897,480
Reimbursement of expenditure incurred in relation
to planned joint venture with Lexshell and Sekoko 3,798,055 144,891
Amounts owed to related parties
Due to Sekoko 8,686 32,884
Parent Entity
2010 2009
Expenditure $ $
Management Fees - -
Reimbursement of expenditure incurred on behalf of
joint venture with CF and Sekoko - -
Reimbursement of expenditure incurred in relation
to planned joint venture with Lexshell and Sekoko - -
Amounts owed to related parties
Due to Sekoko - 32,884
These fees were charged based on normal commercial terms and conditions.
20. AUDITORS` REMUNERATION
Consolidated Group
2010 2009
$ $
Amounts received or due and receivable by
BDO Audit (W A) Pty Ltd:
Audit or review of the financial reports of the
Company and Group 67,615 26,000
Other services (Taxation services) by BDO
Corporate Tax (W A) Pty Ltd 7,975 21,220
75,590 47,220
Parent Entity
2010 2009
$ $
Amounts received or due and receivable by
BDO Audit (W A) Pty Ltd:
Audit or review of the financial reports of the
Company and Group 52,230 26,000
Other services (Taxation services) by BDO
Corporate Tax (W A) Pty Ltd 7,975 8,075
60,205 34,075
21. SUBSEQUENT EVENTS
Subsequent to year end the following events occurred;
On 12 August 2010 the Company announced that it had decided to make amendments
to the Convertible Note Deed Poll entered into in September 2009. The amendments
are intended to position the Company to be better able to attract investors to
rapidly progress FSE`s Waterberg project and allow the Company to undertake its
stated objectives. Further, the Company has agreed with BBY Limited to amend the
terms of the Underwriting Agreement of the Convertible Note Deed Poll. The
amendments to the convertible note deed are as follows;
- The pricing of the securities to be issued by FSE pursuant to subscription
payments made after 13 July 2010, upon conversion of convertible notes will be
the higher of:
(a) a 7.5% discount to the 5 day VW AP up to but not including the date upon
which the note is issued by the issuer; and
(b) A$0.02c per FSE share issued
- Convertible Notes issued after 4 June 2010 shall be in denominations of A$500k
or A$100k at the election of the subscriber.
- Convertible notes may be converted monthly.
22. CONTINGENT LIABILITIES
A term sheet and a deposit of A$200,000 has been paid to Sekoko Coal (T3 Joint
Venture) in order to purchase a further two properties Swanepoelpan and
Duikerfontein. This will result in all eight properties being owned in joint
venture with Sekoko Coal (Pty) Ltd. A further A$1.8 million is payable on the
earlier of transfer of concessions to the joint venture company by 30 June
2011.The agreement is subject to shareholder approval, and therefore this $1.8m
is a contingent liability at 30 June.
Directors` Declaration
The directors of the company declare that:
1. The financial statements, comprising the statement of comprehensive income,
statement of financial position, statement of cash flows, statement of changes
in equity, accompanying notes, are in accordance with the Corporations Act 2001
and:
(a) comply with Accounting Standards and the Corporations Regulations 2001; and
(b) give a true and fair view of the financial position as at 30 June 2010 and
of the performance for the year ended on that date of the company and the
consolidated entity.
2. 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.
3. The remuneration disclosures included in pages 8 to 11 of the directors`
report (as part of audited Remuneration Report), for the year ended 30 June
2010, comply with section 300A of the Corporations Act 2001.
4. The directors have been given a declaration by the chief financial officer
required by section 295A.
5. The consolidated entity has included in the notes to the financial statements
an explicit and unreserved statement of compliance with International Financial
Reporting Standards
This declaration is made in accordance with a resolution of the Board of
Directors and is signed for and on behalf of the directors by:
John Dreyer
Director
Perth
Western Australia
17 September 2010
CORPORATE GOVERNANCE STATEMENT
Introduction
Firestone Energy Limited ("Company") has made it a priority to adopt systems of
control and accountability as the basis for the administration of corporate
governance. Some of these policies and procedures are summarised in this
statement. To the extent that they are applicable, and given its circumstances,
the Company adopts the Eight Essential Corporate Governance Principles and Best
Practice Recommendations (`Recommendations`) published by the Corporate
Governance Council of the ASX.
Where the Company`s corporate governance practices follow a recommendation, the
Board has made appropriate statements reporting on the adoption of the
recommendation. Where, after due consideration, the Company`s corporate
governance practices depart from a recommendation, the Board has offered full
disclosure and reason for the adoption of its own practice, in compliance with
the "if not, why not" regime.
As the Company`s activities develop in size, nature and scope, the size of the
Board and the implementation of additional corporate governance structures will
be afforded further consideration.
DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES
Summary Statement
Recommendation ASX Principles and If not, why not
Recommendations
1.1 X Refer (a) below
1.2 X Refer (a) below
1.3 X Refer (a) below
2.1 - Refer (b) below
2.2 - Refer (b) below
2.3 - Refer (b) below
2.4 X Refer (c) below
2.5 X Refer (d) below
2.6 - Refer (e) below
3.1 X Refer (f) below
3.2 - Refer (g) below
3.3 X Refer (f) below
4.1 X Refer (c) below
4.2 n/a n/a
Recommendation ASX Principles and If not, why not
Recommendations
4.3 n/a n/a
4.4 3 n/a n/a
5.1 X Refer (h) below
5.2 n/a n/a
6.1 X Refer (i) below
6.2 n/a n/a
7.1 X Refer (j) below
7.2 n/a n/a
7.3 - Refer (k) below
7.4 n/a n/a
8.1 X Refer (l) below
8.2 n/a n/a
8.3 n/a n/a
(a) Principle 1 Recommendation 1.1, 1.2 and 1.3
Notification of Departure
Firestone has not formally disclosed the functions reserved to the Board and
those delegated to senior executives.
Explanation for Departure:
The Board recognises the importance of distinguishing between the respective
roles and responsibilities of the Board and management. The Board has
established an informal framework for the management of the Company and the
roles and responsibilities of the Board and management. Due to the small size
of the Board and of the Company, the Board do not think that it is necessary
to formally document the roles of Board and management as it believes that
these roles are being carried out in practice and are clearly understood by
all members of the Board and management. The Board is responsible for the
strategic direction of the Company, establishing goals for management and
monitoring the achievement of these goals, monitoring the overall corporate
governance of the Company and ensuring that Shareholder value is increased.
The appointments of non-executive directors are formalised in accordance with
the regulatory requirements and the Company`s constitution.
(b) Principle 2 Recommendations 2.1, 2.2, 2.3
A majority of the Board should be independent directors and the Chair should be
an independent director. The roles of the Chair and Chief Executive Officer
should not be exercised by the same individual.
Disclosure:
The independent directors of the Board are John Dreyer, Colin McIntyre and John
Wallington. Tim Tebeila and Amanda Matthee are not independent directors.
The Non Executive Chairman is Mr John Dreyer.
(c) Principle 2 Recommendation 2.4 and Principle 4 Recommendations 4.1, 4.2,
4.3, 4.4
Notification of Departure
Separate nomination and audit committees have not been formed.
Explanation for Departure
The Board considers that the Company is not currently of a size, or its affairs
of such complexity, that the formation of separate or special committees is
justified at this time. The Board as a whole is able to address the governance
aspects of the full scope of the Company`s activities and ensure that it adheres
to appropriate ethical standards.
In particular, the Board as a whole considers those matters that would usually
be the responsibility of an audit committee and a nomination committee. The
Board considers that, at this stage, no efficiencies or other benefits would be
gained by establishing a separate audit committee or a separate nomination
committee.
(d) Principle 2 Recommendation 2.5
Notification of Departure
Firestone does not have in place a formal process for evaluation of the Board,
its committees, individual directors and key executives.
Explanation for Departure
Evaluation of the Board is carried out on a continuing and informal basis. The
Company will put a formal process in place as and when the level of operations
of the Company justifies this.
CORPORATE GOVERNANCE STATEMENT
(e) Principle 2 Recommendation 2.6
Companies should provide the information indicated in the Guide to Reporting on
Principle 2.
Disclosure:
Skills, Experience, Expertise and term of office of each Director A profile of
each director containing their skills, experience, expertise and term of office
is set out in the Directors` Report.
Identification of Independent Directors
The independent directors of the Company during the Reporting Period is
disclosed in (b) above.
Independence is measured having regard to the relationships listed in Box 2.1 of
the Principles & Recommendations.
Statement concerning availability of Independent Professional Advice To assist
directors with independent judgement, it is the Board`s policy that if a
director considers it necessary to obtain independent professional advice to
properly discharge the responsibility of their office as a director then,
provided the director first obtains approval for incurring such expense from the
Chair, the Company will pay the reasonable expenses associated with obtaining
such advice.
Nomination Matters
The full Board sits in its capacity as a Nomination Committee.
Performance Evaluation
During the Reporting Period the performance evaluations for the Board and
individual directors did occur on an informal basis in accordance with the
disclosed process in Recommendation 2.5.
Selection and Reappointment of Directors
The Board considers the balance of independent directors on the Board as well as
the skills and qualifications of potential candidates that will best enhance the
Board`s effectiveness.
Each director other than the managing director (if appointed) must retire from
office no later than the longer of the third annual general meeting of the
company or 3 years following that director`s last election or appointment. At
each annual general meeting a minimum of one director or a third of the total
number of directors must resign. A director who retires at an annual general
meeting is eligible for re-election at that meeting. Reappointment of directors
is not automatic.
(f) Principle 3 Recommendation 3.1, 3.3
Notification of Departure
Firestone has not established a formal code of conduct.
Explanation for Departure:
The Board considers that its business practices, as determined by the Board and
key executives, are the equivalent of a code of conduct.
(g) Principle 3 Recommendation 3.2
Companies should establish a policy concerning trading in company securities by
directors, senior executives and employees, and disclose the policy or a summary
of that policy.
Disclosure:
The Company has adopted a formal trading policy which embraces the best
practice recommendation as recommended by the Corporate Governance Council of
the ASX. The Company`s constitution permits directors to acquire shares in the
Company. Company policy prohibits directors from dealing in shares whilst in
possession of price sensitive information. Directors must notify the company
secretary once they have bought or sold shares in the Company or exercised
options over ordinary shares. In accordance with the provisions of the
Corporations Act 2001 and the Listing Rules of the Australian Stock Exchange,
the Company on behalf of the directors must advise the Australian Stock
Exchange of any transactions conducted by them in shares and / or options
in the Company.
(h) Principle 5 Recommendation 5.1, 5.2
Notification of Departure
Firestone has not established written policies and procedures designed to
ensure compliance with ASX Listing Rule disclosure requirements and
accountability for compliance.
Explanation for Departure
The Directors have a long history of involvement with public listed companies
and through the support of professional staff, are kept familiar with the
disclosure requirements of the ASX listing rules.
The Company has in place informal procedures that it believes are sufficient
for ensuring compliance with ASX Listing Rule disclosure requirements and
accountability for compliance. The Board has nominated the Chief Executive
Officer and the Company Secretary as being responsible for all matters relating
to disclosure.
(i) Principle 6 Recommendation 6.1, 6.2
Notification of Departure
Firestone has not established a formal Shareholder communication strategy.
Explanation for Departure
While the Company has not established a formal Shareholder communication
strategy, it actively communicates with its Shareholders in order to identify
their expectations and actively promotes Shareholder involvement in the Company.
It achieves this by posting on its website copies of all information lodged
with the ASX. Shareholders with internet access are encouraged to provide
their email addresses in order to receive electronic copies of information
distributed by the Company. Alternatively, hard copies of information
distributed by the Company are available on request.
(j) Principle 7 Recommendation 7.1, 7.2
Notification of Departure
Firestone has an informal risk oversight and management policy and internal
compliance and control system.
Explanation for Departure
The Board does not currently have formal procedures in place but is aware of
the various risks that affect the Company and its particular business. As the
Company develops, the Board will develop appropriate procedures to deal with
risk oversight and management and internal compliance, taking into account the
size of the Company and the stage of development of its projects.
(k) Principle 7 Recommendation 7.3
The Board should disclose whether it has received assurance from the Chief
Executive Officer (or equivalent) and the Chief Financial Officer (or
equivalent) that the declaration provided in accordance with section 295A of the
Corporations Act is founded on a sound system of risk management and internal
control and that the system is operating effectively in all material respects in
relation to financial reporting risks.
Disclosure:
The Chief Executive Officer (or equivalent) and the Chief Financial Officer (or
equivalent) have provided a declaration to the Board in accordance with section
295A of the Corporations Act and have assured the Board that such declaration is
founded on a sound system of risk management and internal control and that the
system is operating effectively in all material respects in relation to
financial risk.
(l) Principle 8 Recommendations 8.1
Notification of departure
Firestone does not have a formal remuneration policy and has not established a
separate remuneration committee.
CORPORATE GOVERNANCE STATEMENT
Explanation for Departure
The current remuneration of the Directors is disclosed in the Directors` Report.
Non-executive Directors receive a fixed fee for their services. Subject to
shareholder approval, the issue of options or shares to non-executive Directors
may be an appropriate method of providing sufficient incentive and reward while
maintaining cash reserves. Due to the Company`s early stage of development and
small size, it does not consider that a separate remuneration committee would
add any efficiency to the process of determining the levels of remuneration for
the Directors and key executives. The Board believes it is more appropriate to
set aside time at specified Board meetings each year to specifically address
matters that would ordinarily fall to a remuneration committee. In addition,
all matters of remuneration will continue to be in accordance with regulatory
requirements, especially in respect of related party transactions; that is, none
of the Directors will participate in any deliberations regarding their own
remuneration or related issues.
ASX ADDITIONAL INFORMATION
Shareholder Information
Additional information as required by the Australian Securities Exchange Limited
Listing Rules and not disclosed elsewhere in this report is set out below. This
information is current as at 16 September 2010.
Distribution of equity security holders (number of holders)
Number
of Holders
Category (size of holding)
1 - 1,000 2,469
1,001 - 5,000 1,543
5,001 - 10,000 350
10,001 - 100,000 1,492
100,001 - and over 1,018
6,872
There are 4,761 holders of shares holding less than a marketable parcel.
Twenty largest holders of quoted shares
SHAREHOLDERS Number of
shares held % Holding
1 SEKOKO RESOURCESPTY LTD 997,937,832 42.8%
2 COLBERN FIDUCIARY NOMINEES PTY LTD 113,500,000 4.9%
3 BELL POTTER NOMINEES LTD 76,500,000 3.3%
4 UZALILE INVESTMENTS PTY LTD 55,000,000 2.4%
5 JP MORGAN NOMINEES AUSTRALIA LIMITED
6 MILLCORP SECURITIES PTY LTD
7 SEPHOR INVESTMENTS LIMITED 27,000,000 1.2%
8 ISTANA SECURITIES LIMITED 26,841,696 1.2%
9 BLACKMORT NOMINEES PTY LTD <48662 ACCOUNT> 25,000,000 1.1%
10 MICHAEL GILBERT SUPER FUND PTY LTD
11 MRS AMANDA MATTHEE 20,000,000 0.9%
12 FMR INVESTMENTS PTY LIMITED 18,001,750 0.8%
13 SANPOINT PTY LTD 16,875,000 0.7%
14 CARRICK HOLDINGS LIMITED 16,281,817 0.7%
15 GLENEAGLE GOLD LIMITED 15,157,890 0.7%
16 MILLCORP SECURITIES PTY LTD 14,750,000 0.6%
17 WISEPLAN INVESTMENTS PTY LTD
18 HIDDEN VALLEY HOLDINGS (AUST) PTY LIMITED
19 MRS ALLISON ANNETT 14,000,000 0.6%
20 COLMAC PTY LTD 13,200,000 0.6%
1,578,629,985 67.7%
Quoted and unquoted equity securities
Equity Security Quoted Unquoted
Ordinary Shares 2,331,300,464 -
Options - 262,779,767
Substantial shareholders
A substantial shareholder who has notified the Company in accordance with
section 671B of the Corporations Act 2001 is:-
Shareholder Number of
shares
Sekoko Resources Pty Ltd 997,937,832
Unlisted Option holdings at 16 September 2010 Number of Number of
Holders Options
Options expiring 30 Nov 2012 exercisable at 5 cents
(FSEAK) 3 30,000,000
Holdings of more than 20%
The Boyd Super Fund Pty Ltd 10,000,000
Lantech Developments Pty Ltd 10,000,000
Mr Malcolm Keith Smartt + Ms Janice Leonie
Smartt 10,000,000
Options expiring 30 Jun 2013 exercisable at 6 cents
(FSEAO) 9 96,904,767
Holdings of more than 20%
Hsbc Custody Nominees - 20,000,000
Sephor Investments Limited - 20,000,000
Options expiring 31 May 2013 exercisable at 6cents
(FSEAM) 1 110,000,000
Holdings of more than 20%
Sekoko Coal Pty Ltd - 88,000,000
Options expiring 30 Jun 2014 exercisable at 6 cents
(FSEAI) 11 25,875,000
Holdings of more than 20%
Nil - -
Voting rights
Ordinary shares carry one vote per share. There are no voting rights attached to
the options in the Company.
Stock Exchange
The Company is dual listed on the Australian Securities Exchange and the
Johannesburg Stock Exchange and has been allocated the code "FSE". The "Home
Exchange" is Perth.
Other information
Firestone Energy Limited, is incorporated and domiciled in Australia, and is a
publicly listed company limited by shares.
On-market buy-back
There is no current on-market buy-back.
Johannesburg
20 September 2010
Sponsor and Corporate Advisor
River Group
Date: 20/09/2010 17:22:01 Produced by the JSE SENS Department.
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