annual report here

ANNUAL REPORT I 2005
ABN 98 009 075 861
DIRECTORS
Greg Durack (Managing Director)
Chris Bath (Finance Director)
Pedro Kastellorizos (Exploration Director)
Neil Biddle (Non Executive Director)
COMPANY SECRETARY
Chris Bath
REGISTERED OFFICE
Level 3, 30 Richardson Street
West Perth
Western Australia 6005
PO Box 1176
West Perth
Western Australia 6872
T. (08) 9327 0980
F. (08) 9327 0901
E. [email protected]
www.bataviamining.com.au
SHARE REGISTRY
Computershare
Investor Services Pty Limited
Level 2, 45 St George’s Terrace
Perth
Western Australia 6000
T. (08) 9323 2000
F. (08) 9323 2033
AUDITORS
Ernst & Young
STOCK EXCHANGE LISTINGS
Australian Stock Exchange Limited (Code: BTV)
Stock Exchange Berlin, Germany
(Code: MZI)
Corporate Particulars
Contents
Review of Operations 1
Corporate Governance Statement 9
Directors’ Report 11
Statements of Financial Performance 15
Statements of Financial Position 16
Statements of Cash Flows 17
Notes to the Financial Statements 18
Directors’ Declaration 36
Independent Audit Report 37
Auditor’s Independence Declaration 38
ASX Additional Information 39
BATAVIA MINING ANNUAL REPORT 2005
1
Batavia Mining Limited has had to realign its objectives in 2004 and 2005 due to inconsistent metallurgical responses in the Deflector Deposit.
With the exploration success in early 2004 and upgrading of the Deflector Deposit mineral resource, the Project was fast tracked commencing with a bankable feasibility study. The initial testwork on the three different zones of mineralogy, oxide, transitional and primary was encouraging with good recoveries, however subsequent follow-up testwork was inconsistent. Consequently the study could not be completed and was deferred in July.
In the second half of 2004 the Company reviewed alternative treatment options for the oxide ore, including agitated acid leaching and heap leaching treatment processes, although technically feasible, economic analysis showed that they would not be financially viable. In December 2004 it was decided to drill both West and Central lodes at the Deflector Deposit to collect both fresh oxide and transitional sample, and to cut existing primary ore core to undertake a new metallurgical testwork program. The objective of the metallurgical testwork program is to identify and finalise a flowsheet to provide a basis from which the process engineering, mine planning and economic modelling can be undertaken.
With the oxide and transitional zones comprising approximately 40% of the mineral resource the Company decided to recommence exploration drilling at the Deflector Deposit in order to increase the resource,and to show it continues at depth. The drilling extends only to 210m in vertical depth, the limit of the current resource. This program has the potential of extending the primary mineralisation of the resource, whilst simultaneously decreasing the percentage component of the oxide and transitional material in the resource.
Upon a successful metallurgical outcome and resource upgrade, the Company expects to commence process design, mine design and scheduling, in the December quarter of this year. This will then enable recommencement of the Feasibility Study.
The Company, in order to fund the exploration program, the metallurgical program and future study work, announced in May 2005 a non-renounceable pro rata offer of up to 90,407,180 shares at 2 cents, on the basis of 1 new share and free attaching option for every 2 shares held. The Rights Issue closed with acceptances totalling 43,433,466 shares raising $868,669. In July 2005, the shortfall of 46,973,714 shares equal to $939,474 was placed with strong demand for the shortfall securities.
Also in July 2005, the Company embarked on a new strategic focus in acquiring a portfolio of exploration applications and rights in the Northern Territory covering areas prospective for uranium.
The portfolio includes the Harts Range, Plenty, Hale River and Curtis Pound Uranium Project in the Arunta and Davenport Provinces of the Northern Territory.
Experienced technical and geological personnel in uranium exploration have been secured to develop and lead planned uranium exploration programs.
The uranium exploration program will run in parallel with the Gullewa Project and represents an opportunity for the Company to participate in the Federal Government’s vision to further develop the Uranium mining industry after announcing “The Uranium Industry Framework” on 11 August 2005, which is to be developed over the next three years.
Review of Operations
BATAVIA MINING ANNUAL REPORT 2005
2
Review of Operations
Figure 1: Gullewa Project Location Plan
Figure 2: Gullewa Project Tenement Plan
GULLEWA OPERATIONS
The Gullewa Operations are located 430km NNE of Perth and 200km east of Geraldton in the South Murchison District of Western Australia (Fig 1). The Gullewa Operations cover the prospective central and southern portions of the Gullewa Greenstone Belt and include the Gullewa Mining Centre, the Deflector Deposit, the Prince George Mine (Yalgoo), the Michaelangelo and Monarch Prospects.
Batavia’s Gullewa tenements cover a contiguous area in excess of 480km2 (Fig 2). The known resources and the most advanced prospects are covered by granted mining leases complete with various mining, exploration and environmental approvals in place.
Mining infrastructure existing at Gullewa Operations include a carbon in leach treatment plant, a licensed tailings disposal facility, a 50 person accommodation camp, workshops, site offices, borefields and haulage roads. The site infrastructure is on a care and maintenance programme with the site and camp facilities utilised for exploration campaigns.
A number of defined gold and copper/gold resources are contained at Gullewa Operations and are in close proximity to the treatment plant.
A breakdown of the global resource inventory for the Gullewa Operations is presented in Table 1.
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Review of Operations
Prospect Au Eq. oz* Au oz Total oz Au Eq.
(‘000) (‘000) (‘000)
Deflector Deposit 342 - 342
Michaelangelo - 65 65
Surface Stocks 3 - 3
Monarch - King Solomon - New Phoenix - 26 26
Rocksteady - 4 4
Prince George - 4 4
Total 345 99 444
* Where 1% Cu is equivalent to 2.0 g/t Au.
DEFLECTOR DEPOSIT
The Deflector Deposit was discovered in 1991 from the drill testing of an aeromagnetic target and is located 8km east of the treatment plant (Fig 2).
The Deflector Deposit gold and copper mineralisation is within basement rocks associated with quartz and sulphides. The mineralisation has been delineated along 600m in strike length to a vertical depth of 210m and consists of three separate mineralised zones with the deposit open at depth (Fig 4).
In November 2004, Snowden Mining Industry Consultants, (Snowden) completed an updated resource estimate for the Deflector Deposit, summarised in Table 1. The updated resource reduced the tonnes by 689,000, with only a decrease in Au Eq oz of 19,000. This is expected to have a positive impact on the Feasibility Study in reducing overall mining costs.
Table 2: Deflector Deposit Mineral Resource at November 2004
Table 1. Global Resource Inventory – Gullewa Operations
Resource Category Tonnes Au g/t Cu% Au Eq g/t Au Ez oz1
Oxide Ore
Measured 211,000 4.9 1.43 7.8 53,000
Indicated 37,000 2.5 0.70 3.9 4,000
Inferred - - - - -
Sub total 248,000 4.6 1.32 7.20 57,000
Primary Ore2
Measured 134,000 6.6 1.88 10.3 44,000
Indicated 483,000 6.8 1.54 9.9 154,000
Inferred 274,000 6.5 0.60 7.7 68,000
Sub total 891,000 6.7 1.30 9.3 266,000
Total 1,139,000 6.2 1.31 8.8 323,000
1 Where 1% Cu is equivalent to 2.0g/t Au
2 Includes transitional ore
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Review of Operations
In April 2005 the geological model was reviewed and Snowden were requested by the Company to design a deep drill hole program to increase mineral resources in the existing West and Central lodes at Deflector by a combined 150,000 gold equivalent ounces. A total of sixteen holes were designed using RC pre-collars with diamond tails to test ore zone extensions to 400 metres in vertical depth.
In addition to the deep drilling program, the Company plans to drill nine RC holes varying in depth from 40 to 140 metres, to test lodes 3 and 5, and the contact lodes with the objective of increasing the current mineral resource inventory and enhancing the geological understanding of the resource. The drilling program totals 6,400 metres and commenced in July 2005.
Figure 3: Deflector Deposit Drill Section 19220mN
FEASIBILITY STUDY
The Company embarked on fast-tracking a bankable level of Feasibility Study in January 2004 with the objective of bringing the Gullewa Project into operation as soon as possible. However, the initial favourable metallurgical responses of the oxide, transitional and to a certain extent, the primary mineralisation could not be repeated. Consequently, in July 2004 the Bankable Feasibility Study was deferred until the metallurgical issues could be resolved.
METALLURGICAL TESTWORK
The inconsistent metallurgical performance was attributed to poor sample integrity so, in December 2004 the Company decided to collect fresh oxide and transitional ore samples for further testing. Dewatering of the West and Central pits commenced, with West completely dewatered. In total, 18 holes totalling 662 metres were drilled in the upper mineralisation of the Deflector Deposit. The geological data gathered from this program was also incorporated into the geological model.
Existing primary mineralisation diamond core was also quartered to provide samples for metallurgical testing. The past metallurgical testwork was reviewed including the acid leaching testwork and with the copper speciation analyses completed on the fresh samples from the oxide and transitional zones, the metallurgical testwork program developed is focussed on gravity and flotation processes to produce copper-gold concentrates. No acid leaching testwork to recover copper is planned.
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Review of Operations
PRIMARY ORE
The first round of test work on primary ore from the Deflector Deposit has now been completed at Independent Metallurgical Laboratories in Perth, with results to 21 June 2005 summarised below. Both the West and Central ore zones were tested separately, as well as a composite blend comprising 75% West and 25% Central ore to reflect the average resource split. Diamond core, which contains no waste dilution, was used for the testwork program.
In general terms, the flotation tests have been carried out as follows:
• Rougher float using sodium ethyl xanthate as collector. Ore grind of 80% passing 106ìm was used throughout. Both natural and elevated pH was tested.
• Cleaner flotation (i.e. upgrading the rougher concentrate) using sodium cyanide, at an elevated pH (~10 to 11), to depress pyrite, which was liberated at the grind size tested.
Best results were achieved using an elevated pH in the rougher stage.
Copper Flotation Performance
Ore† Assay Calculated Result Recovery Concentrate
Head (%) Head (%) (%) Grade (%Cu)
West 0.93 0.89 Best 93 23
0.92 Average 90 20
Central 1.40 1.44 Best 93 28
1.43 Average 90 28
Blend* 1.05 1.05 Best 91 26
1.07 Average 92 23
Gold recovery data is summarised in the table below. This includes:
• Gold recovered by a laboratory scale gravity test (3” Knelson, mercury amalgamation of concentrate)
• Gold recovered to final cleaner concentrate
• Gold recovered by cyanidation of the cleaner tailings product
• Overall gold in tailings (combination of gold in rougher tailings and cyanide leach residue)
West 12.5 12.5 12.6 58.5 21.0 7.8 92.2
Central 11.6 11.0 23.1 56.9 11.7 8.3 91.7
Blend* 12.3 12.1 15.0 55.2 19.0 10.8 89.2
Ore† Assay Calculated Overall Gold
Head (g/t) Head (g/t) Gravity Float Cleaner Tailings Overall Gold Recovery-gravity
Concentrate Cyanide Leach in Leach /float/leach
% Gold Distribution
† Tests conducted on ore zone diamond core with no waste dilution.
* Blend is a composite comprising 75% west and 25% central which represents the resource split.
The process flowsheet for the primary ore has now been determined and future test work to be undertaken will be to complete variability and closed cycle tests to satisfy the requirements of the Feasibility Study. Fresh primary ore samples will be collected during the forthcoming exploration program.
OXIDE AND TRANSITIONAL ORE
The metallurgical samples collected from the February drill campaign were subjected to copper speciation analysis in order to assist in composite preparation representing the different oxidation zones. From the speciation analysis, it was evident that economic copper recovery from an acid leaching process from both the oxide and transitional zones was unlikely. Consequently, the planned metallurgical test work will now focus on gravity and flotation processes.
This testwork program commenced in June 2005 and due to the complexity of the mineralisation, West and Central lodes will be split into north and south and tested separately. The oxide and transitional material will require substantial testwork to identify an economic process flowsheet, and to develop a process strategy to extract maximum value out of this resource.
PROCESS DESIGN
The flowsheet for the primary mineralisation has been identified from the successful testwork program, however a flotation recovery flowsheet is yet to be developed for the oxide and transitional material. Developing a simple flowsheet for all three types of mineralisation remains the objective to minimise capital and operating costs and until the treatment of the oxide and transitional material is resolved, no work will be undertaken on process design.
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Review of Operations
DEFLECTOR DEPOSIT MINE DESIGN
An open pit design was completed for Deflector West and Central, as well as a portion of the Contact lodes. The pit design extended for 500m along strike to a vertical depth of 80m. A preliminary underground design, with a decline between West and Central lodes was also completed. No further work was undertaken on mine design, as this is put on hold until the oxide and transitional material metallurgy is resolved.
REGIONAL PROSPECTS
The Gullewa Project contains numerous regional targets and prospects which require further evaluation and assessment. Apart from the metallurgical drilling campaign, the exploration activity was minimal as the focus was on completing a Bankable Feasibility Study, for reasons that have been discussed previously. However at the Deflector Deposit, five RC holes totalling 300 metres tested the interpreted fault offset, northern extension of West lode, known as lode 6.
All intersections were recorded in unweathered basalt, except for BDRC106, which intersected mineralisation on the interpreted contact between a felsic porphory and the basalt. This style of mineralisation has not been previously observed at Deflector Deposit and represents a possible new focus for additional exploration. Significant intersections are summarised below:
Collar Locations Drilling Downhole True Uncut Grades
Drillhole Easting Northing Elevation Direction Distance Width (m) Au g/t* Cu %† Ag ppm†
BDRC103 9760 19600 279 -60°-090° 48 to 49m 0.75 8.2 1.0 6
BDRC104 9790 19600 279 -60°-090° 40 to 44m 3.00 10.3 1.1 21
BDRC105 9819 19600 279 -60°-090° - - NSA# NSA# NSA#
BDRC106 9756 19520 279 -60°-090° 32 to 36m 3.00 3.6 0.3 4
BDRC107 9816 19520 279 -60°-090° - - NSA# NSA# NSA#
* FAA505 Fire Assay with AAS finish † DIG43B Four acid volumetric digest with AAS finish # No Significant Assays
MONARCH PROSPECT
The Monarch Prospect covers the area from the Monarch open pit to the King Solomon shaft (Fig 2). The Monarch pit which is located 200m from the treatment plant was previously mined to a depth of 60m. Gold mineralisation at Monarch is associated with auriferous BIF units and shear zones within mafic lithologies.
A number of high grade intersections remain at depth and in the immediate surrounds of the Monarch Pit.
The mined areas of King Solomon and New Phoenix Lodes are located approximately 400m to the northwest of the Monarch Pit. The gold mineralisation in this area is contained within sulphidic quartz veins approximately 1-2m wide which commonly exceed 20 g/t Au.
The King Solomon mine and the New Phoenix lode have been developed and mined to 90m vertical depth.
Batavia undertook no further exploration work on this prospect the past year. Resources in this area are shown in Table 4.
Table 4: Monarch/King Solomon/New Phoenix Resources
Resource Category Tonnes (‘000) Au g/t Au oz (‘000)
Inferred 116 7.00 26
Total 116 7.00 26
GREATER DEFLECTOR AREA
The Greater Deflector Area encompasses the area surrounding the Deflector Deposit and includes Tintoretto, Bellini and Titian prospects, which contain copper and gold mineralisation of a similar style to the Deflector Deposit. Previous infill drilling warrants further follow up exploration, and this will become part of an upcoming re-focus on exploration in the tenement group.
MICHAELANGELO PROSPECT
The Michaelangelo Prospect is located 4km southwest from the treatment plant (Fig 2). Previous mining has been completed in this area on laterite and saprolite gold resources. The deepest pit is restricted to laterite and saprolite mineralisation and was mined to a depth of 45m.
The resource estimated at Michaelangelo is shown in Table 3.
Table 3: Michaelangelo Resources
Resource Category Tonnes (‘000) Au g/t Au oz (‘000)
Indicated 387 1.19 15
Inferred 1,303 1.20 50
Total 1,690 1.20 65
The gold mineralisation primarily occurs in laterite and upper clay saprolite. Primary mineralisation occurs in quartz veins within an intermediate porphyry. The primary mineralisation occurs as a series of stacked sheets striking NW-SE which can contain higher grade plunging shoots at the interpreted intersection of NE-SW structures.
Three short RC holes, totalling 150m, were drilled in Michaelangelo across strike to test a previous high grade intersection that was returned from hole BMAC006 of 6m at 83.5g/t Au from 38m. The follow up holes failed to confirm the previous high grade mineralisation.
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Review of Operations
ROCKSTEADY PROSPECT
The Rocksteady Prospect is located 5km southwest of the treatment plant (Fig 2). Previous mining has been completed in this area via a small pit to a depth of 40m. The mineralisation at Rocksteady consists of a gold-enriched sub-horizontal laterite horizon (which has been mined out) and an auriferous ironstone unit within mafic lithologies. A resource for remaining mineralisation at depth is detailed in Table 5.
Table 5: Rocksteady Resource
The mineralisation at Rocksteady appears to occupy a moderately-plunging overturned fold. A deeper lode has also been identified that is tabular and plunges moderately to the north. Further potential remains to extend the lodes as they are open at depth.
PAYNES FIND PROJECT
The Paynes Find Project is located approximately 150km to the east of Gullewa Operations and 450km northeast of Perth (Fig 1).
No further exploration work was undertaken at Paynes Find during the year.
YALGOO PROJECT
The Yalgoo Project consists of a single granted mining lease 1km north of the Yalgoo townsite (Fig 1). The tenement covers an area of 2km2 and contains the Prince George Mine.
The mineralisation at Prince George is confined to four sub-parallel ferruginous quartz reef systems that strike northerly and dip at between 30 and 50 degrees to the east. First recorded production was 1899 in this area. Good potential remains at Prince George as mineralisation is open at depth.
Resources for the Yalgoo Project are shown in Table 6.
Table 6: Prince George Resource - Yalgoo
No further exploration work was undertaken on the Yalgoo Project for the year.
Resource Category Tonnes (‘000) Au g/t Au oz (‘000)
Inferred 38 3.60 4
Total 38 3.60 4
Resource Category Tonnes (‘000) Au g/t Au oz (‘000)
Inferred 32 3.76 4
Total 32 3.76 4
EXPLORATION
The exploration for the year was minimal, due to the focus on delivering a Bankable Feasibility Study, however, due to inconsistent metallurgical performance from the oxide and transitional zones, an exploration program to increase the primary ore resource at the Deflector Deposit was designed. This deep drilling program commenced in July 2005, and upon a successful outcome, further drilling will be evaluated to potentially increase the resource. This will increase the robustness of the Project.
It is also planned to undertake a reinterpretation of the raw aeromagnetic data over the entire Gullewa tenement area as there has been significant progress in modelling and reinterpretation techniques in recent years. The review will generate further work on the ground, primarily using ground mag to generate direct targets. Primary focus will be reinterpretation of the Deflector Deposit magnetics in order to generate targets of similar mineralisation.
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Review of Operations
URANIUM EXPLORATION PORTFOLIO ACQUISITION
EXPLORATION APPLICATIONS
Subsequent to the end of the financial year, Batavia announced that it had entered into an agreement and lodged applications to secure a substantial portfolio of uranium projects in the Northern Territory of Australia.
The project portfolio includes the Harts Range, Plenty, Hale River and Curtis Pound Uranium Projects in the Arunta & Davenport Provinces of the Northern Territory. These projects combined have an overall area of 2,158km2. These highly prospective exploration areas represents a significant new strategic asset for Batavia alongside its Gullewa Project in Western Australia.
The uranium acquisition includes seven exploration applications as well as one authorisation application. In addition, Batavia has acquired a comprehensive database of historical uranium exploration information, both within its project areas and on a regional scale throughout the Northern Territory, Western Australia and South Australia.
EXPLORATION RIGHTS FROM THOR MINING PLC
The Company has also reached agreement with AIM-listed specialty metals company Thor Mining PLC (Thor) to acquire the uranium exploration rights over a portfolio of exploration licences in the Eastern Arunta Province of the Northern Territory.
The acquisition represents a further step in the Company’s uranium exploration and development strategy in the region.
These tenements comprise uranium exploration rights over a large ground package including an exploration licence and exploration licence applications covering a total area of 1,200 km2. The ELA’s are expected to be granted shortly.
The Thor package complements the nearby Harts Range, Hale River and Plenty uranium projects. Batavia is continuing to negotiate further acquisitions in this highly prospective and under-explored region.
The agreement with Thor also provides Batavia with an extensive regional data package of historical uranium and polymetallic exploration containing numerous identified and conceptual targets within a prolifically mineralised region. Regional exploration for uranium was conducted over the area between 1977 and 1983 by Otter Exploration NL and Geopeko-Uranerz. Polymetallic regional exploration was also conducted by BHP in 1989-1990.
The prospects are located approximately 220km east-northeast of Alice Springs within the polymetallic providence of the Proterozoic Eastern Arunta Province in the Northern Territory.
Batavia has retained the services of an experienced uranium exploration geologist and a geophysicist to plan and implement a comprehensive uranium exploration review.
Work has commenced by integrating all historic geological information within an exploration GIS database for all uranium prospects.
Exploration activities in Year 1 will involve the following:
• Flying a low level fixed wing aerial photography survey
• Helicopter borne radiometric-magnetic survey over all the
exploration licences
• Structural mapping & sedimentology studies with interpretation of regional anomalies to prospect scale projects
• Selection of anomalous areas for detail inspections, based on radiometric anomalies (total uranium count and uranium: thorium ratios)
• Ground reconnaissance checking for anomalies, using aerial photos for initial locations and recording scintillometer for pinpointing radiometric sources.
• Re-establish all known uranium and base-metal prospect delineated by PNC Exploration for further follow up with completion of minor geochemical sampling over the areas in the form of rock chip, soil and stream sediments sampling
Exploration activities in Years 2 and 3 would involve the following:
• Detailed appraisal of the most promising anomalies by grid radiometric and magnetic surveying, detail rock chip sampling of out crops, grid soil sampling and detail geological mapping
• Evaluation of some targets by trenching and shallow RAB drilling, with few deep drill holes by RC, if warranted
The Company will also pursue other uranium exploration acquisition opportunities within Australia.
BATAVIA MINING ANNUAL REPORT 2005
9
CORPORATE GOVERNANCE STATEMENT
Introduction
The Board and management are committed to corporate governance and, to the extent they are applicable to the Company (given its size and scale of operations), have adopted the Ten Essential Corporate Governance Principles and each of the Best Practice Recommendations as published by ASX Corporate Governance Council ("ASX Principles and Recommendations").
Whilst the Board has demonstrated, and continues to demonstrate, its commitment to best practice in corporate governance, it emphasises that good corporate governance is only one factor contributing to the success of the Company’s operations. The Company operates in the high risk mineral exploration and development industry, and its future success is highly dependent on successful development and exploitation of its exploration properties and projects. There are a number of risks that may impact on the Company’s future performance and returns to shareholders, a summary of which is set out in Section 2 listed on the Corporate Governance page on the Company’s website.
The following additional information about the Company’s corporate governance practices is set out on the Company’s website at www.bataviamining.com.au:
• Corporate governance disclosures and explanations;
• Statement of Board and Management Functions;
• Nomination Committee Charter;
• Policy and procedure for selection and appointment of new directors;
• Summary of code of conduct for directors and key executives;
• Summary of policy on securities trading;
• Audit Committee Charter;
• Policy and procedure for selection of external auditor and rotation of audit engagement partners
• Summary of policy and procedure for compliance with continuous disclosure requirements;
• Summary of arrangements regarding communication with and participation of shareholders;
• Summary of Company’s risk management policy and internal compliance and control system;
• Process for performance evaluation of the Board, Board committees, individual directors and key executives;
• Remuneration Committee Charter; and
• Corporate Code of Conduct.
Corporate Governance Disclosures
During the Company’s 2004/2005 financial year ("Reporting Period") the Company complied with the ASX Principles and Recommendations other than in relation to the matters specified below.
Principle Recommendation Notification of Explanation for
Ref Ref Departure Departure
The Board considers that its structure has been, and continues to be, appropriate in the context of the Company’s recent history. The Company considers that each of the non-independent directors possess skills and experience suitable for building the Company. Furthermore, the Board considers that in the current phase of the Company’s growth, the Company’s shareholders are better served by directors who have a vested interest in the Company. Nonetheless, the Board takes the responsibilities of best practice in corporate governance seriously and will consider the appointment of independent directors if deemed appropriate depending on the scope and scale of it’s operations.
The role of the Nomination Committee is carried out by the full Board. The Board considers that given its size, no efficiencies or other benefits would be gained by establishing a separate Nomination Committee.
There was no separate Remuneration Committee.
Only Mr Paul Odd was considered an independent Director.
A separate Nomination Committee has not been formed.
A separate Audit Committee has not been formed.
The role of the Audit Committee is carried out by the full Board. The Board considers that given its size and stage of development, no efficiencies or other benefits would be gained by establishing a separate Audit Committee. The Board will re-consider establishing a separate Audit Committee as the Company’s operations grow.
The full Board carried out the functions of the Remuneration Committee. All matters of remuneration were determined by the Board in accordance with Corporations Act requirements, especially in respect of related party transactions. That is, no directors participated in any deliberation regarding his own remuneration or related issues.
2
2
4
9
2.1, 2.2
2.4
4.2, 4.3
9.2
BATAVIA MINING ANNUAL REPORT 2005
10
CORPORATE GOVERNANCE STATEMENT
Skills, experience, expertise and term of office of each Director
A profile of each director containing the applicable information is set out in the Directors’ Report.
Identification of Independent Directors
Mr Paul Odd resigned as a director on 11 July 2005.
There are currently no directors considered to be independent. The board will consider the appointment of independent directors if deemed appropriate depending on the scope and scale of its operations.
Statement concerning availability of independent professional advice
Subject to the approval of the other Directors an individual director may engage an outside adviser at the expense of Batavia Mining Limited for the purposes of seeking independent advice in appropriate circumstances.
Names of nomination committee members and their attendance at committee meetings
The full Board carries out the functions of the Nomination Committee. The Board did not convene formally as the Nomination Committee during the Reporting Period, but rather, discussed relevant issues on an as-required basis.
Names and qualifications of audit committee members
The full Board performs the functions of the Audit Committee.
Number of audit committee meetings and names of attendees
During the Reporting Period Mr Bath met with the external auditors in respect of the half year and full year financial reports.
Confirmation whether performance evaluation of the Board and its members have taken place and how conducted
During the Reporting Period an evaluation of the Board was conducted as an informal review during regular meetings of the Board.
Company’s remuneration policies
All of the directors received a separate directors’ fee of $30,000 per annum, plus statutory superannuation.
In addition:
• Companies associated with Messrs Barr, Biddle and Durack have received consulting fees for services provided to the Company; and
• Mr Odd has received consulting fees for services provided.
Mr Bath is not remunerated directly by the Company for his executive services. He is remunerated by Tennant Creek Gold Limited, a major shareholder of the Company, which recharges his salary on a cost and time basis.
There is no direct link between remuneration paid to any of the directors and corporate performance such as bonus payments for achievements of key performance indicators.
Remuneration of directors and key executives is competitively set with the assistance of externally prepared surveys and reports, taking into account the experience and qualifications of each individual.
Names of remuneration committee members and their attendance at committee meetings
The full Board carried out the function of the Remuneration Committee. During the Reporting Period, the Board did not convene formally as the Remuneration Committee, but rather, dealt with remuneration-related issues on an as-required basis during regular meetings of the Board.
Existence and terms of any schemes for retirement benefits for non-executive directors
There are no retirement benefits for non-executive directors.
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DIRECTORS’ REPORT
Your Directors submit their report together with the financial report of Batavia Mining Limited (“the Company”) and of the consolidated entity, being the Company and its controlled entities, for the year ended 30 June 2005. The Company is a company limited by shares that is incorporated and domiciled in Australia.
Directors
The Directors of the Company in office during the financial year and until the date of this financial report are as follows. Directors were in office for this entire period unless otherwise stated.
Greg Durack B. App. Sc.
Managing Director
Mr Durack was appointed managing director on 11 April 2005.
Mr Durack is a member of the Australian Institute of Mining Metallurgy and is a metallurgist with 24 years experience in Australia, Papua New Guinea and Greece, primarily on gold projects in both operational and developmental managing roles. Mr Durack has previously held senior positions with Normandy Mining Limited and Newmont Australia.
Mr Durack was appointed a director of Thor Mining PLC on 18 July 2005. Mr Durack has not served as a director of any other listed companies in the last three years.
Chris Bath CA, AICD
Finance Director & Company Secretary
Mr Bath was appointed a director in November 2003. He is a Chartered Accountant and member of the Australian Institute of Company Directors. From 1989 to 1995 he worked in audit and advisory services with two International accounting firms, specialising in the mining and mineral exploration and manufacturing industries.
Since 1995 he has held several senior financial positions in the commercial sector where he has been responsible for acquisition accounting, financial modelling, implementing management reporting systems, management and financial reporting for ASX listed companies and compliance with the Corporations Act and Australian Stock Exchange Listing Rules.
Mr Bath has not served as a director of any listed companies in the last three years.
Mr Bath has been Company Secretary of the Company since June 2003, is currently Company Secretary for Tenannt Creek Gold Limited and joint Company Secretary for Thor Mining PLC.
Pedro Kastellorizos B.App.Sc (Geology)
Exploration Director
Mr Kastellorizos was appointed a director on 8 August 2005.
Mr Pedro Kastellorizos is an exploration and mining geologist with in excess of ten years professional experience.
He has initiated and managed exploration and mining projects in the Northern Territory and Western Australia on behalf of several mining companies, including the successful exploration of uranium, gold and
base metals.
During the past three years Mr Kastellorizos has not served as a director of any listed companies.
Neil Biddle B.App.Sc (Geology), M.Aus.IMM
Mr Biddle was re-appointed a director on 11 April 2005.
Mr Biddle is a geologist and company director with over 17 years professional and management experience in listed companies involved in mining and exploration and was formerly managing director of Border Gold Limited (1991-1995) and Consolidated Victorian Mines NL (1991-1995).
During the past three years Mr Biddle has served as a director of the following listed companies:
• Peninsula Minerals Limited, appointed 21/1/00, resigned 7/5/03; and
• Tennant Creek Gold Limited, appointed 18/12/98.
John W Barr CA, FAICD
Resigned 20 July 2005.
Alan Downie B.App.Sc (Mining Geology), M.Aus.IMM
Resigned 26 November 2004.
Paul Odd B.Sc (Hons), D.I.C., FAus.IMM
Resigned 11 July 2005.
Directors’ Meetngs
Director Meetings held during the time Meetings the Director held office attended
John W Barr (resigned 20/07/05) 8 8
Alan Downie (resigned 26/11/04) 1 1
Gregory Durack (appointed 11/04/05) 1 1
Chris Bath 8 8
Paul Odd (resigned 11/07/05) 8 8
Neil Biddle (appointed 11/04/05) 1 0
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DIRECTORS’ REPORT
Principal Activities
The principal activity of the consolidated entity constituted by Batavia Mining Limited and the entities controlled by it during the year consisted of exploration and development for gold, copper and other minerals within Western Australia.
Results and Review of Operations
The operating loss of the consolidated entity after income tax for the year was $1,101,142 (2004: $5,349,853). A review of the operations during the financial year is set out on pages 1 to 8.
Dividends
No dividends were paid during the year and the directors do not recommend payment of a dividend.
Significant Changes in the State of Affairs
During the year the Company undertook a non-renounceable pro rata offer of up to 90,407,180 shares and options on the basis of 1 share for every 2 shares held together with one free attaching option exercisable at 5 cents on or before 15 June 2006. The issue closed in June 2005 with the Company receiving acceptances for 43,433,466 new Shares and options raising $868,669 before costs.
Subsequent to year end the Company placed the shortfall from this issue and raised $939,474 before costs.
Environmental Regulations
The consolidated entity holds licenses issued by the relevant environmental protection authority covering its operations. These licenses allow mining and treatment activities to be undertaken, specify limits and regulate the management of discharges associated with mining operations as well as the storage of hazardous materials. The Board believes that the consolidated entity has adequate systems in place for the management of its environmental requirements and is not aware of any material breach of those environmental requirements as they apply to the consolidated entity.
Remuneration Report
This report details the amount and nature of remuneration of each director of the Company and the executives receiving the highest remuneration.
Remuneration Policy
The remuneration policy is set to provide a fixed remuneration component and a specific equity related component. There is no separation of renumeration between short-term incentives and long-term incentives. The board believes that this remuneration policy is appropriate given the stage of development of the Company and the activities which it undertakes and is appropriate in aligning director and executive objectives with shareholder and businesses objectives.
The remuneration policy, setting the terms and conditions for the executive directors and other executives has been developed by the board after seeking professional advice and taking into account market conditions and comparable salary levels for companies of a similar size and operating in similar sectors.
Directors receive a base fee of $30,000 per annum. Shareholders have approved Directors fee of an amount of up to $200,000 in aggregate per annum. Superannuation contributions of 9% are paid on these fees as required by law.
Executive Directors and executives receive either a salary plus superannuation guarantee contributions as required by law, currently set at 9%, or provide their services via a consultancy arrangement. Directors and executives do not receive any retirement benefits. Individuals may, however, choose to sacrifice part of their salary to increase payments towards superannuation.
All remuneration paid to directors and executives is valued at cost to the Company and expensed. Options are valued using the Black-Scholes methodology. In accordance with current accounting policy the value of these options is not expensed.
The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to directors is subject to approval by shareholders at a General Meeting. Fees for non-executive directors are not linked to the performance of the economic entity. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and may receive options.
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Details of remuneration for the year ended 30 June 2005
The following table discloses the remuneration of the Directors and executive officers of the Company and the consolidated entity. The information in this table is audited.
1Includes the provision of a motor vehicle. 2Represents 40% of total remuneration. 3Represents 13% of total remuneration. 4Represents 12% of total remuneration
The fair value of the options is calculated at the date of grant using the Black-Scholes model and allocated to each reporting period equally over the period from grant date to vesting date. The value disclosed above is a portion of the fair value of the options allocated to this reporting period.
The term ‘director’ and ‘executive officer’ have been treated as mutually exclusive for the purposes of this disclosure.
Employment contracts
The managing director, Mr Greg Durack, is retained via a servies contract with Martineau Resources Pty Ltd. The contract commenced on 31 January 2005. The contract can be terminated by either party on 14 days' notice. There are no termination payments under the contract.
Options granted to Directors and Senior Executives
No options were granted to Directors and senior Executives as remuneration during the year.
During the year the Company issued options for unissued ordinary shares totalling 43,483,466 (refer note 24(d)) in the Company pursuant to a pro-rata offer to all shareholders. The following Directors took up their entitlements pursuant to this issue:
Neil Biddle 2,452,036 $0.05 15 June 2006
Chris Bath 350,934 $0.05 15 June 2006
Number of Exercise Expiry
Director Options Price Date
DIRECTORS’ REPORT
Directors Directors Consulting Salary Super Value of Insurance Other Total
Fees Fees Options Premiums
SPECIFIED DIRECTORS
Executive
John W Barr 2005 30,000 75,000 – 2,700 – – – 107,700
2004 20,000 112,750 – 1,800 – 6,418 – 140,968
Chris Bath 2005 30,000 – – 2,700 – – – 32,700
2004 13,014 – – 1,171 213,680 6,418 – 34,283
Neil Biddle 2005 6,676 10,000 – 601 – – 13,836 21,113
2004 12,199 59,950 – 1,098 – 3,950 – 77,197
Gregory Durack 2005 6,676 61,468 – 601 – – – 68,745
2004 – – – – – – – –
Alan Downie 2005 12,167 – 77,643 6,988 – – 19,202 106,000
2004 20,000 111,936 31,965 4,677 327,360 6,418 11,792 204,148
Non-Executive
Paul Odd 2005 30,000 39,625 – 2,700 – – – 72,325
2004 1,209 – – 109 – 494 – 1,812
Total Specified Directors
2005 115,519 186,093 77,643 16,290 – – 13,038 408,583
2004 66,422 284,636 31,965 8,855 41,040 23,698 1,792 458,408
SPECIFIED EXECUTIVES
John Libby 2005 – – 44,561 4,010 – – 4,800 53,371
2004 – – 95,270 8,574 413,680 – – 117,524
Total Specified Executives
2005 – – 44,561 4,010 – – 4,800 53,371
2004 – – 95,270 8,574 13,680 – – 117,524
Primary Equity Other
Compensation Compensation
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Likely Developments and Expected Results
Comment on likely developments and expected results from the consolidated entity’s activities are set out in the Review of Operations.
Company Performance
Comments on performance are set out in the Review of Operations.
Indemnification and Insurance of Directors and Officers
Indemnification
The Company has agreed to indemnify current directors and officers against all liabilities to another person (other than the Company or a related body corporate), including legal expenses that may arise from their position as directors and officers of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.
Insurance
The directors have not included details of the amount of the premium paid in respect of the directors' and officers' liability insurance contracts, as such disclosure is prohibited under the terms of the contract.
Events Subsequent to Reporting Date
In July 2005, the Company placed the shortfall arising from the rights issue completed in June 2005. This resulted in the issue of a further 46,973,714 shares being placed, raising a further $939,474 before issue costs.
Non-audit Services
There were no non-audit services provided to the Company by the auditor during the year.
Auditors Independence Declaration
The auditor’s independence declaration for the year ended 30 June 2005 has been received and can be found on page 38.
Signed in accordance with a resolution of directors.
Greg Durack
Managing Director
Perth, 20 September 2005
Share Options
90,407,180 options over unissued ordinary shares with an exercise price of $0.05 were granted during or since the end of the financial year pursuant to the pro-rata offer to all shareholders and the placement of the shortfall.
At the date of this report unissued ordinary shares of the Company under option are:
30 November 2005 $0.15 500,000
15 June 2006 $0.05 90,376,692
30 September 2006 $0.20 37,273,010
31 March 2007 $4.00 258,750
Expiry Date Exercise Price Number of Options
Directors’ Interests
The relevant interest of each director in the shares and options over shares issued by the companies within the consolidated entity at the date of this report is as follows:
Neil Biddle Nil 2,452,036
Gregory Durack 1,500,000 Nil
Chris Bath 565,153 902,469
Pedro Kastellorizos Nil Nil
Director Ordinary Shares Options Over Ordinary Shares
DIRECTORS’ REPORT
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Other revenues from ordinary activities 181,458 289,809 178,964 281,853
Total revenues from ordinary activities 2 181,458 289,809 178,964 281,853
Borrowing costs 3 (3,918) - (3,918) -
Employee expenses (97,111) (157,959) (97,111) (157,959)
Depreciation and amortisation expenses 3 (47,488) (6,586) (47,488) (6,586)
Individually significant items 3 (a) (149,251) (4,173,406) (735,189) (4,178,502)
Other expenses from ordinary activities 3 (b) (984,832) (1,301,711) (979,730) (1,270,184)
Loss from ordinary activities before
related income tax expense (1,101,142) (5,349,853) (1,684,472) (5,331,378)
Income tax expense relating to ordinary activities 4 - - - -
Net loss attributable to members of Batavia Mining Limited (1,101,142) (5,349,853) (1,684,472) (5,331,378)
Share issue costs 17 (51,047) (572,205) (51,047) (572,205)
Total expenses attributable to members of
Batavia Mining Limited and recognised directly in equity (51,047) (572,205) (51,047) (572,205)
Total changes in equity other than those resulting from
transactions with owners as owners attributable to
members of Batavia Mining Limited (1,152,189) (5,922,156) (1,735,519) (5,903,583)
Basic loss per share ($) 5 (0.006) (0.036)
Diluted loss per share ($) 5 (0.006) (0.036)
STATEMENTS OF FINANCIAL PERFORMANCE (YEAR ENDED 30 JUNE 2005)
2005 $ 2004 $ 2005 $ 2004 $
CONSOLIDATED THE COMPANY
NOTE
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Current Assets
Cash assets 7 1,012,734 2,539,461 1,008,105 2,514,793
Receivables 8 394,015 528,998 341,335 430,468
Inventories 9 - 40,000 - 40,000
Other 10 60,261 99,197 60,261 99,197
Total Current Assets 1,467,010 3,207,656 1,409,701 3,084,458
Non-Current Assets
Receivables 8 - - 1,327,418 1,039,709
Other financial assets 11 - - 1 -
Plant and equipment 12 1,068,965 1,109,550 1,068,965 1,109,550
Exploration, evaluation and development expenditure 13 3,201,927 2,101,571 1,367,060 1,069,333
Total Non-Current Assets 4,270,892 3,211,121 3,763,444 3,218,592
Total Assets 5,737,902 6,418,777 5,173,145 6,303,050
Current Liabilities
Payables 14 84,432 472,534 84,432 338,234
Interest-bearing liabilities 15 8,493 7,913 8,493 7,913
Provisions 16 5,019 6,359 5,019 6,359
Total Current Liabilities 97,944 486,806 97,944 352,506
Non-Current Liabilities
Interest-bearing liabilities 15 39,298 47,791 39,298 47,791
Total Non-Current Liabilities 39,298 47,791 39,298 47,791
Total Liabilities 137,242 534,597 137,242 400,297
NET ASSETS 5,600,660 5,884,180 5,035,903 5,902,753
Equity
Contributed equity 17 12,051,753 11,234,131 12,051,753 11,234,131
Accumulated losses 18 (6,451,093) (5,349,951) (7,015,850) (5,331,378)
TOTAL EQUITY 5,600,660 5,884,180 5,035,903 5,902,753
STATEMENTS OF FINANCIAL POSITION (AS AT 30 JUNE 2005)
2005 $ 2004 $ 2005 $ 2004 $
CONSOLIDATED THE COMPANY
NOTE
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Cash flows from operating activities
Payments to suppliers and employees (981,504) (1,551,069) (956,268) (1,506,103)
Interest received 96,445 68,394 93,953 65,307
Borrowing costs (3,918) - (3,918) -
Release of deposits - 197,095 - 197,095
Stamp duty refund 89,921 - 89,921 -
Other 7,154 - 7,154 -
Net cash used in operating activities 22(b) (791,902) (1,285,580) (769,158) (1,243,701)
Cash flows from investing activities
Acquisition of plant and equipment (26,343) (95,915) (26,343) (95,915)
Acquisition of mineral assets and exploration expenditure - (194,134) - (194,134)
Proceeds from sale of plant and equipment 2,727 850 2,727 850
Payments for exploration and evaluation expenditure (1,492,027) (2,592,992) (633,083) (582,056)
Loans to controlled entities - - (873,648) (2,083,318)
Acquisition of controlled entity - - (1) -
Cash outflows on disposal of subsidiary 19 - (1,161) - -
Payment for security deposits (12,000) (154,000) - (129,000)
Net cash used in investing activities (1,527,643) (3,037,352) (1,530,348) (3,083,573)
Cash flows from financing activities
Cash proceeds from issue of shares 868,669 8,137,259 868,669 8,137,259
Payment of share issue costs (67,938) (523,597) (67,938) (523,597)
Payment for share buy-back - (16,191) - (16,191)
Repayment of borrowings (7,913) (1,326,374) (7,913) (1,326,374)
Proceeds from borrowings - 566,325 - 566,325
Net cash provided by financing activities 792,818 6,837,422 792,818 6,837,422
Net (decrease)/increase in cash held (1,526,727) 2,514,495 (1,506,688) 2,510,148
Cash at the beginning of the financial year 2,539,461 24,966 2,514,793 4,645
Cash at the end of the financial year 22(a) 1,012,734 2,539,461 1,008,105 2,514,793
STATEMENTS OF CASH FLOWS (YEAR ENDED 30 JUNE 2005)
2005 $ 2004 $ 2005 $ 2004 $
CONSOLIDATED THE COMPANY
NOTE
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NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
1 Summary of significant accounting policies
(a) Basis of accounting
The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001 including applicable Accounting Standards. Other mandatory reporting requirements (Urgent Issues Group Consensus Views) have also been complied with.
The financial report has been prepared in accordance with the historical cost convention and except where stated, does not take into account changing money values or fair values of non-current assets.
(b) Changes in accounting policy
The accounting policies adopted are consistent with those of the previous year.
(c) Principles of consolidation
The consolidated financial statements are those of the consolidated entity, comprising Batavia Mining Limited (the parent company) and all entities that Batavia Mining Limited controlled from time to time during the year and reporting date.
Information from the financial statements of subsidiaries is included from the date the parent company obtains control until such time as control ceases. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which the parent company has control.
Subsidiary acquisitions are accounted for using the purchase method of accounting.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.
(d) Revenue recognition
Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST). Exchanges of goods or services of the same nature and value without any cash consideration are not recognised as revenues.
Interest revenue
Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.
Sale of non-current assets
The gross proceeds of non-current asset sales are included as revenue at the date control of the asset passes to the buyer, usually when an unconditional contract of sale is signed.
The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds
on disposal.
Dividends
Revenue from dividends from controlled entities is recognised by the parent entity when they are declared by the controlled entities.
(e) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.
(f) Borrowing Costs
Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings, amortisation of ancillary costs incurred in connection with arrangement of borrowings and lease finance charges.
Ancillary costs incurred in connection with the arrangement of borrowings are capitalised and amortised over the life of the borrowings.
Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the assets.
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(g) Taxation
The consolidated entity adopts the income statement liability method of tax effect accounting.
Income tax expense is calculated on the profit/(loss) from ordinary activities adjusted for permanent differences between taxable and accounting income. The tax effect of timing differences, which arise from items being brought to account in different periods for income tax and accounting purposes, is carried forward in the statement of financial position as a future income tax benefit or a provision for deferred income tax.
Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt, or if relating to tax losses when realisation is virtually certain.
(h) Earnings per share
Basic earnings per share (EPS) is calculated by dividing the net profit attributable to members of the parent entity for the reporting period, after excluding any costs of servicing equity (other than ordinary shares and converting preference shares classified as ordinary shares for EPS calculation purposes), by the weighted average number of ordinary shares of the Company, adjusted for any bonus issue.
Diluted EPS is calculated as net profit attributable to members adjusted for:
• costs of servicing equity (other than dividends) and preference share dividends;
• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
(i) Acquisition of assets
All assets acquired including plant and equipment and intangibles other than goodwill are initially recorded at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition.
When equity instruments are issued as consideration, their market price at the date of acquisition is used as fair value, except where the notional price at which they could be placed in the market is a better indication of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity subject to the extent of proceeds received, otherwise expensed.
Subsequent additional costs
Costs incurred on assets subsequent to initial acquisition are capitalised when it is probable that future economic benefits in excess of the originally assessed performance of the asset will flow to the consolidated entity in future years. Costs that do not meet the criteria for capitalisation are expensed as incurred.
(j) Receivables
The collectibility of debts is assessed at balance date and specific provision is made for any doubtful accounts.
Trade debtors
Trade debtors to be settled within 60 days are carried at amounts due.
(k) Inventories
Ore stocks, gold in circuit and stores are valued at the lower of cost and net realisable value using an average cost method and applying absorption costing. Cost includes expenditure incurred in acquiring and bringing the inventories to their existing condition and location.
(l) Investments
Controlled entities
Investments in controlled entities are carried in the Company’s financial statements at the lower of cost and recoverable amount.
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
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(m) Leased assets
Leases under which the consolidated entity assumes substantially all the risks and benefits of ownership are classified as finance leases. Other leases are classified as operating leases.
Finance leases
A lease asset and a lease liability equal to the present value of the minimum lease payments are recorded at the inception of the lease.
Lease liabilities are reduced by repayments of principal. The interest components of the lease payments are expensed. Contingent rentals are expensed as incurred.
Operating leases
Payments made under operating leases are expensed on a straight line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased property.
(n) Exploration expenditure
Exploration costs are accumulated in respect of each separate area of interest.
Exploration costs are carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest, or, where exploration and evaluation activities in the area of interest have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.
When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated costs in respect of that area are written off in the financial period the decision is made.
(o) Recoverable amount of non-current assets valued on cost basis
The carrying amounts of non-current assets valued on the cost basis, other than exploration expenditure carried forward (refer note 1(n)), are reviewed to determine whether they are in excess of their recoverable amount at balance date. If the carrying amount of a non-current asset exceeds its recoverable amount, the asset is written down to the lower amount. The write-down is expensed in the reporting period in which it occurs.
Where a group of assets working together supports the generation of cash inflows, recoverable amount is assessed in relation to that group of assets.
In assessing recoverable amounts of non-current assets the relevant cash flows have not been discounted to their present value, except where specifically stated.
(p) Depreciation and amortisation
Useful lives
All assets, including intangibles, have limited useful lives and are depreciated/amortised using the straight line method over their estimated useful lives, with the exception of carried forward exploration costs and finance lease assets which are amortised over the term of the relevant lease or where it is likely the consolidated entity will obtain ownership of the asset, the life of the asset.
Assets are depreciated or amortised from the date of acquisition.
Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until commercial production commences.
Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected prospectively in current and future periods only. Depreciation and amortisation are expensed, except to the extent that they are included in the carrying amount of another asset as an allocation of production overheads.
Major depreciation periods are:
• Mine specific plant and equipment – life of mine
• Head office plant and equipment over periods of 3 to 8 years.
(q) Payables
Liabilities are recognised for amounts to be paid in the future for goods or services received. Trade accounts payable are normally settled within 60 days.
(r) Interest bearing liabilities
All loans are measured at the principal amount. Interest is charged as an expense as it accrues. Finance lease liability is determined in accordance with the requirements of AASB 1008 Leases. (Refer note 1(m)).
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
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(s) Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave, sick leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used.
Employee benefit expenses and revenues arising in respect of the following categories:
• wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave benefits; and
• other types of employee benefits
are recognised against profits on a net basis in their respective categories.
The value of the equity-based compensation scheme described in note 24 is not being recognised as an employee benefits expense.
(t) Cash & Cash Equivalents
Cash on hand and in banks and short term deposits are stated at nominal value.
For the purposes of the statement of cash flows, cash includes cash on hand and in banks, and money market investments readily convertible to cash within two working days.
(u) Contributed equity
Issued and paid up capital is recognised at the fair value of the consideration received by the Company.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.
(v) Comparatives
Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures.
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
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NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
2 Revenue
Interest 81,656 87,039 79,162 83,375
Revenue from release of security deposit - 197,095 - 197,095
Gross proceeds from sale of plant and equipment 2,727 850 2,727 850
Stamp duty refund 89,921 - 89,921 -
Other 7,154 4,825 7,154 533
Total revenues from non-operating activities 181,458 289,809 178,964 281,853
Total revenues from ordinary activities 181,458 289,809 178,964 281,853
3 Loss from ordinary activities before income tax expense
(a) Individually significant expenses/(revenues) included in
loss from ordinary activities before income tax expense
(Gain)/loss on sale of entity 19 - - - 530,352
Net gain on debt release - (115) - (506,969)
Provision against loans to controlled entities - - 585,938 1,324,814
Provision against investment - - - 2,500,000
Write down in value of exploration expenditure 149,251 4,173,521 149,251 330,305
149,251 4,173,406 735,189 4,178,502
(b) Expenses
Administration costs 214,216 277,793 214,216 277,793
Corporate costs 491,654 734,586 495,945 730,927
Remote camp costs 150,896 148,570 152,870 148,364
Write off acquisition costs - 116,830 - 116,830
DOCA transaction costs - (25,175) - (25,175)
Other 128,066 49,107 116,699 21,445
984,832 1,301,711 979,730 1,270,184
(c) Loss from ordinary activities before income tax has
been arrived at after charging:
i. Depreciation of:
Plant and equipment 12 34,739 6,132 34,739 6,132
Plant and equipment – under lease 12 12,749 454 12,749 454
Total depreciation and amortisation expenses 47,488 6,586 47,488 6,586
ii. Profit (loss) on disposal of plant and equipment (4,401) 850 (4,401) 850
iii. Interest – finance lease 3,918 - 3,918 -
2005 $ 2004 $ 2005 $ 2004 $
CONSOLIDATED THE COMPANY
NOTE
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
2 3
4 Income Tax Expense
Prima facie tax benefit at 30% on loss from ordinary activities (330,342) (1,604,985) (505,342) (1,599,413)
Add/(less) tax effect of permanent differences:
Sundry expenditure not deductible 1,568 10,675 1,568 10,390
Net loss on disposal of subsidiary - 7,015 - 7,015
Other (27,573) (24,730) 148,209 (24,239)
Income tax expense related to current and deferred tax transactions
of the wholly owned subsidiries in the tax consolidated group. - - (782) (5,749)
Total permanent differences (26,005) (7,040) 148,995 (12,583)
Income tax benefit adjusted for permanent differences (356,347) (1,611,996) (356,347) (1,611,996)
Less future income tax benefit not brought to account at reporting
date as realisation of the benefit is not regarded as virtually certain 356,347 1,611,996 356,347 1,611,996
Income tax benefit attributable to operating loss from ordinary activities - - - -
Future income tax benefit arising from tax losses not recognised
at reporting date as realisation of the benefit is not regarded
as virtually certain. 1,935,798 1,244,524 1,935,798 1,244,524
The future income tax benefit will only be obtained if:
(a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;
(b) the conditions for deductibility imposed by tax legislation continue to be complied with; and
(c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.
Tax Consolidation
Effective 1 July 2003, for the purposes of income taxation, Batavia Mining Limited and its 100% owned subsidiaries formed a tax consolidated group.
The members of the tax consolidated group have not yet entered into any tax sharing agreement.
2005 $ 2004 $ 2005 $ 2004 $
CONSOLIDATED THE COMPANY
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
2005 $ 2004 $
CONSOLIDATED
5 Earnings Per Share
The following reflects the income and share data used in the
calculations of basic and diluted earnings per share:
Net loss (1,101,142) (5,349,853)
Weighted average number of ordinary shares used in calculation
of basic earnings per share 182,004,319 146,750,411
Diluted earnings per share has not been calculated as there are no potential ordinary shares considered dilutive. Refer note 17.
Since the end of the financial year, 46,973,714 ordinary shares have been issued pursuant to a rights issue. refer Note 17
No. of Shares No. of Shares
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
2 4
CONSOLIDATED THE COMPANY
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
NOTE
6 Segment Reporting
The consolidated entity operates predominantly in one business segment and in one geographical location. The operations of the consolidated entity consist of gold and other mineral exploration, mining and exploitation within Western Australia.
7 Cash Assets
Cash at bank and on hand 24,666 33,001 20,037 8,333
Cash on deposit 988,068 2,506,460 988,068 2,506,460
22(a) 1,012,734 2,539,461 1,008,105 2,514,793
8 Receivables
Current
Trade debtors - 7,878 - 7,878
Security deposits 357,000 345,000 307,000 295,000
Other debtors 37,015 176,120 34,335 127,590
394,015 528,998 341,335 430,468
Non current
Loans - controlled entities 25(a) - - 3,238,171 2,364,523
Less: provision for non recovery 25(a) - - (1,910,753) (1,324,814)
- - 1,327,418 1,039,709
9 Inventories
Ore stockpile – at cost - 40,000 - 40,000
10 Other Assets
Current
Prepayments 60,261 99,197 60,261 99,197
11 Other Financial Assets
Shares in controlled entities – at cost 19 - - 2,500,001 2,500,000
Provision for diminution on shares in controlled entities - - (2,500,000) (2,500,000)
- - 1 -
2005 $ 2004 $ 2005 $ 2004 $
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
2 5
12 Plant and Equipment
Plant and equipment – at cost 1,071,271 1,067,717 1,071,271 1,067,717
Less accumulated depreciation (40,100) (8,710) (40,100) (8,710)
1,031,171 1,059,007 1,031,171 1,059,007
Plant and equipment under lease – at cost 50,997 50,997 50,997 50,997
Less accumulated depreciation (13,203) (454) (13,203) (454)
37,794 50,543 37,794 50,543
Total plant and equipment – at cost 1,122,268 1,118,714 1,122,268 1,118,714
Accumulated depreciation and amortisation (53,303) (9,164) (53,303) (9,164)
Total written down amount 1,068,965 1,109,550 1,068,965 1,109,550
Reconciliations of the carrying amounts for each class of plant and
equipment are set out below:
Plant and equipment
Carrying amount at beginning of year 1,059,007 957,495 1,059,007 957,490
Additions 14,252 110,222 14,252 110,222
Disposals (7,129) - (7,129) -
Depreciation (34,959) (8,710) (34,959) (8,705)
Carrying amount at end of year 1,031,171 1,059,007 1,031,171 1,059,007
Plant and equipment – under lease
Carrying amount at beginning of year 50,543 - 50,543 -
Additions - 50,997 - 50,997
Depreciation (12,749) (454) (12,749) (454)
Carrying amount at end of year 37,794 50,543 37,794 50,543
(a) Assets pledged as security
Included in the balance of plant and equipment are assets with
a value of $37,794 over which security has been granted as
security over lease obligations.
13 Exploration Expenditure
Costs carried forward in respect of areas of interest in:
Exploration and evaluation phases 3,201,927 2,101,572 1,367,060 1,069,333
The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependenton the successful development and commercial exploitation or sale of the respective areas.
2005 $ 2004 $ 2005 $ 2004 $
CONSOLIDATED THE COMPANY
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
2 6
14 Payables
Current
Trade creditors 4,414 284,486 4,414 212,255
Other creditors 80,018 188,048 80,018 125,979
84,432 472,534 84,432 338,234
15 Interest Bearing Liabilities
Current
Lease liability (a) 8,493 7,913 8,493 7,913
Non-current
Lease liability (a) 39,298 47,791 39,298 47,791
(a) The consolidated entity leases plant and equipment under a finance
lease expiring in 3 years. At the end of the lease term the consolidated
entity has the option to purchase the equipment. Refer note 12(a).
16 Provisions
Current
Provision for employee benefits 5,019 6,359 5,019 6,359
Employees benefits
The consolidated entity had 2 employees as at 30 June 2005 (2004:7)
17 Contributed Equity
Share capital
(a) Issued and paid up capital
Ordinary shares fully paid 12,051,753 11,234,131 12,051,753 11,234,131
(b) Movements in shares on issue
Beginning of the financial year 180,814,361 11,234,131 82,386,940 59,995,764
Issued during the year:
-Share placement - - 29,810,747 3,181,075
Less transaction costs - - - (182,971)
- Rights issue 43,433,466 868,669 47,552,792 4,956,184
Less transaction costs - (51,047) - (389,234)
- Conversion of convertible notes - - 21,200,000 1,060,000
- Exercise of options - - 50 10
- Shares bought back during the year - - (136,168) (16,191)
- Reduction in share capital as approved by shareholders - - - (57,370,506)
Balance at the end of the year 224,247,827 12,051,753 180,814,361 11,234,131
2005 $ 2004 $ 2005 $ 2004 $
CONSOLIDATED THE COMPANY
NOTE
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
NUMBER $ NUMBER $
2005 2004
CONSOLIDATED
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
2 7
17 Contributed Equity (continued)
Rights Issue
During the year the Company issued a prospectus dated 12 May 2005 for a pro-rata entitlement offer of up to 90,407,180 shares at $0.02 each together with one free attaching option exercisable at $0.02 cents on or before 15 June 2006 on the basis of one share and option for every two shares held. The issue closed in June 2005 with only 43,433,466 shares being tken up by shareholders, raising $868,869 before costs. Subsequent to the end of the financial year the shortfall of 46,973,714 shares was placed, raising a further $939,474.
Terms and conditions of contributed equity
Ordinary shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
Subsequent to 30 June 2005 the Company has issued 46,973,714 Ordinary Shares pursuant to the placement of the shortfall from the pro-rata rights issue.
c) Movements in options
Expiry Date Exercise Price Number at Lapsed Exercised Issued Number at
beginning of year end of year
31 March 2005 $20.00 70,000 (70,000) - - -
30 April 2005 $20.00 77,500 (77,000) - - -
30 November 2005 $0.15 2,000,000 (1,500,000) - - 500,000
15 June 2006 $0.05 - - - 43,433,466 43,433,466
30 September 2006 $0.20 37,273,010 - - - 37,273,010
31 March 2007 $4.00 258,750 - - - 258,750
Options issued
Pursuant to the non-renouncable pro-rata rights issue the Company issued 43,433,466 option exercisable at $0.05 on or before 15 June 2006.
Subsequent to 30 June 2005 the Company has issued 46,973,714 options exercisable at $0.05 on or before 15 June 2006 pursuant to the placement of the shortfall from the pro-rata rights issue.
18 Accumulated Losses
Balance at the beginning of the year 5,349,951 57,370,604 5,331,378 57,370,506
Net loss attributable to members of Batavia Mining Ltd 1,101,142 5,349,853 1,684,472 5,331,378
Reduction in share capital (a) - (57,370,506) - (57,370,506)
Balance at end of year 6,451,093 5,349,951 7,015,850 5,331,378
(a) In the previous financial year and in accordance with shareholder approval at the Annual General Meeting on 7 November 2003, the Company reduced issued capital from $60,211,790 to $2,841,284. The reduction was made without any shares in the Company being cancelled or any payment to any shareholder of any paid up share capital and by applying the resultant amount of cancelled paid up share capital of $57,370,506, against the carried forward accumulated losses account of the Company.
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
CONSOLIDATED THE COMPANY
NOTE
2005 $ 2004 $ 2005 $ 2004 $
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
2 8
2005 % 2004 % 2005 $ 2004 $
2005 $ 2004 $ 2005 $ 2004 $
CONSOLIDATED THE COMPANY
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
Acquisitions of entity
Consideration 1 - - -
Fair value of net assets of entity acquired:
Cash assets 1 - - -
Inflow of cash on acquisition 1 - - -
Net cash effect
Cash consideration paid 1 - - -
Cash included in net assets acquired (1) - - -
Cash paid for purchase of controlled entity as reflected in the
consolidated statement of cash flows - - - -
Disposal of entity
Consideration - - - -
Carrying amount on disposal - - - 530,352
Loss on disposal - - - (530,352)
Net assets of entity disposed of:
Cash - 1,161 - -
- 1,161 - -
Cash outflow on disposal - (1,161) - -
19 Controlled Entities
Particulars in relation to controlled entities
Name of controlled entity Place of incorporation % Equity interest of the consolidated entity Parent entity investment
South Murchison Mines Pty Ltd Australia 100 100 2,500,000 2,500,000
Harfort Nominees Pty Ltd Australia 100 - 1 -
2,500,001 2,500,001
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
2 9
20 Financial Instruments
(a) Interest rate risk
The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out below:
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
Weighted Avg Floating Fixed Interest Non Interest
Interest Rate Interest Rate Rate Bearing Total
2005
Financial Assets
Cash 1.16 24,666 - - 24,666
Interest bearing deposits 5.19 988,068 - - 988,068
Other receivables 5.52 357,000 - 37,015 394,015
1,369,734 - 37,015 1,406,749
Financial Liabilities
Trade creditors - - - 84,432 84,432
Lease liabilities 7.27 - 47,791 - 47,791
- 47,791 84,432 132,223
2004
Financial Assets
Cash 1.16 32,997 - - 32,997
Interest bearing deposits 5.31 2,506,464 - - 2,506,464
Other receivables 5.40 345,000 - 183,998 528,998
2,844,461 - 526,530 3,068,459
Financial Liabilities
Trade creditors - - 472,534 472,534
Lease liabilities 7.27 - 55,704 - 55,704
- 55,704 472,534 528,238
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has adopted the policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the consolidated entity’s maximum exposure to credit risk.
(c) Concentrations of credit risk
As the consolidated entity was exclusively involved in exploration during the year, there is currently very little credit risk. The risk is considered immaterial to the operations of the consolidated entity.
(d) Net fair value
The carrying amount of financial assets and financial liabilities recorded in the financial statements represents their respective net fair values, determined in accordance with the accounting policies disclosed in Note 1.
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
3 0
21 Commitments
Exploration expenditure commitments
In order to maintain current rights of tenure to exploration tenements, the Company and the consolidated entity are required to perform minimum exploration work to meet the minimum expenditure requirements specified by various State governments. These obligations are subject to renegotiation when application for a mining lease is made and at other times.
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
2005 $ 2004 $ 2005 $ 2004 $
CONSOLIDATED THE COMPANY
Exploration expenditure commitments
Exploration commitments not provided for in the
financial report payable:
Not later than one year 702,445 667,120 593,605 560,280
Finance Lease commitments
Finance Lease commitments are payable as follows:
Within one year 11,661 11,611 11,661 11,611
One year or later and no later than five years 55,232 55,231 55,232 55,231
66,893 66,842 66,893 66,842
Less: Future lease finance charges 19,102 11,138 19,102 11,138
47,791 55,704 47,791 55,704
Lease liabilities provided for in the financial statements:
Current 8,493 7,913 8,493 7,913
Non-current 39,298 47,791 39,298 47,791
Total lease liability 47,791 55,704 47,791 55,704
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
3 1
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
2005 $ 2004 $ 2005 $ 2004 $
CONSOLIDATED THE COMPANY
(a) Reconciliation of cash
Cash assets 1,012,734 2,539,461 1,008,105 2,514,793
(b) Reconciliation of loss from ordinary activities after
income tax to net cash provided by operating activities
Loss from ordinary activities after income tax (1,101,142) (5,349,853) (1,684,472) (5,331,378)
Add/(less) items classified as investing/financing activities:
Loss (profit) on sale of non-current assets 4,401 (850) 4,401 (850)
Loss on disposal of controlled entities - - - 530,352
Add/(less) non-cash items:
Depreciation/amortisation 47,488 6,586 47,488 6,586
Gain on debt forgiveness - (115) - (506,969)
Writedown in value of ore stockpiles 40,000 - 40,000 -
Exploration expenditure written off 149,251 4,173,521 149,251 330,305
Diminution in loans to controlled entity - 585,939 1,324,814
Diminution in value of investments - - - 2,500,000
Net cash used in operating activities before change in assets and liabilities (860,002) (1,170,711) (857,393) (1,147,140)
Change in assets and liabilities:
Increase/(decrease) in current creditors, borrowing and provisions (108,748) (58,805) (36,424) (73,549)
(Increase)/decrease in current receivables 146,983 (25,924) 89,132 7,127
(Increase)/decrease in other current assets 29,865 (30,140) 35,527 (30,140)
Net cash used in operating activities (791,902) (1,285,580) (769,158) (1,243,702)
(c) Non cash financing and investing activities
During the financial year the consolidated entity acquired plant and
equipment with an aggregate fair value of Nil (2004:$50,997),
by means of finance leases.
23 Auditors’ remuneration
Audit services:
Auditors of the Company
Ernst & Young
- audit or review of the financial reports 24,695 27,564 24,695 27,564
Other services:
Auditors of the Company
Ernst & Young
- taxation services - 8,800 - 8,800
- other assurance services - 2,800 - 2,800
- 11,600 - 11,600
24,695 51,164 24,695 51,164
22 Notes to the statements of cash flows
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
3 2
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
24 Director and Executive disclosures
(a) Details of Directors and Executives
Specified Director
Executive
John W Barr Chairman, resigned 20 July 2005.
Greg Durack Managing Director, appointed 11 April 2005.
Chris Bath Finance Director.
Neil Biddle Director, appointed 11 April 2005.
Alan Downie Managing Director, resigned 26 November 2004.
Non-Executive Directors
Paul Odd Non-Executive Director, resigned 11 July 2005.
Specified Executives
John Libby Exploration Manager, resigned October 2004.
(b) Remuneration of Directors and Executives
The Company has applied the exemption under the Corporation Amendments Regulations 2005 which exempts listed companies from providing remuneration disclosures in relation to their specified directors and specified executives in their annual financial reports by accounting standard AASB 1046 "Director and Executive Disclosures by Disclosing Entities".
These remuneration disclosures are provided in the Remuneration Report on page 12 of the directors’ report, the discussion of the employment contracts in this Remuneration Report on page 13, the table on page 13 of the Remuneration Report and are designated as audited.
(c) Options and rights over equity instruments granted as remuneration
During the reporting period, no options over ordinary shares were granted as remuneration.
The options vest at date of grant and no options were exercised during the year. No options have been granted since the end of the financial year.
The options were provided at no cost to the recipients pursuant to the pro-rata rights issue to all shareholders.
(d) Options holdings of Directors and Executives
The movement during the reporting period in the number of options over ordinary shares in Batavia held, directly, indirectly or beneficially, by each specified director and specified executive, including their personally-related entities, is as follows:
No options held by specified directors or specified executives are vested but not exercisable. Other changes include options acquired pursuant to the pro-rata rights issue to all shareholders.
Held at Granted as Exercised Other Held at Vested and exercisable
Directors 1 July 2004 remuneration changes 30 June 2005 at 30 June 2005
Specified Directors
Executive
John W Barr 500,000 - - - 500,000 500,000
Greg Durack - - - -
Chris Bath 604,117 - - 350,934 955,051 955,051
Alan Downie 1,100,000 - - (1,100,000) - -
Neil Biddle - - - 2,452,036 2,452,036 2,452,036
Non-Executive
Paul Odd - - - - - -
Specified Executives
John Libby 500,000 - - 500,000 - -
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
3 3
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
24 Director and Executive disclosures (continued)
(e) Equity holdings and transactions of Directors and Executives
The movement during the reporting period in the number of ordinary shares of Batavia Mining Ltd held, directly, indirectly or beneficially, by each specified director and specified executive, including their personally-related entities is as follows:
Directors Held at Held at
1 July 2004 Purchases Sales 30 June 2005
Specified Directors
Executive
John W Barr1 10,018,616 3,000,000 (4,018,616) 9,000,000
Greg Durack2 - 1,500,000 - 1,500,000
Chris Bath 910,102 455,051 - 1,365,153
Neil Biddle4 - 8,356,109 - 8,356,109
Alan Downie3, 5 450,000 - (450,000) -
Non-Executive
Paul Odd6 - - - -
Specified Executives
John Libby - - - -
1 Resigned 20/7/05
2 Appointed 11/4/05
3 Resigned 26/11/04
4 Purchases include 1,904,073 ordinary shares held as at the date of his appointment as a Director
5 Sales include 450,000 ordinary shares held at the date of his resignation as a director
6 Resigned 11/7/05
(f) Other transactions and balance with Specified Directors and Specified Executives
A number of specified directors and specified executives, or their personally-related entities, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities.
A number of these entities transacted with the Company or its subsidiaries in the reporting period. The terms and conditions of those transactions were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to unrelated entities on an arm’s length basis.
The aggregate amounts recognised during the year relating to specified directors, specified executives and their personally-related entities also included in the primary benefits component of remuneration of specified directors and specified executives by the consolidated entity (note 24(b)), were total expenses of $146,468. Details of the transactions are as follows:
Transaction Note 2005 $
Specified Directors
John W Barr Consulting Fees (i) 75,000
Greg Durack Consulting Fees (ii) 61,468
Neil Biddle Consulting Fees (iii) 10,000
(i) The Company used the management consulting services of Kensington Consulting Pty Ltd, a company of which Mr John W Barr is a director.
(ii) The Company used the consulting services of Martineau Resources Pty Ltd, a company of which Mr Greg Durack is a director.
(iii) The Company used the geological and consulting services of Hatched Creek Pty Ltd, a company of which Mr Neil Biddle is a related party.
Amounts were billed based on normal market rates for such services and were due and payable under normal payment terms.
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
3 4
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
25 Related Party Disclosures
(a) Wholly owned group transactions
Details of interests in wholly owned controlled entities are set out in note 19. Details of these dealings are set out below.
Loans
Loans between entities in the wholly owned group are non-interest bearing, unsecured and are repayable upon reasonable notice having regard to the financial stability of the Company.
Transactions
Parent Entity
2005 2004
Balances with entities in the wholly-owned group
Receivables–non current 3,238,171 2,364,523
Provision for non recovery (1,910,753) (1,324,814)
1,327,418 1,039,709
(b) Other related transactions
Purchases
The Company paid Tennant Creek Gold Limited $182,793 (2004: $240,919) for the reimbursement of office and administration costs. Messrs Barr and Biddle are directors of Tennant Creek Gold Limited.
(c) Ultimate parent
The ultimate parent entity is Batavia Mining limited.
26 Subsequent Events
I July 2005, the Company placed the shortfall shares arising from the rights issue completed in June 2005. This resulted in the issue of a further 46,973,714 shares, raising a further $939,474 before issue costs.
27 Impact of Australian equivalents to IFRS
Impact of Adopting AASB Australian Equivalent to IFRS
Batavia Mining Limited is in the process of transitioning its accounting policies and financial reporting from current Australian Standards (AGAAP) to Australian equivalents of International Financial Reporting Standards (AIFRS) which will be applicable for the financial year ended 30 June 2006. Priority has been given to the preparation of an opening balance sheet in accordance with AIFRS at 1 June 2004 being the Company’s transition date to AIFRS. This will form the basis of accounting for AIFRS in the future, and is required when the Company prepares its first fully AIFRS compliant financial report for the year ended 30 June 2006.
Set out below are the key areas where accounting policies are expected to change on adoption of AIFRS and the Company’s best estimate of the known or reliably estimated impact of the changes on total equity as at the date of transition and 30 June 2005.
The figures disclosed are management’s best estimates of the quantitative impact of the changes as at the date of preparing the 30 June 2005 financial report. The actual effects of the transition to AIFRS may differ from the estimates disclosed due to (a) ongoing work being undertaken by the Company, (b) potential amendments to AIFRS’s and Interpretations thereof being issued by the standard-setters and IFRIC, and (c) emerging and accepting practice in the interpretation and application of AIFRS and UIG Interpretations.
Share Based Payments
Under AASB 2 “Share-based Payments”, the Company will be required to determine the fair value of options issued to employees as remuneration at grant date and recognise an on a pro-rata basis expense in the Statement of Financial Performance over the vesting period. This standard is not limited to options and also extends to other forms of equity-based remuneration. AASB 2 applies to all share-based payments issued after 7 November 2002 which have not vested as at 1 January 2005. All of the Company’s options were granted before 1 January 2005 (with immediate vesting), therefore the Company has elected to apply the exemption under AASB 1 First Time Adoption of International Financial Reporting Standards not to expense these options. As a result there is no impact on the consolidated and the parent entity from adopting AASB 2 at transition date and at 30 June 2005.
Income Taxes
Under the AASB 112 “Income Taxes”, the Company will be required to use a balance sheet liability method, which focuses on the tax effects of transactions and other events that affect amounts recognised in either the Statement of Financial Position or a tax-based balance sheet. After assessing the major changes relating to the transition of AIFRS, the Company is now in the process of assessing the differences. The impact of AASB 112 at both transition date and at 30 June 2005 has not been quantified, however, it is not expected that there will be any further material impact as a result of adoption of this standard.
B A T A V I A M I N I N G A N N U A L R E P O R T 2 0 0 5
3 5
NOTES TO THE FINANCIAL STATEMENTS (YEAR ENDED 30 JUNE 2005)
Exploration and Evaluation of Mineral Resources
AASB 6 “Exploration for and Evaluation of Mineral Resources” will require the Company to apply “area of interest” accounting to its exploration and evaluation expenditures, effectively grandfathering the treatment currently used by the Company under AASB 1022 “Accounting for Extractive Industries”. Under AASB 6, if facts and circumstances suggest that the carrying amount of any recognised exploration and evaluation assets may be impaired, the Company must perform impairment tests on those assets in accordance with AASB 136 “Impairment of Assets”. Impairment of exploration and evaluation assets is to be assessed at a cash generating unit or group of cash generating unit’s level provided this is no larger than an area of interest. Any impairment loss is to be recognised as an expense in accordance with AASB 136. The Company has analysed its deferred exploration and evaluation expenditure and is satisfied that no expenses were deferred which were incurred before license was granted. As a result of this analysis it is not expected that there will be any further material impact as a result of the adaption of this standard.
Property, Plant and Equipment
Under AASB 116 “Property, Plant and Equipment”, the cost of property, plant and equipment includes the initial estimate of the costs of dismantling and removing plant and equipment and restoring the site in which it is located. This will result in a change to the group’s current accounting policy which currently does not include the cost of dismantling and removing the item and restoring the site in which it is located when measuring property, plant and equipment. Following an assessment by the Company, it is expected that a deferred rehabilitation asset of $600,100 would be booked in the consolidated entity’s and the Company’s financial statements at transition date and at 30 June 2005, subject to impairment testing.
Impairment of Assets
Under AASB 136 “Impairment of Assets”, the recoverable amount of an asset is determined as the higher of net selling price and value of use. This will result in a change in the group’s current accounting policy which determines the recoverable amount of an asset on the basis of undiscounted cash flows. Under the new policy impairment of assets may be recognised sooner and that the amount of write-downs may be greater. The Company assessed the impairment triggers under AASB 136 and the facts and circumstances under AASB 6 relevant to the Company and the consolidated entity at transition date and 30 June 2005 and concluded that the assets have been impaired to the extent of the deferred rehabilitation asset of $600,100 which would be raised on adoption of AASB 116. Accordingly an expense of $600,100 will be booked to the consolidated entity’s and the Company’s retained earnings account at transition date and 30 June 2005.
Provisions, Contingent Liabilities and Contingent Assets
Under AASB 137 “Provisions, Contingent Liabilities and Contingent Assets”, the rehabilitation provision should be measured at the best estimate of the expenditure required to settle the present obligation. This would result in a change to the group’s current accounting policy which recognises the rehabilitation obligation required at the cessation of a particular mine-site gradually over the mine’s life in production. Following an assessment by the Company it is expected that a deferred rehabilitation provision of $600,100 will be booked in the consolidated entities and the Company’s financial statements at transition date and at 30 June 2005.
Financial Instruments
AASB 139 “Financial Instruments Recognition and Measurement” will require financial instruments to be classified into one of the following categories which in turn determines the accounting treatment for the item. The classifications are:
• Financial assets held for trading – which are to be measured at fair value and fair value changes applied through the Statement of Financial Performance;
• Financial assets held to maturity – which are to be measured at amortised costs;
• Loans and receivables – which are measured at amortised cost;
• Available for sale financial assets – which are measured at fair value with fair value changes taken to equity;
• Non-trading financial liabilities – which are measured at amortised cost.
The Company has decided to apply the exemption provided in AASB 1 “First Time Adoption of Australian Equivalents to International Financial Reporting Standards” which permits entities not to apply the requirements of AASB 132 “Financial Instruments”: Presentation and Disclosures and AASB 139 “Financial Instruments”: Recognition and Measurement for the financial year ended 30 June 2005. As a result there is no impact on the consolidated entity’s or the Company’s financial statements at transition date and for the year ended 30 June 2005.
27 Impact of Australian equivalents to IFRS (continued)
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DIRECTORS’ DECLARATION
1. In accordance with a resolution of the Directors of Batavia Mining Limited I state that:
(a) The financial statements and notes and the additional disclosures included in the Directors' report designated as audited of the Company and of the consolidated entity, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2005 and of their performance, for the year ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations 2001; and
(b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. This declaration is made after receiving the declarations required to be made to directors in accordance with section 295A of the Corporations Act 2001 for the financial period ending 30 June 2005.
On behalf of the board.
Greg Durack
Managing Director
Dated at Perth, 20 September 2005
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Scope
The financial report, remuneration disclosures and directors’ responsibility
The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors’ declaration for Batavia Mining Limited (the company) and the consolidated entity, for the year ended 30 June 2005. The consolidated entity comprises both the company and the entities it controlled during that year.
The company has disclosed information about the remuneration of directors and executives (“remuneration disclosures”), as required by Accounting Standard 1046 Director and Executive Disclosures by Disclosing Entities, under the heading “remuneration report” in pages 12 to 13 of the directors’ report, as permitted by the Corporations Regulations 2001.
The directors of the company are responsible for preparing a financial report that gives a true and fair view of thefinancial position and performance of the company and the consolidated entity, and that complies with Accounting Standards in Australia, in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report. The directors are also responsible for the remuneration disclosures contained in the directors’ report.
Audit approach
We conducted an independent audit of the financial report in order to express an opinion to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the financial report is free of material misstatement and the remuneration disclosures comply with Accounting Standard AASB 1046 and the Corporations Regulations 2001. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.
We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards in Australia, and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company’s and the consolidated entity’s financial position, and of their performance as represented by the results of their operations and cash flows and whether the remuneration disclosures comply with Accounting Standard AASB 1046 and the Corporations Regulations 2001.
We formed our audit opinion on the basis of these procedures, which included:
· examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report and the remuneration disclosures; and
· assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.
While we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls. We performed procedures to assess whether the substance of business transactions was accurately reflected in the financial report and the remuneration disclosures. These and our other procedures did not include consideration or judgement of the appropriateness or reasonableness of the business plans or strategies adopted by the directors and management of the company.
Independence
We are independent of the company and the consolidated entity and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration.
Audit opinion
In our opinion:
1. the financial report of Batavia Mining Limited is in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of Batavia Mining Limited and the consolidated entity at 30 June 2005 and of their performance for the year ended on that date;
and (ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
(b) other mandatory financial reporting requirements in Australia.
2. the remuneration disclosures that are contained in pages 12 to 13 of the directors’ report comply with Accounting Standard AASB 1046 and the Corporations Regulations 2001.
Ernst & Young V W Tidy
Partner
Perth 20 September 2005
INDEPENDENT AUDIT REPORT to the Members of Batavia Mining Limited
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AUDITOR'S INDEPENDENCE DECLARATION to the Directos of Batavia Mining Limited
In relation to our audit of the financial report of Batavia Mining Limited for the financial yearended 30 June 2005, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young V W Tidy
Partner
Perth 20 September 2005
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ASX ADDITIONAL INFORMATION
Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in this report is set out below.
Shareholdings (as at 13 September 2005)
Substantial shareholders
The number of shares held by substantial shareholders and their associates are set out below:
Shareholder Number Percentage
Tennant Creek Gold Limited 46,003,839 16.96
Class of shares and voting rights
(a) at meetings of members or classes of members each member entitled to vote may vote in person or by proxy or attorney; and
(b) on a show of hands every person present who is a member has one vote, and on a poll every person present in person or by proxy or attorney has one vote for each ordinary share held.
On-market buy-back
There is no current on-market buy-back.
Distribution of equity securities
Category Ordinary Shares
1-1,000 296
1,001-5,000 255
5,001-10,000 232
10,001-100,000 1,026
100,000 and over 392
2,201
The number of shareholders holding less than a marketable parcel is 701.
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ASX ADDITIONAL INFORMATION
Twenty largest shareholders
Name Number of shares held Percentage of shares held
Tennant Creek Gold Limited 46,003,839 16.96
ANZ Nominees Limited 34,490,645 12.72
Leet Investments Pty Limited 4,000,000 1.47
Mr John Hudson Keesing & Mr Graeme David Meyers 2,775,000 1.02
Sabstern Pty Ltd 2,589,700 0.95
Mr Jack Allan Knight 2,200,000 0.81
Diazill Pty Limited 2,000,000 0.74
Leet Investments Pty Ltd (Superannuation Fund) 2,000,000 0.74
Mr Walid Khnaizer 1,619,354 0.60
Ms Baoqiong Ding 1,510,000 0.56
Mr Gregory Michael Durack 1,500,000 0.55
Mr John Hudson Keesing & Mr Graeme David Meyers (Investment) 1,500,000 0.55
Comsec Nominees Pty Limited 1,407,856 0.52
Westpac Custodian Nominees Limited 1,349,115 0.50
Mr Jeffrey Charles Hogan 1,330,000 0.49
Mr Wei Xiong Yang & Mrs Yin Tse Yang 1,300,000 0.48
RBC Global Services Australia Nominees Pty Limited 1,200,000 0.44
Alfriston Group Limited 1,100,000 0.41
Colbern Fiduciary Nominees Pty 1,090,050 0.40
Forbar Custodians Limited 1,065,000 0.39
112,030,559 41.30
Twenty largest optionholders - expiring 15/06/06
Name Number of shares held Percentage of shares held
Wanabee Holdings Pty Limited 8,950,000 9.90
Malnor Pty Ltd 4,600,000 5.09
Mr Bryan Ralph Elboz & Mrs Patricia Mary Elboz 3,200,000 3.54
Tennant Creek Gold Limited 3,075,000 3.40
Leet Investments Pty Ltd (Superannuation Fund) 2,685,000 2.97
Leet Investments Pty Limited 2,500,000 2.77
Mr Scott James Duncan & Mrs Shelly Mary Therese Duncan 2,425,000 2.68
ANZ Nominees Limited 2,009,961 2.22
Mr Paul Nagle 2,000,000 2.21
Rubiton Pty Ltd 2,000,000 2.21
Biddle Partners Pty Ltd 1,890,118 2.09
Mr Tai Tran 1,750,520 1.94
Mr John Campbell Smyth 1,700,000 1.88
Bonsmith Pty Ltd 1,500,000 1.66
Mick Ashton Nominees Pty Ltd 1,500,000 1.66
Paradise Development Pty Ltd 1,500,000 1.66
Mr Terence Noel Smith 1,500,000 1.66
HSBC Custody Nominees 1,283,850 1.42
Mr Lyndon Ronald Sanderson 1,207,500 1.34
Mr Mark Raymond Tell 1,050,000 1.16
48,326,949 53.46
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Twenty largest optionholders - expiring 30/09/06
Name Number of options held Percentage of options held
Silver Park Pty Ltd 4,241,578 11.38
Mr Mark Trent 1,700,000 4.56
RBC Global Services Australia Nominees Pty Limited 1,200,000 3.22
Dove Creek Pty Ltd 1,162,869 3.12
ANZ Nominees Limited 1,027,195 2.76
Mr Jeffrey Charles Hogan 1,015,952 2.73
Gameday Enterprises Pty Ltd 1,000,000 2.68
J B Property Consulting Pty Ltd 1,000,000 2.68
Rachiner Investments Pty Ltd 1,000,000 2.68
Mr Steven Troy Duncan 950,000 2.55
Mr Peter Douglas Tooth 800,000 2.15
Direct Mining Services Pty Ltd 750,667 2.01
Mr Bedri Gulser & Mrs Ngi Jung Gulser 700,000 1.88
Teetim Pty Ltd 680,000 1.82
Mr Edwin Carl Dimech 650,000 1.74
J B S Pty Ltd 550,000 1.48
Amarilo Investments Pty Ltd 500,000 1.34
Ms Robyn Dorothy Jeffrey & Mr Alan Sydney Tonge 500,000 1.34
Mrs Debra Joan Maher 500,000 1.34
Mrs Mary Elizabeth Mahony 500,000 1.34
20,428,261 54.80
The consolidated entity holds an interest in the following tenements at 30 June 2005:
Prospect Tenements Equity
Gullewa Project E59/877APP, E59/960, E59/982, E59/988, E59/1124, E59/1126APP, 100%
E59/1129, E59/1134APP, L59/35, L59/49, L59/50, L59/64APP, M59/49,
M59/68, M59/132, M59/133, M59/224, M59/294, M59/335, M59/336,
M59/356, M59/391, M59/392, M59/442, M59/507, M59/522, M59/530,
M59/531, M59/601APP, M59/602APP, M59/603APP, M59/604APP,
M59/605APP, M59/606APP, M59/0620APP, M59/0621APP,
M59/0622APP, M59/0623APP, M59/0624APP, M59/0625APP, P59/1640,
P59/1641, P59/1659, P59/1660, P59/1661, P59/1662, P59/1663,
P59/1664, P59/1665, P59/1666, P59/1667, P59/1671, P59/1672,
P59/1673, P59/1674, P59/1692APP
Paynes Find M59/244, P59/1638APP, P59/1639APP 100%
Yalgoo M59/394 100%
ASX ADDITIONAL INFORMATION
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Level 3, 30 Richardson Street
West Perth
Western Australia 6005
PO Box 1176
West Perth
Western Australia 6872
T. (08) 9327 0980
F. (08) 9327 0901
E. [email protected]
www.bataviamining.com.au